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1 MUTUAL FUND
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital 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. A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. A mutual fund is an investment that pools your money with the money of an unlimited number of other investors. In return, you and the other investors each own shares of the fund. The fund's assets are invested according to an investment objective into the fund's portfolio of investments. Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-growing smaller companies or market segments. Aggressive growth funds are also called capital appreciation funds.
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Mutual Funds are investment companies that make investments on behalf of individuals and institutions that share common financial goals. The suitability of a particular mutual fund for an individual investor depends on the type and nature of the fund's investments and amount of diversification. Funds are rated widely as to risk and return, and such ratings can be used to establish a match with investor goals and suitability. "Mutual Funds schemes are managed by respective Asset Management Companies sponsored by financial institutions, banks, private companies or international firms. The biggest Indian AMC is UTI while Alliance, Franklin Templeton etc are international AMC's.

Figure 1.1 Organisation of a Mutual Fund

1.2 Growth of Mutual Fund Business in India The Indian Mutual fund business has passed through three phases. The first phase was between 1964 and 1987, when the only player was the Unit Trust of India, which had a total asset of Rs. 6,700/- crores at the end of 1988. The second phase is between 1987 and 1993 during which period 8 funds were established (6 by banks and one each by LIC and GIC). The total assets under management had grown to Rs. 61,028/crores at the end of 1994 and the number of schemes were 167. The third phase began with the entry of private and foreign sectors in the Mutual fund industry in 1993. Kothari Pioneer Mutual fund was the first fund to be established by the private sector
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in association with a foreign fund. The share of the private players has risen rapidly since then. Within a short period of seven years after 1993 the growth statistics of the business of Mutual Funds in India is given in the table below: Table 1.1 Growth Statistics of The Business of Mutual Funds In India Amount(RsCrores ) 72,333.43 10,444.78 25,167.89 1,07,946.10 Percentage (%) 67.00 9.68 23.32 100.00

Sectors UTI Public Sector Private Sector Total

1.3 ORIGIN OF MUTUAL FUNDS The origin of the mutual funds dates back to the drawn of commercial history. As financial market become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is said that Egyptians and Phoenicians sold their shares in vessels caravans with a view to spread the risk attached to these risky ventures. However the real concept of introducing the modern concept of mutual fund goes to Foreign and colonial government trust of London established in 1968. Thereafter a large number of close ended mutual funds were formed in the USA in 1930s followed by many countries in Europe, the Far East and Latin America. In most countries open-ended and closed- ended types were popular. In India it gained momentum only in 1980, though it began in the year of 1964 with the unit trust of India launching its first fund, the Unit Scheme 1964.

1.4 HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

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

First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)


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

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. Figure 1.2 Indicating the Growth of Assets over the Years

1.5 ORGANISATION OF A MUTUAL FUND There are many entities involved and the diagram below illustrates the organizational set up of a Mutual Fund: Mutual Funds diversify their risk by holding a portfolio of instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced. Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds the controllable risks are substantially reduced. A very important risk involved in Mutual Fund investments is the market risk. However, the company specific risks are largely eliminated due to professional fund management. Figure 1.3 organisations of mutual funds

1.6 CHARACTERISTICS OF A MUTUAL FUND

A Mutual Fund actually belongs to the investors who have pooled their Funds. The ownership of the mutual fund is in the hands of the Investors. A Mutual Fund is managed by investment professional and other service providers, who earn a fee for their services, from the funds.

The pool of Funds is invested in a portfolio of marketable investments. The value of the portfolio is updated every day. The investors share in the fund is denominated by units. The value of the units changes with change in the portfolio value, every day. The value of one unit of investment is called net asset value (NAV).

The investment portfolio of the mutual fund is created according to the stated investment objectives of the Fund.

1.7 OBJECTIVES OF MUTUAL FUNDS


To provide an opportunity for lower income groups to acquire without much

difficulty, property in the form of shares.


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To Cater mainly of the need of individual investors, whose means are small. To manage investors portfolio that provides regular income, growth, Safety, liquidity,

tax advantage, professional management and diversification.

1.8 ADVANTAGES OF MUTUAL FUNDS


The advantages of investing in a Mutual Fund are:

Diversification:

The best mutual funds design

their

portfolios

so

individual

investments will react differently to the same economic conditions. For example, economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. Other securities in the portfolio will respond to the same economic conditions by increasing in value. When a portfolio is balanced in this way, the value of the overall portfolio should gradually increase over time, even if some securities lose value.

Professional Management: Most mutual funds pay topflight professionals to manage their investments. These managers decide what securities the fund will buy and sell.

Regulatory oversight: Mutual funds are subject to many government regulations that protect investors from fraud.

Liquidity: It's easy to get your money out of a mutual fund. Write a check, make a call, and you've got the cash.

Convenience: You can usually buy mutual fund shares by mail, phone, or over the Internet.

Low cost: Mutual fund expenses are often no more than 1.5 percent of your investment. Expenses for Index Funds are less than that, because index funds are not actively managed. Instead, they automatically buy stock in companies that are listed on a specific index.

1.9 DRAWBACKS OF MUTUAL FUNDS


Mutual funds have their drawbacks and may not be for everyone:

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Guarantees: No investment is risk free. If the entire stock market declines in

value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.

Fees and commissions: All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or "loads" to compensate brokers, financial, or financial planners. Even if you don't use a broker or other financial adviser, you will pay a sales commission if you buy shares in a Load Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

Management risk: When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.

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1.10 TYPES OF MUTUAL FUNDS Figure 1.4 Types of Mutual Funds

Open-Ended Mutual Funds: The holders of the shares in the Fund can resell them to the issuing Mutual Fund Company at the time. They receive in turn the net assets value (NAV) of the shares at the time of re-sale. Such Mutual Fund Companies place their funds in the secondary securities market. They do not participate in new issue market as do pension funds or life insurance companies. Thus they influence market price of corporate securities. Open-end investment companies can sell an unlimited number of Shares and thus keep going larger.

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The open-end Mutual Fund Company Buys or sells their shares. These companies sell new shares NAV plus a Loading or management fees and redeem shares at NAV. In other words, the target amount and the period both are indefinite in such funds. Features: There is complete flexibility with regard to ones investment or disinvestment. These units are not publicly traded but, the Fund is ready to repurchase them and resell them at any time. The main aim of this fund is income generation The fund manager has to be very careful in managing the investments because he has to meet the redemption demands at any time made during the life of the scheme. Closed-Ended Mutual Funds:

A closedend Fund is open for sale to investors for a specific period, after which further sales are closed. Any further transaction for buying the units or repurchasing them, Happen in the secondary markets, where closed end Funds are listed. Therefore new investors buy from the existing investors, and existing investors can liquidate their units by selling them to other willing buyers. In a closed end Funds, thus the pool of funds can technically be kept constant.

The asset management company (AMC) however, can buy out the units from the investors, in the secondary markets, thus reducing the amount of funds held by outside investors. The price at which units can be sold or redeemed Depends on the market prices, which are fundamentally linked to the NAV. Investors in closed end Funds receive either certificates or Depository receipts, for their holdings in a closed end mutual Fund. Features:
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These units are publicly traded through stock exchange and generally; there is no repurchase facility by the fund. The main objective of this fund is capital appreciation. The whole fund is available for the entire duration of the scheme and there will not be any redemption demands before its maturity. Hence, the fund manager can manage the investments efficiently and profitably without the necessity of maintaining and liquidity.

Index Fund An index fund tries to match the performance of a broad market index. The fund buys shares in securities included in a particular index in proportion to each security's representation in that index. For example, the Vanguard 500 Index Fund is a mutual fund that replicates the composition of the Standard & Poor 500 stock price index. Of course, index funds can be tied to non-equity indexes as well. For example, Vanguard offers a bond index fund and a real estate index fund.

Growth fund Unlike the income funds, Growth Funds concentrate mainly on long run gains i.e.

capital appreciation. They do not offer regular income and they aim at capital appreciation in the long run. Hence, they have been described as Nest Eggs investments. Income Fund As the very name suggests, this fund aims at generating and distributing regular income to the members on a periodical basis. It concentrates more on the distribution of regular income and it also sees that the average return is higher than that of the income from the bank deposits. Balanced Fund This is otherwise called income-cum-growth fund. It is nothing but a combination of both income and growth funds. It aims at distributing regular income as well as capital appreciation. This is achieved by balancing the investments between the high growth equity shares and also the fixed income earning securities.
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Money Market Funds The aim of Money Market Funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as Treasury Bills, Certificates of Deposit, Commercial Paper and Inter-Bank Call Money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

1.11 FREQUENTLY USED TERMS


Net Asset Value (NAV): Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. Per unit NAV = Net Asset Value No. of Units Outstanding on Valuation date Sale Price: The price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price:-Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price. Redemption Price: - Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Entry Load/Front-End Load (0-2.25%) The commission charged at the time of buying the fund. To cover costs for selling, processing Exit Load/Back- End Load (0.25-2.25%) The commission or charge paid when an investor exits from a mutual fund. Imposed to discourage withdrawals May reduce to zero as holding period increases

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Repurchase or Back-end Load -Is a charge collected by a scheme when it buys backing the units from the unit holders.

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1.12 INTRODUCTION TO ACTIVE AND PASSIVE MANAGEMENT Active management is the traditional way of building a stock portfolio, and includes a wide variety of strategies for identifying companies believed to offer above-average prospects. One method might focus on companies with impressive past growth in sales and profits, another on companies with promising new products, a third on "turnaround" potential of distressed firms, and so on. Another active management method known as technical analysis attempts to find "patterns" in price movements to predict the future prices. Regardless of their individual approach, all active managers share a common thread: they buy and sell securities selectively, based on some forecast of future events. Active management seeks to outperform the broad market in a variety of ways. This approach may be as simple as investing in certain stocks within the index, or as complex as pursuing a statistically-driven investment model that regularly trade in and out of positions. In either case, the defining feature is that a manager is making active decisions as to what instruments should be included and in what relationship. The performance of the portfolio will be affected by the return of the general market, but the difference between your return and the market return will be attributable to active decisions. Active management refers to a portfolio management strategy where the manager or investor makes specific investments with the goal of outperforming an investment benchmark index. The strategy involves ongoing buying and selling by the investor. Active investors purchase investments and continuously monitor their activity in order to exploit profitable conditions. Active investors will typically look at the price movements of their stocks many times a day or a week and typically they seek shortterm profits. Though the process can be highly profitable, it can also be highly risky. Active management might best be described as an attempt to apply human intelligence to find "good deals" in the financial markets. Active management is the predominant model for investment strategy today. Active managers try to pick attractive stocks, bonds, mutual funds, time when to move into or out of markets or market sectors, and place leveraged bets on the future direction of securities and
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markets with options, futures, and other derivatives. Their objective is to make a profit, and, often without intention, to do better than they would have done if they simply accepted average market returns. In pursuing their objectives, active managers search out information they believe to be valuable, and often develop complex or proprietary selection and trading systems. Active management encompasses hundreds of methods, and includes fundamental analysis, technical analysis, and macroeconomic analysis, all having in common an attempt to determine profitable future investment trends. Active management is the art of stock picking and market timing. Passive management refers to a buy-and-hold approach to money management. According to this view, prices react to information slowly enough to allow some investors, presumably professionals, to systematically outperform markets and most other investors. Passive management, on the other hand, stands on solid theoretical grounds, has enormous empirical support, and works very well for investors. A rather impressive group of investors worldwide believes it is difficult to beat markets and perhaps better not to try. Several of the actively-managed mutual funds with strong long-term records invest in value stocks. The most obvious disadvantage of active management is that the fund manager may make bad investment choices or follow an unsound theory in managing the portfolio. The majority of actively-managed large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts. Malkiel advocated that if there are exceptional financial managers, they are very rare. That is why we do not fully support active managed investment style but integrate in passive portfolio with active method for safety reason. While many investors take a long-term approach to buying, this is not the case with active investing. Active management offers the advantage of expert analysis backed by research and experience. This means the expense ratio is generally greater, which impacts net returns. But it also means there is a potential for net returns that outpace the market. Passive or index managers - the terms are often used interchangeably make no forecasts of the stock market or the economy, and no effort to distinguish "attractive" from "unattractive" securities. A passive manager investing in large domestic stocks,
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for example, makes no determination if Ford is preferable to General Motors, CocaCola to Pepsi, or Campbell Soup to Kellogg. Instead he or she simply buys every large company from Abbott Labs to Zions Bank, resulting in a portfolio with hundreds of stocks. The process of buying and holding a well-diversified portfolio. While it is called passive management because there is not a continual process of securities selection and/or timing schemes that create constant trading activity (which drives up costs and often reduced returns), there is considerable work involved if dissimilar price movement diversification is used. Thousands of investments must be evaluated through computer analysis of historical data to select those securities that will provide the most effective diversification and highest yield for a given level of risk. Portfolios generated must also be re-balanced periodically to bring them back in line with the efficient frontier. Passive investment management makes no attempt to distinguish attractive from unattractive securities, or forecast securities prices, or time markets and market sectors. Passive managers invest in broad sectors of the market, called asset classes or indexes, and, like active investors, want to make a profit, but accept the average returns various asset classes produce. Passive investors make little or no use of the information active investors seek out. Instead, they allocate assets based upon longterm historical data delineating probable asset class risks and returns, diversify widely within and across asset classes, and maintain allocations long-term through periodic rebalancing of asset classes. Passive management is a financial strategy in which a fund manager makes as few portfolio decisions as possible, in order to minimize transaction costs, including the incidence of capital gains tax. One popular method is to mimic the performance of an externally specified index. Passive management is most common on the equity market, where index funds track a stock market index, the concept of passive management is counterintuitive to many investors. Actively managed mutual funds must strive to overcome this cost disadvantage by assiduously searching for and identifying investment opportunities that have the potential to generate above-average earnings and price appreciation. This highly competitive and daunting task is sufficiently demanding that the majority of equity funds have been unable to provide
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long-term performance superiority in comparison with the broad market. Moreover, those funds that dominate market averages in a specific time frame are typically unable to sustain outsized performance momentum in subsequent years. One of the most fundamental and enduring investment debates is over active versus passive management. Which consistently offers the best returns over time? Which will ultimately provide investors with the best possibility of achieving financial goals? Passive managers buy and hold portfolios that are designed to replicate the market, or a large proportion of it. By buying each stock in an index, or a broad representation of the stocks in an index, passive managers generally deliver returns that match their index, so in theory at least there will be no nasty surprises. In contrast, active managers seek to build portfolios that outperform a market benchmark, usually through a combination of stock selection and market timing. In some years, some active managers will succeed in outperforming their benchmark, while others will fail. Passive investing proponents argue that markets are efficient - that is, that the market takes into account all the available information about any particular security and price it accordingly. So they believe there is little room to take advantage of mispricing because prices already reflect true value. But the proponents of active management argue that the market is not completely efficient, allowing smart investment managers to best the market. And a number of managers clearly do so every year. But as the availability of information increases every year, say passive managers, so the efficiency will increase and it will become more difficult to beat the market. Passive investors also cite the laws of arithmetic. It is a given that the average return of actively managed portfolios will equal the return of the market. It is impossible for the majority of investors to outperform the market so half of these funds should beat it and the other half should underperform it. If you add in the costs of trading, administration and management fees, fewer than half of actively managed funds can possibly beat the markets over time.

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Once assembled, turnover is very low since every stock is intended to be held indefinitely. Portfolio adjustments are made only in response to fundamental changes in the underlying universe of stocks - when CBS disappears in a merger with Westinghouse, for example, or a new company such as Google joins the ranks of large company stocks. Passive managers often construct their portfolios to closely approximate the performance of well-recognized market benchmarks such as the Standard & Poors 500 index (large U.S. companies), Russell 2000 index (small U.S. companies) or Morgan Stanley EAFE index (large international companies). Passive management means that you select in a broad market index and invest your capital in those markets. This can be accomplished through an ETF or a mutual fund, but the defining feature is that you buy the entire market. In this way, your returns will mirror what the stock market does as a whole. You do not make any changes to your portfolio, instead you passively follow the market. Passive investors will purchase investments with the intention of long-term appreciation and spend limited time for monitoring the price movements. An investment strategy involves very less ongoing buying and selling actions. Also known as a buy-and-hold or couch potato strategy, passive investing requires good initial research, patience and a well diversified portfolio. Unlike active investors, passive investors buy a share and typically don't attempt to profit from short-term price fluctuations. Passive investors instead rely on their belief that in the long term the investment will be profitable. Collective investment schemes (read as Mutual Funds and ULIP funds) that employ passive investment strategies to track the performance of a stock market index are known as Index Funds. Passively managed funds typically have a lower cost than actively managed funds. Additionally, using ETF products may offer some tax-efficiency for taxable investors by avoiding pass-through costs and taking advantage of redemption-in-kind tax strategies. One of the most powerful claims for indexing is that it has been argued to be the most efficient way to invest in the market. Because there is little information that is not readily available to all investors, the sum of the choices of all investors should be an efficient portfolio: hence the idea of market efficiency. Although with passive management you avoid the risk of a money
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manager making costly mistakes, you also lose any ability to take offensive or defensive action in response to market conditions. Active management is the art of stock picking and market timing. Passive management refers to a buy-and-hold approach to money management. It can be applied to any asset class: big stocks, small stocks, value or growth, foreign or domestic can all be accessed by passive techniques. Neither label, "active" or "passive," is perfect, and there will not always be a complete dichotomy between them. In any event, this is a debate about both market behavior and investor behavior. Efficient market theory is the theory postulating that market prices reflect the knowledge and expectations of all investors. It asserts that any new development is instantaneously priced into a security, thus making it impossible to consistently beat the market. With respect to market behaviour there are, at the extremes, two views. At one extreme is the well-known efficient market theory which says that the prices are always fair and quickly reflective of information. In such a world neither professional investors nor the proverbial "little investors" will be able to systematically pick winners... or losers. At the other extreme is what I'll call the market failure hypothesis. According to this view, prices react to information slowly enough to allow some investors, presumably professionals, to systematically outperform markets and most other investors. At the level of investor behaviour, this discussion deals with how a financial advisor should handle his or her clients' money. It is my contention that active management does not make sense theoretically and isn't justified empirically. Other than that, it's O.K. But it's easy to understand the allure, the seductive power of active management. After all, it's exciting, fun to dip and dart, pick stocks and time markets; to get paid high fees for this, and to do it all with someone else's money. Passive management, on the other hand, stands on solid theoretical grounds, has enormous empirical support, and works very well for investors. The key advantage of active management, the potential to beat the market, is only useful to individual investors if they consistently choose the winning managers. With no systematic, reliable way of ensuring that your choice of active manager will outperform the market, in the en The costs of passive funds are low because the fund is not being "actively managed". But there is still an element of manager risk.
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Tracking methods vary, ranging from full replication - holding every stock in the index in proportion, to partial replication - holding a sample of the index, in order to reduce dealing costs. Timing of buying and selling can also affect performance.

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REVIEW OF LITERATURE
Various studies on Active V/S Passive Management has been conducted in foreign countries. However, in Indian context, the number is quite few. Reviews covering some of the areas of Active V/S Passive Management of Mutual Funds Equity Schemes has been discussed in brief. Carlos (2003) has conducted the study and analyse the extent of the passive timing effect in portfolio management. This effect is produced when a portfolio which is not managed actively shows signs of instability in its level of systematic risk. By contrast, market timing involves active management of the portfolio and therefore changes to the level of systematic risk in order to anticipate market movements in an appropriate manner. This study proposes a dynamic beta model which incorporates the effect of passive timing attributable to the accumulated evolution of weightings for the assets that make up the portfolio. The results demonstrate the importance of this effect when applying performance and market timing measures in order to evaluate portfolio results, such as those of mutual funds. Martin (2004) examined about the merit of active or passive investment management encompasses a large body of empirical literature which generally shows that activelymanaged portfolios underperform the market. This research is presented as scientific evidence that active management does not have any economic rationale. The efficacy of this debate has largely gone unchallenged. Unlike previous literature, this paper directly scrutinises the debate's empirical methodology and argues that the rationale it provides for indexing tracking strategies is mistaken. In terms of explaining market failures and predicting security prices, these aspects may be of equal significance to financial fundamentals themselves. This critique is of obvious importance to active managers who have a vested interest in answering this debate, and also to finance scholars because the debate's empirical foundation supports important precepts of investment theory. Miller (2005) examined that a rigorous method for allocating fund expenses between active and passive management and that enable one to compute the implicit cost of active management. Computing this "active expense ratio" requires only a fund's
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published expense ratio, its R-squared relative to a benchmark index, and the expense ratio for a competitive fund that tracks that index. This method is then applied to the Morningstar universe of large-cap mutual funds and active expense ratios are found to average more than 7%. The cost of active management for other classes of mutual funds is also found to substantial. Renaldo (2005) conducted the research and argues that the commonly used market indices imply forms of active investment management in disguise. The selection and rebalancing rules make these indices highly exclusive and dynamic regarding their underlying components and significantly bias their performance. Any passive investment tracking these indices turns into an active strategy characterised by market timing and state-dependent performance. Evidence is provided that exclusive indices outperform (underperform) more inclusive peer indices over upward (downward) markets. The constitution and maintenance rules of exclusive indices correspond to a set of active trading and investment rules similar to momentum and stop-loss strategies. Stotz (2005) investigates whether implied expected returns based on the approach of CLAUS/THOMAS (2001) can be implemented in active portfolio management. This approach uses analysts' forecasts to derive return expectations by equating the present value of expected cash-flows to the current market price. It is found that active investment strategies which maximize implied expected returns significantly outperform a passive index investment. A significant part of this outperformance can be explained by the difference between the implied expected return and the return expectation justified by the CAPM. The empirical results suggest that a substantial part of this difference can be attributed to an optimism bias in analysts' forecasts. Shankar (2007) conducted the research and find that the S&P and the Russell indexes often serve as proxies for passive portfolios in the debate over the merits of active versus passive portfolio management. However, the S&P indexes, are, in effect, actively constructed portfolios, since S&P index managers exercise discretion in selecting firms for the indexes from a pool of eligible firms. In contrast, Russell index managers use a passive, nondiscretionary approach and select firms solely based on market capitalization. I assess the relative merits of these approaches by comparing their performance over the last 11 years. I find that the S&P indexes dominate the
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Russell indexes, particularly in the small-cap sector, where the S&P 600 index consistently outperforms the Russell 2000 index. The results suggest that index investors would benefit by choosing actively constructed index portfolios over passively constructed index portfolios, particularly in the small-cap sector. Adams (2009) examined that the S&P Indices Versus Active Funds (SPIVA) Scorecard reports performance comparisons corrected for survivorship bias, shows equal- and asset weighted peer averages, and provides measures of style consistency for actively managed U.S. equity, international equity, and fixed income mutual funds. Passive management believers can point out that indices have outperformed a majority of active managers across all major domestic and international equity categories, with real estate being the lone exception. Proponents of active management can point to asset-weighted averages suggesting a more level playing field, with active managers level or ahead of benchmarks in most categories, with the exception of midcaps and emerging markets. The five-year data is unequivocal for fixed income funds. Across all categories except emerging market debt, more than three-fourths of active managers have failed to beat fixed income benchmarks. Similarly, five-year asset weighted average returns are lower for active funds in all but two categories. Fallon (2009) conducted the study to find evidence that if actively managed Colombian private pension open mutual funds can outperform a specific market benchmark such as a passively managed ETF. After doing a review of the existing literature on the subject, the data form thirty (30) Colombian private pension open mutual funds along with the data of thirty (30) Exchange Traded Funds was used to obtain a set of common portfolio performance measures. The results obtained indicated that only two of the thirty portfolios under study were able to beat their respective market benchmarks on a risk-adjusted basis. The results indicate that in average a Colombian investor can obtain superior returns by investing in a passively managed product such as ETFs than in actively managed ones, such as the Colombian private pension open mutual funds. These results are consistent with the results of previous researchers and the existing body of literature on the subject of market efficiency.
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Rompotis (2009) conducted the research and expands the debate about "active vs.

passive" management using data from active and passive ETFs listed in the U.S. market. The results reveal that the active ETFs underperform both the corresponding passive ETFs and the market indexes. With respect to risk-adjusted returns, both active and passive ETFs provide investors with no positive excess returns, an expectable finding for the passive ETFs but not for the active ETFs which are aimed at beating the market. Going further, the underperformance of active ETFs is depicted to the low performance rates such as the Sharpe or the Treynor ratios they receive relative to the passive ETFs and the indexes. Furthermore, regression analysis on the selectivity and market timing skills of ETF managers indicate that the managers of both the active and passive ETFs are lacking in such skills. However, the passive managers are not expected to have such skills. Finally, tracking error estimates indicate that the discrepancy between ETF and index returns is greater for active ETFs. Brown (2010) examined that the investment decision confronting managers of multiasset class portfolios can be characterized in terms of the passive (i.e., benchmark or policy) and active (i.e., market timing and security selection) strategies they adopt. In this paper, we investigate whether managers select the appropriate combination of active and passive allocations in their portfolios. We then examine the question empirically using a database consisting of the allocation decisions and investment performance of a large set of university endowment funds over the period from 1989 to 2005. Our findings show that (i) the average endowment had too little active risk exposure in its portfolio, (ii) endowment funds could have significantly increased their risk-adjusted performance by enhancing the scale of the alpha-generating strategies they were already employing, and (iii) this tendency to under-utilize active management skills was more pronounced for larger endowments than for smaller ones. We conclude that the typical endowment fund could have improved its performance by increasing the commitment to its active management skills.

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Many Researches have been conducted on different aspects of the active and passive management but no study has been conducted on the active v/s passive management of mutual fund equity scheme of companies listed on Bombay Stock Exchange.

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3.1 NEED OF THE STUDY The need of the study will be to know Whether the Growth funds (Active) are managed in a better way than the Index funds (Passive). Investment in equity schemes of mutual funds can be puzzling if adequate knowledge is not available to the investors. Therefore study of fund performance along with the risks involved will be inevitable for the investors. 3.2 SCOPE OF THE STUDY The scope of the study was limited to the various index funds and growth funds listed on the Bombay Stock Exchange (BSE). 1. Templeton India Growth Fund. 2. Reliance Growth fund. 3. HDFC Growth fund. 4. LIC Growth Fund 5. Sahara Growth Fund 6. Franklin Index Fund 7. UTI Master Index Fund 8. SBI Magnum Index Fund 9. Birla Sun life Index Fund 10. Tata Index Fund 3.3 OBJECTIVES OF THE STUDY The study was undertaken to achieve the following objectives To know the return provided by growth and index schemes. To know the risks of growth and index schemes.

To know the return per unit of risk of growth and index schemes by using Treynors and Sharpes ratio. To know the excess return provided by growth and index schemes by using Jensons ratio.
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RESEARCH METHODOLOGY

Research is a common parlance which refers to search for knowledge. It is a procedure of logical and systematic application of the fundamentals of science to the general and overall questions of a study and scientific technique, which provide precise tools, specific procedures, and technical rather philosophical means for getting and ordering the data prior to their logical analysis and manipulating different type of research designs is available depending upon the nature of research project, availability of manpower and circumstances. According to D. Slesinger and M. Stephenson research may be defined as the

manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in the construction of theory or in the practice of an art. Thus it is original contribution to the existing stock of knowledge of making for its advancement.

4.1 RESEARCH DESIGN Research Design is a blueprint or framework for conducting the marketing research project. It specified the details of the procedures necessary for obtaining the information needed to structure and solve marketing research problem. The research design used in the study was conclusion oriented and descriptive. Conclusion Oriented Research:-Research designed to assist the decision maker in the situation. In other words it is a research when we give our own views about the research. Descriptive Research:-A type of conclusive research which has as its major objective the description of something-usually market characteristics or functions. In other words descriptive research is a research where in researcher has no control over variable.

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4.2 DATA COLLECTION SOURCE Secondary data has been used for the study. SECONDARY DATA The secondary data are those data which have already been collected by someone else and which have already been passed through the statistical process. Magazines, journals are used as source of secondary data. The following web sites have been used to collect the data from internet.

BOMBAY STOCK EXCHANGE (www.bseindia.com ) ASSOCIATION OF MUTUAL FUNDS-INDIA AND (www.amfiindia.com) MUTUAL FUNDS INDIA (www.mutualfundsindia.com) 4.3 TOOLS OF ANALYSIS AND PRESENTATION To analyze the data obtained the following tools were used. TREYNOR MEASURE developed by Jack Treynor, this performance measure evaluates funds on the basis of Treynor's Index. This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government, as there is no credit risk associated), during a given period and systematic risk associated with it (beta). Symbolically, it can be represented as: Treynor's Index (Ti) = (Ri - Rf)/Bi. Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the fund. SHARPE MEASURE In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. According to Sharpe, it is the total risk of the fund that the investors are concerned about. So, the model evaluates funds on the basis of reward per unit of total risk. Symbolically, it can be written as:
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Sharpe Index (Si) = (Ri - Rf)/Si Where, Si is standard deviation of the fund, Ri represents return on fund, Rf is risk free rate of return While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a low and negative Sharpe Ratio is an indication of unfavorable performance. JENSON MODEL proposes another risk adjusted performance measure. This measure was developed by Michael Jenson and is sometimes referred to as the Differential Return Method. This measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund given the level of its systematic risk. The surplus between the two returns is called Alpha, which measures the performance of a fund compared with the actual returns over the period. Required return of a fund at a given level of risk (Bi) can be calculated as: Ri = Rf + Bi (Rm - Rf) Where, Rm is average market return during the given period. After calculating it, alpha can be obtained by subtracting required return from the actual return of the fund. Higher alpha represents superior performance of the fund and vice versa. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of market is primitive. TOOLS OF PRESENTATION In this study in order to present the data analysed tables has been used. 4.4 LIMITATIONS OF THE STUDY

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Due to constraints of time and resources, the study is likely to suffer from certain limitations. Some of these are mentioned here under so that the findings of the study may be understood in a proper perspective. The limitations of the study were: The research was carried out in a short period. Therefore the parameters were selected accordingly so as to finish the work within the given time frame. Some personal mistakes can be there while analysing and interpreting the data as human errors. The data has been processed and analyzed so that findings can be communicated and can be understood. The findings are presented in the best possible way.

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5. ANALYSIS OF GROWTH AND INDEX FUNDS

5.1TEMPLETON INDIA GROWTH FUND

Table No 5.1 Templeton India Growth Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 20.6 8 1.09 5.06

Sharpe Index (Si)

= (Ri - Rf)/Si = (20.6 8) / 5.06 = 2.49

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (20.6 8) / 1.09 = 11.55 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 1.09 (20.6 8) = 21.74

Analysis and Interpretation The above information revealed that the market rate of return of Templeton India Growth Fund over risk free return is high and it shows a higher risk adjusted performance while considering total as well as the systematic risk.

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5.2 RELIANCE INDIA GROWTH FUND

Table No 5.2 Reliance India Growth Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 16.1 8 1 4.36

Sharpe Index (Si)

= (Ri - Rf)/Si = (16.1 8) / 4.36 = 1.85

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (16.1 8) / 1 = 8.1 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 1 (16.1 8) = 16.1

Analysis and Interpretation The above information revealed that the market rate of return of Reliance India Growth Fund over risk free return is medium and it shows a medium risk adjusted performance while considering total as well as the systematic risk.

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5.3 HDFC GROWTH FUND

Table No 5.3 HDFC Growth Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 26.5 8 1.09 4.9

Sharpe Index (Si)

= (Ri - Rf)/Si = (26.5 8) / 4.9 = 3.77

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (26.5 8) / 1.09 = 16.97 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 1.09 (26.5 8) = 28.17

Analysis and Interpretation The above information revealed that the market rate of return of HDFC Growth Fund over risk free return is very high and it shows a superior risk adjusted performance while considering total as well as the systematic risk.

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5.4 SAHARA GROWTH FUND

Table No 5.4 Sahara Growth Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 9.1 8 1.13 4.36

Sharpe Index (Si)

= (Ri - Rf)/Si = (9.1 8) / 4.36 = 0.25

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (9.1 8) / 1.13 = 0.97 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 1.13 (9.1 8) = 9.24

Analysis and Interpretation The above information revealed that the market rate of return of Sahara Growth Fund over risk free return is quite low and it shows a very low risk adjusted performance while considering total as well as the systematic risk.

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5.5 LIC GROWTH FUND

Table No 5.5 LIC Growth Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 16.4 8 1.02 4.96

Sharpe Index (Si)

= (Ri - Rf)/Si = (16.4 8) / 4.96 = 1.69

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (16.4 8) / 1.02 = 8.23 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 1.02 (16.4 8) = 16.56

Analysis and Interpretation The above information revealed that the market rate of return of Sahara Growth Fund over risk free return is medium and it shows a medium risk adjusted performance while considering total as well as the systematic risk.

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5.6 GROWTH FUNDS

Table No 5.6 Growth Funds Parameters Templeton India Annualised Return 20.6 Reliance India 16.1 26.5 9.1 16.4 HDFC Sahara LIC

Sharpes Ratio Treynor's Ratio

2.49 11.55

1.85 8.1

3.77 16.97

0.25 0.97

1.69 8.23

Jensons Ratio

21.74

16.1

28.17

9.24

16.56

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Analysis and Interpretation The above information revealed that the HDFC Growth Fund is performing better than the other companys funds in terms of risk adjusted performance and the market rate of return over risk free return while considering total as well as the systematic risk.

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5.7 TATA INDEX FUNDS

Table No 5.7 Tata Index Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 16.5 8 0.89 6.06

Sharpe Index (Si)

= (Ri - Rf)/Si = (16.5 8) / 6.06 = 1.40

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (16.5 8) / 0.89 = 9.55 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 0.89 (16.5 8) = 15.56

Analysis and Interpretation The above information revealed that the market rate of return of Tata Index Funds over risk free return is quite low and it shows a low risk adjusted performance while considering total as well as the systematic risk.

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5.8 BIRLA SUN LIFE INDEX FUND

Table No 5.8 Birla Sun life Index Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 16.9 8 0.93 3.76

Sharpe Index (Si)

= (Ri - Rf)/Si = (16.9 8) / 3.76 = 2.36

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (16.9 8) / 0.92 = 9.67 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 0.92 (16.9 8) = 16.18

Analysis and Interpretation The above information revealed that the market rate of return of Birla Sun life Index Fund over risk free return is higher and it shows a high risk adjusted performance while considering total as well as the systematic risk.

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5.9 SBI MAGNUM INDEX FUND

Table No 5.9 SBI Magnum Index Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 17.3 8 0.92 5.1

Sharpe Index (Si)

= (Ri - Rf)/Si = (17.3 8) / 5.1 = 1.82

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (17.3 8) / 0.92 = 10.10 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 0.92 (17.3 8) = 16.55

Analysis and Interpretation The above information revealed that the market rate of return of SBI Magnum Index Fund over risk free return is medium and it shows a medium risk adjusted performance while considering total as well as the systematic risk.

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5.10 FRANKLIN INDEX FUND

Table No 5.10 Franklin Index Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 17.2 8 0.89 5.77

Sharpe Index (Si)

= (Ri - Rf)/Si = (17.2 8) / 5.77 = 1.59

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (17.2 8) / 0.89 = 10.33 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 0.89 (17.2 8) = 16.18

Analysis and Interpretation The above information revealed that the market rate of return of Franklin Index Fund over risk free return is medium and it shows a medium risk adjusted performance while considering total as well as the systematic risk

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5.11 UTI MASTER INDEX FUND

Table No 5.11 UTI Master Index Fund Portfolio Return Risk Free Return Beta Value Of Portfolio Standard Deviation Of The Portfolio 14.71 8 0.85 6.06

Sharpe Index (Si)

= (Ri - Rf)/Si = (14.71 8) / 6.06 = 1.10

Treynor's Index (Ti) = (Ri - Rf)/Bi. = (14.71 8) / 0.85 = 7.89 Jenson model (Ri) = Rf + Bi (Rm - Rf) = 8 + 0.85 (14.71 8) = 13.70

Analysis and Interpretation The above information revealed that the market rate of return of UTI Master Index Funds over risk free return is quite low and it shows a low risk adjusted performance while considering total as well as the systematic risk

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5.12 INDEX FUNDS

Table No 5.12 Index Funds Parameters Tata Birla Sun life Annualised Return Sharpes Ratio Treynor's Ratio Jensons Ratio 1.40 9.55 15.56 2.36 9.67 16.18 1.82 10.10 16.55 1.59 10.33 16.18 1.10 7.89 13.70 16.5 16.9 SBI Magnum 17.3 17.2 Franklin UTI Master 14.71

Analysis and Interpretation The above information revealed that the Birla Sun life Index Fund is performing better than the funds of other companys in terms of risk adjusted performance and the market rate of return over risk free return while in terms of systematic risk adjusted performance the Franklin Index fund is superior to the funds of other company.
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FINDINGS OF THE STUDY

GROWTH FUNDS
The market rate of return of Templeton India growth fund is high and it shows a higher risk adjusted performance while considering total as well as systematic risk The market rate of return of Reliance India growth fund is medium and it shows a medium risk adjusted performance while considering total as well as systematic risk. The market rate of return of HDFC growth fund is very high and it shows a superior risk adjusted performance while considering total as well as systematic risk. The market rate of return of Sahara growth fund is very low and it shows a low risk adjusted performance while considering total as well as systematic risk. The market rate of return of LIC growth fund is medium and it shows a medium risk adjusted performance while considering total as well as systematic risk. The HDFC growth Fund is performing better than the funds of other companys in terms of risk adjusted performance.

INDEX FUNDS
The market rate of return of TATA Index fund is very low and it shows a low adjusted performance while considering total as well as systematic risk The market rate of return of Birla sun life Index fund is high and it shows a superior risk adjusted performance while considering total as well as systematic risk The market rate of return of SBI Magnum Index fund is medium and it shows a medium risk adjusted performance while considering total as well as systematic risk

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The market rate of return of Franklin Index fund is medium and it shows a medium risk adjusted performance while considering total as well as systematic risk

The market rate of return of UTI Master Index fund is medium and it shows a very low risk adjusted performance while considering total as well as systematic risk

The Birla Sun life Index fund is performing better than the funds of other companies in terms of risk adjusted performance and in terms of systematic risk adjusted performance the Franklin Index fund is superior to other companys funds.

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CONCLUSION

After the depth study of the various growth and index funds of various companies which are listed on the Bombay stock exchange it is concluded that the growth funds are performing well than the index funds in terms of the risk adjusted performance while considering the total as well as the systematic risk associated with the fund. The returns provided by the growth funds are healthier than the returns provide by the index funds. Among the growth funds of various companies listed on the Bombay stock exchange the HDFC growth fund is performing better than the other companies growth funds and among the index funds of various companies listed on the Bombay stock exchange the Birla sun life index fund is performing better than the index funds of other companies in terms of risk adjusted performance while considering the total risk associated with the fund while Franklin index fund is performing better than the index fund of other companies in terms of systematic risk associated with the fund. The investors should prefer to invest in the growth funds as compared to the index funds as the growth funds are performing better then the index funds by providing high rate of returns and the level of risk is less in growth funds as compared to the growth funds.

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RECOMMENDATIONS

Keeping in mind the Indian investors who are basically risk averse i would like to give them the following recommendations It is safer for them to invest in growth funds rather than index funds as the returns provided by Growth funds are higher than the Index funds. If the investors would like to invest in growth funds its better for them to invest in HDFC Growth fund as the returns provided by HDFC fund is higher and the risk involved in this fund is lesser. If the investors would like to invest in index funds its better for them to invest in Birla Sun life Index fund as the returns generated by Birla sun life Index fund is higher than the Index fund of other companies and the risk associated with this fund is lesser.

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REFERENCES
Anonymous (nd), available at http://www.mutualfundsindia.com (last accessed on 22nd November, 2010). Anonymous (nd), available at http://www.scribd.com/doc/16656570/Beginners Guide Mutual-Funds India-Infoline (last accessed on 22st November, 2010). Brown, K. (2010). Do Endowment Funds Select the Optimal Mix of Active and Passive Risks? Available at http://ssrn.com/abstract=1568446 Carlos, J. (2003). Passive Timing Effect in Portfolio Management available at http://ssrn.com/abstract=760224 Fallon, E. (2009). Active Management vs. Passive Management in the Colombian Private Pension Open Mutual Fund Industry available at http: //ssrn .com/ abstract =1333566 Martin, L. (2004). Investing in Pseudo-Science: the Active versus Passive Debate Available at http://ssrn.com/abstract=553041 Miller, R. (2005). Measuring the True Cost of Active Management by Mutual Funds available at http://ssrn.com/abstract=746926 Miller, R. (2009). Standard & Poor's Indices Versus Active Funds Scorecard available at http://ssrn.com/abstract=1462712 Olaf, S. (2005). Active Portfolio Management, Implied Expected Returns, and Analyst Optimism available at http://ssrn.com/abstract=831806 Rampotis, G. (2009). Active vs. Passive Management: New Evidence from Exchange Traded Funds available at http://ssrn.com/abstract=1337708 Rolando, A. (2005). Wolf in Sheep's Clothing: The Active Investment Strategies behind Index Performance available at http://ssrn.com/abstract=552704 Shankar, G. (2007). Active Versus Passive Index Management: A Performance Comparison of the S&P and the Russell Indexes available at http://ssrn.com/abstract =900472

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