INTRODUCTIONMUTUALFUND:-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, debenture and other securities. Mutual
funds are money-managing institutions set up to professionally
invest the money pooled in from the public. These schemes are
managed by Asset Management Companies (AMC), which are sponsored by
different financial institutions or companies. Each unit of these
schemes reflects the share of investor in the respective fund and
its appreciation is judged by the Net Asset Value (NAV) of the
scheme.
The Securities and Exchange Board of India (Mutual Funds)
Regulations 1993 defines mutual funds as a fund established in the
form of a trust by a sponsor, to raise monies by the trustees
through in the sales of units t o the public under one or more
schemes for investing in security in accordance with these
regulation
Mutual Funds Concept:-A mutual fund is an entity that pools the
money of many investors its unit-holders to invest in different
securities. Investments may be in shares, debt securities, money
market securities or a combination of these. Those securities are
professionally managed on behalf of the unit-holders, and each
investor holds a pro-rata share of the portfolio i.e. entitled to
any profits when the securities are sold, but subject to any losses
in value as well.
MUTUAL FUND STRUCTURE:-
The SEBI(Mutual Funds) Regulations 1993 define a mutual fund
(MF) as a fund established in the form of a trust by a sponsor to
raise monies by the Trustees through the sale of units to the
public under one or more schemes for investing in securities in
accordance with these regulations.
These regulations have since been replaced by the SEBI (Mutual
Funds) Regulations, 1996. The structure indicated by the new
regulations is indicated as under.
A mutual fund comprises four separate entities, namely sponsor,
mutual fund trust, AMC and custodian. The sponsor establishes the
mutual fund and gets it registered with SEBI.
The mutual fund needs to be constituted in the form of a trust
and the instrument of the trust should be in the form of a deed
registered under the provisions of the Indian Registration Act,
1908.
The sponsor is required to contribute at least 40% of the
minimum net worth (Rs.10 crores) of the asset management company.
The board of trustees manages the MF and the sponsor executes the
trust deeds in favour of the trustees. It is the job of the MF
trustees to see that schemes floated and managed by the AMC
appointed by the trustees are in accordance with the trust deed and
SEBI guidelines.
THEORETICAL FRAMEWORK
Why should we measure fund performance?An investor needs to
understand the basis of appropriate performance measurement for the
fund and acquire the basic knowledge of different measures of
evaluating the performance of a fund. This will help him to
measures the performance of his fund and take right decisionsAn
advisor will be able to know how to measure and evaluate the funds
performance compare them and offer proper advice to an investor
RISK FACTORS OF INVESTING IN A MUTUAL FUND SCHEME:-The risk
factor of investing in a mutual fund can be categorized in to two
as follows:1. Standard risk factors1. Scheme specific risk
factors
1. Standard risk factors:-The standard risk factors are the one,
which are common for any kind of mutual fund scheme. They are
uniformly applicable for any mutual fund scheme. The following are
few of the standard risk factors:
Mutual funds and securities investments are subject to market
risks and there is no assurance or guarantee that the objective of
the mutual fund will be achieved. As with any investment in
securities, the Net Asset Value (NAV) of the units issued under the
scheme can go up or down depending on the factors and forces
affecting the capital/debt markets. Past performance of the
sponsors the asset management company/mutual fund does not indicate
the future performance of the scheme of the mutual fund. Abcd
mutual fund is the name of the scheme and in any manner does not
indicate either the quality of the scheme or its future prospects
and returns. The sponsor is not responsible or liable for any loss
resulting from the operation of the scheme beyond the initial
contribution of Rs 1,00,000/- made by it towards setting up the
fund. There is no guarantee or assurance on the frequency or
quantum of dividends although there is every intention to declare
dividends in dividend plan. Investors in the schemes are not being
offered any guaranteed / assured returns.
2. Scheme specific risk factors:-Scheme specific risk factors
are those factors, which are applicable to a particular scheme it
might arise because of a specific nature of the scheme.
Trading volumes and settlements periods may restrict in equity
and debt investments. Investments in debt are subject to price,
credit and interest rate risk. The NAV of the scheme may be
affected inter alia, by changes in the market conditions, interest
rates trading volumes settlement periods and transfer procedures.
The liquidity of the schemes investments may be inherently
restricted by trading volumes settlement periods and transfer
procedures. In the event of an inordinately large number of
redemption request or of a restructuring of the schemes investment
portfolio, these periods may become significant. Please read the
sections of this offer document entitled special considerations and
Right to limit redemptions
What is risk in mutual funds investment?Risk can be understood
in mutual fund investment in two ways: The investor expects a
certain percentage of return from the fund. Their known as market
risk.Common measures of risk of a mutual fund investmentCommon
measures are as follows: Standard deviation Beta
Standard deviation:-Standard deviation is a measure of total
risk of a fund. In other words it measures the volatility of
returns of a fund it indicates the tendency of the funds NAV to
rise and fall in a short period it measure the extent to which the
NAV fluctuates as compared to the average returns during a period a
fund that has a consistent four year return of 3% , for example
would have a mean or a average, of 3% this SD for this fund would
than be zero because the fund returns in any given year does not
differ from its four year mean of 3% on the other hand a fund that
in each of the last four years returned 5%,17%, 2% and 30% will
have a mean return of 11% the fund will also exhibit a high SD
because each year the return of the fund differs from the mean
return this fund is therefore more risky because it fluctuates
widely between negative and positive returns with in a short
period.
A higher standard deviation means that the returns of the fund
have been more volatile than a fund having low standard deviation
in other words high standard deviation mean high risk.
Beta:-Beta determines the volatility or risk of a fund in
comparison to that of its index or benchmark fund with a beta very
close to 1 means the fund performance closely matches the index or
bench mark a beta greater than 1 indicates greater volatility than
the overall market a beta less than 1 indicates less volatility
than the bench mark.
METHODS OF RISK MEASUREMENTIn the risk measurement mainly three
points are there:1. Subjective estimates1. Standard deviation1. Co-
efficient of variation1. Sharpe ratio
1. Subjective estimates:-Some times as a rule of thumb
qualitative rather than quantitative, estimates may be made as
measures of risks expressions such as low, moderate, or high risk
may be used in different situations when variability of returns
will not be wide it may be called low level of risk when forecast
returns are liable to say widely it may represent high level and
variability of returns is likely to be a moderate nature, the
investment may be said to involve moderate risk only this method of
risk evaluation has its own limitations
2.. Standard deviation:-This represents the variability of
forecast returns when such returns approximate a normal probability
distribution. Standard deviation is generally regards as one of the
best measures of variability or dispersion because it has certain
desirable properties the greater the value of standard deviation
the greater would be the risk and vice versa.Standard Deviation is
a measure of how much the actual performance of a fund over a
period of time deviates from the average performance.
Since Standard Deviation is a measure of risk, a low Standard
Deviation is good. = variance = E (X-Bar)2 pi (Or) = (X-Bar)2 /
N
3. Co- efficient of variation:-Cv is relative measure of
dispersion which measures the risk per unit of return it is
calculated as the standard deviation divided by the expected return
Cv = r/R bar
4. Sharpe Ratio:-The Sharpe Ratio of a fund measures whether the
returns that a fund delivered were commensurate with the kind of
volatility it exhibited. This ratio looks at both, returns and
risk, and delivers a single measure that is proportional to the
risk adjusted returns.
MEASURING OF RETURNThe return should be calculated in two
types:a) Historical returnb) Expected rate of return
a) Historical return:-The following formula can be used to
calculate the historical returnR = [C+ (PE- PB)] / PB
where R = total return over the period C = cash payment received
during the period PE = ending price of the investment PB =
beginning price
b) Expected rate of return:-The following formula can be used to
calculate the expected rate of returnE(R) = E Ri Pi I=1
where E(R) = expected return from stockRi = retrurn from stock
under statePi = probability that the state occursN = number of
possible state of the world
Percentage change in NAV method:-As the name suggests, in this
method only change in the NAV over a period is calculated and
expressed.
The following formula can be used to calculate the return under
this method:(Absolute change in NAV/NAV at the beginning)* 100
Example:- NAV of a scheme of 1st Jan 2006 is Rs.12 NAV of the
scheme on 30th June 2006 is Rs.15 The return rupee is closing =
NAV- initial NAV = 15 - 12 = 3 Therefore percentage return =
absolute change in NAV / initial NAV*100 = 3/12*100 = 25% In
percentage change in NAV method some advantages and
disadvantages.Advantage:-1) It is very simple to use.2) Quite
useful and easy to calculate returns for growth option
investors.
Disadvantage:-1) Does not given an indication of long term
returns2) May not provide returns on compounded basis3) It does not
consider dividend their for cannot be used to calculate returns of
investors who have chosen the dividend payout and the dividend
reinvestment option.
Simple total return method:In this method both dividend and
change in NAV is added to get the returns of the investor. In other
words:
Absolute returns = dividend + change in NAVReturns = returns
/initial NAV * 100 Example:- NAV of a scheme of 1 Jan 2006 is Rs.12
Scheme gives a dividend of 10% (mutual fund always taken as
Rs.10)The return in rupee is= dividend + change in NAV= 1 + 3 =
4
Therefore percentage return = absolute change in NAV/initial NAV
*100 = 4/12 * 100 = 33.33%
There fore, annualized returns = absolute returns/number of
months*12 = 33.33% / 6*12 = 66.67%
Return on investment method or ROI method:In this method it is
assumed that the dividend is again re invested in the same scheme
at the dividend NAV and the return are calculated accordinglyRecall
that after dividend is announcd by a mutual fund scheme its NAV is
reduced by the amount of dividend and dividend distribution tax if
any. This reduced NAV is known as Return ( absolute ) = final value
of investment opening value of investmentWhere, final value of
investment = final units* closing NAVWhere final units = initial
units + new units obtained on reinvestmentWhere new units received
on reinvestment = dividend/ex dividend NAV
Compounded annual growth rate (CAGR) :
This can be calculated by using the following formulaCAGR=
[(A/P)1/n]-1Where A= Final amountP= Initial amountN= period in
yearsex- dividend NAV or post dividend NAV.
SEBI REGULATIONS REGARDING CALCULATION AND PUBLICATION OF
RETURNS BY MUTUAL FUND: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:
Only standard methods of computing returns can be used by mutual
funds, these include measures like annual dividend on face value
annual yield on purchase price, and annual compounded rate of
return. For return of periods less than a year returns can be shown
only on absolute basis the returns can not be annualized. However a
liquid fund can annualize returns provided the returns are not
misleading. For returns of periods more than year CAGR has to be
used Return calculations for funds with payouts should assume that
dividends are reinvested at the ex-dividend NAV Every mutual fund
should highlight CAGR for the past 1,3 and 5 years of the scheme or
since inception, which ever is lower Classification of
markets:-Markets can be classified based on the turnover 1) Large
Cap =Market capitalization above 10000 crores2) Mid Cap =between
1500-10000 crores3) Small Cap =below 1500 croresNet Asset
Value:-The net asset value is the actual value of a share or unit
on any business day. It is computed as follows: NAV = (Market value
of the funds investment + Receivable + Accrued income Liabilities
Accrued expenses) / Number of share or Units outstandingINDUSTRY
PROFILE
Mutual Funds:-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, debenture and other securities.
Mutual funds 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) was 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 1,540bn.
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 1968:-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 cores of assets under management.
SECOND-PHASE 1987-1993:-Entry of non-UTI mutual funds. SBI
Mutual Fund was the first followed by Can bank Mutual Fund (Dec
87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual
Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked
Rs.47, 004 as assets under management.
THIRD PHASE 1993-2000:-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 (nowmerged
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 cores. The Unit Trust of India with Rs.44, 541
cores 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.
On the Growth Track:-
CATEGORYWISE GROWTH OF MUTUAL FUND AUMs
CategoryMarch 2004March 2005March 2006March 2007March 2008
Income funds47,56462,52447,60560,278119,322
Growth funds9,88723,61336,71192,867113,386
Balanced funds3,1414,0804,8677,4939,110
Liquid/money market funds13,73441,70454,06861,50072,006
Gilt funds3,9106,0264,5763,1352,257
Elss funds1,2281,6691,7276,58910,211
Total79,464139,616149,554231,862326,388
Future of Mutual Funds in India:-By March 2010, Indian mutual
fund industry reached Rs 6,26,388 crore. It is estimated that by
2010 March-end, the total assets of all scheduled commercial banks
should be Rs 40,90,000 crore.The annual composite rate of growth is
expected 13.4% during the rest of the decade. In the last 5 years
we have seen annual growth rate of 9%. According to the current
growth rate, by year 2010, mutual fund assets will be double.
ORGANISATION OF MUTUAL FUND:-All mutual funds comprise four
constituents Sponsors, Trustees, Asset Management Company (AMC) and
Custodians.
Sponsors:-The sponsors initiate the idea to set up a mutual
fund. It could be a registered company, scheduled bank or financial
institution. A sponsor has to satisfy certain conditions, such as
capital, record (at least five years operation in financial
services), de-fault free dealings and general reputation of
fairness. The sponsors appoint the Trustee, AMC and Custodian. Once
the AMC is formed, the sponsor is just a stakeholder.
Trust/ Board of Trustees:-Trustees hold a fiduciary
responsibility towards unit holders by protecting their interests.
Trustees float and market schemes, and secure necessary approvals.
They check if the AMCs investments are within well-defined limits,
whether the funds assets are protected, and also ensure that unit
holders get their due returns. They also review any due diligence
by the AMC. For major decisions concerning the fund, they have to
take the unit holders consent. They submit reports every six months
to SEBI; investors get an annual report. Trustees are paid annually
out of the funds assets 0.5 percent of the weekly net asset
value.Fund Managers/ AMC:-They are the ones who manage money of the
investors. An AMC takes decisions, compensates investors through
dividends, maintains proper accounting and information for pricing
of units, calculates the NAV, and provides information on listed
schemes. It also exercises due diligence on investments, and
submits quarterly reports to the trustees. A funds AMC can neither
act for any other fund nor undertake any business other than asset
management. Its net worth should not fall below Rs. 10 crore. And,
its fee should not exceed 1.25 percent if collections are below Rs.
100 crore and 1 percent if collections are above Rs. 100 crore.
SEBI can pull up an AMC if it deviates from its prescribed
role.Custodian:-Often an independent organization, it takes custody
of securities and other assets of mutual fund. Its responsibilities
include receipt and delivery of securities, collecting
income-distributing dividends, safekeeping of the units and
segregating assets and settlementsbetween schemes. Their charges
range between 0.15-0.2 percent of the net value of the holding.
Custodians can service more than one fund.
MUTUAL FUNDS STRUCTURE
SEBI (Securities and Exchange Board of India):-
In the year 1992, Securities and exchange Board of India (SEBI)
Act was passed. The objectives of SEBI are to protect the interest
of investors in securities and to promote the development of and to
regulate the securities market.
Sponsor:- Sponsor is the person who acting alone or in
combination with another body corporate establishes a mutual fund.
Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed
under the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996.
Trustee:-The Mutual Fund is constituted as a trust in accordance
with the provisions of the Indian Trusts Act, 1882 by the Sponsor.
The trust deed is registered under the Indian Registration Act,
1908. The main responsibility of the Trustee is to safeguard the
interest of the unit holders and inter alia ensure that the AMC
functions in the interest of investors and in accordance with the
Securities and Exchange Board of India (Mutual Funds) Regulations,
1996.
Asset Management Company (AMC):-The AMC is appointed by the
Trustee as the Investment Manager of the Mutual Fund. The AMC is
required to be approved by the Securities and Exchange Board of
India (SEBI) to act as an asset management company of the Mutual
Fund. The AMC must have a net worth of at least 10 crore at all
times.
Register and Transfer Agent:-The AMC if so authorized by the
Trust Deed appoints the Registrar and Transfer Agent to the Mutual
Fund. The Registrar processes the application form, redemption
requests and dispatches account statements to the unit holders. The
Registrar and Transfer agent also handles communications with
investors and updates investor records.
SCHEMES AND COMPANIESMUTUAL FUNDS SCHEMES:-Types of Schemes:
Investment objectives:Schemes can be classified by way of their
stated investment objective such as Growth Fund, Balanced Fund, and
Income Fund etc.
Equity oriented Schemes:These schemes, also commonly called
Growth Schemes, seek to invest a majority of their funds in
equities and a small portion in money market instruments. Such
schemes have the potential to deliver superior returns over the
long term. The NAV prices of equity fund fluctuates with market
value of the underlying stock which are influenced by external
factors such as social, political as well as economic. Reliance
Growth Fund, Reliance Index Fund are examples of equity
schemes.
General Purpose:-The investment objectives of general-purpose
equity schemes do not restrict them to invest in specific
industries or sectors. They thus have a diversified portfolio of
companies across a large spectrum of industries. While they are
exposed to equity price risks, diversified general-purpose equity
funds seek to reduce the sector or stock specific risks through
diversification. They mainly have market risk exposure. Reliance
Growth Fund is a general-purpose equity scheme.
Sector Specific:-These schemes restrict their investing to one
or more pre-defined sectors, e.g. technology sector. Since they
depend upon the performance of select sectors only, these schemes
are inherently more risky than general-purpose schemes. They are
suited for informed investors who wish to take a view and risk on
the concerned sector.
Debt Based Schemes:-These schemes, also commonly called Income
Schemes, invest in debt securities such as corporate bonds,
debentures and government securities. The prices of these schemes
tend to be more stable compared with equity schemes and most of the
returns to the investors are generated through dividends or steady
capital appreciation. These schemes are ideal for conservative
investors or those not in a position to take higher equity risks,
such as retired individuals. However, as compared to the money
market schemes they do have a higher price fluctuation risk and
compared to a Gilt fund they have a higher credit risk.
Income schemes:-These schemes invest in money markets, bonds and
debentures of corporates with medium and long-term maturities.
These schemes primarily target current income instead of capital
appreciation. They therefore distribute a substantial part of their
distributable surplus to the investor by way of dividend
distribution. Reliance Income Fund, Reliance Short Term Plan and
Reliance Fixed Investment Plans are examples of bond schemes.
Liquid Income Schemes:-Similar to the Income scheme but with a
shorter maturity than Income schemes. An example of this scheme is
the Reliance Liquid Fund.
Money Market Schemes:-These schemes invest in short term
instruments such as commercial paper (CP), certificates of deposit
(CD), treasury bills (T-Bill) and overnight money (Call). The
schemes are the least volatile of all the types of schemes because
of their investments in money market instrument with short-term
maturities. These schemes have become popular with institutional
investors and high net worth individuals having short-term surplus
funds.
Gilt Funds:-This scheme primarily invests in Government Debt.
Hence the investor usually does not have to worry about credit risk
since Government Debt is generally credit risk free. Reliance Gilt
Fund is an example of such a scheme.
Hybrid Schemes:-These schemes are commonly known as balanced
schemes. These schemes invest in both equities as well as debt.
Reliance Balanced Fund is examples of hybrid schemes.
Special Schemes:Index Schemes:-The primary purpose of an Index
is to serve as a measure of the performance of the market as a
whole, or a specific sector of the market. An Index also serves as
a relevant benchmark to evaluate the performance of mutual funds.
Some investors are interested in investing in the market in general
rather than investing in any specific fund. Such investors are
happy to receive the returns posted by the markets. Index Funds are
launched and managed for such investors. An example to such a fund
is the Reliance Index Fund.
Tax Savings Schemes:-
Investors (individuals and Hindu Undivided Families (HUFs)) are
being encouraged to invest in equity markets through Equity Linked
Savings Scheme (ELSS) by offering them a tax rebate. Units
purchased cannot be assigned / transferred/ pledged / redeemed /
switched out until completion of 3 years from the date of allotment
of the respective Units.
The Scheme is subject to Securities & Exchange Board of
India (Mutual Funds) Regulations, 1996 and the notifications issued
by the Ministry of Finance (Department of Economic Affairs),
Government of India regarding ELSS.Subject to such conditions and
limitations, as prescribed under Section 88 of the Income-tax Act,
1961, subscriptions to the Units not exceeding Rs.10, 000 would be
eligible to a deduction, from income tax, of an amount equal to 20%
of the amount subscribed. Reliance Tax Saver
funds.Constitution:-Schemes can be classified as Closed-ended or
Open-ended depending upon whether they give the investor the option
to redeem at any time (open-ended) or whether the investor has to
wait till maturity of the scheme.Open ended Schemes:- The units
offered by these schemes are available for sale and repurchase on
any business day at NAV based prices. Hence, the unit capital of
the schemes keeps changing each day. Such schemes thus offer very
high liquidity to investors and are becoming increasingly popular
in India. Please note that an open-ended fund is NOT obliged to
keep selling/issuing new units at all times, and may stop issuing
further subscription to new investors.
Closed Ended Schemes:-The unit capital of a close-ended product
is fixed as it makes a one-time sale of fixed number of units.
These schemes are launched with an initial public offer (IPO) with
a stated maturity period after which the units are fully redeemed
at NAV linked prices. In the interim, investors can buy or sell
units on the stock exchanges where they are listed. Unlike
open-ended schemes, the unit capital in closed-ended schemes
usually remains unchanged. After an initial closed period, the
scheme may offer direct repurchase facility to the investors.
Closed-ended schemes are usually more illiquid as compared to
open-ended schemes and hence trade discount to the NAV. This
discount tends towards the NAV closer to the maturity date of the
scheme.
MAIN POINTS OF DISTINCTION BETWEEN OPEN ENDED AND CLOSED ENDED
SCHEME
S.NOFeaturesOpen endedClosed ended
1Subscription Open for public subscription through out the
currency of the scheme Open for a subscription for a limited
period
2Corpus The fund raised from the public keeps raisin The corpus
of the scheme is fixed for all time to come
3ExitEasy and convince exit, any time No exit possible till the
closure of the scheme
4LiquidationUnits can be liquidated at any time Units can be
liquidated only at the end of specific period
5MaturityNo maturity period Fixed maturity period
6ListingNo listing hence not traded in stock exchange Listed in
stock exchange and traded
7LiquidityThrough re- purchase by mutual fund at net asset value
Through trading in stock exchange at the current market price
Interval Schemes:-These schemes combine the features of
open-ended and closed-ended schemes. They may be traded on the
stock exchange or may be open for sale or redemption during
pre-determined intervals at NAV based prices.
ADVANTAGES OF MUTUAL FUNDS:
Benefits of Mutual funds:
Affordability:-A mutual fund invests in a portfolio of assets,
i.e. bonds, shares, etc. depending upon the investment objective of
the scheme. An investor can buy in to a portfolio of equities,
which would otherwise be extremely expensive. Each unit holder thus
gets an exposure to such portfolios with an investment as modest as
Rs.500/-
Diversification:-It simply means that you must spread your
investment across different securities (stocks, bonds, money market
instruments, real estate, fixed deposits etc.) and different
sectors (auto, textile, information technology etc.). Professional
Management:-It is the Fund Manager's job to (a) find the best
securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market
conditions and adjust the mix of the portfolio, as and when
required.
Variety:-Mutual funds offer a tremendous variety of schemes.
This variety is beneficial in two ways: first, it offers different
types of schemes to investors with different needs and risk
appetites; secondly, it offers an opportunity to an investor to
invest sums across a variety of schemes, both debt and equity.
Tax BenefitsRegulations:-Securities Exchange Board of India
(SEBI), the mutual funds regulator has clearly defined rules, which
govern mutual funds. These rules relate to the formation,
administration and management of mutual funds and also prescribe
disclosure and accounting requirements.
Liquidity:-In open-ended mutual funds, you can redeem all or
part of your units any time you wish.
Convenience:-An investor can purchase or sell fund units
directly from a fund, through a broker or a financial planner. The
investor may opt for a Systematic Investment Plan (SIP) or a
Systematic Withdrawal Advantage Plan (SWAP).
Flexibility:- Mutual Funds offering multiple schemes allow
investors to switch easily between various schemes. This
flexibility gives the investor a convenient way to change the mix
of his portfolio over time.
Transparency:- Open-ended mutual funds disclose their Net Asset
Value (NAV) daily and the entire portfolio monthly. This level of
transparency, where the investor himself sees the underlying assets
bought with his money, is unmatched by any other financial
instrument.
DISADVANTAGES OF MUTUAL FUNDS:
Drawback of Mutual Funds:-Mutual funds have their drawbacks and
may not be for everyone. No Guarantees: No investment is risk free.
If the entire stock market declines in value, the value of mutual
fund shares will go down as well, no matter how balanced the
portfolio. Investors encounter fewer risks when they invest in
mutual funds than when they buy and sell stocks on their own. Fees
and commissions: All funds charge administrative fees to cover
their day-to-day expenses. Some funds also charge sales commissions
or "loads" to compensate brokers, financial consultants, or
financial planners. Taxes: During a typical year, most actively
managed mutual funds sell anywhere from 20 to 70 percent of the
securities in their portfolios. If your fund makes a profit on its
sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.Management risk:- B
Risk:-
Risk/Return Trade-Off:-The most important relationship to
understand is the risk-return trade-off. Higher the risk greater
the returns/loss and lower the risk lesser the returns/loss.
Market Risk:-Sometimes prices and yields of all securities rise
and fall. Broad outside influences affecting the market in general
lead to this. This is true, may it be big corporations or smaller
mid-sized companies. This is known as Market Risk. A Systematic
Investment Plan (SIP) that works on the concept of Rupee Cost
Averaging (RCA) might help mitigate this risk.
Credit Risk:-The debt servicing ability (may it be interest
payments or repayment of principal) of a company through its cash
flows determines the Credit Risk faced by you. This credit risk is
measured by independent rating agencies like CRISIL who rate
companies and their paper. A AAA rating is considered the safest
whereas a D rating is considered poor credit quality. A
well-diversified portfolio might help mitigate this risk.
Interest risk:-In a free market economy interest rates are
difficult if not impossible to predict. Changes in interest rates
affect the prices of bonds as well as equities. If interest rates
rise the prices of bonds fall and vice versa. Equity might be
negatively affected as well in a rising interest rate environment.
A well-diversified portfolio might help mitigate this risk.
Political/Government policy Risk:-Changes in government policy
and political decision can change the investment environment. They
can create a favorable environment for investment or vice versa
SEBI GUIDELINES: All Mutual Funds Registered with SEBI Unit
Trust of India Association of Mutual Funds in India.
According to clause 7 of the code of conduct as specified in the
Fifth Schedule to SEBI (Mutual Funds) Regulations, 1996, the mutual
funds should not use any unethical means to sell market or induce
any investor to buy their schemes. Further, clause 8 and 9 provide
inter alia that they shall maintain high standards of integrity and
fairness in all their dealings, render at all times high standards
of service and exercise due diligence.
With a view to implement the code of conduct effectively, it was
made mandatory for all distributors and agents of mutual funds,
vide SEBI circular MFD/CIR No.10/310/01 dated September 25, 2001,
to pass the AMFI certification examination and to follow the
provisions of SEBI (Mutual funds) Regulations and Guidelines with
specific focus on regulations/guidelines on advertisements/sales
literature and code of conduct. This circular is issued under
Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.The
following guidelines issued by the SEBI:1) Take necessary steps to
ensure that the clients interest is protected. 2) Adhere to SEBI
Mutual Fund Regulations and guidelines related to selling,
distribution and advertising practices. Be fully conversant with
the key provisions of the offer document as well as the operational
requirements of various schemes. 3) Provide full and latest
information of schemes to investors in the form of offer documents,
performance reports, fact sheets, portfolio disclosures and
brochures, and recommend schemes appropriate for the clients
situation and needs. 4) Highlight risk factors of each scheme,
avoid misrepresentation and exaggeration, and urge investors to go
through offer documents/key information memorandum before deciding
to make investments. 5) Disclose all material information related
to the schemes/plans while canvassing for business. 6) Abstain from
indicating or assuring returns in any type of scheme, unless the
offer document is explicit in this regard. 7) Maintain necessary
infrastructure to support the AMCs in maintaining high service
standards to investors, and ensure that critical operations such as
forwarding forms and ceruse to AMCs/registrars and dispatch of
statement of account and redemption cheques to investors are done
within the time frame prescribed in the offer document and SEBI
Mutual Fund Regulations. 8) Avoid colluding with clients in faulty
business practices such as bouncing cheques, wrong claiming of
dividend/redemption cheques, etc. 9) Avoid commission driven
malpractices such as: (a) Recommending inappropriate products
solely because the intermediary is getting higher commissions
therefore. (b) Encouraging over transacting and churning of mutual
fund investments to earn higher commissions, even if they mean
higher transaction costs and tax for investors. 10) Avoid making
negative statements about any AMC or scheme and ensure that
comparisons if any are made with similar and comparable products.
11) Ensure that all investor related statutory communications (such
as changes in fundamental attributes, exit/entry load, exit
options, and other material aspects) are sent to investors reliably
and on time12) Maintain confidentiality of all investor deals and
transactions. 13) When marketing various schemes, remember that a
clients interest and suitability to their financial needs is par
amount, and that extra commission or incentive earned should never
form the basis for recommending a scheme to the client.
14) Intermediaries will not rebate commission back to investors
and avoid attracting clients through temptation of rebate/gifts
etc. 15) A focus on financial planning and advisory services
ensures correct selling, and also reduces the trend towards
investors asking for pass back of commission. 16) All employees
engaged in sales and marketing should obtain AMFI certification.
Employees in other functional areas should also be encouraged to
obtain the same certificatiMutual Fund Companies in India:-The
concept of mutual funds in India dates back to the year 1963. The
era between 1963 and 1987 marked the existence of only one mutual
fund company in India with Rs.67 bn assets under management (AUM),
by the end of its monopoly era, the Unit Trust of India (UTI). By
the end of the 80s decade, few other mutual fund companies in India
took their position in mutual fund market.
The new entries of mutual fund companies in India were SBI
Mutual Fund, Can bank Mutual Fund, Punjab National Bank Mutual
Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund
industry. By the end of 1993, the total AUM of the industry was
Rs.470.04 bn. The private sector funds started penetrating the fund
families. In the same year the first Mutual Fund Regulations came
into existence with re-registering all mutual funds except UTI. The
regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company
in India which has now merged with Franklin Templeton. Just after
ten years with private sector players penetration, the total assets
rose up to Rs.1218.05 bn. Today there are 33 mutual fund companies
in India.
A. Bank Sponsored :-1. Joint Ventures - Predominantly Indian -
Canara Robeco Asset Management Company Ltd. - SBI Funds Management
Pvt. Ltd.
2. Joint Ventures - Predominantly Foreign - Baroda Pioneer Asset
Management Company Ltd.
3. Others - IDBI Asset Management Ltd. - UTI Asset Management
Company Ltd
B. Institutions:- - LIC Mutual Fund Asset Management Company
Ltd
ivate SecC. Prtor: 1. Indian:- - Axis Asset Management Company
Ltd. - Benchmark Asset Management Company Pvt. Ltd. - Deutsche
Asset Management (India) Pvt. Ltd. - Edelweiss Asset Management
Ltd. - Escorts Asset Management Ltd. - IDFC Asset Management
Company Pvt. Ltd. - JM Financial Asset Management Pvt. Ltd. - Kotak
Mahindra Asset Management Company Ltd - L&T Investment
Management Ltd. - Motilal Oswal Asset Management Company Ltd. -
Peerless Funds Management Co. Ltd. - Quantum Asset Management Co.
Pvt. Ltd.
Reliance Capital Asset Management Ltd. - Religare Asset
Management Company Ltd. - Sahara Asset Management Company Pvt. Ltd.
- Tata Asset Management Ltd. - Taurus Asset Management Company
Ltd.2.Foreign:- - AIG Global Asset Management Company (India) Pvt.
Ltd. - FIL Fund Management Pvt. Ltd. - Fortis Investment Management
(India) Pvt. Ltd. - Franklin Templeton Asset Management (I) Pvt.
Ltd. - Goldman Sachs Asset Management (I) Pvt. Ltd. - Mirae Asset
Global Investments (India) Pvt. Ltd. - Pramerica Asset Managers
Pvt. Ltd. 3. Joint Ventures - Predominantly Indian :- - Birla Sun
Life Asset Management Company Ltd. - DSP BlackRock Investment
Managers Pvt. Ltd. - HDFC Asset Management Company Ltd. - ICICI
Prudential Asset Mgmt.Company Ltd. - Sundaram BNP Paribas Asset
Management Company Ltd. 4. Joint Ventures - Predominantly Foreign:-
- AEGON Asset Management Company Pvt. Ltd. - Bharti AXA Investment
Managers Pvt. Ltd. - HSBC Asset Management (India) Pvt. Ltd. - ING
Investment Management (India) Pvt. Ltd. - JPMorgan Asset Management
India Pvt. Ltd. - Morgan Stanley Investment Management Pvt.Ltd. -
Principal Pnb Asset Management Co. Pvt. Ltd. - Shinsei Asset
Management (India) Pvt. Ltd.
Major Mutual Fund Companies in India:
ABN AMRO Mutual Fund:-ABN AMRO Mutual Fund was setup on April
15, 2004 with ABN AMRO Trustee (India) Pvt. Ltd. as the Trustee
Company. The AMC, ABN AMRO Asset Management (India) Ltd. was
incorporated on November 4, 2003. Deutsche Bank A G is the
custodian of ABN AMRO Mutual Fund.AXIS Mutual Fund:- Axis Bank was
the first of the new private banks to have begun operations in
1994, after the Government of India allowed new private banks to be
established. The Bank was promoted jointly by the Administrator of
the specified undertaking of the Unit Trust of India (UTI - I),
Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies,
i.e. National Insurance Company Ltd., The New India Assurance
Company Ltd., The Oriental Insurance Company Ltd. and United India
Insurance Company Ltd. Birla Sun Life Mutual Fund:-Birla Sun Life
Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in
1871 and is being represented in Canada, the US, the Philippines,
Japan, Indonesia and Bermuda apart from India. Birla Sun Life
Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of Rs. 10,000 crores.Bank of
Baroda Mutual Fund (BOB Mutual Fund) :-Bank of Baroda Mutual Fund
or BOB Mutual Fund was setup on October 30, 1992 under the
sponsorship of Bank of Baroda. BOB Asset Management Company Limited
is the AMC of BOB Mutual Fund and was incorporated on November 5,
1992. Deutsche Bank AG is the custodian.
HDFC Mutual Fund:-HDFC Mutual Fund was setup on June 30, 2000
with two sponsorers nemely Housing Development Finance Corporation
Limited and Standard Life Investments limited
ING Vysya Mutual Fund:-ING Vysya Mutual Fund was setup on
February 11, 1999 with the same named Trustee Company. It is a
joint venture of Vysya and ING. The AMC, ING Investment Management
(India) Pvt. Ltd. was incorporated on April 6, 1998.
ICICI PRUDENTIAL Mutual Fund:-The mutual fund of ICICI is a
joint venture with Prudential Plc. of America, one of the largest
life insurance companies in the US of A. ICICI PRUDENTIAL Mutual
Fund was setup on 13th of October, 1993 with two sponsors,
Prudential Plc. and ICICI Ltd. The Trustee Company formed is ICICI
PRUDENTIAL Trust Ltd. and the AMC is ICICI PRUDENTIAL Asset
Management Company Limited incorporated on 22nd of June, 1993.
Sahara Mutual Fund:-Sahara Mutual Fund was set up on July 18,
1996 with Sahara India Financial Corporation Ltd. as the sponsor.
Sahara Asset Management Company Private Limited incorporated on
August 31, 1995 works as the AMC of Sahara Mutual Fund. The paid-up
capital of the AMC stands at Rs 25.8 crore.
State Bank of India Mutual Fund:-State Bank of India Mutual Fund
is the first Bank sponsored Mutual Fund to launch offshor fund, the
India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today
it is the largest Bank sponsored Mutual Fund in India. They have
already launched 35 Schemes out of which 15 have already yielded
handsome returns to investors. State Bank of India Mutual Fund has
more than Rs. 5,500 Crores as AUM. Now it has an investor base of
over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund:-Tata Mutual Fund (TMF) is a Trust under the
Indian Trust Act, 1882. The sponsorers for Tata Mutual Fund are
Tata Sons Ltd., and Tata Investment Corporation Ltd. The investment
manager is Tata Asset Management Limited and its Tata Trustee
Company Pvt. Limited. Tata Asset Management Limited's is one of the
fastest in the country with more than Rs. 7,703 crores (as on April
30, 2005) of AUM.
Kotak Mahindra Mutual Fund:-Kotak Mahindra Asset Management
Company (KMAMC) is a subsidiary of KMBL. It is presently having
more than 1,99,818 investors in its various schemes. KMAMC started
its operations in December 1998. Kotak Mahindra Mutual Fund offers
schemes catering to investors with varying risk - return profiles.
It was the first company to launch dedicated gilt scheme investing
only in government securities. Unit Trust of India Mutual Fund:-UTI
Asset Management Company Private Limited, established in Jan 14,
2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Privete Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crore. The sponsorers of UTI
Mutual Fund are Bank of Baroda (BOB), Punjab National Bank (PNB),
State Bank of India (SBI), and Life Insurance Corporation of India
(LIC). The schemes of UTI Mutual Fund are Liquid Funds, Income
Funds, Asset Management Funds, Index Funds, Equity Funds and
Balance Funds.HSBC Mutual Fund: HSBC Mutual Fund was setup on May
27, 2002 with HSBC Securities and Capital Markets (India) Private
Limited as the sponsor. Board of Trustees, HSBC Mutual Fund acts as
the Trustee Company of HSBC Mutual Fund.
Reliance Mutual Fund:-
Reliance Mutual Fund (RMF) was established as trust under Indian
Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited
and Reliance Capital Trustee Co. Limited is the Trustee. It was
registered on June 30, 1995 as Reliance Capital Mutual
Fund which was changed on March 11, 2004. Reliance Mutual Fund
was formed for launching of various schemes under which units are
issued to the Public with a view to contribute to the capital
market and to provide investors the opportunities to make
investments in diversified securities.
Standard Chartered Mutual Fund:-Standard Chartered Mutual Fund
was set up on March 13, 2000 sponsored by Standard Chartered Bank.
The Trustee is Standard Chartered Trustee Company Pvt. Ltd.
Standard Chartered Asset Management Company Pvt. Ltd. is the AMC
which was incorporated with SEBI on December 20,1999.
Franklin Templeton India Mutual Fund:-The group, Frnaklin
Templeton Investments is a California (USA) based company with a
global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of
the largest financial services groups in the world. Investors can
buy or sell the Mutual Fund through their financial advisor or
through mail or through their website. They have Open end
Diversified Equity schemes, Open end Sector Equity schemes, Open
end Hybrid schemes, Open end Tax Saving schemes, Open end Income
and Liquid schemes, Closed end Income schemes and Open end Fund of
Funds schemes to offer.
Morgan Stanley Mutual Fund India:-Morgan Stanley is a worldwide
financial services company and its leading in the market in
securities, investment management and credit services. Morgan
Stanley Investment Management (MISM) was established in the year
1975. It provides customized asset management services and products
to governments, corporations, pension funds and non-profit
organizations. Its services are also extended to high net worth
individuals and retail investors. In India it is known as Morgan
Stanley Investment Management Private Limited (MSIM India) and its
AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close
end diversified equity scheme serving the needs of Indian retail
investors focusing on a long-term capital appreciation.
Escorts Mutual Fund:-Escorts Mutual Fund was setup on April 15,
1996 with Escorts Finance Limited as its sponsor. The Trustee
Company is Escorts Investment Trust Limited. Its AMC was
incorporated on December 1, 1995 with the name Escorts Asset
Management Limited.
Alliance Capital Mutual Fund:-Alliance Capital Mutual Fund was
setup on December 30, 1994 with Alliance Capital Management Corp.
of Delaware (USA) as sponsored. The Trustee is ACAM Trust Company
Pvt. Ltd. and AMC, the Alliance Capital Asset Management India
(Pvt.) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund:-Benchmark Mutual Fund was setup on June
12, 2001 with Niche Financial Services Pvt. Ltd. as the sponsors
and Benchmark Trustee Company Pvt. Ltd. as the Trustee Company.
Incorporated on October 16, 2000 and headquartered in Mumbai,
Benchmark Asset Management Company Pvt. Ltd. is the AMC.
Canbank Mutual Fund:- Canbank Mutual Fund was setup on December
19, 1987 with Canara Bank acting as the sponsor. Canbank Investment
Management Services Ltd. incorporated on March 2, 1993 is the AMC.
The Corporate Office of the AMC is in Mumbai.
CANCHOLA MUTUALFUND:-
Chola Mutual Fund under the sponsorship of Cholamandalam
Investment & Finance Company Ltd. was setup on January 3, 1997.
Cholamandalam Trustee Co. Ltd. is the Trustee Company and AMC is
Cholamandalam AMC Limited.
LIC Mutual Fund:-Life Insurance Corporation of India set up LIC
Mutual Fund on 19th June 1989. It contributed Rs.2 crores towards
the corpus of the Fund. LIC Mutual Fund was constituted as a Trust
in accordance with the provisions of the Indian Trust Act, 1882. .
The Company started its business on 29th April 1994. The Trustees
of LIC Mutual Fund have appointed Jeevan Bima Sahayog Asset
Management Company Ltd as the Investment Managers for LIC Mutual
Fund.
GIC Mutual Fund:-GIC Mutual Fund, sponsored by General Insurance
Corporation of India (GIC), a Government of India undertaking and
the four Public Sector General Insurance Companies, viz. National
Insurance Co. Ltd (NIC), The New India Assurance Co. Ltd. (NIA),
The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co.
Ltd. (UII) and is constituted as a Trust in accordance with the
provisions of the Indian Trusts Act, 1882.Future Outlook:-The
mutual funds industry has been growing annually at the rate of 9
per cent for the last five years and is expected to double its AUMs
by the end of March 2010, according to AMFI. Further, the annual
composite growth rate of the industry is expected to be 13 per cent
in the next ten years. The industry, with less than ten schemes a
decade ago, has 460 schemes today. The schemes are more diverse and
offer a wide array of choice to investors.
COMPANY PROFILE
Axis Bank was the first of the new private banks to have begun
operations in 1994, after the Government of India allowed new
private banks to be established. The Bank was promoted jointly by
the Administrator of the specified undertaking of Unit Trust of
India(UTI)General InsuranceCorporation Of India(GIC)Life
InsuranceCorporation Of India(LIC)Other four PSU insurance
companies, i.e. National Insurance Company Ltd., The New India
Assurance Company Ltd., The Oriental InsuranceCompany Ltd. and
United India Insurance company ltdThe Bank as on 31st December,
2010 is capitalized to the extent of Rs. 409.90 crores with the
public holding (other than promoters and GDRs) at 53.62%.The Bank's
Registered Office is at Ahmedabad and its Central Office is located
at Mumbai. The Bank has a very wide network of more than 1281
branches (including 169 Service Branches/CPCs as on 31st December,
2010). The Bank has a network of over 5303 ATMs (as on 31st
December, 2010) providing 24 hrs a day banking convenience to its
customers. This is one of the largest ATM networks in the
country.The Bank has strengths in both retail and corporate banking
and is committed to adopting the best industry practices
internationally in order to achieve excellence
OBJECTIVES: To carry on the activity of a Mutual Fund as may be
permitted at law and formulate and devise various collective
Schemes of savings and investments for people in India and abroad
and also ensure liquidity of investments for the Unit holders; To
deploy Funds thus raised so as to help the Unit holders earn
reasonable returns on their savings.VISION 2015: To be the
preferred financial solutions provider excelling in customer
delivery through insight, empowered employees and smart use of
technology
Mission AND Values :
Customer Service and Product Innovation tuned to diverse needs
of individual and corporate clientele. Continuous technology up
gradation while maintaining human values. Progressive globalization
and achieving international standards. Efficiency and effectiveness
built on ethical practices.
BOARD OF DIRECTORS: Ms. Shikha Sharma, Chairperson, Associate
Director Mr . T S Narayanasami, Independent Director Mr. Pranesh
Misra, Independent Director Mr. U R Bhat, Independent Director Mr.
Sonu Bhasin, Associate Director Mr. Rajiv Anand, MD & CEO of
Axis AMC, Associate Director
Business Philosophy: Our business will be built on three
pillars. These are:
Outside-in View Investor at the heart of every single decision.
Communicate in his language, not in ours. Enduring Wealth Creation
Play a serious and credible role in investor's money basket.
Encourage investors to build a long-term perspective of the mutual
fund category.Long-term Relationships Leverage the equity of the
'Axis' brand Aim at building relationships rather than being
transactional.
Service Providers: Custodian and Fund Accountant Destuche Bank
A.G. 222,Kodak House, Dr. D.N. Road, Fort, Mumbai - 400 001.
Registrar and Transfer Agent: Karvy Computershare Pvt. Ltd. Unit:
Axis Mutual fund Karvy Plaza, No.8-2-596 Street No.1, Banjara
Hills, Hyderabad - 500 034.
PRODUCTS OF THE COMPANY: Axis Equity Fund Axis Tax Saver
Fund
Axis Midcap Fund
Axis Liquid Fund
Axis Income Saver Fund
Axis Triple Advantage Fund
Axis Short Term Fund Axis Equity Fund: A diversified equity fund
that invests primarily in the Indian equity markets Provides the
opportunity to capitalize on India's high paced growth Supported by
a strong investment management team at Axis Mutual Fund Suitable
for an investment horizon of 5 years or more With no entry load
EasyCall facility availableAxis Tax Saver Fund: A diversified
equity fund that invests in the Indian equity markets Provides the
opportunity to capitalize on India's high paced growth Also
provides tax benefits under section 80C of the Income Tax Act, 1961
Supported by a strong investment management team at Axis Mutual
Fund Suitable for an investment horizon of 5 years or more With no
entry load Has a lock-in period of 3 years i.e. money cannot be
redeemed before 3 years from the date of investment EasyCall
facility availableAxis Midcap Fund: Axis Midcap Fund can help you
do just that. Get more for your family. Like any other equity fund,
it invests in a basket of stocks. But unlike large cap equity
funds, it invests in carefully chosen mid sized companies that have
the potential to offer more returns than the usual large blue chip
companies. While this means that it carries greater risk and
volatility, its just what you might need to provide for that extra
that your family wants. Key Features: An equity fund that invests
primarily in mid sized companies to capitalise on their fast paced
growth Amongst the mid sized companies, it has a preference for the
larger ones that carry relatively lower risk It is suitable for an
investment horizon of 5 yrs or more It is suitable when you want to
plan for a bigger home, better holidays, bigger cars, etc.Axis
Liquid Fund: An extremely low risk fund suitable for an investment
horizon of 1 day 90 days Returns are calculated for the number of
days you remain invested No entry or exit loads High liquidity -
Under normal circumstances, we will endeavour to ensure that an
investor gets his money back one day after putting in a valid
redemption request Axis Income Saver Fund: A low to medium risk
fund suitable for an investment horizon of 2 4 years Brings
stability to your portfolio by investing primarily in fixed income
instruments Offers the potential for capital growth through limited
exposure to equity instruments Adopts a quantitative asset
allocation strategy for risk management Open-ended nature allows
you to buy or sell units of the scheme at any point of time subject
to applicable loads Scheme managed by an experienced team of fund
managersAxis Triple Advantage Fund - Growth through
diversification:
Axis Triple Advantage Fund helps you take advantage of
diversification by investing in a mix of equity, fixed income and
gold. This not only helps avoid monetary surprises but also
provides opportunity for wealth growth. With Axis Triple Advantage
Fund, if you have planned for something, chances are you should be
able to go and get it. Key Features: Suitable for an investment
horizon of 3 years or more Provides diversification across three
asset classes viz. equity, fixed income and gold thereby leading to
reduction in risk Returns potential not compromised even with
reduced risk levels Returns more stable than pure equity or gold
investments over the long term Offers convenience. Now one single
application is sufficient for investment in three asset classes. 20
- 30% of investment in gold. Gold is a good hedge against financial
crises.
Axis Short Term Fund : A low risk fund suitable for an
investment horizon of 6 months or more Aims to provide stable
returns by investing in debt and money market instruments Returns
are calculated for the number of days you remain invested No entry
load but with an exit load of 0.25% if units are redeemed/switched
out within one month from the date of allotment EasyCall facility
available High liquidity - Under normal circumstances, we will
endeavour to ensure that an investor gets his money back one day
after putting in a valid redemption request Tax efficient as
dividends are tax-free in your hands (post deduction of 14.1625%
dividend distribution tax for individual investors - inclusive of
cess and surcharge)
AXIS EQUITY FUND PORTFOLIO:
Portfolio (As on Mar 31, 2011)
EquityValue(Rs in cr.)Qty%
Infosys Technologies59.26182,842.008.10
HDFC Bank45.15192,466.006.17
ICICI Bank42.97384,930.005.88
Tata Consultancy Services42.72360,874.005.84
ITC42.062,309,594.005.75
Housing Development Finance Corporation40.49577,395.005.54
Reliance Industries38.36365,685.005.25
Larsen and Toubro31.79192,467.004.35
State Bank of India29.27105,855.004.00
Coal India23.34673,636.003.19
Oil and Natural Gas Corporation19.62673,635.002.68
Tata Steel17.96288,701.002.46
Mahindra and Mahindra16.85240,583.002.30
Jindal Steel & Power15.10216,519.002.06
Titan Industries14.6738,493.002.01
GAIL India14.51312,761.001.98
Hindalco Industries14.09673,617.001.93
Cummins India13.43192,463.001.84
DQ Entertainment International12.072,145,197.001.65
Jyothy Laboratories11.64529,275.001.59
GlaxoSmithKline Consumer Healthcare10.8248,151.001.48
Sun Pharmaceutical Industries10.65240,585.001.46
Maruti Suzuki India8.5067,365.001.16
Punjab National Bank8.1767,362.001.12
Lupin8.02192,467.001.10
Cadila Healthcare7.6096,235.001.04
Petronet LNG Ltd7.29598,767.001.00
Jubilant Foodworks7.26134,726.000.99
Bharti Airtel6.88192,455.000.94
A.K.Capital Services Ltd6.85161,719.000.94
Bank Of Baroda6.5067,363.000.89
Dr Reddys Laboratories6.3138,494.000.86
Whirlpool of India.5.11192,455.000.70
Emami4.82120,297.000.66
Asian Paints4.5117,840.000.62
Praj Industries4.23589,602.000.58
Others / UnlistedValue(Rs in cr.)Rating%
Others (less than 0.50% of the corpus)7.821.07
Cash / CallValue(Rs in cr.)Rating%
Debt, Cash & Other Receivables64.598.83
Major competitors:
Hdfc mutual fund UTI Mutual Fund State Bank of India Mutual Fund
(SBI) Tata Mutual Fund Reliance Mutual Fund ABN AMRO Mutual Fund
Birla Sun Life Mutual Fund Bank of Baroda Mutual Fund (BOB Mutual
Fund) HSBC Mutual Fund ING Vysya Mutual Fund Prudential ICICI
Mutual Fund Sahara Mutual Fund
DATA ANALYSIS AND INTERPRETATION
Sector allocation of AXIS mutual fund as on 31-jan-2010
Sector%
Banks12.11%
Software7.48%
Consumer Non Durables7.48%
Pharmaceuticals5.34%
Finance4.32%
Petroleum Products3.66%
Oil3.33%
Ferrous Metals2.53%
Construction2.22%
Construction Project2.08%
Non - Ferrous Metals1.76%
Retailing1.49%
Gas1.38%
Power0.90%
Cement0.82%
Industrial Capital Goods0.80%
Auto0.45%
Interpretation : Axis Equity mutual fund has diversified its
investment in 17 sectors .The major allocation was seen in Banking,
Software ,consumer durables and Pharmaceuticals ,this 4 sectors
constitute 33.4% of total asset allocation of the fund which
represent that axis mutual fund is more bullish on this 4 sectors
.Funds are less allocated for Auto ,Cement, Industrial capital
goods and power which constitute less than 5 %.
Sector allocation of Axis Equity mutual fund as on
31-jan-2011
Sector%
Banks18.01%
Software15.08%
Cons Non Durables11.69%
Finance6.85%
Petroleum5.72%
Construction5.55%
Ferrous Metals4.61%
Pharmaceuticals4.47%
Auto4.08%
Gas3.16%
Minerals/Mining2.88%
Non - Ferrous Metals2.84%
Oil2.79%
Media & Ente2.53%
Telecom - Services1.29%
Industrial Products1.24%
Cement0.80%
Capital Goods0.71%
Transportation0.41%
Construction0.38%
Interpretation : Axis Equity mutual fund has diversified its
investment in 20 sectors .The major allocation was seen in Banking,
Software ,consumer durables and Finance ,this 4 sectors constitute
51% of total asset allocation of the fund .which represent that
axis mutual fund is more bullish on this 4 sectors .Funds are less
allocated for Construction ,Cement, Telecom and Capital goods which
constitute less than 5 %.
Comparision of sector allocation from jan 2010 to jan 2011
Sector 2010%Sector 2011%
Banks 12.11%Banks18.01%
Software7.48%Software15.08%
Consumer Non Durables 7.48%Cons Non Durables11.69%
Pharmaceuticals5.34%Finance6.85%
Finance4.32%Petroleum 5.72%
Petroleum Products 3.66%Construction 5.55%
Oil3.33%Ferrous Metals4.61%
Ferrous Metals 2.53%Pharmaceuticals4.47%
Construction2.22%Auto4.08%
Construction Project2.08%Gas 3.16%
Non - Ferrous Metals1.76%Minerals/Mining2.88%
Retailing1.49%Non - Ferrous Metals2.84%
Gas 1.38%Oil2.79%
Power0.90%Media & Ente2.53%
Cement0.82%Telecom - Services1.29%
Industrial Capital Goods0.80%Industrial Products1.24%
Auto 0.45%Cement0.80%
Capital Goods0.71%
Transportation0.41%
Construction0.38%
Changes in Asset allocation from 2010 to 2011
Sector%
Banks5.90%
Software7.60%
Consumer Non Durables4.21%
Pharmaceuticals-0.87%
Finance2.53%
Petroleum Products2.06%
Oil-0.54%
Ferrous Metals2.08%
Construction-1.84%
Construction Project-1.70%
Non - Ferrous Metals1.08%
Retailing-1.49%
Gas1.78%
Power-0.90%
Cement-0.02%
Industrial Capital Goods0.44%
Auto3.63%
Transportation0.41%
Telecom1.29%
Minerals/Mining2.88%
Media & Ente2.53%
Interpretation: Axis Equity mutual fund has diversified its
investment from 17 sectors to 20 sectors. It raised its investment
in Banks, Software and Consumer non durables up to 17.71%.It
reduced investment in Pharmaceuticals, oil, Construction etc
because their contribution is low.
Performance of Axis Equity fund with Benchmark
NIFTY Date close %
29-Jan-104882.05-6.69221
26-Feb-104922.30.824449
31-Mar-105249.16.639173
30-Apr-1052780.550571
30-May-105086.3-3.63206
30-Jun-105312.54.447241
30-Jul-105367.61.037176
31-Aug-105402.40.648334
30-Sep-106029.9511.61613
29-Oct-106017.7-0.20315
30-Nov-105862.7-2.57573
31-Dec-106134.54.636089
31-Jan-115505.9-10.247
AXIS EQUITY FUND GROWTH
FUND DATENAV%
Axis Equity Fund - Growth29-Jan-109.7-3
Axis Equity Fund - Growth26-Feb-109.841.443299
Axis Equity Fund - Growth31-Mar-1010.45.691057
Axis Equity Fund - Growth30-Apr-1010.591.826923
Axis Equity Fund - Growth30-May-1010.33-2.45515
Axis Equity Fund - Growth30-Jun-1010.774.259439
Axis Equity Fund - Growth30-Jul-1010.891.114206
Axis Equity Fund - Growth31-Aug-1011.011.101928
Axis Equity Fund - Growth30-Sep-1012.069.536785
Axis Equity Fund - Growth29-Oct-1011.87-1.57546
Axis Equity Fund - Growth30-Nov-1011.4-3.95956
Axis Equity Fund - Growth31-Dec-1011.843.859649
Axis Equity Fund - Growth31-Jan-1110.63-10.2196
Comparison of AXIS Equity Fund Growth with NIFTY
MONTH/YEARNIFTY %AXIS%
Jan-10-6.69221-3
Feb-100.8244491.443299
Mar-106.6391735.691057
Apr-100.5505711.826923
May-10-3.63206-2.45515
1-Jun4.4472414.259439
Jul-101.0371761.114206
Aug-100.6483341.101928
Sep-1011.616139.536785
Oct-10-0.20315-1.57546
Nov-10-2.57573-3.95956
Dec-104.6360893.859649
Jan-11-10.247-10.2196
Interpretation: If the Nifty is giving positive returns, AXIS
equity Fund is also giving positive returns. The Negative return of
Nifty is impacting heavily on the fund.
Performance of Axis Equity fund with Benchmark SENSEX
SENSEXDADATECLOSE
%
10-Jan16,357.96-6.83859254
10-Feb16,429.550.437646259
10-Mar17,527.776.684415978
10-Apr17,558.710.176519888
10-May16,944.63-3.49729564
10-Jun17,700.904.463183911
10-Jul17,868.290.94565813
10-Aug17,971.120.575488757
10-Sep20,069.1211.6742863
10-Oct20,032.34-0.18326663
10-Nov19,521.25-2.55
10-Dec20,509.095.06033169
11-Jan18,327.76-10.635918
AXIS EQUITY FUND GROWTH
FUND DATENAV%
Axis Equity Fund - Growth29-Jan-109.7-3
Axis Equity Fund - Growth26-Feb-109.841.443299
Axis Equity Fund - Growth31-Mar-1010.45.691057
Axis Equity Fund - Growth30-Apr-1010.591.826923
Axis Equity Fund - Growth30-May-1010.33-2.45515
Axis Equity Fund - Growth30-Jun-1010.774.259439
Axis Equity Fund - Growth30-Jul-1010.891.114206
Axis Equity Fund - Growth31-Aug-1011.011.101928
Axis Equity Fund - Growth30-Sep-1012.069.536785
Axis Equity Fund - Growth29-Oct-1011.87-1.57546
Axis Equity Fund - Growth30-Nov-1011.4-3.95956
Axis Equity Fund - Growth31-Dec-1011.843.859649
Axis Equity Fund - Growth31-Jan-1110.63-10.2196
SENSEX%AXIS%
-6.83859254-3
0.4376462591.443299
6.6844159785.691057
0.1765198881.826923
-3.49729564-2.45515
4.4631839114.259439
0.945658131.114206
0.5754887571.101928
11.67428639.536785
-0.18326663-1.57546
-2.55-3.95956
5.060331693.859649
-10.635918-10.2196
Interpretation:
Performance of AXIS Equity Fund with Top 5 Funds(NAV%)
MONTH/YEARAXIS HDFCSBIKOTAKFRANKLINBIRLA
Jan-10-3-4.88411-5.99385-1.79691961.354167-4.31354
Feb-101.4432990.9914461.362398-1.5877626-1.336070.600436
Mar-105.6910575.7689646.9086028.352188884.68757.562008
Apr-101.8269233.4875061.6092533.813328490.1990056.626417
May-10-2.45515-1.50422-2.59837-3.6732552-3.47567-6.45599
Jun-104.2594395.1711975.5640246.727800981.3374495.420654
Jul-101.1142063.772781.2996394.066354744.5685285.177607
Aug-101.1019283.9513931.7581373.00825636-1.650491.835767
Sep-109.5367858.5704358.4286715.856678045.9230014.050788
Oct-10-1.575461.372001-0.19380.659719620.559183.623571
Nov-10-3.95956-1.71723-2.91262-3.70894472.502317-5.94545
Dec-103.8596490.9974522.044444-1.41542270.904159-0.42091
Jan-11-10.2196-8.26697-7.75261-12.4038911.344086-12.0202
