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S.

No ABBREVIONS USED

AMC Asset Management company


AMFI Association of Mutual fund in India
BSE Bombay Stock Exchange
CLB Company Law Board
CPF Capital Protection Fund
DAAF Dynamic Asset Allocation Fund
ELSS Equity Linked Saving Scheme
EPS Earnings Per Share
FI Financial Institution
FMCG Fast Moving Consumer Goods
FMP Fixed Maturity Plan
FOF Fund of Funds
MF Mutual Funds
MIP Monthly Income Plan
MMMF Money Market Mutual Fund
NAV Net Asset Value
NFO New Fund Offer
NPA Non Performing Asset
NRI Non Resident India
NSE National Stock Exchange
ROI Return on Investment
SEBI Securities and Exchange Board of India
SIP Systematic Investment Plan
SWP Systematic Withdraw Plan
UTI Unit Trust of India
YTM Yield to Maturity

1
Executive Summary
The project contains the brief description of the mutual fund industry in general. The funds that
are selected for study are:

1) SBI Magnum Tax Gain Scheme (G)

2) HDFC Tax Saver (G)

3) Taurus Tax Shield (G)

4) Canara Robeco Equity Tax Saver (G)

5) UTI Equity Tax Saving Plan (G)

6) LIC MF Tax Plan (G)

7) ICICI Pru Tax Plan (G)

The Net Asset Value (NAV) of each of these mutual funds over the last three years is
taken in account to find out the standard deviation of each of the funds. These are taken into
account to measure the returns of those funds. The returns are compared with that of their
benchmark index return. Using the NAV value of these mutual funds, beta (β) co-efficient of
each of them has been calculated to know whether they are less risky, average risky or high risky
funds. Similarly, standard deviation also calculated to understand the risk and return profile of
the selected funds. The returns of these funds over the last three years are also be analyzed.

The project will also contain the comparison of SBI mutual funds with other asset management
funds to analyze the risk and return of the funds. Primary data was collected from the fund
manager

2
Chapter-1
Introduction
Company Profile
Industry Profile

3
INTRODUCTION
TO
TAX SAVING SHEMES

4
INTRODUCTION TOMUTUAL FUND

“Mutual fund is a common pool of money in which investor place their


contribution that is to be invested in accordance with the stated objective.
The fund belongs to all the investors depending on the proportion of his
contribution to the fund.”
A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital market instruments
such as shares, debentures and other securities.
The income earned through these investments and the capital appreciations realized are
shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual
Fund is the most suitable investment for the common man as it offers an opportunity to invest in
a diversified, professionally managed basket of securities at a relatively low cost. The flow chart
below describes broadly the working of a Mutual Fund.

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Definition & Set up of Mutual Fund
In “Mutual Fund book” published by investment company of U.S., “A Mutual Fund is a
financial service organization that receives money from shareholders, invest it, earns returns on
it, attempts to make it grow and aggress to pay the share holders cash on demand for the current
value of his “investment”. The investment managers of the funds manage these savings in such a
way that the risk is minimized and steady return is ensured.

Securities and Exchange Board of India (Mutual Fund) Regulations, 1996 define “Mutual
Fund” as, “a fund established in the form of a trust to raise monies through the sale of units to the
public or a section of the people under one or more schemes for investing in securities, including
“Money market instruments”.

Mutual Fund as financial intermediaries which being a wide variety of


securities within the reach of the most modern investors.
Frank Relicy.

The Mutual Fund is an important vehicle for bringing wealth holder and deficit
units together directly.
James Pierce.

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TYPES OF MUTUAL FUNDS:

1. OPEN-ENDED MUTUAL FUNDS: -

The holders of the shares in the Fund can resell them to the issuing Mutual Fund
Company at the time. They receive in turn the net assets value (NAV) of the shares at the time of
re-sale. Such Mutual Fund Companies place their funds in the secondary securities market. They
do not participate in new issue market as do pension funds or life insurance companies. Thus
they influence market price of corporate securities. Open-end investment companies can sell an
unlimited number of Shares and thus keep going larger.
The open-end Mutual Fund Company Buys or sells their shares. These companies
sell new shares NAV plus a Loading or management fees and redeem shares at NAV. In other
words, the target amount and the period both are indefinite in such funds.

2. CLOSED-ENDED MUTUAL FUNDS:-

A closed–end Fund is open for sale to investors for a specific period, after which further
sales are closed. Any further transaction for buying the units or repurchasing them, Happen in
the secondary markets, where closed end Funds are listed. Therefore new investors buy from the
existing investors, and existing investors can liquidate their units by selling them to other willing
buyers. In a closed end Funds, thus the pool of funds can technically be kept constant. The asset
management company (AMC) however, can buy out the units from the investors, in the
secondary markets, thus reducing the amount of funds held by outside investors. The price at
which units can be sold or redeemed Depends on the market prices, which are fundamentally
linked to the NAV. Investors in closed end Funds receive either certificates or Depository
receipts, for their holdings in a closed end mutual Fund.

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MUTUAL FUND SCHEME TYPES:

1) Equity Diversified Schemes


These schemes mainly invest in equity. They seek to achieve long-term capital
appreciation by responding to the dynamically changing Indian economy by moving across
sectors such as Lifestyle, Pharma, Cyclical, Technology, etc.

2) Sector Schemes
These schemes focus on particular sector as IT, Banking, etc. They seek to generate long-
term capital appreciation by investing in equity and related securities of companies in that
particular sector.

3) Index Schemes
These schemes aim to provide returns that closely correspond to the return of a particular
stock market index such as BSE Sensex, NSE Nifty, etc. Such schemes invest in all the stocks
comprising the index in approximately the same weightage as they are given in that index.

4) Exchange Traded Funds (ETFs)


ETFs invest in stocks underlying a particular stock index like NSE Nifty or BSE Sensex.
They are similar to an index fund with one crucial difference. ETFs are listed and traded on a
stock exchange. In contrast, an index fund is bought and sold by the fund and its distributors.

5) Tax Saving Schemes

Tax-saving schemes offer tax rebates to the investors under tax


laws prescribed from time to time. Under Sec.88 of the Income Tax

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Act, contributions made to any Equity Linked Savings Scheme (ELSS)
are eligible for rebate.

6) Dynamic Funds
These schemes alter their exposure to different asset classes based on the market
scenario. Such funds typically try to book profits when the markets are overvalued and remain
fully invested in equities when the markets are undervalued. This is suitable for investors who
find it difficult to decide when to quit from equity.

7) Balanced Schemes
These schemes seek to achieve long-term capital appreciation with stability of investment
and current income from a balanced portfolio of high quality equity and fixed-income securities.

8) Medium-Term Debt Schemes


These schemes have a portfolio of debt and money market instruments where the average
maturity of the underlying portfolio is in the range of five to seven years.

9) Short-Term Debt Schemes


These schemes have a portfolio of debt and money market instruments where the average
maturity of the underlying portfolio is in the range of one to two years.

10) Money Market Debt Schemes


These schemes invest in debt securities of a short-term nature, which generally means
securities of less than one-year maturity. The typical short-term interest-bearing instruments
these funds invest in Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank
Call Money Market.

11) Medium-Term Gilt Schemes


These schemes invest in government securities. The average maturity of the securities in
the scheme is over three years.
12) Short-Term Gilt Schemes
These schemes invest in government securities. The securities invested in are of short to
medium term maturities.

13) Floating Rate Funds


They invest in debt securities with floating interest rates, which are generally linked to
some benchmark rate like MIBOR. Floating rate funds have a high relevance when interest rates
are on the rise helping investors to ride the interest rate rise.

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14) Monthly Income Plans (MIPS)
These are basically debt schemes, which make marginal investments in the range of 10-
25% in equity to boost the scheme’s returns. MIP schemes are ideal for investors who seek
slightly higher return that pure long-term debt schemes at marginally higher risk.

DIFFERENT MODES OF RECEIVING THE INCOME EARNED FROM


MUTUAL FUND INVESTMENTS

Mutual Funds offer three methods of receiving income:

1) Growth Plan
In this plan, dividend is neither declared nor paid out to the investor but is built into the
value of the NAV. In other words, the NAV increases over time due to such incomes and the
investor realizes only the capital appreciation on redemption of his investment.

2) Income Plan
In this plan, dividends are paid-out to the investor. In other words, the NAV only reflects
the capital appreciation or depreciation in market price of the underlying portfolio.

3) Dividend Re-investment Plan


In this case, dividend is declared but not paid out to the investor, instead, it is reinvested
back into the scheme at the then prevailing NAV. In other words, the investor is given additional
units and not cash as dividend.

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RISKS ASSOCIATED WITH MUTUAL FUNDS
Investing in Mutual Funds, as with any security, does not come without risk. One of
the most basic economic principles is that risk and reward are directly correlated. In other words,
the greater the potential risk the greater the potential return. The types of risk commonly
associated with Mutual Funds are:

1) MARKET RISK
Market risk relates to the market value of a security in the future. Market prices fluctuate and
are susceptible to economic and financial trends, supply and demand, and many other factors that
cannot be precisely predicted or controlled.

2) POLITICAL RISK
Changes in the tax laws, trade regulations, administered prices, etc are some of the many
political factors that create market risk. Although collectively, as citizens, we have indirect
control through the power of our vote individually, as investors, we have virtually no control.

3) INFLATION RISK
Interest rate risk relates to future changes in interest rates. For instance, if an investor invests
in a long-term debt Mutual Fund scheme and interest rates increase, the NAV of the scheme will
fall because the scheme will be end up holding debt offering lower interest rates.

4) BUSINESS RISK
Business risk is the uncertainty concerning the future existence, stability, and profitability of
the issuer of the security. Business risk is inherent in all business ventures. The future financial
stability of a company cannot be predicted or guaranteed, nor can the price of its securities.
Adverse changes in business circumstances will reduce the market price of the company’s equity
resulting in proportionate fall in the

5) ECONOMIC RISK
Economic risk involves uncertainty in the economy, which, in turn, can have an adverse
effect on a company’s business. For instance, if monsoons fail in a year, equity stocks of
agriculture-based companies will fall and NAVs of Mutual Funds, which have invested in such
stocks, will fall proportionately.

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COMPANY PROFILE

12
Company Profile
SBI funds management private limited is an asset management company, a joint venture between
SBI, the country’s largest bank and society general asset management (FRANCE) one of world’s
leading fund management companies.

With over 20 years of rich experience in fund management, SBI fund management private
limited in one of the largest investment firms in India .managing investment mandates of over 46
lakes investors with a network of over 130 points of acceptance spread across India.

INVESTOS SERVICE CENTERS:

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SBIMF INVESTORS SERVICE CENTERS:

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AHMEDABAD KOLKATTA

BANGALORE LUCKNOW

BHILAI LUDHIANA

BHOPAL MUMBAI

BHUBANESHWAR NAGPUR

CHANDIGARH NEW DELHI

CHENNAI PATNA

COIMBATORE PUNE

ERNAKULAM RANCHI

GOA SILIGURI

GURGAON SURAT

GUWAHATI THIRUVANANTHAPURAM

HYDERABAD VADODARA

INDORE VARANASI

JAIPUR VIJAYAWADA

KANPUR

Overview of existing schemes e in mutual funds:


1. Equity fund:

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These funds invest a maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:

• Diversified Equity Funds


• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.

2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income
to the investors. Debt funds are further classified as:

Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interest Rate risk.

Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs).

Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs.

3. Balanced funds:

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As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.

Each category of funds is backed by an investment philosophy, which is pre-defined in


the objectives of the fund. The investor can align his own investment needs with the
funds objective and invest according.

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INDUSTRY PROFILE

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ORGANISATION OF A MUTUAL FUND:
There are many entities involved and the diagram below illustrates the organizational set up of a
Mutual Fund:

Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This
is because by holding all your money in just one asset, the entire fortunes of your portfolio
depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially
reduced.

Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced. A very
important risk involved in Mutual Fund investments is the market risk. However, the company
specific risks are largely eliminated due to professional fund management.

In India, mutual fund industry incorporated by UTI in 1963. The Indian mutual fund
industry dominated by UTI which has a total corpus of Rs.700bn collected from more than 20
million investors. A second largest category of mutual fund is the once floated by a private sector
and by foreign asset management companies.

In 1986, SBI and CANBANK mutual fund entered the arena. Then BOI, LIC, GIC etc
.sponsored by public sector banks. In1993 private international players like Morgan Stanley, JP
Morgan and capital international along with the host of domestic players joined the party. In

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1999, AMFI is framed to regulate mutual funds and to winning the trust and confidence of
investors. Current size of mutual funds is Rs. 1550bn with CAGR of 26.34%.

A Brief History of Mutual Fund


In commercial history of Egyptian it was stated that the shares were in vessels and
caravans, in order to spread the risk of business ventures. After sometime in 1822, can investment
trust called Society General de “Belgiue” was formed in Belgium. The Royal family of Holland
before the separation of Belgium and Holland formed the institution. The institution has set right
services in a wide range of companies and produced the percept of diversification later, the
investment trust concept attracted many countries and considerable progress was med in Switzerland
little in France, Germany, and rest of the Europe.

The concept of investment trust gained momentum in Great Britain. The first investment
trust, the Foreign and Colonial Government Trust, was founded in London in 1868. Later in 1873,
Robert Fleming at Dundee established the Scottish, American Trust. At that time, British bonds were
yielding a returns ranging between five and six per cent.

In 1933, the US Congress directed the Securities and Exchange Commission (SEC) to
investigate the operations of the American Investment Trusts. The SEC recommended the passage of

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legislation, which materialized in 1940. The Investment Companies Act of 1940 provides rules and
regulations for the establishment and mutual funds.

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank. The history of mutual fund in
India can be broadly divided into four distinct phases:

First phase: (1964 – 87) - UTI

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 operations in July 1964 “with a view to
encouraging savings and investment and participation in the income, profits and gains accruing in
the corporation from the acquisition, holding, management and disposal of securities”.

In short, it was set up by the Indian Government with a view to augments small savings
in the country and to canalize these savings to the capital markets. UTI witnessed a slow and steady
growth over the 1970s and 1980s and by the end of 1988 it had an Asset Under Management (AUM)
of Rs.6, 700 crores.

Second phase: (1987 – 1993) – Entry of Public Sector.

Public sector mutual funds set up by sector banks, Life Insurance Corporation of India
(LIC) and the General Insurance Corporation of India (GIC) entered the market in 1987. The first
non-UTI Mutual Fund was the SBI Mutual Fund established in June 1987, followed by Can Bank
Mutual Fund in December 1987, Punjab National Bank in August 1989, India Bank Mutual Fund in
November 1989, and Bank of India Mutual Fund in 1990.

Bank of Baroda Mutual Fund in October 1992. LIC set up its Mutual Fund in June 1989
awhile GIC established its mutual fund in December 1990, at the end of 1993, the mutual fund
industry has asset under management of Rs.47004 crores.

Third phase: (1993 – 2003) Entry of Private Sector.

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of funds families. Also, 1993 was the year in
which the first mutual fund regulations came into being, under which all mutual funds, except UTI
where to be registered and governed. The erstwhile Kothari Pioneer (now merged with the Franklin
Templeton) was the first private sector mutual fund registered in July 1993.

In 1993 SEBI regulations were substituted by a more comprehensive and revised mutual
fund regulations in 1996, the industry now functions under the SEBI regulations 1996.

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The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and acquisitions. At
the end of January 2003, there were 33 mutual funds with total assets of Rs.121805 crores. The
Unit Trust of India with Rs.44541 crores of assets under management was way ahead of other
mutual funds.

Fourth phase: (Since February 2003)


In February 2003, following the repeal of the Unit Trust of India act 1963 UTI was
bifurcated into two separate entities. One is the specified undertaking of the Unit Trust of India with
assets under management of Rs.29835 crores as at the end of January 2003, representing broadly, the
assets of US 64 schemes, assured return and certain other schemes. The specified undertaking of
Unit Trust of India, functioning under an administered and under the rules formed by Government of
India and does not come under the purview of mutual fund regulations.
The second is the UTI Mutual Fund Limited, sponsored by State Bank of India,
Punjab National Bank, Bank of Baroda and Life Insurance Corporation. It is registered with SEBI
and functions under the mutual fund regulations. With the bifurcation of erstwhile UTI which had in
March 2000, more than Rs.76000 crores of assets under management.

With the setting up of a UTI mutual fund, confirming to the SEBI mutual fund
regulations, and which recent mergers taking place among different private sector funds, the mutual
fund industry had entered it current phase of consolidation and growth. As the end of March 2008,
there were 35 Mutual Funds, which manage assets of Rs.505152 under 421 schemes.

Entities in a Mutual Fund Operation


In India, the following entities are involved in a mutual fund operation: the
Sponsor, the Mutual Fund, the Trustees, the Asset Management Company, the Custodian, and the
Registrars and Transfer Agents.

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➢ Sponsor
The sponsor of a mutual fund is like the promoter of a company. The sponsor may
be a bank, a financial institution, or a financial services company. It may be Indian or foreign.

The sponsor is responsible for setting up and establishing the mutual fund. The
sponsor is the settler of the mutual fund trust. The sponsor delegates the trustee’s functions to the
trustee.

➢ Trustees
A trust is a notional entity that cannot contract in its own name. So, the trust enters into
contracts in the name of the trustees. Appointed by the sponsor, the trustees can be either
individuals or a corporate body (a trustee company). To ensure that the trustees are fair and
impartial, SEBI rules mandate that at least two-thirds of the trustees are independent – this
means they have no association with the sponsor.

The trustees appoint the asset management company (AMC), secure necessary
approvals, periodically monitor how the AMC functions, and hold the properties of the various
schemes in trust for the benefit of investors. Trustees can be held accountable for the financial
irregularities of the mutual fund.

➢ Asset Management Companies


Asset Management Companies manage the investment portfolios of schemes. An
AMCs income comes from the management fees it charges the scheme it manages. In order to
earn the management fee, an AMC has naturally to employ people and bear all the establishment
costs that are related to its activity, such as for premises, furniture, computers and other assets,
software development, communication costs, etc. These are to be met out of the management fee
earned.

Within AMC, fund managers are to ensure that schemes funds are invested to achieve
the objective of the scheme and in the interest of the unit holder. The CEO, in tern, has to ensure
that the fund managers perform this role. In addition, compliance with various rules and
regulations, and overall risk management are the responsibility of the mutual fund’s CEO.

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➢ Custodians/Depository
The custodians maintain custody of the securities in which the scheme invests – as
distinct from the registrar who tracks the investment by investors in the scheme. This ensures an
independent record of the investment of the scheme. The custodian also follows up on various
corporate actions, such as rights, bonus and dividends declared by the investment company.

➢ Registrars

An investor’s holding in mutual fund schemes is typically tracked by the scheme’s


Registrar and Transfer agent (R&T). Some AMCs prefer to handle this role in-house, i.e. on their
own instead of appointing an R&T. The Registrar or the AMC as the case may be maintains an
account of the investor’s investment in and disinvestment from the schemes. Requests to invest
more money into a scheme or to redeem money against existing investments in a scheme are
processed by the R&T.

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

a) A Mutual Fund actually belongs to the investors who have pooled their Funds. The
ownership of the mutual fund is in the hands of the Investors.
b) A Mutual Fund is managed by investment professional and other service providers, who
earn a fee for their services, from the funds.
c) The pool of Funds is invested in a portfolio of marketable investments.
d) The value of the portfolio is updated every day.
e) The investor’s share in the fund is denominated by “units”. The value of the units
changes with change in the portfolio value, every day. The value of one unit of
investment is called net asset value (NAV).
f) The investment portfolio of the mutual fund is created according to the stated investment
objectives of the Fund.

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Chapter-2
Research Design and Methodology
a) Need for the Study
b) Objective of the study
c) Sampling and Data Collection
d) Statistical Tools and Technique
e) Limitation of the Study

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RESEARCH
METHODOLOGY

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A) NEED FOR THE STUDY
In present market trend, Mutual Fund is one of the revolutionary
investment alternatives. In present economic liberalization scenario
investors with their huge surplus funds, needs highly diversifiable
instrument alternative for moderate returns with low risks, with this the
mutual funds got significance in Indian capital market.
And Due to the following Advantages

ADVANTAGES OF MUTUAL FUNDS:

1) Reduced Risk.
2) Diversified investment.
3) Botheration free investment.
4) Revolving type of investment (Reinvestment).
5) Selection and timings of investment.
6) Wide investment opportunities.
7) Investments care.
8) Tax benefits.

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B) OBJECTIVES OF THE STUDY
1. To analyze and evaluate the performance of TAXGAIN funds of various
Mutual Fund companies based on past data.

2. To know which Tax gain fund is performing well.

3. Comparison is to be done based on Risk & Return & giving Ranks

4. To provide the information to the Investor as a financial adviser

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C) Sampling & Data Collection
SAMPLING TECHNIQUE:

Convenience sampling technique (which comes under non-probability sampling


method)is taken to select the five balanced funds.

DATA COLLECTION:

1. Primary Data: Collected from the fund manager about the funds they are providing
and the investment methods they are following through personal interview.
2. Secondary Data: Collected from the websites related to mutual funds, books, and
brochures.

SAMPLE
1) SBI Magnum Tax Gain Scheme (G)
2) HDFC Tax Saver (G)
3) Taurus Tax Shield (G)
4) Canara Robeco Equity Tax Saver (G)
5) UTI Equity Tax Saving Plan (G)
6) LIC MF Tax Plan (G)
7) ICICI Pru Tax Plan (G)

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D) Statistical Tools & Techniques

Statistical Tools
1. Mean

2. Standard deviation

3. Beta

4. Sharpe Measure

5. Trey nor Measure

Mean
It is the average of all the 3 year returns. It used to calculate Treynor Measure and
Sharpe measure.

Standard Deviation (σ)


Standard Deviation is a statistical tool, which measures the variability of returns from the
expected value, or volatility. It is denoted by sigma (σ). It is calculated using the formula
mentioned below:

Where, is the sample mean, xi’s are the observations (returns), and N is the total
number of observations or the sample size.

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Beta
Risk is an important consideration in holding any portfolio. The risk in holding
securities is generally associated with the possibility that realized returns will be less than the
returns expected.

Risks can be classified as Systematic risks and Unsystematic risks.

• Unsystematic risks:

These are risks that are unique to a firm or industry. Factors such as management
capability, consumer preferences, labor, etc. contribute to unsystematic risks.
Unsystematic risks are controllable by nature and can be considerably reduced by
sufficiently diversifying one's portfolio.

• Systematic risks:

These are risks associated with the economic, political, sociological and other macro-
level changes. They affect the entire market as a whole and cannot be controlled or
eliminated merely by diversifying one's portfolio

What is Beta?

The degree, to which different portfolios are affected by these systematic risks as
compared to the effect on the market as a whole, is different and is measured by Beta. To put it
differently, the systematic risks of various securities differ due to their relationships with the
market. The Beta factor describes the movement in a stock's or a portfolio's returns in relation to
that of the market return. For all practical purposes, the market returns are measured by the
returns on the index (Nifty, Mid-cap etc.), since the index is a good reflector of the market.

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Methodology
Formula:

Beta is calculated as:


Covariance ( Kj, Km)
β = ------------------------------------

Variance (Km)

Where,
Kj is the returns on the portfolio or stock - DEPENDENT VARIABLE
Km is the market returns or index - INDEPENDENT VARIABLE

Variance is the square of standard deviation.


Covariance is a statistic that measures how two variables co-vary, and is given by:

Where, N denotes the total number of observations, and and respectively represent the
arithmetic averages of x and y.

In order to calculate the beta of a portfolio, multiply the weightage of each stock in the portfolio
with its beta value to arrive at the weighted average beta of the portfolio

Sharpe Measure
Sharpe measure reflects the excess return earned on a portfolio per unit of its total risk. It
is similar to Trey nor measure except that it employees standard deviation as a measure of risk.
Thus,

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Average rate of return – Risk free rate

Sharpe measure = -----------------------------------------------

Standard deviation of return

Trey-nor Measure
According to Jack Trey-nor, systematic risk or beta is the appropriate measure of risk.
Trey-nor measure of portfolio also related to the portfolio of beta.

Thus,

Average rate of return-Risk free rate

Trey-nor measure = ---------------------------------------------

Beta

Note:

1. The Sharpe measure, the Trey-nor measure as well as the Sharpe measure, postulate a linear
relationship between risk and return though they employ different measures of risk.

2. For a perfectly diversified portfolio both the measures give identical rankings because in
such cases the total risk and systematic risk are the same

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E) Limitations of the Study
1) Study is confined to the data available from the fact sheets
And Websites
2) Tax Gain Schemes of Seven AMC’s are only taken in to account due
To Time and Finance constraints.

3) Historical data is not a perfect measure of future performance.

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Chapter-3
Data Analysis
&
Interpretation

35
DATA ANALYSIS
&
INTERPRETATION

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1) SBI MAGNUM TAX GAIN SCHEME (G)
Top of Form

Bottom of Form Open-Ended

Fund Type

Investment Plan Growth

Asset Size (Rs cr) 4,466.97 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Mar 31, 1993

Benchmark BSE 100

Fund Manager Jayesh Shroff

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S.N From NAV TO Date NAV Return X Return
Date (%) Y (%)

1 1/7/1999 4.94 30/06/2000 10.166 105.7 33.5290

2 1/7/2000 10.58 30/06/2001 4.5 -57 -33.3281

3 1/7/2001 4.56 30/06/2002 4.73 3.7 0.8062

4 1/7/2002 4.81 30/06/2003 4.89 1.7 9.9523

5 1/7/2003 4.93 30/06/2004 8.81 78.6 40.6442

6 1/7/2004 8.91 30/06/2005 22.06 147.5 47.9072

7 1/7/2005 22.3 30/06/2006 32.35 45.1 42.0194

8 1/7/2006 32.407 30/06/2007 48.14 48.5 41.1213

9 1/7/2007 48.52 30/06/2008 42.36 -12.7 -7.8244

10 1/7/2008 40.82 30/06/2009 45.65 11.8 7.4387

SUM 372.9 182.2661

AVG 37.29 18.2266

Std Dev Beta Sharpe Trey nor

60.6937 0.3530 0.4990 85.8014

Graphical representation of Returns of


SBI MAGNUM Tax Gain

Interpretation: SBI Magnum Tax gain Fund is Performing


Since 10 Years with

Average Return 37.29


Standard deviation 60.69
Beta 0.353

38
Sharpe 0.499

Trey nor 85.809

2) HDFC TAX SAVER (G)


Top of Form

Bottom of Form Open-Ended

Fund Type

Investment Plan Growth

Asset Size (Rs cr) 1,740.73 (Jul-31-2009)

Minimum Investment Rs.500

Last Dividend Rs.21.00 (Apr-03-2000)

Launch Date Dec 18, 1995

Benchmark S&P CNX 500

Fund Manager Vinay Kulkarni

39
Graphical representation of Returns of
HDFC Tax Saver
S. From Date NAV TO Date NAV Return X Return
N (%) Y (%)

1 1/7/1999 7.26 30/06/200 19.3 165.8 33.1390


0

2 1/7/2000 19.79 30/06/200 16.1 -18.6 -


1 32.4036

3 1/7/2001 16.26 30/06/200 19.01 16.9 6.1971


2

4 1/7/2002 19.24 30/06/200 24.67 28.2 15.3151


3

5 1/7/2003 24.6 30/06/200 37.75 53.5 38.9987


4

6 1/7/2004 38.28 30/06/200 78.11 104 52.1976


5

7 1/7/2005 79.21 30/06/200 115.19 45.4 34.8081


6

8 1/7/2006 115.8 30/06/200 156.53 35.2 40.5029


7

9 1/7/2007 157.21 30/06/200 126.45 -19.6 -


8 11.7534

10 1/7/2008 122.53 30/06/200 146.73 19.7 8.2792


8 9

SUM 430.5 185.281


1

AVG 43.05 18.5281

Std Dev Beta Sharpe Trey nor

55.9107 0.3062 0.6447 117.733


1

40
Interpretation: HDFC Tax Saver has been performing for 10 years

Average Return 37.29


Standard deviation 60.69
Beta 0.353

Sharpe 0.499

Trey nor 85.809

3) TAURUS TAX SHIELD (G)


Top of Form

Bottom of Form Open-Ended

Fund Type

Investment Plan Growth

Asset Size (Rs cr) 23.20 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Mar 31, 1996

Benchmark BSE 200

Fund Manager Prasanna Pathak

41
S. From NAV TO Date NAV Retur Return
N Date nX Y (%)
(%)

1 1/7/1999 10.56 30/06/2000 9.93 -6 25.4689

2 1/7/2000 9.9 30/06/2001 6.61 -33.2 -31.8441

3 1/7/2001 6.73 30/06/2002 8.69 29.2 9.4303

4 1/7/2002 9 30/06/2003 10.23 13.7 14.8946

5 1/7/2003 10.33 30/06/2004 8.6 -16.7 38.1437

6 1/7/2004 8.69 30/06/2005 19.01 118.8 47.2757

7 1/7/2005 19.16 30/06/2006 15.05 -21.5 37.9174

8 1/7/2006 15.17 30/06/2007 20.03 32 41.7983

9 1/7/2007 20.41 30/06/2008 22.44 9.9 -9.1563

10 1/7/2008 21.8 30/06/2009 26.21 20.2 7.2458

SUM 146.4 181.1747

AVG 14.64 18.1174

Std Dev Beta Sharpe Trey nor

42.7133 0.2350 0.1788 32.4999

Graphical representation of Returns of Taurus Tax Shield

Interpretation: Taurus Tax Shield has been performing for 10 years

Average Return 37.29

42
Standard deviation 60.69
Beta 0.353

Sharpe 0.499

Trey nor 85.809

4) CANARA ROBECO EQUITY TAX SAVER (G)


Top of Form
Bottom of Form Open-Ended
Fund Type

Investment Plan Growth

Asset Size (Rs cr) 53.26 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Mar 31, 1993

Benchmark BSE 100

Fund Manager Anand Shah

S.N From Date NAV TO Date NAV Return X (%) Return Y


(%)

1 1/7/1999 3.78330/06/2000 6.309 66.8 33.5290

2 1/7/2000 6.51530/06/2001 3.358 -48.5 -33.3281

3 1/7/2001 3.32930/06/2002 3.19 -4.2 0.8062

4 1/7/2002 3.24930/06/2003 3.276 0.8 9.9523

5 1/7/2003 3.30730/06/2004 4.531 37 40.6442

6 1/7/2004 4.57230/06/2005 6.936 51.7 47.9072

7 1/7/2005 7.11630/06/2006 9.989 40.4 42.0194

8 1/7/2006 10.0630/06/2007 15.199 51.9 41.1213

9 1/7/2007 15.45230/06/2008 13.38 -13.4 -7.8244

43
10 1/7/2008 12.9830/06/2009 17.13 32 7.4387

SUM 214.5 182.2661

AVG 21.45 18.2266

Std Dev Beta Sharpe Trey nor

36.2138 0.61810.3990 23.3768

Graphical representation of Returns of


Canara Robocco Equity Tax Saver

Interpretation: Canara Robocco Equity Tax Saver has been


Performing for 10 years

Average Return 21.45


Standard deviation 36.21
Beta 0.6181

Sharpe 0.399

Trey nor 23.376

5) UTI Equity Tax Savings Plan (G) MUT025

Top of Form Open-Ended

Bottom of Form

44
Fund Type

Investment Plan Growth

Asset Size (Rs cr) 427.12 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Dec 15, 1999

Benchmark BSE Sensitive Index

Fund Manager Swati Kulkarni

45
S.N From NAV TO Date NAV Return X Return Y
Date (%) (%)

1 1/7/2000 6.473 30/06/200 6.28 -3.00 14.2459


1

2 1/7/2001 6.656 30/06/200 7.03 5.70 -28.6775


2

3 1/7/2002 6.912 30/06/200 8.81 18.40 -6.7631


3

4 1/7/2003 7.757 30/06/200 12.77 64.70 32.5540


4

5 1/7/2004 12.725 30/06/200 19.52 53.40 49.4434


5

6 1/7/2005 19.240 30/06/200 25.01 30.00 48.0611


6

7 1/7/2006 25.810 30/06/200 32.24 24.90 37.9914


7

8 1/7/2007 31.850 30/06/200 29.86 -6.20 -8.3319


8

9 1/7/2008 34.860 30/06/200 29.57 -15.20 7.5209


9

SUM 172.70 146.044


4

AVG 19.1888 16.2271

Std Dev Beta Sharpe Trey nor

27.1414 0.5940 0.4490 20.5177

46
Graphical representation of Returns of
UTI Tax Saving Scheme

Interpretation: UTI Tax Saving Scheme has been performing


For 9 years

Average Return 19.188


Standard deviation 27.141
Beta 0.594

Sharpe 0.449

47
Trey nor 20.517

6) LIC MF TAX PLAN (G)


Top of Form

Bottom of Form Open-Ended

Fund Type

Investment Plan Growth

Asset Size (Rs cr) 41.86 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Jan 01, 1997

Benchmark BSE Sensitive Index

Fund Manager Ashish Kumar

From NAV TO Date NAV Return X Return


Date (%) Y (%)

1 1/7/2000 13.31030/06/200 6.710 -49.6 14.2459


1

2 1/7/2001 6.71030/06/200 7.500 11.8 -


2 28.6775

3 1/7/2002 7.65130/06/200 8.714 13.9 -6.7631


3

4 1/7/2003 8.78830/06/200 13.278 51.1 32.5540


4

5 1/7/2004 13.41430/06/200 17.318 29.1 49.4434


5

6 1/7/2005 17.44430/06/200 21.586 23.7 48.0611

48
6

7 1/7/2006 21.62330/06/200 26.966 24.7 37.9914


7

8 1/7/2007 27.10830/06/200 22.135 -18.3 -8.3319


8

9 1/7/2008 22.24430/06/200 24.109 8.4 7.5209


9

SUM 94.8 146.044


4

AVG 10.5333 16.2271

Std Dev Beta Sharpe Trey nor

29.2175 0.3537 0.1209 9.9874

Graphical representation of Returns of LIC MF Tax Plan

Interpretation: LIC MF Tax Plan has been performing for 9 years

Average Return 10.533


Standard deviation 29.217
Beta 0.3537

Sharpe 0.1209

Trey nor 9.9874

49
7) ICICI Pru Tax Plan (G)
Top of Form

Bottom of Form Open-Ended

Fund Type

Investment Plan Growth

Asset Size (Rs cr) 806.34 (Jul-31-2009)

Minimum Investment Rs.500

Launch Date Aug 09, 1999

Benchmark S&P CNX Nifty

Fund Manager Sankaran Naren / Mrinal Singh

S.N From Date NAV TO Date NAV Return XReturn Y


(%) (%)

1 1/7/1999 10.00 30/06/2000 14.02 40.2 23.8750

2 1/7/2000 14.51 30/06/2001 10.4 -28.3 -25.9053

3 1/7/2001 10.38 30/06/2002 13.22 27.4 -4.5608

4 1/7/2002 13.35 30/06/2003 16.45 23.2 6.1888

5 1/7/2003 16.59 30/06/2004 25.18 51.8 33.1564

6 1/7/2004 25.44 30/06/2005 53.23 109.2 44.4574

7 1/7/2005 54.16 30/06/2006 73.12 35.0 40.8813

8 1/7/2006 73.37 30/06/2007 93.38 27.3 38.0103

9 1/7/2007 93.22 30/06/2008 83.62 -10.3 -6.4340

10 1/7/2008 80.81 30/06/2009 85.95 6.4 10.1199

SUM 281.9 159.7892

AVG 28.19 15.9789

Std Dev Beta Sharpe Trey nor

50
37.2445 0.4598 0.5689 46.0798

Graphical representation of Returns of ICICI Pru Tax


Saver

Interpretation: ICICI Pru Tax Saver has been performing for 10


fyears

Average Return 28.19


Standard deviation 37.244
Beta 0.4598

Sharpe 0.5689

Trey nor 46.078

Comparison and Ranking of the Funds

Based on

Sharpe & Trey-nor Measures

51
Calculation of Sharpe's Index:
Mean Return Std Dev Sharpe Rank

Risk free Risk


Fund name Return Premium

29.2175 0.1209
LIC MF 10.5333 7 3.5333 7

37.2445 0.5689
ICICI Pru 28.19 7 21.19 2

55.9107 0.6447
HDFC 43.05 7 36.05 1

SBI 60.6937 0.499


MAGNUM 37.29 7 30.29 3

27.1414 0.449
UTI Equity 19.1888 7 12.1888 4

CANARA 36.2138 0.399


ROBECO 21.45 7 14.45 5

42.7133 0.1788
TAURUS 14.64 7 7.64 6

Calculation of Trey nor's Index:

Fund Mean Risk Risk Beta Trey nor Rank


free

52
name Return Return Premium

LIC MF 10.5333 7 3.5333 0.3537 9.9874 7

ICICI Pru 28.19 7 21.19 0.4598 46.0798 3

HDFC 43.05 7 36.05 0.3062 117.7331 1

SBI 37.29 7 30.29 0.353 85.8014 2


MAGNUM

UTI 19.1888 7 12.1888 0.594 20.5177 6


Equity

CANARA 21.45 7 14.45 0.6181 23.3768 5


ROBECO

TAURUS 14.64 7 7.64 0.235 32.4999 4

Scattered diagram for the Mean & Standard deviation:

X-axis : Standard deviation

53
Y-axis : Mean Return

Chapter-4

54
Summary-Findings & Conclusions

Suggestions

Bibliography

FINDINGS
&

55
CONCLUSIONS

Findings & Conclusions


1) SBI Magnum Tax Gain Scheme is Giving High Risk Premium 30.29 than that of LIC MF
with 3.533 even both are having same Market Risk Beta.

So I conclude that SBI Magnum tax gain is performing better than LIC MF tax plan.

2) HDFC Tax Saver is giving high average return of 43% and at low Standard deviation
55.91

Here I conclude that HDFC is giving good average return.

3) SBI Magnum Tax Gain Scheme got 2nd & 3rd Rank with respect to Trey nor and Sharpe
measures.

So SBI Magnum tax gain is better in the cases of two measures viz.. Sharpe & Treynor

4) Sensitive index or Beta Of Canara Robecco is high i.e 0.6181.

56
So it undergoes more fluctuation to the market.

ICICI Tax plan is performing better than the LIC MF & Taurus plans.

57
SUGGESTIONS

Suggestions

1. As HDFC tax Saver and SBI magnum Tax gain Schemes has been
performing well for the past 10 years so it is better to invest in this funds

2. As Tax-saving schemes offer tax rebates, Under Sec.80(C) of the Income


Tax Act, it is better to invest in the Tax Funds, as we can get good returns &
also tax exemption.

58
3. As the stock markets are in the bullish trend it is better to invest in the funds
which have Beta values above 0.5.

4. Average return of sensex is around 18%, since inception. And the


performance of Mutual funds is much above the sensex performance. So I
suggest everybody to invest in Mutual funds.

5. Average bank rates are also around 8%. So I suggest the investors to invest
in Mutual Funds.

59
BIBILOGRAPHY

Bibliography
Books Referred
AMFI Mutual Fund Testing Program- “A work book by Association of Mutual Funds in India

➢ ICFAI Mutual Fund Text Book

➢ Right and Remedies – “SEBI note on Investor Grievance”

60
Journals
➢ Economic Times

➢ Times of India

➢ Business Line

Magazines
➢ Business World

➢ Business Analysis

➢ Business Standards

Websites
➢ www.amfi.com

➢ www.sbimf.com

➢ www.sebi.com

➢ www.moneycontrol.com

➢ www.valueresearchonline.com

61