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 ADM2N2ST0AT2.N T.
.SMAN2A UN23E0S2TY4 Hyder)b)d 5#%%%%(
!%%&5!%$$
DE6LA0AT2.N
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 Si"nature o the Student
S+,T&A%-%P S+,T&A%-%P
6E0T2F26AT2.N
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 Si"nature o the .uide
S&RA/ANT&I%N S&RA/ANT&I%N

6.NTENTS
6,)pter No. N)me o+ t,e concept P)/e No.
I
Introduction
Need o the study
$bjecti)es o the study
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
6HAPTE0 2 5 2NT0.DU6T2.N
2NT0.DU6T2.N
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%
5
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%
9
.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%
S6.PE .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 METH.D.L.8Y
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
;
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 .pen5ended Sector)*
Funds9/ro-t,:
! Minimum Assets Under M/mt. 0s. #%% 6rore
; 2nception D)te 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
5
st
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 A5 days Treasury bill%
L2M2TAT2.NS
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%
B
;% Sharpe ratio Cin its simplest ormsD 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%
<
6HAPTE0 22 5 0E32EW .F L2TE0ATU0E
?
Mutu)* Funds An o>er>ie-

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 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
rataD% 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
:
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 IndiaD 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 CsubscribersD
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==F sta(e in the
Asset Mana"ement 0ompany CAM0D% ,%"% !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
G
History o+ Mutu)* Fund in 2ndi)
The mutual und industry in India started in 5A?; '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 CUTID 'as established on 5A?; 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 5A:G UTI 'as de2lin(ed rom
the R!I and the Industrial De)elopment !an( o India CID!ID too( o)er the re"ulatory
and administrati)e control in place o R!I% The irst scheme launched by UTI 'as Unit
Scheme 5A?B% At the end o 5AGG UTI had Rs%?#:== crores o assets under mana"ement
Second P,)se ? $&@(5$&&; 9Entry o+ Pub*ic Sector Funds:
5AG: mar(ed the entry o non2 UTI# public sector mutual unds set up by public sector
ban(s and Lie Insurance 0orporation o India CLI0D and .eneral Insurance
0orporation o India C.I0D% S!I Mutual Fund 'as the irst non2 UTI Mutual Fund
established in @une 5AG: ollo'ed by 0anban( Mutual Fund CDec G:D# Punjab National
!an( Mutual Fund CAu" GAD# Indian !an( Mutual Fund CNo) GAD# !an( o India C@un
A=D# !an( o !aroda Mutual Fund C$ct A9D% LI0 established its mutual und in @une
5AGA 'hile .I0 had set up its mutual und in December 5AA=%
At the end o 5AA;# 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 5AA;# a ne' era started in the Indian mutual
und industry# "i)in" the Indian in)estors a 'ider choice o und amilies% Also# 5AA;
'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
A
Pioneer Cno' mer"ed 'ith Fran(lin TempletonD 'as the irst pri)ate sector mutual und
re"istered in @uly 5AA;%
The 5AA; S,!I CMutual FundD Re"ulations 'ere substituted by a more comprehensi)e
and re)ised Mutual Fund Re"ulations in 5AA?% The industry no' unctions under the
S,!I CMutual FundD Re"ulations 5AA?%
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#<B5 crores o assets
under mana"ement 'as 'ay ahead o other mutual unds%
Fourt, P,)se ? since Febru)ry !%%;
In February 9==;# ollo'in" the repeal o the Unit Trust o India Act 5A?; UTI 'as
biurcated into t'o separate entities% $ne is the Speciied Underta(in" o the Unit Trust
o India 'ith assets under mana"ement o Rs%9A#G;< crores as at the end o @anuary
9==;# representin" broadly# the assets o US ?B scheme# assured return and certain
other schemes% The Speciied Underta(in" o Unit Trust o India# unctionin" under an
administrator and under the rules ramed by .o)ernment o India and does not come
under the pur)ie' o the Mutual Fund Re"ulations%
The second is the UTI Mutual Fund Ltd# sponsored by S!I# PN!# !$! 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 9A unds%
5=
Future Scen)rio
The asset base 'ill continue to "ro' at an annual rate o about ;= to ;< F 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/D%
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%
55
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
59
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 CINA/ID 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%
5;
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
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 5F to 9F% 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,LSSD and Pension
Schemes are allo'ed as deduction u*s GG o the Income Ta7 Act# 5A?5% The Act also
pro)ides opportunities to in)estors to sa)e capital "ains u*s <B,A and <B,! by
in)estin" in Mutual Funds# pro)ided the capital asset has been sold prior to April 5#
9=== and the amount is in)ested beore September ;=# 9===%
5<
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
5?
RISK HIERARCHY OF MUTUAL FUNDS
5:
Money
Market
Funds
Gilt
Funds
Balanced
Funds
Equity Income
Funds
Growth and
Income
funds
Focused
Debt Funds
Value Funds
Index Funds
Diversified
Equity Funds
!!ressive
Growth
Funds
"i!h #ield
Debt Funds
Flexible sset
allocation
Funds
Growth Funds
Debt
Funds
"ybrid
Funds
Equity
Funds
$isk
%evel
Money
Market Funds
Gilt Funds
Diversified
Debt Funds
&y'e of Fund
TA!L, 9
Sn)ps,ot o+ Mutu)* Fund Sc,emes
Mutu)*
Fund
Type
.bjecti>e 0is<
2n>estment
Port+o*io
W,o s,ou*d
in>est
2n>estment
,oriAon
Money
M)r<et
Li8uidity K
Moderate
Income K
Reser)ation o
0apital
Ne"li"ible
Treasury !ills#
0ertiicate o
Deposits#
0ommercial
Papers# 0all
Money
Those 'ho
par( their
unds in
current
accounts or
short2term
ban(
deposits
9 days 2 ; 'ee(s
S,ort5
term
Funds
9F*o)tin/
5 s,ort5
term:
Li8uidity K
Moderate
Income
Little
Interest Rate
0all Money#
0ommercial
Papers#
Treasury !ills#
0Ds# Short2
term
.o)ernment
securities%
Those 'ith
surplus
short2term
unds
; 'ee(s 2
; months
1ond
Funds
9F*o)tin/
5 Lon/5
term:
Re"ular
Income
0redit Ris(
6 Interest
Rate Ris(
Predominantly
Debentures#
.o)ernment
securities#
0orporate
!onds
Salaried 6
conser)ati)e
in)estors
More than A 2 59
months
8i*t
Funds
Security 6
Income
Interest Rate
Ris(
.o)ernment
securities
Salaried 6
conser)ati)e
in)estors
59 months 6 more
EBuity
Funds
Lon"2term
0apital
Appreciation
&i"h Ris( Stoc(s
A""ressi)e
in)estors
'ith lon"
term out
loo(%
; years plus
2nde=
Funds
To "enerate
returns that are
commensurate
'ith returns o
respecti)e
indices
NA/ )aries
'ith inde7
perormance
Portolio
indices li(e
!S,# NIFT-
etc
A""ressi)e
in)estors%
; years plus
5G
1)*)nced
Funds
.ro'th 6
Re"ular
Income
0apital
Mar(et Ris(
and Interest
Rate Ris(
!alanced ratio
o e8uity and
debt unds to
ensure hi"her
returns at
lo'er ris(
Moderate 6
A""ressi)e
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)*
5A
$)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
9=
$%.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)estmentsD 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%
95
;. 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</round o+ t,e study5
+ith a plethora o schemes to choose rom# the retail in)estor aces problems in
selectin" unds% Factors such as in)estment strate"y and mana"ement style are
8ualitati)e# but the unds record is an important indicator too% Thou"h past perormance
alone can not be indicati)e o uture perormance# it is# ran(ly# the only 8uantitati)e
'ay to jud"e ho' "ood a und is at present%
Thereore# there is a need to correctly assess the past perormance o dierent mutual
unds% +orld'ide# "ood mutual und companies o)er are (no'n by their AM0s and
99
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 alone should not be considered as the basis o measurement o the perormance
o a mutual und scheme# it should also include the ris( ta(en by the und 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(eL
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( associatedD# durin" a "i)en period and systematic
ris( associated 'ith it CbetaD% Symbolically# it can be represented asL
TreynorJs Inde7 9Ti: D 90i 5 0+:E1i.
+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;
T,e S,)rpe Me)sure
In this model# perormance o a und is e)aluated on the basis o Sharpe Ratio# 'hich is
a ratio o returns "enerated by the und o)er and abo)e ris( ree rate o return and the
total ris( associated 'ith it% Accordin" to Sharpe# it is the total ris( o the und that the
in)estors are concerned about% So# the model e)aluates unds on the basis o re'ard per
unit o total ris(% Symbolically# it can be 'ritten asL
Sharpe Inde7 9Si: D 90i 5 0+:ESi
+here# Si is st)nd)rd de>i)tion o+ t,e +und%
+hile a hi"h and positi)e Sharpe Ratio sho's a superior ris(2adjusted perormance o a
und# a lo' and ne"ati)e Sharpe Ratio is an indication o una)orable perormance%
6omp)rison o+ S,)rpe )nd Treynor
Sharpe and Treynor measures are similar in a 'ay# since they both di)ide the ris(
premium by a numerical ris( measure% The total ris( is appropriate 'hen 'e are
e)aluatin" the ris( return relationship or 'ell2di)ersiied portolios% $n the other hand#
the systematic ris( is the rele)ant measure o ris( 'hen 'e are e)aluatin" less than
ully di)ersiied portolios or indi)idual stoc(s% For a 'ell2di)ersiied portolio the total
ris( is e8ual to systematic ris(% Ran(in"s based on total ris( CSharpe measureD and
systematic ris( CTreynor measureD should be identical or a 'ell2di)ersiied portolio#
as the total ris( is reduced to systematic ris(% Thereore# a poorly di)ersiied und that
ran(s hi"her on Treynor measure# compared 'ith another und that is hi"hly
di)ersiied# 'ill ran( lo'er on Sharpe Measure%
7enson Mode*
@ensonJs model proposes another ris( adjusted perormance measure% This measure 'as
de)eloped by Michael @enson and is sometimes reerred to as the Dierential Return
9B
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( C0iD can be calculated asL2
0i D 0+ F 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 asL2
0i D 0+ F SiESmG90m 5 0+:
9<
+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 JMJ 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
9?
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.
H D im
r
I i

I m

NNNNNNNNNNNNNNNNNNNNNNNN

9
m

im
r
is correlation coeicient bet'een mar(et returns and und returns%
i

is standard de)iation o und returns%9Si:

m

is standard de)iation o mar(et returns%9Sm:

9
m

is mar(et )ariance%
6oe++icient o+ Determin)tion
D C
9
R
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 D C
9
R O=%?B it
implies that ?BF o the )ariation in the portolio returns is due to )ariations in the
mar(et returns% Mathematically it is the s8uare o correlation coeicientCRD%


D P C D Q C
m e a n m e a n
y y x x n

RO 22222222222222222222222222222222222222222222222


9 9
D C D C
mean mean
y y x x

+here > and - are returns on the portolio and returns on the mar(et respecti)ely%
!eta and D C
9
R 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 dayD%
9:
Net Assets o the scheme
NA/ O NNNNNNNNNNNNNNNNNNN
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%


SDO

9
D C
5
mean i
x x
n
9
D C
mean i
x x
"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 usedL2
St)nd)rd De>i)tion
1et)
S,)rp 0)tio
05SBu)re
9G
6HAPTE0 222 5 2NDUST0Y P0.F2LE
9A
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%
;=
6LASS2F26AT2.N .F F2NAN62AL MA0JETS
;5
Fin)nci)* m)r<ets
.r/)niAed m)r<ets Unor/)niAed m)r<ets
6)pit)* M)r<ets Money M)r<ets
2ndustri)* Securities
M)r<et
8o>ernment
Securities M)r<et
Lon/5term *o)n
m)r<et
Prim)ry M)r<et
Second)ry m)r<et
6)** Money M)r<et
6ommerci)* 1i**
M)r<et
Tre)sury 1i** M)r<et
Money Lenders4
2ndi/enuos 1)n<ers
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 areL
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 $erin" CIP$D 'here a irm oers shares to the public
or the irst time%
;9
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"L
;;
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$tion" A inancial deri)ati)e that represents a contract sold by one party
Coption 'riterD to another party Coption holderD% The contract oers the buyer
the ri"ht# but not the obli"ation# to buy CcallD or sell CputD a security or other
inancial asset at an a"reed2upon price Cthe stri(e priceD durin" a certain period
o time or on a speciic date Ce7ercise dateD% 0all options "i)e the option to buy
at certain price# so the buyer 'ould 'ant the stoc( to "o up% Put options "i)e the
option to sell at a certain price# so the buyer 'ould 'ant the stoc( to "o do'n%
S!a$" 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 R either currency mar(et or interest rate
mar(et or any other mar(et or that matter%
;B
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 typesL hard and sot commodities% &ard
commodities are typically natural resources that must be mined or e7tracted C"old#
rubber# oil# etc%D# 'hereas sot commodities are a"ricultural products or li)estoc( Ccorn#
'heat# coee# su"ar# soybeans# por(# etc%D
;<
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 5Ath 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 5Ath century%
!y the early 5A?=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"eD and $T0,I C$)er
the 0ounter ,7chan"e o IndiaD%
&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#
;?
'hich 'ere dominated by the state controlled public sector resultin" in sta"nation o
the economy ri"ht up to the early 5AA=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)estmentD 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"sD 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"eD and the $T0,I C$)er the 0ounter ,7chan"e o IndiaD durin" the mid 5AA=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
;:
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 IndiaD% S,!I came into
prominence in the 5AA=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%
;G
F2NAN62AL MA0JET 0E8ULAT2.NS
Re"ulations are an absolute necessity in the ace o the "ro'in" importance o capital
mar(ets throu"hout the 'orld% The de)elopment o a mar(et economy is dependent on
the de)elopment o the capital mar(et% The re"ulation o a capital mar(et in)ol)es the
re"ulation o securitiesE these rules enable the capital mar(et to unction more
eiciently and impartially%
A 'ell re"ulated mar(et has the potential to encoura"e additional in)estors to parta(e#
and contribute in# urtherin" the de)elopment o the economy% The chie capital mar(et
re"ulatory authority is Securities and ,7chan"e !oard o India CS,!ID%
SE12 is the re"ulator or the securities mar(et in India% It is the ape7 body to de)elop
and re"ulate the stoc( mar(et in India It 'as ormed oicially by the .o)ernment o
India in 5AA9 'ith S,!I Act 5AA9 bein" passed by the Indian Parliament% 0haired by 0
! !ha)e# S,!I is head8uartered in the popular business district o !andra2Hurla
comple7 in Mumbai# and has Northern# ,astern# Southern and +estern re"ional oices
in Ne' Delhi# Hol(ata# 0hennai and Ahmedabad% In place o .o)ernment 0ontrol# a
statutory and autonomous re"ulatory board 'ith deined responsibilities# to co)er both
de)elopment 6 re"ulation o the mar(et# and independent po'ers has been set up%
;A
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 Sense7D in 9===% A mar(et Inde7 is a con)enient and eecti)e product because
o the ollo'in" reasonsL
B=
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 basesD% S,!I has been acti)e in settin" up the
re"ulations as re8uired under la'%
B5
ST.6J EK6HAN8ES 2N 2ND2A
Stoc( ,7chan"es are an or"ani1ed mar(etplace# either corporation or mutual
or"ani1ation# 'here members o the or"ani1ation "ather to trade company stoc(s or
other securities% The members may act either as a"ents or their customers# or as
principals or their o'n accounts%
As per the Securities 0ontracts Re"ulation Act# 5A<? a stoc( e7chan"e is an
association# or"ani1ation or body o indi)iduals 'hether incorporated or not#
established or the purpose o assistin"# re"ulatin" and controllin" business in buyin"#
sellin" and dealin" in securities%
Stoc( e7chan"es acilitate or the issue and redemption o securities and other inancial
instruments includin" the payment o income and di)idends% The record (eepin" is
central but trade is lin(ed to such physical place because modern mar(ets are
computeri1ed% The trade on an e7chan"e is only by members and stoc( bro(er do ha)e
a seat on the e7chan"e%
List o+ Stoc< E=c,)n/es in 2ndi)
!ombay Stoc( ,7chan"e
National Stoc( ,7chan"e
$T0 ,7chan"e o India
0e/ion)* Stoc< E=c,)n/es
5% Ahmedabad
9% !an"alore
;% !hubanes'ar
B% 0alcutta
<% 0ochin
?% 0oimbatore
:% Delhi
G% .u'ahati
A% &yderabad
5=% @aipur
55% Ludhiana
B9
59% Madhya Pradesh
5;% Madras
5B% Ma"adh
5<% Man"alore
5?% Meerut
5:% Pune
5G% Saurashtra Hutch
5A% Uttar Pradesh
9=% /adodara
B;
1.M1AY ST.6J EK6HAN8E
A )ery common name or all traders in the stoc( mar(et# !S,# stands or !ombay
Stoc( ,7chan"e% It is the oldest mar(et not only in the country# but also in Asia% In
the early days# !S, 'as (no'n as IThe Nati)e Share 6 Stoc( !ro(ers Association%I
It 'as established in the year 5G:< and became the irst stoc( e7chan"e in the country
to be reco"ni1ed by the "o)ernment% In 5A<?# !S, obtained a permanent reco"nition
rom the .o)ernment o India under the Securities 0ontracts CRe"ulationD Act# 5A<?%
In the past and e)en no'# it plays a pi)otal role in the de)elopment o the countryJs
capital mar(et% This is reco"ni1ed 'orld'ide and its inde7# S,NS,># is also trac(ed
'orld'ide% ,arlier it 'as an Association o Persons CA$PD# but no' it is a
demutualised and corporatised entity incorporated under the pro)isions o the
0ompanies Act# 5A<?# pursuant to the !S, C0orporatisation and Demutuali1ationD
Scheme# 9==< notiied by the Securities and ,7chan"e !oard o India CS,!ID%
1SE 3ision
The )ision o the !ombay Stoc( ,7chan"e is to I,mer"e as the premier Indian stoc(
e7chan"e by establishin" "lobal benchmar(s%I
Project Report
1SE M)n)/ement
!ombay Stoc( ,7chan"e is mana"ed proessionally by !oard o Directors% It
comprises o eminent proessionals# representati)es o Tradin" Members and the
Mana"in" Director% The !oard is an inclusi)e one and is shaped to beneit rom the
mar(et intermediaries participation%
The !oard e7ercises complete control and ormulates lar"er policy issues% The day2
to2day operations o !S, are mana"ed by the Mana"in" Director and its school o
proessional as a mana"ement team%
1SE Net-or<
The ,7chan"e reaches physically to B5: cities and to'ns in the country% The
rame'or( o it has been desi"ned to sae"uard mar(et inte"rity and to operate 'ith
transparency% It pro)ides an eicient mar(et or the tradin" in e8uity# debt
instruments and deri)ati)es% Its online tradin" system# popularly (no'n as !$LT# is a
proprietary system and it is !S ::AA2929==9 certiied% The !$LT net'or( 'as
e7panded# nation'ide# in 5AA:% The sur)eillance and clearin" 6 settlement unctions
o the ,7chan"e are IS$ A==5L9=== certiied%
Project Report
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 R
First in India to introduce ,8uity Deri)ati)es
First in India to launch a Free Float Inde7
First in India to launch USS )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, $n2Line Tradin" System4 C!$LTD has been a'arded the "lobally
reco"ni1ed the Inormation Security Mana"ement System standard
!S::AA29L9==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"-
Project Report
NAT2.NAL ST.6J 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 CFI4sD
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 5AA9 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"ulationD
Act# 5A<? in April 5AA;# NS, commenced operations in the +holesale Debt Mar(et
C+DMD se"ment in @une 5AAB% The 0apital Mar(et C,8uitiesD se"ment commenced
operations in No)ember 5AAB and operations in Deri)ati)es se"ment commenced in
@une 9===%
Project Report
NSE 80.UP
N)tion)* Securities 6*e)rin/ 6orpor)tion Ltd. 9NS66L:
It is a 'holly o'ned subsidiary# 'hich 'as incorporated in Au"ust 5AA< and
commenced clearin" operations in April 5AA?% 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 L 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 5AAG% IISL has a consultin" and licensin" a"reement 'ith the Standard and
PoorJs CS6PD# 'orldJs leadin" pro)ider o in)estible e8uity indices# or co2brandin"
e8uity indices%
Project Report

N)tion)* Securities Depository Ltd. 9NSDL:
NS, joined hands 'ith ID!I and UTI to promote demateriali1ation o securities% This
step 'as ta(en to sol)e problems related to tradin" in physical securities% It
commenced operations in No)ember 5AA?%
NSE F)cts
It uses satellite communication technolo"y to ener"i1e participation rom
around B== cities in India%
NS, can handle up to 5 million trades per day%
It is one o the lar"est interacti)e /SAT based stoc( e7chan"es in the 'orld%
The NS,2 net'or( is the lar"est pri)ate 'ide area net'or( in India and the
irst e7tended 02 !and /SAT net'or( in the 'orld%
Presently more than A=== users are tradin" on the real time2online NS,
application%
Today# NS, is one o the lar"est e7chan"es in the 'orld and still or"in" ahead% At
NS,# 'e are constantly 'or(in" to'ards creatin" a more transparent# )ibrant and
inno)ati)e capital mar(et%
.3E0 THE 6.UNTE0 EK6HAN8E .F 2ND2A
$T0,I 'as incorporated in 5AA= as a section 9< company under the companies Act
5A<? and is reco"ni1ed as a stoc( e7chan"e under section B o the securities 0ontracts
Project Report
Re"ulation Act# 5A<?% The e7chan"e 'as set up to aid enterprisin" promotes in
raisin" inance or ne' projects in a cost eecti)e manner and to pro)ide in)estors
'ith a transparent and eicient mode o tradin" Modeled alon" the lines o the
NASDAT mar(et o USA# $T0,I introduced many no)el concepts to the Indian
capital mar(ets such as screen2based nation'ide tradin"# sponsorship o companies#
mar(et ma(in" and scrip less tradin"% As a measure o success o these eorts# the
,7chan"e today has 55< listin"s and has assisted in pro)idin" capital or enterprises
that ha)e "one on to build successul brands or themsel)es li(e /IP Ad)anta# Sonora
Tiles 6 !rilliant mineral 'ater# etc%
Need +or .T6E2
Studies by NASS0$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%
Project Report
6HAPTE0 23 5 6.MPANY P0.F2LE
Project Report
2ND2A 2NF.L2NE 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(ersD spread across more than B<= cities and to'ns% The "roup
caters to appro7imately a million customers%
Founded in 5AA< by Mr% Nirmal @ain C0hairman and Mana"in" DirectorD as an
independent business research and inormation pro)ider# the company "radually
e)ol)ed into a one2stop inancial ser)ices solutions pro)ider%
Project Report
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==A% 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%
6.MPANY ST0U6TU0E
India Inoline Limited is listed on both the leadin" stoc( e7chan"es in India# )i1% the
Stoc( ,7chan"e# Mumbai C!S,D and the National Stoc( ,7chan"e CNS,D 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%
Project Report
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 JUa 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" C0odeL IILLD#
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
Project Report
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/ L 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 CIRDAD% 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%<F sta(e in India Inoline
In)estment Ser)ices% This 'ill help ocused e7pansion and capital raisin" in the said
Project Report
subsidiaries or )arious lendin" businesses li(e loans a"ainst securities# SM,
inancin"# distribution o retail loan products# consumer inance business and housin"
inance business% India Inoline In)estment Ser)ices Pri)ate Limited consists o the
ollo'in" step2do'n subsidiaries%
India Inoline Distribution 0ompany Limited Cdistribution o retail loan
productsD
Moneyline 0redit Limited Cconsumer inanceD
India Inoline &ousin" Finance Limited Chousin" inanceD
22FL 9Asi): Pri>)te Limited
IIFL CAsiaD Pri)ate Limited is 'holly o'ned subsidiary 'hich has been incorporated
in Sin"apore to pursue inancial sector acti)ities in other Asian mar(ets% Further to
obtainin" the necessary re"ulatory appro)als# the company has been initially
capitali1ed at 5 million Sin"apore dollars%
Project Report
22FL MANA8EMENT
THE MANA8EMENT TEAM
Mr. Nirm)* 7)in4 6,)irm)n L M)n)/in/ Director
Nirmal @ain# M!A CIIM# AhmadabadD and a 0hartered and 0ost Accountant# ounded
India4s leadin" inancial ser)ices company India Inoline Ltd% in 5AA<#
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"purD and an M!A CIIM !an"aloreD% &e joined
the India Inoline board in @uly 5AAA%
THE 1.A0D .F D20E6T.0S
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
AccountantsD# a member irm o &L! International# headed the audit
Project Report
department till 5AA= 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 R !oard member since March 9==G R completed his
Masters de"ree in commerce rom Allahabad Uni)ersity in 5A?? and a
diploma in !usiness Administration in 5A?:%
Project Report
P0.DU6TS L SE0326ES
EBuities
India Inoline pro)ided the prospect o researched in)estin" to its clients# 'hich 'as
hitherto restricted only to the institutions% Research or the retail in)estor did not e7ist
prior to India Inoline% India Inoline le)era"ed technolo"y to brin" the con)enience
o tradin" to the in)estor4s location o preerence Cresidence or oiceD throu"h
computeri1ed access% India Inoline made it possible or clients to )ie' transaction
costs and led"er updates in real time% The 0ompany is amon" the e' inancial
intermediaries in India to oer a complement o online and oline bro(in"% The
0ompanies net'or( o branches also allo's customers to place orders on phone or
)isit our branches or tradin"%
6ommodities
India Inoline4s e7tension into commodities tradin" reconciles its strate"ic intent to
emer"e as a one stop solutions inancial intermediary% Its e7perience in securities
bro(in" has empo'ered it 'ith re8uisite s(ills and technolo"ies% The 0ompanies
commodities business pro)ides a contra2cyclical alternati)e to e8uities bro(in"% The
0ompany 'as amon" the irst to oer the acility o commodities tradin" in India4s
youn" commodities mar(et Cthe M0> commenced operations in 9==;D% A)era"e
monthly turno)er on the commodity e7chan"es increased rom Rs =%;B bn to Rs
9=%=9 bn%
Project Report
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%
Project Report
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"%
Project Report
6HAPTE0 3
DATA ANALYS2S L 2NTE0P0ETAT2.NS
Project Report
Sector)* Mutu)* Funds 6onsidered5
$. Auto Sector 5 UT2 Tr)nsport)tion )nd Lo/istics Fund
9% 1)n<in/ Sector 5 UT2 1)n<in/ Sector Fund
;. FM68 Sector 5 Fr)n<*in FM68 Fund
". 2n+r)structure Sector 5 T)t) 2n+r)structure Fund
#. Po-er Sector 5 0e*i)nce Di>ersi+ied Po-er Sector Fund
'. Ser>ice Sector 5 Prudenti)* 26262 Ser>ices 2ndustries Fund
:% Tec,no*o/y Sector 5 Fr)n<*in 2n+otec, Fund
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5% Auto Sector5
UT2 Tr)nsport)tion )nd Lo/istics Fund
Sc,eme Sn)ps,ot
sset llocation
,8uity Shares A<%G;
Net 0urrent Assets ;%B=
Unlisted ,8uities =%:=
Short Term Deposits =%=:
As on ;52$0T25=
&o' ( holdin!s s on )*+,-&+*.
Mahindra 6 Mahindra Limited :%<?
Tata Motors Limited :%9;
Asho( Leyland Limited ?%5G
!ajaj Auto Limited <%A?
,icher Motors Limited <%GA
Project Report
62. A H Shridhar
Fund M)n)/er Anoop !has(ar
Address UTI To'ers# W.nW !loc(# !andra2Hurla
0omple7# !andra C,astD# Mumbai B===<5
P,one A5 99 <?:G ???? * <?<:G95=
F)= A5 99 9?<9 BA95
-ebsite '''%utim%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2Auto
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: :5A%G
0e/istr)rs UTI Technolo"y Ser)ices Limited
L)unc, D)te =A2MAR2=B
Sc,eme .bjecti>e
The scheme aims to pro)ide to in)estors "ro'th o capital o)er a period o time as 'ell as to ma(e periodical
distribution o income rom in)estment in stoc(s o respecti)e sectors o the Indian economy%
9% 1)n<in/ Sector5
UT2 1)n<in/ Sector Fund
Sc,eme Sn)ps,ot
sset llocation
,8uity Shares A:%A:
Short Term Deposits 9%99
Net 0urrent Assets 2=%5A
As on ;52$0T25=
&o' ( holdin!s s on )*+,-&+*.
I 0 I 0 I !an( Limited 5A%:;
State !an( $ India 5;%:5
& D F 0 !an( Limited 59%<5
A7is !an( Limited 5=%55
!an( $ !aroda :%9G
;% FM68 Sector5
Fr)n<*in FM68 Fund
Project Report
62. A H Shridhar
Fund M)n)/er Arun Hhurana# Anoop !has(ar
Address UTI To'ers# W.nW !loc(# !andra2Hurla
0omple7# !andra C,astD# Mumbai B===<5
P,one A5 99 <?:G ???? * <?<:G95=
F)= A5 99 9?<9 BA95
-ebsite '''%utim%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2!an(
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: 9;59%<
0e/istr)rs UTI Technolo"y Ser)ices Limited
L)unc, D)te =A2MAR2=B
Sc,eme .bjecti>e
To "enerate capital appreciation throu"h in)estments in the stoc(s o the companies*institutions en"a"ed in the
ban(in" and inancial ser)ices acti)ities%
Sc,eme Sn)ps,ot
sset llocation
,8uity Shares A?%5;
0all And $ther Assets 9%GB
0orporate Debt * !onds 5%=;
As on ;=2N$/25=
&o' ( holdin!s s on ).+/,V+*.
Nestle India Limited 5B%A:
I T 0 Limited 55%9:
Asian Paints Limited A%9<
Pidilite Industries Limited ?%BG
Marico Limited ?%=G
B% 2n+r)structure Sector
T)t) 2n+r)structure Fund
Sc,eme Sn)ps,ot
Project Report
62. Santosh Hamath
Fund M)n)/er Anil Prabhudas
Address Le)el B# +oc(hardt To'ers# !andra 2 Hurla
0omple7# !andra C,astD# Mumbai 2 B===<5
P,one A5 99 <?;9 <G9=
F)= A5 99 99G5 =A9;
-ebsite httpL**'''%templetonindia%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2FM0.
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: BG<%B9
0e/istr)rs Fran(lin Templeton Asset Mana"ement
CIndiaD P)t% Ltd%
L)unc, D)te 5<2MAR2AA
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
,8uity Shares A<%99
0ash And $ther Assets B%:G
As on ;=2N$/25=
&o' ( holdin!s s on ).+/,V+*.
I 0 I 0 I !an( Limited B%A:
0rompton .rea)es Limited B%:A
0ash And $ther Assets B%:G
$il 6 Natural .as 0orporation Limited B%:=
& D F 0 !an( Limited B%<G
<% Po-er Sector5
0e*i)nce Di>ersi+ied Po-er Sector Fund
Sc,eme Sn)ps,ot
Project Report
62. /ed Pra(ash 0hatur)edi
Fund M)n)/er M /enu"opal
Address Fort &ouse# 995 Dr% D% N% Road# Mumbai 2
B== ==5
P,one A5 99 <?<=<9== * 9<5 * 9<9
F)= A5 99 <?;5 <5AB
-ebsite httpL**'''%tatamutualund%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2Inrastructure
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: 5GA:9%A;
0e/istr)rs 0omputer A"e Mana"ement Ser)ices
P)t%Ltd%
L)unc, D)te 9<2N$/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
,8uity Shares AB%?<
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 <%AA
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
Project Report
62. H Raja"opal
Fund M)n)/er Sunil Sin"hania
Address $ne Indiabulls 0entre# To'er5# @upiter Mills
0ompound# GB5# Senapati !apat Mar"# ,lphinstone
Road# Mumbai 2 B== =5;
P,one A5 99 ;=AA B?==
F)= A5 99 ;=B5 BGAA
-ebsite httpL**'''%reliancemutual%com*
6)te/ory ,8uity
Sub56)te/ory Sectoral2Po'er
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: <=955%9
0e/istr)rs Har)y 0omputershare Pri)ate Limited
L)unc, D)te 9A2MAR2=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
,8uity Shares A?%;G
$ther 0urrent Assets ;%?9
Unlisted ,8uities =%==
As on ;=2N$/25=
&o' ( holdin!s s on ).+/,V+*.
Inosys Technolo"ies Limited <9%5<
Tata 0onsultancy Ser)ices Limited 9<%;9
+ipro Limited A%BG
0ash And $ther Assets ;%?9
$racle Financial Ser)ices Sot'are Limited ;%<?
:% Ser>ice Sector5
Prudenti)* 26262 Ser>ices 2ndustries Fund
Sc,eme Sn)ps,ot
Project Report
62. Santosh Hamath
Fund M)n)/er Anand Radha(rishnan# Murali -erram
Address Le)el B# +oc(hardt To'ers# !andra 2 Hurla
0omple7# !andra C,astD# Mumbai 2 B===<5
P,one A5 99 <?;9 <G9=
F)= A5 99 99G5 =A9;
-ebsite httpL**'''%templetonindia%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2TMT
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: 5B=;%<
0e/istr)rs Fran(lin Templeton Asset Mana"ement
CIndiaD P)t% Ltd%
L)unc, D)te 992@UL2AG
Sc,eme .bjecti>e
See(s to pro)ide lon" term capital appreciation by in)estin" primarily in Inormation Technolo"y industry%
sset llocation
,8uity Shares A<%G=
Futures 9%;:
Debt And 0ash And $ther Assets 5%G9
As on ;=2N$/25=
&o' ( holdin!s s on ).+/,V+*.
Inosys Technolo"ies Limited :%?B
& D F 0 !an( Limited :%;:
&ousin" De)elopment Finance 0orporation Limited ?%==
@aipra(ash Associates Limited <%GA
!harti Airtel Limited <%:9
Project Report
62. Nilesh Shah
Fund M)n)/er Sanjay Pare(h
Address ;rd Floor# &allmar( !usiness Pla1a# Sant
Dyanesh'ar Mar"# !andra C,astD# Mumbai 2 B== =<5
P,one A5 99 99?:A??< * 99?:A?:?* 99?A:AGA
F)= A5 99 99?;=B5A
-ebsite httpL**'''%icicipruamc%com
6)te/ory ,8uity
Sub56)te/ory Sectoral2Ser)ices
Type $pen
Min. 2n>estment90s: <===
Tot)* Assets90s.EMn: 9G=9%B
0e/istr)rs 0omputer A"e Mana"ement Ser)ices
P)t%Ltd%
L)unc, D)te 5;2$0T2=<
Sc,eme .bjecti>e
to "enerate capital appreciation and income distribution to unitholders by in)estin" predominantly in e8uity*e8uity
related securities o the companies belon"in" to the ser)ice industry and balance in debt securities and money
mar(et instruments includin" call money%
6HAPTE0 32
F2ND2N8S4 SU88EST2.NS L 6.N6LUS2.N
Project Report
F2ND2N8S
0)te o+ 0eturn Amon" the unds selected# UTI !an(in" Sector und has
"i)en the ma7imum rate o returns C;AFD in the last one year ollo'ed by
Fran(lin FM0. C;;FD% Reliance Di)ersiied Po'er Sector und 'ith a return
o C:%<FD stood last in the table%
Amon" the unds selected# Reliance Di)ersiied Po'er has "i)en the
ma7imum rate o returns C;:FD in the last i)e years ollo'ed by Tata
Inrastructure C9BFD% UTI Transportation and Lo"istics 'ith a return o
C5?%AGFD stood last in the table%
Tot)* 0is< 9St)nd)rd De>i)tion:
UTI !an(in" Sector und has the ma7imum standard de)iation o ?%A9 'hile
Fran(lin FM0. has the least standard de)iation o 9%A?
System)tic 0is< 91et): )nd 6o 5 re*)tion
UTI !an(in" Sector und has the ma7imum !eta o 5%=G 'hile UTI
Transportation and Lo"istics has the least !eta o =%<<%
UTI !an(in" Sector und has the ma7imum co2relation o 5%=: 'hile Fran(lin
FM0. has the least R2S8uared o =%?<
Treynor L S,)rpe 0)tio
UTI !an(in" Sector Fund has the ma7imum Treynor ratio o 2=%5A 'hile
Reliance Di)ersiied und has the least Treynor ratio o 2=%G<%
Fran(lin Inotech has the least Sharpe Ratio o 2=%5< 'hile I0I0I Prudential
Ser)ices has the ma7imum sharpe ratio o =%=5
Project Report
SU88EST2.NS L 6.N6LUS2.NS
5% !an(in" and FM0. sectors ha)e ared 'ell in the last one year and it
is su""ested to in)est in these sectors%

9% It is ad)ised to be (eep a'ay rom inrastructure unds especially
Reliance Inrastructure und%
;% FM0. has the least ris( and !an(in" has the hi"hest ris( amon" the
sectors% It is better to a)oid !an(in" unds or people 'ho 'ant to
a)oid the ris(%
B% In)estors 'ho e7pect slo' and steady returns are ad)ised to or FM0.
sector%
<% UTI !an(in" Sector has a beta o "reater than 5 Ci%e mar(et betaD% This
implies that !an(in" Sector has a hi"her ris( compared to the mar(et
portolio%
?% FM0.# Ser)ices# Transportation and Lo"istics sector has the least beta
and in)estors can in)est in these unds
Project Report
ANNEKU0E 5 2
TE0M2N.L.8Y
Mutu)* FundL 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# 5A?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
Project Report
a"ency that 'ould monitor the ups and do'ns o the mar(et and chart out the best
in)estment strate"ies 'ould be the best thin" to opt or%
+ith so many potential in)estors in India# MFs can "o a lon" 'ay in "ettin"
established# plus 'ith added set o alternati)es 'ithin the MF schemes each has a
scheme ready or the speciic needs%
@ust to ha)e a better perspecti)e# there are )arious options a)ailable in the
orm o ,8uity und# Debt unds# !alance unds and components li(e Money mar(et
unds# Inde7 unds and the li(es o it% Let4s ta(e a pee( at the important ones%
EBuity FundsL The &i"h ris( 2 &i"h return scheme in)ests in the e8uity
mar(ets# the ris( in)ol)ed is comparati)ely hi"her than but not as hi"h as that o the
sector unds that ocus in)estments on speciic sectors% !ut the hi"her the ris(
component# the hi"her is the return rate% &o'e)er# there is a )ariant in this type o
e8uity based scheme called the ,LSS or the ,8uity Lin(ed Sa)in"s Schemes# the
oer a ta7 rebate under Sec GG o I2T act# but the in)estment needs to be loc(ed or at
least ; yearsY Suitable or ris( ta(ers %The problem is that it reacts aster to the mar(et
luctuations# as the NA/ 'ould beha)e the 'ay mar(et beha)es% Alliance AM0 is
supposed to ha)e a "ood e8uity und e7pertise%
Debt FundsL Debt unds in)est in the debt component or the i7ed income
models% So the return is almost certain and the ris( is lo'% &o'e)er# the returns are
also combati)ely lo' compared to the principle amount% In)estments in these (inds o
unds ran"e rom .o)t%Securities to corporate bonds% I you are loo(in" or short2
term sae in)estment options then the li8uid unds in the cate"ory is the ans'er or
you% Se)eral alternati)es this cate"ory is no' a)ailable li(e the income und# "ro'th
und or any lon"2term childcare und and the li(es o it% More di)erse Debt unds are#
more the chances o substantial returns%
1)*)nce +unds 2 This type o unds are part e8uity and part debt unds% The
pattern in)estment in balance unds is usually pre2determined% -ou ha)e open2ended
and closed2ended balance unds# 'here the unds can be traded in an open ended case
just li(e e8uities but based on the Net Asset /alue CNA/D% The closed2ended unds
are loc(ed and cannot bet traded%
Project Report
!alance unds are "ood or those 'ho ha)e ascertained the ris(2return based
on their needs%
W,en to s)y /oodbye to your Mutu)* FundM
There are some proessionals 'ho tal( o 'hen to e7it rom mutual unds li(e other
tal( o 'hen to in)est in mutual unds% People 'ho 'ant to in)est "et more than the
i7ed deposit earnin" Cris( ree rateD# preerred option is mutual unds% It is important
to base the decision on re*)ti>e per+orm)nce and not absolute perormance% +hen
one und is do'n <F 'hile other unds or the mar(et in "eneral are up 5=F# it is )ery
temptin" to s'itch o)er to 'hat is Ihot%I 0hasin" Perormance is the best 'ay to
shoot onesel in the oot as 'e just discussed abo)e%
+hen studyin" re*)ti>e per+orm)nce# one should loo( at his und and
compare it to its peers% &o'e)er# comparisons should be dra'n bet'een parallels and
so e8uity unds cannot and should not be compared 'ith debt unds% +hen choosin" a
benchmar(# one must select unds in the same cate"ory% I one4s und 'as do'n 9F
and the a)era"e e8uity und 'as do'n BF# then there is no "ood enou"h reason to
sell it% $ne should compare the returns posted by his und 'ith that o the peers
across )arious hori1ons such as 52year# ;2year and abo)e% A short2term )ie' can
oten lead to committin" hara2(iri# as it doesn4t present the ull picture% I it has
underperormed the a)era"e o its peers in all cases# then it sure is one o the better
reasons to e7it rom the und%
A c,)n/e in *i+e st)/e
In)estments are done 'ith a certain objecti)e in mind and lie sta"es are oten a
determinin" actor o 'hat a person needs% A youn" man can aord to ta(e more ris(s
than a person nearin" his retirement can% In such cases# it pays to 'ithdra' money
rom the e8uity in)estments made earlier and put them in saer# more conser)ati)e
debt unds that oer stable returns 'ithout compromisin" on ris(% So a chan"e in lie
sta"es 'ould be one such reason to consider s'itchin" into a und that matches 'ith
one4s needs% As one nears retirement# one mi"ht 'ant to consider more conser)ati)e
Project Report
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 doesnNt 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 undD# 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 F.0 MUTUAL FUND 2N3EST.0S 9SU88EST2.NS:
These are the e' e7act as re"ards in)estment in MF4s ta(en rom the boo( 'ith
ZMar(etin" or the A=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%D
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%D
<% 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
Project Report
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 securitiesD% These unds yield a better return than a
money mar(et und% It is "ood or the in)estors 'ho desire saety o principal
amountD% 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
depositsD% They char"e no loads# ho'e)er loads are limited by S,!I to :F%
?% 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 F.0 F2NAN62AL PLANN2N8
2NSU0E Y.U0SELF 1EF.0E Y.U 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%
6H..SE 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%
UT2L2PE THE P.WE0 .F 6.MP.UND2N8
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 Y.U AHEAD .F 2NFLAT2.N
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 inlationD 'hile considerin" an in)estment% &e should in)est
in instruments# 'hich pro)ide proitable2post2inlation returns%
0EDU6E TAK .N Y.U0 2N3ESTMENT
There are t'o realities in the lie% $ne is death 6 the other is ta7% It is ad)isable that
in)estments should be so planned that least possible ta7 'ould be re8uired to be paid%
Smart mo)e or the in)estor is to sa)e e)ery rupee rom ta7 man%
8. F.0 STA1LE L 0EAL2ST26 0ETU0NS
Stability o returns is more important that increased proit% Usually these are
associated 'ith hi"h )olatile in)estment options li(e e8uities 6 e)en 'ith
"o)ernment securities or "ilts as they also run hi"h mar(et ris(% The asset allocation
is su""ested accordin" to the ris( proile o an in)estor% So in)est in the best option 6
"et the ma7imum returns%
Project Report
121L2.80APHY
www.njindiainvest.com
www.moneycontrol.com
www.amfiindia.com
www.karvy.com
www.valueresearchonline.com
MUTUAL FUND P!DU"T AND #$%&"$#'''' TA(MAN
AMF& "!U#$ )!!*
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