Thesis- Portfolio Management

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Introduction to Portfolio Management

Investing in securities such as shares, debentures, and bonds is profitable as well as exciting. It is indeed rewarding, but involves a great deal of risk and calls for scientific knowledge as well artistic skill. In such investments both rationale and emotional responses are involved. Investing in financial securities is now considered to be one of the best avenues for investing one savings while it is acknowledged to be one of the best avenues for investing one saving while it is acknowledged to be one of the most risky avenues of investment. “It is rare to find investors investing their entire savings in a single security. Instead, they tend to invest in a group of securities. Such a group of securities is called portfolio”. Creation of a portfolio helps to reduce risk, without sacrificing returns. Portfolio management deals with the analysis of individual securities as well as with the theory and practice of optimally combining securities into portfolios. An investor who understands the fundamental principles and analytical aspects of portfolio management has a better chance of success.


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Portfolio Management An investor considering investment in securities is faced with the problem of choosing from among a large number of securities and how to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and how much to invest in each. The risk and return characteristics of portfolios. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios.

As the risk return characteristics of individual securities as well as portfolios also change. This calls for periodic review and revision of investment portfolios of investors.

An investor invests his funds in a portfolio expecting to get good returns consistent with the risk that he has to bear. The return realized from the portfolio has to be measured and the performance of the portfolio has to be evaluated.

It is evident that rational investment activity involves creation of an investment portfolio. Portfolio management comprises all the processes involved in the creation and maintenance of an investment portfolio. It deals specifically with the security analysis, portfolio analysis, portfolio selection, portfolio revision & portfolio evaluation. Portfolio management makes use of analytical techniques of analysis and conceptual theories regarding rational allocation of funds. Portfolio management is a complex process which tries to make investment activity more rewarding and less risky.


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Selection of Portfolio The selection of portfolio depends upon the objectives of the investor. The selection of portfolio under different objectives are dealt subsequently

Objectives and asset mix

If the main objective is getting adequate amount of current income, sixty percent of the investment is made in debt instruments and remaining in equity. Proportion varies according to individual preference.

Growth of income and asset mix

Here the investor requires a certain percentage of growth as the income from the capital he has invested. The proportion of equity varies from 60 to 100 % and that of debt from 0 to 40 %. The debt may be included to minimize risk and to get tax exemption.

Capital appreciation and Asset Mix

It means that value of the investment made increases over the year. Investment in real estate can give faster capital appreciation but the problem is of liquidity. In the capital market, the value of the shares is much higher than the original issue price.

Safety of principle and asset mix

Usually, the risk adverse investors are very particular about the stability of principal. Generally old people are more sensitive towards safety.


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Risk and return analysis

The traditional approach of portfolio building has some basic assumptions. An investor wants higher returns at the lower risk. But the rule of the game is that more risk, more return. So while making a portfolio the investor must judge the risk taking capability and the returns desired.

Diversification Once the asset mix is determined and risk – return relationship is analyzed the next step is to diversify the portfolio. The main advantage of diversification is that the unsystematic risk is minimized.


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Evolution of Portfolio Management Portfolio management is essentially a systematic method of maintaining one‘s investment efficiently. Many factors have contributed to the existence and development of the concept.

In the early years of the century analyst used financial statements to find the value of the securities. The first to be analyzed using this was Railroad Securities of the USA. A booklet entitled ―The Anatomy of the Railroad‖ was published by Thomas F. Woodlock in 1900. As the time progressed this method became very important in the investment field, although most of the writers adopted different ways to publish there data.

They generally advocated the use of different ratios for this purpose. John Moody in his book ―The Art of wall Street Investing‖, strongly supported the use of financial ratios to know the worth of the investment. The proposed type of analysis later on became the ―common-size‖ analysis.

The other major method adopted was the study of stock price movement with the help of price charts. This method later on was known as Technical Analysis. It evolved during 1900-1902 when Charles H. Dow, the founder of the Dow Jones and Co. presented his view in the series of editorials in the Wall Street Journal in USA. The advocates of technical analysis believed that stock prices movement is ordered and systematic and the definite pattern could be identified. There investment strategy was build around the identification of the trend and pattern in the stock price movement.


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Another prominent author who supported the technical analysis was Ralph N. Elliot who published a book in the year 1938 titled ―The Wave Principle‖. After analyzing 75 years data of share price, he concluded that the market movement was quite orderly and followed a pattern of waves. His theory is known as Elliot Wave Theory.

According to J.C. Francis the development of investment management can be traced chronologically through three different phases.

First phase is known as Speculative Phase. Investment was not a wide spread activity, but a cake of few rich people. The process is speculative in nature. Investment management was an art and needed skills. Price manipulation was resorted to by the investors. During this time period pools and corners were used for manipulation. The result of this was the stock exchange crash in the year 1929. Finally the daring speculative ventures of investors were declared illegal in the US by the Securities Act of 1934.

Second phase began in the year 1930. The phase was of professionalism. After coming up of the Securities Act, the investment industry began the process of upgrading its ethics, establishing standard practices and generating a good public image. As a result the investments market became safer place to invest and the people in different income group started investing. Investors began to analyze the security before investing. During this period the research work of Benjamin Graham and David L. Dood was widely publicized and publicly acclaimed. They published a book ―Security Analysis‖ in 1934, which was highly sought after. There research work was considered first work in the field of security analysis and acted as the base for further study. They are considered as pioneers of security analysis as a discipline.

Third phase was known as the scientific phase. The foundation of modern portfolio theory was laid by Markowitz. His pioneering work on portfolio management was described in his article in the Journal of Finance in the year 1952 and subsequent books published later on.


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He tried to quantify the risk. He showed how the risk can be minimized through proper diversification of investment which required the creation of the portfolio. He provided technical tools for the analysis and selection of optimal portfolio. For his work he won the Noble Prize for Economics in the year 1990.

The work of Markowitz was extended by the William Sharpe, John Linter and Jan Mossin through the development of the Capital Asset Pricing Model (CAPM).

If we talk of the present the last two phases of Professionalism and Scientific Analysis are currently advancing simultaneously with investment in various financial instruments becoming safer, with proper knowledge to each and every investor.


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Role of Portfolio Management

There was a time when portfolio management was an exotic term. A practice which is beyond the reach of the small investor, but the time has changed now. Portfolio management is now a common term and is widely practiced in INDIA. The theories and concepts relating to portfolio management now find there way in the front pages of the financial newspapers and magazines. In early 90‘s India embarked on a program of economic liberalization and globalization, with high participation of private players. This reform process has made the Indian industry efficient, with rapid computerization, increased market transparency, better infrastructure and customer services, closer integration and higher volume. The markets are dominated by large institutional investors with their diversified portfolios. A large number of mutual funds have come up in the market since 1987. With this development investment in securities has gained considerable momentum

Along with the spread of the securities investment way among Indian investors have changed due to the development of the quantitative techniques. Professional portfolio management, backed by research is now being adopted by mutual funds, investment consultants, individual investors and big brokers. The Securities Exchange Board of India (SEBI) is a regulatory body in INDIA. It ensures that the stock market is free from fraud, and of course the main objective is to ensure that the investor‘s money is safe. Property of Project Guru, www.projectguru.co.cc

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With the advent of computers the whole process of portfolio management has become quite easy. The computer can absorb large volumes of data, perform the computations accurately and quickly give out the results in any desired form. Moreover simulation, artificial intelligence etc provides means of testing alternative solutions.

The trend towards liberalization and globalization of the economy has promoted free flow of capital across international borders. Portfolio not only now include domestic securities but foreign too. So financial investments can‘t be reaped without proper management.

Another significant development in the field of investment management is the introduction to Derivatives with the availability of Options and Futures. This has broadened the scope of investment management.

Investment is no longer a simple process. It requires a scientific knowledge, a systematic approach and also professional expertise. Portfolio management is the only way through which an investor can get good returns, while minimizing risk at the same time.

So portfolio management objectives can be stated as: -

Risk minimization. Safeguarding capital. Capital Appreciation. Choosing optimal mix of securities. Keeping track on performance.


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WHAT IS MUTUAL FUND??

A mutual fund is a form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments, and/or other securities.

Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in 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 portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

The flow chart below describes broadly the working of a mutual fund.


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A mutual fund is a managed group of owned securities of several corporations. These corporations receive dividends on the shares that they hold and realize capital gains or losses on their securities traded. Investors purchase shares in the mutual fund as if it was an individual security. After paying operating costs, the earnings (dividends, capital gains or loses) of the mutual fund are distributed to the investors, in proportion to the amount of money invested.

A mutual fund may be either an open-end or a closed-end fund. An open-end mutual fund does not have a set number of shares; it may be considered as a fluid capital stock. The number of shares changes as investors buys or sell their shares. Investors are able to buy and sell their shares of the company at any time for a market price. However the openend market price is influenced greatly by the fund managers. On the other hand, closedend mutual fund has a fixed number of shares and the value of the shares fluctuates with the market. But with close-end funds, the fund manager has less influence because the price of the underlining owned securities has greater influence

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time.


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Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders. The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. The concept of mutual fund originated in Belgium by the ―Society Generale de Belgique” in the year 1822. Unit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s, Government allowed public sector banks and institutions to set up mutual funds. SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day-to-day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV


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per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.


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TYPES OF MUTUAL FUNDS SCHEMES Mutual fund schemes may be classified on the basis of its structure and its investment objective-:

A)

By Structure

1) Open-ended Fund

An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. The term Mutual fund is the common name for an open-end investment company. Being open-ended means that at the end of every day, the investment management company sponsoring the fund issues new shares to investors and buys back shares from investors wishing to leave the fund.


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2) Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. 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.

3) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

B)

By Investment Objective

1) Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proved


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that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors for a period of time.

2) Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

3) Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. 4) Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. Money market funds have relatively low risks, compared to other mutual funds (and most other investments). By law, they can invest in only certain high-quality, short-term investments issued by the U.S. government, U.S. corporations, and state and local governments. Money market funds try to keep their


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net asset value (NAV) — which represents the value of one share in a fund — at a stable $1.00 per share. But the NAV may fall below $1.00 if the fund's investments perform poorly. Investor losses have been rare, but they are possible. Money market funds pay dividends that generally reflect short-term interest rates, and historically the returns for money market funds have been lower than for either bond or stock funds. That's why "inflation risks" — the risk that inflation will outpace and erode investment returns over time — can be a potential concern for investors in money market funds.


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HISTORY OF INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases


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First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management. Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990 At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 crores Third Phase – 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996 The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and


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acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual fund Fourth Phase – since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT


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ORGANISATION OF MUTUAL FUND There

are

many entities

involved

and

the

diagram

below

illustrates the

organizational set up of a mutual fund:


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Trends in Transactions on Stock Exchanges by Mutual Funds (since January 2000)

Equity (Rs in Crores) Gross Purchase

Time

Debt (Rs in Crores) Gross Sales

Net Purchase/ Gross Sales Purchase

Gross Sales

Net Purchase/ Sales

Jan 2000-March 2000. April 2000 -March 2001. April 2001-March 2002. April 2002-March 2003 April 2003-March 2004 April 2004-March 2005 April 2005-March 2006 April 2006. May 2006. June 2006. July 2006. August 2006. September 2006. October 2006. November 2006. December 2006. January 2007. February 2007. March 2007 (upto 10th)

11070.54 17375.78 12098.11 14520.89 36663.58 45045.25 100435.90 12752.47 18345.43 7843.52 7552.18 8851.58 10345.23 9944.46 12675.21 13181.43 11643.60 12697.09 3844.74

11492.19 20142.76 15893.99 16587.59 35355.67 44597.23 86133.70 9631.91 10452.07 9820.47 7633.89 8425.14 9005.54 9947.97 12700.04 11554.38 12985.83 12971.14 4568.60

-421.65 -2766.98 -3795.88 -2066.70 1307.91 448.02 14302.20 3120.56 7893.36 -1976.95 -81.71 426.44 1339.69 -3.51 -24.83 1627.05 -1342.23 -274.05 -723.86

2764.72 13512.17 33583.64 46663.83 63169.93 62186.46 109804.91 11227.96 15386.47 14235.54 15982.62 16169.28 12878.65 10314.44 13296.65 7584.70 10830.62 10351.99 4784.63

1864.29 8488.68 22624.42 34059.41 40469.18 45199.17 73003.67 6800.08 7774.06 8906.90 8266.41 11853.22 9591.24 7929.50 6961.92 6256.15 8427.46 7682.98 2660.08

900.43 5023.49 10959.22 12604.42 22700.75 16987.29 36801.24 4427.88 7612.41 5328.64 7716.21 4316.06 3287.41 2384.94 6334.73 1328.55 2403.16 2669.01 2124.55

Total (April '06 - March '07)

129676.94

119696.98

9979.96

143043.55

93110.00

49933.55


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Trends in Transactions on Stock Exchanges by Mutual Funds

Equity (Rs in crores) Debt (Rs in crores) Gross Net Gross Net Transactio Purchase Gross Purchase Purchase Gross Purchase n Date s Sales s / Sales s Sales s/ Sales 01.03.07 767.80 796.92 -29.12 845.18 411.54 433.64 02.03.07 442.25 567.57 -125.32 238.24 272.74 -34.50 05.03.07 707.38 541.24 166.14 981.15 591.73 389.42 06.03.07 528.54 460.10 68.44 1148.53 243.93 904.60 07.03.07 338.20 717.76 -379.56 690.76 282.95 407.81 08.03.07 578.23 617.99 -39.76 533.50 524.92 8.58 09.03.07 482.34 867.02 -384.68 347.27 327.74 19.53 10.03.07 0.00 0.00 0.00 0.00 4.53 -4.53 4568.6 2660.0 Total 3844.74 0 -723.86 4784.63 8 2124.55


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Union Budget 2007-08 & the Mutual Fund Industry

The 2007-08 budget presented by the Finance Minister was also a low impact budget, compared with the last year, whose fundamental message was for overall growth of the economy and a positive emphasis to be put on agricultural and rural development, as well as education, which will certainly give a long term boost to the growth of the economy. The reduction in fiscal deficit is also a positive step and the government will also increase spending on education by 34%.

Markets have seen a major correction over the last few trading sessions. On 28 th the markets was hit hard from both sides, internally as well as externally. The budget had a few shockers when the dividend distribution tax was hiked, and on the other side the global market saw major meltdown with the Asian market were beaten the most, Chinese markets alone lost around 9% over the day. The Indian markets could not sustain the beating it got from both ends and saw the maximum decline witnessed in the last eight months. The market was around 200 points down after the markets opened for the day.


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But the announcement of the FM to hike dividend distribution tax saw another fall of more than 300 points which the markets was not able to recover till the end of the day. Among the major sectors Cement is clearly the most hit, and to some extent IT services also got hit, because of bringing both the sector under MAT.

The announcement of MAT of 11.3 % on IT companies was misinterpreted by the market on the budget day, by responding in negative, but saw some recovery, in the next trading day when markets realized that MAT can be used as a deferred tax asset by IT companies post FY 2010 to offset taxes, Secondly SEZs are still MAT free. Hence the impact is not severe as was thought on the budget day. Secondly, as per Finance Minister FBT on ESOP is still under notification.

The Indian Mutual Fund industry also suffered on announcement of the hike in dividend distribution tax. The DDT for the money market and liquid mutual funds has been proposed to be brought at par at 25%. Currently the rate is 12.5% for retail investor and 23% for institutional investors. The FM said that this was being done to restrict the arbitrage opportunities used by these schemes.

Another proposal put up by the Finance Minister was for Mutual Funds to play a bigger role in infrastructure development by launching and operating dedicated infrastructure funds which would directly invest into core sector projects. The Indian Mutual Fund industry already have schemes which are sector specific and invest into infrastructure sector through equities. Now after this particular proposal Mutual Funds can directly invest into infrastructure projects.

FM also allowed delivery based short selling for institutional participants. Mostly in all developed countries short selling is allowed. In India, till recently only the retail investors


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were allowed to enjoy this. Along with FII, Mutual Fund houses are also allowed for delivery based short selling.

FM has proposed to bring the asset management services offered by individuals under the service tax bracket. The individuals who provide investment fund management advisory services will now have to pay service tax. The managers will have to register themselves with the Central Excise department and have to pay service tax, if their service fee is more than Rs.8 lakh per annum.

Along with the above the FM also proposed for the retail investor to invest abroad through Mutual Funds. Currently the industry has quite a few mutual fund schemes which invest dedicatedly abroad. A few more schemes invest partially abroad.

On a whole, the budget other than the DDT hike for the liquid and the money market mutual funds and the infrastructure funds didn‘t have much in store for the Mutual Fund industry.

To summarize, the Budget will sustain high economic growth through larger investments, increased savings and building of manpower capabilities.


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USAGE OF MUTUAL FUND

Mutual funds can invest in many different kinds of securities. The most common are cash, stock, and bonds, but there are hundreds of sub-categories. Stock funds, for instance, can invest primarily in the shares of a particular industry, such as technology or utilities. These are known as sector funds. Bond funds can vary according to risk (high yield or junk bonds, investment-grade corporate bonds), type of issuers (government agencies, corporations, or municipalities), or maturity of the bonds (short or long term). Both stock and bond funds can invest in primarily US securities (domestic funds), both US and foreign securities (global funds), or primarily foreign securities (international funds). By law, mutual funds cannot invest in commodities and their derivatives or in real estate. However, there do exist real estate investment trusts, or REITs, which invest solely in real estate or mortgages, and mutual funds are allowed to hold shares in REITs. A mutual fund may restrict itself in other ways. These restrictions, permissions, and policies are found in the prospectus, which every open-end mutual fund must make available to a potential investor before accepting his or her money. Most mutual funds' investment portfolios are continually adjusted under the supervision of a professional manager, who forecasts the future performance of investments appropriate for the fund and chooses the ones which he or she believes will most closely match the fund's stated investment objective. A mutual fund is administered through a parent management company, which may hire or fire fund managers.


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Mutual funds are subject to a special set of regulatory, accounting, and tax rules. Unlike most other types of business entities, they are not taxed on their income as long as they distribute substantially all of it to their shareholders. Also, the type of income they earn is often unchanged as it passes through to the shareholders. Mutual fund distributions of tax-free municipal bond income are also tax-free to the shareholder. Taxable distributions can either be ordinary income or capital gains, depending on how the fund earned it.

ADVANTAGES AND DISADVANTAGES OF MUTUAL FUND

ADVANTAGES

 Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.  Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own.

 Convenient Administration


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Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

 Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

 Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.  Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.  Transparency You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.


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 Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

 Affordability Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

 Choice of Schemes Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

 Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.


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DISADVANTAGES

 Costs Despite Negative Returns Investors must pay sales charges, annual fees, and other expenses (which we'll discuss below) regardless of how the fund performs. And, depending on the timing of their investment, investors may also have to pay taxes on any capital gains distribution they receive — even if the fund went on to perform poorly after they bought

shares.

 Lack of Control Investors typically cannot ascertain the exact make-up of a fund's portfolio at any given time, nor can they directly influence which securities the fund manager buys and

sells

or

the

timing

of

those

trades.

 Price Uncertainty With an individual stock, you can obtain real-time (or close to real-time) pricing information with relative ease by checking financial websites or by calling your broker. You can also monitor how a stock's price changes from hour to hour — or even second to second. By contrast, with a mutual fund, the price at which you purchase or redeem shares will typically depend on the fund's NAV, which the fund might not calculate until many hours after you've placed your order. In general, mutual funds must calculate their NAV at least once every business day, typically after the major U.S. exchanges close.


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HOW TO INVEST IN MUTUAL FUND??

Step One - Identify your Investment needs

Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.

Step Two - Choose the right Mutual Fund


38

The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications. For selecting the right scheme as per your specific requirements,

Step Three - Select the ideal mix of Schemes Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. Step Four - Invest regularly The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.

Step Five- Start early It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding


39

lets you earn income on income and your money multiplies at a compounded rate of return.

Step Six - The final step All you need to do now is to for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. Mutual Funds are suitable for every kind

of investor - whether starting a career or retiring,

conservative or risk taking, growth oriented or income seeking

RIGHTS OF A MUTUAL FUND UNIT HOLDER

A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is entitled to: 1) Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund.

2) Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme.


40

3) Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase.

4) Vote in accordance with the Regulations to: Approve or disapprove any change in the fundamental investment policies of the scheme, which are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder has a right to redeem the investment.  Change the Asset Management Company.  Wind up the schemes.

5). Inspect the documents of the Mutual Funds specified in the scheme's offer document.

CRITICISM OF MUTUAL FUNDS

The primary criticism of actively managed mutual funds comes from the historical fact that, over long periods of time, most have not returned as much as an index fund would. There are also other criticisms levied against mutual funds as a consequence of the first criticism. One critique covers the concept of the sales load, an upfront or deferred fee as high as 8.5 percent of the amount invested in a fund. Firstly, some critics do not believe that this should be charged on a percentage basis instead of a flat fee basis. A so-called flat fee, annual fee or wrap fee does very little for an investor other than insure that they will pay an advisor a commission for as many years as their relationship exists. It helps


41

an advisor create predictable (and since most investments trend upwards) increasing income flow. Secondly this payment for advice and other services seems dubious to these critics because with so many mutual funds underperforming, but yet visibly attracting money, the advice given seemingly would be bad advice. Mutual funds are also seen by some to have a systemic conflict of interest with regards to their size. Fund companies typically make money by charging a management fee of anywhere between 0.5-2.5 percent of the funds total assets. Although theoretically this could motivate them to cause the fund to perform well, since a well performing fund would cause the amount invested in the fund to rise and thus increasing the fee earned, it also could motivate the fund to focus on attracting more and more new investors, as the new investors adding money to the fund would also cause the assets of the fund to increase. Many investors believe however that the larger the pool of money one works with, the harder it is to invest. Thus the harder it becomes for the mutual fund to perform well. Thus a fund company can be focused on attracting new customers, hurting its existing investors' performance. A great deal of the funds costs are flat and fixed costs, such as the salary for the manager. Thus it can be more profitable to the fund to try and allow it to grow as large as possible, instead of limiting its assets. Other practices of mutual funds have been criticized from time to time, such as funds allowing market timing. More recent criticisms have focused on the fund managers accepting extravagant gifts in exchange for trading stocks through certain investment banks, who presumably overcharge the fund compared to what another, non-gifting investment bank would charge


42

TABLE OF MUTUAL FUND SCHEMES

Mutual Fund

Objective

Risk

Type Liquidity Money Market

+

Moderate

Investment

Who

Portfolio

invest

Treasury Certificate

Income

+ Negligible

should Investment horizon

Bills, Those who park of their

funds

in

Deposits,

current accounts

Reservation

Commercial

or

of Capital

Papers, Call Money bank deposits


short-term

2 days - 3 weeks

43

ShortCall

term Funds (Floating -

short-

Liquidity

Money,

Commercial

+ Little

Moderate

Interest

Income

Rate

Papers,

Bills, CDs, Shortterm

term)

Treasury

Government

Those

with

surplus short-term funds

3 weeks 3 months

securities.

Bond

Predominantly

Funds Regular (Floating Income - Long-

Credit Risk Debentures,

Salaried

&

conservative

9

investors

months

Interest Government

Rate Risk

Gilt

Security

Funds

Income

Funds

Rate Risk

12

Salaried

Government

&

conservative

securities

12 months & more

investors Aggressive

Capital

High Risk

investors

Stocks

with

long term out

Appreciation

3 years plus

look.

generate

returns

Funds

& Interest

Long-term

To

Index

-

Corporate Bonds

term)

Equity

securities,

& More than

that

are

NAV varies Portfolio

commensurate with with

indices

index like BSE, NIFTY

returns performance etc

Aggressive

3 years plus

investors.

of respective indices Balanced Growth Funds

Regular

& Capital

Balanced ratio of Moderate

Market Risk equity

and

debt Aggressive


&

2 years plus

44

Income

and Interest funds Risk

to

ensure

higher returns at lower risk

FREQUENTLY USED TERMS

Net Asset Value (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. Per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. It is calculated as Total market value of the assets or securities – liabilities in the portfolio of the fund


45

Number of fund‘s units (shares) outstanding

Sale Price It is the price you pay when you invest in a scheme. It is also called as Offer Price. It may include a sales load.

Repurchase Price It is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price It is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load It is a charge collected by a scheme when it sells the units. Also called as ‗Front-end‘ load. Schemes that do not charge a load are called ‗No Load‘ schemes. Generally it is 2.25% for subscription below Rs. 2 Crores, 1.25% for Rs. 2 Crore to Rs. 5 Crore and nil above Rs. 5 Crore. However the load structure varies from company to company.

Repurchase or „Back-end‟ Load It is a charge collected by a scheme when it buys back the units from the unit holders. It is 2.25% and is charged if the investment is redeemed before six months from the date of investment in a mutual fund.


46


47

RESEARCH METHODOLOGY

RESEARCH:-


48

Research is a voyage of discovery, a movement from unknown to known. In common parlance, it refers to a scientific and systematic search for pertinent information on a specific topic. It is the pursuit of truth with the help of study, observation, comparison and experiment.

RESEARCH METHOD:-

Research methods may be understood as all those method / techniques that are used by the researcher during the course of studying his research problem.

RESEARCH METHODOLOGY:-

Research methodology is a way to solve the problem scientifically and systematically. In this we study the various steps that are generally adopted by researcher in studying his research problem along with the logic behind them. When we talk about research methodology, we not only talk of the research methods but also the comparison of the logic behind the method we use in the context of our research study and explain why we are using a particular method and why not others. Research Objectives

 To compare performance of different mutual funds in last 1 year.  To compare the return of a mutual fund using different investment ways.  To develop a new investment way in mutual funds.


49

 To compare the different portfolios being maintained by selected mutual funds.  To understand the concept and importance of Mutual Fund & Portfolio Management in today‘s scenario.

RESEARCH DESIGN: -

A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. The research design used in my study is basically exploratory in nature.

METHOD OF DATA COLLECTION: -

The study made in use secondary sources. SECONDARY DATA COLLECTION: Secondary data have been collected from various Books and websites..

SAMPLING DESIGN: -

A sample design is a definite plan for obtaining a sample from a given population .It refers to the technique or the procedure the researcher would adopt in selecting items for


50

the sample i.e. the size of the sample. Judgment sampling has been adopted to select the Mutual Funds.

SAMPL E SIZE: Nine

ANALYSIS OF DATA: -

The data after collection has to be processed and analyzed with the outline laid for the purpose at the time of developing the research plan. This is essential for a scientific study and for insuring that we have all relevant data for making contemplated comparison and analysis. Technically speaking processing implies editing, coding, classification and tabulation of collected data so that they are amenable to analysis. The term analysis refer to the computation of certain measures along with searching for patterns of relationship that exist among data groups .To analyze the data percentages, graphs, pie charts etc are used. After that interpretations are drawn and finally, a list of suggestions and recommendations is put forward. I hope the study will be interesting for a layman, a good experience for the teacher and a key for the industrial pioneers in understanding and facing challenges.


51

Introduction to the Topic


52

The topic of study is “Comparative Analysis of Different Mutual Funds and Investing Ways”. In it 9 mutual funds have been selected and there performance is compared in last 1 year starting from 1 st February 2006 to 31st January 2007. For this there Net Asset Values is used and portfolio maintained is studied. Further returns of different investing ways will be compared in the same mutual fund like One Time Investment, Systematic Investment Plan. Further study would be done to find out that can we develop a new way of investing in them and if yes than what the pre requisite for its implementation. The whole study will be carried out in a manner like firstly different mutual funds will be selected. Than there NAV‘s will be noted from 1 st February 2006 to 31st January 2007. Using some calculations performance will be compared. Using the Fact Sheet of the selected mutual fund minute details of each will be studied. The Mutual Funds under study are as follows: SBI MAGNUM CONTRA RELIANCE GROWTH FUND FRANKLIN INDIA PRIMA FUND HDFC EQUITY FUND DSPML OPPORTUNITIES FUND KOTAK BOND REGULAR FUND JM INCOME FUND LIC MF BOND UTI BOND


53

SBI MUTUAL FUND


54

Incorporated

29 JUNE 1987

Ownership

Public

Ownership Pattern

Foreign - 37%, Domestic-63%

Sponsor

State Bank of India, Society General Asset Management

Fund

The fund takes contrarian call on the markets. It has given compounded annual returns of 67% in past 5 years against the category average of 46%. It is the top wealth creator for the year 2006-07. The fund has mainly shifted its focus to large cap space. It also contains a large cash component of Rs 120 Crore, which amounts to about 10% of its portfolio. This prudence, along with its successful bet on banking stocks has helped the fund out perform the category.

Magnum Contra-G Property of Project Guru, www.projectguru.co.cc

Fund Rating

55

Current Stats & Profile

Trailing Returns

Latest NAV

34.63 (12/03/07)

As on 12 Mar 2007

Fund

Category

52-Week High

39.91 (06/02/07)

Year to Date

-7.65

-8.15

52-Week Low

25.02 (14/06/06)

1-Month

-9.08

-8.49

Fund Category

Equity: Diversified

3-Month

-0.83

-1.40

Type

Open End

1-Year

13.17

6.47

Launch Date

July 1999

3-Year

57.66

33.18

Risk Grade

Below Average

5-Year

53.60

37.90

Return Grade

High

Return Since Launch

32.58

--

Net Assets (Cr)

1,448.78 (28/02/07)

Returns upto 1 year are absolute and over 1 year are annualized.

Benchmark

BSE 100

Relative Performance (Fund Vs Category Average)

Portfolio

Security

Instrument % Net Assets

Praj Industries

Equity

4.97

Reliance Industries

Equity

4.89

Hindustan Zinc

Equity

3.78


56

Mahindra & Mahindra

Equity

3.73

Jai Prakash Associates

Equity

3.49

Aditya Birla Nuvo

Equity

7.47

India Cements

Equity

5.19

F A G Bearings India

Equity

4.95


Equity

4.63

Motor Industries Co.

Equity

4.42


Equity

4.31

Kansai Nerolac Paints

Equity

3.1

Torrent Pharmaceuticals

Equity

3.1

India Infoline

Equity

2.97

C C L Products (I)

Equity

2.88

Cummins India

Equity

2.85

T V S Motor Co.

Equity

2.84

Ashok Leyland

Equity

2.61

Merck Ltd.

Equity

2.53

Esab India

Equity

2.48

Federal Bank

Equity

2.09

Sundaram Fasteners

Equity

1.86

Ruchi Soya Inds.

Equity

1.81

Sesa Goa

Equity

1.8

Raymond

Equity

1.72

Indraprastha Gas

Equity

1.36

Infotech Enterprises

Equity

1.31

Ansal Prop & Infra

Equity

1.27

TIL

Equity

1.26

Ciba Speciality Chemicals

Equity

1.24


57

Top Sectors in Portfolio

Automobile

11.13

FMCG

5.6

Services

5.53

Chemicals

4.34

Financial Services

3.77

Technology

2.21

Metals & Metal Products

1.8

Textiles

1.72

Energy

10.83

18 16 14 12 10 8 6 4 2 0

Composition of Various Sectors

Energy

12.37

Metals & Metal

Construction

Financial Services

12.62

Services

Health Care

Composition of Various Sectors

Automobile

13.61

Health Care

Diversified

Basic/Engineerin

15.67

% Coposition

Basic/Engineering

Sector


58

RELIANCE MUTUAL FUND

Incorporated

30 June 1995

Ownership

Private

Ownership Pattern


Sponsor

Reliance Capital Ltd

About Reliance Mutual Fund

Reliance Mutual Fund (RMF) was established as a trust under the Indian Trusts Act, 1882 with Reliance Capital Limited (RCL), as the Settlor/Sponsor and Reliance Capital Trustee

Co.

Limited

(RCTCL),

as

the

Trustee.

RMF has been registered with the Securities & Exchange Board of India (SEBI) vide registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital Mutual Fund has been changed to Reliance Mutual Fund effective from March 2004. Reliance Mutual Fund was formed to launch various schemes under which units are issued to the Public with a view to contribute to the capital market and to provide investors

the

opportunities

to

make

investments

in


diversified

securities.

59

The main objectives of the Trust are: To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders; 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.

RELIANCE GROWTH FUND

It is a mid cap fund with around 75% in mid cap and a maximum of 25% in large caps. Large cap exposure gives fund tremendous liquidity but not in bearish time. It uses opportunistic style of investment i.e. looking at companies that are scalable in sectors with growth and management passion to grow. It invests nearly in 60 stocks with a bottom up approach. In top holdings, 5.3% of the assets are invested in Reliance Industries. The fund also invests across sectors such as steel, infrastructure, textile & cement, which move with economic and GDP growth. It is also one of the wealth creators in the year 2006-07. Last year return of this fund is 34.22%.

FUND DATA

Structure

Open-ended Equity Growth Scheme

Inception Date

October 8, 1995

Corpus

Rs 3214.06 crore (January 31, 2007)

Minimum Investment Fund Manager

Rs 5,000 Mr. Sunil Singhania


60

Entry Load

<2cr - 2.25%; >_2cr<5cr - 1.25 %;> _5cr - Nil

Exit Load

Nil

Benchmark

BSE 100 Index

SPECIAL FEATURE

Reliance Any Time Money Card

INVESTMENT OBJECTIVE

To achieve long-term growth of capital by investing in Equity and equity related securities through a researchBased investment approach.

PORTFOLIO OF RELIANCE GROWTH FUND Holdings

Weightage (%)

Equities

87.87

JSW Steels Ltd

4.51

Reliance Industries Ltd

3.93

Bharat Earth Movers Ltd

3.74

Jindal Saw Ltd

3.44

Divis Laboratories Ltd

2.84

Jaiprakash Associates

2.63

Northgate Technologies Ltd

2.55

Gujarat State Fertilizers & Chemicals Ltd

2.22

Cambridge Solutions Ltd

2.15

Adani Enterprises Ltd

2.03

Bombay Dyeing & Mfg Company Ltd

2.03

Bank Of Baroda

1.94

Escort India Ltd

1.94

Jain Irrigation Systems Ltd

1.93

Strides Arcolabs Ltd

1.89

Lupin Ltd

1.87

HCL Technologies Ltd

1.82

State Bank Of India

1.77

Greaves Cotton Ltd

1.61

Dena Bank

1.55


61

AIA Engineering Ltd

1.52

United Phosphorous Ltd

1.47

Jindal Steel & Power Ltd

1.45

Crompton Greaves Ltd

1.45

Maharashtra Seamless Ltd

1.40

Radico Khaitan Ltd

1.40

Gujarat Mineral Development Corporation

1.39

Bharati Shipyard Ltd

1.38

Orient Paper & Industries Ltd

1.34

Shivvani Oil And Gas Exploration

1.29

Allcargo Global Logistics Ltd

1.26

NIIT Technologies Ltd

1.24

Mahanagar Telephone Nigam Ltd

1.19

Bharat Petroleum Corp Ltd

1.17

Gammon India Ltd

1.16

Tamilnadu Newsprint Ltd

1.11

GHCL Ltd

1.06

Hexaware Technologies Ltd

1.03

Tata Motors

1.02

Educomp Solutions Ltd

1.02

Equity < 1% Of Corpus

14.11

Derivatives, Cash & Other Receivables

12.13

Grand Total

100.00

SECTOR ALLOCATION Industry

% Allocation

Ferrous Metals

10.81

Industrial Capital Goods

9.72

Software

8.08

Pharmaceuticals

6.89


62

Banks

5.27

Petroleum Products

5.11

Chemicals

4.53

Construction

4.14

Auto

3.94

Industrial Products

3.54

Fertilizers

3.39

Consumer Non Durables

2.93

Auto Ancillaries

2.72

Information Technology

2.55

Trading

2.03

Pesticides

1.47

Minerals/Mining

1.39

Cement

1.34

Oil

1.29

Transportation

1.26

Telecom - Services

1.19

Paper

1.11

Textiles – Cotton

0.97

Net Asset Value Date

Net Asset Value

Wednesday, February 01, 2006

201.18

Wednesday, March 01, 2006

210.22

Monday, April 03, 2006

229.75

Monday, May 01, 2006

251.68

Thursday, June 01, 2006

215.11

Monday, July 03, 2006

199.51

Tuesday, August 01, 2006

193.2

Friday, September 01, 2006

218.12


63

Tuesday, October 03, 2006

234.47

Wednesday, November 01, 2006

250.23

Friday, December 01, 2006

261.78

Tuesday, January 02, 2007

270.05

FRANKLIN INDIA PRIMA FUND

Fund

FRANKLIN India Prima Fund is a 12 year old diversified equity fund with a specific focus on mid/small cap stocks from India‘s emerging businesses. The investment approach is style-agnostic i.e. neither pure growth nor value addition. This style is chosen keeping in mind that different styles tend to out perform in different market conditions. If Rs. 1,000 is invested every month for last five years than there present value would have been Rs 2.12 lakh. Its NAV shoot up from Rs 19.95 in 2001 to Rs. 174.84 in 2006. The fund holds around 40 stocks in its portfolio, with the top 10 holdings accounting for 43.04% of its net assets. The fund holds about Rs 172 Crore as cash. The corpus of the fund is Rs 2,418 Crore. The main feature of the fund is that it hasn‘t seen heavy redemption pressures throughout its 12 years. It is also one of the wealth creator funds. Last year return of this fund is 20.56%.

Fund Style


64

Fund Facts Asset Allocation

Portfolio Concentration

Equity 94%

Top 3 sectors

41.90%

Debt

0%

Top 5 holdings

26.67%

Other

6%

Top 10 holdings

43.04% Fund Rating

Franklin India Prima-G Current Stats & Profile

Trailing Returns

Latest NAV

184.17 (12/03/07)

As on 12 Mar 2007

Fund

Category

52-Week High

220.51 (16/01/07)

Year to Date

-14.08

-8.15

52-Week Low

139.55 (14/06/06)

1-Month

-11.76

-8.49

Fund Category

Equity: Diversified

3-Month

-6.78

-1.40

Type

Open End

1-Year

-2.52

6.47

Launch Date

November 1993

3-Year

35.98

33.18

Risk Grade

Average

5-Year

48.12

37.90

Return Grade

Above Average

Return Since Launch

24.51

--

Net Assets (Cr)

1,583.62 (28/02/07)

Returns upto 1 year are absolute and over 1 year are annualised.

Benchmark

S&P CNX 500

Relative Performance (Fund Vs Category Average)


65

Portfolio

Stock

Instrument % Net Assets

Aditya Birla Nuvo

Equity

7.47

India Cements

Equity

5.19

F A G Bearings India

Equity

4.95


Equity

4.63


Equity

4.42

Ipca Laboratories

Equity

4.31

Kansai Nerolac Paints

Equity

3.1

Torrent Pharmaceuticals

Equity

3.1

India Infoline

Equity

2.97

C C L Products (I)

Equity

2.88

Cummins India

Equity

2.85

T V S Motor Co.

Equity

2.84

Ashok Leyland

Equity

2.61

Merck Ltd.

Equity

2.53

Esab India

Equity

2.48

Federal Bank

Equity

2.09

Sundaram Fasteners

Equity

1.86

Ruchi Soya Inds.

Equity

1.81

Sesa Goa

Equity

1.8

Raymond

Equity

1.72

Indraprastha Gas

Equity

1.36

Infotech Enterprises

Equity

1.31

Ansal Prop & Infra

Equity

1.27

TIL

Equity

1.26

Equity

1.24

Ciba Chemicals

Speciality


66

Top Holdings in Portfolio

%

% Composition

Services

5.53

Chemicals

4.34

Financial Services 3.77 Technology

Sector

2.21


1.8

Textiles

1.72

Net Asset Value

Date

Net Asset Value


179.74


185.56


201.75


209.27


173.9


162.61


160.48


67

Textiles

5.6


FMCG

Technology

11.13

Financial Services

Automobile

Chemicals

12.37

Services

Construction

FMCG

12.62

Automobile

Health Care

Construction

13.61

Health Care

Diversified

18 16 14 12 10 8 6 4 2 0 Basic/Engineering

Basic/Engineering 15.67

Diversified

Composition % Composition

Sector


176.04


185.8


196.98


209.88


216.71

HDFC MUTUAL FUND

Incorporated

30 June 2000

Ownership

Private

Ownership Pattern


Sponsor

Housing Development Finance Corporation Ltd.

Fund Speak

The main feature of this fund is that it has beaten its category for eight consecutive years. The fund is not having large portfolio with number of stocks between 30– 40. Top 5 stocks account for 35-40%. The funds investment policy is to buy quality and sustainable businesses at a reasonable price. So even if a sector don‘t perform well now, but has potential to perform in future, the fund will hold on to it. The fund is also known for quick sector move. The fund doesn‘t offer good returns in 1-2 years, but in long term. It is also the wealth creator fund. Last year return of this fund is 31% nearly.


68

Portfolio

Name of Instrument

Industry +

Quantity

Market/

% to

Fair Value (Rs.

NAV In

Lakhs) EQUITY

&

EQUITY

RELATED

Lanco Infratech Ltd

Engineering

48,119

Subtotal

125.59

0.33

125.59

0.33

(a) Listed / awaiting listing on Stock Exchanges Divis Laboratories Ltd.

Pharmaceuticals

87,707

2,635.60

6.88

Infosys Technologies Ltd.

Software

117,602

2,563.37

6.69

80,000

2,004.60

5.23

310,000

1,955.17

5.10

Industrial Capital Bharat Heavy Electricals Ltd.

Goods Telecom

Bharti Airtel Ltd.

-

Services Industrial Capital

Crompton Greaves Ltd.

Goods

700,000

1,854.30

4.84

State Bank of India

Banks

140,000

1,843.87

4.81

Reliance Industries Ltd.

Petroleum

140,000

1,742.23

4.55


69

Products Apollo Tyres Ltd.

Auto Ancillaries

472,796

1,726.18

4.51

Pharmaceuticals

164,531

1,670.24

4.36

900,000

1,665.90

4.35

186,000

1,589.93

4.15

Goods

416,969

1,588.23

4.15

Corporation Ltd.

Oil

172,500

1,487.55

3.88

Sundaram Clayton Ltd.

Auto Ancillaries

112,000

1,367.02

3.57

Grasim Industries Ltd.

Cement

47,500

1,321.90

3.45

Durables

500,000

1,176.00

3.07

Software

240,000

1,102.80

2.88

Sun Pharmaceutical Industries Ltd.

Consumer ITC Ltd.

Non

Durables Consumer

Kansai Nerolac Paints Ltd.

Non

Durables Industrial Capital

Thermax Ltd. Oil

&

Natural

Gas

Consumer Hindustan Lever Ltd.

Non

Satyam Computer Services Ltd. Hindustan

Petroleum Petroleum

Corporation Ltd.

Products

325,000

915.85

2.39

Tata Motors Ltd.

Auto

110,000

890.07

2.32

Aditya Birla Nuvo Ltd.

Textile Products

75,928

881.83

2.30

Birla Corporation Ltd.

Cement

224,964

825.84

2.16

1,174,66 ISMT Ltd.

Metals

8

811.70

2.12

Hanung Toys & Textiles Ltd

Textile Products

519,066

670.37

1.75

Solar Explosives Ltd.

Chemicals

424,937

590.45

1.54

Eimco Elecon (India) Ltd.

Engineering

145,072

507.10

1.32

Voltamp Transformers Ltd

Power

75,890

452.61

1.18

Phoenix Lamps Ltd.

Auto Ancillaries

308,766

389.82

1.02


70

Global Vectra Helicorp Ltd Chennai

Transportation

256.26

0.67

Products

98,859

218.23

0.57

Transportation

96,000

209.81

0.55

Petroleum Petroleum

Corporation Ltd. Great

159,810

Eastern

Shipping

Company Ltd.

Consumer

Non

EID Parry (India) Ltd.

Durables

144,640

201.92

0.53

Great Offshore Ltd.

Transportation

24,000

145.41

0.38

Subtotal

37,262.16

97.27

Total

37,387.75

97.60

Reverse Repos

873.55

2.28

Subtotal

873.55

2.28

Total

873.55

2.28

Net Current Assets

42.14

0.12

Net Assets

38,303.44

100.00

MONEY MARKET INSTRUMENTS

OTHERS

Top Holding

Sectoral

Assets(%)


14.22

Consumer Non Durables

12.10

Pharmaceuticals

11.24

Software

9.57

Auto Ancillaries

9.10

Petroleum Products

7.51

Cement

5.61

Telecom - Services

5.10

Banks

4.81


71

Transportation

1.60

Chemicals

1.54

Power

1.18

Money

Market

Instruments/Net Receivables

2.40

Sector


Net Asset Value


112.483


119.495


130.819


134.053


112.237


114.59


115.648


128.063


132.634


140.191


147.937


147.286


72

Power

1.65

Transportation

Engineering

Metals

2.12

Oil

Metals

16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Banks

2.32

Cement

Auto

Assets(%)

Auto Ancillaries

3.88

Pharmaceuticals

Oil


4.05

% Assets

Textile Products

DSP Merrill Lynch Opportunities Fund

Fund The fund maintains a complicated portfolio. The fund has constantly figured in the top 25% of its category. The funds mandate is to move around promising sectors. The portfolio is highly diversified. Technology stock is the favourite, but fund also has automobiles, FMCG, metals and engineering. If a sector isn‘t performing the fund believes in buy and hold strategy. There is no mid and small cap stock in the portfolio as the exposure doesn‘t typically exceeds 30%. Its fund managers are Mr. Anup Maheshwari and Mr. Soumendra Lahiri. It is also a wealth creator fund. Last year return of this fund is 36.4%. Type of Scheme:

Open ended growth scheme Growth

Options available:

Dividend Payout Reinvest

Minimum

Application First Purchase - Rs. 5,000/-

amount: Subsequent Purchase - Rs. 1,000/Entry Load:



For Regular investments


73

2.25% : For investments < Rs 5.0 crs Nil : For investments >= Rs 5.0 crs 

For SIP investments 1%

NIL

Exit Load: Contingent

Deferred



For SIP investments 1.25% : If investment is redeemed before the

Sales Charge (CDSC):

completion of 2 years Nil : If investment is redeemed on or after the completion of 2 years

Under normal circumstances, it is anticipated that the asset allocation shall be as follows: Indicative Asset Allocation Indicative Allocation (% of

Instrument Equity

and

Corpus) equity-related

securities Fixed

income

80% - 100%

Risk Profile

Medium to High

securities

(debt* and money market 0% - 20%

Low to Medium

securities) *Debt securities/instruments are deemed to include securitised debts.

HIGHLIGHTS Cut Off Time - Subscription

3:00 PM


74

Cut Off Time -Redemption

3:00 PM

Cut Off Time - Switching

3:00 PM

Redemption cheques issued^

Normally within 3 Business Days of the receipt of redemption request

Systematic Investment Plan (SIP)

Monthly and Quarterly Options available

Minimum Investment for SIP

Rs. 2000/- (Effective November 15,2006)

Systematic Withdrawal Plan (SWP) Minimum Withdrawal for SWP Systematic Transfer Plan (STP) Minimum Transfer for STP

Weekly, Monthly and Quarterly Options available Rs. 1,000/Weekly, Monthly and Quarterly Options available Rs. 1000/-

INVESTMENT OBJECTIVE

An Open Ended growth Scheme, seeking to generate long term capital appreciation and whose secondary objective is income generation and the distribution of dividend from a Portfolio constituted of equity and equity related securities concentrating on the Investment Focus of the Scheme.

ASSET ALLOCATION Equity & Equity related securities: 80% - 100% Fixed Income securities (Debt* & Money market securities): 0% - 20%. Debt securities/ instruments are deemed to include securitised debts


75

Portfolio

Sr.No.

Name of the Instrument

Industry Market Value

% to Net Assets

(Rs. In lakhs) EQUITY & EQUITY RELATED (a) Listed / awaiting listing on the stock exchanges 1 Reliance Industries Petroleum Products

6,338.44

4.26%

2 L&T Industrial Capital Goods

5,621.09

3.78%

3 Infosys Technologies Software

5,553.37

3.73%

4 Tata Consultancy Services Software

4,632.03

3.11%

5 Reliance Communication

4,279.49

2.88%

6 Grasim Industries Cement

4,105.98

2.76%

7 Bharti Televentures Telecom - Services

4,095.93

2.75%

8 ONGC Oil

4,072.42

2.74%

9 Zee Entertainment Media & Entertainment 4,061.53

2.73%

10 Satyam Computer Services Software

3,972.92

2.67%

11 Aditya Birla Nuvo Textile Products

3,736.21

2.51%

12 Tata Motors Auto

3,556.37

2.39%

13 Jaiprakash Industries Construction

3,502.68

2.35%

14 Crompton Greaves Industrial Capital

3,420.59

2.30%

3,277.04

2.20%

16 BHEL Industrial Capital Goods

3,228.42

2.17%

17 State Bank of India Banks

3,189.03

2.14%

18 ITC Consumer Non Durables

3,066.23

2.06%

19 Sterlite Industries Non - Ferrous Metals

2,763.33

1.86%

Goods 15 Deccan Chronicle Holdings Media & Entertainment


76

20 Century Textiles Cement

2,756.03

1.85%

21 Gujarat Ambuja Cements Cement

2,689.09

1.81%

22 Mahindra & Mahindra Auto

2,657.02

1.79%

23 ICICI Bank Banks

2,503.18

1.68%

24 Dr. Reddy‘s Laboratories Pharmaceuticals 2,198.83

1.48%

25 TV 18 Media & Entertainment

2,167.36

1.46%

26 Hindustan Lever Consumer Non Durables 2,035.25

1.37%

27 MphasiS BFL Software

1,995.66

1.34%

28 Ansal Properties Construction

1,961.41

1.32%

29 Siemens Industrial Capital Goods

1,880.10

1.26%

30 Bharat Electronics Industrial Capital Goods1,784.84

1.20%

31 Amtek Auto Auto Ancillaries

1,754.56

1.18%

32 Wire and Wireless Media & Entertainment 1,722.55

1.16%

33 Voltas Consumer Durables

1,627.39

1.09%

34 Lanco Infratech Engineering

1,623.97

1.09%

35 HCL Technologies Software

1,559.48

1.05%

36 Hindustan Construction Construction

1,463.70

0.98%

37 Karur Vysya Bank Banks

1,374.13

0.92%

38 United Phosphorus Pesticides

1,307.21

0.88%

39 BPCL Petroleum Products

1,268.59

0.85%

40 ACC Cement

1,245.82

0.84%

41 Tech Mahindra Software

1,199.95

0.81%

42 Birla Corporation Cement

1,194.11

0.80%

43 Jindal Saw Pipes Industrial Capital Goods 1,162.32

0.78%

44 Cipla Pharmaceuticals

1,094.23

0.74%

45 IOC Petroleum Products

1,087.51

0.73%

46 SAIL Ferrous Metals

1,075.56

0.72%

47 Hindalco Non - Ferrous Metals

1,051.35

0.71%

48 IPCL Petroleum Products

1,047.60

0.70%

49 Bombay Dyeing Chemicals

1,009.92

0.68%


77

50 Graphite India Industrial Products

949.62

0.64%

51 Colgate Consumer Non Durables

936.43

0.63%

52 Hexaware Technologies Software

918.13

0.62%

53 GE Shipping Transportation

869.41

0.58%

54 Mcleod Russell Consumer Non Durables

776.29

0.52%

55 NRB Bearings Industrial Products

764.44

0.51%

56 Sun TV Media & Entertainment

755.82

0.51%

57 Pantaloon Retail Retailing

752.44

0.51%

58 B L Kashyap & Sons Construction

741.82

0.50%

59 HPCL Petroleum Products

717.67

0.48%

60 Hindalco Rights Non - Ferrous Metals

690.61

0.46%

61 DCM Shriram Consolidated Fertilisers

652.77

0.44%

62 Financial Technologies Software

634.71

0.43%

63 Mastek Software

601.11

0.40%

64 Nestle Consumer Non Durables

579.26

0.39%

65 Bannari Amman Sugar Consumer

567.27

0.38%

66 Karur Vysya Bank - Rights Banks

540.97

0.36%

67 Sesa Goa Ferrous Metals

315.16

0.21%

68 I-Flex Solutions Software

291.70

0.20%

69 Centurion Bank of Punjab Banks

284.10

0.19%

70 Bajaj Auto Auto

277.22

0.19%

71 Maruti Udyog Auto

274.24

0.18%

72 Voltamp Transformers Industrial Capital

114.52

0.08%

73 Network18 Media & Entertainment

78.90

0.05%

Total

140,056.43

94.11%

74 ICICI Feb 2007 Banks

1,293.32

0.87%

75 BHEL Feb 2007 Industrial Capital Goods

622.16

0.42%

Non Durables

Goods

DERIVATIVES


78

76 Bharti Feb 2007 Telecom - Services

315.72

0.21%

77 Century Textiles Feb 2007 Cement

230.92

-0.16%

Total

2,000.28

1.34%

CBLO / Reverse Repo Investments

6,417.46

4.31%

Net Receivables / (Payables)

347.60

0.23%

Total

6,765.06

4.55%

Grand Total

148,821.77

100.00%

MONEY MARKET INSTRUMENTS Cash & Equivalent

Major Holdings Sector

% Assets

MEDIA

&

ENTERTAINMENT

8.11

CEMENT

7.9

PETROLEUM PRODUCTS

7.03

BANKS

6.17

TELECOM - SERVICES

5.84

CONSUMER

NON

DURABLES

5.35

CONSTRUCTION

5.15

AUTO

4.55

NON

-

FERROUS

METALS

3.03

OIL

2.74

TEXTILE PRODUCTS

2.51

PHARMACEUTICALS

2.21

AUTO ANCILLARIES

1.18

INDUSTRIAL

1.15


79

PRODUCTS CONSUMER DURABLES 1.09

INDUSTRIAL CAPITAL GOODS

11.98

Sector

Transportation has a share of 0.58% and Retailing has a share of 0.51% in the portfolio. Net Asset Value

Date

Net Asset Value


41.66


44.4


49.51


51.84


42.71


43.44


43.12


47.2


49.27


52.37


55.86


56.809


80

INDUSTRIAL

14.35

CASH &

SOFTWARE

RETAILING

4.55

CHEMICALS

CASH & EQUIVALENT

FERROUS

0.44

CONSUMER

FERTILISERS

AUTO

0.68

TEXTILE

CHEMICALS

NON - FERROUS

0.88

CONSTRUCTION

PESTICIDES

16 14 12 10 8 6 4 2 0 TELECOM -

0.93

PETROLEUM

FERROUS METALS

MEDIA &

1.09 % Assets

ENGINEERING

% Assets

KOTAK MAHINDRA MUTUAL FUND

Incorporated

23 June 1998

Ownership

Private

Ownership Pattern


Sponsor

Kotak Mahindra Finance Ltd

Corpus

Rs. 52.38 Crore

Ideal Investment Horizon

1-2 year

Fund Manager

Mr. Ritesh Jain

Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporates. The group has a net worth of around Rs.2,900 crore and employs around 8,800 employees across its various businesses servicing around 2 million customer accounts through a distribution network of branches, franchisees, representative offices and


81

satellite offices across 282 cities and towns in India and offices in New York, London, Dubai

and

Mauritius.

Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers schemes catering to investors with varying risk - return profiles and was the first fund house in the country to launch a dedicated gilt scheme investing only in government securities. Fund This fund has generated a decent income for its investors with reasonably low level of volatility. 60-70% of its portfolio consists of high yield assets such as bonds, commercial paper, corporate deposits and securitised debts. The balance is employed in riskier government securities. Risk management is most important for this fund. Emphasis on high yield portfolio has kept the fund‘s volatility low. It is the fourth best performing income fund in past six months based on returns. The portfolio of the scheme consists of debt and money market instruments. The investment strategy is to invest across wide maturity horizons and different kind of issuers in debt market, the G-Sec component is normally maintained between 30-50% and it generally doesn‘t invest in corporate bonds with less than AA rating. It is to be noted that NAV of this fund never fell down, even when the Sensex was down. The fund is income generator. Last year return of this fund is 7%.


82


Net Asset Value


18.2249


18.2803


18.3392


18.4542


18.5166


18.6115


18.704


18.9008


19.0739


19.1858


19.3916


19.501


83

Portfolio


84

JM INCOME FUND


85

Inception

1st April, 1995

Fund Manager

Mr. Dwijendra Srivastava

Bench Mark Index

CRISIL COMPOSITE BOND FUND INDEX

Corpus

Rs 26.58 Crore.

Investment Objective To generate stable long term returns with low risk strategy and capital appreciation/ accretion through investment in debt instruments and related securities besides preservation of capital. JM Financial Mutual Fund is one of India's first private sector mutual funds-an integral part of the first wave that commenced operations in 1993-94. Today, they are among the top most mutual funds in the country, ranked by assets managed, and enjoy a superior performance record. The Group's origins can be traced back to the 1950s when the Kampani family began to get involved in India's then nascent capital markets. J.M. Financial and Investment Consultancy Services was founded on September 15, 1973. Under the leadership of Chairman Nimesh N. Kampani, the JM Group has played a stellar and multi-faceted role in the development of India's capital markets. Apart from helping companies raise finance, JM has also been instrumental in educating a burgeoning and prospering middle Property of Project Guru, www.projectguru.co.cc

86

class about the advantages of investing in blue chip companies. In 1999, they commenced a joint venture with Morgan Stanley Dean Witter, that today spans investment banking, broking, fixed income and retail distribution. JM Financial Asset Management Private Limited, the Asset Management Company of JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd., JM Financial Asset Management Private Limited started operations in December 1994 with a simultaneous launch of three funds-JM Liquid Fund (now JM Income Fund), JM Equity Fund and JM balanced Fund. Today, JM Financial Mutual Fund offers a bouquet of funds that caters to the diverse needs of both its institutional and individual investors. Their mission is to manage risk effectively while generating top quartile returns across all product categories. They believe that to cultivate investor loyalty, they must provide a safe haven for their investments. They are focused on helping their investors realize their investment goals through prudent advice, judicious fund management, impeccable research, and strong systems of managing risk scientifically. Fund The fund has given a one year return of 2.6% and five year return of 7.7%. The philosophy behind investment is that invest in papers that offers value to the investor i.e. they consider the relative value and the spread offered by the paper in a maturity bucket instead of just the absolute yield. The fund is in medium risk-return segment. The net assets are mainly invested in AAA rated instruments. The top 5 holdings account for 55.6% of total assets. The major risks associated are Interest Rate Risk, Liquidity Risk, and Reinvestment Risk. Nearly 25% of total assets are held as cash. The portfolio basically includes corporate bonds, money market instruments, g-sec investments. The fund is income generator. Last year return of this fund is 3%.


87

Portfolio


88

Net Assets Value

Date

Net Asset Value


27.7296


27.6479


27.7041


27.8435


27.9194


27.8875


27.9256


28.1315


28.2684


28.3517


28.437


28.5386


89

UTI BOND FUND

UTI Mutual Fund is managed by UTI Asset Management Company Private Limited who has been appointed by the UTI Trustee Company Private Limited for managing the schemes of UTI Mutual Fund and the schemes transferred / migrated from UTI Mutual Fund.

The UTI Asset Management Company has its registered office at : UTI Tower, Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide professionally managed back office support for all business services of UTI Mutual Fund (excluding fund management) in accordance with the provisions of the Investment Management Agreement, the Trust Deed, the SEBI (Mutual Funds) Regulations and the objectives of the schemes. State-of-the-art systems and communications are in place to ensure a seamless flow across the various activities undertaken by UTI AMC.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers) Regulations, 1993 on February 3 2004, for undertaking portfolio management services and also acts as the manager and marketer to offshore funds through its 100 % subsidiary, UTI

International

Limited,

registered

in

Guernsey,

Channel

Islands.

UTI Mutual Fund has come into existence with effect from 1st February 2003. UTI Asset Management Company presently manages a corpus of over Rs. 34500 Crore.

UTI Mutual Fund has a track record of managing a variety of schemes catering to the Property of Project Guru, www.projectguru.co.cc

90

needs of every class of citizenry. It has a nationwide network consisting 70 UTI Financial Centers (UFCs) and UTI International offices in London, Dubai and Bahrain. With a view to reach to common investors at district level, 4 satellite offices have also been opened in select towns and districts. It has a well-qualified, professional fund management team, who has been highly empowered to manage funds with greater efficiency and accountability in the sole interest of unit holders. The fund managers are also ably supported with a strong in-house equity research department. To ensure better management of funds, a risk management department is also in operation.

It has reset and upgraded transparency standards for the mutual funds industry. All the branches, UFCs and registrar offices are connected on a robust IT network to ensure costeffective quick and efficient service. All these have evolved UTI Mutual Fund to position as a dynamic, responsive, restructured, efficient, and transparent and SEBI compliant entity.

Fund

It is a income scheme with relatively low volatility and stable returns. Time horizon of investment is medium. Investing way being conservative, so a portfolio of Corporate Bonds and g-sec is made. The fund has seen a slow but sure growth in NAV. The fund avoids extreme swings in either maturity or duration. It has a corpus of Rs. 388.98 Crore. The top 10 holdings has major share of corporate bonds than g-sec. nearly 61.7% holding is of AAA rated bonds. Emphasis is on adding value through multiple, diversified strategies combined with volatility analytics, and adjustment to traditional variables such as sector, coupon & quality of companies. The average maturity of its portfolio is 3 years. Its fund manager is Mr. Amandeep Chopra. Last year return of this fund is 4.7%.

Portfolio NAME OF THE INSTRUMENT Debt Instruments -


QUANTITY

MARKETVALUE

91

% TO NAV

(a) Listed/awaiting listing on Stock Exchanges NCDR 7.86% UTI BANK LTD. MATURING 25/07/2012 NCD 6% TATA TEA LTD. MATURING 08/06/2007 NCD 8.65% CITIFINANCIAL CONSUMER FINANCE INDIA LTD. MATURING 05/08/2008 NCDR 7.45% HDFC LTD. MATURING 10/08/2009 NCD 8.7% HINDALCO INDUSTRIES LTD. MATURING 23/04/2007 NCD 8.78% POWER FINANCE CORPORATION LTD. MATURING 11/12/2016 NCD 14.75% RELIANCE INDUSTRIES LTD. MATURING 13/02/2008 NCD 8.71% INDIAN RAILWAYS FIN CORPN LTD. MATURING 15/03/2007 NCD 9.25% LIC HOUSING FINANCE LTD. MATURING 18/02/2009 NCD 6.98% INDIAN RAILWAYS FIN CORPN LTD. MATURING 31/03/2007 TOTAL:(a) Listed/awaiting listing on Stock Exchanges (b) Unlisted NCDR 6.58% INDUSTRIAL DEVELOPMENT BANK OF INDIA LIMITED. MATURING 23/08/2010 PTC 8.8479% ICICI BANK LTD MATURING 22/10/2009 NCD 6.58% TATA SONS LTD. MATURING 14/05/2008 PTC 0% TATA MOTORS LTD. MATURING 14/01/2008 NCD 13.05% HONGKONG & SHANGHAI BANKING CORP.LT MATURING 10/08/2009 NCD 8.75% CITICORP FINANCE INDIA LTD. MATURING 12/09/2009 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/05/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/07/2013 PTC 0% ICICI BANK LTD MATURING 07/02/2009 NCD 11.75% CITIBANK N.A. MATURING 31/01/2010 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/10/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/06/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/02/2014 PTC 11.22% STANDARD CHARTERED BANK MATURING 15/04/2013 PTC 11.85% LIC HOUSING FINANCE LTD. MATURING 01/04/2007 PTC 11.85% HDFC LTD. MATURING 01/06/2007 PTC 10.25% LIC HOUSING FINANCE LTD. MATURING 01/05/2007 TOTAL:(b) Unlisted TOTAL:Debt Instruments -

300 20

3001.23 2278.06

9.58 7.27

150 100 200 100 1000000 50 3 30

1484.03 1004.8 1001.46 976.21 686.39 500.72 299.8 299.78 11532.48

4.74 3.21 3.2 3.12 2.19 1.6 0.96 0.96

250 25 15 15

2500 2366.27 1452.54 1090.64

7.98 7.55 4.64 3.48

10 100 1000000 900000 20 5 500000 500000 511000 167000 25 20 7

1079.8 986.82 736.73 594.03 536.45 530.98 380.41 369.19 364.79 106.52 0.64 0.63 0.25 13096.69 24629.17

3.45 3.15 2.35 1.9 1.71 1.69 1.21 1.18 1.16 0.34

150000000 100000000 85000000

1450.35 928.03 826.64 3205.02

4.63 2.96 2.64

0 80000000

2729.61 769.08 3498.69 6703.71

8.71 2.45

* * *

Others GSEC 7.59% RESERVE BANK OF INDIA MATURING 23/03/2015 C D KOTAK MAHINDRA BANK LTD. MATURING 21/12/2007 GSEC 7.44% RESERVE BANK OF INDIA MATURING 23/03/2012 TOTAL:

NET CURRENT ASSETS C P EXIM BANK MATURING 12/07/2007 TOTAL: TOTAL:Others -


92

TOTAL:UTI-Bond Fund

31332.88

Net Asset Value

Date

Net Asset Value


20.579


20.5851


20.6422


20.7818


20.8577


20.8763


20.9533


21.1273


21.2952


21.3934


21.529


21.5554


93

LIC Mutual Fund Bond

Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 and contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordance with the provisions of the Indian Trust Act, 1882. The Settlor is not responsible for the management of the Trust. The Settlor is also not responsible or liable for any loss or shortfall resulting in any of the schemes of LIC Mutual Fund.

The Trustees of the LIC Mutual Fund have exclusive ownership of Trust Fund and are vested with general power of superintendence, discretion and management of the affairs of the Trust. LIC Mutal Fund Asset Management Company Ltd. was formed on 20th April 1994 in compliance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1993. The Company commenced business on 29th April 1994. The Trustees of LIC Mutual Fund have appointed LIC Mutual Fund Asset Management Company Ltd. as the Investment Managers for LIC Mutual Fund. The Trustees are responsible for appointing a Custodian. The Trustees should also ensure that the activities of the Trust and the Asset Management Company are in accordance with the Trust Deed and the SEBI Mutual Fund Regulations as amended from time to time. The Trustees have also to report periodically to SEBI on the functioning of the Fund.


94

The investors under the schemes can obtain a copy of the Trust Deed, the text of the concerned Scheme as also a copy of the Annual Report, on a written request made to the LIC Mutual Fund Asset Management Company Ltd.

Fund

Life Insurance Corporation Mutual Fund Bond is one of the consistent performers in the income category fund. This is due to high exposure to corporate bonds. In August 2006 it was having 87.4% of its net assets as corporate bonds. It is the only income fund that doesn‘t give exposure to government security. The average maturity of its portfolio is 1.3 years. Ten year yield of the fund is nearly 7.6-7.7%. In its portfolio 24.3% holding is of AA- & AA+ bonds. The annual average return is 7.75% in comparison to the category average of 7.34%. Last year return of this fund is 4.43%.

Net Assets Value

Date

Net Asset Value


19.0122


19.0542


19.1114


19.2687


19.3326


19.3877


19.5848


19.6944


19.7949


19.882


19.9989


95


19.8549

Portfolio

Debt Instruments - Bonds/Debentures Listed / Awaiting Listing on Stock Exchanges Banks

AAA

1800

AAA

1650000 1,794.02

16.67

Cement

AA+

50

515.7

4.79

SUNDARAM FINANCE Finance

AA+

50

500

4.65

5

493.58

4.59

Sovereign 500000

491.55

4.57

P1+

37

370

3.44

AA-

2200000 1,209.30

I C I C I BANK

Ferrous

TISCO

Metals

ACC

FINOLEX INDUSTRIES Chemicals AAGOVT. SECURITIES

Govt Securities

RABO INDIA FINANCE Finance

1,839.23

17.1

Privately placed / Unlisted Ferrous

JSW STEEL

Metals

DSP ML CAPITAL KOTAK

MAHINDRA

PRIME

11.24

Finance

AAA(FSO) 100

1,000.00

9.29

Finance

AA+

1,000.00

9.29

Finance

AAA(SO) 3

294.86

2.74

AAA(SO) 14

128.95

1.2

100

Securitised Debt INDIAN RETAIL ABS TRUST ASSET

SECURITIES Finance


96

TRUST 9,637.19

89.57

1,121.64

10.43

Total:

1,121.64

10.43

Scheme Total:

10,758.83 100

Total: Money Market & Net Receivables/Payables Cash 'n' Call, Current Assets & Receivables

Graphical Representation of the Portfolio

Net Assets I C I C I BANK TIS CO

1.2 10.43

2.74

ACC

17.1

SUNDARAM FINANCE

9.29

FINOLEX INDUSTRIES GOVT. SECURITIES RABO INDIA FINANCE 16.67

9.29 11.24

3.44

4.57

4.59

4.65

4.79

JSW STEEL DSP ML CAPITAL KOTAK MAHINDRA PRIME INDIAN RETAIL ABS TRUST ASSET SECURITIES TRUST Cash 'n' Call, Current Assets & Receivables


97


98

Different Investing ways in Mutual Fund

There are basically two ways to invest in a Mutual Fund. These are: One Time Investment Systematic Investment Plan (SIP)

Let us discuss each.

One time investment

In this way of investment investor pays the entire investment amount in one time only. The minimum amount that must be invested in such a way is Rs. 5,000/- only. An entry load of 2.25% (nearly every fund charges) has to be paid by the investor. Depending upon the Net Asset Value (NAV) of the fund units are allotted to the investor. Let us understand it with the help of an example. Let an investor wants to invest Rs 12,000/- in one time only in Reliance Equity Fund. At the date of investment let the NAV of the fund be Rs 12/- per unit. Than the number of units that the investor will get is as follows: -

Total Investment Rs 12,000/NAV Rs 12/-


99

Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12 + (2.25*12)/100 = Rs 12.27/Units actually purchased by investor = Rs 12,000 / Rs 12.27 = 978 Units. This way of investment is recommended for those investors who are sensitive because "emotions" may make the investor susceptible to "mistakes in timings of his purchases and sales". However with this way of investment the investor might loose future opportunities as available in SIP due to fluctuations in Sensex.

Systematic Investment Plan (SIP) SIP is a method of investing a fixed sum, regularly, in a mutual fund. It is very similar to regular saving schemes like a recurring deposit. An SIP allows you to buy units on a given date each month, so that you can implement an investment / saving plan for yourself. Once you have decided on the amount you want to invest every month and the mutual fund scheme in which you want to invest, you can either give post-dated cheques or ECS instruction, and the investment will be made regularly. SIPs generally start at minimum amounts of Rs 500 per month and the upper limit for using an ECS is Rs 25000 per instruction. Therefore, if you wish to invest Rs 100,000 per month, you may need to do it on 4 different dates. In this way of investment investor pays the entire investment amount over a time period generally 1 year. The minimum amount that must be invested in such a way is Rs. 6,000/only i.e. Rs 500/- a month at least continuously for one year. An investor can invest any amount in multiple of 5. Entry load of 2.25% (nearly every fund charges) has to be paid by the investor every month. Depending upon the Net Asset Value (NAV) of the fund units are allotted to the investor. Let us understand it with the help of an example.


100

Let an investor wants to invest Rs 12,000/- in SIP in Reliance Equity Fund on 1st January, 2004. At the date of investment let the NAV of the fund be Rs 12/- per unit. Than the number of units that the investor will get is as follows: -

Total Investment Rs 12,000/Investment on 1st January (Monday) 2004 Rs 1,000/(Total Investment / Number of months) NAV Rs 12/Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12 + (2.25*12)/100 = Rs 12.27/Units actually purchased by investor = Rs 1,000 / Rs 12.27 = 81.50 Units. Now let NAV on 1st February (Wednesday) be Rs 12.50 Entry Load 2.25% Effective NAV that investor will get [Present Day NAV + 2.25% (Present Day NAV)] i.e. 12.50 + (2.25*12.50)/100 = Rs 12.78/Units actually purchased by investor = Rs 1,000 / Rs 12.78 = 78.24 Units. So in the month of February the total units holded by the investor are 81.50 + 78.24 = 159.74 units. In the same way investor will invest Rs 1000/- every month continuously for next 10 months. Depending upon the NAV every month investor will get units after deducting the entry load. The main advantage in SIP is that if Sensex is down on the day of investment than previous day investor will get more units as NAV will also fall generally. The investor can invest using SIP every month, quarterly, half yearly. It is to be noted that Investor can do additional purchase any time both in One time investment as well as SIP.


101

Value Averaging as an Investment way

An investment strategy designed to reduce volatility in which securities, typically mutual funds, are purchased at regular intervals in amounts which increase when the market drops and decrease when the market rises

Instead of simply adding X-amount into your portfolio every month (week, semester, year...) you decide in the beginning, how much your portfolio shall be worth any given time. (I.e. you start with a sum X to start with, and you decide to increase your portfolio by a certain sum per month.)

The value of your portfolio will of course fluctuate according the movements of the markets, and thus will you have to put in more money every month, when the markets drop (to keep up with your projected growth) or less when the markets rise. There might even be times when you will have to withdraw moneys when markets make a big jump up.

This all seems logic in an academic sense, as it really forces you to buy low, and sell high. This investment way is not practiced till time.

But there are certain drawbacks:


102

The administration of such a portfolio amounts to a fair-sized Excel sheet, and needs careful attention at regular intervals. One will have to make a calculation of how much a portfolio will have to grow every month. Something that is filled with rough guesswork at best of times. Of course can you say: I will need X amount when I'm 45 in order to retire early, and then work out how much you have to save every month. But even this number can be nothing short of arbitrary, as there are factors like: Inflation, live expectation, change of lifestyle, health, development of social security... Many people in their accumulation phase would be hard put to suddenly even out ones portfolio after a 20% market decline. As John Mayard said: Markets can remain irrational longer than you can remain solvent.

Comparison of returns from a fund in same time period using different investment ways

Assumptions 1 There is no withdrawals from the selected funds from 1 st February, 2006 to 2nd January, 2007 by the investor.

2 Units are issued to the investor as soon as he made the investment.

Fund: RELIANCE GROWTH FUND

Investment Way Lump sum. Total Investment = Rs 12,000/NAV as on Feb 1, 2006 = Rs 201.18 Entry load @ 2.25% (NAV of the day) = Rs 4.53


103

Effective NAV = 201.18 + 4.53 = Rs 205.70 Units Got = 12,000 / 205.70 = 58.33 NAV as on Jan 2, 2007 = Rs 270.05 Units Value = 58.33 * 270.05 = 15752 1 year return = [(15752-12000)*100]/ 12000 = 31.27%. Average Price = Total of NAV‘s in which investment is made / number of times investment made = 201.18 / 1 = Rs 201.18/Average Cost = Total Investment / Units Purchased = 12000 / 58.33 = Rs 205.70/-

Investment Way SIP Date

NAV

Investment [email protected]%

Units

February 01, 2006

201.18

Rs 1000

Rs 22.5

4.86

March 01, 2006

210.22

Rs 1000

Rs 22.5

4.65

April 03, 2006

229.75

Rs 1000

Rs 22.5

4.25

May 01, 2006

251.68

Rs 1000

Rs 22.5

3.88

June 01, 2006

215.11

Rs 1000

Rs 22.5

4.54

July 03, 2006

199.51

Rs 1000

Rs 22.5

4.90

August 01, 2006

193.2

Rs 1000

Rs 22.5

5.06

September 01, 2006

218.12

Rs 1000

Rs 22.5

4.5

October 03, 2006

234.47

Rs 1000

Rs 22.5

4.17

November 01, 2006

250.23

Rs 1000

Rs 22.5

3.90

December 01, 2006

261.78

Rs 1000

Rs 22.5

3.73

January 02, 2007

270.05

Rs 1000

Rs 22.5

3.62

Total

2735.3

Rs 12,000

52.06

Calculations

Investment per month = Rs 1,000/Load @ 2.25% on Rs 1,000/- = Rs 22.5/-


104

Effective value at which unit will be purchased = Rs 977.5/NAV on 1st Feb, 2006 = Rs 201.18/Units Purchased = 4.86

In the same way units purchased for the next 11 months has been calculated. On 2nd Jan, 2007

Total Units Purchased = 52.06 NAV = Rs 270.05/Investment Value = 52.06 * 270.05 = Rs 14,059/Return = [(14059 – 12000)* 100]/12000 = 17.15%. Average Price = 2735.3 / 12 = Rs 227.94/Average Cost = 120000 / 52.06 = Rs 230.5/-

Investment Way Value Averaging Here our objective is that in 1 st month the value of our investment should be Rs 1,000/and in 2nd month it should be Rs 2,000/-. Similarly in the beginning of 12 th month it should be Rs 12,000/-.

Calculations

Investment per month = Rs 1,000/Load @ 2.25% on Feb 01, 2006 on NAV Rs 201.18 = Rs 4.53/Effective value at which unit will be purchased = Rs 205.71/Units Purchased = 4.86.

Now On March 01, 2006


105

NAV = Rs 210.22/Units Holded = 4.86 Current Value = NAV* Total Units Holded = 210.22 * 4.86 = Rs 1021/Since we are in second month of investment so as per the rules we want our investment to be of value Rs 2,000/-. Thus Investment Required = Rs 2,000- Rs 1,021 = Rs 979/Now Load @ 2.25% on March 01, 2006 on NAV Rs 210.22 = Rs 4.73/Effective value at which unit will be purchased = Rs 214.95/Units Purchased = 979 / 214.95 = 4.55 So Total Units Holded in 2 nd Month = 4.86 + 4.55 = 9.41.

In the same way we will calculate the investment require to be made in next ten months. It is being assumed that Entry Load will be charged every month like in case of SIP.

Returns

Value of the investment as on January 02, 2007 = 44.38 * 270.05 = Rs 11,985/Total Investment Made = Rs 9914/One year return = [(11985-9914)* 100]/9914 = 20.88%. Average Price = 2735.3 / 12 = Rs 227.94/Average Cost = 9914 / 44.38 = Rs 223.38/-

Date

NAV

Current Load

Investment Units

(Rs)

Value

(2.25%) Made

(Rs)

+

Got

(Rs)

NAV (Rs) February 01, 2006

201.18

--------

205.71

1000


4.86

106

March 01, 2006

210.22

1021

214.95

979

4.55

April 03, 2006

229.75

2162

234.9

838

3.57

May 01, 2006

251.68

3267

257.34

733

2.85

June 01, 2006

215.11

3405

219.95

1595

7.25

July 03, 2006

199.51

4605

204

1395

6.84

August 01, 2006

193.2

5780

197.55

1220

6.17

September 01, 2006

218.12

7872

223

128

0.57

October 03, 2006

234.47

8596

240

404

1.68

November 01, 2006

250.23

9594

255.86

406

1.58

December 01, 2006

261.78

10450

267.67

550

2.05

January 02, 2007

270.05

11334

276.12

666

2.41

9914

44.38

Total

2735.3

Kotak Mahindra

Investment Way Lump sum. Total Investment = Rs 12,000/NAV as on Feb 1, 2006 = Rs 18.2249 Entry load @ 2.25% (NAV of the day) = Rs .4096 Effective NAV = Rs 18.6345 Units Got = 12,000 / 18.6345 = 643.96 NAV as on Jan 2, 2007 = Rs 19.501 Units Value = 12558 1 year return = [(12558-12000)*100]/ 12000 = 4.65%. Average Price = Total of NAV‘s in which investment is made / number of times investment made = 18.2249 / 1 = Rs 18.2249/Average Cost = Total Investment / Units Purchased = 12000 / 643.96 = Rs 18.6345/-

Investment Way SIP


107

Date

NAV

Investment [email protected]% Units

February 01, 2006

18.2249

Rs 1000

Rs 22.5

53.63

March 01, 2006

18.2803

Rs 1000

Rs 22.5

53.47

April 03, 2006

18.3392

Rs 1000

Rs 22.5

53.30

May 01, 2006

18.4542

Rs 1000

Rs 22.5

52.97

June 01, 2006

18.5166

Rs 1000

Rs 22.5

52.79

July 03, 2006

18.6115

Rs 1000

Rs 22.5

52.52

August 01, 2006

18.704

Rs 1000

Rs 22.5

52.26

September 01, 2006

18.9008

Rs 1000

Rs 22.5

51.71

October 03, 2006

19.0739

Rs 1000

Rs 22.5

51.24

November 01, 2006

19.1858

Rs 1000

Rs 22.5

50.94

December 01, 2006

19.3916

Rs 1000

Rs 22.5

50.40

January 02, 2007

19.501

Rs 1000

Rs 22.5

50.12

Total

225.1838

625.35

Using the same way and method as used in calculation of return of Reliance using SIP we will find that One year return = 1.625% Average Price = Rs 18.7653 Average Cost = Rs 19.1892

Investment Way Value Averaging Date

NAV

Current

Load

Investment

Units

(Rs)

Value

(2.25%)

Made

Got

(Rs)

+

(Rs)

NAV (Rs) February 01, 2006

18.2249

---------

18.6345

1000

53.63

March 01, 2006

18.2803

980

18.6916

1020

54.57

April 03, 2006

18.3392

1984

18.7518

1016

54.18

May 01, 2006

18.4542

2996

18.8694

1004

53.20


108

June 01, 2006

18.5166

3990

18.9332

1010

53.34

July 03, 2006

18.6115

5004

19.0302

996

52.33

August 01, 2006

18.704

6007

19.1248

993

51.92

September 01, 2006

18.9008

7052

19.326

948

49.05

October 03, 2006

19.0739

8052

19.503

948

48.60

November 01, 2006

19.1858

9032

19.6175

968

49.34

December 01, 2006

19.3916

10086

19.828

914

46.10

January 02, 2007

19.501

11041

19.9398

959

48.09

11776

614.29

Total

225.1838

Using the same way and method as used in calculation of return of Reliance using Value Averaging we will find that One year return = 1.73% Average Price = Rs 18.7653 Average Cost = Rs 19.17


109

FINDINGS

Like a traveler, who after completing his long and arduous journey reaches his destination and looks back upon the area covered by him for recalling the important landmarks and experiences he came across; similarly, it would be desirable to review the various aspects of the present study. So prior to winding up this study, an attempt is made to summarize its major findings and suggestions on the basis of forgoing chapters.


110

Findings: -

1. All the Equity related funds invested in high growth, current high importance sectors Like Energy, Infrastructure, IT, Telecom, Oil, Auto etc.

2. To maintain liquidity all the mutual funds have cash holdings of nearly 10% out of there total assets. Maintaining cash also enables them to invest in any lucrative instrument as it comes.

3. NAV of all the equity related funds fell down in June, July, and August 2006 due to Fall in the Sensex. However those funds which invested in safer instruments like Bonds, Government Securities there NAV were not much affected.

4. The main reasons for Sensex fall were found to be:

The interest rate hike in the US by the Federal Reserve Bank. BSE Metal Index lost 22 per cent. This putted lot of impact as infrastructure development is in Boom in INDIA. Some people viewed that Sensex growth was valuated higher. Markets in US and Japan were attracting liquidity and inflation scare was also there, so a lot of emerging markets pulled back. Industry feared more tax brackets. Many reports were issued which criticized the growth shown by Sensex. It was speculated by experts that Sensex may touch 9000 mark. FII‘s were net sellers in emerging markets to book profits. The rise in the level of margin trading was very high. International Crude Oil Prices were rising.

5. The one year equity related funds is higher than other funds. It proves the principal of high risk, high return.


111

6. DSP Merrill Lynch Mutual Fund gave one year return of 36.4%. Total number of instruments in its portfolio is 77. However HDFC Mutual Fund gave one year return of nearly 34%, with number of instruments in its portfolio close to 60. So it‘s important what instrument we include in portfolio rather than the number of securities. More number of securities only complexes the portfolio management.

7. As the NAV increases, the number of units which an investor gets decreases and viceversa.

8. Average Price which a investor has to pay to invest in a mutual fund was found to be less in one time investment than opting for SIP or Value Averaging (if available).

9. Average Price which an investor has to pay to invest in a mutual fund was found to be equal in SIP and Value Averaging.

10. Average Cost associated with a mutual fund was found to be least in one time investment than Value Averaging, whose average cost was further less than that associated with SIP.

11. Average Price, Average Cost in one time investment was found to be less in comparison to other investing ways. This is one of the reasons why its one year returns are more.

12. To practically implement value averaging the minimum amount condition like in SIP has to be eliminated. As we have seen in the calculations at one time investor was investing Rs. 1596/- and at other Rs 158/- only.

13. One year return in One time investment was found to be more than in Value Averaging investment way, which was further high than one year return using SIP.


112

14. Growth fund option gives investors good returns as well as capital appreciation.


113

Suggestions

1. Best time to invest in stock market is when it is down because with same investment money he will get more value.

2. Mutual Fund is the best way to enter into market particularly for those investors who want good returns with minimum risk as fund of mutual funds is handled by an expert.


114

3. To get good returns investor must invest considering the time horizon of at least two to three years. This will help him in getting good returns.

4. Portfolio management is a difficult task. So fund managers must choose optimal number of securities which meets the objectives of fund.

5. Mutual Fund Companies must devise fund considering the end investor in mind.

6. Individual investors must also choose a basket of securities instead of making investment in only one or two instruments, so that even if one instruments return is negative other instruments return can compensate that.

7. Since there are large number of mutual funds in which an investor can invest, so he must choose the fund in which investment is to be made by clearly understanding the little aspects associated with it.

8. Those investors who are risk averse must invest in open ended funds because he can look at the past performance of the fund under consideration.

9. Diversification of portfolio is must as it will reduce the unsystematic risk and give the return an edge.


115

Limitations

The researcher was inexperienced.


116

The scope of the study was very wide as there are hundreds of mutual funds of different types but only few have been studied. The portfolio published by the various Asset Management Companies might not be the real one. As, if it would be so than any individual can invest in the manner similar to portfolio of funds. The objective of including a particular sector in the portfolio by the fund manager couldn‘t be known. The portfolio being maintained by different funds changes with market conditions. The portfolio being actually maintained under different market conditions in last one year couldn‘t be ascertained. To develop a new way of investment lot of calculations needs to be done, but here only few has been done. The actual hurdles in making value averaging as an investment way in portfolio couldn‘t be found.


117

Conclusion


118

Thus on the whole it can be concluded that there is no conclusive evidence which suggest that performance of mutual fund scheme portfolio is superior to others. But it is for sure performance of the most of the funds in better.

Each investment alternative has its own strengths and weaknesses. Equity related funds give more returns, but the risk associated is also very high. It would be clearer from the fact that when Sensex was down in the middle of 2006, the NAV of all the equity related funds fell down. On the other hand investing in safer instruments like Bank Deposits, Government Bonds….gives investor the assured return with nearly no risk. But the returns are very less in comparison to other instruments. So if an investor wants to get good returns with minimum risk he must invest in basket of securities. Selecting a fund is not an easy task. So he must do his homework very clearly. While choosing the fund it is also very necessary that he chose funds investing in different sectors. Mutual Funds are probably the best investment tool for those persons who don‘t know the basics of Stock Market but wish to invest in it. As mutual fund investments are taken, care by expert fund managers so chances of making a loss in the investment are very less.

Right now practical application of investing in mutual fund by using Value Averaging appears to be difficult. But if it is applied than by investing a small amount an investor will be able to get good returns in comparison to SIP. A lot of research has to be done onto it. In last we can conclude that those investors who wish to get good returns with minimum risk they must invest in mutual funds. But while investing they must consider there investment objectives, expected returns, risk taking capability. Depending upon these they must choose the instrument in which they should invest. Further they should insure that they make investment in basket of instruments as this will give those advantages of various sectors, at the same time minimize the risk.


119

BIBLIOGRAPHY


120

Websites www.reliancemutual.com www.sbimf.com www.franklintempletonindia.com www.hdfcfund.com www.dspmlmutualfund.com www.kotakmutual.com www.jmmutual.com www.licmutual.com www.utimf.com www.valueresearchindia.com www.amfiindia.com www.mutualfundindia.com Books Verma, Dr J.C., ―Mutual Funds & Investment Portfolio‖, Bharat Publications, 2nd Edition. Pandian, Punithavathy, ―Security Analysis and Portfolio Management‖, Vikas Publications, 2nd Reprint. Kothari, C.R., ―Research Methodology‖, New Age International Publishers, 2005.


121

Thesis- Portfolio Management

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