Introduction& Industry Profile: A Study On Portfolio Creation and Mutual Fund Analysis

A study on Portfolio Creation and Mutual Fund Analysis
CHAPTER : 1
INTRODUCTION& INDUSTRY PROFILE
The Indian financial system based on four basic components like Financial Market,
Financial Institutions, Financial Service, Financial Instruments. All play important
role for smooth activities for the transfer of funds and allocation of the funds. The
main aim of the Indian financial system is that providing services efficiently to the
capital market. The Indian capital market has been increasing tremendously during
the second generation reforms. The first generation reforms started in 1991 the
concept of LPG. (Liberalization, privatization, Globalization).
The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank of India. The
history of mutual funds in India can be broadly divided into four distinct phases.
1. First Phase - 1964-1987
Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set
up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked
from the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets
under management.
Adarsh Institute of Management and Information 1

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2. Second Phase - 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non-UTI, public sector mutual funds set up by public
sector banks and Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund
established in June 1987 followed by Canarabank Mutual Fund (Dec 87), Punjab
National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of
India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual
fund in June 1989 while GIC had set up its mutual fund in December 1990. At the
end of 1993, the mutual fund industry had assets under management of Rs. 47,004
crores.
3. Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual
fund industry, giving the Indian investors a wider choice of fund families. Also,
1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first
private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual
funds setting up funds in India and also the industry has witnessed several mergers
and acquisitions. As at the end of January 2003, there were 33 mutual funds with
total assets of Rs. 1,21,805crores. The Unit Trust of India with Rs. 44,541 crores of
assets under management was way ahead of other mutual funds.

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4. Fourth Phase - since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the Specified Undertaking of the Unit
Trust of India with assets under management of Rs. 29,835 crores as at the end of
January 2003, representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The Specified Undertaking of Unit Trust of India, functioning
under an administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000
crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth.
Fig 1 HISTORY OF MUTUAL FUND

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1.1 WHAT IS MUTUAL FUNDS :-

Like most developed and developing countries the mutual fund cult has been
catching on in India. There are various reasons for this. Mutual funds make it easy
and less costly for investors to satisfy their need for capital growth, income and/or
income preservation.
And in addition to this a mutual fund brings the benefits of diversification and
money management to the individual investor, providing an opportunity for
financial success that was once available only to a select few.
Understanding Mutual funds is easy as it's such a simple concept: a mutual fund is a
company that pools the money of many investors -- its shareholders -- to invest in a
variety of different securities. Investments may be in stocks, bonds, money market
securities or some combination of these. Those securities are professionally
managed on behalf of the shareholders, and each investor holds a pro rata share of
the portfolio entitled to any profits when the securities are sold, but subject to any
losses in value as well.
2.2DEFINITIONS:
The reason for increased response towards mutual funds world over is on account
of investment analyst, who takes investment decisions based on research. The
concept of the lower risk carried on by the investor as the funds are diverted with
professional body of investment analyst, who take investment decisions based on
research. The concept of mutual fund has been defined in various ways.
According to SEBI (Mutual Fund) regulatins1993, Mutual fund means a fund

established in the form of trust by sponsor to raise moneys by the trustees

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through the sale of units to the public under one or more schemes for investing
in securities in accordance with these regulations.
However in the Indian context it is safe to define Mutual Fund as trusts

accepting savings from the investors and invest the same as per the objectives
incorporated in the trust deed to manage diversified portfolio which in turn
assure reasonable returns to the investors.
2.3 Why invest in Mutual Funds.
Investing in mutual has various benefits which makes it an ideal investment

avenue. Following are some of the primary benefits.
1. Professional investment management
One of the primary benefits of mutual funds is that an investor has access to
professional management. A good investment manager is certainly worth the fees
you will pay. Good mutual fund managers with an excellent research team can do a
better job of monitoring the companies they have chosen to invest in than you can,
unless you have time to spend on researching the companies you select for your
portfolio. That is because Mutual funds hire full-time, high-level investment
professionals. Funds can afford to do so as they manage large pools of money. The
managers have real-time access to crucial market information and are able to
execute trades on the largest and most cost-effective scale. When you buy a mutual
fund, the primary asset you are buying is the manager, who will be controlling
which assets are chosen to meet the funds' stated investment objectives.
2. Diversification
A crucial element in investing is asset allocation. It plays a very big part in the
success of any portfolio. However, small investors do not have enough money to
properly allocate their assets. By pooling your funds with others, you can quickly
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benefit from greater diversification. Mutual funds invest in a broad range of

securities. This limits investment risk by reducing the effect of a possible decline in
the value of any one security. Mutual fund unit-holders can benefit from
diversification techniques usually available only to investors wealthy enough to buy
significant positions in a wide variety of securities.
3. Low Cost
A mutual fund lets you participate in a diversified portfolio for as little as Rs.5,000
and sometimes less. And with a no-load fund, you pay little or no sales charges to
own them.
4. Convenience and Flexibility
Investing in mutual funds has its own convenience. While you own just one security
rather than many, you still enjoy the benefits of a diversified portfolio and a wide
range of services. Fund managers decide what securities to trade, collect the interest
payments and see that your dividends on portfolio securities are received and your
rights exercised. It also uses the services of a high quality custodian and registrar.
Another big advantage is that you can move your funds easily from one fund to
another within a mutual fund family. This allows you to easily rebalance your
portfolio to respond to significant fund management or economic changes.
5. Liquidity
In open-ended schemes, you can get your money back promptly at net asset value
related prices from the mutual fund itself.
6. Transparency
Regulations for mutual funds have made the industry very transparent. You can
track the investments that have been made on your behalf and the specific

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investments made by the mutual fund scheme to see where your money is going. In
addition to this, you get regular information on the value of your investment.
7. Variety
There is no shortage of variety when investing in mutual funds. You can find a
mutual fund that matches just about any investing strategy you select. There are
funds that focus on blue-chip stocks, technology stocks, bonds or a mix of stocks
and bonds. The greatest challenge can be sorting through the variety and picking the
best for you.
Mutual fund route offers several important advantages.
The popular saying, dont keep all the egg in one basket is quite appropriate in
the case of instruments, if an investor wishes to maximize his returns, he should
invest in a variety of securities available across the market. However, a small
investor with his limited savings cannot acquire a number of securities of
different companies and industries. Thus, the investor gets a proportion of the
average market. This specific character of mutual fund investment avenues
further, the modern portfolio they states that, diversification reduces the risk and
improves the scope for higher returns.
Professionals who have knowledge and experience in security analysis and

portfolio management manage the corpus amount mobilized by the mutual
funds under various schemes. Research is continuous process in mutual funds,
where they identify the undervalued and high yielding securities and make will-
timed purchases and sales. An investor of a mutual fund schemes may gain out
its professional management. The investor can save his cost and time in

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identifying the securities; he can share the benefits of reach and management
costs of the funds with other investor.
Mutual funds are floating different schemes with variety investment objectives.
This creates an opportunity among investors to choose the schemes based on
their objective, motivations, and requirements.
The presence of the Mutual fund institutions in the economy offers certain
advantages to the economy-
Mutual funds are the financial intermediaries, which mobilize the savings from
surplus units and transfer them to the capital and money market by investing in
a variety of financial instruments.
Mutual funds with support of their professional managers, carefully analyses the
prospects of new companies and new industries if the prospects are good,
subscribe large amounts to the equity and debt capital of newly established
companies.
Mutual funds as institutional investors, with their professional expertise in the stock
trading. The increased participation of professional rational investment reduces the
undesirable speculation in the capital market.

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2.4 INTORDUCTION TO MUTUAL FUND :-

A Mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objectives. The mutual fund will have a fund manager who is responsible for
investing the gathered money into specific securities (stocks or bonds). When you
invest in mutual fund, you are buying units or portions of the mutual fund and thus
on investing becomes a shareholders or unit holder of the fund.
Mutual Funds are considered as one of the best available investments as compare to
others they are very cost efficient and also easy to invest in, thus by pooling money
together in a mutual fund, investors can purchase stocks or bonds with much lower
trading costs than if they tried to do it on their own. But the biggest advantage to
mutual funds is diversification, by minimizing risk and maximizing returns.

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Fig 2 Mutual Fund
2.5 EVOLUTION OF MUTUAL FUND :-
In most of the countries, mutual funds have emerged as strong rivals to banking
industry in mobilizing savings funds. The reason that may attributed to same is
that in the banking sector there are many restrictions for investment in the
capital market, there as the mutual funds have been a free access to these
markets which in other words have given then an upper hand in the matter of
operations. Consequently, the returns from mutual funds investment are higher
compared to the returns out of savings in banks in an ideal market condition.
Thus, he mutual funds i8ndusty has witnessed a tremendous growth in countries
like Mexico and South Africa.
Mutual Funds can be broadly classified under 3 heads namely

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a) Investment Trust
b) Holding companies
c) Finance Companies
Out of the above the investment trust got a boost because of good public
response and today we have in India Unit Trust of India that was constituted on
similar lines with the unit trust in the U.S.A.
The unit trusts are open-ended schemes where the investor can buy and sell
Unit at his only will and wish. The other advantage of unit Trust is that even a
small investor can hold shares of many companies and enjoy the returns arising
lot of the investment.
The unit trust of India was constituted under the unit Trust of India act,
1963 and became operational in the year 1964 with the basic objectives of
mobilizing savings through the sale of units and investing them in corporate
securities with the idea of maximizing yield from them and capital appreciation
with inbuilt liquidity. The unit trust of India still commands a good position
among mutual fund in India and approximately 90% of the investments in
mutual fund are in the schemes floated by unit trust of India.
The unit trust of India has many highlights in its performance so far. The
monopoly of unit trust of India was brought to an end with the entry of public
sector mutual funds in the year 1987. Canara bank, State Bank of India, Punjab
National Bank and Indian bank floated the premier mutual funds that came into
being during 1987.

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2.6Growth of Mutual Funds :-
100% growth in the last 6 years (as on 2009).
Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.
In India there are 32 mutual funds : much less than compared to US . There
is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds
are concentrating on the 'A' class cities. Soon they will find scope in the
growing cities.
2.7 ORGANIZATION OF A MUTUAL FUND :-

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Fig 3 Organization Structure
2.8 TYPES OF MUTUAL FUNDS
Any mutual fund has an objective of earning income for the investors and/ or
getting increased value of their investments. To achieve these objectives mutual
funds adopt different strategies and accordingly offer different schemes of
investments. On this basis the simplest way to categorize schemes would be to
group these into
Operational classification highlights the two main types of schemes, i.e., open-
ended and close-ended which are offered by the mutual funds.
Portfolio classificationprojects the combination of investment instruments and

investment avenues available to mutual funds to manage their funds. Any portfolio
scheme can be either open ended or close ended

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Fig 4 Types
A. By Structure :-
1. Open Ended Schemes:
As the name implies the size of the scheme (Fund) is open i.e., not specified
or pre-determined. Entry to the fund is always open to the investor who can
subscribe at any time. Such fund stands ready to buy or sell its securities at any
time. It implies that the capitalization of the fund is constantly changing as
investors sell or buy their shares. Further, the shares or units are normally not
traded on the stock exchange but are repurchased by the fund at announced
rates. Open-ended schemes have comparatively better liquidity despite the fact
that these are not listed. The reason is that investor can any time approach
mutual fund for sale of such units. No intermediaries are required. Moreover,

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the realizable amount is certain since repurchase is at a price based on declared

net asset value (NAV). No minute-to-minute fluctuations in rates haunt the
investors. The portfolio mix of such schemes has to be investments, which are
actively traded in the market. Otherwise, it will not be possible to calculate
NAV. This is the reason that generally open-ended schemes are Equity Based.
Moreover, desiring frequently traded securities, open-ended schemes hardly

have in their portfolio shares of comparatively new and smaller companies since
these are not generally traded. In such funds, option to reinvest its dividend is
also available. Since there is always a possibility of withdrawals, the
management of such funds becomes more tedious as managers have to work
from crisis to crisis. Crisis may be on two fronts, one is, that unexpected
withdrawals require funds to maintain a high level of cash available every time
implying thereby idle cash. Fund managers have to face questions like what to
sell. He could very well have to sell his most liquid assets. Second, by virtue of
this situation such funds may fail to grab favorable opportunities. Further, to
match quick cash payments, funds cannot have matching realization from their
portfolio due to intricacies of the stock market. Thus, success of the open-ended
schemes to a great extent depends on the efficiency of the capital market. The
holders of the shares in the fund can resell them to issuing Mutual Fund
Company at any time They receive in turn the net asset value (NAV) of the
shares at the time of resale. Such mutual funds companies place their funds in
the secondary securities market. They do not participate in new issue markets to
pension funds or life insurance investment companies. Can sell an unlimited
number of shares and thus keep going larger. The open end mutual funds by or
sell their own share.
These companies sell new shares at NAV plus a loading or management fee and
redeem scheme at NAV. UTIS Unit scheme, 1964 and CANCIGO and
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CANGICT are few examples of such funds. The minimum corpus for and
open-ended fund is fifty crores a per SEBI guidelines.
2. Close Ended Schemes:
Such schemes have a definite period after which their shares/units can be
redeemed. Unlike open-ended funds, these funds have fixed capitalization, i.e.,
their corpus normally does not change throughout its life period. Close ended
fund units trade among the investors in the secondary market since these are to
be quoted on the stock exchanges. Their price is determined on the basis of
demand and supply in the market. Their liquidity depends on the efficiency and
understanding of the engage broker. Their price is free to deviate from NAV, i.e.,
there is every possibility that the market price may be above or below its NAV.
If one takes into account the issue expenses, conceptually close ended fund units
cannot be traded at a premium or over NAV because the price of a package of
investments, i.e., cannot exceed the sum of the prices of the investments
constituting the package. Whatever premium exists that may exist only on
account of speculative activities. In India as per SEBI (MF) Regulations every
mutual fund is free to launch any or both types of schemes. Close ended
mutual funds are different form the open-ended mutual fund. Close-ended and
investing company has definite target amount for the funds and cannot sell more
shares after its initial offering. Its growth in terms of numbers is limited. Its
shares are issued like together companys new issue listed and quoted at stock
exchange. That minimum corpus for Close-ended fund is Rs. 20 crores. Close-
ended funds changed funds the secondary market acquisition of corporate
securities.
There is no necessary relationship between the price of close-ended mutual fund

share and its NAV. Its shares may les per the current NAV per share, per more,

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(at a premium) as per less(at discount). Investors doubts about the abilities of
the funds management lack of sales effort (brokers earn less commission of
close ended schemes then open ended schemes) risk ness of the fund.
3. Interval schemes
Interval Schemes are those that combine the features of open-ended and close-
ended schemes.
The units may be traded on the stock exchange or may be open for sale or
redemption during pre-determined intervals
B. By Investment Objectives :-
1. Growth Scheme
Aim is to provide capital appreciation over the medium to long term
Major part of their corpus is invested in equity
High risk
Different Options : Dividend, Capital Appreciation
Investor has choice to select the option and also change the option at later date
Good for investors having long term outlook seeking appreciation over a period
of time
2. Income Scheme
Aim is to provide regular and steady income to the investors
Underlying portfolio is Fixed income securities such as bonds, corporate
debentures, Govt. Securities and Money Market Instruments
Less risky as compared to growth funds
Opportunity of capital appreciation is limited.

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These funds are not affected due to volatility of equity markets but affected
because of change in interest rate in the country.
3. Balanced Funds
Aim is to provide both growth and regular income
Schemes invest in both equities and fixed income securities in proportion
indicated in offer document
Appropriate for investors looking for moderate growth
Generally invest 40 60% in equity and debt instruments
Affected by fluctuations in stock markets, however NAV is less volatile as
compared to growth funds
4. Money Market Funds or Liquid Funds

Income Funds and aim is to provide easy liquidity, preservation of capital and
moderate income
Invest in short term instruments viz. TB, CDs, CPs, Interbank Call Money, Govt.
Securities
Returns fluctuates much less compared to other funds
Appropriate for Corporate and Individual Investors as a means to park their
surplus funds for short periods
(c) Others :-
Tax Saving Schemes
Index Schemes
Sector Specific Schemes

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2.5 FUND MANAGEMENT
ACTIVELY MANAGED FUNDS :-

Mutual Fund managers are professionals. They are considered professionals because
of their knowledge and experience. Managers are hired to actively manage mutual
fund portfolios. Instead of seeking to track market performance, active fund
management tries to beat it. To do this, fund managers actively buy and sell
individual securities. For an actively managed fund, the corresponding index can be
used as a performance benchmark.
Actively Managed Fund Styles :
Fund Styles usually fall within the following three categories.
Fund Styles :-
Value :-
The manager invests in stocks believed to be currently undervalued by the
market.
Growth :-
The Manager selects stocks they believe have a strong potential for beating
the market.
Blend :-
The manager looks for a combination of both growth and value stocks.
Passively Managed Funds :-

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Passively managed mutual funds are an easily understood, relatively safe approach
to investing in broad segments of the market. They are used by less experienced
investors as well as sophisticated institutional investors with large portfolios.
4. PORTFOLIO MANAGEMENT SERVICES

What is Portfolio Management ?
Portfolio Management Services, called as PMS are the advisory services provided
by corporate financial intermediaries. It enables investors to promote and protect
their investments that help them to generate higher returns. It devotes sufficient time
in reshuffling the investments on hand in line with the changing dynamics. It
provides the skill and expertise to steer through these complex, volatile and dynamic
times. It is a choice of selecting and revising spectrum of securities to it with the
characteristics of an investor. It prevents holding of stocks of depreciating value. It
acts as a financial intermediary and is subject to regulatory control of SEBI.
4.1 PHASES OF PORTFOLIO MANAGEMENT
Security Analysis
Portfolio Analysis
Portfolio Selection
Portfolio Revision
Portfolio Evaluation
Security Analysis
(a) Fundamental Analysis

This analysis concentrates on the fundamental factors affecting the company such as
EPS (Earning Per Share) of the company, the dividend Payout ratio, competition
faced by company, market share, quality of management etc.
(b) Technical Analysis

The past movement in the prices of shares is studied to identify trends and patterns
and then tries to predict the future price movement. Current market price is
compared with the future predicted price to determine the mispricing. Technical
analysis concentrates on price movements and ignores the fundamentals of the
shares.
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(c) Efficient Market Hypothesis

This is comparatively more recent approach. This approach holds that market prices
instantaneously and fully reflect all relevant available information. It means that the
market prices will always be equal to the Intrinsic value.
Portfolio Analysis
A portfolio is a group of securities held together as investment. It is an attempt to
spread the risk all over. The return & risk of each portfolio has to be calculated
Mathematically and expressed quantitatively. Portfolio analysis phase of portfolio
Management consists of identifying the range of possible portfolios that can be
constituted from a given set of securities and calculating their risk for further
analysis.
Portfolio selection
The goal of portfolio construction is to generate a portfolio that provides the highest
returns at a given level of risk. Harry Markowitzh portfolio theory provides both the
conceptual framework and the analytical tools for determining the optimal portfolio
in a disciplined and objective way.
Portfolio Revision
The investor/portfolio manager has to constantly monitor the portfolio to ensure that
it continues to be optimal. As the economy and financial markets are highly volatile
dynamic changes take place almost daily. As time passes securities which were once
attractive may cease to be so. New securities with anticipation of high return and
low risk may emerge.
Portfolio Evaluation
Portfolio evaluation is the process, which is concerned with assessing the
performance of the portfolio over a selected period of time in terms of return and
risk. The evaluation provides the necessary feedback for better designing of
portfolio the next time around.

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4.2 TYPES OF PORTFOLIO MANAGEMENT
Types of Portfolio Management
Discretionary Portfolio Management Non-Discretionary

Services Portfolio management servic
Fig 5 Types of Portfolio Management
The Discretionary Portfolio Management Services (DPMS) :-

In this type of services, the client parts with his money in favor of manager,
who in return, handles all the paper work, makes all the decisions and gives a good
return on the investment and for this he charges a certain fees.
The Non Discretionary Portfolio Management Services

The manager function as a counselor, but the investor is free to accept or
reject the managers advice; the manager for a services charge also undertakes the
paper work. The manager concentrates on stock market instruments with a portfolio
tailor made to the risk ability of the investor.

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4.3 MANAGING PORTFOLIO
ASSET ALLOCATION
The process of dividing a portfolio among major asset categories such as bonds,
stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the
portfolio. The ideal asset allocation differs based on the risk tolerance of the
investor.
To help determine which securities, asset classes and subclasses are optimal for
your portfolio; lets define some briefly.
Large Cap Stock :-

These are shares issued by large companies with a market capitalization generally
greater than $10 billion.
Mid Cap Stock :-

These are issued by mid-sized companies with a market cap generally between $2
billion and $10 billion.
Small Cap Stock :-

These represent smaller-sized companies with a market cap of less than $2 billion.
These types of equities tend to have the highest risk due to lower liquidity.
International Securities :-
These types of asset are issued by foreign companies and listed on a foreign
exchange. International securities allow an investor to diversify outside of his or her
country, but they also have exposure to country risk the risk that a country will not
be able to honor its financial commitments.
Emerging Markets :-
This category represents securities from the financial markets of a developing
country. Although investments in emerging markets offer a higher potential return.
There is also higher risk, often due to political instability, country risk and lower
liquidity.
Money Market :-

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Money market securities are debt securities that are extremely liquid investments
with maturities of less than one year. Treasury bills make up the majority of these
type of securities.
Real Estate Investment Trusts (REITs) :-

REITs trade similarly to equities, except the underlying asset is a share of a pool of
mortgages or properties, rather than ownership of a company.
4.4 INVESTOR TYPES

There are many different types of investors in the stock market, investors
can be classified into the following types :
TYPES OF INVESTOR
AGGRESSIVE BALANCED CONSERVATIVE

INVESTOR INVESTOR INVESTOR
Fig. 6 Types of investor.
AGGRESSIVE INVESTOR :-
Aggressive investors tend to concentrate on equity investments such as individual
stocks and mutual funds. They are open to more risk, willing to see large short term
swings in market performance on an annualized basis. They aim for large growth in
the market.

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Fig. 6.1 Aggressive Investor Portfolio
BALANCED INVESTOR :-
Balanced investors will have a time horizon of 5 to 10 years and choose to diversify
across both aggressive growth oriented investments and more conservative interest
earning investments. They emphasize income over growth. Balanced investors are
medium risk investors.
Fig. 6.2 Balanced Investor Portfolio
CONSERVATIVE INVESTOR :-
Conservative investor have a 2 to 5 year of time horizon, typically because they are
nearing retirement or have a short term need for their investment. They prefer a
higher level of income than does the stable investor. Conservative investors are low
to medium risk investors.

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Fig. 6.3 Conservative Investor Portfolio
4.5 SEBI GUIDELINE FOR PMS
For investment in listed securities, an investor is required to open a

Demat account in his/her own name.
Minimum investment amount of clients for such schemes to Rs. 25

lakh from the earlier Rs. 5 lakh.
Portfolio manager will not be allowed to hold the unlisted securities,

besides the listed securities, belonging to the portfolio account, in its
own name on behalf of its clients.
Portfolio manager cannot offer / promise indicative or guaranteed

return to clients.
The portfolio manager is required to have a minimum net worth of Rs.

2 crore.

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CHAPTER : 2
PROFILE OF RESPONDENTS
Respondents Current Age

Age Number of Respondents
18 to 35 years old 71
35 to 50 years old 24
Above 50 years old 5
The above table shows that 71% of respondents are in the age group of 18 to 35
years, 24% of respondents are in the age group of 35 to 50 years, 5% of respondents
are in the age group of above 50 years.
Respondents Annual Income

Income Number of Respondents
Less than 1.5 Lacs 18
1.5 Lacs to 2.5 Lacs 18
3.5 Lacs to 5 Lacs 50
5 Lacs and Above 14

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The above table shows that 18% of respondents have an annual income of less than
1.5 Lacs, 18% of respondents have an annual income of 1.5 Lacs to 2.5 Lacs, 50%
of respondents have an annual income of 3.5 Lacs to 5 Lacs and 14% of respondents
have an annual income of above 5 Lacs.
CHAPTER : 3
RESEARCH DESIGN
1. LITERATURE REVIEW
Comparative Study on Performance Evaluation of Mutual Fund Schemes of
Indian Companies International Refereed Research Journal
www.researchersworld.com VolIII, Issue3(3), July 2012 [48]
Carhart, Mark, 1997, on Persistence in mutual fund performance, journal of

Finance 52, 57-82.
Chevalier, Judith and Glenn Ellison, 1997, Risk taking by mutual funds as a
response to incentives, Journal of Political Economy 105, 1167-1200
Harry Markowitz (1952) provides a theory about how investors should select
securities for their investment portfolio given beliefs about future performance
his rule recommends the portfolio with the highest return is not the one with the
lowest variance of returns and that there is a rate at which an investor can
increase return by increasing variance.
William Sharpe (1964) and John Lintner (1965) separately extend the work of
Markowtiz. They show that the theory implies that the rates of return from
efficient combinations of risky assets move together perfectly. They identified
market as a whole is considered the point of tangency between the SML and the
efficient frontier. This is the foundation for the Capital Asset Pricing Model
(CAPM).

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Sondhi and Jain (2010) examined the market risk and investment performance of
equity Mutual funds in India. The study examined whether high beta of funds
have actually produced high returns over the study period. The results of the
study confirmed that high beta funds may not necessarily produced high returns.
The study revealed that the category, size and ownership have been significant
determinant of the performance of mutual funds during the study period.
2. NEED FOR THE STUDY

Portfolio Management services is becoming a rapidly growing area serving a
broad array of investor both individual and institutional with investment
portfolios ranging in asset size from thousands to cores of rupees.
Increase Market Volatility risk and return parameters of financial assets are
continuously changing so your assets in the portfolio should be properly
managed.
Portfolio creation is another vital aspect in an investors Portfolio because to

gain higher returns with manageable risk.
3. OBECTIVES OF STUDY
The main objective of this study is doing an In-depth analysis of Mutual fund
Portfolio by taking sample of funds and comparing it with it others.
To Understand the concept of Portfolio Creation and its relation to Mutual
Funds.
4. SCOPE OF THE STUDY
Portfolio including other Financial Assets.
Portfolio Manager should try to bring in untapped market of age group of 22 to

35 age as this group is wide and also earn high income with limited liability.
5. LIMITATION TO THE STUDY

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Although the report has been made on the relevant facts and figures but certain
problems have been faced, which are as follows :-
The respondents were sometimes biased while answering the questions.
The time constraint was one of the major problems.
To get an insight in the process of portfolio allocation and deployment of funds

by fund manager is difficult.
The portfolio of mutual fund investments can change according to the market
conditions. This project is carried out and evaluated on the basis of the market
conditions from 1st May 2012 to 31st June 2013.
6. RESEARCH METHODOLOGY
RESEARCH DESIGN
o Exploratory Research & Analytical Research
o Quantitative research
DATA COLLECTION METHOD

o Primary Data
Conducted though a Survey and involved, Interviewing different age group of people.
o Secondary Data
For data collection purpose the secondary sources was used like Mutual fund books,
websites.
SAMPLE DESIGN
o Sample Size : 100 Samples
o Types of Sample : Convenience Sampling
7. CHAPTER SCHEME :-
A. Introduction
B. Profile of organization
C. Design of dissertation
D. Data analysis and interpretation

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E. Summary of findings, conclusion and suggestions.
CHAPTER : 4
DATA ANALYSIS AND INTERPRETATION
The data collected through the Profiler provided for an Analysis of an Individuals
Risk taking capacity through the Risk Analyzer. The questionnaire, after being
administered on the Respondents categorized each of them on the basis of their risk-
taking, as Investor of the following classes : Conservative, Balanced and
Aggressive.
Q.1. Table Showing Current Age
Age Number of Respondents % of Respondents
18 to 35 years old 71 71%
35 to 50 years old 24 24%
Above 50 years old 5 5%
Table : 1
Above 50 years old; 5%; 5%
35 to 50 years old; 24%; 24%
18 to 35 years old; 71%; 71%
18 to 35 years old 35 to 50 years old Above 50 years old

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CHART 1 : SHOWING CURRENT AGE

INTERPRETATION :-
71% of respondents are in the age group of 18 to 35 years, 24% of respondents are
in the age group of 35 to 50 years, 5% of respondents are in the age group of above
50 years.
INFERENCE :-
Majority of respondents are in the age group of 18 to 35 years.
Q.2. Table Showing Annual Income
Income Number of Respondents % of Respondents
Less than 1.5 Lacs 18 18%
1.5 Lacs to 2.5 Lacs 18 18%
3.5 Lacs to 5 Lacs 50 50%
5 Lacs and Above 14 14%
Table : 2
60%
50%
40%
30%
20%
10%
0%
CHART : 2 SHOWING INCOME

INTERPRETATION :-
18% of respondents have an annual income of less than 1.5 Lacs, 18% of
respondents have an annual income of 1.5 Lacs to 2.5 Lacs, 50% of respondents

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have an annual income of 3.5 Lacs to 5 Lacs and 14% of respondents have an
annual income of above 5 Lacs.
INFERENCE :-
Most of the respondents have an annual income of 3.5 Lacs to 5 Lacs.
Q.3. Table Showing percentage of monthly income can be invested

Income Number of Respondents % of Respondents
0 to 10% 11 11%
11% to 20% 35 35%
21% to 30% 40 40%
More than 30% 14 14%
Table : 3
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
0 to 10% 11% to 20% 21% to 30% More than 30%
% of Respondents
CHART : 3 Showing % of Monthly income invested

INTERPRETATION :-
11% of respondents invest 0 to 10% of their income, 35% of respondents invest 11%
to 20% of their income, 40% of respondents invest 21% to 30% of their income and
14% of respondents invest more than 30% of their income.

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INFERENCE :-
Most of the respondents invest 21% to 30% of their income.
Q.4. Table Showing the Important Parameters while investing

Parameters Number of Respondents % of Respondents
Returns 29 29%
Lower Risk Factor 37 37%
Credit Rating 13 13%
Inflation 8 8%
Company 6 6%
Lock in Period 7 7%
Table : 4
% of Respondents
7%
6%
29%
8%
13%
37%
Returns Lower Risk Factor Credit Rating

Inflation Company Lock in Period
Chart : 4 Important parameter while investing

INTERPRETATION :-
29% of respondents feel that returns is an important parameter while investing, 37%
of respondents feel that lower risk factor is an important parameter while investing,
13% of respondents feel that credit rating is an important parameter while investing,
8% of respondents feel that inflation is an important parameter while investing, 6%

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of respondents feel that company is an important parameter while investing and 7%

of respondents feel that lock in period is an important parameter while investing.
INFERENCE :-
Major portion of respondents feel that lower risk factor is an important parameter
while investing.
Q.5. Table Showing highly volatile market are a destination for investments
Number of Respondents % of Respondents
Yes 87 87%
No 13 13%
Table : 5
% of Respondents
90
80
70
60
50
40
30
20
10
0
Yes
NO
% of Respondents
Chart : 5 Showing Volatile market

INTERPRETATION :-
87% of respondents feel that highly volatile market is a destination for investments
and 13% of respondents do not feel so.
INFERENCE :-
Major portion of respondents feel that highly volatile market is a destination for
investments.

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Q.6. Table Showing type of mutual fund schemes has invested

Mutual Fund Schemes Number of Respondents % of Respondents
Debt Schemes 62 62%
Equity Based Schemes 38 38%
Table : 6
70%
60%
50%
40%
30%
20%
10%
0%
Debt Schemes
Equity Based Schemes
Chart : 6 Showing Mutual Fund Schemes

INTERPRETATION :-
62% of respondents have invested in debt schemes as a type of mutual fund schemes
and 38% of respondents have invested in equity based schemes as a type of mutual
fund schemes.
INFERENCE :-
Most of the respondents have invested in debt schemes as a type of mutual fund
schemes.

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Q.7. Table Showing Which principles has consider while selecting a mutual fund
Principles Number of Respondents % of Respondents
Enquiring about the fund manager 24 24%
Finding about past performance 47 47%
Identifying your own objectives 28 28%
Other 1 1%
Table : 7
% of Respondents
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Chart : 7 Showing Principle Considered While Investing

INTERPRETATION:-
24% of respondents consider Enquiring about the fund managerwhile selecting a mutual
fund, 47% of respondents consider Finding about past performance while selecting a
mutual fund, 28% of respondents consider Identifying your own objectives while
selecting a mutual fund and 1% of respondents consider others while selecting a
mutual fund.

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INFERENCE :-
Majority of respondents consider Finding about past performance while selecting a
mutual fund.
Q.8. Table Showing in order to achieve high returns, willing to choose high risk
investments.
Strongly agree 47 47%
Neutral 43 43%
Strongly Disagree 10 10%
Table : 8
100%
100%
100%
90% 100%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Strongly Agree
Neutral
Stongly Disagree
Chart : 8 Showing High return while choosing High Risk

INTERPRETATION :-
47% of respondents strongly agree to achieve high returns, willing to choose high
risk investments, 43% of respondents are neutral to achieve high returns, willing to
choose high risk investments and 10% of respondents strongly disagree to achieve
high returns, willing to choose high risk investments.
INFERENCE :-

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Major portion of respondents strongly agree to achieve high returns, willing to

choose high risk investments.
Q.9. Table Showing expected rate of return from investments

Expected rate of Return Number of Respondents % of Respondents
Potential return of 6 % per 33 33%
annum
Potential return of 10% to 15% 47 47%
per annum
Potential return of more than 20 20%
15% per annum
Table : 9
20%
33%
Potential return of 6 % per
annum
Potential return of 10% to
15% per annum
Potential return of more
than 15% per annum
47%
Chart : 9 Showing Expected rate of Return

INTERPRETATION :-
33% of respondents feel that there is a Potential return of 6 % per annum from
investments , 47% of respondents feel that there is a Potential return of 10 % to 15% per
annum from investments and 20% of respondents feel that there is a Potential return of
more than 15% per annum from investments.

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INFERENCE :-
Major portion of respondents feel that there is a Potential return of 10 % to 15% per annum
from investments.
Q.10. Table showing if investments if portfolio value falls
Less than 5 % per annum 11 11%
5%-10% per annum 37 37%
10%-20% per annum 33 33%
20%-30% per annum 18 18%
More than 30% per annum 1 1%
Table :10
% of Respondents
37%
33%
18%
11%
Chart : 10 Showing Investment Value falls

INTERPRETATION :-
11% of respondents feel that the investments portfolio falls to Less than 5 % per annum,
37% of respondents feel that the investments portfolio falls to 5%-10% per annum, 33%
of respondents feel that the investments portfolio falls to 10%-20% per annum, 18% of
respondents feel that the investments portfolio falls to 20%-30% per annum and 1% of
respondents feel that the investments portfolio falls to More than 30% per annum.
INFERENCE :-

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Majority of respondents feel that the investments portfolio falls to 5%-10% per annum.
Q.11. Table Showing allocation in current portfolio pertains to

Savings and fixed deposits 20 20%
Bonds 36 36%
Equities 31 31%
Mutual Funds 11 11%
Derivatives options, Swaps and 2 2%
Futures
Table : 11
% of Respondents
2%
11% 20%
31%
36%
Savings and fixed deposits Bonds

Equities Mutual Funds
Derivatives options, Swaps and Futures
Chart : 11 Allocation in Current Portfolio

INTERPRETATION :-
20% of respondents feel that Savings and fixed deposits, 31% of respondents feel that
equities, 36% of respondents feel that equities, 11% of respondents feel that Mutual funds
and 2% respondents feel that derivatives option, swaps and futures.
INFERENCE :-

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From above it seem that respondent were conscious about their investment and they
want safe investment. Therefore 36% goes with bond to get fixed returns.
Q.12. Table showing prefer to keep capital safe rather than have high returns
Strongly agree 62 62%
Neutral 31 31%
Strongly disagree 7 7%
Table : 12
70%
60%
50%
40%
30%
20%
10%
0%
Strongly agree Neutral Strongly disagree
% of Respondents
Chart : 12 Prefer to keep High Safe than Return

INTERPRETATION :-
62% of respondents strongly agree to keep capital safe rather than have high returns,
31% of respondents are neutral to keep capital safe rather than have high returns and
7% of respondents strongly disagree to keep capital safe rather than have high
returns.
INFERENCE
Most of the respondents strongly agree to keep capital safe rather than have high
returns.

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.Q.13. Table Showing When an investor expect to liquidate investment

Less than 1 year 14 14%
1 to 2 years 29 29%
3 to 5 years 31 31%
6 to 7 years 12 12%
More than 7 years 14 14%
Table : 13
% of Respondents
14% 14%
12%
29%
31%
Less than 1 year 1 to 2 years 3 to 5 years

6 to 7 years More than 7 years
Chart : 13 Investor expect to liquidate investment

INTERPRETATION :-
14% of respondents expect to liquidate investment in less than 1 year, 29%of
respondents expect to liquidate investment in 1 to 2 years, 31% of respondents
expect to liquidate investment in 3 to 5 years, 12% of respondents expect to
liquidate investment in 6 to 7 years and 14% of respondents expect to liquidate
investment in more than 7 years.
INFERENCE :-
Most of the respondents expect to liquidate investment in 3 to 5 years
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Q.14. Table Showing what an investor think affects mutual Funds

Systematic Risk 73 73%
Unsystematic Risk 27 27%
Table : 14
% of Respondents
Unsystematic Risk
Systematic Risk
0% 10% 20% 30% 40% 50% 60% 70% 80%
% of Respondents
Chart : 14 Investor Think Affect of mutual funds

INTERPRETATION :-
73% of respondents feel that systematic risk affects mutual funds and 27% of
respondents feel that unsystematic risk affects mutual funds.
INFERENCE :-
Majority of respondents feel that systematic risk affects mutual funds.

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Q.15. Table Showing Primary sources of knowledge about mutual funds as an

investment option
Television 50 50%
Internet 17 17%
Newspaper 21 21%
Friends 9 9%
Salesperson 3 3%
Table : 15
% of Respondents
50%
21%
17%
9%
3%
Television Internet Newspaper Friends Salesperson
Chart : 15 Showing Primary sources of knowledge

INTERPRETATION :-
50% of respondents feel that television is a source of knowledge about mutual funds
as an investment option, 17% of respondents feel that internet is a source of
knowledge about mutual funds as an investment option, 21% of respondents feel
that newspaper is a source of knowledge about mutual funds as an investment
option, 9% of respondents feel that friends are a source of knowledge about mutual
funds as an investment option and 3% of respondents feel that salespersons are a
source of knowledge about mutual funds as an investment option.
INFERENCE :-
Most of the respondents feel that television is a source of knowledge about mutual
funds.
4.2 PORTFOLIO CREATION

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4.2.1 AGGRESSIVE INVESTOR PORTFOLIO [ 80% EQUITY & 20% DEBT]
SCHEME NAME NATURE RETURNS BETA AMOUNT

SBI MAGNUM SECTOR EQUITY 23.09 1.1 4,00,000
FUNDS UMBRELLA
PHARMA- GROWTH
SBI MAGNUM SECTOR EQUITY 22.73 1.03 2,00,000

FUNDS UMBRELLA
EMERGBUSS FUND-GROWTH
BIRLA SUN LIFE MNC FUND EQUITY 24.28 0.74 6,00,000

GROWTH
RELIANCE PHARMA FUND EQUITY 29.65 0.91 8,00,000

GROWTH
EQUITY 20,00,000
SUNDARAM BOND SAVER DEBT 9.41 1.17 1,25,000

INSTITUTIONAL PLAN
GROWTH
RELIANCE MONTHLY DEBT 9.40 1.14 1,25,000

INCOME PLAN - GROWTH
SAHARA SHORT TERM BOND DEBT 9.24 1.03 1,25,000

FUND - GROWTH
HDFC MONTHLY INCOME DEBT 9.14 1.28 1,25,000

PLAN- LONG TERM PLAN-
GROWTH
DEBT 5,00,000
TOTAL PORTFOLIO 25,00,000

Table : 16
4.1.3 CONSERVATIVE INVESTOR PORTFOLIO [ 20% EQUITY & 80% DEBT]

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ICICI PRUDENTIAL EQUITY 26.03 0.88 2,00,000
TECHNOLOGY FUND-
GROWTH
FRANKLIN INFOTECH FUND- EQUITY 20.18 0.89 50,000

GROWTH
HDFC MI-CAP EQUITY 21.10 0.80 1,00,000

OPPORTUNITIES FUND
GROWTH
RELIGARE MID N SMALL CAP EQUITY 21.35 0.80 1,50,000

FUND GROWTH
EQUITY 5,00,000
HDFC MULTIPLE YIELD FUND DEBT 10.86 0.45 4,00,000

PLAN 2005 GROWTH
HDFC MULTIPLE YIELD FUND DEBT 10.33 0.69 4,00,000

- GROWTH
SBI MAGNUM CHILDREN DEBT 9.39 0.76 4,00,000

BENEFIT PLAN
TEMPLETON INDIA STIP-IP- DEBT 8.40 0.72 4,00,000

GROWTH
UTI CRTS 81 - GROWTH DEBT 11.21 0.86 4,00,000
DEBT 20,00,000

Table : 17
4.2.3 BALANCED INVESTOR PORTFOLIO [ 50% EQUITY & 50% DEBT]

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HDFC MID-CAP OPPORTUNITIED EQUITY 21.10 0.80 2,00,000
FUND- GROWTH
RELIANCE EQUITY EQUITY 20.97 0.86 3,50,000

OPPORTUNITIES FUND- GROWTH
UTI MNC FUND GROWTH EQUITY 22.46 0.71 4,00,000
RELIGARE MID N SMALL CAP EQUITY 21.35 0.80 3,00,000

FUND GROWTH
EQUITY 12,50,000
UTI CRTS 81 GROWTH DEBT 11.21 0.86 2,50,000
HDFC MONTHLY INCOME PLAN DEBT 9.14 1.28 5,00,000

LONG TERM PLAN- GROWTH
UTI SHORT TERM INCOME FUND- DEBT 8.62 0.83 2,50,000

IP- GROWTH
SBI MAGNUM CHILDREN DEBT 9.39 0.76 2,50,000

BENEFIT PLAN
DEBT 12,50,000
Table : 18

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MUTUAL FUND COMPARISON

The Five Mutual Funds taken for comparison are open ended funds and equity in
nature.
1. HDFC TOP 200 GROWTH
OBJECTIVE :-
To generate long term capital appreciation by investing in a portfolio of equities
and equity linked instruments drawn from the BSE 200 Index.
Type of Scheme Open Ended

Nature Equity
Option Growth
Inception Date Sep 11, 1996
Face Value (Rs./ Unit) 10
MEAN STANDARD SHARPE TREYNO BETA

DEVIATION R
0.38 3.64 0.08 0.31 0.87
2. ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND

INSTITUTIONAL GROWTH
OBJECTIVE :-
Seeks to generate long term capital appreciation and income distribution to unit
holders from a portfolio that is invested in equity and equity related securities of
about 20 companies belonging to the large cap
Nature Equity
Option Growth
Inception Date May 23, 2008
Exit Load If redeemed between 0 year to 1
year, Exit load is 1%.

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DEVIATION R
0.44 3.62 0.09 0.38 0.87
3. DSP BLACKROCK SMALL AND MIDCAP FUND GROWTH
OBJECTIVE :-
The primary investment objectives is to seek to generate long term capital
appreciation from a portfolio that is substantially constituted of equity related
securities

Nature Equity
Option Growth
Inception Date Nov 14, 2006
Minimum Investment (Rs.) 5000
Exit Load If redeemed Between 0 Month to 12
Months : exit load is 1%
Fund Manager AnupMaheswari, Apoorva Shah.

DEVIATION R
0.49 3.74 0.10 0.44 0.87
4. FRANKLIN INDIA BLUECHIP GROWTH
OBJECTIVE :-
Aims to achieve a high degree of capital appreciation through investments is well
established, large size blue chip companies.

Nature Equity
Option Growth
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Fund Manager Sanjay Parekh, ShreyLoonkar, Sunil
Singhania.

DEVIATION R
0.36 3.40 0.07 0.31 0.81
5. RELIANCE BANKING FUND GROWTH
OBJECTIVE :-
The primary investment objective of the scheme is to seek to generate continuous
returns by actively investing in equity and equity related or fixed income securities
of companies in the banking sector.
Nature Equity
Option Growth
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Fund Manager Sanjay Parekh, ShreyLoonkar, Sunil
Singhania.

DEVIATION R
0.52 4.63 0.09 0.49 0.84
RETURNS OF 5 MUTUAL FUNDS
HDFC TOP 200 - GROWTH
Chart : 16

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ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY FUND
Chart 17
DSP BLACKROCK SMALL AND MIDCAP FUND - GROWTH
Chart : 18
FRANKLIN INDIA BLUECHIP GROWTH

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Chart : 19
RELIANCE BANKING FUND GROWTH
Chart : 20
SHARPE RATIO
SCHEMES 2012-2013
HDFC TOP 200 GROWTH 0.08
ICICI PRUDENTIAL FOCUSED BLUECHIP 0.09

EQUITY FUND INSTITUTIONAL GROWTH
DSP BLACKROCK SMALL AND MIDCAP FUND 0.10

GROWTH
FRANKLIN INDIA BLUECHIP GROWTH 0.07

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RELIANCE BANKING FUND GROWTH 0.09
Table : 19
The above table shows the Sharpe ratio of various schemes for the financial year
2012-13, Sharpe ratio is a measure of the excess return per unit of risk in an
investment asset of a trading strategy. The Sharpe ratio is used to characterize how
well the return of an asset compensates the investor for the risk taken.
Among them, DSP BLACKROCK SMALL AND MIDCAP FUND

GROWTHwas considered as the best one with a ratio of 0.10.the least performance
was shown by FRANKLIN INDIA BLUECHIP GROWTHwhich has a ratio of
0.07.
The performance of all selected mutual fund schemes was really low during the
financial year 2012-13.
TREYNOR RATIO
SCHMES 2012-2013


GROWTH
Table : 20

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Treynors Ratio measures the funds performance in relation to the markets

performance. The table shows the Treynors ratio of selected mutual fund schemes
for financial year 2012-13.
Among them RELIANCE BANKING FUND GROWTHwas top performing fund

with a maximum Treynor ratio of 0.49. It means that the scheme has a better risk
adjusted performance as compared to other schemes.
The least performing fund was HDFC TOP 200 GROWTH & FRANKLIN
INDIA BLUECHIP GROWTH with Treynor ratio of 0.31 which shows that the
fund is having a low risk adjusted performance.
STANDARD DEVIATION
SCHMES 2012-2013


GROWTH
Table : 21
Standard Deviation of a fund depicts, that how much the returns of the fund have
deviated from the mean level. The higher the value of standard deviation, the greater
will be the volatility in the funds returns. In financial year 2012-13, RELIANCE
BANKING FUND GROWTHhad standard deviation of 4.63% meaning that the

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funds return fluctuated in either direction (up or down) by 4.63% from its average
return, where asFRANKLIN INDIA BLUECHIP GROWTHshowed minimum
deviation of 3.40%.
RANKINGS
RANK SHARPE RATIO TREYNOR RATIO

1 DSP BLACKROCK SMALL AND RELIANCE BANKING FUND
MIDCAP FUND GROWTH GROWTH
2 ICICI PRUDENTIAL FOCUSED DSP BLACKROCK SMALL AND
BLUECHIP EQUITY MIDCAP FUND GROWTH
FUND INSTITUTIONAL
GROWTH
3 RELIANCE BANKING FUND ICICI PRUDENTIAL FOCUSED
GROWTH BLUECHIP EQUITY
FUND INSTITUTIONAL
GROWTH
4 HDFC TOP 200 GROWTH HDFC TOP 200 GROWTH
5 FRANKLIN INDIA BLUECHIP FRANKLIN INDIA BLUECHIP
GROWTH GROWTH
Table : 22
RAN SHARPE RATIO

K
1 RELIANCE BANKING FUND GROWTH
2 DSP BLACKROCK SMALL AND MIDCAP FUND GROWTH
3 HDFC TOP 200 GROWTH
4 ICICI PRUDENTIAL FOCUSED BLUECHIP EQUITY
FUND INSTITUTIONAL GROWTH
5 FRANKLIN INDIA BLUECHIP GROWTH

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Table : 23
CHAPTER : 5
SUMMARY OF FINDING, CONCLUSION &
SUGGESTIONS
FINDINGS
Majority of respondents are in the age group of 18 to 35 years.

Most of the respondents have an annual income of 3.5 Lacs to 5 Lacs.
Most of the respondents invest 21% to 30% of their income.
Major portion of respondents feel that lower risk factor is an important parameter
while investing.
Major portion of respondents feel that highly volatile market is a destination for
investments.
Most of the respondents have invested in debt schemes as a type of mutual fund
schemes.
Majority of respondents consider Finding about past performance while selecting a
mutual fund.
Major portion of respondents strongly agree to achieve high returns, willing to
choose high risk investments.
Major portion of respondents feel that there is a Potential return of 10 % to 15%
per annum from investments.
Majority of respondents feel that the investments portfolio falls to 5%-10% per
annum.
From above it seem that respondent were conscious about their investment and
they want safe investment. Therefore 36% goes with bond to get fixed returns.
Most of the respondents strongly agree to keep capital safe rather than have high
returns.
Most of the respondents expect to liquidate investment in 3 to 5 years
Majority of respondents feel that systematic risk affects mutual funds.
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Most of the respondents feel that television is a source of knowledge about mutual
funds.
Aggressive investor portfolio [ 80% equity & 20% debt] (Table 16)
Conservative investor portfolio [ 20% equity & 80% debt] (Table 17)
Balanced investor portfolio [ 50% equity & 50% debt] (Table 18)
Portfolio Diversification is necessary in order to manage the risk.
Portfolio created as per Investor class and risk is more preferable.
Sharpe and Treynor ratio are mostly preferred to ascertain the risk and values of
investment.
The Sharpe ratio of various schemes for the financial year 2012-13, DSP
Blackrock small and midcap fund growth was considered as the best one with a
ratio of 0.10. the least performance was shown by franklin India Bluechip
growth which has a ratio of 0.07. (Table 19)
Among them RELIANCE BANKING FUND GROWTHwas top performing fund
with a maximum Treynor ratio of 0.49. It means that the scheme has a better risk
adjusted performance as compared to other schemes. (Table 20)
In financial year 2012-13, RELIANCE BANKING FUND GROWTH had
standard deviation of 4.63% meaning that the funds return fluctuated in either
direction (up or down) by 4.63% from its average return, where as FRANKLIN
INDIA BLUECHIP GROWTH showed minimum deviation of 3.40%. (Table 21)
CONCLUSION
After studying & analyzing different portfolios the following conclusions can be
made :
The construction of the mutual fund schemes portfolio is done by taking various
factors so even after evaluating the mutual funds and ranking them we cannot
say which one is the best scheme of all.

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Portfolio Management services in mutual funds reduces risk without sacrificing

returns.
To understand stock funds, one needs to be familiar with the characteristics of

the different types of companies they hold.
Most of the respondent investors are expecting high returns on their investments
without taking much risk. They also expect liquidity and marketability of their
securities. Very few investors prefer to invest in High Risk-High Return
instruments. Thus we conclude that the investors look for high returns on their
investments but are not ready to bear risk and also they prefer for the safety of
the funds.
Majority of the respondent mutual fund investors are investing in Equity related
mutual fund schemes and few investors are investing in debt related mutual fund
schemes. Only marginal investors are investing in Hybrid Funds ( mixture of
both equity and debt) .
There are various ways of sourcing the performance details of Mutual Fund
schemes. Some of them are Internet, Magazine, financial advisors, financial
institutions, etc.. Most popular among them is Internet because it gives the latest
NAV results of the different schemes at any moment. Only few investors are
sourcing the information through magazines, financial advisors and financial
institutions.
The investors are giving highest priority for three reasons for investing in Mutual
Funds. They are that, the Mutual funds provide High Return with low risk , it is
very simple to monitor and analyse the performance of mutual funds and it is
always better to invest in mutual funds rather that investing directly in to shares.
SUGGESTIONS
Investing in one Mutual Fund scheme may not meet all the investment needs ofan
investor. They should consider investing in a combination of schemes toachieve
their specific goals.It is suggested that the investors should not consider only one
or two factors forinvesting in mutual fund but they should consider other factors
such as higherreturn, degree of transparency, efficient service, fund management
andReputation of mutual fund in selection of mutual funds.

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It is suggested to the investors that instead of keeping long term investment

timehorizon, their time horizon should depends on their objectives and type of
Investment Avenue.
Instead of making wrong decisions regarding investment it is advisable

thatinvestors should take help of financial planner.
Now a days the return on various investments are based on market scenario, soit is
advisable to the investors that they should keep on upgrading themselveswith new
guidelines and changes in terms and conditions. Not only theinvestment avenues
were they have invested but overall investment avenuesthey should be aware of so
that they can make necessary diversification forkeeping their portfolio profitable.
It is suggested to the investors that irrespective of their awareness

regardingInvestment Avenue they should select appropriate investment avenue
which issuitable for them.
It is suggested to the investors that at-least the equity portion of their portfoliomust
be reviewed regularly so that if stock is not performing then
necessarydiversification can be made.
BIBLIOGRAPHY
The data collection is done through intensive study and references from books,
1. Journals:

Technology
Emerging trends of mutual funds in India: A study across category and type of
scheme
By; Bodla B.S and BishnoiSunita
A study on the factors influencing the selection of Mutual fund Company

By; R Vijayalakhmi and Jayasathya
Fundamental Factors Influencing Investments in Mutual Funds- The EIC

Approach
By; K. Viyyanna Rao, NirmalaDaita
2. Websites:
www.valueresearchonline.com
www.mutualfundsindia.com
www.amfiindia.com
www.indiajournals.com
www.fundsindia.com
www.moneycontrol.com
ANNEXTURE
QUESTIONNAIRE
Q.1. What is your Current Age ?
(a) 18 to 35 years old
(b) 35 to 50 years old
(c) Above 50 years old

Technology
Q.2. What is your annual Income ?

(a) Less than 1.5 Lacs
(b) 1.5 Lacs to 2.5 Lacs
(c) 3.5 Lacs to 5 Lacs
(d) 5 Lacs and Above
Q.3. What percentage of monthly income can be invested ?

(a) 0 to 10%
(b) 11% to 20%
(c) 21% to 30%
(d) More than 30%
(e) I currently have no income
Q.4. What do you consider the most important parameters while investing?
(a) Returns
(b) Lower Risk Factor
(c) Credit Rating
(d) Inflation
(e) Company
(f) Lock in Period
Q.5. In this highly volatile market, do you think Mutual Funds are a destination for
Investments?
(a) Yes
(b) No
Q.6. In which type of mutual fund schemes you have invested ?

(a) Debt Schemes
(b) Equity based Schemes
Q.7. Which among the following principles do you consider while selecting a Mutual
Fund?
(a) Enquiring about the fund manager
(b) Finding about past performance
(c) Identifying your own objectives
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(d) Other
Q.8. In order to achieve high returns I am willing to choose high risk investments.
(a) Strongly agree
(b) Neutral
(c) Strongly disagree
Q.9. What is your expected rate of return from your investments ?

(a) Potential return of 6 % per annum
(b) Potential return of 10% to 15% per annum
(c) Potential return of more than 15% per annum
Q.10. I would start to worry about my investments if my portfolio value falls

(a) Less than 5 % per annum
(b) 5%-10% per annum
(c) 10%-20% per annum
(d) 20%-30% per annum
(e) More than 30% per annum
Q.11. Maximum allocation in your current portfolio pertains to

(a) Savings and fixed deposits
(b) Bonds
(c) Equities
(d) Mutual Funds
(e) Derivatives options, swaps and futures
Q.12. I prefer to keep capital safe rather than have high returns
(a) Strongly agree
(b) Neutral
(c) Strongly disagree
Q.13. When do you expect to liquidate your investment ?

(a) Less than 1 year

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(b) 1 to 2 years
(c) 3 to 5 years
(d) 6 to 7 years
(e) More than 7 years
Q.14.What do you think which risks usually affects Mutual Funds?

(a) Systematic Risk
(b) Unsystematic Risk
Q.15. Which are the primary sources of your knowledge about Mutual Funds as an
investment option?
(a) Television
(b) Internet
(d) Newspaper
(e) friends
(f) Relatives

Technology

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A study on Portfolio Creation and Mutual Fund Analysis

1. First Phase - 1964-1987

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2. Second Phase - 1987-1993 (Entry of Public Sector Funds)

3. Third Phase - 1993-2003 (Entry of Private Sector Funds)

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

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4. Fourth Phase - since February 2003

Fig 1 HISTORY OF MUTUAL FUND

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1.1 WHAT IS MUTUAL FUNDS :-

According to SEBI (Mutual Fund) regulatins1993, Mutual fund means a fund

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However in the Indian context it is safe to define Mutual Fund as trusts

2.3 Why invest in Mutual Funds.

Investing in mutual has various benefits which makes it an ideal investment

1. Professional investment management

benefit from greater diversification. Mutual funds invest in a broad range of

4. Convenience and Flexibility

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Mutual fund route offers several important advantages.

Professionals who have knowledge and experience in security analysis and

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2.4 INTORDUCTION TO MUTUAL FUND :-

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Fig 2 Mutual Fund

2.5 EVOLUTION OF MUTUAL FUND :-

Mutual Funds can be broadly classified under 3 heads namely

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2.6Growth of Mutual Funds :-

100% growth in the last 6 years (as on 2009).

2.7 ORGANIZATION OF A MUTUAL FUND :-

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Fig 3 Organization Structure

2.8 TYPES OF MUTUAL FUNDS

Portfolio classificationprojects the combination of investment instruments and

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1. Open Ended Schemes:

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the realizable amount is certain since repurchase is at a price based on declared

Moreover, desiring frequently traded securities, open-ended schemes hardly

2. Close Ended Schemes:

There is no necessary relationship between the price of close-ended mutual fund

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4. Money Market Funds or Liquid Funds

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2.5 FUND MANAGEMENT

ACTIVELY MANAGED FUNDS :-

Passively Managed Funds :-

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4. PORTFOLIO MANAGEMENT SERVICES

(a) Fundamental Analysis

(b) Technical Analysis

(c) Efficient Market Hypothesis

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