INTRODUCTION

A mutual fund is a scheme in which several people invest their money for a common financial cause. The collected money invests in the capital market and the money, which they earned, is divided based on the number of units, which they hold. The mutual fund industry started in India in a small way with the UTI Act creating what was effectively a small savings division within the RBI. Over a period of 25 years this grew fairly successfully and gave investors a good return, and therefore in 1989, as the next logical step, public sector banks and financial institutions were allowed to float mutual funds and their success emboldened the government to allow the private sector to foray into this area. The advantages of mutual fund are professional management, diversification, and economies of scale, simplicity, and liquidity. The disadvantages of mutual fund are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return. The biggest problems with mutual funds are their costs and fees it include Purchase fee, Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs. There are some loads which add to the cost of mutual fund. Load is a type of commission depending on the type of funds. Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party. Before investing in any funds one should consider some factor like objective, risk, Fund Managers and scheme track record, Cost factor etc. A code of conduct and registration structure for mutual fund intermediaries, which were subsequently mandated by SEBI. In addition, this year AMFI was involved in a number of developments and enhancements to the regulatory framework.

NEED FOR THE STUDY

In India very little work has been done to investigate fund managers forecasting abilities. Active fund managers are expected to reward higher return. If the fund manager feels that market on the whole overvalued, then he would get out the market. Hence the present study has the objective of finding out the performance of mutual funds schemes in the frame work of risk and returns. The mutual fund industry is having a profound impact on financial markets while UTI has a dominant players on the courses as well as the debt markets. The new generations of private funds which have gained substantial mass are now seen flexing their muscles. Fund manager, by their selection criteria for stocks have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuations. A system of risk reward has been created where the corporate sector is more transparent then before. While the industry grew in leaps and bounds during the early 1980s mutual fund transactions processing remained a paper intensive, costly and manual process. Eventually, concerns began to surface over how the industry was to handle the surging volume of transactions and the increased risk exposure inherent in such a fast growth. As a result, automaton of transaction processing became necessary thereby increasing efficiency and accuracy by reducing manual processing.

OBJECTIVES OF THE STUDY

To understand the basic concepts of mutual funds and its benefits as an investment avenue. To understand the importance of mutual funds in investing money To analyze the performance of different mutual funds on the basis of various parameters To analyze the alternative investment options for investing money

To analyze the risk, return, volatility of mutual funds.

SCOPE OF THE STUDY

The study Performance of Mutual Funds covers Equity linked schemes of UTI gold

scheme, Reliance Gold scheme, Axis gold scheme, HDFC gold scheme in which share khan is a distributor and this study covers only open ended type schemes only and the study covers the period of past one year only i.e. 2012. Because of the non-availability of data is restricted my research to 1 Year.

METHODOLOGY FOR THE STUDY

Research can be defined as a systemized effort to gain new knowledge. A research is carried out by different methodologies which have their own pros and cons. Research methodology is a way to solve research in study and solving research problems along with logic behind them are defined through research methodology. Thus, while talking about research methodologies we are not only talking of research methods but also consider the logic behind the methods. Sampling: Random sampling is done for the study. Sample size: Four fund houses have been selected for the study.

DATA COLLECTION
The methodology followed for the collecting information are using two sources of data namely Primary data Secondary data

Primary data: the data collected first hand by the researcher concerned with the research problem refers to the primary data. Secondary data

The information available at various sources made for some other purpose but facilitating the study undertaken is called as secondary data.

TOOLS AND TECHNIQUES OF ANALYSIS

Below financial tools has been used for analyzing the data. Treynors Index model Sharpes Index model Jensens Index model

LIMITATIONS OF THE STUDY

The comparision of various schemes have been done on the basis of theoretical data only. This project report consists of four mutual funds under the scheme of growth gilt funds. The time for the study is limited to 45 days in which collection of data, analysis, conclusion and suggestions will be limited. Most of the information is from the secondary data only which may not be accurate. Study is limited to growth schemes only. This is the study conducted within short period. So, it may not be covering all the aspects in detail. This project analysis is restricted to performance measures.

REVIEW OF LITERATURE
WHAT IS A MUTUAL FUND
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.

DEFINITION OF A MUTUAL FUND

A mutual fund is a company that brings together money from many people and invests it in stocks, bonds or other assets. The combined holdings of stocks, bonds or other assets the fund owns are known as its portfolio. Each investor in the fund owns shares, which represent a part of these holdings.

MUTUAL FUND OPERATIONS

Figure 1

CONCEPT OF MUTUAL FUND

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 appreciation realised 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 funds.
6

CONCEPTUAL FRAME WORK

Figure 2

ORGANISATION OF MUTUAL FUND

Figure 3

HISTORY OF MUTUAL FUNDS

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

In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it reached the height of 1,540 bn. First Phase - 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase - 1987-1993 (Entry of Public Sector Funds) Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under management.
8

Third Phase - 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds. Fourth Phase - since February 2003 This phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as on January 2003). 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 AUM 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 September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT

Figure 4

10

MUTUAL FUND STRUCTURE

Figure5

UTI was the first mutual fund set up in India in the year 1963. In early 1990s government allowed public sector banks and institutions to set up mutual funds. In the year 1992 SEBI act was passed. The objectives of SEBI are To protect the interests of investors in securities and to promote the development of and to regulate the securities market. As far as mutual fund are concerned SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual fund in 1993. Thereafter mutual fund sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time to protect the interest of the investors. All mutual fund whether promoted by public sector entities including those promoted by foreign entities are governed by the same set of regulations. There is no distinction in
11

regulatory requirements for these mutual fund and all are subject to monitoring and inspection by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by the entities are of similar type. It may be mentioned here that UTI is not registered with SEBI as a mutual fund.

ADVANTAGES OF MUTUAL FUNDS

Professional management The primary advantage of funds (at least theoretically) is the professional management of your money. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is a relatively inexpensive way for a small investor to get a full-time manager to make and monitor investments. Diversification By owning shares in a mutual fund instead of owning individual stocks or bonds, your risk is spread out. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others. In other words, the more stocks and bonds you own, the less any one of them can hurt you (think about Enron). Large mutual funds typically own hundreds of different stocks in many different industries. It wouldn't be possible for an investor to build this kind of a portfolio with a small amount of money. Liquidity An investor may not be able to sell some of the shares held by him very easily and quickly, where as units of mutual funds are far more liquid. Convenience With most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be accomplished conveniently by telephone, by mail, or online. Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying, and selling securities, an investor will still need to evaluate a mutual fund based on

12

investment goals and risk tolerance before making a purchase decision. Investors should always read the prospectus carefully before investing in any mutual fund. Low cost Due to economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. The benefits are passed on to the investors.

Transparency Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to investors as required by the regulator. Flexibility Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Economies of Scale Because a mutual fund buys and sells large amounts of securities at a time, its transaction costs are lower than you as an individual would pay. Affordability The Mutual funds are available in units. Hence they are highly affordable and due to the very large principal sum, even the small investors are benefited by the investment scheme. Safety Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

13

DISADVANTAGES OF MUTUAL FUNDS No Guarantees The value of your mutual fund investment, unlike a bank deposit, could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time. Taxes When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, a capital-gain tax is triggered, which affects how profitable the individual is from the sale. It might have been more advantageous for the individual to defer the capital gains liability. Costs Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject. Dilution It's possible to have too much diversification (this is explained in our article entitled "Are You Over-Diversified?"). Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money
14

pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

RISKS

Figure 6

DIFFERENT TYPES OF MUTUAL FUND

15

Figure 7

BY STRUCTURE

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

Close - Ended Schemes:

These schemes have a pre-specified maturity period. One can invest directly in the scheme at the time of the initial issue. Depending on the structure of the scheme there are two exit options available to an investor after the initial offer period closes. Investors can transact (buy or sell) the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchanges could vary from the net asset value (NAV) of the scheme on account of demand and supply situation, expectations of unit holder and other market factors. Alternatively some close-ended schemes provide an additional option of selling the units directly to the Mutual Fund through periodic repurchase at the schemes
16

NAV; however one cannot buy units and can only sell units during the liquidity window. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor.

Interval scheme:

Interval Schemes are that scheme, which combines the features of open-ended and closeended schemes. The units may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV related prices. BY INVESTMENT OBJECTIVE

Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to provide capital appreciation over medium to long term. These schemes normally invest a major part of their fund in equities and are willing to bear short-term decline in value for possible future appreciation.

Income Schemes:

Income Schemes are also known as debt schemes. The aim of these schemes is to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. OTHERS
17

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.

Index Schemes:

Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index. The percentage of each stock to the total holding will be identical to the stocks index weight age. And hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. BROAD CLASSIFICATION OF MUTUAL FUNDS

18

Figure 8

Equity Funds
19

Equity funds are considered to be the more risky funds as compared to other fund types, but they also provide higher returns than other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3 years or more. There are different types of equity funds each falling into different risk bracket.

Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investment, thus making money market / liquid funds the safest investment option when compared with other mutual fund types. However, even money market / liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by banks).

Hybrid Funds

As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debts and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio.

Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors (like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of "Investment Grade". Debt funds that target high returns are more risky.

20

Gilt Funds

Also known as Government Securities in India, Gilt Funds invest in government papers (named dated securities) having medium to long term maturity period. Issued by the Government of India, these investments have little credit risk (risk of default) and provide safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction.

Commodity Funds

Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds.

Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation.

Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index linked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad.

21

Fund of Funds

Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non financial assets. Fund of Funds provide investors with an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. However, the expenses of Fund of Funds are quite high on account of compounding expenses of investments into different mutual fund schemes.

22

SNAPSHOT OF MUTUAL FUND SCHEMES

Table-1
Mutual Fund Type Objective Risk Investment Portfolio Who should invest Those who park their funds in current accounts or short-term bank deposits Investment horizon

Money Market

Liquidity + Moderate Income + Reservation of Capital

Negligible

Treasury Bills, Certificate of Deposits, Commercial Papers, Call Money

2 days - 3 weeks

Short-term Funds (Floating short-term) Bond Funds

Liquidity + Moderate Income

Little Interest Rate

Call Money, Commercial Papers, Treasury Bills, CDs, Short-term Government securities. Predominantly Debentures, Government securities, Corporate Bonds

Those with surplus short-term funds

3 weeks 3 months

Regular Income (Floating Long-term) Gilt Funds Security & Income

Credit Risk & Interest Rate Risk

Salaried & conservative investors Salaried & conservative investors Aggressive investors with long term out look.

More than 9 - 12 months

Interest Rate Risk

Government securities

12 months & more

Equity Funds

Long-term Capital Appreciation

High Risk

Stocks

3 years plus

Index Funds

To generate returns that are commensurate with returns of respective indices

NAV varies with index performance

Portfolio indices like BSE, NIFTY etc

Aggressive investors.

3 years plus

Balanced Funds

Growth & Regular Income

Capital Market Risk and Interest Rate Risk

Balanced ratio of equity and debt funds to ensure higher returns at lower risk

Moderate & Aggressive

years plus

23

MUTUAL FUNDS IN INDIA

The year 1993 was a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public sector. This year marked the entry of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual funds. From then on, the graph of mutual fund players has been on the rise with many foreign mutual funds also setting up funds in India. The industry has also witnessed several mergers and acquisitions proving it advantageous to the Indian investors Are mutual funds emerging as preferred investment option? Are they safe and will your money be secured with them? Before proceeding to answer these questions, a look at the February 2006, Indian bull market scenario is worth a mention. For the first time ever, stock market indices in India are at a record high. The Bombay Stock Exchange closed above the 10,000-mark for the first time ever, an ecstatic event in the history of the Stock exchange. Market savvy Indian investors have been busy transacting across sectors such as banking automobile, sugar, consumer durable, fast moving consumer goods (FMCG) and pharmaceutical scripts. And, the Union Finance Minister, Mr.P.Chidambaram, has responded positively and advised investors to take informed decisions or invest through mutual funds. Mutual funds are not considered any more as obscure investment opportunities. The mutual funds assets have registered an annual growth rate of 9% over the past 5 years. Considering the current trend and the relative positive response of the Indian economy, a much bigger jump is on the anvil.

24

MAJOR PLAYERS OF MUTUAL FUNDS IN INDIA

25

HOW TO INVEST IN MUTUAL FUNDS

Identify your Investment needs: Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements. Choose the right Mutual Fund: The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications. Select the ideal mix of Schemes: Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. Invest regularly:
26

The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.

Start early: It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return. The final step: All you need to do now is to Click here for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking.

INVESTMENT STRATEGIES
Systematic Investment Plan: Under this a fixed sum is invested each month on a fixed date of a month. Payment is made through post dated cheques or direct debit facilities. The investor gets fewer units when the NAV is high and more units when the NAV is low. This is called as the benefit of Rupee Cost Averaging (RCA) Systematic Transfer Plan: Under this an investor invest in debt oriented fund and give instructions to transfer a fixed sum, at a fixed interval, to an equity scheme of the same mutual fund.
27

Systematic Withdrawal Plan: If someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.

RIGHTS OF A MUTUAL FUND UNIT HOLDER

Receive unit certificates or statements of accounts confirming the title within

6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund.

Receive information about the investment policies, investment objectives, Receive dividend within 42 days of their declaration and receive the

financial position and general affairs of the scheme. redemption or repurchase proceeds within 10 days from the date of redemption or repurchase. holder.

Approve or disapprove any change in the fundamental investment policies of

the scheme, which are likely to modify the scheme or affect the interest of the unit Change the Asset Management Company. The dissenting unit holder has a right to redeem the investment or can wind

up the scheme.

MUTUAL FUND A GLOBAL INSTRUMENT

All investments whether in shares, debentures or deposits involve risk. Share value may go down depending upon the performance of the company, the industry, state of capital markets and the economy. Generally however, longer the term lesser the risk. Companies may default in payment of interest and principal on their debentures/bonds/deposits. While risk cannot be eliminated, skillful management can minimize risk. Mutual Funds help to

28

reduce risk through diversification and professional management. The experience and expertise of Mutual Fund managers in selecting fundamentally sound securities and timing their purchases and sales help them to build a diversified portfolio that minimizes risk and maximizes returns. Worldwide, the Mutual Fund, or Unit Trust as it is called in some parts of the world, has almost overtaken bank deposits and total assets of insurance funds. As of date, in the US alone there are over 5,000 Mutual Funds with total assets of over US $ 3 trillion (Rs.l00 lakh crores). In India there are 38 Mutual Funds and over 300 schemes with total assets of approximately Rs. 100,000 crores. All mutual funds in India are regulated by the Securities and Exchange Board of India (SEBI).

TAX BENEFITS ON MUTUAL FUNDS

Since, April 1, 2003, all dividends declared by debt-based mutual funds are tax-free in the hands of the investor. A dividend distribution tax of 15% is be paid by the mutual fund on the dividends declared by the fund. Section 2(EA): No. Units held under the Scheme of the Fund are not treated as assets within the meaning of Section 2(EA) of the Wealth Tax Act, 1957 and are, therefore, not liable to Wealth Tax. Section 2(42A): Under Section 2(42A) of the Act, a unit of a mutual fund is treated as short-term capital asset if the same is held for less than 12 months. The units held for more than 12 months are treated as long-term capital asset. Section 10(23D): Under provisions of Section 10(23D) of the Act, any income received by the Mutual Fund is exempt from tax. Section 10(38): Under Section 10(38) of the Act, long-term capital gains arising from transfer of a unit of mutual fund is exempt from tax if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid to the appropriate authority. Section 88: Under Section 88, contributions made from taxable income in the specified investments qualifies for a tax rebate of 20% where gross total income is up to Rs 150,000 and 15% of the invested amount where gross total income is

29

between Rs 150,000 and Rs 500,000, subject to a maximum aggregated ceiling of Rs 70,000. Section 111A: Under Section 111A of the Act, short-term capital gains arising from transfer of a unit of mutual fund is chargeable to tax @ 10% (plus applicable surcharge) if the said transaction is undertaken after October 1, 2004 and the securities transaction tax is paid. However, such securities transaction allowed as rebate under Section 88E of the Act if the transaction business income. Section 112: Under Section 112 of the Act, capital gains, not covered by the exemption under Section 10(38), chargeable on transfer of long-term capital assets are subject to following rates of tax: Resident Individual & HUF --- 20% plus surcharge. Partnership Firms & Indian Companies --- 20% plus surcharge. Foreign Companies --- 20% (no surcharge). 'Units' are included in the proviso to the sub-section (1) to Section 112 of the Act and hence unit holders can opt for being taxed at 10% (plus applicable surcharge) without the cost inflation index benefit or 20% (plus applicable surcharge) with the cost inflation index benefit whichever is beneficial. Section 115AB: Under Section 115AB of the Income Tax Act, 1961, long-term capital gains in respect of units purchased in foreign currency by an overseas financial organization held for a period of more than 12 months will be chargeable at the rate of 10%. Such gains will be calculated without indexation of cost of acquisition. No surcharge is applicable for taxes under section 115AB, in respect of corporates. Section 115E: Under Section 115E of the Act, capital gains chargeable on transfer of long-term capital assets of an Non-Resident Indians (NRIs) are subject to following rates of tax: Investment income: --- 20% Long term capital gains: --- 10% tax will be constitutes

30

 Section 115R: Under Section 115R, the Income distributed to a unit holder of a Mutual Fund shall be charged to following rates of tax to be payable by the Mutual Fund. Amounts distributed to individual or HUF: 12.5%. Amounts distributed to others: 20.0%. However, the above distribution tax will be exempted for open-ended EquityOriented Funds. (Funds investing more than 50% in equity or equity related instruments). For investment in infrastructure bonds and/or equity-linked saving schemes (ELSS) (not exceeding Rs 10,000/- under clause (23D) of Section 10), or eligible issue of equity shares or debentures the maximum qualifying investment limit for tax rebate is Rs 100,000. However, such tax rebate is not available in respect of tax on longterm capital gains as per Section 112 and short-term capital gains as per Section 111A of the Act. No. Units of the mutual fund may be given as a gift and no gift tax will be payable either by the donor or the donee; since mutual funds do not fall within the purview of the Gift Tax Act. The capital gain, which is not exempt from tax as explained above, can be invested in the specified asset mentioned below within 6 months of the sale.

REGULATION ON THE INVESTEMENT OF A MUTUAL FUND

The investments of a mutual fund are subject to a set of regulations prescribed by SEBI. Presently the following restrictions apply: No term loan shall be granted by a mutual fund scheme. A mutual fund, under all its schemes taken together, will not own more than 10 percent of any companys paid up capital carrying voting rights. A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that the aggregate inter-scheme investments made by all the schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5 percent of the net asset value of the mutual fund.
31

 Transfers of investments from one scheme to another scheme of a mutual fund are permitted provided that :

Such transfers are done at the prevailing market price for quoted instruments on spot basis. The securities so transferred shall be in conformity with the investments objective of the scheme to which such transfer has been made. The registration and accounting of the transaction is completed and ratified in the next meeting of the Board of Trustees, of the regulations so require. A mutual fund may borrow to meet liquidity needs, for the purpose of repurchase, redemption of units, or payment of interest or dividend to the unit holders. Such borrowing shall not exceed 20 percent of the net assets of the scheme and the duration of the borrowing shall not exceed 6 months. The fund may borrow from permissible entities at prevailing market rates and may offer the assets if the scheme as collateral for such borrowings. A scheme shall not invest more than 15 percent of its NAV in debt instruments issued by a single issuer which are rates not below investment grade by an authorized credit rating agency. Such investment limit may be extended to 20 percent of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of Asset Management Company. This limit, however, is not applicable for investments in government securities and money market instruments. A scheme shall not invest more than 10 percent of its NAV in unrated debt instruments issued by a single issuer and the total investment on such instruments shall not exceed 25 percent of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of Asset Management Company. A mutual fund will buy and sell securities on the basis of deliveries. It cannot make short sales or engage in carry forward transactions. A mutual fund can enter into derivatives transactions on a recognized stock exchange for purposes of hedging and portfolio balancing in accordance with SEBI guidelines.
32

 A scheme shall not make any investment in any unlisted security of an

associate or group company of the sponsor or any security issued by way of private placement by an associate or group company of the sponsor or

The listed securities of group companies of the sponsor in excess of 25

percent of the net assets. The investment manager may invest in a scheme from time to time. The percentage of such investments to the total net assets may vary from time to time and can be upto 100 percent of the net assets of the scheme. However, the investment manager shall not chare any fees on its investments in the scheme. A scheme shall not invest more than 10 percent of its NAV in the equity shares or equity related instruments of any one company. In sector specific funds, the investment on single scrip shall not exceed the weightage of the scrip in the representative Sectoral index / sub-index if any, or 10 percent of the NAV of the scheme whichever is higher. This limit, however, will not apply to index funds because on that case the exposure to a companys stock would depend on the weightage of the stock on the benchmark index. A scheme invests in ADRs /GDRs of Indian companies listed on overseas stock exchanges to the extent and in a manner approved by RBI. The fund will employ necessary measures to manage foreign exchange movements arising out of such investments. A scheme shall not invest more than 5 percent of its NAV in unlisted equity shares or equity related instruments in case of an open ended scheme and 10 percent of its NAV in case of a close ended scheme. A fund of fund scheme shall be subject to the following restrictions

It shall not invest in the schemes of any other fund. It shall not invest in assets other than in the schemes of the mutual funds except repurchase or redemption. to

the extent of funds required for meeting the liquidity requirements for the purpose of

33

 Traded securities have to valued at the last quoted closing price on the

exchange where the security is principally traded. Non- traded securities shall be valued in good faith by the AMC on the basis of appropriate valuation methods. For the purpose of the financial statements, mutual funds shall mark all investments to market and carry investments in balance sheet at marked value. However, since the unrealized gain arising out of appreciation in investments cannot be distributed, provision has to be made for the exclusion of this item when arriving at distributable income.

CODE OF CONDUCT
Mutual fund schemes should not be organized. Managed or the portfolio of securities selected, in the interest of sponsors, directors of asset management companies , members of Board of trustee company, associated persons in the interest of special class of unit holders rather than in the interest if all classes of unit holders of the schemes.
Trustees and asset management companies must ensure the dissemination to all unit

holders of adequate, accurate, explicit and timely information fairly presented in a simple language about the investment policies, investment objectives, financial position and general affairs if the scheme.

34

 Trustees and asset management companies should avoid excessive concentration of business with broking firms, affiliates and also excessive holding of units in a scheme among a few investors. Trustees and asset management companies must avoid conflicts if interest in Trustees and asset management companies must n managing the affairs if the schemes and keep the interest if all unit holders paramount in all matters. Trustees and asset management companies must ensure scheme wise segregation of [bank accounts] and securities accounts. Trustees and asset management companies shall carry out the business and invest in accordance with the investment objectives stated in the offer documents and take investment decision solely in the interest of unit holders. Trustees and asset management companies must not use any unethical means to sell; market or induce any investor to buy their schemes. Trustees and asset management companies shall maintain high standards of integrity and fairness in all their dealings and in the conduct if their business.
Trustees and asset management companies shall render at all times high standards of

service, exercise due diligence, ensure proper care and exercise independent professional judgment.

COMPANY PROFILE OVERVIEW

The Group is a world-leading provider of premium global business information, delivering independent data, analysis and opinion across the Automotive, Consumer Markets, Energy & Utilities, Financial Services, Logistics & Express, Pharmaceutical & Healthcare, Retail,
35

Technology,

Sourcing

and

Telecoms

industries.

Combining our industry knowledge and experience, we assist over 6000 of the worlds leading companies in making better strategic and operational decisions.

Delivered online via our user-friendly web platforms, our market intelligence products and services ensure that you will achieve your desired commercial goals by giving you the insight you need to best respond to your competitive environment.

WHO WE ARE
The Datamonitor Group is an independent, premium business information and market analysis company that assists clients with operational and strategic decision-making. The Datamonitor Group is a world-leading provider of premium global business information, delivering independent data, analysis and opinion across the Automotive, Consumer Packaged Goods, Energy & Sustainability, Financial Services, Logistics & Express, Pharmaceutical & Healthcare and Retail industries. Combining our industry knowledge and experience, we assist over 6000 of the world leading companies in making better strategic and operational decisions. Delivered online via our user-friendly web platforms, our market intelligence products and services ensure that you will achieve your desired commercial goals by giving you the insight you need to best respond to your competitive environment.

WHAT WE DO
The Datamonitor Groups research and analysis products are compiled by an extensive global network of researchers, in-house analysts and industry specialists. We have established a strong reputation for providing clients with the information they need to make better business decisions in their competitive environments. We collect our own data through an extensive global network using audited methodologies. Our highly qualified teams of analysts draw on their collective industry experience to deliver analysis, comment, opinion and advice on the latest market trends and conditions.

36

Widely respected by the global business media, our analysts are frequently quoted in leading and influential publications.

OUR BRANDS
The Datamonitor Group is an independent, premium business information and market analysis company that assists clients with operational and strategic decision-making. The Datamonitor Group is made up of a number of brands that work together, complementing each other, and ultimately strengthening our offering to our clients. These industry-leading companies have added to Datamonitors organic growth, creating valuable synergies within the group, and ultimately helping our clients achieve their desired goals.

Datamonitor is a world-leading provider of premium global business information, delivering independent data, analysis and opinion across the Automotive, Consumer Packaged Goods, Energy & Sustainability, Financial Services, Logistics & Express, Pharmaceutical & Healthcare and Technology industries.

Verdict Research is the leading authority on UK and European retail markets. Verdicts research publications, consultancy services and news bulletins offer unparalleled analysis on a large variety of retail sectors, issues, geographies and demographics.

eBenchmarkers evaluates the performance, usability, and efficiency of direct-to-consumer financial services, and guides senior management to opportunities for improvement.
37

Orbys is the most successful outsourcing advisor in Europe and continues to help UK and international organizations to evaluate and implement the most appropriate sourcing options for competitive advantage and risk avoidance.

Pack-Track is a team of global packaging specialists that search the world's supermarkets for consumer packaging innovation. Pack-Track provides an invaluable service to the worlds leading FMCG category, brand and innovation specialists through a specialist packaging website, global packaging trend reports and inhouse innovation and ideation workshops.

38

DATA ANALYSIS AND INTERPRETITION PERFORMANCE MEASURE OF MUTUAL FUNDS

BETA:
Beta is a fairly commonly used Measure of Risk. It basically indicates the Level of volatility associated with the Fund as compared to the Benchmark A beta that is greater than one means that the fund is more volatile than the benchmark, while a beta of less than one means that the fund is less volatile than the index. A fund with a beta very close to 1 means the fund's performance closely matches the index or benchmark. The beta is calculated as:

ALPHA:
Alpha is the difference between the returns one would expect from a fund, given its beta, and the return it actually produces. An alpha of -1.0 means the fund produced a return 1% higher than its beta would predict. An alpha of 1.0 means the fund produced a return 1% lower. If a fund returns more than its beta then it has a positive alpha and if it returns less then it has a negative alpha.

39

 STANDARD DEVIATION:
The most basic of all measures- Standard Deviation allows you to evaluate the volatility of the fund. Put differently it allows you to measure the consistency of the returns. Volatility is often a direct indicator of the risks taken by the fund. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return, the average return of a fund over a period of time. The Standard Deviation is calculated as:

=
Where X=Returns = Mean n = no of values = sum of the values

RISK FREE RATE:

The theoretical Rate of Return attributed to an investment with Zero Risk. The RiskFree Rate represents the Interest on an Investor's Money that he or she would expect from an absolutely Risk-Free Investment over a specified period of time.

40

TREYNORS MEASURE:

A Ratio developed by Jack Treynor that measures Returns earned in excess of that which could have been earned on a risk less investment per each unit of market risk. The Treynors measure is calculated as:

=
Where = Return on investment = Risk free returns = beta of a portfolio

SHARPES MEASURE:

A Ratio developed by Nobel Laureate William F. Sharpe to measure Risk-adjusted Performance. It is calculated by subtracting the Risk-Free Rate from the Rate of Return for a portfolio and dividing the result by the Standard deviation of the portfolio returns. The Sharpes measure is Calculated as:

=
Where = Expected portfolio return Risk free returns = Portfolio standard devation

41

JENSEN MEASURE:

A Risk-adjusted Performance Measure that represents the Average Return on a portfolio over and above that predicted by the Capital Asset Pricing Model (CAPM), given the portfolio's beta and the average market return. This is the portfolio's alpha. In fact, the concept is sometimes referred to as "Jensen's alpha."

=
Where Expected total portfolio return Risk free rate Expected market return = Beta of the portfolio

LIST OF GROWTH FUNDS TAKEN FOR COMPARISION

UTI mutual funds Kota mutual funds HDFC mutual funds BIRLA SUN LIFE

42

CALCULATION OF TREYNORS, SHARPES AND JENSENS RATIOS 1. UTI MUTUAL FUNDS

TABLE-2 SCHEME: UTI OPPORTUNITIES FUND(G)
MONTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CNX 5069.7 5273.1 5200.1 5 5143.3 5 4823.4 5 5159.1 5 5112.2 5 5126.3 5583.7 5 5503.2 5786.1 5 5847.5 NAV 27.33 28.53 28.61 28.19 26.7 28.45 28.23 28.4 30.73 30.64 32.03 32.15 ROR(X) 0 4.01 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 ROR(Y) 0 4.39 0.28 -1.47 -5.29 6.55 -0.77 0.60 8.20 -0.29 4.54 0.37 XY 0 17.62 -0.39 1.60 32.87 45.62 0.70 0.17 73.21 0.42 23.32 0.40 X 0 16.10 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 Y 0 19.28 0.08 2.16 27.94 42.96 0.60 0.36 67.31 0.09 20.58 0.14 R(X) 0 2.73 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 R(Y) 0 2.96 0.28 -1.47 -5.29 6.55 -0.77 0.60 8.20 -0.29 4.54 0.37 R(X) 0 7.48 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 R(Y) 0 8.78 0.08 2.16 27.94 42.96 0.60 0.36 67.31 0.09 20.58 0.14

TOTAL AVG

15.33 1.28

17.12 1.43

195.5 5 16.30

216.5 0 18.04

181.4 9 15.12

14.05 1.17

15.70 1.31

207.8 8 17.32

170.99 14.25

Interpretation: The funds highest NAV is in the month of December i.e, 32.15. The average returns of the fund is higher than that of the average market returns which indicates that the fund is performing well as compared to the market. The funds standard deviation of 3.77 indicates the amount of risk involved in investing in the fund.

43

ANALYSIS:
TABLE-3 UTI MUTUAL FUND Treynors MKT ROR AVG ROR RFR S.D Beta Sharpes Jensens

1.28 1.43 0.08 3.7 7

1.1 1 1.22 0.36 0.02

Figure-9

Interpretations:

44

In the above graph for UTI Mutual Funds, I have calculated Treynor, Sharpe and Jensen methods to measure the performance of the funds.

In this graph Treynor has given 1.22, Sharpe 0.36 and Jensen 0.02. From this Jensen has given less performance comparing with other two methods.

(AVG. ROR = Average rate of return, RFR = Risk Free Rate, S.D = Standard Deviation, = Market return, = Beta of the portfolio.)

2.KOTAK MUTUAL FUNDS

TABLE-4 SCHEME: KOTAK SELECT FOCUS FUNDS(G)
MONTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CNX 5069.7 5273.1 5200.15 5143.35 4823.45 5159.15 5112.25 5126.3 5583.75 5503.2 5786.15 5847.5 NAV 10.86 11.23 11.20 11.18 10.56 11.35 11.35 11.39 12.33 12.26 12.83 13.25 ROR(X) 0 4.01 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 ROR(Y) 0 3.45 -0.24 -0.23 -5.52 7.42 0.01 0.41 8.22 -0.56 4.62 3.27 XY 0 13.86 0.33 0.25 34.33 51.67 -0.01 0.11 73.32 0.81 23.74 3.47 X 0 16.10 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 Y 0 11.93 0.06 0.05 30.47 55.11 0.00 0.16 67.51 0.31 21.32 10.72 R(X) 0 2.73 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 R(Y) 0 1.72 -0.24 -0.23 -5.52 7.42 0.01 0.41 8.22 -0.56 4.62 3.27 R(X) 0 7.48 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 R(Y) 0 2.95 0.06 0.05 30.47 55.11 0.00 0.16 67.51 0.31 21.32 10.72

TOTAL AVG

15.33 1.28

20.85 1.74

201.88 16.82

216.50 18.04

197.65 16.47

14.05 1.17

19.11 1.59

207.88 17.32

188.66 15.72

Interpretation:

45

 The funds highest NAV is in the month of December i.e, 13.25.

The average returns of the fund is higher than that of the average market returns

which indicates that the fund is performing well as compared to the market. The funds standard deviation of 3.96 indicates the amount of risk involved in investing in the fund.

ANALYSIS:
TABLE-5 KOTAK MUTUAL FUND Treynors MKT ROR AVG ROR RFR S.D Beta Sharpes Jensens

1.28 1.74 0.08 3.9 6

1.0 9 1.52 0.42 0.35

46

Figure-10

Interpretations:
In the above graph for Kotak Mutual Funds, I have calculated Treynor, Sharpe and Jensen methods to measure the performance of the funds. In this graph Treynor has given 1.52, Sharpe 0.42 and Jensen 0.35. From this Jensen has given less performance comparing with other two methods.

(AVG. ROR = Average rate of return, RFR = Risk Free Rate, S.D = Standard Deviation, = Market return, = Beta of the portfolio.)

47

3.HDFC MUTUAL FUND

TABLE-6 SCHEME: HDFC GROWTH FUND(G)
MONTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CNX 5069.7 5273.1 5200.1 5 5143.3 5 4823.4 5 5159.1 5 5112.2 5 5126.3 5583.7 5 5503.2 5786.1 5 5847.5 NAV 82.26 86.24 85.45 83.67 79.13 84.00 82.86 83.47 90.74 89.51 92.50 93.85 ROR(X) 0 4.01 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 ROR(Y) 0 4.83 -0.92 -2.08 -5.42 6.15 -1.36 0.74 8.70 -1.35 3.34 1.46 XY 0 19.40 1.27 2.27 33.72 42.80 1.24 0.20 77.68 1.95 17.17 1.55 X 0 16.10 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 Y 0 23.37 0.85 4.32 29.39 37.83 1.86 0.55 75.77 1.83 11.15 2.14 R(X) 0 2.73 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 R(Y) 0 3.66 -0.92 -2.08 -5.42 6.15 -1.36 0.74 8.70 -1.35 3.34 1.46 R(X) 0 7.48 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 R(Y) 0 13.39 0.85 4.32 29.39 37.83 1.86 0.55 75.77 1.83 11.15 2.14

TOTAL AVG

15.33 1.28

14.10 1.17

199.2 6 16.60

216.5 0 18.04

189.0 7 15.76

14.05 1.17

12.92 1.08

207.8 8 17.32

179.09 14.92

Interpretation: The funds highest NAV is in the month of December i.e, 93.85.
The average returns of the fund is lower than that of the average market returns

which indicates that the fund is not performing well as compared to the market. The funds standard deviation of 3.86 indicates the amount of risk involved in investing in the fund.

48

ANALYSIS:
TABLE-7 HDFC MUTUAL FUNDS Treynors MKT ROR AVG ROR RFR S.D Beta Sharpes Jensens

1.28 1.17 0.08 3.8 6

1.0 5 1.04 0.28 -0.17

Figure-11

Interpretations:
In the above graph for HDFC Mutual Funds, I have calculated Treynor, Sharpe and Jensen methods to measure the performance of the funds.

49

In this graph Treynor has given 1.04, Sharpe 0.28 and Jensen -0.17. From this Jensen has given less performance comparing with other two methods.

(AVG. ROR = Average rate of return, RFR = Risk Free Rate, S.D = Standard Deviation, = Market return, = Beta of the portfolio.)

4. BIRLA SUNLIFE MUTUAL FUNDS

TABLE-8 SCHEME: BIRLA SUNLIFE FRONTLINE EQUITY FUND(G)
MONTHS JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC CNX 5069.7 5273.1 5200.15 5143.35 4823.45 5159.15 5112.25 5126.3 5583.75 5503.2 5786.15 5847.5 NAV 80.93 83.8 83.07 82.91 78.21 83.9 84.13 84.61 92.18 91.96 97.42 99.32 ROR(X) 0 4.01 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 ROR(Y) 0 3.55 -0.87 -0.19 -5.67 7.28 0.27 0.57 8.95 -0.24 5.94 1.95 XY 0 14.23 1.21 0.21 35.26 50.63 -0.25 0.16 79.84 0.34 30.53 2.07 X 0 16.10 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 Y 0 12.58 0.76 0.04 32.14 52.93 0.08 0.33 80.05 0.06 35.25 3.80 R(X) 0 2.73 -1.38 -1.09 -6.22 6.96 -0.91 0.27 8.92 -1.44 5.14 1.06 R(Y) 0 1.75 -0.87 -0.19 -5.67 7.28 0.27 0.57 8.95 -0.24 5.94 1.95 R(X) 0 7.48 1.91 1.19 38.68 48.44 0.83 0.08 79.63 2.08 26.44 1.12 R(Y) 0 3.07 0.76 0.04 32.14 52.93 0.08 0.33 80.05 0.06 35.25 3.80

TOTAL AVG

15.33 1.28

21.53 1.79

214.22 17.85

216.50 18.04

218.00 18.17

14.05 1.17

19.74 1.64

207.88 17.32

208.49 17.37

Interpretation: The funds highest NAV is in the month of December i.e, 99.32. The average returns of the fund is higher than that of the average market returns which indicates that the fund is performing well as compared to the market.
50

The funds standard deviation of 4.17 indicates the amount of risk involved in investing in the fund.

ANALYSIS:
TABLE-9 BIRLA SUN LIFE MUTUAL FUND Treynors MKT ROR AVG ROR RFR S.D Beta Sharpes Jensens

1.28 1.79 0.08 4.1 7

1.0 4 1.64 0.41 0.46

Figure-12

Interpretations:

51

In the above graph for Birla Sun Life Mutual Funds, I have calculated Treynor, Sharpe and Jensen methods to measure the performance of the funds.

In this graph Treynor has given 1.64, Sharpe 0.41 and Jensen 0.46. From this TABLE-10
NAME UTI KOTAK HDFC BIRLA SUN LIFE VALUE 1.22 1.52 1.04 1.64 RANKS III II IV I

Sharpe has given less performance comparing with other two methods. (AVG. ROR = Average rate of return, RFR = Risk Free Rate, S.D =

Standard Deviation,

= Market return, = Beta of the portfolio.)

PERFORMANCE COMPARISON OF MUTUAL FUNDS

RANKING OF MUTUAL FUNDS WITH TREYNORS MEASURE

52

Figure-13

Interpretation: In the above table for the comparision with treynors index measure, I took 4 mutual funds and ranked them according to their performance. From this treynor Birla sun life with 1.64 got first rank, Kotak with 1.52 got second rank, UTI with 1.22 got third rank, HDFC with 1.04 got fourth rank. The funds having low treynor measure value performs weakly and fund with high treynor measure performs comparitivley well.

The best performing and worst performing funds can be easily identified from the above table. We can say Birla sun life is best performing.

RANKING OF MUTUAL FUND WITH SHARPES MEASURE

53

TABLE-11
NAME UTI KOTAK HDFC BIRLA SUN LIFE VALUE 0.36 0.42 0.28 0.41 RANKS III I IV II

Figure-14

Interpretation:

In the above table for the comparision with Sharpes index measure, I took 4 mutual funds and ranked them according to their performance.

From this Sharpes Kotak with 0.42 got first rank, Birla sun life with 0.41 got second rank, UTI with 1.22 got third rank, HDFC with 1.04 got fourth rank.

The funds having low sharpes measure value performs weakly and fund with high Sharpes measure performs comparitivley well.
54

The best performing and worst performing funds can be easily identified from the above table. We can say Kotak is best performing. RANKING OF MUTUAL FUND

NAME UTI KOTAK HDFC BIRLA SUN LIFE

VALUE 0.02 0.35 -0.17 0.46

RANKS III II IV V

WITH JENSEN MEASURE

Figure-15 Interpretation:

In the above table for the comparision with Jensens index measure, I took 4 mutual funds and ranked them according to their performance.

From this Jensens Birla sun life with 0.46 got first rank, Kotak with 0.35 got second rank, UTI with 0.02 got third rank, HDFC with -0.17 got fourth rank.
55

The funds having low Jensens measure value performs weakly and fund with high Jensens measure performs comparitivley well.

The best performing and worst performing funds can be easily identified from the above table. We can say Birla sun life is best performing.

SUMMARY & CONCLUSIONS

FINDINGS

On an average, the returns of Birla sun life Mutual Fund is more when compared
with other Mutual Fund Schemes.

The fund having low Treynors Measure value performs weakly and the fund with high Treynors Measure performs comparatively well. The best-performing and worst-performing funds can be easily identified. From the Table-10, we can say that Birla Sun Life fund is best-performing when compared with other growth funds.

The fund having low Sharpes Measure value performs weakly and the fund
with high Sharpes Measure performs comparatively well. The best-performing and worst-performing funds can be easily identified. From the Table-11, we can say that Kotak fund is best-performing when compared with other growth funds.

The fund having low Jensens Measure value performs weakly and the fund
with high Jensens Measure performs comparatively well. The best-performing and worst-performing funds can be easily identified. From the Table-12, we can say that Birla Sun Life fund is best-performing when compared with other growth funds.
56

 Both Treynors Measured Value and Jensens Measured value proved that Birla
Sun Life Mutual Fund is the best growth fund when compared with other growth funds.

CONCLUSIONS:

A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. The advantages of mutual fund are professional management, diversification, economies of scale, simplicity and liquidity The disadvantages of mutual fund are high costs, over-diversification, possible tax consequences, and the inability of management to guarantee a superior return. There are many, many types of mutual funds. You can classify funds based on asset class, investing strategy, region, etc. Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the expense ratio) and transaction fees (loads). The biggest problems with mutual funds are their costs and fees. Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party. Mutual fund ads can be very deceiving.

57

58

SUGGESTIONS
The Mutual Funds performance is evaluated easily with the help of Treynors Index model, Sharpe Index model and Jensens Index model. The bestperforming and worst-performing funds can be easily identified. The fund having low TM/SM/JM value performs weakly and the fund with high TM/SM/JM performs comparatively well, it also shows their effectiveness. With a number of Mutual Fund schemes existing in the market, it is very difficult for an investor to choose the best among them. This paper provides a necessary and sufficient result to help to choose the best portfolio to get maximum return with minimum risk. Standard Deviation and Mean proves to be very useful statistical tools in order to reach valuable result. Without help of Average and Standard Deviation, one cannot apply Sharpe Index method. The selected funds for the study gave returns in synchronization with the markets. When there was boom in the stock markets, the funds gave positive returns a little more than what the market had given. During the recessionary phase, the markets declined steadily and so did the fund returns. Overall the fund returns and the market returns for the period of 12 months taken into consideration for the study. It is not only fund or Companys goodwill which can be taken into consideration while choosing a portfolio; the market factors like government policies, economics of scale and the trend in a particular sector should also be considered. Today investor is having enough funds to invest in a number of schemes. He is always in search of such statistical tools which can provide him maximum return with minimum risk. In this regard, Mutual Fund is the best choice. By this study, one can have a lot of findings regarding the performance of the funds in this portfolio.

59

BIBLIOGRAPHY

BOOKS & PAPERS

Black, Ken Business Statistics, Pg. 302-381 Cooper, Donald and Schindler, Pamela Business Research Methods, Pg.

494-526
De Roon, Frans Act A1(2000), Evaluating Style Analysis, Pg. 1-37 Lynch, Anthony, Does Mutual Fund Performance vary over the Business

Cycle? Pg. 1-21

WEBSITES
Association of Mutual Funds in India; http://www.amfiindia.com Business Maps of India, Mutual Fund Performance; http://business.mapsofindia.com Domain-b, Markets, Mutual Funds; http://domain-b.com Economic Times, Personal Finance, Mutual Fund_news; http://economictimes.com Sify, Business, Mutual Funds; http://sify.com/finance/mutualfunds Financial Chronicle, My Money, MFs; http://mydigitalfc.com I Trust, Mutual Funds; http://www.itrust.in IBN Live, Markets; http://www.ibnlive.in India Finance & Investment Guide, Mutual Funds; http://finance.indiamart.com
60

 India Funds Research, Mutual Funds; http://www.indiafunds.net Karvy, Mutual Funds, Article; http://www.karvy.com Money Control, Mutual Funds; http://www.moneycontrol.com Mutual Funds India; http://www.mutualfundsindia.com Myiris, Mutual Funds; http://www.myiris.com

JOURNALS
Indian Journal of Finance April,2011 The Economic Times
Business Standards

61