Mutual Funds Final Project

“A STUDY ON RISK AND RETURN OF MUTUAL FUND “
Chapter PAGE
No: TITTLE NO:
1. INTRODUCTION 04 – 29
1.1 EXECUTIVE SUMMARY

1.2 INTRODUCTION
1.3 BAC KGROUND OF THE STUDY
1.4 REVIEW THE LITERATURE
1.5 STATEMENT OF THE PROBLEM
1.6 NEED OF THE STUDY
1.7 SCOPE OF THE STUDY
1.8 OBJECTIVES OF THE STUDY
1.9 LIMITATIONS OF THE STUDY
2. PROFILE OF THE COMPANY 30 – 42
2.1 Profile of mutual fund industry

2.2 RELIANCE MUTUAL FUND
2.3 HDFC MUTUAL FUND
3. RESEARCH METHODOLOGY 43 – 46
3.1. RESEARCH DESIGN

3.2. METHOD OF DATA COLLECTION
3.3. SECONDARY DATA
3.4. SAMPLE SIZE
Department of Management VSKU, Ballari Page 1

4. DATA ANALYSIS AND INTERPREATION 47 – 62
5. SUMMARY OF FINDINGS 63 – 65
6.
1. Suggestion 66 - 69
2. Conclusions

CHAPTER 1
INTRODUCTION
1.1 EXECUTIVE SUMMARY
1.2 INTRODUCTION
1.3 BAC KGROUND OF THE STUDY
1.4 REVIEW THE LITERATURE
1.5 STATEMENT OF THE PROBLEM
1.6 NEED OF THE STUDY
1.7 SCOPE OF THE STUDY
1.8 OBJECTIVES OF THE STUDY
1.9 LIMITATIONS OF THE STUDY

1.1 Executive summary:
This is paper is the result descriptive study of mutual funds in India a mutual fund is a trust that
pools the saving of a number of investors who share a common financial goal. It throws the light
on how mutual funds really work, how much risk involved in it and how they diversify
themselves investing involves risk of loss of principal and is more concerned on the return of
investment this total risk, measured by standard deviation, can be divided in to two parts:
unsystematic risk, systematic risk, unsystematic risk is also called diversifiable risk. Systematic
risk may be called non diversifiable risk. Unavoidable risk and can be measured by beta.
The main objective of the study is to give investors a basic idea of investing in to the mutual
funds and encourage them to invest in those areas where they can maximize the return on their
capital. The research provided an interesting insight in to awareness about the mutual funds
differences in age groups. Occupation income levels. Risk taking ability of individuals, invest
options preferred etc,
The Indian capital market has been increasing tremendously during last few years, with the
reforms of economy, reforms of industrial policy, reforms of public sector and reforms of
financial sector, the economy has been opened up and many developments have been taking
place in the Indian money market and capital market, in order to help the small investors, mutual
fund industry has comes to occupy an important place, this study helps me to understand how the
companies diversify themselves in different sectors and in different companies maximize the
return and to minimize the risk involved in it. It also thought me how to take every experience in
the right sprit and learn from each one.
Finally I shall consider all my hard work worthwhile, if this endeavor of mine is able to satisfy
all those concerned and proves useful to any one or for any study in the future.

1.2 INTRODUCTION:-
A Mutual fund is a professionally-managed firm of collective investments that pools money
from many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other securities. In a Mutual fund, the fund manager, who is also known as the portfolio
manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the
dividend or interest income. The investment proceeds are then passed along to the individual
investors. The value of a share of the Mutual fund, known as the net asset value per share
(NAV), is calculated daily based on the total value of the fund divided by the number of shares
currently issued and outstanding.
In few years Mutual Fund has emerged as a tool for ensuring one‘s financial wellbeing.
Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising more
and more people are enjoying the benefits of investing in Mutual funds. The main reason the
number of retail Mutual fund investors remains small is that nine in ten people with incomes
in India do not know that Mutual funds exist. But once people are aware of Mutual fund
investment opportunities, the number who decide to invest in Mutual funds increases to as
many as one in five people. With emphasis on increase in domestic savings and improvement
in deployment of investment through markets, the need and scope for Mutual fund operation
has increased tremendously.
The Mutual funds to diversify their activities the following areas:-

1. Portfolio management services.
2. Management of offshore funds.
3. Providing advice to offshore funds.
4. Management of pension or provident funds.
5. Management of venture capital funds.
In this context, it becomes major to study the performance of the Indian Mutual fund
industry. Thus the involvement of Mutual funds in the transformation of Indian economy
has made it urgent to view their services not only as a financial intermediary but also as a

leader as they are playing a significant role in spreading equity culture The relation
between risk-return determines the performance of a Mutual fund scheme. As risk is
commensurate with return, therefore, providing maximum return on the investment made
within the acceptable associated risk level helps in demarcating the better performers from
the laggards.
Finally Mutual fund is a collective saving scheme. Mutual funds play an important role in
mobilizing the savings of small investors and channelizing the same for productive
ventures in the Indian economy. Hence the present study main objective is to analyze
performance evaluation of selected Mutual funds.

1.3 BACKGROUND OF THE STUDY
INTRODUCTION:-
There are a lot of investment avenues available today in the financial market for
an investor with an investable surplus. He can invest in bank deposits, corporate
debentures and bonds where there is low risk but low return. He may invest in stock of
companies where the risk is high and the returns are also proportionately high. The recent
trends in the stock market have shown that an average retail investor always lost with
periodic bearish trends. People began option for portfolio managers with expertise in stock
markets who would invest on their behalf. Thus we had wealth management services
provided by many institutions. However they proved too costly for a small investor. These
investors have found a good shelter with the Mutual funds.
CONCEPT OF MUTUAL FUND:-
A Mutual fund is a common pool of money into which investors place their
contributions that are to be invested in accordance with a stated objective. The ownership
of the fund is thus joint or mutual: the fund belongs to all investors. A single investor’s
ownership for the fund is in the same proportion as the amount of the contribution made by
him or her bears to the total amount of the fund.

Mutual funds are trusts, which accepts savings from investors and invest the same in
diversified financial instruments in terms objectives set out in the trust deed with the view
to reduce the risk and maximize the income and capital appreciation for distribution for the
members. A Mutual fund is a corporation and fund manager’s interest is to professionally
manage the funds provided by the investors and provide a return on them after deducting
reasonable management fees. The objective sought to be achieved by Mutual fund is to
provide an opportunity for lower income groups to acquire without much difficulty
financial assets. They cater mainly to the needs of the individual investor whose means are
small and to manage investors portfolio in a manner that provides a regular income,
growth, safety, liquidity and diversification opportunities.
DEFINITION OF MUTUAL FUND:-
 The SEBI regulations, 1993 defines a Mutual fund as a fund in the form of a trust by a
sponsor, to raise money by the trustees through the sale of units to the public, under one or
more schemes, for investing in securities in accordance with these regulations‖.
 “Mutual fund are collective savings and investment vehicles where savings of small
investors are pooled together to invest for their Mutual benefit and return diversified
proportionately”.
 “A Mutual fund is an investment that pools your money with the money of an unlimited
number of their investors. In return, you and each own shares of fund”.
HISTORY OF MUTUAL FUND IN INDIA:-
The Mutual fund industry in India started in 1963 with the formation of UTI at the
initiative of the government of India and reserve bank of India. The history of Mutual
funds in India can be broadly divided onto four distinct phases. They are below:-
 FIRST PHASE – [1964 TO 1987]:-
UTI was established on 1963 by an Act of parliament. It was set up by the RBI and
functioned under the regulatory and administrative control of the RBI. In 1978 UTI was
de- linked from the RBI and the Industrial Development Bank of India took over the

regulations and administrative control in place of RBI the first scheme launched by UTI
was UTI scheme 1964. At the end of 1988 UTI had 6700 crore rupees of Asset under
Management.
 SECOND PHASE – [1987 TO 1993]
SBI Mutual fund was the first non – UTI Mutual fund established in June 1987
followed by can bank Mutual fund (Dec 1987), Punjab National Bank Mutual fund (Aug
1989), Indian bank Mutual fund (Nov 1989), Bank of India (Jun 1990), Bank of Baroda
Mutual fund (Oct 1992).
 THIRD PHASE – [1993 TO 1996]
Kothari pioneer (now merged with Franklin Templeton) was the first private sector
Mutual fund registered in July 1993. As the end of the January 2003, there were 33 Mutual
funds with total assets of Rs. 1, 21,805 crores.
 FOURTH PHASAE – [1996 to 2004]
The Mutual fund industry witnessed robust growth and strict regulations from SEBI
after 1996. The mobilization of funds and the no. of players operating in the industry
reached new heights as investors started showing more interest in Mutual funds. Investor’s
interests were safeguard by SEBI. In February 2003, following the repeal of the Unit trust
of India Act 1963 UTI was bifurcated into two separate entities.
 FIFTH PHASE- [2004 ONWARDS]
The industry witnessed several merger and acquisition. Recent examples of which are
acquisition of schemes of Alliance Mutual fund by Birla sun life, etc. simultaneously more
international Mutual fund players entered India like Fidelity, Franklin Templeton Mutual
fund etc.
FEATURES OF MUTUAL FUNDS:-
1. Investors purchase standard units of fixed value at the inception of a fund.

2. Most funds also offer investors opportunity to enter after inception at prevailing value of
the units.
3. Each fund has its own investment objective.

4. Depending on the objective, the investment avenues targeted by each fund will be
different.
5. Investors chose between various funds based on their own personal Investment objectives.
6. Funds are managed by professional fund managers for a fee.
7. The value of a unit at any given point would depend upon the value of the various
investments made by the fund at that point in time.
8. Subject to conditions stated at the time of inception of the fund. The investors can redeem
their investments as and when they want.
ASSOCIATION OF MUTUAL FUND IN INDIA:-
 Association of Mutual fund in India (AMFI) was incorporated on 22nd August 1995.
 AMFI modeled on the lines of a Self Regulating Organization (SRO) with a view to
“promoting and protecting the interest of Mutual funds and their unit holder, increasing
public awareness of Mutual funds, and serving the investor’s interest by defining and
maintaining high ethical and professional standards in the Mutual funds Industry”.
 AMFI has brought down the Indian Mutual fund industry to a professional and healthy
market with ethical lines enhancing and maintaining standards.
 It follows the principle of both protecting and promoting the interests of Mutual funds as
well as their unit holders.
OBJECTIVES OF AMFI:-
 AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual fund
Industry.
 To recommend and promote best business practices and code of conduct to be followed by
members and others engaged in the activities of Mutual funds and asset management
including Agencies connected or involved in the field of capital markets and financial
services.
 AMFI of India does represent the government of India, the RBI and other related bodies on
matters relating to the Mutual fund industry.

 It develops a team of well qualified and trained Agents distributors. Intermediaries and
other engaged in the Mutual fund industry.
ORGANISATION STRUCTURE OF MUTUAL FUNDS IN INDIA:-
Mutual funds in India follow a three tier structure. Such as the first tier is the SPONSOR
who thinks of starting the fund. The second tier is the TRUSTEE; the trustees’ role is not
to manage the money. Their job is only to see, whether the money is being managed as per
stated objectives. Trustees may be seen as the internal regulators of a Mutual fund.
Trustees appoint the ASSET MANAGEMENT COMPANY (AMC), who forms the third
tier, to manage investor’s money. The AMC in return charges a fee for the services
provided and this fee is borne by the investors as it is deducted from the money collected
from them.
ORGANISATION STRUCTURE OF MUTUAL FUND IN INDIA
SPONSOR:-
 Any corporate body which initiates the launching of a Mutual fund is referred as “THE
SPONSOR”.
 The sponsor is an expected to have a sound track record and experience in financial
services for a minimum period of 5 years and should ensure various formalities required in
establishing a Mutual fund.

 According to SEBI, the sponsor should have professional competence, financial soundness
and reputation for fairness and integrity. The sponsor contributes 40% of the net worth of
the AMC and custodian in compliance with the regulations.
TRUSTEE:-
 Sponsor creates a public trust and appoints trustees. Trustees are the people authorized to
Act on behalf of the trust. They hold the property of Mutual fund.
 Once the trust is created, it is registered with SEBI after which this trust is known as the
Mutual fund. The trustee role is not manage the money but their job is only to see, whether
the money is being managed as per stated objectives. Trustees may be seen as the internal
regulators of a Mutual fund.
 A minimum of 75% of the trustees must be independent of the sponsor to ensure fair
dealings.
 Trustees appoint the Asset Management Company to manage investor’s money.
CUSTODIAN:-
 A custodian’s role is keeping custody of the securities that are bought by the fun d manager
and also keeping a tab on the corporate actions like rights, bonus and dividends declared by
the companies in which the fund has invested.
 The custodian appointed by the board of trustees. The custodian also participates in a
clearing and settlement system through approved depository companies on the behalf of
Mutual funds, in case of dematerialized securities.
 Only the physical securities are held by the custodian. The deliveries and receipt of units of
a Mutual fund are done by the custodian or a depository participant at the instruction of the
AMC and under the overall direction and responsibility of the trustees. Regulations
provide that the sponsor and the custodian must be separate entities.

ASSET MANAGEMENT COMPANY (AMC):-
 Trustees appoint the asset management company (AMC), to manage investor’s money. The
AMC in return charges a fee for the services provided and this fee is borne by the investors as
it is deducted from the money collected from them.
 The AMC’s board of directors must have at least50% of directors who are independent
directors. The AMC has to be approved by SEBI. The AMC functions under the supervision
of its board of directors, and also under the direction of the trustees and SEBI
 It is the AMC, which in the name of the trust, floats new schemes and manages those schemes
by buying and selling securities. In order to do this the AMC needs to follow all rules and
regulation prescribed by SEBI and as per the investment management agreement it signs with
the trustee.
 The role of the AMC is to manage investor’s money on a day to day base. Those it is
imperative that people with the highest integrity are involved with this activity.
 The AMC cannot deal with a single broker beyond a certain limit of transaction.
 The AMC cannot Act as a trustee for some other Mutual fund.
 The responsibility of preparing the over draft lies with the AMC.
 Appointments of intermediaries like independent financial advisors (IFAs), national and
regional distributors, banks, etc is also done by the AMC.
 Finally, it is the AMC which is responsible for the Acts of its employees and service
providers.

RISK FACTORS OF MUTUAL FUND:-
1. THE RISK – RETURN TRADE- OFF:-
The most important relationship to understand is the risk – return trade- off. The higher
the risk greater the returns / loss and lower the risk lesser the returns / loss. The investors
the decide how much risk
2. MARKET RISK:-
In general, there are certain risks. Associated with every kind of investment on shares.
They are called Market risks. These market risks can be reduced, but cannot be completely
eliminated even by a good investment management. The prices of shares are subjected to
wide prices fluctuation depending upon market conditions over which nobody has control.
3. SCHEME RISK:-
There are certain risks inherent in the scheme itself. It all depends upon the nature of the
scheme. For instance, in a pure growth scheme, risks are greater. It is obvious because if
one expects more return as in the case of growth scheme, one has to take more risks.
4. BUSINESS RISK:-
The corpus of a Mutual fund might have been invested in a company’s shares. If the
business of that company suffers any set back, it cannot declare any dividend. It may even
go to the extent of winding up its business. Though the Mutual fund can with stand such a
risk, its income paying capacities affected.
5. POLITICAL RISK:-
Successive government bring with them fancy new economic ideologies and policies. It
is often said that many economic decisions are politically motivated. Changes in
government bring in the risk of uncertainty which every player in the financial service
industry has to face. So Mutual funds are no exception to it.

TYPES OF MUTUAL FUND SCHEME
Mutual fund schemes may be classified on the basis of its structure and
Investment

A) By Structure
1) Open ended scheme

2) Closed ended scheme
3) Interval scheme
B) By Investment
1) Growth scheme
2) Income scheme
3) Balance scheme
4) Money market
C) By Others
1) Tax saving scheme

2) Industry specifies
3) Index funds
4) Sectoral funds
5) Exchange traded fund
6) Guilt fund
A) Based on structure
1) Open ended fund:-
An open ended fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value (NAV) related prices. The key feature of open end scheme is liquidity.
2) Closed ended scheme:-

A close ended fund has a stipulated maturity period. It is open for subscription only
during a specific period at the time of launch of the scheme. Some close ended funds give an

option of selling back the units to the mutual funds through periodic repurchase at NAV
related prices.
3) Interval fund:-
Interval funds combine the feature of open ended and closed ended schemes. They are open
for sale or redemption during for determined intervals of NAV related force
B) Based on Investment objectives
1) Growth/Equity Oriented schemes:-
The aim of those funds is to provide capital appreciation over the medium to long term.
Typically, such schemes invest a major part of their corpus in equities.
2) Income /Debt oriented schemes:-
The aim of these funds is to provide regular and steady income to investors. Income funds
normally invest in fixed income securities such as funds, corporate debentures,
government securities and money market instruments.
3) Balanced scheme:-
These aim to provide both growth and regular income. Balanced funds invest both in equities
and fixed income securities as per the proportion indicated in their offer documents.
4) Money market and liquid fund:-
These are also income funds and aim to provide easy liquidity, preservation of capital and
moderate income. These funds invest exclusively in safer short term instruments such as
treasury bills, certificate of deposits, commercial paper and interbank call money, government
securities etc

C) By Others
1) Tax saving scheme:-
These schemes offer tax rebates to the investors under specific provisions of the Income Tax
Act 1961. As the government offers tax incentives for investment in specified avenues.
Example: - Equity Linked Saving Schemes (ELSS). Pension schemes launched by the mutual
fund also offer tax benefits.
2) Sector specific schemes:-
These funds invest in the securities of only those sectors or industries as specified in the offer
documents. The returns depend on the performance of the respective sectors/industries.
3) Index funds:-
These funds replicate the portfolio of a particular index such as the BSE sensitive, SE 50
index (Nifty), etc.
4) Sectoral funds:-
Sectoral funds are those, which invest exclusively in a specified industry or group industries
or various segments such as ‘A’ group shares or Initial Public Offering (IPO).
5) Exchange Traded funds:-
Exchange traded funds just like their index fund counterparts also track indexes. The
difference is that the stocks of individual companies that comprise a given index are bundled
into equity like investment vehicle that is traded on an exchange, exactly like a stock.
6) Guilt Funds:-
These funds invest exclusively in government securities which have no default risk. Due to
change in interest rate and other economic factors, NAV’s of those schemes also fluctuate.

ADVANTAGES OF MUTUAL FUNDS:-
Mutual funds have designed to provide maximum benefits to investors, and fund
manager have research team to achieve schemes objective. Assets Management Company
has different type of sector funds, which need to proper planning for strategic investment
and to achieve the market return.
 Portfolio Diversification:
Mutual Funds invest in a well-diversified portfolio of securities which enables investor to

hold a diversified investment portfolio (whether the amount of investment is big or small).
 Professional Management:
Fund manager undergoes through various research works and has better investment
management skills which ensure higher returns to the investor than what he can manage on
his own.
 Less Risk:
Investors acquire a diversified portfolio of securities even with a small investment in a

Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3
securities.
 Low Transaction Costs:
Due to the economies of scale (benefits of larger volumes), Mutual funds pay lesser
transaction costs. These benefits are passed on to the investors.
 Liquidity:
An investor may not be able to sell some of the shares held by him very easily and quickly,
whereas units of a Mutual fund are far more liquid.
 Choice of Schemes:
Mutual funds provide investors with various schemes with different investment objectives.
Investors have the option of investing in a scheme having a correlation between its

investment objectives and their own financial goals. These schemes further have different
plans/options
 Transparency:
Funds provide investors with updated information pertaining to the markets and the
Schemes. All material facts are disclosed to investors as required by the regulator.
 Flexibility:
Investors also benefit from the convenience and flexibility offered by Mutual Funds.
Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa.
Option of systematic (at regular intervals) investment and withdrawal is also offered to the
investors in most open-end schemes.
 Safety:
Mutual Fund industry is part of a well-regulated investment environment where the

interests of the investors are protected by the regulator. All funds are registered with SEBI
and complete transparency is forced.
DISADVANTAGES OF MUTUAL FUNDS:-
The Mutual fund not just advantage of investor but also has disadvantages for the funds.
The fund manager not always made profits but might creates loss for not properly
managed. The fund have own strategy for investment to hold, to sell, to purchase unit at
particular time period.
 Costs Control Not in the Hands of an Investor:
Investor has to pay investment management fees and fund distribution costs as a
percentage of the value of his investments (as long as he holds the units), irrespective of
the performance of the fund.
 No Customized Portfolios:

The portfolio of securities in which a fund invests is a decision taken by the fund manager.
Investors have no right to interfere in the decision making process of a fund manager,
which some investors find as a constraint in achieving their financial objectives
 Difficulty in Selecting a Suitable Fund Scheme :
Many investors find it difficult to select one option from the plethora of
funds/schemes/plans available. For this, they may have to take advice from financial
planners in order to invest in the right fund to achieve their objectives.
 Managing of portfolio of funds:
Availability of large number of funds can actually mean too much choice for the investor.
He may again need advice on how to select a fund to achieve his objectives, quiet similar
to the situation when he has individual shares or bonds to select.
 The wisdom of professional management:
That’s right, this is not an advantage. The average Mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.
 No control:
Unlike picking your own individual stocks, a Mutual puts you in the passenger seat of
somebody else’s car.
 Dilution:
Mutual funds generally have such a small holdings of so many different stocks that
insanely great performance by a fund’s top holdings still doesn’t make much of a
difference in a Mutual fund’s total performance.

MAJOR MUTUAL FUND COMPANIES IN INDIA:
1. ABN AMRO Mutual fund 12. Standard chartered Mutual fund
2. Birla Sun Life Mutual fund 13. Franklin Templeton India Mutual fund
3. Bank of Baroda Mutual fund 14. Morgan Stanley Mutual fund India
4. HDFC Mutual fund 15. Escorts Mutual fund
5. HSBC Mutual fund 16. Alliance capital Mutual fund
6. ING vysya Mutual fund 17. Benchmark Mutual fund
7. Prudential ICICI Mutual fund 18. Canbank Mutual fund
8. SBI Mutual fund 19. Chola Mutual fund
9. TATA Mutual fund 20. LIC Mutual fund
10. UTI Mutual fund 21. GIC Mutual fund
11. Reliance Mutual fund 22. L&T Mutual fund
IMPORTANT STEPS TAKEN BY SEBI FOR REGULATING MUTUAL FUNDS IN

INDIA:-
Important steps are:-
 Formation:
Certain structural changes have also been made in the Mutual fund industry, as a part of
which Mutual funds are required to set up Asset Management companies with 50 %
independent directors, separate board of trustee companies, consisting of a minimum 50%
of independent trustees and to appoint independent custodians. this is to ensure an arm’s
length relationship between trustees, fund managers and custodians, and is in contrast with
the situation prevailing earlier in which all three functions were often performed by one

body which was usually the sponsors of the fund or a subsidiary of the sponsor. Thus, the
process of forming and floating Mutual funds has been made a tripartite exercise by
authorities. The Trustees, the Asset Management Companies and the Mutual fund
shareholders form the three legs.
 Registration:
In January 1993, SEBI prescribed registration of Mutual funds taking into an account
track record of a sponsor, integrity in business transactions and financial soundness while
granting permission. This will curb excessive growth of the Mutual funds and protect
investor’s interest by registering only the sound prompters with a proven track record and
financial strength.
 Documents:
The offer documents of schemes launched by Mutual funds and the scheme particulars are
required to be vetted by SEBI. A standard format for Mutual fund prospectus is being
formulated.
 Code of advertisement:
Mutual funds have been required to adhere to a Code of advertisement.
 Assurance on returns:
SEBI has introduced a change in the securities control and regulations Act governing
the Mutual funds. Guidelines allowing assurances on return subjected to certain conditions.
Hence, only those Mutual funds which have been in the market for at least 5 years are
allowed to assure a maximum return of 12% only, for one year.

 Maximum Corpus:
The current SEBI guidelines on Mutual funds prescribe a minimum start- up corpus of
Rs.50 crore for an open-ended scheme, and Rs.20 crore corpuses for closed-ended scheme,
falling application money has to be refunded
.
 Institutionalization:
The efforts of SEBI have, in the last few years, been to institutionalize the market by
introducing proportionate allotment and increasing the minimum deposit amount of Rs.5000
etc. these efforts is to channel the investment of individual investors into the Mutual funds.
 Valuation of Investment:
The transparent and well understood declaration or Net Asset Values of Mutual fund
schemes is an important issue in providing investors with information as to the performance
of fund.
 Inspection:
SEBI inspect Mutual funds every year. A full SEBI inspection of all the 27 Mutual funds
was proposed to be done by the March 1996 to streamline their operations and protect the
investor’s interests. Mutual funds are monitored and inspected by SEBI to ensure compliance
with the regulation.
 Underwriting:
In July 1994, SEBI permitted Mutual funds to take up underwriting of primary

issues as a part of their investment activity. This step may assist the Mutual funds in
diversifying their business.

1.4 REVIEW OF LITERATURE:-
The existing research available is on either accelerating the return on funds. Few studies
are Mutual funds attracted the attention of worldwide investors and academicians but most of
available that focus on investor’s objective and considering risk associated with the Mutual
funds investors. As the part of research work researcher has reviewed some research paper as
below.
 Prasanth R.H (2009) “performance of Mutual fund with reference to HDFC”. The study
id emphasize the objective of Mutual fund investment benefits of Mutual funds types of
Mutual fund etc., the is going to conducted by taking the NAV values of different types of
HDFC Mutual fund products. Tools used for the study are Sharpe, Treynor and Jensen
ratios. The study finds that before choosing the Mutual fund schemes the investor should
go through fact sheet thoroughly.
 Dr.Vikas Kumar (2011) “performance evaluation of open ended schemes of Mutual

funds”. This study main objective is to appraise the performance of Mutual funds with
regard to risk –return adjustment, the model suggested by Sharpe, Treynor and Jensen. In
this research 20 open ended schemes are taken. The analysis of the open ended schemes
shows that out of 20, five schemes namely reliance growth fund, reliance vision fund,
ICICI prudential tax plan, HDFC top 200 and Birla sun life Equity fund performs better in
comparison to benchmark index BSE-100index in terms of monthly average return and risk
involved in those schemes less than benchmark.
 Kalpesh p.prajapathi and Mahesh.k.patel (2012) “Comparative study on performance

evaluation of Mutual fund of Indian companies”. In this paper the performance evaluation
of Indian Mutual fund is carried out though relative performance index, risk-return
analysis, Sharpe, Treynor and Jensen’s measures. The data used is daily closing NAVs.
The sources of data are website of AMFI. The study period 2007-2011. The return
performance measures suggest the most of the Mutual funds have given positive return

during 2007-2011.it is found that HDFC and RELIANCE Mutual fund have performed
well as compared to the sensex return.
 M.S.Annapoorna & Pradeep (2013) “A Comparative analysis of returns of Mutual fund

schemes ranked one by CRISIL”. Mutual fund industry has experienced a drastic growth in
the post to decades increased in the number of schemes with increased mobilization of
funds in the past few year notes the importance of Indian Mutual funds. The main aim of
this project is to evaluate the performance of Mutual funds schemes ranked one by CRISIL
and compared those returns with SBI domestic term deposits rates. Considering the interest
of retail investors’ simple statistical techniques like, averages and rate of returns are used.
 Pinninti Sivakumar (2013) “performance evaluation of Mutual funds in India with special
reference to selected financial intermediaries”. Mutual fund companies are financial
intermediaries providing financial services to small investors through mobilizations of
funds. The study examines the performance of Mutual funds based on their fund return,
risk and performance ratios. This study found that the Mutual funds are one of the best
investment sources available for Indian small investors to make an investment, if
thoroughly assessed it may given big returns with little the available performance ratios
are very much helpful for the evaluator to assess the fund’s performance .
 C.Srinivas yadav (2014) “performance of selected Equity growth Mutual funds in India”.
The study researcher has undertaken is to evaluate performance of selected growth Equity
funds in India. Carried out using portfolio performance evaluation techniques such as
Sharpe and Treynor measures. S&P CNX NIFTY has been taken as the benchmark. The
study conducted with 15 Equity growth schemes (NAV) were chosen for top 10 AMCs for
the period 2010-2013. In this study found that HDFC - Equity fund growth option scheme
has secured rank 1st under all the measures and hence, it has been the best perform.
 Arsalan mukhthar (2015) “risk adjusted performance evaluation of balanced Mutual fund
schemes in Pakistan”. This research study speaks the Mutual fund is a specialized
collective investment scheme. It invests a pool of money which is collected from the

investors with the purpose of investing in various securities like debentures, stocks, money
.market instrument and other similar assets. Mutual fund existed since 1964 in Pakistan in
capital market carrying certain benefits like risk diversification, assured returns and
professional management for the retail investors. This research paper aimed to study the
performance of some selected Mutual fund schemes in Pakistan based on risk-return
relationship and various measures, 5 balanced schemes offered by various Mutual fund in
Pakistan are selected for this study from 2010-2013. The analysis has been made on the
basis of mean return, beta risk, total risk, Sharpe ratio, Treynor ration and Jensen Alpha
and findings of the study was reveals that average returns of selected portfolio are below
from the market returns.
1.5 STATEMENT OF THE PROBLEM:-
Mutual funds are supposed to be best investment vehicle for small investors, but it is
observed from the market and other reliable sources that Mutual funds have not reached to
their expectations, so after making review of literature on this topic researcher has found
some questions those are: How to analyze the performance of balanced Mutual Fund
against the risk free rate and Benchmarks returns over a period of 10years, and what are
the models that can be used to know the Performance of Mutual fund scheme, finally to
evaluate the performance of selected Mutual fund scheme using popular models of Sharpe,
Treynor and Jensen.
1.6 NEED OF THE STUDY:-
Mutual funds are supposed to be best investment vehicle for small investors, but it
has observed from the market and other reliable sources that Mutual funds have not
reached to their expectations, and today it is noticed that a large number of schemes have
been floated in the market so, it is very difficult to an average investor to examine their
performance. Hence there is need of systematic study on balanced oriented Mutual fund
scheme’s performance of two Asset Management Companies over a period of 10 years.
And the performance evaluation of balanced Mutual fund of HDFC and Reliance Asset

Management Companies by taking particular scheme at a given time of a Mutual fund is

denoted by Net Asset Value (NAV).
1.7 SCOPE OF THE STUDY:-
 The present study covers 5 years average returns of Mutual fund for the period 2013 to
2017.
 This study considers only growth oriented Mutual fund schemes which are subjected to
fluctuating risk and return.
 This study uses Daily NAV as declared by the relevant Mutual funds from the year 2013 of
particular scheme to 2017.
 The study is restricted to 5 mutual fund schemes are taken
1.8 OBJECTIVES OF THE STUDY:
1. To identify the different type of mutual fund schemes available to investors.

2. To review the existing literature on analysis of return on mutual fund.
3. To study the process of mutual funds.
4. To study the measures (Risk & Return) pertaining to analysis of mutual funds
investments.
5. To examines the select mutual fund schemes.
1.9 LIMITATIONS OF THE STUDY:-
“No single work is an exception by the limitations”; every work has got its Limitations.
Here the study has some limitations those are as follows:-
 Due to time constraints the study is limited to only two companies and limited number of
years only.

 This study is not free from inherent limitation of collection and analysis of the sources of
data.
 This study is only based on secondary data it’s not covers any kind of primary data.
 Present study is only confined to select growth Mutual fund; results of the study cannot be
generalized to all categories of Mutual fund schemes.

CHAPTER 2
PROFILE OF THE COMPANY
2.1 Profile of mutual fund industry

2.2 RELIANCE MUTUAL FUND
2.3 HDFC MUTUAL FUND

2.1. Mutual Fund Industry in India
History of Mutual Fund Industry in India

The history of Mutual Fund Industry in India can be traced back to 1963, with the launch of the Unit
Trust of India by the Government of India under an Act of Parliament. UTI was launched under the
regulatory and administrative control of RBI. In 1978, the regulatory and administrative control of
UTI was transferred from the Reserve Bank of India to IDBI (Industrial Development Bank of India).
The first mutual fund scheme that was introduced in India by UTI was in the Unit Scheme (1964).
UTI had Assets under Management worth Rs. 6,700 Crores, by the end of the year 1988.
In 1987, public sector enterprises such as State Bank of India, Punjab National Bank, Canara Bank,
etc. and other non-UTI segments such as General Insurance Corporation of India (GIC) and Life
Insurance Corporation of India (LIC) entered the market and established public sector mutual funds.
The funds introduced by the public sector banks, by way of historic progression, are listed below:
 SBI Mutual Fund

 Canbank Mutual Fund
 Punjab National Bank Mutual Fund
 Indian Bank Mutual Fund
 Bank of India Mutual Fund
 Bank of Baroda Mutual Fund
From the year 1993 onwards, private sector funds were established in the mutual fund industry. In
the same year, Mutual Fund Regulations were introduced in India under which all mutual funds
except UTI have to be registered. The first private sector mutual fund that was registered was the
Kothari Pioneer Fund, which was merged with Franklin Templeton later on. In 1996, the Mutual
Fund Regulations were revised and this substituted the earlier version.
In 2003, the Unit Trust of India Act 1963 was repealed and was divided into 2 separate entities – the
UTI Mutual Fund, which is sponsored by Punjab National Bank, State Bank of India, Life Insurance
Corporation of India and Bank of Baroda and the second entity is the Specified Undertaking of the
Unit Trust of India. This bifurcation was effective from February 2003.

Investor Servicing
The Mutual Fund Industry in India has outsourced the work of servicing investors, to Registrar and
Transfer Agents (RTAs). These RTAs are Karvy and CAMS, with CAMS covering almost 65% of
asset servicing. The only exception is Franklin Templeton Mutual Fund services, which has its own
RTA set up on an in-house basis. These RTAs have investor service centers which offer a wide range
of services such as KYC fulfillment formalities, financial transaction acceptance and processing,
nomination registration, non-financial changes, statement of accounts, transmission of units, etc.
Asset Management Companies in India
 Axis Asset Management Company

 Baroda Pioneer Asset Management Company
 Birla Sun Life Asset Management Company
 BNP Paribas Asset Management Company
 BOI AXA Asset Management Company
 Canara Robeco Asset Management Company
 Deutsche Asset Management Company
 DHFL Pramerica Asset Management Company
 DSP BlackRock Asset Management Company
 Edelweiss Asset Management Company
 Escorts Asset Management Company
 Franklin Templeton Asset Management Company
 Goldman Sachs Asset Management Company
 HDFC Asset Management Company
 HSBC Global Asset Management Company
 ICICI Prudential Asset Management Company
 IDBI Asset Management Company
 IDFC Asset Management Company
 IIFCL Asset Management Asset
 IIFL Asset Management Company
 IL & FS Infra Asset Management Company
 Indiabulls Asset Management Company
 J.P. Morgan Asset Management Company

 JM Financial Asset Management

 Kotak Mahindra Asset Management Company
 L&T Asset Management Company
 LIC Nomura Mutual Fund Asset Management Company
 Mirae Asset Management Company
 Motilal Oswal Asset Management Company
 Peerless Asset Management Company
 PPFAS Asset Management Company
 Principal Asset Management Company
 Quantum Asset Management Company
 Reliance Asset Management Company
 Religare Global Asset Management Company
 Sahara Asset Management Company
 SBI Asset Management Company
 Shriram Asset Management Company
 Sundaram Asset Management Company
 Tata Asset Management Company
 Taurus Asset Management Company
 Union KBC Asset Management Company
 UTI Asset Management Company
Technology for Customer Engagement
AMCs have implemented various technological measures in order to enhance customer engagement
from various sectors of the society. Two programmes that have been introduced by AMCs are the
Investor Awareness Programme (IAP) and District Adoption Programme (DAP). These programmes
improve awareness in locations with limited penetration of mutual funds, regarding the assets and
their benefits.
Other technologies that are being used by AMCs are internet applications, mobile applications and
social media. These companies have improved their online interface for ease of access and use. They
are also using mobile apps to enable investors to track their investments and to monitor their
transacting portfolios. WhatsApp, Face book and other social media platforms are being used in
order to enhance user experience and integrate various services. Social media platforms have been

recognized as an effective channel to leverage technology that would assist in investment and mobile
applications to engage more customers from different segments.
HNIs are the key target segment for AMCS and therefore several custom-made programmes are
being initiated by them in order to enhance their engagement. There are various mass outreach
programmes that are held by AMCs in order to enable growth in the mutual fund industry and to
ensure maturity of the individual customer investments.
Changes to Mutual Fund Industry – SEBI Initiatives
SEBI has dictated various initiatives and directives in order to regulate the mutual fund industry and
to protect investor interests. These can be classified into three segments –
 Protecting investor interests – SEBI has introduced various directives to protect investor
interests. These are as follows:
 Promote transparency by introducing higher disclosures by an Asset Management Company
(AMC).
 Prevent mis-selling by making changes to the commission structure.
 Merging me-too schemes and not giving approval to NFO issuances that are in non-compliance
to this rule.
 Introducing “riskometer” info graphics in all mutual fund product brochures in a comprehensive
and easily understandable format.
 Increasing reach and lowering costs – SEBI offers the following solutions for increasing reach
and lowering costs:
 Launching the MF Utility Portal that would enable investors to trade through a Common
Account Number.
 Areas other than T15 will have differentiated TER for encouraging the sale of direct plans.
 Issuing consolidated account statements.
 Safeguarding the health of mutual fund industry – In order to safeguard the health of the
Indian Mutual Fund Industry, the following regulations are laid down by SEBI:
 Making it mandatory for AMCs to have a capital base of Rs. 500 Million by the year 2017,
from its current value of Rs. 100 Million.
 Proposing the analysis of compensation details for assessing fixed costs of AMCs.
 Conducting stress tests on a regular basis.

Current Status of Indian Mutual Fund Industry
The Indian Mutual Fund Industry has recorded Rs. 13, 460 billion Assets Under Management
(AUM) by December 2015 and is reporting a steady growth till date. Initially, corporate had been the
main contributor to AUM but soon, the retail segment proved to be the segment that contributed the
most to AUM growth in India.
GST rate of 18% applicable for all financial services effective July 1, 2017.

2.2. RELIANCE MUTUAL FUND
Reliance Mutual Fund (RMF) is one of the India’s leading mutual funds, with average assets
under management (AAUM) of Rs 107749cr’s and an investor count of over 72lakh folio’s
(AAUM and investor count as of September 2010).
Reliance Mutual Fund, a part of the Reliance Anil Dhirubhai Ambani Group, is one the fastest
growing mutual funds in the country. RMF offers investors a well rounded portfolio of
products to meet varying investor requirements and has presence in 159 cities across the
country. RMF constantly endeavors to launch innovative products and customer service
initiatives to increase value to investors. Reliance Mutual Fund schemes are managed by
Reliance Capital Asset Management Ltd. This holds 93.37% of the paid-up capital of RCAM,
the balance paid up capital being held by minority shareholders.

VISION AND MISSION STATEMENT OF RMF
Vision Statement
To be globally respected wealth creator with an emphasis on customer

care and a culture of good corporate governance.
Mission Statement
To create and nurture a world class, high performance environment aimed

at delighting our customers.
Focus on Investment Excellence

 A pure investment management organization
 Multi-manager structure encompassing well-known brands across multiple asset classes
 Portfolio managers stay true to their disciplines
 Integrated risk management
Global Perspective Shaped by Local Expertise

 A pioneer in global investing
 Clients in 150+ countries
 16 countries/regions with over U.S. $5 billion in AUM
 World's top cross-border fund management group
 Over 650 investment professionals
Strength and Experience

 Diversified by investment objective, client type, and geographical region
 Strong balance sheet and excellent credit ratings
 Focused on delivering strong long-term results and reliable, personal services.

Different types of mutual fund offered by Reliance Mutual Fund
1) Equity/Growth schemes
2) Debt/Income schemes
3) Sector Specific schemes
4) Exchange Traded Fund
5) Fixed Maturity Plans
Important products which reliance mutual fund offers
1) Reliance Growth Fund (An open ended equity growth schemes)
2) Reliance Vision Fund (An open ended equity growth schemes)
3) Reliance Equity Opportunities Fund (An open ended diversified equity schemes)
4) Reliance Quant plus Fund (An open ended equity schemes)
5) Reliance NRI Equity Fund (A 0pen ended diversified equity schemes)
6) Reliance Tax Saver (ELSS) Fund (An open ended equity linked saving schemes)
7) Reliance Regular Savings Fund (An open ended scheme) Equity Option
8) Reliance Regular Savings Fund (An open ended scheme) Balanced Option
9) Reliance Equity Fund (An open ended diversified equity schemes)
10) Reliance Equity Advantage Fund (An open ended diversified equity schemes)
11) Reliance Equity Linked Saving Fund Series (A lower close ended equity linked saving
schemes)
12) Reliance Natural Resources Fund (An open ended equity scheme)
13) Reliance Infrastructure Fund (An open ended equity scheme)

2.3. HDFC ASSET MANAGEMENT COMPANY (AMC)
HDFC Asset Management Company Ltd (AMC) was incorporated under the companies act
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T Parekh Marge,
169, Back Bay Reclamation, Church gate, Mumbai-400 020.
In terms of the investment management agreement, the trustee has appointed the HDFC asset
management company limited to manage the mutual fund. The paid up capital of the AMC is
Rs.25.161 crore
Zurich insurance company (ZIC), the sponsor of Zurich India mutual fund, following a review
of its overall strategy, had decided to divest its asset management business in India. The AMC
had entered into an agreement with ZIC to acquire the said business, subject to necessary
regulatory approvals.
On obtaining the regulatory approvals, the following schemes of Zurich India mutual fund
have migrated to HDFC mutual fund on June 19, 2003.
The AMC is managing 28 open- ended schemes of the mutual fund the AMC is also
managing 7 closed ended schemes of the mutual fund the AMC is also providing portfolio
management/ advisory services and such activities are not in conflict with the activities of the
mutual fund. The AMC has renewed its registration from SEBI vide registration number

PM/INP000000506 dated December 21,2009 to act as a portfolio manager under the SEBI
(portfolio managers) regulations, 1993. The certificate of registration is valid from January 1,
2010 to December 31, 2012.
VISION AND MISSION STATEMENT OF HDFC
Vision statement of HDFC
To be a dominant player the Indian Mutual Fund space recognized for its high levels of
ethical and professional conduct and a commitment towards enhancing investor interests.
Mission statement of HDFC
To create and improving the performance of customers for the environment hazards
HDFC MUTUAL FUND SCHEMES
HDFC AIF-series 1-plan A (D)
HDFC AIF-series 1-plan A (Div-Q)
HDFC AIF-series 1-plan A (Flexi)
HDFC AIF-series 1-plan A (G)
HDFC AIF-series 1-plan C (D)
HDFC AIF-series 1-plan C (Div-Q)
HDFC AIF-series 1-plan C (Flexi)
HDFC AIF-series 1-Plan C (G)
HDFC Arbitrage Fund –Retail (D)
HDFC Arbitrage Fund –Retail (Div-M)
HDFC Arbitrage Fund –Retail (Div-Q)

HDFC Arbitrage Fund -Retail (G)
HDFC Arbitrage Fund –WP (D)
HDFC Arbitrage Fund –WP (Div-m)
HDFC Arbitrage Fund –WP (G)
HDFC Balanced Fund (Div-Q)
HDFC Balanced Fund (G)
HDFC Banking and PSU Debt Fund (Div-W)
HDFC Banking and PSU Debt Fund (G)
HDFC Capital Builder – (D)
Summary of Schemes
No of Schemes: 495
Corpus under Management: Rs 289420.5048crs (as on 31st Dec 2017)
Arbitrage Funds (6)
Balanced Funds (15)
Equity (38)
ETFs (3)
Fixed Maturity Plans (211)
Floating Rate Income Funds (11)
Fund of Funds (3)
Guilt Funds (4)

Income Funds (15)
Interval Income Funds (2)
Liquid Funds (11)
Monthly Income Plans (8)
Short-term Income Funds (12)
Ultra Short –term Funds (8)
Sponsor: Housing Development Finance Corporation Limited; Standard Life Investment

Limited.
Trustee: HDFC Trustee Company limited
Investment Manager: HDFC Asset Management Company Limited
Statutory Details: HDFC mutual fund, a trust setup under the provisions of the Indian Trusts
Act 1882.

CHAPTER 3
RESEARCH METHODOLOGY
3.1. RESEARCH DESIGN

3.2. METHOD OF DATA COLLECTION
3.3. SECONDARY DATA
3.4. SAMPLE SIZE

3.1 Research design:
The quality of any research project will be enhanced by a good understanding of research
design. Research design is a layout of the executing research project. Research design is
the way of systematic collection of data and analysis of data which is relevant to the
objectives of the research project. It’s a cyanotype for the collection, measurement and
analysis of data.
3.2 Method of data collection:
This research work is purely based on secondary data.
3.3 Secondary source of data:
For this research study descriptive research design has been applied and also data collected from
only secondary sources of information, method of collecting the secondary data were collected
from the various available books, conceptual papers, newspapers, magazines, journals, published
report of Association of mutual funds, annual report of selected mutual fund schemes, various
websites, internet etc. this study tries to examine the performance of the 5 selected mutual fund
schemes.

3.4 Research methodology:
This research work purely on secondary data so, the researcher has used some tools to measure
the performance evaluation of growth oriented Mutual fund using popular models are Sharpe ,
Treynor model based on these two models researcher analyzed and interpretation data of growth
oriented Mutual fund two AMC.
1. SHARPE MODEL:-
Sharpe’s performance index (1966) gives a value to be used for the performance
ranking of various funds or portfolios. Sharpe index measures the Risk Premium of the
portfolio relative to the total amount of risk in the portfolio. This Risk Premium is the
difference between the portfolio’s average rate of return and the riskless rate of return. The
standard deviation of the portfolio indicates the risk. (It expressed as the return per unit of
risk, risk is measured by standard deviation).
WHERE,
Sp - Sharpe’s ratio for fund P,
Rp - Average return on fund P,
p - S.D of return on fund P
Rf - Risk free rate of interest.

2. TREYNOR MODEL:-
This model (1965) is also used for the giving performance rank to various funds or
portfolio. Treynor index measures the risk premium of portfolio relatively to the only
systematic amount of risk in the portfolio. Here Systematic risk means Beta.
Tn = (Rp-Rf) / βp
WHERE,
Tp - Treynor’s ratio for fund P
Βp - Sensitivity of fund return to market return
Rp - Average return on fund
Rf - Risk free rate of interest.

CHAPTER 4
DATA ANALYSIS AND INTERPREATION

PERFORMANCE EVALUATION OF GROWTH MUTUAL FUND
This chapter deals with data analysis and interpretation. Here, the researcher has
tabulated, analyzed and interpreted the data obtained from the secondary sources by websites
of the HDFC Asset Management Company, Reliance Asset Management Company and Debt
oriented benchmark 365 days Treasury Bills.
ANALYSIS AND INTERPRETATION:
RETURN RELATED ANALYSIS & INTERPRETATION:
The return is the total gain or loss experienced on an investment over a period of time. It is
commonly measured as cash distribution during the period plus the change in value,
expressed as a percentage of the beginning-of-period investment value. For the purpose of
carrying out return related analysis andinterpretations, average return is calculated for the
study period. And then two asset management companies’ average return is compared with
average return on the 365 days Treasury Bills benchmark Index. If the average return is found
to be greater than respective average return on the benchmark index, the said fund is to be
considered as experiencing superior return than underlying index and vice-versa.

Table shows the Return for selected Mutual fund and benchmark values
AVERAGE RETURN OF FUNDS (%)
SELECTED AMC COMPANIES IN INDIA
YEAR HDFC Mutual fund Reliance Nippon 365 days
AMC ltd treasury
HDFC HDFC HDFC Reliance Reliance bills
Infrastructure prudence capital banking arbitrage
fund fund builder fund advantage
2013 -14.43 2.06 10.36 -10.37 9.71 8.82
2014 73.89 51.76 50.77 64.87 7.95 7.85
2015 -2.516 0.29 5.43 -6.02 8.06 7.75
2016 -1.92 9.43 3.82 10.75 6.37 6.51
2017 43.30 27.88 42.31 45.09 5.68 7.31
AVERAGE 19.66% 18.28% 22.53% 20.86% 7.55% 7.65%
DEVIATION 12.01% 10.63 14.88 13.21 -0.1%

RANK 03 04 01 02 05
Interpretation:
The table highlights the 5 years information about the values of average returns of HDFC’s
and Reliance funds as well as 365 days Treasury Bills bench mark index. On the basis of
these yearly values average are calculated for the study period. It is clear from the above table
that, in the year 2013 the revenue fund -3 has performed better than the other funds and
respective benchmark index and in 2014 HDFC fund-1 has performed better, in 2015
Reliance fund-1 has better, in 2016 Reliance fund-1 has better, and in 2017 the Reliance fund-
1 has performed better than the other and respective benchmark index. The performance
consists of average return for the 5 years the reliance fund HDFC’s fund-3 has performed
better than the other funds.

RISK RETURN ADJUSTED MODELS ANALYSIS & INTERPRETATION
Risk return relationship has been analyzed by using different measures of performance
appraisal using Sharpe Treynor and Jensen model. Risk and return are two important variables
to be used in the performance evaluation of portfolio. Risk adjusted return analysis is said to
be better way of evaluating portfolio performance.
 SHARPE MODEL:
Sharpe model is also known as reward to variability ratio. It is an excess return earned over a
risk free return per unit of risk involved, where risk is measured by standard deviation of the
rate of return.
1. AMC: HDFC Mutual funds
Select fund: HDFC infrastructure fund Scheme: Growth –option
AMC : HDFC Mutual HDFC infrastructure fund-Growth

fund option
Years Return on mutual Return on market Return on
fund (%) index (%) government
security (%)
2013 -14.43 6.755 8.825
2014 73.89 31.38 7.857
2015 -2.516 -4.06 7.756
2016 -1.92 3.01 6.516
2017 43.30 28.64 7.318
Source: AMFI, SENSEX, RBI.

Five years average data:
Rp: 19.66%, Rm: 13.14%, Beta: 2.14, Rf: 7.65% , 𝛔𝐩 : 33.52
Calculation of Sharpe’s Ratio:
Where,
Sp – Sharpe’s ratio for fund P,
Rp – Average return on fund P
𝛔𝐩 − 𝐒. 𝐃 Of return on fund P
Rf – Risk free rate of interest.
19.66−7.65
Sharpe’s Ratio =
33.52
12.01
=
33.55
SR = 0.35

2. AMC: HDFC prudential fund, Growth-option.
Selected fund: HDFC prudential fund Scheme: Growth option.
AMC : HDFC Mutual HDFC Prudential fund, Growth option.

fund
Years Return on Return on market Return on
mutual fund in index in (%) government
(%) security in (%)
2013 2.06 6.755 8.825
2014 51.76 31.38 7.857
2015 0.29 -4.06 7.756
2016 9.43 3.01 6.516
2017 27.88 28.64 7.318
Rp: 18.29%, Rm:13.145%, Beta: 1.24%, Rf: 7.65%, 𝛔𝐩 : 19.38%
18.28−7.65
Sharpe’s Ratio =
19.38
10.63
=
19.38
SR = 0.55

Selected fund: HDFC capital building fund Scheme: Growth option
AMC : HDFC Mutual HDFC Capital building fund, Growth-

fund option.
mutual fund (%) index in (%) government
security in (%)
2013 10.36 6.755 8.825
2014 50.77 31.38 7.857
2015 5.43 -4.06 7.756
2016 3.82 3.01 6.516
2017 42.31 28.64 7.318
𝐑𝐩:22.53%,𝐑𝐦:13.145%, Beta: 1.35%, 𝐑𝐟: 7.65%, 𝛔𝐩 : 19.89%
22.53−7.65
Sharpe’s Ratio =
19.89
14.88
=
19.89
SR = 0.748

4. AMC: Reliance Nippon Asset Management Ltd.
Selected fund: Reliance banking fund Growth
AMC : HDFC Mutual Reliance Banking fund, Growth.

fund
fund in (%) index in (%) government
security in (%)
2013 -10.37 6.755 8.825
2014 64.87 31.38 7.857
2015 -6.02 -4.06 7.756
2016 10.75 3.01 6.516
2017 45.09 28.64 7.318
Rp: 20.86%, Rm: 13.145%, Beta: 1.92%, Rf: 7.65%, 𝛔𝐩 : 29.40%
20.86−7.65
Sharpe’s Ratio =
29.40
13.21
=
29.40
SR = 0.44

Selected fund: Reliance arbitrage advange fund Scheme: Growth
AMC : HDFC Mutual Reliance Arbitrage Advantage fund,

fund Growth.
fund in (%) index in (%) government
security in (%)
2013 9.71 6.755 8.825
2014 7.95 31.38 7.857
2015 8.066 -4.06 7.756
2016 6.37 3.01 6.516
2017 5.68 28.64 7.318
Rp: 7.55%, Rm: 13.145%, Beta: 0.035%, Rf: 7.65%, 𝛔𝐩 : 1.41%
7.55−7.65
Sharpe’s Ratio =
1.41
−0.1
SR =
1.41
SR = - 0.07092

Table - Sharpe’s Values for Selected Mutual fund and benchmark values
AVERAGE RETURN OF FUNDS (%)
HDFC Mutual fund Reliance Nippon Market

AMC ltd index
HDFC HDFC HDFC Reliance Reliance

Ratios 0.35 0.54 0.74 0.44 -0.079 0.38
Deviation 0.03 0.16 0.36 0.06 -0.31
Rank 04 02 01 03 05
Interpretation:
the table describes the information about the Sharpe’s index both for selected AMC’s 5
funds and the respective benchmark index (NIFTY-50) over a five year period. It is observed
from the above table the performance of HDFC’s is 0.35%, second fund is 0.54%, fund-3 is
0.74% and Reliance’s fund-1 is -0.079% and fund-2 is 0.38 respectively. It is clear that Reliance
selected fund-2 performed lowest when compared with Benchmark both fund. HDFC’s fund-3
has performed well when compared with Benchmark index. And other HDFC and Reliance
funds are next best performance is fund-2 is 0.54, and third is best performed fund is Reliance
fund1 next is HDFC fund-1. The Reliance funds deviations are fund-1 0.06, Reliance fund-2 is -
0.31 and HDFC’s funds are fund-1 0.03, 0.16 and 0.36 so it can be interpreted that except
HDFC’s fund-3 are failed to generate adequate excess return in commensurate with their total
risk (s) as compared to benchmark index (NIFTY-50). The Sharpe’s index is important from
small investor’s point of view. Who seeks diversification through mutual fund.

 TREYNOR MODEL
It is also known as reward to volatility ratio. It is expressed as a ratio of returns to
systematic risk. It measures portfolio risk in terms of beta that is the weighted average of
individual security betas.
1. AMC : HDFC Mutual funds
Select fund : HDFC infrastructure fund Scheme : Growth –option
AMC : HDFC Mutual HDFC infrastructure fund-Growth

fund option
mutual fund (%) index (%) government
security (%)
2013 -14.43 6.755 8.825
2014 73.89 31.38 7.857
2015 -2.516 -4.06 7.756
2016 -1.92 3.01 6.516
2017 43.30 28.64 7.318
Rp: 19.66% , Rm: 13.14%, Beta: 2.14, Rf: 7.65% , 𝛔𝐩 : 33.52%
Calculation of Treynor’sRatio:
𝐑 𝐩−𝐑𝐟
Treynor’s Ratio =( )
𝛃𝐩
𝟏𝟗.𝟔𝟔−𝟕.𝟔𝟓
Treynor’s ratio =
𝟐.𝟏𝟒
12.01 TR = 5.612
=
0.32

1. AMC: HDFC prudential fund, Growth-option.
Selected fund: HDFC prudential fund Scheme: Growth option.
AMC : HDFC Mutual HDFC Prudential fund, Growth option.

fund
(%) security in (%)
2013 2.06 6.755 8.825
2014 51.76 31.38 7.857
2015 0.29 -4.06 7.756
2016 9.43 3.01 6.516
2017 27.88 28.64 7.318
Rp: 18.29%, Rm :13.145%, Beta: 1.24%, Rf: 7.65%, 𝛔𝐩 : 19.38
Calculation of Treynor’s Ratio:
Treynor’s Ratio =( )
𝛃𝐩
𝟏𝟖.𝟐𝟖−𝟕.𝟔𝟓
Treynor’s ratio =
𝟏.𝟐𝟒
10.63
=
1.24
TR = 8.57

Selected fund: HDFC capital building fund Scheme: Growth option
AMC : HDFC Mutual HDFC Capital building fund, Growth-

fund option.
fund (%) index in (%) government
security in (%)
2013 10.36 6.755 8.825
2014 50.77 31.38 7.857
2015 5.43 -4.06 7.756
2016 3.82 3.01 6.516
2017 42.31 28.64 7.318
𝐑 ∶22.53%, 𝐑𝐦:13.145%, Beta: 1.38%, 𝐑𝐟: 7.65%, 𝛔𝐩 : 19.89%
Calculation of Treynor’s Ratio :
Treynor’s ratio = ( )
𝛃𝐩
𝟐𝟐.𝟓𝟑−𝟕.𝟔𝟓
Treynor’s ratio =
𝟏.𝟑𝟓
14.88
=
1.38
TR = 11.022

Selected fund:Reliance banking fund Growth
AMC : HDFC Mutual Reliance Banking fund, Growth.

fund
(%) security in (%)
2013 -10.37 6.755 8.825
2014 64.87 31.38 7.857
2015 -6.02 -4.06 7.756
2016 10.75 3.01 6.516
2017 45.09 28.64 7.318
Rp: 20.86%, Rm: 13.145%, Beta: 1.95%, Rf: 7.65%, 𝛔𝐩 : 29.40%
𝛃𝐩
𝟐𝟎.𝟖𝟔−𝟕.𝟔𝟓
Treynor’s ratio =
𝟏.𝟗𝟓
13.21
=
1.92
TR = 6.88

Selected fund: Reliance arbitrage advantage fund Scheme: Growth
AMC : HDFC Mutual Reliance Arbitrage Advantage fund,

fund Growth.
(%) security in (%)
2013 9.71 6.755 8.825
2014 7.95 31.38 7.857
2015 8.066 -4.06 7.756
2016 6.37 3.01 6.516
2017 5.68 28.64 7.318
Rp: 7.55%, Rm: 13.145%, Beta: 0.035%, Rf: 7.65%, 𝛔𝐩 : 1.41%
𝛃𝐩
𝟕.𝟓𝟓−𝟕.𝟔𝟓
Treynor’s ratio =
𝟎.𝟎𝟑𝟓
−0.1
=
0.035
TR = 2.85

Table - Treynor’s Values for Selected Mutual fund and benchmark values
Treynor’s Risk Return adjusted model(%)
HDFC Mutual fund Reliance Nippon Market

AMC ltd index
HDFC HDFC HDFC Reliance Reliance

Ratios 5.612 8.57 11.022 6.88 -2.88 5.45
Deviation 0.16 3.12 5.57 1.43 2.57
Rank 04 02 01 03 05
INTERPRETATION:
The table exhibit the information of Treynor’s index 5 for selected schemes of KDFC and
Reliance AMC”s and the respective Benchmark index over the period of the study. The above
table portrays the excess return earned over risk free return per unit of systematic risk.
Reliance fund-2 performance (-2.88) however, according to the Treynor’s HDFC fund-3
performance has better than the benchmark index (NIFTY-50) and other fund the fund-3
(11.62) generates sufficient excess return in commensurate with their systematic risk (b) as
compared to benchmark market index. It implies to some extent, fund managers have failed to
incorporate appropriate changes in to the composition of their portfolio to trim well their
performance to the changing conditions in the market. A higher Treynor index compare to
market indicates investors who invested in mutual funds to form well diversified portfolio did
receive adequate return per unit of systematic risk undertaken.

CHAPTER 5
Summary of findings

FINDINGS :
1. The Mutual Fund Industry in India has outsourced the work of servicing investors, to
Registrar and Transfer Agents (RTAs). These RTAs are Karvy and CAMS, with CAMS
covering almost 65% of asset servicing.
2. AMCs have implemented various technological measures in order to enhance customer

engagement from various sectors of the society. Two programmes that have been introduced
by AMCs are the Investor Awareness Programme (IAP) and District Adoption Programme
(DAP). These programmes improve awareness in locations with limited penetration of
mutual funds, regarding the assets and their benefits.
3. The Indian Mutual Fund Industry has recorded Rs. 13, 460 billion Assets Under Management
(AUM) by December 2015 and is reporting a steady growth till date. Initially, corporates had
been the main contributor to AUM but soon, the retail segment proved to be the segment that
contributed the most to AUM growth in India.
4. GST rate of 18% applicable for all financial services effective July 1, 2017.
5. Assets of mutual funds in India constituted less than 5% of GDP which still low compared to
other Asian and global countries
6. When sector funds returns of compared to the related benchmark of the stock index mutual
funds are performing better especially when the period of investment is more than one year
7. When standard deviation of some funds are compared to the stock index standard deviation
risk is lesser in case of funds.
8. Similarly when sharpe ratio is compared which gives relative measure of return (risk)
performance of funds is superior to benchmark index.
9. It is also found that where the period of investment is higher, the return are comparatively
better than shorter period of investment, in case of closed ended schemes.
10. While investing one should consider both NAV and also total returns they cannot completely
rely on the ranks based on either NAV/returns.
11. After analyzing the research study mutual funds in India place a very crucial role to the
development of Indian economy and small investment standard of living

12. It is found that AMFI and SEBI bodies are regulating and controlling the AMC’s in India.
13. People generally like to save their savings in fixed deposits and saving account as there was
very less risk.
14. The most popular medium of investing in mutual fund is through SIP and moreover people
like to invest in equity fund though it is a risky.
15. It is found that average return of HDFC fund-1 infrastructure fund performance is (19.66%)
greater than the other HDFC’s funds. Reliance fund and benchmark index of 365 days
Treasury bills.
16. According to the Shorpe’s model it is found that performance of Reliance AMC’s funds are
poor when compare to performance of HDFC AMC’s third fund and its benchmark index so
HDFC AMC take the first rank.
17. According to Treynor’s method of evaluation that 5 funds except Reliance second fund
excess return earned over risk free return per unit of systematic risk is less when compared to
the 365 days Treasury bills benchmark index but HDFC performance is good than the
Reliance fund so Reliance fund gets second rank whereas HDFC ranked as No.1.
18. It is surprised that in this study because HDFC growth funds performance ranked on number-
1 in the each of two portfolio tools or models.

CHAPTER 6
1. Suggestion
2. Conclusions

Suggestions :
On the basis of findings of the present study the important suggestions are as follows:
1. Reliance fund manager fail in forecast of appropriate security prices in times which
results in poor performance in this background I suggest that the AMC’s mutual funds
company appoint well expertise and experienced. Fund managers to have better future
projections.
2. HDFC AMC has almost good performance once the market the investor suggests the
fund manager of HDFC AMC that they maintain consistency in returns of the portfolio.
This is possible only latest techniques and models are adopted before diversifying the
funds.
3. In the present scenario mutual funds still could not build required confidence among the
existing investors because of the poor performance and lack of transparency. So suggest
to the both AMC’s appoint only competent fully qualified and well experienced in
finance market functioning as their fund manager.
4. It is better for every AMC to establish and develop modern market researches this
contributes a lot in effecting better and efficient portfolio management practices
moreover SEBI makes it obligatory for every AMC to ensure that every fund manager
should be highly qualified and well experienced on the issues pertaining to the capital
market and well worse with the global market trends such a professional knowledge
would definitely act as leverage for better management.
5. Standard deviation of the HDFC’s fund is little bit high so I suggest to HDFC fund
manager take care about minimization of unsystematic risk.
Conclusion:
The mutual funds are one of the investment sources available for Indian small investors to make
an investment. If thoroughly assessed it may give big returns with little savings. The above
performance ratios are very much helpful for the evaluator to assess the funds performance. As
the mutual fund investment is subject market conditions therefore the study is conducted using
only two AMC’s five funds. The performance of HDFC is better than the Reliance Two funds, so
researcher advisable the prospective investor invest in HDFC mutual fund to get more returns.

BIBLIOGRAPHY:-
BOOKS:-
Ambika Prasad Dash, (2013) “Security Analysis and Portfolio Management”,

I. K. International Publishing House Pvt.Ltd.
JOURNALS:-
Allen D.E. and M.N.Tan, (Journal for business finance & accounting 26 (5) & (6),
June/July 1999)
Bruce N. Lehmann and David M. Modest, (The journal of finance, Vol XLII, No.2 June
1987)
Manak C Gupta, (The journal of Financial and quantitative analysis Nov 1974) Vol, 9,
pp-891
Mark Grinblatt and Sheridan Titman, (The Journal of financial and quantitative
analysis, Vol. 29, No.3 (Sept, 1994) PP 419-444)
Mohamed Sivakumar, K.Srinivas Reddy, (IOSR Journal of Business and Management

(IOSR-JBM) ISSN Volume 7, Issue 2 (Jan. - Feb. 2013), PP 34-40)
Dr.R.Narayanasamy, V. Rathnamani, (International Journal of Business and

Management Invention ISSN Volume 2 Issue 4 ‖ April. 2013 PP.18-24)
Pradeep Mamgain, (ISSN Volume -II * Issue- IX* February- 2016)
Mr.Raghavendra Rao Rentala, (SSIJBMR Vol 2, ISSUE 6 [NOV 2012] ISSN)

Rais Ahmad, Abuzar Nomani, (Journal of Economics and Business Research, ISSN No.
1, 2015, pp. 69-83)
WEBSITES:-
www.lntmf.com
www.hsbcmf.com
www.rbi.org
www.nse.com

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“A STUDY ON RISK AND RETURN OF MUTUAL FUND “

1.1 EXECUTIVE SUMMARY

2. PROFILE OF THE COMPANY 30 – 42

2.1 Profile of mutual fund industry

3.1. RESEARCH DESIGN

Department of Management VSKU, Ballari Page 1

4. DATA ANALYSIS AND INTERPREATION 47 – 62

Department of Management VSKU, Ballari Page 2

Department of Management VSKU, Ballari Page 3

1.1 Executive summary:

Department of Management VSKU, Ballari Page 4

The Mutual funds to diversify their activities the following areas:-

Department of Management VSKU, Ballari Page 5

Department of Management VSKU, Ballari Page 6

1.3 BACKGROUND OF THE STUDY

CONCEPT OF MUTUAL FUND:-

Department of Management VSKU, Ballari Page 7

DEFINITION OF MUTUAL FUND:-

HISTORY OF MUTUAL FUND IN INDIA:-

Department of Management VSKU, Ballari Page 8

FEATURES OF MUTUAL FUNDS:-

1. Investors purchase standard units of fixed value at the inception of a fund.

Department of Management VSKU, Ballari Page 9

ASSOCIATION OF MUTUAL FUND IN INDIA:-

Department of Management VSKU, Ballari Page 10

ORGANISATION STRUCTURE OF MUTUAL FUNDS IN INDIA:-

ORGANISATION STRUCTURE OF MUTUAL FUND IN INDIA

Department of Management VSKU, Ballari Page 11

Department of Management VSKU, Ballari Page 12

ASSET MANAGEMENT COMPANY (AMC):-

Department of Management VSKU, Ballari Page 13

RISK FACTORS OF MUTUAL FUND:-

1. THE RISK – RETURN TRADE- OFF:-

Department of Management VSKU, Ballari Page 14

TYPES OF MUTUAL FUND SCHEME

Department of Management VSKU, Ballari Page 15

1) Open ended scheme

1) Tax saving scheme

2) Closed ended scheme:-

Department of Management VSKU, Ballari Page 16

B) Based on Investment objectives

1) Growth/Equity Oriented schemes:-

2) Income /Debt oriented schemes:-

4) Money market and liquid fund:-

Department of Management VSKU, Ballari Page 17

1) Tax saving scheme:-

2) Sector specific schemes:-

5) Exchange Traded funds:-

Department of Management VSKU, Ballari Page 18

ADVANTAGES OF MUTUAL FUNDS:-

Mutual Funds invest in a well-diversified portfolio of securities which enables investor to

Investors acquire a diversified portfolio of securities even with a small investment in a

 Low Transaction Costs:

Department of Management VSKU, Ballari Page 19

Mutual Fund industry is part of a well-regulated investment environment where the

DISADVANTAGES OF MUTUAL FUNDS:-

 Costs Control Not in the Hands of an Investor:

Department of Management VSKU, Ballari Page 20

 Difficulty in Selecting a Suitable Fund Scheme :

 Managing of portfolio of funds:

 The wisdom of professional management:

Department of Management VSKU, Ballari Page 21