dhananjay final pjt

8/12/2019 Dhananjay Final Pjt

1/86

PROJECT REPORT ON COMPARATIVE STUDY OF THE PERFORMANCE OF

THREE INCOME FUNDS (MUTUAL FUNDS) WITH THE TOP THREE FIXED

DEPOSITS SCHEMES OF BANKS (SBI, ICICI & FEDERAL BANK) IN INDIA

Ramaiah Institute of Mana ement Studies Pa e1

Chapter -1

INTRODUCTION


2/86





Problem Definition

The Indian capital market has been increasing tremendously during last few years.

With the reforms of economy, reforms of industrial policy, reforms of public sector and

reforms of financial sector, the economy has been opened up and many developments

have been taking place in the Indian money market and capital market. In order to help

the small investors, mutual fund industry has come to occupy an important place. The

objective of this is to examine the importance and growth of mutual funds and evaluate

the operations of mutual funds and suggest some measures to make it a successful scheme

in India.

The essential purpose behind mutual funds is to secure two important benefits for small

investors:-

(a) Diversification of risk and

(b) Professional management of investments

As regards diversification mutual funds can spread their investments over dozens or even

hundreds of companies but this is not possible for a small investor. Diversification

reduces risk. As regards diversification of risk may be noted that success in the

investment game requires that one must be prepared to spend the time required for

selecting investments and one must also have the necessary skills.

A majority of ordinary investors cant devote the time required or dont have the skills.

This is not to say that all mutual funds are good. There are wide differences in their

performance. Such differences become noticeable only over a long period of 5-10 years.

Over short periods of 1-2 years, a particular fund may, at one time, be among the best,

and at another time among the worst. Hence, you should choose from among the mutual

funds those which have a record of consistently good performance and possess

characteristics (e.g. the industry composition of investments) which will help to achieve

good long term performance.


3/86





In the case of equity funds, the ups and downs in the equity market have direct effect on

the performance of the equity funds. This is an inherent source of risk over both short-

term and long-term in the case of equity funds. An investor inequity funds should have

some understanding of the equity markets behaviour. How do we ensure that the mutual

fund will be managed in the best interest of the unit holders? This problem is taken care

of partly by the regulatory system and partly by fairly fierce competition among the

mutual funds for the investors money.

Deposits have some similarities with structured investment products, which offer 100%

capital protection. In both cases, returns might be linked to the performance of one or

more indices, securities or commodities. However, the mechanisms for delivering

protection of capital are quite different. In the case of a deposit, the deposit-taking firm

has an obligation to repay the depositor, while in the case of a structured investment

product, the protection is usually provided by a third party issuer of debt securities.

Firms communicating with customers in relation to accepting deposits must, from 1

November 2009, comply with the rules in the Banking Conduct of Business Sourcebook

(BCOBS).1. In relation to deposit promotions, standards have not altered, as the new rules

in BCOBS 2 are equivalent to the COBS 4 rules that applied previously.

Key issues identified

Issues we identified from our sample included:

Explanations about the nature of deposit protection or guarantees were either

omitted or potentially misleading,

Lack of clarity about the roles and relationship of the promoter and deposit taker;

Headline rates that do not clarify that it is possible to receive no return;

Complex restrictions and rates of return; and

Uncertainty and inconsistency about how to describe and categorise structured

deposits.

Firms must ensure that descriptions of structured deposits in financial promotions are fair,

accurate and sufficiently clear for the average member of the promotions target audience

to understand. This may pose particular challenges where the basis for the return on the

deposit is more complex, but inexperienced customers may view structured deposits as


4/86





simple savings products. Although some structured deposits are indeed very simple, we

saw others that were either inherently complicated or described in a way that made them

appear so.

The main purpose is to examine the performance of the mutual fund industry in India and

Fixed Deposits in INDIA and compare their performance to know whether Fixed deposits

are better to invest in than Mutual Funds. The study should definitely safe-guard the

interest of Investors. Hence the research is carried to suggest the Schemes based on their

Risk Profile.ang some progress, the progress has been set with

1.1. Mutual fund

A mutual fund is a scheme in which several people invest their money for a

common financial cause. The collected money invests in the capital market and the

money, which they earned, is divided based on the number of units, which they hold.

The mutual fund industry started in India in a small way with the UTI Act creating what

was effectively a small savings division within the RBI. Over a period of 25 years this

grew fairly successfully and gave investors a good return, and therefore in 1989, as the

next logical step, public sector banks and financial institutions were allowed to floatmutual funds and their success emboldened the government to allow the private sector to

foray into this area.

There are many types of mutual funds. We can classify funds based on:-

1. Structure

v Open-ended

v Close-ended

2. Nature

v Equity

v Debt

v Balanced

3. Investment objective

v Growth

v Income

v Money market etc.


5/86





CONCEPT OF MUTUAL FUND:-

A mutual fund is a common pool of money into which investors place their

contributions that are to be invested in accordance with a stated objective. The ownership

of the fund is thus joint or mutual; the fund belongs to all investors. A single investors

ownership of the fund is in the same proportion as the amount of the contribution made

by him or her bears to the tota l amount of the fund Mutual Funds are trusts, which accept

savings from investors and invest the same in diversified financial instruments in terms of

objectives set out in the trusts deed with the view to reduce the risk and maximize the

income and capital appreciation for distribution for the members. A Mutual Fund is a

corporation and the fund managers interest is to professionally manage the funds

provided by the investors and provide a return on them after deducting reasonable

management fees.

Working of Mutual Funds:

The following figure explains the working of Mutual funds

Figure-1


6/86





Common Terms Used

Net Asset Value (NAV): Net Asset Value is the market value of the assets of the

scheme minus its liabilities. Per unit NAV is the net asset value of the scheme

divided by the number of units outstanding on the Valuation Date

Beta: A measure of the volatility, or systematic risk, of a security or a portfolio in

comparison to the market as a whole. Beta is calculated using regression analysis,

and indicates the tendency of a security's returns to respond to swings in the

market. A beta of 1 indicates that the security's price will move with the market. A

beta indicates that the security's price will be more volatile than the market.

History of Mutual Funds

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 funds in India can be broadly divided into four distinct phases.

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It

was set up by the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from

the RBI and the Industrial Development Bank of India (IDBI) took over theregulatory 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


7/86





Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI

Mutual Fund established in June 1987 followed by Canbank 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). At the end of 1993,

the mutual fund industry had assets under management of Rs.47, 004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

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

mutual fund industry, giving the Indian investors a wider choice of fund families.Also, 1993 was the year in which the first Mutual Fund Regulations came into being,

under which all mutual funds, except UTI were to be registered and governed. The

erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private

sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now

functions under the SEBI (Mutual Fund) Regulat ions 1996.

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 does

not come under the purview of the Mutual Fund Regulations.


8/86





COMPANY PROFILE

1.1(A) SBI Mutual Fund

In November 1987, SBI Mutual Fund from the State Bank of India became the

first non UTI mutual fund in India. SBI Mutual Funds (SBI MF) is a partnership between

Indias largest bank State Bank of India and Frances Societe Generale Asset

Management. State bank of India owns 63% in SBI MF and the rest 37% is owned by

Frances Societe Generale Asset Management. As on April 30 2009, the company had

assets of Rs 37213.06 Crs.

It is currently operating a total of 46 schemes which includes Equity schemes, Debtschemes, Short term debt schemes, Equity and debt, Gilt fund.

A total of over 6 million people have invested in the funds of SBI. The fund reaches out

to investors through a network of over 150 points of acceptance, 28 investor service

centres, 46 investor service desks and 56 district organisers.

On the 17th of May, 2010 the company launched a PSU fund with the aim of investing in

public sector companies which offer significant growth prospects for the investors and

also take advantage of the unlocking of value of some of these companies due to

disinvestment by the government.

Products currently being offered by the company are as follows:

Equity / Growth based products -

The equity based funds offered by SBI Mutual Fund, are as follows:

v Magnum COMMA Fund

v Magnum Equity Fund

v Magnum Global Fund

v Magnum Index Fund

Debt / Income based products -

The debt based funds that are in operation now, are as follows:

v Magnum Children's Benefit Plan

v Magnum Gilt Fund


9/86





v Magnum Gilt Fund (Long Term)

v Magnum Gilt Fund (Short Term)

vMagnum Income Fund many more.

Balanced funds -

The balanced funds that are in operation now, are as follows:

v Magnum Balanced Fund.

v Magnum NRI Investment Fund - FlexiAsset Plan.

Key Personnel:

Mr. Achal Gupta Managing Director and Chief Executive Officer.

Mr. Didier Turpin Dy. Chief Executive Officer.

Mr. Navneet Munoot Chief Investment Officer.

Mr. R. S. Srinivas Jain Chief Marketing Officer.

Mr. Vinaya Datar - Company secretary and Compliance officer.

1.1(B) RELIANCE MUTUAL FUND:-

Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,

1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital Trustee Co.

Limited is the Trustee. It was registered on June 30, 1995 as Reliance Capital Mutual

Fund which was changed on March 11, 2004. Reliance Mutual Fund was formed for

launching of various schemes under which units are issued to the Public with a view to

contribute to the capital market and to provide investors the opportunities to make

investments in diversified securities.RMF is one of Indias leading Mutual Funds, with

Average Assets Under Management (AAUM) of Rs. 88,388 crores (AAUM for 30th Apr

09) and an investor base of over 71.53 Lakhs. Reliance Mutual Fund, a part of the

Reliance Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in

the country

Sponsor:- Reliance Capital Limited.

Trustee:- Reliance Capital Trustee Co. Limited.

Investment Manager:- Reliance Capital Asset Management Limited. The Sponsor, the

Trustee and the Investment Manager are incorporated under the Companies Act 1956.


10/86





Vision Statement:- To be a globally respected wealth creator with an emphasis on

customer care and a culture of good corporate governance.

Mission Statement:-To create and nurture a world-class, high performance environment

aimed at delighting our customers.

SCHEMES

A). EQUITY/GROWTH SCHEMES:

v Reliance Infrastructure Fund (Open-Ended Equity)

v Reliance Natural Resources Fund (Open-Ended Equity)

v Reliance Equity Linked Saving Fund (A 10 Year Close-Ended Equity)

B). DEBT/INCOME SCHEMES

v Reliance Monthly Income Plan

v Reliance Income Fund etc.

C). SECTOR SPECIFIC SCHEMES

v Reliance Banking Fund

v Reliance Pharma Fund

1.1(C) UNIT TRUST OF INDIA MUTUAL FUND:-

'Unit Trust of India was created by the UTI Act passed by the Parliament in 1963.

For more than two decades it remained the sole vehicle for investment in the capital

market by the Indian citizens. In mid- 1980s public sector banks were allowed to open

mutual funds. The real vibrancy and competition in the MF industry came with the setting

up of the Regulator SEBI and its laying down the MF Regulations in 1993.UTI

maintained its pre-eminent place till 2001, when a massive decline in the market indices

and negative investor sentiments after Ketan Parekh scam created doubts about the

capacity of UTI to meet its obligations to the investors. This was further compounded by

two factors; namely, its flagship and largest scheme US 64 was sold and re-purchased not


11/86





at intrinsic NAV but at artificial price and its Assured Return Schemes had promised

returns as high as 18% over a period going up to two decades.

Vision:-To be the most Preferred Mutual Fund.

Mission:-

The most trusted brand, admired by all stakeholders.

The largest and most efficient money manager with global presence

The best in class customer service provider

The most preferred employer

The most innovative and best wealth creator

Sponsor:-

v State Bank of India

v Punjab National Bank

v Life Insurance Corporation of India

Trustee: - UTI Trustee Co. Limited

SCHEMES:-

v UTI Energy Fund (Open Ended Fund)

v UTI Equity Tax Savings Plan (Open Ended Fund)

v UTI Master Index Fund

v UTI Short Term Income Fund -Retail Plan etc.


12/86





1.2 Bank Fixed Deposits

Bank Fixed Deposits are also known as Term Deposits. In a Fixed Deposit

Account, a certain sum of money is deposited in the bank for a specified t ime period with

a fixed rate of interest.

The rate of interest for Bank Fixed Deposits depends on the maturity period. It is higher

in case of longer maturity period. There is great flexibility in maturity period and it ranges

from 7days to 10 years. The interest is compounded annually and is added to the principal

amount. Minimum deposit amount is Rs 1000/- and there is no upper limit. Loan /

overdraft facility is available against bank fixed deposits. Premature withdrawal is

permissible but some penalty is levied. Tax Deductible at Source, if the interest paid/

payable on deposit exceeds Rs.5000/- per customer, per year, per branch.

1.2(A) State Bank of India Fixed Deposits

State Bank of India fixed deposit is a good option to earn higher income on

surplus funds. Bank offers flexibility in period from 15 days to 10 years and can be

opened with a nominal amount of Rs. 1000/- only. Against your fixed deposit you can

take loan/overdraft during your urgent financial requirement. There is prematurewithdrawal facility, transfer of term deposit within bank network with out any charge,

interest is accumulated in your account timely and gets compounded quarterly, automatic

renewal of your deposits on maturity. You can convert your special term deposit and vice

versa.

1.2(B) Federal Bank Fixed Deposits

Federal Bank fixed deposit gives you option to give instructions while placing

deposits with regard to closure or renewal of deposit. There is nomination facility. You

can withdraw your money at premature or can get premature renewal of the deposit. You

can take advance also against deposit.

Federal Fixed Deposit Benefits

v Minimum amount Rs.1000.

v Quarterly /Monthly interest payments.

vAdvance upto 90% of deposit.


13/86





1.2( C) ICICI Bank Fixed Deposit

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. In October 2001, the Boards of

Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-

owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI

Capital Services Limited, with ICICI Bank.

ICICI bank has a set of choice of investment plans attached to fixed deposit. You get a

wide range of tenures along with auto renewal facility on maturity of deposits. You canopen term deposit with nominal amount of Rs 1000/- only. Bank has a loan facility

against deposit. The re-investment plans on fixed deposits are lucrative as re-investment

fixed deposit rates do not change in fact works like a recurring debit account transaction.

Fixed Deposit Account

v Flexibility of tenure - 7 days to 10 years

v Liquidityv Premature / Partial withdrawal permitted (subject to applicable charges)

v Loan / Overdraft upto 90%of FD amount

v Option of monthly / quarterly payout available

v Competitive interest rate - Know interest rates for various tenures

v Convenient ways to open a FD

v Internet Banking

vPhone banking

v ICICI Bank Branch
http://www.icicibank.com/interest-rates.html#fdhttp://www.icicibank.com/interest-rates.html#fd


14/86





1.3 Difference Between Bank Fixed deposit and Mutual funds

FEATURES FIXED DEPOSITS MUTUAL FUNDS

Return on Investment Banks offer an assured fixed

rate of return on maturity.

Currently the rate of return

varies from 3.5% to 8.5%

depending on the maturity

period. Interest is compoundedquarterly and the proceeds are

paid on maturity.

The rate of return of a debt

fund is not assured and is

governed by movement in

interest rates and money

market conditions. Any

fluctuat ions in prices orinterest rate impact the NAV

of the fund.

Liquidity Most banks allow premature

withdrawal of the amount

invested, before the actual

maturity date. The interest

would be calculated on the

basis of the number of days the

amount stayed invested with

the bank. For larger amounts,

banks have surrender charges

or penalties. In such cases,

money would not be made

available without penalties or

until the fixed deposit matures.

Liquidity is similar to

individual stocks or equity

mutual funds which allow

investors to liquidate their

units in the market as and

when they require. On

redemption, one can expect to

receive the amount in a day

or two from the fund house.

The amount received would

be based on the Net Asset

Value (NAV) of the fund as

on the date of redemption.

Tax Implications The interest earned on fixed

deposits is added to the total

income, and then taxed at

applicable slabs. Also, if the

total interest earned on all

The short term capital gain of

a debt fund is added to the

income and then taxed at

applicable slabs. For long

term capital gain tax, it is


15/86





fixed deposits in a bank is

greater than Rs 10,000 in a

financial year, a tax of 10.3%

will be deducted at source by

the banks.

calculated as 10% without

indexation or 20% with

indexation.

Capital Appreciation Not too good. Better

Risk Factor Assures capital protection. Not applicable to a larger

extent.

Impact of Inflation No protection Mutual funds have managed

to generate returns that have

surpassed this inflation rate

thus providing positive real

returns.

Investment Costs Banks do not generally charge

any management costs for a

fixed deposit investment.

Funds cost the investor

investment management fees

and fund distribution costs,

charged as a percentage of

the investment value. This is

borne by the investor

irrespective of the fund

performance. Fund houses

also charge an entry or exit

load from investors during

entry or exit from a scheme.


16/86





1.4 RESEARCH OBJECTIVES


17/86





The Research Objectives are formulated using KSA model as follows.

1.4 (A) KSA model

Definition of KSA

KSA model is a competency model of individual. KSA is the same KSAO. KSA

include Knowledge, Skills and Abilities (also called KSAs model) that an applicant must

have to perform successfully in the position. KSA are listed in the Qualifications and

Evaluation section of the job announcement.

Components of KSA:

1. Knowledge

A body of information needed to perform a task.

For example, Human Resources Knowledge includes knowledge of personnel

recruitment, selection, training, compensation and benefits, labour re lations and

negotiation, and personnel information systems.

2. Skills

Skills are the proficiency to perform a certain task.

For example, skill in operating computer peripherals such as printers.

3. Abilities

Abilities are an underlying, enduring trait useful for performing tasks.

For example, oral comprehension the ability to listen to and understand

information and ideas presented through spoken words and sentences.

Classification of KSAs

KSAs include technical elements and behavioural elements.

Technical KSAs measure acquired knowledge and hard technical skills.

Behavioural KSAs measure soft skills, include the attitudes and approaches applicants

take to their work, such as the ability to collaborate on team projects.


18/86





Figure - 2

1.4 (B) Objective

1. To briefly study the Mutual Fund industry in India in the last eight years.

2. To give an idea of the types of schemes available.

3. To study 3 major income schemes from the mutual fund industry.( SBI MutualFund,

Reliance Mutual Fund, ICICI Mutual Fund.

4. To study the Fixed Deposit scheme of 3 banks of India in last 8 years (SBI, ICICI

& Federal Bank )

5. To compares the Fixed Deposit schemes with Mutual Fund schemes.


19/86





1.5 RESEARCH

METHODOLOGY


20/86





Research as a care full investigation or enquiry especially through search for new

facts in any branch of knowledge Research is an academic activity and such as the term

should be used in technical sense. The manipulation of things , concepts or symbols for

the purpose of generalizing to extend ,correct or verify knowledge ,whether that

knowledge through objective.

METHODS OF DATA COLLECTION

Secondary data:

Secondary data means already available through books, journals, magazines, newspaper,

and internet. . The major sources of secondary data are given below.

Textbooks

Websites

News papers

The required data has been collected from websites like www.moneycontrol.com,

www.bseindia.com.

ANALYSIS:

For the proper analysis of data statistical (mean, standard deviation and co-

variance) and financial (Beta and CAPM) method was used.

DATA ANALYSIS AND INTERPRETATION

Data analysis and interpretation is the process of assigning meaning to the

collected information and determining the conclusions, significance, and implications of

the findings. The steps involved in data analysis are a function of the type of information

collected, however, returning to the purpose of the assessment and the assessment

questions will provide a structure for the organization of the data and a focus for the

analysis.

Quantitative Data is presented in a numerical format collected in a standardized manner

e.g. surveys, closed-ended interviews, tests analyzed using statistical techniques
http://www.bseindia.com/http://www.bseindia.com/http://www.moneycontrol.com/


21/86





The analysis ofNUMERICAL (QUANTITATIVE) DATA is represented in mathematical

terms. The most common stat istical terms include:

Mean The mean score represents a numerical average for a set of responses.

Standard deviation The standard deviation represents the distribution of the

responses around the mean. It indicates the degree of consistency among the

responses. The standard deviation, in conjunction with the mean, provides a better

understanding of the data. For example, if the mean is 3.3 with a standard

deviation (StD) of 0.4, then two-thirds of the responses lie between 2.9 (3.3 0.4)

and 3.7 (3.3 + 0.4).

Variance-A measure of the dispersion of a set of data points around their mean

value. Variance is a mathematical expectation of the average squared deviations

from the mean. Variance measures the variability (volatility) from an average.

Volatility is a measure of risk, so this statistic can help determine the risk an

investor might take on when purchasing a specific security.

Co-variance- A measure of the degree to which returns on two risky assets move

in tandem. A positive covariance means that asset returns move together. A

negative covariance means returns move inversely.

One method of calculat ing covariance is by looking at return surprises (deviations from

expected return) in each scenario. Another method is to multiply the correlat ion between

the two variables by the standard deviation of each variable.

Possessing financial assets that provide returns and have a high covariance with each

other will not provide very much diversification.

For example, if stock A's return is high whenever stock B's return is high and the

same can be said for low returns, then these stocks are said to have a positive covariance.

If an investor wants a portfolio whose assets have diversified earnings, he or she should

pick financial assets that have low covariance to each other.

In the project work, NAV and Nifty values are considered from 1 st January 2005 to 31st

December 2012. These values were then considered quarterly to calculate mean, standarddeviation, co variance. This was followed by calculation of CAPM. During the project 3


22/86





mutual funds i.e SBI mutual fund, Reliance Mutual fund and UTI mutual funds was

considered. On the other hand 3 fixed deposits were also considered i.e SBI Fixed

Deposit, ICICI Fixed Deposit and Federal Bank Fixed Deposit.

The rate of return associated with the level of risk and the performance of mutual funds is

compared and analysed with respect to the performance of fixed deposits in India.

The entire aim of the project work is to analyse the fact that Fixed Deposits are better

investing option than Mutual Funds.

Sharpe Ratio: A ratio to measure risk-adjusted performance. The Sharpe ratio is

calculated by subtracting the risk-free rate from the rate of return for a portfolio

and dividing the result by the standard deviation of the portfolio returns. The

Sharpe ratio formula is:

Calculation of Sharpe Ratio:-

S(x) = ( Rx - Rf) / StdDev(x)Where,

x is some investment

Rx is the average annual rate of return of x

Rf is the best available rate of return of a "risk-free" security

StdDev(x) is the standard deviation of Rx

The Sharpe ratio tells us whether a portfolio's returns are due to smart investment

decisions or a result of excess risk. The greater a portfolio's Sharpe ratio, the better its

risk-adjusted performance has been. A negative Sharpe ratio indicates that a risk-less

asset would perform better than the security being analyzed.


23/86





The research design followed in the study is as follows:

Title of the Study : COMPARATIVE STUDY OF THE

PERFORMANCE OF THREE INCOME FUNDS

(MUTUAL FUNDS) WITH THE TOP THREE

FIXED DEPOSITS SCHEMES OF BANKS (SBI,

ICICI & FEDERAL BANK) IN INDIA

Period : 01-Jan-2013 to 31-mar-2013

Sample size : 3 schemes of Mutual Funds

: 3 schemes of Fixed Deposits

Representative sample : 3 Mutual Funds:- SBI MAGNUM FUND, RELIANCE

MUTUAL FUND and UTI MUTUAL FUND.

: 3 Fixed Deposits:- SBI, ICICI, FEDERAL BANK.

Project Design : The project design selected for this project is

Descriptive project design. Descriptive design is one

that is concern with describing the characteristics of

consumers/ dealers who use/ sell the product/ services.

Hence here the characteristics and performance of

Mutual funds and Fixed deposits are studied through

secondary information.

Sampling technique : Systematic sampling technique used keeping in mind with

the following, funds and fixed deposits which are in to the market for more than 5 years,

different investment styles are chosen to know the importance of r isk and return involved.


24/86





1.6 LIMITATIONS OF THE PROJECT


25/86





The limitations of the project are as follows:-

v The time constraint was one of the major problems.

v The study is limited to the different schemes available under the mutual

funds and fixed deposits selected.

v The study is limited to selected mutual fund and fixed deposit schemes.

v The lack of information sources for the analysis part.

v Sample limitation

v Reliability: - The data collected by me is not much reliable

v Parameters: - All the parameters have not been taken.

v Lack of Awareness

v Past performance may or may not sustain in the future

v Unpredictable change in the market cond ition will prove difficulty in

analysis of preferred sector for investing

v Investor preference is analyzed based only on observation

v Market risk is not taken in to consideration due to non possibility of

information

vMicro level data have been taken in analysis; Macro level data may affectthe returns.


26/86





Chapter -2

LITERATURE REVIEW


27/86





Review of the literature plays an important role in any research, it is considering

the importance of mutual funds and several academicians have tried to study the

performance of various mutual funds. Literature on mutual fund performance evaluation

is enormous.

Standard deviation, average variance and average coefficient of variation (COV) are

techniques used for measuring the performance of Mutual Funds and Fixed Deposits.

1. Nidhi Walia-

Faculty PURCITM,

Thapar University, Patiala

2. Dr. (Mrs.) Ravi Kiran,

Assosiate Professor,SOMSS,

Thapar University

Abstract

Financial innovations have become the central driving force taking any financial

system towards economic efficiency. Indian Capital market has shown a spurt growth

with financial innovations becoming a regular feature leading to change in investor's

preferences for newly fangled financial innovations. Mutual fund has become an obvious

choice for most of the investors because of its performance in terms of providing higher

returns at high risk.

At the same time there are bank that offers Fixed Deposit schemes that look attractive

enough. And even some of the top Mutual Funds that offer income schemes often find it

challenge to compute with this FD schemes.


28/86





1. Prof. Kalpesh P Prajapati,

Assistant Professor,

S.V Institute of Management,

Gujarat Technological University,

Ahmedabd, Gujarat, India

2. Prof. Mahesh K Patel,


N.P College of Computer Studies & Management

Hemchandracharya North Gujarat University,

Patan, Gujarat, India.

Abstract

In this paper the performance evaluation of Indian mutual funds and fixed deposits is

carried out through risk-return analysis. The data used is daily closing NAVs.

"Security Market Line" (SML) uses the systematic risk termed beta. Beta is defined as the

covariance between a security (or portfolio of securities) and the market as a whole,

divided by the variance of the market. The market as a whole is considered the point

of tangency between the SML and the efficient frontier This is the foundation for the

Capital Asset Pricing Model (CAPM).

The CAPM is,

= RF+(RM-RF)(Beta)


29/86





Dr. Shakti Kumar

Assistant Professor, Department of Economics and Rural Development,

Dr. R.M.L. Avadh University, Faizabad

Abstract

Equity mutual fund is risk adjusted return in which individual fund does not earn

higher returns from following the momentum strategy in stock (Carhart, 1997) because

of investment constraints (Almazan, 2004). Restriction on competing products is the

reason of the development of money market and short term bond funds (Klapper, 2000).

Therefore, an investor should invest in small equity fund whose trading activity is high

(Dahlquist, 2000) or whose expense ratio is low ( Malkiel, 1995) . Funds that heavily

underperform have very high expense ratio, while funds that are successful do not

increase revenues by raising their fees but benefit from increased size of their funds

(Elton 1996, Carhat 1997). Actively managed equity funds charge higher fees than index

tracking funds or bond and money market funds, reflecting the higher costs of employing

investment management staff to achieve diversification and strategy (James et al. 1999).

Funds charge lower fees when they have smaller boards and a large proportion of

independent directors (Tufano and Sevick, 1997). Larger and more mature funds as well

as no load funds have lower expense ratio (Malhotra and Mcleod, 1997). Aggressive

growth funds charge higher entry and exit fees to discourage redemption because they

hold more of the smaller, less liquid stocks (Chordia, 1996). However, despite the basic

academic advice offered to investors to prefer low expense index funds, actively managed

funds continue to be popular (Gruber, 1996). To decrease the risk it is advised to use

derivative. Bond mutual fund uses derivatives more than equity mutual funds. Use of

derivative is negatively correlated with fund age and positively correlated with fund size

(Johnson and Yu 2004) and it is positively correlated with asset turnover (Koski and

Pontiff, 1999). Derivatives are used for trading rather than hedging (Minton et al. 2009).

Methodology

Index formula of (P1 /P0 *100) has been followed to get the value of the invested money.

It has been adjusted with inflation by depreciation the inflated value.


30/86





Harry Markowitz (1952)

Abstract

It provides a theory about how investors should select securities for their

investment portfolio given beliefs about future performance. He claims that rational

investors consider higher expected return as good and high variability of those returns as

bad. From this simple construct, he says that the decision rule should be to diversify

among all securities, securities which give the maximum expected returns. His rule

recommends the portfolio with the highest return is not the one with the lowest varianceof returns and that there is a rate at which an investor can increase return by increasing

variance. This is the cornerstone of portfolio theory as we know it.

His portfolio theory shows that an investor has a choice of combinations of return and

variance depending on the percentage of wealth invested in various combinations of risky

assets.

William Sharpe (1964) and John Lintner (1965)

Abstract

They show that the theory implies that the rates of return from efficient

combinations of risky assets move together perfectly (will be perfectly correlated). This

gave birth to the "Security Market Line" (SML). The difference between the Capital

Market Line (CML) and SML is the measure of risk used for the horizontal axis. The

CML uses the variance of returns, whereas the SML uses the systematic risk termed beta.

Beta 1s defined as the covariance between a security (or portfolio of securities) and the

market as a whole, divided by the variance of the market. The market as a whole is

considered the point of tangency between the SML and the efficient frontier This is the

foundation for the Capital Asset Pricing Model (CAPM).


31/86





SUKHWINDER KAUR DHANDA

Asst. Prof. cum (Research Scholar) Department of Management Studies,

Baba Banda Singh Bahdaur Engineering College,

Fatehgarh Sahib (Punjab)

DR. G.S.BATRA

Professor,

School of Management studies,

Punjabi Univers ity Patiala (Punjab)

DR BIMAL ANJUM

Prof and HOD,

Management Studies Department, RIMT-IET,

Mandi Gobindgarh (Punjab)

Abstract

Mutual fund companies collect the savings of the investors and make a big corpus

of these savings and invested in a well diversified portfolio of different companies. It is

generally believed that mutual funds are able to diversify the risk. Mutual fund industry

has just four decades old in India. During this short span of time it has made tremendousgrowth. So considering these points this paper is an attempt to study the performance

evaluation of selected mutual funds in terms of risk and return relationship. For this rate

of return method, Beta, Standard Deviation has been used. Nifty has been used as a

benchmark to study the performance of mutual funds in India. The study period has been

taken from 1st January2005 to 31st December 2012.


32/86





Sharad Panwar and Dr. R. Madhumathi

Indian Institute of Technology, Madras

Abstract

The study found that public-sector sponsored funds do not differ significantly from

private-sector sponsored funds in terms of mean returns%. However, there is a significant

difference between public-sector sponsored mutual funds and private-sector sponsored

mutual funds in terms of average standard deviation, average variance and average

coefficient of variation (COV).

Fama and McBeth (1973)

Abstract

They examine the return of securities, using OLS techniques and find that the

CAPM, or market model, explains returns well. They examined three testable

implications of the market model, (1) the relationship between risk and return is linear,

(2) beta is a complete measure of risk, and (3) higher risk should be associated with

higher returns. They conclude that none of the three testable implications canbe rejected.

The results are consistent with efficient markets and a sound asset pricing model,

however, the estimated intercept was somewhat higher than Rf.


33/86





Roll (1978)

Abstract

He shows there is ambiguity when performance is measured by the SML. The

difficulty is that different market indices provide different rankings.

While previous work was mathematically, theoretically, and intellectually rigorous, the

author not only defined this market portfolio but made an attempt to estimate a covariance

matrix with it. Theoretically, the market portfolio IS the composition of all investible

assets. In practice, since this is not measurable, some proxy must be used for the true

market portfolio The trouble is that even an equally weighted and value weighted Index

of the same securities can produce conflicting performance results when used as the

proxy for the market portfolio. The ambiguity of the SML arises because a different beta

can be generated for assets and portfolios by using different indices. Therefore, beta is not

an attribute of the individual asset. Beta is a measure of the risk of an asset if included in

a portfolio of risky assets consisting of the market portfolio and a risk-less asset.Therefore, differences in portfolio selection ability cannot be measured by the SML

criterion. If the index is ex-ante mean variance efficient, it is impossible to discriminate

between winners and losers. If the index is not ex-ante mean-var iance efficient,

designating winners and losers is possible, but another index can designate different

winners and losers and there is no way to determine which one is correct.


34/86





Prof. Kalpesh P Prajapati,


S.V Institute of Management,

Gujarat Technological University,

Ahmedabd, Gujarat, India.

Prof. Mahesh K Patel,


N.P College of Computer Studies & Management

Hemchandracharya North Gujarat University,

Patan, Gujarat, India.

Abstract

In this paper the performance evaluation of Indian mutual funds is carried out

through risk-return analysis. The data used is daily closing NAVs. The source of data iswebsite of Association of Mutual Funds in India (AMFI). The study period is 1st January

2005 to 31st

December, 2012. The results of performance measures suggest that most of the mutual

fund have given positive return during 2005 to 2012.

Sarish and Ajay Jain

Abstract

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal.

The money thus collected is then invested in capital market instruments such as

shares, debentures and other securities. The income earned through these investments and

capital appreciation realized is shared by its unit holders in proportion to the number of

units owned by them. The term risk has a variety of meanings in business and everydaylife. At its most general level, risk is used to describe any situation where there is


35/86





uncertainty about what outcome will occur. Life is obviously very risky. Even the short

term future is often highly uncertain. In probability and statistics, financial management

and investment management, risk is often used in more specific sense to indicate possible

variability of outcomes around some expected.

Zacharias Thomas (1997)Ph D

Thesis, Performance effectiveness of Nationalised Bank- A Case Study of

Syndicate Bank, submitted to Kochin University (1997),

Abstract

Thesis studied the performance effectiveness of Nationalized Bank by taking

Syndicate Bank as case study in his Ph.D thesis. Thomas has examined various aspects

like growth and development of banking industry, achievements of Syndicate Bank in

relation to capital adequacy, quality of assets, Profitability, Social Banking, Growth,

Productivity, Customer Service and also made a comparative analysis of 'the performance

34 effectiveness of Syndicate Bank in relation to Nationalized bank. A per iod of ten years

from 1984 to 1993-94 is taken for the study. This study is undertaken to review and

analyze the performance effectiveness of Syndicate Bank and other Nationalized banks in

India using an Economic ManagerialEfficiency Evaluation Model (EMEE Model)

developed by researcher. Thomas in this study found that Syndicate Bank got 5th Position

in Capital adequacy and quality of assets, 15th in Profitability, 14th Position in Social

Banking, 8th in Growth, 7th in Productivity and 15th position in Customer Service among

the nationalized banks. Further, he found that five nationalized banks showed low health

performance, seven low priority performance and eleven low efficiency performance in

comparison with Syndicate Bank


36/86





Singla HK

Abstract

In his paper, financial performance of banks in India, in ICFAI Journal of Bank

Management No 7, he has examined that how financial management plays a crucial role

in the growth of banking. It is concerned with examining the profitability position of the

selected sixteen banks of banker index for a period of six years (2001-06). The study

reveals that the profitability position was reasonable during the period of study when

compared with the previous years. Strong capital position and balance sheet place, Banks

in better position to deal with and absorb the economic constant over a period of time.

Subramanian and Swami

Abstract

In their paper, Comparative performance of publc sector banks in india Prjanan,

Vol. XXII, have analyzed and compared the efficiency in six public sector banks, four

private sector and three foreign banks for the year 1996-97. Operational efficiency is

calculated in terms of total business and salary expenditure per employee. The analysis

revealed that higher per employee salary level need not result in poor efficiency and

business per employee efficiency co-efficient was also calculated. Among the PSBs,

Bank of Baroda registered the high efficiency and operating profit per employee. Among

the private sector banks Indus Bank followed by Citibank Registered highest and second

highest operating profit per employee respectively. However, among the Nationalized

Banks there existed wide variations in efficiency.Frequent changes are order of the day

for the topics of this nature. Therefore, one should rely on latest information. Some

organizations like, RBI, IBA, SBI and ICRA have carried out several research studies on

various issues relating to banking and exclusive banking journals/periodicals like Bank

Quest, The Bankers, RBI occasional papers, RBI bulletins and general magazines like

Business Today, Business India, Finance India, have been publishing papers on various

aspects like NPAs, capital adequacy, branch expansion, credit dispensation, deposit

mobilization, service quality, technology, performance evaluation, etc. Same studies and

papers suitable to this study are being reviewed here.


37/86





Chapter - 3

FINDINGS


38/86





3.1 Tabulation of Nifty Returns :-

DATE Nifty Return (%) D D^2

31-12-2012 5905.1 5.08 0.76 0.58

28-09-2012 5619.7 7.47 3.16 9.96

29-06-2012 5229 -0.37 -4.69 21.98

30-03-2012 5248.51 0.95 -3.37 11.35

30-12-2011 5199.25 -2.39 -6.71 44.98

30-09-2011 5326.6 -2.83 -7.15 51.13

30-06-2011 5482 -4.65 -8.97 80.44

31-03-2011 5749.5 4.42 0.11 0.01

31-12-2010 5505.9 -8.50 -12.82 164.38

30-09-2010 6017.7 12.11 7.80 60.77

30-06-2010 5367.6 1.70 -2.62 6.86

31-03-2010 5278 8.11 3.79 14.40

31-12-2009 4882.05 3.62 -0.70 0.49

30-09-2009 4711.7 1.62 -2.69 7.25

30-06-2009 4636.45 33.46 29.15 849.56

31-03-2009 3473.95 20.84 16.53 273.09

31-12-2008 2874.8 -0.37 -4.69 22.00

30-09-2008 2885.6 -33.40 -37.72 1422.75

30-06-2008 4332.95 -16.12 -20.44 417.80

31-03-2008 5165.9 0.55 -3.76 14.15

31-12-2007 5137.45 -12.93 -17.25 297.57

28-09-2007 5900.65 36.64 32.33 1045.02

29-06-2007 4318.3 5.64 1.32 1.74

30-03-2007 4087.9 0.13 -4.19 17.55

29-12-2006 4082.7 9.04 4.73 22.35

29-09-2006 3744.1 19.12 14.80 219.08

29-06-2006 3143.2 -10.41 -14.72 216.80

31-03-2006 3508.35 16.90 12.59 158.41

30-12-2005 3001.1 26.58 22.26 495.59


39/86





Table 1

Where,

D= Deviation

The Nifty data is represented below:-

Here ,

The X-axis represents the years and

The Y-axis represents Nifty basic points.

Graph-3

0

1000

2000

3000

4000

5000

6000

7000

01/03/2005

01/07/2005

01/11/2005

01/03/2006

01/07/2006

01/11/2006

01/03/2007

01/07/2007

01/11/2007

01/03/2008

01/07/2008

01/11/2008

01/03/2009

01/07/2009

01/11/2009

01/03/2010

01/07/2010

01/11/201

01/03/2011

01/07/2011

01/11/2011

01/03/2012

01/07/2012

01/11/2012

Nifty

30-09-2005 2370.95 2.54 -1.78 3.17

30-06-2005 2312.3 13.59 9.27 86.01

31-03-2005 2035.65 0.00 -4.32 18.63

Sum= 138.11 Sum=6055.85


40/86





Formula used:-

Calculation of return:-

Return= (P1- P0) / P0

Where,

P1= Current Month

P0= Base Month

Calculation of mean:-

Mean= Total Return / N

Where,

N = Number of Month.

Calculation of Variance:-

Variance = (D)^2 / 32

Where,

D= Deviation

Calculation of Standard Deviation:-

SD= Variance.

Calculation of BETA:-


41/86





Beta= Co Variance / Variance of Nifty.

Where,

Co Variance= Deviation of Investment * Deviat ion of Nifty.

Calculation of CAPM:-

CAPM= Rf+(Rm-Rf)*

Where,

Rf= Risk Free Rate

Rm= Return from Market

= Beta.

Calculation of Sharpe Ratio:-

S(x) = ( Rx - Rf) / StdDev(x)

Where,

x is some investment

Rx is the average annual rate of return of x

Rf is the best available rate of return of a "risk-free" security

StdDev(x) is the standard deviation of Rx

Table 2

Note:-

The following table represents the set of formulas widely used and applied to the

entire project for the purpose of computation and analysis of data.


42/86





Calculation of Mean and Standard Deviation of Nifty:-

Property Calculation Value (%)

Mean 138.11 / 32 4.31

Variance 6055.85 / 32 189.24

Standard Deviation Root of Variance 13.76

Table- 1.1

From the above table, we have found the following:-

Mean

Standard Deviation

Note:

The above calculated data of Nifty will help us to calculate co-variance with respect to

particular mutual funds and fixed deposits.

3.2 Calculation of Risk Free Rate (R.F):-

DATE RF Quarterly RF31-12-2012 8 2.00

28-09-2012 2.00

29-06-2012 2.00

30-03-2012 2.00

30-12-2011 7.8 1.95

30-09-2011 1.95

30-06-2011 1.9531-03-2011 1.95

31-12-2010 7.5 1.88

30-09-2010 1.88

30-06-2010 1.88

31-03-2010 1.88

31-12-2009 7.2 1.8

30-09-2009 1.830-06-2009 1.8


43/86





31-03-2009 1.8

31-12-2008 7.4 1.85

30-09-2008 1.85

30-06-2008 1.85

31-03-2008 1.85

31-12-2007 6.8 1.7

28-09-2007 1.7

29-06-2007 1.7

30-03-2007 1.7

29-12-2006 5.5 1.38

29-09-2006 1.38

29-06-2006 1.38

31-03-2006 1.38

30-12-2005 5.3 1.33

30-09-2005 1.33

30-06-2005 1.33

31-03-2005 1.33

Sum= 55.50

Table- 3

Calculation of mean risk free rate.


Mean 55.50/32 1.73

Table- 3.1

Quarterly Risk Free Rate is calculated to be 1.73(%).

Note:-

The above Risk Free Rate would help us to calculate Beta for mutual funds as well as for

fixed deposits.

The above interest rates have been collected from Government Deposits (Treasury bills)

yearly. Later the interest rate has been converted to quarterly data.


44/86





3.3 SBI MAGNUM INCOME FUND

Calculation of Return, Standard Deviation, Co-variance, Beta and CAPM from the given

NAV (Net Asset Value):-

DATE SBI MAGNUM

INCOME

FUND ( NAV)

RETURN

(%)

DEVIATION (D)^2 D

(From

Table

1)

D*D

31-12-2012 28.12 2.40 1.03 1.05 0.76 0.78

28-09-2012 27.46 3.51 2.13 4.53 3.16 6.71

29-06-2012 26.53 3.07 1.69 2.86 -4.69 -7.93

30-03-2012 25.74 2.55 1.17 1.37 -3.37 -3.95

30-12-2011 25.1 2.83 1.45 2.10 -6.71 -9.72

30-09-2011 24.41 1.96 0.59 0.34 -7.15 -4.18

30-06-2011 23.94 2.09 0.71 0.51 -8.97 -6.38

31-03-2011 23.45 1.47 0.09 0.01 0.11 0.01

31-12-2010 23.11 0.92 -0.46 0.21 -12.82 5.91

30-09-2010 22.9 0.66 -0.72 0.52 7.80 -5.60

30-06-2010 22.75 1.52 0.14 0.02 -2.62 -0.36

31-03-2010 22.41 1.68 0.30 0.09 3.79 1.14

31-12-2009 22.04 0.92 -0.46 0.21 -0.70 0.32

30-09-2009 21.84 0.69 -0.69 0.47 -2.69 1.85

30-06-2009 21.69 3.09 1.71 2.93 29.15 49.88

31-03-2009 21.04 -6.82 -8.20 67.21 16.53 -135.48

31-12-2008 22.58 10.52 9.15 83.64 -4.69 -42.90

30-09-2008 20.43 -0.20 -1.57 2.48 -37.72 59.35

30-06-2008 20.47 -1.30 -2.68 7.18 -20.44 54.78

31-03-2008 20.74 -0.96 -2.33 5.44 -3.76 8.78

31-12-2007 20.94 2.35 0.97 0.94 -17.25 -16.70

28-09-2007 20.46 2.92 1.54 2.37 32.33 49.77

29-06-2007 19.88 0.76 -0.62 0.38 1.32 -0.82

30-03-2007 19.73 0.05 -1.33 1.76 -4.19 5.56


45/86





29-12-2006 19.72 1.28 -0.09 0.01 4.73 -0.44

29-09-2006 19.47 2.04 0.67 0.44 14.80 9.86

29-06-2006 19.08 1.27 -0.10 0.01 -14.72 1.53

31-03-2006 18.84 -0.42 -1.80 3.24 12.59 -22.67

30-12-2005 18.92 0.42 -0.95 0.91 22.26 -21.22

30-09-2005 18.84 1.18 -0.20 0.04 -1.78 0.35

30-06-2005 18.62 1.64 0.26 0.07 9.27 2.41

31-03-2005 18.32 0.00 -1.38 1.90 -4.32 5.95

44.10 195.25 -13.41

Table - 4

Calculation.


Mean 44.10/32 1.38

Variance 195.25/32 6.10


Covariance D*D -13.41/32 -0.42

Nifty Variance From Table 1.1 189.24

Beta Cov/ Var of Nifty -0.22%

Risk Free (RF) From Table 2.1 1.73

CAPM 1.73+(4.32-1.73)(-22%) 1.729

Sharpe Ratio (1.38-1.73) / 2.47 -0.14

Table 4.1

From the following table the following has been calculated:-

Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio


46/86





The SBI MAGNUM INCOME FUND (NAV) data is represented below:-

Here ,


The Y-axis represents SBI Mutual Fund NAV.

Graph-4

0

5

10

15

20

25

30

01/03/2005

01/07/2005

01/11/2005

01/03/2006

01/07/2006

01/11/2006

01/03/2007

01/07/2007

01/11/2007

01/03/2008

01/07/2008

01/11/2008

01/03/2009

01/07/2009

01/11/2009

01/03/2010

01/07/2010

01/11/2010

01/03/2011

01/07/2011

01/11/2011

01/03/2012

01/07/2012

01/11/2012

SBI MAGNUM INCOME FUND ( NAV)


47/86





3.4 RELIANCE INCOME FUND



DATE RELIANCE

INCOME

FUND(G)

NAV

RETURN

(%)

DEVIATION (D)^2 D

(From

Table

1)

D*D

31-12-2012 37.7 2.45 0.55 0.30 0.76 0.42

28-09-2012 36.8 8.97 7.07 50.01 3.16 22.32

29-06-2012 33.77 -2.96 -4.86 23.62 -4.69 22.78

30-03-2012 34.8 2.56 0.66 0.44 -3.37 -2.24

30-12-2011 33.93 2.29 0.39 0.15 -6.71 -2.62

30-09-2011 33.17 1.69 -0.21 0.05 -7.15 1.53

30-06-2011 32.62 1.05 -0.85 0.72 -8.97 7.60

31-03-2011 32.28 1.32 -0.58 0.34 0.11 -0.06

31-12-2010 31.86 1.05 -0.85 0.73 -12.82 10.95

30-09-2010 31.53 0.61 -1.29 1.67 7.80 -10.09

30-06-2010 31.34 1.59 -0.31 0.10 -2.62 0.82

31-03-2010 30.85 0.92 -0.98 0.97 3.79 -3.74

31-12-2009 30.57 1.33 -0.57 0.33 -0.70 0.40

30-09-2009 30.17 0.40 -1.50 2.25 -2.69 4.04

30-06-2009 30.05 3.44 1.54 2.38 29.15 44.95

31-03-2009 29.05 -5.59 -7.49 56.10 16.53 -123.78

31-12-2008 30.77 19.45 17.55 307.95 -4.69 -82.31

30-09-2008 25.76 1.50 -0.40 0.16 -37.72 15.20

30-06-2008 25.38 -0.51 -2.41 5.81 -20.44 49.26

31-03-2008 25.51 0.71 -1.19 1.42 -3.76 4.48

31-12-2007 25.33 4.63 2.73 7.43 -17.25 -47.02

28-09-2007 24.21 2.98 1.08 1.16 32.33 34.82

29-06-2007 23.51 1.56 -0.35 0.12 1.32 -0.46

30-03-2007 23.15 -0.13 -2.03 4.12 -4.19 8.50


48/86





29-12-2006 23.18 1.89 -0.01 0.00 4.73 -0.05

29-09-2006 22.75 2.52 0.62 0.39 14.80 9.23

29-06-2006 22.19 0.77 -1.13 1.27 -14.72 16.61

31-03-2006 22.02 0.64 -1.26 1.59 12.59 -15.86

30-12-2005 21.88 0.83 -1.07 1.15 22.26 -23.84

30-09-2005 21.7 1.02 -0.88 0.77 -1.78 1.56

30-06-2005 21.48 1.85 -0.05 0.00 9.27 -0.47

31-03-2005 21.09 0.00 -1.90 3.61 -4.32 8.20

=60.81 477.10 -48.87

Table- 5

Calculation


Mean 60.81/32 1.90

Variance 477.10/32 14.90



Nifty Var iance From Table 1.1 189.24



CAPM 1.73+(4.32-1.73)(-0.8%) 1.71

Sharpe Ratio (1.90-1.73) / 3.86 0.044

Table- 5.1


Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio


49/86





The RELIANCE INCOME FUND (G) NAV data is represented below:-

Here ,


The Y-axis represents Reliance Mutual Fund NAV.

Graph-5

0

5

10

15

20

25

30

35

40

01/03/2005

01/07/2005

01/11/2005

01/03/2006

01/07/2006

01/11/2006

01/03/2007

01/07/2007

01/11/2007

01/03/2008

01/07/2008

01/11/2008

01/03/2009

01/07/2009

01/11/2009

01/03/2010

01/07/2010

01/11/2010

01/03/2011

01/07/2011

01/11/2011

01/03/2012

01/07/2012

01/11/2012

RELIANCE INCOME FUND(G) NAV


50/86





3.5 UTI-SHORT TERM INCOME FUND-RETAIL PLAIN



DATE UTI-SHORT

TERM

INCOME

FUND- NAV

RETURN

(%)

DEVIATION

(D)

(D)^2 D

(From

Table

1)

D*D

31-12-2012 19.87 2.42 0.52 0.27 0.76 0.40

28-09-2012 19.4 2.92 1.01 1.03 3.16 3.20

29-06-2012 18.85 2.61 0.71 0.50 -4.69 -3.33

30-03-2012 18.37 2.11 0.21 0.04 -3.37 -0.70

30-12-2011 17.99 2.39 0.49 0.24 -6.71 -3.27

30-09-2011 17.57 2.57 0.67 0.44 -7.15 -4.76

30-06-2011 17.13 3.07 1.17 1.36 -8.97 -10.45

31-03-2011 16.62 1.53 -0.38 0.14 0.11 -0.04

31-12-2010 16.37 1.30 -0.60 0.36 -12.82 7.74

30-09-2010 16.16 1.38 -0.52 0.27 7.80 -4.08

30-06-2010 15.94 1.40 -0.50 0.25 -2.62 1.32

31-03-2010 15.72 1.09 -0.81 0.66 3.79 -3.07

31-12-2009 15.55 2.24 0.33 0.11 -0.70 -0.23

30-09-2009 15.21 1.47 -0.44 0.19 -2.69 1.17

30-06-2009 14.99 4.61 2.70 7.30 29.15 78.77

31-03-2009 14.33 0.92 -0.99 0.98 16.53 -16.32

31-12-2008 14.2 2.38 0.48 0.23 -4.69 -2.23

30-09-2008 13.87 2.29 0.38 0.15 -37.72 -14.44

30-06-2008 13.56 2.19 0.28 0.08 -20.44 -5.77

31-03-2008 13.27 1.38 -0.53 0.28 -3.76 1.99

31-12-2007 13.09 2.67 0.76 0.58 -17.25 -13.17

28-09-2007 12.75 2.16 0.26 0.07 32.33 8.41

29-06-2007 12.48 2.30 0.39 0.15 1.32 0.52

30-03-2007 12.2 0.99 -0.91 0.83 -4.19 3.81


51/86





29-12-2006 12.08 1.26 -0.65 0.42 4.73 -3.05

29-09-2006 11.93 1.79 -0.11 0.01 14.80 -1.65

29-06-2006 11.72 1.65 -0.26 0.07 -14.72 3.76

31-03-2006 11.53 1.50 -0.41 0.17 12.59 -5.12

30-12-2005 11.36 1.43 -0.47 0.23 22.26 -10.57

30-09-2005 11.2 1.36 -0.55 0.30 -1.78 0.97

30-06-2005 11.05 1.56 -0.34 0.12 9.27 -3.16

31-03-2005 10.88 0.00 -1.90 3.62 -4.32 8.21

60.90 21.44 14.86

Table- 6

Calculation:-


Mean 60.90/32 1.90

Variance 21.44/32 0.67


Covariance D*D 14.86/32 0.46


Beta Cov/ Var of Nifty 0.24%


CAPM 1.73+(4.32-1.73)(0.24%) 1.74

Sharpe Ratio (1.90 1.73) / .82 0.21

Table- 6.1


Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio


52/86





The UTI-SHORT TERM INCOME FUND-RETAIL PLAIN (G) NAV data is

represented below:-

Here ,


The Y-axis represents UTI Mutual Fund NAV.

Graph-6

0

5

10

15

20

25

01/03/2005

01/07/2005

01/11/2005

01/03/2006

01/07/2006

01/11/2006

01/03/2007

01/07/2007

01/11/2007

01/03/2008

01/07/2008

01/11/2008

01/03/2009

01/07/2009

01/11/2009

01/03/2010

01/07/2010

01/11/2010

01/03/2011

01/07/2011

01/11/2011

01/03/2012

01/07/2012

01/11/201

UTI-SHORT TERM INCOME FUND-RETAIL PLAIN

(G) NAV


53/86





3.6 STATE BANK OF INDIA FIXED DEPOSIT:-



DATE Annual

RT

Quarterly

RT

DEVIATION

(D)

(D)^2 D(From

Table 1)

D*D

31-12-2012 8.5 2.13 0.09 0.01 0.76 0.07

28-09-2012 8.5 2.13 0.09 0.01 3.16 0.27

29-06-2012 9.75 2.44 0.40 0.16 -4.69 -1.87

30-03-2012 9.75 2.44 0.40 0.16 -3.37 -1.34

30-12-2011 9.25 2.31 0.27 0.07 -6.71 -1.83

30-09-2011 9.25 2.31 0.27 0.07 -7.15 -1.96

30-06-2011 9 2.25 0.21 0.04 -8.97 -1.89

31-03-2011 9 2.25 0.21 0.04 0.11 0.02

31-12-2010 9 2.25 0.21 0.04 -12.82 -2.70

30-09-2010 8.5 2.13 0.09 0.01 7.80 0.67

30-06-2010 8.5 2.13 0.09 0.01 -2.62 -0.23

31-03-2010 8.5 2.13 0.09 0.01 3.79 0.33

31-12-2009 7.75 1.94 -0.10 0.01 -0.70 0.07

30-09-2009 7.75 1.94 -0.10 0.01 -2.69 0.27

30-06-2009 7.75 1.94 -0.10 0.01 29.15 -2.96

31-03-2009 8 2.00 -0.04 0.00 16.53 -0.65

31-12-2008 8 2.00 -0.04 0.00 -4.69 0.18

30-09-2008 8 2.00 -0.04 0.00 -37.72 1.47

30-06-2008 8 2.00 -0.04 0.00 -20.44 0.80

31-03-2008 7.25 1.81 -0.23 0.05 -3.76 0.85

31-12-2007 7.25 1.81 -0.23 0.05 -17.25 3.91

28-09-2007 7.25 1.81 -0.23 0.05 32.33 -7.32

29-06-2007 7.5 1.88 -0.16 0.03 1.32 -0.22

30-03-2007 7.5 1.88 -0.16 0.03 -4.19 0.69

29-12-2006 7.5 1.88 -0.16 0.03 4.73 -0.78

29-09-2006 8 2.00 -0.04 0.00 14.80 -0.58


54/86





29-06-2006 8 2.00 -0.04 0.00 -14.72 0.58

31-03-2006 8 2.00 -0.04 0.00 12.59 -0.49

30-12-2005 7.5 1.88 -0.16 0.03 22.26 -3.65

30-09-2005 7.5 1.88 -0.16 0.03 -1.78 0.29

30-06-2005 7.5 1.88 -0.16 0.03 9.27 -1.52

31-03-2005 7.5 1.88 -0.16 0.03 -4.32 0.71

65.25 1.02 -18.81

Table - 7

Calculation


Mean 65.25/32 2.04

Variance 1.02/32 0.032






CAPM 1.73+(4.32-1.73)(-0.31%) 1.72

Sharpe Ratio (2.04 1.73) / .18 1.72

Table- 7.1


Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio


55/86





3.7 ICICI FIXED DEPOSIT



DATE Annual

RT

Quarterly

RT

DEVIATION

(D)

(D)^2 D(From

Table 1)

D*D

31-12-2012 8.5 2.13 0.19 0.037 0.76 0.15

28-09-2012 8.5 2.13 0.19 0.037 3.16 0.61

29-06-2012 9.25 2.31 0.38 0.145 -4.69 -1.79

30-03-2012 9 2.25 0.32 0.101 -3.37 -1.07

30-12-2011 9 2.25 0.32 0.101 -6.71 -2.14

30-09-2011 8.5 2.13 0.19 0.037 -7.15 -1.38

30-06-2011 8.5 2.13 0.19 0.037 -8.97 -1.73

31-03-2011 8.5 2.13 0.19 0.037 0.11 0.02

31-12-2010 8.25 2.06 0.13 0.017 -12.82 -1.68

30-09-2010 8.25 2.06 0.13 0.017 7.80 1.02

30-06-2010 8 2.00 0.07 0.005 -2.62 -0.18

31-03-2010 8 2.00 0.07 0.005 3.79 0.26

31-12-2009 7.5 1.88 -0.06 0.003 -0.70 0.04

30-09-2009 7.5 1.88 -0.06 0.003 -2.69 0.15

30-06-2009 7.5 1.88 -0.06 0.003 29.15 -1.65

31-03-2009 7.5 1.88 -0.06 0.003 16.53 -0.94

31-12-2008 7.5 1.88 -0.06 0.003 -4.69 0.27

30-09-2008 7.5 1.88 -0.06 0.003 -37.72 2.14

30-06-2008 7 1.75 -0.18 0.033 -20.44 3.71

31-03-2008 7 1.75 -0.18 0.033 -3.76 0.68

31-12-2007 7 1.75 -0.18 0.033 -17.25 3.13

28-09-2007 7 1.75 -0.18 0.033 32.33 -5.87

29-06-2007 7 1.75 -0.18 0.033 1.32 -0.24

30-03-2007 7.25 1.81 -0.12 0.014 -4.19 0.50

29-12-2006 7.25 1.81 -0.12 0.014 4.73 -0.56

29-09-2006 7.5 1.88 -0.06 0.003 14.80 -0.84


56/86





29-06-2006 7.5 1.88 -0.06 0.003 -14.72 0.83

31-03-2006 7.5 1.88 -0.06 0.003 12.59 -0.71

30-12-2005 7 1.75 -0.18 0.033 22.26 -4.04

30-09-2005 7 1.75 -0.18 0.033 -1.78 0.32

30-06-2005 7 1.75 -0.18 0.033 9.27 -1.68

31-03-2005 7 1.75 -0.18 0.033 -4.32 0.78

61.81 0.932 -11.89

Table- 8

Calculation:-


Mean 61.81/32 1.93

Variance 0.932/32 0.029



Nifty Var iance From table 1.1 189.24

Beta Cov/ Var of Nifty -0.20


CAPM 1.73+(4.32-1.73)(-0.20%) 1.72

Sharpe Ratio (1.93 1.73) / .17 1.18

Table- 8.1


Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio


57/86





3.8 FEDERAL BANK FIXED DEPOSIT



DATE Annual

RT

Quarterly

RT

DEVIATION

(D)

(D)^2 D(From

Table 1)

D*D

31-12-2012 8.25 2.06 0.12 0.0133 0.76 0.09

28-09-2012 8.25 2.06 0.12 0.0133 3.16 0.36

29-06-2012 8.75 2.19 0.24 0.0577 -4.69 -1.13

30-03-2012 8.75 2.19 0.24 0.0577 -3.37 -0.81

30-12-2011 8.5 2.13 0.18 0.0316 -6.71 -1.19

30-09-2011 8.5 2.13 0.18 0.0316 -7.15 -1.27

30-06-2011 8.25 2.06 0.12 0.0133 -8.97 -1.03

31-03-2011 8.25 2.06 0.12 0.0133 0.11 0.01

31-12-2010 8.25 2.06 0.12 0.0133 -12.82 -1.48

30-09-2010 8 2.00 0.05 0.0028 7.80 0.41

30-06-2010 8 2.00 0.05 0.0028 -2.62 -0.14

31-03-2010 8 2.00 0.05 0.0028 3.79 0.20

31-12-2009 7.5 1.88 -0.07 0.0052 -0.70 0.05

30-09-2009 7.5 1.88 -0.07 0.0052 -2.69 0.19

30-06-2009 7.5 1.88 -0.07 0.0052 29.15 -2.11

31-03-2009 8 2.00 0.05 0.0028 16.53 0.87

31-12-2008 8 2.00 0.05 0.0028 -4.69 -0.25

30-09-2008 8 2.00 0.05 0.0028 -37.72 -1.99

30-06-2008 7.5 1.88 -0.07 0.0052 -20.44 1.48

31-03-2008 7 1.75 -0.20 0.0389 -3.76 0.74

31-12-2007 7 1.75 -0.20 0.0389 -17.25 3.40

28-09-2007 7 1.75 -0.20 0.0389 32.33 -6.38

29-06-2007 7 1.75 -0.20 0.0389 1.32 -0.26

30-03-2007 7.25 1.81 -0.13 0.0182 -4.19 0.56

29-12-2006 7.25 1.81 -0.13 0.0182 4.73 -0.64

29-09-2006 7.5 1.88 -0.07 0.0052 14.80 -1.07


58/86





Table-9

Calculation


Mean 62.31/32 1.95

Variance 0.5087/32 0.0159






CAPM 1.73+(4.32-1.73)(-0.18%) 1.73

Sharpe Ratio 1.95-1.73/(0.13) 1.69

Table- 9.1


Mean

Standard Deviation

Covariance

Beta

CAPM

Sharpe Ratio

29-06-2006 7.5 1.88 -0.07 0.0052 -14.72 1.06

31-03-2006 8 2.00 0.05 0.0028 12.59 0.66

30-12-2005 7.5 1.88 -0.07 0.0052 22.26 -1.61

30-09-2005 7.5 1.88 -0.07 0.0052 -1.78 0.13

dhananjay final pjt

Documents