A project report on mutual fund a safer investment


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A project report on mutual fund a safer investment

  1. 1. “Mutual fund a safer investmentINDEX PART I 1. Executive Summary 2. Introduction to Mutual Fund 3. Industrial background. 4. Company Profile PART II 5. Research Design / Methodology. a. Project Idea b. Objectives c. Duration of the Project d. Need for study e. Research Methodology f. Proposed outcome g. Benefits/ Limitations of Mutual Fund 6. Recommendation 7. Conclusion 8. Bibliography.Babasbapatilfreepptmba.com Page 1
  2. 2. “Mutual fund a safer investment Executive Summary Mutual Fund investment is the fastest growing investment industry in the present scenario and it needs to be properly supported with educating the investor community which is not aware of Mutual Fund as it is of other forms of investment patterns like those of Fixed Deposits, Savings Accounts, Postal Deposits, Recurring Deposits, Insurance plans, Stocks etc.The strength of ViVi securities lies in the qualitative manpower. IndianMutual Fund investment is picking up fast, which has already happened incountries like US, U.K, France etc., the recent trends have shown thatprivate ltd companies are doing far better as compared to Government PSU’sin India which was not the case few years earlier and this implies that peopleare more attracted towards Mutual Funds investment as compared to otherform of the investments.Babasbapatilfreepptmba.com Page 2
  3. 3. “Mutual fund a safer investmentResearch DesignOrganization:ViVi Securities, BelgaumNature of Business:Shares and Stock Broking services.Topic of the study: “Mutual fund a safer investment”Need for the Study:  Association of mutual fund in India  Asset Management companyObjectives of the study:  Organisation study.  To understand the concept of Mutual fund, its working and various types of mutual fund.  To study the performance of various schemes.  To compare the performance of four mid cap funds.  To study the risk involved in MFsBabasbapatilfreepptmba.com Page 3
  4. 4. “Mutual fund a safer investmentResearch Methodology:Study of mutual fund market  Collection of data:  Secondary data: data Fact sheets of SBI, Kotak, Tata and Sundaram Mutual Funds collected through various web-sites, Magazines, Journals and newspaper  Analysis of data  Preparation of project reportScope of the projectThe scope of the project is limited to analysis of mid cap mutual funds.Proposed Outcome:  Avoids hassle free investments  Avoids time consumption for researchBabasbapatilfreepptmba.com Page 4
  5. 5. “Mutual fund a safer investmentIntroduction to Mutual FundA mutual Fund is a common pool of money into which investors place theircontributions that are to be invested in accordance with a stated objective.The ownership of the fund is thus joint or “mutual”; the fund belongs to allinvestors. Investor bears in the same proportion as the amount of thecontribution make a single investor’s ownership of the fund to the totalamount of the fund.A mutual fund uses the money collected from investors to buy those assets,which are specifically permitted by its stated investment objective. Thus anequity fund would buy mainly equity assets — ordinary shares, preferenceshares, warrants, etc. A bond fund would mainly buy debt instruments suchas debentures, bonds or government securities. It is these assets, which areowned by the investors in the same proportion as their contribution bears tothe total contributions of all investors put together.When an investor subscribes to a mutual fund, he or she buys a part of theassets or the pool of funds that are outstanding at that time. It is no differentfrom buying “shares” of a joint stock company, in which case the purchasemakes the investor a part owner of the company and its assets.Babasbapatilfreepptmba.com Page 5
  6. 6. “Mutual fund a safer investmentTYPES OF MUTUAL FUNDSMutual funds can be classified in different ways according to theirinvestment objectives, their constitution, as follows:  Equity Fund  Debt / Income Funds  Balanced Funds  Liquid / Money Market Funds  Closed Ended funds  Open Ended Funds  Load Funds  No Load FundsBabasbapatilfreepptmba.com Page 6
  7. 7. “Mutual fund a safer investmentCLASSIFICATION BASED ON INVESTMENT OBJECTIVE:Funds can be classified according to their investment objectives on 4 maincategories as they best reflect the risk and returns associated with investingin mutual funds. 1. EQUITY FUNDS:Equity funds invest a major portion of their corpus in equity shares issued by companies,acquired directly in initial public offerings or through the secondary market. Equity fundswould be exposed to the equity price fluctuation risk at the market level, at the industryor sector level and at the company-specific level. Equity funds, Net Asset Valuesfluctuate with all these price movements these price movements are caused by all kindsof external repayment as in case of debt instruments. Hence, Equity Funds are generallyconsidered at the higher end of the risk spectrum among all funds available in the market.On the other hand, unlike debt instruments that offer fixed amounts of repaymentsequities can appreciate in value in line with the issuer’s earnings potential, and so offerthe greatest potential for growth in capital.Equity Funds adopt different investment strategies resulting in different levels of risk.Hence, they are generally separated into different types in terms of their investmentstyles. Below are some of the major types of equity funds, arranged in order of higher tolower risk levela. Aggressive Growth Fundsb. Growth FundsBabasbapatilfreepptmba.com Page 7
  8. 8. “Mutual fund a safer investmentc. Specialty Funds1. Sector Funds2. Offshore Funds3. Small-Cap Equity Funds4. Option Income fundsAll AMC’s have floated this type of funds. Prominent examples include JM Equity Fund,Morgan Stanley Growth Fund, Mastergain 92, Birla Advantage Fund, Sun F&C ValueFund, Kothari Pioneer Prima fund etc.2. DEBT/INCOME FUNDS:Debt Funds invest in debt instruments issued not only by governments, but also byprivate companies, banks and financial institutions and other entities such asinfrastructure companies/utilities. By investing in debt, these funds target low risk andstable income for the investor as their key objectives. However, as compared to themoney market funds, they do have a higher price fluctuation risk, since they invest inlonger-term securities. Similarly, as compared to Gilt Funds, general debt funds do have ahigher risk of default by their borrowers.1. Debt funds are largely considered as Income Funds as they do not target capitalappreciation, look for high current income, and therefore distribute a substantial part oftheir surplus to investors. Income funds that target returns substantially above marketlevels can face more risks. Different investment objectives set by the fund managerswould result in different risk profiles.Babasbapatilfreepptmba.com Page 8
  9. 9. “Mutual fund a safer investment3. BALANCED FUNDS:These are funds that invest both in equity shares and income bearing instruments.Then idea is to reduce the volatility of the fund while providing some upside for capitalappreciation. There is some flexibility in changing the asset composition between equityand debt and the fund managers exploit this to buy the best asset class at each time.Prominent balanced funds include JM Balanced Fund, Alliance 95, Tata Twin OptionBalanced and GIC balanced funds. Govt. has announced special concessions for fundswith more that 50% of the assets invested in equity. So for next three years the dividendwill be taxed neither in the hands of the investor nor in the hands of the funds.4. LIQUID / MONEY MARKET FUNDS:Often considered to be at the order of risk level, Money Market Funds invest in securitiesof a short-term nature, which generally means securities of less than one-year maturity.The typical, short term, interest bearing instruments these funds invest in includeTreasure Bills issued by Governments, Certificates of Deposit issued by banks andCommercial Paper issued by companies. In India, Money Market Mutual Funds alsoinvests in the inter bank call money market.The major strengths of money market funds are the liquidity and safety of principal thatthe investors can normally expect from short-term investments. These funds invest inhighly liquid money market instruments. They have emerged as an alternative for savingsand short term fixed deposit accounts. Regulations for managing liquid funds are moreflexible than those for managing money market funds. Hence they are more popular thanthe latter. Eg. Birla Cash Plus, Prudential Liquid Fund, Templeton India Liquid fund, UTIfund, UTI Money Market Funds, JM Liquid fund.Babasbapatilfreepptmba.com Page 9
  10. 10. “Mutual fund a safer investmentCLASSIFICATION BASED ON CONSTITUTION OBJECTIVE: 1. OPEN END-CLOSED END FUNDS:An open-end fund is one that has units available for sale and repurchase at all time. Aninvestor can buy or redeem units from the fund itself at a price based on the Net AssetValue (NAV) per unit. NAV per unit is obtained by dividing the amount of the marketvalue of the fund’s assets (plus accrued income minus the fund’s liabilities) by thenumber of units outstanding. The number of units outstanding goes up or down everytime the fund issued new units outstanding. The number of units outstanding goes up ordown every time the fund issued new units or repurchases existing units. In other words,the ‘unit capital’ of an open-end mutual fund is not fixed but variable. The fund size andits total investment amount go up if more new subscriptions come in from new investorsthan redemptions by existing investors; the fund shrinks when redemptions of unitsexceed fresh subscriptions.Note that an open-end fund is not obliged to keep selling/issuing new units at all times,and many successful funds stop issuing further subscriptions from new investors afterthey reach a certain size and think they cannot manage a larger fund without adverselyaffecting profitability. On the other hand, an open-end fund rarely denies to its investorsthe facility to redeem existing units, subject to certain obvious conditions. For example,redemption is only possible after the investor’s cheque for initial subscription has cleared,or until after any “look-in period” specified by the fund is over, or only after the specifiedredemption period for collection of funds.Unlike an open-end fund, the ‘unit capital’ of a closed-end fund is fixed, as it makes aone-time sale of a fixed number of units. Later on, unlike open-end funds, closed-endfunds do not allow investors to buy or redeem units directly from the funds. However, toprovide the much closed-end funds get themselves listed on a stock exchange. Tradingthrough a stock exchange enables investors to buy or sell units of a closed-end mutualBabasbapatilfreepptmba.com Page 10
  11. 11. “Mutual fund a safer investmentfund from each other, through a stockbroker, in the same fashion as buying or sellingshares of a company. The fund’s units may be traded at a discount or premium to NAVbased on investor’s perceptions about the fund’s future performance and other marketfactors affecting the demand for or supply of the fund’s units. 2. LOAD AND NO-LOAD FUNDS:Marketing of a new mutual fund scheme involves initial expenses. These expenses maybe recovered from the investors in different ways at different time. Three usual ways inwhich a fund’s sales expenses may be recovered from the investors are:I. At the time of investor’s entry into the fund/scheme, by deducting a specific amountfrom his initial contribution, or2. By charging the fund/scheme with a fixed amount each year, during the stated numberof years, or3. At the time of the investor’s exit from the fund/scheme, by deducting a specifiedamount from the redemption proceeds payable to the investor.These charges made by the fund managers to the investors to cover distribution expensesare often called a “front-end or entry-load”. This is the first case above. The load amountcharged to the scheme over a period of time is called a “deferred load”. This is the thirdcase above. Some funds may also charge different amount of loads to the investors,depending upon how many years the investor has stayed with the fund; the longer theinvestor stays with the fund, less the amount of “exit load” he is charged. This is called“contingent deferred sales charge”.Note that the front-end load amount is deducted from the initial contribution/purchaseamount paid by the incoming investor, thus reducing his initial investment amount.Similarly exit loads would reduce the redemption proceeds paid out to the outgoinginvestor. If the sales charge is made on a deferred basis directly to the scheme, theamount of the load may not be apparent to the investor, as the scheme’s NAV wouldreflect the net amount after the deferred load.Babasbapatilfreepptmba.com Page 11
  12. 12. “Mutual fund a safer investmentFunds that charge front-end, back-end or deferred loads are called load funds. Funds thatmake no such charges or loads for sales expenses are called no-load funds.In India, SEBI has defined a “load’ as the one-time fee payable by the investor to allowthe fund to meet initial issue expenses including brokers’/agents/distributors’commissions, advertising and marketing expenses. SEBI definition of a load fund wouldinclude all funds that charge a front-end load, which is in line with the internationallyused definition. However, SE would consider a fund to be “a no-load” fund, if an AMCabsorbs these initial marketing expenses and does not charge the fund-a situation that issomewhat special to India and not widely prevalent elsewhere. Internationally, a fund,even when it does not make a front-end load, would still be considered a load fund, if itcharges an exit load or a deferred sales load.Babasbapatilfreepptmba.com Page 12
  13. 13. “Mutual fund a safer investmentIndustrial Background Concept of Mutual Fund:Mutual Fund is an American Concept and the terms “Investments Trust”, InvestmentCompany”, “Mutual Fund”, “Money Fund” etc. are being used interchangeably inAmerican Literature. Investment Company as defined in the US Investment company Act1940 is any issuer that is or holds out as being engaged primarily or proposes to engageprimarily in the business of investing, reinvesting or trading in securities, is engaged orproposes to the business of issuing face amount of certificates of the installment type orhas been engaged in such business and has any such certificates outstanding; is engagedor proposes to engage in the business of investing, reinvesting, owning, holding ortrading in securities and bounds or proposes to acquire investment securities having avalue exceeding 40% of the value of such issuer’s total assets(exclusive of government ofsecurities and a cash items) on an unconsidered basis.The profits or losses are shared by the investors in proportion to theirinvestments. The mutual fund normally comes out with number of schemeswith different objectives which are launched from time to time. A MutualBabasbapatilfreepptmba.com Page 13
  14. 14. “Mutual fund a safer investmentfund is required to be registered with Securities and Exchange Board ofIndia (SEBI) which regulates securities markets before it can collect fundsfrom the public.As the countries first and foremost mutual fund, Unit Trust of India hasplayed significant supportive role in this process. As a pioneering garnerlarger household savings. It responded innovatively to the needs ofinvestment and income goals of different strata of society. Under one roofthere are schemes for every one in the family, from the newborn child to oldand retired individuals. The Unit Trust has lunched schemes to cater tovarying notions of savers. Thus, there are saving schemes for those whoprefer safe and steadily rising returns. There are also high growth schemesfor those who can wait and are prepared to take some risk with UTIWith a view to providing a wider choice to small investors, the Governmentamended Banking Regulation Act to permit commercial banks to launchmutual fund India. Considering the fact that the household sector has adominant share in the aggregate net savings of the economy, banks in theirquest for mobilizing the community savings into productive avenues havefound in mutual funds a lucrative opportunity.Babasbapatilfreepptmba.com Page 14
  15. 15. “Mutual fund a safer investmentCOMPANY PROFILE  FOUNDATION OF VENTURA Founded in 1994 by Chartered Accountants Sajid Malik and Hemant Majethia.They are the first generation entrepreneurs and are the principal promoters of Ventura. Adedicated and efficient team of senior managers assists Mr. Majethia the CEO of thecompany. ABOUT VENTURA Ventura is one of the leading Commodity and Financial Futures Brokers with astrong and established market reputation spanning over 12 years. Ventura Securities Ltd., is a leading stock broking organization promoted andmanaged by professionals having exceptional knowledge of Capital Market. Werecognize in our operating philosophy that the key to our business is service, which willresult in total satisfaction to our clients. Ventura is a full-service domestic brokerage house providing value-based advisoryservices to Institutions (Foreign and Domestic), High Net Worth and Retail Investorswith its core area of operations being stock-broking. We have considerable strength anddomain knowledge in the booming derivatives market. Ventura has achieved a reputation for innovative and unbiased research alongwith excellent technical analysis and execution capabilities. Not only has Venturaprovided value-added services to the gamut of India-based funds, it has also developedthe advice-driven business of high net worth and corporate clients.PHILOSOPHY To propel corporate growth we have clear focus to service our clients withundivided attention hence, we do not carry on any proprietary trading or investment.Vision To create an all India network of brokers’ relationship and build the distributionstrength of Ventura.Babasbapatilfreepptmba.com Page 15
  16. 16. “Mutual fund a safer investmentTRACK RECORD In a short time span we have achieved substantial success in its core businessactivity. We owe our success to our unique business building strategy plan, componentsof which are:  A differentiated positioning  Selective geographic spread  Flexible and lean operating structure  High quality peopleWhy ventura Our services are offered under total confidentiality and integrity with the solepurpose of maximizing returns for our clientsWe operate on an alert and well-defined system in risk management and settlementmechanism. Such as EXPERTISE  Current news and views, analysis, trends during market hours, Daily newsletter and its implications on events affecting the economy and stock markets, Long- term investment avenues, trading strategy on Index and specific companies and Risk averse investment through derivative product mix.  Live market commentary through - “Pointer”- customised on line chat room mainly to cater to upcountry outlets, a pioneering effort and a runaway successful product.  Derivatives - Trading strategies in Future and Options; straddle calls to minimize risks and maximize returns.  On-line trading and Depository services, to cater our retail clients, are on the anvil and should commence shortly.  Research - An integrated system of research approach is to constantly look out for value in the market place based on intrinsic worth of the Company / Industry with necessary skills to analyse markets indices and stocks from a technical perspective to feed our army of retails clients.  Networking: Regular touch with Institutional Investors (Foreign and Domestic) to gauge, understand and interpret markets sentiments. This we see as a value addition for our outstation clients who are very far away from the fulcrum of action.Products and services We aim to add value and provide our clients with an unrivalled and specialisedservice which reflects the expertise and efficiency of our dedicated support teams.Babasbapatilfreepptmba.com Page 16
  17. 17. “Mutual fund a safer investmentExpertise and innovationWe put our clients needs first and extend a highly personalised service through dedicateddealers. Our combination of service, technology, flexibility and experience makes ourback-office second-to-none.Information and researchNo broking house is complete without the ability to provide detailed, relevant and timelyinformation and research. Our research department produces reports covering all of themajor exchanges and products.Offerings  Daily pointer  Sms facility  Client preview site  Demat services  Wider networking  Weekly report and product notes  Internet online tradingAbout ViVi Securities, Belgaum BranchBabasbapatilfreepptmba.com Page 17
  18. 18. “Mutual fund a safer investmentThe Belgaum branch was started on 21st June 2004 with the capital of Rs 5lakh. And the average volumes 2.5 to 3 crores and it has around 700customers at present and its advertisement is mainly word of mouth.Objectives  Good services  Proper guidance to investor  Maximize its returnsThis branch offers trading in  NSE  BSE  Derivatives  Mutual fund  Commodity exchange  Demat servicesBabasbapatilfreepptmba.com Page 18
  19. 19. “Mutual fund a safer investmentMUTUAL FUND STRUCTUREThe structure of mutual fund consists ofSponsorSponsor is the person who acting alone or in combination with another bodycorporate establishes a mutual fund. Sponsor must contribute at least 40% ofthe net worth of the Investment Managed and meet the eligibility criteriaprescribed under the Securities and Exchange Board of India (Mutual Funds)Regulations, 1996.The Sponsor is not responsible or liable for any loss orshortfall resulting from the operation of the Schemes beyond the initialcontribution made by it towards setting up of the Mutual Fund.Babasbapatilfreepptmba.com Page 19
  20. 20. “Mutual fund a safer investmentTrustThe Mutual Fund is constituted as a trust in accordance with the provisionsof the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registeredunder the Indian Registration Act, 1908.TrusteeTrustee is usually a company (corporate body) or a Board of Trustees (bodyof individuals). The main responsibility of the Trustee is to safeguard theinterest of the unit holders and ensure that the AMC functions in the interestof investors and in accordance with the Securities and Exchange Board ofIndia (Mutual Funds) Regulations, 1996, the provisions of the Trust Deedand the Offer Documents of the respective Schemes.Asset Management Company (AMC)The Trustee as the Investment Manager of the Mutual Fund appoints theAMC. The AMC is required to be approved by the Securities and ExchangeBoard of India (SEBI) to act as an asset management company of the MutualFund. Atleast 50% of the directors of the AMC are independent directorswho are not associated with the Sponsor in any manner. The AMC musthave a net worth of atleast 10 crore at all times.Registrar and Transfer AgentThe AMC if so authorized by the Trust Deed appoints the Registrar andTransfer Agent to the Mutual Fund. The Registrar processes the applicationform; redemption requests and dispatches account statements to the unitholders. The Registrar and Transfer agent also handles communications withinvestors and updates investor records.Babasbapatilfreepptmba.com Page 20
  21. 21. “Mutual fund a safer investmentBenefits of Mutual Fund investmentProfessional ManagementMutual Funds provide the services of experienced and skilled professionals, backed by adedicated investment research team that analyses the performance and prospects ofcompanies and selects suitable investments to achieve the objectives of the scheme.DiversificationMutual Funds invest in a number of companies across a broad cross-section of industriesand sectors. This diversification reduces the risk because seldom do all stocks decline atthe same time and in the same proportion. You achieve this diversification through aMutual Fund with far less money than you can do on your own.Convenient AdministrationInvesting in a Mutual Fund reduces paperwork and helps you avoid many problems suchas bad deliveries, delayed payments and follow up with brokers and companies. MutualFunds save your time and make investing easy and convenient.Return PotentialOver a medium to long-term, Mutual Funds have the potential to provide a higher returnas they invest in a diversified basket of selected securities.Low CostsMutual Funds are a relatively less expensive way to invest compared to directly investingin the capital markets because the benefits of scale in brokerage, custodial and other feestranslate into lower costs for investors.DEMERITS OF INVESTMENTS IN MUTUAL FUNDSNo control over the costs:Since investors do not directly monitor the funds operations they cannot control the costseffectively. Regulators therefore usually limit the expenses of mutual funds.No tailor-made portfolios:Mutual fund portfolios are created and marketed by AMC’s, into which investors invest.They cannot create tailor made portfolios.Managing a portfolio of funds:As the number of mutual funds increases, in order to tailor a portfolio for him, an investormay be holding a portfolio of funds, with the costs of monitoring them and using them,being incurred by him.Babasbapatilfreepptmba.com Page 21
  22. 22. “Mutual fund a safer investmentBenefits of investing in Mutual Funds: 1. Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument a professional analytical approach is required in addition to access to research and information and time and methodology to make sound investment decisions and keep monitoring them. 2. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide the small investors with an opportunity to invest in a larger basket of securities. 3. The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. 4. It is possible to invest in small amounts as and when the investor has surplus funds to invest. 5. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds. 6. In case of open-ended funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks/bonds.Risks involved in investing in Mutual Funds:Babasbapatilfreepptmba.com Page 22
  23. 23. “Mutual fund a safer investmentMutual Funds do not provide assured returns. Their returns are linked to theirperformance. They invest in shares, debentures and deposits. All these investmentsinvolve an element of risk. The unit value may vary depending upon the performance ofthe company and companies may default in payment of interest/principal on theirdebentures/bonds/deposits. Besides this, the government may come up with newregulation which may affect a particular industry or class of industries. All these factorsinfluence the performance of Mutual Funds.Market RiskSometimes prices and yields of all securities rise and fall. Broad outside influencesaffecting the market in general lead to this. This is true, may it be big corporations orsmaller mid-sized companies. This is known as Market Risk. A Systematic InvestmentPlan (“SIP”) that works on the concept of Rupee Cost Averaging (“RCA”) might helpmitigate this risk.Political/Government Policy RiskChanges in government policy and political decision can change the investmentenvironment. They can create a favorable environment for investment or vice versaInflation RiskInflation is the loss of purchasing power over time. A lot of times people makeconservative investment decisions to protect their capital but end up with a sum of moneythat can buy less than what the principal could at the time of the investment. Thishappens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk.Interest Rate RiskIn a free market economy interest rates are difficult if not impossible to predict. Changesin interest rates affect the prices of bonds as well as equities. If interest rates rise theprices of bonds fall and vice versa. Equity might be negatively affected as well in a risinginterest rate environment. A well-diversified portfolio might help mitigate this risk.Liquidity RiskBabasbapatilfreepptmba.com Page 23
  24. 24. “Mutual fund a safer investmentLiquidity risk arises when it becomes difficult to sell the securities that one haspurchased. Liquidity Risk can be partly mitigated by diversification, staggering ofmaturities as well as internal risk controls that lean towards purchase of liquid securities.Credit RiskThe debt servicing ability (may it be interest payments or repayment of principal) of acompany through its cash flows determines the Credit Risk faced by you. This credit riskis measured by independent rating agencies like CRISIL who rate companies and theirpaper. A ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poorcredit quality. A well-diversified portfolio might help mitigate this risk.The different plans that Mutual Funds offer:Growth PlanA growth plan is a plan under a scheme wherein the returns from investments arereinvested and very few income distributions, if any, are made. The investor thus onlyrealises capital appreciation on the investment. This plan appeals to investors in the highincome bracket. Under the dividend plan, income is distributed from time to time. Thisplan is ideal to those investors requiring regular income. Automatic Investment PlanUnder the Automatic Investment Plan (AIP) also called Systematic Investment Plan(SIP), the investor is given the option for investing in a specified frequency of months ina specified scheme of the Mutual Fund for a constant sum of investment. AIP allows theinvestors to plan their savings through a structured regular monthly savings program.Entry/Exit Load:A Load is a charge, which the AMC may collect on entry and/or exit from a fund. A loadis levied to cover the up-front cost incurred by the AMC for selling the fund. It alsocovers one time processing costs. Some funds do not charge any entry or exit load. Thesefunds are referred to as No Load Fund. Funds usually charge an entry load rangingbetween 1.00% and 2.00%. Exit loads vary between 0.25% and 2.00%.Babasbapatilfreepptmba.com Page 24
  25. 25. “Mutual fund a safer investmentASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) : With the increase in mutual fund players in India, a need for mutual fundassociation in India was generated to function as a non-profit organization. Association ofMutual Funds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex body of all Asset Management Companies (AMC) which hasbeen registered with SEBI. Till date all the AMCs are that have launched mutual fundschemes are its members. It functions under the supervision and guidelines of its Boardof Directors. Association of Mutual Funds India has brought down the Indian Mutual FundIndustry to a professional and healthy market with ethical lines enhancing andmaintaining standards. It follows the principle of both protecting and promoting theinterests of mutual funds as well as their unit holders.The objectives of Association of Mutual Funds in India : The Association of Mutual Funds of India works with 30 registered AMCs of thecountry. It has certain defined objectives which juxtaposes the guidelines of its Board ofDirectors. The objectives are as follows: • This mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry. • It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. • AMFI interacts with SEBI and works according to SEBI’s guidelines in the mutual fund industry. • Association of Mutual Fund of India does represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry.Babasbapatilfreepptmba.com Page 25
  26. 26. “Mutual fund a safer investment • It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. • AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. • At last but not the least association of mutual fund of India also disseminate information’s on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.Name of the Asset Management Company:Name of the Asset WebsiteManagement CompanyABN AMRO Asset http://www.assetmanagement.abnamro.co.in/Babasbapatilfreepptmba.com Page 26
  27. 27. “Mutual fund a safer investmentManagement (India) Ltd.Benchmark Asset http://www.benchmarkfunds.com/Management Co. Pvt. Ltd.Birla Sun Life Asset http://www.birlasunlife.com/Management Co. Ltd.BOB Asset Management Co. http://www.bobmf.com/Ltd.Canbank Investment http://www.canbankmutual.com/Management Services Ltd.DBS Cholamandalam Asset http://www.dbscholamutualfund.com/Management Ltd.Deutsche Asset Management http://www.dws-india.com/(India) Pvt. Ltd.DSP Merrill Lynch Fund http://www.dspmlmutualfund.com/Managers Ltd.Escorts Asset Management http://www.escortsmutual.com/Ltd.Fidelity Fund Management fidelity.co.inPvt.Ltd.Franklin Templeton Asset http://www.franklintempletonindia.com/Management (India) Pvt. Ltd.HDFC Asset Management Co. http://www.hdfcfund.com/Ltd.HSBC Asset Management http://www.hsbcinvestments.co.in/(India) Pvt. Ltd.ING Investment Management http://www.ingvysyamf.com/(India) Pvt. Ltd.JM Financial Asset http://www.jmfinancialmf.com/Management Pvt. Ltd.Jeevan Bima Sahayog Asset http://www.licmutual.com/Management Co. Ltd.Kotak Mahindra Asset http://www.kotakmutual.com/Management Co. Ltd.Lotus India Asset http://www.lotusindiaamc.com/Babasbapatilfreepptmba.com Page 27
  28. 28. “Mutual fund a safer investmentManagement Co. Pvt. Ltd.Morgan Stanley Investment http://www.msgfindia.com/Management Pvt. Ltd.Principal Pnb Asset http://www.principalindia.com/Management Co. Pvt. Ltd.Prudential ICICI Asset http://www.pruicici.com/Management Co. Ltd.Quantum Asset Management http://www.quantumamc.com/Co. Pvt. Ltd.Reliance Capital Asset http://www.reliancemutual.com/Management Ltd.Sahara Asset Management Co. http://www.saharamutual.com/Pvt. Ltd.SBI Funds Management Pvt. http://www.sbimf.com/Ltd.Standard Chartered Asset http://www.standardcharteredmf.com/Management Co. Pvt. Ltd.Sundaram BNP Paribas Asset http://www.sundarambnpparibas.in/Management Co. Ltd.Tata Asset Management Ltd. http://www.tatamutualfund.com/Taurus Asset Management Co. http://www.taurusmutualfund.com/Ltd.UTI Asset Management Co. http://www.utimf.com/Pvt. Ltd.Mutual Fund Globally  The money market mutual fund segment has a total corpus of $ 1.48 trillion in the U.S. against a corpus of $ 100 million in India.  Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only Fidelity and Capital are non-bank mutual funds in this group.Babasbapatilfreepptmba.com Page 28
  29. 29. “Mutual fund a safer investment  In the U.S. the total number of schemes is higher than that of the listed companies while in India we have just 277 schemes  Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.  In the U.S. about 9.7 million households will manage their assets on-line by the year 2003, such a facility is not yet of avail in India.  On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.Changes Taken Place  Lower Costs: As per SEBI regulations, bond funds can charge a maximum of 2.25% and equity funds can charge 2.5% as administrative fees. Therefore if the administrative costs are low, the benefits are passed down and hence Mutual Funds are able to attract mire investors and increase their asset base.  Better Advice: Mutual funds could provide better advice to their investors through the Net rather than through the traditional investment routes. Direct dealing with the fund could help the investor with their financial planning.  New investors would prefer online: Mutual funds can target investors who are young individuals and who are Net savvy, since servicing them would be easier on the Net.Future of Mutual FundMutual Funds sponsored by various public sector financial institutions have madeconsiderable dent particularly in the sphere of resource mobilization during the shortperiod of their existence. This they have been able to achieve through launching ofseveral scheme offering triple benefits of income, liquidity and growth. However, theyhave so far confined their area of operations to urban areas leaving vast savingspotentiality in rural hinterlands untapped. By beneficences of rural a5reas and introducingBabasbapatilfreepptmba.com Page 29
  30. 30. “Mutual fund a safer investmentthem about the benefits of the schemes, mutual funds can raise burgeoning amount ofresources, which can be gainfully employed for the national development.All this is possible only when the people have full confidence that their investments inmutual funds will remain safe. To inspire such confidence it is necessary that theGovernment should enact a comprehensive legislation on the pattern of the UTI Actgovern the operations of all the mutual funds.The asset base will continue to grow at an annual rate of about 30 to 35 % over the nextfew years as investor’s shift their assets from banks and other traditional avenues. Someof the older public and private sector players will either close shop or be taken over.Out of ten public sector players five will sell out, close down or merge with strongerplayers in three to four years. In the private sector this trend has already started with twomergers and one takeover. Here too some of them will down their shutters in the nearfuture to come.But this does not mean there is no room for other players. The market will witness aflurry of new players entering the arena. There will be a large number of offers fromvarious asset management companies in the time to come. Some big names like Fidelity,Principal, Old Mutual etc. are looking at Indian market seriously. One important reasonfor it is that most major players already have presence here and hence these big nameswould hardly like to get left behind.The mutual fund industry is awaiting the introduction of derivatives in India as this wouldenable it to hedge its risk and this in turn would be reflected in its Net Asset Value(NAV).SEBI is working out the norms for enabling the existing mutual fund schemes to trade inderivatives. Importantly, many market players have called on the Regulator to initiate theprocess immediately, so that the mutual funds can implement the changes that arerequired to trade in Derivatives.COMPARISON OF MUTUAL FUND WITH OTHER INVESTMENTMutual Funds with Sharers:In case of investing in shares you’ll have to spend the time to study and learn the market,also you should learn to buy individual stocks, because you maximize your gains byinvesting in the leading stocks in the leading groups in the markets. If you don’t want tospend the time, delegate it to a good diversified domestic stock fund. The mutual fundBabasbapatilfreepptmba.com Page 30
  31. 31. “Mutual fund a safer investmentcompany has an investment manager for each scheme that decides upon where to invest,how to invests and when to invest. He will take care of your investment.Mutual Funds with Fixed Deposit:In case of the fixed deposit the money, which you have invested, will lock in for certainperiod until the fixed deposit matures. That is before the lock in period you can’t removeyour money. The returns on the fixed deposit are only the interest prescribed on it. Whereas in the mutual fund investment there is exit option for every scheme by which you canexit at any time. Due to which your money will not be locked. In the mutual fundinvestment the returns are through the dividend and also the growth appreciation.Mutual funds are now also competing with commercial banks in the race for retailinvestor’s savings and corporate float money. The power shift towards mutual funds hasbecome obvious. . The basic fact lies that banks cannot be ignored and they will not closedown completely. Their role as intermediaries cannot be ignored. It is just that MutualFunds are going to change the way banks do business in the future.Banks v/s Mutual Funds BANKS MUTUAL FUNDSReturns Low BetterAdministrative exp. High LowRisk Low ModerateInvestment options Less MoreNetwork High penetration Low but improvingLiquidity At a cost BetterBabasbapatilfreepptmba.com Page 31
  32. 32. “Mutual fund a safer investmentQuality of assets Not transparent TransparentInterest calculation Minimum balance between 10th Everyday & 30th. Of every monthGuarantee Maximum Rs.1 lakh on deposits NoneINVESTORS SEVEN RULESHere are seven rules that go a long way in helping you meet your investmentobjectives.Know your risk profile:Your investments should reflect your risk taking capacity. Equity fundsmight lure when the market is rising and your neighbor is making money,but if you are not cut out for the risk that accompanies it don’t bite the bait.So, check if the funds objective matches yours. Invest only after you havefound your match. If you are racked by uncertainty, seek exper4t advicefrom a qualified financial advisor.Identify your investment horizon:Invest in an equity fund only if you are willing to stay on for at least twoyears. For income and gilt funds, have a one-year perspective at least.Anything less than one year, the only option among mutual funds is liquidfunds.Read the offer document carefully:The offer document contains essential details pertaining to the fund,including the summary information (type of scheme, the name of the AssetManagement Company and price of units among other things), investmentobjectives and investment procedure, financial information and risk factors.Go through the fund fact sheet:Babasbapatilfreepptmba.com Page 32
  33. 33. “Mutual fund a safer investmentFund fact sheets give you valuable information of how the fund hasperformed in the past. You can check the funds portfolio, its diversificationlevels and its performance in the past. The more fact sheets you examine, thebetter.Diversify across fund houses:If you are routing a substantial sum through mutual funds, you shoulddiversify across fund houses. That way, you spread your risk.Do not chase incentives:Don’t get lured by investment incentives. Some financial intermediaries giveupfront incentives, in the form of a percentage of your initial investment, toinvest in a particular fund. Don’t buy it. Your focus should be to find a fundthat matches your investment needs and risk profile, and is a performer.Track your investments:One easy way to keep track of your fund is to keep track of the intelligentinvestor rankings of mutual funds, which are complied on a quarterly basis.These rankings allow you to take note of your funds performance and riskprofile and compare it across various time periods as well as across its peerset,Net Asset Value (NAV)The net asset value of the fund is the cumulative market value of the assets fund net of itsliabilities. In other words, if the fund is dissolved or liquidated, by selling off all theassets in the fund, this is the amount that the shareholders would collectively own. Thisgives rise to the concept of net asset value per unit, which is the value, represented by theownership of one unit in the fund. It is calculated simply by dividing the net asset valueof the fund by the number of units.Babasbapatilfreepptmba.com Page 33
  34. 34. “Mutual fund a safer investmentCalculation of NAVThe most important part of the calculation is the valuation of the assets owned by thefund. Once it is calculated, the NAV is simply the net value of assets divided by thenumber of units outstanding. The detailed methodology for the calculation of the assetvalue is given below.NAV= (Market valueof the scheme’s investment) + Other Assets (Including accruedinterest) + Unamortized issue expenses (only in case of schemes launched on load basis)– All Liabilities except All Asset and liabilities are valued at the current pricesDetails on the above itemsFor liquid shares/debentures, valuation is done on the basis of the last or closing marketprice on the principal exchange where the security is tradedFor illiquid and unlisted and/or thinly traded shares/debentures, the value has to beestimated. For shares, this could be the book value per share or an estimated market priceif suitable benchmarks are available. For debentures and bonds, value is estimated on thebasis of yields of comparable liquid securities after adjusting for illiquidity. The value offixed interest bearing securities moves in a direction opposite to interest rate changesValuation of debentures and bonds is a big problem since most of them are unlisted andthinly traded. This gives considerable leeway to the AMCs on valuation and some of theAMCs are believed to take advantage of this and adopt flexible valuation policiesdepending on the situation.Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, withevery passing day, interest is said to be accrued, at the daily interest rate, which iscalculated by dividing the periodic interest payment with the number of days in eachperiod. Thus, accrued interest on a particular day is equal to the daily interest ratemultiplied by the number of days since the last interest payment date. Usually, dividendsare proposed at the time of the Annual General meeting and become due on the recorddate.Mutual Fund Weightage to various sectors in March07 investment trend by various fund houses over the last 6 monthsSector Investment (Rs. cr) WeightageEngineering 14,169.39 14.2%Banking/Finance 12,710.10 12.7%Information Technology 11,838.24 11.9%Oil & Gas 7,706.11 7.7%Automotive 6,731.96 6.7%Cement 5,822.06 5.8%Babasbapatilfreepptmba.com Page 34
  35. 35. “Mutual fund a safer investmentTelecom 5,683.10 5.7%Pharmaceuticals 5,533.54 5.5%Manufacturing 5,322.88 5.3%Metals & Mining 4,976.70 5.0%Media 3,183.53 3.2%Chemicals 3,131.07 3.1%Conglomerates 2,603.40 2.6%Miscellaneous 1,990.53 2.0%Services 1,834.24 1.8%Utilities 1,772.22 1.8%Consumer Non-Durables 1,771.20 1.8%Food & Beverage 1,467.79 1.5%Tobacco 1,420.23 1.4%Consumer Durables 177.89 0.2%TOTAL 99,846.19 100.0%Systematic Investment Plan - A plan for future…1 � Investment - The basicsWe can define investment as the process of “Sacrificing something now for the prospectof gaining something later”. The definition implies that there are three dimensions of aninvestment-time, today’s sacrifice and prospective gain. Investment is a three-stepprocess.Babasbapatilfreepptmba.com Page 35
  36. 36. “Mutual fund a safer investment Identifying ones Step 1 financial goals Select of asset Step 2 classes Regular savings Step 3 planFor example,If Mr. X’s monthly consumption expenditure is Rs 20,000 today and he wants to maintainthe same standard of living when he retires. What sum he will require if he is 30-year-old now? Assuming five percent inflation he would need Rs 78,400 a month when heretires at 58. Now to earn this amount every month from investment that earn 5 percent ayear, he would need to have saved Rs 1.88 Crore when he retires.If he can put aside 20,000 a month he can just invest them in bonds that earn 5 percentand reach the target in most non-volatile manner. At the other extreme, he could investjust Rs 4166 every month in equities. Assuming 15 per cent returns this should generatethe desired Rs 1.8 Crore. Actually real strategy should be to take a middle path betweenthese two extremes and allocate some portion of portfolio to both based on your ownfinancial situation and risk taking ability.Taking a cue from the above example systematic investment plan is the one, whichhelps in achieving financial goal of an individual.1 � What is a Systematic Investment Plan?Systematic Investment Plan (SIP) is a disciplined way of investing, whereyou invest fixed amounts at a regular frequency. You often decide to startsaving and investing regularly, but get caught up in your day-to-dayactivities and forget investments. SIP, the time-tested investment approachhelps bring in the much-needed discipline, and has shown good results theworld over.1 � Benefits of SIPBabasbapatilfreepptmba.com Page 36
  37. 37. “Mutual fund a safer investment 0 � Rupee cost averaging 1 � Power of compounding 2 � Makes Investment a habit 3 � Low Cost (No entry load)2 � Rupee Cost AveragingX and Y who are on a trip to a riverbank decide to test their swimmingskills. X dives deep into the water, kicks his legs, splashes the water, strokehard, shows all his skill to move faster than the current of the water. Ydecides just to remain afloat and allow the stream to take him along with it.In the end, to your surprise you find that Y has covered more distance thanX.The same applies to equity market also; most of us try to time the marketperfectly. But, this is difficult at best given the volatility of the stockmarkets. Unfortunately, it is impossible to consistently predict the marketsand even experienced investment professionals find it hazardous to do so.Nevertheless, there is a proven investment strategy that can help you offsetthe volatility of the markets and turn it into an advantage. This strategy iscalled Rupee Cost Averaging. Below is the example to explain how it worksnder systematic investment plan:Babasbapatilfreepptmba.com Page 37
  38. 38. “Mutual fund a safer investmentSimply put, Rupee Cost Averaging is a disciplined investment practice that takes theguesswork out of "timing" the markets. The essence of this strategy is that more units areMonth Amount Fluctuating Rising Market Falling Invested (Rs) Market MarketPrice Units Price Units Price Units1 2,000.00 12.00 166.67 12.00 166.67 12.00 166.672 2,000.00 15.00 133.33 14.00 142.86 10.00 200.003 2,000.00 9.00 222.22 16.00 125.00 8.00 250.004 2,000.00 15.00 133.33 18.00 111.11 6.00 333.33Total 8,000.00 51.00 655.56 60.00 545.64 36.00 950.00Average Rs. 12.20(i.e. Rs. 8000/ 655.55 Rs. 14.66(i.e. Rs 8.42(i.e.Rs.cost per units) Rs. 8000/ 8000/950.00 units)unit 545.63 units)purchased automatically when prices are low and fewer units when prices are high. Overtime, this result in the average cost per unit - the money you pay - being lower than theaverage price per unit1 � Power of compoundingInflation can steadily erode the value of your income. However, long-term investing canprovide returns that outpace inflation-through the power of compounding.Year after year, any money that you invest may earn interest, dividends, or capital gains.When you reinvest those earnings, they help generate additional earnings; thoseadditional earnings help generate more earnings, and so on. This is called compounding.Let us take an example, two friends, X, and Y are 20 years old. X decides that he wantsto start investing his money early to build himself a secure future and decides to save Rs.5,000 monthly (i.e. Rs. 60,000 per annum) at the age of 20. Y feels that he is young andwants to enjoy his money forthe time being. Y wakes up late and decides to invest at the age of 35 years and decides tosave Rs. 10,000 per month (i.e. Rs. 1,20,000 per annum). At the age of 60 years whenthey want to retire, using an interest rate of 7% per annum, X who had invested Rs. 5,000monthly for 25 years has Rs. 1.15 cr. and Y who had invested Rs. 10,000 monthly for thesame amount of time has Rs. 57 lacs. Please refer to the illustrations below for a betterunderstanding.X (7%) :Babasbapatilfreepptmba.com Page 38
  39. 39. “Mutual fund a safer investmentY (7%) :The key therefore lies in starting earlier, and giving your investments alonger time to row. Money starts multiplying, more towards the end asexplained by above example1 � Does SIP work…?Given below are some examples of how a SIP has worked in select MutualFunds schemes:Templeton Schemes HDFC SchemesBlue-chip Fund Prima Growth Fund Equity Top Fund Fund 200Monthly 1000 1000 1000 1000 1000InvestmentNos of Investment 86 123 89 110 91monthsTotal Investment 86000 123000 89000 110000 91000Value of Investment 337410 549558 249501 518895 267978Return on 37.69% 27.45% 27.23% 33% 29%InvestmentBabasbapatilfreepptmba.com Page 39
  40. 40. “Mutual fund a safer investmentCOMPARISON BY NATURE OF INVESTMENTSThe table below compares the investment options with respect to Return, Safety,Volatility, Liquidity, and Convenience. Investment Return Safety Volatility Liquidity Convenience Options Equity High Low High High or Moderate Low F1 Bonds Moderate High Moderate Moderate High Corporate Moderate Moderate Moderate Low Low Debentures Company Moderate Low Low Low Moderate Fixed Deposits Bank Low High Low High High Deposits PPF Moderate High Low Moderate High Life Low High Low Low Moderate Insurance Real estate High Moderate High Low Low Mutual High High Moderate High High FundsBabasbapatilfreepptmba.com Page 40
  41. 41. “Mutual fund a safer investmentMagnum Mid Cap Fund (SBI Mutual Fund) Open Ended Equity Fund Date of Inception: 17/03/2005 Corpus (Assets Under Management): Rs.343.64Cr Options: Growth and Dividend Top 10 holdings: Maharashtra Seamless Limited 6.00% India Cements Limited 5.48% Infotech Enterprises Limited 5.09% Thermax Limited 4.89% Nagarjuna Construction Company Limited 4.84% Skf India Limited 4.67% IVRCL Infrastructure & Projects Limited 4.60% Opto Circuit Limited 4.55% Crompton Greaves Limited 4.27% Hotel Leela Venture Limited 3.77%Babasbapatilfreepptmba.com Page 41
  42. 42. “Mutual fund a safer investmentAsset Allocation: Asse t Allocation cash others 10% 0% Equity 90% Equity cash othersPerformance Report: Period Return 1 month -12.84% 3 months 6.15% 6 months 27.52% 1yr 48.1% 3yr NA 5yr NA S.Inception 47.89%Babasbapatilfreepptmba.com Page 42
  43. 43. “Mutual fund a safer investment NAV Analysis:Date NAV15/6/2006 14.1216/6/2006 14.8919/6/2006 15.4120/6/2006 15.6421/6/2006 16.1122/6/2006 16.4423/6/2006 16.4626/6/2006 15.7927/6/2006 15.5528/6/2006 15.4429/6/2006 15.4730/6/2006 16.01 17 16.5 16 15.5 15 NAV 14.5 14 13.5 13 12.5 15/6 16/6 20/6 21/6 22/6 26/6 27/6 28/6 19/6 23/6 29/6 30/6 DateBabasbapatilfreepptmba.com Page 43
  44. 44. “Mutual fund a safer investment Tata Mid Cap Fund: Open Ended Equity Fund Date of Inception: 15/06/2005 Corpus (Assets Under Management): Rs.249.42Cr Options: Growth and Dividend Top 10 holdings: Dishman Pharmaceu & Chem Ltd. 4.31% Greaves Limited 4.06% Lakshmi Machine Works Limited 4.04% Voltas Limited 3.87% Indian Hotels Co. Limited 3.85% Nagarjuna Construction Limited 3.12% Ccl Products India Limited 2.84% Tamilnadu Newspreint & Paper Ltd. 2.81% EIH Limited 2.63% Hinduja Tmt Limited 2.50% Asset Allocation:Babasbapatilfreepptmba.com Page 44
  45. 45. “Mutual fund a safer investment Asset Allocation Cash Others 4% 0% Equity 96% Equity Cash Others Performance Report: Period Return 1yr 12.8% 3yr NA 5yr NA S.Inception 12.42% NAV Analysis:Babasbapatilfreepptmba.com Page 45
  46. 46. “Mutual fund a safer investmentDate NAV15/6/2006 10.07216/6/2006 10.62419/6/2006 10.86220/6/2006 10.93521/6/2006 11.20222/6/2006 11.36623/6/2006 11.26226/6/2006 10.86327/6/2006 10.84428/6/2006 10.78729/6/2006 10.86430/6/2006 11.253 11.5 11 10.5 NAV 10 9.5 9 16/6 19/6 22/6 28/6 15/6 20/6 21/6 23/6 26/6 27/6 29/6 30/6 DateBabasbapatilfreepptmba.com Page 46
  47. 47. “Mutual fund a safer investment Sundaram Select Mid Cap Fund: Open Ended Equity Fund Date of Inception: 19/07/2002 Corpus (Assets Under Management): Rs.991.45Cr Options: Growth and Dividend Top 10 holdings: Ansal Properties & Industries Limited 4.67% Unitech Limited 4.10% Emami Limited 3.71% Madras Cements Limited 3.61% Balrampur Chini Mills Limited 3.08% Jaiprakash Associates Limited 2.96% Lakshmi Machine Works Limited 2.81% Bajaj Hindustan Limited 2.80% Kalpataru Power Transmission Ltd. 2.58% Kirloskar Oil Engines Ltd. 2.20% Asset Allocation: Asset Allocation Debt 0% Others cash 0% 34% Equity 66% Equity cash Debt OthersBabasbapatilfreepptmba.com Page 47
  48. 48. “Mutual fund a safer investment Performance Report: Period Return 1yr 76.6% 3yr 75.9% 5yr NA S.Inception 76.33% NAV Analysis:Date NAV15/6/2006 66.50716/6/2006 68.38819/6/2006 69.85220/6/2006 70.45521/6/2006 72.08122/6/2006 73.723/6/2006 73.94726/6/2006 72.45427/6/2006 71.84628/6/2006 71.69629/6/2006 72.0130/6/2006 74.075Babasbapatilfreepptmba.com Page 48
  49. 49. “Mutual fund a safer investment 76 74 72 70 NAV 68 66 64 62 15/6 19/6 20/6 22/6 23/6 27/6 28/6 16/6 21/6 26/6 29/6 30/6 Date Kotak Mid Cap Fund: Open Ended Equity Fund Date of Inception: 28/01/2005 Corpus (Assets Under Management): Rs.344.11Cr Options: Growth and Dividend Top 10 holdings: Deccan Chronicle Holdings 4.73% JSW Steel 4.62% Jindal Steel & Power 3.94% Tata Metaliks 3.71% Madras Cements 3.35% Television Eighteen 3.09%Babasbapatilfreepptmba.com Page 49
  50. 50. “Mutual fund a safer investment Mahaveer Spg. Mills 2.97% Areva T & D 2.89% Taj GVK Hotels & Resorts 2.80% Bharat Earth Movers 2.78% Asset Allocation: Asset Allocation 0% cash 8% 0% Equity 92% Equity cash Performance Report: Period Return 1yr 34.9% 3yr NA 5yr NA S.Inception 34.48% NAV Analysis:Babasbapatilfreepptmba.com Page 50
  51. 51. “Mutual fund a safer investmentDate NAV15/6/2006 13.69616/6/2006 14.29319/6/2006 14.68120/6/2006 14.67221/6/2006 15.00622/6/2006 15.3323/6/2006 15.34626/6/2006 14.8827/6/2006 14.73228/6/2006 14.56529/6/2006 14.61730/6/2006 15.102 15.5 15 14.5 NAV 14 13.5 13 12.5 15/6 16/6 19/6 20/6 21/6 22/6 26/6 27/6 28/6 30/6 23/6 29/6 Date Comparison table of equity diversified midcap mutual funds SBI TATA KOTAK SUNDARAMBabasbapatilfreepptmba.com Page 51
  52. 52. “Mutual fund a safer investmentCorpus Rs.343.64Cr Rs.249.42Cr Rs.344.11Cr Rs.991.45CrAsset Allocation Eq: 90% Eq:96% Eq: 92% Eq: 66% Cash:10% Cash:4% Cash: 8% Cash: 34%Returns 1yr : 48.1% 1yr: 12.8% 1yr : 34.9% 1yr: 76.6% S.I: 47.89% S.I.:12.42% S.I. :34.48% S.I.:76.33%NAV as on15/6/06 14.12 10.072 13.696 66.50730/6/06 16.01 11.253 15.102 74.075Change (%) 15.8688 11.15228 14.96504 73.409Minimum Invt. Rs.5000 Rs.5000 Rs.5000 Rs.5000Load: Entry 2.25% 2.25% 2.25% 2.25% Exit Nil Nil Nil Nil By looking into the table we can say that Sundaram select mid cap mutual fund is performing extremely well in the market. It has large corpus. And it has wide diversification in investment. By investing nearly one third (34%) in cash market it is actively gaining the opportunity of cash market. Its diversified investment resulted in good returns to the investors and increase in the NAV. By comparing these four equity diversified mid cap fund’s performance we can say that the fund’s performance and its NAV depends on the following factors-  Its portfolio in which it has invested  The asset allocation of the fund  The sectors to which it has targeted  The bench mark of stock market index which it has taken as base The common objective of all mid cap funds, with slight difference in words, is to provide investors with opportunities for long term growth in capital along with the liquidity of an open ended scheme by investing predominantly in a well- diversified basket of equity stocks of companies whose market capitalization is between Rs. 200 crores to Rs. 2000 crores and in debt and money market instruments. Babasbapatilfreepptmba.com Page 52
  53. 53. “Mutual fund a safer investment Out of above Sundaram Select Mid Cap is performing very well in the market since inception. It is ranked number one in returns by money control. Even we can say that Sundarm Select Mid Cap fund has started earlier than other three but it has a very selective and diversified portfolio and its corpus is also huge compare to other three. It has also sustained its growth from inception. The reason for difference in NAV of each fund is its portfolio, asset allocation, selection of sectors, and proportion of investment in the selected sector, different options, and different objective of the schemes etc. So while investing in any existing mutual fund’s scheme it is better to look at its portfolio and also the performance, but the present performance may not be assured in future.Rate of Return =Price Change +Dividend Received*100 Purchase PriceThe general equation used to calculate the compounded value after N years isgiven below:A=P (1+I) to the power nP = principalI = Interest rateN= number of yearsBabasbapatilfreepptmba.com Page 53
  54. 54. “Mutual fund a safer investmentSuggestions  Transparency, Flexibility and Ease of understanding, these core benefits of Mutual Funds need to be effectively communicated to the customers.  Though being riskier in nature mutual funds returns, sizable amount of returns to the investors, this will play a role of enlightening new investors in the pool.  The Mutual Fund Industry must convince the general public about the latest development (i.e. tax exemptions on dividends & returns in Mutual Funds by the finance ministry.) This would largely help to get clients.  People generally want a reasonable return on their investment. Majority of the investors try to see that their investments are secure. In case of equity mutual funds both in the growth and dividend plans have been realizing more than 15%-20% returns on a year-to-year basis. This has uplifted the mutual fund Industry in the country. This will largely attract people to invest in Mutual Funds.  In the current scenario the bank are returning in the area of 4.5%to 8% returns/ annum, which are taxable. On the other hand tax-free returns of minimum two digits in equity mutual funds are need of the day, to beat inflation in our economy.Babasbapatilfreepptmba.com Page 54
  55. 55. “Mutual fund a safer investment  By creating active awareness regarding the progress of Mutual Fund, the Industry in India has seen tremendous growth in the last three years. This should be further proceeded more aggressively.Conclusions: As per the study Mutual Fund has good future. It is gaining importance in theminds of consumers. Common people are taking more interest in Mutual Funds alongwith other conventional investment options. But the service providers like “ViViSecurities” need to more educate the customers. Midcap funds are more promising. Sothe companies need to promote these funds more in order to benefit the investor and gaintheir confidence.Babasbapatilfreepptmba.com Page 55
  56. 56. “Mutual fund a safer investment BIBLIOGRAPHY  Introduction to Mutual Fund By AMFI  Brochures  Journals Web Sites:  www.amfiindia.com  www.Ventura1.com  www.moneycontrol.comBabasbapatilfreepptmba.com Page 56
  57. 57. “Mutual fund a safer investmentBabasbapatilfreepptmba.com Page 57