Evaluation Study of Risk and Returns of Sahara Mutual Funds-Veena Kamin-04118

Evaluation study of Risk and Returns of Sahara Mutual Funds __________________________________________________________________________

A PROJECT REPORT ON

EVALUATION STUDY OF RISK AND RETURNS OF SAHARA MUTUAL FUNDS

Submitted in partial fulfillment of the requirements of The M.B.A Degree Course of Bangalore University

Submitted By

VEENA KAMIN (REGD.NO:04XQCM 6115)

Under the Guidance and Supervision Of

Prof. Santhanam

M.P.BIRLA INSTITUTE OF MANAGEMENT Associate Bharatiya Vidya Bhavan

# 43, Race Course Road, Bangalore-560001 JUNE 2006

___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 1


Declaration

I hereby declare that this project report titled “Evaluation study of risk and returns of Sahara

mutual funds” is a record of independent work carried out by me, towards the partial fulfillment of

requirements for MBA course of Bangalore University at M.P.Birla Institute of Management. This

has not been submitted in part or full towards any other degree.

PLACE: BANGALORE

DATE: Miss. Veena Kamin



Principal’s Certificate

This to certify that the project report titled “Evaluation study of risk and returns of Sahara mutual

funds” has been prepared by MISS. Veena Kamin bearing the registration no.04XQCM6115 under

the guidance and supervision of Prof.SANTHANAM MPBIM, Bangalore.

Place: Bangalore Principal

Date: (Dr.N.S.Malavalli)



Guide’s Certificate

This is to certify that the Project Report entitled “Evaluation study of risk and returns of Sahara

mutual funds”, done by Miss. Veena Kamin bearing Registration No.04XQCM6115 is a bonafide

work done, carried under my guidance during the academic year 2005-06 in a partial fulfillment of

the requirement for the award of MBA degree by Bangalore University.

Place: Bangalore Prof. Santhanam

Date :



ACKNOWLEDGEMENT

I am thankful to Dr.N.S.Malavalli, Principal, M.P.Birla institute of management, Bangalore, who has

given his valuable support during my project.

I am extremely thankful to Prof. Santhanam, M.P.Birla institute of Management, Bangalore, who

has guided me to do this project by giving valuable suggestions and advice.

Finally, I express my sincere gratitude to all my friends and well wishers who helped me to do this

project.

Miss. Veena Kamin



INDEX

Chapters Particulars Page no.

Chapter I Research Extract 1

Chapter II a. Introduction to Mutual funds

b. Objectives of the study

c. Need for the study

d. Scope of the study

e. Limitations of the study

2

32

32

32

33

Chapter III a. Company profile

b. Product profile

34

36

Chapter IV a. Design of the study

b. Type of research

c. Methodology of data collection

d. Tools and techniques used

42

42

47

49

Chapter V a. Presentation and analysis of data

b. Testing of Hypothesis

50

68

Chapter VI Findings

Suggestions

Conclusion

71

72

73

Bibliography



RESEARCH EXTRACT

Mutual Funds (MF) have become one of the most attractive ways for the average person to

invest their money. It is said that Bank investment is the first priority of people to invest their

savings and the second place is for investment in Mutual Funds and other avenues. A Mutual

Fund pools resources from thousands of investors and then diversifies its investment into

many different holdings such as stocks, bonds, or Government securities in order to provide

high relative safety and returns.

The Project is a “FINANCE PROJECT” which tries to explain in layman’s language about

the history, growth, & pros and cons of investing in Mutual Funds and the second part of it

deals with the analysis of risk and returns of equity and debt schemes of Sahara Mutual Fund

in comparison with their respective benchmark indices.

The main objective of the project was to get an Overview of Mutual Fund Industry, its set up,

its working and to find out the risks and returns of both equity and debt schemes of Sahara

Mutual fund. Also generate leads of the prospective investors in Mutual Funds for the Asset

Management Company (AMC) to sell Mutual Fund products and to make people aware of

the Sahara Mutual Fund and its products.

The project includes a brief idea about the growth of MF industry (History), the broad

idea about the organization and concept of MF and SEBI Guidelines on Mutual Funds.

There are many improvements pending in the field and it has to happen as soon as possible

so as to call the MF industry as an Organized and well-developed sector.

The past performance of MF is not necessarily indicative of future performance of the

scheme and no AMC guarantees Returns and or safety of Principal.



INTRODUCTION TO MUTUAL FUNDS

Mutual Funds - The 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 appreciations realized are shared by its unit holders in proportion to the number of

units owned by them. Thus a Mutual Fund is the most suitable investment for the common

man as it offers an opportunity to invest in a diversified, professionally managed basket of

securities at a relatively low cost. The flow chart below describes broadly the working of a

mutual fund:



The following simple diagram clearly shows the working of a mutual fund:



Mutual Funds – Organization

There are many entities involved and the diagrams above (Fig 1, 2, 3) illustrate the

organizational set up of a mutual fund:

Advantages of Mutual Funds

• Diversification

y

es

• Professional Management

• Convenient Administration

• Return Potential

• Low Costs

• Liquidity

• Transparenc

• Flexibility

• Choice of schem

• Tax benefits

• Well regulated

Disadvantages of Mutual Funds

• No control over the costs



• No tailor made portfolios



HISTORY OF MUTUAL FUNDS (WORLDWIDE):

When three Boston securities executives pooled their money together in 1924 to create

the first mutual fund, they had no idea how popular mutual funds would become.

The idea of pooling money together for investing purposes started in Europe in the

mid-1800s. The first pooled fund in the U.S. was created in 1893 for the faculty

and staff of Harvard University. On March 21st, 1924 the first official mutual fund

was born. It was called the Massachusetts Investors Trust.

After one year, the Massachusetts Investors Trust grew from $50,000 in assets in

1924 to $392,000 in assets (with around 200 shareholders). In contrast, there are

over 10,000 mutual funds in the U.S. today totaling around $7 trillion (with

approximately 83 million individual investors) according to the Investment

Company Institute.

The stock market crash of 1929 slowed the growth of mutual funds. In response to

the stock market crash, Congress passed the Securities Act of 1933 and the

Securities Exchange Act of 1934. These laws require that a fund be registered with

the SEC and provide prospective investors with a prospectus. The SEC (U.S.

Securities and Exchange Commission) helped create the Investment Company Act

of 1940, which provides the guidelines that all funds must comply with today.

With renewed confidence in the stock market, mutual funds began to blossom. By

the end of the 1960s there were around 270 funds with $48 billion in assets.

In 1976, John C. Bogle opened the first retail index fund called the First Index

Investment Trust. It is now called the Vanguard 500 Index fund. In November of

2000 it became the largest mutual fund ever with $100 billion in assets.



History of Indian Mutual Fund Industry

The history of Mutual Funds in India can be broadly divided into 4 Phases:

1. First phase (1964-1987)

The Unit Trust of India (UTI) was established in the year 1963 by passing an Act in

the Parliament. The UTI was setup by the Reserve Bank of India (RBI) and functioned under the

Regulatory and Administrative control of the RBI. The First scheme in the history of mutual funds was UNIT SCHEME-64, which is

popularly known as US-64. In 1978, UTI was de-linked from RBI. The Industrial Development Bank of India

(IDBI) took over the Regulatory and Administrative control. At the end of the year 1988, UTI had Rs.6,700/- Crores of Assets Under

Management.

2. Second phase (1987-1993)

Entry of Public Sector Funds.

In the year 1987, public sector Mutual Funds setup by public sector banks, Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC) are came in to existence.

State Bank of India Mutual Fund was the first non-UTI Mutual Fund.

The following are the non-UTI Mutual Funds at initial stages.

SBI Mutual Fund in June 1987.

Can Bank Mutual Fund in December 1987.

LIC Mutual Fund in June 1989.

Punjab National Bank Mutual Fund in August 1989.

Indian Bank Mutual Fund in November 1989.

Bank of India Mutual Fund in June 1990.



GIC Mutual Fund in December 1990.

Bank of Baroda Mutual Fund in October 1992.

At the end of 1993, the entire Mutual Fund Industry had Assets under Management of

Rs.47, 004/- Crores.

3. Third phase (1993-2003)

Entry of Private Sector Funds - a wide choice to Indian Mutual Fund investors.

In 1993, the first Mutual Fund Regulations came into existence, 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.

In 1996, the 1993 Securities Exchange Board of India (SEBI) Mutual Funds

Regulations were substituted by a more comprehensive and revised Mutual Fund

Regulations.

The number of Mutual Fund houses went on increasing, with many foreign mutual

funds setting up funds in India.

In this time, the Mutual Fund industry has witnessed several Mergers &Acquisitions.

The UTI with Rs.44, 541/- Crores. Of Assets Under management was way ahead of

all other Mutual Funds.

The following was the status at end of February 2003:

(Source – AMFI website)

Number of schemes Amount (in Crores) Open-ended schemes 321 82,693 Close-ended schemes 51 4497 TOTAL 372 87,190



The diagram below shows the three segments and some players in each segment:

4. Fourth phase (since 2003 February)

Following the repeal of the UTI Act in February 2003, it was (UTI) bifurcated into 2

separate entities.

One is the specified undertaking of the UTI with asset under management of Rs.29,

835/- Crores as at the end of January 2003.

The second is the UTI Mutual Funds Limited, sponsored by State Bank of India,

Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India.

UTI is functioning under an Administrator and under the Rules framed by the

Government of India and does not come under the purview of the Mutual Fund

Regulations.

The UTI Mutual Funds Limited is registered with SEBI and functions under the

Mutual Funds Regulations.

With the bifurcation of the Erstwhile UTI, with the setting up of a UTI Mutual Fund,

confirming 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 phases of consolidation and growth.

At the end of September 2004, there were 29 funds, which manage assets of Rs.1,

53,108/- Crores under 421 different schemes.

At the end of March 2006, the status of Mutual fund Industry was:

No. of schemes Amount (in crores)

Open-ended schemes 414 1,85,999

Close-ended schemes 46 71,500

TOTAL 460 2,57,499

(Source – AMFI website)



The following graph shows the amount invested in Mutual Fund Industry

Amount Invested in Mutual Funds

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Jul-88 Jul-93 Jul-03 Jul-04 Jul-05

Rs.

in C

rs.



Association of Mutual Funds in India (AMFI)

With the increase in Mutual Fund players in India, a need for Mutual Fund Association in

India was generated to function as a non-profit organization. Association of Mutual Funds in

India (AMFI) was incorporated on 22nd August, 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has been

registered with Securities Exchange Board of India (SEBI). Till date all the AMCs are that

have launched mutual fund schemes are its members. It functions under the supervision and

guidelines of its Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a

professional and healthy market with ethical lines enhancing and maintaining standards. It

follows the principle of both protecting and promoting the interests of mutual funds as well

as their unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the country. It

has certain defined objectives which juxtaposes the guidelines of its Board of Directors. The

objectives are as follows:

This Mutual Fund Association of India maintains high professional and ethical

standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of conduct

which is followed by members and related people engaged in the activities of Mutual

Fund and Asset Management. The agencies who are by any means connected or

involved in the field of capital markets and financial services also involved in this

code of conduct of the association.



AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual

Fund industry.

Associations of Mutual Fund of India do represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual Fund

Industry.

It develops a team of well qualified and trained Agent distributors. It implements a

programme of training and certification for all intermediaries and other engaged in

the mutual fund industry.

AMFI undertakes all India awareness programme for investors in order to promote

proper understanding of the concept and working of Mutual Funds.

At last but not the least Association of Mutual Fund of India also disseminate

information on Mutual Fund Industry and undertakes studies and research either

directly or in association with other bodies.

The sponsors of Association of Mutual Funds in India

Bank Sponsored

SBI Fund Management Ltd.

BOB Asset Management Co. Ltd.

Canbank Investment Management Services Ltd.

UTI Asset Management Company Pvt. Ltd.

Institutions

GIC Asset Management Co. Ltd.

Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector



Indian:

Benchmark Asset Management Co. Pvt. Ltd.

Cholamandalam Asset Management Co. Ltd.

Credit Capital Asset Management Co. Ltd.

Escorts Asset Management Ltd.

JM Financial Mutual Fund

Kotak Mahindra Asset Management Co. Ltd.

Reliance Capital Asset Management Ltd.

Sahara Asset Management Co. Pvt. Ltd

Sundaram Asset Management Company Ltd.

Tata Asset Management Private Ltd.

Predominantly India Joint Ventures:

Birla Sun Life Asset Management Co. Ltd.

DSP Merrill Lynch Fund Managers Limited

HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:

ABN AMRO Asset Management (I) Ltd.

Alliance Capital Asset Management (India) Pvt. Ltd.

Deutsche Asset Management (India) Pvt. Ltd.

Fidelity Fund Management Private Limited

Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

HSBC Asset Management (India) Private Ltd.

ING Investment Management (India) Pvt. Ltd.

Morgan Stanley Investment Management Pvt. Ltd.

Principal Asset Management Co. Pvt. Ltd.

Prudential ICICI Asset Management Co. Ltd.

Standard Chartered Asset Mgmt Co. Pvt. Ltd.



Association of Mutual Funds in India Publications: AMFI publishes mainly two types of

bulletin. One is on the monthly basis and the other is quarterly. These publications are of

great support for the investors to get intimation of the know how of their parked money.

inly two types of

bulletin. One is on the monthly basis and the other is quarterly. These publications are of

great support for the investors to get intimation of the know how of their parked money.

Mutual Fund StructureMutual Fund Structure


Registrar Provides Registrar and transfer

Services

Distributors

Provides the network for distribution of the schemes to

the investor

Custodian

Provide Custodial Service

Hold Unit holders funds in MF enter into an agreement with SEBI and ensure compliance

Mutual Fund (E.g. Sahara Wealth Plus

Fund)

AMC (E.g. Sahara Asset Management Company)

Float MF Funds, Manages the Funds as SEBI Guidelines and

AMC agreement

Sponsor Company Sahara India Financial

Corporation Ltd (SIFCL)

Establishes the MF as a trust registers the MF with SEBI

Managed by Board of Trustees


SEBI REGULATIONS ON MUTUAL FUNDS

The Government brought Mutual Funds in the Securities market under the regulatory

framework of the Securities and Exchange board of India (SEBI) in the year 1993.

SEBI issued guidelines in the year 1991 and comprehensive set of regulations relating to the

organization and management of Mutual Funds in 1993.

SEBI REGULATIONS 1993 (20.1.1993)

The regulations bar Mutual Funds from options trading, short selling and carrying forward

transactions in securities. The Mutual Funds have been permitted to invest only in

transferable securities in the money and capital markets or any privately placed debentures or

securities debt. Restrictions have also been placed on them to ensure that investments under

an individual scheme, do not exceed five per cent and investment in all the schemes put

together does not exceed 10 per cent of the corpus. Investments under all the schemes cannot

exceed 15 per cent of the funds in the shares and debentures of a single company.

SEBI grants registration to only those mutual funds that can prove an efficient and orderly

conduct of business. The track record of sponsors, a minimum experience of five years in the

relevant field of Investment, financial services, integrity in business transactions and

financial soundness are taken into account. The regulations also prescribe the advertisement

code for the marketing schemes of Mutual Funds, the contents of the trust deed, the

investment management agreement and the scheme-wise balance sheet. Mutual Funds are

required to be formed as trusts and managed by separately formed as trusts and managed by

separately formed Asset Management Companies (AMC). The minimum net worth of such

AMC is stipulated at Rs.5 crores of which, the Mutual Fund should have a custodian who is

not associated in any way with the AMC and registered with the SEBI.

The minimum amount raised in closed-ended scheme should be Rs.20 Crores and for the

open-ended scheme, Rs.50 Crores. In case, the amount collected falls short of the minimum

prescribed, the entire amount should be refunded not later than six weeks from the date of



closure of the scheme. If this is not done, the fund is required to pay an interest at the rate of

15 per cent per annum from the date of expiry of six weeks. In addition to these, the Mutual

Funds are obliged to maintain books of accounts and provision for depreciation and bad

debts.

Further, the Mutual Funds are now under the obligation to publish scheme-wise annual

reports, furnish six month un-audited accounts, quarterly statements of the movements of the

net asset value and quarterly portfolio statements to the SEBI. There is also a stipulation that

the Mutual Funds should ensure adequate disclosures to the investors. SEBI has agreed to let

the Mutual Funds buy back the units of their schemes. However, the funds cannot advertise

this facility in their prospectus. SEBI is also empowered to appoint an auditor to investigate

into the books of accounts or the affairs of the Mutual Funds.

SEBI can suspend the registration of Mutual Funds in the case of deliberate manipulation,

price rigging or deterioration of the financial position of Mutual Funds.

SEBI REGULATIONS, 1996

SEBI announced the amended Mutual Fund Regulations on December 9, 1996 covering

Registration of Mutual Funds, Constitution and Management of Mutual funds and Operation

of Trustees, Constitution and Management of Asset Management Companies (AMCs) and

custodian schemes of MFs, investment objectives and valuation policies, general obligations,

inspection and audit. The revision has been carried out with the objective of improving

investor protection, imparting a greater degree of flexibility and promoting innovation.

The increase in the number of MFs and the types of schemes offered by them necessitated

uniform norms for valuation of investments and accounting practices in order to enable the

investors to judge their performance on a comparable basis. The Mutual Fund Regulations is

sued in December 1996 provide for a scheme-wise report and justification of performance,

disclosure of large investments which constitute a significant portion of the portfolio and

disclosure of the movements in the unit capital.



The existing Asset Management Companies are required to increase their net worth from

Rs.10 crores within one year from the date of notification of the amended guidelines. AMCs

are also allowed to do other fund-based businesses such as providing investment

management services to offshore funds, other Mutual Funds, Venture Capital Funds and

Insurance Companies. The amended guidelines retained the former fee structure of the

AMCs of 1.25% of weekly average Net Asset Value (NAV) up to Rs.100 crores and 1% of

NAV for net assets in excess of Rs.100 crores.

The consent of the investors has to be obtained for bringing about any change in the

fundamental attributes of the scheme on the basis of which the unit holders had made initial

investments. The regulation empowers the investor. The amended guidelines require

portfolio disclosure, standardization of accounting policies, valuation norms for NAV and

pricing. The regulations also sought to address the areas of misuse of funds by introducing

prohibitions and restrictions on affiliate transactions and investment exposures to companies

belonging to the group of sponsors of mutual funds. The payment of early bird incentive for

various schemes has been allowed provided they are viewed as interest payment of early bird

incentive for early investment with full disclosure.

The various Mutual Funds are allowed to mention an indicative return for schemes for fixed

income securities. In 1998-99 the Mutual Funds Regulation were amended to permit Mutual

Funds to trade in derivatives for the purpose of hedging and portfolio balancing. SEBI

registered Mutual Funds and Fund managers are permitted to invest in overseas markets,

initially within an overall limit of US $500 million and a ceiling for an individual fund at

US$ 50 million.

SEBI made (October 8, 1999) investment guidelines for MFs more stringent. The new

guidelines restrict MFs to invest no more than 10% of NAV of a scheme in share or share

related instruments of a single company. MF’s in rated debt instruments of a single issuer is

restricted to 15% of NAV of the scheme (up to 20% with prior approval of Board of Trustees

or AMC). Restrictions in un- rated debt instruments and in shares of unlisted companies.

The new norms also specify a maximum limit of 25% of NAV for any scheme for investment



in listed group companies as against an umbrella limit of 25% of NAV of all schemes taken

together earlier. SEBI increased (June 7, 2000) the maximum investment limit for MFs in

listed companies from 5% to 10% of NAV in respect of open-ended funds. Changes in

fundamental attributes of a scheme was also allowed without the consent of three fourths of

unit holders provided the unit holders are given the exit option at NAV without any exit load.

MFs are also not to make assurance or claim that is likely to mislead investors. They are also

banned from making claims in advertisement based on past performance.

Types of Mutual Fund Schemes

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position,

risk tolerance and return expectations etc. The table below gives an overview into the

existing types of schemes in the Industry.

By Structure

Open - Ended Schemes

Close - Ended Schemes

Interval Schemes

By Investment Objective

Growth/Equity Schemes

General Purpose

Income/Debt Funds

Money Market

Guilt Funds

Balanced Schemes

Other Schemes

Tax Saving Schemes ___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 25


Special Schemes:

Sector Specific Schemes

Index Schemes

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. On the other hand, an

open-ended fund rarely denies to its investor the facility to redeem existing units.

Close 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 New Fund Offer (NFO) 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 generally listed. Unlike

open-ended schemes, the unit capital in Close-ended schemes usually remains unchanged.

After an initial closed period, the scheme may offer direct repurchase facility to the investors.

Close-ended schemes are usually more illiquid as compared to open-ended schemes and

hence trade at a discount to the NAV. This discount tends towards the NAV closer to the

maturity date of the scheme.

Interval Schemes



These schemes combine the features of open-ended and Close-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.

Growth/Equity 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. However, because they invest in

equities, these schemes are exposed to fluctuations in value especially in the short term.

Equity schemes are hence not suitable for investors seeking regular income or needing to use

their investments in the short-term. They are ideal for investors who have a long-term

investment horizon. 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. Sahara Growth Fund is the example for equity schemes.

General Purpose Equity Schemes

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. Sahara Wealth Plus Fund is an

Equity Fund which is a general-purpose equity scheme.

Income /Debt Schemes

These schemes, also commonly known as 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 who are not in a position to take higher equity risks.

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.

These schemes invest in money markets, bonds and debentures of corporate companies with

medium and long-term maturities. These schemes primarily target current income instead of

capital appreciation. Hence, a substantial part of the distributable surplus is given back to the

investor by way of dividend distribution. These schemes usually declare quarterly dividends

and are suitable for conservative investors who have medium to long-term investment

horizon and are looking for regular income through dividend or steady capital appreciation.

Sahara Income Fund is an example of Income/Debt/Bond scheme.

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. Sahara Short Term

Plan is an example of Money Market Scheme.

Gilt Funds

These primarily invest in Government Debt. Hence, the investor usually does not have to

worry about credit risk since Government Debt is generally credit risk free. The investor is

open to Interest risk, where the value of the securities changes in relation to the market

scenario. Sahara Gilt Fund is an example of one such scheme.

Balanced Schemes

These schemes are also commonly called balanced schemes. These invest in both equities as

well as debt. By investing in a mix of this nature, balanced schemes seek to attain the

objective of income and moderate capital appreciation. Such schemes are ideal for investors

with a conservative, long-term orientation. Tata Balanced Fund and Tata Young Citizen's

Fund are perfect examples of such hybrid schemes.

Tax Saving 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 80 C of the Income-tax Act, 1961, subscriptions to the Units not

exceeding Rs.1, 00, 000 would be fully tax exempt from income tax. The exemption under

section 80 C of IT act is also applicable to other eligible schemes. Sahara Tax Gain Fund is

an example of ELSS.

Special Schemes

Sector Specific Equity Schemes:

These schemes restrict their investing to one or more pre-defined sectors, e.g. technology

sector. They depend upon the performance of these select sectors only and are hence

inherently more risky than general-purpose equity schemes. Ideally suited for informed

investors who wish to take a view and risk on the concerned sector. The Tata Life Sciences

and Technology Fund is an example of sector specific equity scheme.

Index schemes:

An Index is used as a measure of performance of the market as a whole, or a specific sector

of the market. It 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. As it is not practical to invest in each and every stock in the market in proportion to

its size, these investors are comfortable investing in a fund that they believe is a good

representative of the entire market. Index Funds are launched and managed for such

investors. An example to such a fund is the Tata Index Fund.



Comparison of Mutual Funds with other Products/ Investment

opportunities

The mutual fund sector operates under stricter regulations as compared to most other

investment avenues. Apart from the tax efficiency and legal comfort how do mutual funds

compare with other products? Here the investment in Mutual Funds is compared with:

1. Company Fixed Deposits.

2. Bank Fixed Deposits.

3. Bonds and Debentures.

4. Equity.

5. Life Insurance

1. Company Fixed Deposits versus Mutual Funds

Fixed deposits are unsecured borrowings by the company accepting the deposits. Credit

rating of the fixed deposit program is an indication of the inherent default risk in the

investment.

The moneys of investors in a mutual fund scheme are invested by the AMC in specific

investments under that scheme. These investments are held and managed in-trust for the

benefit of scheme’s investors. On the other hand, there is no such direct correlation between

a company’s fixed deposit mobilization, and the avenues where these resources are deployed.

A corollary of such linkage between mobilization and investment is that the gains and losses

from the mutual fund scheme entirely flow through to the investors. Therefore, there can be

no certainty of yield, unless a named guarantor assures a return or, to a lesser extent, if the

investment is in a serial gilt scheme. On the other hand, the return under a fixed deposit is

certain, subject only to the default risk of the borrower.



Both fixed deposits and mutual funds offer liquidity, but subject to some differences:

• The provider of liquidity in the case of fixed deposits is the borrowing company. In

mutual funds, the liquidity provider is the scheme itself (for open-end schemes) or the market

(in the case of closed-end schemes).

• The basic value at which fixed deposits are en-cashed is not subject to market risk.

However, the value at which units of a scheme are redeemed entirely depends on the market.

If securities have gained in value during the period, then the investor can even earn a return

that is higher than what she anticipated when she invested. Conversely, she could also end up

with a loss.

• Early encashment of fixed deposits is always subject to a penalty charged by the

company that accepted the fixed deposit. Mutual fund schemes also have the option of

charging a penalty on “early” redemption of units (by way of an ‘exit load’). If the NAV has

appreciated adequately, then despite the exit load, the investor could earn a capital gain on

her investment.

2. Bank Fixed Deposits versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits. The major difference is that

banks are more stringently regulated than are companies. They even operate under stricter

requirements regarding Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR).

While the above are causes for comfort, bank deposits too are subject to default risk.

However, given the political and economic impact of bank defaults, the Government as well

as Reserve Bank of India (RBI) tries to ensure that banks do not fail.

Further, bank deposits up to Rs 1, 00, 000 are protected by the Deposit Insurance and Credit

Guarantee Corporation (DICGC), so long as the bank has paid the required insurance

premium of 5 paise per annum for every Rs 100 of deposits. The monetary ceiling of Rs

100,000 is for all the deposits in all the branches of a bank, held by the depositor in the same

capacity and right.



3. Bonds and Debentures versus Mutual Funds

As in the case of fixed deposits, credit rating of the bond / debenture is an indication of the

inherent default risk in the investment. However, unlike fixed deposits, bonds and

debentures are transferable securities.

While an investor may have an early encashment option from the issuer (for instance through

a “put” option), generally liquidity is through a listing in the market. Implications of this are:

• If the security does not get traded in the market, then the liquidity remains on paper. In

this respect, an open-end scheme offering continuous sale / re-purchase option is superior.

• The value that the investor would realize in an early exit is subject to market risk. The

investor could have a capital gain or a capital loss. This aspect is similar to a MF scheme.

It is possible for an astute investor to earn attractive returns by directly investing in the debt

market, and actively managing the positions. Given the market realities in India, it is

difficult for most investors to actively manage their debt portfolio. Further, at times, it is

difficult to execute trades in the debt market even when the transaction size is as high as Rs 1

crore. In this respect, investment in a debt scheme would be beneficial.

Debt securities could be backed by a hypothecation or mortgage of identified fixed and / or

current assets (secured bonds / debentures). In such a case, if there is a default, the identified

assets become available for meeting redemption requirements. An unsecured bond /

debenture is for all practical purposes like a fixed deposit, as far as access to assets is

concerned.

The investment in mutual fund scheme is held by a Custodian for the benefit of all investors

in that scheme. Thus, the securities that relate to a scheme are ring-fenced for the benefit of

its investors.



4. Equity versus Mutual Funds

Investment in both equity and mutual funds are subject to market risk.

An investor holding an equity security that is not traded in the market place has a problem in

realizing value from it. But investment in an open-end mutual fund eliminates this direct risk

of not being able to sell the investment in the market. An indirect risk remains, because the

scheme has to realize its investments to pay investors. The AMC is however in a better

position to handle the situation.

Another benefit of equity mutual fund schemes is that they give investors the benefit of

portfolio diversification through a small investment. For instance, an investor can take an

exposure to the index by investing a mere Rs 5,000 in an index fund.

5. Life Insurance versus Mutual Funds

Life insurance is a hedge against risk – and not really an investment option. So, it would be

wrong to compare life insurance against any other financial product.

Occasionally on account of market inefficiencies or mis-pricing of products in India, life

insurance products have offered a return that is higher than a comparable “safe” fixed return

security – thus, you are effectively paid for getting insured! Such opportunities are not

sustainable in the long run.



FUTURE OF MUTUAL FUNDS IN INDIA

At the end of 2006 March, Indian mutual fund industry reached Rs. 2, 57, 499 crores. It is

estimated that by 2010 March-end, the total assets of all scheduled commercial banks should

be Rs. 40, 90, 000 crores.

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.

Going by the above facts and generally, mutual funds have often been considered a good

route to invest and earn returns with reasonable safety. Small and big investors have both

invested in instruments that have suited their needs. And so equity and debt funds have

attracted investments alike. The performance of the investments, equity in particular, for the

last one-year, has however been disappointing for the investors.

The fall in NAVs of equity funds, and it is really steep in some, even to the extent of 60-70

percent, has left investors disgusted. Such backlash was only to be expected when funds, in a

hurry to post good returns invested in volatile tech stocks. The move, though good under

conducive market conditions, is the point of rebuttal now. Owing to volatility in market and

profit warnings by some IT majors, tech stocks have been on the downhill journey and the

result is fall in NAVs of most equity funds.

This hurts the investor but then investments in equity are never safe. Mutual funds are not

just guilty of mismanaging their risks as the recent survey by Pricewaterhouse Coopers

indicates but also not educating their investors enough on the risks facing them. It is for the

mutual benefit of the investors as well as mutual funds that investor is educated enough or

else an agitated investor might route his investments to other avenues that are considered

safe.

Debt funds are safe investments and generate returns far in excess of what other so-called

safe avenues such as banks generate. Despite this, the inflow of funds in debt funds and



banks is by no means comparable. The factor contributing to this the lack of understanding

caused by improper guidance by the intermediaries.

Till now, Investor education has been one of the issues, less cared for, by the industry. The

industry focused upon the amounts and not why a person wanted to invest or whether a

particular product suited him or not. While educating the customer might not have been on

the cards earlier, the things are beginning to change now.

With SEBI passing on the guidelines, the funds will engage in investor education. The

guidelines state that funds will utilize the income earned on unclaimed money lying with

them for a period exceeding three years to educate the investors. AMFI has started a

certification program for intermediaries. This will be made mandatory for the intermediaries

and is aimed at educating the investors about the risks attached to the schemes and to

inculcate adequate skills into the intermediaries to help the investors choose the right kind of

fund. Steps such as these are aimed at obliterating various flaws in the system by

standardizing the knowledge base of intermediaries, as they are the interface between the

investor and the funds.

Although the investors themselves are also guilty of picking funds that were not suited for

them, the blame can’t lie square on their shoulders alone. The industry has also got to bear

some of it. With such programs becoming mandatory, it can be ensured to some extent that

ignorance ceases to be an aspect associated with the industry.

Till now, investors have been ignorant about the kind of fund to be picked or how to select a

fund. Teaching an investor how to select a fund is thus an important aspect. Educated

investors can, on their part, ask pertinent questions to find funds that qualify to be in their

portfolio as per their risk bearing capacity.

It would not be improper to say that investor education is still the key to managing the funds

handed over by investors. The investors are important to the industry and likewise, mutual

funds form an important avenue for an investor. It would thus be of critical importance to

educate people for an informed investor is in the best position to pick up Schemes as per his



need. This would also infuse some confidence in the minds of the investors who under the

current scenario seem to be losing faith on account of the falls suffered in recent times.

An educated and informed intermediary stands the best chance of understanding the needs of

the client and also of winning his confidence through proper guidance. As it is, investor

education will remain a key issue for mutual funds in the longer run and educating the

intermediaries will be the first step towards it.



OBJECTIVES OF THE STUDY:

To study Mutual Fund Industry in India.

To study the different Schemes provided by Sahara Mutual Fund.

To study the performance of different schemes of the Company.

To study the Risk involved in different Schemes. To study the Weekly Returns with respect to their Benchmark.

STATEMENT OF THE PROBLEM: “The project deals with the Overview of Mutual Industry in India and evaluation study

of Risk and Returns of Debt and Equity Schemes of Sahara Mutual Fund in comparison with

their respective benchmark indices”.

NEED FOR THE STUDY: The evaluation study of risk and returns of Equity and Debt Schemes of Sahara Mutual Fund

is useful to know the performance of schemes and it helps the investors to invest in Mutual

Fund schemes either- Equity, Debt or Balanced.

The performance of different schemes however helps the prospective investors to choose the

best schemes that suit his objective.

SCOPE OF THE STUDY:

The study was limited to just finding the risk and returns associated with the schemes.

The study covers the six different schemes provided by Sahara Mutual Fund.

The study covers the period of past three and half months from February 10, 2006 to

May 26, 2006.

The study covers only the open-ended funds.



The study does not cover the scheme Sahara Tax Gain Fund, an open ended fund, due

to non availability of historical benchmark index of this scheme.

LIMITATIONS OF THE STUDY:

The study was limited only to Sahara Mutual Fund schemes.

Time duration for the study was very short as it was restricted to just 10 weeks.

Out of eight schemes only six have been taken for analysis.

The study was limited to the extent of just finding the risks and returns of each

schemes of the fund.



COMPANY PROFILE

Sahara Asset Management Co. Pvt. Ltd.

The registered office of the AMC is situated at Units A and B, Eighth floor, Riyaz

Garden, #29, Kodambakkam High Road, Chennai-34. In terms of the investment

management agreement dated July 18, 1996 the trustee has appointed Sahara Asset

Management Company Pvt. Ltd. to manage the Mutual Fund. The paid up share capital

of the AMC is Rs. 25.80 crores. The Sahara Asset Management Company was sponsored

by Sahara India Financial Corporation Ltd (SIFL) which is the flagship company of

Sahara India Group. Incorporated in 1987, SIFL is the First Residuary Non-Banking

Company (RNBC) in India that has been granted certificate of registration by RBI and is

considered to be a leading public deposit mobilization company in the private sector. The

Sahara India Group has over the years emerged as a multi-service and multi-product

business conglomerate with diverse interests in fields such as Aviation, Life Insurance,

Para banking, Housing, Infrastructure & Tourism, Consumer products, Media&

Entertainment. TABLE - 4

Number of Schemes 08

Number of Schemes including options 35

Debt Schemes 02

Short term debt Schemes 01

Gilt Fund 01

Equity Schemes 04



Recently, Sahara Mutual Fund has launched Open-ended equity fund – Sahara Wealth Plus

Fund. The objective of the scheme is to generate long-term capital growth from a diversified

portfolio of predominantly equity and equity related instruments. It is estimated that, the fund

will invest 70%-100% in equity & equity related securities and 0-30% in debt and money

market Instruments. Out of 0-30% in debt and money market instruments 0-20% will be in

securitized debt. The scheme offers growth, dividend and dividend reinvestment options.

The following are the main features of this new scheme:

Simply timeless

Simply trustworthy

Simply unstructured

Simply consistent

Sahara Mutual Fund also pioneered several service initiatives that helped to increase

transactional ease. It was the first mutual fund to initiate:

Across the counter redemptions for all classes of investors in liquid funds.

Next day redemptions for non-liquid funds.

Phone transacts service wherein investors can redeem without having any Personal

Identification Numbers.



PRODUCT PROFILE

Different products/Schemes of Sahara Mutual Fund

I. EQUITY – ORIENTED SCHEMES

Equity-oriented schemes are popularly known as Growth schemes. Since they invest a

majority of their funds in equities, these schemes deliver higher returns in the long run, and

are hence ideal for investors who have a long term investment horizon.

Since the value of equity funds fluctuate with changes in the social, political and economic

scenarios, equity-oriented schemes are not suitable for investors seeking regular income or

returns in the near future.

Sahara Mutual Fund offers four equity-oriented schemes:

Sahara Growth Fund

Sahara Tax Gain Fund

Sahara Mid Cap Fund

Sahara Wealth Plus Fund

II. DEBT - ORIENTED SCHEMES

Debt-oriented schemes are also known as Income schemes. Since these schemes invest in

debt securities such as debentures, bonds and government securities, their prices are more

stable than those of equity-oriented schemes. It is for this reason that debt-oriented schemes

are preferred by medium-risk investors such as retired individuals who may be unable to take

high equity risks.

While they are more stable than equities, debt-oriented schemes fluctuate more than money

market schemes and are subject to a higher credit risk than gilt funds, which invest in

government debt.



Sahara Mutual Fund offers four debt-oriented schemes:

Sahara Short Term Plan

Sahara Income Fund

Sahara Liquid Fund Sahara Gilt fund

I) 1. Sahara Growth Fund

Scheme Objective: The investment objective of the scheme is to achieve capital appreciation

by investing in equity and equity related instruments.

Scheme Type: Open – ended growth fund

Investor Profile: Ideal for investors seeking high returns at a relatively medium risk across

long horizon.

Investment Option: Investors under the Sahara Growth Fund have the choice of Growth,

Dividend payout Option & Dividend Reinvestment Option.

Inception Date: August 30, 2002

Benchmark Index: S & P CNX Nifty

2. Sahara Tax Gain Fund

Investment Objective: The Objective of the scheme is to provide immediate tax relief and

long term growth of capital investors.

Scheme Type: An open – ended Equity Linked Saving Scheme (ELSS).

Investor Profile: Ideal for investors seeking high returns at alternatively medium risk across

long term horizon by investing in equity & equity related instruments. ___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 43


Investment Option: Investors under the Sahara Tax Gain Fund have the choice of Growth,

Dividend payout, Dividend Reinvestment Option.

Inception Date: April 1, 1997

Benchmark Index: BSE 200 Index

3. Sahara Midcap Fund

Investment Objective: The investment objective of the scheme is to achieve long term

capital growth at medium level of risks by investing primarily in mid-cap stocks. The

investment manager will have the discretion to invest up to 100% of the assets in the

portfolio in equity/equity related instruments at a given point of time.

Scheme Type: An open – ended growth fund

Investor profile: Ideal for investors seeking high returns at relatively medium risk across

long term horizon.

Investment Option: Investors under the Sahara Mid Cap Fund have the choice of Growth

plan, Dividend plan, Growth Auto-payout plan and Bonus plan.

Inception Date: December 31, 2004

Benchmark index: CNX Midcap Index

4. Sahara Wealth Plus Fund

Investment Objective: The primary objective of the scheme would be to invest in equity &

equity related instruments of companies that would be wealth builders in the long term.

Scheme Type: open- ended growth fund



Investor profile: Ideal for investors seeking high returns at relatively medium risk across

long term horizon.

Investment Option: Investors under the Sahara Wealth Plus Fund have the choice of

Variable pricing option and Fixed pricing option.

Sub options: Under variable pricing option – Growth, Dividend, Dividend Reinvestment

option.

Inception Date: July4, 2005

Benchmark Index: S & P CNX 500

II) 1. Sahara Short Term Plan

Investment Objective: The primary objective of the scheme would be to generate regular

income and secondary objective is growth of capital through investment in debt instruments,

money market and related instruments, whilst at all times emphasizing the importance of

capital preservation.

The overall objective of Sahara Short term plan would be in consonance with the investment

objective of Sahara Income Fund, however the specific objective is to generate returns that

would Endeavour to generate returns in line with Mibor linked short term papers with daily

call/put option.

Scheme Type: open- ended short term plan.

Investor profile: Ideal for investors who have a short term investment horizon and wish to

avoid high volatility but expect superior returns than liquid Funds.

Investment Option: Investors under the Sahara Short term plan have the choice of growth,

Dividend pay out and Dividend Reinvestment option.



Inception date: September 11, 2002

Benchmark Index: Crisil Liquid Fund Index

2. Sahara Income Fund

Investment Objective: The primary objective of the scheme would be to generate regular

income and secondary objective is growth of capital through investment in debt instruments,

money market and related instruments, whilst at all times emphasizing the importance of

capital preservation.

Scheme Type: open- ended Income Fund.

Investor profile: Ideal for investors seeking reasonable returns at relatively low risk across a

medium to long term investment horizon.

Investment Option: Investors under the Sahara Income Fund have the choice of Growth,


Inception date: February 21, 2002

Benchmark Index: Crisil Composite Bond Fund Index

3. Sahara Liquid Fund

Investment Objective: To create a highly liquid portfolio of good quality debt as well as

money market instruments with a view to provide high liquidity and reasonable returns to the

Unit holders.

Scheme Type: open- ended Liquid Fund.

Investor profile: Ideal for investors who wish to park their short term surpluses at relatively

low risk. Corporate and High Net Worth investors who have temporary surpluses can benefit

from this scheme.



Investment Option: Investors under the Sahara Liquid Fund have the choice of Growth and

Dividend Reinvestment options.


Benchmark Index: Crisil Liquid Fund index

4. Sahara Gilt Fund

Investment Objective: To generate risk free return and thus provide medium to long term

capital gains with income distribution along with capital gains tax relief to its Unit holders, at

all times emphasizing the importance of capital preservation.

Scheme Type: open- ended Gilt Fund.

Investor profile: Ideal for investors with low-moderate risk appetite, PF trusts, Financial

institutions/Banks & Corporates.

Investment Option: Investors under the Sahara Gilt Fund have the choice of Growth,



Benchmark Index: I Sec Composite Index



DESIGN OF THE STUDY

INTRODUCTION:

A detail study is done on various Investment Schemes provided by Sahara Mutual

Fund. Analysis is done on the Risk and Returns of Debt and Equity Scheme provided by the

organization. Where it is useful to the investors to mobilize the savings in the respective

schemes provided by the Company.

RESEARCH DESIGN:

A Research design is a method and procedure for acquiring information needed to solve

the problem. A research design is the basic plan that helps in the data collection or analysis.

It specifies the type of information to be collected the sources and data collection procedure.

METHOD OF RESEARCH DESIGN USED UNDER STUDY IS:

DESCRIPTIVE RESEARCH:

Descriptive research is study of existing facts to come to a conclusion. In this

research an attempt has been made to analyze the past performance of the Sahara Mutual

schemes and to know the benefits to the investors. The study is done on different schemes

provided by the company to know the company’s performance for the past few months and

to know the risk and returns of the funds.



OPERATIONAL DEFINITIONS OF THE CONCEPT

RISK:

The dictionary meaning of risk is the possibility of loss or injury. Any rational investor,

before investing his/her investible wealth in the security, analyzes the risk associated with a

particular security. The actual return he receives from a security may vary from his expected

return and the risk is expressed in term of variability of return. The down side of risk may be

caused by several factors, either common to all securities or specific to a particular security.

Investor in general would like to analyze the risk factors and a through knowledge of a risk

helps him to plan his portfolio in such a manner so as to minimize risk associated with the

investment.

Risk consists of two components:

The systematic risk.

The unsystematic risk.

The systematic risk is caused by the factors external to a particular company and

uncontrollable by the company. The systematic risk affects the market as a whole.

In case of unsystematic risk the factors are specific, unique and related to a particular

industry or company.

Systematic Risk: The systematic risk affects the entire market. The economic conditions,

political situations and the sociological changes affect the security market. These factors are

beyond the control of the corporate and the investor. The investor cannot avoid them. This is

subdivided into:

i. Market Risk

ii. Interest Rate Risk

iii. Purchasing Power Risk. ___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 49


Unsystematic Risk: The unsystematic risk is unique and peculiar to a firm or an industry.

Unsystematic Risk stems from managerial inefficiency, technological change in the

production process, availability of raw material, changes in the customer preference, and

labour problems. The nature and magnitude of the above-mentioned factors differ from

industry to industry, and company to company. They have to be analyzed separately for each

industry and firm. Broadly, unsystematic risk can be classified into:

i. Business Risk

ii. Financial Risk

Risk Measurement: Understanding the nature of risk is not adequate unless the investor or

analyst is capable of expressing it in some quantitative terms. Measurements cannot be

assured of cent percent accuracy because risk is caused by numerous factors such as social,

political, economic and managerial efficiency. The statistical tools used to quantify risk are:

i. Standard Deviation:

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

data is, the higher the deviation.

b. 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.

ii. Beta: Beta describes the relationship between the securities return and the index

returns.

Beta = + 1.0



One percent change in market index returns causes exactly one percent change in the security

return. It indicates that the security moves in tandem with the market.

Beta = + 0.5

One percent change in the market index return causes 0.5 percent change in the security

return. The security is less volatile compared to the market.

Beta = + 2.0

One percent change in the market index return causes 2 percent change in the security return.

The security return is more volatile. When there is a decline of 10% in the market return, the

security with beta of 2 would give a negative return of 20%. The security with more than 1

beta value is considered to be risky.

Negative Beta

Negative beta value indicates that the security return moves in the opposite direction to the

market return. A security with a negative beta of -1 would provide a return of 10%, if the

market return declines by 10% and vice-versa.

RATE OF RETURN:

The compounded annual return on a mutual fund scheme represents the return to investors

from a scheme since the date of issue. It is calculated on NAV basis or price basis. On NAV

basis it reflects the return generated by the fund manager on NAV. On price basis it reflects

the return to investors by way of market or repurchase price

Net Asset Value (NAV):

The net asset value of the fund is the cumulative market value of the assets fund of its

liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in

the fund, this is the amount that the shareholders would collectively own. This gives rise to

the concept of net asset value per unit, which is the value, represented by the ownership of

one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the



number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring

the “per unit”. We also abide by the same convention.

Computation of Net Asset Value

The Net Asset Value (NAV) of the units will be determined as of every working day and for

such other days as may be required for the purpose of transaction of units.

The NAV shall be calculated in accordance with the following formula, or such other

formula as may be prescribed by SEBI from time to time.

Market /Fair value of scheme’s investments + Receivables + Accrued

Income + Other Assets – Accrued Expenses – Payables – Other

Liabilities NAV = ------------------------------------------------------------------------------------------ Number of Units Outstanding



METHODOLOGY OF DATA COLLECTION:

SOURCES OF DATA:

SECONDARY DATA used for the study:

Internet sources.

Newspapers.

Announcements and publishing’s by the company.

CONCEPTUAL DESIGN:

Sample unit: Schemes of Sahara Mutual Fund.

Sample size: 16 weeks NAV of the Schemes.

Sampling Procedure: Direct.



SCHEMES CONSIDERED FOR THE EVALUATION STUDY

In this project I have considered total of six schemes. Their relative Benchmark Indices are:

SAHARA INCOME FUND – CRISIL COMPOSITE BOND INDEX

SAHARA SHORT TERM FUND – CRISIL LIQUID FUND INDEX

SAHARA LIQUID FUND – CRISIL LIQUID FUND INDEX

SAHARA GILT FUND – I SEC COMPOSITE INDEX

SAHARA GROWTH FUND – S&P CNX NIFTY

SAHARA MIDCAP FUND – S&P CNX MIDCAP INDEX



TOOLS & TECHNIQUES USED FOR THE STUDY

To analyze the data in the project various statistical tools are used. They are: i. Beta:

2 2( )(

( )N XY X Y

N Y Yβ Σ − Σ Σ=

Σ − Σ)

β = Beta of the fund;

N = Number of Observations;

X = Weekly return of NAV;

Y = Weekly return of the Index.

ii. Standard Deviation: 22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

Xd XNΣ⎛ ⎞= −⎜ ⎟

⎝ ⎠

Where

σ = Standard Deviation;

N = Number of observations;

d = Deviations from actual mean;

s

iii. Rate of Return for a period:

B A DXB

− +=

Where,

A = NAV at the end of the period of the period;

B = NAV at the beginning of the period;

D = Dividend paid during the period; ___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 55


ANALYSIS AND INTEPRETATIONS

1. The table showing the weekly returns of CRISIL Composite Bond Fund Index and

that of Sahara Income Fund

Index date Index value Weekly returns NAV in Rs Dividend Returns

10/02/2006 1217.38 ----- 10.6606 ----- -----

17/02/2006 1221.82 0.363% 10.6696 ----- 0.084%

24/02/2006 1222.37 0.044% 10.6775 ----- 0.073%

03/03/2006 1224.67 0.187% 10.6874 ----- 0.092%

10/03/2006 1226.35 0.136% 10.6966 ----- 0.086%

17/03/2006 1226.08 -0.022% 10.7038 ----- 0.067%

24/03/2006 1225.06 -0.083% 10.7100 ----- 0.057%

31/03/2006 1226.88 0.148% 10.7185 ----- 0.079%

07/04/2006 1230.49 0.293% 10.7319 ----- 0.124%

14/04/2006 1232.33 0.149% 10.7396 ----- 0.071%

21/04/2006 1232.57 0.019% 10.7753 ----- 0.331%

28/04/2006 1233.98 0.114% 10.7838 ----- 0.078%

05/05/2006 1235.69 0.138% 10.7935 ----- 0.089%

12/05/2006 1236.67 0.079% 10.7988 ----- 0.049%

19/05/2006 1239.05 0.192% 10.8084 ----- 0.088%

26/05/2006 1240.07 0.082% 10.8152 ----- 0.062%



RISK CALCULATIONS The table showing the calculation of Beta and Standard Deviation of

Sahara Income Fund

X D d² Y Y² X*Y 0.084 -0.003893 0.000051 0.363 0.131769 0.030492 0.073 -0.014893 0.022180 0.044 0.001936 0.003212 0.092 0.004106 0.000016 0.187 0.034969 0.017204 0.086 -0.001893 0.000003 0.136 0.018496 0.011696 0.067 -0.020893 0.000436 -0.022 0.000484 -0.00147 0.057 -0.030893 0.000954 -0.083 0.006889 -0.00473 0.079 -0.008899 0.000079 0.148 0.021904 0.011692 0.124 0.036106 0.001303 0.293 0.085849 0.036332 0.071 -0.016893 0.000285 0.149 0.022201 0.010579 0.331 0.243106 0.059100 0.019 0.000361 0.006289 0.078 -0.009893 0.000097 0.114 0.012996 0.008892 0.089 0.001106 0.000122 0.138 0.019044 0.012282 0.049 -0.038893 0.001512 0.079 0.006241 0.003871 0.088 0.000106 0.000000010.192 0.036864 0.016896 0.062 -0.258933 .0670462980.082 0.006724 0.005084

1.3184 -0.121446 0.153184 1.839 0.219073 0.163237 N=15; ∑Χ =; 1.3184 ΣY = 1.839; Σd = -0.12144; ∑Y² = 0.219073; Σd² = 0.153184; ∑XY = 0.163237; σ = 0.1007308 β=0.007384; ___________________________________________________________________________ M.P.Birla Institute of Management, Bangalore 57


CALCULATION OF BETA AND STANDARAD DEVIATION FOR SAHARA

INCOME FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*0.163237 – (1.3184) (1.839)]/[15*0.219073 – (0.1839)2

= [2.448555 – 2.4245376]/[3.286095 – 0.03381921] = [0.0240174/3.25227579] = 0.007384798

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=20.153184 0.121446

15 15−⎛ ⎞− ⎜ ⎟

⎝ ⎠

= 0.017490.010212266225

−⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.010212266 0.00006555− = 0.010146714 = 0.1007308 Inference: As the β is less than 1 it can be said that the scheme is less risky. For One percent change in

the market index causes 0.007384 percent change in the scheme return. The scheme is less

volatile compared to the market. The Standard Deviation of the scheme is 0.1007308.which

means the scheme’s returns vary with the index to the extent of 0.1007308.



2. The table showing the weekly returns of CRISIL Liquid Fund Index

And that of Sahara Short -Term Fund

Index

Date

Index

Value

Weekly

Returns

NAV in

Rs DIVIDEND RETURNS

10/02/2006 1161.91 ----- 10.5587 ----- -----

17/02/2006 1162.96 0.090% 10.5595 ----- 0.007%

24/02/2006 1163.85 0.076% 10.5673 ----- 0.073%

03/03/2006 1164.92 0.091% 10.5744 ----- 0.067%

10/03/2006 1165.85 0.079% 10.5806 ----- 0.058%

17/03/2006 1166.98 0.096% 10.5872 ----- 0.062%

24/03/2006 1167.95 0.083% 10.5936 ----- 0.060%

31/03/2006 1168.64 0.059% 10.6011 ----- 0.070%

07/04/2006 1169.86 0.104% 10.6082 ----- 0.066%

14/04/2006 1170.91 0.896% 10.6173 ----- 0.085%

21/04/2006 1172.22 0.111% 10.6735 ----- 0.526%

28/04/2006 1173.28 0.090% 10.6825 ----- 0.084%

05/05/2006 1174.45 0.099% 10.6915 ---- 0.084%

12/05/2006 1175.32 0.074% 10.7010 ----- 0.088%

19/05/2006 1176.33 0.085% 10.7111 ----- 0.094%

26/05/2006 1177.33 0.084% 10.7209 ----- 0.091%



RISK CALCULATIONS

The table showing the calculation of Beta and Standard Deviation of

Sahara Short -Term Fund

X d d² Y Y² X*Y 0.007 -0.094 0.008836 0.090 0.0081 0.00063 0.073 -0.028 0.000784 0.076 0.00577 0.005548 0.067 -0.034 0.001156 0.091 0.008281 0.006097 0.058 -0.043 0.001849 0.079 0.006241 0.004582 0.062 -0.039 0.001521 0.096 0.009216 0.005952 0.060 0.041 0.001681 0.083 0.006889 0.00498 0.070 -0.031 0.000961 0.059 0.003481 0.00413 0.066 -0.035 0.001225 0.104 0.010816 0.006864 0.085 -0.016 0.000256 0.896 0.802816 0.07616 0.526 0.425 0.180625 0.111 0.012321 0.058386 0.084 -0.017 0.000289 0.090 0.0081 0.00756 0.084 -0.017 0.000289 0.099 0.009801 0.008316 0.088 -0.013 0.000169 0.074 0.005476 0.006512 0.094 -0.07 0.0049 0.085 0.007225 0.00799 0.091 -0.10 0.01 0.084 0.007056 0.007644 1.515 -0.071 0.214252 2.1170000.911589 0.211351

N=15; ∑X=1.515; ΣY = 2.117000; Σd = -0.071; ∑Y²=0.911589; Σd² = 0.214252; ∑XY=0.211351; σ = 0.1194196; β= -0.00402;



CALCULATION OF BETA AND STANDARD DEVIATION FOR SAHARA SHORT

TERM FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*0.211351 – (1.515) (2.117000)]/[15*0.911589 – (2.117000)2

= [3.170265 – 3.207255]/[13.673835 – 4.481689] = [-0.03699/9.192146] = -0.00402408

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=20.214232 0.071

15 15−⎛ ⎞− ⎜ ⎟

⎝ ⎠

= 0.0050410.014283466225

⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.014283466 0.00002240444− = 0.014261061 = 0.119419686

Inference: The beta of the scheme is negative. This means that the scheme is moving in the

opposite direction to that of the market. If the market declines by 1 percent then the scheme

gains by 0.00402408 percent. The standard deviation of the scheme is 0.119419686, which

means the fund does not have much variation in the returns.



3. The table showing the weekly returns of CRISIL Liquid Fund Index

And that of Sahara Liquid Fund

Index Date Index Value Weekly Returns NAV in Rs DIVIDEND RETURNS

10/02/2006 1161.91 ------ 10.2387 ----- -----

17/02/2006 1162.96 0.090% 10.2386 ----- -0.0009%

24/02/2006 1163.85 0.076% 10.2387 ----- 0.0009%

03/03/2006 1164.92 0.091% 10.2386 ----- -0.0009%

10/03/2006 1165.85 0.079% 10.2386 ----- 0%

17/03/2006 1166.98 0.096% 10.2386 ----- 0%

24/03/2006 1167.95 0.083% 10.2386 ----- 0%

31/03/2006 1168.64 0.059% 10.2386 ----- 0%

07/04/2006 1169.86 0.104% 10.2386 ----- 0%

14/04/2006 1170.91 0.896% 10.2386 ----- 0%

21/04/2006 1172.22 0.111% 10.2386 ----- 0%

28/04/2006 1173.28 0.090% 10.2386 ----- 0%

05/05/2006 1174.45 0.099% 10.2386 ----- 0%

12/05/2006 1175.32 0.074% 10.2386 ----- 0%

19/05/2006 1176.33 0.085% 10.2386 ----- 0%

26/05/2006 1177.33 0.084% 10.2386 ----- 0%



RISK CALCULATIONS

The table showing the calculation of Beta and Standard Deviation of Sahara

Liquid Fund

X d d² Y Y² X*Y -0.0009 -0.00102 0.00000104 0.090 0.0081 0.000081 0.0009 0.00078 0.0000006084 0.076 0.005776 0.000068 -0.0009 -0.00102 0.00000104 0.091 0.008281 -0.000081 0 -0.00012 0.0000000144 0.079 0.006241 0 0 -0.00012 0.0000000144 0.096 0.009216 0 0 -0.00012 0.0000000144 0.083 0.006889 0 0 -0.00012 0.0000000144 0.059 0.003481 0 0 -0.00012 0.0000000144 0.104 0.010816 0 0 -0.00012 0.0000000144 0.896 0.802816 0 0 -0.00012 0.0000000144 0.111 0.012321 0 0 -0.00012 0.0000000144 0.090 0.0081 0 0 -0.00012 0.0000000144 0.099 0.009801 0 0 -0.00012 0.0000000144 0.074 0.005476 0 0 -0.00012 0.0000000144 0.085 0.007225 0 0 -0.00012 0.0000000144 0.084 0.007056 0 -0.0018 -0.0027 0.0000028612 2.117000 0.911595 -0.0000936

N=15; ∑X=-0.0018; ΣY = 2.117; Σd = -0.027; ∑Y²=0.911595; Σd² = 0.0000028612; ∑XY=-0.0000936; σ = 0.00071745; β=0.00026180789;



CALCULATION OF BETA AND STANDARD DEVIATION FOR SAHARA LIQUID

FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*-0.0000936– (-0.0018) (2.117000)]/[15*0.911595 – (2.117000)2]

= [-0.001404 + 0.0038106]/[13.673835 – 4.481689] = [0.0024106/9.192236] = 0.00026180789

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=20.0000028612 0.027

15 15−⎛ ⎞− ⎜ ⎟

⎝ ⎠

= 0.000007290.000000190746225

⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.000000190746 0.000000324+ = 0.000000514746 = 0.0007174580127 Inference: As the β is less than 1 it can be said that the scheme is less risky. For One percent

change in the market index causes 0.00026180789 percent change in the scheme return. The

scheme is less volatile compared to the market. The standard deviation of the scheme is

0.0007174580127 which means there is almost no variation in the returns with the index.



4. The table showing the weekly returns of I-Sec Composite Index

And that of Sahara Gilt Fund

Index date Index value Weekly returns NAV in Rs Dividend Returns

10/02/2006 3430.77 ----- 10.4326 ----- ----

17/02/2006 3455.46 0.714% 10.4545 ----- 0.209%

24/02/2006 3461.79 0.182% 10.4624 ----- 0.075%

03/03/2006 3474.11 0.354% 10.4705 ----- 0.077%

10/03/2006 3480.29 0.177% 10.4809 ----- 0.099%

17/03/2006 3466.16 -0.407% 10.4853 ----- 0.041%

24/03/2006 3448.64 -0.508% 10.4891 ----- 0.036%

31/03/2006 3456.47 0.226% 10.4996 ----- 0.136%

07/04/2006 3479.29 0.655% 10.5179 ----- 0.173%

14/04/2006 3490.17 0.311% 10.5256 ----- 0.073%

21/04/2006 3484.77 -0.154% 10.5271 ----- 0.014%

28/04/2006 3490.95 0.177% 10.5368 ----- 0.092%

05/05/2006 3497.56 0.188% 10.5485 ----- 0.110%

12/05/2006 3500.9 0.095% 10.5505 ----- 0.018%

19/05/2006 3515.88 0.426% 10.5609 ----- 0.098%

26/05/2006 3519.73 0.109% 10.5662 ----- 0.050%


http://www.amfiindia.com/indices/Li-BEX.asp


RISK CALCULATIONS


Sahara Gilt Fund

X D d² Y Y² X*Y 0.209 0.1222667 0.0149491 0.714 0.609796 0.149226 0.075 -0.011733 0.00013766 0.182 0.033124 0.01365 0.077 -0.009733 0.000094731 0.354 0.125316 0.027258 0.099 0.012267 0.000150479 0.177 0.031329 0.017523 0.041 -0.045733 0.002091507 -0.407 0.165649 -0.01668 0.036 -0.050733 0.002573837 -0.508 0.258064 -0.01828 0.136 0.049267 0.002427237 0.226 0.051076 0.030736 0.173 0.086267 0.007441995 0.655 0.429025 0.113315 0.073 -0.013733 0.000188595 0.311 0.096721 0.022703 0.014 -0.072733 0.005290089 -0.154 0.023716 -0.00215 0.092 0.005267 0.000027741 0.177 0.031329 0.016284 0.110 0.023267 0.000541353 0.188 0.035344 0.02068 0.018 -0.068733 0.004724225 0.095 0.009025 0.00171 0.098 0.011267 0.000126945 0.426 0.181476 0.041748 0.050 -0.036733 0.001349313 0.109 0.011881 0.00545 1.301 0.0000047 0.019690256 2.545 2.092871 0.423173

N=15; ∑X=1.301; ΣY = 2.545; Σd = 0.0000047; ∑Y²=2.092871; Σd² = 0.0196902; ∑XY=0.423171; σ = 0.036230977; β=0.121870088;



CALCULATION OF BETA AND STANDARD DEVIATION FOR SAHARA GILT

FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*0.423171 – (1.301) (2.545)]/[15*2.092871 – (2.545)2

= [6.347565 – 3.311045]/[31.393065 – 6.477025] = [3.03652/24.91604] = 0.121870088

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=20.019690256 0.0000047

15 15⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.000000000022090.001312683733225

⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.001312683733 0.0000000000000981777− = 0.001312683733 = 0.036230977

Inference: As the β is less than 1 it can be said that the scheme is less risky. For One

percent change in the market index causes 0.121870088 percent change in the scheme return.

The scheme is less volatile compared to the market. The standard deviation of the scheme is

0.036230977 which expresses the extent of variability of returns to the index.



5. The table showing the weekly returns of S&P CNX Nifty Index

And of Sahara Growth Fund

Index dateIndex

Value

Weekly

Returns

NAV in

Rs DIVIDEND RETURNS

10/02/2006 2087.55 ----- 17.5500 ----- ----

17/02/2006 2098.15 0.505% 17.5700 ----- 0.113%

24/02/2006 2112.35 0.672% 17.5700 ----- 0%

03/03/2006 2170.00 2.656% 17.3900 ----- -1.035%

10/03/2006 2169.85 -0.006% 17.3900 ----- 0%

17/03/2006 2210.75 1.850% 17.7100 ----- 1.806%

24/03/2006 2220.80 0.452% 18.1800 ----- 2.585%

31/03/2006 2237.30 0.073% 18.6000 ----- 2.258%

07/04/2006 2303.15 2.859% 18.7900 ----- 1.011%

14/04/2006 2353.65 2.145% 19.1300 ----- 1.777%

21/04/2006 2318.70 -1.484% 19.2400 ----- 0.571%

28/04/2006 2369.80 2.156% 20.2500 ----- 4.987%

05/05/2006 2326.10 -1.878% 19.9700 ----- -1.402%

12/05/2006 2367.75 1.759% 20.6100 ----- 3.105%

19/05/2006 2428.65 2.507% 21.2900 ----- 3.193%

26/05/2006 2500.35 2.867% 21.7500 ----- 2.114%



RISK CALCULATIONS The table showing the calculation of Beta and Standard Deviation of

Sahara Growth Fund

X D d² Y Y² X*Y 0.113 -1.3382 1.70779 0.505 0.25502 0.057065

0 -1.4512 2.10598 0.672 0.45158 0

-.035 -1.812 3.28334 2.656 7.05433 -0.09296

0 -1.4512 2.10598 -0.006 0.000036 0

1.806 0.3548 0.12588 1.850 3.4225 3.3411

2.585 1.1338 1.28550 0.452 0.204304 1.16842

2.258 0.8068 0.65092 0.073 0.005329 0.166805

1.011 -0.4402 0.19377 2.859 8.173881 2.890449

1.777 0.3258 0.10614 2.145 4.601025 3.811665

0.571 -0.8802 0.77475 -1.484 2.202256 -0.84736

4.987 3.5358 12.5018 2.156 4.648336 10.751972

-1.402 -2.8532 8.14075 -1.878 3.526884 2.632956

3.105 1.6538 2.73505 1.759 3.094081 5.461695

3.193 1.7418 3.03386 2.507 6.285049 8.004851

2.114 0.6628 0.43930 2.867 8.219689 6.060838 21.768 -0.0108 39.19081 17.133 52.1443 44.17012

N=15; ∑X=21.768; ΣY =17.133; Σd = -0.0108; Σd² = 39.19081; ∑Y²=52.1443; ∑XY=44.17012; σ = 1.61639; β=0.592685;



CALCULATION OF BETA AND STANDARD DEVIATION FOR SAHARA

GROWTH FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*44.17012 – (21.768) (17.133)]/[15*52.1443 – (17.133)2

= [662.5518 – 372.951144]/[782.1645 – 293.5396] = [289.600656/488.6249] = 0.592685

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=239.19081 0.0108

15 15−⎛ ⎞− ⎜ ⎟

⎝ ⎠

= 0.000116642.612720667225

⎛ ⎞− ⎜ ⎟⎝ ⎠

= 2.612720149 = 1.616391088

Inference: As the β is less than 1 it can be said that the scheme is less risky. For One percent

change in the market index causes 0. 592685 percent change in the scheme return. The

scheme is less volatile compared to the market. The returns of the scheme have varied with

the deviation of 1.61639 with the benchmark index.



6. The table showing the weekly returns of CNX MIDCAP Index

And of Sahara Midcap Fund

Index dateIndex

Value

Weekly

Returns NAV in Rs DIVIDEND RETURNS

10/02/2006 3057.55 ----- 10.8534 ----- -----

17/02/2006 3129.46 2.297% 11.1527 ----- 2.683%

24/02/2006 3128.69 -0.024% 11.4580 ----- 2.664%

03/03/2006 3069.19 -1.938% 10.9299 ----- -

4.831%

10/03/2006 3054.13 -0.493% 10.8401 ----- -

0.082%

17/03/2006 3141.36 2.776% 11.0744 ----- 2.115%

24/03/2006 3249.23 3.319% 11.4380 ----- 3.178%

31/03/2006 3396.35 4.331% 11.9212 ----- 4.053%

07/04/2006 3437.60 1.199% 11.8462 ----- -0.633%

14/04/2006 3487.30 1.425% 12.1611 ----- 2.589%

21/04/2006 3492.90 0.160% 12.4338 ----- 2.193%

28/04/2006 3622.70 3.582% 13.1660 ----- 5.561%

05/05/2006 3552.55 -1.974% 13.0224 ----- -1.090%

12/05/2006 3630.15 2.137% 13.2793 ----- 1.934%

19/05/2006 3726.35 2.581% 13.6960 ----- 3.042%

26/05/2006 3832.50 2.769% 13.8665 ----- 1.229%



RISK CALCULATIONS


Sahara Midcap Fund

X D d² Y Y² X*Y 2.683 1.042667 1.08715447 2.297 5.276209 6.612851

2.664 1.023667 1.04789412 -0.024 0.000576 -.063936

-.831 -6.471333 41.8781508 -1.938 3.755844 9.362478

-.082 -1.72233 2.966420629 -0.493 0.243049 0.040426

2.115 0.474667 0.22530876 2.776 7.706176 5.87124

3.178 1.537667 2.364419803 3.319 11.015761 10.547782

4.053 2.412667 5.820962053 4.331 18.757561 17.5535

-0.633 -2.27333 5.168029289 1.199 1.437601 0.758967

2.589 0.948667 0.899969076 1.425 2.030625 5.257288125

2.193 0.552667 0.305440812 0.160 0.0256 0.35088

5.561 3.92067 15.37165325 3.582 12.830724 19.919502

-1.090 -2.273033 5.166679019 -1.974 3.896676 2.15166

1.934 0.29367 0.086242068 2.137 4.566769 4.132958

3.042 1.401667 1.964670379 2.581 6.661561 7.851402

1.229 -0.41133 0.169192368 2.769 7.667361 3.403101 24.605 0.45732 84.52218377 22.147 50.223402 94.02009913

N=15; ∑X=24.605; ΣY = 22.147; Σd = 0.45732; Σd² = 84.52218377; ∑Y²=50.223402; ∑XY=94.02009913; σ =2.373580151; β=3.292132102;



CALCULATION OF BETA AND STANDARD DEVIATION FOR SAHARA

MIDCAP FUND

2 2( )(

( )N XY X Y


Σ − Σ)

= [15*94.02009913 – (24.605) (22.147)]/[15*50.223402 – (22.147)2

= [1410.301487-544.926935]/[753.35103-490.4896] = [865.374552/262.86143] = 3.292132102

22d d

N Nσ Σ Σ⎛ ⎞= − ⎜ ⎟

⎝ ⎠

=284.52218377 0.45732

15 15⎛ ⎞− ⎜ ⎟⎝ ⎠

= 0.2091415825.634812251225

⎛ ⎞− ⎜ ⎟⎝ ⎠

= 05.634812251 0.000929518144− = 5.633882733 = 2.373580151

Inference: The beta of the scheme is more than +2 means the scheme is prone to more risk.

This means that the scheme is more volatile. If the market declines by 1 percent then the

scheme also declines but by 3%percent or more. The standard deviation of the scheme is

2.373580151, which means the fund has very much variation in the returns when compared

with its benchmark index CNX Midcap Index.



HYPOTHESIS

H0: There is no significant difference in the risk and returns between Sahara Mutual Fund

schemes.

HA: There is significant difference in the risk and returns between Sahara Mutual Fund

schemes.

Income fund

Short term fund

Liquid fund

Gilt fund

Growth fund

Mid cap fund

113.648392 111.4861457 104.831 108.839143 308.0025 117.7963113.840364 111.5030403 104.8289 109.29657 308.7049 124.3827114.009006 111.6678293 104.831 109.461814 308.7049 131.2858114.220519 111.8179354 104.8289 109.63137 302.4121 119.4627114.417252 111.9490964 104.8289 109.849265 302.4121 117.5078114.571334 112.0888038 104.8289 109.941516 313.6441 122.6423114.7041 112.224361 104.8289 110.021219 330.5124 130.8278

114.886242 112.3833212 104.8289 110.2416 345.96 142.115115.173678 112.5339072 104.8289 110.62622 353.0641 140.3325115.339008 112.7270593 104.8289 110.788255 365.9569 147.8924116.10709 113.9236023 104.8289 110.819834 370.1776 154.5994116.290342 114.1158063 104.8289 111.024154 410.0625 173.3436116.499642 114.3081723 104.8289 111.270852 398.8009 169.5829116.614081 114.511401 104.8289 111.31305 424.7721 176.3398116.821511 114.7276632 104.8289 111.532609 453.2641 187.5804116.968551 114.9376968 104.8289 111.644582 473.0625 192.2798



1. ∑X2 = 15212.0708

2. ∑X2 = 15212.0708

N 96

= 158.4590711

3. Sum of squares of funds

= 115.2569446 + 112.9316151 + 104.82919 + 110.3938784 + 360.594606 + 146.7482 = 950.7544264 4. Total sum of squares = 15212.0708 - 158.4590711 = 15053.61175 5. Sum of squares due to different fund = 950.7544264 - 158.4590711 = 792.2953554



ANOVA TABLE

Sources of variance

Sum of squares

Degrees of freedom

Mean square F cal F tab

Between funds

792.2953554

5 158.4590711

1 2.30

Error 14261.3164

90 158.4590711

Total 15053.61175

95

Hypothesis Testing:

F cal < F tab then H0 is accepted F cal > F tab then HA is accepted

Conclusion:

Since F cal is less than F tab, H0 i.e., null hypothesis is accepted.



SUMMARY OF FINDINGS

FINDINGS:

The research project was done about Sahara Asset Management Company Pvt Ltd and the

data collected for the project was for a period of three and a half months i.e. from February

10, 2006 to May 26, 2006. And on the collected data, study was done and the following were

the findings:

The Sahara Income Fund has given good returns for the investors in this period. The

beta of the fund is 0.0073. The Standard Deviation of the fund is 0.10073

The Sahara Short-Term Fund has not given stable returns to the investors. The beta of

the fund is -0.00402. The Standard Deviation of the fund is 0.11941.

The returns of the Sahara Liquid Fund have been very good in this period. The beta of

the fund is 0.00026180. The Standard Deviation of the fund is 0.0007174580.

The Sahara Gilt Fund has given stable returns for the investors. The beta of the fund

is 0.12187. The Standard Deviation of the fund is 0.036230977.

The Sahara Growth Fund has given varied returns to the investors. The beta of the

scheme is 0.5926. The Standard Deviation of the fund is 1.61639.

The returns of the Sahara Midcap Fund are positive but the scheme is prone to more

risk. Due to which beta of the scheme is 3.9213. The Standard Deviation of the fund is

2.373580151.



SUGGESTIONS AND CONCLUSIONS

RECOMMENDATIONS:

The Beta of Sahara Midcap Fund is 3.2921. Therefore the Company should try to

reduce the high risk associated with Sahara Midcap fund by wisely selecting the portfolio for

investments and thereby reducing the risks. Since Sahara Midcap Fund has very high Beta

i.e. it describes the volatility attached with this particular scheme the company’s fund

managers should take necessary steps to in the interests of the investors so as not to expose

their investments to such magnitude of volatility.

Sahara Income Fund has a beta of 0.0073 hence the scheme is less volatile than the

market, and it is less volatile than the market. The scheme should generate reasonable returns

while maintaining safety and providing investor superior liquidity. Although it is not beating

the index it is giving consistent returns and regular dividends are possible.

The Sahara Gilt Fund has a beta of 0.12187 so it means it’s the scheme is less

volatile. So the company should harness on it by excessively advertising its benefits and in

turn invite investors to invest whose risk appetite is less. The company should educate the

HNIs, Corporates, Banks, and other cooperative societies about the merits of this product and

try to induce them to invest.

The returns of the Sahara Short Term Fund have varied very much the objective of

the scheme to generate returns in line with Mibor linked short term papers with call/put

option and to give stable income to the investors. The Beta of the scheme is negative which

indicates the fact that it doesn’t move with the market sometimes. In short it explains its

inconsistency.

The standard deviation of the Equity funds like the Sahara Growth Fund and Sahara

Midcap Fund is high, so the company should try to reduce the risk involved by reducing the

standard deviation of the fund.



CONCLUSIONS:

From the findings it can be concluded that:

The beta of Sahara Income Fund is 0.007384798 hence can be said the scheme is less

volatile compared to the market.

The Sahara Short-Term Fund has not given stable returns the beta of the fund is

0.00402408 that means the fund is less volatile than the market but its inconsistency in

movement with the market is a major concern. The beta of the fund is negative which means

the fund moves in the opposite direction to that of the market.

Sahara Liquid Fund has the beta of 0.00026180 this means for every 1% change in

the market index causes 0.00026180 change in the scheme return. The scheme is almost

volatile free when compared to the market.

Sahara Gilt Fund has given a stable return with the standard deviation of 0.03623.

under its own category it is doing exceptionally well.

The standard deviation of the Equity schemes of Sahara Mutual Fund viz. Sahara

Growth Fund and Sahara Midcap Fund are high which means the returns of these funds have

varied from the average return of the respective funds.



BIBLIOGRAPHY

BOOKS REFERRED

Investment and Portfolio Management by Prasanna Chandra.

Security Analysis and Portfolio Management by Punithavathy Pandian.

Security Analysis and Portfolio Management by V.K.Bhalla.

Investment Management by Preeti Singh.

Indian Financial System by M.Y.Khan.

Invest India Economic Foundation’s Mutual Fund Industry guide.

MAGAZINES

ICFAI university press’s monthly periodical journal CHARTERED FINANCIAL

ANALYST.

Outlook Money by fortnightly magazines.

Business Today.

Business World.

NEWS PAPERS

Business Standard.

Economic Times.

Business Line.

WEB SITES

www.saharamutual.com

www.amfi.com

www.sebi.gov.in

www.mutualfundsindia.com

www.nseindia.com


http://www.saharamutual.com/

http://www.amfi.com/

http://www.sebi.gov.in/

http://www.mutualfundsindia.com/

http://www.nseindia.com/

Documents

Evaluation Study of Risk and Returns of Sahara Mutual Funds-Veena Kamin-04118