INTRODUCTION

The Indian financial system based on four basic components like Financial Market,
Financial Institutions, Financial service, Financial Instruments. All are play important
role for smooth activities for the transfer of the funds and allocation of the funds. The
main aim of the Indian financial system is that providing the efficiently services to the
capital market. The Indian capital market has been increasing tremendously during the
second generation. The first generation reforms started in 1991 the concept of LPG
(liberalization, privatization, and globalization).

Then after 1997 second generation reforms was started, still the its going on, its
Include reforms of industrial investment, reforms of fiscal policy, reforms of ex-imp
policy, reforms of public sector, reforms of public sector, reforms of foreign
investment through the institutional investors, reforms banking sectors. The economic
development model adopted by Indian 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 form time to
time. The last two decades have been a phenomenal expansion in the geographical
coverage and the financial spread of our financial system.

The spared 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 economy polices, there has been a rapid growth of capital market,
money market and financial services industry including merchant banking, leasing
and venture capital, leasing, hire purchasing. Consistent with the growth of financial
sector and second generation reforms its needs to fruition of the financial sector. It
also need to providing the efficient service to the investor Mostly if the investors are
supply small amount, in that point of view the mutual fund play vital for better service
to the small investors. The main vision for the analysis for the study is to scrutinize
the performance of five star rated mutual funds, given the weight of risk, return, and
assets under management, net assets value, book value and price earnings ratio.

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INVESTMENT:

What is investment?

An investment is an asset or item that is purchased with the hope that it will generate
income or will appreciate in the future. In an economic sense, an investment is the
purchase of goods that are not consumed today but are used in the future to create
wealth. In finance, an investment is a monetary asset purchased with the idea that the
asset will provide income in the future or will be sold at a higher price for a profit.

A financial investment is an asset that you put money into with the hope that it will
grow or appreciate into a larger sum of money. The idea is that you can later sell it at
a higher price or earn money on it while you own it. You may be looking to grow
something over the next year, such as saving up for a car, or over the next 30 years,
such as saving for retirement.

What investment is NOT?

Investing is NOT gambling. Gambling is putting money at risk by betting on an
uncertain outcome with the hope that you might win money. Part of the confusion
between investing and gambling, however, may come from the way some people use
investment vehicles. For example, it could be argued that buying a stock based on a
'hot tip' you heard at the water cooler is essentially the same as placing a bet at a
casino.
Types of investments

Bonds

Grouped under the general category called 'fixed-income' securities, the term 'bond' is
commonly used to refer to any founded on debt. When you purchase a bond, you are
lending out your money to a company or government. In return, they agree to give
you interest on your money and eventually pay you back the amount you lent out.

The main attraction of bonds is their relative safety. If you are buying bonds from a
stable government, your investment is virtually guaranteed (or "risk-free" in investing
parlance). The safety and stability, however, come at a cost. Because there is little
risk, there is little potential return. As a result, the rate of return on bonds is generally
lower than other securities.

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Stocks

When you purchase stocks, you become a part owner of the business. This entitles
you to vote at the shareholder's meeting and allows you to receive any profits that the
company allocates to its owners–these profits are referred to as dividends.

While bonds provide a steady stream of income, stocks are volatile. That is, they
fluctuate in value on a daily basis. When you buy a stock, you aren't guaranteed
anything. Many stocks don't even pay dividends, making you any money only by
increasing in value and going up in price which might not happen.

Compared to bonds, stocks provide relatively high potential returns. Of course, there
is a price for this potential: you must assume the risk of losing some or all of your
investment.

Mutual Funds

A mutual fund is a collection of stocks and bonds. When you buy a mutual fund, you
are pooling your money with a number of other investors, which in turn enables you
(as part of a group) to pay a professional manager to select specific securities for you.
Mutual funds are all set up with a specific strategy in mind, and their distinct focus
can be nearly anything: large stocks, small stocks, bonds from governments, bonds
from companies, stocks and bonds, stocks in certain industries, stocks in certain
countries, and the list goes on. The primary advantage of a mutual fund is that you can
invest your money without needing the time or the experience in choosing
investments. To know more about mutual funds, please visit our learning centre.

Alternative Investments: Options, Futures, FOREX, Gold, Real Estate, Etc.

So, you now know about the two basic securities: equity and debt, better known as
stocks and bonds. While many (if not most) investments fall into one of these two
categories, there are numerous alternative vehicles, which represent more complicated
types of securities and investing strategies.

The good news is you probably don't need to worry about alternative investments at
the start of your investing career. They are generally high-risk/high-reward securities
that are much more speculative than plain old stocks and bonds. Yes, there is the
opportunity for big profits, but they require some specialized knowledge. So if you
don't know what you are doing, you could get yourself into a lot of trouble. We would

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therefore suggest that you start with simpler investment avenues and leave these
investment vehicles for the experts.

INTRODUCTION OF MUTUAL FUND:

Mutual fund is an investment company that pools money from shareholders and
invests in a variety of securities, such as stocks, bonds and money market instruments.
Most open-end mutual fund stands ready to buy back its shares at their current net
asset value, which depends on the total market value of the fund’s investment
portfolio at the time of redemption. Most open-end mutual funds continuously, to
differentiate it from a closed-end investment company. Mutual funds invest pooled
cash of many investors to meet the fund’s stated investment objective. Mutual funds
stand ready to sell and redeem their shares at any time at the fund’s current net asset
value: total fund assets divided by shares outstanding.

In simple words, mutual funds is mechanism for pooling the resources by issuing
units to the investors and investing funds in securities in accordance with objectives
as disclosed in offer document. Investments in securities are spared across a wide
cross-section of industries and sectors and thus risk is reduced. Diversification
reduces the risk because all stocks may not move in the same direction in the same
proportion at the same time. Mutual fund issues units of the investors in accordance
with quantum of money invested by them. Investors of mutual fund are known as unit
holders. The profits or losses are shared by the investors in proportion to their
investments. The mutual funds normally come out with a number of schemes with
different investments objective which are launched from time to time. In India, A
mutual fund is required to be registered with securities and exchange Board of India
(SEBI) which regulates securities market before it can be collect funds from the
public. In short, a mutual fund is a common pool of money in to which investors with
common investment objectives place their contributions that are to be invested in
accordance with the stated investment objective of the schemes. The investment
manager would invest the money collected from the investors in to assets that are
defined by the stated objective of the scheme.

For example, an equity fund would invest equity related instruments and a debt fund
would invest in bonds, debentures, gifts e.t.c. Mutual fund is a suitable invests in a
diversified, professionally managed basket of securities at a relatively low cost.

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Meaning of Mutual Funds:

A mutual fund is a professionally managed form of collective investments that pools

Money from many investors and invests it in stocks, bonds, short-term money market
Instruments and other securities. In a mutual fund, the fund manager, who is also
known as the portfolio manager, trades the fund’s underlying securities, Realizing
capital gains or losses and collects the dividend or interest income. The investment
proceeds are then passed along to the individual investors.
Definition of mutual funds

A mutual fund is an investment vehicle made up of a pool of funds collected from

many investors for the purpose of investing in securities such as stocks, bonds, money
market instruments and similar assets. Mutual funds are operated by money managers,
who invest the fund's capital and attempt to produce capital gains and income for the
fund's investors.

“A mutual fund is pool of money from numerous investors who wish to save or make
money just like you. Investing in a mutual fund can be a lot easier than buying and
selling individual stocks bonds on your own. Investors can sell their shares when they
want.”

“A mutual fund is nothing more than a collection of stocks and bonds. You can think
of a mutual fund as accompany that brings together a group of people and invests
their money in stocks, bonds, and other securities. Each investor own shares, which
represent a portion of the holdings of the fund.”

“It is a Non depository or Non-banking financial intermediary which acts as an

important vehicle for bringing wealth holders and deficit units together indirectly”.

A mutual fund also referred to as an open-end fund, that spreads money across a
diversified portfolio of securities- including stocks, bonds, or money market
instruments.

Mutual funds have been around for a long time, dating back to the early 19th century.
The first modern American Mutual fund opened in 1924, yet it was only in the 1900’s
that mutual funds became mainstream investments, as the number of households
owning them nearly tripled during that decade. With recent surveys showing that over

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88% of all investors participate in mutual funds, you’re probably already familiar with
these investments, or perhaps even own some. Into any case, it’s important that you
know exactly how these investments work and how you can use them to your
advantage. A mutual fund is a special type of company that pools together money
from many investors and invests it on behalf of the group, in accordance with a stated
set of objectives. Mutual funds raise the money by selling shares of the fund to the
public; much like any other company can sell stock in itself to the public. Funds then
take the money they receive from the sale of their shares and use it to purchase
various investment vehicles, such as stock, bonds and money market instruments. In
return for the money they give to the fund when purchasing shares, shareholders
receive an equity position in the fund and, in effect, in each of its underlying
securities. For most mutual funds, shareholders are free to sell their shares at any
time, although the price of shares in a mutual fund will fluctuate daily, depending
upon the performance of the securities held by the fund.

CONCEPT OF MUTUAL FUND:

A mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective. The
ownership of the fund is thus joint or “mutual” the fund belongs to all investors. A

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single investor’s ownership of the fund is in the same proportion as the amount of the
contribution made by him or her bears to the total amount of the fund.

Mutual funds are trusts, which accept savings from investors and invest the same in
diversified financial instruments in terms of objectives set out in the trust deed with
the view to reduce the risk and maximize the income and capital appreciation for
distribution for the members. A mutual fund is a corporation and the fund manager’s
interest is to professionally manage the funds provide by the investors and provide a
return on them after deducting reasonable management fees.

The objective sought to be achieved by mutual fund is to provide an opportunity for

lower income groups to acquire without much difficulty financial assets. They cater
mainly to the needs of the individual investors whose means are small and to manage
investors portfolio in a manner that provide a regular income, growth, safety, liquidity
and diversification opportunities.

FUND BASICS

A mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the schemes. These could
range from shares to debenture to money market instruments. The income earned
through these investments and the capital appreciation realized by the schemes is
shared by its unit holders in proportion to the number of units owned by them. Thus a
mutual fund is the most suitable investment for the common man as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. The small savings of all the investors are put together to increase the buying
power and hire a professional manager to invest and monitor the money. Anybody
with an investible surplus of as little as a few thousand rupees can invest in mutual
funds. Each mutual fund scheme has a defined investment objective and strategy. A
mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested I capital market
instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciation realized is shared by its unit
holders in proportion to the number of units owned by them. Thus a mutual fund is

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the most suitable investment for the common man as it offers an opportunity to invest
in a diversified, professionally managed basket of securities at a relatively low cost.

Structure of Mutual funds:

1. A Sponsor.
2. A Trustee.
3. An asset management company (AMC)
While the above mentioned play the most important roles in creating and running a
fund house, the custodian, registrar and transfer agent (RTA), auditors and the fund
accountants play a vital supporting role in aiding the smooth functioning of a mutual
fund.

Fund Sponsor – The Sponsor is the main body that establishes the Mutual fund. The
Sponsor can be compared to a promoter of a company. The responsibility of the
sponsor includes appointing the trustees with the approval of SEBI and setting up an
AMC under the Companies act 1956 while getting the trust registered with SEBI.
Since the Sponsors play the most important role in the functioning of a mutual fund,
SEBI has a set of strict guidelines for the eligibility of a sponsor. Some of them are as
follows: the sponsor should have a sound track record of carrying out business in the
financial services space for not less than five years. A Sponsor also needs to have
made profits in at least three of the five years including the latest year. During the
same period, it is also important that the sponsor has had a positive net worth. It

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should be contributing a minimum of 40 per cent net worth of the AMC. it is also
important that the sponsor has a good track record of fairness and integrity in all its
transactions. For example ICICI Bank and Prudential Plc are sponsors for ICICI
Mutual Fund. For Birla Sun Life Mutual Fund, Aditya Birla Financial Services and
Sun Life (India) AMC Investments Inc. are sponsors.

Trustee – The main role of a trustee is to ensure that the interest of the unit holders is
protected while making sure that the mutual fund complies with all the regulations of
SEBI. Either, the sponsor should appoint four trustees or establish a trustee company
with at least four independent directors. Additionally, at least two thirds of the
trustees or the directors should be independent not associated with the sponsor in any
way.
Some of the key responsibilities of the trustees include, entering into an investment
management agreement with the AMC to define its functioning. They are also
responsible for ensuring that the AMC has all the required process, procedures and
systems in place while making sure that all the key personnel such as the CEO, CIO,
the fund managers and the analysts are appointed after through due diligence. All the
schemes launched by the AMC have to be approved by the trustees prior to launch.
The trustees will be reviewing all the transactions of the AMC on a quarterly basis
wile filing reports to SEBI on a half yearly basis.

Asset Management Company (AMC):

The AMC is the investment manager of the trust. It takes care of the day today
operation of the mutual fund and managing the investors’ money as well. The AMC is
appointed either by the trustee or the Sponsor after obtaining the approval of SEBI.
The AMC consists of the Chief Investment Officer, the fund managers and analysts,
who are together responsible for managing the various schemes launched. The
compliance officer ensures compliance of all the activities of the AMC in line with
SEBIs rules and regulations. For example; HDFC AMC is the Asset Management
Company for HDFC Mutual Fund.

Types of AMCs in Indian context

1. AMCs owned by banks.

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 2. AMCs owned by financial institutions.

3. AMCs owned by Indian private sector companies.

4. AMCs owned by foreign institutional investors.

5. AMCs owned by Indian &foreign sponsors.

Custodian – The custodian has the custody of the all the shares and various other
securities bought by the AMC. The custodian is responsible for the safe keeping of all
the securities. The custodian is liable for keeping the investment account of the
mutual fund.
Often an independent organization, it takes custody all securities & other assets of
mutual fund. Its responsibilities include receipt & delivery of securities collecting
income-distributing dividends, safekeeping of the unit & segregating assets &
settlements between schemes. Mutual fund is managed either trust company board of
trustees. Board of trustees & trust are governed by provisions of Indian trust act. If
trustee is a company, it is also subject Indian Company Act. Trustees appoint AMC in
consultation with the sponsors & according to SEBI regulation. All mutual fund
schemes floated by AMC have to be approved by trustees. Trustees review & ensure
that net worth of the company is according to stipulated norms, every quarter. Though
the trust is the mutual fund, the AMC is its operational face. The AMC is the first
functionary to be appointed, & is involved in appointment of all other functionaries.
The AMC structures the mutual fund products, markets them & mobilizes fund,
manages the funds & services to the investors. A draft offer document is to be
prepared at the time of launching the fund. Typically, it pre-specifies investment
objectives of the fund, the risk cost involved in the process & the broad rules to enter
& to exit from the fund & other areas of operation. In India as in most countries, these
sponsors need approval from a regulator, SEBI in our case. SEBI looks at track
records of the sponsor & its financial strength granting approval to the fund for
commencing operations. A sponsor then hires an asset management company to
invest the funds according to the investment objective. It also hires another entity to
be the custodian of the assets of the fund & Registrars perhaps the third one to handle
registry work for the unit holder of the fund.
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Transfer Agent (R & T Agent):

The Registrars & Transfer Agents(R & T Agents) are responsible for the investor
servicing function, as they maintain the records of investors in mutual funds. They
process investor applications; record details provide by the investors on application
forms; send out to investors details regarding their investment in the mutual fund;
send out periodical information on the performance of the mutual fund; process
dividend payout to investor; incorporate changes in information as communicated by
investors; & keep the investor record up-to-date, by recording new investors &
removing investors who have withdrawn their funds.
TYPES OF MUTUAL FUND SCHEMES:

1. By structure:

Open-ended Fund:

An open-end fund is one that is available for subscription all through the year. These
do not have a fixed maturity. Investors can conveniently buy and sell units at Net
Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.

Closed-end Fund:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to
15 years. The fund is open for subscription only during a specified period. Investors
can invest in the scheme at the time of the initial public issue and thereafter they can
buy or sell the units of the scheme on the stock exchanges where they are listed. In
order to provide an exit route to the investors, some close-ended funds give an option
of selling back the units to the Mutual Fund through periodic repurchase at NAV
related prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor.

Interval Funds:

Interval funds combine the features of open-ended and close-ended schemes. They are
open for sale or redemption during pre- determined intervals at NAV related prices.

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2. By Investment Objective:

Growth Funds:

The aim of growth funds is to provide capital appreciation over the medium to long
term. Such schemes normally invest a majority of their corpus in equities. It has been
proved that returns from stocks, have outperformed most other kind of investments
held over the long term. Growth schemes are ideal for investors having a long term
outlook seeking growth over a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate
debentures and Government securities. Income Funds are ideal for capital stability
and regular income.

Balanced Fund:

The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are
also affected because of fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money Market Funds:

The aim of money market funds is to provide easy liquidity, preservation of capital
and moderate income. These schemes generally invest in safer short-term instruments
such as treasury bills, certificates of deposit, commercial paper and inter-bank call
money. Returns on these schemes may fluctuate depending upon the interest rates
prevailing in the market. These are ideal for Corporate and individual investors as a
means to park their surplus funds for short periods.

3. Other schemes

 Tax saving schemes: These schemes offer tax rebates to the investors under
specific provisions of the Indian Tax laws as the government offers tax

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 incentives for investment in specified avenues. Investment made in equity
linked saving schemes (ELSS) and pension schemes are allowed as deduction
u/s 80c of the Income Tax Act, 1961. The Act also provides opportunities to
investors to save capital gains u/s 54EA and 54EB by investing in mutual
funds.

 Gilt Fund: These funds invest exclusively in government securities.

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

 Special Schemes:

Industry Specific Schemes: Industry specific schemes invest only in the

industries in the offer document. The investment of these funds is limited to
specific industries like InfoTech, FMCG, and pharmaceutical etc.

Sectoral schemes: Sectoral funds are those which invest exclusively in a

specified sector. This could be an industry or a group of industries or various
segments such as ‘A’ group shares or initial public offerings.

 Index schemes: Index funds attempt to replicate the performance of a

particular index such as the BSE senses or the NSE 50.

Mutual Fund Investment as Tax savings Scheme:

MF is a mechanism for pooling the resources by issuing to the investors and investing
funds in securities in accordance with objectives as disclosed in offer document.
Investments in securities are spread across a wide cross-section of industries and
sectors and thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at the same time. MF
issues units to the investors in accordance with quantum of money invested by them.
The profits or losses are shared by the investors in proportion to their investments.
The MF normally comes out with a number of schemes with different investment

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objectives which are launched from time to time. Among the different schemes, the
scheme which is quite popular for its tax advantages is known as tax saving MF. MF
according to investment objectives, comprise of, pure growth scheme, balanced
schemes and tax saving schemes. Among the three types, tax saving scheme is more
profitable because it acts as a tax shield (SEBI, 2013).

These schemes offer tax rebates to the investors under specific provisions of the
Indian IT laws prescribed from time to time. Tax planning may seem like a hard
exercise requiring lot of efforts that may make an ordinary investor nervous at the first
glance. Equity Linked Saving Scheme (ELSS) a simple way to get tax benefits and at
the same time get an opportunity to gain from the Indian equity markets. ELSS is a
type of diversified equity MF which is qualified for tax exemption under section 80C
of the IT Act, and offers the twin advantage of capital appreciation and tax benefits. It
comes with a lock in period of 3 years. ELSS funds are one of the best avenues to
save tax under section 80C. Furthermore no tax is levied on the long-term capital
gains from these funds. Moreover, compared to other tax saving options; ELSS has
the shortest lock in period of three years. (SBI, 2013). In present economic
liberalization scenario investors with their huge surplus funds, needs highly
diversifiable instrument alternative for moderate returns with low risk, with this
advantage, the MF got significance in Indian capital market. MF is a productive
package for an investor with limited finances. With its various diversified options in
the MF, the MF companies are attracting investors towards them. Tax saving scheme
is among the popular MF schemes which has been attracting investors towards them.
Thus, it is relevant from the view point of the investors to know the performance of
the various tax saving schemes of MF. With the rise in demand for MF and with the
rise in demand in the tax saving schemes, various MF companies are coming with
their tax saving schemes.

Now, the customers have a wide range of choice among the various MF tax saving
schemes of different MF companies. So, it is important from the view point of the
investors to know which tax saving scheme is performing well in the present days on
the basis of the past records. In the era of globalization there are many investment
opportunities available to the investors, such as investment in bonds, securities, shares
etc. At the same time, there are other tax saving schemes also which are available for
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investment like NSC, PPF, Life Insurance, NSS, and PO Deposit Scheme etc. So, it is
very important for the investors to know which option is better for them keeping in
view both the risk and the associated return taken into consideration.

Against this backdrop, the objective of the present paper is to evaluate the
performance of Tax Gain funds of various MF companies in India during 2007-2012.
Accordingly, apart from the introductory section, the remaining paper is organized
as following. Section 2 presents a brief review of literature following the Data &
Methodology Section applied in this paper. Section 4 presents the Results and
discussion. Finally, this paper concludes in Section 5.
Equity Linked saving schemes (ELSS): Equity linked saving schemes is also a type
of mutual fund and falls under the Equity mutual fund category. As the name
indicates, ELSS mutual fund invests major portion of its corpus into equity and equity
related instruments. But there are some distinct features which makes ELSS plans
different from other equity mutual funds.

Investments made in ELSS plans are eligible for deduction from the taxable income
under section 80c of the income tax act. There is no limit for investments in ELSS
plans, but investment of up to Rs 1, 00, 000 qualify for income tax benefits.
Investments made in normal mutual funds do not qualify for income tax deduction.

Features of an ELSS plan:

1. ELSS is an equity linked tax saving investments instrument.

2. Money collected under ELSS plan is mainly invested in equity and equity related
instruments

3. The financial product is more suited to those investors who are willing to take high
risk and looking for high returns.

4. There is no upper limit on investments that can be made in ELSS. However

investments up to 1, 00,000 made in less in a financial year qualify for
deduction from taxable income under section 80c of the income tax act.

5. ELSS come with a 3year lock in period.

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6. Long term capital gains earned on investments from ELSS are tax free.

7. Also dividends eared from ELSS plan are tax free in the hands of the investor.

Advantages of MF:

Mutual funds have designed to provide maximum benefits to investors, and fund
manager have research team to achieve schemes objective. Assets Management
Company has different type of sector funds, which need to proper planning for
strategic investment and to achieve the market return.

Transparency: The performance of a mutual fund is reviewed by various

publications and rating agencies, making it easy for investors to compare fund to
another. As a unit holder, you are provided with regular updates, for example daily
NAVs, as well as information on the fund's holdings and the fund manager's strategy.

Affordability: As a small investor, you may find that it is not possible to buy shares
of larger corporations. Mutual funds generally buy and sell securities in large volumes
which allow investors to benefit from lower trading costs. The smallest investor can
get started on mutual funds because of the minimal investment requirements. You can
invest with a minimum of Rs.500 in a Systematic Investment Plan on a regular basis.

Tax benefits: Investments held by investors for a period of 12 months or more

qualify for capital gains and will be taxed accordingly. These investments also get the
benefit of indexation.
Liquidity: With open-end funds, you can redeem all or part of your investment any
time you wish and receive the current value of the shares. Funds are more liquid than
most investments in shares, deposits and bonds. Moreover, the process is
standardized, making it quick and efficient so that you can get your cash in hand as
soon as possible.
Professional management: Qualified professionals manage your money, but they are
not alone. They have a research team that continuously analyses the performance and
prospects of companies. They also select suitable investments to achieve the
objectives of the scheme. It is a continuous process that takes time and expertise
which will add value to your investment. Fund managers are in a better position to
manage your investments and get higher returns.

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Diversification: The cliché, "don't put all your eggs in one basket" really applies to
the concept of intelligent investing. Diversification lowers your risk of loss by
spreading your money across various industries and geographic regions. It is a rare
occasion when all stocks decline at the same time and in the same proportion. Sector
funds spread your investment across only one industry so they are less diversified and
therefore generally more volatile.
More choice: Mutual funds offer a variety of schemes that will suit your needs over a
lifetime. When you enter a new stage in your life, all you need to do is sit down with
your financial advisor who will help you to rearrange your portfolio to suit your
altered lifestyle.
Disadvantages of MF:

The mutual fund not just advantage of investor but also has disadvantages for the
funds. The fund manager not always made profits but might creates loss for not
properly managed. The fund have own strategy for investment to hold, to sell, to
purchase unit at particular time period.

Costs Control Not in the Hands of an Investor:

Investor has to pay investment management fees and fund distribution costs as a
percentage of the value of his investments (as long as he holds the units), irrespective
of the performance of the fund.
No Customized Portfolios:
The portfolio of securities in which a fund invests is a decision taken by the fund
manager. Investors have no right to interfere in the decision making process of a fund
manager, which some investors find as a constraint in achieving their financial
objectives.

Difficulty in Selecting a Suitable Fund Scheme:

Many investors find it difficult to select one option from the plethora of
funds/schemes/plans available. For this, they may have to take advice from financial
planners in order to invest in the right fund to achieve their objectives.

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 NEEDS FOR THE STUDY

Generally, most of the investors investing in mutual funds in order to avail tax
benefits and also to earn returns, in this connection they would park their funds in the
tax saving schemes. A study required to analyze the performance of selected tax
saving schemes to fulfill the objectives of the investors. Hence the study has been
undertaken.

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 SCOPE OF THE STUDY
It has grown enormously over the years. In the first age of mutual funds, when the
investment management companies started to offer mutual funds, choices were few.
Even though people invested their money in mutual funds as these funds offered them
diversified investment option for the first time. By investing in these funds they were
able to diversify their investment in common stocks, preferred stocks, bonds and other
financial securities. At the same time they also enjoyed the advantage of liquidity.
With Mutual Funds, they got the scope of easy access to their invested funds on
requirement.

19
 OBJECTIVES OF THE STUDY

1. To understand the tax saving schemes in mutual funds.

2. To compare performance of selected tax saving schemes in comparison with

market portfolio.

3. To study the tax savings scheme on mutual funds, its performance in the market,
and its exposure to stock.

4. To measure the comparative beta analysis of selected AMC.

20
 RESEARCH&METHODOLOGY
RESEARCH:

Research is a process of steps used to collect and analyze information to increase our
understanding of a topic or issue.

DESCRIPTIVE RESEARCH:

Descriptive research may be characterized as simply the attempt to determine,

describe or identify what is, while analytical research attempts to establish why it is
that way or how it came to be.

Source of Data:

1. Primary data: collected from the fund manager about the funds they are providing
and the investment methods they are following through personal interview.

2. Secondary data: collected from the websites related to mutual funds websites,
journals, books and brochures.

TOOLS FOR PERFORMANCE MEASURES

In this study, the tools used for the analysis are Standard Deviation, Beta, Correlation,
Coefficient of Determination, Treynor Ratio, Sharp Ratio and Jensen Measure for a
period of 5 years from 2011-12 to 2015-16.

21
 LIMITATIONS OF THE STUDY

1. It studies about tax savings schemes.

2. The duration of the study is limited.

3. The study was limited SBI MAGNUM TAX GAIN SCHEMES, HDFC TAX
SAVEING, ICICI PRU TAX PLAN, RELIANCE TAX SAVER, FRANKLIN TAX
SAVER companies only.

4. The study was limited by time constraint.

5. This study is evaluation of performance of selected schemes.

22
 INDUSTARY PROFILE

The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963.Though the growth was slow, but it accelerated
from the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement, but
quality wise as well as quantity wise. Before, the monopoly of the market had seen an
ending phase, the Assets under Management (AUM) was RS.67bn.The private sector
entry to the fund family rose the AUM to Rs.470bn in March 1993 and till April 2004,
it reached the height of 1540bn. Putting the AUM of the mutual fund industry into
comparison, the total of its is less than the SBI alone, constitute less than 11% of the
total deposits held by the Indian banking industry.

History-The landmarks

1963: UTI is India’s first mutual fund.

1964: UTI launches US-64

1971: UTI’s ULIP (unit-linked Insurance plan) is second scheme to be selected.

1986: UTI master share, India’s first true”Mutual fund” scheme, launched.

1987: PSU banks and insurers allowed floating Mutual funds: state bank of India first
off the blocks.

1992: The Hashed Mehta-fuelled bull market arouses middle-class in interest in

shares and mutual funds.

1993: private sector and foreign players allowed.

1994: Morgan Stanley is the first foreign player.

1996: SEBI mutual fund and regulations.

1998: UTI Master Index Fund is the country’s first index fund.

2000: The Industry’s assets under management crosses Rs 1, 00,000 crore.

2001: US-64 scam leads to UTI overhaul.

23
2002: UTI bifurcated, comes under SEBI purview: mutual fund distribution banned
from giving commission to investors; floating rate funds and foreign debt funds debut.

2003: AMFI certification made compulsory for new agents; fund of funds launched.

WHAT IS A MUTUAL FUND?

Mutual fund is the pool of the money, based on the trust who invests the savings of a
number of investors who shares a common financial goal, like the capital appreciation
and dividend earning. The money thus collect is then invested in capital market
instruments such as shares, debenture, and foreign market. Investors invest money and
get the units as per the unit value which we called as NAV (net assets value). Mutual
fund is the most suitable investment for the common man as it offers an opportunity
to invest in diversified portfolio management, good research team, professionally
managed Indian stock as well as the foreign market, the main aim of the fund manager
is to taking the scrip that have under value and future will rising, then fund manager
sell out the stock. Fund manager concentration on risk – return trade off, where
minimize the risk and maximize the return through diversification of the portfolio.
The most common features of the mutual fund unit are low cost. The below I mention
the how the transactions will done or working with mutual fund.

Overview of Mutual Fund Industry in India:

The most important trend in the MF Industry is the aggressive expansion of the
foreign owned MF companies and the decline of the companies floated by
nationalized banks and smaller private sector players. Many nationalized banks got
into the MF business in the early nineties and got off to a good start due to the stock
market boom prevailing then. The MF 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 MF in India can be broadly be 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

24
launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores
of assets under management.
Second Phase – 1987-1993:1987 marked the entry of non- UTI, public sector MF set
up by public sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI MF was the first non- UTI MF established
in June 1987 followed by Can bank MF(Dec 87), Punjab National Bank MF (Aug 89),
Indian Bank MF (Nov 89), Bank of India (Jun 90), Bank of Baroda MF (Oct 92). LIC
established its MF in June 1989 while GIC had set up its MF in December 1990.At
the end of 1993, the MF industry had assets under management of Rs.47, 004 crores.
Third Phase – 1993-2003: With the entry of private sector funds in 1993, a new era
started in the Indian MF industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first MF Regulations came into being,
under which all MF, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
MF registered in July1993.The 1993 SEBI (MF) Regulations were substituted by a
more comprehensive and revised MF Regulations in 1996. The industry now
functions under the SEBI (MF) Regulations 1996. The number of MF houses went on
increasing, with many foreign MF 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 MF with total assets of Rs. 1,21,805 corers. The UTI with Rs.44,541 corers of
assets under management was way ahead of other MFs.
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, 835crores 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 MF Regulations.
The second is the UTI MF, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the MF 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 MF, conforming to the SEBI MF
Regulations, and with recent mergers taking place among different private sector

25
funds, the MF industry has entered its current phase of consolidation and growth. The
following graph indicates the growth of assets over the years.
GROWTH OF MUTUAL FUND INDUSTARY:

The history of mutual funds dates support to 19th century when it was introduced in
Europe, in particular, Great Britain. Robert Fleming set up in 1868 the first
investment trust called Foreign and colonial investment trust which promised to
manage the finances of the moneyed classes of Scotland by scattering the investment
over a number of different stocks. This investment trust and other investment trusts
which were afterward set up in Britain and the U.S., resembled today’s close ended
mutual funds. The first mutual fund in the U.S., Massachusetts investor’s trust, was
set up in March 1924. This was the open ended mutual fund.

The stock market crash in 1929, the Great Depression, and the outbreak of the Second
World War slackened the pace of growth of the mutual fund industry. Innovations in
products and services increased the popularity of mutual funds in the 1950s and
1960s. The first international stock mutual fund was introduced in the US in 1940. In
1976, the first tax exempt municipal bond funds emerged and in 1979, the first money
market mutual funds. The latest additions are the international bond fund in 1986 arm
funds in 1990. This industry witnessed substantial growth in the eighties and nineties
when there was a significant increase in the number of mutual funds, schemes, assets,
and shareholders. In the US the mutual fund industry registered s tenfold growth the
eighties. Since 1996, mutual fund assets have exceeds bank deposits. The mutual fund
industry and the banking industry virtually rival each other in size.

A Mutual fund is type of Investment Company that gathers assets form investors and
collectively invests in stocks, bonds, or money market instruments. The investment
company concepts date to Europe in the late 1700s, according to K. Geert
Rouwenhost in the Origins Mutual Funds, when “a Dutch Merchant and Broker
Invited subscriptions from investor with limited means.” The materialization of
“investment pooling “in England in the 1800s brought the concept closer to U.S.
shores. The enactment of two British Laws, the Joint Stock Companies Acts of 1862
and 1867, permitted investors to share in the profits of an investment enterprise, and
limited investor liability to the amount of investment capital devoted to the enterprise.

26
May be more outstandingly, the British fund model established a direct link with U.S.
Securities markets, serving finance the development of the post Civil War U.S.
economy. The Scottish American Investment Trust, Formed on February1, 1873 by
fund pioneer Robert Fleming, invested in the economic potential of the United States,
Chiefly through American railroad bonds. Many other trusts followed that not only
targeted investment in America, but led to the introduction of the fund investing
concept on U.S. shores in the late 1800 and early 1900s.

Nov. 1925. All these funds were opening ended having redemption feature. Similarly,
they had almost all the features of good modern Mutual Funds like sound investment
policies and restrictions, open end ness, self liquidating features, a publicized
portfolio, simple capital structure, excellent and professional fund management and
diversification etc, and hence they are the honored grandparents of today’s funds.
Prior to these funds all the initial investment companies were closed ended
companies. Therefore, it can be said that although the basic concept of diversification
and professional fund management, were picked by U.S.A. from England Investment
Companies. “The Mutual Fund is an American Creation.”

Because of their exclusive feature, open ended Mutual Funds rapidly became very
popular. By 1929, there were 19 open ended Mutual Funds in USA with total assets of
$ 140 million. But the 1929 Stock Market crash followed by great depression of 1930
ravaged the U.S. Financial Market as well as the Mutual Fund Industry. This
necessitated stricter regulation for mutual funds and for Financial Sectors. Hence, to
protect the interest of the common investors, U.S. Government passed various Acts,
such a Securities Act 1933, Securities Exchange Act 1934 and the Investment
Companies Act 1940. A committee called the National Committee of Investment
Company (Now, Investment Company Institute), was also formed to co-operate with
the Federal Regulatory Agency and to keep informed of trends in Mutual Fund
Legislation.

As a result of this measure, the Mutual Fund Industry began to develop speedily and
the total net assets of the Mutual Funds Industry increased from $ 448 million in 1940
to $ 2.5 billion in 1950. The number of shareholder’s accounts increased from
296000, to more than one Million during 1940-1951. “As a result of renewed interest

27
in Mutual Fund Industry they grew at 18% annual compound rate reaching peak of
their rapid growth curve in the late 1960s.”

AMFI IN MUTUAL FUNDS:

AMFI is the Short form Association of Mutual Funds in India. Everyone is having a
Question about AMFI & its Role of Mutual Fund Industry. This piece of Information
may helpful those who want to know AMFI with clear understanding.
The Association of Mutual Funds in India (AMFI) is dedicated to developing
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. AMFI is
established on the lines of the Investment Company Institute (ICI), the
national association of US investment companies.
AMFI was incorporated on August 22, 1995 as a non-profit organization with
an objective to:

 To promote best business practices and code of conduct in all areas of

operation of Mutual Fund Industry.
 AMFI should maintain high professional and ethical standards in the
Mutual Fund Industry.
 AMFI should interact with the Securities and Exchange Board of India
(SEBI) and to represent to SEBI on all matters concerning the Mutual
Fund Industry.
 AMFI to make a representation to the Government, RBI and other
regulatory bodies in matters relating to the Mutual Fund Industry.
 It has to develop a well-trained agent distributor’s network for the Mutual
Fund Industry.
 To Promote Nationwide investor awareness program to make the
investors understand the concept and working of Mutual Funds.
 To disseminate information on Mutual Fund Industry and to undertake
studies and research directly and/or in association with other bodies.

AMFI has also set up the Committee on Valuation of Mutual Funds, Committee on
Best Practices, Committee on RBI Related Matters, and Committee on Registration of

28
AMFI Certified Distributors for reviewing and evolving standards in the Mutual
Fund Industry.

SEBI Guideline of Mutual Fund

SEBI Regulation Act 1996

Establishment of a Mutual Fund:

In India mutual fund play the role as investment with trust, some of the formalities
laid down by the SEBI to be establishment for setting up a mutual fund. As the part of
trustee sponsor the mutual fund, under the Indian Trust Act, 1882, under the trustee
company are represented by a board of directors. Board of Directors is appoints the
AMC and custodians. The board of trustees made relevant agreement with AMC and
custodian. The launch of each scheme involves inviting the public to invest in it,
through an offer documents.
Depending on the particular objective of scheme, it may open for further sale and
repurchase of units, again in accordance with the particular of the scheme, the scheme
may be wound up after the particular time period.
1. The sponsor has to register the mutual fund with SEBI
2. To be eligible to be a sponsor, the body corporate should have a sound track record
and a general reputation of fairness and integrity in all his business transactions.

29
 COMPANY PROFILE

SBI Mutual Fund is India's largest bank sponsored mutual fund with an investor base
of over 3 million. SBI Mutual Fund is a joint venture between the State Bank of India,
India's largest banking enterprise and Society General Asset Management of France,
one of the world's leading fund management companies.

Since its inception SBI Mutual Fund has launched thirty-two schemes and
successfully redeemed fifteen of them. SBI Mutual Fund schemes have consistently
outperformed benchmark indices.SBI Mutual is the first bank-sponsored fund to
launch an offshore fund-ResurgentIndiaOpportunitiesFund.

Presently, SBI Mutual Fund manages over Rs. 17000 corers of assets. The fund has a
network of 100 collection branches, 26 investor service centers, 28 investor service
desks and 40 district organizers.

ABOUT SBI FUNDS MANAGEMENT LTD (SBIFM)

SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund.
SBI Mutual Fund has been constituted as a trust, sponsored by State Bank India.
Today the Fund has an investor base of over 2.8 million spread over 23
schemes. With a large network of collecting branches and investor service
centers, SBI Mutual Fund constantly endeavors to get closer to its growing
family of investors. SBI is the largest public sector Bank in India with 8,836
branches all over India. SBI is the leader in providing loans to trade & industry.
It also provides related services, which generate significant fee-based income. It
has also identified project finance and consumer banking as key areas.

Currently the SBI Mutual Fund offers 177 schemes in with different investment
objective and needs, as follows.

SBI mutual fund schemes offers

30
 No. of schemes including 177
options
Equity Schemes 36
Debt Schemes 115
Short term debt Schemes 11
Equity & Debt 3
Money Market 0
Gilt Fund 12

SBI Mutual fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India’s
largest bank patronized by over 80% of the top corporate houses of the country.

Started in July 1987, the fund has launched 67 schemes and successfully redeemed 15
schemes. In the process, it has rewarded its investors handsomely with consistently
high returns. A total of over 3.5 million investors have reposed their faith in the
wealth generation expertise of the mutual fund. Schemes of the mutual fund have
consistently outperformed benchmarks indices and have emerged as the preferred
investment for the millions of investors.

Today the fund manages Rs.29492.9685 crore as on Mar 31, 2012 of assets and has
diversified profile of investors actively parking their investments across 37 active
schemes. The fund serves this vast family of investors by reaching out to them
through network of 100 collection branches, 26 investor service centers, 28 investor
service desks, and 52 district organizers.

SBI Mutual fund is the first bank sponsored fund to launch an off-shore fund called
Resurgent India Opportunity Fund Growth through innovation and stable investment
policies is the SBI mutual fund.

SBI Magnum Tax Gain (ELSS)

31
The nature of the scheme is open ended equity linked savings (ELSS) scheme with a
lock-in period of 3 years. It will be comes in market at 1996. The minimum
application amount is for new & existing investors Rs.500 and in multiples of Rs. 500
thereafter.

 Tax planning is an essential but challenging process to undertake. In the sea of

tax saving instruments available for investors, mutual funds through equity
linked savings scheme (ELSS) provide an option to gain from the growth
potential of equity markets while getting tax benefits. ELSS investments are
eligible for tax deduction up to Rs. 1,50,000 per year under Section 80C of
Income Tax Act 1961.

 SBI Magnum Tax Gain Scheme aims to deliver the benefit of investment in a
portfolio of equity shares, while offering tax rebate on such investments made
in the scheme under section 80C of the Income-tax Act, 1961. It also seeks to
distribute income periodically depending on distributable surplus. Investments
in this scheme would be subject to a statutory lock-in of 3 years from the date
of investment to avail benefit of Section 80C of Income Tax Act.

 Investors looking at dual advantage of saving taxes along with exposure to

equity markets may invest in this fund. This portfolio is ideal for investors
who would like to invest for long-term capital appreciation.

Managed by ICICI Prudential Asset Management Company, ICICI Prudential Mutual

Fund is a joint venture between Prudential Plc and ICICI Bank. While Prudential Plc
is one of the largest players in insurance and fund management sectors in UK, ICICI
Bank, on the other hand, is India’s second largest bank in the private sector.
Prudential Plc is a dominant player in international financial services group, with
operations spread across Asia, the US, and the UK. ICICI Bank provides numerous

32
banking products and financial services to both corporate and retail customers through
different delivery channels and specialized subsidiaries in the areas of investment
banking, life and non-life insurance, venture capital, and asset management. ICICI
Prudential Mutual Fund offers plenty of retail and corporate investment solutions
ranging in a variety of asset classes, namely, Equity, Fixed Income, Real Estate, and
Gold.
ABOUT ICICI:
ICICI Bank is one of the largest private sector banks in India with total assets of Rs.
6,461.29 billion as on March 31, 2015 and profit after tax of Rs. 111.75 billion for the
financial year ended on March 31, 2015. ICICI Bank has an extensive network of
4,450 Branches and about 13,916 ATMs across India.
ICICI Bank caters to the daily financial needs of millions of customers in India and
also globally through its diversified banking products and financial services to
individual & corporate customers. ICICI Bank is known for creating a next generation
delivery channels and a wide gamut of value added services delivered through its
specialized subsidiaries in the areas of life and non-life insurance, investment
banking, venture capital and asset management.
Apart from its dominant presence in India, ICICI bank also has subsidiaries in the
United Kingdom, Russia and Canada and branches in the United States, Singapore,
Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai. ICICI bank also operates an
International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The UK
subsidiary has established its branches in Belgium and Germany.

ICICI Prudential Mutual Funds:

ICICI Prudential Asset Management Company Ltd. is one of India’s largest asset
management companies and is a joint venture between ICICI Bank of India and
Prudential Plc of UK and was established in 1998. The company handles mutual
funds and also offers portfolio management services to its customers. It also boasts of
a customer base in excess of 3 million customers and is continuing its growth at an
impressive pace.

33
ABOUT ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY

ICICI Prudential Asset Management Company Ltd. (IPAMC/ the Company) is the
joint venture between ICICI Bank, a well-known and trusted name in financial
services in India and Prudential Plc, one of UK’s largest players in the financial
services sectors. IPAMC was incorporated in the year 1993. The Company in a span
of over 18 years since inception and just over 13 years of the Joint Venture has forged
a position of preeminence in the Indian Mutual Fund industry as the third largest asset
management company in the country, contributing significantly to the growth of the
Indian mutual fund industry.

The Company manages significant Mutual Fund Asset Under Management (AUM), in
addition to Portfolio Management Services and International Advisory Mandates for
clients across international markets in asset classes like Debt, Equity and Real Estate
with primary focus on risk adjusted returns.

IPAMC has witnessed substantial growth in scale. From merely 2 locations and 6
employees during inception to the current strength of over 700 employees with reach
across around 150 locations, the growth momentum of the Company has been
exponential. The organization today is an ideal mix of investment expertise, resource
bandwidth & process orientation. IPAMC’s Endeavour is to bridge the gap between
savings & investments to help create long term wealth and value for investors through
innovation, consistency and sustained risk adjusted performance

ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion
(US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$ 1,271
million) for the year ended March 31, 2012. The Bank has a network of 2,890
branches and 10,021 ATMs in India, and has a presence in 19 countries, including
India.
ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through its
specialized subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management.

34
HDFC (Housing Development Finance Corporation Limited) is one of the dominant
players in the Indian mutual fund space. HDFC was incorporated in 1977 as the first
specialized Mortgage Company in India. HDFC Mutual Funds are handled by HDFC
Asset Management Company Limited. HDFC Asset Management Company was
incorporated under the Companies Act, 1956, on December 10, 1999, and was
approved to act as an Asset Management Company for the Mutual Fund by SEBI on
July 3, 2000. The company also provides portfolio management / advisory services.

HDFC TaxSaver (ELSS)

The nature of the scheme is open ended equity linked savings (ELSS) scheme with a
lock-in period of 3 years. It will HDFC Tax Saver (ELSS) is managed by Vinay
Kulkarni and Rakesh Vyas. The fund has been consistently topped the charts except in
2007 when it underperformed its benchmark. This is a good fund to hold on to for the
long term goals combined with tax savings be comes in market at March 31, 1996.
The minimum application amount is for new & existing investors Rs.500 and in
multiples of Rs. 500 thereafter.

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.

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. 25.169 crore..

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

35
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. These Schemes
have been renamed as follows:

Reliance Mutual Fund (RMF) is the biggest Mutual Fund house in India. It has has
been sponsored by Reliance Capital Ltd (RCL). RCL has been promoted by Reliance
Industries Ltd., one of India's largest private sector enterprises. Reliance Capital Asset
Management Ltd manages the investments of Reliance Mutual Fund.

ABOUT RELIANCE ASSET MANAGEMENT COMPANY

Reliance Mutual Fund ('RMF') is one of India’s leading Mutual Funds, with Average
Assets under Management (AUM) of Rs. 90,636 Corers and an investor count of over
58.42 and 64.53 Lakh folios. (AUM and investor count as of Oct to Dec '12).

Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing
mutual funds in India. RMF offers investors a well-rounded portfolio of products to
meet varying investor requirements and has presence in 179 cities across the country.
Reliance Mutual Fund constantly endeavors to launch innovative products and
customer service initiatives to increase value to investors. Reliance Capital Asset
Management Limited (‘RCAM’) is the asset manager of Reliance Mutual Fund.
RCAM is a subsidiary of Reliance Capital Limited (RCL). Presently, RCL holds
65.23% of its total issued and paid-up equity share capital and the balance of its
issued and paid up equity share capital is held by other shareholders which includes
Nippon Life Insurance Company (“NLI”), holding 26% of RCAM’s total issued and
paid up equity share capital. NLI acquired the said 26% share holding in RCAM on
August 17, 2012.

36
Reliance Capital Ltd. is one of India’s leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.

Reliance Mutual Fund (RMF) was initially set up as a Trust in accordance with the
provisions of the Indian Trust Act, 1882 by Reliance Capital Limited acting as a
Settler /Sponsor, vide a Trust Deed dated April 25, 1995 (the “Original Trust
Deed”).The Original Trust Deed was duly registered under the Indian Registration
Act, 1908. The Original Trust Deed was subsequently amended from time to time. In
order to consolidate all amendments to the Original Trust Deed in one document, an
Amended and Restated Trust Deed was executed on March 15, 2011 (the “Amended
and Restated Trust Deed”). The Amended and Restated Trust Deed was subsequently
registered under the Indian Registration Act, 1908 and the Amended and Restated
Trust Deed was duly filed with SEBI. Reliance Capital Trustee Co. Limited entered
into an Investment Management Agreement dated May 12, 1995 with Reliance
Capital Asset Management Ltd. (RCAM) to function as the Investment Manager for
all the Schemes of RMF.

FRANKLIN TEMPLETON MUTUAL FUND

FTMF has been constituted as a Trust on January 4, 1996 in accordance with the
provisions of the Indian Trusts Act, 1882 and the Deed of Trust is registered under the
Indian Registration Act, 1908. FTMF has been sponsored by Templeton International
Inc. (liability restricted to the seed corpus of Rs. 1 Lakh) with Franklin Templeton
Trustee Services Pvt. Ltd. (“Trustee”) as the Trustee. The Trustee has entered into an
Investment Management Agreement dated January 5, 1996 with Franklin Templeton
Asset Management (India) Pvt. Ltd. (“AMC”) appointing the AMC as the Investment
Manager for all the schemes of FTMF. FTMF is registered with SEBI on February 19,
1996.

Review of activities of Franklin Templeton Mutual Fund: During the year under
review, the Mutual Fund continued to focus on launching meaningful products with
investment objectives that are relevant to investors. The Mutual Fund launched

37
Templeton India Corporate Bond Opportunities Fund, an open end debt fund
investing in corporate bonds, mobilizing over Rs.250 crore, FT India Feeder -
Franklin U.S. Opportunities Fund, a fund of funds scheme investing in the units of
Franklin U. S. Opportunities Fund, an overseas fund that invests primarily in U. S.
securities, mobilizing over Rs.100 crore and Franklin Templeton Fixed Tenure Fund
Series XVI mobilizing over Rs.68 crore. As a part of product rationalization process
to make the offerings more meaningful and easy to understand for investors and to
reduce product overlap between similar schemes, few schemes / plans were merged
during the year. The Liquid Plan of Templeton India Treasury Management Account
(TITMA) was merged into Regular Plan of TITMA effective September 4, 2011.
Franklin FMCG Fund and Franklin Pharma Fund merged into Franklin India Prima
Plus effective September 9, 2011. Franklin India Index Tax Fund (FITF) merged into
Franklin India Index Fund – NSE Nifty Plan effective September 9, 2011.

Franklin India Index Tax Fund (FITF) was launched in February 2001 as open end
passively managed ELSS scheme. The scheme invested in companies, whose
securities are part of the S&P CNX Nifty, with the aim to generate returns
commensurate with S&P CNX Nifty. As part of our product rationalization process
and with a view to reduce overlap between similar schemes, it was decided to merge
FITF with the Growth Option under the Nifty Plan of Franklin India Index Fund. The
effective date of the merger was September 9, 2011. As on March 31, 2012, the
Mutual Fund served more than 20 lakh active investors through its 34 branches and
105 offices of our collection partners across India.

Frankline India Tax Shield

The nature of the scheme is open ended equity linked savings (ELSS) scheme with a
lock-in period of 3 years. It will be comes in market at April 10 1999. The minimum
application amount is for new & existing investors Rs.500 and in multiples of Rs. 500
thereafter.

38
 DATA ANALYSIS

1. Standard Deviation for ICICI Prudential tax plan

YEAR RETURN AVERAGE dy = (Y- ) dy2

RETURN( )
2011-2012 -3.8 13.6 -17.4 302.7

2012-2013 6.3 13.6 19.9 396.01

2013-2014 27.9 13.6 41.5 1722.25
2014-2015 44.7 13.6 58.3 3398.89
2015-2016 -6.7 13.6 -20.3 412.09
Total 68.4 6232.2

∑
Average Return ( ) =

=68.4/5
=13.6
∑d y2 = 6232.2
∑
Variance √ =

= 6232.2/4
= 1558
Standard Deviation (S.D) = √ = 39.61

39
2. Standard Deviation for SBI Magnum tax gain

YEAR RETURN AVERAGE dy = (Y- ) dy2

RETURN( )
2011-2012 -4.2 12.58 -16.8 282.24

2012-2013 5.7 12.58 17.76 315.41

2013-2014 23.1 12.58 34.26 1173.7
2014-2015 47.5 12.58 58.86 3464.5

2015-2016 -9.2 12.58 -21.78 474.36

TOTAL 62.9 5710.25

∑
Average Return ( ) =

=60.3/5

=12.06

∑
Variance √ =

=5756.25/4
=1427.06

Standard Deviation (S.D) = √ =37.7

3. Standard Deviation for HDFC tax saver

YEAR RETURN(y) AVERAGE dy = (Y- ) dy2

RETURN( )
2011- -4.2 11.66 15.26 232.88
2012
2012- 5.9 11.66 17.76 315.41
2013
2013- 22.5 11.66 33.86 1146.7
2014

40
 2014- 44.8 11.66 56.86 3233.5
2015
2015- -10.2 11.66 22.26 501.5
2016
Total 58.3 =5429.4

∑
Average Return ( ) =

=58.3/5

=11.66

∑
Variance √ =

=5429.4/4
=1085.35
Standard Deviation (S.D) = √ =32.99

4. Standard Deviation for reliance tax saver

YEAR RETURN(y) AVERAGE dy = (Y- ) dy2

RETURN( )
2011- -2.6 16.04 -18.44 340.03
2012
2012- 3.4 16.04 19.24 370.17
2013
2013- 32.6 16.04 48.44 2346.43
2014
2014- 61.5 16.04 77.34 5981.47
2015
2015- -10.7 16.04 -26.74 715.02
2016
Total 80.2 =9753.12

41
 ∑
Average Return ( ) =

=80.2/5

=16.04

∑
Variance √ =

=9753.12/4
=2438.28
Standard Deviation (S.D) = √ =49.37

5. Standard Deviation for Franklin tax shield

YEAR RETURN(y) AVERAGE dy = (Y- ) dy2

RETURN( )
2011-2012 -0.3 15.18 -15.28 229.37
2012-2013 6.6 15.18 21.78 474.8
2013-2014 20.7 15.18 35.88 1287.6
2014-2015 53.1 15.18 68.28 4662.5
2015-2016 -4.2 15.18 -19.68 371.94
Total 75.9 =7026.07

∑
Average Return ( ) =

=75.9/5

=15.18

∑ 2
Variance √ =

=7026.4/4
=1756.925
Standard Deviation (S.D) = √ =41.95

42
Table showing Return and standard deviation of selected tax saving schemes

FUND RETURN STANDARD

DEVATION
RELIANCE 16.04 49.37
FRANKLIN 15.18 41.95
ICICI 13.61 39.61
SBI 12.56 FUND
HDFC 11.66 32.79

Sowing Risk and Return of selected tax saving schemes

60

50

40

30 RETURN
Standard deviation
20

10

0
RELIANCE FRANKLIN ICICI SBI HDFC

Inference: From the table above shows that average return and standard deviation
details. From the table it can be seen that Reliance fund making highest average return
of 16.05% during the period. However it’s also facing highest risk of 49.37 of all the
four funds. The SBI fund, HDFC fund, Franklin India funds and Reliance fund are
making similar amount average return but risk is not much higher

43
 COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK
RETURNS

1. ICICI Prudential Tax saver

Return of ICICI Peru Tax Saver Vs Benchmark's Return

Year Return on Return on index(X)

fund(Y)
2011-2012 -3.8 -6.14

2012-2013 6.3 7.6

2013-2014 27.9 25.3

2014-2015 44.7 40.6

2015-2016 -6.7 -14.9

ICICI Prudential Tax Plan Vs Benchmark's Fund

50

40

30

20 Return on fund(Y)
10 Return on index(X)

-10 1 2 3 4 5

-20
.

Interpretation: In above table shows that the fund yielded 44.7 return while index
return is 40.6% in 2014. In the year 2014 ICICI Prudential Tax Plan fund perform well.

44
2.SBI MAGNUM TAX PLAN

Return of SBI Magnum Tax Plan Vs Benchmark's Return

Year Return on fund(Y) Return on index(X)

2011 -4.8 -6.14

2012 5.7 7.6

2013 23.1 25.3

2014 47.5 40.6

2015 -9.1 -14.9

Return of SBI Magnum Tax Plan Vs Benchmark's Fund

60

50

40

30
Return on fund(Y)
20
Return on index(X)
10

-10 1 2 3 4 5

-20

Interpretation: In above table shows that the fund yielded 47.5% return while index
return is 40.66% in 2014.In the year 2014 ICICI Prudential Tax plan perform well.

45
3.HDFC TAX SAVER

Return of SBI Magnum Tax Plan Vs Benchmark's Return

Year Return on fund(Y) Return on index(X)

2011 -4.2 -6.14

2012 5.7 7.6

2013 22.2 25.3

2014 46.8 40.6

2015 -10.2 -14.9

Return of HDFC Tax Saver Vs Benchmark's Fund

50

40

30

20 Return on fund(Y)

10 Return on index(X)

0
1 2 3 4 5
-10

-20

Interpretation: In above table shows that the fund yielded 46.8% return while index
return is 40.66% in 2014.In the year 2014 HDFC Tax Saver perform well.

46
4.RELIANCE TAX SAVER

Return of Reliance Tax Saver Vs Benchmark's Return

Year Return on fund(Y) Return on index(X)

2011 -0.6 -6.14

2012 3.4 7.6

2013 32.6 25.3

2014 61.5 40.6

2015 -10.7 -14.9

Return of RELIANCE Tax Saver Vs Benchmark's Fund

70

60

50

40

30 Return on fund(Y)
20 Return on index(X)

10

0
1 2 3 4 5
-10

-20

Interpretation: In above table shows that the fund yielded 61.5% return while index
return is 40.66% in 2014.In the year 2014 RELIANCE Tax Saver perform well.

47
5. Franklin India Tax Shield

Return of Franklin India Tax Shield Vs Benchmark's Return

Year Return on fund(Y) Return on index(X)

2011 -0.3 -6.14

2012 6.6 7.6

2013 20.7 25.3

2014 53.1 40.6

2015 -4.2 -14.9

Return of Franklin India Tax Shield Vs Benchmark's Fund

60

50

40

30
Return on fund(Y)
20
Return on index(X)
10

0
1 2 3 4 5
-10

-20

Interpretation: In above table shows that the fund yielded 53.1% return while index
return is 40.66% in 2014.In the year 2014 Franklin Tax Saver perform well.

48
CALCULATION OF BETA VLAUES:

1. Calculation of ICICI Prudential Tax Saver

Beta Calculation for ICICI Prudential Tax Saver

year Return on Return on XY

Fund(Y) index(X)

2011 -3.8 -6.14 23.32 37.69

2012 6.3 7.6 47.94 57.91
2013 27.9 25.3 705.89 640.09
2014 44.7 40.6 2172.42 1648.36
2015 -6.7 -14.9 99.83 222.01
Total 68.4 52.4 3049.4 2606.06

∑ (∑ ∗∑ )
Beta ( ) = ∑ (∑ )

=5(3049.4)-(68.4*52.4)/5(2606.3)- (52.4)2

=11642.32/10285.74

=1.13

2. Calculation of SBI Magnum Tax Plan

Beta Calculation for SBI MAGNUM TAX PLAN

year Return on Return on XY

Fund(Y) index(X)

2011 -4.8 -6.14 29.47 37.69

2012 5.7 7.61 43.37 57.91
2013 23.1 25.3 584.43 640.09
2014 47.5 40.6 1928.5 1648.36
2015 -9.1 -14.9 135.59 222.01
Total 62.4 52.4 2721.36 2606.06

49
 ∑ (∑ ∗∑ )
Beta ( ) = ∑ (∑ )

=5(2721.36)-(52.4*62.4)/5(2606.06)- (52.4)2

=10339.24/10285.74

=1.05

3. Calculation of HDFC Tax Plan

Beta Calculation for HDFC TAX PLAN

year Return on Return on XY

Fund(Y) index(X)

2011 -4.2 -6.14 25.78 37.69

2012 5.7 7.61 43.32 57.91
2013 22.2 25.3 561.66 640.09
2014 44.8 40.6 1900.8 1648.36
2015 -10.2 -14.9 151.98 222.01
Total 58.3 52.4 2682.98 2606.06

∑ (∑ ∗∑ )
Beta ( ) =
∑ (∑ )

=5(2682.98)-(52.4*58.4)/5(2606.06)- (52.4)2

=10354.59/10285.74

=1.03

50
4. Calculation of Reliance Tax saver

Beta Calculation for RELIANCE TAX SAVING

year Return on Return on XY

Fund(Y) index(X)
2011 -2.6 -6.14 15.96 37.69
2012 3.4 7.61 25.84 57.91
2013 32.6 25.3 824.7 640.09
2014 61.5 40.6 2496.9 1648.36
2015 -12.7 -14.9 189.2 222.01
Total 80.3 52.4 3552.6 2606.06

∑ (∑ ∗∑ )
Beta ( ) = ∑ (∑ )

=5(3552.6)-(80.3*52.4)/5(2606.06)- (52.4)2

=1355.28/10285.74

=1.31

5. Calculation of Franklin Tax saver

Beta Calculation for FRANKLIN TAX SAVING

year Return on Return on XY

Fund(Y) index(X)
2011 -0.3 -6.14 1.84 37.69
2012 6.6 7.61 50.22 57.91
2013 20.7 25.3 523.7 640.09
2014 53.1 40.6 2155.3 1648.36
2015 -4.2 -14.9 62.58 222.01
Total 75.8 52.4 2793.64 2606.06

51
 ∑ (∑ ∗∑ )
Beta ( ) =
∑ (∑ )

=5(2793.64)-(75.8*52.4)/ 5(2606.06) - (52.4)2

=9996.08/10285.74

=0.97

BETA VALUES OF FIVE SCHEMES

Beta Values estimated of selected tax saving schemes

Fund Beta value Finding

Reliance tax saver 1.31 Aggressive

ICICI Prudential Tax Plan 1.13 Aggressive

SBI Magnum Tax Gain 1.05 Aggressive
HDFC Tax Saver Fund 1.03 Aggressive
Franklin India Tax Shield 0.97 Defensive

Beta value plotted with the selected tax saving schemes

1.4

1.2

0.8
Index
0.6
Beta value
0.4

0.2

0
1 2 3 4 5

Inference: The result of beta is present in above table. It shows that the beta
value(beta>1) then the scheme is good scheme (Aggressive), only Franklin India tax
shield fund beta value is (0.97< 1), that means only Franklin India tax shield fund will

52
be performed in defensive way as compare to all the other selected tax saving
schemes.

CALCULATION OF CORRELATION

1. ICICI Prudential Tax Plan

Beta Calculation for ICICI Prudential Tax Plan

Year Returns on Returns on dy = dx = dy2 d x2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -3.8 -6.14 -17.4 -16.6 302.7 276.2 288.8

2012 6.3 7.6 -4.3 -2.87 18.4 8.2 12.4

2013 27.9 25.3 14.3 14.8 204.4 219.04 211.6

2014 44.7 40.6 31.7 30.1 1004.8 906.4 954.1

2015 -6.7 -14.9 -20.3 -25.3 412.1 640.1 513.5

Total 68.4 52.4 1942.3 2049.5 1980.1

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

1980.1
= =0.98
(1942.3)(2049.7)

53
2. SBI MAGNUM TAX SAVER

Beta Calculation for SBI Magnum Tax Saver

Year Returns on Returns on dy = dx = dy2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -4.8 -6.14 -17.2 -16.9 295.8 275.6 290.6

2012 5.7 7.61 -6.7 -2.8 44.89 7.8 18.76

2013 23.1 25.3 10.7 14.9 114.4 219.01 159.4

2014 47.5 40.6 35.1 30.1 1232.1 906.4 1302.2

2015 -9.1 -14.9 -21.5 25.5 462.2 640.3 419.2

Total 62.4 52.4 2149.3 2049.5 2190.16

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2190.6
=
(2149.3)(2049.7)

=1.04

54
3. HDFC TAX SAVER

Beta Calculation for HDFC Tax Saver

Year Returns on Returns on dy = dx = dy2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -4.2 -6.14 -15.8 -16.9 249.6 275.6 267.12

2012 5.7 7.61 -5.9 -2.8 34.81 7.8 16.52

2013 22.2 25.3 10.6 14.9 112.3 219.01 157.9

2014 44.8 40.6 33.2 30.1 1102.2 906.4 999.3

2015 -10.2 -14.9 -21.8 -25.5 475.2 640.3 555.9

Total 58.3 52.4 1974.11 2049.5 1996.74

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

1996.7
=
(1974.1)(2049.7)

=0.99

55
4. RELIANCETAX SAVING

Beta Calculation for Reliance Tax Saver

Year Returns Returns on dy = dx = dy2 d x2 dx dy

on Fund Index (X) (Y - (X-
(Y) Y)̅ X)̅
2011 -2.6 -6.14 -18.7 -16.9 349.6 275.6 316.1

2012 3.4 7.61 -12.7 -2.8 161.2 7.8 35.56

2013 32.6 25.3 16.5 14.9 272.2 219.01 245.8

2014 61.5 40.6 45.4 30.1 2061.1 906.4 1366.5

2015 -12.7 -14.9 -28.8 -25.5 829.4 640.3 734.4

Total 80.3 52.4 3673.5 2049.5 2698.3

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2698.3
=
(3673.5)(2049.7)

=0.95

56
5. FRANKLIN TAX SAVING

Beta Calculation for Franklin Tax Saver

Year Returns Returns dy = dx = dy2 dx2 dx dy

on Fund on Index (Y - Y)̅ (X- X)̅
(Y) (X)
2011 -0.3 -6.14 -15.46 -16.9 237.1 275.6 261.2

2012 6.6 7.61 -8.52 -2.8 72.59 7.8 23.8

2013 20.7 25.3 5.61 14.9 31.36 219.01 83.5

2014 53.1 40.6 38.12 30.1 1453.1 906.4 1146.8

2015 -4.2 -14.9 -19.3 -25.5 372.4 640.3 492.1

Total 75.8 52.4 2166.4 2049.5 2007.4

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2007.4
=
(2166.4)(2049.7)

=0.92

57
CALCULATION OF CORRELATION

1. ICICI Prudential Tax Plan

Beta Calculation for ICICI Prudential Tax Plan

Year Returns on Returns on dy = dx = d y2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -3.8 -6.14 -17.4 -16.6 302.7 276.2 288.8

2012 6.3 7.6 -4.3 -2.87 18.4 8.2 12.4

2013 27.9 25.3 14.3 14.8 204.4 219.04 211.6

2014 44.7 40.6 31.7 30.1 1004.8 906.4 954.1

2015 -6.7 -14.9 -20.3 -25.3 412.1 640.1 513.5

Total 68.4 52.4 1942.3 2049.5 1980.1

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

1980.1
= =0.98
(1942.3)(2049.7)

58
2. SBI MAGNUM TAX SAVER

Beta Calculation for SBI Magnum Tax Saver

Year Returns on Returns on dy = dx = dy2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -4.8 -6.14 -17.2 -16.9 295.8 275.6 290.6

2012 5.7 7.61 -6.7 -2.8 44.89 7.8 18.76

2013 23.1 25.3 10.7 14.9 114.4 219.01 159.4

2014 47.5 40.6 35.1 30.1 1232.1 906.4 1302.2

2015 -9.1 -14.9 -21.5 25.5 462.2 640.3 419.2

Total 62.4 52.4 2149.3 2049.5 2190.16

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2190.6
=
(2149.3)(2049.7)

=1.04

59
3. HDFC TAX SAVER

Beta Calculation for HDFC Tax Saver

Year Returns on Returns dy = dx = dy2 d x2 dx dy

Fund (Y) on Index (Y - (X- X)̅
(X) Y)̅
2011 -4.2 -6.14 -15.8 -16.9 249.6 275.6 267.12

2012 5.7 7.61 -5.9 -2.8 34.81 7.8 16.52

2013 22.2 25.3 10.6 14.9 112.3 219.01 157.9

2014 44.8 40.6 33.2 30.1 1102.2 906.4 999.3

2015 -10.2 -14.9 -21.8 -25.5 475.2 640.3 555.9

Total 58.3 52.4 1974.11 2049.5 1996.74

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

1996.7
=
(1974.1)(2049.7)

=0.99

60
4. RELIANCETAX SAVING

Beta Calculation for Reliance Tax Saver

Year Returns on Returns on dy = dx = dy2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X-
X)̅
2011 -2.6 -6.14 -18.7 -16.9 349.6 275.6 316.1

2012 3.4 7.61 -12.7 -2.8 161.2 7.8 35.56

2013 32.6 25.3 16.5 14.9 272.2 219.01 245.8

2014 61.5 40.6 45.4 30.1 2061.1 906.4 1366.5
2015 -12.7 -14.9 -28.8 -25.5 829.4 640.3 734.4
Total 80.3 52.4 3673.5 2049.5 2698.3

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2698.3
=
(3673.5)(2049.7)

=0.95

61
 5. FRANKLIN TAX SAVING

Beta Calculation for Franklin Tax Saver

Year Returns on Returns on dy = dx = dy2 dx2 dx dy

Fund (Y) Index (X) (Y - Y)̅ (X- X)̅

2011 -0.3 -6.14 -15.46 -16.9 237.1 275.6 261.2

2012 6.6 7.61 -8.52 -2.8 72.59 7.8 23.8
2013 20.7 25.3 5.61 14.9 31.36 219.01 83.5

2014 53.1 40.6 38.12 30.1 1453.1 906.4 1146.8

2015 -4.2 -14.9 -19.3 -25.5 372.4 640.3 492.1
Total 75.8 52.4 2166.4 2049.5 2007.4

∑
Average Return ( x) =

( x) = 52.4/5= 10.4

∑
r= 2 2

2007.4
=
(2166.4)(2049.7)

=0.92

62
CORRELATION VALUES OF FIVE SCHEMES

Table shows Correlation estimates of selected tax saving schemes

Fund Correlation (r)

Franklin India Tax Shield 0.92

Reliance Tax saving Fund 0.95

HDFC TAX SAVER FUND 0.99

ICICI Prudential Tax Plan 0.99

SBI MAGNUM TAX PLAN 1.04

Correlation on selected tax saving schemes

Correlation (r)
1.06
1.04
1.02
1
0.98
0.96
0.94
0.92 Correlation (r)
0.9
0.88
0.86
Franklin Reliance HDFC TAX ICICI SBI
India Tax Tax saving SAVER Prudential MAGNUM
Shield Fund FUND Tax Plan TAX PLAN

Interpretation: The above table present the result of correlation estimated of selected
tax saving schemes the analysis reveals that all the scheme are highly correlated with
market index suggesting direct relationship between returns of tax saving schemes
and benchmark index. It shows that the results follow the market index.

63
COEFFICIENT OF DETERMINATION OF FIVE SELECTED SCHEMES

Table shows Coefficient of determination estimates of selected tax saving

schemes

Fund Correlation (r) Coefficient of

Determination (r2)
Franklin India Tax 0.92 0.84
Shield
Reliance Tax 0.95 0.91
saving Fund
HDFC TAX 0.99 0.98
SAVER FUND
ICICI Prudential 0.99 0.98
Tax
SBI MAGNUM 1.04 1.08
TAX PLAN

Coefficient of determination on selected tax saving schemes

1.2
1
0.8
0.6 Correlation (r)
0.4
Coefficient of
0.2 Determination (r2)
0
Franklin Reliance HDFC TAX ICICI SBI
India Tax Tax saving SAVER Prudential MAGNUM
Shield Fund FUND Tax Plan TAX PLAN

Interpretation: The result of coefficient of determination is present in above table, It

shows the percentage of variation attributes to the market movement. It is seen that
except SBI magnum tax plan all other scheme are highest values of (r2) indicates that
much of the variation in return of the scheme are return by market.

64
MEASURING THE PERFORMANCE OF THE SCHEMES

1. Treynor Ratio

Treynor ratio =

. .
Reliance = .

= 11.13

. .
Franklin = .

= 8.2

. .
SBI = .

= 6.7

. .
ICICI = .

= 7.8

. .
HDFC = .

= 5.2

65
2. Sharpe Ratio

Sharpe Ratio =

. .
Reliance = .

= 15.3

. .
Franklin = .

= 14.1

. .
SBI = .

= 12.7

. .
ICICI = .

= 13.4

. .
HDFC = .

= 11.4

3. Jensen Model

Jensen model = p-[Rf+βp( m-R f)]

Reliance = 16.1-[6.5+1.31(10.4-6.5)]
= 5.03

Franklin = 15.1-[6.5+0.99(10.4-6.5)]
= 4.6

SBI = 12.9-[6.5+1.09(10.4-6.5)]
= 2.6

ICICI = 13.6-[6.5+1.13(10.4-6.5)]
= 2.8
HDFC = 11.6-[6.5+1.03(10.4-6.5)]
= 1.2

66
STATISTICAL ANALYSIS OF FUND PERFORMANCE

Table show Statistical Analysis of selected tax saving scheme Performance

Treynor ratio Sharpe Ratio Jensen model

p-[Rf+βp( m-
SCHEMES
Rf)]

RELIANCE TAX SAVER 11.13 15.3 5.03

FRANKLIN INDIA TAX 8.2 14.1 4.6

SHIELD
ICICI PRU TAX PLAN 7.8 13.4 2.8

SBI MAGNUM TAX 6.7 12.7 2.6

PLAN
HDFC TAX SAVER 5.2 11.4 1.2

Statistical Analysis of selected tax saving schemes Performance

18
16
14
12
10
TREYNOR RATIO
8
6 SHARPE RATIO
4
JENSEN MODEL
2
0
RELIANCE FRANKLIN ICICI PRU SBI HDFC TAX
TAX SAVER INDIA TAX TAX PLAN MAGNUM SAVER
TAX PLAN

Interpretation: The result of Treynor’s, Sharpe and Jensen method is present in

above table. It show the performance level of all the five selected tax saving schemes.
It is seen that analysis of returns in relation to the market risk of the fund. The higher
returns are ranked accordingly Reliance tax saver 1 st, Franklin 2nd, ICICI fund is 3 rd,
and SBI fund is 4th and HDFC fund is 5th by using all the three methods.

67
 FINDINGS

1.Mainly there are five tax saving schemes under mutual funds.

2. The minimum and maximum investment in mutual funds is limited is Rs 500 and
Rs 1,00,000 respectively.

3. Based on return on Investments, Reliance has more return than other tax saving
schemes.

4. When compared with benchmark index Reliance mutual fund performance is very
good then compared to the others followed by Franklin India tax shield, SBI Magnum
tax plan, ICICI prudential tax saver and HDFC tax saver.

5. With respect to Beta analysis, Reliance has highest beta value i.e. 1.31% others
Followed by Franklin India tax shield, SBI Magnum tax plan, ICICI pru tax saver and
HDFC tax saver.

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 SUGGESTIONS

1. SBI tax saving mutual funds is satisfactory but they can improve the performance
of Magnum Tax plan by increasing the tax shield.

2.HDFC tax saver mutual funds are subjected to less risk& less return the investors
whose criteria is to reduce the risk, they should be attracted is invest in HDFC tax
saving scheme.

3. The performance of ICICI is good and it can further enhance its performance by
investing its strategies in comparison with Reliance tax saver schemes under mutual
fund.

4. As Financial advisor, I can say that that for the people who are ready to take more
risk and earn high returns Reliance schemes are appropriate. Those who aspire
moderate risk and good return, SBI is appropriate. Finally those who want less risk
and less return HDFC Tax saver scheme are appropriate.

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 CONCLUSION

Mutual funds are one of the best investments ever created because they are very cost
efficient and very easy to investment. Investor who wants to invest into tax saving
mutual funds needs to make two decisions. One is which fund to hold and how much
money to invest each. This study helps the investors to choose the suitable schemes
for investment. The present study has examined the performance of five tax saving
mutual fund schemes of India during the period from financial year 2011-12 to 2015-
16. The schemes performance as RELIANCE TAX SAVER, FRANKILN TAX
SAVER, ICICI PRU TAX SAVER,SBI MAGNUM TAX SAVER, HDFC TAX
SAVER, and FRANKILN TAX SAVER. In term of schemes relative performance
among tax saving mutual funds by applying Sharpe Index, Treynor Index and Jensen
Index models. The schemes of Reliance tax saver high risk and high return, HDFC tax
saver low risk and low return. We can conclude SBI Tax saver few risk & optimum
return to the investors.

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 BIBLIOGRAPHY

TEXT BOOKS

Donald E Fischer Security Analysis Portfolio Management

Ronald J Jordan

H.Sadhak Mutual Fund in India

WEB SITES

www.amfiindia.com

www.infoline.com

www.bseindia.com

www.nseinda.com

www.bluechipinda.co.in

MAGAZINES

Business India -- DEC 2008

Business World -- DEC 2008, JAN 2011.

NEWS PAPERS

Economic Times

Business Standard.

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