1

INTRODUCTION

PART-A: ABOUT THE INDUSTRY:
History of Indian Mutual Funds industry:
The history of Indian MF industry can be traced in four phases.
First Phase : 1964-1987: Initiative taken by UTI.
Second Phase : 1987-1993: Entry of public sector (LIC, GIC etc).
Third Phase : 1993-2003: Entry of private sector (Kothari Pioneer).
Fourth Phase : 2003 onwards.
First Phase:
The Mutual Fund industry in India started in 1963 with formation of Unit Trust of India
(UTI) initiated by the Government of India and The Reserve Bank. In 1978, UTI was de-linked
from the RBI and the industrial Development Bank of India took over the regulatory and
administrative control instead of RBI.
The first scheme launched by UTI was Unit Scheme 1964. At the end of 1998, UTI had
Asset Management of Rs. 6700 cr.

Second Phase:
The year1987 marked the entry of non-UTI, public sector mutual funds set up by public
sector banks and Life Insurance Company (LIC) and General Insurance Company of India
(GIC).
SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed
by Canbank Mutual Fund (December 1987), Punjab National Bank Mutual Fund (August 1989),
India Bank Mutual Fund (November 1989), Bank of India Mutual Fund (June 1990), and Bank
of Baroda Mutual Fund (October 1992). LIC established its mutual fund in June 1989 while GIC
set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had Assets under Management of Rs.
47,000 cr.


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Third Phase:
With the entry of private sector funds in 1993, a new era stated in the India Mutual Fund
industry, providing Indian invertors with 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 1993.
The 1993 Sebi (MF) Regulations were substituted by a more comprehensive and revised
Mutual Fund Regulations in 1996. The industry now works under the Sebi (Mutual Fund)
Regulations 1996.
Fourth Phase:
In February 2003, following the repeal of Unit Trust of India with Assets Under Management of
Rs. 29835 cr as at the end of January 2003, representing broadly the assets of US-64 Scheme,
assured return and certain other schemes. It does not come under the purview of the Mutual Fund
Regulations.
The second is UTI Mutual Fund sponsored by SBI, PNB, BOB and LIC. It is registered
with Sebi and works under the Mutual Fund Regulations.
At the end of March, 2006 the Assets Under Management were Rs.2, 31,513 cr.











3

Growth of Asset Under Management






A mutual fund is a group of investors operating through a fund manager to purchase a
diverse portfolio of stocks or bonds. There are myriad kinds of mutual funds, each with its own
goals and methodologies. Whether or not a mutual fund is a good investment is a matter of much
public debate, with many claiming they are excellent for the average person, and others saying
they are simply a poor way to invest.

For the individual investor, mutual funds provide the benefit of having someone else
manage your investments, take care of recordkeeping for your account, and diversify your rupees
over many different securities that may not be available or affordable to you otherwise. Today,
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minimum investment requirements on many funds are low enough that even the smallest investor
can get started in mutual funds.
A mutual fund, by its very nature, is diversified -- its assets are invested in many different
securities. Beyond that, there are many different types of mutual funds with different objectives
and levels of growth potential, furthering your chances to diversify.
Many critics of mutual funds point out that scarcely over 20% of mutual funds
outperform the Standard and Poor's 500 Index. This means that nearly 80% of the time, an
investor would have been more profitable by simply buying equal shares in all 500 of the
companies currently on the S&P 500
Strengths of Mutual Fund:
Mutual Funds provide several benefits to investors. Some of them are:
Benefits retail investors as a source of saving with higher return.
The concept is based on Drops make an Ocean. So, it is a mutual act for common
benefit.
It is Professionally Managed.
There is flexibility of portfolio diversification.
There is diversification of risk as it contains small investors in one hand and investment
in basket of blue chip companies, gilt-edged securities, bonds, debt instruments or
indices.
There is a relative liquidity.
It is small investor savvy, so it attracts investors in large numbers.
The entry and exit load is nominal. The administration expenses are also economical.
The MF is tax efficient, as in the year 1999 the government has fully exempted the
dividends of MF units in the hands of investors from tax obligations.
Various investment options are available in the hands of investors, which may cater to
their specific needs, reinvestment option, dividend option, investment pattern such as
equity, debt, or balanced funds etc.



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Weaknesses of Mutual Fund:
As it is the case with other investment vehicles, MFs too are not free from certain shortcomings.
Some of them are:
It has no tailor-made schemes to suit to each individual retail investor.
No guarantee of returns.
No control over costs.
It has the drawback of the problem of managing large corpus.
Volatility of return depends on market conditions, which is subject to frequent market
volatility.
Mostly investment period is medium-term to long-term where expected return is
more. Money Market Mutual Funds scheme is for short period where return is not
lucrative and the instruments are less in number.
The Indian equity market has gained significantly during the last one year and mutual
funds are not left far behind. Both the avenues nave created wealth for the investors. But the
equity market has attracted much more attention than the mutual funds market. The reason
behind this is that in India investment in the equity market has seen there since long but the
mutual fund market is still growing. For the creation of wealth through this avenue a proper
understanding of mutual funds is a mist.

Meaning of Mutual Fund
A mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected and then invested in capital market
instruments such as shares, debentures and other securities. The income earned through these
investments and the capital appreciation realized is shared by its unit holders in proportion to the
number of units owned by them. Thus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed basket
of securities at a relatively low cost.



6

Mutual Fund Operation Flow Chart



Now lets understand how it differs from portfolio management. In case of mutual funds, the
investments of different investors are pooled to form a common ingestible corpus and gain or
loss to all investors during a given period is same for all investors. While in the case of the
portfolio investor remain identifiable to him. Here the gain or loss of all the investors will be
different from each other.
The advantages of investing in a mutual fund are:
Professional management
Diversification
Convenient administration
Return potential
Low costs
Liquidity
Transparency
Flexibility
Choice of schemes
Tax benefits
Well regulated

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Disadvantages of Mutual Fund
There are certainly some benefits to mutual fund investing, but you should also be aware
of the drawbacks associated with mutual funds.
1. No Insurance:-
Mutual funds, although regulated by the government, are not insured against losses. The
Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit
unions, and savings and loans, not mutual funds. That means that despite the risk-reducing
diversification benefits provided by mutual funds, losses can occur, and it is possible (although
extremely unlikely) that you could even lose your entire investment.
2. Dilution:-
Although diversification reduces the amount of risk involved in investing in mutual
funds, it can also be a disadvantage due to dilution. For example, if a single security held by a
mutual fund doubles in value, the mutual fund itself would not double in value because that
security is only one small part of the fund's holdings. By holding a large number of different
investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly.
3. Fees and Expenses:-
Most mutual funds charge management and operating fees that pay for the fund's
management expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds
charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade
shares so often that the transaction costs add up significantly. Some of these expenses are
charged on
an ongoing basis, unlike stock investments, for which a commission is paid only when you buy
and sell (see Investor Guide University: Fees and Expenses).
4. Poor Performance:-
Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75%
of all mutual funds fail to beat the major market indexes, like the S&P 500, and a growing
number of critics now question whether or not professional money managers have better stock-
picking capabilities than the average investor.
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5. Loss of Control:-
The managers of mutual funds make all of the decisions about which securities to buy
and sell and when to do so. This can make it difficult for you when trying to manage your
portfolio. For example, the tax consequences of a decision by the manager to buy or sell an asset
at a certain time might not be optimal for you. You also should remember that you are trusting
someone else with your money when you invest in a mutual fund.
6. Trading Limitations:-
Although mutual funds are highly liquid in general, most mutual funds (called open-
ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and
sell them at the end of the day, after they've calculated the current value of their holdings.
7. Size:-
Some mutual funds are too big to find enough good investments. This is especially true of
funds that focus on small companies, given that there are strict rules about how much of a single
company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an
average of $50 million in each, then it needs to find at least 100 such companies to invest
in; as a result, the fund might be forced to lower its standards when selecting
companies to invest in.
8. Inefficiency of Cash Reserves:-
Mutual funds usually maintain large cash reserves as protection against a large number
of simultaneous withdrawals. Although this provides investors with liquidity, it means that some
of the fund's money is invested in cash instead of assets, which tends to lower the investor's
potential return.
9. Different Types:-
The advantages and disadvantages listed above apply to mutual funds in general.
However, there are over 10,000 mutual funds in operation, and these funds vary greatly
according to investment objective, size, strategy, and style. Mutual funds are available for
virtually every investment strategy (e.g. value, growth), every sector (e.g. biotech, internet), and
every country or region of the world. So even the process of selecting a fund can be tedious.

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Categories of Mutual Fund Schemes:
Mutual fund schemes can be categorized by their structure, investment objectives and
other special schemes.
By Structure
Open ended fund
These funds do not have a fixed date of redemption. Generally they are open for
subscription and redemption throughout the year. Their processes are linked to the daily Net
Asset Value. From the investors perspective, they are much more liquid than closed ended
funds. Investors are permitted to join or withdraw from the fund after an initial lock in period.

Close ended funds
These funds are open initially for entry during the initial public offering and thereafter
closed for entry as well exit. These funds have a fixed date of redemption. One of the
characteristics of the close ended schemes is that they are generally traded at a discount to NAV:
but the discount narrows as maturity nears. These funds are open for subscription only once and
can be redeemed only on the fixed date of redemption. The units of these funds are listed, are
tradable and the subscribers to the fund would be able to exit from the fund at any time through
the secondary market.
Interval Funds
The funds combine the features of both open ended and close ended funds wherein the
fund is close ended for the first couple of years and open ended thereafter. Some funds allow
fresh subscriptions and redemption at fixed times every year in order to reduce the administrative
aspects of daily entry or exit, yet providing reasonable liquidity.

By investment objective

Growth Funds
These funds seek to provide growth of capital with secondary emphasis on dividend.
They invest in shares with a potential for growth and capital appreciation. Because they invest in
well-established companies where the company itself and the industry in which it operates are
thought to have good long term growth potential, growth funds provide low current income.
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Growth funds generally incur higher risks than income funds in an effort to secure more
pronounced growth.
Income Fund
Growth and income funds seek long-term growth of capital as well as current income.
The investment strategies used to reach these goals vary among funds. Some invest in growth
stocks, stocks paying high dividends, preferred stocks, convertible securities or fixed-income
securities such as corporate bonds and money market instruments. Others may invest in growth
stocks and earn current income by selling covered call options on their portfolio stocks.
Growth and income funds have low to moderate stability of principal and moderate
potential for current income and growth. They are suitable for investors show can assume
some risk to achieve growth of capital but who also want to maintain a moderate level of
current income.
Balanced Funds
Balanced funds aim at providing both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents. Balanced
funds are ideal for investors who are looking for a combination of income and moderate growth.

Money Market Funds
For the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in higher liquid, virtually risk-free,
short-term debt securities of agencies of the Indian government, banks and corporations and
treasury bills,. Because of their short term investments, money market mutual funds are able to
keep a virtually constant unit price, only the yield fluctuates. Therefore, they are an attractive
alternative to bank accounts. With yields that are generally competitive with and usually higher
than yields on bank savings account, they offer advantages. Money can be withdrawn any time
without penalty. Although not insured, money market funds invest only in highly liquid, short
term top rated money market instruments.
Money market funds are suitable for investors who want high stability of principal and
current income with immediate liquidity.
In India there are 22 fund houses and more than 100 schemes are available to the
investors. In India we generally find two types of open ended funds namely funds with growth
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option and dividend option. In the growth option, an investor can redeem his holding at the
prevailing NAV on a particular day to the mutual fund company. This option does not provide
any intermediate returns to the holder. The main objective as this option is to achieve the growth.
In case of dividend option the investor gets periodic dividend. Dividend payment is made on the
discretion of the mutual fund company. Past dividend payment record does not reveal that the
company is going to maintain the same track record. Another option available to the investor is
of dividend reinvestment. In this case the dividend declared is invested back in the same scheme.
Consequently, the investor has more units every time when the dividend is declared, by the NAV
depreciates.

Mutual funds differ with reference to the types as instrument in which the money has
been invested as per the requirements of the investors. Following are the various schemes offered
by the mutual funds and their performance.

Rating of Mutual Fund Schemes:
Mutual Fund schemes are periodically evaluated by independent institutions. CRISIL,
Value Research India, and economic Times are three such institutions whose rankings or
evaluations are currently very popular.
CRISIL:
Credit rating and Information Services of India Limited (CRISIL) carries out Composite
performance Rankings that cover all open-ended schemes that disclose their entire portfolio
composition and have NAV information for at least two years. It currently ranks schemes in five
categories, viz Equity Schemes, Debt Schemes, Gilt Schemes, Balanced Schemes, and Liquid
Schemes. Its ranking is based on four criteria, viz., and risk-adjusted return of the schemes
NAV, diversification of the portfolio, liquidity, and asset size. The weights assigned to these
criteria vary from category to category.
Costs of investing in a Mutual Fund:
There are four types of costs associated with mutual fund investing: initial issue
expenses, entry load, exit load, and annual recurring expenses.
Initial issue expenses: include items such as brokerage fees and commission, marketing and
advertising expenses, printing and distribution costs, and so on which are incurred when the
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scheme is launched. Initial expenses upto 6% of the amount mobilized can be charged to the
scheme.
Entry load or sales load is the load imposed when the units are purchased. It may be upto 2% of
course for many schemes it is nil. It the entry load is 2%, it means that when you8 buy the units
of a mutual fund scheme which has a net asset value that have an entry load are called load
schemes and schemes that have no entry load are called no-load schemes.
Exit load or redemption load is the load imposed when the units are sold back to the
mutual fund. In practice it varies from 0 % to 3%. This load is imposed to deter investors from
withdrawing from the scheme. In some cases a contingent deferred sales charge is not applicable
when there is an entry load.
Annual recurring expenses refer to the investment management and advisory fees charged by the
AMC and operation expenses like marketing and selling expenses, brokerage costs, trustee fees,
custodian fees, audit fees, costs of investor communication. Costs of providing account
statements and dividend / redemption chequse and warrants and costs of statutory
advertisements.

PART-B: ABOUT THE TOPIC: RISK AND RETURN ON MUTUAL FUND
Any rational investor, before investing his or her ingestible wealth in the stock, analyses
the risk associated with the particular stock. The actual return he receives from a stock may vary
from his expected return and the risk is expressed in terms of variability of return. The down side
risk may be caused by several factors, either common to all stocks pr specific to a particular
stock. Investor in general would like to analyze the risk factors and a thorough knowledge of the
risk helps him to plan his portfolio in such a manner so as to minimize the risk associated with
the investment.
Definition of Risk
The dictionary meaning of risk is the possibility of loss or injury; the degree or
probability of such loss. In risk, the probable outcomes of all the possible events are listed. Once
the events are listed subjectively, the derived probabilities can be assigned to the entire possible
events.


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Types of Risk:
Risk consists of two components, the systematic risk and unsystematic risk. The
systematic risk is caused by factors external to the particular company and uncontrollable by the
company. The systematic risk affects the market as a whole. In the case of unsystematic risk the
factors are specific, unique and related to the particular industry or company.

Systematic Risk :
The systematic risk affects the entire market. Often we read in the newspaper that the
stock market is in the bear hug or in the bull grip. This indicates that the entire market is moving
in a particular direction either downward or upward. The economic conditions, political
situations and the sociological changes affect the security market. The recession in the economy
affects the profit prospect of the industry and the stock market. The 1998 recession experienced
by developed and developing countries have affected the stock markets all over the world. The
South East Asian crisis has affected the stock market worldwide. These factors are beyond the
control of the corporate and the investor. They cannot be entirely avoided by the investor. It
drives home the point that the systematic risk is unavoidable. The systematic risk is further sub-
divided into

- Market Risk
- Interest Rate Risk
- Purchasing Power Risk

Market Risk:
Market risk as that portion of total variability of return caused by the alternating forces of
bull and bear markets. When the security index moves upward haltingly for a significant period
of time, it is known as bull market. In the bull market, the index moves from a low level to the
peak. Bear market is just a reverse to the bull market; the index declines haltingly from the peak
to a market low point called through for a significant period of time. During the bull and bear
market more than 80% of the securities prices rise or fall along with the stock market indices.


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Interest Rate Risk
Interest rate risk is the variation in the single period rates of return caused by the
fluctuations in the market interest rate. Most commonly interest rate risk affects the price of
bonds, debentures and stocks. The fluctuations in the interest rates are caused by the changes in
the government monetary policy and the changes that occur in the interest rates of treasury bills
and the government bonds. The bonds issued by the government and quasi-government are
considered to be risk free.

Purchasing Power Risk:
Variations in the returns are caused also by the loss of purchasing power of currency.
Inflation is the reason behind the loss of purchasing power. The level of inflation proceeds faster
than the increase in capital value. Purchasing power risk is the probable loss in the purchasing
power of the returns to be received. The rise in price penalizes the returns to the investor, and
every potential rise in price is a risk to the investor.

Unsystematic Risk:
As already mentioned, unsystematic risk is unique and peculiar to a firm or an industry.
Unsystematic risk stems from managerial inefficiency, technological change in the production
process, availability of raw material, changes in the consumer preference, and labor problems.
The nature and magnitude of the above mentioned factors differ from industry to industry, and
company to company. They have to be analyzed separately for each industry and firm. The
changes in the consumer preference affect the consumer products like television sets, washing
machines, refrigerators, etc. unsystematic risk can be classified into:


Business risk
Financial risk

Business Risk:
Business risk is that portion of the unsystematic risk caused by the operating environment
of the business. Business risk arises from the inability of a firm to maintain its competitive edge
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and the growth or stability of the earnings. Variation that occurs in the operating environment as
reflected on the operation income and expected dividends.
Financial Risk:
It refers to the variability of the income to the equity capital due to the debt capital.
Financial risk in a company is associated with the capital structure of the company. Capital
structure of the company consists of equity funds and borrowed funds. The presence of debt and
preference capital results in a commitment of paying interest or per fixed rate of dividend. The
interest payment affects the payments that are due to the equity investors.
Measurement of Risk:
The risk associated with a single asset is assessed from both a behavior and a
quantitative/statistical point of view. The behavioral view of risk can be obtained by using:
- Sensitivity analysis
- Probability distribution

The statistical measure of risk of an asset/security is:
Standard deviation
Coefficient of variation


Sensitivity Analysis:
It is a behavior approach to assess risk using number of possible returns estimates to
obtain a sense of the variability among outcomes.


Probability Distribution:
It is a model that relates probabilities to the associated outcomes based on the rerun the
expected value of the return can be computed the expected rate of return is the weighted average
of all possible returns multiplied by their respective probabilities.



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Standard Deviation:
Risk refers to the dispersion of returns around expected values. The most common
statistical measure of risk of an asset is the standard deviation from the mean/expected values of
return. It represents the square root of the average squared deviation of the individual returns
from the expected returns.
Co-efficient of Variation:
It is a measure of relative dispersion used in comparing the risk of assets with differing
expected values. The co-efficient of variation is computed by dividing the for an asset by its
expected value.
Return:
Investment decisions are influenced by various motives. Some people invest in a business
to acquire control and enjoy the prestige associated with it. Some people invest in expensive
yachts and famous villas to display their wealth. Most investors, however, are largely guided by
the pecuniary motive of earning a return on their investment.

For earning returns investors have to almost invariably bear some risk. In general, risk
and return go hand in hand. While investors like returns they abhor risk. Investment decisions,
therefore, involve a tradeoff between risk and return. Since risk and return are central to
investment decisions

Meaning of Return:
Return is the primary motivation force that drives investment. It represents the reward for
undertaking investment. Since the game of investing is about returns (after allowing for risk),
measurement of realized (historical) returns is necessary to assess how well the investment
manager has done. In addition, historical returns are often used as an important input in
estimating future (prospective) returns.





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Components of Return:
The return of an investment consists of two components.
Current Return:
The first component that often comes to mind when one is thinking about return is the
periodic cash flow (income), such as dividend or interest, generated by the investment. Current
return is measured as the periodic income in relation to the beginning price of the investment.

Capital Return:
The second component of return is reflected in the price change called the capital return it
is simple the price appreciation (or depreciation) divided by the beginning price of the asset. For
assets like equity stocks, the capital return predominates.

Thus the total return for any security (or for that matter any asset) is defined are
Total return = Current return Capital return
The current return can be zero or positive, whereas the capital return can be negative,
zero, or positive

Measuring Historical Return:

The total return on an investment for a given period is:
Cash payment received during the period + price change over the Price of
Investment at the beginning Period

All items are measured in rupees. The rupee cash payment received during the period
may be positive may be positive zero. The rupee price change over the period is simply the
difference between the ending price and the beginning price. This can be positive (ending price
exceeds the beginning price) or zero (ending price equals the beginning price) or negative
(ending price is less then the beginning price) in formal terms


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R
( )
E B
B
C P P
P
+
=
Where R = total return over the period
C = cash payment received during the period
PE = ending price of the investment
PB= beginning price


Return Relative:
Often it is necessary to measure returns in a slightly different manner. This is particularly
true when a cumulative wealth index or a geometric mean has to be calculated, because in such
calculations negative returns cannot be used. The concept of return relative is used in such cases.
The return relative is defined as:
Return relative=
E
B
C P
P
+
.

















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LITERATURE REVIEW
Literature on mutual fund performance evaluation is enormous. A few research studies that have
influenced the preparation of this paper substantially are discussed in this section. Sharpe,
William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on
results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new
predictor of mutual fund performance, one that differs from virtually all those used previously by
incorporating the volatility of a fund's return in a simple yet meaningful manner.
Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensens
alpha) that estimates how much a managers forecasting ability contributes to funds returns. As
indicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio
over the return of the benchmark index, where the portfolio is leveraged to have the benchmark
indexs standard deviation. S.Narayan Rao , et. al., evaluated performance of Indian mutual
funds in a bear market through relative performance index, risk-return analysis, Treynors ratio,
Sharpes ratio, Sharpes measure , Jensens measure, and Famas measure. The study used 269
open-ended schemes (out of total schemes of 433) for computing relative performance index.
Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally
used for further analysis. The results of performance measures suggest that most of mutual fund
schemes in the sample of 58 were able to satisfy investors expectations by giving excess returns
over expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al.,
conducted an empirical study on conditional performance of Indian mutual funds. This paper
uses a technique called conditional performance evaluation on a sample of eighty-nine Indian
mutual fund schemes .This paper measures the performance of various mutual funds with both
unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton
model. The effect of incorporating lagged information variables into the evaluation of mutual
fund managers performance is examined in the Indian context. The results suggest that the use
of conditioning lagged information variables improves the performance of mutual fund schemes,
causing alphas to shift towards right and reducing the number of negative timing coefficients.
Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this
paper, measures of evaluating portfolio performance based on lower partial moment are
developed. Risk from the lower partial moment is measured by taking into account only those
states in which return is below a pre-specified target rate like risk-free rate. Kshama
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Fernandes(2003) evaluated index fund implementation in India. In this paper, tracking error of
index funds in India is measured The consistency and level of tracking errors obtained by some
well-run index fund suggests that it is possible to attain low levels of tracking error under Indian
conditions. At the same time, there do seem to be periods where certain index funds appear to
depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund
portfolios, developed a multicriteria methodology and applied it to the Greek market of equity
mutual funds. The methodology is based on the combination of discrete and continuous multi-
criteria decision aid methods for mutual fund selection and composition. UTADIS multi-criteria
decision aid method is employed in order to develop mutual funds performance models. Goal
programming model is employed to determine proportion of selected mutual funds in the final
portfolios. Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual funds
matched to randomly selected conventional funds of similar net assets to investigate differences
in characteristics of assets held, degree of portfolio diversification and variable effects of
diversification on investment performance. The study found that socially responsible funds do
not differ significantly from conventional funds in terms of any of these attributes. Moreover, the
effect of diversification on investment performance is not different between the two groups. Both
groups underperformed the Domini 400 Social Index and S & P 500 during the study period.
A number of recent studies have examined the issue of performance persistence in mutual funds.
Grinblatt and Titman (1992) analyze performance of 279 funds over the period of 1975 to 1984
using a benchmark technique and find evidence that performance differences between funds
persists over time. Hendricks, Patel, and Zeckhauser (1993) study 165 no-load growth-oriented
funds over the period 1974 to 1988 and obtain similar results. In a study of 728 mutual fund
returns over the period 1976 to 1988, Goetzman and Ibbotson (1994) find that two-year
performance is predictive of performance over the successive two years. Volkman and Wohar
(1995) extend this analysis to examine factors that impact performance persistence. Their data
consists of 322 funds over the period 1980 to 1989, and shows performance persistence is
negatively related to size and negatively related to levels of management fees.
Studies of performance persistence in mutual funds are not without contrary evidence. Carhart
(1997) shows that expenses and common factors in stock returns such as beta, market
capitalization, one-year return momentum, and whether the portfolio is value or growth oriented
21

"almost completely" explain short term persistence in risk-adjusted returns. He concludes that his
evidence does not "support the existence of skilled or informed mutual fund portfolio managers"
(Carhart, 1997, p. 57). In the Kahn and Rudd 1995 study of 300 equity funds and 195 bond funds
between 1983 and 1993, only the bond funds show evidence of persistence. In an article in this
issue, Detzel and Weigand (1998) use a regression residual technique to control for the effects of
investment style, size and expense ratios. They find, after controlling for these variables, no
evidence of performance persistence.
Two other studies have used performance ranks. Dunn and Theisen (1983) rank the annual
performance of 201 institutional portfolios for the period 1973 through 1982 without controlling
for fund risk. They found no evidence that funds performed within the same quartile over the
ten-year period. They also found that ranks of individual managers based on 5-year compound
returns revealed no consistency. Bauman and Miller (1995) studied the persistence of pension
and investment fund performance by type of investment organization and investment style. They
employed a quartile ranking technique because they noted that "investors pay particular attention
to consultants' and financial periodicals' investment performance rankings of mutual funds and
pension funds" (Bauman & Miller, 1995, p. 79). They found that portfolios managed by
investment advisors showed more consistent performance (measured by quartile rankings) over
market cycles and that funds managed by banks and insurance companies showed the least
consistency. They suggest that this result may be caused by a higher turnover in the decision-
making structure in these less consistent funds. This study controls for the effects of turnover of
key decision makers by restricting the sample to those funds with the same manager for the
entire period of study.





22

RESEARCH DESIGN
1. Title of the Study
A study on The analysis of Risk and Return towards Mutual Fund Schemes (Equity)
2. Statement of the Problem
In the current economic scenario interest rates are falling and fluctuation in the share
market has put investors in confusion. One finds it difficult to take decision on investment. This
is primarily, because investments are risky in nature and investors have to consider various
factors before investing in investment avenues. Therefore the study aims to create awareness
about mutual fund schemes in form their risk, return & liquidity among the investors.
3. Objectives of the Study
Saving money is not enough. Each of us also need to invest ones savings intelligently in
order to have enough money available for funding the higher education of ones children, for
buying a house, or for ones own golden years. But the rapidly growing number of investment
avenues often led to confusion. Objectives of the study are to provide information to individual
investors regarding their risk, and choosing the best investment options to match their goals and
attitude to risk.
1. To find out Mutual Fund Schemes in respect of their risk, return and liquidity.
2. Analyzing the performance of mutual fund schemes.
3. Objective is to provide information to investors how to invest their hard money most
profitably in mutual funds schemes.
4. Objective is to provide information to investors how to adjust their investment portfolio
with changes in their life and volatile market situation.
5. Provide information about pros and cons of investing in Mutual Funds
6. To offer valuable suggestions on the basis of findings




23

4. Scope of the Study.
The study is limited to mutual fund schemes in respect of their risk, return and liquidity.
The study covers 3 randomly selected mutual fund schemes out of mutual fund industry in India.
The analysis is strictly based on unit price information. Other company performance indicators
are not considered. It focuses on net asset value prices during the period from Year 2006 to Year
2010 data.
Research Technique
The quality of research output and the validity of its findings depend upon
appropriateness of the sampling design selected for the study. It was needed to apply inferential
statistical analysis; hence probability sampling was chosen to be essential.
The study is related to the risk and return on mutual fund scheme. Therefore the Random
Sampling was used
Research Instruments
For analysis of the scheme value the risk and return formulas was used for 5 year data.
Source of Data
Secondary data
The data has collected with collected with companys websites, The data has collected with
observation of net asset value of each scheme and other websites like Valueresearchonline.com,

Limitations of the Study
The study is limited to some selected mutual fund schemes
The data which relates to 5 year data because of limited time
The information is not available at a proper







24

Company Profile
HDFC Mutual Fund
HDFC Asset Management Company Limited (AMC)

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169,
Backbay Reclamation, Churchgate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset
Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is
Rs. 25.161 crore.
The present equity shareholding pattern of the AMC is as follows :
Particulars % of the paid up equity capital
Housing Development Finance Corporation Limited 60
Standard Life Investments Limited 40
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review
of its overall strategy, had decided to divest its Asset Management business in India. The AMC
had entered into an agreement with ZIC to acquire the said business, subject to necessary
regulatory approvals.
On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have
migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as
follows:



25

Former Name New Name
Zurich India Equity Fund HDFC Equity Fund
Zurich India Prudence Fund HDFC Prudence Fund
Zurich India Capital Builder Fund HDFC Capital Builder Fund
Zurich India TaxSaver Fund HDFC TaxSaver
Zurich India Top 200 Fund HDFC Top 200 Fund
Zurich India High Interest Fund HDFC High Interest Fund
Zurich India Liquidity Fund HDFC Cash Management Fund
Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund*
*HDFC Sovereign Gilt Fund has been wound up in March 2006

The AMC is managing 28 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund,
HDFC Equity Fund, HDFC Top 200 Fund, HDFC Capital Builder Fund, HDFC Core & Satellite
Fund, HDFC Premier Multi-Cap Fund, HDFC Index Fund, HDFC Long Term Advantage Fund,
HDFC TaxSaver, HDFC Arbitrage Fund, HDFC Mid-Cap Opportunities Fund, HDFC Balanced
Fund, HDFC Prudence Fund, HDFC Childrens Gift Fund, HDFC Gold Exchange Traded Fund,
HDFC MF Monthly Income Plan, HDFC Multiple Yield Fund, HDFC Multiple Yield Fund- Plan
2005, HDFC Income Fund, HDFC High Interest Fund, HDFC Short Term Plan, HDFC Short
Term Opportunities Fund, HDFC Medium Term Opportunities Fund, HDFC Gilt Fund and
HDFC Floating Rate Income Fund , HDFC Liquid Fund, HDFC Cash Management Fund and
HDFC Quarterly Interval Fund.

The AMC is also managing 7 closed ended Schemes of the HDFC Mutual Fund viz. HDFC Long
Term Equity Fund, HDFC Infrastructure Fund, HDFC Fixed Maturity Plans - Series XI, HDFC
Fixed Maturity Plans - Series XII, HDFC Fixed Maturity Plans - Series XIV, HDFC Fixed
Maturity Plans - Series XV and HDFC Fixed Maturity Plans - Series XVII.
The AMC is also providing portfolio management / advisory services and such activities are not
26

in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from
SEBI vide Registration No. - PM / INP000000506 dated December 21, 2009 to act as a Portfolio
Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration
is valid from January 1, 2010 to December 31, 2012.

PRODUCTS-

Children's Gift Fund
Children's Gift Fund

Debt/ Income Fund
Invest in money market and debt
instruments and provide optimum
balance of yield, ...

Equity / Growth Fund
Invest primarily in equity and
equity related instruments.

Exchange Traded Funds
Invest primarily in equity and
equity related instruments.


Fixed Maturity Plan
Invest primarily in Debt / Money
Market Instruments and
Government Securities...

Liquid Funds
Provide high level of liquidity by
investing in money market and
debt instruments.

Quarterly Interval Fund
The primary objective of the
Scheme is to generate regular
income through investme...


Equity/ Growth Funds-
HDFC Top 200 Fund.
HDFC Prudence Fund
HDFC Mid-Cap Opportunities Fund.
HDFC Long Term Advantage Fund (ELSS).
HDFC Index Fund - Sensex Plus Plan.
HDFC Index Fund - Nifty Plan.
HDFC Equity Fund.
HDFC Capital Builder Fund.
27

HDFC Arbitrage Fund.
HDFC Balanced Fund
HDFC Core and Satellite Fund.
HDFC Growth Fund
HDFC Index Fund - Sensex Plan
HDFC Infrastructure Fund.
HDFC TOP 200 FUND-
EQUITY - LARGE & MID CAP CATEGORY (57 schemes) for 3 and 5 year periods ending
March 31, 2011


"'Elite' Rating: These funds represent Morningstar analysts' highest conviction picks.
Morningstar awards the rating to funds that it believes are capable of outperforming their peers
over the long term. To earn this rating, a fund must be significantly better than its peers in most
key respects.
CRISIL Mutual Fund Rank

HDFC Top 200 Fund was assigned 'CRISIL Mutual Fund Rank 1' # in the 'Open
End Consistent Equity Category (out of 39 schemes) for the 5 year period ending
December 31, 2010 by CRISIL.

HDFC Top 200 Fund - Growth Option was assigned 'CRISIL Mutual Fund Rank 1'
in the 'Open End Large Cap Oriented Equity Schemes' Category (out of 30 schemes) for the 2
year period ending December 31, 2010 by CRISIL.
Investment Objective
To generate long term capital appreciation from a portfolio of equity and equity-linked
instruments primarily drawn from the companies in BSE 200 index.
28

Basic Scheme Information

Nature of Scheme Open Ended Growth Scheme
Inception Date October 11, 1996
Option/Plan Dividend Option, Growth Option. The Dividend Option
offers Dividend Payout and Reinvestment Facility.
Entry Load
(purchase / additional purchase /
switch-in)
NIL
(With effect from August 1, 2009)


Exit Load
(as a % of the Applicable
NAV)
- In respect of each purchase / switching of units, an Exit Load
of 1.00% is payable if Units are redeemed / switched-out
within 1 year from the date of allotment..
- No Exit Load is payable if Units are redeemed / switched-out
after 1 year from the date of allotment.
Minimum Application Amount

For new investors: Rs.5000 and any amount thereafter.
For existing investors: Rs. 1000 and any amount thereafter.
Lock-In-Period Nil
Net Asset Value Periodicity Every Business Day.
Redemption Proceeds Normally dispatched within 3 Business days
Tax Benefits
(As per present Laws)
Please click for details
Current Expense Ratio (#)
(Effective Date 22nd May 2009)
On the first 100 crores average weekly net assets 2.5000%
On the next 300 crores average weekly net assets 2.25%
On the next 300 crores average weekly net assets 2.00%
On the balance of the assets 1.75%

Investment Pattern
The asset allocation under the Scheme will be as follows :
Sr.No. Asset Type (% of Portfolio) Risk Profile
1 Equities and Equity
Related Instruments
Upto 100% (including use of derivatives for
hedging and other uses as permitted by
prevailing SEBI Regulations)
Medium to
High
2 Debt & Money
Market Instruments
Balance in Debt & Money Market
Instruments
Low to
Medium

29

* Investment in Securitized debt, if undertaken, would not exceed 20% of the net assets of the
scheme.

The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures
& Options and such other derivative instruments as may be introduced from time to time for the
purpose of hedging and portfolio balancing and and other uses as may be permitted under the
regulations and guidelines.

The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas
markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds
and such other instruments as may be allowed under the Regulations from time to time.

Subject to the Regulations and the applicable guidelines, the Scheme may, engage in Stock
Lending activities. Also refer to Section on Stock Lending by the Fund.

If the investment in equities and related instruments falls below 65% of the portfolio of the
Scheme at any point in time, it would be endeavored to review and rebalance the composition.

Notwithstanding anything stated above, subject to the regulations, the asset allocation pattern
indicated above may change from time to time, keeping in view market conditions, market
opportunities, applicable regulations and political and economic factors. It may be clearly
understood that the percentages stated above are only indicative and are not absolute and that
they can vary substantially depending upon the perception of the AMC, the intention being at all
times to seek to protect the NAV of the scheme. Such changes will be for short term and
defensive considerations.

The Trustee may from time to time at their absolute discretion review and modify the strategy,
provided such modification is in accordance with the Regulations or in the event of a
discontinuation of or change in the compilation or the constituents of the BSE 200 Index.

Provided further and subject to the above, any change in the asset allocation affecting the
30

investment profile of the Scheme and amounting to a change in the Fundamental Attributes of
the Scheme shall be effected in accordance with sub-regulation (15A) of regulation 18 of SEBI
regulations.
Investment Strategy
The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scraps
is intended to reduce risks while maintaining steady growth. Stock specific risk will be
minimized by investing only in those companies / industries that have been thoroughly
researched by the investment manager's research team. Risk will also be reduced through a
diversification of the portfolio.



STATE BANK OF INDIA - MUTUAL FUND
A partner for life
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with
an investor base of over 4.6 million. With over 20 years of rich experience in fund
management, SBI MF brings forward its expertise in consistently delivering value to its
investors
Proven Skills in wealth generation:
SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track
record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has
grown immensely since its inception and today it is India's largest bank, patronized by
over 80% of the top corporate houses of the country.
SBI Mutual Fund is a joint venture between the State Bank of India and Socit General
Asset Management, one of the worlds leading fund management companies that manages
over US$ 500 Billion worldwide.

31

Exploiting expertise, compounding growth:
In twenty years of operation, the fund has launched 38 schemes and successfully redeemed
fifteen of them. In the process it has rewarded its investors handsomely with consistently
high returns.
A total of over 5.4 million investors have reposed their faith in the wealth generation
expertise of the Mutual Fund.
Schemes of the Mutual fund have consistently outperformed benchmark indices and have
emerged as the preferred investment for millions of investors and HNIs.
Today, the fund manages over Rs. 51,461 crores of assets and has a diverse profile of
investors actively parking their investments across 36 active schemes.
The fund serves this vast family of investors by reaching out to them through network of
over 130 points of acceptance, 28 investor service centers, 46 investor service desks and
56 district organizers.
SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India
Opportunities Fund.
Growth through innovation and stable investment policies is the SBI MF credo.
Fund house expertise:
The investment environment is becoming increasingly complex. Innumerable parameters
need to be factored in to generate a clear understanding of market movement and
performance in the near and long term future.

At SBIMF, we devote considerable resources to gain, maintain and sustain our profitable
insights into market movements. We consistently push the envelope to ensure our
investors get the maximum benefits year after year.
Research - the backbone of our Performance
Our expert team of experienced and market savvy researchers prepare comprehensive
32

analytical and informative reports on diverse sectors and identify stocks that promise high
performance in the future.
This team works in tandem with a compliance and risk-monitoring department, which
ensures minimization of operational risks while protecting the interests of the investors.

Quite naturally many of our equity funds have delivered consistent returns to investors
and have repeatedly out performed benchmark indices by wide margins.
AWARDS AND ACHIEVEMENTS
SBI- MUTUAL FUND has been performing excellently since its
inception. The fund has received lot of appreciation for its performance from the mutual
fund industry. It has been awarded by ICRA on line award 8 times, CNBC- TV 18 CRISIL
4 AWARDS, the Lipper award (year 05-06) and most recently the CNBC TV 18 Crisil
Mutual Fund Award of the year 2007 and 5 award for the schemes





















33

2010


2009



2008


34



2007








35

2006





Risk Management Team:
The Risk Management unit is a separate division within the organization headed by the
Chief Risk Officer (CRO). A Risk Management Committee, comprising the MD, Deputy
CEO, CRO, COO, CIO and the CMO meets on a regular basis to manage risk within the
organization.
The CRO is responsible for risk management over all the functions within the organization
including Investments, Marketing, Operations, etc. Currently, t he CRO is an experienced
investment professional and is assisted by a two-member team, one being an investment
Professional with an MBA in Finance and the other being an investment professional
deputed from SGAM
36

SBI- MUTUAL FUND PRODUCTS:
EQUITY SCHEMES:
The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher returns
which stock markets can provide. However they are also exposed to the volatility and
attendant risks of stock markets and hence should be chosen only by such investors who
have high risk taking capacities and are willing to think long term. Equity Funds include
diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds
invest in various stocks across different sectors while Sectoral funds which are specialized
Equity Funds restrict their investments only to shares of a particular sector and hence, are
riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a
particular index and the performance of such funds move with the movements of the
index.
+ Magnum COMMA Fund
+ Magnum Equity Fund
+ Magnum Global Fund
+ Magnum Index Fund
+ Magnum MidCap Fund
+ Magnum Multicap Fund
+ Magnum Multiplier Plus 1993
+ Magnum Sector Funds Umbrella
MSFU - FMCG Fund
MSFU - Emerging Businesses Fund
MSFU - IT Fund
MSFU - Pharma Fund
MSFU - Contra Fund
+ SBI Arbitrage Opportunities Fund
+ SBI Blue chip Fund
37

+ SBI Infrastructure Fund - Series I
+ SBI Magnum Taxgain Scheme 1993
+ SBI ONE India Fund
+ SBI TAX ADVANTAGE FUND - SERIES I

DEBT SCHEMES:
Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either compl etely avoiding any investments in
the stock markets as in Income Funds or Gilt Funds or having a small exposure to equities
as in Monthly Income Plans or Children's Plan. Hence they are safer than equity funds. At
the same time the expected returns from debt funds would be lower. Such investments are
advisable for the risk-averse investor and as a part of the investment portfolio for other
investors.
+ Magnum Childrens Benefit Plan
+ Magnum Gilt Fund
Magnum Gilt Fund (Long Term)
Magnum Gilt Fund (Short Term)
+ Magnum Income Fund
+ Magnum Income Plus Fund
Magnum Income plus Fund (Saving Plan)
Magnum Income plus Fund (Investment Plan)
+ Magnum Insta Cash Fund
+ Magnum InstaCash Fund -Liquid Floater Plan
+ Magnum Institutional Income Fund
+ Magnum Monthly Income Plan
+ Magnum Monthly Income Plan Floater
+ Magnum NRI Investment Fund
+ SBI Capital Protection Oriented Fund - Series I
+ SBI Debt Fund Series
SDFS 15 Months Fund
38

SDFS 90 Days Fund
SDFS 13 Months Fund
SDFS 18 Months Fund
SDFS 24 Months Fund
SDFS 30 DAYS
SDFS 30 DAYS
SDFS 60 Days Fund
SDFS 180 Days Fund
SDFS 30 DAYS
+ SBI Premier Liquid Fund
+ SBI Short Horizon Fund
SBI Short Horizon Fund - Liquid Plus Fund
SBI Short Horizon Fund - Short Term Fund

BALANCED SCHEMES:

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence they are less
risky than equity funds, but at the same time provide commensurately lower returns. They
provide a good investment opportunity to investors who do not wish to be completely exposed to
equity markets, but is looking for higher returns than those provided by debt funds.
Magnum Balanced Fund
Magnum NRI Investment Fund - Flexi Asset Plan
Magnum Equity Fund
Investment objectives
To provide the investor Long-term capital appreciation by investing in high growth
companies along with the liquidity of an open-ended scheme through investments
primarily in equities and the balance in debt and money market instruments



39

Asset Allocation
Instrument % of Portfolio of
Plan A & B
Risk Profile
Equity and related instruments not less than 70% High
Debt instruments not more than 30% Medium
Securitized Debt investments in debt not more than 10% Low
Money market instruments * Balance Low
Scheme Highlights
1.A diversified equity fund, focusing on aggressive growth
2 .Ideal for investors who wish to benefit from the growth of the equity markets and are
comfortable with the attendant volatility
Launch Date

Minimum Application

January 2, 1991 Rs. 1000
Entry Load Exit Load
NA 1)For exit only 1 year from the date of
allotment -1%
2)For exit after 1 year from the date of
allotment- NIL
SIP SWP
Rs. 500 per months-12 months, Rs. 100 per
months- 6 months, Rs 1500/quarter-12 months
Available for a minimum of Rs 500/-
subject to maintaining the minimum
investment payable on a monthly basis

NAV

PLAN
LATEST NAV DATE
1)Magnum Equity Fund Growth
2)Magnum Equity Fund-Dividend
44.35
29.8
21/04/2011
21/04/2011
40

BANK OF BARODRA PIONEER INVESTMENT
Corporate Profile
Baroda Pioneer Asset Management Company Limited
Baroda Pioneer Asset Management Company Limited was formed as a wholly owned subsidiary
of Bank of Baroda in 1995 with the key focus of managing the assets of Baroda Pioneer Mutual
Fund.
Bank of Baroda entered into an agreement on 5 October, 2007 with Pioneer Investments (Pioneer
Global Asset Management SpA), a global asset manager with 80 years of experience and assets
under management of just under 187.86 billion (as on September 30, 2008).
Consequent to the agreement and necessary regulatory approvals, Pioneer Investments has
acquired a stake of 51% in Baroda Pioneer Asset Management Company. The Fund and the
AMC are being renamed as Baroda Pioneer Mutual Fund and Baroda Pioneer Asset Management
Company Limited.
The Fund currently manages five equity funds, one balanced fund, three debt funds and one
liquid fund.
With a focus on enhancing the overall customer experience, Baroda Pioneer Asset Management
Company is working towards:

1 Enhancing the existing product range to include products that will provide investors with a
much wider choice suited to their diverse needs and risk profiles
2 Providing access to international product offerings through the range available with Pioneer
Investments across its global network
3 Providing superior and consistent investment performance through sound local investment
management supported by expertise available across the globe
4 Creating an increasing number of access points for investors through the vast branch
network of Bank of Baroda
41

5 Bringing in the highest levels of compliance and corporate governance
6 Introducing increasingly innovative and useful service features on an ongoing basis
7 Making it easier for investors to receive prompt and empathetic customer service

Sponsors
Pioneer Global Asset Management S.p.A.:
With 80 years experience in fund management, Pioneer Investments (the Group) has a
history few asset management companies can match. Pioneer Investments flagship fund,
Pioneer Fund, is the third oldest mutual fund in the United States. It has not only
weathered volatile market conditions, but has outperformed common stocks, long term
bonds, US Treasury Bills and inflation since its foundation in 1928.
Innovation is part of Pioneer heritage. At the forefront of the establishment of the modern
US mutual fund industry, Pioneer Investments is an industry leader in the development of
this market in Europe. The Group was the first asset management company to launch
investment funds in
Italy, first in Germany to register US mutual funds under the Foreign Investments Act, and
first to distribute open-ended investment funds in Poland. In 2002 it acquired the Momentum
Group, which in keeping with Pioneer Investments tradition of innovation, is one of the
founders of the funds of hedge funds industry.
In October 2000, UniCredito Italiano S.p.A. (UCI) completed its acquisition of the
Pioneer Group, Inc., further bolstering the capabilities of its asset management operations in
Milan and Dublin. Through the consolidation of these powerful investment houses, Pioneer
Investments is ideally positioned to expand its global reach and penetrate deeper into each
market
The main activity of Pioneer Investments is the management and distribution of over 180
investment funds and alternative investments. With investment centers in Boston, Dublin,
Milan and Singapore it manage assets worth 167 billion as on 31st July 2009.
42

Headquartered in Milan, Pioneer Investments has a presence in over 31 countries around the
world. The investment process is active, bottom-up and research-driven, based upon the
principles of fundamental investing that Pioneer Investments has used since 1928. The
approach enables Pioneer Investments to make informed judgments about how industries
and companies have operated in the past, about their future behavior and about the effects of
these variables on stock prices. We add a strong quantitative discipline to this process, which
supports the work of fundamental analysts and keeps a close check on the investment risks
for its funds.
*Pioneer Investments is a trading name of the Pioneer Global Asset Management S.p.A.
group of companies (PGAM). PGAM is a wholly owned subsidiary of UniCredit S.p.A

Bank of Baroda
In the Indian banking universe, Bank of Baroda occupies a distinct position. Bank of Baroda
is a state-owned bank with more than 100 years of successful existence. The biggest strength
is its uninterrupted profit performance and consistent record in dividend payments. The
name inspires confidence among its customers. The track record in the market, the sound
financials, its contribution to social sectors and even to policy-making has given the Bank a
unique place in the market place.

Bank of Barodas vast distribution channel of domestic branches (at 2,926 on 31st March,
2009), extension counters and ATMs (at 1,179), and a strong international presence in 25
countries (excluding India) covering regions like U.S.A., U.K., Africa, Middle East and Asia
Pacific zones has ensured a wide global client base of 36.5 millions.

During the financial year 2008-09, Bank touched a global business level of 3,36,383 crores
reflecting a growth of 30% (y- y). The level of net profit at Rs.2,227 crores reflected a robust
year-on-year growth of 55.2%. On the front of asset quality management, while the gross
NPA declined from 2.47% in 2006-07 to 1.27% in 2008-09, the net NPA declined from
0.60% to 0.31%.

43

Bank of Baroda enjoyed the CRAR of 14.05% (as per the Basel II). While the ROAA stood
at 1.09%, the ROE stood at 19.56% at end March 2009.
Board of Trustees
Shri R. L. Baxi
Chairman
Independent Trustee
Qualification : B.Com, LLB, F.C.I.I(London), F.F.I.I.
Mr. R L Baxi has more than 47 year of experience in General Insurance Industry,
Investments, accounts and General Administration. He worked as a General Manager in
Indian Mercantile Insurance Co. Ltd, GIC, National Insurance Company and The New India
Assurance Co. Ltd. He also worked as Director & General Manager of The New India
Assurance Co. Ltd. Mr. Baxi is Director in various companies.




Shri Shrinivas K Suvarna
Independent Trustee
Qualification : B. Com, LLB, CAIIB
Mr. Shrinivas K Suvarna has over 35 year of experience in Banking, Finance, Accounts,
General Administration and consultancy. He retired from the Bank of Baroda as a Deputy
General Manager.







44

Shri. V. H. Bhatia
Independent Trustee
Qualification : B. Com, ACA
Mr. V H Bhatia has more than 40 year of experience in Banking, Finance, Accounts and
General Administration. He retired from the Bank of Baroda as a General Manager.




Shri A. D. M.Chavali
Associate Trustee
Qualification : M.Com, FCA, CAIIB
Mr. A. D. M. Chavali is the General Manager of Bank of Baroda. Mr. Chavali was the Ex-
Managing Director of BOB Asset Management Co. Ltd.( now Baroda Pioneer Asset
Management Co. Ltd.) He served on various positions in the Bank of Baroda having more
than 30 year of experience in Banking, Finance and General Administration


Board of Directors
Associate Directors
Dr A. Khandelwal
Dr. Anil K Khandelwal is the Chairman of Baroda Pioneer Asset Management Company
Limited. He is Ex-Chairman & Managing Director, Bank of Baroda. A chemical engineer with
an MBA and a degree in Law, he also holds a Doctoral Degree in Management. He is also a
Fellow of the Indian Institute OF Banking & Finance.
Dr. Khandelwal was also the Chairman & Managing Director of Dena Bank for a year till
February 2005, before he took over as the Chairman & Managing Director of Bank of Baroda.
45

Prior to this he was the Executive Director at Bank of Baroda since 2000.
Mr..M.D.Mallya
Mr. M. D. Mallya is the Chairman and Managing Director of Bank of Baroda. Prior to joining
the Bank, he was the Chairman & Managing Director of Bank of Maharashtra. Mr. Mallya,
passed out Bachelor of Engineering with Distinction from Karnataka Regional Engineering
College, Suratkal. Subsequently, he completed post-graduation Diploma in Management from
Indian Institute of Science, Bangalore with Distinction. In a career spanning over 31 years, he
acquired a rich experience in banking at various positions and assignments.
Mr. M. D. Mallya has been on various committees of Indian Banks' Association and National
Institute of Bank Management (NIBM), Pune like - Member of the Managing Committee of IBA
and Standing Committee on Legal and Banking Operations of IBA, Member of the Governing
Board of NIBM, Finance Committee of NIBM and Campus Committee of NIBM., Member of
the Governing Council of Indian Institute of Banking and Finance, Member of the Governing
Council of Institute of Banking Personnel Selection.
Mr. Angus Stening
Mr Angus Stening has been the CEO, Asia & Emerging Markets at Pioneer Investments since
early 2007 and prior to that he was Head of Central & Eastern Europe (2004-07) and Executive
Vice President Operations & IT. Before joining Pioneer Investments, Mr Stening was with DB
Global Institutional Services (1999) and BT Funds Management (1998-99).
Mr. N. Ramani
Mr. N. Ramani is General Manager (Wholesale Banking), Bank of Baroda, and responsible for
domestic corporate lending, domestic foreign business and the Corporate Debt Restructuring
Cell. He has been with Bank of Baroda since 1973 and has a rich experience in the banking
industry. He is also a Director with BOB Capital Markets Limited, a 100% subsidiary of Bank of
Baroda. He holds a post graduate degree (M.Sc).in Physics, and is a CAIIB.
46

Mr. Roger Yates
Mr. Roger Yates is the Chief Executive Officer (CEO) of Pioneer Investments, and a well known
name in the global fund management industry. Prior to this, he was the CEO at Henderson Asset
Management, an organisation he served for about ten years. Mr. Yates holds a B.A. (Hons)
degree in modern history from Oxford University, and is a non-executive director with JP
Morgan Elect PLC and IG Group PLC.


Independent Directors
Mr. G.P. Gupta
Mr G P Gupta is Ex-Chairman & Managing Director Industrial Development Bank of India (July
1998 - January 2001). Mr Gupta was also Chairman, Unit Trust of India (January 1997 - June
1998) and has served in various roles ending as Executive Director at Industrial Development
Bank of India (1969 - 1996)
Professor BB Bhattacharya
Professor B.B.Bhattacharya is currently the Vice-Chancellor of Jawaharlal Nehru University.
Prior to that he was Director (2001-2005) and Professor (1981 onwards) at the Institute of
Economic Growth, Delhi. He passed M.A. in Economics from the University of Allahabad in
1966 with first position in the order of Merit and obtained Ph.D. in Economics from Delhi
School of Economics, University of Delhi in 1971.
Dr Pradip N. Khandwalla
Professor Khandwalla taught at McGill University, Canada, for several years before returning to
India in 1975. since then he was a professor at the Indian Institute of Management, Ahmedabad
until his retirement in 2002. He was L&T Chair Professor of Organizational Behaviour at IIMA
from 1985 to 1991 and then the Director of IIMA up to 1996. Dr Pradip N. Khandwalla was
educated at Bombay University (B.Com), Wharton School, University of Pennsylvania (MBA),
and Carnegie-Mellon University (Ph.D). He is also a member of the Institute of Chartered
47

Accountants of India.
Mr. Shiv Dayal
Mr Shiv Dayal is Founder and Managing Director of Langham Capital and is responsible for
managing all aspects of the firm's activities including origination and executing transactions,
client relationship management and financial management. He is also Chairman of F1F9 (India)
Private Ltd. Immediately prior to founding Langham Capital, Mr Dayal managed two technology
ventures in Europe, worked in the Mergers & Acquisitions groups at JPMorgan and Dresdner
Kleinwort Benson in London and New York. He began his career with the Tata Group of
Companies in India as a member of the Tata Administrative Service. Mr Shiv Dayal has a
Bachelor degree in Economics from the University of Sussex, a Masters degree in Development
Economics from the University of East Anglia and an MBA from London Business School.
Mr. Rohit Arora
Rohit Arora, Founder and serves as Chairman of Emr Technology Ventures (p) Ltd. Mr. Arora
has over two decades of experience in business process outsourcing, investment banking and
management consulting. Mr. Arora is also the founder director of AR Credit, a transaction
processing company focused on the domestic BPO market. He was earlier the Managing Director
of AIA Capital India Pvt. Ltd, the Investment Banking arm of AIG - American International
Group. He was responsible for setting up AIA. Prior to that he was a consultant with A. F.
Ferguson & Co. (former correspondents of KPMG in India). Mr. Arora is a fellow member of the
Institute of Chartered Accountants of India.
PRODUCTS
Equity
Debt
Liquid
48


Equity Funds
Baroda Pioneer PSU Equity Fund
Baroda Pioneer Infrastructure Fund
Baroda Pioneer ELSS 96
Baroda Pioneer Balanced Fund
Baroda Pioneer Growth Fund

Debt Fund

Baroda Pioneer Short Term Bond Fund
Baroda Pioneer Public Sector Undertaking (PSU) Bond Fund
Baroda Pioneer Treasury Advantage Fund
Baroda Pioneer Income Fund
Baroda Pioneer Gilt Fund
Baroda Pioneer MIP Fund

Liquid Funds

Baroda Pioneer Liquid Fund is an open-ended money market scheme targeted for generating
income with a high level of liquidity by investing in a portfolio of money market instruments &
debt securities. The initial offer of the scheme was open from 14-02-2002 to 18-02-2002 and was
again opened for on-going sales/repurchase from 22-02-2002.

Baroda Pioneer Liquid Fund declared a post tax dividend within a month of its launch, of
Rs.0.0530 per unit (Rate - 6.04% Annualized) for the year ended 31-03-2002.



49

Highlights of the scheme
Baroda Pioneer Liquid Fund is an Open Ended Liquid Fund from Baroda Pioneer Mutual
Fund
Baroda Pioneer Mutual Fund is sponsored by Bank of Baroda, one of the largest public sector
banks of the country. Baroda Pioneer Asset Management Company Limited is the Investment
Manager to the Scheme.
The scheme is targeted Generate income with a high level of liquidity by Investing in a
portfolio of Money Market and Debt Securities.
Transparency of operations i.e. daily determination of NAV, sale price, redemption price and
full disclosure of investment portfolio periodically
Choice of Growth Plan and Dividend Plan
Facility of systematic investment and withdrawal available
Barodra Pioneer Growth Fund
Baroda Pioneer Growth Fund is a Open Ended Growth Scheme of Baroda Pioneer mutual
fund. The scheme is targeted for long term capital appreciation through a well researched
portfolio comprising of equity, equity related instruments and money market instruments
Highlight of the scheme

Baroda Pioneer Growth Fund is an open-ended growth Scheme from Baroda Pioneer Mutual
Fund
Baroda Pioneer Mutual Fund is sponsored by Bank of Baroda, one of the largest public
sector banks of the country. Baroda Pioneer Asset Management Company Limited is the
Investment Manager to the Scheme.
The scheme is targeted for long term capital appreciation through a well researched
portfolio comprising of equity, equity related instruments and money market instruments
Transparency of operations i.e. daily determination of NAV, sale price, redemption price
and full disclosure of investment portfolio periodically
Tax benefits under the Income Tax Act, 1961, as amended from time to time.

50

Choice of Growth Plan, Dividend Plan and Dividend Re-investment Plan
Facility of Systematic investment and withdrawal available
Assured allotment to all applicants

DATA ANALYSIS AND INTERPRETATION
CALUCLATION OF RISK AND RETURN OF MUTUAL FUND SCHEMS
1-HDFC TOP 200 FUNDS(Growth)

YEAR NAV RETURN%(Ri) (R-R1) (R-R1)2

2006 109.92 37.44 4.22 17.87
2007 169.79 54.46 21.24 451.47
2008 92.8 -45.35 -78.56 6171.98
2009 180.46 94.46 61.24 3751.31
2010 225.66 25.05 -8.16 66.61

R1=33.212 Ri=166.06
Fund Return is:-

1
n
i
Ri
R
n

=
=

=166.06/5 =33.212%
The Standard Deviation is:


51

o =
2
1
1
n
i
Ri R
n

=
| |

|
\ .

=(10459.24)/4= 51.13%
Standard Deviation is 51.13%

2-SBI Magnum Equity scheme(Growth)
YEAR NAV RETURN%(R) (R-R1) (R-R1)2
2006 27.58 51.47 16.92 284.45
2007 47.24 71.28 36.73 1349.53
2008 20.65 -56.29 -90.83 8250.81
2009 38.81 87.94 53.40 2851.13
2010 45.92 18.32 -16.22 263.21

Total Returns (R) =172.72 R1= 34.544


R1=172.72/5=34.544 (R-R1)2= 12999.13
Standard Deviation:

o =
2
1
1
n
i
Ri R
n

=
| |

|
\ .

=12999.13/4 =28.50%
Standard Deviation is 28.50%





52

3-Barodra Equity Growth
YEAR NAV RETURNS%
(R)
(R-R1) (R-R1)2
2006 30.12 29.10 -1.25 1.56
2007 49.68 64.94 34.59 1196.46
2008 26.14 -47.38 -77.73 6041.95
2009 49.90 90.90 60.55 3666.30
2010 56.98 14.19 -16.16 261.14

Total Returns= 151.75, R1=30.35
R1= 151.75/5= 30.35 ( R-R1)2=11167.41


Standard Deviation:

o =
2
1
1
n
i
Ri R
n

=
| |

|
\ .

=(11167.41)/4 =52.83%
Standard Deviation is 52.83%










53


ANALYSIS AND INTERPRETATION
TABLE-1
Table showing the Risk and Return of HDFC TOP 200 (Growth Option) form Year 2006
to Year 2010

YEAR RISK% RETURN%
2006-2010 51.13% 33.21%

GRAPH-1
Graph showing the Risk and Return of HDFC TOP200 Equity Fund (Growth Option)
from Year 2006 to Year 2010






0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Risk Returns
Series1
54

TABLE- 2
Table showing the Risk and Return of SBI Magnum Equity (Growth Option) form Year
2006 to Year 2010
YEAR RISK RETURN
2006-2010 28.50% 34.54%

GRAPH-2
Graph showing the Risk and Return of SBI Magnum Equity Fund (Growth Option) from
Year 2006 to Year 2010











0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
RISK RERURN
Series1
55

Table-3
Table showing the Risk and Return of Barodra Growth fund (Growth Option) form Year
2006 to Year 2010
YEAR RISK RETURN
2006-2010 52.83% 30.35%

GRAPH-3
Graph showing the Risk and Return of Barodra Growth fund (Growth Option) from
Year 2006 to Year 2010


0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
RISK RETURN
Series1
56




57






















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