02 research

8/8/2019 02 Research

1/43

MAJOR RESEARCH PROJECT REPORT

(SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF MASTER OF

BUSINESS ADMINISTRATION AWARDED BY DEVI AHILYA

VISHVAVIDHYALAYA, INDORE)

ON

INVESTMENT IN MUTUAL FUNDZ

MBA IV SEM

2008-2010

Submitted By:

SHALINI MAHESHWARI


2/43

CONNECT

ACKNOWLEDGEMENT

EXECUTIVE SUMMARY

COMPANY PROFILE

CHAPTER 1

INTRODUTION

WHAT IS MUTUAL FUND {WITH EXAMPLE}

MUTUAL FUND OVERVIEW

MECHANISM OF MUTUAL FUND WITH OPERATIONAL

FLOWCHART

EXPERTISE OF INVESTMENT/ FUND MANAGER

CHAPTER 2

OBJECTIVE OF THE STUDY

SCOPE OF THE STUDY

HOW TO YOU INVEST IN MUTUAL FUND?


3/43

WHAT IS THE TYPES MUTUAL FUND?

BY INVESTMENT OBJECTIVES

OTHER SCHEMES

SPECIAL PRODUCT

RISK FACTORS OF MUTUAL FUND

CHAPTER 3

ADVANTAGES OF INVESTING IN MUTUAL FUND

DISADVANTAGE OF INVESTING IN MUTUAL FUND

RULER OF INVESTING IN MUTUAL FUND FOR INVESTOR

VALUTION OF MTUTUAL FUND

1. NAV {WITH EXAMPLE}

2. CALCULATION OF NAV

3. MUTUAL FUND IN INDIA

4. DATA ANALYSIS

REFERENCE

CONCLUSION

BIBLIOGRAPHY


4/43

EXECUTIVE SUMMARY

The project talks about A over view of various financial factor related to the investment in

Mutual Funds.

The first few pages talk about the introduction and objectives of the study.This is followed by literature review with details about mutual funds.

Next comes the survey, the purpose of which is to study the working of mutual funds, the

characteristics of mutual funds that attract the investor and what an investor should consider for

safe investment and better returns.

The last part consists of findings, recommendations, limitations, conclusion and bibliography.

The questionnaire has been annexed to the report.

COMPANY PROFLIE

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment

managers of Birla Sun Life Mutual Fund, is a joint venture between the Aditya

Birla Group and the Sun Life Financial Services Inc. of Canada. The joint

venture brings together the Aditya Birla Group's experience in the Indian

market and Sun Life's global experience.

Established in 1994, Birla Sun Life Mutual fund has emerged as one of India's

leading flagships of Mutual Funds business managing assets of a large investor

base. Our solutions offer a range of investment options, including diversified

and sector specific equity schemes, fund of fund schemes, hybrid and monthly

income funds, a wide range of debt and treasury products and offshore funds.


5/43

Birla Sun Life Asset Management Company has one of the largest team of

research analysts in the industry, dedicated to tracking down the best

companies to invest in. BSLAMC strives to provide transparent, ethical and

research-based investments and wealth management services.

Heritage

The Aditya Birla Group

The Aditya Birla Group is one of India's largest business houses. Global in

vision, rooted in Indian values, the Group is driven by a performance ethic

pegged on value creation for its multiple stakeholders.The Group's operations span 66 state of the art, straddling India, Thailand,

Malaysia, Indonesia, Egypt, Philippines, Canada, Australia and China.

A US $28 billion corporation with a market cap. of US $31.5 billion and in the

League of Fortune 500, the Aditya Birla Group is anchored by an

extraordinary work force of 130,000 employees, belonging to 30 different

nationalities. Over 50 per cent of its revenues flow from its operations across

the world.

The Aditya Birla Group is a dominant player in all its areas of operations viz;

Aluminium, Copper, Cement, Viscose Staple Fibre, Carbon Black, Viscose

Filament Yarn, Fertilisers, Insulators, Sponge Iron, Chemicals, Branded

Apparels, Insurance, Mutual Funds, Software and Telecom. The Group has

strategic joint ventures with global majors such as Sun Life (Canada), AT&T

(USA), the Tata Group and NGK Insulators (Japan), and has ventured into the

BPO sector with the acquisition of TransWorks, a leading ITES/BPO

company.

Sun Life Financial

Sun Life Financial Inc is a leading international financial services organization

providing a diverse range of wealth accumulation and protection products and

services to individuals and corporate customers. Chartered in 1865, Sun Life

Financial Inc and its partners today have operations in key markets


6/43

worldwide, including Canada, the United States, the United Kingdom, Hong

Kong, the Philippines, Japan, Indonesia, India, China and Bermuda.

Introduction

Investing wisely makes your money grows, helping you to meet your financial

obligation.

To ensure that you get maximum gain from your investments. Different investmentavenues are available to investors. Mutual funds also offer good investmentopportunities to the investors. Like all investments, they also carry certain risks.The investors should compare the risks and expected yields after adjustment of taxon various instruments while taking investment decisions. The investors may seekadvice from experts and consultants including agents and distributors of mutualfunds schemes while making investment decisions.

With an objective to make the investors aware of functioning of mutual funds, anattempt has been made to provide information in question-answer format whichmay help the investors in taking investment decisions.

They must be well planned keeping in mind your needs & investment preferences.You need to take into account the fact that inflation makes everything more costlyyear after year.

What is the mutual fund?

The money pooled by a mutual fund is utilized by a investment manager topurchase & trade in stock (equity), bonds (debt) or other securities as stated in theinvestment objective of the schemes. The profits or losses are shared by theinvestors in proportion to their investments. The mutual funds normally come outwith a number of schemes with different investment objectives which are launchedfrom time to time. A mutual fund is required to be registered with Securities and


7/43

Exchange Board of India (SEBI) which regulates securities markets before it cancollect funds from the public.THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds)

REGULATIONS,1996 defines a mutual fund as a " a fund establishment in theform of a trust to raise money through the sale of units to the public or a section of

the public under one or more schemes for investing in securities, including moneymarket instruments."

Then the gains or losses which result from the investing process, along with

any interest or divided earned, are passed on to the investors.

Investment with a commonFinancial objective pool

In the money

Any gains & loss along Unit of mutual schemes areWith interest/dividend is allocated in proportionPassed on to the investor in to the moneyProportion to units held

The money collected isEquity, debt on other

Securities by theInvestment manager


8/43

EXAMPLE

For instance, If Ram, Shyam & Sudha all want to invest in equity they maycollect their money in a common kitty, this kitty would represent the mutual fund.Lets say Ram had contributed Rs. 500 to the kitty, Shyam gave anotherRs. 300 & Sudha put in Rs. 200. This total of Rs.1000 would be invested in equity

by on investment manager.At the end of one year, If the common Kitty of Rs. 1000 becomes Rs. 1100 i.e. a

profit of Rs. 100 theoretically, Rams share in this profit would be Rs. 50

Shuyams Rs. 30 Sudhas Rs. 20.This example is for IIustrations purchases, In a mutual fund there are be expenseswhich would also be distributed proportionally.

MUTUAL FUND OVERVIEW

The most important trend in the mutual fund industry is the aggressive expansion ofthe foreign owned mutual fund companies and the decline of the companies floated

by nationalized banks and smaller private sector players.

Many nationalized banks got into the mutual fund business in the early nineties andgot off to a good start due to the stock market boom prevailing then. These banksdid not really understand the mutual fund business and they just viewed it as

another kind of banking activity. Few hired specialized staff and generally chose totransfer staff from the parent organizations. The performance of most of theschemes floated by these funds was not good. Some schemes had offeredguaranteed returns and their parent organizations had to bail out these AMCs by

paying large amounts of money as the difference between the guaranteed and actualreturns. The service levels were also very bad. Most of these AMCs have not beenable to retain staff, float new schemes etc. and it is doubtful whether, barring a fewexceptions, they have serious plans of continuing the activity in a major way.


9/43

The experience of some of the AMCs floated by private sector Indian companieswas also very similar. They quickly realized that the AMC business is a business,which makes money in the long term and requires deep-pocketed support in theintermediate years. Some have sold out to foreign owned companies, some havemerged with others and there is general restructuring going on.

They can be credited with introducing many new practices such as new productinnovation, sharp improvement in service standards and disclosure, usage oftechnology, broker education and support etc. In fact, they have forced the industryto upgrade itself and service levels of organizations like UTI have improveddramatically in the last few years in response to the competition provided by these.

A Mutual Fund is a trust that pools the savings of a number of investors who share acommon financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earnedthrough these investments and the capital appreciation realized is shared by its unitholders in proportion to the number of units owned by them. Thus, a Mutual Fund isthe most suitable investment for the common person as it offers an opportunity toinvest in a diversified, professionally managed basket of securities at a relativelylow cost. The flow chart below describes broadly the working of a mutual fund:


10/43

MECHANISM OF MUTUAL FUND WITH OPERATIONAL FLOWCHART


11/43

Expertise of investment/fund manager

All investment mode of in a mutual fund are handled by investment managers.

Mutual fund hire full timeExperienced & qualified investment

Professionals to manage the large poolsOf money collected from the investor

These managers have real an investment manager is Timeinformation & they supported by a team ofExecute trade on a large research analysts who help

Cost-effective scale him to monitor the investment& gauge how they are likelyto perform.


12/43

With the help of the research team, the investment manager makes infomeddecisions, about what equity or debt security to buy retain or sell & at what point intime.

OBJECTIVE OF THE STUDY

To give a brief idea about the benefits available from Mutual Fund investment

To discuss about the market trends of Mutual Fund investment.

Observe the fund management process of mutual funds

Explore the recent developments in the mutual funds in India

To give an idea about the regulations of mutual funds

SCOPE OF THE STUDY

In my project the scope is limited to some prominent mutual funds in the mutual

fund industry. I analyzed the funds depending on their schemes like equity, income,

balance. But there is so many other schemes in mutual fund industry like

specialized (banking, infrastructure, pharmacy) funds, index funds etc.

My study is mainly concentrated on equity schemes, the returns, in income schemes

the rating of CRISIL, ICRA and other credit rating agencies.

HOW TO YOU INVEST IN MUTUAL FUND?

Mutual funds normally come out with an advertisement in newspapers publishingthe date of launch of the new schemes. Investors can also contact the agents anddistributors of mutual funds who are spread all over the country for necessaryinformation and application forms. Forms can be deposited with mutual fundsthrough the agents and distributors who provide such services. Now a days, the postoffices and banks also distribute the units of mutual funds. However, the investorsmay please note that the mutual funds schemes being marketed by banks and postoffices should not be taken as their own schemes and no assurance of returns is


13/43

given by them. The only role of banks and post offices is to help in distribution ofmutual funds schemes to the investors.

Investors should not be carried away by commission/gifts given byagents/distributors for investing in a particular scheme. On the other hand they must

consider the track record of the mutual fund and should take objective decisions.

Non-Resident Indians (NRI) can also invest in mutual funds. Normallynecessary details in this respect are given in the offer documents of the schemes.

WHAT IS THE TYPES MUTUAL FUND?

By Structure:

Open-ended Funds

An open-end fund is one that is available for subscription all through the year

These do not have a fixed maturity. Investors can conveniently buy and sell units at

Net Asset Value ("NAV") related prices. The key feature of open-end schemes is

liquidity.

Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3to 15 years. The fund is open for subscription only during a specified period.

Investors can invest in the scheme at the time of the initial public issue and

thereafter they can buy or sell the units of the scheme on the stock exchanges where

they are listed. In order to provide an exit route to the investors, some close-ended

funds give an option of selling back the units to the Mutual Fund through periodic

repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the

two exit routes is provided to the investor.

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They

are open for sale or redemption during pre-determined intervals at NAV related

prices.


14/43

By Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long-

term. Such schemes normally invest a majority of their corpus in equities. It has

been proven that returns from stocks, have outperformed most other kind o

investments held over the long term. Growth schemes are ideal for investors having

a long-term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Such

schemes generally invest in fixed income securities such as bonds, corporate

debentures and Government securities. Income Funds are ideal for capital stability

and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Suchschemes periodically distribute a part of their earning and invest both in equities

and fixed income securities in the proportion indicated in their offer documents. In

a rising stock market, the NAV of these schemes may not normally keep pace, or

fall equally when the market falls. These are ideal for investors looking for a

combination of income and moderate growth.

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


15/43

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.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time

you buy or sell units in the fund, a commission will be payable. Typically entry and

exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a

good performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit. That is,

no commission is payable on purchase or sale of units in the fund. The advantage of

a no load fund is that the entire corpus is put to work.

OTHER SCHEMES:

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the Government offers tax incentives for investment in

specified avenues. Investments made in Equity Linked Savings Schemes (ELSS)

and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961.

The Act also provides opportunities to investors to save capital gains u/s 54EA and

54EB by investing in Mutual Funds.


16/43

Special Schemes

Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer

document. The investment of these funds is limited to specific industries like

InfoTech, FMCG, Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as theBSE Sensex or the NSE 50

Sect oral Schemes

Sect oral Funds are those, which invest exclusively in a specified industry or a

group of industries or various segments such as 'A' Group shares or initial public

offerings.

SPECIAL PRODUCT

Systematic Investment Plan (SIP)

SIP or systematic investment planning is method through which you can invest in mutual funds

through small and periodic installments. In fact you can invest as low as Rs. 1000/- on a

monthly basis. Moreover you can also select the tenure of the installments. We recommend a

minimum investment tenure of 3 years.


17/43

(You Earn Regularly

You Spend Regularly

Do You Invest Regularly?

We all have various dreams that we want to realize owning a Car, a House or going on a

Vacation. Besides these, we also need to plan for Childrens Education, their Marriage and ourRetirement.)Achieving these dreams may seem like climbing Mt Everest, but its possible if you

prepare for it Step by Step

Why is SIP a Smart choice?

Inculcate financial discipline

Helps you make investment your first priority from it being your last priority.

Average out your cost of investment and hence reduce your risk

Lets say you invested Rs 1000 every month. And lets say the scheme invested in is available

at a rate of Rs 20 per unit. Then in month 1, you will be able to obtain 50 units. In month 2 if

the unit value goes down to Rs 10 then you will be able to obtain 100 units.

Hence for Rs 2000 invested over 2 months the total value of your investment at the end of 2

months is Rs 1500. However if you had invested a straight sum of Rs 2000 in month 1 when the

rate was Rs 20 per unit your net value at the end of month 2 will only be Rs 1000/-.

Hence an SIP helps you average out your cost and thereby reduce risk resulting in generating

superior returns.

Helps in compounding your wealth

Getting rich is simpler than you think, here's a simple formula to get rich:

Start Early + Invest Regularly = Create Wealth

Invest Regularly

Systematic investing has a compounding effect on your investments. In the long term, an

investment as low as Rs 1000/- per month swells up into a huge corpus.


18/43

This can be best explained by the following graph. The graph shows the value of investment at

various rates of return for Rs. 1000/- invested every month for 30 years.

The BSE Sensex has generated returns at 19.43%* CAGR from 1st January 1991 to 1st January2008. Rs. 1000 invested every month since January 1991 would have led to a total investment

of Rs. 3.6 Lakhs. This investment would have been worth Rs. 2.03 Cr in January 2008.

Did you know that Rs 1,000 invested every month would total to Rs 240,000 after 1 month?

Yes and in the above example we have assumed ZERO growth rate. To understand the power

of compounding further, lets just add a simple growth rate of 3%. Then Rs 1000 invested every

month becomes Rs 327,660. At 20% the amount will grow to Rs 24,76,191/-. Isnt that

incredible?

Start Early

Now that we know that the power of compounding can create magic for your investments

starting your investments early also has its own advantages. Starting early means that the power

of compounding starts acting on your money earlier thereby generating higher returns.

Consider the following graph:


19/43

An individual who starts planning for his retirement at 25yrs of age by investing a modest Rs.

1000 / month collects unto Rs. 40 Lakhs on retirement whereas his investment over the period

is just Rs. 4.2 Lakhs

On the other hand if the same individual delays his retirement planning by 5 yrs, his wealth

upon retirement reduces significantly (approx Rs. 15 Lakhs.)

Systematic Transfer Plan (STP)

Investing in a debt fund normally assures you of fairly consistent returns while equity funds

have the potential to create wealth. However the stability of the debt fund is much reassuring

against the volatility in an equity fund investment. To combine the best of both worlds, we

provide the facility of Systematic Transfer plan.

Ideal for

Investors who want to invest lump sum money in schemes with stable returns and ensure small

exposure to equity schemes in order to avail of the potential for higher growth through equities.

Invest a lump sum amount in a debt-oriented scheme. Specify a desired amount to be

transferred to any of our equity schemes like Birla Sun Life Frontline Equity Fund Plan A /Birla


20/43

Sun Life MidCap Fund. The amount will be transferred to the selected scheme on the 1st of

every month.

Applicability

STP OUT is available from any of the below Open-ended schemes except Birla Sun Life TaxRelief96, Birla Sun Life Equity Plan and Birla Sun Life Index fund

STP IN is available to any of the below Open-ended schemes except Birla Sun Life Index

fund.

EQUITY Fund Family

Birla Sun Life Advantage Fund

Birla Sun Life Dividend Yield Plus

Birla Sun Life Equity Plan

Birla Sun Life India Opportunities Fund

Birla Sun Life MNC Fund

Birla Sun Life Midcap Fund

Birla Sun Life GenNext Fund

Birla Sun Life Equity Fund

Birla Sun Life New Millennium Fund

Birla Sun Life Buy India Fund

Birla Sun Life Basic Industries Fund

Birla Sun Life Frontline Equity Fund Plan A

Birla Sun Life Tax Relief96**

Birla Sun Life 95 Fund

Birla Sun Life Freedom Fund

Birla Sun Life Top 100 Fund

Birla Sun Life Infrastructure Fund

Birla Sun Life International Equity Fund

Birla Sun Life Index Fund

Birla Sun Life Special Situations Fund

Debt Fund Family


21/43

Birla Sun Life Liquid Plus

Birla Sun Life Bond Index Fund

Birla Sun Life Dynamic Bond Fund

Birla Sun Life Floating Rate Fund Long Term Plan

Birla Sun Life Gilt Plus

Birla Sun Life Income Plus

Birla Sun Life MIP*

Birla Sun Life MIP II*

Birla Sun Life Monthly Income*

Birla Sun Life Ultra Short Term Fund

Birla Sun Life Income Fund

Birla Sun Life Gilt Plus

Liquid Fund Family

Birla Sun Life Cash Manager

Birla Sun Life Cash Plus

Birla Sun Life Floating Rate Fund Short Term Plan

* An Open-Ended income scheme. Monthly Income is not assured and is subject to availability

of distributable surplus

** An open-ended equity linked savings scheme (ELSS)(All investments are subject to a lock-

in period of 3 years from the date of allotment)

Investment Options

There are three options for investing in Systematic Transfer Plan:

Weekly Transfer Plan

Monthly Transfer Plan

Quarterly Systematic Transfer Plan

Details Monthly Systematic Transfer Plan

Minimum Amountance (at the time of

enrollment)

Weekly STP : Rs 6000/-


22/43

Monthly STP: Rs 6000/-

Quarterly STP: Rs 8000/-

Minimum Transfer Amount Weekly Plan: 5 Transfers of Rs 1000/- eachand above

Monthly Plan: Minimum 6 Transfers of Rs1000/- each and above

Quarterly Plan: Minimum 4 Transfers of Rs2000/- each and above

Transfer dates Weekly STP 1,7,14,21,28 of each month Monthly STP 1,7,14,21,28 of each month Quarterly STP - 1,7,14,21,28 of each quarter Investors can also opt for upto 4 multiple

dates within a month and in this case, thetransfer can be instructed for 1,7,14,21,28 ofeach month.

In case of ambiguity STP date will be 7 ofeach month

In case of > 4 multiple dates provided,7,14,21,28 of each month will be considered.

Load in case of Systematic Transfer Plan:

Exit Load at time of transfer OUT: Exit Load as applicable to respective schemes.

Entry Load at time of transfer IN: No Entry Load is payable if transfer is within theSchemes (s) belonging to same Fund Family*.

-Entry load as applicable to respective Scheme willbe payable if the transfer is from Scheme belongingto one Fund Family to another Fund Family.

Exit Load at time of redemption: Exit Load as applicable to respective schemes.

*The Fund Family referred in Systematic Transfer Plan shall include Scheme(s) as specified

below:

Equity Fund Family:


23/43

Birla Sun Life Tax Plan / Birla Sun Life Dividend Yield Plus / Birla Sun Life Tax Plan / Birla

Sun Life India Opportunities Fund / Birla Sun Life MNC Fund / Birla Sun Life Midcap Fund /

Birla Sun Life India GenNext Fund / Birla Sun Life Equity Fund / Birla Sun Life New

Millennium Fund / Birla Sun Life Buy India Fund / Birla Sun Life Basic Industries Fund / Birla

Sun Life Frontline Equity Fund / Birla Sun Life Tax Relief96 / Birla Sun Life95 Fund / Birla

Sun Life Freedom Fund / Birla Sun Life Top 100 Fund / Birla Sun Life Infrastructure Fund /Birla Sun Life International Equity Fund / Birla Sun Life Index Fund / Birla Sun life Special

Situations Fund / Birla Sun Life Commodity Equities Fund.

Debt Fund Family:

Birla Sun Life Savings Fund / Birla Sun Life Short Term Opportunities Fund / Birla Sun Life

Dynamic Bond Fund / Birla Sun Life Floating Rate Fund Long Term Plan / Birla Sun Life

Gift Plus / Birla Sun Life Income Plus / Birla Sun Life Government Securities Fund / Birla SunLife MIP# / Birla Sun Life MIP II# / Birla Sun Life Monthly Income# / Birla Sun Life Ultra

Short Term Fund / Birla Sun Life Income Fund / Birla Sun Life Medium Term Plan.

Liquid Fund Family

Birla Sun Life Cash Plus / Birla Sun Life Cash Manager / Birla Sun Life Floating Rate Fund

Short Term Plan.

Systematic Withdrawal Plan(SWP)

A Systematic Withdrawal Plan (SWP) is a facility that allows an investor to withdraw money

from an existing mutual fund at predetermined intervals. The money withdrawn through asystematic withdrawal plan can be reinvested in another fund or retained by the investor in cash

When is a SWP generally used?

What makes SWP a wise strategy?

SWP is available in two options
http://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#generalhttp://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#wisehttp://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#availablehttp://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#wisehttp://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#availablehttp://mutualfund.birlasunlife.com/ManageInvestments/SystematicWithdrawalPlan/tabid/103/Default.aspx#general


24/43

When is a SWP generally used?

Systematic withdrawal plans are used by investors to create a regular flow of income from their

investments. Investors looking for income at periodical intervals for e.g. funding a travel plan

during the childrens summer vacations, also set up their withdrawals in such a way that the

cash is available when most required.

What makes SWP a wise strategy?

Withdrawals (also referred to as redemption) attract no Tax Deducted at Source Please

note that Capital Gains Tax will chargeable on the withdrawn amount.

SWP can be set up to withdraw only the appreciation made on a particular investment. In

this way your capital stays invested while you continue to enjoy the gains periodically.

SWP is available in two options:

Fixed Withdrawal: Where you specify amounts you wish to withdraw from your investment

on a monthly/quarterly basis.

Appreciation Withdrawal: Where you can withdraw your appreciated amount on a

monthly/quarterly basis. Post-dated warrants sent to investors are dated 1st of every month.

RISK FACTORS OF MUTUAL FUND

The Risk-Return Trade-off:

The most important relationship to understand is the risk-return trade-off. Higher

the risk greater the returns/loss and lower the risk lesser the returns/loss.

Hence it is up to you, the investor to decide how much risk you are willing to take.

In order to do this you must first be aware of the different types of risks involved

with your investment decision

Market Risk:
http://mutualfund.birlasunlife.com/ServiceHelpdesk/Glossary/tabid/179/Default.aspxhttp://mutualfund.birlasunlife.com/ServiceHelpdesk/Glossary/tabid/179/Default.aspxhttp://mutualfund.birlasunlife.com/ServiceHelpdesk/Glossary/tabid/179/Default.aspxhttp://mutualfund.birlasunlife.com/ServiceHelpdesk/Glossary/tabid/179/Default.aspx


25/43

Sometimes prices and yields of all securities rise and fall. Broad outside influences

affecting the market in general lead to this. This is true, may it be big corporations

or smaller mid-sized companies. This is known as Market Risk. A Systematic

Investment Plan (SIP) that works on the concept of Rupee Cost Averaging

(RCA) might help mitigate this risk.

Credit Risk:

The debt servicing ability (may it be interest payments or repayment of principal) of

a company through its cashflows determines the Credit Risk faced by you. Thiscredit risk is measured by independent rating agencies like CRISIL who rate

companies and their paper. A AAA rating is considered the safest whereas a D

rating is considered poor credit quality. A well-diversified portfolio might help

mitigate this risk.

Inflation Risk:

Things you hear people talk about

"Rs. 100 today is worth more than Rs. 100 tomorrow."

"Remember the time when a bus ride casted 50 paise?"

"Mehangai Ka Jamana Hai."

The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot

of times people make conservative investment decisions to protect their capital but

end up with a sum of money that can buy less than what the principal could at the

time of the investment. This happens when inflation grows faster than the return on

your investment. A well-diversified portfolio with some investment in equities

might help mitigate this risk.

Interest Rate Risk:


26/43

In a free market economy interest rates are difficult if not impossible to predict.

Changes in interest rates affect the prices of bonds as well as equities. If interest

rates rise the prices of bonds fall and vice versa. Equity might be negatively

affected as well in a rising interest rate environment. A well-diversified portfolio

might help mitigate this risk.

Political/Government Policy Risk: Changes in government policy and political

decision can change the investment environment. They can create a favorable

environment for investment or vice versa.

Liquidity Risk:

Liquidity risk arises when it becomes difficult to sell the securities that one has

purchased. Liquidity Risk can be partly mitigated by diversification, staggering of

maturities as well as internal risk controls that lean towards purchase of liquid

securities.

VARIOUS INVESTMENT FACTOR IN MUTUAL FUND

To cater to different investment needs, Mutual Funds offer various investment

options. Some of the important investment options include:

Growth Option:

Dividend is not paid-out under a Growth Option and the investor realizes only the

capital appreciation on the investment (by an increase in NAV).

Dividend Payout Option:

Dividends are paid-out to investors under the Dividend Payout Option. However,

the NAV of the mutual fund scheme falls to the extent of the dividend payout.

Dividend Re-investment Option:

Here the dividend accrued on mutual funds is automatically re-invested in

purchasing additional units in open-ended funds. In most cases mutual funds offer


27/43

the investor an option of collecting dividends or re-investing the same.

Retirement Pension Option:

Some schemes are linked with retirement pension. Individuals participate in these

options for themselves, and corporate participate for their employees.

ADVANTAGES OF INVESTING IN MUTUAL FUND

The benefits on offer are many with good post-tax returns and reasonable safetybeing the hallmark that we normally associate with them. Some of the other major

benefits of investing in them are:

Number of available options

Mutual funds invest according to the underlying investment objective as specified atthe time of launching a scheme. So, we have equity funds, debt funds, gilt funds and

many others that cater to the different needs of the investor. The availability ofthese options makes them a good option. While equity funds can be as risky as thestock markets themselves, debt funds offer the kind of security that aimed at thetime of making investments. Money market funds offer the liquidity that desired by

big investors who wish to park surplus funds for very short-term periods. The onlypertinent factor here is that the fund has to selected keeping the risk profile of theinvestor in mind because the products listed above have different risks associatedwith them. So, while equity funds are a good bet for a long term, they may not findfavor with corporate or High Net worth Individuals (HNIs) who have short-termneeds.

Diversification

Investments spread across a wide cross-section of industries and sectors and so therisk is reduced. Diversification reduces the risk because not all stocks move in thesame direction at the same time. One can achieve this diversification through aMutual Fund with far less money than one can on his own.


28/43

Professional Management

Mutual Funds employ the services of skilled professionals who have years ofexperience to back them up. They use intensive research techniques to analyze eachinvestment option for the potential of returns along with their risk levels to come up

with the figures for performance that determine the suitability of any potentialinvestment.

Potential of Returns

Returns in the mutual funds are generally better than any other option in any otheravenue over a reasonable period. People can pick their investment horizon and stay

put in the chosen fund for the duration. Equity funds can outperform most otherinvestments over long periods by placing long-term calls on fundamentally goodstocks. The debt funds too will outperform other options such as banks. Thoughthey are affected by the interest rate risk in general, the returns generated are moreas they pick securities with different duration that have different yields and so areable to increase the overall returns from the

Get Focused

I will admit that investing in individual stocks can be fun because each companyhas a unique story. However, it is important for people to focus on making money.Investing is not a game. Your financial future depends on where you put you hard-earned dollars and it should not take lightly.

Efficiency

By pooling investors' monies together, mutual fund companies can take advantageof economies of scale. With large sums of money to invest, they often tradecommission-free and have personal contacts at the brokerage firms.

Ease of Use

Can you imagine keeping track of a portfolio consisting of hundreds of stocks? Thebookkeeping duties involved with stocks are much more complicated than owning a


29/43

mutual fund. If you are doing your own taxes, or are short on time, this can be a bigdeal.

Wealthy stock investors get special treatment from brokers and wealthy bankaccount holders get special treatment from the banks, but mutual funds are non-

discriminatory. It doesn't matter whether you have $50 or $500,000, you are gettingthe exact same manager, the same account access and the same investment.

Risk

In general, mutual funds carry much lower risk than stocks. This is primarily due todiversification (as mentioned above). Certain mutual funds can be riskier thanindividual stocks, but you have to go out of your way to find them.

With stocks, one worry is that the company you are investing in goes bankrupt.With mutual funds, that chance is next to nil. Since mutual funds, typically holdanywhere from 25-5000 companies, all of the companies that it holds would have togo bankrupt.

I will not argue that you should not ever invest in individual stocks, but I do hopeyou see the advantages of using mutual funds and make the right choice for themoney that you really care about.

DISADVANTAGE OF INVESTING IN MUTUAL FUND

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

No 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 howbalanced the portfolio. Investors encounter fewer risks when they invest in mutualfunds than when they buy and sell stocks on their own. However, anyone whoinvests 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 consultants, or financial planners. Even if you don't use a broker


30/43

or other financial adviser, you will pay a sales commission if you buy shares in aLoad Fund.

Taxes: During a typical year, most actively managed mutual funds sell anywherefrom 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 youreinvest the money you made.

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

RULES OF INVESTMENT IN MUTUTAL FUND FOR INVESTOR

The intelligent investors seven rules:-

Its one to understand mutual funds & their working; its another to ride on thispotent investment vehicle to create in tune with your risk profile & investmentneeds. Here are seven must-dos that go a long way in helping you meet yourinvestment objectives.

Know your risk profile

Can you live with volatility? Or are you a low-risk investor? Would you be satisfiedif your fund invests in fixed-income securities, & yields low but sure-shot returns?These are some of the question you need to ask yourself before investing in a fund.

Your investments should reflect your risk-taking capacity. Equity funds mightlure when the market is rising & your neighbor is making money, but if you are notcut out for the risk that accompanies it, dont after you have found your match. Ifyou racked by uncertainty, seek expert advice from a qualified financial advisor.

Identify your investment horizon


31/43

How long you want to stay invested in a fund is as important as deciding upon yourrisk profile. A mutual fund is essentially a saving vehicle, not a speculation vehicle-dont get in with the intention of making overnight gains.

Invest in an equity fund only if you are willing to stay on for at least two year.For income & gilt funds, have a one-year perspective at least. Anything less than

one-year, the only option among mutual funds is liquid funds.

Read the offer document carefully

This is a must before you commit your money to a fund. The offer documentcontains essential details pertaining to the fund, including the summary information(type of scheme, name of the asset Management Company & price of units, amongother things), investment objectives & investment procedure, financial information& risk factors.

Go through the fund fact sheet

Fund fact sheets give your valuable information of how the has performed in thepast. You can check the funds portfolio, its diversification levels & its performancein the past. The more fact sheets you examine, the better.

Diversify across fund houses

If you routing a substantial sum through mutual fund, you should diversify acrossfund houses. That way, you spread your risk.

Do not chase incentives

Dont get lured by investment incentives. Some financial intermediaries giveupfront incentives, in the form of a percentage of your initial investment, to investin a particular fund. Dont buy it. Your focus should be to fund that matches yourinvestment needs & risk profile, & is a performer.

Track your investments

Your job doesnt end at the point of making the investment. Its important you trackyour investment on a regular basis, be it in equity, debt or balanced fund. One easyway to keep track of your fund is to keep track of the Intelligent Investor ranking ofmutual funds, which are complied on a quarterly basis (log on to on iinvestor.comto see the rankings for the quarter ended June 2001). These ranking allow you takenote of your funds performance & risk profile, & compare it across various time


32/43

periods as well as across its peer set. In addition, you should run some basic checksin the fund fact sheets & the quarterly reports you get form your fund.

In the case of debt funds, check the portfolio distribution & the funds holding inAAA & equivalent papers. If you find your fund is holding a significant quantity

(above 10 percent) in below AA-rated paper, your investment is not safeRemember, even a single default can drag the NAV of your debt down.If you come across negative reports of the fund, ask financial advice or broker aboutit, especially if theres a possibility of your investment depreciating in value. If thethreat is real, reduce your exposure to the fund

.VALUATION OF MUTUAL FUND

The net asset value of the Fund is the cumulative market value of the assets Fund

net of its liabilities. In other words, if the Fund is dissolved or liquidated, by selling

off all the assets in the Fund, this is the amount that the shareholders would

collectively own. This gives rise to the concept of net asset value per unit, which is

the value, represented by the ownership of one unit in the Fund. It is calculated

simply by dividing the net asset value of the Fund by the number of units. However,

most people refer loosely to the NAV per unit as NAV, ignoring the per unit. Wealso abide by the same convention.

Calculation of NAV

The most important part of the calculation is the valuation of the assets owned by

the Fund. Once it is calculated, the NAV is simply the net value of assets divided by

the number of units outstanding. The detailed methodology for the calculation of

the net asset value is given below.

The net asset value is the actual value of a unit on any business day. NAV is the

barometer of the performance of the scheme.

The net asset value is the market value of the assets of the scheme minus its

liabilities and expenses. The per unit NAV is the net asset value of the scheme

divided by the number of the units outstanding on the valuation date.


33/43

NAV

The value of the units of a mutual fund.

When you invest in a mutual fund scheme, you will receive a number of units in

exchange for the money you invest in effect you buy units.

This value of each unit keeps on changing once the investment manager begins

investing the money. It could go up, if the value of the overall portfolio goes up. If

the scheme makes temporary profits or it could go down if the mutual fund scheme

makes a temp or any loss. In fact, it will change on a daily basis on the basis of

investment made under the scheme. The value of a unit is called NAV of a unit.

Net Asset Value (NAV) Formula

value of fund

number of shares

= Net Asset Value (NAV)

Net Asset Value (NAV) Example

$100,000,000 total fund value

10,000,000 shares

= $10 per share

EXAMPLE

Lets say each unit is worth Rs. 10

Ram who has invested Rs. 500 would receive 50 units.


34/43

Shyam would get 30 units. (For Rs. 300)

Sudha would get 20 units. (For Rs. 200)

Mahesh who has invested Rs.1000 would receive100 units.

(Lets say each unit is NV Rs. 10)

Get the latest NAV

SchemeCode Scheme Name NAV Date

NAV(Rs.)

SubscriptionPrice

RedemptionPrice

862DBirla Sun Life FixedTerm Plan-instl-series Aa-dividend

26/08/2008 10.00000 0 9.6 History

501APBirla Sun Life CashPlus-disciplineAdvantage Fund

15/08/2010 10.44260 10.4426 10.4426 History

861GBirla Fixed TermPlan-retail-seriesAa-growth

26/08/2008 10.89870 0 10.4628 History

882GBirla Sun Life FixedTerm Plan -instl-series Ae- Growth

20/04/2009 11.29080 0 10.8392 History

884RGBirla Sun LifeQuarterly IntervalFund - Series 2-growth

27/11/2009 11.50310 11.5031 11.3881 History

881GBirla Sun Life FixedTerm Plan -retail-series Ae- Growth

20/04/2009 11.24210 0 10.7924 History

884RD

Birla Sun LifeQuarterly IntervalFund - Series 2-dividend

27/11/2009 10.00000 10 9.9 History

83AP

Birla Sun Life ShortTerm Fund-discipline AdvantageFund

13/08/2010 10.51930 10.5193 10.493 History

878G

Birla Sun LifeInterval IncomeFund-institutional-monthly Plan-seriesI-growth

16/10/2009 11.42830 11.4283 11.3712 History

861DBirla Fixed TermPlan-retail-seriesAa-dividend

26/08/2008 10.00000 0 9.6 History

862GBirla Sun Life FixedTerm Plan-instl-series Aa-growth

26/08/2008 10.94290 0 10.5052 History

883RG Birla Sun LifeQuarterly IntervalFund - Series 1-

02/06/2009 11.31200 11.312 11.1989 History
http://__dopostback%28%27dgdnav%24_ctl3%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl3%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl4%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl4%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl5%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl5%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl6%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl6%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl7%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl7%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl8%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl8%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl9%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl9%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl10%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl10%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl11%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl11%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl12%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl12%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl13%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl13%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl14%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl14%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl3%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl4%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl5%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl6%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl7%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl8%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl9%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl10%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl11%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl12%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl13%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl14%24lnkschemename%27%2C%27%27%29/


35/43

growth

882DBirla Sun Life FixedTerm Plan -instl-series Ae- Dividend

20/04/2009 10.00000 0 9.6 History

883RD

Birla Sun LifeQuarterly IntervalFund - Series 1-dividend

02/06/2009 10.00000 10 9.9 History

601DBirla Sun Life AssetAllocation Fund -Aggressive Plan -Dividend

13/08/2010 34.12630 34.1263 34.1263 History

601G

Birla Sun Life AssetAllocation Fund -Aggressive Plan -Growth

13/08/2010 34.12630 34.1263 34.1263 History

603D

Birla Sun Life AssetAllocation Fund -Conservative Plan -Dividend

13/08/2010 20.19930 20.1993 20.1993 History

603G

Birla Sun Life AssetAllocation Fund -Conservative Plan -Growth

13/08/2010 20.19930 20.1993 20.1993 History

602D

Birla Sun Life AssetAllocation Fund -Moderate Plan -Dividend

13/08/2010 27.75850 27.7585 27.7585 History

602G

Birla Sun Life AssetAllocation Fund -Moderate Plan -Growth

13/08/2010 27.75850 27.7585 27.7585 History

331AP

Birla Sun LifeSavings Fund -DisciplineAdvantage Plan

13/08/2010 10.47520 10.4752 10.4752 History

513WD

Birla Sun LifeFloating Rate Fund -Short Term - Ip -Weekly Dividend

15/08/2010 10.01040 10.0104 10.0104 History

513G

Birla Sun LifeFloating Rate Fund -Short Term - Ip -Growth

15/08/2010 12.44000 12.44 12.44 History

513FD

Birla Sun LifeFloating Rate Fund -Short Term - Ip -Fortnightly Dividend

15/08/2010 10.00000 10 10 History

513DD

Birla Sun LifeFloating Rate Fund -Short Term - Ip -Daily Dividend

15/08/2010 10.00000 10 10 History

Yield

Percentage is the amount of income from dividends and interest divided by the NAV, or

price per share. A mutual fund yield can be easily compared to a bond yield.

Mutual Fund Yield Formula
http://__dopostback%28%27dgdnav%24_ctl15%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl15%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl16%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl16%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl17%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl17%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl18%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl18%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl19%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl19%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl20%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl20%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl21%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl21%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl22%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl22%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl23%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl23%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl24%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl24%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl25%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl25%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl26%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl26%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl27%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl27%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl15%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl16%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl17%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl18%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl19%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl20%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl21%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl22%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl23%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl24%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl25%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl26%24lnkschemename%27%2C%27%27%29/http://__dopostback%28%27dgdnav%24_ctl27%24lnkschemename%27%2C%27%27%29/


36/43

income distribution per share

price per share

= Yield %

Mutual Fund Yield Example

$.60 income per share

$10 per share

= 6% yield

Total return

Is the current value of shares plus all distributions taken as cash minus the initial

investment?

Mutual Fund Total Return Formula

Current Value of Shares + Cash Distributions - Initial Investment = Total Profit or Loss

Mutual Fund Total Return Example

$12,000 current value of shares + $3,000 total cash distributions - $6,000

initial investment

= $9,000

Profit

MUTUAL FUND IN INDIA

The Indian Mutual Fund has passed through three phases. The first phase was

between 1964 and 1987 and 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


37/43

each by LIC and GIC). The total assets under management had grown to 61,028

crores at the end of 1994 and the number of schemes was 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 in association with a foreign Fund.As at the end of financial year 2000(31st march) 32 Funds were functioning with

Rs. 1, 13,005 crores as total assets under management. As on august end 2000, there

were 33 Funds with 391 schemes and assets under management with Rs 1, 02,849

crores.

The securities and Exchange Board of India (SEBI) came out with comprehensive

regulation in 1993 which defined the structure of Mutual Fund and Asset

Management Companies for the first time.

Several private sectors Mutual Funds 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 managing 1,02,000

crores.

RIDING OVERSEAS INTEREST IN INDIA

Investor looking for contrarian option can consider limited exposure to Birla Sun

Life MNC fund. After its lack-lustre performance until 2007, Birla MNC ramped up

its performance since, delivering an inspiring two-year compounds annual

performance of about 40 %.

Its long- term record of 21 % (over the five year) too, though not among the best,

outbeat the diversified funds category average return marginally. This pick-up is

indicative of a turnaround in the theme as well as the funds strategy. The

increasing focus of foreign parents on their Indian units has brought the MNC

theme back into the limelight.


38/43

SUITABILITY: Birla Sun Life MNC is a contrarian call for the following reasons.

Even though MNCs in the consumer & pharma space have performed well

fundamentally, many in capital goods & auto ancillary space have turned in an

indifferent financial performance over the last year & a half. Increasing investments

& importance of the Indian units in the eyes of their MNCs parents, thanks to thedomestic market potential in addition to the strategic use of the these units as an

outsourcing hub, however, could boost the performance of these companies in the

long term.

PERFORMANCE: the lack-luster performance of some of the MNC stock has not

however curtailed the performance of Birla MNC as some of its good picks from

the consumer non-durables & pharma space ensured good returns. The funds one-

year return of 75% places it in the top 15 equity funds, well ahead of its peer UTI

MNC (60%) as well as funds such as HDFC Capital Builder, which also has a

similar midcap exposure .

Investor may, however, have to keep in mind that the funds performance was

mediocre until 2007, when it underperformed the equity-fund average returns by a

significant margin. It turned its performance around during the correction by taking

significant exposure to large- cap stocks, in addition to stock from sector as pharmathat bore the market correction well.

This helped the fund contain its declines in 2008 to about 43% falling less than even

top large-cap funds such as HDFC top 200.

The performance is creditable also as the fund was fully invested during a good part

of the correction.

While it did reduce its equity exposure to about 85% by December 2008, it was

quick to hick it after the market lows in 2009.

This, in addition to good sector calls, seems to have helped boost performance.


39/43

While consumer non-durables & pharma are the top sector (in the with the market

mood), the fund also sports a good chunk of stock from sectors such as capital

goods, credit rating agencies, & auto ancillaries.

Returns (%) Net Assets- Rs. 215 crore

0

10

20

30

40

50

60

70

1st

Qtr

2nd

Qtr

3rd

Qtr

4th

Qtr

fund

category average

DATA ANALYSIS

METHODOLOGY

To achieve the objective of studying the stock market data has been collected.

Research methodology carried for this study can be two types

1. Primary

2. Secondary

PRIMARY:

The data, which has being collected for the first time and it is the original data.


40/43

In this project the primary data has been taken from HSE staff and guide of the

project.

SECONDARY:

The secondary information is mostly taken from websites, books, journals, etc.

Fund review: Birla Sun Life Mid Cap Plan A

THIS FUND MAKES A MARK IN MARKET RALLY, AVERAGE

PERFORMER IN SLUMP

LAST year, the fund outshone the category by turning in 120 % returns, 22% ahead

of its category average.

The fund in managed by Sunjay Chawla, who holds a degree in MMS. This fund

started off as a middle-of-the-road performance & began to take on the competition

in 2006, thanks to Chawlas savvy sector selection.

Though the portfolio is churned quite frequently, this fund avoids concentrated bets.Since 2005, no sector has breached the 20% mark, neither has a single stock crossed

an allocation of 6%. you can often find the portfolio packed with stocks, sometimes

as high as 65.

But that could also be the result of portfolio transition. When the fund manager

shifts between themes (say defensive to growth), it takes time to offload stock.

The schemes can invest in equity & related instruments in the 65-100% range. The

stocks invested in would have a market capitalization between RS.150 crore &

Rs.1500 crore.

Whats interesting is the fund managers flexibility. At the end of 2008, he was

heavily into debt. Which he totally offloaded early 2009 to significantly move into


41/43

cash. Just before 2009s rally, his large-cap allocation stood at 25% in February

(which is the maximum limit) to drop to one cent in just two months.

During market rallies, this fund does make its mark but during downturns it will not

dramatically stray from the category average. Its appeal lies in the fact that over the

long run, it amply rewards its investors.

In the 3-year & 5-year period as of May 31,2010, the fund returned 13% (category

average:6%) & 25% (category average: 19%), respectively.

- VALUE RESEARCH

CONCLUSION

Mutual funds are funds that pool the money of several investors to invest in equityor debt markets. Mutual Funds could be Equity funds, Debt funds or balancedfunds.

Fund are selected on quantitative parameters like volatility, FAMA Model, riskadjusted returns, and rolling return coupled with a qualitative analysis of fund

performance and investment styles through regular interactions / due diligenceprocesses with fund managers. BIBLIOGRAPHY

Websites:

www.hseindia.comwww.nseindia.comwww.amfiindia.comwww.hdfc.comwww.icicidirect.com

Reference books:

connect of the Birla sun life mutual fund


42/43


43/43

02 research

Documents