A Study On Impact of Financial Crisis On Indian Mutual Funds

CHAPTER- I
1:1 General Introduction

The term investment can be explained as if a person have surplus fund available then he can
either save that money or opt for an investment .i.e. when a person has more money than
required for current consumption then that individual is likely to be an investor whether he or
she invests in a bank deposits for earning interest or in stocks and shares, or purchase properly
,or gold or antique or a price of art, essentially the individual is investing his surplus in procuring
an asset, such that the present sacrifice will procure some future benefits.
1.1.1 Features of Investments:
Any decision or planning on investment or its management should the following factors.
 Safety
 Liquidity
 Appreciation
 Legality
 Transferability
 Risk factor
1.1.2 Some of the Major Investment Options:
1. Equity shares
2. Fixed income securities
3. Money market instruments
4. Mutual fund
5. Real estate
6. Non marketable financial asset
7. Precious object
8. Financial derivatives
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In the minds of every common man investing in stock market is a very risky affair. According to
basis financial theory, which states that an investor can reduce his total risk by holding a
portfolio of assets instead of only one asset. This is because by holding all your money in just
one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of
a variety of assets, this risk is substantially reduced.
According to basis financial theory, which states that an investor can reduce his total risk by
holding a portfolio of assets instead of only one asset. This is because by holding all your money
in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a
portfolio of a variety of assets, this risk is substantially reduced.
Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis.
Much of economic and financial theory is based on the notion that individuals act rationally and
consider all available information in the decision making process. Since the competition in the
market is very high, it is the responsibility of the fund manager to analyze investor behavior and
understand their needs and expectations to gear up the performance to meet investor
requirements and also to fight competition.
A very important risk involved in mutual fund investments is the market risk. When the market
is in doldrums, most of the equity funds will also experience a downturn. However, the company
specific risks are largely eliminated due to professional fund management.This study reveals
facts about Indian Mutual Fund Industry in Brief.
Mutual Fund is an instrument of investing money. One of the options is to invest the money in
stock market. But a common investor is not informed and competent enough to understand the
intricacies of stock market. This is where mutual funds come to the rescue. A Mutual Fund is a
trust that pools the savings of a number of investors who share a common financial goal. The
money thus collected is then invested in capital market instruments such as shares, debentures
and other securities. The income earned through these investments and the capital appreciation
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realized is shared by its unit holders in proportion to the number of units owned by them. Thus a
Mutual Fund is the most suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a relatively low cost.
A mutual fund is a group of investors operating through a fund manager to purchase a diverse
portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By
pooling money together in a mutual fund, investors can purchase stocks or bonds with much
lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out
which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification.
A mutual fund is just the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment objective. The mutual
fund will have a fund manager who is responsible for investing the gathered money into specific
securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions
of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others they
are very cost efficient and also easy to invest in, thus by pooling money together in a mutual
fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to
do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing
risk & maximizing returns.
1.2 MUTUAL FUNDS
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A Mutual Fund is a trust that pools the savings of a number of investors who share a common
financial goal. The money thus collected is invested by the fund manager in different types of
securities depending upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned through these investments and the
capital appreciations realized by the scheme are shared by its unit holders in proportion to the
number of units owned by them. Thus, a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally managed
portfolio at a relatively low cost. The small savings of all the investors are put together to
increase the buying power and hire a professional manager to invest and monitor the money.
Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual
Funds. Each Mutual Fund scheme has a defined investment objective and strategy.
You can buy mutual fund shares directly from the mutual fund company or from a stockbroker.
Either way buying and redeeming is relatively easy.
The following picture shows the operational flow of mutual funds
Figure 1.1
MUTUAL FUND OPERATIONAL FLOW CHART
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1.2.1 Features of Mutual Fund Investments
1. Professional Management
Mutual Funds provide the services of experienced and skilled professionals, backed by a
dedicated investment research team that analyses the performance and prospects of companies
and selects suitable investments to achieve the objectives of the scheme.
2.Diversification
Mutual Funds invest in a number of companies across a broad cross-section of industries
and sectors.
This diversification reduces the risk because seldom do all stocks decline at the same time and in
the same proportion. You achieve this diversification through a Mutual Fund with far less money
than you can do on your own.
3. Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such
as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds
save your time and make investing easy and convenient.
4. Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return
as they invest in a diversified basket of selected securities.
5. Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing
in the capital markets because the benefits of scale in brokerage, custodial and other fees
translate into lower costs for investors.
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6. Liquidity
In open-end schemes, the investor gets the money back promptly at net asset Value related
prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange
at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV
related prices by the Mutual Fund.
7. Transparency
You get regular information on the value of your investment in addition to disclosure on the
specific investments made by your scheme, the proportion invested in each class of assets and the
fund manager's investment strategy and outlook.
8. Flexibility
Through features such as regular investment plans, regular withdrawal plans and dividend
reinvestment plans, you can systematically invest or withdraw funds according to your needs and
convenience.
9.Affordability
Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund
because of its large corpus allows even a small investor to take the benefit of its investment
strategy.
10. Choice of Schemes
Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.
1.2.2 Drawbacks of Mutual Funds:
Mutual funds have their drawbacks and may not be for everyone
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1) No Guarantees:
No investment is risk free. If the entire stock market declines in value, the value of mutual fund
shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer
risks when they invest in mutual funds than when they buy and sell stocks on their own.
However, anyone who invests through a mutual fund runs the risk of losing money.
2) Fees and commissions:
All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge
sales commissions or "loads" to compensate brokers, financial consultants, or financial planners.
Even if you don't use a broker or other financial adviser, you will pay a sales commission if you
buy shares in a Load Fund.
3) Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent
of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on
the income you receive, even if you reinvest the money you made.
4) Management risk:
When you invest in a mutual fund, you depend on the fund's manager to make the right decisions
regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you
might not make as much money on your investment as you expected. Of course, if you invest in
Index Funds, you forego management risk, because these funds do not employ managers
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1.2.3 Types of Mutual Fund Schemes: Mutual fund schemes may be classified on the
basis of its structure and its investment objective.
 By structure:
 Open ended.
 Close ended.
 Interval schemes.
 By investment objectives:
 Growth schemes.
 Income schemes.
 Balanced schemes.
 Money market schemes.
 Other schemes:
 Tax saving schemes.

 Special schemes
 Index schemes.
 Sector specific schemes.
By Structure
1) Open-end Funds
An open-end fund is one that is available for subscription all through the year. These do not have
a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")
related prices. The key feature of open-end schemes is liquidity.
2) Closed-end Funds
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.
The fund is open for subscription only during a specified period. Investors can invest in the
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scheme at the time of the initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide an exit route to the
investors, some close-ended funds give an option of selling back the units to the Mutual Fund
through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one
of the two exit routes is provided to the investor.
3) Interval Funds
Interval funds combine the features of open-ended and close-ended schemes.

They are open for sale or redemption during pre-determined intervals at NAV related prices.
By Investment Objective
1) Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to long term.
Such schemes normally invest a majority of their corpus in equities. It has been proved that
returns from stocks, have outperformed most other kind of investments held over the long
term. Growth schemes are ideal for investors having a long term outlook seeking growth over
a period of time.
2) Income Funds
The aim of income funds is to provide regular and steady income to investors. Such schemes
generally invest in fixed income securities such as bonds, corporate debentures and Government
securities. Income Funds are ideal for capital stability and regular income.
3) Balanced Funds
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The aim of balanced funds is to provide both growth and regular income. Such schemes
periodically distribute a part of their earning and invest both in equities and fixed income
securities in the proportion indicated in their offer documents. In a rising stock market, the NAV
of these schemes may not normally keep pace, or fall equally when the market falls. These are
ideal for investors looking for a combination of income and moderate growth.
4) Money Market Funds
The aim of money market funds is to provide easy liquidity, preservation of capital and moderate
income. These schemes generally invest in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes
may fluctuate depending upon the interest rates prevailing in the market. These are ideal for
Corporate and individual investors as a means to park their surplus funds for short periods.
OTHER SCHEMES
1) Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of the Indian Income
Tax laws as the Government offers tax incentives for investment in specified avenues.
Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed
as deduction u/s 88 of the Income Tax Act, 1961.
2) Special Schemes
a) Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer document. The
investment of these funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc.
b) Index Schemes
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Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or
the NSE 50.
c) Sectoral Schemes
Sectoral Funds are those which invest exclusively in a specified sector. This could be an industry
or a group of industries or various segments such as 'A' Group shares or initial public offerings.
Mutual Fund Structure
Figure 1.2.1
Sponsor
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Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or
liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund.
Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts
Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.
Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The
main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alias
ensure that the AMC functions in the interest of investors and in accordance with the Securities
and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust
Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee
are independent directors who are not associated with the Sponsor in any manner.
Asset Management Company (AMC)
The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is
required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset
management company of the Mutual Fund. At least 50% of the directors of the AMC are
independent directors who are not associated with the Sponsor in any manner. The AMC must
have a net worth of at least 10 crore at all times.
Registrar and Transfer Agent
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The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the
Mutual Fund. The Registrar processes the application form, redemption requests and dispatches
account statements to the unit holders. The Registrar and Transfer agent also handles
communications with investors and updates investor record.
1.2.2 RIGHTS OF A MUTUAL FUND UNIT HOLDER:
A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is
entitled to:
1. Receive information about the investment policies, investment objectives, financial

position and general affairs of the scheme.
2. Receive unit certificates or statements of accounts confirming the title within 6 weeks
from the date of closure of the subscription or within 6 weeks from the date of request for
a unit certificate is received by the Mutual Fund.
3. Receive dividend within 42 days of their declaration and receive the redemption or
repurchase proceeds within 10 days from the date of redemption or repurchase.
4. Vote in accordance with the Regulations to:-
Approve or disapprove any change in the fundamental investment policies of the scheme, which
are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit
holder has a right to redeem the investment.
a. Change the Asset Management Company.
b. Wind up the schemes.
1.2.3 TAX BENEFITS OF MUTUAL FUNDS:
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Section 94(6) of the Income Tax Act 1961:- Section 94(6) of the Income Tax Act 1961
now provides that any person who buys or acquires any securities or unit within a period
of three months prior to the record date and such person sells or transfers such securities
or unit within a period of three months after such date and the dividend or income on
such securities or unit received or receivable by such person is exempt, then, the loss, if
any, arising to him on account of such purchase and sale of securities or unit, to the
extent such loss does not exceed the amount of dividend or income received or receivable
on such securities or unit, shall be ignored for the purposes of computing his income
chargeable to tax.
Section 10(33) of the Income Tax Act 1961
The dividend received by the investors from the scheme will be exempt from income tax for all
categories of investors under Section 10(33) of the Income Tax Act, 1961. The scheme will pay a
distribution tax currently @10% plus surcharge if the portfolio holds less than 50 percent debt
securities on an average during the last one year period.
Section 88 of the Income Tax Act 1961
Specified units of mutual fund schemes qualify for rebate under Section 88 of the Income Tax
Act, 1961, subscription to the Units of the Scheme by Individuals and Hindu Undivided
Families, not exceeding Rupees ten thousand would be eligible to a deduction, from income-tax,
of an amount equal to 20% of the amount so subscribed. In the case of subscription by an
individual, whose income is derived from the exercise of his profession as an author, playwright,
artist, musician, actor or sportsman (including an athlete), the deduction admissible would be at
the rate of 25%.
Tax Deduction at Source: There will not be any Tax Deduction at Source on payment to
resident unit-holders towards redemption or dividends.
Wealth tax benefits: Mutual Fund units are exempt from Wealth Tax.
Tax Deduction at Source (TDS):
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Redemptions/Exchanges/Switches by non-residents, OCBs & FIIs will be subjected to tax
deduction at source at the rates in force and certificates for tax deducted will be issued.
To Charitable Trusts:
Investment in the units of the scheme is an eligible mode of investment under Section 11(5) of
the Income Tax Act read with Income Tax Rule 17 C.
To the Fund:
Open Ended Mutual Funds are exempt from income tax under Section 10 [23D] of the Act.
CHAPTER - 2: RESEARCH DESIGN
2.1-Title of the Study:

A study on Impact of Financial Crisis on Indian Mutual Funds.
2.2- Statement of the Problem
Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis.
Much of economic and financial theory is based on the notion that individuals act rationally and
consider all available information in the decision making process. Since the competition in the
market is very high, it is the responsibility of the fund manager to analyze investor behavior and
understand their needs and expectations to gear up the performance to meet investor
requirements and also to fight competition.
Because of Global Economic Recession almost all Sectors in the Country are get affected. Indian
Financial market faced a slowdown. People temporarily stopped investing, they lost the
trustworthiness of Indian market. As compared to other world markets Indian markets were less
affected. Impact were affected by Indian Mutual funds also.
A very important risk involved in mutual fund investments is the market risk. When the market
is in doldrums, most of the equity funds will also experience a downturn. However, the company
specific risks are largely eliminated due to professional fund management .This study reveals
facts about Indian Mutual Fund Industry in Brief.
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2.3 Objectives of the study
 To Study the Impact of Financial Crisis in Indian Mutual Funds
 To study performance of Indian MFs during Recession period.
 To study the general Trend of Mutual Funds after recession Period.
 To identify the preferred savings avenue among the investors in this juncture
 To assess Mutual Fund selection behavior among the investors with special
consideration with global financial crisis.
2.4 Methodology
Methodology here refers to the method as to how the researcher has done his
efforts towards the activity of reviewing the literature. For this study Secondary data are
readily available, because they were collected for some other purpose and which can also be
used to solve the present problem. They are the cheapest and the easiest means of access to
information.
2.4.1 Sources for Data Collection
Secondary Data: The various secondary data which will be used in this work includes
 Internet
 Periodicals
 News Papers
 Journals
 Books related to mutual funds etc.
2:4.2 Sampling
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For the purpose of study and evaluation Various Mutual Fund schemes from various sectors
were selected randomly in order to analyze the effect of impact of recession in Indian Mutual
Funds. 10 Equity based Mutual Fund schemes were selected randomly.
2.4.3 Method of Analysis
 Standard Deviation, Beta

 Jenson Measure, Treyner Measure & Sharpe Measure
2.5 OPERATIONAL DEFINITION OF CONCEPTS
2.5.1 Net Asset Value or NAV
NAV is the total asset value (net of expenses) per unit of the fund and is calculated by the Asset
Management Company (AMC) at the end of every business day. Net asset value on a particular date
reflects the realizable value that the investor will get for each unit that he his holding if the scheme is
liquidated on that date.
Net asset Value of an investment company is the company’s total assets minus its total liabilities. For
Example, if an investment company has securities and other assets worth $100 million and has liabilities
of $10 million, the investment company’s NAV will be $90 million one day, $100 million the next, and
$80 million.
For Calculating NAV in Years
NAV Closing Value – NAV Opening Value
= *100
NAV Opening Value
Entry Load
It is the load charged by the fund when one invests into the fund. It increases the price of the units to more
than the NAV and is expressed as a percentage of NAV.
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Exit Load
It is the load charged by the fund when one redeems the units from the fund. It reduces the price
of the units to less than the NAV and is expressed as a percentage of NAV.
Performance
Performance of an investment indicates the returns from an investment. The returns can come by
way of income distributions as well as appreciation in the value of the investment.
2.5.2 STANDARD DEVIATION
A measure of the dispersion of a set of data from its mean. The more spread apart the data is
higher the deviation. In finance, a standard deviation is applied to the annual rate of return of an
investment to measure the investment Volatility (Risk). A volatile stock would have a high
standard deviation. In mutual funds, the standard deviation tells us how much the return on the
fund is deviating from the expected normal returns. Standard deviation can also be calculated as
the square root of the variance.
Standard Deviation (Risk) of the Fund:
n Rp2 - ( R )p
2
1/2
p =
n2
Where: p : Risk of the Fund.
Rp : Return of the fund.
Standard Deviation (Risk) of the benchmark index:
1/2
n Rm2 - ( R ) m
2 18
m
= n2
Where
Rm Index Return (Market Return)
m Risk of the Index
2.5.3 BETA
It is the measure of the relative sensitivity of a stock or mutual fund to the market. The market is
assigned a beta of 1. The higher the beta, the more sensitive the stock or fund is considered to be
relative to the market as a whole. In other words, funds with beta more than 1 will react more to
any fluctuations (whether upward or downward) in market than funds with beta less than 1.
Beta of the Fund:
Where:
n
p =
 (R - AR ) (R
p p m – ARm  p : Beta of the fund.
Rp: Return of the fund.
n ARp: Average return of the Mutual
Fund Scheme.
ARm: Average return of the
i=1 benchmark index.
 Rm – ARm2
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2.6 Scope of the study:
 For the Purpose of this study I considered 10 different Mutual Fund Schemes
 All those Mutual Funds were Equity Mutual Funds
 Only Indian Mutual Funds have Considered
 NAV for a period of Five years was considered
2:7 Limitations of the Study
 Since the study had to be conducted in a short span of time, the accuracy may be affected.
 The results obtained during the period cannot be taken as a conclusive decision for
making a choice for investment
 Conclusions were depends upon facts from secondary data.
 Only 10 Equity funds were compared and analyzed.
 Only funds, which are more than five years old, have been considered.
 Only open-ended funds have been considered.
 The NAV values and the Benchmark Index values obtained may not have been entirely
accurate.
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2.8 Chapter Scheme
CHAPTER- 1: INTRODUCTION
 Introduction of the research topic

 Subject background of the topic
CHAPTER- 2: RESEARCH DESIGN

 Brief Introduction
 Statement of the Problem
 Review of Literature
 Objective of the Study
 Methodology
 Sampling
 Tools for data collection
 Need for the Study
 Limitation of the Study
CHAPTER- 3: INDUSTRY PROFILE
CHAPTER- 4: ANALYSIS AND INTERPRETATION OF DATA
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CHAPTER- 5: SUMMARY AND CONCLUSION
 Findings
 Conclusion from the study
 Suggestions
 Bibliography
 Annexure
CHAPTER 3:- PROFILES
3.1 History of the Indian Mutual Fund Industry
The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the
initiative of the Government of India and Reserve Bank the. The history of mutual funds in India
can be broadly divided into four distinct phases
First Phase – 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI
and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of
1988 UTI had Rs.6,700 crores of assets under management.
Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non-
UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of
India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first
non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87),
Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India
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(Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989
while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund
industry had assets under management of Rs.47,004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated
into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets
under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of
Unit Trust of India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund Regulations. The
second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with
SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with
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the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and
with recent mergers taking place among different private sector funds, the mutual fund industry
has entered its current phase of consolidation and growth.
Financial Services Industry:
Financial services organizations are striving to achieve increasingly ambitious profit and
growth targets against a background of heightened risk, regulation and market pressures. As of
2004, the financial services industry represented 20% of the market capitalization of the S&P
500 in the United States.
Financial services refer to services provided by the finance industry. The finance industry
encompasses a broad range of organizations that deal with the management of money. Among
these organizations are banks, credit card companies, insurance companies, consumer finance
companies, stock brokerages, investment funds and some government sponsored enterprises.
Customer needs and expectations are evolving in the face of increasing personal wealth,
more private funding of pensions and healthcare and the desire for ever more accessible and
personalised financial products and services. In turn, intense competition has squeezed industry
margins and forced organisations to cut costs while still seeking to enhance the quality of client
choice and service. The battle for talent is also heating up as company seek to enhance
innovation, customer loyalty and investment returns.
The corollary of this market evolution is increasing risk as products become more
complex, organisations more diffuse and the business environment ever more uncertain.
Regulation is also tightening in the wake of public and government pressure for improved
governance, transparency and accountability. In this environment, the winners will be companies
that can turn the challenges into opportunities to build stronger and more enduring customer
relationships; sharpen process efficiency; unlock talent and creativity; use improved risk
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management processes to deliver more sustainable returns; and use new regulatory demands as a
catalyst for strengthening the business and enhancing market confidence.
Organisations will also need to identify and concentrate on core competencies where they
can exert maximum competitive advantage, be this particular product, service, process or
geographical territory. For some this will require a strategic re-orientation towards becoming a
specialist niche provider. Even larger groups will need to differentiate their offering and by
implication the associated brand.
In economics, a financial market is a mechanism that allows people to easily buy and sell
(trade) financial securities (such as stocks and bonds), commodities (such as precious metals or
agricultural goods), and other fungible items of value at low transaction costs and at prices that
reflect the efficient market hypothesis. Financial markets have evolved significantly over several
hundred years and are undergoing constant innovation to improve liquidity.
Both general markets (where many commodities are traded) and specialized markets
(where only one commodity is traded) exist. Markets work by placing many interested buyers
and sellers in one "place", thus making it easier for them to find each other. An economy which
relies primarily on interactions between buyers and sellers to allocate resources is known as a
market economy in contrast either to a command economy or to a non-market economy such as a
gift economy.
In finance, financial markets facilitate:
 The raising of capital (in the capital markets)

 The transfer of risk (in the derivatives markets)
 International trade (in the currency markets)
and are used to match those who want capital to those who have it.
Typically a borrower issues a receipt to the lender promising to pay back the capital.
These receipts are securities which may be freely bought or sold. In return for lending money to
the borrower, the lender will expect some compensation in the form of interest or dividends.
25
Definition of Financial Market:
The term financial markets can be a cause of much confusion.
Financial markets could mean:
1. Organizations that facilitate the trade in financial securities. i.e. Stock Exchanges facilitate
the trade in stocks, bonds and warrants.
2. The coming together of buyers and sellers to trade financial securities. i.e. stocks and shares
are traded between buyers and sellers in a number of ways including: the use of stock
exchanges; directly between buyers and sellers etc.
In academia, students of finance will use both meanings but students of economics will only use
the second meaning.Financial markets can be domestic or they can be international market.
Types of Financial Markets:
The financial markets can be divided into different subtypes:
 Capital Market, which is the market for securities, where companies and governments
can raise long term funds. The capital market includes the stock market and the bond
market. Financial regulators, such as the U.S. Securities and Exchange Commission,
oversee the capital markets in their designated countries to ensure that investors are
protected against fraud. The capital markets consist of the primary market, where new
issues are distributed to investors, and the secondary market, where existing securities are
traded.
 Capital Market which consists of:
1. Stock Markets, which provide financing through the issue of shares or common
stock, and enable the subsequent trading thereof.
26
2. Bond Markets, which provide financing through the issue of bonds, and enable
the subsequent trading thereof.
 Commodity Markets, which facilitate the trading of commodities.
 Money Markets, which provide short term debt financing and investment.
 Derivatives Markets, which provide instruments for the management of financial risk.
 Futures Markets, which provide standardized forward contracts for trading products at
some future date; see also forward market.
 Insurance Markets, which facilitate the redistribution of various risks.
 Foreign Exchange Markets, which facilitate the trading of foreign exchange.
The capital markets consist of primary markets and secondary markets. Newly formed (issued)
securities are bought or sold in primary markets. Secondary markets allow investors to sell
securities that they hold or buy existing securities.
Raising Capital:
To understand financial markets, let us look at what they are used for, i.e. what is their
purpose?
Without financial markets, borrowers would have difficulty in finding lenders

themselves. Intermediaries such as banks help in this process. Banks take deposits from those
who have money to save. They can then lend money from this pool of deposited money to those
who seek to borrow. Banks popularly lend money in the form of loans and mortgages.
More complex transactions than a simple bank deposit require markets where lenders and
their agents can meet borrowers and their agents, and where existing borrowing or lending
commitments can be sold on to other parties. A good example of a financial market is a stock
exchange. A company can raise money by selling shares to investors and its existing shares can
be bought or sold.
27
The following table illustrates where financial markets fit in the relationship between
lenders and borrowers:
Figure 3.1
Relationship between lenders and borrowers
Lenders Financial Intermediaries Financial Markets Borrowers
Interbank Individuals
Banks
StockExchange Companies
Individuals InsuranceCompanies
MoneyMarket CentralGovernment
Companies PensionFunds
BondMarket Municipalities
Mutual Funds
Foreign Exchange Public Corporations
Analysis of Financial Markets:
Much effort has gone into the study of financial markets and how prices vary with
time. Charles Dow, one of the founders of Dow Jones & Company and The Wall Street Journal,
enunciated a set of ideas on the subject which are now called Dow Theory. This is the basis of
the so-called technical analysis method of attempting to predict future changes. One of the tenets
of "technical analysis" is that market trends give an indication of the future, at least in the short
term. The claims of the technical analysts are disputed by many academics, who claim that the
evidence points rather to the random walk hypothesis, which states that the next change is not
28
correlated to the last change.The scale of changes in price over some unit of time is called the
volatility. It was discovered by Benoit Mandelbrot that changes in prices do not follow a
Gaussian distribution, but are rather modeled better by Levy stable distributions. The scale of
change, or volatility, depends on the length of the time unit to a power a bit more than 1/2. Large
changes up or down are more likely than what one would calculate using a Gaussian distribution
with an estimated standard deviation.
The graph indicates the growth of assets over the years.
Figure 3.2
29
3.1.2 Global Economic Recession
30
A recession is a general slowdown in economic activity in a country over a sustained period of
time, or a business cycle contraction. A recession is when GDP growth slows, businesses stop
expanding, employment falls, unemployment rises, and housing prices decline. During
recessions, many macroeconomic indicators vary in a similar way. Production as measured by
Gross Domestic Product (GDP), employment, investment spending, capacity utilization,
household incomes and business profits all fall during recessions.Governments usually respond
to recessions by adopting expansionary macroeconomic policies, such as increasing money
supply, increasing government spending and decreasing taxation.
The technical definition of an economic recession is when GDP growth is negative for two
quarters or more. A recession is usually preceded by several quarters of slowing but positive
growth. It usually feels like a recession before it has officially started. Therefore, a recession is
also defined by a period when economic growth slows, businesses stop expanding, employment
falls, unemployment rises, and housing prices decline.
Economic recessions are caused by a decline in GDP growth, which is itself caused by a
slowdown in manufacturing orders, falling housing prices and sales, and a drop-off in business
investment. The result of this slowdown is falling employment, and rising unemployment, which
causes a slowdown in retail sales. This creates a downward spiral in manufacturing and increased
layoffs. A stock market decline, known as a bear market, can either be a result of a recession but
is often a cause itself.Each recession has its own specific causes, but all of them are usually
preceded by a period of irrational exuberance. This is also known as a business cycle.
Many experts state that it is only an economic recession when GDP growth is negative for two
consecutive quarters or more. However, for all practical purposes a recession starts when there
are several quarters of slowing but still positive growth. Often a quarter of negative growth will
occur, following by positive growth for several quarters, and then another quarter of negative
growth.
One of the causes of the current recession was that the Fed was also slow to raise interest rates
when the economy started to boom again in 2004. Low interest rates in 2004 and 2005 helped
31
created the housing bubble. Irrational exuberance set in again as many investors took advantage
of low rates to buy homes just to resell. Others bought homes they couldn't afford thanks to
interest-only loans.
The crisis began one year ago in the US sub prime home-loan market and has spread into a
global credit squeeze, dragging down world economic growth. Sub-prime lending are loans made
to borrowers who are perceived to have high credit risk. While the US remains the focal point,
financial institutions in other countries have also been affected, reflecting unreliable global
financial conditions. The crisis happened due to weakness in risk management systems and
prudential supervision. The IMF warned that the global economy was being hit by a serious
slowdown and its report indicated that total losses related to US risky loans could reach $1.4
trillions. It predicted dire consequences for banks and financial systems if financial regulators
and banks did not act quickly.
About the only good thing about a recession is that it will cure inflation. The balancing act the
Federal Reserve must pursue is to slow economic growth enough to prevent inflation without
triggering a recession. Currently, it must do this without the help of fiscal policy, which is
generally trying to stimulate the economy as much as possible through lowering taxes, spending
on social programs and ignoring current account deficits.
Observation of economic recession:
The calculation of a country's gross domestic product or GDP is usually for two or more quarters
of a year, successively. Many economists judge recessions to better understand the causes and
find effective solutions to them. A period of recession is a significant decline in economic
activity. The decline could be observed over a period of a few months. The abstract decline that
affects real people is sensed via a fall in the GDP, actual income on record, employment data,
production and sales etc. A recession is measured from the time of initial decline, which is
mostly just after the economy reaches a peak of activity till the time the resultant ‘trough’ shows
up on the graph. Most recessions are brief.
Figure 3.3
32
33
Table 3.1
34
Wider implications:
A recession documents simultaneous decline in employment, profit and investment, and an

upscale inflation. During the economic collapse, the periods of deflation and alternative inflation
are part of a process studied by economists as ‘stagflation’. A severe economic recession is a
devastating breakdown of an economy. Those economies that are market-oriented are usually
characterized by economic driving cycles and there it is debated whether or not, in such
economies, government intervention smoothes, exaggerates or creates it. A period of recession
witnesses a stock market drop at the onset. Sometimes, nearly half of the stock market declines
are recorded after the onset of the period. The period of economic recession can also be sensed
via the unemployment rate and subsequent claims, a housing recession and the use of the
indicator index.
Asia and the financial crisis
Countries in Asia are increasingly worried about what is happening in the West. A number of
nations urged the US to provide meaningful assurances and bailout packages for the US
economy, as that would have a knock-on effect of reassuring foreign investors and helping ease
concerns in other parts of the world.
Many believed Asia was sufficiently decoupled from the Western financial systems. Asia has not
had a subprime mortgage crisis like many nations in the West have, for example. Many Asian
nations have witnessed rapid growth and wealth creation in recent years. This lead to enormous
investment in Western countries. In addition, there was increased foreign investment in Asia,
mostly from the West.
However, this crisis has shown that in an increasingly inter-connected world means there are
always knock-on effects and as a result, Asia has had more exposure to problems stemming from
the West. Many Asian countries have seen their stock markets suffer and currency values going
on a downward trend. Asian products and services are also global, and a slowdown in wealthy
countries means increased chances of a slowdown in Asia and the risk of job losses and
associated problems such as social unrest.
35
India and China are the among the world’s fastest growing nations and after Japan, are the
largest economies in Asia. From 2007 to 2008 India’s economy grew by a whopping 9%. Much
of it is fueled by its domestic market. However, even that has not been enough to shield it from
the effect of the global financial crisis, and it is expected that in data will show that by March
2009 that India’s growth will have slowed quickly to 7.1%. Although this is a very impressive
growth figure even in good times, the speed at which it has dropped—the sharp slowdown—is
what is concerning.
China, similarly has also experienced a sharp slowdown and its growth is expected to slow down
to 8% (still a good growth figure in normal conditions). However, China also has a growing
crisis of unrest over job losses. Both have poured billions into recovery packages.
Japan, which has suffered its own crisis in the 1990s also faces trouble now. While their banks
seem more secure compared to their Western counterparts, it is very dependent on exports. Japan
is so exposed that in January alone, Japan’s industrial production fell by 10%, the biggest
monthly drop since their records began.
Towards the end of October 2008, a major meeting between the EU and a number of Asian
nations resulted in a joint statement pledging a coordinated response to the global financial crisis.
However, as Inter Press Service (IPS) reported, this coordinated response is dependent on the
entry of Asia’s emerging economies into global policy-setting institutions.
This is very significant because Asian and other developing countries have often been treated as
second-class citizens when it comes to international trade, finance and investment talks. This
time, however, Asian countries are potentially trying to flex their muscle, maybe because they
see an opportunity in this crisis, which at the moment mostly affects the rich West.
Asian leaders had called for “effective and comprehensive reform of the international monetary
and financial systems.” For example, as IPS also noted in the same report, one of the Chinese
state-controlled media outlets demanded that “We want the U.S. to give up its veto power at the
International Monetary Fund and European countries to give up some more of their voting rights
in order to make room for emerging and developing countries.” They also added, “And we want
36
America to lower its protectionist barriers allowing an easier access to its markets for Chinese
and other developing countries’ goods.”
Whether this will happen is hard to know. Similar calls by other developing countries and civil
society around the world, for years, have come to no avail. This time however, the financial
crisis could mean the US is less influential than before. A side-story of the emerging Chinese
superpower versus the declining US superpower will be interesting to watch.It would of course
be too early to see China somehow using this opportunity to decimate the US, economically, as it
has its own internal issues. While the Western mainstream media has often hyped up a “threat”
posed by a growing China, the World Bank’s chief economist (Lin Yifu, a well respected
Chinese academic) notes “Relatively speaking, China is a country with scarce capital funds and
it is hardly the time for us to export these funds and pour them into a country profuse with capital
like the U.S.”
Asian nations are mulling over the creation of an alternative Asia foreign exchange fund, but
market shocks are making some Asian countries nervous and it is not clear if all will be able to
commit. What seems to be emerging is that Asian nations may have an opportunity to demand
more fairness in the international arena, which would be good for other developing regions, too.
The subprime mortgage crisis reached a critical stage during the first week of September 2008,
characterized by severely contracted liquidity in the global credit markets and insolvency threats
to investment banks and other institutions.
Reserve balances from banks in the Federal Reserve System began increasing over required
levels of about $10 billion at the beginning of September 2008, just after the Democratic and
Republican national conventions, and just before the stock market crash and presidential debates.
Beginning October 6, Section 128 of the Emergency Economic Stabilization Act of 2008
allowed the Federal Reserve System to pay interest on the excess balances, producing further
pressure on international credit markets. Excess on reserve balances topped $870 billion by the
end of the second week of January 2009. In comparison, the increase in reserve balances reached
only $65 billion after September 11, 2001 before falling back to normal levels within a month.
37
The root cause of the global financial crisis is deeply embedded in policy deficiencies in the
international financial system and in the unsustainable fundamentals of the world economy. The
prospect of a systemic world financial breakdown and, consequently, a long lasting economic
slowdown seems real. Now the complete financial deregulation of U.S. and Europe stands
discredited. The British Government has already bought shares in British banks and the US
Government has decided to buy. This will enable the Government to have a place on the boards
and to effectively control the financial institutions.
India and Recession

The contagion of the crisis has spread to India through various mechanisms by impacting
financial and real sectors of the economy, as well as affecting the business confidence.
India’s financial markets - equity markets, money markets, forex markets and credit markets -
came under pressure from a number of directions.
As a consequence of the global liquidity squeeze, Indian banks and corporate found their
overseas financing drying up, forcing corporates to shift their credit demand to the domestic
banking sector. The corporates withdrew their investments from domestic money market mutual
funds putting redemption pressure on the mutual funds and on non-banking financial companies
where the mutual funds companies had invested a significant portion of their funds.
The substitution of domestic financing for overseas financing affected money markets and credit
markets. The forex market also came under pressure because of reversal of capital flows as part
of the global de-leveraging process. Simultaneously, corporates were converting the funds raised
locally into foreign currency to meet their external obligations. These factors put downward
pressure on the rupee. Now with regard to the impact on the real sector, the transmission of the
crisis has been straight – through the slump in demand for exports.
The United States, European Union and the Middle East, which account for three quarters of
India’s trade in goods and services, are in a downturn. Service export growth is also likely to be
affected adversely, as financial services firms – traditionally large users of outsourcing services –
are restructured. Remittances from migrant workers also will be downward, as the Middle East
38
adjusts to lower crude prices and advanced economies go into a recession. The crisis also spread
through transmission of business sentiments - the-2- confidence levels. The ongoing turbulence
in the global markets prompted bankers to be risk averse and cautious about lending.
The Government and the RBI have responded to the unusual circumstances by way of
announcing fiscal and monetary stimulus packages.
There is evidence of domestic economic activity slowing down. Real GDP growth has moderated
in the first half of 2008/09. The services sector too, which has been our prime growth engine for
the last five years, is on the decline, mainly in construction, transport and communication, trade,
and hotels. For the first time in seven years, exports have declined in absolute terms during
October-December 2008. Recent data indicate that the demand for bank credit is slackening
despite comfortable liquidity in the system. Higher input costs and dampened demand have
dented corporate margins.
The index of industrial production has shown negative growth and investment demand has
decelerated. All these factors suggest that growth moderation may be steeper and more extended
than earlier projected. In addressing the crisis, India has several advantages also. Most notably,
the headline inflation, as measured by the wholesale price index, has fallen sharply, and recent
trends suggest a faster-than-expected reduction in inflation. The slowing domestic demand has
contributed to the disinflation. The decline in inflation will reduce input costs for corporates.
Furthermore, the decline in global crude prices and naphtha prices will reduce the size of
subsidies to oil and fertilizer companies, thus helping to earmark more funds for infrastructure
spending. It is also expected that imports will shrink more than exports keeping the current
account deficit modest. There are also several structural factors to our advantage.
First, notwithstanding the severity of the adverse shocks, India’s financial markets have shown
admirable resilience. The banking system remains sound, healthy, well capitalized and prudently
regulated. Second, our comfortable reserve position provides confidence to overseas investors.
Third, since a large majority of Indians do not participate in equity and asset markets, the
negative impact of the wealth loss effect that is plaguing the advanced economies will be quite
moderate. Consequently, consumption demand will prop up in course of time. Fourth, because of
39
India’s mandated priority sector lending, institutional credit for agriculture will be unaffected.
The farm loan waiver package implemented by the Government will further insulate the
agriculture sector from the crisis. Finally, over the years, India has built an extensive network of
social safety-net programmes, including the flagship rural employment guarantee programme,
which will protect the poor from the extreme impact of the global crisis. Over the last five years,
India clocked an unprecedented nine per cent growth rate, driven largely by domestic
consumption, investment and foreign trade. At the heart of India’s growth were a growing
entrepreneurial spirit, rise in productivity and increase in savings. These fundamental strengths
continue to be in place. Nevertheless, the global crisis will dent India’s growth trajectory as
investments and exports will decline. However, once the global economy begins to recover,
India’s turn around will be swifter, backed by strong fundamentals. Meanwhile, the challenge for
the Government and the RBI is to manage the crisis, taking care of the poor and the vulnerable
sections of the population.
Figure 3.4
BSE sensex Changes During Recession Period
40
3.2 COMPANY PROFILES
COMPANIES DESCRIPTION:
 BIRLA SUNLIFE MUTUAL FUNDS
Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla
Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life
Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's
experience in the Indian market and Sun Life's global experience.
Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading
Mutual Funds managing assets of a large investor base. The fund offers a range of investment
options, which include diversified and sector specific equity schemes, fund of fund schemes,
hybrid and monthly income funds, a wide range of debt and treasury products and offshore
funds. BSLAMC follows a long-term, fundamental research based approach to investment. The
approach is to identify companies, which have excellent growth prospects and strong
fundamentals. The fundamentals include the quality of the company’s management,
sustainability of its business model and its competitive position, amongst other factors. Birla Sun
Life Asset Management Company has one of the largest team of research analysts in the
industry, dedicated to tracking down the best companies to invest in. Birla Sun Life AMC strives
to provide transparent, ethical and research-based investments and wealth management services.
Scheme: Birla Sun life Frontline Equity
Objective: Birla Sun Life Frontline Equity Fund is an open-ended diversified equity fund, which
invests in handpicked frontline stocks (i.e. stocks which have the potential of providing superior
growth opportunities) such that it is representative of all leading sectors of its chosen benchmark.
The scheme targets the same sectoral weights (+/- 5%) within its portfolio as the benchmark, the
BSE 200. However, the choice of stocks is not limited to the benchmark, thus providing a wider
universe of investible stocks.
41
Investing across sectors ensures diversification and at the same time investing in frontline stocks
provides for a possibility of higher returns. Birla Sun Life Frontline Equity Fund is ideal for
investors looking at investing in quality stocks across the leading sectors of the economy.
The scheme aims to generate long-term capital growth, income generation and distribution of
dividend. It would target the same sectoral weights as BSE 200, subject to flexibility of selecting
stocks within a particular sector..
TABLE 3.1
Description of the Birla sun life frontline Equity
Mutual fund family Birla Sun life Mutual Fund
Fund class Equity Diversified
Launch Date August 2002
Fund Manager Mahesh Patil
Minimum Investment Rs.5000
Subsequent Investment Rs.1000
Minimum Withdrawal --
Minimum Balance --
Pricing Method Forward
Type Open End
Bench Mark BSE 200
Source: secondary data
42
 DSP Merrill Lynch Mutual Fund
DSP Merrill Lynch Limited (DSPML) - DSPML is a leading financial service provider in India.
It is a culmination of a long standing relationship between DSP Financial Consultants Limited
(DSP), and Merrill Lynch and Co. (ML), the leading international capital raising, financial
management and advisory company.In India,
DSPML is the leading underwriter and broker for debt and equity securities and a leading
advisor to corporations and institutions. For private customers, our platform of products and
services provides access to a robust range of investing and wealth building tools with the
personal guidance of financial consultants. DSPML is also among the first firms to set up a full-
fledged research team in India. The Company is among the major players in the debt and equity
markets and is also a primary dealer of Government Securities.
DSP Merrill Lynch Limited is a full service investment banking and brokerage firm with a
leading position in helping clients to raise capital, mergers and acquisitions, securities research,
sales and trading and investment advisory activities. DSP Merrill Lynch Capital Limited is a
leading NBFC registered with the Reserve Bank of India. It offers solutions to clients in terms of
securities based loans, IPO financing, secured financing backed by receivables, real estate and
other collaterals and also structured products designed to meet the investment needs of clients. It
also makes principal investments in partnership with clients.
DSP Merrill Lynch Securities Trading Company Limited is an NBFC registered with the
Reserve Bank of India and carries on the activity of a primary dealer as permitted by the Reserve
Bank of India. It is one of the leading players in the sovereign, corporate bond and derivatives
markets.
43
Scheme: Opportunities Growth
Objective: The scheme seeks to achieve long-term capital appreciation by responding to the
dynamically changing Indian economy by moving across sectors such as the lifestyle, pharma,
cyclical and technology.
TABLE 3.2
Description about the fund:

Mutual fund family DSP Merillynch Mutual Fund
Launch Date August 2000
Fund Manager Anup Maheshwari
Minimum Withdrawal Rs.1000
Minimum Balance Rs.500
Type Open End
Bench Mark S & P CNX Nifty
 ICICI Mutual Fund
44
ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's foremost
financial services companies-and Prudential plc - a leading international financial services group
headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank
holding a stake of 74% and Prudential plc holding 26%.Started their operations in December 2000 after
receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide
team comprises of 2099 branches (inclusive of 1,116 micro-offices), over 276,000 advisors; and 18
bancassurance partners.

ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of
AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most
Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted
Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold
our commitment to deliver world-class financial solutions to customers all over India.
Scheme: Prudential Growth
Objective :- The scheme seeks to generate long-term capital appreciation by investing predominantly in
equities that is 95% in equities while the rest would be invested in debt and money market instruments.
TABLE 3.3
45
Description of the ICIC Prudential Growth
Mutual fund family ICICI Mutual Fund
Launch Date June 1998
Fund Manager Kaushik Roychaudhary
Type Open End
Bench Mark S & P CNX Nifty
 HDFC Mutual Fund
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
46
The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund
(HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF),
HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF),
HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating
Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC
Capital Builder Fund (HCBF), HDFC TaxSaver (HTS), HDFC Prudence Fund (HPF), HDFC
High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF), HDFC MF Monthly
Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC Multiple Yield Fund
(HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005
(HMYF-Plan 2005), HDFC Quarterly Interval Fund (HQIF) and HDFC Arbitrage Fund (HAF).
The AMC is also managing 11 closed ended Schemes of the HDFC Mutual Fund viz. HDFC
Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure Fund,
HDFC Fixed Maturity Plans, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity
Plans - Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series
V, HDFC Fixed Maturity Plans - Series VI, HFDC Fixed Maturity Plans - Series VII and HFDC
Fixed Maturity Plans - Series VIII.
The AMC is also providing portfolio management / advisory services and such activities are not
in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from
SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio
Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration
is valid from January 1, 2007 to December 31, 2009.
Scheme : Equity Growth
Objective: The scheme seeks to provide long-term capital appreciation by predominantly investing in
high growth companies.
TABLE 3.4
47
Description of the HDFC Equity Growth fund
Mutual fund family HDFC Mutual Fund
Launch Date December 1994
Fund Manager Prashanth Jain
Type Open End
Bench Mark S & P CNX 500
48
 J M Mutual Fund
JM Financial Asset Management Private Limited (AMC), Sponsored by J.M. Financial &
Investment Consultancy Services Pvt. Ltd. and JM Financial Ltd., JM Financial Asset
Management Pvt. Ltd. (formerly known as J.M. Capital Management Pvt. Ltd.) is registered
under the Companies Act, 1956 and was incorporated on June 9, 1994.
JM Financial Trustee Company Pvt. Ltd. has entered into an Investment Management Agreement
(IMA) on September 1, 1994 appointing JM Financial Asset Management Pvt. Ltd. as the AMC
for the Fund. The AMC has to submit quarterly reports and/or such other reports at such intervals
as may be prescribed by the Trustee or SEBI on the functioning of the Fund to the Trustee.
The AMC can be removed by the Trustee or by 75% of the Unit holders of the particular Fund,
subject to the approval of SEBI. The AMC will manage the Scheme(s) of the Fund, in
accordance with the provisions of Investment Management Agreement, the Trust Deed, the
Regulations and the investment objectives of the Schemes.
Scheme: Equity Growth
Objective: The scheme seeks long-term capital growth and appreciation through investment primarily in
equities.
49
TABLE 3.5
Description of the JM Equity Growth

Mutual fund family J M Mutual Fund
Fund Manager Amandeep Chopra
Subsequent Investment --
Minimum Balance --
Type Open End
Bench Mark Sensex
Source: Secondary data
50
 Kotak Mutual Funds
Kotak Mahindra is one of India's leading financial institutions, offering complete financial
solutions that encompass every sphere of life. From commercial banking, to stock broking, to
mutual funds, to life insurance, to investment banking, the group caters to the financial needs of
individuals and corporates.
The group has a net worth of around Rs.3,200 crore and employs around 10,800 employees
across its various businesses servicing around 2.6 million customer accounts through a
distribution network of branches, franchisees, representative offices and satellite offices across
300 cities and towns in India and offices in New York, London, Dubai, Mauritius and Singapore.
Kotak Mahindra Asset Management Company Limited (KMAMC), a wholly owned subsidiary
of KMBL, is the Asset Manager for Kotak Mahindra Mutual Fund (KMMF). KMAMC started
operations in December 1998 and has over 4 Lac investors in various schemes. KMMF offers
schemes catering to investors with varying risk - return profiles and was the first fund house in
the country to launch a dedicated gilt scheme investing only in government securities.
Scheme: Kotak 30 Growth
Objective:The scheme seeks capital appreciation, through investments in equities. The fund would invest
in not more than 30 stocks. A part of the corpus will be invested in debt also.
51
TABLE 3.6
Description of the Kotak 30 Growth

Mutual fund family Kotak Mutual Funds
Fund Manager Krishna Sanghvi
Type Open End
Bench Mark S&P CNX Nifty
52
 Reliance Mutual Funds
Reliance Mutual Fund (RMF) is one of India’s leading Mutual Funds, with Average Assets
Under Management (AAUM) of Rs. 88,388 Crs (AAUM for 30th Apr 09 ) and an investor base
of over 71.53 Lacs. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani
Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-
rounded portfolio of products to meet varying investor requirements and has presence in 118
cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative
products and customer service initiatives to increase value to investors. "Reliance Mutual Fund
schemes are managed by Reliance Capital Asset Management Limited., a subsidiary of Reliance
Capital Limited, which holds 93.37% of the paid-up capital of RCAM, the balance paid up
capital being held by minority shareholders." Reliance Capital Ltd. is one of India’s leading and
fastest growing private sector financial services companies, and ranks among the top 3 private
sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and proprietary
investments, stock broking and other financial services.
Scheme: Reliance Equity Growth
Objective: The scheme aims at long-term growth of capital through research based investment
approach. The funds will be invested in Equity and equity related instruments, and there will be
an exposure to debt and money market instruments also.
53
TABLE 3.7
Description of the Reliance Growth
Mutual fund family

Reliance Mutual Funds
Launch Date October 1995
Fund Manager V Ramanan
Type Open End
Bench Mark BSE 100
 Sundaram Mutual Funds
54
The Company was incorporated in 1954, with the object of financing the purchase of
commercial vehicles and passenger cars. The company was started with a paid-up capital
of Rs.2.00 Lakhs and later went public in 1972.
The Company's shares were listed in the Madras Stock Exchange in 1972 and in the
National Stock Exchange in January 1998.
Subsequently, the equity shares of the Company have been delisted from Madras Stock
Exchange Limited (MSE) with effect from January 27, 2004, in accordance with SEBI
(Delisting of Securities) Guidelines, 2003, for voluntary delisting.
Scheme: BNP Paribas Growth
Objective: The scheme aims to provide to investors a reasonably diversified portfolio of stocks
essentially meant to give higher returns in the medium to long term. However on a selective
basis, short-term opportunities that may yield above average returns will not be ignored.
TABLE 3.8
55
Description of the Sundaram BNP Paribas Growth
Mutual fund family
Sundaram Mutual Funds
Launch Date March 1997
Fund Manager Rajesh Singh
Type Open End
Bench Mark BSE 200
 TATA Mutual Funds
Backed by one of the most trusted and valued brands in India, Tata Mutual Fund has earned the
trust of lakhs of investors with its consistent performance and world-class service.Tata Mutual
56
Fund manages around Rs. 19,438.00 crores (average AUM for the month) as on April 30, 2009
worth of assets across its varied offerings. Tata Mutual Fund offers an investment option for
everyone, whether you are a businessman or salaried professional, a retired person or housewife,
an aggressive investor or a conservative capital builder.The Tata Asset Management philosophy
is centred on seeking consistent, long-term results. Tata Asset Management aims at overall
excellence, within the framework of transparent and rigorous risk controls.
Scheme: Pure Equity Growth
Objective: Earlier known as Tata Twin Option (Equity), the scheme aims at medium to long term capital
growth, with 100 per cent investments in the equity of large-cap, liquid blue-chip companies.
TABLE 3.9
57
Description of the Tata Pure Equtiy Growth
Mutual fund family

TATA Mutual Fuds
Launch Date March 1998
Fund Manager M Venugopal
Type Open End
Bench Mark Sensex
 HSBC Mutual Fund
HSBC Mutual Fund, a premier asset management company, offers optimum investment
performance, institutionalised investment management process, efficient service and a flexible
product range to create wealth in the long term for individual and institutional investors.
58
HSBC Global Asset Management has an outstanding track record and a longstanding presence
globally. With approximately USD299 billion (as on 31 October 2008) of assets under
management worldwide and a presence in about 20 countries, it is one of the premier fund
management organisations in the world.
HSBC Global Asset Management in India provides a comprehensive range of investment

management solutions to a diverse client base and is committed to delivering consistent
investment performance, world-class service and a broad range of solutions for all types of
investors. Our range of offerings in India comes under two broad categories Mutual Fund and
Portfolio Management Services.
Scheme: Equity growth
Objective: The scheme seeks to generate long-term capital growth from a diversified portfolio of
equity and equity related securities of companies across a range of market capitalization’s, with a
preference for medium and large companies.
TABLE 3.10
Description of the HSBC Equity
59
Mutual fund family
HSBC Mutual Fund
Fund Manager Mihr Vora
Type BSE 200
Bench Mark Sensex
CHAPTER 4 - ANALYSIS ANS INTREPRETATION OF DATA
BIRLA SUNLIFE FRONTILINE EQUITY
This part of the chapter provides the comparison of Birla Frontline Equity with Market Indicators
(BSE200).
60
TABLE 4.1: Comparison of Birla Frontline equity fund with market indicators (BSE200.) with the
calculation of portfolio return & market return, Average fund & Index return, Standard deviation of fund
& index return and Beta.
NAV BSE200
Year Opening Closing Rp Rp^2 Opening Closing Rm Rm^2
2004 20.01 23.94 19.64 385.73 769.67 886.55 15.18 230.60
2005 24.46 33.94 38.75 1502.11 890.48 1186.23 33.21 1103.06
2006 33.98 50.13 47.52 2258.90 1188.78 1655.74 39.28 1542.96
2007 50.86 81.34 59.92 3591.51 1655.28 2656.52 60.48 3658.75
2008 82.13 61.42 -25.21 635.85 2664.67 1950.17 -26.81 718.98
Total 140.63 8374.12 121.35 7254.37
Arp 28.12 SDRp 28.72 Beta 1.15
Arm 24.27 SDRm 29.35

Where,
Rp Fund Return (Portfolio Return)
Rm Index Return (Market Return)
ARp Average fund return
Arm Average Index return
SDRp Standard deviation of Fund Return
SDRm Standard deviation of Index return
Figure. 4.1
Comparison of Birla Frontline equity fund with market indicators (BSE200.)
61
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
-40.00%
Portfolio Return
Market Return
 The fund has performed fairly, the return of the fund is greater for the period
2004,2005,2006 and 2007 when compared to the respective market index which is the
BSE 200
 From the Beginning of 2008 the Fund started declining because of the impact of
Recession.
 The average return of the fund is also satisfactory.
 The Beta of this scheme was 1.15, which shows that it is very volatile and it has greater
risks than compared to the benchmark index.
 Its standard deviation was at 28.72 very much comparable to that of the benchmark at
29.35 has higher risks.
 The standard deviation of fund return and Index return is satisfactory.
 From January 2009 , the Fund shows a recovery Trend
 Benchmark Index Greatly affected this Mutual Fund
 4.2 DSP Merrill Lynch – Opportunities Growth
This part of the chapter provides the comparison of DSP Black Rock Growth with Market
Indicators (S & P CNX Nifty)
62
TABLE 4.2: Comparison of DSP growth equity fund with market indicators (S & P CNX Nifty)
with the calculation of portfolio return & market return, Average fund & Index return, Standard
deviation of fund & index return and Beta.
S & P CNX
NAV NIFTY
2004 20.43 26.06 27.5575 759.417 1880 2081 10.69149 114.3079
2005 26.48 39.06 47.5076 2256.97 2080 2837 36.39423 1324.54
2006 39.07 56.23 43.9212 1929.07 2837 3966 39.79556 1583.686
2007 56.81 89.89 58.2292 3390.64 3966 6139 54.79072 3002.023
2008 90.54 63.07 -30.34 920.527 6136 4735 -22.8325 521.3214
Total 146.875 9256.62 118.84 6545.88
Arp 29.375 SDRp 31.43 Beta 1.23
Arm 23.7679 SDRm 27.28
63
Figure 4.2
Comparison of DSP growth equity fund with market indicators (S & P CNX Nifty)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
-40.00%
 The fund has performed better for the year 2004, 2005, 2006 and 2007 is greater than the
return of the index fund except in the year 2008, where the fund return is falling lower
than the index return which is the S&P CNX Nifty.
 During 2008 Fund affected badly because of Recession
 The average return of the fund is also satisfactory.
 The beta of the fund suggests that it is very volatile and it has greater risks than compared
to the benchmark index.
 The standard deviation of the fund is very much comparable to that of Index return.
 Throughout the year 2008 the Fund showed a Negative Returns
64
4.3 ICICI Prudential Growth Fund
This part of the chapter provides the comparison of ICICI Prudential Growth with Market
Indicators (S & P CNX Nifty)
TABLE 4.3: Comparison of ICICI Prudential growth fund with market indicators
(S & P CNX Nifty) with the calculation of portfolio return & market return,
Average fund & Index return, Standard deviation of fund & index return and Beta.
S & P CNX
NAV NIFTY
2004 39.15 43.73 11.6986 136.857 1880 2081 10.69149 114.3079
2005 44.08 65.39 48.3439 2337.13 2080 2837 36.39423 1324.54
2006 65.58 93.36 42.3605 1794.41 2837 3966 39.79556 1583.686
2007 94.48 134.81 42.6863 1822.12 3966 6139 54.79072 3002.023
2008 134.72 103.44 -23.219 539.1 6136 4735 -22.8325 521.3214
Total 121.871 6629.62 118.84 6545.88
Arp 24.3741 SDRp 27.05 Beta 1.25
Arm 23.7679 SDRm 27.28
65
Figure 4.3
Comparison of ICICI Prudential growth fund with market indicators
(S & P CNX Nifty)
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
Portfolio Return
Market Return
 From the above graph and table we can state that the fund returns are higher for the
year 2005 & 2006 than the Index returns. And in the year 2007 the index return is
greater than the fund return and in 2008 both the fund return and index return falling
at the same stage.
 The beta of the fund suggests that it is very volatile and it has greater risks than
compared to the benchmark index.
 The average return of the fund is also satisfactory
 The standard deviation of fund return is comparable to the that of Bench mark
return..
66
4.4 HDFC EQUITY FUND
This part of the chapter provides the comparison of HDFC Equity with Market Indicators (S & P
CNX 500)
TABLE 4.4: Comparison of HDFC equity fund with market indicators (S & P CNX500)
NAV S & P CNX 500
2004 52.29 66.39 26.965 727.111 1542.45 1804.9 17.01514 289.5149
2005 66.69 107.01 60.4588 3655.27 1818.55 2459.2 35.22862 1241.055
2006 107.19 145.39 35.6377 1270.04 2465 3295.05 33.67343 1133.9
2007 147.29 223.32 51.6193 2664.55 3299.9 5354.7 62.26855 3877.373
2008 224.59 166.41 -25.905 671.068 5370.35 3825.85 -28.7598 917.9552
Total 148.776 8988.04 119.426 7459.8
Arp 29.7552 SDRp 30.2 Beta 1.24
Arm 23.8852 SDRm 30.35
67
Figure 4.4
Comparison of HDFC equity fund with market indicators
(S & P CNX500)
80.00%
60.00%
40.00%
20.00%
0.00%
2004 2005 2006 2007 2008
-20.00%
-40.00%
Portfolio Return
Market Return
 The fund has outperformed the benchmark returns in the Year 2006 and 2007
 In the Year 2006, 2007 and 2008 it has underperformed the benchmark returns
 From the above return variations we can consider this fund as an inconsistent
performer.
 During 2008 Fund showed deep negative returns.
 The standard deviation of Fund return and benchmark return is satisfactory.
68
4.5 J M Mutual Fund Equity Growth
This part of the chapter provides the comparison of JM Equity Growth with Market Indicators
(Sensex)
TABLE 4.5: Comparison of JM equity fund with market indicators (Sensex) with the calculation of
portfolio return & market return, Average fund & Index return, Standard deviation of fund & index
return and Beta.
NAV SENSEX
Openin Closin
Year g g Rp Rp^2 Opening Closing Rm Rm^2
312.78 12.4344
2004 15.21 17.9 17.6857 5 5872.48 6602.69 4 154.6153
2609.3 41.8236
2005 18.03 27.24 51.0815 2 6626.49 9397.93 5 1749.218
1902.2 13786.9 46.3191

2006 27.33 39.25 43.6151 7 9422.49 1 8 2145.466
1967.8 13827.7 20286.9 46.7119

2007 39.9 57.6 44.3609 9 7 9 4 2182.006
809.36 20325.2 15832.5

2008 58.49 41.85 -28.449 3 7 5 -22.1041 917.9552
7601.6
Total 128.294 4 125.185 7149.26
Arp 25.6588 SDRp 29.35 Beta 0.94
Arm 25.037 SDRm 28.33
69
Figure 4.5
Comparison of JM equity fund with market indicators (Sensex)
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
-40.00%
Portfolio Return
Market Return
 The benchmark index for this scheme is the SENSEX.

 The return of the fund is very low as compared to the respective benchmark index. The
average return of the fund is 21.27 as compared to the benchmark index of 25.037
 The beta of 0.94, indicates that it is less volatile as compared to the benchmark index
 The standard deviation of fund return is very much comparable to that of benchmark
return
70
4.6 KOTAK 30 GROWTH FUND
This part of the chapter provides the comparison of Kotak 30 Growth with Market Indicators (S
& P CNX Nifty)
TABLE: 4.6: Comparison of Kotak 30 Growth fund with market indicators (S&P CNX Nifty) with the
S & P CNX
NAV NIFTY
2004 23.68 31.86 34.5439 1193.28 1880 2081 10.69149 114.3079
2005 32.55 47.59 46.2058 2134.98 2080 2837 36.39423 1324.54
2006 47.63 68.34 43.481 1890.6 2837 3966 39.79556 1583.686
2007 68.93 113.84 65.1531 4244.92 3966 6139 54.79072 3002.023
2008 114.2 85.19 -25.403 645.302 6136 4735 -22.8325 521.3214
Total 163.981 10109.1 118.83 6545.88
Arp 32.7962 SDRp 30.76 Beta 1.37 .
Arm 23.766 SDRm 27.28
71
Figure 4.6
Comparison of Kotak 30 Growth fund with market indicators

(S&P CNX Nifty)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
Portfolio Return
Market Return
 The benchmark index for this scheme is the S & P CNX NIFTY.
 The return of the fund is very low as compared to the respective benchmark index. The
average return of the fund is 21.27 as compared to the benchmark index of 25.037.
 The Beta of this scheme was 1.94, which shows that is a aggressive portfolio compared to
the benchmark index.
 The standard deviation of Fund return is very much comparable to that of Benchmark
return.
72
4.7 RELIANCE MUTUAL GROWTH FUND
This part of the chapter provides the comparison of Reliance Growth with Market Indicators
(BSE 100)
TABLE 4.7: Comparison of Reliance Growth fund with market indicators (BSE 100)
NAV BSE 100
Openin Closin
Year g g Rp Rp^2 Opening Closing Rm Rm^2
41.120 1690.8 15.8843

2004 79.45 112.12 2 7 3089.58 3580.34 6 252.3129
67.623 4572.9 37.8369

2005 112.86 189.18 6 5 3593.58 4953.28 2 1431.633
39.815 1585.2 40.6458

2006 190.78 266.74 5 7 4964.64 6982.56 5 1652.085
74.682 5577.4 11154.2 59.3536

2007 270.05 471.73 5 7 6999.7 8 9 3522.86
894.15 11186.4
2008 476.85 334.26 -29.902 9 5 8320.87 -25.6165 656.2065
193.33 14320.
Total 9 7 128.104 7515.1
Arp 38.6679 SDRp 37.01 Beta 1.5
Arm 25.6209 SDRm 29.09
Source secondary data
73
Figure 4.7
Comparison of Reliance Growth fund with market indicators (BSE 100)
80.00%
60.00%
40.00%
20.00%
0.00%
2004 2005 2006 2007 2008
-20.00%
-40.00%
Portfolio Return
Market Return
 From the above table and graph we can state that the fund return and index return is fair
for the period 2006, 2007 and both the fund and index return are falling a lower rate in
the year 2008.
 The Bench Mark index for this scheme is BSE100
 The beta of the fund suggests that it is very volatile and it has greater risks than compared
to the benchmark index
 The standard deviation of fund return is very much comparable to that of bench mark
return.
74
4.8 SUNDARAM BNP PARIBAS GROWTH
This part of the chapter provides the comparison of Sundaram BNP Paribas Growth with Market
Indicators (BSE 200)
TABLE 4.8: Comparison of Sundaram BNP Paribas Growth fund with market indicators (BSE 200) with
the calculation of portfolio return & market return, Average fund & Index return, Standard deviation of
fund & index return and Beta.
NAV BSE 200
2004 26.85 33.87 26.1453 683.574 769.67 886.55 15.18573 230.6064
2005 34.29 48.13 40.3616 1629.06 890.48 1186.23 33.21242 1103.065
2006 48.17 68.63 42.4746 1804.09 1188.78 1655.74 39.28061 1542.966
2007 69.39 117.88 69.8804 4883.27 1655.28 2656.52 60.48765 3658.756
2008 118.84 80.13 -32.573 1061.01 2664.67 1950.17 -26.8138 718.9813
Total 146.289 10061
Arp 38.6679 SDRp 37.01 Beta 1.2
Arm 25.6209 SDRm 29.09
75
Figure 4.8
Comparison of Sundaram BNP Paribas Growth fund with market indicator (BSE 200)
80.00%
60.00%
40.00%
20.00%
0.00%
2004 2005 2006 2007 2008
-20.00%
-40.00%
Portfolio Return
Market Return
 The return of the fund is higher than the benchmark index for the year 2004 to 2007.
 The benchmark index for the comparison of this fund is the BSE 200
 The beta of the fund indicates that it is volatile as against the benchmark index.
 The NAV returns of the fund are better than the bench mark index.
 The standard deviation of fund return is very much comparable to that of benchmark
return.
76
4.9 TATA PURE EQUITY GROWTH
This part of the chapter provides the comparison of TATA Pure Equity Growth with Market
Indicators (Sensex)
TABLE: 4.9: Comparison of Tata Pure equity growth fund with market indicators (Sensex.) with the
NAV SENSEX
2004 23.56 29.94 27.0798 733.315 5872.48 6602.69 12.43444 154.6153
2005 30.19 43.22 43.16 1862.78 6626.49 9397.93 41.82365 1749.218
2006 43.3 61.65 42.3788 1795.96 9422.49 13786.91 46.31918 2145.466
2007 62.55 99.45 58.9928 3480.15 13827.77 20286.99 46.71194 2182.006
2008 100.03 73.09 -26.932 725.328 20325.27 15832.55 -22.1041 488.5917
Total 144.679 8597.54 125.185 6719.9
Arp 28.9359 SDRp 29.7 Beta 1.15
Arm 25.037 SDRm 26.77
77
Figure 4.9
Comparison of Tata Pure equity growth fund with market indicators (Sensex.)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
-40.00%
Portfolio Return
Market Return
 The fund has outperformed the benchmark returns in the Year 2004 and mid 2006
 For the rest of the year it has underperformed the benchmark returns
performer
 Overall the Fund has not given good returns
 The standard deviation of fund return and benchmark return is satisfactory.
78
4.10 HSBC EQUITY FUND
This part of the chapter provides the comparison of HSBC Equity with Market Indicators
(Sensex)
TABLE: 4.10: Comparison of HSBC equity fund with market indicators (Sensex)
NAV SENSEX
2004 27.13 36.97 36.2698 1315.5 5872.48 6602.69 12.43444 154.6153
2005 37.44 52.49 40.1976 1615.85 6626.49 9397.93 41.82365 1749.218
2006 52.39 72.04 37.5072 1406.79 9422.49 13786.91 46.31918 2145.466
2007 73.02 114.92 57.3815 3292.64 13827.77 20286.99 46.71194 2182.006
2008 115.04 88.56 -23.018 529.832 20325.27 15832.55 -22.1041 488.5917
Total 148.338 8160.61 125.185 6719.9
Arp 29.6676 SDRp 27.46 Beta 1.18
Arm 25.037 SDRm 26.77
79
Figure 4.10
Comparison of HSBC equity fund with market indicators (Sensex)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
-10.00% 2004 2005 2006 2007 2008
-20.00%
-30.00%
Portfolio Return
Market Return
 The fund has outperformed the benchmark returns in the Year 2004 and mid 2007
 For the rest of the year it has underperformed the benchmark returns
performer
 Overall the Fund has not given good returns and is very volatile in nature.
 The standard deviation of fund return and benchmark return is satisfactory.
80
Table 4.11
Top Five Funds based on NAV Returns
Sl.No. Funds Rank
1 Reliance Growth 1
2 Sundaram BNP Paribas Growth 2
3 Tata Pure Equity 3
4 Kotak 30 Growth 4
5 HDFC Equity 5
Table 4.12
The Top five fund based on Standard Deviation
Sl.No. Funds Rank
1 Reliance Growth 1
2 Sundaram BNP Paribas Growth 2
3 Kotak 30 Growth 3
4 Tata Pure Equity 4
5 HDFC Equity 5
81
CHAPTER 5 – FINDINGS RECCOMENDATIONS AND CONCLUSION
5.1 FINDINGS
 All funds had a steep decline in the year 2008.
 Recession Badly affected Indian Mutual Funds.
 Almost all sectors got affected by the Impact of Recession.
 During January 2008 Decline percentage was more.
 The analysis of 10 Equity Diversified Mutual funds based on NAV returns for a period of
5 years ranked, RELIANCE Equity fund as 1st with 74.68% followed by SUNDARAM
BNP PARIBAS Growth as 2nd with 69%, Tata Pure Equity Growth fund as 3 rd and
Kotak 30 Growth fund.
 All Equity schemes has shown better returns than their respective benchmark index.
 Sundaram BNP Paribas Growth fund managed efficiently showing better performance in
different holding periods, compared to market portfolios
 The beta of the funds suggest that they are no highly volatile when it is compared to their
respective benchmark indexes,
 Of the 10 Equity schemes selected RELIANCE EQUITY Growth, J M EQUITY
GROWTH and SUNDARAM BNP PARIBAS GROWTH were the funds, which had the
highest return. They had the highest increase in its NAV during the year of 2007.
 Track Record, Brand Image and the Portfolio mix were the most preferred criteria for
investing in debt funds by the respondents in the order of preference.
 The performance measures of all Equity schemes are satisfactory on an average.
82
5.2 CONCLUSION
According to Amartya Sen, the Nobel laureate in Economics, the present recession in the global
economy is more a ‘matter of psychology than economics’ and no amount of financial stimulus
would be enough to turn it around. “We have to get rid of the mindset, the mindset of recession.”
The economic meltdown gripped the world due to financial mismanagement and lack of
regulations by the developed countries. The stimulus packages alone would not perk up the
economy and these should be supplemented by coordinated efforts by the developed and
emerging economies so that a more participatory and all-inclusive development policy and
agenda should be adopted and a more equitable international financial architecture should be
visualized and implemented without loss of time.For the casual investor who does not have the
time or inclination to actively manage his or her own portfolio, mutual funds reduce the time and
effort needed. That stays true even in a recession. The trick is finding mutual funds that do well
in tough economic times. There are certain industries that weather recession better than others
and the best mutual funds will be sector funds which are based on a specific industry. Industries
that do well during economic downturn include utilities (everyone still needs to keep the lights
on), oil and gas (still need to drive to work), and staple consumer goods (babies still need diapers
and kids still need clothes).
Mutual funds in recession-proof sectors can still be volatile and under-perform if the fund
manager buys and sells constantly or the fund charges a high management fee. Review the fee
structures for the funds you are considering and choose one with a high historical return and low
fee.Mutual funds can still be the foundation of your investment portfolio if you choose carefully
and understand the basics. There are bargains to be had in the current economic climate. All
stocks, and therefore all mutual funds, are being punished because of the rampant fear and lack
of confidence in the markets. Those mutual funds that contain good quality, recession-proof
stocks will weather the storm and provide solid returns.
83
Saving money is not enough. Each of us also need to invest ones savings intelligently in order to have
enough money available for funding the higher education of ones children, for buying a house, or for
ones own golden years.The study will guide the new investor who wants to invest in equity-diversified
schemes 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 diversified schemes.
84
5.3 RECOMMENDATIONS
 The Mutual Fund companies can utilize this opportunity of soft interest regime followed
by the banks and attract the fixed deposit and the savings Bank Account Investors.
 Asset Management Companies Can give a clear cut information regarding their Position
in the current Scenario.
 Investors should consider entrusting some of their money to funds that have done well in
tough markets or amid a weak economy.
 The Mutual Fund Asset Management companies can Educate and give Awareness about
the concept of Mutual Funds to the investors. As majority of the investors do not know
what a Mutual Fund is. And it should highlight the benefits of mutual fund over other
investment and also their safety and security advantages to attract more number of
customers.
 In the Present Scenario, The Mutual Fund Asset Management companies can come up
with more advertisements and promotional measures and it should also target the FII’s
and individual investors who invest in the capital markets.
 The fund can state always the objective of each fund floated by the Asset Management
Company to the investors so that the right investors can choose the right fund.
 To induce investments into mutual funds the Government can to provide tax breaks that
would attract investment into mutual funds.
 The risk management systems and the benchmarking of indices can be improved by
AMFI (Association of Mutual Funds in India) to give the investors more guidelines and
tools to take a good investment decision during Recession Period.
85
BIBLIOGRAPHY
Books
 Chandra Prasanna Investment analysis and portfolio management , The McGraw hill
companies ,2005
 V.K.Bhalla, Security Analysis and Portfolio management -2005 Edition
 Bodie, Kane, Markus Investments , TATA McGraw hill companies, 2004
 Avadhani V.A, Investments and Securities Markets in India, Himalaya Publishing House,
2003
 Jain Rajiv, Investing in India, Indian Investment Publication, 2004
Journals
 The ICFAI Journal of applied finance, Vol 13 NO.9 , September 2007

 ICFAI Reader, Feb 2009
 The ICFAI Journal- Treasury Management, Jan 2009& Feb 2009
 Indian Journal of Finance, Vol 3, No.3, Mar 2009
 Indian Journal of Finance, Vol 3, No.4, April 2009
Websites
 www.sbimf.com/latestnav.asp
 http://amfiindia.com/showhtml.asp?page=mfindustry
 www.mutualfundsindia.com/mfbasic
 www.moneycontrol.com
 www.wikipedia.com
 http://bseindia.com/histdata/hindices.asp
 www.camsonline.com
86

A Study On Impact of Financial Crisis On Indian Mutual Funds

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A Study On Impact of Financial Crisis On Indian Mutual Funds

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CHAPTER- I

1:1 General Introduction

1.1.1 Features of Investments:

1.2 MUTUAL FUNDS

MUTUAL FUND OPERATIONAL FLOW CHART

10. Choice of Schemes

1.2.2 Drawbacks of Mutual Funds:

2) Fees and commissions:

 Tax saving schemes.

Interval funds combine the features of open-ended and close-ended schemes.

4) Money Market Funds

1) Tax Saving Schemes

a) Industry Specific Schemes

Mutual Fund Structure

Asset Management Company (AMC)

Registrar and Transfer Agent

1.2.2 RIGHTS OF A MUTUAL FUND UNIT HOLDER:

1. Receive information about the investment policies, investment objectives, financial

4. Vote in accordance with the Regulations to:-

a. Change the Asset Management Company.

b. Wind up the schemes.

1.2.3 TAX BENEFITS OF MUTUAL FUNDS:

Section 10(33) of the Income Tax Act 1961

Section 88 of the Income Tax Act 1961

Tax Deduction at Source (TDS):

CHAPTER - 2: RESEARCH DESIGN

2.1-Title of the Study:

2.4.1 Sources for Data Collection

2.4.3 Method of Analysis

 Standard Deviation, Beta

2.5.1 Net Asset Value or NAV

For Calculating NAV in Years

NAV Closing Value – NAV Opening Value

NAV Opening Value

2.5.2 STANDARD DEVIATION

Standard Deviation (Risk) of the Fund:

Where: p : Risk of the Fund.

Rp : Return of the fund.

Standard Deviation (Risk) of the benchmark index:

Rm Index Return (Market Return)

m Risk of the Index

Beta of the Fund:

2:7 Limitations of the Study

 Introduction of the research topic

CHAPTER- 2: RESEARCH DESIGN

CHAPTER- 3: INDUSTRY PROFILE

CHAPTER- 4: ANALYSIS AND INTERPRETATION OF DATA

CHAPTER 3:- PROFILES

3.1 History of the Indian Mutual Fund Industry

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

Fourth Phase – since February 2003

Financial Services Industry:

In finance, financial markets facilitate:

 The raising of capital (in the capital markets)

 International trade (in the currency markets)

The term financial markets can be a cause of much confusion.

Financial markets could mean:

Types of Financial Markets:

The financial markets can be divided into different subtypes:

Without financial markets, borrowers would have difficulty in finding lenders

Relationship between lenders and borrowers

Lenders Financial Intermediaries Financial Markets Borrowers