The document discusses the concept of mutual funds in India, outlining how mutual funds pool money from investors and invest it in securities to achieve specific investment objectives. It provides an overview of the growth of the mutual fund industry in India and describes the key advantages of mutual funds like diversification of risk, professional fund management, and convenient administration. The document also examines the structure and working of mutual funds in India.

1. A
REPORT
ON
“MUTUAL FUND INDUSTRY-
ANALYSIS & RECENT TRENDS”
By:
Priyanka Agrawal
PICT-SITM
Pune
Kotak Mahindra Asset Management Company
Limited
A
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2. REPORT
ON
“MUTUAL FUND INDUSTRY-
ANALYSIS & RECENT TRENDS”
By:
Priyanka Agrawal
PICT-SITM
A report submitted in partial fulfillment of
the requirement of MBA Program
Submitted to:
Mr.Balaramchandran
Faculty Member
PICT-SITM, Pune
&
Mr. Rohit Kaushal
Relationship Manager
Kotak Mahindra Asset Management Company Limited
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3. ACKNOWLEDGEMENT
The success behind the completion of any good job is the support and the
joint team effort of a number of people. There are many persons, whose help
& cooperation, made this project successful.
My deepest sense of gratitude, profound respect and sincere thanks to
Mr. Balaramchandran (faculty member PICT-SITM Pune ) my project
guide, for his valuable assistance, keen interest and constant motivation at
each step of the project. It would not have been possible for me to reach this
stage without his support & guidance.
My special thanks to Mr. Rohit Kaushal (Relationship Manager- Kotak
Mahindra Asset Management Co. Ltd.), my company guide who has been
there with me throughout the entire project. He always had the answers to
my queries, be it regarding any concept related to mutual funds. His warmth
support, practical guidance and easy explanations not only regarding the
project matters but others too add to the success of my project. His
continuous interaction and support made it possible for the successful
completion of the project.
I would also like to thank my parents and my friends for all their time-to-
time assistance. Last but not the least I would like to thank God because
without his divine grace nothing would have been possible.
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4. TABLE OF CONTENTS
Page No.
Acknowledgements……………………………………………………... 3
List of Illustrations……………………………………………………... 6
Abstract………………………………………………………………… 7
1. Introduction
a. Purpose…………………………………………………… 8
b. Objective………………………………………………...... 8
c. Proposed Methodology………………………………....... 9
d. Limitations of the Project………………………………… 9
2. About Mutual Funds
a. Concept of Mutual Funds………………………………... 10
b. Advantages of Mutual Funds…………………………..... 13
c. Disadvantages of Mutual Funds…………………………. 15
3. Mutual Fund Industry
a. Phases of Growth………………………………………… 16
b. Major Mutual Fund Companies………………………......18
c. Players in the Industry…………………………………… 23
d. Types of Mutual Fund…………………………………… 24
e. Advertisement of Mutual Funds……………………….... 29
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5. 4. Distribution Model
a. Multi-Channel Distribution Model……………………… 31
b. Distribution Channels………………………………….... 32
c. Challenges in Distribution……………………………….. 33
d. Curbing Unethical Practices……………………………... 34
e. Spreading Mutual Fund Culture………………………… 35
5. Terms associated with Mutual Funds
a. Offer Document………………………………………….. 36
b. Net Asset Value………………………………………….. 39
c. Pricing Of Units………………………………………….. 40
d. Investment Plans…………………………………………. 42
e. Tax Provisions…………………………………………… 44
f. Restriction on Investment……………………………….. 46
g. Asset Allocation Principles……………………………… 48
6. Measuring & Evaluating Mutual Fund
Performance
a. Measurement of Mutual Fund Performance……………... 56
b. Recent Trends in Mutual Fund Industry…………………..63
i) Impact on Mutual Funds of the Union
Budget………… 67
c. Fund Analysis
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6. i) Equity Based Fund………………………………. .73
ii) Debt Based Fund………………………………… 76
iii) ELSS Tax Saver………………………………… 79
iv) Monthly Income Plans………………………….. 82
v) Cash Funds………………………………………. 85
7. Conclusion……………………………………………………….. 88
8. Recommendations……………………………………………….. 89
9. Appendices……………………………………………………….. 91
10. Reference….……………………………………………………... 116
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7. TABLE OF ILLUSTRATIONS
1. Working of Mutual Funds……………………………………… 12
2. Structure of Mutual Funds……………………………………... 24
3. Mutual Fund Classification…………………………………….. 24
4. Multi-Channel Distribution Model……………………………… 31
5. Investor Earning Opportunities…..…………………………….. 37
6. Expenses charged by AMC………………………………………. 41
7. Investor in Different Phases…………………………………….. 49
8. Portfolio Model (By Jacobs)…………………………………….. 50
9. Wealth Cycle Classification……………………………………… 51
10.Comparison of Investment Products
a. By Nature of Investment………………………………….. 52
b. By Performance……………………………………………. 53
11.Risk-Return Grid………………………………………………… 54
12. Bank v/s Mutual Fund…………………………………………… 55
13. Diagrams showing
a. Beta……………………………………………………….. 57
b. R Squared…………………………………………………. 58
c. Treynor Ratio…………………………………………….. 59
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8. d. Sharpe Ratio……………………………………………… 60
14. Fund Analysis (On the basis of NAV)…………………………. 70
15. Different Funds which are compared…………………………. 71
16. Calculation showing Mutual Fund Performance
a. Equity Fund Scheme……………………………………… 73
b. Debt Fund Scheme……………………………………….. 76
c. ELSS Tax Saver Scheme………………………………… 79
d. Monthly Income Plans…………………………………… 82
e. Cash Funds……………………………………………….. 85
s
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9. ABSTRACT
If size is the measure of dominance, then the Indian mutual fund industry can
now boast on that. With the total Asset Under Management (AUM)
increasing from Rs.1,01,565 Crores in Jan 2000 to Rs.5,67,601.98 Crores
by April 2008, according to the Association of Mutual Funds in India
(AMFI), the industry’s growth has been nothing but exceptional. It has
indeed come a long way from being a single player, single scheme (US-64)
industry to having 34 players and more than 480 schemes.
What has driven the growth? Numbers of factors have contributed to the
surge in the industry’s growth. First and foremost, a buoyant domestic
economy coupled with a booming stock market has been one of the major
drivers of the growth in recent times particularly in the last five-year.
Another significant factor facilitating this growth has been a conducive
regulatory regime, thanks to increased effort by SEBI to improve market
surveillance and protect investor’s interests. Further, incentives, such as
making dividend tax free in the hands of investors have also provided strong
impetus to the growth.
This research covers various aspect of mutual funds industry in India.
Starting with basic concept of mutual fund and its advantages it would give
detail about the growth of mutual fund industry in India, its present scenario.
It also throws some light on major mutual fund companies in India, the
different types of mutual funds on the basis of structure, investment, load and
schemes and also it covers the different phases of growth of mutual fund
industry. Then it covers the calculation of NAV, the various investment
plans, factor’s that help in calculating the mutual fund performance.
In the end mutual fund analysis have been done on the basis of Standard
Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe Ratio on various
schemes like Equity based Funds, Debt based Funds, Monthly Income Plans,
Cash Funds & ELSS Tax Saver Schemes.
INTRODUCTION
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10. Purpose of the project
This project provides better understanding to the reader by giving insights on
Indian Mutual Fund Industry through comparative analysis of different Asset
Management Companies and their schemes in India. To do a comparative
analysis of five major Mutual Funds of India namely
 Kotak Mutual Fund
 HDFC Mutual Fund
 UTI Mutual Fund
 Reliance Mutual Fund
 Prudential ICICI Mutual Fund
Objective of the Project
For every problem there is a research. As all the researches are based
on some and my study is also based upon some objective and these
are as follows:
 To give a holistic and a comprehensive view of mutual fund industry
in India
 Comparative study of returns given by various AMC Mutual funds on
the basis of 6 parameters like Standard Deviation, Beta, Alpha, R
Squared, Treynor Ratio & Sharpe Ratio.
 To understand the risk profile of the customer
 To know the awareness of investors about schemes provided by
various AMCs
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11. Proposed Methodology
In broader perspective the whole project can be divided into three sections.
Under SECTION I, on the basis of past and present the industry has been
analyzed and based on which future outlook has been projected. This section
covers following things:
i. Concept of Mutual Funds and its Advantages.
ii. Types of Mutual Funds.
iii. Size of Industry
iv. Growth trends
SECTION II focuses on the distribution Channel used by different AMC in
order to sell their schemes. This section also tries to cover
i. Distribution models.
ii. Challenges in distribution.
iii. Curbing Unethical Practices
iv. Spreading Mutual Fund Culture
Section III focuses on the different tools used to measure & evaluate the
performance of different Mutual Funds. This section covers the following
things:
i. The performance of the Mutual Funds is evaluated on the basis of
Standard Deviation, Beta, Alpha, R Squared, Treynor Ratio & Sharpe
Ratio.
ii. Recent Trends in the Mutual Fund industry
iii. Impact on Mutual Funds of the Union Budget.
Finally on the basis of findings and observation suitable recommendations
will be given.
Limitations
 The analysis is completely based on the past performance and not
confirms the future performance.
 The research is based on secondary data collected from other sources
like magazines, newspapers and websites etc.
 Reliability of the sources could also be limitation for the project.
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12. ABOUT MUTUAL FUNDS
CONCEPT
Individuals or institutions when have surplus
money, i.e. savings, would like to invest with the
common and logical motive of growing money by
getting returns on the investments. There are
various avenues to park money towards fulfillment
of your objective of return on investment.
One can invest money either where you can get
assured returns & hence the risk is low but returns
also are low compared to the high risk
investments.
The other way is through investing in shares i.e.
equity market. Generally the returns on equity
investments are higher than debt investment but
risk also is higher. To get good returns one really
needs to understand the economy and
performance of companies where you are
investing money. For a common man it may be
cumbersome while managing own profession, job
or business.
Hence the concept of mutual fund has evolved to
manage the funds i.e. on behalf of the investor;
fund managers will be taking decisions to
maximize the investor’s returns.
The concept of mutual funds in India dates back to the year 1963. The era
between 1963 and 1987 marked the existence of only one mutual fund
company in India with Rs. 67bn assets under management (AUM), by the
end of its monopoly era, the Unit Trust of India (UTI). By the end of the 80s
decade, few other mutual fund companies in India took their position in
mutual fund market.
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13. The new entries of mutual fund companies in India were SBI Mutual Fund,
Canbank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank
Mutual Fund, Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund
industry. By the end of 1993, the total AUM of the industry was Rs. 470.04
bn. The private sector funds started penetrating the fund families. In the same
year the first Mutual Fund Regulations came into existence with re-
registering all mutual funds except UTI. The regulations were further given a
revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India
which has now merged with Franklin Templeton. Just after ten years with
private sector player penetration, the total assets rose up to Rs. 1218.05 bn.
Today there are 34 mutual fund companies in India.
A Mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective.
The ownership of the fund is thus joint or “mutual”; the fund belongs to all
investors. A single investor’s ownership of the fund is in the same proportion
as the amount of the contribution made by him bears to the total amount of
the fund.
A mutual fund uses the money collected from investors to buy those assets,
which are specifically permitted by its stated investment objective. Thus, an
equity fund would buy mainly equity assets-ordinary shares, preference
shares, warrants, etc. a bond fund would mainly buy debt instruments, such
as debentures, bonds, or government securities. It is these assets, which are
owned by the investors in the proportion of their investments.
When an investor subscribes to a mutual fund, he or she buys a part of the
assets or the pool of funds that are outstanding at that time. It is no different
from buying “shares” of a joint stock company, in which case the purchase
makes the investor a part owner of the company and its assets. In fact, in the
USA, a mutual fund is constituted as an investment company and an investor
“buys in to the fund” meaning he buys the shares of the fund. In India, a
mutual fund id constituted as a trust an investor subscribes to the “units”
issued by the fund, which is where the term Unit Trust comes from. . Mutual
funds issues units to the investors in accordance with quantum of money
invested by them. Investors of Mutual funds are known as Unit Holders.
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14. Investments in securities are spread across a wide cross-section of industries
and sectors and thus the risk is reduced. Diversification reduces the risk
because all stocks may not move in the same direction in the same proportion
at the same time. The profits and losses are shared by the investors in
proportion to their investments. Mutual funds normally come out with a
number of schemes with different investments objectives which are launched
from time to time. A mutual fund is required to be registered with Securities
and Exchange Board of India which regulates securities markets before it can
collect funds from public.
However, whether the investor gets funds shares or units is only a matter of
legal distinction. In any case, a mutual fund shareholder or unit holder is a
part owner of the fund’s assets. The term unit-holder includes the mutual
fund account-holder or closed-end fund shareholder. A unit holder in Unit
Trust of India US-64 scheme is the same as a UTI Master shareholder or an
investor in an alliance
Each share or unit that an investor holds needs to be assigned a value. Since
the units held by investor evidence the ownership of the assets, the value of
the total assets of the fund when divided by the total number of units issued
by the mutual fund gives us the value of one unit. This is generally called the
Net Asset Value (NAV) of one unit or one share. The value of an investor’s
part ownership is the determined by the NAV of the number of units held.
Example: If the value of a fund’s assets stands at Rs 1000 and it has 10
investors who have bought 10 units each, the total numbers of units issued
are 100, and the value of one unit is Rs 10 (1000/100). If a single investor in
fact owns 3 units, the value of his ownership of the fund will be Rs 30
(1000/100*3). Note that the value of the fund’s investments will keep
fluctuating with the market price movements, causing the NAV also
fluctuate. For example, if the value of our funds assets increased from Rs
1000 to Rs 1200, the value of our investors holding of 3 units (1200/100*3)
Rs 36. The investment value can go up and down, depending on the market
value of the fund’s assets.
The flow chart below describes broadly the working of a mutual fund:
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15. SOURCE: AMFI
Advantages of Mutual Funds
If mutual funds are emerging as the favorite investment vehicle, it is because
of the many advantages they have over other forma and avenues of investing,
particularly for the investor who has limited resources available in terms of
capital and ability to carry out detailed research and market monitoring. The
following are the major benefits offered by mutual funds to all investors:
i) Portfolio Diversification
Mutual Funds spread the investment across different securities (stocks,
bonds, money market instruments, real estate, fixed deposits etc.) by
investing in a number of companies across a broad cross-section of industries
and sectors (auto, textile, information technology etc.). This kind of a
diversification may add to the stability of your returns and reduces the risk
with far less money than you can do on your own. For example during one
period of time equities might underperform but bonds and money market
instruments might do well enough to offset the effect of a slump in the equity
markets.
ii) Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with
brokers and companies.
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16. iii) Professional Management
Qualified investment professionals who seek to maximize returns and
minimize risk monitor investor's money. The investment professional has
experience in making investment decisions. It is the Fund Manager's job to
(a) find the best securities for the fund, given the fund's stated investment
objectives; and (b) keep track of investments and changes in market
conditions and adjust the mix of the portfolio, as and when required.
iv) Liquidity
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units
can be sold on a stock exchange at the prevailing market price or the investor
can avail of the facility of direct repurchase at NAV related prices by the
Mutual Fund.
v) Affordability
Investors individually may lack sufficient funds to invest in high-grade
stocks. A mutual fund because of its large corpus allows even a small
investor to take the benefit of its investment strategy.
vi) Variety
Mutual funds offer a tremendous variety of schemes. This variety is
beneficial in two ways: first, it offers different types of schemes to investors
with different needs and risk appetites; secondly, it offers an opportunity to
an investor to invest sums across a variety of schemes, both debt and equity.
vii) Tax Benefits
In case of Individuals and Hindu Undivided Families a deduction up to Rs.
9,000 from the Total Income will be admissible in respect of income from
investments specified in Section 80L, including income from Units of the
Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-
Tax.
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17. viii) Transparency
Open-ended mutual funds disclose their Net Asset Value (NAV) daily and
the entire portfolio monthly. This level of transparency, where the investor
himself sees the underlying assets bought with his money, is unmatched by
any other financial instrument.
Disadvantages of Mutual Funds
While the benefits of investing through mutual funds far outweigh the
disadvantages, an investor and his advisor will do well to be aware of few
shortcomings of using the mutual fund as an investment vehicle.
i) No Tailor-made-Portfolios
Investing through funds means, the investor delegates the decision of
investing through which securities to fund manager. The very high-net-worth
individuals or large corporates may find this as a constraint in achieving their
objectives. However this constraint can be overcome to some extent by
offering families of schemes to investor, within the same fund.
ii) No control over costs
Investor pays the investment management fees as long as he remains within
the fund. Fees are usually payable as a percentage of the value of his
investments, whether the fund value is rising or declining. The investor also
pays the fund distribution cost, which he would not incur in direct
investment.
iii) Managing a Portfolio of Funds
Availability of a large number of options from mutual funds can actually
mean too much choice for the investor. He may again need advice on how to
select a fund to achieve his objectives.
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18. MUTUAL FUND INDUSTRY
The Phases of Growth
The Indian mutual industry has come a long way since the inception of UTI
in 1963.According to AMFI, the evolution of the industry can be classified
broadly into four phases, which mark its transition from a period when UTI
ruled the roost to a period of competition and increased awareness among
investors.
i) First Phase (1964-87) – UTI all the way
This phase begin with the inception of the Unit Trust of India (UTI). It
remained the only mutual fund player in the country till 1987. UTI started its
operation in July 1964 “with a view to encouraging savings and investments
and participation in income, profits and gains accruing to the corporation
from acquisition, holding, management and disposal of securities.” In short,
it was set up by Indian government with a view to augment small savings in
the country and to channelize these savings to the capital markets. UTI
witnessed a slow and steady growth over the 1970s and the 1980s and by the
end of 1988 it had an AUM of Rs.67bn. It still continues to be the largest
player in the domestic mutual fund industry with an AUM of Rs. 23,500 cr
as on March 31, 2008.
ii) Second Phase (1987-1993) – Enter Public sector Mutual Funds
Public sector mutual funds set up by public sector banks, Life insurance
Corporation of India (LIC) and the General insurance Corporation of India
(GIC) entered in the market in 1987. The first non mutual fund was the SBI
Mutual Fund established in June 1987, followed by Canbank Mutual Fund in
December 1987, Punjab National Bank Mutual Fund in August 1989, India
Bank Mutual Fund in Nov 1989, Bank of India Mutual Fund in June 1990
and Bank of Baroda Mutual Fund in Oct 1992. LIC set up its mutual Fund in
Jun e 1989 while GIC established its Mutual Fund in Dec 1990. During this
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19. period, the total asset of the industry grew to about Rs. 610bn with the total
number of schemes increasing to about 167 by the end of 1994.
iii) Third Phase of (1993-2003) – Private players enter the scene
This phase marked the entry of private sector funds. The phase also signaled
the intensification of competition. Both domestic and foreign players entered
the market, offering a wide variety of schemes to investors. Kothari Pioneer
Mutual Fund was the first private sector fund to establish in association with
the foreign fund. Private players like Morgan Stanley, Jardine Fleming, JP
Morgan, George Soros and Capital International entering the market. The
total AUM by the end of Jan 31, 2003 increased to $ 34,927mn from
$23,260mn in March 1995 with a CAGR of 6.92%.
iv) Fourth Phase (since Feb 2003)– UTI’s restructuring and beyond
In Feb 2003 UTI ACT 1963 was replaced and UTI was bifurcated into two
separate entities: Specified undertaking of Unit Trust of India, which is still
under the Govt. of India and the UTI Mutual Fund Ltd. This was done in the
wake of the sever payment crisis that UTI suffered on account of its assured
return schemes of US-64 that finally resulted in an adverse impact on the
India capital markets. US-64 was the first scheme launched by UTI with a
significant equity exposure and the returns of which were not linked to the
market. However, the industry has overcome that shock and is hoped to have
learnt its lesson.
Major Mutual Fund Companies in India:
i) Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of
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20. Kotak Mahindra Bank Limited (KMBL). It is presently having more than
1,99,800 investors in its various schemes. KMAMC started its operations in
December 1998. Kotak Mahindra Mutual Fund offers schemes catering to
investors with varying risk - return profiles. It was the first company to
launch dedicated gilt scheme investing only in government securities.
ii) HDFC Mutual Fund
HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an
Asset Management Company for the HDFC Mutual Fund by SEBI vide its
letter dated June 30, 2000. HDFC Mutual Fund was setup with two sponsors
namely Housing Development Finance Corporation Limited and Standard
Life Investments Limited.
iii) Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14,
2003, manages the UTI Mutual Fund with the support of UTI Trustee
Company Private Limited. UTI Asset Management Company presently
manages a corpus of over Rs.20000 Crores. The sponsors of UTI Mutual
Fund are Bank of Baroda (BOB), Punjab National Bank (PNB), State Bank
of India (SBI), and Life Insurance Corporation of India (LIC). The schemes
of UTI Mutual Fund are Liquid Funds, Income Funds, Asset Management
Funds, Index Funds, Equity Funds and Balance Funds.
iv) Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of America,
one of the largest life insurance companies in the US of A. Prudential ICICI
Mutual Fund was setup on 13th of October, 1993 with two sponsors,
Prudential Plc. and ICICI Ltd. The Trustee Company formed is Prudential
ICICI Trust Ltd. and the AMC is Prudential ICICI Asset Management
Company Limited incorporated on 22nd of June, 1993.
v) Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts
Act, 1882. The sponsor of RMF is Reliance Capital Limited and Reliance
Capital Trustee Co. Limited is the Trustee. It was registered on June 30,
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21. 1995 as Reliance Capital Mutual Fund which was changed on March 11,
2004. Reliance Mutual Fund was formed for launching of various schemes
under which units are issued to the Public with a view to contribute to the
capital market and to provide investors the opportunities to make
investments in diversified securities.
vi) ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO
Trustee (India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO
Asset Management (India) Ltd. was incorporated on November 4, 2003.
Deutsche Bank AG is the custodian of ABN AMRO Mutual Fund.
vii) Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and
Sun Life Financial. Sun Life Financial is a global organization evolved in
1871 and is being represented in Canada, the US, the Philippines, Japan,
Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund
follows a conservative long-term approach to investment. Recently it crossed
AUM of Rs. 10,000 crores.
viii) Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30,
1992 under the sponsorship of Bank of Baroda. BOB Asset Management
Company Limited is the AMC of BOB Mutual Fund and was incorporated
on November 5, 1992. Deutsche Bank AG is the custodian.
ix) HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and
Capital Markets (India) Private Limited as the sponsor.
x) ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same
named Trustee Company. It is a joint venture of Vysya & ING. The AMC,
ING Investment Management Pvt. Ltd. was incorporated on April 6, 1998.
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22. xi) Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company Private
Limited incorporated on August 31, 1995 works as the AMC of Sahara
Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.
xii) State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to
launch offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr.
approximately. Today it is the largest Bank sponsored Mutual Fund in India.
They have already launched 35 Schemes out of which 15 have already
yielded handsome returns to investors. State Bank of India Mutual Fund has
more than Rs. 5,500 Crores as AUM. Now it has an investor base of over 8
Lakhs spread over 18 schemes.
xiii) Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The
sponsors for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment
Corporation Ltd. The investment manager is Tata Asset Management
Limited and Tata Trustee Company Pvt. Ltd. Tata Asset Management
Limited's is one of the fastest in the country with more than Rs. 7,703 Crores
(on April 30, 2005).
xiv) Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by
Standard Chartered Bank. The Trustee is Standard Chartered Trustee
Company Pvt. Ltd. Standard Chartered Asset Management Company Pvt.
Ltd. is the AMC which was incorporated with SEBI on December 20, 1999.
xv) Franklin Templeton India Mutual Fund
The group, Franklin Templeton Investments is a California (USA) based
company with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is
one of the largest financial services groups in the world. Investors can buy or
sell the Mutual Fund through their financial advisor or through mail or
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23. through their website. They have Open end Diversified Equity schemes,
Open end Sector Equity schemes, Open end Hybrid schemes, Open end Tax
Saving schemes, Open end Income and Liquid schemes, Closed end Income
schemes and Open end Fund of Funds schemes to offer.
xvi) Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in
the market in securities, investment management and credit services. Morgan
Stanley Investment Management (MISM) was established in the year 1975.
It provides customized asset management services and products to
governments, corporations, pension funds and non-profit organizations. Its
services are also extended to high net worth individuals and retail investors.
In India it is known as Morgan Stanley Investment Management Private
Limited (MSIM India) and its AMC is Morgan Stanley Mutual Fund
(MSMF).
xvii) Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance
Limited as its sponsor. The Trustee Company is Escorts Investment Trust
Limited. Its AMC was incorporated on December 1, 1995 with the name
Escorts Asset Management Limited.
xviii) Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with
Alliance Capital Management Corp. of Delaware (USA) as sponsor. The
Trustee is ACAM Trust Company Pvt. Ltd. and AMC, the Alliance Capital
Asset Management India Private Ltd. with the corporate office in Mumbai.
xix) Chola Mutual Fund
Chola Mutual Fund under the sponsorship of Cholamandalam Investment &
Finance Company Ltd. was setup on January 3, 1997. Cholamandalam
Trustee Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC
Limited.
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24. xx) LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC
Mutual Fund was constituted as a Trust in accordance with the provisions of
the Indian Trust Act, 1882. . The Company started its business on 29th April
1994. The Trustees of LIC Mutual Fund have appointed Jeevan Bima
Sahayog Asset Management Company Ltd as the Investment Managers for
LIC Mutual Fund.
xxi) GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India
(GIC), a Government of India undertaking and the four Public Sector
General Insurance Companies, viz. National Insurance Co. Ltd (NIC), The
New India Assurance Co. Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC)
and United India Insurance Co. Ltd. (UII) and is constituted as a Trust in
accordance with the provisions of the Indian Trusts Act, 1882.
The Players in the Mutual Fund Industry
The players in the Indian Mutual Funds Industry are similar to some extent to
the players in other financial services industry. The players are as follows:
SEBI
The Securities Exchange Board of India (SEBI) is the regulatory authority
for all the mutual funds sponsored by the public/private sector banks,
financial institutions, private sector companies, non- banking finance
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25. companies and foreign institutional investors. SEBI has laid down the rules
and regulations regarding the obligations of the entities involves in a mutual
fund, its establishment and launch of different schemes, investments and
valuation, financial reporting, conduct and operations of mutual funds.
Asset Management Company (AMC)
Its role is highly significant in the mutual funds operation. They are the fund
managers i.e. they invest the investors money in various securities after
proper research and analysis. They also look after the administrative
functions of a mutual fund for which they charge management fee.
Intermediaries
They act as a link between the mutual fund companies and the investors. The
intermediaries include brokers, sub- brokers, and investment houses. The
other intermediary- registrar and transfer agents perform activities, which are
associated with maintaining records concerning units already issued or to be
issued by the company. The registrar also performs other activities such as
dividend payment, investor grievance, etc.
Investors
Investors subscribe to the units issued by the mutual funds in the hope of
getting a return commensurate with the risk involved. SEBI protects the
interest of the investors through the guidelines laid down under SEBI
(Disclosure and Investor Protection) Guidelines, 2000. The mutual fund
investor mainly includes individual, HUF, corporate and trusts.
Types of Mutual Funds
There are many types of mutual funds available to the investor. However,
these different types of funds can be grouped into certain classifications for
better understanding.
Structure of a Mutual Fund
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26. SOURCE: http://amfiindia.com
Mutual Fund Classification
SOURCE: http://amfiindia.com
 By Structure
i) Open-ended Funds
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy and
sell units at Net Asset Value (NAV) related prices. Hence, the unit capital of
the schemes keeps changing each day. Such schemes thus offer very high
liquidity to investors and are becoming increasingly popular in India. Please
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27. note that an open-ended fund is NOT obliged to keep selling/issuing new
units at all times, and may stop issuing further subscription to new investors.
On the other hand, an open-ended fund rarely denies to its investor the
facility to redeem existing units.
ii) Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally ranging
from 3 to 15 years. The fund is open for subscription only during a specified
period. Investors can invest in the scheme at the time of the initial public
issue and thereafter they can buy or sell the units of the scheme on the stock
exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to
the Mutual Fund through periodic repurchase at NAV related prices. SEBI
Regulations stipulate that at least one of the two exit routes is provided to the
investor.
Closed-ended schemes are usually more illiquid as compared to open-ended
schemes and hence trade at a discount to the NAV. This discount tends
towards the NAV closer to the maturity date of the scheme.
iii) Interval Funds
Interval funds combine the features of open-ended and close-ended schemes.
They may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals at NAV based prices.
 By Investment Objective
i) Growth Funds
The aim of growth funds is to provide capital appreciation over the medium
to long- term. Such schemes normally invest a majority of their corpus in
equities. It has been proven that returns from stocks, have outperformed most
other kind of investments held over the long term. Growth schemes are ideal
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28. for investors having a long-term outlook seeking growth over a period of
time.
ii) Income Funds
The aim of income funds is to provide regular and steady income to
investors. Such schemes generally invest in fixed income securities such as
bonds, corporate debentures and Government securities. Income Funds are
ideal for capital stability and regular income.
iii) Balanced Funds
The aim of balanced funds is to provide both growth and regular income.
Such schemes periodically distribute a part of their earning and invest both in
equities and fixed income securities in the proportion indicated in their offer
documents. In a rising stock market, the NAV of these schemes may not
normally keep pace, or fall equally when the market falls. These are ideal for
investors looking for a combination of income and moderate growth.
iv) Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer short-
term instruments such as treasury bills, certificates of deposit, commercial
paper and inter-bank call money. Returns on these schemes may fluctuate
depending upon the interest rates prevailing in the market. These are ideal for
Corporate and individual investors as a means to park their surplus funds for
short periods.
v) Gilt Fund
These funds invest exclusively in government securities. Government
securities have no default risk. NAVs of these schemes also fluctuate due to
change in interest rates and economic factors as is the case with income or
debt oriented schemes.
vi) Index Funds
Index Funds replicate the portfolio of a particular index such as the BSE
sensitive index, S&P NSE 50 index(Nifty).These schemes invest in the
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29. securities in the same weight age comprising of an index. NAV’s of such
schemes would rise or fall in accordance with the rise or fall in the index,
though not exactly by the same percentage due to some factors known as
“Tracking Error” in technical terms. Necessary disclosure in this regard is
made in the offer document of the mutual fund scheme. There are also
exchange traded index funds launched by the mutual funds which are traded
on the stock exchanges.
 On the basis of Load
i) Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable.
Typically entry and exit loads range from 1% to 2%. It could be worth
paying the load, if the fund has a good performance history.
ii) No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit.
That is, no commission is payable on purchase or sale of units in the fund.
The advantage of a no load fund is that the entire corpus is put to work.
 Other Schemes
i) Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of
the Indian Income Tax laws as the Government offers tax incentives for
investment in specified avenues. Investments made in Equity Linked Savings
Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of
the Income Tax Act, 1961. The Act also provides opportunities to investors
to save capital gains u/s 54EA and 54EB by investing in Mutual Funds,
provided the capital asset has been sold prior to April 1, 2000 and the amount
is invested before September 30, 2000.
ii) Industry Specific Schemes
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30. Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.
iii) Sectoral Schemes
Sectoral Funds are those, which invest exclusively in a specified industry or
a group of industries or various segments such as 'A' Group shares or initial
public offerings. In these funds or schemes the investor invests in the
securities of only those sectors or industries which are specified in the offer
documents. E.g. Pharmaceuticals, software, Fast Moving Consumers goods
(FMCG), petroleum stocks, etc. the return on these funds is dependent on the
performance of the respective sector/industries. While these funds may give
higher returns, they are more risky compared to the diversified funds.
Investors need to keep a watch on the performance of these sectors and must
exit at an appropriate time. They may seek an advice of an expert.
Advertisements of Mutual Funds
 Advertisements through Hoardings/Posters
It is essential for the investors to read the Offer Documents & Risk
Factors before investing in the mutual funds scheme to take well
informed investment decisions. Considering that the investors get very
little time to read the advertisements through hoardings/posters, etc.
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31. while passing by, it is clarified that such advertisements may carry
only the following statement apart from copy of advertisement:
“Mutual Fund investments are subject to market risks, read the
offer document carefully before investing”
The above statement shall be displayed in black letters of at least 8
inches height or covering 10% of the display area on white
blackboard. The compliance officers shall ensure that he statement
appearing in such advertisements are in legible font.
 Advertisements through Audio-Visual Media
Advertisements through audio-visual media like television, a statement
“Mutual Fund investments are subject to market risks, read the
offer document carefully before investing” shall be displayed on the
screen for at least 2 seconds, in a clearly legible font-size covering at
least 80% of the total screen space and accompanied by a voice-over
reiteration. The remaining 20% space can be used for the name of the
mutual fund or logo or name of scheme, etc.
 Performance Advertisements
• Disclosure of Benchmarks in Advertisements: All performance
advertisements disclosing return statistics shall mention the
returns on the benchmark indices, during the same time periods.
• Performance of Money Market Schemes: The investors in
cash/liquid/money market schemes have short investment
horizon therefore the mutual funds while advertising simple
annualized returns of such schemes based on a period of 30 days
can also advertise simple annualize returns based on 15 days
period.
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32. • Impact of Distribution Taxes: While advertising returns by
assuming reinvestment of dividends, if distribution taxes are
excluded while calculating the returns, this should also be
disclosed.
• Pay-out of Dividends: While advertising pay-out dividends, it
shall be disclosed that after the payment of dividend, the NAV
will fall to the extent of the payout and distribution taxes (if
applicable), in the main body of the advertisement.
 Fund of Fund’s Advertisement
In case of Fund of Fund’s scheme, the mutual funds shall disclose in
the offer document as well as in the advertisements that the investors
are bearing the recurring expenses of the scheme in addition to the
expenses of other schemes in which Fund of Fund’s scheme makes
investment.
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33. Distribution Model
AMC
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34. Direct Sales Brokers Banks Tied Agency Internet
Institutional Brokers
IFAs
Large HNW Retail
Corporate
Corporate Customer Customer
Customer Segments
Multi - Channel Distribution
Distribution Channels
In highly competitive environment, product innovation or development has
become a necessity for mutual fund players to stay ahead. Increasing
commoditization and growing needs of the customers are forcing players to
shift to solution based models from production based ones. In either model,
the role of distribution channel remains critical as it helps stave off
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35. competition by maintaining relationships, providing advisory services and
customizing need-based solution
Relationship plays a vital role while selling mutual fund products. An agent
is essential channel between investors and mutual fund products. However it
is difficult for AMCs to manage and monitor large agent force. So they take
shelter in third-party distribution AMCs like KARVY, BAJAJ Capital, and
Integrated Enterprises etc. These AMCs in turn, appoint their agents to sell
the MF to AMCs products. Agents advise the customer on the kind of
product that caters to the needs of the client. To unload their work, the
companies bear a huge market expense in the form of higher commission to
lure investors.
To control increasing operational costs, AMCs are opting for the service s of
large distributors to sell their products by leveraging their value chain, which
comprises of a brokers, sub brokers and agents. However mutual fund
players have to bear splurging marketing expenses to push their product
against others. In addition mutual fund AMCs are also using banks and Non
–Banking Financial AMCs (NBFC) as distribution channels to leverage their
reach and huge client base. UTI is distributing its offerings through selected
branches of Indian Bank, Corporation Bank, Bank of India an Allahabad
Bank, besides, they are also appointing sales personnel to meet investors,
educate them and sell their products.
The contribution of direct marketing to the total sales is miniscule, but the
cost burden is huge. The post office is also used as a channel of Distribution
by mutual funds AMCs, given the fact that the post office has the largest
network then many other institution or bank in the country. As far as retail
penetration is concerned, the post office plays a vital role because its offices
are distributed through the country. Mutual fund industry is also using the
internet to distribute their products because of the cost advantages and
increased communication. However, the fact is that internet has its limits in
providing customized advice to individuals; restrict its use on large scale.
Challenges in Distribution
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36.  Lack of awareness
 Risk aversion
 Extensive availability of the central govt. assured return
 Delay (in Liquidity)
 Tardy inter-city payment system
 Transaction cost of establishing contact centers
It has been a big challenge for the Mutual Fund Industry. As most of the
investors are still not aware how it functions. They sometime feel that it is a
costly affair. Educating investors about the advantages of investing in mutual
funds compared to risk-free savings instrument is a big task for the industry.
According to the Securities Market Infrastructure- Leveraging Expert
(SMILE), the transaction cost of establishing contact centers, delay in fund
transfer and tardy inter-city payment system are the major impediments. So
enhancing the reach through the existing distribution model will require
more investments.
As of now, mutual fund investments are confined to the metros, tier 1 and 2
cities (about 50 cities). A major reason for this is high cost of developing
retail infrastructure. So, scaling up the operation by increasing investment in
other cities doesn’t seem feasible.
There is also a regulatory entanglement in fund realization. Allotment of
units Net Asset Value (NAVs) is done before realization of funds, except in
liquid and money market schemes. Such delay is quite pervasive in smaller
towns, where it can be 3-5 days or more. Such hassle could prevent investors
from investing in mutual funds. However, these problems are being resolved
with appointment of registrars to meet the time-lines of recording the
transactions. In addition, technological advancements of remittance
instruments such as Electronic clearing Services (ECS), Electronic Funds
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37. Transfer (FT) and Real- Time Gross settlement System (RTGS), is a making
the process fast and reducing delay in fund transfer across cities.
The extensive availability of the central govt. assured return on small
products are restricting the competition as well as penetration of wide
variety of mutual fund products, particularly in the smaller towns where
investors are not willing to take risk. This poses a great challenge for the
industry to realize its potential.
Curbing unethical practices
The industry faces challenge to control certain practices. AMCs are wooing
the distributors by offering more commission to push their products. In the
hope of getting more incentives, distributors may opt for unfair practices like
false projections to sell unsuitable products, motivate the investors to shift
from one fund to another, namely high net worth investors and persuade
them to over invest. However, the client’s concern and his needs should be of
prime importance while selling. To curb such unethical practices, the
Association of Mutual Funds in India (AMFI) has prescribed that
agents/distributors must have AMFI certification. And to control the huge
market expenses the authority has prescribed that the commission rates also
shouldn’t be more than mutual fund’s expense limit of 2.5% for equity and
2.25 % for debt. Such regulations are required to be more effective to stop
such unethical practices.
Spreading the Mutual Fund Culture
Though the Indian Mutual Fund industry has a huge potential, it is yet to be
realized. To realize its growth potential, industry will have to focus on its
reach in the retail segment. According to Chairman of AMFI there are about
180 million households in India, of which just 11.8 millions invest in mutual
funds, making it penetration of 6.7% in the urban areas 13.7% of the
households invest in mutual funds; in rural areas this percentage is just 3.8%.
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38. So there is a need to focus on rural penetration for future growth. To achieve
its growth, educating the customer about the mutual funds as a saving vehicle
will be critical. More efforts are required from the regulators and the industry
to manage the wealth of individuals to further propel the growth of the
industry by popularizing the use of mutual funds. The govt. should properly
regulate and monitor the regulation so that a favorable climate can be
created. Regulations should be tightened to curb unethical practices. They
should also develop a comprehensive risk management system so that it can
induce more investment. The industry should focus on product innovation
and maintain transparency, flexibility, service and innovation to realize its
potential.
Offer Document
When an AMC or a Fund Sponsor wishes to launch a new mutual fund
scheme, they are required to formulate the details of the schemes and register
it with SEBI before announcing the scheme and inviting the investors to
subscribe to the fund. Launch of a new mutual fund scheme is called a New
Fund Offer (NFO). The document containing the details of the new fund
offer that the AMC or the Sponsor prepares and circulates to the prospective
investors is called the Offer Document.
Offer Document issued by mutual funds serve the same purpose of inviting
investors and giving them the information about the new fund offer. The
offer document of the closed-end fund is issued only once at the time of
issue, as the units are normally not re-purchasable for investors. But, the
open-end fund could issue and repurchase units on an ongoing basis. This
means that the offer document of the open-end funds is valid for all the time,
until amended, though it will be first issued at the time of launch of the
scheme. SEBI requires the offer document of the open-end fund to be revised
every two years.
Options Offered to Investors:
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39.  Dividend Option: The investor can choose to receive a part of the
profits of the mutual fund at some intervals before their redemption.
This option is Dividend Option. Investors who choose dividend option
can again have 2 sub options:
• Dividend Payout Option: Investors who choose the
dividend payout option on their investments will receive
dividends as and when such dividends are declared by
the scheme. Dividends are paid out to the investors in the
form of warrants or are directly credited to the investor’s
bank account.
• Dividend Re-investment Option: Investors who opt for
the dividend reinvestment option do not take the amount
of dividend out of the scheme. They re-invest the
dividends that are declared by the mutual funds back into
the mutual funds itself, at a NAV that is prevalent
immediately after the declaration of dividend or the NAV
at the time of re-investment. This NAV is known as ex-
div NAV.
 Growth Option: The investors who do not want to receive any part of
profits of the mutual fund before its redemption. Rather they want to
retain the profits made in the pool and want their returns to grow by
being compounded. Whenever they need to get some money or profits
back, they would sell a part of their units. This is Growth Option.
Investor Earning Opportunities:
Dividend Payout Dividend Growth Option
Reinvestment
Dividend Yes Yes No
Change in NAV Yes Yes Yes
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40. Lock-in Period Options:
Mutual funds usually do not have lock-in periods, during which investors
cannot exit the fund. Mutual funds may create products with lock-in periods.
Repurchase information can be found in the offer document. There are 2
normal situations when investors are restricted from exiting the fund:
 An open-ended fund may announce an initial offer period, during
which time it will only sell units. There may be no repurchase during
that period. The fund will announce a date from which further sales
and repurchases will take place.
 Some specific funds scheme can be designed to have a minimum
period of investment.
Example: Investments in special “Equity Linked Savings Scheme” are
eligible for tax rebates. In order to enjoy the tax rebate, the investor is
required to stay invested for a period of 3 years.
In extra-ordinary situations, mutual funds can, with notice to the
investors through a national daily, impose temporary lock-in periods.
Investors have to check the offer document to see if the mutual fund
has sought such a right for itself.
Regulations regarding Cutoff Timings:
 All funds except liquid funds
• Purchases:
In respect of valid applications received upto 3 p.m. by the
Mutual Fund, same day’s closing NAV shall be applicable.
In respect of valid applications received after 3 p.m. by the
Mutual Fund, the closing NAV of the next business day shall be
applicable.
• Redemption:
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41. In respect of valid applications received upto 3 p.m. by the
Mutual Fund, same day’s closing NAV shall be applicable.
In respect of valid applications received after 3 p.m. by the
Mutual Fund, the closing NAV of the next business day shall be
applicable.
 Liquid funds
• Purchases:
In respect of valid applications, closing NAV of the day
immediately before the day on which funds are available for
utilization by the fund shall be applicable. However, in respect
of any application received after 1 p.m. by the Mutual Fund and
the funds are available for utilization by the fund on the same
day, closing NAV of the same day shall be applied.
• Redemption
In respect of valid applications received upto 10:00 a.m. by the
Mutual Fund, previous day’s closing NAV shall be applicable.
In respect of valid applications received after 10:00 a.m.by the
Mutual Fund, same day’s NAV shall be applicable.
Net Asset Value
Net Asset Value (NAV) represents a fund's per share market value. This
is the price at which investors buy (bid price) fund shares from a fund
company and sell them (redemption price) to a fund company. Dividing
the total value of all the cash and securities in a fund’s portfolio, less any
liabilities, by the number of shares outstanding, derives it. The
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42. NAV computation is undertaken once at the end of each trading day
based on the closing market prices of the portfolio's securities.
NAV: Net Assets of the Scheme/ Number of Units Outstanding
Or
(Market Value of Investment + Receivables + Other Accrued Income
+ Other Assets – Accrued Expenses – Other Payables – Other
Liabilities)/Number of Units Outstanding on the Valuation Date
For the purpose of NAV calculation, the day on which NAV is calculated
by a fund is known as the Valuation Date. NAV of all schemes must be
calculated and published at least every Wednesday for Closed-end
schemes and daily for Open-end schemes. The day’s NAV must be posted
on AMFI website by 8:00 p.m. that day. This applies to both Open-end &
Closed-end schemes.
The fund’s NAV is affected by these 4 factors:
• Purchase & Sale of investment securities
• Valuation of all investment securities held
• Other assets & liabilities
• Units sold or redeemed
Pricing Of Units
Although NAV per unit defines the fair value of the investor’s holding in the
fund, the fund may not repurchase the investor’s units at the same price as
NAV. There can be entry or exit loads. The Sale price is NAV + Entry Load
and the Repurchase price is NAV – Exit Load. SEBI requires that fund must
ensure that repurchase price is not lower than 93% of NAV (95% in the case
of a closed-end fund). On the other side, the fund may sell new units at a
price that is different from the NAV, but the sale price cannot be higher than
107% of NAV. Also, the difference between the repurchase price and the
sale price of the unit is not permitted to exceed 7% of the sale price.
Sale Price: Applicable NAV * (1 + Entry Load)
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43. Repurchase Price: Applicable NAV * (1 – Exit Load)
Fees & Expenses:
An AMC may charge the scheme with Investment Management & Advisory
Fees that are fully disclosed in the offer document subject to the following
limits:
 1.25% of the first Rs.100 Crores of weekly average net assets
outstanding in the accounting year, and @ 1% of weekly average net
assets in excess of Rs.100 Crores.
 For no load schemes, the AMC may charge an additional
management fee up to 1% of weekly average net assets outstanding
in the accounting year.
Initial Issue Expenses
 Initial Issue Expenses will be permitted for Closed Ended Scheme
only and such scheme will not charge entry load.
 Initial Issue Expenses of launching schemes (not to exceed 6% of
initial resources raised under the scheme)
Total Expenses:
Total Expenses charged by the AMC to a scheme, excluding issue or
redemption expenses but including investment management &
advisory fees, are subject to the following limits:
On the first Rs.100 Crores of daily or average weekly net assets 2.5%
On the next Rs.300 Crores of daily or average weekly net assets 2.25%
On the next Rs.300 Crores of daily or average weekly net assets 2.0%
On the balance of daily or average weekly net assets 1.75%
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44. For Bond Funds:
On the first Rs.100 Crores of daily or average weekly net assets 2.25%
On the next Rs.300 Crores of daily or average weekly net assets 2.0%
On the next Rs.300 Crores of daily or average weekly net assets 1.75%
On the balance of daily or average weekly net assets 1.5%
Investment Plans
The term “investment plans” generally refers to the portfolio flexibility that
the funds to investors offering different ways to invest or reinvest. The
different investment plans are an important consideration in the investment
decision, because they determine the level of flexibility available to the
investor. Also, the investment plan offered by a fund allows the investors
freedom with respect to investing one time or at regular intervals, making
transfers to different schemes within the same fund family, or receiving
income at specified intervals or accumulating distributions. These are some
of the investment plans offered by mutual funds in India:
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45. • Automatic Reinvestment Plans (ARP):
Many funds offer 2 options under the same scheme- the Dividend
Option & the Growth Option. The ARP allows the investor to
reinvest the amount of dividends or other distributions made by the
fund in the same fund & receive additional units, instead of receiving
them in cash.
• Systematic Investment Plan (SIP):
These require the investor to invest a fixed sum periodically, thereby
letting the investor save in a disciplined and phased manner. The
mode of investment could be though direct debit to the investor’s
salary or bank account. A modified version of SIP is the Voluntary
Accumulation Plan (VAP) that allows the investor flexibility with
respect to the amount and frequency of investment.
• Systematic Withdrawal Plan (SWP):
Such plans allows the investor to make systematic withdrawals from
his fund investment account on a periodic basis, thereby providing
the same benefit as regular income. The investor must withdraw a
specific minimum amount with the facility to have withdrawal
amounts sent to his residence by a cheque or credited directly into the
bank account. The amount withdrawn is treated as redemption of
units at the applicable NAV as specified in the offer document. The
investor is usually required to maintain a minimum balance in his
fund account under this plan.
• Systematic Transfer Plan (STP):
These plans allow the investor to transfer on a periodic basis a
specified amount from one scheme to another with the same fund
family- meaning two schemes managed by the same AMC and
belonging to the same mutual fund. A transfer will be treated as
redemption of units from the scheme from which the transfer is
made, and as investment in units of the scheme into which the
transfer is made. Such redemption or investment will be at the
applicable NAV for the respective schemes as specified in the offer
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46. document. The investor is usually required to maintain a minimum
balance in his fund account under this plan for which the transfer is
made.
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47. Tax Provisions
 Income earned by any mutual fund registered with SEBI (Mutual Fund)
Regulation, 1996 is fully exempt from tax under section 10 (23D) of the IT act.
 However, income distributed to unit-holders by a closed-end or debt fund is
liable to a dividend distribution tax at a rate stipulated by the Government. This
tax is not applicable to distributions made by open-end-equity-oriented funds
(funds with more than 50% of their portfolio in Equity).
 Dividend Distribution Tax is payable by the fund on its distributions and out of
its income, the investor pays indirectly since the fund’s NAV and the value his
investment will come down by the amount of tax paid by the fund.
Example: If a closed-end or a debt fund declares a dividend distribution of
Rs.100, Rs.10.20 (Tax Rate 10.2%) will be the tax in the hands of the fund.
While the investor will get Rs.100, the fund will have Rs.10.20 less to invest.
The fund’s current cash flow diminish by Rs.10.20 paid as tax, and its impact
will be reflected in the lower value of the fund’s NAV and hence investor’s
investment on a compound basis in future periods.
 Since the tax is on distributions, it makes income schemes less attractive in
comparison to growth schemes, as the objective of income schemes is to pay
regular dividends.
 The fund cannot avoid the tax even if the investor chooses to reinvest the
distribution back into the fund.
Example: The fund will still pay Rs.10.20 tax on the announced distribution,
even if the investor chooses to reinvest his dividends in the concerned scheme.
Tax Benefits to the Investor
 Dividends Received from Mutual Funds:
• Income distributed by a fund is exempted in the hands of investors
• No TDS on any income distribution by mutual fund
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48. What is risk?
Risk can be defined as the potential for harm. But when anyone analyzing
mutual funds uses this term, what is actually being talked about is volatility.
Volatility is nothing but the fluctuation of the Net Asset Value (price of a
unit of a fund). If there is high volatility, then there will be greater
fluctuations in NAV.
Generally, past volatility is taken as an indicator of future risk and for the
task of evaluating a mutual fund, this is an adequate approximation.
How risk is measured?
There are 2 ways in which you can determine how risky a fund is.
 Standard Deviation
Standard Deviation is a measure of how much the actual performance
of a fund over a period of time deviates from the average performance.
Since Standard Deviation is a measure of risk, a low Standard
Deviation is good.
 Sharpe Ratio
The Sharpe Ratio of a fund measures whether the returns that a fund
delivered were commensurate with the kind of volatility it exhibited.
This ratio looks at both, returns and risk, and delivers a single measure
that is proportional to the risk adjusted returns.
Since Sharpe Ratio is a measure of risk-adjusted returns, a high
Sharpe Ratio is good.
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49. Important Points:
 Don't just look at the NAV, also look at the risks-returns
Kotak 30 has 3 stars & Kotak Opportunities has 4 stars. That does not
mean that their NAV is approximately the same. In fact, the NAV of
Kotak 30 is 90.22 & NAV of Kotak Opportunities is 40.48
However, Kotak 30 took a below average risk and delivered an above
average return, while Kotak Opportunities took an average risk to get
the high returns. So, don’t just look at the NAV also consider the
risks-returns of the fund.
 Higher rating does not mean better returns
A fund with more stars does not indicate a higher return when
compared with the rest. All it means is that you will get a good return
without putting your money at too much risk.
ICICI Prudential Liquid Fund has a 4-star rating while ICICI
Prudential Growth Fund has a 3-star rating. However, the fund with
the 3-star rating has a higher NAV (109.08) than the one with the 4-
star rating (11.73).
 Higher rating does not mean more risk
HDFC Top 200 has an NAV of 140.47 while UTI Infrastructure has an
NAV of 36.60
This does not necessarily mean that HDFC Top 200 is offering a
higher risk since the return is higher.
In fact, according to the ratings, HDFC Top 200, a 5-star fund has a
low risk while UTI Infrastructure, a 5-star fund has an average risk.
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50. Recent Trends in the Mutual Fund Industry
 Funds betting on Natural Resources
• Since Indian regulations do not permit mutual funds to invest directly
in commodities, fund houses go for schemes that invest in stocks of
mining companies.
• At least five funds, keen on investing in natural resources, are set to hit
the market, as per documents filed with the stock market regulator
SEBI. There are two funds from ING and one each from Mirae Asset
Management, Tata AMC and HSBC MF.
 Systematic Transfer Plans lower Volatility Risk
• Systematic Transfer Plan (STP) helps in reaching the financial goals
by investing a fixed sum in the chosen fund for a pre-determined
number of installments. STP offers an investor the security of a liquid
fund while trying to enhance returns by investing a part of the funds in
equity. This helps mitigate any risk arising from volatility or improve
the fund’s returns in a boom. Thus, an investor can match his risk
appetite with that of the equity scheme.
• Most fund houses are already offering this STP facility to investors. In
the first week of May, JP Morgan AMC launched Optimiser
Systematic transfer plan, wherein investors can invest a lump sum in
JP Morgan India Liquid Fund or JP Morgan India Liquid Plus Fund
through STP. An amount predetermined by the investor would be
transferred periodically (daily, weekly, monthly or quarterly) from this
fund to any of the existing equity schemes managed by JP Morgan
Mutual Fund.
• STP is definitely going to gain ground as aspirations, possibilities and
opportunities increase among the youth. However, fund managers feel,
STP is yet to be promoted in India to its full extent. Investors need to
be adequately informed about it.
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51.  Mutual Fund industry to tap Entertainment space
• To cash the bullish growth of the entertainment &
media industry in the country financial institutions are
rolling out a slew of mutual funds focusing on these
spaces.
• Many of the funds will cover a wide range of areas within the
entertainment arena such as retail, shopping malls, mobile content
providers, lifestyle beyond the conventional media like television,
film, print advertising and multiplex.
• Global media giants like Viacom, Walt Disney, BBC, J C Decaux and
Astro are already in the country or looking at it. The industry has
already witnessed deals such as Walt Disney-UTV, Blackstone-
Eenadu and Adlabs-ADAG (Anil Dhirubhai Ambani Group).
 Brand name works for Mutual Funds
• A brand image is very important for mutual funds and investors base
their decisions on known and dependable brands. Brand-building
exercises are mostly taken up by foreign players and big industrial
houses which have deep pockets, while fund houses with lower corpus
can only attract investors by showing good performance.
• Fund mobilisation trend in mutual funds space suggests that brand
play an important role in helping fund houses attract investors initially
although in the long term it boils down to the performance of the
schemes.
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52. • Country's MF industry holds immense potential for the existing as well
as the new players entering or those envisaging an entry into the space,
but firms with a strong brand presence definitely has a competitive
advantage.
 Mutual Fund Industry’s AUM advances by 7.33% in April
• The asset base of the industry has grown by 7.33% to Rs. 567601.98
Crores.
• Compared to the last month, April has been great for the mutual fund
industry as 28 AMCs out of 34 posted positive growth in their AAUM.
Reliance Mutual Fund has topped the chart with an AAUM of Rs
96,386.40 Crores. ICICI Prudential MF and UTI MF continue to be at
the second and third position respectively.
 Reliance MF offers life insurance cover through SIP investment
• Reliance MF has introduced a scheme to encourage investors to save
and invest regularly through Systematic Investment Plan (SIP), to
ensure that investors achieve their financial objective even in the
unfortunate event of death before completing the SIP tenure as the
balance amount towards the SIP installments remaining unpaid shall
be made good from the life insurance cover.
• The nominee would be able to continue investing in the scheme
without having to make any further contribution. The cost of life
insurance premium will be borne by the AMC.
 Kotak Mahindra Mutual Fund launches Sensex ETF
• Kotak Mahindra Asset Management Company has announced the
launch of an exchange traded fund which will focus on the stocks that
comprise the BSE SENSEX.
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53. • Kotak Mahindra Asset Management Company has announced the
launch of an exchange traded fund which will focus on the stocks that
comprise the BSE SENSEX.
• The fund is open for subscription from May 07, 2008 till May 16,
2008. The units will be listed on BSE to provide liquidity through
secondary market. Each unit of the Kotak Sensex ETF will be
approximately equal to 1/100th of the value of BSE SENSEX. The
minimum investment amount during the New Fund Offer is Rs 10,000
and in multiples of Rs 1,000.
 Reliance Mutual Fund achieves a milestone
• Reliance Mutual Fund, owned by Anil Ambani controlled Reliance
Capital, has achieved the coveted milestone by notching up Rs 1
trillion of assets under its management this April.
• Reliance Mutual Fund is the first mutual fund in India to cross this
mark. On April 30, the total Assets Under Management (AUM) of the
fund was Rs 100812 Crores, including Rs 34000 Crores in equity
schemes and Rs 66800 Crores in debt funds.
 ICICI Prudential AMC Step towards Transparency
• ICICI Prudential AMC has taken a pioneering step towards
transparency and investors right to information. The company has
disclosed the complete details on the securitizations and pass through
certificates across all its fixed income funds on a consolidated basis
in its April’ 08 Fact sheet.
• The fact sheet will provide details of obligators, underlying asset class,
rating etc on a consolidated basis across the entire fixed income
portfolio which will play a key role in aiding investors gain complete
insight of their investment and evaluate the credit quality of their
portfolio.
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54. Impact on Mutual Fund Industry of the Union Budget
 Easing in Income Tax slabs
• Threshold limit of Income Tax exemption for individuals rose as
follows -
Up to Rs.150,000 - NIL
Rs.150,001 to Rs.300,000 - 10%
Rs.300,001 to Rs.500,000 - 20%
Rs.500,001 and above - 30%
Impact
• This is expected to increase the disposable income in the hands of the
individuals to some extent which could translate into increased retail
investments in mutual funds.
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55.  Increase in Short Term Capital Gain Tax
• Short Term Capital Gains Tax rose from 10% to 15%
Impact
• Since long term capital gains tax has been left unchanged, this hike in
short term capital gains tax could encourage long-term investments
which augur well to the development of the concept of “long term” in
the Indian Mutual Fund industry, which is conspicuous by its absence
but which is coveted by the fund industry given the greater flexibility
that this provides in fund’s management.
• At the same time since the short term capital gains tax is still lower
than the income tax slabs of typical capital market investors, it is not
expected to cause too many investors to turn away from mutual
funds.
 Incentives for equities should be continued and the status quo on long-
term capital gain tax and STT should be maintained.
 Section 80 C deduction for tax saving should be raised from the
current limit of Rs 1 lakh and Equity Linked Saving Schemes from
mutual funds should be given the benefit of the same.
 Know your Customer (KYC) Compliance for Mutual Funds
• KYC is an acronym for “Know your Client”, a term commonly used
for Client Identification Process. SEBI has prescribed certain
requirements relating to KYC norms for Financial Institutions and
Financial Intermediaries including Mutual Funds to ‘know’ their
clients. This would be in the form of verification of identity and
55 | P a g e

56. address, financial status, occupation and such other personal
information. Applicant must be KYC compliant while investing with
any SEBI registered Mutual Fund.
• The provisions of The Prevention of Money Laundering Act, 2002
(PMLA), has made it mandatory for all Mutual Funds to comply with
the ‘Know Your Client’ (KYC) norms of the applicants desirous of
subscribing to their ‘units’. In this regard, it has been mandated to
create the necessary infrastructure in order to handle the KYC on
behalf of the Mutual Fund Industry.
• As a result, all applicants will now have to submit their PAN card
copy (which serves as Proof of Identity (PoI)) and Proof of Address
(PoA) only once to the designated Point of Service (PoS) centers
spread across the country. After confirming the credentials of the
investor, the PoS issues KYC acknowledgement letter that needs to be
submitted along with the mutual fund investments.
 Norms for dedicated infrastructure funds should be finalized regarding
which announcement was made in last Union Budget.
 Existing open-ended equity schemes of mutual fund industry should
be included for the purpose of tax savings wherein a lock-in period of
three years can be introduced in separate plan of same schemes.
 Dividend distribution taxes on Money Market Mutual Funds which
was increased last year should be brought back to earlier levels.
 Service Taxes realigned for ULIP’s
• Asset management services provided under Unit Linked Insurance
Plans (ULIPs) would be brought on par with asset management
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57. services provided under mutual funds as regards chargeability to
service tax.
• Services provided by stock/commodity exchanges and clearing houses
would also be brought under the service tax net.
Impact
• The competitiveness of mutual funds vis-à-vis ULIPs in the
investment basket of investors is expected to increase somewhat.
• Transactional expense levels of mutual funds are expected to go up
marginally on account of their exposure to stock and commodity
exchange which are expected to pass on the service tax. But clarity on
what would define services here and on what amount the service tax
would be levied is awaited.
FUND ANALYSIS (On the basis of NAV)
Fund Category Rating 3 Year
Return
DSPML T.I.G.E.R. Reg Equity: Diversified 45.64
Tata Infrastructure Equity: Diversified 45.31
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58. Magnum Contra Equity: Diversified 44.80
Kotak Opportunities Equity: Diversified 43.72
UTI Infrastructure Equity: Diversified 43.18
Magnum Multiplier Plus Equity: Diversified 43.05
Reliance Growth Equity: Diversified 42.00
Sundaram BNP Paribas Select Equity: Diversified 41.06
Midcap Reg
HDFC Top 200 Equity: Diversified 39.65
BoB Growth Equity: Diversified 38.55
Principal Child Benefit Hybrid: Equity-oriented 36.93
Magnum Balanced Hybrid: Equity-oriented 31.37
HDFC Prudence Hybrid: Equity-oriented 29.27
Birla Sun Life Income Debt: Medium-term 8.37
ICICI Prudential Long-... Debt: Medium-term 7.54
Kotak Flexi Debt Debt: Medium-term 7.47
Sundaram BNP Paribas S... Equity: Diversified 44.86
DWS Investment Opportunity Equity: Diversified 44.10
DSPML Equity Fund Equity: Diversified 43.39
ICICI Prudential Dynamic Equity: Diversified 42.69
Kotak 30 Equity: Diversified 42.68
DSPML Top 100 Equity Reg Equity: Diversified 42.55
Magnum Equity Equity: Diversified 42.23
Source: http://amfiindia.com (on 8th May, 2008)
Funds which have been compared are:
 Kotak
Category Fund
Equity Fund Scheme Kotak 30 – Growth
Debt Fund Scheme Kotak Bond Short Term
ELSS Tax Saver Kotak Tax Saver Scheme – Growth
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59. Monthly Income Plan Kotak Income Plus
Cash Fund Kotak Liquid Instrument
 HDFC
Category Fund
Equity Fund Scheme HDFC Equity Fund- Growth
Debt Fund Scheme HDFC HI Short Term
ELSS Tax Saver HDFC Tax Saver Scheme- Growth
Monthly Income Plan HDFC MIP- Short Term
Cash Fund HDFC Liquid
 UTI
Category Fund
Equity Fund Scheme UTI Equity Fund- Growth
Debt Fund Scheme UTI Short Term Income Regular
ELSS Tax Saver UTI ETSP- Growth
Monthly Income Plan UTI- MIS
Cash Fund UTI Liquid Cash Instrument
 ICICI
Category Fund
Equity Fund Scheme ICICI Prudential Dynamic Plan- Growth
Debt Fund Scheme ICICI Prudential Short Term
ELSS Tax Saver ICICI Prudential Tax Plan
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60. Monthly Income Plan ICICI Prudential MIP
Cash Fund ICICI Prudential Liquid
 Reliance
Category Fund
Equity Fund Scheme Reliance Growth
Debt Fund Scheme Reliance Short Term
ELSS Tax Saver Reliance Tax Saver
Monthly Income Plan Reliance MIP
Cash Fund Reliance Liquid Cash
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61. Equity Fund Scheme
1. Kotak 30- Growth
2. HDFC Equity Fund- Growth
3. UTI Equity Fund- Growth
4. ICICI Prudential Dynamic Plan- Growth
5. Reliance Growth
Standard Sharpe Treynor Beta R Square Alpha
Deviation Ratio Ratio
Kotak 25.48 1.39 3.09 .96 .88 4.98
HDFC 23.61 1.34 2.65 .91 .92 2.75
UTI 23.06 1.06 2.13 .88 .89 -3.28
ICICI 25.10 1.43 1.95 .87 .77 7.78
Reliance 27.93 1.29 2.97 .98 .76 4.74
Note: The data is collected on 8th May, 2008
Findings
Standard Sharpe Treynor Beta R Alpha Total
Deviation Ratio Ratio Square
Kotak 4 2 1 4 3 2 16
HDFC 2 3 3 3 1 4 16
UTI 1 5 4 2 2 5 19
ICICI 3 1 5 1 4 1 15
Reliance 5 4 2 5 5 3 24
Analysis
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62. The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI stands out with rank 1
(23.06) & following UTI is HDFC (23.61) which suggest that these funds are
stable in their returns .
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also ICICI Prudential
Dynamic Plan has lowest beta (.87) among these funds which is followed by
UTI Equity Fund- Growth (.88). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns. As we have to do the analysis we have to take one stand so in
this case, according to me 1st rank should be given to that beta value which is
lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, HDFC Equity
Growth fund has the maximum R Square (.92) followed by UTI Equity
Growth fund (.89).
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63. But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio ICICI Prudential Growth fund (1.43) stands out
clear with 1st rank, followed by Kotak 30 Growth fund (1.39).
In case of Treynor ratio, Kotak 30 Growth fund (3.09) value is higher so it
has been given the 1st rank among the others which is followed by Reliance
Equity fund (2.97).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, ICICI Prudential Dynamic Growth Plan (7.78) is
the best followed by Kotak-30 Growth fund (4.98).
Thus, ICICI Prudential Dynamic Growth Plan is the best Equity fund for the
investor for investment purpose. It is the best fund as far as Alpha, Beta &
Sharpe ratio is concerned. Though R Square is not so convincing which
means that the fund is not so diversified. It stands at 3 rd position in Standard
Deviation after UTI Equity Growth fund & HDFC Equity Growth fund and
last when Treynor ratio is considered. But when we combine all the 6
parameters which are considered to measure the performance of a Mutual
Fund, ICICI Prudential Dynamic Growth Plan is the best Equity Fund when
compared with rest of the Equity funds.
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64. Debt Fund Scheme
1. Kotak Bond Short Term
2. HDFC HI Short Term
3. UTI Short Term Income Regular
4. ICICI Prudential Short Term
5. Reliance Short Term
Standard Sharpe Treynor Beta R Alpha
Deviation Ratio Ratio Square
Kotak .59 5.30 3.42 .48 .55 2.27
HDFC .52 7.10 3.11 .42 .54 2.95
UTI .66 2.53 2.87 .51 .49 .77
ICICI .85 3.01 2.56 .62 .44 1.45
Reliance .54 6.55 2.98 .46 .59 2.72
th
Note: The data is collected on 8 May, 2008
Findings
Standard Sharpe Treynor Beta R Alpha Total
Deviation Ratio Ratio Square
Kotak 3 3 1 3 2 3 15
HDFC 1 1 2 1 3 1 9
UTI 4 5 4 4 4 5 26
ICICI 5 4 5 5 5 4 28
Reliance 2 2 3 2 1 2 12
Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, HDFC HI Short Term stands out
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65. with rank 1 (.52) & following HDFC HI is Reliance Short Term fund (.54)
which suggest that these funds are stable in their returns & also are less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC HI Short
Term has lowest beta (.42) among these funds which is followed by Reliance
Short Term fund (.46). But beta of 1 is preferable because of the returns it is
considered safe for the value of 1 in this analysis almost most of the funds
have beta of less than 1 which means that these funds are managed in
keeping the people risk at a manageable level, which help investors to earn
safe returns. As we have to do the analysis we have to take one stand so in
this case, according to me 1st rank should be given to that beta value which is
lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
So, higher R Square means a well diversified portfolio. So, Reliance Short
Term fund has the maximum R Square (.59) followed by Kotak Bond Short
Term (.55). HDFC HI Short term fund is on the 3rd place (.54).
But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
65 | P a g e

66. considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio HDFC HI Short Term fund (7.10) stands out clear
with 1st rank, followed by Reliance Short Term fund (6.55).
In case of Treynor ratio, Kotak Bond Short Term fund (3.42) value is higher
so it has been given the 1st rank among the others which is followed by
HDFC HI Short Term fund (3.11).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, HDFC HI Short Term fund (2.95) is the best
followed by Reliance Short Term fund (2.72).
Thus, HDFC HI Short Term fund is the best Debt fund when compared with
the other funds of Kotak, ICICI, UTI & Reliance. It has the smallest
Standard Deviation & also the smallest Beta when compared with all the
funds. This shows the fund is less risky and will give good returns to its
investors. When taken R Square into consideration, this fund stands at the 3rd
position after Kotak Bond Short Term & Reliance Short Term. This shows
that the fund is less diversified. The fund is the best performer as far as
Sharpe ratio is concerned and is the 2nd best when Treynor ratio is
considered. The fund is a good performer as it has the highest Alpha. So, if a
66 | P a g e

67. person wants to invest in Debt for a short term then he can go in for HDFC
HI Short Term fund.
ELSS Tax Saver Fund
1. Kotak Tax Saver Scheme- Growth
2. HDFC Tax Saver Scheme- Growth
3. UTI ETSP- Growth
4. ICICI Prudential Tax Plan
5. Reliance Tax Saver
Standard Sharpe Treynor Beta R Alpha
Deviation Ratio Ratio Square
Kotak 25.65 .76 1.41 .96 .78 -4.55
HDFC 25.22 1.05 1.93 .92 .84 -3.11
UTI 24.49 .91 1.94 .96 .86 -7.11
ICICI 29.02 .90 1.80 .94 .66 -4.04
Reliance 27.54 .86 1.62 1.03 .61 -5.32
Note: The data is collected on 8th May, 2008
Findings
Standard Sharpe Treynor Beta R Square Alpha Total
Deviation Ratio Ratio
Kotak 3 5 5 3.5 3 3 22.5
HDFC 2 1 2 1 2 1 9
UTI 1 2 1 3.5 1 5 13.5
ICICI 5 3 3 2 4 2 19
Reliance 4 4 4 5 5 4 26
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68. Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI ETSP- Growth fund stands
out with rank 1 (24.49) followed by HDFC Tax Saver Scheme- Growth fund
(25.22) which suggest that these funds are stable in their returns & also are
less risky.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also HDFC Tax Saver
Scheme Fund has lowest beta (.92) among these funds which is followed by
ICICI Prudential Tax Plan (.94). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns and in this case beta is approximately equal to 1. As we have to
do the analysis we have to take one stand so in this case, according to me 1st
rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
68 | P a g e

69. So, higher R Square means a well diversified portfolio. So, UTI ETSP-
Growth fund has the maximum R Square (.86) followed by HDFC Tax Saver
Scheme- Growth Fund (.84)
But the analysis can’t be done on these three parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In case of Sharpe Ratio, an HDFC Tax Saver Scheme- Growth fund (1.05)
stand out clear with 1st rank, followed by UTI ETSP Growth fund (.91) &
just next is ICICI Prudential Tax Plan (.90).
In case of Treynor ratio, it is the just the opposite of Sharpe Ratio, UTI ETSP
Growth fund (1.94) value is higher so it has been given the 1st rank among
the others which is followed by HDFC Tax Saver Scheme fund (1.93).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, all the funds have a negative figure which means
that all the funds are not performing good. But, when compared among these
5 funds HDFC Tax Saver Scheme (-3.11) is the best followed by ICICI
Prudential Tax Plan (-4.04).
Thus, HDFC Tax Saver Scheme is the best Tax Saver Fund. It stands 2nd in
case of Standard Deviation after UTI ETSP Growth Fund and is the best fund
69 | P a g e

70. when Beta is compared followed by ICICI Prudential Tax Plan. As far as R
Square is considered it stands at 2nd position after UTI ETSP Growth Fund. It
is again the best when we consider the Sharpe Ratio. Though all the funds
are showing a negative figure when alpha is compared but again it is the best
as far as these 5 funds are compared. So, if we keep all the 6 parameters in
mind the investor should be advised to invest in HDFC Tax Saver Scheme.
Monthly Income Plans (MIP)
1. Kotak Income Plus
2. HDFC MIP- Short Term
3. UTI- MIS
4. ICICI Prudential MIP
5. Reliance MIP
Standard Sharpe Treynor Beta R Square Alpha
Deviation Ratio Ratio
Kotak 5.63 .28 4.04 .20 .69 2.70
HDFC 4.24 -.07 2.97 .17 .81 1.67
UTI 4.18 .76 3.65 .22 .55 2.34
ICICI 4.48 .47 4.71 .18 .71 3.13
Reliance 5.50 -.25 3.03 .15 .63 2.02
Note: The data is collected on 8th May, 2008
Findings
Standard Sharpe Treynor Beta R Alpha Total
Deviation Ratio Ratio Square
Kotak 5 3 2 4 3 2 19
HDFC 2 4 5 2 1 5 19
UTI 1 1 3 5 5 3 18
ICICI 3 2 1 3 2 1 12
Reliance 4 5 4 1 4 4 22
70 | P a g e

71. Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, UTI stands out with rank 1 (4.18)
& following UTI is HDFC (4.24) which suggest that these funds are stable in
their returns.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also Reliance MIP has
lowest beta (.87) among these funds which is followed by HDFC MIP- Short
term (.88). But beta of 1 is preferable because of the returns it is considered
safe for the value of 1 in this analysis almost most of the funds have beta of
less than 1 which means that these funds are managed in keeping the people
risk at a manageable level, which help investors to earn safe returns. As we
have to do the analysis we have to take one stand so in this case, according to
me 1st rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
71 | P a g e

72. So, higher R Square means a well diversified portfolio. So, HDFC MIP-
short Term fund has the maximum R Square (.81) followed by ICICI
Prudential MIP fund (.71).
But the analysis can’t be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio UTI MIP fund (.76) stands out clear with 1 st rank,
followed by ICICI Prudential MIP fund (.47). HDFC MIP & Reliance MIP
have negative Sharpe ratio.
In case of Treynor ratio, ICICI Prudential MIP (4.71) value is higher so it has
been given the 1st rank among the others which is followed by Kotak Income
Plus fund (4.04).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
In case of Alpha ICICI MIP (3.13) is the best fund followed by Kotak
Income Plus (2.70) & UTI MIS (2.34) in the third place.
ICICI Prudential MIP is recommended to the investors. ICICI is the 3rd
highest in standard deviation after UTI MIS fund and HDFC MIP fund. It is
also 3rd as far as beta of the fund is considered after Reliance MIP & HDFC
MIP- Short Term. It is 2nd best in Sharpe ratio after UTI MIS and it is the
72 | P a g e

73. best in Treynor ratio followed by Kotak Income plus. ICICI Prudential MIP
should be considered by the investors. Also ICICI Prudential MIP is the best
fund when Alpha is considered. But, if the investor wants to take less risk
then he can go in for HDFC MIP- Short Term fund as this fund is 2md best
in both Standard Deviation & Beta. But, after considering all the 6
parameters ICICI Prudential MIP is the best fund.
Cash Funds
1. Kotak Liquid Instrument
2. HDFC Liquid
3. UTI Liquid Cash Instrument
4. ICICI Prudential Liquid
5. Reliance Liquid Cash
Standard Sharpe Treynor Beta R Square Alpha
Deviation Ratio Ratio
Kotak .12 17.20 169.89 .10 .20 1.84
HDFC .15 16.91 154.23 .13 .23 2.24
UTI .15 16.40 152.66 .09 .10 1.98
ICICI .14 15.91 157.78 .15 .33 1.98
Reliance .38 1.44 121.79 .30 .17 .03
Note: The data is collected on 8th May, 2008
Findings
Standard Sharpe Treynor Beta R Alpha Total
Deviation Ratio Ratio Square
Kotak 1 1 1 2 3 4 12
HDFC 3.5 2 3 3 2 1 14.5
UTI 3.5 3 4 1 5 2.5 19
ICICI 2 4 2 4 1 2.5 15.5
Reliance 5 5 5 5 4 5 29
73 | P a g e

74. Analysis
The analysis suggests that in case of standard deviation which is desired to
be low so that the fund can perform better, Kotak Liquid Instrument stands
out with rank 1 (.12) & ICICI Prudential Liquid (.14) which suggest that
these funds are stable in their returns. HDFC Liquid & UTI Liquid Cash
Instrument shares the 3rd position as they both have the same standard
deviation.
As the desired level of Beta is low so that the fund return is stable but this is
contradiction statement because beta shows the volatility of the stock or fund
lower beta means that funds returns are stable but in today’s competitive
world there is a quote “Higher the risk higher the return” if we go by this we
need to have a high value of beta. this also depends upon the risk appetitive
of the investor if he is aggressive investor he would want his fund beta to be
high but the case is entirely different in case of risk averse investor but as
these funds are managed by professionals so we would be giving 1st rank to
that fund which has lowest beta value . In this case also UTI Liquid Cash
Instrument has lowest beta (.09) among these funds which is followed by
Kotak Liquid Instrument (.10). But beta of 1 is preferable because of the
returns it is considered safe for the value of 1 in this analysis almost most of
the funds have beta of less than 1 which means that these funds are managed
in keeping the people risk at a manageable level, which help investors to earn
safe returns. But in this case, beta of all the funds is much below than 1. As
we have to do the analysis we have to take one stand so in this case,
according to me 1st rank should be given to that beta value which is lowest.
If two funds have same beta value then R-square value is used with the
beta which show how reliable the beta number is higher R-square value
is preferred.
Also, one of the important advantages of the mutual fund is that the investor
can enjoy the benefits of diversification of portfolio. Further, well diversified
portfolio diversifies the risk of the portfolio. Diversification can be measured
with the help of coefficient of diversification (R Square).
74 | P a g e

75. So, higher R Square means a well diversified portfolio. So, ICICI Liquid
Cash Instrument fund has the maximum R Square (.33) followed by HDFC
Liquid fund (.23).
But the analysis can’t be done on these two parameters. Standard deviation
measures total risk and this is the case with a single portfolio so we have also
considered ratios which are quite important for mutual funds analysis like
Sharpe ratio & Treynor ratio.
Sharpe ratio represents this trade-off between risk and returns. A higher
Sharpe ratio is therefore better as it represents a higher return generated per
unit of risk. Sharpe ratio provides an unbiased look into fund's performance.
This is because they are based solely on quantitative measures. Both the
Treynor Ratio and the Sharpe Ratio provide measures for ranking the relative
performance of various portfolios, on a risk-adjusted basis. So, in these two
ratios higher value is preferred for the fund selection.
In the case of Sharpe ratio Kotak Liquid Instrument fund (17.20) stands out
clear with 1st rank, followed by HDFC Liquid fund (16.91).
In case of Treynor ratio, Kotak Liquid Instrument fund (169.89) value is
higher so it has been given the 1st rank among the others which is followed
by ICICI Prudential Liquid fund (157.78).
Alpha indicates the superior performance of the fund. If the alpha is positive
the fund has performed better and if the alpha is negative the fund has not
performed upto the benchmark.
When Alpha is considered, HDFC Liquid fund (2.24) followed by UTI
Liquid Cash Instrument (1.98) & ICICI Prudential Liquid fund (1.98) each.
Kotak Liquid Instrument fund is recommended to all the investors as it has
the least standard deviation i.e. the risk is least as compared to all other
mutual funds. Beta is also 2nd lowest just after UTI Liquid Cash Instrument
and is also very close as it has the beta of (.10) and UTI Liquid Cash
instrument has of (.09). When compared the Sharpe ratio & the Treynor
75 | P a g e

76. ratio, Kotak Liquid Instrument has the highest ratio. Though it is the 3rd best
in R Square i.e. it is less diversified as compared to ICICI Prudential Liquid
& HDFC Liquid. Keeping in mind all the 6 parameters, Kotak Liquid
instrument fund is the best Cash Fund when compared with rest of the cash
funds.
CONCLUSION
After analyzing the mutual funds under 5 categories like Equity based, Debt
based, ELSS Tax Saving, Monthly Income Plans & Cash funds under 6
parameters like Standard deviation, Beta, Alpha, R Squared, Treynor Ratio
& Sharpe Ratio, I have come to a conclusion that there are different funds
which are performing best under different categories. No fund is the best in
all the categories.
Category Fund
Equity Fund Scheme ICICI Prudential Dynamic Plan- Growth
Debt Fund Scheme HDFC HI- Short Term
ELSS Tax Saver HDFC Tax Saver Scheme
76 | P a g e

77. Monthly Income Plan ICICI Prudential MIP
Cash Fund Kotak Liquid Instrument
So, it can be seen that ICICI Prudential is the best in Equity Fund Scheme &
Monthly Income Plan but HDFC is the best in Debt Fund Scheme & ELSS
Tax Saver Scheme. Kotak is the best in Cash Fund & when the NAV of past
3 years is compared T.I.G.E.R. fund is the best fund with a NAV of 45.64
and among these 5 funds Kotak Opportunities is the best fund with an NAV
of 43.72 of the past 3 years.
Investors have added to their portfolios well-managed diversified equity
funds with proven track records over longer time frames. On the basis of the
performance of diversified equity funds and how domestic markets are
placed, risk-taking investors would do well, who hold a larger portion of
their portfolio in actively managed diversified equity funds.
RECOMMENDATIONS
 Diversify
• One should diversify the investments between a few funds (the
actual number depends entirely on the amount of investment). This
strategy ensures that the portfolio is not dependent on the
performance of one single fund. However, one needs to avoid over-
diversification as that would achieve nothing.
• Investor can also plan like one mutual fund of diversified equity
plan, second mutual fund of balanced type and third one you can
plan of debt type etc. In this manner the money will get diversified,
risk is reduced and the investor will get excellent profit.
77 | P a g e

78. • For Example: Rs 20,000 per month, it would be wise to opt for a
maximum of three funds. Consider well rated large-cap funds, mid-
cap funds and a balanced fund. The latter would provide the debt
component and reduce the portfolio's downside risk.
 Don’t just judge a fund by its NAV
• Never judge a fund on the basis of its NAV. Also have a look at the
Standard Deviation, Beta, Alpha, R Squared, Treynor & Sharpe
Ratios & also its performance in the bear and the bull phase, and
then invest in it. Only judging a fund by its NAV, is irrelevant
while selecting the fund as it is the percentage gain or loss that
matters.
• Also look for past returns, dividend etc. the mutual fund has
declared. If the investor has chosen equity or stock market related
mutual fund, then he may go for SIP (Systematic Investment Plan)
method. A risk adverse investor should avoid investing in the
Sectoral funds.
 New Fund Offer (NFO), a marketing device
• AMC’s use NFOs to create excitement and push their funds. These
schemes are launched because they are easy avenues to capture
management fees and increase the fund house's asset base. These
schemes are usually just clones of existing schemes, but with new
peppy names flaunted to attract investors.
• It is important for investors to understand that NFOs are merely
marketing devices. There are a number of existing funds that have
78 | P a g e

79. proved their mettle and investors should opt for them because they
have a track record.
APPENDICES
 Kotak
Kotak 30- Growth
Objective
The investment objective of the scheme is to generate capital appreciation from a
portfolio of predominantly equity and equity related securities. The portfolio will
79 | P a g e

80. generally comprise of equity and equity related instruments of around 30companies
which may go up to 39 companies, and that these companies may or may not be the
same which constitute the BSE Sensitive Index or NSE Fifty (S&P CNX Nifty)
Index. Review and rebalancing will be conducted if the investment in companies
exceed above 39.
Type of Scheme Open Ended Krishna Sanghvi,
Fund Manager
Sanjib Guha .
Nature Equity
SIP
Option Growth
STP
Inception Date Dec 22, 1998
SWP
Face Value
10
(Rs/Unit) Expense ratio(%) 2.24
Fund Size in Rs. 684.07 as on Apr Portfolio
Cr. 30, 2008 Turnover 131.26
Ratio(%)
Last Dividend
10 % as on Dec 31, 2001
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. and
Entry Load
Amount greater than 50000000 then Entry load is 0%.
Exit Load If redeemed bet. 0 Months to 6 Months; Exit load is 1%.
Kotak Bond Short Term
Objective
The objective of the Plan is to provide reasonable returns and high level of liquidity
by investing in debt instruments and money market instruments so as to spread the
risk across different kinds of issuers in the debt markets.
80 | P a g e

81. Type of Scheme Open Ended Fund Manager Deepak Agrawal
Nature Debt SIP
Option Growth STP
Inception Date Apr 25, 2002 SWP
Face Value Expense ratio(%) 0.60
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 257.73 as on Apr Turnover NA
Cr. 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
Kotak Tax Saver Scheme- Growth
Objective
81 | P a g e

82. The investment objective of the scheme is to generate long term capital
appreciation from a diversified portfolio of equity and equity related securities and
enable investors to avail the income tax rebate, as permitted from time to time.
Type of Scheme Open Ended Fund Manager Krishna Sanghvi
Nature Equity SIP
Option Growth STP
Inception Date Oct 25, 2005 SWP
Face Value Expense ratio(%) 2.31
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 463.48 as on Apr Turnover 84.31
Cr. 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
500
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. &
Entry Load
Amount greater than 50000000 then Entry load is 0%.
Exit Load If redeemed after 0 Year; Exit load is 0%. Exit Load is 0%.
Kotak Income Plus
82 | P a g e

83. Objective
To enhance returns over a portfolio of debt instruments with a moderate exposure
in equity and equity related instruments.
Type of Scheme Open Ended Ritesh Jain,
Fund Manager Krishna Sanghvi,
Nature Debt
Sanjib Guha
Option Growth
SIP
Inception Date Nov 14, 2003
STP
Face Value
10 SWP
(Rs/Unit)
Expense ratio(%) 2.22
Fund Size in Rs. 28.95 as on Apr
Cr. 30, 2008 Portfolio
Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
If redeemed bet. 0 Year to 1 Year; and Amount Bet. 0 to
Exit Load
2500000 then Exit load is 1%.
83 | P a g e

84. Kotak Liquid Instrument
Objective
Aims to provide reasonable returns and high level of liquidity by investing in debt
instruments such as bonds, debentures, Government Securities, money market
instruments such as treasury bills, commercial paper, certificate of deposit,
including repos in permitted securities of different maturities so as to spread the
risk across different kinds of issuers in the debt markets.
Type of Scheme Open Ended Ritesh Jain,
Fund Manager
Deepak Agrawal.
Nature Short Term Debt
SIP
Option Growth
STP
Inception Date Mar 12, 2003
SWP
Face Value
10
(Rs/Unit) Expense Ratio(%) 0.72
Fund Size in Rs. 4475.02 as on Portfolio
Cr. Apr 30, 2008 Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
10000000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
84 | P a g e

85.  HDFC
HDFC Income Fund- Growth
Objective
Aims at providing capital appreciation through investments predominantly in equity
oriented securities
Type of Scheme Open Ended Fund Manager Prashant Jain
Nature Equity SIP
Option Growth STP
Inception Date Dec 24, 1994 SWP
Face Value Expense ratio(%) 1.82
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 4243.96 as on Turnover 56.62
Cr. Apr 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. &
Entry Load
Amount greater than 50000000 then Entry load is 0%.
Exit Load Exit Load is 0%.
85 | P a g e

86. HDFC HI Short Term
Objective
Seeks to generate income with a view to maximize income while maintaining the
optimum balance of Yield , Safety and Liquidity.
Type of Scheme Open Ended Fund Manager Shabbir Kapasi
Nature Debt SIP
Option Growth STP
Inception Date Feb 6, 2002 SWP
Face Value Expense ratio(%) 0.40
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 199.35 as on Apr Turnover NA
Cr. 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
1000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
86 | P a g e

87. HDFC Tax Saver Scheme
Objective
The fund plans to provide tax benefits along with capital appreciation
Type of Scheme Open Ended Fund Manager Vinay R Kulkarni
Nature Equity SIP
Option Growth STP
Inception Date Mar 31, 1996 SWP
Face Value Expense ratio(%) 2.02
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 1416.85 as on Turnover 50.91
Cr. Apr 30, 2008 Ratio(%)
Last Dividend
210 % as on Apr 4, 2000
Declared
Minimum
500
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. &
Entry Load
Amount greater than 50000000 then Entry load is 0%.
Exit Load Exit Load is 0%.
87 | P a g e

88. HDFC Monthly Income Plan - Short Term
Objective
The primary objective of the Scheme is to generate regular returns through
investment primarily Open Ended Money Market Instruments. Shobhit Mehrotra
Type of Scheme in Debt and Fund Manager The Secondary
Vinay R Kulkarni
objective of the scheme is to generate long term capital appreciation by investing a
Nature Debt
portion of the Scheme’s assets in equity and equity related instruments.
SIP
Option Growth
STP
Inception Date Dec 8, 2003
SWP
Face Value
10
(Rs/Unit) Expense ratio(%) 2.13
Fund Size in Rs. 117.1 as on Apr Portfolio
Cr. 30, 2008 Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
88 | P a g e

89. Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0
to 1000000 then Exit load is 0.5%. If redeemed bet. 0
Exit Load
Months to 3 Months; and Amount greater than 1000001 then
Exit load is 0.25%.
HDFC Liquid
Objective
The primary objective of the Scheme is to enhance income consistent with a high
level of liquidity, through a judicious portfolio mix comprising of money market
and debt instruments.
Type of Scheme Open Ended Fund Manager Shobhit Mehrotra
Nature Short Term Debt SIP
Option Growth STP
Inception Date Oct 17, 2000 SWP
Face Value Expense ratio(%) 0.55
10
(Rs/Unit)
Portfolio
Fund Size in Rs. 5078.26 as on Turnover NA
Cr. Apr 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
10000
Investment (Rs)
89 | P a g e

90. Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
 UTI
UTI Equity Fund
Objective
The principal investment objective is to provide long term capital appreciation
through investment in the securities market in India.
Type of Scheme Open Ended Fund Manager Anoop Bhaskar
Nature Equity SIP
Option Growth STP
Inception Date Apr 20, 1992 SWP
Face Value Expense Ratio(%) 1.54
10
(Rs/Unit) Portfolio
Fund Size in Rs. 1762.51 as on Turnover 51.31
Cr. Apr 30, 2008 Ratio(%)
90 | P a g e

91. Last Dividend
20 % as on Jun 10, 2005
Declared
Minimum
2000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 19999999 then Entry load is 2.25%. and
Entry Load
Amount greater than 20000000 then Entry load is 0%.
If redeemed bet. 0 Days to 180 Days; and Amount Bet. 0 to
19999999 then Exit load is 1%. If redeemed bet. 0 Days to
Exit Load
180 Days; and Amount greater than 20000000 then Exit load
is 0.5%.
UTI Short Term- Income Regular
Objective
The scheme aims to generate steady and reasonable income, with low risk and high level
of liquidity from a portfolio of money market securities and high quality debt.
Type of Scheme Open Ended Fund Manager Amit Jain
Nature Debt SIP
Option Growth STP
Inception Date Aug 27, 2007 SWP
Face Value Expense ratio(%) 0.67
10
(Rs/Unit) Portfolio
Fund Size in Rs. 618.57 as on Apr Turnover NA
Cr. 30, 2008 Ratio(%)
91 | P a g e

92. Last Dividend
NA
Declared
Minimum
10000000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load If redeemed bet. 0 Days to 15 Days; Exit load is 0.75%.
UTI ETSP- Growth
Objective
Aims at providing investors the opportunity to participate in the reasonable growth
in the value of investments in equities and equity - linked securities, over a period
of time, in addition to tax benefits
92 | P a g e

93. Type of Scheme Open Ended Fund Manager Swati Kulkarni
Nature Equity SIP
Option Growth STP
Inception Date Dec 15, 1999 SWP
Face Value Expense ratio(%) 2.33
10
(Rs/Unit) Portfolio
Fund Size in Rs. 352.89 as on Apr Turnover 38.39
Cr. 30, 2008 Ratio(%)
Last Dividend
20 % as on Nov 30, 2004
Declared
Minimum
500
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 19999999 then Entry load is 2.25%. and
Entry Load
Amount greater than 20000000 then Entry load is 0%.
Exit Load Exit Load is 0%.
UTI Monthly Income Scheme
Objective
The scheme aims at distributing income periodically.
93 | P a g e

94. Type of Scheme Open Ended Amandeep
Fund Manager
Nature Debt Chopra
Option Growth SIP
Inception Date Oct 11, 2002 STP
Face Value SWP
10
(Rs/Unit) Expense ratio(%) 1.40
Fund Size in Rs. 144.08 as on Apr Portfolio
Cr. 30, 2008 Turnover 32.31
Ratio(%)
Last Dividend
NA
Declared
Minimum
1000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
If redeemed bet. 0 Days to 180 Days; and Amount Bet. 0 to
Exit Load 999999 then Exit load is 0.5%. and Amount greater than
1000000 then Exit load is 0%.
UTI Liquid Cash Instrument
Objective
The scheme aims to generate steady and reasonable income, with low risk and high
level of liquidity from a portfolio of money market securities and high quality debt.
94 | P a g e

95. Type of Scheme Open Ended Amandeep
Fund Manager
Nature Short Term Debt Chopra
Option Growth SIP
Inception Date Jun 24, 2003 STP
Face Value SWP
1000
(Rs/Unit) Expense ratio(%) 0.24
Fund Size in Rs. 10929.77 as on Apr Portfolio
Cr. 30, 2008 Turnover NA
Ratio(%)
Last Dividend NA
Declared
Minimum 100000
Investment (Rs)
Purchase Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
 ICICI Prudential
ICICI Prudential Dynamic Plan- Growth
Objective
95 | P a g e

96. Seeks to generate capital appreciation by actively investing in equity and equity
related securities. For defensive considerations, the Scheme may invest in debt,
money market instruments and derivatives.
Type of Scheme Open Ended S Naren, Amit
Fund Manager
Nature Equity Mehta .
Option Growth SIP
Inception Date Oct 18, 2002 STP
Face Value SWP
10
(Rs/Unit) Expense ratio(%) 1.90
Fund Size in Rs. 1895.78 as on Portfolio
Cr. Apr 30, 2008 Turnover 225
Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. and
Entry Load
Amount greater than 50000000 then Entry load is 0%.
If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0
to 49999999 then Exit load is 1%. If redeemed bet. 6 Months
Exit Load to 12 Months; and Amount Bet. 0 to 49999999 then Exit load
is 0.5%. and Amount greater than 50000000 then Exit load is
0%.
ICICI Prudential Short Term
Objective
Aims to generate income through investments in a basket of debt and money
market instruments with a view to provide reasonable returns with low interest
risks.
96 | P a g e

97. Type of Scheme Open Ended Chaitanya Pande,
Fund Manager
Nature Debt Amit Mehta .
Option Growth SIP
Inception Date Feb 23, 2003 STP
Face Value SWP
10
(Rs/Unit) Expense Ratio(%) 0.80
Fund Size in Rs. 403.12 as on Apr Portfolio
Cr. 30, 2008 Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
25000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
ICICI Prudential Tax Plan
Objective
The scheme seeks to generate long term capital appreciation from a portfolio that is
Invested predominantly in equity and equity related securities
97 | P a g e

98. Type of Scheme Open Ended S Naren, Amit
Fund Manager
Nature Equity Mehta
Option Growth SIP
Inception Date Aug 9, 1999 STP
Face Value SWP
10
(Rs/Unit) Expense ratio(%) 2.11
Fund Size in Rs. 891.95 as on Apr Portfolio
Cr. 30, 2008 Turnover 187
Ratio(%)
Last Dividend
NA
Declared
Minimum
500
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Amount Bet. 0 to 49999999 then Entry load is 2.25%. and
Entry Load
Amount greater than 50000000 then Entry load is 0%.
Exit Load Exit Load is 0%.
ICICI Prudential Monthly Income Plan
Objective
The primary investment objective of the scheme is to generate regular income and
secondary objective is to generate capital appreciation.
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99. Type of Scheme Open Ended Prashant Kothari,
Nature Debt Fund Manager Rahul Goswami,
Amit Mehta
Option Growth
SIP
Inception Date Oct 14, 2000
STP
Face Value
10 SWP
(Rs/Unit)
Fund Size in Rs. 356.01 as on Apr Expense ratio(%) 1.95
Cr. 30, 2008 Portfolio
Turnover 42
Ratio(%)
Last Dividend
NA
Declared
Minimum
5000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0
Exit Load to 1000000 then Exit load is 0.5%. and Amount greater than
1000001 then Exit load is 0%.
ICICI Prudential Liquid
Objective
Aims to generate steady and consistent returns from a basket of high quality liquid
debt instruments.
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100. Type of Scheme Open Ended Chaitanya Pande,
Fund Manager
Nature Short Term Debt Amit Mehta
Option Growth SIP
Inception Date Feb 23, 2003 STP
Face Value SWP
10
(Rs/Unit) Expense ratio(%) 0.25
Fund Size in Rs. 18912.28 as on Portfolio
Cr. Apr 30, 2008 Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
10000000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
 Reliance
Reliance Growth
Objective
Seeks to provide Long Term Capital Appreciation
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101. Type of Scheme Open Ended Fund Manager Sunil Singhania
Nature Equity SIP
Option Growth STP
Inception Date Oct 7, 1995 SWP
Face Value Expense ratio(%) 1.81
10
(Rs/Unit) Portfolio
Fund Size in Rs. 5369.89 as on Turnover 50
Cr. Apr 30, 2008 Ratio(%)
Last Dividend NA
Declared
Minimum 5000
Investment (Rs)
Purchase Daily
Redemptions
NAV Calculation Daily
Entry Load Amount Bet. 0 to 19999999 then Entry load is 2.25%. and
Amount Bet. 20000000 to 49999999 then Entry load is
1.25%. and Amount greater than 50000000 then Entry load is
0%.
If redeemed bet. 0 Year to 1 Year; and Amount Bet. 0 to
Exit Load 49999999 then Exit load is 1%. and Amount greater than
50000000 then Exit load is 0%.
Reliance Short Term
Objective
It aims to generate stable returns for investors with a short-term investment horizon
by investing in fixed income securities of a short-term maturity.
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102. Type of Scheme Open Ended Fund Manager Prashant Pimple
Nature Debt SIP
Option Growth STP
Inception Date Dec 17, 2002 SWP
Face Value Expense ratio(%) 0.65
10
(Rs/Unit) Portfolio
Fund Size in Rs. 602.7 as on Apr Turnover NA
Cr. 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
50000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
Reliance Tax Saver
Objective
The primary objective of the scheme is to generate long-term capital appreciation
from a portfolio that is invested predominantly in equity and equity related
instruments.
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103. Type of Scheme Open Ended Fund Manager Ashwani Kumar
Nature Equity SIP
Option Growth STP
Inception Date Aug 23, 2005 SWP
Face Value Expense ratio(%) 1.89
10
(Rs/Unit) Portfolio
Fund Size in Rs. 2009.74 as on Turnover 98
Cr. Apr 30, 2008 Ratio(%)
Last Dividend NA
Declared
Minimum 500
Investment (Rs)
Purchase Daily
Redemptions
NAV Calculation Daily
Entry Load Amount Bet. 0 to 19999999 then Entry load is 2.25%. and
Amount Bet. 20000000 to 49999999 then Entry load is
1.25%. and Amount greater than 50000000 then Entry load is
0%.
Exit Load Exit Load is 0%.
Reliance Monthly Income Plan
Objective
The primary objective of the scheme is to generate regular income in order to make
regular dividend payments to unit holders with the secondary objective of growth in
capital
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104. Type of Scheme Open Ended Ashwani Kumar
Fund Manager
Nature Debt Prashant Pimple
Option Growth SIP
Inception Date Dec 29, 2003 STP
Face Value SWP
10
(Rs/Unit) Expense ratio(%) 1.99
Fund Size in Rs. 250.56 as on Apr Portfolio
Cr. 30, 2008 Turnover NA
Ratio(%)
Last Dividend
NA
Declared
Minimum
10000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
0 Months to 3 Months; and Amount Bet. 0 to 2500000 then
Exit load is 0.75%. If redeemed bet. 3 Months to 6 Months;
and Amount Bet. 0 to 2500000 then Exit load is 0.6%. If
redeemed bet. 6 Months to 9 Months; and Amount Bet. 0 to
Exit Load
2500000 then Exit load is 0.5%. If redeemed bet. 9 Months to
12 Months; and Amount Bet. 0 to 2500000 then Exit load is
0.25%. If redeemed bet. 0 Days to 7 Days; and Amount
greater than 2500001 then Exit load is 0.1%.
Reliance Liquid Cash
Objective
To generate optimal returns consistent with moderate levels of risk and high
liquidity.
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105. Type of Scheme Open Ended Fund Manager Amit Tripathy
Nature Short Term Debt SIP
Option Growth STP
Inception Date Dec 4, 2001 SWP
Face Value Expense ratio(%) 0.40
10
(Rs/Unit) Portfolio
Fund Size in Rs. 66.11 as on Apr Turnover NA
Cr. 30, 2008 Ratio(%)
Last Dividend
NA
Declared
Minimum
25000
Investment (Rs)
Purchase
Daily
Redemptions
NAV Calculation Daily
Entry Load Entry Load is 0%.
Exit Load Exit Load is 0%.
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106. References:
• http://amfiindia.com
• http://mutualfundindia.com
• http://valueresearchonline.com
• http://investopedia.com
• AMFI Workbook
• TREYNOR J.: How to Rate Management of Investment Funds,
Harvard Business Review, 1965/1
• SHARPE W.: Asset Allocation: Management style and Performance
Measurement. The Journal of Portfolio Management, Winter 1992
• Newspapers ( Economic Times , Business Line)
• Magazines ( Business World)
• Lynch, A. and D. Musto, (2002), “How Investors Interpret Past Fund
Returns”
• Brown, Stephen J. and William N. Goetzmann, 1995, Performance
Persistence," Journal of Finance, Volume 50 (2), pp. 679-698.
• Elton, Edwin J., Martin J. Gruber, and Christopher R. Blake, 1996,
The persistence of risk adjusted mutual fund performance, Journal of
Business 69, 133–157.
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