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A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
A study on performance evaluation of equity shares & mutual funds
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A study on performance evaluation of equity shares & mutual funds

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A study on performance evaluation of equity shares & mutual funds

A study on performance evaluation of equity shares & mutual funds

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  • 1. Performance Evaluation of Equity shares & Mutual Funds INTRODUCTION 1.1 Executive Summary In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because of investments are risky in nature and investors have to consider various factors before investing in investment avenues. These factors include risk, return, volatility of shares and liquidity. The main objective of comparing investment in equity shares with mutual fund schemes is to analyze the performance of mutual funds with their benchmark and comparing them with equities by using risk, return, beta and alpha as a parameter. Historical data were taken for calculating risk, return, alpha and beta. Analysis has done on percentage method for comparing equity shares with mutual fund schemes. Compare to equities mutual funds are less risky with stable returns and mutual funds gives the investor a diversified portfolio. Those who have well knowledge in equity market they can go for equity investments rather than investing in mutual funds because no control on the expenses made by the fund manager. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability. 1.2 Statement of the Problem: In the current economic scenario interest rates are falling and fluctuation in the share market has put investors in confusion. One finds it difficult to take decision on investment. This is primarily, because investments are risky in nature and investors have to consider various factors before investing in investment avenues. Therefore the study aims to compare equity and mutual fund schemes in form their risk, return & liquidity and also creating awareness about Equity and Mutual Fund Schemes among the investors H.R.I.H.E. HASSAN 1
  • 2. Performance Evaluation of Equity shares & Mutual Funds 1.3 Objectives of the Study: Saving money is not enough. Each of us also need to invest one’s savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. But the rapidly growing number of investment avenues often led to confusion. Objectives of the study are to provide information to individual investors regarding their risk, and choosing the best investment options to match their goals and attitude to risk. 1. To compare Equity and Mutual Fund Schemes in respect of their risk & return. 2. Analyzing the performance of equity shares and mutual fund schemes with their benchmark. 3. Finding the Volatility of shares by using beta. 4. Provide information about pros and cons of investing in Equity and Mutual Funds portfolio management. The study is limited to compare equity capital and mutual fund schemes in respect of their risk, return and liquidity. The study covers 5 randomly selected stocks out of 30 BSE, 50 Sensex companies and 5 randomly selected mutual fund schemes out of mutual fund industry in India for comparison. The analysis is strictly based on share price and unit price information. Other company performance indicators are not considered. It focuses on every month ending closing prices of during the period from 1st Apr, 2003 to 31st Mar, 2007. 1.4 Scope of the Study The project primarily deals with equity, derivatives, mutual funds. The scope of the study of mutual funds is very large but my study is confined to only 4 AMC’s mutual funds. This study confines as how mutual fund is good investment avenue for investors. The study considers performance evaluation of mutual fund based on three measures that are Jensen’s measures, Sharpe’s measures, and Treyor’s measures. H.R.I.H.E. HASSAN 2
  • 3. Performance Evaluation of Equity shares & Mutual Funds 1.5 Research Methodology The whole study can be termed as comparative study. It is also a desk research hence; there is no field work and collection of primary date for this research. The study centres on comparing equity and mutual fund schemes in respect of their risk, return and liquidity. However, with the objective and scope of the study in mind, it was decided to base the study on return series of selected stocks and mutual fund schemes. BSE being the premier exchange of India was chosen for selecting stocks. It is widely accepted that BSE Sensex is the one of the most reliable index of the stock exchange that reflects present day market condition. Since it is not possible to compare all the 30 scripts in the index with all Mutual Fund Schemes due to time and resource constraints, sampling techniques were considered. Randomly selected samples will facilitate inference of the population, in our case BSE Sensex and mutual fund industry in India. Hence by stratified random sampling 5 scrip’s out of 30 Sensex and 5 mutual fund schemes out of whole mutual fund industry were selected. The initial examination of the composition of index revealed that it is composed of primarily two types of industries: manufacturing and services in the ratio of 3:2. there for to give correct picture appropriate weight was assigned to manufacturing industries and hence three scrip’s from manufacturing and two from service industries were randomly selected and in case of mutual funds it consists basically large cap, mid cap, small cap, sectorial funds and contra funds therefore one fund from each area were selected. Monthly share price and unit prices of the selected scrip’s and units were collected from historical data. In order to avoid bias, at least three years monthly data was decided to be necessary. The reference period is from 1st Apr, 2003 to 31st Mar, 2007. 1.51 SOURCES OF DATA Meaning of primary data: In primary data collection, you collect the data yourself using methods such as interviews and questionnaires. The key point here is that the data you collect is unique to you and your research and, until you publish, no one else has access to it. H.R.I.H.E. HASSAN 3
  • 4. Performance Evaluation of Equity shares & Mutual Funds Primary data: collected through face to face conversation with portfolio managers and Brokers Meaning of Secondary data: In research, secondary data is data collected and possibly processed by people other than the researcher in question. Common sources of secondary data for social science include censuses, large surveys, and organizational records. In historical research secondary sources are summaries, collections, and interpretations of primary sources. Secondary data: Collected through Reports, Magazines, Publications, Newspapers, Internet Sampling technique: The quality of research output and the validity of its findings depend upon appropriateness of the sampling design selected for the study. It was needed to apply inferential statistical analysis; hence probability sampling was chosen to be essential. Criteria for Selecting Sampling Techniques  It is intended to generalize the finding based on the sample examination to the population, therefore, probability sampling adopted in order to have a representative sample.  Since the population is heterogeneous stratified random sampling was taken.  Probability sampling produces high degree of precision compared to non probability sampling. H.R.I.H.E. HASSAN 4
  • 5. Performance Evaluation of Equity shares & Mutual Funds 1.52 Sample Design 1. Relative population – 30 BSE sensitivity index companies and mutual fund industry in India. 2. Sampling frame – list of population, elements from which sample is drawn (see the annexure). 3. Method of sampling – stratified random sampling. Stratification or division of population into homogeneous group was done on the basis of industry. 4. Variables – monthly calculated risk and returns were used for comparing equity and mutual fund schemes. b. Sample size: Five companies and five mutual fund schemes were selected. (Since the population is heterogeneous stratified random sampling was taken). c. Sample Description EQUITIES BENCHMARK ACC LIMITED BSE SENSEX BHEL BSE SENSEX HERO HONDA BSE SENSEX ICICI BANK LIMITED BSE SENSEX INFOSIS BSE SENSEX MUTUAL FUNDS BENCHMARK FRANKLIN INDIA PRIMA FUND BSE 100 PRUDENTIAL ICICI MUTUAL FUND BSE 100 BSE 100 RELIANCE MUTUAL FUND BSE SENSEX SBI MUTUAL FUND BSE 100 BSE 100 SUNDARAM SMILE FUND BSE 500 f. Limitations of the Study H.R.I.H.E. HASSAN 5
  • 6. Performance Evaluation of Equity shares & Mutual Funds The time period for the project was limited to only one and half month and information provided is limited to the extent of internet and journals.  Some of the persons were not so responsive.  Possibility of error in data collection because many of investors may have not given actual answers of my questionnaire.  Sample size is limited to 200 visitors of Allegro advisor private limited out of the 120 had invested in Mutual Fund.  The sample size may not adequately represent the whole market H.R.I.H.E. HASSAN 6
  • 7. Performance Evaluation of Equity shares & Mutual Funds THEORITICAL FRAME WORK 2.1 Background of the study: Introduction to Equity Capital and Mutual Fund Issue of shares is the most important method of raising capital. Finance raised by the issue of shares serves as a financial floor to the company’s capital structure. Shares indicate the ownership or equity interest in the assets of the company. Shares are of different nominal or face values and of different kinds to attract different kinds of investors. The maximum amount of capital to be raised by the issue of shares is mentioned in the memorandum of association. During 1990-91 and 1991-92, equity accounts for 35 to 39 percent of the total capital raised respectively. This proportion was reversed in 1992-93, the first year of free pricing, when the share of equity increased to 62 percent. His share of equity finance increased to a high of 73.18 percent in 1994-95. However, in 1995-96 there is a rise in the importance of debt largely due to the high interest rates in the economy and negative returns from the secondary market. The mutual fund industry in India started in 1964 with the formation of Unit Trust of India, at the initiative of the Government of India. The 1993 SEBI Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The end of millennium marks 36 years of existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds others are against it. UTI commenced its operations from July 1964. The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came in to existence during a period marked by great political and economic turmoil that depressed the financial market; entrepreneurs were rather hesitant to enter the capital markets. H.R.I.H.E. HASSAN 7
  • 8. Performance Evaluation of Equity shares & Mutual Funds 2.2 Concept of Equity Capital and Mutual Fund The term Equity literally means the stock or ownership of a company. They are also known as ordinary shares. The rate of dividend on equity shares varies according to the amount of profit available and the intention of board of directors. In the event of winding up of the company, equity shares can be refunded only after all other claims, including those of preference shares for the refund of their capital, have been met. Equity capital or financing is money raised by a business in exchange for a share of ownership in the company. Ownership is represented by owning shares of stock outright or having the right to convert other financial instruments into stock of that private company. Two key sources of equity capital for new and emerging businesses are angel investors and venture capital firms. Equity capital is represented by funds that are raised by a business, in exchange for a share of ownership in the company. Equity financing allows a business to obtain funds without incurring debt, or without having to repay a specific amount of money at a particular time. The Equity Capital Markets Group (ECM) oversees the Firm's activities in the primary equity and equity-linked markets, as well as monetization and equity derivatives. It provides support in the origination of primary market transactions and manages their structuring, syndication, marketing and distribution. The world over, it’s been shown that over long tenures, equities–with their risk premier–have provided approximately 7 percentage points higher returns than risk-free options. People have to accumulate significant amounts of wealth during their working years. Right now, a 17-year bond gives you only 5.5 per cent. So, it is imperative that these people have some exposure to equity. A mutual fund is a trust that pools the money of many investors – its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are H.R.I.H.E. HASSAN 8
  • 9. Performance Evaluation of Equity shares & Mutual Funds professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. A mutual fund is a group of investors operating through a fund manager to purchase a diverse portfolio of stocks or bonds. There are myriad kinds of mutual funds, each with its own goals and methodologies. Whether or not a mutual fund is a good investment is a matter of much public debate, with many claiming they are excellent for the average person, and others saying they are simply a poor way to invest. For the individual investor, mutual funds provide the benefit of having someone else manage your investments, take care of recordkeeping for your account, and diversify your rupees over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify. Many critics of mutual funds point out that scarcely over 20% of mutual funds outperform the Standard and Poor's 500 Index. This means that nearly 80% of the time, an investor would have been more profitable by simply buying equal shares in all 500 of the companies currently on the S&P 500. 2.21 Schemes of Mutual funds Schemes according to Maturity Period: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. Open-ended Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. H.R.I.H.E. HASSAN 9
  • 10. Performance Evaluation of Equity shares & Mutual Funds Close-ended Scheme: A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis. Schemes according to Investment Objective: A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close- ended schemes as described earlier. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. H.R.I.H.E. HASSAN 10
  • 11. Performance Evaluation of Equity shares & Mutual Funds Balanced Scheme: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds. Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. Gilt Fund: These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc, these schemes invest in the securities in the same weightage comprising of an index. NAV’s of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. Sector Specific Schemes: H.R.I.H.E. HASSAN 11
  • 12. Performance Evaluation of Equity shares & Mutual Funds These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre- dominantly in equities. Their growth opportunities and risks associated are like any equity oriented scheme. 2.3 Advantages of Equity Capital and Mutual Fund: Advantages of Equity Capital: 1. High dividend and high value:- In times of prosperity, the equity shareholders get a very high rate of dividend, sufficiently higher than that on preference shares. At the same time, their share value will also go up in the market. 2. Voting rights:- It is only the equity shareholders who enjoy voting rights on all the policy matters of the company. 3. Pre-emptive right to new shares:- Equity shareholders have the pre-emptive right to purchase new shares. Under the provisions of the companies act, the existing shareholders of the company have a right to allotment of newly issued shared. 4. Many privileges and rights:- Equity shareholders enjoy many privileges and rights. For example, they can vote H.R.I.H.E. HASSAN 12
  • 13. Performance Evaluation of Equity shares & Mutual Funds at meetings, elect directors, control the directors to run the company efficiently and profitably, look into the books and records of the company and transfer or sell their shareholdings. 2.31 Advantages of Mutual Fund: 1. Professional Investment Management:- By pooling the funds of thousands of investors, mutual funds provide full-time, high-level professional management that few individual investors can afford to obtain independently. Such management is vital to achieving results in today's complex markets. Your fund managers' interests are tied to yours, because their compensation is based not on sales commissions, but on how well the fund performs. 2. Diversification:- Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund shareowners can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. 3. Low Cost:- If you tried to create your own diversified portfolio of 50 stocks, you'd need at least Rs.1, 00,000 and you'd pay thousands of rupees in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as Rs.10, 000, and sometimes less. And if you buy a no-load fund, you pay or no sale charges to own them. 4. Convenience and Flexibility:- You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, clip the bond coupons, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. 5. Quick, Personalized Service:- H.R.I.H.E. HASSAN 13
  • 14. Performance Evaluation of Equity shares & Mutual Funds Most funds now offer extensive websites with a host of shareholder services for immediate access to information about your fund account. Or a phone call puts you in touch with a trained investment specialist at a mutual fund company who can provide information you can use to make your own investment choices, assist you with buying and selling your fund shares. 6. Ease of Investing:- You may open or add to your account and conduct transactions or business with the fund by mail, telephone or bank wire. You can even arrange for automatic monthly investments by authorizing electronic fund transfers from your checking account in any amount and on a date you choose. 7. Total Liquidity, Easy Withdrawal:- You can easily redeem your shares anytime you need cash by letter, telephone, bank wire or check, depending on the fund. Your proceeds are usually available within a day or two. 8. Life Cycle Planning:- With no-load mutual funds, you can link your investment plans to future individual and family needs -- and make changes as your life cycles change. You can invest in growth funds for future college tuition needs, then move to income funds for retirement, and adjust your investments as your needs change throughout your life. 9. Market Cycle Planning:- For investors who understand how to actively manage their portfolio, mutual fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market funds on the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates. 10. Investor Information:- H.R.I.H.E. HASSAN 14
  • 15. Performance Evaluation of Equity shares & Mutual Funds Shareholders receive regular reports from the funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the mutual fund price listings of daily newspapers. You can also obtain pricing and performance results for the all mutual funds at this site, or it can be obtained by phone from the fund. 11. Periodic Withdrawals:- If you want steady monthly income, many funds allow you to arrange for monthly fixed checks to be sent to you, first by distributing some or all of the income and then, if necessary, by dipping into your principal. 12. Dividend Options:- You can receive all dividend payments in cash. Or you can have them reinvested in the fund free of charge, in which case the dividends are automatically compounded. This can make a significant contribution to your long-term investment results. 13. Automatic Direct Deposit:- You can usually arrange to have regular, third-party payments -- such as Social Security or pension checks -- deposited directly into your fund account. This puts your money to work immediately, without waiting to clear your checking account, and it saves you from worrying about checks being lost in the mail. 14. Recordkeeping Service:- With your own portfolio of stocks and bonds, you would have to do your own recordkeeping of purchases, sales, dividends, interest, short-term and long term gains and losses. Mutual funds provide confirmation of your transactions and necessary tax forms to help you keep track of your investments and tax reporting. 15. Safekeeping:- When you own shares in a mutual fund, you own securities in many companies without having to worry about keeping stock certificates in safe deposit boxes or sending them by registered mail. You don't even have to worry about handling the mutual fund H.R.I.H.E. HASSAN 15
  • 16. Performance Evaluation of Equity shares & Mutual Funds stock certificates; the fund maintains your account on its books and sends you periodic statements keeping track of all your transactions. 16. Retirement and College Plans:- Mutual funds are well suited to Individual Retirement Accounts and most funds offer IRA-approved prototype and master plans for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans. 17. Online Services:- The internet provides a fast, convenient way for investors to access financial information. A host of services are available to the online investor including direct access to no-load companies. Visit Company Links to access these Companies. 18. Sweep Accounts:- With many funds, if you choose not to reinvest your stock or bond fund dividends, you can arrange to have them swept into your money market fund automatically. You get all the advantages of both accounts with no extra effort. 19. Asset Management Accounts:- These master accounts, available from many of the larger fund groups, enable you to manage all your financial service needs under a single umbrella from unlimited check writing and automatic bill paying to discount brokerage and credit card accounts. 2.32 Disadvantages of Equity Capital and Mutual Fund Disadvantages of Equity Capital: 1. No refund of capital:- H.R.I.H.E. HASSAN 16
  • 17. Performance Evaluation of Equity shares & Mutual Funds Since equity shares cannot be refunded, excessive issue of such shares may leads to overcapitalization, particularly when the earning capacity of the company declining. 2. Benefits only in prosperity:- During the periods of prosperity, the company has to distribute heavy dividends on these shares. 3. Manipulation of control:- Since the equity shares have proportionate voting power, the company’s management may be vitiated by manipulation of votes, clique-formation, abuse of proxy rights etc. 4. High risk:- Equity share holders cannot claim dividend as a matter of right, because the decision to fit the rate of dividend on equity shares is vested in the Board of Directors. Therefore investors as a class may find equity shares unsafe, unattractive and unremunerated. 5. Unhealthy Speculation:- During the period of boom, the market value of shares will go up, which leads to unhealthy speculation in the stock market. Disadvantages of Mutual Fund: There are certainly some benefits to mutual fund investing, but you should also be aware of the drawbacks associated with mutual funds. 1. No Insurance:- Mutual funds, although regulated by the government, are not insured against losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain losses at banks, credit unions, and savings and loans, not mutual funds. That means that despite the risk-reducing diversification benefits provided by mutual funds, losses can H.R.I.H.E. HASSAN 17
  • 18. Performance Evaluation of Equity shares & Mutual Funds occur, and it is possible (although extremely unlikely) that you could even lose your entire investment. 2. Dilution:- Although diversification reduces the amount of risk involved in investing in mutual funds, it can also be a disadvantage due to dilution. For example, if a single security held by a mutual fund doubles in value, the mutual fund itself would not double in value because that security is only one small part of the fund's holdings. By holding a large number of different investments, mutual funds tend to do neither exceptionally well nor exceptionally poorly. 3. Fees and Expenses:- Most mutual funds charge management and operating fees that pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high sales commissions, 12b-1 fees, and redemption fees. And some funds buy and trade shares so often that the transaction costs add up significantly. Some of these expenses are charged on an ongoing basis, unlike stock investments, for which a commission is paid only when you buy and sell (see Investor Guide University: Fees and Expenses). 4. Poor Performance:- Returns on a mutual fund are by no means guaranteed. In fact, on average, around 75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a growing number of critics now question whether or not professional money managers have better stock-picking capabilities than the average investor. 5. Loss of Control:- The managers of mutual funds make all of the decisions about which securities to buy and sell and when to do so. This can make it difficult for you when trying to manage your portfolio. For example, the tax consequences of a decision by the manager to buy or sell an asset at a certain time might not be optimal for you. You also should remember that you trust someone else with your money when you invest in a mutual fund. H.R.I.H.E. HASSAN 18
  • 19. Performance Evaluation of Equity shares & Mutual Funds 6. Trading Limitations:- Although mutual funds are highly liquid in general, most mutual funds (called open-ended funds) cannot be bought or sold in the middle of the trading day. You can only buy and sell them at the end of the day, after they've calculated the current value of their holdings. 7. Size:- Some mutual funds are too big to find enough good investments. This is especially true of funds that focus on small companies, given that there are strict rules about how much of a single company a fund may own. If a mutual fund has $5 billion to invest and is only able to invest an average of $50 million in each, then it needs to find at least 100 such companies to invest in as a result, the fund might be forced to lower its standards when selecting companies to invest in. 8. Inefficiency of Cash Reserves:- Mutual funds usually maintain large cash reserves as protection against a large number of simultaneous withdrawals. Although this provides investors with liquidity, it means that some of the fund's money is invested in cash instead of assets, which tends to lower the investor's potential return. 9. Different Types:- The advantages and disadvantages listed above apply to mutual funds in general. However, there are over 10,000 mutual funds in operation, and these funds vary greatly according to investment objective, size, strategy, and style. Mutual funds are available for virtually every investment strategy (e.g. value, growth), every sector (e.g. biotech, internet), and every country or region of the world. So even the process of selecting a fund can be tedious. H.R.I.H.E. HASSAN 19
  • 20. Performance Evaluation of Equity shares & Mutual Funds PROFILE OF ALLEGRO ADVISORS PVT LTD 3.1 Introduction: Allegro Capital Advisors Put Ltd. One of the oldest and largest broking firms in the Industry. The company’s offerings include stock broking through the branch and Internet, Investments in IPO, Mutual funds and Portfolio management service. Allegro Capital Advisors Pvt. Ltd. has a full-fledged research division involved in Macro Economic studies, Sect oral research and Company Specific Equity Research combined with a strong and well networked sales force which helps deliver current and up to date market information and news. Kotak Securities’ network spans over 112 cities with 351 outlets, with an employee workforce beyond 5100. The company is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can avail the company’s brokerage services for executing the transactions and the depository services for settling them. Allegro Capital Advisors Pvt. Ltd processes more than 4, 00,000 trades a day which is much higher even than some of the renowned international brokers. Allegro Capital Advisors Pvt. Ltd. has over Rs. 3300 crore of Assets Under Management (AUM) as of 31st March, 2009. The portfolio Management Service provides top class service, catering to the high end of the market. Portfolio Management from Allegro Capital Advisors Pvt. Ltd. comes as an answer to those who would like to grow exponentially on the crest of the stock market, with the backing of an expert. Unlike many other companies, Allegro Capital Advisors Pvt. Ltd. has a Centralised Risk Management System and an in-house Research Team which allows it to offer the same H.R.I.H.E. HASSAN 20
  • 21. Performance Evaluation of Equity shares & Mutual Funds levels of service to customers across all locations. Allegro Capital Advisors Pvt. Ltd has been the first in providing many products and services which have now become industry standards. • Facility of Margin Finance to the customers • Investing in IPOs and Mutual Funds on the phone • SMS alerts before execution of depository transactions • Mobile application to track portfolios • Auto Invest - A systematic investing plan in Equities and Mutual funds MANAGEMENT TEAM al Kashyap - Chairman and CEO Kunal Kashyap - Chairman and CEO H.R.I.H.E. HASSAN 21
  • 22. Performance Evaluation of Equity shares & Mutual Funds       H.R.I.H.E. HASSAN 22
  • 23. Performance Evaluation of Equity shares & Mutual Funds - G a u t a m B e n j a m i n : 1 8 yr s + ex pe ri en ce in m ul ti H.R.I.H.E. HASSAN na 23 ti o na
  • 24. or ga Performance Evaluation of Equity shares & Mutual Funds ni - za S ti o a ns n in j cl a u y di M n g a as n D s ir a ec b to d r ( a C r: or 1 p 8 or yr at s e + Fi in na In nc te e) rn A at n io de na rs l en M an ar d H.R.I.H.E. HASSAN ke 24 H ts ea tr d ad
  • 25. M g ed F ia Performance Evaluation of Equity shares & Mutual Funds X & , T In ec te h re n st ol R h o at n g es ol y , o Pr E g ac q y ti ui ce ty , In Er di ns ce t s, & C Y o o m u m n o g di VALUE ADVANTAGE ti Independent - es E , Allegro is an independent, unbiased advisor to its clients. Our advice is free from the compulsions associated with representing manufacturers of financial products. It is x St unaffected by the limitations of operating in a compartmentalized business group. We, pe ru therefore, have the credibility and operational edge to be independent while consistently rti ct placing our client's interest first. se ur in ed Informed M Pr & o A d H.R.I.H.E. HASSAN 25 , uc L ts ev an
  • 26. ag D ed er B iv Performance Evaluation of Equity shares & Mutual Funds u at The diverse experience and skills of our team together with top sources of market y- iv and industry information, enables us to provide the best advice to our clients - corporate, o es institutions or individuals. Our methodology, people development, analysis and research ut at processes are of the highest standard. We make it our business to be fully informed about s, JP our client needs, while closely following products and industry trends. M M an or Innovative ag ga Solutions at Allegro are the result of innovative tools and investment ideas that e n, seamlessly integrate business lines based on trends, expertise and a time-tested approach m B to being custodians of our clients' financial interests. Alternative investment strategies, en an the focus on restructuring debt or our pioneering initiative to advise corporations on t k public offerings, bear testimony to Allegro's ability to offer solutions that are out-of-the- B of box.We believe there are no packaged, off-the-shelf solutions. Every recommendation u A made by our team fits into a customized plan that is outlined at the commencement of a y- m relationship. Each proposal is backed by proprietary, focused research, fund management o er expertise and the lowest client-to-advisor ratio in the industry. ut ic s, a 3.2 EQUITY TRADING C an ro d Trading accounts ss M - With an Allegro Capital Advisors Pvt. Ltd. online trading account customer can buy ul and sell shares in an instant. Any time customer want, from anywhere you like. b ti or St Allegro Capital Advisors Pvt. Ltd. online trading account comes with a depository de ra participant account where customer can keep all shares, in safe custody with National r te Securities Depository. Tr g an Customer can also link an Allegro Capital Advisors Pvt. Ltd. online trading account y to an Internet companying account of your choice, so that you can move cash in and out sa A of this account easily, without the bother of writing cheques all the time. ct si io an ns H Trading services an ed d ge H.R.I.H.E. HASSAN Pr 26 F iv u at n e d
  • 27. q - ui E Performance Evaluation of Equity shares & Mutual Funds ty x Trading is super-fast, extremely safe and highly secure at Allegro Capital Advisors pe Pvt. Ltd. Apart from providing the most advanced trading platform in the country, - rti Allegro Capital Advisors Pvt. Ltd. also offers facilities like instant cash transfer, after- C se market order, limit against shares and four times exposure on margin. ha in rt se er tti Transaction charges are reasonable at Allegro Capital Advisors Pvt. ed n Ltd. A g cc u  0.5% all inclusive for trades that result into delivery o p u  0.1% all-inclusive for intra-settlement trades an nt  Trading account opening charges = Rs750 only d an m No transaction charges for depository participant (DP) account t an Note: our non-trading DP clients are charged 0.02% and 0.04% of trade value for an ag purchase and sale transactions respectively. d in B g DP account maintenance charges (Rs75 per quarter) waived until October 31, 2002 A fi ( na H nc Trading products o ia ns For timely and accurate "Buy" and "Sell" recommendations try our Super-Duper l ) Tradingproducts. m M ar at ke Depository services he ts b Customer can open a Depository Participant (DP) account, either through an Allegro Capital Advisors Pvt. Ltd. branch or through an Allegro Capital Advisors Pvt. Ltd. us franchisee. There is no fee for opening a DP account with Allegro Capital Advisors Pvt. Ltd. in However a nominal deposit (refundable) is charged towards services, which are adjusted es against all future billings. se s fr H.R.I.H.E. HASSAN o 27 m gr o
  • 28. u n d Performance Evaluation of Equity shares & Mutual Funds u p, Allegro ba Capital Advisors Pvt. Ltd. offers dematerialisation /rematerialisation services to individual and corporate investors. ck to Dematerialization is the process by which a client can get physical certificates fr converted into electronic balances maintained in his account with the DP. o Dematerialization is the process by which a client can get his electronic holdings nt converted into physical certificates. , at JP Allegro Capital Advisors Pvt. Ltd. also offers Pledge facility, which enables you to M obtain loans against their dematerialized shares. So customer gets liquidity without or having to sell their shares. ga n, B "Mutual Fund" section provides exhaustive information on various mutual fund an schemes. You can also download from our site forms of various mutual fund schemes k including HDFC MF, JF MF, Pioneer ITI MF, Prudential ICICI MF, Templeton MF and of Zurich India MF. A m er 3.3 Derivatives trading ic a It also provides derivatives trading services through our ground network of share an shops. With Allegro Capital Advisors Pvt. Ltd. you can invest in index and stock futures as d well as stock and index options on the NSE. Keep track of the derivatives market with A "Derivatives Info Kit" and find out which strike to buy/sell using Black & Scholars zu Option calculator. ra C ap Content features at Allegro Capital Advisors Pvt. Ltd. online trading in equities is it made easy with the help of jargon-free investment advice. If you experience our al language, presentation style or content, you will find a common thread--the one that helps A you make informed investment decisions and Simplifies investing in stocks. H.R.I.H.E. HASSAN d 28 vi so rs
  • 29. o- F Performance Evaluation of Equity shares & Mutual Funds o u n Track domestic and international stock indices with "Indices at a Glance". Get de real-time stock quotes, live NSE ticker, daily top 5 gainers/losers, volume toppers and d) more market statistics, all at Allegro Capital Advisors Pvt. Ltd. Know about the market as it happens through "Live Markets". - M ec Keep abreast of the latest news and developments not only in the stock market but ha also in the world outside with "Live News" brought to you by Reuters. We also have a ni tie-up with Capital Market News Service for "Archive News". ca l E n gi ne er II T B o ANALYSIS OF DATA & INTERPRETATIONS m Calculation of Return and Risk of Selected Mutual Fund Schemes and ba their Bench Marks y, 1. BSE SENSEX: Calculation of Return and Standard Deviation M DATE SCRIP RETURN IN R-R1 (R-R1)2 B VALUE % A 31/01/2008 13827.77 - fr 28/02/2008 14124.36 2.14 3.23 10.46 o 31/03/2008 13013.74 -7.86 -6.77 45.83 30/04/2008 m 12811.93 -1.55 -0.46 0.21 31/05/2008 X 13987.77 9.18 10.27 105.47 30/06/2008 L 14610.28 4.46 5.55 30.80 31/07/2008 14685.16 0.51 1.6 2.56 R H.R.I.H.E. HASSAN I 29
  • 30. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 15344.02 4.48 5.57 31.02 30/09/2008 15401.99 0.37 1.46 2.13 31/10/2008 17356.99 12.69 13.78 189.88 30/11/2008 20130.23 15.98 17.07 291.38 31/12/2008 19547.09 -2.89 1.8 3.24 31/01/2009 20325.27 3.98 5.07 25.70 29/02/2009 17820.67 -12.32 -11.23 126.11 31/03/2009 17227.56 -3.32 -2.23 4.97 30/04/2009 15771.72 -8.45 -7.36 54.16 31/05/2009 17560.15 11.33 12.42 154.25 30/06/2009 16591.46 -5.51 -4.42 19.53 31/07/2009 13480.02 -18.75 -7.66 311.87 31/08/2009 14064.26 8.34 9.43 88.92 30/09/2009 14412.99 2.47 3.56 12.67 31/10/2009 13006.72 -9.75 -8.66 74.99 30/11/2009 10209.37 -21.50 -20.41 416.56 31/12/2009 9162.94 -10.24 -9.15 83.72 TOTAL -26.21 2086.43 Bench Mark Return and Risk (BSE Sensex) Return = (P1 /P0 X 100)-100 Where, P1 = Current month price, P0 = Previous month price R1 = , where n=number of months. R1 = -26.21/24 = -1.09 SD= ∑(R-R1)2/n = 2086.43/24 =9.32 H.R.I.H.E. HASSAN 30
  • 31. Performance Evaluation of Equity shares & Mutual Funds 2. BSE 100: Calculation of Return and Standard Deviation DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 6999.7 28/02/2008 7163.28 2.34 3.51 12.32 31/03/2008 6553.79 -8.51 -7.34 53.82 30/04/2008 6464.11 -1.37 -0.20 0.04 31/05/2008 7096.51 9.78 10.96 120.03 30/06/2008 7502.26 5.72 6.89 47.47 31/07/2008 7626.47 1.66 2.83 8.00 31/08/2008 7936.68 4.07 5.24 27.46 30/09/2008 7894.18 -0.54 0.64 0.41 31/10/2008 8989.89 13.88 15.05 226.58 30/11/2008 10531.27 17.15 18.32 335.56 H.R.I.H.E. HASSAN 31
  • 32. Performance Evaluation of Equity shares & Mutual Funds 31/12/2008 10488.02 -0.41 0.76 0.58 31/01/2009 11186.45 6.66 7.83 61.34 29/02/2009 9519.26 -14.90 -13.73 188.54 31/03/2009 9229.75 -3.04 -1.87 3.49 30/04/2009 8295.01 -10.13 -8.95 80.19 31/05/2009 9334.8 12.54 13.71 187.90 30/06/2009 8762.16 -6.13 -4.96 24.62 31/07/2009 7047.26 -19.57 -18.40 338.53 31/08/2009 7352.68 4.33 5.51 30.32 30/09/2009 7552.13 2.71 3.89 15.09 31/10/2009 6761.37 -10.47 -9.30 86.45 30/11/2009 5146.07 -23.89 -22.72 516.09 31/12/2009 4631.07 -10.01 -8.84 78.06 TOTAL -28.14 2442.89 Bench Mark Return and Risk (BSE 100) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price R1 = , where n=number of months. R1 = -28.14/24 = -1.17 SD= ∑(R-R1)2/n = 2442.89/24 =10.08 H.R.I.H.E. HASSAN 32
  • 33. Performance Evaluation of Equity shares & Mutual Funds 3. BSE 500: Calculation of Return and Standard Deviation DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 5269.98 28/02/2008 5425.12 2.94 4.28 18.33 31/03/2008 4955.28 -8.66 -7.32 53.63 30/04/2008 4877.65 -1.57 -0.23 0.05 31/05/2008 5354.63 9.78 11.12 123.56 30/06/2008 5669.8 5.89 7.22 52.17 31/07/2008 5796.78 2.24 3.58 12.79 31/08/2008 6016.93 3.80 5.13 26.37 30/09/2008 5975.41 -0.69 0.65 0.42 31/10/2008 6792.93 13.68 15.02 225.55 30/11/2008 7880.34 16.01 17.35 300.85 H.R.I.H.E. HASSAN 33
  • 34. Performance Evaluation of Equity shares & Mutual Funds 31/12/2008 7943.25 0.80 2.14 4.56 31/01/2009 8620.1 8.52 9.86 97.18 29/02/2009 7216.35 -16.28 -14.95 223.43 31/03/2009 6991.67 -3.11 -1.78 3.16 30/04/2009 6197.26 -11.36 -10.03 100.50 31/05/2009 6977.67 12.59 13.93 194.04 30/06/2009 6525.63 -6.48 -5.14 26.43 31/07/2009 5224.8 -19.93 -18.60 345.85 31/08/2009 5441.26 4.14 5.48 30.03 30/09/2009 5588.18 2.70 4.04 16.30 31/10/2009 4942.68 -11.55 -10.21 104.33 30/11/2009 3691.04 -25.32 -23.99 575.33 31/12/2009 3313.97 -10.22 -8.88 78.83 TOTAL -32.09 2613.71 Bench Mark Return and Risk (BSE 500) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price R1 = , where n=number of months. R1 = -32.09/24 = -1.33 SD= ∑(R-R1)2/n = 2613.71/24 =10.43 H.R.I.H.E. HASSAN 34
  • 35. Performance Evaluation of Equity shares & Mutual Funds 1. Reliance Vision Fund:- Reliance Vision Fund is large cap open ended growth fund. Its objective is to achieve long term growth of capital through a research based investment approach. Monthly risk and return from 30th Apr 2003 to 31st Mar 2007 is calculated below. Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -17.52/24, = -0.73 Where n=number of months. SD = ∑ (R- R1)2 /n, = 2078.95./24 SD = 9.30 Calculation of Beta B = [ ∑(Ra –Ra1)(Rm-Rm1)]/∑(Rm-Rm1)2 H.R.I.H.E. HASSAN 35
  • 36. Performance Evaluation of Equity shares & Mutual Funds Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 244.29/2086.44 B = 0.11 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-0.76-(-1.14)*0.11 =0.04 Calculation of Risk and Return DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 184.14 28/02/2008 171.42 -6.91 -6.18 38.17 31/03/2008 169.69 -1.01 -0.28 0.08 30/04/2008 183.8 8.32 9.05 81.81 31/05/2008 200 8.81 9.54 91.08 30/06/2008 207.32 3.66 4.39 19.27 31/07/2008 219.24 5.75 6.48 41.98 31/08/2008 214.28 -2.26 -1.53 2.35 30/09/2008 235.29 9.80 10.53 110.98 31/10/2008 268.3 14.03 14.76 217.84 30/11/2008 264.45 -1.43 -0.71 0.50 H.R.I.H.E. HASSAN 36
  • 37. Performance Evaluation of Equity shares & Mutual Funds 31/12/2008 287.66 8.78 9.51 90.38 31/01/2009 246.44 -14.33 -13.60 184.95 29/02/2009 240.47 -2.42 -1.69 2.86 31/03/2009 206.12 -14.28 -13.55 183.73 30/04/2009 221.46 7.44 8.17 66.78 31/05/2009 211.84 -4.34 -3.61 13.06 30/06/2009 172.06 -18.78 -18.05 325.75 31/07/2009 184.29 7.11 7.84 61.43 31/08/2009 186.23 1.05 1.78 3.18 30/09/2009 167.54 -10.04 -9.31 86.60 31/10/2009 133.54 -20.29 -19.56 382.74 30/11/2009 128.82 -3.53 -2.80 7.87 31/12/2009 138.31 7.37 8.10 65.56 TOTAL -17.52 2078.95 Calculation of Beta Return of return of (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm-Rm1 Rm1) Rm1)2 28/02/2008 -6.91 -6.15 2.14 3.28 -20.16 10.76 31/03/2008 -1.01 -0.25 -7.86 -6.72 1.67 45.16 30/04/2008 8.32 9.08 -1.55 -0.41 -3.73 0.17 31/05/2008 8.81 9.57 9.18 10.32 98.78 106.49 30/06/2008 3.66 4.42 4.46 5.60 24.76 31.36 31/07/2008 5.75 6.51 0.51 1.65 10.74 2.72 31/08/2008 -2.26 -1.50 4.48 5.62 -8.42 31.58 30/09/2008 9.8 10.56 0.37 1.51 15.94 2.28 31/10/2008 14.03 14.79 12.69 13.83 204.56 191.26 30/11/2008 -1.43 -0.67 15.98 17.12 -11.44 293.08 H.R.I.H.E. HASSAN 37
  • 38. Performance Evaluation of Equity shares & Mutual Funds 31/12/2008 8.78 9.54 -2.89 -1.75 -16.70 3.06 31/01/2009 -14.33 -13.57 3.98 5.12 -69.46 26.21 29/02/2009 -2.42 -1.66 -12.32 -11.18 18.54 125.00 31/03/2009 -14.28 -13.52 -3.32 -2.18 29.48 4.75 30/04/2009 7.44 8.20 -8.45 -7.31 -59.96 53.44 31/05/2009 -4.34 -3.58 11.33 12.47 -44.62 155.49 30/06/2009 -18.78 -18.02 -5.51 -4.37 78.75 19.10 31/07/2009 7.11 7.87 -18.75 -17.61 -138.62 310.13 31/08/2009 1.05 1.81 8.34 9.48 17.17 89.86 30/09/2009 -10.04 -9.28 2.47 3.61 -33.49 13.03 31/10/2009 -20.29 -19.53 -9.75 -8.61 168.15 74.14 30/11/2009 -3.53 -2.77 -21.5 -20.36 56.36 414.55 31/12/2009 7.37 8.13 -10.24 -9.10 -74.00 82.82 TOTAL -17.52 -26.21 244.29 2086.44 2. Franklin India Prima Fund:- Franklin India Prima Fund is mid cap open ended growth fund. Its objective is to achieve long term growth of capital through a research based investment approach. Monthly risk and return from 30th Apr 2003 to 31st Mar 2007 is calculated below. Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -64.98/24, = -2.70 Where n=number of months. SD = ∑ (R- R1)2 /n, = 3044.07/24 SD = 11.26 Calculation of Beta B = [ ∑(Ra –Ra1)(Rm-Rm1)]/∑(Rm-Rm1)2 H.R.I.H.E. HASSAN 38
  • 39. Performance Evaluation of Equity shares & Mutual Funds Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 497.41/2442.98 B = 0.20 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-2.83-(-1.22)*0.20 = -0.32 Calculation of Risk and Return DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 60.23 28/02/2008 54.27 -9.90 -7.19 51.67 31/03/2008 51.93 -4.31 -1.60 2.57 30/04/2008 55.45 6.78 9.49 89.98 31/05/2008 60.52 9.14 11.85 140.44 30/06/2008 63.14 4.33 7.04 49.51 31/07/2008 58.52 -7.32 -4.61 21.25 31/08/2008 58.06 -0.79 1.92 3.69 30/09/2008 62.38 7.44 10.15 102.98 31/10/2008 67 7.41 10.11 102.29 H.R.I.H.E. HASSAN 39
  • 40. Performance Evaluation of Equity shares & Mutual Funds 30/11/2008 69.82 4.21 6.92 47.84 31/12/2008 80.02 14.61 17.32 299.86 31/01/2009 64.39 -19.53 -16.83 283.09 29/02/2009 61.44 -4.58 -1.87 3.51 31/03/2009 52.43 -14.66 -11.96 142.98 30/04/2009 55.48 5.82 8.52 72.67 31/05/2009 52.74 -4.94 -2.23 4.98 30/06/2009 37.14 -29.58 -26.87 722.08 31/072009 38.97 4.93 7.63 58.29 31/08/2009 40.31 3.44 6.15 37.77 30/09/2009 35.52 -11.88 -9.18 84.19 31/10/2009 26.14 -26.41 -23.70 561.70 30/11/2009 24.05 -8.00 -5.29 27.96 31/12/2009 26.17 8.81 11.52 132.77 TOTAL -64.98 3044.07 Calculation of Beta Return of return of (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm-Rm1 Rm1) Rm1)2 28/02/2008 -9.9 -7.07 2.34 3.56 -25.21 12.70 31/03/2008 -4.31 -1.48 -8.51 -7.29 10.82 53.09 30/04/2008 6.78 9.61 -1.37 -0.15 -1.41 0.02 31/05/2008 9.14 11.97 9.78 11.00 131.66 121.08 30/06/2008 4.33 7.16 5.72 6.94 49.68 48.21 31/07/2008 -7.32 -4.49 1.66 2.88 -12.96 8.31 31/08/2008 -0.79 2.04 4.07 5.29 10.77 28.02 30/09/2008 7.44 10.27 -0.54 0.68 7.02 0.47 31/10/2008 7.41 10.24 13.88 15.10 154.59 228.12 H.R.I.H.E. HASSAN 40
  • 41. Performance Evaluation of Equity shares & Mutual Funds 30/11/2008 4.21 7.04 17.15 18.37 129.26 337.58 31/12/2008 14.61 17.44 -0.41 0.81 14.18 0.66 31/01/2009 -19.53 -16.70 6.66 7.88 -131.69 62.15 29/02/2009 -4.58 -1.75 -14.9 -13.68 24.00 187.05 31/03/2009 -14.66 -11.83 -3.04 -1.82 21.50 3.30 30/04/2009 5.82 8.65 -10.13 -8.91 -77.00 79.33 31/05/2009 -4.94 -2.11 12.54 13.76 -29.11 189.43 30/06/2009 -29.58 -26.75 -6.13 -4.91 131.27 24.07 31/07/2009 4.93 7.76 -19.57 -18.35 -142.28 336.59 31/08/2009 3.44 6.27 4.33 5.55 34.79 30.84 30/09/2009 -11.88 -9.05 2.71 3.93 -35.62 15.47 31/10/2009 -26.41 -23.58 -10.47 -9.25 218.08 85.50 30/11/2009 -8 -5.17 -23.89 -22.67 117.29 513.77 31/12/2009 8.81 11.64 -10.01 -8.79 -102.23 77.20 TOTAL -64.98 -28.14 497.41 2442.98 3. Prudential ICICI FMCG Plan Prudential ICICI FMCG Plan is sector open ended growth fund. Its objective is to achieve long term growth of capital through a research based investment approach. Monthly risk and return from 30th Apr 2003 to 31st Mar 2007 is calculated below. Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -19.08/24, = -0.79 Where n=number of months. SD = ∑ (R- R1)2 /n, = 1466.14/24 SD = 7.81 Calculation of Beta H.R.I.H.E. HASSAN 41
  • 42. Performance Evaluation of Equity shares & Mutual Funds B = [ ∑(Ra –Ra1)(Rm-Rm1)]/∑(Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 207.48/2442.98 B = 0.08 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-0.83-(-1.22)*0.08 = 0.03 Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 41.61 28/02/2008 39.42 -5.26 -4.47 19.97 31/03/2008 39.07 -0.89 -0.09 0.01 30/04/2008 38.74 -0.84 -0.05 0.00 31/05/2008 41.98 8.36 9.16 83.87 30/06/2008 42.45 1.12 1.91 3.66 31/07/2008 44.05 3.77 4.56 20.83 31/08/2008 44.47 0.95 1.75 3.06 H.R.I.H.E. HASSAN 42
  • 43. Performance Evaluation of Equity shares & Mutual Funds 30/09/2008 46.92 5.51 6.30 39.74 31/10/2008 48.61 3.60 4.40 19.33 30/11/2008 48.98 0.76 1.56 2.42 31/12/2008 57.77 17.95 18.74 351.22 31/01/2009 50.32 -12.90 -12.10 146.44 29/02/2009 48.58 -3.46 -2.66 7.09 31/03/2009 46.52 -4.24 -3.45 11.87 30/04/2009 49.96 7.39 8.19 67.07 31/05/2009 47.86 -4.20 -3.41 11.62 30/06/2009 41.01 -14.31 -13.52 182.73 31/07/2009 40.1 -2.22 -1.42 2.03 31/08/2009 41.29 2.97 3.76 14.16 30/09/2009 37.47 -9.25 -8.46 71.52 31/10/2009 29.91 -20.18 -19.38 375.64 30/11/2009 30.66 2.51 3.30 10.91 31/12/2009 31.82 3.78 4.58 20.96 TOTAL -19.08 1466.14 Calculation of Beta (Ra-Ra1) Return of return of (Rm- (Rm- Date company Ra-Ra1 market Rm-Rm1 Rm1) Rm1)2 28/02/2008 -5.26 -4.43 2.34 3.56 -15.79 12.70 31/03/2008 -0.89 -0.06 -8.51 -7.29 0.44 53.09 30/04/2008 -0.84 -0.01 -1.37 -0.15 0.00 0.02 31/05/2008 8.36 9.19 9.78 11.00 101.12 121.08 30/06/2008 1.12 1.95 5.72 6.94 13.54 48.21 31/07/2008 3.77 4.60 1.66 2.88 13.26 8.31 H.R.I.H.E. HASSAN 43
  • 44. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 0.95 1.78 4.07 5.29 9.42 28.02 30/09/2008 5.51 6.34 -0.54 0.68 4.33 0.47 31/10/2008 3.6 4.43 13.88 15.10 66.90 228.12 30/11/2008 0.76 1.59 17.15 18.37 29.21 337.58 31/12/2008 17.95 18.78 -0.41 0.81 15.28 0.66 31/01/2009 -12.9 -12.07 6.66 7.88 -95.16 62.15 29/02/2009 -3.46 -2.63 -14.9 -13.68 35.98 187.05 31/03/2009 -4.24 -3.41 -3.04 -1.82 6.20 3.30 30/04/2009 7.39 8.22 -10.13 -8.91 -73.21 79.33 31/05/2009 -4.2 -3.37 12.54 13.76 -46.39 189.43 30/06/2009 -14.31 -13.48 -6.13 -4.91 66.14 24.07 31/07/2009 -2.22 -1.39 -19.57 -18.35 25.51 336.59 31/08/2009 2.97 3.80 4.33 5.55 21.10 30.84 30/09/2009 -9.25 -8.42 2.71 3.93 -33.12 15.47 31/10/2009 -20.18 -19.35 -10.47 -9.25 178.92 85.50 30/11/2009 2.51 3.34 -23.89 -22.67 -75.70 513.77 31/12/2009 3.78 4.61 -10.01 -8.79 -40.50 77.20 TOTAL -19.08 -28.14 207.48 2442.98 4. Sundaram S.M.I.L.E. Fund Sundaram S.M.I.L.E. Fund is Mid cap open ended growth fund. Its objective is to achieve capital appreciation by investing in diversified stocks that are generally termed as 'Small and Midcaps' and by investing in other equities. Monthly risk and return from 28th Feb 2006 to 31st Mar 2007 is calculated below. Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -11.22/24, = -0.46 Where n=number of months. SD = ∑ (R- R1)2 /n, = 3331.85./24 H.R.I.H.E. HASSAN 44
  • 45. Performance Evaluation of Equity shares & Mutual Funds SD = 11.78 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 34.13/2613.17 B = 0.01 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-0.49-(-1.40))*0.01 =-0.009 Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 19.29 28/02/2008 17.34 -10.11 -9.64 92.95 31/03/2008 17.07 -1.56 -1.09 1.19 30/04/2008 18.12 6.15 6.62 43.81 31/05/2008 19.33 6.68 7.15 51.06 30/06/2008 20.18 4.40 4.86 23.67 31/07/2008 20.97 3.91 4.38 19.21 H.R.I.H.E. HASSAN 45
  • 46. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 20.82 -0.72 -0.25 0.06 30/09/2008 24.5 17.68 18.14 329.17 31/10/2008 29.17 19.06 19.53 381.38 30/11/2008 30.44 4.35 4.82 23.25 31/12/2008 34.07 11.93 12.39 153.58 31/01/2009 27.07 -20.55 -20.08 403.14 29/02/2009 26.73 -1.26 -0.79 0.62 31/03/2009 22.93 -14.22 -13.75 189.02 30/04/2009 25.58 11.56 12.02 144.59 31/05/2009 24.47 -4.34 -3.87 14.99 30/06/2009 20.06 -18.02 -17.55 308.16 31/07/2009 21.25 5.93 6.40 40.96 31/08/2009 19.13 -9.98 -9.51 90.42 30/09/2009 13.86 -27.55 -27.08 733.37 31/10/2009 12.91 -6.85 -6.39 40.79 30/11/2009 12.55 -2.79 -2.32 5.39 31/12/2009 14.44 15.06 15.53 241.10 TOTAL -11.22 3331.85 Calculation of Beta Return of return of Rm- (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm1 Rm1) Rm1)2 28/02/2008 -10.11 -9.62 2.94 4.34 -41.71 18.79 31/03/2008 -1.56 -1.07 -8.66 -7.26 7.79 52.78 30/04/2008 6.15 6.64 -1.57 -0.17 -1.16 0.03 31/05/2008 6.68 7.17 9.78 11.18 80.10 124.89 30/06/2008 4.4 4.89 5.89 7.29 35.61 53.07 31/07/2008 3.91 4.40 2.24 3.64 15.99 13.21 31/08/2008 -0.72 -0.23 3.8 5.20 -1.21 26.99 H.R.I.H.E. HASSAN 46
  • 47. Performance Evaluation of Equity shares & Mutual Funds 30/09/2008 17.68 18.17 -0.69 0.71 12.81 0.50 31/10/2008 19.06 19.55 13.68 15.08 294.69 227.26 30/11/2008 4.35 4.84 16.01 17.41 84.20 302.94 31/12/2008 11.93 12.42 0.8 2.20 27.26 4.82 31/01/2009 -20.55 -20.06 8.52 9.92 -198.92 98.31 29/02/2009 -1.26 -0.77 -16.28 -14.88 11.49 221.56 31/03/2009 -14.22 -13.73 -3.11 -1.71 23.55 2.94 30/04/2009 11.56 12.05 -11.36 -9.96 -120.05 99.30 31/05/2009 -4.34 -3.85 12.59 13.99 -53.87 195.59 30/06/2009 -18.02 -17.53 -6.48 -5.08 89.15 25.86 31/07/2009 5.93 6.42 -19.93 -18.53 -118.95 343.54 31/08/2009 -9.98 -9.49 4.14 5.54 -52.54 30.64 30/09/2009 -27.55 -27.06 2.7 4.10 -110.83 16.77 31/10/2009 -6.85 -6.36 -11.55 -10.15 64.61 103.12 30/11/2009 -2.79 -2.30 -25.32 -23.92 55.08 572.40 31/12/2009 15.06 15.55 -10.22 -8.82 -137.21 77.88 TOTAL -11.22 -32.09 -34.13 2613.17 5. SBI MSFU CONTRA SBI MSFU CONTRA is open ended growth fund. Its objective is to achieve capital appreciation by investing in diversified stocks. Monthly risk and return from 31st May 2006 to 31st Mar 2007 is calculated below. Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -14.38/24, = -0.59 Where n=number of months. SD = ∑ (R- R1)2 /n, = 1424.86/24 H.R.I.H.E. HASSAN 47
  • 48. Performance Evaluation of Equity shares & Mutual Funds SD = 7.70 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 197.92/2442.98 B = 0.08 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-0.63-(-1.22))*0.08 =-0.04 Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 36.15 28/02/2008 33.88 -6.28 -5.68 32.27 31/03/2008 33.84 -0.12 0.48 0.23 30/04/2008 35.82 5.85 6.45 41.60 31/05/2008 37.61 5.00 5.60 31.32 30/06/2008 37.61 0.00 0.60 0.36 31/07/2008 39.35 4.63 5.23 27.30 H.R.I.H.E. HASSAN 48
  • 49. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 39.17 -0.46 0.14 0.02 30/09/2008 43.14 10.14 10.73 115.22 31/10/2008 48.21 11.75 12.35 152.56 30/11/2008 48.59 0.79 1.39 1.92 31/12/2008 52.48 8.01 8.60 74.04 31/01/2009 45.13 -14.01 -13.41 179.73 29/02/2009 45.18 0.11 0.71 0.50 31/03/2009 40.67 -9.98 -9.38 88.05 30/04/2009 42.84 5.34 5.93 35.22 31/05/2009 40.88 -4.58 -3.98 15.81 30/06/2009 35.52 -13.11 -12.51 156.56 31/07/2009 37.08 4.39 4.99 24.91 31/08/2009 37.53 1.21 1.81 3.29 30/09/2009 34.44 -8.23 -7.63 58.28 31/10/2009 28.18 -18.18 -17.58 308.97 30/11/2009 27.03 -4.08 -3.48 12.12 31/12/2009 29.04 7.44 8.04 64.56 TOTAL -14.38 1424.86 Calculation of Beta Return of return of Rm- (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm1 Rm1) Rm1)2 28/02/2008 -6.28 -5.65 2.34 3.56 -20.15 12.70 31/03/2008 -0.12 0.51 -8.51 -7.29 -3.68 53.09 30/04/2008 5.85 6.48 -1.37 -0.15 -0.95 0.02 31/05/2008 5 5.63 9.78 11.00 61.90 121.08 30/06/2008 0 0.63 5.72 6.94 4.34 48.21 31/07/2008 4.63 5.26 1.66 2.88 15.15 8.31 H.R.I.H.E. HASSAN 49
  • 50. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 -0.46 0.17 4.07 5.29 0.87 28.02 30/09/2008 10.14 10.77 -0.54 0.68 7.36 0.47 31/10/2008 11.75 12.38 13.88 15.10 186.91 228.12 30/11/2008 0.79 1.42 17.15 18.37 26.00 337.58 31/12/2008 8.01 8.64 -0.41 0.81 7.02 0.66 31/01/2009 -14.01 -13.38 6.66 7.88 -105.52 62.15 29/02/2009 0.11 0.74 -14.9 -13.68 -10.06 187.05 31/03/2009 -9.98 -9.35 -3.04 -1.82 16.99 3.30 30/04/2009 5.34 5.97 -10.13 -8.91 -53.13 79.33 31/05/2009 -4.58 -3.95 12.54 13.76 -54.43 189.43 30/06/2009 -13.11 -12.48 -6.13 -4.91 61.26 24.07 31/07/2009 4.39 5.02 -19.57 -18.35 -92.01 336.59 31/08/2009 1.21 1.84 4.33 5.55 10.19 30.84 30/09/2009 -8.23 -7.60 2.71 3.93 -29.91 15.47 31/10/2009 -18.18 -17.55 -10.47 -9.25 162.32 85.50 30/11/2009 -4.08 -3.45 -23.89 -22.67 78.31 513.77 31/12/2009 7.44 8.07 -10.01 -8.79 -70.87 77.20 TOTAL -14.38 -28.14 197.92 2442.98 Average risk of selected mutual fund schemes Mutual Fund Schemes Risk Beta Alpha Reliance Vision fund 9.30 0.11 0.04 Franklin India prima fund 11.26 0.20 -0.32 Pru icici FMCG sector 7.81 0.08 0.03 fund Sundaram SMILE fund 11.78 0.01 0.009 SBI Contra Fund 7.70 0.08 .04 Total 64.49 Bench Mark 9.32 H.R.I.H.E. HASSAN 50
  • 51. Performance Evaluation of Equity shares & Mutual Funds Average risk = 64.49/5 =12.89 ANALYSIS: 1. Sundaram SMILE fund has the highest risk factor of 11.78% with 0.01% a. Beta and 0.009% of alpha. 2. SBI Contra Fund has the lowest risk factor of 7.70% with 0.08% of beta and 0.04% of alpha. 3. Bench Mark has the risk factor of 9.32% 4. On an average Mutual Fund Schemes have the risk factor of 12.89% INTERPETATION: Risk is a major factor influence all type of investors. In the above selected Mutual Fund Schemes average risk factor is 12.89% even though the risk factor of bench mark is 9.32%; it is very close to average risk. It is showing Mutual Funds are also risky. Average return of selected mutual fund schemes Mutual Fund Schemes Return Reliance Vision fund -0.73 Franklin India prima fund -2.70 Pru icici FMCG sector fund -0.79 Sundaram SMILE fund -0.46 H.R.I.H.E. HASSAN 51
  • 52. Performance Evaluation of Equity shares & Mutual Funds SBI Contra Fund -0.59 Total -5.27 Bench Mark -1.09 AVERAGE RETURN= -5.27/5 = -1.05 ANALYSIS: 1. Sundaram SMILE fund got the lowest negative return of -0.46% 2. Bench Mark return is -1.09% 3. On an average Mutual Fund Schemes have got -1.05% per month. INTERPETATION: Return is a major factor influencing factor to all type of investors. In the above selected Mutual Fund Schemes average return is -1.05%, compared to bench mark return mutual fund returns are good and it will attract more and more customers. H.R.I.H.E. HASSAN 52
  • 53. Performance Evaluation of Equity shares & Mutual Funds Calculation of Return and Risk of Selected companies Calculation of Return and Risk of Bench Mark (BSE SENSEX) DATE SCRIP RETURN IN R-R1 (R-R1)2 VALUE % 31/01/2008 13827.77 - 28/02/2008 14124.36 2.14 3.23 10.46 31/03/2008 13013.74 -7.86 -6.77 45.83 30/04/2008 12811.93 -1.55 -0.46 0.21 31/05/2008 13987.77 9.18 10.27 105.47 30/06/2008 14610.28 4.46 5.55 30.80 31/07/2008 14685.16 0.51 1.6 2.56 31/08/2008 15344.02 4.48 5.57 31.02 H.R.I.H.E. HASSAN 53
  • 54. Performance Evaluation of Equity shares & Mutual Funds 30/09/2008 15401.99 0.37 1.46 2.13 31/10/2008 17356.99 12.69 13.78 189.88 30/11/2008 20130.23 15.98 17.07 291.38 31/12/2008 19547.09 -2.89 1.8 3.24 31/01/2009 20325.27 3.98 5.07 25.70 29/02/2009 17820.67 -12.32 -11.23 126.11 31/03/2009 17227.56 -3.32 -2.23 4.97 30/04/2009 15771.72 -8.45 -7.36 54.16 31/05/2009 17560.15 11.33 12.42 154.25 30/06/2009 16591.46 -5.51 -4.42 19.53 31/07/2009 13480.02 -18.75 -7.66 311.87 31/08/2009 14064.26 8.34 9.43 88.92 30/09/2009 14412.99 2.47 3.56 12.67 31/10/2009 13006.72 -9.75 -8.66 74.99 30/11/2009 10209.37 -21.50 -20.41 416.56 31/12/2009 9162.94 -10.24 -9.15 83.72 TOTAL -26.21 2086.43 Bench Mark Return and Risk (BSE Sensex) Return = (P1 /P0 *100)-100 Where, P1 = Current month price, P0 = Previous month price R1 = , where n=number of months. R1 = -26.21/24 = -1.09 SD= ∑(R-R1)2/n = 2086.43/24 H.R.I.H.E. HASSAN 54
  • 55. Performance Evaluation of Equity shares & Mutual Funds =9.32 1. ACC Limited:- Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 1099 28/02/2008 1024.9 -6.74 -3.54 12.52 31/03/2008 899 -12.28 -9.08 82.44 30/04/2008 726 -19.24 -16.04 257.25 31/05/2008 841 15.84 19.04 362.71 30/06/2008 860 2.26 5.46 29.85 31/07/2008 940 9.30 12.51 156.42 H.R.I.H.E. HASSAN 55
  • 56. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 1048 11.49 14.69 215.91 30/09/2008 1072 2.29 5.49 30.19 31/10/2008 1230 14.74 17.94 321.97 30/11/2008 1088 -11.54 -8.34 69.56 31/12/2008 1098 0.92 4.12 17.01 31/01/2009 1035 -5.74 -2.53 6.42 29/02/2009 778.8 -24.75 -21.55 464.36 31/03/2009 782 0.41 3.62 13.07 30/04/2009 835 6.78 9.98 99.64 31/05/2009 765 -8.38 -5.18 26.82 30/06/2009 662 -13.46 -10.26 105.26 31/07/2009 527 -20.39 -17.19 295.43 31/08/2009 579 9.87 13.07 170.87 30/09/2009 560 -3.28 -0.08 0.01 31/10/2009 615 9.82 13.03 169.68 30/11/2009 500 -18.70 -15.49 240.08 31/12/2009 419.5 -16.10 -12.90 166.29 TOTAL -76.91 3313.74 Calculation of Beta Return of Ra- return of (Ra-Ra1)(Rm- (Rm- Date company Ra1 market Rm-Rm1 Rm1) Rm1)2 28/02/2008 -6.74 -3.40 2.14 3.28 -11.14 10.76 31/03/2008 -12.28 -8.94 -7.86 -6.72 60.06 45.16 30/04/2008 -19.24 -15.90 -1.55 -0.41 6.52 0.17 31/05/2008 15.84 19.18 9.18 10.32 197.96 106.49 30/06/2008 2.26 5.60 4.46 5.60 31.37 31.36 31/07/2008 9.3 12.64 0.51 1.65 20.85 2.72 31/08/2008 11.49 14.83 4.48 5.62 83.35 31.58 H.R.I.H.E. HASSAN 56
  • 57. Performance Evaluation of Equity shares & Mutual Funds 30/09/2008 2.29 5.63 0.37 1.51 8.50 2.28 31/10/2008 14.74 18.08 12.69 13.83 250.07 191.26 30/11/2008 -11.54 -8.20 15.98 17.12 -140.34 293.08 31/12/2008 0.92 4.26 -2.89 -1.75 -7.46 3.06 31/01/2009 -5.74 -2.40 3.98 5.12 -12.27 26.21 29/02/2009 -24.75 -21.41 -12.32 -11.18 239.34 125.00 31/03/2009 0.41 3.75 -3.32 -2.18 -8.18 4.75 30/04/2009 6.78 10.12 -8.45 -7.31 -74.00 53.44 31/05/2009 -8.38 -5.04 11.33 12.47 -62.81 155.49 30/06/2009 -13.46 -10.12 -5.51 -4.37 44.22 19.10 31/07/2009 -20.39 -17.05 -18.75 -17.61 300.21 310.13 31/08/2009 9.87 13.21 8.34 9.48 125.25 89.86 30/09/2009 -3.28 0.06 2.47 3.61 0.23 13.03 31/10/2009 9.82 13.16 -9.75 -8.61 -113.34 74.14 30/11/2009 -18.7 -15.36 -21.5 -20.36 312.68 414.55 31/12/2009 -16.1 -12.76 -10.24 -9.10 116.10 82.82 TOTAL -76.88 -26.21 1367.19 2086.44 Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -76.91/24, = -3.20 Where n=number of months. SD = ∑ (R- R1)2 /n, = 3313.74/24 SD = 11.75 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company H.R.I.H.E. HASSAN 57
  • 58. Performance Evaluation of Equity shares & Mutual Funds Rm= Return on market, Rm1= Average return on market = 1367.19/2086.44 B = 0.65 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-3.20-(-1.13))*0.65 = -1.34 Factor Risk Return Beta Alpha Percentage 11.75 -3.20 0.65 1.34 ANALYSIS: 1. ACC Ltd. has a risk factor of 11.75% 2. Its rate of return on a monthly average is -3.2% 3. Alpha and Beta are 0.65 and 1.34 respectively INTERPETATION: Beta of the ACC ltd. is 0.65which is less than one; it shows the less volatility of scrip with respect to market. Risk of the share is 11.75% and the rate of return is only -3.2%. H.R.I.H.E. HASSAN 58
  • 59. Performance Evaluation of Equity shares & Mutual Funds 2. BHEL:- Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 2302 28/02/2008 2520 9.47 10.39 108.05 31/03/2008 2190 -13.10 -12.17 148.12 30/04/2008 2275 3.88 4.81 23.10 31/05/2008 2510 10.33 11.25 126.66 30/06/2008 1408 -43.90 -42.98 1847.26 31/07/2008 1550 10.09 11.01 121.22 H.R.I.H.E. HASSAN 59
  • 60. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 1710 10.32 11.25 126.50 30/09/2008 1889 10.47 11.39 129.79 31/10/2008 2059.9 9.05 9.97 99.44 30/11/2008 2680 30.10 31.03 962.74 31/12/2008 2699 0.71 1.63 2.67 31/01/2009 2585 -4.22 -3.30 10.88 29/02/2009 2070 -19.92 -19.00 360.92 31/03/2009 2235 7.97 8.90 79.13 30/04/2009 2070 -7.38 -6.46 41.70 31/05/2009 1910.5 -7.71 -6.78 45.98 30/06/2009 1675.55 -12.30 -11.37 129.35 31/07/2009 1387 -17.22 -16.30 265.58 31/08/2009 1631.1 17.60 18.52 343.13 30/09/2009 1700 4.22 5.15 26.51 31/10/2009 1620 -4.71 -3.78 14.30 30/11/2009 1320 -18.52 -17.59 309.54 31/12/2009 1354 2.58 3.50 12.25 TOTAL -22.19 5334.82 Calculation of Beta Return of return of (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm-Rm1 Rm1) Rm1)2 28/02/2008 9.47 10.43 2.14 3.28 34.22 10.76 31/03/2008 -13.1 -12.14 -7.86 -6.72 81.55 45.16 30/04/2008 3.88 4.84 -1.55 -0.41 -1.99 0.17 31/05/2008 10.33 11.29 9.18 10.32 116.56 106.49 30/06/2008 -43.9 -42.94 4.46 5.60 -240.42 31.36 31/07/2008 10.09 11.05 0.51 1.65 18.24 2.72 H.R.I.H.E. HASSAN 60
  • 61. Performance Evaluation of Equity shares & Mutual Funds 31/08/2008 10.32 11.28 4.48 5.62 63.42 31.58 30/09/2008 10.47 11.43 0.37 1.51 17.26 2.28 31/10/2008 9.05 10.01 12.69 13.83 138.50 191.26 30/11/2008 30.1 31.06 15.98 17.12 531.82 293.08 31/12/2008 0.71 1.67 -2.89 -1.75 -2.93 3.06 31/01/2009 -4.22 -3.26 3.98 5.12 -16.67 26.21 29/02/2009 -19.92 -18.96 -12.32 -11.18 211.93 125.00 31/03/2009 7.97 8.93 -3.32 -2.18 -19.48 4.75 30/04/2009 -7.38 -6.42 -8.45 -7.31 46.90 53.44 31/05/2009 -7.71 -6.75 11.33 12.47 -84.11 155.49 30/06/2009 -12.3 -11.34 -5.51 -4.37 49.54 19.10 31/07/2009 -17.22 -16.26 -18.75 -17.61 286.26 310.13 31/08/2009 17.6 18.56 8.34 9.48 175.99 89.86 30/09/2009 4.22 5.18 2.47 3.61 18.71 13.03 31/10/2009 -4.71 -3.75 -9.75 -8.61 32.25 74.14 30/11/2009 -18.52 -17.56 -21.5 -20.36 357.43 414.55 31/12/2009 2.58 3.54 -10.24 -9.10 -32.26 82.82 TOTAL -22.19 -26.21 1782.71 2086.44 Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -22.19/24, = -0.92 Where n=number of months. SD = ∑ (R- R1)2 /n, = 5334.82/24 SD = 14.90 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 H.R.I.H.E. HASSAN 61
  • 62. Performance Evaluation of Equity shares & Mutual Funds Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 1782.71/2086.44 B = 0.85 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-0.92-(-1.13))*0.85 = -0.17 ANALYSIS: 1. BHEL has a risk factor of 14.9% 2. Its rate of return on a monthly average is -0.92% 3. Alpha and Beta are -0.17and 0.85 respectively INTERPETATION: Beta of the BHEL is 0.85 which is very close to one; it shows the equal volatility of scrip with respect to market. Risk of the share is 14.9% and the rate of return is only -0.92%. H.R.I.H.E. HASSAN 62
  • 63. Performance Evaluation of Equity shares & Mutual Funds 3. ICICI BANK LTD:- Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 889 28/02/2008 957 7.65 10.58 112.0209 31/03/2008 841 -12.12 -9.19 84.38744 30/04/2008 823 -2.14 0.79 0.631452 31/05/2008 871.5 5.89 8.83 77.93398 H.R.I.H.E. HASSAN 63
  • 64. Performance Evaluation of Equity shares & Mutual Funds 30/06/2008 924 6.02 8.96 80.26449 31/07/2008 955 3.35 6.29 39.56318 31/08/2008 923.85 -3.26 -0.33 0.106819 30/09/2008 901 -2.47 0.46 0.213078 31/10/2008 1063.45 18.03 20.96 439.5277 30/11/2008 1276 19.99 22.92 525.4082 31/12/2008 1180 -7.52 -4.59 21.05491 31/01/2009 1235 4.66 7.60 57.69869 29/02/2009 1170 -5.26 -2.33 5.420559 31/03/2009 1061.1 -9.31 -6.37 40.61186 30/04/2009 775 -26.96 -24.03 577.3274 31/05/2009 899 16.00 18.93 358.5323 30/06/2009 784 -12.79 -9.86 97.16129 31/07/2009 630 -19.64 -16.71 279.1542 31/08/2009 610 -3.17 -0.24 0.057434 30/09/2009 658.75 7.99 10.93 119.3939 31/10/2009 540.1 -18.01 -15.08 227.2989 30/11/2009 415 -23.16 -20.23 409.1489 31/12/2009 356.1 -14.19 -11.26 126.7386 TOTAL -70.44 3679.656 Calculation of Beta Return of Rm- (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 return of market Rm1 Rm1) Rm1)2 28/02/2008 7.65 10.71 2.14 3.28 35.13 10.76 31/03/2008 -12.12 -9.06 -7.86 -6.72 60.87 45.16 30/04/2008 -2.14 0.92 -1.55 -0.41 -0.38 0.17 31/05/2008 5.89 8.95 9.18 10.32 92.39 106.49 30/06/2008 6.02 9.08 4.46 5.60 50.86 31.36 H.R.I.H.E. HASSAN 64
  • 65. Performance Evaluation of Equity shares & Mutual Funds 31/07/2008 3.35 6.41 0.51 1.65 10.58 2.72 31/08/2008 -3.26 -0.20 4.48 5.62 -1.11 31.58 30/09/2008 -2.47 0.59 0.37 1.51 0.89 2.28 31/10/2008 18.03 21.09 12.69 13.83 291.70 191.26 30/11/2008 19.99 23.05 15.98 17.12 394.65 293.08 31/12/2008 -7.52 -4.46 -2.89 -1.75 7.80 3.06 31/01/2009 4.66 7.72 3.98 5.12 39.54 26.21 29/02/2009 -5.26 -2.20 -12.32 -11.18 24.57 125.00 31/03/2009 -9.31 -6.25 -3.32 -2.18 13.62 4.75 30/04/2009 -26.96 -23.90 -8.45 -7.31 174.70 53.44 31/05/2009 16 19.06 11.33 12.47 237.70 155.49 30/06/2009 -12.79 -9.73 -5.51 -4.37 42.51 19.10 31/07/2009 -19.64 -16.58 -18.75 -17.61 291.94 310.13 31/08/2009 -3.17 -0.11 8.34 9.48 -1.02 89.86 30/09/2009 7.99 11.05 2.47 3.61 39.90 13.03 31/10/2009 -18.01 -14.95 -9.75 -8.61 128.70 74.14 30/11/2009 -23.16 -20.10 -21.5 -20.36 409.19 414.55 31/12/2009 -14.19 -11.13 -10.24 -9.10 101.26 82.82 TOTAL -70.44 -26.21 2446.00 2086.44 Return=P1 /0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = -70.44/24, = -2.93 Where n=number of months. SD = ∑ (R- R1)2 /n, = 3679.66/24 SD = 12.83 H.R.I.H.E. HASSAN 65
  • 66. Performance Evaluation of Equity shares & Mutual Funds Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 2446/2086.44 B = 1.18 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-2.93-(-1.13))*1.18 = -2.12 ANALYSIS: 1. ICICI Bank Ltd. has a risk factor of 12.83% 2. Its rate of return on a monthly average is -2.93% 3. Alpha and Beta are -2.12 and 1.18 respectively INTERPETATION: H.R.I.H.E. HASSAN 66
  • 67. Performance Evaluation of Equity shares & Mutual Funds Beta of the ICICI Bank Ltd. is 1.18 which is higher to one; it shows the high volatility of scrip with respect to market. Risk of the share is 12.83% and the rate of return is only -2.93%. 4. INFOSYS TECHNOLOGIES LTD:- Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 2242 H.R.I.H.E. HASSAN 67
  • 68. Performance Evaluation of Equity shares & Mutual Funds 28/02/2008 2244.45 0.11 1.88 3.52 31/03/2008 2400 6.93 8.70 75.64 30/04/2008 2000 -16.67 -14.90 222.01 31/05/2008 2080 4.00 5.77 33.26 30/06/2008 1935 -6.97 -5.20 27.09 31/07/2008 1935 0.00 1.77 3.12 31/08/2008 1965 1.55 3.32 11.00 30/09/2008 1875 -4.58 -2.81 7.91 31/10/2008 1900 1.33 3.10 9.61 30/11/2008 1849 -2.68 -0.92 0.84 31/12/2008 1616 -12.60 -10.83 117.39 31/01/2009 1758 8.79 10.55 111.39 29/02/2009 1515 -13.82 -12.06 145.34 31/03/2009 1530 0.99 2.76 7.60 30/04/2009 1450 -5.23 -3.46 11.99 31/05/2009 1794 23.72 25.49 649.79 30/06/2009 1956 9.03 10.80 116.57 31/07/2009 1739.9 -11.05 -9.28 86.14 31/08/2009 1551 -10.86 -9.09 82.63 30/09/2009 1760 13.48 15.24 232.32 31/10/2009 1425 -19.03 -17.27 298.16 30/11/2009 1413 -0.84 0.92 0.86 31/12/2009 1300 -8.00 -6.23 38.82 TOTAL -42.40 2292.98 Calculation of Beta Return of return of Rm- (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 market Rm1 Rm1) Rm1)2 H.R.I.H.E. HASSAN 68
  • 69. Performance Evaluation of Equity shares & Mutual Funds 28/02/2008 0.11 1.95 2.14 3.28 6.41 10.76 31/03/2008 6.93 8.77 -7.86 -6.72 -58.96 45.16 30/04/2008 -16.67 -14.83 -1.55 -0.41 6.09 0.17 31/05/2008 4 5.84 9.18 10.32 60.30 106.49 30/06/2008 -6.97 -5.13 4.46 5.60 -28.71 31.36 31/07/2008 0 1.84 0.51 1.65 3.04 2.72 31/08/2008 1.55 3.39 4.48 5.62 19.07 31.58 30/09/2008 -4.58 -2.74 0.37 1.51 -4.13 2.28 31/10/2008 1.33 3.17 12.69 13.83 43.89 191.26 30/11/2008 -2.68 -0.84 15.98 17.12 -14.32 293.08 31/12/2008 -12.6 -10.76 -2.89 -1.75 18.83 3.06 31/01/2009 8.79 10.63 3.98 5.12 54.44 26.21 29/02/2009 -13.82 -11.98 -12.32 -11.18 133.90 125.00 31/03/2009 0.99 2.83 -3.32 -2.18 -6.18 4.75 30/04/2009 -5.23 -3.39 -8.45 -7.31 24.76 53.44 31/05/2009 23.72 25.56 11.33 12.47 318.77 155.49 30/06/2009 9.03 10.87 -5.51 -4.37 -47.52 19.10 31/07/2009 -11.05 -9.21 -18.75 -17.61 162.13 310.13 31/08/2009 -10.86 -9.02 8.34 9.48 -85.47 89.86 30/09/2009 13.48 15.32 2.47 3.61 55.31 13.03 31/10/2009 -19.03 -17.19 -9.75 -8.61 147.98 74.14 30/11/2009 -0.84 1.00 -21.5 -20.36 -20.43 414.55 31/12/2009 -8 -6.16 -10.24 -9.10 56.03 82.82 TOTAL -42.4 -26.21 845.21 2086.44 Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price H.R.I.H.E. HASSAN 69
  • 70. Performance Evaluation of Equity shares & Mutual Funds R1 = ∑R/n, = -42.40/24, = -1.76 Where n=number of months. SD = ∑ (R- R1)2 /n, = 2292.92/24 SD = 11.16 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 845.21/2086.44 B = 0.40 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (-1.76-(-1.13))*0.40 =- -0.25 ANALYSIS: 1. INOFSYS has a risk factor of 11.16% H.R.I.H.E. HASSAN 70
  • 71. Performance Evaluation of Equity shares & Mutual Funds 2. Its rate of return on a monthly average is -1.76% 3. Alpha and Beta are -0.25 and 0.4 respectively INTERPETATION: Beta of the INOFSYS is 0.4 which is lower than one; it shows the low volatility of scrip with respect to market. Risk of the share is 11.16% and the rate of return is only -1.76%. 5. HEROHONDA:- H.R.I.H.E. HASSAN 71
  • 72. Performance Evaluation of Equity shares & Mutual Funds Calculation of Return and Risk DATE SCRIP VALUE RETURN IN % R-R1 (R-R1)2 31/01/2008 760 28/02/2008 715.55 -5.85 -6.37 40.58 31/03/2008 674.9 -5.68 -6.20 38.47 30/04/2008 661.05 -2.05 -2.57 6.62 31/05/2008 700 5.89 5.37 28.85 30/06/2008 730 4.29 3.76 14.17 31/07/2008 692 -5.21 -5.73 32.80 31/08/2008 665.5 -3.83 -4.35 18.93 30/09/2008 660 -0.83 -1.35 1.82 31/10/2008 742.2 12.45 11.93 142.40 30/11/2008 725 -2.32 -2.84 8.06 31/12/2008 727.75 0.38 -0.14 0.02 31/01/2009 698 -4.09 -4.61 21.25 29/02/2009 677 -3.01 -3.53 12.46 31/03/2009 762 12.56 12.03 144.82 30/04/2009 705 -7.48 -8.00 64.03 31/05/2009 857 21.56 21.04 442.64 30/06/2009 765 -10.74 -11.26 126.71 31/07/2009 690 -9.80 -10.33 106.61 31/08/2009 790 14.49 13.97 195.20 30/09/2009 821 3.92 3.40 11.58 31/10/2009 875 6.58 6.06 36.68 30/11/2009 769 -12.11 -12.64 159.66 31/12/2009 795 3.38 2.86 8.18 TOTAL 12.51 1662.51 Calculation of Beta H.R.I.H.E. HASSAN 72
  • 73. Performance Evaluation of Equity shares & Mutual Funds Return of Rm- (Ra-Ra1)(Rm- (Rm- Date company Ra-Ra1 return of market Rm1 Rm1) Rm1)2 28/02/2008 -5.85 -6.39 2.14 3.28 -20.97 10.76 31/03/2008 -5.68 -6.22 -7.86 -6.72 41.83 45.16 30/04/2008 -2.05 -2.59 -1.55 -0.41 1.06 0.17 31/05/2008 5.89 5.35 9.18 10.32 55.17 106.49 30/06/2008 4.29 3.75 4.46 5.60 20.98 31.36 31/07/2008 -5.21 -5.75 0.51 1.65 -9.49 2.72 31/08/2008 -3.83 -4.37 4.48 5.62 -24.58 31.58 30/09/2008 -0.83 -1.37 0.37 1.51 -2.07 2.28 31/10/2008 12.45 11.91 12.69 13.83 164.66 191.26 30/11/2008 -2.32 -2.86 15.98 17.12 -49.03 293.08 31/12/2008 0.38 -0.16 -2.89 -1.75 0.29 3.06 31/01/2009 -4.09 -4.63 3.98 5.12 -23.72 26.21 29/02/2009 -3.01 -3.55 -12.32 -11.18 39.73 125.00 31/03/2009 12.56 12.02 -3.32 -2.18 -26.20 4.75 30/04/2009 -7.48 -8.02 -8.45 -7.31 58.66 53.44 31/05/2009 21.56 21.02 11.33 12.47 262.06 155.49 30/06/2009 -10.74 -11.28 -5.51 -4.37 49.32 19.10 31/07/2009 -9.8 -10.34 -18.75 -17.61 182.16 310.13 31/08/2009 14.49 13.95 8.34 9.48 132.20 89.86 30/09/2009 3.92 3.38 2.47 3.61 12.19 13.03 31/10/2009 6.58 6.04 -9.75 -8.61 -51.97 74.14 30/11/2009 -12.11 -12.65 -21.5 -20.36 257.64 414.55 31/12/2009 3.38 2.84 -10.24 -9.10 -25.81 82.82 TOTAL 12.51 -26.21 1044.09 2086.44 H.R.I.H.E. HASSAN 73
  • 74. Performance Evaluation of Equity shares & Mutual Funds Return=P1 /P0 *100 Where, P1 = Current month price, P0 = Previous month price R1 = ∑R/n, = 12.51/24, = 0.52 Where n=number of months. SD = ∑ (R- R1)2 /n, = 1662.51/24 SD = 8.32 Calculation of Beta B = [∑ (Ra –Ra1) (Rm-Rm1)]/∑ (Rm-Rm1)2 Where Ra = Return on Company, Ra1= Average return on company Rm= Return on market, Rm1= Average return on market = 1044.09/2086.44 B = 0.50 Calculation of Alpha Alpha = (Ra1 - Rm1)*B = (0.52-(-1.13))*0.50 =0.82 ANALYSIS: H.R.I.H.E. HASSAN 74
  • 75. Performance Evaluation of Equity shares & Mutual Funds 1. Herohonda Ltd. has a risk factor of 12.83% 2. Its rate of return on a monthly average is -2.93% 3. Alpha and Beta are -2.12 and 1.18 respectively INTERPETATION: Beta of the Herohonda ltd. is 1.18 which is very close to one; it shows the equal volatility of scrip with respect to market. Risk of the share is 12.83% and the rate of return is only -2.93%. Average risk of selected Company shares Company ACC Ltd BHEL ICICI Infosys Herohonda Bench Total Bank Mark Risk 11.75 14.9 12.83 11.16 12.83 9.32 63.47 Average risk = 63.47/5 =12.69 ANALYSIS: H.R.I.H.E. HASSAN 75
  • 76. Performance Evaluation of Equity shares & Mutual Funds 1. BHEL has the highest risk factor of 14.9% with 0.85% beta and - -0.17% of alpha. 2. Infosys has the lowest risk factor of 11.16% with 0.40% of beta and -0.25% of alpha. 3. Bench Mark has the risk factor of 9.32% 4. On an average Equity shares have the risk factor of 12.69% INTERPETATION: Risk is a major factor influence all type of investors. In the above selected Equity Shares average risk factor is 12.69% and the risk factor of bench mark is 9.32%, it is showing equities are more risky. Average return of selected Company shares Company ACC BHEL ICICI Infosys Herohonda Bench Total Ltd Bank Mark Return -3.2 -0.92 -2.93 -1.76 -2.93 -1.09 -11.74 Average return = -11.74/5 = -2.34 ANALYSIS: H.R.I.H.E. HASSAN 76
  • 77. Performance Evaluation of Equity shares & Mutual Funds 1. BHEL shares have got the highest return of -0.92% 2. Bench Mark return is -1.09% 3. On an average equity shares have got -2.34% per month. INTERPETATION: Return is a major factor influencing factor to all type of investors. In the above selected equity shares average return is -2.34%, compared to bench mark return of -1.09% selected equity shares returns are good and it will attract more and more customers. Comparison of Selected Equity Capital and Mutual Fund Schemes in respect their Risk Investment Mutual fund Equity Risk 12.69 12.89 ANALYSIS: H.R.I.H.E. HASSAN 77
  • 78. Performance Evaluation of Equity shares & Mutual Funds 1. Mutual funds have the risk on an average of 12.69% 2. Equity shares have the risk on an average of 12.89% INTERPETATION: Equity capital and Mutual fund schemes are subjected to market risk. Based on the above analysis mutual funds have an average risk of 12.69% which is compared to equity shares risk of 12.89% is lower. Those who would like to take risk can go for equity investments. H.R.I.H.E. HASSAN 78
  • 79. Performance Evaluation of Equity shares & Mutual Funds Comparison of Selected Equity Capital and Mutual Fund Schemes in respect their Return Investment Mutual fund equity return -1.05 -2.34 ANALYSIS: 1. Mutual funds have average return of -1.05% 2. Equity shares have the return on an average of -2.34% INTERPETATION: Equity capital and Mutual fund schemes are subjected to market risk. Based on the above analysis mutual funds have an average return of -1.05% which is compared to equity shares return of -2.34% is lower. Those who would like to take risk can go for equity investments for getting higher return. H.R.I.H.E. HASSAN 79
  • 80. Performance Evaluation of Equity shares & Mutual Funds FINDINGS Saving money is not enough. Each of us also need to invest one’s savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. 1. Investments in both equity capital and mutual fund schemes are subjected to market risk. 2. Now a day’s investments in equity and mutual fund schemes are increases because of falling interest rates and awareness of equity capital and mutual fund schemes in the minds of investors. 3. BHEL has a highest risk factor of 14.9% and Infosys has a lowest risk factor of 11.16%, where as benchmark risk is 9.32% which shows investing in equity is more risky. 4. Sundaram SMILE fund has higher risk factor of 11.78% with a negative return of 0.46%. 5. On the basis of above analysis mutual funds have a risk factor on an average 12.69%, and their returns are -1.05% per month 6. On the basis of above analysis Equity shares have a risk factor on an average 12.89%, and their returns are -2.34% per month 7. On the basis of above statements it has proved higher the risk higher the return and lower the risk lower the return. 8. Investment in mutual fund schemes gives diversified portfolio to investors. 9. Standard deviation is one of the best ways for finding risk of scrip’s mutual fund units. 10. In case of both equities and mutual funds(open ended) liquidity is very high, within three working days mutual funds will converted into cash and liquidity of equity is based on demand and supply conditions of the market for a particular scrip. H.R.I.H.E. HASSAN 80
  • 81. Performance Evaluation of Equity shares & Mutual Funds SUGGESTIONS 1. Now a day’s Indian capital market is attracting more and more foreign institutional investors (FII’s) because of economic stability and increasing growth rate, it leads to gradual increase in the stock market indices. 2. This is the right time to invest in share and mutual funds because of above reason. 3. Interest rates are falling gradually and equity markets are booming because of this reason investors can move from bank deposits to mutual funds and equities. Five basic norms of smart investing: 1. Investors must have a portfolio approach to wealth. 2. One must analyze one's risk appetite. 3. One must possess a long-term outlook 4. Never forget to do homework and analysis. 5. It is essential to have control over one's emotions. Investment in both equity capital and mutual fund schemes are subjected to market risk. Following are the recommendations given to investors for investing rationally in equity capital and mutual fund schemes. • Aggressive Growth Funds Investors who can assume the risk of potential loss in value of their investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income. • Balanced/Equity Income funds H.R.I.H.E. HASSAN 81
  • 82. Performance Evaluation of Equity shares & Mutual Funds Balanced and equity income funds are suitable for conservative investors who want high current yield with some growth. • Growth Funds Although growth funds are more conservative than aggressive growth funds, they are still relatively volatile. They are suitable for growth-oriented investors but not investors who are unable to assume risk or who are dependent on maximizing current income from their investments. • Growth and Income Funds Growth and income funds have low to moderate stability of principal and moderate potential for current income and growth. They are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income. • Fixed-Income Funds Fixed-income funds are suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so. Again, carefully read the prospectus to learn if a fund's investment policy with respect to yield and risk coincides with your own objectives. • Money Market Funds Money market funds are suitable for conservative investors who want high stability of principal and moderate current income with immediate liquidity. H.R.I.H.E. HASSAN 82
  • 83. Performance Evaluation of Equity shares & Mutual Funds CONCLUSION Saving money is not enough. Each of us also need to invest one’s savings intelligently in order to have enough money available for funding the higher education of one’s children, for buying a house, or for one’s own golden years. The study will guide the new investor who wants to invest in equity and mutual fund schemes by providing knowledge about how to measure the risk and return of particular scrip or mutual fund scheme. The study recommends new investors to go for mutual funds rather than equities, because of high risk and market instability. From the calculation it is found that the average risk of equities based on sample size is 12.89% & they are earning -2.34% returns per month where as mutual funds average risk based on sample size is only 12.69 & they are earning -1.05% per month. H.R.I.H.E. HASSAN 83
  • 84. Performance Evaluation of Equity shares & Mutual Funds BIBLIOGRAPHY TEXT BOOKS:  Donald E. Fischer & Ronald J. Jordan-Prentice Security Analysis and Portfolio Management, - hall of India Pvt. Ltd.  Punithavathy Pandian, Security Analysis and Portfolio Management-Vikas Publishing House Pvt.Ltd.  S.Kevin, Security Analysis and Portfolio Management -PHI Learning Pvt.Ltd.  V.K. Bhalla, Investment Management -Anmol Publications Pvt.Ltd WEB SITES: www.nseindia.com www.financeyahoo.com www.amfliindia.com www.google.com www.bseindia.com www.rbi.org.in H.R.I.H.E. HASSAN 84

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