Presentation On
“The Role of Micro Finance in the Growth
of an Industry and Region”
Submitted by : Ashokkumar Hegde
511135...
Mutual Fund In India,
An Overview
CHAPTER 1: Introduction to Mutual Fund And Its
Various Aspects.
CHAPTER2: Mutual Fund Vs...
CHAPTER 1: Introduction to Mutual Fund
And Its Various Aspects.
1.1 Introduction
• Mutual funds, as the name indicates is ...
• Thus a mutual fund is the most suitable investment for the common person
• It offers an opportunity to invest in a diver...
1.2 ORGANISATION OF A MUTUAL FUND
• Mutual funds have a unique structure not shared with other entities such as
companies ...
1.3 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY
• The mutual fund industry in India started in 1963 with the formation of U...
1.4. WORLD PANORAMA
• At the very dawn of commercial history, Egyptians and Phoenicians were
selling shares in vessels and...
• The enactment of Securities Act of 1933, Investment Company Act of 1940
and Investment Advisors Act of 1940, led to the ...
At the end of first quarter of 2003, the assets of worldwide mutual funds
stood at USD 11.2 trillion while the assets of e...
The number of worldwide mutual funds stood at 53,150 with equity funds
accounting for 42 percent as shown in the Exhibit 1...
1.5. INVESTMENT ALTERNATIVES IN INDIA
• Non marketable financial assets: These are such financial assets which
gives moder...
• Precious objects: Investors can also invest in the objects which have value.
• Financial Derivatives: These are such ins...
1.6. STRUCTURE OF MUTUAL FUND
• Since there is a clear distinction between open ended schemes and close
ended schemes, usu...
Sponsor
Company
Establishes MF as a Trust
Registers MF with SEBI
Mutual Fund
Asset
Management
Company
Custodian
Holds unit...
1.7. SEBI REGULATIONS:
• SEBI formulates policies and regulates the mutual funds to protect the
interest of the investors....
1.8 ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)
• With the increase in mutual fund players in India, a need for mutual fun...
• AMFI interacts with SEBI and works according to SEBIs guidelines in the
mutual fund industry.
• Associations of Mutual F...
1.9 ADVANTAGES OF MUTUAL FUNDS
The Advantages of investing in a Mutual Fund are:
• Professional Management
• Diversificati...
1.10. THE DISADVANTAGES OF MUTUAL FUND:
The Disadvantages of investing in a Mutual Fund are:
• Professional Management
• C...
1.11. WHY TO INVEST IN MUTUAL FUNDS:
A proven principle of sound investment is – “do not put all eggs in one
basket”. Inve...
1.12. CLASSIFICATION OF MUTUAL FUND
• Mutual funds can be classified as follow:-
 Based on their structure:
• Open-ended ...
• Income Schemes:
• Balanced Schemes:
• Money Market Schemes:
• Load Funds:
• No-Load Funds:
 OTHER SCHEMES
• Tax Saving ...
CATEGORIES OF MUTUAL FUND:
1.13. FREQUENTLY USED TERMS
• Net Asset Value (NAV):
• Sale Price:
• Repurchase Price:
• Redemption Price:
• Sales Load:
•...
1.14. MUTUAL FUND FEES AND EXPENSES
• TRANSACTION FEES:
• PERIODIC FEES:
• OTHER OPERATING EXPENSES:
• LOADS:Load funds ex...
1.15. SELECTION PARAMETERS FOR MUTUAL FUND
• Objective:
• Risk capacity and capability:
• Fund Manager’s and scheme track ...
CHAPTER 2 : Mutual Fund
Vs
Other Investments
From investors’ viewpoint mutual funds have several advantages such as:
• Pro...
However there are some disadvantages with mutual funds such as:
• The investor must rely on the integrity of the professio...
2.1. Bank Fixed Deposits verses Mutual Fund:
2.2. Bonds and Debentures versus Mutual Funds
2.3. Equity versus Mutual Funds...
Pointers to Measure Mutual Fund Performance
MEASURES DESCRIPTION IDEAL RANGE
STANDARD
DEVIATION
Standard Deviation allows ...
CHAPTER 3 : Best Mutual Funds
To Invest In 2012
• 3.1. Best Mutual Funds to invest in 2012 – Equity Funds
• 3.1.1. Best Mu...
3.1.2. Best Mutual Funds to invest in 2012 –Large & Mid Cap Funds
- Mutual Funds between 60 to 80 per cent of assets in la...
• Best Mutual Funds to invest in 2012 – Year on Year Returns
- You can see year on year performance to check the consisten...
Performance of different equity fund categories
You can clearly see that multi-cap & midcaps have given better returns
tha...
CHAPTER 4 : Risk Factors Of
Mutual Funds
• INVESTMENT STRATEGIES :
1. Systematic Investment Plan:
2. Systematic Transfer P...
RISK HIERARCHY OF MUTUAL FUNDS
4.2. RISK FACTORS OF MUTUAL FUNDS:
1. The Risk-Return Trade-Off:
2. Market Risk:
3. Credit Risk:
4. Inflation Risk:
5. Int...
CHAPTER– 5 : Comparision Between
Direct Investment in Equity
and Mutual Fund
• Comparison between direct investment in equ...
Equity diversified funds
The five funds I have chosen after comparing their performance vis-à-vis the
other mutual funds i...
5.3. FINDINGS AND ANALYSIS
• In this chapter the findings of the performance evaluation of the
various equity diversified ...
• Risk and return analysis:
FUND RETURN MARKET RETURN SD MARKET
EQUITY DIVERSIFIED
SBI Magnum Global Fund (G)
13.40% 15.89...
INVESTOR SURVEY ANALYSIS
• To understand the investor‟s preference following questions have been asked:
1. Investment aven...
CONCLUSION
• Mutual Funds now represent perhaps most appropriate investment opportunity for most
investors. As financial m...
FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA
Financial experts believe that the future of Mutual Funds in India will be very
b...
• Emphasis on better corporate governance.
• Trying to curb the late trading practices.
• Introduction of Financial Planne...
BIBLIOGRAPHY
• REFERENCE BOOK:
• FINANCIAL MARKET AND SERVICES - Gordon and Natarajan
•
• WEBSITE:
•
• www.bseindia.com
• ...
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  • - The sponsor is the promoter of the mutual fund.- A Board of Trustees – a body of individuals, or a trust company – a corporate body, may manage the Trust. Board of Trustees manages most of the funds in India.Right of Trustees-Appoint the AMC with the prior approval of SEBI- Approve each of the schemes floated by the AMC- Have the right to request any necessary information from the AMC concerning the operations of various schemes managed by the AMCObligations of the AMC and its DirectorsThey must ensure that:- Investment of funds is in accordance with SEBI Regulations and the Trust Deed- Take responsibility for the act of its employees and others whose services it has procuredDo not undertake any other activity conflicting with managing the fund.The role of an Asset management companies is to act as the investment manager of the trust. They are the ones who manage money of investors.The custodian is appointed by the Board of Trustees for safekeeping of securities in terms of physical delivery and eventual safe keeping or participating in the clearing system through approved depository companies.
  • 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.SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996.
  • In 1822, King William I of Netherlands came up with a close-end fund.In 1873, Robert Fleming, established ‘The Scottish American Trust’. In 1893, first American investment trust was the close-end Boston Personal Property Trust created.In 1926, first fund, ‘Massachusetts Investment Trust’ was organized for the professors of Harvard University and offered shares to the public.By 1930’s, 920 mutual funds were formed in U.S.A. and most of them were close end.
  • The Mutual fund industry in Japan dates back to 1937. But an investment trust modeled on the unit trusts of U.K. was established only in l941.Prior to 1960s, the U.S.A. provident fund professional investment authorities were abhorrent of investing in equities as they are of in India today.In U.S.A., the number of mutual funds grew from 70 in 1940 to more than 3000 by the end of 1989. The mutual fund industry’s assets in U.S.A. increased from USD 44 billion in 1980 to USD 1 trillion in 1989. The value of securities owned by U.S.A. fund houses increased from USD 60 billion in 1960 to more than USD 100 billion in 1983
  • - Mutual funds emerged as the most important investment vehicle for household investments in U.S.A. with the basic objective of allowing small investors to partake in the capital market by investing in a wide portfolio of stocks so as to reduce risk
  • - As on March 2004, there were 8,212 mutual funds in U.S.A. totaling around USD 7.6 trillion where one out of every three investor held a mutual fund investment.
  • Non marketable financial assets: e.g. Bank Deposits/Post Office Schemes/Company FDs/PPFEquity sahres: e.g. These can be classified into following broad categories as per stock market:Blue chip sharesGrowth sharesIncome sharesCyclic sharesSpeculative sharesBonds: e.g. G sec bondsGOI relief fundsGovt. agency fundsPSU BondsRBI BONDDebenture of private sector co.Money market instrument: e.g. T-Bills/ Certificate of Deposit/ Commercial PaperMutual Funds -The different types of schemes areBalanced FundsIndex FundsSector FundEquity Oriented FundsLife insurance: different schemes are:Endowment assurance policyMoney back policyWhole life policyTerm assurance policyReal estate: e.g. Agricultural land / Semi urban land / Farm House
  • Precious objects: e.g. Gold / Silver / Precious stones / Art Objects
  • Open-ended funds (unit-trusts) in the UK follow the ‘trust approach’, while close-ended schemes follow (investment trusts) follow the ‘corporate approach’.
  • [I.e. minimum 20 investors per scheme and one investor can hold more than 25% stake in the corpus in that one scheme].
  • Equity Funds:-Diversified Equity Funds -Mid-Cap Funds -Sector Specific Funds -Tax Savings Funds (ELSS) Debt Funds:-Gilt Funds-Income Funds-MIPs-Short Term Plans (STPs): -Liquid Funds:
  • TRANSACTION FEES-Purchase Fee:-Redemption Fee:-Exchange Fee:PERIODIC FEES-Management Fee:-Account Fee:Front-end load:Also known as Sales Charge, this is a fee paid when shares are purchased. Also known as a "front-end load," this fee typically goes to the brokers that sell the fund's shares.Back-end load:Also known as Deferred Sales Charge, this is a fee paid when shares are sold. Also known as a "back-end load," this fee typically goes to the brokers that sell the fund's shares. Level load / Low load:It's similar to a back-end load in that no sales charges are paid when buying the fund. Instead a back-end load may be charged if the shares purchased are sold within a given time frame. The distinction between level loads and low loads as opposed to back-end loads, is that this time frame where charges are levied is shorter.No-load Fund:As the name implies, this means that the fund does not charge any type of sales load. But, as outlined above, not every type of shareholder fee is a "sales load." A no-load fund may charge fees that are not sales loads, such as purchase fees, redemption fees, exchange fees, and account fees.
  • Role of micro finance

    1. 1. Presentation On “The Role of Micro Finance in the Growth of an Industry and Region” Submitted by : Ashokkumar Hegde 511135575 In partial fulfillment of the requirement for the award of the degree of MBA [Finance] Trinity Academy for corporate training ltd [Study Centre – 03216]
    2. 2. Mutual Fund In India, An Overview CHAPTER 1: Introduction to Mutual Fund And Its Various Aspects. CHAPTER2: Mutual Fund Vs Other Investments CHAPTER 3: Best Mutual Fund to Invest In 2012 CHAPTER 4: Risk Factors of Mutual Funds CHAPTER 5: Comparision Between Direct Investment in Equity And Mutual Fund Conclusion Bibliography
    3. 3. CHAPTER 1: Introduction to Mutual Fund And Its Various Aspects. 1.1 Introduction • Mutual funds, as the name indicates is the fund where in numerous investors come together to invest in various schemes of mutual fund. • Plays a crucial role in an economy by mobilizing savings and investing them in the capital market. • A mutual fund is an institution that invests the pooled funds of public to create a diversified portfolio of securities. • Mutual fund as an investment company combines or collects money of its shareholders and invests those funds in variety of stocks, bonds, and money market instruments. • Investors who invest in mutual funds are provided with units to participate in stock markets. These units provide a means of participation in the stock market for people who have neither the time, nor the money, nor perhaps the expertise to undertake the direct investment in equities. • The price of units in any mutual fund is governed by the value of underlying securities hence fluctuates. • It also depends on the fund manager expertise knowledge and hence Fund Manager plays a vital role. • A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.
    4. 4. • Thus a mutual fund is the most suitable investment for the common person • It offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. • Suitable for small investors who generally do not have adequate time, knowledge, experience & resources for directly accessing the capital market. • The interest of the investors is protected by the SEBI, which acts as a watchdog. Mutual funds are governed by SEBI (Mutual Funds) regulations, 1996.
    5. 5. 1.2 ORGANISATION OF A MUTUAL FUND • Mutual funds have a unique structure not shared with other entities such as companies or firms. • The structure of the mutual fund India is governed by the SEBI (Mutual Funds) regulations, 1996. These regulations make it mandatory for mutual funds to have a structure of sponsor, trustee, AMC, custodian.
    6. 6. 1.3 HISTORY OF THE 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. • First Phase – 1964-87 - Unit Trust of India (UTI) was established on 1963 by an Act of Parliament by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India • 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). • Third Phase – 1993-2003 (Entry of Private Sector Funds) -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. • 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.
    7. 7. 1.4. WORLD PANORAMA • At the very dawn of commercial history, Egyptians and Phoenicians were selling shares in vessels and caravans in order to spread the risk of these perilous ventures. • In 1822, groups of people in Belgium established a company to finance investments in national industries under the name of „Societe Generale de Belgique‟ incorporating the concept of risk sharing. • In 1868, the Foreign and Colonial Government Trust of London was formed, which was the real pioneer to spread risk of investors over a large number of securities and was considered as the Mecca of modern mutual funds. • Sherman L Adams, the father of modern mutual fund, along with Charles Learoyd and Ashton Carr established a modest portfolio of 45 common stocks worth USD 50,000. • The crash of stock markets in 1929 led to the demise of many close-end funds. • In Canada, the Canadian Investment Fund was the first to be set up in 1932 followed by Commonwealth International Corporation Limited and Corporate Investors Limited.
    8. 8. • The enactment of Securities Act of 1933, Investment Company Act of 1940 and Investment Advisors Act of 1940, led to the revival of mutual funds in U.S.A. • Investment trusts in Japan were set up under the Securities Investment Law of 1951 with the three important characteristics namely contractual nature, open-end and flexibility. • In 1980s, because of high mutual fund returns, employees (through IRA accounts) en masse shifted to equity option for their retirement fund. • With the increasing inflation and interest rates during 1990’s, the individual and institutional investors became extremely sensitive to the true value of money. • American investors embraced mutual funds with a fervor that even the most optimistic fund executives could not have predicted. • By the end of 1994 in U.S.A., mutual funds had become the second largest financial institution after the banking sector holding assets worth USD 2161.4 billion. • By the end of 1996, of the U.S.A mutual fund industry’s (USD 3,539 trillion) assets, households owned USD 2.626 trillion (74.2 percent) while the remaining USD 9123 billion (25.8 percent) was held by banks, trustees, and other institutional investors
    9. 9. At the end of first quarter of 2003, the assets of worldwide mutual funds stood at USD 11.2 trillion while the assets of equity funds contributed for 35 percent.
    10. 10. The number of worldwide mutual funds stood at 53,150 with equity funds accounting for 42 percent as shown in the Exhibit 1.2.
    11. 11. 1.5. INVESTMENT ALTERNATIVES IN INDIA • Non marketable financial assets: These are such financial assets which gives moderately high return but cannot be traded in market. • Equity shares: These are shares of company and can be traded in secondary market. • Bonds: Bonds are the instruments that are considered as a relatively safer investment avenues. • Money market instrument: Money market instruments are those instruments, which have a maturity period of less than one year • Mutual Funds- A mutual fund is a trust that pools together the savings of a number of investors who share a common financial goal. • Life insurance: Now-a-days life insurance is also being considered as an investment avenue. • Real estate: One of the most important assets in portfolio of investors is a residential house.
    12. 12. • Precious objects: Investors can also invest in the objects which have value. • Financial Derivatives: These are such instruments which derive their value from some other underlying assets. It may be viewed as a side bet on the asset. The most important financial derivatives from the point of view of investors are: – Options – Futures
    13. 13. 1.6. STRUCTURE OF MUTUAL FUND • Since there is a clear distinction between open ended schemes and close ended schemes, usually two different types of structural and management approaches are followed. • The management and operations of the two types of funds, are, therefore, guided by separate regulatory mechanisms, and the rules are laid down by separate controlling authorities. However, no such distinctions exist in India and both approaches (Trust and Corporate) have been integrated by SEBI. • The formation and operations of mutual funds in India are guided solely by the SEBI regulations. • A mutual fund consists of four separate entities – sponsor, mutual fund trust, AMC and custodian. These are, of course, assisted by other independent administrative entities, such as banks, registrars and transfer agents.
    14. 14. Sponsor Company Establishes MF as a Trust Registers MF with SEBI Mutual Fund Asset Management Company Custodian Holds unit holders‟ fund in MF Ensures compliance to SEBI Enters into agreement with AMC Floats MF funds Manages funds as per SEBI guidelines and AMC agreement Provides necessary custodian services Managed by a Board of Trustees Bankers Registrars and Transfer Agents Provide Banking Services Provide registrar services and act as transfer agents Appointed by BOT Appointed by Trustees Appointed by AMC Appointed by AMC STRUCTURE OF THE INDIAN MUTUAL FUNDS
    15. 15. 1.7. SEBI REGULATIONS: • SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. • SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. • The regulations were fully revised in 1996 and have been amended thereafter from time to time. • 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. • SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. • Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. • Further SEBI Regulations, inter-alia, stipulate that MFs cannot guarantee returns in any scheme and that each scheme is subject to 20 : 25 condition. • SEBI has permitted MFs to launch schemes overseas subject various restrictions and also to launch schemes linked to Real Estate, Options and Futures, Commodities, etc.
    16. 16. 1.8 ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) • With the increase in mutual fund players in India, a need for mutual fund association in India was generated to function as a non-profit organization. Association of Mutual Funds in India (AMFI) was incorporated on 22nd August, 1995. • AMFI is an apex body of all Asset Management Companies (AMC) which has been registered with SEBI. • Association of Mutual Funds India has brought down the Indian Mutual Fund Industry to a professional and healthy market with ethical lines enhancing and maintaining standards. The Objectives of Association of Mutual Funds in India: • The Association of Mutual Funds of India works with 30 registered AMCs of the country. • This mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry. • It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management.
    17. 17. • AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. • Associations of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. • It develops a team of well qualified and trained Agent distributors. • AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds. • At last but not the least association of mutual fund of India also disseminate information on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies. AMFI Publications: • AMFI publish mainly two types of bulletin. One is on the monthly basis and the other is quarterly.
    18. 18. 1.9 ADVANTAGES OF MUTUAL FUNDS The Advantages of investing in a Mutual Fund are: • Professional Management • Diversification • Economies of Scale • Convenient Administration • Return Potential • Low Costs • Liquidity • Transparency • Flexibility • Affordability • Choice of Schemes • Well-Regulated • Simplicity
    19. 19. 1.10. THE DISADVANTAGES OF MUTUAL FUND: The Disadvantages of investing in a Mutual Fund are: • Professional Management • Costs • Taxes
    20. 20. 1.11. WHY TO INVEST IN MUTUAL FUNDS: A proven principle of sound investment is – “do not put all eggs in one basket”. Investment in mutual funds is beneficial due to following reasons. • They help in pooling of funds and investing in large basket of shares of different companies. • Professional fund managers engaged by mutual funds take desirable investment decision on behalf of investors so as to make better utilization of resources. • Investment in mutual funds is comparatively more liquid because investor can sell the units in open market or can approach mutual fund to repurchase the units at net asset value depending upon the type of scheme. • Investors can avail tax rebates by investing in different tax saving schemes floated by these funds, approved by the government. • Operating cost is minimized per head because of large size of investible funds, there by realizing more net income of investors.
    21. 21. 1.12. CLASSIFICATION OF MUTUAL FUND • Mutual funds can be classified as follow:-  Based on their structure: • Open-ended funds: • Close-ended funds: • Interval Schemes:  By Nature: • 1. Equity Fund: • 2. Debt Funds: • 3. Balanced Funds: • Further the mutual funds can be broadly classified on the basis of investment parameter viz,  BY INVESTMENT OBJECTIVE: • Growth Schemes:
    22. 22. • Income Schemes: • Balanced Schemes: • Money Market Schemes: • Load Funds: • No-Load Funds:  OTHER SCHEMES • Tax Saving Schemes: • Index Schemes: • Sector Specific Schemes:
    23. 23. CATEGORIES OF MUTUAL FUND:
    24. 24. 1.13. FREQUENTLY USED TERMS • Net Asset Value (NAV): • Sale Price: • Repurchase Price: • Redemption Price: • Sales Load: • No Load:
    25. 25. 1.14. MUTUAL FUND FEES AND EXPENSES • TRANSACTION FEES: • PERIODIC FEES: • OTHER OPERATING EXPENSES: • LOADS:Load funds exhibit a "Sales Load" with a percentage charge levied on purchase or sale of shares. A load is a type of Commission (remuneration). - Front-end load: - Back-end load: - Level load / Low load: - No-load Fund:
    26. 26. 1.15. SELECTION PARAMETERS FOR MUTUAL FUND • Objective: • Risk capacity and capability: • Fund Manager’s and scheme track record: • Cost factor: • Types of Returns on Mutual Fund - Income is earned from dividends on stocks and interest on bonds. - If the fund sells securities that have increased in price, the fund has a capital gain
    27. 27. CHAPTER 2 : Mutual Fund Vs Other Investments From investors’ viewpoint mutual funds have several advantages such as: • Professional management and research to select quality securities. • Spreading risk over a larger quantity of stock whereas the investor has limited to buy only a hand full of stocks. The investor is not putting all his eggs in one basket. • Ability to add funds at set amounts and smaller quantities such as $100 per month • Ability to take advantage of the stock market which has generally outperformed other investment in the long run. • Fund manager are able to buy securities in large quantities thus reducing brokerage fees.
    28. 28. However there are some disadvantages with mutual funds such as: • The investor must rely on the integrity of the professional fund manager. • Fund management fees may be unreasonable for the services rendered. • The fund manager may not pass transaction savings to the investor. • The fund manager is not liable for poor judgment when the investor's fund loses value. • There may be too many transactions in the fund resulting in higher fee/cost to theinvestor - This is sometimes call "Churn and Earn". • Prospectus and Annual report are hard to understand. • Investor may feel a lost of control of his investment dollars.  There may be restrictions on when and how an investor sells/redeems his mutual fund shares.  Company Fixed Deposits versus Mutual Funds  Both fixed deposits and mutual funds offer liquidity, but subject to some differences:
    29. 29. 2.1. Bank Fixed Deposits verses Mutual Fund: 2.2. Bonds and Debentures versus Mutual Funds 2.3. Equity versus Mutual Funds • Advantages of Mutual Funds over Stocks • Advantages of Stock over Mutual Funds? 2.4. Life Insurance versus Mutual Fund
    30. 30. Pointers to Measure Mutual Fund Performance MEASURES DESCRIPTION IDEAL RANGE STANDARD DEVIATION Standard Deviation allows to evaluate the volatility of the fund. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its mean return. Should be near to it’s mean return. BETA Beta is a fairly commonly used measure of risk. It basically indicates the level of volatility associated with the fund as compared to the benchmark. Beta > 1 = high risky Beta = 1 = Avg Beta <1 = Low Risky R-SQUARE R- square measures the correlation of a fund’s movement to that of an index. R- squared describes the level of association between the fund's volatility and market risk. R-squared values range between 0 and 1, where 0 represents no correlation and 1 represents full correlation. ALPHA Alpha is the difference between the returns one would expect from a fund, given its beta, and the return it actually produces. It also measures the unsystematic risk . Alpha is positive = returns of stock are better then market returns. Alpha is negative = returns of stock are worst then market. Alpha is zero = returns are same as market. SHARPE RATIO Sharpe Ratio= Fund return in excess of risk free return/ Standard deviation of Fund. Sharpe ratios are ideal for comparing funds that have a mixed asset classes. The higher the Sharpe ratio, the better a funds returns relative to the amount of risk taken.
    31. 31. CHAPTER 3 : Best Mutual Funds To Invest In 2012 • 3.1. Best Mutual Funds to invest in 2012 – Equity Funds • 3.1.1. Best Mutual Funds to invest in 2012 –Large Cap Funds - Mutual Funds with more than 80 per cent of assets in large-cap companies over the last three years are added in this category. Large cap funds can provide stability to any portfolio. Best Large Cap Mutual Funds 1m 3m 6m 1yr 3yr 5yr 10yr DSP BlackRock Top 100 Equity -8.07 -5.03 -16.07 -20.02 17.76 8.03 Franklin Templeton Franklin India Bluechip -5.36 -2.45 -11.64 -16.65 22.83 7.44 25.86 ICICI Prudential Focused Bluechip Equity -4.07 -0.07 -10.91 -14.5 26.67 Category Average -5.5 -2.29 -14.6 -21.56 14.64 3.32 16.6
    32. 32. 3.1.2. Best Mutual Funds to invest in 2012 –Large & Mid Cap Funds - Mutual Funds between 60 to 80 per cent of assets in large-cap companies over the last three years. They are definitely bit aggressive than large cap funds but still can get part in conservative investor‟s portfolio. • 3.1.3. Best Mutual Funds to invest in 2012 –Multi Cap Funds • Funds with between 40 to 60 per cent of assets in large-cap companies over the last three years are categorized under Multi-Cap. It‟s been noticed that Multi-caps funds also keep moving from one category to other as couple of month‟s back Reliance Equity Opportunities was in Multi-Cap category but now it is part of Mid & Small Cap funds. Best Large & Mid Cap Mutual Funds 1m 3m 6m 1yr 3yr 5yr 10yr Fidelity Equity -5.99 -4.64 -13.88 -19.28 23.04 7.69 HDFC Top 200 -6.02 -4.44 -16.79 -22.21 22.74 9.65 28.87 UTI Opportunities -3.77 0.04 -6.33 -10.80 27.61 12.87 Category Average -5.79 -4.13 -14.74 -21.65 15.62 2.88 18.8
    33. 33. • Best Mutual Funds to invest in 2012 – Year on Year Returns - You can see year on year performance to check the consistency of the funds. Best Multi Cap Mutual Funds 1m 3m 6m 1yr 3yr 5yr 10yr DSP BlackRock Equity -9.42 -9.89 -19.34 -24.19 19.42 7.95 26.81 HDFC Equity -9.42 -9.89 -19.34 -24.74 24.87 8.79 28.16 Quantum Long Term Equity -9.42 -9.89 -19.34 -18.89 27.78 9.86 Category Average -9.42 -9.89 -19.34 -23.58 17.47 3.78 22.79
    34. 34. Performance of different equity fund categories You can clearly see that multi-cap & midcaps have given better returns than large cap but were more volatile. Performance of different equity fund categories You can clearly see that multi-cap & midcaps have given better returns than large cap but were more volatile.
    35. 35. CHAPTER 4 : Risk Factors Of Mutual Funds • INVESTMENT STRATEGIES : 1. Systematic Investment Plan: 2. Systematic Transfer Plan 3. Systematic Withdrawal Plan: 4.1. RISK V/S. RETURN:
    36. 36. RISK HIERARCHY OF MUTUAL FUNDS
    37. 37. 4.2. RISK FACTORS OF MUTUAL FUNDS: 1. The Risk-Return Trade-Off: 2. Market Risk: 3. Credit Risk: 4. Inflation Risk: 5. Interest Rate Risk: 6. Political / Government Policy Risk: 7. Liquidity Risk:
    38. 38. CHAPTER– 5 : Comparision Between Direct Investment in Equity and Mutual Fund • Comparison between direct investment in equity and investment through Mutual funds 5.1. SELECTION CRITERIA FOR SCHEMES: • Selection of equity diversified funds are done here on the basis of their Return, risk , liquidity, affordability, entry-exit load, and performance over the years. 1. Only open ended funds are considered while choosing best equity related mutual funds. 2. Among growth and dividend schemes, only growth scheme has been taken so as to avoid repetition (as portfolio remains same for both the options) 3. Selection has been done on the basis of last 1 year performance.
    39. 39. Equity diversified funds The five funds I have chosen after comparing their performance vis-à-vis the other mutual funds in this category of funds are: Scheme Name Asset Size (Rs cr) as on 31st March,2012 NAV as on 28th May,2012 1 Yr 2 yr 3 yr 5 yr SBI Magnum Global Fund (G): 915.38 -0.30 5.70 16.00 4.40 ICICI Prudential Services Industries Fund (G): 171.7 15.61 -6.90 -1.10 8.30 -1.60 ICICI Prudential Dynamic Plan (G) 4092.27 101.021 -5.2 2.5 14 7.5 Reliance Growth Fund (G) 5769.98 408.688 -8.00 -3.80 7.90 6.70 Birla Sun Life Frontline Equity Fund - Plan A (G): 2900.75 223.94 -9.90 -4.80 4.60 2.20 5.2. Direct Equity The four stocks are chosen on the basis of their past returns and Beta . - Reliance Industries - Tata Motors - State Bank of India - Infosys Technologies
    40. 40. 5.3. FINDINGS AND ANALYSIS • In this chapter the findings of the performance evaluation of the various equity diversified mutual funds and direct equity with respect to benchmarks is listed. The mutual funds and stocks have been chosen on the basis of their returns over past three years. The benchmark chosen is BSE Sensex for the comparison. The mutual funds chosen are: 1. SBI Magnum Global Fund (G) 2. ICICI Prudential Services Indus.(G) 3. ICICI Prudential Dynamic Plan (G) 4. Reliance Growth Fund (G) 5. Birla Frontline Equity (G) Direct Equity chosen for purpose are: 1. Reliance Industries 2. Tata Motors 3. State Bank of India 4. Infosys Technologies
    41. 41. • Risk and return analysis: FUND RETURN MARKET RETURN SD MARKET EQUITY DIVERSIFIED SBI Magnum Global Fund (G) 13.40% 15.89% 1.75% ICICI Prudential Services Indus.(G) 31.70% 15.89% 1.75% ICICI Prudential Dynamic Plan (G) 17.80% 15.89% 1.75% Reliance Growth Fund (G) 12.90% 15.89% 1.75% Birla Frontline Equity (G) 23.40% 15.89% 1.75% DIRECT EQUITY FUND RETURN SD FUND MARKET RETURN SD MARKET FUND BETA Reliance 71.85% 2.18% 15.89% 1.75% 1.01 Tata Motors -21.97% 2.56% 15.89% 1.75% 1.13 SBI 2.57% 2.28% 15.89% 1.75% 0.91 Infosys Technologies 35.04% 2.03% 15.89% 1.75% 0.92
    42. 42. INVESTOR SURVEY ANALYSIS • To understand the investor‟s preference following questions have been asked: 1. Investment avenues you are aware of: 2. Factors considered while investing 3. Your portfolio includes majority of: 4. Types of Mutual funds invested in 5. Past returns as a good measure of performance : 6. Past returns as the only measure of performance: 7. Approach in making Investment 8. While investing, you are more concerned about: 9. How often do you monitor your portfolio? 10. How often do you monitor your portfolio? 11. How your portfolio allocation has changed over the time 12. You prefer to invest in Equity through? 13. You prefer Mutual Funds (Equity) because (as per their first choice) 14. Sources of information for mutual funds 15. You prefer direct investment because (as per their first choice)
    43. 43. CONCLUSION • Mutual Funds now represent perhaps most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. As the investor always try to maximize the returns and minimize the risk. Mutual fund satisfies these requirements by providing attractive returns with affordable risks. Risk takers for getting capital appreciation should invest in growth, equity schemes. Investors who are in need of regular income should invest in income plans. • The stock market has been rising for over three years now. This in turn has not only protected the money invested in funds but has also helped to grow these investments. This has also instilled greater confidence among fund investors who are investing more into the market through the MF route than ever before. Reliance India mutual funds provide major benefits to a common man who wants to make his life better than previous. • India's largest mutual fund, UTI, still controls nearly 80 per cent of the market. Also, the mutual fund industry as a whole gets less than 2 per cent of household savings against the 46 per cent that go into bank deposits. Some fund managers say this only indicates the sector's potential. "If mutual funds succeed in chipping away at bank deposits, even a triple digit growth is possible over the next few years.
    44. 44. FUTURE PROSPECT OF MUTUAL FUNDS IN INDIA Financial experts believe that the future of Mutual Funds in India will be very bright. It has been estimated that by March-end of 2010, the mutual fund industry of India will reach Rs 40,90,000 crore, taking into account the total assets of the Indian commercial banks. In the coming 10 years the annual composite growth rate is expected to go up by 13.4%. • 100% growth in the last 6 years. • Numbers of foreign AMC’s are in the queue to enter the Indian markets like Fidelity Investments, US based, with over US$1trillion assets under management worldwide. • Our saving rate is over 23%, highest in the world. Only channelizing these savings in mutual funds sector is required. • We have approximately 29 mutual funds which is much less than US having more than 800. There is a big scope for expansion. • 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are concentrating on the 'A' class cities. Soon they will find scope in the growing cities. • Mutual fund can penetrate into rural areas like the Indian insurance industry with simple and limited products. • SEBI allowing the MF's to launch commodity mutual funds.
    45. 45. • Emphasis on better corporate governance. • Trying to curb the late trading practices. • Introduction of Financial Planners who can provide need based advice. • Looking at the past developments and combining it with the current trends it can be concluded that the future of Mutual Funds in India has lot of positive things to offer to its investors.
    46. 46. BIBLIOGRAPHY • REFERENCE BOOK: • FINANCIAL MARKET AND SERVICES - Gordon and Natarajan • • WEBSITE: • • www.bseindia.com • www.moneycontrol.com • www.google.co.in • www.capitalmarket.com • www.indiainfoline.com • www.yahoofinance.com • www.mutualfundsindia.com • www.utimf.com • www.reliancemutual.com • www.amfiindia.com • • Magazines: • • Mutual fund Insight • Investors India • Business World • Business India • • • SEARCH ENGINE: • www.google.com • www.altavista.com • www.yahoo.com
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