Professional Documents
Culture Documents
INTRODUCTION
INTRODUCTION
A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing
the gathered money into specific securities (stocks or bonds). When you invest in a
mutual fund, you are buying units or portions of the mutual fund and thus on investing
becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to mutual
funds is diversification, by minimizing risk & maximizing returns.
The need of study arises for learning the variables available that distinguish the mutual fund of
two companies.
To chose best company for mutual investment between UTI& BIRLA SUNLIFE MNC fund.
To
project
mutual
fund
as
the
productive
avenue
for
investing
activities.
To provide information regarding types of mutual fund which is beneficial for whom.
OBJECTIVES
To analysis which provides better returns from UTI& BIRLA SUNLIFE MNC fund.
To know how many people are satisfied by their investment in UTI& BIRLA SUNLIFE
MNC fund.
Correlation coefficient
Treynors Ratio
Sharpes Ratio
CHAPTER-II
REVIEW OF LITERATURE
The investment may be diversified to spread risk and to ensure good return to the
investors. The Mutual Funds employ professional, experts and investment consultants to
conduct investment analysis and then to select the portfolio of securities where the
funds are to be invested.
Each investor owns units, which represent a portion of the holdings of the fund.
You can make money from a MF in three ways:-
1. Income is earned from dividends on stocks and interest on bonds. A Fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in the form of dividends.
3. If fund holdings increase in price but are not sold by the fund manager, the funds
shares increase in price. You can then sell your Mutual Fund units for a profit.
Funds will also usually give you a choice either to receive a cheque for dividends or
to re-invest the same and get more units.
Sponsor
Trustee
AMC
Custodian
SPONSOR:
Establishes the MUTUAL FUND
Sometimes this power is given by the sponsor to the trustees through the trust deed.
should be disclosed.
TRUSTEE:
Manages the Mutual Fund and look after the operation of the appointed AMC.
The investments are held by the Trustees, in a fiduciary responsibility.
Trustees approve each Mutual Fund Scheme floated by AMC.
Furnish report to SEBI on half yearly basis on AMC and Fund Functioning.
compliance factor.
AMC is responsible to the trustees.
AMC fees have a ceiling, decided by SEBI.
Should have a net worth of at least Rs.10 crores at all the times.
CUSTODIAN:
Appointed by board of trustees for safekeeping of securities.
Its an entity independent of sponsors.
SEBI regulates the securities market in India. According to SEBI every Mutual Fund
require that at least two thirds of the directors of trustee company or board of
trustees must be independent i.e. they should not be associated with the sponsors.
Also, 50% of the directors of AMC must be independent. All Mutual Fund are
required to be registered with SEBI before they launch any Scheme.
funds. The ownership of the Mutual Fund is in the hands of the investors.
Mutual funds are trusts or registered associations managed by investment
professionals and other service providers, who earn a fee for their services from the
fund.
The pools of the funds are invested in a portfolio of marketable investments
can sell their units in the open market at Net Asset Value (NAV).
NAV = Market value of the funds investments + Receivables + Accrued Income Liabilities
Accrued Expenses
STRUCTURE
OPEN-ENDED
SCHEME
CLOSED-ENDED
SCHEME
INTERVAL SCHEME
INTERVAL SCHEMES
Interval schemes are those that combine both the features of both open-ended and
close- ended schemes. The units may be traded on the stock exchange or may be
open for sale redemption during predetermined intervals at NAV related prices.
EQUITY SCHEME
BALANCED SCHEME
INVESTMENT
OBJECTIVE
MONEY MARKETSCHEME
OTHER SCHEMES
2) Diversification
In a Mutual Fund, you may choose to reinvest your earnings automatically to buy
more shares. When you reinvest, not only do you have the potential to earn money
on your initial investment, you may also have the opportunity to earn money on the
dividends and capital gains you accumulate. Compounding may increase the impact of
what you contribute and can help your money grow faster. And the longer you invest,
the greater the potential growth.
4) Systematic Investing
You can invest in most mutual funds automatically through regular payments directly
from your bank account; you can start building a long-term investment program.
With systematic investing you invest a fixed amount of money at regular intervals
regardless of market conditions, helping out market fluctuations.
5) Hassle-free operations
With most Mutual Funds, buying and selling shares, changing distribution options,
and obtaining information can be accomplished conveniently by telephone, by mail, or
online. Although a funds shareholder is relieved of the day-to-day tasks involved in
researching, buying and selling securities, an investor will still need to evaluate a
Mutual Fund based on investment goals and risk tolerance before making a purchase
decision. Investors should always read the prospectus carefully before investing in any
Mutual Fund.
6) Buying Power
When you invest in a mutual fund, you join the other investors in a pool of
investment money. The result is that you have a partial stake in each company the
fund holds for a relatively small amount of principal invested, while potentially
offsetting some of the risk associated with holding individual securities.
7) Choice
There is an incredible array of mutual funds more than 10,000 available to meet
your specific Investment objective. Funds have different investment objectives and
degrees of investment risk often indicated through asset classes and sub-classes,
such as money market funds, fixed income funds, balanced funds, growth and income
funds, growth funds and aggressive growth funds.
8) Liquidity
Mutual fund shares are liquid and orders to buy or sell are placed during market
hours. However, orders are not executed until the close of business when the NAV
(Net Asset Value) of the fund can be determined. Fees or commissions may or may
not be applicable. Fees and commissions are determined by the specific fund and the
Institution that executes the order.
9) Transparency
You get regular information on the value of your investments in addition to disclosure
on the specific investments made by your scheme, the proportion invested in each
class of assets and the fund managers investment strategy and outlook.
Diversification is usually a good thing because it reduces risk, but Mutual Funds
sometimes make small investments in so many securities that they become over
diversified. In other words, the Mutual Funds holdings in each security may be so
small that it is difficult to realize substantial return from any of those holdings, which
in turn means that the overall return for each investor is small.
2) Unused Cash
Your cash may occasionally serve as liquidity insurance rather than work for you as
an investment. The constant availability of shares is certainly convenient for investors
in a mutual fund, but it can also operate as a disadvantage. A Mutual Fund manager
must always prepare for the possibility than an investor will cash in his or her
shares. As a result Mutual Funds must maintain a ready cash supply at all times.
3) Fluctuating Returns
Mutual funds are like many other investments without a guaranteed return. There is
always the possibility that the value of your mutual fund will depreciate. Unlike
fixed- income products, such as Bonds and Treasury Bills, mutual funds experience
price fluctuations along with stocks that make up the fund.
4) Costs Despite Negative Returns
Investors must pay sales charges, annual fees, service charges and other expenses
regardless of how the fund performs. In addition, depending on the timing of their
investment, investors may also have to pay taxes on any capital gains distribution
they receive even if the fund went on to perform poorly after they bought shares.
5) Misleading Advertisements
The misleading advertisements of different funds can guide investors down the
wrong path. Some funds may be incorrectly labeled as growth funds, while others are
classified as small-cap or income.
6) Evaluating Funds
Not offer investors the opportunity to compare the P/E ratio, sales growth, earnings
share, etc. A Mutual Funds Net Asset Value gives the investors the total value of the
Another limitation of mutual fund is the difficulty they pose for investors interested in
researching and evaluating the different funds. Unlike stocks, mutual funds do funds
portfolio less liabilities.
7) Poor Transparency
Technology used for servicing of investors and for portfolio management and
investment decision making is poor and general efficiency and timeliness are lacking
as a result of antiquated methods of operation. Telex, telephone and communication
systems are poor and antiquated.
TYPES OF RISK
All investments involve some form of risk. Even an insured band account is subject
to the possibility that inflation will rise faster than your earnings, leaving you with less
real purchasing power than when you started (Rs.1000 gets you less than it got your
father when he was your age). Consider these common types of risks and evaluate
them against potential rewards when you select an investment.
Market
Inflation
Credit
Interest Rate
TYPE OF
RISKS
Exchange Rate
Investment
Government Policies
1) Market Risk: At times the prices or yields of the all the securities in a particular
market rise or fall due to broad outside influences. When this happens, the stock
prices of both an outstanding, highly profitable company and a fledging
corporation may be affected. This change in price is due to Market Risk.
2) Inflation Risk: Some times referred to as loss of purchasing power. Whenever
inflation sprints forward faster than the earnings on your investment, you run the
risk that youll actually be able to buy less, not more. Inflation risk also occurs
when prices rise faster than your return.
3) Credit Risk:
your money when you invest. How certain are you that it will be able to pay the
interest you are promised, or repay your principal when the investment matures.
4) Interest Risk: Changing interest rates affect both equities and bonds in many ways.
Investors are minded that predicting which way rates Effect of loss rev
professionals and inability to adapt:
An industries key asset is often the personnel who run the business i.e.
intellectual properties or the key employees of the respective companies. Given
the ever-changing complexion of few industries and the high obsolescence levels,
availability of qualified, trained and motivated personnel is very critical for the
success of industries in few sectors. It is, therefore, necessary to attract key
personnel and also to retain them to meet the changing environment and
challenges the sector offers. Failure or inability to attract/retain such qualified
key personnel may impact the prospects of the companies in the particular sector
in which fund invests.
5) Exchange risk:
regard to the tax benefits may impact business prospects of the companies leading
to an impact on the investments made by the fund.
FOCUS
SUITABLE
BENEFITS
PRODUCTS
OFFERED BY
MFS
Liquidity, Better
based Funds
Post-Tax return
EXPECTED
Low
Medium
Debt
Liquidity,
Better
Partially Debt,
Diversified
Post-Tax
returns,
Partially Equity
Better Management,
Diversification
Equity
Fixed Deposits
High
Equity
Diversification,
Funds (Diversified as
Expertise in stock
well as Sector)
picking, Liquidity,
Tax free dividends
compulsory that every mutual fund levy sales charges but they certainly have operating
expenses. No doubt they influence returns on investment in a fund.
Operating expense
These referred to cost incurred to operate a mutual fund. Advisory fees paid to
investment mangers, Audit fees to chartered accountant, custodial fees, register and
transfer agent fees, trustee fee, agent commission. Operating expenses also known
as expenses ratio which is annual expenses expressed as a percentage of the
funds average daily net assets mutual funds.
Operating expenses
Expenses Ratio =
For instant, if funds Rs. 100 Crores and expenses 20 lakhs. Then expenses ratio is 2%
expenses ratio is available in the offer document and from historical per unit statistics
included in the financial results of the fund which are published by annually. UN
audited for the half year ending Sep30 and audited for the physically year end in March
30.Depending upon schemes and net asset, operating expenses are determined by
limits mandated by SEBI Mutual fund regulation Act. Any excess over specified
limits as to be born by Asset Management Company, the trustees or sponsors.
Sales charges:
These are known commonly sales loads; these are charged directly to investor. Sales
loads are used by mutual fund for the payment of agents commission, distribution and
marketing expensed. These charges have not effect on the performance of the scheme.
Sales loads are usually express in percentage and or of two types front-end and back
end.
Front-end load:
mutual fund scheme. It determines public offer price which intern decides how much
of your initial investment actually get invested the standard practice of arriving a
public offer price is as follows:
Net Asset Value
Public offer price = -------------------------(1- front end load)
Let us assume, an investor invests Rs.10, 000 in a scheme that charges a 2%front end
load at a NAV per unit RS. 10 using the formula public offer price =10/ (1-0.02) is Rs.
10.20. So only 980 units are allotted to the investor
Amount invested
Number of units allotted =
May be a fixed fee redemption (or) a contingent deferred sales charges-a redemption
load continues so long as the redeeming or selling of the units of the units of a fund
does not take place in the event of back end load is applied. The redemption price is
arriving at using following formula.
Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that charges
a 2% back end load at a NAV per unit of Rs. 10. Using the formula redemption price
10/ (1+0.02) = Rs. 9.8
So, what the investor gets in hand is 9800(908*1000)
Contingent Deferred Sales Charges (CDSC):
Contingent deferred sales charges are a structured back end load. It is paid when the
units are redeemed during the initial years of ownership. It is for a pre determined period
only and reduced over the time youre invested for a fund. The longer the investor
remains in fund the lower the CDSC.
The SEBI (mutual fund Regulation 1996) stipulate that a CDSC may be
charge only for first 4 years after purchase of units and also stipulate the maximum
CDSC that can we charge every year. The SEBI Mutual funds Regulation 1996 do not
allow either the front end load or back end load to any combination is higher that 7%.
Transaction cost:
Some funds may also impose a switch over fee which is a charge on transfer of
investment from one scheme to another with in a same mutual fund family and also to
switch from on plan (short term) to another (long term) within same scheme.
Month
Amount Invested
Purchase Price
No of Units Purchased
1000
10
100
1000
09
111.11
1000
10
100
1000
11
90.9
Table 2 (b)
Total Investment = Rs. 4000; No of units purchased is 402.21. The average cost per
units work out to be Rs9.95.
As illustrated, over time you have a lower average cost per unit. By investing
a fixed amount of money at regular intervals, you as an investor stand to gain
reasonable returns and create significantly wealth-over time.
Getting into SIP program does not required large investment amounts at regular
intervals. Even as small as Rs. 1000 can be invested at regular intervals.
Builds Investment Kitty:
You have to give Post-Dated cheque (PDCs) to the mutual fund for deposit
on specific dates, for the amount you want to invest. These cheques are presented to
your bank account on these dates and the funds are withdrawn from your account
for investment in the mutual fund scheme at the prevailing NAV. Other than
making the initial investment and issuing the cheques at the beginning, no further
efforts are required from you.
SIPs help you avoid missing market falls because of lack of time to track the market.
You dont have the responsibility of actively monitoring market movement to be able to
enter during falls.
Market timing doesnt work:
Trying to time the markets, i.e. entering when the markets fall and exiting when the
markets rise, usually does not work. It is best to take the systematic investment
approach to stay above market
Redemption of Units:
The units can be redeemed (i.e. sold back to the mutual fund) or switched-out subject
to completion of lock in period, on every business day at the redemption price. The
redemption/switch out request can be made by way of a written request, on a pre printed
form or by using the relevant tear off section of the transaction slip enclosed with
the account statement, which should be submitted at/may be sent by mail to any of the
ISCs.
Redemption price:
PARAMETERS DESCRIPTION
Beta
Alpha
Correlation coefficient
Treynors Ratio
Sharpes Ratio
Jensens Ratio
Beta
Beta is a measure of volatility, or systematic risk, of a security or portfolio in
comparison to the market as a whole. Beta measures a stock's volatility, the degree to
which a stock price fluctuates in relation to the overall market. Investment analysts use
the Greek letter beta, . It is calculated using regression analysis. A beta of 1
indicates that the security's price will move with the market. A beta greater than 1
indicates that the security's price will be more volatile than the market, and a beta
less than 1 means that it will be less volatile than the market.
While standard deviation determines the volatility of a fund according to the disparity
of its returns over a period of time, beta, another useful statistical measure, determines
the volatility, or risk, of a fund in comparison to that of its index.
Investors expecting the market to be bullish may choose funds exhibiting high betas,
which increase investors' chances of beating the market. If an investor expects the
market to be bearish in the near future, the funds that have betas less than 1 are a good
choice because they would be expected to decline less in value than the index. For
example, if a fund had a beta of 0.5 and the S&P 500 declined 6%, the fund would be
expected to decline only 3%. Be aware of the fact that beta by itself is limited and
can be skewed due to factors of other than the market risk affecting the fund's
volatility.
Here is a basic guide to various betas:
Negative beta - A beta less than 0 is possible but highly unlikely. People used to
think that gold and gold stocks should have negative betas because they tended to do
better when the stock market declined, but this hasn't been true overall.
Beta = 0 - Basically this is cash (assuming no inflation).
Beta between 0 and 1 - Low-volatility investments, such as utilities, are usually in this range
Beta = 1 - This is the same as an index, such as the S&P 500 or some other index fund.
Beta greater than 1 - This denotes anything more volatile than the broad-based index,
like a sector fund.
Beta greater than 100 - This is impossible because the stock would be expected go to
zero on any decline in the stock market. The beta never gets higher than two to three.
The beta value for an index itself is taken as one. Equity funds can have beta values,
which can be above one, less than one or equal to one. By multiplying the beta value of
a fund with the expected percentage movement of an index, the expected movement
in the fund can be determined. Thus if a fund has a beta of 1.2 and the market is
expected to move up by ten per cent, the fund should move by 12 per cent Similarly if
the market loses ten per cent, the fund should lose 12 per cent.
This shows that a fund with a beta of more than one will rise more than the market and
also fall more than market. Clearly, if you'd like to beat the market on the upside, it
is best to invest in a high-beta fund. But you must keep in mind that such a fund
will also fall more than the market on the way down. So, over an entire cycle, returns
may not be much higher than the market.
Similarly, a low-beta fund will rise less than the market on the way up and lose less
on the way down. When safety of investment is important, a fund with a beta of less
than one is a better option. Such a fund may not gain much more than the market on
the upside; it will protect returns better when market falls.
Alpha
A measure of risk, used for mutual funds with regards to their relation and the
market. A positive alpha is the extra return awarded to the investor for taking a risk,
instead of accepting the market return.
The formula for alpha is:
Alpha = [ (sum of y) - ((b)(sum of x)) ] / n
n =number of observations (36 mos.)
b = beta of the fund
x = rate of return for the market
y = rate of return for the fund
Alpha measures how much if any of this extra risk helped the fund outperform its
benchmark by 1%. Negative alphas are bad in that they indicate that the fund under
performed for the amount of extra, fund-specific risk that the fund's investors
undertook.
STANDARD DEVIATION:
Standard deviation is probably used more than any other measure to describe the risk
of a security (or portfolio of securities). If you read an academic study on
investment performance, chances are that standard deviation will be used to gauge
risk. It's not just a financial tool, though. Standard deviation is one of the most
commonly used statistical tools in the sciences and social sciences. It provides a precise
measure of the amount of variation in any group of numbers--the returns of a mutual
fund.
Measure of the dispersion of a set of data from its mean. The more spread apart the
data is, the higher the deviation. Standard deviation is applied to the annual rate of
return of an investment to measure the investment's volatility (risk).
A volatile stock would have a high standard deviation. In mutual funds, the standard
deviation tells us how much the return on the fund is deviating from the expected
normal returns. Standard deviation is a statistical measure of the range of a fund's
performance. When a fund has a high standard deviation, its range of performance
has been very wide, indicating that there is a greater potential for volatility.
Technically speaking, standard deviation provides a quantification of the variance of
the returns of the security, not its risk. After all, a fund with a high standard deviation
of returns is not necessarily "riskier" than one with a low-standard deviation of returns.
Correlation:
Correlation is a useful tool for determining if relationships exist between securities. A
correlation coefficient is the result of a mathematical comparison of how closely related
two variables are.
The relationship between two variables is said to be highly correlated if a movement in
one variable results or takes place at the same time as a similar movement in another
variable. A useful feature of correlation analysis is the potential to predict the movement
in one security when another security moves.
other securities. In other words a change in price in one results in a later change in price
of the other.
changes, the other security or indicator or otherwise financial vehicle, will often move
in the opposite direction.
Correlation analysis is a measure of the degree to which a change in the independent
variable will result in a change in the dependent variable. A low correlation
coefficient (e.g., 0.1) suggests that the relationship between the two variables is weak
or non-existent. A high correlation coefficient (e.g., 0.80) indicates that the dependent
variable will most likely change when the Independent variable changes. Correlation
can also be used for a study between an indicator and a stock or index to help
determine the predictive abilities of changes in the indicator. Correlation is not static.
In other words, the correlation between two things in the markets does change over
time and so a careful understanding that what has happened in the past may not
predict what will happen in the future should be part of any basis in trading
financial instruments in the market.
SHARPES RATIO
Sharpes is the summary measure of portfolio performance which properly adjusts
performance for risk. It measures the risk premiums of the portfolio relative to the total
amount of risk in the portfolio.
The Sharpes index is given by:
Sharpes Index =
Graphically the index measures the slope of the line emanating from the risk less rate
outward to the portfolio in question. Thus, the Sharpe Index summarizes the risk and
return of a portfolio in a single measure that categorizes the performance of the
fund on a risk- adjusted basis. The larger the value of Sharpe Index the better the
portfolio has performed.
TREYNORS RATIO
Treynors ratio measures the risk premium of the portfolio, where risk premium
equals the difference between the return of the portfolio and the risk less rate. The
risk premium is related to the amount of systematic risk assumed in the portfolio.
Graphically; the index measures the slope of the line emanating outward from risk
less rate to the portfolio under consideration.
Treynors ratio is given as
(Average return of portfolio Risk less rate of interest)
CHAPTER-III
INDUSTRY PROFILE
& COMPANY PROFILE
INDUSTRY PROFILE
The First investment trust (now called Mutual Fund) began in the Netherlands in the
early 1800s. The first in the U.S. was the New York Stock Trust, which started in 1889.
Since Boston was the economic center of the nation until the turn of the century, the
majority of funds started thereFidelity, Pioneer and Putnum Fund, to name a few. A
Fund that was comprised of both stocks and bonds (the Wellington Fund) started in
1928 and is still part of Vanguard. As the 20's crashed to a close, there were 10 Mutual
Funds in the nation.
Foundation for the Mutual Fund in India was laid by the parliament in 1963. With the
enactment
of
Unit
Trust
of
India
(UTI)
Act
the
then
Finance
Minister
Mr.T.T.Krishnamacharya who initiated the act made it clear to the parliament act UTI would
provide an opportunity for the middle and lower income groups to acquire property in
the form of share. Thus UTI came out with the mission of catering to the needs of
individuals investors whose means are small, with its maiden fund, an open ended fund in
1964.
The Indian Mutual Fund Industry can be studied in four phases:FIRST PHASE BETWEEN 1964 1987
The genesis of the Mutual Fund industry in India can be traced back to 1964 with the
setting up of the Unit Trust of India (UTI) by the Government of India. Since then
UTI has grown to be a dominant player in the industry. UTI is governed by a special
legislation, the Unit Trust of India Act, 1963. It was setup by the Reserve Bank of
India and functioned under the regulatory and administrative control of RBI. In 1978,
UTI was de-linked from the RBI and the administrative control in place of RBI. The
first scheme launched by UTI was unit Scheme 1964. At the end of 1988, UTI had Rs.
6700 crores of assets under the management.
Till 1986, UTI was the only mutual player in India. The industry was opened up for
wider participation in 1987 when public sector banks and insurance companies were
permitted to setup Mutual Funds.
Since then, many public sector banks have setup Mutual Funds. SBI Mutual Fund was
the first non-UTI Mutual Funds established in June 1987 followed by can bank
Mutual Funds, Punjab National Bank Mutual Fund, India bank Mutual Funds, Bank of
India, Bank of Boroda Mutual Funds. Also the two Insurance companies LIC (June
1987) and GIC (December 1990) have established Mutual Funds. At the end of 1993,
the Mutual Fund industry had assets under management of Rs. 47004 crores. This
phase changed the mind set of the investors.
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 Funds 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 sector Mutual
Fund registered in July 1993.
Securities Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation)
1993, which for the first time established a comprehensive regulatory framework for
the Mutual Fund Industry. Since then several Mutual Funds have been setup by the
private and joint sectors.
In February 2003, following the repeal of the Unit Trust of India act 1963, UTI was
bifurcated into separate entities. One is the specified undertaking of the UTI with asset
under management of Rs. 29835 crores as at the end of January 2003, representing
broadly, the assets of US 64 schemes, assured return and certain other schemes.
The second is UTI Mutual Fund ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered in SEBI and functions under the Mutual Fund regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76000
crores of assets under management and with the setting up of the UTI Mutual Fund. At
the end of October 31, 2006 there were 39 funds which manage assets of Rs. 176726
crores under 426 schemes.
Evolution
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
The East India Company was the dominant institution in those days and business in its
loan securities used to be transacted towards the close of the eighteenth century.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850.
The 1850's witnessed a rapid development of commercial enterprise and brokerage
business attracted many men into the field and by 1860 the number of brokers increased
into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in
1865, a disastrous slump began (for example, Bank of Bombay Share which had
touched Rs 2850 could only be sold at Rs. 87).
At the end of the American Civil War, the brokers who thrived out of Civil War in
1874, found a place in a street (now appropriately called as Dalal Street) where they
would conveniently assemble and transact business. In 1887, they formally established
in Bombay,
alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange
acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock
Ahmadabad gained importance next to Bombay with respect to cotton textile industry.
After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in
1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry
was to Calcutta. Also tea and coal industries were the other major industrial groups
in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in
jute shares, which was followed by a boom in tea shares in the 1880's and 1890's;
and a coal boom between 1904 and 1908. On June 1908, some leading brokers
formed "The Calcutta Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and
Steel Company Limited in 1907, an important stage in industrial advancement under
Indian enterprise was reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange"
with 100 members. However, when boom faded, the number of members stood reduced
from 100 to 3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there
was a rapid increase in the number of textile mills and many plantation companies
were floated. In 1937, a stock exchange was once again organized in Madras - Madras
Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras
Stock Exchange Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged
with the Punjab Stock Exchange Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth
The Second World War broke out in 1939. It gave a sharp boom which was followed
by a slump. But, in 1943, the situation changed radically, when India was fully
mobilized as a supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities,
those dealing in them found in the stock market as the only outlet for their activities.
They were anxious to join the trade and their number was swelled by numerous others.
Many new associations were constituted for the purpose and Stock Exchanges in all
parts of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited
and the Delhi Stocks and Shares Exchange Limited - were floated and later in June
1947, amalgamated into the Delhi Stock Exchnage Association Limited.
Post-independence Scenario
Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.
Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well
established exchanges, were recognized under the Act. Some of the members of the
other Associations were required to be admitted by the recognized stock exchanges on
a concessional basis, but acting on the principle of unitary control, all these pseudo
stock exchanges were refused recognition by the Government of India and they there
upon ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India
(mentioned above). The number virtually remained unchanged, for nearly two decades.
During eighties, however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur,
1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange
Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock
Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at
Patna, 1986), Jaipur Stock Exchange Limited (1989),Bhubaneswar Stock Exchange
Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot,
1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established
exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of
India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets
since independence. It is quite evident from the Table that Indian stock markets
have not only grown just in number of exchanges, but also in number of listed
companies and in capital of listed companies. The remarkable growth after 1985 can
be clearly seen from the Table, and this was due to the favouring government policies
towards security market industry.
Trading Pattern of the Indian Stock Market
Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend
paying, growth-oriented companies with a paid-up capital of atleast Rs.50 million and
a market capitalization of atleast Rs.100 million and having more than 20,000
shareholders are, normally, put in the specified group and the balance in non-specified
group.
Two types of transactions can be carried out on the Indian stock exchanges: (a) spot
delivery transactions "for delivery and payment within the time or on the date stipulated
when entering into the contract which shall not be more than 14 days following the
date of the contract" : and (b) forward transactions "delivery and payment can be
extended by further period of 14 days each so that the overall period does not exceed
90 days from the date of the contract". The latter is permitted only in the case of
specified shares. The brokers who carry over the outstandings pay carry over charges
(cantango or backwardation) which are usually determined by the rates of interest
prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell
securities for his clients on a commission basis and also can act as a trader or dealer as
a principal, buy and sell securities on his own account and risk, in contrast with the
practice prevailing on New York and London Stock Exchanges, where a member can
act as a jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional
style of face-to-face trading with bids and offers being made by open outcry.
However, there is a great amount of effort to modernize the Indian stock exchanges in
the very recent times.
Over The Counter Exchange of India (OTCEI)
The traditional trading mechanism prevailed in the Indian stock markets gave way to
many functional inefficiencies, such
unduly long settlement periods and benami transactions, which affected the small
investors to a great extent. To provide improved services to investors, the country's
first ringless, scripless, electronic stock exchange - OTCEI - was created in 1992 by
country's premier financial institutions - Unit Trust of India, Industrial Credit and
Investment Corporation of India, Industrial Development Bank of India, SBI Capital
Markets, Industrial Finance Corporation of India, General Insurance Corporation and
its subsidiaries and CanBank Financial Services.
Trading at OTCEI is done over the centres spread across the country. Securities traded
on the OTCEI are classified into:
Listed Securities - The shares and debentures of the companies listed on the
OTC can be bought or sold at any OTC counter all over the country and
they should not be listed anywhere else
In the case of permitted securities, the system is similar to a traditional stock exchange.
The difference is that the delivery and payment procedure will be completed within 14
days.
Compared to the traditional Exchanges, OTC Exchange network has the
following advantages:
OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.
Since the exact price of the transaction is shown on the computer screen, the
investor gets to know the exact price at which s/he is trading.
With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of
the recommendations of high powered Pherwani Committee, the National Stock
Exchange was incorporated in 1992 by Industrial Development Bank of India,
Industrial Credit and Investment Corporation of India, Industrial Finance Corporation
of India, all Insurance Corporations, selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.
Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit bonds,
commercial paper, certificate of deposit, etc.
There are two kinds of players in NSE:
(a) trading members and
(b) participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players
like banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading mechanism
which adopts the principle of an order-driven market. Trading members can stay at
their offices and execute the trading, since they are linked through a communication
network. The prices at which the buyer and seller are willing to transact will appear
on the screen. When the prices match the transaction will be completed and a
confirmation slip will be printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as follows:
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since inter-
market operations are streamlined coupled with the countrywide access to the securities.
traditional trading mechanism can be done away with greater operational efficiency
and informational transparency in the stock market operations, with the support of
total computerized network.
Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in capital market operations. And capital market being
one of the major source of long-term finance for industrial projects, India cannot
afford to damage the capital market path. In this regard NSE gains vital importance in
the Indian capital market system.
Preamble
Often, in the economic literature we find the terms development and growth are
used interchangeably. However, there is a difference. Economic growth refers to
the sustained increase in per capita or total income, while the term economic
development implies sustained structural change, including all the complex effects of
economic growth. In other words, growth is associated with free enterprise, where as
development requires some sort of control and regulation of the forces affecting
development. Thus, economic development is a process and growth is a phenomenon.
Economic planning is very critical for a nation, especially a developing country like
India to take the country in the path of economic development to attain economic
growth.
Why Economic Planning for India?
One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the
levels of income, saving and investment. However, increasing the rate of capital
formation in India is beset with a number of difficulties. People are poverty ridden.
Their capacity to save is extremely low due to low levels of income and high propensity
to consume. Therefor, the rate of investment is low which leads to capital deficiency
and low productivity. Low productivity means low income and the vicious circle
continues. Thus, to break this vicious economic circle, planning is inevitable for
India.
The market mechanism works imperfectly in developing nations due to the ignorance
and unfamiliarity with it. Therefore, to improve and strengthen market mechanism
planning is very vital. In India, a large portion of the economy is non-monitised; the
product, factors of production, money and capital markets is not organized properly.
Thus the prevailing price mechanism fails to bring about adjustments between
aggregate demand and supply of goods and services. Thus, to improve the economy,
market imperfections has to be removed; available resources has to be mobilized and
utilized efficiently; and structural rigidities has to be overcome. These can be attained
only through planning.
In India, capital is scarce; and unemployment and
disguised
unemployment
is
prevalent. Thus, where capital was being scarce and labour being abundant, providing
useful employment opportunities to an increasing labour force is a difficult exercise.
Only a centralized planning model can solve this macro problem of India.
Further, in a country like India where agricultural dependence is very high, one cannot
ignore this segment in the process of economic development. Therefore, an economic
development model has to consider a balanced approach to link both agriculture and
industry and lead for a paralleled growth. Not to mention, both agriculture and
industry cannot develop without adequate infrastructural facilities which only the
state can provide and this is possible only through a well carved out planning strategy.
The governments role in providing infrastructure is unavoidable due to the fact that
the role of private sector in infrastructural development of India is very minimal
since these infrastructure projects are considered as unprofitable by the private sector.
Further, India is a clear case of income disparity. Thus, it is the duty of the state to
reduce the prevailing income inequalities. This is possible only through planning.
The development of planning in India began prior to the first Five Year Plan of
independent India, long before independence even. The idea of central directions of
resources to overcome persistent poverty gradually, because one of the main policies
advocated by nationalists early in the century. The Congress Party worked out a
program for economic advancement during the 1920s, and 1930s and by the 1938
they formed a National Planning Committee under the chairmanship of future Prime
Minister Nehru. The Committee had little time to do anything but prepare programs
and reports before the Second World War which put an end to it. But it was already
more than an academic exercise remote from administration. Provisional government
had been elected in 1938, and the Congress Party leaders
held positions of
responsibility. After the war, the Interim government of the pre-independence years
appointed an Advisory Planning Board. The Board produced a number of somewhat
disconnected Plans itself. But, more important in the long run, it recommended the
appointment of a Planning Commission.
The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at
all, while millions of refugees crossed the newly established borders of India and
Pakistan, and while ex-princely states (over 500 of them) were being merged into India
or Pakistan. The Planning Commission as it now exists, was not set up until the new
India had adopted its Constitution in January 1950.
To formulate a plan for the most effective and balanced use of the countrys
resources.
Having determined the priorities, to define the stages in which the plan should
be carried out, and propose the allocation of resources for the completion of each
stage.
To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political
situation, should be established for the successful execution of the Plan.
To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.
To appraise from time to time the progress achieved in the execution of each stage
of the Plan and recommend the adjustments of policy and measures that such
appraisals may show to be necessary.
Elimination of poverty
Economic growth, as the primary objective has remained in focus in all Five Year
Plans. Approximately, economic growth has been targeted at a rate of five per cent per
annum. High priority to economic growth in Indian Plans looks very much justified in
view of long period of stagnation during the British rule
fund schemes, the total assets in the mutual fund industry grew to about Rs. 610 billion
with the total number of schemes increasing to 167 by the end of 1994. The third phase of
the mutual fund industry, which commenced in 1994, witnessed exponential growth of the
industry, with the advent of private players therein. As on May 31, 2004, the total assets
under management stood at Rs. 1540 billion and the total number of schemes stood at 399.
During the last three and a half decades, UTI has been a dominant player in the mutual
fund industry. The total assets under the management of the UTI as on September 30, 2002
were to the tune of Rs. 442 billion, which amount to almost 41% of the total assets under
management in the domestic mutual fund industry. UTI has witnessed some erosion of
assets pursuant to the last years crisis arising on account of its Unit 64 scheme, the scheme
with largest amount of assets under management. This was the first scheme launched by
the UTI with a significant equity exposure and the returns of which was not linked to the
market. This resulted in a payment crisis when the stock markets crashed during the last
two years, which resulted in some degree of loss of investors confidence in UTI leading to
erosion of its assets under management. This period also gave opportunity to the private
players to demonstrate better returns thereby capturing a significant market share.Whatever
may have happened to mutual funds in the past and whatever one is seeing now, mutual
funds are here to stay as long as they can deliver the aspirations of their investors. One
must not forget that India is a large nation with a population of more than 1 billion people
and the potential continues to be huge. However, to be fair mutual fund managers should
also strive to improve their performance and not blame the vagaries of the market all the
times.
The Company has grown from an institutional brokerage house to a full-fledged financial
intermediary having nationwide presence in major cities with branches and franchisees to
service a wide range of clients. We are committed to gradually enhancing our network in
the near future.
The Company has also invested in the joint-venture company with Standard Chartered
Bank viz. Standard Chartered UTI Securities (P) Ltd. that is engaged in primary dealership
and Government securities. The Company has started Commodity Trading through its
subsidiary, UTISEC COMMODITIES LIMITED, which provides facility of commodity
trading on NCDEX and MCX.
paperwork no queues. Get information on IPO news, Forthcoming IPOs and a lot more on
Usectrade.com
Commodities:
Metals, energies, grains and livestock whatever you wish to trade, you'll find it on our
commodity trading system. Plus, you'll get a comprehensive suite of educational,
analytical, and execution tools that makes trading commodities easy.
Insurance:
Usectrade in association with Birla Sunlife brings you a secure insurance option
without the hassles and worries of a conservative insurance plan. With least paperwork,
you get the dual benefit of a risk cover and savings. What's more, we shall send you regular
reminders about your premium payments due.
Bonds
Fixed income securities can help reduce your risk within an investment portfolio
while providing a steady stream of income over time. Currently you can choose to invest
online in GOI Bonds. If you are looking to diversify your portfolio, possibly improve your
tax efficiency and/or reducing your risk exposure, you may want to consider making fixed
income securities part of your personal investment strategy
Research:
Charting Tools - Get a combined view of stocks, rapid price changes and volume increases
with this pre-trade analytic tool. Enables you to do technical market analysis of stocks on
price, volume, market cap and P/E for NSE/BSE Benchmark against Domestic as well as
International Indices.
Sector Watch - You can access sector-wise information to track sectors and individual
scrips within the sector, which makes analysis easy for you.
Corporate Infohub - We provide you with exhaustive company information, detailed
financials and ratios. And we also allow you to evaluate financials across peer companies.
Our extensive database covers more than 4000 companies.
Newsroom - View live market news from the most reliable sources on equity, debt, politics
and general events. You even have access to live news analysis, market commentary and
happening stocks.
Online Ledger - View your Digital Contract Note, summary of your transactions using
Online "Bills & Accounts"
My Inbox - Maintain records of all Important notifications related to your account
SMS Alerts - Set Price based Alerts for Stocks of your choice
Dedicated Customer Care Centre & State-of- the-art Phone-2-Trade Desk
Interactive Demo - A step-by-step guide to enable you to navigate through the process of
Investing Online on our website Usectrade.com
Subscription to Mailers - Subscribe to our Inhouse Research Reports covering our entire
Product Bouquet
Investment Banking and Advisory Services
Investment Banking is one of the prime focus areas of the company and we provide value
added, customized solutions to our clients. Leveraging on the knowledge, expertise and
experience of our professionals, we offer services that range from managing public issues,
debt and equity placements, corporate advisory services and financial consultancy to
facilitating mergers and acquisitions.
The Investment Banking Team's business philosophy emphasizes:
It has always been the endeavor of UTI Securities to bring all the market constituents
together in a mutually beneficial relationship.
Equity capital Markets
The Issue Management group focuses on public issues, open offers and buy back
issues. Our proximity to large institutions gives us an added advantage in placing large
equity issues. This division is supported by a nationwide network comprising of 12
branches, 15 franchisees and sub-brokers across the country for retail distribution. Within a
short span, UTISEL has already been recognized as one of the leading merchant bankers in
India.
UTI Securities has consistently provided professional guidance and expert services.
Over the years, it has developed strong relationships with institutional investors and other
market intermediaries, enabling it to structure and successfully place a wide array of
Capital Market products that meet the requirements of the issuer, investor and the market.
The Equity Capital Markets group offers the following services:
Rights Issues
Buy-Back
Underwriting
Open Offers
Delisting of Securities
Private Equity
The Equity Capital Markets group seamlessly draws on the expertise provided by the
Equity Research and Equity Sales teams on all the public offerings.
We have been associated with a number of issues in different capacities as Lead
Managers, Co Managers, Syndicate/Sub-syndicate Members, etc. in the past. We
successfully lead managed recently the public issue of Four Soft Ltd., a software products
company, with an issue size aggregating Rs. 200 million. We were also involved as a
syndicate member in the issue of Indraprastha Gas Ltd. where we procured over 12,000
applications.
Clients:
We are currently lead managing the issues of SMS Pharmaceuticals, a bulk drugs
manufacturer; Glenmark Laboratories Ltd. which is in formulations segment; Vivimed
Labs Ltd., manufacturer of pharmaceutical ingredients catering to the personal care
industry and Crew BOS Products Ltd., a fashion accessories manufacturer. The size of the
said issues ranges from Rs. 150 million to Rs. 500 million. We are also Lead Managing
Rights Issue of Varun Shipping Company Ltd of Rs.130 -150 Crores. We also pursue
Buyback/Delisting offers amongst others.
We are aiming at making further inroads by securing mandates of premier companies in the
Pharmaceutical, Textiles, Information Technology, Hospitality, Banking and Housing
Private Equity
The Private Equity Group arranges equity placement through the off-market route using its
privileged relationships with various Venture Capital and Strategic & Portfolio Equity
investor who operate from within the country as well as from abroad. The Private Equity
group assists companies seeking capital infusions in the form of seed capital, venture
capital, angel investment, strategic investment, and mezzanine financing from the private
equity marketplace.
The private equity group identifies start up, later stage projects for investing in wellmanaged companies, which are placed to grow rapidly and to take advantage of the
favourable economic conditions existing within the space with a clearly defined business
model. Private Equity Group has followed the philosophy of being a multi-sector player, as
it believes that in the Indian context it ensures an optimum balance of risk and return to its
investors. Private Equity Group has demonstrated its industry expertise in different sectors
by backing diverse sectors like Pharma, Power, Entertainment, Information Technology
etc.
The Private Equity division has been successful in arranging pre IPO funding from venture
capitalists/Private Equity investors. Recently we have done the placement for Four Soft
Ltd. and Glenmark Laboratories Ltd. aggregating Rs. 140 million.
incorporated with limited liability under the Companies Act, 1956. Birla Sun Life Asset
Management Company Ltd. (BSLAMC) is the investment manager of Birla Mutual
Fund.
Vision
To be the most trusted name in investment and wealth management, to be the preferred
employer in the industry and to be a catalyst for growth and excellence of the asset
management business in India.
Mission
To consistently pursue investor's wealth optimization by
Debt Schemes
Birla MIP
Birla MIP-II
Other Schemes
Birla Balance
Offshore Schemes
Formerly known as Regular Withdrawal Plan (RWP) - is the best alternative for investors
who need regular income. GROW is available in two options:
Fixed Withdrawal: Where investors specify amounts they wish to withdraw from
their investment on a monthly/quarterly basis.
deterrent when Investors make a choice. To combine the best of both worlds Birla presents
STEER formerly known as Systematic Transfer Plan (STP).
UNIQUE FEATURES OF BIRLA
Birla Bond Exchange
Birla Bond Exchange is a unique facility introduced by Birla Sun Life AMC Ltd. to
help retail investors replace their existing portfolio of debt securities with a diversified debt
fund in order to optimize returns and improve liquidity.
Readicheques
A product add-on available for Resident Indian investors in the growth plans of the debt
schemes, i.e. Birla Income Plus, Birla Cash Plus, Birla Bond Plus, Birla MIP and Birla Gilt
Plus. Readicheques are pre-issued undated repurchase cheques drawn in favour of the first
applicant. Under normal circumstances, when investor wishes to redeem, he needs to fill up
a repurchase request and submit it to the Investor Service Centre. Normally the repurchase
warrant is delivered to the investor on the third working day from the date of submitting
the redemption request. With Readicheques, all the investor needs to do is to request for
preissued warrants in advance and deposit them as and when needed. Thus, the hassles of
filling in a redemption request, submitting at an Investor Service Centre and then waiting
for the redemption warrant to reach him are done away with this product add-on.
Birla Gift Certificates
Birla Gift Certificates brought to investors is a novel idea for presenting a gift for special
occasions, festivals or simply to say you care. Investors can present these Gift Certificates
to their loved ones or their valued business associates on special occasions. Birla Gift
Certificates can be used for acquiring units of five funds - Birla Income Plus (BIP), Birla
Monthly Income Plan (MIP), Birla Midcap, Birla Dividend Yield Plus (BDYP) and Birla
Advantage Fund (BAF). These Gift Certificates can be bought from any of BSLAMC
branches.
CHAPTER-IV
DATA ANALYSIS & INTERPRETATION
For the purpose of data analysis and interpretation the following mutual
funds have been chosen;
a)
b)
c)
d)
Each product has been analyzed using the following tools and the results tabulated,
presented graphically and the evaluation of the same has been given under the
caption 'Interpretation' below the graph.
The fund NAVs are compared with the bench mark of nifty for the analysis.
For analysis Net Asset Value ( NAV) of the schemes have been taken for 18 months from
August-13 to March-15
Month
Market
Level
( NIFTY)
Birla
MNC Fund
UTI MNC
Fund
UTI
Growth
Fund
Birla Growth
fund
Aug-13
3033.45
21.08
159.95
57.62
7.94
Sep-13
3046.75
21.22
162.21
57.94
7.98
Oct-13
3121.45
21.69
163.7
59.18
8.1
Nov-13
3112.8
21.86
163.84
59.22
8.12
Dec-13
2920.4
20.7
154.38
56.44
7.7
Jan-14
2873
20.18
154.48
55.55
7.57
Feb-14
2773.1
19.75
152.69
53.99
7.42
Mar-14
2744.95
19.64
152.59
53.55
7.39
Apr-14
2835.3
20
155.28
54.64
7.53
May-14
2736.7
19.56
152.9
53.31
7.33
June-14
2828.45
19.87
154.27
54.56
7.46
July-14
2846.2
19.98
156.12
54.73
7.49
Aug-14
2796.6
19.63
155.72
53.92
7.38
Sep-14
2706.15
19.18
153.08
52.47
7.25
Oct-14
2713.8
19.11
151.88
52.5
7.24
Nov-14
2678.55
18.71
150.67
51.76
7.14
Dec-14
2771.35
19.24
151.51
53.03
7.24
Jan-15
2849.5
19.62
152.33
54.04
7.35
Feb-15
2823.95
19.47
151.76
53.86
7.34
Mar15
2874.8
19.71
152.91
54.54
7.42
Average
2854.36
20.01
155.11
54.84
7.52
Calculations of Risk of Birla MNC fund for the period of 18 months from August-12 to March-
15
Month
Market Level
( NIFTY)
Market
Return
Return
21.08
Aug-13
3033.45
Sep-13
3046.75
0.44
21.22
0.66
Oct-13
3121.45
2.45
21.69
2.21
Nov-13
3112.8
-0.28
21.86
0.78
Dec-13
2920.4
-6.18
20.7
-5.31
Jan-14
2873
-1.62
20.18
-2.51
Feb-14
2773.1
-3.48
19.75
-2.13
Mar-14
2744.95
-1.02
19.64
-0.56
Apr-14
2835.3
3.29
20
1.83
May-14
2736.7
-3.48
19.56
-2.20
June-14
2828.45
3.35
19.87
1.58
July-14
2846.2
0.63
19.98
0.55
Aug-14
2796.6
-1.74
19.63
-1.75
Sep-14
2706.15
-3.23
19.18
-2.29
Oct-14
2713.8
0.28
19.11
-0.36
Nov-14
2678.55
-1.30
18.71
-2.09
Dec-14
2771.35
3.46
19.24
2.83
Jan-15
2849.5
2.82
19.62
1.98
Feb-15
2823.95
-0.90
19.47
-0.76
Mar-15
2874.8
1.80
19.71
1.23
Average
Return
-0.36
-0.42
SD (Risk)
2.75
2.15
Beta
0.75
8
6
4
2
0
-2
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
-4
Series2
Series1
-6
-8
-10
-12
-14
Interpretation:
Birla MNC fund has been analyzed and it is found that there is a negative
growth. Howe ver on the basis of the average returns of Birla MNC fund there is a
negative growth 0.42 as against the index average of negative 0.36 the beta being
less than 1 the stock is not highly volatile.
Calculation of Risk of UTI MNC fund for the period of 18 months from August-13 to
March-15
Month
Aug-13
Market Level
( NIFTY)
Market
Return
3033.45
Return
159.95
Sep-13
3046.75
0.44
162.21
1.41
Oct-13
3121.45
2.45
163.7
0.92
Nov-13
3112.8
-0.28
163.84
0.09
Dec-13
2920.4
-6.18
154.38
-5.77
Jan-14
2873
-1.62
154.48
0.06
Feb-14
2773.1
-3.48
152.69
-1.16
Mar-14
2744.95
-1.02
152.59
-0.07
Apr-14
2835.3
3.29
155.28
1.76
May-14
2736.7
-3.48
152.9
-1.53
June-14
2828.45
3.35
154.27
0.90
July-14
2846.2
0.63
156.12
1.20
Aug-14
2796.6
-1.74
155.72
-0.26
Sep-14
2706.15
-3.23
153.08
-1.70
Oct-14
2713.8
0.28
151.88
-0.78
2678.55
-1.30
150.67
-0.80
Dec-14
2771.35
3.46
151.51
0.56
Jan-15
2849.5
2.82
152.33
0.54
Feb-15
2823.95
-0.90
151.76
-0.37
2874.8
1.80
152.91
0.76
Nov-14
Mar-15
Average
Return
SD (Risk)
Beta
-0.36
-0.28
2.75
1.69
0.51
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
-4
-6
Series2
Series1
-8
-10
-12
-14
Calculations of Risk of UTI Growth fund for the period of 18 months from August-10
to March-15
Month
Aug-13
Market Level
( NIFTY)
Market
Return (x)
3033.45
Return(y)
57.62
Sep-13
3046.75
0.44
57.94
0.56
Oct-13
3121.45
2.45
59.18
2.14
Nov-13
3112.8
-0.28
59.22
0.07
Dec-13
2920.4
-6.18
56.44
-4.69
Jan-14
2873
-1.62
55.55
-1.58
Feb-14
2773.1
-3.48
53.99
-2.81
Mar-14
2744.95
-1.02
53.55
-0.81
Apr-14
2835.3
3.29
54.64
2.04
May-14
2736.7
-3.48
53.31
-2.43
June-14
2828.45
3.35
54.56
2.34
July-14
2846.2
0.63
54.73
0.31
Aug-14
2796.6
-1.74
53.92
-1.48
Sep-14
2706.15
-3.23
52.47
-2.69
Oct-14
2713.8
0.28
52.5
0.06
2678.55
-1.30
7.14
-1.38
Dec-14
2771.35
3.46
7.24
1.40
Jan-15
2849.5
2.82
7.35
1.52
Feb-15
2823.95
-0.90
7.34
-0.14
Mar-15
2874.8
1.80
7.42
1.09
Nov-14
Average
Return
SD (Risk)
-0.36
-0.42
2.75
1.86
0.65
Beta
4
2
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
-2
Series1
Series2
-4
-6
-8
Interpretation:
UTI Growth fund has been analyzed and it is found that there is a negative growth.
However on the basis of the average returns of UTI Growth fund there is a negative
growth 0.42 as against the index average of negative 0.36 the beta being less than 1
the stock is not highly volatile.
Name of the
Fund
Return
(Rm)
Risk
Beta ()
Rf
(std dev)
Sharp' s
Treynor
(Rm- Rf)/
(Rm-Rf)/
2.15
0.75
-0.28
1.69
0.51
-0.35
2.07
0.75
-0.42
1.86
0.65
0.06
-0.22
-0.64
-0.20
-0.67
-0.20
-0.55
-0.26
-0.73
0.06
0.06
Birla Growth
fund
0.06
0
-0.05
Birla Growth
fund
-0.1
-0.15
-0.2
-0.22
-0.2
-0.2
-0.25
-0.26
-0.3
Interpretation:
From the above table and graph we can know that UTI MNC fund and UTI growth
are giving good returns and they are in first position,
0
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
-0.55
-0.64
-0.7
-0.67
-0.73
-0.8
Interpretation:
From the above table and graph we can know UTI Growth f u n d is performing
well and it is in first position
The general trend in the reduction of the market price for various mutual funds
schemes studied is not encouraging the stock market index has also been
falling continuously because of general economic slowd own howe ver the funds
are ranked considering sharp and trenyors in the order of performance
CHAPTER-V
DATA ANALYSIS & INTERPRETATION
FINDINGS
SHARPES: As per Sharpe performance measure, a high Sharpe ratio is preferable as
it indicates a superior risk adjusted performance of a fund. From the above table UTI
MNC fund and UTI Growth a better risk-adjusted performance out of considered
schemes
SUGGESTIONS TO INVESTORS:
Investing Checklist
Performance of various funds with similar objectives for at least 3-5 years
Think hard about investing in sector funds For relatively aggressive investors
Close touch with developments in sector, review portfolio regularly Look for `load'
costs
Portfolio Decision
The right asset allocation
i. Age = % in debt instruments
ii. Reality= different financial position, different allocation
iii. Younger= Riskier
TRAPS TO AVOID
IPO Blur
Begin with existing schemes (proven track record) and then new schemes
iii. Avoid Market Timing
MF Comparison
Absolute returns
% Difference of NAV
iv. Diversified Equity with Sector Funds NO
Benchmark returns
v. SEBI directs
vi. Fund's returns compared to its benchmark
Market conditions
Brand building is an exercise, which every business enterprise will have. Brand
is the soul of an institution; it survives on it, lives with it and cherishes it. Example:
BIRLA SUNLIFE MUTUAL FUND has a brand, every bank, insurance companies;
mutual fund companies have got their own brands.
2) Strength full Strategies:
Every AMC should try to turn into a more modern, a more vibrant, a more
transparent and regulatory compliance institution. It is with this in mind, every
institution should try to come up with verity of different type of products to fill
different investment objectives
3) Marketing tools for total quality achievement:
a) Large Network.
b) Effective Man power
c) Distribution across the Market
d) Customer relations(Building better relationships)
e) Value added service
f) Better transparency level
g) Building brand name as a disciplined player
4) Innovation:
MF industry can be classified morely into three categories like equity, debt and
balanced. And there is also complexive in nature. Fund managers are not able to
reach niche market. The products are should be innovative that can meet niche
market. Here MF should follow the FMCG industry innovative strategy.
CONCLUSIONS
From the study analysis conducted it is clear that in UTI MNC Fund is performing
very well.
The prospective investors are needed to be made aware of the investment in mutual
funds.
The Industry should keep consistency and transparency in its management and
investors objectives.
There is 100% growth of mutual fund as foreign AMCS are in queue to enter the
Indian markets.
BIBILIOGRAPHY
TEXT BOOKS
I.Donald E Fischer Ronald J Jordan
H.Sadhak