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CONTENTS
CHAPTER – I INTRODUCTION
1. Introduction on mutual funds
2. Objectives of the study
3. Scope of the study
4. Application of the study
5. Methodology of the study
6. Tools used for analysis
7. Limitations of the study
CHAPTER – II REVIEW OF LETERATURE
CHAPTER – III COMPANY PROFILE
CHAPTER – IV ANALYSIS & INTERPRETATION
CHAPTER – VCONCLUSIONS & SUGGESTIONS
1. Conclusions
2. Suggestions
CHAPTER – VI BIBILOGRAPHY
1
4. INTRODUCTION
Last two decades have witnessed a phenomenal growth in trade and industry the world
over. The days are passed when capital used to remain within the boundaries of nations.
In this era of globalization and liberalization, technology, capital and other resources are
not only crossing the borders of nation but also increasing the volume of international
trade. The rapidity with which the concept of corporate finance, bank finance and
investment finance have changed in recent years have given birth to new financial
products known as Mutual funds.
As the name suggests, this is financial instrument that pools the savings of number of
investors who share a common financial goal. The money thus collected is invested by
the funds manager in different types of securities depending on the objective of the
scheme.
Mutual funds have become increasingly importance in the world of finance. Mutual funds
legally known as “open-ended companies” are subject to regulations set forth by the
Investment Company Act 1940, when deciding how to invest. Mutual funds are attractive
because they require less of investors, as they offer diversification, experts talk and bond
selection, low cost and preferential tax treatment. Additionally Mutual funds do not have
a predetermined number of stocks to sell; rather stocks are added to the fund as required
by the demand.
A mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is invested by the fund manager in
different types of securities depending upon the objective of the scheme. This could range
from shares to debentures to money market instruments. The income earned through these
investments and the capital appreciations realized by the scheme are shared by its unit
holders in proportion to the number of units owned by them.
Thus mutual fund is the most suitable investment for the common man as it offers the
opportunity to invest in a diversified professionally managed portfolio at a relatively low
cost. Any body with an investible surplus of as little as a few thousand rupees can invest
in mutual funds.
A mutual fund is the ideal investment vehicle for today’s complex and modern financial
scenario. Markets for equity shares, bonds and other fixed income instruments, real estate
derivatives and other assets have become mature and information driven. A typical
4
5. individual is unlikely to have the knowledge, skills, inclination and time to keep track of
events, understand their implications and act speedily. Thus a mutual fund is the sum total
of many parts, each of which is designated to perform a specific function. SEBI, the
market regulator has outlined clearly the role and responsibilities of each entity. How well
they function determines, in part, the quality of your experience with the mutual fund.
As investment vehicles go, mutual funds are unique being the only ones to operate on the
principle of pooling resources. The element of novelty extends to their working also in
the kind of investment exposures they offer, the terms they use, the norms for pricing they
follow, and lots more. These character traits will unravel through the course of this book.
Life makes many demands of us. There’s so much to indulge in and deal with. At work or
at home. With family, friends or self. Woven into these threats is the inescapable truth
that money is a means to many an end. A house in the sub-urbs, good education for the
kids, a set of four wheels to zip around and early retirement. The ends might differ but the
means – at least one of them – to reach them remain the same: money. Earned wisely,
saved regularly, and invested smartly.
People say that they don’t have the discipline, they don’t understand investing, especially
the stock market. They don’t have time and don’t really care. Well they should, even if
just a little. After all it’s their money and their life and it helps to have their saving
working for you. They don’t need to get neck – deep in to their personal finances, but the
least they can do, and should do, is get a fix on the big picture. Explore and understand
what they want from their investments, and leave the rest to the money managers: mutual
funds. These investment vehicles don’t demand them to have a deep understanding of
financial matters; they don’t even demand oodles of your time.
5
6. OBJECTIVES OF THE STUDY
1) The main purpose is to study whether mutual fund is investor’s best choice or not.
2) The objective of doing this project is to make a study of various investment schemes
in the secondary market.
3) To ascertain the various fluctuation in different sect oral schemes of mutual funds
4) To know how various schems effect mutual fund investment and its performance
taking past record
5) To study the performance of selected mutual fund companies and equity companies
and their performance in 1 years
6) To reveal the current situation of mutual funds and equites as well as index in last
one year in india.
6
7. SCOPE OF THE STUDY
1) The study covers the concept and details of mutual funds and introduction on equity,
derivatives and index.
2) The study also includes returns of equity, mutual funds and relative index of different
sectors.
3) Equities year high and low is also included in the study.
4) The project report covers the study of Net Asset Value (NAV) of mutual funds in
different sectors.
5) The analysis part includes the Net Asset Value (NAV) charts which gives the clear
picture of the present value of the mutual fund company.
6) The study includes the information regarding the selection of portfolio for different
funds in theory part.
7) The theory part also includes following information related to mutual fund :
History of mutual funds
Concept of mutual funds
Why mutual funds
Net Asset Value (NAV)
Types and benefits of mutual funds
Trends in mutual funds
Future scenario
Problem of mutual fund industry in India.
7
8. NEED &IMPORTANTS OF THE STUDY
1) The study helps the investor to compare various investment schemes and the returns
from those investments.
2) The reader can have thorough knowledge on concepts and trends of mutual funds.
3) The study helps to have the knowledge of various schemes and working of mutual
funds.
4) User can make proper analysis of returns in different schemes comparing the
performance of the study period.
5) The study enables the readers to assess the Net Asset Value (NAV) by seeing the
charts.
6) Researchers can think of further study by including the data of large period.
7) The study also enables us to understand the fluctuations related to Sensex and Nifty
8
9. METHODOLOGY OF THE STUDY
All information related to the topic needs to be carefully scrutinized to avoid the
risk of biased analysis. Having once identified which information is relevant and need to
be collected, we will have to define how this will be done.
The method employed in the investigation depends on the purpose and scope of the study.
Let us try to understand methodology.
1) RESEARCH DESIGN: Research design is some statement or specification of
procedures for collecting and analyzing the information required for the solution of some
specific problem.
Here the exploratory research is used as investigation is mainly concerned with
determining the trends and positive and negative returns in different sectors of mutual
funds and equities. Exploratory research is generally carried out by three sources of
information
A) Study of secondary sources
B) Discussion with individuals
C) Analyzing some specific areas
2) DATA COLLECTION METHODS: The key for creating useful system are
selectivity in collection of data and linking that selectivity to the analysis and decision
issue of the action to be taken. The accuracy of collected data is of great significance for
drawing correct and valid conclusions from the investigation.
The following are the main steps in data collection process
a) Type of information required in the investigation
b) Establishing the facts that are available at present and additional facts required.
c) Identification of sources from where the information can be available.
d) Selection of appropriate information i.e. collection method.
e)
9
10. 3) SOURCES OF INFORMATION: Data available in marketing research are either
primary or secondary.
Primary data: primary data are generated in an investigation according to the needs of
problem in head. Primary data is collected using case study methods. There are some set
of Qualitative techniques used for collection of some socio economic information about
some phenomenon.
Secondary data: Secondary data can be defined as data collected by some one else for
purpose other than solving the problem being investigated. Secondary data is collected
from external sources which include information from published material of SEBI and
some of the information is collected online. The data sources also include various books,
journals, magazines, news papers, etc. The organization profile is collected from Branch
Manager.
10
11. TOOLS USED FOR ANALYSIS
A Table is a systematic arrangement of statistical data in rows and columns. Rows
are horizontal arrangements whereas columns are vertical. Tabulation is a systematic
presentation of data in a form suitable for analysis and interpretation. The tables used are
as follows:
1) One way table: It presents only one characteristic and hence in answering one or
more independent questions with regard to those characteristics.
2) Two-way table: It contains sub divisions of a total and is able to answer two mutually
dependent questions.
3) Three-way table: It sub-divides the total in to three distinct categories It is capable of
answering three mutually dependent questions
11
12. GRAPHICAL REPRESENTATION OF DATA
A picture is worth a thousand words. The impression created by a picture has much
greater impact than any amount of detailed explanation. Statistical data can be effectively
presented in the form of diagrams and graphs. Graphs and Diagrams make complex data
simple and easily understandable. They help to compare related data and bring out subtle
data with amazing clarity. The Diagram used is as follows:
1) Bar diagrams: Bar diagrams are used specifically for categorical data or series. They
consist of the group of equidistant rectangles, one for each group or category of data
in which the values of magnitudes are represented by length or height of rectangles.
2) Sample Bar diagram: It is used of comparative study of two or more aspects of a
single variable or single category of data.
3) Percentage bar diagram: If sub-divided bar diagrams are presented on a percentage
basis i.e. each component as a percentage of whole, it is said to be a percentage bar
diagram.
COMPARATIVE STUDY
Comparative study is made by comparing the different investment schemes including
mutual funds, equity and relative indexes. The returns of mutual funds and equity are
compared for different sectors. The Net Asset Value of different mutual fund companies
is also shown in the study. Overall the study is done by comparing different investment
schemes and what returns they give in the period of 1 year.
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13. LIMITATIONS
1) Equity return is not taken from NSE stock exchange.
2) The data of mutual fund companies and equity companies is taken only for 3& 6
months and 1 year due to non availability of data.
3) Due to limitation of time all sectors are not studied, only selected sectors have been
studied.
4) Data for mutual funds available on website is day to day basis data. Data is updated
daily. Hence the data is available as on 31 marches 2012
5) only growth funds are taken.
6) Due to non availability of data NSE scrip Tata consultancy information has
not taken.
13
15. INTRODUCTION ON MUTUAL FUND
The concept of “Mutual fund” is a new feature in the cap of Indian capital market but not
to international market. The concept of mutual fund spread to USA in the beginning of
20th
century and three mutual fund companies were started in 1924. Mutual funds have
been successfully working in the USA and some western countries. These funds have
been useful in filling the gap between the demand and supply of capital in the market. A
mutual fund motivates small and big investors to entrust their savings to it so that these
are professionally employed in sharing good return. A large number of investors have
small savings with them. They can at the most buy shares of one or two companies. When
small savings are pooled and entrusted to mutual fund then these can be used to buy blue
chips where regular returns and capital appreciation are ensured.
Fund is an American concept. The terms like investment company, money fund
investment trust and mutual funds are used interchangeably and used to describe the same
thing in American literature. In British literature mutual funds has not been explained but
is considered as a synonym of investment trust of USA.
DEFINITION & MEANING
A mutual fund is an investment vehicle for investors, who pool their savings for investing
in diversified portfolio of securities with the aim of attractive yields and appreciation in
their value.
As per mutual fund book published by investment company institute of US, “Mutual fund
is a financial service organization that receives money from shareholders, invests it,
earns return on it, attempt to make it grow and agree to pay the shareholder cash on
demand for the current value of investment”
SEBI (mutual fund) regulations, 1996 defines mutual funds as
“A fund established in the form of a trust to raise monies through the sale of units to the
public or a section of public under one or more schemes for investing in securities
including money market instruments”
A mutual fund is a special type of institution a trust or an investment company
which acts as an investment – intermediary and channelises the savings of large number
15
16. of people to the corporate securities in such a way that investors get a steady return,
capital appreciation and low risk
A mutual fund is a trust that pools the savings of a number of investors who wish
to start investing but do not have a large amount of capital to work with or who want to
take hands of approach and let the professional take all decisions. Mutual funds are
basically large funds operated by investment companies and pull money from many
different people and then invest according to a certain goal for the fund. This allows for
greater diversification than would be possible for a single person with less-than-generous
assets and also removes the burden of researching market conditions and constantly
adjusting investments accordingly from the individual.
HISTORY OF MUTUAL FUND INDUSTRY
The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank the. The history of
mutual funds in India can be broadly divided into four distinct phases
FIRST PHASE – 1964-87 Unit Trust of India (UTI) was established on 1963 by
an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-
linked from the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under
management.
SECOND PHASE – 1987-1993 (Entry of Public Sector Funds) 1987 marked the
entry of non- UTI, public sector mutual funds set up by public sector banks and Life
Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Canara Bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual
fund in December 1990. At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores.
16
17. THIRD PHASE – 1993-2003 (Entry of Private Sector Funds) With the entry of
private sector funds in 1993, a new era started in the Indian mutual fund industry, giving
the Indian investors a wider choice of fund families. Also, 1993 was the year in which the
first Mutual Fund Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993. The
1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI
(Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing,
with many foreign mutual funds setting up funds in India and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003, there were 33
mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with
Rs.44,541 crores of assets under management was way ahead of other mutual funds.
FOURTH PHASE – since February 2003 In February 2003, following the repeal
of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is
the Specified Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64
scheme, assured return and certain other schemes. The Specified Undertaking of Unit
Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund
Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores
of assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of September, 2004, there were 29 funds, which
manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of
assets over the years.
17
18. GROWTH IN ASSETS UNDER MANAGEMENT
ZZZ
Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the
Unit Trust of India effective from February 2003. The Assets under management of the
Specified Undertaking of the Unit Trust of India has therefore been excluded from the
total assets of the industry as a whole from February 2003 onwards.
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19. CONCEPT OF MUTUAL FUND
A Mutual Fund is a trust that pools the savings of a number of investors who share
a common financial goal. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned through
these investments and the capital appreciation realised are shared by its unit holders in
proportion to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost. The flow
chart below describes broadly the working of a mutual fund:
Mutual Fund Operation Flow Chart
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20. ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organisational set up of a mutual fund:
WHY MUTUAL FUNDS
Let's suppose you're just getting started as an investor and have $5,000 to invest
and you have three important goals you want to achieve. First, you don't want to lose your
money in a risky venture so you want security, like that found in a certificate of deposit or
other fixed income investment. But you also want to make the most money you can, so
you want the prospect for growth potential, too. Finally, since you don't have the time or
knowledge to actively manage your money, you want professional money management --
occasionally diversifying your investments into promising new opportunities. That sounds
like a very good plan, but where can you invest your money and have a chance to meet all
three criteria? Certificates of deposit and other fixed income investments offer security,
but often with low rates of interest and a fixed potential for growth.
Individual stocks may carry greater potential for growth, but $5,000 isn't a lot to invest
and if you put it all in one stock, you risk everything if it performs poorly. And, brokers
and investment advisors can offer you advice and money management, but at a price --
you pay for their services, which reduces further the amount you have available to invest.
More than 80 million people, or one out of every two households in America,
invest in mutual funds. Currently, over $6 trillion is invested in mutual funds. While
funds have been around since the 1920's, their popularity over the past 25 years has
soared. The reasons:
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21. Mutual funds make it easy and less costly for investors to
satisfy their need for capital growth, income and/or income
preservation
Mutual funds bring diversification and professional money
management to the individual investor
A mutual fund is a company that pools the money of many investors -- its shareholders
-- to invest in a variety of different securities. Investments may be in stocks, bonds,
money market securities or some combination of these. Those securities are
professionally managed on behalf of the shareholders, and each investor holds a pro rata
share of the portfolio -- entitled to any profits when the securities are sold, but subject to
any losses in value as well.
For the individual investor, mutual funds provide the benefit of having someone else
manage your investments, take care of record keeping for your account, and diversify
your dollars over many different securities that may not be available or affordable to you
otherwise. Today, minimum investment requirements on many funds are low enough that
even the smallest investor can get started in mutual funds.
A mutual fund, by its very nature, is diversified -- its assets are invested in many different
securities. Beyond that, there are many different types of mutual funds with different
objectives and levels of growth potential, furthering your chances to diversify.
NET ASSET VALUE
The net asset value of the fund is the cumulative market value of the assets fund
net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all
the assets in the fund, this is the amount that the shareholders would collectively own.
This gives rise to the concept of net asset value per unit, which is the value, represented
by the ownership of one unit in the fund. It is calculated simply by dividing the net asset
value of the fund by the number of units. However, most people refer loosely to the NAV
per unit as NAV, ignoring the "per unit". We also abide by the same convention.
The price measured per unit is called the Net asset value NAV of the unit. Just as
a share or a bond is brought at a price, a mutual fund is bought and sold at its NAV. If for
example u were to invest Rs.10000 in a scheme when its NAV is Rs.10 you will be
21
22. allotted 1000 units (10000/10) roughly –the fund charges a nominal processing fee. The
NAV of any scheme tells how much each unit of it is worth at any point in time, and is
therefore the simplest measure of how it is performing. A scheme’s NAV is its Net assets
(market value of the securities is owns minus whatever it owes) divided by the number of
units it has issued.
a. scheme’s NAV is a dynamic figure. The market value of the scheme’s portfolio
changes from day to day as prices of shares and bonds move up or down. The number of
units outstanding also changes, as new investors come into the scheme and old ones
leave. If the NAV of your schemes rises from Rs.10 to Rs.11 over a period of time, your
scheme is said to have generated a return of 10 percent. Similarly if its Net NAV falls
form Rs.10 to Rs. 9, it is said to have lost 10 percent. Fund houses have to calculate and
disclose, the NAVs of their schemes daily. Fund NAVs can be easily looked up. While
the general dailies give a random listing of schemes, the financial papers are more
exhaustive in their coverage. When invested in a scheme, its NAV is the figure to track,
as it quantifies your returns, and your purchase price will be based on it. Random listing
of schemes, the financial papers random listing
TYPES OF MUTUAL FUNDS
This section provides descriptions of the characteristics -- such as investment
objective and potential for volatility of your investment -- of various categories of funds.
These descriptions are organized by the type of securities purchased by each fund:
equities, fixed-income, money market instruments, or some combination of these.
This table organizes these fund types by how aggressive or conservative they are
and by investment objective. Because mutual funds have specific investment objectives
such as growth of capital, safety of principal, current income or tax-exempt income, you
can select one fund or any number of different funds to help you meet your specific goals.
22
23. In general mutual funds fall into these general categories:
Equity Funds invest in shares of common stocks.
Fixed-Income Funds invest in government or corporate securities which offer
fixed rates of return.
Balanced Funds invest in a combination of both stocks and bonds.
Money Market Funds for high stability of principal, liquidity and income.
Bond Funds, both tax-exempt and taxable funds to generate income.
Specialty/Sector Funds to diversify holdings within an industry.
23
24. Equity Funds
Aggressive Growth Funds
What they invest in: These funds seek maximum growth of capital with
secondary emphasis on dividend or interest income. They invest in common
stocks with a high potential for rapid growth and capital appreciation.
Because they invest in stocks which can experience wide swings up or down,
these funds have a relatively low stability of principal. They often invest in the
stocks of small emerging growth companies and generally provide low current
income because these companies usually reinvest their profits in their businesses
and pay small dividends, if any. Aggressive growth funds generally incur higher
risks than growth funds in an effort to secure more pronounced growth. These
funds may invest in a broad range of industries or concentrate on one or more
industry sectors. Some use borrowing, short-selling, options and other speculative
strategies to leverage their results.
Suitable for: Investors who can assume the risk of potential loss in value of their
investment in the hope of achieving substantial and rapid gains. They are not
suitable for investors who must conserve their principal or who must maximize
current income.
Growth Funds
What they invest in: Generally invest in stocks for growth rather than current
income.
Growth funds are more likely to invest in well-established companies where the
company itself and the industry in which it operates are thought to have good
long-term growth potential.
Growth funds provide low current income, but the investor's principal is more
stable than it would be in an aggressive growth fund. While the growth potential
may be less over the short term, many growth funds have superior long-term
performance records. They are less likely than aggressive growth funds to invest
in smaller companies which may provide short-term substantial gains at the risk of
substantial declines.
24
25. Suitable for: Although growth funds are more conservative than aggressive
growth funds, they are still relatively volatile. They are suitable for growth-
oriented investors but not investors who are unable to assume risk or who are
dependent on maximizing current income from their investments.
International/Global Funds
What they invest in: International funds seek growth through investments in
companies outside the United States. Global funds seek growth by investing in
securities around the world, including the United States. Both provide investors
with another opportunity to diversify their mutual fund portfolio, since foreign
markets do not always move in the same direction as the U.S.
The best way to invest abroad is through mutual funds, rather than direct
investment in a foreign security. Most investors are unfamiliar with foreign
investment practices and currencies and may not have a clear understanding of
how economic or political events can affect foreign securities. An investor in an
international mutual fund doesn't have to worry about trading practices,
recordkeeping, time zones or other laws and customs of a foreign country -- that is
all handled by the fund's money manager.
International and global funds can invest in common stocks or bonds of foreign
firms and governments. Many international funds invest in a particular country or
region of the world.
Suitable for: While international and global funds offer opportunities for growth
and diversification, these types of funds do carry some additional risks over
domestic funds and should be carefully evaluated and selected according to the
investor's objectives, timeframe and risk profile. Because most international and
global funds are considered to be aggressive growth funds or growth funds,
investors must be willing to assume the risk of potential loss in value in the hope
of achieving substantial gains. They are not suitable for investors who must
conserve their principal or maximize current income.
25
26. Growth and Income Funds
What they invest in: Growth and income funds seek long-term growth of capital
as well as current income. The investment strategies used to reach these goals vary
among funds
Some invest in a dual portfolio consisting of growth stocks and income stocks, or
a combination of growth stocks, stocks paying high dividends, preferred stocks,
convertible securities or fixed-income securities such as corporate bonds and
money market instruments. Others may invest in growth stocks and earn current
income by selling covered call options on their portfolio stocks.
Suitable for: Growth and income funds have low to moderate stability of
principal and moderate potential for current income and growth. They are suitable
for investors who can assume some risk to achieve growth of capital but who also
want to maintain a moderate level of current income.
Fixed-Income Funds
What they invest in: The goal of fixed income funds is to provide high current
income consistent with the preservation of capital. Growth of capital is of
secondary importance
Income funds that invest primarily in common stocks are classified as equity
income funds (see next listing). Those that invest primarily in bonds and preferred
stocks are classified as fixed-income funds. These funds invest in corporate bonds
or government-backed mortgage securities that have a fixed rate of return.
Since bond prices fluctuate with changing interest rates, there is some risk
involved despite the fund's conservative nature. When interest rates rise, the
market price of fixed-income securities declines and so will the value of the
income funds' investments. Conversely, in periods of declining interest rates, the
value of fixed-income funds will rise and investors will enjoy capital appreciation
as well as income
26
27. Fixed-income funds offer a higher level of current income than money market
funds, but a lower stability of principal. They are generally more stable in price
than funds that invest in stocks. Within the fixed-income category, funds vary
greatly in their stability of principal and in their dividend yields. High-yield funds,
which seek to maximize yield by investing in lower-rated bonds of longer
maturities, entail less stability of principal than fixed-income funds that invest in
higher-rated but lower-yielding securities.
Some fixed-income funds seek to minimize risk by investing exclusively in
securities whose timely payment of interest and principal is backed by the full
faith and credit of the U.S. Government. These include securities issued by the
U.S. Treasury, the Government National Mortgage Association ("Ginnie Mae"
securities), the Federal National Mortgage Association ("Fannie Maes") and
Federal Home Loan Mortgage Corporation ("Freddie Macs"). All are backed by
pools of mortgages.
Suitable for: Fixed-income funds are suitable for investors who want to
maximize current income and who can assume a degree of capital risk in order to
do so. Again, carefully read the prospectus to learn if a fund's investment policy
with respect to yield and risk coincides with your own objectives.
Balanced/Equity Income funds
What they invest in: Equity income funds seek high current yield by investing
primarily in equity securities of companies which pay high dividends. Unlike
interest payments on bonds, dividends on equity securities can change as
companies raise or lower their dividends. Since yield-oriented stocks are more
volatile than comparably rated fixed-income securities, equity income funds offer
less stability of principal than fixed-income funds. Balanced funds are more
evenly invested in equities and income securities.
Suitable for: Balanced and equity income funds are suitable for conservative
investors who want high current yield with some growth.
Money Market Funds
27
28. What they invest in: For the cautious investor, these funds provide a very high
stability of principal while seeking a moderate to high current income. They invest
in highly-liquid, virtually risk-free, short-term debt securities of agencies of the
U.S. Government, banks and corporations and U.S. Treasury Bills. They have no
potential for capital appreciation.
Tax-exempt money market funds invest in securities that provide safety of
principal, liquidity and income exempt from federal income taxes by investing in
short-term, high-rated municipal obligations.
Because of their short-term investments, money market mutual funds are able to
keep a constant share price; only the yield fluctuates. Therefore, they are an
attractive alternative to bank accounts. With yields that are generally competitive
with -- and usually somewhat higher than -- yields on bank certificates of deposit
(CDs), they offer several advantages:
Money can be withdrawn any time without penalty. Money market funds also
offer check writing privileges.
Although not insured by the FDIC or FSLIC, money market funds invest only in
highly-liquid, short-term, top-rated money market instruments.
• Money market funds are suitable for conservative investors who want high
stability of principal and moderate current income with immediate liquidity.
Suitable for: Money market funds are suitable for conservative investors who
want high stability of principal and moderate current income with immediate
liquidity.
Municipal Bond Funds
What they invest in: "Muni" bond funds provide higher tax-exempt income than
tax-exempt money market funds by investing in longer-maturity (and often lower-
28
29. rated) securities, which generally offer higher yields than the short-term, high-
rated securities in which tax-exempt money market funds invest
Municipal bond funds vary greatly in the quality and maturity of the municipal
bonds they invest in. The longer the maturity, the higher the yield. Also, the lower
the credit rating of the issuer, the greater the risk and the higher the yield
While municipal bond funds generally provide lower yields than income funds
with debt obligations of similar maturities and ratings, for an investor in a high
marginal tax bracket the after-tax yields of municipal bond funds will be higher.
The price and yield of municipal bond funds will fluctuate moderately with
interest rates. As interest rates decline, the value of principal increases while yield
decreases; as rates increase, bond prices decline but yields increase.
Suitable for: Suitable for investors in medium to higher tax brackets who want
current income free from federal income tax.
Double & Triple Tax-Exempt Bond Funds
What they invest in: These bond funds provide the investor with an even greater
tax advantage by investing in municipal bonds of a single state. Triple tax-exempt
funds are exempt from income tax in a specific city. Thus they generate income
exempt from not only federal income tax but also from state and/or city income
tax for residents of those jurisdictions. Like all bond funds, the value of the shares
will fluctuate with interest rates, as will the current yield. Also, the stability of
principal and yield levels vary with the quality and maturity length of the bonds in
which the funds invest. Lack of geographic diversification increases credit risk of
these funds compared with national funds.
Suitable for: These funds are suitable for investors in medium to high tax
brackets in high tax states who want income with maximum exemption from
taxes.
Specialty/Sector Funds
29
30. What they invest in: These funds invest in securities of a specific industry or
sector of the economy such as health care, high technology, leisure, utilities or
precious metals
Because such funds invest primarily in one sector, they do not offer the element of
downside risk protection found in mutual funds that invest in a broad range of
industries. However, the funds do enable investors to diversify holdings among
many companies within an industry, a more conservative approach than investing
directly in one particular company
Sector funds offer the opportunity for sharp capital gains in cases where the fund's
industry is "in favor" but also entail the risk of capital losses when the industry is
out of favor
While sector funds restrict holdings to a particular industry, other specialty funds
such as index funds give investors a broadly-diversified portfolio and attempt to
mirror the performance of various market averages. Index funds generally buy
shares in all the companies composing the S&P 500 Stock Index or other broad
stock market indices
Asset allocation funds move funds among a variety of markets and instruments in
response to the fund manager's view of relative market prospects. They are
broadly diversified and sometimes have higher management fees since there may
be a variety of securities in the portfolio. These funds are suitable for investors
who can tolerate a moderate to high degree of risk, are seeking capital
appreciation and to whom dividend income is secondary in importance. And
whatever the instruments, social responsibility funds apply moral and ethical as
well as economic principles in the selection of securities.
Suitable for: Specialty funds are suitable for investors seeking to invest in a
particular industry who can monitor industry performance regularly and alter
investment strategies accordingly. Investors must be willing to assume the risk of
potential loss in value of their investment in the hope of achieving substantial
gains. They are not suitable for investors who must conserve their principal or
maximize current income.
30
31. BENEFITS OF MUTUAL FUNDS
1) Professional Investment Management: By pooling the funds of thousands of
investors, mutual funds provide full-time, high-level professional management that
few individual investors can afford to obtain independently. Such management is vital
to achieving results in today's complex markets. Your fund managers' interests are
tied to yours, because their compensation is based not on sales commissions, but on
how well the fund performs. These managers have instantaneous access to crucial
market information and are able to execute trades on the largest and most cost-
effective scale. In short, managing investments is a full-time job for professionals.
2) Diversification: Mutual funds invest in a broad range of securities. This limits
investment risk by reducing the effect of a possible decline in the value of any one
security. Mutual fund shareowners can benefit from diversification techniques usually
available only to investors wealthy enough to buy significant positions in a wide
variety of securities.
3) Low Cost: If you tried to create your own diversified portfolio of 50 stocks, you'd
need at least $100,000 and you'd pay thousands of dollars in commissions to assemble
your portfolio. A mutual fund lets you participate in a diversified portfolio for as little
as $1,000, and sometimes less. And if you buy a no-load fund, you pay or no sale
charges to own them.
4) Convenience and Flexibility: You own just one security rather than many, yet enjoy
the benefits of a diversified portfolio and a wide range of services. Fund managers
decide what securities to trade, clip the bond coupons, collect the interest payments
and see that your dividends on portfolio securities are received and your rights
exercised. It's easy to purchase and redeem mutual fund shares, either directly online
or with a phone call.
5) Quick, Personalized Service: Most funds now offer extensive websites with a host
of shareholder services for immediate access to information about your fund account.
Or a phone call puts you in touch with a trained investment specialist at a mutual fund
company who can provide information you can use to make your own investment
choices, assist you with buying and selling your fund shares, and answer questions
about your account status.
31
32. 6) Ease of Investing: You may open or add to your account and conduct transactions or
business with the fund by mail, telephone or bank wire. You can even arrange for
automatic monthly investments by authorizing electronic fund transfers from your
checking account in any amount and on a date you choose. Also, many of the
companies featured at this site allow account transactions online.
7) Total Liquidity, Easy Withdrawal: You can easily redeem your shares anytime you
need cash by letter, telephone, bank wire or check, depending on the fund. Your
proceeds are usually available within a day or two.
8) Life Cycle Planning: With no-load mutual funds, you can link your investment plans
to future individual and family needs -- and make changes as your life cycles change.
You can invest in growth funds for future college tuition needs, then move to income
funds for retirement, and adjust your investments as your needs change throughout
your life. With no-load funds, there are no commissions to pay when you change your
investments.
9) Market Cycle Planning: For investors who understand how to actively manage their
portfolio, mutual fund investments can be moved as market conditions change. You
can place your funds in equities when the market is on the upswing and move into
money market funds on the downswing or take any number of steps to ensure that
your investments are meeting your needs in changing market climates. A word of
caution: since it is impossible to predict what the market will do at any point in time,
staying on course with a long-term, diversified investment view is recommended for
most investors.
10) Investor Information: Shareholders receive regular reports from the funds, including
details of transactions on a year-to-date basis. The current net asset value of your
shares (the price at which you may purchase or redeem them) appears in the mutual
fund price listings of daily newspapers. You can also obtain pricing and performance
results for the all mutual funds at this site, or it can be obtained by phone from the
fund.
11) Periodic Withdrawals: If you want steady monthly income, many funds allow you
to arrange for monthly fixed checks to be sent to you, first by distributing some or all
of the income and then, if necessary, by dipping into your principal.
32
33. 12) Dividend Options: You can receive all dividend payments in cash. Or you can have
them reinvested in the fund free of charge, in which case the dividends are
automatically compounded. This can make a significant contribution to your long-
term investment results. With some funds you can elect to have your dividends from
income paid in cash and your capital gains distributions reinvested.
13) Automatic Direct Deposit: You can usually arrange to have regular, third-party
payments -- such as Social Security or pension checks -- deposited directly into your
fund account. This puts your money to work immediately, without waiting to clear
your checking account, and it saves you from worrying about checks being lost in the
mail.
14) Recordkeeping Service: With your own portfolio of stocks and bonds, you would
have to do your own recordkeeping of purchases, sales, dividends, interest, short-term
and long-term gains and losses.
15) Safekeeping: When you own shares in a mutual fund, you own securities in many
companies without having to worry about keeping stock certificates in safe deposit
boxes or sending them by registered mail. You don't even have to worry about
handling the mutual fund stock certificates; the fund maintains your account on its
books and sends you periodic statements keeping track of all your transactions.
16) Retirement and College Plans: Mutual funds are well suited to Individual
Retirement Accounts and most funds offer IRA-approved prototype and master plans
for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k)
retirement plans. Funds also make it easy to invest -- for college, children or other
long-term goals. Many offer special investment products or programs tailored
specifically for investments for children and college.
17) Online Services: The internet provides a fast, convenient way for investors to access
financial information. A host of services are available to the online investor including
direct access to no-load companies.
18) Sweep Accounts: With many funds, if you choose not to reinvest your stock or bond
fund dividends, you can arrange to have them swept into your money market fund
automatically. You get all the advantages of both accounts with no extra effort.
33
34. 19) Asset Management Accounts: These master accounts, available from many of the
larger fund groups, enable you to manage all your financial service needs under a
single umbrella from unlimited check writing and automatic bill paying to discount
brokerage and credit card accounts.
20) Margin: Some mutual fund shares are marginable. You may buy them on margin or
use them as collateral to borrow money from your bank or broker. Call your fund
company for details.
MARKET TRENDS
Alone UTI with just one scheme in 1964, now competes with as many as 400 odd
products and 34 players in the market. In spite of the stiff competition and losing market
share, UTI still remains a formidable force to reckon with.
Last six years have been the most turbulent as well as exiting ones for the
industry. New players have come in, while others have decided to close shop by either
selling off or merging with others. Product innovation is now passé with the game
shifting to performance delivery in fund management as well as service. Those directly
associated with the fund management industry like distributors, registrars and transfer
agents, and even the regulators have become more mature and responsible.
The industry is also having a profound impact on financial markets. While UTI
has always been a dominant player on the bourses as well as the debt markets, the new
generation of private funds which have gained substantial mass are now seen flexing their
muscles. Fund managers, by their selection criteria for stocks have forced corporate
governance on the industry. By rewarding honest and transparent management with
higher valuations, a system of risk-reward has been created where the corporate sector is
more transparent then before.
Funds have shifted their focus to the recession free sectors like pharmaceuticals,
FMCG and technology sector. Funds performances are improving. Funds collection,
which averaged at less than Rs100bn per annum over five-year period spanning 1993-98
doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded
Rs300bn. Total collection for the current financial year ending March 2000 is expected to
reach Rs450bn.
34
35. What is particularly noteworthy is that bulk of the mobilization has been by the private
sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net
inflow of Rs. 7819.34 crore during the first nine months of the year as against a net
inflow of Rs.604.40 crore in the case of public sector funds.
Mutual funds are now also competing with commercial banks in the race for retail
investor’s savings and corporate float money. The power shift towards mutual funds has
become obvious. The coming few years will show that the traditional saving avenues are
losing out in the current scenario. Many investors are realizing that investments in savings
accounts are as good as locking up their deposits in a closet. The fund mobilization trend
by mutual funds in the current
year indicates that money is going to mutual funds in a big way. The collection in the first
half of the financial year 1999-2000 matches the whole of 1998-99.
India is at the first stage of a revolution that has already peaked in the U.S. The
U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual
fund assets are not even 10% of the bank deposits, but this trend is beginning to change.
Recent figures indicate that in the first quarter of the current fiscal year mutual fund
assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank,
The Financial Express September, 99) This is forcing a large number of banks to adopt
the concept of narrow banking wherein the deposits are kept in Gilts and some other
assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be
ignored and they will not close down completely. Their role as intermediaries cannot be
ignored. It is just that Mutual Funds are going to change the way banks do business in the
future.
35
36. COMPARISON OF BANKS, MUTUAL FUNDS, EQUITY & DERIVATIVES
BANKS MUTUAL
FUNDS
EQUITY DERIVATIVES
Returns Low Better Better Better
Administrati
ve exp.
High Low Low Low
Risk Low Moderate High High
Investment
options
Less More More Less
Network High penetration Low but
improving
High penetration High penetration
Liquidity At a cost Better Better Better
Quality of
assets
Not transparent Transparent Transparent -
Interest
calculation
Minimum balance
between 10th. & 30th.
Of every month
Everyday NA NA
Guarantee Maximum Rs.1 lakh
on deposits
None NA NA
36
37. RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in the mutual fund industry is the aggressive expansion
of the foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players.
Many nationalized banks got into the mutual fund business in the early nineties
and got off to a good start due to the stock market boom prevailing then. These banks did
not really understand the mutual fund business and they just viewed it as another kind of
banking activity. Few hired specialized staff and generally chose to transfer staff from the
parent organizations. The performance of most of the schemes floated by these funds was
not good. Some schemes had offered guaranteed returns and their parent organizations
had to bail out these AMCs by paying large amounts of money as the difference between
the guaranteed and actual returns. The service levels were also very bad. Most of these
AMCs have not been able to retain staff, float new schemes etc. and it is doubtful
whether, barring a few exceptions, they have serious plans of continuing the activity in a
major way.
The experience of some of the AMCs floated by private sector Indian companies
was also very similar. They quickly realized that the AMC business is a business, which
makes money in the long term and requires deep-pocketed support in the intermediate
years. Some have sold out to foreign owned companies, some have merged with others
and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in here with the
expectation of a long haul. They can be credited with introducing many new practices
such as new product innovation, sharp improvement in service standards and disclosure,
usage of technology, broker education and support etc.
In fact, they have forced the industry to upgrade itself and service levels of
organizations like UTI have improved dramatically in the last few years in response to the
competition provided by these.
37
38. SELECTING FUNDS FOR YOUR PORTFOLIO
The chart below can be used to identify the types of funds best suited to your particular
investment objectives. Refer to it as you begin to formulate your portfolio.
If Your Basic
Objective Is
You Want The
Following
Fund Type
These Funds Invest
Primarily In
Potential
Capital
Appreciation
Potential
Current
Income
Potential
Risk
Maximum
Capital
Growth
Aggressive
Growth
International
Common stocks
with potential for
very rapid growth.
May employ certain
aggressive
strategies
Very High Very Low
High to
Very High
High Capital
Growth
Growth
Specialty/
Sector
International
Common stocks
with long-term
growth potential
High to Very
High
Very Low High
Current
Income &
Capital
Growth
Growth &
Income
Common stocks
with potential for
high dividends and
capital appreciation
Moderate Moderate
Moderate
to High
High Current
Income
Fixed Income
Equity Income
Both high-dividend-
paying stocks and
bonds
Very Low
High to
Very High
Low to
Moderate
Current
Income &
Protection of
Principal
General
Money Market
Funds
Money market
instruments
None
Moderate
to High
Very Low
Tax-Free
Income &
Protection of
Principal
Tax-Exempt
Money Market
Short-term
municipal notes and
bonds
None
Moderate
to High
Low
Current
Income &
Maximum
Safety of
Principal
U.S.
Government
Money Market
U.S.Treasury and
agency issues
guaranteed by the
U.S. Government
None
Moderate
to High
Low
38
39. FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investor’s shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with
stronger players in three to four years. In the private sector this trend has already started
with two mergers and one takeover. Here too some of them will down their shutters in the
near future to come.
But this does not mean there is no room for other players. The market will witness
a flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, and Old Mutual etc. are looking at Indian market seriously. One important
reason for it is that most major players already have presence here and hence these big
names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge its risk and this in turn would be reflected in its Net Asset Value
(NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate the
process immediately, so that the mutual funds can implement the changes that are
required to trade in Derivatives.
PROBLEMS & PROSPECTS OF MUTUAL FUNDS
1) Wrong positioning : The mutual funds in India have been quite wrongly promoted as
an alternative to equity industry. Thus creating very high expectations in the minds of
the investors. In a falling market, these expectations have been belied. Only the pure
equity schemes can be compared with the stock market index. However pure equity
schemes are few in India, further, investment is not purely linked to a particular index.
Therefore returns form mutual funds cannot really be compared with stock market
index.
39
40. 2) Limited product range: Indian mutual funds have remained centered around a
limited product range basically income, income-cum-growth and tax saving schemes.
Efforts to develop and expand the market through innovative new products have been
negligible. These have happened due to the tendency to avoid risk, inability to
understand future market developments, and change in investor preference. Therefore
the extent of mutual funds market has remained limited.
3) Confused market situation: probably the introduction and implementation of new
regulatory norms has contributed in some measure to market sluggishness, as the
emerging market was, initially, not able to respond to the regulatory objectives.
4) Absence of Innovative Marketing Network: The absence of product diversification
and a confused market situation has been made worse by the absence of an innovative
marketing network for mutual funds. The agent oriented network has largely been
failure because most of the agents have not been specifically trained to sell mutual
funds products,
5) Lack of adequate research infrastructure: the passive approach of some mutual
funds in managing investor’s funds is compounded by the lack of adequate research
infrastructure. Consequently, returns commensurate with the market movement could
not be realized by many schemes, which has tended to show up Indian mutual funds
in a bad light.
6) Inefficient management: Management is considered to be a key factor for the
operational efficiency of any business venture. This factor becomes even more crucial
for service ventures such as mutual funds. What mutual funds require are managers
who have a clear understanding of prevailing and emerging market potential, investor
preference and macro economic fundamentals.
7) Lack of investor’s education: The market success of any new product particularly a
financial product depends largely on its acceptance by consumers, in this case
investors. Mutual funds must undertake a well design and comprehensive program of
investor education especially aimed at investors in rural and semi-urban areas.
However this has been mostly neglected in India.
40
41. 8) Lack of media support: investors understanding about mutual funds product and it
feature must be increased as it was found to be very low so far. This problem requires
quick and structured attention. This can be solved with effective use of media. A
positive media support is also required and mutual funds need to be media friendly. A
very closer coordination between AMFI, mutual funds and the media to promote
investor education in India.
9) Ignorance of liquidity management: over emphasis on asset management has often
ignored the crucial importance of liability management in mutual funds, leading many
Indian funds into a liquidity trap at the time of redemption. A more scientific
approach needs to be adopted by the funds.
10) Risk management ignored: Derivatives have been widely used by the mutual funds
as a measure of risk management as a complex and competitive market place. Further
the practice of stock lending, used widely in the western market has induced
efficiency in funds management a regulatory environment for mutual funds need to
encouraged this practices in India.
41
42. INTRODUCTION ON EQUITY SHARES
Equity is a term commonly used to describe the ordinary share capital of the
business. Ordinary share in the equity capital of the business entitle the holders to all
distributed profits after the holders of debentures and preference shares have been paid.
Ordinary shares are issued to the owners of the company. It is important to understand the
market values of company’s shares have little relationship to their nominal or face value.
The market value of the company share is determined by the price another investor is
prepared to pay for them. In the case of publicly quoted companied, this is reflected in the
market value of the ordinary shares traded on the stock exchange. In case of privately
owned companies, where there is unlikely to be much trading in shares, market value is
often determined when the business is sold or when the minority share holding is valued
for taxation purpose.
Differed ordinary shares are a form of ordinary shares which are entitled to a dividend
only after a certain date or only if profits rise above a certain amount. Voting rights might
also differ from those attach to other ordinary shares. Financing a company through the
sale of stock in accompany is known as equity financing. Alternatively debt financing can
be done to avoid giving up shares of ownership of the company. Equity financing are
usually used for longer term investment projects such as investment in a new factory or a
new foreign market.
Equity investment generally refers to the buying and holding of shares of stock on a stock
market by individuals and funds in anticipation of income from dividends and capital gain
as the value of stock rises. It also sometimes refers to the acquisition of equity
(ownership) participation in a private (unlisted) company or a start up. (A company being
created or newly created). When the investment is in infant companies it is refer to as
venture capital investing and is generally understood to be higher risk than investment in
listing, going concern situations.
42
43. ON INDEX INTRODUCTION
Stock market talk is everywhere, from T.V and radio, to the newspapers and the
web. But what does it mean? When people say that “the market turned a great
performance today”. “What is the market anyway?”
As it turns out, when most people talk about “the market” they are actually
referring to an index. With the growing importance of the stock market in our society the
names of indexes such as S & P 500, NIFTY, and SENSEX have become part of our
every vocabulary.
Index can be defined as “a statistical measure of changes in the portfolio of stocks
representing the portion of the overall market.” It would be difficult to track every single
security trading in the country. To get around this we take a smaller sample of the market
that is representative of the whole. Thus, just a pollster’s use a political survey to gauge
the sentiment of population, the investors use indexes to track the performance of the
stock market. Ideally change in price of an index would represent and exactly
proportionate change in the stocks included in the index.
Indexes are great tools for telling us what direction the market is taking, what
trends are prevailing. “An index is a number use to represent the changes in a set of
values between a base time period and another time period” A stock index is number that
helps you measure the levels of the market. Most stock indexes attempt to be proxies for
the market they exist in. returns on the index are thus supposed to represent the returns on
the market i.e the returns that u could get if u had the entire market in your portfolio.
43
45. COMPANY PROFILE
OVERVIEW:
Tata Capital Limited is a subsidiary of Tata Sons Limited. The Company is registered
with the Reserve Bank of India as a Systemically Important Non Deposit Accepting Core
Investment Company and offers through itself and its subsidiaries fund and fee-based
financial services to its customers.
Tata Capital Financial Services Limited ("TCFSL") is a subsidiary of Tata Capital
Limited. The Company is registered with the Reserve Bank of India as a Systemically
Important Non Deposit Accepting Non Banking Financial Company (NBFC) and offers
fund and fee-based financial services to its customers, under the Tata Capital brand.
A trusted and customer-centric, one-stop financial services provider, TCFSL caters to
the diverse needs of retail, corporate and institutional customers, across various areas of
business namely the Commercial Finance, Infrastructure Finance, Wealth Management,
Consumer Loans and distribution and marketing of Tata Cards.
TCFSL has over 100 branches spanning all critical markets in India.
‘We only do what’s right for you’
The Tatas are amongst the most respected business houses in the world. Tata Capital
aims to bring the trust and expertise of the Tatas to an economically and socially relevant
sector like financial services.
The essence of brand Tata Capital is encapsulated in our brand proposition – ‘We only
do what’s right for you'. The proposition reflects our strong resolve to deliver financial
solutions that are ‘right’ for our customers and the society at large.
Tata Capital seeks to build strong relationships with its customers and deliver superior
and consistent customer experience across all products and touch-points.
At Tata Capital, our wide product suite comprises of the following:
COMMERCIAL FINANCE
The Commercial Finance business helps small, medium and large corporates grow their
business. Our range of offerings includes Term Loans, Working Capital Loans, Channel
45
46. Finance, Equipment Finance, Lease Rental Discounting, Bill Discounting, Letter of
Credit* and Bank Guarantee*.
* Offered through arrangement made with select banks.
^ Originated and serviced by Tata Capital Financial Services Limited.
INVESTMENT BANKING
Tata Securities Limited (TSL), a wholly-owned subsidiary of Tata Capital Limited holds
a Category | Merchant Banking license from the Securities and Exchange Board of India
(SEBI ) to carry out merchant banking business. Our Investment banking business
provides a broad range of services, including equity capital markets transaction execution,
underwriting, mergers, and acquisitions advisory, structured finance advisory, private
equity advisory and infrastructure advisory.
* Brought to you by Tata Securities Limited (TSL), a wholly-owned subsidiary of Tata
Capital Limited. TSL holds a Category I Merchant Banking license from the Securities
and Exchange Board of India.
Private Equity
Tata Capital acts as Investment Manager to Private Equity Funds which identify and
invest into target companies with significant growth potential, nurture them and exit
profitable.
Infrastructure Finance
The Infrastructure Finance business caters to the specialized needs of the infrastructure
sector. Our range of offerings includes Equipment Finance, Project Finance, Equipment
Rentals, Working Capital Loans, Bill Discounting/ Factoring, Refinance, Top Up Loans
and Loan Syndication.
^ Originated and serviced by Tata Capital Financial Services Limited.
Securities
Tata Securities Limited, a wholly owned subsidiary of Tata Capital Limited, offers, both
institutional and retail customers, quality products and services like equity trading and
research.
Wealth Management
46
47. Tata Capital Wealth Management offers a range of Investment Advisory services and
markets third party investment products like Portfolio Management Services, Private
Equity and Venture Capital Funds, Structured Products, Mutual Funds, Fixed Deposits
and Bonds.
^Marketed by Tata Capital Financial Services Limited
Consumer Loans
Our wide range of consumer loans such as Home Loans*, Auto Loans, Personal Loans,
Business Loans, Education Loans, Loans against Property, Loans against Shares#.
* Brought to you by Tata Capital Housing Finance Limited, a wholly-owned subsidiary of
Tata Capital Limited.
# Currently available in select cities only.
^ Originated and serviced by Tata Capital Financial Services Limited.
Tata Cards
The Tata Card* combines the convenience of a powerful credit card with a rewarding
membership to the Empower program. The credit card allows customers to earn points
and membership to the Empower program, India's first multi-brand loyalty program,
offering them the advantage of redeeming these points across several loyalty partners.
* Tata Card is the White Label Card issued, operated and serviced by the State Bank of
India with Tata Capital only marketing the card.
^ Marketed by Tata Capital Financial Services Limited.
Travel Related Services
TC Travel and Services Limited, a wholly - owned subsidiary of Tata Capital Limited,
offers a wide range of services that includes airline ticketing, Visa & passport facilitation,
booking hotel accommodation, Cars-hire and surface transport
Foreign Exchange
TT Holdings & Services Limited, a wholly-owned subsidiary of Tata Capital Limited
offers travel related foreign exchange products such as travelers cheques, foreign
currency notes, foreign currency denominated pre-paid travel cards, arrangement for
inward money transfer service and other associated travel related products.
Alliances
47
48. Tata Capital’s alliances and partnerships are based on and are an extension of the
Company’s core objects and values. These include:
With Mizuho Securities Co. Ltd. to foster business cooperation in private equity,
investment banking including cross border mergers and acquisitions, securities business
including broking and distribution, structured finance and other business areas such as
wealth management.
With Mizuho Corporate Bank Limited (MHCB) to foster business cooperation,
enhancing cross-market value creation capabilities, strengthening competitive advantages
in addition to aiding each other in gaining a deeper understanding of the Indian and
Japanese markets. As part of the understanding, Tata Capital and MHCB will cooperate
in a wide-range of business areas. Some of these include Ninja Loans, Project and
Infrastructure Finance and Treasury Products.
With Mitsubishi UFJ Securities Co., Limited to establish a basis of cooperation in a wide
range of strategic business areas that include cross-border investment banking, global
offering of Indian equities and working towards development of the local bond market.
48
50. Leaders with a vision
Tata Capital Board consists of valuable and extensively experienced individual experts in
their domains. They direct and nurture the Company with their priceless guidance,
foresight and vision.
Farrokh K. Kavarana
Farrokh K. Kavarana is a Director of Tata Sons Limited and Tata Industries Limited, the
apex holding companies of the Tata Group. He is the Chairman of several Tata
Companies in India and abroad – notably Tata AIG Life and General Insurance
Companies, Tata Asset Management Ltd., Trent Ltd. and Tata Projects Ltd. Between
2000 and 2005, he served as the Executive Chairman of Tata Infotech Ltd. (now merged
with Tata Consultancy Services), and from 1994 to 2000 he was the Executive Director of
Tata Motors Limited, India’s largest automobile manufacturer. Prior to that, he shared his
experience and vision as the Vice-Chairman and Managing Director of Tata International
AG, Switzerland, responsible for the Tata Group’s overseas operations and investments.
Before joining the Tata Group in 1975, he held key positions with McKinsey & Co. Inc.,
in London and Washington D.C. as well as The Bowater Corporation in UK and Europe.
Farokh Nariman Subedar
Mr. F N Subedar is a qualified chartered accountant and company secretary and has vast
experience in the matters of company administration, taxation, accounts and finance. He
is the senior Vice President - Finance and Company Secretary of Tata Sons Ltd. and is on
the board of various Tata companies. Mr. Subedar has served as the Chairman of the
Direct Taxation Committee of the Bombay Chambers of Commerce and Industry.
Hoshang Noshirwan Sinor
Hoshang Noshirwan Sinor was the Chief Executive, Indian Banks’ Association, Mumbai,
India till July 31, 2008. With 46 years of extensive experience in the banking sector, he
has had exposure to the working of both public sector and private sector banks in India
and has hence, had the experience of both the phases of nationalization and liberalization
in this sector in India. He started his career in 1965 with Central Bank of India and in
1969 moved to Union Bank of India where his career grew with the company for 28 long
years. In 1996, he was appointed as the Executive Director of Central Bank of India.
Thereafter, he moved to ICICI Bank in July 1997 as Executive Director. On 1st June
1998, he took over as Managing Director and CEO of ICICI Bank. During his tenure,
50
51. ICICI Bank emerged from a marginal player to a major player in banking fraternity.
During this period, ICICI Bank also became the first bank from India to be listed on New
York Stock Exchange. This was followed by an acquisition of an old private sector bank
namely Bank of Madura in 2001 which gave ICICI Bank size and the geographic reach.
Mr. Sinor has also worked on various committees of the Govt. of India, Reserve Bank of
India (RBI) and Confederation of Indian Industry (CII) and has contributed to numerous
policy and decision making processes.
Ishaat Hussain
Ishaat Hussain, the Finance Director of Tata Sons Ltd. since July 2000, joined the Board
of Tata Sons as an Executive Director on 1st July 1999. Prior to joining Tata Sons, he
served as the Senior Vice-President and Executive Director – Finance in Tata Steel where
he served for almost 10 years. Besides being on the Board of Tata Sons Ltd., he is also
the Chairman of Voltas Limited and Tata Sky Limited. He serves on the Boards of several
Tata Companies like Tata Steel, Tata Industries, Tata Teleservices and Titan Industries
Limited. Mr. Hussain is a member on the Primary Markets Advisory Committee of the
Securities and Exchange Board of India (SEBI). In April 2005, he was appointed a
Member of the Board of Trade and in November 2006 he was appointed a Public Interest
Director of Bombay Stock Exchange Limited.
Janki Ballabh
Janki Ballabh joined the State Bank of India in July 1966 and served in several important
positions which included assignments at the New York Branch of the Bank, Chief
Executive Officer of the Bank's Branch at Singapore, Chief General Manager (Product
Development, Marketing and Personal Banking) at the Corporate Office and Deputy
Managing Director and Group Executive (International Banking), before taking over as
Chairman, State Bank Group in November 1, 2000. Besides heading the State Bank of
India, Shri Ballabh was also the chairman of the Seven Associate Banks of the State Bank
of India, 4 banking subsidiaries of the Bank abroad and seven non-banking subsidiaries of
the Bank in India. On retirement from State Bank of India, Shri Ballabh was appointed by
the President of India as Vigilance Commissioner in the Central Vigilance Commission,
New Delhi for 3 years from November 2002 to October 2005. Shri Ballabh worked as
Chairman, Reserve Bank of India Services Board from 8th December 2005 to 23rd
October 2007. He is presently the Chairman, UTI Trustee Co. of UTI Mutual Fund. He
also serves as the Director on the Boards of Tata AIG Life Insurance Co. and Small
51
52. Industries Development Bank of India (SIDBI). He is also a Member of the Asia Pacific
Advisory Committee of Barclays Bank PLC, London since June 1, 2007.
Praveen P Kadle
Praveen P Kadle, the Managing Director of Tata Capital Limited, has been associated
with the Tata Group for over 18 years in various important capacities. For the first 5
years, he served as the Chief Financial Officer of Tata’s joint venture with IBM in India.
Thereafter, he joined Tata Motors Limited as Vice-President (Finance) and in the year
2001 he joined the Board of Tata Motors Limited as Executive Director – Finance and
Corporate Affairs.
52
53. SECURITIES
The securities and trading business is brought to you by Tata Securities Limited, a wholly
owned subsidiary of Tata Capital Limited. Tata Securities Limited is engaged in the
business of providing Broking and Distribution services to both Retail and Institutional
customers.
Tata Securities Limited distributes third-party investment products and offers stock
broking services in its capacity as a member of the Bombay Stock Exchange Limited
(BSE), the National Stock Exchange of India Limited (NSEIL) and Association of Mutual
Funds of India (AMFI). Tata Securities Limited is also a Depository Participant with the
Central Depository Services (India) Limited (CDSL) and National Securities Depository
Limited (NSDL).
Retail Broking
We offer a 3-in-1 account which brings to you a seamless platform for trading in Equities
and investing in Mutual Funds and IPOs at very attractive brokerage rates.
Institutional Broking
We provide a suite of products and services to Institutional customers supported with
comprehensive and incisive research on companies and their sectors.
53
55. ANALYSIS & INTERPRETATION
PREFACE
The analysis is done to know whether, Mutual fund, is it investor’s best choice.
The information is collected of different sectors which include FMCG Sector, , Pharma
Sector and Index sector.
The returns of selected Mutual funds and selected Equities are calculated for 3&6
months and 1year period. Equities closing price are also given for half year and annually.
The information collected is shown in graphical form to make it more simple and easy to
understand by the Reader. The information regarding all Mutual Funds and Equities is
given in the Table.
The Analysis is done by comparing the Particular Sector Mutual Funds with
Equities and also with Relative Sensex and Nifty, index of BSE and NSE. The average of
Particular Sector Mutual Funds and Equities is taken and returns are calculated. Let us
take for example, In FMCG Sector the Returns of ICICI Prudential FMCG Fund, Franklin
FMCG fund and Magnum FMCG Fund are added and then divided by 3 hence the
average is taken as returns of FMCG Mutual Funds in the same way Returns of HLL
Equity, Dabur Equity, Colgate Equity, Tata tea Equity and Britannia Equity are also
added and divided by 5 and the average is taken as the returns of FMCG sector Equities.
The Returns of Relative Sensex and Nifty is Calculated and then the Analysis is done to
know the position of Mutual Funds in the market in long term and short term period. The
period of 3 months and 6 months is taken as short term and period of 1 year is taken as
long term period. The comparison of aggregate Mutual Funds and Equities is shown in
Table.
55
56. FMCG – SECTOR MUTUAL FUNDS & EQUITIES
(TABLE: 4.1)
RETURNS OF FMCG SECTOR EQUITIES & MUTUAL FUNDS
NAME
Absolute returns %
3 MONTHS 6 MONTHS 1 YEAR
Franklin FMCG Fund 15.12 -9.9 55.20
Pru ICICI FMCG Fund 0.57 0.30 0.12
Magnum FMCG Fund 0.21 0.04 0.10
Hind Lever ltd Equity 0.84 0.95 0.84
Dabur equity -0.82 0.38 0.01
Colgate Equity 0.72 0.48 0.79
Britannia Equity 0.0019 0.08 0.0013
Tata tea Equity 0.014 0.05 0.06
RETURNS OF EQUITIES
(BAR DIAGRAM – 4.1)
RETURNS OF MUTUAL FUNDS & EQUITIES
RETURNS OF FMCG SECTOR
EQUITIES & MUTUAL FUNDS
-20
0
20
40
60
1 2 3
Franklin FMCG
Fund
Pru ICICI
FMCG Fund
Magnum
FMCG Fund
56
57. -20
-10
0
10
20
30
40
50
60
1 2 3
Franklin
FMCG Fund
Pru ICICI
FMCG Fund
Magnum
FMCG Fund
-1
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
0.8
1
1.2
Hind
Lever ltd
Equity
Dabur
equity
Colgate
Equity
Britannia
Equity
Tata tea
Equity
Series1
Series2
Series3
57
59. (TABLE: 4.1A)
FMCG MUTUAL FUNDS VS EQUITIES & RELATIVE INDEX
NAME
ABSOLUTE RETURNS IN %
3 MONTHS 6 MONTHS 1 YEAR
FMCG SECTOR
MUTUAL FUNDS
0.15 0.10 0.55
FMCG SECTOR
EQUITIES
0.023 0.019 0.017
RELATIVE TO
SENSEX
594.13 1476.18 1725.89
RELATIVE TO
NIFTY
6561.00 9965.46 9830.72
FMCG Mutual Funds includes Franklin FMCG Fund, Prudential ICICI FMCG Fund
and Magnum FMCG fund.
FMCG Equities includes Hindustan lever ltd, Dabur, Colgate, Tata Tea and Britannia
ABSOLUTE RETURNS OF MUTUAL FUNDS AND EQUITIES
(LINE DIAGRAM 4.1)
59
0
0.1
0.2
0.3
0.4
0.5
0.6
1 2 3
FMCG SECTOR
MUTUAL FUNDS
FMCG SECTOR
EQUITIES
60. ABSOLUTE RETURNS OF INDEX
0
2000
4000
6000
8000
10000
12000
1 2 3
RELATIVE TO
SENSEX
RELATIVE TO
NIFTY
ABSOLUTE RETURNS OF INDEX
0
2000
4000
6000
8000
10000
12000
1 2 3
RELATIVE TO
SENSEX
RELATIVE TO
NIFTY
60
61. (ANALYSIS)
As observed from the Table, we can say that ICICI Prudential FMCG Fund,
Franklin FMCG Fund and Magnum FMCG Fund Gives good Return. The Bar
diagram representation makes it very clear.
In FMCG Equities from Table and Bar Diagram we can see that Hindlever gives
maximum Returns then any other Equities. The next comes Colgate and TataTea
which gives almost the same Returns. Tata tea Equities shows good Returns only
in long term period Whereas Dabur gives Negative Returns in short term period..
The Returns of individual Mutual Fund of FMCG Sector in particular period is
summed up and then average is taken as the Returns of FMCG Mutual Funds. In
the same manner individual Equity is summed up and the average is taken as
FMCG Equities. These aggregated Mutual funds and Equities are now compared
in Table with the Nifty and Sensex, the Index of NSE and BSE.
FMCG Mutual funds, as observed from the Table and Line Diagram grows
rapidly. FMCG Equities show very good Returns in long term and short term
period i.e. in 3 & 6 months and 1 years period . But Dabur shows negative returns
in 3 months from the Table .
When comparison is made between Mutual Funds and Equities, Returns are not
similar in both short term and long term period as we can see clearly from the
Line Diagram .
As Sensex and Nifty grows in the Market, FMCG Mutual Funds shows upward
trend where as equities shows down ward. Both Sensex and Nifty is going at
different level having different Exchanges. We can see Mutual Funds , Equities ,
Nifty and Sensex all together in the line Diagram .
61
62. Overall Performance of Equities and Mutual Funds is not satisfactory, mutual
funds shows better yieldings compare to equities. Equities shows negative returns.
If investor don’t want to take risk then he must go for Mutual funds as we can
observe form the Table that in individual Equity sometimes returns are negative
for example in Dabur Equity, but in Mutual Funds we can see negative Returns
but compare to equities mutual funds are risk minimising.
PHARMA-SECTOR MUTUAL FUNDS & EQUITIES
(TABLE :4.4)
HIGH/LOW & RETURNS OF PHARMA SECTOR EQUITIES & MFS
NAME
ABSOLUTE RETURS %
3MONTHS 6MONTHS 1 YEAR
Franklin Pharma Fund 0.07 0.05 0.46
Magnum Pharma Fund 0.29 -0.74 -0.02
UTI Pharma & health fund 0.08 0.01 0.27
Dr Reddy’s Equity 0.083 0.072 0.062
Ranbaxy Equity 0.027 0.027 0.042
Orchid equity 0.013 -0.012 0.010
Cipla equity 0.025 0.029 0.26
Sun Pharma Equity 0.022 0.024 0.030
(BAR DIAGRAM)
RETURNS OF MUTUAL FUNDS
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
1 2 3
Franklin Pharma
Fund
Magnum Pharma
Fund
UTI Pharma &
health fund
62
63. (BAR DIAGRAM)
RETURNS OF MUTUAL FUNDS
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
1 2 3
Franklin
Pharma Fund
Magnum
Pharma Fund
UTI Pharma &
health fund
(BAR DIAGRAM 4.8)
RETURNS OF EQUITIES
-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
Dr Reddy’s Equity Ranbaxy Equity Orchid equity Cipla equity Sun Pharma Equity
Series1
Series2
Series3
63
64. -20
-10
0
10
20
30
40
50
60
Franklin FMCG
Fund
Pru ICICI
FMCG Fund
Magnum
FMCG Fund
Hind Lever ltd
Equity
Dabur equity Colgate Equity Britannia
Equity
Tata tea Equity
Series1
Series2
Series3
-0.8
-0.6
-0.4
-0.2
0
0.2
0.4
0.6
Franklin
Pharma Fund
Magnum
Pharma Fund
UTI Pharma &
health fund
Dr Reddy’s
Equity
Ranbaxy Equity Orchid equity Cipla equity Sun Pharma
Equity
Series1
Series2
Series3
64
65. (TABLE :4.4A)
PHARMA – SECTOR MUTUAL FUNDS VS EQUITIES & RELATIVE INDEX
NAME
ABSOLUTE RETURNS IN %
3 MONTHS 6 MONTHS 1 YEAR
PHARMA
MUTUAL FUNDS
0.44 0.80 0.75
PHARMA
EQUITIES
0.17 0.16 0.40
RELATIVE TO
SENSEX
594.13 1476.18 1725.89
RELATIVE TO
NIFTY
6561.00 9965.46 9830.72
Pharma Sector Mutual Funds include UTI Pharma & Healthcare Fund, Franklin
Pharma Fund, Magnum Pharma Fund.
Pharma Sector Equities includes Dr Reddy Labs, Ranbaxy, orchid and cipla Sun
Pharma.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1 2 3
PHARMA
MUTUAL FUNDS
PHARMA
EQUITIES
(LINE DIAGRAM 4.4)
65
67. ABSOLUTE RETURNS OF MUTUAL FUNDS, EQUITIES & INDEX
0
50
100
150
200
250
300
350
3 MTHS 6 MTHS 1 YR 3 YRS
PERIOD
ABSOLUTERETURNS
PHARMA MF
PHARMA EQUITIES
RELATIVE SENSEX
RELATIVE NIFTY
67
68. (ANALYSIS)
Pharma Sector fund, as, we can see clearly that all Mutual Funds performance in
long term period and short term period is very good.
From Table we can also see that Dr Reddy’s Equity, Sun Pharma Equity and
Ranbaxy & cipla equit also performs well. But we can also notice that Pharma
Sector Equity such as orchid gives negative Returns in the period of 6months . In
the same way equity also gives very poor Returns during the study period.
The Returns of individual Mutual Fund of Pharma-sector in particular period is
summed up and then average is taken as the Returns of Pharma Sector Mutual
Funds. In the same way individual Equity are summed up and average is taken as
Pharma Sector Equities. These aggregated Mutual funds and Equities are now
compared in Table with the Nifty and Sensex . Pharma Sector Mutual Funds
performs well in both short term and long term period as noticed form the Table.
But sbi pharma sector shows negetive returns in 6months and 1 year. equities
gives good Returns in short term but in short term Orchid Equity shows negative
returns in 6 months.
When Both Pharma Sector Mutual Funds and Equities are compared, Mutual
Funds perform better than Equities in long term period. In short term Equities
gives good result but in lone term the performance shows downward trend as we
can observe from the Line Diagram .
As relative Sensex and Nifty grows in the Market, Pharma Sector Mutual Funds
also shows upward trend but Equities does not show any upward trend in long
term period as we can clearly observe in the Line Diagram showing Comparison
between Mutual Funds, Equities, Sensex and Nifty.
In long and short Pharma Sector Mutual Funds performs better than Pharma
Sector Equities. It is advisable to invest in Pharma Sector Mutual Fund rather than
Equity, because we can notice from the Line Diagram that Equities does not show
any upward trend with the growth in Mutual Funds, Sensex, and Nifty as we have
seen from Table that Individual Pharma Equity gives negative Returns whereas
the case is never done with Mutual Funds.
68
70. • Even though mutual funds show in short term negative returns but it is better to
invest in mutual funds.
• in FMCG sector Franklin fmcg fund shows negative returns in 6 months.
• In pharma sector sbi mutual fund shows negative returns both in short & long
term.
• In fmcg sector in short term dabur gives negative returns in 3 months.
• In pharma sector orchid shows negative returns in 6 months.
70
72. I. TEXT BOOK
1. Security Analysis Portfolio Management
Donald Fisher
Ronald A Jordan
2. Mutual Fund In India
H.Sadhak
II. WEB SITES
www.mutualfundsindia.com
www.amfiindia.com
www.utimf.com
www.bseindia.com
III. MAGAINES
Business India
Business World
IV. NEWS PAPERS
Economic Times
Business Standard.
Homework Help
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72