1 AN INDUSTRY INTERNSHIP REPORT A STUDY ON FACTORS INFLUENCING MUTUAL FUNDS ADVISIORY IN BANKS AND PERFORMANCE ANALYSIS OF EQUITY FUNDS WITH RESPECT TO SBI. PROJECT UNDERTAKEN AT SBI MUTUAL FUND BANJARA HILLS SUBMITTED BY KANCHAN TIWARI ROLLNO:2B2-20 PGDM- BIFAAS Corporate guide Faculty guide Mr.C.Sundeep Mr.D.Sreekanth (Senior relationship manager) (Assistant professor) SIVA SIVANI INSTITUTE OF MANAGEMENT KOMPALLY (2011-2013)
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INTRODUCTION TO MUTUAL FUNDS AND ITS VARIOUS ASPECTS
Mutual fund act like a vehicle to mobilize money from investors to invest in different market
and securities in line with the investment objective agreed upon between the mutual fund and
investor.
It is a trust that pools the savings of number of investors who share a common financial goal.
This pool of money is invested in accordance with a stated objective.
The money thus collected is the invested in capital market instrument such as shares,
debentures and other securities. The income earned through these investment and capital
appreciation realized are shared by its unit holders in proportion the number of units owned
by them.
Thus mutual fund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securities at
relatively low cost.
A mutual fund is an investment tool that allow small investor access to well diversified
portfolio of equities, bonds and other securities. Each shareholder participates in the gain or
loss of fund. Units are issued and can be redeemed as needed. The fund‟s net asset value is
determined every day.
Investments in each security are spread across wide cross section of industries and sectors
that risk is reduced.
Diversification reduces the risk because all stocks may no move in the same direction and in
the same proportion at the same time.
Mutual fund issue units to the investors in accordance with quantum of money invested by
them investors of mutual fund are known as unit holders.
Some may like it to be paid off regularly as dividends, others might like the money to grow
in the scheme.
Mutual fund address such differential expectations between investors within a scheme, by
offering various options such as:
a. Dividend payout option,
b. Dividend re- investment option and
c. Growth option
An investor buying into a scheme gets to select the preferred option also.
The relative size of mutual fund companies is assessed by their assests under
management(AUM).
When a scheme is first launched, asset under management would be the amount mobilized
from investors.
If the scheme has a positive profitability metric, its AUM goes up; a negative profitability
metric will pull it down.
If the scheme is open to receiving money from investors even post NFO then such
contributions from investors boost the AUM.
Conversely, if the scheme pays any money to the investors, either as dividend or as
consideration for buying back the units of investors, the AUM falls
The AUM thus captures the impact of the profitability metric and the flow of unit holder
money to or from the scheme.
ADVANTAGES OF MUTUAL FUNDS FOR INVESTORS:
Professional management- mutual funds offers investors the opportunity to earn an income or
build their wealth through professional management of their investible funds.
Portfolio diversification- units of scheme give investors exposure to a range of securities held
in the investment portfolio of the scheme. Thus, even a small investment of rs 5000 in amutual fund scheme can be giving investors a diversified investment portfolio.
Economies of scale- the pooling of large sums of money from so many investors makes it
possible for the mutual fund to engage professional managers to manage the investment.
Individual investor with small amounts to invest cannot, by themselves, to engage such
Literature on mutual fund performance is enormous. A few research studies that have influenced the
preparation drawing on results obtained in the field of portfolio analysis, economist jack l. tenor has
suggested a new predictor of mutual fund performance one that differs from virtually all those usedpreviously by incorporating the volatility of a fund‟s return. Michael . C. Jensen derived a risk-
adjusted measure of portfolio performance(Jensen‟ alpha) that estimates how much a manager‟s
forecasting ability contributes to fund‟s returns. As indicated by Stat man (2000) the e SDAR of
fund portfolio is the excess return of the portfolio over the return of the benchmark index where the
portfolio is leveraged to have the benchmark index‟s standard deviation. S. Narayan rao evaluated
performance of Indian mutual funds in a bear market through relative performance index. Risk
If you've ever applied for your company's 401k, you've undoubtedly invested your earnings in a
mutual fund. Most companies give you a menu of mutual fund choices to pick from and a bunch of
books that describe what securities each fund invests in. As of December 2008, mutual funds were a
$9.6 trillion industry. Simply, mutual funds are professionally managed funds that collect money
from people to invest in a range of securities including stocks, bonds, money markets, and other
investments. If the fund is actively managed, then the fund manager makes trades on a regular basis.
But there are many mutual funds that are called index funds that mirror the performance of various
indexes like the Standard & Poor's 500 and do not need to make a lot of trades, and thus a fund
manager.
Mutual fund managers can work for one of the larger firms like Fidelity Investments, CapitalResearch, or Vanguard Group or work for one of the many smaller private funds. Managers arecharged with forecasting investor cash flows into and out of the fund, as well as future performance
of investments in the fund. Different mutual funds have different investment objectives, and the fundmanager must choose the appropriate securities for that objective. The one goal that is among allmanagers is to outperform certain benchmarks, like the Standard & Poor's 500 index, which tracks500 large U.S. companies. Sometimes travel is necessary for managers to talk with customers, meetcompanies to analyze their financial statements, visit factories, or whatever research the managersees appropriate to make a sound decision on the fund.
Mutual fund managers generally major in business, economics, accounting or math, but many havebackgrounds in computer science, engineering, physics or biology. Besides a MBA, many managershave an investment qualification such as Chartered Financial Analyst (CFA). Fresh MBAs are rarelyrecruited for manager positions, but can rise to the position by starting out as research analysts, who
research various securities and the institutions that have issued them, as well as making investmentrecommendations to the manager.
GENESIS OF MUTUAL FUND:
Mutual fund emerged in the UK and US as investment management institutions in the earlytwentieth century during the 1920‟s. The origin of the mutual fund may however be tracked to thedays of ancient geese where merchants banded together to take shares in commercial undertakings.Similar arrangements existed in Rome and Europe also where merchants in colonial America used totake shares in voyages which when completed would be liquidated and assets divided amongthemselves. The Scottish America investments trust was formed in 1873 to hold portfolio of
American rail road bonds and shares in trust were issued to the interested citizens of Dundee. Mostof these schemes were of closed type and the shares were sold and purchased at the market rates andthe law of demand and supply set the price.
The concept of mutual fund was experimented in the US from the 1920‟s and institutional businesswas becoming popular in the late 1940‟s. As the financial climate during the early 1980‟s enhanced
the competitiveness of certain investment the number and type of mutual funds.
In the UK during 1920‟s the accepting houses emerged as a major force in the business of
investment management activities. Investment management has its genesis in the deployment of thelarge fortunes made by some of the Victorian merchant bankers. But the only in 1950 the acceptinghouses rapidly built up on their existing skill and knowledge to deal with increasing capital. Theinvestment trust was superseded by the Unit Trust as small savers means of access to professional
management.
HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY:
The mutual fund industry in India started in 1963 with the formation of unit trust of India, at theinitiative of the government of India and reserve bank. The history of mutual funds in India can bebroadly divided into four distinct phases
First phase:1964-1987
Unit trust of India (UTI) was established on 1963 by an act of parliament. It was set up by the
reserve bank of India and functional under the regulatory and administrative control over the reservebank 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 schemelaunched by UTI was unit scheme 1964. At the end of 1988 UTI had rs 6,700 crores of assets undermanagement.
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 lifeinsurance Corporation of India (LIC) and general Insurance Corporation of India (GIC). SBI mutualfund was the first non-UTI mutual fund established in June 1987 followed by canbank mutual fund
(DEC 87), Punjab national bank mutual fund (AUG 89), Indian bank mutual fund (NOV 89), bank of India(JUN 90 ), bank of Baroda mutual fund(OCT 92). LIC established its mutual fund in June1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of rs 47,004 crores.
Third phase: 1993-2003(entry of private sector funds)
With the entry of private sector funds in 993, a new era started in the Indian mutual fund industry,giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which thefirst mutual fund regulations came into being, under which all mutual funds, expect UTI were to be
registered and governed. The erstwhile Kothari pioneer (now merged with franklin Templeton) wasthe first private sector mutual fund registered in July 1993.
The 1993 SEBI regulations were substituted by a more comprehensive and revised mutual fundregulations in 1996. The industry now functions under the SEBI regulations 1996.
The number of mutual fund houses went on increasing with many foreign mutual funds setting upfunds in India and also the industry has witnessed several mergers and acquisitions. As at the end of
January 2003, there were 33 mutual funds with 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 othermutual funds.
Fourth phase: since February 2003
In February 2003, following the repeal of the unit trust of India Act 1963 UTI was bifurcated intotwo separate entities. One is the specified undertaking of the Unit Trust of India with assets undermanagement of rs 29,835 crores at the end of January 2003, representing broadly, the assets of us 64schemes, assured return and certain other schemes. The specified undertaking of Unit Trust of India,functioning under an administrator and under the rules framed by government of India and does notcome under the purview of the mutual fund regulations.
The second is the UTI mutual fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered withSEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTIwhich had in march 2000 more than rs 76,000 crore of assets under management and with the setting
up of a UTI mutual fund, conforming to the SEBI mutual funds, the mutual fund industry hasentered its current phase of consolidation and growth. As at the end of October 31 2003, there were31 funds which manage assets of rs 126726 crores under 386 schemes.
UNIT TRUST OF INDIA (UTI)
UTI US-64 scheme has faced repeated problems owing to the administrative setting of entry/exitprices. In order to protect investors, Government interventions became necessary. Theseinterventions have accompanied by structural improvements also, most importantly, US-64 nowreports NAV on daily basis, and all new investors face a purely NAV-driven scheme, with noadministrative pricing. In the coming months, further efforts aimed at turning UTI into a normal
SEBI regulated mutual fund are expected.
FINANCIAL INTERVENTIONS INTO US-64 SCHEME
1. Special unit scheme 1999 (SU-99): on June 29, 1999, government of India did a buyback from UTI of psu shares at book value, which was higher than the then prevailing marketvalue. This effectively constituted a transfer of RS. 1,528 crore to the investors in US-64.
2. Limited repurchase facility (july, 2001): investors were given a window through which up to3000 units could be sold back to UTI, so that the investors exiting would not do so at theexpense of investors who did not exit. This programmed covered roughly 40 percent of theassets of US-64.
3. Extended repurchase facility (December, 2001): in December, 2001 the limit of 3000 unitswas raised to 5000 units. In addition, investors above 5000 units were given an assurance thatif they exited in May 2003, they would get the higher of NAV or Rs. 10. Once again,government would make up the gap between repurchase price and NAV experienced by UTI,if any.
Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual funds inIndia. RMF offers investors a well-rounded portfolio of products to meet varying investorrequirements and has presence in 179 cities across the country. Reliance Mutual Fund constantlyendeavors to launch innovative products and customer service initiatives to increase value toinvestors. Reliance Capital Asset Management Limited („RCAM‟) is the asset manager of Reliance
Mutual Fund. RCAM a subsidiary of Reliance Capital Limited, which holds 92.93% of the paid-upcapital of RCAM, the balance paid up capital being held by minority shareholders.
Reliance Capital Ltd. is one of India‟s leading and fastest growing private sector financial services
companies, and ranks among the top 3 private sector financial services and banking companies, interms of net worth. Reliance Capital Ltd. has interests in asset management, life and generalinsurance, private equity and proprietary investments, stock broking and other financial services.
Sponsor : Reliance Capital Limited
Trustee : Reliance Capital Trustee Co. Limited
Investment Manager /
AMC : Reliance Capital Asset Management Limited
Statutory Details : The Sponsor, the Trustee and the Investment Manager are incorporatedunder the Companies Act 1956.
ICICI mutual fund:
ICICI Prudential Asset Management Company Ltd. (IPAMC/ the Company) is the joint venturebetween ICICI Bank, a well-known and trusted name in financial services in India and Prudential,one of UK‟s largest players in the financial services sectors. IPAMC was incorporated in the year
1993. The Company in a span of over 18 years since inception and just over 13 years of the JointVenture, has forged a position of preeminence in the Indian Mutual Fund industry as the third largestasset management company in the country, contributing significantly to the growth of the Indianmutual fund industry.
ICICI Bank offers a wide range of banking products and financial services to corporate and retailcustomers through a variety of delivery channels and through its specialized subsidiaries in the areasof investment banking, life and non-life insurance, venture capital and asset management.
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956,on December 10, 1999, and was approved to act as an Asset Management Company for the HDFCMutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169,Back bay Reclamation, Church gate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC AssetManagement Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs.25.169 crore.
LIC mutual fund:
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989 and contributed Rs.2 Crores towards the corpus of the Fund. LIC Mutual Fund was constituted as a Trust in accordancewith the provisions of the Indian Trust Act, 1882. The settlor is not responsible for the managementof the Trust. The settlor is also not responsible or liable for any loss or shortfall resulting in any of the schemes of LIC Mutual Fund. The Trustees of the LIC Mutual Fund have exclusive ownership of Trust Fund and are vested with general power of superintendence, discretion and management of theaffairs of the Trust. LIC Mutual Fund Asset Management Company Ltd. was formed on 20th April1994 in compliance with the Securities and Exchange Board of India (Mutual Funds) Regulations,1993. The Company commenced business on 29th April 1994. The Trustees of LIC Mutual Fundhave appointed LIC Mutual Fund Asset Management Company Ltd. as the Investment Managers forLIC Mutual Fund. The Trustees are responsible for appointing a Custodian. The Trustees should also
ensure that the activities of the Trust and the Asset Management Company are in accordance withthe Trust Deed and the SEBI Mutual Fund Regulations as amended from time to time. The Trusteeshave also to report periodically to SEBI on the functioning of the Fund.
KOTAK mutual fund:
We are sponsored by Kotak Mahindra Bank Limited, one of India's fastest growing banks, with apedigree of over twenty years in the Indian Financial Markets. Kotak Mahindra Asset ManagementCo. Ltd., a wholly owned subsidiary of the bank, is our Investment Manager.
We made a humble beginning in the Mutual Fund space with the launch of our first scheme inDecember, 1998. Today we offer a complete bouquet of products and services suiting the diverseand varying needs and risk- return portfolios of investors.
We are committed to offering innovative investment solutions and world-class services andconveniences to facilitate wealth creation for our investors.
With 25 years of rich experience in fund management, we at SBI Funds Management Pvt. Ltd. bring
forward our expertise by consistently delivering value to our investors. We have a strong and proudlineage that traces back to the State Bank of India (SBI) - India's largest bank. We are a JointVenture between SBI and AMUNDI (France), one of the world's leading fund managementcompanies.
With our network of over 222 points of acceptance across India, we deliver value and nurture thetrust of our vast and varied family of investors.
Excellence has no substitute. And to ensure excellence right from the first stage of productdevelopment to the post-investment stage, we are ably guided by our philosophy of „growth throughinnovation‟ and our stable investment policies. This dedication is what helps our customers achieve
their financial objectives.
Our Vision
“To be the most preferred and the largest fund house for all asset classes, with a consistent track
record of excellent returns and best standards in customer service, product innovation, technologyand HR practices.”
Our Services
MUTUAL FUNDS
Investors are our priority. Our mission has been to establish Mutual Funds as a viable investmentoption to the masses in the country. Working towards it, we developed innovative, need-specificproducts and educated the investors about the added benefits of investing in capital markets viaMutual Funds.
Today, we have been actively managing our investor's assets not only through our investmentexpertise in domestic mutual funds, but also offshore funds and portfolio management advisoryservices for institutional investors.
This makes us one of the largest investment management firms in India, managing investment
mandates of over 5.4 million investors.
Portfolio Management and Advisory Services
SBI Funds Management has emerged as one of the largest player in India advising various financialinstitutions, pension funds, and local and international asset management companies.
We have excelled by understanding our investor's requirements and terms of risk / returnexpectations, based on which we suggest customized asset portfolio recommendations. We alsoprovide an integrated end-to-end customized asset management solution for institutions in terms of advisory service, discretionary and non-discretionary portfolio management services.
OFFSHORE FUNDS
SBI Funds Management has been successfully managing and advising India's dedicated offshorefunds since 1988. SBI Funds Management was the 1st bank sponsored asset management companyfund to launch an offshore fund called 'SBI Resurgent India Opportunities Fund' with an objective toprovide our investors with opportunities for long-term growth in capital, through well-researchedinvestments in a diversified basket of stocks of Indian Companies.
FUND HOUSE EXPERTISE
INVESTMENT EXPERTISE
The best investment strategies put together by the best minds, our Fund Managers. With a sharp eyeto monitor, gauge and understand the changes in the market, our fund managers and analysts gear upto meet new challenging environments. Their ability to capture the growth potential of Indiansecurities and manage complex portfolios as well as the drive to deliver optimum results is theirforte. With superior securities selection, incisive research, intensive coverage including internalforecasts, active monitoring and regular tracking, our dedicated team ensures minimization of riskswhile protecting our investor's interest. Always.
INVESTMENT PHILOSOPHY
Growth through innovation.Our expert team of experienced and market savvy researchers prepare comprehensive analytical andinformative reports on diverse sectors and identify stocks that promise high performance in thefuture.
What is innovation?
Innovation is the process of turning ideas into concrete plans for progressive growth. We alwaysseek to provide our investors with opportunities for progressive growth through our innovativeproducts, superior stock selection and active portfolio management. Accordingly, we also enhanceand optimize asset allocation and stock selection based on internal and external research. Derivatives
are used to hedge and rebalance portfolios to keep the risk factors at reasonable levels,
The three main phrases, which act as a guiding force for the investment performance, are as follows:
Long-term capital appreciation for the investor: Our fund manager's view is not guided byany momentum play but by the objective of generating sustainable performance for theinvestor.
Superior stock selection: Our team is encouraged to be ahead of the rest of the industry interms of identifying new ideas & opportunities.
Active fund management: While the performance of all the funds is benchmarked against aspecific index, we do not encourage our investment team to replicate the index compositionwith the fund portfolio.
Optimal Risk Management
Risk Management is an inherent part of any business. As one of the core focus areas, each of ourstrategies is subject to close scrutiny on a continuous basis. Regulatory agencies around the worldare placing increasing pressure on institutions to measure and manage risk better. At SBI FundsManagement, we follow enterprise wide approach to risk management with a dedicated, experiencedand professional risk management team covering significant functions of the organization. Risk Management focuses on:
Identifying actual and potential areas of risk
Assessing the adequacy of internal controls Proposing risk mitigating measures and Safeguarding investor interest through ongoing analysis and monitoring
Investment Objective
Setting benchmarks time and again. For our investors.
Our objective is to endeavor to outperform our benchmarks through well researched investments inIndian equities. This is achieved by implementing an active management style based on fundamentalanalysis, leading to the construction of a portfolio. It could be blended, large cap, mid cap, or
specific sector oriented - which aims at capturing the growth potential of Indian equities.
PRODUCTS:
Every investor is unique.
At SBI Mutual Fund we know that every investor has unique financial goals and requires a differentset of products. Which is why, we have a wide range of schemes that fulfill every kind of investors‟
requirements. Each scheme is managed by devising a different strategy which is reflective of theinvestors profile and carries with it different risks and rewards.
There are six basic asset classes, which we manage, and variations of these six asset classes formvarious products:
Equity Schemes: The primary objective of the equity asset class is to provide capital growth / appreciation.
Hybrid Schemes: These schemes invest in a mixture of debt and equity securities in differentproportions.
Debt / Income Schemes: The schemes in this asset class generally invest in fixed incomesecurities.
Fixed Maturity Plans: These are closed ended debt schemes with a fixed maturity date . Liquid Schemes The strategy for liquid funds include investments in short investment. Exchange Traded Funds ETFs are nothing but a basket of securities that are traded on the
stock exchange.
COMPETITOR OF SBI MUTUAL FUND:
1. ICICI mutual fund2. Reliance mutual fund3. UTI mutual fund4. Birla Sun Life mutual fund5. Kotak mutual fund6. HDFC mutual fund7. Sundaram mutual fund
8.
LIC mutual fund9. Principal10. Franklin Templeton
AWARDS AND ACHIEVEMENT OF SBI MUTUAL FUND:
LIPER AWARD- THE LIPPER INDIA FUND AWARDS 2008
ICRA MUTUAL FUND AWARD 2008
OUTLOOK MONEY- NDTV PROFIT AWARDS
CNBC- AWAAZ CONSUMER AWARD 2007
LIPPER AWARD - THE LIPPER INDIA FUND AWARDS 2007
ICRA MUTUAL FUND AWARD 2007 CNBC TV18- CRISIL MUTUAL FUND OF THE YEAR AWARD 2007
CNBC AWAAZ CONSUMER AWARDS 2006
LIPPER AWARD- THE LIPPER INDIA FUND AWARDS 2006
CNBC TV18- CRISIL MUTUAL FUND OF THE YEAR AWARD 2006
This report is based on secondary data, however secondary data collection was given more
importance since it is overhearing factor. One of the most important users of research methodology
is that it helps in identifying the problem, collecting, analyzing the required information data andproviding an alternate solution to the problem. It also helps in collecting the vital information that is
required by the top management to assist them for the better decision making both day to day
decision and critical ones.
DATA SOURCES
Research is totally based on Secondary data can be used only for the reference. Research has been
done by secondary data collection . The secondary data has been collected through various mutual
fund company‟s websites
INTRODUCTION ABOUT SBI MUTUAL FUND PRODUCTS
Equity schemes
Debt/ income schemes
Liquid schemes
Hybrid schemes
Fixed maturity plans
Exchanges traded schemes
Fund of fund scheme
EQUITY SCHEMES
The primary objective of the equity asset class is to provide capital growth / appreciation byinvesting in the equity and equity related instruments of companies over medium to long term.
Equity/ Growth Funds
SBI Magnum Multicap Fund
SBI Magnum Equity Fund SBI Magnum Multiplier Plus 1993 SBI Blue Chip Fund SBI Magnum Global Fund SBI One India Fund SBI Magnum Midcap Fund
SBI Magnum Sector Funds Umbrella - Emerging Businesses Fund SBI Magnum Sector Funds Umbrella - Contra Fund SBI Magnum Sector Funds Umbrella - FMCG Fund
SBI Magnum Sector Funds Umbrella - IT Fund SBI Magnum Sector Funds Umbrella - Pharma Fund
Thematic Funds
SBI Magnum COMMA Fund SBI Infrastructure Fund - Series I SBI PSU Fund
ELSS Funds
SBI Tax Advantage Fund - Series I SBI Tax Advantage Fund - Series II SBI Magnum Tax gain Scheme 1993
Index Funds
SBI Magnum Index Fund
Market Neutral Strategy
SBI Arbitrage Opportunities Fund
Debt / Income Schemes
The schemes in this asset class generally invest in fixed income securities such as bonds, corporatedebentures, government securities (gilts), money market instruments, etc. and provide regular andsteady income to investors.
SBI Magnum Children's Benefit Plan SBI Magnum Income Plus Fund - Saving Plan SBI Magnum Income Fund Floating Rate Plan - Savings Plus Bond Plan
SBI Magnum Income Fund Floating Rate Plan - Long Term SBI Magnum Income Fund
SBI Dynamic Bond Fund SBI Magnum Gilt Fund - Short Term Plan SBI Magnum Gilt Fund - Long Term Plan SBI Short Horizon Debt Fund - Short Term Fund SBI Short Horizon Debt Fund - Ultra Short Term Fund
The investment objective of the emerging businesses fund would be to participate in the growth
potential presented by various companies that are considered emergent and have export orientationopportunities or are globally competitive. The fund may also evaluate emerging businesses with
growth potential and domestic focus.
About emerging businesses fund:
It is a multi cap fund i.e. fund will not have more than 50% in small cap and can go 0-100%
in large cap and 0-100% in mid cap stocks.
The fund invested in large cap stocks for liquidity purpose and fund look at generating pure
returns with long stocks.
An actively managed, diversified equity portfolio maintained with 25-40 stocks.
Out of 25 stocks/companies:
mid cap and small cap stocks are 17-18 stocks.
large stocks are 7-8 stocks.
EBF performance is because of 17-18 stocks in mid cap and small cap.
To provide investors maximum growth opportunity through well researched investments in Indian
equities. PCD‟S and FCD‟S from selected industries with high growth potential in bonds.
About global fund:
Magnum Global Fund is an open-ended equity scheme which makes well researchedinvestments in stocks and securities of companies from selected industries with highgrowth potential.
Fund Philosophy & Positioning: Predominantly midcap. Upto25% flexibility into large caps for liquidity purposes; these, however,would be largely at the lower end of the large cap curve. Three pillar investment philosophy –
Competitive Edge (as defined objectively by market share, gross margin so brand franchise),
Consistent Return on Equity of 20% over time and minimum prospective Growth of 20%; stock selection with in this space driven by valuations and relative risk. Investment perspective –
longterm,3yearsplus
Fund Strategy: Sector positioning a derivative of bottom up stock picking; presently, biased towards Consumer
Discretionary and Industrials and meaningfully underweight Financials and Energy. Philosophy
renders a „quality‟ bias to the portfolio which makes it leveraged to flat/falling markets in the short
term. Consciously o/w Industrials, which is perceived higher- beta, but in „quality‟ names within that
sector such as Sadbhav, Eicher, Exide and Greaves Cotton.
Top holdings of global fund:
Stock name % of total AUM
SADBHAV ENGINEERING 4.29%
MUTHOOT FINANCE LIMITED 4.04%
EICHER MOTORS LIMITED 3.76%
READINGTON (INDIA) LTD 3.66%
DIVIS LABORATORY LIMITED 3.59%
CADILA HEALTHCARE LIMITED 3.48%
MRF LTD 3.41%
PAGE INDUSTRIES LIMITED 3.34%PUNJAB NATIONAL BANK 3.31%
Capital market plays a vital role to stabilize the economic growth, strength industrial performance
and provide various investment avenues to the investors to help the various industries and to ensure
portfolio return. Among various financial products, mutual fund ensures the minimum risks and
maximum return to the investors, its having own policies, term condition that are different fromother products, so the market volatilization will not make more effect in return.
AUM/Fund house analysis:
Asset Management Company: a firm that invest the pooled funds of retail investors in securities in
line with state disinvestment objective.
It is constituted as a company under the Indian companies act.
Minimum net worth of rs 10 corers of AMC
Minimum contribution sponsor40% of share capital of AMC
At least 50% of directors of AMC to be independent
AMC accountable to the trustees
AMC charges asset management fees subject to celling prescribed by SEBI
Asset management agreement between AMC and Trustee
Obligations of AMC:
Limit of 5% of aggregate purchase and sales securities under its entire scheme per broker per
quarter.
All security transaction with a sponsor and his associates to be disclosed.
Sales and service:
Investors can purchase and sell mutual funds units through various types of intermediaries-
individual agent, distribution companies, national/regional brokers, banks, post office etc. As well
as from the asset management companies including the unit trust of India.
To different type of investor, the mutual fund industry comprising of AMC‟s and intermediaries at
present offers the following two levels of service such as value added service and basic services.
Factors to be considered before investment in mutual fund from customer perspective:
Market risk
Inflation risk
Credit risk
Interest rate risk
Exchange risk
Investment risk
Market risk:
At times the prices or yields of 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 fledgling corporation may be affected. This changes in price is due to market risk.
Inflation risk:
Sometimes referred to as “loss of purchasing power.” Whenever inflation sprints forward faster than
the earnings on your investment, you run the risk that you‟ll actually be able to buy less, not more,
inflation risk also occurs when prices rise faster than your returns.
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
Interest risk:
Changing interest rates affect both equities and bonds in many ways. Investors are reminded that
“predicting” which way rates will go is rarely successful. A diversified portfolio can help in
offsetting these changes.
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 apositive or negative impact on companies which in turn would have an effect on the investment of
the fund.
Changes in government policies:
Changes in government policy especially in regard to the tax benefits may impact the business
prospects of the companies leading to an impact on the investments made by the fund.
What are the steps involved in selection of an equity fund?
Classify equity funds into broad categories that signify their return and risk characterstics.
Equity funds can be grouped into diversified funds, index funds, sectoral funds, and
specialized funds.
Classify funds further on the basis of fund manager style. Investors may want to choosebetween value and growth styles, depending on their risk and return prefrences.
Evaluate the performance of the scheme. This is done both within the peer group, and in
comparison with the benchmark.
Understand the structural characterstics of the scheme. This includes:
Size of the fund: investor prefer larger funds to smaller funds. Smaller funds of a
large fund house may also be preferred.
Fund age: older funds with track record of performance are preferred to new ones.
Portfolio manager experience: Experienced fund manager are preferred to new ones.
Cost of investing: funds with lower expense ratio are preferred.
Understand the portfolio characteristics‟ of the scheme.
How can an investor evaluate the portfolio characteristics of an equity fund?
Portfolio characteristic include:
Percentage of cash in the portfolio: Equity funds typically hold very less in cash.
Portfolio concentration: portfolios should be diversified according to stated objectives.
Market capitalization of the fund: if the market capitalization of chosen stocks is higher, the
fund can be expected to have lower risk and higher liquidity and vice – versa
Portfolio turnover: high level of churn in the portfolio may not meet the needs of the longterm investor. Transaction cost may also be high
Portfolio risk statistics: there are three recommended statistics are:
Ex marks or r squared of the portfolio – the extent to sensitivity to market. Index fund
will have an ex-mark of 100%. Lower ex-mark means that returns of the fund are less
dependent on market returns.
Beta – this is a measure of risk of the portfolio. If beta is higher than 1, the fund has a
risk level that is higher than that of the market, and vive versa. Diversified funds will
have a beta closer to 1.
Gross dividend yield: if the funds yield is higher returns after costs are higher.
A better performing fund will have higher ex-marks, lower beta, and higher gross dividend yield.
The study is made within the geographical boundaries of Hyderabad and secundrabad only.
The study was for 45 days.
The investor has better control over what securities are bought and sold on his behalf.
A unit holder is just one of several thousand investors in a scheme. Once a unit holder has
bought into the scheme, investment management is left to the fund manager with in the broad
parameter of the investment objective.
The unit holder cannot influence what securities or investments the scheme would buy.
Over 800 mutual fund schemes offered by 38 mutual funds and multiple options within those
schemes make it difficult for investors to choose between them.
Greater dissemination of industry information through various media and availability of professional advisors in the market should help investors handle this overload.
Arranging free seminars in different organizations can increase the awareness of mutual fund
services. Organizations such as software firms, companies, hospital etc.
From the above analysis, both HDFC fund and SBI fund are both good funds to invest and
there is only marginal difference between them so to invest in these two fund if given a
choice, an investor can choose based upon his likings and faith on the brand image of the
fund house, as per the statistical comparison if you compare the Sharp ratio these both funds
are closely related i.e. 0.21 for SBI fund and 0.22 HDFC fund.
From the above analysis we come to a conclusion that ICICI Prudential focused Blue chip
fund is better option than the SBI fund as if you compare the Sharp ratio of both the funds ,
ICICI prudential is greater than the SBI fund thus i.e Risk Adjusted return for every one
rupee invested is 0.39, where in for the SBI fund is 0.21.
From the following two tables we can see the Two funds are closely competitive to each
other but if you go by the sharp ratio, the SBI fund has the higher sharp ratio than the
Franklin Templeton investments, i.e. sharp ratio gives the risk adjusted return and if you see
the ratio is higher in SBI fund thus investors can invest in this fund In the comparission of two funds i.e. SBI magnum equity fund with DSPBR top 100 equity
funds. It has been observed that the on one side the SBI fund has good performance return
over a year when compared to the DSPBR fund. When risk and volatility is coming into
picture it is seen that with respect to investor point of view that they prefer fund which has
low standard deviation, high shape ratio and beta less than 1 consider to be more volatile and
beta value ranging in the 0.75-0.79 then it is considered to be good volatility measure.
In this case the DSPBR fund having the high Sharpe ratio which compared to SBI fund. So