Professional Documents
Culture Documents
SLNO 1 INTRODUCTION 2 INDUSTRY PROFILE 3 COMPANY PROFILE 4 PRODUCT PROFILE 5 RESEARCH DESIGN 6 THEORITICAL BACKGROUND 7 DATA ANALYSIS AND INTERPRETATION 8 FINDINGS,SUGGESTIONS &CONCLUSIONS 9 BIBLIOGRAPHY 70 66 56 49 43 34 18 4 1 PARTICULARS PAGE NO
LIST OF TABLES
Table no
1 2 3 4 5 6 7
Particulars
Growth in assets Reliance equity products Kotak equity products Tata equity products Reliance equity fund analysis Kotak equity fund analysis Tata equity fund analysis
Page no
9 40 41 42 57 58 59
8 9 10 11 12 13
NAV of Reliance NAV of Kotak NAV of Tata Grades of risks and returns Companys position Returns with BSE
60 61 62 64 64 65
LIST OF CHARTS
Chart no 1 2 3 4 Particulars Growth in assets NAV graph Returns of companies Risks of companies Page no 9 63 63 63
Chapter -1
Chapter-1 INTRODUCTION
Mutual Funds - The Concept
A mutual fund is a trust that pools the savings of number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its
unit holders on proportion to the number of units owned by them. 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. The flow chart below describes broadly the working of a mutual fund:
Well regulated
CHAPTER-2
assets under management (AUM). 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 1987 followed by Canbank mutual fund (Dec. 87), Punjab national bank mutual fund (Aug. 89), LIC established its mutual fund in June 1989 while GIC had set up its mutual funds in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.
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. In 1995, the RBI permitted private sector institutions to set up money
market mutual funds (MMMFs). They can invest in treasury bills, call and notice money, commercial paper, commercial bills accepted/co-accepted by banks, certificates or deposit and dated government securities having unexpired maturity upto one year.
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) regulation 1996. 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
The diagram below shows the three segments and some players in each segment:
end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
The second is the UTI mutual fund ltd., sponsored by SBI, PNB, BOB and LIC. It is registered with the SEBI and functions under the mutual fund
regulations. As at the end of September, 2004, there were 29 funds, which manage assets of Rs. 1, 53, 108 crores under 421 schemes.
On 31st march 2006, Indias MF assets stood at Rs. 2, 31,862 crores.
The following are the major events in Indian mutual fund industry:1963 - UTI is Indias first mutual fund.
1964 - UTI launches US-64. 1971 - ULIP (unit linked insurance plan) is second scheme was launched. 1986 - UTI master share, Indias first true mutual fund scheme launched. 1987 - PSU banks and insurers allowed to float mutual fund; State Bank of India [SBI] first of the blocks. 1992 - The Harshad Mehta fuelled bull market arouses middle class interest in shares and mutual funds. 1993 - Private sector and foreign players allowed, Kothari Pioneer first private fund house to start operations SEBI set up to regulate industry. 1994 - Morgan Stanley is the first foreign layer. 1996 - SEBIs mutual fund rules and regulations which form the basis of most current laws came in to force. 1998 - Master index fund is the countrys first index fund. 1999 - The take over of 20th century AMC by the Zurich mutual fund is the first acquisition in the mutual fund industry. 2000 - The industrys assets under management crosses Rs. 1, 00, 000 crores.
The following graph shows the amount invested in Mutual Fund Industry And The graph indicates the growth of assets over the years.
are that have launched mutual fund schemes are its members. It functions under the supervision and Guidelines. Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. It follows the principle of both protecting and promoting the interests of mutual funds as well as their unit holders. The objectives of Association of Mutual Funds in India The Association of Mutual Funds of India works with 30 registered AMCs of the country. This Mutual Fund Association of India maintains high professional and ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code of conduct.
AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual Fund industry. Represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of Mutual Funds.
At last but not the least Association of Mutual Fund of India also disseminate information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies
GIC Asset Management Co. Ltd. Jeevan Bima Sahayog Asset Management Co. Ltd. Private Sector Indian: Benchmark Asset Management Co. Pvt. Ltd. Cholamandalam Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd.
Escorts Asset Management Ltd. JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Ltd. Reliance Capital Asset Management Ltd. Sahara Asset Management Co. Pvt. Ltd
Sundaram Asset Management Company Ltd. Tata Asset Management Private Ltd. Predominantly India Joint Ventures: Birla Sun Life Asset Management Co. Ltd. DSP Merrill Lynch Fund Managers Limited HDFC Asset Management Company Ltd.
Predominantly Foreign Joint Ventures: ABN AMRO Asset Management (I) Ltd. Alliance Capital Asset Management (India) Pvt. Ltd. Deutsche Asset Management (India) Pvt. Ltd. Fidelity Fund Management Private Limited Franklin Templeton Asset Mgmt. (India) Pvt. Ltd. HSBC Asset Management (India) Private Ltd. ING Investment Management (India) Pvt. Ltd. Morgan Stanley Investment Management Pvt. Ltd. Principal Asset Management Co. Pvt. Ltd. Prudential ICICI Asset Management Co. Ltd. Standard Chartered Asset Mgmt Co. Pvt. Ltd.
Association of Mutual Funds in India Publications: AMFI publishes mainly two types of bulletin. One is on the monthly basis and the other is quarterly. These publications are of great support for the investors to get intimation of the know how of their parked money.
SEBI REGULATIONS ON MUTUAL FUNDS The Government brought Mutual Funds in the Securities market under the regulatory framework of the Securities and Exchange board of India (SEBI) in the year 1993.
The fall in NAVs of equity funds, and it is really steep in some, even to the extent of 60-70 percent, has left investors disgusted. Such backlash was only to be expected when funds, in a hurry to post good returns invested in volatile tech stocks. The move, though good under conducive market conditions, is the point of rebuttal now. Owing to volatility in market and profit warnings by some IT majors, tech stocks have been on the downhill journey and the result is fall in NAVs of most equity funds.
This hurts the investor but then investments in equity are never safe. Mutual funds are not just guilty of mismanaging their risks as the recent survey by Pricewaterhouse Coopers indicates but also not educating their investors enough on the risks facing them. It is for the Mutual benefit of the investors as well as mutual funds that investor is educated enough or else an agitated investor might route his investments to other avenues that are considered safe. Debt funds are safe investments and generate returns far in excess of what other socalled safe avenues such as banks generate. Despite this, the inflow of funds in debt funds and banks is by no means comparable. The factor contributing to this the lack of understanding caused by improper guidance by the intermediaries. Till now, Investor education has been one of the issues, less cared for, by the industry. The industry focused upon the amounts and not why a person wanted to invest or whether a particular product suited him or not. While educating the customer might not have been on the cards earlier, the things are beginning to change now. With SEBI passing on the guidelines, the funds will engage in investor education. The guidelines state that funds will utilize the income earned on unclaimed money lying
with them for a period exceeding three years to educate the investors. AMFI has started a certification program for intermediaries. This will be made mandatory for the intermediaries and is aimed at educating the investors about the risks attached to the schemes
Till now, investors have been ignorant about the kind of fund to be picked or how to select a fund. Teaching an investor how to select a fund is thus an important aspect. Educated investors can, on their part, ask pertinent questions to find funds that qualify to be in their portfolio as per their risk bearing capacity. It would not be improper to say that investor education is still the key to managing the funds handed over by investors. The investors are important to the industry and likewise, mutual funds form an important avenue for an investor. It would thus be of critical importance to educate people for an informed investor is in the best position to pick up Schemes as per his need. This would also infuse some confidence in the minds of the investors who under the current scenario seem to be losing faith on account of the falls suffered in recent times. An educated and informed intermediary stands the best chance of understanding the needs of the client and also of winning his confidence through proper guidance. As it is, investor education will remain a key issue for mutual funds in the longer run and educating the intermediaries will be the first step towards it.
ORGANIZATION CHART
CHAIRMAN
CHAPTER - 3
Chapter- 3
COMPANY PROFILE
ANANDRATHI:
AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. The firm was founded in 1994 by Mr. AnandRathi, today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth
management, investment banking, corporate advisory, brokerage and distribution of equities, commodities, mutual funds and insurance, structured products-all of which are supported by powerful research teams.
The firms philosophy is entirely client centric, with a clear focus on providing long term value additions to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporates and Institutions and was recently Ranked by Asia Money 2006 poll amongst South Asia's top 5 wealth managers for the ultra-rich. In year 2007 Citigroup Venture Capital International joined the group as financial partner.
MILESTONES:
1994:
Started activities in consulting and Institutional equity sales with staff of 15.
1995:
Set up a research desk and empanelled with major institutional investors.
1997:
Retail brokerage services launched.
1999:
Lead managed first IPO and executed first M & A deal.
2001:
Initiated Wealth Management Services.
2002:
Retail business expansion recommences with ownership model.
2003:
Wealth Management assets cross Rs1500 crores
2004:
Commodities Wealth brokerage and real assets estate services introduced. Rs3000crores Management cross
2004:
Commodities brokerage and real estate services introduced.
Wealth
Management
assets
cross
Rs3000crores
2005:
Real Estate Private Equity Fund Launched. Retail Branch network expands across 200 locations within India.
2006:
AR Middle East, WOS acquires membership of Dubai Gold & Commodityexchange. Ranked amongst South Asia's top 5 wealth managers for the ultra-rich. Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Net worth Individuals (HNI). Ranked 9th in the Retail Category having more than 5% market locations within India. share. Completes its presence in all States across the country with offices at 300+
2007:
Citigroup Venture Capital International picks up 19.9% equity stake .
clients backed by in-depth research. They firmly believe in the importance of selecting appropriate asset allocations based on the client's risk profile. They have a dedicated mutual fund research cell for mutual funds that consistently churns out superior investment ideas, picking best performing funds across asset classes and providing insights into performances of selected funds.
Products:
-Equities. -Derivatives. -Commodities, IPOs -Mutual funds. -Life and non-life insurance. -Depository services. -Bonds. -Value-added services.
Clients:
-Institutional clients including most leading mutual fund cos, -Banks and insurance companies. -Individuals, families and corporate across India. -Non resident Indians.
Mr. A.V. Srikanth joins Anand Rathi securities as director, wealth management, Mumbai-sep 16, 2007. Rakesh rawal head private wealth management- Deutsche bank, Bangalore joins Anand rathi- Apr 03, 2007. Citigroup venture capital international is picking up 19.9% stake in Anand Rathi Securities Ltd. Mar 23, 2007 Anand Rathi launches Chandigarh Office-Oct 09, 2006. Anand rathi launches Chandigarh office- Oct 09, 2006
ManagementTeam:
AR brings together a highly professional core management team that comprises of individuals with extensive business as well as industry experience.
In-DepthResearch:
Our research expertise is at the core of the value proposition that we offer to our clients. Research teams Across the firm continuously track various markets and products. The aim is however common - to go far deeper than others, to deliver incisive insights and ideas and be accountable for results.
Management team:
Its senior management comprises a diverse talent pool that brings
Mr. PRADEEP GUPTA Vice Chairman Plus 17 years of experience in financial Services
Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Assets Under Management (AUM) of Rs. 93,532 crore (AUM as on 29th Feb 08) and an investor base of over 65.73 lakhs.
Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 115 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors.
Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited, a subsidiary of Reliance Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up capital being held By minority shareholders. Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.
Vision Statement:
To be a globally respected wealth creator with an emphasis on customer care and a culture of good corporate governance. Mission Statement: To create and nurture a world-class, high performance environment aimed at delighting our customers.
Reliance Capital Asset Management Limited (RCAM), a company registered under the Companies Act, 1956 was appointed to act as the investment manager of Reliance Mutual Fund. Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management Company for the Mutual Fund by SEBI vides their letter no IIMARP/1264/95
Dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including preference shares as on September 30, 2007 is Rs.152.02 crores. Reliance Mutual Fund has launched thirty-five Schemes till Date namely, "Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance Capital Limited, which hold 93.37% of the paid-up capital of RCAM, the balance paid up capital being held By minority shareholders. Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management Company for the Mutual Fund by SEBI vides their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including preference shares as on March 31, 2005 is Rs.113.59 crores. Reliance Mutual Fund has launched thirty-two Schemes till Date, namely:
1.B
Reliance Growth Fund (September 1995) Reliance Vision Fund (September 1995) Reliance Liquid Fund (March 1998) Reliance Short Term Fund (December 2002) Reliance Banking Fund (May 2003) Reliance Diversified Power Sector Fund (March 2004) Reliance Floating Rate Fund (August 2004) Reliance NRI Equity Fund (October 2004) Reliance Index Fund (February 2005) Reliance Regular Savings Fund (May 2005) Reliance Tax Saver (ELSS) Fund (July 2005) Reliance Equity Fund (February 2006) Reliance Fixed Horizon Fund (April 2006) Reliance Fixed Horizon Fund II (November 2006) Reliance Long Term Equity Fund (November 2006) Reliance Interval Fund (March 2007)
Reliance Income Fund (December 1997) Reliance Medium Term Fund (August 2000) Reliance Gilt Securities Fund (July 2003) Reliance Monthly Income Plan (December 2003) Reliance Pharma Fund ( May 2004) Reliance Media & Entertainment Fund (September 2004) Reliance NRI Income Fund (October 2004) Reliance Equity Opportunities Fund (February 2005) Reliance Liquidity Fund (June 2005) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund III (March 2007) Reliance Liquid Plus Fund (March 2007) Reliance Long Term Equity Fund (Nov 2006)
The main objectives of the Trust are: To carry on the activity of a Mutual Fund as may be permitted at law. To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and To take such steps as may be necessary from time to time to realize the effects without any limitation. Equity Growth Schemes: The aim of growth funds is to provide capital appreciation over the medium to longterm. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.
VISION STATEMENT: The global Indian financial service brand: Kotak customer will enjoy the benefits of dealing with a global Indian brand that best understands their needs and delivers. customized pragmatic solutions across multiple platforms. Kotak will be a world class Indian financial services group. Their technology and best practices will be benchmarked along international lines while their understandings of customers. The most preferred employer in financial services: - a culture of empowerment and a spirit of enterprise attract bright minds like with an entrepreneurial streak to join the Kotak and stay with Kotak. Working with a home grown, professionally-managed company, which has partnerships with internationally does, gives their people a perspective that is universal as well as unique. The most trusted financial services company: - Kotak will create an ethos of trust across all their constituents. Adhering to high standards of compliance and corporate governance will be an integral part of building trust. Value creation: - value creation rather than size alone will be their business driver.
Key employees:
Ajay Bagga, CEO, Kotak Mahindra Mutual Fund, held the position of National Head, Sales, Distribution and Business Development at the erstwhile Pioneer ITI Asset Management Company Ltd. Prior to joining Kotak Mahindra Asset Management Company on 27th February 2004, Mr. Bagga headed Marketing for the credit card Joint Venture between GE Capital and SBI Cards, a role he held for a year and a half. Mr. Sandesh Kirkire is the Chief Executive Officer of Kotak Mahindra Asset Management Company. He moved into this role in May 2005. Mr. Kirkire joined the Kotak Group in 1994, and has 15 years of in-depth knowledge and hands-on experience related to fund management, corporate finance, proprietary trading, investment banking and treasury. Prior to joining Kotak, Mr. Kirkire worked with SBI Capital Markets Limited and ITC Bhadrachalam Finance & Investments Limited. Mr. Kirkire, 41, is a Mechanical Engineer and holds a Masters Degree in Management from Jamnalal Bajaj Institute of Management.
Backed by one of the most trusted and valued brands in India, Tata Mutual Fund has earned the trust of lakhs of investors with its consistent performance and world-class service. Tata Mutual Fund manages around Rs. 23,252.02 crores (as on February 29, 2008) worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for everyone, whether you are a businessman or salaried professional, a retired person or housewife, an aggressive investor or a conservative capital builder. The Tata Asset Management philosophy is centered on seeking consistent, long-term results. Tata Asset Management aims at overall excellence, within the framework of transparent and rigorous risk controls. We constantly benchmark our efforts against these tenets of performance: Consistency: We strive to deliver consistent results through our value-based investing methodology, keeping alive the credo of the late doyen of the Tata Group, Mr. J.R.D. Tata, that money received from the people should go back to them several times over. Flexibility: Tata Mutual Fund offers investors a broad range of managed investment products in various asset classes and risk parameters. Stability: Our commitment to the highest quality of service and integrity is the foundation upon which we build trust with our clients.
Service: We offer a wide range of services to assist investors have a fulfilling and rewarding financial planning experience with us. We have designed our services keeping in mind the needs of our investors, giving them a smooth and hassle-free financial planning process. A Proud Pedigree: Tata Asset Management Ltd is a part of the Tata group, one of India's largest and most respected industrial groups, renowned for its adherence to business ethics.
The Group has always believed in returning wealth to the society that it serves. Thus, nearly two-thirds of the equity of Tata Sons, the Group's promoter company, is held by philanthropic trusts, which have created a host of national institutions in the natural sciences, medical care, energy and the arts. The trusts also give substantial annual grants and endowments to deserving individuals and institutions in the areas of education, healthcare and social uplift. By combining ethical values with business acumen, globalization with national interests and core businesses with emerging ones, the Tata Group aims to be the largest and most respected global brand from India. This way, it fulfils its long-standing commitment to improving the quality of life of its stakeholders. The Tata name is a unique asset, representing leadership with trust. Leveraging this asset to enhance Group synergy and becoming globally competitive is the route to sustained growth and long-term success.
Chapter- 4
Large cap funds. Mid cap funds. Equity mutual funds. Balanced fund. Growth funds. No load mutual funds. Exchange traded funds. Value funds. Money market mutual funds.
International mutual funds. Regional mutual fund. Sector mutual funds. Index funds. Fund of funds. 1. Closed- end mutual funds: A closed end mutual fund has a set number of shares issued to the public through an initial public offering. These funds have a stipulated maturity period generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed.
2. Open- end funds: An open end mutual fund is a fund that does not have a set number of shares. It continues to sell shares to investors and will buy back shares when investors wish to sell units are bought and sold at their current asset value. Open end funds keep some portion of their assets in short term and money market securities to provide available funds for redemptions. A large portion of most mutual funds is invested in highly liquid securities, which enables the fund to raise money by selling securities at prices very close to those used for valuations.
3. Large cap funds: Large cap funds are those mutual funds, which seek capital appreciation by investing primarily in stocks of large blue chip companies with above-average prospects for earning growth. Different mutual funds have different criteria for classifying companies as large cap. Generally, companies with a market capitalization in excess of Rs.1000 crore are known large cap companies. 4. Mid cap funds: Mid cap funds are those mutual funds, which invest in small/medium sized companies. As there is no standard definition classifying companies as small or medium, each mutual fund has its own classification for small and medium sized companies. Generally companies with a market capitalization of up to Rs. 500 crore are classified as small. Those companies that have a market capitalization between Rs. 500 crore and Rs.1000 crore are classified as medium sized. 5. Equity mutual funds: Equity mutual funds are also known as stock mutual funds. It invests pooled amounts of money in the stocks of public companies. Stocks represent part ownership, or
equity, in companies, and the aim of stock ownership is to see the value of the companies increase over time. Stocks are often categorized by their market capitalization and can be classified in to 3 basic sizes as small medium and large. .
6. Balanced fund: Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys combination of common stock, preferred stock, bonds and short term bonds, to provide both income and capital appreciation while avoiding excessive risk. 7. Growth funds: Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. They focus on those companies, which are experiencing significant earnings or revenue growth, rather than companies that pay out dividends. Growth funds look for the fastest growing companies in the market. 8. No load mutual funds: Mutual funds can be classified in to two types- load mutual funds and no load mutual funds. Load mutual funds are those funds that charge commission at the time of purchase or redemption. They can be further classified in to, (a) Front end load funds. (b) Back end load funds. Front end load funds charge commission at the time of purchase and back end load funds at the time of redemption. 9. Exchange traded funds: Exchange traded funds represent a basket of securities that are traded in an exchange. An ETF will invest in either all of the securities or a representative sample of the
securities included in the index. The investment objective of an ETF is to achieve the same return as a particular market index.
10. Value funds: Value funds are those mutual funds that tend to focus on safety rather that growth, and often choose investments providing dividends as well as capital appreciation. They invest in companies that the market has overlooked, and stocks that have fallen out of favour with mainstream investors, either due to changing investor preferences. 11. Money market mutual funds: A money market mutual fund is a mutual fund that invests solely in money market instruments. Money market instruments are forms of debt that mature in less than one year and are very liquid. Treasury bills make up the bulk of money market instruments. Securities in the money market are relatively risk free. 12. International mutual funds: International mutual funds are those mutual funds that invest in non-domestic securities markets through out the world. Investing in international markets provides greater portfolio diversification and let you capitalize on some of the worlds best opportunities. If investments are chosen carefully, international mutual fund may be profitable when some markets are rising and others are declining. 13. Regional mutual fund: Regional mutual fund is a mutual fund that confines itself to investments in securities from a specified geographical area, usually, the funds local region. A regional mutual fund generally looks to own a diversified portfolio of companies based in and operating out of its specified geographical area. The objective is to take advantage of regional Growth potential before the national investment community does.
14. Sector mutual funds: Sector mutual funds that restrict their investments to a particular segment or sector of the economy. These funds concentrate on one industry such as infrastructure, health care, utilities, pharmaceuticals etc. the idea is to allow investors to place bets on specific industries or sectors, which have strong growth potential. These funds tend to be more potential. These funds volatile than funds holding a diversified portfolio of securities in many industries. Such concentrated portfolios can produce tremendous gains or losses, depending on whether the chosen sector is in or out of favour. 15. Index funds: An index fund is a type of mutual fund that builds its portfolio by buying stock in all the companies of a particular index and thereby reproducing the performance of an entire section of the market. The most popular index of stock index funds is the standard & Poors 500. An S & P stock index fund owns 500 stocks- all the companies that are included in the index. 16. Fund of funds: A fund of fund is a type of mutual fund that invests in other mutual funds. Just as mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds. FOF are designed to achieve greater diversification than traditional mutual funds. But on the flipside, expense fees on fund of funds are typically higher than those on regular funds because they include part of the expense fees charged by the underlying funds.
Reliance Growth Fund (September 1995) Reliance Income Fund (December 1997) Reliance Medium Term Fund (August 2000) Reliance Gilt Securities Fund (July 2003) Reliance Monthly Income Plan (December 2003) Reliance Pharma Fund ( May 2004) Reliance Media & Entertainment Fund (September 2004) Reliance NRI Income Fund (October 2004) Reliance Equity Opportunities Fund (February 2005) Reliance Liquidity Fund (June 2005) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund I (August 2006) Reliance Fixed Horizon Fund III (March 2007) Reliance Liquid Plus Fund (March 2007) Reliance Long Term Equity Fund (Nov 2006)
Reliance Vision Fund (September 1995) Reliance Liquid Fund (March 1998) Reliance Short Term Fund (December 2002) Reliance Banking Fund (May 2003) Reliance Diversified Power Sector Fund (March 2004) Reliance Floating Rate Fund (August 2004) Reliance NRI Equity Fund (October 2004) Reliance Index Fund (February 2005) Reliance Regular Savings Fund (May 2005) Reliance Tax Saver (ELSS) Fund (July 2005) Reliance Equity Fund (February 2006) Reliance Fixed Horizon Fund (April 2006) Reliance Fixed Horizon Fund II (November 2006) Reliance Long Term Equity Fund (November 2006) Reliance Interval Fund (March 2007)
Kotak 30 (D) Kotak 30 (G) Kotak Balance Kotak Bond - Deposit Plan (D) Kotak Bond - Deposit Plan (G) Kotak Bond - Regular Plan (Bonus)
Kotak Bond - Regular Plan (Div-A) Kotak Bond - Regular Plan (Div-Q) Kotak Bond - Regular Plan (G) Kotak Bond - Short Term Plan (D) Kotak Bond - Short Term Plan (G) Kotak Cash Plus (Div-M) Kotak Cash Plus (G) Kotak Contra (D) Kotak Contra (G) Kotak Dynamic FOF (G) Kotak ELSS (D) Kotak ELSS (G) Kotak equity FOF(D) Kotak Equity FOF(G)
Tata Tax Advantage Fund 1 Tata Equity Management Fund Tata Capital Builder Fund Tata Indo-Global Infrastructure Fund Tata Growing Economies Infrastructure Fund
Chapter-5
Chapter- 5
RESEARCH DESIGN
Design of the study:
A detail study is done on various Investment Schemes of Mutual Fund. Analysis is done on the Risk and Returns of Equity Scheme provided by the organization. Where it is useful to the investors to mobilize the savings in the respective schemes provided by the Company.
NEED FOR THE STUDY: The evaluation study of risk and returns of Equity and Growth Schemes of Kotak Mutual Fund is useful to know the performance of scheme and it helps the investors to invest in Mutual Fund schemes either- Equity, Debt or Balanced. The performance of different schemes however helps the prospective investors to choose the best schemes that suit his objective.
SCOPE OF STUDY:
Scope of study means what are the areas of the study. In other words it means the risks and returns that will be faced by the various mutual funds in the market. The study was limited to just finding the risk and returns associated with the one scheme. The study conducted in AnandRathi based on the information furnished by the organization. The study covers the one scheme for Quarterly bases. The study covers the period of past three months from January 1, 2008 to April 1, 2008. The study covers only the open-ended fund. The study does not cover the other schemes of mutual funds.
In the study only three mutual fund companies have been considered.
The Project is a finance project which tries to explain about the history, growth & pros and cons of investing in Mutual Funds and the second part of it deals with the analysis of risk & returns.
OBJECTIVES OF THE STUDY: The study relating to mutual funds has the following objectives:
To know the history of Anand Rathi. To know the growth of mutual funds. To understand the pros and cons of mutual funds. To know the way of investing in mutual funds. To analyze the risks and ret urns of mutual funds in general. To suggest some measures to maximize return in minimum risk.
A Research design is a method and procedure for acquiring information needed to solve the problem. A research design is the basic plan that helps in the data collection or analysis. It specifies the type of information to be collected the sources and data collection procedure.
METHOD OF RESEARCH DESIGN USED UNDER STUDY IS: DESCRIPTIVE RESEARCH: Descriptive research is study of existing facts to come to a conclusion. In this research an attempt has been made to analyze the past performance of the Mutual schemes and to know the benefits to the investors. The study is done on different schemes provided by the company to know the companys performance for the past few months and to know the risk and returns of the funds. TOOLS & TECHNIQUES USED FOR THE STUDY To analyze the data in the project various statistical tools are used. They are: 1. Beta: = Nxy-(x) (y) /Nx2-(x) 2.
= Beta of the fund; N = Number of Observations; X = Quarterly return of Index; Y = Quarterly return of the NAV. 2. Treynor Ratio: = rp-rf/ T= Treynor ratios rp = portfolio return; rf = risk free rate; = portfolio beta;
RESEARCH METHODOLOGY:
It is the scientific way of collection of data or information needed to carry out the project work. The information is mainly needed for analysis and
comparison of data with reference to mutual funds schemes. The information about the risks and returns has been gathered from branch manager of Anand Rathi in Tumkur, Mr.Rajashekar.N. the detail of introduction of the risks and returns of mutual funds is given in the forthcoming chapters of the project.
The data is collected in the two ways are also known as methods or sources of data;
1. Primary Data:
The basic or preliminary information is collected through face to face interaction with the manager, Anand Rathi, Tumkur district.
2. Secondary Data:
Besides the primary data, secondary data is required for
Analysis and the same was collected through the following sources Internet Brochures Bulletins, Company advertisements, Public leaflets.
Net asset values issued by companies to the chief representative.
Etc
Out of many schemes only one has been taken for analysis. The study was limited to the extent of just finding the risks and returns of one scheme of the fund on quarterly bases. So no any great research was done. The study has been done on equity diversified scheme out of many schemes. The study has been done on only three mutual fund companies of India. The study of returns has been calculated by one method.
Chapter-6
Risk consists of two components: The systematic risk. The unsystematic risk.
Systematic Risk: The systematic risk affects the entire market. The economic conditions, political situations and the sociological changes affect the security market. These factors are beyond the control of the corporate and the investor. The investor cannot avoid them. This is subdivided into: 1. Market Risk 2. Interest Rate Risk 3. Purchasing Power Risk. Unsystematic Risk: The unsystematic risk is unique and peculiar to a firm or an industry. Unsystematic Risk stems from managerial inefficiency, technological change in the production process, availability of raw material, changes in the customer preference, and labour problems. The nature and magnitude of the above-mentioned factors differ from industry to industry, and company to company. They have to be analyzed separately for each industry and firm.
Broadly, unsystematic risk can be classified into: 1. Business Risk 2. Financial Risk
Risk Measurement: Understanding the nature of risk is not adequate unless the investor or analyst is capable of expressing it in some quantitative terms. Measurements cannot be assured of cent percent accuracy because risk is caused by numerous factors such as social, political, economic and managerial efficiency. The statistical tools used to quantify risk are: I. Standard Deviation: A measure of the dispersion of a set of data from its mean. The more spread apart the data is, the higher the deviation. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility (risk). A volatile stock would have a high standard deviation. In mutual funds, the standard deviation tells us how much the return on the fund is deviating from the expected normal returns. Standard deviation can also be calculated as the square root of the variance.
Beta:
Beta describes the relationship between the securities return and the index returns Beta = + 1.0
One percent change in market index returns causes exactly one percent change in the security return. It indicates that the security moves in tandem with the market. Beta = + 0.5 One percent changes in the market index return causes 0.5 percent change in the security return. The security is less volatile compared to the market. Beta = + 2.0 One percent change in the market index return causes 2 percent change in the security return. The security return is more volatile. When there is a decline of 10% in the market
return, the security with beta of 2 would give a negative return of 20%. The security with more than 1 beta value is considered to be risky. Negative Beta Negative beta value indicates that the security return moves in the opposite direction to the market return. A security with a negative beta of -1 would provide a return of 10%, if the market return declines by 10% and vice-versa. RATE OF RETURN: The compounded annual return on a mutual fund scheme represents the return to investors from a scheme since the date of issue. It is calculated on NAV basis or price basis. On NAV basis it reflects the return generated by the fund manager on NAV. On price basis it reflects the return to investors by way of market or repurchase price.
Net Asset Value (NAV): The net asset value of the fund is the cumulative market value of the assets fund 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, ignoring the per unit. We also abide by the same convention. Computation of Net Asset Value
The Net Asset Value (NAV) of the units will be determined as of every working day and for such other days as may be required for the purpose of transaction of units. The NAV shall be calculated in accordance with the following formula, or such other formula as may be prescribed by SEBI from time to time.
Market /Fair value of schemes investments + Receivables + Accrued Income + Other Assets Accrued Expenses Payables-Other liabilities NAV= _____________________________________________________ Number of Units Outstanding
Some important terms with respect to mutual funds: Corpus: The total money available with a scheme at any point of time is referred to as the corpus or assets under management. The mutual fund, on your and other investors behalf, invests this corpus in various securities in line with its stated objectives. Unit: Your mutual fund issues you units against your investment. A unit is the currency of a fund what share is to a company; a unit is to a fund. Load: Although the NAV represents the schemes current value. It is not the exact prices are which investors enter or exit the scheme. Fund houses levy nominal shares, on most of their schemes to meet their processing costs and to discourage investors from leaving. This charge is referred to as load and it is the prices you pay over and above the funds NAV when you buy or sell units. You pay and entry load at time of buying units. You pay and exit load at the time of selling. Expenses:
This is the fund charges you for managing your money. Fund managers have to be paid a fee, as do the other constituents involved in managing your money. Redemption: When you sell your units, partly fully to your fund, it is sale from your point of view in mutual fund parlance it is called repurchase or redemption you will have to fill another form and mutual funds will pay you the schemes NAV on the prevailing minus the exit load, and mail you cheque within there to five days. Disclosure: From time to time your fund will share with you information relating to your scheme. Under SEBI rules, fund houses have to send to all unit holders. Annual reports disclosing the complete portfolio of all their schemes performance over various time periods and how it stands up in given market condition. Most fund houses update their schemes portfolio on the websites even quicker the norm being on monthly basis.
Chapter- 7
Chapter- 7\
DATA ANALYSIS AND INTERPRETATION
The analysis and interpretation is done on the secondary data that is NAV of the equity mutual fund scheme of the different mutual fund companies. Secondary Data : Besides the primary data, secondary data is required for Analysis and the same was collected through the following sources
Internet Brochures Bulletins Company advertisements Public leaflets. Net asset values issued by companies to the chief representative.
Etc
An open-ended equity fund(diversified) February 07, 2006. Objective of the scheme is to seek to generate capital appreciation and provide long-term growth opportunities by investing in a portfolio constituted of equity & equity related securities of top 100 companies by market capitalization and of companies which are available in the derivatives segment from time to time.
REF is mandated to invest in the top 100 companies by market capitalisation or stocks traded in the futures and the options segment. At any time, it will invest a minimum of 75% of net assets in equities. It has a flexible investment strategy that can respond to changes in the stock market valuations by short-selling.
** At the time of investment. * Investment by the scheme in Securitised debt will not normally exceed 50% of the debt components. Liquidity Options Available Load Structure NAV calculation on all business days. Growth & Dividend Entry Load: Nil * Exit Load :
For Retail Plan for subscriptions of less than Rs 5 Crs per purchase transaction :1% if redeemed/switched on or before completion of 1 year from the date of allotment :nil if redeemed/switched after completion of 1 year from the date of allotment For subscriptions of more than Rs 5 Crs per purchase transaction: Nil For Institutional Plan - Nil
Minimum Application Amount Rs.5, 000/- & in multiples of Re.1/- thereafter.
Kotak Opportunities
(Open Ended Equity Scheme)
Type of Scheme Launch Date Fund Objective Fund Investment Strategy Asset Allocation Instrument An open-ended equity fund. August 25, 2004. The objective of the scheme will be to provide income distribution and/or medium to long term capital gains while at all times emphasizing the importance of capital appreciation. Investments under this scheme will be made only in equities of growth value stocks. Proportion ** % of funds available Risk Profile Likely Around (%)
** At the time of investment. * Investment by the scheme in Securitised debt will not normally exceed 50% of the debt components. Liquidity Options Available Load Structure NAV calculation on all business days.
Growth, Dividend Payout, Dividend Re-Investment Entry Load: 2.25% Exit Load : 1.00%
Entry load of 2.25% for investments upto Rs. 5 Crores. Exit Load 1% for investment less than 5 crores if exit within 6 months from the date of allotment and 0.50% if the units are redeemed after 6 months but within 1 year.
Type of Scheme Launch Date Fund Objective Fund Investment Strategy Asset Allocation
An open-ended equity fund. February 25, 1993. The objective of the scheme will be to provide income distribution and/or medium to long term capital gains while at all times emphasizing the importance of capital appreciation. Investments under this scheme will be made only in equities of growth value stocks. Proportion ** % of funds available Risk Profile Likely Around (%) Equity & Equity Related 80-100 High
Instrument
** At the time of investment. * Investment by the scheme in Securitised debt will not normally exceed 50% of the debt components. Liquidity Options Available Load Structure NAV calculation on all business days. Growth & Dividend Entry Load: For investment amount greater than or equal to Rs.2 crores: Nil. For investment amount less than Rs.2 crores: 2.25% Exit Load For each investment amount of less than Rs. 2crores: 1% if redeemed on or before expiry of 6 months from the date of allotment. For each investment amount greater than or equal to Rs.2 crores: Nil Rs.5, 000/- & in multiples of Re.1/- thereafter.
NAV
Change
%Change
NAV Date
31 Mar 2008 31 Mar 2008 31 Mar 2008 31 Mar 2008 31 Mar 2008
Growth Plan Bonus Option Growth Plan Growth Option Institutional Plan - Bonus Plan Institutional Plan - Dividend Plan
Kotak Opportunities
(Open Ended Equity Scheme)
31-03-08 31-03-08
37.715 14.592
NAV Price
10.2839 11.0880 23.0998 71.2481 31.0666 32.9947
Date
31 Mar 2008 31 Mar 2008 31 Mar 2008 31 Mar 2008 31 Mar 2008 31 Mar 2008
40 35 30 25 20 15 10 5 0
Graph showing
60 50 40 30 20 returns 10 0 -10
1/2/2008
1/3/2008
1/4/2008
Risk Grade
Sharpe Ratio
NAV (Rs)
equity opportunities
1.6
42.58
45.33
-26.90
+ Avg
1.37
584.54
84.91
Y DATE 1/4/2008 1/3/2008 1/2/2008 TOTAL Avg x2 beta TR NAV(MF) 21.859 20.056 18.169 BSE INDEX 15761.02 17578.72 18233.42
Y DATE 1/4/2008 1/3/2008 1/2/2008 TOTAL Avg x2 beta TR NAV(MF) 10.2839 10.1054 9.0678 BSE INDEX 15761.02 17578.72 18233.42
Chapter-8
SUMMARY OF FINDINGS
FINDINGS: The project was done at AnandRathi Mutual Fund in Tumkur for a period of from Feb 1 to Apr1 and the data collected for the project was for a period of three years and in brief of three months i.e. from 1st Jan 2008 to 2nd Apr 2008. And on the collected data, study was done and the following were the findings: The above equity mutual funds have given good returns in the recent 3 months and also in the period of three years. The Kotak Opportunities has given good returns when compared to other two mutual fund companies in the equity diversified scheme in the period of quarter. (i.e. 2/1/2008 to 1/4/2008) TATA Opportunities have given good return in last two months than Reliance, and Reliance has suffered a great loss in the first month of this year. Though there was the great downfall in the market in January, however all the three have given average returns and it is impressive. Reliance and Kotak have given in the last three months all positive returns. Though Kotak has given positive returns it is of bit risk due to which of this mutual fund of equity scheme is 0.538330 Reliance stands next in its positive returns compared to Kotak and its also of average risk and but high return and its is 0.45317. TATA has got both positive and negative returns and its of average risk and average return and its is 0.508651. The equity fund of Reliance has given 0.004735, Kotak of 0.006814 and TATA of 0.004381 excess returns than the risk free returns (Treasury bills) for per unit of risk.
And among Indias top 100 mutual funds in equity diversified scheme Kotak opportunities stands 1st rank, reliance stands 15th rank and TATA opportunities stands 24th rank. SUGGESTIONS The findings of the study relating to mutual funds, needs some recommendations or suggestions for further development and to attract more number of investors. Though some funds are meant long term investments the company has When compared to overall market its still less return so it is advisable to take efforts to improve returns so that they will get more at end of long terms. their best. Steps may be taken to reduce the volatility of equity funds as it is more They have to regularly pay dividends to their unit holders out of profits And its also advisable to invest in basic industries as it gives more volatile when compared to other funds. to encourage investments. returns. for all the companies to divest the investment of the fund so that they can yield to
For AnandRathi: It is suggested promote its products through mass communication media like television, radio and internet to promote its products. As it is effective media to attract prospective investors There is need to set up offices in every city and provide internet facility to speed up the servicing activity to makeup transactions effectively and to maintain goodwill.
CONCLUSIONS:
Indian stock market, one of the emerging markets in the world showed impressive performance in last couple of years. It also overtook Dow Jones of USA & gave superb returns when it touched all time high. But in early eighties Indian markets were literally weighed down by the need to deal with shares in paper form. There were problems galore with handling documents- fake & stolen shares, fake signatures & signature mismatches, duplication & mutilation of shares, transfer problems etc. the trading volumes was small due to small investing population. The real growth & change occurred from mid eighties in the wake of liberalization initiative of the government. The reforms in the financial sector were envisaged in the banking sector, capital market, securities market regulation, mutual funds, foreign investments & government control.
Mutual Funds (MF) have become one of the most attractive ways for the average person to invest HIS money. It is said that Bank investment is the first priority of people to invest their savings and the second place is for investment in Mutual Funds and other avenues. A Mutual Fund pools resources from thousands of investors and then diversifies its investment into many different holdings such as stocks, bonds, or Government securities in order to provide high relative safety and returns. . Also generate leads of the prospective investors in Mutual Funds for the Asset Management Company (AMC) to sell Mutual Fund products and to make people aware of the Mutual Funds and its products.
There are many improvements pending in the field and it has to happen as soon as possible so as to call the MF industry as an Organized and well-developed sector.
If we see the performance of the Reliance, Kotak and TATA Equity Fund has shown the impressive returns to the investors. However in spite of volatility in the market, they stand at good position compared to their benchmark. No doubt there is fluctuation in the NAV (Rs) of equity diversified Fund. But we can see that there has not been complete downfall in NAV (Rs). The track record of the NAV (Rs) has shown sound increase even though there was some what consistency but it has not decrease to a great extent. We can say that at last taken these three Equity Growth mutual funds have performed well than their benchmark due to the diversified allocation of fund into different sectors which have been performing well in the market. And due to the systematic analysis of the fund managers.
BIBLIOGRAPHY
BOOKS REFERRED: Security Analysis and Portfolio Management by Punithavathy Pandian Invest India Economic Foundation. MAGAZINES: Outlook Money by fortnightly magazines. Value Research Mutual Fund Insight Business Today. Business World. WEBSITES: