“COMPARITIVE ANALYSIS ON MUTUAL FUNDS”

ABSTRACTA 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 invested by the fund manager in different types of securities depending upon the objective of

the scheme. These could range from shares to debentures to money market instruments. The income earned through

these investments and the capital appreciations realized by the scheme are shared by its unit holders in proportion to

the number of units owned by them (pro rata). 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 portfolio at a relatively low cost.

Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual

Fund scheme has a defined investment objective and strategy.

Mutual Funds now represent perhaps most appropriate investment opportunity for most investors. As financial

markets become more sophisticated and complex, investors need a financial intermediary who provides the required

knowledge and professional expertise on successful investing. As the investor always try to maximize the returns and

minimize the risk. Mutual fund satisfies these requirements by providing attractive returns with affordable risks.

The basic purpose of the study is to give broad idea on Mutual Funds and analyze various schemes to highlight the

diversified investment that Mutual Fund offers to its investors. Through this study one can understand how to invest

in Mutual Funds and turn the raw investment into ripen fruits by taking wise decisions, taking the risk factors into

account.

The Study covers the basic meaning, concept, structure and the organization of the Mutual Funds. The Study is restricted to explain only the returns provided by the Mutual Funds from various schemes

INDEX

S.No: CONTENTS PAGE NO.

1. INTRODUCTION 1-7

Objectives of the Study

Need of the Study

Scope of the Study

Methodology of the Study

Limitation of the Study

2. REVIEW OF LITERATURE 8-45

3. COMPANY PROFILE 46-56

4. DATA ANALYSIS AND

INTERPRETATION 57-70

5. FINDINGS & SUGGESTION 71-73

6. CONCLUSION 74-75

7. BIBLIOGRAPHY 76

CHAPTER – I

INTRODUCTION

INTRODUCTION TO MUTUAL FUND

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 across a wide cross-section of industries and sectors and thus the risk is reduced.

Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the

same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors

of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. 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 and Exchange Board of India (SEBI) which regulates securities markets before

it can collect funds from the public.

A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and

custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The

trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC)

approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered

with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general

power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI

Regulations by the mutual fund.

OBJECTIVESMAIN OBJECTIVE:

A study on comparative analysis of mutual funds in Networth Mutual Fund schemes, are effecting on the

financial performance of the company.

ANCILLARY OBJECTIVES:

To know the different mutual fund schemes in NETWORTH mutual Fund.

To know the concept of Mutual funds.

To know how the NETWORTH Mutual funds are participating in the stock market.

To know how the NETWORTH Mutual funds are effecting on the overall performance of the Networth

Securities Limited

To know the final conclusions on mutual funds.

NEED OF THE STUDY

The primary objective of doing this project is to know about mutual funds and its functioning with special

reference to SBI Mutual Funds. This project helps us to know in detail about mutual fund industry right from its

inception stage, growth and future prospects. It also helps in understanding different schemes of mutual funds. The

study is focused on SBI mutual funds and their schemes like equity, income, balance as well as the returns associated

with those schemes.

The project study tries to ascertain the asset allocation, entry load, exit load, associated with the mutual funds.

Ultimately this would help in understanding the benefits of mutual funds to investors.

SCOPE OF THE STUDY:The study is limited to the analysis made on two major types of schemes offered by six banks. Each scheme is

calculated in term of their risk and return using different performance measurement theories. The reasons for such

performance in immediately analyzed in the commentary. Column charts are used to reflect the portfolio risk and return.

METHODOLOGY:

Meaning of research: The method and technique that are used for conducting the research. Research methodology

is a systemic way of solving research problem this methodology includes all the stages of research such as research

process, research design, sampling design, data collection, data analysis, data interpretation and data presentation.

Research Process: - This is the process of conducting entire research in such away to solve the research problem. It

includes identification of problem conducting the research and interpretation of the data and reporting.

To test the Different Mutual fund Schemes and its effect on the Business with reference to the NETWORTH Mutual

Funds.

Research design: - It indicates a design of research problem and research process

1. Information collected from the Questionnaire to the NETWORTH Mutual Fund Vijayawada branch.

2. I collect all the Financial Statements from the NETWORTH Mutual fund websites.

Data collection:-The objective of the present study can be accomplished by conducting a systematic research to

know the effect of NETWORTH Mutual Fund Schemes on the Business.

1. Primary data The information presented in the report is primary data, i.e. the data Collected from the

“NETWORTH COMPANY” through the Questionnaire.

2. Secondary data

Secondary data is taken from

Website

NETWORTH Journals

Security Analysis (sem-3)

Brocuhers

Tools for data analysis:- To analyse the information (or) data collected form Branch Manager and various financial

Statements the following tools are used:

1. Percentages

2. Averages

3. Range

4. Graphs

5. Bar Chart

LIMITATIONS

Mostly the data is related to the secondary data. To collect the primary data from the company is difficult task and it is a confidential matter to the company.

The product is restricted to only mutual funds.

The data is only limited to financial performance of the mutual funds.

The collected primary data is only from the one branch head of Vijayawada.

The comparison for the financial performance of the company is taken only for 3 years.

INDUSTRY PROFILE

An Overview The mutual fund industry in India began with the setting up of the Unit Trust of

India (UTI) in 1963 by the Government of India. Till the year 2000, UTI has grown to be a

dominant player in the industry with the assets of over Rs. 76,547 crores as of March 31, 2000. The

UTI is governed by a special legislation, the Unit Trust of India Act, 1963. In 1987 public sector

banks and insurance companies were permitted to set up mutual funds.

Also the two insurance companies LIC and GIC established mutual funds. Securities

Exchange Board of India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first

time established a comprehensive regulatory framework for the mutual fund industry.

Growth of Mutual Funds

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 assets of Rs. 6700 crores

at the end of 1988. The second phase is between 1987 and 1993 in 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. 61028 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 the private sector in association with a

foreign fund. At the end of financial year 31march 2000

Funds arc were functioning with Rs. 113005 crores as total assets under management. As on

August end 2000 there were 33 funds with 391 schemes and assets under management with Rs.

102849 crores.

As you probably know, mutual funds have become extremely popular over the last 20 years.

What was once just another obscure financial instrument is now a part of our daily lives. More than

80 million people, or one half of the households in America, invest in mutual funds That means

that, in the United States alone, trillions (yes, with a "T") of dollars are invested in mutual funds.

In fact, to many people, investing means buying mutual funds. After all, it's common

knowledge that incesting in mutual funds is (or at least should be) better than simply letting your

cash waste away in a savings account, but, for most people, that's where the understanding of funds

ends. It doesn't help that mutual fund salespeople speak a strange language that, sounding sort of

like English, is interspersed with jargon like MER, NAVPS, load/no-load, etc.

Originally mutual funds were heralded as a way for the little guy to get a piece of the market.

Instead of spending all your free time buried in the financial pages of the Wall Street Journal, all

you have to do is buy a mutual fund and you'd be set on your way to financial freedom. As you

might have guessed, it's not that easy. Mutual funds are an excellent idea in theory, but, in reality,

they haven't always delivered. Not all mutual funds are created equal, and investing in mutuals isn't

as easy as throwing your money at the first salesperson who solicits your business.

We'll explain the basics of mutual funds and hopefully clear up some of the myths around

them. You can then decide whether or not they are right for you.

The Evolution

The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry in the

year 1963. The primary objective at that time was to attract the small investors and it was made

possible through the collective efforts of the Government of India and the Reserve Bank of India.

HISTORY OF 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 of India. 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

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.

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

Canbank 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 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, 004crores.

.

1992-93 Amount

Mobilised

Assets Under

Management

Mobilisation as

% of gross

Domestic

Savings

UTI 11,057 38,247 5.2%

Public Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%

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

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 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 number of Mutual Fund houses went on increasing, with many foreign Mutual Funds

setting up funds in India and also the industry has witnessed several mergers and acquisitions. AS at

the end of January 2003, there were 33 Mutual Funds with total assets of Rs. 1,21,805crores. The

Unit Trust of India with Rs.44, 541crores of assets under management was way ahead of other

Mutual Funds.

Fourth Phase -- since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the specified Undertaking of the Unit Trust of India

with assets under management of Rs.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, confirming 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. As at the end of October 31, 2003, there were

31 funds, which manage assets of Rs.1, 26,726crores under 386 schemes

However, UTI Mutual Fund is still the largest player in the industry. In 1999, there was a significant

growth in mobilization of funds from investors and assets under management which is supported by

the following data:

GROSS FUND MOBILISATION (RS. CRORES)

From To UTI Public

sector

Private

sector

Total

01-April-

98

31-March-

99

11,679 1,732 7,966 21,377

01-April-

99

31-March-

00

13,536 4,039 42,173 59,748

01-April-

00

31-March-

01

12,413 6,192 74,352 92,957

01-April-

01

31-March-

02

4,643 13,613 1,46,267 1,64,523

01-April- 31-Jan-03 5,505 22,923 2,20,551 2,48,979

02

01-Feb.-03 31-March-

03

* 7,259* 58,435 65,694

01-April-

03

31-March-

04

- 68,558 5,21,632 5,90,190

01-April-

04

31-March-

05

- 1,03,246 7,36,416 8,39,662

01-April-

05

31-March-

06

- 1,83,446 9,14,712 10,98,158

Phase V. Growth and Consolidation – 2004 Onwards:

The industry has also witnessed several mergers and acquisitions recently, examples of which are

acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund and PNB

Mutual Fund by Principal Mutual Fund. Simultaneously, more international mutual fund players

have entered India like Fidelity, Franklin Templeton Mutual Fund etc. There were 29 funds as at the

end of March 2006. This is a continuing phase of growth of the industry through consolidation and

entry of new international and private sector players.

The mutual fund industry, beset by net redemptions by investors and adverse global and local

market conditions, shrank by 1.6% in terms of assets under management during the year FY2011-

2012.

The benchmark BSE Sensex and the assets under management (AuM) for the mutual fund industry

have risen in tandem. Booming markets in 2006 saw increased investor participation in the industry,

leading to fund inflows enabling the AuM to grow at a pace greater than the Sensex.

However, volatile market conditions in the last two years have led to net withdrawals by investors to

the tune of 49,406 crore INR in FY 2010-11 and 22,023 crore INR in FY 2011-12, leading to a

further drop in AuM, in addition to the drop caused by adverse market movements.

The mutual fund industry is primarily debt-oriented with debt funds (including liquid funds)

forming 64% of the AuM. As in the past, increased equity participation is the need of the hour for

the mutual fund industry. The period from 2006 to 2012 saw a number of major events, a very

significant one being the global meltdown in the banking and financial services industry (BFSI),

which had knock-on effects on almost all business sectors. Considering that we now live in a

connected world, India faced its own share of consequences although companies in the BFSI

segment remained relatively unaffected by the turmoil seen in the Western world. It seemed as

though the tighter regulatory regime had paid a dividend in an imploding global scenario. The

relevant indices and statistics— including stock markets—reflected the stress the Indian

environment went through. This document examines the various trends, outcomes and issues

pertaining to the Indian asset management industry against this backdrop.

The Sensex rose from the levels of 14,000 in February 2007 to a dizzying peak of 21,000 in a span

of a year (January 2008) and then plunged to levels below 9,000 in the next year (March 2009)!

This was despite the fact that the GDP grew by 9.3% in FY 2007-08 and 6.8% in FY 2008-09. Since

then, the market has largely been in the range of 15,000 to 17,000, thanks to the prevalent global

and local geo-political uncertainties. Regardless of all the above factors, the Indian asset

management industry has racked up an absolute growth of over 50% (31 March 2007 to 31 March

2009), which is no mean feat.

Over the same period, many mutual fund schemes actually delivered a positive alpha! This is

something the common investor is largely unaware of. Yet the industry again finds itself facing

several challenges. Factors such as softer economic outlook, an uncertain investor and regulatory

changes (e.g., the removal of the entry load in 2009) have led up to this situation. Mutual funds are

one of the several options that investors explore for investing surplus funds. In a deposit-dominated

market like India it is important for mutual funds to be able to offer differentiated risk-rewards and

gain shelf-space. With many seemingly similar offerings from multiple mutual funds unable to

clearly communicate their Superiority, a less informed investor may find it difficult to make a

choice. This uncertainty leads to a weakened ‘pull’ for the product. On the other hand, in an open

architecture distribution scenario, distributors are well aware of the differential incentive and

brokerage structures across products. After the compensation norms for distributors were altered

(i.e. abolition of entry load), the brokerage offered for selling mutual fund products has become less

competitive vis-à- vis some other products. Thus, the ‘push’ for the product has also weakened. The

question, therefore, is this: how can the mutual fund products regain the shelf- space they seem to

have lost in a scenario where investor knowledge and awareness is relatively poor?

Against this backdrop, the industry has seen the number of mutual funds grow from 32 to 44 over

the last six years. The number of schemes has grown from 779 to 4,473 (counting various options of

a single scheme as separate schemes) in the same period.

Further, there have been 18 new entrants through the joint-venture (JV) or acquisition route, which

include the following:

• Nomura

• KBC Bank

• L&T Finance

• Goldman Sachs

• Natixis Global AMC

• T Rowe Price

• Pramerica

There is one reported proposed entry – of Schroder Investment Management through the acquisition

of a significant minority stake in an existing AMC or trust company and also one reported proposed

exit, viz. Fidelity This growth serves to demonstrate that, at a fundamental level, there are many

significant global and local players that consider the Indian mutual fund industry to be attractive. It

is necessary to understand the mix of investors, distributors, types and number of schemes as factors

that contribute to a sustainable and profitable operating model.

The data as on 31 March 2012 relating to geographic contributions to the total AuM tells a revealing

story.

The large number of corporate investors contributing to the skew towards the debt- oriented or non-

equity AuM is mirrored by the disproportionate contribution from Mumbai. The top five cities

(Mumbai, New Delhi, Bangalore, Kolkata and Chennai) contribute over 71% of the total AuM, with

Mumbai alone accounting for more than 42%.

Thus, an overwhelming majority of the funds garnered from the urban non-retail segment are short-

term investments. Further, this is not a short-term trend as it has been noticed over a period of a few

years. Therefore, if the industry wants to change the age profile of the funds it has at its disposal, it

needs to seriously look at the other investors i.e. retail investors and high net-worth individuals

(HNIs) in the urban and semi-urban areas. This will also help fulfil the objectives of financial

inclusion.

This is not to say that corporate investors should not be encouraged to invest in mutual funds as this

leads to channelising corporate surpluses into the capital market in a structured fashion. At the same

time AMCs could do well to have a sharper focus on the retail investor. It is good to remember that

mutual funds originally aimed to provide individual investors with the opportunity to make long-

term capital market investments. Earlier, ‘long-term’ referred to periods of five to ten years. The

perception in recent times of long-term is probably that of two to three years. This is a period not

nearly enough for a fund manager to demonstrate an alpha that justifies continued investment.

Key Challenges

Traditionally, the Life Insurance Corporation of India and the Unit Trust of India

for their own products developed large distribution networks. The LIC model

involved engaging deeply with distributors and agents, by educating and equipping

them to sell. Agents were well compensated and penetration was deep. In return,

the agents worked exclusively with LIC and did not sell other products.

Unlike this, the mutual fund distribution network evolved in an open architecture

mode. All distributors were free to distribute or offer products from multiple asset

management companies (AMCs). As a result, the bond between the AMC and the

distributor was relatively weaker. An AMC did not end up spending resources

beyond a certain level on developing the distributor skills as the latter could then

easily use these improved skills to sell other competing products.

The withdrawal of the entry-load, which constituted a good part of the

commissions passed on to the distributors, was one of the other factors leading to a

sudden change in the distribution space.

Generally, it is more expensive for a distributor to reach out to a retail investor

than to a corporate investor. While an average retail investor folio has about 35,000

INR of assets, an average corporate investor folio has 59 lakh INR of assets.

Hence, a distributor will need to reach around 170 retail investors to get the same

AuM as a single corporate folio, which acts as a relative disincentive to chasing

and capturing individual retail investors.

Considering the higher costs of acquisition of a retail investor, one could consider

evaluating differential expenses being charged to retail and institutional investors.

This may, however, impact investor returns of the two segments who have invested

in the same scheme, leading to discontent among retail investors. Moreover, 0

despite the higher upfront cost of acquiring a retail investor, the sticky nature of

retail investors indicate that retail consumers break even and are actually more

profitable than corporate clients in the long run.

Upfront commission: After the alteration to entry-load norms, in August 2011,

transaction charges were introduced to compensate distributors (refer to the

‘transaction charges paid to distributors’ point in the regulatory section). In respect

of the ‘opt-in’ facility offered to distributors, only 16% have opted in with the rest

opting out of charging the transaction fee. A possible reason for this trend could be

the lower limit of 10.000 INR on the ticket size, which consequently disincentives

small scale distributors and sub-distributors who typically get large volumes of low

ticket size subscriptions. This trend also indicates that this move has only partially

brought back distributor interest in selling to this segment.

Trail commission: The changes to trail commission led to large distributors

focusing on servicing and retaining existing investor-clients rather than reaching

out to new investors. Later, in May 2010, AMFI members agreed to ban trail

commission on transferred portfolio.

The reduced trail commission, which was typically charged to schemes, implied

increased scheme returns, which could prove beneficial to investors. However, the

blanket ban on all trail commissions for transferred portfolios could serve as a

detraction to investors whose existing agents were not servicing them, given the

reduced attraction for a new agent to service sans a trail commission.

The abolition of the entry load and the revision of trail commission guidelines

have taken care of some key issues, but in turn have given rise to other aspects

which need to be tackled and resolved.

Mandatory disclosure of commission earned: A mandatory disclosure alerts the

investor about the extent of distributor gain while putting the onus on the

distributor to explain the rationale for the switch.1

In this context, a re-introduction of the entry load in its original form appears to

many to be a regressive step rather than a solution to the current problems faced by

the industry. One of the fallouts of such re-introduction could be an increased

churn to some extent.

Payment of distributor commission by investors: Currently, an investor is required

to draw two cheques: one to the AMC for the investment amount and the other to

the distributor for the commission. Distributors on the field have observed that

investors may be hesitant to go through this process. The depositing and

subsequent collection of the distribution commissions by the distributor also

involves a cost. A system whereby investors are given the option to draw a single

cheque to the AMC, which clearly indicates the distribution commission to be

paid by the AMC to the distributor, may help in simplifying this process.

Direct channels and exclusive or preferential treatment for distributors: Asset

management companies currently do not foresee a significant change in their

current cost structure, thereby continuing to have a limited margin to pass on to the

distributors as commission. Any increase or decrease in AuM directly affects the

revenues (management fees) and profitability of an AMC. In such a scenario,

AMCs having access to their ‘own’ distribution channel to sell mutual fund

products have a relative advantage; this includes AMCs with Indian banks and

brokerage houses as sponsors. Banks have also been focussing increasingly on

earning a higher percentage of their income from services and fees. Hence, there is

a mutual benefit for banks to use their network to sell mutual fund products,

whether those offered by their own group AMC or by others.

Currently, AMCs not having exclusive distributors have a limited incentive to

invest on training and improving the awareness, knowledge and skill of

distributors. Economic compulsions could see companies move towards a

committed distributorship system.2

Alternate lower cost distribution channels:Other avenues for AMCs to diversify their distribution base could include an

examination of distribution channels prevalent in other industries, especially those

that involve a low distribution cost— such as the FMCG industry. Customers in

Tier-2 and lower cities could also be tapped by leveraging on the reach of PSU

banks in these areas, which could be mutually beneficial. Alternate technology-

based channels including the Internet and mobile banking could also be further

explored with the aim of reaching a larger customer base at lower costs.

Given the widespread use of mobile phones and secure payment gateways, it is

expected that this channel will be used to directly reach investors for reasons

other than merely communicating the daily NAV.

Another suggestion that could be considered is to lighten the AMFI certification

requirement for distributors with sales or collection below a certain threshold. This

will encourage sub- distributors in the far-flung areas to distribute mutual fund

products to investors with smaller investible surpluses.

OpportunitiesIn any industry, innovation and improvements happen when the rules are changed.

Large-scale environmental changes such as those that have taken place in the last

three years must lead to innovation and evolution.

• Newer leaner operating structures will have to evolve which will entail the use of

technology that helps an AMC reach the retail end user with solutions that enable

transactions via platforms such as mobile or online platforms.This will not only

give greater direct access but will also help AMCs to better understand investor

behaviour and create the appropriate environment and products to move towards

long and healthy relationships with the investors.

3

• As the industry evolves, outsourcing an increasing number of functions to reduce

the head-count and increase efficiency might be the norm. All aspects of operating

costs must be examined for efficiencies.

• A rational look at schemes of an AMC by their management teams is needed to

better understand the mix, the cost and the benefits – to the investors as well as to

the AMCs.

• Agile product design, re-positioning of ETFs and SIPs

• Better communication of scheme returns on a relative basis to investors is

required. The alpha achieved is insufficiently communicated or understood.

• The new AIF guidelines will create opportunities to broaden the revenue base

without commensurate cost increases.

• The asset management industries in the US and in Japan have had their “401 k”

moments. In the late 70s market regulators in the US permitted pension funds (later

401K) to invest a portion of their funds (at the discretion of the individual) into

mutual fund schemes. This saw a huge upsurge in the AuM of the industry as a

whole. Similarly the Japanese asset management industry went on a growth surge

around the turn of the century when the pension and retirement funds were

permitted to be invested in the asset management schemes. The EPF in India is a

huge pool of long-term investible funds. These are expected to yield high returns.

If the right mechanism were to be created to channelise even a small proportion of

the funds to be invested in the Indian mutual fund schemes (specific schemes can

be selected if required), it will provide a boost to the industry, apart from

maintaining the more important objective of having the funds managed by a

regulated sector and by persons with a track record. Imagine the change if 20% of

the 3,00,000 crore INR were permitted to be invested in the Indian capital markets

via the asset management industry. It will be the industry’s ‘401K’ moment.4

A similar impact could be generated by introducing the concept of individual

retirement accounts (IRAs). Some of the investment products available are in the

nature of retirement benefit plans (EPF, PPF and now NPS as well as certain

insurance products). Avenues such as EPF are available to only a certain section of

the population. To encourage people to save for the post retirement period IRAs

can be offered. The investments into such schemes could be self-directed, flexible

and in specific circumstances tax deductible. The fund so created could be

available tax free (EEE) at the age of retirement.

Such a concept exists in the mature western markets such as the US and

contributes to about 20% of the assets under management!

The recently announced Rajiv Gandhi Equity Savings Scheme is another

opportunity for the mutual fund industry. We believe that given the low financial

awareness of such new or first time investors in the far flung regions, it is

imperative that these investors are channelised into the markets via mutual funds

rather than directly investing into equities themselves!

Advisory services to off-shore funds should be explored further as an area of

revenue diversification. More could be done in this direction.

Conclusion: Evolution and not revolution The Indian asset management industry has answered existential questions.

However, the present scenario demands vigorous innovation and reinvention.

Wholesale or drastic changes may not be warranted; instead, the purpose may be

better served by adopting a cluster of key initiatives in the areas of cost efficiency,

product design and positioning, alternative distribution models, revenue

diversification and capacity creation. We believe a sensitive regulatory

environment will support the evolution going forward.

5

Mutual fund products are a natural component of options for all class of investors

and will remain so. The evolution is more towards gaining a larger mind share with

all key stakeholders including, most importantly, the investors.

6

CHAPTER-IITHEREOTICAL PROFILE

7

DEFINITION:

Mutual fund is the pool up savings of small investors to raise funds called mutual funds. Mutual

funds are invested in diversified portfolio to spread risk. While it opens an investment channel to

small investors, it reduces risks, improves liquidity and results in stable returns and better capital

appreciation in the long run.

CONCEPTA 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 appreciation realized are shared by its unit holders in proportion to the number of units

owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it

offers an opportunity to invest in a diversified, professionally managed basket of securities at a

relatively low cost. The flow chart below describes broadly the working of a mutual fund:

8

Mutual fund in IndiaUnit Trust of India was the first mutual fund set up in India in the year 1963. In early 1990s,

Government allowed public sector banks and institutions to set up mutual funds.

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of

SEBI are to protect the interest of investors in securities and to promote the development of and to

regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to

protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.

Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital

market. The regulations were fully revised in 1996 and have been amended thereafter from time to

time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests

of investors.

All mutual funds whether promoted by public sector or private sector entities including those

promoted by foreign entities are governed by the same set of Regulations. There is no distinction in

regulatory requirements for these mutual funds and all are subject to monitoring and inspections by

SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these

entities are of similar type

You can make money from a mutual fund in three ways:

1) Income is earned from dividends on stocks and interest on bonds.

2) If the fund sells securities that have increased in price, the fund has a capital gain.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's

shares increase in price. You can then sell your mutual fund shares for a profit

9

Advantages of Mutual Funds:• Professional Management - The primary advantage of funds is the professional

management of your money. Investors purchase funds because they do not have the time or

the expertise to manage their own portfolios. A mutual fund is a relatively inexpensive way

for a small investor to get a full-time manager to make and monitor investments.

• Diversification - By owning shares in a mutual fund instead of owning individual stocks or

bonds, your risk is spread out. The idea behind diversification is to invest in a large number

of assets so that a loss in any particular investment is minimized by gains in others.

• Economies of Scale - Because a mutual fund buys and sells large amounts of securities at a

time, its transaction costs are lower than what an individual would pay for securities

transactions.

• Liquidity - Just like an individual stock, a mutual fund allows you to request that your

shares be converted into cash at any time.

• Simplicity – Minimum investment is small.

Disadvantages: • Dilution - It's possible to have too much diversification. Because funds have small holdings in

so many different companies, high returns from a few investments often don't make much

difference on the overall return.

• Taxes - When making decisions about your money, fund managers don't consider your personal

tax situation.

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MUTUAL FUNDMutual fund is a trust that pools money from a group of investors (sharing common financial

goals) and invest the money thus collected into asset classes that match the stated investment

objectives of the scheme. Since the stated investment objective of a mutual fund scheme

generally forms the basis for an investor's decision to contribute money to the pool, a mutual

fund can not deviate from its stated objectives at any point of time.

Every Mutual Fund is managed by a fund manager, who using his investment management skills

and necessary research works ensures much better return than what an investor can manage on

his own. The capital appreciation and other incomes earned from these investments are passed on

to the investors (also known as unit holders) in proportion of the number of units they own.

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When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets

of the fund in the same proportion as his contribution amount put up with the corpus (the total

amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit

holder.

Any change in the value of the investments made into capital market instruments (such as shares,

debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the

market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is

calculated by dividing the market value of scheme's assets by the total number of units issued to

the investors.

For example:

A. If the market value of the assets of a fund is Rs. 100,000

B. The total number of units issued to the investors is equal to 10,000.

C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00

D. Now if an investor 'X' owns 5 units of this scheme

E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by

the NAV of the scheme)

ADVANTAGES OF MUTUAL FUND 1. Portfolio Diversification Mutual Funds invest in a well-diversified portfolio of securities

which enables investor to hold a diversified investment portfolio (whether the amount of

investment is big or small).

2. Professional Management Fund manager undergoes through various research works and has

better investment management skills which ensure higher returns to the investor than what he can

manage on his own.

3. Less Risk Investors acquire a diversified portfolio of securities even with a small

investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely

2 or 3 securities.

4. Low Transaction Costs Due to the economies of scale (benefits of larger volumes), mutual

funds pay lesser transaction costs. These benefits are passed on to the investors.

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5. Liquidity An investor may not be able to sell some of the shares held by him very easily and

quickly, whereas units of a mutual fund are far more liquid.

6. Choice of Schemes Mutual funds provide investors with various schemes with different

investment objectives. Investors have the option of investing in a scheme having a correlation

between its investment objectives and their own financial goals. These schemes further have

different plans/options

DISADVANTAGES OF MUTUAL FUND

1.Costs Control Not in the Hands of an Investor Investor has to pay investment management

fees and fund distribution costs as a percentage of the value of his investments (as long as he

holds the units), irrespective of the performance of the fund.

2. No Customized Portfolios The portfolio of securities in which a fund invests is a decision

taken by the fund manager. Investors have no right to interfere in the decision making process of

a fund manager, which some investors find as a constraint in achieving their financial objectives.

3. Difficulty in Selecting a Suitable Fund Scheme Many investors find it difficult to select one

option from the plethora of funds/schemes/plans available. For this, they may have to take advice

from financial planners in order to invest in the right fund to achieve their objectives.

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TYPES OF MUTUAL FUNDSGeneral Classification of Mutual Funds

Open-end Funds / Closed-end Funds

Open-end Funds

Funds that can sell and purchase units at any point in time are classified as Open-end Funds. The

fund size (corpus) of an open-end fund is variable (keeps changing) because of continuous

selling (to investors) and repurchases (from the investors) by the fund. An open-end fund is not

required to keep selling new units to the investors at all times but is required to always

repurchase, when an investor wants to sell his units. The NAV of an open-end fund is calculated

every day.

Closed-end Funds

Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are

known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times.

After the closure of the offer, buying and redemption of units by the investors directly from the

Funds is not allowed. However, to protect the interests of the investors, SEBI provides investors

with two avenues to liquidate their positions:

1. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units

from/to each other. The trading is generally done at a discount to the NAV of the scheme. The

NAV of a closed-end fund is computed on a weekly basis (updated every Thursday).

2. Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the

corpus of the Fund and its outstanding units do get changed.

Load Funds/no-load funds

0Load Funds

Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio churning,

fund manager’s salary etc. Many funds recover these expenses from the investors in the form of

load. These funds are known as Load Funds. A load fund may impose following types of loads

on the investors:

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Entry Load – Also known as Front-end load, it refers to the load charged to an investor

at the time of his entry into a scheme. Entry load is deducted from the investor’s contribution

amount to the fund.

Exit Load – Also known as Back-end load, these charges are imposed on an investor

when he redeems his units (exits from the scheme). Exit load is deducted from the redemption

proceeds to an outgoing investor.

Deferred Load – Deferred load is charged to the scheme over a period of time.

Contingent Deferred Sales Charge (CDSS) – In some schemes, the percentage of exit

load reduces as the investor stays longer with the fund. This type of load is known as Contingent

Deferred Sales Charge.

No-load Funds

All those funds that do not charge any of the above mentioned loads are known as No-load

Funds.

Tax-exempt Funds/ Non-Tax-exempt Funds

Tax-exempt Funds

Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-end

equity oriented funds are exempt from distribution tax (tax for distributing income to investors).

Long term capital gains and dividend income in the hands of investors are tax-free.

Non-Tax-exempt Funds

Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all funds,

except open-end equity oriented funds are liable to pay tax on distribution income. Profits arising

out of sale of units by an investor within 12 months of purchase are categorized as short-term

capital gains, which are taxable. Sale of units of an equity oriented fund is subject to Securities

Transaction Tax (STT). STT is deducted from the redemption proceeds to an investor

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BROAD MUTUAL FUND TYPES

1. Equity Funds

Equity funds are considered to be the more risky funds as compared to other fund types, but they

also provide higher returns than other funds. It is advisable that an investor looking to invest in

an equity fund should invest for long term i.e. for 3 years or more. There are different types of

equity funds each falling into different risk bracket. In the order of decreasing risk level, there

are following types of equity funds:

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Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for

maximum capital appreciation and invest in less researched shares of speculative nature.

Because of these speculative investments Aggressive Growth Funds become more volatile

and thus, are prone to higher risk than other equity funds.

a. Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of

3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest in

companies that are expected to outperform the market in the future. Without entirely adopting

speculative strategies, Growth Funds invest in those companies that are expected to post above

average earnings in the future.

b. Specialty Funds - Specialty Funds have stated criteria for investments and their

portfolio comprises of only those companies that meet their criteria. Criteria for some specialty

funds could be to invest/not to invest in particular regions/companies. Speciality funds are

concentrated and thus, are comparatively riskier than diversified funds. There are following types

of specialty funds:

1. Sector Funds: Equity funds that invest in a particular sector/industry of the market are known

as Sector Funds. The exposure of these funds is limited to a particular sector (say Information

Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods) which is why

they are more risky than equity funds that invest in multiple sectors.

2. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one

or more foreign companies. Foreign securities funds achieve international diversification and

hence they are less risky than sector funds. However, foreign securities funds are exposed to

foreign exchange rate risk and country risk.

3. Mid-Cap or Small-Cap Funds:

Funds that invest in companies having lower market capitalization than large capitalization

companies are called Mid-Cap or Small-Cap Funds. Market capitalization of Mid-Cap

companies is less than that of big, blue chip companies (less than Rs. 2500 crores but more than

Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores.

17

Market Capitalization of a company can be calculated by multiplying the market price of the

company's share by the total number of its outstanding shares in the market. The shares of Mid-

Cap or Small-Cap Companies are not as liquid as of Large-Cap Companies which gives rise to

volatility in share prices of these companies and consequently, investment gets risky.

4. Diversified Equity Funds - Except for a small portion of investment in liquid money market,

diversified equity funds invest mainly in equities without any concentration on a particular

sector(s). These funds are well diversified and reduce sector-specific or company-specific risk.

However, like all other funds diversified equity funds too are exposed to equity market risk. One

prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As

per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times.

ELSS investors are eligible to claim deduction from taxable income (up to Rs 1 lakh) at the time

of filing the income tax return. ELSS usually has a lock-in period and in case of any redemption

by the investor before the expiry of the lock-in period makes him liable to pay income tax on

such income(s) for which he may have received any tax exemption(s) in the past.

Equity Index Funds - Equity Index Funds have the objective to match the performance of a

specific stock market index. The portfolio of these funds comprises of the same companies that

form the index and is constituted in the same proportion as the index. Equity index funds that

follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that

follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). Narrow indices are

less diversified and therefore, are more risky.

2.Debt/IncomeFunds

Funds that invest in medium to long-term debt instruments issued by private companies, banks,

financial institutions, governments and other entities belonging to various sectors (like

infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile

funds that seek to generate fixed current income (and not capital appreciation) to investors. In

order to ensure regular income to investors, debt (or income) funds distribute large fraction of

their surplus to investors. Although debt securities are generally less risky than equities, they are

subject to credit risk (risk of default) by the issuer at the time of interest or principal payment. To

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minimize the risk of default, debt funds usually invest in securities from issuers who are rated by

credit rating agencies and are considered to be of "Investment Grade".

a. Diversified Debt Funds - Debt funds that invest in all securities issued by entities

belonging to all sectors of the market are known as diversified debt funds. The best feature of

diversified debt funds is that investments are properly diversified into all sectors which results in

risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all investors

which further reduces risk for an individual investor.

b. Focused Debt Funds* - Unlike diversified debt funds, focused debt funds are narrow

focus funds that are confined to investments in selective debt securities, issued by companies of a

specific sector or industry or origin. Some examples of focused debt funds are sector, specialized

and offshore debt funds, funds that invest only in Tax Free Infrastructure or Municipal Bonds.

Because of their narrow orientation, focused debt funds are more risky as compared to

diversified debt funds. Although not yet available in India, these funds are conceivable and may

be offered to investors very soon.

c. Assured Return Funds - Although it is not necessary that a fund will meet its objectives

or provide assured returns to investors, but there can be funds that come with a lock-in period

and offer assurance of annual returns to investors during the lock-in period. Any shortfall in

returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds

are generally debt funds and provide investors with a low-risk investment opportunity. However,

the security of investments depends upon the net worth of the guarantor (whose name is

specified in advance on the offer document). To safeguard the interests of investors, SEBI

permits only those funds to offer assured return schemes whose sponsors have adequate net-

worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e.

Monthly Income Plans of UTI) that assured specified returns to investors in the future.

d. Fixed Term Plan Series –

Fixed Term Plan Series usually are closed-end schemes having short term maturity period (of

less than one year) that offer a series of plans and issue units to investors at regular intervals.

Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series

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usually invest in debt / income schemes and target short-term investors. The objective of fixed

term plan schemes is to gratify investors by generating some expected returns in a short period.

3.Also known as Government Securities in India, Gilt Funds invest in government papers

(named dated securities) having medium to long term maturity period. Issued by the Government

of India, these investments have little credit risk (risk of default) and provide safety of principal

to the investors. However, like all debt funds, gilt funds too are exposed to interest rate risk.

Interest rates and prices of debt securities are inversely related and any change in the interest

rates results in a change in the NAV of debt/gilt funds in an opposite direction.

4. Money Market/Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt

instruments. These securities are highly liquid and provide safety of investment, thus making

money market / liquid funds the safest investment option when compared with other mutual fund

types. However, even money market / liquid funds are exposed to the interest rate risk. The

typical investment options for liquid funds include Treasury Bills (issued by governments),

Commercial papers (issued by companies) and Certificates of Deposit (issued by banks).

5.HybridFunds

As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities,

debts and money market securities. Hybrid funds have an equal proportion of debt and equity in

their portfolio. There are following types of hybrid funds in India:

a.Balanced Funds

The portfolio of balanced funds includes assets like debt securities, convertible securities, and

equity and preference shares held in a relatively equal proportion. The objectives of balanced

funds are to reward investors with a regular income, moderate capital appreciation and at the

same time minimizing the risk of capital erosion. Balanced funds are appropriate for

conservative investors having a long term investment horizon.

b.Growth-and-Income Funds Funds that combine features of growth funds and income funds

are known as Growth-and-Income Funds. These funds invest in companies having potential for

20

capital appreciation andthose known for issuing high dividends. The level of risks involved in

these funds is lower than growth funds and higher than income funds.

6. Commodity Funds

Those funds that focus on investing in different commodities (like metals, food grains, crude oil

etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds.

A commodity fund that invests in a single commodity or a group of commodities is a specialized

commodity fund and a commodity fund that invests in all available commodities is a diversified

commodity fund and bears less risk than a specialized commodity fund. “Precious Metals Fund”

and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples

of commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in

shares/securitized assets of housing finance companies, are known as Specialized Real Estate

Funds. The objective of these funds may be to generate regular income for investors or capital

appreciation.

8. ExchangeTradedFunds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-

end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock

exchanges like a single stock at index linked prices. The biggest advantage offered by these

funds is that they offer diversification, flexibility of holding a single share (tradable at index

linked prices) at the same time. Recently introduced in India, these funds are quite popular

abroad.

9. Fund of Funds

Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund

schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a

portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds

maintain a portfolio comprising of equity/debt/money market instruments or non financial assets.

Fund of Funds provide investors with an added advantage of diversifying into different mutual 21

fund schemes with even a small amount of investment, which further helps in diversification of

risks. However, the expenses of Fund of Funds are quite high on account of compounding

expenses of investments into different mutual fund schemes.

Risk Hierarchy of Different Mutual Funds

Thus, different mutual fund schemes are exposed to different levels of risk and investors should

know the level of risks associated with these schemes before investing. The graphical

representation hereunder provides a clearer picture of the relationship between mutual funds and

levels of risk associated with these funds:

22

MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in

the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the

public under one or more schemes for in vesting in securities in accordance with these

regulations.

These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The

structure indicated by the new regulations is indicated as under.

A mutual fund comprises four separate entitles, namely sponsor, mutual fund trust, AMC and

custodian. The sponsor establishes the mutual fund and gets its registered with SEBI.

The mutual fund needs to be constituted in the form of a trust and the instrument of the trust

should be in the form of a deed registered under the provisions of the Indian Registration Act,

1908.

The sponsor is required to contribute at lease 40% of the minimum net worth (Rs.10 crore) of the

asset management company. The board of trustees manages the MF and the sponsor executes the

trust deeds in favour of the trustees. It is the job of the MF trustees to see that schemes floated

and managed by the AMC appointed by the trustees are in accordance with the trust deed and

SEBI guidelines.

23

MUTUAL FUND STRUCTURE

24

Sponsor Company (E.g. Prudential, ICICI)

Establishes the MF as a trustRegisters the MF with SEBI

Managed by a Board of Trustees

Mutual Fund(E.g. Prudential, ICICI, Mutual Fund)

Hold unit-holders funds in MF enter into an agreement with SEBI and ensure compliance

AMC(e.g. prudential ICICI Asset Management Company)

Float MF fundsManages the fund as per SEBI guidelines and AMC agreement

Custodian Provide custodial services

Registrar Provides registrar and transfer services

Distributors Provides the network for distribution of the scheme to the investors

STATE BANK OF INDIA

State Bank of India is the first Bank sponsored Mutual Fund to launch offshore

fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately. Today it

is the largest Bank sponsored Mutual Fund in India. They have already launched

35 Schemes out of which 15 have already yielded handsome returns to investors.

State Bank of India Mutual Fund has more than Rs. 5,500 Crores as AUM. Now it

has an investor base of over 8 lakhs. Spread over 18schemes

UNIT TRUST OF INDIA (UTI)

UTI, the first bank to begin operations as new private banks in 1994 after the

Government of India allowed new private banks to be established. UTI Bank was

jointly promoted by the Administrator of the specified undertaking of the Unit Trust

of India (UTI-I), Life Insurance Corporation of India (LIC) and General Insurance

Corporation Ltd. Also with associates viz. National Insurance Company Ltd., the

New India Assurance Company, The Oriental Insurance Corporation and United

Insurance Company Ltd

UTI Bank in India today is capitalized with Rs. 232.86 Crores with 47.50% public

holding other than promoters. It has more than 200 branch offices and Extension

Counters in the country with over 1250 UTI Bank ATM proving to be one of the

largest ATM networks in the country. UTI Bank India commits to adopt the best

industry practices internationally to achieve excellence. UTI Bank has strengths in

retail as well as corporate banking.

By the end of December 2004, UTI Bank in India had over 2.7 million debit cards.

This is the first bank in India to offer the AT PAR Cheque facility, without any

charges, to all its Savings Bank customers in all the places across the country where it

has presence.

25

The latest offerings of the bank along with Dollar variant is the Euro and Pound

Sterling variants of the International Travel Currency Card. The Travel Currency

Card is a signature based pre-paid travel card which enables travellers global access

to their money in local currency of the visiting country in a safe and convenient way.

Stock Exchange where the shares of UTI Bank are listed:

Stock Exchange Code No. ISIN No.

Ahmedabad Code No. 63134

Mumbai Code No. 532215 – A Group

NSE Code No. UTIBANKEQ

OTCEI Code No. Permitted Security

NSDL ISIN No. INE238A01026

CDSL ISIN No. INE238A01026

Share Capital of UTI Bank

Authorized Share Capital: Rs. 300 Crores

Paid Up Share Capital: Rs. 232.86 Crores

Declared Rate of Interests by UTI Bank

Year 1998-99 - 10% (Pro-rata)

Year 1999-00 - 12%

Year 2000-01 - 15%

Year 2001-02 - 20%

Year 2002-03 - 22%

26

Year 2003-04 - 25%

UTI Mutual Fund is managed by UTI Asset Management Company Private Limited

(Estb: Jan 14, 2003) who has been appointed by the UTI Trustee Company Private

Limited for managing the schemes of UTI Mutual Fund and the schemes transferred /

migrated from UTI Mutual Fund.

The UTI Asset Management Company has its registered office at: UTI Tower,

Gn Block, Bandra - Kurla Complex, Bandra (East), Mumbai - 400 051 will provide

professionally managed back office support for all business services of UTI Mutual

Fund (excluding fund management) in accordance with the provisions of the

Investment Management Agreement, the Trust Deed, the SEBI (Mutual Funds)

Regulations and the objectives of the schemes. State-of-the-art systems and

communications are in place to ensure a seamless flow across the various activities

undertaken by UTI AMC.

UTI AMC is a registered portfolio manager under the SEBI (Portfolio Managers)

Regulations, 1993 on Janruary 3 2004, for undertaking portfolio management

services and also acts as the manager and marketer to offshore funds through its 100

% subsidiary, UTI International Limited, registered in Guernsey, Channel Islands.

UTI Mutual Fund has a track record of managing a variety of schemes catering to the

needs of every class of citizenry. It has a nationwide network consisting 70 UTI

Financial Centers (UFCs) and UTI International offices in London, Dubai and

Bahrain. With a view to reach to common investors at district level, 4 satellite offices

have also been opened in select towns and districts. It has a well-qualified,

professional fund management team, who has been highly empowered to manage

funds with greater efficiency and accountability in the sole interest of unit holders.

27

HSBC

HSBC is the largest bank in Hong Kong and second largest group in the world after

Citicorp. Before moving its headquarter to London in 1990, it was headquartered in

Hong Kong. HSBC India is having branches in Ahmedabad, Bangalore, Chennai,

Chandigarh, Coimbatore, Gurgaon, Vijayawada, Jaipur, Kochi, Kolkata, Ludhiana,

Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam.

HSBC NRI centers are located in Asia-Pacific, the Middle East, Europe and North

America. HSBC NRI centres provide full range of personal and private banking

products in India and overseas. HSBC Internet banking adds to the services of HSBC

India abroad.

HSBC India, along with HSBC Investment product and HSBC Insurance, it offers

international Gold Card and Classic Credit Cards from VISA and MasterCard and

debit cards from Visa. HSBC in India gives 24 hour banking services, extensive

network of ATMs, integrated Call Centre and also HSBC e-banking.

HSBC Bank India Fact File

The HSBC Group develops and applies advanced technology to the efficient and

convenient delivery of banking and related financial services. HSBC Bank India

provides the following:

Self-service banking with over 150 in-branch and off-branch ATMs and

24-hour phone banking.

Trade and corporate banking services with real-time access to a

centralised information database

Instantaneous inter-city transactions through online connections between

all branches

28

ICICI BANK

ICICI Limited was established in 1955 by the World Bank, the Government of India

and the Indian Industry, for the promotion of industrial development in India by

giving project and corporate finance to the industries in India.

ICICI Bank has grown from a development bank to a financial conglomerate and has

become one of the largest public financial institutions in India. ICICI Bank has

financed all the major sectors of the economy, covering 6,848 companies and 16,851

projects. As of March 31, 2000, ICICI had disbursed a total of Rs. 1, 13,070 crores,

since inception.

ICICI Bank Fact Files

Total assets: Rs.146, 214 crore (December 31, 2004)

Network : 530 branches

ATMs : Over 1,880

Abroad Subsidiaries : United Kingdom and Canada

Abroad branches : Singapore and Bahrain

Representative offices : United States, China, United Arab Emirates,

Bangladesh and

South Africa.

29

ABN AMRO

Profile

ABN AMRO is an international bank with European roots. We have a clear focus on

consumer and commercial clients in our local markets and focus globally on select

multinational corporations and financial institutions, as well as private clients. Our

business mix gives us a competitive edge in our chosen markets and client segments.

Our strategy is built on leveraging our advantages as a Group to create the best value

for ? and with ? our clients.

We are active in four principal customer segments: Personal Banking, Private

Banking, Business and Commercial and Corporate and Institutional.

Although we serve a broad range of clients, our strategic focus is on the mid-market

segment. This is the client area where we have a strong and distinctive competitive

advantage and where we feel we can be most profitable in the future.

The ABN AMRO Corporate Values and Business Principles provide the framework

within which we carry out our operations.

In brief...

ABN AMRO is a prominent international bank, our history going back to 1824.

ABN AMRO ranks eighth in Europe and 12th in the world based on total assets, with

more than 4,000 branches in 53 countries, a staff of more than 99,000 full-time

equivalents and total assets of EUR  1,120.1 bln (as at 1 November 2010).

Organisation

We implement our strategy through a number of Business Units (BUs). These units

are responsible for managing a distinct region, client segment or product segment,

while also sharing expertise and operational excellence across the Group.

30

We have five regional Client BUs: the Netherlands, Europe, North America, Latin

America and Asia. These BUs serve about 20 million consumer clients and small to

larger businesses worldwide. We have two global Client BUs to serve clients with.

The BU Private Clients provides private banking services to wealthy individuals and

families and has EUR 150 bln in Assets under Administration (as at July 2009). The

BU Global Clients serves our 550 multinational clients.

We have three Product BUs: Global Markets, Asset Management and Transaction

Banking.

Global Markets develops products for our commercial clients across the

globe.

Transaction Banking is our product organisation covering all payments and

trade in the bank for our retail, private client, and commercial markets.

Asset Management, which is one of the world's leading asset managers,

operates from over 20 locations worldwide and manages EUR 211 bln

worth (as at July 2010) of assets for private investors and institutional

clients.

Services

Services was established to create cost savings through consolidation and

standardisation. It focuses on further exploiting new market solutions for support

services with the aim to achieve better products and services for our clients at lower

costs.

Group Functions

Group Functions collaborates with the BUs in maximising client and shareholder

value. Its basic functions are governance (facilitating the implementation of

Managing Board policy throughout the bank), standard and policy setting (setting the

parameters that the BUs work within), and sharing expertise across the company.

31

Segments

To provide all our clients with even better products and services, we also have a

cross-BU Consumer Client Segment and a cross-BU Commercial Client Segment.

These segments focus on aligning the Client BUs with the Product BUs, sharing best

practices and exchanging winning formulas across the Group in order to deliver high-

quality solutions to our client bases across the world

Corporate Values

Our Corporate Values provide the foundation for the bank's Business   Principles . The

bank formulated these Corporate Values in 1997.

Our values and principles also help us on our journey to sustainable development. By

living according our defined Corporate Values and Business Principles we can meet

the needs of our organization and stakeholders today, thus protecting, sustaining and

enhancing human, natural and financial capital for the future. Read more about

ABN   AMRO and sustainable development .

Integrity: Above all, we are committed to integrity in all that we do, always,

everywhere.

Teamwork: It is the essence of our ability to succeed as a trusted preferred supplier

of financial solutions to our clients. Our overriding loyalty is to the good of the whole

organization. We learn from each other and share our skills and resources across

organizational boundaries for our clients' benefit and our own.

Respect: We respect every individual. We draw strength from equal opportunity and

diversity, at the same time supporting personal growth and development. We value

and we all benefit from the entrepreneurial spirit of each individual.

Professionalism: We are committed to the highest standards of professionalism, we

pursue innovation, we deploy imagination, we are open to new ideas and we act 32

decisively and consistently. We are determined to deliver outstanding quality so that

our relationships with our clients will be long lasting and close.

Business Principles

A compass to guide us on our journey

ABN AMRO is an ambitious institution, committed to continuous improvement in

everything we do. Our success depends on excellent performance and a solid

reputation. Transparency and dialogue are of crucial importance in all our

relationships if we are to maintain our reputation as a respectable and reliable

institution.

Based on our four Corporate Values, we have formulated Business Principles to

guide all our employees in their daily work. Defining them clarifies what we stand for

and unites us as a group.

These Business Principles are:

We are the heart of our organization

We pursue excellence

We aim to maximize long-term shareholder value

We manage risk prudently and professionally

We strive to provide excellent service

We build our business on confidentiality We assess business partners on their standards We are a responsible institution and a good corporate citizen We respect human rights and the environment We are accountable for our actions and open about them

Business Principles alone are not the answer to every problem, but they do challenge

us to translate their spirit into our daily practice and shift our horizons beyond short-

term profit to long-term value creation through sustainable development.

33

Performance Measures of Mutual Funds The most important and widely used measures of performance are:

The Treynor Measure

The Sharpe Measure

Jenson Model

Fama Model

The Trevnor 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 Hi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive Treynor's

Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index

is an indication of unfavorable performance.

The 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:

Sharpe Index (Si) = (Ri – Rf)/Si

Where, Si is standard deviation of the fund.

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.

34

Comparison of Sharpe and Treynor Sharpe and Treynor measures are similar in a way, since they both divide the risk premium by a

numerical risk measure. The total risk is appropriate when we are evaluating the risk return

relationship for well diversified portfolios. On the other hand, the systematic risk is the relevant

measure of risk when we are evaluating less than fully diversified portfolios or individual stocks.

For a well-diversified portfolio the total risk is equal to systematic risk. Rankings based on total

risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-

diversified portfolio,as the total risk is reduced to systematic risk. Therefore, a poorly diversified

fund that ranks higher on Treynor measure, compared with another fund that is highly

diversified, will rank lower on Sharpe Measure.

Jenson Model

Jenson’s 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 can not mitigate unsystematic risk, as his knowledge of market is primitive.

Fama Model

The Eugene Fama model is an extension of Jenson model. This model compares the

35

performance, measured in terms of returns, of a fund with the required return commensurate with

the total risk associated with it. The difference between these two is taken as a measure of the

performance of the fund and is called net selectivity.

The net selectivity represents the stock selection skill of the fund manager, as it is the excess

return over and above the return required to compensate for the total risk taken by the fund

manager. Higher value of which indicates that fund manager has earned returns well above the

return commensurate with the level of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm – Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then calculated by

subtracting this required return from the actual return of the fund. Among the above performance

measures, two models namely, Treynor measure and Jenson model use systematic risk based on

the premise that the unsystematic risk is diversifiable. These models are suitable for large

investors like institutional investors with high risk taking capacities as they do not face paucity

of funds and can invest in a number of options to dilute some risks. For them, a portfolio can be

spread across a number of stocks and sectors.

However, Sharpe measure and Fama model that consider the entire risk associated with fund are

suitable for small investors, as the ordinary investor lacks the necessary skill and resources to

diversified. Moreover, the selection of the fund on the basis of superior stock selection ability of

the fund manager will also help in safeguarding the money invested to a great extent. The

investment in funds that have generated big returns at higher levels of risks leaves the money all

the more prone to risks of all kinds that may exceed the individual investors’ risk appetite.

36

LIST OF AMC’SABN AMRO Mutual fund

Birla Mutual fund

Deutsche Mutual fund

DSP Merrill Lynch Mutual fund

Franklin Templeton Mutual fund

HDFC Mutual fund

HSBC Mutual fund

ING Vysya Mutual fund

JM Financial Mutual fund

LIC Mutual fund

Morgan Stanley Mutual fund

Principal Mutual fund

Prudential NETWORTH Mutual fund

Reliance Mutual fund

SBI Mutual fund

Sundaram Mutual fund

TATA Mutual fund

Unit Trust of India Mutual fund

UTI Mutual fund

37

TYPES OF MUTUAL FUND SEHEMES

BY STRUCTURE

Open-Ended Schemes

Close-Ended Schemes

Interval Schemes

BY INVESTMENT OBJECTIVE

Growth Schemes

Income Schemes

Balanced Schemes

Money Market Schemes

OTHER SCHEMES

Tax saving Schemes

Special Schemes

Index Schemes

Sector Specific Schemes

Mutual fund schemes may be classified on the basis of its structure and its investment objective.

By Structure:

Open-ended fundsAn open ended 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 3 to 15 years. The

fund is open for subscription only during a specific 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.38

Interval funds

These combine the features of open-ended and closed-ended schemes. They are open for sale or

redemption during pre-determined intervals at NAV related prices.

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 the majority of their corpus in equities. It has been proven that returns

from stocks, have outperformed most other kind of investments held over the long term. Growth

schemes are ideal 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. Such schemes periodically

distribute a part of their earning and investment 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 fund

For over 30 years, money market funds have treated investors well. Money market funds have been around for 30 years and are a very popular place for investors to park their money.

Money market funds are a type of mutual fund that invests in short-term (less than a year) debt

securities of agencies of the U.S. Government, banks and corporations and U.S. Treasury Bills.

They are fixed at $1 per share and only the yield fluctuates.

39

Load Funds

A load fund is one that charges a commission for entry of exit. That is, each time you buy or sell

units in the fund, a commission will be payable. Typically entry exit loads range from 1% to 2%. It

could be corpus is put to work.

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 investor under specific provisions of the Indian income tax

laws as the Government offers tax incentives for investment in Equity Linked Saving Scheme

(ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act. The Act also

provide opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual

funds, provided the capital asset has been sold to April 1,2000 and the amount is invested before

September 30,2000.

Special Schemes:

Industry Specific Schemes

Industry Specific Schemes invest in the industries specified in the offer document. The investment

of these funds is limited to specific like Info Tech, FMCG, and Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as the BSE sensex or

the NSE.

40

SECTORAL SCHEMES:

Sectoral funds are those, which invest exclusively in a specified industry or a group of industries or

various segments such as ‘A’ Group shares or initial public offerings.

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.

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.

Sales Load

Is a charge collected by a scheme when it sells the units. Also called, ‘Front-end’ load. Schemes

that do not charge a load are called ‘No Load’ schemes.

Repurchase or ‘Back-end’ Load

Is a charge collected by a scheme when it buys back the units from the unit holders.

41

CHAPTER -III

COMPANY PROFILE

42

COMPANY PROFILE

Incorporated in 1993, Net worth Stock Broking Limited (NSBL) has been a listed

company at Bombay Stock Exchange (BSE), Mumbai since 1995.

A Member, at the National Stock Exchange of India (NSE) and Bombay Stock Exchange,

Mumbai (BSE) on the Capital Market and Derivatives (Futures & Options) segment, NSBL has

been traditionally servicing Institutional clients and in the recent past has forayed into retail

broking, establishing branches across the country. Presence is being marked in the Middle East,

Europe and the United States too, as part of our attempts to cater to global markets. We are a

Depository participant at Central Depository Services India (CDSL) with plans to become one at

National Securities Depository (NSDL) by the end of this quarter. We have our customers

participating in the booming commodities markets with our membership at the Multi Commodity

Exchange of India (MCX) and National Commodity & Derivatives Exchange (NCDEX), through

Networth Stock.Com Ltd. With its strong support and business units of research, distribution &

advisory, NSBL aims to become a one-stop solution to the broking and investment needs of its

clients, globally.

Strong team of professional’s experienced and qualified pool of human resources drawn

from top financial service & broking houses form the backbone of our sizeable infrastructure.

Highly technology oriented, the company’s scalability of operations and the highest level of

43

service standards has ensured rapid growth in the number of locations & the clients serviced in a

very short span of time. ‘Networthians’, as each one of our 400 plus and ever growing team

members are addressed, is a dedicated team motivated to continuously progress by imbibing the

best of global practices, Indian sing

such practices, and to constantly evolve a comprehensive suite of products &

services trying to meet every financial / investment need of the clients.

NSE CM and Derivatives Segment SEBI Regn. 1NB230638639 & 1NF230638639

BSE CM and Derivatives Segment SEBI Regn. 1NB010638634 &

PMS SEBI Regn. 1NP000001371 CDSL DP SEBI Regn. IN-DP-CDSL

251-2004

Commodities Trading: MCX -10585 and NCDEX - 00011 (through Networth Stock.Com Ltd.)

Hyderabad (Somajiguda)

401, Dega Towers, 4th Floor, Raj Bhavan Road, Somajiguda Hyderabad - 500 082

Andhra Pradesh.

Phone Nos.: 040-55560708, 55562256, and 30994985

Mumbai (MF Division)

49, Au Chambers, 4th Floor, Tamarind Lane, Fort

Mumbai - 400 001

Maharashtra.

Phone Nos.: 022- 22650253

Mumbai (Registered Office)

44

5, Church gate House, 2nd Floor, 32/ 34 Veer Narirnan Road, Fort

Mumbai - 400 001

Maharashtra.

Phone No. 022-22850428

The Networth connectivity with 107 branches and growing

107 branches107 branches

Products and services portfolio

Retail and institutional broking

Research for institutional and retail clients

Distribution of financial products

PMS

Corporate finance

45

Net trading

Depository services

Commodities Broking

Infrastructure

• A corporate office and 3 divisional offices in CBD of Mumbai which houses state-of-the-

art dealing room, research wing & management and back offices.

• All of 107 branches and franchisees are fully wired and connected to hub at Corporate

office at Mumbai. Add on branches also will be wired and connected to central hub

• Web enabled connectivity and software in place for net trading.

46

• 60 operative ID’s for dealing room

• In house technology back up team to ensure un-interrupted connectivity.

1993: Networth Started with 300 Sq.ft. of office space & 10 employees

2006: Spread over 42 cities (around 70,000 Sq.ft of office space) with over 107 branches &

employee strength over 400

Market & research

Focusing on your needs

Every investor has different needs, different preferences, and different viewpoints. Whether

investor prefer to make own investment decisions or desire more in-depth assistance, company

committed to providing the advice and research to help you succeed.

1. Networth providing following services to their customers :

2. Daily Morning Notes

3. Market Musing

4. Company Reports

5. Theme Based Reports

6. Weekly Notes

7. IPOs

8. Sector Reports

9. Stock Stance

10.Pre-guarter/Updates

11.Bullion Tracker

47

12.F&O Tracker

QUALITY POLICY

To achieve and retain leadership, Networth shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial services.

In the process, Networth will strive to exceed Customer’s expectations.

As per the quality policy, Networth will:

Build in house processes that will ensure transparent and harmonious relationships with

its clients and investors to provide high quality of services.

Establish a partner relationship with in its investor service agents and vendors that will

help in keeping up its commitments to the customers.

Provide high quality of work life for all its employees and equip them with

adequate knowledge & skill so as to respond to customer’s needs.

Continue to uphold the values of honesty & integrity and strive to establish unparalleled

standards in business ethics.

Use state-of-the art information technology in developing new and innovative financial

products and services to meet the changing needs of investors and clients.

Strive to be a reliable source of value-added financial products and services and constantly guide

the individuals and institutions in making a judicious choice of it.

Strive to keep all stake-holders (share holders, clients, investors, employees, suppliers and

regulatory authorities) proud and satisfied.

Key Personnel:

• Mr. S P Jain – CMD Networth Stock Broking Ltd.

48

A qualified Chartered Accountant with over 15 years of experience in the capital

markets.

• Mr. Deepak Mehta – Head PMS

Over 12 years of experience in the capital markets and has the prior work experience of

serving on the Equity desk of Reliance.

• Mr.Viral Doshi – Equity Strategist

A qualified Chartered Accountant with experience of over a decade in technical analysis

with respect to equity markets.

• Mr. Vinesh Jain – Asst. Fund Manager

A qualified MBA graduate specializing in finance and over two years of experience in

the capital markets.

• Research and the Back office.

we have sought to provide premium financial services and information, so that the power of

investment is vested with the client. We equip those who invest with us to make intelligent

investment decisions, providing them with the flexibility to either tap into our extensive

knowledge and expertise, or make their own decisions. We made our debut into the financial

world by servicing Institutional clients, and proved its high scalability of operations by growing

exponentially over a short period of time. Now, powered by a top-notch research team and a

network of experts, we provide an array of financial products & services spanning entire

India.Our strong support, technology-driven operations and business units of research,

distribution, advisory, wide array of products & services coalesce to provide you with a one-stop

solution to cater to all your investment needs. Our single minded objective is to help you grow

your Networth.

49

OUR GROUP COMPANIES

Networth Stock Broking Ltd. [NSBL]

NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the Bombay Stock

Exchange Ltd (BSE) in the Capital Market and Derivatives (Futures & Options) segment. NSBL

has also acquired membership of the currency derivatives segment with NSE, BSE & MCX-

SX. It is Depository participants with Central Depository Services India (CDSL) and National

Securities Depository (India) Limited (NSDL). With a client base of over 1L loyal customers,

NSBL is spread across the country though its over 230+ branches. NSBL is listed on the BSE

since 1994. 

50

Networth Wealth Solutions Ltd. [NWSL] 

NWSL is into the business of delivery of Financial Planning & Advice. It’s vision is to ‘Advice

& Execute money related solutions to/for our customers in the most Convenient & Consolidated

manner, while making sure that their experience with us is always pleasant & memorable

resulting in positive advocacy’. The product & Services include Financial Planning, Life

Insurance, On-line Trading Account, Mutual Funds, Debentures/Bonds, General Insurance,

Loans and Depository Services.

 NetworthStock.ComLtd.[NSCL]

NSCL is the commodities arm of NSBL. It is a member at the Multi Commodity Exchange of

India (MCX) and National Commodity & Derivatives Exchange (NCDEX) and is backed by

solid research & analytics in Commodities.

 NetworthSoftTechLtd.[NSL]

NSL is an ISO 9001:2000 Certified Company. It is into Application Development &

maintenance. Building & Implementation of packaged software across various functions within

the Financial Services Industry is at its core. It also provides data center services which include

hosting of websites, applications & related services. It combines a unique delivery model infused

by a distinct culture of customer satisfaction.

 Ravisha Financial Services Pvt. Ltd. [RFSL]

RFSL is a RBI registered NBFC engaged in financing, primarily it provides loan against

securities

51

Principles & Values

At Net worth Stock Broking Ltd. success is built on teamwork, partnership and the diversity of

the people.

At the heart of our values lie diversity and inclusion. They are a fundamental part of our culture,

and constitute a long-term priority in our aim to become the world's best international bank.

Values

Responsive

Trustworthy

Creative

Courageous

Approach

Participation:- Focusing on attractive, growing markets where we can leverage our

relationships and expertise

Competitive positioning:- Combining global capability, deep local knowledge and

creativity to outperform our competitors

Management Discipline:- Continuously improving the way we work, balancing the

pursuit of growth with firm control of costs and risks Commitment to stakeholders

Customers:- Passionate about our customers' success, delighting them with the quality of

our service

Our People:- Helping our people to grow, enabling individuals to make a difference and

teams to win

Communities:- Trusted and caring, dedicated to making a difference

Investors:- A distinctive investment delivering outstanding performance and superior

returns

Regulators: - Exemplary governance and ethics wherever we are.

52

CHAPTER – IVDATA ANALYSIS & INTERPRETATION

53

NAV History – Historical value for a period of

4-Nov-2013 to 27-Jan-2014SBI MUTUAL FUNDMagnum Equity Fund – Growth & Dividend

DATE DIVIDEND GROWTH

04-Nov-13 42.14 42.17

11-Nov-13 35.57 40.47

18-Nov-13 37.84 43.06

25-Nov-13 38.33 43.61

02-Dec-13 39.31 44.73

09-Dec-13 40.06 45.58

16-Dec-13 38.8 44.15

23-Dec-13 39.68 45.15

30-Dec-13 41.52 47.24

06-Jan-14 42.51 48.36

13-Jan-14 41.46 47.17

20-Jan-14 33.74 43.24

27-Jan-14 34.89 39.7

54

1SBI MAGNUM EQUITY FUND – Dividend & Growth

INTERPRETATION:

The above graph indicates that the Equity Fund - Growth and Dividend from the 1st

week of Dec is almost performing same but in 2nd week of Jan the performance of

Growth has drastically changed when compared to Dividends, and again the

performance showed is similar in rest of the weeks. Because of declaring Dividends

frequently, the performance of Dividend always shows less when compared with

others.

55

NAV History – Historical value for a period of

4-Nov-2013 to 27-Jan-2014

UTI MUTUL FUND

UTI Equity Fund – Growth & Dividend

DATE DIVIDEND GROWTH

04-Nov-13 41.42 44.89

11-Nov-13 39.88 43.22

18-Nov-13 42.09 45.6

25-Nov-13 40.8 44.21

02-Dec-13 41.63 45.11

09-Dec-13 41.3 45.2

16-Dec-13 41.85 45.36

23-Dec-13 42.73 46.31

30-Dec-13 44.3 48.02

06-Jan-14 45.68 49.51

13-Jan-14 44.91 48.68

20-Jan-14 38.3 41.5

27-Jan-14 39.1 42.39

56

UTI EQUITY FUND – Dividend & Growth

INTERPRETATION:

From the above graph we can observe that Growth is showing more performance than

Dividends. In the month of Jan we can see that Growth has fallen down in the last

week and raised in first week and the Dividend has also raised in the 1st week of Jan.

Because of declaring Dividends frequently, the performance of Dividend always

shows less when compared with others

NAV History – Historical value for a period of

4-Nov-2013 to 27-Jan-2014

57

HSBC MUTUAL FUND

HSBC Equity Fund – Growth & Dividend

DATE DIVIDEND GROWTH

04-Nov-13 44.25 106.75

11-Nov-13 42.82 103.31

18-Nov-13 45.02 108.62

25-Nov-13 43.96 106.06

02-Dec-13 45.27 109.22

09-Dec-13 46.1 111.23

16-Dec-13 45.2 109.06

23-Dec-13 46.12 111.27

30-Dec-13 47.68 114.92

06-Jan-14 48.95 118.11

13-Jan-14 48.4 116.78

20-Jan-14 41.49 100.1

27-Jan-14 42.67 102.96

58

HSBC EQUITY FUND – Dividend & Growth

INTERPRETATION:

The above graph there is little fluctuations in the values of Dividends and Growth.

But here we can see that Growth is again performing well. It showed a less

performance in the last week and Dividend showed similar performance in all the

weeks. Because of declaring Dividends frequently, the performance of Dividend

always shows less when compared with others.

59

NAV History – Historical value for a period of

4-Nov-2013 to 27-Jan-2014

ICICI PRUDENTIAL MUTUAL FUND

ICICI EMERGING STAR FUND Growth & Dividend

DATE DIVIDEND GROWTH

04-Nov-13 24.13 36.87

11-Nov-13 23.63 36.1

18-Nov-13 25.86 39.51

25-Nov-13 25.14 38.42

02-Dec-13 26.05 39.8

09-Dec-13 27.85 42.56

16-Dec-13 28.07 41.95

23-Dec-13 28.06 42.88

30-Dec-13 30.19 46.12

06-Jan-14 31.14 47.58

13-Jan-14 29.62 45.26

20-Jan-14 23.25 38.3

27-Jan-14 23.55 38.8

ICICI EQUITY FUND – Dividend & Growth60

INTERPRETATION:

From the above graph it indicates that the Growth and Dividend are performing

similar but in the month of Jan both of them have declined .It had drastically

fallen in the month of the Jan. From the 1st week of Dec to 1st week of Jan

both have increased and the performance showed is well. Because of declaring

Dividends frequently, the performance of Dividend always shows less when

compared with others.

61

NAV History – Historical value for a period of

4-Nov-2013 to 27-Jan-2014

ABN AMRO MUTUAL FUND

ABN AMRO Equity Fund Growth & Dividend

DATE DIVIDEND GROWTH

04-Nov-13 22.48 41.1

11-Nov-13 21.67 39.62

18-Nov-13 23 42.04

25-Nov-13 22.24 40.64

02-Dec-13 23.04 42.12

09-Dec-13 23.78 43.46

16-Dec-13 23.26 42.52

23-Dec-13 17.61 43.46

30-Dec-13 18.54 45.76

06-Jan-14 19.33 47.71

13-Jan-14 18.75 46.28

20-Jan-14 15.2 37.52

27-Jan-14 15.55 38.41

62

ABN AMRO EQUITY FUND – Dividend & Growth

INTERPRETATION:

In this you can see that right from the starting month Growth is showing good

performance compare to Dividends. There are some fluctuations in growth, but

in dividends the values shown are almost constant. Because of declaring

Dividends frequently, the performance of Dividend always shows less when

compared with others.

63

NAV History – Historical NAV for a Period from 1-Dec-2012 to 28-Jan-2013

NATIONAL BANKS COPERATE BANKS

S B I UTI HSBC ICICI ABN AMRO

DATEDividen

dGrowth Dividend Growth Dividend Growth Dividend Growth Dividend Growth

04/11/201342.14 42.17 41.42 44.89 44.25 106.75 24.13 36.87 22.48 41.10

11-Nov-1335.57 40.47 39.88 43.22 42.82 103.31 23.63 36.10 21.67 39.62

18-Nov-1337.84 43.06 42.08 45.60 45.02 108.62 25.86 39.51 23.00 42.04

25-Nov-1338.33 43.61 40.80 44.21 43.96 106.06 25.14 38.42 22.24 40.64

02-Dec-1339.31 44.73 41.63 45.11 45.27 109.22 26.05 39.80 23.04 42.12

09-Dec-1340.06 45.58 41.30 45.20 46.10 111.23 27.85 42.56 23.78 43.46

16-Dec-1338.80 44.15 41.85 45.36 45.20 109.06 28.07 41.95 23.26 42.52

23-Dec-1339.68 45.15 42.73 46.31 46.12 111.27 28.06 42.88 17.61 43.46

30-Dec-1341.52 47.24 44.30 48.02 47.68 114.92 30.19 46.12 18.54 45.76

06-Jan-1442.51 48.36 45.68 49.51 48.95 118.11 31.14 47.58 19.33 47.71

13-Jan-1441.46 47.17 44.91 48.68 48.40 116.78 29.62 45.26 18.75 46.28

20-Jan-1433.74 43.24 38.30 41.50 41.49 100.10 23.25 38.30 15.20 37.52

27-Jan-1434.89 39.70 39.10 42.39 42.67 102.96 23.55 38.80 15.55 38.41

INTERPRETATION:

The above graph clearly indicates the overall performance of Equity Fund-Dividend

and Growth of all the banks taken into consideration. In SBI, from the 1st week of

Dec both are almost performing same but in 2nd week of Jan the performance of

Growth has drastically changed when compared to Dividends, and again the

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performance showed is similar in rest of the weeks. In UTI, we can observe that

Growth is showing more performance than Dividends. In the month of Jan we can see

that Growth has fallen down in the last week and raised in first week and the

Dividend has also raised in the 1st week of Jan. In HSBC, there are little fluctuations

in the values of Dividends and Growth. But here we can see that Growth is again

performing well. It showed a less performance in the last week and Dividend showed

similar performance in all the weeks. In ICICI it indicates that the Growth and

Dividend are performing similar but in the month of Jan both of them have declined

.It had drastically fallen in the month of the Jan. From the 1st week of Dec to 1st

week of Jan both have increased and the performance showed is well. In HDFC, right

from the starting month Growth is showing good performance compare to Dividends.

There are some fluctuations in Growth, but in dividends the values shown are almost

constant. Because of declaring Dividends frequently, the performance of Dividend

always shows less when compared with others.

From the above graph it clearly indicates that the HDFC bank is showing excellent

performance when compared to other Banks. The Corporate Banking sectors are

showing good performance than nationalized Banking sectors.

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CHAPTER-VFINDING & SUGGESTIONS

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FINDINGS:

1. From the table 1 (i.e.) SBI bank we can see that both Dividend and Growth are similar to each other .where as growth has been increased in the 2nd week of Jan with a value of 29.64%.

2. In UTI bank table we can see that growth has performed well when compared to dividends. There was a slight fluctuation in the values of dividends and growth.

3. When we see corporate banks (i e) HDFC the performance of Growth is very good when compared to Dividends. This bank has been shown a positive performance when compared to other banks were it is good for investing in this bank.

4. When we see ICICI bank both the Dividends and Growth are equal or similar to each other there is no change in them. In the month of Jan it raised in the first week but it had a drastic fall in all the following weeks.

5. When we see HSBC bank here again growth has been performed well when we compare to dividends. This increase in the value has been reached to certain extent and it has been declined in last week of Jan.

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SUGGESTIONS:

1. If we compare Nationalized and Corporate banks we can see that corporate banks have performed well during these 3 months.

2. Nationalized banks performed well up to certain extent and it values were declining further. This decline may cause due to declaration of any dividends in those banks and so it was showing low values.

3. In Nationalized banks we can see internally in Dividends SBI bank has performed well and if wee see Growth UTI bank has performed well.

4. In corporate banks we can see internally in Dividends and Growth HDFC bank has performed relatively well when compare to other banks. Both the values are high in this bank. It had reached to a maximum height.

5. So its better for investors to invest in corporate sectors rather than investing in Nationalized sector which gives them maximum number of return for their investment.

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CONCLUSION:1. Corporate sectors provide good services if we see through customer point of

view. They are very caring to their customers.

2. With the increase in infrastructure, technology, introduction of various

schemes and services, online trading its clear that any one wants to invest will

surely invest in corporate banks.

3. Now u can see most of them are opening their account in corporate banks

instead of nationalized banks this is due to extra benefit & services which they

are getting from that sector.

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TIPS FOR MUTUAL FUND INVESTORS:

These are the few exact as regards investment in MF’s taken from the book with

“Marketing for the 90’s” given by the Wall Street. Check your letter of offer of funds

prospectus to guard yourselves against any hidden fees.

Ensue that the funds track record is the same as that of the current management.

Avoid mutual funds that charge exit fees at the back end door (fees charged by MF

from the unit holders at the time to redemption of the units).

Buy the funds with no sale charged loads. (A load is a charge by the fund when

investor buys it is called the entry load or when he sells is called the exit load).

If the charge is heavy by the mutual fund to discourage the investors from taking

short positions in the funds units because too many investors sell their units at a time

then the fund has to sell its holdings to meet the obligations that yield into vital of the

fines overall return. Most short funds like guilt funds (these are the funds which can

be invested only in government securities and treasury bills thus the investors have an

opportunity to buy risk free securities). These funds yield a better return than a

money market fund. It is good for the investors who desire safety of principal

amount. Money market funds (these funds in views in money market instruments

such as treasury bills, govt.bonds, certificates of bank deposits, commercial deposits).

They charge no loads, however loads are limited by SEBI to 7%.

Check funds performance in bear as well as the bull market.

Guard fund risk by checking its portfolio for diversification volatility.

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BIBLIOGRAPHY

Books References :

1. Security Analysis and Portfolio Management

(Fischer & Jordan)

2. Investment Decisions

(V.K. Bhalla)

3. Security Analysis & Portfolio Management

(Robbins)

WEBSITES

www.mutualfundsindia.com

www.Networth.com

www.sbimf.com

www.uti.com

www.moneycontrol.com

www.amfiindia.com

www.nse-india.com

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