Performance Evaluation of Mutual Funds" Conducted at EMKAY GLOBAL FINANCIAL SERVICES PRIVATE LTD

EMKAY GLOBAL FINANCIAL SERVICES LTD
Executive Summary
The project titled Performance Evaluation of Mutual Funds is undertaken at Emkay share and securities ltd in Bangalore, Malleshwaram branch. The project is related to the study of the growth schemes in different Mutual Fund companies. The project titled Performance Evaluation of Mutual Funds was undertaken for six weeks, where areas starting from the collection of data, industry profile, performance measurement of three different companies, and suggestions and conclusion about mutual fund industries are covered. Among different types of investment alternatives in security market, Mutual fund is one of the best investment alternatives as compared to other alternatives. One of the reasons why mutual funds have become so popular with the common Indian investor is because it has opened a new avenue of investing their small savings more fruitfully. The main objective of the study of investments evaluates the performance of Mutual Funds in the terms of risk and return and to find out the financial performance of mutual fund schemes. The theoretical parameters as suggested by Sharpe, Treynor and Jensen, to appraise investment performance of Mutual funds adjusted with the risk are used in this study.
While comparing, return alone should not be considered as the basis of measurement of the performance of mutual fund scheme, and should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated by the fund, in general can be defined as variability or fluctuation in the returns of a fund during a period.
In this project, three companies namely Reliance mutual fund, SBI mutual fund and HDFC mutual fund are considered. From these three companies, one open ended growth
Page 1
EMKAY GLOBAL FINANCIAL SERVICES LTD schemes are taken and compared between each other using the various index mentioned above and conclusions are drawn.
Taking into consideration the study of mutual funds in India, one could conclude that mutual fund arguably is one of the best investment plans available to the investors, which not only offers fixed income or return but also capital appreciation, if managed properly and judiciously.
Page 2
CHAPTER-1 INTRODUCTION TO MUTUAL FUNDS
Page 3
INTRODUCTION TO MUTUAL FUNDS

Mutual Funds - The Concept 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:
Mutual fund provides an opportunity for an investor. It has a benefit of diversification and the advantages of the return of capital market with less risk. Mutual fund birth place is America. It was registered in 1882, until the beginning of foreign company established their business in India. Page 4
Mutual funds help investors in bond picking decision by professionals, as they dont have the time, knowledge, skills and expertise to manage the money themselves. When selecting a unit trust fund, investors tend to trust and rely on the funds track record. It is of course greatly determined by the investment managers behind the trust. Its no difference for the fund managers. They set their expectations markets and plan their investment strategies and decision accordingly. Expectations are constantly built into markets especially after an anticipated event (economic or otherwise) to explain why a particular stock or the stock market in general went up or down.
The explanation for this behavior is pretty simple. Investors, especially professional investors, are rational human beings. They set their expectations on how things are going to pan out and then make key investment decisions based on these expectations.
A successful fund manager must be creative, innovative and understand all the essential financial concepts like the cost of capital, price earning ratio, dividend yields, discounted cash flows and portfolio theory. With these concepts, he supposedly can derive valuations of stock. Then, he buys an undervalued stock and sells it when it becomes overvalued. One must have an interest in markets not only when theyre hot but also otherwise. A good fund manager has the ears of a fox and is able to figure out the huge amount of noise coming from the various markets in order to pick the right pieces of pies. The experience of the fund manager plays a large part in fund managing. Experience gives a fund manager the material with which to mix and match hypothesis. While history rarely repeats itself, as the timing may be off or the reaction may be more intense, it gives a guide with which to forecast future outcomes.
The fund manager should be rational about his view of the markets or a particular stock, drawn a conclusion and instinctively act on it. In more difficult situation, a fund manager can sense when theyre in sync with the market; when they feel that the force is with them. However, even the best fund manager can lose his hearing and sight just when he Page 5
EMKAY GLOBAL FINANCIAL SERVICES LTD thinks he has skills down part. A successful fund manager is one who is able to hold strongly onto ones beliefs even through paper losses and volatility.
A good fund manager has to know macroeconomics and valuation methodologies well, but its still not enough. In other words, he has to anticipate what the market, comprising all investors and market participants, will focus on next, extrapolate the outcome and position his portfolio ahead of time for that outcome to materialize.
This must be done over and again is revised because the fund manager will sometimes be wrong. Markets will always test a fund managers conviction or expectations. A great fund manager will understand rational expectations in markets and constantly fell its pulses. Managing money successfully is purely a form of art.
Mutual fund like most developing countries the cult has been catching on in India. There are various reasons for this. Mutual funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation. And in addition to this a mutual fund brings the benefits of diversification and money management to the individual investors, providing an opportunity for financial success that was once available only to a select few. Understanding mutual fund is easy as its such a simple concept: a mutual fund is a company that pools the money of many investors its shareholders to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a prorate share of the portfolio entitled to any profits when the securities are sold, but subject to any losses in value as well.
For an individual investor, mutual fund provides the benefits of having someone else manage your investments and diversify your money over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify.
Page 6
EMKAY GLOBAL FINANCIAL SERVICES LTD ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:
The structure consists of 1. Sponsor

Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute atleast 40% of the networth of the Investment Manged and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund.
2. Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.
3. Trustee
Page 7
EMKAY GLOBAL FINANCIAL SERVICES LTD Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. Atleast 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner.
4. Registrar and Transfer Agent

The AMC if so authorised by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form, redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.
5. Asset Management Company (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. Atleast 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of atleast 10 crore at all times.
THE MUTUAL FUND INDUSTRY

Page 8
The genesis of the mutual fund industry in India can be traced to 1964 with the setting up of the UTI by the government of India. Since then UTI has grown to be a dominant player in the industry. UTI is governed by a special legislation, the UTI act of 1963.
The industry was opened up for wider particular in 1987 when public sector banks and insurance companies were permitted to set up mutual funds. Since then, 6 public sector banks have set up mutual fund. Also the two insurance companies LIC and GIC have established mutual funds. Securities exchange board of India formulated the mutual fund regulation 1993, which for the first time established a comprehensive regulatory framework for the mutual fund industry. Since then several mutual funds have been set up by the private and joint sectors.
GROWTH OF MUTUAL FUND

The Indian mutual fund industry has passed through three phases. The first phase was between 1964 and 1987 when UTI was the only player. By the end of 1988, UTI had total asset of Rs 6700 cores. The second phase was between 1987 and 1993 during which period 8 funds were established (6 by banks and one each by LIC and GIC.). This resulted in the total assets under management to grow to Rs 61,028 cores at the end of 1994 and number of schemes was 167.
The third phase began with the entry of private and foreign sectors in the mutual fund industry in 1993. Several private sectors mutual fund were launched in 1993 and 1994. The share of the private players has risen rapidly since then.
Currently there are 34 mutual fund organizations in India. Kothari pioneer mutual fund was the first fund to be established by the private sector in association with a foreign fund.
The private sector and foreign funds signaled a growth phases in the industry and at the end of financial year 2000, 32 funds were functioning with Rs113005 cores as total assets Page 9
EMKAY GLOBAL FINANCIAL SERVICES LTD under management. As on august end 2000, there were 33 funds with 391 schemes and assets under management with Rs 102849 cores. The SEBI came out with comprehensive regulation in 1993 which defined the structure of mutual fund and asset management companies for the first time.
This section traces the growth of the mutual funds industry from 1964, when the first mutual fund, was launched. The industry has since witnessed the entry of public sector mutual funds, the established of a regulatory authority (SEBI) the promulgation of the mutual fund regulation in 1993 and other regulatory measures for the healthy growth of the industry and investor protection. The growth of mutual fund industry in India is very slow till the end of 1980s preliminarily due to government control and over regulation of the financial services industry. Severe entry barriers restricted the growth of the mutual fund industry in terms of the number of players, mobilization of savings and creation of assets. Till 1986-87, the mutual funds market in India was controlled solely by UTI, which was formed by the government of India under the act of parliament. UTI commenced operations in July 1964 with a view to encouraging savings and investment and participation in the income.
Today there are 3 different players operating in the Indian market: UTI, non- UTI public sector mutual funds and private 3 sector mutual funds including 4 foreign mutual funds.
PHASES OF DEVELOPMENT
The mutual fund industry has witnessed four inter related stages of development in terms of the entry of players. Phase I- July 1964- Nov 1987 Phase II Nov 1987 Oct 1993 Phase III Oct 1993- 2003 Phase IV Feb 2003
Phase I - Monopoly of UTI (1964-87) Page 10
EMKAY GLOBAL FINANCIAL SERVICES LTD Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India.
This period was dominated solely by UTI, which prepared the ground for the future mutual funds industry. The first decade of UTI operation 1964-74 was formulate the period. The first and still the most popular, product launched reinvestment plan in 1966-67. Another popular scheme, unit linked insurance plan was launched in 1971.
The second phase of operation 1974-84 was one of the consolidation and expansion. In this period, UTI was delinked from RBI in 1978 and open ended growth funds were introduced. Six new schemes were launched during 1981-84. During 1984-87, innovative and widely accepted schemes like childrens gift growth fund 1986 and Master share 1987 were launched. The first Indian offshore fund, India fund, was launched in Aug 1986. UTI was one of the few organizations that fully prepared to face the emerging challenges. At the end of 1988 UTI had Rs.6, 700 cores of assets under management.
Phase II entry of public sector funds. (1987-93)

In 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).
This period was marked by the entry of non UTI public sector mutual funds into the market, which bought in a degree of competition. With the opening up of the economy, much public sector financial institution remained the exclusive domain of the public sector in this period.
The first non UTI mutual fund - SBI mutual fund was launched by the state bank in Nov 1987. This was followed by the, Canbank mutual fund scheme launched in Dec 1987, Page 11
EMKAY GLOBAL FINANCIAL SERVICES LTD LIC mutual fund launched in 1989, Indian bank mutual fund scheme launched in 1990. the Bank of India mutual fund (Jan 1990) GIC mutual fund had set up in Dec 1990. PNB mutual fund(Aug 1989) Bank of Baroda Mutual Fund (Oct 92).
The Collections increased to RS 37480.2crore in 1991-92. Thus there was a 96% increase in mobilization between 1989-90 and 1991-92. At the end of 1993, the mutual fund industry had assets under management of Rs.47, 004 cores. Howe ever, UTI continued to remain the dominant player in the market, though its shares declined from: In 1988-89 --------- 87.9% In 1991-92 --------- 84% The total collection declined from: In 1991-92 --------- RS 2567.5 cores In 1992-93 --------- RS 1964 cores In 1993-94 --------- Rs 386.7 cores
This could be attributed in to two factors: SEBI had prohibited mutual fund from launching any scheme with an assured income, arguably the most popular among investors. According to mutual fund regulations, 1993 Indian mutual funds were to form asset management companies pending which they couldnt launch any scheme.
Before 1989, there were no regulatory guidelines for the mutual fund industry in India. The first guidelines were issued by in Oct 1989, but comprehensive guidelines were issued by the government of India in June 1990. These covered all mutual funds and made registration with SEBI mandatory. Another significant development during this period was the opening up of the mutual fund market to the private sector.
Phase III Emergence of competitive market. (1993-2003)
Page 12
EMKAY GLOBAL FINANCIAL SERVICES LTD A new era in the mutual industry began in 1993 with the entry of private sector funds, which posed serious competition to the existing public sector funds. Private sector funds have distinct operational advantage, such as the following:
Most of them are floated jointly by Indian organizational and experienced foreign asset management companies, which facilities access to the latest technology and foreign fund management strategies.
Private sector funds are able to attract the best managerial talent from the public sector. Their job has been made easier by the infrastructural inputs already created by the public sector mutual funds.
The scheme was the madras based KOTHARI PIONEER MUTUAL FUND. It launched open ended prima fund in Nov 1993. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions.
As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1, 21,805 cores. The Unit Trust of India with Rs.44, 541 cores of assets under management was way ahead of other mutual funds.
During the year 1993-94 First private mutual fund: KOTHARI PIONEER mutual fund. ICICI mutual fund. 20th Century mutual fund. Morgan Stanley mutual fund. Taurus mutual fund launched their schemes.
During 1994-95 six other entered the market: Page 13
EMKAY GLOBAL FINANCIAL SERVICES LTD Apple mutual fund JM mutual fund Sriram mutual fund CRB mutual fund Alliance mutual fund Birla mutual fund.
Between 1993 and 1995 further regulatetory measures were introduced. The government of India allowed NRI and OCB to invest in UTI and other mutual funds both in the primary and secondary market on a fully repatriable basis and within the existing ceiling. The practice of requiring the mutual funds to obtain prior approval for advertising was dispensed with.
Mutual fund allowed to invest up to 25% of the resources mobilized in the money market instruments. The practice of reissuing of units of closed ended schemes was dispensed with. Mutual funds were given permission to buy back their own units from the secondary market in case these being traded at a substantial discount to the NAV. From 1 Dec 1993, new issuers were allowed to reserve 20% of public issue for mutual fund. Mutual funds were allowed to launch income schemes with assured returns for one year at a time. Mutual funds were given permission to enter into under writing activities to augment their income.
Development of mutual funds industry since 1996-97. The important developments are summarized below and will be discussed at greater length in a subsequent section. SEBI revised the mutual fund regulations and issued the revised SEBI mutual fund regulations in1996. RBI issued revised guidelines for money market mutual funds. These were later incorporated in the SEBI regulations. Page 14
EMKAY GLOBAL FINANCIAL SERVICES LTD SEBI issued standard offer documents and memorandum containing key information. The P.k.kaul committees recommendations on the manner in which the trustees should discharge their responsibilities were accepted. SEBI permitted securities lending, derivatives trading and investment in ADR/GDR. Private sector mutual fund gradually strengthened their position in the market, posing serious challenges to UTI and public sector funds.
There was a phase of fluctuations in resources mobilization, which reached a low in 1996-97 and a peak in 1999-2000. Money market fund fails to take off. Assured return schemes failed to fulfill their promises. Fund managers proved incompetent, in terms of both planning and performing. Several funds witnessed management changes due to the many mergers and takeovers. Non performance forced many funds to close down.
Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 cores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 cores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the Page 15
EMKAY GLOBAL FINANCIAL SERVICES LTD SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.
TYPES OF MUTUAL FUNDS

Getting a handle on whats under the hood helps you become a better investor and put together a more successful portfolio. To do this one must know the different types of funds that cater to investor needs, whatever the age, financial position, risk tolerances and return expectations. The mutual funds schemes can be classified according to both their investment objective like income, growth, tax savings as well as the number of units if these are unlimited then the fund is an open ended one while if there are limited units then the fund is close ended. This section provides descriptions of the characteristics --- such as investment objective and potential for volatility of your investment of various categories of funds. These descriptions are organized by the type of securities purchased by each fund: equities, fixed income, money market instruments, or some combination of these.
Open ended schemes

They do not have a fixed maturity period. Investors can buy or sell units at NAV related prices from and to the mutual funds on any business day. These schemes have unlimited capitalization, open ended schemes do not have a fixed maturity, there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange. Open ended schemes are preferred for their liquidity. Such funds can issue and redeem units any time during the life of a scheme. Hence unit capital of open ended funds can fluctuate on a daily basis. The advantages of open ended funds over close ended are as follows:
Any time exit option, the issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad delivers.
Page 16
EMKAY GLOBAL FINANCIAL SERVICES LTD Any time entry option, an open ended fund allows one to enter the fund at any time and even to invest at regular intervals.
Close ended schemes

It has fixed maturity periods. Investors can buy into these funds during the period when these funds are open in the initial issue. After that such schemes can not issue new units except in case of bonus or rights issue. However, after the initial issue, you can buy or sell units of the schemes on the stock exchanges where they are listed. The market price of the units could vary from the NAV of the schemes due to demand and supply factors, investors expectations and other market factors.
Classification according to investment objectives
Mutual funds can be further classified based on their specific investment objective such as growth of capital, safety of principal, current income or tax exempt income. In general mutual funds fall into 3 general categories: 1. Equity funds are those invest in share or equity of companies. 2. fixed income funds invest in government or corporate securities that offer fixed rates of return 3. While funds that invest in a combination of both stocks and bonds are called balanced funds.
Classification according to investment objectives
Growth funds
Page 17
It primarily looks for growth of capital with secondary emphasis on dividend. Such funds invest in shares with a potential for growth and capital appreciation. They invest in well established companies where the company itself and the industry in which it operates are thought to have good long term growth potential and hence growth funds provide low current income.
Growth funds generally incur higher risks than income funds in an effort to secure more pronounced growth. Some growth funds concentrate on one or more industry sectors and also invest in a broad range of industries. Growth funds are suitable for investors who can afford to assume the risk of potential loss in value of their investments in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income.
Specialty/sector funds
These funds invest in securities of a specific industry or sector of the economy such as health care, technology, leisure, utilities or precious metals. The funds enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company.
Sector funds offer the opportunity for sharp capital gains in cases where the funds industry is in favor but also entail the risk of capital losses when the industry is out of favor. While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly diversified portfolio and attempt to mirror the performance of various markets averaged. Index funds generally buy shares in all the companies composing the BSE Sensex or NSE nifty or other broad stock market indices. They are not suitable for investors who must conserve their principal or maximize current income.
Fixed income funds
Page 18
EMKAY GLOBAL FINANCIAL SERVICES LTD It primarily looks to provide current income consistent with the preservation of capital. These funds invest in corporate bonds or government backed mortgage securities that have a fixed rate of return. Within the fixed income category, funds vary greatly in their stability of principal and in their dividend yields. High yields funds which seek to maximize yields by investing in lower rated bonds of longer maturities, entail less stability of principal than fixed income funds that invest in higher rated but lower yielding securities. Some fixed income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the Indian govt. fixed income funds are suitable for investors who want to maximize current income and who can assume a degree of capital risk in order to do so.
Balanced funds
The balanced fund aims to provide both growth and income. These funds invest in both shares and fixed income securities in the proportion indicated in their offer documents. Idle for investor who looking for a combination of income and moderate growth.
Money Market funds/liquid funds

For the cautions investor, these funds provide vary a high stability of principal while seeking a moderate to high current income. They invest in highly liquid, virtually risk free, short term debt securities of agencies of the Indian govt, banks and corporations and treasury bills. Because of their short term investments, MMMF are able to keep a virtually constant unit price; only the yield fluctuates.
Money can be withdrawn any time without penalty. Although not insured, money market funds invest only in highly liquid, short term, top rated money market instruments. Money market funds are suitable for investors who want high stability of principal and current income with immediate liquidity.
Structure of mutual funds typical mutual funds in India has the following constituents:
Page 19
Establishes MF as a trust
Sponsor companies
Registers MF with SEBI
Holds unit holders fund in MF

Managed by a board of trustees
Mutual funds
Ensures compliance to SEBI Enters into agreement with AMC
Floats MF funds
Asset Management company
Manages funds as per SEBI Guidelines & AMC agreement
Custodians
Provides necessary custodian services
Bankers
Provides banking services
Registrars & transfer agents
Provides register services & act as transfer gents.
Funds sponsor:
A sponsor is any person who acting alone or in combination with another body corporate established a mutual fund. The sponsor of a fund is similar to the promoter of the company. In accordance with SEBI regulations, the sponsor forms a trust and appoints a board of trustees, and also generally appoints an AMC as fund manager. In addition, the sponsor also appoints a custodian to hold the fund assets. The sponsor must contribute at least Page 20
EMKAY GLOBAL FINANCIAL SERVICES LTD 40% of the net worth of the AMC and possess a sound financial track record over 5 years prior to registration.
Mutual funds:
In India is constituted in the form of a trust under the Indian trust act 1882. The fund invites investors to contribute their money in the common pool by subscribing to units issued by various schemes established by the trusts. The assets of the trust are held by the trustee for the benefits of unit holders, who are beneficiaries of the trusts.
Trustees:
The mutual funds or the trust can either be managed by the board of trustees, which is a body of individuals, or by trust company, which is corporate body. Most of the funds in India are managed by board of trustees. The trustees being the primary guardians of the unit holders funds and assets, a trustee has to be a person of high repute and integrity.
Asset Management Company:

The AMC which is appointed by the sponsor or the trustees are approved by the SEBI acts like the investments manager of trust. The AMC functions under the supervision of its own directors, and also under the direction of the trustees
and SEBI. AMC in the name of trust floats and manages the different investments schemes as per the SEBI regulations and as per the investments management agreement signed with the trustees. A part from these, the mutual funds has some other fund constituents. Such as custodians and depositories, banks, transfer agents and distributors.
INVESTMENT COMPANIES
Page 21
EMKAY GLOBAL FINANCIAL SERVICES LTD They are financial intermediaries that collets funds from individual investors and invest those in a potentially wide range of securities or other assets. Pooling of assets is the key idea behind investment companies.
Investment companies perform several impartment functions for their investors: Record keeping & administration. Diversification & divisibility. Professional management. Lower transaction costs.
NET ASSET VALUE

Investors buy shares in investment companies is proportional to the number of shares purchased. The value of share is called the NAV. NAV equals assets minus liabilities expressed on a per share basis: NAV = market value of asset liabilities/shares outstanding.
COST OF INVESTING IN MUTUAL FUND

Fee structure: an individual investor choosing a mutual fund should consider not
only the funds stated investment policy and past performance but also its management fees and other expenses. You should be aware of four general of fees.
Front End Load:
it is commission or sales charges paid when you purchase the
shares. These charges, which are used primarily to pay the brokers who sell the funds, may not exceed 8.5%, but in practice they are rarely higher than 6%. Low load funds have loads that range up to 3% of invested funds. No load funds have a front end sales charge.
Back end load:
it is a redemption or exit fee incurred when you sell your shares.
Typically, funds that impose back end loads start then at 5% or 6% and reduce them by 1% point for every year the funds are left invested. Thus an exit fee that starts at 6% would fall to 4% by the start of your third year. Page 22
Operating expenses:
they are the costs incurred by the mutual fund in operating the
portfolio, including administrative expenses and advisory fee paid to the investment manager. These expenses, usually expressed as a percentage of total assets under management, may range from .2%to 2%.
12b- 1charges:
the Securities and Exchange Commission allows the manager of so
called 12b-1 funds to use fund assets to pay for distribution costs such as advertising, promotional literature including annual reports and prospectuses and most important commission paid to brokers who sell the fund to investors. The 12b-1 fees are limited to 1% of a funds average net asset per year.
REGULATIONS OF MUTUAL FUND

The primary authority for regulating MFs in India is SEBI. SEBI requires all MFs to be registered with it. The SEBI mutual fund regulations 1996 outlined the broad frame work of authorization process and selection criteria. Accordingly, the authorization for mutual fund will be granted in two steps:
1. Involve approval and eligibility of each of the constituents of mutual fund namely: sponsors, trustees, Asset Management Company and custodians.
2. Involve formal authorization of the mutual fund for business. For this purpose the sponsor or the AMC would be required to apply to SEBI in an application from for authorization along with an application fee to be specified later.
The AMC will be authorized by SEBI on the basis of the criteria indicated in the guidelines. SEBI regulation clearly state that all funds and schemes operational under them would bind by their regulations SEBI has recently taken following steps for the regulation of mutual funds: Formation:
Page 23
EMKAY GLOBAL FINANCIAL SERVICES LTD Certain structural changes have also been made in the mutual funds industry, as part of which mutual funds are required to set up AMC with 50% of independent directors, separate board of trustee companies, consisting of a minimum 50% of independent, trustees and to maintain independent custodians. Thus the process of forming and floating mutual funds has been made a tripartite exercise by authorities. SEBI guidelines provide for the trustees to maintain an arms length relationship with the AMCs and do all those things that secure the right of investors. Registration: In Jan 1993 SEBI prescribed registration of mutual funds taking into account track record of a sponsor, integrity in business transactions and financial soundness which granting permission. This will curb excessive growth of a proven track record and financial strength. In Feb 1993 SEBI cleared six private sector mutual funds namely: 20th century finance corporation, industrial credit and Investment Corporation of India, TATA sons, credit capital Finance Corporation, CEAT financial services and apple industries. Documents: The offer documents of the schemes launched by mutual funds and the schemes particularly are required to be vetted by SEBI. A standard format for mutual and prospectus is being formulated. Code of advertisement: A mutual fund has been required to adhere to code of advertisement. Assurance of returns: SEBI has introduced a change in the securities control and regulation Act governing the mutual funds. Hence, only those mutual funds which have been in the market for at least 5 years are allowed to assure a maximum return of 12% only for 1 year. With this SEBI by default allowed public sector V as advantage against the newly setup private mutual funds.
As per basic tenets of investments it can be justifiably argued that investment in the capital market carried a certain amount of risk, and any investors investing in the market with an aim of making profit from capital appreciation or otherwise should also be prepared to bear he risk of loss. Page 24
Minimum corpus: The current SEBI guidelines on mutual funds prescribed a minimum start up corpus of Rs 50 cores for open ended schemes, and Rs 20 cores corpus for close ended schemes, failing which application money has to be refunded. Institutionalization: The efforts of SEBI have in the last few years, been to institutionalization the market by introducing proportionate allotment and increasing the minimum deposit amount to Rs 5000 etc. these efforts are to channel the investment of individual investors into the mutual funds. Investment in funds mobilized: In Nov 1992 SEBI increased the time limit from 6 months 9 months within which the mutual funds have to invest resources raised from the latest tax saving schemes. Valuation of investment: SEBI should work in tandem with the ICAI to take up a fresh look at mutual funds regulation enacted in 1993. The valuation of investment a key aspects of fund accounting as on balance sheet date, need review. There are no accounting standards or guidelines prescribed by the ICAI for the valuation of a mutual funds investment portfolio. Inspection: SEBI inspect mutual funds every year. A full SEBI inspection of all the more than 35 mutual funds was proposed to be done by the march 1996 to stream line their operations and protect the investors interest. Mutual funds are monitored and inspected by SEBI to ensure compliance with the regulations. Underwriting: In July 1994 SEBI permitted mutual funds to take underwriting of primary issues as a part of their investment activity. This step may assist the mutual funds in diversifying their business. Conduct: Page 25
EMKAY GLOBAL FINANCIAL SERVICES LTD In Sep 1994 it was clarified by SEBI that mutual funds shall not offer buy back schemes or assumed returns to corporate investors. The regulations governing mutual funds and portfolio managers ensure transparency in their functioning. Voting rights: In Sep 1993 mutual funds were allowed to exercise their voting rights. Department of company affairs has reportedly granted mutual funds the right to vote as full fledged shareholders in companies where they have equity investment.
MUTUAL FUND RISK

This covers mutual fund education designed to help beginners and professionals alike. There are many aspects of mutual funds an investor should understand before a mutual fund purchase is made.
Risk Every type of investment, including mutual funds, involves risk. Risk refers to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. A fund's investment objective and its holdings are influential factors in determining how risky a fund is. Reading the prospectus will help you to understand the risk associated with that particular fund. Generally speaking, risk and potential return are related. This is the risk/return tradeoff. Higher risks are usually taken with the expectation of higher returns at the cost of increased volatility. While a fund with higher risk has the potential for higher return, it also has the greater potential for losses or negative returns. The school of thought when investing in mutual funds suggests that the longer your investment time horizon is the less affected you should be by short-term volatility. Therefore, the shorter your investment time horizon, the more concerned you should be with short-term volatility and higher risk.
Defining Mutual fund risk

Different mutual fund categories as previously defined have inherently different risk characteristics and should not be compared side by side. A bond fund with below-average risk, for example, should not be compared to a stock fund with below average risk. Even Page 26
EMKAY GLOBAL FINANCIAL SERVICES LTD though both funds have low risk for their respective categories, stock funds overall have a higher risk/return potential than bond funds.
Of all the asset classes, cash investments (i.e. money markets) offer the greatest price stability but have yielded the lowest long-term returns. Bonds typically experience more short-term price swings, and in turn have generated higher long-term returns. However, stocks historically have been subject to the greatest shortterm price fluctuationsand have provided the highest long-term returns. Investors looking for a fund which incorporates all asset classes may consider a balanced or hybrid mutual fund. These funds can be very conservative or very aggressive. Asset allocation portfolios are mutual funds that invest in other mutual funds with different asset classes. At the discretion of the manager(s), securities are bought, sold, and shifted between funds with different asset classes according to market conditions. Mutual funds face risks based on the investments they hold. For example, a bond fund faces interest rate risk and income risk. Bond values are inversely related to interest rates. If interest rates go up, bond values will go down and vice versa. Bond income is also affected by the change in interest rates. Bond yields are directly related to interest rates falling as interest rates fall and rising as interest rise. Income risk is greater for a short-term bond fund than for a long-term bond fund. Similarly, a sector stock fund (which invests in a single industry, such as telecommunications) is at risk that its price will decline due to developments in its industry. A stock fund that invests across many industries is more sheltered from this risk defined as industry risk. Following is a glossary of some risks to consider when investing in mutual funds. Call Risk. The possibility that falling interest rates will cause a bond issuer to redeemor callits high-yielding bond before the bond's maturity date.
Country Risk. The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an earthquake, a poor harvest) will weaken a country's economy and cause investments Page 27
EMKAY GLOBAL FINANCIAL SERVICES LTD in that country to decline. Credit Risk. The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Also called default risk. Currency Risk. The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called exchange-rate risk. Income Risk. The possibility that a fixed-income fund's dividends will decline as a result of falling overall interest rates. Industry Risk. The possibility that a group of stocks in a single industry will decline in price due to developments in that industry. Inflation Risk. The possibility that increases in the cost of living will reduce or eliminate a fund's real inflation-adjusted returns. Interest Rate Risk. The possibility that a bond fund will decline in value because of an increase in interest rates. Manager Risk. The possibility that an actively managed mutual fund's investment adviser will fail to execute the fund's investment strategy effectively resulting in the failure of stated objectives. Market Risk. The possibility that stock fund or bond fund prices overall will decline over short or even extended periods. Stock and bond markets tend to move in cycles, with periods when prices rise and other periods when prices fall. Principal Risk. The possibility that an investment will go down in value, or "lose money," from the original or invested amount.
Page 28
FUND ADVANTAGES AND DISADVANTAGES

This section covers mutual fund education designed to help beginners and professionals alike. There are many aspects of mutual funds an investor should understand before a mutual fund purchase is made. The information below discusses the advantages and disadvantages of mutual fund investing. The advantages include but are not limited to: diversification, professional management, convenience, and liquidity. Disadvantages include but are not limited to: risks and costs.
Advantages Diversification
Using mutual funds can help an investor diversify their portfolio with a minimum investment. When investing in a single fund, an investor is actually investing in numerous securities. Spreading your investment across a range of securities can help to reduce risk. A stock mutual fund, for example, invests in many stocks - hundreds or even thousands. This minimizes the risk attributed to a concentrated position. If a few securities in the mutual fund lose value or become worthless, the loss maybe offset by other securities that appreciate in value. Further diversification can be achieved by investing in multiple funds which invest in different sectors or categories. This helps to reduce the risk associated with a specific industry or category. Diversification may help to reduce risk but will never completely eliminate it. It is possible to lose all or part of your investment.
Professional Management:
Mutual funds are managed and supervised by investment professionals. As per the stated objectives set forth in the prospectus, along with prevailing market conditions and other factors, the mutual fund manager will decide when to buy or sell securities. This eliminates the investor of the difficult task of trying to time the market. Furthermore, mutual funds can eliminate the cost an investor would incur when proper due diligence is given to researching securities. This cost of managing numerous securities is dispersed among all the investors according to the amount of shares they own with a fraction of each dollar invested used to cover the expenses of the fund. Fund managers have more money to research more securities more in depth than the average investor. Page 29
Convenience:
With most mutual funds, buying and selling shares, changing distribution options, and obtaining information can be accomplished conveniently by telephone, by mail, or online. Although a fund's shareholder is relieved of the day-to-day tasks involved in researching, buying, and selling securities, an investor will still need to evaluate a mutual fund based on investment goals and risk tolerance before making a purchase decision. Investors should always read the prospectus carefully before investing in any mutual fund.
Liquidity:
Mutual fund shares are liquid and orders to buy or sell are placed during market hours. However, orders are not executed until the close of business when the NAV (Net Average Value) of the fund can be determined. Fees or commissions may or may not be applicable. Fees and commissions are determined by the specific fund and the institution that executes the order.
Minimum Initial Investment:

Most funds have a minimum initial purchase of $2,500 but some are as low as $1,000. If you purchase a mutual fund in an IRA, the minimum initial purchase requirement tends to be lower. You can buy some funds for as little as $50 per month if you agree to dollar-cost average, or invest a certain dollar amount each month or quarter.
Disadvantages Risks and Costs:

Changing market conditions can create fluctuations in the value of a mutual fund investment. There are fees and expenses associated with investing in mutual funds that do not usually occur when purchasing individual securities directly. As with any type of investment, there are drawbacks associated with mutual funds. No Guarantees. The value of your mutual fund investment, unlike a bank deposit, Page 30
EMKAY GLOBAL FINANCIAL SERVICES LTD could fall and be worth less than the principle initially invested. And, while a money market fund seeks a stable share price, its yield fluctuates, unlike a certificate of deposit. In addition, mutual funds are not insured or guaranteed by an agency of the U.S. government. Bond funds, unlike purchasing a bond directly, will not re-pay the principle at a set point in time. The Diversification "Penalty." Diversification can help to reduce your risk of loss from holding a single security, but it limits your potential for a "home run" if a single security increases dramatically in value. Remember, too, that diversification does not protect you from an overall decline in the market. Costs. In some cases, the efficiencies of fund ownership are offset by a combination of sales commissions, 12b-1 fees, redemption fees, and operating expenses. If the fund is purchased in a taxable account, taxes may have to be paid on capital gains. Keep track of the cost basis of your initial purchase and new shares that are acquired by reinvesting distributions. It's important to compare the costs of funds you are considering always look at "net" returns when comparing fund performances. Net return is the bottom line; an investment's true return after all costs is deducted. Prospectuses will not contain all the costs that affect the net return on your investment. This is why it is important to compare net returns whether or not the fund in a noload or load fund.
PROBLEM FACED BY THE INVESTORS

Changing a manager at a mutual fund has its peculiar risks. The new manager may have a difference style or have little talent. A manager transition that involves a major strategy change is always causing for pause. Even if the new manager has succeeded elsewhere and thus offers ground for optimism. 1. Changing strategies: The new strategy is likely to create asset mix issues or other
problems for many shareholders. 2. Talented manager has been changed: Shareholder should think whenever a good
manager is replaced by a manager from inside or outside the firm who has an identical or very similar investment philosophy, but has delivered disappointing or uninspiring results at his or her other offerings. Shareholders also have reason to be concerned when a talented Page 31
EMKAY GLOBAL FINANCIAL SERVICES LTD manager is replaced by a like minded and skilled individual who has taken on too many offerings. 3. Sectoral changes: There have been instances of sectoral reshuffles. For example, the change in manager of alliance basic industries during September 2003. The number of stocks went down from 23 to 17. However, the amount of money invested in the top five stocks from 43.8% to 52%.
Page 32
CHAPTER-2 RESEARCH DESIGN
Page 33
INTRODUCTION
The central idea of a mutual fund investment is to leave the job of managing your money to a professional fund manager.
When you invest money in a fund, what you are doing is basically hiring a fund manager to manage your money. And the success at which he is able to take the right calls on behalf of the investors gets reflected in the performance of his fund. Hence, the fund manager is the one who is finally responsible for your funds performance, whether good or bad.
When you evaluate a funds return or risk, what you are actually evaluating is the return that the fund manager earned and the risks that he took. So when you screen funds on the basis of their performance record and kind of returns they have been able to deliver as compared to their peers, you are comparing the ability of one fund manager over the rest. This means that the continuity of fund management is important to a fund.
Investment is the employment of fund with the aim of achieving additional income or growth in value. The essential quality of an investment is that it involves waiting for a reward. It involves the commitment of resources, which have been saved or put away from current consumption in the hope that some benefits will occur in future. Investment has also often been confused with the term speculation.
Speculation involves the investment and vice-versa. Both are leading to claims money aim at maximization of return consistent with the risk taken. Motive is the determining factor distinguishing between investment and speculation. In investment, the investor has long term and medium objective, taken delivery of securities and books profits as and when the return are higher than his target expectation.
Page 34
STATEMENT OF PROBLEM
An Overview of Mutual Fund Industry in India & Evaluation study on Risk and Returns of Reliance mutual fund, SBI mutual fund and HDFC mutual fund under the growth scheme in comparison with respective Benchmark Index using Beta and to find which out of the three mutual funds is better performing.
OBJECTIVES OF THE STUDY:

To evaluate return on different mutual funds. To measure mutual funds using different tools. To rank the funds of selected AMCs according to Sharpes, Treynors, Jensens performance measure. To know which is the best growth scheme to invest among the three.
SCOPE OF THE STUDY

3AMCs (HDFCMF, SBIMF, RELIANCEMF) are considered for evaluation. The study considers three years performance starting from Jan 2006 to Dec 2009 The study considered is growth scheme. The study covers only the open-ended funds
Page 35
RESEARCH METHODOLOGY
Any kind of investigation or research study requires a preliminary plan. The aim and scope must be understood at the out set. One has to present the clear idea of the research procedure used in the study since the value of any systematic research lies in its methodology. Any enquiry would prove unsuccessful, if it is not done along certain methodical lines. The level of any research depends on proper sampling, a collection of data by personal interviews, classification of interpretation of data and at the end, the formulation of generalization and conclusion.
SAMPLING DESIGN
The samples were chosen based on the past performance and future expected growth. The sample type is stratify and a convenient sample. The companies are as follows: Reliance mutual fund SBI mutual fund HDFC mutual fund
SOURCES OF DATA
This report is prepared with the help of both primary as well as secondary data. The primary data was collected from the Emkay shares and securities ltd, Bangalore through personal enquiry. The secondary data (technical data) was collected through bulletins, fact sheet, performance reports, websites magazines and other sources. However secondary data was predominantly used.
Page 36
EMKAY GLOBAL FINANCIAL SERVICES LTD LIMITATIONS OF THE STUDY:
The study is confined to 3 AMCs Interaction with the company professional was limited, due to their busy schedule. Time was the limiting factor.
Page 37
CHAPTER-3 COMPANY PROFILE
Page 38
COMPANY PROFILE
Corporate structure Emkay share and stock brokers limited was founded in 24th January 1995 as Emkay share and stock brokers private limited, by two dynamic and young CAs, Shri Krishna Kumar Karwa and Shri Prakash Kacholia. It was converted into a public limited company in 20th October 2005 and the name was changed to Emkay share and stock brokers limited. The company acquired the membership of: BSE 1996 NSE 1999 Derivatives segment BSE trading & clearing member 2000 Depository participant CDSL 2000 Debt market BSE 2001 Derivatives segment NSE trading & clearing member 2001
Emkay is a full service brokerage house providing comprehensive advisory services to its clients under one umbrella, which would enable managing complete financial planning needs. It has expertise in advisory services in both cash and derivatives sides of the capital markets and are also distributors of savings/investment instruments like mutual fund schemes, savings bonds, IPO etc. Emkay also provides commodity trading through its group subsidiaries, and is a member of the MCX and NCDEX. The services are offered under total confidentiality and integrity with the sole purpose of maximizing returns to our clients.
The customer base is a mix of institutional high net worth and retail investors. These diversified base of customer together with its wide gamut of services, provides us with the necessary stability and strength to weather the volatility much better then that of the competitors and also maintain high standards of customer service levels through out. Emkay meets the support needs of this investor base through execution skills driven by an experienced sales team and research backed advice generated by a team of experienced analysts. Emkay advisory service range from investing, trading, research, financial and planning the portfolio management which are offered to a large number of high net worth individuals
Page 39
EMKAY GLOBAL FINANCIAL SERVICES LTD and corporate. Most of these services are tailor made to meet the needs of HNIs and corporate in line with their investment objective.
Subsidiaries: Emkay fin cap limited is a subsidiary of our company with 85% shares held by our company. EFL was formed as a private company on 16th may 2005 for carrying on share financing activities and has been converted to public limited company on Feb. 14, 2006.
Emkay trade limited is a subsidiary of our company our company holds 100% shares held of ECL. The company was formed on 5th Jan 2006 and proposes to carry on commodity broking business. It proposes to invest in the membership of two commodity exchanges namely: 1. MCX commodity exchange 2. NCDX commodity exchange
MISSION To provide research driven unbiased advice with the objective sustainable superior investment returns for our clients. To provide flawless execution support to meet diverse client needs on a platform of professionalism and integrity.
VALUES To be fair, empathetic and responsive in serving our customers. To respect and reinforce our fellow employees and the power of teamwork. To strive relentlessly to improve what we do and how we do it. To always earn and be worthy of our customers trust.
Major events:
Executed first trade in Sensex futures market on BSE 2000 Executed first Sensex options trade 2000 The Top10 domestic brokerage houses are rated by Asia money poll 2004 of fund managers 2005. Page 40
Board of directors:
Mr. G.P. GUPTA, Chairman, has 35 years experience in development banking. He was formerly the chairman and managing director of industrial development bank of India and chairman of UTI. Besides, being a past director of Bharat heavy electrical limited, National Aluminium Co. Limited, Hindustan Aeronautics Ltd.
Mr. KRISHNA KUMAR KARWA, MD, is a CA and has 17 years experience in the stock market across research, dealing and execution with special focus on the segment of the capital markets. He also directs the wealth management services business, which is aimed at providing portfolio advisory and risk management.
Mr. PRAKASH KACHOLIA, MD is a CA and has 15 years experience in share broking activities. He leads the company derivatives business generating trading strategies and identifying market opportunities. He has served the BSE in the capacity of a governing board member and on the derivatives committee of SEBI at the time of the launch of derivatives in the Indian market. He is currently on the board of BSE limited and CDSL
AMC PROFILE OF RELIANCE MUTUAL FUND Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Average Assets under Management (AAUM) of Rs. 81,627 Crs (AAUM for the month Feb 09) and an investor base of over 71.51 Lacs. Reliance mutual fund, promoted by the Anil Dhirubhai Ambani (ADAG) group, is one of the fastest growing mutual funds in India having doubled its assets over the last one year. In March, 2006, the Reliance mutual fund emerged as the largest private sector fund house in the country, overtaking Prudential ICICI which has been holding that position for many years.
Page 41
EMKAY GLOBAL FINANCIAL SERVICES LTD The sponsor of the fund is Reliance Capital Limited, the financial services arm of ADAG. Reliance Capital Asset Management Limited, a wholly owned subsidiary of Reliance Capital Limited, acts as the AMC to the fund.
Here is a list of mutual funds of Reliance: Debt/Income Funds Reliance Income Fund Reliance Monthly Income Plan Reliance Fixed Term Scheme Reliance Gilt Securities Fund Reliance Liquid Fund Reliance Medium Term Fund Reliance Short Term Fund Reliance Floating Rate Fund Reliance NRI Income Fund Reliance Fixed Maturity Fund Series - I Reliance Fixed Maturity Fund Series - II Reliance Liquidity Fund Reliance Regular Savings Fund Reliance Fixed Tenor Fund Reliance Fixed Tenor Fund Plan B Reliance Fixed Horizon Fund Plan A & B Sector Specific Funds Reliance Banking Fund Reliance Diversified Power Sector Fund Reliance Pharma Fund Reliance Media & Entertainment Fund Equity Funds Reliance Growth Fund Reliance Vision Fund NRI Equity Fund Reliance Index Fund Reliance Equity Opportunities Fund Reliance Tax Saver (ELSS) Fund Reliance Equity Fund
Reliance Capital Asset Management Ltd.
Reliance Capital Asset Management Limited (RCAM), a company registered under the Companies Act, 1956 was appointed to act as the Investment Manager of Reliance Mutual Fund. Reliance Capital Asset Management Limited is a subsidiary of Reliance Capital Limited, the sponsor.
Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Page 42
EMKAY GLOBAL FINANCIAL SERVICES LTD Management Company for the Mutual Fund by SEBI vide their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including preference shares as on September 30, 2007 is Rs.152.02 cores. Reliance Mutual Fund has launched thirty-five Schemes till date, namely:
Reliance Capital Asset Management Limited is a wholly owned subsidiary of Reliance Capital Limited. The entire paid-up capital (100%) of Reliance Capital Asset Management Limited is held by Reliance Capital Limited.
Reliance Capital Asset Management Limited (RCAM) was approved as the Asset Management Company for the Mutual Fund by SEBI vides their letter no IIMARP/1264/95 dated June 30, 1995. The Mutual Fund has entered into an Investment Management Agreement (IMA) with RCAM dated May 12, 1995 and was amended on August 12, 1997 in line with SEBI (Mutual Funds) Regulations, 1996. Pursuant to this IMA, RCAM is authorized to act as Investment Manager of Reliance Mutual Fund. The net worth of the Asset Management Company including preference shares as on March 31, 2005 is Rs.113.59 cores. Reliance Mutual Fund has launched thirty-two Schemes till date, namely: Reliance Growth Fund (September 1995) Reliance Income Fund (December 1997) Reliance Medium Term Fund (August 2000) Reliance Vision Fund (September 1995) Reliance Liquid Fund (March 1998) Reliance Short Term Fund (December 2002) Reliance Gilt Securities Fund (July 2003) Reliance Banking Fund (May 2003)
Reliance Monthly Income Plan (December Reliance Diversified Power Sector Fund 2003) Reliance Pharma Fund ( May 2004) Reliance Media & Entertainment (March 2004) Reliance Floating Rate Fund (August 2004) Fund Reliance NRI Equity Fund (October 2004)
(September 2004) Reliance NRI Income Fund (October 2004) Reliance Index Fund (February 2005)
Reliance Equity Opportunities Fund (February Reliance Regular Savings Fund (May 2005) 2005) Page 43
EMKAY GLOBAL FINANCIAL SERVICES LTD Reliance Liquidity Fund (June 2005) Reliance Tax Saver (ELSS) Fund (July 2005) Reliance Fixed Tenor Fund (November 2005) Reliance Fixed Horizon Fund I (August 2006) Reliance Equity Fund (February 2006) Reliance Fixed Horizon Fund (April 2006)
Reliance Fixed Horizon Fund III (March Reliance Fixed Horizon Fund II (November 2007) Reliance Liquid Plus Fund (March 2007) 2006) Reliance Long Term Equity Fund
(November 2006) Reliance Long Term Equity Fund (Nov 2006) Reliance Interval Fund (March 2007) Fixed Horizon Fund V
Reliance Fixed Horizon Fund - IV (August Reliance 2007) Reliance Gold Exchange Traded Fund
(September 2007)
(October 2007)
RCAM has been registered as a portfolio manager vides SEBI Registration No. INP000000423 and renewed effective from 1st August, 2003. RCAM has commenced these activities. It has been ensured that key personnel of the AMC, the systems, back office, bank and securities accounts are segregated activity wise and there exists systems to prohibit access to inside information of various activities. As per SEBI Regulations, it will further ensure that AMC meets the capital adequacy requirements, if any, separately for each such activity.
RCAM has been appointed as the Investment Manager of "Reliance India Power Fund", a Venture Capital Fund registered with SEBI vides Registration no.IN/VCF/0506/062 dated June 16, 2005. However, there is no conflict of interest between various businesses activities carried on by Asset Management Company.
The main objectives of the Trust are: To carry on the activity of a Mutual Fund as may be permitted at law and formulate and devise various collective Schemes of savings and investments for people in India and abroad and also ensure liquidity of investments for the Unit holders; Page 44
EMKAY GLOBAL FINANCIAL SERVICES LTD To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on their savings and To take such steps as may be necessary from time to time to realize the effects without any limitation.
The Management Team Board of directors: Mr. Soumen Ghosh Mr. Kanu Doshi Mr. Manu Chadha Mr. Sushil Tripathi Equity fund manager: Mr. Sunil B. Singhania Mr. Ashwani Kumar Mr. Shailesh Raj Bhan Mr. Shiva Chanani Mr. Govind Agarwal Management team: -CEO Mr. Sundeep Sikka -Head Equity Investments Mr. Madhusudan Kela -Head Fixed Income Mr. Amitabh Mohanty
Debt fund manager: Mr. Amit Tripathi Ms. Anju Chhajer Mr. Arpit Malaviya
Page 45
AMC PROFILE OF 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 July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.
HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in the country with consistent and above average fund performance across categories since its incorporation on December 10, 1999.
The single most important factor that drives HDFC Mutual Fund is its belief to give the investor the chance to profitably invest in the financial market, without constantly worrying about the market swings. To realize this belief, HDFC Mutual Fund has set up the infrastructure required to conduct all the fundamental research and back it up with effective analysis. The strong emphasis on managing and controlling portfolio risk avoids chasing the latest fads and trends.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.161 crore. Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals.
On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as follows: Page 46
EMKAY GLOBAL FINANCIAL SERVICES LTD Former Name Zurich India Equity Fund Zurich India Prudence Fund Zurich India Capital Builder Fund Zurich India TaxSaver Fund Zurich India Top 200 Fund Zurich India High Interest Fund Zurich India Liquidity Fund Zurich India Sovereign Gilt Fund New Name HDFC Equity Fund HDFC Prudence Fund HDFC Capital Builder Fund HDFC TaxSaver HDFC Top 200 Fund HDFC High Interest Fund HDFC Cash Management Fund HDFC Sovereign Gilt Fund*
HDFC Sovereign Gilt Fund has been wound up in March 2006 . The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF), HDFC TaxSaver (HTS),
The Board of Directors of HDFC Trustee company Limited consists of the following eminent persons.

Mr. Anil Kumar Hirjee Mr. James Aird Page 47

Mr. Shishir K. Diwanji Mr. Ranjan Sanghi Mr. V. Srinivasa Rangan
AMC PROFILE OF SBI MUTUAL FUND
SBI Mutual Fund (SBI MF) is one of the largest mutual funds in the country with an investor base of over 5.4 million. With over 20 years of rich experience in fund management, SBI MF brings forward its expertise in consistently delivering value to its investors. SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronised by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manages over US$ 500 Billion worldwide. In twenty years of operation, the fund has launched 38 schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistent returns. A total of over 5.4 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund. Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNIs. Page 48
EMKAY GLOBAL FINANCIAL SERVICES LTD Today, the fund manages over Rs. 27,076.63 crores of assets and has a diverse profile of investors actively parking their investments across 36 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district organisers. SBI Mutual is the first bank-sponsored fund to launch an offshore fund Resurgent India Opportunities Fund. Mr. Achal K. Gupta Managing Director & Chief Executive Officer Mr. Didier Turpin Dy. Chief Executive Officer Mr. C A Santosh Chief Manager - Customer Service. Mr. Ashwini K Jain Chief Operating Officer
Mr. Navneet Munot Chief Investment Officer
Ms. Aparna Nirgude Chief Risk Officer
Mr. R. S. Srinivas Jain Chief Marketing Officer Ms. Vinaya Datar Company Secretary & Compliance Officer
Mr. Parijat Agrawal Head Fixed Income
Page 49
CHAPTER-4 THEORETICAL ASPECTS OF PERFORMANCE MEASUREMENT
Page 50
EMKAY GLOBAL FINANCIAL SERVICES LTD THEROTICAL ASPECTS OF PERFORMANCE MEASUREMENT
Portfolio manager evaluates his portfolio performance and identifies the sources of strength and weakness after carrying out the portfolio analysis. This analysis examines the industries and security of the individual company primarily to develop value and return expectation for the security and then the evaluation is carried out. The evaluation of portfolio provides a feed back about performance to evolve management strategy. The portfolio performance evaluation is last stage of investment process but it is a continuous process. The performance of portfolio evaluation has acquired importance in case of mutual fund where in various managed portfolios are prevalent.
In order to determine the risk adjusted returns of investment portfolios several authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class. The most important and widely used measures of portfolio are: Sharpes performance index Treynor's performance index Jensens performance index
1. Sharpe Ratio or performance index The Sharpe Ratio (also known as Reward-to-Volatility-Ratio) indicates the excess return per unit of risk associated with the excess return. The higher the Sharpe Ratio, the better the performance. SR = Rp Rf SD
Where: SR. = Sharpe ratio Rp =Portfolio returns Page 51
EMKAY GLOBAL FINANCIAL SERVICES LTD Rf. SD = Risk free rate = standard deviation of the port folio
Graphically, the Sharpe Ratio is the slope of a line between the risk free rate and the portfolio in the mean/volatility space. Actually, the task of finding the efficient portfolio in the Markowitz' mean-variance framework with a risk free asset is equal to maximizing the Sharpe Ratio of the portfolio. The Sharpe Ratio is closely related to the t-statistic for measuring the statistical significance of the mean excess return. The t-statistic will equal the Sharpe Ratio times the square root of the number of returns used for the calculation. The Sharpe Ratio does not refer to the market portfolio or any other benchmark. Actually, the implicit benchmark is the risk free rate of return. The excess return can be interpreted as a zero-investment strategy: It can be obtained by taking a long position in the portfolio and a short position in the risk free rate, with the funds from the latter used to finance the purchase of the former. Because the total risk of a portfolio - its standard deviation - is used in the Sharpe Ratio, diversification does not play any role in performance analysis. The Sharpe Ratio is a useful measure for an investor which puts all his money in one fund; in this situation, only total risk matters 2. Treynor Ratio or performance index Like the Sharpe Ratio, the Treynor Ratio (sometimes called Reward-to-VariabilityRatio) also relates excess return to risk; but systematic risk instead of total risk is used. The higher the Treynor Ratio, the better the performance under analysis. TR = Rp Rf Where: TR = Treynor ratio Rp = Portfolio return Page 52
EMKAY GLOBAL FINANCIAL SERVICES LTD Rf = Riskfree rate = Portfolio beta
In mean/beta-space, the Treynor Ratio is graphically represented by the line between the riskfree rate and the portfolio. Portfolio beta is the average beta of individual assets in the given portfolio. Like the Sharpe Ratio, TR does not quantify the value added of active portfolio management. It is a ranking criterion only. But it can be expected that portfolio managers which possess private information will have a higher TR than the TR of the uninformed market strategy. A ranking of portfolios based on the TR measure is only useful if the funds under consideration are sub-funds of a broader, fully diversified portfolio. If this is not the case, portfolios with identical systematic risk, but different total risk, will be rated the same. But the portfolio with a higher total risk is less diversified and therefore has a higher unsystematic risk which is not priced in the market. 3. JENSENS MEASURE The Sharpe and Treynor Ratios discussed above can only be used in relative performance comparison between portfolios and between a portfolio and a benchmark. Alpha (also called Jensen's Alpha) measures the value added by selection activities. Alpha is defined as the difference between the average realized return of a portfolio manager with private information and the expected return of the passive strategy based upon public information only with equal systematic risk. JM= Rp [Rf+ (Rm-Rf)] Rp = average return on portfolio Rf = risk free rate Rm = return on market = beta
Page 53
CHAPTER-5 DATA ANALYSIS
Page 54
DATA ANALYSIS
Calculation of Return. Calculation of Beta. Calculation of Standard deviation. Calculation of Variance of different mutual funds. Calculation of Benchmark index return. Calculation of Sharpes, Treynors, and Jenson's.
1. Return Ending NAV- Beginning NAV = -------------------------------------------------Beginning NAV
2. Variance (Ri-R) = --------------N
Where: = variance of return Ri = return from the stock in period I R = Arithmetic mean of returns of stocks N = number of periods
Page 55
EMKAY GLOBAL FINANCIAL SERVICES LTD 3. BETA
Simple words beat is regression coefficient i = COVim m Where: i = estimate of the slope in the regression model COVim = covariance return on the stock I and the return on the market portfolio m = covariance of the return on market portfolio
yp.xm = --------------------------- ym
Note: yp.xm = (Rp-Rp)* (Rm-Rm) ym = (Rm-Rm)
Page 56
EMKAY GLOBAL FINANCIAL SERVICES LTD Performance of Reliance mutual fund (growth fundopen-end scheme)
Net Asset Date JAN-06 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN-07 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN-08 FEB MAR APR MAY JUN JUL AUG SEP OCT Value 198.66 204.74 219.72 229.76 247.31 220.55 199.52 193.62 215.98 234.8 248.35 257.79 266.74 264.61 260.73 259.54 275.5 294.34 307.46 324.13 311.78 347.84 404.79 419.16 471.73 390.86 380.05 333.74 369.86 211.84 301.71 317.47 318.87 281.05 3.060505 7.316597 4.569452 7.638405 -10.8204 -9.53525 -2.9571 11.54839 8.71377 5.770869 3.801087 3.471818 -0.79853 -1.46631 -0.45641 6.149341 6.838475 4.45743 5.421843 -3.8102 11.56585 16.37247 3.549989 12.54175 -17.1433 -2.7657 -12.1852 10.8228 -42.7243 42.42353 5.223559 0.440987 -11.8606 Returns Total Index Returns 2892.66 3017.32 3230.43 3488.42 3445.45 2915.17 3092.1 3311.08 3492.13 3651.88 3868.61 3910.18 4037.6 4083.73 3731.12 3947.27 4184.39 4218.43 4474.18 4301.35 4659.92 5456.61 5748.57 5963.57 5756.35 5201.56 4769.49 4901.9 5028.65 4463.76 4124.6 4417.1 4206.66 3210.2 4.309528 7.06289 7.986243 -1.23179 -15.3907 6.069286 7.081918 5.468004 4.574572 5.934751 1.074546 3.258674 1.14251 -8.63451 5.793167 6.00719 0.8135 6.062682 -3.86283 8.33622 17.09665 5.350575 3.740061 -3.47476 -9.63788 -8.30655 2.776188 2.585732 -11.2334 -7.59808 7.091597 -4.76421 -23.6877 1.880505 6.136597 3.389452 6.458405 -12.0004 -10.7153 -4.1371 10.36839 7.53377 4.590869 2.621087 2.291818 -1.97853 -2.64631 -1.63641 4.969341 5.658475 3.27743 4.241843 -4.9902 10.38585 15.19247 2.369989 11.36175 -18.3233 -3.9457 -13.3652 9.642796 -43.9043 41.24353 4.043559 -0.73901 -13.0406 4.009528 6.76289 7.686243 -1.53179 -15.6907 5.769286 6.781918 5.168004 4.274572 5.634751 0.774546 2.958674 0.84251 -8.93451 5.493167 5.70719 0.5135 5.762682 -4.16283 8.03622 16.79665 5.050575 3.440061 -3.77476 -9.93788 -8.60655 2.476188 2.285732 -11.5334 -7.89808 6.791597 -5.06421 -23.9877 7.539939 41.50113 26.05215 -9.89292 188.2955 -61.8194 -28.0575 53.5839 32.20364 25.8684 2.030153 6.780742 -1.66693 23.64347 -8.98908 28.36097 2.905625 18.88679 -17.6581 -40.1023 174.4474 76.73071 8.152905 -42.8879 182.0945 33.95882 -33.0948 22.04085 506.367 -325.745 27.46222 3.742521 312.8145 16.07632 45.73668 59.07834 2.34638 246.1991 33.28466 45.99442 26.70827 18.27197 31.75042 0.599922 8.753749 0.709824 79.82544 30.17488 32.57202 0.263682 33.2085 17.32916 64.58083 282.1273 25.50831 11.83402 14.24885 98.76142 74.07264 6.131506 5.224571 133.0201 62.37965 46.12579 25.64624 575.4086 3.536301 37.65782 11.48839 41.711 144.0103 114.8166 17.11557 107.5036 56.75769 21.07608 6.870098 5.25243 3.914583 7.002951 2.67784 24.69435 32.01834 10.74155 17.99324 24.90209 107.8658 230.8111 5.616847 129.0894 335.7426 15.56852 178.6296 92.98352 1927.585 1701.029 16.35037 0.546141 170.0581 Returns X Y XY Y^2
Page 57

NOV DEC JAN TOTAL 218.28 200.67 216.49 -22.3341 -8.06762 7.88359 1.1849 2834.78 2895.8 2854.36 -11.6946 2.152548 -1.43104 0.3 -23.5141 -9.24762 6.70359 -11.9946 1.852548 -1.73104 282.0422 -17.1317 -11.6042 41.358 143.8704 3.431934 2.996493 64.007 552.9131 85.51847 44.93812 174.63
RELIANCE N MEAN(Rp) SD BETA SHARPES TREYNORS JENSONS 36 1.18 13.21% 0.6461 -0.4629 -9.4646 -1.5924
Inference: As the is less than 1 it can be said that the scheme is less risky. For One percent change in the market index causes 0.6461 percent change in the scheme return. The Standard Deviation of the scheme considering both systematic and unsystematic is 13.2%.
Page 58
EMKAY GLOBAL FINANCIAL SERVICES LTD Performance of SBI mutual fund (Magnum equity growth fund
Net Asset Date JAN-06 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN-07 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN-08 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV Value 19.5 20.65 21.12 21.98 22.43 22.97 24.29 25.17 26.34 26.57 27.51 27.54 27.58 28.53 26.49 26.61 27.9 29.6 30.61 32.68 32.42 42.48 43.2 43.96 47.24 37.22 36.91 33.05 36.03 34.28 27.68 30.87 30.42 26.57 20.28 5.897436 2.276029 4.07197 2.047316 2.40749 5.746626 3.62289 4.648391 0.873197 3.537825 0.109051 0.145243 3.444525 -7.15037 0.453001 4.847802 6.09319 3.412162 6.762496 -0.79559 31.03023 1.694915 1.759259 7.461328 -21.2108 -0.83289 -10.4579 9.016641 -4.85706 -19.2532 11.52457 -1.45773 -12.6561 -23.6733 Returns Total Index Returns 2892.66 3017.32 3230.43 3488.42 3445.45 2915.17 3092.1 3311.08 3492.13 3651.88 3868.61 3910.18 4037.6 4083.73 3731.12 3947.27 4184.39 4218.43 4474.18 4301.35 4659.92 5456.61 5748.57 5963.57 5756.35 5201.56 4769.49 4901.9 5028.65 4463.76 4124.6 4417.1 4206.66 3210.2 2834.78 4.309528 7.06289 7.986243 -1.23179 -15.3907 6.069286 7.081918 5.468004 4.574572 5.934751 1.074546 3.258674 1.14251 -8.63451 5.793167 6.00719 0.8135 6.062682 -3.86283 8.33622 17.09665 5.350575 3.740061 -3.47476 -9.63788 -8.30655 2.776188 2.585732 -11.2334 -7.59808 7.091597 -4.76421 -23.6877 -11.6946 -0.42256 -4.04397 -2.24803 -4.27268 -3.91251 -0.57337 -2.69711 -1.67161 -5.4468 -2.78218 -6.21095 -6.17476 -2.87547 -13.4704 -5.867 -1.4722 -0.22681 -2.90784 0.442496 -7.11559 24.71023 -4.62508 -4.56074 1.141328 -27.5308 -7.15289 -16.7779 2.696641 -11.1771 -25.5732 5.204566 -7.77773 -18.9761 -29.9933 4.009528 6.76289 7.686243 -1.53179 -15.6907 5.769286 6.781918 5.168004 4.274572 5.634751 0.774546 2.958674 0.84251 -8.93451 5.493167 5.70719 0.5135 5.762682 -4.16283 8.03622 16.79665 5.050575 3.440061 -3.77476 -9.93788 -8.60655 2.476188 2.285732 -11.5334 -7.89808 6.791597 -5.06421 -23.9877 -11.9946 -1.69428 -27.3489 -17.2789 6.544854 61.39015 -3.30796 -18.2916 -8.63888 -23.2828 -15.6769 -4.81067 -18.2691 -2.42262 120.3511 -32.2284 -8.40212 -0.11647 -16.7569 -1.84204 -57.1825 415.0489 -23.3593 -15.6892 -4.30825 273.5981 61.56164 -41.5452 6.1638 128.9099 201.9792 35.34732 39.38805 455.1937 359.7578 16.07632 45.73668 59.07834 2.34638 246.1991 33.28466 45.99442 26.70827 18.27197 31.75042 0.599922 8.753749 0.709824 79.82544 30.17488 32.57202 0.263682 33.2085 17.32916 64.58083 282.1273 25.50831 11.83402 14.24885 98.76142 74.07264 6.131506 5.224571 133.0201 62.37965 46.12579 25.64624 575.4086 143.8704 0.17856 16.3537 5.05364 18.25583 15.30773 0.328758 7.274402 2.794277 29.66767 7.7405 38.57588 38.12762 8.268356 181.4508 34.42168 2.167368 0.051443 8.455521 0.195803 50.63167 610.5954 21.39141 20.80036 1.302631 757.9471 51.16377 281.4969 7.271875 124.9267 653.989 27.08751 60.49302 360.0942 899.599 Returns X Y XY Y^2
Page 59

DEC JAN 19.2 20.65 -5.32544 7.552083 0.6323 2895.8 2854.36 2.152548 -1.43104 0.3 -11.6454 1.232083 1.852548 -1.73104 -21.5737 -2.13278 49.97 3.431934 2.996493 64.007 135.6164 1.518029 124.46
TOTAL
SBI N(NUMBER OF OBSERVATION) MEAN SD BETA SHARPES TREYNORS JENSONS 36 0.63 11.15% 0.78 -0.598 -8.5483 -1.2077
Inference: As the is less than 1 it can be said that the scheme is less risky. For One percent change in the market index causes 0.78 percent change in the scheme return. The scheme is less volatile compared to the market. The Standard Deviation of the scheme considering both systematic and unsystematic is 11.15%.
Page 60
EMKAY GLOBAL FINANCIAL SERVICES LTD Performance of HDFC mutual fund (open ended fund)
Net Asset Date Jan-06 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Jan-07 FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Jan-08 FEB MAR APR MAY JUN JUL AUG Value 35.73 36.48 41.23 43.12 37.82 34.19 37.19 38.59 40.67 43.44 46.52 47.84 48.41 48.91 45.04 45.46 48.58 53.19 54.69 58.71 58.17 73.68 74.89 80.57 68.43 67.83 62.15 66.19 62.81 53.47 53.81 58.87 2.099076 13.02083 4.584041 -12.2913 -9.5981 8.774495 3.764453 5.389997 6.810917 7.090239 2.837489 1.191472 1.032844 -7.91249 0.932504 6.863176 9.489502 2.820079 7.350521 -0.91978 26.66323 1.642237 7.584457 -15.0676 -0.87681 -8.37388 6.500402 -5.10651 -14.8702 0.635871 9.403457 Returns
Total Index Returns 2892.66 3017.32 3230.43 3488.42 3445.45 2915.17 3092.1 3311.08 3492.13 3651.88 3868.61 3910.18 4037.6 4083.73 3731.12 3947.27 4184.39 4218.43 4474.18 4301.35 4659.92 5456.61 5748.57 5963.57 5756.35 5201.56 4769.49 4901.9 5028.65 4463.76 4124.6 4417.1 4.309528 7.06289 7.986243 -1.23179 -15.3907 6.069286 7.081918 5.468004 4.574572 5.934751 1.074546 3.258674 1.14251 -8.63451 5.793167 6.00719 0.8135 6.062682 -3.86283 8.33622 17.09665 5.350575 3.740061 -3.47476 -9.63788 -8.30655 2.776188 2.585732 -11.2334 -7.59808 7.091597 1.517076 12.43883 4.002041 -12.8733 -10.1801 8.192495 3.182453 4.807997 6.228917 6.508239 2.255489 0.609472 0.450844 -8.49449 0.350504 6.281176 8.907502 2.238079 6.768521 -1.50178 26.08123 1.060237 7.002457 -15.6496 -1.45881 -8.95588 5.918402 -5.68851 -15.4522 0.053871 8.821457 4.009528 6.76289 7.686243 -1.53179 -15.6907 5.769286 6.781918 5.168004 4.274572 5.634751 0.774546 2.958674 0.84251 -8.93451 5.493167 5.70719 0.5135 5.762682 -4.16283 8.03622 16.79665 5.050575 3.440061 -3.77476 -9.93788 -8.60655 2.476188 2.285732 -11.5334 -7.89808 6.791597 6.082761 84.12246 30.76066 19.71916 159.7332 47.26485 21.58314 24.84775 26.62595 36.67231 1.746981 1.803227 0.379841 75.89411 1.925379 35.84787 4.574 12.89734 -28.1762 -12.0686 438.0771 5.354805 24.08888 59.07371 14.49746 77.07916 14.65508 -13.0024 178.2174 -0.42547 59.91178 16.07632 45.73668 59.07834 2.34638 246.1991 33.28466 45.99442 26.70827 18.27197 31.75042 0.599922 8.753749 0.709824 79.82544 30.17488 32.57202 0.263682 33.2085 17.32916 64.58083 282.1273 25.50831 11.83402 14.24885 98.76142 74.07264 6.131506 5.224571 133.0201 62.37965 46.12579 2.301521 154.7246 16.01633 165.7213 103.6344 67.11698 10.12801 23.11684 38.79941 42.35718 5.087232 0.371456 0.203261 72.1564 0.122853 39.45318 79.34359 5.008997 45.81288 2.255329 680.2305 1.124102 49.03441 244.9113 2.128122 80.20771 35.02749 32.35916 238.7718 0.002902 77.8181 Returns X Y XY Y^2
Page 61

SEP OCT NOV DEC JAN TOTAL 0.5826 0.3 58.28 64.007 85.35 54.54 42.28 40.09 41.93 37.71 -7.35519 -22.4789 -5.17975 4.589673 -10.0644 4206.66 3210.2 2834.78 2895.8 2854.36 -4.76421 -23.6877 -11.6946 2.152548 -1.43104 -7.93719 -23.0609 -5.76175 4.007673 -10.6464 -5.06421 -23.9877 -11.9946 1.852548 -1.73104 40.19561 553.1778 69.10993 7.424407 18.42931 25.64624 575.4086 143.8704 3.431934 2.996493 62.99898 531.8058 33.19781 16.06144 113.3457
HDFC N(NUMBER OF OBSERVATION) MEAN SD BETA SHARPES TREYNORS JENSONS 36 0.58 9.23% 0.9105 -0.7277 -7.377 -0.3439
Inference: As the is less than 1 it can be said that the scheme is less risky. For One percent change in the market index causes 0.9105 percent change in the scheme return. The scheme is less volatile compared to the market. The Standard Deviation of the scheme is 9.23% which means the scheme is better compared to other mutual funds.
Note: Rp= mean of the return portfolio. Rm= mean of the return market portfolio. Risk free rate of return = 7.3 %
Page 62
SAMPLE CALCULATION
RELIANCE MUTUAL FUND SHARPES MEASURE: Rp-Rf p TREYNORS MEASURE: Rp-Rf =
1.18 - 7.3 = -0.4629 13.2 1.18 7.3 = -9.4646 0.6461
JENSONS MEASURE: Rp [Rf+ (Rm-Rf)] = 1.18% - [7.3+0.6461 (0.3-7.3)] = -1.5924
HDFC MUTUAL FUND SHARPES MEASURE: Rp-Rf p TREYNORS MEASURE: Rp-Rf =
0.582 - 7.3 =-07277 9.23 0.582 7.3 = -7.377 0.9105
Page 63
EMKAY GLOBAL FINANCIAL SERVICES LTD SBI MUTUAL FUND SHARPES MEASURE: Rp-Rf p
0.632 - 7.3 = -0.598 11.15
TREYNORS MEASURE: Rp-Rf =
0.632 7.3 = -8.5483 0.78
RELIANCE MEAN(Rp) SD BETA SHARPES TREYNORS JENSONS
SBI
HDFC
1.18 13.21% 0.6461 -0.4629 -9.4646 -1.5924
0.63 11.15% 0.78 -0.598 -8.5483 -1.2077
0.58 9.23% 0.9105 -0.7277 -7.377 -0.3439
Page 64
CHAPTER-6 SUMMARY OF FINDINGS
SUMMARY OF FINDINGS
Page 65
According to Sharpes model A high and positive ratio denotes a superior risk adjusted performance of a fund and a low and negative Sharpe ratio is an indicator of lack luster performance.
Ranking on the basis of Sharpe model SL.NO 1. 2. 3. MUTUAL FUNDS RELIANCE SBI HDFC SHARPE -0.4629 -0.598 -0.7277 RANKING 1 2 3
Under Sharpe measure the performance of all the funds is negative
Acc to Sharpe measure, RMF is ranked 1st, though its in negative comparatively better than the other funds. SBIMF gets the 2nd place it shows that its risk adjusted to performance of funds is in negative and relatively better compared to the HDFCMF.
HDFCMF is placed 3rd in a years performance and when compared to other funds the performance is low.
All the three mutual funds thus have in negative and thus not suitable for investors to invest in the mutual fund according to Sharpe
According to Treynors model Page 66
EMKAY GLOBAL FINANCIAL SERVICES LTD A high and positive ratio denotes a superior risk adjusted performance of a fund; where as a low and a very negative Treynors ratio is an indication of dismissal performance. Ranking on the basis of Treynors model
SL.NO 1. 2. 3.
MUTUAL FUNDS HDFC SBI RELIANCE
TREYNORS -7.377 -8.5483 -9.4646
RANKING 1 2 3
Under Treynors measure the performance of all the funds is negative
Acc to Treynors measure, HDFC is ranked 1st, though its in negative comparatively better than the other funds SBIMF gets the 2nd place it shows that its risk adjusted to performance of funds is in negative and relatively better compared to the RELIANCE.
RELIANCE is placed 3rd in a years performance and when compared to other funds the performance is low.
All the three mutual funds thus have in negative and thus not suitable for investors to invest in this mutual fund according to Treynors.
According to Jensens model Page 67
If a higher alpha represents a superior performance of the fund and vice versa Ranking on the basis of Jensen model SL.NO 1. 2. 3. MUTUAL FUNDS HDFC SBI RELIANCE JENSENS -0.3439 -1.2077 -1.5924 RANKING 1 2 3
Under Jensen measure the performance of all the funds is negative
Acc to Jensen measure, HDFC is ranked 1st, though its in negative comparatively better than the other funds SBIMF gets the 2nd place it shows that its risk adjusted to performance of funds is in negative and relatively better compared to the RELIANCE. RELIANCE is placed 3rd in a years performance and when compared to other funds the performance is low. All the three mutual funds thus have in negative and thus not suitable for investors to invest in these mutual fund according to Jensen
Page 68
CHAPTER-7 CONCLUSION AND SUGGESTION
CONCLUSION
Page 69
Indian mutual fund industry has witnessed a lot of ups and down in its chequered history. In the year 2008 the mutual fund industry has witnessed severe downturn due to various reasons like recession, withdrawals from FII and lack of confidence of investors and common layman. However mutual funds assist efficient resources allocation, provide strong support to the capital market and help investors realizing the benefits of stock market investing. The growing importance of Indian mutual fund in the market place may be noticed in terms of increased mobilization of funds and growing number of investor accounts education regarding various schemes and avenues with there relative benefits compared to other investment avenues.
Return alone should not be considered as the basis of measurement of the performance of mutual fund scheme, and it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them
From this study, on the basis of various analysis techniques used we can rank the samples accordingly.
HDFC SBI RELIANCE
This implies that investing in HDFC mutual fund is a better option when compared to the other two. Hence we can conclude the following.
A mutual fund brings together a group of people and invests their money in stocks, bonds, and other securities. The advantages of mutual fund are professional management, diversification, and economies of scale, simplicity and liquidity. The disadvantages of mutual are high costs, over-diversification, possible tax Page 70
EMKAY GLOBAL FINANCIAL SERVICES LTD consequences, and the inability of management to guarantee a superior return. There are many types of mutual funds. You can classify funds based on asset class, investing strategy, region, etc. Mutual funds have lots of costs. Costs can be broken down into ongoing fees (represented by the expense ratio) and transaction fees (loads). Mutual funds are easy to buy and sell. You can either buy them directly from the fund company or through a third party.
SUGGESTIONS
Page 71
Mutual fund must be managed by the AMCs in an adequate and more transparent manner and also judicious way backed up properly research and expertise.
The fund manager should disclose what is being planned and executed at the hedging front.
They should take their investors into confidence as to what they plan doing at the times of volatile fluctuations in the NAV.
As there are some infrastructure problems, fund managers need to be more vigilant on the market movement and be flexible in adapting to emerging global trends.
Some of the few mutual fund houses are quite declined but everybody should embrace the same spirit. This ultimately is the line that differentiates the best from the rest.
The mutual fund Asset Management Companies should educate and give awareness about the concept of Mutual Funds to the investors. As majority of the investors in India are not aware of Mutual Funds is benefits over other investment. Therefore it leads to minimum investment in Mutual Funds.
BIBILOGRAPHY
Page 72
Reference book: Security Analysis & Portfolio Management. -Punithavathy Pandian Investment Analysis & Portfolio Management. Prasanna Chandra
Magazines: Mutual fund insight
Journals and Fact sheets SBI RELIANCE HDFC Web-sites: www.bseindia.com www.nseindia.com www.amfiindia.com www.investorguide.com www.emkay.com
WEEKLY PROGRESS REPORT
Page 73
EMKAY GLOBAL FINANCIAL SERVICES LTD SL. NO. 1 2 3 4 5 6 7 DATE FROM- TO 05/03/09 12/03/09 13/03/09 20/03/09 21/03/09 28/03/09 05/04/09 12/04/09 13/04/09 17/04/09 18/04/09 25/04/09 26/04/09 03/05/09 Plan for report contents Theoretical prospective Industry profile Company profile Collection of data Analysis of data Preparation of project report TOPIC COVERED GUIDES SIGNATURE
Page 74

Performance Evaluation of Mutual Funds" Conducted at EMKAY GLOBAL FINANCIAL SERVICES PRIVATE LTD

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Performance Evaluation of Mutual Funds" Conducted at EMKAY GLOBAL FINANCIAL SERVICES PRIVATE LTD

Enviado por

Direitos autorais:

Formatos disponíveis

EMKAY GLOBAL FINANCIAL SERVICES LTD

EMKAY GLOBAL FINANCIAL SERVICES LTD

CHAPTER-1 INTRODUCTION TO MUTUAL FUNDS

EMKAY GLOBAL FINANCIAL SERVICES LTD

INTRODUCTION TO MUTUAL FUNDS

EMKAY GLOBAL FINANCIAL SERVICES LTD

EMKAY GLOBAL FINANCIAL SERVICES LTD ORGANISATION OF A MUTUAL FUND

The structure consists of 1. Sponsor

4. Registrar and Transfer Agent

5. Asset Management Company (AMC)

THE MUTUAL FUND INDUSTRY

EMKAY GLOBAL FINANCIAL SERVICES LTD

GROWTH OF MUTUAL FUND

Phase I - Monopoly of UTI (1964-87) Page 10

Phase II entry of public sector funds. (1987-93)

Phase III Emergence of competitive market. (1993-2003)

During 1994-95 six other entered the market: Page 13

Fourth Phase since February 2003

TYPES OF MUTUAL FUNDS

Open ended schemes

Close ended schemes

Classification according to investment objectives

Classification according to investment objectives

EMKAY GLOBAL FINANCIAL SERVICES LTD

Fixed income funds

Money Market funds/liquid funds

EMKAY GLOBAL FINANCIAL SERVICES LTD

Holds unit holders fund in MF

Ensures compliance to SEBI Enters into agreement with AMC

Asset Management company

Manages funds as per SEBI Guidelines & AMC agreement

Provides necessary custodian services

Provides banking services

Registrars & transfer agents

Provides register services & act as transfer gents.

Asset Management Company:

NET ASSET VALUE

COST OF INVESTING IN MUTUAL FUND

Front End Load:

it is commission or sales charges paid when you purchase the

Back end load:

it is a redemption or exit fee incurred when you sell your shares.

EMKAY GLOBAL FINANCIAL SERVICES LTD

the Securities and Exchange Commission allows the manager of so

REGULATIONS OF MUTUAL FUND

EMKAY GLOBAL FINANCIAL SERVICES LTD

MUTUAL FUND RISK

Defining Mutual fund risk

EMKAY GLOBAL FINANCIAL SERVICES LTD

FUND ADVANTAGES AND DISADVANTAGES

EMKAY GLOBAL FINANCIAL SERVICES LTD

Minimum Initial Investment:

Disadvantages Risks and Costs:

PROBLEM FACED BY THE INVESTORS

EMKAY GLOBAL FINANCIAL SERVICES LTD

CHAPTER-2 RESEARCH DESIGN

EMKAY GLOBAL FINANCIAL SERVICES LTD

EMKAY GLOBAL FINANCIAL SERVICES LTD

OBJECTIVES OF THE STUDY:

SCOPE OF THE STUDY

EMKAY GLOBAL FINANCIAL SERVICES LTD

EMKAY GLOBAL FINANCIAL SERVICES LTD LIMITATIONS OF THE STUDY: