A project report on different schemes of mutual funds and their comparative analysis


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A project report on different schemes of mutual funds and their comparative analysis

  1. 1. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisEXECUTIVE SUMMARY:Primary investment objective of an individual or organization is to maximize the returnsand minimizing Market risk through effective diversification. Mutual funds have become latest buzz word for the average person to invest theirmoney. It is said that the bank investment is the first priority of people to invest theirsavings and next and safer investment place is in mutual funds. A Mutual fund poolsresources from thousands of investors and then diversifies its investment into manydifferent holdings such as in stocks ,bonds/debt instruments, Government securities etc.in order to provide more safer and relatively high returns as compared with Fixeddeposits etc. The Project is basically “FINANCE PROJECT” which tries to explain in layman’slanguage about the history, growth and pros & cons of investing in mutual funds. In the second part of this project it will cover the detailed track record of the threeMutual fund schemes such as : Franklin Blue chip Fund ICICI Prudential Power and HDFC capital builder fund.And also comparative analysis of these funds with their respective benchmark indices.The main reason for selecting these three schemes is : All three schemes incepted in theyear 1994 and since then they are in market , it will give me an opportunity to take indepth 15 year track records with market performance and also to know how these fundsperformed during market crash/ups and downs of the market movement.Babasabpatilfreepptmba.com 1
  2. 2. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTopic of the study:“Track Record of the Different Schemes of Mutual funds and their comparativeanalysis”Main Objective of the Project:“Understanding the Concept of Mutual funds, and comparative analysis of threeMutual fund schemes”Sub Objectives: 1. Study the Mutual fund industry in India 2. Analyzing the performance of three funds since 1994. 3. To study the performance of schemes compared to their respective benchmark. 4. To study the risk involved in these 3 schemes compared to their Benchmark. Research Design: Descriptive research is study of existing facts to a conclusion. In this research I willmake an attempt to analyze the performance of the funds and also how much riskassociated with them.Babasabpatilfreepptmba.com 2
  3. 3. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisMethodology: Primary data: Discussion with company Guide and with other officials, Secondary Data: 1. Materials Provided by Organization like [1] Research reports [2] Monthly fact sheets 2. Business Magazines like [1] Mutual funds insight [2] Money Today etc. 3. Internet.: www.bseindia.com www.nseindia.com www.valueresearch.com etc.Babasabpatilfreepptmba.com 3
  4. 4. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Benefits of the study: 1. This study will help us to know the workings and concept of Mutual funds. 2. this research helps to find how much return can earned by investing in Mutual funds as compared with FD 3. It will also help to convince the others regarding how Mutual Funds re better risk adjusted as compared with direct investment through shares. 4. and finally it will give Picture about how these three funds [Franklin Bluechip,ICICI Prudential power,HDFC capital builder fund] performing over last 15 years.Limitations: Main Limitation is that in this project we are only considering threeschemes of mutual funds, and another limitation is data availability/collection is verytediousBabasabpatilfreepptmba.com 4
  5. 5. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFINDINGS OF THE PROJECT ARE: • Among these three funds more popular among investors is Franklin blue chip fund. • Both Franklin blue chip fund and ICICI pru power fund faced problems during 2000 and 2001 main reasons are: 1.Ketan Parek’s case and 2.September 11th attack on US WTO • HDFC capital Builder fund faced crucial period during 2006, main reason was its portfolio then mainly consisting of FMCG companies and in that year they drastically came down. • Among these three funds highest Beta is of Franklin i.e 0.96,lowest is of HDFC capital builder fund and sharp ratio high in case of Franklin and low in case of HDFCCB fund . • ICICI Pru Power’s performance is more or less is stable even if we see its BETA,Alpha,Sharp ratio and average returns also good i.e 2.86. • Average Return is high in case of HDFC CB Fund i.e 3.04 • Franklin blue-chip fund once upon a time it was considered to be as star in mutual funds but due to high market volatility in the year 2006 and 2007 but now from 2008 January on words it could salvage some of its lost pride because of comparatively low volatility in Blue chip stocksBabasabpatilfreepptmba.com 5
  6. 6. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSUGGESTION/RECOMMENDATON TO INVESTORS:By the study and analysis of the mutual fund industry it will be better to suggest that eventhough mutual funds are subject to risk but they are better risk adjusted as compared withstocks, from last five years it has become a buzz word for investment main reason it isuseful in case of getting tax reductions etc.If a person wants to earn more as compared to Bank FD where possible returns are just10-12% where as in mutual fund minimum is around 15-20% mutual funds are goodoption compared with stock market .If person does not want to take much risk then he can invest in the funds like HDFCCapital builder fund because as we have already seen in returns chart, compared withother two funds(Franklin blue-chip and ICICI power).that it has given constant returns inshorter period of time, with less BETA and arithmetic mean return is also highIf a person is more interested and ready to take risk then the Franklin Blue-chip fund willthe good option. By looking at its BETA and SD Risk both are high but if person investin this fund for more than 4 years he will get returns around 35%.Babasabpatilfreepptmba.com 6
  7. 7. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisMutual fundsThe concept:In earlier times direct was the only investment vehicle available. If we wanted to buyfixed deposit/bond we had to apply on our own. Similarly, when we wanted to buyshares, we had to call up stock brokers, who would procure shares on our behalf andsame was the case with property. The cost involved in direct buying is least amongst allinvestment vehicles. However we need to have skills and time to use this form ofinvesting.Another investment vehicle is a mutual fund. Mutual fund works on the concept ofpooling in money. Assume there are 5 to 6 friends who want to invest money in aparticular asset class say equity. Also assume they do not have skills and time. Howeverone of them knows an expert who regularly invests in stock markets. All these friends goto an expert and give him their investment amount. The expert invests on their behalf. Ifthere is profit in investment, they all benefit and if there is any loss they suffer. Expertsget certain fee for investing on their behalf. This is the concept of a mutual fund.Investing in mutual fund is slightly expensive than "direct" form of investing. Howeverthe decision-making and procedure of investing is transferred to the Mutual FundCompany. Insurance as an investment vehicle works somewhat similar to mutual fund,while traditional insurance plans invest only in debt-based products and are not marketlinked.A vehicle for investing in stocks and bondsA mutual fund is not an alternative investment option to stocks and bonds, rather it poolsthe money of several investors and invests this in stocks, bonds, money marketinstruments and other types of securities.Buying a mutual fund is like buying a smallBabasabpatilfreepptmba.com 7
  8. 8. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisslice of a big pizza. The owner of a mutual fund unit gets a proportional share of thefund’s gains, losses, income and expenses.Babasabpatilfreepptmba.com 8
  9. 9. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Each mutual fund has a specific stated objective The fund’s objective is laid out in the funds prospectus, which is the legal document that contains information about the fund, its history, its officers and its performanceFund Objective What the fund will invest inEquity (Growth) Only in stocksDebt (Income) Only in fixed-income securitiesMoney Market (includingIn short-term money market instruments (includingGilt) government securities)Balanced Partly in stocks and partly in fixed-income securities, in order to maintain a balance in returns and risk Managed by an Asset Management Company (AMC) The company that puts together a mutual fund is called an AMC. An AMC may have several mutual fund schemes with similar or varied investment objectives. The AMC hires a professional money manager, who buys and sells securities in line with the funds stated objective. All AMCs Regulated by SEBI, Funds governed by Board of Directors The Securities and Exchange Board of India (SEBI) mutual fund regulations require that the fund’s objectives are clearly spelt out in the prospectus. In addition, every mutual fund has a board of directors that is supposed to represent the shareholders interests, rather than the AMC’s. Babasabpatilfreepptmba.com 9
  10. 10. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFor small and medium investor – who does not have skills and time – mutual fundseems the best option.Currently in India we have mutual funds, which invest mainly in two asset classes, debtand equity. And now many mutual fund companies also investing in real estate,infrastructure projects, natural energy resources etc.Mutual funds concept can be well understood with the following diagram: M M U A T R INVEST THEIR U INVEST IN K I MONEY A VARIETY OF E N L STOCKS/BONDS T V F E U F S N L T D U O C R S PROFIT/LOSS FROM T S PROFIT/LOSS C INDIVIDUAL U FROM PORTFOLIO H INVESTMENT A INVESTMENT E TI M O E N S Babasabpatilfreepptmba.com 10
  11. 11. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisBenefits through investing in Mutual funds:Professional Money Management: Fund managers are responsible for implementing aconsistent investment strategy that reflects the goals of the fund. Fund managers monitormarket and economic trends and analyze securities in order to make informedinvestment decisions. Diversification: Diversification is one of the best ways to reduce risk Mutual fundsoffer investors an opportunity to diversify across assets depending on their investmentneedsLiquidity: Investors can sell their mutual fund units on any business day and receive thecurrent market value on their investments within a short time period (normally three- tofive-daysAffordability: The minimum initial investment for a mutual fund is fairly low for mostfunds (as low as Rs500 for some schemes).Convenience: Most private sector funds provide you the convenience of periodicpurchase plans, automatic withdrawal plans and the automatic reinvestment of interestand dividends. Mutual funds also provide you with detailed reports and statements thatmake record-keeping simple. You can easily monitor the performance of your mutualfunds simply by reviewing the business pages of most newspapers or by using our MutualFunds section in Investor’s Mall.Flexibility and variety: You can pick from conservative, blue-chip stock funds, sectoralfunds, funds that aim to provide income with modest growth or those that take big risks Babasabpatilfreepptmba.com 11
  12. 12. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisin the search for returns. You can even buy balanced funds, or those that combine stocksand bonds in the same fund. Babasabpatilfreepptmba.com 12
  13. 13. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTax benefits on Investment in Mutual Funds: 1) 100% Income Tax exemption on all Mutual Fund dividends 2) Capital Gains Tax to be lower of - 10% on the capital gains without factoring indexation benefit and 20% on the capital gains after factoring indexation benefit. 3) Open-end funds with equity exposure of more than 50% are exempt from the payment of dividend tax for a period of 3 years from 1999-2000.Disadvantages of Mutual Funds: • No Control Over the costs • No tailor made portfolios Babasabpatilfreepptmba.com 13
  14. 14. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisINDUSTRY OVERVIEWA little history:Mutual funds made an opening in India in 1963 under the enactment f Unit Trust of India(UTI), which came out with is debut scheme named US-64, an open ended scheme n,which is operating till date. Up to 1986-87 it had launched 20 schemes, mobilizing netresources amounting to Rs. 4564 crores.for these 23 long years up to 1987 UTI enjoyedcomplete monopoly of the unit trust business in India. It remained one and the onlymutual fund in India. as the next logical step, public sector banks and financialinstitutions were allowed to float mutual funds and their success emboldened thegovernment to allow the private sector to foray into this area.The initial years of the industry also saw the emerging years of the Indian equity market,when a number of mistakes were made and hence the mutual fund schemes, whichinvested in lesser-known stocks and at very high levels, became loss leaders for retailinvestors. From those days to today the retail investor, for whom the mutual fund isactually intended, has not yet returned to the industry in a big way. But to be fair, theindustry too has focused on brining in the large investor, so that it can create a significantbase corpus, which can make the retail investor feel more secure.Ups & Downs of Mutual fund Industry In IndiaTen years ago, close-end funds were the order of the day. Most debt funds offeredassured returns. And even equity funds managed to convey the impression of fixedreturns by sporting calling themselves "Triple Plus" and "Double Square Plus". Equityfunds were largely judged by their dividends, rights and bonus offers, rather than by thereturns.The mutual fund industry has lived through its share of crises of confidence over the pastten years. And there are still grey areas. But the regulatory framework, disclosure norms Babasabpatilfreepptmba.com 14
  15. 15. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisand service standards have all changed beyond recognition, making mutual funds one ofthe most investor-friendly avenues available today.Private sector plays:When the first crop of private sector-sponsored mutual funds (such as Kothari Pioneer,20th Century Finance and Apple Finance) debuted in 1993-94, they had a difficult timeweaning investors away from the Unit Trust of India and the public sector bank-sponsored funds.The bull market of 1994 and the subsequent IPO boom changed all this. With retailinvestors tasting the power of the equity, a spate of private equity funds made their debutin 1994-95.Funds such as the Apple Midas the Goldshare and Morgan Stanley Growth Fund drewretail investors in large numbers. Unfortunately, as the IPO bubble burst, and the equitymarket went into a slide, so did the NAV of the equity funds launched in the bull market.But the important development during this period was the emergence of open-end funds,which offered on-tap liquidity to their investors and raised the bar on NAV and portfoliodisclosures.The second coming: After the upsets of 1994-95, it was a slow and painstaking recoveryfor the private sector funds. In the five years that followed, many more private sectorfunds threw their hat into the ring, some of them big global names such as AllianceCapital, the Templeton group, Newton and Principal Financial.With a lull in the equity market, fund houses spent this period expanding their portfolioof debt offerings. Alongside the plain-vanilla debt funds, came the gilt, liquid, cash funds Babasabpatilfreepptmba.com 15
  16. 16. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisand treasury management plans, to cater to high net worth and corporate investors. Therewas also a slew of balanced and hybrid fund launches.During this period, assured return schemes from the UTI and the bank-sponsored fundswere buffeted by controversy, after some reneged on promises. This was followed by thecrisis in US-64. These events helped drive the concept of market-linked returns firmlyinto the minds of investors. And this put private sector fund houses firmly back on theradar screens of investors.Restructuring pays off: The years from 1996 to 1998 saw equity funds restructuringtheir portfolios and piling them up with FMCG, pharma and infotech stocks. By end-1999, the secular bull run, led by the IT stocks, had helped many an equity fund build animpressive record of performance. But this "second coming" of equity funds was also toend in disappointment. The newfound fancy for equity saw the rollout of a slew oftechnology funds at the height of the bull markets in 2000. When these crashed, some ofthe goodwill painstakingly built by the equity funds also took a beating.Debt in fashion: But, by then, private sector fund houses had managed to build up astrong performance track record in their debt products. Helped by the secular decline ininterest rates and a basket of innovative offerings, mutual funds managed to deliverreturns that were substantially higher than what was available from alternative savingsavenues such as fixed deposits.This led to a large-scale migration of assets to debt-oriented mutual funds.By 2003, private sector mutual funds had wrested a lions share of the mutual fund assetsfrom the UTI and the PSU bank-sponsored funds. By end-December 2003, the mutualfund industry was managing Rs 1,40,000 crore of assets, with 80 per cent of it in privatesector funds. Babasabpatilfreepptmba.com 16
  17. 17. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSwept by consolidation: The years from 1999-2003 saw a considerable churn in theindustry. With competition intensifying, the weaker players were taken over. There wasalso a coming together of some of the larger fund houses. Babasabpatilfreepptmba.com 17
  18. 18. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisThe takeover of the Kothari Pioneer funds by the Franklin Templeton group and theZurich funds by the HDFC group are instances. A few fund houses saw their foreignpartners pull out, only to be replaced by new ones. Over the past couple of years, some ofthe big global names in financial services — HSBC, Grindlays and Deutsche Bank —have made an entry into the Indian fund arena. With US fund behemoth — Fidelity —now readying to enter the Indian market, the industry, at long last, appears to be reachingmaturity.Regulations stay in tune: Regulations have kept pace with the rapid changes in theindustry structure over the past decade. Both the offer documents and the financialstatements of mutual funds have been simplified over the years. Half-yearly portfolio andfinancial disclosures have been made compulsory.Stringent investment norms have been put in place to prevent concentration and reduceexposure to illiquid and thinly traded securities. Disclosure requirements have been fine-tuned to reveal more about the pattern of ownership in a fund, and transactions withrelated and group companies. SEBI recently trained its sights on reforming thedistribution and selling side of the mutual fund business.Healthy competition: Intensifying competition has ensured that the fund houses havekept two jumps ahead of the regulatory requirements, at least on disclosures and servicestandards. Daily NAV is now a standard feature with funds, and transaction-processingtimes have been compressed to less than 48 hours.Many funds have moved to a monthly disclosure of portfolios. Dissemination ofinformation has leapfrogged with the use of websites for routine disclosures. Value-addedservices such as systematic investment plans, switch options, cheque-writing facilities,and call centre services promise to improve the investing experience for investors. Babasabpatilfreepptmba.com 18
  19. 19. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSavvy investors: As the equity market pauses after the secular bull run of 2003, equityfunds appear to be back in the investors good books. Hybrid products such as the MIPs(Monthly Income Plans) and equity funds have attracted sizeable inflows in the recentmonths. Is this a sign that retail investors are finally beginning to channel theirinvestments in equities through mutual funds? Or, are they, yet again, falling into the age-old trap of jumping onto the bandwagon, in the late stages of a stock market rally?It is early days yet to say which of these is true. But there are a couple of positive signalsfrom the pattern of fund flows in the recent months.For one, inflows have been pretty selective, a sign that investors are tracking fundperformance far more closely than before.Second, outflows from equity funds have also been rising, which suggests that investorsare selling out when their target returns are met.These are signs that mutual fund investors may be on to the two crucial skills forsuccessful investing — a sense of timing and investment discipline; and that, too, at thesame time.Basis on which Mutual funds are compared :Choosing a mutual fund seems to have become a very complex affair lately. There are nodearth of funds in the market and they all clamor for attention.The most crucial factor in determining which one is better than the rest is to look atreturns. Returns are the easiest to measure and compare across funds. Babasabpatilfreepptmba.com 19
  20. 20. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisAt the most trivial level, the return that a fund gives over a given period is just thepercentage difference between the starting Net Asset Value (price of unit of a fund) andthe ending Net Asset Value. Babasabpatilfreepptmba.com 20
  21. 21. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisReturns by themselves dont serve much purpose. The purpose of calculating returns is tomake a comparison. Either between different funds or time periods. And, you must becareful not to make a mistake here. Or else, you could end up investing in the wrongfunds.Absolute returnsAbsolute returns measure how much a fund has gained over a certain period. So you lookat the NAV on one day and look at it, say, six months or one year or two years later. Thepercentage difference will tell you the return over this time frame.But when using this parameter to compare one fund with another, make sure that youcompare the right fund. To use the age-old analogy, dont compare apples with oranges.So if you are looking at the returns of a diversified equity fund (one that invests indifferent companies of various sectors), compare it with other diversified equity funds.Dont compare it with a sector fund which invests only in companies of a particularsector. Dont even compare it with a balanced fund (one that invests in equity and fixedreturn instruments).Benchmark returnsThis will give you a standard by which to make the comparison. It basically indicateswhat the fund has earned as against what it should have earned. A funds benchmark isan index that is chosen by a fund company to serve as a standard for its returns. Themarket watchdog, the Securities and Exchange Board of India, has made it mandatory forfunds to declare a benchmark index. In effect, the fund is saying that the benchmarksreturns are its target and a fund should be deemed to have done well if it manages to beatthe benchmark. Babasabpatilfreepptmba.com 21
  22. 22. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisLets say the fund is a diversified equity fund that has benchmarked itself against theSensex.So the returns of this fund will be compared vis-a-viz the Sensex. Now if the markets aredoing fabulously well and the Sensex keeps climbing upwards steadily, then anythingless than fabulous returns from the fund would actually be a disappointment.If the Sensex rises by 10% over two months and the funds NAV rises by 12%, it is saidto have outperformed its benchmark. If the NAV rose by just 8%, it is said to haveunderperformed the benchmark.But if the Sensex drops by 10% over a period of two months and during that time, thefunds NAV drops by only 6%, then the fund is said to have outperformed the benchmark.A funds returns compared to its benchmark are called its benchmark returns.At the current high point in the stock market, almost every equity fund has doneextremely well but many of them have negative benchmark returns, indicating that theirperformance is just a side-effect of the markets rise rather than some brilliant work bythe fund manager.Time periodThe most important thing while measuring or comparing returns is to choose anappropriate time period.The time period over which returns should be compared and evaluated has to be the sameover which that fund type is meant to be invested in.If you are comparing equity funds then you must use three to five year returns. But this isnot the case of every other fund. Babasabpatilfreepptmba.com 22
  23. 23. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFor instance, cash funds are known as ultra short-term bond funds or liquid funds thatinvest in fixed return instruments of very short maturities. Their main aim is to preservethe principal and earn a modest return. So the money you invest will eventually bereturned to you with a little something added.Investors invest in these funds for a very short time frame of around a few months. So itis alright to compare these funds on the basis of their six month returns.Market conditionsIt is also important to see whether a funds return history is long enough for it to haveseen all kinds of market conditions.For example, at this point of time, there are equity funds that were launched one to twoyears ago and have done very well. However, such funds have never seen a sustaineddeclining market (bear market). So it is a little misleading to look at their rate of returnsince launch and compare that to other funds that have had to face bad markets.If a fund has proved its mettle in a bear market and has not dipped as much as itsbenchmark, then the fund manager deserves a pat on the back. Babasabpatilfreepptmba.com 23
  24. 24. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTYPES OF MUTUAL FUNDS: Mutual fund schemes can be broadly classified in totwo categories. They are • PORTFOLIO CLASSIFICATION • OPERATIONAL CLASSIFICATION MUTUAL FUND SCHEME Portfolio classification operational classification  Return based • Income scheme • Growth scheme Open-ended scheme • Conservative scheme  Investment based • Equity scheme • Bond scheme • Balanced structure  Sector based • Real Estate schemes • Industry specific Closed ended scheme • Other scheme Babasabpatilfreepptmba.com 24
  25. 25. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis  Leveraged Based • Leveraged schemes • Non-leveraged  Other schemes • Gilt scheme • Index funds Babasabpatilfreepptmba.com 25
  26. 26. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisOperational schemes A) Open-ended schemes In these schemes, size of the fund is not predetermined as entry to or exit from the funds is open to investor who can buy or sell the securities to the fund at any time. This fund has greater liquidity to the funds along with the predetermined repurchase price based on the declared Net Asset Value. Portfolio mix of such schemes consists of actively traded securities in the market, preferably equity Babasabpatilfreepptmba.com 26
  27. 27. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis shares. As investors can anytime withdraw from the fund, therefore the management of such funds is quiet tedious. B) Closed –ended schemes This scheme has deposits redemption date unlike open- ended schemes. These funds have fixed capital base and are traded among the investors among the secondary market. the forces of demand and supply hence determine their price. Price is free to deviate from its net asset value. Management of such fund is comparatively easier because manager can evolve long term investment plans depending upon the life of the scheme. Within these two broad operational classification there are followingclassification being made. RETURN –BASED CLASSIFICATION Income funds: These are for the investors who are more concerned about regular returns from their investment. Growth funds: The main objective of this fund is to achieve an increase in value of investment through capital appreciation and not the regular income. Babasabpatilfreepptmba.com 27
  28. 28. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisConservative funds: These funds aim at giving reasonable rate of return in addition to capital appreciation.Investment –based classification:Equity funds :These funds invest in the equity shares of companies and undertake greaterrisk associated with it. This gives good rate of return in rising market.Bond funds: These funds provide greater security to investors by investing in bonds,debenture, etc. investment here has no capital appreciation.Balanced funds: These funds are a combination of both debt and equity .trends in marketwill determine which proportion of the mix is to be determined.Sector based classification: These funds or the schemes that invest in the securities ofonly those sectors or industries as specified in the offer documents.eg pharmaceuticals,software, fast moving consumer goods (FMCG), petroleum stocks etc. the returns onthese funds or the schemes depends on the performance of that particularsector/industries. These schemes may give the higher returns but are very risky comparedto diversified funds. Investors need to keep an eye on the performance of these of thesesectors and should exit on an appropriate time. Leverage based classification:In this type of fund or scheme investment is made byborrowing money from the market and making investment in fund there by makingleverage benefits available to mutual fund investor, i.e. giving good returns to theinvestors from the income earned by investing borrowed funds.Index-based classification :Index funds replicate the portfolio of a particular index suchas the BSE sensitive index, S&P NSE 50 index (nifty). These schemes invest in the Babasabpatilfreepptmba.com 28
  29. 29. Track Record of the Different Schemes of Mutual funds and their comparativeanalysissecurities in the same weight age comprising of an index. NAVs of such schemes wouldrise or fall in accordance with the rise or fall in the index, through not exactly by the Babasabpatilfreepptmba.com 29
  30. 30. Track Record of the Different Schemes of Mutual funds and their comparativeanalysissame by the same percentage due to some factors. Necessary disclosure in this regard ismade in offer document of the mutual fund schemes. There are also exchange tradedindex funds launched by the mutual funds that are traded on the stock exchanges.GILT-FUND:These funds invest exclusively in government securities. Governmentsecurities have no default risk .NAVs of these schemes also fluctuate due to change ininterest rates and other economic factors as are the case with income or debt –orientedschemes.DIFFERENT TYPES OF PLANS THE MUTUAL FUND OFFERS Mutual fund offers different types of plans to its investors. they are as follows. 1. GROWTH PLAN Under growth plan the investor realizes only the capital appreciation on the investment and does not get any income in the form of dividend. 2. INCOME PLAN Under income plan, the investor realizes income in the form of dividend. However, his NAV will all to the extent of the dividend. 3. DIVIDEND RE-INVESTMENT PLAN Here the dividend accrued on the mutual funds is automatically re-invested in the purchasing additionally units in the open ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-investing the same. Babasabpatilfreepptmba.com 30
  31. 31. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis 4. SYSTEMATIC INVESTMENT PLAN In this type of plan the investor is giventhe option of preparing a predetermined number of post dated cheques in favour of thefund. He will get the units on the date of cheque at the existing NAV. For instances , if onthe 5th March ,he has given a post dated cheque for June 5 th 2006, he will get units on 5 thJune 2006 at the existing NAV. 5. SYSTEMATIC WITHDRAWAL PLAN As opposed to SIP, the systematic withdrawal plan allows the investor the facility to withdraw predetermined amount/units from his fund at a pre-determined interval. The investor’s units will be redeemed at the existing NAV as on that day. The unit holder may set-up a systematic Withdrawal plan on a monthly, quarterly or semi annually or on a annual basis to redeem a fixed number of units or redeem enough units to provide a fixed amount of money. 6. RETIREMENT PENSION PLAN Some schemes are linked with retirementpension. Individuals participate in these plans for themselves, and corporate for theiremployees. 7. INSURANCE PLANS: Some schemes launched by UTI and LIC offer insurance cover to investor. Babasabpatilfreepptmba.com 31
  32. 32. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis 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, eg: Equity Linked Saving Scheme (ELSS). Pension schemes launched by the mutual fund also offer tax benefits. These schemes are growth- oriented and invest pre-dominantly in equities. Their growth opportunities and risk associated are like any equity oriented scheme. LOAD OR NO LOAD FUND A load fund is one that charges a percentage of NAV for entry or exit. That is, each time one buys or sells the units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10 .if the entry as well as exit load charge is 2% , then the investors who buy would be required to pay Rs.10.20 and those would want to repurchase must pay Rs.9.80 per unit. A no-load fund is the one that does not charge for entry or exit. It means the investors can enter the fund/scheme at NAV and no additional charges are payable on the purchase or sale of units. Babasabpatilfreepptmba.com 32
  33. 33. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTerminologies Demystified… • Asset Allocation – Diversifying investments in different assets such as stocks, bonds, real estate, cash in order to optimize risk. • Fund Manager – The individual responsible for making portfolio decision for a mutual fund, in line with fund’s objective. • Fund Offer Document – Document with investment objectives, risk factors, expenses summary, how to invest etc. • Dividend – Profits given to the investor from time to time. • Growth – Profits ploughed back into scheme. This causes the NAV to rise. • NAV – Market value of assets of scheme minus its liabilities. • Per unit NAV = Net Asset Value No. of Units Outstanding on Valuation date • Entry Load/Front-End Load (0-2.25%) – The commission charged at the time of buying the fund. Babasabpatilfreepptmba.com 33
  34. 34. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis – To cover costs for selling, processing • Exit Load/Back- End Load (0.25-2.25%) – The commission or charge paid when an investor exits from a mutual fund. Imposed to discourage withdrawals – May reduce to zero as holding period increases. • Sale Price/ Offer Price – Price you pay to invest in a scheme. May include a sales load. (In this case, sale price is higher than NAV) • Re-Purchase Price/ Bid Price – Price at which close-ended scheme repurchases its units • Redemption Price – Price at which open-ended scheme Babasabpatilfreepptmba.com 34
  35. 35. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Babasabpatilfreepptmba.com 35
  36. 36. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisASSOCIATION OF MUTUAL FUNDS IN INDIA[AMFI]With increase in Mutual Fund players in India, a need for mutual fund association inIndia was generated to function as a non-profit organization.Association of mutual funds in India (AMFI) was incorporated on 22nd August, 1995. AMFI is an apex body of all Assets Management Companies (AMC) which has beenregistered with Security Exchange Board of India (SEBI) .till date all the AMCs are thathave mutual fund schemes are its members. It functions under the supervision andguidelines of its board of Directors.Association of Mutual Funds India has brought down the Indian Mutual Fund Industry toa professional and a healthy market with the ethical lines enhancing and maintainingstandards. It follows the principle of both protecting and promoting the interests ofmutual funds as well as their unit holders.THE OBJECTIVES OF ASSOCIATION OF MUTUAL FUNDS IN INDIA The Association of Mutual Funds of India works with 30 registered AMCS of thecountry. It has certain defined objectives which juxtaposes the guidelines of its Board ofDirectors. The objectives are as follows.  This Mutual Fund Association of India maintains high professional and ethical standards in all areas of operation of the industry. It also recommends and promotes the top class business practices and code of conductwhich is followed by members and related people engaged in activities of Mutual Fundand Assets Management. The agencies that are by any means connected or involved inthis code of conduct of the association. Babasabpatilfreepptmba.com 36
  37. 37. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis  AMFI interacts with SEBI and works according to SEBI’s guidelines in the mutual fund industry.  Association of Mutual Fund of India do represent the government of India , the Reserve bank of India and other related bodies on matters relating to the Mutual Fund Industry.  It develops a team of well qualified and trained agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the Mutual Fund Industry..  AMFI undertakes all India awareness programme for investors in order to promote proper understanding of the concept and working of mutual funds.  At last Association of mutual fund of India also disseminate information on mutual fund industry and undertakes studies and research either directly or in association with other bodies. Babasabpatilfreepptmba.com 37
  38. 38. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisThe sponsors of Association of Mutual Funds in India.Bank sponsored 1) SBI Mutual management Ltd. 2) BOB asset management CO. Ltd. 3) Canbank Investment Management Services. Ltd 4) UTI Asset management Company Pvt, Ltd.Institution • GIC Asset management Co.Ltd • Jeevan Bima sahayog asset management Company.PRIVATE SECTORINDIAN • Benchmark asset management company • Cholamandalam Asset Management Co.Ltd • Credit Capital Asset Management Co.Ltd • Escorts Asset Management Ltd • JM Financial Mutual fund • Kotak Mahindra asset management company • Reliance capital Asset management Ltd • Sahara Asset management Co.Ltd • Sundaram Asset management Co.Ltd Babasabpatilfreepptmba.com 38
  39. 39. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis • Tata Asset Management Private Ltd Babasabpatilfreepptmba.com 39
  40. 40. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisIndian joint ventures • Birla Sun life Asset management company • DSP Merill Lynch Fund Managers company • HDFC Asset management companyPredominantly Foreign Joint Ventures:-  ABN AMRO Asset Management (I) Ltd.  Alliance Capital Asset Management (India) Pvt. Ltd.  Deutsche Asset Management (India) Pvt. Ltd.  Fidelity Fund Management Private Limited  Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.  HSBC Asset Management (India) Private Ltd.  ING Investment Management (India) Pvt. Ltd.  Morgan Stanley Investment Management Pvt. Ltd.  Principal Asset Management Co. Pvt. Ltd.  Prudential ICICI Asset Management Co. Ltd.  Standard Chartered Asset Mgmt Co. Pvt. Ltd.Association of Mutual Funds in India Publications: AMFI publishes mainly two typesof bulletin. One is on the monthly basis and the other is quarterly. These publications areof great support for the investors to get intimation of the know how of their parkedmoney. Babasabpatilfreepptmba.com 40
  41. 41. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSEBI REGULATIONS ON MUTUAL FUNDSThe Government brought Mutual Funds in the Securities market under the regulatoryframework of the Securities and Exchange board of India (SEBI) in the year 1993. Babasabpatilfreepptmba.com 41
  42. 42. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSEBI issued guidelines in the year 1991 and comprehensive set of regulations relating tothe organization and management of Mutual Funds in 1993.SEBI REGULATIONS 1993 (20.1.1993)The regulations bar Mutual Funds from options trading, short selling and carryingforward transactions in securities. The Mutual Funds have been permitted to invest onlyin transferable securities in the money and capital markets or any privately placeddebentures or securities debt. Restrictions have also been placed on them to ensure thatinvestments under an individual scheme, do not exceed five per cent and investment in allthe schemes put together does not exceed 10 per cent of the corpus. Investments underall the schemes cannot exceed 15 per cent of the funds in the shares and debentures of asingle company.SEBI grants registration to only those mutual funds that can prove an efficient andorderly conduct of business. The track record of sponsors, a minimum experience of fiveyears in the relevant field of Investment, financial services, integrity in businesstransactions and financial soundness are taken into account. The regulations alsoprescribe the advertisement code for the marketing schemes of Mutual Funds, thecontents of the trust deed, the investment management agreement and the scheme-wisebalance sheet. Mutual Funds are required to be formed as trusts and managed byseparately formed as trusts and managed by separately formed Asset ManagementCompanies (AMC). The minimum net worth of such AMC is stipulated at Rs.5 crores ofwhich, the Mutual Fund should have a custodian who is not associated in any way withthe AMC and registered with the SEBI.The minimum amount raised in closed-ended scheme should be Rs.20 Crores and for theopen-ended scheme, Rs.50 Crores. In case, the amount collected falls short of theminimum prescribed, the entire amount should be refunded not later than six weeks from Babasabpatilfreepptmba.com 42
  43. 43. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisthe date of Closure of the scheme. If this is not done, the fund is required to pay aninterest at the rate of 15 per cent per annum from the date of expiry of six weeks. In addition to these, the Mutual Funds are obliged to maintain books of accounts andprovision for depreciation and bad debts.Further, the Mutual Funds are now under the obligation to publish scheme-wise annualreports, furnish six month un-audited accounts, quarterly statements of the movements ofthe net asset value and quarterly portfolio statements to the SEBI. There is also astipulation that the Mutual Funds should ensure adequate disclosures to the investors.SEBI has agreed to let the Mutual Funds buy back the units of their schemes. However,the funds cannot advertise this facility in their prospectus. SEBI is also empowered toappoint an auditor to investigate into the books of accounts or the affairs of the MutualFunds.SEBI can suspend the registration of Mutual Funds in the case of deliberate manipulation,price rigging or deterioration of the financial position of Mutual Funds.SEBI REGULATIONS, 1996SEBI announced the amended Mutual Fund Regulations on December 9, 1996 coveringRegistration of Mutual Funds, Constitution and Management of Mutual funds andOperation of Trustees, Constitution and Management of Asset Management Companies(AMCs) and custodian schemes of MFs, investment objectives and valuation policies,general obligations, inspection and audit. The revision has been carried out with theobjective of improving investor protection, imparting a greater degree of flexibility andpromoting innovation.The increase in the number of MFs and the types of schemes offered by themnecessitated uniform norms for valuation of investments and accounting practices in Babasabpatilfreepptmba.com 43
  44. 44. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisorder to enable the investors to judge their performance on a comparable basis. TheMutual Fund Regulations is sued in December 1996 provide for a scheme-wise reportand justification of performance, disclosure of large investments which constitute asignificant portion of the portfolio and disclosure of the movements in the unit capital.The existing Asset Management Companies are required to increase their net worth fromRs.10 crores within one year from the date of notification of the amended guidelines.AMCs are also allowed to do other fund-based businesses such as providing investmentmanagement services to offshore funds, other Mutual Funds, Venture Capital Funds andInsurance Companies. The amended guidelines retained the former fee structure of theAMCs of 1.25% of weekly average Net Asset Value (NAV) up to Rs.100 crores and 1%of NAV for net assets in excess of Rs.100 crores.The consent of the investors has to be obtained for bringing about any change in thefundamental attributes of the scheme on the basis of which the unit holders had madeinitial investments. The regulation empowers the investor. The amended guidelinesrequire portfolio disclosure, standardization of accounting policies, valuation norms forNAV and pricing. The regulations also sought to address the areas of misuse of funds byintroducing prohibitions and restrictions on affiliate transactions and investmentexposures to companies belonging to the group of sponsors of mutual funds. Thepayment of early bird incentive for various schemes has been allowed provided they areviewed as interest payment of early bird incentive for early investment with fulldisclosure.The various Mutual Funds are allowed to mention an indicative return for schemes forfixed income securities. In 1998-99 the Mutual Funds Regulation were amended topermit Mutual Funds to trade in derivatives for the purpose of hedging and portfoliobalancing. SEBI registered Mutual Funds and Fund managers are permitted to invest in Babasabpatilfreepptmba.com 44
  45. 45. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisoverseas markets, initially within an overall limit of US $500 million and a ceiling for anindividual fund at US$ 50 million.SEBI made (October 8, 1999) investment guidelines for MFs more stringent. The newguidelines restrict MFs to invest no more than 10% of NAV of a scheme in share or sharerelated instruments of a single company. MF’s in rated debt instruments of a singleissuer is restricted to 15% of NAV of the scheme (up to 20% with prior approval ofBoard of Trustees or AMC). Restrictions in un- rated debt instruments and in shares ofunlisted companies. The new norms also specify a maximum limit of 25% of NAV forany scheme for investment in listed group companies as against an umbrella limit of 25%of NAV of all schemes taken together earlier. SEBI increased (June 7, 2000) themaximum investment limit for MFs in listed companies from 5% to 10% of NAV inrespect of open-ended funds. Changes in fundamental attributes of a scheme was alsoallowed without the consent of three fourths of unit holders provided the unit holders aregiven the exit option at NAV without any exit load. MFs are also not to make assuranceor claim that is likely to mislead investors. They are also banned from making claims inadvertisement based on past performance. Babasabpatilfreepptmba.com 45
  46. 46. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisCOMPANY PROFILEThe Kotak Mahindra GroupKotak Mahindra is one of Indias leading financial conglomerates, offering completefinancial solutions that encompass every sphere of life. From commercial banking, tostock broking, to mutual funds, to life insurance, to investment banking, the group catersto the financial needs of individuals and corporates.The group has a net worth of over Rs. 5,609 crore, employs around 17,100 people in itsvarious businesses and has a distribution network of branches, franchisees, representativeoffices and satellite offices across 344 cities and towns in India and offices in New York,London, Dubai, Mauritius and Singapore. The Group services around 3.6 millioncustomer accounts.Kotak Group Products & Services: 1. Bank 2. Life Insurance 3. Mutual Fund 4. Car Finance 5. Securities 6. Institutional Equities 7. Investment Banking 8. Kotak Mahindra International 9. Kotak Private Equity 10. Kotak Realty Fund Babasabpatilfreepptmba.com 46
  47. 47. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisKOTAK SECURITIES: Kotak Securities Ltd. 100 % subsidiary of KotakMahindra Bank is one of the oldest and largest broking firms in the Industry with amarket share of 8.5 % (as on 30th September).Their offerings include stock broking through the branch and Internet, Investments inIPO, Mutual funds and Portfolio management service.Their Accolades include:Best Performing Equity Broker in India – CNBC Financial Advisor Awards 2008Avaya Customer Responsiveness Awards (2007) in Financial Services SectorBest Brokerage Firm in India by Asiamoney in 2007The Leading Equity House in India in Thomson Extel Surveys Awards for the year 2007Euromoney Award (2006 and 2007) - Best Provider of Portfolio Management: EquitiesAvaya Customer Responsiveness Awards (2006) in Financial Institution SectorAsiamoney Award (2006) - Best Broker in IndiaEuromoney Award (2005) - Best Equities House in IndiaFinance Asia Award (2005) - Best Broker in IndiaFinance Asia Award (2004) - Indias best Equity HousePrime Ranking Award (2003-04) - Largest Distributor of IPOsThey have been the first in providing many products and services which have nowbecome industry standards. Some of them are: Babasabpatilfreepptmba.com 47
  48. 48. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFacility of Margin Finance to the customersInvesting in IPOs and Mutual Funds on the phoneSMS alerts before execution of depository transactionsMobile application to track portfoliosAuto Invest - A systematic investing plan in Equities and Mutual fundsProvision of margin against securities automatically against shares in your DemataccountThey have a full-fledged research division involved in Macro Economic studies, Sectoralresearch and Company Specific Equity Research combined with a strong and wellnetworked sales force which helps deliver current and up to date market information andnews.They are also a depository participant with National Securities Depository Limited(NSDL) and Central Depository Services Limited (CDSL), providing dual benefitservices wherein the investors can avail our brokerage services for executing thetransactions and the depository services for settling them. They use to process more than600000 trades a day which is much higher even than some of the renowned internationalbrokers.Their network spans over 310 cities with 867 outlets.Kotak Securities Limited has over Rs. 4000 crore of Assets Under Management (AUM)as of 31st December, 2007. The portfolio Management Service provides top class service,catering to the high end of the market. Portfolio Management from Kotak Securities Babasabpatilfreepptmba.com 48
  49. 49. Track Record of the Different Schemes of Mutual funds and their comparativeanalysiscomes as an answer to those who would like to grow exponentially on the crest of thestock market, with the backing of an expert. Babasabpatilfreepptmba.com 49
  50. 50. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisORGANIZATION STRUCTURE OF KOTAK SECURITIES Chairman & MD Vice-President Regional Heads North South East west State heads State heads State heads State heads Area Area Area Area managers managers managers managers BR Mgr BR Mgr BR Mgr BR Mgr RM RM RM RM Babasabpatilfreepptmba.com 50
  51. 51. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisANALYSIS PART OF THE PROJECTAnalysis part of the project starts from the detailed information about the funds selectedthat is as follows: Franklin India Blue ICICI Prudential HDFC capital chip Fund Power builder fund Objective: : Aims to achieve Objective: To generate Objective: The fund a high degree of capital capital appreciation through plans to achieve capital appreciation through investments in equity appreciation in fixed investments in well- related securities in core period of time by established, large size blue sectors and associated investing predominantly chip companies feeder industries. in equity oriented securities Type: Open Ended diversified Type: Open Ended Type: Open Ended equity Scheme diversified equity Scheme diversified equity Scheme Bench mark:BSE sensex Benchmark:S&P CNX Nifty Bench mark: S&P CNX500 Inception: Nov 30, 1993 Inception: Aug 24, 1994 Inception: Dec 31, 1993 Minimum Investment Min Investment:Rs 5000 Min Investment:Rs 5000 (Rs:5000 Fund Manager: K. N. Siva Fund Manager: Fund Manager: Subramanian Mr Anand Shah Chandresh Nigam Babasabpatilfreepptmba.com 51
  52. 52. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTRACK RECORD OF THE PROJECTS:-Under this project we selected those funds that are introduced during the year 1993-94As this was the year when major private sectors entered into mutual fund business, untilthat only the UTI enjoyed the monopoly in this industry. The main reason for this is tostudy and analyze the industry properly.Franklin India Blue-chip Fund(G)About Franklin TempletonFranklin Templeton is one of the largest* private sector fund houses in the country withover Rs.31,175 crores of assets under management for over 24 lakh investor accounts (asof December 31, 2007). It manages one of the most comprehensive ranges of mutualfunds (48) catering to varied investor requirements and offering different investmentstyles to choose from. It has Offices in 33 cities and Collection Centres in another 46locations across the country.Franklin Templeton Investments is one of the largest financial services groups in theworld based at San Mateo, California USA. The group has US$ 647 billion in assetsunder management globally (as of November 30, 2007). Franklin Templeton has 60 yearsof experience in investment management and with offices in over 29 countries, providesinvestment management and advisory services to a client base of over 17.7 millionunitholder accounts. Babasabpatilfreepptmba.com 52
  53. 53. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFranklin Templeton Mutual Funds are managed by Franklin Templeton Investments - aglobal investment management major. Franklin Templeton started their India operationsin 1996 as Templeton Asset Management India Pvt. Limited. It flagged off the mutualfund business with the launch of Templeton India Growth Fund in September 1996.Franklin Templeton Asset Management (India) Private Limited acts as the assetmanagement company with Templeton holding a majority of 75 per cent of the equity.Franklin India Blue chip FundFund Details:Type of Scheme Open EndedNature of Scheme EquityInception Date Nov 30, 1993Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 2471.4888 on Jan 31, 2008Increase/Decrease since Dec 31, 2007 (Rs. -452.855in crores)Previous Name Pioneer ITI Bluechip - GrowthMinimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation DailyFund Manager K. N. Siva SubramanianEntry Load Entry Load is 2.25%.Exit Load Exit Load is 0%.Objective: Aims to achieve a high degree of capital appreciation through investments inwell-established, large size blue chip companiesScheme Performance (%) as on Mar 4 , 200814 days 1 month 3 months 1 year 3 yrs* Inception*-7.81 -10.88 -17.43 27.3 32.4 27.5Top 10 Holdings as on Jan 31, 2008 Babasabpatilfreepptmba.com 53
  54. 54. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisCompany Nature Value (Cr.) %Reliance Industries Ltd EQ 185.99 7.53Bharati Tele - Ventures EQ 169.46 6.86Larsen & Toubro Limited EQ 169.3 6.85Housing Development Finance Corporation Ltd EQ 156.39 6.33Grasim Industries Ltd EQ 138.59 5.61ICICI BANK LTD. EQ 131.75 5.33Kotak Mahindra Bank Ltd. EQ 123.94 5.01Infosys Technologies Ltd EQ 120.31 4.87Aditya Birla Nuvo Limited. EQ 103.9 4.2Bharat Heavy Electricals Ltd EQ 98.04 3.97Top Industry Allocation as on Jan 31, 2008Banks 13.5176%Oil & Gas, Petroleum & Refinery 12.172%Engineering & Industrial Machinery 9.3138%Telecom 8.3178%Finance 7.1913%Computers - Software & Education 7.1902%Electricals & Electrical Equipments 6.9137%Auto & Auto ancilliaries 6.7521%Cement 6.0963%Textiles 4.2038% Babasabpatilfreepptmba.com 54
  55. 55. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSpecial Features: Easy liquidity : all transactions are processed within 3 working days.Pioneer ITI Bluechip - Growth changed to Franklin India Bluechip - Growth w.e.f Aug30, 2002.Asset Allocation as on Jan 31, 2008Equity Debt Money Market96.54 0 3.46Best and worst performance:Best (Period) Worst (Period)Month 41.78 (16/02/1994 - 18/03/1994) -27.80 (12/05/2006 - 13/06/2006)Quarter 55.99 (15/12/1998 - 16/03/1999) -31.51 (22/02/2000 - 23/05/2000)Year 199.42 (04/01/1999 - 04/01/2000) -36.54 (15/09/2000 - 17/09/2001)Relative performance [fund v/s Category wise] Babasabpatilfreepptmba.com 55
  56. 56. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisFund Style:Performance Analysis:FRANKLIN INDIA Bluechip Fund--formerly Pioneer ITI Bluechip Fund--has been a topperformer almost since its inception in October 1993. After the Franklin Templeton-Pioneer ITI merger in July 2002, the scheme is managed by Franklin TempletonInvestments, but the equity fund management team is intact. K.N. Siva Subramanian isstill the fund manager and Ravi Mehrotra continues as Chief Investment Officer.Allaying investors fears about a change in fund management styles, Mehrotra says: "Thestock picking style will remain, as that was a prerequisite demanded by Pioneer ITI whileselling the funds."FIBCF was launched as a three-year close-ended fund but was converted to an open-ended one in January 1997. The fund aims to provide medium to long-term capitalappreciation by seeking steady and consistent growth from well-established largecompanies. Babasabpatilfreepptmba.com 56
  57. 57. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Babasabpatilfreepptmba.com 57
  58. 58. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisRating. Outlook Money has consistently ranked FIBCF among the top performing fundsin the diversified equity category. The fund has a good performance track record and hasdelivered steady and consistent returns. In last five years, its CAGR (compoundedannualised growth rate) has been 26.14 per cent; its three-year performance is 0.62 percent, and one-year performance is 14.74 per cent.Its benchmark index, BSE Sensex, on the other hand, has reported a pathetic -1.93 percent for five years, -11.37 per cent for three years and -1.79 per cent for one year. Inmoney terms, Rs 10,000 invested in FIBCF at inception (December 1, 1993) would havegrown to Rs 52,270 as of today. In contrast, Sensex would have given a meagre Rs 9,808.By outperforming its benchmark index, FIBCF has proved (at least historically) thatactive funds can outperform index funds in long term. Babasabpatilfreepptmba.com 58
  59. 59. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisICICI PRUDENTIAL POWER FUNDABOUT ICICI PRUDENTIALICICI Prudential Asset Management Company enjoys the strong parentage ofPrudential plc, one of UKs largest players in the insurance & fund management sectorsand ICICI Bank, a well-known and trusted name in financial services in India. ICICIPrudential Asset Management Company, in a span of just over eight years, has forged aposition of pre-eminence in the Indian Mutual Fund industry as one of the largest assetmanagement companies in the country with assets under management of Rs. 37,906.24crore (as of March 31, 2007). The Company manages a comprehensive range of schemesto meet the varying investment needs of its investors spread across 68 cities in thecountry.SponsorsICICI Bank is Indias second-largest bank with total assets of about Rs. 344,658 crores asat March 31, 2007 and profit after tax of Rs. 3,110 crores for the year ended March 31,2007 (Rs. 2,540 crores for the year ended March 31, 2006). ICICI Bank has a network ofabout 710 branches and 45 extension counters and over 3,271 ATMs. ICICI Bank offers awide range of banking products and financial services to corporate and retail customersthrough a variety of delivery channels and through its specialised subsidiaries andaffiliates in the areas of investment banking, life and non-life insurance, venture capitaland asset management. ICICI Bank set up its international banking group in fiscal 2002to cater to the cross border needs of clients and leverage on its domestic bankingstrengths to offer products internationally. ICICI Bank currently has subsidiaries in theUnited Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, SriLanka and Dubai International Finance Centre and representative offices in the UnitedStates, United Arab Emirates, China, South Africa and Bangladesh. UK subsidiary of Babasabpatilfreepptmba.com 59
  60. 60. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisICICI Bank has established a branch in Belgium. ICICI Bank is the most valuable bank inIndia in terms of market capitalisation.Headquartered in London, Prudential plc is a leading international financial servicesgroup, offering a significant portfolio of life insurance and fund management products inthe United Kingdom, the United States, Asia and continental Europe.Prudential plc is a leading international financial services group providing retail financialproducts and services and fund management to many millions of customers worldwide.As a group Prudential plc has, as of December 31, 2006, over GBP251 billion of fundsunder management, more than 20 million customers and over 23,000 employeesworldwide as of December 31, 2006.In the United Kingdom Prudential is a leading lifeand pensions provider offering a range of retail financial products. M&G is PrudentialsUK & European Fund Manager, with around £250 billion of funds under management (asof 31 December 2006). Jackson National Life, acquired by Prudential in 1986, is aleading provider of long-term savings and retirement products to retail and institutionalcustomers throughout the United States. Egg provides banking, insurance and investmentproducts through its Internet site www.egg.com. In Asia, Prudential is the leadingfinancial services group with an extensive network of over 30 life insurance and 10 fundmanagement operations spanning 13 diverse markets. Babasabpatilfreepptmba.com 60
  61. 61. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Babasabpatilfreepptmba.com 61
  62. 62. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisICICI PRUDENTIAL POWER MUTUAL FUND-GICICI Prudential Power, is an open-ended equity fund which does just that. Theportfolio is made up of large-cap and mid-cap stocks, and is aimed at capturing thegrowth opportunities across multiple sectors in the market.INVESTMENT PHILOSOPHY:ICICI Prudential Power follows a blend of top-down macro research to identify growthsectors and bottom-up fundamental research to identify stocks. It seeks to optimise risk-adjusted return by building a portfolio of large and mid-cap stocks across select sectors.ICICI Prudential Power is a multi-sector fund focused on investing in carefully selectedstocks offering optimum risk-adjusted return across select growth sectors.Investment objective: To generate capital appreciation by actively investing in equity/equity related securities. For defensive considerations, the Scheme may invest in debt,money market instruments, to the extent permitted under the Regulations. The AMC willhave the discretion to completely or partially invest in any of the type of securities statedabove so as to maximize the returns. Babasabpatilfreepptmba.com 62
  63. 63. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisBenefits by investing in this fund:ICICI Prudential Power offers the following key benefits: • It gives you a core large-cap portfolio with some exposure to mid-cap stocks • It provides you the edge as it seeks to capture the best sectoral opportunities in the market.Fund informationType of Scheme Open EndedNature of Scheme EquityInception Date Aug 24, 1994Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 1094.0721 on Mar 31, 2008Increase/Decrease since Feb 29, -186.9532008 (Rs. in crores)Rolled Over To Open EndedPrevious Name Prudential ICICI PowerMinimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation Daily Amount Bet. 0 to 49999999 then EntryEntry Load load is 2.25%. and Amount greater than 50000000 then Entry load is 0%.Exit Load If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0 to 49999999 then Exit load is 1%. If redeemed bet. 6 Months to 12 Months; and Amount Bet. 0 to 49999999 then Exit load is 0.5%. and Amount greater than 50000000 then Exit load is 0%.Fund manager Mr Anand Shah Babasabpatilfreepptmba.com 63
  64. 64. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisTop Ten holdings as on Feb 29, 2008Company Nature Value (Cr.) %Reliance Industries Ltd EQ 93.61 7.31Steel Authority of India Ltd EQ 62.71 4.9Sterlite Industries (India) Ltd EQ 62.23 4.86Bharti Airtel Ltd EQ 57.84 4.51Bharat Heavy Electricals Ltd EQ 56.6 4.42Zee Entertainment Enterprises Ltd EQ 54.85 4.28Larsen & Toubro Limited EQ 46.66 3.64ICICI BANK LTD. EQ 45.6 3.56Sun Pharmaceuticals Industries Ltd EQ 43.93 3.43Union Bank Of India Ltd EQ 41.89 3.27Top industry allocation as on Feb 29, 2008Banks 12.7765%Oil & Gas, Petroleum & Refinery 11.5705%Housing & Construction 9.3932%Entertainment 8.7206%Steel 6.5094%Engineering & Industrial Machinery 5.7927%Pharmaceuticals 5.0092%Telecom 4.9636%Metals 4.8579%Computers - Software & Education 4.5851%Asset Allocation as on Mar 31, 2008 Babasabpatilfreepptmba.com 64
  65. 65. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisEquity Debt Money Market94.59 0 5.41 Babasabpatilfreepptmba.com 65
  66. 66. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisScheme Performance (%) as on Apr 3 , 200814 days 1 month 3 months 1 year 3 yrs* Inception*NA -9.72 -29.4 15.48 32.69 17.35Net Asset Value (Rs/Unit) 86.89 As On Apr 3, 2008Best and worst performance period : Best period Worst periodMonth 34.39 (03/12/1999 - 04/01/2000) -35.48 (11/04/2000 - 12/05/2000)Quarter 78.29 (22/11/1999 - 22/02/2000) -46.59 (22/02/2000 - 23/05/2000)Year 215.03 (08/03/1999 - 07/03/2000) -59.60 (13/03/2000 - 13/03/2001)Relative Performance (Fund v/s category) Babasabpatilfreepptmba.com 66
  67. 67. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisPerformance Analysis:This fund isnt shooting out the lights but has put up a respectable return. Its 13-yearperformance is suggestive of a decent record with neither a blockbuster performance, nora massive blow-up. Only one year (2000) did it land in the bottom quartile.The funds focus on fundamentals is its strength. It would be rare to come across anyunheard names in its portfolios. If they did appear, it would be in miniscule proportions.Since the fund refuses to chase momentum plays that have the tendency to fall asdramatically as they rise, it steered clear of real estate stocks which had been in fashion inthe last couple of years. This is precisely why the fund doesnt set the charts on fire, butneither does it give its investors sleepless nights.Although this is encouraging, instability at the helm rarely benefits investors. The highdegree of churn in fund management continues to worry. Under Anand Shahs leadership(since January 2007), the portfolio has become more focused with under 35 stocks, asagainst the earlier count of 50. Consequently, the concentration in the top three holdingshas also gone up from 15 per cent to over 20 per cent. But once you realize that theseholdings include Reliance Industries, Bharti Airtel and ICICI Bank, any apprehensions onthis front disappear.Its theme of core and feeder industries is more diverse than what appears at first blush. Itsinclusion of sectors as diverse as energy, transportation, financial services, info tech,healthcare, electricity, media and hotels, give it a more diversified slant. The large-cap tiltalong with its concentrated portfolio and broad theme make it an appealing option. Babasabpatilfreepptmba.com 67
  68. 68. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisHDFC CAPITAL BUILDER FUNDABOUT HDFC ASSET MANAGEMENT COMPANY:HDFC Asset Management Company Limited (AMC) was incorporated under theCompanies Act, 1956, on December 10, 1999, and was approved to act as an AssetManagement Company for the Mutual Fund by SEBI on June 30, 2000. The sponsorHDFC was incorporated in 1977 as first specialised housing finance institution in India.HDFC provides financial assistance to individuals, corporates and developers for thepurchase and construction of residential housing. It also provides property-relatedservices, training and consultancy. In the mutual fund venture, HDFC has tied up withStandard Life, one of the leading Insurance companies in the United Kingdom, havingvast experience in management of funds. HDFC has developed a strong and dedicatedteam of agents that market its fixed deposit products. These key partners would constitutethe backbone of the marketing and distribution network of Mutual Fund and will remain acentral theme of the organisational framework in times to come. No. of schemes 88 No. of schemes including options 351 Equity Schemes 34 Debt Schemes 292 Short term debt Schemes 15 Equity & Debt 6 Money Market 0 Gilt Fund 4Fund Managers : Anil Bamboli , Chirag Setalvad , Dhawal Mehta , Mustafa Mehmood ,Prashant Jain, Shabbir Kapasi, Shobhit Mehrotra , Srinivas Rao Ravuri , Vinay RKulkarni. Babasabpatilfreepptmba.com 68
  69. 69. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisABOUT HDFC CAPITAL BUILDER FUND:HDFC Capital Builder is a value-style diversified equity fund investing in midcaps(benchmark S&P CNX 500). Value style investing involves identifying good stocks thattrade at a steep discount to their fair value.INVESTMENT STYLEFUND INFORMATION:Type of Scheme Open EndedNature of Scheme EquityInception Date Dec 31, 1993Face Value(Rs/Unit) 10Fund Size (Rs. in crores) 645.7181 on Mar 31, 2008Increase/Decrease since Feb 29, 2008 (Rs. -102.576in crores)Rolled Over To Open Ended Zurich I C B F - Zurich India QuantumPrevious Name Growth FundMinimum Investment (Rs) 5000Purchase Redemptions DailyNAV Calculation DailyFund Manager Chandresh Nigam Amount Bet. 0 to 49999999 then Entry loadEntry Load is 2.25%. and Amount greater than 50000000 then Entry load is 0%.Exit Load Exit Load is 0%.Top Ten holdings are as follows: Babasabpatilfreepptmba.com 69
  70. 70. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisCompany Nature Value (Cr.) %ICICI BANK LTD. EQ 54.42 7.27State Bank of India EQ 40.52 5.41Bharat Heavy Electricals Ltd EQ 40.25 5.38Crompton Greaves Ltd EQ 34.38 4.59Sintex Industries Ltd EQ 30.91 4.13Exide Industries Ltd EQ 30.24 4.04IPCA Laboratories Ltd EQ 29.74 3.97SKF Bearings India Ltd EQ 29.17 3.9Indraprastha Gas Ltd EQ 25.28 3.38Thermax Limited EQ 24.86 3.32Top industry allocation Feb 29, 2008Banks 17.7639%Electricals & Electrical Equipments 9.973%Pharmaceuticals 9.491%Finance 8.2077%Auto & Auto ancilliaries 7.9401%Engineering & Industrial Machinery 7.5767%Steel 5.6552%Chemicals 5.0128%Metals 4.166%Plastic 4.1309% Babasabpatilfreepptmba.com 70
  71. 71. Track Record of the Different Schemes of Mutual funds and their comparativeanalysis Top ten holdings Banks Electricals & Electrical Equipm ents Pharm aceuticals Finance Auto & Auto anci Engineering & Industrial Machinery Steel Chem icals Metals PlasticAsset Allocation as on Mar 31, 2008 :Equity Debt Money Market92.2 0 7.8Scheme Performance (%) as on Apr 4 , 200814 days 1 month 3 months 1 year 3 yrs* Inception*NA -10.87 -32.9 22.93 25.76 14.92 Babasabpatilfreepptmba.com 71
  72. 72. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisBest and Worst performance of the fund: Best performance worst performanceMonth 30.93 (20/03/1998 - 21/04/1998) -33.87 (12/05/2006 - 13/06/2006)Quarter 45.72 (22/09/2003 - 22/12/2003) -32.90 (04/01/2008 - 04/04/2008)Year 146.48 (24/04/2003 - 23/04/2004) -46.06 (30/11/1994 - 30/11/1995Relative performance of the fund(fund v/s category average) Babasabpatilfreepptmba.com 72
  73. 73. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisPerformance analysis of the fund:Equity fund investors have rarely had it so ironical. During 2003 time they were jubilantspectators to an astonishing surge in equity markets that saw them double their money inless than 12 months. A year later they have seen more than 25% of their gains shaved off.While there is nothing startling about this to the seasoned equity fund investor, it isnevertheless disquieting to investors with a low to moderate risk profile. At Personalfnwe have seen a lot of investors who have been distraught at the volatility in stock marketsover the last few months. This got us to look at funds that did reasonably well during thebull run last year and redeemed themselves equally well during the slide over the last 3months. One fund that caught our eye was HDFC Capital Builder.HDFC Capital Builder is a fund that has for long lived in the shadow of its morerenowned siblings – HDFC Equity and HDFC Top 200. However, the fund is nowemerging as a force to reckon with and its performance in the year 2004 and 2005. HDFCCapital Builder is a value-style diversified equity fund investing in midcaps (benchmarkS&P CNX 500). Value style investing involves identifying good stocks that trade at asteep discount to their fair value.Investors can retain their holdings in HDFC Capital Builder. After hugely underperforming the market in 2006, the fund has saw a pick-up in performance over a one-year period. Capital Builder’s portfolio has undergone a major overhaul and wears a moreaggressive look. This makes it more suitable to investors with a risk appetite.While the fund enjoys a long track record, it has displayed a chequered performance overthe past three years. This may be partly due to the frequent changes in the fund’spositioning. Capital Builder has changed its focus from a value/defensive fund to a mid-cap focused fund in 2003-04 and now sports a profile similar to other diversified funds. Babasabpatilfreepptmba.com 73
  74. 74. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisSome of the changes are likely to have occurred due to fund manager changes; three fundmanagers have handled this fund in the last three years. Investors can wait for the fund todisplay a greater consistency in its performance over the next year or so, beforecontemplating fresh exposures. For now, the fund need not form a core part of yourportfolio. HDFC Capital Builder has generated a return of about 55 per cent during 2005,beating the category average of about 45 per cent. Until 2006, Capital Builder did displaya strong performance record and was among top choices for those who desired a fundwith a mid-cap focus.However, it was a laggard in 2006. In a year when only an aggressive investment strategyhelped funds outpace the markets, Capital Builder’s focus on defensive sectors such asFMCG and its well-diversified approach to investing worked against its favour.The massive underperformance resulted in considerable outflows from the fund, whichadded instability to its performance. Over the past year, however, the portfolio appears tohave undergone significant changes. Capital Builder shed its exposure to FMCG and autoancillaries and has considerably stepped up its holdings in banks, electricals and electricalequipments, capital goods and metals stocks etc. Babasabpatilfreepptmba.com 74
  75. 75. Track Record of the Different Schemes of Mutual funds and their comparativeanalysisRETURNS OF THE FUNDS COMARED TO BENCH MARK:1.FRANKLIN INDIA BLUE-CHIP FUND 40 35 30 25 FIBCF 20 BSE SENSEX 15 10 5 0 since 5 yr since 3 yr since 1 yr2.ICICI PRUDENTIAL POWER FUND 60 50 40 ICICI PPF 30 S&P CNX NIFTY 20 10 0 since 5 yr since 3 yr since 1 yr3.HDFC CAPITAL BUILDER FUND Babasabpatilfreepptmba.com 75