summer traning project

Summer Training

Project

“PORTFOLIO MANAGEMENT

Through MUTUAL FUUNDS”

COMPANY NAME

NITESH KUMAR TIWARI MBA

Enrolment no: A7001909063Specialization: FINANCE & MARKETING

Industry Guides:

Faculty Guide:

Mr. Manish Guar

Mrs. Parul Tripathi

Branch Manager Sr. Lecturer HR Edelweiss Broking Ltd. ABS, Lucknow

(SUMMER INTERNSHIP REPORT IN PARTIAL FULFILLMENT OF THE AWARD OF FULL TIME MASTERS IN BUSINESS ADMINISTRATION (2009-11)

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AMITY BUSINESS SCHOOL

AMITY UNIVERSITY UTTAR PRADESH -

LUCKNOW

DECLARATION

I hereby certify that the work which is being presented in the project entitled,

“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUND.” in partial

fulfillment of the requirements for the award degree of Master of Business

Administration at AMITY BUSINESS SCHOOL, AMITY UNIVERSITY,

UTTAR PRADESH, LUCKNOW, is an authentic record of my own work carried out

under the supervision of Mrs. PARUL TRIPATHI, Sr. Lecturer, ABS, Lucknow.

The matter presented in this Project Report by me has not been submitted by anyone

for the award of any other degree of this or any other University.

This is to certify that the above statement made by the candidate is correct and true to

the best of my knowledge.

NITESH KUMAR TIWARI

MBA (Finance & Marketing)

Semester- 3rd

En:-A7001909063

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STUDENT’S CERTIFICATE

Certified that this report is prepared based on the summer internship project undertaken

by me in Edelweiss Broking Ltd. from 10th may 2010 to th june 2010, under the able

guidance of Dr. Azara Isharat, Asst. Professor, ABS in partial fulfillment of the

requirement for award of degree of Master of Business Administration (MBA-G) from

Amity University, Uttar Pradesh.

Student. Faculty Guide ABS DirectorNitesh Kr. Tiwari Mrs. Parul Tripathi Prof. R. P. Singh

Signature Signature Signature

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ACKNOWLEDGEMENT

In pursuit of an MBA degree, summer internship is a critical component of the entire

process. ‘Edelweiss Mutual Fund PVT. LTD.’ has given me the opportunity to gain

invaluable experience under the guidance of Mr. Manish Guar (Sales Manager,

Lucknow Region) & Mr. Ali Ashad (Team leader- Retail channel). Their continuous

support and valuable in hand experience provided me with the conceptual

understanding and practical approach needed to work efficiently for this project. The

entire Edelweiss Mutual Fund’s staff is praiseworthy.

Last but not the least; I would also like to thank Prof. R.P. Singh, Director ABS and

my faculty Guide Mrs. Parul Tripathi Sr. Lecturer, ABS for her great advices and

Guidance and also to the entire staff of Edelweiss Broking ltd.,Mr. Anurag

Tripathi and Mr. Rochak Sahay and all my friends and colleagues who helped

whenever I faced any difficult situation.

I hope this report, reflecting my learning in the past eight weeks, is as beneficial to the

organization as it had been to me.

Again, I sincerely thank to all of them.

Nitesh Kumar Tiwari MBA, 3rd Semester Amity Business School En.-A7001909063

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Certificate

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PREFACE

Finance & its functions are the part of economic activity. Finance is very essentially

needed for all types of organizations viz; small, medium, large-scale industries &

service sector. Hence the role of finance manager & the subject finance accounting

gained maximum importance. Liberalization, globalization & privatization created

new challengers to entrepreneur & corporate world in carrying they’re day to day

activities. So, “finance is regarded as the life blood of a business organization.”

Master of Business Administrator as a professional course develop a new horizon of

knowledge & skill set & make as available for those seeking challenging carriers in

the of liberalizing & globalizing scenario of the corporate world.

The goal of the Summer Training is to give a corporate exposure (Real life situation)

to the students as well as to give them an opportunity to apply theory into the practice.

The real business problems are drastically different from class-room case solving.

Summer Project aims to providing little insight into working of an organization to a

management trainee.

Among every stage of knowledge being inculcated in students, practical training in

the corporate world plays a significant role in exhibiting and pruning their capabilities

and skill sets. The purpose behind writing a report is to put in to works the practical

training that is imparted into me that gives a better and a clear understanding of the

experience I got.

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“PORTFOLIO MANAGEMENT THROUGH MUTUAL FUND”

being a very important aspect of Edelweiss Mutual Fund Pvt. Ltd., I have tried to

explore many areas of the subject in my project report.

While preparing this project report I got the knowledge about various aspects

regarding financial decisions made in organization like “Edelweiss Mutual Fund Pvt.

Ltd.” the business world.

Table of contents

CHAPTER-1……………………………………………………..9-111. Executive summary………………………………………….092. Project objective…………………………………………......103. Research Methodology………………………………………11

CHAPTER-2…………………………………………………….12-211. Background……………………………………………….12-132. Trustee…………………………………………………….14-163. Business principal…………………………………………17-184. Theme Research……………………………………….…..19-205. Sponsor……………………………………………………….21

CHAPTER-3……………………………………………………...22-231. About Investment………………………………………….22-23

CHAPTER-4………………………………………………………24-521. Introduction ………………...................................................24-302. Type of Mutual Fund……………………………………….31-343. Benefits of the Mutual Fund………………………………..35-384. Disadvantage ……………………………………………….39-435. History………………………………………………………44-456. Industry Profile……………………………………………..46-517. Companies……………………………………………………..52

CHAPTER-5……………………………………………………….53-60 1. Port Folio Management…………………………………….53-552. Types of Investors………………………………………….56-583. Measurement of MF………………………………………..58-60

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CHAPTER-6……………………………………………………….61-961. Scheme Portfolio…………………………………………….61-632. HDFC Equity Fund………………………………………….64-763. ICICI Growth Fund………………………………………….77-864. Core & Satellite Fund………………………………………..87-925. ICICI Dynamic plan…………………………………………93-96

CHAPTER-7………………………………………………………..97-1. Conclusion…………………………………………………..97-982. Recommendations…………………………………………..99-101

ANNEXUR

Fact Sheet (Page-105)

Curriculum Vitae ( Page -106-107)

List of Figures

FIGURE-1FIGURE-2FIGURE-3FIGURE-4

List of GraphsGRAPH-1GRAPH-2GRAPH-3GRAPH-4GRAPH-5

List of TablesTABLE-1TABLE-2TABLE-3TABLE-4TABLE-5TABLE-6TABLE-7TABLE-8TABLE-9TABLE-10

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TABLE-11TABLE-12TABLE-13TABLE-14TABLE-15TABLE-16TABLE-17TABLE-18TABLE-19TABLE-20

CHAPTER-1

INTRODUCTION

EXECUTIVE SUMMARY

Investment may be defined as an activity that commits funds in any financial/physical form in the present with an expectation of receiving additional return in the future. The expectation brings with it a probability that the quantum of return may vary from a minimum to a maximum. The possibility of variation in the actual return is known as investment risk. Thus every investment involves a return and risk. The investor can choose the investment funds he wants to invest his money, providing the investor an opportunity to have a direct stake in the performance of the financial markets. He can also benefit from attractive tax advantages.A mutual fund is a professionally managed firm of collective investments that collects money from many investors and puts it in stocks, bonds, short-term money market instruments, and/or other securities. The fund manager, also known as portfolio manager, trades the fund's underlying securities, realizing capital gains or losses and

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passing any proceeds to the individual investors. Today, the worldwide value of all mutual funds totals more than $26 trillion in assets. The principal paid are invested in fund/funds of the investor’s choice (depending on the allocation rate) & units are allocated depending on the price of units for the fund/funds.

PROJECT OBJECTIVE:

The premiums that are collected are invested in different funds like equity fund, mid-cap fund, debt fund, balanced fund and cash fund. The funds must be allocated such that their performance is stable and improves so that the investor gets high returns. Due to the increasing competition it becomes necessary that the companies fund is the best performing fund with highest return. Among the different mutual funds this study is to find out the best fund which will yield high returns to the investor and minimize there risk.

OBJECTIVES OF THE STUDY:

To study the different investment guidelines prescribed by deferent mutual fund company.

To analyze the present performance of different mutual funds To analyze that how deferent companies diversified their portfolio for

maximum profit of their INVESTMENT.

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Based on the findings suitable suggestions are given.

Research Methodology

Since I have to get project for the analysis of the portfolio in mutual fund, that is why I have not go through primary data.I have also Interacted to more than 100 customers through phone calling during the lead generation, which also

Secondary objectives: I have selected the secondary data in my study to

- To understand the portfolio management process in mutual fund- To know the effects of political, economical, social and technological factors

on Mutual Fund Industry in India.- Evaluating fund performance

Collection of data

For the complete study I required data of Mutual Fund and getting from the secondary data base.

Sources of the data collection will be,

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(1) Internet(2) Various magazines/bulletins(3) News papers(4) Related books

Limitations

It is based on Secondary Data. Time Constraint Lack of resources

CHAPTER-2

Overview

Edelweiss, a rare flower found in Switzerland. You will discover in our identity: A graphic flower that represents ideas. Around it, the protective arms of the letter ‘e’: We believe ideas create wealth, but values protect it.

It is the practice of this core thought that has led to Edelweiss becoming one of the leading financial services company in India. Its current businesses include investment banking, securities broking, and investment management. We provide a wide range of

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services to corporations, institutional investors and high net-worth individuals.

The core inspiring thought of ‘ideas creating wealth and values protecting it’ is translated into an approach that is led by entrepreneurship and creativity and protected by intellectual rigour, research and analysis. Edelweiss Asset Management Limited, a subsidiary of Edelweiss Capital Limited (ECL) is the asset management company acting as an investment manager to Edelweiss Mutual Fund (EMF).

Edelweiss Capital Limited is one of the leading and fastest growing financial services company in India. Founded in 1996, Edelweiss Capital including its subsidiaries offers a wide array of multi-line solutions including Investment Banking, Institutional Equities, Asset Management, Wealth Management, Private Client Business, Insurance Brokerage, Wholesale Financing and Treasury Operations.

Edelweiss Asset Management Limited constitutes a team of experienced professionals from the Financial Services industry. The management team is highly qualified and carries a rich experience of working in the mutual fund industry and finance related areas. Edelweiss Asset Management Limited will follow a research based and process oriented investment approach. Edelweiss Asset Management Limited will observe the highest ethical standards while deploying investors’ monies and servicing investors and dealing with business partners.

Service Approach

Client Focus

Edelweiss is driven by the emphasis we place on building long-term relationships with our clients. We work closely with our clients to equip them with the ability to address large, fast-growing market opportunities. Our emphasis on long-term relationships also means that we have a significant ongoing involvement with almost all of the clients that we work with.

Execution Orientation

We focus obsessively on delivering high quality execution through our experienced team of professionals. Each team is led by senior personnel and is highly research and ideas driven. We place strong emphasis on confidentiality and integrity in a sensitive business environment.

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Culture

Edelweiss fosters a culture that is entrepreneurial and results-driven and that emphasizes teamwork and intellectual rigour. Our team is encouraged to display higher levels of initiative, drive, and hunger for learning and taking on additional responsibility.

Professional Integrity

We place a strong emphasis on confidentiality, honesty and integrity in our business dealings. We expect our people to maintain high ethical standards, both in their professional and personal lives. We strive to be fair in all our dealings. We respect our competitors.

Research Driven

All our businesses are built on a research and analytics foundation. Our understanding of underlying market trends and strong analytical expertise has resulted in a demonstrated ability to identify emerging trends and themes early. We seek to provide the highest quality research and investment opinions to our clients.

Board of Directors

Mr. Rashesh Shah

Chairman, CEO and Founder of Edelweiss. Mr.Rashesh Shah has previously worked for ICICI (now ICICI Bank, India’s largest private sector financial conglomerate) where he handled a World Bank aided program for export-oriented projects.

Mr. Venkat Ramaswamy

Executive Director and Head of Investment Banking and Co-Founder of Edelweiss. Mr. Venkat Ramaswamy has previously worked with the Spartek Emerging Opportunities Fund and ICICI, where he worked on project-based lending to large corporates, analyzing and evaluating investment decisions. He subsequently managed the Spartek Fund that focused on making equity investments in small and emerging companies..

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Mr. Narendra Jhaveri

Mr. Jhaveri, on his return from U.K., after a brief stint with NCAER as Senior Economist, joined the Economics Dept. of the Reserve Bank of India in 1965. He shifted to ICICI in 1974 as Chief Economist and then moved to project finance.. He also serves as the Chairman of the IMC Economic Research and Training Foundation

Mr. Kunna Chinniah

Mr. Kunna Chinniah is Executive Vice President with GIC Special Investments ("GIC SI"). GIC SI is the private equity arm of the Government of Singapore Investment Corporation ("GIC"). Mr Chinniah oversees the Asian private equity business for GIC SI. Mr Chinniah began his career in 1982 as a Senior Field Engineer with Schlumberger Wireline Services in the Middle East.

Mr. P.N. Venkatachalam

Mr. P.N. Venkatachalam has over 40 years of experience in the banking sector in India and abroad. Mr. Venkatachalam joined the State Bank of India as a probationary officer on April 1967 and retired on March 2004 as a managing director

Mr. Navtej S. Nandra

Mr. Nandra is currently serving as an Independent Board member at Edelweiss Capital Ltd., where he is a member of the audit and remuneration committees. He is also Senior Advisor to DTZ Holdings plc, a global real estate management and consultancy company headquartered in London. Mr. Nandra brings a wealth of global experience in helping financial services companies define and implement performance improvement and achieve growth.

Mr. Berjis Desai

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Mr. Berjis Desai, is an Independent Director on the Board of Directors of the Company. Mr. Desai is the Managing Partner, J. Sagar & Associates, one of India's leading law firms. He holds a Masters in Law. He is an Advocate and a Solicitor.

Senior Management Team

Rashesh Shah

Chairman & CEO

Deepak Mittal

CEO, Edelweiss Tokio Life Insurance Company Limited

Naresh Kothari

President & Co-head Institutional Equities, Private Client Services

Peeyoosh Chadda

Co-head - Asset Management

Vikas Khemani

Executive Vice President &Co-head - Institutional Equities

Venkat Ramaswamy

Executive Director

Himanshu Kaji

CFO & Group COO

Rujan Panjwani

President & Co-head - Asset Management

Rajeev Mehrotra

Executive Vice President & Head - Special Opportunities Investments

Ravi Bubna

Executive Vice President & Co-Head - ECL Finance

Our Principles:

Thinking and transparent organization Fair to our investors, partners and employees Ethical in all our actions Focus on growth Our assets are our stakeholders, reputation and capital

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http://www.edelcap.com/AboutUs/SrManagementTeamContent.aspx?ReportID=3DDDCB71-04A0-4110-AD59-950BD846596E&PageType=I#%23










Creativity and innovation in everything we do

FIGURE-1

Business Principles

‘Ideas create, values protect’ is how we define what Edelweiss believes in. But when we say ‘values protect’ what do we mean? Here’s a handy guide to the values and principles we will live by and live up to.

We will be a Thinking Organization. We will constantly bring ‘thought’ to everything we do. Our clients’ and our own success depends on our ability to use greater ideation and more imagination in our approach.

We will be Fair to our clients, our employees and all stake holders. We want our clients and our employees to be ‘richer’ for their relationship with us.

We will take care of our People seriously. Our policies – in spirit and in letter – will ensure transparency and equal opportunity for all. We will go beyond the normal goals of attracting, recruiting, retaining and rewarding fine talent: We will ensure that every individual in Edelweiss has an opportunity to achieve their fullest potential.

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We will operate as a Partnership, internally and externally. Though individuals are very often brilliant, we believe teamwork and collaboration will always ensure a better and more balanced organization. We will also treat our clients as partners and show them the same respect and consideration that we would toward our internal team members.

We will focus on the Long Term. Though the world will change a lot in the coming years and our assumptions for the future may not hold up, we will reflect on the long-term implications of our actions. Even when making short-term decisions we will be aware of the long-term implications.

We will focus on Growth for our clients, employees and shareholders.

Our Reputation and image is more important than any financial reward. Reputation is hard to build and even harder to rebuild. Reputation will be impacted by our ability to think for our clients, maintain confidentiality and by our adherence to our value system.

We will Obey and Comply with the rules of the land. We will maintain the highest standard of integrity and honesty. When we are unclear we will seek clarifications.

We will respect Risk. Our business is going to be a constant challenge of balancing risk and reward. Our ability to constantly keep one eye on risk will guide us through this fine balance.

Our Financial Capital is a critical resource for growth. We will Endeavour to grow, protect, and use our financial capital wisely.

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“Ideas Create Value Protect”

Theme Research

Theme-based fundamental research

What is theme-based research?Inductive research or ’connecting the dots’ across economy-wide trends, thereby providing a different perspective. Creating a hypothesis of the evolution of trends over a longer period of time.

Why are themes important? Themes play out over long periods of time; potential payouts are also over a longer duration. The breadth of the pay-back is also not restricted to a few companies, but potentially a number of multi-baggers are created in different sectors.

We have been one of the earliest to cover the private capital markets in India

and profile high growth sectors and companies. Edelweiss' research has helped in developing an in-depth understanding of these new, high growth areas, particularly in the Indian context, by analyzing industry dynamics and

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emerging trends as well as showcasing some of the exciting private companies in each sector. Our goal is to find companies in the early stages of significant growth.

Economy and StrategyAs emerging markets are increasingly seen as a distinct asset class for global investors, the Indian economy's strong growth brings it under the spot light. India has witnessed enviable growth, even by emerging market standards for about five years now. With macro-fundamentals in place and openness to foreign capital flows, global investor interest in India is on the rise.

In this context, our macro economic research has a two fold purpose: keeping pace with dynamic economic trends—both Indian and international;

and providing an outlook on future trends.

Our macro-economic research also provides a basis for implications of a top-down approach on various sectors. And, this is where our macro-strategy effort comes in; it aims at building plays from changes in policy as well as economic trends, based on their likely sectorial impact.

Stock Ideas

Idea origination from first principles. Bottom-up research to spot potential multi-baggers. Use of quantitative screens and qualitative mechanisms to identify under-valued high performing companies doing business in emerging sectors with high growth potential and operating in areas where India has a clear edge over the rest of the world. Leveraging considerable base of relationships with corporate India.

Quantitative and Alternative Research

We are one of the leading quantitative research houses in India. Our four-person analytics team comprises of graduates in quantitative disciplines who generate innovative, quantitatively originated ideas backed by deep fundamental understanding.

We generate a host of alternative investment strategies that cover the entire spectrum of opportunities:

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Opportunistic market-timing – e.g. leveraged positions and synthetic positions Market-neutral – e.g. simultaneous long/short positions in stocks, sectors

and indices Risk arbitrage – e.g. event-driven arbitrage opportunities Interest / Volatility arbitrage – e.g. cash-future and dispersion trades

We also create customized products and screens specific to clients’ investment styles:

Screens for deep-value, growth, momentum and income, turnaround investing styles

System-based trading models for clients derived from rigorous back-testing.

Edelweiss Capital Limited (Edelweiss) offers a full range of services and transactions

expertise, including capital raising services in public markets, private placements of

equity, mezzanine and convertible debt, mergers and acquisitions and restructuring

advisory services. Edelweiss has been empanelled with more than 50 foreign

institutional investors and all leading domestic institutional investors and is

recognized for cutting edge derivatives expertise with on of the largest market share

in the institutional derivative market. Edelweiss core strength lies in differential

research including top down, bottom up, quantitative analytics spanning across large

cap and mid cap companies.

Edelweiss Mutual Fund (EMF) is set up as a Trust under the Indian Trusts

Act, 1882 vide Trust Deed dated 30th January 2008, executed between

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Edelweiss Capital Limited (ECL) and Edelweiss Trusteeship Company

Limited with restricted liability to seed corpus of Rs. 1 lac of ECL.

CHAPTER-3

Investor’s Portfolio

What is an Investment?

An investment is the use of capital to create more money through the acquisition of a security that promise the safety of the principal and generate a reasonable return.

Various Investment Options

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Savings form an important part of the economy of any nation. With the saving invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenue to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings.There are basically two kinds of investments. One that gives returns at fixed rate and other where the rate of return is depending upon the certain factors of the economy.

1. Fixed Return Options

Post office monthly income scheme

Public provident fund

Bank fixed deposits

Government securities or gilts

RBI taxable bonds

Insurance

Company fixed deposits

Infrastructure bonds

2. Variable Return Options

Mutual Funds

Share and Stock market

1. Primary invested in equity (IPO)

2. Secondary market investment in equity

3. Derivative, Futures and Options

Gold

Real estate

Foreign exchange assets

3. UNIT LINKED INSURANCE PLANS

1. ULIP capital secure fund.

2. ULIP balanced fund.

3. ULIP growth fund

4. ULIP equity fund

5. Pension capital secure fund

6. Pension balanced fund

7. Pension growth fund

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CHAPTER-4

INTRODUCTION TO MUTUAL FUNDS

Mutual fund is a buzz in the market these days. The mutual fund industry is

burgeoning, it is completely untapped market. Only 5% of total potential of this

industry has been grabbed. Hence this industry has a lot of opportunities in it. That’s

why it is so much interactive.

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As Indian economy is growing at the rate of 8% per annum, we can see its effect in all

areas. The Indian stock market and companies have become lucrative for foreign

investors. More and more fund is pouring in our country. This is increasing liquidity

in the market and hence increasing the money in the hands of people and thus

investment. As the future prospects for Indian companies are bright, they have lots of

opportunities to expand their business worldwide, the investment in Indian

companies.

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 invested by the fund manager in

different types of securities depending upon the objective of the scheme. These could

range from shares to debentures to money market instruments. The income earned

through these investments and the capital appreciations realized by the scheme are

shared by its unit holders in proportion to the number of units owned by them (pro

rata). Thus a Mutual Fund is the most suitable investment for the common man as it

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

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

rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined

investment objective and strategy.

A mutual fund is the ideal investment vehicle for today’s complex and modern

financial scenario. Markets for equity shares, bonds and other fixed income

instruments, real estate, derivatives and other assets have become mature and

information driven. Price changes in these assets are driven by global events

occurring in faraway places. A typical individual is unlikely to have the knowledge,

skills, inclination and time to keep track of events, understand their implications and

act speedily. An individual also finds it difficult to keep track of ownership of his

assets, investments, brokerage dues and bank transactions etc.

A mutual fund is the answer to all these situations. It appoints professionally qualified

and experienced staff that manages each of these functions on a full time basis. The

large pool of money collected in the fund allows it to hire such staff at a very low cost

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to each investor. In effect, the mutual fund vehicle exploits economies of scale in all

three areas - research, investments and transaction processing. While the concept of

individuals coming together to invest money collectively is not new, the mutual fund

in its present form is a 20th century phenomenon. In fact, mutual funds gained

popularity only after the Second World War. Globally, there are thousands of firms

offering tens of thousands of mutual funds with different investment objectives.

Today, mutual funds collectively manage almost as much as or more money as

compared to banks.

A draft offer document is to be prepared at the time of launching the fund. Typically,

it pre specifies the investment objectives of the fund, the risk associated, the costs

involved in the process and the broad rules for entry into and exit from the fund and

other areas of operation. In India, as in most countries, these sponsors need approval

from a regulator, SEBI (Securities exchange Board of India) in our case. SEBI looks

at track records of the sponsor and its financial strength in granting approval to the

fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to

the investment objective. It also hires another entity to be the custodian of the assets

of the fund and perhaps a third one to handle registry work for the unit holders

(subscribers) of the fund.

In the Indian context, the sponsors promote the Asset Management Company also, in

which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the

Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the

Birla Sun Life Asset Management Company Ltd., which has floated different mutual

funds schemes and also acts as an asset manager for the funds collected under the

schemes.

Future Scenario

The asset base will continue to grow at an annual rate of about 30 to 35 % over the

next few years as investor’s shift their assets from banks and other traditional

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avenues. Some of the older public and private sector players will either close shop or

be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger

players in three to four years. In the private sector this trend has already started with

two mergers and one takeover. Here too some of them will down their shutters in the

near future to come.

But this does not mean there is no room for other players. The market will witness a

flurry of new players entering the arena. There will be a large number of offers from

various asset management companies in the time to come. Some big names like

Fidelity, Principal, and Old Mutual etc. are looking at Indian market seriously. One

important reason for it is that most major players already have presence here and

hence these big names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as this

would enable it to hedge its risk and this in turn would be reflected in it’s Net Asset

Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade

in derivatives. Importantly, many market players have called on the Regulator to

initiate the process immediately, so that the mutual funds can implement the changes

that are required to trade in Derivatives.

Market Trends

A lone UTI with just one scheme in 1964 now competes with as many as 400 odd

products and 34 players in the market. In spite of the stiff competition and losing

market share, UTI still remains a formidable force to reckon with.

Last six years have been the most turbulent as well as exiting ones for the industry.

New players have come in, while others have decided to close shop by either selling

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off or merging with others. Product innovation is now passé with the game shifting to

performance delivery in fund management as well as service. Those directly

associated with the fund management industry like distributors, registrars and transfer

agents, and even the regulators have become more mature and responsible.

The industry is also having a profound impact on financial markets. While UTI has

always been a dominant player on the bourses as well as the debt markets, the new

generations of private funds which have gained substantial mass are now seen flexing

their muscles. Fund managers, by their selection criteria for stocks have forced

corporate governance on the industry. By rewarding honest and transparent

management with higher valuations, a system of risk-reward has been created where

the corporate sector is more transparent then before.

Funds have shifted their focus to the recession free sectors like pharmaceuticals,

FMCG and technology sector. Funds performances are improving. Funds collection,

which averaged at less than Rs100bn per annum over five-year period spanning 1993-

98 doubled to Rs210bn in 1998-99. In the current year mobilization till now have

exceeded Rs300bn. Total collection for the current financial year ending March 2000

is expected to reach Rs450bn.

What is particularly noteworthy is that bulk of the mobilization has been by the

private sector mutual funds rather than public sector Mutual funds are now also

competing with commercial banks in the race for retail investor’s savings and

corporate float money. The power shift towards mutual funds has become obvious.

The coming few years will show that the traditional saving avenues are losing out in

the current scenario. Many investors are realizing that investments in savings accounts

are as good as locking up their deposits in a closet. The fund mobilization trend by

mutual funds in the current year indicates that money is going to mutual funds in a big

way.

India is at the first stage of a revolution that has already peaked in the U.S. The U.S.

boasts of an Asset base that is much higher than its bank deposits. In India, mutual

fund assets are not even 10% of the bank deposits, but this trend is beginning to

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change. Recent figures indicate that in the first quarter of the current fiscal year

mutual fund assets went up by 115% whereas bank deposits rose by only 17%.

(Source: Think-tank, the Financial Express September, 99) This is forcing a large

number of banks to adopt the concept of narrow banking wherein the deposits are kept

in Gilts and some other assets which improves liquidity and reduces risk. The basic

fact lies that banks cannot be ignored and they will not close down completely. Their

role as intermediaries cannot be ignored. It is just that Mutual Funds are going to

change the way banks do business in the future.

WHAT IS A MUTUAL FUND?

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

common financial goal. It offers an opportunity to invest in a diversified,

professionally managed basket of securities at a relatively low cost. The flow chart

below describes broadly the working of a mutual fund:

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GRAPH-1

“Mutual Funds are popular among all income levels. With a mutual fund, we get

a diversified basket of stocks managed by professionals”

These Trusts are run by experienced Investment Managers who use their knowledge

and expertise to select individual securities, which are classified to form portfolios

that meet predetermined objectives and criteria.

These portfolios are then sold to the public. They offer the investors the following

main services:

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Portfolio Diversification: Diversification of the portfolio is the means to

invest the assets in the deferent securities which leads to mitigate the risk in

the Investment.

Marketability: A new financial asset is created that may be more easily

marketable than the underlying securities in the portfolio.

Organization of a Mutual Fund

A mutual fund is set up in the form of a trust, which has sponsor, trustees,

asset management company (AMC) and custodian. The trust is established by a

sponsor or more than one sponsor who is like promoter of a company. The trustees of

the mutual fund hold its property for the benefit of the unit holders. Asset

Management Company (AMC) approved by SEBI manages the funds by making

investments in various types of securities. Custodian, who is registered with SEBI,

holds the securities of various schemes of the fund in its custody. The trustees are

vested with the general power of superintendence and direction over AMC. They

monitor the performance and compliance of SEBI Regulations by the mutual fund.

GRAPH-2

31

TYPES OF MUTUAL FUND SCHEMES

Mutual fund schemes may be classified on the basis of its structure and its investment

objective.

By Structure:

Open-ended Funds:

An open-end fund is one that is available for subscription all through the year. These

do not have a fixed maturity. Investors can conveniently buy and sell units at Net

Asset Value ("NAV") related prices. The key feature of open-end schemes is

liquidity.

Closed ended Funds:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to

15 years. The fund is open for subscription only during a specified period. Investors

can invest in the scheme at the time of the initial public issue and thereafter they can

buy or sell the units of the scheme on the stock exchanges where they are listed. In

order to provide an exit route 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 the two exit routes is

provided to the investor. .

Interval Funds:

Interval funds combine the features of open-ended and close-ended schemes. They are

open for sale or redemption during pre-determined intervals at NAV related prices

32

By Investment Objective

Growth Funds:

The aim of growth funds is to provide capital appreciation over the medium to long

term. Such schemes normally invest a majority of their corpus in equities. It has been

proved that returns from stocks, have outperformed most other kind of investments

held over the long term. Growth schemes are ideal for investors having a long term

outlook seeking growth over a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate

debentures and Government securities. Income Funds are ideal for capital stability

and regular income.

Balanced Fund:

The aim of balanced funds is to provide both growth and regular income. Such

schemes periodically distribute a part of their earning and invest both in equities and

fixed income securities in the proportion indicated in their offer documents. In a rising

stock market, the NAV of these schemes may not normally keep pace, or fall equally

when the market falls. These are ideal for investors looking for a combination of

income and moderate growth.

Money Market Funds:

The aim of money market funds is to provide easy liquidity, preservation of capital

and moderate income. These schemes generally invest in safer short-term instruments

such as treasury bills, certificates of deposit, commercial paper and inter-bank call

33

money. Returns on these schemes may fluctuate depending upon the interest rates

prevailing in the market. These are ideal for Corporate and individual investors as a

means to park

their surplus funds for short periods.

Other Schemes

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the Government offers tax incentives for investment in

specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and

Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The

Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB

by investing in Mutual Funds.

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer

document. The investment of these funds is limited to specific industries like

InfoTech, FMCG, and Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the

BSE Sensex or the NSE 50

Spectral Schemes

34

Sectoral Funds are those which invest exclusively in a specified sector. This could be

an industry or a group of industries or various segments such as 'A' Group shares or

initial public offerings

BENEFITS OF MUTUAL FUNDS

Diversification

Professional management Tax

benefits

35

Affordability Transparency

FIGURE-3

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.

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.

Affordability

A mutual fund invests in a portfolio of assets, i.e. bonds, shares etc. depending upon

the investment objective of the scheme. An investor can buy into a portfolio of

equities, which would otherwise be extremely expensive.

36

Tax Benefits

Any income distributed after March 31, 2002 will be subject to tax in the assessment

of all unit-holders. However, as a measure of concession to Unit holders of open –

ended and equity – oriented funds, income distributions for the year ending March 31,

2003, will be taxed at a concessional rate of 10%.

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.

Low Costs

Investing in the capital markets because the benefits of scale in brokerage, mutual

funds are a relatively less expensive way to invest compared to directly custodial and

other fees translate into lower costs for investors.

Liquidity

In open – ended schemes, the investor gets the money back promptly at MAV related

prices from the mutual fund. In closed – ended 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.

Transparency

You get regular information on the value of your investment in addition to disclosure

on the specific investments made by your scheme, the proportion invested in each

class of assets and the fund manager’s investment strategy and outlook.

Flexibility

37

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.

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.

Tax breaks

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.

What’s 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.

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).

38

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.

Restrictive gains

Diversification helps, if risk minimization is your objective. However, the lack of

investment focus also means you gain less than if you had invested directly in a single

security.

In our earlier example, say, 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.

RISK ASSOCIATED WITH MUTUAL FUNDS

39

Credit Political inflation RISKS

Liquidity Market

Figure-4

Risk-Return Trade Off

The most important relationship to understand is the risk-return trade off. Higher the

risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to

you, the investor to decide how much risk you are willing to take. In order to do this

you must first be aware of the different types of risks involved with your investment

decision.

Market Risk

Sometimes prices and yields of all securities rise and fall. Broad outside influences

affecting the market lead to this. This is true, may it be big corporations or smaller

mid-sized companies. This is known as Market Risk. A Systematic Investment Plan

(SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate

the risk.

Credit Risk

The debt servicing ability of a company through its cash flows determines the Credit

Risk faced by you. This credit risk is measured by independent rating agencies like

CRISIL who rate companies and their paper. A ‘AAA’ rating is considered the safest

whereas a ‘D’ rating is considered poor credit quality. A well – diversified portfolio

might help mitigate this risk.

Inflation Risk

40

Inflation is the loss of purchasing power over a time. A lot of times people make

conservative investment decisions to protect their capital but end up with a sum of

money that can buy less than what the principal could, at the time of investment. A

well–diversified portfolio with some investment in equities might help mitigate this

risk.

Interest Rate Risk

In a free market economy interest rates are difficult and not impossible to predict.

Changes in interest rates affect the prices of bonds as well as equities. If interest rates

rise, the prices of bonds will fall and vice versa. Equity might be negatively affected

as well in a rising interest rate environment. A well-diversified portfolio might help

mitigate this risk.

Political Risk

Changes in government policy and political decision can change the investment

environment. They can create a favorable environment for investment or vice versa.

Liquidity Risk

Liquidity risk arises when it becomes difficult to sell the securities that one has

purchased. It can be partly mitigated by diversification, staggering of maturities as

well as internal risk controls that lean towards purchase of liquid securities. It simply

means that you must spread your investment across different securities (stocks, bonds,

money market instruments, real estate, fixed deposits etc.). This kind of a

diversification may add to the stability of your returns, for example, during one period

of time equities might under perform but bonds and money market instruments might

do well enough to offset the effect of a slump in the equity Markets.

DISADVANTAGES OF MUTUAL FUNDS

There are certainly some benefits to mutual fund investing, but you should also be

aware of the drawbacks associated with mutual funds.

41

1. No Insurance:

Mutual funds, although regulated by the government, are not insured against

losses. The Federal Deposit Insurance Corporation (FDIC) only insures against

certain losses at banks, credit unions, and savings and loans, not mutual funds.

That means that despite the risk-reducing diversification benefits provided by

mutual funds, losses can occur, and it is possible (although extremely unlikely)

that you could even lose your entire investment.

2. Dilution:

Although diversification reduces the amount of risk involved in investing in

mutual funds, it can also be a disadvantage due to dilution. For example, if a

single security held by a mutual fund doubles in value, the mutual fund itself

would not double in value because that security is only one small part of the fund's

holdings. By holding a large number of different investments, mutual funds tend

to do neither exceptionally well nor exceptionally poorly.

3. Fees and Expenses:

Most mutual funds charge management and operating fees that pay for the fund's

management expenses (usually around 1.0% to 1.5% per year). In addition, some

mutual funds charge high sales commissions, 12b-1 fees, and redemption fees.

And some funds buy and trade shares so often that the transaction costs add up

significantly. Some of these expenses are charged on an ongoing basis, unlike

stock investments, for which a commission is paid only when you buy and sell .

4. Poor Performance:

Returns on a mutual fund are by no means guaranteed. In fact, on average, around

75% of all mutual funds fail to beat the major market indexes, like the S&P 500,

42

and a growing number of critics now question whether or not professional money

managers have better stock-picking capabilities than the average investor.

5. Loss of Control:

The managers of mutual funds make all of the decisions about which securities to

buy and sell and when to do so. This can make it difficult for you when trying to

manage your portfolio. For example, the tax consequences of a decision by the

manager to buy or sell an asset at a certain time might not be optimal for you. You

also should remember that you are trusting someone else with your money when

you invest in a mutual fund.

6. Trading Limitations:

Although mutual funds are highly liquid in general, most mutual funds (called

open-ended funds) cannot be bought or sold in the middle of the trading day. You

can only buy and sell them at the end of the day, after they've calculated the

current value of their holdings.

7. Size: Some mutual funds are too big to find enough good investments. This is

especially true of funds that focus on small companies, given that there are strict

rules about how much of a single company a fund may own. If a mutual fund has

$5 billion to invest and is only able to invest an average of $50 million in each,

then it needs to find at least 100 such companies to invest in; as a result, the fund

might be forced to lower its standards when selecting companies to invest in.

8. Inefficiency of Cash Reserves: Mutual funds usually maintain large cash reserves

as protection against a large number of simultaneous withdrawals. Although this

provides investors with liquidity, it means that some of the fund's money is

43

invested in cash instead of assets, which tends to lower the investor's potential

return.

Different Types:

The advantages and disadvantages listed above apply to mutual funds in general.

However, there are over 10,000 mutual funds in operation, and these funds vary

greatly according to investment objective, size, strategy, and style. Mutual funds are

available for virtually every investment strategy (e.g. value, growth), every sector

(e.g. biotech, internet), and every country or region of the world. So even the process

of selecting a fund can be tedious.

Net Asset Value (NAV)

Open-end mutual funds price their shares in terms of a Net Asset Value (NAV) (note

that you can calculate NAV for a closed-end fund too, but it will not necessarily be

the price at which you buy or sell closed-end shares). NAV is calculated by adding up

the market value of all the fund's underlying securities, subtracting all of the fund's

liabilities, and then dividing by the number of outstanding shares in the fund. The

resulting NAV per share is the price at which shares in the fund are bought and sold

(plus or minus any sales fees). Mutual funds only calculate their NAVs once per

trading day, at the close of the trading session.

HISTORY OF MUTUAL FUND IN INDIA

HISTORY – The Landmarks

1963: UTI is India’s first mutual fund.

1964: UTI launches US-64.

44

1971: UTI’s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched.

1986: UTI Master share, India’s first true ‘mutual fund’ scheme, launched.

1987: PSU banks and insurers allowed floating mutual funds; State Bank of India

(SBI) first off the blocks.

1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares

and mutual funds.

1993: Private sector and foreign players allowed; Kothari Pioneer first private fund

house to start operations; SEBI set up to regulate industry.

1994: Morgan Stanley is the first foreign player.

1996: Sebi’s mutual fund rules and regulations, which forms the basis of most current

laws, come into force.

1998: UTI Master Index Fund is the country’s first index fund.

1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first

acquisition in the mutual fund industry.

2000: The industry’s assets under management crosses Rs 1, 00,000 crore.

2001: US-64 scam leads to UTI overhaul.

2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned

from giving commissions to investors; floating rate funds and Foreign debt funds

debut.

2003: AMFI certification made compulsory for new agents; fund of funds launched.

45

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. The history of

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

INDUSTRY PROFILE:

GRAPH-5

46

GRAPH-6 (Industry Growth)

Growth of asset under management from March-1965 to March-2009

STRUCTURE OF THE MUTUAL FUND IN INDIA

FIGURE-7

Like other countries, India has a legal framework within which mutual funds must be

constituted. In India, open and close – end funds operate under the same regulatory

structure, i.e. in India, all mutual funds are constituted along one unique structure – as

47

unit trust. A mutual fund in India is allowed to issue open – end and close – end

schemes under a common legal structure. The structure, which is required to be

followed by mutual funds in India, laid down under SEBI (Mutual Fund) Regulations,

1996.

The Fund Sponsor

‘Sponsor’ is defined under SEBI Regulations as any person who, acting alone or in

combination with another body corporate establishes a mutual fund. The sponsor of a

fund is akin to the promoter of companies he gets the fund registered with SEBI. The

sponsor will form a Trust and appoint a Board of Trustees. All these appointments are

made in accordance with the SEBI Regulations. As per the existing SEBI Regulations,

for a person to qualify as a sponsor, must contribute at least 40% of the net worth of

the AMC and issues a sound financial track over five years prior to registration.

Mutual Funds as Trusts

Mutual Fund in India is constituted in the form of a Public Trust under the Indian

Trust Act 1882. The fund invites investors to contribute their money in the common

pool by subscribing to units issued by various schemes established by the Trust as

evidence of their beneficial interest in the fund. The Trust or Fund has no legal

capacity itself rather it is the Trustee(s) who have legal capacity and therefore the

trustees take all acts in relation to the Trust itself.

Trustees in mutual fund

A Board of Trustees – a body of individuals, or a trust company – a corporate body,

may manage the Trust. Board of Trustees manages most of the funds in India. The

Trust is created through a document called the Trust Deed that is executed by the

48

Fund Sponsor in favors of the trustees. They are the primary guardian of the unit

holder’s funds and assets. They ensure that AMC’s operations are along professional

lines.

Right of Trustees

a) Appoint the AMC with the prior approval of SEBI

b) Approve each of the schemes floated by the AMC

c) Have the right to request any necessary information from the AMC concerning

the operations of various schemes managed by the AMC

Obligations of the AMC and its Directors

They must ensure that:

a) Investment of funds is in accordance with SEBI Regulations and the Trust

Deed

b) Take responsibility for the act of its employees and others whose services it

has procured

c) Do not undertake any other activity conflicting with managing the fund

Asset Management Company

The role of an Asset Management Company (AMC) is to act as the investment

manager of the trust under the Board supervision.

Transfer Agents

Transfer Agents are responsible for issuing and redeeming units of the mutual fund

and provide other related services such as preparation of transfer documents updating

investor’s records. A fund may choose to opt this activity in-house or by an outside

transfer agent.

49

Distributors

AMCs usually appoint distributors or brokers, who sell units on behalf of the fund.

Some funds require that all transactions to be routed through such brokers.

Bankers

A fund’s activities involved dealing with the money on a continuous basis primarily

with respect to buying and selling units, paying for investment made, receiving the

proceeds from sale of investment and discharging its obligations towards operative

expenses. A fund’s banker therefore plays a crucial role with respect to its financial

dealings.

Custodian and Depository

The custodian is appointed by the Board of Trustees for safekeeping of securities in

terms of physical delivery and eventual safe keeping or participating in the clearing

system through approved depository companies.

ASSOCIATION OF MUTUAL FUNDS IN INDIA

With the increase in mutual fund players in India, a need for mutual fund association

in India was generated to function as a non profit organization. Association of Mutual

Funds in India (AMFI) was incorporated on 22nd August, 1995.

AMFI is a apex body of all Asset Management Companies (AMC) which has been

registered with SEBI. Till date all the AMCs are that have launched mutual fund

50

schemes are its members. It functions under the supervision and guidelines of its

Board of Directors.

Association of Mutual Funds India has brought down the Indian Mutual Fund

Industry to a professional and healthy market with ethical lines enhancing and

maintaining standards. It follows the principle of both protecting and promoting the

interests of mutual funds as well as their unit holder.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the

country. It has certain defined objectives which juxtaposes the guidelines of its Board

of Directors. The objectives are as follows:

This mutual fund association of India maintains high professional and ethical

standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of

conduct which is followed by members and related people engaged in the

activities of mutual fund and asset management. The agencies who are by any

means connected or involved in the field of capital markets and financial services

also involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual

fund industry.

Association of Mutual Fund in India does represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual

Fund Industry.

It develops a team of well qualified and trained Agent distributors. It implements a

program of training and certification for all intermediaries and other engaged in

the mutual fund industry.

AMFI undertakes all India awareness programmed for investor’s in order to

promote proper understanding of the concept and working of mutual funds.

51

At last but not the least association of mutual fund of India also disseminate

information’s on Mutual Fund Industry and undertakes studies and research either

directly or in association with other bodies.

Companies in India

1. Edelweiss Mutual Fund

2. ABN AMRO Mutual Fund

3. Birla Sun Life Mutual Fund

4. Bank of Baroda Mutual Fund (BOB Mutual Fund)

5. HDFC Mutual Fund

6. HSBC Mutual Fund

7. ING Vysya Mutual Fund

8. Prudential ICICI Mutual Fund

9. Sahara Mutual Fund

10. State Bank of India Mutual Fund

11. Tata Mutual Fund

12. Kotak Mahindra Mutual Fund

13. Unit Trust of India Mutual Fund

52

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http://finance.indiamart.com/india_business_information/sahara.html

http://finance.indiamart.com/india_business_information/prudential_icici.html

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http://finance.indiamart.com/india_business_information/birla_sunlife.html

http://finance.indiamart.com/india_business_information/abn_amro.html

14. Reliance Mutual Fund

15. Standard Chartered Mutual Fund

16. Franklin Templeton India Mutual Fund

17. Morgan Stanley Mutual Fund India

18. Escorts Mutual Fund

19. Alliance Capital Mutual Fund

20. Benchmark Mutual Fund

21. Canbank Mutual Fund

22. Chola Mutual Fund

23. GIC Mutual Fund

24. LIC Mutual Fund

25. Fidelity Mutual Fund

26. IL&FS Mutual Fund

27. DSP Merill lynch Mutual Fund

28. Sundaram Mutual Fund

29. Principal Mutual Fund

30. Taurus Mutual Fund

31. Deutsche Mutual fund

32. IDBI Investment Company Ltd.

33. Bank of India Mutual Fund

53

CHAPTER-5

Portfolio Management

People have different investment objective and risk appetite so to get the highest

returns asset allocation through active portfolio management is the key element.

Asset allocation is a method that determines how you divide your portfolio among

different investment instruments and provides you with the proper blend of various

asset classes.

It is based on the theory that the type or class of security you own equity, debt or

money market- is more important than the particular security itself. In other words

asset allocation is way to control risk in your portfolio. Different asset class will react

differently to market conditions like inflation, rising or falling interest rates or a

market segment coming into or falling out of favor.

Asset allocation is different from simple diversification. Suppose you diversify your

equity portfolio by investing in five or ten equity funds. You really have not done

much to control risk in your portfolio if all these funds come from only one particular

segment of the market say large cap stocks or mid cap stocks. In case of an adverse

reaction for that segment, all the funds will react similarly means they will go down.

If you build your portfolio with various top performing growth funds without really

bothering to analyze their portfolio allocation, you may end up with over-exposure to

a particular segment. Another point you need to remember is that growth funds are

highly correlated- they tend to move in the same direction in response to a given

market force.

The advantage of asset allocation lies in achieves superior returns when markets are

down while minimizing the exposure of the portfolio to volatility. In fact, asset

54

allocation is based on certain dimensions that, when combined tend to control the

volatility while achieving targeted returns.

Portfolio Management Process

Portfolio management is a complex activity, which may be broken down into the

following steps:

1. Specification of investment objectives and constraints:

The typical objectives sought by an investor are current income, capital appreciation,

safety, fixed returns on principal investment.

2. Choice of asset mix:

The most important decision in portfolio management is the asset mix decision. This

is concerned with the proportions of “Stock” or “

Units” of mutual fund or “Bond” in the portfolio. The appropriate mix of Stock and

Bonds will depend upon the risk tolerance and investment horizon of the investor.

3. Formulation of portfolio strategy:

Once the certain asset mix has been chosen an appropriate portfolio strategy has to be

decided out. Two broad portfolio choices are available

An active portfolio management: it strive to earn superior risk adjusted returns by

resorting to market timing, or sector rotation or security selection or some

combination of these.

55

A passive portfolio management involves holding a broadly diversified portfolio

and maintaining a pre-determined level of risk exposure.

Designing a model Portfolio

There are certain objectives that should keep in mind while designing a portfolio these

are:

Higher absolute rate of return and high real rate of return

Maximization current income

High post tax returns

Positive real return

Preservation of capital

Growth in capital

For my study I am making three dummy portfolios for three different kinds of

investors.

Types of Investor

1. Cautious Investor:

It’s kind of investor who is less bothers about high returns. He wants to lower down

his risk profile and demand for fixed income on his investment. His main objective of

investment is fixed returns with less risk.

2. Balanced Investor:

56

It’s a kind of investor who is bothers about returns as well as risk. He wants moderate

returns with moderate risk.

3. Aggressive Investor:

It’s a kind of investor who is ready to take risk. He believes in high risk and high

returns. So he only wants to invest in equity schemes. I have made an assumption that

each investor want to invest Rs.5 Lakh .

Portfolio for Cautious Investor

Investment Instrument Amount Returns

Kisan Vikas Patra 1,50,000 Rs. 8.4% p.a.

PPF 70,000 Rs. 8.5% p.a.

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a.

NSC 80,000 Rs. 8.16% p.a.

Post office monthly MIP 1,00,000 Rs. 8% p.a.

TOTAL 5,00,000 Rs.

Table-1

Logic behind selection of particular Instrument:

As investor does not want to take risk, he is satisfied with fixed return rather they are

less than equity investment’s returns. So I took thus instrument which provides good

return as well as secure also. All of these instruments will give him return around 8%

annually.

Portfolio for Balance Investor


HDFC Prudence Fund 1,30,000 Rs. 54.2% p.a.

Reliance Vision Fund 1,00,000 Rs. 78.3% p.a.

57

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a.

PPF 70,000 Rs. 8.5% p.a.

Kisan Vikas Patra 1,00,000 Rs. 8.4% p.a.

TOTAL 5,00,000 Rs.

Table-2


As investor does not want to take high risk, he is satisfied with fixed return plus some

equity exposure. But he wants some safety in equity exposure also. So I took thus

instrument which provides good return as well as safety also. Fixed return

instruments like PPF, Bank FD and kisan viaks patra will give him return around 8%

annually and I suggest Balance kind of funds to him where he will have exposure of

both equity as well as debts. HDFC prudence fund is best performing fund under

balance scheme. To increase the ratio of equity in portfolio I suggested Reliance

vision fund which is mainly based on large and mid cap companies.

Portfolio for Aggressive Investor


HDFC Core & Satellite Fund 1,30,000 Rs. 83.56% p.a.

Prudential ICICI Emerging Star Fund 90,000 Rs. 93.3% p.a.

Franklin Flexi Cap Fund 1,10,000 Rs. 86.25% p.a.

Fidelity Equity Fund 80,000 Rs. 82.4% p.a.

DSP Top 100 90,000 Rs. 79.28% p.a.

TOTAL 5,00,000 Rs.

Table-3


58

As investor ready to take high risk, he is looking for high returns on his investment. I

took thus instrument which provides good return. All of these instruments will give

him return around 80% annually. Currently Mid cap companies will perform better

than large cap companies so, I select more funds which are focusing on mid cap

companies like HDFC, Franklin’s funds.

To take the benefit of increasing Sensex I took DSP top 100.

Measurement of Returns on Portfolios

The realized rate of return will be calculated by

1. Time Weighted Rate of Return (TWROR)

It is calculated by using Dietz Algorithm

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

Po= Portfolio value at the beginning of the period

Pi= Portfolio value at the end of the period

Ci= Net contributions during time interval

Ri= Rate of Return for the time interval

a) Rate of return for cautious investor

Investment Instrument Amount ReturnsCurrent

Value

Kisan Vikas Patra 1,50,000 Rs. 8.4% p.a. 1,62,600

PPF 70,000 Rs. 8.5% p.a. 75,950

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a. 1,06,500

NSC 80,000 Rs. 8.16% p.a. 86,528

59

Post office monthly MIP 1,00,000 Rs. 8% p.a. 1,08,000

TOTAL 5,00,000 Rs. 5,39,578

Table-4

Time Weighted Rate of Return (TWROR)

Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(539578-0.5(0))/ (500000+0.5(0))-1}*100 = 7.91% p.a.

b) Rate of return for balance investor

Investment Instrument Amount Returns Current

Value

HDFC Prudence Fund 1,30,000 Rs. 54.2% p.a. 2,00,460

Reliance Vision Fund 1,00,000 Rs. 78.3% p.a. 1,78,300

Bank Fixed Deposits 1,00,000 Rs. 6.5% p.a. 1,06,500

PPF 70,000 Rs. 8.5% p.a. 75,950

Kisan Vikas Patra 1,00,000 Rs. 8.4% p.a. 1,08,400

TOTAL 5,00,000 Rs. 6,69,610

Table-5


Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(669610-0.5(0))/ (500000+0.5(0))-1}*100

= 33.92%p.a.

c) Rate of return for aggressive investor

Investment Instrument Amount Returns Current Value

60

HDFC Core & Satellite Fund 1,30,000 Rs. 83.56% p.a. 2,38,628

Prudential ICICI Emerging Star Fund 90,000 Rs. 93.3% p.a. 1,73,790

Franklin Flexi Cap Fund 1,10,000 Rs. 86.25% p.a. 2,04,875

Fidelity Equity Fund 80,000 Rs. 82.4% p.a. 1,45,920

DSP Top 100 90,000 Rs. 79.28% p.a. 1,61,352

TOTAL 5,00,000 Rs. 9,24,565

Table-6


Ri= [(Pi-0.5Ci)/ (Po+0.5Ci)-1}*100

= {(924565-0.5(0))/ (500000+0.5(0))-1}*100 = 84.91%p.a.

CHAPTER-6

61

INTERPRETATION OF THE EXISTING MUTUAL FUNDS

Scheme Portfolio

Like investors portfolio different scheme under mutual fund have different portfolio.

By scheme portfolio we mean portfolio or companies in which fund manager invested

the fund. The selection of companies depend upon many issue which have great

impact in current scenario as well as in near future. Fund manager has to do lot of

research before investing into particular script.

Before going into detail one should understand Sensex movement. Mutual fund

returns are based on Sensex. Their Net Asset Value is directly related to Share market.

The below table shown the Sensex change on monthly basis. Means what is % change

in Sensex during one month.

Sensex Journey

62

Percentage Changes at the End of the Day

Date Opening Closing Change Change in %

30-Sep-08 8,672.66 8,634.48 -38 -0.43

3-Oct-08 8,662.99 8,697.65 35 0.44

31-Oct-08 7,717.07 7,892.32 175 2.26

2-Nov-08 7,953.28 8,072.75 119 1.49

30-Nov-08 8,962.92 8,788.81 -174 -0.19

2-Dec-08 9,010.58 8,961.61 -49 -0.54

30-Dec-08 9,339.32 9,397.93 58 0.62

2-Jan-09 9,422.49 9,390.14 -32 -0.33

31-Jan-09 9,892.23 9,919.89 27 0.27

2-Feb-09 9,890.90 9,843.87 -47 -0.47

28-Feb-09 10,308.71 10,370.24 62 0.61

2-Mar-09 10,597.19 10,626.78 29 0.27

31-Mar-09 11,325.96 11,279.96 -46

-

0.41

TABLE-7

Percentage Changes at the End of the Month

Date Opening Closing

Change In Closing

Prices Change in %

30-Sep-08 8,672.66 8,634.48 Nil Nil

31-Oct-08 7,717.07 7,892.32 742

8.59

30-Nov-08 8,962.92 8,788.81 896 11.35

30-Dec-08 9,339.32 9,397.93 609 6.92

31-Jan-09 9,892.23 9,919.89 522 5.55

28-Feb-09 10,308.71 10,370.24 451 4.54

31-Mar-09 11,325.96 11,279.96 909 8.76

63

Table-8

Graph-8(Sensex Journey)

Sensex has boomed with lots of ups and down from last year 2009. It seems very

fluctuating.

For my study purpose I have taken HDFC Equity Fund and HDFC Core & Satellite

Fund. What is their portfolio means in which companies the fund manager invested

the fund. How he has allocated funds among various industries as well as various

companies. After studying both the fund’s portfolio I compare them with Reliance

Growth fund, Prudential ICICI Growth Fund, DSP Tiger Fund and Kotak

Opportunity Fund. Comparison is based on per month returns and Sensex returns

during the same period.

HDFC Equity Fund

64

Portfolio Top 10 Holdings For October

S. No. Company Industry % of NAV

1

Oil & Natural Gas Corporation

Ltd. Oil 9.11

2 State Bank of India Banks 9.02

3 Infosys Technologies Ltd. Software 7.97

4 Satyam Computer Services Ltd. Software 7.68

5 Bharat Heavy Electricals Ltd.

Industrial Capital

Goods 7.25

6 Amtek Auto Ltd. Auto Ancillaries 6.05

7 Maruti Udyog Ltd. Auto Ancillaries 5.21

8 United Phosphorus Ltd. Pesticides 4.69

9 Crompton Greaves Ltd.

Industrial Capital

Goods 4.67

10 Mahindra & Mahindra Ltd. Auto 4.54

Top 10 Holdings 66.09

Others Equity Holdings 33.91

TOTAL 100

Table-9

NAV Changed During the Month

(GROWTH)

Date NAV Change % Change

1, Oct 2008 93.055

31, Oct 2008 88.295

-

4.76 -5.11

Table-10

Compare returns with Sensex Movement

65

Date Closing Change % change

30-Sep-08 8,634.48

31-Oct-08 7,892.32 -742 -8.59

TABLE-11

HDFC Equity Fund

Portfolio Top 10 Holdings For December

S. No. Company Industry % of NAV

1

Oil & Natural Gas Corporation

Ltd. Oil 9.14


3 Tata Motors Ltd. Auto 8.67



6 Crompton Greaves Ltd.

Industrial Capital

Goods 4.87


8 Mahindra & Mahindra Ltd. Auto 4.45

9 Bharat Heavy Electricals Ltd.

Industrial Capital

Goods 4.44




TOTAL 100

TABLE-12


(GROWTH)

66

Date NAV Change % Change

1, Dec 2008 102.827

3o, Dec 2009 107.009 4.182 4.06

TABLE-13



30-Nov-

08 8,788.81

30-Dec-

08 9,397.93 609 6.92

TABLE-14

In the month of December Sensex has grown by 6.92% but fund’s return were only

4.06% which indicating towards lower performance of fund.

HDFC Equity Fund (Comparison of Oct. & Dec.)

How Fund's Portfolio effected Returns

67

October December

Industry

% Of

Allocation Industry

% Of

Allocation

Software 19.97 Software 20.14

Industrial Capital Goods 13.73 Auto 17.48

Auto 12.73 Industrial Capital Goods 13.77

Banks 9.28 Oil 9.14

Oil 9.11 Banks 7.73

Auto Ancillaries 8.68 Auto Ancillaries 7.19

Pesticides 4.69 Pesticides 3.98

Power 4.07

Consumer Non

Durables 3.27

Transportation 2.74 Transportation 3.15

Petroleum Products 2.41 Metals 2.25

Hardware 2.11 Gas 2.01

Textile 1.92 Pharmaceuticals 1.63

Metals 1.76 Hardware 1.5

Pharmaceuticals 1.45 Textile 2.57

Chemicals 0.88 Chemicals 0.82

Telecom-service 0.79

Construction 0.21

IT Consulting &

Services 0.09

TABLE-15

Oct-Dec Month Portfolio

Industry Change

68

Software 0.17

Auto 4.75

Industry Capital Goods 0.04

Oil 0.03

Banks -1.55

Auto Ancillaries -1.49

Pesticides -0.71

Consumer Non Durables 3.27

Transportation 0.41

Metals 0.51

Gas 2.01

Pharmaceuticals 0.18

Hardware -0.61

Textile 0.66

Chemicals -0.06

TABLE-16

Tata Motors Share Benefit

Date Price Change % Change

31, Oct 2008 472

31, dec2008 639.55 167.55 35.49%

TABLE-17

Fund manager added auto industry by taking Tata motors to 8.67 % which had no

exposure in the month of October in the portfolio. During that time Tata Motors has

grown from 472 to 639.55 Rs means 35.49% increase which fletched fund

performance in to positive. So, fund manager decision of taking Tata Motors has

proved right.

Amtek Share Benefit

69


31, Oct 2008 273.7

31, dec2008 297 24 8.79%

TABLE-18

Fund manager reduced Amtek exposure in the portfolio by 1.26 % which proved right

because its share price rose only by 8.79% where Sensex was increasing at 19.2%.so

Amtek performed lower than market so its good to sell this script from portfolio.

HDFC Equity Fund

Portfolio Top 10 Holdings For February

S. No. Company Industry

% of

NAV




4 Bharat Heavy Electricals Ltd. Industrial Capital Goods 7.05

5 Oil & Natural Gas Corporation Ltd. Oil 6.58



8 ITC Ltd. Consumer Non Durables 5.97




TOTAL 100

TABLE-22


(GROWTH)

70

Date NAV Change % Change Beta

1, Feb 2009 113.063 0.83

28, Feb 2009 116.844 3.781 3.344 0.83



31-Jan-06 9236

28-Feb-06 8800 436 -4.72

TABLE-

Industry Wise Allocation

January February

71

Industry

% Of

Allocation Industry

% Of

Allocation


Auto 18.16 Industry Capital Goods 17.32

Industry Capital Goods 15.35 Auto 12.59

Banks 8.6 Consumer Non Durables 10.16

Oil 7.89 Auto Ancillaries 8.9

Auto Ancillaries 6.65 Banks 7.92

Consumer Non Durables 3.94 Oil 6.58

Pesticides 3.93 Pesticides 3.7

Transportation 2.84 Transportation 2.32

Gas 2.1 Metals 1.78

Metals Pharmaceuticals 1.45

Pharmaceuticals 1.42 Hardware 1.29

Hardware 1.38 Textile 2.09

Textile 2.04 Chemicals 0.67

Chemicals 0.7 IT Consulting & Services 0.12

IT Consulting & Services 0.1

TABLE-24

Jan-Feb Month Portfolio

Industry Change

72

Software -0.97


Auto -5.57


Auto Ancillaries 2.25

Banks -0.68

Oil -1.31

Pesticides -0.23

Transportation -0.62

Metals -0.07

Pharmaceuticals 0.03

Hardware -0.09

Textile 0.05

Chemicals -0.03


TABLE-25

ITC Share Benefit


31, Jan 2006 154.8

28, Feb 2006 172.45 17.65 11.41

TABLE-26

Add ITC to 5.97 which had no exposure in the month of January in the portfolio.

During that time ITC has grown from 154.8 to 172.45 Rs means 11.41% increase

which is higher than Sensex 4.54% growth, this decision gave return at 3.44%.

Crompton Greaves Share Benefit

73

Date Price Change

%

Change

31, Jan 2006 906.35

28, Feb 2006 892.45 -13.9 -1.53

TABLE-27

Reduce share of Crompton Greaves which had less exposure in the month of February

than January in the portfolio. During that time Crompton has felt from 906.35 to

892.45 Rs means 1.53% decrease. Due to this fund’s performance has not felt.

HDFC Equity Fund

Portfolio Top 10 Holdings For March 09

SR. No. Company Industry

% of

NAV



3 ITC Ltd. Consumer Non Durables 7.81





8 Crompton Greaves Ltd. Industrial Capital Goods 5.06

9 Siemens Ltd. Industrial Capital Goods 4.78




TOTAL 100

TABLE-28


(GROWTH)

74


1, Mar 2009 116.844 0.88

31, Mar 2009 127.151 10.307 8.821 0.88

TABLE-29



28-Feb-06 8800

31-Mar-06 9568.14 768.14 8.73

TABLE-30


February March

Industry

% Of

Allocation Industry

% Of

Allocation


Industry Capital Goods 17.32 Industry Capital Goods 17.35

Auto 12.59 Consumer Non Durables 12.46

Consumer Non Durables 10.16 Auto 11.37


Banks 7.92 Auto Ancillaries 7.67

Oil 6.58 Oil 3.86

Pesticides 3.7 Media & Entertainment 3.29

Transportation 2.32 Pesticides 2.87

Metals 1.78 Telecom- Services 2.65

Pharmaceuticals 1.45 Metals 2.13

Hardware 1.29 Transportation 1.86

Textile 2.09 Hardware 1.81

75

Chemicals 0.67 Textile 2.05

IT Consulting & Services 0.12 Pharmaceuticals 1.09

Chemicals 0.87


TABLE-31

Feb-March Month Portfolio

Industry Change

Software -2.97



Auto -1.22

Banks -0.04


Oil -2.72

Media & Entertainment 3.29

Pesticides -0.83

Telecom- Services 2.65

Metals 0.35

Transportation -0.46

Hardware 0.52

Textile -0.04

Pharmaceuticals -0.36

Chemicals 0.2

IT Consulting & Services -0.04

TABLE-32

Crompton Greaves Share Benefit

76


28, Feb 2006 892.45

31, March 2006 1049.3 156.85 17.57

TABLE-33

Add share of Crompton Greaves which had less exposure in the month of February in

the portfolio. During March Crompton has grown from 892.45 to 1049.3 Rs means

17.57% increase. So, these decision results in 8.4% return on fund.

Satyam Computer Share Benefit


28, Feb 2006 769.65

31, March 2006 848.5 78.85 10.24

TABLE-34

Satyam computer has grown at the rate of 10.24% which is 20% higher than Sensex

growth in that time period

Prudential ICICI Growth Fund

January 09

S. No Companies Industry % of NAV

1 Hindalco Industry Ltd. Non Ferrous Metals 5.43

2 Bharat Heavy Electricals Limited Industrial Capital Goods 4.16

3 Associated Cement Companies Ltd Cement 3.87

4 Oil & Natural Gas Company Ltd Oil 3.73

5 Grasim Industries Limited Cement 3.47

6 Reliance Industries Limited Petroleum Products 3.36


8 Jaiprakash Associates Ltd Construction 3.08

77

9 Mahindra & Mahindra Limited Auto 3.03

10 ITC Limited Consumer Non Durables 3

TABLE-35


GRAPH-9


(GROWTH)


1, Jan 2009 68.7 0.98

31, Jan 2009 70.42 1.72 2.5 0.98

TABLE-36

In January, ICICI Growth Fund has given only 2.5% returns where HDFC Equity

Fund has given 5.34% returns. So we can say that HDFC has performed better in

January.

Reliance Industry Share Benefit

78


31, Dec 2008 897.85

31, Jan 2009 713.9 -183.95 -20.4

TABLE-37

In the month of January Reliance Industry’s share price has come down to 713.9 Rs

which is 20.4% lesser than December price. ICICI has exposure of reliance industry

in to portfolio which harms the fund’s overall returns.

Jai Prakash Associate Share’s Benefit


31, Dec 2008 379.9

31, Jan 2009 408.25 28.35 7.46

TABLE

ICICI has exposure of Jai Prakash Associates which has rose by 7.46% in January

month. HDFC Mutual fund did not have Jai Prakash’s exposure in their portfolio.

Prudential ICICI Growth Fund (TABLE-)

February


1 Bharat Heavy Electricals Limited

Industrial Capital

Goods 4.84

2 Jaiprakash Associates Ltd Construction 4.14

3 Reliance Industries Limited Petroleum Products 3.99

4 ITC Limited

Consumer Non

Durables 3.82

79

5 Grasim Industries Limited Cement 3.73

6

Associated Cement Companies

Ltd Cement 3.71

7 Bajaj Auto Limited Auto 3.68


9 Mahindra & Mahindra Limited Auto 3.44

10 Oil & Natural Gas Company Ltd Oil 3.44


GRAPH

80


(GROWTH)


1, Feb 2009 70.42 0.96

28, Feb 2009 71.79 1.37 1.94 0.96

In February market has boomed by 4.54% where HDFC Equity fund has given 3.33%

returns. So it has performed similar to market trend but ICICI Growth fund has given

only 1.94% in same period. So, we can say that this fund has performed lower than

market

Prudential ICICI Growth Fund

March


1 Bharat Heavy Electricals Limited Industrial Capital Goods 4.84%

2 Reliance Industries Limited Petroleum Products 4.64%

3 Larsen & Toubro Limited Industrial Capital Goods 4.03%

4 ITC Limited Consumer Non Durables 3.91%

5 Siemens India Limited Industrial Capital Goods 3.82%

6 Bajaj Auto Limited Auto 3.52%

7

Associated Cement Companies

Ltd Cement 3.49%

8 Mahindra & Mahindra Limited Auto 3.32%

9 Cipla Limited Pharmaceuticals 3.28%

10 Grasim Industries Limited Cement 3.17%

TABLE

81


GRAPH

NAV Changed During the Month (GROWTH)


1, March 2009 71.79 0.78

31, March 2009 80.94 9.15 12.74 0.78

TABLE

ICICI Growth fund has grown up by 12.74% in March where HDFC Equity Fund has

grown only by 8.8%

CIPLA Share’s Benefit


31, Dec 2008 552.15

31, Jan 2009 662.25 110.1 19.94

TABLE

82

ICICI has CIPLA script in their portfolio which has grown to 662.25 Rs. It has rose

by 19.94% in March month. HDFC did not have CIPLA’s exposure. This script has

the main reason behind ICICI better performance over HDFC.

Reliance Growth Fund

January

S. No. Companies % of NAV

1

Bharat Earth Movers

Ltd. 4.96

2 Kirloskar Brothers 3.84

3 Crompton Greaves Ltd. 2.99

4 Hindustan Lever Ltd. 2.64

5 State Bank of India 2.58

6 Strides Arcolabs Ltd. 2.35

7 United Phosphorous 2.26

8 Jindal Saw Ltd. 2.2

9 Jaiprakash Associates 2.11

10 Reliance Industries Ltd. 2.08

TABLE


S. No. Industry % Of Allocation

1 Industry Capital Goods 10.44

2 Consumer Non Durable 10.41

3 Industrial Products 9.34

4 Software 8.92

5 Banks 7.25

6 Pharmaceuticals 6.1

7 Ferrous Metals 5.16

8 Fertilizers 3.09

9 Chemicals 3.09

10 Construction 2.8

83

11 Auto Ancillaries 2.33

12 Pesticides 2.26

13 Petroleum Products 2.08

14 Auto 2.05

15 Telecom Services 1.86

TABLE

Reliance Growth Fund

March


1

Bharat Earth Movers

Ltd. 4.91

2 Reliance Industries Ltd. 4.6

3 Kirloskar Brothers 4.18

4 Bombay Dying Ltd. 2.66

5 Bank of Baroda 2.58

6 Crompton Greaves Ltd. 2.57

7 Jaiprakash Associates 2.31

8 Strides Arcolabs Ltd. 2.16

9 Jindal Saw Ltd. 2.1

10 JSW Steels Ltd. 2.04

TABLE


S. No. Industry % Of Allocation

1 Industry Capital Goods 10.76

2 Industrial Products 10.19

3 Consumer Non Durable 8.37

4 Software 8.17

5 Pharmaceuticals 7.78

6 Banks 7.19

84

7 Ferrous Metals 6.98

8 Petroleum Products 5.95

9 Chemicals 4.55

10 Construction 3.11

11 Fertilizers 2.78

12 Telecom Services 2.56

13 Auto 2.34

14 Auto Ancillaries 2.19

15 Pesticides 2.14

TABLE



1, Mar 2009 207.15 0.87

31, Mar 2009 229.76 22.61 10.91 0.87

Reliance growth fund has given 10.91% returns to investors in the month of March

where market has boomed by only 8.4%. In the same month HDFC Equity fund has

given only 8.84 % returns.

Kirloskar Brother Share’s Benefit


28, Feb 2009 196.55

31, Mar 2009 291.7 95.15 48.41

Kirloskar Brother Share price has risen from 196.55 to 291.7 Rs. This means 48.41%

increase in March month. HDFC Mutual Fund had not this script into their portfolio.

85

Bombay Dyeing Share’s Benefit


28, Feb 2009 375.35

31, Mar 2009 596 220.45 58.71

Bombay Dyeing shares have grown by 58.71% where the overall Sensex has grown

only by 8.76% Reliance has 4.18% exposure to this script.

JSW Steel Share’s Benefit


28, Feb 2009 205.1

31, Mar 2009 302.85 97.75 47.61

In the month of March JSW Steel has moved to 302.85 Rs which was 47.61%

increase. Reliance has 2.04% exposure to this script.

86

Core & Satellite Fund

Nature of scheme : Open ended growth scheme

Objective: To generate capital appreciation through equity investment in companies whose

shares are quoting at prices below their true value.

Fund Manager : Dhawal Mehta

Inception Date : September 17, 2004


Portfolio Top 10 Holdings For October

S.No. Company Industry %To NAV






6 ITC Ltd. Consumer Capital Goods 5.27


8 Hindalco Industries Ltd. Non- Ferrous Metals 4.74

9 United Phosphorus Ltd. Pesticides 4.22

10 Hindustan Construction Company Ltd. Construction 4.07



TOTAL 100

TABLE

87



1, oct 2008 17.18 1.03

31, oct 2008 15.699 (-1.481) (-8.6) 1.03

TABLE



30-Sep-08 8,634.48

31-Oct-08 7,892.32

(-742)

(-8.59)

TABLE


Portfolio Top 10 Holdings For December

S.

No. Company Industry

% To

NAV







7 Hindustan Construction Company Ltd. Construction 5.18

88

8 ITC Ltd. Consumer Non Durable 5.15

9 Hindalco Industries Ltd. Non- Ferrous Metals 4.14

10 Hindustan zinc Ltd. Non- Ferrous Metals 3.75



Total 100



1, Dec 2008 17.542 0.87

30, Dec 2008 18.822 1.28 7.2 0.87

TABLE



30-Nov-

08 8,788.81

30-Dec-

08 9,397.93 609 6.92

TABLE


October December

Industry

% Of

Allocation Industry

% Of

Allocation

Industry Capital

Goods 22.15 Industry Capital Goods 21.42

89


Banks 12.61 Auto Ancillaries 10.76


Non-Ferrous

Metals 8.48 Non-Ferrous Metals 7.89

Auto 7.17 Auto 6.33

Pesticides 5.42 Construction 5.18

Consumer Non

Durable 5.27 Consumer Non Durable 5.15

Construction 4.07 Pesticides 4.96

Industrial Products 2.67 Industrial Products 2.94

Chemicals 1.71 Chemicals 2.12

Consumer Durables 1.29 Consumer Durables 1.43

Power 0.53

TABLE

Oct-Dec month portfolio

Industry Change

Industry Capital Goods -0.73

Software -1.58


Banks -2.86

Non-Ferrous Metals -0.59

Auto -0.84

Construction -0.5

Consumer Non Durable 1.11

Pesticides -0.12

Industrial Products 0.27

Chemicals 0.41

Consumer Durables 0.14

90

TABLE

Hindustan Construction Ltd. Share Benefit


31, Oct 2008 853.85

31, Dec2008 127.2

TABLE

Fund bought Hindustan Construction Ltd. shares.

ICICI Dynamic Plan

January Portfolio


1 Deccan Chronicle Holdings Ltd 7.18

2 Subex Systems Limited 4.02

3 Hindalco Industries Limited 3.89

4 E.I.D. Parry (India) Limited 3.49

5 State Bank of India 3.38

6 Bajaj Hindustan Limited 3.35

7 Reliance Industries Limited 3.18

8 Larsen & Toubro Limited 3.12

9

Sterlite Industries (India)

Limited 2.98

10 Grasim Industries Limited 2.98

TABLE


91

GRAPH


(GROWTH)


1, Jan 2009 42.68 0.91

31, Jan 2009 44.51 1.83 4.28 0.91

TABLE

Sterlite share's price

Date Price Change % change

1, Jan 2009 1074.75

31, Jan 2009 1363.45 288.75 26.86

TABLE

Fund has 2.98% exposure of Sterlite which has grown 26.86% in January month.

92

ICICI Dynamic Plan

February Portfolio



2 Jain Irrigation Systems Limited 4.5





7 Hindalco Industries Limited 3.21


9

Century Textiles & Industries

Ltd 3.14

10 Amtek Ltd. 3.01

TABLE


93

TABLE


(GROWTH)


1, Feb 2009 44.51 0.98

28, Feb 2009 46.22 1.71 3.64 0.98

Century textile share's price


1, Feb 2009 2.9

28, Feb 2009 2.9 Nil Nil

TABLE

Dynamic plan has 3.14% exposure of this script which has grown by 0 % means its

share price remained same during the month of February.

94

ICICI Dynamic Plan

March Portfolio




3

Triveni Engineering & Industries

Ltd 4.98

4 Jain Irrigation Systems Limited 3.89


6 Century Textiles & Industries Ltd 3.46


8 Tata Consultancy Services Limited 3.18



TABLE

95


GRAPH-



1, March

2009 46.22

0.95

31, March

2009 53.35 7.13 15.42

0.95

TABLE

Triveni share's price

Date Price Change % change

1, Mar 2009 76.95

31-Mar-09 125.95 49 64.47

TABLE

Fund has increased Triveni shares in portfolio to 4.98% which has grown by 64.47%

during March.

96

CHAPTER-7

Conclusion

The performance of mutual funds in India in the initial phase was not even closer to

satisfactory level. People rarely understood, and of course investing was out of

question. But yes, some 24 million shareholders were accustomed with guaranteed

high returns by the beginning of liberalization of the industry in 1992. This good

record of UTI became marketing tool for new entrants. The expectations of investors

touched the sky in profitability factor. However, people were miles away from the

preparedness of risks factor after the liberalization.

The annual composite rate of growth is expected 13.4% during the rest of the decades.

In the last 5 years we have seen annual growth rate of 9%. According to the current

growth rate, by year 2010, mutual fund assets will be double.

The government is also helping in boosting mutual fund industry. Government is

emphasizing a lot on infrastructure development and social spending and yet targeting

a lower fiscal deficit. FIIs continued to be positive on emerging markets in general

and the Indian markets in particular. FIIs buying have considerable portion in mutual

funds buying.

Key Points:

Almost 100% growth in the last 6 years.(excepting 2008)

Our saving rate is over 30%, highest in the world. Only channel zing these

savings in mutual funds sector is required.

We have some 70 mutual funds which are much less than US having more

than 800. There is a big scope for expansion.

97

'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are

concentrating on the 'A' class cities. Soon they will find scope in the growing

cities.

SEBI allowing the MFs to launch commodity mutual funds.

This year budget has increased the limit of investment in overseas market by

mutual funds to 33-35%.

During last financial year investment habit of India has increased by 25 %

and it is expected to grow by 30 % this year.

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Recommendations

Studying the mutual fund industry I came to know that there are more then 700 types

of funds available in the market. What I see that most of the fund managers who are

investing in equity market are putting their funds into large cap funds which is of

course more secure but it is giving less return to the investors. i thought of preparing

my own portfolio by investing 25 percent in money market and the rest of the 75

percent in mid cap equity To provide investors with opportunities for long term

growth in capital along with the liquidity of an open ended scheme by investing

predominantly in a well diversified basket of equity stocks of companies and in debt

and money market instruments.. The portfolio is mentioned below:-

EQUITY

Company Name % of Net Assets

Maharashtra Seamless Ltd 4.61

Infotech Enterprises Limited 4.33

Kesoram Industries Ltd 4.02

Gitanjali Gems Ltd. 3.18

KEC International Ltd. 3.08

Nagarjuna Construction Company Ltd 3.06

Thermax Limited 3.02

Pantaloon Retail (India) Ltd. Equity 2.89

Eastern Silk Industries Limited 2.81

3 i Infotech Limited. 2.68

Crompton Greaves Ltd 2.65

Welspun Gujarat Stahl Rohren Ltd 2.65

Hotel Leela Venture Ltd 2.51

Adlabs Films Limited 2.23

Mangalam Cement Ltd 2.19

Amtek Auto Ltd 2.17

KEI Industries 2.14

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Elecon Engineering Company Ltd 2.09

India Cements Ltd 1.79

IVRCL Infrastructure & Projects Ltd. 1.67

Raymond Ltd 1.61

Opto Circuit Ltd. 1.52

SKF Bearings India Ltd 1.48

Crest Animation Studios Ltd 1.46

Ansal Properties & Industries Ltd 1.36

Gujarat Mineral Development Corporation Limited 1.30

Lupin Ltd. 0.97

Deepak Fertilizers & Petrochemicals Corp Ltd 0.93

Usha Martin Ltd 0.93

RPG Transmission Ltd 0.86

Gujarat State Petronet Ltd. 0.78

Jagran Prakashan Ltd 0.75

Rajshree Sugars & Chemicals Ltd 0.66

Indo Asian Fuse Gear Ltd 0.65

Sri Adhikari Brothers Television Network Ltd 0.58

Global Vectra Helicorp Ltd 0.37

Sagar Cements Ltd 0.32

Bharati Shipyard 0.3

PVR Ltd. 0.3

K E C Infrastructure Ltd. 0.28

Dwarikesh Sugar Industries 0.26

Tanla Solutions Ltd 0.17

Mahindra Ugine Steel Company Ltd 0.16

Redington India Ltd. 0.15

Suryalakshmi Cotton Mills Ltd 0.15

Top Industry Allocation

Industry Allocation

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Steel 8.35%

Computers - Software & Education 7.18%

Housing & Construction 6.09%

Textiles 5.85%

Diversified 5.63%

Electricals & Electrical Equipments 5.44%

Engineering & Industrial Machinery 5.11%

Entertainment 4.57%

Cement 4.30%

Power Generation, Transmission & Equip 3.94%

Asset Allocation

Equity Debt Money Market

74.06 - 25.94

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My Learning from PROJECT

I have learnt many things which I might not be able to learn under class room training

like looking at the stock market terminal and analyzing the stocks and thereby

deducing about their performance and thus designing the portfolio on the basis of

their performances. I want to share some of experience or learning with you.

First and the most important I learnt about Mutual Fund Industry. Before this

project I dint have much knowledge about Mutual funds. But now I have good

knowledge about Mutual Funds.

I learnt about marketing elements also. How the companies, banks and

brokerage houses market their products in front of customer in presence of

competitor’s products.

I learnt about mutual funds as well as other products like insurance, DMAT

account, IPO, some of banking product and transactions and some financial

services offered by EDELWEISS Broking Ltd.

I also learnt about the risk factor calculation of the mutual funds, how the

various broking firms calculate the risk factors of various mutual funds.

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ANNEXURE

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FACT SHEET OF THE EDELWEISS MUTUAL FUND

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Webography

hdfcfund.com

google.com

altavista.com

investmart.com

icicidirect.com

amfiindia.com

nseindia.com

mutualfundsindia.com

Bibliography

Book on “Portfolio Management” by Press

Magazine “AAG” by HDFC Bank, April issue.

Business world

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CARICULOUMN VITAE

Nitesh Kumar Tiwari

Village & Post-Imbrahimpur Bhadohi-221310Mob:-+91 9336826902 E-mail Id:[email protected]

CAREER OBJECTIVE

To build a career with a leading organization with an environment comprising of committed and dedicated people, helping organizational and individual growth and develop my professional competence to the fullest.

EDUCATION

QUALIFICATION UNIVERSITY/BOARD %TAGE or CGPA YR–PASSOUT MAJOR SUBJECTS

MBA (Finance/Marketing

)

AMITY UNIVERSITY 2nd Semester 2009-011 Finance/Marketing

B.Sc.(Math) V.B.S.Purvanchal ,University

57.8 2007 P.C.M.

IntermediateU.P.BOARD 69.0 2004 P.C.M, English,

Hindi High School U.P. BOARD 60.5 2002 Science, Hindi,

English, Math, Sanskrit,

So-Science.

SPECIALIZATION

Marketing Finance

COMPUTER SKILLS

MS Word, Excel, PowerPoint etc.

PROJECTS

I have completed Marketing Research on “Tata-NANO-Consumer Perception”. (2010)

Business Plan on ‘Cloud Computing’.(2010) International Marketing Plan for GITS food Product Pvt. Ltd. (For Australian

Market)(2010)

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ACHIEVEMENTS

School prefect for class 11th & 12th.

EXTRA CURRICULAR ACTIVITIES

Led cleanliness and health awareness drives in my village Volunteered in FRESHERS 2009-11 at AMITY UNIVERSITY. Volunteered in I-VIEW SAMANVAY 2010 at AMITY UNIVERSITY. Attended MILITARY TRAINING CAMP at MANESAR, GURGAON with an aim

to further sharpen my team management and self-survival skills. Participated in Blood Donation Camp.

PERSONAL VITAE

Strengths:

Quick Learner and adept at adapting to different conditions. Good at communication skills. Patience on most occasions. Friendly Go getter

Hobbies & Interests: Traveling to new places. Listening to music. Bathroom singing Sketching

Other Relevant Information:

Date of Birth: 16th of December, 1987 Linguistic Abilities: Hindi, English, French(Basic)

WORK EXPERIENCE

Taught Mathematics :

During my Gradation (2004-07) in (∆+ Coaching center in Mirzapur). After Graduation (2007-09) in (Sankalp & 3-D Sikha Sansthan in Varanasi)

REFEREE

Mr. Anil Sharma Professor (Strategy & Finance)Amity Business SchoolMob: +91-9415610158E Mail: [email protected]

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summer traning project

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