A Project Report on The Analysis and Comparative Study of SBI and HDFC Mutual Fund

“The Analysis and Comparative Study of SBI and HDFC Mutual Fund”

Index

Contents

sl.no Particulars Page no.

1 Executive summary 02-06

2 Industry analysis 07-08

3

Company analysis.

3.1) Way to Gain investment co.ltd.

3.2) HDFC MF.

3.3) .SBI MF

09-10

11-13

14-19

4 Introduction to the topic. 20

4.1) back ground

a. Mutual fund concept.

b. Schemes according to maturity period

c. Schemes according to investment objective

d. Benefits of mutual funds

e. History of mutual fund

20

20

20-21

21-24

25-27

27-32

4.2) important variables

a) risk measurements

b) return measurements

c) performance measures/ratio

d) related terms

33

33-36

37-39

40-40

41- 48

4.3) importance of the project 49

4.4) objectives 50-51

5 Analysis 52-67

6 Findings 68-69

Babasabpatilfreepptmba.com Page 1


7 Conclusions 70

8 Suggestions 71

9 Bibliography 72

1) Executive summary


Name of the Company, where the project is undertaken:

“WAY TO GAIN INVESTMENT CONSULTANCY (P) LTD”

P.B Road,

Opposite Canara bank,

Achyutha Complex, Dharwad.

a) Back ground of the project

Mutual fund is a very hot concept in two tier cities because these cities are

growing at a faster rate. And at the equal rate the standard of living also increasing,

people getting higher exposures in their jobs means they are getting higher salaries that’s

why they are now looking new investment opportunities. There for This project report is

written in such away that the reader of the project get clear understanding of concept i.e.

the mutual fund concept, types of mutual funds in India, explains the pros and cons of the

concept and the four phases of mutual fund industry in India.

b) Variables



In the project the risk, return and performance measurements are calculated for

making analysis and comparison of two mutual fund schemes. The calculations are done

in excel sheet then it is turned to word document the followings are the measures for the

risk and return calculations.

Risk measurements

Standard deviation.

Beta.

R squire.

Alpha.

c) Significance of the project

This project involves evaluating the performance of two mutual fund scheme.

States the advantages and disadvantages to invest in the mutual fund.

This project will helps the company (i.e. “way to gain”) to recommend the good

scheme in selected two mutual fund schemes.

In this project risk, return and performance measures are calculated, so that it will

be easy to recommend better scheme.

Main Objective:

“Evaluating the Performance of SBI and HDFC Mutual Fund Scheme”

Sub Objectives of the study:



Comprehensive study of mutual fund concept

Applying the various parameters to measure and evaluate the risk and the

respective returns of selected mutual fund schemes.

Recommending good mutual fund scheme to invest and earn more returns on

selected mutual fund schemes.

Methodology:

The study is generally exploratory in nature, as it studies the performances of two

mutual fund schemes based on the performance measures.

Methods of Performance measure/ratio;

Treynor measure/ratio

Sharpe measure/ratio

Jensen measure/ratio

Sources of Data:

The data (i.e. NAV) for the study has been downloaded from the internet (i.e.

websites of the mutual funds) and is converted to returns and used for the study which

formed the primary data for the study.

Research Tools:

The research has been done by using the following statistical techniques

Average

Standard Deviation

Variance



Co-variance

Correlation

Beta

Systematic and Unsystematic Risk measure

Measure of Alpha

Analysis and findings

In the analysis part I have calculated risk, return and performance measures of the

two schemes and the same is compared with each other.

1) Here between our chosen scheme Magnum Equity Fund-Growth is having higher

average return of 0.1234 as compare to that of HDFC Equity Fund-Growth which is

having only 0.09177 so it is obvious to conclude that Magnum Equity Fund-Growth is

on an average performing well in terms of Average Daily Returns.

2) In the above case the Magnum Equity Fund-Growth is having 1.998246472 as a

Standard deviation as compare to that of HDFC Equity Fund-Growth which is having

Standard Deviation of 1.714523761 so here we can conclude that Magnum Equity Fund-

Growth is having more fluctuation so there will be higher risk.

3) Here one more thing we can observe that both the scheme having perfect positive

correlation. But Magnum Equity Fund-Growth is having 0.938181407 which is more as

compare to that of HDFC Equity Fund-Growth which is having 0.874566887.

4) Variance of the Magnum Equity Fund-Growth is 4.096683202 and 3.459706829 is for

HDFC Equity Fund-Growth means HDFC Equity Fund-Growth is consistent compare to

the Magnum Equity Fund-Growth.



5) So it should be noted that HDFC Equity Fund-Growth having less risk and less return

as compare to Magnum Equity Fund-Growth which is having high risk and high return.

6) Performance ratios show the excess return of the schemes over and above risk free rate

of return and here we can see that Magnum Equity Fund-Growth is comparatively having

good excess return than the HDFC Equity Fund-Growth.

Conclusions:

In the conclusion part I have compared the two schemes with each other and suggested

that which schemes is having high risk compare to other scheme.

1) From the project report we can conclude that Magnum Equity Fund-Growth is having

high risk with high returns and also performing good compare to HDFC Equity Fund-

Growth

2) HDFC Equity Fund-Growth is having less risk and less return compare to Magnum

Equity Fund-Growth.



3) Here from the calculations we can conclude that the one may get approximately 30 to

35% returns from the Magnum Equity Fund-Growth. Where as investing in HDFC

Equity Fund-Growth he may get 24 to 28% returns.

4) At present both schemes are underperforming means not meeting the investor’s

expectations.

5) Magnum Equity Fund-Growth is more volatile than that of HDFC Equity Fund-

Growth.

Suggestions:

• Here I would like to suggest, the company i.e. Way to Gain also consider the risk

returns and performance measurements to its unit holder when they come to

investment into their company.

• From this project report it is clear that who wants to take higher risk and higher

return they can go for Magnum Equity Fund-Growth

• Who wants a less risk and less return they can invest in HDFC Equity Fund-

Growth

• Here I also suggest the company to make some awareness campaign because

many people who are interested in earnings through this investment companies

don’t know the concept only.



2) Industry analysis

Mutual fund industry today is a booming investment sector with more than 30

players. And these players bring plenty of schemes to there investor. Some of them

gained the trust of there investors, and still some gained the mutual fund awards from the

industry. Between these healthy competitions the investors are getting some good

investment schemes. However with a plethora of schemes to choose from, the investor

faces many problems that is he will get struck in thinking that should I take more risk or

should I invest in some other investment sector for ex. In Banking.

World wide good mutual companies over are known by their AMC’s and this

fame is directly linked to their superior stocks selection skill. For mutual fund to grow,

AMC’s must be held accountable for their selection of stocks. In other words there must

be some performance indicator that will reveal th equality of stock selection of various

AMC’s

We have seen that many of the mutual fund schemes are giving good returns to its

investors, here we should not assume that the good return giving schemes are better to

invest, because return alone should not be consider as the basis of measuring of the

performance of a mutual fund sachem. It should also include the risk taken by the fund

manager, because as we know that the fund manager invest the pooled fund into

securities in this securities there are many companies like large cap companies small cap

companies and mid cap companies while investing into these share market the fund

manager has to study the companies and invest, if he invest in high risk yielding

companies then there will be very risk in investing into such type of fund.



Risk associated with a fund, in a general, can be defined as variability or

fluctuations in the returns generated by it. The higher the fluctuation in the returns of a

fund during a given period, higher will be the risk associated with it. These fluctuations

in the returns generated by a fund are result of two guiding forces. First, general market

fluctuations, which affect all the securities, present in the market, called market risk or

systematic risk and second, fluctuations due to specific securities present In the portfolio

of the fund, called unsystematic risk.

The total risk of a given fund is sum of these two and is measured in terms of

standard deviation of returns of the fund. Systematic risk, on the other hand, is measured

in terms of BETA, which represents fluctuations in the NAV of the fund visa versa

market. Beta is calculated by relating the returns on a mutual fund with the returns in the

market. While unsystematic risk can be diversified through investments in a number of

instruments, by using risk return relationship, we try to assess the competitive strength of

the mutual funds visa versa one another in a better way.



3) Company Analysis

3.1 WAY TO GAIN

P.B. Road, Opp. Canara Bank,

Achuta Complex, Dharwad.

Brief History:

The company is founded by N.S. Kongi, Ishwar Yenagi and Ningappa Yenagi

with a share of 40%, 40% and 20% respectively. Company was established on April

2006.

It was Ishwar Yenagi at first who initiated this initiative to establish the company

with a dealership certificate of AMFI in hand. So he involved two more persons to build

this company i.e., N.S. Kongi, Ningappa Yenagi. So it is a collective effort from all the

three personalities to venture into this Way to Gain. The company is mainly dealing into

Mutual Funds of all AMC’s.

Organizational structure:



Service offered by the Company:

The company is mainly into Mutual Fund which forms the chunk of its revenue.

And as a subsidiary business they provide stock broking of equities. And this broking is

fraternized from Kotak Securities.


DIRECTORS

N.S. KONGI ISHWAR YENAGI NINGAPPA YENAGI

BACK OFFICERHEMA

MARKETING OFFICERShashidar

ASSISTANTABDUL

ASSISTANTMahantesh


Charges and Commissions:

As per SEBI regulations an AMFI qualified agents can charge upto 2% on the

investment into Mutual Fund. And usually this 2% is paid by AMC’s of the respective

Mutual Fund Companies.

Service Promotions:

Marketing and Promotional activities of the company are done by circulating

pamphlets and also through local News Paper advertisements.

Targeted Segment

The company and its operations are confined to the region of Hubli-Dharwad,

Haveri and Belgaum.

Sales and Profitability of the Company

Way to Gain is making approximately 30 lac revenue from sale of Mutual Funds

for every month.

Competitors

Way to gain is growing at a faster rate in the twine city but at the same time

facing many competitors like Karvey, geojit, SHCIL, HDFC bank, ICICI bank, and many

more.

In the next pages I have written introduction of the two selected AMC and

their respective other products.



3.2 HDFC Trustee Company Limited:

A company incorporated under the Companies Act, 1956 is the Trustee to

the Mutual Fund vides the Trust deed dated June 8, 2000, as amended from time to time.

HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

HDFC Asset Management Company Limited (AMC):

It was incorporated under the Companies Act, 1956, on December 10,

1999, and was approved to act as an Asset Management Company for the Mutual Fund

by SEBI on July 3, 2000. The registered office of the AMC is situated at Ramon House,

3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400

020. In terms of the Investment Management Agreement, the Trustee has appointed

HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up

capital of the AMC is Rs. 75.161 crore.

Products:

Open Ended

HDFC Arbitrage Fund

HDFC Balanced Fund

HDFC Capital Builder Fund

HDFC Cash Management Fund - Call Plan


http://www.indobase.com/markets/mtfi-india/hdfc-arbitrage-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-cash-management-fund--call-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-capital-builder-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-balanced-fund.php


HDFC Cash Management Fund - Savings Plan

HDFC Cash Management Fund - Savings Plus Plan

HDFC Children's Gift Fund Investment Plan

HDFC Children's Gift Fund Savings Plan

HDFC Core & Satellite Fund

HDFC Equity Fund

HDFC Floating Rate Income Fund Long Term Plan

HDFC Floating Rate Income Fund Short Term Plan

HDFC Gilt Fund Long Term Plan

HDFC Gilt Fund Short Term Plan

“HDFC Growth Fund”

HDFC High Interest Fund

HDFC High Interest Fund - Short Term Plan

HDFC Income Fund

HDFC Index Fund Nifty Plan

HDFC Index Fund SENSEX Plan

HDFC Index Fund SENSEX Plus Plan

HDFC Liquid Fund

HDFC Liquid Fund Premium Plan

HDFC Liquid Fund Premium Plus Plan

HDFC Long Term Advantage Fund

HDFC MF Monthly Income Plan - Long Term Plan

HDFC MF Monthly Income Plan - Short Term Plan

HDFC Multiple Yield Fund

HDFC Multiple Yield Fund Plan 2005


http://www.indobase.com/markets/mtfi-india/hdfc-multiple-yield-fund-plan-2005.php

http://www.indobase.com/markets/mtfi-india/hdfc-multiple-yield-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-mf-monthly-income-plan--short-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-mf-monthly-income-plan-long-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-long-term-advantage-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-liquid-fund-premium-plus-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-liquid-fund-premium-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-liquid-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-index-fund-sensex-plus-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-index-fund-sensex-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-index-fund-nifty-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-income-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-high-interest-fund-short-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-high-interest-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-growth-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-gilt-fund-short-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-gilt-fund-long-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-floating-rate-income-fund-short-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-floating-rate-income-fund-long-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-equity-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-core-and-satellite-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-childrens-gift-fund-savings-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-childrens-gift-fund-investment-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-cash-management-fund-savings-plus-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-cash-management-fund--savings-plan.php


HDFC Premier Multi Cap Fund

HDFC Prudence Fund

HDFC Short Term Plan

HDFC TaxSaver

HDFC Top 200 Fund

Close Ended

HDFC Long Term Equity Fund

HDFC Quarterly Interval Fund

Awards & Accolades:

The Annual CNBC – TV 18 – BNP Paribas Awards 2004.

The Outlook Money Awards 2004.

The CRISIL Best Fund Awards 2003.

The ICRA Online Mutual Fund Awards 2004.

Selected Scheme in HDFC Mutual Fund


Mutual Fund HDFC Mutual Fund

Scheme Name HDFC Equity Fund

Scheme Type Open Ended

Scheme Category Growth

http://www.indobase.com/markets/mtfi-india/hdfc-quarterly-interval-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-long-term-equity-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-top-200-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-taxsaver.php

http://www.indobase.com/markets/mtfi-india/hdfc-short-term-plan.php

http://www.indobase.com/markets/mtfi-india/hdfc-prudence-fund.php

http://www.indobase.com/markets/mtfi-india/hdfc-premier-multi-cap-fund.php


Minimum Investment;


Latest Net Asset Value

Scheme NAV

Name

Net Asset

Value

Repurchase

Price

Sale

Price Date

HDFC Equity

Fund-Growth

Plan 167.296 167.296 171.06 11-Apr-08

Latest Assets Under Management (AUM Rs in Lacs)

Scheme NAV Name

Average AUM

For The Month As At The End Of

HDFC Equity Fund-Growth

Plan 189583.2 Mar-08


For new investors: Rs.5000 and in multiples of Rs.100 thereafter

For existing investors: Rs. 1000 and in multiples of Rs. 100 thereafter

Entry Load:

For investments below Rs. 5 crores, Entry load is 2.25%.

For Investments of Rs. 5 crores and above, Entry Load is Nil.

Exit Load: Nil.

3.3 SBI MUTUAL FUND;

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an

enviable track record in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - India’s largest banking enterprise. The

institution has grown immensely since its inception and today it is India's largest bank,

patronized by over 80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and Society

General Asset Management, one of the world’s leading fund management companies that

manages over US$ 330 Billion worldwide.



In eighteen years of operation, the fund has launched thirty-two schemes and

successfully redeemed fifteen of them. In the process it has rewarded it’s investors

handsomely with consistently high returns.

A total of over 3.5 million investors have reposed their faith in the wealth

generation expertise of the Mutual Fund. Schemes of the Mutual fund have

consistently outperformed benchmark indices and have emerged as the preferred

investment for millions of investors and HNI’s.

Today, the fund manages over Rs. 16500 crores of assets and has a diverse

profile of investors actively parking their investments across 30 active schemes.

The fund serves this vast family of investors by reaching out to them

through network of 100 collection branches, 26 investor service centers, 28 investor

service desks and 52 districts organize.



SBI MUTUAL FUND PRODUCTS

Equity scheme

The investments of these schemes will predominantly be in the stock markets and

endeavor will be to provide investors the opportunity to benefit from the higher returns

which stock markets can provide. However they are also exposed to the volatility and

attendant risks of stock markets and hence should be chosen only by such investors who

have high risk taking capacities and are willing to think long term. Equity Funds include

diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds

invest in various stocks across different sectors while sectoral funds which are specialized

Equity Funds restrict their investments only to shares of a particular sector and hence, are

riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of

a particular index and the performance of such funds move with the movements of the

index.

Magnum COMMA Fund

Magnum Equity Fund-growth

Magnum Global Fund

Magnum Index Fund

Magnum MidCap Fund

Magnum Multicap Fund

Magnum Sector Funds Umbrella

MSFU - FMCG Fund

MSFU - Emerging Businesses Fund

MSFU - IT Fund

MSFU - Pharma Fund

MSFU - Contra Fund


http://www.sbimf.com/Product_Details.asp?ProductId=12





http://www.sbimf.com/Product_Details.asp?ProductId=5&catid=1







Magnum Multiplier Plus 1993

SBI Arbitrage Opportunities Fund

SBI Blue chip Fund

SBI Infrastructure Fund - Series I

SBI Magnum Tax gain Scheme 1993

SBI ONE India Fund

Selected Scheme in SBI Mutual Fund

Mutual Fund SBI Mutual Fund

Launch Date 29-Oct-93

Minimum Subscription Amount 1000

Objective of Scheme an open ended equity scheme, the objective of the

scheme is to provide the investor long-term capital

appreciation by investing in high growth

companies along with the liquidity of an open-

ended scheme through investments primarily in

equities and the balance in debt and money market

instruments.









Scheme Category Growth

Scheme Name Magnum Equity Fund – Growth

Scheme Type Open Ended

Latest Net Asset Value

Scheme NAV Name Net Asset Value Date

Magnum Equity Fund-

Growth 32.77 11-Apr-08

Latest Assets Under Management (AUM Rs in Lacs)

Scheme NAV Name Average AUM For The Month

Magnum Equity Fund- Growth 7243.69

DEBT FUNDS SCHEMES



Debt Funds invest only in debt instruments such as Corporate Bonds, Government

Securities and Money Market instruments either completely avoiding any investments in

the stock markets as in Income Funds or Gilt Funds or having a small exposure to

equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity

funds. At the same time the expected returns from debt funds would be lower. Such

investments are advisable for the risk-averse investor and as a part of the investment

portfolio for other investors.

Magnum Children’s Benefit Plan

Magnum Gilt Fund

Magnum Gilt Fund (Long Term)

Magnum Gilt Fund (Short Term)

Magnum Income Fund

Magnum Income Plus Fund

Magnum Income Plus Fund (Saving Plan)

Magnum Income Plus Fund (Investment Plan)

Magnum Insta Cash Fund

Magnum InstaCash Fund -Liquid Floater Plan

Magnum Institutional Income Fund

Magnum Monthly Income Plan

Magnum Monthly Income Plan Floater

Magnum NRI Investment Fund

SBI Debt Fund Series

SDFS 15 Months Fund

SDFS 90 Days Fund

SDFS 13 Months Fund

SDFS 18 Months Fund

SDFS 24 Months Fund

SDFS 60 Days Fund

SDFS 180 Days Fund

SBI Premier Liquid Fund























Balance funds scheme

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence

they are less risky than equity funds, but at the same time provide commensurately lower

returns. They provide a good investment opportunity to investors who do not wish to be

completely exposed to equity markets, but is looking for higher returns than those

provided by debt funds.

Magnum Balanced Fund

Magnum NRI Investment Fund Flexi Asset Plan

SBI Mutual FUNDS AWARDS

LIPPER AWARD

THE LIPPER INDIA FUND AWARDS 2008

ICRA

MUTUAL FUND AWARDS 2008





OUTLOOK MONEY

NDTV PROFIT AWARDS

LIPPER AWARDS

THE LIPPER INDIA FUNDS AWARDS 2007

CNBC TV18 – CRISIL

MUTUAL FUND OF THE YEAR AWARD 2007

CNBC



AWAZ CONSUMER AWARDS 2006

LIPPER AWARDS

THE LIPPER INDIA FUND AWARDS 2006

ICRA

MUTUAL FUND AWARDS 2005


4) Introduction to project

4.1 Background of the project topic

4.1.a Mutual Fund Concept

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 realized is shared by its unit

holders in proportion to the number of units owned by them. Thus a Mutual Fund is the

most suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost. The flow

chart below describes broadly the working of a mutual fund

4.1.b Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

Open-ended Fund/ Scheme:

An open-ended fund or scheme is one that is available for subscription and

repurchase on a continuous basis. These schemes do not have a fixed maturity period.

Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices

which are declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The

fund is open for subscription only during a specified period at the time of launch of the

scheme. Investors can invest in the scheme at the time of the initial public issue and

thereafter they can buy or sell the units of the scheme on the stock exchanges where the

units are listed. In order to provide an exit route to the investors, some close-ended funds

give an option of selling back the units to the mutual fund through periodic repurchase at

NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is

provided to the investor i.e. either repurchase facility or through listing on stock

exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

4.1.c Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended or close-

ended schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme:

The aim of growth funds is to provide capital appreciation over the medium to

long- term. Such schemes normally invest a major part of their corpus in equities. Such

funds have comparatively high risks. These schemes provide different options to the

investors like dividend option, capital appreciation, etc. and the investors may choose an

option depending on their preferences. The investors must indicate the option in the

application form. The mutual funds also allow the investors to change the options at a

later date. Growth schemes are good for investors having a long-term outlook

seeking appreciation over a period of time.

Income / Debt Oriented Scheme:

The aim of income funds is to provide regular and steady income to investors.

Such schemes generally invest in fixed income securities such as bonds, corporate

debentures, Government securities and money market instruments. Such funds are less

risky compared to equity schemes. These funds are not affected because of fluctuations in

equity markets. However, opportunities of capital appreciation are also limited in such

funds. The NAVs of such funds are affected because of change in interest rates in the

country. If the interest rates fall, NAVs of such funds are likely to increase in the short

run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such

schemes invest both in equities and fixed income securities in the proportion indicated in

their offer documents. These are appropriate for investors looking for moderate growth.

They generally invest 40-60% in equity and debt instruments. These funds are also

affected because of fluctuations in share prices in the stock markets. However, NAVs of

such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity,

preservation of capital and moderate income. These schemes invest exclusively in safer

short-term instruments such as treasury bills, certificates of deposit, commercial paper

and inter-bank call money, government securities, etc. Returns on these schemes fluctuate

much less compared to other funds. These funds are appropriate for corporate and

individual investors as a means to park their surplus funds for short periods.

Gilt Fund:

These funds invest exclusively in government securities. Government securities

have no default risk. NAVs of these schemes also fluctuate due to change in interest rates

and other economic factors as is the case with income or debt oriented schemes.

Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive

index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same

weightage comprising of an index. NAVs of such schemes would rise or fall in

accordance with the rise or fall in the index, though not exactly by the same percentage

due to some factors known as "tracking error" in technical terms. Necessary disclosures

in this regard are made in the offer document of the mutual fund scheme.

There are also exchange traded index funds launched by the mutual funds which are

traded on the stock exchanges.

Sector specific funds/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. They may also seek advice of an expert.

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the

Income Tax Act, 1961 as the Government offers tax incentives for investment in

specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes

launched by the mutual funds also offer tax benefits. These schemes are growth oriented

and invest pre-dominantly in equities. Their growth opportunities and risks associated are

like any equity-oriented scheme.

Fund of Funds ( FoF ) scheme:

A scheme that invests primarily in other schemes of the same mutual fund or

other mutual funds is known as a FoF scheme. An FoF scheme enables the investors to

achieve greater diversification through one scheme. It spreads risks across a greater

universe.

Load or no-load Fund:

A Load Fund is one that charges a percentage of NAV for entry or exit. That is,

each time one buys or sells units in the fund, a charge will be payable. This charge is used

by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is

Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would

be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual

fund will get only Rs.9.90 per unit. The investors should take the loads into consideration

while making investment as these affect their yields/returns. However, the investors

should also consider the performance track record and service standards of the mutual

fund which are more important. Efficient funds may give higher returns in spite of loads.

4.1.d Benefits of mutual funds

Affordability:

Investors individually may lack sufficient funds to invest in high grade stocks. A

mutual fund because of its large corpus allows even a small investor to take the benefits

of its investment strategy.

Convenient administration:

Investment in mutual fund reduces paper work and helps in avoiding many

problems such as bad deliveries, delayed payments and follow up with brokers and

companies. Mutual fund saves time and makes investing easy and convenient.

Diversification:

Mutual funds invest in number of companies across a broad cross- section of

industries and sectors. This diversification reduces the risk

because seldom do all stocks decline at the same time and in the same proportion. You

achieve this diversification through a mutual fund with far less money than you can do on

your own.

Flexibility:

Through features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans you can systematically invest or withdraw funds according

to your needs and convenience.

Liquidity:

In open-end schemes, the investor gets the money back promptly at net asset

value related prices from the mutual fund. In closed-end schemes the units can be sold on

a stock exchange at the prevailing market price or the investor can avail of the facility of

direct repurchase at NAV related prices by the mutual fund.

Low costs:

Mutual funds are a relatively less expensive way to invest capital markets because

the benefits of scale in brokerage, custodial and other fees transaction into lower costs for

investors

Professional management:

Mutual funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance and

prospects of companies and selects suitable investments to achieve the objectives of the

scheme.

Return potential:

Over a medium to long term mutual funds have the potential to provide a higher

return as they invest in a diversified basket of selected securities.

Choice of scheme:

Mutual funds offer a family of schemes to suit your varying needs over a lifetime.

Transparency

You get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion invested in

each class of assets and the fund managers investment strategy and outlook

Well regulated:

All mutual funds are registered with SEBI and they function within the

provisions of strict regulations designed to protect the interest of investors. The

operations of mutual funds are regularly monitored by SEBI.

4.1.e History of Mutual Fund Industry

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 dramatic improvements,

both quality wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry

to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it

reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it

is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by

the Indian banking industry. The main reason of its poor growth is that the mutual fund

industry in India is new in the country. Large sections of Indian investors are yet to be

intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund

companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development

of the sector. Each phase is briefly described as under.

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.

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.

Some facts for the growth of mutual funds in India

100% growth in the last 6 years.

Our saving rate is over 23%, highest in the world. Only chanalising these savings

in mutual funds sector is required.

We have approximately 29 mutual funds which is much less than US having more

than 800. There is a big scope for expansion.

'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are

concentrating on the 'A' class cities. Soon they will find scope in the growing

cities.

Mutual fund can penetrate rurals like the Indian insurance industry with simple

and limited products.

SEBI allowing the MF's to launch commodity mutual funds.

Emphasis on better corporate governance.

Trying to curb the late trading practices.

Introduction of Financial Planners who can provide need based advice.

CHART SHOWING FUNCTIONING OF MUTUAL FUNDS IN INDIA

Asset Management Company:

It is a company set up primarily for managing the investment of mutual funds and

makes investment decisions in accordance with the scheme objectives, deed of Trust and

other provisions of the Investment Management Agreement. For Tata Mutual Fund, Tata

Asset Management Limited is the Asset Management Company.

GROWTH IN ASSETS UNDER MANAGEMENT

SEBI Regulations:

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 or

such other SEBI (MF) Regulations as may be in force from time to time and would

include Circulars, Guidelines etc., unless specifically mentioned to the contrary.

4.2. Variables in the project topic

In the project the risk and return measurements are calculated for making

comparison between two sector funds the calculations are done in excel sheet then it is

turned to word document the followings are the measures for the risk and return

calculations.

4.2. A. Risk measurements

1) Standard deviation.

2) Beta.

3) R squire.

4) Alpha.

Standard deviation

The square root of the variance in a series. It shows how the data are spread out.

A measure of the dispersion of a set of data from its mean. The more spread apart the

data is, the higher the deviation.

In finance, standard deviation is applied to the annual rate of return of an

investment to measure the investment’s volatility (risk).

A volatile stock would have a high standard deviation. In mutual funds the

standard deviation tells us how much the return on the fund is deviating from the

expected normal returns. Standard deviation can also be calculated as the square root of

the variance. To determine how well a fund is maximizing the return received for its

volatility, you can compare the fund to another with a similar investment strategy and

similar returns. The fund with the lower standard deviation would. Be more optimal

because it is maximizing the return received for the amount of risk acquired

Formula for calculating standard deviation

BETA

Beta describes the relationship between the securities return and the index. A

measure of the volatility or systematic risk of a security or a portfolio in comparison to

the market as a whole is known as "beta coefficient".

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 or

benchmark. A fund with a beta very close to 1 means the fund's performance closely

matches the index or benchmark. A beta greater than 1 indicates greater volatility than

the overall market, and a beta less than 1 indicates less volatility than the benchmark.

If, for example, a fund has a beta of 1.05 in relation to the S&P 500, the fund has

been moving 5% more than the index. Therefore, if the S&P 500 increased 15%, the fund

would be expected to increase 15.75%. On the other hand, a fund with a beta of 2.4

would be expected to move 2.4 times more than its corresponding index. So if the S&P

500 moved 10%, the fund would be expected to rise 24%, and, if the S&P 500 declined

10%, the fund would be expected to lose 24%. 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

http://www.investopedia.com/terms/b/bearmarket.asp

http://www.investopedia.com/terms/b/bullmarket.asp

http://www.investopedia.com/terms/s/sp500.asp

http://www.investopedia.com/terms/b/benchmark.asp

http://www.investopedia.com/terms/i/index.asp

http://www.investopedia.com/terms/b/beta.asp

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%.

Formula for Beta calculation

R- Square

The R-squared of a fund advises investors if the beta of a mutual fund is measured

against an appropriate benchmark. Measuring the correlation of a fund's movements to

that of an index, R-squared describes the level of association between the fund's volatility

and market risk, or more specifically, the degree to which a fund's volatility is a result of

the day-to-day fluctuations experienced by the overall market. R-squared values range

between 0 and 100, where 0 represents the least correlation and 100 represents full

correlation. If a fund's beta has an R-squared value that is close to 100, the beta of the

fund should be trusted. On the other hand, an R-squared value that is close to 0 indicates

that the beta is not particularly useful because the fund is being compared against an

inappropriate benchmark.

For example, a bond fund was judged against the S&P 500, the R-squared value

would be very low. A bond index such as the Lehman Brothers Aggregate Bond Index

would be a much more appropriate benchmark for a bond fund, so the resulting R-

squared value would be higher. Obviously the risks apparent in the stock market are

different than the risks associated with the bond market. Therefore, if the beta for a bond

were calculated using a stock index, the beta would not be trustworthy.

An inappropriate benchmark will skew more than just beta. Alpha is calculated

using beta, so if the R-squared value of a fund is low, it is also wise not to trust the figure

given for alpha. We'll go through an example in the next section.

Alpha coefficient:

It is the excess return of the fund above risk adjusted market return, given its

level of risk as measured by beta. An investment with a positive alpha indicates that the

fund has performed better than expected, given its beta. And a negative alpha indicates

that the fund has under performed.

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

underperformed for the amount of extra, fund-specific risk that the fund's investors

undertook.

Calculation of Alpha

Alpha = Excess Return - ((Beta x (Benchmark - RFR))

Benchmark = Total Return of Benchmark Index

RFR = Risk free return or Treasury bill

http://www.investopedia.com/terms/a/alpha.asp

4. 2. B. RETURN ANALYSES OF MUTUAL FUNDS

The various methods for measuring mutual fund returns are as follows.

1. Percentage change in NAV

2. Simple total returns.

3. ROI or Total return with dividend reinvestment.

1) Percentage change in NAV

Percentage change in NAV is an absolute measure of return, which finds the NAV

appreciation between two points of time, as a percentage.

Calculation is as follows

(Absolute change in NAV/NAV at the beginning)*100

In case the period is not equal to one year then there will be change calculation.

Converting a return value for a period other than one year, into a value for 1 year is called

as annualisation. In order to annualize a rate, we find out what the return would be for a

year, if the return behaved for a year, in the same manner it did, for any other fractional

period.


(End period NAV/beginning period NAV)-1)*12/n*100

Pros and cons of the method:

This method is simple and very easy to calculate and understand. However,

examining return over a single period may not provide an indication of long term returns.

An important limitation also is that this method is more useful for computing returns on

growth options of mutual fund schemes. It may not be suitable for computing returns on

schemes with dividend distributions or withdrawal plans.

2) Simple total returns

It is customary to represent return as percent per annum. This makes it easier to

compare the returns from various investment options, for a standard holding period. The

investment in a mutual fund can choose to keep his investment for a period of time, not

necessarily 1 year. Therefore, if the holding period is different from 1 year, we have to

normalize the computation shown above, as % p.a.

The total return method takes into account the dividends distributed by the mutual

fund, and adds it to the NAV appreciation, to arrive at returns.


(End period NAV- beginning period NAV)+dividend received) /beginning period

NAV)*100

This return is called the simple annualized return from investing in mutual fund.

Pros and cons of the method

The total return method takes into account the dividend distributions and is

therefore comparable across various kinds of mutual fund classes. The most important

limitation of this method is that it does not take into account the re – investment of

dividends received at the intervening period.

3. Total return with dividend reinvestment

This method is also called the return of investment (ROI) method. In this method,

we assume that dividend are reinvested into the scheme as soon as they are received at

the then prevailing NAV (ex-dividend NAV).

Total returns with reinvestment are calculated as:

(Value of the holding at the end of the period/value of the holdings at the beginning

of the period)-1)* 100

Value of holding at the beginning of the period = number of units at the beginning *

beginning NAV.

Value of holding at the end of the period = number of units at the end * end NAV.

Number of units reinvested = dividends/ ex dividend NAV.

This methodology of computing returns is widely used by many mutual fund

tracking agencies.

SEBI regulations regarding reporting of returns by mutual funds

A return earned by a mutual fund scheme is a very important indicator used by

mutual funds in their publicity literature and advertisements. In order to ensure

uniformity and comparability across funds, SEBI has stipulated some norms for return

data that is published by mutual funds. These are.

1. Mutual funds can only use standard return computations such as annual dividend

on face value, annual yield on purchase price, and annual compounded rate of

return.

2. If the scheme has been in existence for over a year, compounded annual yield is

the accepted method of calculating return.

3. return calculations for funds with payouts should assume that dividend are

reinvested at the ex- dividend NAV

4. Return should be shown for the past 1,3 and 5 years of the scheme, or since

inception, which ever is lower.

5. For funds in existence for less than one year, total returns should be shown, and

such returns should not be annualize or compounded.

4.2. C. PERFORMANCE MEASURES/RATIO

Treynor Measure/ Ratio;

According to Jack Treynor, systematic risk or beta is the appropriate measure of

risk, as suggested by Capital Asset Pricing Model CAPM. The Treynormeasure of

portfolio performance relates the excess return on a portfolio to the portfolio beta.

Treynor Measure= Excess Return on Portfolio (Fund)

Beta of Portfolio (Fund)

=Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment

Beta of Fund

Sharpe Measure/ Ratio;

The Sharpe Measure is similar to the Treynor Measure except that it employs

Standard Deviation, not beta, as the measure of risk. Thus

Sharpe Measure = Excess Return on Portfolio (Fund)

Standard Deviation of Portfolio (Fund)

= Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment


Jensen Measure/ Ratio:

Like the Trynor Measure, the Jensen Measure or Jensen’s Alpha is based on

CAPM. It reflects the difference between the return actually earned on a portfolio (Fund)

and the return portfolio was suppose to earn, given its beta as per CAPM. Jensen Measure

is

Jensen Measure = Avg. Return on Fund–[Risk Free Return + Fund Beta

(Avg.Market Return – Risk Free Return)]

4.2. D. Some more related terms

Annual Return:

The percentage of change in net asset value over a year's time, assuming

reinvestment of distribution such as dividend payment and bonuses.

Annualized Return:

This is the hypothetical rate of return, if the fund achieved it over a year's time,

would produce the same cumulative total return if the fund performed consistently over

the entire period. A total return is expressed in a percentage and tells you how much

money you have earned or lost on an investment over time, assuming that all dividends

and capital gains are reinvested.

Benchmark:

A parameter against which a scheme can be compared. For example, the

performance of a scheme can be benchmarked against an appropriate index.

Capital Appreciation:

As the value of the securities in a portfolio increases, a fund's Net Asset Value

(NAV) increases, meaning that the value of your investment rises. If you sell units at a

higher price than you paid for them, you make a profit, or capital gain. If you sell units at

a lower price than you paid for them, you'll have a capital loss.

Compounding:

When you deposit money in a bank, it earns interest. When that interest also

begins to earn interest, the result is compound interest. Compounding occurs if bond

income or dividends from stocks or mutual funds are reinvested. Because of

compounding, money has the potential to grow much faster.

Entry Load:

Load on purchases/ switch-out of units.

Equity Schemes:

Schemes where more than 50% of the investments are made in the equity shares

of various companies. The objective is to provide capital appreciation over a period of

time.

Expense Ratio:

It is the percentage of fund's value that is paid as expenses. Expenses include

management fees and all the other fees associated with the fund's daily operations.

Exit Load:

Load that is charged on redemptions i.e. during the exit of the fund.

Fund Category:

It is a type of scheme which the mutual fund company invests its corpus in a

particular category. It could be a growth, debt, balanced, gilt or liquid scheme

Fund Family:

It is the AMC which manages the various types of funds.

Fund Management Costs:

It is the charge levied by an AMC on the investors for managing their funds.

Fund Manager:

The person who makes all the final decisions regarding investments of a scheme,

i.e. the person who makes all the investment decisions.

Investment Objective:

The identification of attributes associated with an investment or investment

strategy, designed to isolate and compare risks, define acceptable levels of risk, and

match investments with personal goals.

Information Ratio:

It measures average return in excess of benchmark portfolio divided by the

standard deviation of this excess return.

Load:

A charge that is levied as a percentage of NAV at the time of entry into the

Scheme/Plans or at the time of exiting from the Scheme/Plans.

No-Load Scheme:

A Scheme where there is no initial Entry or Exit Load.

Mutual Funds:

An investment company/trust that pools money from unitholders and invests that

money into a variety of securities, including stocks, bonds, and money-market

instruments in line with the funds objective.

NAV: Net Asset Value:

NAV is the value of the fund which is obtained by the following formula

NAV Change:

The difference between today's closing net asset value (NAV) and the previous

day's closing net asset value (NAV).

NAV %Change:

The percentage change between today's closing net asset value (NAV) and the

previous day's closing net asset value (NAV)

Net Worth:

Market/Fair Value of Scheme's investments (+) Receivables (+)Accrued Income (+) Other Assets (-) Accrued Expenses

(-) Payables (-) Other Liabilities

Number of Units outstandingNAV =

A person's net worth is equal to the total value of all possessions, such as a house,

stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and

revolving credit lines.

Net Yield:

Rate of return on a security net of out-of-pocket costs associated with its

purchase, such as commissions or markups.

Offer Document Or Prospectus:

The official document issued by mutual funds prior to the launch of a fund

describing the characteristics of the proposed fund to all its prospective investors. It

contains all the information required as per the Securities and Exchange Board of India,

such as investment objective and policies, services, and fees. Individual investors are

encouraged to read and understand the fund's prospectus.

Risk Adjusted Returns%:

Generally, the expected returns from an investment are dependent on the risk

involved in the investment. For the purpose of comparing returns from investments

involving varying levels of risk, the returns are adjusted for the level of risk before

comparison. Such returns (reduced for the level of risk involved) are called risk-adjusted

returns.

Sale Price:

The price at which a fund offers to sell one unit of its scheme to investors. This

NAV is grossed up with the entry load applicable, if any.

Sales Charge:

Fee on the purchase of new shares of a mutual fund. A sales charge is similar to

paying a premium for a security in that the customer must pay a higher offering price.

Sometimes, it is called a load.

Scheme:

It is a fund or plan where the money contributed by the unit holders are

maintained and managed and the profit/loss from the scheme accrue only to the unit

holders. A mutual fund can launch more than one scheme.

Sharpe Ratio:

The Sharpe ratio measures the risk-adjusted return of a fund. Simply put, the ratio

measures the variability of ' excess returns' (defined by returns of the fund over the 'risk

free return). Mathematically, the formula takes a fund's return in excess of a risk-free

investment and divides this by the standard deviation of the returns. Higher the Sharpe

ratio better is the fund.

Spread:

The difference between the rates at which money is deposited in a financial

institution and the higher rates at which the money is lent out. Also, the difference

between the bid and ask price for a security.

Total Return%:

Return on an investment, taking into account capital appreciation, dividends or

interest, and individual tax considerations adjusted for present value and expressed on an

annual basis.

Unit:

Unit representing a share in the assets of the corresponding plan of the Scheme.

Unit Holder:

A person who holds Unit(s) under any plan of the Scheme.

Valuation:

Calculating the market value of the assets of a mutual fund scheme at any point of

time.

Volatility:

In investing, volatility refers to the ups and downs of the price of an investment.

Greater the ups and downs, more volatile the investment is.

Volatility Measures:

Volatility measures the variability of historical returns. Relative Volatility, Beta,

and R2 compare a portfolio's total return to those of a relevant market, represented by the

benchmark index. Standard Deviation is calculated independent of an index.

Yield:

The percentage of return an investor receives based on the amount invested or on

the current market value of holdings.

Yield Curve:

The relationship at a given point in time between yields on a group of fixed-

income securities with varying maturities -- commonly, Treasury bills, notes, and bonds.

The curve typically slopes upward since longer maturities normally have higher yields,

although it can be flat or even inverted.

Yield to Maturity:

Used to determine the rate of return an investor will receive if a long-term,

interest-bearing investment, such as a bond is held to its maturity date. It takes into

account purchase price, redemption value, time to maturity, coupon yield and the time

between interest payments.

4.3 Importance of the project

I. Mutual fund is very hot subject in two tier cities like Hubli-Dharwad so one should

first understand the concept roughly before investing. This project report helps the

reader about mutual fund concept and the related terms involved in it.

II. In this project report I have calculated the risk measures that is BETA, Standard

Deviation, Alpha and R-Square, by this an investor come to know the concepts,

and even they can also calculate using the spread sheet.

III. In this report I have analyze the mutual fund schemes i.e. Magnum Equity Fund-

Growth and HDFC Equity Fund-Growth and also stated the advantages and

disadvantages of investing in the mutual fund.

IV. This project helps the company i.e. “way to gain” to recommend the good scheme

to its valued customers.

V. In this project I have calculated the returns of two mutual fund schemes i.e.

Magnum Equity Fund-Growth and HDFC Equity Fund-Growth, so that reader can

also understand the way of calculating returns.

VI. This project report helps the investor to understand the investment opportunities in

the mutual fund industry.

4.4 Objectives

Main Objective:

“Evaluating the Performance of SBI and HDFC Mutual Fund Scheme”

Sub Objectives of the study:

Comprehensive study of mutual fund concept

Applying the various parameters to measure and evaluate the risk and the

respective returns of selected mutual fund schemes.

Recommending good mutual fund scheme to invest and earn more returns on

selected mutual fund schemes.

Type of the Study

The study is generally exploratory in nature, as it studies the performances of two

mutual fund schemes i.e. HDFC Equity Fund-Growth Plan and Magnum Equity Fund-

Growth based on the performance measures.

Sources of Data

The data (i.e. NAV) for the study has been downloaded from the internet (i.e.

websites of the mutual funds) and is converted to returns and used for the study which

formed the primary data for the study.

Research Tools

The research has been done by using the following statistical techniques;

Average

Standard Deviation

Variance

Co-variance

Correlation

Compounded return

Beta

Systematic and Unsystematic Risk measure

Measure of Alpha

Plan of Analysis

One year annualized returns are calculated based on the daily returns

S&P CNX NIFTY index is benchmark index and the risk free return is calculated

using NAV’s of respective schemes.

All the above mentioned Statistical measures are calculated to get the results.

Limitations of the Study

The following are the limitations of the study:

As many statistical tools are used, the limitations of these subjects cannot be

denied.

Each evaluation measure or variable has its own drawbacks.

There are very few funds available as the industry hasn’t expanded considerably.

5) Analysis of the study

In analysis part I have shown the calculations of Risk, Returns

and Performance Measures of both the schemes i.e. Megnum Equity

Fund-Growth and HDFC Equity Fund-Growth.

Following are the Returns calculations of Megnum Equity Fund-

Growth and HDFC Equity Fund-Growth.

Percentage change in NAV

(For period equals to one year)

Fund name: Magnum Equity Fund-Growth

NAV as on 1st mar 2007 --------------------------------- 26.56

NAV as on 3rd mar 2008 ---------------------------------- 35.16

Formula

Absolute change in NAV

NAV at the beginning

= 8.6 100

26.56

= 32.38

Fund name: HDFC Equity Fund-Growth

NAV as on 1st mar 2007 --------------------------------- 143.68

NAV as on 3rd mar 2008 ---------------------------------- 180.72

37.04 100

143.68

= 25.78

Percentage change in NAV

(For period not equals to one year)

Fund name: Magnum Equity Fund-Growth

NAV as on 2nd jan 2007 --------------------------------- 27.87

NAV as on 31st mar 2008 ---------------------------------- 33.05

Formula

(End period NAV/beginning period NAV)-1)*12/n*100

(33.05/27.87)-1)*12/15*100

=14.86

Fund name: HDFC Equity Fund-Growth

NAV as on 2nd jan 2007 ----------------------------------- 147.29

NAV as on 31st mar 2008 ----------------------------------165.79

(165.79/147.29)-1*12/15*100

= 10.05

The following are the NAVs of SBI Magnum Equity Fund-

Growth and HDFC Equity Fund-Growth and there respective returns.

Date Index SBI HDFC Index Returns SBI Returns

HDFC

Returns

2-Apr-

07 4379.37 25.6 136.747

3-Apr-

07 4448.12 25.84 137.879 1.569860505 0.9375 0.827806094

4-Apr- 4499.91 26.13 140.005 1.164312114 1.122291022 1.541931694

07

5-Apr-

07 4522.51 26.32 141.044 0.502232267 0.727133563 0.742116353

9-Apr-

07 4632.8 26.93 144.217 2.438690019 2.317629179 2.249652591

10-Apr-

07 4638.41 27.03 144.475 0.121093075 0.371333086 0.178897079

11-Apr-

07 4655.88 26.97 144.623 0.376637684

-

0.221975583 0.102439868

12-Apr-

07 4616.35 26.83 143.395 -0.84903391

-

0.519095291 -0.849104223

13-Apr-

07 4721.82 27.22 146.359 2.284705449 1.45359672 2.067017678

16-Apr-

07 4837.53 27.85 149.17 2.45053814 2.314474651 1.920619846

17-Apr-

07 4803.3 27.77 148.129 -0.707592511

-

0.287253142 -0.6978615

18-Apr-

07 4835.42 27.74 148.283 0.668706931

-

0.108030248 0.103963437

19-Apr-

07 4818.61 27.59 147.674 -0.347643018 -0.5407354 -0.410701159

20-Apr-

07 4923.47 28.05 149.697 2.176146233 1.66727075 1.369909395

23-Apr-

07 4931.08 27.99 149.685 0.154565784

-

0.213903743 -0.008016193

24-Apr-

07 4999.52 28.5 151.082 1.387931244 1.822079314 0.933293249

25-Apr-

07 5030.3 28.59 151.556 0.615659103 0.315789474 0.313736911

26-Apr-

07 5043.03 28.66 151.758 0.253066418 0.244840853 0.133284067

27-Apr-

07 4929.15 28.25 150.19 -2.258166221

-

1.430565248 -1.033223949

30-Apr-

07 4934.46 28.44 151.16 0.107726484 0.672566372 0.645848592

3-May-

07 5010.44 28.86 153.169 1.539783482 1.476793249 1.329055306

4-May-

07 4970 28.64 151.523 -0.807114744

-

0.762300762 -1.074629984

7-May-

07 4962.52 28.51 151.31 -0.150503018

-

0.453910615 -0.140572718

8-May-

07 4921.3 28.31 150.17 -0.830626375

-

0.701508243 -0.753420131

9-May-

07 4924.08 28.24 150.135 0.056489139

-

0.247262451 -0.023306919

10-May-

07 4908.99 28.07 149.399 -0.306453185

-

0.601983003 -0.490225464

11-May-

07 4920.88 28.17 149.984 0.242208682 0.356252227 0.391568886

14-May-

07 4990.55 28.4 152.086 1.415803677 0.816471424 1.401482825

15-May-

07 4973.65 28.57 152.673 -0.33864003 0.598591549 0.385965835

16-May-

07 5034.79 28.92 154.307 1.229278297 1.225061253 1.070261277

17-May-

07 5093.9 29.14 155.085 1.174031092 0.760719225 0.5041897

18-May-

07 5087.8 28.98 154.665 -0.119751075

-

0.549073439 -0.270819228

21-May- 5143.81 29.17 156.184 1.100868745 0.655624569 0.982122652

07

22-May-

07 5164.58 29.4 156.702 0.403786298 0.788481316 0.331660093

23-May-

07 5126.07 29.13 156.262 -0.745655988

-

0.918367347 -0.280787737

24-May-

07 5076.21 28.97 155.368 -0.972674973

-

0.549261929 -0.572116061

25-May-

07 5128.42 29.11 156.35 1.028523249 0.483258543 0.632047783

28-May-

07 5138.56 29.31 158.641 0.197721715 0.687049124 1.465302207

29-May-

07 5182.87 29.65 160.17 0.862303836 1.160013647 0.963811373

30-May-

07 5130.23 29.35 159.282 -1.015653489

-

1.011804384 -0.554410938

31-May-

07 5185.95 29.6 161.281 1.086111149 0.851788756 1.255006843

1-Jun-

07 5188.58 29.74 161.903 0.050713948 0.472972973 0.385662291

4-Jun-

07 5152.36 29.59 160.884 -0.698071534

-

0.504371217 -0.629389202

5-Jun-

07 5173.61 29.72 161.656 0.412432361 0.439337614 0.479848835

6-Jun-

07 5069.99 29.22 159.352 -2.002856806

-

1.682368775 -1.425248676

7-Jun-

07 5047.71 28.95 158.5 -0.439448599

-

0.924024641 -0.534665395

8-Jun-

07 5007.87 28.62 157.927 -0.789268797

-

1.139896373 -0.361514196

11-Jun-

07 5008.59 28.54 158.852 0.01437737

-

0.279524808 0.585713653

12-Jun-

07 5021.28 28.45 158.746 0.253364719

-

0.315346882 -0.066728779

13-Jun-

07 4971.76 28.25 157.546 -0.986202721

-

0.702987698 -0.755924559

14-Jun-

07 5042.38 28.74 159.777 1.420422547 1.734513274 1.416094347

15-Jun-

07 5044.9 28.93 159.936 0.0499764 0.661099513 0.099513697

18-Jun-

07 5015.45 28.74 159.064 -0.583757854

-

0.656757691 -0.545218087

19-Jun-

07 5096.72 29.16 160.965 1.620392986 1.461377871 1.195116431

20-Jun-

07 5138.26 29.53 162.679 0.815033983 1.268861454 1.064827758

21-Jun-

07 5160.94 30 163.951 0.441394558 1.591601761 0.781907929

22-Jun-

07 5142.38 29.84 163.004 -0.35962441

-

0.533333333 -0.577611603

25-Jun-

07 5151.26 29.87 163.479 0.172682688 0.100536193 0.291403892

26-Jun-

07 5183.07 29.95 164.292 0.617518821 0.267827251 0.497311581

27-Jun-

07 5156.77 29.9 163.61 -0.507421277

-

0.166944908 -0.415114552

28-Jun-

07 5179.91 30.14 163.509 0.448730504 0.802675585 -0.061732168

29-Jun-

07 5223.82 30.61 165.313 0.847698126 1.559389516 1.103303182

2-Jul-07 5218.32 30.67 166.647 -0.105286936 0.196014374 0.806954081

3-Jul-07 5271.3 31.06 167.92 1.015269282 1.271600913 0.763890139

4-Jul-07 5273.42 31.15 167.161 0.040217783 0.289761751 -0.452000953

5-Jul-07 5267.33 31.07 166.71 -0.115484828 -0.25682183 -0.269799774

6-Jul-07 5304.84 31.36 167.913 0.712125498 0.933376247 0.721612381

9-Jul-07 5346.64 31.49 169.806 0.787959675 0.414540816 1.127369531

10-Jul-

07 5331.14 31.34 169.19 -0.289901695

-

0.476341696 -0.362766922

11-Jul-

07 5308.27 31.26 169.53 -0.428988922

-

0.255264837 0.200957503

12-Jul-

07 5379.66 31.73 171.572 1.344882608 1.503518874 1.204506577

13-Jul-

07 5450.57 32.28 171.953 1.318113041 1.733375355 0.222064206

16-Jul-

07 5462.01 32.35 171.714 0.209886305 0.21685254 -0.138991469

17-Jul-

07 5443.84 32.1 170.313 -0.33266142

-

0.772797527 -0.815891541

18-Jul-

07 5447.23 32.31 170.129 0.06227222 0.654205607 -0.10803638

19-Jul-

07 5522.95 32.82 172.024 1.390064308 1.578458682 1.113860659

20-Jul-

07 5527.74 32.86 172.56 0.086729013 0.121876904 0.31158443

23-Jul-

07 5592.26 33.42 174.41 1.167203957 1.704199635 1.072090867

24-Jul-

07 5593.96 33.42 174.391 0.030399159 0 -0.010893871

25-Jul-

07 5555.16 33.06 172.962 -0.693605246

-

1.077199282 -0.819423021

26-Jul- 5592.81 32.98 173.457 0.677748256 - 0.28619003

07 0.241984271

27-Jul-

07 5381.97 31.88 168.741 -3.769840206 -3.33535476 -2.718829451

30-Jul-

07 5375.74 31.93 168.101 -0.11575687 0.156838143 -0.379279487

31-Jul-

07 5483.25 32.68 172.325 1.99991071 2.348888193 2.512775058

1-Aug-

07 5261.69 31.53 165.817 -4.040669311

-

3.518971848 -3.776584941

2-Aug-

07 5274.76 31.9 167.251 0.248399279 1.173485569 0.864808795

3-Aug-

07 5330.23 32.22 169.181 1.051611827 1.003134796 1.153954236

6-Aug-

07 5255.08 31.8 167.657 -1.409882876

-

1.303538175 -0.900810375

7-Aug-

07 5276.76 31.98 168.455 0.412553187 0.566037736 0.475971776

8-Aug-

07 5406.51 32.54 171.664 2.458895231 1.751094434 1.904959782

9-Aug-

07 5335.14 32.07 168.498 -1.320075243

-

1.444376152 -1.844300494

10-Aug-

07 5250.51 31.42 166.582 -1.586275149

-

2.026816339 -1.137105485

13-Aug-

07 5299.34 31.84 167.491 0.930004895 1.336728199 0.545677204

14-Aug-

07 5295.27 31.7 167.411 -0.076802017

-

0.439698492 -0.04776376

16-Aug-

07 5063.42 30.5 160.869 -4.378435849

-

3.785488959 -3.907747997

17-Aug-

07 4978.73 29.93 158.649 -1.672584933

-

1.868852459 -1.380004849

20-Aug-

07 5101.1 30.61 161.45 2.457855718 2.271967925 1.765532717

21-Aug-

07 4938.51 29.65 155.995 -3.187351748 -3.13622999 -3.378755033

22-Aug-

07 5033.64 30.26 157.769 1.926289508 2.057335582 1.137215936

23-Aug-

07 4987.63 30.1 156.451 -0.91405027

-

0.528750826 -0.835398589

24-Aug-

07 5078.77 30.65 158.572 1.827320792 1.827242525 1.355696033

27-Aug-

07 5215.11 31.47 163.29 2.684508257 2.675367047 2.975304593

28-Aug-

07 5237.01 31.62 164.074 0.419933616 0.476644423 0.480127381

29-Aug-

07 5283.81 31.74 164.406 0.893639691 0.379506641 0.202347721

30-Aug-

07 5348.64 31.9 165.742 1.226955549 0.504095778 0.81262241

31-Aug-

07 5411.29 32.42 168.827 1.171325795 1.630094044 1.86132664

3-Sep-

07 5424.33 32.73 170.663 0.24097766 0.956199877 1.087503776

4-Sep-

07 5430.49 32.73 170.669 0.113562412 0 0.003515701

5-Sep-

07 5426.37 32.55 170.547 -0.075867924 -0.54995417 -0.071483398

6-Sep-

07 5478.17 32.78 171.931 0.954597641 0.706605223 0.811506506

7-Sep- 5467.13 32.57 172.113 -0.201527152 - 0.105856419

07 0.640634533

10-Sep-

07 5470.46 32.82 172.496 0.060909472 0.767577525 0.222528223

11-Sep-

07 5457.35 32.81 171.558 -0.239650779

-

0.030469226 -0.543780725

12-Sep-

07 5457.12 33.02 171.156 -0.0042145 0.640048766 -0.234323086

13-Sep-

07 5496.07 33.35 171.692 0.713746445 0.999394306 0.313164598

14-Sep-

07 5483.09 33.18 170.646 -0.236168753

-

0.509745127 -0.609230482

17-Sep-

07 5454.74 33.31 170.482 -0.517044221 0.391802291 -0.096105388

18-Sep-

07 5517.33 33.67 172.737 1.147442408 1.08075653 1.322720287

19-Sep-

07 5743.32 34.51 176.388 4.096002958 2.494802495 2.113617812

20-Sep-

07 5761.77 34.82 177.417 0.321242766 0.898290351 0.583373019

21-Sep-

07 5871 35.34 178.491 1.895771612 1.493394601 0.605353489

24-Sep-

07 5985.91 35.92 179.893 1.957247488 1.641199774 0.785473777

25-Sep-

07 5993.99 35.68 179.563 0.134983653

-

0.668151448 -0.18344238

26-Sep-

07 5995.94 35.69 180.001 0.032532587 0.028026906 0.24392553

27-Sep-

07 6068.83 35.7 180.955 1.215655927 0.028019053 0.529997056

28-Sep-

07 6094.11 36.1 182.838 0.416554756 1.120448179 1.040590202

1-Oct-

07 6151.88 36.52 184.165 0.94796451 1.163434903 0.725779105

3-Oct-

07 6323.99 37.45 186.076 2.797681359 2.546549836 1.037656449

4-Oct-

07 6321.38 37.8 185.771 -0.041271413 0.934579439 -0.16391152

5-Oct-

07 6293.71 37.89 186.045 -0.437720877 0.238095238 0.147493419

8-Oct-

07 6171.46 37.39 182.428 -1.942415523

-

1.319609396 -1.944153296

9-Oct-

07 6465.33 38.66 187.386 4.761758158 3.396630115 2.717784551

10-Oct-

07 6603.91 39.86 189.828 2.14343274 3.103983445 1.303192341

11-Oct-

07 6705.13 40.43 193.137 1.532728338 1.430005018 1.743156963

12-Oct-

07 6587.9 39.64 189.764 -1.748362821

-

1.953994558 -1.746428701

15-Oct-

07 6881.82 40.76 195.809 4.461512773 2.82542886 3.185535718

16-Oct-

07 6878.92 40.75 195.696 -0.042140015

-

0.024533857 -0.057709298

17-Oct-

07 6746.99 39.75 192.444 -1.917888273 -2.45398773 -1.661761099

18-Oct-

07 6494.74 38.17 186.005 -3.738704222

-

3.974842767 -3.34590842

19-Oct-

07 6330.03 36.65 181.373 -2.536052252

-

3.982184962 -2.490255638

22-Oct- 6292.55 36.64 181.983 -0.5920983 -0.02728513 0.336323488

07

23-Oct-

07 6644.48 38.96 191.226 5.592804189 6.331877729 5.079045845

24-Oct-

07 6671.7 39.07 193.973 0.40966336 0.282340862 1.436520138

25-Oct-

07 6760.63 39.5 197.384 1.332943628 1.100588687 1.758492161

26-Oct-

07 6922.5 40.67 203.727 2.394303489 2.962025316 3.213533012

29-Oct-

07 7169.67 41.83 209.357 3.570530878 2.852225227 2.763502138

30-Oct-

07 7124.58 41.92 208.164 -0.628899238 0.215156586 -0.569840034

31-Oct-

07 7163.3 42.48 210.3 0.543470633 1.335877863 1.026114025

1-Nov-

07 7121.96 42.16 209.25 -0.577108316

-

0.753295669 -0.499286733

2-Nov-

07 7202.01 42.46 211.374 1.12398834 0.711574953 1.015053763

5-Nov-

07 7098.67 42.17 208.297 -1.434877208

-

0.682995761 -1.455713569

6-Nov-

07 7024.91 41.87 205.49 -1.039067882

-

0.711406213 -1.347595021

7-Nov-

07 7021.12 41.65 204.624 -0.053950869

-

0.525435873 -0.4214317

8-Nov-

07 6919.65 41.15 201.741 -1.44521102

-

1.200480192 -1.408925639

9-Nov-

07 6876.51 40.87 199.968 -0.623441937

-

0.680437424 -0.878849614

12-Nov-

07 6820.5 40.47 203.629 -0.814512013

-

0.978712992 1.830792927

13-Nov-

07 6915.56 41.16 209.762 1.393739462 1.704966642 3.011849982

14-Nov-

07 7209.99 42.24 210.78 4.257500477 2.623906706 0.485311925

15-Nov-

07 7178.71 42.29 210.356 -0.433842488 0.118371212 -0.201157605

16-Nov-

07 7172.31 42.15 212.453 -0.089152508

-

0.331047529 0.996881477

19-Nov-

07 7173.27 43.06 209.097 0.013384809 2.158956109 -1.579643498

20-Nov-

07 7019.36 42.62 200.768 -2.145604445

-

1.021830005 -3.983318747

21-Nov-

07 6752.41 41.1 199.733 -3.80305327

-

3.566400751 -0.515520402

22-Nov-

07 6701.81 41.24 201.546 -0.74936208 0.340632603 0.907711795

23-Nov-

07 6810.16 42.38 204.862 1.616727421 2.764306499 1.64528197

26-Nov-

07 6959.61 43.61 204.038 2.194515254 2.902312412 -0.402221984

27-Nov-

07 6918.92 43.36 201.956 -0.584659198

-

0.573263013 -1.020398161

28-Nov-

07 6821.04 43.24 201.59 -1.414671654

-

0.276752768 -0.181227594

29-Nov-

07 6841.75 42.99 206.176 0.303619389

-

0.578168363 2.27491443

30-Nov-

07 6997.6 43.96 207.921 2.277925969 2.256338683 0.846364271

3-Dec- 7121.74 44.73 207.709 1.774036813 1.751592357 -0.101961803

07

4-Dec-

07 7113.64 45.52 211.803 -0.11373625 1.76615247 1.971026773

5-Dec-

07 7212.82 45.89 212.077 1.394222929 0.812829525 0.129365495

6-Dec-

07 7230.63 45.78 213.228 0.246921454

-

0.239703639 0.542727406

7-Dec-

07 7254.45 45.77 213.451 0.329431875 -0.0218436 0.104582888

10-Dec-

07 7237.85 45.58 216.943 -0.228825066

-

0.415119074 1.635972659

11-Dec-

07 7403.77 46.16 218.36 2.292393459 1.272487933 0.653166961

12-Dec-

07 7479.08 46.76 217.747 1.017184488 1.29982669 -0.280729071

13-Dec-

07 7356.2 46.36 216.845 -1.642982827

-

0.855431993 -0.414242217

14-Dec-

07 7343.61 46.34 209.757 -0.171148147

-

0.043140638 -3.268694229

17-Dec-

07 7014.87 44.15 209.392 -4.476544915

-

4.725938714 -0.174010879

18-Dec-

07 6972.75 43.69 209.843 -0.600438782

-

1.041902605 0.215385497

19-Dec-

07 6984.11 43.74 210.041 0.162919938 0.114442664 0.094356257

20-Dec-

07 7002.72 43.94 214.741 0.266462012 0.457247371 2.237658362

24-Dec-

07 7268.18 45.15 217.682 3.790812713 2.753755121 1.369556815

26-Dec-

07 7379.02 46.27 218.797 1.525003508 2.480620155 0.512215066

27-Dec-

07 7392.06 45.94 219.857 0.176717233 -0.7132051 0.484467337

28-Dec-

07 7389.9 46.65 223.324 -0.029220542 1.545494123 1.576934098

31-Dec-

07 7461.48 47.24 217.45 0.968619332 1.264737406 -2.630259175

1-Jan-08 7468.49 47.22 224.592 0.09394919

-

0.042337003 3.284433203

2-Jan-08 7511.06 48.23 226.239 0.569994738 2.138924185 0.733329771

3-Jan-08 7510.02 47.97 225.043 -0.013846248

-

0.539083558 -0.528644487

4-Jan-08 7626.41 48.49 227.097 1.549796139 1.08401084 0.912714459

7-Jan-08 7632.26 48.36 227.613 0.076707127

-

0.268096515 0.227215683

8-Jan-08 7642.89 47.88 225.209 0.139277226

-

0.992555831 -1.056178689

9-Jan-08 7623.64 47.65 223.089 -0.251868076

-

0.480367586 -0.941347815

10-Jan-

08 7483.81 46.52 220.013 -1.834163208

-

2.371458552 -1.378821905

11-Jan-

08 7536.23 46.56 221.852 0.700445361 0.085984523 0.835859699

14-Jan-

08 7544.53 47.17 221.851 0.110134643 1.310137457 -0.000450751

15-Jan-

08 7383.38 46.23 219.711 -2.135984614

-

1.992792029 -0.964611383

16-Jan-

08 7215.08 45.22 217.617 -2.279443832

-

2.184728531 -0.953070169

17-Jan- 7187.64 45.39 217.003 -0.380314563 0.37593985 -0.282147075

08

18-Jan-

08 6934.95 43.24 207.764 -3.515618478

-

4.736726151 -4.257544827

21-Jan-

08 6331.44 38.34 193.685 -8.702441979

-

11.33209991 -6.776438652

22-Jan-

08 5955.22 36.63 181.808 -5.942092162

-

4.460093897 -6.132121744

23-Jan-

08 6325.66 38.98 192.228 6.220425106 6.415506416 5.731320954

24-Jan-

08 6119.07 37.52 186.269 -3.265904269

-

3.745510518 -3.099964625

25-Jan-

08 6544.4 40.26 195.274 6.950892864 7.302771855 4.834406155

28-Jan-

08 6411.61 39.7 193.408 -2.029063016

-

1.390958768 -0.955580364

29-Jan-

08 6419.74 39.76 192.123 0.126801225 0.151133501 -0.664398577

30-Jan-

08 6282.15 38.91 189.907 -2.143233215

-

2.137826962 -1.153427752

31-Jan-

08 6245.45 39.04 188.42 -0.584194901 0.334104343 -0.783014844

1-Feb-

08 6465.46 38.69 191.075 3.522724543

-

0.896516393 1.409086084

4-Feb-

08 6647.28 39.7 195.54 2.81217423 2.610493668 2.336778752

5-Feb-

08 6672.07 40.25 194.906 0.372934494 1.385390428 -0.324230337

6-Feb-

08 6475.74 39 190.044 -2.942565051

-

3.105590062 -2.494535828

7-Feb-

08 6245.48 37.72 185.194 -3.555732627

-

3.282051282 -2.55204058

8-Feb-

08 6229.73 37.22 183.235 -0.252182378

-

1.325556734 -1.057809648

11-Feb-

08 5909.35 35.19 177.14 -5.142758996

-

5.454056959 -3.326329577

12-Feb-

08 5886.53 35.1 175.403 -0.386167683

-

0.255754476 -0.980580332

13-Feb-

08 5998.76 35.34 177.861 1.906556154 0.683760684 1.401344333

14-Feb-

08 6330.73 37.24 186.056 5.533977022 5.376344086 4.6075306

15-Feb-

08 6453.55 37.82 188.816 1.940060625 1.557465091 1.483424345

18-Feb-

08 6421.91 37.82 188.985 -0.490272796 0 0.089505127

19-Feb-

08 6426.66 37.76 188.963 0.073965534

-

0.158646219 -0.011641136

20-Feb-

08 6272.88 36.43 184.9 -2.392844806

-

3.522245763 -2.15015638

21-Feb-

08 6318.3 36.67 185.551 0.724069327 0.658797694 0.352082207

22-Feb-

08 6219.66 36.06 183.174 -1.561179431

-

1.663485138 -1.281049415

25-Feb-

08 6329.13 36.63 184.251 1.760064055 1.580698835 0.587965541

26-Feb-

08 6413.55 37.3 186.915 1.333832612 1.829101829 1.445853754

27-Feb-

08 6411.53 37.54 186.959 -0.031495817 0.643431635 0.023540112

28-Feb- 6431.87 37.52 188.246 0.317240971 - 0.688386224

08 0.053276505

29-Feb-

08 6356.92 36.91 187.594 -1.165290965

-

1.625799574 -0.346355301

3-Mar-

08 6027.69 35.16 180.716 -5.179080435 -4.74126253 -3.666428564

4-Mar-

08 5919.69 34.27 176.827 -1.791731161

-

2.531285552 -2.151995396

5-Mar-

08 5989.23 34.34 178.118 1.174723676 0.204260286 0.730092124

7-Mar-

08 5806.95 33.3 173.18 -3.043463016

-

3.028538148 -2.772319474

10-Mar-

08 5842.02 33.28 171.579 0.603931496 -0.06006006 -0.924471648

11-Mar-

08 5921.71 34.41 175.113 1.364082971 3.395432692 2.05969262

12-Mar-

08 5929.12 34.46 172.954 0.125132774 0.145306597 -1.232918173

13-Mar-

08 5626.82 32.26 165.452 -5.098564374

-

6.384213581 -4.337569527

14-Mar-

08 5775.57 32.97 167.99 2.643589097 2.200867948 1.533979644

17-Mar-

08 5481.22 31.05 158.401 -5.096466669

-

5.823475887 -5.708077862

18-Mar-

08 5517.59 30.91 158.694 0.663538409

-

0.450885668 0.18497358

19-Mar-

08 5567.43 31.08 157.98 0.903292923 0.549983824 -0.449922492

24-Mar-

08 5611.17 31.12 158.076 0.785640771 0.128700129 0.060767186

25-Mar-

08 5936.92 32.83 166.059 5.805384617 5.494858612 5.050102482

26-Mar-

08 5877.72 32.67 165.856 -0.997150037

-

0.487359123 -0.122245708

27-Mar-

08 5879.4 32.83 166.306 0.028582512 0.489745944 0.271319699

28-Mar-

08 6015.47 34.1 171.142 2.314351805 3.868413037 2.90789268

31-Mar-

08 5762.88 33.05 165.788 -4.199006894

-

3.079178886 -3.128396302

Following are the risk measures of SBI Magnum Equity Fund-

Growth and HDFC Equity Fund-Growth.

SBI % HDFC %

BETA 0.964116814 0.750390035

CORRL 0.938181407 0.874566887

VAR 4.096683202 3.459706829

COVAR 3.834309858 2.984316853

Std. Dev 1.998246472 1.998246472

Systematic

Risk 0.938182321 93.81823207 0.874568384 87.45684

Unsystematic

Risk 0.061817679 6.18176793 0.125431616 12.54316

RSQ 0.880184353 0.76486724

ALPHA -0.001728715 -0.005654814

Following are the PERFORMANCE MEASURES of SBI

Magnum Equity Fund-Growth and HDFC Equity Fund-Growth.

Treynor Ratio;

Formula

Treynor Measure= Excess Return on Portfolio (Fund)

Beta of Portfolio (Fund)


Beta of Fund

SBI Magnum Equity Fund-Growth:-

= 0.123454698 – 0.08

0.964116814

= 0.0450 or 4.50%

HDFC Equity Fund-Growth:-

= 0.091777762 – 0.08

0.750390035

= 0.0156 or 1.56%

Sharpe Measure/ Ratio;

Formula;

Sharpe Measure = Excess Return on Portfolio (Fund)





= 0.123454698 – 0.08

1.998246472

= 0.02174 or 2.174%


= 0.091777762 – 0.08

1.714523761

= 0.00686 or 0.68%

Jensen Measure/ Ratio;

Formula;

Jensen Measure = Avg. Return on Fund–[Risk Free Return + Fund Beta(Avg.Market

Return – Risk Free Return)]


= 0.123454698 - (0.08 + 0.964116814 (0.129842578 - 0.08)

= 0.123454698 - (1.044116814(0.049842578)

= 0.123454698 - 0.05204147374

= 0.07141322426 or 7.14 %


= 0.091777762 - (0.08 + 0.750390035 (0.049842578)

= 0.091777762 - (0.830390035(0.049842578)

= 0.091777762 - 0.04138878008

= 0.05038898192 or 5.038898192 %

6) Findings

Following table shows the findings of the project report.

1) returns calculations

Magnum

Equity Fund-

Growth

HDFC Equity

Fund-Growth

% Change in NAV (for period equals to one year) 32.38 25.78

% Change in NAV (for period not equals to one

year) 14.86 10.05

2) risk calculations

BETA 0.964116814 0.750390035

CORRL 0.938181407 0.874566887

VAR 4.096683202 3.459706829

COVAR 3.834309858 2.984316853

Std. Dev 1.998246472 1.714523761

Systematic Risk 0.938182321 0.874568384

Unsystematic Risk 0.061817679 0.125431616

RSQ 0.880184353 0.76486724

ALPHA -0.001728715 -0.005654814

3)performance measures

Treynor Measure/ Ratio 4.50% 1.56%

Sharpe Measure/ Ratio 2.1746% 0.68%

Jensen Measure/ Ratio 7.14% 5.039%

Findings

1) Here between our chosen scheme Magnum Equity Fund-Growth is having higher

average return of 0.1234 as compare to that of HDFC Equity Fund-Growth which is

having only 0.09177 so it is obvious to conclude that Magnum Equity Fund-Growth is

on an average performing well in terms of Average Daily Returns.

2) In the above case the Magnum Equity Fund-Growth is having 1.998246472 as a

Standard deviation as compare to that of HDFC Equity Fund-Growth which is having

Standard Deviation of 1.714523761 so here we can conclude that Magnum Equity Fund-

Growth is having more fluctuation so there will be higher risk.

3) Here one more thing we can observe that both the scheme having perfect positive

correlation. But Magnum Equity Fund-Growth is having 0.938181407 which is more as

compare to that of HDFC Equity Fund-Growth which is having 0.874566887.

4) Variance of the Magnum Equity Fund-Growth is 4.096683202 and 3.459706829 is for

HDFC Equity Fund-Growth means HDFC Equity Fund-Growth is consistent compare to

the Magnum Equity Fund-Growth.

5) Even Beta value of the HDFC Equity Fund-Growth is less i.e. 0.750390035 as

compare to that of Magnum Equity Fund-Growth which is 0.964116814 so we can say

that the HDFC Equity Fund-Growth is less varying with that of the Magnum Equity

Fund-Growth.

6) Here Magnum Equity Fund-Growth and HDFC Equity Fund-Growth is under

performed means unable to meet the investor expectations and alpha of both the schemes

are

-0.001728715 and -0.005654814

7) As stated above R-Square ranges from 0-100 so here HDFC Equity Fund-Growth is

having only 0.76486724 i.e.76.486724% that of the Magnum Equity Fund-Growth which

is having 0.880184353 i.e.88.0184353%

8) So it should be noted that HDFC Equity Fund-Growth having less risk and less return

as compare to Magnum Equity Fund-Growth which is having high risk and high return.

9) Performance ratios show the excess return of the schemes over and above risk free rate

of return and here we can see that Magnum Equity Fund-Growth is comparatively having

good excess return than the HDFC Equity Fund-Growth.

7) Conclusions of the project report

1) From the project report we can conclude that Magnum Equity Fund-Growth is having

high risk with high returns and also performing good compare to HDFC Equity Fund-

Growth

2) HDFC Equity Fund-Growth is having less risk and less return compare to Magnum

Equity Fund-Growth.

3) Here from the calculations we can conclude that the one may get approximately 30 to

35% returns from the Magnum Equity Fund-Growth. Where as investing in HDFC

Equity Fund-Growth he may get 24 to 28% returns.

4) At present both schemes are underperforming means not meeting the investor’s

expectations.

5) Magnum Equity Fund-Growth is more volatile than that of HDFC Equity Fund-

Growth.

8) Suggestions of the project report

• Here I would like to suggest, the company i.e. Way to Gain also consider the risk

returns and performance measurements to its unit holder when they come to

investment into their company.

• From this project report it is clear that who wants to take higher risk and higher

return they can go for Magnum Equity Fund-Growth

• Who wants a less risk and less return they can invest in HDFC Equity Fund-

Growth

• Here I also suggest the company to make some awareness campaign because

many people who are interested in earnings through this investment companies

don’t know the concept only.

• As we know that Dharwad- Hubli is of many villages so the company should go

for awareness campaign.

• As company is growing rapidly, so I suggest the company to hire some marketing

officers to increase the company revenue.

9) Bibliography

Web sites:-

www.amfiindia.com

www.google.com

www.mutualfundsindia.com

www.bseindia.com

www.nseindia.com

www.ask.com

www.sbimf.com

www.hdfcfund.com

News papers:-

Business line

Business standard

Mutual Fund Insight

Books:-

Investment analysis and portfolio management ----

Prasanna chandra

I

http://www.hdfcfund.com/

http://www.sbimf.com/

http://www.ask.com/

http://www.nseindia.com/

http://www.bseindia.com/

http://www.mutualfundsindia.com/

http://www.google.com/

http://www.amfiindia.com/

Documents

A Project Report on The Analysis and Comparative Study of SBI and HDFC Mutual Fund