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A

Project Report

On

ANALYSIS OF MUTUAL FUNDSSCHEMES

For

KARVY Stock Broking Ltd.

Submitted

In Partial Fulfillment of

MASTER IN BUSINESS ADMINISTRATION

BY

SRUJANA KUMARI MORTHA

MBA-I

FINANCE SPECIALIZATION

COLLEGE OF MANAGEMENT RESEARCH & ENGINEERING

PUNE 58

(2006)

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ACKNOWLEDGEMENT

I, Srujana Kumari Mortha student of College of Management Research &

Engineering, Pune have done my summer Training Project for a period of

45 days in KARVY Stock Broking Ltd, Pune. This project is an attempt

to share my experience & learning in a short span of time with company

like KARVY. A successful project can never be prepared by single effort of

a person to whom the project is assigned but also demands help &

guardianship of some conversant person, who support actively or

passively in the completion of project. I would like to take this opportunity

to thank the Management of the company for giving me a chance to

undertake project under the kind co-operation and guidance about the

different investment options with a fantastic advisory group.I must

continue to offer my grateful thanks to Mr. Ravi Gaikwad Sr.Relationship

Manager) & Ninad Rughatate (Sr Relationship Manager) for their

information & advice about the company to my project report. I am also

thankful to my Internal Guide Prof. Shushmita Nande & Prof.

Chandrashaker D. Ranade CMRE Pune for his assistance &

encouragement, inspiration & various suggestions from starting to the

completion of the project.

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I also express my gratitude in no less measure to our Director

Mr. Anshul B. Sharma, CMRE who guided me towards fulfillment of my

project report. I sincerely hope that my project work will help the company

in the long run.

SURJANA KUMARI MORTHA

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CONTENTS

Sr. No Contents

01 Executive Summary

02 Company Profile

03 Objectives & Scope

04 Introduction

05 Industry Prospects

06 AMCs in India

07 Mutual Funds in India

08 Research Methodology

09 Operations & Data Collection

10 Recommendations

11 Limitations

12 Conclusion

13 Annexure

14 Bibliography

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EXECUTIVE SUMMARY

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With globalization and the growing competition in the investments opportunity

available, the investor would naturally be interested in tracking the value of his

investments, whether he invests directly in the market or indirectly through

Mutual Funds. He would have to make intelligent decisions on whether he gets

an acceptable return on his investments in the funds selected by him, or if he

needs to switch to another fund. He therefore needs to understand the basis of

appropriate preference measurement for the fund, and acquire the basic

knowledge of the different measures of evaluating the performance of the fund.

Only then would he be in a position to judge correctly whether his fund is

performing well or not, and make the right decision. The project titled Analysis

of Mutual Fund Schemes is an earnest effort top help the investors in

tracking the performance of their investments in Mutual Funds and has been

carried out with the objective of giving and understanding of Mutual Fund as a

financial product, the meaning, importance, working etc. of Mutual Fund, the

current position of Mutual Fund Industry in India, the number of competitors and

other Mutual Fund position. The methodology for carrying out the project was

very simple that is through secondary data obtained through various mediums

like fact sheet of the funds, the Internet, Business magazines, Newspaper, etc.

the analysis of Principal PNB Funds has been done with respect to its various

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competitors on the basis of its ranking system mentioned in the Analysis and

Findings part, which is formulated keeping the benefits and convenience to the

investors in mind. The funds have been analyzed under various types such as

Equity Funds, Income Funds and Balanced Funds.

History has shown that investment categories that have had the greatest return

potential also have had the greatest risk potential. Likewise, investments with

conservative return are generally the least risky. The key to successful and

stress free investing, therefore is to strike a balance between the financial

objective and the ability to tolerate risk. Generally, this entails diversifying money

across a combination of low, medium and high risk investments to create an

overall balance, with the potential to meet both short and long term goals. The

basic asset classes-stocks, bonds and cash equivalents consist of broad

groupings of investments that can be divided further into more distinct and

complex classes. Generally, stocks have historically provided maximum growth

with higher risks. Bonds can provide both diversification (which helps to reduce

overall risk) & a regular income stream and cash equivalents (such as money

market funds) provide a less risky alternative to stocks and bonds while providing

some protection from the erosion caused by inflation.

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COMPANY PROFILE

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About KARVY

KARVY is founded by a group of Hyderabad based CHARTED ACCOUNTANTS

in 1982 as a professional service firm. In the span of 20 years KARVY has

entered into capital market activity too.

KARVY is spread over 163 cities having about 440 offices. Over 450 NSE and

BSE terminals spread across the country. Around 6000 active business

associates are being attached with KARVY across the country. It also comprises

of 3000 employees and professionals

Principal activity of KARVY

KARVY CONSULTANTS LTD.

Deals with depository participant services and IT enabled services.

KARVY COMPUTERSHARE PRIVATE LIMITED

Performs transfer agency services for corporate and Mutual fund and also

registrar for IPOs.

KARVY INVESTOR SERVICE LIMITED

Includes Merchant Banking and Corporate Finance.

KARVY SECURITIES LTD.

Is a big distributor of equity and other financial product.

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In spite of all this KARVY has its RESERCH CENTER in

Hyderabad and also member of Hyderabad stock exchange. It is also a member

of National Stock Exchange.

CORNERSTONES OF STRAREGY

Focus on retail segment.

Build a strong pan-india network managed by experienced professionals,

build presence across metros & class A/B town.

Build full-service capabilities leveraging the network-offer the entire gamut of

financial services, backed by strong transactionprocessing and high volume

handling capability.

Established a high degree of customer ownership and top-of-mind recall in

the local markets- ensures steady customer traffic and repeat business.

Build a trusted brand; ensure high visibility.

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ACHIVEMENTS

Largest independent distributor for financial products

Amongst the top 5 stock brokers

Amongst the top 3 Depository participants

Largest network of branches and business associates

Amongst top 10 investment Bankers.

Ranking 1st in retail procurement in equity IPOs.

Ranking 8th in Merchant Banking services.

MISSION OF KARVY

Their mission is to be a leading, preferred service provider to our customer, and

they aim to achieve this leadership position by building an innovative,

enterprising, and technology driven organization which will set the highest

standards of service and business ethics.

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PRIVATE CLIENT GROUP

This specialized division was set up to cater to the HIGH NET WORTH

INDIVIDUAL and institutional clients keeping in mind that they require a different

kind of financial planning and management that will augment not just existing

finances but there lifestyle as well. Here they follow a hard nosed business

approach with the soft touch of dedicated customer care and personalized

attention. For this purpose they offer a comprehensive and personalized service

that encompasses planning and protection of finances, planning of business

needs and retirement needs and the host of other services, all provided on a

one-to-one basis. The research report has been widely appreciated by this

segment. The delivery and support modules have been fine tuned by giving

facility to client to access online portfolio information, constant updates on their

portfolios as well as value added advice on portfolio churning, sector switches

etc.

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OBJECTIVE AND SCOPE

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OBJECTIVE:

My project Analysis of Mutual Fund Schemes& Analyzing the

Performance Factors was conducted for the following objective:-

To gain an understanding and knowledge of Mutual Funds as an

Investment Tool.

To study the product profile of the company.

To evaluate the performance of selected schemes of Mutual Fund of

different companies.

To compare the Mutual fund schemes on different parameters such as

Annualized Returns, Standard Deviation, Sharpe Ratio, Beta, Alpha and

R-squared.

To analyze the performance factor of the Fund based on different drivers

associated with the specific fund.

SCOPE:

The scope of the project is limited to Indian Securities Market and related to the

Funds actively performing in the market. Mainly analysis part is with the products

available with KARVY. However the project covers the overall scenario of the

security market in India with different investment options, one of them is Mutual

Fund.

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INTRODUCTION

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Financial planning is the process of identifying ones wealth

accumulation and protection goals and developing a coordinated plan to helppriorities ones future financial decision. Financial planning should be taken as

seriously as a medical prescription, as it deals with ones financial health. It

should be seen not just as a means of achieving financial security, but as making

a vital contribution to ones overall happiness and peace of mind.

Financial planning can be manageable or overwhelming depending

upon how one approaches it. Without guidance; its hard to know what one

needs and when one needs it. With right information, tools and timeline, the

choices become much easier.

Intact, too many people are investing in MUTUAL FUNDS. After all itscommon Knowledge that investing in mutual fund is {or at least should be} better

than simply letting your cash waste in a saving account, but for most people

thats where the understanding of funds end. It doesnt help that mutual fund sale

people speak a strange language that, that sounding sort of English, is

interspersed with jargon like NAV, load/no-load, etc. Originally MUTUAL FUND

Swere heralded as a way for the little guy to get a piece of a market. Instead of

spending all the free time buried in the financial pages of ECONOMIC TIMES all

one has to do is buy a mutual funds and be set on his way to financial freedom.

But its not that easy .MUTUAL FUNDS are in excellent idea in theory but in

reality they havent always delivered. Not all mutual funds are created equal, andinvesting in mutual fund isnt easy as thronging ones money at the first sales

person who solicits business.

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INDUSTRY PROSPECTS

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What is a Mutual Fund?

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

their contributions that are to be invested in accordance to the stated

objective. The ownership of the fund is thus mutual, the fund belong to all

investors. Anybody with an invest able surplus of a few thousand rupees can invest

in mutual funds. These investors buy units of a particular mutual fund scheme that has a

defined investment objective and strategy. The money thus collected is invested by the fund manager in different

types of securities. These could range from shares to debentures to money market

instrument, depending upon the schemes stated objective. The income earned through these investments and the capital

appreciation realized by the scheme is shared by its unit holders in

proportion to the number of units owned by them Types of mutual fund schemes may be classified on the basis of its

structure &its investment objective.. Thus a mutual fund is the most suitable investment for the common man

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

managed basket of securities at a relatively low cost and hence the riskfactor is also decreased in some way.

The above figure shows that the investors pool their money with fund

manager who invest in number of securities which may be government bonds,

stocks, treasury bills, commercial papers, call money etc. these securities

generate returns, which may be passed on to investors in the form of dividend or

capital appreciation, depending on the investor.

E.g.:- If the value of a funds asset stands at Rs.1000 and it has 10

investors who

have bough 10 units each, the total number of units issued are 100, and

the value of one unit is Rs.10 (1000/100). If an single investor in fact owns 3

units, the value of his ownership of the fund will be Rs.30 (1000/10*3 units). The

value of the funds invested will keep fluctuating with the market pre movements

causing the Net Asset Value (NAV) also to fluctuate.

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For example, if the value of our funds assets increased from 1000 to

1200, the value of our investors holding of 3 units will now be (1200/100*3units)

Rs.36. the investment value can go up or down, depending on the market value

of the funds assets.

Benefits of Mutual Funds?

If mutual funds are emerging as the favorite investment vehicle, it is

because of the many advantages they have over other forms and avenues of

investing, particularly for investor who has limited resources available in terms of

capital and ability to carry out detailed research and market monitoring. The

following are the major advantages offered by mutual funds to all investors:-

Portfolio diversification

Professional Management

Reduction/Diversification of Risk

Reduction of Transaction Costs

Liquidity

Convenience and Flexibility

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PORTFOLIO DIVERSIFICATION:-

Mutual Funds normally invest in a well-diversified portfolio or securities.

Each investor in a fund is a part owner of all the funds assets. This

enables him to hold a diversified investment portfolio even with a small

amount of investments that would otherwise require big capital.

PROFESSIONAL MANAGEMENT:-

Even if an investor has a big amount of capital available to him, he

benefits from the professional management skills brought in by the fund in

the management of the investors portfolio. The investment management

skills, along with the needed research into available investment option,

ensure a much better return then what an investor can manage by his

own. Few investors have the skills and resources of their own to succeed

in todays fast moving, global and sophisticated markets.

REDUCTION / DIVERSIFICATION OF RISK:-

An investor in a mutual fund acquires a diversified portfolio, no

matter how small is investment. Diversification reduces the risk of loss, as

compared to investing directly in one or two shares or debentures or other

instruments. When an investor invests directly, all the risk of potential loss

in his own. A fund investor also reduces his risk in another way. While

investing in the pool of funds with other investors, any loss on one or two

securities is also shared with other investors. This risk reduction is one of

the most important benefits of a collective investment vehicle like the

mutual fund.

REDUCTIOPN OF TRANSACTION COSTS:-

What is true of risk is also true of the transaction costs. A direct

investor bears all the costs of investing such as brokerage or custody of

securities. When going through a fund, he has the benefit of economies of

scale; the funds pay lesser costs because of larger volumes, a benefit

passed on to its investors.

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LIQUIDITY:-

Often, investors hold shares or bonds they cannot directly,

easily and quickly sell. Investment in mutual funds, on the other hand, is

more liquid. An investor can liquidate the investment, by selling the units to

the fund if open-end, or selling them in the market if the fund is close-end,and collect funds at the end of a period specified by the mutual fund or the

stock market.

CONVENIENCE AND FLEXIBILITY:-

Mutual Fund management companies offer many investor

services that a direct market investor cannot get. Investors can easily

transfer their holding from one scheme to the other, get updated market

information, and so on.

Limitations of Mutual Funds?

While the benefits of investing through mutual funds far outweigh the

disadvantages, an investor and his advisor will do well to be aware of a few

shortcoming of using the mutual funds as investment vehicle.

1. NO CONTROL OVER COST:-

An investor in a mutual fund has no control over the overall cost

of investing. He pays investment management fees as long as he remains

with the fund, albeit in return for the professional management and

research. Fees are usually payable as a percentage of the value of his

investments, whether the fund value is rising or declining. A mutual fund

investor also pays fund distribution costs, which he would not incur indirect investing. However, this shortcoming only means that there is a cost

to obtain the benefits of mutual fund services. However, this cost is often

less than the cost of investing by the investors.

1. NO TAILOR-MADE PORTFOLIO:

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Unit Trust of India (UTI)

In 1963, UTI was established by an act of Parliament and given a

monopoly. Operationally, UTI was set up by the Reserve Bank of India, but was

later de-linked from the RBI (Reserve Bank of India). The first and still one of the

largest schemes, launched by UTI was Unit Scheme 1964. Over the years, US-

64 attracted, and probably still has, the largest number of investors in any single

investment scheme. It was also at least partially the first open-end scheme in the

country, now moving towards becoming fully open-end.

Later in 1970s and 80s, UTI started innovating and offering differentschemes to suit the needs of different classes of investors. Unit Linked Insurance

Plan (ULIP) was launched in 1971. Six new schemes were introduced between

1981 and 1984. During 1984-87, new schemes like Childrens Gift Growth fund

(1986) and Master share (1987) were launched. Master share could be termed

as the first diversified equity investment scheme in India. The first Indian Offshore

Fund, India Fund, was launched in August 1986.

The mutual fund industry in India not only started with UTI, but still counts

UTI as its largest player with the largest corpus of invest able funds among all

mutual funds currently operating in India. Until 1980s, UTIs operations in the

stock market often determined the direction of market movements. At the end of

1988 UTI had Rs.6,700 Crores of Assets Under Management (AUM).

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CLASSIFICATION OF MUTUAL FUNDS:

There are many types of mutual funds available to the investor. However,

these different types of funds can be grouped into certain classifications for better

understanding. From investors perspective, we would follow three basicclassifications:-

Open end v/s close end

Load and Noload Funds

Tax-Exempt and Non-Tax-Exempt Fun

OPEN END V/S CLOSE END:-

An Open-End Fund is one that has units available for sale &

repurchases all times. An investor can buy or redeem units from the fund itself at

a price based on the Net Asset Value (NAV). NAV per unit is obtained by

dividing the amount of the market value of the funds assets (plus accrued

income minus the funds liabilities) by the number of units outstanding.

The number of units outstanding goes up or down every time the fund issues

new units or repurchases existing units. In other words, the unit capital of an

open-end mutual fund is not fixed but variable. Whereas in Close-End Fund it

makes a one time of sale of fixed number of units. Later on, unlike open-end

funds do not allow investors to buy or redeem units directly from the funds. In

this, the fund units can be traded at a discount or premium to NAV based on

investors perception about the funds future performance and other market factor

affecting the demand for or supply of funds units. The number of units

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outstanding of a close-end fund does not vary on account of trading in the funds

units at the stock exchange.

LOAD AND NOLOAD FUNDS:-

Marketing of a new mutual fund scheme involves initial expenses. These

expenses may be recovered from the investors in different ways at different

times. Three usual ways in which funds sales expenses may be recovered from

the investors are:-

a. At the time of investors entry into the fund/scheme, by deducting a

specific amount from his initial contribution, or

b. At the time of the investors exit from the fund/scheme, by

deducting a specified amount from the redemption proceeds payable

to the investor.

These charges made by the fund managers to the investors to cover

distribution/sales/marketing expenses are often called LOADS. The load

charges to the investor at the time of entry into a scheme is called a front-end or

entry load. The load amount charged to the scheme over a period of time is

called as deferred load. The load that an investor pays at the time of his exit is

called a back-end or exit load. Funds that charge front-end, back-end or

deferred loads are called LOAD FUNDS. Funds that make no such charges orloads for sales expenses are called NO-LOAD FUNDS.

TAX-EXEMPT AND NON-TAX-EXEMPT FUNDS:-

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When a fund invests in tax-exempt securities, it is called a Tax-Exempt

Fund. In India, after the 1999 union government budget, all of the dividend

income received from any of the Mutual Funds is tax free in the hands of

investor.However, funds other than Equity funds have to pay adistribution tax,

before distributing income to investors. In otherwords, Equity Mutual Fund

scheme are tax-exempt investment avenues, while otherfunds are taxable fordistributable income. When a fund invests in non-tax-exempt securities, it is

called a Non-Tax-Exempt Fund.

TYPES OF MUTUAL FUNDS:

All mutual funds would be either open or close-end, load or no-loadfund. These classifications are general. Following are the different types of

mutual funds:-

Money Market Funds

Gilt Funds

Debt Fund or Income Fund

Equity funds

Commodity Funds

Real Estate Funds

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0

10

20

30

40

50

60

70

80

Income FundsGrowth Funds

Balanced Funds

Money Market

Tax Saving Schemes

Glit Funds

MONEY MARKET FUNDS:-

Often considered to be at the lowest rung in the order of risk level, Money

Market funds invest in securities of short-term nature, which generally means

securities of less than one year aturity. The typical, short term, interest bearinginstruments these funds invest in include:- Treasury Bills issued by Government,

Certificate of Deposit issued by Banks and Commercial paper issued by

Companies. In India, Money Market Mutual Funds also invests in the inter bank

call money market.

GILT FUNDS:-

Gilts are Government securities with medium to long term maturities,

typically of over one year (under one-year instruments being money marketsecurities). In India now we have seen the emergence of Government Securities

or Gilt funds that invest in government paper called dated security. Since the

issuer is the Government/s of India/States, these funds have little risk of default

and hence offer better protection of principal.

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DEBT FUND OR INCOME FUND:-

Debt fund invests in Debt instrument issued not only by governments, but

also by private companies, banks and financial institutions and other entities

such as infrastructure companies or utilities. By investing in Debt, these fund

target low risk and stable income for the investor as their key objectives. Debtfunds are largely considered as Income Funds as they do not target capital

appreciation, look for high current income, and therefore distribute a substantial

part of their surplus to investors. Income Funds that target returns substantially

above market levels can face more risks. Debt Funds includes:- Diversified Debt

Funds, Focused Debt Funds, High Yield Debt Funds, Assured Return Funds- An

Indian Variant and Fixed Term Plan Series- Another Indian Variant.

EQUITY FUNDS:-

In Equity market there is high risk and high return. Equity Funds invests a

major portion of their corpus in equity shares issued by companies, acquired

directly in Initial Public Offering (IPO) or through the secondary market. Equity

funds would be exposed to the equity price fluctuation risk at the market level, at

the industry or sector level and at the company specific level. Equity Funds

(NAV) Net Asset Value fluctuates with all these price movements. Below some

of the major types of equity funds, arranged in order of higher to lower risk level

they are:- Aggressive Growth funds, Growth Funds, Specialty Funds, Diversified

Equity Funds, Equity Index Funds, Value Funds and Equity Income Funds.

Net Asset Value (NAV)

Net Asset Value of the fund is the cumulative market value of the assets

fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by

selling off all the assets in the fund, this is the amount that the shareholders

would collectively own. This gives rise to the concept of net asset value per unit,

which is the value, represented by the ownership of one unit in the fund. It is

calculated simply by dividing the net asset value of the fund by the number of

units. However, most people refer loosely to the NAV per unit as NAV, ignoringthe "per unit". We also abide by the same convention

NAV= Net assets of the scheme / Number of units outstanding

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HYBRID FUNDS- QUASI EQUITY/QUASI DEBT:-

Many Mutual Funds mix different types of securities in their portfolios.

Thus, most funds, equity or debt, always have some money market securities intheir portfolios as these securities offer the much-needed liquidity. There are

funds that, however, seek to hold a relatively balanced holding of debt and equity

securities in their portfolios. Such funds are termed as Hybrid Funds as they

have a dual equity/ bond focus. Some of the funds which comes under this are: -

Balanced Funds, Growth and Income Funds and Asset Allocation Funds.

COMMODITY FUNDS:-

Commodity funds specialize in investing in different commodities directly

or through shares of commodity companies or through commodity futures

contract. Specialized funds may invest in single commodity or a commodity

group such as edible oils or grains, while diversified commodity funds will spread

their asset over many commodities.

REAL ESTATE FUNDS:-

Specialized Real Estate Funds would invest in Real Estate directly, or

may fund real estate developers, or lend to them, or buy shares of housing

finance companies or may even buy their securitized assets. The funds may

have a growth orientation or seek to give investors regular income. There hasrecently been an initiative to offer such as income fund by HDFC. So these are

the different Mutual Funds which are available in Indian Securities Market. Based

on different consideration the investment is done by the Fund Managers. Each

type of Mutual Fund has its own benefits and limitations.

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ORGANISATION OF A MUTUAL FUND:-

There are many entities involved for the functioning of a successful

fund to make it more effective and the diagram below illustrates the

organizational set up of a mutual fund:

MUTUAL FUND SETUP

RECENT TREND IN MUTUAL FUND INDUSTRY:-

The most important trend in mutual fund industry is aggressive expansion of

the foreign owned mutual fund companies & the decline of the companies floated

by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early

nineties and got off to a good start due to the stock market boom prevailing then.

These banks did not really understand Mutual Fund business and they justviewed it as another kind of banking activity. Few hired specialized staff and

generally chose to transfer staff from the parent organizations. The performance

of most of the schemes floated by these funds was not good. Some schemes

had offered guaranteed returns and their parent organizations had to bail out

these AMCs by paying large amounts of money as the difference between the

guaranteed and actual returns. Most of these AMCs have not been able to retain

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staff, float new schemes etc. and it is doubtful whether, barring a few exceptions,

they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian

companies was also very similar. They quickly realized that the AMC business is

a business, which makes money in the long term and requires deep-pocketedsupport in the intermediate years. Some have sold out to foreign owned

companies, some have merged with others and there is general restructuring

going on.

The foreign owned companies have deep pockets and have come in here

with the expectation of a long haul. They can be credited with introducing many

new practices such as new product innovation, sharp improvement in service

standards and disclosure, usage of technology, broker education and support

etc. In fact, they have forced the industry to upgrade itself and service levels of

organizations like UTI have improved dramatically in the last few years in

response to the competition provided by these.

AMCs IN INDIA:

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Institutions:-

GIC Asset Management Company Limited

IL & FS Asset Management Company Limited

Jeevan Bima Sahayog Asset Management Company Limited

INDIAN Private Sector:

Benchmark Asset Management Company Limited

Cholamandalam Asset Management Company Limited

Escorts Asset Management Company Limited

J.M. Capital Asset Management Company Limited

Kotak Mahindra Asset Management Company Limited

Sundaram Asset Management Company Limited

Reliance Capital Asset Management Company Limited

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Tata Asset Management Company Private Limited

JOINT VENTURE-PREDOMINANTELY INDIAN

Birla Sunlife Asset Management Company Private Limited

Credit Capital Asset Management Company Limited

DSP Merill Lynch Fund Mergers Limited

Sahara Asset Management Company Private Limited

HDFC Asset Management Company Limited

JOINT-VENTURE-PREDOMINANTLY FOREIGN

ABN AMRO Asset Management India Limited

Alliance Capital Asset Management (India) Private Limited

Deutsche Asset Management (India) Private Limited

HSBC Asset Management (India) Private Limited

ING Investment Management (India) Private Limited

Morgan Stanley Investments Management Private Limited

Principal PNB Asset Management Company Private Limited

Prudential ICICI Management Company Limited

SC Asset Management Company Private Limited

Franklin Templeton Asset Management (India) Pvt. Limited

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MUTUAL FUNDS IN INDIA:

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When you invest in a MF, you depend on the fund's managers to make

the right decisions regarding the fund's portfolio. If the manager does not perform

well, you might not make as much money on you investment as you expected.

The short-term focus of money managers and pressure from unit holders for

immediate performance are obstacles to long-term growth.

Most funds lack the cash reserves to pay off the massive redemptions

which will follow a market panic. Fund managers can change without notice.

RESEARCH METHODOLOGY:

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A research is a careful investigation or enquiry, especially through search

foe new facts in any branch of knowledge. It is a systemized effort to gain more

knowledge.

Research Methodology is a way to systematically solve the research

problem. It includes not only the research methods, but also the logic behind

using the methods.

The methods of research used in this project were as follows:-

Analytical Research

Applied Research

Analytical Research:-

In analytical research the researcher has to use the facts already

available, and analyze these to make the critical evaluation of the material.

In this project I have used many raw data from the various sources and

analyzed it for underlying trends.

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Applied Research:-

Applied Research aims at finding a solution for an immediate problem.

Research aimed at certain conclusions (say a solution) facing a concrete social

or business problem is an example of applied research. Thus the central aim of

applied research is to find a solution for some pressing practical problem.

In this project, in the last section, by means of assumptions I have found

the feasibility of a project that the organization means to undertake.

The analysis of the trends followed by the mutual funds was Analytical

Research.

OPERATIONS & DATACOLLECTION:

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From the secondary data available from the fact sheet, internet etc.

Analyses between three different types of funds are as follows:-

Equity Diversified Fund

Income Fund

Balanced Fund

Mutual Fund companies that are selected for the analysis are as follows:-

Principal PNB Mutual Fund

Birla Mutual Fund

HDFC Mutual fund

UTI mutual fund

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Interpretation:

HDFC equity is recommended over Principal equity as this fund has a better

return as compared to other Mutual Funds.

Sharpe Ratio is in direct relation with the Risk and Return means as the risk

is increasing so as the return, as in the case of HDFC Equity, its risk is high so as

the returns of the fund.

Considering the 3-year period than HDFC equity is better than Principal

Equity, while the other two mutual funds have not completed 3 years.

.

RECOMMENDATION & SUGGESTIONS:

Principal Mutual Fund has almost all the kinds of Debt Funds and those funds

are performing quite well since last year, hence it should retain its performance.

Principal Mutual Fund should come up with fund of funds, where the fund

manager invests in the different schemes of Principal to make the portfolio of

Principal Mutual Fund a complete Mutual Fund organization.

Most of the business for Mutual Fund Industry comes through

Distributors/Agents. During the stay in branch office in winter training an

impression was formed that advisors are not satisfied by the commission

structure. Since, advisors bring mostly retail customers and retail customers have

a major share in the total business, company should take some steps to nullify

the dissatisfaction among the advisors to reap long term results.

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As so many people dont know about mutual fund & other financial product,

industry should do something to gain knowledge as many people do not invest

there money use to lack of knowledge &because of high risk.

They should have customer care department.

Industry should intimate investor about the mutual funds that which mutual fund will

give them better returns.

LIMITATIONS:

Though the report has given the insight to the various mutual fund

schemes but cannot be said fully relevant because of some limitations these

are:-

It is difficult to get full insight of how fund managers have deployed their funds.

There are more than 30 companies and offering various ranges of products and

analyzing all of them is again a difficult task.

Mutual Fund industry performance is dependent on daily churning of portfolio and

Net Asset Value of each fund changes every day, thus the fund which in

comparison is doing better today may not perform well tomorrow and thus it

affects the analysis process.

Due to the time constraint only four companies share in portfolio is taken for the

study. Remaining 26 companies are not studied or difficult to study because of

time limitation though they have considerable effect on return.

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Funds which are compared have different asset size and time period and they

may not be so relevant for comparison. In Debt oriented fund the different rating

companies have different criteria to rate their companies and hence it affects on

the analysis part of the research.

CONCLUSION:

A Mutual Fund pools the money of people with similar investment goals. The

money in turn is invested in various securities depending on the objective of the

mutual fund scheme, and the profits (losses) are shared among investors in

proportion to their investment.

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ANNEXEURE

QUESTIONAIRE:-

* NAME :

* AGE GROUP :

a)25-35 b)35-45 c)45-60 d) 60 & above

* PLACE :

1.WHAT PERCENTAGE OF INCOME DO YOU INVEST?

OVER 50% 30% TO 50%

10% TO 30% Below 10%

2.WHAT ARE THE VARIOUS INVESTMENT SCHEMES IN WHICH YOU INVEST?

Bank

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Insurance

Stock Market

Bonds and Debenture

PPF (Public provident Funds)

NSC (National saving certificate)

Post office saving schemes

Real Estate

Gold

Chit Funds

4.ARE YOU AWARE OF MUTUAL FUNDS?

Yes

No

5.WHAT IS YOUR PERCEPTION ABOUT MUTUAL FUNDS?

Safe

Risky

Others

9. HOW DO YOU LOOK MUTUAL FUND COMPANYS?

Brand Name

Good Service

High Yield

Advertisement

Any Other Reason...........................................

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BIBLIOGRAPHY

Books and magazines:

C.R.Kothari Research methodology

AMFI MF TEST Work book

Indian business year book-2005

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