A Summer Training Project Report On

PERFORMANCE COMPARISON DIFFERENT FUNDS OF MUTUAL

An Internship Report submitted in the partial fulfillment of the requirement for the degree of

MASTER OF BUSINESS ADMINISTRATION (2009-2011)

UNDER THE GUIDANCE OF: Rohit Pal Singh (Co-ordinator)

SUBMITTED BY: Kavita Singh 097609

DAYALBAGH EDUCATIONAL INSTITUTE, FACULTY OF SOCIAL SCIENCE, AGRA.

ACKNOWLEDGEMENT

With limitless humility, I would like to praise and thank God, the Supreme and the merciful, who blessed me with all the favorable circumstances to go through this project. I am highly grateful to my project coordinator, Mr. Rohit Pal Singh for all his guidance and support during the course of this training. I am indebted to all the staff members of ICICI Prudential who were always ready to help me. I wish to express my profound gratitude to Dr. K.Santi Swarup, Deptt. Of Management, Faculty of Social Sciences for his learned guidance, constant encouragement and valuable suggestions. I am highly obliged to my parents, brother and sister. I am also indebted to my venerable relatives and friends whose love and affection has played a vital role during the course of this training.

-Kavita Singh

CONTENTS

ACKNOWLEDGEMENT ............................................................................................................................. 2 OBJECTIVES OF THE STUDY ..................................................................................................................... 5 COMPANYS PROFILE .............................................................................................................................. 6 INTRODUCTION ..................................................................................................................................... 10 MUTUAL FUND INDUSTRY .................................................................................................................... 10 HISTORY OF MUTUAL FUND INDUSTRY ................................................................................................ 12 WHAT IS A MUTUAL FUND? .................................................................................................................. 17 MUTUAL FUNDS STRUCTURE ................................................................................................................ 19 TYPES OF MUTUAL FUNDS .................................................................................................................... 29 BENEFITS OF INVESTING THROUGH A MUTUAL FUND ......................................................................... 38 DISADVANTAGES OF MUTUAL FUND .................................................................................................... 39 PERFORMANCE MEASURES OF MUTUAL FUNDS.................................................................................. 40 PERFORMANCE COMPARISON OF MUTUAL FUNDS OF FIVE COMPANIES........................................... 44 CALCULATION OF RISK FREE RATE OF RETURN ....................................... Error! Bookmark not defined. Birla Sun Life Mutual Fund ....................................................................... Error! Bookmark not defined. Kotak Mahindra Mutual Fund .................................................................. Error! Bookmark not defined. Escorts Mutual Fund ................................................................................ Error! Bookmark not defined. ICICI Prudential Mutual Fund ................................................................... Error! Bookmark not defined. Reliance Mutual Fund .............................................................................. Error! Bookmark not defined. DATA ANALYSIS AND INTERPRETATION ................................................... Error! Bookmark not defined. CROSS TABULATION ................................................................................. Error! Bookmark not defined. RESULTS AND FINDINGS........................................................................... Error! Bookmark not defined. SUGGESTIONS .......................................................................................... Error! Bookmark not defined. CONCLUSIONS .......................................................................................... Error! Bookmark not defined. REFERENCES ............................................................................................. Error! Bookmark not defined. APPENDIX ................................................................................................. Error! Bookmark not defined. 4

OBJECTIVES OF THE STUDY

The objectives of the study is to analyses, in detail the growth pattern of mutual fund industry in India and to evaluate performance of different schemes floated by most preferred mutual funds in public fund in public and private sector. The main objectives of this project are: To study about the Mutual Funds in India To study the various Mutual Funds schemes in India. To study about the risk factors involved in the Mutual Funds and How to analyze it? To study the performance indices that can be used for mutual fund comparison. To compare mutual funds of selected five companies on the basis of their return and Sharpe Index. To study the people in which age and income group prefer mutual funds over other investment options.

COMPANYS PROFILE

ICICI Prudential Asset Management Company enjoys the strong parentage of Prudential plc, one of UK's largest players in the insurance & fund management sectors and ICICI Bank, a well-known and trusted name in financial services in India. ICICI Prudential Asset Management Company, in a span of just over eight years, has forged a position of pre-eminence in the Indian Mutual Fund industry as one of the largest asset management companies in the country with average assets under management of Rs. 83,069.89 Crore (as of April 30, 2010). The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread across 230 cities in the country. At inception May 1998 Average Assets Under Management Number of Funds Managed Rs. 160 Crores 2 As on April 30, 2010 Rs. 4,062.34 billion 40

Sponsors

Securities and Exchange Board of India, vide its letter no. MFD/PM/567/02 dated June 4, 2002, has accorded its approval in recognizing ICICI Bank Ltd. as a co-sponsor consequent to the merger of ICICI Ltd. with ICICI Bank Ltd. ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95 billion (US$ 100 billion) at March 31, 2008 and profit after tax of Rs. 41.58 billion for the year ended March 31, 2008. ICICI Bank is second amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization Free float holding excludes all promoter holdings, strategic investments and cross holdings among public sector entities. The Bank has a network of about 1,308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). (Source: Overview at www.icicibank.com).

Headquartered in London, Prudential plc and its affiliated companies together constitute one of the world's leading financial services groups. Prudential provides insurance and financial services in a number of markets around the world, including in Asia, the US, the UK, Europe and the Middle East. Founded in 1848, the company has 249 billion in funds under management (as of 31 December 2008) and more than 21 million customers worldwide. Prudential has been writing
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life insurance in the United Kingdom for 160 years and has had the largest long-term fund in the United Kingdom, for over a century. In the United Kingdom, Prudential is a leading retirement savings and income solutions and life assurance provider. M&G is Prudential's fund management business in the United Kingdom and Europe, with almost 140 billion in funds under management (as of 31 December 2008). In the United States, Jackson National Life, which we acquired in 1986, is one of the largest life insurance companies providing retirement savings and income solutions. In Asia, Prudential is the leading Europe-based life insurer in terms of market coverage and number of top three ranking positions. It is also one of the largest and most successful fund managers in Asia with more top five market rankings than any other regional player. Today, Prudential has life insurance and fund management operations spanning 13 diverse markets in Asia. Prudential plc is incorporated and with its principal place of business in the United Kingdom. It is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States.

VALUES AT ICICI PRUDENTIAL Every member of the ICICI Prudential team is committed to 5 core values: Integrity Customer First Boundaryless Ownership Passion.

MANAGEMENT TEAM
Mr.Nimesh Shah- Managing Director & Chief Executive Officer

Nimesh Shah joined ICICI Prudential AMC as its Managing Director in July 2007.

Mr. B Ramakrishna - Executive Vice President Mr. Raghav Iyengar - Head - Retail & Institutional Business Mr. Kalyan Prasath - Head - Information Technology Mr. Hemant Agarwal - Head - Operations Mr. Ashish Kakkar - Head - Human Resources & Administration Mr. Aashish Somaiyaa - Head Retail Business

Fund Management
Mr. S. Naren - Chief Investment Officer - Equity Mr. Chaitanya Pande - Head Fixed Income

BOARD OF DIRECTORS Asset Management Company Ms. Chanda Kocchar Chairperson Mr. Dileep Choksi Mr. Barry Stowe Mr. N S Kannan Dr. ( Mrs.) Swati A. Piramal Mr. Nimesh Shah Mr. Vikram B. Trivedi Mr. Nilesh Shah Mr. Vijay Thacker

INTRODUCTION

MUTUAL FUND INDUSTRY

The mutual fund industry in India is one of the emerging industries in India. Today, the Indian mutual fund industry has 40 players. The number of public sector players has reduced from 11 to 5. The public sector has gradually receded into the background, passing on a large chunk of market share to private sector players. The Association of Mutual Funds in India (AMFI) is the industry body set up to facilitate the growth of the Indian mutual fund industry. It plays a pro-active role in identifying steps that need to be taken to protect investors and promote the mutual fund sector. It is noteworthy that AMFI is not a Self-Regulatory Organisation (SRO) and its recommendations are not binding on the industry participants. By its very nature, AMFI has an advisors or a counsellors role in the mutual fund industry. Its recommendations become mandatory if and only if the Securities and Exchange Board of India (SEBI) incorporates them into the regulatory framework it stipulates for mutual funds. The Indian mutual fund industry follows a 3-tier structure as shown below:

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1. Sponsors They are the individuals who think of starting a mutual fund. The Sponsor approaches SEBI, the market regulator and also the regulator for mutual funds. Not everyone can start a mutual fund. SEBI will grant a permission to start a mutual fund only to a person of integrity, with significant experience in the financial sector and a certain minimum net worth. These are just some of the factors that come into play.

2. Trust Once SEBI is satisfied with the credentials and eligibility of the proposed Sponsors, the Sponsors then establish a Trust under the Indian Trust Act 1882. Trusts have no legal identity in India and thus cannot enter into contracts. Hence the Trustees are the individuals authorized to act on behalf of the Trust. Contracts are entered into in the name of the Trustees. Once the Trust is created, it is registered with SEBI, after which point, this Trust is known as the mutual fund.
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3. Asset Management Company (AMC) The Trustees appoint the AMC, which is established as a legal entity, to manage the

investors (unit holders) money. In return for this money management on behalf of the mutual fund, the AMC is paid a fee for the services provided. This fee is to be borne by the investors and is deducted from the money collected from them. The AMC has to be approved by SEBI and it functions under the supervision of its Board of Directors, and also under the direction of the Trustees and the regulatory framework established by SEBI. It is the AMC, which in the name of the Trust, that floats new schemes and manages these schemes by buying and selling securities.

HISTORY OF MUTUAL FUND INDUSTRY

The mutual fund industry started in 1963 with the formation of the Unit Trust of India which was the initiative of the Government of India and the Reserve Bank of India. The history of mutual funds in India can be broadly classified into four distinct phases : First Phase : 1964 1987 An Act of Parliament established Unit Trust of India(UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the RBI. In 1978, UTI was delinked from RBI and the 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. 6700 crores of AUM. Second Phase : 1987 1993 (Entry of Public Sector Funds)

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In 1987, it was the entry of non-UTI, public sector mutual funds setup by public sector banks and the Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June,1987. Mobilization as % of gross Savings 5.2% 0.9% 6.1% Domestic

1992-93

Amount Mobilized

Assets Management

Under

UTI Public Sector Total

11,057 1,964 13,021

38,247 8,757 47,004

Third Phase : 1993 2003 (Entry of Private Sector Funds) With the entry of the private sector funds in 1993, a new era started in the Indian Mutual Fund Industry, giving the investors a wider choice of fund families. Also, 1993 was the year in which 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 industry now functions under SEBI Regulations, 1996. At the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The UTI with Rs. 44,541 crores of AUM was way ahead of other mutual funds. Fourth Phase Since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. Growth in Assets under Management

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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. The Assets under Management(AUM) have grown at a rapid pace over the past few years at a CAGR of 35% for the past few years at a CAGR of 35 percent for the five- year period from 31 March, 2005 to 31 March, 2009. Over the 10-year period from 1999 to 2009 encompassing varied economic cycles, the industry grew at 22% CAGR. This growth was despite two falls in the AUM the first being after year 2001 due to dotcom bubble burst and the second in 2008, consequent to the global economic crisis. AUM Base and Growth Relative To the Global Industry India has been amongst the fastest growing markets for mutual funds since 2004 in the fiveyear period from 2004 to 2008 (as of December) the Indian mutual fund industry grew at 29 percent CAGR as against the global average of 4 percent . Over this period, the mutual fund industry in mature markets like the US and France grew at 4 percent, while some of the emerging markets viz. China and Brazil exceeded the growth witnessed in the Indian market.

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AUM to GDP Ratio The ratio of AUM to Indias GDP , gradually increased from 6 percentin 2005 to 11 percent in 2009. Despite this however, this continues to be significantly lower than the ratio in developed countries, where the AUM accounts for 20-70 percent of the GDP.

WHAT IS AN INVESTMENT? In finance, the purchase of a financial product or other item of value with an expectation of favorable future returns. In general terms, investment means the use money in the hope of making more money. There are three fundamentals of investment : 15

Safety Liquidity Return

Investments

INVESTMENT AVENUES

Debt

Insurance

Equity

Small Savings PPF

RBI Bonds

Primary Market

Secondary Market

Post Office

Fixed Return Options

Variable Return Options

1. Post Office 2. Public Provident Fund 3. Bank Fixed Deposits 4. Government Securities or Gilts 5. RBI Taxable Bonds 6. Insurance 7. Company Debentures 8. Company Fixed Deposits

1. Mutual Funds 2. Shares and Stock Markets 3. Gold & Silver 4. Property 5. Foreign Exchange

9. Infrastructure Bonds

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WHAT IS A MUTUAL FUND?

A mutual fund is a legal vehicle that enables a collective group of individuals to: i. Pool their surplus funds and collectively invest in instruments / assets for a common investment objective. ii. Optimize the knowledge and experience of a fund manager, a capacity that individually they may not have. iii. Benefit from the economies of scale which size enables and is not available on an individual basis. Investing in a mutual fund is like an investment made by a collective.

Concept of Mutual Funds

Many Investors with common financial objectives pool their money

Investors, on a proportionate basis, get mutual fund units for the sum contributed to the pool

The money collected from investors is invested into shares, debentures and the other securities by the fund manager

The fund manager realize gains or losses, and collects dividend or interest income

Any capital gains or losses from such investment are passed on to the investors in proportion of the number of units held by them
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An individual as a single investor is likely to have lesser amount of money at disposal than say, a group of friends put together. Now, lets assume that this group of individuals is a novice in investing and so the group turns over the pooled funds to an expert to make their money work for them. This is what a professional Asset Management Company does for mutual funds. The AMC invests the investors money on their behalf into various assets towards a common investment objective. Hence, technically speaking, a mutual fund is an investment vehicle which pools investors money and invests the same for and on behalf of investors, into stocks, bonds, money market instruments and other assets. The money is received by the AMC with a promise that it will be invested in a particular manner by a professional manager (commonly known as fund managers). The fund managers are expected to honor this promise. The SEBI and the Board of Trustees ensure that this actually happens. When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc.) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors. For example: A. If the market value of the assets of a fund is Rs. 100,000 B. The total number of units issued to the investors is equal to 10,000. C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00 D. Now if an investor 'X' owns 5 units of this scheme

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E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by the NAV of the scheme).

MUTUAL FUNDS STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations.

These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908.
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The Custodian maintains the custody of the securities in which the scheme invests. It also keeps a tab on corporate actions such as rights, bonus and dividends declared by the companies in which the fund has invested. The Custodian is appointed by the Board of Trustees. The Custodian also participates in a clearing and settlement system through approved depository companies on behalf of mutual funds, in case of dematerialized securities. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favour of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines TYPES OF RETURN There are three ways, where the total returns provided by mutual funds can be enjoyed by investors: 1. Income is earned from dividends on stocks and interest on bonds. A fund pays out nearly all income it receives over the year to fund owners in the form of a distribution. 2. If the fund sells securities that have increased in price, the fund has a capital gain. Most funds also pass on these gains to investors in a distribution. 3. If fund holdings increase in price but are not sold by the fund manager, the fund's shares increase in price. You can then sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for distributions or to reinvest the earnings and get more shares.

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INDICATORS OF INVESTMENT RISK

There are five main indicators of investment risk that apply to the analysis of stocks, bonds and mutual fund portfolios. They are alpha, beta, r-squared, standard deviation and the Sharpe ratio. These statistical measures are historical predictors of investment risk/volatility and are all major components of modern portfolio theory (MPT).

The MPT is a standard financial and academic methodology used for assessing the performance of equity, fixed-income and mutual fund investments by comparing them to market benchmarks.

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All of these risk measurements are intended to help investors determine the riskreward parameters of their investments. In this article, we'll give a brief explanation of each of these commonly used indicators.

UNDERSTANDING AND MANAGING RISK

All investments whether in shares, debentures or deposits involve risk: share value may go down depending upon the performance of the company, the industry, state of capital markets and the economy; generally, however, longer the term, lesser the risk; companies may default in payment of interest/principal on their debentures/bonds/deposits; the rate of interest on an investment may fall short of the rate of inflation reducing the purchasing power. While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds help to reduce risk through diversification and professional management. The experience and expertise of Mutual Fund managers in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimize risk and maximizes returns. The risk return trade-off indicates that if investor is willing to take higher risk then correspondingly he can expect higher returns and vice versa if he pertains to lower risk instruments, which would be satisfied by lower returns. For example, if an investors opt for bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital protected funds and the profit-bonds that give out more return which is slightly higher as compared to the bank deposits but the risk involved also increases in the same proportion. Thus investors choose mutual funds as their primary means of investing, as Mutual funds provide professional management, diversification, convenience and liquidity. That doesnt mean mutual fund investments risk free. This is because the money that is pooled in are not invested only in debts funds which are less riskier but are also invested in the stock markets which involves a higher risk but can expect higher returns.
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RISKS ASSOCIATED WITH MUTUAL FUNDS At the cornerstone of investing is the basic principle that the greater the risk you take, the greater the potential reward. Remember that the value of all financial investments will fluctuate. Individual tolerance for risk varies, creating a distinct "investment personality" for each investor. Some investors can accept short-term volatility with ease, others with near panic. So whether you consider your investment temperament to be conservative, moderate or aggressive, you need to focus on how comfortable or uncomfortable you will be as the value of your investment moves up or down. Managing Risks

Mutual funds offer incredible flexibility in managing investment risk. Diversification and Automatic Investing (SIP) are two key techniques you can use to reduce your investment risk considerably and reach your long-term financial goals. Diversification

When you invest in one mutual fund, you instantly spread your risk over a number of different companies. You can also diversify over several different kinds of securities by investing in different mutual funds, further reducing your potential risk. Diversification is a basic risk management tool that you will want to use throughout your lifetime as you rebalance your portfolio to meet your changing needs and goals. Investors, who are willing to maintain a mix of equity shares, bonds and money market securities have a greater chance of earning significantly higher returns over time than those who invest in only the most conservative investments.
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Additionally, a diversified approach to investing -- combining the growth potential of equities with the higher income of bonds and the stability of money markets -- helps moderate your risk and enhance your potential return. Systematic Investment Plan (SIP)

The Unitholders of the Scheme can benefit by investing specific Rupee amounts periodically, for a continuous period. Mutual fund SIP allows the investors to invest a fixed amount of Rupees every month or quarter for purchasing additional units of the Scheme at NAV based prices. Here is an illustration using hypothetical figures indicating how the SIP can work for investors: Suppose an investor would like to invest Rs.1,000 under the Systematic Investment Plan on a quarterly basis. Amount Invested (Rs.) Purchase Price (Rs.) No. of Units

Purchased Initial Investment 1 2 3 4 5 6 7 8 9 10 11 TOTAL 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12,000 8.20 7.40 6.10 5.40 6.00 8.20 9.25 10.00 11.25 13.40 14.40 121.95 135.14 163.93 185.19 166.67 121.95 108.11 100.00 88.89 74.63 69.44 1,435.90 1000 10 100

Average unit cost Rs 12,000/1,435.9 = Rs 8.36

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Average unit price 109.6/12 = Rs 9.13 Unit price at beginning of next quarter Rs 14.90 Market value of investment 1435.9 * 14.90= Rs 21,395/The investor liquidates his units and gets back Rs 21,395/Using the SIP strategy the investor can reduce his average cost per unit. The investor gets the advantage of getting more units when the market is turned down.

TYPES OF RISKS
All investments involve some form of risk. Even an insured bank account is subject to the possibility that inflation will rise faster than your earnings, leaving you with less real purchasing power than when you started (Rs. 1000 gets you less than it got your father when he was your age). Consider these common types of risk and evaluate them against potential rewards when you select an investment.

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Market Risk

At times the prices or yields of all the securities in a particular market rise or fall due to broad outside influences. When this happens, the stock prices of both an outstanding, highly profitable company and a fledgling corporation may be affected. This change in price is due to "market risk". Inflation Risk

Sometimes referred to as "loss of purchasing power." Whenever inflation sprints forward faster than the earnings on your investment, you run the risk that you'll actually be able to buy less, not more. Inflation risk also occurs when prices rise faster than your returns. Credit Risk

In short, how stable is the company or entity to which you lend your money when you invest? How certain are you that it will be able to pay the interest you are promised, or repay your principal when the investment matures? Interest Rate Risk

Changing interest rates affect both equities and bonds in many ways. Investors are reminded that "predicting" which way rates will go is rarely successful. A diversified portfolio can help in offseting these changes. Exchange Risk

A number of companies generate revenues in foreign currencies and may have investments or expenses also denominated in foreign currencies. Changes in exchange rates may, therefore, have a positive or negative impact on companies which in turn would have an effect on the investment of the fund.
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Investment Risk

The sectoral fund schemes, investments will be predominantly in equities of select companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the equity performance of such companies and may be more volatile than a more diversified portfolio of equities. Changes in Government Policy

Changes in Government policy especially in regard to the tax benefits may impact the business prospects of the companies leading to an impact on the investments made by the fund.

REGULATORY AUTHORITIES
To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public or by private sector entities including one promoted by foreign entities is governed by these Regulations. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. Its objective is to increase public awareness of the mutual fund industry. AMFI also is engaged in upgrading professional standards and in promoting best industry practices in diverse areas such as valuation, disclosure, transparency etc.

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MUTUAL FUNDS IN INDIA

1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13)

ABN AMRO Mutual Fund Benchmark Mutual Fund Birla Sun Life Mutual Fund Bharti AXA Mutual Fund BOB Mutual Fund Canara Robero Mutual Fund DBS Chola Mutual Fund Deutsche Mutual Fund DSP BlackRock Mutual Fund Escorts Mutual Fund Fidelity Mutual Fund Fortis ( ABN ) Mutual Fund Franklin Templeton Mutual Fund
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14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) 27) 28) 29)

HDFC Mutual Fund HSBC Mutual Fund ING Vysya Mutual Fund JM Financial Mutual Fund Kotak Mahindra Mutual Fund LIC Mutual Fund Principal Mutual Fund ICICI Prudential Mutual Fund Reliance Mutual Fund Sahara Mutual Fund SBI Mutual Fund Standard Chartered Mutual Fund Sundaram Mutual Fund Tata Mutual Fund Taurus Mutual Fund UTI Mutual Fund

TYPES OF MUTUAL FUNDS

There are wide variety of Mutual Fund schemes that cater to investor needs, whatever the age, financial position, risk tolerance and return expectations. The mutual fund schemes can be classified according to both their investment objective (like income, growth, tax saving) as well as the number of units (if these are unlimited then the fund is an open-ended one while if there are limited units then the fund is close-ended).

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Open-ended schemes These funds are sold at the NAV based prices, generally calculated on every business day. These schemes have unlimited capitalization, open-ended schemes do not have a fixed maturity - i.e. there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange. Open-ended funds are bringing in a revival of the mutual fund industry owing to increased liquidity, transparency and performance in the new open-ended funds promoted by the private sector and foreign players. Open-ended funds score over close-ended ones on several counts. Some of these are listed below: a) Any time exit option : The issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. b) Tax advantage : Though Budget 2004 proposals envisage a tax rate of 20.91%(Corporate investors) and 13.06875% (Non-Corporate investors) on dividend distribution made by the Debt funds, the funds continue to remain attractive investment vehicles. In equity plans there is no distribution tax.

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c) Any time entry option : An open-ended fund allows one to enter the fund at any time and even to invest at regular intervals (a systematic investment plan). The open ended funds offered by ICICI Prudential Mutual Fund are Liquid Plan Income Plan Gilt-Treasury Gilt-Investment Balanced Fund Growth Fund Tax Plan FMCG Fund Technology Fund Monthly Income Plan Child Care Plan Power and Short Term Plan

Close ended schemes Schemes that have a stipulated maturity period, limited capitalization and the units are listed on the stock exchange are called close-ended schemes. These schemes have historically seen a lot of subscription. This popularity is estimated to be on account of firstly, public sector MFs having floated a lot of close-ended income schemes with guaranteed returns and secondly easy liquidity on account of listing on the stock exchanges. The closed-ended fund managed by ICICI Prudential Mutual Fund is ICICI Premier. Classification according to investment objectives Objectives Mutual funds have specific investment objectives such as growth of capital, safety of principal, current income or tax-exempt income. In general mutual funds fall into three general categories:
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Equity Funds invest in shares or equity of companies. Fixed-Income funds invest in government or corporate securities that offer fixed rates of return.

Balanced Funds invest in a combination of both stocks and bonds.

i) Growth Funds These funds seek to provide growth of capital with secondary emphasis on dividend. They invest in shares with a potential for growth and capital appreciation. Because they invest in well-established companies where the company itself and the industry in which it operates are thought to have good long-term growth potential, growth funds provide low current income. Growth funds generally incur higher risks than income funds in an effort to secure more pronounced growth. These funds may invest in a broad range of industries or concentrate on one or more industry sectors. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income. ii) Growth and Income Funds Growth and income funds seek long-term growth of capital as well as current income. The investment strategies used to reach these goals vary among funds. Some invest in a dual portfolio consisting of growth stocks and income stocks, or a combination of growth stocks, stocks paying high dividends, preferred stocks, convertible securities or fixed-income securities such as corporate bonds and money market instruments. Others may invest in growth stocks and earn current income by selling covered call options on their portfolio stocks. Growth and income funds have low to moderate stability of principal and moderate potential for current income and growth. They are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income. iii) Fixed-Income Funds

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The goal of fixed income funds is to provide current income consistent with the preservation of capital. These funds invest in corporate bonds or government-backed mortgage securities that have a fixed rate of return. Within the fixed-income category, funds vary greatly in their stability of principal and in their dividend yields. High-yield funds, which seek to maximize yield by investing in lower-rated bonds of longer maturities, entail less stability of principal than fixed-income funds that invest in higher-rated but lower-yielding securities.

Low

Risk

High

Some fixed-income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the Indian Government. Fixed-income funds are suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so. iv) Balanced Fund

33

The Balanced fund aims to provide both growth and income. These funds invest in both shares and fixed income securities in the proportion indicated in their offer documents. Ideal for investors who are looking for a combination of income and moderate growth. v) Money Market Funds/Liquid Funds For the cautious investor, these funds provide a very high stability of principal while seeking a moderate to high current income. They invest in highly liquid, virtually risk-free, short-term debt securities of agencies of the Indian Government, banks and corporations and Treasury Bills. Because of their short-term investments, money market mutual funds are able to keep a virtually constant unit price; only the yield fluctuates. Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with - and usually higher than -- yields on bank savings account, they offer several advantages. Money can be withdrawn any time without penalty. Although not insured, money market funds invest only in highly liquid, short-term, top-rated money market instruments. Money market funds are suitable for investors who want high stability of principal and current income with immediate liquidity. vi) Specialty/Sector Funds These funds invest in securities of a specific industry or sector of the economy such as health care, technology, leisure, utilities or precious metals. The funds enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company. Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various market averages.

34

Index funds generally buy shares in all the companies composing the BSE Sensex or NSE Nifty or other broad stock market indices. They are not suitable for investors who must conserve their principal or maximize current income.

A summary is presented in the table below of the various funds and their investment objectives.

35

Comparison
Investment Avenues Fixed Deposits

with
Liquidity Safety

Other
Returns

Investment
TAX Volatility BENEFIT

Avenues
CONVENIENCE

Low Moderate to high Low Low Low

Low

Moderate

Low

No

Moderate

Equity shares

Low

Uncertain

High

No

Moderate

Co.Debenture Co. Deposit Life Insurance Mutual Funds

Moderate Moderate High

Moderate Low Low

Moderate Low Low

No No Yes

Low Low Moderate

High (Open ended) Mutual Funds High (close ended ) RBI Bonds Bank Fixed Deposit PPF Post Office NSC Gold Infrastructure Bonds Real Estate Public sec. & FII Bonds National Savings Certificate Moderate

Moderate

Moderate

High

No

High

Moderate

Moderate

High

Yes

High

High

Moderate

Low

Yes

Moderate

High

High

Low

Low

No

High

Low High Low High

High High High High

Moderate Good Moderate Moderate

Low Low Low Moderate

Yes Yes Yes No

Moderate Moderate Moderate High

Moderate

High

Moderate

Low

No

Low

Low

Moderate

Variable

High

Yes

High

Moderate

High

Moderate

Moderate

No

High

Low

High

Moderate

Low

Yes

Moderate

36

Comparison between FD, Bonds and Mutual Fund Features

Characteristics Accessibility Tenor Min. Investment Tax Benefits Liquidity Convenience Transparency

FD's Low Fixed(medium) Rs.1000 None Low Medium None

Bonds Low Fixed(Long) Rs.5000 80L, 88 Very Low Tedious None

Mutual Funds High No Lock-in Rs.5000 Dividend Tax-Free Very High Very High Very High

Funds differ in terms of their risk profile Equity Funds High Level of Return, but has a high level of risk too

Debt Funds

Returns comparatively less risky than equity funds

Liquid and Money Market Provide stable but low level of return Funds

37

BENEFITS OF INVESTING THROUGH A MUTUAL FUND

A mutual fund is an entity that pools the money of many investors -- its unit-holders -- to invest in different securities. Investments may be in shares, debt securities, money market securities or a combination of these. Those securities are professionally managed on behalf of the unit-holders, and each investor holds a pro-rata share of the portfolio i.e. entitled to any profits when the securities are sold, but subject to any losses in value as well. i) Professional investment management

Mutual funds hire full-time, high-level investment professionals. Funds can afford to do so as they manage large pools of money. The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale. ii) Diversification Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-holders can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. iii) Low Cost A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000/-, and sometimes less. And with a no-load fund, you pay little or no sales charges to own them. iv) Convenience and Flexibility You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It also uses the services of a high quality custodian and registrar in order to make sure that your convenience remains at the top of our mind. v) Personal Service

38

One call puts you in touch with a specialist who can provide you with information you can use to make your own investment choices. They will provide you personal assistance in buying and selling your fund units, provide fund information and answer questions about your account status. vi)Liquidity In open-ended schemes, you can get your money back promptly at net asset value related prices from the mutual fund itself. vii) Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by the mutual fund scheme.

DISADVANTAGES OF MUTUAL FUND

1. Costs Control Not in the Hands of an Investor: Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments, irrespective of the performance of the fund.

2. No Customized Portfolios: The portfolio of securities in which a fund invests is a decision taken by the fund manager. Investors have no right to interfere in the decision making process of a fund manager, which some investors find as a constraint in achieving their financial objectives.

3. Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult to

select one option from the plethora of funds/schemes/plans available.

39

PERFORMANCE MEASURES OF MUTUAL FUNDS

Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First, general market fluctuations, which affect all the securities present in the market, called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk cannot. By using the risk return relationship, we try to assess the competitive strength of the mutual funds vis--vis one another in a better way. In order to determine the risk-adjusted returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class. The most important and widely used measures of performance are: The Treynor Measure The Sharpe Measure Jenson Model

40

 Fama Model

The Treynor Measure Developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta). Symbolically, it can be represented as: Treynor's Index (Ti) = (Ri - Rf)/Bi. Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund. All risk-averse investors would like to maximize this value. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index is an indication of unfavorable performance. The Sharpe Measure In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as: Sharpe Index (Si) = (Ri - Rf)/Si Where, Si is standard deviation of the fund. While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance. Comparison of Sharpe and Treynor

41

Sharpe and Treynor measures are similar in a way, since they both divide the risk premium by a numerical risk measure. The total risk is appropriate when we are evaluating the risk return relationship for well-diversified portfolios. On the other hand, the systematic risk is the relevant measure of risk when we are evaluating less than fully diversified portfolios or individual stocks. For a well-diversified portfolio the total risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-diversified portfolio, as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that ranks higher on Treynor measure, compared with another fund that is highly diversified, will rank lower on Sharpe Measure. Jenson Model Jenson's model proposes another risk adjusted performance measure. This measure was developed by Michael Jenson and is sometimes referred to as the Differential Return Method. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund given the level of its systematic risk. The surplus between the two returns is called Alpha, which measures the performance of a fund compared with the actual returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm - Rf) Where, Rm is average market return during the given period. After calculating it, alpha can be obtained by subtracting required return from the actual return of the fund. Higher alpha represents superior performance of the fund and vice versa. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor can not mitigate unsystematic risk, as his knowledge of market is primitive. Fama Model The Eugene Fama model is an extension of Jenson model. This model compares the performance, measured in terms of returns, of a fund with the required return commensurate with the total risk associated with it. The difference between these two is taken as a measure of the performance of the fund and is called net selectivity.

42

The net selectivity represents the stock selection skill of the fund manager, as it is the excess return over and above the return required to compensate for the total risk taken by the fund manager. Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf) Where, Sm is standard deviation of market returns. The net selectivity is then calculated by subtracting this required return from the actual return of the fund. Among the above performance measures, two models namely, Treynor measure and Jenson model use systematic risk based on the premise that the unsystematic risk is diversifiable. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. For them, a portfolio can be spread across a number of stocks and sectors. However, Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors, as the ordinary investor lacks the necessary skill and resources to diversified. Moreover, the selection of the fund on the basis of superior stock selection ability of the fund manager will also help in safeguarding the money invested to a great extent.

43

PERFORMANCE COMPARISON OF MUTUAL FUNDS OF 4 COMPANIES

RESEARCH METHODOLOGY
Research is an organized enquiry designed and carried out to provide information for solving a problem. Research methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically.

DATA COLLECTION The task of data collection begins after a research problem has been defined. While deciding about the method of data collection to be used for the study, the researcher should keep in mind two types of data viz, primary and secondary. NAV and corresponding returns of 4 Mutual Funds Schemes: In this study, we have selected the 4 mutual fund companies. The funds are chosen randomly from the available means. Primary data may be described as those data that have been observed and recorded by the researchers for the first time to their knowledge. Primary data can be classified into two types: Data classified by their nature.

44

Data classified according to function.

Primary

data

can

be

collected

through

several

methods.

Some

of

the

important ones are: i. ii. Observation method Interview method

Secondary data are collected from various websites as well as books, newspapers, research papers.

TECHNIQUES USED IN THIS STUDY In this study, we have used various statistics tools like descriptive statistics, percentage, indices available, etc. for analyzing, interpreting and comparison of different mutual fund schemes. The Sharpe Index Model is also used to analyze the performance evaluation and ranking for the difference mutual funds schemes in India. SCOPE OF THE STUDY: The 4 most preferred public and private sector mutual funds schemes have been taken for the study.

LIMITATIONS OF THE STUDY: Due to shortage of time and money, we selected only 4 mutual funds schemes which include public and private mutual funds. My study is based on the limited 4 mutual funds schemes only which affect the results of the study.

45

1. Fidelity Equity Fund (G) Fidelity has been investing in India for its global clients for over ten years, but in 2004, FIL Fund Management Private Limited, the Indian arm opened for business in the country. As on 31 December 2011, with managed assets of over Rs 8,278 crores, 15 funds and over 19 lakh customer accounts, Fidelity is among the fastest growing asset management companies in India. Our on-the-ground investment team comprising six fund managers and seven analysts is supported by three sector analysts in Gurgaon and three regional sector analysts in Hong Kong. We have offices in 16 cities and fidelity.co.in, our website, helps investors across the country to access our funds and services. In keeping with our charter for India, we are committed to answering different customer needs with a well-differentiated range of investment options, which spans six equity funds, six fixed income funds, a hybrid fund, two fund-of-funds and a regular opportunity to invest in fixed maturity plans.

Fidelity Equity Fund - OverviewYou could invest in a large cap, mid cap or small cap fund, select a growth or a value fund. Or, you could choose the five-in-one Fidelity Equity Fund. The fund invests across cap sizes and in value and growth stocks as well. In true Fidelity tradition, we pick stocks based on a companys core strengths underpinned by first-hand, in-depth research carried out by an unrivalled global team of investment professionals. As a core investment, the Fidelity Equity Fund can add real quality to your portfolio. To generate long-term capital growth from a diversified portfolio of Fund objective Inception date Fund Manager Benchmark index SIP availability BSE-200 Yes Growth and Dividend options available. The Dividend option offers Options Minimum payout or reinvestment facilities For opening a folio: Rs. 5,000 For SIP: Rs. 5,000 (minimum single
46

predominantly equity and equity-related securities May 16, 2005 Sandeep Kothari and Anirudh Gopalakrishnan

Investment Entry Load

investment Rs. 500, minimum 6 cheques) NIL For redemption within 1 year from the date of allotment or Purchase

Exit Load

applying First in First Out basis - 1.00%

Key BenefitsFidelity Equity Fund - Key Benefits Ideal investment Greater diversification 360-degree research core No sector, market cap or investment style bias Invests across small, mid and large caps, value and growth stocks Every stock is handpicked and stock selection is underpinned by first-hand research Investment instalments can be planned as part of SIP available monthly budget

Terms of issue Units are available on an ongoing basis at the Applicable NAV. Minimum purchase amount Minimum additional purchase amount Minimum redemption amount/units Rs. 5,000 Rs. 1000 Rs. 1,000/100 Units

Loads Entry NIL

47

For redemption within 1 year from the date of allotment or Purchase applying First in First Out basis - 1.00%

A switch-out or a withdrawal under SWP may also attract an Exit Load like any Redemption. No Exit Loads/CDSC will be chargeable in case of switches made between different options of the Scheme.

No Exit loads will be chargeable in case of; (i) Units allotted on account of dividend reinvestments; and (ii) Units issued by way of bonus, if any.

In case of units switched out/systematically transferred to another option within the Scheme and if subsequently redeemed, for the purpose of determining the Exit Load, the date when such units were first allotted in the Scheme will be considered as the Exit purchase/allotment date.

Risk factors Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Schemes objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor or mutual funds managed by the Sponsor does not indicate the future performance of the Scheme. Fidelity Equity Fund is the name of the Scheme, and this does not in any manner indicate the quality of the Scheme, its future prospects or returns. Investments in the Scheme will be affected by trading volumes, settlement periods, volatility, price fluctuations, inability to sell securities, disinvestment of holdings of any unlisted stocks prior to target date of disinvestment, credit risk and interest rate risk. Please read the Scheme Information Document and Statement of Additional Information carefully before investing.

48

Returns (NAV as on Jul-17-2012) Period 1 mth 3 mth 6 mth 1 year 2 year 3 year 5 year Returns (%) 3.7 -2.4 5.3 -5.7 -0.8 10.8 6.0 Rank # 32 64 56 41 37 5 8

Absolute Returns (in %) Year 2012 2011 2010 2009 2008 2007 Qtr 1 13.7 -4.3 2.7 -0.5 -25.5 -2.3 Qtr 2 -1.9 6.7 42.5 -12.4 22.3 Qtr 3 -8.5 14.1 18.8 1.5 12.0 Qtr 4 -6.8 -0.8 6.6 -22.7 19.1 Annual -21.1 26.3 82.9 -50.5 53.6

49

Competition Assets (Rs.cr) Jun-12 Rank 2 Rank 2 3mth(%)6mth(%) 1yr(%) 3yr(%) 5yr(%)

Large Cap

Crisil Rank

HDFC Top 200 Fund (G)

11,189.82

-2.1 8.05

-5.9

30.8

59.8

Franklin India Bluechip (G)

4,565.20

-0.7 6.55

-2.4

33.1

41.4

ICICI Pru Focused BluechipRank Eqty (G) 1

3,809.54

-1.4 6.05

-3.0

39.7

--

DSP-BR Top 100 Equity - RPRank (G) 2

3,119.27

-4.5 5.75

-5.1

26.0

43.3

Performance

50

51

2. Fidelity India Growth Fund (G)

Overview
Let your money ride on growth. The Fidelity India Growth Fund mirrors the India opportunity. The fund predominantly invests in Indian equities, but can stretch its canvas to Indian companies listed abroad and international companies that benefit from doing business in India. Invest now and you could give your portfolio a boost. Fidelity India Growth Fund - Fund Facts To generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives in the Indian markets. The fund can also additionally invest in Fund objective Inception date foreign securities in international markets. October 23, 2007

securities

upto

10%

as

permitted

by

SEBI/RBI)

Indicative Asset Allocation Fund Manager SIP availability Sandeep Kothari and Anirudh Gopalakrishnan Yes Growth and dividend. The dividend option offers dividend payout and Options Tax Benefits dividend reinvestment facilities. Similar to domestic equity mutual funds. Limited to entry load only. No amortisation, no hidden costs.

Initial

Issue

52

Expenses Lump Sum: Rs. 5,000

SIP: Minimum amount Rs. 5,000 via minimum 6 installments. Each Minimum Investment Entry Load Factors Investment Style Details Scheme Classification An open ended equity growth scheme. To generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related securities, including equity Investment Objective derivatives, in the Indian markets. The Scheme could also additionally invest in Foreign Securities in the international markets. minimum single installment should Rs. 500. Auto-debit facility available from NFO onwards NIL

Normal Asset Allocation Equity and Equity related securities (including Indian and foreign equity securities upto 10% as permitted by SEBI/RBI) Money Market Instruments Terms of issue Units are available on an ongoing basis at the Applicable NAV. Minimum purchase amount Minimum additional purchase amount Minimum redemption amount/units Rs. 5,000 Rs. 1000 Rs. 1,000/100 Units 95% 5%

53

Scheme Information Document, Key Information Memorandum and Application Forms / Transaction Slips available at the ISCs / distributors.

Risk factors Mutual funds, like securities investments, are subject to market risks and there is no guarantee against loss in the Scheme or that the Scheme's objectives will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme can go up or down depending on various factors and forces affecting capital markets. Past performance of the Sponsor/the AMC/the Mutual Fund does not indicate the future performance of the Scheme. Fidelity India Growth Fund is the name of the Scheme, and this does not in any manner indicate the quality of the Scheme, its future prospects or returns. Investments in the Scheme will be affected by trading volumes, settlement periods, volatility, pricefluctuations, inability to sell securities, disinvestment of holdings of any unlisted stocks prior to target date of disinvestment, credit risk and interest rate risk and the risks associated with investments in derivatives. The Scheme may invest in overseas markets which carry risks related to fluctuations in the foreign exchange rates, the nature of the securities market of the country, repatriation of capital due to exchange controls and political circumstances. Please read the Scheme Information Document and Statement of Additional Information carefully before investing. Performance

54

55

3. ICICI Prudential Focused Bluechip Equity Fund

Investment Type: Open Ended Equity Fund Fund Category: Large Cap Investment-mantra Rating: Definite Buy (Can be part of Investor Core portfolio) Investment-mantra Recommended Investment Style : Initiate a Systematic Investment Plan (SIP) in this quality mutual fund

ICICI Prudential Focused Equity Fund, an open-ended equity scheme was launched in May 2008 with an aim to generate long-term total capital appreciation by investing in equity and equity related securities of about 20 large-cap companies. The scheme, without having any sector bias, seeks to capture the best opportunities that are available in the universe of large and well established companies. ICICI Prudential Focused Blue-chip Equity Fund follows the bottom-up approach to identify stocks that are available at a bargain price and have a promising potential for long-term growth. The fund focuses on fact that diversification is needed to reduce risk but too much diversification can result in diminishing returns. So the fund tries to strike a balance between minimum risk and maximum returns. The fund invests in large established companies which are relatively stable and strives to grow investors wealth in long run. Large Cap Orientation: The fund focuses on large cap companies since they have a reputation for consistency and stability built on a long-standing track record. They are generally less volatile when compared to small and mid cap companies. Investment Philosophy This fund invests in about 20 equity and equity related securities, and seeks to generate long term capital appreciation. The portfolio is mandated to select stocks from among the Top 200 stocks in terms of market capitalization on the NSE. This fund adopts a bottom-up approach to Stock Selection and the fund manager has the flexibility to choose between stocks across all themes, sectors and investment styles. The Fund Manager reserves the right to increase the holdings of the fund beyond 20 stocks if the assets managed under the fund grow beyond Rs 1,000 crores.

56

(Source : ICICI Prudential Mutual Fund Website) Key Benefits

Higher Liquidity due to broader investor participation Relatively lower volatility compared to mid and small cap stocks Large caps generally recover faster than small and mid cap stocks Benefit of optimal diversification strategy targeted at long term capital appreciation

Sectoral Weightages Since the launch of this fund, financial services has been the most favored sector for the fund, with an average exposure of almost 23 per cent at present. This is followed by the information technology and oil and gas sectors to which the fund had an average exposure of 14 per cent and 13 per cent, respectively currently.

57

The fund has been substantially overweight on financial sector as compared to its benchmark. In fact, the exposure to the sector has been more than twice as compared to the constituents of the S&P CNX Nifty. The fund began with the investment objective of investing in just about 20 stocks till the time it attained at least Rs 1,000 crore of AUM. Though it has crossed the threshold AUM, the fund is still following the strategy. The fund has retained nearly 40% of its total investments for over two years. These include stocks like ICICI Bank , ITC Bhel, L&T and Infosys Technologies to name a few which the fund could manage to pocket at fairly discounted rates in 2008. Similarly, the fund was also proactive in investing in some of the fine blue chips in 2009 at attractive valuations. These include stocks like Bajaj Auto , Axis Bank , Bank of Baroda , Punjab National Bank , Hindustan Zinc. Currently ITC is the top holding with 7.36% followed by ONGC and PNB with 6.97% and 6.17% respectively. Fund currently has 87.68% allocation to equity, 7.18% of others/Unlisted and Cash/Call accounts for 5.16%. Fund Performance ICICI Prudential Focused Blue-chip Equity delivered 91% returns in 2009 as against 76% returns by its benchmark index the Nifty. Since its inception in May 2008, the scheme has enriched its investors by more than 60% (absolute) gains, i.e., every Rs 100 invested in this scheme in May 2008 is worth more than Rs 160 today. The fund is benchmarked to the S&P CNX Nifty Index and has delivered an annualized return of 56 per cent over the last two years, as compared to 44 per cent returns by the benchmark and peer group respectively, during the same period. An analysis of the month-on-month performance vis-a-vis the benchmark (S&P CNX Nifty) reveals the fund has beaten the benchmark 68 per cent of the times (22 out of 33 months) visa-vis 53 percent of the times by peers (17 out of 33 months). After the market recovery in

58

May 2009, the fund has given an annualized return of 39 per cent vis-a-vis 28 per cent by the benchmark. Since inception, the fund has outperformed its peers and its benchmark a really impressive performance. Facts and Figures If you would have invested in SIP of ICICI Prudential Focused Blue-chip Equity of 5000 per month since its inception till date (May 26, 2008 to Apr 26, 2011) , your investments of 1,80,000 would have been 2,77,315 today giving handsome SIP Investment Returns (CAGR) of 31.92%. Investment-mantra.ins take on ICICI Prudential Focused Blue-chip Equity Fund The fund was initiated in May 2008 which was one of the challenging year of equity markets. However, those who dared to invest in this large cap equity fund must have been a happier lot. Withstanding the initial subdued response, the scheme now boost of assets of size of over 1600 crores and has handsomely rewarded its investors over this period of two and a half years. This fund can definitely be considered as part of your core Mutual Fund portfolio inclined towards providing a large cap flavor and committed to long term capital appreciation from investments in handpicked large cap stocks. The fund has outperformed the broader indices by fairly good margins. Do consider this aggressive large cap mutual fund while evaluating various mutual funds in large cap space for your mutual fund portfolio and SIP your way to achieve your long term goals. Do remember the fund has highly concentrated portfolio so new investors with high-risk quotient can consider investing in the scheme.

59

Returns (NAV as on Jul-17-2012) Period Returns (%) Rank #

1 mth 3 mth 6 mth 1 year 2 year 3 year 5 year

2.6 -1.4 6.0 -3.0 3.4 11.8 -

65 46 52 15 6 4 -

Absolute Returns (in %) Year 2012 2011 Qtr 1 12.7 -2.6 Qtr 2 -1.0 Qtr 3 -9.4 Qtr 4 -2.4 Annual -16.5

60

2010 2009 2008

3.4 2.9 -

2.9 41.6 -9.5

15.4 19.2 -0.7

1.2 -0.2 -19.8

26.5 87.5 -28.6

Asset Allocation (%)(Jun 29, 12) Equity Others Debt Mutual Funds Money Market Cash / Call 93.81 0.21 0.00 N.A 0.00 5.97

Competition Assets (Rs.cr) Jun-12 Rank 2 3mth(%)6mth(%) 1yr(%) 3yr(%) 5yr(%)

Large Cap

Crisil Rank

HDFC Top 200 Fund (G)

11,189.82

-2.1 8.05

-5.9

30.8

59.8

61

Franklin India Bluechip (G)

Rank 2

4,565.20

-0.7 6.55

-2.4

33.1

41.4

Performance Graph

62

4. UTI Opportunities Fund (G) Investment will be made in stocks of those companies engaged in the following areas:

This scheme seeks to generate capital appreciation and/or income distribution by investing the funds of the scheme in equity shares and equity-related instruments. The focus of the scheme is to capitalise on opportunities arising in the market by responding to the dynamically changing Indian economy by movi

Scheme details

Fund Type Investment Plan Launch date Benchmark Asset Size (Rs cr)

:Close-Ended :Growth :Sep 07, 2006 :BSE-100 :1,422.50 (Jun-30-2012) :Rs.5000 :Anoop Bhaskar

Minimum Investment Fund Manager

Load Details

Entry Load Exit Load

:N.A. :N.A.
63

Load Comments Exit Load offer expenses

: An early exit charge equivalent to the unamortized new fund

will be recovered from the investors incase of redemption before expiry of 5 years from the date of allotment

Returns (NAV as on Jul-17-2012) Period 1 mth 3 mth 6 mth 1 year 2 year 3 year 5 year Returns (%) 2.8 -2.0 7.3 2.0 6.7 12.2 11.8 Rank # 58 59 28 2 1 3 1

Absolute Returns (in %) Year 2012 2011 2010 Qtr 1 13.4 -5.5 -2.0 Qtr 2 -0.2 1.6 Qtr 3 -5.1 16.2 Qtr 4 -1.9 0.5 Annual -12.6 17.9

64

2009 2008 2007

3.4 -26.7 -6.0

46.6 -11.3 24.4

19.4 -2.5 19.3

-0.2 -17.4 26.3

94.6 -49.5 70.1

Asset Allocation (%)(Jun 29, 12) Equity Others Debt Mutual Funds Money Market Cash / Call 88.48 0.26 2.42 N.A 0.00 8.82

Performance Graph

65

66