Damani Final c Curve(2)

8/3/2019 Damani Final c Curve(2)

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Name of Fund: TIMSR GROWTH FUND

Submitted to: PROF. AKSHAY DAMANI

Date of submission: SEPTEMBER 16, 2011

Students Name and Number:

SANKET BHELOSE 05

SWATI DALMIA 12NIRAV PAREKH 35

NEHA SHAH 100

HEMAL SHAH 97

DEEPAK PATIL 91

Course: PGDMFINANCE 2010 -12

Module Title: Securities analysis and Portfolio Management

Note B: Portfolio Outline

1. Introduction

TIMSR MUTUAL FUND is one of the largest mutual funds and well-established fund house in the country with

consistent fund performance across categories since its incorporation on December 10, 1999. While our past experience

does make us a veteran, but when it comes to investments, we have never believed that the experience is enough.

Our Investment Philosophy

The single most important factor that drives TIMSR Mutual Fund is its belief to give the investor the chance to profitably

invest in the financial market, without constantly worrying about the market swings. To realize this belief, TIMSR Mutual

Fund has set up the infrastructure required to conduct all the fundamental research and back it up with effective analysis.

Our strong emphasis on managing and controlling portfolio risk avoids chasing the latest "fads" and trends.

We Offer

We believe, that, by giving the investor long-term benefits, we have to constantly review the markets for new trends, to

identify new growth sectors and share this knowledge with our investors in the form of product offerings. We have come

up with various products across asset and risk categories to enable investors to invest in line with their investment

objectives and risk taking capacity. Besides, we also offer Portfolio Management Services.

2. Fund Details

Nature of Scheme Open-ended equity scheme w.e.f. June 25,2010

Inception Date June 25, 2007

Option/PlanDividend Option, Growth Option. Dividend Option offers Dividend

Payout and Dividend Re-investment facility.

Entry Load NIL


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(For Lumpsum Purchases and

investments through SIP/STP)

Unfront commission shall be paid directly by the investor to the ARN

Holder (AMFI registered Distributor) based on the investors' assessment

of various factors including the service rendered by the ARN Holder.

Exit Load

(as a % of the Applicable NAV)(Including for investments

through Systematic Investment Plan

(SIP)/ Systematic Transfer Plan (STP))

In respect of each purchase / switch-in of units, an Exit Load of1.00% is payable if Units are redeemed / switched-out within 1

year from the date of allotment.

No Exit Load is payable if Units are redeemed / switched-outafter 1 year from the date of allotment.

No Entry / Exit Load shall be levied on bonus units and units allotted on

dividend reinvestment.

Minimum Application Amount(Other than Systematic Investment Plan

(SIP)/ Systematic Transfer Plan (STP))

For new investors: Rs.5000 and any amount thereafter.

For existing investors: Rs. 1000 and any amount thereafter.

Lock-In-Period Nil

Net Asset Value Periodicity Every Business Day.

Redemption Proceeds Normally dispatched within 3-4 Business day

Tax Benefits

(As per present Laws)

Current Expense Ratio (#)

(Effective Date 22nd May 2009)

On the first 100 crores average weekly net assets 2.50%

On the next 300 crores average weekly net assets 2.25%

On the next 300 crores average weekly net assets 2.00%

On the balance of the assets 1.75%

(#) Any change in the expense ratio will be updated within two working days.

Plan Name NAV Date NAV AmountDividend Option 14 Sep 2011 15.4530

Growth Option 14 Sep 2011 15.4530

TOP

Investment Pattern

The asset allocation under the respective Plans will be as follows :

Sr. No. Type of InstrumentsMinimum Allocation

(% of Net Assets)

Maximum Allocation

(% of Net Assets)

Risk Profile of the

Instrument

1

Equity and equity related securities

of Small and Mid-Cap companies of

which

Small-Cap companies

Mid-Cap companies

75

5

70

100

15

95

High

2Equity and equity related securities

other than the above0 25 High

3 Debt and Money Market Securities 0 25 Low to Medium

The Investment in Securitised Debt will not normally exceed 25% of the net assets of the Scheme.

The Scheme may seek investment opportunity in the ADR / GDR / Foreign Equity and Debt Securities (max. 25%

of net assets). The Scheme may take derivatives position for hedging and portfolio balancing (max. 20% of the net

assets) based on the opportunities available subject to SEBI Regulations.
http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=909ef6c9-2c56-4ccb-8095-d618424147d4#tophttp://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=909ef6c9-2c56-4ccb-8095-d618424147d4#tophttp://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=909ef6c9-2c56-4ccb-8095-d618424147d4#top


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2.1 Name of Fund: TIMSR Growth midcap and small cap fund

Investment Policy

The investment Policy of the Scheme is to generate long-term capital appreciation from a portfolio that is

substantially constituted of equity and equity related securities of Small and Mid-Cap companies.

The Investment Manager will also seek participation in other equity and equity related securities to achieve optimal

portfolio construction. The Scheme may also invest a certain portion of its corpus in debt and money market

securities.

Small and Mid-Cap companies offer higher return potential than large cap companies on one hand but also carry

higher risk than large cap companies, particularly over the short and medium term. The following are some of the

reasons why Small / Mid cap companies offer higher return potential.

1. Relatively less known by market participants / price discovery by market is not full.2. Better growth prospects due to presence in a new segment/ area that is growing at a faster pace.3. Ability to gain share due to new technology, better product / service etc.

4. Room for P/E multiples to expand if the company transitions from a small / mid cap to large cap, etc.

To reduce risk, the Fund will maintain a well diversified portfolio. While the portfolio focuses primarily on a buy

and hold strategy at most times, it will balance the same with a rational approach to selling when the valuations

become too demanding even in the face of reasonable growth prospects in the long run. Though every endeavour

will be made to achieve the objectives of the Scheme, the AMC/Sponsors/Trustees do not guarantee that the

investment objectives of the Scheme will be achieved. No guaranteed returns are being offered under the Scheme.

Pursuant to the SEBI Regulations, the Scheme shall not make any investment in:

Any unlisted security of an associate or group company of the Sponsors; or

Any security issued by way of private placement by an associate or group company of the Sponsors; or

The listed securities of group companies of the Sponsors which is in excess of 25% of the net assets.

The Scheme may invest in other schemes managed by the AMC or in the schemes of any other mutual funds,provided it is in conformity with the investment objectives of the Scheme and in terms of the prevailing SEBI

Regulations. As per the SEBI Regulations, no investment management fees will be charged for such investments

and the aggregate inter scheme investment made by all the schemes of HDFC Mutual Fund or in the schemes of

other mutual funds shall not exceed 5% of the net asset value of the HDFC Mutual Fund.

Objective of Fund

The aim of the fund is to generate long-term capital appreciation from a portfolio that is substantially constituted of

equity and equity related securities of mid- and small-cap companies.

Target Customer

Who is eligible to invest?

Individuals

HUFs

NRI

Minors

Association of Persons


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Company

PartnerShip Firm

Trust

Societies

FIIs

OCBs

Repatriable Yes

Type of Fund

VR Category Equity: Mid & Small Cap

Type Open End

Load

Entry Load Nil

Exit Load 1% for redemption within 365 days

Investment Strategy

Strategy

The fund aims to generate appreciation by investing predominantly in mid-cap and small cap stocks. The risk of holding

such stocks is reduced by maintaining a well diversified portfolio. While the portfolio will primarily focus on a buy-and-

hold strategy at most times, it will balance the same with a rational approach to selling when the valuations become too

demanding even in the face of reasonable growth prospects in the long run. The key will be to identify stocks with room

for PE multiples to expand if the company transitions from a small to mid cap stock.

a) Short term: Funds will be reviewed on a half yearly basis

b) Investment responsibilities: Fund Managers held for investing the funds described above and compliancewith objectives and investment policy.

c) Investment diversification:Investments in equity were invested in accordance to optimal portfolio

calculations

d) Finance and Audit Committee approval:No deviations in the investment strategy during the covered period were made;


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3) List of Asset/asset class and justification for selection

Asset Allocation

% Net Assets Equity 100%

In addition to the business risks that are specific it its market environment, a firm faces market risk and credit risk

such as interest rates, etc. The funds are allocated to form the portfolio in following proportions: Textile Sector 25%,

Pharma Sector- 25%, Auto Sector- 15%, Materials Sector-15%, Finance Sector- 20%. In six Months period revision

was made to portfolio and NAV accumulated over the period was replaced for the benefit of higher returns,

maintaining the same level of risk-return spread. The Portfolio had increasing NAV for the fund administrators were

able to manage the risk.

Justification:

List of Asset class and justification of selection

Elder Pharma

It is engaged in the manufacture of a wide range of pharmaceutical product through research and development

and also in the manufacturing and marketing of diverse products through licensing agreements with

international pharmaceutical companies. The company is also engaged in the manufacturing of active

pharmaceutical ingredients. Its Annual Average return for last 5 years (March 2010) is 19.22%.Companys

annual average dividend for last 5 years is 5.18. Its P/E ratio is 10.65 while industry P/E is 10.61. Average

EPS for last 5 yrs is 30.25.

RAYMOND LTD

With over 60% market share in India, Raymond Ltd. is one of the largest integrated manufacturers of worsted

fabric in the world. Its Annual Average return for last 5 years (March 2010) is 14.91%. Its P/E ratio is 7.76

while industry P/E is 7.69. Average EPS for last 5 yrs is.

TIMKEN IND LTD

Timken India Limited is an India-based company. The Company is a producer of engineered antifriction

bearings and related products and services and alloy steel and components. The Company helps create,

transfer and control power, putting its friction management and power transmission technologies to work

across a range of industry spectrum.

Its Annual Average return for last 5 years (March 2010) is 17.09%. Its P/E ratio is 20.57 while industry P/E is

16.52. Average EPS for last 5 yrs is 5.49

DIC India Ltd

DIC India Limited is an India-based company engaged in printing ink business. The Company also operates

in graphic arts business, and offers printers supplies, machinery, pigments and reprographic products.

Its Annual Average return for last 5 years (March 2010) is 17.10%. Its P/E ratio is 8.94 while industry P/E is

15.58. Average EPS for last 5 yrs is 25.27.

DHFL

DHFL arguably stands strong as the third largest housing finance company & the second largest housing

finance company in the private sector.

Its Annual Average return for last 5 years (March 2011) is 51%.


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4.) Asset Allocation Process:

No two of our clients have the same asset allocation, although clients with similar goals and

tolerances for risk may have comparable allocations. The model pictured above is derived from a

process that can be summarized as follows:

1. Estimating short-term and long term financial requirements.We estimate your liquidity requirements for the near and long term. The outcome of this process is to establish a

flexible model that serves as a guide in establishing your financial goals.

2. Determining your tolerance for investment risk.Investment professionals often use the term risk in the context of predictability. For example, the return on a

risky investment is more unpredictable than the return on a risk-free investment that provides a certain return.

We assess the level of risk you feel is tolerable and comfortable. We also discuss the tradeoffs involved with not

tolerating risk. For example, by accepting more risk you may obtain higher investment returns. Typically a lower

return is expected over the long term as a consequence of assuming lower risk. Determining an investor's risk

tolerance is a very important process. Our models provide estimates of returns for given levels of risk based on

historical data, but the future is uncertain and it 's human nature not to know exactly how we will feel when market

returns are negative or produce lower returns than what was expected. Long-term success will be determined by theability to continue to stay invested during periods of uncertainty or even despair. Therefore, gauging an accurate

level of risk tolerance prior to market fluctuations may make the difference between long-term success or failure.

3. Establishing an Investment Policy.We formulate an investment policy describing your expectations about investment performance and how much

volatility you are willing to accept in achieving your investment goals. In a sense, your policy embodies long-term

guiding principles that, once established, should be retained unless your long-term investment goals change. We

anticipate that your policy will remain fairly consistent from year to year, with intermittent changes in response to

your financial circumstances.

4. Performing asset allocation analysis.

The final step of the process - which is typically performed at least annuallyis dividing your

investments among various asset classes in a manner that is consistent with your investment policy. In

recommending this tactical asset allocation, we endeavor to strike the appropriate balance between achieving your

goals for investment returns and reducing risk. This balance is unique to each investor. Critical to the process is our

research on what lies ahead in the capital markets and how various asset classes behave together to moderate risk.

Since asset allocation is far more important than security selection, timing (or luck), we put a great deal of emphasis

and effort into analyzing the information gathered during the previous steps to derive an appropriate asset allocation.

Our asset allocation model provides us with a guide for investment in certain asset classes. At the conclusion of this

step, we review and recommend investment managers who are most likely to outperform other managers in their

chosen management style over the next three to five years. We then recommend specific steps that we can take to

implement the allocation for you.

5. Changing the portfolio as of 31st

March 2010, 30th

September 2010 & 31st

March 2011

Fund managers aimed to increase the return at reasonable alteration of risk. In the given case, before churning of

portfolio C Curve appears as:


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After 31st

March 2010, Raymond Ltd is been replaced by DIC India Ltd

After that on 30th

September 2010, TIMKEN India Ltd was replaced by DHFL Ltd

0.2050

0.2100

0.2150

0.22000.2250

0.2300

0.2350

0.3880 0.3890 0.3900 0.3910 0.3920

Return

Return

0.185

0.19

0.195

0.2

0.205

0.21

0.215

0.336 0.338 0.34 0.342 0.344 0.346

Return

Return

0.0000

0.0500

0.1000

0.1500

0.2000

0.3240 0.3260 0.3280 0.3300 0.3320

Return

Return


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5) Portfolio Evaluation:

A benchmark is a comparative figure for analyzing the performance of any portfolio. The current portfolio had to

outperform SENSEX, therefore as one of the benchmarks for measurement SENSEX rate was used. It is an

accepted rate by the portfolio mangers as the benchmark or the cut-off. Reilly and Brown (2006) identify the Sharpe

ratio as a measure to evaluate portfolio performance as follows:

Si = Ri rfr

ri = average rate of return for the portfolio i during a specified time period.

rfr = average rate of return on risk-free assets during the same time period.

= standard deviation of the rate of return for portfolio I during the time period.

The present portfolio outcomes when plotted into Sharpe ratio gave the following results:

As on 31/03/10 Si = 0.22 0.0717 = 0.382216

0.388

As on 30/09/10 Si = 0.2120 0.79 = 0.386628

0.344

As on 30/03/11 Si = 0.16 0.0839 = 0.240823

0.316

The portfolio on 30th

September,2011 has a lower risk than other two . This indicates that the change of asset class

has been a right decision by the portfolio manger. It also gives a demonstration of the comparison that can be done

in order to evaluate performance.

Even though it has outperform SENSEX, but average has decrease year on year this is because of the internal and

external market, because of which our benchmark index has also decrease year on year .

However, any portfolio will be a desirable one if the assets allocated within the portfolio are justified.

The modern portfolio theory optimization problems an ex ante model of portfolio analysis; so the more accurate the

forecasts of the portfolio inputs the better a fund managers ability to take advantage of the future return and

covariance structure, generating greater ability to exploit the risk return trade off.

6) Costs (exit loads):

Entry Load NilExit Load 1% for redemption within 365 days


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7. Portfolio manager background

Since: Jan2008

Mr. Hemal Shah is a Commerce graduate from Mumbai University.

Prior to this, he has worked with Kotak Mahindra AMC from July 2002-September 2005 managing equityportfolios. SSKI Investor Services from (March 1999- July 2001) & from (Jan 2002 -July 2002) was involved in

Portfolio advisory -Retail Broking Services, Nimbus Communications-(July 2001-Jan 2002) was involved in

Broadcasting - Content Development, LKP Shares & Stock Brokers Pvt. Ltd (January 1998- March 1999) was a

Analyst -Equity Research, Meghraj Financial Services (July 1996-July 1998) was a Portfolio Manager

8) Conclusions

With new developments taking place in the domestic new methods for portfolio optimization have developed related

to probability forecasts of returns and diversification.

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Damani Final c Curve(2)