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CHAPTER I
INTRODUCTION
Mutual Fund is one of the financial instruments in capital market, here the study based on the empirical investigation on the performance of Mutual Fund schemes, main purpose of the study is to identify which of the month and year schemes provided highest return and minimize the risk. Research need because of the capital market is unexpected volatility and some time reaction was positive and negative. Good and bad news affects price movement, that needs to identify how much market or bench mark provided return. On years 2008 started with large IPO offering of Reliance Power, which sucked the liquidity from the market and more companies have lined up plans to raise money from the markets.
Investors need to identify trade – off return and risk. The year 2009 had unprecedented global liquidity crisis that led to a share slowdown in growth. The industrial growth index was zero. Time valuations are attractive for investment decision and strategies for active diversification of portfolio. March 2009 sensex and Nifty down by 37% & 36 % respectively. Mutual fund industry has been affected by stock market movements. Mutual fund increased their stock/ scrip fund holding from 4.1% to 21.2% of the total market capitalization. It had opportunity to research in this field, with focus on competitive structure of the mutual fund industry. Equity diversified fund directly affect the stock movements while index, income and balance fund are less affects.
There are a lot of investment avenues available today in the financial market for an
investor with an investable surplus. He can invest in Bank Deposits, Corporate Debentures, and
Bonds where there is low risk but low return. He may invest in Stock of companies where the
risk is high and the returns are also proportionately high. The recent trends in the Stock Market
have shown that an average retail investor always lost with periodic bearish tends. People began
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opting for portfolio managers with expertise in stock markets who would invest on their behalf.
Thus we had wealth management services provided by many institutions. However they proved
too costly for a small investor. These investors have found a good shelter with the mutual funds.
A.) CONCEPT OF MUTUAL FUND:
A mutual fund is a common pool of money into which investors place their contributions
that are to be invested in accordance with a stated objective. The ownership of the fund is thus
joint or “mutual”; the fund belongs to all investors. A single investor’s ownership of the fund is
in the same proportion as the amount of the contribution made by him or her bears to the total
amount of the fund Mutual Funds are trusts, which accept savings from investors and invest the
same in diversified financial instruments in terms of objectives set out in the trusts deed with the
view to reduce the risk and maximize the income and capital appreciation for distribution for the
members. A Mutual Fund is a corporation and the fund manager’s interest is to professionally
manage the funds provided by the investors and provide a return on them after deducting
reasonable management fees.
The objective sought to be achieved by Mutual Fund is to provide an opportunity for
lower income groups to acquire without much difficulty financial assets. They cater mainly to
the needs of the individual investor whose means are small and to manage investors portfolio in a
manner that provides a regular income, growth, safety, liquidity and diversification
opportunities.
DEFINITION:
“Mutual funds are collective savings and investment vehicles where savings of small (or
sometimes big) investors are pooled together to invest for their mutual benefit and returns
distributed proportionately”.
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“A mutual fund is an investment that pools your money with the money of an unlimited
number of other investors. In return, you and the other investors each own shares of the fund.
investments. Aggressive growth funds seek long-term capital growth by investing
primarily in stocks of fast-growing smaller companies or market segments. Aggressive growth
funds are also called capital appreciation funds”.
Why Select Mutual Fund?
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt for bank
FD, which provide moderate return with minimal risk. But as he moves ahead to invest in capital
protected funds and the profit-bonds that give out more return which is slightly higher as
compared to the bank deposits but the risk involved also increases in the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity. That doesn’t mean
mutual fund investments risk free.
This is because the money that is pooled in are not invested only in debts funds which are
less riskier but are also invested in the stock markets which involves a higher risk but can expect
higher returns. Hedge fund involves a very high risk since it is mostly traded in the derivatives
market which is considered very volatile.
Concept of Mutual Funds
Many Investors with common financial objectives pool their money
Investors, on a proportionate basis, get mutual fund units for the sum contributed to the pool
The money collected from investors is invested into shares, debentures and the other securities by the fund manager
The fund manager realize gains or losses, and collects dividend or interest income
Any capital gains or losses from such investment are passed on to the investors in proportion of the number of units held by them
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B.) Background of Study
The mutual fund industry started in 1963 with the formation of the Unit Trust of India which was
the initiative of the Government of India and the Reserve Bank of India.
The history of mutual funds in India can be broadly classified into four distinct phases : -
First Phase : 1964 – 1987
An Act of Parliament established Unit Trust of India(UTI) on 1963. It was set up by the Reserve
Bank of India and functioned under the Regulatory and administrative control of the RBI. In
1978, UTI was delinked from RBI and the IDBI took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme, 1964. At the end of
1988 UTI had Rs. 6700 crores of AUM.
Second Phase : 1987 – 1993 (Entry of Public Sector Funds)
In 1987, it was the entry of non-UTI, public sector mutual funds setup by public sector banks and
the Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non-UTI Mutual Fund established in June,1987.
1992-93 Amount Mobilized Assets Under Management
Mobilization as % of gross Domestic
Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%
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Third Phase : 1993 – 2003 (Entry of Private Sector Funds)
With the entry of the private sector funds in 1993, a new era started in the Indian Mutual Fund
Industry, giving the investors a wider choice of fund families. Also, 1993 was the year in which
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 industry now
functions under SEBI Regulations, 1996. At the end of January 2003, there were 33 mutual funds
with total assets of Rs. 1,21,805 crores. The UTI with Rs. 44,541 crores of AUM was way ahead
of other mutual funds.
Fourth Phase – Since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes.
Growth in Assets under Management
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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered
with SEBI and functions under the Mutual Fund Regulations.
The Assets under Management(AUM) have grown at a rapid pace over the past few years at a
CAGR of 35% for the past few years at a CAGR of 35 percent for the five- year period from 31
March, 2005 to 31 March, 2009. Over the 10-year period from 1999 to 2009 encompassing
varied economic cycles, the industry grew at 22% CAGR.
This growth was despite two falls in the AUM the first being after year 2001 due to dotcom
bubble burst and the second in 2008, consequent to the global economic crisis.
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C.) Present Study
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D.) Objective of Study
The objectives of the study is to analyses, in detail the growth pattern of mutual fund industry in
India and to evaluate performance of different schemes floated by most preferred mutual funds in
public fund in public and private sector.
The main objectives of this project are:-
To study about the Mutual Funds in India
To study the various Mutual Funds schemes in India.
To study about the risk factors involved in the Mutual Funds and How to analyze it?
To study the performance indices that can be used for mutual fund comparison.
To compare mutual funds of selected companies on the basis of their return and Sharpe
Index.
To study the people in which age and income group prefer mutual funds over other
investment options.
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E.) Scope and Limitations of Study
If mutual funds are emerging as the favorite investment vehicle, it is because of the many
advantages they have over other forms and the avenues of investing, particularly for the investor
who has limited resources available in terms of capital and the ability to carry out detailed
research and market monitoring. The following are the major advantages offered by mutual
funds to all investors:
1. Portfolio Diversification:Each investor in the fund is a part owner of all the fund’s assets, thus enabling him to hold a
diversified investment portfolio even with a small amount of investment that would otherwise
require big capital.
2. Professional Management:Even if an investor has a big amount of capital available to him, he benefits from the professional
management skills brought in by the fund in the management of the investor’s portfolio. The
investment management skills, along with the needed research into available investment options,
ensure a much better return than what an investor can manage on his own. Few investors have
the skill and resources of their own to succeed in today’s fast moving, global and sophisticated
markets.
3. Reduction/Diversification Of Risk:When an investor invests directly, all the risk of potential loss is his own, whether he places a
deposit with a company or a bank, or he buys a share or debenture on his own or in any other
from. While investing in the pool of funds with investors, the potential losses are also shared
with other investors. The risk reduction is one of the most important benefits of a collective
investment vehicle like the mutual fund.
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4. Reduction Of Transaction Costs:What is true of risk as also true of the transaction costs. The investor bears all the costs of
investing such as brokerage or custody of securities. When going through a fund, he has the
benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit
passed on to its investors.
5. Liquidity:Often, investors hold shares or bonds they cannot directly, easily and quickly sell. When they
invest in the units of a fund, they can generally cash their investments any time, by selling their
units to the fund if open-ended, or selling them in the market if the fund is close-end. Liquidity
of investment is clearly a big benefit.
6. Convenience And Flexibility:Mutual fund management companies offer many investor services that a direct market investor
cannot get. Investors can easily transfer their holding from one scheme to the other; get updated
market information and so on.
7. Tax Benefits:Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit
holders. However, as a measure of concession to Unit holders of open-ended equity- oriented
funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional
rate of 10.5%.
In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the Total
Income will be admissible in respect of income from investments specified in Section 80L,
including income from Units of the Mutual Fund. Units of the schemes are not subject to
Wealth-Tax and Gift-Tax.
8. Choice of Schemes:Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
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9. Well Regulated:All Mutual Funds are registered with SEBI and they function within the provisions of strict
regulations designed to protect the interests of investors. The operations of Mutual Funds are
regularly monitored by SEBI.
10. Transparency:You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and
the fund manager's investment strategy and outlook.
LIMITATIONS OF INVESTING THROUGH MUTUAL FUNDS:
1. No Control over Costs:An investor in a mutual fund has no control of the overall costs of investing. The investor pays
investment management fees as long as he remains with the fund, albeit in return for the
professional management and research. Fees are payable even if the value of his investments is
declining. A mutual fund investor also pays fund distribution costs, which he would not incur in
direct investing. However, this shortcoming only means that there is a cost to obtain the mutual
fund services.
2. No Tailor-Made Portfolio:Investors who invest on their own can build their own portfolios of shares and bonds and other
securities. Investing through fund means he delegates this decision to the fund managers. The
very-high-net-worth individuals or large corporate investors may find this to be a constraint in
achieving their objectives. However, most mutual fund managers help investors overcome this
constraint by offering families of funds- a large number of different schemes- within their own
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management company. An investor can choose from different investment plans and constructs a
portfolio to his choice.
3. Managing a Portfolio Of Funds:Availability of a large number of funds can actually mean too much choice for the investor. He
may again need advice on how to select a fund to achieve his objectives, quite similar to the
situation when he has individual shares or bonds to select.
4. The Wisdom of Professional Management:That's right, this is not an advantage. The average mutual fund manager is no better at picking
stocks than the average nonprofessional, but charges fees.
5. No Control:Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of
somebody else's car.
6. 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.
7. Buried Costs:Many mutual funds specialize in burying their costs and in hiring salesmen who do not make
those costs clear to their clients.
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F.) Hypothesis
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G.) Research and Methodology
Research as a care full investigation or enquiry especially through search for a new facts in any
branch of knowledge” Research is an academic activity and such as the term should be used in
technical sense. The manipulation of things , concepts or symbols for the purpose of
generalizing to extend ,correct or verify knowledge ,whether that knowledge through objective.
Research methodology is a way to systematically solve the research problem. It may be
understood as a science of studying how research is done scientifically. In ii researcher pursue
various steps that are generally adopted by a researcher in studying his research problem along
with the logic behind them. It is necessary to know not only the research methods and techniques
but also the methodology. Researcher not only needs to know how to develop certain indices or
tests, how to calculate mean, standard deviation and beta.
Research method part of research methodology, research methodology start with title of the
research problem and researcher set the objectives of the research, which helpful for society, and
other researcher for further research. After objectives need to review of literatures means idea
generation and inspired to do the research. Research methodology included sample design.
Sample design shows types of sampling method, sample size, sampling period.
1. Universe:
The universe of the study consists of the all the assets management companies (AMC), included selected five start mutual funds under the different objective of the study.
Sampling Unit:
The sample unit included Equity Schemes Diversification Funds, Balanced Schemes, Income Balanced Schemes, Monthly Income Funds, Long – Term and Short – Term Funds. All the schemes rating the five starts by Mutual fund Insight.
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Sources List:
Sample should collect on secondary sources. It’s included the mutual fund fact sheet and magazine the ―Mutual Fund Insight‖. and addition to others journals, magazines, articles, books and the publisher and unpublished documents of the mutual funds have been consider in the research.
Sample Period:
Sample study should take from period January 2005 to December 2009.
Sample Size:
Sample size of the study was as below:
1. Equity Diversified Mutual Fund 19th Schemes
Birla Sun Life Equity Fund 3.A
DSPML Equity Fund 3.B
Franklin India Prima Fund 3.C
HDFC Equity Fund 3.D
HDFC Top 200 3.E
Prudential Growth Fund 3.F
Kotak Opportunities Fund 3.G
Magnum Contra Fund 3.H
Magnum Global Fund 3.I
Reliance Growth Fund 3.J
Reliance Vision Fund 3.K
Sundaram Select Midcap Fund 3.L
Tata Pure Equity Fund 3.M
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2. Balance, Index and Income 15th Schemes
Birla Sun Life Midcap Fund 4.A
HDFC Balance Fund 4.B
HDFC Prudence Fund 4.C
Magnum Balanced Fund 4.D
Principal Child Benefits Fund 4.E
UTI CRT’s 81 Fund 4.F
UTI Mahila Unit Fund 4.G
Birla Sun Life Index Fund 4.H
Magnum Index Fund 4.I
Tata Index Sensex A Fund 4.J
UTI Sunder Fund 4.K
Franklin Infotech Fund 4.L
Magnum Pharam Fund 4.M
Prudential ICICI Fund 4.O
UTI Master Value Fund 3.N
HDFC Taxsaver Fund 3.O
Magnum Tax Gain Fund 3.P
Sahara Tax Gain Fund 3.Q
Principal Personal Tax Saver Fund 3.R
Sundaram Paribas Tax saver Fund 3.S
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The primary objective of the
scheme is to generate long-term
capital appreciation from a portfolio
that is invested predominantly in
equity and equity related
instruments.
Tax Benefits:
•Investment upto Rs 1 lakh by the
eligible investor in this fund would
enable you to avail the benefits
under Section 80C (2) of the
Income-tax Act, 1961.
•Dividends received will be
absolutely TAX FREE.
•The dividend distribution tax (payable by the AMC) for equity schemes is also NIL
8. Reliance Growth Fund (Open-Ended Equity):
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
9. Reliance Vision Fund (Open-Ended Equity) :
The primary investment objective of the Scheme is to achieve long term growth of capital by
investment in equity and equity related securities through a research based investment approach.
10. Reliance Equity Opportunities Fund (Open-Ended Diversified Equity):
The primary investment objective of the scheme is to seek to generate capital appreciation &
provide long-term growth opportunities by investing in a portfolio constituted of equity securities
Long and Short term Period 10th Schemes
Birla Bond Index Fund 5.A
DSPML Bond Retail Fund 5.B
Kotak Bond Regular Fund 5.C
Templeton India Income Fund 5.D
UTI Bond Advantages Fund 5.E
Birla Monthly Income Plan 5.F
DSPML Saving Plus Moderate Fund 5.G
LIC Monthly Income Plan Fund 5.H
Prudential Monthly Income Plan Fund 5.I
Tata Monthly Income Plan Fund 5.J
Prudential Flexible Plans 5.K
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& equity related securities and the secondary objective is to generate consistent returns by
investing in debt and money market securities.
B). DEBT/INCOME SCHEMES:
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures, Government
securities and money market instruments. Such funds are less risky compared to equity schemes.
These funds are not affected because of fluctuations in equity markets. However, opportunities
of capital appreciation are also limited in such funds. The NAVs of such funds are affected
because of change in interest rates in the country. If the interest rates fall, NAVs of such funds
are likely to increase in the short run and vice versa. However, long term investors may not
bother about these fluctuations.
1. Reliance Monthly Income Plan:
(An Open Ended Fund, Monthly Income is not assured & is subject to the availability of
distributable surplus) The Primary investment objective of the Scheme is to generate regular
income in order to make regular dividend payments to unit holders and the secondary objective
is growth of capital.
2. Reliance Gilt Securities Fund - Short Term Gilt Plan & Long Term Gilt Plan:
(Open-ended Government Securities Scheme) The primary objective of the Scheme is to
generate optimal credit risk-free returns by investing in a portfolio of securities issued and
guaranteed by the central Government and State Government.
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3. Reliance Income Fund:
(An Open-ended Income Scheme) The primary objective of the scheme is to generate optimal
returns consistent with moderate levels of risk. This income may be complemented by capital
appreciation of the portfolio. Accordingly, investments shall predominantly be made in Debt &
Money market Instruments.
4. Reliance Medium Term Fund:
(An Open End Income Scheme with no assured returns) The primary investment objective of the
Scheme is to generate regular income in order to make regular dividend payments to unit holders
and the secondary objective is growth of capital
5. Reliance Short Term Fund:
(An Open End Income Scheme) The primary investment objective of the scheme is to generate
stable returns for investors with a short investment horizon by investing in Fixed Income
Securities of short term maturity.
6. Reliance Liquid Fund:
(Open-ended Liquid Scheme) The primary investment objective of the Scheme is to generate
optimal returns consistent with moderate levels of risk and high liquidity Accordingly,
investments shall predominantly be made in Debt and Money Market Instruments.
7. Reliance NRI Income Fund:
(An Open-ended Income scheme) The primary investment objective of the Scheme is to generate
optimal returns consistent with moderate levels of risks. This income may be complimented by
capital appreciation of the portfolio. Accordingly, investments shall predominantly be made in
debt Instruments.
8. Reliance Liquidity Fund:
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(An Open - ended Liquid Scheme) The investment objective of the Scheme is to generate
optimal returns consistent with moderate levels of risk and high liquidity. Accordingly,
investments shall predominantly be made in Debt and Money Market Instruments.
UNIT TRUST OF INDIA MUTUAL FUND
'Unit Trust of India was created by the UTI Act passed by the Parliament in 1963. For
more than two decades it remained the sole vehicle for investment in the capital market by the
Indian citizens. In mid- 1980s public sector banks were allowed to open mutual funds. The real
vibrancy and competition in the MF industry came with the setting up of the Regulator SEBI and
its laying down the MF Regulations in 1993.UTI maintained its pre-eminent place till 2001,
when a massive decline in the market indices and negative investor sentiments after Ketan
Parekh scam created doubts about the capacity of UTI to meet its obligations to the investors.
This was further compounded by two factors; namely, its flagship and largest scheme US 64 was
sold and re-purchased not at intrinsic NAV but at artificial price and its Assured Return Schemes
had promised returns as high as 18% over a period going up to two decades.
In order to distance Government from running a mutual fund the ownership was transferred to
four institutions; namely SBI, LIC, BOB and PNB, each owning 25%. UTI lost its market
dominance rapidly and by end of 2005,when the new share-holders actually paid the
consideration money to Government its market share had come down to close to 10%.
A new board was constituted and a new management inducted. Systematic study of its problems
role and functions was carried out with the help of a reputed international consultant. Once again
UTI has emerged as a serious player in the industry. Some of the funds have won famous
awards, including the Best Infra Fund globally from Lipper. UTI has been able to benchmark its
employee compensation to the best in the market.
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Besides running domestic MF Schemes UTI AMC is also a registered portfolio manager under
the SEBI (Portfolio Managers) Regulations.
This company runs two successful funds with large international investors being active
participants. UTI has also launched a Private Equity Infrastructure Fund along with HSH Nord
Bank of Germany and Shinsei Bank of Japan.
Vision:
To be the most Preferred Mutual Fund.
Mission:
• The most trusted brand, admired by all stakeholders.
• The largest and most efficient money manager with global presence
• The best in class customer service provider
• The most preferred employer
• The most innovative and best wealth creator
• A socially responsible organisation known for best corporate governance.
Assets Under Management: UTI Asset Management Co. Ltd
Sponsor:
•State Bank of India
•Bank of Baroda
•Punjab National Bank
•Life Insurance Corporation of India
Trustee: UTI Trustee Co. Limited.
Reliability:
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UTIMF has consistently reset and upgraded transparency standards. All the branches, UFCs and
registrar offices are connected on a robust IT network to ensure cost-effective quick and efficient
service. All these have evolved UTIMF to position as a dynamic, responsive, restructured,
efficient and transparent entity, fully compliant with SEBI regulations.
SCHEMES:
A). EQUITY FUND:
1. UTI Energy Fund (Open Ended Fund):
Investment will be made in stocks of those companies engaged in the following are:
a) Petro sector - oil and gas products & processing.
b) All types of Power generation companies.
c) Companies related to storage of energy.
D) Companies manufacturing energy development equipment related ( like petro and power).
e) Consultancy & Finance Companies.
2. UTI Transportation And Logistics Fund (Auto Sector Fund) (Open Ended
Fund):
Investment Objective is “capital appreciation” through investments in stocks of the companies
engaged in the transportation and logistics sector. At least 90% of the funds will be invested in
equity and equity related instruments. At least 80% of the funds will be invested in equity and
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equity related instruments of the companies principally engaged in providing transportation
services, companies principally engaged in the design, manufacture, distribution, or sale of
transportation equipment and companies in the logistics sector. Up to 10% of the funds will be
invested in cash/money market instruments.
3. UTI Banking Sector Fund (Open Ended Fund):
An open-ended equity fund with the objective to provide capital appreciation through
investments in the stocks of the companies/institutions engaged in the banking and financial
services activities.
4. UTI Infrastructure Fund (Open Ended Fund):
An open-ended equity fund with the objective to provide Capital appreciation through investing
in the stocks of the companies engaged in the sectors like Metals, Building.
materials, oil and gas, power, chemicals, engineering etc. The fund will invest in the stocks of
the companies which form part of Infrastructure Industries
5. UTI Equity Tax Savings Plan (Open Ended Fund):
An open-ended equity fund investing a minimum of 80% in equity and equity related
instruments. It aims at enabling members to avail tax rebate under Section 80C of the IT Act and
provide them with the benefits of growth.
6. UTI Growth Sector Fund – Pharma (Open Ended Fund):
An open-ended fund which exclusively invests in the equities of the Pharma & Healthcare sector
companies. This fund is one of the growth sector funds aiming to invest in companies engaged in
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business of manufacturing and marketing of bulk drug, formulations and healthcare products and
services.
7. UTI Growth Sector Fund – Services (Open Ended Fund):
An open-ended fund which invests in the equities of the Services Sector companies of the
country. One of the growth sector funds aiming to provide growth of capital over a period of
time as well as to make income distribution by investing the funds in stocks of companies
engaged in service sector such as banking, finance, insurance, education, training, telecom,
travel, entertainment, hotels, etc.
8. UTI Growth Sector Fund – Software (Open Ended Fund):
An open-ended fund which invests exclusively in the equities of the Software Sector companies.
One of the growth sectors funds aiming to invest in equity shares of companies belonging to
information technology sector to provide returns to investors through capital growth as well as
through regular income distribution.
9. UTI Master Equity Plan Unit Scheme (Close Ended Fund):
The scheme primarily aims at securing for the investors capital appreciation by
investing the funds of the scheme in equity shares of companies with good growth prospects.
10. UTI Master Plus Unit Scheme (Open Ended Fund):
An open-ended equity fund with an objective of long-term capital appreciation through
investments in equities and equity related instruments, convertible debentures, derivatives in
India and also in overseas markets.
A). INDEX FUND:
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1. UTI Master Index Fund (Open Ended Fund):
UTI MIF is an open-ended passive fund with the primary investment objective to invest in
securities of companies comprising the BSE sensex in the same weight age as these companies
have in BSE sensex. The fund strives to minimise performance difference with the sensex by
keeping the tracking error to the minimum.
2. UTI Gold Exchange Traded Fund (Open Ended Fund):
To endeavour to provide returns that, before expenses, closely track the performance and yield of
Gold. However the performance of the scheme may differ from that of the underlying asset due
to racking error. There can be no assurance or guarantee that the investment objective of UTI-
Gold ETF will be achieved.
3. UTI Sunder (Open Ended Fund):
To provide investment returns that, before expenses, closely correspond to the
performance and yield of the basket of securities underlying the S & P CNX Nifty Index.
C). ASSETS FUND:
UTI Variable Investment Scheme:
UTI VIS-ILP is an open ended scheme with the objective of providing the investors with a
product that would enable them to diversify their risks through a suitable allocation between debt
and equity asset classes and thereby generate superior risk-adjusted returns through a dynamic
asset allocation process.
D). BALANCED FUND:
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1. UTI Mahila Unit Scheme (Open Ended Fund):
To invest in a portfolio of equity/equity related securities and debt and money market
instruments with a view to generate reasonable income with moderate capital appreciation. The
asset allocation will be Debt : Minimum 70%, Maximum 100% Equity : Minimum 0%,
Maximum 30%.
2. UTI Balanced Fund (Open Ended Fund):
An open-ended balanced fund investing between 40% to 75% in equity /equity related securities
and the balance in debt (fixed income securities) with a view to generate regular income together
with capital appreciation.
3. UTI Retirement Benefit Pension Fund (Open Ended Fund):
The objective of the scheme is to provide pension to investors particularly self- employed
persons after they attain the age of 58 years, in the form of periodical cash flow up to the extent
of repurchase value of their holding through a systematic withdrawal plan.
4. UTI Unit Link Insurance Plan (Open Ended Fund):
To provide return through growth in the NAV or through dividend distribution and reinvestment.
RELIANCE MUTUAL FUND UTI MUTUAL FUND
When started? Established in 1995
Currently No. 1 company in India.
Established in 1964
First Mutual Fund company
in India.
How they come into Registered with SEBI as trust By the UTI act passed by the
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business? under Indian trust Act 1882. parliament in 1963.
Minimum investment Rs. 500.0 Rs. 1000.0
Investment Equity:
Bank: 8-15%
Software: 8-19%
Petroleum products: 4-8%
Pharmaceuticals: 6-10%
Invest in 12-20 sectors which
includes: Auto, Auto Ancillaries,
Finance, Industrial Capital Goods,
Telecom-Services, Power,
Construction Project, Hotels,
Retailing, Media & Entertainment,
Transportation etc.
Equity:
Financial service: 16-22%
Energy: 12-18%
Consumer goods: 08-14%
Invest in 7-15 sector which
include: IT, Telecom,
Automobile, Cement
Products, Derivatives,
Textile, Metals etc.
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Main Funds. UTI Dividend yield fund,
UTI Opportunity Fund.
Reliance Diversified Fund,
Reliance Equity Opportunity
Fund,
Reliance regular saving
funds.
Type of fund offered Equity fund, Debt Fund, Sector
specific fund and Gold exchange
traded fund.
Equity fund, Index fund,
Asset fund, Balanced fund,
Debt fund(Income, Liquid)
Numbers of schemes
offered
106 schemes. 107 schemes.
Distribution • Online and internet based
distribution.
• Reliance outlets and branches.
• Tie-up with Post offices
branches.
• UTI outlets and Branches.
Is any other venue? • Life Insurance.
• General Insurance.
• Broking and distribution.
• Consumer Finance.
• Private Equity.
• Assets Reconstruction.
• UTI Bank.
• Pan card.
• Bank Recruitment.
• ULIP.
CHAPTER III
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REVIEW OF LITERATURE
An attempt has been made to review some existing literature available and having broad relatively with the subjective area.
Treynor, Jeck L. (1965), ―How to Rate the Management of Investment Funds‖, Harvard
Business Review, Vol 43, No.1, Jan – Feb. , pp. 63-75. The Treynor give you an idea about scheme rate and fund manager investment style. The fund manager success in the side of selection of the scrip, fund provided first-rate return.
NAV 2007 Mutual Fund, Insight, volume V, number 2, value research in this journal sanjeev pandiya has evaluate the market and needs of mutual funds. He had evaluated NAV of selected fund and shows the fluctuations on unit price. Sanjeev mentioned highlight market capitalization of Mutual Fund.
Nucleus Investment, 15 September to 15 October 2007, Volume 1, publication by Asit Mehta investment Intermediates Ltd, the agency providing the facility for investor for mutual fund investment. Asit Mehta has own researcher team doing work on performance measurement of the fund input and capital appreciation.
Invest Know how Sept 2007, Publications from Punjab National Bank in association with Vijay Bank, Issuing by principal Assets Management Company. Assets Management Company has responsibility to issue every month fact sheets and key information memorandum.
Portfolio Statement Sept 2007, Fund Manager speaks, Tata Mutual Fund under Tata Assets Management Company. Tata Mutual Fund issued every month fact sheet which mentioned fund performance and compare with indices returns, also mentioned systematic investment plan return compare with lump sum investment.
Fundamentals, October 2007, Reliance Mutual Fund, Reliance Capital Assets Management Ltd. Annual Report for the AMC of Reliance Mutual Funds. Reliance Mutual fund schemes performance mentioned on offer documents. Offer document indicates detail information of particular fund with past performance.
Applied Finance, Sept 2007 Volume 13 No: 9. The Institute of Chartered Financial Analysts of India, University Press ICFAI, how to maximum take the benefit for fluctuation of the capital market. Here the author accent how to take maximum benefits for fluctuation of capital market, trading of units
Journal Capital Market October 22, No: 04 2007, Volume XX11/17 issuing by capital market publishers India Pvt. Ltd, What is the future situation for the capital market and how much fund will come to the mutual fund industry. The data indicates how capital market reacts and take advantages of it.
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Indian Journal of Finance, Volume Number 4, October – November 2007, Prof. Vedulla Shekhar, the article mention that how the fund manager role follow the active investment strategies. The research paper shows the strategic of fund manager, diversification of different sector as per the mention on the fact sheet. Active and passive strategic of investment affects on fund return.
Investment Monitors, The complete Magazine for Indian Investors, volume VIII issue 12 under the analysis of technical and mutual funds scheme cost and data of last three years performance of risk and return. The magazine shows the technical analysis and how much investor paid for transaction cost and tax.
Money Today, make you richer your financial diet, The Indian Today Group, RNI no. deleng/ 2006 / 18800, Indian GDP growing, how it’s affected the number of the investment opportunities in the capital market.
Journal of Financial Management and Analysis Volume – 20 No; 1, US congress library card No; 90 – 640754, the financial analyses based on how to used different types of ratio. (Financial Decision Making): The fund having own features of investment on equity, debt and money market Mutual Fund.
E.J. Elton And M.J. Gurber (1996) have tried to prove that past performance is predictive of future risk adjusted performance and form a combination of actively managed portfolios with the same risk as a portfolio of index fund but higher mean return. The research paper weight on portfolio index return means market return and could fund provided same return.
Fisher and Gorden, Security Analysis and Portfolio Management, his study based on how to verified the risk under the calculated of Beta and Portfolio risk adjustment return. Beta played role for risk measurement of the fund. Risk involved on the fund than tried to reduce it and increased return. Beta indicates diversification of the portfolio.
Bala Ramasamy, Mattew C.H., have examined the growth in terms of size and choice, in the Mutual Funds industry among emerging markets has been impressive. The papers give you an idea about future market of Mutual Fund, Also highlight tax benefit received to invest in Mutual Fund.
Kuo – Ping Chang ―Evaluating Mutual Fund Performance‖ an application of minimum convex input requirement set approach‖, Computer and Operational research, Vol – 39, Issue – 6, may – 2006. The papers evaluating the performance of the fund with follow the operational research technique. The author pursue computer excel sheet to measure the performance of the funds.
Charactered Financial Analyst March 2007. The ICFAI Press, the magazine states the how to used different type of covariance and correlation and risk and return. The correlation of the fund return also needs to check out. Portfolio construction and diversification of portfolio as per the market shows sector wise return.
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Funds Watch; Nj Investment Mutual Funds; September 15 2007. NJ Investment Consultancy, selected Investor portfolio, how to construction of the portfolio for individual investor in Mutual Fund. Nj Investment Mutual Fund magazine explained individual portfolio construction and selection of selected fund for active investment strategic.
Accounting & Finance; Publisher of Tata Mcgraw Hill & Mcgraw Hill, How to calculated the beta and Price Earning Ratio. The Fund Performance also communicated return inform of Price Earnings Ratio and Price Book Ratio.
Indian Economy Review, Capital Market Publisher India Private Limited. Over all review for Assets Management Company, strategies follow by the fund managers. The Capital Market publisher high light the economic situation and how the fund performance under particular political and business risk.
Indian Journal of Finance, Volume I Number – 2, June and July 2007. The data for balance scrod card of the selected schemes of mutual funds, the research paper was evidence for selected schemes performance and balance scored card of the fund.
India Today, Newspapers for India under NO. 28587/75, data based on the fund performance of the equity related scheme and how the FII investment affected the diversification of the assets. The Fund Performance also confirmed how Foreign Institutional Investors purchased Mutual Fund, might the Fund diversification of the portfolio.
Fund Manager, Business Standards October 2007, Going Global Market for Investment, Evolution of the diversification of the assets to one sector to another sector, Fund demonstrates return as well as risk. Equity diversification fund has highly risky compare with balance fund and risk.
Shapre W.F. (1963), ―A simplified Model for portfolio Analysis‖, Management Science, vol
Fuller R.J. and Farell J.L. jr, (1987),‖ Modern Investments and Security Analysis‖,
Singapore: McGraw Hill Book Co.: the paper explained the modern investment management, how much pororation of the Mutual fund on portfolio compare with the scrip investment.
Obaidullah M.,(1992),‖Are Price / Earnings Ratios Indicators of Future Investment
Performance?‖, Indian Journals of Finance and Research, vol 2 (1); 5-12: the future investment means portfolio diversification, every time need to adjustment of fund risk, that wise portfolio diversification.
Huang Stanely S.C. and Randall Maury R., Investment Theory, Englewood Cliffs, New Jersey (1987) ; Investment Theory proved when to invest, to hold, to sell. The theory indicates the investment process and when to invest, how much to save the money.
Mallikarrajunappa T., and Iqbal, (2003),‖Stock Price reactions to Earnings Announcement‖,
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Journals of IAMD and IUCBEr, vol.26(1), 53 -60
Baks, Klaas P., Andrew Metrick, and Jessica Wachter, 2000, Should investors avoid all actively managed mutual funds? A study in Bayesian performance evaluation, Journal of Finance, forthcoming. Here paper point toward Bayesian theorem for evaluation of the portfolio, future can fund Manger pursue this model.
Brown, Stephen J., 1979. Optimal portfolio choice under uncertainty: a Bayesian approach. The optimum portfolio should achieve with strategic planned. The fund manger must need to study the different approach to measure the risk and return. Optimum portfolios means not just reduce risk but reduce average risk and increased average return.
In V. S. Bawa, S. J. Brown, and R.W. Klein, eds.: Estimation Risk and Optimal Portfolio Choice (North Holland, Amsterdam). The fund has need to identification of the risk and return. The estimation of risk and return was very difficult due to economy and political risk. The Optimal Portfolio means proportion of the fund allocation.
Carhart, Mark M., 1997, on persistence in mutual fund performance, Journal of Finance 52,57—82.On determination of the fund performance need to identification risk and measures fund return. The paper demonstrate how to identified scheme and diversification of the portfolio. The portfolio need to adjustment risk.
Chen, Zhiwu, and Peter J. Knez, 1996, Portfolio performance measurement: Theory and applications, Review of Financial Studies 9, 511—555. Portfolio performance evaluation was needed. Capital market affects by number of factors and political and market risk. Research team has been Assets Management Company pocket watch the market return or bench mark return.
Elton, Edwin J., Martin J. Gruber and Christopher R. Blake, 1996, The persistence of risk- adjusted mutual fund performance, Journal of Business 69, 133—157. The
Lintner, John, 1965, The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets, Review of Economics and Statistics 47, 13—37. The paper was concentration risky fund affects fund return.
Sharpe, William F., 1964, Capital asset prices: A theory of market equilibrium under conditions of risk, Journal of Finance 19, 425—442. William model confirmed how much risk free return plus risk premium. The risk premium is high when fund has high risk, the fund manger should concentration portfolio diversification.
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CHAPTER IV
DATA ANALYSIS AND INTERPRETATION
Q.1 Which banking mutual fund do you prefer for mutual Fund?
Company Name Percentages of respondents
Reliance Money 25
Other 10
UTI 15
Reliance Other UTI0
5
10
15
20
25
INTERPRETATION: 50% of respondent have Reliance Money, 30% of respondent have UTI
and 20% others.
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Q.2 Which banking mutual fund offer you good investment plan?
Company Name Percentage of respondent
Reliance 22
Other 21
UTI 7
RELIANCE Other UTI0
5
10
15
20
25
INTERPRETATION: 44% respondent for Reliance, 32 % for other, 14% for UTI.
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Q.3 Which banking mutual fund offer a lot of tax saving?
Company Name Percentage of respondent
Reliance 20
Other 15
UTI 15
Reliance Other UTI02468101214161820
INTERPRETATION: 40% respondent for Reliance, 30%for UTI, 30% for other
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Q.4 which banking mutual fund offers you a large number of product & services?
Company Name Percentage of respondent
Reliance 18
Other 16
UTI 16
Reliance Other UTI15
15.5
16
16.5
17
17.5
18
INTERPRETATION: 36% respondent for Reliance, 32%for UTI and 32% for other.
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Q.5 Which banking mutual fund offer you a good e-mail facility?
Company Name Percentage of respondent
Reliance 22
Other 15
UTI 13
Reliance Other UTI0
5
10
15
20
25
INTERPRETATION: 44% respondent for Reliance, 30% for other and 26% UTI.
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Conclusion Represented by pie chart:
Tools of Analysis
Sharpe’s Performance
Sharpe’s performance index gives a single value to be used for the performance ranking of
various funds or portfolios. Sharpe Index measures the risk premium of the portfolio relative to
the total amount of the risk in the portfolio. This risk premium is the Different between the
portfolio’s average rate of return and the risk less rate of return. The standard deviation indicates
portfolio the risk. The index assigns the highest values to assets that have best risk- adjusted
average rate of return.
Reliance41%
Other30%
UTI29%
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St = Rp – Rf / 6p
Sharpe’s index = portfolio average return – risk free rate of
return / S.D. Of the portfolio return
Jenson Measure
The absolute risk adjusted return measure was developed by Michael Jensen and commonly
known as Jensen’s measure. It is mentioned as a measure of absolute performance because a
definite standard is set and against that the performance is measured. The standard is based on
the manager’s predictive ability successful prediction of security price would enable the
manager’s to earn higher returns than the ordinary investor expects to earn in a given level of
risk.
Jenson = Portfolio Average Return – Risk Free Rate of Return/Beta
Treynor’s Performance Index
The Treynor index, an investor should know the concept of relationship between a given market return and the fund’s characteristic line. The fund’s performance is measured in characteristic line. The return is given by the relation to the market performance. The ideal fund’s return rises at a faster rate than the general market performance when the market is moving upwards and it’s rate of return declines slowly than the market return, in the decline. The ideal fund may place its fund in the treasury bills or short sell the stock during the decline and earn positive return.
Rp = a + B ( Rm – Rf)
Rp = Average return of portfolio
Rf = Risk less rate of return
a = The intercept
B = A measure of systematic risk
Rm = Average market return
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CHAPTER V
FINDINGS AND SUGGESTIONS
FINDINGS:
In Equity Schemes we have taken Reliance Vision Fund and Reliance growth Fund. Both schemes are open ended but Reliance Growth fund is more valuable for Reliance Mutual Fund than reliance vision Fund.
In Debt scheme we have taken Reliance money Manager Fund and Reliance Liquidity Fund .In it both schemes are open ended but reliance money manager is more beneficial for reliance mutual fund.
In sector specific scheme we have taken Reliance media and entertainment fund and Reliance Pharma fund scheme both is more efficient for Reliance Mutual Fund.
Above all the schemes of Reliance Mutual Fund Debt schemes are best schemes for Mutual Fund. There is a Good investment plan and saving scheme in reliance Mutual Fund.
SUGGESTION:
Reliance Money and UTI have to add some extra features in it with aggressive marketing promotional strategy.
Advertisement on television is the main source of attraction so the company must advertise its products heavily.
Product must be improved. There should be provision of complain suggestion boxes at each branch.
CONCLUSION:
• Mutual Fund investment is better than other raising fund.
• Reliance Mutual Fund have good returns in investment.
• A good brand is always welcomed over here people are more aware and conscious for the brand so they go for they are ready to spend some extra bucks for the quality.
• At last all cons are concluded by that Reliance Money is still growing industry in India and is still exploring its potential and prospects in here.
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LIMITATIONS:
The research done only selected a scheme which was related with five rating star and the
value research magazine.
The data would not collect to the Assets Management Company data sheet, but collection
from the market or secondary source.
The research analysis was based on the past performance of the only selected Equity
Diversified Scheme.
The research had been based on the Net Assets Value, that NAV continuous fluctuation
The research analysis compares the Net Assets Value and Expense Ratio, but NAV
continuous fluctuation.
Fund manager investment style based on capital market situation. It could not possible
always pursue the mentioned objectives.
Equity Diversified schemes having different objectives due to sector wise allocation of the
fund.
Performance measurement techniques should not give equal weight to each of the schemes.
Sharpen Performance evaluation is based on variance, not cover market risk and that risk also
affect fund return.
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CHAPTER VI
BIBLIOGRAPHY
