1. A
Report on
“Construct an optimal portfolio using different parameters of mutual fund”
Submitted to
SAL INSTITUTE OF MANAGEMENT
Under the guidance of
Prof. Chinmay Gandhi
Submitted By
Hardik Thakar-(En.no.128070592162)
Tirth Kaushal- (En.no.128070592050)
Batch: 2012-14
2. Introduction. . .
Preface:
• Finance & its functions are the part of economic activity. Finance is very essentially needed for
all types of organizations i.e. small, medium, large-scale industries & service sector. Hence the
role of finance manager & the subject finance accounting gained maximum importance.
Liberalization, globalization & privatization created new challengers to entrepreneur &
corporate in carrying they’re day to day activities. So, “finance is regarded as the life blood of
a business organization.”
3. Contd…
• Master of business administrator is professional course which develop a new body of
knowledge & skill set & make as available for those seeking challenging carriers in the of
liberalization & globalization.
• The purpose behind writing a report is to put in to works the practical training that is imparted
into me that gives a better and a clear understanding of the experience I got.
• “Construct an optimal portfolio using different parameters of mutual fund”
• Being a very important aspect of mutual fund, I have tried to explore many areas of this aspect
in my project report.
4. Introduction . . .
• Mutual fund is a buzz in the market these days. The mutual fund industry is burgeoning, it is
completely untapped market. Only 5% of total potential of this industry has been grabbed.
Hence this industry has a lot of opportunities in it. That’s why it is so much interactive.
• As Indian economy is growing at the rate of 5.6% per annum, we can see its effect in all areas.
The Indian stock market and companies have become lucrative for foreign investors. More and
more fund is pouring in our country. This is increasing liquidity in the market and hence
increasing the money in the hands of people and thus investment. As the future prospects for
Indian companies are bright, they have lots of opportunities to expand their business worldwide,
the investment in Indian companies.
5. History of Mutual Fund. . .
• 1963: UTI is India’s first mutual fund.
• 1964: UTI launches US-64.
• 1971: UTI’s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched.
• 1986: UTI Master share, India’s first true ‘mutual fund’ scheme, launched.
• 1987: PSU banks and insurers allowed floating mutual funds; State Bank of India (SBI)
first off the blocks.
• 1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in shares and
mutual funds.
6. Contd . . .
• 1993: Private sector and foreign players allowed; Kothari Pioneer first private fund house to
start operations; SEBI set up to regulate industry.
• 1994: Morgan Stanley is the first foreign player.
• 1996: Sebi’s mutual fund rules and regulations, which forms the basis of most current laws,
come into force.
• 1998: UTI Master Index Fund is the country’s first index fund.
• 1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first acquisition in the
mutual fund.
7. Contd . . .
• 2000: The industry’s assets under management crosses Rs 1, 00,000 crore.
• 2001: US-64 scam leads to UTI overhaul.
• 2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned from
giving commissions to investors; floating rate funds and Foreign debt funds debut.
• 2003: AMFI certification made compulsory for new agents; fund of funds launched.
• The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. The history of
mutual funds in India can be broadly divided into four distinct phases.
9. Contd. . .
• A mutual fund is set up in the form of a trust, which has sponsor, trustees,
• asset management company (AMC) and custodian. The trust is established by a sponsor
or more than one sponsor who is like promoter of a company. The trustees of the mutual
fund hold its property for the benefit of the unit holders. Asset Management Company
(AMC) approved by SEBI manages the funds by making investments in various types of
securities. Custodian, who is registered with SEBI, holds the securities of various
schemes of the fund in its custody. The trustees are vested with the general power of
superintendence and direction over AMC. They monitor the performance and
compliance of SEBI Regulations by the mutual fund.
10. Types of Mutual Fund. . .
• By Structure:
• Open-ended Funds:
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors
can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.
• Closed ended Funds:
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for
subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit
route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic
repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor.
11. By investment objective. . .
• Growth Funds:
The aim of growth funds is to provide capital appreciation over the medium to long term. Such
schemes normally invest a majority of their corpus in equities. It has been proved that returns from
stocks, have outperformed most other kind of investments held over the long term. Growth schemes
are ideal for investors having a long term outlook seeking growth over a period of time.
• Income Funds:
The aim of income funds is to provide regular and steady income to investors. Such schemes generally
invest in fixed income securities such as bonds, corporate debentures and Government securities.
Income Funds are ideal for capital stability and regular income.
12. Contd. . .
• Balanced Fund:
The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the
NAV of these schemes may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and moderate growth.
13. Other Scheme. . .
• Tax Saving Schemes:
These schemes offer tax rebates to the investors under specific provisions of the Indian
Income Tax laws as the Government offers tax incentives for investment in specified avenues.
Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are
allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities
to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds.
• Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document. The
investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc.
14. Research Methodology. . .
Need of the study:
• The need of the study aimed to know that how people can construct and maintain their portfolio
by keeping stable and less risky investment in their portfolio.
• A study was also conducted to measure the performance of various funds on the basis of various
performance measuring ratios such as Sharpe ratio, beta, alpha.
• The study was basically undertaken to understand the financial needs of the customer and to
provide or suggest them products and services according to their financial needs.
• This study was undertaken to find out the funds which can make portfolio strong by keeping
less risk.
15. Scope of the project. . .
Scope of the project:
• Indian stock exchange like BSE, NSE include large number of securities. All these
securities are important at its place, but it is very difficult and lengthy task to study
all this securities at time.so, in this study only few securities from different sectors
listed on BSE and are taken as sample. This sample is selected on base of return
they had given in past. All securities which are representing the population of
different sectors are taken into consideration in this study. In portfolio
management, only few securities are selected which gives higher return to increase
the return on investment and minimize risk.
16. Limitation of project. . .
• The project is limited to the extent of information available.
• Dividend incomes are not considered.
• The study is purely academic interest.
• All the calculation could not be brought into the report.
17. Proposed methodology. . .
• Types of data: Secondary data.
• Sampling unit: Mutual fund.
• Period of study: 3 years
• Tools and techniques: Different parameters of mutual fund.
18. Terminologies. . .
• TERMINOLOGY:
ALPHA
• The alpha ratio illustrates the effect of the portfolio manager’s choice on the fund's return. The greater the alpha,
the better a return has the investment yielded compared with other investment objects with the same market
risk. Alpha is an annualized return measure of how much better or worse a fund’s performance is relative to an
index of funds in the same category, after allowing for differences in risk.
BETA
• A ratio that measures the market risk of securities or a fund. If the beta ratio exceeds one, the fund is more sensitive
than funds in general to the fluctuations of the stock market. The beta may also be negative, which means that the
value of the fund will, on average, move to the opposite direction than the general market development.
19. Data Analysis. . .
1 year 3year
scheme name alpha beta Sharp ratio alpha beta sharp ratio
axis equity fund-gr 0.78 0.73 0.23 0.11 0.89 -0.01
axis long term equity fund-gr 0.56 0.72 0.17 0.46 0.83 0.06
birla sun life equity fund-gr 0.1 1.03 0.1 -0.19 1.08 -0.07
birla sun life frontline eqity fund-gr 0.64 0.95 0.16 0.19 0.96 0
birla sun life top 100-gr 0.36 0.97 0.09 0.23 0.98 0.01
bnp paribas dividend yield fund-gr 0.2 0.87 0.06 0.38 0.84 0.04
bnp paribas equity fund-gr 0.32 0.76 0.1 0.2 0.81 0.01
bnp paribas midcap fund-gr 0.59 0.99 0.14 0.6 1.01 0.07
dsp blackrock opportunities fund-gr 0.08 1 0.03 0.03 0.96 -0.03
dsp black rock top 100 equity fund-gr -0.23 0.96 -0.04 0.06 0.93 -0.02
franklin india blue chip fund-gr -0.04 0.83 0 0.12 0.86 -0.01
franklin india high growth companies fund-gr 0.62 0.91 0.15 0.11 1.04 -0.02
franklin india opportunities fund-gr -0.26 0.98 -0.04 -0.17 0.98 -0.07
hdfc capital builder-gr 0.1 0.81 0.04 0.15 0.9 -0.01
hdfc equity fund-gr -0.15 1.13 -0.01 0.2 1.06 0
hdfc growth fund-gr -0.32 1.01 -0.05 0.21 0.98 0
hdfc longterm advantage fund-gr 0.18 0.83 0.06 0.28 0.98 0.02
hdfc midcap opportunity fund-gr 0.01 0.95 0.02 0.55 1.01 0.06
hdfc top 200 fund-gr -0.09 1.11 0 0.19 1.05 0
icici prudential discovery fund-gr 0.36 0.92 0.09 41 0.99 0.04
icici prudential focoused bluechip equity fund 0.18 0.81 0.06 0.34 0.9 0.03
icici prudential midcap fund-gr 0.43 0.87 -0.09 -0.26 1.1 -0.08
icici prudential top 100 fund-gr 0.01 0.82 0.01 0.18 0.93 0
icici prudential top 200 fund-gr 0.04 0.96 0.02 0.06 1.09 -0.03
idfc premier equity fund-gr 0.09 0.82 0.04 0.04 0.99 -0.03
idfc sterling equity fund-gr 0.21 0.88 0.06 0.37 1.02 0.03
21. Five different funds. . .
Scheme Kotak 50 (G)
Fund Class Large Cap
Fund Type Open-Ended
Ranking Rank 3
Scheme Asset
Rs in cr
719.67
Jun-30-2013
Inception Date 22-Dec-98
Last Dividend Rs/Units 1
Benchmark S&P CNX Nifty
Minimum Investment(Rs.) 5000
AMC/Fund Family Kotak Mahindra Asset Mgmt Co. Ltd.
AMC Asset Rs in cr 37,202.99 Jun-30-2013
Latest NAV Rs/Units 108.86900 Jul-24-2013
52 week high 115.7 19 jun 12
52 week low 94.820 May 26, 12
3 Months 2.50%
6 Months 5.40%
1 Year 13.60%
2 Years 2.30%
3 Years 2.80%
5 Years 7.00%
Top 5 holdings ICICI Bank, Reliance, HDFC Bank, ITC, Bharti Airtel
Scheme ICICI Pru Services Indus. (G)
Fund Class Diversified Equity
Fund Type Open-Ended
Ranking Rank 2
Scheme Asset
Rs in cr
140.81
Jun-30-2013
Inception Date 18-Nov-05
Last Dividend Rs/Units N.A
Benchmark BSE 200
Minimum Investment(Rs.) 5000
AMC/Fund Family ICICI Prudential Asset Mgmt.Co. Ltd
AMC Asset Rs in cr 91,694.87 Jun-30-2013
Latest NAV Rs/Units 21.72000 Jul-24-2013
52 week high 29.1 16 Jan 12
52 week low 15.900 Jul 26, 12
3 Months 14.40%
6 Months 10.20%
1 Year 35.20%
2 Years 11.20%
3 Years 8.10%
5 Years 9.10%
Top 5 holdings Dr Reddys Labs, Cipla, Infosys, Lupin, TCS
22. Scheme SBI Blue Chip Fund (G)
Fund Class Large Cap
Fund Type Open-Ended
Ranking Rank 2
Scheme Asset
Rs in cr
716.96
Jun-30-2013
Inception Date 20-Jan-06
Last Dividend Rs/Units N.A
Benchmark BSE 100
Minimum Investment(Rs.) 5000
AMC/Fund Family SBI Funds Management Private Limited
AMC Asset Rs in cr 59,163.19 Jun-30-2013
Latest NAV Rs/Units 16.1818 Jul-26-2013
52 week high 17.431 May 16, 13
52 week low 13.780 Jul 26, 12
3 Months -3.10%
6 Months -4.90%
1 Year 16.50%
2 Years 6.50%
3 Years 3.60%
5 Years 8.30%
Top 5 holdings ITC, HDFC Bank, Reliance, ICICI Bank, TCS
Scheme HDFC Top 200 Fund (G)
Fund Class Term Large Cap
Fund Type Open-Ended
Ranking Rank 3
Scheme Asset
Rs in cr
11,206.84
Jun-30-2013
Inception Date 19-Aug-96
Last Dividend Rs/Units 2.5
Benchmark N.A
Minimum Investment(Rs.) 5000
AMC/Fund Family HDFC Asset Management Co. Ltd.
AMC Asset Rs in cr 104,976.79 Jun-30-2013
Latest NAV Rs/Units 209.90000 Jul-24-2013
52 week high 234.759 Jan 21, 13
52 week low 190.951 Jul 26, 12
3 Months -4.90%
6 Months -9.80%
1 Year 8.10%
2 Years -1.00%
3 Years 1.80%
5 Years 11.10%
Top 5 holdings ICICI Bank, SBI, Infosys, ITC, Larsen
23. Scheme Kotak Balance
Fund Class Balanced
Fund Type Open-Ended
Ranking Rank 3
Scheme Asset
Rs in cr
101.21
Jun-30-2013
Inception Date 29-Nov-99
Last Dividend Rs/Units 4.7
Benchmark N.A
Minimum Investment(Rs.) 5000
AMC/Fund Family Kotak Mahindra Asset Mgmt Co. Ltd.
AMC Asset Rs in cr 37,202.99 Jun-30-2013
Latest NAV Rs/Units 18.41200 Jul-24-2013
52 week high 23.938 Jan 18, 13
52 week low 18.017 Jun 26, 13
3 Months -1.70%
6 Months -2.50%
1 Year 12.30%
2 Years 5.50%
3 Years 4.90%
5 Years 8.40%
Top 5 holdings ITC, HUL, Infosys, HDFC Bank, Power Grid Corp
