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A comparative study on direct equity investing and mutual fund investing

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A comparative study on direct equity investing and mutual fund investing

  1. 1. Summer Internship Project Report On A COMPARATIVE STUDY ON DIRECT EQUITY INVESTING AND MUTUAL FUND INVESTING At Geojit Bnp Paribas, Kottayam Submitted in partial fulfilment of the degree of BBA + GDBA Programme of Amity University (U.P) Submitted to: Submitted by: Ms. Anitha Suresh Mr. Akash Jeevan Faculty guide A31106413023 BBA class of 2014 Amity Global Business School, Cochin BBA+GDBA Batch 2013-2016
  2. 2. DECLARATION Title of Project Report: ‘A Comparative Study on Direct Equity Investing and Mutual Fund Investing’ I declare (a)That the work presented for assessment in this Summer Internship Report is my own, that it has not previously been presented for another assessment and that my debts (for words, data, arguments and ideas) have been appropriately acknowledged (b)That the work conforms to the guidelines for presentation and style set out in the relevant documentation. Date: Mr. Akash Jeevan A31106413023 BBA class of 2014
  3. 3. CERTIFICATE FROM FACULTY GUIDE I Ms. Anitha Suresh hereby certify that Mr. Akash Jeevan student of Bachelor of Business Administration at Amity Global Business School, Kochi, Amity University Uttar Pradesh has completed the Project Report on ― ‘A comparative study on direct equity investing and mutual fund investing.’ Ms. Anitha Suresh Faculty in charge AGBS, Kochi
  4. 4. CERTIFICATE FROM INDUSTRY
  5. 5. ACKNOWLEDGEMENT An undertaking of work life - this is never an outcome of a single person; rather it bears the imprints of a number of people who directly or indirectly helped me in completing the present study. I would be failing in my duties if I don't say a word of thanks to all those who made my training period educative and pleasurable one. I am thankful to GEOJIT BNP PARIBAS, KOTTAYAM for giving me an opportunity to do summer training in the company. First of all, I am extremely grateful to Mr. Sunil K (Branch Manager, Kottayam) for his guidance, encouragement and tutelage during the course of the internship despite his extremely busy schedule. My very special thanks to him for giving me the opportunity to do this project and for his support throughout as a mentor. I must also thank my faculty guide Ms. Anitha Suresh (Faculty, Amity Global Business School) for her continuous support, mellow criticism and able directional guidance during the project. I sincerely thank Mr. Ashish K Pillai (Faculty, Amity Global Business School) for his valuable suggestions and guidance for the completion of my summer internship and preparation of the report. I would also like to thank all the respondents for giving their precious time and relevant information and experience, I required, without which the Project would have been incomplete. Finally I would like to thank all lecturers, friends and my family for their kind support and to all who have directly or indirectly helped me in preparing this project report. And at last I am thankful to all divine light and my parents, who kept my motivation and zest for knowledge always high through the tides of time.
  6. 6. ABSTRACT A comparative study is a process of conducting studies of two or more subject with respect of their features. It’s a comparison of their respective pros and cons. This way of a study helps in finding out a best thing from the compared things. Here I made a comparative study on direct investing in equity shares and investing in mutual funds. The objective of my study is to find out a best security to invest in Indian Financial Market according to an investor. This study makes to understand the followings factors:  Performance of equity shares and mutual funds for the past 10 years  Makes me to understand the factors regarding the stock split and bonus shares  Understand the stock market crash on 2008  Gives me a lot of information about Indian Financial Market I have done project on “A Comparative Study on Direct Equity Investing and Mutual Fund Investing” of 8 weeks during my summer internship training at Geojit Bnp Paribas, Kottayam under the guidance of Mr. Sunil K (Branch manager). I have tried to put my best effort that this report can help anyone about the Indian Capital Market, the equity shares and mutual funds. This report has several features:  The language and concept used to explain is very simple to understand any reader  Makes enough tables and graphs for easier understanding  Added several websites as reference, which is helpful for a reader to get additional information  Added some interesting facts about the study, which will definitely makes the reader more enthusiastic
  7. 7. TABLE OF CONTENTS Chapter 1: Introduction to company………………………………………………..…1 1.1: Introduction to Financial Market……………………………………………6 1.1.1: Indian Financial Market…………………………………………..…6 1.2: The Equity Capital………………………………………………………….8 1.2.1: Face Value of a Share…………………………………………….….9 1.2.2: Issue of Shares……………………………………………………….9 1.2.3: Advantages of Equity Shares……………………………………...…9 1.2.4: Disadvantages of Equity Shares……………………………………10 1.3: The Mutual Fund……………………………………………………….…11 1.3.1: NAV (Net Asset Value)…………………………………………….12 1.3.2: Various Types of Mutual Funds……………………………………12 1.3.3: Advantages of Mutual Fund……………………………………..…14 1.3.4: Disadvantages of Mutual Fund……………………………………..16 1.4: Indian Stock Market Preview – 2004 April to 2014 March………………..16 1.4.1: Biggest falls in the Indian stock market history………………….…17 Chapter 2: Literature Review…………………………………………………...........20 Chapter 3: Research Methodology…………………………………………………...22 Chapter 4: Analysis and Interpretations……………………………………………..24 Chapter 5: Conclusion and Recommendations………………………………………70 References……………………………………………………………………………...72 Annexure……………………………………………………………………………....73
  8. 8. LIST OF TABLES 4.1: Price and return of NSE CNX NIFTY……………………….……………………..24 4.2: Price and return of Hindustan Unilever Limited……………………………………27 4.3: Price and return of Larsen & Toubro Limited………………………………………29 4.4: Price and return of Bharat Petroleum Corporation Limited…………….…………..31 4.5: Price and return of Infosys Limited……………………………………...…………33 4.6: Price and return of Dr. Reddy's Laboratories Limited……………………..……….35 4.7: Price and return of State Bank of India……………………………………………..37 4.8: Price and return of Tata Steel Limited………………………………………….…..39 4.9: Price and return of Maruti Suzuki India Limited…………………………………...41 4.10: Price and return of Bharat Heavy Electricals Limited……………………………..43 4.11: Price and return of Bharti Airtel Limited………………………………………….45 4.12: Price and return of Birla sun life equity fund-regular plan-growth…………….….48 4.13: Price and return of Reliance growth fund-regular plan-growth…………………...50 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth…………52 4.15: Price and return of Tata pure equity fund-regular plan-growth………………….54 4.16: Price and return of SBI magnum equity fund-regular plan-growth……………...56 4.17: Price and return of Canara Robeco equity diversified fund-regular plan-growth….58 4.18: Price and return of HDFC top 200 fund-regular plan-growth…………………..…60 4.19: Price and return of Franklin India prima fund-regular plan-growth…………….…62 4.20: Price and return of UTI equity fund-regular plan-growth…………………………64 4.21: Price and return of Sundaram growth fund-regular plan-growth …………….……66
  9. 9. LIST OF GRAPHS 4.1: Price and return of NSE CNX NIFTY……………………………………………...24 4.2: Price and return of Hindustan Unilever Limited…………………………………....27 4.3: Price and return of Larsen & Toubro Limited………………………………………29 4.4: Price and return of Bharat Petroleum Corporation Limited……………………...…31 4.5: Price and return of Infosys Limited………………………………………………...33 4.6: Price and return of Dr. Reddy's Laboratories Limited…………………………...…35 4.7: Price and return of State Bank of India…………………………………………..…37 4.8: Price and return of Tata Steel Limited…………………………………………...…39 4.9: Price and return of Maruti Suzuki India Limited…………………………………...41 4.10: Price and return of Bharat Heavy Electricals Limited…………………………..…43 4.11: Price and return of Bharti Airtel Limited……………………………………….…45 4.12: Price and return of Birla sun life equity fund-regular plan-growth………………48 4.13: Price and return of Reliance growth fund-regular plan-growth………………….50 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth…………52 4.15: Price and return of Tata pure equity fund-regular plan-growth…………….……54 4.16: Price and return of SBI magnum equity fund-regular plan-growth………...……56 4.17: Price and return of Canara Robeco equity diversified fund-regular plan-growth….58 4.18: Price and return of HDFC top 200 fund-regular plan-growth……………………..60 4.19: Price and return of Franklin India prima fund-regular plan-growth…………….…62 4.20: Price and return of UTI equity fund-regular plan-growth…………………………64 4.21: Price and return of Sundaram growth fund-regular plan-growth ……………….…66
  10. 10. LIST OF FIGURES 1.1: Mutual Fund Operation……………………………………………………………12 1.2: Indian stock market crash – 2008………………………………………………….19 Annexure figure 1: A bull in stock market……………………………………………....73 Annexure figure 2: A bear in stock market ……………………………………………..74
  11. 11. CHAPTER 1: INTRODUCTION
  12. 12. 1 | P a g e Introduction to Company Geojit BNP Paribas, today, is a leading retail financial services company in India with a growing presence in the Middle East. The company rides on its rich experience in the capital market to offer its clients a wide portfolio of savings and investment solutions. The gamut of value-added products and services offered ranges from equities and derivatives to Mutual Funds, Life & General Insurance and third party Fixed Deposits. The needs of over 710,000 clients are met via multichannel services - a countrywide network of over 486 offices, phone service, dedicated Customer Care Centre and the Internet. Geojit BNP Paribas has membership in, and is listed on, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). In 2007, global banking major BNP Paribas joined the company’s other major shareholders - Mr. C.J.George, KSIDC (Kerala State Industrial Development Corporation) and Mr.Rakesh Jhunjhunwala – when it bought a stake to become the single largest shareholder. The company also has a strategic presence in the Middle East Region in the form of joint ventures and partnerships. Barjeel Geojit Securities, its joint venture with the Al Saud group, is headquartered in Dubai, in the United Arab Emirates, and has branches in Abu Dhabi, Ras Al Khaimah, Al Ain, and Sharjah. Aloula Geojit Brokerage Co., the joint venture with the Al Johar group in Saudi Arabia is headquartered in Riyadh, with branches in Dammam and Jeddah. BBK Geojit Securities KSC, located in Kuwait, is a joint venture with Bank of Bahrain, Kuwait and JZA. Geojit Qurum Business Group Financial Services LLC is the joint venture with QBG and National Securities Co. and based in Oman. A strong brand identity and extensive industry knowledge coupled with BNP Paribas’ international expertise gives Geojit BNP Paribas a competitive advantage. Expanding range of Online Products and Services Geojit BNP Paribas has proven expertise in providing online services. In the year 2000, the company was the first stockbroker in the country to offer Internet Trading, integrating the first Bank Payment Gateway in the country for Internet Trading, among many other industry firsts. This experience, along with the BNP Paribas Personal Investors’ expertise
  13. 13. 2 | P a g e as the leading online broker in Europe, is helping the company to rapidly expand its business in the Internet Trading segment. Currently, clients can trade online in equities, derivatives, currency futures, mutual funds and IPOs, and select from multiple bank payment gateways for online transfer of funds. Strategic B2B agreements with South Indian Bank, City Union Bank and Federal Bank enable the respective bank’s clients to open integrated 3-in-1 accounts to seamlessly trade via a sophisticated Online Trading platform. Further, deployment of BNP Paribas’ state-of-the-art globally accepted systems and processes is already scaling up the sales of Mutual Funds and Insurance. Note: Certified financial advisors help clients to arrive at the right financial solution to meet their individual needs. The wide range of products and services on offer includes: Equities, Derivatives, Currency Futures, Custody Accounts, Mutual Funds, Life Insurance & General Insurance, IPOs, Portfolio Management Services, Property Services, Margin Funding and Loans against Shares. A growing footprint With a presence in almost all the major states of India, the network of over 491 offices across 300 cities and towns presently covers Andhra Pradesh, Bihar, Chattisgarh, Goa, Gujarat, Haryana, Jammu & Kashmir, Karnataka, Kerala, Madhya Pradesh, Maharashtra, New Delhi, Orissa, Punjab, Rajasthan, Tamil Nadu & Pondicherry, Uttar Pradesh, Uttaranchal and West Bengal. Milestones Product innovation backed by a high level of domain specific knowledge and state-of- the-art technology has helped Geojit BNP Paribas set many milestones including numerous industry firsts.  1986 C. J. George became member of Cochin Stock Exchange  1987
  14. 14. 3 | P a g e M/s C. J. George and Co. was set up at Ravipuram, Cochin  1988 Company was renamed at M/s Geojit & Co.  1994 Becomes a Public Limited Company named Geojit Securities Ltd.  1995 o Kerala State Industrial Development Corporation Ltd. (KSIDC) acquires 24 percent equity stake. o Membership in National Stock Exchange (NSE). o Public Issue.  1996 Launch of Portfolio Management Services with SEBI registration.  1997 Depository Participant (DP) under National Securities Depository Limited.  1999 Membership in Bombay Stock Exchange (BSE).  2000 o BSE Listing. o 1st broking firm in India to offer online trading facility. o Commences Derivative Trading with NSE. o Integrates the 1st Bank Payment Gateway in the country for Internet Trading.  2001 o Becomes India's first DP to launch depository transactions through Internet. o Establishes Joint Venture in the UAE to serve NRI customers.
  15. 15. 4 | P a g e  2002 1st in India to launch an integrated internet trading system for Cash & Derivatives segments.  2003 o Geojit Commodities Limited, wholly owned subsidiary, launched Online Futures Trading in agri-commodities, precious metals and in energy futures on multiple commodity exchanges. o National launch of online futures trading in Rubber, Pepper, Gold, Wheat and Rice. o Company renamed as Geojit Financial Services Ltd.  2004 National launch of online futures trading in Cardamom.  2005 o NSE Listing. o Geojit Credits, a subsidiary, registers with RBI as a Non-Banking Financial Company (NBFC). o National launch of online futures trading in Coffee.  2006 Charter member of the Financial Planning Standards Board of India.  2007 o BNP Paribas takes a stake in the company’s equity, making it the single largest shareholder. o Establishes Joint Venture in Saudi Arabia to serve the Saudi national and the NRI.  2008 o BNP Paribas Securities India (P) Ltd. – a Joint Venture with BNP Paribas S.A. for Institutional Brokerage. o 1st brokerage to offer full Direct Market Access execution in India for institutional clients.  2009
  16. 16. 5 | P a g e o Launch of Property Services division. o Launch of online trading in Currency Derivatives. o Consequent to BNP Paribas becoming the largest stakeholder in Geojit BNP Paribas, company is renamed as Geojit BNP Paribas Financial Services Ltd.  2010 o Launch of FLIP (Financial Investment Platform), a new advanced online investment platform. o Launch of state of the art Mobile Trading platform to empower clients to trade from anywhere, even while on the move through the innovative application FLIP- ME. o Barjeel Geojit Securities, its joint venture with the Al Saud group is headquartered in Dubai, in the United Arab Emirates, and owns branches in Abu Dhabi, Ras Al Khaimah, Al Ain, and Sharjah. o Aloula Geojit Capital Co., the joint venture with the Al Johar group in Saudi Arabia is headquartered in Riyadh with branches in Dammam and Jeddah. o BBK Geojit Securities KSC, located in Kuwait, is a joint venture with BBK and JZA. o QBG Geojit Financial Services LLC is the joint venture with Qurum Business Group (QBG) and National Securities Co. and based in Oman.  2011 o Geojit BNP Paribas and JZ Associates LLC, Kuwait signed a JV deal with Bank of Bahrain and Kuwait to from BBK Geojit Securities KSC. The agreement was signed by Abdulkarim Bucheery, CEO of BBK, C. J. George and Jassem Hassan Zainal of JZ Associates LLC o Geojit BNP Paribas joined hands with Qurum Business Group and National Securities Company in Oman to form QBG Geojit Securities LLC, Oman. The deal was inked by Sheikh Abdulaziz bin Ahmed Al Hosni, Vice President and Chairman of Qurum Business Group and C. J. George  2012 Qualified Foreign Investors (QFI) Investment services launched.
  17. 17. 6 | P a g e 1.1 Introduction to Financial Market A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods. There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded). Markets work by placing many interested buyers and sellers, including households, firms, and government agencies, in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy. In finance, financial markets facilitate:  The raising of capital (in the capital markets)  The transfer of risk (in the derivatives markets)  Price discovery  Global transactions with integration of financial markets  The transfer of liquidity (in the money markets)  International trade (in the currency markets) – and are used to match those who want capital to those who have it. Typically a borrower issues a receipt to the lender promising to pay back the capital. These receipts are securities which may be freely bought or sold. In return for lending money to the borrower, the lender will expect some compensation in the form of interest or dividends. This return on investment is a necessary part of markets to ensure that funds are supplied to them. 1.1.1 Indian Financial Market India Financial market is one of the oldest in the world and is considered to be the fastest growing and best among all the markets of the emerging economies. The history of Indian
  18. 18. 7 | P a g e capital markets dates back 200 years toward the end of the 18th century when India was under the rule of the East India Company. The development of the capital market in India concentrated around Mumbai where no less than 200 to 250 securities brokers were active during the second half of the 19th century. The financial market in India today is more developed than many other sectors because it was organized long before with the securities exchanges of Mumbai, Ahmedabad and Kolkata were established as early as the 19th century. By the early 1960s the total number of securities exchanges in India rose to eight, including Mumbai, Ahmedabad and Kolkata apart from Madras, Kanpur, Delhi, Bangalore and Pune. Today there are 21 regional securities exchanges in India in addition to the centralized NSE (National Stock Exchange) and OTCEI (Over the Counter Exchange of India). However the stock markets in India remained stagnant due to stringent controls on the market economy that allowed only a handful of monopolies to dominate their respective sectors. The corporate sector wasn't allowed into many industry segments, which were dominated by the state controlled public sector resulting in stagnation of the economy right up to the early 1990s. Thereafter when the Indian economy began liberalizing and the controls began to be dismantled or eased out, the securities markets witnessed a flurry of IPOs that were launched. This resulted in many new companies across different industry segments to come up with newer products and services. A remarkable feature of the growth of the Indian economy in recent years has been the role played by its securities markets in assisting and fuelling that growth with money rose within the economy. This was in marked contrast to the initial phase of growth in many of the fast growing economies of East Asia that witnessed huge doses of FDI (Foreign Direct Investment) spurring growth in their initial days of market decontrol. During this phase in India much of the organized sector has been affected by high growth as the financial markets played an all-inclusive role in sustaining financial resource
  19. 19. 8 | P a g e mobilization. Many PSUs (Public Sector Undertakings) that decided to offload part of their equity were also helped by the well-organized securities market in India. The launch of the NSE (National Stock Exchange) and the OTCEI (Over the Counter Exchange of India) during the mid-1990s by the government of India was meant to usher in an easier and more transparent form of trading in securities. The NSE was conceived as the market for trading in the securities of companies from the large-scale sector and the OTCEI for those from the small-scale sector. While the NSE has not just done well to grow and evolve into the virtual backbone of capital markets in India the OTCEI struggled and is yet to show any sign of growth and development. The integration of IT into the capital market infrastructure has been particularly smooth in India due to the country’s world class IT industry. This has pushed up the operational efficiency of the Indian stock market to global standards and as a result the country has been able to capitalize on its high growth and attract foreign capital like never before. The regulating authority for capital markets in India is the SEBI (Securities and Exchange Board of India). SEBI came into prominence in the 1990s after the capital markets experienced some turbulence. It had to take drastic measures to plug many loopholes that were exploited by certain market forces to advance their vested interests. After this initial phase of struggle SEBI has grown in strength as the regulator of Indian capital markets and as one of the country’s most important institutions. 1.2 The Equity Capital Investors owning equity shares of a company are owners of the company. They are issued equity shares of the company, as evidence of such ownership. Equity investors are not entitled to any fixed return or repayment of capital. However, they are entitled to the benefits that arise out of the performance of the company. If the business fails, they may lose the entire investment. Of all the financiers, they take the most risk. Total equity capital of a company is divided into equal units of small denominations, each called a share. For example, in a company the total equity capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs 10 is called a Share.
  20. 20. 9 | P a g e Thus, the company then is 12 said to have 20, 00,000 equity shares of Rs 10 each. The holders of such shares are members of the company and have voting rights. 1.2.1 Face Value of a Share The nominal or stated amount (in Rs.) assigned to a security by the issuer. For shares, it is the original cost of the stock shown on the certificate; for bonds, it is the amount paid to the holder at maturity. Also known as par value or simply par. For an equity share, the face value is usually a very small amount (Rs. 5, Rs. 10) and does not have much bearing on the price of the share, which may quote higher in the market, at Rs. 100 or Rs. 1000 or any other price. For a debt security, face value is the amount repaid to the investor when the bond matures (usually, Government securities and corporate bonds have a face value of Rs. 100). The price at which the security trades depends on the fluctuations in the interest rates in the economy. When a security is sold above its face value, it is said to be issued at a Premium and if it is sold at less than its face value, then it is said to be issued at a Discount. 1.2.2 Issue of Shares Most companies are usually started privately by their promoter(s). However, the promoters’ capital and the borrowings from banks and financial institutions may not be sufficient for setting up or running the business over a long term. So companies invite the public to contribute towards the equity and issue shares to individual investors. The way to invite share capital from the public is through a ‘Public Issue’. Simply stated, a public issue is an offer to the public to subscribe to the share capital of a company. Once this is done, the company allots shares to the applicants as per the prescribed rules and regulations laid down by SEBI. 1.2.3 Advantages of Equity Shares  More Income: Equity shareholders are the residual claimant of the profits after meeting all the fixed commitments. The company may add to the profits by trading on equity. Thus equity capital may get dividend at high in boom period.
  21. 21. 10 | P a g e  Right to participate in the Control and Management: Equity shareholders have voting rights and elect competent persons as directors to control and manage the affairs of the company.  Capital profits: The market value of equity shares fluctuates directly with the profits of the company and their real value based on the net worth of the assets of the company. An appreciation in the net worth of the company's assets will increase the market value of equity shares. It brings capital appreciation in their investments.  An Attraction of Persons having Limited Income: Equity shares are mostly of lower denomination and persons of limited recourses can purchase these shares.  Tax Advantages: Equity shares also offer tax advantages to the investor. The larger yield on equity shares results from an increase in principal or capital gains, which are taxed at lower rate than other incomes in most of the countries  Other Advantages: It appeals most to the speculators. Their prices in security market are more fluctuating. 1.2.4 Disadvantages of Equity Shares  Uncertain and Irregular Income: The dividend on equity shares is subject to availability of profits and intention of the Board of Directors and hence the income is quite irregular and uncertain. They may get no dividend even three are sufficient profits.  Capital loss During Depression Period: During recession or depression periods, the profits of the company come down and consequently the rate of dividend also comes down. Due to low rate of dividend and certain other factors the market value of equity shares goes down resulting in a capital loss to the investors.  Loss on Liquidation: In case, the company goes into liquidation, equity shareholders are the worst suffers. They are paid in the last only if any surplus is available after every other claim including the claim of preference shareholders is settled. It is evident from the advantages and disadvantages of equity share capital discussed above that the issue of equity share capital is a must for a company, yet it should not solely depend on it. In order to make its capital structure flexible, it should raise funds from other sources also.
  22. 22. 11 | P a g e  Dividend at the board’s mercy: The rate of dividend is recommended by the board. The shareholders in the AGM cannot declare a higher rate than what is recommended by the board.  Illiquid: Since equity shares are not refundable they are treated as illiquid.  Speculation: higher dividends during prosperous periods and low dividend during depression period shall lead to ample speculation. 1.3 Mutual Fund A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors and invests it in stocks, bonds, short-term money market instruments and other securities. Mutual funds have a fund manager who invests the money on behalf of the investors by buying / selling stocks, bonds etc. Currently, the worldwide value of all mutual funds totals more than $US 26 trillion. There are various investment avenues available to an investor such as real estate, bank deposits, post office deposits, shares, debentures, bonds etc. A mutual fund is one more type of Investment Avenue available to investors. There are many reasons why investors prefer mutual funds. Buying shares directly from the market is one way of investing. But this requires spending time to find out the performance of the company whose share is being purchased, understanding the future business prospects of the company, finding out the track record of the promoters and the dividend, bonus issue history of the company etc. An informed investor needs to do research before investing. However, many investors find it cumbersome and time consuming to pore over so much of information, get access to so much of details before investing in the shares. Investors therefore prefer the mutual fund route. They invest in a mutual fund scheme which in turn takes the responsibility of investing in stocks and shares after due analysis and research. The investor need not bother with researching hundreds of stocks. It leaves it to the mutual fund and its professional fund management team. Another reason why investors prefer mutual funds is because mutual funds offer diversification. An investor’s money is invested by the mutual fund in a variety of shares, bonds and other securities thus diversifying the investor’s portfolio across different companies and sectors. This diversification helps in reducing the overall risk of the portfolio. It is also less expensive to invest in a mutual fund since the minimum investment amount in mutual fund units is fairly low (Rs. 500 or
  23. 23. 12 | P a g e so). With Rs. 500 an investor may be able to buy only a few stocks and not get the desired diversification. Figure 1.1: Mutual Fund Operation 1.3.1 NAV (Net Asset Value) NAV means Net Asset Value. The investments made by a Mutual Fund are marked to market on daily basis. In other words, we can say that current market value of such investments is calculated on daily basis. NAV is arrived at after deducting all liabilities (except unit capital) of the fund from the realisable value of all assets and dividing by number of units outstanding. Therefore, NAV on a particular day reflects the realisable value that the investor will get for each unit if the scheme is liquidated on that date. This NAV keeps on changing with the changes in the market rates of equity and bond markets. Therefore, the investments in Mutual Funds is not risk free, but a good managed Fund can give you regular and higher returns than when you can get from fixed deposits of a bank etc. 1.3.2 Various Types of Mutual Funds A common man is so much confused about the various kinds of Mutual Funds that he is afraid of investing in these funds as he cannot differentiate between various types of
  24. 24. 13 | P a g e Mutual Funds with fancy names. Mutual Funds can be classified into various categories under the following heads:- (A) According to type of investments: - While launching a new scheme, every Mutual Fund is supposed to declare in the prospectus the kind of instruments in which it will make investments of the funds collected under that scheme. Thus, the various kinds of Mutual Fund schemes as categorized according to the type of investments are as follows:-  Equity funds/schemes  Debt funds / schemes (also called Income Funds)  Diversified funds / schemes (also called Balanced Funds)  Gilt funds/ schemes  Money market funds/ schemes  Sector specific funds  Index funds B) According to the time of closure of the scheme : While launching new schemes, Mutual Funds also declare whether this will be an open ended scheme (i.e. there is no specific date when the scheme will be closed) or there is a closing date when finally the scheme will be wind up. Thus, according to the time of closure schemes are classified as follows:-  Open ended schemes  Close ended schemes Open ended funds are allowed to issue and redeem units any time during the life of the scheme, but close ended funds cannot issue new units except in case of bonus or rights issue. Therefore, unit capital of open ended funds can fluctuate on daily basis (as new investors may purchase fresh units), but that is not the case for close ended schemes. In other words we can say that new investors can join the scheme by directly applying to the mutual fund at applicable net asset value related prices in case of open ended schemes but not in case of close ended schemes. In case of close ended schemes, new investors can buy the units only from secondary markets.
  25. 25. 14 | P a g e C) According to tax incentive schemes: Mutual Funds are also allowed to float some tax saving schemes. Therefore, sometimes the schemes are classified according to this also:-  Tax saving funds  Non tax saving funds / Other funds (D) According to the time of pay-out: Sometimes Mutual Fund schemes are classified according to the periodicity of the pay outs (i.e. dividend etc.). The categories are as follows:-  Dividend Paying Schemes  Reinvestment Schemes 1.3.3 Advantages of Mutual Fund  Professional Management: Mutual funds offer investors the opportunity to earn an income or build their wealth through professional management of their investible funds. There are several aspects to such professional management viz. investing in line with the investment objective, investing based on adequate research, and ensuring that prudent investment processes are followed.  Affordable Portfolio Diversification: Units of a scheme give investors exposure to a range of securities held in the investment portfolio of the scheme. Thus, even a small investment of Rs 5,000 in a mutual fund scheme can give investors a diversified investment portfolio.  Economies of Scale: The pooling of large sums of money from so many investors makes it possible for the mutual fund to engage professional managers to manage the investment. Individual investors with small amounts to invest cannot, by themselves, afford to engage such professional management.  Liquidity: At times, investors in financial markets are stuck with a security for which they can’t find a buyer – worse, at times they can’t find the company they invested in! Such investments, whose value the investor cannot easily realise in the market, are technically called illiquid investments and may result in losses for the investor. Investors in a mutual fund scheme can recover the value of the moneys invested, from the mutual fund itself. Depending on the structure of the mutual fund scheme, this would be possible, either at any time, or during specific
  26. 26. 15 | P a g e intervals, or only on closure of the scheme. Schemes where the money can be recovered from the mutual fund only on closure of the scheme, are listed in a stock exchange. In such schemes, the investor can sell the units in the stock exchange to recover the prevailing value of the investment.  Tax Deferral: Mutual funds are not liable to pay tax on the income they earn. If the same income were to be earned by the investor directly, then tax may have to be paid in the same financial year. Mutual funds offer options, whereby the investor can let the moneys grow in the scheme for several years. By selecting such options, it is possible for the investor to defer the tax liability. This helps investors to legally build their wealth faster than would have been the case, if they were to pay tax on the income each year.  Tax benefits: Specific schemes of mutual funds (Equity Linked Savings Schemes) give investors the benefit of deduction of the amount invested, from their income that is liable to tax. This reduces their taxable income, and therefore the tax liability. Further, the dividend that the investor receives from the scheme, is tax- free in his hands.  Convenient Options: The options offered under a scheme allow investors to structure their investments in line with their liquidity preference and tax position.  Investment Comfort: Once an investment is made with a mutual fund, they make it convenient for the investor to make further purchases with very little documentation. This simplifies subsequent investment activity.  Regulatory Comfort: The regulator, Securities & Exchange Board of India (SEBI) has mandated strict checks and balances in the structure of mutual funds and their activities. Mutual fund investors benefit from such protection.  Systematic approach to investments: Mutual funds also offer facilities that help investor invest amounts regularly through a Systematic Investment Plan (SIP); or withdraw amounts regularly through a Systematic Withdrawal Plan (SWP); or move moneys between different kinds of schemes through a Systematic Transfer Plan (STP). Such systematic approaches promote an investment discipline, which is useful in long term wealth creation and protection.
  27. 27. 16 | P a g e 1.3.4 Disadvantages of Mutual Fund  Lack of portfolio customization: Some securities houses offer Portfolio Management Schemes (PMS) to large investors. In a PMS, the investor has better control over what securities are bought and sold on his behalf. On the other hand, a unit-holder is just one of several thousand investors in a scheme. Once a unit- holder has bought into the scheme, investment management is left to the fund manager (within the broad parameters of the investment objective). Thus, the unit- holder cannot influence what securities or investments the scheme would buy. Large sections of investors lack the time or the knowledge to be able to make portfolio choices. Therefore, lack of portfolio customization is not a serious limitation in most cases.  Choice overload: Over 800 mutual fund schemes offered by 38 mutual funds – and multiple options within those schemes – make it difficult for investors to choose between them. Greater dissemination of industry information through various media and availability of professional advisors in the market should help investors handle this overload.  No control over costs: All the investor's moneys are pooled together in a scheme. Costs incurred for managing the scheme are shared by all the Unit holders in proportion to their holding of Units in the scheme. Therefore, an individual investor has no control over the costs in a scheme. SEBI has however imposed certain limits on the expenses that can be charged to any scheme. These limits, which vary with the size of assets and the nature of the scheme. 1.4 Indian Stock Market Preview – 2004 April to 2014 March As the study period is from April 2004 to March 2014, here is the relevance to give a preview of Indian stock market. As this is the period were market shows booms (bull), depression (bear), and stable moments. So this is the period of making a good study. As in April 2004 period Sensex is trading at 5807.13 and Nifty is at 1800s. In 2005 period Sensex is between 6000s and late 9000s.at the same time Nifty is between 1900s and
  28. 28. 17 | P a g e 2700s. In 2006 – 2007 period is a booming period for both Sensex and Nifty, Sensex get into 10000s and made a record close of 19843.96 points in December 2007, and Nifty also made a record close of 6159.21 at December 2007. But the period 2008 – 2009 is a depressive (bearish) for Indian stock market. The Sensex shows a record low of 7,697.39 in the 2008 financial year and Nifty also came down to 2526.2. But in the mid of 2009, the new government lead by Dr Manmohan Singh came into power, which made the bearish market to rise into bullish trend. The Sensex rise gradually and made a record in October 2011 at 20267.72 points, and Nifty also made a record at 6335.25 in November 2010. From 2011 to 2013 period market is going in a zigzag way, the Sensex is trading between 16000s and 20000s and Nifty is also in 4500s and 5800s. In 2013 – 2014 financial year both Sensex and Nifty comes into 22000s and 6500s respectively. 1.4.1 Biggest falls in the Indian stock market history May 18, 2006: The Sensex registered a fall of 826 points (6.76 per cent) to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets. The Nifty crashed by 496.50 points (8.70%) points to close at 5,208.80 points. April 2, 2007: The Sensex opened with a huge negative gap of 260 points at 12,812 following the Reserve Bank of India decision to hike the cash reserve ratio and repo rate. Unabated selling, mainly in auto and banking stocks, saw the index drift to lower levels as the day progressed. The index tumbled to a low of 12,426 before finally settling with a hefty loss of 617 points (4.7%) at 12,455. August 1, 2007: The Sensex opened with a negative gap of 207 points at 15,344 amid weak trends in the global market and slipped deeper into the red. Unabated selling across- the-board saw the index tumble to a low of 14,911. The Sensex finally ended with a hefty loss of 615 points at 14,936. The NSE Nifty ended at 4,346, down 183 points. This is the third biggest loss in absolute terms for the index. August 16, 2007: The Sensex, after languishing over 500 points lower for most of the trading session, slipped again towards the close to a low of 14,345. The index finally ended with a hefty loss of 643 points at 14,358.
  29. 29. 18 | P a g e October 18, 2007: Profit-taking in noon trades saw the index pare gains and slip into negative zone. The intensity of selling increased towards the closing bell, and the index tumbled all the way to a low of 17,771 - down 1,428 points from the days high. The Sensex finally ended with a hefty loss of 717 points (3.8%) at 17,998. The Nifty lost 208 points to close at 5,351. October 24, 2008: The Sensex plunged by 1070.63 points (10.96 per cent) to close at 8,701.07. The National Stock Exchange's Nifty ended at 2,557.25, down 13.11 per cent or 386 points. The BSE Midcap closed 8.38 per cent lower and BSE Small cap Index ended 7.66 per cent down. November 21, 2007: Mirroring weakness in other Asian markets, the Sensex saw relentless selling. The index tumbled to a low of 18,515 - down 766 points from the previous close. The Sensex finally ended with a loss of 678 points at 18,603. The Nifty lost 220 points to close at 5,561. December 17, 2007: A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 - down 856 points from the day's open. The Sensex finally ended with a huge loss of 769 points (3.8%) at 19,261. The NSE Nifty ended at 5,777, down 271 points. January 18, 2008: Unabated selling in the last one hour of trade saw the index tumble to a low of 18,930 - down 786 points from the day’s high. The Sensex finally ended with a hefty loss of 687 points (3.5%) at 19,014. The index thus shed 8.7% (1,813 points) during the week. The NSE Nifty plunged 3.5% (208 points) to 5,705. January 21, 2008: The Sensex saw it’s highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on high volatility as investors panicked following weak global cues amid fears of the US recession.
  30. 30. 19 | P a g e Figure 1.2: Indian stock market crash – 2008 January 22, 2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875 points at 16,730. The Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for one hour at the Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within minutes of opening, crossing the circuit limit of 10 per cent. February 11, 2008: The Sensex finally ended with a loss of 834 points (4.8%) at 16,631. The NSE Nifty slipped over 5% (263 points) to 4,857. March 3, 2008: The Bombay Stock Exchange benchmark Sensex witnessed its second- largest fall ever losing 900.84 points to close at 16,677.88 on frantic selling by funds, triggered by deepening concern over United States recession and some Budget-related concerns. March 17, 2008: The Bombay Stock Exchange benchmark Sensex crashed by 951 points to close at 14,809 on weak cues from the overseas markets. Unabated selling saw the index slip below the 15,000-mark. 10 October 2008: The markets crashed by 801 points to close at a low of 10,528. The crisis in the global markets, a fall in the rupee and poor IIP numbers led to the fall.
  31. 31. CHAPTER 2: LITERATURE REVIEW
  32. 32. 20 | P a g e P. Sandeep ( September 2011) The stock market has become an essential market which plays a vital role in economic prosperity and foster capital formation and help in sustaining economic growth. Stock markets are more than a place to trade securities; they operate as a facilitator between savers and users of capital by means of pooling of funds, sharing risk, and transferring wealth. Stock markets are essential for economic growth as they insure the flow of resources to the most productive investment opportunities. Gupta (1972) in his book has studied the working of stock exchanges in India and has given a number of suggestions to improve its working. The study highlights the' need to regulate the volume of speculation so as to serve the needs of liquidity and price continuity. It suggests the enlistment of corporate securities in more than one stock exchange at the same time to improve liquidity. The study also wishes the cost of issues to be low, in order to protect small investors. Jamadar Lal (1992) presents a profile of Indian investors and evaluates their investment decisions. He made an effort to study their familiarity with, and comprehension of financial information, and the extent to which this is put to use. The information that the companies provide generally fails to meet the needs of a variety of individual investors and there is a general impression that the company's Annual Report and other statements are not well received by them. Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding and also for selling shares. He advised the investors to buy shares of a growing company of a growing industry. Buy shares by diversifying in a number of growth companies operating in a different but equally fast growing sector of the economy. He suggested selling the shares the moment company has or almost reached the peak of its growth. Also, sell the shares the moment you realise you have made a mistake in the initial selection of the shares. The only option to decide when to buy and sell high priced shares is to identify the individual merit or demerit of each of the shares in the portfolio and arrive at a decision. Sathya Swaroop Debashish (2009) measured the performance of the equity based mutual funds in India. 23 schemes were studied over a period of April 1996 to March
  33. 33. 21 | P a g e 2009 (13 years). The analysis was done on the basis of mean return, beta risk, coefficient of determination, sharp ratio, Treynor ratio and Jensen alpha. The first analysis has been done on the basis of returns, followed by a comparison between market returns and the return on schemes. It was concluded that UTI mutual fund schemes and Franklin Templeton schemes have performed excellently in public and private sectors respectively. Further, on the basis of the parameters like Sharpe ratio, Deutsche, Franklin Templeton, Prudential ICICI (in private sector) and SBI and UTI (in public sector) mutual funds schemes have out- performed the market portfolio with positive values. However, the overall analysis finds Franklin Templeton and UTI being the best performers, and Birla Sun Life, HDFC and LIC mutual funds showing poor below - average performance when measured against the risk - return relationship models and measures. Rohatgi (1973) states that the basic function of the stock market is to provide ready marketability or liquidity to holdings of securities. The ideal stock market is one that can provide instantaneous and unlimited liquidity. But it is reasonable to assume that a prudent long-term investor in equities would provide for his immediate cash needs. This is in agreement with the three motives of liquidity preference. If so, one would expect not `instant' liquidity, but moderate liquidity. It will be unreasonable for any investor to suppose that his equity holdings are as good as cash. Jack Clark Francis (1986) revealed the importance of the rate of return in investments and reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world, investors cannot predict exactly what rate of return an investment will yield. However he suggested that the investors can formulate a probability distribution of the possible rates of return.
  34. 34. CHAPTER 3: RESEARCH METHODOLOGY
  35. 35. 22 | P a g e Aim: This study aims at creating awareness in the minds of investor in terms of risk, return, liquidity & marketability of their investments. Also focuses on which would be the better investment for an individual investor. Objectives:  To compare Equity and Mutual Fund Schemes in respect of their risk & return.  Analysing the performance of equity shares and mutual fund schemes with their benchmark NSE CNX Nifty.  Finding the performance by taking the quarterly average of 10 years.  Provide information about pros and cons of investing in Equity and Mutual Funds Scope of the study: The study is primarily deals with equity and mutual fund investments. The study covers 10 randomly selected stocks out of 50 NSE CNX NIFTY companies and 10 randomly selected mutual fund schemes out of mutual fund industry in India for comparison. The analysis is strictly based on share prices and Net asset values of the mutual funds which will help an investor to identify better investment avenues from the market. The study goes through a period in which the market has shown booms, depression, and consistent performance. Research Methodology:  Sampling technique: - Since the population is heterogeneous stratified random sampling were taken  Sample size: - Ten companies and ten mutual fund scheme were selected.  Sample description: - In this study 10 companies have been selected from NSE CNX Nifty and 10 mutual funds selected on the basis of their Net Asset Value and after that comparison made between them, using their benchmark. Data collection methods: The entire date were collected from the secondary source. Internet is main source of secondary sources of date collection used. Magazines, Newspapers and Journals were also used for collecting data.
  36. 36. 23 | P a g e Analysis and Interpretations: The analysis and interpretation has been made with the help of graphs and percentage of returns of securities. Microsoft Excel 2013 is the software used for this purpose. Limitations of the study:  The sample size is limited by 10 each on equity shares and mutual funds  The benchmark for equity shares and mutual funds is NSE CNX NIFTY, other benchmarks for securities may have shown good or bad performance.  The data was collected from the time horizon of 10 financial years starting from April 2004 to March 2014.  The comparison here made strictly on price of equity shares and NAV of mutual funds, the study hasn’t gone deep into other factors.  The data has been collected from secondary sources only, relevance of information may not fully trustworthy.
  37. 37. CHAPTER 4: ANALYSIS AND INTERPRETATION
  38. 38. 24 | P a g e Benchmark: NSE CNX NIFTY Average share price and percentage returns of CNX NIFTY is as follows: Table 4.1: Price and returns of NSE CNX NIFTY FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 1841.81 0% 0% 2005-06 2765.28 50% 50% 2006-07 3626.14 97% 31% 2007-08 5053.19 174% 39% 2008-09 3485.46 89% -31% 2009-10 4956.30 169% 42% 2010-11 5827.68 216% 18% 2011-12 5127.63 178% -12% 2012-13 5642.46 206% 10% 2013-14 6146.43 234% 9% Graph 4.1: Price and returns of NSE CNX NIFTY -50% 0% 50% 100% 150% 200% 250% 0.00 1000.00 2000.00 3000.00 4000.00 5000.00 6000.00 7000.00 NSE CNX NIFTY POINT(Avg) %RETURN % RETURN(YoY)
  39. 39. 25 | P a g e The NSE CNX NIFTY has performed so well for long and medium term. For short term except 2008-09 and 2011-12 the Nifty performed well. One of the main thing is that the Nifty hasn’t shown a negative return for the continuous long term and short term period. In 2007 and 2008, a period in which stock market crash happens, then also the Nifty did not shows it badly. The high percentage of return the Nifty has given is 234% in 2013-14 for the continuous 10 year period. The main reason for the good performance of Nifty is that the stock embed in it. Overall the has given good support to,  Long-term investors – Better  Medium-term investors – Good  Short-term investors – Fair
  40. 40. 26 | P a g e Equity Shares Following are the equity shares selected for the study from NSE CNX NIFTY: 1. Hindustan Unilever limited 2. Larsen & Toubro Ltd. 3. Bharat Petroleum Corporation Limited 4. Infosys Ltd. 5. Dr. Reddy's Laboratories Ltd. 6. State Bank of India 7. Tata Steel Ltd. 8. Maruti Suzuki India Ltd. 9. Bharat Heavy Electricals Limited 10. Bharti Airtel Ltd.
  41. 41. 27 | P a g e 1. Hindustan Unilever limited Average share price and percentage returns of the company is as follows: Table 4.2: Price and returns of HUL FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 132.01 0% 0% 2005-06 ₹ 203.60 54% 54% 2006-07 ₹ 226.95 72% 11% 2007-08 ₹ 212.93 61% -6% 2008-09 ₹ 236.80 79% 11% 2009-10 ₹ 258.61 96% 9% 2010-11 ₹ 294.15 123% 14% 2011-12 ₹ 375.43 184% 28% 2012-13 ₹ 498.04 277% 33% 2013-14 ₹ 597.20 352% 20% Graph 4.2: Price and return of HUL -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% ₹ - ₹ 100.00 ₹ 200.00 ₹ 300.00 ₹ 400.00 ₹ 500.00 ₹ 600.00 ₹ 700.00 HINDUSTAN UNILEVER LIMITED PRICE(Avg) % RETURN % RETURN(YoY)
  42. 42. 28 | P a g e Hindustan unilever limited is one of the top FMCG in India. As we can see that the share price is growing yearly, which has not showed any negative return for the continuous 10 years. For a short term investor the return is also good except in the year of 2007-08 as because of stock market crash it shows a bit down. But overall return of Hindustan Unilever is at a peak as it shows 352% of return in the end of 10 year. For example if an investor but 10 shares at ₹ 132.01 in 2004-05 period and after 10 years at 2013-14 his investment grows up to ₹ 5972.
  43. 43. 29 | P a g e 2. Larsen and Toubro Limited Average share price and percentage returns of the company is as follows: Table 4.3: Price and return of L&T Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 883.76 0% 0% 2005-06 ₹ 1,732.26 96% 96% 2006-07 ₹ 1,645.11 86% -5% 2007-08 ₹ 3,052.33 245% 86% 2008-09 ₹ 1,519.06 72% -50% 2009-10 ₹ 1,641.36 86% 8% 2010-11 ₹ 1,873.31 112% 14% 2011-12 ₹ 1,371.25 55% -27% 2012-13 ₹ 1,491.99 69% 9% 2013-14 ₹ 1,134.70 28% -24% Graph 4.3: Price and return of L&T Ltd. -100% -50% 0% 50% 100% 150% 200% 250% 300% ₹ - ₹ 500.00 ₹ 1,000.00 ₹ 1,500.00 ₹ 2,000.00 ₹ 2,500.00 ₹ 3,000.00 ₹ 3,500.00 LARSEN AND TOUBRO PRICE(Avg) % RETURN % RETURN(YoY)
  44. 44. 30 | P a g e Larsen and Toubro Limited is one of the best infrastructure sector company in India. But its share price shows a little bit disappointing for the long term as well as short term investor. Its share price on year over year is on a sig-sag manner, means up and down. But on unexpectedly on year 2007-08 shows a return of 245%, its share price is at ₹ 3,052.33 which is of high for the period of 10 years. A noticing point is that when stock market crash many of the company’s share price where at the lowest level but Larsen & Toubro is one which shows the highest return at that time. If an investor has got L&T in his portfolio he cannot face a big down on his portfolio. According to a short term investor L&T did not give any high return except on 2007-08 period.
  45. 45. 31 | P a g e 3. Bharat Petroleum Corporation Limited Average share price and percentage returns of the company is as follows: Table 4.4: Price and return of BPCL FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 379.86 0% 0% 2005-06 ₹ 408.16 7% 7% 2006-07 ₹ 335.40 -12% -18% 2007-08 ₹ 407.51 7% 22% 2008-09 ₹ 334.05 -12% -18% 2009-10 ₹ 539.44 42% 61% 2010-11 ₹ 670.64 77% 24% 2011-12 ₹ 619.03 63% -8% 2012-13 ₹ 456.68 20% -26% 2013-14 ₹ 376.54 -1% -18% Graph 4.4: Price and return of BPCL -40% -20% 0% 20% 40% 60% 80% 100% ₹ - ₹ 100.00 ₹ 200.00 ₹ 300.00 ₹ 400.00 ₹ 500.00 ₹ 600.00 ₹ 700.00 ₹ 800.00 BPCL PRICE(Avg) % RETURN % RETURN(YoY)
  46. 46. 32 | P a g e Bharat Petroleum Corporation Limited is one of the Petroleum Corporation of India in which majority of the shares are held by government. BPCL has not performed so well. But in the year of 2009 to 2012 the shares of BPCL performed well compared to whole 10 year. For a long term concern the BPCL did not give any good return, but for a short term investor for the year 2009-10 and 2010-11 is of a good time of earnings. Overall we can see that the BPCL is good for short term investors
  47. 47. 33 | P a g e 4. Infosys Limited Average share price and percentage returns of the company is as follows: Table 4.5: Price and return of Infosys Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 2,892.13 0% 0% 2005-06 ₹ 2,712.95 -6% -6% 2006-07 ₹ 2,297.26 -21% -15% 2007-08 ₹ 1,757.90 -39% -23% 2008-09 ₹ 1,393.55 -52% -21% 2009-10 ₹ 2,332.03 -19% 67% 2010-11 ₹ 3,131.39 8% 34% 2011-12 ₹ 2,769.36 -4% -12% 2012-13 ₹ 2,563.05 -11% -7% 2013-14 ₹ 3,070.08 6% 20% Graph 4.5: Price and return of Infosys Ltd. -60% -40% -20% 0% 20% 40% 60% 80% ₹ - ₹ 500.00 ₹ 1,000.00 ₹ 1,500.00 ₹ 2,000.00 ₹ 2,500.00 ₹ 3,000.00 ₹ 3,500.00 INFOSYS LIMITED PRICE(Avg) % RETURN % RETURN(YoY)
  48. 48. 34 | P a g e As we all know Infosys Limited is one of the best IT Company in India. As Infosys at a glance* has given negative return for long as well as short term horizon. In 2007 and 2008 period both short and long term return is at the deepest level, but in the year 2009 and 2010 period showed good short term return. As the company overall given short term investors a good return. *In the year 2004 and 2006 Infosys Limited had issued bonus shares in the ratio 3:1 and 1:1 respectively, which is an indirect return for an investor, as investor got additional shares without paying money.
  49. 49. 35 | P a g e 5. Dr. Reddy's Laboratories Limited Average share price and percentage returns of the company is as follows: Table 4.6: Price and return of Dr. Reddy’s Lab Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 769.11 0% 0% 2005-06 ₹ 996.40 30% 30% 2006-07 ₹ 884.70 15% -11% 2007-08 ₹ 657.71 -14% -26% 2008-09 ₹ 534.76 -30% -19% 2009-10 ₹ 1,048.54 36% 96% 2010-11 ₹ 1,548.71 101% 48% 2011-12 ₹ 1,589.44 107% 3% 2012-13 ₹ 1,722.51 124% 8% 2013-14 ₹ 2,424.63 215% 41% Graph 4.6: Price and return of Dr. Reddy’s Lab Ltd. -50% 0% 50% 100% 150% 200% 250% ₹ - ₹ 500.00 ₹ 1,000.00 ₹ 1,500.00 ₹ 2,000.00 ₹ 2,500.00 ₹ 3,000.00 DR. REDDY'S LABORATORIES LIMITED PRICE(Avg) % RETURN % RETURN(YoY)
  50. 50. 36 | P a g e Dr. Reddy’s Lab also given a good return in short and long term except the drop down period of 2007 and 2008. From 2004 to 2008 the stock is moving in a constant manner, but after that the share price goes like rocket speed. It shows 215% return in the year 2013-14. For a short term investor who started investing in 2008-09 period and his investment period is of medium (1, 3, or 5) he should have earn a record return. Because from 2008 to 2014 the stock price is 5 times greater than 2008 price. For example an investor has bought 100 shares at ₹ 534.76 on 2008, his total investment is ₹ 53576. On 2014 his investment has grown to ₹ 242463.
  51. 51. 37 | P a g e 6. State Bank of India Average share price and percentage returns of the company is as follows: Table 4.7: Price and return of State Bank of India FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 551.38 0% 0% 2005-06 ₹ 874.19 59% 59% 2006-07 ₹ 999.11 81% 14% 2007-08 ₹ 1,860.76 237% 86% 2008-09 ₹ 1,232.71 124% -34% 2009-10 ₹ 2,071.86 276% 68% 2010-11 ₹ 2,779.91 404% 34% 2011-12 ₹ 2,007.78 264% -28% 2012-13 ₹ 2,304.46 318% 15% 2013-14 ₹ 1,813.23 229% -21% Graph 4.7: Price and return of State Bank of India -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% ₹ - ₹ 500.00 ₹ 1,000.00 ₹ 1,500.00 ₹ 2,000.00 ₹ 2,500.00 ₹ 3,000.00 STATE BANK OF INDIA PRICE(Avg) % RETURN % RETURN(YOY)
  52. 52. 38 | P a g e State Bank of India is largest bank in India. The amazing thing about SBI is that its stock price never showed a negative return* for the continuous 10 year period. Investing in SBI for long term has given investors higher returns as compared to same sector. For the short and medium investors SBI has given a good return except in 2008 and 2011 period. In 2010-11 period showed the highest return of 404%, in 2007 and 2008 period were disappoint period for almost all investors, but after that SBI had solved the problems with high returns. One of the noticing thing is that from 2009-10 to 2012-13 the stock is trading at 2000s*, but on 2013-14 it drops a little bit. Overall we can say that SBI was most flavoured to long term investors. * The State Bank of India had made rights issue in 2008 in the ratio of 1:5 at a premium of Rs 1580 per share. That is reason of the stock price increase.
  53. 53. 39 | P a g e 7. Tata Steel Limited Average share price and percentage returns of the company is as follows: Table 4.8: Price and return of Tata Steel Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 344.06 0% 0% 2005-06 ₹ 419.93 22% 22% 2006-07 ₹ 500.30 45% 19% 2007-08 ₹ 769.41 124% 54% 2008-09 ₹ 394.78 15% -49% 2009-10 ₹ 537.46 56% 36% 2010-11 ₹ 610.04 77% 14% 2011-12 ₹ 458.18 33% -25% 2012-13 ₹ 395.93 15% -14% 2013-14 ₹ 340.86 -1% -14% Graph 4.8: Price and return of Tata Steel Ltd. -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% 140% ₹ - ₹ 100.00 ₹ 200.00 ₹ 300.00 ₹ 400.00 ₹ 500.00 ₹ 600.00 ₹ 700.00 ₹ 800.00 ₹ 900.00 TATA STEEL LIMITED PRICE(Avg) % RETURN % RETURN(YOY)
  54. 54. 40 | P a g e Tata Steel Limited (TISCO) is one of the most steel manufactures in India. But looking into its share price the company has not given a huge return except in 2007-08 period. Tata steel is also one of the company which have given a high return on the stock market crashed period. The price is at ₹ 769.41 during 2007-08 period and the continuous return given was 124%. For the short term investor 2007-08 is of a good period for high return. One of the main thing is that in 2004-15 the price ₹ 344.06 and after 10 years in 2013-14 the price come back to ₹ 340.86. Overall the stock has not performed so well with respect to short and long term time horizon
  55. 55. 41 | P a g e 8. Maruti Suzuki India Limited Average share price and percentage returns of the company is as follows: Table 4.9: Price and return of Maruti Suzuki India Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 410.16 0% 0% 2005-06 ₹ 633.64 54% 54% 2006-07 ₹ 881.85 115% 39% 2007-08 ₹ 891.10 117% 1% 2008-09 ₹ 651.70 59% -27% 2009-10 ₹ 1,437.10 250% 121% 2010-11 ₹ 1,387.10 238% -3% 2011-12 ₹ 1,127.93 175% -19% 2012-13 ₹ 1,322.90 223% 17% 2013-14 ₹ 1,657.99 304% 25% Graph 4.9: Price and return of Maruti Suzuki India Ltd. -50% 0% 50% 100% 150% 200% 250% 300% 350% ₹ - ₹ 200.00 ₹ 400.00 ₹ 600.00 ₹ 800.00 ₹ 1,000.00 ₹ 1,200.00 ₹ 1,400.00 ₹ 1,600.00 ₹ 1,800.00 MARUTI SUZUKI INDIA LIMITED PRICE(Avg) % RETURN % RETURN(YOY)
  56. 56. 42 | P a g e Maruti Suzuki India Limited is one of the largest automobile manufactures in India. As its innovative technology and reputation has made investors to make trust over it. The company’s share has given better return as compared to companies in the same sector. It is also one of the company in which, has not given a negative return for continuous 10 year period. In the year 2009-10 and 2013-14 the company was given highest return of 250% and 304% respectively. For a short term investor in the period of 2008-09 and 2009- 10 the company has given 121% return, which is of a good return according to a short term investor. After that the share has not performed so well for a short investor. Overall the company had given good support to long term investors than short and medium term investors.
  57. 57. 43 | P a g e 9. Bharat Heavy Electricals Limited Average share price and percentage returns of the company is as follows: Table 4.10: Price and return of BHEL FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 652.40 0% 0% 2005-06 ₹ 1,430.28 119% 119% 2006-07 ₹ 2,227.24 241% 56% 2007-08 ₹ 2,056.48 215% -8% 2008-09 ₹ 1,460.96 124% -29% 2009-10 ₹ 2,331.71 257% 60% 2010-11 ₹ 2,331.14 257% 0% 2011-12 ₹ 1,046.55 60% -55% 2012-13 ₹ 221.16 -66% -79% 2013-14 ₹ 171.15 -74% -23% Graph 4.10: Price and return of BHEL -100% -50% 0% 50% 100% 150% 200% 250% 300% ₹ - ₹ 500.00 ₹ 1,000.00 ₹ 1,500.00 ₹ 2,000.00 ₹ 2,500.00 BHARAT HEAVY ELECTRICAL LIMITED PRICE(Avg) % RETURN % RETURN(YoY)
  58. 58. 44 | P a g e Bharat Heavy Electrical Limited is one of the government holding company. BHEL at a glance* shows a low or negative returns mainly in terms of short term investment horizon. But for a medium period the stock has performed well, especially from 2005-06 to 2010- 11, which is of a prosperous* period for a medium term investors, as the stock has given returns on 200s. The stock really disappointed* short term investor in the period 2010-11 as the return given is 0%. Conclude that the stock is more flourish able to medium term investors. *The company was given bonus in the ratio of 1:1 in 2007and there is a stock split happens in 2011, the ₹ 10 face value split to ₹ 2. Both is of an indirect return to an investor.
  59. 59. 45 | P a g e 10. Bharti Airtel Limited Average share price and percentage returns of the company is as follows: Table 4.11: Price and return of Bharti Airtel Ltd. FY PRICE(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 176.65 0% 0% 2005-06 ₹ 337.55 91% 91% 2006-07 ₹ 558.28 216% 65% 2007-08 ₹ 899.63 409% 61% 2008-09 ₹ 711.84 303% -21% 2009-10 ₹ 465.80 164% -35% 2010-11 ₹ 336.33 90% -28% 2011-12 ₹ 363.58 106% 8% 2012-13 ₹ 294.84 67% -19% 2013-14 ₹ 314.60 78% 7% Graph 4.11: Price and return of Bharti Airtel Ltd. -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% ₹ - ₹ 100.00 ₹ 200.00 ₹ 300.00 ₹ 400.00 ₹ 500.00 ₹ 600.00 ₹ 700.00 ₹ 800.00 ₹ 900.00 ₹ 1,000.00 BHARTI AIRTEL LIMITED PRICE(Avg) % RETURN % RETURN(YOY)
  60. 60. 46 | P a g e Bharti Airtel Limited is the largest telecom company in India. The return of Airtel also did not shown a negative for the continuous 10 year period. It has also given a highest return on 2007-08 and 2008-09, of 409% and 304% respectively. The graph shows a peak on 2007-08 period. For a short term investor the return was not so good except the initial stages. Mainly the company has more with long and medium term investor. Overall the company maintained its long and medium term investors in good condition.
  61. 61. 47 | P a g e Mutual Funds For the study her I had chosen equity mutual funds which are of from diversified equity funds, large cap funds, multi-cap funds, and small and medium cap funds. All funds are of high risk. The selected mutual funds are: 1. Birla sun life equity fund-regular plan-growth 2. Reliance growth fund-regular plan-growth 3. ICICI prudential top 200 fund-regular plan-growth 4. Tata pure equity fund-regular plan-growth 5. SBI magnum equity fund-regular plan-growth 6. Canara Robeco equity diversified fund-regular plan-growth 7. HDFC top 200 fund-regular plan-growth 8. Franklin India prima fund-regular plan-growth 9. UTI equity fund-regular plan-growth 10. Sundaram growth fund-regular plan-growth
  62. 62. 48 | P a g e 1. Birla Sun Life Equity Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.12: Price and return of Birla sun life equity fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 69.15 0% 0% 2005-06 ₹ 122.99 78% 78% 2006-07 ₹ 161.01 133% 31% 2007-08 ₹ 242.12 250% 50% 2008-09 ₹ 151.37 119% -37% 2009-10 ₹ 232.90 237% 54% 2010-11 ₹ 274.35 297% 18% 2011-12 ₹ 229.55 232% -16% 2012-13 ₹ 255.37 269% 11% 2013-14 ₹ 280.64 306% 10% Graph 4.12: Price and return of Birla sun life equity fund-regular plan-growth -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% ₹ - ₹ 50.00 ₹ 100.00 ₹ 150.00 ₹ 200.00 ₹ 250.00 ₹ 300.00 BIRLA SUN LIFE EQUITY FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  63. 63. 49 | P a g e Birla Sun Life equity fund is a diversified equity fund, started in 1998. The fund has performed well in its time horizon, as it gives 306% of return in the tear of 2013-14, which is among highest in the diversified equity fund. The funds gives a good support to its long term investors. For the short term investors also the fund is so favourable as it give 78% of return in 2005-06 period. The fund is little bit down for short term investors in the period 2008-09 and 2011-12. Overall the fund has mainly focused long and medium term investors than short term investors.
  64. 64. 50 | P a g e 2. Reliance Growth Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.13: Price and return of Reliance growth fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 97.48 0% 0% 2005-06 ₹ 181.96 87% 87% 2006-07 ₹ 240.15 146% 32% 2007-08 ₹ 365.19 275% 52% 2008-09 ₹ 251.59 158% -31% 2009-10 ₹ 396.39 307% 58% 2010-11 ₹ 482.08 395% 22% 2011-12 ₹ 411.52 322% -15% 2012-13 ₹ 456.54 368% 11% 2013-14 ₹ 462.68 375% 1% Graph 4.13: Price and return of Reliance growth fund-regular plan-growth -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% ₹ - ₹ 100.00 ₹ 200.00 ₹ 300.00 ₹ 400.00 ₹ 500.00 ₹ 600.00 RELIANCE GROWTH FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  65. 65. 51 | P a g e Reliance growth fund was incepted in 1995, is a large cap focussed fund. The fund has given well support to long and short term investors as the fund has given 395% and 375% of return in the 2010-11 and 2013-14 periods respectively. Which is of highest among the funds compared here. As in the period 2008-09 the fund shown a downward for short and medium investors. For the last 5 years the fund has given return in 300s, which is of a good period for a long term investor to take profits. After all the fund is most with the long term as well as short term investors.
  66. 66. 52 | P a g e 3. ICICI Prudential Top 200 Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 32.12 0% 0% 2005-06 ₹ 53.50 67% 67% 2006-07 ₹ 73.42 129% 37% 2007-08 ₹ 99.68 210% 36% 2008-09 ₹ 63.29 97% -37% 2009-10 ₹ 94.51 194% 49% 2010-11 ₹ 126.64 294% 34% 2011-12 ₹ 101.47 216% -20% 2012-13 ₹ 113.34 253% 12% 2013-14 ₹ 124.61 288% 10% Graph 4.14: Price and return of ICICI prudential top 200 fund-regular plan-growth -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% ₹ - ₹ 20.00 ₹ 40.00 ₹ 60.00 ₹ 80.00 ₹ 100.00 ₹ 120.00 ₹ 140.00 ICICI PRUDENTIAL TOP 200 FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  67. 67. 53 | P a g e ICICI prudential top 200 is a large and multi cap focussed fund started in 1994. The fund has well performed for long term investors as it gives 294% of return in 2010-11 period. One of the main thing is that the fund had not achieved a return in 300s, as the fund’s NAV is moving in a systematic way. The fund has got given a well return to short term investors. But as the NAV is lower investors has got an opportunity to buy more number of units. Overall the fund is best suited for long term investors.
  68. 68. 54 | P a g e 4. Tata Pure Equity Fund – Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.15: Price and return of Tata pure equity fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 26.49 0% 0% 2005-06 ₹ 42.90 62% 62% 2006-07 ₹ 56.12 112% 31% 2007-08 ₹ 80.32 203% 43% 2008-09 ₹ 56.33 113% -30% 2009-10 ₹ 83.58 215% 48% 2010-11 ₹ 101.84 284% 22% 2011-12 ₹ 91.45 245% -10% 2012-13 ₹ 102.86 288% 12% 2013-14 ₹ 112.77 326% 10% Graph 4.15: Price and return of Tata pure equity fund-regular plan-growth -50% 0% 50% 100% 150% 200% 250% 300% 350% ₹ - ₹ 20.00 ₹ 40.00 ₹ 60.00 ₹ 80.00 ₹ 100.00 ₹ 120.00 TATA PURE EQUITY FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  69. 69. 55 | P a g e Tata pure equity is a large cap based fund incepted in 1998. The fund has given 326% of return in the year 2013-14, which is of highest in its 10 year period. The fund is more favourable to long and medium term investors, then also it gives a little bit support to short term investors. In the year 2008-09 the fund shows a lagging for long as well as short term investors, after all the fund has performed good. Overall the fund is most suitable for long term investors.
  70. 70. 56 | P a g e 5. SBI Magnum Equity Fund – Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.16: Price and return of SBI magnum equity fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 11.24 0% 0% 2005-06 ₹ 18.01 60% 60% 2006-07 ₹ 24.83 121% 38% 2007-08 ₹ 36.75 227% 48% 2008-09 ₹ 23.85 112% -35% 2009-10 ₹ 36.59 225% 53% 2010-11 ₹ 44.48 296% 22% 2011-12 ₹ 40.67 262% -9% 2012-13 ₹ 45.63 306% 12% 2013-14 ₹ 49.31 339% 8% Graph 4.16: Price and return of SBI magnum equity fund-regular plan-growth -100% -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% ₹ - ₹ 10.00 ₹ 20.00 ₹ 30.00 ₹ 40.00 ₹ 50.00 ₹ 60.00 SBI MAGNUM EQUITY FUND(G) NAV(Avg) % RETURN RETURN(YoY)
  71. 71. 57 | P a g e SBI magnum equity fund is a large cap – oriented fund, started in the year of 1991. Which is one of the oldest fund of SBI. The fund is a consistent performer mainly supported long term investors. The fund has given 306% and 339% of return in the period 2012-13 and 2013-14 respectively. The fund is also a fair supporter for short term investor in the initial and middle phase of the 10 year period. As the NAV is lower investors can buy more units with lesser money Concluding the fund is mostly favoured to long term investors.
  72. 72. 58 | P a g e 6. Canara Robeco Equity Diversified Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.17: Price and return of Canara Robeco equity diversified fund-regular plan growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 15.15 0% 0% 2005-06 ₹ 23.50 55% 55% 2006-07 ₹ 27.65 83% 18% 2007-08 ₹ 40.18 165% 45% 2008-09 ₹ 27.41 81% -32% 2009-10 ₹ 44.74 195% 63% 2010-11 ₹ 55.81 268% 25% 2011-12 ₹ 52.76 248% -5% 2012-13 ₹ 59.71 294% 13% 2013-14 ₹ 64.11 323% 7% Graph 4.17: Price and return of Canara Robeco equity diversified fund-regular plan growth -50% 0% 50% 100% 150% 200% 250% 300% 350% ₹ - ₹ 10.00 ₹ 20.00 ₹ 30.00 ₹ 40.00 ₹ 50.00 ₹ 60.00 ₹ 70.00 CANARA REBECO EQUITY DIVERSIFIED FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  73. 73. 59 | P a g e Canara rebeco equity diversified fund is an equity diversified fund, started in 2003. It has given 323% of return for long term investors in the period 2013-14 and 63% of return for the short term investors in the period 2009-10. The fund has shown a downward in 2008- 09 period. But in 2011-12 period, every fund had shown a good downward trend, canara rebeco equity diversified fund is the fund which has shown a little bit downward of 5% of return for the short term investors. As the NAV is lower, the fund is affordable to small investors. Overall the fund is more favourable to its long term investors.
  74. 74. 60 | P a g e 7. HDFC Top 200 Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.18: Price and return of HDFC top 200 fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 45.55 0% 0% 2005-06 ₹ 75.87 67% 67% 2006-07 ₹ 100.28 120% 32% 2007-08 ₹ 140.54 209% 40% 2008-09 ₹ 105.63 132% -25% 2009-10 ₹ 169.93 273% 61% 2010-11 ₹ 215.06 372% 27% 2011-12 ₹ 192.99 324% -10% 2012-13 ₹ 212.59 367% 10% 2013-14 ₹ 225.44 395% 6% Graph 4.18: Price and return of HDFC top 200 fund-regular plan-growth -50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 450% ₹ - ₹ 50.00 ₹ 100.00 ₹ 150.00 ₹ 200.00 ₹ 250.00 HDFC TOP 200 FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  75. 75. 61 | P a g e HDFC top 200 fund is a large cap focussed fund incepted in 1996. As the graph and table shows that the fund has given a good return to its long and medium term investors. The fund had given 395% of return in the period 2013-14. For the past four years the fund is a good performer. The fund is also not too bad for short term investors as it has given 67% and 61% of return in the period 2005-05 and 2009-10 respectively. Overall the fund mostly supported long and medium term investors.
  76. 76. 62 | P a g e 8. Franklin India Prima Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.19: Price and return of Franklin India prima fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 94.65 0% 0% 2005-06 ₹ 163.11 72% 72% 2006-07 ₹ 186.76 97% 14% 2007-08 ₹ 249.34 163% 34% 2008-09 ₹ 139.81 48% -44% 2009-10 ₹ 224.36 137% 60% 2010-11 ₹ 281.63 198% 26% 2011-12 ₹ 255.90 170% -9% 2012-13 ₹ 298.80 216% 17% 2013-14 ₹ 341.11 260% 14% Graph 4.19: Price and return of Franklin India prima fund-regular plan-growth -100% -50% 0% 50% 100% 150% 200% 250% 300% ₹ - ₹ 50.00 ₹ 100.00 ₹ 150.00 ₹ 200.00 ₹ 250.00 ₹ 300.00 ₹ 350.00 ₹ 400.00 FRANKLIN INDIA PRIMA FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  77. 77. 63 | P a g e Franklin India prima fund is multi-cap oriented fund started in the year of 1993. As the table shows that the fund is not so good to its medium and short term investors. But fund is better for its long term investors as it had given 260% of return in the year of 2013-14 period. The fund has favoured to short term investors in the period 2005-06 and 2009-10 with return of 72% and 60% respectively. Overall the fund is a good performer to its long term investors.
  78. 78. 64 | P a g e 9. UTI Equity Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.20: Price and return of UTI equity fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 18.29 0% 0% 2005-06 ₹ 25.77 41% 41% 2006-07 ₹ 30.15 65% 17% 2007-08 ₹ 40.26 120% 34% 2008-09 ₹ 29.84 63% -26% 2009-10 ₹ 44.50 143% 49% 2010-11 ₹ 55.41 203% 25% 2011-12 ₹ 51.96 184% -6% 2012-13 ₹ 59.05 223% 14% 2013-14 ₹ 65.23 257% 10% Graph 4.20: Price and return of UTI equity fund-regular plan-growth -50% 0% 50% 100% 150% 200% 250% 300% ₹ - ₹ 10.00 ₹ 20.00 ₹ 30.00 ₹ 40.00 ₹ 50.00 ₹ 60.00 ₹ 70.00 UTI EQUITY FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  79. 79. 65 | P a g e UTI equity fund is a large & mid cap oriented fund started in the year of 1992. The fund is a consistent performer as it gives only 257% return for its long term investors, which is quiet lower compared to same class funds. As we can see that the is not satisfied its short and long term investors. One of the main thing is that the fund’s NAV is lower and is affordable to small investors. Concluding that the fund is a long term investor oriented fund.
  80. 80. 66 | P a g e 10. Sundaram Growth Fund - Regular Plan – Growth Average share price and percentage returns of the fund is as follows: Table 4.21: Price and return of Sundaram growth fund-regular plan-growth FY NAV(Avg) % RETURN % RETURN(YoY) 2004-05 ₹ 29.78 0% 0% 2005-06 ₹ 47.19 58% 58% 2006-07 ₹ 61.71 107% 31% 2007-08 ₹ 89.44 200% 45% 2008-09 ₹ 58.19 95% -35% 2009-10 ₹ 80.72 171% 39% 2010-11 ₹ 95.92 222% 19% 2011-12 ₹ 83.18 179% -13% 2012-13 ₹ 89.40 200% 7% 2013-14 ₹ 93.04 212% 4% Graph 4.21: Price and return of Sundaram growth fund-regular plan-growth -50% 0% 50% 100% 150% 200% 250% ₹ - ₹ 20.00 ₹ 40.00 ₹ 60.00 ₹ 80.00 ₹ 100.00 ₹ 120.00 SUNDARAM GROWTH FUND(G) NAV(Avg) % RETURN % RETURN(YoY)
  81. 81. 67 | P a g e Sundaram growth fund is a large-cap oriented fund incepted in 1997. As we can see that the fund is a poor performer mainly for short and medium term investors. But for its long term investor the fund is not so good, as its gives only 222% return in the compared period. For a small investors the fund is financial affordable as the NAV is lower. Overall the fund is mostly good for long term investors.
  82. 82. 68 | P a g e Comparative analysis and interpretation As we had seen 10 equity shares and 10 mutual funds, and their performance for 10 financial year period. Most of the equity shares had given unexpected returns to its long, medium, and short term investors. Mutual funds also not so bad in giving returns, but they are performing in a systematic way. One of the main advantage of investing directly into equity stocks is that, huge fluctuations will affect 100% positively or negatively to investors. Wherein such a huge fluctuations will balanced in mutual funds, as mutual funds has a bunch of equity stocks in its portfolio. Thus investing in mutual funds are less risky than direct equity investing. Here 2 of the companies – State bank of India and Bharti airtel limited has given returns to long term investors in 400s percent. The mutual funds has not given such huge returns. As the graphs and tables shows that the price of direct investing in equity stocks is too high than the NAV of mutual funds, which is not affordable for investors with small amount of money. For example in an investor has ₹ 1000 in his hand. With that money he is not able to buy a stock of L&T, SBI, etc. But he is able to buy at least 3 or 5 units of any mutual funds. One of the main advantage of mutual fund is that diversification, if an investor has got lessor money, as he buys mutual fund units, his/her money is investing in diversified manner. In a mutual fund industry the portfolio is managed by the fund manager and his team. But in a direct investing method his/her portfolio has to manage by the investors himself. All is about the investor’s preference, some investors find satisfaction in managing his funds in portfolio. An investor can’t order the fund manager to buy stocks of his preference in a mutual fund investing. The main 3 things every investor has to bear in mind before going to invest directly are: 1. The time of entry, 2. Choosing a company, and 3. Time of exit. But it is not so important when an investor invest in a mutual funds, because the fund’s fund manager will take care of these things. Only one thing the investor has to bear in mind which is choosing a scheme from the bunch of schemes of the AMCs. If an investor
  83. 83. 69 | P a g e is investing through a distributor, he will help the investor to choose a better funds which suit with the investors financial goals. As I explained above about the huge fluctuation in equity shares, few of the main examples of stock which had fluctuate more for the past 10 years are:  Suzlon Energy – low: ₹ 5.72 (mid 2013) & high: ₹ 460(early 2008)  Adani Enterprises – low: ₹ 5(mid 2001) & high: ₹ 785.25(late 2011)  Reliance Communications – low: ₹ 46.50(mid 2012) & high: ₹ 844(early 2008)  Wockhardt Pharma – low: ₹ 67.50(early 2009) & high: ₹ 2166.05(early 2013) This above high and low rates will shows that if an investor has bought any of the above stocks he will get returns of 40 or 50 times more than invested money. That is one of the main advantage of direct investing – unexpected return/profit. Here time of entry, choosing a company, and time of exit is very important. In mutual funds such a huge fluctuating never occur as huge return in one company is balanced by low return on another company because the portfolio is diversified. Here in the comparison I had chosen those equity stocks from NSE CNX NIFTY, but the benchmark has not given such a huge return in the past 10 financial year period, that’s because of balancing of high and low returns.
  84. 84. CHAPTER 5: CONCLUSION AND RECOMMENDATIONS
  85. 85. 70 | P a g e Conclusion As the comparative study makes to find out so many answers to questions before direct investing and mutual fund investing. The concluded points are:  For a start-up investor mutual fund investment method is more favourable and affordable, as risk is low compared to direct investing.  For an investor with lessor money, he/she should go for mutual fund investing as NAV is lower than the price of a stock.  If an investor wants to make profits out of speculation then he should choose direct investing in equity shares.  Investing in direct equities makes an investor to study more about the company, the financial market, and the economy.  People need a systematic way of investing should go for mutual fund investing.  Investing with a fixed income strategy, should choose mutual fund as an investment choice.  Short term as well as medium term investors should choose direct equity investing as an investment choice.  Mutual fund investing is termed as a long term horizon of getting a good return, as the fund is going in a systematic way.  If an investor has got time in making a market study and managing his/her portfolio, should invest in equity shares directly, otherwise go for mutual fund investing.  If an investor like in buying and selling stocks, managing the stocks in his portfolio should choose direct investing in equity stocks.
  86. 86. 71 | P a g e Recommendations As the recommendations given here is my personal view as an investor in stock market. My recommendations are:  Direct investing in equity shares is the best way to learn about stock market and economy of a nation.  If you really enjoy in managing the portfolio, should choose direct investing.  If you don’t know anything about stock market, just getting an income is your concern, you should choose a mutual fund scheme.  Make a good study before choosing an investment option.  Be aware that investing in any securities whether direct investing or mutual fund investing, involves a certain risk. Analysis the risk with the financial backups and then choose an investment option.
  87. 87. 72 | P a g e REFERENCES Websites: www.nseindia.com www.bseindia.com www.moneycontrol.com www.indiainfoline.com/Markets/News www.globalresearch.co.in www.valueresearchonline.com www.amfi.com www.sebi.gov.in www.nseindia.moneycontrol.com en.wikipedia.org/wiki/financial market www.rbi.co www.businesstimes.com www.economicstimes.com http://stocktraderschat.com http://getsplithistory.com http://economictimes.indiatimes.com/definition/ bonus-share www.rediff.com/business www.thereformedbroker.com/2012/04/08/10-things-you-need-to-know-about- indias-stock-market www.forbes.com Magazines: NISM: Workbook for – NISM Series 5-A: Mutual Fund Distributors Certification Examination. Geodata – Monthly investment magazine by Geojit Bnp Parbas Financial services Limited: Volume 6, Issues 9, 10, 11, 12 and Volume 7, Issue 1.(refer capital market & mutual fund chapters) Mathrubhumi Yearbook Plus 2014. (refer page no: 42-58, 472-479, 546-561, 625- 686)
  88. 88. 73 | P a g e ANNEXURE Annexure 1: Trends in Stock Market You might have heard some animal’s names in Stock Market activities. I would like to share real meaning for this Words or Names through this article. They are 1. Bull 2. Bear 3. Lamp 4. Deer 5. Dead Cat Bounce 6. Hound Dog 7. Lame Duck Bull: In jallikattu bull is raising its horns for showing its maximum strength. As like, when the prices are continuous to be ascending in stock market that market is called as bullish market. The term (BULLISH) is used to indicate that, the stock market is dominated by bull. The investors always like bullish market because then only they are going to earn more profit. Annexure figure 1: A bull in stock market
  89. 89. 74 | P a g e Bear: Bear in stock market is otherwise called as “Anucnu”. When the prices are continuous to be descending in stock market that market is called as “BEARISH MARKET”. If a person will be caught by bear, it may cause more damages to his body. As like, when a stock market is catch by bear. The investors will take more time to recover from that damage. So the investors are not investing their money during this period. Instead of that they are selling their shares (which they have bought in low prices). Again it will lead to reduce the share prices. Annexure figure 2: A bear in stock market Lamp: The investors are not having basic knowledge about stock market. They are not interesting to learn about stock market. But they would like to invest their money in stock market. This type of investors are mostly depends on others like stock brokers etc., sometimes they are losing their money (which they have invested) and cheated by others. Deer: Dear is not familiar among investors. Investors are applying for the new issue of shares in the capital market. After bought shares form the firms. They are not selling their shares as soon as possible. They are waiting for raises in share. If share prices meet their expected level. They are going to sell the shares. They are more patience in market activities (Buying & Selling). These types of investors are called as DEER. Dead Cat Bounce: The DEAD CAT BOUNCE is a term which is derived from a real time incident i.e. if a dead cat is fall down from a great height it may bounce some extend. As like, when the share market is meet big fall it indicates that, it will bounce some extend. It is a famous term during 1985. But now it is not famous among investors.
  90. 90. 75 | P a g e Hound Dog: The Hound Dog indicates that “The buyers who have an ability to take purchase and sales decisions according to market fluctuations”. Lame Duck: The Lame Duck is mostly used in Europe. The term was invented in 18th century. This used in London Stock Exchange to indicate default debt of investors and brokers. The continuous increases in default debt will lead to bankrupt. The investor who is making more trades without profit. They are called as Lame Duck. Annexure 2: Facts about Indian Stock Market 10 Things You Need to Know about India’s Stock Market: 1. Equity Averse: Indians are hugely equity averse. Only 1.2% of the Indian household financial savings is directly invested in shares (2010-2011). This amounts to a laughable figure of 2.5 Billion dollars for the entire Indian household population. 2. Low Participation: In a country of 1.2 billion, there are only 20 Million demat accounts (e.g.: a dematerialised account for individual Indian citizens to trade in listed stocks or debentures in electronic form) and 248 portfolio managers. 3. Foreigners vs Locals: Foreign Institutional Investors (FIIs) hold a larger stake in listed Indian companies (10.45%) than the combined stake of Indian Mutual Funds (2.68%) and Indian Financial Institutions/Insurance Companies (5.32%) 4. Inflows vs Outflows: In January -March of 2012, Foreign Institutional Investors (FIIs) invested $8.89 Billion in the Indian stock markets. In the same period, domestic institutions such as mutual funds, insurance companies etc sold around $4 Billion worth. 5. Total Market Cap to GDP: The current (2011) Market Cap to GDP ratio is around 86. In the last 19 years, the ratio ranged from a low of 25.1 (!) in 1992-93 to a high of 101 in 2007-2008. 6. Exchanges: The two main stock exchanges for Equity Trading in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). BSE is the oldest stock exchange in Asia and claims to have the largest number of listed companies in the world.
  91. 91. 76 | P a g e However, of the 8900 scripts (stocks) listed, only about a third (around 3000) are traded every day. 7. Volume: The daily turnover in the Equity Cash segment of National Stock Exchange (NSE) is around $3 billion and that of Bombay Stock Exchange (BSE) is half a billion dollars. Three fourths (75%) of the turnover can be attributed to the top 100 scripts. 8. Derivatives: The National Stock Exchange (NSE) has a monopoly in the Equity Derivatives market. It ranks very high in global rankings for the number of contracts traded – 2nd in Stock Index Options, 3rd in Stock Index Futures and 3rd in Single Stock Futures. The daily turnover in the derivatives segment is around $30 Billion. 9. Brokers vs Algos: Around 70% of the trading volume is done by the top 100 brokers. Algorithmic and co-location trading accounted for about 25% of derivatives volume and around 30% of equities volume on the NSE and BSE. 10. Foreign Investors Now Welcome: Earlier foreign citizens were prohibited from trading directly in the Indian stock markets but since Jan 2012, these restrictions are withdrawn and now they are permitted to invest freely. ==============================================================

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