Evaluation of Mutual Fundportfolio at Sbi Project Report Mba Finance

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION
ABBREVIATIONS USED IN THE STUDY NAVNet Asset Value AMC- Asset Management Company SEBI- Security Exchange Board of India AMFI- Association of Mutual Funds in India UTI- Unit Trust of India MF- Mutual Fund ELSS- Equity Linked Saving Scheme
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EXECUTIVE SUMMERY
Mutual Funds over the years have gained immensely in their popularity. Apart from the many advantages that investing in mutual funds provide like diversification, professional management, the ease of investment process has proved to be a major enabling factor. However, with the introduction of innovative products, the world of mutual funds nowadays has a lot to offer to its investors. With the introduction of diverse options, investors needs to choose a mutual fund that meets his risk acceptance and his risk capacity levels and has similar investment objectives as the investor. With the plethora of schemes available in the Indian markets, an investors needs to evaluate and consider various factors before making an investment decision. Hence an investor must infer the fact sheets of the various scheme to asses the portfolio management style of the fund manager. Mutual funds provide risk diversification: diversification of a portfolio is amongst the primary tenets of portfolio structuring, and a necessary one to reduce the level of risk assumed by the portfolio holder. Mutual funds represent one such option. So it is always safe for investor to invest their hard earned money in those schemes which have invested in stock of divers sectors with potential to earn higher returns. So this project is carried to understand the science of portfolio management that mutual fund apply to trade off with risk and maximize return. It becomes very difficult for investor to make decision as where to invest his hard earned money and in which stream of investment will reap optimal appreciation of money invested for the period. By analyzing the fact sheets of the Asset Management Company we can auspicate the best fund scheme to invest. There are many research institutes, which provide updated information of all the schemes that are available and the trend in the Mutual Fund industry. All that we need is to read between the lines and make sense of befuddling information, and acquire knowledge related to investment and comprehend finance terminology. BABASAB PATIL 2
Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. India offers biggest opportunity for asset management companies The next five years will see the Indian asset management business grow at least 33 percent annually. The main drivers of this will be the retail segment, expected to grow at 36 percent annually, and the institutional investor segment, expected to grow at 29 percent annually. This will take the total assets under management (AUM) to $440 billion, as per study by McKinsey, a consultancy firm. In India, asset management business is in emerging phase. One reason why it also has the fastest growth rate though still behind Russia and China. The business has grown 47 percent annually since 2003, taking the total AUM in India today to $92 billion. It grew 97 percent and 67 percent in Russia and China, respectively. Investment in mutual funds is still low in India, by both the retail and institutional categories. AUM as a percentage of GDP works out to only 8 percent here, compared with 79 percent in the US, and 39 percent in Brazil. AUM as a percentage of bank deposits is also abysmally low in India, at 25 percent, while it is 140 percent in the US and 96 percent in Brazil. The business is very profitable in India, with operating profits at 32 bps as a percentage of average AUM. In developed markets, this ratio is very low: it is 18 bps in the US and 12 bps in the UK Moreover, the setup of a legal structure, which has enough teeth to safeguard investors interest, ensures that the investors are not cheated out of their hard-earned money. All in all, benefits provided by them cut across the boundaries of investor category and thus create for them, a universal appeal.
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The project has been under taken at SBI- MUTUAL FUND HUBLI. The focus of study is to evaluate the portfolio performance of the funds. In this report an attempt is made to evaluate the performance of three growth-oriented mutual funds on the basis of monthly returns compared to benchmark returns for the period of 3 years. For this purpose, risk adjusted performance measures suggested by Jenson, Treynor and Sharpe are employed. I have chosen three Growth schemes having highest asset under management as fund with huge asset basis can diversify risk by deploying assets in various investment vehicle. The schemes I have chosen for study are MAGNUM CONTRA FUND MAGNUM GLOBAL FUND MAGNUM TAX GAIN SCHEME The rationale behind choosing these three different schemes (one is equity scheme, other one is diversified scheme and one more is tax scheme) is that these three are the top performing schemes of SBI MF. And has highest Asset Under Management So to know as to weather the risk and return associated with these schemes are high as they are one of the best schemes or it is vice versa. The schemes are compared with the Benchmark BSE 100 index. Three years values have been taken into consideration for calculation. The past performance is not an indicative for the future growth .No AMC can guarantee for any return.
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DESIGN OF THE STUDY

TITLE OF THE PROJECT
MUTUAL
FUNDPORTFOLIO
PERFORMANCE
EVALUATION
OBJECTIVES Objective To Evaluate portfolio performance of mutual fund scheme with its respective benchmark
Sub objectives Elaborate rationalism of investment Comprehensive study of mutual fund industry Inquisition of SBI Mutual Fund and its schemes SCOPE OF THE STUDY
The study was conducted on only SBI Mutual fund schemes. The study was conducted on three schemes of SBI The study focuses on portfolio management strategy applied with respect to 3 schemes of SBI Mutual Fund. BABASAB PATIL 5
The study covers the period from January 2005 to Dec 2007.
METHODOLOGY OF DATA COLLECTION

SOURCES OF DATA PRIMARY DATA Discussion with the company managers regarding the schemes nature, their performance, and risk associated with these schemes and the return that these schemes are generating. SECONDARY DATA Internet sources Materials provided by the company Business magazines CONCEPTUAL DESIGN Sample unit: Sample size: schemes of SBI mutual fund 5 years NAV and market index values
Conclusion
The schemes taken for study proved to be a good investment avenue for all the investors as the risk associated with these schemes are low and they are yielding a very good return. it should be considered for Long-term investment plan. The volatility in the market might have affected the returns of the schemes for short period like 6 months or one year, but the performance of the schemes for 3 years and above proves to be consistent. The schemes have been the one of the best schemes of SBI MF and hence have bagged many awards.
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COMPANY PROFILE
STATE BANK OF INDIA - MUTUAL FUND A partner for life. SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund. SBI Mutual Fund has been constituted as a trust, sponsored by State Bank India. Today the Fund has an investor base of over 2.8 million spread over 23 schemes. With a large network of collecting branches and investor service centers, SBI Mutual Fund constantly endeavors to get closer to its growing family of investors. SBI is the largest public sector Bank in India with 8,836 branches all over India. SBI is the leader in providing loans to trade & industry. It also provides related services, which generate significant fee-based income. It has also identified project finance and consumer banking as key areas. Currently the SBI Mutual Fund offers 64 schemes in with different investment objective and needs, as follows.
No. of schemes No. of schemes including options Equity Schemes Debt Schemes Short term debt Schemes Equity & Debt Money Market Gilt Fund
64 177 36 115 11 3 0 12
Corpus under management Rs.29492.9685 Crs. as on Feb 29, 2008
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SBI Mutual fund is Indias 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- Indias largest banking enterprise. The institution has grown immensely since its inception and today it is Indias largest bank patronized by over 80% of the top corporate houses of the country. SBI Funds Management Pvt. Ltd Investment Managers for SBI Mutual Fund, one of the largest mutual funds in the country. SBI- Mutual fund is a joint venture between Societe-Generale Asset Management, one of the worlds leading fund management companies that manage over 330 U.S.$ billion worldwide. Started in July 1987, the fund has launched 67 schemes and successfully redeemed 15 schemes. 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 benchmarks indices and have emerged as the preferred investment for the millions of investors and HNIs Today the fund manages Rs.29492.9685 Crs. as on Feb 29, 2008 of assets and has diversified profile of investors actively parking their investments across 37 active schemes. The fund serves this vast family of investors by reaching out to them through network of 100 collection branches, 26 investor service centers, 28 investor service desks, and 52 district organizers. SBI- Mutual fund is the first bank sponsored fund to launch an off-shore fund called Resurgent India Opportunity Fund Growth through innovation and stable investment policies is the SBI-mutual fund credo
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FUND-HOUSE EXPERTISE
The investment environment is becoming increasingly complex. Innumerable parameter need to be factored in to generate a clear understanding of market movement and performance in the near and long term future. At SBI- mutual fund the team donates considerable resources to gain, maintain and sustain the profitable insights in to market movements. The team consistently pushes the envelope to ensure our investors get the maximum benefits year after year. RESEARCH- THE BACKBONE OF SBI MF SUCESSFUL PERFORMANCE Our expert and experienced and market savvy researchers prepare comprehensive analytical and informative reports on diverse sectors and identify stocks that promise high performance in the future. This team works in tandem with a compliance and risk-monitoring department, which insures minimization of operational while protecting the interest of investors. The fund house has an experienced team of fund managers and analyst who continuously monitor market movements to identify stocks that promise high performance in the future. This team works in tandem with a compliance and riskmonitoring department, which ensures minimization of operational risks while protecting the interests of the investors. The outcome of this is that the schemes continue to deliver consistent returns to investors and outperform benchmark indices.
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KEY PERSONNEL OF SBI MUTUAL FUND Mr. Syed Shahabuddin Managing Director
Mr. C A Santosh
Chief Manager - Customer Service.
Mr. Didier Turpin
Dy. Chief Executive Officer
Ms.Aparna Nirgude
Chief Risk Officer
Mr. Achal K. Gupta
Chief Operating Officer
Mr. Ashutosh P Vaidya
Company Secretary & Compliance Officer
Mr. Sanjay Sinha
Chief Investment Officer
Mr. Parijat Agrawal
Head Fixed Income
Mr. R. S. Srinivas Jain
Chief Marketing Officer
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THE FUND MANAGERS

Quote by Managing Director Mr. Syed Shahabuddin, Managing Director and CEO, SBI Mutual Fund said: We at SBI Mutual Fund endeavor to provide efficient and prompt service to our investors and cater to their investment and servicing needs.
Chief Investment Officer: Sanjay Sinha

Mr. Sanjay Sinha has taken over as Chief Investment Officer with effect from June 1, 2007. Mr. Sinha joined SBI Mutual Fund as the Head of Equities in November 2005 and has managed the largest number of funds in SBI MF covering the entire spectrum of equity funds from index funds, diversified equity funds to sector funds. He has over 18 years of experience in the Mutual Fund Industry. Prior to joining SBI MF, Mr. Sinha worked as Senior Fund Manager with UTI Mutual Fund and was managing a corpus of over Rs 28 billion (over US$600 million). A Post Graduate from IIM Kolkatta, Mr. Sanjay Sinha has a rich experience in managing funds.
Head Portfolio Management Services / Fund Manager : Nipa Ladiwala After obtaining a post graduate degree in Business Management and Law, Nipa worked as an equity analyst, and dealer for the offshore Funds of UTI. Subsequently she was appointed as Fund Manager for India Growth Fund, which was listed on NYSE. She was head of Research at UTI Securities before joining SBIMF as Head of PMS. Nipa has 6 years experience as Fund Manager. She has a BABASAB PATIL 12
total of 15 years experience and has been with SBI Funds Management Pvt Ltd since October 2005.
Debt / Fixed Income : Parijat Agrawal (Head Fixed Income) Parijat has done his B.E (ECE) and PGDM (IIM Bangalore). He has got 12 years experience in capital markets in areas like research, dealing and fund management. Parijat is associated with SBI Funds Management Pvt. Ltd. since July 2006. Prior to joining SBI Funds Management Pvt. Ltd., he was with State Bank of Mauritius Limited, Mumbai as Head Treasury.
Ganti N Murthy (Asst. Vice President & Fund Manager) Mr. Murthy did his B.Sc (Hons) from Osmania University and his Masters in Financial Management from Jamnalal Bajaj Institute of Management Studies, Mumbai. He has over 12 years experience in the Mutual Fund Industry, 9 years in Unit Trust of India and 3 years in Cholamandalam AMC Ltd. Prior to joining SBI Funds Management Pvt. Ltd., he was with Cholamandalam Mutual Fund as Fund Manager Debt.
Offshore Funds - Fund Manager : Anand Gupta Anand holds charter from CFA Institute, USA and Institute of Chartered Accountants of India. Before joining SBI Funds Management in October 2005, Anand has worked with HSBC securities and domestic brokerage house as equity
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research analyst for 3 years. Anand has 5 years of experience in capital markets and 3 years of experience in Audit & Business consulting. Investment Team (Equity) : Aashish Wakankar (Vice President & Fund Manager) Aashish Wakankar is a Bachelor of Science from University of Mumbai and holds Post Graduate Diploma in Management Studies from Jamnalal Bajaj Institute of Management Studies, University of Mumbai. He has more than 12 years of experience in capital markets ranging from institutional equities, equity research and fund management. He is associated with SBI Funds Management from December 2005. Prior to joining SBI Funds Management, he has worked with Kotak Mahindra Asset Management, Deutsche Asset Management - part of Deutsche Bank Group, and TATA TD Waterhouse Securities - a joint venture between the TATA Group, India and TD Bank Financial Group, Canada. At Deutsche Asset Management, he was responsible for advising the offshore fund Deutsche India Equity Fund, Japan and MetLife Insurance. Pankaj Gupta Fund Manager Pankaj has done his B.Com (Hons), PGDBM, C.S and PGDBM IIM Lucknow. He has experience of over 4 years in Mutual Fund, Equity Research and Corporate Banking. His last assignment was ICICI Bank Ltd. and has been with SBI Funds Management Pvt. Ltd. since December 2005. Jayesh Shroff Fund Manager Jayesh has done his B.Com and PGD (MBFS) ICFAI. He has experience of over 5 years as Fund Manager. He also has wide experience in investment banking activities including M&A activities, venture capital funding, preparation of
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business plans, project reports etc. His last assignment was with BOB Mutual Fund and has been with SBI Funds Management Pvt. Ltd. since March 2006. Vivek Pandey Fund Manager Vivek is a Science graduate and has done his CFA from ICFAI. He has about 7 years of experience in the industry. He is currently placed in Investment Department as a Junior Fund Manager since June 2007. Investment Team (Debt) : Killol Pandya - Fund Manager Killol has done his B.Com, DPCM and MMS (Finance). He has over 7 years of experience in debt trading. His last assignment was with IL&FS Investmart India and has been with SBI Funds Management Pvt. Ltd. since June
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PRODUCTS OF SBI MUTUAL FUNDS
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 MSFU - FMCG Fund MSFU - Emerging Businesses Fund MSFU - IT Fund MSFU - Pharma Fund MSFU - Contra Fund SBI Arbitrage Opportunities Fund SBI Blue chip Fund SBI Infrastructure Fund - Series I SBI Magnum Taxgain Scheme 1993 SBI ONE India Fund SBI TAX ADVANTAGE FUND - SERIES
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Debt Fund 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 Childrens 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 Insta Cash Fund -Liquid Floater Plan Magnum Institutional Income Fund Magnum Monthly Income Plan Magnum Monthly Income Plan Floater Magnum NRI Investment Fund SBI Capital Protection Oriented Fund - Series I SBI Debt Fund Series SDFS 15 Months Fund SDFS 90 Days Fund SDFS 13 Months Fund SDFS 18 Months Fund
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SDFS 24 Months Fund SDFS 30 DAYS SDFS 30 DAYS SDFS 60 Days Fund SDFS 180 Days Fund SDFS 30 DAYS SBI Premier Liquid Fund SBI Short Horizon Fund SBI Short Horizon Fund - Liquid Plus Fund SBI Short Horizon Fund - Short Term Fund
Balanced Schemes..
Magnum Balanced Fund invest 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 - FlexiAsset Plan
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AWARDS AND ACHIEVEMENTS SBI- MUTUAL FUND has been performing excellently since its inception. The fund house expertise and excellent performance is frequently recognized by the mutual fund industry. SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for our schemes.
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HISTORY OF MUTUAL FUNDS :
When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become. The idea of pooling money together for investing purposes started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts Investors Trust. After one year, the Massachusetts Investors Trust grew from $50,000 in assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are over 10,000 mutual funds in the U.S. today totaling around $7 trillion (with approximately 83 million individual investors) according to the Investment Company Institute. The stock market crash of 1929 slowed the growth of mutual funds. In response to the stock market crash, Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. These laws require that a fund be registered with the SEC and provide prospective investors with a prospectus. The SEC
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(U.S. Securities and Exchange Commission) helped create the Investment Company Act of 1940, which provides the guidelines that all funds must comply with today. With renewed confidence in the stock market, mutual funds began to blossom. By the end of the 1960s there were around 270 funds with $48 billion in assets. INCEPTION OF MUTUAL FUND IN INDIA: Mutual funds made an opening in India in 1963 under the enactment f Unit Trust of India (UTI), which came out with is debut scheme named US-64, an open ended scheme n, which is operating till date. Up to 1986-87 it had launched 20 schemes, mobilizing net resources amounting to Rs. 4564 crores. for these 23 long years up to 1987 UTI enjoyed complete monopoly of the unit trust business in India. It remained one and the only mutual fund in India. It was in 1986 that the government of India amended banking regulation act and allowed commercial banks in public sector to set up mutual funds. This lead to promotion of SBI-MUTUAL FUND by State Bank Of India (SBI) in July 1987 followed by Canara Bank Indian bank Bank of India Bank of Baroda Punjab National bank
The government of India further granted permission to Insurance Corporation to public sector to float mutual funds. The following were the corporations,
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Life Insurance Corporation General Insurance of Corporation This was the picture till 1991, but when in 1991 the government of India followed a policy of liberalization, privatization, and globalization it opened the gates to private sector to launch mutual funds.
The History of Indian mutual fund industry can be broadly classified in to The four phases: Phase 1 July 1964 to November 1987 Phase 1 November 1987- October 1993 Phase 3--- October 1993- February 2003 Phase 4-- since February 2003
First Phase 1964-87 monopoly of UTI Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund
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established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.
Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations.
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With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.
Introduction to Mutual Funds

Mutual Funds - 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 then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund The following simple diagram clearly shows the working of a mutual fund:
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Mutual fund as an investment company combines or collects money of its shareholders and invests those funds in variety of stocks, bonds, and money market instruments. The latter include securities, commercial papers, certificates of deposits, etc. Mutual funds provide the investor with professional management of funds and diversification of investment. Investors who invest in mutual funds are provided with units to participate in stock markets. These units are investment vehicle that provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake the direct investment in equities. On the other hand they also provide a route into specialist markets where direct investment often demands both more time and more knowledge than an investor may possess. The price of units in any mutual fund is governed by the value of underlying securities. The value of an investors holding in a unit can therefore, like an investment in share, can go down as well as up. Hence it is said that mutual funds are subjected to market risk. Mutual fund cannot guarantee a fixed rate of return. It depends on the market condition. If the particular scheme is performing well than more return can be expected. It also depends on the fund manager expertise knowledge. It is also seen that people invest in particular funds depending on who the fund manager is
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WHY TO INVEST IN MUTUAL FUNDS: A proven principle of sound investment is do not put all eggs in one basket. Investment in mutual funds is beneficial due to following reasons. They help in pooling of funds and investing in large basket of shares of different companies. Thus by investing in diverse companies, mutual funds can protect against unexpected fall in value of investment. An average investor does not have enough time and resources to develop professional attitude towards their investment. Here professional fund managers engaged by mutual funds take desirable investment decision on behalf of investors so as to make better utilization of resources. Investment in mutual funds is comparatively more liquid because investor can sell the units in open market or can approach mutual fund to repurchase the units at net asset value depending upon the type of scheme. Investors can avail tax rebates by investing in different tax saving schemes floated by these funds, approved by the government. Operating cost is minimized per head because of large size of investiable funds, there by realizing more net income of investors.
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Instruments where Mutual funds deploy funds

1. Equity Equity represents the shares of a company. Mutual funds are entitled to dividends, rights and bonuses declared by the companies apart from the benefit of capital appreciation resulting from appreciation resulting from appreciation in the market value of the held shares. This is definitely reflected in the appreciation of the net asset value of the mutual fund units. The disadvantage of investing in equity is the highly volatile nature of the Indian capital markets leading to sudden changes in the prices of the shares. 2 Convertible Debentures These are bonds issued by companies that automatically get converted into equity shares on a pre-determined date. From that date onwards the so converted shares have the same benefits and risks that normal equity shares have. 3. Fixed Income Securities. Mutual funds invest a part of their funds in fixed income securities like debentures or Bonds or Gilts. The underlying idea is to have some fixed return to safeguard and meet the recurring expenses and to pay at least some dividend to the investors. Bonds or debentures are instruments issued by public or private limited companies, having a fixed rate of interest payable on a fixed date every year. Gilts are also similar instruments but the only difference is that they are issued by the Government and are hence considered as the safest investment. 4. Money Market Instruments Money market instruments are instruments that are issued /invested in for a short term ranging from a few days to a few months. In spite of the fact the yield from such instruments is very low, mutual funds (especially open-ended) invest a part of their funds in money market instruments to maintain adequate liquidity to meet short term / sudden requirements like repurchase. Some of the money market instruments are commercial paper, Treasury Bills, Bills of exchange and Call Money.
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In nutshell, mutual funds act as financial intermediaries by building a liaison between financial market and small investors. Mutual funds are financial intermediaries as they pool down small savings of scattered investors and invest in to securities in capital market and earn income over it. The earning is distributed in the shape of return on investment to investors who again save a part of it and reinvest through mutual funds.
Types of Mutual Funds Schemes in India

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. thus mutual funds has Variety of flavors, Being a collection of many stocks, an investors can go for picking a mutual fund might be easy. There are over hundreds of mutual funds scheme to choose from. It is easier to think of mutual funds in categories, mentioned below. Overview of existing schemes existed in mutual fund category: BY STRUCTURE 1. Open - Ended Schemes: An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. 2. Close - Ended Schemes: A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. 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 they 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. 3. Interval Schemes: Interval Schemes are that scheme, which combines the features of open-ended and close-ended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices.
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Overview of existing schemes existed in mutual fund category: BY NATURE 1. Equity fund: These funds invest a maximum part of their corpus into equities holdings. The structure of the fund may vary different for different schemes and the fund managers outlook on different stocks. The Equity Funds are sub-classified depending upon their investment objective, as follows: Diversified Equity Funds Mid-Cap Funds Sector Specific Funds Tax Savings Funds (ELSS) Equity investments are meant for a longer time horizon, thus Equity funds rank high on the risk-return matrix. 2. Debt funds: The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these funds ensure low risk and provide stable income to the investors. Debt funds are further classified as: Gilt Funds: Invest their corpus in securities issued by Government, popularly known as Government of India debt papers. These Funds carry zero Default risk but are associated with Interest Rate risk. These schemes are safer as they invest in papers backed by Government. Income Funds: Invest a major portion into various debt instruments such as bonds, corporate debentures and Government securities. MIPs: Invests maximum of their total corpus in debt instruments while they take minimum exposure in equities. It gets benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when compared with other debt schemes.
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Short Term Plans (STPs): Meant for investment horizon for three to six months. These funds primarily invest in short term papers like Certificate of Deposits (CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested in corporate debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provide easy liquidity and preservation of capital. These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash management of corporate houses and are meant for an investment horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are considered to be the safest amongst all categories of mutual funds. 3. Balanced funds: As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to provide investors with the best of both the worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment parameter viz Each category of funds is backed by an investment philosophy, which is pre-defined in the objectives of the fund. The investor can align his own investment needs with the funds objective and invest accordingly.
By investment objective: Growth Schemes:
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Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear shortterm decline in value for possible future appreciation. Income Schemes: Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50). Money Market Schemes: Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money Others Dividend Re-investment plan Here the dividend accrued on the mutual funds is automatically re-invested in the purchasing additionally units in the open ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-investing the same.
Systematic investment Plan In this type of plan the investor is given the option of preparing a predetermined number of post-dated cheques in favour of the fund. He will get the units on the date of cheques at the existing NAV.
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For instances , if on the 5th March ,he has given a post dated cheques for June 5th 2006, he will get units on 5th June 2006 at the existing NAV. Systematic Withdrawal Plan: As opposed to SIP, the systematic withdrawal plan allows the investor the facility to withdraw predetermined amount/units from his fund at a pre-determined interval. The investors units will be redeemed at the existing NAV as on that day. The unit holder may set-up a systematic Withdrawal plan on a monthly, quarterly or semi annually or on an annual basis to redeem a fixed number of units or redeem enough units to provide a fixed amount of money. Retirement Pension Plan Some schemes are linked with retirement pension. Individuals participate in these plans for themselves, and corporate for their employees. Insurance Plan: Some schemes launched by UTI and LIC offer insurance cover to investor. Like ULIP plans
Tax Saving Scheme 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, eg: Equity Linked Saving Scheme (ELSS). Pension schemes launched by the mutual fund also offer tax benefits. These schemes are growth-oriented and invest pre-dominantly in equities. Their growth opportunities and risk associated are like any equity-oriented scheme. Load and No-Load Funds
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A load fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells the 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 charge is 2% , then the investors who buy would be required to pay Rs.10.20 and those would want to repurchase must pay Rs.9.80 per unit. A no-load fund is the one that does not charge for entry or exit. It m
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Pros & cons of investing in mutual funds:

For investments in mutual fund, one must keep in mind about the Pros and cons of investments in mutual fund. Advantages of Investing Mutual Funds: 1. Professional Management - The basic advantage of funds is that, they are professional managed, by well-qualified professional. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments. 2. Diversification - Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. 3. Economies of Scale - Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors. 4. Liquidity - Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want. 5. Simplicity - Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small. Most AMC also have automatic purchase plans whereby as little as Rs. 2000, where SIP start with just Rs.50 per month basis. Disadvantages of Investing Mutual Funds: 1. Professional Management- Some funds doesnt perform in neither the market, as their management is not dynamic enough to explore the available opportunity in the market, thus many investors debate over whether or not the so-called professionals are any better than mutual fund or investor him self, for picking up stocks.
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2. Costs The biggest source of AMC income, is generally from the entry & exit load which they charge from an investors, at the time of purchase. The mutual fund industries are thus charging extra cost under layers of jargon. 3. Dilution - Because funds have smallholdings across different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money. 4. Taxes - when making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability. Mutual Funds Organization
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Structure of mutual Fund in India

The formation and operations of mutual funds in India is solely guided by the Securities and Exchange Board of India (SEBI) regulations, in 1993, which came in to force on 20 Jan 1993. The above figure shows the structure of Indian mutual funds. A mutual fund comprises four separate entities namely, Sponsors Mutual fund trust AMC Custodian
These are associated by other independent administrative entities like banks, registrar, and transfer agents. The sponsor for a mutual fund can be any person who, acting alone or in combination with another body corporate establishes the mutual fund and gets it registered with SEBI. The sponsor is required to contribute at least 40% of the minimum net worth (Rs 10 crores) of the asset management company. The sponsor must have a sound track record and general reputation of fairness and integrity in all his business transactions. As per SEBI regulations, 1996, a mutual fund must be formed by the sponsor and registered with SEBI. A mutual fund shall be constituted in the form of trust and the instrument of trust shall be in the form of the deed, duly registered under the provision of the Indian registration act 1908, executed by the sponsor in favor of trustees named in such an instrument.
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Mutual fund is managed by the Board of trustees and the sponsor executes the trust deeds in favor of the trustees. The mutual fund raises money through sale of units under one or more schemes for investing in securities in accordance with SEBI guidelines. It is the job of mutual fund trustees to see that the schemes floated and managed by the AMC appointed by the trustees, are accordance with the trust deeds and SEBI guidelines. It is also the responsibility of the trustee to control the capital property of mutual fund schemes. The trustees have the right to obtain relevant information from the AMC, as well as a quarterly report on its activities. They can also dismiss the AMC under specific condition as per SEBI regulations. At least half the trustees should be independent persons. The AMC or its employees cannot act as a trustee. No person who is appointed as a trustee of a mutual fund can be appointed as a trustee of any other mutual fund unless he is independent trustee and prior permission is obtained from the mutual fund in which he is a trustee. The trustees are required to submit half yearly reports to SEBI on the activities of the mutual fund. The trustees appoint the custodian and supervise their activities. The trustees can be removed only with prior approval of SEBI. As per the SEBI guidelines, an asset management company is appointed by trustees to float the schemes for mutual fund and manage the funds raised by selling units a scheme. The AMC must act as per SEBI guidelines, the trust deeds and the management agreement between the trustees and the AMC.
The AMC should be registered with SEBI. As per revised guidelines the net worth of an AMC should be in the form of cash all assets should held in the name of the AMC. In
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case the AMC wants to carry out the other fund management business, it should satisfy the capital adequacy requirement for each such business independently. The AMC cannot give or guarantee loans and is prohibited from acquiring any assets (out of the scheme property) which would involve the assumption of unlimited liability. The AMC is required to disclose the scheme particulars and base of calculation of NAV. It must submit quarterly reports to the mutual fund. The director of the AMC should be a person of repute and high standing, with at least 5 years experience in the relevant field. The appointment of the AMC can be terminated by a decision of 75% of unit holders or a majority of the trustees. The SEBI 1996 defines the mutual fund as a fund established in the form of trust to raise moneys through the sale of units to the public or section of public under one or more schemes for investing in securities, including money marketable instruments. Since the definition is restricting the scope of operations of mutual funds to diversify their activities in the following years Portfolio management services Management of off-shore funds Providing advice to off-shore funds Management of pension or provident funds Management of venture capital funds Management of money market funds Management of real estate funds The regulations deal with the various issues relating to the launching, advertising, and listing of mutual fund schemes. All the schemes to be launched by an AMC need to be approved by the trustees and copies of offer documents of such schemes are to be filed with the SEBI. The offer document shall contain adequate disclosures to enable investors BABASAB PATIL 40
to make informed decisions. Advertisements in respect of schemes should be in conformity with the prescribed advertisement code of SEBI. The listing of closed ended scheme is mandatory and every closed ended scheme should be listed in a recognized stock exchange within six months from the closure of subscription. However, listing is not mandatory: Units of a closed ended scheme can be repurchased or reissued by an AMC. Units of a closed ended scheme can also be converted in to an open-ended scheme. Units of a closed ended scheme may be rolled over by passing a resolution by majority shareholders. Guaranteed returns can be provided in a scheme if such return is fully guaranteed by the AMC or the sponsor. In such cases, there should be a statement indicating name of the person and the manner in which the guarantee to be made must be made in the offer document. The regulations provide procedures for winding up of a closed ended scheme. A closed ended scheme will be wound up on redemption date, unless it is rolled over, or if 75% of unit holders of a scheme pass a resolution for winding up of the scheme, or if the trustees, on the happening of any event, require the scheme to be wound up, or SEBI so directs in the interest of the investors. Some other operational aspects as prescribed by SEBI are 1) Appointment of custodian. 2) Disclosure 3) Advertisement 4) Investment restriction 5) Sale and distribution of units 6) Code of conduct.
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SEBI REGULATIONS ON MUTUAL FUND

SEBIs regulatory reach has been extended to more areas and there is a considerable change in the capital market. SEBIs annual report for 97-98 has stated that throughout its six years existence as a statutory body, it has sought to balance the twin objectives of investor protection and market development. it has formulated new rules and crafted regulations to foster development. Monitoring and surveillance was put in the stock exchanges in 96-97 and strengthened 97-98.
OBJECTIVES OF SEBI
The promulgation of the SEBI ordinance in the parliament gave statutory status to SEBI in 92. According to the preamble of the SEBI, the three main objectives are: To protect the interest of the investors in securities. To promote the development of securities market To regulate the securities market.
FUNCTIONS OF SEBI
a) Regulating the business in stock exchanges and any other securities Market. b) Registering and regulating the working of stock brokers , sub brokers, Share transfer agents, bankers to the issue, trustees of the trust deed Underwriters, portfolio managers, investment advisors, and other such intermediaries who may be associated with securities market in any manner. c) Registering and regulating the working of collective investment schemes mutual funds. d) Promoting and regulating self-regulatory organization e) Prohibiting fraudulent and unfair trade practices in the securities market
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MUTUAL FUNDS AND SEBI

For the smooth conduct and regulation of the mutual fund several guidelines have been issued by the SEBI regarding the investment, disclosure, accountability distribution, of its profits to its members and the asset management companies. SEBI has issued regulation and code of conduct in 93 that provided a basic legal framework for the functioning of the mutual fund. The mutual fund regulation act 1996 has provided a sound footing and considerable leeway to fund management. The new elements incorporated in the year 98, have placed the investors in a better position with regard to proper asset management and disclosure.
DISCLOSURE NORMS
With the number of mutual funds schemes on the increase (in 97 alone 67 new of schemes of wide varieties were introduced in the market) the investor should be kept well informed about the nature and functioning of the mutual funds. It should start right from the offer document. The offer document should provide essential information to assist the investors to informed and correct decision. According to SEBI regulations the standard offer document should give the following information Standard and scheme specific risk factors. The latter may be related to investment objective, investment strategy, asset allocation, risks from non diversification if any, and from investing in closed ended schemes (range of discount, liquidity) Due diligence by the asset management company (AMC)
Fundamental attributes such as type of schemes, investment objective (including the tentative equity /debt/money market portfolio) and terms of issue (provision such as listing, repurchase /redemption, fees, expenses, guarantee/safety net)
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Details of the offer, such as sale, purchase, minimum corpus and pricing of units in relation to NAV Likely initial issue expenses, actual issue expenses for schemes launched during the last year, expenses borne by the AMC and annual recurring expenses (as a percentage of average weekly net assets). Identification of AMC and background of fund managers. Asset allocation pattern (as a percentage of the assets) with indicative range of investment or the maximum investment in a certain assets class. The policy of diversification or concentration to be pursued. The portfolio turnover policy and effects of investment techniques on total portfolio turnover. The policy with respect to dividend and distributions, including any options for unit holders. The policy of the fund regarding their scheme transfers. Associate transaction The borrowing policy including the intent and purpose of borrowing and stock lending by the fund. Valuation of assets, accounting policies and NAV. The manner of determination of redemption and repurchase price of the units.
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Tax treatment of investments in mutual funds, investor rights, and services and redressal of investor grievances. The amendment in 1998 made a significant change in information disclosure pertaining to litigation/penalties. SEBI has now mandated the disclosure of information contained in reports of investigation and inspection conducted by it. So far such information was neither disclosed in the offer document nor in the annual reports. Now, all mutual funds have to disclose in the offer documents the information pertaining to the following areas. All cases of penalty awarded by the SEBI or any other regulatory body against the sponsor of the mutual fund, the Trustee Company/ board of trustee, or any of the directors or key personnel of the AMC and trustee company. The nature of the penalty must be disclosed. Pending material litigation proceedings including pending criminal and economic cases against any of the afore mentioned parties. The name of the court or agencies in which the proceedings are pending, the date instituted , the principal parties thereto, a brief description of the factual basis alleged to underline the proceedings and relief sought, if any shall be indicated.
Any deficiency in the system and operations of the sponsor of the mutual fund or any company associated with the sponsor in any capacity such as the AMC or the trustee company. This must pertain to matters that SEBI has specifically directed disclosures. The full disclosure in the annual reports is mandatory.
INVESTMENT
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The investment made issued by the mutual funds decides the return for the investor. Improper management would land the investor in peril. To prevent this, SEBI has tightened its control regarding the investment criteria. They are as given below:Mutual funds cannot deal in option trade, short sale carry forward transaction in securities. They can only invest in transferable securities in the money market capital market, any privately placed debenture or debt securities. Mutual funds required to form trust and managed separately by the asset management companies. The minimum net worth of asset management should be Rs 5 crores and 40% should be the sponsors contribution. Investment under individual schemes should not cross the 5% of the corpus of any companys share and the investment under all schemes should not exceed 10% of the funds in the shares, debentures or securities of a single company. Mutual fund shall not make investment in any privately placed securities issued by the associates/group companies of the sponsors. The aggregate investment of mutual funds in the listed or to be listed securities of group companies of the sponsor shall not exceed 25% of the net assets of all schemes of the fund. The assets management companies (AMC) would be required to disclose in the offer document maximum investment proposed to be made by the schemes in the securities of the group companies of the sponsors and also aggregate investment made by all schemes in the group companies. The AMCs shall have to submit quarterly report to the trustees giving details about the transactions in the securities of the group companies during the quarter and the trustees have to make specific comments in their half yearly reports to the SEBI on those investment.
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The group for this purpose would have the meaning as provided in the Monopolies and Trade Practices Act in 1969. An AMC cannot purchase or sell securities through a broker who is an associate of the sponsor beyond 5% of the gross business of the mutual fund, which will be monitored on a quarterly average than on a daily basis. An AMC shall not in quarter purchase or sell securities for any of the schemes through any broker beyond 5% of the aggregate business of the securities in a quarter , unless the AMC records the justification for exceeding the limit and reports such cases to the trustees on a quarterly basis. ACCOUNTABILITY Every mutual fund for each scheme should keep and maintain proper books of accounts, records and documents to explain its transaction. The records should disclose at any point of time financial position of the mutual fund in a true and fair view of the state of affairs of the fund. The accounts should provide information regarding the distribution or accumulation of income accruing to the unit holder in a fair and true manner. Short-term capital gains and long-term capital gains should be segregated in the accounts. All the expenses should be clearly identified and appropriated to the individual scheme. The AMC may charge the mutual fund with investment management and advising fees that are fully disclosed in the prospectus subject to the following viz, One and quarter of one per cent of the weekly average net assets outstanding in each accounting year for scheme concerned as long as the net assets do not exceed Rs. 100 crores and one percent of the excess amount over Rs.100 crores.
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The AMC can charge a) initial issue costs of sponsoring the fund and its schemes b) recurring expenses related to marketing and selling expenses including agents commission, brokerage and transaction costs and registrar services for transfer of shares sold or redeemed, provided , the initial expenses in respect of any one scheme shall not exceed 6% of the fund raised under the scheme.
The above mentioned expenses and fees payable to Asset management Company shall be charged to the mutual fund. DIVIDEND Mutual funds after closing the accounts, distribute by way of dividend the holders in accordance with the regulations, an amount not less than 90% of the profits earned during the year by that scheme. This does not apply to a cumulative investment schemes or a growth oriented scheme where the nature of the scheme has been made known to the investors at the time of offer.
MANAGEMENT
The sponsor should have a sound track record, experience in the relevant field of financial services for a minimum period of five years, professional competence, financial soundness and general reputation of integrity in all his business transaction. AMC shall be authorized for business by SEBI on the basis of certain criteria. The memorandum and articles of association of the AMC would have to be approved by the SEBI. The trustee board should be constituted with two thirds of independent trustees to stand for the interest of the investors.
ASSOCIATION OF MUTUAL FUNDS IN INDIA

With 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. BABASAB PATIL 48
AMFI is an apex body of all Assets Management Companies (AMC) which has been registered with Security Exchange Board of India (SEBI) .till date all the AMCs are that have 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 a healthy market with the 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 this code of conduct of the association. activities of Mutual Fund and Assets Management. The agencies that are by any means connected or involved in
AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry.
Association 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 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.
The sponsors of Association of Mutual Funds in India. Bank sponsored SBI Mutual management Ltd.
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BOB asset management CO. Ltd. Canbank Investment Management Services. Ltd UTI Asset management Company Pvt, Ltd.
Institution GIC Asset management Co.Ltd Jeevan Bima sahayog asset management Company.
PRIVATE SECTOR INDIAN Benchmark asset management company Cholamandalam Asset Management Co.Ltd Credit Capital Asset Management Co.Ltd Escorts Asset Management Ltd JM Financial Mutual fund Kotak Mahindra asset management company
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Reliance capital Asset management Ltd Sahara Asset management Co.Ltd Sundaram Asset management Co.Ltd Tata Asset Management Private Ltd
Indian joint ventures Birla Sun life Asset management company DSP Merill Lynch Fund Managers company HDFC Asset management company
Foreign joint ventures ABN AMRO Asset Management (I) Ltd. Alliance capital Asset management (India) Pvt.Ltd
INVESTMENT PERSPECTIVE
Investment is the employment of funds on assets with the aim of earning income or capital appreciation. Investment has two attributes namely time and risk. Present sacrificed to get a return in the future. The sacrifice that has to be borne is certain but the BABASAB PATIL 52
return in the future may be uncertain. This attribute of investment indicates the risk factor. The risk is undertaken with a view to reap some return from the investment. For laymen. Investment means some monetary commitment. Financial investment is the allocation of money to assets that are expected to yield some gain over a period of time. It is an exchange of financial claims such as stocks and bonds for money .they are expected to yield returns and experience capital growth over the years Investment objectives:The main investment objectives are increasing the rate of return and reducing the risk. Other objectives like safety, liquidity, and hedge against inflation can be considered as subsidiary objectives. Return Investor always expects a good rate of return from their investments. Rate of return could be defined as the total income the investor receives during the holding period stated as a percentage of the purchasing price at the beginning of the holding period. Capital appreciation & dividend Return = Purchase price Risk Risk of holding securities is related with the probability of actual return become less than the expected return. An investment whose rate of return varies widely from period to period is risky than whose return that does not change much. Every likes to reduce the risk of his investment by proper combination of different securities. Liquidity Marketability of the investment provides liquidity to the investment. The liquidity depends upon the marketing and trading facility. If a portion of the investment could be converted into the cash without much loss of time, if would help the investor meet the
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emergencies. Stocks are liquid only if they command good market by providing adequate return through dividends and capital appreciation. Hedge against inflation; Since there is inflation in almost all the economy, the rate of return should ensure a cover against the inflation. The return rate should be higher than the rate of inflation, otherwise the investor will have loss in real terms. Growth stocks would appreciate in their values overtime and provide a protection against inflation. the return thus earned should assure the safety of the principal amount, regular flow of income and be a hedge against inflation. Safety The selected investment avenue should be under the legal and regulatory framework. If it is not under the legal framework, it is difficult to represent the grievances, if any. Approval of the law itself adds a flavor of safety. Even though approved by law, the safety of the principal differs from one mode of investment to another. Investments done with the government assure more safety than with the private party. The investment process The investment process involves a series of activities leading to the purchase of securities or other investment alternatives The investment process can be divided in to 1. Framing of investment policy 2. Investment analysis 3. Valuation 4. Portfolio construction 5. Portfolio evaluation Investment Process
Investment Policy Analysis Valuation Portfolio Construction Portfolio Evaluation
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Investable fund Knowledge Objectives
Market Industry Company
Intrinsic value Future value
Diversification Selection & Allocation
Appraisal Revision
Financial Planning Whenever we talk of planning, the first question which comes to our mind is what is the objective? The first step of planning is setting up of objectives. the same applies with financial planning. Every investor has needs at various stages in his life. For example we need money for our education, for buying car, buying house etc. we have to ensure that we should have money when we need it. As we all need money to meet our needs, these needs can be the best objectives or goals for us to plan finances. So, financial planning is a process aimed at achieving investors goal in life.
Life cycle stage of financial planning Life cycle stage Childhood stage Features Choice of investment products. This is a period Long term investment No immediate needs. dependency which lasts of money received in Long-term investments. Priority
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Young Unmarried
till the full time education finishes. Most of the fulfillments and requirements are filled by parents. Might still depend to some extent on parents. Relatively lower income and would not be able to afford large amount to financial planning. More risk taking ability.
the form of gifts at various occasions.
They might not have any dependents and hence might not need insurance. Main need is to protect their earnings against any disability or long sickness. More immediate and short term needs.
Liquid plans and short term investments. Investments for long term plans when adequate short term savings have been achieved.
Young married stage both partners earn
Two incomes to meet cost and save. Sufficient income and surplus to meet financial planning needs. Short and intermediate term Housing and insurance needs. Consumer finance needs
Young married stage one partne with childern rs earn
To secure income loss of any partner against any disability or sickness. Life insurance so that unfortunate events of any partners death that part of income may be replaced Need for emergency fund. Two or more Life insurance of dependent on just earning member is one earner. Less must. potential to save Need to start for pension provision at an early stage is immense. Life assurance of earning member is must. Consumer finance needs are high. Financial needs
Medium to long-term investments. Ability to take risks. Fixed income, insurance and equity products.
Medium to long-term investments. lesser ability to take risks and save.
Young married Arrival of kids changes with childern the scenario. The expenditure starts raising at a faster rate than income childrens
Medium to long-term investments. Ability to take risks. Portfolio of products, for growth and long term
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education holidays and are highest as this consumer finance stage is ideal for housing. disciplining spending and saving regularly Married with Individuals are in mid- Higher saving ratio elder children career and family has recommended. become bigger with more Priority would shift children. Improved from protection needs finance and better life to investment needs style Medium term needs because of pension for childrens education needs. Because of and marriage. Need for loan repayment needs pension, insurance and requirement cash medical cover higher. flows is higher. Post family /pre- Childrens have become Adequate income and retirement stage. independent. Last chance savings to ensure adequate income to maintain the standards of living after retirement. Retirement stage As a thumb rule, after After retirement the retirement individual need savings rate declines 2/3rd of their final years substantially incomes . In general people would fall in one of the following three categories: 1)Low pension income and low capital to supplement it. 2)Relatively low pension income plus some accumulated capital. 3)sufficient pension income plus substantial assets and capital.
Medium term investments with higher liquidity needs. Portfolio of products including equity, debts and pension plans. Major contribution to pension products contribution to health insurance. Maximum investment in pension funds
The need would correspond to categories 1),2),3) of the previous column: 1)continue to work and/or produce fixed income with no risk at all. 2)invest capital to produce additional income and can take any risk 3)wise people. need to preserve the value of savings against inflation
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PYRAMID OF INVESTMENT AVENUES :
The above pyramid speaks about the different types of risk and the respective growth associated with the risk. It can be seen that, at the lower level risk is very less and their more safety. This kind of portfolio is usually preferred by the in the third level of their life cycle i.e. mainly people who are pension holders. As we move on to the pyramid we see that there is average risk and reasonable growth and income. These are people in second level of their life cycle who are well settled in life who are ready to take the calculated risk. The last level depicts a picture of people who can assume the highest risk. these are people who have just started their career who can take high risk.
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PORTFOLIO MANAGEMENT
Portfolio:
It is combination of all the securities, group of assets - such as stocks, bonds and debt instrument - held by an investor. It is constructed in such a manner to meet the investors goals & objectives . The balanced portfolio is the one which gives maximum return with minimum risk. The process of blending together the broad assets classes so as to obtain optimum return with minimum risk is called portfolio construction. To reduce their risk, investors tend to hold more than just a single stock or other asset. Each piece of the portfolio is divided up into specific assets such as bonds, equities, stock , commodity etc. A passive form of portfolio management involves the matching of future cash flows with future liabilities. Diversification is a familiar term to most investors. In the most general sense, it can be summed up with phrase: "Dont put all of your eggs in one basket." The main objective is reduction of risk in loss of capital & income.
Portfolio Management
The art and science of making decisions about investment mix and policy, matching investments to objectives, asset allocation for individuals and institutions, and balancing risk vs. performance. Portfolio management is all about strengths, weaknesses, opportunities and threats in the choice of debt vs. equity, domestic vs. international, growth vs. safety, and numerous other trade offs encountered in the attempt to maximize return at a given appetite for risk. A Guide To Portfolio Construction In today's financial market place, a well-maintained portfolio is vital to any investor's success. As an individual investor, we need to know how to determine an asset allocation which best conforms to our personal investment goals and strategies. In other words, a portfolio should meet future needs for capital . Investors can construct portfolios aligned to their goals and investment strategies by following a systematic approach. Some essential steps for taking such approaches are as under : Step1:Determining the appropriate Assets Allocation Ascertaining our individual financial situation and investment goals is the first task in constructing a portfolio. Important items to consider are age, how much time we have to grow our investments, as well as amount of capital to invest and future capital needs. A single college graduate just beginning his or her career and a 55-year-old married person expecting to help pay for a child's college education and plans to retire soon will have disparate investment strategies. A second factor to take into account is personality and risk tolerance. Generally, the more risk we can bear, the more aggressive our portfolio will be, devoting a larger portion to
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equities and less to bonds and other fixed-income securities. Conversely, the less risk that's appropriate, the more conservative our portfolio will be. Here are two examples: one suitable for a conservative investor and another for the moderately aggressive investor.
The main goal of a conservative portfolio is to protect its value. The allocation shown above would yield current income from the bonds, and would also provide some longterm capital growth potential from the investment in high-quality equities.
A moderately aggressive portfolio satisfies an average risk tolerance, attracting those willing to accept more risk in their portfolio in order to achieve a balance of capital growth and income.
Step 2: Achieving the Portfolio Designed in Step 1 Once we determined the right asset allocation, we simply need to divide our capital between the appropriate asset classes. On a basic level, this is not difficult: equities are equities, and bonds are bonds. For example, an investor might divide the equity portion between different sectors and market caps, and between domestic and foreign stock. The bond portion might be allocated between those that are short term and long term, government versus corporate debt and so forth. BABASAB PATIL 61
Stock picking - Choose stocks that satisfy the level of risk we want to carry in the equity portion of your portfolio - sector, market cap and stock type are factors to consider. Analyze the companies using stock screeners to shortlist potential picks, than carry out more in-depth analysis on each potential purchase to determine its opportunities and risks going forward. This is the most work-intensive means of adding securities to our portfolio, and requires to regularly monitor price changes in our holdings and stay current on company and industry news. Bond picking - When choosing bonds, there are several factors to consider including the coupon, maturity, the bond type and rating, as well as the general interest rate Step 3: Re-assessing Portfolio Weightings Once we have an established portfolio, we need to analyze and rebalance it periodically because market movements may cause our initial weightings to change. To assess our portfolio's actual asset allocation, quantitatively categorize the investments and determining their values' proportion to the whole. To rebalance, we need to determine which of our positions are over-weighted and those that are under-weighted. Step 4: Rebalancing Strategically Once we have determined which securities we need to reduce and by how much, decide which under-weighted securities we will buy with the proceeds from selling the overweighted securities. When selling assets to rebalance our portfolio, take a moment to consider the tax implications of readjusting our portfolio. Perhaps our investment in growth stocks has appreciated strongly over the past year, but if we were to sell all of our equity positions to rebalance our portfolio, we may incur significant capital gains taxes. In this case it might be more beneficial to simply not contribute any new funds to that asset class in the future while continuing to contribute to other asset classes. This will reduce our growth stocks' weighting in our portfolio over time without incurring capital gains taxes. Importance of Diversification. Throughout the entire portfolio construction process, it is vital that we remember to maintain our diversification. It is not enough simply to own securities from each asset class; we must also diversify within each class. Ensure that our holdings within a given asset class are spread across an array of subclasses and industry sectors. Portfolio Evaluation: Portfolio Manager evaluates portfolio performance and identifies the sources of strength and weakness. The evaluation provides a feedback about the performance to evolve better management strategy.
Portfolio management style

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Basically the fund managers who manage the portfolio of the scheme follow normally two kinds of strategy they can be classified into aggressive defensive strategy. Aggressive Portfolio Management Strategy Aggressive investment management and capital growth strategies are portfolio management strategies which aim at maximizing the return over investment. An aggressive portfolio management strategy often includes high-return high-risk investments such as equities. Aggressive portfolio management requires highest grade of money management and is not at all suitable for those with low-risk tolerance and those with less experience. In an aggressive portfolio management strategy, usually more than 60% of investments are done in equities. Aggressive investors allocate lesser percentage of their money in low-risk low-return or fixed- income products like bonds, treasury notes, money market funds, etc. They often choose to invest in aggressive stocks from high growth companies, small and mid caps, etc. Although these strategies may include methods for limiting downside risks, they will not be as strict as defensive investment strategies. The advantages of aggressive investment strategy include long-term capital growth and higher return over investment. The disadvantages include higher risk, high volatility in asset value, difficulty in estimating the return and the need of active money management. Aggressive investment strategy is suitable for long-term returns and not at all for monthly earnings or living costs. With aggressive strategies, it is better to diversify investments and to include some low-risk investments. Defensive Investment Strategy : As the name suggests, defensive investment strategy is the portfolio management strategy which aims at investing in low-risk products. Defensive investors choose bonds, treasury notes, money market funds, and defensive stocks. Defensive stocks include stocks which are undervalued, less volatile, steadily growing, and/or offering reasonable dividends. Defensive investors must be very strict with their money management and investment product selection. The main advantage of a good defensive investment strategy is the minimized risk of losing the capital. Other advantages include better planning of investments, almost steady and predictable income, and better use of risk-minimizing practices like close stop-losses. Defensive investment strategy suits beginners, investors with less risk-tolerance and investors having less time to monitor their portfolio. Defensive investment strategy is a low profit strategy, and often requires much more capital investment to get a targeted profit. When investing in stocks or similar products,
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defensive investors are limited with their options and often limited with their profit maximizing techniques such as leverage or margin trading. This type of investment Some manager uses mix of both strategies to balance the needs of investors and investment objective of fund house as whole.
Evaluation
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The facts sheets of Magnum Global, Magnum Contra, and Magnum taxgain Funds are given below. By analyzing the data we can observe the type of management the fund manager follows to beat risk and earn extra return, how often the mix in portfolio is changed which is most favored sector is the invest decision of fund manager right and can he break even or out performance the bench mark indices SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manage over US$ 500 Billion worldwide. Exploiting expertise, compounding growth In twenty years of operation, the fund has launched 38 schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistently high returns. A total of over 4.6 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 HNIs. Today, the fund manages over Rs. 28500 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district organisers.
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Portfolio as on 31-9-07 of Magnum Global Fund NAV :45.82 AUM 1138.22 Cr.
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Portfolio As on 28-2-07 of Magnum Global fund

NAV:42.10 AUM: 123021 Cr.
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Portfolio as on 31-3-07 Global Fund

NAV: 41.21 AUM: 1361.69
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NAV: 43.02 AUM: 11504.48
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NAV: 45.50 AUM: 1579.30
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NAV: 46.54 AUM: 1,614 Cr
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Portfolio as on 30-7-07-07 Global Fund

NAV: 47.75 AUM: 1,594.47 Cr
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NAV: 47.30 AUM: 1,626.95 Cr
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NAV: 46.54
AUM: 1,614 Cr
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NAV: 60.20 AUM: 1858.33 l
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NAV: 46.54 AUM: 1,614 Cr
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Snapshot of Magnum Global portfolio management Magnum Global has had a seesaw ride over the years. At times it finds itself at the bottom of the category & then comes out tops only to fade again From a fairly dismal track record, it was the best performer in 2004 and the second best in 2005. Last year too it had a good performance. But with the recent increased diversification, low concentration levels and huge asset base, this mid-cap fund is in unknown territory. The fund's strength has been its ability to pick trends, invest aggressively and to make huge gains. Some of its profitable picks include Dishman Pharmaceuticals, Sintex Industries, India Cements, Infotech Enterprises and Jai Prakash Associates. Its earlier focus of 30-35 stocks has given way to 70, none of which account for more than 5 per cent. This could be the fall-out of its large asset base which has crossed Rs 1,700 crores. Its five-year returns of 64.95 per cent (annualised) rank it way ahead of the category's 51.19 per cent. But its year-to-date and one-year returns are below the category average. SBI Magnum Global Fund has increased exposure to select sectors like banking, metal etc while offloaded large holding in textile, auto, and services sectors. The scheme has made fresh investment in Bank of Baroda whereas exited Arvind Mills. The scheme has raised investment in banking sector as it introduced Bank of Baroda with 2 lakh shares and bought 0.5 lakh shares of Axis Bank. (View - What is SBI Magnum Global Fund buying / selling?) In the metal sector, it has purchased 4.9 lakh shares of Usha Martin and in the conglomerate sector, bought 1.5 lakh shares of Sintex India. In the auto sector, it has sold 14.29 lakh shares of Ashok Leyland and in the pharma sector, offloaded 5.4 lakh shares of Marksans Pharma. In the services sector, it has cut exposure to Hotel Leela by selling 2.43 lakh shares. Thermax, Jaiprakash Associates and Shree Cements were the top stocks held by the scheme in September. Cement (19.64%), Engineering (17.12%) and Metals (8.34%) were the top invested sectors in the scheme's portfolio. (Check out - Top stocks held by SBI Magnum Global Fund). The cash exposure of the scheme has decreased from 11.77% to 6.59%. The total assets managed by the scheme were of Rs 1,728 crores as on September 30, 2007. Over the last one-year, SBI Magnum Global Fund has yielded 41.3% returns as against 47.09% yielded by its benchmark BSE 100 as on October 12, 2007. Currently Magnum Global is performing at its best , and shows the potential to bounce back.
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INVESTMENT OBJECTIVE: To provide the investors maximum growth opportunity through equity investments in stocks of growth-oriented sectors. There are four sub-funds dedicated to specific sectors viz. IT, Pharmaceuticals, FMCG, and a Contrasub fund for investment in stocks currently out of favour. PORTFOLIO MANAGER COMMENTS: The fund continues to be one of the better performing diversified equity fund, while remaining contrarian in its strategy of investment. Industrial manufacturing and energy continue to be the top two sectors by way of weightage, with a slight increase in exposure in each - we increased exposure to metals during the month under review and reduced the fund exposure to the automobile sector. The Sep-Dec '06 quarterly performance of the top ten sectors where the fund is invested continued to show strong traction in net profit growth which is expected to support valuations at current levels.
PORTFOLIO MANAGER COMMENTS:

The fund continues to be one of the better performing diversified equity fund, while remaining contrarian in its strategy of investment. Industrial manufacturing and energy continue to be the top two sectors by way of weightage, with a slight increase in exposure in each - we increased exposure to metals during the month under review and reduced the fund exposure to the automobile sector. The Sep-Dec 06 quarterly performance of the top ten sectors where the fund is invested continued to show strong traction in net profit growth which is expected to support valuations at current
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levels.
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Portfolio as on 31-107 Contra NAV :38.78 AUM 11479.94 Cr
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Portfolio as on 28-2-07 NAV :35.69 144878 Cr
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Portfolio as on 31-3-07 contra NAV :35.55 1499.10 Cr
Portfolio as on 30-4-07 BABASAB PATIL 88
NAV :3.886 AUM 1701.88 Cr
Sectaoral break down
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Portfolio as on 31--07 NAV :41.43 AUM 1837.07 Cr
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Portfolio As on 30 6-07 contra NAV: 41.97 AUM:1837.00 Cr
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Portfolio as on 30-7-07 Contra NAV:44.29 AUM: 1906.56 Cr.
Portfolio as on 30-8-07 Contra
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NAV: 44.05 AUM: 1970.44 Cr.
Portfolio as on 30-10-07 Contra BABASAB PATIL 93
NAV: 55.32 AUM: 2357.13 Cr.
Portfolio as on 30-11-07 Contra BABASAB PATIL 94
NAV: 56.49 AUM: 2474.07 Cr.
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Magnum Contra Contra Funds are mutual funds where the fund manager invests in stocks where he sees value that can be unlocked in the long run and are therefore candidates for a long term bet. SBI`s Magnum Contra Fund, belonging to the Magnum sector funds umbrella, is one such fund that has fairly stuck to its investment objective and succeeded in giving good returns to the investors. The main objective of the fund is to provide the investors maximum growth opportunity through equity investments in stocks of growth-oriented sectors. Launched in July 1999, the SBI Contra Fund is an open ended diversified equity scheme that can invest in large, mid and small cap stocks and has two options of growth and dividend for investors to choose according to their needs. The advantage of being a contra fund is that the fund manager may use his own discretion in selecting stocks under this category and the stocks that he feels are undervalued.
The fund boasts of assets under management (AUM) of Rs 2747 crores making it the largest contra fund available in the market. When looked at from a longer-term horizon the fund has outperformed most of the funds in the equity diversified category with returns of 62.32% over a 3-year period and 72.02% over a 5-year period as compared to the benchmark (BSE 100 index) returns of 46% and 46.2% respectively. When compared with other peer funds having the same investment objective, the fund has left behind every other fund in its category by miles. The portfolio does not have any bias towards market cap and has a mix of large and mid caps with the large caps currently having a higher proportion. The portfolio price earnings (P/E) ratio is fairly high at about 24 compared to peer group of diversified funds while the
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index of volatility, beta, at about 0.91 is on par with similar funds. The portfolio is fairly diversified now with about 600 stocks in the portfolio as compared to 46 stocks a year back. The top 4 sectors contribute to 45% of the total portfolio while the top 10 stocks comprise of 37% of the portfolio. Industrial Manufacturing, Energy and Automobiles are the top 3 sectors the fund has invested in while Reliance Industries, welspun Gugrat Stahi Rohan Ltd, M & M, SBI and Jaiprakash Associates form the top five stocks that the fund has bet upon. The fund has stuck to its investment theme of being a long term fund with most of the stocks remaining the same throughout the last one year without any bias towards a sector as has been the policy of most of SBI`s mutual fund schemes. On investigating further into the holdings of the fund we find that the fund has a fair number of stocks which have not done too well in the recent past. There is about 7.25% exposure to pharma stocks like Cipla, Ranbaxy, Lupin and Biocon in its portfolio which have been under performers on the index for quite sum time now. It also has PSU banking stocks like Punjab National Bank, Oriental Bank of Commerce and Union Bank. Overall, it is worth investment fund since contra investing works best during corrections, a phase that we may see now for the stock market. A s are about to see major correction in the market in coming day.
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Current Asset under Management Rs 3,782 Cr.
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Portfolio As On 30-4-07
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As on 31-5-07 Taxgain
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As on 31-7-07 TAXGAIN
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As on 30-11-07 Tax gain
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As on 31-12-07 Tax gain
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SBI Magnum Tax Gain. Its three- and five-year returns are impressive and have outpaced it immediate peers three-year period.. The portfolio was skewed towards mid-caps earlier in past year and now it is more inclined towards large-cap bias. In the latest portfolio, stocks with a market capitalization of more than Rs 3,000 crores account for 71% per cent of large cap. The turnaround and shift towards large-caps can mitigate the funds risk profile. Investors with a moderate risk profile can consider investment in this fund through the systematic investment route to minimise market risk. The superior performance, even compared with open-ended diversified funds, makes it an ideal investment opportunity for an investor looking beyond tax benefits. An investment in the fund is eligible for tax benefit under Section 80C with a three-year lock-in period.
Portfolio Overview: The fund has a well-diversified portfolio with nearly 90+ stocks. The fund prefers to restrict single-stock exposure below 5 per cent and the top ten account for 35 per cent of the portfolio. However, it takes some concentrated bets on sectors; the top 5 sectors accounted for 50 per cent. The fund appears to adopt a buy-and-hold strategy and is low on portfolio churning. Some of the prominent stocks held for close to a year include Reliance Industry Ltd, Jaiprakash associat Ltd, welspun Gugrat stsahi Rohan Ltd, Thermax Ltd Crompton Graves Ltd.
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CALCULATION OF PRIME RATIOS:
ARITHMETIC MEAN: The most popular & widely used measure for representing the entire data by one value is what most layman call an average & what the statistician call the arithmetic mean. It is obtained by adding together all the items & by dividing this total by the number of items.
AM = y N Where: X = Average or Arithmetic Mean. X = Sum of the frequency. N = Total number of frequency.
STANDARD DEVIATION:
Understanding the nature of the risk is not adequate unless the investor or analyst is capable of expressing it in some quantitative terms. Expressing the risk of a stock in quantitative terms makes it comparable with other stocks. Measurement cannot be assured of cent per cent accuracy because risk is caused by numerous factors such as social, political, economic and managerial efficiency. Measurement provides an approximate quantification of risk. The statistical tool often used to measure and used as a proxy for risk is the standard deviation. It is a measure of the values of the variables around its mean or it is the square root of the sum of the squared deviations from the mean divided by the number of observances. The standard deviation helps to measure the variability of return.
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SD = (y- Y) N
Where, y = NAV return for the period Y = Arithmetic return N= number of observation BETA: While standard deviation determines the volatility of a fund according to the disparity of its returns over a period of time, beta, another useful statistical measure, determines the volatility, or risk, of a fund in comparison to that of its index or benchmark. A fund with a beta very close to 1 means the fund's performance closely matches the index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta less than 1 indicates less volatility than the benchmark.
Beta measures non-diversifiable risk. Beta shows how the price of a security responds to market forces. Beta is calculated by relating the returns on a security with the returns for the market. It can be positive or negative. Calculated as
= NXY - (X)( Y) NX - (X) X = Sum of market return Y = Sum of NAV return N = number of observations
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Many investors mistakenly base the success of their portfolios on returns alone. Few consider the risk that they took to achieve those returns. Since the 1960s, investors have known how to quantify and measure risk with the variability of returns, but no single measure actually looked at both risk and return together. Today, we have three sets of performance measurement tools to assist us with our portfolio evaluations. The Treynor, Sharpe and Jensen ratios combine risk and return performance into a single value, but each is slightly different
SHARPE RATIO Sharpe ratio was derived in 1966 by William Sharpe, it has been one of the most referenced risk/return measures used in finance, and much of this popularity can be attributed to its simplicity. The ratio describes how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset. in the portfolio. The Sharpe measure should only be used for portfolios but not for single securities. The Sharpe ratio tells us whether the returns of a portfolio are because of smart investment decisions or a result of excess risk. This risk premium is difference between the portfolios average rate of return & the risk free rate of interest dividing the result by the standard deviation of the portfolio return. Higher the Sharpe Index better is the performance of the fund.
Sr= rt - r* Where: Sr = Sharpe Index Rp = average return on portfolio t Rf = risk free rate of interest = standard deviation (risk) of return of portfolio
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TREYNOR PERFORMANCE MEASURES:
Jack L. Treynor was the first to provide investors with a composite measure of portfolio performance that also included risk. Treynor's objective was to find a performance measure that could apply to all investors, regardless of their personal risk preferences. The Treynor performance measure is appropriate for single securities & for portfolios. It is the measurement of the returns earned in excess of that which could have been earned on a risk-less investment (i.e., Treasury bill) (per each unit of market risk assumed). The Trey nor performance relates excess return over the risk-free rate (Portfolio Return Risk-Free Rate) / Beta St = Rp- Rf Where: Rp = average return on portfolio t Rf = risk free rate of interest = portfolio BETA
ALPHA: (Jensen Measure) Alpha measures how much if any of this extra risk helped the fund outperform its corresponding benchmark. Using beta, alpha's computation compares the fund's performance to that of the benchmark's risk-adjusted returns and establishes if the fund's returns outperformed the market's, given the same amount of risk. Formula WHERE Rp = Average return of Portfolio Rm= Average return of market index Rf = Average risk free return = Rp --[Rf + (Rm Rf)]
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= Beta
R-Squared :
The R-squared of a fund advises investors if the beta of a mutual fund is measured against an appropriate benchmark. Measuring the correlation of a funds movements to that of an index, R-squared describes the level of association between the funds volatility and market risk, or more specifically, the degree to which a funds volatility is a result of the day-to-day fluctuations experienced by the overall market. R-squared values range between 0 and 100, where 0 represents the least correlation and 100 represents full correlation. If a funds beta has an R-squared value that is close to 100, the beta of the fund should be trusted. On the other hand, an Rsquared value that is close to 0 indicates that the beta is not particularly useful because the fund is being compared against an inappropriate benchmark. Calculated as xy = N * xy x* y .
{[(N*x2) (x)2] [(N*y2) (y)2]}.5
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Performance Evaluation of Three Funds

Magnum Global Fund FormJan-2005 to Dec-2007 Date J an-05 Feb-05 Mar-05 A pr-05 May-05 J un-05 J ul-05 A ug-05 Sep-05 Oct-05 Nov-05 Dec-05 J an-06 Feb-06 Mar-06 A pr-06 May-06 J un-06 J ul-06 A ug-06 Sep-06 Oct-06 Nov-06 Dec-06 J an-07 Feb-07 Mar-07 A pr-07 May-07 J un-07 J ul-07 A ug-07 Sep-07 Oct-07 Nov-07 Dec-07 Date GROWTH OPTION X *X 0.000 6.559 13.002 23.342 75.695 30.377 51.195 7.657 83.237 79.448 138.927 4.315 217.227 14.407 78.844 34.585 191.983 0.001 0.429 88.942 44.214 18.921 24.588 0.551 5.477 74.984 0.848 45.785 38.392 3.349 27.479 3.347 199.484 252.088 0.004 54.965 1934.648 X *X NAV 18.340 20.190 20.400 20.900 22.740 22.340 22.800 22.250 30.240 27.950 30.840 33.220 36.030 37.180 41.450 45.280 41.540 36.360 36.170 39.810 42.760 46.000 51.370 52.080 45.820 42.100 41.210 43.020 45.500 46.540 47.750 47.300 52.130 57.420 60.200 67.470 NAV Y 0.000 0.000 10.087 101.752 1.040 1.082 2.451 6.007 8.804 77.507 -1.759 3.094 2.059 4.240 -2.412 5.819 35.910 1289.536 -7.573 57.347 10.340 106.913 7.717 59.556 8.459 71.551 3.192 10.187 11.485 131.898 9.240 85.378 -8.260 68.223 -12.470 155.499 -0.523 0.273 10.064 101.276 7.410 54.911 7.577 57.414 11.674 136.280 1.382 1.910 -12.020 144.480 -8.119 65.914 -2.114 4.469 4.392 19.291 5.765 33.232 2.286 5.224 2.600 6.760 -0.942 0.888 10.211 104.273 10.148 102.976 4.842 23.440 12.076 145.840 145.019 3244.441 Y y*Y x*y 0.000 25.833 -3.751 -11.841 76.596 -9.695 14.733 -6.675 327.623 67.499 121.874 -16.031 124.670 12.115 101.977 54.340 114.445 -0.440 -0.342 94.909 49.273 32.959 57.887 1.026 -28.130 70.303 -1.946 29.719 35.719 4.183 13.629 1.724 144.225 161.118 -0.316 89.532 1748.744 x*y y-Y 5.944 -3.103 -1.692 4.661 -5.902 -2.084 -6.555 31.767 -11.716 6.197 3.574 4.316 -0.951 7.342 5.097 -12.403 -16.613 -4.666 5.921 3.267 3.434 7.531 -2.761 -16.163 -12.262 -6.257 0.249 1.622 -1.857 -1.543 -5.085 6.068 6.005 0.699 7.933 y-Y y*Yxy*Y 0.000 35.334 9.628 2.863 21.723 34.834 4.343 42.972 1009.149 137.259 38.401 12.775 18.626 0.905 53.900 25.980 153.827 275.989 21.767 35.053 10.675 11.794 56.715 7.622 261.242 150.350 39.150 0.062 2.630 3.450 2.381 25.861 36.826 36.057 0.488 62.939 2643.569 y*Yxy*Y
BSE100 X 3521.710 0.000 3611.900 2.561 3481.660 -3.606 3313.450 -4.831 3601.730 8.700 3800.240 5.512 4072.150 7.155 4184.830 2.767 4566.630 9.123 4159.590 -8.913 4649.870 11.787 4553.280 -2.077 5224.370 14.739 5422.670 3.796 5904.170 8.879 6251.390 5.881 5385.210 -13.856 5387.110 0.035 5422.390 0.655 5933.770 9.431 6328.330 6.649 6603.600 4.350 6931.050 4.959 6982.500 0.742 7145.910 2.340 6527.120 -8.659 6587.210 0.921 7032.930 6.766 7468.700 6.196 7605.370 1.830 8,004.05 5.242 7857.610 -1.830 8967.410 14.124 10391.190 15.877 10384.400 -0.065 11154.280 7.414 124.594 BSE100 X
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MAGNUM GLOBAL FUND
Global Funds:
Arithmetic Mean AM = y_ = 145.109 = 4.03 N 36
Where y = average return of portfolio N = Number of observations
STANDARD DEVIATION
SD = (y-Y) 2 N SD = 2643.569 36 SD = 8.5
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BETA = N*XY (X) (Y) N* (X)2 (X)2 = 36 * 1748.744 (124.59) (145.109) 36*1934.648 (124.59 )2 = 0.8
ALPHA: (Jensen Measure ) = Rp --[Rf + (Rm Rf)] = = 4.03 [0.60 + (3.46 0.60)] = 1.14 WHERE Rp = Average return of Portfolio Rm= Average return of market index Rf = Average risk free return = Beta
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SHRPE RATIO St= Rp Rf S.D Sr = 0.4 Where Rp = Average return of Portfolio Rf = Average risk free return SD = Standard deviation = 4.03 0.60 8.5
Treynor:
Treynor =
Rp-Rf
Treynor = 4.03 0.60 0.8 Treynor = 4.3 Rp = Average return of Portfolio Rf = Average risk free return = Beta
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R-Squared
xy =
N * xy x* y
{[(N*x2) (x)2] [(N*y 2) (y)2]}.5

xy = 36 * 1748.744 (124.59) (145.109) .
{[(36*1934.648) (124.59 )2 ] [(36*3244.44)- (145.1)]}
xy = 0.4
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Portfolio evaluation of Magnum Contra Fund for 3 years

MAGNUM CONTRA FUND growth option Date J an-05 Feb-05 M ar-05 A pr-05 M ay-05 J un-05 J ul-05 A ug-05 Sep-05 Oct-05 Nov-05 Dec-05 J an-06 Feb-06 M ar-06 A pr-06 M ay-06 J un-06 J ul-06 A ug-06 Sep-06 Oct-06 Nov-06 Dec-06 J an-07 Feb-07 M ar-07 A pr-07 M ay-07 J un-07 J ul-07 A ug-07 Sep-07 Oct-07 Nov-07 Dec-07 Date BSE100 3521.710 3611.900 3481.660 3313.450 3601.730 3800.240 4072.150 4184.830 4566.630 4159.590 4649.870 4553.280 5224.370 5422.670 5904.170 6251.390 5385.210 5387.110 5422.390 5933.770 6328.330 6603.600 6931.050 6982.500 7145.910 6527.120 6587.210 7032.930 7468.700 7605.370 8,004.05 7857.610 8967.410 10391.190 10384.400 11154.280 X 0.000 2.561 -3.606 -4.831 8.700 5.512 7.155 2.767 9.123 -8.913 11.787 -2.077 14.739 3.796 8.879 5.881 -13.856 0.035 0.655 9.431 6.649 4.350 4.959 0.742 2.340 -8.659 0.921 6.766 6.196 1.830 5.242 -1.830 14.124 15.877 -0.065 7.414 124.594 BSE100 X X *X 0.000 6.559 13.002 23.342 75.695 30.377 51.195 7.657 83.237 79.448 138.927 4.315 217.227 14.407 78.844 34.585 191.983 0.001 0.429 88.942 44.214 18.921 24.588 0.551 5.477 74.984 0.848 45.785 38.392 3.349 27.479 3.347 199.484 252.088 0.004 54.965 1934.648 X *X NAV 16.640 18.250 18.350 18.000 19.420 19.980 22.470 24.800 26.070 24.380 27.290 28.210 30.650 32.180 36.500 39.010 33.980 32.200 31.900 34.910 37.120 38.990 41.630 41.650 38.780 35.690 35.550 38.860 41.430 41.970 44.290 44.050 49.370 55.310 56.490 62.360 NAV Y y*y 0.000 0.000 9.675 93.615 0.548 0.300 -1.907 3.638 7.889 62.235 2.884 8.315 12.462 155.313 10.369 107.524 5.121 26.224 -6.483 42.023 11.936 142.468 3.371 11.365 8.649 74.812 4.992 24.919 13.424 180.217 6.877 47.289 -12.894 166.259 -5.238 27.441 -0.932 0.868 9.436 89.033 6.331 40.076 5.038 25.379 6.771 45.846 0.048 0.002 -6.891 47.483 -7.968 63.489 -0.392 0.154 9.311 86.692 6.613 43.738 1.303 1.699 5.528 30.556 -0.542 0.294 12.077 145.858 12.032 144.759 2.133 4.552 10.391 107.977 141.963 2052.412 Y y*y y*x 0.000 24.779 -1.976 9.215 68.636 15.893 89.170 28.693 46.721 57.781 140.687 -7.003 127.480 18.947 119.201 40.441 178.658 -0.185 -0.610 88.987 42.094 21.913 33.575 0.036 -16.126 68.998 -0.361 63.001 40.978 2.385 28.977 0.991 170.577 191.029 -0.139 77.039 1770.483 y*x y-Y 0.000 5.619 -3.508 -5.963 3.833 -1.172 8.406 6.313 1.065 -10.539 7.880 -0.685 4.593 0.936 9.368 2.821 -16.950 -9.294 -4.988 5.380 2.275 0.982 2.715 -4.008 -10.947 -12.024 -4.448 5.255 2.557 -2.753 1.472 -4.598 8.021 7.976 -1.923 6.335 0.003 y-Y
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Magnum Contra Fund

Arithmetic Mean AM = y_ N = 141.96 36 = 3.94
Where y = average return of portfolio N = Number of observations
STANDARD DEVIATION
SD = (y- Y) 2 N SD = 38.43 6 SD = 6.40
BETA: = N*XY (X) (Y) N* (X)2 (X)2 = 36 * 1770.48 124.59 * 141.96 36 * 1934.65 124.59 = 0.85
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ALPHA: (Jensen Measure) = Rp --[Rf + (Rm Rf)] = 3.94 [0.60 + 0.85(3.46- 0.60)] = 0.87
WHERE
Rp = Average return of Portfolio Rm= Average return of market index Rf = Average risk free return = Beta SHRPE RATIO Sr = Rp-Rf S.D Sr = 3.94 0.60 6.4 Sr = 0.5 Rp = Average return of Portfolio Rf = Average risk free return SD = Standard deviation
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Treynor:
Treynor = Rp-Rf Treynor = 3.94 0.60 0.85 Treynor = 3.92 where Rp = Average return of Portfolio Rf = Average risk free return = Beta
R-Squared xy = N * xy x* y .
{[(N*x2) (x)2] [(N*y 2) (y)2]}.5

xy = 36 * 1770.48 124.59 * 141.96 .
{[(36 * 1934.65) (124.59) 2] [(36*2052.412)(141.96) 2]} .5
xy = 0.7
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Portfolio evaluation of Magnum Taxgain Fund for 3 years

M aganum Taxgain open end Y 0.000 9.768 4.639 6.534 10.660 -18.474 11.492 11.372 2.759 -5.983 10.659 4.389 5.451 3.249 -17.629 6.121 -13.009 -4.514 2.044 7.915 5.680 6.073 9.116 1.737 3.989 -6.739 -21.401 5.917 3.650 3.328 4.219 -0.239 11.233 12.920 1.384 7.691 86.000 Y y *y x *y 0.000 0.000 95.408 25.015 21.522 -16.728 42.688 -31.566 113.626 92.741 341.278 -101.818 132.061 82.224 129.320 31.467 7.612 25.172 35.797 53.329 113.612 125.633 19.266 -9.118 29.710 80.335 10.556 12.332 310.788 -156.536 37.468 35.998 169.229 180.247 20.380 -0.159 4.177 1.338 62.648 74.646 32.260 37.767 36.879 26.415 83.107 45.205 3.016 1.289 15.914 9.336 45.417 58.358 457.993 -19.702 35.011 40.037 13.323 22.617 11.078 6.091 17.797 22.114 0.057 0.438 126.186 158.657 166.927 205.135 1.917 -0.090 59.153 57.020 2803.182 1175.240 y *y x *y y -Y y *Y x y *Y 0.000 7.379 54.445 2.250 5.063 4.145 17.178 8.271 68.402 -20.863 435.253 9.103 82.860 8.983 80.692 0.370 0.137 -8.372 70.092 8.270 68.391 2.000 4.001 3.062 9.374 0.860 0.740 -20.018 400.728 3.732 13.929 -15.398 237.092 -6.903 47.658 -0.345 0.119 5.526 30.537 3.291 10.829 3.684 13.570 6.727 45.257 -0.652 0.425 1.600 2.561 -9.128 83.325 -23.790 565.954 3.528 12.447 1.261 1.590 0.939 0.882 1.830 3.348 -2.628 6.908 8.844 78.221 10.531 110.903 -1.005 1.009 5.302 28.112 2592.031 y -Y y -Y *y -Y
from jan-07 to dec-07
B S E 100 X X *X NA V DA TE 3521.710 0.000 0.000 33.580 J an-05 2.561 6.559 36.860 Feb-05 3611.900 M ar-05 3481.660 -3.606 13.002 38.570 A pr-05 3313.450 -4.831 23.342 41.090 8.700 75.695 45.470 M ay-05 3601.730 5.512 30.377 37.070 J un-05 3800.240 4072.150 7.155 51.195 41.330 J ul-05 2.767 7.657 46.030 A ug-05 4184.830 9.123 83.237 47.300 Sep-05 4566.630 Oct-05 4159.590 -8.913 79.448 44.470 Nov-05 4649.870 11.787 138.927 49.210 4.315 51.370 Dec-05 4553.280 -2.077 J an-06 5224.370 14.739 217.227 54.170 3.796 14.407 55.930 Feb-06 5422.670 8.879 78.844 46.070 M ar-06 5904.170 5.881 34.585 48.890 A pr-06 6251.390 M ay-06 5385.210 -13.856 191.983 42.530 0.035 0.001 40.610 J un-06 5387.110 5422.390 0.655 0.429 41.440 J ul-06 9.431 88.942 44.720 A ug-06 5933.770 6.649 44.214 47.260 Sep-06 6328.330 4.350 18.921 50.130 Oct-06 6603.600 4.959 24.588 54.700 Nov-06 6931.050 6982.500 0.742 0.551 55.650 Dec-06 2.340 5.477 57.870 J an-07 7145.910 Feb-07 6527.120 -8.659 74.984 53.970 0.921 0.394 42.420 M ar-07 6587.210 6.766 45.785 44.930 A pr-07 7032.930 6.196 38.392 46.570 M ay-07 7468.700 7605.370 1.830 3.349 48.120 J un-07 8,004.05 5.242 27.479 50.150 J ul-07 3.347 50.030 A ug-07 7857.610 -1.830 8967.410 14.124 199.484 55.650 Sep-07 Oct-07 10391.190 15.877 252.088 62.840 0.004 63.710 Nov-07 10384.400 -0.065 7.414 54.965 68.610 Dec-07 11154.280 124.594 1934.195 B S E 100 X X *X NA V
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Magnum Tax Gain Fund

Arithmetic Mean AM = y_ = 86 N AM = 2.39 Where y = average return of portfolio N = Number of observations STANDARD DEVIATION 36
SD = (y-Y) 2 N SD = 2592.03 36 SD = 8.48 BETA: = N*XY (X) (Y) N* (X)2 (X)2 = 36 * 1175.240 124.59 * 86 36 * 1934.65 124.59 = 0.58
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ALPHA: (Jensen Measure) = Rp --[Rf + (Rm Rf)] = 2.39 [0.60 + 0.58 (3.46- 0.60)] = 0.13
WHERE
Rp = Average return of Portfolio Rm= Average return of market index Rf = Average risk free return = Beta SHRPE RATIO Sr= Rp-Rf S.D Sr = 2.39 - 0.60 8.48 Sr = 0.2 Rp = Average return of Portfolio Rf = Average risk free return SD = Standard deviation
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Treynor: Treynor = = Rp-Rf Treynor = 2.39 0.60 0.58 Treynor = 3.0 where Rp = Average return of Portfolio Rf = Average risk free return = Beta
R-Squared xy = N * xy x* y .
{[(N*x2) (x)2] [(N*y 2) (y)2]}.5

xy = 36 * 1175.240 124.59 * 86
{[(36*1934.65) (124.59)] [(36*2803.182)(86)]}.5 xy = 0.19
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Findings Consolidated ratios SBI Mutual Fund

FUND RATIO AVERAGE RETURN STANDERD DEVIATION BETA JENSEN ALPHA SHARPE TRAYNOR R-SQUARED Magnum Global Magnum Contra Magnum Taxgain
4.03 8.5 0.82 1.14 0.4 4.3 0.4
3.94 6.4 0.85 0.87 0.53 3.9 0.7
2.39 8.4 0.58 1.3 0.2 3 0.2
The above calculation of ratios helps us to interpret the performance of three funds Magnum Global, Magnum Contra, & Magnum Taxgain(Growth option). The ratios are calculated with help of trailing monthly returns of the respective fund for three years starting from Jan-2005 to Dec- 2007,along with benchmark indices. From the above tabulation we can understand how the funds performed in past and what are its drawbacks. Proper analysis helps us to recognize the well-managed fund portfolio and invest in best available fund schemes. Arithmetic mean Arithmetic mean gives the average return that can be expected from investment. The arithmetic average return is appropriate as a measure of the central tendency of a number of returns calculated for a particular time i.e. for five years. It shows the From our calculations we see that average monthly return of Global fund is 4 % which is very good. And Contra has return of 3.9 %which is near to above returns.
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But Taxgain average monthly return has decreased to 2.3 which is less then others, this may be due to wrong allocation of asset or market force.
Standard Deviation: The standard deviation essentially reports a fund's volatility, which indicates the tendency of the returns to rise or fall drastically in a short period of time. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return, the average return of a fund over a period of time. The fund with the lower standard deviation would be more optimal because it is maximizing the return received for the amount of risk acquired. From our calculation we can see that Contra fund has got less deviation from its mean which means less risk and more return. Where as Global and Taxgain fund have SD of 8.5 which is more riskier than Contra . Beta While standard deviation determines the volatility of a fund according to the disparity of its returns over a period of time, beta, another useful statistical measure, determines the volatility, or risk, of a fund in comparison to that of its index or benchmark. A fund with a beta very close to 1 means the fund's performance closely matches the index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta less than 1 indicate less volatility than the benchmark. From our calculation we can see that Global And Contra funds Beta is 8.4& 8.5 which is very close to 1 means the funds performance is similar to its benchmark indices (BSE-100). Taxgain beta is .54 and other two funds have beta less then 1, means less volatile then its benchmark.
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Jensen Alpha: Or portfolio Alpha is used to analyze the performance of an investment manager one must look not only at the overall return of a portfolio, but also at the risk of that portfolio. Jensen's measure is one of the ways to help determine if a portfolio is earning the proper return for its level of risk. If the value is positive, then the portfolio is earning excess returns. In other words, a positive value for Jensen's alpha means a fund manager has "beat the market" with his or her stock picking skills. Our calculation shows that portfolio alpha of Global and Taxgain are positive and more then one, which means the fund portfolio is earning excess return, but contra portfolio is .87 near to one but no negative shows that the fund has not earned excess return for the amount of risk it has taken.
Sharpe Measure: The ratio describes how much excess return you are receiving for the extra volatility that you endure for holding a riskier asset. One will always need to be properly compensated for the additional risk taken and for not holding a risk-free asset. Higher the value of sharpe ratio better the fund has performed. Sharpe ratio can be used to rank the desirability of funds or portfolios. In our calculation we see that ttthe sharpe ratio is not impressive but not negetive too. Global funds ratio is 0.4, Contra ratio is 0. 87 and . Taxgain Sharpe ratio is 0.2 which is very low it shows it has not been compensated for the higher risik it had taken Treynor Measure: Treynor ratio is a risk-adjusted measure of return based on systematic risk.the treynor measure reflects the excess return earned per unit of risk It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility. In our calculation we can see that Global fund has 4.3 treynor ratio Contra has 3.9 ratio and for taxgain it is 3, which shows tha all are having high treynor ratio means the funds have earned excess return for each unit of risk taken when we consider systematic risk to calculat risk adjusted return.
R-Squared :
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The R-squared of a fund advises investors if the beta of a mutual fund is measured against an appropriate benchmark. Measuring the correlation of a fund's movements to that of an index, R-squared describes the level of association between the fund's volatility and market risk, or more specifically, the degree to which a fund's volatility is a result of the day-to-day fluctuations experienced by the overall market. R-squared of all the three funds is less then 1 and only contra r-squared is near to one that is 0.7 some what closer to its benchmark volatility and other fund have less similarity with the market risk and its bench mark indices i.e. BSE100 Table below shows the return by the schemes over the period of three years tiapril 2008
Scheme Name SBI Magnum Contra - Growth SBI Magnum Tax Gain Scheme- Growth SBI Magnum Global Fund 94 - Growth Average performance of similar category funds BSE100 1 mth 3 mths 6 mths -9.19 -12.06 -16.15 -12.47 -7.75 1 yr -7.5 3 yrs NAV 48.7 54.2 48.23 50.38
6.89 6.71 9.96 7.86 7.59
24.7 44.75
-9.95 20.38 41.93 -11.44 11.53 38.88 -9.63 18.87 41.85 -6.88 26.6 38.23--
BSE-100 Indices for 3 year

12000.000 10000.000 monthly 8000.000 6000.000 4000.000 2000.000 0.000 10 13 16 19 1 4 7 22 25 31 index 34 28 Series1
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NAV of global fund for 3 years from Jan 2005 toDEC 2007
80.000 70.000 60.000 50.000 NAV 40.000 30.000 20.000 10.000 0.000 1 3 5 7 9 17 31 m onthly 35 11 13 15 19 21 23 25 27 29 33 Series1
NAV of Contra fund for3 years

70.000 60.000 50.000 40.000 30.000 20.000 10.000 0.000 1 4 7 10 13 16 19 22 25 28 31 Monthly 34 NAV Series1
NAV of TAXGAIN
80.000 60.000 NAV 40.000 20.000 0.000 1 4 7 13 25 10 16 19 22 28 31 Monthly 34 Series1
Wee can see that Magnum Contra has performed in terms of NAV Appreciation. Thane other funds.
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Three returns can be graphed as below Contra has performed at par with BSE-100 Index Where as Global and Taxgain are below benchmark
TO sum up all the Three Funds are well managed but still they can have to improve to perform better to sustain in race of vigorous market.
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Conclusion:
The schemes chosen for study proves to be a good investment avenue for all the investors as the risk associated with these schemes is comparatively lower than other top funds. At the same time yielding a very good return. So it should be considered as Long-term investment plan. As per calculation all the ratio is positive indicating a good performance, but still it can do better in future. The volatility in the market might have affected the returns of the schemes for short period like 6 months or one year, but the performance of the schemes for 3 years and above seams to be consistent. The schemes have been the one of the best schemes of SBI MF and hence have bagged many awards With the Indian stock markets growing at a frantic pace in 2007 (much like 2006), investors who were willing to take on risk have been rewarded rather handsomely for their efforts. While the smart investor has been grounded, many an ecstatic investor has lost his bearings taking on even higher dosage of risk for that additional return. Nonetheless, 2007 had a lot of innovation in store for the mutual fund investor, not all of which were positive. And there are indications that 2008 could prove to be just as innovative. Given that the domestic mutual fund industry has far from matured, it is only natural to expect a lot of new products and innovation along the way. 2007 witnessed some of these innovations. Infrastructure funds storm the rankings among the new innovative and successful launch of funds. New trend in fund offer is Real estate mutual funds (REMFs) which are a relatively new phenomenon in India. Their emergence will fuel rapid growth of the industry in the country.
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Suggestions:
The fund should not change its investment strategy of investing long period undervalued stock and wait till they appreciate over period of time.
The should introduce new schemes in real estate Fund as its going to be the most sort after fund in future with lower minimum Investment limit.
The SBI MF should expand its oversee globalize world economy.
investment to take advantage of
The SBI MF should sell units more aggressively as it has advantage of large investor base across the country.
All fund portfolio should have mix of 60- 65 percent large cap stock and 35 40 percent of mid cap stock as there are many emerging business.
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Bibliography 1) Jaspal Singh, History of Mutual Funds, Mutual Funds.
2) Sadhak, Structure of Mutual Fund in India, Mutual funds in India.
3) Punithavathy Pandian, Risk Return Analyses, Security Analyses and Portfolio of Management.
4) Jansen & Fischer, Risk Return Analyses, Security Analyses and Portfolio Management.
5) Vidyaut Kumar Ta, (2007) SBI MF Leading Market Success, Business Barons, pp-26 to 31.
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WEBSITES REFERED: www. valuereserachonline.com www. Icicidirect.com www.investopedia.com www.amfi.com www.sbimf.com www.birlasunlife.com
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Evaluation of Mutual Fundportfolio at Sbi Project Report Mba Finance

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Evaluation of Mutual Fundportfolio at Sbi Project Report Mba Finance

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MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

DESIGN OF THE STUDY

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

METHODOLOGY OF DATA COLLECTION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Corpus under management Rs.29492.9685 Crs. as on Feb 29, 2008

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Chief Manager - Customer Service.

Mr. Didier Turpin

Dy. Chief Executive Officer

Chief Risk Officer

Mr. Achal K. Gupta

Chief Operating Officer

Mr. Ashutosh P Vaidya

Company Secretary & Compliance Officer

Mr. Sanjay Sinha

Chief Investment Officer

Mr. Parijat Agrawal

Head Fixed Income

Mr. R. S. Srinivas Jain

Chief Marketing Officer

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

THE FUND MANAGERS

Chief Investment Officer: Sanjay Sinha

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

PRODUCTS OF SBI MUTUAL FUNDS

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Debt Fund Schemes

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Magnum Balanced Fund Magnum NRI Investment Fund - FlexiAsset Plan

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

HISTORY OF MUTUAL FUNDS :

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Introduction to Mutual Funds

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Instruments where Mutual funds deploy funds

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

Types of Mutual Funds Schemes in India

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

By investment objective: Growth Schemes:

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION

MUTUAL FUNDPORTFOLIO PERFORMANCE EVALUATION