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A project report on MUTUAL FUNDS At Submitted by Ms. SWETHA. Y.P HT No !"#$%&'(!%%" Project submitted in p)rti)* +u*+i**ment +or T,e A-)rd + T,e De/ree + MASTE0 F 1US2NESS ADM2N2ST0AT2N T
SMAN2A UN23E0S2TY4 Hyder)b)d 5#%%%%( !%%&5!%$$
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DE6LA0AT2N
I hereby declare that this Project Report titled MUTUAL FUNDS submitted by me to the Department o !usiness Mana"ement# $%U%# &yderabad# is a bonaide 'or( underta(en by me and it is not submitted to any other Uni)ersity or Institution or the a'ard o any de"ree diploma * certiicate or published any time beore%
Name and Address o the Student S+,T&A%-%P
Si"nature o the Student S+,T&A%-%P
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6E0T2F26AT2N
This is to certiy that the Project Report title ,MUTUAL FUNDS submitted in partial ulilment or the a'ard o M!A Pro"ramme o Department o !usiness
Mana"ement#
$%U%
&yderabad#
'as
carried out by S+,T&A -%P under my "uidance% This has not been submitted to any other Uni)ersity or
Institution
or
the
a'ard
o
any
de"ree*diploma*certiicate%
Name and address o the .uide S&RA/ANT&I%N
Si"nature o the .uide S&RA/ANT&I%N
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6NTENTS
6,)pter No.
N)me o+ t,e concept
P)/e No.
Introduction Need o the study $bjecti)es o the study I Scope o the study Methodolo"y o the study Limitations o the study II
Re)ie' o Literature
III
Industry Proile
I/
0ompany Proile
/
Data analysis and interpretation
/I
Findin"s# Su""estions and 0onclusion
/II
!iblio"raphy
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6HAPTE0 2 5 2NT0DU6T2N
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2NT0DU6T2N A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a common inancial "oal% The money thus collected is then in)ested in capital mar(et instruments such as shares# debentures and other securities% The income earned throu"h these in)estments and the capital appreciations reali1ed are shared by its unit holders in proportion to the number o units o'ned by them% Thus a Mutual Fund is the most suitable in)estment or the common man as it oers an opportunity to in)est in a di)ersiied# 2proessionally mana"ed bas(et o securities at a relati)ely lo' cost%
The project idea is to project mutual unds as the better a)enue or in)estment% Mutual und is producti)e pac(a"e or a lay2in)estor 'ith limited inances% Mutual und is a )ery old practice in U%S%# and it has made a recent entry into India% 0ommon man in India still inds 3!an(4 as a sae door or in)estment% This sho's that mutual unds ha)e not "ained a stron" oot2hold in his lie%
The project creates an a'areness that the mutual und is 'orthy in)estment practice% The )arious schemes o mutual unds pro)ide the in)estor 'ith a 'ide ran"e o in)estment options accordin" to his ris(2bearin" capacities and interest% !esides# they also "i)e a handy return to the in)estor% The project analyses )arious schemes o mutual und by ta(in" dierent mutual und schemes rom dierent AM04S% The uture challen"es or mutual unds in India are also considered%
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NEED F THE STUDY
The study basically made to educate the in)estors about Mutual Funds% Analy1e the )arious schemes to hi"hli"ht the ris( and return o di)ersity o in)estment that mutual unds oer% Thus# throu"h the study one 'ould understand ho' a common man could ruitully con)ert a pittance into "reat penny by 'isely in)estin" into the ri"ht scheme accordin" to his ris(2 ta(in" abilities% A small in)estor is the one 'ho is able to correctly plan 6 decide in 'hich proitable 6 sae instrument to in)est% To loc( up one4s hard earned money in a sa)in"s ban(4s account is not enou"h to counter the monster o inlation% Usin" simple concepts o di)ersiication# po'er o compound interest# stable returns 6 limited e7posure to e8uity in)estment# one can ma7imi1e his returns on in)estments 6 multiply one4s sa)in"s%
In)estment is a serious proposition one has to loo( into )arious actors beore decidin" on the instruments in 'hich to in)est% To sa)e is not enou"h% $ne must in)est 'isely 6 "et ma7imum returns% $ne must plan in)estment in such a 'ay that his in)estment objecti)es are satisied% A sound in)estment is one 'hich "i)es the in)estor reasonable returns 'ith a proper proitable mana"ement
This report "i)es the details about )arious in)estment objecti)es desired by an in)estor# details about the concept 6 'or(in" o mutual und%
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17E6T23ES F THE STUDY
•
To understand the concept o Mutual Funds%
•
To study the dierent Sectoral Mutual Funds in India%
•
To analyse the perormance o dierent sectoral mutual unds%
•
To identiy the best Sectoral Mutual Funds to in)est in India%
•
To su""est the best mutual unds or in)estors%
S6PE F THE STUDY
No' a days# there is a lot o scope or the mutual unds% The Financial mana"ers ha)e to decide 'hether to in)est in the Shares# bonds# debentures# real estate# "old and other
0ommodities to "et the ma7imum beneits or unds% The inancial mana"ers
should also reduce the ris( rom the In)estments% The scope o the study is conirmed to the sectoral unds a)ailable in Indian mutual unds%
0ESEA06H METHDL8Y In the present project 'or( the data as been collected rom a)ailable source that is secondary data li(e 'ebsites# Ne'spapers and ma"a1ines% The sample si1e ta(en is o : dierent sectoral unds
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S)mp*in/ Desi/n Samplin" method use is non probabilistic jud"mental samplin"% The Mutual Fund Scheme or the study ha)e been selected based on ollo'in" ; criteria
$
Type o+ t,e sc,eme
! ;
Minimum Assets Under M/mt. 2nception D)te
pen5ended Sector)* Funds9/ro-t,: 0s. #%% 6rore Prior to $st Apri*4 !%%'
.ro'th option or the entire selected scheme has been considered%
0ese)rc, Desi/n $. 1enc,m)r< 2nde= For this study the <= shares mar(et inde7 S6P 0N> NIFT- has been used as the mar(et inde7% !. Period o+ study Period o study has been ta(en as < years startin" rom 5st April# 9==? to 5=th @uly 9=5=% ;. 0is< Free 0)te + 0eturn Ris( ree rate o return reers to that minimum return on an in)estment that has no ris( o loosin" the in)estment o)er 'hich it is earned% For this purpose o this study ris( ree rate o return is represented by 5 days Treasury bill%
L2M2TAT2NS
5% The analysis is based on historical data and thus indicates the past perormance 'hich may not al'ays be indicati)e o the uture perormance%
9% Dierent schemes consider dierent mar(et indices as their benchmar(s# but or the purpose o uniormity in the study all schemes ha)e to be compared a"ainst same benchmar( inde7%
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;% Sharpe ratio Cin its simplest orms that the relationship bet'een ris( and return is linear and remain linear throu"hout its entire ran"e% /arious research 'or(s conducted in this re"ard sho' that the relationship is not as simple as 0apital Mar(et theory 'ould su""est% This is an inherent 'ea(ness o capital Asset Pricin" Model%
B% The time period considered by the study is only three yearsE a lar"er period could ha)e ensured co)era"e o a ull mar(et cycle# thus "i)in" a more real picture o the perormance o the schemes%
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6HAPTE0 22 5 0E32EW F L2TE0ATU0E
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Mutu)* Funds An o>er>ieA Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a common inancial "oal% The money thus collected is in)ested by the und mana"er in dierent types o securities dependin" upon the objecti)e o the scheme% These could ran"e rom shares to debentures to money mar(et instruments% The income earned throu"h these in)estments and the capital appreciations reali1ed by the scheme are shared by its unit holders in proportion to the number o units o'ned by them Cpro rata% Thus a Mutual Fund is the most suitable in)estment or the common man as it oers an opportunity to in)est in a di)ersiied# proessionally mana"ed portolio at a relati)ely lo' cost% Anybody 'ith an in)estible surplus o as little as a e' thousand rupees can in)est in Mutual Funds% ,ach Mutual Fund scheme has a deined in)estment objecti)e and strate"y%
A mutual und is the ideal in)estment )ehicle or today4s comple7 and modern inancial scenario% Mar(ets or e8uity shares# bonds and other i7ed income instruments# real estate# deri)ati)es and other assets ha)e become mature and inormation dri)en% Price chan"es in these assets are dri)en by "lobal e)ents occurrin" in ara'ay places% A typical indi)idual is unli(ely to ha)e the (no'led"e# s(ills# inclination and time to (eep trac( o e)ents# understand their implications and act speedily% An indi)idual also inds it diicult to (eep trac( o o'nership o his assets# in)estments# bro(era"e dues and ban( transactions etc%
A mutual und is the ans'er to all these situations% It appoints proessionally 8ualiied and e7perienced sta that mana"es each o these unctions on a ull time basis% The lar"e pool o money collected in the und allo's it to hire such sta at a )ery lo' cost to each in)estor%
In eect# the mutual und )ehicle e7ploits economies o scale in all three areas 2 research# in)estments and transaction processin"% +hile the concept o indi)iduals
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comin" to"ether to in)est money collecti)ely is not ne'# the mutual und in its present orm is a 9= th century phenomenon%
In act# mutual unds "ained popularity only ater the Second +orld +ar% .lobally# there are thousands o irms oerin" tens o thousands o mutual unds 'ith dierent in)estment objecti)es% Today# mutual unds collecti)ely mana"e almost as much as or more money as compared to ban(s%
A drat oer document is to be prepared at the time o launchin" the und% Typically# it pre speciies the in)estment objecti)es o the und# the ris( associated# the costs in)ol)ed in the process and the broad rules or entry into and e7it rom the und and other areas o operation% In India# as in most countries# these sponsors need appro)al rom a re"ulator# S,!I CSecurities e7chan"e !oard o India in our case% S,!I loo(s at trac( records o the sponsor and its inancial stren"th in "rantin" appro)al to the und or commencin" operations%
A sponsor then hires an asset mana"ement company to in)est the unds accordin" to the in)estment objecti)e% It also hires another entity to be the custodian o the assets o the und and perhaps a third one to handle re"istry 'or( or the unit holders Csubscribers o the und%
In the Indian conte7t# the sponsors promote the Asset Mana"ement 0ompany also# in 'hich it holds a majority sta(e% In many cases a sponsor can hold a 5== sta(e in the Asset Mana"ement 0ompany CAM0% ,%"% !irla .lobal Finance is the sponsor o the !irla Sun Lie Asset Mana"ement 0ompany Ltd%# 'hich has loated dierent mutual unds schemes and also acts as an asset mana"er or the unds collected under the schemes
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History o+ Mutu)* Fund in 2ndi) The mutual und industry in India started in 5?; 'ith the ormation o Unit Trust o India# at the initiati)e o the .o)ernment o India and Reser)e !an( the% The history o mutual unds in India can be broadly di)ided into our distinct phases
First P,)se ? $&'"5@( Unit Trust o India CUTI 'as established on 5?; by an Act o Parliament% It 'as set up by the Reser)e !an( o India and unctioned under the Re"ulatory and administrati)e control o the Reser)e !an( o India% In 5:G UTI 'as de2lin(ed rom the R!I and the Industrial De)elopment !an( o India CID!I too( o)er the re"ulatory and administrati)e control in place o R!I% The irst scheme launched by UTI 'as Unit Scheme 5?B% At the end o 5GG UTI had Rs%?#:== crores o assets under mana"ement
Second P,)se ? $&@(5$&&; 9Entry o+ Pub*ic Sector Funds: 5G: mar(ed the entry o non2 UTI# public sector mutual unds set up by public sector ban(s and Lie Insurance 0orporation o India CLI0 and .eneral Insurance 0orporation o India C.I0% S!I Mutual Fund 'as the irst non2 UTI Mutual Fund established in @une 5G: ollo'ed by 0anban( Mutual Fund CDec G:# Punjab National !an( Mutual Fund CAu" G# Indian !an( Mutual Fund CNo) G# !an( o India C@un =# !an( o !aroda Mutual Fund C$ct 9% LI0 established its mutual und in @une 5G 'hile .I0 had set up its mutual und in December 5=%
At the end o 5;# the mutual und industry had assets under mana"ement o Rs%B:#==B crores%
T,ird P,)se ? $&&;5!%%; 9Entry o+ Pri>)te Sector Funds: +ith the entry o pri)ate sector unds in 5;# a ne' era started in the Indian mutual und industry# "i)in" the Indian in)estors a 'ider choice o und amilies% Also# 5; 'as the year in 'hich the irst Mutual Fund Re"ulations came into bein"# under 'hich all mutual unds# e7cept UTI 'ere to be re"istered and "o)erned% The erst'hile Hothari http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Pioneer Cno' mer"ed 'ith Fran(lin Templeton 'as the irst pri)ate sector mutual und re"istered in @uly 5;%
The 5; S,!I CMutual Fund Re"ulations 'ere substituted by a more comprehensi)e and re)ised Mutual Fund Re"ulations in 5?% The industry no' unctions under the S,!I CMutual Fund Re"ulations 5?%
The number o mutual und houses 'ent on increasin"# 'ith many orei"n mutual unds settin" up unds in India and also the industry has 'itnessed se)eral mer"ers and ac8uisitions% As at the end o @anuary 9==;# there 'ere ;; mutual unds 'ith total assets o Rs% 5#95#G=< crores% The Unit Trust o India 'ith Rs%BB#
Fourt, P,)se ? since Febru)ry !%%;
In February 9==;# ollo'in" the repeal o the Unit Trust o India Act 5?; UTI 'as biurcated into t'o separate entities% $ne is the Speciied Underta(in" o the Unit Trust o India 'ith assets under mana"ement o Rs%9#G;< crores as at the end o @anuary 9==;# representin" broadly# the assets o US ?B scheme# assured return and certain other schemes% The Speciied Underta(in" o Unit Trust o India# unctionin" under an administrator and under the rules ramed by .o)ernment o India and does not come under the pur)ie' o the Mutual Fund Re"ulations%
The second is the UTI Mutual Fund Ltd# sponsored by S!I# PN!# !$! and LI0% It is re"istered 'ith S,!I and unctions under the Mutual Fund Re"ulations% +ith the biurcation o the erst'hile UTI 'hich had in March 9=== more than Rs%:?#=== crores o assets under mana"ement and 'ith the settin" up o a UTI Mutual Fund# conormin" to the S,!I Mutual Fund Re"ulations# and 'ith recent mer"ers ta(in" place amon" dierent pri)ate sector unds# the mutual und industry has entered its current phase o consolidation and "ro'th% As at the end o March# 9==?# there 'ere 9 unds%
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Future Scen)rio
The asset base 'ill continue to "ro' at an annual rate o about ;= to ;< o)er the ne7t e' years as in)estor4s shit their assets rom ban(s and other traditional a)enues% Some o the older public and pri)ate sector players 'ill either close shop or be ta(en o)er%
$ut o ten public sector players i)e 'ill sell out# close do'n or mer"e 'ith stron"er players in three to our years% In the pri)ate sector this trend has already Started 'ith t'o mer"ers and one ta(eo)er% &ere too some o them 'ill do'n their shutters in the near uture to come%
!ut this does not mean there is no room or other players% The mar(et 'ill 'itness a lurry o ne' players enterin" the arena% There 'ill be a lar"e number o oers rom )arious asset mana"ement companies in the time to come% Some bi" names li(e Fidelity# Principal# $ld Mutual etc% are loo(in" at Indian mar(et seriously% $ne important reason or it is that most major players already ha)e presence here and hence these bi" names 'ould hardly li(e to "et let behind%
The mutual und industry is a'aitin" the introduction o deri)ati)es in India as this 'ould enable it to hed"e its ris( and this in turn 'ould be relected in its Net Asset /alue CNA/%
S,!I is 'or(in" out the norms or enablin" the e7istin" mutual und schemes to trade in deri)ati)es% Importantly# many mar(et players ha)e called on the Re"ulator to initiate the process immediately# so that the mutual unds can implement the chan"es that are re8uired to trade in Deri)ati)es%
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0ecent trends in mutu)* +und industry
The most important trend in the mutual und industry is the a""ressi)e e7pansion o the orei"n o'ned mutual und companies and the decline o the companies loated by nationali1ed ban(s and smaller pri)ate sector players%
Many nationali1ed ban(s "ot into the mutual und business in the early nineties and "ot o to a "ood start due to the stoc( mar(et boom pre)ailin" then% These ban(s did not really understand the mutual und business and they just )ie'ed it as another (ind o ban(in" acti)ity% Fe' hired speciali1ed sta and "enerally chose to transer sta rom the parent or"ani1ations% The perormance o most o the schemes loated by these unds 'as not "ood% Some schemes had oered "uaranteed returns and their parent or"ani1ations had to bail out these AM0s by payin" lar"e amounts o money as the dierence bet'een the "uaranteed and actual returns%
The ser)ice le)els 'ere also )ery bad% Most o these AM0s ha)e not been able to retain sta# loat ne' schemes etc% and it is doubtul 'hether# barrin" a e' e7ceptions# they ha)e serious plans o continuin" the acti)ity in a major 'ay% The e7perience o some o the AM0s loated by pri)ate sector Indian companies 'as also )ery similar% They 8uic(ly reali1ed that the AM0 business is a business# 'hich ma(es money in the lon" term and re8uires deep2poc(eted support in the intermediate years% Some ha)e sold out to orei"n o'ned companies# some ha)e mer"ed 'ith others and there is "eneral restructurin" "oin" on%
The orei"n o'ned companies ha)e deep poc(ets and ha)e come in here 'ith the e7pectation o a lon" haul% They can be credited 'ith introducin" many ne' practices such as ne' product inno)ation# sharp impro)ement in ser)ice standards and disclosure# usa"e o technolo"y# bro(er education and support etc% In act# they ha)e
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orced the industry to up"rade itsel and ser)ice le)els o or"ani1ations li(e UTI ha)e impro)ed dramatically in the last e' years in response to the competition pro)ided by these%
Types o+ Mutu)* Funds Mutual und schemes may be classiied on the basis o its structure and its in)estment objecti)e%
1y Structure pen5ended Funds An open2end und is one that is a)ailable or subscription all throu"h the year% These do not ha)e a i7ed maturity% In)estors can con)eniently buy and sell units at Net Asset /alue CNA/ related prices% The (ey eature o open2end schemes is li8uidity%
6*osed5ended Funds A closed2end und has a stipulated maturity period 'hich "enerally ran"in" rom ; to 5< years% The und is open or subscription only durin" a speciied period% In)estors can in)est in the scheme at the time o the initial public issue and thereater they can buy or sell the units o the scheme on the stoc( e7chan"es 'here they are listed% In order to pro)ide an e7it route to the in)estors# some close2ended unds "i)e an option o sellin" bac( the units to the Mutual Fund throu"h periodic repurchase at NA/ related prices% S,!I Re"ulations stipulate that at least one o the t'o e7it routes is pro)ided to the in)estor%
2nter>)* Funds Inter)al unds combine the eatures o open2ended and close2ended schemes% They are open or sale or redemption durin" pre2determined inter)als at NA/ related prices %
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1y 2n>estment bjecti>e5
8ro-t, Funds The aim o "ro'th unds is to pro)ide capital appreciation o)er the medium to lon"2 term% Such schemes normally in)est a majority o their corpus in e8uities% It has been pro)en that returns rom stoc(s# ha)e outperormed most other (ind o in)estments held o)er the lon" term% .ro'th schemes are ideal or in)estors ha)in" a lon"2term outloo( see(in" "ro'th o)er a period o time%
2ncome Funds The aim o income unds is to pro)ide re"ular and steady income to in)estors% Such schemes "enerally in)est in i7ed income securities such as bonds# corporate debentures and .o)ernment securities% Income Funds are ideal or capital stability and re"ular income%
1)*)nced Funds The aim o balanced unds is to pro)ide both "ro'th and re"ular income% Such schemes periodically distribute a part o their earnin" and in)est both in e8uities and i7ed income securities in the proportion indicated in their oer documents% In a risin" stoc( mar(et# the NA/ o these schemes may not normally (eep pace# or all e8ually 'hen the mar(et alls% These are ideal or in)estors loo(in" or a combination o income and moderate "ro'th%
Money M)r<et Funds The aim o money mar(et unds is to pro)ide easy li8uidity# preser)ation o capital and moderate income% These schemes "enerally in)est in saer short2term instruments such as treasury bills# certiicates o deposit# commercial paper and inter2ban( call money% Returns on these schemes may luctuate dependin" upon the interest rates pre)ailin" in the mar(et% These are ideal or 0orporate and indi)idual in)estors as a means to par( their surplus unds or short periods% 5B http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Lo)d Funds A Load Fund is one that char"es a commission or entry or e7it% That is# each time you buy or sell units in the und# a commission 'ill be payable% Typically entry and e7it loads ran"e rom 5 to 9% It could be 'orth payin" the load# i the und has a "ood perormance history%
No5Lo)d Funds A No2Load Fund is one that does not char"e a commission or entry or e7it% That is# no commission is payable on purchase or sale o units in the und% The ad)anta"e o a no load und is that the entire corpus is put to 'or(%
t,er Sc,emes5
T)= S)>in/ Sc,emes These schemes oer ta7 rebates to the in)estors under speciic pro)isions o the Indian Income Ta7 la's as the .o)ernment oers ta7 incenti)es or in)estment in speciied a)enues% In)estments made in ,8uity Lin(ed Sa)in"s Schemes C,LSS and Pension Schemes are allo'ed as deduction u*s GG o the Income Ta7 Act# 5?5% The Act also pro)ides opportunities to in)estors to sa)e capital "ains u*s
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Speci)* Sc,emes
•
2ndustry Speci+ic Sc,emes
Industry Speciic Schemes in)est only in the industries speciied in the oer document% The in)estment o these unds is limited to speciic industries li(e InoTech# FM0.# and Pharmaceuticals etc%
•
2nde= Sc,emes
Inde7 Funds attempt to replicate the perormance o a particular inde7 such as the !S, Sense7 or the NS, <=
•
Sector)* Sc,emes
Sectoral Funds are those# 'hich in)est e7clusi)ely in a speciied industry or a "roup o industries or )arious se"ments such as JAJ .roup shares or initial public oerin"s%
•
6ommodities Funds
0ommodities unds speciali1e in in)estin" in dierent commodities directly or throu"h commodities uture contracts% Speciali1ed unds may in)est in a sin"le commodity or a commodity "roup such as edible oil or rains# 'hile di)ersiied commodity unds 'ill spread their assets o)er many commodities
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RISK HIERARCHY OF MUTUAL FUNDS
Money Market Funds
Gilt Funds
Debt Funds
Equity Funds "ybrid Funds
Flexible sset allocation Funds
!!ressive Growth Funds
Growth Funds
"i!h #ield Debt Funds
$isk %evel
Diversified Equity Funds
Index Funds
Value Funds
Focused Debt Funds
Money Market Funds
Gilt Funds
Diversified Debt Funds
Growth Income and funds Balanced Funds
Equity Income Funds
&y'e of Fund
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TA!L, 9 Sn)ps,ot o+ Mutu)* Fund Sc,emes Mutu)* Fund Type
bjecti>e
0is<
2n>estment s,ou*d Port+o*io W,o in>est
Those 'ho Treasury !ills# par( their Li8uidity K 0ertiicate o unds in Moderate Money Deposits# current Income K Ne"li"ible M)r<et 0ommercial accounts or Reser)ation o Papers# 0all short2term 0apital Money ban( deposits S,ort5 term Funds 9F*o)tin/ 5 s,ort5 term:
Li8uidity K Moderate Income
1ond Funds
Re"ular 9F*o)tin/ 5 Lon/5 term:
Income
8i*t Funds
Security 6 Income
0all Money# 0ommercial Papers# Those 'ith Little Treasury !ills# surplus Interest Rate 0Ds# Short2 short2term term unds .o)ernment securities%
2n>estment ,orion
9 days 2 ; 'ee(s
; 'ee(s 2 ; months
Predominantly Debentures# 0redit Ris( Salaried 6 .o)ernment More than 2 59 6 Interest conser)ati)e securities# months Rate Ris( in)estors 0orporate !onds Salaried 6 Interest Rate .o)ernment conser)ati)e 59 months 6 more Ris( securities in)estors A""ressi)e in)estors 'ith lon" term out loo(%
; years plus
To "enerate returns that are Portolio NA/ )aries 2nde= commensurate indices li(e A""ressi)e 'ith inde7 Funds 'ith returns o !S,# NIFT- in)estors% perormance respecti)e etc indices
; years plus
EBuity Funds
Lon"2term 0apital Appreciation
&i"h Ris(
Stoc(s
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1)*)nced Funds
.ro'th 6 Re"ular Income
!alanced ratio 0apital o e8uity and Mar(et Ris( debt unds to Moderate 6 and Interest ensure hi"her A""ressi)e Rate Ris( returns at lo'er ris(
9 years plus
1ene+its o+ Mutu)* Fund in>estment
$. Pro+ession)* M)n)/ement Mutual Funds pro)ide the ser)ices o e7perienced and s(illed proessionals# bac(ed by a dedicated in)estment research team that analyses the perormance and prospects o companies and selects suitable in)estments to achie)e the objecti)es o the scheme%
!. Di>ersi+ic)tion
Mutual Funds in)est in a number o companies across a broad cross2section o
industries and sectors% This di)ersiication reduces the ris( because seldom do all stoc(s decline at the same time and in the same proportion% -ou achie)e this di)ersiication throu"h a Mutual Fund 'ith ar less money than you can do on your o'n%
;. 6on>enient Administr)tion In)estin" in a Mutual Fund reduces paper'or( and helps you a)oid many problems such as bad deli)eries# delayed payments and ollo' up 'ith bro(ers and companies% Mutual Funds sa)e your time and ma(e in)estin" easy and con)enient%
". 0eturn Potenti)* 5 http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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$)er a medium to lon"2term# Mutual Funds ha)e the potential to pro)ide a
hi"her return as they in)est in a di)ersiied bas(et o selected securities%
#. Lo- 6osts
Mutual Funds are a relati)ely less e7pensi)e 'ay to in)est compared to directly
in)estin" in the capital mar(ets because the beneits o scale in bro(era"e# custodial and other ees translate into lo'er costs or in)estors%
'. LiBuidity In open2end schemes# the in)estor "ets the money bac( promptly at net asset )alue related prices rom the Mutual Fund% In closed2end schemes# the units can be sold on a stoc( e7chan"e at the pre)ailin" mar(et price or the in)estor can a)ail o the acility o direct repurchase at NA/ related prices by the Mutual Fund%
(. Tr)nsp)rency In)estors "et re"ular inormation on the )alue o your in)estment in addition to disclosure on the speciic in)estments made by the scheme# the proportion in)ested in each class o assets and the und mana"erJs in)estment strate"y and outloo(%
@. F*e=ibi*ity Throu"h eatures such as re"ular in)estment plans# re"ular 'ithdra'al plans and di)idend rein)estment plans# one can systematically in)est or 'ithdra' unds accordin" to your needs and con)enience%
&. A++ord)bi*ity In)estors indi)idually may lac( suicient unds to in)est in hi"h2"rade stoc(s% A mutual und because o its lar"e corpus allo's e)en a small in)estor to ta(e the beneit o its in)estment strate"y
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$%.We** 0e/u*)ted All Mutual Funds are re"istered 'ith S,!I and they unction 'ithin the pro)isions o strict re"ulations desi"ned to protect the interests o in)estors% The operations o Mutual Funds are re"ularly monitored by S,!I%
Limit)tion o+ Mutu)* Fund 2n>estment
$. No 6ontro* >er 6ost An In)estor in mutual und has no control o)er the o)erall costs o in)estin"% &e pays an in)estment mana"ement ee C'hich is a percenta"e o his in)estments as lon" as he remains in)ested in und# 'hether the und )alue is risin" or declinin"% &e also has to pay und distribution costs# 'hich he 'ould not incur in direct in)estin"% &o'e)er this only means that there is a cost to obtain the beneits o mutual und ser)ices% This cost is oten less than the cost o direct in)estin"%
!. No T)i*or5M)de Port+o*ios In)estin" throu"h mutual unds means dele"ation o the decision o portolio composition to the und mana"ers% The )ery hi"h net 'orth indi)iduals or lar"e corporate in)estors may ind this to be a constraint in achie)in" their objecti)es%
&o'e)er# most mutual unds help in)estors o)ercome this constraint by oerin" lar"e no% o schemes 'ithin the same und%
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;. M)n)/in/ A Port+o*io + Funds A)ailability o lar"e no% o unds can actually mean too much choice or the in)estors% &e may a"ain need ad)ice on ho' to select a und to achie)e his objecti)es% AMFI has ta(en initiati)e in this re"ard by startin" a trainin" and certiication pro"ram or prospecti)e Mutual Fund Ad)isors% S,!I has made this certiication compulsory or e)ery mutual und ad)isor interested in sellin" mutual und%
". T)=es Durin" a typical year# most acti)ely mana"ed mutual unds sell any'here rom 9=
to := percent o the securities in their portolios% I your und ma(es a proit on its sales# you 'ill pay ta7es on the income you recei)e# e)en i you rein)est the money you made%
#. 6ost o+ 6,urn The portolio o und does not remain constant% The e7tent to 'hich the portolio chan"es is a unction o the style o the indi)idual und mana"er i%e% 'hether he is a buy and hold type o mana"er or one 'ho a""ressi)ely churns the und% It is also dependent on the )olatility o the und si1e i%e% 'hether the und constantly recei)es resh subscriptions and redemptions% Such portolio chan"es ha)e associated costs o bro(era"e# custody ees etc% 'hich lo'ers the portolio return commensurately%
6onceptu)* b)c
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this ame is directly lin(ed to their superior stoc( selection s(ills% For mutual unds to "ro'# AM0s must be held accountable or their selection o stoc(s% In other 'ords# there must be some perormance indicator that 'ill re)eal the 8uality o stoc( selection o )arious AM0s% Return aloneund should not be itconsidered as the basisthe o measurement theund perormance o a mutual scheme# should also include ris( ta(en byothe mana"er because dierent unds 'ill ha)e dierent le)els o ris( attached to them% For e)aluatin" the perormance o selected Sectoral Mutual Fund schemes ris(2return relation models ha)e been used li(e C The Treynor Measure C The Sharpe Measure C @enson Model C Fama Model
T,e Treynor Me)sure
De)eloped by @ac( Treynor# this perormance measure e)aluates unds on the basis o TreynorJs Inde7% This Inde7 is a ratio o return "enerated by the und o)er and abo)e ris( ree rate o return C"enerally ta(en to be the return on securities bac(ed by the "o)ernment# as there is no credit ris( associated# durin" a "i)en period and systematic ris( associated 'ith it Cbeta% Symbolically# it can be represented as
TreynorJs Inde7 9Ti: 90i 5 0+:1i.
+here# 0i represents return on +und4 0+ is ris< +ree r)te o+ return )nd 1i is bet) o+ t,e +und.
All ris(2a)erse in)estors 'ould li(e to ma7imi1e this )alue% +hile a hi"h and positi)e TreynorJs Inde7 sho's a superior ris(2adjusted perormance o a und# a lo' and ne"ati)e TreynorJs Inde7 is an indication o una)orable perormance% 9; http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Method% This measure in)ol)es e)aluation o the returns that the und has "enerated )s% the returns actually e7pected out o the und "i)en the le)el o its systematic ris(% The surplus bet'een the t'o returns is called Alpha# 'hich measures the perormance o a und compared 'ith the actual returns o)er the period% Re8uired return o a und at a "i)en le)el o ris( C0i can be calculated as2
0i 0+ 1i 90m 5 0+:
+here# 0m is )>er)/e m)r<et return durin/ t,e /i>en period % Ater calculatin" it# )*p,) c)n be obt)ined by subtr)ctin/ reBuired return +rom t,e )ctu)* return o+ t,e +und% &i"her alpha represents superior perormance o the und and )ice )ersa%
Limitation o this model is that it considers only systematic ris( not the entire ris( associated 'ith the und and an ordinary in)estor can not miti"ate unsystematic ris(# as his (no'led"e o mar(et is primiti)e%
F)m) Mode* The ,u"ene Fama model is an e7tension o @enson model% This model compares the perormance# measured in terms o returns# o a und 'ith the re8uired return commensurate 'ith the total ris( associated 'ith it% The dierence bet'een these t'o is ta(en as a measure o the perormance o the und and is called net selecti)ity%
The net se*ecti>ity represents the stoc( selection s(ill o the und mana"er# as it is the e7cess return o)er and abo)e the return re8uired to compensate or the total ris( ta(en by the und mana"er% &i"her )alue o 'hich indicates that und mana"er has earned returns 'ell abo)e the return commensurate 'ith the le)el o ris( ta(en by him%
Re8uired return can be calculated as2
0i 0+ SiSmG90m 5 0+:
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+here# Sm is st)nd)rd de>i)tion o+ m)r<et returns% The net selecti)ity is then calculated by subtractin" this re8uired return rom the actual return o the und%
Amon" the abo)e perormance measures# t'o models namely# Treynor me)sure )nd 7enson mode* use system)tic ris< b)sed on t,e premise t,)t t,e unsystem)tic ris< is di>ersi+i)b*e.
T,ese mode*s )re suit)b*e +or *)r/e in>estors li(e institutional in)estors 'ith hi"h
ris( ta(in" capacities as they do not ace paucity o unds and can in)est in a number o options to dilute some ris(s%
For them# a portolio can be spread across a number o stoc(s and sectors% &o'e)er# S,)rpe me)sure )nd F)m) mode* t,)t consider t,e entire ris< )ssoci)ted -it, +und )re suit)b*e +or sm)** in>estors4 as the ordinary in)estor lac(s the necessary s(ill
and resources to di)ersiied%
Moreo)er# the selection o the und on the basis o superior stoc( selection ability o the und mana"er 'ill also help in sae"uardin" the money in)ested to a "reat e7tent% The in)estment in unds that ha)e "enerated bi" returns at hi"her le)els o ris(s lea)es the money all the more prone to ris(s o all (inds that may e7ceed the indi)idual in)estorsJ ris( appetite%
1ETA !eta measures a stoc(Js )olatility# the de"ree to 'hich its price luctuates in relation to the o)erall mar(et% In other 'ords# it "i)es a sense o the stoc(Js mar(et ris( compared to the "reater mar(et% !eta is used also to compare a stoc(Js mar(et ris( to that o other stoc(s% In)estment analysts use the .ree( letter JJ to represent beta.
This measure is calculated usin" re/ression analysis% A beta o 5 indicates that the securityJs price tends to mo)e 'ith the mar(et% A beta "reater than 5 indicates that the
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securityJs price tends to be more )olatile than the mar(et# and a beta less than 5 means it tends to be less )olatile than the mar(et .
I σ i I σ m
r im
9 σ m
r im
is correlation coeicient bet'een mar(et returns and und returns%
is standard de)iation o und returns%9Si: σ m is standard de)iation o mar(et returns%9Sm: σ i
9 σ m
is mar(et )ariance%
6oe++icient o+ Determin)tion
C R 9 D 555
) me)sure o+ re*i)bi*ity o+ 1et)
!eta depends on the inde7 used to calculate it% It can happen that the inde7 bears no correlation 'ith the mo)ements in the und% Due to this reason# it is essential to ta(e a loo( at statistical )alue called 0oeicient o Determination alon" 'ith !eta% It sho's ho' reliable the beta number is% It )aries bet'een 1ero and one% /alue o 5 indicates perect correlation 'ith the ind7% Thus# an I C R 9 D O=%?B it implies that ?B o the )ariation in the portolio returns is due to )ariations in the mar(et returns% Mathematically it is the s8uare o correlation coeicientCR%
∑
n Q x C− x m RO
D × C y − ym eD a
e a n
22222222222222222222222222222222222222222222222 C y y D ∑C x x D ∑ −
mean
9
×
−
9
mean
+here > and - are returns on the portolio and returns on the mar(et respecti)ely% !eta and C R 9 D should thus be used to"ether 'hen e7aminin" a und4s ris( proile%
NET ASSET 3ALUE 9NA3: NA/ per unit o a scheme on a day is the net mar(et )alue o the securities held by the total no% o the units o the scheme on the particular day% It is actually the )alue o o net asset per unit% Since the mar(et )alue o securities chan"es e)eryday# NA/ o a und also )aries on a day to day basis% NA/4s or open ended schemes are re8uired to be disclosed a daily basisCbusiness day% 9: http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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NA/ O
Net Assets o the scheme
No% o units outstandin"
+here# NumeratorO Mar(et )alue o in)estmentKrecei)ablesKother Accrued Income K$ther Assets2 Accrued ,7penses2$ther Payables2$ther Liabilities%
St)nd)rd De>i)tion5 ) me)sure o+ Tot)* 0is< Standard De)iation is the most common statistical measure o jud"in" a und4s )olatility and ris(% It measures a und4s total ris( i%e% sum o systematic ris( and unsystematic ris(% Mathematically it "i)es a 38uality ratin"4 o an a)"% The SD o an a)"% is the amt% !y 'hich the no% that "o in to an a)"% de)iate rom that a)"% It tells us ho' closely an a)"% represents the underlyin" a)"% !ut one thin" to be (ept in mind is that a hi"h Standard De)iation may be a measure o )olatility# but it does not necessarily mean that such a und is 'orse than one 'ith a lo' Standard De)iation% I the irst und is a much hi"her perormer than the second one# the de)iation 'ill not matter much%
5
∑C x n
SDO
∑C x − x i
mean
i
− x mean D
9
D 9 "i)es the s8uare o the sum o dierences o each )alue in the sample
rom the mean o the sample o 3n4 element% Note 5 For this project ollo'in" tools ha)e been used2 • • • •
St)nd)rd De>i)tion 1et) S,)rp 0)tio 05SBu)re
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6HAPTE0 222 5 2NDUST0Y P0F2LE 9 http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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F2NAN62AL MA0JETS
Finance is the pre2re8uisite or modern business and inancial institutions play a )ital role in the economic system% It is throu"h inancial mar(ets and institutions that the inancial system o an economy 'or(s% Financial mar(ets reer to the institutional arran"ements or dealin" in inancial assets and credit instruments o dierent types such as currency# che8ues# ban( deposits# bills# bonds# e8uities# etc%
Financial mar(et is a broad term describin" any mar(etplace 'here buyers and sellers participate in the trade o assets such as e8uities# bonds# currencies and deri)ati)es% They are typically deined by ha)in" transparent pricin"# basic re"ulations on tradin"# costs and ees and mar(et orces determinin" the prices o securities that trade%
.enerally# there is no speciic place or location to indicate a inancial mar(et% +here)er a inancial transaction ta(es place# it is deemed to ha)e ta(en place in the inancial mar(et% &ence inancial mar(ets are per)asi)e in nature since inancial transactions are themsel)es )ery per)asi)e throu"hout the economic system% For instance# issue o e8uity shares# "rantin" o loan by term lendin" institutions# deposit o money into a ban(# purchase o debentures# sale o shares and so on%
In a nutshell# inancial mar(ets are the credit mar(ets caterin" to the )arious needs o the indi)iduals# irms and institutions by acilitatin" buyin" and sellin" o inancial assets# claims and ser)ices%
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6LASS2F26AT2N F F2NAN62AL MA0JETS
Fin)nci)* m)r<ets
r/)nied m)r<ets
Unor/)nied m)r<ets
6)pit)* M)r<ets
Money M)r<ets
2ndustri)* Securities M)r<et
Money Lenders4 2ndi/enuos 1)n<ers
6)** Money M)r<et
Prim)ry M)r<et
6ommerci)* 1i** M)r<et
Second)ry m)r<et
Tre)sury 1i** M)r<et
8o>ernment Securities M)r<et
Lon/5term *o)n m)r<et
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6)pit)* M)r<et
The capital mar(et is a mar(et or inancial assets 'hich ha)e a lon" or indeinite maturity% .enerally# it deals 'ith lon" term securities 'hich ha)e a period o abo)e one year% In the 'idest sense# it consists o a series o channels throu"h 'hich the sa)in"s o the community are made a)ailable or industrial and commercial enterprises and public authorities% As a 'hole# capital mar(et acilitates raisin" o capital%
The major unctions perormed by a capital mar(et are 5% Mobili1ation o inancial resources on a nation2'ide scale% 9% Securin" the orei"n capital and (no'2ho' to ill up deicit in the re8uired resources or economic "ro'th at a aster rate% ;% ,ecti)e allocation o the mobili1ed inancial resources# by directin" the same to projects yieldin" hi"hest yield or to the projects needed to promote balanced economic de)elopment%
0apital mar(et consists o primary mar(et and secondary mar(et% Primary market Primary mar(et is a mar(et or ne' issues or ne' inancial claims%
&ence it is also called as Ne' Issue Mar(et% It basically deals 'ith those securities 'hich are issued to the public or the irst time% The mar(et# thereore# ma(es a)ailable a ne' bloc( o securities or public subscription% In other 'ords# it deals 'ith raisin" o resh capital by companies either or cash or or consideration other than cash% The best e7ample could be Initial Public $erin" CIP$ 'here a irm oers shares to the public or the irst time% ;9 http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Secondary market Secondary mar(et is a mar(et 'here e7istin" securities are traded%
In other 'ords# securities 'hich ha)e already passed throu"h ne' issue mar(et are traded in this mar(et% .enerally# such securities are 8uoted in the stoc( e7chan"e and it pro)ides a continuous and re"ular mar(et or buyin" and sellin" o securities% This mar(et consists o all stoc( e7chan"es reco"ni1ed by the "o)ernment o India%
Money M)r<et
Money mar(ets are the mar(ets or short2term4 hi"hly li8uid debt securities% Money mar(et securities are "enerally )ery sae in)estments 'hich return relati)ely lo' interest rate that is most appropriate or temporary cash stora"e or short term time needs% It consists o a number o sub2mar(ets 'hich collecti)ely constitute the money mar(et namely call money mar(et# commercial bills mar(et# acceptance mar(et# and Treasury bill mar(et%
Deri>)ti>es M)r<et
The deri)ati)es mar(et is the inancial mar(et or deri)ati)es# inancial instruments li(e utures contracts or options# 'hich are deri)ed rom other orms o assets% A deri)ati)e is a security 'hose price is dependent upon or deri)ed rom one or more underlyin" assets% The deri)ati)e itsel is merely a contract bet'een t'o or more parties% Its )alue is determined by luctuations in the underlyin" asset% The most common underlyin" assets include stoc(s# bonds# commodities# currencies# interest rates and mar(et inde7es% The important inancial deri)ati)es are the ollo'in"
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•
For!ard" For'ards are the oldest o all the deri)ati)es% A or'ard contract
reers to an a"reement bet'een t'o parties to e7chan"e an a"reed 8uantity o an asset or cash at a certain date in uture at a predetermined price speciied in that a"reement% The promised asset may be currency# commodity# instrument etc% •
F#t#re" Future contract is )ery similar to a or'ard contract in all respects
e7ceptin" the act that it is completely a standardi1ed one% It is nothin" but a standardi1ed or'ard contract 'hich is le"ally enorceable and al'ays traded on an or"ani1ed e7chan"e% •
O$tion" A inancial deri)ati)e that represents a contract sold by one party
Coption 'riter to another party Coption holder% The contract oers the buyer the ri"ht# but not the obli"ation# to buy Ccall or sell Cput a security or other inancial asset at an a"reed2upon price Cthe stri(e price durin" a certain period o time or on a speciic date Ce7ercise date% 0all options "i)e the option to buy at certain price# so the buyer 'ould 'ant the stoc( to "o up% Put options "i)e the option to sell at a certain price# so the buyer 'ould 'ant the stoc( to "o do'n% •
S!a$" It is yet another e7citin" tradin" instrument% Inact# it is the combination
o or'ards by t'o counterparties% It is arran"ed to reap the beneits arisin" rom the luctuations in the mar(et either currency mar(et or interest rate mar(et or any other mar(et or that matter%
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Forei/n E=c,)n/e M)r<et
It is a mar(et in 'hich participants are able to buy# sell# e7chan"e and speculate on currencies% Forei"n e7chan"e mar(ets are made up o ban(s# commercial companies# central ban(s# in)estment mana"ement irms# hed"e unds# and retail ore7 bro(ers and in)estors% The ore7 mar(et is considered to be the lar"est inancial mar(et in the 'orld% It is a 'orld'ide decentrali1ed o)er2the2counter inancial mar(et or the tradin" o currencies% !ecause the currency mar(ets are lar"e and li8uid# they are belie)ed to be the most eicient inancial mar(ets% It is important to reali1e that the orei"n e7chan"e mar(et is not a sin"le e7chan"e# but is constructed o a "lobal net'or( o computers that connects participants rom all parts o the 'orld%
6ommodities M)r<et
It is a physical or )irtual mar(etplace or buyin"# sellin" and tradin" ra' or primary products% For in)estorsJ purposes there are currently about <= major commodity mar(ets
'orld'ide that acilitate in)estment trade
in nearly 5== primary
commodities% 0ommodities are split into t'o types hard and sot commodities% &ard commodities are typically natural resources that must be mined or e7tracted C"old# rubber# oil# etc%# 'hereas sot commodities are a"ricultural products or li)estoc( Ccorn# 'heat# coee# su"ar# soybeans# por(# etc%
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2ND2AN F2NAN62AL MA0JETS India Financial mar(et is one o the oldest in the 'orld and is considered to be the astest "ro'in" and best amon" all the mar(ets o the emer"in" economies%
The history o Indian capital mar(ets dates bac( 9== years to'ard the end o the 5Gth century 'hen India 'as under the rule o the ,ast India 0ompany% The de)elopment o the capital mar(et in India concentrated around Mumbai 'here no less than 9== to 9<= securities bro(ers 'ere acti)e durin" the second hal o the 5th century%
The inancial mar(et in India today is more de)eloped than many other sectors because it 'as or"ani1ed lon" beore 'ith the securities e7chan"es o Mumbai# Ahmadabad and Hol(ata 'ere established as early as the 5th century%
!y the early 5?=s the total number o securities e7chan"es in India rose to ei"ht# includin" Mumbai# Ahmadabad and Hol(ata apart rom Madras# Hanpur# Delhi# !an"alore and Pune% Today there are 95 re"ional securities e7chan"es in India in addition to the centrali1ed NS, CNational Stoc( ,7chan"e and $T0,I C$)er the 0ounter ,7chan"e o India%
&o'e)er the stoc( mar(ets in India remained sta"nant due to strin"ent controls on the mar(et economy that allo'ed only a handul o monopolies to dominate their respecti)e sectors% The corporate sector 'asnJt allo'ed into many industry se"ments#
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'hich 'ere dominated by the state controlled public sector resultin" in sta"nation o the economy ri"ht up to the early 5=s%
Thereater 'hen the Indian economy be"an liberali1in" and the controls be"an to be dismantled or eased outE the securities mar(ets 'itnessed a lurry o IP$4s that 'ere launched% This resulted in many ne' companies across dierent industry se"ments to come up 'ith ne'er products and ser)ices% A remar(able eature o the "ro'th o the Indian economy in recent years has been the role played by its securities mar(ets in assistin" and uellin" that "ro'th 'ith money rose 'ithin the economy% This 'as in mar(ed contrast to the initial phase o "ro'th in many o the ast "ro'in" economies o ,ast Asia that 'itnessed hu"e doses o FDI CForei"n Direct In)estment spurrin" "ro'th in their initial days o mar(et decontrol% Durin" this phase in India much o the or"ani1ed sector has been aected by hi"h "ro'th as the inancial mar(ets played an all2inclusi)e role in sustainin" inancial resource mobili1ation% Many PSUs CPublic Sector Underta(in"s that decided to oload part o their e8uity 'ere also helped by the 'ell2or"ani1ed securities mar(et in India% The launch o the NS, CNational Stoc( ,7chan"e and the $T0,I C$)er the 0ounter ,7chan"e o India durin" the mid 5=s by the "o)ernment o India 'as meant to usher in an easier and more transparent orm o tradin" in securities% The NS, 'as concei)ed as the mar(et or tradin" in the securities o companies rom the lar"e2scale sector and the $T0,I or those rom the small2scale sector% +hile the NS, has not just done 'ell to "ro' and e)ol)e into the )irtual bac(bone o capital mar(ets in India the $T0,I stru""led and is yet to sho' any si"n o "ro'th and de)elopment% The inte"ration o IT into the capital mar(et inrastructure has been particularly smooth in India due to the country4s 'orld class IT ;: http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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industry% This has pushed up the operational eiciency o the Indian stoc( mar(et to "lobal standards and as a result the country has been able to capitali1e on its hi"h "ro'th and attract orei"n capital li(e ne)er beore% The re"ulatin" authority or capital mar(ets in India is the S,!I CSecurities and ,7chan"e !oard o India% S,!I came into prominence in the 5=s ater the capital mar(ets e7perienced some turbulence% It had to ta(e drastic measures to plu" many loopholes that 'ere e7ploited by certain mar(et orces to ad)ance their )ested interests% Ater this initial phase o stru""le S,!I has "ro'n in stren"th as the re"ulator o India4s capital mar(ets and as one o the country4s most important institutions%
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T,e b)sic objecti>es o+ t,e 1o)rd -ere identi+ied )s •
to protect the interests o in)estors in securitiesE
•
to promote the de)elopment o Securities Mar(etE
•
to re"ulate the securities mar(et and
•
For matters connected there'ith or incidental thereto%
Since its inception S,!I has been 'or(in" tar"etin" the securities and is attendin" to the ulillment o its objecti)es 'ith commendable 1eal and de7terity% The impro)ements in the securities mar(ets li(e capitali1ation re8uirements# mar"inin"# establishment o clearin" corporations etc% reduced the ris( o credit and also reduced the mar(et%
S,!I has introduced the comprehensi)e re"ulatory measures# prescribed re"istration norms# the eli"ibility criteria# the code o obli"ations and the code o conduct or dierent intermediaries li(e# ban(ers to issue# merchant ban(ers# bro(ers and sub2 bro(ers# re"istrars# portolio mana"ers# credit ratin" a"encies# under'riters and others% It has ramed bye2la's# ris( identiication and ris( mana"ement systems or 0learin" houses o stoc( e7chan"es# sur)eillance system etc% 'hich has made dealin" in securities both sae and transparent to the end in)estor%
Another si"niicant e)ent is the appro)al o tradin" in stoc( indices Cli(e S6P 0N> Nity 6 Sense7 in 9===% A mar(et Inde7 is a con)enient and eecti)e product because o the ollo'in" reasons
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•
It acts as a barometer or mar(et beha)iorE
•
It is used to benchmar( portolio perormanceE
•
It is used in deri)ati)e instruments li(e inde7 utures and inde7 optionsE
•
It can be used or passi)e und mana"ement as in case o Inde7 Funds%
T'o broad approaches o S,!I is to inte"rate the securities mar(et at the national le)el# and also to di)ersiy the tradin" products# so that there is an increase in number o traders includin" ban(s# inancial institutions# insurance companies# mutual unds# primary dealers etc% to transact throu"h the ,7chan"es% In this conte7t the introduction o deri)ati)es tradin" throu"h Indian Stoc( ,7chan"es permitted by S,!I in 9=== AD is a real landmar(%
S,!I has enjoyed success as a re"ulator by pushin" systemic reorms a""ressi)ely and successi)ely Ce%"% the 8uic( mo)ement to'ards ma(in" the mar(ets electronic and paperless rollin" settlement on TK9 bases% S,!I has been acti)e in settin" up the re"ulations as re8uired under la'%
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59% Madhya Pradesh 5;% Madras 5B% Ma"adh 5<% Man"alore 5?% Meerut 5:% Pune 5G% Saurashtra Hutch 5% Uttar Pradesh 9=% /adodara
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1M1AY ST6J EK6HAN8E
A )ery common name or all traders in the stoc( mar(et# !S,# stands or !ombay Stoc( ,7chan"e% It is the oldest mar(et not only in the country# but also in Asia% In the early days# !S, 'as (no'n as The Nati)e Share 6 Stoc( !ro(ers Association% It 'as established in the year 5G:< and became the irst stoc( e7chan"e in the country to be reco"ni1ed by the "o)ernment% In 5
In the past and e)en no'# it plays a pi)otal role in the de)elopment o the countryJs capital mar(et% This is reco"ni1ed 'orld'ide and its inde7# S,NS,># is also trac(ed 'orld'ide% ,arlier it 'as an Association o Persons CA$P# but no' it is a demutualised and corporatised entity incorporated under the pro)isions o the 0ompanies Act# 5
1SE 3ision
The )ision o the !ombay Stoc( ,7chan"e is to ,mer"e as the premier Indian stoc( e7chan"e by establishin" "lobal benchmar(s%
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1SE F)cts
!S, as a brand is synonymous 'ith capital mar(ets in India% The !S, S,NS,> is the benchmar( e8uity inde7 that relects the robustness o the economy and inance% It 'as the
•
First in India to introduce ,8uity Deri)ati)es
•
First in India to launch a Free Float Inde7
•
First in India to launch US )ersion o !S, Sense7
•
First in India to launch ,7chan"e ,nabled Internet Tradin" Platorm
•
First in India to obtain IS$ certiication or Sur)eillance# 0learin" 6 Settlement
•
J!S, $n2Line Tradin" System4 C!$LT has been a'arded the "lobally reco"ni1ed the Inormation Security Mana"ement System standard !S::299==9%
•
First to ha)e an e7clusi)e acility or inancial trainin"
•
Mo)ed rom $pen $utcry to ,lectronic Tradin" 'ithin just <= days
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%SE !it& it" 'on( &i"tory o) ca$ita' market de*e'o$ment i" )#''y (eared to contin#e it" contri+#tion" to )#rt&er t&e (ro!t& o) t&e "ec#ritie" market" o) t&e co#ntry, t&#" &e'$in( India increa"e" it" "$&ere o) in)'#ence in internationa' )inancia' market"-
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NAT2NAL
ST6J
EK6HAN8E
F
2ND2A
L2M2TED The National Stoc( ,7chan"e o India Limited has "enesis in the report o the &i"h Po'ered Study .roup on ,stablishment o Ne' Stoc( ,7chan"es# 'hich recommended promotion o a National Stoc( ,7chan"e by inancial institutions CFI4s to pro)ide access to in)estors rom all across the country on an e8ual ootin"% !ased on the recommendations# NS, 'as promoted by leadin" Financial Institutions at the behest o the .o)ernment o India and 'as incorporated in No)ember 59 as a ta72 payin" company unli(e other stoc( ,7chan"e in the country%
$n its reco"nition as a stoc( e7chan"e under the Securities 0ontracts CRe"ulation Act# 5
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NSE 80UP
N)tion)* Securities 6*e)rin/ 6orpor)tion Ltd. 9NS66L:
It is a 'holly o'ned subsidiary# 'hich 'as incorporated in Au"ust 5< and commenced clearin" operations in April 5?% It 'as ormed to build conidence in clearin" and settlement o securities# to promote and maintain the short and consistent settlement cycles# to pro)ide a counter2party ris( "uarantee and to operate a ti"ht ris( containment system%
NSE.2T Ltd.
It is also a 'holly o'ned subsidiary o NS, and is its IT arm% This arm o the NS, is uni8uely positioned to pro)ide products# ser)ices and solutions or the securities industry% NS,%IT primarily ocuses on in the area o tradin"# bro(er ront2end and bac(2oice# clearin" and settlement# 'eb2based# insurance# etc% Alon" 'ith this# it also pro)ides consultancy and implementation ser)ices in Data +arehousin"# !usiness 0ontinuity Plans# Site Maintenance and !ac(ups# Stratus Mainrame Facility Mana"ement# Real Time Mar(et Analysis 6 Financial Ne's% 2ndi) 2nde= Ser>ices Products Ltd. 922SL:
It is a joint )enture bet'een NS, and 0RISIL Ltd% to pro)ide a )ariety o indices and inde7 related ser)ices and products or the Indian 0apital mar(ets% It 'as set up in May 5G% IISL has a consultin" and licensin" a"reement 'ith the Standard and PoorJs CS6P# 'orldJs leadin" pro)ider o in)estible e8uity indices# or co2brandin" e8uity indices%
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Re"ulation Act# 5
Studies by NASS0$M# sot'are technolo"y par(s o India# the )enture capitals unds and the "o)ernment4s IT tas(s Force# as 'ell as risin" interest in IT# Pharmaceutical# !iotechnolo"y and Media shares ha)e repeatedly emphasi1ed the need or a national stoc( mar(et or inno)ation and hi"h "ro'th companies% Inno)ati)e companies are critical to de)elopin" economics li(e India# 'hich is under"oin" a major technolo"ical re)olution% +ith their abilities to "enerate employment opportunities and contribute to the economy# it is essential that these companies not only e7pand e7istin" operations but also set up ne' units% The (ey issue or these companies is raisin" timely# cost eecti)e and lon" term capital to sustain their operations and enhance "ro'th% Such companies# particularly those that ha)e been in operation or a short time# are unable to raise unds throu"h the traditional inancin" methods# because they ha)e not yet been e)aluated by the inancial 'orld%
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6HAPTE0 23 5 6MPANY P0F2LE
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2ND2A 2NFL2NE L2M2TED India Inoline is a one2stop inancial ser)ices shop# most respected or 8uality o its inormation# personali1ed ser)ice and cuttin"2ed"e technolo"y%
3ision
$ur )ision is to be the most respected company in the inancial ser)ices space%
2ndi) 2n+o*ine 8roup
The India Inoline "roup# comprisin" the holdin" company# India Inoline Limited and its 'holly2o'ned subsidiaries# include the entire inancial ser)ices space 'ith oerin"s ran"in" rom ,8uity research# ,8uities and deri)ati)es
tradin"#
0ommodities tradin"# Portolio Mana"ement Ser)ices# Mutual Funds# Lie Insurance# Fi7ed deposits# .oI bonds and other small sa)in"s instruments to loan products and In)estment ban(in"%
India Inoline also o'ns and mana"es the 'ebsites '''%indiainoline%com and '''%<paisa%com% The company has a net'or( o o)er 95== business locations Cbranches and sub2bro(ers spread across more than B<= cities and to'ns% The "roup caters to appro7imately a million customers%
Founded in 5< by Mr% Nirmal @ain C0hairman and Mana"in" Director as an independent business research and inormation pro)ider# the company "radually e)ol)ed into a one2stop inancial ser)ices solutions pro)ider%
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India Inoline recei)ed re"istration or a housin" inance company rom the National &ousin" !an( and recei)ed the 3Fastest "ro'in" ,8uity !ro(in" &ouse 2 Lar"e irms4 in India by Dun 6 !radstreet in 9==% It also recei)ed the Insurance bro(in" license rom IRDAE recei)ed the )enture capital licenseE recei)ed in principle appro)al to sponsor a mutual undE recei)ed 3!est bro(er2 India4 a'ard rom Finance AsiaE 3Most Impro)ed !ro(era"e2 India4 a'ard rom Asia money%
6MPANY ST0U6TU0E
India Inoline Limited is listed on both the leadin" stoc( e7chan"es in India# )i1% the Stoc( ,7chan"e# Mumbai C!S, and the National Stoc( ,7chan"e CNS, and is also a member o both the e7chan"es% It is en"a"ed in the businesses o ,8uities bro(in"# +ealth Ad)isory Ser)ices and Portolio Mana"ement Ser)ices% It oers bro(in" ser)ices in the 0ash and Deri)ati)es se"ments o the NS, as 'ell as the 0ash se"ment o the !S,% It is re"istered 'ith NSDL as 'ell as 0DSL as a depository participant# pro)idin" a one2stop solution or clients tradin" in the e8uities mar(et% It has recently launched its In)estment ban(in" and Institutional !ro(in" business%
A S,!I authori1ed Portolio Mana"erE it oers Portolio Mana"ement Ser)ices to clients% These ser)ices are oered to clients as dierent schemes# 'hich are based on dierin" in)estment strate"ies made to relect the )aried ris(2return preerences o clients%
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2ndi) 2n+o*ine Medi) )nd 0ese)rc, Ser>ices Limited
The ser)ices represent a stron" support that dri)es the bro(in"# commodities# mutual und and portolio mana"ement ser)ices businesses% It underta(es e8uities research 'hich is ac(no'led"ed by none other than Forbes as J!est o the +ebJ and Ja must read or in)estors in AsiaJ% India InolineJs research is a)ailable not just o)er the internet but also on international 'ire ser)ices li(e !loomber" C0ode IILL# Thomson First 0all and Internet Securities 'here India Inoline is amon"st the most read Indian bro(ers%
2ndi) 2n+o*ine 6ommodities Limited.
India Inoline 0ommodities P)t Limited is en"a"ed in the business o commodities bro(in"% Their e7perience in securities bro(in" empo'ered them 'ith the re8uisite
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s(ills and technolo"ies to allo' them to oer commodities bro(in" as a contra2 cyclical alternati)e to e8uities bro(in"% It enjoys memberships 'ith the M0> and N0D,># t'o leadin" Indian commodities e7chan"es# and recently ac8uired membership o D.0>% It has a multi2channel deli)ery model# ma(in" it amon" the select e' to oer online as 'ell as oline tradin" acilities%
2ndi) 2n+o*ine M)r<etin/ Ser>ices
India Inoline Mar(etin" and Ser)ices Limited is the holdin" company o India Inoline Insurance Ser)ices Limited and India Inoline Insurance !ro(ers Limited% •
India Inoline Insurance Ser)ices Limited is a re"istered 0orporate A"ent 'ith the Insurance Re"ulatory and De)elopment Authority CIRDA% It is the lar"est 0orporate A"ent or I0I0I Prudential Lie Insurance 0o Limited# 'hich is IndiaJs lar"est pri)ate Lie Insurance 0ompany% India Inoline 'as the irst corporate a"ent to "et licensed by IRDA in early 9==5%
•
India Inoline Insurance !ro(ers Limited India Inoline Insurance !ro(ers Limited is a ne'ly ormed subsidiary 'hich 'ill carry out the business o Insurance bro(in"%
2ndi) 2n+o*ine 2n>estment Ser>ices Limited
0onsolidated shareholdin"s o all the subsidiary companies en"a"ed in loans and inancin" acti)ities under one subsidiary% Recently# $rient .lobal# a Sin"apore2based in)estment institution in)ested USD :?%: million or a 99%< sta(e in India Inoline In)estment Ser)ices% This 'ill help ocused e7pansion and capital raisin" in the said
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22FL MANA8EMENT
•
THE MANA8EMENT TEAM
Mr. Nirm)* 7)in4 6,)irm)n M)n)/in/ Director
Nirmal @ain# M!A CIIM# Ahmadabad and a 0hartered and 0ost Accountant# ounded India4s leadin" inancial ser)ices company India Inoline Ltd% in 5<# pro)idin" "lobally acclaimed inancial ser)ices in e8uities and commodities bro(in"# lie insurance and mutual unds distribution# amon" others%
Mr. 0 3en<)t)r)m)n4 E=ecuti>e Director
R /en(ataraman# co2promoter and ,7ecuti)e Director o India Inoline Ltd%# is a !% Tech C,lectronics and ,lectrical 0ommunications ,n"ineerin"# IIT Hhara"pur and an M!A CIIM !an"alore% &e joined the India Inoline board in @uly 5%
•
THE 1A0D F D20E6T0S
Apart rom Nirmal @ain and R /en(ataraman# the !oard o Directors o India Inoline Ltd% comprises
:
Mr. Ni*es, 3i<)msey4 2ndependent Director
Mr% /i(amsey# !oard member since February 9==< 2 a practicin" 0hartered Accountant and partner CHhimji Hun)erji 6 0o%# 0hartered Accountants# a member irm o &L! International# headed the audit
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department till 5= and thereater also handles inancial ser)ices# consultancy# in)esti"ations# mer"ers and ac8uisitions# )aluations etc
Mr S)t P)* J,)tt)r4 Non E=ecuti>e Director
Mr Sat Pal Hhattar# 2 !oard member since April 9==5 2 Presidential 0ouncil o Minority Ri"hts member# 0hairman o the !oard o Trustee o Sin"apore !usiness Federation# is also a lie trustee o SINDA# a non proit body# helpin" the under2pri)ile"ed Indians in Sin"apore% &e joined the India Inoline board in April 9==5% Mr Jr)nti Sin,)4 2ndependent Director
Mr% Hranti Sinha V !oard member since @anuary 9==< V completed his masters rom the A"ra Uni)ersity and started his career as a 0lass I oicer 'ith Lie Insurance 0orporation o India%
Mr Arun J. Pur>)r4 2ndependent Director
Mr% A%H% Pur)ar !oard member since March 9==G completed his Masters de"ree in commerce rom Allahabad Uni)ersity in 5?? and a diploma in !usiness Administration in 5?:%
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2nsur)nce
An entry into this se"ment helped complete the clientJs product bas(etE concurrently# it "raduated the 0ompany into a one stop retail inancial solutions pro)ider% To ensure ma7imum reach to customers across India# it has employed a multi pron"ed approach and reaches out to customers )ia our Net'or(# Direct and Ailiate channels% India Inoline 'as the irst corporate in India to "et the a"ency license in early 9==5%
2n>est n*ine
India Inoline has made in)estin" in Mutual unds and primary mar(et so eortless% $nly re"istration is needed% No paper'or( no 8ueues and No re"istration char"es% India Inoline oers a host o mutual und choices under one roo# bac(ed by in2depth research and ad)ice rom research house and tools coni"ured as in)estor riendly%
We)*t, M)n)/ement
The (ey to achie)in" a successul In)estment Portolio is to ha)e a careully planned inancial strate"y based on a thorou"h understandin" o the clientJs in)estment needs and ris( appetite% The IIFL Pri)ate +ealth Mana"ement Team o inancial e7perts 'ill recommend an appropriate inancial strate"y to eecti)ely meet customer4s in)estment re8uirements%
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Asset M)n)/ement
India Inoline is a leadin" pan2India mutual und distribution house associated 'ith leadin" asset mana"ement companies% It operates primarily in the retail se"ment le)era"in" its e7istin" distribution net'or( to reach prospecti)e clients% It has recei)ed the in2principle appro)al to set up a mutual und%
Port+o*io M)n)/ement
IIFL Portolio Mana"ement Ser)ice is a product 'herein an e8uity in)estment portolio is created to suit the in)estment objecti)es o a client% India Inoline in)ests the client4s resources into stoc(s rom dierent sectors# dependin" on client4s ris(2return proile% This ser)ice is particularly ad)isable or in)estors 'ho cannot aord to "i)e time or donJt ha)e that e7pertise or day2to2day mana"ement o their e8uity portolio%
Ne-s*etters
As a subscriber to the Daily Mar(et Strate"y# client4s "et research reports o India Inoline research team on a priority basis% The Indiainoline +ee(ly Ne'sletter is the lashbac( or the 'ee( "one by% A 'ee(ly outloo( coupled 'ith the best o the 'eb stories rom Indiainoline and lin(s to important in)estment ideas# Leader Spea( and eatures is deli)ered in the client4s inbo7 e)ery Friday e)enin"%
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Sc,eme Sn)ps,ot 62 Santosh Hamath
6)te/ory ,8uity
Fund M)n)/er Anil Prabhudas
Sub56)te/ory Sectoral2FM0.
Address Le)el B# +oc(hardt To'ers# !andra 2 Hurla 0omple7# !andra C,ast# Mumbai 2 B===<5
Type $pen Min. 2n>estment90s: <===
P,one 5 99
0e/istr)rs Fran(lin Templeton Asset Mana"ement CIndia P)t% Ltd% L)unc, D)te 5<2MAR2
Sc,eme bjecti>e See(s to pro)ide lon" term capital appreciation by in)estin" primarily in shares o companies operatin" in the FM0. industry%
sset llocation ?%5;
,8uity Shares 0all And $ther Assets
9%GB
0orporate Debt * !onds
5%=;
As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
Nestle India Limited
5B%:
I T 0 Limited
55%9:
Asian Paints Limited
%9<
Pidilite Industries Limited
?%BG
Marico Limited
?%=G
B% 2n+r)structure Sector T)t) 2n+r)structure Fund Sc,eme Sn)ps,ot
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62 /ed Pra(ash 0hatur)edi
6)te/ory ,8uity
Fund M)n)/er M /enu"opal
Sub56)te/ory Sectoral2Inrastructure
Address Fort &ouse# 995 Dr% D% N% Road# Mumbai 2 B== ==5
Type $pen Min. 2n>estment90s: <===
P,one 5 99
Tot)* Assets90s.Mn: 5G:9%; F)= 5 99
0e/istr)rs 0omputer A"e Mana"ement Ser)ices P)t%Ltd% L)unc, D)te 9<2N$/2=B
Sc,eme bjecti>e The in)estment objecti)e o the Scheme is to pro)ide income distribution and * or medium to lon" term capital "ains by in)estin" predominantly in e8uity*e8uity related instrument o the companies in the inrastructure sectors%
sset llocation <%99
,8uity Shares
B%:G
0ash And $ther Assets As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
I 0 I 0 I !an( Limited
B%:
0rompton .rea)es Limited
B%:
0ash And $ther Assets
B%:G
$il 6 Natural .as 0orporation Limited
B%:=
& D F 0 !an( Limited
B%
<% Po-er Sector5 0e*i)nce Di>ersi+ied Po-er Sector Fund Sc,eme Sn)ps,ot
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62 H Raja"opal
6)te/ory ,8uity
Fund M)n)/er Sunil Sin"hania
Sub56)te/ory Sectoral2Po'er
Address $ne Indiabulls 0entre# To'er5# @upiter Mills 0ompound# GB5# Senapati !apat Mar"# ,lphinstone
Type $pen
Road# Mumbai 2 B== =5;
Min. 2n>estment90s: <===
P,one 5 99 ;= B?==
Tot)* Assets90s.Mn: <=955%9
F)= 5 99 ;=B5 BG
0e/istr)rs Har)y 0omputershare Pri)ate Limited
-ebsite http**'''%reliancemutual%com*
L)unc, D)te 92MAR2=B
Sc,eme bjecti>e The primary in)estment objecti)e o the scheme is to see( to "enerate continous returns by acti)ely in)estin" in e8uity and e8uity related or i7ed income securities o Po'er and other associated companies
sset llocation B%?<
,8uity Shares Deri)ati)es#0ash And $ther Recei)ables
<%;<
As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
$ther ,8uities
G%;;
0ummins India Limited
?%;9
Torrent Po'er Limited
<%
I 0 I 0 I !an( Limited
<%BG
0ash And $ther Assets And Deri)ati)es
<%;<
?% Tec,no*o/y Sector5 Fr)n<*in 2n+otec, Fund Sc,eme Sn)ps,ot
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6HAPTE0 32 F2ND2N8S4 SU88EST2NS 6N6LUS2N
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ANNEKU0E 5 2 TE0M2NL8Y Mutu)* Fund An in)estment tool that pools in in)estments made by people and that
corpus is proessionally mana"ed by urther in)estin" as per the type o und that4s bein" operated% The intention is to loat money in the mar(et by o'nin" assets components o many companies at the same meetin" the assurances made to in)estors% There is no obli"ation 'hatsoe)er or assured returns% NA35A cumulati)e mar(et )alue o total assets component o its liabilities% It4s
actually the measure o 'hat each shareholder 'ould a8uire i the assets o the company are li8uidated% No5Lo)d +unds 2 there is no commission component present to enter and e7it
o the und o'nership% It4s a ull in)ol)ement o the corpus% ELSS 2 ,8uity lin(ed sa)in"s scheme is a scheme 'ith a ta7 rebate allo'ed as
per the Sec GG in the Indian income ta7 act# 5?5%It pro)ides the in)estors 'ith the opportunity to sa)e "ains on capital throu"h in)estments made in MFs% 2nde= Funds 2 An interestin" scheme that tries to replicate the beha)ior o the
particular stoc( inde7# that is o interest% The portolio o the und 'ould majorly consist o e8uities listed in that inde7% Sector Funds 2 An MF scheme that has its portolio chart o companies that belon" to a certain sector# say $il% This is a hi"h2ris( und# as the perormance o that
sector 'ould directly relect in the unds NA/% So# here 'e are 'ith the di)erse mar(et o Mutual Funds% ,ach one claimin" their USP% +hile MFs certainly are N$T the saest# but they are relati)ely more sae than the direct in)ol)ement in the e8uity mar(et# "i)en that act that majority o the in)estors are either ill2inormed or not inormed about the 'ay the mar(ets mo)e%
So 'hat e7actly ma(es MFs the ri"ht (ind o und mana"ement tool# espy in a country li(e IndiaX A country li(e India or or that matter any de)elopin" country has some basic problems 'hich pre)ent the inormation to be a)ailable reely and that too in an accessible ashion# so 'ith a situation li(e that# a proessionally mana"ed
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unds% I one "ets married# one mi"ht need to compromise one4s ris( tolerance and desired returns 'ith that o the spouse% This could tri""er o the need to e7it% A m)jor c,)n/e in )ny b)sic )ttribute o+ t,e +und
'hen the und chan"es any basic attribute as mentioned by it in its oer documents# the in)estors ha)e a choice o "ettin" out o it% ,)en S,!I has pro)ided or an e7it route bein" made a)ailable to the in)estors% 0han"es li(e a chan"e in Asset Mana"ement 0ompany or in in)estment style o und or chan"e o structure say rom closed2end to open2end etc% are "ood enou"h reasons or an in)estor to consider s'itchin" or e7itin" rom it as they are certainly li(ely to aect the und in a major 'ay% Fund doesnt comp*y -it, its objecti>e
$ne o the important parameters in the selection o the und is ali"nment o the ris( proiles o the in)estor and und% The objecti)e o the und says a lot about ho' the und plans to in)est% I the objecti)e is not bein" complied 'ith# it is one o the e7it points 'orth considerin"% For e7ample# the three unds discussed abo)e# Alliance ,8uity# !irla Ad)anta"e and IN. .ro'th all claim to be di)ersiied e8uity unds yet they had hu"e e7posures to select I0, sector scripts that not only added )olatility than is e7pected out o di)ersiied unds but also in a 'ay# 'ent a"ainst their stated objecti)e% T,e FundOs E=pense 0)tio 0ises a small rise in an e7pense ratio is not a bi" deal# ho'e)er a si"niicant rise can result in substantial reduction o yields and so it 'ould be better to e7it the und% In the case o bond unds or money mar(et unds# it is hi"hly unli(ely that the und can increase its returns enou"h to justiy an increase in the undJs e7penses% T,e Fund M)n)/er ,)s c,)n/ed
a simple chan"e o und mana"ers# in itsel# is not enou"h reason to sell a und on a short2term basis% I it is a passi)ely mana"ed und Cinde7 und# then one has little to no reason to 'orry% &o'e)er# i it is an acti)ely mana"ed und# then has to (eep the eyes open on the ne' mana"er% $bser)in" the styles# stoc( pic(in" and ris(s underta(en by the ne' mana"er is important or it discloses a lot about ho' the und
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mi"ht are in the uture% I satisied# one 'ill ha)e no reason to complain later but the process needs time and so an in)estor has to obser)e the und mana"er or some time beore one ta(es a decision% Enou/, ,)s been e)rned
&o'e)er# nothin" is as important as to rein the horses in time% The primary principle behind saety o in)estment is to ta(e ris(s that can be tolerated% The principle also is speciic on the e7pectations that the in)estor must ha)e rom any in)estment% @ust as it is important to set realistic tar"ets that one hopes to achie)e rom the in)estment# it is also important to e7it 'hen tar"et as e7pected has been achie)ed irrespecti)e o the act that it mi"ht be "eneratin" better returns in a short2term% The abo)e list is certainly not e7hausti)e and indi)iduals 'ill ha)e other better reasons to 8uit as 'ell% It4s just that most don4t (no' 'hen to apply thou"ht and so these 'ould come in handy%
T2PS F0 MUTUAL FUND 2N3EST0S 9SU88EST2NS:
These are the e' e7act as re"ards in)estment in MF4s ta(en rom the boo( 'ith ZMar(etin" or the =4s[ "i)en by the +all Street% 5% 0hec( your letter o oer o unds prospectus to "uard yoursel)es a"ainst any hidden ees% 9% ,nsue that the unds trac( record is the same as that o the current mana"ement ;% A)oid MF4s that char"e e7it ees at he bac( end door Cee s char"ed by MF rom the
unit holders at he time to redemption o the units%
B% !uy the unds 'ith no sale char"ed loads%Ca load is a char"e by the und 'hen in)estor buys it is called the entry load or 'hen he sells is called the e7it load% <% I the char"e it4s hea)y by the M F to discoura"e the in)estors rom ta(in" short positions in the unds units because too many in)estors sell their units at a time then the und has to sell its holdin"s to meet the obli"ations that yield into )ital o
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the ines o)erall return% Most short unds li(e "uilt unds Cthese are the unds the in)est only in "o)ernment securities and treasury bills thus the in)estors ha)e an opportunities to buy ris( ree securities% These unds yield a better return than a money mar(et und% It is "ood or the in)estors 'ho desire saety o principal amount% Money mar(et unds Cthese unds in )ie's in money mar(et instruments such as treasury bills# "o)t% bonds# certiicates o ban( deposits# commercial deposits% They char"e no loads# ho'e)er loads are limited by S,!I to :% ?% 0hec( und4s perormance in bear as 'ell a the bull mar(et% :% .uard und ris( by chec(in" its portolio or di)ersiication )olatility%
JEY STEPS F0 F2NAN62AL PLANN2N8 2NSU0E YU0SELF 1EF0E YU 2N3EST
Insurance is the pre2re8uisite o all in)estments the main purpose o insurance is to protect your current lie style ater retirement% It acts as a shield a"ainst all type o inancial ris(s% In)estor has to reali1e that insurance is more or sae "uardin" a"ainst ris( aced in lie rather than bein" an in)estment or proit%
6HSE S2MPLE 2N3ESTMENT
$ur daily lie is ull o complications the day2to2day "rind lea)es us 'ith little ener"y to (eep trac( o our inancial in)estments% That is copy an in)estor should choose
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simple 6 uncomplicated instruments% Thereore he has to in)est the hassle ree instruments%
UT2L2E THE PWE0 F 6MPUND2N8
0ompoundin" means payment o interest on accumulated interest% Thus money earned by you 'or(s hard 6 earns more money or you% This implies that not only the principal earns income or you but interest "enerated by you also earns income% $ne important actor is the time period% Lon"er the time hi"her the beneit
2N3EST 2N 2NT0UMENTS THAT JEEP YU AHEAD F 2NFLAT2N
That silently creeps up rom behind 6 starts eatin" your hard earned sa)in"s e)en beore you reali1e the situation% An in)estor should loo( at the real return Cthe rate o return minus the rate o inlation 'hile considerin" an in)estment% &e should in)est in instruments# 'hich pro)ide proitable2post2inlation returns%
0EDU6E TAK N YU0 2N3ESTMENT
There are t'o realities in the lie% $ne is death 6 the other is ta7% It is ad)isable that in)estments should be so planned that least possible ta7 'ould be re8uired to be paid% Smart mo)e or the in)estor is to sa)e e)ery rupee rom ta7 man%
8 F0 STA1LE 0EAL2ST26 0ETU0NS
Stability o returns is more important that increased proit% Usually these are associated 'ith hi"h )olatile in)estment options li(e e8uities 6 e)en 'ith "o)ernment securities or "ilts as they also run hi"h mar(et ris(% The asset allocation is su""ested accordin" to the ris( proile o an in)estor% So in)est in the best option 6 "et the ma7imum returns%
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121L280APHY
www.njindiainvest.com www.moneycontrol.com www.amfiindia.com www.karvy.com www.valueresearchonline.com MUTUAL FUND P!DU"T AND #$%&"$#'''' TA(MAN AMF& "!U#$ )!!*
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A project report on MUTUAL FUNDS At Submitted by Ms. SWETHA. Y.P HT No !"#$%&'(!%%" Project submitted in p)rti)* +u*+i**ment +or T,e A-)rd + T,e De/ree + MASTE0 F 1US2NESS ADM2N2ST0AT2N T
SMAN2A UN23E0S2TY4 Hyder)b)d 5#%%%%( !%%&5!%$$
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DE6LA0AT2N
I hereby declare that this Project Report titled MUTUAL FUNDS submitted by me to the Department o !usiness Mana"ement# $%U%# &yderabad# is a bonaide 'or( underta(en by me and it is not submitted to any other Uni)ersity or Institution or the a'ard o any de"ree diploma * certiicate or published any time beore%
Name and Address o the Student S+,T&A%-%P
Si"nature o the Student S+,T&A%-%P
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6E0T2F26AT2N
This is to certiy that the Project Report title ,MUTUAL FUNDS submitted in partial ulilment or the a'ard o M!A Pro"ramme o Department o !usiness
Mana"ement#
$%U%
&yderabad#
'as
carried out by S+,T&A -%P under my "uidance% This has not been submitted to any other Uni)ersity or
Institution
or
the
a'ard
o
any
de"ree*diploma*certiicate%
Name and address o the .uide S&RA/ANT&I%N
Si"nature o the .uide S&RA/ANT&I%N
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6NTENTS
6,)pter No.
N)me o+ t,e concept
P)/e No.
Introduction Need o the study $bjecti)es o the study I Scope o the study Methodolo"y o the study Limitations o the study II
Re)ie' o Literature
III
Industry Proile
I/
0ompany Proile
/
Data analysis and interpretation
/I
Findin"s# Su""estions and 0onclusion
/II
!iblio"raphy
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6HAPTE0 2 5 2NT0DU6T2N
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2NT0DU6T2N A Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a common inancial "oal% The money thus collected is then in)ested in capital mar(et instruments such as shares# debentures and other securities% The income earned throu"h these in)estments and the capital appreciations reali1ed are shared by its unit holders in proportion to the number o units o'ned by them% Thus a Mutual Fund is the most suitable in)estment or the common man as it oers an opportunity to in)est in a di)ersiied# 2proessionally mana"ed bas(et o securities at a relati)ely lo' cost%
The project idea is to project mutual unds as the better a)enue or in)estment% Mutual und is producti)e pac(a"e or a lay2in)estor 'ith limited inances% Mutual und is a )ery old practice in U%S%# and it has made a recent entry into India% 0ommon man in India still inds 3!an(4 as a sae door or in)estment% This sho's that mutual unds ha)e not "ained a stron" oot2hold in his lie%
The project creates an a'areness that the mutual und is 'orthy in)estment practice% The )arious schemes o mutual unds pro)ide the in)estor 'ith a 'ide ran"e o in)estment options accordin" to his ris(2bearin" capacities and interest% !esides# they also "i)e a handy return to the in)estor% The project analyses )arious schemes o mutual und by ta(in" dierent mutual und schemes rom dierent AM04S% The uture challen"es or mutual unds in India are also considered%
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NEED F THE STUDY
The study basically made to educate the in)estors about Mutual Funds% Analy1e the )arious schemes to hi"hli"ht the ris( and return o di)ersity o in)estment that mutual unds oer% Thus# throu"h the study one 'ould understand ho' a common man could ruitully con)ert a pittance into "reat penny by 'isely in)estin" into the ri"ht scheme accordin" to his ris(2 ta(in" abilities% A small in)estor is the one 'ho is able to correctly plan 6 decide in 'hich proitable 6 sae instrument to in)est% To loc( up one4s hard earned money in a sa)in"s ban(4s account is not enou"h to counter the monster o inlation% Usin" simple concepts o di)ersiication# po'er o compound interest# stable returns 6 limited e7posure to e8uity in)estment# one can ma7imi1e his returns on in)estments 6 multiply one4s sa)in"s%
In)estment is a serious proposition one has to loo( into )arious actors beore decidin" on the instruments in 'hich to in)est% To sa)e is not enou"h% $ne must in)est 'isely 6 "et ma7imum returns% $ne must plan in)estment in such a 'ay that his in)estment objecti)es are satisied% A sound in)estment is one 'hich "i)es the in)estor reasonable returns 'ith a proper proitable mana"ement
This report "i)es the details about )arious in)estment objecti)es desired by an in)estor# details about the concept 6 'or(in" o mutual und%
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17E6T23ES F THE STUDY
•
To understand the concept o Mutual Funds%
•
To study the dierent Sectoral Mutual Funds in India%
•
To analyse the perormance o dierent sectoral mutual unds%
•
To identiy the best Sectoral Mutual Funds to in)est in India%
•
To su""est the best mutual unds or in)estors%
S6PE F THE STUDY
No' a days# there is a lot o scope or the mutual unds% The Financial mana"ers ha)e to decide 'hether to in)est in the Shares# bonds# debentures# real estate# "old and other
0ommodities to "et the ma7imum beneits or unds% The inancial mana"ers
should also reduce the ris( rom the In)estments% The scope o the study is conirmed to the sectoral unds a)ailable in Indian mutual unds%
0ESEA06H METHDL8Y In the present project 'or( the data as been collected rom a)ailable source that is secondary data li(e 'ebsites# Ne'spapers and ma"a1ines% The sample si1e ta(en is o : dierent sectoral unds
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S)mp*in/ Desi/n Samplin" method use is non probabilistic jud"mental samplin"% The Mutual Fund Scheme or the study ha)e been selected based on ollo'in" ; criteria
$
Type o+ t,e sc,eme
! ;
Minimum Assets Under M/mt. 2nception D)te
pen5ended Sector)* Funds9/ro-t,: 0s. #%% 6rore Prior to $st Apri*4 !%%'
.ro'th option or the entire selected scheme has been considered%
0ese)rc, Desi/n $. 1enc,m)r< 2nde= For this study the <= shares mar(et inde7 S6P 0N> NIFT- has been used as the mar(et inde7% !. Period o+ study Period o study has been ta(en as < years startin" rom 5st April# 9==? to 5=th @uly 9=5=% ;. 0is< Free 0)te + 0eturn Ris( ree rate o return reers to that minimum return on an in)estment that has no ris( o loosin" the in)estment o)er 'hich it is earned% For this purpose o this study ris( ree rate o return is represented by 5 days Treasury bill%
L2M2TAT2NS
5% The analysis is based on historical data and thus indicates the past perormance 'hich may not al'ays be indicati)e o the uture perormance%
9% Dierent schemes consider dierent mar(et indices as their benchmar(s# but or the purpose o uniormity in the study all schemes ha)e to be compared a"ainst same benchmar( inde7%
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;% Sharpe ratio Cin its simplest orms that the relationship bet'een ris( and return is linear and remain linear throu"hout its entire ran"e% /arious research 'or(s conducted in this re"ard sho' that the relationship is not as simple as 0apital Mar(et theory 'ould su""est% This is an inherent 'ea(ness o capital Asset Pricin" Model%
B% The time period considered by the study is only three yearsE a lar"er period could ha)e ensured co)era"e o a ull mar(et cycle# thus "i)in" a more real picture o the perormance o the schemes%
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6HAPTE0 22 5 0E32EW F L2TE0ATU0E
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Mutu)* Funds An o>er>ieA Mutual Fund is a trust that pools the sa)in"s o a number o in)estors 'ho share a common inancial "oal% The money thus collected is in)ested by the und mana"er in dierent types o securities dependin" upon the objecti)e o the scheme% These could ran"e rom shares to debentures to money mar(et instruments% The income earned throu"h these in)estments and the capital appreciations reali1ed by the scheme are shared by its unit holders in proportion to the number o units o'ned by them Cpro rata% Thus a Mutual Fund is the most suitable in)estment or the common man as it oers an opportunity to in)est in a di)ersiied# proessionally mana"ed portolio at a relati)ely lo' cost% Anybody 'ith an in)estible surplus o as little as a e' thousand rupees can in)est in Mutual Funds% ,ach Mutual Fund scheme has a deined in)estment objecti)e and strate"y%
A mutual und is the ideal in)estment )ehicle or today4s comple7 and modern inancial scenario% Mar(ets or e8uity shares# bonds and other i7ed income instruments# real estate# deri)ati)es and other assets ha)e become mature and inormation dri)en% Price chan"es in these assets are dri)en by "lobal e)ents occurrin" in ara'ay places% A typical indi)idual is unli(ely to ha)e the (no'led"e# s(ills# inclination and time to (eep trac( o e)ents# understand their implications and act speedily% An indi)idual also inds it diicult to (eep trac( o o'nership o his assets# in)estments# bro(era"e dues and ban( transactions etc%
A mutual und is the ans'er to all these situations% It appoints proessionally 8ualiied and e7perienced sta that mana"es each o these unctions on a ull time basis% The lar"e pool o money collected in the und allo's it to hire such sta at a )ery lo' cost to each in)estor%
In eect# the mutual und )ehicle e7ploits economies o scale in all three areas 2 research# in)estments and transaction processin"% +hile the concept o indi)iduals
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comin" to"ether to in)est money collecti)ely is not ne'# the mutual und in its present orm is a 9= th century phenomenon%
In act# mutual unds "ained popularity only ater the Second +orld +ar% .lobally# there are thousands o irms oerin" tens o thousands o mutual unds 'ith dierent in)estment objecti)es% Today# mutual unds collecti)ely mana"e almost as much as or more money as compared to ban(s%
A drat oer document is to be prepared at the time o launchin" the und% Typically# it pre speciies the in)estment objecti)es o the und# the ris( associated# the costs in)ol)ed in the process and the broad rules or entry into and e7it rom the und and other areas o operation% In India# as in most countries# these sponsors need appro)al rom a re"ulator# S,!I CSecurities e7chan"e !oard o India in our case% S,!I loo(s at trac( records o the sponsor and its inancial stren"th in "rantin" appro)al to the und or commencin" operations%
A sponsor then hires an asset mana"ement company to in)est the unds accordin" to the in)estment objecti)e% It also hires another entity to be the custodian o the assets o the und and perhaps a third one to handle re"istry 'or( or the unit holders Csubscribers o the und%
In the Indian conte7t# the sponsors promote the Asset Mana"ement 0ompany also# in 'hich it holds a majority sta(e% In many cases a sponsor can hold a 5== sta(e in the Asset Mana"ement 0ompany CAM0% ,%"% !irla .lobal Finance is the sponsor o the !irla Sun Lie Asset Mana"ement 0ompany Ltd%# 'hich has loated dierent mutual unds schemes and also acts as an asset mana"er or the unds collected under the schemes
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History o+ Mutu)* Fund in 2ndi) The mutual und industry in India started in 5?; 'ith the ormation o Unit Trust o India# at the initiati)e o the .o)ernment o India and Reser)e !an( the% The history o mutual unds in India can be broadly di)ided into our distinct phases
First P,)se ? $&'"5@( Unit Trust o India CUTI 'as established on 5?; by an Act o Parliament% It 'as set up by the Reser)e !an( o India and unctioned under the Re"ulatory and administrati)e control o the Reser)e !an( o India% In 5:G UTI 'as de2lin(ed rom the R!I and the Industrial De)elopment !an( o India CID!I too( o)er the re"ulatory and administrati)e control in place o R!I% The irst scheme launched by UTI 'as Unit Scheme 5?B% At the end o 5GG UTI had Rs%?#:== crores o assets under mana"ement
Second P,)se ? $&@(5$&&; 9Entry o+ Pub*ic Sector Funds: 5G: mar(ed the entry o non2 UTI# public sector mutual unds set up by public sector ban(s and Lie Insurance 0orporation o India CLI0 and .eneral Insurance 0orporation o India C.I0% S!I Mutual Fund 'as the irst non2 UTI Mutual Fund established in @une 5G: ollo'ed by 0anban( Mutual Fund CDec G:# Punjab National !an( Mutual Fund CAu" G# Indian !an( Mutual Fund CNo) G# !an( o India C@un =# !an( o !aroda Mutual Fund C$ct 9% LI0 established its mutual und in @une 5G 'hile .I0 had set up its mutual und in December 5=%
At the end o 5;# the mutual und industry had assets under mana"ement o Rs%B:#==B crores%
T,ird P,)se ? $&&;5!%%; 9Entry o+ Pri>)te Sector Funds: +ith the entry o pri)ate sector unds in 5;# a ne' era started in the Indian mutual und industry# "i)in" the Indian in)estors a 'ider choice o und amilies% Also# 5; 'as the year in 'hich the irst Mutual Fund Re"ulations came into bein"# under 'hich all mutual unds# e7cept UTI 'ere to be re"istered and "o)erned% The erst'hile Hothari http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Pioneer Cno' mer"ed 'ith Fran(lin Templeton 'as the irst pri)ate sector mutual und re"istered in @uly 5;%
The 5; S,!I CMutual Fund Re"ulations 'ere substituted by a more comprehensi)e and re)ised Mutual Fund Re"ulations in 5?% The industry no' unctions under the S,!I CMutual Fund Re"ulations 5?%
The number o mutual und houses 'ent on increasin"# 'ith many orei"n mutual unds settin" up unds in India and also the industry has 'itnessed se)eral mer"ers and ac8uisitions% As at the end o @anuary 9==;# there 'ere ;; mutual unds 'ith total assets o Rs% 5#95#G=< crores% The Unit Trust o India 'ith Rs%BB#
Fourt, P,)se ? since Febru)ry !%%;
In February 9==;# ollo'in" the repeal o the Unit Trust o India Act 5?; UTI 'as biurcated into t'o separate entities% $ne is the Speciied Underta(in" o the Unit Trust o India 'ith assets under mana"ement o Rs%9#G;< crores as at the end o @anuary 9==;# representin" broadly# the assets o US ?B scheme# assured return and certain other schemes% The Speciied Underta(in" o Unit Trust o India# unctionin" under an administrator and under the rules ramed by .o)ernment o India and does not come under the pur)ie' o the Mutual Fund Re"ulations%
The second is the UTI Mutual Fund Ltd# sponsored by S!I# PN!# !$! and LI0% It is re"istered 'ith S,!I and unctions under the Mutual Fund Re"ulations% +ith the biurcation o the erst'hile UTI 'hich had in March 9=== more than Rs%:?#=== crores o assets under mana"ement and 'ith the settin" up o a UTI Mutual Fund# conormin" to the S,!I Mutual Fund Re"ulations# and 'ith recent mer"ers ta(in" place amon" dierent pri)ate sector unds# the mutual und industry has entered its current phase o consolidation and "ro'th% As at the end o March# 9==?# there 'ere 9 unds%
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Future Scen)rio
The asset base 'ill continue to "ro' at an annual rate o about ;= to ;< o)er the ne7t e' years as in)estor4s shit their assets rom ban(s and other traditional a)enues% Some o the older public and pri)ate sector players 'ill either close shop or be ta(en o)er%
$ut o ten public sector players i)e 'ill sell out# close do'n or mer"e 'ith stron"er players in three to our years% In the pri)ate sector this trend has already Started 'ith t'o mer"ers and one ta(eo)er% &ere too some o them 'ill do'n their shutters in the near uture to come%
!ut this does not mean there is no room or other players% The mar(et 'ill 'itness a lurry o ne' players enterin" the arena% There 'ill be a lar"e number o oers rom )arious asset mana"ement companies in the time to come% Some bi" names li(e Fidelity# Principal# $ld Mutual etc% are loo(in" at Indian mar(et seriously% $ne important reason or it is that most major players already ha)e presence here and hence these bi" names 'ould hardly li(e to "et let behind%
The mutual und industry is a'aitin" the introduction o deri)ati)es in India as this 'ould enable it to hed"e its ris( and this in turn 'ould be relected in its Net Asset /alue CNA/%
S,!I is 'or(in" out the norms or enablin" the e7istin" mutual und schemes to trade in deri)ati)es% Importantly# many mar(et players ha)e called on the Re"ulator to initiate the process immediately# so that the mutual unds can implement the chan"es that are re8uired to trade in Deri)ati)es%
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0ecent trends in mutu)* +und industry
The most important trend in the mutual und industry is the a""ressi)e e7pansion o the orei"n o'ned mutual und companies and the decline o the companies loated by nationali1ed ban(s and smaller pri)ate sector players%
Many nationali1ed ban(s "ot into the mutual und business in the early nineties and "ot o to a "ood start due to the stoc( mar(et boom pre)ailin" then% These ban(s did not really understand the mutual und business and they just )ie'ed it as another (ind o ban(in" acti)ity% Fe' hired speciali1ed sta and "enerally chose to transer sta rom the parent or"ani1ations% The perormance o most o the schemes loated by these unds 'as not "ood% Some schemes had oered "uaranteed returns and their parent or"ani1ations had to bail out these AM0s by payin" lar"e amounts o money as the dierence bet'een the "uaranteed and actual returns%
The ser)ice le)els 'ere also )ery bad% Most o these AM0s ha)e not been able to retain sta# loat ne' schemes etc% and it is doubtul 'hether# barrin" a e' e7ceptions# they ha)e serious plans o continuin" the acti)ity in a major 'ay% The e7perience o some o the AM0s loated by pri)ate sector Indian companies 'as also )ery similar% They 8uic(ly reali1ed that the AM0 business is a business# 'hich ma(es money in the lon" term and re8uires deep2poc(eted support in the intermediate years% Some ha)e sold out to orei"n o'ned companies# some ha)e mer"ed 'ith others and there is "eneral restructurin" "oin" on%
The orei"n o'ned companies ha)e deep poc(ets and ha)e come in here 'ith the e7pectation o a lon" haul% They can be credited 'ith introducin" many ne' practices such as ne' product inno)ation# sharp impro)ement in ser)ice standards and disclosure# usa"e o technolo"y# bro(er education and support etc% In act# they ha)e
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orced the industry to up"rade itsel and ser)ice le)els o or"ani1ations li(e UTI ha)e impro)ed dramatically in the last e' years in response to the competition pro)ided by these%
Types o+ Mutu)* Funds Mutual und schemes may be classiied on the basis o its structure and its in)estment objecti)e%
1y Structure pen5ended Funds An open2end und is one that is a)ailable or subscription all throu"h the year% These do not ha)e a i7ed maturity% In)estors can con)eniently buy and sell units at Net Asset /alue CNA/ related prices% The (ey eature o open2end schemes is li8uidity%
6*osed5ended Funds A closed2end und has a stipulated maturity period 'hich "enerally ran"in" rom ; to 5< years% The und is open or subscription only durin" a speciied period% In)estors can in)est in the scheme at the time o the initial public issue and thereater they can buy or sell the units o the scheme on the stoc( e7chan"es 'here they are listed% In order to pro)ide an e7it route to the in)estors# some close2ended unds "i)e an option o sellin" bac( the units to the Mutual Fund throu"h periodic repurchase at NA/ related prices% S,!I Re"ulations stipulate that at least one o the t'o e7it routes is pro)ided to the in)estor%
2nter>)* Funds Inter)al unds combine the eatures o open2ended and close2ended schemes% They are open or sale or redemption durin" pre2determined inter)als at NA/ related prices %
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1y 2n>estment bjecti>e5
8ro-t, Funds The aim o "ro'th unds is to pro)ide capital appreciation o)er the medium to lon"2 term% Such schemes normally in)est a majority o their corpus in e8uities% It has been pro)en that returns rom stoc(s# ha)e outperormed most other (ind o in)estments held o)er the lon" term% .ro'th schemes are ideal or in)estors ha)in" a lon"2term outloo( see(in" "ro'th o)er a period o time%
2ncome Funds The aim o income unds is to pro)ide re"ular and steady income to in)estors% Such schemes "enerally in)est in i7ed income securities such as bonds# corporate debentures and .o)ernment securities% Income Funds are ideal or capital stability and re"ular income%
1)*)nced Funds The aim o balanced unds is to pro)ide both "ro'th and re"ular income% Such schemes periodically distribute a part o their earnin" and in)est both in e8uities and i7ed income securities in the proportion indicated in their oer documents% In a risin" stoc( mar(et# the NA/ o these schemes may not normally (eep pace# or all e8ually 'hen the mar(et alls% These are ideal or in)estors loo(in" or a combination o income and moderate "ro'th%
Money M)r<et Funds The aim o money mar(et unds is to pro)ide easy li8uidity# preser)ation o capital and moderate income% These schemes "enerally in)est in saer short2term instruments such as treasury bills# certiicates o deposit# commercial paper and inter2ban( call money% Returns on these schemes may luctuate dependin" upon the interest rates pre)ailin" in the mar(et% These are ideal or 0orporate and indi)idual in)estors as a means to par( their surplus unds or short periods% 5B http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Lo)d Funds A Load Fund is one that char"es a commission or entry or e7it% That is# each time you buy or sell units in the und# a commission 'ill be payable% Typically entry and e7it loads ran"e rom 5 to 9% It could be 'orth payin" the load# i the und has a "ood perormance history%
No5Lo)d Funds A No2Load Fund is one that does not char"e a commission or entry or e7it% That is# no commission is payable on purchase or sale o units in the und% The ad)anta"e o a no load und is that the entire corpus is put to 'or(%
t,er Sc,emes5
T)= S)>in/ Sc,emes These schemes oer ta7 rebates to the in)estors under speciic pro)isions o the Indian Income Ta7 la's as the .o)ernment oers ta7 incenti)es or in)estment in speciied a)enues% In)estments made in ,8uity Lin(ed Sa)in"s Schemes C,LSS and Pension Schemes are allo'ed as deduction u*s GG o the Income Ta7 Act# 5?5% The Act also pro)ides opportunities to in)estors to sa)e capital "ains u*s
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Speci)* Sc,emes
•
2ndustry Speci+ic Sc,emes
Industry Speciic Schemes in)est only in the industries speciied in the oer document% The in)estment o these unds is limited to speciic industries li(e InoTech# FM0.# and Pharmaceuticals etc%
•
2nde= Sc,emes
Inde7 Funds attempt to replicate the perormance o a particular inde7 such as the !S, Sense7 or the NS, <=
•
Sector)* Sc,emes
Sectoral Funds are those# 'hich in)est e7clusi)ely in a speciied industry or a "roup o industries or )arious se"ments such as JAJ .roup shares or initial public oerin"s%
•
6ommodities Funds
0ommodities unds speciali1e in in)estin" in dierent commodities directly or throu"h commodities uture contracts% Speciali1ed unds may in)est in a sin"le commodity or a commodity "roup such as edible oil or rains# 'hile di)ersiied commodity unds 'ill spread their assets o)er many commodities
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RISK HIERARCHY OF MUTUAL FUNDS
Money Market Funds
Gilt Funds
Debt Funds
Equity Funds "ybrid Funds
Flexible sset allocation Funds
!!ressive Growth Funds
Growth Funds
"i!h #ield Debt Funds
$isk %evel
Diversified Equity Funds
Index Funds
Value Funds
Focused Debt Funds
Money Market Funds
Gilt Funds
Diversified Debt Funds
Growth Income and funds Balanced Funds
Equity Income Funds
&y'e of Fund
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TA!L, 9 Sn)ps,ot o+ Mutu)* Fund Sc,emes Mutu)* Fund Type
bjecti>e
0is<
2n>estment s,ou*d Port+o*io W,o in>est
Those 'ho Treasury !ills# par( their Li8uidity K 0ertiicate o unds in Moderate Money Deposits# current Income K Ne"li"ible M)r<et 0ommercial accounts or Reser)ation o Papers# 0all short2term 0apital Money ban( deposits S,ort5 term Funds 9F*o)tin/ 5 s,ort5 term:
Li8uidity K Moderate Income
1ond Funds
Re"ular 9F*o)tin/ 5 Lon/5 term:
Income
8i*t Funds
Security 6 Income
0all Money# 0ommercial Papers# Those 'ith Little Treasury !ills# surplus Interest Rate 0Ds# Short2 short2term term unds .o)ernment securities%
2n>estment ,orion
9 days 2 ; 'ee(s
; 'ee(s 2 ; months
Predominantly Debentures# 0redit Ris( Salaried 6 .o)ernment More than 2 59 6 Interest conser)ati)e securities# months Rate Ris( in)estors 0orporate !onds Salaried 6 Interest Rate .o)ernment conser)ati)e 59 months 6 more Ris( securities in)estors A""ressi)e in)estors 'ith lon" term out loo(%
; years plus
To "enerate returns that are Portolio NA/ )aries 2nde= commensurate indices li(e A""ressi)e 'ith inde7 Funds 'ith returns o !S,# NIFT- in)estors% perormance respecti)e etc indices
; years plus
EBuity Funds
Lon"2term 0apital Appreciation
&i"h Ris(
Stoc(s
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1)*)nced Funds
.ro'th 6 Re"ular Income
!alanced ratio 0apital o e8uity and Mar(et Ris( debt unds to Moderate 6 and Interest ensure hi"her A""ressi)e Rate Ris( returns at lo'er ris(
9 years plus
1ene+its o+ Mutu)* Fund in>estment
$. Pro+ession)* M)n)/ement Mutual Funds pro)ide the ser)ices o e7perienced and s(illed proessionals# bac(ed by a dedicated in)estment research team that analyses the perormance and prospects o companies and selects suitable in)estments to achie)e the objecti)es o the scheme%
!. Di>ersi+ic)tion
Mutual Funds in)est in a number o companies across a broad cross2section o
industries and sectors% This di)ersiication reduces the ris( because seldom do all stoc(s decline at the same time and in the same proportion% -ou achie)e this di)ersiication throu"h a Mutual Fund 'ith ar less money than you can do on your o'n%
;. 6on>enient Administr)tion In)estin" in a Mutual Fund reduces paper'or( and helps you a)oid many problems such as bad deli)eries# delayed payments and ollo' up 'ith bro(ers and companies% Mutual Funds sa)e your time and ma(e in)estin" easy and con)enient%
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$)er a medium to lon"2term# Mutual Funds ha)e the potential to pro)ide a
hi"her return as they in)est in a di)ersiied bas(et o selected securities%
#. Lo- 6osts
Mutual Funds are a relati)ely less e7pensi)e 'ay to in)est compared to directly
in)estin" in the capital mar(ets because the beneits o scale in bro(era"e# custodial and other ees translate into lo'er costs or in)estors%
'. LiBuidity In open2end schemes# the in)estor "ets the money bac( promptly at net asset )alue related prices rom the Mutual Fund% In closed2end schemes# the units can be sold on a stoc( e7chan"e at the pre)ailin" mar(et price or the in)estor can a)ail o the acility o direct repurchase at NA/ related prices by the Mutual Fund%
(. Tr)nsp)rency In)estors "et re"ular inormation on the )alue o your in)estment in addition to disclosure on the speciic in)estments made by the scheme# the proportion in)ested in each class o assets and the und mana"erJs in)estment strate"y and outloo(%
@. F*e=ibi*ity Throu"h eatures such as re"ular in)estment plans# re"ular 'ithdra'al plans and di)idend rein)estment plans# one can systematically in)est or 'ithdra' unds accordin" to your needs and con)enience%
&. A++ord)bi*ity In)estors indi)idually may lac( suicient unds to in)est in hi"h2"rade stoc(s% A mutual und because o its lar"e corpus allo's e)en a small in)estor to ta(e the beneit o its in)estment strate"y
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$%.We** 0e/u*)ted All Mutual Funds are re"istered 'ith S,!I and they unction 'ithin the pro)isions o strict re"ulations desi"ned to protect the interests o in)estors% The operations o Mutual Funds are re"ularly monitored by S,!I%
Limit)tion o+ Mutu)* Fund 2n>estment
$. No 6ontro* >er 6ost An In)estor in mutual und has no control o)er the o)erall costs o in)estin"% &e pays an in)estment mana"ement ee C'hich is a percenta"e o his in)estments as lon" as he remains in)ested in und# 'hether the und )alue is risin" or declinin"% &e also has to pay und distribution costs# 'hich he 'ould not incur in direct in)estin"% &o'e)er this only means that there is a cost to obtain the beneits o mutual und ser)ices% This cost is oten less than the cost o direct in)estin"%
!. No T)i*or5M)de Port+o*ios In)estin" throu"h mutual unds means dele"ation o the decision o portolio composition to the und mana"ers% The )ery hi"h net 'orth indi)iduals or lar"e corporate in)estors may ind this to be a constraint in achie)in" their objecti)es%
&o'e)er# most mutual unds help in)estors o)ercome this constraint by oerin" lar"e no% o schemes 'ithin the same und%
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;. M)n)/in/ A Port+o*io + Funds A)ailability o lar"e no% o unds can actually mean too much choice or the in)estors% &e may a"ain need ad)ice on ho' to select a und to achie)e his objecti)es% AMFI has ta(en initiati)e in this re"ard by startin" a trainin" and certiication pro"ram or prospecti)e Mutual Fund Ad)isors% S,!I has made this certiication compulsory or e)ery mutual und ad)isor interested in sellin" mutual und%
". T)=es Durin" a typical year# most acti)ely mana"ed mutual unds sell any'here rom 9=
to := percent o the securities in their portolios% I your und ma(es a proit on its sales# you 'ill pay ta7es on the income you recei)e# e)en i you rein)est the money you made%
#. 6ost o+ 6,urn The portolio o und does not remain constant% The e7tent to 'hich the portolio chan"es is a unction o the style o the indi)idual und mana"er i%e% 'hether he is a buy and hold type o mana"er or one 'ho a""ressi)ely churns the und% It is also dependent on the )olatility o the und si1e i%e% 'hether the und constantly recei)es resh subscriptions and redemptions% Such portolio chan"es ha)e associated costs o bro(era"e# custody ees etc% 'hich lo'ers the portolio return commensurately%
6onceptu)* b)c
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this ame is directly lin(ed to their superior stoc( selection s(ills% For mutual unds to "ro'# AM0s must be held accountable or their selection o stoc(s% In other 'ords# there must be some perormance indicator that 'ill re)eal the 8uality o stoc( selection o )arious AM0s% Return aloneund should not be itconsidered as the basisthe o measurement theund perormance o a mutual scheme# should also include ris( ta(en byothe mana"er because dierent unds 'ill ha)e dierent le)els o ris( attached to them% For e)aluatin" the perormance o selected Sectoral Mutual Fund schemes ris(2return relation models ha)e been used li(e C The Treynor Measure C The Sharpe Measure C @enson Model C Fama Model
T,e Treynor Me)sure
De)eloped by @ac( Treynor# this perormance measure e)aluates unds on the basis o TreynorJs Inde7% This Inde7 is a ratio o return "enerated by the und o)er and abo)e ris( ree rate o return C"enerally ta(en to be the return on securities bac(ed by the "o)ernment# as there is no credit ris( associated# durin" a "i)en period and systematic ris( associated 'ith it Cbeta% Symbolically# it can be represented as
TreynorJs Inde7 9Ti: 90i 5 0+:1i.
+here# 0i represents return on +und4 0+ is ris< +ree r)te o+ return )nd 1i is bet) o+ t,e +und.
All ris(2a)erse in)estors 'ould li(e to ma7imi1e this )alue% +hile a hi"h and positi)e TreynorJs Inde7 sho's a superior ris(2adjusted perormance o a und# a lo' and ne"ati)e TreynorJs Inde7 is an indication o una)orable perormance% 9; http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Method% This measure in)ol)es e)aluation o the returns that the und has "enerated )s% the returns actually e7pected out o the und "i)en the le)el o its systematic ris(% The surplus bet'een the t'o returns is called Alpha# 'hich measures the perormance o a und compared 'ith the actual returns o)er the period% Re8uired return o a und at a "i)en le)el o ris( C0i can be calculated as2
0i 0+ 1i 90m 5 0+:
+here# 0m is )>er)/e m)r<et return durin/ t,e /i>en period % Ater calculatin" it# )*p,) c)n be obt)ined by subtr)ctin/ reBuired return +rom t,e )ctu)* return o+ t,e +und% &i"her alpha represents superior perormance o the und and )ice )ersa%
Limitation o this model is that it considers only systematic ris( not the entire ris( associated 'ith the und and an ordinary in)estor can not miti"ate unsystematic ris(# as his (no'led"e o mar(et is primiti)e%
F)m) Mode* The ,u"ene Fama model is an e7tension o @enson model% This model compares the perormance# measured in terms o returns# o a und 'ith the re8uired return commensurate 'ith the total ris( associated 'ith it% The dierence bet'een these t'o is ta(en as a measure o the perormance o the und and is called net selecti)ity%
The net se*ecti>ity represents the stoc( selection s(ill o the und mana"er# as it is the e7cess return o)er and abo)e the return re8uired to compensate or the total ris( ta(en by the und mana"er% &i"her )alue o 'hich indicates that und mana"er has earned returns 'ell abo)e the return commensurate 'ith the le)el o ris( ta(en by him%
Re8uired return can be calculated as2
0i 0+ SiSmG90m 5 0+:
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+here# Sm is st)nd)rd de>i)tion o+ m)r<et returns% The net selecti)ity is then calculated by subtractin" this re8uired return rom the actual return o the und%
Amon" the abo)e perormance measures# t'o models namely# Treynor me)sure )nd 7enson mode* use system)tic ris< b)sed on t,e premise t,)t t,e unsystem)tic ris< is di>ersi+i)b*e.
T,ese mode*s )re suit)b*e +or *)r/e in>estors li(e institutional in)estors 'ith hi"h
ris( ta(in" capacities as they do not ace paucity o unds and can in)est in a number o options to dilute some ris(s%
For them# a portolio can be spread across a number o stoc(s and sectors% &o'e)er# S,)rpe me)sure )nd F)m) mode* t,)t consider t,e entire ris< )ssoci)ted -it, +und )re suit)b*e +or sm)** in>estors4 as the ordinary in)estor lac(s the necessary s(ill
and resources to di)ersiied%
Moreo)er# the selection o the und on the basis o superior stoc( selection ability o the und mana"er 'ill also help in sae"uardin" the money in)ested to a "reat e7tent% The in)estment in unds that ha)e "enerated bi" returns at hi"her le)els o ris(s lea)es the money all the more prone to ris(s o all (inds that may e7ceed the indi)idual in)estorsJ ris( appetite%
1ETA !eta measures a stoc(Js )olatility# the de"ree to 'hich its price luctuates in relation to the o)erall mar(et% In other 'ords# it "i)es a sense o the stoc(Js mar(et ris( compared to the "reater mar(et% !eta is used also to compare a stoc(Js mar(et ris( to that o other stoc(s% In)estment analysts use the .ree( letter JJ to represent beta.
This measure is calculated usin" re/ression analysis% A beta o 5 indicates that the securityJs price tends to mo)e 'ith the mar(et% A beta "reater than 5 indicates that the
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securityJs price tends to be more )olatile than the mar(et# and a beta less than 5 means it tends to be less )olatile than the mar(et .
I σ i I σ m
r im
9 σ m
r im
is correlation coeicient bet'een mar(et returns and und returns%
is standard de)iation o und returns%9Si: σ m is standard de)iation o mar(et returns%9Sm: σ i
9 σ m
is mar(et )ariance%
6oe++icient o+ Determin)tion
C R 9 D 555
) me)sure o+ re*i)bi*ity o+ 1et)
!eta depends on the inde7 used to calculate it% It can happen that the inde7 bears no correlation 'ith the mo)ements in the und% Due to this reason# it is essential to ta(e a loo( at statistical )alue called 0oeicient o Determination alon" 'ith !eta% It sho's ho' reliable the beta number is% It )aries bet'een 1ero and one% /alue o 5 indicates perect correlation 'ith the ind7% Thus# an I C R 9 D O=%?B it implies that ?B o the )ariation in the portolio returns is due to )ariations in the mar(et returns% Mathematically it is the s8uare o correlation coeicientCR%
∑
n Q x C− x m RO
D × C y − ym eD a
e a n
22222222222222222222222222222222222222222222222 C y y D ∑C x x D ∑ −
mean
9
×
−
9
mean
+here > and - are returns on the portolio and returns on the mar(et respecti)ely% !eta and C R 9 D should thus be used to"ether 'hen e7aminin" a und4s ris( proile%
NET ASSET 3ALUE 9NA3: NA/ per unit o a scheme on a day is the net mar(et )alue o the securities held by the total no% o the units o the scheme on the particular day% It is actually the )alue o o net asset per unit% Since the mar(et )alue o securities chan"es e)eryday# NA/ o a und also )aries on a day to day basis% NA/4s or open ended schemes are re8uired to be disclosed a daily basisCbusiness day% 9: http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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NA/ O
Net Assets o the scheme
No% o units outstandin"
+here# NumeratorO Mar(et )alue o in)estmentKrecei)ablesKother Accrued Income K$ther Assets2 Accrued ,7penses2$ther Payables2$ther Liabilities%
St)nd)rd De>i)tion5 ) me)sure o+ Tot)* 0is< Standard De)iation is the most common statistical measure o jud"in" a und4s )olatility and ris(% It measures a und4s total ris( i%e% sum o systematic ris( and unsystematic ris(% Mathematically it "i)es a 38uality ratin"4 o an a)"% The SD o an a)"% is the amt% !y 'hich the no% that "o in to an a)"% de)iate rom that a)"% It tells us ho' closely an a)"% represents the underlyin" a)"% !ut one thin" to be (ept in mind is that a hi"h Standard De)iation may be a measure o )olatility# but it does not necessarily mean that such a und is 'orse than one 'ith a lo' Standard De)iation% I the irst und is a much hi"her perormer than the second one# the de)iation 'ill not matter much%
5
∑C x n
SDO
∑C x − x i
mean
i
− x mean D
9
D 9 "i)es the s8uare o the sum o dierences o each )alue in the sample
rom the mean o the sample o 3n4 element% Note 5 For this project ollo'in" tools ha)e been used2 • • • •
St)nd)rd De>i)tion 1et) S,)rp 0)tio 05SBu)re
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6HAPTE0 222 5 2NDUST0Y P0F2LE 9 http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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F2NAN62AL MA0JETS
Finance is the pre2re8uisite or modern business and inancial institutions play a )ital role in the economic system% It is throu"h inancial mar(ets and institutions that the inancial system o an economy 'or(s% Financial mar(ets reer to the institutional arran"ements or dealin" in inancial assets and credit instruments o dierent types such as currency# che8ues# ban( deposits# bills# bonds# e8uities# etc%
Financial mar(et is a broad term describin" any mar(etplace 'here buyers and sellers participate in the trade o assets such as e8uities# bonds# currencies and deri)ati)es% They are typically deined by ha)in" transparent pricin"# basic re"ulations on tradin"# costs and ees and mar(et orces determinin" the prices o securities that trade%
.enerally# there is no speciic place or location to indicate a inancial mar(et% +here)er a inancial transaction ta(es place# it is deemed to ha)e ta(en place in the inancial mar(et% &ence inancial mar(ets are per)asi)e in nature since inancial transactions are themsel)es )ery per)asi)e throu"hout the economic system% For instance# issue o e8uity shares# "rantin" o loan by term lendin" institutions# deposit o money into a ban(# purchase o debentures# sale o shares and so on%
In a nutshell# inancial mar(ets are the credit mar(ets caterin" to the )arious needs o the indi)iduals# irms and institutions by acilitatin" buyin" and sellin" o inancial assets# claims and ser)ices%
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6LASS2F26AT2N F F2NAN62AL MA0JETS
Fin)nci)* m)r<ets
r/)nied m)r<ets
Unor/)nied m)r<ets
6)pit)* M)r<ets
Money M)r<ets
2ndustri)* Securities M)r<et
Money Lenders4 2ndi/enuos 1)n<ers
6)** Money M)r<et
Prim)ry M)r<et
6ommerci)* 1i** M)r<et
Second)ry m)r<et
Tre)sury 1i** M)r<et
8o>ernment Securities M)r<et
Lon/5term *o)n m)r<et
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6)pit)* M)r<et
The capital mar(et is a mar(et or inancial assets 'hich ha)e a lon" or indeinite maturity% .enerally# it deals 'ith lon" term securities 'hich ha)e a period o abo)e one year% In the 'idest sense# it consists o a series o channels throu"h 'hich the sa)in"s o the community are made a)ailable or industrial and commercial enterprises and public authorities% As a 'hole# capital mar(et acilitates raisin" o capital%
The major unctions perormed by a capital mar(et are 5% Mobili1ation o inancial resources on a nation2'ide scale% 9% Securin" the orei"n capital and (no'2ho' to ill up deicit in the re8uired resources or economic "ro'th at a aster rate% ;% ,ecti)e allocation o the mobili1ed inancial resources# by directin" the same to projects yieldin" hi"hest yield or to the projects needed to promote balanced economic de)elopment%
0apital mar(et consists o primary mar(et and secondary mar(et% Primary market Primary mar(et is a mar(et or ne' issues or ne' inancial claims%
&ence it is also called as Ne' Issue Mar(et% It basically deals 'ith those securities 'hich are issued to the public or the irst time% The mar(et# thereore# ma(es a)ailable a ne' bloc( o securities or public subscription% In other 'ords# it deals 'ith raisin" o resh capital by companies either or cash or or consideration other than cash% The best e7ample could be Initial Public $erin" CIP$ 'here a irm oers shares to the public or the irst time% ;9 http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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Secondary market Secondary mar(et is a mar(et 'here e7istin" securities are traded%
In other 'ords# securities 'hich ha)e already passed throu"h ne' issue mar(et are traded in this mar(et% .enerally# such securities are 8uoted in the stoc( e7chan"e and it pro)ides a continuous and re"ular mar(et or buyin" and sellin" o securities% This mar(et consists o all stoc( e7chan"es reco"ni1ed by the "o)ernment o India%
Money M)r<et
Money mar(ets are the mar(ets or short2term4 hi"hly li8uid debt securities% Money mar(et securities are "enerally )ery sae in)estments 'hich return relati)ely lo' interest rate that is most appropriate or temporary cash stora"e or short term time needs% It consists o a number o sub2mar(ets 'hich collecti)ely constitute the money mar(et namely call money mar(et# commercial bills mar(et# acceptance mar(et# and Treasury bill mar(et%
Deri>)ti>es M)r<et
The deri)ati)es mar(et is the inancial mar(et or deri)ati)es# inancial instruments li(e utures contracts or options# 'hich are deri)ed rom other orms o assets% A deri)ati)e is a security 'hose price is dependent upon or deri)ed rom one or more underlyin" assets% The deri)ati)e itsel is merely a contract bet'een t'o or more parties% Its )alue is determined by luctuations in the underlyin" asset% The most common underlyin" assets include stoc(s# bonds# commodities# currencies# interest rates and mar(et inde7es% The important inancial deri)ati)es are the ollo'in"
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•
For!ard" For'ards are the oldest o all the deri)ati)es% A or'ard contract
reers to an a"reement bet'een t'o parties to e7chan"e an a"reed 8uantity o an asset or cash at a certain date in uture at a predetermined price speciied in that a"reement% The promised asset may be currency# commodity# instrument etc% •
F#t#re" Future contract is )ery similar to a or'ard contract in all respects
e7ceptin" the act that it is completely a standardi1ed one% It is nothin" but a standardi1ed or'ard contract 'hich is le"ally enorceable and al'ays traded on an or"ani1ed e7chan"e% •
O$tion" A inancial deri)ati)e that represents a contract sold by one party
Coption 'riter to another party Coption holder% The contract oers the buyer the ri"ht# but not the obli"ation# to buy Ccall or sell Cput a security or other inancial asset at an a"reed2upon price Cthe stri(e price durin" a certain period o time or on a speciic date Ce7ercise date% 0all options "i)e the option to buy at certain price# so the buyer 'ould 'ant the stoc( to "o up% Put options "i)e the option to sell at a certain price# so the buyer 'ould 'ant the stoc( to "o do'n% •
S!a$" It is yet another e7citin" tradin" instrument% Inact# it is the combination
o or'ards by t'o counterparties% It is arran"ed to reap the beneits arisin" rom the luctuations in the mar(et either currency mar(et or interest rate mar(et or any other mar(et or that matter%
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Forei/n E=c,)n/e M)r<et
It is a mar(et in 'hich participants are able to buy# sell# e7chan"e and speculate on currencies% Forei"n e7chan"e mar(ets are made up o ban(s# commercial companies# central ban(s# in)estment mana"ement irms# hed"e unds# and retail ore7 bro(ers and in)estors% The ore7 mar(et is considered to be the lar"est inancial mar(et in the 'orld% It is a 'orld'ide decentrali1ed o)er2the2counter inancial mar(et or the tradin" o currencies% !ecause the currency mar(ets are lar"e and li8uid# they are belie)ed to be the most eicient inancial mar(ets% It is important to reali1e that the orei"n e7chan"e mar(et is not a sin"le e7chan"e# but is constructed o a "lobal net'or( o computers that connects participants rom all parts o the 'orld%
6ommodities M)r<et
It is a physical or )irtual mar(etplace or buyin"# sellin" and tradin" ra' or primary products% For in)estorsJ purposes there are currently about <= major commodity mar(ets
'orld'ide that acilitate in)estment trade
in nearly 5== primary
commodities% 0ommodities are split into t'o types hard and sot commodities% &ard commodities are typically natural resources that must be mined or e7tracted C"old# rubber# oil# etc%# 'hereas sot commodities are a"ricultural products or li)estoc( Ccorn# 'heat# coee# su"ar# soybeans# por(# etc%
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2ND2AN F2NAN62AL MA0JETS India Financial mar(et is one o the oldest in the 'orld and is considered to be the astest "ro'in" and best amon" all the mar(ets o the emer"in" economies%
The history o Indian capital mar(ets dates bac( 9== years to'ard the end o the 5Gth century 'hen India 'as under the rule o the ,ast India 0ompany% The de)elopment o the capital mar(et in India concentrated around Mumbai 'here no less than 9== to 9<= securities bro(ers 'ere acti)e durin" the second hal o the 5th century%
The inancial mar(et in India today is more de)eloped than many other sectors because it 'as or"ani1ed lon" beore 'ith the securities e7chan"es o Mumbai# Ahmadabad and Hol(ata 'ere established as early as the 5th century%
!y the early 5?=s the total number o securities e7chan"es in India rose to ei"ht# includin" Mumbai# Ahmadabad and Hol(ata apart rom Madras# Hanpur# Delhi# !an"alore and Pune% Today there are 95 re"ional securities e7chan"es in India in addition to the centrali1ed NS, CNational Stoc( ,7chan"e and $T0,I C$)er the 0ounter ,7chan"e o India%
&o'e)er the stoc( mar(ets in India remained sta"nant due to strin"ent controls on the mar(et economy that allo'ed only a handul o monopolies to dominate their respecti)e sectors% The corporate sector 'asnJt allo'ed into many industry se"ments#
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'hich 'ere dominated by the state controlled public sector resultin" in sta"nation o the economy ri"ht up to the early 5=s%
Thereater 'hen the Indian economy be"an liberali1in" and the controls be"an to be dismantled or eased outE the securities mar(ets 'itnessed a lurry o IP$4s that 'ere launched% This resulted in many ne' companies across dierent industry se"ments to come up 'ith ne'er products and ser)ices% A remar(able eature o the "ro'th o the Indian economy in recent years has been the role played by its securities mar(ets in assistin" and uellin" that "ro'th 'ith money rose 'ithin the economy% This 'as in mar(ed contrast to the initial phase o "ro'th in many o the ast "ro'in" economies o ,ast Asia that 'itnessed hu"e doses o FDI CForei"n Direct In)estment spurrin" "ro'th in their initial days o mar(et decontrol% Durin" this phase in India much o the or"ani1ed sector has been aected by hi"h "ro'th as the inancial mar(ets played an all2inclusi)e role in sustainin" inancial resource mobili1ation% Many PSUs CPublic Sector Underta(in"s that decided to oload part o their e8uity 'ere also helped by the 'ell2or"ani1ed securities mar(et in India% The launch o the NS, CNational Stoc( ,7chan"e and the $T0,I C$)er the 0ounter ,7chan"e o India durin" the mid 5=s by the "o)ernment o India 'as meant to usher in an easier and more transparent orm o tradin" in securities% The NS, 'as concei)ed as the mar(et or tradin" in the securities o companies rom the lar"e2scale sector and the $T0,I or those rom the small2scale sector% +hile the NS, has not just done 'ell to "ro' and e)ol)e into the )irtual bac(bone o capital mar(ets in India the $T0,I stru""led and is yet to sho' any si"n o "ro'th and de)elopment% The inte"ration o IT into the capital mar(et inrastructure has been particularly smooth in India due to the country4s 'orld class IT ;: http://slidepdf.com/reader/full/blackbook-project-on-mutual-funds
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industry% This has pushed up the operational eiciency o the Indian stoc( mar(et to "lobal standards and as a result the country has been able to capitali1e on its hi"h "ro'th and attract orei"n capital li(e ne)er beore% The re"ulatin" authority or capital mar(ets in India is the S,!I CSecurities and ,7chan"e !oard o India% S,!I came into prominence in the 5=s ater the capital mar(ets e7perienced some turbulence% It had to ta(e drastic measures to plu" many loopholes that 'ere e7ploited by certain mar(et orces to ad)ance their )ested interests% Ater this initial phase o stru""le S,!I has "ro'n in stren"th as the re"ulator o India4s capital mar(ets and as one o the country4s most important institutions%
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T,e b)sic objecti>es o+ t,e 1o)rd -ere identi+ied )s •
to protect the interests o in)estors in securitiesE
•
to promote the de)elopment o Securities Mar(etE
•
to re"ulate the securities mar(et and
•
For matters connected there'ith or incidental thereto%
Since its inception S,!I has been 'or(in" tar"etin" the securities and is attendin" to the ulillment o its objecti)es 'ith commendable 1eal and de7terity% The impro)ements in the securities mar(ets li(e capitali1ation re8uirements# mar"inin"# establishment o clearin" corporations etc% reduced the ris( o credit and also reduced the mar(et%
S,!I has introduced the comprehensi)e re"ulatory measures# prescribed re"istration norms# the eli"ibility criteria# the code o obli"ations and the code o conduct or dierent intermediaries li(e# ban(ers to issue# merchant ban(ers# bro(ers and sub2 bro(ers# re"istrars# portolio mana"ers# credit ratin" a"encies# under'riters and others% It has ramed bye2la's# ris( identiication and ris( mana"ement systems or 0learin" houses o stoc( e7chan"es# sur)eillance system etc% 'hich has made dealin" in securities both sae and transparent to the end in)estor%
Another si"niicant e)ent is the appro)al o tradin" in stoc( indices Cli(e S6P 0N> Nity 6 Sense7 in 9===% A mar(et Inde7 is a con)enient and eecti)e product because o the ollo'in" reasons
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•
It acts as a barometer or mar(et beha)iorE
•
It is used to benchmar( portolio perormanceE
•
It is used in deri)ati)e instruments li(e inde7 utures and inde7 optionsE
•
It can be used or passi)e und mana"ement as in case o Inde7 Funds%
T'o broad approaches o S,!I is to inte"rate the securities mar(et at the national le)el# and also to di)ersiy the tradin" products# so that there is an increase in number o traders includin" ban(s# inancial institutions# insurance companies# mutual unds# primary dealers etc% to transact throu"h the ,7chan"es% In this conte7t the introduction o deri)ati)es tradin" throu"h Indian Stoc( ,7chan"es permitted by S,!I in 9=== AD is a real landmar(%
S,!I has enjoyed success as a re"ulator by pushin" systemic reorms a""ressi)ely and successi)ely Ce%"% the 8uic( mo)ement to'ards ma(in" the mar(ets electronic and paperless rollin" settlement on TK9 bases% S,!I has been acti)e in settin" up the re"ulations as re8uired under la'%
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59% Madhya Pradesh 5;% Madras 5B% Ma"adh 5<% Man"alore 5?% Meerut 5:% Pune 5G% Saurashtra Hutch 5% Uttar Pradesh 9=% /adodara
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1M1AY ST6J EK6HAN8E
A )ery common name or all traders in the stoc( mar(et# !S,# stands or !ombay Stoc( ,7chan"e% It is the oldest mar(et not only in the country# but also in Asia% In the early days# !S, 'as (no'n as The Nati)e Share 6 Stoc( !ro(ers Association% It 'as established in the year 5G:< and became the irst stoc( e7chan"e in the country to be reco"ni1ed by the "o)ernment% In 5
In the past and e)en no'# it plays a pi)otal role in the de)elopment o the countryJs capital mar(et% This is reco"ni1ed 'orld'ide and its inde7# S,NS,># is also trac(ed 'orld'ide% ,arlier it 'as an Association o Persons CA$P# but no' it is a demutualised and corporatised entity incorporated under the pro)isions o the 0ompanies Act# 5
1SE 3ision
The )ision o the !ombay Stoc( ,7chan"e is to ,mer"e as the premier Indian stoc( e7chan"e by establishin" "lobal benchmar(s%
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1SE F)cts
!S, as a brand is synonymous 'ith capital mar(ets in India% The !S, S,NS,> is the benchmar( e8uity inde7 that relects the robustness o the economy and inance% It 'as the
•
First in India to introduce ,8uity Deri)ati)es
•
First in India to launch a Free Float Inde7
•
First in India to launch US )ersion o !S, Sense7
•
First in India to launch ,7chan"e ,nabled Internet Tradin" Platorm
•
First in India to obtain IS$ certiication or Sur)eillance# 0learin" 6 Settlement
•
J!S, $n2Line Tradin" System4 C!$LT has been a'arded the "lobally reco"ni1ed the Inormation Security Mana"ement System standard !S::299==9%
•
First to ha)e an e7clusi)e acility or inancial trainin"
•
Mo)ed rom $pen $utcry to ,lectronic Tradin" 'ithin just <= days
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%SE !it& it" 'on( &i"tory o) ca$ita' market de*e'o$ment i" )#''y (eared to contin#e it" contri+#tion" to )#rt&er t&e (ro!t& o) t&e "ec#ritie" market" o) t&e co#ntry, t&#" &e'$in( India increa"e" it" "$&ere o) in)'#ence in internationa' )inancia' market"-
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NAT2NAL
ST6J
EK6HAN8E
F
2ND2A
L2M2TED The National Stoc( ,7chan"e o India Limited has "enesis in the report o the &i"h Po'ered Study .roup on ,stablishment o Ne' Stoc( ,7chan"es# 'hich recommended promotion o a National Stoc( ,7chan"e by inancial institutions CFI4s to pro)ide access to in)estors rom all across the country on an e8ual ootin"% !ased on the recommendations# NS, 'as promoted by leadin" Financial Institutions at the behest o the .o)ernment o India and 'as incorporated in No)ember 59 as a ta72 payin" company unli(e other stoc( ,7chan"e in the country%
$n its reco"nition as a stoc( e7chan"e under the Securities 0ontracts CRe"ulation Act# 5
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NSE 80UP
N)tion)* Securities 6*e)rin/ 6orpor)tion Ltd. 9NS66L:
It is a 'holly o'ned subsidiary# 'hich 'as incorporated in Au"ust 5< and commenced clearin" operations in April 5?% It 'as ormed to build conidence in clearin" and settlement o securities# to promote and maintain the short and consistent settlement cycles# to pro)ide a counter2party ris( "uarantee and to operate a ti"ht ris( containment system%
NSE.2T Ltd.
It is also a 'holly o'ned subsidiary o NS, and is its IT arm% This arm o the NS, is uni8uely positioned to pro)ide products# ser)ices and solutions or the securities industry% NS,%IT primarily ocuses on in the area o tradin"# bro(er ront2end and bac(2oice# clearin" and settlement# 'eb2based# insurance# etc% Alon" 'ith this# it also pro)ides consultancy and implementation ser)ices in Data +arehousin"# !usiness 0ontinuity Plans# Site Maintenance and !ac(ups# Stratus Mainrame Facility Mana"ement# Real Time Mar(et Analysis 6 Financial Ne's% 2ndi) 2nde= Ser>ices Products Ltd. 922SL:
It is a joint )enture bet'een NS, and 0RISIL Ltd% to pro)ide a )ariety o indices and inde7 related ser)ices and products or the Indian 0apital mar(ets% It 'as set up in May 5G% IISL has a consultin" and licensin" a"reement 'ith the Standard and PoorJs CS6P# 'orldJs leadin" pro)ider o in)estible e8uity indices# or co2brandin" e8uity indices%
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Re"ulation Act# 5
Studies by NASS0$M# sot'are technolo"y par(s o India# the )enture capitals unds and the "o)ernment4s IT tas(s Force# as 'ell as risin" interest in IT# Pharmaceutical# !iotechnolo"y and Media shares ha)e repeatedly emphasi1ed the need or a national stoc( mar(et or inno)ation and hi"h "ro'th companies% Inno)ati)e companies are critical to de)elopin" economics li(e India# 'hich is under"oin" a major technolo"ical re)olution% +ith their abilities to "enerate employment opportunities and contribute to the economy# it is essential that these companies not only e7pand e7istin" operations but also set up ne' units% The (ey issue or these companies is raisin" timely# cost eecti)e and lon" term capital to sustain their operations and enhance "ro'th% Such companies# particularly those that ha)e been in operation or a short time# are unable to raise unds throu"h the traditional inancin" methods# because they ha)e not yet been e)aluated by the inancial 'orld%
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6HAPTE0 23 5 6MPANY P0F2LE
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2ND2A 2NFL2NE L2M2TED India Inoline is a one2stop inancial ser)ices shop# most respected or 8uality o its inormation# personali1ed ser)ice and cuttin"2ed"e technolo"y%
3ision
$ur )ision is to be the most respected company in the inancial ser)ices space%
2ndi) 2n+o*ine 8roup
The India Inoline "roup# comprisin" the holdin" company# India Inoline Limited and its 'holly2o'ned subsidiaries# include the entire inancial ser)ices space 'ith oerin"s ran"in" rom ,8uity research# ,8uities and deri)ati)es
tradin"#
0ommodities tradin"# Portolio Mana"ement Ser)ices# Mutual Funds# Lie Insurance# Fi7ed deposits# .oI bonds and other small sa)in"s instruments to loan products and In)estment ban(in"%
India Inoline also o'ns and mana"es the 'ebsites '''%indiainoline%com and '''%<paisa%com% The company has a net'or( o o)er 95== business locations Cbranches and sub2bro(ers spread across more than B<= cities and to'ns% The "roup caters to appro7imately a million customers%
Founded in 5< by Mr% Nirmal @ain C0hairman and Mana"in" Director as an independent business research and inormation pro)ider# the company "radually e)ol)ed into a one2stop inancial ser)ices solutions pro)ider%
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India Inoline recei)ed re"istration or a housin" inance company rom the National &ousin" !an( and recei)ed the 3Fastest "ro'in" ,8uity !ro(in" &ouse 2 Lar"e irms4 in India by Dun 6 !radstreet in 9==% It also recei)ed the Insurance bro(in" license rom IRDAE recei)ed the )enture capital licenseE recei)ed in principle appro)al to sponsor a mutual undE recei)ed 3!est bro(er2 India4 a'ard rom Finance AsiaE 3Most Impro)ed !ro(era"e2 India4 a'ard rom Asia money%
6MPANY ST0U6TU0E
India Inoline Limited is listed on both the leadin" stoc( e7chan"es in India# )i1% the Stoc( ,7chan"e# Mumbai C!S, and the National Stoc( ,7chan"e CNS, and is also a member o both the e7chan"es% It is en"a"ed in the businesses o ,8uities bro(in"# +ealth Ad)isory Ser)ices and Portolio Mana"ement Ser)ices% It oers bro(in" ser)ices in the 0ash and Deri)ati)es se"ments o the NS, as 'ell as the 0ash se"ment o the !S,% It is re"istered 'ith NSDL as 'ell as 0DSL as a depository participant# pro)idin" a one2stop solution or clients tradin" in the e8uities mar(et% It has recently launched its In)estment ban(in" and Institutional !ro(in" business%
A S,!I authori1ed Portolio Mana"erE it oers Portolio Mana"ement Ser)ices to clients% These ser)ices are oered to clients as dierent schemes# 'hich are based on dierin" in)estment strate"ies made to relect the )aried ris(2return preerences o clients%
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2ndi) 2n+o*ine Medi) )nd 0ese)rc, Ser>ices Limited
The ser)ices represent a stron" support that dri)es the bro(in"# commodities# mutual und and portolio mana"ement ser)ices businesses% It underta(es e8uities research 'hich is ac(no'led"ed by none other than Forbes as J!est o the +ebJ and Ja must read or in)estors in AsiaJ% India InolineJs research is a)ailable not just o)er the internet but also on international 'ire ser)ices li(e !loomber" C0ode IILL# Thomson First 0all and Internet Securities 'here India Inoline is amon"st the most read Indian bro(ers%
2ndi) 2n+o*ine 6ommodities Limited.
India Inoline 0ommodities P)t Limited is en"a"ed in the business o commodities bro(in"% Their e7perience in securities bro(in" empo'ered them 'ith the re8uisite
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s(ills and technolo"ies to allo' them to oer commodities bro(in" as a contra2 cyclical alternati)e to e8uities bro(in"% It enjoys memberships 'ith the M0> and N0D,># t'o leadin" Indian commodities e7chan"es# and recently ac8uired membership o D.0>% It has a multi2channel deli)ery model# ma(in" it amon" the select e' to oer online as 'ell as oline tradin" acilities%
2ndi) 2n+o*ine M)r<etin/ Ser>ices
India Inoline Mar(etin" and Ser)ices Limited is the holdin" company o India Inoline Insurance Ser)ices Limited and India Inoline Insurance !ro(ers Limited% •
India Inoline Insurance Ser)ices Limited is a re"istered 0orporate A"ent 'ith the Insurance Re"ulatory and De)elopment Authority CIRDA% It is the lar"est 0orporate A"ent or I0I0I Prudential Lie Insurance 0o Limited# 'hich is IndiaJs lar"est pri)ate Lie Insurance 0ompany% India Inoline 'as the irst corporate a"ent to "et licensed by IRDA in early 9==5%
•
India Inoline Insurance !ro(ers Limited India Inoline Insurance !ro(ers Limited is a ne'ly ormed subsidiary 'hich 'ill carry out the business o Insurance bro(in"%
2ndi) 2n+o*ine 2n>estment Ser>ices Limited
0onsolidated shareholdin"s o all the subsidiary companies en"a"ed in loans and inancin" acti)ities under one subsidiary% Recently# $rient .lobal# a Sin"apore2based in)estment institution in)ested USD :?%: million or a 99%< sta(e in India Inoline In)estment Ser)ices% This 'ill help ocused e7pansion and capital raisin" in the said
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22FL MANA8EMENT
•
THE MANA8EMENT TEAM
Mr. Nirm)* 7)in4 6,)irm)n M)n)/in/ Director
Nirmal @ain# M!A CIIM# Ahmadabad and a 0hartered and 0ost Accountant# ounded India4s leadin" inancial ser)ices company India Inoline Ltd% in 5<# pro)idin" "lobally acclaimed inancial ser)ices in e8uities and commodities bro(in"# lie insurance and mutual unds distribution# amon" others%
Mr. 0 3en<)t)r)m)n4 E=ecuti>e Director
R /en(ataraman# co2promoter and ,7ecuti)e Director o India Inoline Ltd%# is a !% Tech C,lectronics and ,lectrical 0ommunications ,n"ineerin"# IIT Hhara"pur and an M!A CIIM !an"alore% &e joined the India Inoline board in @uly 5%
•
THE 1A0D F D20E6T0S
Apart rom Nirmal @ain and R /en(ataraman# the !oard o Directors o India Inoline Ltd% comprises
:
Mr. Ni*es, 3i<)msey4 2ndependent Director
Mr% /i(amsey# !oard member since February 9==< 2 a practicin" 0hartered Accountant and partner CHhimji Hun)erji 6 0o%# 0hartered Accountants# a member irm o &L! International# headed the audit
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department till 5= and thereater also handles inancial ser)ices# consultancy# in)esti"ations# mer"ers and ac8uisitions# )aluations etc
Mr S)t P)* J,)tt)r4 Non E=ecuti>e Director
Mr Sat Pal Hhattar# 2 !oard member since April 9==5 2 Presidential 0ouncil o Minority Ri"hts member# 0hairman o the !oard o Trustee o Sin"apore !usiness Federation# is also a lie trustee o SINDA# a non proit body# helpin" the under2pri)ile"ed Indians in Sin"apore% &e joined the India Inoline board in April 9==5% Mr Jr)nti Sin,)4 2ndependent Director
Mr% Hranti Sinha V !oard member since @anuary 9==< V completed his masters rom the A"ra Uni)ersity and started his career as a 0lass I oicer 'ith Lie Insurance 0orporation o India%
Mr Arun J. Pur>)r4 2ndependent Director
Mr% A%H% Pur)ar !oard member since March 9==G completed his Masters de"ree in commerce rom Allahabad Uni)ersity in 5?? and a diploma in !usiness Administration in 5?:%
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2nsur)nce
An entry into this se"ment helped complete the clientJs product bas(etE concurrently# it "raduated the 0ompany into a one stop retail inancial solutions pro)ider% To ensure ma7imum reach to customers across India# it has employed a multi pron"ed approach and reaches out to customers )ia our Net'or(# Direct and Ailiate channels% India Inoline 'as the irst corporate in India to "et the a"ency license in early 9==5%
2n>est n*ine
India Inoline has made in)estin" in Mutual unds and primary mar(et so eortless% $nly re"istration is needed% No paper'or( no 8ueues and No re"istration char"es% India Inoline oers a host o mutual und choices under one roo# bac(ed by in2depth research and ad)ice rom research house and tools coni"ured as in)estor riendly%
We)*t, M)n)/ement
The (ey to achie)in" a successul In)estment Portolio is to ha)e a careully planned inancial strate"y based on a thorou"h understandin" o the clientJs in)estment needs and ris( appetite% The IIFL Pri)ate +ealth Mana"ement Team o inancial e7perts 'ill recommend an appropriate inancial strate"y to eecti)ely meet customer4s in)estment re8uirements%
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Asset M)n)/ement
India Inoline is a leadin" pan2India mutual und distribution house associated 'ith leadin" asset mana"ement companies% It operates primarily in the retail se"ment le)era"in" its e7istin" distribution net'or( to reach prospecti)e clients% It has recei)ed the in2principle appro)al to set up a mutual und%
Port+o*io M)n)/ement
IIFL Portolio Mana"ement Ser)ice is a product 'herein an e8uity in)estment portolio is created to suit the in)estment objecti)es o a client% India Inoline in)ests the client4s resources into stoc(s rom dierent sectors# dependin" on client4s ris(2return proile% This ser)ice is particularly ad)isable or in)estors 'ho cannot aord to "i)e time or donJt ha)e that e7pertise or day2to2day mana"ement o their e8uity portolio%
Ne-s*etters
As a subscriber to the Daily Mar(et Strate"y# client4s "et research reports o India Inoline research team on a priority basis% The Indiainoline +ee(ly Ne'sletter is the lashbac( or the 'ee( "one by% A 'ee(ly outloo( coupled 'ith the best o the 'eb stories rom Indiainoline and lin(s to important in)estment ideas# Leader Spea( and eatures is deli)ered in the client4s inbo7 e)ery Friday e)enin"%
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Sc,eme Sn)ps,ot 62 Santosh Hamath
6)te/ory ,8uity
Fund M)n)/er Anil Prabhudas
Sub56)te/ory Sectoral2FM0.
Address Le)el B# +oc(hardt To'ers# !andra 2 Hurla 0omple7# !andra C,ast# Mumbai 2 B===<5
Type $pen Min. 2n>estment90s: <===
P,one 5 99
0e/istr)rs Fran(lin Templeton Asset Mana"ement CIndia P)t% Ltd% L)unc, D)te 5<2MAR2
Sc,eme bjecti>e See(s to pro)ide lon" term capital appreciation by in)estin" primarily in shares o companies operatin" in the FM0. industry%
sset llocation ?%5;
,8uity Shares 0all And $ther Assets
9%GB
0orporate Debt * !onds
5%=;
As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
Nestle India Limited
5B%:
I T 0 Limited
55%9:
Asian Paints Limited
%9<
Pidilite Industries Limited
?%BG
Marico Limited
?%=G
B% 2n+r)structure Sector T)t) 2n+r)structure Fund Sc,eme Sn)ps,ot
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62 /ed Pra(ash 0hatur)edi
6)te/ory ,8uity
Fund M)n)/er M /enu"opal
Sub56)te/ory Sectoral2Inrastructure
Address Fort &ouse# 995 Dr% D% N% Road# Mumbai 2 B== ==5
Type $pen Min. 2n>estment90s: <===
P,one 5 99
Tot)* Assets90s.Mn: 5G:9%; F)= 5 99
0e/istr)rs 0omputer A"e Mana"ement Ser)ices P)t%Ltd% L)unc, D)te 9<2N$/2=B
Sc,eme bjecti>e The in)estment objecti)e o the Scheme is to pro)ide income distribution and * or medium to lon" term capital "ains by in)estin" predominantly in e8uity*e8uity related instrument o the companies in the inrastructure sectors%
sset llocation <%99
,8uity Shares
B%:G
0ash And $ther Assets As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
I 0 I 0 I !an( Limited
B%:
0rompton .rea)es Limited
B%:
0ash And $ther Assets
B%:G
$il 6 Natural .as 0orporation Limited
B%:=
& D F 0 !an( Limited
B%
<% Po-er Sector5 0e*i)nce Di>ersi+ied Po-er Sector Fund Sc,eme Sn)ps,ot
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62 H Raja"opal
6)te/ory ,8uity
Fund M)n)/er Sunil Sin"hania
Sub56)te/ory Sectoral2Po'er
Address $ne Indiabulls 0entre# To'er5# @upiter Mills 0ompound# GB5# Senapati !apat Mar"# ,lphinstone
Type $pen
Road# Mumbai 2 B== =5;
Min. 2n>estment90s: <===
P,one 5 99 ;= B?==
Tot)* Assets90s.Mn: <=955%9
F)= 5 99 ;=B5 BG
0e/istr)rs Har)y 0omputershare Pri)ate Limited
-ebsite http**'''%reliancemutual%com*
L)unc, D)te 92MAR2=B
Sc,eme bjecti>e The primary in)estment objecti)e o the scheme is to see( to "enerate continous returns by acti)ely in)estin" in e8uity and e8uity related or i7ed income securities o Po'er and other associated companies
sset llocation B%?<
,8uity Shares Deri)ati)es#0ash And $ther Recei)ables
<%;<
As on ;=2N$/25=
&o' ( holdin!s
s on ).+/,V+*.
$ther ,8uities
G%;;
0ummins India Limited
?%;9
Torrent Po'er Limited
<%
I 0 I 0 I !an( Limited
<%BG
0ash And $ther Assets And Deri)ati)es
<%;<
?% Tec,no*o/y Sector5 Fr)n<*in 2n+otec, Fund Sc,eme Sn)ps,ot
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6HAPTE0 32 F2ND2N8S4 SU88EST2NS 6N6LUS2N
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ANNEKU0E 5 2 TE0M2NL8Y Mutu)* Fund An in)estment tool that pools in in)estments made by people and that
corpus is proessionally mana"ed by urther in)estin" as per the type o und that4s bein" operated% The intention is to loat money in the mar(et by o'nin" assets components o many companies at the same meetin" the assurances made to in)estors% There is no obli"ation 'hatsoe)er or assured returns% NA35A cumulati)e mar(et )alue o total assets component o its liabilities% It4s
actually the measure o 'hat each shareholder 'ould a8uire i the assets o the company are li8uidated% No5Lo)d +unds 2 there is no commission component present to enter and e7it
o the und o'nership% It4s a ull in)ol)ement o the corpus% ELSS 2 ,8uity lin(ed sa)in"s scheme is a scheme 'ith a ta7 rebate allo'ed as
per the Sec GG in the Indian income ta7 act# 5?5%It pro)ides the in)estors 'ith the opportunity to sa)e "ains on capital throu"h in)estments made in MFs% 2nde= Funds 2 An interestin" scheme that tries to replicate the beha)ior o the
particular stoc( inde7# that is o interest% The portolio o the und 'ould majorly consist o e8uities listed in that inde7% Sector Funds 2 An MF scheme that has its portolio chart o companies that belon" to a certain sector# say $il% This is a hi"h2ris( und# as the perormance o that
sector 'ould directly relect in the unds NA/% So# here 'e are 'ith the di)erse mar(et o Mutual Funds% ,ach one claimin" their USP% +hile MFs certainly are N$T the saest# but they are relati)ely more sae than the direct in)ol)ement in the e8uity mar(et# "i)en that act that majority o the in)estors are either ill2inormed or not inormed about the 'ay the mar(ets mo)e%
So 'hat e7actly ma(es MFs the ri"ht (ind o und mana"ement tool# espy in a country li(e IndiaX A country li(e India or or that matter any de)elopin" country has some basic problems 'hich pre)ent the inormation to be a)ailable reely and that too in an accessible ashion# so 'ith a situation li(e that# a proessionally mana"ed
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unds% I one "ets married# one mi"ht need to compromise one4s ris( tolerance and desired returns 'ith that o the spouse% This could tri""er o the need to e7it% A m)jor c,)n/e in )ny b)sic )ttribute o+ t,e +und
'hen the und chan"es any basic attribute as mentioned by it in its oer documents# the in)estors ha)e a choice o "ettin" out o it% ,)en S,!I has pro)ided or an e7it route bein" made a)ailable to the in)estors% 0han"es li(e a chan"e in Asset Mana"ement 0ompany or in in)estment style o und or chan"e o structure say rom closed2end to open2end etc% are "ood enou"h reasons or an in)estor to consider s'itchin" or e7itin" rom it as they are certainly li(ely to aect the und in a major 'ay% Fund doesnt comp*y -it, its objecti>e
$ne o the important parameters in the selection o the und is ali"nment o the ris( proiles o the in)estor and und% The objecti)e o the und says a lot about ho' the und plans to in)est% I the objecti)e is not bein" complied 'ith# it is one o the e7it points 'orth considerin"% For e7ample# the three unds discussed abo)e# Alliance ,8uity# !irla Ad)anta"e and IN. .ro'th all claim to be di)ersiied e8uity unds yet they had hu"e e7posures to select I0, sector scripts that not only added )olatility than is e7pected out o di)ersiied unds but also in a 'ay# 'ent a"ainst their stated objecti)e% T,e FundOs E=pense 0)tio 0ises a small rise in an e7pense ratio is not a bi" deal# ho'e)er a si"niicant rise can result in substantial reduction o yields and so it 'ould be better to e7it the und% In the case o bond unds or money mar(et unds# it is hi"hly unli(ely that the und can increase its returns enou"h to justiy an increase in the undJs e7penses% T,e Fund M)n)/er ,)s c,)n/ed
a simple chan"e o und mana"ers# in itsel# is not enou"h reason to sell a und on a short2term basis% I it is a passi)ely mana"ed und Cinde7 und# then one has little to no reason to 'orry% &o'e)er# i it is an acti)ely mana"ed und# then has to (eep the eyes open on the ne' mana"er% $bser)in" the styles# stoc( pic(in" and ris(s underta(en by the ne' mana"er is important or it discloses a lot about ho' the und
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mi"ht are in the uture% I satisied# one 'ill ha)e no reason to complain later but the process needs time and so an in)estor has to obser)e the und mana"er or some time beore one ta(es a decision% Enou/, ,)s been e)rned
&o'e)er# nothin" is as important as to rein the horses in time% The primary principle behind saety o in)estment is to ta(e ris(s that can be tolerated% The principle also is speciic on the e7pectations that the in)estor must ha)e rom any in)estment% @ust as it is important to set realistic tar"ets that one hopes to achie)e rom the in)estment# it is also important to e7it 'hen tar"et as e7pected has been achie)ed irrespecti)e o the act that it mi"ht be "eneratin" better returns in a short2term% The abo)e list is certainly not e7hausti)e and indi)iduals 'ill ha)e other better reasons to 8uit as 'ell% It4s just that most don4t (no' 'hen to apply thou"ht and so these 'ould come in handy%
T2PS F0 MUTUAL FUND 2N3EST0S 9SU88EST2NS:
These are the e' e7act as re"ards in)estment in MF4s ta(en rom the boo( 'ith ZMar(etin" or the =4s[ "i)en by the +all Street% 5% 0hec( your letter o oer o unds prospectus to "uard yoursel)es a"ainst any hidden ees% 9% ,nsue that the unds trac( record is the same as that o the current mana"ement ;% A)oid MF4s that char"e e7it ees at he bac( end door Cee s char"ed by MF rom the
unit holders at he time to redemption o the units%
B% !uy the unds 'ith no sale char"ed loads%Ca load is a char"e by the und 'hen in)estor buys it is called the entry load or 'hen he sells is called the e7it load% <% I the char"e it4s hea)y by the M F to discoura"e the in)estors rom ta(in" short positions in the unds units because too many in)estors sell their units at a time then the und has to sell its holdin"s to meet the obli"ations that yield into )ital o
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the ines o)erall return% Most short unds li(e "uilt unds Cthese are the unds the in)est only in "o)ernment securities and treasury bills thus the in)estors ha)e an opportunities to buy ris( ree securities% These unds yield a better return than a money mar(et und% It is "ood or the in)estors 'ho desire saety o principal amount% Money mar(et unds Cthese unds in )ie's in money mar(et instruments such as treasury bills# "o)t% bonds# certiicates o ban( deposits# commercial deposits% They char"e no loads# ho'e)er loads are limited by S,!I to :% ?% 0hec( und4s perormance in bear as 'ell a the bull mar(et% :% .uard und ris( by chec(in" its portolio or di)ersiication )olatility%
JEY STEPS F0 F2NAN62AL PLANN2N8 2NSU0E YU0SELF 1EF0E YU 2N3EST
Insurance is the pre2re8uisite o all in)estments the main purpose o insurance is to protect your current lie style ater retirement% It acts as a shield a"ainst all type o inancial ris(s% In)estor has to reali1e that insurance is more or sae "uardin" a"ainst ris( aced in lie rather than bein" an in)estment or proit%
6HSE S2MPLE 2N3ESTMENT
$ur daily lie is ull o complications the day2to2day "rind lea)es us 'ith little ener"y to (eep trac( o our inancial in)estments% That is copy an in)estor should choose
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simple 6 uncomplicated instruments% Thereore he has to in)est the hassle ree instruments%
UT2L2E THE PWE0 F 6MPUND2N8
0ompoundin" means payment o interest on accumulated interest% Thus money earned by you 'or(s hard 6 earns more money or you% This implies that not only the principal earns income or you but interest "enerated by you also earns income% $ne important actor is the time period% Lon"er the time hi"her the beneit
2N3EST 2N 2NT0UMENTS THAT JEEP YU AHEAD F 2NFLAT2N
That silently creeps up rom behind 6 starts eatin" your hard earned sa)in"s e)en beore you reali1e the situation% An in)estor should loo( at the real return Cthe rate o return minus the rate o inlation 'hile considerin" an in)estment% &e should in)est in instruments# 'hich pro)ide proitable2post2inlation returns%
0EDU6E TAK N YU0 2N3ESTMENT
There are t'o realities in the lie% $ne is death 6 the other is ta7% It is ad)isable that in)estments should be so planned that least possible ta7 'ould be re8uired to be paid% Smart mo)e or the in)estor is to sa)e e)ery rupee rom ta7 man%
8 F0 STA1LE 0EAL2ST26 0ETU0NS
Stability o returns is more important that increased proit% Usually these are associated 'ith hi"h )olatile in)estment options li(e e8uities 6 e)en 'ith "o)ernment securities or "ilts as they also run hi"h mar(et ris(% The asset allocation is su""ested accordin" to the ris( proile o an in)estor% So in)est in the best option 6 "et the ma7imum returns%
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121L280APHY
www.njindiainvest.com www.moneycontrol.com www.amfiindia.com www.karvy.com www.valueresearchonline.com MUTUAL FUND P!DU"T AND #$%&"$#'''' TA(MAN AMF& "!U#$ )!!*
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