CHAPTER-I

INTRODUCTION

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 INTRODUCTION
A Mutual Fund is a body corporate registered with the Securities and Exchange Board of
India (SEBI) that pools up the money from individual / corporate investors and invests the
same on behalf of the investors /unit holders, in equity shares, Government securities,
Bonds, Call money markets etc., and distributes the profits. In other words, a mutual fund
allows an investor to indirectly take a position in a basket of assets.

Unit Trust of India is the first Mutual Fund set up under a separate act, UTI Act in 1963,
and started its operations in 1964 with the issue of units under the scheme US-64.

Securities Exchange Board of India (SEBI) is the regulatory body for all the mutual funds
mentioned above. All the mutual funds must get registered with SEBI. The only exception
is the UTI, since it is a corporation formed under a separate Act of Parliament.

SEBI is the regulatory authority of MFs. SEBI has the following broad guidelines
pertaining to mutual funds :

1. MFs should be formed as a Trust under Indian Trust Act and should be operated by
Asset Management Companies (AMCs).
2. MFs need to set up a Board of Trustees and Trustee Companies. They should also
have their Board of Directors.
3. The net worth of the AMCs should be at least Rs.5 crore.
4. AMCs and Trustees of a MF should be two separate and distinct legal entities.
5. The AMC or any of its companies cannot act as managers for any other fund.
6. AMCs have to get the approval of SEBI for its Articles and Memorandum of
Association.
7. All MF schemes should be registered with SEBI.
8. MFs should distribute minimum of 90% of their profits among the investors.
There are other guidelines also that govern investment strategy, disclosure norms
and advertising code for mutual funds.

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

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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

NEED OF THE STUDY

 Mutual funds are dynamic financial intuitions which play crucial role in an
economy by mobilizing savings and investing them in the capital market.
 The activities of mutual funds have both short and long term impact on the savings
in the capital market and the national economy.
 Mutual funds, trust, assist the process of financial deepening & intermediation.
 To banking at the same time they also compete with banks and other financial
intuitions.
 India is one of the few countries to day maintain a study growth rate is domestic
savings.

SCOPE THE STUDY

 The study is limited to the analysis made for a Growth scheme offered by four
AMC‟s.
 Each scheme is calculated their risk and return using different performance
measurement theories.
 Because of the reason for such performance is immediately analyzed in the issue.
 Graphs are used to reflect the portfolio risk and return.

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OBJECTIVES OF THE STUDY
 To show the wide range of investment options available in MF‟s by explaining
various schemes offered by different AMC‟s.
 To help an investor to make a right choice of investment, while considering the
inherent risk factors.
 To understand the recent trends in the MF world.
 To understand the risk and return of the various schemes.
 To find out the various problems faced by Indian mutual funds and possible
solutions.

RESEARCH METHODOLOGY & TOOLS

This study is basically depends on

1. Primary Data
2. Secondary Data

Primary data: The primary data collected from the different companies through enquiry.

Secondary data: The secondary data collected from the different sites, broachers, news
papers, company offer documents, different books and through suggestions from the
project guide and from the faculty members of our college.

TOOLS USED IN THIS PROJECT

The following parameters were considered for analysis:

 Beta
 Alpha
 Correlation coefficient
 Treynor‟s Ratio
 Sharpe‟s Ratio

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LIMITATIONS OF THE STUDY:
 The study is conducted in short period, due to which the study may not be detailed
in all aspects.
 The study is limited only to the analysis of different schemes and its suitability to
different investors according to their risk-taking ability.
 The study is based on secondary data available from monthly fact sheets, web sites;
offer documents, magazines and newspapers etc., as primary data was not
accessible.
 The study is limited by the detailed study of various schemes.
 The NAV‟S are not uniform.
 The data collected for this study is not proper because some mutual funds are not
disclosing the correct information.
 The study is not exempt from limitations of Sharpe Treynor and Jenson measure.
 Unique risk is completely ignored in all the measure.

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 CHAPTER - II

REVIEW OF LITERATURE

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CONCEPT OF MUTUAL FUNDS

Like most developed and developing countries the mutual fund culture has been
catching on in India. There are various reasons for this. Mutual funds make it easy and less
costly for investors to satisfy their need for capital growth, income and/or income
preservation. And in addition to this a mutual fund brings the benefits of diversification
and money management to the individual investor, providing an opportunity for financial
success that was once available only to a select few.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciations realized are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a diversified, -
professionally managed basket of securities at a relatively low cost. The flow chart below
describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

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Organization of a Mutual

BENEFITS OF MUTUAL FUNDS

Investing in mutual has various benefits which makes it an ideal investment avenue.
Following are some of the primary benefits.
Professional investment management
One of the primary benefits of mutual funds is that an investor has access to professional
management. A good investment manager is certainly worth the fees you will pay. Good
mutual fund managers with an excellent research team can do a better job of monitoring
the companies they have chosen to invest in than you can, unless you have time to spend
on researching the companies you select for your portfolio. That is because Mutual funds
hire full-time, high-level investment professionals. Funds can afford to do so as they
manage large pools of money. The managers have real-time access to crucial market
information and are able to execute trades on the largest and most cost-effective scale.
When you buy a mutual fund, the primary asset you are buying is the manager, who will
be controlling which assets are chosen to meet the funds' stated investment objectives.

Diversification
A crucial element in investing is asset allocation. It plays a very big part in the success of
any portfolio. However, small investors do not have enough money to properly allocate
their assets. By pooling your funds with others, you can quickly benefit from greater
diversification. Mutual funds invest in a broad range of securities. This limits investment
risk by reducing the effect of a possible decline in the value of any one security. Mutual
fund unit-holders can benefit from diversification techniques usually available only to
investors wealthy enough to buy significant positions in a wide variety of securities.

Low Cost
A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000, and
sometimes less. And with a no-load fund, you pay little or no sales charges to own them.

Convenience and Flexibility

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Investing in mutual funds has its own convenience. While you own just one security rather
than many, you still enjoy the benefits of a diversified portfolio and a wide range of
services. Fund managers decide what securities to trade, collect the interest payments and
see that your dividends on portfolio securities are received and your rights exercised. It
also uses the services of a high quality custodian and registrar. Another big advantage is
that you can move your funds easily from one fund to another within a mutual fund family.
This allows you to easily rebalance your portfolio to respond to significant fund
management or economic changes.

Liquidity
In open-ended schemes, you can get your money back promptly at net asset value related
prices from the mutual fund itself.

Transparency
Regulations for mutual funds have made the industry very transparent. You can track the
investments that have been made on you behalf and the specific investments made by the
mutual fund scheme to see where your money is going. In addition to this, you get regular
information on the value of your investment.

Variety
There is no shortage of variety when investing in mutual funds. You can find a mutual
fund that matches just about any investing strategy you select. There are funds that focus
on blue-chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest
challenge can be sorting through the variety and picking the best for you.

TYPES OF MUTUAL FUNDS

Getting a handle on what's under the hood helps you become a better investor and put
together a more successful portfolio. To do this one must know the different types of funds
that cater to investor needs, whatever the age, financial position, risk tolerance and return
expectations. The mutual fund schemes can be classified according to both their
investment objective (like income, growth, tax saving) as well as the number of units (if

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these are unlimited then the fund is an open-ended one while if there are limited units then
the fund is close-ended).
This section provides descriptions of the characteristics -- such as investment objective and
potential for volatility of your investment -- of various categories of funds. The type of
securities purchased by each fund organizes these descriptions: equities, fixed-income,
money market instruments, or some combination of these.

Open-Ended Schemes
Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at
NAV-related prices from and to the mutual fund on any business day. These schemes have
unlimited capitalization, open-ended schemes do not have a fixed maturity, there is no cap
on the amount you can buy from the fund and the unit capital can keep growing. These
funds are not generally listed on any exchange.
Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem
units any time during the life of a scheme. Hence, unit capital of open-ended funds can
fluctuate on a daily basis. The advantages of open-ended funds over close-ended are as
follows:
Any time exit option. The issuing company directly takes the responsibility of providing
an entry and an exit. This provides ready liquidity to the investors and avoids reliance on
transfer deeds, signature verifications and bad deliveries. Any time entry option, an open-
ended fund allows one to enter the fund at any time and even to invest at regular intervals.

Close-Ended Schemes
Close-ended schemes have fixed maturity periods. Investors can buy into these funds
during the period when these funds are open in the initial issue. After that such schemes
can not issue new units except in case of bonus or rights issue. However, after the initial
issue, you can buy or sell units of the scheme on the stock exchanges where they are listed.
The market price of the units could vary from the NAV of the scheme due to demand and
supply factors, investors‟ expectations and other market factors

Classification According To Investment Objectives

Mutual funds can be further classified based on their specific investment objective such as
growth of capital, safety of principal, current income or tax-exempt income.

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In general mutual funds fall into three general categories:
1] Equity Funds are those that invest in shares or equity of companies.
2] Fixed-Income Funds invest in government or corporate securities that offer fixed rates
of return are
3] While funds that invest in a combination of both stocks and bonds are called Balanced
Funds.

Growth Funds
Growth funds primarily look for growth of capital with secondary emphasis on dividend.
Such funds invest in shares with a potential for growth and capital appreciation. They
invest in well-established companies where the company itself and the industry in which it
operates are thought to have good long-term growth potential, and hence growth funds
provide low current income. Growth funds generally incur higher risks than income funds
in an effort to secure more pronounced growth.
Some growth funds concentrate on one or more industry sectors and also invest in a broad
range of industries. Growth funds are suitable for investors who can afford to assume the
risk of potential loss in value of their investment in the hope of achieving substantial and
rapid gains. They are not suitable for investors who must conserve their principal or who
must maximize current income.

Growth and Income Funds

Growth and income funds seek long-term growth of capital as well as current income. The
investment strategies used to reach these goals vary among funds. Some invest in a dual
portfolio consisting of growth stocks and income stocks, or a combination of growth
stocks, stocks paying high dividends, preferred stocks, convertible securities or fixed-
income securities such as corporate bonds and money market instruments. Others may
invest in growth stocks and earn current income by selling covered call options on their
portfolio stocks.
Growth and income funds have low to moderate stability of principal and moderate
potential for current income and growth. They are suitable for investors who can assume
some risk to achieve growth of capital but who also want to maintain a moderate level of
current income.

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Fixed-Income Funds
Fixed income funds primarily look to provide current income consistent with the
preservation of capital. These funds invest in corporate bonds or government-backed
mortgage securities that have a fixed rate of return. Within the fixed-income category,
funds vary greatly in their stability of principal and in their dividend yields. High-yield
funds, which seek to maximize yield by investing in lower-rated bonds of longer
maturities, entail less stability of principal than fixed-income funds that invest in higher-
rated but lower-yielding securities.
Some fixed-income funds seek to minimize risk by investing exclusively in securities
whose timely payment of interest and principal is backed by the full faith and credit of the
Indian Government. Fixed-income funds are suitable for investors who want to maximize
current income and who can assume a degree of capital risk in order to do so.
Balanced
The Balanced fund aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents.
Ideal for investors who are looking for a combination of income and moderate growth.

Money Market Funds/Liquid Funds

For the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid, virtually risk-free,
short-term debt securities of agencies of the Indian Government, banks and corporations
and Treasury Bills. Because of their short-term investments, money market mutual funds
are able to keep a virtually constant unit price; only the yield fluctuates.
Therefore, they are an attractive alternative to bank accounts. With yields that are
generally competitive with - and usually higher than -- yields on bank savings account,
they offer several advantages. Money can be withdrawn any time without penalty.
Although not insured, money market funds invest only in highly liquid, short-term, top-
rated money market instruments. Money market funds are suitable for investors who want
high stability of principal and current income with immediate liquidity.

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Specialty/Sector Funds
These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable investors to
diversify holdings among many companies within an industry, a more conservative
approach than investing directly in one particular company.
Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry
is "in favor" but also entail the risk of capital losses when the industry is out of favor.
While sector funds restrict holdings to a particular industry, other specialty funds such as
index funds give investors a broadly diversified portfolio and attempt to mirror the
performance of various market averages.
Index funds generally buy shares in all the companies composing the BSE Sensex or NSE
Nifty or other broad stock market indices. They are not suitable for investors who must
conserve their principal or maximize current income.

RISK Vs. REWARD

Having understood the basics of mutual funds the next step is to build a successful
investment portfolio. Before you can begin to build a portfolio, one should understand
some other elements of mutual fund investing and how they can affect the potential value
of your investments over the years. The first thing that has to be kept in mind is that when
you invest in mutual funds, there is no guarantee that you will end up with more money
when you withdraw your investment than what you started out with. That is the potential
of loss is always there. The loss of value in your investment is what is considered risk in
investing. Even so, the opportunity for investment growth that is possible through
investments in mutual funds far exceeds that concern for most investors. Here‟s why At
the cornerstone of investing is the basic principal that the greater the risk you take, the
greater the potential reward. Or stated in another way, you get what you pay for and you
get paid a higher return only when you're willing to accept more volatility.
Risk then, refers to the volatility -- the up and down activity in the markets and individual
issues that occurs constantly over time. This volatility can be caused by a number of
factors -- interest rate changes, inflation or general economic conditions. It is this
variability, uncertainty and potential for loss, that causes investors to worry. We all fear
the possibility that a stock we invest in will fall substantially. But it is this very volatility

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that is the exact reason that you can expect to earn a higher long-term return from these
investments than from a savings account.
Different types of mutual funds have different levels of volatility or potential price change,
and those with the greater chance of losing value are also the funds that can produce the
greater returns for you over time. So risk has two sides: it causes the value of your
investments to fluctuate, but it is precisely the reason you can expect to earn higher
returns. You might find it helpful to remember that all financial investments will fluctuate.
There are very few perfectly safe havens and those simply don't pay enough to beat
inflation over the long run.

TYPES OF RISKS
All investments involve some form of risk. Consider these common types of risk and
evaluate them against potential rewards when you select an investment.

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

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Inflation Risk
Sometimes referred to as "loss of purchasing power." Whenever inflation rises forward
faster than the earnings on your investment, you run the risk that you'll actually be able to
buy less, not more. Inflation risk also occurs when prices rise faster than your returns.
Credit Risk
In short, how stable is the company or entity to which you lend your money when you
invest? How certain are you that it will be able to pay the interest you are promised, or
repay your principal when the investment matures?
Interest Rate Risk
Changing interest rates affect both equities and bonds in many ways. Investors are
reminded that "predicting" which way rates will go is rarely successful. A diversified
portfolio can help in offsetting these changes.
Exchange risk
A number of companies generate revenues in foreign currencies and may have investments
or expenses also denominated in foreign currencies. Changes in exchange rates may,
therefore, have a positive or negative impact on companies which in turn would have an
effect on the investment of the fund.
Investment Risks
The sectoral fund schemes, investments will be predominantly in equities of select
companies in the particular sectors. Accordingly, the NAV of the schemes are linked to the
equity performance of such companies and may be more volatile than a more diversified
portfolio of equities.
Call Risks
Call risk is associated with bonds have and embedded call option in them. This option
gives the issuer the right to call back the bonds prior to maturity. Then investor how ever is
exposed to some risks here. The price of the callable bond many not rise much above the
price at which the issuer may call the bond.
Changes in the Government Policy

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Changes in Government policy especially in regard to the tax benefits may impact the
business prospects of the companies leading to an impact on the investments made by the
fund. Effect of loss of key professionals and inability to adapt business to the rapid
technological change.

An industries' key asset is often the personnel who run the business i.e. intellectual
properties of 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
sec

Investment cycle in Mutual Funds

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Types of mutual funds

History of the Indian Mutual Fund Industry:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India,
at the initiative of the Government of India and Reserve Bank the. The history of mutual
funds in India can be broadly divided into four distinct phases

First Phase – 1964-87(UTI MONOPOLY)

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the
Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

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Development Bank of India (IDBI) took over the regulatory and administrative control in
place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of
India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June
1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up
its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004
cores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund registered in
July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign I am
dearmutual funds setting up funds in India and also the industry has witnessed several
mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs. 1, 21,805 crores.

Fourth Phase – since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of
India with assets under management of Rs.29, 835 crores as at the end of January 2003,
representing broadly, the assets of US 64 scheme, assured return and certain other

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schemes. The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does not come under
the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to the
SEBI Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of June 30, 2003, there were 31 funds, which
manage assets of Rs.104762 crores under 376 schemes.
The graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts
of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are
not even 10% of the bank deposits, but this trend is beginning to change. Recent figures
indicate that in the first quarter of the current fiscal year.

The formation and operations of mutual funds in India is solely guided by SEBI (Mutual
Fund) Regulations, 1993, which came into force on 20 January 1993. The regulations have
since been replaced by the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996, through a notification on 9 December 1996.
A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC
and custodian. They are of course assisted by other independent administrative entities
like banks, registrars and transfer agents. We may discuss in brief the formation of
different entities, their functions and obligations.

The sponsor for a mutual fund can by any person who, acting alone or in combination with
another body corporate establishes the mutual fund and gets it registered with SEBI. The
sponsor is required to contribute at least 40 per cent of the minimum net worth (Rs 10
crore) of the asset management company. The sponsor must have a sound track record and
general reputation of fairness and integrity in all his business transactions.

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As per SEBI Regulation, 1996, a mutual fund is to be formed by the sponsor and registered
with SEBI. A mutual fund shall be constituted in the form of a trust and the instrument of
trust shall be in the form of a deed, duly registered under the provisions of the Indian
Registration Act, 1908, executed by the sponsor in favor of trustees named in such an
instrument.

The board of trustees manages the mutual fund and the sponsor executes the trust deeds in
favor of the trustees. The mutual fund raises money through sale of units under one or
more schemes for investing in securities in accordance with SEBI guidelines. It is the job
of the mutual fund trustees to see that the schemes floated and managed by the AMC
appointed by the trustees, are in accordance with the trust deeds and SEBI guidelines. It is
also the responsibilities of the trustees to control the capital property of mutual funds
schemes.

The trustees have the right to obtain relevant information from the AMC, as well as a
quarterly report on its activities. They can also dismiss the AMC under specific condition
as per SEBI regulations.

At least half the trustees should be independent persons. The AMC or its
employees cannot act as a trustee. No person who is appointed as a trustee of a mutual
fund can be appointed as a trustee of any other mutual fund unless he is an independent
trustee and prior permission is obtained from the mutual fund in which he is a trustee.

The trustees are required to submit half-yearly reports to SEBI on the activities of the
mutual fund. The trustees appoint a custodian and supervise their activities. The trustees
can be removed only with prior approval of SEBI.

As per SEBI guidelines, an asset management company is appointed by the trustees to

float the schemes for the mutual fund and manage the funds raised by selling units under a
scheme. The AMC must act as per SEBI guidelines, trust deeds and management
agreement between trustee & the AMC.

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The Importance of Accounting Knowledge
Mutual funds in India are required to follow the accounting policies laid down in SEBI
(Mutual Fund) Regulations, 1996 and the amendments in 1998. This section of the
workbook summarizes the important Regulations, and periodical budgets.

Net Asset Value (NAV)

A mutual fund is a common investment vehicle where the assets of the fund belong
directly to the investors. The fund does not account for investors' subscriptions as
liabilities or deposits but as Unit Capital. On the other hand, the investments made on
behalf of the investors are reflected on the assets side and are the main constituents of the
balance sheet. There are, however, liabilities of a strictly short-term nature that may be part
of the balance sheet. The fund's Net Assets are therefore defined as the assets minus the
liabilities. As there are many investors in a fund, it is common practice for mutual funds to
compute the share of each investor on the basis of the value of Net Assets Per Share/Unit,
commonly known as the Net Asset Value (NAV).

The following are the regulatory requirements and accounting definitions lay down by
SEBI.
NAV = Net Assets of the scheme / Number of Units Outstanding, i.e. Market value of
investments + Receivables + Other Accrued Income + Other Assets
Accrued Expenses-Other Payables-Other Liabilities
=
No. Of Units Outstanding as at the NAV date

A fund's NAV is affected by four sets of factors:

-- Purchase and sale of investment securities
-- Valuation of all investment securities held
-- Other assets and liabilities, and
-- Units sold or redeemed

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Pricing of Units:
Although NAV per share defines the value of the investor's holding in the fund, the
fund may not repurchase the investor's units at the same price as NAV. However, SEBI
requires that the fund must ensure that repurchase price is not lower than 93% of NAV
(95% in the case of a closed end fund). On the other side, a fund may sell new units at a
price that is different from the NAV, but the sale price cannot be higher than 107% of
NAV. Also, the difference the repurchase price and the sale price of the unit is not
permitted to exceed 7% of the sale price.

Fees and Expenses:

An AMC may incur many expenses specifically for given schemes, and other
common expenses. In any case, all expenses should be clearly Unidentified and allocated
to the individual schemes. The AMC may charge the scheme with investment management
and advisory fees that are fully disclosed in the offer document subject to the following
limits:

 @ 1.25% of the first Rs. 100 crore of weekly average net assets outstanding in the
accounting year, and @ 1% of weekly average net assets in excess of Rs. 100 crore.
 For no load schemes, the AMC may charge an additional management fee up to 1%
of weekly average net assets outstanding in the accounting year.

Investment management and advisory fees are subject to the overall ceiling for expenses.

 Initial expenses of launching schemes (not to exceed 6% of initial resources raised

under the scheme); and
 Recurring expenses including:

i. Marketing and selling expenses including agents' commission

ii. Brokerage and transaction costs
iii. Registrar services for transfer of units sold or redeemed
v. Fees and expenses of trustees
v. Audit fees
vi. Custodian fees
vii. Costs related to investor communication
viii. Costs of fund transfers from location to location

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 ix. Costs of providing account statements and dividend / redemption
cheques and warrants
x. Insurance premium paid by the fund
xi. Winding up costs for terminating a fund or a scheme
xii. Other costs as approved by SEBI
The total expenses charged by the AMC to a scheme, excluding issue or redemption
expenses but including investment management and advisory fees are subject to the
following limits:
 On the first Rs. 100 Crores of average weekly net assets-2.5%
 On the next Rs. 300 Crores of average weekly net assets -2.0%
 On the balance of average weekly net assets-1.75%
 For bond funds, the above percentages are required to be lower by 0.25%

Initial Issue Expenses:

When a scheme is first launched, the AMC will incur significant expenses, whose
benefit will accrue over many years. All expenses cannot, therefore, be charged to a
scheme in the first year itself. SEBI permits "amortization" of initial expenses as follows:

 For a closed-end scheme floated on a 'load' basis, the initial issue expenses shall be
amortized on a weekly basis over the period of scheme. For example, a 5-year (i.e.
260 week) closed-end scheme with initial issue expenses of Rs. 5 lakhs must
charge Rs.1923 (5 lakhs / 260 weeks) every week to the fund. It cannot charge the
entire amount of Rs. 5 lakhs at the time of issue.
 For an open-end scheme floated on a 'load' basis, initial issue expenses may be
amortized over a period not exceeding five years. For example, if an open-end
scheme has initial issue expenses of Rs. 10 lakhs, it need not charge this entire
amount to the fund in the year of issue. Instead, it may charge Rs. 2 lakhs (10 lakhs
/ 5 years) per year to the fund, thereby spreading the charge of initial issue
expenses over a maximum of 5 years. Issue expenses incurred during the life of an
open-end scheme cannot be amortized.
 Un amortized portion of initial issue expenses shall be included for NAV
calculation, considered as "other asset". The investment advisory fee cannot be
claimed on this asset. Hence, they have to be excluded while determining the
chargeable investment management / advisory fees. While calculating the

23
 maximum amount of chargeable expenses, the un amortized portion of the initial
issue expenses will not be included as part of the average weekly net assets figure.

Accounting Policies:

 Investments are required to be marked to market using market prices. Any

unrealized appreciation cannot be distributed, and provision must be made for the
same.
 Dividend received by the fund on a share should be recognized, not on the date of
declaration, but on the date the share is quoted on ex-dividend basis. For example,
if a fund owns shares on which dividend is declared on April 5, and the shares are
quoted on ex-dividend basis on April 20, the dividend income will be included by
the fund for distribution/NAV computation only April 20.
 In determining gain or loss on sale of investments, the average cost method must be
followed to determine the cost of purchase. This will be applied by security.
 Purchase / sale of investments should be recognized on the trade date and not
settlement date
 Bonus / rights shares should be recognized only when the original shares are traded
on the stock exchange on an ex-bonus /ex-rights basis
 Income receivable on investments, which is accrued, but not received for 12
months beyond due date, should be provided for, and no further accrual should be
made for such investment
 An investment shall be regarded as non-performing if it has provided no returns
through dividend/interest for more than 2years at the end of the accounting year
 Investments owned by mutual funds are marked to market. Therefore, the value of
investments appreciates or depreciates based on market fluctuations, which is
reflected in the balance sheet. However, this change in value constitutes unrealized
gain/loss. When any investments are actually sold, the proportion of the unrealized
gain / loss that pertains to such investments becomes realized gain/loss. Therefore,
at any given time, the NAV includes realized and unrealized gain/loss on
investments. While SEBI prohibits the distribution of unrealized appreciation on
investments, realized gain in available for distribution.

24
An open-end scheme sells and repurchases units on the basis of NAV. SEBI therefore
prescribes the use of an equalization account, to ensure that creation / redemption of units
does not change the percentage of income distributed. This involves the following steps:

 Computation of distributable reserves:

 Income + Realized Gain on Investments- Expenses-Unrealized Losses (unrealized
gains are excluded)
 If distributable reserves are positive, the following percentage is computed:
 Distributable Reserve / Units Outstanding
 The above percentage is multiplied with the number of new units sold, and the
equalization account is credited by this amount, if units are sold above par; if the
units are sold below par, the equalization account is debited by this amount. The
same percentage is multiplies with the number of units repurchased, and the
equalization account is debited by this amount if the units are repurchased above
par; if the units are repurchased below par, the equalization account is credited.
 The net balance in the equalization account is transferred to the profit and loss
account. It is only an adjustment to the distributable surplus and does not affect the
net income for the period.

VALUATION
Mutual funds value their investments on a 'mark-to-market' basis with reference to the
date on which they are valued i.e., the valuation date.

Valuation of Traded Securities:

 Where a security is traded on a stock exchange, it is valued at the last quoted

closing price on the stock exchange where it is "principally traded".
 If a security is not traded on any stock exchange on a particular valuation day, the
value at which it was traded on the selected/other stock exchange on the
 Earliest previous day may be used, provided such date is not more than 60 days
prior to the valuation date.
 Valuation of traded securities, once the market price is obtained as above, is quite
simple. The fund will multiply its current holding in number of shares or bonds by
the applicable market price to get the "mark to market" value.

25
valuation of Non-traded Securities:

 When a security is not traded on any stock exchange for 60 days prior to the
valuation date, it must be treated as non-traded' scrip.
 Non-traded securities shall be valued 'in good faith' by the AMC on the basis of
appropriate valuation methods, which shall be periodically reviewed by the trustees
and reported by the auditors as fair and reasonable. The following principles are to
be applied for the valuation of non-traded securities:
 Equity instruments: are to be valued on the basis of capitalization of earnings solely
or in combination with its balance sheet Net Asset Value. For this purpose,
capitalization rate will be determined by reference to the price or earning rations of
comparable traded securities with an appropriate discount for lower liquidity to be
used.

Debit instruments: are to be valued on a yield to maturity basis, the capitalization

factor being determined for comparable traded securities with an appropriate discount for
lower liquidity.

 Call money, bills purchased: under rediscounting and short term deposits with
banks are to be valued at cost + accrual: other money market instruments at yield at
which they are currently traded; non-traded instruments (not traded for 7 days) will
be valued at cost plus interest accrued till the beginning of the valuation day plus
the difference between redemption value and cost, spread uniformly over the
remaining maturity of the instrument
 Government Securities: are to be valued at yield to maturity based on
prevailing market rate
 Convertible debentures and bonds: non-convertible component is to be
valued as a debt instrument, and convertible as any equity instrument. If after
Conversion, the resultant equity instrument would be traded pari passu with an
existing instrument, which is traded, the value of the latter instrument can be
adopted after an appropriate discount for the non-tradability of the instrument.

26
RISK INVOLVED IN MUTUAL FUNDS INDUSTRY:
Mutual funds are not free from risk. It is so because basically the mutual funds also invest
their funds in stock markets on shares, which are volatile in nature and are not risk free, the
following risk are inherent in their dealing.

INHERENT RISK FACTORS:

1) Market Risks:
In general there are certain risks associated with the every kind of investment on shares.
They are called market risks. These market risks can be reduced, but cannot be completely
eliminated even by a good investment.
2) Scheme Risks
There are certain risks inherent in the scheme itself. It all depends upon the nature of the
scheme. For instance, in a pure growth scheme, risks are greater.
3) Investment Risks
Whether the mutual fund makes money in shares or loses depends upon the investment
expertise of the Asset Management Company. If the investment advice goes wrong, the
fund has to suffer a lot.
4) Business Risks
The corpus of a mutual fund might have been invested in a company‟s shares. If the
business of that company suffers any set back, it cannot declare any dividend. It may even
go to the extent of winding up its business.

5) Political Risks
Successive Governments bring with them fancy new economic ideologies and policies. It
is often said that many economic decisions are politically motivated.

27
PARAMETERS DESCRIPTION
The following parameters were considered for analysis:
 Beta
 Alpha
 Correlation coefficient
 Treynor‟s Ratio
 Sharpe‟s Ratio
 Jensen‟s 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, ß. 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.

28
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.

29
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
corresponding benchmark. Using beta, alpha's computation compares the fund's
performance to that of the benchmark's risk-adjusted returns and establishes if the fund's
returns outperformed the market's, given the same amount of risk.

For example, if a fund has an alpha of 1, it means that the fund outperformed the
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
30
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. Sometimes, there are securities that lead other
securities. In other words a change in price in one results in a later change in price of the
other. A high negative correlation means that when a securities price 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.

31
PORTFOLIO MEASUREMENT METHODS:
We are interested in discovering if the management of a mutual fund is performing well;
that is, has management done better through its selective buying and selling of securities
than would have been achieved through merely “buying the market” ––picking a large
number of securities randomly and holding them throughout the period?
The most popular ways of measuring management‟s performance are
1. Sharpe‟s Performance Measure
2. Treynor‟s Performance Measure
3. Jensen‟s Performance Measure

SHARPE’S 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:
Sharpe‟s Index = (Average return on portfolio – Risk less rate of interest)
(Deviation of returns on portfolio)
Graphifically 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.

TREYNOR’S RATIO
Treynor‟s 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)
Treynor Index = -------------------------------------------------------
Beta coefficient of portfolio

32
Jensen’s Performance Measure (Michael)
It refers the actual return earned in portfolio and return expected out of portfolio given its
level of risk.
CAPM – is used to calculate the expected return. The difference between the expected
return and act retain can be said the return earned out of the mandatory of systematic risk.
This excess return refers the manager‟s predictive ability and managerial skills.

CAPM
rp = rf + (rm – rf)
Differential return is calculated as follows:
p = rp - rp
p =positive ––> Superior returns
p = Negative ––> Unskilled management (worse portfolio)
p = 0 ––> Neutral performance

Higher alpha represents superior performance of a fund and vice versa.

33
 CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE

34
 INDUSTRY PROFILE

Stocks that respond to interest rate moves, coupled with select debt schemes, are likely to
be the winners in 2015, with the Reserve Bank of India expected to start easing its
monetary policy.

Fund managers said economic prospects have improved, but the New Year may be tougher
for equity investors to make money as valuations of many stocks are rich after the broad-
based rally in 2014. Concern over interest rate hike in the US and weak global crude oil
prices may also keep investors on.

India is among the top-performing emerging markets in 2014. So far in 2014, the Sensex
has gained 34%. Smaller companies have fared even better, with the BSE Mid Cap index
surging 56% and the BSE Small Cap Index jumping 75%.

Though the falling crude prices have improved the prospects of the Indian economy, India
may not be spared if there is an emerging market sell-off. "On the global front, oil
exporting nations could face problems, and there could be a global risk aversion.

Market participants consider probable interest rate cuts by the Reserve Bank of India (RBI)
as the biggest trigger for the economy and the markets. The extent of monetary policy
easing would determine the strength of rally in shares of the so-called interest rate-
sensitive sectors such as banks, auto, real estate and bonds.

Fund managers said debt funds could offer good returns in the coming year as a fall in
interest rates could lead to an appreciation in bond prices. With wholesale price inflation
coming at nil for November, expectations of interest rate cuts as early as in the March
quarter are high. "Shortterm rates can fall more than long-term rates. We expect consumer
inflation to be in the range of 5-5.5%, and expect RBI to cut interest rates by 50 basis
points in 2015," said Dhawal Dalal, executive V-P and head (fixed income), DSP
BlackRock Mutual Fund. If interest rates fall by 50 basis points, investors could see a 5%
capital appreciation on their long-term gilt fund portfolio.

Measured by BSE Sensex, stock market has generated a positive return of about 9 per cent
for investors in 2013, while gold prices fell by about three per cent and its poorer cousin
silver plummeted close to 24 per cent.

35
After outperforming stock market for more than a decade, gold has been on back foot for
two consecutive years now vis-a-vis equities, shows an analysis of their price movements.

"Gold's under-performance was mainly due to prices falling in dollar terms amid
anticipated tapering over last several months combined with FII investment in Indian
stocks.

"This movement has been equally true for global markets as 2013 saw gold losing its shine
and markets coming back with a bang," said Jayant Manglik, President Retail Distribution,
Religare Securities.

"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.

Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.

In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of
about 12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."

"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets,
including stocks in Indian markets. However, assurance by the Fed about planned and
staggered tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2014 due
to continued strength of the US dollar and benign in the second half. By that time,
elections too would have taken place. A combination of domestic and international factors
point to a bumper closing of Indian markets in 2014 with double-digit percentage growth,"
he said.

Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent and
16 per cent, respectively, in 2013.

36
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly
USD 20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore (USD
24.37 billion).

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, the "Native Share and Stock Brokers' Association" (which is 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 Exchange at Bombay was
consolidated.

Other leading cities in stock market operations

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

37
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.

38
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 thereupon
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

39
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.

40
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 as, absence of liquidity, lack of transparency, 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
 Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded
 Initiated debentures - Any equity holding atleast one lakh debentures of a particular
scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The original
certificate will be safely with the custodian. But, a counter receipt is generated out at the
counter which substitutes the share certificate and is used for all transactions.

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.

41
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.
 Greater transparency and accuracy of prices is obtained due to the screen-based
scripless trading.
 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.
 Faster settlement and transfer process compared to other exchanges.
 In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes a
longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency
investors are gradually becoming aware of the manifold advantages of the OTCEI.

National Stock Exchange (NSE)

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.

42
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.
 Delays in communication, late payments and the malpractice‟s prevailing in the
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

43
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

44
and this is possible only through a well carved out planning strategy. The government‟s
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.

Planning History of India

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 1920‟s, and 1930‟s 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.

Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :
 To make an assessment of the material, capital and human resources of the country,
including technical personnel, and investigate the possibilities of augmenting such

45
 of these resources as are found to be deficient in relation to the nation‟s
requirement.
 To formulate a plan for the most effective and balanced use of the country‟s
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.
 To make such interim or auxiliary recommendations as appear to it to be
appropriate either for facilitating the discharge of the duties assigned to it or on a
consideration of the prevailing economic conditions, current policies, measures and
development programs; or on an examination of such specific problems as may be
referred to it for advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

 Increasing National Income
 Reducing inequalities in the distribution of income and wealth
 Elimination of poverty
 Providing additional employment; and
 Alleviating bottlenecks in the areas of : agricultural production, manufacturing
capacity for producer‟s goods and balance of payments.

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

46
 COMPANY PROFILE

Monarch Networth Capital is a strategic amalgamation of two leading financial service

providers Monarch Group of Companies and Networth Stock Broking Ltd. With more than
2 decades in devising and executing smarter financial products and strategies, we have
emerged as one of the leading and reliable financial services provider. We have added
more verticals to our business ranging from pure stock broking services and including the
entire gamut of financial services such as primary marketing operations, mutual funds,
insurance and comprehensive financial planning.

Our constant focus is on scaling and upgrading the technology and infrastructure with the
aim of providing the best services to the investors. The Monarch Networth Capital is an
ISO certified company which has been scaling new heights, only because of the trust
placed on us by our clients and investors.

We have always believed in building a knowledge bank to bring about a progressive

change for all our customers and stakeholders. This sharing of financial knowledge has
been adding more value to our clients‟ asset. It has also established us as a unique entity in
this domain.

Client First, Always

 It's not just service that we offer. We deliver service that is customized and
personalized by devising unobvious and smarter strategies.
 We help our clients reach their financial goals and often exceed it. Technology is
the tool that aids us in helping our clients.
 At monarch Networth capital Limited, we apply creative techniques & best
research methodologies to provide cost effective, profit maximizing & risk
minimizing solutions for all our clients.
 Since the merger, we have doubled up the size of our organization and operations
with an aim to nurture and improve our power innovations and to execute
excellence in an increasingly competitive and a volatile world.
 With proven track record of financial excellence and diversified client base
including Retail Clients, Corporate Clients, HNIs, we are marching on
transforming the industry.

47
  With continuous innovation in products, services, technological offerings, and
customer engagement models, we are taking customer engagement and satisfaction
to new heights.
Vision
Seeing the unseen
To be recognized as a pioneer in providing financial services anchored with values of
Innovation, Trust and Diversity.

Mission
Seeing the unseen
As a leading investment company, we provide quality investment solutions and help our
clients build their financial securities. Our goal is to strive towards delivering a superior
investment performance to meet the needs of our stakeholders by portraying the spirit of
teamwork, efficiency and integrity.

MILESTONES

Phase 1 (1995-2000)

 Started office at Ahmedabad with very small team of 5 members

 Got membership of NSE

Phase 2 (2000-2005)
 Expanded our operation across western region
 Got membership of BSE, NSDL, MCX, NCDEX, NMCE & DGCX
 Total Manpower strength crossed 200
 More than 300 Sub brokers

Phase 3 (2005-2011)
 Total Manpower strength crossed 300
 More than 70000 Clients
 More than 500 Sub brokers
 Inauguration of Monarch House in 2009 (current Corporate office of MNCL)
 Got ISO 9001:2008 & ISO/IEC 27001:2005 in 2010
 Strategic amalgamation with Networth Stock Broking Limited

48
2011 TO CURRENT
 Launched "TechExcel" highly Technology driven Back-office solution 2017.
 Launched Super fast on-line trading application "Moneymaker" in 2017.
 Top performer cash Market NSE 2015-2016.
 Got award of Top Performer in Active Accounts(Big DPs) of NSDL star Performer
in 2013 & 2015.
 Got Award of Top Performer in New Accounts – Opened(NON –Bank Category-
2nd Position) of NSDL Star Performer in 2014.
 Got Award Leader in go green Initiative of NSDL Star Performer in 2014.
 Got Merchant banking license in 2013.
 Expanded our operation aggressively in major cities of North India and South India
including Remote places as well.
 Network of +1003 Sub Brokers, more than 690 + Employees, 70+ Branches with
more than +226100 clients across India.
 Empanelled/Servicing all major AMC‟s Insurance Companies and Banks with our
Investment Ideas and Research Products.

BOARD OF DIRECTORS

VAIBHAV SHAH

Chairman cum Managing Director-Monarch Networth Capital Limited

MANJU BAFNA

Whole time Director- Monarch Networth Capital Limited

SHAILEN SHAH

Associate Director-Monarch Networth Capital

BANKIM SHAH

Chief Operating Officer- Monarch Networth Capital Limited

PRODUCTS & SERVICES

49
Equity and Derivatives : The Equity market also known as the stock market is where the
listed securities are traded in the secondary market. This is one of the most vital areas of a
market economy, as investors have the opportunity to own a slice of ownership in a
company with the potential to realize gains based on its future performance. The securities
market has two interdependent and inseparable segments, the new issues (primary) market
and the stock (secondary) market. The primary market provides the channel for creation
and sale of new securities, while the secondary market deals in securities previously
issued. The Stock market or Equities market is where listed securities are traded in the
secondary market. Indian Equity Market at present is a lucrative field for the investors and
investing in Indian stocks are profitable for not only the long and medium-term investors,
but also the position traders, short-term swing traders and also very short term intra-day
traders. The growing financial capital markets of India being encouraged by domestic and
foreign investments is becoming a profitable business more with each day. If all the
economic parameters are unchanged Indian Equity Market will be conducive for the
growth of private equities and this will lead to an overall improvement in the Indian
economy. Emerging markets like India, are fast becoming engines for future growth.
Currently, only a very low percentage of the household savings of Indians are invested in
the domestic stock market, but with GDP growing at 7-8% annually and a stable financial
market, we might see more money joining the race. Our experienced trading consultants
and advanced trading tools will provide the support you need to achieve your long-term
and medium terms goals via the stock markets.

Commodities : A commodity market is a market that trades in primary economic sector

rather than manufactured products. Soft commodities are agricultural products such as
Jeera, Castor, Guar, wheat, coffee, Sugar, etc. Hard commodities are mined, such as gold,
silver, steel, nickel, crude oil etc. Investors access about 45 major commodity markets
worldwide with purely financial transactions increasingly outnumbering physical trades in
which goods are delivered. Futures contracts are the oldest way of investing in
commodities. Futures are secured by physical assets. Commodity markets can include
physical trading and derivatives trading using spot prices, forwards and futures. Farmers
have used a simple form of derivative trading in the commodity market for centuries for
price risk management. A financial derivative is a financial instrument whose value is
derived from a commodity termed an underlyer. The same trading formula has evolved
having trading platform like Multi Commodity Exchange of India Limited, National

50
Commodity and Derivatives Exchanges Limited and National Multi Commodity Exchange
Limited. Commodities actually offer immense potential to become a separate asset class
for market-savvy investors, arbitrageurs and speculators. They are also easy to understand
as far as fundamentals of demand and supply are concerned. Historically, pricing in
commodities futures has been less volatile compared with equity and bonds, thus providing
an efficient portfolio diversification option.

Currency Derivatives : Currency derivatives can be described as contracts between the

sellers and buyers, whose values are to be derived from the underlying assets i.e. the
currency amounts.

IPO : Initial public offering (IPO), also referred to simply as a "public offering", is the
first sale of stock by a private company to the public. IPO is a way for a company to raise
money from investors for its future projects and get listed to Stock Exchange.

From an investor point of view, IPO gives a chance to buy stocks of a company, directly
from the company at the price of their choice (In book build IPO''''s). Although an IPO
offers more control over the price at which the investor is willing to buy the stock it is no
less risky than buying a stock in the market.

From a company prospective, the single most important use of an IPO is the provision of
funds. IPO''''s provide capital for the company's future growth or for paying its previous
borrowings and allows the company's stock to be traded publicly in the Stock Market.

Companies need fund to finance their new projects, upgrading of infrastructure,

acquisition, future growth plans or to pay off previous borrowings. Borrowing the money
from a financial institution compels the company to pay interest on those borrowings. On
the other hand when a company issues an IPO or an Initial Public Offering, the company
offers a fixed numbers of its shares to be held by the public and to be traded publicly.

The investors in an IPO book their shares by offering the pay the company the issue price
or the price of each share. The money paid by investors for the newly-issued shares goes
directly to the company (in contrast to a later trade of shares on the exchange, where the
money passes between investors). An IPO, therefore, allows a company to tap a pool of
investors to provide it with large volumes of capital for future growth. The company is

51
never required to repay the capital, but instead the new shareholders have a right to future
profits distributed by the company.

Mutual Funds : Mutual funds are investment companies that pool money from investors
at large and offer to sell and buy back its shares on a continuous basis and use the capital
thus raised to invest in securities of different companies.

Bond & FD : In finance, a bond is a debt security, in which the authorized issuer owes the
holders a debt and is obliged to repay the principal and interest (the coupon) at a later date,
termed maturity.

A bond is simply a loan in the form of a security with different terminology: The issuer is
equivalent to the lender, the bond holder to the borrower, and the coupon to the interest.
Bonds enable the issuer to finance long-term investments with external funds. Note that
certificates of deposit (CDs) or commercial paper are considered to be money market
instruments and not bonds.

Bonds and stocks are both securities, but the major difference between the two is that
stock-holders are the owners of the company (i.e., they have an equity stake), whereas
bond-holders are lenders to the issuing company. Another difference is that bonds usually
have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be
outstanding indefinitely. An exception is a consol bond, which is a perpetuity (i.e., bond
with no maturity).

Life Insurance : Life insurance in India made its debut well over 100 years ago. Life
insurance is a contract that pledges payment of an amount to the person assured (or his
nominee) on the happening of the event insured against. Life insurance or life assurance is
a contract between the policy owner and the insurer, where the insurer agrees to pay a sum
of money upon the occurrence of the insured individual's or individuals' death or other
event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a
stipulated amount called a premium at regular intervals or in lump sums.

52
General Insurance : Insurance other than 'Life Insurance' falls under the category of
General Insurance. General Insurance comprises of insurance of property against fire,
burglary etc, personal insurance such as Accident and Health Insurance, and liability
insurance which covers legal liabilities. There are also other covers such as Errors and
Omissions insurance for professionals, credit insurance etc.

Depository Services : Dematerialisation is the process by which physical share certificates

are converted into electronic form. While it is not yet compulsory that all the shares listed
on the stock exchanges are dematerialised, there is a steady increase in the number of
companies trading in the dematerialised shares.

We offer Depository facilities to facilitate a seamless transaction platform as a part of our

value-added services for our clients. Networth is a depository participant with the Central
Depository Services (India) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL)
for trading and settlement of dematerialized shares.

Merchant Banking
Powered by Trust, Driven with Passion
Through our Merchant Banking division, we are a one-stop solution for our clients to
whom we provide the complete range of capital/fund raising and financial advisory
services.

53
 CHAPTER-IV

DATA ANALYSES

&

INTERPRETATION

54
For analysis Net Asset Value (NAV) of the Four AMC’S
for the period of 1st Nov 2018 to 22nd Dec 2018

SBI
IDBI
Magnum Indiabulls
GOLD HDFC
Market Balanced blue chip
FUND- GOLD
Date Level ( Fund- fund-
GROWTH Fund –
NIFTY) Growth Growth Growth

22/12/2018 7376.65 92.37 8.23 13.58 8.87

21/12/2018 7357.00 91.38 8.25 13.31 8.93

20/12/2018 7381.8 91.24 8.21 13.39 8.98

19/12/2018 7420.35 92.12 8.13 13.67 8.92

18/12/2018 7561.65 91.30 8.15 13.50 8.89

15/12/2018 7467.4 92.89 8.05 13.78 8.74

14/12/2018 7557.9 94.20 8.08 13.95 8.79

13/12/2018 7587.2 94.63 8.00 14.05 8.67

12/12/2018 7527.45 94.93 8.09 14.01 8.77

11/12/2018 7611.65 95.46 8.14 14.12 8.80

08/12/2018 7673.35 95.87 8.08 14.17 8.81

07/12/2018 7788.05 95.25 8.10 14.09 8.82

06/12/2018 7828.4 96.38 8.00 14.44 8.85

05/12/2018 7924.55 96.29 7.94 14.48 8.68

04/12/2018 7938.45 96.34 7.90 14.43 8.61

01/12/2018 7897.8 97.43 7.80 14.71 8.57

30/11/2018 7929.2 96.61 7.87 14.60 8.60

29/11/2018 7863.2 96.76 7.86 14.66 8.57

55
28/11/2018 7888.75 96.67 7.87 14.63 8.61

23/11/2018 7830.45 96.27 7.87 14.53 8.51

22/11/2018 7829.4 96.13 7.92 14.53 8.57

21/11/2018 7745.65 95.44 7.88 14.41 8.64

18/11/2018 7828.9 95.55 7.79 14.48 8.58

17/11/2018 7783.05 95.37 7.88 14.38 8.49

16/11/2018 7725.25 95.68 7.90 14.52 8.53

15/11/2018 7659.15 94.91 7.94 14.29 8.55

14/11/2018 7558.2 94.55 7.93 14.22 8.54

11/11/2018 7699.6 94.08 7.90 14.11 8.55

10/11/2018 7643.3 93.99 7.94 14.04 8.56

09/11/2018 7695.5 94.32 7.98 14.16 8.60

08/11/2018 7738.5 93.94 7.94 14.00 8.64

07/11/2018 7816.55 94.82 7.99 14.22 8.60

04/11/2018 7817.6 95.28 7.88 14.34 8.66

03/11/2018 7902.3 95.46 7.79 14.34 8.58

02/11/2018 7976.7 95.74 7.88 14.45 8.50

01/11/2018 7958.15 96.06 7.89 14.56 8.57

Average 7722.38 94.93 7.96 14.21 8.66

56
Calculations of Risk of SBI Magnum Balanced Fund- Growth
For the period of 1st Nov 2018 to 22nd Dec 2018
Market Level SBI Magnum returns
Balanced
Date ( NIFTY) returns
Fund- Growth

22/12/2018 7376.65 92.37

21/12/2018 7357.00 -19.65 91.38 -0.99

20/12/2018 7381.8 24.8 91.24 -0.14

19/12/2018 7420.35 38.55 92.12 0.88

18/12/2018 7561.65 141.3 91.30 -0.82

15/12/2018 7467.4 -94.25 92.89 1.59

14/12/2018 7557.9 90.5 94.20 1.31

13/12/2018 7587.2 29.3 94.63 0.43

12/12/2018 7527.45 -59.75 94.93 0.3

11/12/2018 7611.65 84.2 95.46 0.53

08/12/2018 7673.35 61.7 95.87 0.41

07/12/2018 7788.05 114.7 95.25 -0.62

06/12/2018 7828.4 40.35 96.38 1.13

05/12/2018 7924.55 96.15 96.29 -0.09

04/12/2018 7938.45 13.9 96.34 0.05

01/12/2018 7897.8 -40.65 97.43 1.09

30/11/2018 7929.2 -9.4 96.61 -0.38

29/11/2018 7863.2 -66 96.76 0.15

28/11/2018 7888.75 25.55 96.67 -0.09

23/11/2018 7830.45 -58.3 96.27 -0.4

22/11/2018 7829.4 -1.05 96.13 -0.14

57
21/11/2018 7745.65 -83.75 95.44 -0.69

18/11/2018 7828.9 83.25 95.55 0.11

17/11/2018 7783.05 -45.85 95.37 -0.18

16/11/2018 7725.25 -57.8 95.68 0.31

15/11/2018 7659.15 -66.1 94.91 -0.77

14/11/2018 7558.2 -100.95 94.55 -0.36

11/11/2018 7699.6 141.4 94.08 -0.47

10/11/2018 7643.3 -56.3 93.99 -0.09

09/11/2018 7695.5 52.2 94.32 0.33

08/11/2018 7738.5 43 93.94 -0.38

07/11/2018 7816.55 78.05 94.82 0.88

04/11/2018 7817.6 1.05 95.28 0.46

03/11/2018 7902.3 84.7 95.46 0.18

02/11/2018 7976.7 74.4 95.74 0.28

01/11/2018 7958.15 -18.55 96.06 0.32

Average 15.74 0.153

Stranded Deviation (SD) 1.48 0.08

Beta 0.57

58
Graphical Presentation of SBI Magnum Balanced Fund-Growth For the month of
Dec 2018

returns
2

1.5

0.5
returns
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37
-0.5

-1

-1.5

Interpretation:

SBI Magnum Balanced Fund-Growth has been analyzed and it is found that there is a
positive growth. However on the basis of the avg returns of SBI there is a growth 0.15 as
against the index avg of 14.74 the beta being less than 1 the stock is not highly volatile.

59
Calculations of Risk of IDBI GOLD FUND-GROWTH

For the period of 1st December 2016 to 22nd January 2017

returns IDBI GOLD returns
Market Level
Date FUND-
( NIFTY)
GROWTH

22/12/2018 7376.65 8.23

21/12/2018 7357.00 -19.65 8.25 0.02

20/12/2018 7381.8 24.8 8.21 -0.04

19/12/2018 7420.35 38.55 8.13 -0.08

18/12/2018 7561.65 141.3 8.15 0.02

15/12/2018 7467.4 -94.25 8.05 -0.1

14/12/2018 7557.9 90.5 8.08 0.03

13/12/2018 7587.2 29.3 8 -0.08

12/12/2018 7527.45 -59.75 8.09 0.09

11/12/2018 7611.65 84.2 8.14 0.05

08/12/2018 7673.35 61.7 8.08 -0.06

07/12/2018 7788.05 114.7 8.1 0.02

06/12/2018 7828.4 40.35 8 -0.1

05/12/2018 7924.55 96.15 7.94 -0.06

04/12/2018 7938.45 13.9 7.9 -0.04

01/12/2018 7897.8 -40.65 7.8 -0.1

30/11/2018 7938.6 40.8 7.82 0.02

29/11/2018 7929.2 -9.4 7.87 0.05

28/11/2018 7863.2 -66 7.86 -0.01

23/11/2018 7888.75 25.55 7.87 0.01

60
22/11/2018 7830.45 -58.3 7.87 0

21/11/2018 7829.4 -1.05 7.92 0.05

18/11/2018 7745.65 -83.75 7.88 -0.04

17/11/2018 7828.9 83.25 7.79 -0.09

16/11/2018 7783.05 -45.85 7.88 0.09

15/11/2018 7725.25 -57.8 7.9 0.02

14/11/2018 7659.15 -66.1 7.94 0.04

11/11/2018 7558.2 -100.95 7.93 -0.01

10/11/2018 7699.6 141.4 7.9 -0.03

09/11/2018 7643.3 -56.3 7.94 0.04

08/11/2018 7695.5 52.2 7.98 0.04

07/11/2018 7738.5 43 7.94 -0.04

04/11/2018 7816.55 78.05 7.99 0.05

03/11/2018 7817.6 1.05 7.88 -0.11

02/11/2018 7902.3 84.7 7.79 -0.09

01/11/2018 7976.7 74.4 7.88 0.09

22/12/2018 7958.15 -18.55 7.89 0.01

Average 16.15 -0.009

Stranded Deviation (SD) 1.48 -0.004

Beta 0.12

61
Graphical Presentation of IDBI GOLD FUND-GROWTH For the month of Dec 18

Return
0.1

0.05

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Return
-0.05

-0.1

-0.15

Interpretation:

IDBI GOLD FUND-GROWTH have been analyzed and it is found that there is a negative
growth. However on the basis of the avg returns of IDBI GOLD FUND-GROWTH there is
a negative growth 0.004as against the index avg of negative 0.19 the beta being less than 1
the stock is not highly volatile.

62
Calculations of Risk of Indiabulls blue chip fund-Growth

For the period of 1st Nov 2018 to 22nd Dec 2018

Indiabulls
Market Level
Date blue chip
( NIFTY) Return Return
fund-Growth

22/12/2018 7376.65 13.58

21/12/2018 7357.00 -19.65 13.31 -0.27

20/12/2018 7381.8 24.8 13.39 0.08

19/12/2018 7420.35 38.55 13.67 0.28

18/12/2018 7561.65 141.3 13.50 -0.17

15/12/2018 7467.4 -94.25 13.78 0.28

14/12/2018 7557.9 90.5 13.95 0.17

13/12/2018 7587.2 29.3 14.05 0.1

12/12/2018 7527.45 -59.75 14.01 -0.04

11/12/2018 7611.65 84.2 14.12 0.11

08/12/2018 7673.35 61.7 14.17 0.05

07/12/2018 7788.05 114.7 14.09 -0.08

06/12/2018 7828.4 40.35 14.44 0.35

05/12/2018 7924.55 96.15 14.48 0.04

04/12/2018 7938.45 13.9 14.43 -0.05

01/12/2018 7897.8 -40.65 14.71 0.28

30/11/2018 7938.6 40.8 14.67 -0.04

29/11/2018 7929.2 -9.4 14.60 -0.07

28/11/2018 7863.2 -66 14.66 0.06

23/11/2018 7888.75 25.55 14.63 -0.03

63
22/11/2018 7830.45 -58.3 14.53 -0.1

21/11/2018 7829.4 -1.05 14.53 0

18/11/2018 7745.65 -83.75 14.41 -0.12

17/11/2018 7828.9 83.25 14.48 0.07

16/11/2018 7783.05 -45.85 14.38 -0.1

15/11/2018 7725.25 -57.8 14.52 0.14

14/11/2018 7659.15 -66.1 14.29 -0.23

11/11/2018 7558.2 -100.95 14.22 -0.07

10/11/2018 7699.6 141.4 14.11 -0.11

09/11/2018 7643.3 -56.3 14.04 -0.07

08/11/2018 7695.5 52.2 14.16 0.12

07/11/2018 7738.5 43 14.00 -0.16

04/11/2018 7816.55 78.05 14.22 0.22

03/11/2018 7817.6 1.05 14.34 0.12

02/11/2018 7902.3 84.7 14.34 0

01/11/2018 7976.7 74.4 14.45 0.11

22/12/2018 7958.15 -18.55 14.56 0.11

Average 16.15 0.02

Stranded Deviation (SD) 1.48 0.01

Beta 0.12

64
Graphical Presentation of Indiabulls blue chip fund-Growth For the month of Dec
18

0.4

0.3

0.2

0.1

-0.1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39

-0.2

-0.3

-0.4

Interpretation:

Indiabulls blue chip fund-Growth have been analyzed and it is found that there is a
positive growth. However on the basis of the avg returns of Indiabulls blue chip fund-
Growth there is a negative growth 0.02 as against the index avg of negative 0.02 the beta
being less than 0.12 the stock is not highly volatile.

65
Calculations of HDFC GOLD Fund –Growth

For the period of 1st Nov 2018 to 22nd Dec 2018

Return Return
Market Level
Date HDFC GOLD
( NIFTY) Fund –
Growth

22/12/2018 7376.65 8.87

21/12/2018 7357.00 -19.65 8.93 0.06

20/12/2018 7381.8 24.8 8.98 0.05

19/12/2018 7420.35 38.55 8.92 -0.06

18/12/2018 7561.65 141.3 8.89 -0.03

15/12/2018 7467.4 -94.25 8.74 -0.15

14/12/2018 7557.9 90.5 8.79 0.05

13/12/2018 7587.2 29.3 8.67 -0.12

12/12/2018 7527.45 -59.75 8.77 0.1

11/12/2018 7611.65 84.2 8.80 0.03

08/12/2018 7673.35 61.7 8.81 0.01

07/12/2018 7788.05 114.7 8.82 0.01

06/12/2018 7828.4 40.35 8.85 0.03

05/12/2018 7924.55 96.15 8.68 -0.17

04/12/2018 7938.45 13.9 8.61 -0.07

01/12/2018 7897.8 -40.65 8.57 -0.04

30/11/2018 7938.6 40.8 8.55 -0.02

29/11/2018 7929.2 -9.4 8.60 0.05

28/11/2018 7863.2 -66 8.57 -0.03

66
23/11/2018 7888.75 25.55 8.61 0.04

22/11/2018 7830.45 -58.3 8.51 -0.1

21/11/2018 7829.4 -1.05 8.57 0.06

18/11/2018 7745.65 -83.75 8.64 0.07

17/11/2018 7828.9 83.25 8.58 -0.06

16/11/2018 7783.05 -45.85 8.49 -0.09

15/11/2018 7725.25 -57.8 8.53 0.04

14/11/2018 7659.15 -66.1 8.55 0.02

11/11/2018 7558.2 -100.95 8.54 -0.01

10/11/2018 7699.6 141.4 8.55 0.01

09/11/2018 7643.3 -56.3 8.56 0.01

08/11/2018 7695.5 52.2 8.60 0.04

07/11/2018 7738.5 43 8.64 0.04

04/11/2018 7816.55 78.05 8.60 -0.04

03/11/2018 7817.6 1.05 8.66 0.06

02/11/2018 7902.3 84.7 8.58 -0.08

01/11/2018 7976.7 74.4 8.50 -0.08

22/12/2018 7958.15 -18.55 8.57 0.07

Average 16.15 0.008

Stranded Deviation (SD) 1.48 0.002

Beta 0.08

67
Graphical presentation of HDFC GOLD Fund –Growth)For the month of Dec 18

Return
0.15

0.1

0.05

0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Return
-0.05

-0.1

-0.15

-0.2

Interpretation:

HDFC GOLD Fund –Growthhas been analyzed and it is found that there is a negative
growth. However on the basis of the avg returns of HDFC GOLD Fund –Growththere is
a negative growth 0.008 as against the index avg of negative 0.02 the beta being less than
0.08 the stock is not highly volatile.

68
 Comparative Study of the performance of the Selected AMC’s Sharp index and
Treynor index are calculated For the month of Dec 18

Sharp's Treynor
Return Risk(std Beta
Name of the Fund Rf
(Rm) dev) (β) (Rm- (Rm-
Rf)/σ Rf)/β

SBI Magnum Balanced 0.153 0.08 0.57 0.06 1.16 0.26

Fund- Growth

IDBI GOLD FUND- -0.42 -0.85

0.009 -0.004 0.12 0.06
GROWTH

Indiabulls blue chip fund- -4.00 -0.33

0.02 0.01 0.12 0.06
Growth

HDFC GOLD Fund –

0.008 0.002 0.08 0.06 -2.6 -0.86
Growth

The graphical representation of Sharp Index:

69
Interpretation:

 From the above table and graph we can know that SBI Magnum Balanced
Fund- Growth and are giving good returns and they are in first position,

 And the second position is Indiabulls blue chip fund-Growth

The graphical representation of TREYNER Index:

Interpretation:

 From the above table and graph we can know SBI Magnum Balanced Fund-
Growth is performing well and it is in first position

 And the second position is Indiabulls blue chip fund-Growth

 The general trend in the reduction of the market price for various mutual funds
studied is not encouraging the stock market index has also been falling
continuously because of general economic slowdown however the funds are
ranked considering sharp and trenyors in the order of performances

70
 CHAPTER-V

 FINDINGS
 SUGGESSIONS
 CONCLUSIONS
 BIBLIOGRAPHY

71
FINDINGS

SHARPE’S: 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 Indiabulls
blue chip fund-Growth and SBI show a better risk-adjusted performance out of top4
AMC‟S.

TREYNOR’s: As per TREYNOR‟S ratio the Treynor‟s reward to volatility - having high
positive index is favorable. Therefore, as per this ratio also SBI -Growth is preferable.

72
SUGGESTIONS TO INVESTORS:

Investing Checklist

 Financial goals & Time frame

(Are you investing for retirement? A child‟s education? Or for current income? )

Risk Taking Capacity

Identify funds that fall into your Buy List

Obtain and read the offer

Documents match your objectives

 In terms of equity share and bond weightings, downside risk

 protection, tax benefits offered, dividend payout policy, sector focus

 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

 Management fees, annual expenses of the fund and sales loads

 Look for size and credentials

 Asset size less than Rs. 25 Crores

 Diversify, but not too much

 Invest regularly, choose the S-I-P

 MF- an integral part of your savings and wealth building plans.

73
Portfolio Decision

The right asset allocation

i. Age = % in debt instruments

ii. Reality= different financial position, different allocation

iii. Younger= Riskier

2. Selecting the right fund/s

i. Based on scheme‟s investment philosophy

ii. Long-term, appetite for risk, beat inflation– equity funds best

3. TRAPS TO AVOID

4. IPO Blur

5. Begin with existing schemes (proven track record) and then new

6. schemes

i. Avoid Market Timing

7. MF Comparison

8. Absolute returns

9. –% Difference of NAV

i. Diversified Equity with Sector Funds– NO

10. Benchmark returns

i. SEBI directs

ii. Fund's returns compared to its benchmark

Time period –Equal to time for which you plan to invest

74
 iii. Equity- compare for 5 years, Debt- for 6 months

11. Market conditions

Recommendations and Suggestions to AMCS:

1) Brand building:

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: LIC
Nomura Balanced -Growth 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

75
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.

The Ground rules of Mutual Fund Investing

Assess yourself

1) Try to understand where the money is going

2) Don't rush in picking funds, think first

3) Invest. Don‟t speculate

4) Don‟t put all the eggs in one basket

5) Be regular

6) Do your homework

7) Find the right funds

8) Keep track of your investments

9) Know when to sell your mutual funds

76
CONCLUSIONS

 From the study analysis conducted it is clear that in EQUITY FUNDS- SBI
MUTUAL FUND is performing very well.
 Investing in Indiabulls blue chip fund-Growth will leads to profits.
 By seeing the overall performance SBI MUTUAL 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.
 Mutual funds can also perctrate in to rural areas.

77
 BIBILIOGRAPHY

BOOKS

1. Mutual Funds: The Money Multiplier by Lalitha Thamaraipandy Published in the

year of 12 May 2017.

2. Guide to Indian Mutual Fund written by Ankit Gala , Jitendra Gala Published by
Buzzingstock Publishing House; 2nd edition (2007)

3. Indian Mutual Funds Handbook Written by Sundar Sankaran published by Vision

Books; 5th edition (25 May 2018).

4. Common Sense on Mutual Funds Written by John C. Bogle Published by Wiley;

Updated 10th Anniversary edition (December 2, 2009)

WEBSITES

1. www.amfiindia.com
2. www.mnclgroup.com
3. www.bseindia.com
4. www.nseinda.com
5. www.bluechipinda.co.in

MAGAZINES

1. Business India
2. Business World

NEWS PAPERS

1. Economic Times
2. Business Standard.

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