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“AN ANALYSIS & PERFORMANCE OFEQUITY MUTUAL FUNDS”
SUBMITTED IN FULFILLMENT OF DEGREE OF UG
UNDER GUIDANCE OF
Ms. PRIYANKA SRIVASTAVA
CAPITAL MARKET SERVICES DIVISION (CMSD)SAHARA INDIA PARIWAR
SUBMITTED BY: -PRITI SINGH
07621033
SHERWOOD COLLEGE OF PROFESSIONALMANAGEMENT
LUCKNOW
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Acknowledgement to the company
The opportunity to get practical training in a reputed organization
fulfills the felt gap between the theory and practical. In the case of astudent of FINANCE this aspect assumes an additional dimension
I hereby acknowledge SAHARA INDIA for providing the
constant guidance for encouragement which helped me a lot to be
successful in my efforts. This formal acknowledgement will hardly be
sufficient to express my deep sense of gratitude to all of them. It was a
memorable experience while doing my project at SAHARA
ORGANISATION , Lucknow.
I am highly indebted and thankful to Ms.Priyanka
Srivastava for her guidance and encouragement, without which
the satisfactory completion of this project would not had been
possible. She is a constant source of inspiration to me, showing all the
patience and abundant encouragement throughout the project
duration.
Acknowledgement couldn’t end without expressing my gratitude
towards Mr. PANKAJ VARSHNEYA who was instrumental in
timely completion of the project.
Words fall short in expressing my sincere regards towards the
members of CMSD Mr. Devendra Singh and Mr. Santosh
kumar for their expert advice and invaluable suggestions.
Lastly thanks to teacher and colleagues who directly orindirectly helped me in procurement of my goal.
In all SAHARA INDIA provided a wonderful simulating
environment for this very educative and instructive training.
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(PRITI
SINGH)
Acknowledgement to the FacultyOf UG , Sherwood College Of
Professional Management
It is high privilege for me to express my deep sense of gratitudeto all those faculty members who helped me in the completion of the
project, especially my UG Director Mr. S P Singh who was always
there at hour of need.
My special thanks to Prof. Gyan (FACULTY OF FINANCE) for
helping me in the completion of project work and its report
submission.
Last but not the least my special thanks to the faculty of
Sherwood college of professional management for their kind co–
operation and providing me with all the necessary documents needed
and guidance during the time period of project completion.
(PRITISINGH)
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DECLARATION
This is the report of the project work entitled “ AN
ANALYSIS OF PERFORMANCE OF EQUITY MUTUAL
FUNDS ” undertaken by me during the two month training
at SAHARA INDIA , Lucknow.
I hereby declare that project report is being submitted by
me to the Department of Commerce for the partial
fulfillment of the degree of Master of Finance & Control. A
copy of this project has been submitted to the organization
where the project was developed. This project is not
submitted to any other organization or university or college
and is the outcome of my work.
(PRITISINGH)
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INDEXSr. No. Contents Pg. No.1 Introduction 6
2 Company Profile 11
3 Capital Market Services Division 16
4 Initial Methods Of Investment 19
5 History Of Mutual Funds 2 3
6 Mutual Funds & its classifications 31
7 Advantages of Mutual Funds 388 Disadvantages Of Mutual Funds 40
9 Tax Aspect of Mutual Funds 42
10 Terms Related To Mutual Funds 43
11 Steps Involved In Investments Of Mutual Funds 50
12 Growth in Mutual Fund Industry 50
13 Comparison Of Mutual Fund With Other Deposits 55
14 Market Trends Mutual Funds 63
15 Research Objective & Research Design 64
16 Data Analysis 6517 Recommendations & Conclusion 82
18 Questionnaire 85
19 FAQ’s 87
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20 Glossary 89
21 Bibliography 93
Introduction
A Mutual Fund is an ideal investment vehicle where a number of
investors come together to pool their money with common investment
goal. Respective Asset Management Company (AMC) manages eachMutual Fund with different type of schemes. An investor can invest his
money in one or more schemes of Mutual Fund according to his
choice and becomes the unit holder of the scheme. Fund manager in
different types of suitable stock and securities, bonds and money
market instruments then invests the invested money in a particular
scheme of a Mutual Fund. Each Mutual Fund is managed by qualified
professional men, who use this money to create a portfolio, which
includes stock and shares, bonds, gilt, money-market instruments or
combination of all. Thus Mutual Fund will diversify your portfolio
over a variety of investment vehicles. Mutual Fund offers an investor
to invest even a small amount of money. A security that gives small
investors access to a well-diversified portfolio of equities, bonds, and
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other securities. Each shareholder participates in the gain or loss of
the fund. Shares are issued and can be redeemed as needed. The
fund's net asset value (NAV) is determined each day. Each mutual
fund portfolio is invested to match the objective stated in the
prospectus.
Respective Asset Management Companies sponsored by
financial institutions, banks, private companies or international firms
manages Mutual Funds schemes. The biggest Indian AMC is UTI while
Alliance, Franklin Templeton etc are international AMC's .
Mutual Fund offers several benefits to an investor such as
potential return, liquidity, transparency, income growth, good post
tax return and reasonable safety. There are number of options
available for an investor offered by a mutual fund.
A draft offer document is to be prepared at the time of
launching the fund. Typically, it pre specifies the investment
objectives of the fund, the risk associated, the costs involved in the
process and the board rules for entry into and exit from the fund and
other areas of operation. In India, as in most countries, these
sponsors need approvals from a regulator, SEBI (securities Exchange
Board of India) in our case. SEBI looks at track records of the sponsor
and its financial strength in granting approval to the fund for
commencing operations.
A sponsor then hires an Asset Management Company to invest
the funds according to the investment objectives. It also hires another
entity to be the custodian of the asset of the fund and perhaps a third
one to handle registry work for the unit holder (subscriber) of the
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fund, in the Indian context, the sponsor promote the Asset
Management Company also, in which it holds a majority stake. In
many cases a sponsor can hold a 100% stake in the Asset Management
Company (AMC).
A mutual fund is like a big pizza cut into slices. Each slice is
called a share. The share price is called the Net Asset Value (NAV).
Unlike a stock price that will fluctuate all day long, the mutual fund
price changes only once a day, at the close of the stock market
Each Mutual Fund has a specific stated objective
The fund’s objective is laid out in the fund’s prospectus, which isthe legal document that contains information about the fund, its
history, its officers and its performance.
Some popular objectives of amutual fund are
FUND OBJECTIVE WHAT THE FUND WILL INVEST IN
Equity (growth) Only in stocks
Debt (income) Only in fixed-income securitiesMoney Market (including Gilt) In short-term money market
instrument (including governmentsecurities)
Balanced Partly in stocks and partly in fixed-income securities, in order tomaintain a 'balance' in return andrisk
FLOW C HART OF HOW MUTUAL FUND WORKS
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The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or variedinvestment objectives.
The AMC hires a professional money manager, who buys and sellssecurities in line with the fund’s stated objective.
All AMCs regulated by SEBI, funds governed by board of directors.
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ORGANISATION OF MUTUAL WORK
The securities and exchange Board of India (SEBI) mutual fundregulations require that the fund’s objectives are clearly spelt out inthe prospectus.
In addition, every mutual fund has a board of directors that issupposed to represent the shareholder’s interest, rather than the
AMC’s
A mutual fund is a company that combines, or pools, investors' money and, generally, purchases stocks or bonds . Ideally, a fund's size andresultant efficiency, combined with experienced management ,provide advantages for investors that include diversification , expertstock and bond selection, low cost, and convenience.
In terms of legal structure, a mutual fund is a corporation thatreceives preferential tax treatment under the U.S. Internal RevenueCode. The assets of a mutual fund consist almost entirely of thesecurities it holds in its portfolio . The most common type of mutualfund, called an open-end fund , allows investors to buy and sell stock in it on an ongoing basis.
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COMPANY PROFILE
The Mutual Fund Industry is one of the fastest growing sectors inIndia with an average CAGR of 20% over the past five years. In thisscenario, Sahara Mutual Funds is all set to revolutionize the India
AMC industry, with a mission to give every class of investors aprofitable and prudent investment option with a perfect balance of returns, safety and liquidity.
Investment options are:Debt: Sahara Income Fund, Sahara Gilt Fund, Sahara Liquid Fund,
And Sahara Short Term Plan.Equity: Sahara Growth Fund, Sahara Tax Gain Fund.
Sahara India Pariwar’s success story began in 1978. Starting on amodest scale with a capital of only Rs. 2000 (USD 43), the company has traversed a long way to become a frontrunner in Indianentrepreneurship.Today, Sahara India Pariwar is a major entity on the corporate scenehaving an asset base of over Rs. 50,000 crores (USD 10.87 billion) anddiversified business interests that include: Public DepositMobilization, Infrastructure & Housing, Media & Entertainment,
Aviation, Consumer Products, Information Technology, SundarbansProject, Sahara Hospital, Araria Jute Project, Life Insurance, MutualFunds, Housing Finance, Power Project, Computer Manufacturing,Hotel and Caring Scheme.
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SAHARA’S CORE COMMITMENTS - OUR STRENGTH
EmotionEmotion is in Performance of genuine duties towards the loved onesprimarily in their benefit, from their point of view. EMOTION is THEKEY that generates the required energy and enthusiasm for desiredquality performance.
Discipline
The enthusiastic obedience of laws and orders, which are given by therightful authority.
Duty
The enthusiastic obedience of laws and orders, which are given by ourCONSCIENCE.
No Discrimination
Never should we discriminate in any of our actions, reactions,attitudes, decisions, conclusions, in any of our expressions whilecaring for the six health’s of other human beings, namely physical,material, mental, emotional, social and professional health.
Quality
Results from honoring Rules, Regulations, Commitments, Values,Fairness, Performance of Duties by honestly balancing one's own andothers' reasonable point of view in the matters of Material & Emotional aspects.Quality is our essence and we, at Sahara India Pariwar, have alwaysstressed on the Qualitative aspect. Consequently in this run forquality, quantity has always pursued us. We look forward to reachingthe zenith and reaffirm our commitment to the process of soundnation-building.
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“We chase Quality,
Quantity chases us” Give Respect
To definitely make others feel important and respected by givingsincere regard to others' feelings, reasonable wishes & thoughts withan open and receptive mind and warmth.
Self-respect
To develop a sense of respect for oneself in others' mind, i.e. to
generate genuine & warm feelings for oneself among others on acontinuous basis.
Truth
Means total transparency in action, reaction, attitude and all otherexpressions and the conviction to follow the right course.
Collective Materialism
Means to progress and prosper together for collective sharing andcaring and not individually or for a select group.
Religion
There is a religion higher than religion itself - it is NATIONALITY. Wemay practice our religions in the confines of our homes, but outside,
we should be Indians and only Indians. 'Bharatiyata' or Nationalismthus becomes our supreme religion.
Absolute Honesty
We firmly believe that our mind inside knows the truth and we should be absolutely honest to our mind inside and accordingly our actions,reactions, directions, decisions and all our expressions should bepresent in all human dealings.
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PHILOSOPHY SAHARA INDIA PARIWAR'S PHILOSOPHY - "Collective
Materialism"
In any human relationship, it becomes imperative to take intoconsideration the materialistic aspect of life - we do so but by giving it
second priority.The first priority is given to emotional aspect and with perfect
blending of materialism with emotionalism, results in continuouscollective growth for collective sharing and caring, that gives animpetus to our philosophy - "COLLECTIVE MATERIALISM".
FEELINGS THAT DWELS IN AN ORGANISATION
Maan-Samman,Atmasamman Emotions are of two kinds - love and respect. Love is an inferior
emotion which has been given by God to fulfill your reasonable,unreasonable needs. But in human society since we have the thinkingpower, respect for others and sense of self-respect are the mostsuperior emotions.
"Saharasri"SubrataRoySahara
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The Man and His Vision
He has talked about problems and proposed the solutions on 5 socialissues namely Population, Education, Political (Election) system,Media & Religion, besides interacting on various aspects of life andprofessional life. According to him if these five issues are taken care of properly, our beloved country shall be the best in the worldSAHARA INDIA FINANCIAL CORPORATION LIMITED
Sahara India Financial Corporation Limited, (SIFCL) is the flagshipcompany of Sahara India Group. Incorporated in 1987, SIFCL is theFirst Residuary Non-Banking Company (RNBC) in India that has beengranted certificate of registration by RBI and is considered to be aleading public deposit mobilization company in the Private sector. TheSahara India Group, has over the years emerged as a multi-serviceand multi-product business conglomerate with diverse interests infields such as Aviation, Life Insurance, Para banking, Housing,Infrastructure & Tourism, Consumer Products, Media & Entertainment
Sahara India Financial Corporation Limited is the largest depositmobilization company in the private sector with the highest yearly deposit level in India. It is the first Residuary Non-Banking Company (RNBC) to be granted a certification of registration by the ReserveBank of India. It has over 61 million esteemed depositors (1 out of every 17 Indians) served by 9.1 lakh staff through over 1500 branches
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“ Capital Market Services Division ”
Capital Market Services Division (CMSD) is a Division of Sahara IndiaFinancial Corporation Ltd. (SIFCL) with an objective to provide
various fee based services to the Investors in the Capital Market.
This Division operates through a cluster of Service Centers & collection centres. It deals in Depository Services with NationalSecurities Depository Ltd (NSDL) & Central Depository Services (I)Ltd as a Depository Participant (DP) and has also ventured into other
related activities like Mutual Fund distribution, Financing againstInitial Public Offerings, Distribution of other Financial Products etc.
Our Strong And Strict Fundamentals
• Stringent expense control.Cost of fund (including interest cost) within 8% p.a.
• No speculative investment.Total investment in listed equity shares (less than 1% of the totalassets.)
• High class quality investment.Restricting the non-performing assets ratio within 0.75% only.
• No unsecured loans.
Hence no bad debts at all.
• Capital adequacy ratio.24.64% as on 30.09.2004(statutory requirement 12%)
Present Activities of CMSDDepository Services.
• Mutual Fund Distribution.
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• Distribution of RBI Bonds, Infrastructure Bonds, Capital GainTax Bonds.
• IPO Financing (Financing for Subscribing New Initial PublicOfferings) etc.
Our Services
• Extended Business Hours.• Highly Competitive Rates.• Proposed Activities:• Round the Clock Helpdesk service through IVRS facility and
availability on 24/7/365 basis.• Convenience of anywhere accounts management through
SPEED-e (NSDL) / easiest (CDSL).• Personalized and Efficient Service by NCFM qualified staff
Our Offering
• Multiple financial products in a very convenient manner.• Depository services• Internet Trading of securities• Distribution of Mutual Fund Units
Distribution of Other Products• CMSD is also a Distributor for other financial products like
• RBI Relief Bonds (Tax Free)• Infrastructure Bonds• Capital Gain Tax Bonds• Initial Public Offerings etc.
Future Plans:
• Loan against Shares and Mutual Fund Units.• Funding for Margin Trading• Distribution of Insurance Products.• Facilitating Internet Trading of Securities• Retailing of Debt Instruments.
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• Geographical Expansion based on potentials of respectivemarkets.
Initial Product Offering by Capital Market ServiceDivision
SAHARA INCOME FUND
Depositing your money in a savings account bank or fixed deposit willonly provide you safety, but the opportunity for your money toappreciate is limited. Sahara Income Fund provides safety, highestcredit quality, plus an opportunity to earn steady and regular income.
SAHARA LIQUID FUND
Sahara Liquid Fund is a good parking place for your idle funds. It
provides an opportunity to generate returns on your idle funds withminimal risk and high liquidity.
SAHARA GILT FUND
When you invest in Gilt Fund, your investment carries no Credit risk. You can enjoy steady returns at a relatively low risk over a medium tolong-term horizon.
SAHARA SHORT TERM FUND
Every Corporate and High Net worth investors who have treasury surpluses for a few days can benefit from Sahara Short Term Plans.
SAHARA GROWTH FUND
Make your Investments grow with the benefit of Equities.
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SAHARA TAX GAIN FUND
Sahara Tax Gain Fund is an Equity Linked Saving Scheme (ELSS) thatnot only helps you save tax under section 88 of the Income Tax Act,1961 but also has the potential of long-term growth through
investments in equities.
INITIAL METHODS OF INVESTMENT
What is `deposit?’
The term `deposit’ has been defined as receipt of any money borrowed by the company but not including any of the following :-
• Government Borrowings• Borrowings from any financial institutions;• Borrowings from any Banks;• Borrowings from any company • Security deposit;• Advance from purchasing/selling agent• money received in Trust ;• Subscription against application for shares;
•
Subscription against bonds, debentures, etc. secured by amortgage with or without option to convert into shares;• Money brought in by issue of any secured bonds/debenture• Money brought in by promoters;• Money received from the shareholders of a private limited
company or a deemed public company.
What are the limits for accepting deposits?
A company can borrow deposits up to the extent given below:-• up to 25% of the paid-up capital and free reserves of the
company from the public and
• up to 10% of its paid-up capital and free reserves from itsshareholders.
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• Therefore, maximum deposit a company can accept frompublic/shareholders is 35% of its paid up capital and freereserves as mentioned above.
• If the company is a `Government Company’, then it can accept
or renew deposits from public up to 35% of its paid up capitaland free reserves.
• "Free Reserves" mean the balance in the share premiumaccount, capital and debenture redemption reserves and any other reserves shown in the balance-sheet of the company andcreated by appropriation out of the profits of the company, butdoes not include the balance in any reserve created forrepayment of any future liability or for depreciation in assets orfor bad debts;
•
revaluation of any assets of the company
Period of accepting deposits:-
A company can invite/accept deposits for a period not less than 6months and not more than 36 months from the date of acceptance of such deposits or from the date of its renewal. Therefore, a company can accept/invite deposits for a period between 6-36 months.
However, a company may accept deposits up to 10% of its paid up
capital and free reserves which are repayable after three months,from the date of such deposits or renewal thereof to meet any of itsshort term requirements.
Rate of interest
Maximum rate of interest that a company can offer on fixed depositsis 15%.
FIXED DEPOSITS
Fixed deposits remain the most popular instrument for financialsavings in India. They are the middle path investments with adequatereturns and sufficient liquidity. There are basically three avenues forparking savings in the form of fixed deposits. The most common are
bank deposits. For nationalized banks, the yield is generally low with amaximum interest of 10 to 10.5% per annum for a period of three
years or more. As opposed to that, NBFCs and company deposits aremore attractive.
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The idea is to select the right company to minimize the risk. Company deposits as a saving instrument have declined in popularity over thelast three years. The major reasons being the slowdown in economy resulting in default by some companies. Also, some NBFCs simply
vanished with the depositors' money. All that is likely to change forthe better. Corporate performance is likely to improve and strictercontrol by RBI should improve NBFCs record. But one still needs to beselective. Let us help you in making the right decision.
Post office is a very safe and secure investment avenue. The money isused in the development of the society as a whole, while it providessteady returns. The biggest advantage of investing in post officeschemes is the tax benefit that they provide. Thus a lot of savings gothrough this channel to dual advantage - tax benefits and steady returns
Deposit account
A deposit account is an account at a banking institution that allowsmoney to be held on behalf of the account holder. Some banks chargea fee for this service, while others may pay the client interest on thefunds deposited.
The account holder retains rights to their deposit, althoughrestrictions placed on access depend upon the terms and conditions of the account and the provider.
A deposit is a type of asset .
Saving deposit
Savings deposits are accounts maintained by commercial banks ,savings and loan associations , credit unions , and mutual savings
banks that pay interest but can not be used directly as money (by, forexample, writing a check). These accounts let customers set aside aportion of their liquid assets that could be used to make purchases.But to make those purchases, savings account balances must betransferred to " transaction deposits " (or " checkable deposits ") orcurrency. However, this transference is easy enough that savingsaccounts are often termed near money. Savings accounts, as suchconstitute a sizeable portion of the M2 monetary aggregate .
With savings accounts you can make withdrawals, but you do not havethe flexibility of using checks to do so. As with an MMDAs ( money market deposit account ), the number of withdrawals or transfers youcan make on the account each month is limited
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Time deposit
A time deposit (also known as a term deposit, particularly in Australia and New Zealand ) is a money deposit at a bank that cannot be
withdrawn for a certain "term" or period of time . When the term isover it can be withdrawn or it can be held for another term. Generally speaking, the longer the term the better the yield on the money. A certificate of deposit is a time-deposit product.Note that the M2 money supply includes funds that can be useddirectly in payment, such as money market mutual funds and money market deposit accounts (MMDAs). MMDAs are considered by theUnited States Federal Reserve (the Fed) to be savings accounts andare thus exempt from reserve requirements. These large transaction accounts not being included in the M1 money supply suggests that theFed does not pay much attention to ordinary transaction deposits , and
in July 2000, it announced that it was no longer setting target rangesfor growth rates of the monetary aggregates
Transaction deposit
Transaction accounts include all deposits against which the accountholder is permitted make withdrawals by negotiable or transferableinstruments, payment orders of withdrawal, or telephone orpreauthorized transfers for the purpose of making payments to thirdpersons or others. However, accounts subject to the rules that permitno more than six preauthorized, automatic, or other transfers permonth (of which no more than three may be by check , draft , debit card , or similar order payable directly to third parties) are savings deposits , not transaction accounts
Current account
A current account is a deposit account in the UK and countries with aUK banking heritage offering various flexible payment methods toallow customers to distribute money directly to others. Most currentaccounts have a cheque book , offer the facility to arrange standing orders , direct debits and payment via a debit card . Current accountsmay also allow borrowing via an overdraft facility.Current accounts providers include banks , building societies andcredit unions .Since the internet revolution most retail banking institutions offeraccess to current accounts via online banking.
Demand deposit
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A demand account (or demand deposit, demand deposit account) is adeposit account held at a bank or other financial institution , the fundsdeposited in which are payable on demand. The primary purpose of demand accounts is to facilitate cashless payments by means of check ,
bank draft , direct debit , electronic funds transfer , etc. A demand account is commonly known as:• a share draft account• a a checking account• current account• a current account• a cheque account
Mutual Funds: A Safe Road to Capital Market
Investment (History)
Terms such as personal finance and financial planning are now
more prevalent in the vocabulary of the common man, than they were
a few years ago. The Indian growth story along with that of the young
population with high income are some of the key reasons of this
growing trend. The market has also reacted by providing a range of
financial planning tools and the retail investor is being communicatedthe same.
As the country is progressing and per capita income is increasing
people have started giving more attention towards investment. Now
every educated and aware Indian wants to grow his wealth and to
make his future safe. Capital markets have always attracted the
investors because of their higher returns but the risk side is so
dominant and uncertain that a common man hesitates in investing incapital markets. Mutual funds have emerged as a new tool in the hands
of the investors, which reduces the risk side of the investment. Though
mutual funds can not truncate the risk part completely but definitely
they have an edge over the direct trading.
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A Mutual Fund is a pool of investments used to buy a large
portfolio of securities that will be managed by a professional advisor.
When one buys a share in the mutual fund then effectively he buys a
bit of each security held in the mutual fund portfolio. Mutual funds are
not risk free investments. Even investing in mutual funds whose
portfolio consists only of guaranteed government bonds contains an
element of risk. But, when someone invests in Mutual funds then total
risk is minimized due to the diversity of the portfolio.
Past couple of years has seen a surge in mutual funds
investment. In fact mutual funds are fast emerging as the preferred
vehicle for the capital market investments. The origin of mutual fund
industry in India is with the introduction of the concept of mutual fund
by UTI in the year 1963. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI players entered the
industry. In 1995, the RBI permitted private sector institutions to set
up Money Market Mutual Funds (MMMFs). They can invest in treasury
bills, call and notice money, commercial paper, commercial bills
accepted/co-accepted by banks, certificates of deposit and dated
government securities having unexpired maturity up to one year. The
mutual fund industry can be broadly put into four phases according to
the development of the sector. Each phase is briefly described as
under.
• First Phase - 1964-87: Unit Trust of India (UTI) was established
on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control
of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI
and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme
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launched by UTI was Unit Scheme 1964 (popularly US-64). At the end
of 1988 UTI had Rs.6700 crores of assets under management.
• Second Phase - 1987-1993 (Entry of Public Sector Funds):
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed
by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90),
Bank of Baroda Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990.
The end of 1993 marked Rs.47004 as assets under management.
• Third Phase - 1993-2003 (Entry of Private Sector Funds):
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice
of fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund)
Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now functions under theSEBI (Mutual Fund) Regulations 1996. The number of mutual fund
houses went on increasing, with many foreign mutual funds setting up
funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual
funds with total assets of Rs. 121805 crores. The Unit Trust of India
with Rs.44541 crores of assets under management was way ahead of
other mutual funds.• Fourth Phase - since February 2003: This phase had bitter
experience for UTI. It was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with AUM of
Rs.29835 crores (as on January 2003). The Specified Undertaking of
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Unit Trust of India, functioning under an administrator and under the
rules framed by Government of India and does not come under the
purview of the Mutual Fund Regulations. The second is the UTI Mutual
Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered withSEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than
Rs.76000 crores of AUM and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent
mergers taking place among different private sector funds, the mutual
fund industry has entered its current phase of consolidation and
growth. As at the end of September, 2004, there were 29 funds, whichmanage assets of Rs.153108 crores under 421 schemes.
Growth in Asset under Management (AUM)
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YEARS Rs. In CroresMar-65 25
Mar-87 4564
Mar-93 47000
Mar-03 79464
Mar-04 139616
Mar-05 149554
Mar-06 231862
Mar-07 326388
Mar-08 505152
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It is clear from the above table that past 10 to 15 years have seen a
dramatic shift in the mutual fund growth. The following graph also
represents that how mutual funds have performed during different
phases and after 4 th phase the rapid boom has been recorded due to
the entry of the many new entrants. But graph also shows the impact
of market on the performance of the mutual fund as the AUM from
2003 to 2008 is very fluctuating.
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Year on Year Growth of the Mutual Funds In
Terms Of Asset under Management
It is clear from the above table and graphical representation that
Mutual funds have seen an upward trend from the year 2004-05 and
their asset value is continuously increasing. Change in AUM over the
last year has been represented by the following graph:
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Year AUMChange over the
last year
Change in %over the last
year
March-00 93717
March-01 83131 -10586 -11.30
March-02 94017 10886 13.09
March-03 75306 -18711 -19.90
March-04 137226 61920 82.22
March-05 145807 8581 6.25
March-06 225290 79483 54.51
March-07 325157 99867 44.33
March-08 527171 202014 62.13
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If
we
see the last year performance on monthly basis then it will become
clear that how mutual funds get affected by the market.
Monthly change during Last Financial- Year 2007-08
(*Source: moneycontrol.com, here AUM in Rs. Crores )
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MonthAssets under
management(AUM)Change in
AUM
Rate of changeIn Percent
April-07 351294 26137 8.04May-07 414990 63696 18.13
June-07 401612 -13378 -3.22 July-07 487398 85786 21.36
August-07 468386 -19012 -3.90September-07 478474 10088 2.15
October-07 557470 78996 16.51November-07 538672 -18798 -3.37December-07 550699 12027 2.23 January-08 549703 -996 -0.18February-08 566054 16351 2.97
March-08 527171 -38883 -6.87
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The following graph shows that how mutual funds get affected by
the market and how they see Ups & downs with in a year. It also
represents that how the investors’ decisions of investing or not
investing change during a year.
In the past few years mutual funds have attracted the minds of
many investors. Even they have also snatched the market share of
commercial banks in terms of deposits. From the available data it could
be make out that from 2005 to 2008 AUM of Mutual funds have been
higher than the deposits of the scheduled commercial banks in India.
Year AUM deposits of Banks2005 145807 137668
2006 225290 141590
2007 325157 175341
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(Source: moneycontrol.com and RBI annual journal of banking)
Rules and Guidelines:
All MFs are allowed to apply for firm allotment in public issues. SEBI
regulates the functioning of mutual funds, and it requires that all MFs
should be established as trusts under the Indian Trusts Act. The actual
fund management activity shall be conducted from a separate assetmanagement company (AMC). The minimum net worth of an AMC or
its affiliate must be Rs. 50 million to act as a manager in any other
fund. MFs can be penalized for defaults including non-registration and
failure to observe rules set by their AMCs. MFs dealing exclusively with
money market instruments have to be registered with RBI. All other
schemes floated by MFs are required to be registered with SEBI.
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Mutual Funds & its classifications
Mutual funds basically are of two types:
(1) Closed end: a closed end mutual fund issues only a certain
number of units. After the units are sold and the money is
invested in its portfolio of securities, trading of the fund’s
units can take place on stock exchange.
(2) Open end: an open end mutual fund is constantly offering
new units to the public and redeeming its outstanding units.
There is no limit to the no. of units to be issued.
No Control: Unlike picking your own individual stocks, a mutual fund
puts you in the passenger seat of somebody else's car.
Dilution: Mutual funds generally have such small holdings of so many
different stocks that insanely great performance by a fund's top
holdings still doesn't make much of a difference in a mutual fund's total
performance.
Buried Costs: Many mutual funds specialize in burying their costs
and in hiring salesmen who do not make those costs clear to their
clients
Some Facts for the Growth of Mutual Funds in India • Numbers of foreign AMCs are in the queue to enter the Indian
markets like Fidelity Investments, US based, with overUS$1trillion assets under management worldwide.
• Our saving rate is over 23%, highest in the world. Only
channelizing these savings in mutual funds sector is required.
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• Number of mutual funds in India is much less than US having
more than 800. There is a big scope for expansion.
• Tier-II and Tier-III class cities are growing rapidly. Today most of
the mutual funds are concentrating on the Metro and Tier-I class
cities. Soon they will find scope in the growing cities.
• Mutual fund can penetrate rural like the Indian insurance
industry with simple and limited products.
• SEBI allowing the MFs to launch commodity mutual funds.
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planners who can provide need based
advice.
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REASON WHY PEOPLE INVEST IN DEPOSITS There has been an age old concept of people investing in fixed depositsand other methods of deposits .They follow this concept because againand again investing in different fields might fetch them loss atdifferent stages of life and in order to have a secure future peopleprefer to invest in one deposit for a particular period of time and
withdraw them whenever they need.In today’s era where people are more concerned about their securefuture and due to their busy life they lack knowledge about othermethods if investment.
REASONS OF INVESTMENTS
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BASIC INVESTMENT OBJECTIVE
The investment approach will be based on a set of well established butflexible principles that emphasize the concept of sustainable economicearnings and cash return on investment as the means of valuation of companies.
Five basic principles serve as the foundation for this investmentapproach. They are as follows:
Focus on the long term
There is substantive empirical evidence to suggest that equitiesprovide the maximum risk adjusted returns over the long term. In anattempt to take full advantage of this phenomenon, investments would
be made with a long term perspective.
Investments confer proportionate ownership
The approach to valuing a company is similar to making aninvestment in a business. Therefore, there is a need to have acomprehensive understanding of how the business operates. The key
issues to focus on are growth opportunities, sustainable competitiveadvantage, industry structure and margins and quality of themanagement.
Maintain a margin of safety
The benchmark for determining relative attractivenessof stocks would be the intrinsic value of the business. TheInvestment Manager would endeavor to purchase stocks thatrepresent a discount to this value, in an effort to preserve capital andgenerate superior growth.Maintain a balanced outlook on the market
The investment portfolio would be regularly monitored tounderstand the impact of changes in business and economic trend as
well as investor sentiment. While short-term market volatility wouldaffect valuations of the portfolio, this is not expected to influence thedecision to own fundamentally strong companies.
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Example:
You invest $1,000 in a mutual fund with an NAV of $10.00. You willtherefore own 100 shares of the fund. If the NAV drops to $9.00(because the value of the fund's portfolio has dropped), you will stillown 100 shares, but your investment is now worth $900. If the NAV goes up to $11.00, your investment is worth $1,100. (This exampleassumes no sales charge.)
• Sale Price
Is the price you pay when you invest in a scheme? Also called OfferPrice. It may include a sales load.
• Repurchase Price
Is the price at which a close-ended scheme repurchases its units and itmay include a back-end load. This is also called Bid Price.
• Redemption Price
Is the price at which open-ended schemes repurchase their units andclose-ended schemes redeem their units on maturity? Such prices areNAV related.
• Sales Load
Is a charge collected by a scheme when it sells the units? Also called,‘Front-end’ load. Schemes that do not charge a load are called ‘NoLoad’ schemes.
• Repurchase or ‘Back-end’ Load
Is a charge collected by a scheme when it buys back the units from theunit holders?
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ASSET MANAGEMENT COMPANY
In an endeavor to enlarge the range of services available to ourcustomers, PNB has been distributing the products of Principal PNB
Asset Management Company Pvt. Ltd. from its designated branches.In recent times Mutual funds have gained rapid popularity as a goodinvestment vehicle. The variety of schemes and income optionsoffered by Mutual Funds can suit the financial preferences of allclasses of investors, be it Retail, Corporate or Institutional.
The following benefits, intrinsic to investments in Mutual Funds haveinspired greater confidence amongst the investors:
• Transparency • Efficient Performance• Liquidity • Convenience• Tax benefits
Range of schemes:Mutual Funds offer schemes keeping in view the risk profile and risk-return preferences of investors. For an aggressive investor withappetite for risk, Equity oriented schemes are available which have ahigher potential for capital appreciation. For a conservative investor
with expectations of stable returns and low risk, Income Schemes areavailable. To suit various type of requirements of the investors,following is the range of schemes offered by PRINCIPAL PNB AMC:Principal Growth Scheme: Open-ended equity fund with aninvestment portfolio of stocks diversified across different sectors of the economy.
• Principal balanced Fund:
Open ended fund with an equity (diversified) component of 51% to70% and Debt component (including Money Market) 30% to 49%.
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Principal Income Fund: Open-ended fund with up to 100% investmentin Debt instruments (including Money Market instruments andsecuritized debt)
• Principal Income Fund –
Short Term Debt: Open-ended short term maturity debt fund aimed atproviding stable returns with lower to negligible risks. Fund invests indebt securities, predominantly 100% money market instruments andsecuritized debt.
• Principal Cash management Fund:
Open-ended fund that invests 100% of its corpus in Money Marketinstruments and seeks to provide an excellent avenue to park very short term cash surpluses and earn returns linked to the call money market rates.
• Principal Index Fund:
Open-ended fund that tracks S&P CNX Nifty (NSE) closely. The aim of the fund is to provide its investors returns commensurate with theNifty.
• Principal Government Securities Fund:
Open-ended dedicated Gilt scheme investing in GovernmentSecurities.
Innovative options to facilitate greater control over investments:Mutual Funds have options such as Systematic Investment Plans,Systematic withdrawal plan, Trigger Option, Automatic Rebalancing,Dividend Re-investment, etc that enable you to get the most out of
your investment in Mutual Funds.
• Distribution Reach
The distribution services of Mutual Fund products are available atselected branches of all the zones except Bihar, Chhatisgarh andJharkhand.
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• Risk Profile
Mutual Fund investments are subject to market risks. Please read theoffer document of the scheme carefully for details on risk factors
before investment. Punjab National Bank does not guarantee any assured returns for your investments through Mutual Fund.
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Advantages Of Mutual Funds Since their creation, mutual funds have been a popular investment
vehicle for investors. Their simplicity along with other attributesprovides great benefit to investors with limited knowledge, time ormoney. To help you decide whether mutual funds are best for you and
your situation, we are going to look at some reasons why you might want to consider investing in mutual funds.
DiversificationOne rule of investing, for both large and small investors, isasset diversification . Diversification involves the mixing of investments within a portfolio and is used to manage risk. Forexample, by choosing to buy stocks in the retail sector and offsettingthem with stocks in the industrial sector, you can reduce the impact of the performance of any one security on your entire portfolio. Toachieve a truly diversified portfolio, you may have to buy stocks with
different capitalizations from different industries and bonds with varying maturities from different issuers. For the individual investor,this can be quite costly.
By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the largeamounts of cash needed to create individual portfolios. One caveat,however, is that simply purchasing one mutual fund might not give
you adequate diversification - check to see if the fundis sector or industry specific. For example, investing in an oil andenergy mutual fund might spread your money over fifty companies,
but if energy prices fall, your portfolio will likely suffer. (Learn how toprotect yourself against loss, read Recession-Proof Mutual Funds .)
Economies of ScaleThe easiest way to understand economies of scale is by thinking about
volume discounts; in many stores, the more of one product you buy,the cheaper that product becomes. For example, when you buy adozen donuts, the price per donut is usually cheaper than buying asingle one. This also occurs in the purchase and sale of securities. If
you buy only one security at a time, the transaction fees will berelatively large.
Mutual funds are able to take advantage of their buying and sellingsize and thereby reduce transaction costs for investors. When you buy a mutual fund, you are able to diversify without thenumerous commission charges. Imagine if you had to buy the 10-20stocks needed for diversification. The commission charges alone
would eat up a good chunk of your savings. Add to this the fact that you would have to pay more transaction fees every time you wanted to
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modify your portfolio - as you can see the costs begin to add up. Withmutual funds, you can make transactions on a much larger scale forless money...)
Divisibility
Many investors don't have the exact sums of money to buy round lotsof securities. One to two hundred dollars is usually not enough to buy a round lot of a stock, especially after deducting commissions.Investors can purchase mutual funds in smaller denominations ,ranging from $100 to $1,000 minimums. Smaller denominations of mutual funds provide mutual fund investors the ability to makeperiodic investments through monthly purchase plans while takingadvantage of dollar-cost averaging . So, rather than having to waituntil you have enough money to buy higher-cost investments, you canget in right away with mutual funds. This provides an additionaladvantage - liquidity.
Liquidity Another advantage of mutual funds is the ability to get in and out withrelative ease. In general, you are able to sell your mutual funds in ashort period of time without there being much difference between thesale price and the most current market value. However, it isimportant to watch out for any fees associated with selling,including back-end load fees. Also, unlike stocks and exchange-traded funds (ETFs), which trade any time during market hours, mutualfunds transact only once per day after the fund's net asset value (NAV)is calculated.
Professional Management When you buy a mutual fund, you are also choosing a professionalmoney manager . This manager will use the money that you invest to
buy and sell stocks that he or she has carefully researched. Therefore,rather than having to thoroughly research every investment before
you decide to buy or sell, you have a mutual fund's money manager tohandle it for you. (For more insight, see Does Your Investment
Manager Measure Up? and Assess Your Investment Manager .)
Conclusion As with any investment, there are risks involved in buying mutualfunds. These investment vehicles can experience market fluctuationsand sometimes provide returns below the overall market. Also, theadvantages gained from mutual funds are not free: many of themcarry loads , annual expense fees and penalties for early withdrawal.
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Disadvantages of Mutual FundsLike many investments, mutual funds offer advantages anddisadvantages, which are important for you to consider andunderstand before you decide to buy. Here we explore some of thedrawbacks of mutual funds.
Fluctuating ReturnsMutual funds are like many other investments without a guaranteedreturn: there is always the possibility that the value of your mutualfund will depreciate. Unlike fixed-income products , suchas bonds and Treasury bills , mutual funds experience pricefluctuations along with the stocks that make up the fund. Whendeciding on a particular fund to buy, you need to research the risksinvolved - just because a professional manager is looking after thefund, that doesn't mean the performance will be stellar.
Another important thing to know is that mutual funds are notguaranteed by the U.S. government, so in the case of dissolution, you
won't get anything back. This is especially important for investors inmoney market funds. Unlike a bank deposit, a mutual fund will not beinsured by the Federal Deposit Insurance Corporation (FDIC).
Diversification?
Although diversification is one of the keys to successful investing,many mutual fund investors tend to over diversify. The idea of diversification is to reduce the risks associated with holding a singlesecurity; over diversification (also known as diworsification ) occurs
when investors acquire many funds that are highly related and, as aresult, don't get the risk reducing benefits of diversification.
At the other extreme, just because you own mutual funds doesn'tmean you are automatically diversified. For example, a fund thatinvests only in a particular industry or region is still relatively risky.
Cash, Cash and More Cash
As you know already, mutual funds pool money from thousands of investors, so everyday investors are putting money into the fund as
well as withdrawing investments. To maintain liquidity and thecapacity to accommodate withdrawals, funds typically have to keep alarge portion of their portfolios as cash. Having ample cash is greatfor liquidity, but money sitting around as cash is not working for youand thus is not very advantageous.
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CostsMutual funds provide investors with professional management, but itcomes at a cost. Funds will typically have a range of different fees thatreduce the overall payout. In mutual funds, the fees are classified intotwo categories: shareholder fees and annual operating fees.The shareholder fees, in the forms of loads and redemption fees, arepaid directly by shareholders purchasing or selling the funds. Theannual fund operating fees are charged as an annual percentage -usually ranging from 1-3%. These fees are assessed to mutual fundinvestors regardless of the performance of the fund. As you canimagine, in years when the fund doesn't make money, these fees only magnify losses.
Misleading AdvertisementsThe misleading advertisements of different funds can guide investorsdown the wrong path. Some funds may be incorrectly labeled asgrowth funds, while others are classified as small cap or incomefunds. The Securities and Exchange Commission (SEC) requires thatfunds have at least 80% of assets in the particular type of investmentimplied in their names. How the remaining assets are invested is up tothe fund manager.However, the different categories that qualify for the required 80% of the assets may be vague and wide-ranging. A fund can thereforemanipulate prospective investors by using names that are attractiveand misleading. Instead of labeling itself a small cap, a fund may besold as a "growth fund". Or, the "Congo High-Tech Fund" could besold with the title "International High-Tech Fund".
Evaluating Funds Another disadvantage of mutual funds is the difficulty they pose forinvestors interested in researching and evaluating the different funds.Unlike stocks, mutual funds do not offer investors the opportunity tocompare the P/E ratio , sales growth, earnings per share , etc. A mutualfund's net asset value gives investors the total value of the fund'sportfolio less liabilities, but how do you know if one fund is betterthan another?
Furthermore, advertisements, rankings and ratings issued by fundcompanies only describe past performance. Always note that mutualfund descriptions/advertisements always include the tagline "pastresults are not indicative of future returns". Be sure not to pick fundsonly because they have performed well in the past - yesterday's big
winners may be today's big losers.
Conclusion When you buy any investment, it's important to understand both the
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good and bad points. If the advantages that the investment offersoutweigh its disadvantages, it's quite possible that mutual funds aresomething to consider. Whether you decide in favor or against mutualfunds, the probability of a successful portfolio increases dramatically
when you do your homework.
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TAX ASPECT OF MUTUAL FUND A mutual fund is a trust that holds the savings of a number of investors - institutional and individual - who share a commonfinancial goal. The accumulated money is then invested in capital
market instruments such as shares, debentures, and other securities.The income earned through these investments and the capitalappreciation realized are shared by its unit holders in proportion tothe number of units owned by them. Thus a mutual fund is the mostsuitable investment for the common investors as it offers anopportunity to invest in a diversified and professionally managed basket of securities at a relatively low cost. Mutual fundinvestments are, however, subject to tax exemptions.
Income Tax exemptions on mutual funds of India:Chapter III of the Income Tax Act, 1961 provides for exemptions in
income tax. There are few specified incomes on which a person canget exemptions. It means that at the time of calculating annualincome, this type of income will not be added. For claiming any of these exemptions, it is necessary to furnish documents which showsthat your income comes under this list.
Income of specified Mutual Funds registered and/or set upunder/by SEBI Act, 1992, public sector bank/financial institution/RBIfulfilling such conditions as specified. Ref. Income Tax Act 10(23D).
Some Tax Saving Mutual Funds India available, are -
• SBI Mutual Funds• Prudential ICICI• Bank Of Baroda• Bajaj Capital• DSP Merrill Lynch Mutual Fund India• Franklin Templeton Mutual Fund India• Standard Chartered Mutual fund India
Tax Saving Mutual Funds India generally maintains the followingrules of the SEBI while granting tax benefits on their schemes -
• Any special tax benefits for the mutual fund company andits shareholders (only section numbers of the Income Tax
Act and their substance should be mentioned, withoutreproducing the text of the sections).• Tax benefits are to be declared under the column of "objectsof the offering".
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For further information on Tax Saving Mutual Funds India, visit www.sebi.gov.in .
TERMS RELATED TO MF
Annual and Semiannual Reports —Summaries that a mutual fundsends to its shareholders that discuss the fund’s performance over acertain time period and identify the securities in the fund’s portfolioon a specific date. Appreciation —An increase in an investment’s
Value.
Asked or Offering Price —(As seen in some mutual fund newspaperlistings, see p. 25.) The price at which a mutual fund’s shares can bepurchased. The asked or offering price includes the current net asset
value per share plus any sales charge.
Average Portfolio Maturity —The average maturity of all the bonds in a
bond fund’s portfolio. Assets —The current dollar value of the pool of money shareholdershave invested in a fund.
Automatic Reinvestment —A fund service giving shareholders theoption to purchase additional shares using dividends and capital gaindistributions.
Bear Market —A period during which security prices in a particularmarket (such as the stock market) are generally falling.
Bid or Sell Price —The price at which a mutual fund’s shares areredeemed, or bought back, by the fund. The bid or redemption price isusually the current net asset value per share.
Bond —A debt security, or IOU, issued by a company, municipality orgovernment agency. A bond investor lends money to the issuer and, inexchange, the issuer promises to repay the loan amount on a specifiedmaturity date; the issuer usually pays the bondholder periodicinterest payments over the life of the loan.
Broker/Dealer (or Dealer) —A firm that buys and sells mutual fundshares and other securities from and to investors.
Bull Market —A period during which security prices in a particular
market (such as the stock market) are generally rising.Capital Gain Distribution —Profits distributed to shareholdersresulting from the sale of securities held in the fund’s portfolio.
Closed-end Fund —A type of investment company that has a fixednumber of shares which are publicly traded. The price of a closed-endfund share fluctuates based on investor supply and demand. Closed-end funds are not required to
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redeem shares and have managed portfolios.
Commission —A fee paid by an investor to a broker or other salesagent for investment advice and assistance.
Compounding —Earnings on an investment’s earnings. Over time,compounding can produce significant growth in the value of aninvestment.
Contingent Deferred Sales Charge (CDSC) — A fee imposed whenshares are redeemed (sold back to the fund) during the first few yearsof ownership.
Credit Risk —The possibility that a bond issuer may not be able to pay interest and repay its debt.
Custodian —An organization, usually a bank, that holds the securitiesand other assets of a mutual fund.
Depreciation —A decline in an investment’s value.
Diversification —The practice of investing broadly across a number of securities to reduce risk.
Dollar -cost Averaging —The practice of investing a fixed amount of money at regular intervals, regardless of whether the securitiesmarkets are declining or rising.
Exchange Privilege —A fund option enabling shareholders to transfertheir investments from one fund to another within the same fundfamily as their needs or objectives change. Typically, fund companiesallow exchanges several times a year for a low or no fee.
Expense Ratio —A fund’s cost of doing business— disclosed in theprospectus—expressed as a percent of its assets.
Face Value —The amount that a bond’s issuer must repay at thematurity date.
Family of Funds —A group of mutual funds, each typically with its owninvestment objective, managed and distributed by the same company.
401(k) Plan —An employer-sponsored retirement plan that enablesemployees to make tax-deferred contributions from their salaries tothe plan.
403(b) Plan —An employer-sponsored retirement plan that enablesemployees of universities, public schools, and non-profitorganizations to make taxdeferred contributions from their salariesto the plan.
457 Plan —An employer-sponsored retirement plan that enablesemployees of state and local governments and other tax-exemptemployers to make tax-deferred contributions from their salaries tothe plan.
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Hedge Fund —A private investment pool for wealthy investors that,unlike a mutual fund, is exempt from SEC regulation.
Income —Dividends, interest and/or short-term capital gains paid to amutual fund’s shareholders. Income is earned on a fund’s investmentportfolio after deducting operating expenses.
Individual Retirement Account (IRA) —An investor-established, tax-deferred account set up to hold and invest funds until retirement.
Inflation Risk —The risk that a portion of an investment’s return may be eliminated by inflation.
Interest Rate Risk —The possibility that a bond’s or bond mutualfund’s value will decrease due to rising interest rates.
Investment Adviser —An organization employed by a mutual fund togive professional advice on the fund’s investments and assetmanagement practices.
Investment Company —A corporation, trust or partnership thatinvests pooled shareholder dollars in securities appropriate to theorganization’s objective. Mutual funds, closed-end funds and unitinvestment trusts are the three types of investment companies.
Investment Objective —The goal that an investor and mutual fundpursue together, e.g., current income, long-term capital growth, etc.
Issuer —The company, municipality or government agency that issuesa security, such as a stock, bond or money market security.
Large-cap Stocks —Stocks of large-capitalization companies, which aregenerally considered to be companies whose total outstanding sharesare valued at $2 billion or more.Liquidity —The ability to have ready access to invested money. Mutualfunds are liquid because their shares can be redeemed for current
value (which may be more or less than the original cost) on any business day.
Long-term Funds —A mutual fund industry designation for all fundsother than money market funds. Long-term funds are broadly dividedinto equity (stock) and bond and income funds.
Management Fee —The amount paid by a mutual fund to theinvestment adviser for its services.
Maturity —The date by which an issuer promises to repay the bond’sface value.
Mutual Fund —An investment company that stands ready to buy back its shares at their current net asset value, which is the total market
value of the fund’s investment portfolio divided by the number of shares outstanding. Most mutual funds
continuously offer new shares to investors.
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National Association of Securities Dealers, Inc. (NASD) —A self-regulatory organization with authority over firms that distributemutual fund shares as well as other securities.
Net Asset Value (NAV) —The per-share value of a mutual fund, found by subtracting the fund’s liabilities from its assets and dividing by the
number of shares outstanding. Mutual funds calculate their NAVs atleast once daily.
No-load Fund —A mutual fund whose shares are sold without a salescommission and without a 12b-1 fee of more than .25 percent per year.
Open-end Investment Company —The legal name for a mutual fund,indicating that it stands ready to redeem (buy back) its shares frominvestors.
Operating Expenses —Business costs paid from a fund’s assets beforeearnings are distributed to shareholders. These include managementfees and 12b-1 fees and other expenses.
Portfolio —A collection of securities owned by an individual or aninstitution (such as a mutual fund) that may include stocks, bonds andmoney market securities.
Portfolio Manager —A specialist employed by a mutual fund’s adviserto invest the fund’s assets in accordance with predeterminedinvestment objectives.
Portfolio Turnover —A measure of the trading activity in a fund’sinvestment portfolio—how often securities are bought and sold by afund.
Prepayment Risk —The possibility that a bond owner will receive hisor her principal investment back from the issuer prior to the bond’smaturity date.
Principal —see Face Value.
Prospectus —The official document that describes a mutual fund toprospective investors. The prospectus contains information required
by the SEC, such as investment objectives and policies, risks, servicesand fees.
Quality —The creditworthiness of a bond issuer, which indicates thelikelihood that it will be able to repay its debt.
Redeem —To cash in mutual fund shares by selling them back to thefund. Mutual fund shares may be redeemed on any business day. You
will receive the current share price, called net asset value, minus any deferred sales charge or redemption fee.
Reinvestment Privilege —An option whereby mutual fund dividendsand capital gain distributions automatically buy new fund shares.
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Risk/Reward Tradeoff —The investment principle that an investmentmust offer higher potential returns as compensation for the likelihoodof increased volatility.
Rollover —The shifting of an investor’s assets from one qualifiedretirement plan to another—due to changing jobs, for instance—
without a tax penalty.Sales Charge or Load —An amount charged for the sale of some fundshares, usually those sold by brokers or other sales professionals. By regulation, a mutual fund sales charge may not exceed 8.5 percent of an investment purchase. The charge may vary depending on theamount invested and the fund chosen. A sales charge or load isreflected in the asked or offering price (see Asked Price).
Securities and Exchange Commission (SEC) — The primary U.S.government agency responsible for the regulation of the day-to-day operations and disclosure obligations of mutual funds.
Series Fund —A group of different mutual funds, each with its owninvestment objective and policies, that is structured as a singlecorporation or business trust.
Share Classes (e.g., Class A , Class B, etc.) —Represent ownership inthe same fund, but charge different fees. This can enable shareholdersto choose the type of fee structure that best suits their particularneeds.
Shareholder —An investor who owns shares of a mutual fund or othercompany.
Short-term Funds —Another term for money market funds.
Small-cap Stocks —Stock of small-capitalization companies, which aregenerally considered to be companies whose total outstanding sharesare valued at less than $1 billion.
Statement of Additional Information (SAI) — The supplementary document to a prospectus that contains more detailed informationabout a mutual fund; also known as “Part B” of the prospectus.
Stock —A share of ownership or equity in a corporation.
Total Return —A measure of a fund’s performance that encompassesall elements of return: dividends, capital gain distributions and
changes in net asset value. Total return is the change in value of aninvestment over a given period,
assuming reinvestment of any dividends and capital gaindistributions, expressed as a percentage of the initial investment.
Transfer Agent —The organization employed by a mutual fund toprepare and maintain records relating to shareholder accounts.
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12b-1 Fee —A mutual fund fee, named for the SEC rule that permits it,used to pay for distribution costs, such as advertising andcommissions paid to dealers. If a fund has a 12b-1 fee, it will bedisclosed in the fee table of a fund’s prospectus.
Underwriter —The organization that sells a mutual fund’s shares to
broker/dealers and investors.Unit Investment Trust (UIT) —An investment company that buys andholds a fixed number of shares until the trust’s termination date.
When the trust is dissolved, proceeds are paid to shareholders. A UIThas an unmanaged portfolio. Like a mutual fund, shares of a UIT can
be redeemed on any business day.
Withdrawal Plan —A fund service allowing shareholders to receiveincome or principal payments from their fund account at regularintervals.
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How to invest in Mutual Fund • Step One - Identify your Investment needs
Your financial goals will vary, based on your age, lifestyle,financial independence, family commitments, and level of income and expenses among many other factors. Therefore, thefirst step is to assess your needs. You can begin by defining yourinvestment objectives and needs which could be regular income,
buying a home or finance a wedding or educate your children ora combination of all these needs, the quantum of risk you are
willing to take and your cash flow requirements.
• Step Two - Choose the right Mutual Fund
The important thing is to choose the right mutual fund scheme whichsuits your requirements. The offer document of the scheme tells youits objectives and provides supplementary details like the track recordof other schemes managed by the same Fund Manager. Some factorsto evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years inrelation to the appropriate yardstick and similar funds in the samecategory. Other factors could be the portfolio allocation, the dividend
yield and the degree of transparency as reflected in the frequency andquality of their communications. •
Step Three - Select the ideal mix of SchemesInvesting in just one Mutual Fund scheme may not meet all yourinvestment needs. You may consider investing in a combination of schemes to achieve your specific goals.
• Step Four - Invest regularly
The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewerunits when the price is higher and more units when the price is low,thus bringing down your average cost per unit. This is called rupeecost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematicinvestment plan facility offered by many open end funds.
• Step Five- Start early
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It is desirable to start investing early and stick to a regular investmentplan. If you start now, you will make more than if you wait and investlater. The power of compounding lets you earn income on income and
your money multiplies at a compounded rate of return.
•
Step Six - The final step All you need to do now is to Click here for online application forms of various mutual fund schemes and start investing. You may reap therewards in the years to come. Mutual Funds are suitable for every kind of investor - whether starting a career or retiring, conservative orrisk taking, growth oriented or income seeking.
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THINGS KEPT IN MIND BEFOREINVESTING
Prospectus
By law, you should receive a prospectus from the fund company before you invest in it. Many investors ignore the prospectus, but thisis a must read. The mutual fund's objectives are displayed in theprospectus. It tells you the goals of the fund and how it intends toachieve them. You will also find information about the fund's pastperformance and fees.
Mutual Fund FamiliesMutual Fund Glossary
Mutual Fund Fees
The fees are displayed in the prospectus as well as on many mutualfund research sites. Try to buy funds with low expense ratios andcertainly avoid 12b-fees. I have yet to hear a valid argument on why
you should ever buy a loaded fund. A loaded fund is a fund that carriesfront-end loads, back-end loads or deferred loads. These loads are
basically sales charges. There are plenty of no-load funds to meet yourobjectives.
GROWTH IN MUTUAL FUNDS SECTOR “Mutual funds are shuddering at the prospect of an economicrecovery. But they have enough time to consolidate their client base.”
The Smart Investor Team
Normally a recovery means good news for all, consumers,manufacturers and service providers. But hold on. Mutual funds
aren't very enthusiastic, though. Why? Because, the biggest investorsin the domestic mutual fund industry today are large corporates and banks. Investors have put in more than 50 per cent of total assets of the industry. And, a recovery means that corporates may pull out theirmoney to invest in their core activities. Similarly, a revival in creditdemand on the back of a recovery means that banks may need to pullout their investments from mutual funds to meet the demand.
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That's perhaps why mutual funds are pulling such long faces at theprospect of a recovery. What if the economy recovers and corporatesgo on a spending spree? Capacity expansions, merger and acquisitionactivity and better credit demand would require corporates and banksto encash their existing investments to plough back in their core
business.
Obviously, there is a strong possibility of large scale redemptions. While fund companies see this issue as a matter of concern, they areoptimistic about guarding their current assets. Says Ved PrakashChaturvedi, chief executive officer, Tata TDW Mutual Fund, "Despitean economic recovery, the fund industry should be able to retain andin fact, grow its assets."
Is a economic recovery underway? The outlook on the economy ispretty much positive and economists are predicting a wide-rangingrecovery led by an increase in domestic consumer demand.
According to the latest data released by the Central StatisticalOrganization (CSO), the Indian economy grew 4.3 per cent in 2002-03. With the manufacturing and services sectors growing at 6.0 percent and 7.1 per cent respectively, the poor performance of the
agriculture sector dragged down the overall growth. Growth in theagricultural sector declined 3.2 per cent last fiscal. The growth inmanufacturing industry was led by buoyant exports and a boost toconstruction activity.
This year, again, the manufacturing sector is expected to grow at afaster clip. The overall manufacturing outsourcing story should meanmore business for Indian manufacturing companies too.
Construction is again going to be a key driver. So sectors like steel andcement have already seen a quantum jump in demand and many loss-making companies such as Ispat, Essar, and the Jindal group have
turned profitable. Similarly, many other sectors such as consumerdurables and textiles are seeing demand-led growth. Many of thesecorporate houses are thus focusing on the longer-term targets.
Some sectors like steel are already talking of capacity expansion andgreen field projects. Others like cement have been seeingconsolidation. However, as Sanjeev Bafna, senior vice-presidentCorporate finance, Grasim Industries says "It will take 1-2 years forthe Indian industry to start committing funds into expansions."
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But whenever it happens, will corporates queue up for redemptions? And secondly, will banks and financial institutions, which haveinvested their surplus funds in mutual funds on the back of poorcredit off take in the last couple of years, divert their money intolending?
The latter, of course, is a definite possibility. Last year, lending behemoth IDBI was among the biggest investors in mutual funds.Others such as ICICI bank and HDFC also figured in the list of biggestinvestors.
While Reliance Industries was one of the largest investors in mutualfunds, mutual fund sources say that some of the other big investorsare from the banking industry. For instance, both IDBI and SIDBI aresaid to have a considerable exposure in rolling over surplus funds inmutual funds. Other big players in the sector include the FinolexGroup, ICICI Bank, Bank of India, Central bank and LIC Housing
Finance.Clearly, a lot depends on the outlook for the economy. Any revival willresult in an increase in credit off take and thus, funds will have to beredirected from the market to industry. But the probability of thathappening in the near-term is bleak: there is a huge amount of liquidity in the banking sector, and further rate cuts will only add to it.
But corporate money pulling out may not be that big a threat. Here isCompanies typically park their surplus cash in treasury instruments(liquid fund schemes). And, they deploy money considered surplus ina slightly longer horizon into medium term funds. Industry expertsfeel that the economic recovery will have no impact on the flows intoliquid funds.
As a matter of fact, improved cash flow for corporates will only increase the popularity of liquid funds. Even more, they say that today financially healthy corporates will find it less prudent to pull outmoney from investments like mutual funds to fund expansions
because borrowed funds are so cheap.
Also, capital expenditure is never lumped together but is spread overa period of time and prudence requires a judicious mix of debt andequity depending on the project size, horizon of returns, gestationperiod etc. Hence there will not be any sudden withdrawal of fundsfrom the market. Such expenditure is planned in advance and asresult, a company cannot take the risk of a sudden withdrawal of itsinvestment.
Opportunity cost of money
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To get a feel of this, look at the opportunity cost of money. Currently,companies have witnessed around a 500-600 basis points reduction ininterest costs on long-term debt from about 16 per cent-plus in 1998-99 to about 10 per cent now, and even lesser for top rated corporates,
which can raise money at around 5.5-6.0 per cent per annum. As a
result, it is much more attractive to fund investments by taking onadditional debt while continuing to earning a higher return fromdeploying internal cash into market instruments such as mutualfunds.
Arbitrage between debt vs. funds
But the main reason that the companies prefer raising debt is two-fold. Firstly, debt is available at historically low costs and secondly,tax considerations favor debt. These include a tax benefit on the
interest costs, a dividend distribution tax on dividend income andcapital gains tax on long-term capital gains. As a result, while effectivecost of debt is less than 4 per cent, the effective tax-adjusted return onmutual fund investment is around 5-6 per cent.
Grasim's Bafna says "the biggest factor that will determine an outflow of funds is the any change in the tax status of dividends and capitalgains tax on long-term capital gains". Currently, dividends frommutual funds are tax-free in the hands of the investors except for adividend distribution tax of 12.81 per cent. Long-term capital gains aretaxed at 10.25 per cent with indexation benefits, and at 20.5 per cent
without indexation benefits.
The banking sector, with the considerable amount of liquidity in thesystem, has also been a significant investor in mutual funds. Forinstance, as on March 31, 2003, HDFC had investments of around Rs1500 crore in liquid funds. According to MA Ravi Kumar, RegionalHead - Global Markets, Stanchart Grindlays "The corporate sectoraccounts for a reasonable chunk of the investments in mutual funds.
While there may be some withdrawal of funds, an increase ineconomic activity will also increase the surplus funds. Therefore, overa period of time, the cash surpluses will find their way back into themarket"
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Current Scenario of Mutual FundIndia is at the first stage of a revolution that has already peaked in theU.S. the U.S. boasts if an asset base that are much higher than itsdeposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicatethat in the first quarter of the current fiscal year mutual fund asset
went up by 115% whereas bank deposit rose up only 17%. This isforcing a large number of banks to adopt the concept of narrow
banking wherein the deposits are kept in Gilts and some other assets.This improves liquidity and reduces risk. The basic fact lies that bankscannot be ignored and they will not completely. Their role closes downas intermediaries cannot be ignored. It is just mutual Funds are goingto change the way banks do business in the future.
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COMPARISONS OF MUTUAL FUNDWITH OTHER DEPOSITS
BANKS V/S MUTUAL FUNDS
Banks v/s Mutual FundsBANKS MUTUAL FUNDS
Returns Low Better Administrativeexp.
High Low
Risk Low ModerateInvestmentoptions
Less More
Network High Penetration Low put improving
Liquidity At a cost BetterQuality of assets
Not Transparent Transparent
Interestcalculation
Min. bal. between 10th & 30thof every month
Everyday
Guarantee Max. Rs. 1Lakh on deposit None
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SHARES MUTUAL FUNDS
Know-how is needed Superficial know. Is sufficien t
High cost involved Low Cost
Time needed one can sleep over
Professional Management.
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SHARES V/S MUTUAL FUNDS
Insuance Vs Mutual FundsBoth these instruments are designed to serve different purposes andare not comparable. A unit-linked plan from an insurance company isan insurance policy designed to pay a lump sum on maturity or ondeath if earlier. Premium paid under these plans is eligible for taxdeduction under Section 88 of the Income Tax Act. On the other hand,mutual funds are investment avenues to participate in the growth of financial markets and do not provide any tax deduction (except ELSSand pension funds).
For a unit-linked insurance plan, providing life cover is the mostimportant function; returns are just an added benefit, which getsmagnified, given the tax rebates. Though unit-linked plans offertransparency in returns in terms of net asset value and flexibility ininvestment options in debt, equity or mixes of both, these advantagesremain secondary, whereas for a mutual fund, the main objective is toprovide returns.
Moreover, unit-linked plans are not as liquid as mutual funds. Thereis a lock-in of three years. Even if one redeems after three years, you
would be at a loss because of higher initial administrative charges. Forexample, the upfront charges for the first two premium amounts areas high as 20-27 per cent. Then there is an annual management fee of 0.8-1.25 per cent and a flat fee of Rs 15-20 per month. Finally, there isa deduction for risk cover. This goes towards contribution to the sumassured or the life insurance cover, which is based on mortality ratesas calculated by actuaries. Though mutual funds too have entry andexit loads (maximum 2 per cent) and expenses (maximum 2.5 percent), these costs are lower than unit-linked plans.
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COMPARISON AMONG DIFFERENTINVESTMENT AVENUES
INVESTMENT AVENUES
FD RealEstate
Business
Asset MF Shares RBIBonds
PPF NSC PostOffice
RETURNS * 5.25% V V DEP V V 8% 9.50% 8% 8%POST TAX
YIELD3.63% V V - V V 5.60% 6-
6.5%5.60% 5.60
%INFLATION 6% - - - - - - - - -RRR -2.50% V V - V V -
0.40%0.65% -
0.40%-0.40%
Pos RRR - Pos Pos - Pos Pos - - - -LIQUIDITY - LOW LOW - HIG
HHIGH LOW LOW LOW LO
W
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PUBLIC PROVIDENT FUND
Scheme: Public Provident Fund
Tenure:15 years and then optional extension inblocks of 5 years
Issue date: Perpetually OpenClosure date: At the end of the 15th year Interest: 9.5%Interest Payment: Yearly (Computed on monthly balance)Effective interest rate: 9.9%Minimum investment: Rs.100
Maximum Investment: Rs.60000 per financial year Tax benefits: Sec.88 and Sec.10
Loan Facility:
Available. Loans can be obtained upto25% of the balance at the end of the 2ndpreceding financial year in the 3rd year of opening at an interest rate 1% above theprevalent PPF rate. Thus the repaymentrate is now 12%. After the repayment of the first loan is affected, a second loan
can be taken. This loan facility ceasesafter the end of the 6 th financial year asafter that the withdrawal facility starts.
Withdrawal:
Available.From the 7th year and every year thereafter, the account holder is allowed towithdraw a maximum of 50% of thebalance that is to his/her credit at the endof the 4th or the 1st previous financial
year, whichever is lower.
Remarks:
1. Benefits are two fold, 20% of the amountpaid each year in the account is availableas a tax rebate and interest earned is taxfree.2. The account can be opened even at anyof the select few nationalized banks also.
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NATIONAL SAVING CERTIFICATE
Scheme: National Savings Certificate
Tenure: 6 years
Issue date: Perpetually Open
Closure date: End of tenure
Interest: 9.5%
Interest Payment: Half-Yearly
Effective interest rate: 9.7%
Minimum investment: Rs.100
Maximum Investment: No Limit
Tax benefits: Sec. 88 and Sec.80L
Loan Facility: Not available. However canbe pledged in a bank
Withdrawal: Not available
Remarks: None
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KISAN VIKAS PATRAScheme: Kisan Vikas Patra
Tenure: 6.5 years (en cashable after 2.5
years)Issue date: Perpetually Open
Closure date: End of tenure
Interest: 9.5%
Interest Payment: Cumulative compounding
Effective interest rate: 9.5%
Minimum investment: Rs.100
Maximum Investment: No Limit
Tax benefits: Nil
Loan Facility: Not Available. However can bepledged in a bank.
Withdrawal: Not Available
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POST OFFICE SCHEME
Scheme: Monthly Income SchemeTenure: 6 yearsIssue date: Perpetually OpenClosure date: Anytime after 3rd year Interest: 11%Interest Payment: MonthlyEffective interest rate: 11.57%Minimum investment: Rs.6000
Maximum Investment: Rs.300000 - Individual nameRs.600000 - Joint Name
Tax benefits: Sec.80L
Loan Facility: After completion of 1st year, but 5% of the amount deposited is deducted.
Withdrawal: After 3rd year full deposit amount canbe withdrawn without any penalties.
Remarks: At the end of the 6th year, the amount
his repaid with 10% bonus.
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Current Mutual Fund Schemes:One can select specific Investment Avenue from among the productsoffered by the following fund houses:
Alliance Capital Mutual FundBenchmark Mutual FundBirla Sun Life Mutual FundBOB Mutual FundCanbank Mutual FundChola Mutual FundDeutsche Mutual FundDSP Merrill Lynch Mutual FundEscorts Mutual FundFidelity Mutual FundGIC Mutual FundHDFC Mutual FundHSBC Mutual FundING Vysya Mutual FundJ M Mutual FundKotak Mahindra Mutual FundLIC Mutual FundMorgan Stanley Mutual FundPRINCIPAL Mutual FundPrudential ICICI Mutual FundReliance Mutual Fund
Sahara Mutual FundSBI Mutual FundStandard Chartered Mutual FundSundaram Mutual FundTata Mutual FundTaurus Mutual FundTempleton Mutual Fund UTI Mutual Fund
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MARKET TRENDS Alone UTI with just one scheme in 1964 now competes with as many as 400 odd products and 34 players in the market. Now withincreasing competition and losing market share, UTI no longerremains a formidable force to reckon with.
Last six years have been the most turbulent as well as exiting ones forthe industry. New players have come in, while others have decided toclose shop by either selling off or merging with others. Productinnovation is now passed with the game shifting to performancedelivery in fund management as well as service. Those directly associated with the fund management industry like distributors,registrars and transfer agents, and even the regulator have becomemore mature and responsible.
The industry is also having a profound impact on financial market.UTI has once been a dominant player on the bourses as well as thedebt market, but now, new generations of private funds, has gainedsubstantial mass, and are flexing their muscles. Fund managers by their selection criteria for stocks have forced corporate governance onthe industry. By rewarding honest and transparent management withhigher valuations, a system of risk reward has been created where thecorporate sector is more transparent than before.
Funds have shifted their focus to the recession free sector likepharmaceutical, FMCG and technology sector, funds performances
are improving. Funds collection, which averaged at less than Rs 100 bn per annum over five-year period spanning 1993-1998 doubled to Rs210 bn in 1998-1999. In the financial year ending march2000 wasmobilization was above Rs 300 bn. Total collections for the financial
year march 2000 was around Rs 450 bn. What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sectormutual funds. Indeed private MFs saw a net inflow of Rs 7819.43crores during the first nine months of the year as against a net inflow of Rs 604.40 crores in case of public sector funds.Mutual funds are now also competing with commercial banks in race
for retail investor’s savings and corporate float money. The powershift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in thecurrent scenario. Many investors are realizing that investments insaving account are good as locking up their deposits in a closet. Thefund mobilization trends by mutual funds in the current year indicatethat money is going to mutual funds in a big way.
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RESEARCH OBJECTIVEThe present study has been undertaken with the object of examining,analyzing and inferring the performance of the mutual funds, whichaddresses the following issues:
• To understand what type of mutual fund is most preferred by the existing customer because performance of these funds is thecriteria for customer selection.
• Which mutual fund is the best in its category?
• To understand the best way to attract customer investing inmutual fund by understanding the factors responsible formaking a mutual fund successful.
• To find out the reasons behind not investing in mutual fund and
to find out the most important attributes so as to keep theexisting customer & to attract new customers.
• To understand which factors govern their choice of investment?
RESEARCH DESIGN As the focus is on the probable reasons responsible for the low dealersales therefore the research design used is Exploratory Research.
METHODOLOGY
The data was collected through both primary & secondary sources.Primary data was collected from the market by circulating
questionnaires to the respondents.
The secondary data was collected from the Internet site of:
www.amfiindia.com.,www.valueresearch.com,www.capitalmarket.com , www.bseindia.com .
My sample size is 200 in number and we are dealing with theGovernment Offices and recognized private Offices. Importantsecondary data were available to us from the office records of thedepartments and various magazines and newspaper published by theconcerned authorities.
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DATA ANALYSISINDIVIDUAL PERFORMANCE OF EACH FUND
Sahara growth fundHDFC Top 200Reliance Regular SavingDSBPR top 100 Equity
Kotak 30
1. Kotak 30Current Stats & Profile
Latest NAV
91.552 (23/10/09)52-Week High
93.824 (16/10/09)
52-Week Low
49.276 (09/03/09)Fund Category
Equity: DiversifiedType
Open EndLaunch Date
December 1998Risk Grade
Below AverageReturn Grade
Average Net Assets (Cr)
Trailing ReturnsAs on 23 Oct 2009 Fund Category
Year to Date 61.97 75.151-Month 3.51 3.073-Month 14.49 15.371-Year 61.89 74.383-Year 13.58 10.495-Year 28.62 25.30
Return Since Launch 26.13 --Returns upto 1 year are absolute and over 1year are annualised.
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1,026.07(30/09/09)
Benchmark
S&P CNX Nifty
Relative Performance (Fund Vs Category Average)
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2. Sahara growth fundCurrent Stats & Profile
Latest NAV
77.2604 (23/10/09)52-Week High
78.675 (20/10/09)52-Week Low
40.7636 (27/10/08)Fund Category
Equity: DiversifiedType
Open EndLaunch Date
August 2002Risk Grade
Not RatedReturn Grade
Not Rated
Net Assets (Cr)
5.94 (30/09/09)Benchmark
S&P CNX Nifty
Trailing ReturnsAs on 23 Oct 2009 Fund Category
Year to Date 68.17 75.151-Month 3.51 3.07
3-Month 15.08 15.371-Year 70.32 74.383-Year 18.96 10.495-Year 29.32 25.30
Return Since Launch 32.83 --Returns upto 1 year are absolute and over 1
year are annualised.
Relative Performance (Fund Vs Category Average)
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3. Dspbrtop 100 equity
Current Stats & Profile
Latest NAV
11.843 (23/10/09)52-Week High
12.069 (16/10/09)52-Week Low
6.31 (27/10/08)Fund Category
Equity: DiversifiedType
Open EndLaunch Date
April 2007Risk Grade
Not RatedReturn Grade
Not Rated Net Assets (Cr)
23.70 (30/09/09)Benchmark
BSE 100
Trailing ReturnsAs on 23 Oct 2009 Fund Category
Year to Date 69.55 75.151-Month 2.88 3.073-Month 14.02 15.371-Year 66.36 74.383-Year -- 10.495-Year -- 25.30
Return Since Launch 6.39 --Returns upto 1 year are absolute and over 1
year are annualised.
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4. HDFC Top- 200
5. 5. Reliance regular saving fund.
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Current Stats & ProfileLatest NAV 173.652 (23/10/09)
52-Week High 178.333 (16/10/09)52-Week Low 78.474 (09/03/09)
Fund Category Equity: DiversifiedType Open End
Launch Date September 1996Risk Grade Below Average
Return Grade Above AverageNet Assets (Cr) 4,967.70 (30/09/09)
Benchmark BSE 200
Trailing ReturnsAs on 23 Oct 2009 Fund Category
Year to Date 87.13 75.151-Month 3.94 3.073-Month 13.89 15.371-Year 83.90 74.383-Year 19.34 10.495-Year 32.32 25.30
Return Since Launch 26.23 --Returns up to 1 year are absolute and
over 1 year is annualized.Relative Performance (Fund Vs Category Average)
Current Stats & ProfileLatest NAV 26.0601 (23/10/09)
52-Week High 26.6832 (16/10/09)52-Week Low 11.343 (09/03/09)
Fund Category Equity: DiversifiedType Open End
Launch Date May 2005Risk Grade Average
Return Grade HighNet Assets (Cr) 1,606.52 (30/09/09)
Benchmark BSE 100
Trailing ReturnsAs on 23 Oct 2009 Fund Category
Year to Date 90.24 75.151-Month 3.97 3.073-Month 16.70 15.371-Year 91.97 74.383-Year 21.75 10.495-Year -- 25.30
Return Since Launch 23.97 --Returns upto 1 year are absolute and
over 1 year are annualised.
Relative Performance (Fund Vs Category Average)
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RELATIVE PERFORMANCE1. Kotak 30
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Best and Worst Performance
Best (Period) Worst (Period)
Month 29.54 (03/12/1999 - 04/01/2000) -32.18 (24/09/2008 - 24/10/2008)
Quarter 61.87 (09/03/2009 - 10/06/2009) -41.29 (24/02/2000 - 25/05/2000)
Year 167.69 (24/02/1999 - 24/02/2000) -53.53 (14/01/2008 - 13/01/2009)
Relative Performance (Fund Vs Category Average)
Returns and Risk Aggregates
Rating & Risk Modern Portfolio Stat Volatility MeasuresFund Rating R-Squared 0.97 Mean 18.36Fund Risk Grade Below Average Alpha 1.78 Standard Deviation 32.31Fund Return Grade Average Beta 0.90 Sharpe Ratio 0.41
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Annual Returns 2008 2007 2006 2005 2004
Fund Return -50.35 66.56 43.61 49.37 36.76Rank In Category 54/193 49/162 40/145 41/100 9/75Category Average -55.15 59.45 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68Sensex -52.45 47.15 46.70 42.33 13.08
Quarterly Returns
Q1 Q2 Q3 Q42009 -1.97 37.45 18.99 --2008 -24.87 -13.26 -2.01 -22.24
2007 -4.90 15.59 16.81 29.722006 24.95 -9.65 13.79 11.802005 0.82 4.74 31.31 7.722004 8.11 -10.95 16.40 22.052003 -3.74 22.18 23.60 33.172002 12.53 -2.35 -6.93 13.962001 -15.16 -5.72 -17.91 15.382000 10.14 -19.61 -13.39 -4.351999 46.40 -4.44 33.38 34.921998 -- -- -- --
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Trailing Returns
As of 23 Oct 2009 Fund Return Category Return S&P CNX Nifty Sensex
Year-to-Date 61.97 75.15 68.87 74.25
1-Week -2.42 -1.72 -2.82 -2.24
1-Month 3.51 3.07 0.55 0.55
3-Month 14.49 15.37 10.46 10.37
1-Year 61.89 74.38 69.79 72.04
2-Year -2.27 -3.43 -4.45 -4.66
3-Year 13.58 10.49 10.96 10.02
5-Year 28.62 25.30 22.93 24.41
Return less than 1-year are absolute and over 1 year are annualised
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1-Year 70.32 74.38 69.79 72.04
2-Year 6.26 -3.43 -4.45 -4.66
3-Year 18.96 10.49 10.96 10.02
5-Year 29.32 25.30 22.93 24.41
Return less than 1-year are absolute and over 1 year are annualised
Annual Returns 2008 2007 2006 2005 2004
Fund Return -43.15 60.32 42.32 39.06 20.20Rank In Category 6/193 76/162 49/145 78/100 53/75Category Average -55 .15 59.45 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68Sensex -52.45 47.15 46.70 42.33 13.08
Quarterly Returns Q1 Q2 Q3 Q4
2009 1.38 37.35 19.68 --2008 -22.47 -14.59 3.30 -16.902007 -4.77 14.07 15.53 27.742006 21.20 -9.39 14.59 13.10
2005 -3.22 2.80 27.86 9.322004 -7.50 -9.08 17.40 21.752003 -6.06 16.43 31.95 39.042002 -- -- -- 10.69
3. DSPBR Top 100 EquityReturns and Risk Aggregates
Rating & Risk Modern Portfolio Stat Volatility Measures
Fund Rating Not Rated R-Squared -- Mean --
Fund Risk Grade -- Alpha -- Standard Deviation --
Fund Return Grade -- Beta -- Sharpe Ratio --
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Best and Worst Performance Best (Period) Worst (Period)
Month 30.08 (11/05/2009 - 10/06/2009) -27.10 (24/09/2008 - 24/10/2008)Quarter 62.34 (09/03/2009 - 10/06/2009) -30.84 (02/09/2008 - 03/12/2008)Year 66.36 (23/10/2008 - 23/10/2009) -55.58 (19/11/2007 - 20/11/2008)
Relative Performance (Fund Vs Category Average)
Trailing ReturnsAs of 23 Oct 2009 Fund Return Category Return S&P CNX Nifty Sensex
Year-to-Date 69.55 75.15 68.87 74.25
1-Week -1.87 -1.72 -2.82 -2.24
1-Month 2.88 3.07 0.55 0.55
3-Month 14.02 15.37 10.46 10.37
1-Year 66.36 74.38 69.79 72.04
2-Year -- -3.43 -4.45 -4.66
3-Year -- 10.49 10.96 10.02
5-Year -- 25.30 22.93 24.41
Return less than 1-year are absolute and over 1 year are annualised
Annual Returns 2008 2007 2006 2005 2004
Fund Return -51.28 -- -- -- --Rank In Category 64/193 -- -- -- --Category Average -55.15 59.45 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68Sensex -52.45 47.15 46.70 42.33 13.08
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Quarterly Returns Q1 Q2 Q3 Q4
2009 1.45 39.68 19.42 --2008 -- -9.64 -0.93 -18.38
4. HDFC Top 200Returns and Risk Aggregates
Rating & Risk Modern Portfolio Stat Volatility MeasuresFund Rating R-Squared 0.97 Mean 23.33Fund Risk Grade Below Average Alpha 6.33 Standard Deviation 33.53Fund Return Grade Above Average Beta 0.93 Sharpe Ratio 0.54
Best and Worst Performance Best (Period) Worst (Period)
Month 33.09 (11/05/2009 - 10/06/2009) -30.45 (26/09/2008 - 27/10/2008)Quarter 88.14 (09/03/2009 - 10/06/2009) -42.90 (21/02/2000 - 22/05/2000)
Year 154.57 (24/04/2003 - 23/04/2004) -48.09 (14/01/2008 - 13/01/2009)
Relative Performance (Fund Vs Category Average)
Trailing Returns
As of 23 Oct 2009 Fund Return Category Return S&P CNX Nifty Sensex
Year-to-Date 87.13 75.15 68.87 74.25
1-Week -2.62 -1.72 -2.82 -2.24
1-Month 3.94 3.07 0.55 0.55
3-Month 13.89 15.37 10.46 10.37
1-Year 83.90 74.38 69.79 72.04
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2-Year 8.37 -3.43 -4.45 -4.66
3-Year 19.34 10.49 10.96 10.02
5-Year 32.32 25.30 22.93 24.41
Return less than 1-year are absolute and over 1 year are annualised
Annual Returns
2008 2007 2006 2005 2004 Fund Return -45.35 54.46 37.44 55.25 27.52
Rank In Category 16/193 97/162 65/145 20/100 27/75Category Average -55.15 59.45 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.68Sensex -52.45 47.15 46.70 42.33 13.08
Quarterly Returns Q1 Q2 Q3 Q4
2009 -0.27 55.33 19.48 --2008 -22.53 -12.25 2.89 -21.862007 -4.93 15.15 16.75 20.862006 20.35 -10.83 17.50 9.002005 1.53 9.63 21.89 14.432004 -0.70 -10.23 17.58 21.652003 -3.60 34.61 35.01 33.842002 19.03 0.06 -8.05 15.172001 -9.54 -0.95 -13.58 16.062000 5.67 -21.25 -15.56 6.071999 32.84 -0.78 31.80 6.581998 8.41 -3.04 5.96 0.301997 3.31 21.82 2.87 -6.111996 -- -- -- 0.20
5. Reliance Regular SavingReturns and Risk Aggregates
Rating & Risk Modern PortfolioStat Volatility Measures
Fund Rating R-Squared 0.87 Mean 28.02Fund Risk Grade Average Alpha 8.90 Standard Deviation 41.60Fund Return Grade High Beta 1.10 Sharpe Ratio 0.55
Best and Worst Performance
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Best (Period) Worst (Period)Month 40.05 (11/05/2009 - 10/06/2009) -33.96 (24/09/2008 - 24/10/2008)Quarter 96.91 (09/03/2009 - 10/06/2009) -42.07 (02/09/2008 - 02/12/2008)Year 96 .74 (04/01/2007 - 04/01/2008) -57.61 (14/01/2008 - 13/01/2009)
Relative Performance (Fund Vs Category Average)
Trailing Returns
As of 23 Oct 2009 Fund Return Category Return S&P CNX Nifty Sensex
Year-to-Date 90.24 75.15 68.87 74.25
1-Week -2.34 -1.72 -2.82 -2.24
1-Month 3.97 3.07 0.55 0.55
3-Month 16.70 15.37 10.46 10.37
1-Year 91.97 74.38 69.79 72.04
2-Year 11.43 -3.43 -4.45 -4.66
3-Year 21.75 10.49 10.96 10.02
5-Year -- 25.30 22.93 24.41
Return less than 1-year are absolute and over 1 year are annualised
Annual Returns
2008 2007 2006 2005 2004
Fund Return -54.61 92.98 55.95 -- --
Rank In Category 94/193 5/162 10/145 -- --
Category Average -55.15 59.45 34.73 46.58 26.38
S&P CNX Nifty -51.79 54.77 39.83 36.34 10.6
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8
Sensex -52.45 47.15 46.70 42.33 13.08
Quarterly Returns Q1 Q2 Q3 Q4
2009 -1.85 58.95 20.14 --2008 -27.50 -15.72 -3.06 -23.382007 -7.64 19.77 12.80 54.662006 18.29 -6.49 28.07 10.092005 -- -- 0.16 -0.18
ANALYSIS(QUESTIONNAIRE)
1. Number of male & female.
MALE FEMALE133 67
No. of male & female
1
66%
234%
1
2
2. Age classification
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BELOW 30 31-40 YRS. 41-50 YRS. ABOVE 50 YRS.41 99 36 24
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age classification
1
21%
2
49%
318%
4
12% 1
2
3
4
3. Classification by occupation
Govt. employee Private employee Self employed101 88 11
occupation
1
50%2
44%
3
6% 1
2
3
4. Factors affecting decision
Economic scenario
(1)
company's image(2)
fund performance(3)
fund manager (4)
36 45 30 12
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tax incentive
(5)
minimum initial investment(6)
entry/exit load(7)
open/closed ended(8)
22 15 8 32factors affecting decision of investors
36
45
30
12
22
15
8
32
0
10
20
30
40
50
1 2 3 4 5 6 7 8
factors affecting decision
n o .
o f p e o p
l e
Series1
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RECOMMENDATIONS & CONCLUSIONSTapping the up coming market - Semi Urban Market as there is a lot of opportunity. Most of the Mutual Funds are operating in the metrosand big cities as per their present branch office locations. If they haveto increase their market size they have to open more distributioncenters at the various urban and semi-urban markets.To create the awareness about the different products of Mutual Fundand not about the generic product. Various respondents were notaware of the mutual fund products and the type of mutual fundschemes and the risk associated with mutual fund products.
To provide some kind of curriculum at the school/college level tocreate awareness regarding Mutual Fund. The shift of preference may change the market leadership in terms of
AUM in years to come. Therefore, the change of strategy and tactics isrequired to maintain their market position, those who are holdingtoday and those who want to hold in future.
LACK OF PROPER GUIDANCE MAKE MUTUAL FUNDFALL
From the days of the Unit Trust of India till now when private sectorfunds have assumed a dominant position, what do you see as theindustry's greatest achievements? And what are the challenges? Theachievements are manifold. The performance record of both equity and debt funds have been excellent. Plus, there is a robust risk-management system in place and the atmosphere is very vibrant. Wehave also seen improvements on the service side. The investor now has the liberty to switch schemes and redemptions are credited to
bank accounts in less than 24 hours. There are many other facilitiesavailable like monthly fact-sheets, quarterly holding-statements,online trading, etc. We have done many things, but much more needsto be done.
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The greatest challenge, of course, is to get more retailparticipation in funds. We have made tremendous efforts inthis direction. About 250 mutual fund outlets, including
branches, franchisees and collection centers, were openedacross the country in the last two years. Today, in metros andnon-metros, there are more than 1,000 outlets to provideservices to investors.
Mutual Funds are still not the most preferred investment vehicle in the country. How do you think this could change? Inour country, people want to buy only sacred assets. Unless thismindset changes, it will be difficult to get investors interestedin mutual funds. Government securities and post-officeinvestments offer 8 per cent assured returns, while banks offer6 per cent. So, competition is very high. Only sustained efforts
by a trained and qualified distributor class can bring success.
Again this is wrong, when it is done regularly. We are discussing various ways to tackle the same and will take it up with Sebi. But thereis no clear solution as of now.
Why don't you say there should be no additional incentives for new funds?
You must understand that this is also a business. So, we cannot micro-manage everything. There is a cap on expenses that funds can charge.
Within the existing cap, there should be freedom and creativity for themanagers to work.Despite the plethora of new funds launched in the past year, there has
been hardly any real innovation... There is a drought in the area of real innovations. Though funds are packaged differently, all of theminvest in the same companies. But it is not a problem as long as theinvestor is not misled. As long as fund companies say what they aregoing to do and do not camouflage anything, it should be fine. The factis that, people have a mindset to buy at Rs 10. The industry has tocater to that sentiment. Most mutual funds are launching fundsfocused on the flavour of the day or season. Don't you think this isdangerous?
People have a mindset to buy at Rs. 10. The industry has to cater tothat sentimentThere is risk in the market. We can contain it, but can not eliminate it.Can we have a uniform load structure to attract more retail investors?There is always a discount for those who buy big. That is one of the
basic laws of business. If you buy one shirt, you pay the full-price. If you buy two shirts, you get discount. If you buy three, you get one free.
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QUESTIONAIRE TO PRESENT INVESTORS IN MUTUAL FUNDS
Dear Sir/Madam,I am currently engaged in a study on “analysis and
performance of Equity Mutual Funds”. In this connection I request
you to read the following items carefully & answer them .The answers you give will be held confidential & used purely for academicpurposes.
Indicate your response by tick marking where applicable.
1.) Name:-
2.) Sex:- Male Female
3.) Age:- Below 30 31 – 40 years
41 – 50 years Above 50 years.
Academic Qualification (Last Qualification):-
Which of the following is your source of income? Government employee
Private employee Self employed
Annual Income In Rs.Below 1 Lakh 1 - 3 Lakhs
3- 5 Lakhs Above 5 Lakhs
Have you ever invested in any of the Mutual Funds? Yes No
Rank in order of preference of savings avenue (Highest being given 1strank & the lowest being given 9th rank)
___ Currency ___ Real Estate
___ Units of UTI ___ Life Insurance& Mutual Bonds
___ Bank Deposits ___ Shares
___ Postal Savings ___ Pension & Provident Fund
___ Gold
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As a mutual fund investor what is your experience?Highly satisfied SatisfiedSomewhat satisfied UnsatisfiedHighly unsatisfied
Reasons For Preference Of Mutual Funds(Please Tick mark in the boxprovided.)
Professional Management Liquidity
Good Return Capital Appreciation
Tax Benefit Diversification
Safety Flexibility
What Are the Decision Affecting Factors:-Economic Scenario Company's Image
Fund Performance Fund ManagersImage
Tax Incentive Minimum InitialInvestment
How did you come to know about Mutual Fund investments schemes?
News Paper T.V.
Financial Magazines Reference Groups
Brokers/Agents Mail
What effects your decision regarding of investment in Mutual Funds?Economic Scenario Company’s Image
entry/exit load open/closed endedFund Performance Fund Management Image
Tax Incentives Minimum Initial
Investment Which Equity Fund is the best?ICICI Pru(growth) HDFC (growth)reliance growth (growth)
escorts growth DBS chola growthTATA growth Sahara growth
LICMF growth Principal growthTEMPLETION India growth OTHERS
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Thanks you very much for your kind co-operation & for taking time tocomplete this questionnaire.
ANNEXURE: 2
FAQs ON MUTUAL FUNDS
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?Some banks and savings institutions are now offering uninsuredproducts such as mutual funds and annuities. These products may provide you with higher returns, but these investments involve risk.
America's Community Bankers, a national trade associationrepresenting nearly 2,000 savings institutions across the country, hasprovided the answers to some commonly asked questions:
Q. Are the mutual fund or annuity investments I buy from a bank orsavings institution insured?
A. No. These investments are not like insured deposits. They are notguaranteed by the FDIC, they are not guaranteed by the bank orsavings institution, and they are not guaranteed by the U.S.government. You are not protected against losses on the amount youinvest.
Q. Are there risks in investing in mutual funds or annuities?
A. Yes. You may get more or less back than the original amount youinvested. There may also be sales charges for these investments. Thesales representative should thoroughly brief you to make sure youunderstand these risks and charges, and you should be asked to signan acknowledgement form verifying that you have received theinformation and understand it.
Q. Who can sell me these products?
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A. Only properly trained sales personnel can sell these products.Tellers may not sell or provide advice to you on these products. They can refer you to the sales desk for these services.
Q. How can I be sure I am investing in the right mutual fund or
annuity? A. A sales representative should ask you questions about how muchrisk you are willing to accept, your investment objectives and yourfinancial resources and background. You have no obligation toprovide this information, but it would be helpful to the salesrepresentative in suggesting the most appropriate investment for you.
GLOSSARY
• AdvisorThe organization employed by a mutual fund to give professional
advice on the fund’s investment and to supervise the management of its assets.
• Asset Allocation Fund A fund that spreads its portfolio among a wide variety of investment,including domestic and foreign stocks and bonds, governmentsecurities, gold bullion and real estate stocks. This gives smallinvestors far more diversification than they could get allocatingmoney on their own. Some of these funds keep the proportionsallocated between different sectors relatively constant, while othersalter the mix as market conditions change.
• AlphaA percentage that is a measure of the returns of a fund with its risk
adjusted for. Alpha is calculated from the difference between a fund'sactual returns and its expected returns given its market risk level asmeasured by its beta. It is also a measure of the value added ordeducted by the fund's manager. An alpha of 1 means the fundproduced a return 1% higher than what its beta would predict. An
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alpha of –1 means the fund produced a return 1% lower. Naturally,higher the alpha the better it is for the investor. No, not always. For ahigh alpha to be better, simultaneously, another number called the R-squared should be high enough too. Normally, with R-squaredanywhere below 50, never trust the alpha however high. Alpha
depends entirely on the accuracy of beta. And beta again, is calculated by the R-squared. So if you believe that beta is the definite value forrisk then any positive alpha would be a sufficient condition for afund's good performance.
• Balanced fund A mutual fund scheme that invest half in corpus in equity and theother half in debt instruments. A balanced fund is less risky than anequity fund but at the same time gives better returns than an debtfund.
•
BetaIt is a measure of a securities risk. Each security has a certain amountof risk attached to it. Beta tries to measure the risk involved with eachsecurity. Thus an investor should choose a security which gives thehighest return for a given risk level.
• Bonds
A debt instrument issued for a period of more than one year with thepurpose of raising capital by borrowing Bond is a promise to pay theprincipal along with the interest after a specified period of time.
• Capital GainsIt is the profit earned on selling capital assets. Capital gains arecalculated by subtracting from the selling price the following1. Indexed cost of Acquisition2. Indexed cost of Improvement3. And any other holding cost.
•
CustodianThe bank or trust company that maintains a mutual fund’s assets,including its portfolio of securities or some records of them. Providessafekeeping of securities but has no role in portfolio management.
• CorpusThe amount of money available with a scheme for investment.
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• DebentureThey are bonds issued by a company to raise capital There are
various kinds of debentures. They could be secured orunsecured, convertible or non-convertible.
•
Debt/Equity Determined by dividing long-term debt by commonstockholder’s equity. It is one of the most useful financial ratios.Creditors use it to see whether it is safe to lend money to theparticular company. The ratio should ideally be around 2.
• DistributorThe individual or a corporation serving as principal underwriter of amutual fund’s shares, buying shares directly from the fund, andreselling them to other investor.
• DividendsIncome distributed to share holders. Dividends can be received fromthe ownership of stock or from mutual funds. Mutual fundshareholders have the option to reinvest dividends automatically inorder to purchase more shares.
• Gilts
Gilts are government-based securities. The name signifies that thesecurity is very safe and is as sound as gold itself.
• Growth and income fundsGrowth funds are mutual fund schemes,
which invest in the equity market while income funds invest in fixedincome securities.
• Growth fundGrowth funds are Mutual funds that invest in equities market.
• Hedging A strategy designed to reduce investment risk hedging techniques usescall options, put options, short selling, or futures contracts. A hedgecan help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by reducing the risk of loss.
• Instrument
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Any tradable commodity whose price can be obtained from aFinancial Market is called as an instrument.
• Net assetsNet assets are the total amount of money that comprises the mutual
fund's holdings. Small funds have millions of dollars while large fundsmay have over 50 billion dollars. Sometimes a manager may close afund to new investors if its size is large
• P/E ratioRatio of the price of a stock to the total earnings of the company iscalled as P/E ratio. Companies with very high ratios of greater than 30are considered to be overpriced. Company stock with a low ratio isconsidered to be undervalued and potentially good investments.Mutual funds with a value type of investment strategy seek a portfolioconsisting of stocks with low ratios with the expectation that they will
increase in price.• Portfolio
The collection of all the holdings of a mutual fund, such as bonds, andstocks is called as portfolio. In a mutual fund's annual report, a list of the fund's current portfolio will usually be contained.
• Preferred stock Preferred stock is a type of shares offered by a company, which pay apre-stated dividend, before common stock dividends are issued. The
benefits of owning preferred stock are realized if the company ever
goes bankrupt. If this occurs, preferred stock share holders receivetheir money first. Common stock holders may not receive any money,if none is remaining after paying preferred stock holders.
• Prospectus A document, usually in the form of a booklet, that providesinformation about a specific mutual fund; such as the fundsinvestment and redemption policies. The prospectus, according tolaw, must always be accompanied with the application. Prospectiveinvestors should always read the mutual fund's prospectus beforesending money.
• Volatility The degree to which a mutual fund's share price will change in value
• WithdrawalTo redeem shares of a mutual fund or stock is called as withdrawal. Ina mutual fund, partial or full redemptions may be made over the
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phone. Some funds may impose an extra redemption fee to discouragemarket timers from pulling their money immediately after investing.If this is a fund's policy, it will be stated in the prospectus.
• Yield
Income or dividends received from a security or mutual fund.
BIBLIOGRAPHY
AMFI –Mutual Fund Testing Programme for Distributors & Employees of Mutual Funds in India.
Fact Sheets of various Mutual Funds
Economic Times
Web sites :-
www.mutualfundsindia.com
www.mutualfund.com
www.moneycontrol.com
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www.saharaindiapariwar.net
www.bseindia.com
www.valueresearchonline.com
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