Final Draft 2007

RISK AND RETURN ANALYSIS OF MUTUAL FUNDS
INTRODUCTION
According to Shakespeare out of this nettle, danger, we pluck this flower, safety'. The economic development model adopted by India in the post-independence era has been characterized by mixed economy with the public sector playing a dominating role and the activities in private industrial sector control measures emaciated from time to time. The industrial policy resolution was introduced by the government in the 1948, immediately after the independence. This outlined the approach to industrial growth and development. The industrial policy statement of 1980 focused attention on the need for promoting competition in the domestic market, technological up gradation and modernization. A number of policy and procedural changes were introduced in 1985 and 1986, aimed at increasing productivity, reducing costs, improving quality, opening domestic market to increase competition and making free the public sector from constraints. Overall, in the seventh plan period (1985-86 to 1989-90), Indian industries grew by an impressive average annual rate of 8.5 percent. The last two decades have seen a phenomenal expansion in the geographical coverage and financial spread of our financial system. The spread of the banking system has been a major factor in promoting financial intermediation in the economy and in the growth of financial savings. With progressive liberalization of economic policies, there has been a rapid growth of capital market, money market and financial services industry including merchant banking, leasing and venture capital. Consistent with this evolution of the financial sector, the mutual fund industry has also come to occupy an important place. The prospectus investors have various options to invest his surplus funds, expecting reasonable returns from his investment .There are various avenues available in the present scenario, like: Post office Deposit Real Estate Equity shares Debentures Bank Deposits Gold / Silver Mutual Funds RJS Institute of Management Studies 1
CONCEPT OF MUTUAL FUNDS:

Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. Since the stated investment objectives of a mutual fund scheme generally form the basis for an investor's decision to contribute money to the pool, a mutual fund can not deviate from its stated objectives at any point of time. Every Mutual Fund is managed by a fund manager, who using his investment management skills and necessary research works ensures much better return than what an investor can manage on his own. The capital appreciation and other incomes earned from these investments are passed on to the investors (also known as unit holders) in proportion of the number of units they own.
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INTRODUCTION TO MUTUAL FUNDS:

The most developed and developing countries the mutual fund cult has been catching on in India. The important reasons for this interesting occurrence are: 1. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. 2. Mutual fund brings the benefits of diversification and money management to the individual investor, providing an opportunity for financial success that was once available only to a select few. Understanding Mutual funds is easy as it's such a straightforward concept. A mutual fund is a company that pools the money of many investors, its shareholders to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally & efficiently managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investor, mutual funds propose the benefit of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your odds to diversify. A Mutual Fund is a trust registered with the Securities and Exchange Board of India (SEBI), which pools up the money from individual / corporate investors and invests the same on behalf of the investors /unit holders, in equity shares, Government securities, Bonds, Call money markets etc., and distributes the profits. 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. This pooled income is professionally managed on behalf of the unit-holders, and each investor holds a proportion of the portfolio RJS Institute of Management Studies 3
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS i.e. entitled not only to profits when the securities are sold, but also subject to any losses in value as well.
For retail investor who does not have the time and expertise to analyze and invest in stocks and bonds, mutual funds offer a viable investment alternative. This is because: 1. Mutual Funds provide the benefit of cheap access to expensive stocks. 2. Mutual funds diversify the risk of the investor by investing in a basket of assets. 3. A team of professional fund managers manages them with in-depth research inputs from Investment analysts. 4. Being institutions with good bargaining power in markets, mutual funds have access to crucial corporate information which individual investors cannot access.
HISTORY OF MUTUAL FUNDS:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while RJS Institute of Management Studies 4
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS 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. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. Mutual funds go back to the times of the Egyptians and Phoneticians when they sold shares in caravans and vessels to spread the risk of these ventures. The foreign and colonial government Trust of London of 1868 is considered to be the fore-runner of the modern concept of mutual funds. The USA is, however, considered to be the Mecca of modern mutual funds. By the early - 1930s quite a large number of close - ended mutual funds were in operation in the U.S.A. Much later in 1954, the committee on finance for the private sector recommended mobilization of savings of the middle class investors through unit trusts. Finally in July 1964, the concept took root in India when Unit Trust of India was set up with the twin objective of mobilizing household savings and investing the funds in the capital market for industrial growth. Household sector accounted for about 80 percent of nations savings and only about one third of such savings was available to the corporate sector. It was felt that UTI could be an effective vehicle for channelzing progressively larger shares of household savings to productive investments in the corporate sector. The process of economic liberalization in the eighties not only brought in dramatic changes in the environment for Indian industries, corporate sector and the capital market but also led to the emergence of demand for newer financial services such as issue management, corporate counseling, capital restructuring and loan syndication. After two decades of UTI monopoly, recently some other public sector organizations like LIC (1989), GIC (1991 ), SBI (1987), Can Bank (1987), Indian Bank (1990), Bank of India (1990), Punjab National Bank (1990) have been permitted to set up mutual funds. Mr. M.R. Mayya the Executive Director of Bombay Stock Exchange opined recently that the decade of nineties will belong to mutual funds because the ordinary investor does not have the time, experience and patience to take independent investment decisions on his own. Importance of Mutual Fund Small investors face a lot of problems in the share market, limited resources, lack of professional advice, lack of information etc. Mutual funds have come as a much needed help to these investors. It is a special type of institutional device or an investment vehicle through which the investors pool their savings which are to be invested under the guidance of a team of experts in wide variety of portfolios of corporate securities in such a way, so as to minimize risk, while ensuring safety and steady return on RJS Institute of Management Studies 6
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS investment. It forms an important part of the capital market, providing the benefits of a diversified portfolio and expert fund management to a large number, particularly small investors. Now days, mutual fund is gaining its popularity due to the following reasons: 1. With the emphasis on increase in domestic savings and improvement in deployment of investment through markets, the need and scope for mutual fund operation has increased tremendously. The basic purpose of reforms in the financial sector was to enhance the generation of domestic resources by reducing the dependence on outside funds. This calls for a market based institution which can tap the vast potential of domestic savings and channelize them for profitable investments. Mutual funds are not only best suited for the purpose but also capable of meeting this challenge. 2. An ordinary investor who applies for share in a public issue of any company is not assured of any firm allotment. But mutual funds who subscribe to the capital issue made by companies get firm allotment of shares. Mutual fund latter sell these shares in the same market and to the Promoters of the company at a much higher price. Hence, mutual fund creates the investors confidence. 3. The psycho of the typical Indian investor has been summed up by Mr. S.A. Dave, Chairman of UTI, in three words; Yield, Liquidity and Security. The mutual funds, being set up in the public sector, have given the impression of being as safe a conduit for investment as bank deposits. Besides, the assured returns promised by them have investors had. 4. Great appeal for the typical Indian investor. As mutual funds are managed by professionals, they are considered to have a better knowledge of market behaviors. Besides, they bring a certain competence to their job. They also maximize gains by proper selection and timing of investment. 5. Another important thing is that the dividends and capital gains are reinvested automatically in mutual funds and hence are not fritted away. The automatic reinvestment feature of a mutual fund is a form of forced saving and can make a big difference in the long run. 6. The mutual fund operation provides a reasonable protection to investors. Besides, presently all Schemes of mutual funds provide tax relief under Section 80 L of the Income Tax Act and in addition, some schemes provide tax relief under Section 88 of RJS Institute of Management Studies 7
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS the Income Tax Act lead to the growth of importance of mutual fund in the minds of the investors. 7. As mutual funds creates awareness among urban and rural middle class people about the benefits of investment in capital market, through profitable and safe avenues, mutual fund could be able to make up a large amount of the surplus funds available with these people. 8. The mutual funds attracts foreign capital flow in the country and secure profitable investment avenues abroad for domestic savings through the opening of off shore funds in various foreign investors. Lastly another notable thing is that mutual funds are controlled and regulated by SEBI and hence are considered safe. Due to all these benefits the importance of mutual fund has been increasing.
GROWTH TREND OF MUTUAL FUND

Opening of the mutual fund industry to the public sector banks and insurance companies, led to the launching of more and more of new schemes. The mutual fund industry in India has grown fast in the recent period. The performance is encouraging especially because the emphasis in India has been on individual investors rather in contrast to advanced countries where mutual funds depend largely on institutional investors, In general, it appears that the mutual fund in India have given a good account of themselves so far. UTI's annual sale of units crossed Rs.1000 crores mark in 1986 to 87, 2000 crores mark in 1987-88 and reached Rs.5500 crores mark in 1989 to 90. During 1990 to 91 on account of decline of corporate interest, sales declined to Rs.4100 crores though individual sales increased over its preceding year. LICMF has concentrated on funds which includes life and accident cover. GICMF provide home insurance policy. The bank sponsored mutual fund floated regular income, growth and tax incentives schemes. Together the eight mutual fund service more than 15 million investors with UTI alone holds for 13 million unit holding accounts. Magnum Regular Income Scheme 1987 assured a return of 12 percent but gave 20 percent dividend in 1993, UTI record 26 percent dividend for 1992 to 93 under the unit 1964 scheme. Magnum Tax saving scheme 1988 to 89 did not promise RJS Institute of Management Studies 8
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS any return but declared 14 percent dividend in 1993 and recorded a capital appreciation of 15 percent in the first year. Equity oriented scheme have earned attractive returns. Especially since early 1991 there has been a steady increase in the number of equity oriented growth funds. With the boom of June 1990 and then again 1991 due to the implementation of new economic policies towards structure of change the price of securities in stock market appreciated considerably. The high rate of growth in equity price led to a high rate of appreciation in the net asset value of the equity oriented funds for which investors started changing their preferences from fixed income funds to growth oriented or unfixed income funds. That is why more equity oriented mutual funds were launched in 1991. Master share provide a respective dividend of 18 per cent in 1993, Can share earned a dividend of 15 percent in 1993. In general the Unit Trust of India which manages over 28,000 crores under various schemes has for its service an excellent reputation. The concept of mutual funds in India dates back to the year 1963. The era between 1963 and 1987 marked the existence of only one mutual fund company in India with Rs. 67bn assets under management (AUM), by the end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund companies in India took their position in mutual fund market. The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund. The succeeding decade showed a new horizon in Indian mutual fund industry. By the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private sector funds started penetrating the fund families. In the same year the first Mutual Fund Regulations came into existence with re-registering all mutual funds except UTI. The regulations were further given a revised shape in 1996. Kothari Pioneer was the first private sector mutual fund company in India which has now merged with Franklin Templeton. Just after ten years with private sector players penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 44 mutual fund companies in India.
Some facts for the growth of mutual funds in India

Number of foreign AMCs is in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. We have approximately 44 mutual funds which are much less than US having more than 800. There is a big scope for expansion. 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products. SEBI allowing the MF's to launch commodity mutual funds. Emphasis on better corporate governance. Trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice. RJS Institute of Management Studies 10
CATEGORIES OF MUTUAL FUND:
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Mutual funds can be classified as follow:

Based on their structure:
Open-ended funds: Investors can buy and sell the units from the fund, at any
point of time.
Close-ended
funds: These funds raise money from investors only once.
Therefore, after the offer period, fresh investments can not be made into the fund. If the fund is listed on a stocks exchange the units can be traded like stocks (E.g., Morgan Stanley Growth Fund). Recently, most of the New Fund Offers of closeended funds provided liquidity window on a periodic basis such as monthly or weekly. Redemption of units can be made during specified intervals. Therefore, such funds have relatively low liquidity.
Based on their investment objective: Equity funds: These funds invest in equities and equity related instruments.
With fluctuating share prices, such funds show volatile performance, even losses. However, short term fluctuations in the market, generally smoothens out in the long term, thereby offering higher returns at relatively lower volatility. At the same time, such funds can yield great capital appreciation as, historically, equities have outperformed all asset classes in the long term. Hence, investment in equity funds should be considered for a period of at least 3-5 years. It can be further classified as:
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS i) Index funds- In this case a key stock market index, like BSE Sensex or Nifty is tracked. Their portfolio mirrors the benchmark index both in terms of composition
and individual stock weightages.
ii) Equity diversified funds- 100% of the capital is invested in equities spreading across different sectors and stocks.
iii|) Dividend yield funds- it is similar to the equity diversified funds except that they invest in companies offering high dividend yields.
iv) Thematic funds- Invest 100% of the assets in sectors which are related through some theme. e.g. -An infrastructure fund invests in power, construction, cements sectors etc.
v) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A banking sector fund will invest in banking stocks.
vi) ELSS- Equity Linked Saving Scheme provides tax benefit to the investors.
Balanced fund: Their investment portfolio includes both debt and equity. As a result, on
the risk-return ladder, they fall between equity and debt funds. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. Following are balanced funds classes:
i) Debt-oriented funds -Investment below 65% in equities.
ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.
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Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore, they invest exclusively in fixed-income instruments like bonds, debentures, Government of India securities; and money market instruments such as certificates of deposit (CD), commercial paper (CP) and call money. Put your money into any of these debt funds depending on your investment horizon and needs.
i) Liquid funds- These funds invest 100% in money market instruments, a large portion being invested in call money market.
ii) Gilt funds ST- They invest 100% of their portfolio in government securities of and T-bills.
iii) Floating rate funds - Invest in short-term debt papers. Floaters invest in debt instruments which have variable coupon rate.
iv) Arbitrage fund- They generate income through arbitrage opportunities due to mis-pricing between cash market and derivatives market. Funds are allocated to equities, derivatives and money markets. Higher proportion (around 75%) is put in money markets, in the absence of arbitrage opportunities.
v) Gilt funds LT- They invest 100% of their portfolio in long-term government securities.
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vi) Income funds LT- Typically, such funds invest a major portion of the portfolio in long-term debt papers.
vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities.
viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in line with that of the fund.
ADVANTAGES OF MUTUAL FUND
S. No.
Advantage
Particulars Mutual Funds invest in a well-diversified portfolio of
1.
Portfolio Diversification
securities which enables investor to hold a diversified investment portfolio (whether the amount of
investment is big or small). Fund manager undergoes through various research 2. Professional Management works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. Investors acquire a diversified portfolio of securities 3. Less Risk even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS Due to the economies of scale (benefits of larger 4. Low Transaction Costs volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. An investor may not be able to sell some of the 5. Liquidity shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid. Mutual funds provide investors with various schemes with different investment objectives. Investors have 6. Choice of Schemes the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options Funds provide investors with updated information pertaining to the markets and the schemes. All 7. Transparency material facts are disclosed to investors as required by the regulator.
Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can 8. Flexibility switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Mutual Fund industry is part of a well-regulated investment environment where the interests of the 9. Safety investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS DISADVANTAGES OF MUTUAL FUND S. No. Disadvantage Costs Control Not in 1. the Hands of an Particulars Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units), irrespective of the performance of the fund. The portfolio of securities in which a fund invests is a No Portfolios Customized 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. Many investors find it difficult to select one option Difficulty in Selecting from the plethora of funds/schemes/plans available. 3. a Suitable Fund For this, they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.
Investor
2.
Scheme
The following chart gives us operational flow of a Mutual Fund
MUTUAL FUND
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ORGANIZATIONAL STRUCTURE OF MUTUAL FUNDS:

There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:
Terms:
a. Unit Holders: A Significant Unit holder means any entity holding 5% or more of the total corpus of any Scheme managed by the member and includes all entities directly or indirectly controlled by such a unit holder. b. Trustees: A trustee means a member of the Board of Trustees or a director of the Trustee Company. c. Sponsors: One that finances a project or an event carried out by another person or group. d. Transfer Agent: An agent employed by a corporation or mutual fund to
maintain shareholder records, including purchases, sales, and account balances.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS e. Custodian: An entity, usually a bank or trust company,
which holds and safeguards securities owned by a mutual fund. Such an entity may also act as a transfer agent. also called mutual fund corporation
f. AMC (Asset Management Company): A company that invests its clients' pooled fund into securities that match its declared financial objectives. Asset management companies provide investors with more diversification and investing options than they would have by themselves. g. The Mutual Fund: Mutual fund is a trust that pools money from a group of investors (sharing common financial goals) and invest the money thus collected into asset classes that match the stated investment objectives of the scheme. h. SEBI: SEBI means Securities and Exchange Board of India.
ASSOCIATIONS OF MUTUAL FUNDS (AMFI) IN INDIA

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

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The objectives are as follows: This mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. Association of Mutual Fund of India does represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.
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MAJOR MUTUAL FUND COMPANIES IN INDIA

ABN AMRO Mutual Fund: ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.
Birla Sun Life Mutual Fund: Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life Financial. Sun Life Financial is a global organization evolved in 1871 and is being represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to investment. The AUM of the company is Rs. 57689.46 crores as at 28-feb.2011.
Bank of Baroda Mutual Fund (BOB Mutual Fund): Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992 under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992. Deutsche Bank AG is the custodian.
HDFC Mutual Fund: HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely Housing Development Finance Corporation Limited and Standard Life Investments Limited. The net AUM of the company is Rs. 86635.55 crores as at 28-feb.2011.
HSBC Mutual Fund: HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund. RJS Institute of Management Studies 21
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS ING Vysya Mutual Fund: ING Vysya Mutual Fund was setup on February 11, 1999 with the same named Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment Management (India) Pvt. Ltd. was incorporated on April 6, 1998.
ICICI Prudential Mutual Fund: The mutual fund of ICICI is a joint venture with Prudential Plc. of America, one of the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund was setup on 13th of October, 1993 with two sponsors, Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management Company Limited incorporated on 22nd of June, 1993.
Sahara Mutual Fund: Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial Corporation Ltd. as the sponsor. Sahara Asset Management Company Private Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crores.
State Bank of India Mutual Fund: State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it is the largest Bank sponsored Mutual Fund in India. They have already launched 38 Schemes out of which 15 have already yielded handsome returns to investors. State Bank of India Mutual Fund has more than Rs. 42,750.02 Crores as AUM As on February 2011. Now it has an investor base of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund: Tata Mutual Fund is a Trust under the Indian Trust Act, 1882. The sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment manager is Tata Asset Management Limited and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limited's is one of the fastest in the country. RJS Institute of Management Studies 22
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS Kotak Mahindra Mutual Fund: Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL. It is presently having more than 1, 99,818 investors in its various schemes.
KMAMC started its operations in December 1998. Kotak Mahindra Mutual Fund offers schemes catering to investors with varying risk - return profiles. It was the first company to launch dedicated gilt scheme investing only in government securities.
Unit Trust of India Mutual Fund: UTI Asset Management Company Private Limited, established in Jan 14, 2003, manages the UTI Mutual Fund with the support of UTI Trustee Company Private Limited. UTI Asset Management Company presently manages a corpus of over Rs.20000 Crores. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance Funds.
Reliance Mutual Fund: Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for launching of various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors the opportunities to make investments in diversified securities.
Standard Chartered Mutual Fund: Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC which was incorporated with SEBI on December 20, 1999.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS Franklin Templeton India Mutual Fund: The group, Franklin Templeton Investments is a California (USA) based company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest financial services groups in the world. Investors can buy or sell the Mutual Fund through their financial advisor or through mail or through their website. They have Open end Diversified Equity schemes, Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax Saving schemes, Open end Income and Liquid schemes, Closed end Income schemes and Open end Fund of Funds schemes to offer.
Morgan Stanley Mutual Fund India: Morgan Stanley is a worldwide financial services company and its leading in the market in securities, investment management and credit services. Morgan Stanley Investment Management (MISM) was established in the year 1975. It provides customized asset management services and products to governments, corporations, pension funds and non-profit organizations. Its services are also extended to high net worth individuals and retail investors. In India it is known as Morgan Stanley Investment Management Private Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified equity scheme serving the needs of Indian retail investors focusing on a long-term capital appreciation.
Escorts Mutual Fund: Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as its sponsor. The Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated on December 1, 1995 with the name Escorts Asset Management Limited.
Alliance Capital Mutual Fund: Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance Capital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India (Pvt) Ltd. with the corporate office in Mumbai. RJS Institute of Management Studies 24
Benchmark Mutual Fund: Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company. Incorporated on October 16, 2000 and headquartered in Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.
Canbank Mutual Fund: Canbank Mutual Fund was setup on December 19, 1987 with Canara Bank acting as the sponsor. Canbank Investment Management Services Ltd. incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.
Chola Mutual Fund: Chola Mutual Fund under the sponsorship of Cholamandalam Investment & Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.
LIC Mutual Fund: Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. . The Company started its business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company Ltd as the Investment Managers for LIC Mutual Fund.
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STATUTORY REGULATIONS:
There is an association called Associations of Mutual Funds in India (AMFI) where all the mutual fund companies are members. Mutual funds in India are governed by the Securities Exchange Board of India (SEBI) mutual fund regulations since 1996 as amended from time to time. It is a non-profit organization committed to develop the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of Mutual Funds and their unit holders. Mutual Fund both conceptually and operationally is different from other savings instruments. Mutual Funds invest in instruments of capital markets which have different risk-return profile. It is very necessary that the investors understand properly the conceptual framework of Mutual Fund and its operational features. AMFI therefore thought it appropriate to produce a booklet in the form of an investors concise guide that will explain in simple language the concept and working of Mutual Funds. All the mutual funds must get registered with SEBI. The only exception is the UTI, since it is a corporation formed under a separate Act of Parliament. The main statutory regulations protecting the interest of the investors are as follows: On the basis of performance of the mutual funds the investors should decide when to enter / exit from a mutual fund scheme. Mutual funds are required to send annual report or abridged annual report to the unit holders at the end of the year. In case the complaints are not solved by the trustees of the mutual fund, the investors can approach SEBI for redressal of their complaints / grievances. The government has taken sufficient initiatives through SEBI to safeguard the interest of the individual investors who have invested in mutual fund schemes. i. ii. iii. Members shall not, in respect of any securities, be party toCreating a false market, Price rigging or manipulation Passing of price sensitive information to brokers, Members of stock exchanges and other players in the capital markets or take action which is unethical or unfair to investors.
26
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS FREQUENTLY USED TERMS:
Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Sale Price. is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price. Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes. Repurchase or Back-end Load Is a charge collected by a scheme when it buys back the units from the unit holders
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SBI MUTUAL FUND:

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 State Bank of India (SBI) Indias largest banking enterprise. The institution has grown immensely since its inception and today it is Indias largest bank, patronised by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management
companies that manages over US$ 500 Billion worldwide. 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 consistent returns. A total of over 5.8 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. 41497.86 crores of assets and has a diverse profile of investors actively parking their investments across 38 active schemes. (As on December 2010). 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. 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 20052006) and most recently with the CNBC TV 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for its schemes. RJS Institute of Management Studies 28
Sponsors of SBI mutual fund:

State Bank of India (SBI): SBI is the largest state-owned banking and financial services company in India. The bank traces its ancestry to British India, through the Imperial Bank of India, to the founding in 1806 of the Bank of Calcutta, making it the oldest commercial bank in the Indian Subcontinent. Bank of Madras merged into the other two presidency banks, Bank of Calcutta and Bank of Bombay to form Imperial Bank of India, which in turn became State Bank of India. The government of India nationalized the Imperial Bank of India in 1955, with the Reserve Bank of India taking a 60% stake, and renamed it the State Bank of India. In 2008, the government took over the stake held by the Reserve Bank of India. SBI provides a range of banking products through its vast network of branches in India and overseas, including products aimed at non-resident Indians (NRIs). The State Bank Group, with over 16,000 branches, has the largest banking branch network in India. With an asset base of $352 billion and $285 billion in deposits, it is a regional banking behemoth. It has a market share among Indian commercial banks of about 20% in deposits and advances, and SBI accounts for almost one-fifth of the nation's loans. The State Bank of India is the 29th most reputed company in the world according to Forbes. Also SBI is the only bank to get featured in the coveted "top 10 brands of India" list in an annual survey conducted by Brand Finance and The Economic Times in 2010. The State Bank of India is the largest of the Big Four Banks of India, along with ICICI Bank, Punjab National Bank and Canara Bank its main competitors.
societe generale:
SocGen is a major European financial services company which also has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Socit Gnrale in the RJS Institute of Management Studies 29
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS business district of La Dfense in the city of Nanterre, west of Paris. The three main divisions are Retail Banking & Specialized Financial Services (particularly in France and Eastern Europe), Corporate and Investment Banking (Derivatives, Structured Finance and Euro Capital Markets) and Global Investment Management & Services. Societe generale is one of the oldest banks in France. The original name was Societe generale pour favoriser le dveloppement du commerce et de l'industrie en France (English: General Company to Support the Development of Commerce and Industry in France). Socit Gnrale is often nicknamed SocGen in the international financial world.
Vision:
To reach out to the smallest of the small investor and provide them with alternate investment options to help achieve their financial goals.
Mission:
Group with world class standards and significant global business commitment to excellence in customer, shareholders and employees satisfaction and to play a leading role in the expanding and diversifying financial services sector.
Values:
Excellence in customer service. Profit orientation. Belonging and commitment to the industry. Fairness in all dealing and relations Risk taking and innovation.
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Fund details:
Mutual Fund Setup Date Incorporation Date Sponsor Trustee Chairman CEO / MD CIO Compliance Officer Investor Service Officer Assets Managed Ownership Pattern Equity Funds (Open End) Debt Funds (Open End) Short-term Debt (Open End) Hybrid Funds (Open End) Closed-end Funds : SBI Mutual Fund : Jun-29-1987 : Feb-07-1992 : State Bank of India : SBI Mutual Fund Trustee Company Private Limited : N.A : Mr. Achal Kumar Gupta : Mr. Navneet Munot : Ms. Vinaya Datar : Mr. C A Santosh : Rs. 41497.86 crore (Dec-31-2010) : domestic- 63%, foreign- 37% : 17 : 19 : none : 07 : 22
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Products of SBI Mutual Funds

i. Equity schemes: ii. Debt scheme: Magnum comma fund Magnum global fund Magnum index fund Magnum midcap fund Magnum multicap fund Magnum sector funds umbrella SBI arbitrage opportunities fund SBI blue chip fund SBI one India fund SBI tax advantage fund - series i iii. Balanced scheme: Magnum Children`s Benefit Plan Magnum Gilt Fund Magnum Income Fund Magnum Income Plus Fund Magnum Institutional Income Fund Magnum Monthly Income Plan Magnum Monthly Income Plan Floater Magnum NRI Investment Fund SBI Capital Protection Oriented Fund S I SBI Capital Protection Oriented Fund - S II iv. Exchange traded scheme:
Magnum Balanced Fund
SBI Gold Exchange Traded Scheme
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Key personnel:
Mr. Achal K. Gupta Managing Director & Chief Executive Officer Mr. V. Anand Executive Vice President Ms. Aparna Nirgude Chief Risk Officer Mr. Didier Turpin Dy. Chief Executive Officer
Mr. K. T. Ravindran Chief Operating Officer Ms. Vinaya Datar Company Secretary & Compliance Officer Mr. R. S. Srinivas Jain Chief Marketing Officer
Mr. Navneet Munot Chief Investment Officer
Fund Managers - Equity: R. Srinivasan (Senior Fund Manager) Jayesh Shroff (Senior Fund Manager) Dharmendra Grover (Joint Fund Manager) Sohini Andani (Joint Fund Manager) Fund Managers Fixed Income: Sankar Chebiyyam (Senior Fund Manager) Rajeev Radhakrishnan (Senior Fund Manager)
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HDFC MUTUAL FUND:

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crores. Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals. On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 21, 2009 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2010 to December 31, 2012.
HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in the country with consistent and above average fund performance across categories since its incorporation on December 10, 1999. While our past experience does make us a veteran, but when it comes to investments, we have never believed that the experience is enough.
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Sponsors of HDFC mutual fund:

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC): HDFC was incorporated in 1977 as the first specialized Mortgage Company in India. HDFC provides financial assistance to individuals, corporates and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and valuation), training and consultancy. Of these activities, housing finance remains the dominant activity. HDFC has a client base of around 11 lac borrowers, 9 lac depositors, 1.95 lac shareholders and about 25,000 deposit agents, as at December 31, 2010. HDFC had raised funds from international agencies such as the World Bank, IFC (Washington), USAID, DEG, ADB and KfW, international syndicated loans, domestic term loans from banks and insurance companies, bonds and deposits. HDFC has received the highest rating for its bonds and deposits program for the fifteenth year in succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance company in the private sector to be granted a Certificate of Registration (on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India. STANDARD LIFE INVESTMENTS LIMITED: Standard Life Investments was launched as an investment management company in 1998. It is the dedicated investment management company of the Standard Life group and is a wholly owned subsidiary of Standard Life Investments (Holdings) Limited, which in turn is a wholly owned subsidiary of Standard Life plc.with global assets under management of approximately US$213.9 billion as at June 30, 2010 Standard Life Investments Limited is one of the world's major investment companies, operating in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA, and is responsible for investing money on behalf of five million retail and institutional clients worldwide.
35
RISK AND RETURN ANALYSIS OF MUTUAL FUNDS The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. The company was present in the Indian life insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch an insurance joint venture. In April 2006, the Board of The Standard Life Assurance Company recommended that it should demutualise and Standard Life plc float on the London Stock Exchange. At a Special General Meeting held in May voting members overwhelmingly voted in favour of this. The Court of Session in Scotland approved this in June and Standard Life plc floated on the London Stock Exchange on 10th July 2006. In order to meet the different needs and risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering all of the major markets worldwide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. The company's current holdings in UK equities account for approximately 1.8% of the market capitalisation of the London Stock Exchange.
Vision: To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interest. Mission: The mission is to be "a World Class Indian mutual fund player", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS Objectives: The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of financial services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.
Achievements: HDFC Asset Management Company (AMC) is the first AMC in India to have been assigned the CRISIL Fund House Level 1 rating. This is its highest Fund Governance and Process Quality Rating which reflects the highest governance levels and fund management practices at HDFC AMC. It is the only fund house to have been assigned this rating for third year in succession. Company was also awarded NDTV Profit Business Leadership Award 2009 in the Mutual Funds Category for the period April 1, 2008 to March 31, 2009 from amongst six nominees in the category. NDTV Profit Business Leadership Awards have been instituted to honour organization excellence and promise to acknowledge the best, the brightest and the most dynamic of Indian organizations that have emerged as leaders in their respective verticals and are taking India to economic superpower status. The objective of the Awards is to salute men and women who fuel Indias journey to the forefront of the World Economy. Grand Thornton India are the Business Process Advisors to the Awards instituted by NDTV Profit.
Investment Philosophy: The single most important factor that drives HDFC Mutual Fund is its belief to give the investor the chance to profitably invest in the financial market, without constantly worrying about the market swings. To realize this belief, HDFC Mutual Fund has set up the infrastructure required to conduct all the fundamental research and back it up with effective analysis. Our strong emphasis on managing and controlling portfolio risk avoids chasing the latest fads and trends.
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Fund details:
Mutual Fund Setup Date Incorporation Date Sponsor
: HDFC Mutual Fund : Jun-30-2000 : Dec-10-1999 : Housing Development Finance Corporation Limited Standard Life Investments Limited
Trustee Chairman CEO / MD CIO Compliance Officer Investor Service Officer Assets Managed Ownership Pattern Equity Funds (Open End) Debt Funds (Open End) Short-term Debt (Open End) Hybrid Funds (Open End) Closed-end Funds
: HDFC Trustee Company Limited : Mr. Deepak Parekh : Mr. Milind Barve (Managing Director) : Mr. Prashant Jain : Mr. Yezdi Khariwala : Mr. John Mathews : Rs. 89383.09 crores (Dec-31-2010) : domestic- 60%, foreign- 40% : 12 : 24 : none : 10 : 32
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Products of HDFC Mutual Funds

i. Equity / Growth Fund: ii. Debt/ Income Fund:
HDFC Mid-Cap Opportunities Fund HDFC TaxSaver (ELSS) HDFC Index Fund - Sensex Plus Plan HDFC Arbitrage Fund HDFC Capital Builder Fund HDFC Equity Fund HDFC Infrastructure Fund HDFC Balanced Fund HDFC Top 200 Fund HDFC Growth Fund iii. Exchange Traded Funds:
HDFC Debt Fund for Cancer Cure HDFC Medium Term Opportunities Fund HDFC Short Term Opportunities Fund HDFC Gilt Fund - Long Term Plan HDFC High Interest Fund - Short Term Plan HDFC Income Fund HDFC Short Term Plan HDFC Multiple Yield Fund HDFC Cash Management Fund HDFC High Interest Fund iv. Quarterly Interval Fund:
HDFC Quarterly Interval Fund HDFC Gold Exchange Traded Fund v. Children's Gift Fund: vi. Liquid Funds:
HDFC Children's Gift Fund - Savings Plan HDFC Children's Gift Fund- Investment Plan vii. Fixed Maturity Plan:
HDFC Cash Management Fund - Savings Plan HDFC Cash Management Fund - Call Plan HDFC Liquid Fund HDFC Liquid Fund Premium Plan
HDFC FMP 100D March 2011 HDFC FMP 370D March 2011
HDFC Liquid Fund Premium Plus Plan
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BOARD OF DIRECTORS:
Mr. Deepak S. Parekh Chairman of the Board,
Mr. N. Keith Skeoch Associate director on the Board
Mr. Keki M. Mistry Associate director on the Board
Mr. James Aird associate director on the Board
Dr. Deepak B. Phatak Independent Director on the Board
Mr. Hoshang S. Billimoria Independent Director on the Board
Mr. Vijay Merchant Independent Director on the Board
Mr. Milind Barve Managing Director of the AMC
FUND MANAGERS: Mr. Prashant Jain (Executive Director & Chief Investment Officer) Mr. Shobhit Mehrotra (Senior Fund Manager and Head of Credit) Mr. Anil Bamboli (Senior Fund Manager) Mr. Anand Laddha (Senior Fund Manager) Mr. Srinivas Rao Ravuri (Senior Fund Manager)
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BIRLA SUN LIFE MUTUAL FUND:

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's experience in the Indian market and Sun Life's global experience. Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading flagships of Mutual Funds business managing assets of a large investor base. Our solutions offer a range of investment options, including diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds. Birla Sun Life Asset Management Company has one of the largest team of research analysts in the industry, dedicated to tracking down the best companies to invest in. BSLAMC strives to provide transparent, ethical and research-based investments and wealth management services.
Sponsors of BIRLA SUN LIFE mutual fund:
The Aditya Birla Group: The Aditya Birla Group is one of India's largest business houses. Global in vision, rooted in Indian values, the Group is driven by a performance ethic pegged on value creation for its multiple stakeholders.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS The Group operates in 26 countries India, UK, Germany, Hungary, Brazil, Italy, France, Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand, Laos, Indonesia, Philippines, UAE, Singapore, Myanmar, Bangladesh, Vietnam, Malaysia, Bahrain and Korea. A US $29 billion corporation in the League of Fortune 500, the Aditya Birla Group is anchored by an extraordinary work force of 130,000 employees, belonging to 40 different nationalities. Over 60 per cent of its revenues flow from its operations across the world. The Aditya Birla Group is a dominant player in all its areas of operations viz; Aluminium, Copper, Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn, Fertilisers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has strategic joint ventures with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group and NGK Insulators (Japan), and has ventured into the BPO sector with the acquisition of TransWorks, a leading ITES/BPO company. Sun Life Financial: Sun Life Financial Inc is a leading international financial services organization providing a diverse range of wealth accumulation and protection products and services to individuals and corporate customers. Chartered in 1865, Sun Life Financial Inc and its partners today have operations in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda.
Vision: To be a leader and role model in a broad based and integrated financial services business.
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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS Mission: To consistently pursue investor's wealth optimization by: Achieving superior and consistent investment results. Creating a conducive environment to hone and retain talent. Providing customer delight. Institutionalizing system-approach in all aspects of functioning. Upholding highest standards of ethical values at all times. Values: Integrity Commitment Passion Seamlessness Speed
Philosophy: Birla Sun Life Asset Management Company follows a long-term, fundamental research based approach to investment. The approach is to identify companies, which have excellent growth prospects and strong fundamentals. The fundamentals include the quality of the companys management, sustainability of its business model and its competitive position, amongst other factors.
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Fund details:
Mutual Fund Setup Date Incorporation Date Sponsor
: Birla Sun Life Mutual Fund : Dec-23-1994 : Sep-05-1994 : Aditya Birla Nuvo Limited, Sun Life (India) AMC Investments Inc
Trustee Chairman CEO / MD CIO Compliance Officer Investor Service Officer Assets Managed Ownership Pattern Equity Funds (Open End) Debt Funds (Open End) Short-term Debt (Open End) Hybrid Funds (Open End) Closed-end Funds
: Birla Sun Life Trustee Company Private Limited : Mr. Kumar Mangalam Birla : Mr. A. Balasubramanian : N.A : Mr. Rajiv Joshi : Mrs. Molly Kapoor : Rs. 57689.47 crore (Dec-31-2010) : domestic 50%, foreign 50% : 28 : 28 : none :9 : 25
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Products of BIRLA SUN LIFE Mutual Funds

i. Save tax and create wealth: ii. Alternative to my bank A/c:
BSL Tax Relief '96
BSL Dynamic Bond Fund BSL Savings Fund
iii.
Additional regular income:
iv.
Hybrid:
Birla Sun Life MIP II Savings 5 Plan
Birla Sun Life Capital Protection Oriented Birla Sun Life 95 Fund
v.
Grow my wealth:
vi.
Other Schemes:
BSL India Reforms Fund BSL Equity Fund BSL Frontline Equity Fund Plan A BSL Infrastructure Fund BSL Top 100 Fund BSL MidCap Fund BSL Index Fund BSL International Equity Fund BSL GenNext Fund BSL Freedom Fund
Birla Sun Life Gilt Plus - Regular Birla Sun Life Floating Rate Fund Birla Sun Life Cash Manager Birla Sun Life Interval Income Fund Birla Sun Life Monthly Income Birla Sun Life Pure Value Birla Sun Life International equity plan A Birla Sun Life Sun Life Advantage Fund Birla Sun Life Commodities Fund Birla Sun Life Buy India Fund
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BOARD OF DIRECTORS:
Mr. Prafull Anubhai Independent Director of the board
Mr. Gurcharan Das Independent Director of the board
Dr. V.Arunachalam Independent Director of the board
Mr. Suresh Talwar Associate Director of the board
Mr. B.N.Puranmalka Associate Director of the board
FUND MANAGERS: 1. Mr. Mahesh Patil - Head Equity - Domestic Assets 2. Mr. Ajay Argal - Head Equity Offshore 3. Mr. Sanjay Chawla - Fund Manager 4. Mr. Ajay Garg - Fund Manager 5. Mr. Ankit Sancheti - Fund Manager 6. Mr. Atul Penkar - Fund Manager 7. Mr. Vineet Maloo - Fund Manager 8. Mr. Hemang Dagli - Fund Manager 9. Mr. Maneesh Dangi - Head - Fixed Income 10. Mr. Satyabrata Mohanty - Head - Mixed Assets RJS Institute of Management Studies 46
AWARDS ARCHIVED:
Lipper Fund Awards 2008 ICRA Mutual Fund Awards 2008 Lipper Fund Awards 2007 CNBC TV18 - CRISIL Mutual Fund of the Year Awards for 2007 ICRA Mutual Fund Awards 2007 ICRA Mutual Fund Awards 2005 ICRA Mutual Fund Awards 2004 CNBC - TV 18 - BNP PARIBAS Mutual Fund of the Year Awards 2004 CRISIL Best Fund Awards Business Barons Best Brand Award 2002
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TITLE:
A study on RISK AND RETURN RELATING TO EQUITY GROWTH SCHEME OF MUTUAL FUND OF LEADING THREE MUTUAL FUNDS ORGANIZATIONS.
STATEMENT OF THE PROBLEM:

Investing in mutual funds is one of the most popular avenues of investments. This study is aims at guiding investors to invest their funds in mutual funds by analyzing the risk and return aspect of equity growth scheme of SBI Mutual Funds, BIRLA SUN LIFE Mutual Funds and HDFC Mutual Funds.
OBJECTIVES OF THE STUDY:

The study of performance analysis of Mutual Fund schemes. The study is to help an investor to decide about his investment, striking a balance between risk and return of various Mutual Fund schemes.
3.
1. 2.
The study of statutory regulations protecting the interest of the investors.
SCOPE OF THE STUDY:

The Mutual Fund Industry has shown rapid growth in the past decade and the small investors with their savings are active investors in Mutual Fund schemes they look for proper guidance to balance the risk and return on their investments. This study helps them to plan their investment in the right schemes and also to switch over from one scheme to another scheme, so as to increase their returns over a period of time. The study is related to the performance of Mutual Funds schemes for the period from 2006 to 2010.
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LIMITATIONS OF THE STUDY:
The performance of the Mutual Funds are seriously affected by economic policies of the Government of the India, the impact of the same could not be studied in-depth due to shortage of time.
The study is limited by the availability of the secondary data.
METHODOLOGY OF THE STUDY:
The Secondary data is collected through websites, Magazines, Books, Journals, Published records of the Mutual Funds organization and Associations of Mutual Funds.
The data collected is analyzed through portfolio evaluation by using several techniques like SHARPEs INDEX MODEL and so on. The tables and graphs are translated into charts for better analysis and interpretation.
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1. Table and graph showing Risk of the SBI Mutual Fund from 2005 2010 from Annexure 3.
YEAR RISK () (%)
2005 2006 48.07
2006 2007 21.93
2007 2008 5.25
2008 2009 72.13
2009 - 2010 51.23
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Analysis:
From the above table and graph it can be analyzed that the risk of 48.07% is involved in the year 2005 2006, 21.93% of risk in the year 2006 2007, 5.25% of risk in the year 2007 2008, 72.13% of risk in the year 2008 2009 and 51.23% in the year 2009 2010. .
Inference:
From the above analysis it can be inferred that the minimum risk of 5.25% is involved during the year 2007 2008 and maximum risk at 72.13% during the year 2008 2009.
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2. Table and graph showing Risk of the HDFC Mutual Fund from 2005 2010 from Annexure 3.
YEAR RISK () (%)
2005 2006 46.91
2006 2007 30.41
2007 2008 18.18
2008 2009 73.38
2009 - 2010 75.08
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Analysis:
From the above table and graph it can be analyzed that the risk of 46.91% is involved in the year 2005 2006, 30.41% of risk in the year 2006 2007, 18.18% of risk in the year 2007 2008, 73.38% of risk in the year 2008 2009 and 75.08% in the year 2009 2010.
Inference:
From the above analysis it can be inferred that the minimum risk of 18.18% is involved during the year 2007 2008 and maximum risk of 75.08% during the year 2009 2010.
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3. Table and graph showing Risk of the BIRLA SUN LIFE Mutual Fund from 2005 2010 from Annexure 3.
YEAR RISK () (%)
2005 2006 52.35
2006 2007 26.54
2007 2008 9.62
2008 2009 78.02
2009 - 2010 61.84
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Analysis:
From the above table and graph it can be analyzed that the risk of 52.35% is involved in the year 2005 2006, 26.54% of risk in the year 2006 2007, 9.62% of risk in the year 2007 2008, 78.02% of risk in the year 2008 2009 and 61.84% in the year 2009 2010.
Inference:
From the above analysis it can be inferred that the minimum risk of 9.62% is involved during the year 2007 2008 and maximum risk of 78.02% during the year 2008 2009.
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4. Table and graph showing Risk of all the three mutual fund organization from Annexure 3.
Company Risk (%)
SBI Mutual Fund 46.14
HDFC Mutual Fund 53.81
BIRLA SUN LIFE Mutual Fund 51.86
In the above table we have calculated the company risk with the help of STANDARD DEVIATION:
Where, N = number o f years X = return for every year
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Analysis:
From the above table and graph it can be analyzed that SBI mutual fund is at a risk of 46.14%, HDFC mutual fund is at a risk of 53.81% and BIRLA SUN LIFE mutual fund is at a risk of 51.86% respectively.
Inference:
From the above analysis it can be inferred that the SBI mutual fund is making a minimum risk of 46.14% and HDFC mutual fund is making a maximum risk of 53.81%.
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5. Table and graph showing market risk of all the three mutual funds from Annexure 4.
Company BETA
SBI Mutual Fund 1.12%
HDFC Mutual Fund 1.28%
BIRLA SUN LIFE Mutual Fund 1.25%
In the above table we have calculated the market risk with the help of BETA:
= nxy - (x)*(y) nx - (x)

Where, n = number of years X = Market returns Y = Company returns
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Analysis:
From the above table and graph it can be analyzed that SBI mutual fund has a risk of 1.12%, HDFC mutual fund has 1.28% and BIRLA SUN LIFE mutual fund has 1.25%.
Inference:
From the above analysis it can be inferred that SBI mutual fund has a minimum risk of 1.12% as followed by others respectively.
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6. Table and graph showing Returns of the SBI Mutual Fund from 2005 2010 from Annexure 1.
YEAR RETURNS (%)
2005 2006 82.42
2006 2007 12.42
2007 2008 29.10
2008 2009 -37.78
2009 - 2010 85.58
60
Analysis:
From the above table and graph it can be analyzed that 82.42% of returns in the year 2005 2006, 12.42% of returns in the year 2006 2007, 29.10% of returns in the year 2007 2008, -37.78% of returns in the year 2008 2009 and 85.58% in the year 2009 2010.
Inference:
From the above analysis it can be inferred that the company is making high returns of 85.58% during the year 2009 2010, and negative returns during the year 2008 2009.
61
7. Table and graph showing Returns of the HDFC Mutual Fund from 2005 2010 from Annexure 1.
YEAR RETURNS (%)
2005 2006 86.33
2006 2007 9.01
2007 2008 21.24
2008 2009 -33.96
2009 - 2010 114.5
62
Analysis:
Inference:
63
8. Table and graph showing Returns of the BIRLA SUN LIFE Mutual Fund from 2005 2010 from Annexure 1.
YEAR RETURNS (%)
2005 2006 89.54
2006 2007 10.65
2007 2008 27.57
2008 2009 -40.83
2009 - 2010 99.03
64
Analysis:
Inference:
65
9. Table and graph showing Returns of all the three mutual fund organization from Annexure 1.
Company Returns (%)
SBI Mutual Fund 34.35
HDFC Mutual Fund 39.42
BIRLA SUN LIFE Mutual Fund 37.19
In the above table we have calculated the company returns with the help of MEAN:
= x / n
Where, n = number o f years
= Mean
x = return for every year
66
Analysis:
From the above table and graph it can be analyzed that SBI mutual fund is making a returns of 34.35%, HDFC mutual fund is making a returns of 39.42% and BIRLA SUN LIFE mutual fund is making a returns of 37.19% respectively.
Inference:
From the above analysis it can be inferred that the HDFC mutual fund is making a maximum returns of 39.42% and SBI mutual fund is making a minimum returns of 34.35%.
67
10. Table and graph showing Ranking in SHARPES INDEX model from Annexure 8 and 9.
Company RETURNs RANKING
SBI Mutual Fund 0.55% 2
HDFC Mutual Fund 0.57% 1
BIRLA SUN LIFE Mutual Fund 0.54% 3
SHARPEs performance index gives a single value to be used for the performance ranking of various funds or portfolios. This is the difference between the portfolios average rate of return and the riskless rate of return. The index assigns the highest values to assets that have best risk - adjusted average rate of return.
St = (Rp Rf/ )
Where, St = Sharpes index Rp = Portfolio average return Rf = Risk free rate of interest
= Standard deviation of the portfolio return
68
Analysis:
From the above table and graph it can be analyzed that returns of SBI mutual fund is 0.55%, HDFC mutual fund returns is 0.57% and BIRLA SUN LIFE mutual fund returns is 0.54%.
Inference:
From the above analysis it can be inferred that SBI mutual fund is ranked first position on the bases of the performance, and others followed by HDFC and BIRLA SUN LIFE mutual fund respectively.
69
11. Table and graph showing Ranking in TREYNORS INDEX model from Annexure 8 and 9 Company RETURNs RANKING SBI Mutual Fund 22.63% 2 HDFC Mutual Fund 23.77% 1 BIRLA SUN LIFE Mutual Fund 22.55% 3
TREYNORs performance is measured in relation to the market performance. This is the difference between the average return and the riskless rate of return. The risk premium depends on the systematic risk assumed in the portfolio
Tn = (Rp Rf/ )
Where, Tn = Treynors index Rp = Portfolio average return Rf = Risk free rate of interest = Beta co efficient of the portfolio return
70
Analysis:
Inference:
From the above analysis it can be inferred that HDFC mutual fund is ranked first position on the bases of the performance, and others followed by SBI and BIRLA SUN LIFE mutual fund respectively.
71
12. Table and graph showing Ranking in JENSENS INDEX model Rp= Rf + (Rm Rf) from Annexure 8 and 9. Company RETURNS (%) RANKING SBI Mutual Fund 2.15 3 HDFC Mutual Fund 3.91 1 BIRLA SUN LIFE Mutual Fund 2.30 2
JENSENs performance is measured as an absolute performance; the return of the portfolio varies in the same proportion of to the difference between the market return and riskless rate of interest. Beta is assumed to reflect the systematic risk.
JI=Rp [Rf + (Rm Rf)]

Where, Rp = Portfolio average return (expected return) Rf = Risk free rate of interest Rm = average market return = Beta co efficient of the portfolio return The difference between the actual return and the expected return shows the performance.
72
Analysis:
Inference:
From the above analysis it can be inferred that HDFC mutual fund is ranked first position on the bases of the performance, and others followed by BIRLA SUN LIFE and SBI mutual fund respectively.
73
13. Table and graph showing Portfolio Returns for SBI Mutual Fund from 2005 2010 from Annexure 5.
YEAR RETURNS (%)
2009 2010 85.58
2008 2010 20.77
2007 2010 55.35
Inception 2005 2010 214.89
74
Analysis:
From the above table and graph it can be analyzed that the portfolio returns for the first year 2009 2010 is 85.58%, 20.77% for the second year 2008 2010, 55.35% for in the third year 2007 2010, and since from inception that is 2005 2010 is 214.89%.
Inference:
From the above analysis it can be inferred that

The performance of the fund in the first three years has given a return of 55.35%. The fund has performed well since inception and given a return of 214.89%.
75
14. Table and graph showing Portfolio Returns for HDFC Mutual Fund from 2005 2010 from Annexure 5.
YEAR RETURNS (%)
2009 2010 114.5
2008 2010 43.34
2007 2010 72.78
Inception 2005 2010 246.24
76
Analysis:
Inference:

77
15. Table and graph showing Portfolio Returns for BIRLA SUN LIFE Mutual Fund from 2005 2010 from Annexure 5.
YEAR RETURNS (%)
2009 2010 99.03
2008 2010 19.57
2007 2010 51.11
Inception 2005 2010 207.9
78
Analysis:
Inference:

79
16. Table and graph showing Performance of SBI Mutual Fund for from 2005 2010 from Annexure 7.
YEAR MARKET RETURNS (%) COMPANY RETURNS (%)
2005 2006 70.78 82.42
2006 2007 13.04 12.42
2007 2008 25.60 29.10
2008 2009 -37.87 -37.78
2009 2010 77.01 85.58
80
Analysis:
From the above table and graph it can be observed that the highest market returns of the SBI mutual fund is showing 77.01% during the year 2009 2010 and on the other hand the highest company returns is showing 85.58% during the year 2009- 2010.
Inference:
From the above analysis it can be inferred that:
The company is over performing against market return in the year 2005 2006, 2007 2008, 2008 2009 and 2009 2010 with the returns of 82.42%, 29.1%, 37.78% and 85.58% respectively.
The company is under performing against market return in the year 2006 2007 with the returns of 12.42%.
81
17. Table and graph showing Performance of HDFC Mutual Fund for from 2005 2010 from Annexure 7.
2005 2006 70.78 86.33
2006 2007 13.04 9.01
2007 2008 25.60 21.24
2008 2009 -37.87 -33.96
2009 - 2010 77.01 114.5
82
Analysis:
From the above table and graph it can be observed that the highest market returns of the HDFC mutual fund is showing 77.01% during the year 2009 2010 and on the other hand the highest company returns is showing 114.5% during the year 2009- 2010.
Inference:
The company is over performing against market return in the year 2005 2006, 2008 2009, and 2009 2010 with the returns of 89.33%, -33.96% and 114.5% respectively.
The company is under performing against market return in the year 2006 2007 and 2007 2008 with the returns of 9.01% and 21.24% respectively.
83
18. Table and graph showing Performance of BIRLA SUN LIFE Mutual Fund for from 2005 2010 from Annexure 7.
2005 2006 70.78 89.54
2006 2007 13.04 10.65
2007 2008 25.60 27.57
2008 2009 -37.87 -40.83
2009 2010 77.01 99.03
84
Analysis:
From the above table and graph it can be observed that the highest market returns of the Birla Sun Life mutual fund is showing 77.01% during the year 2009 2010 and on the other hand the highest company returns is showing 99.03% during the year 2009- 2010.
Inference:
The company is over performing against market return in the year 2005 2006, 2007 2008, and 2009 2010 with the returns of 89.54%, 27.57% and 99.03% respectively. The company is under performing against market return in the year 2006 2007 and 2008 2009 with the returns of 10.65% and -40.83% respectively.
85
19. Table and graph showing Performance of the portfolios from 2005 2010 from Annexure 6.
Company MARKET RETURNS (%) COMPANY RETURNS (%)
SBI Mutual Fund 29.71 34.35
HDFC Mutual Fund 29.71 39.42
BIRLA SUN LIFE Mutual Fund 29.71 37.19
86
Analysis:
From the above table and graph it can be analyzed that the market return is compared to the SBI mutual fund which has a return of 34.35%, HDFC mutual fund is 39.42% and Birla Sun Life mutual fund is 37.19%.
Inference:
From the above analysis it can be inferred that the HDFC mutual fund is over performing followed by Birla sun life mutual funds and SBI mutual funds respectively as against market return.
87
Findings:
The HDFC equity growth fund is showing consistent performance since its inception which has led to increasing inflows into the fund. All the three mutual funds companies have over performed market (BSE 100) by the healthy margin over the period of last 5 years. They have also over performed the average returns by the category which is 34.35% (SBI), 39.42% (HDFC) and 37.19% (BSL) for one year period. The HDFC equity growth fund has consistently performed better than other two mutual funds organizations. Since inception the scheme has given 246.20% returns as compared to market returns (BSE 100) is 165.40%. The HDFC equity growth fund is making a maximum risk of 53.81% and maximum returns of 39.42% as compared to BIRLA SUN LIFE growth fund and SBI growth fund respectively. According to SHARPEs Index model HDFC growth fund is ranked at the first position followed by the SBI and BIRLA SUN LIFE mutual funds. According to TREYNORs Index model HDFC growth fund is ranked at the first position followed by the SBI and BIRLA SUN LIFE mutual funds. According to JENSENs Index model HDFC growth fund is ranked at the first position followed by the BIRLA SUN LIFE and SBI mutual funds. as per calculation: SBI growth fund = 1.12, HDFC growth fund = 1.28, BIRLA SUN LIFE growth fund = 1.25,
88
CONCLUSIONS:
The study is conducted on THE RISK AND RETURN RELATING TO EQUITY GROWTH SCHEME OF MUTUAL FUND OF LEADING THREE MUTUAL FUNDS ORGANIZATIONS only for those funds which come under equity growth category. The risk, returns and ranking is an only opinion on the relative past performance of the mutual fund scheme and various factors that can influence its future performance. From the study it is conclude that HDFC Mutual Funds has performed well by giving highest return. While comparing the Risk and Return also HDFC is ranked first by giving maximum returns. The functioning of Mutual Funds are regulated by SEBI and they have come out with various rules and regulations to protect the interest of the investors.
89
SUGGESTIONS:
Investors should analyze risk and return factor before investing to any mutual funds organization.
Investors should analyze the portfolio of the company and should also analyze the company and market returns before investing.
Investing in Mutual fund is subjected to market risk so investors should read all the scheme documents carefully before investing.
As per the study investors who want to again a maximum returns should opt a company which is having high risk, and minimum risk involves minimum returns.
There are many players in the mutual funds, but before investing to them investor should know about the company history and profile.
Highlight risk factors of each scheme, avoid misrepresentation and exaggeration and urge investors go through scheme information document before deciding to make investments.
All the employees engaged in sales and marketing should obtain Associations of Mutual Fund India (AMFI) certification and maintaining the confidentiality of all the investors deals and transactions.
Industry should safeguard the investors right towards correct description of the product, goods / services, transparency and ability to take the decisions. Its better to invest in the well known and standard mutual fund company like: HDFC, SBI, BIRLA SUN LIFE, RELIANCE, UTI, and ICICI Prudential.
90
1.
NAME OF THE BOOK
Books: NAME OF THE AUTHOR PUBLISHER NAME Himalayan Preethi singh publishing house Himalayan publishing house Himalayan publishing house 2008 2007 2010 YEAR OF PUBLICATION
Portfolio Management
Investment analysis and portfolio management Investment analysis and portfolio management
Punithavathi pandian Dr. V.A.Avadhani
2.
Web sites:
www.amfiindia.com www.mutualfundindia.com www.valueresearchonline.com www.sbimf.com www.hdfcfund.com www.birlasunlife.com
3.
News papers, journals and magazines
91
ANNEXURE 1:
Rf = 9%
SBI MUTUAL FUNDS

Year 2006 2007 2008 2009 2010 Starting year 1-Apr-05 1-Apr-06 1-Apr-07 1-Apr-08 1-Apr-09 NAV 12.63 23.67 25.60 32.93 21.43 Ending year 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 NAV 23.04 26.61 33.05 20.49 39.77 Return = (Ending year - Starting year)/ Starting year (%) 82.42 12.42 29.10 - 37.78 85.58
HDFC MUTUAL FUNDS

Year Starting year 1-Apr-05 1-Apr-06 1-Apr-07 1-Apr-08 1-Apr-09 NAV Ending year 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 NAV Return = (Ending year - Starting year)/ Starting year (%) 86.33 09.01 21.24 - 33.96 114.50
2006 2007 2008 2009 2010
068.24 130.819 136.747 164.836 110.148
127.150 142.602 165.788 108.852 236.272
BIRLA SUN LIFE MUTUAL FUNDS

Year 2006 2007 2008 2009 2010 Starting year 1-Apr-05 1-Apr-06 1-Apr-07 1-Apr-08 1-Apr-09 NAV 82.14 157.48 167.37 211.51 127.07 Ending year 31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10 NAV 155.69 174.25 213.51 125.15 252.91 Return = (Ending year - Starting year)/ Starting year (%) 89.54 10.65 27.57 - 40.83 99.03
92
ANNEXURE 2: MARKET RETURN

STARTING DATE CLOSING PRICE ENDING DATE CLOSING PRICE MARKE T RETUR N (%) 70.78 13.04 25.60 -37.87 77.01
1-Apr-05 (05 - 06) 1-Apr-06 (06 - 07) 1-Apr-07 (07 - 08) 1-Apr-08 (08 - 09) 1-Apr-09 (09 - 10)
6605.04 11564.36 12455.37 15626.62 9901.99
31-Mar-06 31-Mar-07 31-Mar-08 31-Mar-09 31-Mar-10
11279.96 13072.1 15644.44 9708.5 17527.77
ANNEXURE 3: STANDARD DEVIATION FOR THE SBI COMPANY

year
2006 2007 2008 2009 2010
Returns (Rp) in %
82.42 12.42 29.1 -37.78 85.58
Rf
9 9 9 9 9
A (Rp-Rf)
73.42 3.42 20.10 - 46.78 76.58 A = 126.74 = 25.35 = 46.14
(A - )
48.07 - 21.93 - 5.25 - 72.13 51.23
(A - )
2310.73 480.93 27.56 5202.74 2624.51 10646.47
STANDARD DEVIATION FOR THE HDFC COMPANY

year
2006 2007 2008 2009 2010
Returns (Rp) in %
86.33 09.01 21.24 - 33.96 114.50
Rf
9 9 9 9 9
A (Rp-Rf)
77.33 0.01 12.24 - 42.96 105.50 A = 152.12 = 30.42 = 53.81
(A - )
46.91 - 30.41 - 18.18 - 73.38 75.08
(A - )
2200.55 924.77 330.51 5384.62 5637.01 14477.46
93
STANDARD DEVIATION FOR THE BIRLA SUN LIFE COMPANY

year
2006 2007 2008 2009 2010
Returns (Rp) in %
89.54 10.65 27.57 - 40.83 99.03
Rf
9 9 9 9 9
A (Rp-Rf)
80.54 1.65 18.57 - 49.83 90.03 A = 140.96
(A - )
52.35 - 26.54 - 9.62 - 78.02 61.84
(A - )
2740.52 704.37 92.54 6087.12 3824.19 13448.74
= 28.19
= 51.86
= (A - ) /n
ANNEXURE 4: ' calculation for SBI company
Year 2006 2007 2008 2009 2010 Market Returns (Rm) 70.78 13.04 25.6 -37.87 77.01 Returns (Rp) 82.42 12.42 29.1 -37.78 85.58 Rf 9 9 9 9 9 X (Rm - Rf) 61.78 4.04 16.60 - 44.87 68.01 105.56 Y (Rp -Rf) 73.42 3.42 20.10 - 46.78 76.58 126.74 X 3816.77 16.32 275.56 2013.32 4625.36 10747.33 XY 4535.89 13.82 333.66 2099.02 5208.21 12190.60
=1.12
' calculation for HDFC Company

Year 2006 2007 2008 2009 2010 Market Returns (Rm) 70.78 13.04 25.6 -37.87 77.01 Returns (Rm) 86.33 09.01 21.24 - 33.96 114.50 Rf 9 9 9 9 9 X (Rm - Rf) 61.78 4.04 16.60 - 44.87 68.01 105.56 Y (Rp -Rf) 77.33 0.01 12.24 - 42.96 105.50 152.12 X 3816.77 16.32 275.56 2013.32 4625.36 10747.33 XY 4777.45 0.04 203.18 1927.62 7175.05 14083.34
=1.28 RJS Institute of Management Studies 94
' calculation for BIRLA SUN LIFE Company

Year 2006 2007 2008 2009 2010 Market Returns (Rm) 70.78 13.04 25.6 -37.87 77.01 Returns (Rm) 89.54 10.65 27.57 - 40.83 99.03 Rf 9 9 9 9 9 X (Rm - Rf) 61.78 4.04 16.60 - 44.87 68.01 105.56 Y (Rp -Rf) 80.54 1.65 18.57 - 49.83 90.03 140.96 X 3816.77 16.32 275.56 2013.32 4625.36 10747.33 XY 4975.76 6.67 308.26 2235.87 6122.94 13649.50
=1.25
ANNEXURE 5: Returns of the portfolio for SBI company

Year Starting year 1-Apr-05 NAV (X) 12.63 Ending year 31-Mar10 31-Mar10 31-Mar10 31-Mar10 NAV (Y) 39.770 RETURNS = (Y X)/X (%) 214.90
Inception (05 10) (07 - 10)
1-Apr-07
25.600
39.770
55.40
(08 - 10)
1-Apr-08
32.930
39.770
20.80
(09 - 10)
1-Apr-09
21.430
39.770
85.60
95
Returns of the portfolio for HDFC company

Inception (05 10) (07 - 10)
1-Apr-07
136.747
236.272
72.80
(08 - 10)
1-Apr-08
164.836
236.272
43.34
(09 - 10)
1-Apr-09
110.148
236.272
114.50
Returns of the portfolio for BIRLA SUN LIFE company

Inception (05 10) (07 - 10)
1-Apr-07
167.37
252.91
51.10
(08 - 10)
1-Apr-08
211.51
252.91
19.60
(09 - 10)
1-Apr-09
127.07
252.91
99.01
96
ANNEXURE 6: Returns of the market

Year Starting year 1-Apr-05 NAV (X) 6605.04 Ending year 31-Mar10 31-Mar10 31-Mar10 31-Mar10 NAV (Y) 17527.77 RETURNS = (Y - X)/X (%) 165.40
Inception (05 10) (07 - 10)
1-Apr-07
12455.37
17527.77
40.70
(08 - 10)
1-Apr-08
15626.62
17527.77
12.20
(09 - 10)
1-Apr-09
9901.99
17527.77
77.00
ANNEXURE 7: Performance of the portfolios

COMPANY MARKET Returns 29.71 29.71 29.71 Returns
SBI HDFC BSL
34.35 39.42 37.19
97
ANNEXURE 8: Performance of the SBI company

Year 2006 2007 2008 2009 2010 MARKET Returns 70.78 13.04 25.60 -37.87 77.01 Returns (%) 82.42 12.42 29.10 - 37.78 85.58
Performance of the HDFC company

Performance of the BIRLA SUN LIFE company

98
ANNEXURE 9:
Rm = 12%
Data for calculation of Ranking the portfolio's using SHARPEs, TREYNOR's and JENSEN's INDEX
SBI HDFC BSL
Return on portfolio (Rp)

Expected return Performance
34.35 32.20 2.15

46.14
39.42 35.51 3.91 53.81 0.09 1.28 30.42
37.19 34.89 2.30

51.86
Standard deviation of portfolio (p) Market risk free rate of return (Rf) Risk of portfolio (p) Risk premium = Rp-Rf
0.09 1.12 25.35
0.09 1.25 28.19
99
ANNEXURE 10:
Ranking table
Formula SBI HDFC UTI
SHARPE's Index
2 0.55% 2 22.63% 3
1 0.57% 1 23.77% 1 3.91
3 0.54% 3 22.55% 2 2.30
TREYNOR's Index
JENSEN's Index
Actual returns Expected returns
2.15
100

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RISK AND RETURN ANALYSIS OF MUTUAL FUNDS

RISK AND RETURN ANALYSIS OF MUTUAL FUNDS

CONCEPT OF MUTUAL FUNDS:

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INTRODUCTION TO MUTUAL FUNDS:

HISTORY OF MUTUAL FUNDS:

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GROWTH TREND OF MUTUAL FUND

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Some facts for the growth of mutual funds in India

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CATEGORIES OF MUTUAL FUND:

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Mutual funds can be classified as follow:

funds: These funds raise money from investors only once.

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and individual stock weightages.

i) Debt-oriented funds -Investment below 65% in equities.

ii) Equity-oriented funds -Invest at least 65% in equities, remaining in debt.

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Particulars Mutual Funds invest in a well-diversified portfolio of

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maintain shareholder records, including purchases, sales, and account balances.

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