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INTRODUCTION
Mutual funds are a very new type of intermediary on the Indian financialscene.Mutual fund is the trust at low. It is a special type of managed, pooled
portfolio financial company, or financial service organization. That
sells/units/stocks in itself to the public to obtain its resources and it invest the
savings so mobilized or pooled in a large, diversified and sound portfolio of
equity shares, Bonds, Money market instruments etc.,
In the US an alternative form of this is the unit investment trust
which is an unmanaged fixed-income security portfolio put together by a
sponsor and handled by an independent trustee. Redeemable trust certificates are
sold to investors NAV (Net Asset Value) plus a small commission. All
interest/dividend and principal repayment are distributed to the holders of the
certificates. The sponsor makes a secondary market in these certificates for those
who wish to sell the securities of the trust are almost always kept unchanged in
the case of fixed income securities, the trust ceases to exist when the bonds
mature.
The story of UTI began in 1964, the first mutual fund setup a Trust
in terms of UTI Act, 1963. It was an associate institute of the RBI till February,
1976 when it was made an associate institute of IDBI. UTI got its borrowings powers from this parent institute. UTI provides attractive
investment opportunities through issues of units and shares under various
schemes.
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OBJECTIVES & METHODOLOGY OF THE STUDY
An attempt has been made in this section to discuss about the objectives
of the study and methodology employed in this study. Attempts are also made topresent the need of the study, scope of the study, sources of collection of data &
limitations prescribed for the study.
OBJECTIVES OF THE STUDY
The Objectives and the Methodology employed in the study are as follows.
Attempts are also made to present the need and scope of the study.
The following are the Main and other objectives of the study is as follows
(1). To evaluate the performance of open-ended balanced growth schemes of
five mutual fund players.
(2) To assign Rank- to -Rank profile based on Net Asset Value (NAV).
Besides the above, the other objectives are:
a. This study enables an investor, the concepts constituents,advantages, disadvantages, types and Risks associated with the mutual
fund industry.
b. To guide the rationale investors to take wise investment decisions.
c. To suggest the Tax benefits associated with the investments inMutual funds under various schemes.
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NEED OF THE STUDY
The need of the present study is evaluate the performance of mutual fund
players in India. This study is confined to balanced growth funds of Birala Sun
Life, ICICI Prudential, Tata, JM finance, and Kotak mutual funds.
(1) The present study entitled on An Overview of Mutual fund Industry in
India With reference to Kotak Mutual funds, is an empirical study which
covers the concept, characteristics, Investment process and Risk return
profile of mutual funds according to SEBI guidelines.
(2) Mutual funds are diversified investments and the pattern of investment is
based on the principle dont put all eggs in one basket. The investor is
provided with the rightist information depending upon their investing
objective and respective risk return profile.
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SCOPE OF THE STUDY
The present study focus its attential on the performance of Tata, Biral
Sun Life, ICICI Prudential, JM finance in general Kotak in Particular. A mtual
fund is a pure intermediary which perform a basic function of buying and selling
of securities on behalf of its unit holders easily, economically, conveniently and
profitably.
Financial sector reforms since 1991 targeted operational flexibility and
functional autonomy to financial service industry to enhance, efficiency
productivity and profitability. Mutual funds are important segment of the
financial system hence this study evaluates the mutual fund industry in general
and the Kotak mutual funds in particular. The period of two months i.e April,
2010 and May, 2010 is taken as a reasonable period for this study.
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SOURCES OF COLLECTION OF DATA
The data that is collected for this study can be divided into two types.
1. Primary sources of collection of data.
2. Secondary sources of collections of data.
1. PRIMARY SOURCES OF COLLECTION OF DATA
The primary data collected from the corporate office of the Kotak
Mahindra Mutual Funds Pvt., Ltd.,, Hyderabad . The information which is
collected from the present study is of prime in nature.
2. SECONDARY SOURCES OF COLLECTION OF DATA
It is from various annual reports of Kotak Mahindra Mutual Funds Pvt.,
Ltd.,, Hyderabad. It is intended to collect the information form various
publications and also from various University Libraries.
PERIOD OF THE STUDY
For the sake of the present study, during the period of April To May,
2009 is taken as a reasonable period for drawing conclusions on Mutual Fund
Industry in India.
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SIGNIFICANCE OF THE STUDY
1) Over the past decades mutual funds have grown. Intensely in popularity and
have experience a considerable growth rate.
2) Mutual funds are popular because they make it easy for small investors to
invest their money in a diversified pool of securities.
3) As the mutual fund industry has evoved over the year.
4) Mutual funds are a very new type of intermediary on the Indian financial
scene.Mutual fund is the trust at low. It is a special type of managed, pooled
portfolio financial company, or financial service organization. That
sells/units/stocks in itself to the public to obtain its resources and it invest
the savings so mobilized or pooled in a large, diversified and sound
portfolio of equity shares, Bonds, Money market instruments etc.,
5) Mutual funds also provides investors:-
Continuous supervision and analysis.
Investment consultancy.
Judicious investment decisions.
Expert, Experience, Professional, Management of portfolio at
affordable cost.
6) Hence the present study is concerned mainly with the operational
efficiency of balanced growth funds of five mutual fund industry players.
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AN OVERVIEW OF MUTUAL FUND INDUSTRY IN
INDIA
CONCEPT OF MUTUAL FUNDS
A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is then invested
in capital market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciation realized is
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.
MUTUAL FUND OPERATION FLOW CHART
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ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
HISTORY OF THE MUTUAL FUND INDUSTRY
A mutual fund is a managed group of owned securities of several
corporations receive dividends on the shares that they hold and realize capital
gains or losses on their securities traded. Investors purchase shares in the mutualfund if it was individual security. After paying operating costs, the earnings of
the mutual fund are distributed to the investors, in proportion to the amount of
money invested. Investors hope that a loss on one holding will be made up by a
gain on another. Heeding the adage Dont put all eggs in one basket the
holders of mutual-fund shares are able collectively to ;gain the4 advantage by
diversifying their investments, which might be beyond their financial means
invidually.
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A mutual fund may be either an open-end or a closed-end fund. An open-
end mutual fund does not have a set number of shares; it may be considered as a
fluid capital stock. The number of shares changes as Investors buys or sell their
shares. Investors are able to buy and sell their shares of the company at any time
for a market price. However the open-end market price is influenced greatly by
the fund managers. On the other hand, closed-end mutual fund has a fixed
number of shares and the value of the shares fluctuates with the market. But with
close-end fu8nds, the fund manager has less influence because the price of the
underlining owned securities has greater influence.
The modern mutual fund was first introduced in Belgium in 1822. This
form of investment soon spread to Great Britain and France. Mutual funds
became popular in the United States in the 1920s and continue to be popular
since the 1930s, especially opened mutual funds. Mutual funds experience a
period of tremendous growth after world war II, especially in the 1980s and
1990s.
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 Reserve Bank
Of India. The history of mutual funds in India cab be broadly divided into four
distinct phases
First Phase 1964-87
Unit Trust of India (UTI) was established don 1963by an Act of
parliament. It was set up by the Reserve Bank of India and functioned under the
Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked
from the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched
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by UTI was Unit Scheme 1964. at the end of 1988 UTI had Rs.6,700 crores of
assets under management.
Second phase 1987-1993 (Entry of Public Sector
Funds)
1987 marked the entry of non UTI, public sector mutual funds set up by
public sector banks and life insurance Corporation of India (LIC) and general
Insurance Corporation of India (GIC). SBI mutual fund was the first non UTI
mutual fund established in June 1987 fallowed by can bank mutual fund (Dec
87), Punjab national bank mutual fund (AUG 89), Indian bank mutual fund (Nov
89), Bank of India (Jun 90), Bank Of Baroda mutual fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up it mutual fund in
December 1990.
At the end of 1993, the mutual fund industry had asset under management of Rs.
47,004 crores
Third Phase 1993-2003 (Entry of Private Sector
Funds)
With the entry of private sector fund in 1993, in new era started in the
India mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was ;the year in which the first mutual fund regulationcome into being under which all mutual funds, except UTI were to be registered
and governed. The erstwhile Kothari pioneer was the first private sector mutual
fund registered in July 1993.
The SEBI (Mutual Fund), 1993, regulations were substituted by a more
comprehensive and revised Mutual Fund Regulation in 1996. The industry now
functions functions under the SEBI (Mutual Fund) Regulation 1996.
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The number of mutual fund housed when on increasing, with many
foreign mutual funds setting up funds in Indian and also the industry has
witnessed several mergers and acquisitions. As at the end of January 2003, there
were 33 mutual funds with total assets of Rs. 1, 21,805 crores. The Unit Trust of
India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase Since February 2003
In February 2003, following the repeal of the Unit Trust OF India Act
1963 UTI was bifurcated into two separate entities. One is the specified
Undertaking of the Unit Trust if India with assets under management o;f
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 specified
undertaking of unit trust of India, functioning under an administrator and underthe rules framed by Government of India and does not come under the purview
of the mutual fund regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March 2000
more than Rs.76,000 crores of assets under management and with the setting up
of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phjase o;f consolidation and growth.
FUTURE SCENARIO
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The asset bas e will continue to grow at an annual rate of about 30 to
35% over the next few years as investors shift their assets from banks and other
traditional avenues. Some of the older public and private sector players will
either close shop or be taken over.Out of ten public sector players five will sell
out, close down or merge with stronger players in three to four years. In the
private sector this trend has already started with two mergers and one takeover.
Here too some of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market will
witness a flurry of new players entering the arena. There will be a large number
of offers from various asset management companies in the time to come. Some
big names like Fidelity, Principal, Old Mutual etc. are looking at Indian market
seriously. One important reason for it is that most major players already have
presence here and hence these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in
India as would enable it to hedge its risk and this in turn would be reflected in its
Net Asset Value (NAV).SEBI is working out the norms for enabling the existing
mutual fund schemes to trade in derivatives. Importantly, many market players
have called on the regulator to initiate the process immediately, so that the
mutual funds can implement the changes that are required to trade in
Derivatives.
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PROFESSIONAL MANAGEMENT OF MUTUAL
FUNDS
Mutual funds use professional managers to make the decisions regarding
which companies securities should be bought and sold. The managers of the
mutual fund decide how the pooled funds will be invested. Investment
opportunities are abundant and complex. Fund managers are expected to know
what is available, the risks and gains possible, the cost of acquiring and selling
the investments and the law and regulations in the industry. The ability of the
managers to select porofitable investments and to sell those likely to decline in
value is a key factor for the mutual fund to earn money for the investors.
MARKET TRENDS
Alone UTI with just one scheme in 1964 now comets with as many as
400 odd products and 34 players in the market. In spite of the stiff competition
and losing market share, UTI still remains a formidable force to reckon with.
Last six years have been the most turbulent as will as exiting ones for the
industry. New players have come in, while others have decided to close shop by
either selling off or merging with others. Product innovation is now pass with
the game shifting to performance directly associated with the fund management
industry like distributors registrars and transfer agents, and even the regulators
have become mature and responsible.
The industry is also having a profound impact on financial markets.
While UTI has always been a dominant player on the bourses as well as the debt
markets, the new generations of private funds which have gained substantial
mass are now seen flexing their muscles. Fund managers, by their selection
criteria for stocks have forced corporate governance on the industry. By
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rewarding honest and transparent management with higher valuations, a system
of risk-reward has been created where the corporate sector is more transparent
then before.
Funds have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performances are
improving. Funds collection, which averaged at less than Rs 1000bn per annum
over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. in the
current year mobilization till now have exceeded Rs300bn. Total collection for
the current financial year ending March 2000 is expected to reach Rs450bn. It is
noticed that bulk of the mobilization has been by the private sector mutual funds
rather than public sector mutual funds. Indeed private MFs saw a net inflow of
Rs. 7819.34 crore during the first nine months of the year as against a net inflow
of Rs.604.40 crore in the case of public sector funds.
Mutual funds are now also competing with commercial banks in the race
for retail investors savings and corporate float money. The power shift towards
mutual funds has become obvious. The coming few years will show that the
traditional saving avenues are losing out in the current scenario. Many investors
are realizing that investments in savings accounts are as good as locking up their
deposits in a closet. The fund mobilization trend by mutual funds in the current
year indicates that money is going to mutual funds in a big way. The collection
in the first half of the financial year 1999-2000 matches the whole of 1998-99.
India is at the first stage of a revolution that has already peaked in the
U.S the U.S. boasts of an Asset base that is much higher than its bank deposits.
In India, mutual fund assets are not even 10% of the bank deposits, but this
trends is beginning to change. Recent figures indicate that in the first quarter of
the current fiscal year mutual fund assets went up by 115% whereas bank
deposits rose by only 17%. This is forcing a large number of banks to adopt the
concept of narrow banking wherein the deposits are kept in Gilts and some other
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assets which improves liquidity and reduces risk. The basic fact lies that banks
cannot be ignored and they will not close down completely.
MUTUAL FUND COMPANIES
The concept of mutual funds in India dates back to the year 1963. the era
between 1963 and 1987 marked the existence of only one mutual fund company
in India with Rsa. 67bn assets under management (AUM).The new entries of
mutual fund companies in India were SBI Mutual Fund, Canbank Mutual Fund,
Punjab National Bank Mutual Fund, Indian Bank Mutual Fund, Bank of India
Mutual Fund Kothari pioneer was the first private sector mutual fund company I
India which has now merged with Franklin Templeton. Just after ten years with
private sector players penetration, the total assets rose up to Rs. 1218.05bn.
Today there are 33 mutual fund companies in India.
MAJOR MUTUAL FUND COMPANIES I INDIA
ABN AMRO MUTUAL FUND
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN
AMRO Trustee (India) Pvt. Ltd. As the Trustee Company. The AMC, ABN
AMRO Asset Management (India) Ltd. Was incorporated on November 4, 2003.
Deutsche Bank A G is the custodian of ABN AMRO Mutual Fund.
BIRLA SUN LIFE MUTUAL FUND
Birla sun life Mutual Funds is the joint venture of Aditya Birla Group
and Sun Life Financial. Sun Life Financial is a golbl organization evolved in
1871 and is being represented in Canada, the US, the Philippines, Japan,
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Indonesia and Bermuda apart from India. Birla sun Life Mutual Fund follows a
conservative long-term approach to investment. Recently it crossed AUM of Rs.
10,000 crores.
BANK OF BARODA MUTUAL FUND (BOB MUTUAL
FUND)
BANK OF Baroda Mutual Fund or BOB Mutual Fund was setup on
October 30, 1992 under the sponsorship of Bank of Baroda. BOB Mutual Fund
and was incorporated on November 5, 1992. Deutsche Bank AG is the
custodian.
HDFC MUTUAL FUND
HDFC Mutual Fund was setup on june 30, 2000 with two sponsorers
namely Housing Development Finance Corporation Limited and Standard Life
Investments Limited.
HSBC MUTUAL FUND
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securitiesand Capital Markets (India) Private Limited as the sponsor. Board of Trustees,
HSBC Mutual Fund acts as the Trustee Company of HSBC Mutual Fund.
ING VYSYA MUTUAL FUND
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ING Vysya Mutual Fund was setup on February 11, 1999 with the same
named Trustee Company. It is a joint venture of Vysya and ING. The AMC,
ING Investment Management (India) Pvt. Ltd. Was incorporated on April 6,
1998.
ICICI PRUDINTIAL MUTUAL FUND
The mutual fund of ICICI is a joint venture with prudential Plc. of
America, one of the largest life insurance companies in the US of A. ICICI
PRUDENTIAL Mutual Fund was setup on 13 th of October, 1993 with two
sponsor, prudential Plc. and ICICI Ltd. The trustee Company formed is ICICI
PURDENTIAL Trust Ltd. And the AMC is ICICI PRUDENTIAL Asset
Management Company Limited incorporated on 22an of June, 1993.
SAHARA MUTUAL FUND
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India
Financial Corporation Ltd. As the sponsor. Sahara Asset Management Company
Private Limited incorporated on August 31, 1995 works as the AMC of Sahara
Mutual Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.
SBI MUTUAL FUND
State bank of India Mutual Fund is the firs 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
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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 18 schemes.
TATA MUTUAL FUND
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. the
sponsor for Tata Mutual Fund are Tata Sons Ltd., and Tata InvestmentCorporation Ltd. The investment manager is Tata Asset Management Limited
and its Tata Trustee Company Pvt. Limited. Tata Asset Management Limiters is
one of the fastest in the country with more than Rs. 7,703 crores (as on April 30,
2005) of AUM.
KOTAK MAHINDRA MUTUAL FUND
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary
of KMBL. It is presently having more than 1,99,818 investors in its various
schemes. KMAMC started its operations in December 1998. Kotak Mahindra
Mutual Fund offers schemes catering to investors with varying risk- return
profiles. It was the firs company to launch dedicated gilt scheme investing only
in government securities.
UTI MUTUAL FUND
UTI Asset Management Company private Limited, Established in Jan 14,
2003, manages the UTI Mutual Fund with the support of UTI Trustee Company
private Limited. UTI Asset Management Company presently manages a corpus
of over Rs.20000 Crore. The sponsor of UTI Mutual Fund are Bank of Baroda
(BOB), Punjab Bat ional Bank (PNB), State Bank of India (SBI), and Life
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Insurance Corporation of India (LIC). The schemes of UTI Mutual Fund are
Liquid Funds, Income Funds, Asset Management Funds, Index Funds, Equity
Funds and Balance Funds.
RELIANCE MUTUAL FUND
Reliance Mutual Fund (RMF) was established as trust under Indian
Trusts Act, 1882. The sponsor of RMF is Reliance Capital Limited and RelianceCapital Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as
Reliance Capital Mutual Fund which was changed on March 11, 2004. reliance
Mutual Fund was formed for launching of various schemes under which units
are issued to the public with a view to contribute to the capital market and to
provide investors the opportunities to make investments undiversified securities.
STANDARD CHARTERED MUTUAL FUND
Standard Chartered Mutual Fund was set up on March 13, 2000
sponsored by standard Chartered Bank. The Trustee is Standard Chartered
Trustee Company Pvt. Ltd. Standard Chartered Asset Management CompanyPvt. Ltd. Is the AMC which was incorporated with SEBI on December 20, 1999.
FRANKLIN TEMPLETON INDIA MUTUAL FUND
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Alliance Capital Mutual Fund was setup on December 30, 1994 with
Alliance Capital Management Corp. of Delaware (USA) as sponsored. The
Trustee is ACAM Trust Company Pvt. Ltd. And AMC, the Alliance Capital
Asset Management India (Pvt) Ltd. With the corporate office in Mumbai.
BENCHMARK MUTUAL FUND
Benchmark Mutual Fund was setup on June 12, 2001 with Niche
Financial Services Pvt. Ltd. As the sponsored and Benchmark Trustee Company
Pvt. Ltd. As the Trustee Company. Incorporated on October 16, 2000 and
headquartered in Mumbai, Asset Management Company Pvt. Ltd. Is the AMC.
CANBANK MUTUAL FUND
Canbank Mutual Fund was setup on December 19, 1987 with Canara
Bank acting as the sponsor. Canbank Investment Management Services Ltd.
Incorporated on March 2, 1993 is the AMC. The Corporate Office of the AMC is
in Mumbai.
CHOLA MUTUAL FUND
Chola Mutual Fund under the sponsorship of Cholamandalam
investment & Finance Company Ltd. Was setup on January 3, 1997.
Cholamandalam Trustee Co. Ltd. Is the Trustee Company and AMC is
Cholamandalam AMC Limited.
LIC MUTUAL FUND
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Life Insurance Corporation of India set up LIC Mutual Fund on 19 th june
1989. It contributed Rs. 2 Crores towards the corpus of the Fund. LIC Mutual
Fund was constituted as a Trust in accordance with the provisions of the Indian
Trust Act, 1882. The Company started its business on 29 th April 1994. The
Trustees of LIC Mutual Fund have appointed Jeevan Bima Sashay Asset
Management Company Ltd as the Investment Managers for LIC Mutual Fund.
PROFILE OF THE ORGANISATION
Corporate Profile
Kotak Mahindra is one of India's leading financial institutions, offering
complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the financial needs of individuals and
corporates.
Kotak Mahindra Asset Management Company Limited (KMAMC), a
wholly owned subsidiary of KMBL, is the Asset Manager for Kotak Mahindra
Mutual Fund (KMMF). KMAMC started operations in December 1998 and has
over 4 Lac investors in various schemes. KMMF offers schemes catering to
investors with varying risk - return profiles and was the first fund house in the
country to launch a dedicated gilt scheme investing only in government
securities. KMMF has been registered with SEBI vide registration number
MF/038/98/1 dated 23rd June 1998.
The sponsor company, Kotak Mahindra Finance Limited (KMFL), was
converted into Kotak Mahindra Bank Limited (Kotak Bank) in March 2003 their
being granted a Banking License by Reserve Bank of India. KMFL promoted by
Mr. Uday S Kotak, Mr. S.A.A.Pinto and Kotak & Co., was incorporated on
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November 21, 1985, under the name Kotak Capital Management Finance
Limited
In early 1986, the promoters were joined by Late Mr.Harish Mahindra
and Mr. Anand G Mahindra and the Companys name was changed to Kotak
Mahindra Finance Limited. Kotak & Co is a highly respected trading company
of Mumbai, with international business. KMFL started with a capital base of
Rs.30.88 lakhs. From being a provider of a single financial product, KMFL grew
substantially during the seventeen years of its existence into a highly diversified
financial services company and has now converted into a Bank. As on
September 30, 2005, the net worth of Kotak Bank is around Rs. 800 crore and
combined with its subsidiaries, the Group net worth (before minority interest) is
around Rs. 2,000 crore. There are over 47,000 shareholders of Kotak Bank.
The Sponsor and its subsidiaries / associates offer wide ranging financial
services such as loans, lease and hire purchase, consumer finance, home loans,
commercial vehicles and car finance, investment banking, stock broking,
primary market distribution of equity and debt products and life insurance. The
group has offices in over 88 Indian cities and also present internationally in
Mauritius, London, Dubai and New York. Kotak Mahindra (UK) Limited, an
ultimate subsidiary of Kotak Bank, is the first company owned from India to be
registered with the Financial Services Authority in UK. Kotak Mahindra Old
Mutual Life Insurance Limited is a joint venture between Kotak Bank and Old
Mutual Plc based in the UK and with large presence in the South African
insurance market.
Some of the other subsidiaries of Kotak Bank are Kotak Mahindra
Securities Limited, Kotak Mahindra Prime Limited, Kotak Mahindra
International Limited, Kotak Mahindra Private-Equity Trustee Limited, Kotak
Mahindra Investments Limited, Kotak Mahindra Inc., and Kotak Forex
Brokerage Limited.The Sponsor has been consistently profitable and dividend
paying company since inception. All group companies are professionally run
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companies, employing over 5,000 professional staff including CAs, MBAs and
Engineers.
Credit recognitions and awards:
NDTV AWARDS, 2006
LIPPER FUND AWARDS, 2006
ICRA AWARDS, 2006
ICRA MFR 1 (December 2004 & December 2005)
OUTLOOK MONEY BEST WEALTH CREATOR DEBT 2003
CRISIL BEST FUND AWARD 2003
KOTAK MAHINDRA GROUP
Kotak Mahindra is one of India's leading financial conglomerates,
offering complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life insurance, to
investment banking, the group caters to the diverse financial needs of individuals
and corporate.
The group has a net worth of over Rs. 5,609 crore, employs around
17,100 people in its various businesses and has a distribution network of
branches, franchisees, representative offices and satellite offices across 344
cities and towns in India and offices in New York, London, Dubai, Mauritius
and Singapore. The Group services around 3.6 million customer accounts.
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The journey so far
Key group companies and their businesses
Kotak Mahindra Bank The Kotak Mahindra Group's flagship company,
Kotak Mahindra Finance Ltd which was established in 1985, was
converted into a bank- Kotak Mahindra Bank Ltd in March 2003
becoming the first Indian company to convert into a Bank. Its banking
operations offer a central platform for customer relationships across the
group's various businesses. The bank has presence in Commercial
Vehicles, Retail Finance, Corporate Banking, Treasury and Housing
Finance.
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Kotak Mahindra Capital Company Kotak Mahindra Capital Company
Limited (KMCC) is India's premier Investment Bank. KMCC's core
business areas include Equity Issuances, Mergers & Acquisitions,
Structured Finance and Advisory Services.
Kotak Securities Kotak Securities Ltd. is one of India's largest brokerage
and securities distribution houses. Over the years, Kotak Securities has
been one of the leading investment broking houses catering to the needs of
both institutional and non-institutional investor categories with presence
all over the country through franchisees and coordinators. Kotak Securities
Ltd. offers online (through www.kotaksecurities.com) and offline services
based on well-researched expertise and financial products to non-
institutional investors.
Kotak Mahindra Prime Kotak Mahindra Prime Limited (KMP) (formerly
known as Kotak Mahindra Primus Limited) has been formed with the
objective of financing the retail and wholesale trade of passenger and
multi utility vehicles in India. KMP offers customers retail finance for
both new as well as used cars and wholesale finance to dealers in the
automobile trade. KMP continues to be among the leading car finance
companies in India.
Kotak Mahindra Asset Management Company Kotak Mahindra Asset
Management Company Kotak Mahindra Asset Management Company
(KMAMC), a subsidiary of Kotak Mahindra Bank, is the asset manager
for Kotak Mahindra Mutual Fund (KMMF). KMMF manages funds in
excess of Rs 20,800 crore and offers schemes catering to investors with
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varying risk-return profiles. It was the first fund house in the country to
launch a dedicated gilt scheme investing only in government securities.
Kotak Mahindra Old Mutual Life Insurance Limited Kotak Mahindra Old
Mutual Life Insurance Limited is a joint venture between Kotak Mahindra
Bank Ltd. and Old Mutual plc. Kotak Life Insurance helps customers to
take important financial decisions at every stage in life by offering them a
wide range of innovative life insurance products, to make them financially
independent.
DIRECTORS TRUSTEE COMPANY
Uday S. Kotak B.Com, MMS has been an Executive Vice
Chairman and Managing Director of Kotak Mahindra Bank Limited
(Formerly known as Kotak Mahindra Finance Limited) since August 1, 2002.
Mr. Kotak is the principal founder and promoter of Kotak Mahindra Finance
Ltd. He is responsible for the growth of Kotak Mahindra from a fledgling
finance company in 1985 to a financial institution providing the full basket of
financial services today. He serves as Chairman of the Board.
Mr. Amit Desai is a graduate in Commerce and Law from the
Bombay University. He is an advocate and has about 20 years of experience
in criminal, economic and revenue laws. Mr. Desai is associated with the
Sponsor.
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Mr. Girish Sharedalal is a graduate in Commerce and Arts and
also a Fellow of the Institute of Chartered Accountants of India. Formerly a
Senior Partner of Messrs Dalal, Desai and Kumana, a firm of Chartered
Accountants, he has about 44 years of experience in the field of audit,
taxation and management consultancy.
Mr. Tushar Mavani is a graduate in Commerce and Law from the
Bombay University. He is a partner with Messrs Mulla & Mulla & Craigie
Blunt & Caroe and has about 14 years of experience in the legal field.
Mr. Anirudha Barwe is a postgraduate in Mathematics and also a
Certified Associate of Indian Institute of Bankers, Mumbai. Mr. Barwe has
about 43 years of experience in the field of banking and financial services.
Mr. Barwe was actively associated with and responsible to a great extent for
the success of the Resurgent India Bond issue of SBI. Mr. Barwe retired as
the Managing Director of SBI Capital Markets Limited in October 1998.
After retirement, Mr. Barwe worked with IDFC as Chief Financial Officer
for 3 years.
Mr. Chandrashekhar Sathe is a graduate with B. Tech.(Chemical
Engineering) from IIT, Mumbai. He has over 27 years' experience in
Banking and Finance. He has been a part of the Senior Management team of
the Kotak Mahindra Group since 1992 and was responsible for setting up
the Fixed Income Securities capability of Kotak Mahindra Capital
Company. Mr. Sathe is a widely consulted expert on Foreign Exchange and
Money Markets in India and is a frequent contributor to financial
newspapers, magazines and TV News channels. Mr. Sathe was the Chief
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Executive Officer of the AMC for the period, 1st April, 1998 to 30th
November, 2001 and currently heads the Risk Management function at
Kotak Mahindra Bank Limited. Mr. Sathe is associated with the Sponsor.
3.3 SCHEME DETAILS OF KOTAK MAHINDRA
1. KOTAK 30
Objective: - The investment objective is to generate capital appreciation from a
portfolio of predominantly equity and equity related securities with investment
in, generally not more than 30 stock.
Structure :- Open Ended Equity Growth Scheme
Minimum investment:- Rs 5,000
2. KOTAK TECH
Objective: - The investment objective is to generate capital appreciation from a
predominantly equity and equity related securities issued by multinational
companies.
Structure: - Open Ended Equity Growth Scheme.
Minimum investment:- Rs 5,000
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3. KOTAK MNC
Objective: - The investment objective is to generate capital appreciation from a
portfolio of predominantly equity and equity related securities issued by
multinational companies.
Structure: - Open Ended Equity Growth Scheme
Minimum investment: - Rs 5,000
4. KOTAK BALANCE
Objective: - The investment objective is to achieve growth by investing in
Equity and equity related instruments, balanced with income generation by
Investing in debt and money market instruments
Structure :- Open Ended Balanced Scheme.
Minimum investment:- Rs 5,000
5. KOTAK INCOME PLUS
Objective: - To enhance returns over a portfolio of debt instruments with a
moderate exposure in Equity & Equity related instruments
Structure:- Open Ended Income Scheme
Minimum Investment: - Rs 5,000
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6. KOTAK GILT
Objective: - To generate risk free returns through investments in sovereign
Securities issued by the central government and / or a state government and /
or reverse repos in such securities
Structure: - Open Ended Dedicated Gilt Scheme
Minimum Investment: - Savings & investment Plan; Rs 5,000
Serial Plans; Rs 10 lakhs
7. KOTAK BOND
Objective: - To create a portfolio of debt and money market instruments of
different maturities so as to spread the risk across a wide maturity Horizon &
different kinds of issuers in the debt market
Kotak Bond Short Term Plan
To provide reasonable returns and high level of liquidity by
investing in debt & money market instruments of different
maturities, So as to spread the risk across different kinds of issuers
in the debt market.
Structure: - Open Ended Debt Scheme
Minimum Investment: - Deposit Plan Rs 5,000
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Wholesale Plan: Rs 1 lakh
Short Term Plan: Rs5, 000
Institutional Plan; Rs 1 crore
8. KOTAK LIQUID
Objective; - To provide reasonable returns and high level of liquidity by
Investing in debt and money market instruments of different Maturities so as to
spread the risk across different kinds of Issuers in the debt markets
Structure; - Open Ended Debt Scheme
Minimum Investment: - Rs 5,000
Institutional plan: Rs 1 crore
Institutional Premium Plan: Rs 20 crores
9. KOTAK FLOATER
Objective: - To reduce the interest rate risk associated with investments in fixed
rate instruments by investing predominantly in floating rate securities, money
market Instruments and using appropriate derivatives
Structure: Open Ended Debt Scheme
Minimum Investment: Rs 5,000.
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10. KOTAK DYNAMIC INCOME
Objective: To maximize returns through an active management of a portfolio of
debt and securities.
Structure: Open Ended Debt Scheme
Minimum Investment: Rs 5,000
11. KOTAK GLOBAL INDIA
Objective: To generate capital appreciation from a diversified portfolio of
predominantly equity and equity related securities issued by globally
competitive Indian Companies.
Highlights
Investment in a diversified equity portfolio of Globally Competitive
Indian Companies.
Tax advantage
Recurring Investment Facility available during continuous offer.
Redemption on all Working days.
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FACILITIES PROVIDED BY KOTAK
MAHINDRA
1. Systematic Investment Plan (SIP):
Management of one's finances to attain a defined goal calls for a lot of
discipline, many a times self-imposed. Our Systematic Investment Plan is a tool,
which can help you, inject this discipline in your financial management efforts.
Our Systematic Investment Plan (SIP) provides you the facility to periodically
invest a fixed sum over any defined period of time (6 months or more) in a
disciplined manner. SIPs help in arresting uncertainties associated with trying to
time the market and thus, in the long term tends to iron out market fluctuations.
It brings down your average cost of acquisition of units. As you would allocate a
fixed sum every month, you would buy more units when the prices of our units
are lower than when they are higher.
2. Systematic Withdrawal Plan (SWP):
Our Systematic Withdrawal Plan (SWP) is designed receive a regular
stream of payouts in a defined frequency and to book profits periodically
Through our SWP you can redeem defined sums at a pre-defined frequency by
giving a one-time instruction to us. You may choose to regularly withdraw either
a fixed sum or just the appreciation on your investments.
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This facility caters to two segments of investor needs:
1) Investors wanting defined, regular funds inflow from their investments.
2) Investors interested in booking gains at a regular interval.
3. Systematic Transfer Plan (STP):
Systematic Transfer Plan (SWP) caters a phased entry into the Equity
markets rather than putting in all your money at one trench and to book profits
from your equity holdings. Through our STP you can choose to switch your
investments from one Kotak Mutual scheme to another at a predefined frequency
by giving a one-time instruction to us. You also have a choice between switching
a fixed sum or only the appreciation on your investments.
You can choose to transfer either a fixed sum every defined period or only the
appreciation on your investments over that period from one scheme to another.
The later is helpful, where you do not want the transfer to disturb your capital
contribution.
4. Direct Credit Facility:
Our Direct Credit Facility comes automatically to you (unless you
choose otherwise) if you hold an account with any of the 12 banks listed below:
ABN AMRO Bank HSBC IndusindS Bank
Citi Bank HDFC Kotak Mahindra Bank
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Centurion Bank of Punjab ICICI Standard Chartered
Deutsche Bank IDBI Bank UTI Bank
Direct Credit is safer, faster and convenient compared to the conventional
cheque payout mechanism.
5. ECS of Dividends:
ECS (Electronic Clearing Service) is a Reserve Bank of India offering to
facilitate, among others, faster and seamless payout of dividends directly into
your bank account.
ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective
and hassle-free. Besides, you don't run the risk of loss of dividend instruments in
transit and the associated delays in obtaining a duplicate instrument. This facility
is currently offered across all banks in over 48 locations.
6. Online Transactions Facility:
Our Online Transactions Facility allows you to have instant access to
your investments at any time from anywhere just at the click of a button.
Here's a list of all facilities you can avail by signing in for our Online
Transactions Facility:
-Redemption.
-Switch Over.
-Account Statement.
7. Email Communication:
The world over, e-mail has been revolutionizing communication. No
more need to have paper trails; e-mail makes communication real-time, easy tostore and retrieve and cost-effective.
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You can now opt to receive all your communication from us over e-mail:
- Account Statement for your investments
-Transaction Confirmations
-Daily NAVs and Dividend Updates
-Market Reviews
-Information on product launches, service initiatives, dividends, etc.
-Annual Reports
-Other Statutory Communication
8. SMS Services:
With cell phones fast qualifying for an assured parking in every
pocket, we could not resist allowing you that extra convenience to be in touch
with your investments whenever you wish, wherever you are.
Try our SMS facility to :
-Access the latest NAVs and Dividends for our various schemes on
SMS.
-Receive information on product launches, service initiatives, dividends,
etc. on SMS.
-Post your queries to our Dedicated Services Desk.
9. Updates from Markets:
Market Review-Weekly Market Review [ended 29th February
2008]
Performance-Monthly Performance Snapshot [as on 31/12/2007]
Half Yearly Accounts and Portfolio- March 2007&September
2007 Fact Sheet- Current Month, Yearly Fact Sheet
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KMAMC Annual Report-2006 - 2007
Credit Policy for 2007-08
CONCEPTUAL FRAME WORK
MUTUAL FUNDS
Mutual Funds are professionally managed pool of money
from a group of investors. A Mutual fund manager invests your funds in
securities including stocks and bonds, Money Market instruments or some
combination and decides the best time to buy and sell. By pooling your resources
with other investors in Mutual Funds, you can diversify even a small investment
over a wide spectrum.
With the emergence of the capital market at the center stage of the Indian
financial system from its marginal role a decade earlier, the Indian capital
market also witnessed during the same period a significant institutional
development in the form of diversified structure of Mutual Funds. A Mutual
fund is a special type of investment institution which acts as an investment
conduit.
It pools the savings, particularly of the relatively small investors, and
invests them in a well-diversified portfolio of sound investment. As an
investment intermediary, it offers a variety of services/advantages to the
relatively small investors who on their own cannot successfully construct and
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manage investment portfolio mainly due to the small size of their funds, lack of
expertise and experience, and so on.
Regulated by the Investment Company Act of 1940, mutual
funds are open-ended investment companies that pool investors' money into a
fund operated by a portfolio manager. This manager then turns around and
invests this large pool of shareholder money in a portfolio of various assets, or
combinations of assets. This may include investments in stocks, bonds, options,
futures, currencies, treasuries and money market securities. Depending on the
stated objective of the fund, each will vary in regard to content and risk.
Funds issue and redeem shares on demand at the fund's NAV, or net asset value.
Mutual fund management fees typically range between 0.5% and 2% of assets
per year, but exchange fees and other administrative charges also apply.
DEFINITION :
According to SEBI - Mutual Fund is defined as - A fund established in
the form of a trust to raise moneys through the sale of units to the public or a
section of the public under one or more schemes for investing in securities,
including money market instruments.
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 the offer document.
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OBJECTIVES OF MUTUAL FUNDS
The objectives sought to be achieved by Mutual funds are as follows :-
To provide an opportunity for lower income groups to acquire without
much difficulty property in the form of shares.
To cater mainly to the need of individual investors whose means are
small?
To manage investors portfolios in a manner that provides regular
income, growth, safety, liquidity and diversification.
ADVANTAGES OF MUTUAL FUNDS
The following are the advantages of investing in a Mutual Fund are:
Professional Management
Diversification
Convenient Administration
Return Potential
Low Costs
Liquidity
Transparency
Flexibility
Choice of schemes
Tax benefits
Well regulated
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DISADVANTAGES OF INVESTING IN MUTUAL
FUNDS
-- Many funds charge hefty fees, leading to lower overall returns.
-- Over time, statistics have shown that most actively managed funds tend to
under perform their benchmark averages.
-- Mutual funds cannot be bought or sold during regular trading hours, but
instead are priced just once per day.
TYPES OF MUTUAL FUND SCHEMES
Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. The table below
gives an overview into the existing types of schemes in the Industry.
BY STRUCTURE
Open Ended Schemes
Close Ended Schemes
Interval Schemes
BY INVESTMENT OBJECTIVE
Growth Schemes
Income Schemes
Balanced Schemes
Money Market Schemes
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OTHER SCHEMES
Tax Saving Schemes
Special Schemes
Index Schemes
Sector Specific Schemes
SCHEMES OF MUTUAL FUNDS
Mutual fund schemes are usually open-ended (Perpetually
open for investors and redemption) or close-ended (with a fixed term). A Mutual
Fund scheme issues units that are normally priced at Rs.10/- during the initial
offer. The number of units you own against the total number of units issued by a
Mutual Fund scheme determines your share in the profits or losses in the
scheme.
The Mutual Funds can be classified under the following types:
ACCORDING TO STRUCTURE
STRUCTURE
OPEN-ENDED
SCHEME
CLOSED-ENDED
SCHEME
INTERVAL
SCHEME
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OPEN - ENDED SCHEME
An open-ended scheme is a scheme in which an investor can buy and sell
units on a daily basis. The scheme has a perpetual existence and flexible, ever
changing corpus. Open-Ended schemes do not have a fixed maturity period. The
investors are free to buy and sell any number of units, at any point of time, at
prices that are linked to the NAV of the units.
In these schemes the investor can invest and disinvest any amount, any
time after a short initial lock in period. This scheme gives investors with
instant liquidity and fund announces sale and repurchase price from time to time.
The units can be bought from and sold to any Mutual Fund.
ADVANTAGES OF OPEN-ENDED FUNDS OVER
CLOSE-ENDED FUNDS
Any time Entry Option.
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This provides ready liquidity to the investors and avoids reliance on
transfer deeds, signature verifications and bad deliveries.
Allows to enter the fund at any time and even to invest at regular
intervals.
Any time Exit Option.
CLOSE ENDED SCHEME
A Close-ended scheme has a stipulated maturity period. E.g. 5-7 years. A
Close-ended scheme is one in which the subscription period for the Mutual Fund
remains open only for a specific period, called the redemption period. At the
end of this period, the entire corpus is disinvested and the proceeds distributed to
unit holders. After final distribution the scheme ceases to exist. Such schemes
can be rolled over by approval of unit holders.
Reasons for fluctuations in NAV
Investors doubts about the abilities of the funds management.
Lack of sales effort (Brokers earn less commission on closed end schemes
than on open ended schemes).
Risk ness of the fund.
Lack of marketability of the funds units.
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INTERVAL SCHEMES
Interval schemes are those that combine both the features of both open-
ended and close-ended schemes. The units may be traded on the stock exchange
or may be open for sale redemption during during predetermined intervals at
NAV related prices.
ACCORDING TO INVESTMENT OBJECTIVE
INVESTMENT
OBJECTIVE
EQUITY SCHEME
DEBT OR BOND SCHEME
BALANCED SCHEME
MONEY MARKETSCHEME
GROWTH & INCOME
FUND
OTHER SCHEMES
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TYPES OF RISK
All investments involve some form of risk. Even an insured band account
is subject to the possibility that inflation will rise faster than your earnings,
leaving you with less real purchasing power than when you started (Rs.1000 gets
you less than it got your father when he was your age). Consider these common
types of risks and evaluate them against potential rewards when you select an
investment.
1) Market Risk: At times the prices or yields of the all the securities
in a particular market rise or fall due to broad outside influences. When this
happens, the stock prices of both an outstanding, highly profitable company
and a fledging corporation may be affected. This change in price is due to
Market Risk.
2 ) Inflation Risk: Some times referred to as loss of purchasing
power. Whenever inflation sprints forward faster than the earnings on your
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investment, you run the risk that youll actually be able to buy less, not more.
Inflation risk also occurs when prices rise faster than your return.
3) Credit Risk: In short, how stable is the company or entity to which
you lend your money when you invest. How certain are you that it will be
able to pay the interest you are promised, or repay your principal when the
investment matures.
4) Interest Risk: Changing interest rates affect both equities and bonds
in many ways. Investors are minded that predicting which way rates Effect
of loss rev professionals and inability to adapt: An industries key asset is
often the personnel who run the business i.e. intellectual properties or the key
employees of the respective companies. Given the ever-changing complexion
of few industries and the high obsolescence levels, availability of qualified,
trained and motivated personnel is very critical for the success of industries
in few sectors. It is, therefore, necessary to attract key personnel and also to
retain them to meet the changing environment and challenges the sector
offers. Failure or inability to attract/retain such qualified key personnel may
impact the prospects of the companies in the particular sector in which fund
invests.
5) Exchange risk: A number of companies generate revenues in foreign
currencies and may have investments or expenses also denominated in
foreign currencies. Changes in exchange rates may, therefore, have a positive
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negative impact on companies which in turn would have an effect on the
investment of the fund.
6). Changes in government policy: Changes in government
policy especially in regard to the tax benefits may impact business prospects
of the companies leading to an impact on the investments made by the fund.
RISK RETURN GRID
RISK
TOLERANCE/
RETURN
EXPECTED
FOCUS
SUITABLE
PRODUCTS
BENEFITS
OFFERED BY
MFS
Low DebtBank/company FD,
Debt based Funds
Liquidity, Better
Post-Tax return
Medium
Partially
Debt,
Partially
Equity
Balanced Funds,
some Diversified
Equity Funds are
some debt Funds,
Mix of share and
Fixed Deposits
Liquidity, Better
Post-Tax returns,
Better
Management,
Diversification
High Equity
Capital Market,
Equity Funds
(Diversified as well
as Sector)
Diversification,
Expertise in stock
picking, Liquidity,
Tax free dividends
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CLASSES OF MUTUAL FUND SHARES:
The most common variations of share classes for load mutual funds are front-
load A shares, back-end load B shares, and level-load C shares.
Class A Shares:
A mutual fund's A Shares charge a front-end load at the time of purchase. This is
a sales fee that is charged as a percentage of the total investment and is used to
compensate the financial representative who sells the fund. The amount of the
front-end load is subtracted from the original investment.
For example: If an investor places $10,000 in a mutual fund with a front-end
load of 2%, then the total sales charge would be $200. The remaining $9,800
will go toward the purchase of shares in the fund.
A shares may also impose an asset-based sales charge. Investors do not pay these
charges directly. Instead, they are taken from the fund's assets. The fund then
uses these fees to market and distribute its shares. The 12b-1 fee, which can
equal a maximum of 0.25% per year, is an example of an asset-based sales
charge.
Class B Shares:
B Shares charge back-end loads. When an investor purchases the B shares of a
mutual fund, the sales charge is deferred until the fund is sold. This deferred load
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usually decreases each year. B shares typically charge a higher asset-based sales
charge than Class A shares
For example: The B shares of a mutual fund may carry a 5% load if shares are
sold within the first year. This back-end load of 5%, however, could be reduced
by 1 % every year, until it is eliminated in the 5th year. Some B shares
automatically convert to A shares after a specified period of time, which reduces
the 12b-1 fees
Class C Shares:
Class C shares typically do not impose a front-end load, but will often charge a
nominal fee if the shares are sold within one year. Class C shares often impose a
high asset-based sales charge, but will not convert to A shares when the load
reverts to zero.
USAGE OF MUTUAL FUND
Since the Investment Company Act of 1940, a mutual fund is one of three basic
types ofinvestment companies available in theUnited States.
Mutual funds can invest in many kinds ofsecurities. The most common are cash
instruments, stock, and bonds, but there are hundreds of sub-categories. Stock
funds, for instance, can invest primarily in the shares of a particular industry,
such as technology or utilities. These are known as sector funds. Bond funds can
vary according to risk (e.g., high-yieldjunk bonds or investment-grade corporate
bonds), type of issuers (e.g., government agencies, corporations, or
municipalities), or maturity of the bonds (short- or long-term). Both stock and
bond funds can invest in primarily U.S. securities (domestic funds), both U.S.
and foreign securities (global funds), or primarily foreign securities
(international funds).
Most mutual funds' investment portfolios are continually adjusted under the
supervision of a professional manager, who forecasts cash flows into and out of
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the fund by investors, as well as the future performance of investments
appropriate for the fund and chooses those which he or she believes will most
closely match the fund's stated investment objective. A mutual fund is
administered under an advisory contract with a management company, which
may hire or fire fund managers.
Mutual funds are subject to a special set of regulatory, accounting, and tax rules.
In the U.S., unlike most other types of business entities, they are not taxed on
their income as long as they distribute 90% of it to their shareholders and the
funds meet certain diversification requirements in the Internal Revenue Code.
Also, the type of income they earn is often unchanged as it passes through to the
shareholders. Mutual fund distributions of tax-free municipal bond income are
tax-free to the shareholder. Taxable distributions can be eitherordinary income
or capital gains, depending on how the fund earned those distributions. Net
losses are not distributed or passed through to fund investors.
NET ASSET VALUE
The net asset value, or NAV, is the current market value of a fund's
holdings, less the fund's liabilities, usually expressed as a per-share amount. For
most funds, the NAV is determined daily, after the close of trading on some
specified financial exchange, but some funds update their NAV multiple times
during the trading day. The public offering price, or POP, is the NAV plus a
sales charge. Open-end funds sell shares at the POP and redeem shares at the
NAV, and so process orders only after the NAV is determined. Closed-end funds
(the shares of which are traded by investors) may trade at a higher or lower price
than their NAV; this is known as a premium ordiscount, respectively. If a fund
is divided into multiple classes of shares, each class will typically have its own
NAV, reflecting differences in fees and expenses paid by the different classes.
Some mutual funds own securities which are not regularly traded on any
formal exchange. These may be shares in very small or bankrupt companies;
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they may be derivatives; or they may be private investments in unregistered
financial instruments (such as stock in a non-public company). In the absence of
a public market for these securities, it is the responsibility of the fund manager to
form an estimate of their value when computing the NAV. How much of a fund's
assets may be invested in such securities is stated in the fund's prospectus.
MANAGEMENT FEES
The management fee for the fund is usually synonymous with the
contractual investment advisory fee charged for the management of a fund's
investments. However, as many fund companies include administrative fees inthe advisory fee component, when attempting to compare the total management
expenses of different funds, it is helpful to define management fee as equal to
the contractual advisory fee + the contractual administrator fee. This "levels the
playing field" when comparing management fee components across multiple
funds.
Contractual advisory fees may be structured as "flat-rate" fees, i.e., asingle fee charged to the fund, regardless of the asset size of the fund. However,
many funds have contractual fees which include breakpoints so that as the value
of a fund's assets increases, the advisory fee paid decreases. Another way in
which the advisory fees remain competitive is by structuring the fee so that it is
based on the value of all of the assets of a group or a complex of funds rather
than those of a single fund.
NON-MANAGEMENT EXPENSES
Apart from the management fee, there are certain non-management
expenses which most funds must pay. Some of the more significant (in terms of
amount) non-management expenses are: transfer agent expenses (this is usually
the person you get on the other end of the phone line when you want to
purchase/sell shares of a fund), custodian expense (the fund's assets are kept incustody by a bank which charges a custody fee), legal/audit expense, fund
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accounting expense, registration expense (the SEC charges a registration fee
when funds file registration statements with it), board of directors/trustees
expense (the members of the board who oversee the fund are usually paid a fee
for their time spent at meetings), and printing and postage expense (incurred
when printing and delivering shareholder reports).
INVESTOR FEES AND EXPENSES
Fees and expenses borne by the investor vary based on the arrangement
made with the investor's broker. Sales loads (or contingent deferred sales loads
(CDSL)) are not included in the fund's total expense ratio (TER) because they donot pass through the statement of operations for the fund. Additionally, funds
may charge early redemption fees to discourage investors from swapping money
into and out of the fund quickly, which may force the fund to make bad trades to
obtain the necessary liquidity. For example, Fidelity Diversified International
Fund (FDIVX) charges a 1 percent fee on money removed from the fund in less
than 30 days.
BROKERAGE COMMISSIONS
An additional expense which does not pass through the statement of
operations and cannot be controlled by the investor is brokerage commissions.
Brokerage commissions are incorporated into the price of the fund and are
reported usually 3 months after the fund's annual report in the statement of
additional information. Brokerage commissions are directly related to portfolioturnover (portfolio turnover refers to the number of times the fund's assets are
bought and sold over the course of a year). Usually, higher rate of portfolio
turnover returns in higher brokerage commissions. The advisors of mutual fund
companies are required to achieve "best execution" through brokerage
arrangements so that the commissions charged to the fund will not be excessive.
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DATA ANALYSIS
FUND : TATA OPEN-ENDED BALANCED
GROWTH FUND
OBJECTIVE : Aims to invest in equity and debt oriented securities so as to
give investor balanced returns.
PORTFOLIO OF THE FUND
Sector APR
2010
May
2010
A FM CG 15.14 15.89
B Energy 14.94 13.28
C Finance 8.65 8.05
D Engineering &industrymachinery
6.65 8.47
E Communication 4.98 7.21
F Technology 4.85 5.08
G Health care 2.72 3.05
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H Diversified 2.65 2.69
I Automobile 2.06 2.52
J Services 1.94 2.02
TATA OPEN-ENDED BALANCED GROWTH FUND
Sector wise chart
56
0
2
4
6
8
10
12
14
16
30-
30-
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FUND : BIRLA OPEN-ENDED BALANCED
GROWTH FUND
OBJECTIVE : The Scheme aims to balance income requirements
with growth of capital through balanced mix of investment in equity and debt.
66.38%
16.14%
17.48%
Equity Debt Money Market
CHART SHOWING ASSET ALLOCATION OF TATABALNCED FUND
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PORTFOLIO OF THE FUND
Sector Apr 2010 May
2010
A Health care 16.39 12.89
B FM CG 12.45 11.32
C Energy 6.18 7.44
D Engineering & industrymachinery
5.28 6.61
E Diversified 4.56 5.02
F Financial 4.54 4.80
G Chemical 4.22 4.34
H Technology 3.86 4.01
I Services 3.03 3.74
J Communication 1.31 2.01
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0
2
4
6
8
1 0
1 2
1 4
1 6
1 8
A B C D E F G H I J
3 0 / 0 4 / 2
3 0 / 0 5 / 2
Allocation
Sector Name
59
Sector wise chart:
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The BIRLA Balanced Fund Portfolio consists of 62.24% Equity
holdings, 29.36% Debt, 8.40% Money Market. It is evident from the data that
though the Investors have risk taking ability, they balanced their investments
by investing in Debt also.
FUND : PRU ICICI OPEN-ENDED BALANCED
GROWTH FUND
OBJECTIVE : Aims to invest in equity and debt oriented securities
so as to give investor balanced returns.
62.24%
29.36%
8.40%
CHART SHOWING ASSET ALLOCATION OF BIRLA
BALANCED
Equity Debt Money Market
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PORTFOLIO OF THE FUND
Sector Apr 10 May 10
A Energy 6.95 5.80
B Financial 5.65 4.92
C FM CG 4.43 4.48
D Diversified 4.29 4.01
E Communication 4.15 4.65
F Metals 3.62 4.87
G Engineering & industrymachinery
3.53 5.2
H Chemicals 3.26 4.3
I Health care 2.67 3.8
J Technology 2.67 3.2
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0
1
2
3
4
5
6
7
A B C D E F G H I J
3 0 -A p3 1 -M a
Sector Name
Allo
cation
62
Sector wise chart:
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The Pru ICICI Balanced Fund Portfolio consists of 53.87% Equity
holdings, 43.13% Debt. It is evident from the data that though the Investors
have risk taking ability, they balanced their investments by investing in Debt
also.
FUND : DSP BLACK ROCK OPEN-ENDED BALANCED
GROWTH FUND
OBJECTIVE : Seeks to generate long term capital appreciation and
current income from a portfolio constituted of equity and equity related
securities as well as fixed income securities.
CHART SHOWING ASSET ALLOCATION OF PRU ICICI
BALANCED FUND
56.87%
43.13%
63
Equity Debt
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PORTFOLIO OF THE FUND
Sector Apr 2010 may2010
A Energy 16.42 14.19
B FM CG 11.72 10.93
C Health care 8.43 8.51
D Engineering & IndustrialMachinery
3.88 4.65
E Technology 3.85 5.05
F Automobile 2.92 3.01
G Finance 2.83 2.88
H Services 2.57 4.87
I Chemicals 2.51 3.28
J Diversified 1.84 1.67
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CHART SHOWING ASSET ALLOCATION OFDSP MERRILL LYNCH BALANCED FUND
0
2
46
8
10
12
14
16
18
A B C D E F G H I J
30-Apr-10
31-May-1
Sector Name
Allocatio
n
SECTOR WISE CHART:
63.59%
20.16%
16.25%
Equity holdings Money market Debt holdings
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FUND : JM FINANCIAL OPEN-ENDED
BALANCED GROWTH
OBJECTIVE : Aims to provide investors with liquidity and current
income along with capital appreciation.
PORTFOLIO OF THE FUND
Sector APR10 MAY 10
A Financials 11.38 12.72
B Engineering 7.75 19.12
C Communication 7.64 9.49
D Energy 7.34 11.44
E Automobile 5.60 4.64
F Diversified 5.07 2.92
G Construction 4.71 4.58
H Textiles 2.60 0.00
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67
0
2
4
6
8
10
1214
16
18
20
A B C D E F G H
30-04-2010
31-05-2010
CHART SHOWING ASSET ALLOCATION OF JM FINANCIAL
BALANCED FUND
Equity Debt
52.09%
21.64%
26.27%
Money market
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TATA OPEN-ENDED BALANCED GROWTH FUND
DATE 1st JUN09
30thAUG 31st oct 31st dec 28th feb 30th apr 31st
May10
NAV 60.67 53.24 56.00 41.84 43.56 48.95 58.60
Fund performance and NAV values over a period of 1 year.
68
0
10
20
30
40
50
60
70
1stju
n08
31stAu
g
31stOc
t
31-Dec
28thFeb
30thAp
r
31stMa
ry09
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BIRLA OPEN-ENDED BALANCED GROWTH FUND
DATE 1st Jun09 30th aug 31st oct 31st dec 28st feb 30th apr 31st May10
NAV 31.60 28.722 27.0411 25.2149 26.9224 29.2455 32.29
Fund performance and NAV values over a period of 1 year.
0
5
10
15
20
25
30
35
stjun
ethau
g
0thoct
1std
ec
8thfeb
0thapr
ay2010
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Pru ICICI OPEN-ENDED BALANCED GROWTH FUND
DATE 1st
june09
30th aug 31st Oct 31th dec 28th feb 30th Apr 31st
May10
NAV 37.78 33.26 34.79 25.86 27.16 29.39 33.83
Fund performance and NAV values over a period of 1 year.
70
0
5
10
15
20
25
30
35
40
1stJun
e08
30thAu
g
31st
oct
31st
dec
28thfeb
30th
apr
31stMa
y10
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KOTAK OPEN-ENDED BALANCED GROWTH FUND
DATE 1st
June0930th july 30thSep 30th
Nov
31st Jan 31st mar 31st
May10
NAV 48.69 43.73 46.07 36.46 36.91 39.67 47.91
Fund performance and NAV values over a period of 1 year.
71
0
5
10
15
20
25
30
35
40
45
50
1stju
ne2009
30thjuly
30thsep
30thnov
31stjan
31stma
r
30thma
y
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JM FINANCIAL OPEN-ENDED BALANCED GROWTH
FUND
DATE 1st june08
30th
July31st Sep 30th Nov 31st jan 31thMar 31st
May09
NAV 24.12 21.13 22.12 14.06 15.00 14.85 20.76
Fund performance and NAV values over a period of 1 year.
72
0
5
10
15
20
25
1stju
ne09
30thjuly
31stsep
30thnov
31stjan
10
31stMa
r10
30th
may1
0
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INTERPRETATION
PERFORMANCE EVALUATION
We are interested in discovering if the management of a mutual fund is
performing well; that is, has management done better through its selective
buying and selling of securities than would have been achieved through merely
buying the market picking a large number of securities randomly and holding
them throughout the period?
One of the most popular ways of measuring managements
performance is by comparing the yields for the managed portfolio with the
market or with a random portfolio.
The following formula can be used to evaluate Mutual fund performance:-
Where:
NAV t = per-share net asset value at the end of yeart
D t = Capital appreciation during year.
73
NAVt + Dt1
NAVt 1
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NAV t-1 = per-share net asset value at the end of the previous year.
PERFORMANCE EVALUATION OF SELECTED
FUNDS
NAV t-1 = 1stJune, 2009
NAVt= 31st may2010
1) TATA Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t NAV t-
1)
60.67 59.60 -1.07
Applying the formula we get-
= -1.07
59.8878
= -0.0176 x 100
= -1.76 %
2) BIRLA Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t NAV t-
1)31.6 32.29 0.69
Applying the formula we get-
= 0.6931.6
= 0.0218 x 100
= 2.18%
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3) Pru ICICI Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t NAV t-
1)37.78 33.83 -3.95
Applying the formula we get-
= -3.95__37.78
= -0.1045x 100
= -10.45%
4) DSP MERRILL LYNCH Open-Ended Balanced growth
Fund
NAV t-1 NAV t
D t (NAV t NAV t-
1)
48.69 47.91 -0.78
Applying the formula we get-
= -0.78__48.69
= -0.01606x 100
= -1.6%
5) JM FINANCIAL Open-Ended Balanced growth Fund
NAV t-1 NAV t
D t (NAV t NAV t-
1)
24.12 20.76 -10.9269
Applying the formula we get-
= -3.36__24.12
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= -0.139 x 100 = -13.93%
FUND PERFORMANCE RANKING
Name of the Fund NAV Rank
Birla open-ended Balanced Growth Fund2.18% 1
DSP Merrill Lynch open-ended Balanced Growth
Fund -1.6%
2
Tata open-ended Balanced Growth Fund
-1.76%3
Pru ICICI open-ended Balanced Growth Fund-10.45% 4
JM Financial open-ended Balanced Growth Fund -13.93% 5
CHART SHOWING PERFORMANCE OF FUNDS
76
-1 4
-1 2
-1 0
-8
-6
-4
-2
0
2
4
BRILA
KOTA
KTA
TA
PRUICICI
JMFINA
NCE
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SWOT ANALYSIS
Strengths
1. Simplified speed and quality of services offered by Mutual Fund Companies.
2. As on investment tool for the investors to boost.
3. Wide range of investment schemes offered by mutual fund companies to
meet various requirements of investors.
4. Diversification of funds which minimizes the risk.
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Weakness
1. NAV range doesnt seem to fit in with corporate compensation. There is
positioning and pricing problem.
2. Delays in infrastructure development may dampen the growth rate of NAVs
of different schemes, which in turn affects the investor to invest.
3. Deregulation of interest rates may affect the profitability of companies.
4. Stiff competition from existing mutual fund companies and new Entrants.
Opportunities
1. Perceptive changes in life style.2. Addition of level of new class of entrepreneurs to the broad base of middle
class of the market.
3. The range of schemes and services offered by mutual fund companies is large
enough for all investors to have a slice of cake.
4. The falling interest rates would make to raise capital at less cost. Hence more
opportunities for companies.
5. Globalization is buying fresh opportunities in terms of foreign tie-ups.
Threats:
1. Risk of scams.
2. Severe increase in the competition among mutual fund companies results in
decreasing the spread.
FINDIGS OF THE STUDY
The following findings are emerged from the Present Study entitled on An
Overview of Mutual Fund Industry in India A Study with reference to Kotak
Mahindra Asset Management Co., Ltd. In a nutshell, these are:
Highest number of investors come from salary class.
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Most of the people in between the age group of 25-35 invest their money
up to 6% of their annual income in Mutual fund.
Five balanced fund schemes are chosen for the study TATA, BIRLA
SUN LIFE, ICICI PRUDENTIAL, JM FINANCE, KOTAK MUTUAL FUNDS.
The funds chosen for the study are some of the top performance in the market.
The fund investment is a combination of equity, debt and money market.
As such the investments are diversified and the risk is balanced.
The mutual funds are one of the biggest advantages to the investors those
who invest their money in all his favorite stocks and bonds.
Mutual Funds have still not become truly Investment