A PROJECT REPORT ON Analysis of Mutual fund and Selling the of Mutual fund of RELIGARE AT

IN THE PARTIAL FULFILLMENT OF THE POST GRADUATE DIPLOMA IN MANAGEMENT

NIT Kurukshetra Session: 2010-2012

Under Guidance of: Mr. ASHIISH MEHROTRA BRANCH MANAGER

Submitted by: MAYANK NAGAR ROLL NO. 310045 DBA NIT

DE L

I, the undersigned, hereby declare that the Project Report entitled THE ROLE AND PERFORMANCE OF MUTUAL FUNDS IN BOOMING STOCK MARKET AND THE PREFERENCE OF INVESTORS WHILE INVESTING IN VARIOUS TYPES OF MUTUAL FUND SCHEMES written and submitted by me to the NIT Kurukshetra in partial fulfillment of the requirement for the award of degree of Master of Business Administration under the guidance of Prof. Vinod Kumar is my original work and the conclusions drawn therein are based on the material collected by myself.

Pl c

Karnal

MAYANK NAGAR

Date: 25/07/2011

ACKNOWLEDGE ENT

This report incorporates the contribution of many people and without their support this work would not have come in completion. So I would like to extend my immense indebtness to all of them who have guided and motivated me throughout my research project. I sincerely thank to all of them for their valuable contribution without which this project report would have not reached its goals. I am indeed grateful to respected Mr. Vinod Kumar (Faculty, N.I.T. Kurukshetra), for his valuable support & guidance throughout the research project. I would like to thank my parents who really inspired me to take many necessary actions independently & encouraging my belief towards life . Last, but not the least, I would like to express my faith in the Almi who has given me strength at every phase of life to stand and excel.
ty

PREFACE

This project includes the review of work done in the field of Indian Financial Markets in order to analyze investors preference towards different routes to enter the equity market, to find out their investment pattern and to identify the factors affecting the investors choice. Today the field of investment is even more dynamic than it was only a decade ago. World event rapidly-events that alter the values of specific assets the individual has so many assets to choose from, and the amount of information available to the investors is staggering and continually growing. Furthermore, inflation has served to increased awareness of the importance of financial planning and wise investing. In this project I will study the preference of investors towards different routes to enter the equity market, investment pattern of the individuals and the factors affecting the investors choice to understand investments behaviour Customers are the King of the market and so it s very important to keep the customers loyal with the company. Investors behaviour is changing and they are now leaving behind the sacred investment options like the fixed deposits, company deposits, gold etc. Investors are now looking towards equity linked investment options. So it is very important to identify the motivating factors that guide the individuals investment decisions. This study will help the company to know their customers well and help to improve their database management and expand the clientele by bridging the gap between investors expectations and what the company provides. The ultimate aim of the study is to fulfil all the relevant expectations of the customers by analyzing the preference of investors for different routes to enter the equity market, studying the investment pattern of the individuals and by identify the factors affecting the preference of investors towards different routes for entering the equity market. The result of the analysis done can be discussed with the official concerned in the organization to make him aware of the customers preferences and suggest him the improvements thereof. This study will also be helpful for the companys future strategys point of view. Company can quickly take required steps to rectify the existing problems and enhance its performance. This in turn shall be instrumental in my career when I join an organization as it would upgrade my skills and add value to my learning curve

IN

UC ION OF MU UAL FUN

A mutual fund is types of investment vehicle where investors pool their money in order to allow each investor participate in a portfolio of securities. The individual investor doesn't actually own each security but instead, he owns shares of the mutual fund. The main benefit of a mutual fund is that it provides a way for the investor to achieve diversification in his investment without having invested a lot of money. The first mutual fund was the Massachusetts Investors Trust introduced in 1924. At the end of its first year, the fund had 200 investors with $63,600 in assets. At the end of 1995, the fund grew to 73,500 investors with assets totalling $1.8 billion! Now there are over 7000 different mutual funds available for you to choose form. You may be wondering why you should choose a mutual fund. Simple - a mutual fund offers 2 large benefits over owning the stocks individually. Those benefits are diversification with professional management without having to invest a lot of money. Diversification is important because it helps to reduce the risk. By owning shares of multiple companies, the fund's share value is not devastated if an individual company has a poor performance. Selecting which securities to buy, the allocation of cash and securities, and when to purchase is all done by the fund manager or the management team. The fund manager has the training, time and the resources to make the best informed investment decisions. Also, he fund may be part of a family of funds where the investor can switch between funds at no additional cost, including switching in and out of a money market funds. Most mutual funds include some degree of check writing privileges and may offer automatic transfer of funds on a periodic basis like monthly for those who want to regularly invest a set dollar amount. This type of investment is called dollar cost averaging.

INT ODUCTION OF COMPANY

Religare, a Ranbaxy promoter group company, is one of Indias leading integrated financial services institutions. The company offers a large and diverse bouquet of services ranging from equities commodities, insurance broking, to wealth advisory, portfolio management services, personal financial services, investment banking and institutional broking services. The services are broadly clubbed across three key business verticals-retail, wealth management and the institutional spectrum. Religare enterprises limited are the holding company for all its businesses, structured and being operated through various subsidiaries. Religares retail network spread across the length and breadth of the country with its presence through more than 900 locations more than 300 cities and towns. Having spread itself fairly well across the country and with promise of resting on its laurels, it has aggressively started eyeing global geographies.

Recently, Religare has also partnered with AEGON, one of the largest insurance and pension companies globally, to offer life insurance and mutual fund in India. The venture shall combine the international expertise of AEGON with the distribution of Religare. Religare Enterprises Ltd. is an India based financial services company with operations around the globe. Commonly referred to as Religare, the company offers a range of financial services through its group companies. The services offered include broking, insurance, asset management, lending solutions, investment banking and wealth management. Serving over a million clients, Religare has around 15 billion dollars of assets under management. The Religare group of companies include Religare Capital Markets, Religare Securities, Religare Broking, Religare Online, Religare Finvest, Religare Finmart, Religare Insurance, Religare Health Insurance, Aegon Religare, Religare Mutual Funds, Religare Macquire, Milestone Religare, Religare Art and Vistaar Religare. Religare is headquartered in India, and has a presence in London, New York, Japan, Hong Kong, Singapore, Dubai, Brazil and Indonesia.

RSL is a member of the National Stock Exchange of India, Bombay Stock Exchange of India, Depository Participant with National Securities Depository Limited and Central Depository Services (I) Limited, and SEBI approved Portfolio Manager Religare is also providing in-house Depository services to its clientele and is one of the leading depository service providers in the country

PHILOSOPHY OF RELIGARE
Defi eRefi e.Achieve At Reli e we believe Our client are people, not account hence successful invest ent

management relati nshi begins with a clear understanding of each clients specific needs, concerns and long term objectives. Our investment philosophy applies a disciplined approach to building a customi ed strategy designed to meet your individual financial goals and tolerance for risk.

PROCESS

FIGURE

T e Reli are E
y y y y y

Pan India foot print Dedicated team of trained and skilled advisors Strong pedigree driven by diligent processes and ethical business Wide & varied platter of products & services to choose from Backed by strong & Credible research practices

Pri rity Client Group Services (PCG)

At Religare we strongly believe in not just providing you with incisive investment advice but we are equally focused to ensure timely execution of your important trades. With this as our driving philosophy we have created a unique client centric business model that revolves around optimum service delivery. Further, our investment advisory is underpinned by comprehensive fundamental and technical research helping you to time your investment decisions perfectly.

Milestones
y y y y y y y

Advisor to the issue of Allied Digital Services Ltd. July 2007 Syndicate Member in the IPO of Abhishek Mills Ltd. Feb 2007 Syndicate Member in the IPO of AMD Metplast Ltd. Feb 2007 Underwriting in IPO of Cambridge Technology Enterprises Ltd. Dec 2006 Syndicate Member in the IPO of Shree Ashtavinayak Cine Vision Ltd. Dec 2006 Preferential Allotment of Equity Shares of Rainbow Papers Ltd. Dec 2006 Underwriting in FPO of Gulshan Sugars Ltd. Nov 2006

Product offerings
y Mutual

Funds - Life & Non - Life

y Insurance y Bonds y Deposits y IPOs y Small

Savings Instruments

ORGANIZATION OF MUTUAL FUND

T e Structure consist of :-

Sponsor
The sponsor is the promoter of the mutual fund. The sponsor establishes the mutual fund and registers the same with the SEBI 1. Sponsor appoints the trustees, custodians and the AMC with the prior approval of SEBI regulation. 2. Sponsor must have at least five year track record of business interest in the financial markets. 3. Sponsor must have been profit making in at least three of the above five years. 4. Sponsor must contribute at least 40% of the capital of the AMC

Asset management company (AMC)

The trustee delegates the task of floating schemes and managing the collected money to a company of professionals, usually experts who are known for smart stock picks. This is an asset management company (AMC). The AMC charges a fee for the services it renders to the mutual fund trust. Thus the AMC acts as the investment manager of the trust under the broad supervision and direction of the trustees. The AMC must have a net worth of at least Rs. 10 crores. At all times and it cannot act as a trustee of any other mutual fund.

Trustees
The mutual fund, which is a trust, is managed either by a trust or by a Board of Trustees. Board of Trustees and trust companies are governed by the provision of the Indian Trust Act. If the trustee is a company, it is also subject to the provision of the Indian Company Act. It is the responsibility of the trustees to protect the interest of the investors, whose fund is managed by the AMC. The AMC and functionaries are functionally accountable to the trustees.

1. Trustees must ensure that the transaction of the mutual fund are in accordance with the trust deed. 2. Trustees must ensure that the AMC has systems and procedures in place and that all the funds constituents are appointed. 3. Trustees must ensure due diligence on the part of AMC in the appointment of constituents and business associates.

Custodian
purchased by the mutual fund and undertakes responsibility for its handling and safe keeping. For instance, the stock holding The custodian, an independent organization, has the possession of all securities corporation of India limited (SCHIL) is the custodian for most fund houses in the country

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the mutual fund. The Registrar processes the application form, redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer Agent also handles communications with investors and updates inve

HISTORY OF MUTUAL FUND

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual fund in India can be broadly divided into four distinct phases.

First Phase-1964-87

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase- 1987-1993(Entry of Public Sector Funds)

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.
Third Phase- 1993-2003(Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian inv estors a wider choice of fund families. Also, 1993was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21, 805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds

Fourth Phase- since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme , assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and doest not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of UTI Mutual Fund, conforming to the SEBI Mutual Fund, conforming to the SEBI Mutual Fund Regulation, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its cur rent phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

Types Of Mutual Fund

y Open-Ended Schemes y Close-Ended Schemes

Open-ended Fund/Scheme

The performance of mutual fund such as Risk-adjusted returns of the schemes NAV, Diversification of Portfolio An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell unites at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open -ended schemes is liquidity. CRISILs composite performance ranking (CPR) measures the performance for each of the open-ended scheme of Mutual Fund. There are four parameters considered to measure Liquidity and Asset Size.
Close-ended Fund/Scheme

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time if the initial public issue and thereafter they can buy or sell the unit of scheme on the stock exchange where the units are lis ted. In order to provide an exit rout to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI

Regulations stipulate that at least one of two exit routes i s provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

Schemes according to Investment objective :

A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open -ended or close-ended schemes as described earlier. Such scheme may be classified mainly as follows:

Net Asset Value

Asset Value is the market value of the securities held by the scheme. Since market value of the securities changes every day, NAV of 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 unit of the scheme of any particular date. For example if the market value of the securities of a mutual fund scheme is Rs.200 lacks and the mutual fund has issued 10 lakh units of Rs.10 each to the investors, then the NAV per unit of fund is Rs.20. NAV is required to be disclosed by the mutual fund on regular basisdaily or weekly-depending on the type of scheme.

Sale Price
Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

Repurchase Price
Is the at which open-ended scheme repurchase their units and close-ended scheme redeem their units on maturity. Such price are NAV related.

Sales load
Is the charge collected by scheme when it sells the units. Also called, front-end load. Schemes that do not charge a load are calledNo-loadschemes.
,

Redemption Price
Is the price at which open-ended scheme repurchase their unit and close ended schemes redeem their units on maturity. Such prices are NAV related.

Repurchase or Bac -end Load

Is a charge collected by the scheme when it buys back the unit from the unit holder.

The Factors that affect the NAV of a fund

The major factors affecting the NAV of a fund are : y y y y

Sale and purchase of securities Sale and repurchase of units Valuation of assets. Accrual of income and expenses

The NAV of a fund is primarily affected by the market value of the investment portfolio the number of units outstanding, the accrual of expenses and income, are other factors that impact the NAV of a fund.

EVALUATING PORTFOLIO PERFORMANCE

We have two major requirements of a PM: 1. The ability to derive above average returns for a given risk class (large risk-adjusted returns); and 2. The ability to completely diversify the portfolio to eliminate all unsystematic risk

SEBI REGISTERED MUTUAL FUNDS

Axis Mutual Fund,

1st Floor, Axis House, Bombay Dyeing Mills Compound, Pandurang Budhkar Marg, Worli, Mumbai 400025 TEL : 39403300 FAX : 22040130 WEB : www.axismf.com www.axismutual.com Email customerservice@axismf.com Toll Free No : 1800 3000 3300 MF/061/09/01 04.09.2009
Bharti AXA Mutual Fund

51, 5th Floor, Kalpataru Synergy, East Wing, Vakola, Santacruz (E), Mumbai 400 055. TEL : 40479000 FAX : 40479001 Web : www.bhartiaxa-im.com Email: info@bhartiaxa-im.com MF/056/08/01 31.03.2008
ICICI Prudential Mutual Fund

2nd Floor, 302, Block B-2, Nirlon Knowledge Park, Western Express Highway, Mumbai - 400063. Tel No. +9122 42090573 MF/003/93/6 13.10.1993

IDBI Mutual Fund

IDBI Building, 2nd Floor, Plot No.39-41, Sector 11, CBD Belapur, Navi Mumbai 400 614. Tel.: 66096100/ 66096101 Fax: 66096110 E-mail: Krishnamurthy.vijayan@idbimutual.co.in www.idbimutual.co.in MF/064/10/01 29.3.2010
IDFC Mutual Fund,

One IndiaBulls Centre, 841, Jupiter Mills Compound, Senapati Bapat Marg, Elphinstone Road (West), Mumbai 400 013. TEL : 22621111 FAX : 22693365 Email : investor@idfcmf.com WEB : www.idfcmf.com MF/042/00/3 13.3.2000
LIC Nomura Mutual Fund

Industrial Assurance Bldg., 4th Floor, Opp Churchgate Stn., Mumbai 400 020. TEL : 22851661/22851663 FAX : 22040039 WEB : www.licmutual.com MF/012/94/5 9.5.1994
L&T Mutual Fund

309, Trade Centre, 3rd Floor, Bandra Kurla Complex, Bandra (East), Mumbai - 400 051. TEL : 66574000 FAX : 66574004 WEB : www.lntmf.com E-mail: ltmf@lntmf.com MF/035/97/9 3.1.1997

Religare Mutual Fund 3rd Floor, GYS Infinity, Paranjpe B Scheme, Subhash Road, Vile Parle (East), Mumbai 400 057.

TEL: 67310000 FAX: 28371565 MF/052/06/01 24.07.2006

WHAT IS THE PROCEDURE FOR REGISTERING A MUTUAL FUND WITH SEBI?

An applicant proposing to sponsor a mutual fund in India must submit an application in Form A along with a fee of Rs.25, 000. The application is examined and once the sponsor satisfies certain conditions such as being in the financial services business and possessing positive net worth for the last five years, having net profit in three out of the last five years and possessing the general reputation of fairness and integrity in all business transactions, it is required to complete the remaining formalities for setting up a mutual fund. These include inter alia, executing the trust deed and investment management agreement, setting up a trustee company/board of trustees comprising two- thirds independent trustees, incorporating the asset management company (AMC), contributing to at least 40% of the net wo rth of the AMC and appointing a custodian. Upon satisfying these conditions, the registration certificate is issued subject to the payment of registration fees of Rs.25.00 lacs for details; see the SEBI (Mutual Funds) Regulations, 1996.

HOW TO REDUCE RISK WHILE INVESTING

In equity or commodity markets have more risk compare than Mutual fund because in this like pool of money. In this mutual fund, investor invests in different sector so if one company will fall then other company will be recovering the money of that company. In this fund mostly no losses of investor so this is best from other. By this mutual fund reduce the risk in the market. Basically in equity and commodity market , the investor invest on one thing for example- investor invest in equity so investor invest in only one company share as well as on commodity.

COMPARISON OF MUTUAL FUNDS

1 Bi la Sun Life Commodities Equities Fund Global Ag i Plan -Retail G owth

16.1224(NAV) 15.6387(RPP) 16.1224(SP) 02-Aug-2011

y y y y

Face value 10 Min investment Rs 5000 Entry load Nil Exit load 1 % Its face value is 10 but in market its value is 16.1224 because it totally depends upon the demand and supply. This is not good for investment by investor because in this plan have no growth so investor does not invest in this scheme. If any investor invest in this plan so he /she invest Rs 5000/- per month Upto minimum 2 years. It just like saving of money. Exit load means if investor want money back whatever invest before 1 year so charge for exit is 1%

2. ICICI Prudential LT Plan- Regular Growth

21.1008(NAV) 21.1008(RPP) 21.1008(SP) 02-Aug-2011

This is same as Birla Sun Life Commodities Equities Fund Global Agri Plan -Retail Growth because it has all price are same. So no profit for investor.

3. HDFC LONG TERM EQUITY FUND-Growth

16.251(NAV)
y y y y

16.088(RPP)

16.251(SP)

02-Aug-2011

Minimum Investment (Rs) 5000 Face Value (Rs/Unit) 10 Entry load Nil Exit load 1 %

In this plan difference between of RPP (Repurchase price) and SP (Selling price) is 0.163. If investor invests in this plan means 5000 per month that means is according the present market rate. Rs 16.088 = 1 share Rs 5000 = 310.790651 share If investor 5000 invest regular upto 2 years 1 year = 12 months 2 year = 24 months So 5000 X 24 = 120000 Rs Profit on 1 share is 0.163 then profit after 2 years is 120000 X 0.163 = 19560 Return of money after two years is 19560 + 120000 = 1395600 Rs. Exit load means if investor want money back whatever invest before 1 year so charge for exit is 1% price of share whatever price of share at that time when investor redeem the account.

4. Religare Banking Fund - Retail Growth

19.96(NAV)
y y y y

19.76(RPP)

19.96(SP)

02-Aug-2011

Minimum Investment (Rs) 1000 Face Value (Rs/Unit) 10 Entry load Nil Exit load 1 %

Same calculation according of HDFC LONG TERM EQUITY FUND-Growth profit then the profit of after two years is

4800

Return in 2 years is

24000 + 4800 = 28800

Rs

Conclusion from calculation of some mutal fund Therefore conclusion is that Religare mutual fund is affordable for all people who belong to upper middle class family or lower middle class of family or middle class family. Because in this scheme invest only 1000 Rs in every month upto 3 years. Everyone can give 1000 Rs, for invest in the mutual fund because everyone does not aware about mutual fund thats by this is problem that rest of the people are not interest to invest in mutual fund or may be in share market. Now market of Religare is depository participate and its work is that they invest in mutual fund or equity market also in insurance or commodity market of investor currency,

if anyone who are interest in this opportunity then go to Religare and listen the term and condition of Religare and invest in the mutual fund with 1000 cheque and identit y card. This all document give to Religare and they will start your investing in mutual fund iin monthly based

Performance Evaluation of Mutual Funds

Any meaningful evaluation of performance will necessarily have to measure total return per unit of risk or the ability to earn superior returns for a given risk class. There are various statistical techniques to measure this factor. One of the technique estimates the realized portfolio returns in excess of the risk free return, as a multiple of the factor of the portfolio. The factor of portfolio, in turn, measures the systematic or undiversifiable risk of the portfolio, the relation to the market index.

Mutual funds sell their shares to punbsp; Market value of Scheme's Investments + Receivables + Accrued

Income + Other Assets - Accrued Expenses - Payables - Other Liabilities NAV of MF = ---------------------------------------------------------------------------------------------No. of Units outstanding under the Scheme

The net asset Value of a mutual fund scheme is basically the per unit market value of all the assets of the scheme. To illustrate this better, a simple example will help. Scheme name XYZ Scheme size Rs. 50,00,00,000 (Rs. Fifty crores) Face value of units Rs. 10 No. Of Units (Scheme size) 5,00,00,000 Face value of units Investments In shares Market value of shares Rs. 75,00,00,000 (Rs Seventy Five crores) NAV(Market value of Investments / No. of units) = Rs. 75,00,00,000 ----------------------5,00,00,000 = Rs.15 Thus, each unit of Rs. 10 is worth Rs. 15.

Simply stated, NAV is the value of the assets of the assets of each unit of the scheme, or even simpler value of one unit of the scheme. Thus, if the NAV is more than the face value (Rs. 10), it means the money has appreciated and vice versa. NAV also includes dividends, interest accruals and reduction of liabilities and expenses, besides market value of investments.

How to calculate Mutual Fund Risk

Beta
This common measure compares a mutual fund's volatility with that of a benchmark and is supposed to give some sense of how far you can expect a fund to fall when the market takes a dive, or how high it might climb if the bull is running hard. A fund with a beta greater than 1 is considered more volatile than the market; less than 1 means less volatile. So say your fund gets a beta of 1.15 -- it has a history of fluctuating 15% more than the benchmark If the market is up, the fund should outperform by 15%. If the market heads lower, the fund should fall by 15% more. But beta, though a useful guide, is far from perfect, especially when used as a proxy for "risk." The problem here, as with many risk measures, is the benchmark. The benchmark has to be a correct measure of comparison only then will the beta hold any indicative value. The beta of a fund is determined as follows: [(n) (sum of (xy)) ]-[ (sum of x) (sum of y)] [(n) (sum of (xx)) ]-[ (sum of x) (sum of x)] where: n = # of observations (36 months) x = rate of return for the S&P 500 Index y = rate of return for the fund

Alpha
Alpha was designed to take beta one step further. It looks at the relationship between a fund's historical beta and its current performance, or the difference between the return beta would lead you to expect and the return a fund actually gets. An alpha of 0 simply means that the fund did as well as expected, considering the risks it took. So if that fund with the beta of 1.15 beat the market by 15% (or underperformed it by 15% when the market was down), it would have a 0 alpha. If your fund has a positive alpha, that means it returned more than its beta predicted. A negative alpha means it returned less. The trouble with alpha is that it's only as good as its beta. If the benchmark isn't appropriate to a fund in deriving its beta, then alpha, too, will be imprecise. The alpha of a fund is determined as follows: [ (sum of y) -((b)(sum of x)) ] / n where:

n =number of observations (36 months) b = beta of the fund x = rate of return for the S&P 500 y = rate of return for the fund

Standard Deviation
Meet the most popular of the risk measures -- one with a distinct advantage over beta. While beta compares a fund's returns with a benchmark, standard deviation measures how far a fund's recent numbers stray from its long-term average. For example, if Fund X has a 10% average rate of return and a standard deviation of 5%, most of the time, its return will range from 5% to 15%. A large stan dard deviation supposedly shows a more risky fund than a smaller one. But here, again, what's problematic is your reference point. The number alone doesn't tell you much. You have to compare one standard deviation with the others among a fund's peers. But a more glaring problem is that the standard deviation system rewards consistency above all else. A fund is considered stable based on the uniformity of its own monthly returns. So if it loses money but does so very consistently it can have a very low standard deviation -- down 3% each and every month wins a standard deviation of zero. And likewise, a fund that gains 10% one month and 15% the next would be penalized by a high standard deviation -- a reminder that volatility, although perhaps a cousin to risk, itself isn't necessarily a bad thing.

Sharpe Ratio
This formula, worked by Nobel Laureate Bill Sharpe, tries to quantify how a fund performs relative to the risk it takes. Take a fund's returns in excess of a guaranteed investment (a 90-day T-bill) and divide by the standard deviation of those returns. The bigger the Sharpe ratio, the better a fund performed considering its riskiness. Here, again, you have the problem of relativity -- the ratio itself doesn't tell you anything, you have to compare it with the Sharpe of other funds. But this ratio has an advantage over alpha because it uses standard deviation instead of beta as the volatility variable, and therefore you don't have to worry that a fund doesn't relate well to the chosen index.

P/B ratio
A ratio used to compare a stock's market value to its book value. It is calculated by dividing the current closing price of the stock by the latest quarter's book value per share. Also known as the "price-equity ratio". Calculated as:

NEED FOR MUTUAL FUND

The small investor often finds himself in a dilemma when he has to take a decision regarding his savings. If he invests all his money in safety first investments like NSCs or Bank Deposits, he fully exposes them to the risk of a fall in their purchasing power owing to inflation. On the other hand he finds that if he makes direct investment into the stock market, his investment is susceptible to depreciation in value and poor dividend returns. This is because:
y He lacks a large amount of investible funds which can be deployed over a large

number of securities, depreciation in the value of some are more than offset by appreciation in the value of the others.
y He lacks the ability to proper technical knowledge that is ne eded to evaluate the

market and the individual scripts.

y He lacks the ability to engage experienced investment managers. Such a

proposition would any not be cost effective for such a small portfolio.
y Managing a portfolio involves continuous supervision of i nvestments for which

the individual never has adequate time.

y The individual does not have access to the same kind of information about the

company he invests in, as a large investors or mutual fund manager would have

through their money power and contacts. He would thus be at a disadvantage if he invests individually.

Difference between Shares and Mutual fund

Shares

Shares: When companies look for money for their business, they can get it in two ways either they borrow from a bank and pay interest ("debt") or they ask people like you and me to invest and give us shares ("equity"). A share is a part of a business. Then let's say a friend named Sarath wants to buy a share of this business but the company has got all the money it needs. So Sarath asks us to sell our shares to him, at a higher value than we bought it. So he will own our share of the company, but he's willing to pay more because he thinks the company will do well. Now we make a profit and then Sarath perhaps sells it to someone else at even higher values etc. The company doesn't really get affected because it isn't seeing the money, but the share price goes up as the company starts doing better, and as more people begin to want the shares. Why does the share price go up? The answer is: Perceived value. I may think the company is worth 1 crore, but someone else might think it's worth 2 crores. When my shares reach my valuation I sell, but someone else will think it's a good deal and buy. To organise such buying and selling, there are commercial "stock exchanges". BSE and NSE are some of them, though there are a number of other, smaller exchanges in India. An exchange provides a common place for people to buy or sell shares, with sales happening on an auction basis - buyers bid for shares at a price they are willing to pay, and sellers "ask" for a price from buyers. Exchanges match these prices and share exchanges happen along with payments. "Brokers" facilitate these exchanges, and you pay them a fee as brokerage, part of which goes to the stock exchange as well.

Mutual fund

Mutual funds are not just restricted to shares. They are mutual investments, therefore they can be anywhere. The common ones are equity (stocks and shares) and Debt. Debt markets are where companies borrow money, but they want to borrow huge sums of money that you and I

don't have. Therefore, we pool in our money (mutual fund) and give the big whole lot to the company at an interest. Even the government borrows, but again, only large sums of money. Mutual funds can invest there too. Debt is traditionally "safer" than equity since there is a fixed valuation and good rating mechanisms to curb risk; and in the same vein, the profits (and losses) are usually much lesser than equity. Mutual funds can also invest in other investment avenues, like Gold, Real Estate, and Commodities and even in Windmills! Of course, in India only a few of these are available.

Difference between of Fixed deposit and Mutual fund

Fixed Deposits
* Investment for a fixed period * Assured return on fixed deposits * Interest income is taxable * Low returns * High safety in Banks; otherwise depends upon rating * Objective is to earn income

A fixed deposit account allows you to deposit your money for a set period of time, thereby earning you a higher rate of interest in return. Fixed deposits also give you a higher rate of interest than a savings bank account.

Mutual fund
* No fixed tenure in Open ended schemes * No assurance for either returns or capital growth * Income earned by way of distribution from the open ended schemes * Safety depends upon the investment objective * Objective is to earn income and capital grow

Mutual funds are investment companies that pool money from investors at large and offer to sell and buy back its shares on a continuous basis and use the capital thus raised to invest in securities of different companies.

Difference between of LIC and Mutual fund

ULIP ULIPs are regulated by the IRDA. , but this also ensures that the investor is availed as much information as necessary, unlike with ULIPs. Daily NAV are followed with Mutual Funds. You would only have the option of purchasing a new policy, thus incurring new administration costs again . ULIPs. While keeping your premium the same a ULIP will allow you to increase your life cover. By reducing your investment allocation this is achieved you cannot increase your life cover if you have a term policy purchased on top of a Mutual Fund. Ex jeevan aanand Mutual fund Mutual Funds are regulated by the SEBI. From an industrial point of view, while Mutual Funds focus on low costs and better performance. Mutual Funds have very stringent transparency requirements. Ex- HDFC Mutual Fund

ANLYSIS OF PATTERN OF INVESTMENT

70% of the Respondents were looking for Recurring pattern of Investment and only 3% of the Respondents went for Lump-Sum pattern of Investment

40% of the Retired Respondents belong to the Lump -Sum group because of the heavy among received at the time of Retirement.

70 60 50

70

NO. OF

40 30

30

PREFERENCE TOWARDS MUTUAL FUND SCHEMES 10

0 Lum Sum R p ecurring

20

Open-Ended 96

INVESTMEN Close-Ended T

Total No. Of Respondents 100

96% of the respondents look for Open-Ended schemes, which provides them better liquidity position and capital appreciation opportunities. Respondents were ready to take risk (moderat e) for such kind of schemes and made their investment in Open Ended Schemes

ANALYSIS OF TIME DURATION FOR MUTUAL FUND INVESTMENT

Long- Term

Mid-Term

Short-Term

Total No. Of Respondents 100

40

60

60% of respondents made their investment for mid term period i.e. 1-2.5 years and only 46% respondents made their investment for long term that is over 2.5 years.

RECOMMENDATIONS

The study has provided with the useful data from the responses of the respondents interviewed. The last part of the report therefore is dedicated to the suggestions and recommendations. Following are a few useful recommendations:

More penetration to the market should be made so that the more retail investments are utilized by the companies in the capital market.

Derivative market should be made so that hedging will be done and it will benefit the market.

Government or Public Sector should provide some guarantee, which makes the investors more secure and encourage them for investing.

More and more Bank sponsored funds should be introduced in the market that will increase the trust of investors to invest in Mutual fund schemes.

More new schemes will be introduced at a large scale with various features and benefits, so that a large corpus will be made for investments.

On-line trading should be used more as compared to other means/sources.

CONCLUSION

One should note markets and asset classes do not move in tandem. The investor has to spread his investment among different types of asset classes and marketsstocks and bonds, domestic and foreign markets so that he can position yourself to seize opportunities as the performance cycle shifts from one market or asset class to another. This spread helps him to get a consistent and better return which will help him to fulfill his financial commitment.

The asset allocation should vary according to the investment style and goals of an investor. For this an investor should take help a Financial Advisor as he has the better knowledge about the various assets which gives better and consistent return, and if the asset is not performing well then he can make the necessary changes in the asset allocation in the portfoilo.

Questionnaire as provided by the company

TARGET PORTFOLIO QUESTIONNAIRE 1) How old are you? 1. 65 and over 2. 45 to 64 3. 35 to 44 4. 25 to 34 5. 24 and under

2) How long do you want to invest? 1. 1 year 2. 2 to 5 years 3. 6 to 10 years 4. 11 to 20 years 5. 21 years or more

3) What is your primary objective for your investment? 1. Preservation of Principal 2. Current Income 3. Growth and Income 4. Conservative Growth 5. Aggressive Growth

4) How do you expect your current income to change? 1. Decrease dramatically 2. Decrease slightly 3. Remain about the same

4. Increase with the pace of inflation 5. Increase dramatically 5) What amount of money do you have set aside for emergencies? (This doesnt include borrowings or credit lines, but does include funds that you can withdraw quickly in case of an emergency: checking, savings and money market accounts,CDs, money market funds, and investments in U.S.Treasury and Agency Securities with a maturity of less than 3 years.) 1. None 2. Enough to cover 3 months of expenses 3. Enough to cover 6 months of expenses 4. Enough to cover 9 months of expenses 5. Enough to cover more than 12 months of expenses

6) How much investing experience do you have? 1. None 2. Minimal youve invested in basic vehicles for a short amount of time 3. Some youve invested in IRAs and employer sponsored retirement plans for a few years but are ready for additional investments 4. Fair Amount youve invested in a variety of Stocks and mutual funds for years and are Confident in your investing ability 5. Extensive youve invested in most types of Investments and have a profound knowledge of financial markets and strategies If youre a more experienced investor, you may be comfortable with More risk. Conversely, if you have little or no investing experience, You may want to choose a less risky portfolio to start with. 7) Which of these investment vehicles are you most comfortable with? 1. Savings accounts, CDs, and other short-term, FDIC-insured investments 2. Income-producing bonds and bond mutual funds 3. Stock and bond mutual funds 4. Growth stocks and growth-stock mutual funds

5. Emerging growth stocks and aggressive-growth

Advantages of Mutual Funds

1. Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. This risk of default by any company that one has chosen to invest in, can be minimized by investing in mutual funds as the fund managers analyze the companies financials more minutely than an individual can do as they have the expertise to do so. They can manage the maturity of their portfolio by investing in instruments of varied maturity profiles. 2. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. 3. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. 4. Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Apart from liquidity, these funds have also provided very good post-tax returns on year to year basis. Even historically, we

find that some of the debt funds have generated superior returns at relatively low level of risks. On an average debt funds have posted returns over 10 percent over one-year horizon. The best performing funds have given returns of around 14 percent in the last one-year period. In nutshell we can say that these funds have delivered more than what one expects of debt avenues such as post office schemes or bank fixed deposits. Though they are charged with a dividend distribution tax on dividend payout at 12.5 percent (plus a surcharge of 10 percent), the net income received is still tax free in the hands of investor and is generally much more than all other avenues, on a post tax basis. 5. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. 6. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. Since there is no penalty on pre mature withdrawal, as in the cases of fixed deposits, debt funds provide enough liquidity. Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the securities as a result of interest rate variation and one can benefits from any such price movement. 7. Transparency Investors get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. 8. Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans; you can systematically invest or withdraw funds according to your needs and convenience. 9. Affordability A single person cannot invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. This limits him from diversifying his portfolio as well as benefiting from multiple investments. Here again, investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment.

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. 10. Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. 11. Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. 12. Tax Benefits Last but not the least, mutual funds offer significant tax advantages. Dividends distributed by them are tax-free in the hands of the investor. They also give you the advantages of capital gains taxation. If you hold units beyond one year, you get the benefits of indexation. Simply put, indexation benefits increase your purchase cost by a certain portion, depending upon the yearly cost-inflation index (which is calculated to account for rising inflation), thereby reducing the gap between your actual purchase cost and selling price. This reduces your tax liability. Whats more, tax-saving schemes and pension schemes give you the added advantage of benefits under Section 88. You can avail of a 20 per cent tax exemption on an investment of up to Rs 10,000 in the scheme in a year

Disadvantages of mutual funds

Mutual funds are good investment vehicles to navigate the complex and unpredictable world of investments. However, even mutual funds have some inherent drawbacks. Understand these before you commit your money to a mutual fund. 1. No assured returns and no protection of capital If you are planning to go with a mutual fund, this must be your mantra: mutual funds do not offer assured returns and carry risk. For instance, unlike bank deposits, your investment in a mutual fund can fall in value. In addition, mutual funds are not insured or guaranteed by any government body (unlike a bank deposit, where up to Rs 1 lakh per bank is insured by the Deposit and Credit Insurance Corporation, a subsidiary of the Reserve Bank of India). There are strict norms for any fund that assures returns and it is now compulsory for funds to establish that they have resources to back such assurances. This is because most closed -end

funds that assured returns in the early-nineties failed to stick to their assurances made at the time of launch, resulting in losses to investors. A scheme cannot make any guarantee of return, without stating the name of the guarantor, and disclosing the net worth of the guarantor. The past performance of the assured return schemes should also be given.

2. Restrictive gains Diversification helps, if risk minimisation is your objective. However, the lack of investment focus also means you gain less than if you had invested directly in a single security. Assume, Reliance appreciated 50 per cent. A direct investment in the stock would appreciate by 50 per cent. But your investment in the mutual fund, which had invested 10 per cent of its corpus in Reliance, will see only a 5 per cent appreciation.
3. Taxes During a typical year, most actively manage mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made. 4. Management risk When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you ex pected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

BLIOGRAPHY

(MONEYCONTROL, 20011) (SEBI, 20011) (AMFI INDIA) (RELIGARE Securities) (SHARE MARKET BASICS, 2011)

y y

ABSTRACT
The purpose of this research is to evaluate the performance of the mutual funds in Bangladesh. In this research is to assess the effectiveness and usefulness of mutual funds & find out the interest of shareholders. In line with this, the research aim is also to know the approaches & methods of calculating profitability of mutual fund to determine how effective is in protecting the shareholders value. In order that the abovementioned objectives of this research can be achieved, I will employ normative survey wherein, formulated questionnaires will be filled out by the chosen respondents. The gathered data will be treated by getting the frequencies and after which, it will be analyzed and presented