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PERFORMANCE ANALYSIS OF SELECT MUTUAL FUNDS IN INDIA

CHAPTER-1

INTRODUCTION

Introduction about internship:

The project at WAY2WEALTH gave an practical experience about the organization

structure, online trading mechanism, knowledge about mutual funds and its analysis while

choosing best funds. During these ten weeks of the project in the organization we were

exposed to the working environment of the organization. It gave an opportunity to know

about the Stock market performance and mutual funds performance. In the company, I

learned about how management theories and concepts are applied in an organization. I

learned how the Top Management of the organization works with middle level and

operational level in providing them idea and support as stock market is very volatile.

Moreover, employees were quick to react for the inadequacies caused in their work place and

take decisions in solving those problems by sharing their views with the superiors and which

would be solved by practical negotiation rather than theoretical procedures. Learning always

supports in boosting our knowledge level. The “wealth team” in the indiranagar branch

provided me the guidance in analysing of performance of mutual funds and helped me with

the project. Meanwhile, the project was a good exposure to know the working conditions of

the broking industry. Another important aspect that was noticed in the company was

regarding the discipline followed by the executives while they were handling the customer’s

grievances and solving their problems. The employees were very friendly and co-operative.

The day-to-day operation was allocated to the employee by the top-level management. The

project at WAY2WEALTH was very helpful, as we came across the risk that is involved in

the work carried out in stock broking company.

INTRODUCTION TO MUTUAL FUND

Mutual fund is an investment company that pools money form shareholders and invest in a

variety of securities, such as stocks, bonds, and money market instruments. Most open-end

mutual funds stand ready to buy back (redeem) its shares at their current net asset value,

which depends on the total market value of the funds investment portfolio at the time of

redemption. Most open end mutual funds continuously offer new shares to investors. Also

known as open-end investment company, to differentiate it from a closed –end Investment

Department of MBA AIT Bangalore Page 1


Company. Mutual funds invest pooled cash of many investors to meet the fund’s stated

investment objective. Mutual fund stands ready to sell and redeem their shares at any time at

the funds current net asset value: Total fund assets divided by shares outstanding. In Simple

Words, Mutual fund is a mechanism for pooling the resources by issuing units to the

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

document. Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may

not move in the same direction in the same proportion at the same time. Mutual fund issues

units to the investors in accordance with quantum of money invested by them. Investors of

mutual funds are known as unit holders. The profits or losses are shared by the investors in

proportion to their investments.. The investment manager would invest the money collected

from the investor in to assets that are defined permitted by the stated objective of the scheme.

For example, an equity fund would invest equity and equity related instruments and a debt

fund would invest in bonds, debentures, gilts etc. Mutual Fund is a suitable investment for the

common man as it offers an opportunity to invest in a diversified, professionally managed

basket of securities at a relatively low cost.

TOPIC CHOOSEN FOR STUDY

“PERFORMANCE ANALYSIS OF SELECT MUTUAL FUNDS IN INDIA”

NEED FOR STUDY

The study first tries to understand the composition of the selected funds which determines the

scope of performance for the funds, followed by use of various tools and techniques that are

relevant in quantifying and understanding the risk and return relationships for each mutual

fund scheme under consideration. Then a comparative analysis of the mutual fund schemes is

done to see which fund has performed the best.

This study is significant to the company as it looks into the minute details that differentiate

the performances of funds of different companies with same theme or sector under similar

market conditions. This would help the company to use the report and take right measures in

selecting the mutual funds.



Objectives of the study

1) To understand the performances of various schemes using various tools to measure the

performances

2) To examine the return from the selected mutual fund

3) To know whether the mutual funds are able to provide reward to variability and volatility

4) To compare security market return with fund return.

5) To measure and compare the performance of selected mutual fund schemes of different

mutual fund companies.

SCOPE OF STUDY :

The present study comprises of six mutual fund schemes launched by different mutual fund

companies. These are

1 DSP Black Rock Top 100 Equity Fund - Regular Plan - Growth

2 Franklin India Blue chip Fund-Growth

3 ICICI Prudential Top 100 Fund - Regular Plan –Growth

4 Reliance Vision Fund-GROWTH PLAN-Growth Option

5 HDFC Top 200 Fund - Growth Option

6 SBI BLUE CHIP FUND-REGULAR PLAN GROWTH

The performance of the fund depends on the kind of stock chosen by the fund managers of

the company. Because each stock perform differently in market. The time period of this

research work is from 1st April 2009 to 31st march 2013. The NAV of the selected scheme

have been compared for five years with an annual return. Then these schemes have been

compared with the bench mark return to evaluate the performance of these schemes.



METHODOLOGY ADOPTED

The present study made an attempt to analyse the performance of the selected mutual

fund schemes with the market during the period of the study . In order to achieve the

objectives an analysis has been made to compare these schemes with the market on the basis

of risk and return. Different statistical and financial tools are used to evaluate the

performance of these mutual fund schemes under the present study. These tools and

techniques include standard deviation, beta, alpha, R squared, Sharpe ratio and Treynor

ratio. The current study is based on only secondary data. The researcher has used NAV

values of six mutual funds chosen for the study. NAV values are collected from NSE & BSE

and then it has been compared with their respective benchmark indexes.

REVIEW OF LITERATURE:

Ms. Rajeswari T.R., Prof. V.E. Rama Moorthy (2001) in the paper ―An Empirical Study

on Factors Influencing the Mutual Fund Scheme Selection by Retail Investors‖ have

expressed that mutual fund is a retail product designed to target small investors, salaried

people and others who are not intimidated by the mysteries of stock market but, nevertheless,

like to reap the benefits of stock market investing. At the retail level, investors are unique and

are a highly heterogeneous group. Hence, their fund/scheme selection also widely differs

Shome (1994) based on growth schemes examined the performance of the mutual fund

industry between April 1993 to March 1994 with BSE SENSEX as market surrogate. The

study revealed that, in the case of 10 schemes, the average rate of return on mutual funds was

marginally lower than the market return.

Gupta Ramesh (1989) evaluated fund performance in India comparing the returns earned by

schemes of similar risk and similar constraints. An explicit risk-return relationship was

developed to make comparison across funds with different risk levels. His study decomposed

total return into return from investors risk, return from manager’s risk and target risk. Mutual

fund return due to selectivity was decomposed into return due to selection of securities and

timing of investment in a particular class of securities.

Gupta and Sehgal (1998) evaluated performance of 80 mutual fund schemes over four years

(1992-96). The study tested the proposition relating to fund diversification, consistency of

performance, parameter of performance and risk-return relationship. The study noticed the



existence of inadequate portfolio diversification and consistency in performance among the

sample schemes

Roshni Jayam’s (2002) study brought out that equities had a good chance of appreciation in

future. The researcher was of the view that, investors should correctly judge their investment

objective and risk appetite before picking schemes, diversified equity funds were typically

safer than others and index funds were the best when market movements were not certain.

The researcher suggested Systematic Withdrawal Plan (SWP) with growth option was more

suitable for investors in need of regular cash inflows.

Jenson, Michal C. (1967) The Performance of Mutual Funds in the Period 1945 – 1964‖,

The Journal of Finance, Vol 23, No. 2, pp.389 – 416. The research paper indicates the past

performance of the fund, predict the future demand of the fund, investors attract to invest in

Mutual Fund.

Trey nor (1965) presents a new way of viewing performance results. He attempted to rate the

performance of mutual funds on a characteristics line graphically. The steeper the line, the

more systematic risk or volatility a fund possesses. By incorporating various concepts, he

developed a single line index, Tn, called Trey nor index.

Sharpe (1966) explains in a modern portfolio theory context that the expected return on an

efficient portfolio and its associated risk (unsystematic risk) are linearly related. By

incorporating various concepts he developed a Sharpe index. In this paper he attempted to

rate the performance on the basis of the optimal portfolio with the risky portfolio and a risk-

free asset is the one with the greatest reward-to-variability .The unsystematic risk is related to

particular security due to inefficient management

LIMITATIONS OF THE STUDY

The certain limitations of this study are as follows:

• The study considers only five years of data to analyse mutual funds

• The study uses only six mutual funds for the analysis.

• The study is based on secondary data only.



CHAPTER-2

INDUSTRY PROFILE

Overview

Mutual funds go back to the times of the Egyptians and Phoenicians when they sold shares in

caravans and vessels to spread the risk of these ventures. The foreign and colonial

government Trust of London of 1868 is considered to be the fore-runner of the modern

concept of mutual funds. The USA is, however, considered to be the Mecca of modern

mutual funds. By the early - 1930s quite a large number of close - ended mutual funds were



in operation in the U.S.A. Much latter in 1954, the committee on finance for the private

sector recommended mobilization of savings of the middle class investors through unit trusts.

Finally in July 1964, the concept took root in India when Unit Trust of India was set up.

INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at

the initiative of the Government of India and Reserve Bank of India. The history of mutual

funds in India can be broadly divided into four distinct phases

First Phase - 1964-1987

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

the Reserve Bank of India and functioned under the Regulatory and administrative control of

the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial

Development Bank of India (IDBI) took over the regulatory and administrative control in

place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988

UTI had Rs. 6,700 crores of assets under management.

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

1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks

and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987

followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),

Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund

(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund

in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004

crores.

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

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

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year

in which the first Mutual Fund Regulations came into being, under which all mutual funds,



except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged

with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

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

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI

(Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and acquisitions.

As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805

crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way

ahead of other mutual funds.

Fourth Phase - since February 2003

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

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of

India with assets under management of Rs. 29,835 crores as at the end of January 2003,

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

The Specified Undertaking of Unit Trust of India, functioning under an administrator and

under the rules framed by Government of India and does not come under the purview of the

Mutual Fund Regulations.

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

with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the

erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under

management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual

Fund Regulations, and with recent mergers taking place among different private sector funds,

the mutual fund industry has entered its current phase of consolidation and growth.

The Indian retail brokerage industry consists of companies that primarily act as agents for the

buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a

commission or transaction fee basis.



Evolution of the Indian Brokerage Market

The Indian broking industry is one of the oldest trading industries that have been around even

before the establishment of the BSE in 1875. Despite passing through a number of changes in

the post liberalization period, the industry has found its way towards sustainable growth. The

evolution of the brokerage market is explained in three phases: pre 1990, 1990-2000, post

2000.

Early years

The equity brokerage industry in India is one of the oldest in Asian region. India had an

active stock market for about 150 years that played a significant role in developing risk

markets and also promoting enterprise and supporting the growth of industry. The routes of

stock market in India began in 1860’s during the American civil war that led to a sudden

surge in the demand for cotton from India resulting in setting up of a number of joint stock

companies that issued securities to raise finance. This trend was akin to the rapid growth of

securities markets in Europe and North America in the background of expansion of railroads

and exploration of natural recourses and land development. Bombay at that time was a major

financial centre having housed 31 banks 20 insurance companies and 62 joint stock

companies. In the aftermath of the crash, bank, on whose building steps shares brokers used

to gather to seek stock tips and share news, disallowed them to gather there, thus forcing

them to find a place of their own, which later turned into Dalal Street. A group of about 300

brokers formed the stock exchange in July 1875, which led to the formation of a trust in 1887

known as the “Native Shares and Stock Brokers Association”.A unique feature of the stock

market development in India was that that it was entirely driven by local enterprises, unlike

the banks which during the pre-independence period were owned and run by the British.

Following the establishment of the first stock exchange in Mumbai, other stock exchanges

came into being in major cities in India, namely Ahmedabad (1894), Calcutta (1908), Madras

(1937), Uttar Pradesh & Nagpur (1940) and Hyderabad (1944). The stock markets gained

from surge and boom in several industries such as jute (1870’s), tea (1880s & 1890s), coal

(1904 &1908) etc., at different points of time.



Beginning of New Equity Culture

A new phase in the Indian stock markets began in the 1970s, with the introduction of Foreign

Exchange Regulation Act (FERA) that led to divestment of foreign equity by the

multinational companies, which created a surge in retail investing. The early 1980s witnessed

another surge in stock markets when major companies such as Reliance accessed equity

markets for resource mobilization that evinced huge interest from retail investors. A new set

of economic and financial sector reforms that began in the early 1990s gave further impetus

to the growth of the stock markets in India. As a part of the reform process, it became

imperative to strengthen the role of the capital markets that could play an important role

inefficient mobilization and allocation of financial resources to the real economy. Towards

this end, several measures were taken to streamline the processes and systems including

setting up an efficient market infrastructure to enable Indian finance to grow further and

mature. The importance of an efficient micro market infrastructure came into focus following

the incidence of market abuses in securities and banking markets in 1991 and 2001 that led to

extensive investigations by two respective Joint Parliamentary Committees. The Securities

and Exchange Board of India (SEBI), which was set up in 1988 as an administrative

arrangement, was given statutory powers with the enactment of the SEBI Act,1992. The

broad objectives of the SEBI include

To protect the interests of the investors in securities

to promote the development of securities markets and to regulate the securities

markets

The scope and functioning of the SEBI has greatly expanded with the rapid growth of

securities markets in India in the last fifteen years. Following the recommendations of the

High Powered Study Group on Establishment of New Stock Exchanges, the National Stock

Exchange of India (NSE) was promoted by financial institutions with an aim to provide

access to investors all over the country. NSE was incorporated in Nov 1992 as a tax paying

company, the first of such stock exchanges in India, since stock exchanges earlier were trusts,

being run on no-profit basis. NSE was recognized as a stock exchange under the Securities

Contracts (Regulations) Act 1956 in Apr 1993. It commenced operations in wholesale debt

segment in Jun 1994 and capital market segment (equities) in Nov1994. The setting up of the

National Stock Exchange brought to Indian capital markets several innovations and modern

practices and procedures such as nationwide trading network, electronic trading, greater



transparency in price discovery and process driven operations that had significant bearing on

further growth of the stock markets in India. Faster and efficient securities settlement system

is an important ingredient of a successful stock market. To speed the securities settlement

process, The Depositories Act 1996 was passed that allowed for dematerialization (and

dematerialization) of securities in depositories and the transfer of securities through

electronic book entry..

Rapid growth

The last decade has been exceptionally good for the stock markets in India. In the back of

wide-ranging reforms in regulation and market practice as also the growing participation of

foreign institutional investment, stock markets in India have showed phenomenal growth in

the early1990s. The stock market capitalization in mid-2007 is nearly the same size as that of

the gross domestic product as compared to about 25 percent of the latter in the early 2000s.

Investor base continued to grow from domestic and international markets. The value of share

trading witnessed sharp jump too. Foreign institutional investment in Indian stock markets

showed continuous rise reaching about USD10 ban in each of these years between FY04 to

FY06. Stock markets became intensely technology and process driven, giving little scope for

manual intervention that has been the source of market abuse in the past. Electronic trading,

digital certification, straight through processing, electronic contract notes, online

broking have emerged as major trends InTechnology. Risk management became robust

reducing the recurrence of payment defaults. Product expansion took place in a speedy

manner. Indian equity markets now offer, in addition to trading in equities, opportunities in

trading of derivatives in futures and options in index and stocks. ETFs are showing gradual

growth. Within five years of introduction of derivatives, Indian stock markets now are

ranked first in stock futures and fourth in index futures. Indian stock markets are transaction

intensive and thus rank among the top five markets in this regard. Stock exchange reforms

brought in professional management separating conflicts of interest between brokers as

owners of the exchanges and traders/dealers.while NYSE Group led consortium took stake

in the National Stock Exchange, Deutsche Borse and Singapore Stock Exchange bought

equity in the Bombay Stock Exchange Ltd.



Industry Analysis: Securities Brokerage

The Securities Brokerage Industry is cyclical and comprised of two distinct types of

businesses. Brokerages, also known as financial services companies, strive to meet the

investing needs of their clients, and exchanges facilitate securities trading. Net profits

correlate to the performance of the broader equity market. Some hold up better than their

peers during bear markets.

Brokerage Basics

Brokerages are fairly diversified. A big chunk of the top line comes from filling buy and sells

orders from clients. There are two ways in which a broker can meet a client's trade request.

The broker can act as an intermediary, matching a customer's buy order with a third-party's

sell order and vice versa. In this capacity, the broker acts as an agent, receiving a

"Commission" (highlighted on the Value Line page). As well, the broker can act as a

principal, meeting a customer's order from its own inventory. Revenue from this activity falls

under the heading "Principal Transactions"; it may include gains and losses on the

brokerage's own investments. We usually classify fee-based revenue as "Other". Fees are

calculated as a percentage of a client's assets, and stem from managed mutual funds and

specialized, high-net-worth accounts.

The Function of Exchanges

Exchanges provide a marketplace for traders to buy and sell securities. In years past, trading

took place on large open floors, where buyers and sellers engaged in face-to-face

transactions. Today, most exchanges utilize electronic systems, which allow for fast, efficient

trading. A few still use traditional trading floors, but in conjunction with an electronic

system.Exchanges generate revenue in several ways. Those that concentrate on the equities

market collect fees from listed companies. Both equity and derivative exchanges receive a

payment for each trade that takes place on their platform. The top lines of these companies

perform quite well during volatile markets. Another source of revenue comes from supplying

market data to financial information providers. Too, revenue may be produced from

developing, marketing and distributing technology used in trading and information

processing. Among other means of generating revenue, an exchange may clear third-party or

in-house trades.Compared with those of brokerages, the cost structures of exchanges are more

fixed in nature. Operating performance is linked to transaction volume. Margins expand as



trading increases, and the reverse is true when activity slows. Reductions in fixed costs

enhance operating leverage. Generally, exchanges do not assume heavy debt burdens.

Substantial debt, however, will be taken on to complete a promising acquisition.

Managements endeavour to quickly lighten the burden with improved cash flow.

Brokerage Firm

A brokerage firm, or simply brokerage, is a financial institution that facilitates the buying

and selling of financial securities between a buyer and a seller. Brokerage firms serve a

clientele of investors who trade public stocks and other securities, usually through the firm's

agent stockbrokers. A traditional, or "full service", brokerage firm usually undertakes more

than simply carrying out a stock or bond trade. The staffs of this type of brokerage firm is

entrusted with the responsibility of researching the markets to provide appropriate

recommendations and in so doing them direct the actions of pension fund managers

and portfolio managers alike. These firms also offer margin loans for certain approved clients

to purchase investments on credit, subject to agreed terms and conditions. Traditional

brokerage firms have also become a source of up-to-date stock prices and quotes.

They help lower costs in two ways:

By matching buy and sell orders within the firm's order book, the overall quantity of

stock to be traded can be reduced, thus reducing commissions payable to others by

the brokerage firm.

The broker can split the bid-ask spread with the investor when matching buy and sell

orders - a win-win situation in most cases

Distributor

Many broker-dealers also serve primarily as distributors for mutual fund shares. These

broker-dealers may be compensated in numerous ways and, like all broker-dealers, are

subject to compliance with requirements of the Securities and Exchange Commission and one

or more self-regulatory organizations, such as the Financial Industry Regulatory Authority

(FINRA). The forms of compensation may be sales loads from investors, or Rule 12b-1 fees

or servicing fees paid by the mutual funds.



Broker

A broker is an individual or party that arranges transactions between a buyer and a seller for

a commission when the deal is executed. A broker who also acts as a seller or as a buyer

becomes a owner party to the deal. Distinguish agent—one who acts on behalf of a principal.

In general a broker is an independent agent used extensively in some industries. A broker's

prime responsibility is to bring sellers and buyers together and thus a broker is the third-

person facilitator between a buyer and a seller. An example would be a real estate broker who

facilitates the sale of a property. Brokers also can furnish market information regarding

prices, products, and market conditions. Brokers may represent either the seller (90% of the

time) or the buyer (10%) but not both at the same time. An example would be a stockbroker,

who makes the sale or purchase of securities on behalf of his client. Brokers play a huge role

in the sale of stocks, bonds, and other financial services.

Future of Industry:

India is a thickly populated country with many middle class and upper middle class

people who are interested in investing and who require investment advice for getting

maximum returns with minimum risk. Added to this increasing software companies etc,

where young professionals drawing huge salary but have less knowledge about investment

planning, definitely need help of professional investment advisers and mutual funds



Change in asset under management from 2009 to 2014

Mutual Funds March 2009 March 2014 Change % Change

HDFC Mutual Fund 57,956 112,963 55,006 94.91

ICICI Prudential Mutual Fund 51,433 106,822 55,389 107.69

Reliance Mutual Fund 80,963 103,542 22,579 27.89

Birla Sun Life Mutual Fund 47,096 89,051 41,955 89.08

UTI Mutual Fund 48,754 74,233 25,479 52.26

SBI Mutual Fund 26,383 65,499 39,117 148.27

Franklin Templeton Mutual Fund 19,205 45,404 26,199 136.42

IDFC Mutual Fund 14,362 41,349 26,987 187.90

Kotak Mahindra Mutual Fund 18,204 33,079 14,875 81.71

DSP BlackRock Mutual Fund 14,413 31,631 17,218 119.47

Tata Mutual Fund 17,030 21,954 4,924 28.92

Deutsche Mutual Fund 9,355 18,795 9,440 100.91

L&T Mutual Fund 1,023 18,255 17,232 1683.62

Sundaram Mutual Fund 9,267 16,422 7,155 77.21

JPMorgan Mutual Fund 2,454 16,248 13,794 562.21

Religare Invesco Mutual Fund 6,023 14,496 8,473 140.68

LIC NOMURA Mutual Fund 23,092 10,584 -12,508 -54.17

Baroda Pioneer Mutual Fund 1,132 8,106 6,974 616.07


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http://www.moneycontrol.com/mutual-funds/amc-details/SB

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http://www.moneycontrol.com/mutual-funds/amc-details/HD

http://www.moneycontrol.com/mutual-funds/amc-assets-monitor?sort=3&month1=200903&month2=201403




HSBC Mutual Fund 9,575 7,659 -1,916 -20.02

Canara Robeco Mutual Fund 4,744 6,499 1,755 36.99

JM Financial Mutual Fund 4,788 6,046 1,259 26.29

PRINCIPAL Mutual Fund 6,757 4,134 -2,623 -38.82

Goldman Sachs Mutual Fund 1,069 3,764 2,696 252.26

Taurus Mutual Fund 208 3,532 3,324 1595.38

BNP Paribas Mutual Fund 5,811 3,446 -2,365 -40.70

Morgan Stanley Mutual Fund 1,346 2,572 1,226 91.11

BOI AXA Mutual Fund 197 1,991 1,795 913.19

Mirae Asset Mutual Fund 162 692 530 326.92

PineBridge Mutual Fund 1,377 649 -728 -52.88

ING Mutual Fund 2,529 564 -1,965 -77.70

Quantum Mutual Fund 57 356 300 527.87

Escorts Mutual Fund 182 269 88 48.35

Sahara Mutual Fund 146 191 45 30.60

Edelweiss Mutual Fund 22 169 147 659.56

Total 487,114 870,968 383,85444.07

COMPANY PROFILE


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Started in 1984, Way2Wealth today has established itself as one of India’s ‘Premier

Investments Consultancy Firms’. It is known for making investing simpler, more

understandable and profitable for the investors. They offer a wide range of products &

services under one roof, for the convenience and benefit of customers.

Way2Wealth is currently a 100 offices & 1000 employees’ organization. Their team, from

varied and diverse professional, educational, or demographic backgrounds, continuously

strives and contributes to their customer needs and company’s growth.

The journey since 1984:

Sivan Securities started in 1984, has a long and illustrious track record of being

amongst the premier Financial Intermediaries in the country as well as being an incubator for

IT start-up firms.

The Venture Capital division came to be known as Global Technology Ventures

(GTV has provided venture capital to companies such as Kshema Technologies, Mind Tree,

Ivega etc.) and the Financial Intermediary Division was spun off as Way2wealth in the year

2000.

Way2Wealth is promoted by Sivan Securities and Global Technology Ventures Ltd.

Over the years, Sivan has developed a strong reputation for navigating its investors

through all the ups and downs in the market. Way2Wealth has inherited these same values in

addition to a base of 75,000 individual customers, over 300 corporate/institutional clients.



Other companies in the group include Amalgamated Bean Coffee way2Trading company Ltd.

(one of the largest Coffee Exporters in India) and Café Coffee Day, a chain of youth hangout

coffee parlors.

Way2wealth has a very credible management team, who has well over 100 man-years of

experience amongst themselves.

Ownership Pattern

Mr. ShashiBhushan

CEO

Over 18 years of experience in Indian Capital Markets, covering various aspects of

brokering business; viz. Branch network, alternate channels, private client group, Investment

Advisory etc. Previously with IL&FS Invest smart Ltd. As Head-Retail equities business

since 1998. Prior to which he was associated with Kotak securities, Escort securities, etc.

Mr. Ketan Sheth

Director Research

Over 25 years of experience in the Indian Capital Markets. Post graduate with

specialization in Management and a member of ICWA. Known in the markets for his astute

stock-picking ability. Director of research and drives the Portfolio Management Services

Desk.

MR. Sunil Ramrakiani

COO-Trading Products

Over 12 years of experience across diversified asset class commodities, Equity, FX

Market & Treasury management. Previously with ICICI Bank – Treasury, IL&FS

Investsmart, Rudolf wolff, etc. Involved in product development committees of commodity

exchanges and regulatory committees. Set up the commodities desk at IL&FS Investsmart,

which has gained a leadership position in a few commodity segments. One of the earliest base

metal/equity derivatives traders in the country.



Mr. Gentil Augustine

Head – HRD

Over 12 years of experience in various sectors of the service industry. Previously

IL&FS Investsmart (AVP-HR) and Elbee-UPS.

Mr. Srinath B G

Head – Finance & Accounts.

Over 15 years of experience, Spread across finance, business advisory, financial

planning, operations, accounting, compliance and auditing function. An FCA and previously

a practicing Chartered Accountant

Mr. Shantanu Bharadwaj

Head- Product development.

Over 7 years of experience in the Indian Capital Markets. Previously IL&FS

Investsmart Ltd and NCDEX.

Mr. Hutaib Bandukwala

Head-Marketing, Communications & Service Quality.

MBA with over 9 years of experience in branding, marketing & product management,

spanning retail financial services and banking. Previously with ICICI Bank Ltd. As Head-

product manager (alternate Channel) and IL&FS Investsmart into brand management.

Nature of business carried on by Way2wealth:-

Not everybody is an investment professional; there is always a need for someone who

can guide investors through the complex maze of investment options with unbiased and

expert advice. Someone, who can be a friend and an expert who would understand the needs

of the investor and help him achieve his financial goals..



WAY2WEALTH is the Investment Consultancy arm of Sivan Securities providing

Advisory and Investment facilitation services to retail investors, corporate and

institutions.

VISION:

We believe that “our knowledge combined with our investors trust and involvement

will lead to the growth of wealth and make it an exciting experience".

MISSION:

"To be the pre-eminent destination for personalized financial solutions helping

individuals create wealth".

Quality policy

Way2wealth aim for complete customer satisfaction, by providing superior quality

financial services. In the process W2W will strive to exceed customer’s expectations.

Build in house that will ensure transparent and harmonious relationship with its

clients and investors to provide high quality of services.

Provide high quality of work life for all its employees and equip them with adequate

knowledge and skills so as to respond to customer’s needs.

To maintain its best quality W2W also has an expert Research Team. Research is at

the core of company’s advice. W2W believe that sound investment decisions are made on

sound analysis of facts, past performance and credible market information. W2W research

cell focuses on providing data and analysis to help customers make sound investment

decisions.

The Research cell is managed by a highly qualified team that is handpicked and

trained extensively in the proprietary Way2wealth Investment Philosophy centered on finding

the best investment solutions for W2W customers.



Based in the commercial capital enables the team to have a pulse of the trends

allowing dissemination of the most up-to-date and latest information. The Way2Wealth

research cell measures up to international standards of technology and on-site resources.

Area of operation (National)

Way2wealth services are available through way2wealth strong network of 162 branches

spanning 62 major towns and cities in the country as shown in the map below.

W2W is functioning in the following cities of India:

In North

1) Delhi

2) Chandigarh

3) Ludhiana

4) Noida



In South

1) Karnataka: Bangalore, Mysore, Hubli, Mangalore

2) Maharastra: Mumbai, Pune, Goa

3) Andhra Pradesh: Hyderabad, Vijayvada, Guntur, Vizak

4) Tamil Nadu: Chennai, Madhurai, Coimbatur

5) Kerala: Trivandum, Cochin.

W2W has branches in major cities of the above states. All branches are set up in the

commercial spaces of potential investment zones ranging between 750sft to 1000sft

Blue symbolises knowledge. W2W is into a knowledge industry. Knowledge is

limitless, so is the sky and sea, both of which are blue in colour. Knowledge applied

leads to creation of wealth for W2W investors. Hence, the colour blue for knowledge.

Red symbolises Trust. Red is the colour of blood and the heart. Trust is a matter of

the heart. W2W knowledge bears fruit only when the investor places his Trust in

company.

Yellow is a vibrant colour, which evokes feelings of excitement. W2W strive to

make investing and exciting and involving experience for its investors.

Green symbolises Growth. Growth in nature is visible in the form of plants and trees; all

of which are green. Knowledge, trust and excitement should ultimately lead to growth of

the investors’ wealth. Hence, the colour green has been chosen for Growth.


Brand Name:

The word ‘Way’ brings focus to the mind. It gives direction.

‘Wealth’ denotes stability, discipline & long term.


W2W Philosophy

“Our knowledge combined with your trust and involvement will lead to growth

of wealth and make investing an exciting experience”.

Group Companies

Way2Wealth is associated with the following companies.

1. Global Technology Ventures – GTV Provides access to capital for companies with global

market leadership potential.

2. Amalgamated Bean Coffee Trading Company Ltd.

India's largest coffee conglomerate & green coffee exporter, involved in all sectors of coffee

from plantations, retailing to exports.

3. Café Coffee Day

Pioneered the café concept and today is the largest retail chain of coffee cafes in India.

4. Tanglin

Develops world-class infrastructure facilities for technology enterprises - 'Global Village',

'TechBay', etc.

Business Overview

Way2Wealth performs the following 3 main activities. It is broadly divided into:

a. 1. Broking Business

b. 2. Distribution of Financial Products

c. 3. Fund Based Activities.

The details of each activity is as under:

1>Broking Business

• Network of 114 full service branches across 60 Indian cities / towns.

• 1,00,000+ broking clients

• Depository holdings - Rs.4000mn.

• Structured product offering for HNI clients

• Seamless execution services for corporate, institutional & retail clientele

• Arbitrage

2>Distribution of Financial Products

• Distribution of MF’s, Insurance, IPO’s

• Sticky equity centric assets and low churn



• Corporate Acquisition Group for corporate acquaintances

• 500+ wealth managers across the country

300+ channel partners

3>Fund Based Activities

• Margin Trade Finance

• IPO financing

• Mutual Funds financing

• PMS assets of Rs.700 million.

• Structured products

• ESOP funding

1.3.4 SBU’S

• Way2Wealth Capital Pvt. Ltd.

Non Deposit taking NBFC (Non-Banking Financial Corporation)

• Way2Wealth Commodities Pvt. Ltd.

• Way2Wealth Distributors Pvt. Ltd.

• Way2Wealth Illuminati Securities Private Ltd.

• Way2Wealth Institutional Brokers

• Way2Wealth Realty Advisors (P) Ltd.

• Way2Wealth Securities Pvt. Ltd.

Mandi2Market Traders Private Limited

• Techno Shares and Stocks Ltd.

• Techno Commodities Pvt. Ltd.

• Way2Wealth Insurance Brokers Pvt. Ltd.



PRODUTS/SERVISES PROFILE

The different products and services offered by Way2Wealth are as follows:

Trading Products

Way2Wealth is a full services broking and advisory house combining the best of tradition

with technology offering traditional broker assisted trading to HNI’s, Individuals and

Corporates along with Online Trading facility to the new generation self-directed customer.

Advisory Products

They have significant experience of advising investors through various market cycles. Their

team comprises high quality professionals with experiences spanning assignments in Asset

Management companies, private banking and other financial distributors.

Their wealth managers are trained to offer Financial Planning and end-to-end personalized

investment management services for Wealth Generation, Retirement Planning and Capital

Buildup at different stages of life.

Investment Products

They have relationships with all major AMCs in the country and leveraging on their

network of wealth managers, channel partners and distribution of Mutual Funds is a key

strength of Way2Wealth.

Mutual Funds

Advising retail individuals, HNIs and Corporate Treasuries, they offer a choice of mutual

funds spanning all investment objectives and asset classes and have a systematic 4-step

advisory process comprising Background Profiling, Risk Profiling, Model Portfolio

Creation, Review and Rebalancing. Way2Wealth offers the following services in Mutual

Fund.

Mutual Fund desk for Key Relationships

• Customized services suiting the specific needs of corporate clients. Starts with an in-

depth understanding of the client and his business.

• Personalized services for HNI, SME’s & Corporate clients for MF Advisory &

execution.



• Reputed for its service capabilities

• Services for HNI / Corporates with a minimum margin of Rs.25 Lakhs.

• Research reports available at varying durations, to assist the team while making

recommendations.

Portfolio Management

Portfolio Management Services is an exclusive offering from Way2Wealth that specializes

in providing risk managed investment solutions to discerning High Networth Individuals,

Non Resident Indians (NRIs), Overseas Corporate Bodies (OCBs) and Indian Corporates.

Their discretionary Portfolio Management Service gives investors the benefit of unbiased

investment advice designed to achieve their financial objectives. In addition to managing

client portfolios, they undertake all operational activities such as custody, accounting and

reporting making it completely hassle free for the customer.

Specifically they offer the following services:

Treasury Management

W2W advises Institutional and Wholesale investors for their investments in various asset

classes to help manage their Treasuries and optimize the portfolio yields. A structured

methodology is employed for assessment, portfolio modeling, performance measurement

and periodic review.

Hedging in Commodities and Currencies

W2W has a specialized team, with vast experience in domestic and global markets, advising

corporates and SMEs in their hedging programs. They help clients roll out their hedging

policies, define optimum hedge scenarios with due scenario analysis and risk controls. Their

capabilities in technical analysis help in further optimizing the entry and exit points for

successful implementing of hedging strategies.

ESOP Planning and Advisory

ESOP planning, structuring and plan execution are important tasks for corporates planning

to issue ESOPs to their employees. They extend comprehensive assistance in the entire



process. Further, they also assist corporate employees in sourcing ESOP loans through their

tie-ups.

Tax Filing and Financial Planning to Employees

Essentially an employee welfare initiative by corporates, they assist this initiative by rolling

out temporary kiosks at work sites during the tax filing season. Corporate employees get

spot advice and assistance in filing and submission of their Income Tax Returns through

qualified chartered accounts.

Funding Products

Way2Wealth Capital Pvt. Ltd is a Non Deposit taking Non-Banking Financial Company

(NBFC) registered with Reserve Bank Of India, is primarily engaged in the business

providing:

Margin Trade Financing

IPO Funding

ESOP Funding

Loan Against Securities

Margin Trade Financing

Our Margin Trade Financing product allows you to take leveraged positions in capital

markets segment facilitating purchase of securities with the help of amount borrowed from

us against securities placed as collateral.

Benefits

a. Interest is charged only on outstanding amount and only for utilized duration

b. Repayment either by sale of scrips or by cheque

c. Provision to draw down against available limits

d. Competitive interest rates

e. Exhaustive number of approved securities

Way2Wealth provides the following online services to its investors to maximize their

wealth.



Online Trading:

1. Multi-exchange trading facility

a. Equity (NSE & BSE)

b. Derivatives (NSE)

c. Commodities trading (NCDEX & MCX)

d. IPO online

e. Mutual Funds Online

2. Wholesome solution

Trade through multiple channels with a single account- Online

- Call 'n' Trade

- Offline through designated branches

3. Customer care

Superior, multilingual officers for trading& product needs

4. W2W Direct

a. Browser based, convenient & ready to use trading system, ideal for beginners and

investors.

b. Works behind a proxy too, giving you the flexibility to trade even from your work place.

5. W2W Pro

a. Application based, desktop trading terminal

b. Works on advance technology platform, providing comfort, reliability & speed

c. It is ideal for active traders, who trade to take advantage of intra-day or shot term price

movements.

d. Priority access to relationship managers

e. Integrated BSE / NSE market watch screen for Cash & Derivatives

Live streaming quotes for all segments ‘Advanced Alert’ capability - set targets &stop loss

parameters for each script.



Way2Wealth offers the following unique products and services

Commodities Services Offerings

a. Structured Product

b. Hedging Strategies

c. Arbitrage opportunities

d. Specialized services, e.g. Arbitrage, Furnace Oil trading, etc.

e. Physical market linkages

f. Forex Commodities Combo services.

g. Seamless execution services for corporate, institutional & retailclientele.

h. Night dealing services for active HNI, corporate and retail clients.

i. Well capable of handling large deliveries.

j. Well recognized research products.

Structured Products

a. Trading strategies based on algorithmic, statistical analysis

b. Minimizing human intervention in decision making, to avoid emotional entry & exit

c. Supportive tools for clients having limited or less knowledge in commodities or for those

who are unable to monitor the market on a daily basis

d. Combination of products with Forex – Commodities

e. Strategies designed with physical & futures market

Currency Services Offerings


Products:

Plain ‘vanilla’ execution in cash and F&O

Hedging & arbitrage strategy Trading based on algorithm &

statistical analysis Derivatives strategies

a. pair tradingb. options linked strategies

Research support

Services Offering:

Seamless execution - e-contract notes, recorded lines, etc.

Best client - dealer ratio Personalized Advisory Portfolio Structuring Reputed amongst HNI, SME and

corporate houses Recommendations based on in-

house research.


a. Member of NSE, BSE and MCX

b. Research support

c. Hedging strategies

d. Commodities - Currency combi strategy

e. Centralized dealing desk

f. Beneficial for clients having forex exposure and business in commodities & equities.

g. Personalized strategies on case to case basis.

Way2Wealth provides services in Insurance area to cover up the risk of its customers.

Life and general insurance:

Insurance, in law and economics, is a form of risk management primarily used to hedge

against the risk of potential financial loss. Insurance is defined as the equitable transfer of the

risk of a potential loss, from one entity to another, in exchange for a premium and duty of

care.

Insurance in Way2Wealth:

Life Insurance

Group Policies

a. Credit Covers

b. Employees Term Cover

c. Gratuity

d. Superannuation

Individual Policies

a. Children’s Plan

b. Endowment

c. Money Back

d. Retirement Plans

Term



a. Unit Linked Plans

b. Whole-Life Plans

1. General or Non-Life Insurance

Industrial:

a. Burglary Policy

b. Contractors All Risk Policy

c. Contractors Plant & Machinery Policy

d. Electronics Equipment Policy

e. Fire Policy

f. Machinery Breakdown Policy

g. Marine-cum-Erection

Personal

a. Householders’ Policy

b. Medi-claim Policy

c. Money Insurance

d. Motor Policy

e. Overseas Medi- claim Policy

f. Personal Accident Policy

Tax planning:

Tax planning is not a device to reduce tax burden. In fact, it helps savings by

investment in government securities. Savings reduce extravagance, and correspondingly

inflation. Tax saving are permitted only for investment made in government securities and

bonds of priority sectors which ultimately help the nation. Therefore, the savings in tax help

the central and state governments to mobilize funds by way of investments and as such the

government earns much by way of other benefits, by sacrificing small amount of tax. The

Supreme Court in one case observed that “Tax planning may be legitimate provided it is

within the framework of law”. By tax planning, the government is equally benefited.

Retirement plans:



One of the major services that financial advisers offer is retirement planning. The

financial adviser will typically have great knowledge in the areas of budgeting, forecasting,

taxation, asset allocation and financial tools and products in order to establish realistic goals

and the strategy by which to reach them. In the United States, this will include the use of

several investment tools such as 401(k)/401(k) Roth account(s), Individual Retirement

Accounts/Roth IRAs, mutual funds, stocks, bonds and CDs.

The financial adviser will determine what percentage of the available income is

necessary—when taking into account the tax liabilities, expected inflation and projected

return on investment—in order to meet a minimum balance by the client’s target age of

retirement. This is a fairly straightforward calculation, and there exist many automated tools

that do this. The financial adviser’s greatest contribution will be that of asset allocation:

determining how to maximize the return on investment while satisfying the client’s tolerance

INFRASTRUCTURE FACILITIES

Way2WealthInvestment outlets are designed to be places where retail can come in touch with

Investment opportunities in an atmosphere of convenience and comfort.

Most branches are located in the ground floor sporting huge glass frontage promoting

easy accessibility and reflecting our attitude of complete transparency.

The major portion of the branch area dedicated for customer use. The furniture is in CKD

formats to add flexibility in using the branch for Investors purposes.

Connectivity to NSE for trading facilities.

TV and other electronic mediums to facilitate real time update and dissemination of

information to our customers.

Each branch comprises of trained and qualified investment advisors to take care of the

needs of the customers.

All the branches are connected internally via LAN and externally through VSAT or

ISDN network to provide real time data transfer.

Help desk at each outlet, with full facilities and connectivity to the Head Office (HO)

Competitors’ Profile



Angel Broking Limited

Angel Broking, Ltd. provides retail personal financial services in India. The company offers

e-broking, portfolio management, mutual fund, private client group, commodities broking,

investment advisory, wealth management, IPO, and depository services. The company was

founded in 1987 and is based in Mumbai, India.

Angel Broking Limited is one of the leading and professionally managed stock broking firm

involved in quality services and research. Angel Broking Limited is a corporate member of

The Stock Exchange, Mumbai.

The membership of the company with The Stock Exchange Mumbai was originally in the

name of Mukesh R. Gandhi, which was eventually turned into a corporate membership in

the name of Angel Broking Limited.

Angel Broking Limited is managed by Mr. Dinesh Thakkar and he is well supported by Mr.

Mukesh Gandhi, a fifteen years veteran in the market.

Products:

•Sales

•Marketing

•Account Management

•New Releases

The group is well supported by a professional and qualified research team and efficient

operations and back office team, which comprises of highly dedicated and qualified

individuals. Angel has an in-house, state of art research department.

Angel believes in reaching out to the customer at the farthest end rather than by reaching out

to them.

The company in its endeavor to give its client the best has opened up several branches all

over Mumbai, which are efficiently integrated with the Head Office.

Angel Broking Limited is primarily into retail stock broking, with a customer base of retail

investors, which has been increasing at a compounded growth rate of 100% every year. The

company has huge network sub-brokers in Mumbai and other places outside Mumbai,

registered with SEBI, who act as channel partners for the company.



Karvy Stock Broking Limited

Karvy Stock Broking Limited provides stock broking and research advisory services in India.

The company offers portfolio analysis, depository participant, and financial planning and

management services for individuals and institutional clients. It also provides a monthly

magazine, Finapolis, which provides up-dated market information on market trends,

investment options, and opinions. The company was founded in 1990 and is based in

Hyderabad, India. Karvy Stock Broking Limited operates as a subsidiary of Karvy

Consultants Limited.

They offer trading on a vast platform; National Stock Exchange, Bombay Stock Exchange

and Hyderabad Stock Exchange. More importantly, they make trading safe to the maximum

possible extent, by accounting for several risk factors and planning accordingly. Their highly

skilled research team, comprising of technical analysts as well as fundamental specialists,

secure result-oriented information on market trends, market analysis and market predictions.

This crucial information is given as a constant feedback to their customers, through the

following daily reports which are delivered to them thrice a day;

•The Pre-session Report, where market scenario for the day is predicted

•The Mid-session Report, timed to arrive during lunch break, where the market forecast for

the rest of the day is given and

•The Post-session Report, the final report for the day, where the market and the report itself is

reviewed.

To add to this repository of information, they publish a monthly magazine called KARVY.

The Finapolis which analyzes the latest stock market trends and takes a close look at the

various investment options, and products available in the market, while a weekly report,

called KARVY Bazaar Baatein, keeps their customers more informed on the immediate

trends in the stock market.

Motilal Oswal Securities Ltd



Motilal Oswal Securities is a leading research and advisory based stock broking house

of India, with a dominant position in both institutional and retail broking. Motilal Oswal

Securities Provide advice-based broking (equities and derivatives), portfolio management

services (PMS), e-broking, depository services, commodities trading, IPO and mutual fund

investment advisory services, has witnessed rapid organic growth due to favourable market

conditions as well as efforts put in by the company itself. FY05 and FY06 saw the company

grow inorganically through acquisition of three significant regional broking firms from

Andhra Pradesh, Karnataka and Kerala.

The retail business unit provides equity investment solutions to more than 1,61,000

investors through 1017 outlets spanning 375 cities and 24 states.

Motilal Oswal Securities invests almost 5-10% of its revenue on equity research and

hires and trains the best resources to become advisors to its valued clients.

SWOT ANALYSIS

STRENGTHS

24+ years of existence in the financial services industry

Renowned companies in the group, they are:

- Amalgamated Bean Coffee Trading Company Ltd.

- Café Coffee Day

Under Research Desk, they provide daily market updates to their clients for making safe

investments and get high end returns. They also assist for fundamental & technical analysis

Exclusive desks for advising and servicing HNI & Corporate relationships

They employ highly competent and dedicated employees as they get enough support from

company which provides handsome rewards, insurance facilities, etc.

The company has huge client base. With the devoted employees in the organization clients

are loyal to the company.

They have relationships with all major AMCs in the country and leveraging on their network

of wealth managers, channel partners and distribution of Mutual Funds is a key strength of

Way2Wealth.

Weaknesses



The current software platform used comes in a module wise package, which is rigid in

performing activities and deterrent to their functioning of business

Lack of aggressive marketing

Charges high rate of brokerage compared to their competitors which dismays the investors to

invest more in the company

Opportunities

With the growing Indian economy people are willing to invest in securities, so opportunities

are there to convert prospect into clients. Investors are more cognizant about the share market

Listing of companies: This enables company to pool capital from the public and broaden its

operation which increases core competency of company

Growing IPO issues.

Growing awareness about Mutual Fund & stock market

In strategic foreign locations NRI desk can be set up to assist them to increase their returns

Can venture into other business like-

i. Real Estate Broking

ii. Exclusive tie-up for distribution of Personal Loans

Threats

Growing competition in investment consultant market

Market uncertainties have become one of the threats.It includes volatility in the existing

market and changes in the government policy and economic fluctuations

Swelling independent financial advisors, online advising, independent stock brokers.

Financial advises in Medias like NEWS channels (NDTV, CNBC), financial news papers

(economic times, business today) and magazines.

Future growth and prospects



India is a thickly populated country with many middle class and upper middle class

people who are interested in investing and who require investment advice for getting

maximum returns with minimum risk. Added to this increasing software companies etc,

where young professionals drawing huge salary but have less knowledge about investment

planning, definitely need help of professional investment advisers who will guide them in

investing their wealth.

India is one of the fastest developing country and has got huge young working

population. They are willing to invest their money in various alternatives so can easily attract

them and guide them with their investments.



CHAPTER-3

THEORETICAL BACKGROUND OF THE STUDY

ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organizational

setup of a mutual fund:

The Evolution

The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry

in the year 1963. The primary objective at that time was to attract the small investors and it

was made possible through the collective efforts of the Government of India and the Reserve

Bank of India. The history of mutual fund industry in India can be better understood divided

into following phases:

Phase1.EstablishmentandGrowthofUnitTrustofIndia-1964-87

Unit Trust of India enjoyed complete monopoly when it was established in the year 1963 by

an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to operate

under the regulatory control of the RBI until the two were de-linked in 1978 and the entire

control was transferred in the hands of Industrial Development Bank of India (IDBI). UTI

launched its first scheme in 1964, named as Unit Scheme 1964 (US-64), which attracted the

largest number of investors in any single investment scheme over the years.



UTI launched more innovative schemes in 1970s and 80s to suit the needs of different

investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift

Growth Fund and India Fund (India's first offshore fund) in 1986, Master share (India’s first

equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured returns)

during 1990s. By the end of 1987, UTI's assets under management grew ten times to Rs 6700

crores.

PhaseII.EntryofPublicSectorFunds-1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering the

market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of India

became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed by Can

bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund,

GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the

industry increased six times to Rs. 47,004 crores. However, UTI remained to be the leader

with about 80% market share.

PhaseIII.EmergenceofPrivateSecorFunds-1993-96

The permission given to private sector funds including foreign fund management

companies (most of them entering through joint ventures with Indian promoters) to

enter the mutual fund industry in 1993, provided a wide range of choice to investors

and more competition in the industry. Private funds introduced innovative products,

investment techniques and investor-servicing technology. By 1994-95, about 11 private

sector funds had launched their schemes.

PhaseIV.GrowthandSEBIRegulation-1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI after

the year 1996. The mobilization of funds and the number of players operating in the industry

reached new heights as investors started showing more interest in mutual funds. Inventors'

interests were safeguarded by SEBI and the Government offered tax benefits to the investors

in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI

that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted

all dividend incomes in the hands of investors from income tax. Various Investor Awareness



Programmers were launched during this phase, both by SEBI and AMFI, with an objective to

educate investors and make them informed about the mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal status

as a trust formed by an Act of Parliament. The primary objective behind this was to bring all

mutual fund players on the same level. UTI was re-organized into two parts: 1. The Specified

Undertaking, 2. The UTI Mutual Fund

Presently Unit Trust of India operates under the name of UTI Mutual Fund and its past

schemes (like US-64, Assured Return Schemes) are being gradually wound up. However,

UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant

growth in mobilization of funds from investors and assets under management which is

supported by the following data:

Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently,examples of which

are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual

Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more international

mutual fund players have entered India like Fidelity, Franklin Templeton Mutual Fund etc.

There were 29 funds as at the end of March 2006. This is a continuing phase of growth of the

industry through consolidation and entry of new international and private sector players.

ADVANTAGES OF MUTUALFUNDS

i) Professional investment management

Mutual funds hire full-time, high-level investment professionals. Funds can afford to do so as

they manage large pools of money. The managers have real-time access to crucial market

information and are able to execute trades on the largest and most cost-effective scale.

ii) Diversification

Mutual funds invest in a broad range of securities. This limits investment risk by reducing the

effect of a possible decline in the value of any one security. Mutual fund unit-holders can



benefit from diversification techniques usually available only to investors wealthy enough to

buy significant positions in a wide variety of securities.

iii) Low Cost

A mutual fund let's you participate in a diversified portfolio for as little as Rs.5,000/-, and

sometimes less. And with a no-load fund, you pay little or no sales charges to own them.

iv) Convenience and Flexibility

You own just one security rather than many, yet enjoy the benefits of a diversified portfolio

and a wide range of services. Fund managers decide what securities to trade collect the

interest payments and see that your dividends on portfolio securities are received and your

rights exercised. It also uses the services of a high quality custodian and registrar in order to

make sure that your convenience remains at the top of our mind.

v) Personal Service

One call puts you in touch with a specialist who can provide you with information you can

use to make your own investment choices. They will provide you personal assistance in

buying and selling your fund units, provide fund information and answer questions about

your account status. Our Customer service centers are at your service and our Marketing team

would be eager to hear your comments on our schemes.

vi) Liquidity

In open-ended schemes, you can get your money back promptly at net asset value related

prices from the mutual fund itself.

vii) Transparency

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

specific investments made by the mutual fund scheme



Dis-advantages of mutual funds

1. Professional Management

Some funds doesn’t perform in neither the market, as their management is not dynamic

enough to explore the available opportunity in the market, thus many investors debate over

whether or not the so-called professionals are any better than mutual fund or investor him

self, for picking up stocks.

2. Costs The biggest source of AMC income is generally from the entry & exit load which

they charge from investors, at the time of purchase. The mutual fund industries are thus

charging extra cost under layers of jargon.

3. Dilution

Because funds have small holdings across different companies, high returns from a few

investments often don't make much difference on the overall return. Dilution is also the result

of a successful fund getting too big. When money pours into funds that have had strong

success, the manager often has trouble finding a good investment for all the new money.

4. Taxes

When making decisions about your money, fund managers don't consider your personal tax

situation. For example, when a fund manager sells a security, a capital-gain tax is triggered,

which affects how profitable the individual is from the sale. It might have been more

advantageous for the individual to defer the capital gains liability.

TYPES OF MUTUAL FUND SCHEMES



OPENENDED SCHEME

These funds are sold at the NAV based prices, generally calculated on every business day.

These schemes have unlimited capitalization, open-ended schemes do not have a fixed

maturity - i.e. there is no cap on the amount you can buy from the fund and the unit capital

can keep growing. These funds are not generally listed on any exchange. Open-ended funds

are bringing in a revival of the mutual fund industry owing to increased liquidity,

transparency and performance in the new open-ended funds promoted by the private sector

and foreign players. Open-ended funds score over close-ended ones on several counts.

Close-ended schemes

Schemes that have a stipulated maturity period, limited capitalization and the units are listed

on the stock exchange are called close-ended schemes. These schemes have historically seen

a lot of subscription. This popularity is estimated to be on account of firstly, public sector

MFs having floated a lot of close-ended income schemes with guaranteed returns and



secondly easy liquidity on account of listing on the stock exchanges. The closed-ended fund

managed by ICICI Prudential Mutual Fund is ICICI Premier.

Interval schemes

Interval Schemes are that scheme, which combines the features of open-ended and close-

ended schemes. The units may be traded on the stock exchange or may be open for sale or

redemption during pre-determined intervals at NAV related prices.

According to investment objective

Objectives

Mutual funds have specific investment objectives such as growth of capital, safety of

principal, current income or tax-exempt income. In general mutual funds fall into three

general categories:

Equity Funds invest in shares or equity of companies.

Fixed-Income funds invest in government or corporate securities that offer fixed rates

of return.

Balanced Funds invest in a combination of both stocks and bonds.

Growth Schemes:

Growth Schemes are also known as equity schemes. The aim of these schemes is to provide

capital appreciation over medium to long term. These schemes normally invest a major part

of their fund in equities and are willing to bear short-term decline in value for possible future

appreciation.

Income Schemes:

Income Schemes are also known as debt schemes. The aim of these schemes is to provide

regular and steady income to investors. These schemes generally invest in fixed income

securities such as bonds and corporate debentures. Capital appreciation in such schemes may

be limited.



Balanced Schemes:

Balanced Schemes aim to provide both growth and income by periodically distributing a part

of the income and capital gains they earn. These schemes invest in both shares and fixed

income securities, in the proportion indicated in their offer documents (normally 50:50).

Money Market Schemes:

Money Market Schemes aim 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 money.

Other schemes

Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time to

time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked Savings

Scheme (ELSS) are eligible for rebate.

Special schemes

Index Schemes:

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

Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks that

constitute the index. The percentage of each stock to the total holding will be identical to the

stocks index weightage. And hence, the returns from such schemes would be more or less

equivalent to those of the Index.

Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or industries

as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer

Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the

performance of the respective sectors/industries. While these funds may give higher returns,



they are more risky compared to diversified funds. Investors need to keep a watch on the

performance of those sectors/industries and must exit at an appropriate time.

Overview of existing schemes existed in mutual fund category:

By nature

1. Equity fund:

These funds invest a maximum part of their corpus into equities holdings. The structure of the

fund may vary different for different schemes and the fund manager’s outlook on different

stocks. The Equity Funds are sub-classified depending upon their investment objective, as

follows:

Diversified Equity Funds

Mid-Cap Funds

Sector Specific Funds

Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on the

risk-return matrix.

2. Debt funds:

The objective of these Funds is to invest in debt papers. Government authorities, private

companies, banks and financial institutions are some of the major issuers of debt papers. By

investing in debt instruments, these funds ensure low risk and provide stable income to the

investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as

Government of India debt papers. These Funds carry zero Default risk but are associated with

Interest Rate risk. These schemes are safer as they invest in papers backed by Government.

Income Funds: Invest a major portion into various debt instruments such as bonds, corporate

debentures and Government securities.



MIPs: Invests maximum of their total corpus in debt instruments while they take minimum

exposure in equities. It gets benefit of both equity and debt market. These scheme ranks

slightly high on the risk-return matrix when compared with other debt schemes.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These

funds primarily invest in short term papers like Certificate of Deposits (CDs) and

Commercial Papers (CPs). Some portion of the corpus is also invested in corporate

debentures.

Liquid Funds: Also known as Money Market Schemes, These funds provides easy liquidity

and preservation of capital. These schemes invest in short-term instruments like Treasury

Bills, inter-bank call money market, CPs and CDs. These funds are meant for short-term cash

management of corporate houses and are meant for an investment horizon of 1day to 3

months. These schemes rank low on risk-return matrix and are considered to be the safest

amongst all categories of mutual funds.

3. Balanced funds:

As the name suggest they, are a mix of both equity and debt funds. They invest in both

equities and fixed income securities, which are in line with pre-defined investment objective

of the scheme. These schemes aim to provide investors with the best of both the worlds.

Equity part provides growth and the debt part provides stability in returns.



WORKING OF MUTUAL FUNDS

RISK AND RETURN MATRIX

The risk return trade-off indicates that if investor is willing to take higher risk then

correspondingly he can expect higher returns and vise versa if he pertains to lower risk

instruments, which would be satisfied by lower returns. For example, if an investors opt for

bank FD, which provide moderate return with minimal risk. But as he moves ahead to invest

in capital protected funds and the profit-bonds that give out more return which is slightly

higher as compared to the bank deposits but the risk involved also increases in the same



proportion..Thus investors choose mutual funds as their primary means of investing, as

Mutual funds provide professional management, diversification, convenience and liquidity.

That doesn’t mean mutual fund investments risk free. This is because the money that is

pooled in are not invested only in debts funds which are less riskier but are also invested in

the stock markets which involves a higher risk but can expect higher returns. Hedge fund

involves a very high risk since it is mostly traded in the derivatives market which is

considered very volatile.

Managing risk

Use to reduce your investment risk considerably and reach your long-term financial goals

Mutual funds offer incredible flexibility in managing investment risk. Diversification and

Automatic Investing (SIP) are two key techniques you can.

Diversification

When you invest in one mutual fund, you instantly spread your risk over a number of

different companies. You can also diversify over several different kinds of securities by

investing in different mutual funds, further reducing your potential risk. Diversification is a

basic risk management tool that you will want to use throughout your lifetime as you

rebalance your portfolio to meet your changing needs and goals. Investors, who are willing to

maintain a mix of equity shares, bonds and money market instruments.

Indian Market Scenario

Indian capital market has seen unprecedented boom in its activity in the last 15 years in terms

of number of stock exchanges, listed companies, trade volumes, market intermediaries,

investor population, etc. However, this surge in activity has brought with it numerous

problems that threaten the very survival of the capital markets in the long run, most of which

are due to the large volume of paper work involved and paper based trading, clearing and

settlement. Until the late eighties, the common man kept away from capital market and thus

the quantum of funds mobilized through the market was meager. A major problem, however,

continued to plague the market. The Indian markets were drowned in shares in the form of

paper and hence it was problematic to handle them. Fake and stolen shares, fake signatures

and signature mismatch, duplication and mutilation of shares, transfer problems, etc. The



investors were scared and were under compensated for the risk borne by them. The century

old system of trading and settlement requires handling of huge volumes of paper work. This

has made the investors, both retail and institutional, wary of entering the capital market.

However, lack of modernization become a hindrance to growth and resulted in creation of

cumbersome procedures and paper work. However, the real growth and change occurred

from mid-eighties in the wake of liberalization initiatives of the Government. The reforms in

the financial sector were envisaged in the banking sector, capital market, securities market

regulation, mutual funds, foreign investments and Government control. These institutions and

stock exchanges experienced that the certificates are the main cause of investors` disputes

and arbitration cases. Since the paperwork was not matching the rapid growth so there was a

need for a better system to ensure removal of these impediments.Government of India

decided to set up a fully automated and high technology based model exchange that could

offer screen-based trading and depositories as the ultimate answer to all such reforms and

eliminate various bottlenecks in the capital market, particularly, the clearing and settlement

system in stock exchanges.[1] A depository in very simple terms is a pool of pre-verified

shares held in electronic mode which offers settlement of transactions in an efficient and

effective way.

Evaluating portfolio Performance

It is important to evaluate the performance of the portfolio on an on-going basis. The

following factors are important in this process: Consider long-term track record rather than

short-term performance. It is important because long-term track record moderates the

effects which unusually good or bad short-term performance can have on a fund's track

record. Besides, longer-term track record compensates for the effects of a fund manager's

particular investment style. Evaluate the track record against similar funds. Success in

managing a small or in a fund focusing on a particular segment of the market cannot be relied

upon as an evidence of anticipated performance in managing a large or a broad based

fund. Discipline in investment approach is an important factor as the pressure to perform can

make a fund manager susceptible to have an urge to change tracks in terms of stock selection

as well as investment strategy. The objective should be to differentiate investment skill of the

fund manager from luck and to identify those funds with the greatest potential of future

success.



SEBI REGISTERED MUTUAL FUNDS

1. FORTIS Mutual fund

2. Benchmark Mutual fund,

3. DSP Blackrock Mutual fund,

4. Franklin Templeton Mutual fund

5. HDFC Mutual fund,

6. HSBC Mutual fund,

7. ICICI Securities Fund,

8. Reliance vision fund,

9. ICICI Prudential Mutual fund

10. IDFC Mutual fund, ,

WHAT IS THE PROCEDURE FOR REGISTRATION OF MUTUAL FUND WITH

SEBI

An applicant proposing to sponsor a Mutual fund in India must submit an application in

Form A along with a fee of Rs.25, 000. The application is examined and once the

sponsor satisfies certain conditions such as being in the financial services business and

possessing positive net worth for the last five years, having net profit in three out of the

last five years and possessing the general reputation of fairness and integrity in all

business transactions, it is required to complete the remaining formalities for setting up

a Mutual fund. These include inter alia, executing the trust deed and investment

management agreement, setting up a trustee company/board of trustees comprising two-

thirds independent trustees, incorporating the asset management company (AMC),

contributing to at least 40% of the net worth of the AMC and appointing a custodian.

Upon satisfying these conditions, the registration certificate is issued subject to the

payment of registration fees of Rs.25.00 lacs for details; see the SEBI (Mutual funds)

Regulations, 1991



5 Ways to measure the mutual fund risk

The distributors have a large variety of products to offer to the prospective investors. But the

catch here is a large number of companies offering similar products to the investors. Thus

there are large numbers of mutual fund products flooding the market. So, there should be

some factors, which will compare these four AMCs. These comparative factors are:

Treynor’s ratio

Treynor’s measure is called as ‘risk to volatility’ ratio. Treynor’s considers portfolio beta as a

measure of risk. Portfolio beta is the average beta of individual assets in the given portfolio.

TR= (RP-RF)/ β

where,

RP= Expected return

RF= Risk free return

β = Beta of the portfolio

Sharpe ratio

While an investor seeks to generate high returns the equation arises, how high? Thought the

sky can be the limit, usually one asks for returns, which are higher than those, which we are

normally accustomed to. These are returns from risk-less instruments like treasury bills,

government securities or bank savings deposits. So the aim of investing seems to be to

generate returns in excess of the risk free return. At the same times high returns are generally

associated with a high degree of volatility. The Investors accept this volatility only because

they want higher returns. The Sharpe ratio represents this trade off between risk and returns.

At the same time it also factors in the desire to generate returns, which are higher than those

from risk free returns.



SHARPE’S RATIO:

Where,

R= Expected return

RF= Risk free return

σ = Standard deviation

The Sharpe ratio is the returns generated over the risk free rate, per unit of risk. Risk in this

case is taken to be funds standard deviation. As standard deviation represents the total risk

experienced by a fund, the Sharpe ratio reflects the returns generated by undertaking all

possible risks. A higher Sharpe ratio is therefore better as it represents a higher return

generated per unit of risk. Thus the Sharpe ratio should be used to compare the performance

of funds. Alternatively one can compare the Sharpe ratio of a fund with that of its benchmark

index. If the only information available is that the Sharpe ratio of a fund is 1.2, no meaningful

inference can be drawn as nothing is known about the peer group performance. The Shape

ratio uses standard deviation as its risk component; a low standard deviation can unduly

influence results. Thus a fund with low returns but with a relatively mild standard deviation

can end up with a high Sharpe ratio. Such a fund will have a vary tranquil portfolio and not

generative high returns. For an investor who puts in all his/her money in a single fund, Sharpe

ratio is a useful measure of risk-adjusted return. This is because standard deviation measures

total risk and this is the case with a single portfolio. The Sharpe ratio tells us whether a

portfolio returns are due to smart investment decisions or a excess risk. This measurement is

very useful because although one portfolio or fund reaps higher returns than its peers, it is

only a good investment if those higher returns do not come with too much additional risk.

The greater a portfolio’s Sharpe ratio, the better its risk-adjusted performance has been.



Beta

A measure of the volatility, or systematic risk, of security or a portfolio in comparison to the

market as whole a beta of 1 indicates that security’s price will move with the market. A beta

is less than 1 means that the security will be less volatile than the market. A beta of greater

than 1 indicates that the security’s price will be more volatile than the market. For example, if

a stock’s beta is 1.2, it’s theoretically 20% more volatile on the market.

Calculating BETA

BETA is ascertained mathematically by finding the covariance of the returns of the

scrip to those of the market and then dividing it by the variance of the market return.

As a market professional one is aware of his / her investment objectives and how much

risk he/she can assume and can best decide whether to use weekly, monthly or daily

pricing information in beta calculation.For this study, Historical data for benchmark

indices-BSE 200, NIFTY, CNX 500, SENSEX and NAV performance of each of the

funds have been collected

Where,

n – Number of days

x – Returns of the index

y – Returns of the fund

R-squared

R-squared measures the relationship between a portfolio and its benchmark. It can be thought

of as a percentage from 1 to 100.R-squared is not a measure of the performance of a

portfolio. A great portfolio can have a very low R-squared. It is simply a measure of the

correlation of the portfolio's returns to the benchmark's returns. R-squared can be used to

ascertain the significance of a particular beta or alpha. Generally, a higher R- squared will

indicate a more useful beta figure. If the R-squared is lower, then the beta is less relevant to


β = nΣxy – (Σx)( Σy)

nΣx2 – (Σx)2


the fund's performance General Range for R-Squared:

A. 70-100% = good correlation between the portfolio's returns and the benchmark's returns

B 70% = average correlation between the portfolio's returns and the benchmark's returns

C 40% = low correlation between the portfolio's returns and the benchmark's returns.

Standard Deviation

In the core of the fund analysis activity lie the twin pursuits of judging returns and

risk. Stripped of a lot of the complexity, this task involves determining a

fund's average performance over a period of time. Standard Deviation gives a

quality rating of an average. The Standard Deviation of an average is the amount

by which the numbers that go into an average deviate from that average. It

tells us how closely an average represents the underlying numbers.If the

individual monthly performances are very different from the average, then that

fund is risky, delivering high returns in some months and poor returns in others. If

they are mostly similar, then the fund is a low risk one, with about the same

returns month after month. A high Standard Deviation may be a measure of

volatility, but it does not necessarily mean that such a fund is worse than one with

a low Standard Deviation. If the first fund is a much higher performer than the

second one, the deviation will not matter much.

Variance:

Variance: Variance = s2


r = nΣxy – (Σx)( Σy) . √nΣx2 – (Σx)2 √nΣy2 – (Σy)2


JENSEN MEASURE: This measure developed by Michael Jensen. The formula for

Jensen measure is: (RP – RF) = + ( RM – RF) + EP

Where, Rp is return of mutual fund portfolio,

Rf is risk free rate of return,

P is the systematic risk of the portfolio,

Rm is the return of benchmark portfolio..

Correlation Co-efficient:

It measures the nature and the extent of relationship between the stock market index returns and a fund’s return in a particular period.

DETAILS OF SCHEMES SELECTED

1. DSP BlackRock Top 100 Equity Fund - Regular Plan - Growth

Fund Type Open-EndedInvestment Plan GrowthLaunch date Feb 21, 2003Benchmark S&P BSE 100Asset Size (Rs cr) 2,625.05 (Mar-31-2014)Minimum Investment Rs.5000

Objective : The scheme seeks to provide long-term capital appreciation by predominantly

investing in high growth companies



2. Franklin India Bluechip Fund-Growth

Fund Type Open-EndedInvestment Plan GrowthLaunch date Nov 30, 1993Benchmark S&P BSE SENSEXAsset Size (Rs cr) 3,998.33 (Mar-31-2014)Minimum Investment

Rs.5000

Investment Objective

An open-end growth scheme with an objective primarily to provide medium to long-term capital appreciation.

3. ICICI Prudential Top 100 Fund regular plan growth

Fund Type Open-EndedInvestment Plan GrowthLaunch date Jun 19, 1998Benchmark CNX NIFTYAsset Size (Rs cr) 448.32 (Mar-31-2014)Minimum Investment

Rs.5000

Objective : The fund seeks long-term growth of capital and regular income

through 90% investment in equities and 10% in debt and money market portfolio

4. Reliance Vision Fund-GROWTH PLAN-Growth Option

Mutual Fund : Reliance Mutual Fund

Scheme Name : Reliance Equity

Scheme Type : Open-ended

Scheme Category : Equity-Diversified (Growth)

Launch Date : March-2006

Objective : The scheme aims to generate capital appreciation and

provide long-term growth opportunities by investing in equity and equity related securities of

top 100 companies by market capitalization.



5. HDFC Top 200 Fund

Fund Type Open-EndedInvestment Plan GrowthLaunch date Aug 19, 1996Benchmark S&P BSE 200Asset Size (Rs cr) 10,037.88 (Mar-31-2014)Minimum Investment

Rs.5000


To generate long-term capital appreciation from a portfolio of equity and equity-linked instruments primarily drawn from the companies in BSE 200 index.

6. SBI BLUE CHIP FUND-REGULAR PLAN GROWTH

Fund Type Open-EndedInvestment Plan GrowthLaunch date Jan 20, 2006Benchmark S&P BSE 100Asset Size (Rs cr) 781.26 (Mar-31-2014)Minimum Investment

Rs.5000


To provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of equity stocks of companies whose market capitalization is at least equal to or more than the least market capitalized stock of BSE 100 Index.



FINANCIAL STATEMENT

Balance Sheet of Way2Wealth for 5 years2013 2012 2011 2010 2009

SOURCES OF FUNDSOwner's FundEquity Share Capital 7040.13 5765.49 5556.60 5080.44 4617.46Share Application Money 368.61 1206.90 343.53 141.44 143.13Preference Share Capital 234.31 270.71 251.07 266.00 281.71

Reserves & Surplus 145460.6

6 125761.4

7 108137.9

7 92727.26 73364.32

Loan FundsSecured Loans 11818.77 10485.00 8378.55 7468.68 4238.56Unsecured Loans 8060.71 9700.60 10240.28 11606.52 11003.34

Total 172983.1

9 153190.1

7 132908.0

0 117290.3

4 93648.52

USES OF FUNDSFixed AssetsGross Block 51618.48 41917.16 37212.41 34792.74 31057.93Less: Revaluation Reserve 0.00 1.60 1.67 40.01 5.77Less: Accumulated Depn. 20589.11 14806.05 14156.18 14952.41 12386.98Net Block 31029.37 27109.51 23054.55 19800.32 18665.18Capital Work-in-progress 5650.80 5029.91 4677.78 5524.65 5400.95Investments 51184.96 44688.16 41939.08 43069.59 28162.54

Net Current Assets

CA, Loans & Advances 139391.0

3 120242.5

2 96698.02 79187.34 69043.36

Less : CL & Provisions 54273.10 43883.48 33567.36 30400.71 27743.83Total Net Current Assets 85117.94 76359.03 63130.66 48786.62 41299.53Misc. expenses not written 0.13 3.55 105.93 109.15 120.32

Total 172983.2

0 153190.1

6 132908.0

0 117290.3

3 93648.52

Note :BV of Unquoted Investments

47486.95 39986.10 36168.03 38931.23 26752.10

MV of Quoted Investments 5842.51 6651.02 6425.69 4605.82 1517.44Contingent liabilities 32552.40 93509.10 14124.10 9749.56 10483.79

Number of Equity shares outstanding (in lakhs)

227327.37

162051.20

151679.55

132468.78

105639.83



Profit and loss account of Way2Wealth for 5 years

2013 2012 2011 2010 2009Income:

Operating Income 174616.7

3 151649.7

7 126567.1

0 105970.5

5 101357.3

7Expenses:Material Consumed 5875.48 7270.89 8152.75 6623.43 5234.83Manufacturing Expenses 11241.65 23030.50 20705.58 19468.29 19376.02Personnel Expenses 74372.65 62056.94 49649.95 40233.40 38521.03Selling Expenses 0.00 41.04 451.79 972.51 958.55Administrative Expenses 38987.47 21510.28 15120.97 9572.18 10044.94Expenses Capitalized 0.00 0.00 -336.86 -308.84 -213.45

Cost Of Sales 130477.2

6 113909.6

5 93744.18 76560.97 73921.93Operating Profit 44139.48 37740.12 32822.92 29409.57 27435.44Other Recurring Income 8331.77 7724.75 3511.04 2359.56 2486.58Adjusted PBDIT 52471.24 45464.86 36333.96 31769.13 29922.02Financial Expenses 2251.72 2051.55 1422.57 1121.36 874.46Depreciation 5425.79 4788.95 4169.60 3930.52 3486.03Other Write offs 0.62 0.69 14.89 22.19 43.05Adjusted PBT 44793.11 38623.67 30726.90 26695.06 25518.47Tax Charges 10208.18 8813.64 5395.60 4140.39 2720.48Adjusted PAT 34584.93 29810.03 25331.29 22554.67 22797.99Non Recurring Items -984.21 749.91 16.49 135.24 -2625.46Other Non-Cash adj. -179.16 36.19 64.16 42.59 -98.33Reported Net Profit 33421.13 30614.21 25424.05 22732.42 20058.53

PB Appropriation 101584.7

4 84085.23 66568.19 56058.54 43075.22

Equity Dividend 9003.20 9343.73 7596.07 5996.52 3638.48Preference Dividend 22.50 25.54 20.86 26.98 18.73Dividend Tax 1797.94 1809.64 1461.88 1185.38 740.21Retained Earnings 90735.36 71709.56 56709.54 47664.28 37937.60



CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

CALCULATIONS BASED ON STATISTICAL PARAMETERS

TABLE NO-1

NAME OF THE SCHEME BETA SD R SQURD

DSP BlackRock Top 100 Equity Fund - Regular Plan – Growth

0.6337746 28.21126 0.887569

Franklin India Bluechip Fund-Growth 1.077692 33.7495665 0.979731

ICICI Prudential Top 100 Fund - Regular Plan –Growth

0.911914889 25.97394503 0.983005

Reliance Vision Fund-GROWTH PLAN-Growth Option

0.8138004 35.32941 0.9331265

HDFC Top 200 Fund - Growth Option 1.02708081 37.08293026 0.9920006

SBI BLUE CHIP FUND-REGULAR PLAN GROWTH

0.6367484 31.64028 0.71225

INTERPRETATION

Above table reveals about the statistical parameters used to analyse the performance of the selected mutual fund scheme .

1. In DSP black rock top 100 fund (growth) it has beta value of fund 0.633 (Beta < 1) which says that the fund has low level of systematic risk and it has performed well by providing an better return to the investors where else it has an standard deviation of fund is 28.2112 it shows that the funds risk factor is below average and overall the fund has performed well, R- Squared value of fund is 0.8875 hence the fund has good correlation between funds return with its benchmark return



2. In Franklin India blue chip fund (growth) it has beta value of fund 1.077 (Beta > 1) which says that the fund has high level of systematic risk and it has performed well by providing an better return to the investors where else it has an standard deviation of fund is 33.09 it shows that the funds risk factor is below average and overall the fund has performed well, R- Squared value of fund is 0.97 hence the fund's performance patterns have been in line with the benchmark index.

3. In ICICI Prudential top 100 regular fund (growth) it has beta value is 0.91 (Beta < 1) which says that the fund has low level of systematic risk and the fund beta value says its more volatile to its bench mark indices The standard deviation of the fund is 25.97 says that the funds above average risky and provide high return to the investors. , R-Squared value of a fund is 0.98 it has good correlation with its benchmark return.

4. In Reliance Vision fund (growth) it has beta value of 0.81, (Beta < 1) which says that the fund has low level of systematic risk where standard deviation of fund is 35.32 that means the fund is high risky, R- Squared value of a fund is 0.93 it has good correlation with its benchmark return.

5. In HDFC TOP 200 fund (growth) it has beta value of fund is 0.99. where it has an standard deviation of fund is 37.08 that means the fund has high risk factor and also provided high return to the investors, R-Squared value of a fund is 0.99 it has good correlation with its benchmark return

6. In SBI blue chip fund regular plan(growth) it has beta value of fund 0.63 (Beta < 1) which says that the fund has low level of systematic risk and it has performed well by providing an better return to the investors where else it has an standard deviation of fund is 31.64 it shows that the funds risk factor is below average and overall the fund has performed well, R- Squared value of fund is 0.71 hence the fund has good correlation between funds return with its benchmark return.



Comparison of fund return with index return

TABLE NO-2

NAME OF THE SCHEME AVERAGE RETURN

BENCH MARK INDEX

INDEX RETURN

DSP BlackRock Top 100 Equity Fund - Regular Plan - Growth

20.56229 BSE 100 13.51463

Franklin India Bluechip Fund-Growth

24.45468982 S&P SENSEX 21.61178

ICICI Prudential Top 100 Fund - Regular Plan -Growth

25.56101496 CNX NIFTY 20.19116

Reliance Vision Fund-GROWTH PLAN-Growth Option

21.60177 BSE 100 13.51463

HDFC Top 200 Fund - Growth Option

26.84778774 BSE200 22.99037

SBI BLUE CHIP FUND-REGULAR PLAN GROWTH

23.57908 BSE100 13.51463

GRAPH NO-1



DSP FRANKLIN ICICI RELIANCE HDFC SBI0

5

10

15

20

25

30

FUND RETURNINDEX RETURN

INTERPRETATION

The above table number-2 and graph number-1 shows the average rate of return of select six mutual fund equity schemes and their bench mark returns computed on the basis of ‘Rate of return measure.’

The totals of six equity schemes were selected. Out of six equity schemes it is clear from table and graph that six schemes have outperformed their respective benchmark indexes.. The ‘SBI blue chip fund, Reliance Vision Fund and DSP Blackrock Top 100 have performed good. The rest of the schemes have performed moderately when compared to that of their respective bench mark indexes.





TABLE NO-3

Table showing SHARPE'S RATIO of mutual funds

SCEME NAME AVG RETURN RF SD

SHARPE'SRATIO

RANK

DSP BlackRock Top 100 Equity Fund - 20.56229 8.194 28.21126 0.438416788

5

FranklinIndia Bluechip Fund 24.45468982 8.194 33.7495665 0.481804405

4

ICICI Prudential Top 100 Fund 25.56101496 8.194 25.97394503 0.66863216

1

Reliance Vision Fund21.60177 8.194 35.32941 0.379507328

6

HDFC Top 200 Fund - 26.84778774 8.194 37.08293026 0.5030289572

SBI BLUE Chip fund23.57908 8.194 31.64028 0.486249806

3

GRAPH NO-2

DSP Franklin ICICI Reliance HDFC SBI0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

2



INTERPRETATION

Table (3) and Graph (2) explains about the performance of a selected fund based on Sharpe ratio and ranking of the fund is made on their highest ratio. A higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk. In ICICI Prudential top 100 fund ratio were 0.66% which gives good return at high risk and have 1st rank whereas the worst performer is ‘Reliance vision fund’ it has has been ranked 6th.The greater a portfolio’s Sharpe ratio, the better its risk-adjusted performance. The other schemes like HDFC Top 200 Fund with 0.5% have been ranked 2nd, SBI blue chip fund with 0.486% have been ranked 3rd, Franklin India Bluechip Fund with 0.481% have been ranked 4 th, DSP BlackRock Top 100 Equity Fund with 0.43% have been ranked 5th and Reliance Vision Fund with 0.36% have been ranked 6th respectively.



TABLE NO-4

Table showing TREYNOR’S RATIO of mutual funds

SCEME NAMEAVGRETURN RF BETA

TREYNOR'S RATIO

RANK

DSP BlackRock Top 100 Equity Fund 20.56229

8.194 0.6337746 19.51528193

2

Franklin India Bluechip Fund- 24.45468982

8.194 1.077692 15.08843883

3

ICICI Prudential Top 100 Fund 25.56101496

8.194 0.911914889 19.04455687

4

Reliance Vision Fund21.60177

8.194 0.8138004 16.47550186

6

HDFC Top 200 Fund26.84778774

8.194 1.02708081 18.16194749

5

SBI BLUE CHIP FUND23.57908

8.194 0.6367484 24.16194528

1

GRAPH NO-3


5

10

15

20

25

2



INTERPRETATION

Table (4) and graph (3) shows that HDFC top 200 Fund has a much higher average return

over the past five years than other schemes. Looking solely at return figures makes the choice

very clear: One should invest in HDFC top 200 Fund. However, the Treynor ratio paints a

different story.

The Treynor ratio states that SBI blue chip Fund provided 24.16 % return per unit of risk as

measure by beta, while HDFC top 200 Fund only provided an 18.16% return per unit of risk.

SBI blue chip fund has beta of 0.636 means that it is about 63.6% as volatile as its bench

mark index, while HDFC to 200 fund has beta of 1.02 indicates that the ICICI Prudential Top

100 Fund is more almost twice volatile as the bench mark index..

The Treynor ratio actually points to SBI blue chip fund has a better risk-adjusted return.

However, the Treynor ratios are close enough that investors choosing between these

companies should base their decisions on their personal risk tolerance

Observing given table it is known that SBI BLUE CHIP FUND is ranked 1st , DSP

BlackRock Top 100 is ranked 2nd, Franklin India Bluechip Fund is ranked 3rd, ICICI

Prudential Top 100 Fund is ranked 4th, HDFC Top 200 Fund is ranked 5th, and Reliance

Vision Fund is ranked 6th respectively.



TABLE NO-5

TABLE SHOWING JENSON’S MEASURE OF MUTUAL FUNDS

Scheme NameAverage return

Risk Free Beta Rm

Jenson’s ratio

DSP BlackRock Top 100 Equity Fund - Regular Plan – Growth 20.56229 8.194 0.6337746

13.51463 8.99620985

Franklin India Bluechip Fund-Growth 24.45468982 8.194 1.077692

21.61178 1.800455656

ICICI Prudential Top 100 Fund - Regular Plan –Growth 25.56101496 8.194

0.911914889

20.19116 6.42662613

Reliance Vision Fund-GROWTH PLAN-Growth Option 21.60177 8.194 0.8138004

13.51463 9.077839178

HDFC Top 200 Fund - Growth Option 26.84778774 8.194 1.02708081

22.99037 3.456720055

SBI BLUE CHIP FUND-REGULAR PLAN GROWTH 23.57908 8.194 0.6367484

13.51463 11.99717736

GRAPH NO-4


2

4

6

8

10

12

2



INTERPRETATION

The above chart showing Jenson’s measure of six mutual funds performance. RELIANCE,

ICICI, DSP, FRANKLIN, HDFC and SBI performance are 9.077, 6.42, 8.99, 1.809, 3.457

and 11.997 respectively. here SBI performance is said to be good because highest value in the

jenson’s measure of 11.99. while lowest jenson’s measure is 1.8 that is Franklin India Blue

chip fund . A positive value for Jensen's alpha means a fund manager has "beat the market".

Jensen's measure is one of the ways to help determine if a portfolio is earning the proper

return for its level of risk. Here all mutual funds performance is excess positive return But

best performer is SBI bluechip fund.



FINDINGS:

Here we have shown six years Performance Analysis of Reliance, ICICI, DSP, Franklin,

HDFC & SBI.

The average return of Reliance vision fund is 21.60%. The standard deviation of

Reliance vision fund is 35.32.beta of this mutual fund is 0.8138 and correlation is

0.9659.

The standard deviation of ICICI prudential is 25.97.beta of this mutual fund is 0.911

and correlation is high positive correlation (i.e, 0.9914).

The beta of above portfolios are calculated in that Franklin India blue chip fund and

HDFC top 200 fund had beta values greater than 1(Beta> 1) which says that the fund

has high level of systematic risk.

The standard deviation of DSP black rock is 28.211.beta of this mutual fund is

0.633(i.e, low level of systematic risk) and correlation is high positive correlation (i.e,

0.9421)

The standard deviation of FRANKLN bluechip is 33.74.beta of this mutual fund is

1.077 (i.e, high level of systematic risk) and correlation is high positive correlation

(i.e,0.9898).

HDFC: performance of average return is 26.84%& standard deviation of the portfolio

is 37.08. But it is involved in high systematic risk because beta >1 that is 1.02.

Correlation of HDFC is 0.99 that is highly positive correlation.

SBI: performance of average return is 23.57%& standard deviaton of the portfolio is

31.64. But it is involved in low systematic risk because beta <1 that is 0.63 and

correlation of SBI is 0.84 that is highly positive correlation.

Treynors ratio of all mutual funds ranks orderly : SBI, DSP, ICICI, HDFC,

RELIANCE and FRANKLIN. The highest rank goes to SBI blue chip fund because

its performance is tremendous than other portfolios. The values of respective

portfolios are 24.161, 19.515, 19.044, 18.161, 16.088 & 15.088.

Sharpe’s ratio of all portfolio ranks orderly with values: ICICI, HDFC, SBI,

FRANKLIN, DSP and RELIANCE are 0.668, 0.503, 0.4862, 0.4817, 0.4384 and

0.3795 respectively. In this sharpes ratio we are assigned highest rank goes to ICICI

top 100 equity because its sharpes performance is better than others and lowest rank

goes to reliance vision fund



Jensens Ratio of all Portfolio Ranks orderly: Reliance, ICICI, DSP, FRANKLIN,

HDFC and SBI performance are 9.077, 6.42, 9.01, 1.809, 3.457 and 11.997

respectively. Here SBI performance is said to be good because highest value in the

Jensen's ratio. Lowest Ratio is 1.809 that is Franklin bluechip.

SUGGESSIONS

The average return of HDFC Top 200 fund is better than others because average

return is more (26.84%). So its Performance is said to be good.

Standard deviation of HDFC Top 200 fund is greater than others because highest SD

(37.08). So it consist High systematic risk.

Beta of all Mutual Funds are 0.813, 0.919, 0.633, 1.07, 1.02 & 0.636. if beta >1: High

systematic risk, if beta <1: low level of risk. If beta =1: unitary effect. Here HDFC &

FRANKLIN involved high level of systematic risk and remaining 4 mutual funds

have lower level risk.

Among all the schemes HDFC Top 200 Fund, ICICI Prudential Top 100 Fund and

Franklin India Bluechip Fund have Correlation values close to 1 which indicates that

the funds have good correlation with its benchmark return

The Sharpe’s ratio of ICICI Prudential top 100 fund were 0.66% which gives good

return at high risk and have been ranked as 1st .it has got the better risk-adjusted

performance than other schemes. highest rank goes to ICICI top 100 equity because

its sharpes performance is better than others and lowest rank goes to reliance vision

fund. Though also, all portfolios performance is said to be good.

Treynor ratio actually points to SBI blue chip fund has a better risk-adjusted return.

However, the Treynor ratios are close enough that investors choosing between these

companies should base their decisions on their personal risk tolerance. The highest

rank goes to SBI blue chip fund because its performance is tremendous than other

portfolios

The Jensens Ratio of all 6 portfolios are calculated and among it SBI blue chip fund

gives the highest value 11.99. Lowest Ratio is 1.809 that is Franklin bluechip. A

positive value for Jensen's ratio means a fund manager has "beat the market".



CONCLUSION

Mutual Funds now represent perhaps most appropriate investment opportunity for most

investors. As the investor always try to maximize the returns and minimize the risk. Mutual

fund satisfies these requirements by providing attractive returns with affordable risks.

The fall in the CNX NIFTY during the year 2011 has impacted the performance of all the

selected funds. In the ultimate analysis it may be concluded that all the funds have performed

well in the high volatile market movement expect Reliance vision. Therefore it is essential for

investors to consider statistical parameters like Jensens ratio, beta, standard deviation,

sharpe’s ratio and while investing in mutual funds apart from considering NAV and TOTAL

RETURN in order to ensure consistent performance of mutual funds.

Bibliography



[1] Brennan, M. J. and Cao, H. H. (1997), “International Portfolio Investment Flows”,

Journal of finance, Vol. 52, pp. 851- 80.

[2] Carhart, M. M. (1997), “On persistence in mutual fund performance”, Journal of Finance,

Vol. 52, No. 1, pp. 57-82.

[3] Chen, H. L., Jegadeesh, N. and Wermers, R. (2000), “The Value of Active Mutual Fund

Management: An Examination of The Stockholdings and Trades of Fund Managers”, journal

of financial and quantitative analysis, Vol. 35, No. 3.

[4] Chen, C. R. et al. (1992), “A Cross- Sectional Analysis of Mutual Funds”Market Timing

and Security Selection Skills”, Journal of Business Finance and Accounting, Vol. 19, no. 5.

[5] Costa, B. A. and Porter, G. E. (2003), “Mutual fund managers: Does longevity imply

expertise?”, Journal of Economics & Finance, Vol. 27, No. 2, pp. 224-235.

[6] Costa, B. A., Jakob, K. and Porter, G. E. (2006), “Mutual fund performance and changing

market trends 1990-2001: Does manager experience matter?”, Journal of Investing, Vol. 15,

No. 2, pp. 79-86.

[7] Coval, J. and Moskowitz, T. (1999), “Home bias at home: local equity preference in

domestic portfolios”, Journal of finance Vol. 54, pp. 2045- 73.

Web sites:

www.mutualfundindia.com

www.indiamart.com

www.indiainfoline.com

www.bseindia.com

www.sbhindia.com


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