Final Report ion Report

8/6/2019 Final Report ion Report

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STUDY OF MUTUAL FUNDS AND Its COMPETITION IN INDIAA Dissertation Report

SUBMITTED FOR THE PARTIAL FULFILMENT OF

THE REQUIREMENT FOR THE AWARD

OF

Master of Business Administration

SUBMITTED BY

Indranil Choudhury

ROLL NO.-AUR0901025

UNDER GUIDENCE OF

Faculty Guide

Mr.Udayan KarnatakAMITY BUSINESS SCHOOL

AMITY UNIVERSITY RAJASTHAN

Year of Submission-2009-11


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Table of Contents

y

List of Tables

Chapter 1

Table 1.1-Introduction to mutual funds.

Table 1.2-Meaning of mutual Funds.

Table 1.3-Type of mutual funds.

Table 1.4- Concept of mutual funds.

Chapter 2

Table 2.1-Research methodology and sample profile

Table 2.2-Sample size

Chapter 3

Table 3.1-MFs By Structure.

Table 3.2-MFs By Investment.

Table 3.3-MFs By Nature.

Table 3.4- Performance of ING CUB Fund

Table 3.5-Peformance of Wealth Builder

Table 3.6-Debt Funds

Table 3.7-Liquid Funds

Table 3.8-SIP

Table 3.9(a)-Tax Implications

Table 3.9(b)-Other Schemes.


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Chapter 4

Table 4.1-how to use Beta for MFs.

Table 4.2-How to use Sharpe and Treynor Ratios.

Table 4.3-Portfolio of respective funds.

Table 4.4-Portfolio T/O ratios.

Table 4.5-Entry and Exit loads.

Table 4.6-Expense Ratio.

Table 4.7-Dividend History.

Table 4.8-Asset allocation.

Table 4.9(a)-Increase and decrease in fund size.

Table 4.9(b)-Standard deviation and fund size.

Chapter 5

Table 5.1-Competition faced by MFs.

Table5.2-Insurance products as a competition to MFs.

Table5.3-How to generate return from insurance.

Table5.4-market share of private companies.

Table5.5-Current market share of Private companies.

Table5.6-Various types of Life insurance.

Table5.7-Tax benefit.

Chapter 6

Table 6.1- Analysis of insurance plan.

Table 6.2- Premium allocation


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Chapter 7

Table 7.1- Conclusion and suggestion

Table7.2- Example

y List of Figures and Flow Charts

Chapter 1

Table 1.4- Concept of Mutual funds.

Chapter 3

Table 3.4- ING C.U.B fund NAV chart

Table 3.5-UTI Wealth builder fund NAV Chart

Chapter 5

Table 5.3-How to generate returns from Insurance

Table 5.4-Market share of private Insurance companies.

Table 5.5-Current market share of Private companies.

Table5.5-NAV Chart of HDFC.

Table5.5-NAV Chart of Reliance industries.

y List of Abbreviation

IIFL - India Info line Pvt ltd.


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ACKNOWLEDGMENT

I am highly indebted to my Director Of ABS, Major General B.N.Kaul , who gave me an

opportunity to work in the Finance Topic in this esteemed College and also for his whole-hearted

support and suggestions. Working under his able guidance was truly a learning experience for

me.

I would also like to thank my faculty guide, Lec. Udyan Karnatak, who from the beginning had

confidence in my abilities to not only complete the project, but to complete it with excellence.

I am also heartily thankful to all other faculty members for their precious time, recommendations

and suggestions that were of great help in completion of this project.


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Chapter 1

Table 1.1

Introduction of Mutual Fund

Started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and

Reserve Bank and the first scheme launched by UTI was Unit Scheme 1964.Though the growth was slow but

it accelerated in 1987 because of non UTI players and SBI mutual fund was the first non UTI mutual fund

established in 1987 and in 1993 SEBI (mutual fund) regulation were substituted by a more comprehensive

and revised Mutual Fund regulations in 1996 and industry now functions under the SEBI mutual fund

regulations 1996.The only exception is UTI,since it is a corporation formed under the separate act of

Parliament.

Table 1.2

Meaning of Mutual Fund

Mutual fund allows a group of investors to pool their money together with a predefined investment objective.

and mutual fund will have a fund manager who is responsible for investing the gathered money into specific

securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual

fund and thus on investing becomes a shareholder or unit holder of the fund.

Table 1.3

Types of Mutual Fund Schemes

1. By Structure

- Open ended Schemes

- Close ended Schemes

- Interval Schemes

2. By Investment Objectives

- Growth Schemes

- Balanced Schemes

- Income Schemes


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- Money Market Schemes

3. By Nature

- Equity Fund

- Debt Fund

- Balanced Fund

4. Other Schemes

- Tax Saving Schemes

- Sector Specific Schemes

- Index Schemes

Table 1.4


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Chapter 2

Table 2.1

Research method and sample profile

Method- In order to conduct the research, telephonic calls have been made to various individuals

and specially doctors and lawyers from Jaipur.

In the call conducted the following questions were asked

y Do they invest in share markets?

y Do they invest in mutual funds?

y If they dont invest then are they willing to invest?

y If they are not willing to invest what are the reasons for the same.

y If they are willing to invest then what and where are they willing to expose themselves?

y What is the Minimum and maximum amount they can invest p.a.

As this research was conducted by me while I was working in India Info line (As a part of my

college placement) most of the calls that were made gave a negative response. Most of them

even disconnected the call when they heard that the call was made from a brokerage company.

But as and when the days passed some calls were converted and positive response started

flowing in.

The data was mainly collected from Yellow pages for the doctors and the lawyers journal which

was obtained by me from the Jaipur high court.

Table 2.2

The following work was done and the responses of the potential client are as follows


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Name of the Person Phone number Profession Response

Adhikari Prahalad sungh 2546873 Lawyer Not Picking up

Nitin Agarwal 9414360296 Lawyer Not interested and ended the call directly

Amit kumar agarwal 9829197115 Lawyer Not available

Anindita Agarwal 9830024698 Lawyer Phone number does not exists

Bal swaroop agarwal 26217913 Lawyer Not picking up

Mukesh Agarwal 9829166780 Lawyer call disconnected

Pankaj Agarwal 9414413545 Lawyer Not picking up the call

Smt. Prabha agarwal 9414071930 Lawyer Not picking up the call

Purshottam agarwal 01421-225522 Lawyer Wrong number

Ram gopal agarwal 2242227 Lawyer Not interested and ended the call directly

Ratan kumar agarwal 9829090323 Lawyer Not interested

Ratan Lal agarwal 9414042642 Lawyer dont call him again

Rishi pal agarwal 9829069784 Lawyer He died few days ago

Surya Prakash Agarwal 9829064729 LawyerNot interested as he believes itis a bad stock market

Virendra Prasa Agarwal 9414076288 Lawyer Not interested as he is 60 years of age

Vinod kumar agarwal 2785837 Lawyer Number out of service

Vipin Agarwal 2652618 Lawyer Route Busy

Vizzy Agarwal 9829067997 Lawyer Not Interested

yamani Agarwal 2523106 Lawyer husband does all the investment

Agrajit Aloana Bimal 9868553362 Lawyer Very busy and told to call next year

Anchal agarwal 2307168 Lawyer She got married

Dr Sanjay Mittal 9785245155 Doctor

First talked with the asistancethen the Doctor said that hewas not interested as he is leaving India

Dr Sunil Srivastava 9414159191 Doctor Did not pick up the call but later cut the callDR Dinesh Mathur 9929766659 Doctor Told to call at 7pm

Abhishek dental care 2394411 Doctor Not In use

Dr Abhishek Vashishtha 5107515 Doctor Not answering the call

Dr Malti Gupta 2701710 Doctor Directly cut the call

Manoj Kumar agarwal 9829011375 Lawyer Is in a meeting and told not to bother again

Poonam agarwal 25220022 Lawyer

Her father told thatshe is out of station and

she will be back after 2 months

Ravi Shankar agarwal 9414337839 Lawyer Not Interested

Rajiv Agarwal 9828014235 Lawyer Not Picking up

Shailendra agarwal 9414042131 Lawyer Directly cut the callRajiv Agrawal 9828014235 Lawyer Told to call after 5pm

Ahmed sager 9414057814 Lawyer Told to meet afeter 01/04/2011

Ahluwalia Bhawani 9829020373 Lawyer Not picking up the call

Ahmed Ansar 9414362324 Lawyer Agreed to meet

Ahmed Khaleel 9829188186 Lawyer Agreed to meet

Amit Ahuja 9829795959 Lawyer Agreed to meet

S.K Ajmera 9828019188 Lawyer Not interested as he had the


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bad experience of the downfall of 2002

Ambrish 9414714157 Lawyer Not interested and ended the call directly

Amipal 9252059443 Lawyer Not picking up the call

Anand Digvijay 9829050089 Lawyer Not interested

Anand Rakesh babu 9462063791 Lawyer Not picking up the call

Anand Sapdeep 9414322714 Lawyer The Call was on wait

Anandka Gaurav 9414201527 Lawyer Switched off

Amiruddin Ansari 9414245759 Lawyer Call After 5pm

Arvind Kumar Arora 9887612418 Lawyer Not picking up the call

Man Mohan Arora 9828200027 Lawyer Call after Holi

Neeraj Kumar arsani 9414486031 Lawyer Not Picking up the call

Arya Hoshiyar Singh 9314969073 Lawyer Not interested in insurance and in equity

Arya Laxmi Kant 9351978068 Lawyer Not interested at all

Arya OM Prakash 9314643080 Lawyer Agreed to meet

Arya Pratap singh 9414260560 Lawyer Agreed to meet

Dr Agarwal VishalEndodonic Centre 9414044400 Doctor The Call was on wait

Anant Dental Clinic 9828011291 Doctor The call was not answered

Dr Anita nair 2336340 Doctor dont call her again

Ashok Dental clinic 2370093 Doctor Told to call the next day

Avnish dental care 9414454411 Doctor

Told to send whatever marketinfo we have, and if he likesthem he'l call back

Balaji Dental clinic 9828012176 Doctor Told to call after 1 hour

Dr. Bupesh Bhatt 3249360 Doctor Cut the Call directly

Dr Bindu Bharadwaj 2301909 Doctor Satisfied with Motialal oswal

Dr.Chopra 2610491 Doctor Does not believe in stock market

Dr Seema Choudhury 2385288 Doctor

Dont want to get in to Stockmarkets becausehis hisbandhave strictly warned her not to

Dr Choudhury(Choudhury dental carecentre) 9414362455 Doctor Not Interested

Ashia ganpat singh 9928092593 Lawyer Call afetr half hour

JP Asiwal 9351323764 Lawyer Number out of service

Asthana Pradeeo Kumar 9414187891 Lawyer Number out of service

Sandeep ahuja 9829048066 Lawyer Agreed to meet

Babita 9460367524 Lawyer Number not Valid

Badetia jagdish prasad 9214304665 Lawyer Told to call later as he was busy in the courtBagdara Suwer singh 9414796059 Lawyer The Number was wrong

Bagdia Dhruv singh 9314500952 Lawyer The Number was wrong

Rajesh Bagria 9414922057 Lawyer Not picking up the callDr. Kiran(Kiran dentalclinic) 6536520 Doctor Number not in serviceDr kiran Taneja-Siddhivinayak complex 9784637269 Doctor

When talked about IndiaInfoline she directly cut the call


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Dr kiran Taneja-sadala19 9414076209 Doctor Call not picking up

Kumar Dental care 9314505050 Doctor Not interested

Malhotra dental care 9829466789 Doctor Do not disturb

Dr Deepak R Bharadwaj 9829054056 Doctor Call later

Dr Harsh nath ravindra 2551404 Doctor Not InterestedDr Rishab Jain 9414251399 Doctor Do not disturb

Dr.Ritu Rai gupta 9887022867 DoctorHusband is a Chartered accountantso dont need any assistance

Dr. S .D Sharma 9414889161 Doctor Cell Switched Off

Dr Vijay Saxendra 9414074205 Doctor Not Interested

Bagdoliya dilip singh 9829888544 Lawyer To call after 5pm

Bagria Madan Lal 9314231878 Lawyer Agreed to meet

Suman Bai 9460579971 Lawyer Wrong number

Baid narendra kumar 9829436162 Lawyer Do not disturb again

Bairwa hans Raj 9314849195 Lawyer Not interested

Barala Dharmendra 9783227100 Lawyer Not interestedBeniwal Balweer singh 9928602848 Lawyer number busy

Beniwal Brijmohan 9351675780 Lawyer Switched off

Benowal Inderaj Singh 9414624509 Lawyer Not interested

Beniwal Manoj 9414095132 Lawyer Agreed to meet

Bhaba Girish 9829648468 Lawyer Number not in ExistantBhaduria Rajesh kumarsingh 9414248873 Lawyer Not interested

Bhagwati Prashant 9214347666 Lawyer Is busy and said not to disturb any more

Dr Deepak Sharma 9414039654 Doctor Have asked to call after 1 hour

Dev dental hospital 2466401 Doctor To busy and have said not to call again

Dr Saraswat dentalhospital 2351728 Doctor Do not disturb again

Dr Indearesh Goyal 2703482 Doctor Do not disturb again

Dr Lavish gupta 9950765090 Doctor Do not disturb again

Dr. Vivek gupta 2372882 Doctor Dont call againDr harsh(Harsh dentalhospital) 9414279627 Doctor Have asked to call after 1 hour

Dr K.K.Vashittha 2562418 Doctor Have asked not to call again

Dr. Kamlesh Agarwal 2303148 Doctor Telephone number Temporary withdrawnDr.Kushal (KushalDental Clinic) 5547925 Doctor Number temporalily not available

Dr Khanna( Khannadental clinic) 2393516 Doctor

Smt Khanna told that his husbanddoes all the work of investmentand when asked for the numbershe was reluctant to give his number

Bhagwati Sandeep 9829586024 Lawyer Agreed to meet

Bhaira suresh kumar 9414258275 Lawyer Not picking up the call

Bhambani Dropadi 9352788871 Lawyer Directly cut the call

Dr Nishi Sonkhya 9314900555 Doctor Do not Disturb


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Dr.Vinod jain 9414050027 Doctor Not Interested

Dr. Navneet Khotari 2351716 Doctor Not Interested

Dr. Rakshita Kothari 9314877393 Doctor Do not disturb

Dr. Bharat Sapra 9829150500 Doctor Call after 6pm

Dr Harsh Udawat 9928076901 Doctor Not Interested

Dr.N.K Malpani 9414169090 Doctor Call after 4.30 pm

Dr. Alook Pareek 9950570398 Doctor Directly disconnected the phone

Dr Anuraj Dhaker 9829213226 Doctor

he was complaining that allbrokerage firms have justexploited his money including IIFL

so he would rather not invest hishard earned money

Dr Ashok Mittal 2522063 Doctor Not picking up the call

Dr.CP Agarwal 9829233850 Doctor As he is driving the car call him after 1 hour

Dr CS Mittal 9887079174 Doctor Directly cut the call

Dr Dillip Kimmatkar 9828166303 Doctor Not interested in any financial services

Dr Dillip Mehta 9983904061 Doctor Not Interested

Dr Dinesh saini 9829006051 DoctorOut of station and dontwant to get disturbed

Dr Agarwal 9314299612 DoctorNot interested and does notwant any financial assistance

Dr Rajan garg 9314502026 Doctor Agreed to meet

Dr. Meena Govardhan 2203268 Doctor Please dont Disturb

Bhambu naresh 9414504545 Lawyer Agreed to meet

Bhambi ashok kumar 9214114303 Lawyerlost faith in the market after theloss in november 2008

Bhambo rajesh kumar 9828428260 Lawyer Wrong number

Abhishek Bhandari 9829295394 Lawyer Call after 22/03/2011

L.M bhanddari 9828152478 Lawyer

Have got calls from other brokers also,and was tired with this calls

so dosent wanted to be disturbed(was abusing)

Nitin Bhandari 9928877875 Lawyer Not picking up the call

Sumer chand Bhandari 9413842858 Lawyer The cell was switched off

Abhishek Bharadwaj 9829653107 Lawyer Have asked to call tomorrow i-e 18/03/201

Bhargava manu 9414048871 Lawyer Had asked to call after 1 hour

Bhargava Rakesh kumar 9414261644 Lawyer Have asked to call between 3-4pm

Bharti Subhas 9314282688 Lawyer Have asked to call at 5pm

Neeraj Bhatt kumar 9414068469 Lawyer Have asked to call after 01/04/2011

Smt.Sadhna Bhatt 9829180881 Lawyer Wrong number

Bhattacharya DRP 2811685 Lawyerwas busy and have asked to calltomorrow evening at 5pm

Bhattacharya Kishore 9214598792 Lawyer Have told not to disturb again

Bhedi Yogesh Kumar 9414461915 Lawyer Not interested at all

Dr Govind saini 9414202598 DoctorHave said" why cant you understandthat I dont require any financial services".

Dr.DD Gupta 9414063815 Doctor have said not to bother again


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Dr. J.B Gupta 9829414680 Doctor Directly disconnected the phone

Dr.D.K Ramawat 9414106240 Doctor Call in the Evening at 6pm

Dr Sushil Sanghi 9829065605 Doctor Not interested in any financial servicesDr.Sanjeev KumarSharma 9983333421 Doctor Do not disturb

Dr.Puneet Saxena 9414079182 Doctor Cell Switched OffDr V.D Sharma 9414073019 Doctor dosent want to talk to any brokerage firm

Dr D.S Malik 9829122957 Doctor Call After 4-5 days

Dr. M.K. Bhora 9314156461 Doctor Call in the After at 6pm

Dr Manoj Kabra 9414306722 Doctor Told to call after lunch

DR R.K.Verma 9829059970 Doctor The number was Busy

Dr.Anoop Jhurani 9829019985 Doctor not interested

Dr Anurag Dhaker 9829213226 Doctor Do not disturb

Dr Sachin Gupta 9414064560 DoctorPlease dont call me again orI will file a complain against you

Dr KK Sharma 2785794 Doctor

Have already invested with a local

broker who is his best friendDr.Kapil Gangwal 9314504479 Doctor Not picking up the call

Dr Mahavir Jangid 9829030404 Doctor Call after 1 hour

Dr Vishwanath Mathur 9414054377 Doctor Not interested

Dr Pankaj Singhal 9251478826 Doctor Number not in use

Dr. S.B solanki 9414079343 Doctor Directly disconnected the phone

Dr saurabh mathur 9950191816 Doctor The number is busy

Dr Jai krishan mittal 9784011957 Doctor said not to bother him again

Bhojak Ravi 9414075929 LawyerThe moment he heard about IIFlhe disconnected the call

V.N Bohra 9414042470 Lawyer

Not interested as he is handlingthe litigation for a lot of banks and

have qualified CA's to look after his protfolioSurendra Singhchandrewi 9414826906 Lawyer not ansewring the callPushpendra kumarchansoria 9414826906 Lawyer

Have met with an accidentand would like to be not disturbed

Atul Chaturvedi 9828262621 LawyerHave asked to call on 04/04/2011 tohave an appointment on the next day

Bharti chaturvedi 9828077560 Lawyer number does not existManish Kumarchaturvedi 9929307024 Lawyer Have shifted to Haryana so not interestedNarendra Kumarchaturvedi 9928402990 Lawyer Is interested to call after 10/04/2011

Prashant Chaturvedi 9828023808 Lawyer His mother said that he is out of India

Swarnim Chaturvedi 9414074197 LawyerTo call after a week as he is not in

jaipur-call on 12/04/2011

Amit Chaudhury 9952535962 Lawyer The Number was wrong

ashok Chaudhury 9414338375 LawyerHave left Jaipur and will contactif he is interested

Kuldeep singhChaudhury 9414278752 Lawyer Wrong number


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Mahipal SinghChaudhury 9413685482 Lawyer

Left jaipur forever as said byhis brother,and when asked thatif he was interested he directly cut the call

Rahul Chaudhury 9413300006 Lawyer The cell was switched offSnajjan kumarChaudhury 9314548571 Lawyer The Number was wrong

Vikas Choudhury 9828535348 Lawyer not interested as he does notbelieve in the stock markets at all

Deepak achauhan 9214694928 Lawyer Not picking up the call

Rahul Singh Chauhan 9413437299 Lawyer Do not disturb againAbhimanyu Singhchauhan 9414483731 Lawyer Disconnected the call directlyDr. Vijendra Narain

jhameria 9413972477 DoctorWife seriously injured so dontwated to be disturbed

Dr Alok Gupta 9414062700 Doctor Not picking up the call

Ashish Chauhan 9413966666 Lawyer The number is not in exitance

Atul Kumar chauhan 9414499674 Lawyer Dialed number does not exists

Bhanwar singh Chauhan 9414047205 Lawyer

Was driving the car and said to

call after 15 minutesDeepesh Chauhan 9414358555 Lawyer Have asked not to bother him againDevendra kumarChauhan 9414454870 Lawyer Not responding

Dinesh Chauhan 9829699908 Lawyer Not picking up the callMahendra singhchauhan 9214611884 Lawyer The cell was switched off

Mukesh Chauhan 9828083104 Lawyer The number is Busy

Nathu Singh Chauhan 9414796820 Lawyer Not at all interested

R.K.Chauhan 9314210610 LawyerDisconnected the call directlyafter hearing IIFL

Rupendra Chauhan 9460145435 Lawyer

Not interested as he does not have

even Rs 100 to invest any whereSiddharth SinghChauhan 9414068800 Lawyer Directly cut the call

Mahesh Kumar chawla 9414200101 Lawyer The Call was on wait


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Chapter 3

Mutual Funds In India

Table 3.1

By Structure

Open - Ended Schemes

An open ended schemes contains following points

(i) An open-end fund is one that is available for subscription all through the year.

(ii) These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset

Value ("NAV") related prices.

(iii) The key feature of open-end schemes is liquidity.

Close - Ended Schemes

An close ended schemes has following characteristics which describes this scheme

(i) A closed-end fund has a set maturity period which generally ranging from 3 to 15 years.

(ii) The fund is open for subscription only during a specified period.

(iii) 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.

(iv) SEBI Regulations decide that at least one of the two exit routes is provided to the investor, In

order to provide an exit route to the investors

Interval Schemes

An interval schemes contains following points through which we can know about this scheme-

(i) Interval Schemes are that scheme, which combines the features of open-ended and close-ended


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schemes.

(ii) The units may be traded on the stock exchange or may be open for sale or redemption during

pre-determined intervals at NAV related prices.

Table 3.2By Investment Objectives

Growth Schemes

Growth Schemes are also known as equity schemes and the aim of these schemes is to provide capital

appreciation over medium to long term. These schemes normally invest a major part of their fund in equities

and are ready to bear short-term decline for getting long term capital appreciation.

Income Schemes

Income Schemes are also known as debt schemes and these schemes provide regular and steady income to

investors. These schemes generally invest in fixed income securities such as bonds and corporate

debentures. Capital appreciation in such schemes may be limited.

Balanced Schemes

Balanced Schemes aim to provide both growth and income by periodically distributing a part of the income and

capital gains they earn. These schemes invest in both shares and fixed income securities, in the proportion

indicated in their offer documents but normally they invest 50% in shares and 50% in f ixed income securities.

Money Market Schemes

Money Market Schemes provide easy liquidity, preservation of capital and moderate income and these

schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit,

commercial paper and inter-bank call money.


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Tax Benefits (ELSS) -

Dividends from mutual funds are fully exempt from income tax under Section 10(33). Equity funds (schemesthat invest 50 per cent of their funds in equity) are also exempt from dividend tax. ELSSs offer under section88 tax rebate on investments up to Rs 10,000 in a financial year. The difference between the selling price andthe cost price is taxable as capital gain in the year of sale, at 10 per cent or 20 per cent, depending onwhether or not you claim indexation benefits.

Table 3.4-

ING C.U.B. Fund (Growth)

Types of Features Close Ended

Nature Equity

Option Growth

Fund Size 41.38 as on july 08

Beta 0.64

Sharpe Ratio 0.39

Standard Deviation 3.12


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Treynor Ratio 1.88

Portfolio Turnover Ratio 119.33Expense Ratio 2.50

Risk & Return

3 Month 6 Month 1 Year 3 Year 5 year Since

Inception

-19.48 -28.75 -8.90 NA NA 16.88

Portfolio of the Fund

Portfolio Attributes

P/E 19.37 as on June 08

P/B 3.70 as on June 08

Dividend Yield 0.84 as on June 08

Market Cap. 5,115.44 as on June - 2008


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Assets Allocation

Equity Debt Cash & Equivalent

91.29 0.0 8.71

Net Asset Value (NAV)

Latest NAV 13.72 as on Aug 5, 2008

52 Weeks High 23.23 as on Jan 7, 2008

52 Weeks Low 11.92 as on Jul 16, 2008


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Increase & Decrease in the Fund 1.7 Crore

Last Dividend NA

Minimum Investment 5000

Table 3.5

UTI Wealth Builder Fund

Types of Features Close Ended

Nature Equity

Option Growth

Fund Size 808.6 as on Jun 30, 2008

Beta 0.95

Sharpe Ratio 0.27

Standard Deviation 3.60


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Treynor Ratio 1.01

Portfolio Turnover Ratio 143.48

Expense Ratio 1.93

Risk & Return

3 Month 6 Month 1 Year 3 Year 5 year Since

Inception

-15.56 -24.85 -7.05 NA NA 7.48


Portfolio Attributes

P/E 24.68 as on June 08

P/B 4.08 as on June 08

Dividend Yield 0.61 as on June 08

Market Cap. 49,172 as on June 2008

Assets Allocation


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Equity Debt Cash & Equivalent

79.36 3.29 17.35


Latest NAV 11.50 as on Aug 5, 2008

52 Weeks High 17.58 as on Jan 7, 2008

52 Weeks Low 10.13 as on Jul 16, 2008


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Increase & Decrease in the Fund -164.57 Crore

Last Dividend NA

Minimum Investment 5000


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Table 3.6-

Debt Fund

The objective of these Funds is to invest in debt papers. Government authorities, private companies, banks and

financial institutions are some of the major issuers of debt papers. By investing in debt instruments, these fundsensure low risk and provide stable income to the investors. Debt Funds are Classified as:

(i) Gilt Fund

(ii) Monthly Income Plan

(iii) Liquid Fund

(iv) Short Term Plan

(v) Income Fund

Gilt Fund

Invest their amount in securities issued by Government, popularly known as Government of India debt papers.

These schemes are safer as they invest in papers backed by Government. Gilt funds differ from bond funds

because bond funds invest in corporate bonds, government securities, and money market instruments. Giltfunds stick to high quality-low risk debt; mainly government securities and government securities mean and

include central government dated securities, state government securities and treasury bills. The gilt funds

provide to the investors the safety of investments made in government securities and better returns than direct

investments in these securities through investing in a variety of government securities yielding varying rate of

returns gilt funds, however, do run the risk.. The first gilt fund in India was set up in December 1998.

The Reserve Bank provides liquidity support and other facilities, such as, Subsidiary General and current

accounts, transfer of funds through the Reserve Bank's Remittance Facility Scheme and access to call money

market to dedicated gilt funds. These facilities are provided to encourage gilt funds.


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Monthly Income Plan

Plan holder invests maximum of their total amount in debt instruments, they invest minimum in equities. It gets

benefit of both equity and debt market. These scheme ranks slightly high on the risk-return matrix when

compared with other debt schemes. A debt fund that pays a dividend every month or where the investor opts for

a systematic withdrawal plan also provides regular monthly income to investors.

Then what is special about Monthly Income Plans? The difference between a debt fund and an Monthly Income

Plan is that a debt fund is fully invested in debt securities, whereas an Monthly Income Plan has the flexibility of

owning equity - up to 15 per cent in most Monthly Income Plans at present.

Tax Implication

An investor can replicate the MIP by having 90 per cent of his portfolio in a debt fund and 10 per cent in an

equity fund. If the weightage of equity goes up to 13 per cent, he will rebalance his portfolio, for which he will

have to pay tax. Thus, the MIP is a better option than this method. If an investor goes for the dividend plan of an

MIP, he will have to pay tax on the dividend.

The most tax-efficient method is to opt for systematic withdrawal plans. Though this may appear as if the

investor is eating into his capital, it need not necessarily be so as the NAV of the fund will keep rising. The

investor only has to take a precaution of limiting withdrawals to about 10 per cent of the invested amount each

year.


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Table 3.7

Liquid Fund

These schemes invest in short-term instruments like Treasury Bills, inter-bank call money market, Commercial

Papers and Certificate of Deposits. These funds are meant for short-term cash management of corporate

houses and the investment period is of 1day to 3 months. These schemes rank low on risk-return matrix and

are considered to be the safest amongst all categories of mutual funds.

Liquid Funds score over short term fix deposits. Banks give a fixed rate in the range 5%-5.5% p.a. for a term of

15-30 days. Returns from deposits are taxable depending on the tax bracket of the investor, which considerably

pulls down the actual return. Dividends from liquid funds are tax-free in the hands of investor, which is why they

are more attractive than deposits. The distribution tax in the case of liquid funds is higher at 25% as compared

to other debt-based funds. Other debt-based funds such as income funds or MIP have a lower distribution tax of

12.5%. Nowadays, mutual funds have introduced liquid plus funds that are for all practical purposes like liquid

funds. However, the distribution tax rate on these funds is the lower rate of 12.5%


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Table 3.8-

Systematic Investment Plan

A Systematic investment plan is a popular investment strategy available to salaried or regular income group

investors among others. Instead of making one lump sum investment, investors put in a fixed sum of money

each month, over a period of time. The amount to invest each month and the time span of this investment is

decided by the investors. There are many options available in the market. This system does away with the need

to time the market. SIP investment is an attractive scheme for wide range of income groups. You can invest as

little as Rs. 500 a month and there is no upper limit. A Systematic Investment Plan is not a type of mutual fund .

It is a method of investing in a mutual fund.

In SIP the money is invested in a mutual fund which invests your money in the stock market and financial

instruments such as bonds. SIP is only a methodology of investing. Investors must remember that merely

investing through SIPs will not deliver the results. You need to choose the right scheme first. Money invested

through a SIP will lose value if invested in the wrong scheme. So selection of the right scheme is the first job.

Benefits:

(i) By opting to invest every month, you invest in a disciplined manner. This results in forced savings. As this is

a monthly exercise, you tend to plan your expenditure.

(ii) Historically the returns offered by stock market investmentsare higher than any other form of saving.

(iii) Buy low sell high, just four words sum up a winning strategy for the stock markets. But timing the market is

not easy for everyone. If you invest via a SIP, you do not commit the error of buying units when the market is at

its peak. Since you are buying small amounts continuously, your investment will average out over a period of

time.

(iv) You will end up buying some units at a high cost and some units a lower price. Over time, your chances of

making a profit are much higher when compared to a one-time investment.

(v) Mutual Fund investmentsare managed by qualified and experienced professionals who have the expertise

of investment techniques, backed by dedicated investment research team.


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Banks have been luring investors by offering attractive deposit rates, but Fixed Maturity Plans with tax-adjusted

returns, still score higher. Fixed Income instruments seem to be stealing the show these days. Currently 90 day

Bank FD offers 5.50-5.75% whereas Fixed Maturity Plans of 90 days are offering 6.85-7.10%.

The tax implication is same here as the interest earned on Bank FDs and the appreciation earned in Fixed

Maturity Plans has to be added to the income of that year and tax is to be paid as per your tax slab.

The attraction increases when the term selected by you is over 365 days. Let's consider a bank FD offering

8.00% and an Fixed Maturity Plan offering 8.00%. In a bank FD you have to pay 30% tax (if you are in the

highest tax bracket). So your post tax return is 8.00% minus 30% tax on it, which leaves you with a paltry 5.60%

post tax returns.

Whereas, in Fixed Maturity Plans you need to pay just 10% concessional Long Term Capital Gain Tax without

indexation or 20% with indexation for investments of over a year. So your post tax return is 8.00% minus 10%

tax on it, which leaves you with a smart 7.20% post tax returns. (Add 2% education cess & 10% surcharge if

applicable on tax paid in both cases). In institutional plans, corporate earn additional 0.25% -- 0.40% pa returns.

The attraction increases further if the term is higher than, say, 2 years.

Though banks are offering 8.00% for 366-390 day deposits, the rate of interest is lower on higher terms. Banks

are offering 7.50% (8.00% for Senior Citizens) for terms over 2 years and attract the usual 30% tax (for highest

tax bracket individuals) whereas FMPs offer 8-8.10% returns.

So, get smart to earn higher returns and pay very less tax .

How to select between Bank Fixed deposits & FMPs?

Calculate Post-Tax Returns -- That's where you win or lose.


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Fixed Maturity Plans are surely the smarter option than Bank FDs. . .

But is there something smarter in Debt for some specific needs?

Situation A: You have to park your funds for short duration, but you are not sure whether you would need it

back in a month or 6 months.

Problem: In Bank FDs. if you make 15 days FD and renew every 15 days, you will lose on the interest rate. If

you make a 6 month bank FD and if you have to prematurely withdraw it, you pay 0.50% penalty on the

applicable interest rate for that period of deposit.

In Fixed Maturity Plans, if you have to prematurely withdraw it, you pay an exit load.

Solution: In such scenario, where you may need your funds back at short notice, Liquid funds should be

preferred over bank FDs & FMPs. Liquid funds have no specific term and can be withdrawn anytime. They

generate around 5.00% p.a. returns.

Opt for dividend option (monthly) so that your returns are tax-free (though 14.025% DDT is applicable) rather

than paying short term capital gains tax for any period less than 1 year.

Balanced Fund

As the name suggest they, are a mix of both equity and debt funds. They invest in both equities and fixed

income securities, which are in line with pre-defined investment objective of the scheme. These schemes aim to

provide investors with the best of both the worlds. Equity part provides growth and the debt part provides

stability in returns.

Table 3.9(b)

Other Schemes

(i) Tax Saving Schemes(ii) Index Schemes

(iii) Sector Specific Schemes


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Tax Saving Schemes

This scheme offers tax rebates to the investors under the law. Under Sec.88 of the Income Tax Act,

contributions made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate. The

Templeton India Pension Plan is a balanced fund. This means up to 40% of the money is invested in

equity and the rest in debt (fixed income instruments).

(i) Maximum investment: No cap but the tax benefit will only avail up to an investment of Rs 70,000.

(ii) Lock-in period: Three years.

(iii) Return: Not fixed. Dividends and appreciation in the net asset value (NAV). This is the cost of a

unit of a fund. Both are tax free.

Index Fund

Index schemes attempt to replicate the performance of a particular index such as the BSE Sensex or

the NSE 50. The portfolio of these schemes will consist of only those stocks that constitute the index.

The percentage of each stock to the total holding will be identical to the stocks index weightage. And

hence, the returns from such schemes would be more or less equivalent to those of the Index.

Sector Specific Schemes

These are the funds/schemes which invest in the securities of only those sectors or industries as specified in

the offer documents. Like Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum

stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries.

While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to

keep a watch on the performance of those sectors/industries and must exit at an appropriate time


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Chapter 4

Analysis of Mutual Funds

Weshould consider the following terms to come to the unbiased decision. Terms are as follows:

Risk & Return

Portfolio of that fund

Dividend History

Increase & Decrease in Fund Size

Assets Allocation

Beta

Sharpe Ratio

Portfolio Turnover Ratio

Entry Load

Exit Load

Expense Ratio

Standard Deviation

Table 4.1

Beta

Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to

respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta

of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates

that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2 then its

theoretically 20% more volatile than market.

Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta

of greater than 1, offering the possibility of a higher rate of return, but also posing more risk. and ideal beta is

0.8.


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A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market

as a whole

Table 4.2

Treynor Ratio

A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been

earned on a risk less investment per each unit of market risk.

The Treynor ratio is calculates:

(Average Return of the Portfolio - Average Return of the Risk-Free Rate) / Beta of the Portfolio

Sharpe Ratio

The Sharpe ratio tells us whether a portfolio's returns are due to smart investment decisions or a result of

excess risk. This measurement is very useful because although one portfolio or fund can reap higher returns

than its peers, it is only a good investment if those higher returns do not come with too much additional risk. The

greater a portfolio's Sharpe ratio, the better its risk-adjusted performance has been.


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Table 4.3

Portfolio of the Respective Fund

A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-

traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial

professionals.

Prudence suggests that investors should construct an investment portfolio in accordance with risk tolerance and

investing objectives. Think of an investment portfolio as a pie that is divided into in to pieces of varying sizes

representing a variety of asset classes and types of investments to accomplish an appropriate risk-return

portfolio allocation.

For example: A conservative investor might favor a portfolio with large cap value stocks, broad-based market

index funds, investment-grade bonds and a position in liquid, high-grade cash equivalents.

In contrast, a risk loving investor might add some small cap growth stocks to an aggressive, large cap growth

stock position, assume some high-yield bond exposure, and look to real estate, international and alternative

investment opportunities for his or her portfolio.

So before investing the money in any mutual fund, we should look at the portfolio and analyze the portfolio that

how much fund it contains. And look at the top 10 holding of that company.

Table 4.4

Portfolio Turnover Ratio

It is the measurement of how frequently assets within a fund are bought and sold by the managers. Portfolio

turnover is calculated by taking either the total amount of new securities purchased or the amount of securities

sold - whichever is less - over a particular period, divided by the total net asset value (NAV) of the fund. The

measurement is usually reported for a 12-month time period.


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The portfolio turnover measurement should be considered by an investor before deciding to purchase a given

mutual fund or similar financial instrument. After all, a firm with a high turnover rate will incur more transaction

costs than a fund with a lower rate. Unless the superior asset selection renders benefits that offset the added

transaction costs they cause, a less active trading posture may generate higher fund returns.

In addition, cost conscious fund investors should take note that the transactional brokerage fee costs are not

included in the calculation of a fund's operating expense ratio and thus represent what can be, in high-turnover

portfolios, a significant additional expense that reduces investment return.

Table 4.5

Entry Load

Entry load is the commission that an investor has to pay while purchasing units of a mutual fund. This is a

certain percentage that the mutual fund charges and charge applied at the time of the initial purchase for an

investment, usually mutual funds and insurance policies. It is deducted from the investment amount and, as a

result, it lowers the size of the investment.

Lets say you are investing Rs 10,000 in a fund that has a 2% entry load. So out of your investment, Rs 200 will

be deducted as a load and the balance will be invested.

Exit Load

A fee or charge assessed to an investor for withdrawing money prior to a previously stipulated date. This is

almost always expressed and charged as a percentage of assets rather than a flat fee. Exit Fees may be found

not only on mutual funds as back-end loads, but also on hedge funds, annuities and limited partnership

units. Often the managers of these funds employ investing strategies that keep daily liquidity to a minimum, and

the exit fees act as a deterrent to early withdrawals. Investor should consider this charge before

investing their money. Lets say there is an exit load of 2.5%. If you are selling your units and it amounts to Rs15,000, then the fund will deduct Rs 375 and the balance will be returned to you.


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Dispersion

In finance, dispersion is used to measure the volatility of different types of investment strategies. Returns that

have wide dispersions are generally seen as more risky because they have a higher probability of closing

dramatically lower than the mean. In practice, standard deviation is the tool that is generally used to measure

the dispersion of returns. A large dispersion tells us how much the return on the fund is deviating from the

expected normal returns.


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Chapter 5

Table 5.1

The competition faced by MFs

When we are talking about Mutual funds and how would they benefit the consumers in their

investment policies, one important thing that was worth noticing that most of the consumers of such

financial products were more comfortable with life insurance products.

The Indian mentality is of such nature that, if on one hand my life and the future of my family is getting

secured and at the same time my investment needs are also getting fulfilled then why should I go for

a risky investment (When compared to LIC). So a study about how LIC is taking the possible share of

peoples investment from MFs is very important for this study as well.

Table 5.2

Insurance In India

Insurance Act, 1938

Nationalization of Life Insurance Industry Incorporation of LIC 1956

Nationalizations ofGeneral Insurance Business GIBNA, 1972

Opening up of Insurance Industry - IRDA Act, 1999

PublicGrievances (Ombudsman) Rules, 1998

Indian Insurance Industry has become more competitive in the recent years particularly after 1990s.

Most of the largest financial corporations over the world have entered with their insurance products to

India's Insurance Market. Various insurance schemes are easily available in the Indian Insurance

Industry these days

Before insurance sector was opened to the private sector Life Insurance Corporation (LIC) was the only

insurance company in India. After the opening up of Insurance sector in India there has been a glut of

insurance companies in India. These companies have come up with innovative and flexible insutrancepolicies to cater to varying needs of the individual. Opening up of the Insurance sector has also forced the Lic

to tighten up its belt and deliver better service. All in all it has been a bonanza for the consumer.

Major Life insurance Companies in India are:

y Aviva Life Insurance


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y Bajaj Allianz

y Birla S un Life Insurance

y Bharti AXA Life Insurance Co. Ltd

y Future General India Life Insurance Co. Ltd

y

HDFC Standard Life Insurancey ICICI Prudential

y IDBI Fortis Life Insurance Co. Ltd

y ING Vysya

y Kotak Mahindra

y LIC

y Max New York Life Insurance

y Metlife India Insurance

y Reliance Life Insurance

y SBI Life Insurance

y Shriram Life Insurance

y Sahara India Life Insurance Co. Ltd

y Tata AIG Life Insurance


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Table 5.3

How to Generate Return from Insurance


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Table 5.4

Market share of Private Companies For 2002-03

Table 5.5

Current Market Share of Private Companies

ICICI Prudential31.8%

Birla Sunlife14.4%Bajaj Allianz

11.5%

SBI Life10.2%

HDFC Std. Life7.7%

Tata AIG7.3%

MNYL5.1%

Aviva4.5%

Kotak2.9%

ING Vysya2.1%

AMP Sanmar1.5%

MetLife1.2%


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Table 5.6

Life Insurance

Life is very fragile and death is a certainty. We cannot control the uncertainties of life. But, we can cover the

risks surrounding us. Life insurance, simply put, is the cover for the risks that we run during our lives. It

protects us from the contingencies that could affect us.Life insurance is not for the person who passes away,

it for those who survive. It is the responsibility of every bread earner to guard against the events that could

affect the family in the unfortunate circumstance of his / her demise. Thus, having a life insurance policy is

very vital. Before going for a life insurance policy it is imperative that you know about various types of life

insurance policies. Major among them

(i) Term Policy

(ii) Whole Life Policy

(iii) Endowment Policy

(iv) Money Market Policy


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(v) Unit Link Insurance Plan

(vi) Pension Plan

Term Policy

Term Insurance, also known as pure life cover, is the cheapest and the simplest form of insurance

under this insurance policy, against payment of regular premium, the insurer agrees to pay your

beneficiaries the sum assured in event of your premature death. However, if you survive till the end of

the policy term, nothing is payable to you. This policy has no savings component and the premiums

you pay are purely a cost to buy you life cover. Term Insurance, also known as pure life cover, is the

cheapest and the simplest form of insurance. Under this insurance policy, against payment of regular

premium, the insurer agrees to pay your beneficiaries the sum assured in event of your premature

death. However, if you survive till the end of the policy term, nothing is payable to you. This policy has

no savings component and the premiums you pay are purely a cost to buy you life cover. Term life

insurance is only truly useful if you have an inkling that youre going to die in a month, and want to

cover your bases quickly and easily. Most term life insurance policies can be purchased much quicker

than their whole life insurance counterparts, due to their nature. The providers of term life insurance

dont check into your background and health nearly as completely as a whole life provider might.

Odds are good that your term will expire without you expiring. This gives the insurance company what

they want most, your money. This is suitable for .

y Those are looking for a low cost life cover without any savings benefits attached.

y Those are at that stage in life where insurance cover is vital but you cannot afford high premium payment

due to low income

Whole Life Policy

.Whole life insurance refers to an insurance policy that provides for a life contribution by the insured. This is

not for a fixed phase as in term life insurance, but for the whole of the insureds life. Most people have

classified whole life insurance as a forceful scheme manipulated by most employers, giving employees no

choice over their future. This proposition is not founded and there are options such as single premium,

interest-sensitive and traditional whole life insurance policies. The premium on a whole life insurance policies

are usually very high giving the fact that cover is for life. The insured is paying for the insurance as well as for

investment. But most insured are given the options to either pay a fixed or periodic premium.

Whole life insurance should be considered the best choice for those seeking long term goals. No matter how

expensive it can be, we need it for our own safety. Think of what might happen not only to your dependents

upon death, but also to you upon retirements. Life may prove unattractive to you if you had not made enough

investments. As a result, the best favor and protection we could afford ourselves is through a whole life


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insurance. This is more important if there are others who solely depend on you. Whole life insurance is

therefore to provide a long term economic sovereignty and harmony to your beloved ones. Keep in mind that

a whole life insurance policy can be cancelled at any time and upon such an event, the present cash worth of

your savings can be paid to you.

Whole life insurance is not a service that can easily be purchased over the counter. It is more complex than

term life insurance. At times there are certain regulations as to medical examinations. Any reasonable insurer

will want to know the state of your health before selling out a policy to you. This will settle on what quantity of

premium to charge on you. Medical examinations are also necessary to place you in a risk or non-risk

category. For example, smokers, patients who have survived strokes, heart diseases, cancer and other

terminal diseases will all be put in a high risk group and as such, the amount of premium you are liable to will

have to increase. Risky activities as determined by the insurer such as those of climbers and fire fighters may

also increase the amount of premium. A whole life insurance may only be disadvantageous in that it is

expensive. The benefits outweigh the defects. When faced with a shortage of money, you may take out a loan

using your policy as collateral.

Endowment Policy

An Endowment Policy is a combination of savings along with risk cover. These policies are specifically

designed to accumulate wealth and at the same time cover your life. In simple words, these polices are

issued for specific time periods during which you pay a regular premium. If you die during the tenure of the

policy, your beneficiaries will receive the sum assured along with the accumulated bonus additions. if you

outlive the policy tenure you will receive the sum assured along with accumulated bonus additions.

An endowment life insurance policy is designed primarily to provide a living benefit and only secondarily to

provide life insurance protection. Therefore, it is more of an investment than a whole life Policy.

Endowment life insurance pays the face value of the policy either at the insured's death or at a certain age or

after a number of years of premium payment. Endowment policy is an instrument of accumulating capital for a

specific purpose and protecting this savings program against the saver's premature death. This is suitable for

y Those want to accumulate capital for anticipated financial needs like buying an asset such as a home,

providing for your old age, your children's education, marriage, etc.


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Money Back Policy

These policies are structured to provide sums required as anticipated expenses (marriage, education, etc)

over a stipulated period of time. With inflation becoming a big issue, companies have realized that sometimes

the money value of the policy is eroded. That is why with-profit policies are also being introduced to offset

some of the losses incurred on account of inflation. A portion of the sum assured is payable at regular

intervals. On survival the remainder of the sum assured is payable. In case of death, the full sum assured is

payable to the insured. The premium is payable for a particular period of time. This is an anticipated

endowment policy with an additional feature of receiving a benefit at regular intervals during the tenure of the

policy. The risk cover continues for the entire sum assured in spite of the installments already paid. If you

outlive the policy, the balance sum assured along with accumulated bonus is paid back to you.

This is suitable for

y Those plan to coincide the funds received from the policy with your future anticipated needs like a

car, an overseas holiday, children's educational needs, marriage expenses, etc

Unit linked insurance plan (ULIP)

Unit linked insurance plan (ULIP) is life insurance solution that provides for the benefits of protection

and flexibility in investment. The investment is denoted as units and is represented by the value that it

has attained called as Net Asset Value (NAV). The policy value at any time varies according to the

value of the underlying assets at the time. A ULIP is a life insurance policy which provides a

combination of risk cover and investment. The dynamics of the capital market have a direct bearing

on the performance of the ULIPs.

ULIP provides multiple benefits to the consumer. The benefits include:


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y Life protection

y Investment and Savings

y Flexibility

y Adjustable Life Cover

y Investment Options

y Transparency

y Options to take additional cover against

y Death due to accident

y Disability

y Critical Illness

y Surgeries

y Liquidity

y Tax planning

Unit Fund

The allocated (invested) portions of the premiums after deducting for all the charges and premium

for risk cover under all policies in a particular fund as chosen by the policy holders are pooled

together to form a Unit fund.

Types of Funds which ULIP Offer

Most insurers offer a wide range of funds to suit ones investment objectives, risk profile and time

horizons. Different funds have different risk profiles. The potential for returns also varies from fund to

fund.

The following are some of the common types of funds available along with an indication of their risk

characteristics.

General Description Nature of Investments Risk

Category

Equity Funds Primarily invested in company stocks with the

general aim of capital appreciation

Medium to

High

Income, Fixed

Interest and Bond

Funds

Invested in corporate bonds, government

securities and other fixed income instruments

Medium


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Cash Funds Sometimes known as Money Market Funds

invested in cash, bank deposits and money

market instruments

Low

Balanced Funds Combining equity investment with fixed interest

instruments

Medium

Investment ReturnsGuaranteed in a ULIP

Investment returns from ULIP may not be guaranteed. In unit linked products/policies, the investment risk in

investment portfolio is borne by the policy holder Depending upon the performance of the unit linked fund(s)

chosen; the policy holder may achieve gains or losses on his/her investments. It should also be noted that the

past returns of a fund are not necessarily indicative of the future performance of the fund.

Pension plan

pension plan or an annuity is an investment that is made either in a single lump sum payment or

through installments paid over a certain number of years, in return for a specific sum that is received

every year, every half-year or every month, either for life or for a fixed number of years.annuities differ

from all the other forms of life insurance in that an annuity does not provide any life insurance cover

but, instead, offers a guaranteed income either for life or for certain perioed .

Typically annuities are bought to generate income during one's retired life, which is why they are also

called pension plans. By buying an annuity or a pension plan the annuitant receives guaranteed

income throughout his life. He also receives lump sum benefits for the annuitant's estate in addition to

the payments during the annuitant's lifetime.

Charges, fees and deductions

ULIPs offered by different insurers have varying charge structures. Broadly, the different types of fees and

charges are given below. However it may be noted that insurers have the right to revise fees and chargesover a period of time.

Premium Allocation Charge


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This is a percentage of the premium appropriated towards charges before allocating the units under the

policy. This charge normally includes initial and renewal expenses apart from commission expenses.

Mortality Charges

These are charges to provide for the cost of insurance coverage under the plan. Mortality charges dependon number of factors such as age, amount of coverage, state of health etc

Fund Management Fees

These are fees levied for management of the fund(s) and are deducted before arriving at the Net Asset

Value (NAV) .

Policy/ Administration Charges

These are the fees for administration of the plan and levied by cancellation of units. This could be flat

throughout the policy term or vary at a pre-determined rate.

Surrender Charges

A surrender charge may be deducted for premature partial or full encashment of units wherever applicable, as

mentioned in the policy conditions.

Fund Switching Charge

Generally a limited number of fund switches may be allowed each year without charge, with subsequent

switches, subject to a charge.

Service Tax Deductions

Before allotment of the units the applicable service tax is deducted from the risk portion of the premium.

Investors may note, that the portion of the premium after deducting for all charges and premium for risk cover

is utilized for purchasing units

. Net Asset Value (NAV)

NAV is the value of each unit of the fund on a given day. The NAV of each fund is displayed on the

website of the respective insurers.

Payment of premiums is discontinued

a) Discontinuance within three years of commencement If all the premiums have not been paid for at

least three consecutive years from inception, the insurance cover shall cease immediately. Insurers may give


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an opportunity for revival within the period allowed; if the policy is not revived within that period, surrender

value shall be paid at the end of third policy anniversary or at the end of the period allowed for revival,

whichever is later.

(b) Discontinuance after three years of commencement -- At the end of the period allowed for revival, the

contract shall be terminated by paying the surrender value. The insurer may offer to continue the insurance

cover, if so opted for by the policy holder, levying appropriate charges until the fund value is not less than one

full years premium. When the fund value reaches an amount equivalent to one full years premium, the

contract shall be terminated by paying the fund value.

Table 5.7

Tax Benefits

Under Sec.80C of the Income Tax Act

Premiums paid upto maximum of Rs.1,00,000/-, subject to maximum of 20% of Sum Assured ,to effect or

keep in force an insurance on the life of the individual, the spouse and any child of the individual.

Under Sec.80CCC of the Income Tax Act

Premiums paid upto maximum of Rs. 1,00,000/- to effect or keep in force a contract of annuity plan for

receiving pension.

Under Sec.80 D of Income Tax Act

Premiums paid (other than through cash) towards Critical Illness Rider, subject to a total maximum of

Rs.15,000/- (an additional Rs 5,000 for senior citizens) to effect or keep in force an insurance on the health of

the individual, spouse and dependent parents or children.

Maturity Benefits are exempted under sec 10 (10D)

Maturity benefits are tax free. However in cases where premium exceeds 20% of Sum assured in any year,

benefits paid in excess of premiums paid will be taxable.

However, u/s.80 CCE, the aggregate amount of deduction under section 80C, section 80CCC, and

section 80CCD shall not, in any case exceed Rs.1lakh


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Table 5.8

Analysis of Debt Fund

Company HDFC (MIP) Growth Reliance (MIP) (Growth)

Types of Features Open Ended Open Ended

Nature Debt Debt

Option Growth Growth

Fund Size 1222.97 as on Jun 30, 2008 209.63 as on Jul 31, 2008

Beta 0.97 0.98

Sharpe Ratio 0.32 0.11

Standard Deviation 0. 0.79

Treynor Ratio 0.24 0.09

Portfolio Turnover Ratio NA NA

Expense Ratio 1.72 2.00

Inception Date Dec 8,2003 Dec 29,2003

Increase & Decrease in Fund - 77.94 Crore - 30.75 Crore

Last Dividend Declared NA NA


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Risk & Return

Company 1Month 3 Month 6 Month 1 Year 3 year Since

InceptionHDFC (MIP) 2.72 -3.22 -4.09 1.44 9.76 10.66

Reliance (MIP) 2.33 0.29 -1.67 4.22 8.59 8.47


Assets Allocation

Company Equity Debt Cash & Equivalent

HDFC MIP24.65 58.66 16.69

Reliance MIP 9.71 35.19 55.10

Company HDFC MIP (Growth) Reliance MIP (Growth)

Latest NAV 15.96 as on Aug 5, 2008 14.58 as on Aug 5, 2008

52 Weeks High 17.44 as on Jan 7, 2008 15.14 as on Jan 7, 2008


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NAV Chart of HDFC

NAV Chart of Reliance

52 Weeks Low 15.32 as on Jul 16, 2008 13.70 as on Aug 21, 2007


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Conclusion

If we analyze both fund without any hallo effect then we can come to the conclusion that HDFC Monthly

Income Plan is better or Reliance Monthly Income plan and while analyzing the fund the most important thing

is which we have to consider is Risk & Return because if the fund is not giving good returns then there is

nothing in that fund and while analyzing Monthly Income Plan we should Focus on monthly return because it

is monthly income plan and if we look at the 1 month return then HDFC is giving good result but if we look at

the return 3 and 6 month return then Reliance is quite good and if we look at the long term growth then HDFC

MIP Fund is much better then Reliance MIP fund so it is very difficult to analyze but if we look at the beta

then HDFC MIP Funds beta is 0.97 and Reliance MIP Funds beta is 0.98 so again it is very close and sharp

ratio of HDFC MIP Funds is much better then Reliance MIP Funds and expense ratio of HDFC is 1.72%And

2.0% of Reliance MIP Fund so again HDFC is cheaper in case of expense ratio and Fund size of HDFC

Fund is decreasing means investors are withdrawing their money which means they are getting good returnsand Fund size of Reliance is also decreasing but not like HDFC ,and the most important thing is that ICRA

has given Seven Star to HDFC MIP Fund and Three Star to Reliance MIP Fund and so investor should

invest in HDFC MIP Fund because from last few month this fund gained a growth of 3.06 % and Reliance

MIP Fund has gained a growth of 2.41 % so investor should preferred HDFC MIP Fund.

Analysis of Balanced Fund

Company Canara Robeco Balanced

Fund Growth

UTI Balanced

Growth

Types of Features Open Ended Open Ended

Nature Equity & Debt Equity & Debt


Fund Size (in crores) 126.21 as on Jun 30, 2008 868.13 as on Jun 30, 2008

Beta 1.07 0.97


Standard Deviation 2.67 2.42


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Portfolio Turnover Ratio 24 20.87


Inception Date Feb 1, 1993 Feb 12, 1995

Increase & Decrease in Fund 6.85 Crore -124.46 Crore

Last Dividend Declared NA 14 % as on Jun 30, 1999

Risk & Return

Company 3 Month 6 Month 1 Year 3 Year 5 year Since

Inception

Canara

Robeco Balanced

Fund Growth

-8.83 -11.47 -1.19 21.95 27.03 9.72

UTI Balanced

Growth -10.94 -17.54 -4.56 13.19 20.68 14.71


Assets Allocation



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Canara RobecoBalanced FundGrowth

67.80 14.32 17.88

UTI Balanced Growth 67.19 21.48 11.33


Conclusion

If we analyze both fund without being biased then we can come to the conclusion that Canara Fund is better

or UTI Fund and while analyzing the fund the most important thing is which we have to consider is Risk &

Return because if the fund is not giving good returns then there is nothing in that fund and the return of

Canara Robeco Balanced Fund is much better at every stage like if we look at the history of the return then

Canara Fund has given good return after 3 years 21.95 % where UTI gave 13.19 % so Canara Robeco Fund

is better than UTI Fund in case of return and if we talk about sharp ratio then Canara fund has .26 and UTI

Fund has .24 so Canara Fund is Slightly Better and due to the better return portfolio turnover ratio of Canara

Fund is 24 % where UTIs portfolio turnover ratio is 20.87 which is less than Canara Fund which means

transaction of securities are high because of good return and the both funds invest maximum in equity but

canara fund invest more in cash & equivalent tan debt bur UTI Balanced Fund invest more in debt after equity

CompanyCanara Robeco BalancedGrowth

UTI BalancedGrowth



52 Weeks Low 35.56 as on Jul 16, 2008 51.06 as on July 16,2008


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and UTI declared 14 % dividend in 1999 but after this they didnt declared dividend may be because of bad

return and ICRA has given Four Star to Canara Robeco Fund where UTI fund got Two Star on the basis of

all facts and ICRAs rating investor should adopt Canara Robeco Fund.

Company Canara Robeco Balanced

Fund Growth

UTI Balanced

Growth

Types of Features Close Ended Open Ended

Nature Equity Equity & Debt


Fund Size (in crores) 41.38 as on july 08 868.13 as on Jun 30, 2008

Beta 0.64 0.97


Standard Deviation 3.12 2.42


Portfolio Turnover Ratio 119.33 20.87


Inception Date Feb 1, 1993 Feb 12, 1995

Increase & Decrease in Fund 6.85 Crore -124.46 Crore

Last Dividend Declared NA 14 % as on Jun 30, 1999


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Risk & Return

Company 3 Month 6 Month 1 Year 3 Year 5 year Since

InceptionCanara

Robeco Balanced

Fund Growth

-8.83 -11.47 -1.19 21.95 27.03 9.72

UTI Balanced

Growth -10.94 -17.54 -4.56 13.19 20.68 14.71


Assets Allocation


Canara RobecoBalanced FundGrowth

67.80 14.32 17.88

UTI Balanced Growth 67.19 21.48 11.33


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Chapter 6

Table 6.1

Analysis of Insurance Plan

CompanyCanara Robeco BalancedGrowth

UTI BalancedGrowth



52 Weeks Low 35.56 as on Jul 16, 2008 51.06 as on July 16,2008

Company HDFC (Young Star) Kotak (Head Start)

Fund Charges 1.25 of Fund Value 1.1 of Fund Value

Administration Charges Rs. 60 per month 75 Rs per Month in 1 year40 Rs.Per Month in 2nd year onwards

Partial Withdrawal

Charges

After 3rd yr 30% of premium

After 2nd yr 15% of premium

NA

Switch Charges Rs100 for every add switch 500 for every additional switch

Policy Revival Charges Rs. 250 Rs. 500

Free Switches 24 Switches in a year 4 Switches in a Year


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Table 6.2

Premium Allocation

Surrender Charges After 1st yr 95% of Fund ValueAfter 2nd yr 35% of Fund Value After 3rd yr 15% of Fund Value After 4th yr 5% of Fund Value

3% in 4th

year

2% in 5th year

1% in 6th year

Minimum Investment 12000 15000

Company HDFC (YOUNG STAR)

Regular Premium Paid Year 1 Yearly (in percentage)

12000- 199,000 40

2,00,000 4,99,000 52

5,00,000- 9,99,000 6410,00,000- 19,00,000 77

20,00,000 + 90

Regular Premium paid Year 2 Yearly (in percentage)

12000- 199,000 93

2,00,000 4,99,000 93

5,00,000- 9,99,000 93

10,00,000- 19,00,000 93

20,00,000 + 93

Regular Premium paid Year 3 on wards Yearly (in percentage)

12000- 199,000 98


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2,00,000 4,99,000 98

5,00,000- 9,99,000 98

10,00,000- 19,00,000 98

20,00,000 + 98


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Company KOTAK HEAD STARAT)

Regular Premium Paid Year 1 Yearly (in percentage)

15000-2499968

25000-14999968

150,000 or Above80.5

Regular Premium paid Year 2 Yearly (in percentage)

15000-2499986

25000-14999991

150,000 or Above 93

Regular Premium paid Year 3 on wards Yearly (in percentage)

15000-2499993

25000-14999995

150,000 or Above96

Regular Premium paid 4-10 Year

15000-2499999

25000-14999999

150,000 or Above99

Regular Premium paid 11 Year on wards

15000-24999100

25000-149999100

150,000 or Above100


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Chapter 7

Table 7.1

Conclusion and suggestions

If we deeply analyze both plans then it is very difficult to take the final decision because HDFC is providing 24

free switches and on the other hand KOTAK provides only 4 free switches in a year but in case of

administration charges KOTAK is cheaper than HDFC because KOTAK is charging Rs 75 per month in 1st

year and Rs 40 per month in 2nd

year on wards and limited premium term is 3-10 years if we take minimum

premium term then the total administration expenses for 3 years is Rs

1860 and on the other hand if we take HDFC Plan for minimum term then total administration expenses for 3

years are Rs 2160 so KOTAK is cheaper but KOTAK charges Rs 500 for every additional switch on the other

hand HDFC charges Rs 100 for every additional switch. But fund charges are high in HDFC than KOTAK,

So till now its very difficult to say that HDFC is better or KOTAK but the most important instrument is premium

allocation charges which helps an analyst to come to the unbiased decision we can come to the conclusion

with the help of this example:

Table 7.2

EXAMPLES-

Mr. X adopt HDFC Young Star Plan and he pays 20,000 premium per annum and so the money

invested every year after premium allocation charges

Annual Regular

Premium Paid

Premium

Allocation

Amount Invested

In Market

Year

20,000 40 4800 1

20,000 93 18,600 2

20,000 98 19,600 3

20,000 98 19,600 4

20,000 98 19,600 5

20,000 98 19,600 6

20,000 98 19,600 7

20,000 98 19,600 8

20,000 98 19,600 9

20,000 98 19,600 10


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20,000 98 19,600 11

20,000 98 19,600 12

20,000 98 19,600 13

20,000 98 19,600 14

20,000 98 19,600 15

Total Premium Paid Amount Invested

In the Market

Amount Invested In the Market

In Percentage

3,00,000 2,78,200 92.40%

Mr. Y adopts KOTAK Head Start Plan and he pays 20,000 premium per annum and so the money

invested every year after premium allocation charges is:

Annual Regular

Premium Paid

Premium

Allocation

Amount Invested

In Market

Year

20,000 68 12,800 1

20,000 86 17,200 2

20,000 93 18,600 3

20,000 99 19,800 4

20,000 99 19,800 5

20,000 99 19,800 6

20,000 99 19,800 7

20,000 99 19,800 8

20,000 99 19,800 9

20,000 99 19,800 10

20,000 100 20,000 1120,000 100 20,000 12

20,000 100 20,000 13

20,000 100 20,000 14

20,000 100 20,000 15


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Total Premium Paid Amount Invested

In the Market

Amount Invested In the Market

In Percentage

3,00,000 2,87,200 95.73%

So we can conclude this thing that KOTAK Plan is better because 95.73% amount of an investor is invested

and in HDFC it is only 92.4% so every person want to invest maximum amount in the market.

Final Report ion Report

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