CHAPTER-I

INTRODUCTION

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 INTRODUCTION OF MUTUAL FUNDS

Mutual Funds are professionally managed pool of money from a group of

investors. A Mutual fund manager invests your funds in securities including

stocks and bonds, Money Market instruments or some combination and

decides the best time to buy and sell. By pooling your resources with other

investors in Mutual Funds, you can diversify even a small investment over a

wide spectrum.

With the emergence of the capital market at the center stage of the Indian

financial system from its marginal role a decade earlier, the Indian capital market also

witnessed during the same period a significant institutional development in the form of

diversified structure of Mutual Funds. A Mutual fund is a special type of investment

institution which acts as an investment conduct.

It pools the savings, particularly of the relatively small investors, and invests

them in a well-diversified portfolio of sound investment. As an investment intermediary,

it offers a variety of services/advantages to the relatively small investors who on their

own cannot successfully construct and manage investment portfolio mainly due to the

small size of their funds, lack of expertise and experience, and so on. These services

include the

diversification of portfolio, expertise of the professional management, liquidity of

investment, tax shelter, reduced risk and reduced cost.

Mutual fund is the most suitable investment mode for the common man as it

offers an opportunity to invest in a diversified, professionally managed portfolio at a

relatively low cost. Any body with an investible surplus of as little as a few thousand

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rupees can invest in mutual funds. Each Mutual fund scheme has a defined investment

objective and strategy.

The most important trend in the Mutual Fund industry is the aggressive

expansion of the foreign owned Mutual Fund companies and the decline of the

companies floated by nationalized banks and smaller private sector players.

Funds issue and redeem shares on demand at the fund's net asset value (NAV).

Mutual fund management fees typically range between 0.5% and 2% of assets per year,

exchange fees and other administrative charges also apply.

According to SEBI - Mutual Fund is defined as - “A fund established in the

form of a trust to raise money’s through the sale of units to the public or a section of the

public under one or more schemes for investing in securities, including money market

instruments.”Mutual Fund is a mechanism for pooling the resources by issuing units to

the investors and investing funds in securities in accordance with objectives as disclosed

in the offer document.

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OBJECTIVES OF THE STUDY

(1) The Main objective of this project is to study and analyze Open-Ended Balanced

growth schemes of five years Mutual Funds and to compare and Rank each of

them.

(2) To give a broad idea on basics, structure, constituents, characteristics, advantages,

disadvantages, types, and risk associated with Mutual Funds.

(3) To give investor an idea on Mutual Funds and its working in the market with

illustrations.

(4) To help and guide investors to take wise investment decisions.

(5) To help the investors have an understanding of the Risks associated with Mutual

fund investment.

(6) The Tax benefits of investing in Mutual Funds under various schemes.

(7) To understand the recent trends in the world of Mutual Funds.

(8) The project gives a detailed idea which enables even a common man or fresh

investor to understand the functioning of Mutual Funds and to take wise

investment decisions.

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SCOPE OF THE STUDY

1) The Study covers the basic meaning, concept, structure and the organization of the

Mutual Funds.

2) The Study is restricted to explain only the returns provided by the Mutual Funds

from various schemes.

3) Under this study investments relating to Open-Ended Balanced Growth Fund of

Mutual Funds are taken into account.

4) The theoretical part of the study include the following concepts:-

 Characteristics of Mutual Funds.

 Advantages/ Disadvantages of Mutual Funds.

 Net Asset Value (NAV).

 Investment Process.

 Risk return grid of Mutual Funds.

 SEBI guidelines.

5) The tools used for graphical representation of data include Pie charts, Bar

diagrams, and other accessories.

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6) The Study is made to equip the investors with the information, which will enable

them to choose the type of Scheme depending upon their investing objective and

respective Risk return grid.

NEED FOR THE STUDY

The basic purpose of the study is to give broad idea on Mutual Funds and

analyze various schemes to highlight the diversified investment that Mutual Fund offers

to its investors. Through this study one can understand how to invest in Mutual Funds

and turn the raw investment into ripen fruits by taking wise decisions, taking the risk

factors into account.

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RESEARCH METHODOLOGY

All information related to the topic needs to be carefully scrutinized to avoid the

risk of biased analysis. Having once identified which information is relevant and need to

be collected, we will have to define how this will be done.

The Method employed in the investigation depends on the purpose and scope of the
study.

 Research Design:

Research design is some statement or specification of procedures for collecting

and

analyzing the information required for the solution of some specific problem. Here, the

exploratory research is used as investigation and is mainly concerned with determining

the trends and returns in Mutual Funds and Bank returns.

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 Data Collection Methods:

The key for creating useful system is selectivity in collection of data and linking

that selectivity to the analysis and decision issue of the action to be taken. The accuracy

of collected data is of great significance for drawing correct and valid conclusions from

the research.

Sources of Information:

Data available in marketing research are either primary or secondary. Primary

Data is not included in this study, only secondary data is taken in to account since, it is a

comparative analysis.

Secondary Data:

Secondary data can be defined as - “data collected by some one else for

purpose other than solving the problem being investigated”. Secondary data is

collected from external sources which include information from published material of

SEBI and some of the information is collected online. The data sources also include

various books, magazines, newspapers, websites etc. The organization profile is

collected from the Hyderabad Stock Exchange.

TOOLS USED FOR ANALYSIS

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TABULATION:

A Table is a systematic arrangement of statistical data in rows and columns.

Rows are horizontal arrangements whereas columns are vertical arrangements.

Tabulation is a systematic presentation of data in a form suitable for analysis and

interpretation.

PRESENTATION OF DATA:

The impression created by a picture has much greater impact than detailed explanation.

Statistical data can be effectively presented in the form of diagrams and graphs. Graphs

and Diagrams make complex data simple and easily understandable. They help to

compare related data and bring out subtle data with amazing clarity. The diagrams used

are as follows –

 PIE CHARTS: The Pie charts are used to represent a component on a

percentage basis. Each part of a component is shown as the percentage of whole

component. Pie Charts are used to represent the percentage share of Equity, Debt

& Money Market components of Balanced Growth Fund.

 BAR DIAGRAMS: The Bar Diagrams are used specifically for

categorical data series. They consist of the group of equidistant rectangles, one for

each group or category of data in which the values of magnitudes are represented

by length or height of rectangles.

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 LIMITATIONS OF THE STUDY

 The data that is considered for the Comparative analysis of various Mutual Funds

returns of Open-Ended Balanced Growth Fund are only for a short period of one

year ( 1st April 2009 to 31st march 2011) and performance during this period may

not be same in future.

 As the project period is limited, the long-term data of Mutual Funds are not taken

into consideration in analysis section.

 Mutual Funds of only Five organizations are taken into account for analyzing their

performance, because the time duration of the project is short and limited. The

performance of these funds since inception are not considered.

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 This study on Mutual Funds is restricted to Open-Ended Balanced Schemes only.

The core details are untouched.

 The data taken into account for analysis is very general. confidential data is

ignored as it is highly sensitive. As a result the information presented in the

research report is limited.

CHAPTER-II

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 INDUSTRY
PROFILE

GROWTH AND HISTORY OF MUTUAL FUNDS

The First investment trust (now called Mutual Fund) began in the Netherlands in

the early 1800s. The first in the U.S. was the New York Stock Trust, which started in

1889. Since Boston was the economic center of the nation until the turn of the century,

the majority of funds started there—Fidelity, Pioneer and Putnum Fund, to name a few.

A Fund that was comprised of both stocks and bonds (the Wellington Fund) started in

1928 and is still part of Vanguard. As the 20's crashed to a close, there were 10 Mutual

Funds in the nation.

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 Foundation for the Mutual Fund in India was laid by the parliament in 1963.

With the enactment of Unit Trust of India (UTI) Act the then Finance Minister Mr. T.T.

Krishnamacharya who initiated the act made it clear to the parliament act “UTI would

provide an opportunity for the middle and lower income groups to acquire

property in the form of share.” Thus UTI came out with the mission of catering to the

needs of individuals investors whose means are small, with its maiden fund, an open

ended fund in 1964.

The Indian Mutual Fund Industry can be studied in four phases:-

FIRST PHASE BETWEEN 1964 – 1987

The genesis of the Mutual Fund industry in India can be traced back to 1964

with the setting up of the Unit Trust of India (UTI) by the Government of India. Since

then UTI has grown to be a dominant player in the industry. UTI is governed by a

special legislation, the Unit Trust of India Act, 1963. It was setup by the Reserve Bank

of India and functioned under the regulatory and administrative control of RBI. In 1978,

UTI was de-linked from the RBI and the 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 assets under the management.

SECOND PHASE 1987-1993 (Entry of Public Sector Funds)

Till 1986, UTI was the only mutual player in India. The industry was opened up

for wider participation in 1987 when public sector banks and insurance companies were

permitted to setup Mutual Funds.

Since then, many public sector banks have setup Mutual Funds. SBI Mutual

Fund was the first non-UTI Mutual Funds established in June 1987 followed by can

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bank Mutual Funds, Punjab National Bank Mutual Fund, India bank Mutual Funds,

Bank of India, Bank of Boroda Mutual Funds. Also the two Insurance companies LIC

(June 1987) and GIC (December 1990) have established Mutual Funds. At the end of

1993, the Mutual Fund industry had assets under management of Rs. 47004 crores. This

phase changed the mind set of the investors.

THIRD PHASE 1993-2003

With the entry of private sector funds in 1993, a new era started in the Indian

Mutual Fund Industry, giving the Indian investors a wider choice of fund families. Also,

1993 was the year in which the first Mutual Funds 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 sector Mutual

Fund registered in July 1993.

Securities Exchange Board of India (SEBI) formulated the Mutual Fund

(Regulation) 1993, which for the first time established a comprehensive regulatory

framework for the Mutual Fund Industry. Since then several Mutual Funds have been

setup by the private and joint sectors.

FOURTH PHASE - Since February 2003

In February 2003, following the repeal of the Unit Trust of India act 1963, UTI

was bifurcated into separate entities. One is the specified undertaking of the UTI with

asset under management of Rs. 29835 crores as at the end of January 2003, representing

broadly, the assets of US 64 schemes, assured return and certain other schemes.

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 The second is UTI Mutual Fund ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered in SEBI and functions under the Mutual Fund regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76000 crores

of assets under management and with the setting up of the UTI Mutual Fund. At the end

of October 31, 2006 there were 39 funds which manage assets of Rs. 176726 crores

under 426 schemes.

PRESENT SCENARIO

The decade of 80’s witnessed the emergence of stock markets as major source of

finance for trade and industry. The process of liberalization and deregulation had led to

a pace of growth almost unparallel in the history of any nation.

Average annual capital mobilization from the marked, which used to be about

Rs.70 crores in the 60’s and Rs.90 crores in the 70’s increased manifold during the 8-‘s

with the amount raised in 1989-90 being of the order of Rs.647.3 crores. The number of

listed companies rose from 2265 in 1980 to over 8600 at the end of 2006; the daily

turnover accordingly shot up from Rs.25 crores in 1979-80 to about Rs.585 crores in

2005-2006.

Distribution of Worldwide Mutual Fund Assets by Region

(Percentage of Total Assets)

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Figure 2.1

At present, there are 20 stock exchanges recognized under the Securities

Contracts (Regulation) Act, 1956. These recognized stock exchanges mobilize and

direct the flow of savings of the general public into productive channels of investment.)

. According the latest statistics the market capitalization (assets) of Mutual Funds

in India is amounting to Rs. 3, 00,000 Crores.

FIGURE SHOWING THE WORKING OF MUTUAL FUND

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Figure 2.2

STRUCTURE AND CONSTITUENTS OF FUND

MUTUAL
FUND

Sponsor Trustee AMC Custodian

Figure 2.3

SPONSOR

 Establishes the MUTUAL FUND

→ Need to have sound financial track record.

→ Appoints TRUSTEES.

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 → Appoints Asset Management Company.

→ Must contribute 40% of the net worth of the AMC.

 Sometimes this power is given by the sponsor to the trustees through the trust deed.

 At least 50% of directors on the board of Asset Management Company should be

independent of the sponsor.

 Asset Management Company shall not deal with any broker or firm associated with

sponsor beyond 5% of daily gross business of the Mutual Fund.

 All securities transactions of the Asset Management Company with its associates

should be disclosed.

TRUSTEE

 Manages the Mutual Fund and look after the operation of the appointed AMC.

 The investments are held by the Trustees, in a fiduciary responsibility.

 Trustees approve each Mutual Fund Scheme floated by AMC.

 Furnish report to SEBI on half yearly basis on AMC and Fund Functioning.

ASSET MANAGEMENT COMPANY

 AMC acts as investment manager of the trust under the board supervision and

direction of the trustees.

 AMC floats the different Mutual Fund schemes.

 Submits report to the Trustees on quarterly basis, mentioning activity and

compliance factor.

 AMC is responsible to the trustees.

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 AMC fees have a ceiling, decided by SEBI.

 Should have a net worth of at least Rs.10 crores at all the times.

CUSTODIAN

 Appointed by board of trustees for safekeeping of securities.

 It’s an entity independent of sponsors.

SEBI regulates the securities market in India. According to SEBI every Mutual Fund

require that at least two thirds of the directors of trustee company or board of trustees

must be independent i.e. they should not be associated with the sponsors. Also, 50% of

the directors of AMC must be independent. All Mutual Fund are required to be

registered with SEBI before they launch any Scheme.

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 CHAPTER-III
COMPANY
PROFILE

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 Religare

Religare Enterprises Limited (REL) is the holding company for one of India's leading
diversified financial services groups, headquartered in New Delhi, India. It offers an
integrated suite of financial services through its underlying subsidiaries and operating
entities, includes Loans to Small and Medium Enterprises (SME)'s, Affordable Housing
Finance. REL is listed on the Bombay Stock Exchange (BSE) and National Stock
Exchange (NSE) in India.

History

Founded in 1984, initially Religare was a stock brokerage firm called Religare
Securities Ltd (RSL) and was admitted to the National Stock Exchange (NSE) in 1994.
In 2000, it secured membership of the Futures and Options segment of the NSE and also
registered with National Securities Depository Limited (NSDL) as a depository
participant.[2]

Religare Finvest, a group company, was founded in 2001 as a private non-banking

financial institution. In 2002, RSL received registration as ‘Portfolio Manager’
from Securities and Exchange Board of India(SEBI). RSL registered with Central
Depository Services Limited (CDSL) as a depository participant in 2003. It also became
a stock broker at the Bombay Stock Exchange (BSE) in 2004. In the same year, Religare
Commodities Ltd., a commodities broking company, started operations as a ‘trading
cum clearing member’ at both the Multi Commodity Exchange (MCX) and the National
Commodity and Derivatives Exchange (NCDEX).[citation needed]

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An office was established in London in 2006. In 2006, RSL received registration as
Merchant Banker in Category - I from SEBI. Religare announced a joint venture with
Macquarie Bank Ltd. in October 2007 to expand its wealth management business. REL
went public with an initial public offering(IPO) of its stock in November, 2007, which
was oversubscribed 159 times.[3] The same year, RSL received membership of
derivative segment of the BSE as trading-cum-clearing member.[citation needed]

AEGON Religare, a life insurance joint venture between AEGON, Religare

and Bennett, Coleman & company, launched its pan-India operations in 2008. Religare
Asset Management Company was formed on the back of Religare’s acquisition of Lotus
India AMC and received the final regulatory approval from SEBI to launch mutual fund
business in India. Religare entered into the institutional equities business and Religare
Global Asset Management formed, for international expansion.[citation needed]. In May, 2015
Religare exited the life insurance joint venture. [4]

In 2011, Religare Finvest successfully issued non-convertible debentures (NCDs) worth

Rs. 800 crore. In December 2011, Avigo Capital [5] and in January 2012, Jacob
Ballas[6] invest in Religare Finvest Limited (RFL). In 2012 International Finance
Corporation (IFC), an arm of World Bank Group, invested in Religare.[7] Religare
Health Insurance Company Limited (RHIC) started operations in 2012.[8] Union Bank of
India and Corporation Bank tie up with Religare Health Insurance. In 2013 Religare
bought Macquarie's stake in the wealth management business. In the same year the
name of Religare Mutual Fund was changed to Religare Invesco Mutual Fund. In 2014
Religare announced acquiring a 26% stake in YourNest Angel Fund through its Global
Asset Management arm (RGAM).[9] Religare has exited its global asset management
business. In February 2017, Anand Rathi Wealth Management acquired Religare’s
wealth management business.[10] In April 2017, Religare announced that it had sold its
stake to the True North a consortium of PE investors.

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Religare plans to raise additional funds worth Rs 1200 crore through debt and equity to
use the proceeds for investments t

MUMBAI: Religare Enterprises on Saturday said that it has constituted a new board in
an effort to ‘set its house in order’ as the company reels under allegations of corporate
governance and investigations from the Reserve Bank of India. Religare also plans to
raise additional funds worth Rs 1200 crore through debt and equity to use the proceeds
for investments to bolster its capital and to make investments in subsidiaries as required.
With the induction of the new board Reigare said it has embarked on an urgent effort to
populate the Board with highly experienced professionals in the field of finance,
corporate governance, strategy and administration. The financial services arm promoted
by Malvinder and Shivinder Singh said it has appointed ex banker Vikram Talwar, P.
Vijaya Bhaskar, retired Executive Director of the Reserve Bank of India; and Siddharth
Mehta, the founder of Bay Capital Partners in its board.

Vijaya Bhaskar will chair the Audit Committee while Ashok Mehta has been appointed
interim CEO. The search for a full time CEO and other senior management is being
started on an immediate basis with plans for appointments in due course, the company
said in a statement to exchanges.

"Religare today embarks on a turnaround to achieve growth and profitability backed by

strong focus on internal controls and processes as well as the highest levels of integrity
and corporate governance”, said Vikram Talwar. “Our first task is to set the house in
order by placing a team of high quality professionals to lead the business. We look to
make Religare the most trusted brand for our customers, employees and all other
stakeholders and are committed to ensuring that their interests are always served." he

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added.

The new Board, Religare said intends to ensure that the company and its subsidiaries are
adequately staffed with highly experienced finance and management professionals. The
changes are at the initiative of a consortium of investors with the objective of instilling
the highest levels of corporate governance and effective management in Religare and its
subsidiaries. The new board members stressed that the Malvinder and Shivinder Singh
promoters of the company have resigned from the Board and have no further association
with the company nor any responsibilities for its management and governance.

“The company will strive to achieve the highest levels of corporate governance both in
letter and spirit”, said Vijay Bhaskar, Chair of Audit Committee. The decision by
Religare came a day after ET reported that its auditors launched an “extensive review”
of its financial services arm after an RBI inspection of a subsidiary found diversion of
funds within group firms to the tune of Rs 525 crore despite a directive against
corporate lending. The auditors submitted the Reserve Bank of India’s findings as part
of their ‘qualified opinion’ while signing off on the company’s third-quarter results.
Qualified opinion is an accounting exercise when the auditors raise queries and opinions
if they find discrepancies in the accounting of a company.?

The Company History page lists out the major events in chronological order for
Religare Enterprises Ltd.
Company History - Religare Enterprises Ltd.
Our Company was originally incorporated as "Vajreshwari Cosmetics Private Limited"
on January 30, 1984.For details on our Promoters,see the sections titled "Our Promoters
and Promoter Group" and "OurManagement" beginning on pages 105 and 92,
respectivelyThe name of our Company was subsequently changed to "Religare
Enterprises Private Limited" pursuant to a special resolution of our shareholders dated
January 10, 2006. The fresh certificate of incorporation consequent to the change of
name was granted to our Company on January 31, 2006, by the Registrar of Companies,
Punjab, Himachal Pradesh & Chandigarh at Jalandhar.
The status of our Company was changed to a public limited companyby a special
resolution of the members dated July 14, 2006. The fresh certificate of incorporation

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consequent to the change of name was granted to our Company on August 11, 2006, by
the Registrar of Companies, NCT at New Delhi.
At the time of incorporation, the main object of our Company was to purchase, sell,
import, export,manufacture, pack, replace or otherwise deal in all types of tooth paste,
tooth brush, face powder, face cream and other cosmetics.
Changes in our Registered Office
At the time of incorporation, the registered office of our Company was situated at
House No. 1509, Phase - I, S.A.S. Nagar, Mohali, Punjab, India. Subsequently, our
Registered Office has been shifted twice, the significant details of which are provided
below:
From To Date of resolution of Board/ Shareholders Date of approval of concerned
authority House No. 1509, Phase - I, S.A.S. Nagar, Mohali, Punjab
House No. 92, Giani Zail Singh Nagar, Ropar, Punjab, India#
April 30, 1996 April 30, 1996 House No. 92, Giani Zail Singh Nagar, Ropar, Punjab
19, Nehru Place, New Delhi - 110 019, India* September 26, 2005 March 14, 2006
The companies mentioned below have been recently acquired by our Company and
have become our subsidiaries. (a) Religare Securities Limited
(b) Religare Finvest Limited
(c) Religare Commodities Limited
(d) Religare Insurance Broking Limited (e) Religare Venture Capital Private Limited.
For details regarding our Subsidiaries, see the section titled History and Certain
Corporate Matters " Our Subsidiaries" beginning on page 76.
Key Events and Milestones
Year Events 1994 RSL received membership of the NSE as ‘stock broker 2000 RSL
received membership of the Futures and Options segment of the NSE RSL received
registration as ‘Depository Participant’ with NSDL
2001 RFL received registration as ‘non-banking financial institution notaccepting public
deposits with RBI
2002 RSL received registration as ‘Portfolio Manager’ from SEBI
2003 RSL received registration as ‘Depository Participant’ with CDSL.
2004 RSL received membership of the BSE as ‘stock broker

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RCL received membership of MCX as ‘trading-cum-clearing member RCL received
membership of NCDEX as ‘trading-cum-clearing member
2005 RFL received enrollment as ‘AMFI registered mutual fund advisor

2006 Establishment of representative office in London. RCL received membership of

NMCE. RIBL received licence from IRDA to act as ‘composite broker’. Joint venture
agreement with Aegon International N.V. for carrying on the business of mutual fund
asset management.RSL received registration as ‘Merchant Banker in Category - I from
SEBI.
2007 -RSL received membership of derivative segment of the BSE as trading-cum-
clearing member
-Religare Enterprises to enter the capital market
-Religare - Macquarie Joint Venture for Wealth Management
2008
-Religare to acquire UK brokerage Hichens
-Religare strengthens its "Bancinvest" Channel Adds Karur Vysya Bank to its kitty
-Religare AEGON Asset Management Company Private Limited, a joint venture
between Religare and AEGON, has received the final regulatory approval from the
Securities and Exchange Board of India (SEBI) to launch mutual fund business in the
country.
-Religare Enterprises gets SEBI nod for LOTUS acquisition
2009
- Religare, a diversified financial services company, and Andhra Bank, a well known
Public Sector Bank in the country, have entered into a strategic tie-up offering Religare's
internet trading services platform to the Bank's customers.
-Religare and Swiss Re join hands to enter India health insurance space
-Religare launches CSR Initiative
2010
-Religare enters Sri Lanka's financial markets
-Religare Picks 55% In Landmark Partners For $171.5M
-Religare Enterprises announces the appointment of Ravi Mehrotra as the Executive
Director of the company.
-Religare Enterprises Ltd Issues Rights in the Ratio of 2:3

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-Registered Office of the Company has been shifted From 19, Nehru Place, New Delhi-
110 019 To D3, P3B, District Centre, Saket, New Delhi- 110017.
2011
-Religare Enterprises Ltd appoints Raghuram Raju as Group General Counsel.
-Religare Enterprises had acquired 100% equity shares of Shreyas Stocks Private
Limited and Shreyas Advisory Services Private Limited, entities based in Chennai.
2012
-Mr. Sudhakar Shetty has been appointed as Company Secretary and Compliance
Officer of the Company.
2013 -The name of Religare Mutual Fund has been changed to Religare Invesco Mutual
Fund. -Union Bank of India ties up with Religare Health Insurance . - Religare
Enterprises launched "Mantras to W.I.N" - a guidebook on Family Managed Businesses
- in association with the Entrepreneurship Development Institute of India (EDI).
2014 -Religare Enterprises Limited (REL), has announced acquiring a 26% stake in
YourNest Angel Fund.
2015 -Religare Capital Markets partners with FSG Capital
2016 -Religare Securities Ltd. ("RSL") wholly owned subsidiary Company of the
Religare Enterprises Ltd. ("REL") have incorporated a wholly owned subsidiary
Company i.e. Religare Business Solutions Ltd. .

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 CHAPTER-IV

THEORITICAL
FRAMEWORK

MUTUAL FUNDS

DEFINITION

A Mutual Fund is a financial intermediary which acts as an instrument of

investment. It collects the funds from different investors to a common pool of investible

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funds and then invests these funds in a wide variety of investment opportunities in

diversified portfolios of securities such as Money Markets instrument, corporate and

government bonds and equity shares of joint stock companies.

The investment may be diversified to spread risk and to ensure good return to

the investors. The Mutual Funds employ professional, experts and investment

consultants to conduct investment analysis and then to select the portfolio of securities

where the funds are to be invested.

Each investor owns units, which represent a portion of the holdings of the fund. You can

make money from a MF in three ways:-

1. Income is earned from dividends on stocks and interest on bonds. A Fund pays out

nearly all income it receives over the year to fund owners in the form of a

distribution.

2. If the fund sells securities that have increased in price, the fund has a capital gain.

Most funds also pass on these gains to investors in the form of dividends.

3. If fund holdings increase in price but are not sold by the fund manager, the fund’s

shares increase in price. You can then sell your Mutual Fund units for a profit. Funds

will also usually give you a choice either to receive a cheque for dividends or to re-

invest the same and get more units.

ORGANISATION OF MUTUAL FUND

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 Figure 2.4

CHARACTERISTICS OF MUTUAL FUNDS

 A Mutual Fund actually belongs to the investors who have pooled their funds. The

ownership of the Mutual Fund is in the hands of the investors.

 Mutual funds are trusts or registered associations managed by investment

professionals and other service providers, who earn a fee for their services from the

fund.

 The pools of the funds are invested in a portfolio of marketable investments (Shares

and Securities). The value of the portfolio is updated everyday.

 Mutual funds collect money from small investors and in return, they will issue a

certificate in units.

 The investor’s share in the fund is denoted by “UNITS". The value of the units

changes with the change in the portfolio’s value every day.

 The profits of investments will be distributed to the unit holders. The unit holders

can sell their units in the open market at ‘Net Asset Value’ (NAV).

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NET ASSET VALUE (NAV)

Mutual Funds invest the money collected from the investors in securities

markets. In simple words, Net Asset Value is the market value of the securities scheme

also varies on day to day basis. The NAV per unit is the market value of securities of a

scheme divided by the total number of units of the scheme on any particular date. The

performance of a particular scheme of a Mutual Fund is denoted by “Net Asset Value”.

For example; if the market value of securities of a MF Scheme is Rs. 200 lakhs

and the Mutual Fund has issued 10 lakhs units of Rs. 10 each to the investors, then the

NAV per unit of the fund is Rs. 20. NAV is required to be disclosed by the MF on a

regular basis – daily or weekly – depending on the type of scheme.

OBJECTIVES OF MUTUAL FUNDS

The objectives sought to be achieved by Mutual funds are as follows :-

 To provide an opportunity for lower income groups to acquire without much

difficulty property in the form of shares.

 To cater mainly to the need of individual investors whose means are small?

 To Manage investor’s portfolio’s in a manner that provides regular income, growth,

safety, liquidity and diversification.

SJCET MBA Dept 31

SCHEMES OF MUTUAL FUNDS

Mutual fund schemes are usually open-ended (Perpetually open for investors

and redemption) or close-ended (with a fixed term). A Mutual Fund scheme issues units

that are normally priced at Rs.10/- during the initial offer. The number of units you own

against the total number of units issued by a Mutual Fund scheme determines your

share in the profits or losses in the scheme.

TYPES OF MUTUAL FUND SCHEMES

The Mutual Funds can be classified under the following types:

ACCORDING TO STRUCTURE

STRUCTURE

OPEN-ENDED CLOSED-ENDED INTERVAL

SCHEME SCHEME SCHEME

Figure 2.5

OPEN - ENDED SCHEME

An open-ended scheme is a scheme in which an investor can buy and sell units

on a daily basis. The scheme has a perpetual existence and flexible, ever changing

corpus. Open-Ended schemes do not have a fixed maturity period. The investors are

SJCET MBA Dept 32

free to buy and sell any number of units, at any point of time, at prices that are linked to

the NAV of the units.

In these schemes the investor can invest and disinvest any amount, any time

after a short initial lock – in period. This scheme gives investors with instant liquidity

and fund announces sale and repurchase price from time to time. The units can be

bought from and sold to any Mutual Fund.

Advantages of Open-ended funds over Close-ended funds

 Any time Entry Option.

 This provides ready liquidity to the investors and avoids reliance on transfer deeds,

signature verifications and bad deliveries.

 Allows to enter the fund at any time and even to invest at regular intervals.

 Any time Exit Option.

CLOSE – ENDED SCHEME

A Close-ended scheme has a stipulated maturity period. E.g. 5-7 years. A Close-

ended scheme is one in which the subscription period for the Mutual Fund remains open

only for a specific period, called the ‘redemption period’. At the end of this period, the

entire corpus is disinvested and the proceeds distributed to unit holders. After final

distribution the scheme ceases to exist. Such schemes can be rolled over by approval of

unit holders.

Reason’s for fluctuations in NAV

 Investor’s doubts about the abilities of the fund’s management.

 Lack of sales effort (Brokers earn less commission on closed end schemes than on

open ended schemes).

SJCET MBA Dept 33

 Riskiness of the fund.

 Lack of marketability of the fund’s units.

INTERVAL SCHEMES

Interval schemes are those that combine both the features of both open-ended and

close-ended schemes. The units may be traded on the stock exchange or may be open

for sale redemption during during pre–determined intervals at NAV related prices.

ACCORDING TO INVESTMENT OBJECTIVE

EQUITY SCHEME

DEBT OR BOND SCHEME

BALANCED SCHEME

INVESTMENT
OBJECTIVE
MONEY MARKET
SCHEME

GROWTH & INCOME

FUND

OTHER SCHEMES

SJCET MBA Dept 34

Figure 2.6

RISK ASSOCIATED WITH MUTUAL FUND

INVESTMENT

The Principal that the greater risk you take, the greater the potential reward.

Typically, risk is defined as short – term price variability. But on a long – term basis,

risk is the possibility that your accumulated real capital will be insufficient to meet your

financial goals. And if you want to reach your financial goals, you must start with an

honest.

At the cornerstone or investing is the basic appraisal of your own personal

comfort zone with regard to risk. Individual tolerance for risk varies, creating a distinct

‘investment personality’ for each investor. Some investors can accept short-term

volatility with ease, others with near panic. So whether you consider you investment

temperament to be conservative, moderate or aggressive, you need to focus on how

comfortable or uncomfortable you will be as the value of your investment moves up or

down

TYPES OF RISK

All investments involve some form of risk. Even an insured band account is subject to

the possibility that inflation will rise faster than your earnings, leaving you with less real

purchasing power than when you started (Rs.1000 gets you less than it got your father

SJCET MBA Dept 35

when he was your age). Consider these common types of risks and evaluate them

against potential rewards when you select an investment.

Market

Inflation

Credit

Interest Rate

TYPE OF
RISKS
Employees

Exchange Rate

Investment

Government Policies

Figure 2.8

1) Market Risk: At times the prices or yields of the all the securities in a

particular market rise or fall due to broad outside influences. When this happens, the

stock prices of both an outstanding, highly profitable company and a fledging

corporation may be affected. This change in price is due to “Market Risk”.

SJCET MBA Dept 36

2) Inflation Risk: Some times referred to as “loss of purchasing power”.

Whenever inflation sprints forward faster than the earnings on your investment, you

run the risk that you’ll actually be able to buy less, not more. Inflation risk also

occurs when prices rise faster than your return.

3) Credit Risk: In short, how stable is the company or entity to which you lend

your money when you invest. How certain are you that it will be able to pay the

interest you are promised, or repay your principal when the investment matures.

4) Interest Risk: Changing interest rates affect both equities and bonds in many

ways. Investors are minded that “predicting” which way rates Effect of loss rev

professionals and inability to adapt:

An industries key asset is often the personnel who run the business i.e.

intellectual properties or the key employees of the respective companies. Given the

ever-changing complexion of few industries and the high obsolescence levels,

availability of qualified, trained and motivated personnel is very critical for the

success of industries in few sectors. It is, therefore, necessary to attract key

personnel and also to retain them to meet the changing environment and challenges

the sector offers. Failure or inability to attract/retain such qualified key personnel

may impact the prospects of the companies in the particular sector in which fund

invests.

5) Exchange risk: A number of companies generate revenues in foreign currencies

and may have investments or expenses also denominated in foreign currencies.

Changes in exchange rates may, therefore, have a positive negative impact on

companies which in turn would have an effect on the investment of the fund.

SJCET MBA Dept 37

6). Changes in government policy: Changes in government policy especially in

regard to the tax benefits may impact business prospects of the companies leading to

an impact on the investments made by the fund.

RISK RETURN GRID

Table 2 (a)

RISK TOLERANCE/
BENEFITS OFFERED
FOCUS SUITABLE PRODUCTS
RETURN EXPECTED
BY MF’S

Bank/company FD, Liquidity, Better

Low Debt
Debt based Funds Post-Tax return
Balanced Funds, some Liquidity, Better
Partially Debt, Diversified Equity Post-Tax returns,
Medium Partially Funds are some debt Better Management,
Equity Funds, Mix of share Diversification
and Fixed Deposits
Capital Market, Equity Diversification,
Funds (Diversified as Expertise in stock
High Equity well as Sector) picking, Liquidity,
Tax free dividends

COST INVOLVED IN MUTUAL FUNDS

An investor must know that there are certain costs can be classified into 2 broad

categories:

 Operating expenses - Which are paid out of the funds earnings

SJCET MBA Dept 38

 Sales charges - That are directly deducted from your investment. It is

not compulsory that every mutual fund levy sales charges but they

certainly have operating expenses. No doubt they influence returns on

investment in a fund.

 Operating expenses

These referred to cost incurred to operate a mutual fund. Advisory fees paid to

investment mangers, Audit fees to chartered accountant, custodial fees, register and

transfer agent fees, trustee fee, agent commission. Operating expenses also known as

expenses ratio which is annual expenses expressed as a percentage of the funds

average daily net assets mutual funds. The break up of these expenses is required

to be reported in the schemes offer document (or) prospectus

Operating expenses
Expenses Ratio = -----------------------------
Average Net Assets

For instant, if funds Rs. 100 Crores and expenses 20 lakhs. Then expenses ratio

is 2% expenses ratio is available in the offer document and from historical per unit

statistics included in the financial results of the fund which are published by annually.

UN audited for the half year ending Sep’30 and audited for the physically year end in

March 30.

SJCET MBA Dept 39

 Depending upon schemes and net asset, operating expenses are determined by

limits mandated by SEBI Mutual fund regulation Act. Any excess over specified limits

as to be born by Asset Management Company, the trustees or sponsors.

 Sales charges:

These are known commonly sales loads; these are charged directly to investor.

Sales loads are used by mutual fund for the payment of agent’s commission, distribution

and marketing expensed. These charges have not effect on the performance.

 Front-end load: It is a one time fixed fee paid by an investor when

buying a mutual fund scheme. It determines public offer price which intern decides how

much of your initial investment actually get invested the standard practice of arriving a

public offer price is as follows:

Net Asset Value

Public offer price = ---------------------------
(1- front end load)

Let us assume, an investor invests Rs.10, 000 in a scheme that charges a 2%front

end load at a NAV per unit RS. 10 using the formula public offer price =10/ (1-0.02) is

Rs. 10.20. So only 980 units are allotted to the investor

Amount invested
Number of units allotted = --------------------------
Public offer price

10,000/10..20= 980 units at a NAV of Rs. 10

This means units worth 9800 are allotted to him on an initial investment of Rs. 10,000.

Front end loads tent to decrease as initial investment amount increase.

SJCET MBA Dept 40

 Back end load:

May be a fixed fee redemption (or) a contingent deferred sales charges-a

redemption load continues so long as the redeeming or selling of the units of the units of

a fund does not take place in the event of back end load is applied. The redemption price

is arriving at using following formula.

Net Asset Value

Redemption price = ------------------------------
(1+ back end load)

Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that charges a

2% back end load at a NAV per unit of Rs. 10. Using the formula redemption price 10/

(1+0.02) = Rs. 9.8

So, what the investor gets in hand is 9800(908*1000)

 Contingent Deferred Sales Charges (CDSC):

Contingent deferred sales charges are a structured back end load. It is paid when

the units are redeemed during the initial years of ownership. It is for a pre determined

period only and reduced over the time you’re invested for a fund. The longer the

investor remains in fund the lower the CDSC.

The SEBI (mutual fund Regulation 1996) stipulate that a CDSC may be charge

only for first 4 years after purchase of units and also stipulate the maximum CDSC that

can we charge every year. The SEBI Mutual funds Regulation 1996 do not allow either

the front end load or back end load to any combination is higher that 7%.

 Transaction cost:

SJCET MBA Dept 41

 Some funds may also impose a switch over fee which is a charge on transfer of

investment from one scheme to another with in a same mutual fund family and also to

switch from on plan (short term) to another (long term) within same scheme.

SYSTEMATIC INVESTING PLANS (SIPs)

It is an investment vehicle, where you need to deposit a fixed amount at regular

intervals (monthly, quarterly, etc.) in a MF scheme; just like you do in a recurring

deposit account with a bank or the post office.

Regular Investing is not easy. Owing to lack of time, most people invest

sporadically. The result? The returns are rarely optimal. However, there is a foolproof

way of investing a fixed amount of money at regular intervals: Chola Mutual Fund’s

“Systematic Investment Plan” (SIP). SIP uses the concept of rupee cost averaging,

ensuring investors buy more when prices are low; and fewer units when prices are high.

Benefits of Systematic Investment Plans

Discipline Saving:

Inculcating discipline in your investment has been easier. Your investment is

done on a regular basis by the mutual fund without any intervention required by you.

The best part is that you will not feel the pain of having to save since the money will

move from your bank account automatically.

Rupee Cost Averaging:

The SIP helps you take advantage of the fluctuation in the stocks market by

rupee cost averaging. The investor buys more units when the prices are low and

fewer units cost. Assume you are investing Rs.1000/- each for next four months.

SJCET MBA Dept 42

 Month Amount Invested Purchase Price No of Units Purchased
1 1000 10 100
2 1000 09 111.11
3 1000 10 100
4 1000 11 90.9
Table 2 (b)

Total Investment = Rs. 4000; No of units purchased is 402.21. The average cost per

units work out to be Rs9.95.

As illustrated, over time you have a lower average cost per unit. By investing a

fixed amount of money at regular intervals, you as an investor stand to gain reasonable

returns and create significantly wealth-over time.

Lower Cost of Investing:

Getting into SIP program does not required large investment amounts at regular

intervals. Even as small as Rs. 1000 can be invested at regular intervals.

Builds Investment Kitty:

You have to give Post-Dated cheque (PDCs) to the mutual fund for deposit on

specific dates, for the amount you want to invest. These cheques are presented to your

bank account on these dates and the funds are withdrawn from your account for

investment in the mutual fund scheme at the prevailing NAV. Other than making the

initial investment and issuing the cheques at the beginning, no further efforts are

required from you.

Overcoming market volatility:

SJCET MBA Dept 43

 SIPs help you avoid missing market falls because of lack of time to track the

market. You don’t have the responsibility of actively monitoring market movement to be

able to enter during falls.

Market timing doesn’t work:

Trying to time the markets, i.e. entering when the markets fall and exiting when

the markets rise, usually does not work. It is best to take the systematic investment

approach to stay above market

Redemption of Units:

The units can be redeemed (i.e. sold back to the mutual fund) or switched-out

subject to completion of lock in period, on every business day at the redemption price.

The redemption/switch out request can be made by way of a written request, on a pre

printed form or by using the relevant tear off section of the transaction slip enclosed

with the account statement, which should be submitted at/may be sent by mail to any of

the ISC’s.

Redemption price:

Redemption price will be calculated on the basis of the loads of different plans/options.

The redemption price per unit will be calculated using the following formula:

Redemption Price = Application NAV * (1 – exit Load, if any)

Example for calculation of redemption Price

If the application NAV is Rs.10.00; Exit/redemption load is 2%, then the redemption

price will be calculated as follows:

SJCET MBA Dept 44

 = Rs.10.00 *(1-0.02)

= Rs.10.00 * (0.98)

= Rs.9.80

ADVANTAGES OF MUTUAL FUNDS

The key advantages of both open and close-end Mutual Funds is that they put

professional managers with experience and access to sophisticated financial research to

work for you this, and other wide range of key benefits are as follows :-

1) Professional Management

Experienced portfolio managers carefully select a fund’s holdings according to the

fund’s seated investment objective. The portfolio management team continuously

monitors and evaluates the fund’s holdings to help make sure it keeps pace with

changing market conditions. The team decides when to buy and sell securities.

There is a fee associated with this professional management.

2) Diversification

A Single diversified Mutual Fund may invest in dozens – even hundreds – of

different holdings. This approach may reduce the impact on your return if any one

investment held by the fund declines. Diversification spreads your assets among

different types of holdings and may be one of the best ways to protect yourself amid

the complexity and uncertainty of the financial markets.

3) Compounding

SJCET MBA Dept 45

 In a Mutual Fund, you may choose to reinvest your earnings automatically to buy

more shares. When you reinvest, not only do you have the potential to earn money

on your initial investment, you may also have the opportunity to earn money on the

dividends and capital gains you accumulate. Compounding may increase the impact

of what you contribute and can help your money grow faster. And the longer you

invest, the greater the potential growth.

4) Systematic Investing

You can invest in most mutual funds automatically through regular payments

directly from your bank account; you can start building a long-term investment

program. With systematic investing you invest a fixed amount of money at regular

intervals regardless of market conditions, helping out market fluctuations.

5) Hassle-free operations

With most Mutual Funds, buying and selling shares, changing distribution options,

and obtaining information can be accomplished conveniently by telephone, by mail,

or online. Although a fund’s shareholder is relieved of the day-to-day tasks involved

in researching, buying and selling securities, an investor will still need to evaluate a

Mutual Fund based on investment goals and risk tolerance before making a purchase

decision. Investors should always read the prospectus carefully before investing in

any Mutual Fund.

6) Buying Power

When you invest in a mutual fund, you join the other investors in a pool of

investment money. The result is that you have a “partial stake” in each company the

SJCET MBA Dept 46

 fund holds for a relatively small amount of principal invested, while potentially

offsetting some of the risk associated with holding individual securities.

7) Choice

There is an incredible array of mutual funds – more than 10,000 – available to meet

your specific Investment objective. Funds have different investment objectives and

degrees of investment risk – often indicated through asset classes and sub-

classes,such as money market funds, fixed income funds, balanced funds, growth

and income funds, growth funds and aggressive growth funds.

8) Liquidity

Mutual fund shares are liquid and orders to buy or sell are placed during market

hours. However, orders are not executed until the close of business when the NAV

(Net Asset Value) of the fund can be determined. Fees or commissions may or may

not be applicable. Fees and commissions are determined by the specific fund and the

Institution that executes the order.

9) Transparency

You get regular information on the value of your investments 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.

DISADVANTAGE OF MUTUAL FUNDS:

1) Over Diversification

SJCET MBA Dept 47

 Diversification is usually a good thing because it reduces risk, but Mutual Funds

sometimes make small investments in so many securities that they become over

diversified. In other words, the Mutual Fund’s holdings in each security may be so

small that it is difficult to realize substantial return from any of those holdings,

which in turn means that the overall return for each investor is small.

2) Unused Cash

Your cash may occasionally serve as liquidity insurance rather than work for you as

an investment. The constant availability of shares is certainly convenient for

investors in a mutual fund, but it can also operate as a disadvantage. A Mutual Fund

manager must always prepare for the possibility than an investor will cash in his or

her shares. As a result Mutual Funds must maintain a ready cash supply at all times.

3) Fluctuating Returns

Mutual funds are like many other investments without a guaranteed return. There is

always the possibility that the value of your mutual fund will depreciate. Unlike

fixed-income products, such as Bonds and Treasury Bills, mutual funds experience

price fluctuations along with stocks that make up the fund.

4) Costs Despite Negative Returns

Investors must pay sales charges, annual fees, service charges and other expenses

regardless of how the fund performs. In addition, depending on the timing of their

investment, investors may also have to pay taxes on any capital gains distribution

they receive – even if the fund went on to perform poorly after they bought shares.

5) Misleading Advertisements

SJCET MBA Dept 48

 The misleading advertisements of different funds can guide investors down the

wrong path. Some funds may be incorrectly labeled as growth funds, while others

are classified as small-cap or income.

6) Evaluating Funds

Not offer investors the opportunity to compare the P/E ratio, sales growth, earnings

share, etc. A Mutual Fund’s Net Asset Value gives the investors the total value of the

Another limitation of mutual fund is the difficulty they pose for investors interested

in researching and evaluating the different funds. Unlike stocks, mutual funds do

fund’s portfolio less liabilities.

7) Poor Transparency

Technology used for servicing of investors and for portfolio management and

investment decision making is poor and general efficiency and timeliness are

lacking as a result of antiquated methods of operation. Telex, telephone and

communication systems are poor and antiquated.

SJCET MBA Dept 49

 CHAPTER-V

DATA ANALYSIS
AND
INTERPRETITION

PORTFOLIO OF THE FUND

SJCET MBA Dept 50

 Sector
Mar2016 Jan 2017
Table 4 (a)
Finance
17.90 17.63
Banks
11.37 8.38
Power Generation, Transmission 80 31Mar16
8.05 10.43 76 31Jan17
& Equipment
Electricals & Electrical
Equipments 7.22 8.47

Steel
7.21 7.66
Engineering &Industry Machinery
6.89 5.08
Oil & Gas, Petroleum&
Refinery 6.30 6.60

Housing & Construction

5.03 7.91
Telecom
2.69 3.05
Entertainment
2.55 2.88
Debt 17.63 15.79
Money market 7.16 6.12

Figure 4.1

SJCET MBA Dept 51

CHART SHOWING ASSET ALLOCATION OF TATA

BALANCED FUND

Figure 4.2
 The TATA Balanced Fund Portfolio consists of 75.21% Equity holdings, 17.63%
Debt, 7.16% Money Market. It is evident from the data that though the investors
have risk taking ability, they balanced their investments by investing in Debt also.

FUND : BIRLA OPEN-ENDED BALANCED GROWTH FUND

OBJECTIVE : The Scheme aims to balance income requirements with growth of

capital through balanced mix of investment in equity and deb

SJCET MBA Dept 52

 PORTFOLIO OF THE FUND

Sector Mar 2016 Jan 2017

A Finance 16.86 13.14

B Pharmaceuticals 11.23 11.95

C Oil & Gas, Petroleum & 10.26 11.04

Refinery
D Banks 9.40 10.29

E Auto & Auto ancilliaries 7.43 7.59

F Computers - Software & 5.15 4.93

Education
G Securities 4.97 2.25
H Sugar 4.87 4.22
I Tobacco & Pan Masala 4.81 4.46

J Breweries & Distilleries 4.74 6.04

k Debt 14.88 17.39
L Money market 5.40 6.70

Table 4 (b)

80 31Mar16
76 31Jan17

Figure 4.3

SJCET MBA Dept 53

Figure 4.4
 The BIRLA Balanced Fund Portfolio consists of 79.72%Equity holdings, 14.88%
Debt, 5.40% Money Market. It is evident from the data that though the Investors
have risk taking ability, they balanced their investments by investing in Debt also.

s
FUND : Pru ICICI OPEN-ENDED BALANCED GROWTH FUND

OBJECTIVE : Aims to invest in equity and debt oriented securities so as to give

investor balanced returns.

SJCET MBA Dept 54

 PORTFOLIO OF THE FUND

Sector Mar 2016 Jan 2017

A Banks 15.17 11.47

B Securities 13.52 9.75

C Oil & Gas, Petroleum & Refinery 10.83 10.90

D Engineering & Industrial 8.58 6.74

Machinery

E Telecom 6.00 6.48

F Miscellaneous 5.31 0.00

G Finance 4.84 9.41

H Electricals & Electrical 4.36 3.64

Equipments

I Cement 4.09 6.35

J Steel 3.49 4.97

k Debt 22.08 24.98

L Money market 1.73 5.31

Table 4 (c)

76 3Mar15
70 31Jan16

SJCET MBA Dept 55

Figure 4.5

Figure 4.6
 The Pru ICICI Balanced Fund Portfolio consists of 76.19% Equity holdings,
22.08% Debt, 1.73% Money market. It is evident from the data that though the
Investors have risk taking ability, they balanced their investments by investing in
Debt also.

FUND : DSP MERRILL LYNCH OPEN-ENDED BALANCED

GROWTH FUND

SJCET MBA Dept 56

OBJECTIVE : Seeks to generate long term capital appreciation and

current income from a portfolio constituted of equity and equity related securities as

well as fixed income securities.

PORTFOLIO OF THE FUND

Sector Mar 2016 Jan 2017

A Banks 2.48 19.10

B Finance 12.88 12.03

C Oil & Gas, Petroleum & Refinery 12.14 12.47

D Engineering & Industrial 4.41 5.65
Machinery

E Fertilizers, Pesticides & 4.38 6.05

Agrochemicals

F Power Generation, Transmission & 3.60 3.01

Equip

G Housing & Construction 3.59 2.88

H Computers - Software & Education 3.40 5.87

I Pharmaceuticals 2.44 3.20

J Entertainment 2.44 2.59

k Debt 37.84 20.92

L Money market 10.40 6.23

Table 4 (d)

SJCET MBA Dept 57

 74 31Mar16
73 31Jan17

Figure 4.7

Figure 4.8

 The DSP Merrill Lynch Balanced Fund Portfolio consists of 51.76%Equity

holdings, 37.84%Debt, 10.40% Money Market. It is evident from the data that

SJCET MBA Dept 58

 though the Investors have risk taking ability, they balanced their investments by
investing in Debt also.

FUND : JM FINANCIAL OPEN-ENDED BALANCED GROWTH

FUND

OBJECTIVE : Aims to provide investors with liquidity and current income along

with capital appreciation.

PORTFOLIO OF THE FUND

Sector Mar 2016 Jan 2017

A Banks 19.95 12.72

B Housing &Construction 16.70 19.12

C Finance 11.45 9.49

D Steel 11.41 11.44

E Computers – Software & 7.62 4.64

Education
F Cement 6.65 2.92

G Miscellaneous 4.15 4.58

H Tobacco & Panmasala 3.66 0.00

I Edible Oil & Vanaspati 3.50 3.99

J Rubber & Tyres 0.94 0.95

K Debt 12.12 24.91

L Money market 1.85 5.24

SJCET MBA Dept 59

Figure 4 (e)

 Balanced Fund Portfolio consists of 51.76%Equity holdings, 37.84%Debt, 10.40%

Money Market. It is evident from the data that though the Investors have risk taking
ability, they balanced their investments by investing in Debt also.

86 31Mar16
70 31Jan17

Figure 4.9

SJCET MBA Dept 60

Figure 4.10

 The JM Balanced Fund Portfolio consists of 86.03% Equity holdings, 12.12% Debt,
% 1.85% Money Market. It is evident from the data that though the Investors have
risk taking ability, they balanced their investments by investing in Debt also.

SJCET MBA Dept 61

 TATA OPEN-ENDED BALANCED GROWTH FUND

DATE 1st Apr16 29th Jun 31st Aug 26th Oct 27th Dec 28th Feb 31stMar17

NAV 50.92 48.29 54.42 58.13 61.95 71.61 67.31

Table 4 (f)

 Fund performance and NAV values over a period of 1 year.

Figure 4.11

SJCET MBA Dept 62

 BIRLA OPEN-ENDED BALANCED GROWTH FUND

DATE 1st Apr16 29th Jun 31st Aug 26th Oct 27th Dec 28th Feb 31stMar17

NAV 28.37 27.18 29.63 31.66 33.18 33.54 32.15

Table 4 (g)

 Fund performance and NAV values over a period of 1 year.

SJCET MBA Dept 63

 Pru ICICI OPEN-ENDED BALANCED GROWTH FUND

DATE 1st Apr 16 29th Jan 31st Aug 26th Oct 27th Dec 28th Feb 31stMar17

NAV 35.84 33.46 36.39 36.32 39.90 43.53 41.27

Table 4 (h)

 Fund performance and NAV values over a period of 1 year.

Figure 4.13

SJCET MBA Dept 64

 DSP MERRILL LYNCH OPEN-ENDED BALANCED GROWTH
FUND

DATE 1st Apr16 29th Jun 31st Aug 26th Oct 27th Dec 28th Feb 31stMar17

NAV 39.33 36.97 42.50 44.56 47.46 51.92 50.14

Table 4 (i)

 Fund performance and NAV values over a period of 1 year.

Figure 4.14

SJCET MBA Dept 65

 JM FINANCIAL OPEN-ENDED BALANCED GROWTH FUND

DATE 1st Apr 15 29th Jun 31st Aug 26th Oct 27th Dec 28th Feb 31stMar16

NAV 23.87 21.92 24.73 27.30 29.91 31.61 28.45

Table 4 (j)

 Fund performance and NAV values over a period of 1 year.

Figure 4.15

SJCET MBA Dept 66

 PERFORMANCE EVALUATION

We are interested in discovering if the management of a mutual fund is

performing well; that is, has management done better through its selective buying and

selling of securities than would have been achieved through merely “buying the market”

picking a large number of securities randomly and holding them throughout the period?

One of the most popular ways of measuring management’s performance is by

comparing the yields for the managed portfolio with the market or with a random

portfolio.

The following formula can be used to evaluate Mutual fund performance:-

NAVt + Dt
1
NAVt – 1

Where:

NAV t = per-share net asset value at the end of year t

Dt= Capital appreciation during year.

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 NAV t-1 = per-share net asset value at the end of the previous year.

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 PERFORMANCE EVALUATION OF SELECTED FUNDS

NAV t-1 = 1st April, 2016

NAV t = 31st March, 2017

1) TATA Open-Ended Balanced growth Fund

NAV t-1 NAV t D t (NAV t NAV t-1)

50.9259 67.3129 16.387

Applying the formula we get-

= 67.3129+16.387- 1
50.9295

= 0.6434 x 100
= 64.34%

2) BIRLA Open-Ended Balanced growth Fund

NAV t-1 NAV t D t (NAV t NAV t-1)

28.37 32.15 3.78

Applying the formula we get-

= 32.15+3.78 - 1
28.37

= 0.2664 x 100
= 26.64%

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3) Pru ICICI Open-Ended Balanced growth Fund

NAV t-1 NAV t D t (NAV t NAV t-1)

35.84 41.27 5.43
Applying the formula we get-

= 41.27+5.43 - 1
35.84

= 0.3030 x 100

= 30.30%

4) DSP MERRILL LYNCH Open-Ended Balanced growth Fund

NAV t-1 NAV t D t (NAV t NAV t-1)

39.339 50.146 10.807
Applying the formula we get-

= 50.146+10.807 - 1
39.339

= 0.5494 x 100
= 54.94%

5) JM FINANCIAL Open-Ended Balanced growth Fund

NAV t-1 NAV t D t (NAV t NAV t-1)

23.87 28.4438 4.5738
Applying the formula we get-

= 28.4438+4.5738- 1
23.87

= 0.3832 x 100
= 38.32%

FUND PERFORMANCE RANKING

NAV

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 Name of the Fund Rank
Tata open-ended Balanced Growth Fund 64.34% 1

2
DSP Merrill Lynch open-ended Balanced Growth Fund
54.94%

JM Financial open-ended Balanced Growth Fund 3

38.32%
Pru ICICI open-ended Balanced Growth Fund 30.30% 4

Birla open-ended Balanced Growth Fund 26.64% 5

Table 4 (k)

Figure 4.16

SWOT ANALYSIS

Strengths

1. Simplified speed and quality of services offered by Mutual Fund Companies.

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2. As on investment tool for the investors to boost.
3. Wide range of investment schemes offered by mutual fund companies to
meet various requirements of investors.
4. Diversification of funds which minimizes the risk.

Weakness

1. NAV range doesn’t seem to fit in with corporate compensation. There is positioning
and pricing problem.
2. Delays in infrastructure development may dampen the growth rate of NAV’s of
different schemes, which in turn affects the investor to invest.
3. Deregulation of interest rates may affect the profitability of companies.
4. Stiff competition from existing mutual fund companies and new Entrants.

Opportunities

1. Perceptive changes in life style.

2. Addition of level of new class of entrepreneurs to the broad base of middle class of
the market.
3. The range of schemes and services offered by mutual fund companies is large
enough for all investors to have a slice of cake.
4. The falling interest rates would make to raise capital at less cost. Hence more
opportunities for companies.
5. Globalization is buying fresh opportunities in terms of foreign tie-ups.

Threats:

1. Risk of scams.
2. Severe increase in the competition among mutual fund companies results in
decreasing the spread.

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 CHAPTER-VI
FINDINGS,
SUGGESTIONS
&
CONCLUSION

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FINDINGS

 Mutual funds are subjected to risk please read the document before investing.

 The Biggest advantage with Mutual Funds is that the investor don’t need huge

amount to be invested in all his favorite stocks and bonds. Most Mutual Funds

have a minimum investment of Rs.5000.

 As most of the investors in the market have less risk taking capabilities, the

Balanced fund investments are suitable one.

 The Balanced fund investments are a combination of Equity, Debt & Money

markets. As such, the investments are diversified and the risk is balanced.

 The Balanced Fund Investments provide, steady and assured returns to the

investors. This is one of the important reasons, for choosing the Balanced

investments.

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 SUGGESTIONS

The information in this project report will provide the investors the basic knowledge

about Mutual Funds and enable them to choose the best investments suiting their

risk/return profile. Basing on the information in this project, recommendations made to

investors are as follows:-

 Mutual funds provide regular and steady income to investors.

 Systematic investment plan in Mutual Funds is the best tool for sound investment

to small investors who prefer investments in installments.

 Liquidity, transparency, well regulated and flexibility, are some of the features of

Mutual funds which is very advantageous to investors.

 The entry load and exit load in Mutual Funds is very low which does not affect the

ultimate yields.

 Safety of funds & positive rate of return over inflation are the basic two needs of

traditional investor. Mutual Fund is well equipped to cater to these basic desires of

investors.

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 CONCLUSIONS

 Five Balanced fund schemes are chosen for the study – Tata, Birla, Pru ICICI,

DSP Merrill Lynch & JM Financial. The Funds Chosen for the study are some of

the top performers in the Market.

 It is evident from the analysis that ‘The TATA OPEN ENDED BALANCED

GROWTH FUND’ out performed all the other four. It recorded a Net Asset

Value of 64.34%.

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BIBLIOGRAPHY

BOOKS

 Security analysis and -- DONALD E. FISHER &

portfolio management RONALD J. JORDAN

 Financial Services -- M.Y.KHAN

 Essentials of Investment &

Tax Planning -- ICFAI

 Personal Finance -- ASHU DATT

NEWS PAPERS

 The Economic Times

 The New Indian Express

MAGAZINES

 Business World

WEBSITES

 www.mutualfundsindia.com

 www.stockholding.com

 www.moneypore.com

 www.amfiindia.com

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