CONTENTS

Chapter Page
Particulars
No. No.
EXECUTIVE SUMMARY

1 INTRODUCTION 1
1.1 Topic Chosen for the study 1-1
1.2 Need for the study 2-2
1.3 Objective of the study 2-2
2 REVIEW OF LITERATURE AND RESEARCH DESIGN 3
2.1 Scope of the study 3-3
2.2 Theoretical Background of the study 3-14
2.3 Methodology adopted 14-14
2.4 Literature Review 15-19
2.5 Limitations of the study 19-19

3 INDUSTRY AND COMPANY PROFILE 20

3.1 INDUSTRY PROFILE 20-23
3.2 COMPANY PROFILE 23-34
3.2.1 Overview and Company Background and Management 23-24
3.2.2 Milestone, Top Management and Nature of Business 25-29
3.2.3 Promoters, Features, Benefits, Mission, Vision, Quality Policy 29-30
3.2.4 Awards and Recognition, Products/Services, Area of Operation 30-35
3.2.5 Ownership Pattern, Infrastructural Facilities 35-35
3.2.6 Competitors Information 35-36
3.2.7 Mc Kinsey’s model 37-42
3.2.8 Organization chart and SWOT analysis 43-45
3.2.9 Growth and Future prospects 45-45
3.2.10 Financial Statement 46-49
4 RESULTS,ANALYSIS AND DISCUSSIONS 50-74
5 FINDINGS, CONCLUSIONS AND RECOMMENDATIONS 75-76
Bibliography

Annexure

LIST OF TABLES
 Page
Table No. Particulars
No.
Table showing analysis of Return of Birla Sunlife equity fund
Table 4.1 50
(G) in India

Table showing analysis of Return of CanaraRobeco equity

Table 4.2 51
diversified (G) in India

Table showing analysis of Return of Franklin India Bluechip

Table 4.3 52
fund (G)in India

Table 4.4 Table showing analysis of Return of Tata ethical fund (G)in India 53

Table showing analysis of Return of HSBC Unique Opportunities

Table 4.5 54
fund(G) in India

Tableshowing analysis of return and variability in return of

Table 4.6 55
selected equity mutual funds

Table 4.7 Tableshowing analysis of beta of selected equity mutual funds 56

Tableshowing performance evaluation of Top 5 equity mutual

Table 4.8 57
funds on the basis of Sharpe’s Performance Index

Tableshowing performance evaluation of Top 5 equity mutual

Table 4.9 58
funds on the basis of Treynor’s Performance Index

Tableshowing performance evaluation of Top 5 equity mutual

Table 4.10 59
funds on the basis of Jensen’s Performance Index

Table 4.11 Table showing average return, risk and beta 60

Table 4.12 Table showing analysis of Return of SBI Gold ETF in India 61

Table 4.13 Table showing analysis of Return of UTI Gold ETF in India 62

Table 4.14 Table showing analysis of Return of Kotak Sensex ETF in India 63

Table showing analysis of Return of R* Shares Banking ETF in

Table 4.15 64
India

Table 4.16 Table showing analysis of Return of GS Nifty ETF in India in 65

Table showing analysis of return and variability in return of

Table 4.17 66
selected ETFs
 Table 4.18 Table showing analysis of beta of selected ETFs 67

Table showing performance evaluation of Top 5 ETFs on the

Table 4.19 68
basis of Sharpe’s Performance Index

Table showing performance evaluation of Top 5 ETFs on the

Table 4.20 69
basis of Treynor’s Performance Index

Table showing performance evaluation of Top 5 ETFs on the

Table 4.21 70
basis of Jensen’s Performance Index

Table 4.22 Table showing average return, risk and beta 71

Table 4.23 Table showing Spearman’s rank correlation 72

Table showing comparison of selected equity diversified mutual

Table 4.24 73
funds and ETFs in respect to return

Table showing comparison of selected equity diversified mutual

Table 4.25 74
funds and ETFs in respect to variability in return

LIST OF GRAPHS AND CHARTS

Graph No. Particulars Page No.
Graph showing analysis of Return of Birla sunlife equity
Graph 4.1 50
fund (G) in India

Graph showing analysis of Return Canara Robeco equity

Graph 4.2 51
diversified (G) in India

Graph showing analysis of Return of Franklin India

Graph 4.3 52
Bluechip fund (G) in India

Graph showing analysis of Return of Tata ethical fund (G)

Graph 4.4 53
in India
 Graph showing analysis of Return of HSBC Unique
Graph 4.5 54
Opportunities fund (G) in India

Graph showing average return, variability in return and

Graph 4.6 60
beta

Graph showing analysis of Return of SBI Gold ETF in

Graph 4.7 61
India

Graph showing analysis of Return of UTI Gold ETF in

Graph 4.8 62
India

Graph showing analysis of Return of Kotak Sensex ETF in

Graph 4.9 63
India

Graph showing analysis of Return of R* Shares Banking

Graph 4.10 64
ETF in India

Graph showing analysis of Return of GS Nifty ETF in

Graph 4.11 65
India

Graph showing average return, variability in return and

Graph 4.12 71
beta

Graph showing comparison of selected equity diversified

Graph 4.13 73
mutual funds and ETFs in respect to return

Graph showing comparison of selected equity diversified

Graph 4.14 74
mutual funds and ETFs in respect to variability in return
 EXECUTIVE SUMMARY

In the current economic scenario interest rates are falling and fluctuation in the share
market has put investors in confusion. One finds it difficult to take decision on investment.
This is primarily, because of investments that are risky in nature and investors have to
consider various factors before investing in investment avenues.

These factors include risk, return, volatility of shares and liquidity. The main
objective of investment in Equity mutual fund schemes and ETFs is to analyze the
performance evaluation of these funds with their benchmark by using risk, return, beta and
alpha as a parameter.

Historical data were taken for calculating risk, return and beta. Performance of these
funds is also been evaluated using different performance indexes which is used to rank the
different funds used in the study.It also uses Spearman’s rank correlation.Compare to ETF,
Equity mutual funds have high risk with high returns as they give the investor a diversified
portfolio. Those who have well knowledge in ETFs, they can go for ETF investments rather
than investing in Equity mutual funds as it has less risk.

ETFs have certain advantages over mutual funds. The units can be purchased easily. It
can be traded in real-time basis. ETF and equity mutual funds offer diversification in the
portfolio.

The study will guide the new investor who wants to invest in Equity mutual fund
schemes and ETFs by providing knowledge about how to measure the risk and return of
particular scrip or mutual fund scheme. The study recommends new investors to go for equity
mutual funds rather than ETFs, as it involves high return.

It was found that ETFs as an investment avenue is less popular and investment
through SIP is gaining popularity in the volatile market.
 CHAPTER1
INTRODUCTION

1.1TOPIC: COMPARATIVE ANALYSIS OF EQUITY MUTUAL FUNDS

AND ETF’S

Like most developed and developing countries the mutual fund cult has been catching on in
India. There are various reasons for this. Mutual funds make it easy and less costly for
investors to satisfy their need for capital growth, income and/or income preservation.

And in addition to this a mutual fund brings the benefits of diversification and money
management to the individual investor, providing an opportunity for financial success that
was once available only to a select few.

It's important to understand that each mutual fund has different risks and rewards. In general,
the higher the potential return, the higher the risk of loss. Although some funds are less risky
than others, all funds have some level of risk. It’s never possible to diversifyaway all risk. 

Equity mutual funds invest in shares of companies that are listed on the stock exchanges.

ETF is defined as a security that tracks an index, a commodity or a basket of assets like an
index fund but trades like a stock on an exchange and experiences price changes throughout
the day as it is bought and sold. ETF were first launched in 1993 in United States. Their
popularity as a structured product has grown immensely because of the benefits it provides to
investors and traders. The issuance of ETF is just like a primary market IPO or a mutual fund
NFO. Shares are issued by the fund manager and listed on the exchanges. Investors can buy
and sell these shares from the secondary market through their brokers. ETF are often called as
index shares, are a hybrid of index mutual funds and stocks.

ETFs by nature track a certain index (e.g. Nifty). Hence, the returns one can expect from
ETFs will be equal to the rise in the index.The ETFs trading value is based on the net asset
value of the underlying stocks in the target index. Think of it as a Mutual Fund that you can
buy and sell in real time at a price which changes throughout the day.
1.2 Need for the Study:

The study is conducted to understand the concept of ETF and to evaluate the performance of
it, and also to evaluate the performance of equity mutual funds. The study also involves
thecomparison of investment performance of different ETFs and equity mutual funds. It is to
analyse the different types of investment opportunities available these days.

1.3 Objectives of the Study:

 To evaluate the performance of Equity mutual funds traded in India

 To analyze the risk and return involved in selected ETF’s
 To study the return of Equity mutual funds and ETFs with their respective
Benchmark indexes

 To study the best performing funds using Sharpe, Treynor and Jensen measures.
 To compare the performance of Equity mutual funds and ETFs in India.
 CHAPTER2
REVIEW OF LITERATURE AND RESEARCH DESIGN

2.1 Scope of the Study:

 The present study includes 5 years average returns of the Equity mutual funds and
ETFs, based on which future of the risks and returns are analyzed to help potential
investors.
 The study involves 5 different schemes of equity mutual funds and 5 different
schemes of ETFs.
 To evaluate the performance of these schemes. Three performance indexes are used
that is Sharpe’s, Treynor’s and Jensen’s measure.

2.2 THEORETICAL BACKGROUND OF THE STUDY:

Mutual Funds
A mutual fund, by its very nature, is diversified that is, its assets are invested in many
different securities.

A mutual fund is a company that pools the money of many investors and its shareholders to
invest in a variety of different securities. Investments may be in stocks, bonds, money market
securities or some combination of those securities are professionally managed on behalf of
the shareholders, and each investor holds a share of the portfolio entitled to any profits when
the securities are sold, but subject to any losses in value as well.
For the individual investor, mutual funds provide the benefit of having someone else manage
your investments and diversify your money over many different securities that may not be
available or affordable to you otherwise. Today, minimum investment requirements on many
funds are low enough that even the smallest investor can get started in mutual funds. Mutual
funds make it easy and less costly for investors to satisfy their need for capital growth,
income and/or income preservation.

Benefits of Mutual Funds:

Professional Investment Management

One of the primary benefits of mutual funds is that an investor has access to professional
management. A good investment manager is certainly worth the fees you will pay. Good
mutual fund managers with an excellent research team can do a better job of monitoring the
companies they have chosen to invest in than you can, unless you have time to spend on
researching the companies you select for your portfolio. That is because Mutual funds hire
full-time, high-level investment professionals. Funds can afford to do so as they manage large
pools of money. The managers have real-time access to crucial market information and are
able to execute trades on the largest and most cost-effective scale. When you buy a mutual
fund, the primary asset you are buying is the manager, who will be controlling which assets
are chosen to meet the funds' stated investment objectives.

Diversification
A crucial element in investing is asset allocation. It plays a very big part in the success of any
portfolio. However, small investors do not have enough money to properly allocate their
assets. By pooling your funds with others, you can quickly benefit from greater
diversification. Mutual funds invest in a broad range of securities. This limits investment risk
by reducing the effect of a possible decline in the value of any one security. Mutual fund unit-
holders can benefit from diversification techniques usually available only to investors
wealthy enough to buy significant positions in a wide variety of securities.

Low Cost
A mutual fund lets you participate in a diversified portfolio for as little as Rs.5000, and
sometimes less. And with a no-load fund, you pay little or no sales charges to own them.
Convenience and Flexibility
Investing in mutual funds has its own convenience. While you own just one security rather
than many, you still enjoy the benefits of a diversified portfolio and a wide range of services.
Fund managers decide what securities to trade collect the interest payments and see that your
dividends on portfolio securities are received and your rights exercised. It also uses the
services of a high quality custodian and registrar. Another big advantage is that you can move
your funds easily from one fund to another within a mutual fund family. This allows you to
easily rebalance your portfolio to respond to significant fund management or economic
changes.

Liquidity
In open-ended schemes, you can get your money back promptly at net asset value related
prices from the mutual fund itself.

Transparency
Regulations for mutual funds have made the industry very transparent. You can track the
investments that have been made on your behalf and the specific investments made by the
mutual fund scheme to see where your money is going. In addition to this, you get regular
information on the value of your investment.

Variety
There is no shortage of variety when investing in mutual funds. You can find a mutual fund
that matches just about any investing strategy you select. There are funds that focus on blue-
chip stocks, technology stocks, bonds or a mix of stocks and bonds. The greatest challenge
can be sorting through the variety and picking the best for you

Types of Mutual Funds:

All mutual funds are variations of these three asset classes. For example, while equity funds
that invest in fast-growing companies are known as growth funds, equity funds that invest
only in companies of the same sector or region are known as specialty funds.
Money Market Funds:
Money market consists of short-term debt instruments, mostly Treasury bills. This is a safe
place to park your money. You won't get great returns, but you won't have to worry about
losing your principal.The typical return is twice the amount you would earn in a regular
checking/savings account and a little less than the average certificate of deposit (CD). 

Bond/Income Funds:
Income funds are named appropriately: their purpose is to provide current income on a steady
basis. When referring to mutual funds, the terms "fixed-income," "bond," and "income" are
synonymous. These terms denote funds that invest primarily in government and corporate
debt. While fund holdings may appreciate in value, the primary objective of these funds is to
provide a steady cash flow to investors. As such, the audience for these funds consists of
conservative investors and retirees.

Bond funds are likely to pay higher returns than certificates of deposit and money market
investments, but bond funds aren't without risk. Because there are many different types of
bonds, bond funds can vary dramatically depending on where they invest. For example, a
fund specializing in high yield junk bonds is much more risky than a fund that invests in
government securities. Furthermore, nearly all bond funds are subject to interest rate risk,
which means that if rates go up the value of the fund goes down.

Balanced Funds:
The objective is to provide a balanced mixture of safety, income and capital appreciation.The
strategy of balanced funds is to invest in a combination of fixed income and equities. A
typical balanced fund might have a weighting of 60% equity and 40% fixed income. The
weighting might also be restricted to a specified maximum or minimum for each asset class.

Equity Funds:
Funds that invest in stocks represent the largest category of mutual funds. Generally, the
investment objective of this class of funds is long-term capital growth with some income.
There are, however, many different types of equity funds because there are many different
types of equities. A great way to understand the universe of equity funds is to use a style box,
an example of which is below.
Open ended Fund
An open ended mutual fund is one that is available for subscription and repurchase on a
continuous basis. These funds do not have a fixed maturity period.

Close ended Fund

A close ended mutual fund has a stipulated maturity period ex: 3-5 yrs. The fund is open for
subscription only during a specific period at the time of launch of scheme.

Equity linked Mutual Funds

These funds invest in shares of companies that are listed on the stock exchanges. Depending
upon the sub-category of equity class, we may define them as:

Large-cap Funds: Large-cap funds are, typically, the least risky funds. These companies are
among the least volatile companies as they are mostly in mature businesses. You must
allocate highest to this category of investment.

Mid- and small-cap funds: These funds are riskier than large-cap funds. They invest in
small-sized companies that are in their growing stages. Since these companies are in their
growing stages, they can get volatile in an uncertain market. These are high-risk companies;
they typically rise more than large-cap funds in rising markets, but fall more than large-cap
companies in falling markets.

Sector/thematic funds: While sector funds invest in one or two sectors, thematic funds
invest in a bunch of sectors that are woven by a common theme, such as infrastructure,
consumer spending, fast-moving consumer goods and so on. These are the riskiest of all types
of funds as their portfolios are typically very concentrated.

ETF (Exchange Traded Fund):

An ETF is a basket of stocks that reflects the composition of an index, like S&P CNX Nifty
or CNX Bank index. The ETFs trading value is based on the net asset value of the underlying
stocks in the target index. Think of it as a Mutual Fund that you can buy and sell in real time
at a price which changes throughout the day.
ETFs have not enjoyed the kind of popularity that the conventional mutual funds enjoy.

Reasons being,

 The lack of understanding of the concept of ETF amongst the general investor. 
 ETFs by nature track a certain index (e.g. Nifty or the Bankex). Hence, the returns
one can expect from ETFs will be equal to the rise in the index. Whereas, India is a
growing market and hence offers huge opportunities in the non-index shares too.
Therefore, it is not difficult for an active fund manager to beat the index and offer
better returns. As such ETFs (and index-funds too, by that logic) have comparatively
negligible AUMs.

However, two things make ETFs popular in India

• One, is that as market valuations become fairly or over-valued, it will become more &
more difficult to beat the index. Then index-based funds (both conventional MFs &
ETFs) may become a better option than actively-managed funds

• Gold ETFs or Real-Estate ETFs have no comparable product in the conventional MF

sector, and hence become the only MF route to invest in such markets

How Does An ETF Work?

In a normal fund we buy/sell units directly from/to the AMC. First the money is collected
from the investors to form the corpus. The fund manager then uses this corpus to build and
manage the appropriate portfolio. When you want to redeem your units, a part of the portfolio
is sold and you get paid for your units. The units in a conventional MF are, therefore, called
‘in-cash’ units.

But in ETF, we have something called the ‘authorized participants’ (appointed by the AMC).
They will first deposit all the shares that comprise the index (or the gold in case of Gold ETF)
with the AMC and receive what is called the ‘creation units’ from the AMC. Since these units
are created by depositing underlying shares/gold, they are called ‘in-kind’ units.

These creation units are a large block, which are then split into small units and accordingly
bought/sold in the open market on the stock exchange by these ‘authorized
participants’.Therefore, technically every buy and sell need not change the corpus of an ETF
unlike a conventional MF.
However, as and when there is more demand, these authorized participants deposit more
shares with the AMC and get more creation units to satisfy the demand. Or if there is more
redemption, then they give back these creation units to the AMC, take back their shares, sell
them in the market and pay the investor.

All this may seem to be a bit complicated and time-consuming. But, in effect, it is all system
driven and hence happens on real-time basis with minimal effort & cost.

ETF Creation
The creation and redemption process for ETF shares is almost the exact opposite of that of
mutual fund shares. When investing in mutual funds, investors send cash to the fund
company, which then uses that cash to purchase securities and in turn issue additional shares
of the fund. When investors wish to redeem their mutual fund shares, the shares are returned
to the mutual fund company in exchange for cash. The creation of an ETF, however, does not
involve cash.

The process begins when a prospective ETF manager (known as a sponsor) files a plan with
the SEC to create an ETF. Once the plan is approved, the sponsor forms an agreement with
an authorized participant, generally a market maker, specialist or large institutional investor,
who is empowered to create or redeem ETF shares. (In some cases, the authorized participant
and the sponsor are the same).

The authorized participant borrows shares of stock, often from a pension fund, and places
those shares in a trust, and uses them to form creation units of the ETF. Creation units are
bundles of stock varying from 10,000 to 600,000 shares, but 50,000 shares is what's
commonly designated as one creation unit of a given ETF. Then, the trust provides shares of
the ETF - which are legal claims on the shares held in the trust (the ETFs represent tiny
slivers of the creation units) - to the authorized participant. Because this transaction is an in-
kind trade - that is, securities are traded for securities (the authorized participant provides
shares of stock to the trust and the trust in turn provides ETF shares to the authorized
participant) and no cash changes hands - there are no tax implications. Once the
authorizedparticipant receives the ETF shares, the shares are then sold to the public on the
open market just like shares of stock.
When ETF shares are bought and sold on the open market, the underlying securities that were
borrowed to form the creation units remain in the trust account. The trust generally has little
activity beyond paying dividends from the stock held in the trust to the ETF owners and
providing administrative oversight because the creation units are not impacted by the
transactions that take place on the market when ETF shares are bought and sold.

Redemptions
When investors want to sell their ETF holdings, they can do so by one of two methods. The
first is to sell the shares on the open market. This is generally the option chosen by most
individual investors. The second option is to gather enough shares of the ETF to form a
creation unit and then exchange the creation unit for the underlying securities. This option is
generally only available to institutional investors due to the large number of shares required
to form a creation unit. When these investors redeem, the creation unit is destroyed and the
securities are turned over to the redeemer. The beauty of this option is in its tax implications
for the portfolio.

We can see these tax implications best by comparing the ETF redemption to that of mutual
fund redemption. When mutual fund investors redeem shares from a fund, all shareholders in
the fund are affected by tax burden because to redeem the shares, the mutual fund may have
to sell the securities it holds, realizing the capital gain, which is subject to tax. Also, all
mutual funds are required to pay out all dividends and capital gains on a yearly basis. So even
if the portfolio has lost value that is unrealized, there is still a tax liability on the capital gains
that had to be realized because of the requirement to pay out dividends and capital gains.

ETFs minimize this scenario by paying large redemptions with shares of stock. When such
redemptions are made, the shares with the lowest cost basis in the trust are given to the
redeemer. This increases the cost basis of the ETF's overall holdings, minimizing capital
gains for the ETF. It doesn't matter to the redeemer that the shares it receives have the lowest
cost basis because the redeemer's tax liability is based on the purchase price it paid for the
ETF shares, not the fund's cost basis. When the redeemer sells the shares of stock on the open
market, any gain or loss incurred has no impact on the ETF. In this manner, investors with
smaller portfolios are protected from the tax implications of trades made by investors with
large portfolios.
Advantages of ETF
 Buy and sell just like a share
 Buy and sell at real time prices
 One can put limit orders
 Delivery in your DEMAT account
 Minimum trading lot just one unit
 Exposure with small sum of money
 Lower expense ratio

Statistical tools used for Research:

Calculation of NAV:
The most important part of the calculation is the valuation of the assets owned by the Fund.
Once it is calculated, the NAV is simply the net value of assets divided by the number of
units outstanding. The detailed methodology for the calculation of the net asset value is given
below.
 The net asset value is the actual value of a unit on any business day NAV is the
barometer of the performance of the scheme.
 The net asset value is the market value of the assets of the scheme minus its liabilities
and expenses.
 Per unit NAV is the net asset value of the scheme divided by the number of the units
outstanding on the valuation date.

Return:
Return on a typical investment consists of two components. The basic is the periodic cash
receipts (or income) on the investment, either in the form of interest or dividends. The second
component is the change in the price of the assets-commonly called the capital gain or loss.
This element of return is the difference between the purchase price and the price at which the
assets can be or is sold; therefore, it can be a gain or a loss.
The return has been calculated as under:

Portfolio return:

Where,Rit is the difference between Net Asset Values for two consecutive day’s dividend by
the NAV of the preceding day.

Market return:

Where,Rmt is the difference between market indices of two consecutive day’s dividend by the
market index for the preceding day

Beta
The extent to which the fund returns are impacted by the market returns is measured by the
beta co-efficient. A fund with higher beta is more risky than one with lower beta. It measures
the systematic risk and shows how prices of securities respond to the market forces. It is
calculated by relating the return on a security with return for the market. The beta relates the
volatility of a single security to the volatility of the market as a whole.

If β that is greater than 1 means that the fund is more volatile than the benchmark index,
while a β of less than 1 means that the fund is less volatile than the market index. A fund with
a β very close to 1 means the fund’s performance closely matches the index. If β is zero then
the risk is almost nil. A fund with a negative β moves in the direction opposite to that of the
market.

= Covar / σm2

Where, Covariance (covar) is the average of the products of deviations for each data point
pair. And, covar is calculated as:

σm2 = Market Variance

Standard Deviation
Standard deviation is one of the commonly used statistical parameter to measure total
risk. It is used to measure the variability of return i.e. the variation between the actual and
expected return. Since the markets are volatile, the returns fluctuate every day. High S.D
implies high volatility and a low S.D implies low volatility for a fund. It is calculated using
the formula.

Sharpe’s Index
Sharpe index is a measure of the risk premium of the portfolio relative to the total
amount of risk in the portfolio. Higher Sharpe ratio of a fund means that these returns have
been generated taking lesser risk. In other words, the fund is less volatile and yet generating
good returns.

Where, = The Sharpe ratio

= The total risk (S.D.)

= The average portfolio return

= The average risk free rate

Treynor’s Index
The Treynor ratio also called reward-to-volatility ratio relates the excess return over
the risk-free rate to the additional risk taken.However the systematic risk is usedinstead of the
total risk. Positive and high Treynor's Index shows a superior risk-adjusted performance of a
fund, a Negative and low Treynor's Index indicates an unfavorable performance.
Where, = Treynor ratio

= the average portfolio return

= the average risk free rate

= the slope of the characteristic line during the time period

Jensen’s Performance Index

Where, = average portfolio return

= average risk free rate

= the slope of the characteristic line during the time period

= average market return

2.3Methodology Adopted:

Descriptive research also known as statistical research, describes data and

characteristics about the population or phenomenon being studied. It is a fact finding
investigation. In descriptive research, definite conclusions can be arrived at, but it does not
establish a cause effect relationship. This research is used for this project as the study is based
on past data taken from NSE website.

Sources of data
For the purpose of project, the data required is collected purely from secondary data sources.
Secondary data sources are found to be most suitable as they are more reliable and accurate
and would also provide all the information necessary for the analysis.

All the data has been collected through secondary sources only
 1. Web site = moneycontrol.com, nseindia.com, googlefinance.com
2. Various books and papers.

2.4 Literature Review

K.P. Sivakumar, Dr. S. Rajamohan (2010) examined the performance of mutual fund
players based on Private and Public sector participants. The study revealed that there is a
significant contribution by all the participants for the growth of the mutual fund industry in
India. The performance of mutual funds was analyzed from 1998-99 to 2008-09 by taking
into consideration of resource mobilization, the study also found that the private participants
play a greater role in resource mobilization compared to those of public sector. This study
indicated that there is a significant difference between the quantum funds mobilized by
Public sector with or without UTI. Hence it proved that the UTI has a greater role in
performance of mobilization of funds.

Ravi Shukla and Sandeep Singh (1997) evaluated the Investment Performance of the U.S.
based global equity mutual funds. The study found that the global equity funds are superior
performers when compared to the global benchmark. By considering the data for the period
of January 1988 to March 1995, the study revealed that the U.S. domestic equity funds
outperformed the global funds in terms of total as well as risk adjusted returns. Based on the
traditional performance evaluation methods, the study indicated that the global funds provide
superior returns during the months when the U.S. domestic market performs poorly.
Therefore if the U.S. investors have the ability to forecast the market, they can switch to the
global funds during the downturn in the domestic market.

Martin Eling, Roger Faust (2009) examined the performance of hedge funds and traditional
mutual funds. The study analyzed the data from 2001-2009 and found that the value provided
by hedge funds, especially compared to traditional mutual fund active in emerging markets.
By using existing performance measurement models plus a new asset style factor model to
identify the return sources and the alpha, revealed that some hedge funds generate significant
positive alpha, whereas most traditional mutual funds do not outperform benchmarks. The
study also found those hedges funds are more active in shifting their asset allocation and has
high degree of freedom in their investment style are the difference in performance.

M. Jayadev (1996) carried out a research on Mutual fund performance with respect to
growth oriented funds for the period of 21 months from June 1992 to March 1994 in terms of
diversification, market timing and selectivity, it is found to be highly diversified fund with
high diversification, reduced total risk of the portfolio. The study showed that the growth
oriented fund does not outperform the benchmark index. Jayadev indicated that the fund
managers of growth funds are found to be poor in terms of their ability of market timing and
selectivity and suggested fund managers can earn better returns by adopting market timing
strategy and selecting the underpriced securities. The study concluded that, the growth
oriented funds have not performed better in terms of total risk and the funds are not offering
advantages of diversification and professionalism to the investors.

SharadPanwar and Dr. R. Madhumathi (2006) carried out a study on public sector and
private sector sponsored mutual funds to investigate the difference in characteristics of assets
held, and portfolio diversification for the period of May, 2002 to May, 2005. The study found
that public-sector sponsored funds do not differ significantly from private – sector sponsored
funds in terms of average returns. However, the study showed that there is a statistical
difference between three classes of public sector sponsored; private sector Indian sponsored
and private sector foreign sponsored mutual funds in terms of average standard deviation,
average variance and average co-efficient of variation. The result of this study revealed that
private sector Indian sponsored mutual funds outperformed both public-sector sponsored and
private sector foreign sponsored mutual funds.

Dr. Zakri Y. Bello (2009) investigated the performance of U.S. domestic equity mutual
funds during recessions of 1990 and 2001 and during the 12 months following each
recession. He found that common stocks with small capitalization in the ensuing 12 months
from the end of a recession of 1990, but produced disappointment results after the recession
of 2001. The study pointed out that the rate of return on common stocks, and hence on stock
mutual funds, during the two recessions was completely different. With regard to the
recession of 1990, stock mutual fund performance was higher in the post-recession period.
The result of this study showed the funds that held small capitalization stocks earned higher
returns than the other categories during the 12 months after the recession period.

C. Edward Chang, H. Doug Witte (2010) examined the performance of socially responsible
funds in the U.S. mutual fund industry for the fifteen years. This paper empirically compared
operating characteristics and performance measures of SRFs relative to category averages in
the U.S. mutual fund industry. The operating characteristics were examined by expense ratio,
annual turnover rates and tax cost ratio. The performance measures include conventional risk,
return and risk – adjusted return measures such as Multi factor model and CAPM model. The
result of this study revealed that SRFs have had a relative advantage in terms of lower
expense ratios, lower annual turnover rates, lower tax cost ratios and lower risk, SRFs also
exhibited lower return and two risk- adjusted return measures indicate SRFs have inferior
reward to risk performance. This study also proved that domestic stock SRFs has not
generated competitive returns relative to conventional funds in the same categories over the
past 10-15 years. SRFs in balanced fund and fixed income categories especially during 2007-
2010, have performed better than the category averages with lower risk, higher returns and
high risk adjusted returns. Hence this study suggested that the costs of socially responsible
investing are not homogenous.

Manish Saboo (2008) studied the performance of 22 mutual funds based on data pertaining
to the period 2000-2007. Funds were evaluated by using measures like Sharpe ratio, Treynor
ratio, Jensen Alpha, information ratio, expense ratio etc. The results revealed that out of 22
funds only 7 portfolios performed worse and the remaining are performing better than the
market portfolio. Systematic risk for each of the funds (beta) was found to be very low. A
positive alpha for most of the funds indicated that the manager generated a return more than
what was expected given the portfolios risk level. Based on the risk-adjusted measure most of
the funds outperformed the market portfolio. These measures used in this study lead to
similar results with high rank correlation between the measures.
SoumyaGuha Deb, Ashok Banejee(2008) evaluated the relative performance of equity
mutual funds in India over the period from January 2000 to June 2005 with respect to three
performance indicators, namely, raw returns, the tracking error they generate over their
benchmarks and the information ratios. The study also tested the persistence in their
performance with respect to the indicators across time. Sample of 62 equity mutual fund
schemes were considered for this study. The result of this study showed that the funds have
generated positive average weekly returns during the sample period. The average weekly
information ratio was also positive and the funds have done well with respect to all three
performance measures. The evidence of persistence was most prominent over an evaluation
horizon of one year and less when the time horizon is three months or six months and it
disappears completely when the horizon is extended to a period of more than thirty months.

Adjei Frederick (2009) found no significant difference between the performances of the
ETFs and the S&P 500 index. He found weak evidence of performance persistence on both
the half-yearly and the yearly horizons. Johnson (2009) reported the existence of tracking
errors between foreign ETFs and the underlying home index returns. Blitz David et al. (2010)
investigated the performance of index mutual funds and the ETFs that are listed in Europe.
They found that European index funds and ETFs underperform their benchmarks by 50 to
150 basis points per annum. William (2009) found the existence of tracking errors between
foreign ETFs and the underlying home index in US.

Blitz David and Huij (2011) evaluated the performance of ETFs that provide passive
exposure to global emerging markets (GEM) equities and found that GEM ETFs exhibit
higher tracking error. Houweling (2011) found that treasury ETFs were able to track their
benchmark but investment grade corporate bond ETFs and high yield corporate bond ETFs
underperform their benchmarks. Charupat&Miu (2011) analyzed the performance of leverage
ETFs, and concluded that price deviations are small among leverage ETFs and that price
volatility is more, as a result of rebalancing, at the end of the day.

Patrick (2011) found that in Hong Kong the magnitude of tracking errors is negatively
related to the size but positively related to the expense ratio of the ETFs. He further
commented that replicating the performance of underlying securities involves more risk,
since they have a higher tracking error than in the US and Australia.

2.4Limitations of the Study:

 Time was one of the limiting factors for study.

 Collecting historical NAV is very difficult.

 Selection of the schemes for the study is also a very difficult task because of the wide
variety of schemes.

 Various schemes of the funds being used in the project are limited.
 CHAPTER 3
INDUSTRY AND COMPANY PROFILE

3.1INDUSTRY PROFILE
Stock market is a place where trading of company stocks, other securities and derivatives
takes place. Stock exchanges are corporations or mutual organizations, which are specialized
in trading stocks and securities.

A stock market is a public market for the trading of company stock and derivatives at an
agreed price; these are securities listed on a stock exchange as well as those only traded
privately. The stock market is one of the most important sources for companies to raise
money. This allows businesses to be publicly traded, or raise additional capital for expansion
by selling shares of ownership of the company in a public market.

First stock exchange Mumbai (Bombay) stock exchange is India. Found in 1875 with more
than 6,000 stocks being listed. In India there are total 23 stock exchanges operating across the
country. The national stock exchange (NSE) situated in Mumbai the small and medium sized
companies can list their stocks in over the counter exchange of India (OCTEI).

The securities and exchange board of India (SEBI) regulates the functioning of capital market
and protects the interests of investor. It is located in Mumbai some functions of SEBI are as
follows:-
 Regulations of working in stock exchanges and other securities markets
 Registration and regulation of the operation of collective investment plans, including
mutual funds
 Inhibition of fallacious and unfair business practices in the securities markets.
 Controlling accomplishment of shares and takeover of companies

Stock exchange means anybody of individuals, whether incorporated or not, constitutes for
the purpose of regulating or controlling the business of buying selling or dealing in securities.
These securities include:
 Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like
nature in or of any incorporated company of other body corporate
 Government securities and
 Rights or interest in securities

The Indian retail brokerage industry consists of companies that primarily act as agents for the
buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a
commission or transaction fee or Brokerage basis.

An agent that charges a fee or commission for executing buys and sells orders submitted by
an investor. The firm that acts as an agent for a customer, charge the customer the
commission for its service. Roles similar to that of a stockbroker include investment advisor,
financial advisor and probably many others. A stockbroker may or may not be also an
investment advisor.A stockbroker is a regulated professional broker who buys and sells
shares and other securities through market makers or Agency Only Firms on behalf of
investors.

Typically, a broker who receives an order from a customer will communicate with a company
employee located at a particular exchange, who will execute the order at the exchange and
report details of the transaction to the broker. Customers typically keep their securities in an
account with the broker. Brokers charge customers commissions for conducting transactions
and fees for maintaining their accounts.
Some of the main characteristics of the brokerage industry include growth in e-broking,
decline in brokerage fees and growing derivative market and many more. There are several
national as well as local players in stock trading services which are providing various services
to their customers like online trading, portfolio management system, stock broking etc.

New forms of trading including T+2 settlement system, dematerialization etc. are
strengthening the retail brokerage market and attracting foreign companies to enter the Indian
industry various alternative forms of investment including fixed deposits with banks and post
offices etc. act as substitutes to retail broking products and services.

HISTORY OF STOCK MARKET IN INDIA

There are 23 recognized stock exchanges in India Bombay Stock Exchange, National Stock
Exchange, Ahmadabad Stock Exchange, Bangalore Stock Exchange, Bhubaneswar Stock
Exchange, Calcutta Stock Exchange, Delhi Stock Exchange, Guwahati Stock Exchange,
Hyderabad Stock Exchange, Jaipur Stock Exchange, Ludhiana Stock Exchange, Cochin
Stock Exchange, Coimbatore Stock Exchange, Madhya Pradesh Stock Exchange, Magadh
Stock Exchange, Madras Stock Exchange, Mangalore Stock Exchange Meerut Stock
Exchange OTC Exchange Of India, Pure Stock Exchange, Saurashtra Kutch Stock
Exchange, Uttar Pradesh Stock Exchange, Vodadara Stock Exchange.BSE and NSE represent
themselves as synonyms of Indian stock market.

Bombay Stock Exchange:

The Bombay Stock Exchange Limited is the oldest stock exchange not only in the country,
But also in Asia with a rich heritage of over 133 years of existence. It traces its history to the
1850s, when stockbrokers would gather under banyan trees in front of Mumbai's Town Hall.
The location of these meetings changed many times, as the number of brokers constantly
increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an
official organization known as 'The Native Share & Stock Brokers Association'.It was
established in the year 1875 and became the first stock exchange in the country to be
recognised by the government. In 1956, BSE obtained a permanent recognition from the
Government of India under the Securities Contracts (Regulation) Act, 1956.The history of
Indian stock trading starts with 318 persons taking membership in native share and stock
brokers association, know called as Bombay stock exchange or BSE in short.BSE stands first
to National stock exchange in terms of popularity.

National Stock Exchange:

The National Stock Exchange of India was promoted by leading financial institutions at the
behest of the Government of India, and was incorporated in November 1992 as a tax-paying
company. In April 1993, it was recognized as a stock exchange under the Securities Contracts
(Regulation) Act, 1956.NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment of the NSE commenced
operations in November 1994, while operations in the Derivatives segment commenced in
June 2000.

Capital market reforms in India and the launch of the Securities and Exchange Board of India
(SEBI) accelerated the incorporation of the second Indian stock exchange called the National
Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the
largest stock exchange in India.

3.2 COMPANY PROFILE

3.2.1 OVERVIEW AND COMPANY BACKGROUND AND MANAGEMENT

AnandRathi is a leading full service investment bank founded in 1994 offering a wide range
of financial services and wealth management solutions to institutions, corporations, high-net
worth individuals and retail. The firm has rapidly expanded its footprint to over 700
locations across India with international presence in Dubai, Hong Kong & New York,
founded by Mr. AnandRathi and Mr. Pradeep Gupta, the group today employs over 3,500
professionals throughout India and its international offices.

The firm’s philosophy is entirely client centric, with a clear focus on providing long term
value addition to clients, while maintaining the highest standards of excellence, ethics and
professionalism. The entire firm activities are divided across distinct client groups:
Individuals, Private Clients, Corporate and Institutions. AnandRathi has been named The
Best Domestic Private Bank in India by Asiamoney in their Fifth Annual Private Banking
Poll 2009. The firm has emerged a winner across all key segments in Asiamoney’s largest
survey of high net worth individuals in India. In year 2007 Citigroup Venture Capital
International joined the group as a financial partner.

AnandRathi has been voted #1 by money polls for 2 consecutive years:

 2009 - No.1 Domestic private bank
 2010 - No.1 Domestic Private Bank
 Our client base is a strong testimony to our experience in managing wealth large
families and institutions.
 Easy and quick access to capital through our existing client relationships which
includes promoters of family owned business, top management of leading companies,
Professionals, Corporate treasuries and trusts.
 Credited with developing and selling some of the most innovative products in the
market.
 Strong retail distribution network: Nationwide reach
 AnandRathi’s retail footprint extends across over 700 locations across India.
 Manage more than 3.5 lakhs client accounts across the country, with a daily turnover
of around INR 20 billion.
 Strong product portfolio which induces equities. Derivatives, commodities, IPO’s
mutual funds, life and non-life insurance depository services and bonds.
 Leading distributor of IPO, insurance, mutual funds and third party products.
 We have been ranked 8th amongst all brokers for amount procured in IPO’s in India
during January to June 2010 by prime data base. The firm’s philosophy is entirely client
centric, with a clear focus on providing long term value addition to clients, while
marinating the highest standards of excellence, ethics and professionalism.

COMPANY BACKGROUND AND MANAGEMENT

On corporation in 2005, FCH focused on three business lines: investment advisory, asset
management and wholesale financing. In 2010, it decided to focus on the financing business.
As a result, mile stone capital. Its advisory arm was carved out. That year V. Vaidyanathan
stepped in as managing director to implement the change in strategy towards emerging as a
diversified retail NBFC. With its network of 173 branches and well established in the south
and the north, FCH is creating a niche in India’s urban regions.

3.2.2 MILESTONE, TOP MANAGEMENT AND NATURE OF BUSINESS

Top Management

Board of Directors

Mr.AnandRathi Mr. Pradeep Gupta

Mr. Amit Rathi
Vice Chairman Group Chairman Managing Director

Managing director V. Vaidyanathan was previously MD & CEO of ICICI prudential life
insurance and executive director on the ICICI bank board. He was part of the core team that
set up ICICI bank’s retail business between 2000 and 2009. Also chairman of ICICI home
Finance and served on the board of ICICI Lombard General Insurance and CIBIL, India’s
first credit bureau. Heading the consumer business, ApulNayyar has been with FCH since
October 10. Prior to this, he was ED & CEO of India info line investment services and India
info line housing finance. Overall, he has 14 years’ experience in financial services head of
wholesale credit, ShaileshShirali joined FCH in Jul’08. Prior to this, he was MD – global
structured finance and investments at DSPML capital, India. Overall, Shailesh has post-
qualification experience of over 17 years in financial services. Chief financial officer
AshokShinkar was earlier on the board of Wanbury, a Pharma company. He was also
associated with SSKI corporate finance as vice-president and handled corporate finance
advisory. Chief risk officer Pankaj Sanklecha has 15 years’ experience in retail and SME
banking, having held leadership positions across risk and business. Prior to FCH, he was with
standard Chartered bank for seven years where he was head of credit for retail lending,
managing a portfolio of $2.5bn.

Nature of Business
AnandRathi share and stock brokers LTD (AnandRathi) is a Mumbai-based stock broking
firm which was established in 1994. The company was earlier known asnavratan capital &
securities Pvt. Ltd. AnandRathi is a member of BSE and NSE and pirates in the cash as well
as derivative segment in both of these exchanges. It also provides depository services and is
registered member of NSDL and CDSL. The various other products and services offered by
the company include investment banking, margin funding distribution of mutual funds, WMS
and research, the company catered largely to retail clients. Who contributed approximately
81% to the company’s trading volume during CY09. AnandRathi is also a member of DGCX
and affiliated with London metal exchange (LME) and securities and futures commission
(SFC).

3.2.3 PROMOTERS, FEATURES, BENEFITS, MISSION, VISION, QUALITY

POLICY:
Promoters:
Promoter is offered to promoters of the companies against their shareholding in their
respective company. With the help of this facility the promoter can increase the shareholding
or use in expansion and diversification of the business.

Features:
 Loan available against existing promoter holding
 Margin – 50% - 75% (depending on the risk profile of the business and the stock)
 Tenor – 1 to 3 years
 Loan Amount – INR 1 Cr to INR 5 Cr
 Attractive Interest Rates
 Simple Documentation

Benefits:
 Increase promoters holding in the business with the use of existing stake
 Liquidity requirement for expansion and diversification of business
 Easier and faster processing
 Promoters do not have to liquidate their holdings to meet short-term cash
requirements
 Promoter can increase their stake through buying at lower price
Mission:
“To be India’s first domestic company providing complete financial services solution across
globe”

Vision:
“To be a shining example as a leader in innovation and the first choice for clients and
employees”

Quality policy:
 Improving asset quality is the key behind decent performance of bank
stocks in a falling interest rate environment.
 Credit to improve; soft inflation to spur deposits.
 A likely accommodative monetary policy by RBI (100bps monetary
easing in CY13), expected recovery in infra credit demand and sustained improvement in
household leveraging could push bank credit growth to 16% in FY14 and 15% in FY15.
 Moreover, falling inflation would improve real interest rates, which in
turn, could channel both household and corporate savings to bank term deposits.
 Estimated deposit growth at 17% in FY14 and 16% in FY15.
 NIM gains restricted by stretched credit-to-deposit. In a low real
interest rate environment, banks would have limited flexibility to lower deposit rates.

2.2.4 AWARDS AND RECOGNITION, PRODUCTS/SERVICES, AREA OF

OPERATION

AWARDS AND RECOGNITION:

Best Branch – Overall Brokerage - Bellary Branch Rest Of Karnataka
Pan India - First Place
Best Branch – Overall Brokerage - Warangal Branch Andhra Pradesh
Pan India - Second Place
Best Branch – Overall Brokerage - Jammu Bahu Plaza Branch Punjab & Jammu
Pan India - Third Place Kashmir
Best Branch – Equity - Pan India - Jaipur Retail 1 Branch Rajasthan
First Place
Best Branch – Equity - Pan India - Vijaynagar Branch Bangalore
Second Place
Best Branch – Equity - Pan India - Jammu Bahu Plaza Branch Punjab & Jammu
Third Place Kashmir
Best Branch – Commodity - Pan Warangal Branch Andhra Pradesh
India - First Place
Best Branch – Commodity - Pan Bellary Branch Rest Of Karnataka
India - Second Place
Best Branch – Commodity - Pan Nizamabad Branch Andhra Pradesh
India - Third Place
Best Branch – Currency - Pan India Chandigarh Branch Punjab & Jammu
- First Place Kashmir
Best Branch – Currency - Pan India Nasik MG Road Branch Rest of Maharashtra
- Second Place
Best Branch – Currency - Pan India Howrah Branch East India
- Third Place
Best Branch – Cross Sell - Pan Goa Branch Rest Of Karnataka
India - First Place
Best Branch – Cross Sell - Pan Tumkur Branch Rest Of Karnataka
India - Second Place
Best Branch – Cross Sell - Pan Allahabad Branch UP &Uttranchal
India - Third Place
Best Branch – Franchisee Revenue Noida Branch Delhi & NCR
- Pan India - First Place
Best Branch – Franchisee Revenue Nasik MG Road Branch Rest of Maharashtra
- Pan India - Second Place
Best Branch – Franchisee Revenue Jammu Bahu Plaza Branch Punjab & Jammu
- Pan India - Third Place Kashmir
Best Branch – Revenue Rest of Udaipur Branch Rajasthan
Maharashtra New Client acquisition
- Pan India - First Place
Best Branch – Revenue Rest of DadarW Branch Mumbai
Maharashtra New Client acquisition
- Pan India - Second Place
Best Branch – Revenue Rest of Wardha Branch Central India
Maharashtra New Client acquisition
- Pan India - Third Place
Best Branch – Revenue from New Ajani New Branch Central India
Client acquisition - Pan India - First
Place
Best Branch – Revenue from New Gulbarga Branch Rest Of Karnataka
 Client acquisition - Second Place
Best Branch – Revenue from New Gandhibazar Branch Bangalore
Client acquisition - Pan India -
Third Place
Best Branch – Franchisee Revenue Noida Branch Delhi
- Pan India - First Place
Best Branch – Franchisee Revenue CG Road Branch Gujarat
- Pan India - Second Place
Best Branch – Franchisee Revenue Surat Own Branch Gujarat
- Pan India - Third Place
Best Branch – Cross Sell - Pan Market Yard Branch ROM
India
- First Place
Best Branch – Cross Sell - Pan Tumkur Branch Rest Of Karnataka
India - Second Place
Best Branch – Cross Sell - Pan Begum Bazar Branch Hyderabad
India - Third Place

PRODUCTS/SERVICES PROFILE
 DEMAT Account, Trading Account
 Mutual Funds
 Equities
 Derivatives
 Commodities, Bonds
 Insurance
 Gold E Lock

SERVICE PROVIDED:
1. Equity & Derivatives Brokerage:
AnandRathi provides end-to-end equity solutions to institutional and individual investors.
Consistent delivery of high quality advice on individual stocks, sector trends and investment
strategy has established a competent and reliable research unit across the country.

Clients can trade through online on BSE and NSE for both equities and derivatives. They are
supported by dedicated sales and trading teams in trading desks across the country. Research
and investment ideas can be accessed by clients either through their designated dealers,
email, web or SMS.

2. Mutual Funds:
AnandRathi is one of India’s top mutual fund distribution houses. Their success lies in their
philosophy of providing consistently superior, independent and unbiased advice to their
clients backed by in-depth research. They firmly believe in the importance of selecting
appropriate asset allocations based on the client’s risk profile.

AR have a dedicated mutual fund research cell for mutual funds that consistently churns out
superior investment ideas, picking best performing funds across asset classes and providing
insights into performances of select funds.

3. Depository Services:
AR depository services provides with a secure and convenient way for holding your
securities on both CDSL and NSDL.AR depository services include settlement, clearing and
custody of securities, registration of shares and dematerialization. Also offer daily updated
internet access to holding statement and transaction summary.

4. Commodities:
AR commodities broking services include online futures trading through NCDEX and MCX
and depository services through CDSL. Commodities broking is supported by a dedicated
research cell that provides both technical as well as fundamental research. Our research
covers a broad range of traded commodities including precious and base metals, oils and
oilseeds, agriculture commodities such as wheat, chana, guar and sugar, jeera and cotton.In
addition to transaction execution, we provide our clients customized advice on hedging
strategies, investment ideas and arbitrage opportunities.

5. Insurance Broking:
As an insurance broker, AR provide to his clients comprehensive risk management
techniques, both within the business as well as on the personal front.Risk management
includes identification, measurement and assessment of the risk and handling of the risk of
which insurance is an integral part. The firm deals with both life insurance and general
insurance products across all insurance companies. Their guiding philosophy is to manage the
client’s entire risk set by providing the optimal level of cover at the least possible cost. The
entire sales process and products selection is research oriented and customized to the client’s
needs. They lay strong emphasis on timely claim settlement and post sales services.

OTHER SERVICES:
 Risk Management
 Due diligence and research on policies available
 Recommendation on a comprehensive i8nsurance cover based on client’s needs
 Maintain proper records of clients policies
 Assist client in paying premiums
 Continuous monitoring of client account
 Assist client in claim negotiation and settlement
AREAS OF OPERATION
AnandRathi financial services offers and provides services not only to regional, national but
also to international countries it has a strong and wide distribution network. We can find
offices of AnandRathi in 197 cities and 28 states and has several branches in Dubai, Bangkok
etc.

3.2.5 OWNERSHIP PATTERN, INFRASTRUCTURAL FACILITIES

Ownership pattern:
AnandRathi has an autocratic management system all strategic decisions and actions are
taken by owner of organization. New plans, services, branch opening decisions taken by top
management in entire AnandRathi service firm.
But in branch level they have democratic management system. It means all vital decisions
taken by branch management.

Infrastructural facilities:
 Dealing desk
 Land line phones
 Research team, equity team
 Sales talent
 Intellectual capital, specialized transactions

3.2.6 COMPETITORS INFORMATION

The Following are the Competitors information in detail to AnandRathi, it consider the sub
brokers, number of employees, number of branches, city and total terminals.

Company Name Total Sub No. of No. of City

Termin Broker Employe Branc
als s es h
A S Stock Broking & Management 15 NA 25 2 Mumbai
Private Limited
Action Financial Services (India) 18 25 31 10 Mumbai
Limited
Alankit Assignments Limited 650 60 700 20 New
Delhi
Anagram Securities Limited 999 964 1183 139 Mumbai
Angel Broking Limited 5081 2408 1800 66 Mumbai
Anush Shares & Securities Private 37 10 40 30 Chennai
Limited
Arcadia Share & Stock Brokers 191 121 150 60 Mumbai
Private Limited
Arch Finance Limited 16 NA 45 10 New
 Delhi
Zuari Investments Limited 31 NA 50 15 New
Delhi
Skyes& Ray Equities (India) 18 300 50 250 Mumbai
Limited
SKI Capital Services Limited 88 NA 60 18 New
Delhi
Bonanza Portfolio Limited 2177 536 1200 380 Delhi
UTI Securities Limited 270 150 575 35 Mumbai
India Info line Limited 970 NA 3858 540 Mumbai
India bulls Securities Limited 2700 NA 8922 475 New
Delhi
Bonanza Portfolio Limited 2177 536 1200 380 Delhi
IL&FS Investment Securities 661 NA 1600 288 Mumbai
Limited
ICICI Securities Limited 1051 587 1833 270 Mumbai

3.2.7 THE McKINSEYS 7’S MODEL WITH REFERENCE TO ANANDRATHI:

Structure
Structure

Strategy
Strategy System
System

Shared
Shared
Value
Value

Skills
Skills Style
Style

Staff
Staff

STRATEGY:
Set out the vision, mission, objective and major action plans and policies of the organization.
These set out the picture of the organization in the future typically spelling out the overall
corporate strategy, the Strategic business unit strategy and functional Strategies. It can also be
defined as the choice of direction and action that the company adopts to achieve its objective
in a competitive situation. It is the first step that the company has to take in leading its
organization to ladder of success. The major areas of Strategic Goals of ANANDRATHI are:

Major Description
Desired share of present and new markets, including areas in
1) Market Standing which new products are needed and service goals aimed at
building customer loyalty.
Innovation in products/ services as well as innovation in skill
2) Innovation
and activities required to supply them.
Supply, development and performance of manager’s
3) Human Resources
employee attitudes.
4) Financial Resources Sources of capital supply and how it will be utilized.

Physical facilities and how they will be utilized in providing

5) Physical Resources
services.

6) Productivity Efficient use of resources relatives to outcomes.

Responsibilities in such area as concern for community and

7) Social Responsibility
ethical behavior.

STRUCTURE:
Include policies and procedures that govern the way in which the organization acts within the
organization. It provides the frame work for relationship among different parts of the
organization. It sets out formal reporting relationships, mode of communication, their
respective roles and rules and regulation for carrying out different tasks. If it is not properly
defined it has a detrimental effect on the effective and efficient working because motivation
and morale is low, decision are delayed and are of poor quality the expenses rises, orders are
lost due to competition, lack of confidence etc.

Structure of any organization has to answer the following questions-

 What is basic structural form?
 How centralized versus decentralized is the organization?
 What is the relative status and power of the organization?

2.2.8 ORGANISATION CHART AND SWOT ANALYSIS:

Chart showing the Organization Structure of AnandRathi Financial Service Limited

HEAD OFFICE
Chairman

Regional Heads Zonal Heads

Regional Product
Heads
Sr. Regional Head Jr. Regional Head

Branch Manager Relationship

Back Office

Dealers Sales Team

SYSTEMS:
Systems in their frame work stands for the rules and regulations, procedures and practices
that must be allowed to carry out the tasks in the organization. A good system adds to the
efficient and effective working of the entrepreneur. At AnandRathi in Vijaynagar the
procedure followed is clear, transparent and not complicated.

The information systems at the various branches of AnandRathi are followed by submission
of MIS reports at end of their day to day activities. The activities of the front end operation
include:
 Client Advisory Services
 Processing of DEMAT account transactions.
 New issue promotions.
 Portfolio Management of NRI clients.
 Promotions activities for promotions of various funds (New Recommended ones).
 Finally MIS reporting of day to day transactions.

At the back office day to day operations include-

 Processing of various application forms of DEMAT account IPO’s and forwarding the
same to the Head office.
 Providing statement of account to the investors on request.
 Addressing requests for non-payment of sub broker’s commission.
 MIS reporting of day to day transactions.

The Total Quality Control System of AnandRathi has created principles about its quality
philosophy-
 Create constancy of purpose and improve services for long range needs rather than short
term profitability.
 Search continually problems in the system and improve processes.
 Encourage effective two way communication and other means to drive fear throughout
the organization and help people to work more productively.

The Electronic Data Processing (EDP) department of AnandRathi takes care of both offline
and online transactions. In the online transactions, online trading takes place using NEAT
software. It is connected to NSDL, CDSL, NSE and BSE and helps stock brokers to trade
online. The offline is mainly connected for the purpose of conversion of physical form of
shares to electronic form.

STYLE:
Style includes Leadership style of top management and overall operating style of the
organization. Style impacts the norms people follow and they work and interact with each
other and with customers.
 How does the top management make decisions – Participatory Vs Top Down?
 How do managers spend their time in informal meetings, informal conversations, etc.?

At AnandRathi, they follow a very in effable style of functioning.

 Managers, staff etc. are approachable (a perfect blend of formal and informal approaches)
 Personal attention to the project trainees helps in creating a good image in the eyes of the
public.
 Staff has very good informal conversations that develop a sense of loyalist, motivation,
dedication within the employees.
 Emergency meetings are held where top management and employees collectively
participate- targets for the week is set, responsibilities are delegated, suggestions are
invited.
 There is a good cordial relation between the management and the employees which shows
a participatory leadership style is observed.

STAFF:
The staffing procedure mainly includes how the organization has to look into its people, their
backgrounds, and competencies. Staff also includes the organization approaches to
recruitment, selection and specialization. How people developed, how recruits are trained,
socialized and integrated and how their careers are managed?
 At AnandRathi, there are around 2500 employees working across India.
 At AnandRathi, in Vijaynagar branch there are about 10 employees.
 The candidates are recruited from diverse fields of commerce like B.COM’s, MBA’s,
ICWA’s, CA’s and CFA’s, great opportunity for fresher’s and post graduates.
 They are involved in all the required meetings and activities.
 The Staff are given freedom to use their innovation and creative skills.
 Get together are held for staff members to socialize.
 Staff grievances are given a listening in a year.

SKILLS:
Include distinctive competencies that reside in the organization. These can be distinctive
competencies people, management practices, systems and technology. What new capabilities
the organization needs to develop, which one does it need to unlearn to compete in future.
This can be learnt through a SWOT Analysis.

The competent skills of the people include good communication and presentation skills,
strong academic record, consistent in the performance levels etc.

SHARED VALUES:
It refers to core or fundamental values that are widely shared in the organization and serve as
guiding principles that are important. These values have great meaning because they focus
attention and provide a broader sense and purpose. They also give a strong basis for stabilities
to the organization, in a rapidly changing environment by providing a basic meaning to
people working in the organization.
 Do people have a shared understanding of why a company exits?
 Do people have a shared understanding of the vision of the company?
 How do people describe the ways in which the company is distinctive?

At AnandRathi, which is primarily a client or investor oriented organization has embedded

this quality among all its member employees. The members work today towards the growth
and success of the unit. The employees share responsibility and protect the company’s name
and integrity. There is no sharing of confidential/important information with the outsiders.
There is collective responsibility and accountability on the part of its members. This can be
said as the shared values of the employees of the organization.

SWOT ANALYSIS
A SWOT analysis is a tool, used in management and strategy formulation. It can help to
identify the Strengths, Weaknesses, Opportunities and Threats of a particular
company.Strengths and weaknesses are internal factors that create value or destroy value.
They can include assets, skills, or resources that a company has at its disposal, compared to
its competitors. They can be measured using internal assessments or
external benchmarking.Opportunities and threats are external factors that create value or
destroy value. A company cannot control them. But they emerge from either the competitive
dynamics of the industry/market or from demographic, economic, political, technical, social,
legal or cultural factors.

SWOT Matrix
INTERNAL (S) (W)
Internal Internal Breadth of
Strengths Weakness Services
EXTERNAL
In line with its
(O)
SO Strategies WO Strategies client-centric
External
Opportunities Use ‘S’ to take Take advantage of philosophy, the
advantage of ‘O’ ‘O’ by overcoming
firm offers to its
‘W’
(T) clients the entire
External ST Strategies WT Strategies spectrum of
Threats Use ‘S’ to avoid ‘T’ Minimize ‘W’ and financial services
avoid ‘T’
ranging from
brokerage services in equities and commodities, distribution of mutual funds, IPOs and
insurance products, real estate, investment banking, merger and acquisitions, corporate
finance and corporate advisory.

Clients deal with a relationship manager who leverages and brings together the product
specialists from across the firm to create an optimum solution to the client needs.

In-Depth Research
Our research expertise is at the core of the value proposition that we offer to our clients.
Research teams across the firm continuously track various markets and products. The aim is
however common to go far deeper than others, to deliver incisive insights and ideas and be
accountable for results.

STRENGTHS
 Global parentage and expertise.
 Experience senior management.
 World class technology and infrastructure.
 Strict risk control systems.
 Fundamental and technical research.
 Multiple products under one roof.
 Company with well diversified portfolio.

WEAKNESSES
 Many competitors.
 No direct marketing strategy.
 Payment services are not good.
 No global reach.
 Weak brand name.

OPPORTUNITIES
 To grab the growing Indian market.
 Scope for taking its business overseas and going global.
 Scope for increasing its branch network especially in the important financial centers as
well as extending its physical presence in other parts of the country.
 Up gradation of the latest technology to give better and faster service to its clients

THREATS
 Global economic slowdown.
 The Indian capital market is fluctuating.
 The ever increasing and challenging neck-to-neck competition especially with those
established and existing reputed stock broking companies.
 Uncertainty of the market and volatility and fluctuations in the stock prices.
 Change in customer needs, preferences and taste.
 Threat from new entrants into the field of stock broking.

3.2.9 Growth and Future Prospectus

Growth is an every successful organization positive sign in the competitive world. In India
financial market is booming drastically and number of new investors is increasing. At present
India’s progress and growth measured on investment related option like equality shares,
mutual funds, commodities etc. and stock market is a barometer of the economy.

AnandRathi is providing competitive service to clients and day by day their clients spreading
across India. For growth they are conducting education meeting and conference for investors.
As investors Increases Company’s profit also increases.

AnandRathi growth aspect is increases of clients, motivating new investors providing new
DEMAT A/c, providing multi investment option in one floor. Increasing in day’s total
transaction and also AnandRathi company has bright prospective and is very dynamic
because financial market is so young and energetic. It helps to company’s growth and creates
mark in the financial market.
 3.2.10 Financial Statement Analysis

Figure showing Income Statement (Rs. in Millions)

Year end March FY 12 FY 13 FY 14

Net interest income 1815 2915 4078

NII growth (%) 108.3 60.6 39.9

Non-interest inc 1562 1812 2224

Total income 3377 4727 6302

Total inc growth (%) 52.6 40.0 33.3

Op. Expenses 1611 2151 2741

Operating profit 1766 2576 3561

Op. profit growth (%) 49.0 45.9 38.2

Provisions 268 523 703

PBT 1498 2053 2858

Tax 464 664 924

PAT 1034 1389 1934

PAT growth (%) 110.4 34.4 39.2

FDEPS (Rs./share) 16.0 21.4 29.8

DPS(Rs./share) 1.8 2.3 2.7

Figure showing the Balance Sheet (Rs. in Millions)
Year end March FY 12 FY 13 FY 14

Share capital 648 648 648

Reserves and Surplus 8125 9344 11076

Borrowings 39997 58071 77595

Current liabilities and provisions 3226 3871 4645

Deferred tax liabilities - - -

Total liabilities 51995 71933 93964

Advances 47425 66395 86313

Investments 1120 1219 1397

Cash and bank bal 2930 3609 5404

Fixed and other assets 521 710 851

Total assets 51995 71933 93964

No. of shares (m) 65 65 65

Borrowings growth (%) 52.4 45.2 33.6

Loans growth (%) 66.0 40.0 30.0

Analysis:
Based on the above income statement and Balance sheet of last five years, the company
financial statement analysis can be evaluated by using key ratio.
Key Ratios

Year end: March FY 12 FY 13 FY 14

NIM (%) 4.8 5.1 5.3

Other Income /total income (%) 46.2 38.3 35.3

Cost-income(Rs.) 47.7 45.5 43.5

Provision coverage (%) 94.4 85.3 85.4

Dividend payout (%) 11.3 10.7 9.0

Borrowings-loans (%) 84.3 87.5 89.9

Investment-deposit (%) - - -

Gross NPA (%) 0.1 0.4 0.5

Net NPA (%) 0.0 0.1 0.1

Balance Value(Rs.) 135.4 154.2 181.0

Adjustable BV(Rs.) 135.4 153.6 179.9

Current Asset Ratio (%) 17.8 14.2 12.7

ROE (%) 12.7 14.8 17.8

ROA (%) 2.3 2.2 2.3

Dividend Yield (%) 1.4 1.9 2.1

Interpretation
The total income are decreasing year over year from FY 12 to FY 14 at the same time cost-
income also decreasing year over year.
Dividend payout has been increasing in FY 12 later it has got decreasing drastically,
borrowings loans are increased in FY 12 later it has got decreasing due to managing the risk
and adjusting the profits. Gross Net Present Assent (NPA) has got decreasing;

Net NPA has maintaining consistency every year and adjustable balance value has got
increasing, Due to decrease in the NPA the Current Asset Ratio has got decreasing from
17.8% to 12.7% from FY 10 to FY 14.

Finally, Return on Equity (ROE) has increasing year over year; the investor is getting better
return on their investment. It will intend to invest in Stock Market, but the AnandRathi
Company Return on Asset (ROA) has got decreasing due to lack of maintenance.The
dividend Yield has been increasing year over year and the investors are getting good dividend
on the company profit.

5 Equity Mutual Funds Included In the Study:

1. Birla sunlife equity fund (G)
2. Canara Robeco equity diversified (G)
3. Franklin India Bluechip fund (G)
4. Tata ethical fund (G)
5. HSBC Unique Opportunities fund(G)

5 ETFs Included in the study:

1. SBI Gold ETF
2. UTI Gold ETF
3. Kotak Sensex ETF
4. R* Shares Banking ETF
5. GS Nifty ETF

CHAPTER 4

RESULTS, ANALYSIS AND DISCUSSIONS

Table 4.1: showing analysis of Return of BirlaSunlife equity fund (G) in India in 2009
Year Fund return Index return

2009 88.02 90.13

2010 13.73 13.67

2011 -28.73 -26.14

2012 35.89 30.39

2013 7.76 4.20

Average return 23.33 22.45

Graph 4.1: showing analysis of return of Birla Sunlife equity fund (G) in India in 2009

100 88.02
80
60
35.89
40
20 13.73 7.76
0
-20 2009 2010 2011 2012 2013
-40 -28.73

Interpretation 4.1:
The above table showing the analysis of return of Birla Sunlife equity (G) in India has
outperformed than its index value in the year 2010, 2011 and 2013. The fund has the highest
return of 88.02 in the year 2009 and it also has the lowest and negative return of -28.73 in the
year 2011.

Table 4.2: showing analysis of Return of CanaraRobeco equity diversified (G) in India

Year Fund return Index return

2009 92.35 90.13

2010 20.67 13.67

2011 -15.86 -26.14

 2012 31.32 30.39

2013 4.3 4.20

Average return 26.56 22.45

Graph 4.2: showing analysis of Return of CanaraRobeco equity diversified (G) in India

Interpretation:
The above table showing the analysis of return of CanaraRobeco equity diversified (G) in
India has outperformed than the index value in all the year. The fund has the highest return of
92.35 in the year 2009 and it also has lowest and negative return of -15.86 in the year 2011.

Table 4.3: showing analysis of Return of franklin India Bluechip fund (G) in India

Year Fund return Index return

2009 84.50 79.10

2010 22.17 17.86

2011 -17.72 -24.64

2012 26.57 25.70

 2013 4.26 8.98

Average return 23.96 21.4

Graph 4.3: showing analysis of return of Franklin India Bluechip fund (G) in India

Interpretation:
The above table showing the analysis of return of Franklin India Bluechip fund (G) in India
has outperformed than the index value in all the yearexcept in the year 2013. The fund has
highest return of 84.5 in the year 2009 and it has the lowest and negative return of -17.72 in
the year 2011.

Table 4.4: showing analysis of Return of Tata ethical fund (G) in India

Year Fund return Index return

2009 111.34 86.49

2010 19.34 14.05

2011 -16.33 -26.45

2012 25.67 31.34

 2013 16.37 3.41

Average return 31.28 21.77

Table 4.4: showing analysis of Return of Tata ethical fund (G) in India

Interpretation:
The above table showing the analysis of return of Tata ethical fund (G)in India has
outperformed than the index value in all the yearexcept in the year 2012. The fund has the
highest return of 111.34 in the year 2009 and it has the lowest and negative return of -16.33
in the year 2011.

Table 4.5: showing analysis of Return of HSBC Unique Opportunities fund (G) in India

Year Fund return Index return

2009 71.56 90.13

2010 21.95 13.67

2011 -27.69 -26.14

2012 31.64 30.39

 2013 -1.28 4.20

Average return 19.24 22.45

Graph4.5: showing analysis of Return of HSBC Unique Opportunities fund (G) in India

Interpretation:
The above table showing the analysis of return of HSBC Unique Opportunities fund (G)in
India has outperformed than the index value in the year2010 and 2012.

The fund has the highest return of 71.56 in the year 2009 and it also has the lowest and
negative return of -27.69 in the year 2011.

Table 4.6: showing analysis of return and variability in return of selected equity mutual
funds

Fund name Return SD

Birla sunlife equity fund (G) 23.33 42.97

Canara Robeco equity diversified (G) 26.56 40.87

Franklin India Bluechip fund (G) 23.96 38.08

 Tata ethical fund (G) 31.28 47.63

HSBC Unique Opportunities fund(G) 19.24 37.16

Interpretation:
Standard deviation is used to measure the variation in individual returns from the average
expected returns over a certain period.

Tata ethical fund (G) has the highest return compared to other equity mutual funds selected,
this fund also have highest SD i.e. variability in return. Higher standard deviation means a
greater fluctuation in expected return.

HSBC Unique Opportunities fund(G)has the lowest risk factor with less return compared to
other equity mutual funds selected which means has a less fluctuation in expected return.

Table 4.7: showing analysis of beta of selected equity mutual funds

Fund name Beta

Birla sunlife equity fund (G) 0.99

Canara Robeco equity diversified (G) 0.95

 Franklin India Bluechip fund (G) 1.00

Tata ethical fund (G) 1.11

HSBC Unique Opportunities fund(G) 0.85

Interpretation:
Tata ethical fund (G) has beta value more than one which says that the stock is more volatile
compared to the market. The stock value with more than 1 beta value is considered to be
risky.

Franklin India Bluechip fund (G) has beta value equal to one which indicates that the stock
moves in tandem with the market.

And the other 3 remaining funds have beta value less than one which says that the stock is
less volatile compared to market.

Table 4.8: showing performance evaluation of Top 5 equity mutual funds on the basis of
Sharpe’s Performance Index

Scheme name Average Rf SD(σ) Sharpe’s Rank

return(Rp) index

Birla sunlife equity fund (G) 23.33 2.76 42.97 0.48 4

 Canara Robeco equity 26.56 2.76 40.87 0.58 2
diversified (G)

Franklin India Bluechip fund 23.96 2.76 38.08 0.56 3

(G)

Tata ethical fund (G) 31.28 2.76 47.63 0.60 1

HSBC Unique Opportunities 19.24 2.76 37.16 0.44 5

fund(G)

Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using sharpe’s index according to this index Tata ethical fund (G) is the best Equity
Diversified Scheme because this scheme has ranked first and is also having the best risk-
adjusted rate of return followed by Canara Robeco equity diversified (G).

Table 4.9: showing performance evaluation of Top 5 equity mutual funds on the basis of
Treynor’s Performance Index

Scheme name Average Rf beta Treynor’s Rank

return(Rp)
index

Birla sunlife equity fund (G) 23.33 2.76 0.99 20.78 4

Canara Robeco equity 26.56 2.76 0.95 25.05 2

diversified (G)
Franklin India Bluechip fund 23.96 2.76 1.00 21.20 3
(G)

Tata ethical fund (G) 31.28 2.76 1.11 25.70 1

HSBC Unique Opportunities 19.24 2.76 0.85 19.39 5

fund(G)

Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using Treynor’s index. According to this index Tata ethical fund (G) is the best Equity
Diversified Scheme because this scheme has ranked first and is also having the best risk-
adjusted rate of return followed by Canara Robeco equity diversified (G).

Table 4.10: showing performance evaluation of Top 5 equity mutual funds on the basis
of Jensen Performance Index

Scheme name Beta β Alfa α Jensen’s Rank

index(α/β)

Birla sunlife equity fund (G) 0.99 1.08 1.09 4

Canara Robeco equity 0.95 5.09 5.63 2

diversified (G)

Franklin India Bluechip fund 1.00 2.56 2.56 3

(G)

Tata ethical fund (G) 1.11 7.42 6.68 1

HSBC Unique Opportunities 0.85 -0.26 -0.31 5

fund(G)

Interpretation:
The above table showing the performance evaluation of the selected equity mutual funds
using Jensen’s index. According to this index, Tata ethical Fund (G)ranked as first best
Equity Diversified Scheme followed by Canara Robeco equity diversified (G).

Table 4.11: showing average return, risk and beta

Average return 24.87

Average risk 41.34

Average Beta 0.98

Graph 4.6: showing average return, variability in return and beta

Interpretation:
The above table showing the average return, variability in return and beta of the selected
equity mutual funds having average return is 24.87 and beta is 0.98 and the risk involved is
41.34.Return is a major factor influencing factor to all types of investors.

ETFs

Table 4.12: showing analysis of Return of SBI Gold ETF in India

Year Fund return Index return

2009 -6.40 14.13

2010 23.15 21.85

2011 27.79 30.39

2012 13.29 11.55

2013 -11.67 -6.64

Average return 9.23 14.26

Graph4.7: showing analysis of Return of SBI Gold ETF in India

Interpretation:
The above table showing the analysis of return of SBI Gold ETF in India has outperformed
than its index value in the year 2010 and 2012. The fund has the highest return of 27.79 in the
year 2011 and it also has the lowest and negative return -11.67 in the year 2013.

Table 4.13: showing analysis of Return of UTI Gold ETF in India

Year Fund return Index return

2009 22.36 24.39

2010 21.72 22.95

2011 30.92 28.93

2012 10.75 12.96

2013 -12.41 -13.91

Average return 14.67 15.06

Graph 4.8: showing analysis of Return of UTI Gold ETF in India

Interpretation:
The above table showing the analysis of return of UTI Gold ETF in India has outperformed
than its index value in the year 2011 and 2013. The fund has the highest return of 30.92 in the
year 2011 and it also has the lowest and negative return of -12.41 in the year 2013.

Table 4.14: showing analysis of Return of Kotak Sensex ETF in India

Year Fund return Index return

2009 82.09 79.10

2010 16.87 17.86

2011 -22.99 -24.64

2012 27.37 25.70

2013 10.58 8.98

Average return 22.78 21.4

Graph 4.9: showing analysis of Return of Kotak Sensex ETF in India

Interpretation:
The above table showing the analysis of return of Kotak Sensex ETF in India has
outperformed than its index value in all the year except in the year 2010. The fund has the
highest return of 82.09 in the year 2009 and it also has the lowest and negative return -22.99
in the year 2011.

Table 4.15: showing analysis of Return of R* Shares banking ETF in India

Year Fund return Index return

2009 82.86 77.63

2010 29.34 31.13

2011 -30.25 -32.42

2012 57.47 56.54

2013 -5.59 -8.73

Average return 26.77 24.83

Graph 4.10: showing analysis of Return of R* Shares banking ETF in India

Interpretation:
The above table showing the analysis of return of R* Shares banking ETFin India has
outperformed than its index value in the all year except in the year 2010.

The fund has the highest return of 82.86 in the year 2009 and it also has the lowest and
negative return of -30.25 in the year 2011.

Table4.16: showing analysis of Return of GS Nifty ETF in India

Year Fund return Index return

2009 73.38 74.12

2010 18.15 18.25

2011 -23.10 -24.62

2012 26.38 27.70

2013 5.54 6.76

Average return 20.07 20.44

Graph 4.11: showing analysis of Return of GS Nifty ETF in India

Interpretation:
The above table showing the analysis of return of GS Nifty ETFin India has outperformed
than its index value in the year 2011. The fund has the highest return of 73.38 in the year
2009 and it also has the lowest and negative return of -23.1 in the year 2011.

Table 4.17: showing analysis of return and variability in return of selected ETFs

Fund name Return SD

SBI Gold ETF 9.23 17.58

UTI Gold ETF 14.67 16.75

Kotak Sensex ETF 22.78 38.14

R* Shares Banking ETF 26.77 45.81

GS Nifty ETF 20.07 35.21

Interpretation:
Standard deviation is used to measure the variation in individual returns from the average
expected returns over a certain period.

R* Shares Banking ETF has the highest return compared to other ETFs selected, it also have
highest SD i.e. variability in return. Higher standard deviation means a greater fluctuation in
expected return.

UTI Gold ETF has the lowest risk factor with moderate return compared to other ETFs
selected which means has a less fluctuation in expected return.

Table 4.18: showing analysis of beta of selected ETFs

Fund name Beta

SBI Gold ETF 0.58

UTI Gold ETF 0.97

Kotak Sensex ETF 1.02

R* Shares Banking ETF 1.00

GS Nifty ETF 0.98

Interpretation:
Kotak Sensex ETF has beta value more than one which says that the stock is more volatile
compared to the market. The stock value with more than 1 beta value is considered to be
risky.

R* Shares Banking ETF has beta value equal to one which indicates that the stock moves in
tandem with the market.

And the other 3 remaining funds have beta value less than one which says that the stock is
less volatile compared to market.

Table 4.19: showing performance evaluation of Top 5 ETFs on the basis of Sharpe’s
Performance Index

Scheme name Avg. Rf SD(σ) Sharpe’s Rank

return(Rp) index

SBI Gold ETF 9.23 2.76 17.58 0.37 5

UTI Gold ETF 14.67 2.76 16.75 0.71 1

Kotak Sensex ETF 22.78 2.76 38.14 0.53 2

 R* Shares Banking ETF 26.77 2.76 45.81 0.52 3

GS Nifty ETF 20.07 2.76 35.21 0.49 4

Interpretation:
The above table showing the performance evaluation of the selected ETFs using sharpe’s
index. According to this index, UTI Gold ETF is the best ETF Scheme because this scheme
has ranked first and is also having the best risk-adjusted rate of return followed by Kotak
Sensex ETF.

Table 4.20: showing performance evaluation of Top 5 ETFs on the basis of Treynor’s
Performance Index

Scheme name Avg. return(Rp) Rf Beta Treynor’s Rank

index

SBI Gold ETF 9.23 2.76 0.58 11.16 5

UTI Gold ETF 14.67 2.76 0.97 12.28 4

Kotak Sensex ETF 22.78 2.76 1.02 19.63 2

R* Shares Banking ETF 26.77 2.76 1.00 24.01 1

GS Nifty ETF 20.07 2.76 0.98 17.66 3

Interpretation:
The above table shows performance evaluation of the selected ETFs using Treynor’s index.
According to Treynor’s performance index, R* Shares Banking ETF is the best ETF because
this scheme has ranked first and is also having the best risk-adjusted rate of return followed
by Kotak Sensex ETF.

Table 4.21: showing performance evaluation of Top 5 ETFs on the basis of Jensen
Performance Index

Scheme name Betaβ Alfaα Jensen’s Rank

index(α/β)

SBI Gold ETF 0.58 -0.2 -0.34 5

UTI Gold ETF 0.97 -0.021 -0.021 4

Kotak Sensex ETF 1.02 1.01 0.99 2

R* Shares Banking ETF 1.00 1.94 1.94 1

GS Nifty ETF 0.98 -0.016 -0.016 3

Interpretation:
The above table shows the performance evaluation of the selected ETFs using Jensen’s index.
According to this index, R* Shares Banking ETF ranked as first best ETF followed by Kotak
Sensex ETF.

Table 4.22: showing average return, risk and beta

Average return 18.70

Average risk 30.70

Average Beta 0.91

Graph 4.12: showing average return, variability in return and beta

Interpretation:
The above table showing the average return, variability in return and beta of the selected
ETFs having average return is 18.70 and beta is 0.91 and the risk involved is 30.70.Return is
a major factor influencing factor to all types of investors.

Table 4.23: showing spearman's rank correlation

Investment avenues Correlation

Equity mutual funds 1*

ETF 0.3*

*=significant at 0.01 level of significance

Interpretation:
The above table shows the hypothesis testing using Spearman’s rank correlation to find the
significant relationship between performances of Sharpe’s and Treynor’s measure. It is clear
from the table that there is a significant relationship between the performance of Equity
mutual funds using Sharpe’s and Treynor’s measure. Hence the alternative hypothesis is
accepted and null hypothesis is rejected.

At the same time, there is no significant relationship between the performance of ETF based
on Sharpe’s and Treynor measure, hence null hypothesis is accepted. This may be due to
sharpe’s measure is depend on Standard deviation and Treynor’s measure depends on Beta.

Table 4.24: showing comparison of selected equity diversified mutual funds and ETFs in respect
to return

Investment avenues Return

Equity Mutual Funds 24.70

ETF 18.70

Graph 4.13: showing comparison of selected equity diversified mutual funds and ETFs
in respect to return
 Interpretation:
The above table showing the comparison of equity mutual funds and ETFs in respect to
return in which Equity Mutual Funds have an average return of 24.70 which is compared
to ETFs of 18.70 is higher. Those who would like to have a higher return with an ability
of withstanding high risk they can invest in Equity mutual funds.

Table 4.25: showing comparison of selected equity diversified mutual funds and ETFs in respect
to variability in return

Investment avenues Variability in return (SD)

Equity Mutual Funds 41.51

ETF 30.70

Graph 4.14: showing comparison of selected equity diversified mutual funds and ETFs
in respect to variability in return
Interpretation:
The above table showing the comparison of equity mutual funds and ETFs in respect to
variability in return in whichequity mutual funds have an average risk of 41.51 which is
compared to ETFs risk of 30.70 is higher. Those who would like to take risk can go for equity
mutual funds.

CHAPTER 5

SUMMARY OF FINDINGS, CONCLUSIONS and SUGGESTIONS

FINDINGS:
 Tata ethical fund (G) has the highest return in equity mutual funds when compared to
other equity mutual funds selected, this fund also have highest SD i.e. variability in
return.

 R* Shares Banking ETF has the highest return compared to other ETFs selected, it
also have highest SD i.e. variability in return.

 From the above analysis/statement it has proved higher the risk, higher the return and
lower the risk, lower will be the return.
  According to Sharpe’s performance Index we find that Tata ethical fund (G) is ranked
as 1st in equity mutual funds and UTI Gold ETF in ETFs. The Sharpe’s index
considers total risk of the Scheme.

 According to Treynor’s Performance Index, Tata ethical fund (G) is ranked as 1st in
equity mutual funds and R* Shares Banking ETF in ETFs. The Treynor’s index
considers the return premium for systematic risk undertaken.

 According to Jensen’s Performance Index, Tata ethical fund(G) is ranked as 1st in

equity mutual funds and R* Shares Banking ETF in ETFs. The Jensen’s index
compares the actual or realized return of the portfolio with calculated return and
hence depicts the predictive ability of the managerial personnel

 According to all the three indexes Tata ethical fund(G)is the best equity diversified
scheme because this particular scheme is having the best risk adjusted rate of return.

 Investments in both equity mutual funds and ETFs are subjected to market risk.

 Now a day’s investments in Equity mutual funds and ETFs are increasing because of
falling interest rates and awareness of Equity mutual funds and ETFs in the minds of
investors.

 Investment in mutual fund schemes and ETFs gives diversified portfolio to investors.

 Equity mutual funds have highest return with highest standard deviation when
compared to ETFs

CONCLUSIONS:
It is examined that investment performance of Equity Mutual funds and ETFs in terms
ofPerformance measure, some funds shows conformity with the linear relationship ofreturn
and risk. Some funds do not demonstrate this relationship. Some funds have outperformed
both in terms of Treynor measure and Sharpe measure. However somefunds exhibited
superior performance in terms of systematic risk but did not do so inrespect of total risk.

It becomes increasingly necessary to periodically monitor and evaluate performance

as objectively as can. More importantly, such evaluationshould provide meaningful feedback
for improving the quality of the investmentmanagement process on a continuing basis. In
particular, it should help in articulatingthe investment objectives with greater clarity,
sharpening the investment strategy andrefining the methods of security selection, value of
experience that matters.The study recommends new investors to choose equity mutual funds
if the investor is a risk taker or if not he can go for ETFs which have moderate return and
moderate risk compared to equity mutual funds.

SUGGESTIONS:
 Investors are recommended to invest in the scrip’s which have low risk or high risk
depending on the level of the risk the investor is ready to undertake.
 Investors are recommended to avoid the stocks which are overpriced and invest in the
underpriced scripts.
 Investors are recommended to invest after evaluating the performance of different
funds as in the above selected funds Tata ethical fund (G) in equity mutual fund and
R* Shares Banking ETF in ETFs rank first, it’s better to invest in these funds.
 Investors who are willing to take less risk can go for ETFs and those with high risk
can go for Equity mutual funds.
 One should also use all the three indexes in diversifying equity schemes risk to be
adjusted with rate of return for the investors.
BIBLIOGRAPHY

Books:

 Investment analysis and portfolio management – Prasanna Chandra – Second Edition-

TMH 2005
 Security analysis and portfolio management – Punithavathy Pandian - Second edition
– Vikas 2005 pg. 149-151,362-371,411-424
 V K Balla “Investment Management”, S Chand publications,12th edition, pg. 96
 Security analysis and portfolio management – Donald E Fischer, Ronald J. Jordan –
sixth edition – Prince Hall of India Pvt. Ltd - 2000

Articles:

 K.P.Sivakumar, Dr.S.RajaMohan(2010), the performance Evaluation of Mutual fund

Industry in India. The Indian Journal of Management, Volume 3, Issue 1, 25-30.
 Ravi Shukla and Sandeep Singh (1997), the performance evaluation of U.S. Global
equity funds: evidence from 1988-95, Global finance Journal, 8(2), 279-293.
 Martin Eling, Roger Faust (2009). The performance of Hedge funds and mutual funds
in emerging markets, Journal of banking & Finance, 34(2010), 1993-2009
 Paula A. Tkac(2001), the performance of open-end International Mutual funds,
Federal Bank of Atlanta, Economic Review, 3(2001), 1-17.
 M. Jayadev (1995), Mutual fund performance: An analysis of monthly returns,
Finance India, Vol.X, No.1, March 1996, 73-84.
 Dr. Zakri Y Bello(2009), The performance of U.S. domestic equity mutual funds
during recent recessions, Global Journal of Finance and Banking Issues, Vol.3,
3(2009), 1-8.
 Madhumita Chakraborty, P.K.Jain and Vinay Kallianpura(2009), Mutual fund
performance: An evaluation of select growth funds in India, South Asian Journal of
Management, Vol.15,4(2009). 80-92.
 C. Edward Chang, H. Doug Witte (2010), Performance evaluation of U.S socially
responsible mutual funds: Revisiting Doing Good and Doing Well, American Journal
of Business, Vol.25, No.1, 9-21.
  SoumyaGuhea Deb, Ashok Banerjee, B BChakrabarti(2008) Persistence in
Performance of Indian equity mutual funds: An empirical Investigation, IIMB
Management Review, 172- 187.

Webliography:
 www.rathi.com
 www.rathionline.com
 www.nseindia.com
 www.moneycontrol.com
 www.economictimes.com
 www.investopedia.com
 www.wikipedia.com

ANNEXURE

Calculation of returns, standard deviation of Birla SunlifeEquity Fund (G) and its
benchmark(S&P BSE 200)

Date NAV Returns (Rp) Closing price of Returns (Rm)

 BSE 200

Dec 2008 133.2 1163.67

Dec2009 250.44 88.02 2212.51 90.13

Dec 2010 284.83 13.73 2514.96 13.67

Dec 2011 203 -28.73 1857.46 -26.14

Dec 2012 275.86 35.89 2421.91 30.39

Dec 2013 297.27 7.76 2523.58 4.20

Total 116.67 112.25

Average return

Rp = Σ Rp / n

= 116.67/5

=23.33

Rm = Σ Rm / n

= 112.25/5

= 22.45

Standard deviation

= 42.97
Beta

β = Covar / σm2

Sharpe’s Performance Index

Treynor’s Performance Index

Jensen’s Performance Index

α = Rp – (Rf + β (Rm – Rf))

ETFs

Calculation of returns, standard deviation of SBI Gold ETF and its benchmark

Date NAV Returns Index closing Returns

price
 Dec 2008 1780 1471.48

Dec2009 1666.16 -6.40 1679.45 14.13

Dec 2010 2051.88 23.15 2046.4 21.85

Dec 2011 2622.13 27.79 2668.3 30.39

Dec 2012 2970.56 13.29 2976.55 11.55

Dec 2013 2623.94 -11.67 2778.8 -6.64

Total 46.16 71.28

Average return

Rp = Σ Rp / n

= 46.16/5

= 9.23

Rm = Σ Rm / n

= 71.28/5

=14.26

Standard deviation

= 17.58

Spearman’s rank correlation