1.

1 DEFINITION

A mutual fund is a scheme in which several people invest their money for a common
financial cause. The collected money invests in the capital market and the money, which
they earned, is divided based on the number of units, which they hold.

The mutual fund industry started in India in a small way with the UTI Act creating what
was effectively a small savings division within the RBI. Over a period of 25 years this
grew fairly successfully and gave investors a good return, and therefore in 1989, as the
next logical step, public sector banks and financial institutions were allowed to float
mutual funds and their success emboldened the government to allow the private sector to
foray into this area.

The advantages of mutual fund are professional management, diversification, liquidity,

simplicity and economies of scale.

The disadvantages of mutual fund are high costs, over-diversification, possible tax
consequences, and the inability of management to guarantee a superior return.

The biggest problems with mutual funds are their costs and fees it include Purchase fee,
Redemption fee, Exchange fee, Management fee, Account fee & Transaction Costs. There
are some loads which add to the cost of mutual fund. Load is a type of commission
depending on the type of funds.

Mutual funds are easy to buy and sell. You can either buy them directly from the fund
company or through a third party. Before investing in any funds one should consider some
factor like objective, risk, Fund Manager’s and scheme track record, Cost factor etc.

There are many, many types of mutual funds. You can classify funds based Structure
(open-ended & close-ended), Nature (equity, debt, balanced), Investment objective
(growth, income, money market) etc.

A code of conduct and registration structure for mutual fund intermediaries, which were
subsequently mandated by SEBI. In addition, this year AMFI was involved in a number of
developments and enhancements to the regulatory framework.

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The most important trend in the mutual fund industry is the aggressive expansion of the
foreign owned mutual fund companies and the decline of the companies floated by
nationalized banks and smaller private sector players.

Principal Mutual Fund, Reliance Mutual Fund, ICICI Mutual Fund, DSP BLACKROCK
Mutual Fund, Birla Sun Life Mutual Fund and UTI Mutual Fund are the top performing
equity mutual fund company in India.

Reliance mutual funding is considered to be most reliable mutual funds in India. People
want to invest in this institution because they know that this institution will never dissatisfy
them at any cost. You should always keep this into your mind that if particular mutual
funding scheme is on larger scale then next time, you might not get the same results so
being a careful investor you should take your major step diligently otherwise you will be
unable to obtain the high returns.

1.2 WHAT IS AN EQUITY FUND?

An Equity Fund is a Mutual Fund Scheme that invests predominantly in shares/stocks of

companies. They are also known as Growth Funds.

Equity Funds are either Active or Passive.  In an Active Fund, a fund manager scans the
market, conducts research on companies, examines performance and looks for the best
stocks to invest. In a Passive Fund, the fund manager builds a portfolio that mirrors a
popular market index, say Sensex or Nifty Fifty.

Furthermore, Equity Funds can also be divided as per Market Capitalisation, i.e. how much
the capital market values an entire company’s equity. There can be Large Cap, Mid Cap,
Small or Micro Cap Funds.

Also there can be a further classification as Diversified or Sectoral / Thematic. In the

former, the scheme invests in stocks across the entire market spectrum, while in the latter it
is restricted to only a particular sector or theme, say, Infotech or Infrastructure.

Thus, an equity fund essentially invests in company shares, and aims to provide the benefit
of professional management and diversification to ordinary investors.

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1.3 WHY INVEST IN EQUITY MUTUAL FUNDS?

Equity mutual fund is suitable for investors who are seeking long term capital growth. The
risk and return vary from scheme to scheme under equity mutual funds as they are either
actively or passively managed by the fund managers. Here are eight reasons for you to
invest in equity mutual funds

 1.3.1 Easy on Pocket

Anyone and everyone can invest in equity mutual fund through SIP mode. One can start
investing with just Rs 500 a month, A SIP allows regular periodic investments through
ECS (Electronic Clearing Service) process where money gets automatically deducted from
your bank account every month at a predetermined date.

1.3.2 Capital Appreciation

One of the primary benefits of investing in equity mutual fund is to get capital appreciation
benefit. It is one of the financial instrument which can give you high inflation beating
returns. If there is an increase in stock prices, it would reflect in appreciation in the
invested money. On can accumulate good amount of wealth over a period of time.

1.3.3 Portfolio Diversification

When you invest in equity mutual funds it gets spread into considerable sectors reducing
the risk of losses in future. Therefore, if some stocks underperformed at the exchange, the
outperforming ones can make up for the losses, hence minimises your market risk in your
overall portfolio. However, one cannot escape all risks even having a well-diversified
portfolio.

1.3.4 Financial Goal-Oriented Funds

If you have long-term financial goals, equity mutual fund can be one of the best vehicles to
achieve the goal. The funds are categorised into large-cap, mid-cap, small-cap, etc. and

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accordingly the returns vary from fund to fund. The higher the risk associated, the more
you have chances of getting higher returns to achieve your target amount.

1.3.4 Tax Planning Option

While investing through ELSS (Equity linked saving scheme) funds one can avail tax
benefits. Investing lump-sum for 3 years lock-in period will help you get a tax deduction in
the current financial year for up to Rs 1.5 lakh under section 80C of the Income Tax Act
1961. The schemes only have least lock-in as compared to other tax planning avenues like
5year -FDs, PPF, NPS, etc. They also tend to give much higher returns when compared to
other tax-saving financial instruments. However, the returns are market linked and not
guaranteed.

1.3.5 Tax-Free Returns

When your investments in equity mutual funds go beyond a holding period of 12 months,
the returns become tax-free. However, if redeemed before a year, short term capital gain
tax is applied at the rate of 15% which may reduce your appreciated capital to a much
higher level and your actual returns may become negative. Therefore, it always advisable
to invest for a long time horizon so that you not only earn high compounded returns but
also, get all your money tax free once redeemed.

1.3.6 Professionally Managed

One need not review their funds daily as the schemes are managed professionally by fund
managers. When an investor is unable to invest in equities due to lack of financial market
knowledge, equity mutual funds are the best option. All the schemes are managed by
professional fund managers who manage the money on behalf of several investors.

1.3.7 Easy to Liquidate

Getting the corpus back to your bank account is easy while investing through mutual
funds. Redemption can be done at any point in time. Whenever you are in need of money,
you can stop your SIP and redeem the number of free or all units you want. The whole

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process takes around about a week’s time but if your SIP is already matured, you can get
your money back in three days.

1.4 ADVANTAGES OF EQUITY MUTUAL FUNDS

Equity fund investments are investments which are made in stocks or equity, representing
ownership equity or share in companies. Equity Funds are used to diversify the portfolio of
a mutual fund. Moreover, equity funds have certain benefits that no other funds have, these
are:

1.4.1 Diversified Portfolio

Equity funds have widespread diversification, with very small initial investment. This
means buying stocks of different companies at different times in different economic
sectors. This is helpful in ways that if a stock drops at the exchange the other stocks can
make up for the loss.

1.4.2 Capital Appreciation

This is one of the primary benefits of equity fund investments. As a company grows &
earns profit, it usually chooses to reinvest the profit to grow through increasing market
share, product developments, etc. With the increasing growth of the company, the market
price of the stock increases, leading to capital appreciation for the investors.

1.4.3 Dividend

Investing in blue chip companies, usually gives the investors a steam of regular income in
the form of dividends. These companies usually pay out regular dividends in good & bad
economic times, typically paid quarterly. Having a diversified portfolio will ensure a
steady stream of income throughout the year. Different companies have different cycles, so
investors are guaranteed a pay cheque every month.

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1.4.4 Liquidity

Stocks are traded in all major exchanges in the world, every day. This makes them a highly
liquid investment. This means that an investor can sell their stocks whenever they want to.
Stocks are not as liquid as your savings in your bank account, but they are a close second,
much more than real estate. An investor can usually get their money from a stock sale
within a week.

1.4.5 No brokerage or commissions

They usually fund houses charge bank fees, commission, brokerage etc., for their services
which eventually reduces the profit earned by an investor. The more you pay, the less you
get. One of the major benefits of equity funds is that, very often, an investor can avoid
brokerage fees altogether. Over a long period of time, this becomes a major plus of
investing in these types of mutual funds.

1.4.6 Professional management

Investments are always surrounded by a degree of uncertainty. An investor is scared of

investing due to lack of adequate knowledge & time, self-discipline, or investing
experience. Mutual Funds fit in perfectly in this situation as they have an inherent design
to tap professional expertise to manage investments which, in turn, relive the stress of the
investor.

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1.5 DISADVANTAGES OF EQUITY MUTUAL FUNDS:

1.5.1 Higher costs

Since the funds are professionally managed they entail higher costs such as salary of fund
manager, exit ratio among others.

1.5.2 Lock in

ELSS funds have a lock in period of 3 years, hence less liquid.

1.5.3 Higher risks

Equity funds entail higher risks as compared to debt funds and are not suitable for those
investors who want a lower risk for their investment.

1.5.4 Suitability

An equity mutual fund may slightly differ with the investor's objectives in terms of risk,
objectives, returns etc. Also an investor may want to give more weight to a particular
sector or stock but cannot do in case of mutual funds as these schemes are standardised for
all the investors.

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STRUCTURE OF FINANCIAL INSTITUTION

Fig. Structure of Financial Institution.

2.1 DEFINITION

Mutual funds are investment companies that pool money from investors at large and offer
to sell and buy back its shares on a continuous basis and use the capital thus raised to
invest in securities of different companies. The stocks these mutual funds have are very
fluid and are used for buying or redeeming and/or selling shares at a net asset value.
Mutual funds possess shares of several companies and receive dividends in lieu of them
and the earnings are distributed among the shareholders.

Mutual funds are conceived as institutions for providing small investors with avenues of
investments in the capital market. .Since small investors generally do not have adequate
time, knowledge, experience and resources for directly accessing the capital market, they
have to rely on an intermediary, which undertakes informed investment decisions and
provides consequential benefits of professional expertise.

Mutual funds have diversified investments spread in calculated proportions amongst

securities of various economic sectors. Mutual funds get their earnings in two ways. First,
is the most organic way, which is the dividend they get on the securities they hold?
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Second, is by the redemption of their shares by investors will be at a discount to the current
NAVs (net asset values).

2.2 ORGANIZATION STRUCTURE OF MUTUAL FUNDS

Mutual funds have organization structure as per there Security Exchange Board of India
guideline, Security Exchange Board of India specified authority and responsibility of
Trustee and Asset Management Companies. The objectives is to controlling, to promoted,
to regulate, to protect the investor’s right and efficient trading of units. Operation of
Mutual fund start with investors save their money on mutual fund, than Mutual Fund
manager handling the funds and strategic investment on scrip. As per the objectives of
particular scheme manager selected scrips. Unit value will become high when fund
manager investment policy generate the return on capital market. Unit return depends on
fund return and efficient capital market. Also affects international capital market, liquidity
and at last economic policy. Below the graph indicates how the process was going on to
investors to earn returns. Mutual fund manager having high responsibility inside of return
and how to minimize the risk. When fund provided high return with high risk, investors
attract to invest more fund for same scheme.

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2.3 Below cycle shows the process of investing in mutual funds

• Investors pull their money with Fund Manager

• Fund Manager invest in different securities
• Securities generate Returns
• Returns are passed back to investors

Fig. Mutual Fund Process.

The mutual fund industry has been in India for a long time. This came into existence in
1963 with the establishment of Unit Trust of India, a joint effort by the Government of
India and the Reserve Bank of India. The next two decades from 1986 to 1993 can be
termed as the period of public sector funds with entry of new public sector players into the

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mutual fund industry namely, Life Insurance Corporation of India and General Insurance
Corporation of India.

The year of 1993 marked the beginning of a new era in the Indian mutual fund industry
with the entry of private players like Morgan Stanley, J.P Morgan, and Capital
International. This was the first time when the mutual fund regulations came into
existence.

SEBI (Security Exchange Board of India) was established under which all the mutual
funds in India were required to be registered. SEBI was set up as a governing body to
protect the interest of investor. By the end of 2008, the number of players in the industry
grew enormously with 46 fund houses functioning in the country.

With the rise of the mutual fund industry, establishing a mutual fund association became a
prerequisite. This is when AMFI (Association of Mutual Funds India) was set up in 1995
as a non-profit organization. Today AMFI ensures mutual funds function in a professional
and healthy manner thereby protecting the interest of the mutual funds as well as its
investors.

The mutual fund industry is considered as one of the most dominant players in the world
economy and is an important constituent of the financial sector and India is no exception.
The industry has witnessed startling growth in terms of the products and services offered,
returns churned, volumes generated and the international players who have contributed to
this growth. Today the industry offers different schemes ranging from equity and debt to
fixed income and money market.

The market has graduated from offering plain vanilla and equity debt products to an array
of diverse products such as gold funds, exchange traded funds (ETF’s), and capital
protection oriented funds and even thematic funds. In addition investments in overseas
markets have also been a significant step. Due credit for this evolution can be given to the
regulators for building an appropriate framework and to the fund houses for launching such
different products. All these reasons have encouraged the traditional conservative investor,
from parking fund in fixed deposits and government schemes to investing in other products
giving higher returns.

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It is interesting to note that the major benefits of investing in a mutual funds is to capitalize
on the opportunity of a professionally managed fund by a set of fund managers who apply
their expertise in investment. This is beneficial to the investors who may not have the
relevant knowledge and skill in investing. Besides investors have an opportunity to invest
in a diversified basket of stocks at a relatively low price. Each investor owns a portion of
the fund and hence shares the rise and fall in the value of the fund. A mutual fund may
invest in stocks, cash, bonds or a combination of these.

In 1964, Unit Trust of India, single MF entity in India.

1964

Eight new funds established by banks, LIC and GIC.

Total number of schemes up to 167.
1987 - 1993

Assets under management (AUM) grows to Rs 6,700 Cr.

1988

AUM shoots up to Rs 61,000 Cr.

Private and Foreign sector players enter the industry.
1993 Kothari Pioneer Mutual Fund first entrant.

SEBI formulates Mutual Fund Regulation, a comprehensive regulatory framework.

1996

42 Mutual Fund Organisations.

AUM nearly Rs 23.06 lakh crores.
2018

F
ig. History of Mutual Funds in India.

2.4 GROWTH OF MUTUAL FUND INDUSTRY IN INDIA:

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India
(UTI) at the initiative of the Reserve Bank of India (RBI) and the Government of India.
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The objective then was to attract small investors and introduce them to market investments.
Since then, the history of mutual funds in India can be broadly divided into six distinct
phases.

2.4.1 Phase I (1964-87)

Growth of UTI:
In 1963, UTI was established by an Act of Parliament. As it was the only entity offering
mutual funds in India, it had a monopoly. Operationally, UTI was set up by the Reserve
Bank of India (RBI), but was later delinked from the RBI. The first scheme, and for long
one of the largest launched by UTI, was Unit Scheme 1964.

Later in the 1970s and 80s, UTI started innovating and offering different schemes to suit
the needs of different classes of investors. Unit Linked Insurance Plan (ULIP) was
launched in 1971. The first Indian offshore fund, India Fund was launched in August 1986.
In absolute terms, the investible funds corpus of UTI was about Rs.600 crores in 1984. By
1987-88, the assets under management (AUM) of UTI had grown 10 times to Rs. 6,700
crores.

2.4.2 Phase II (1987-93)

Entry of Public Sector Funds:
The year 1987 marked the entry of other public sector mutual funds. With the opening up
of the economy, many public sector banks and institutions were allowed to establish
mutual funds. The State Bank of India established the first non-UTI Mutual Fund, SBI
Mutual Fund in November 1987.

This was followed by Canara Bank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual
Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. From 1987-
88 to 1992-93, the AUM increased from Rs 6,700 crores to Rs 47,004 crores, nearly seven
times. During this period, investors showed a marked interest in mutual funds, allocating a
larger part of their savings to investments in the funds.
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2.4.3 Phase III (1993-96)
Emergence of Private Funds:
A new era in the mutual fund industry began in 1993 with the permission granted for the
entry of private sector funds. This gave the Indian investors a broader choice of 'fund
families' and increasing competition to the existing public sector funds. Quite significantly
foreign fund management companies were also allowed to operate mutual funds, most of
them coming into India through their joint ventures with Indian promoters.

The private funds have brought in with them latest product innovations, investment
management techniques and investor-servicing technologies. During the year 1993-94, five
private sector fund houses launched their schemes followed by six others in 1994-95.

2.4.4 Phase IV (1996-99)

Growth and SEBI Regulation:
Since 1996, the mutual fund industry scaled newer heights in terms of mobilization of
funds and number of players. Deregulation and liberalization of the Indian economy had
introduced competition and provided impetus to the growth of the industry.

A comprehensive set of regulations for all mutual funds operating in India was introduced
with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for
all funds. Erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes.

Similarly, the budget of the Union government in 1999 took a big step in exempting all
mutual fund dividends from income tax in the hands of the investors. During this phase,
both SEBI and Association of Mutual Funds of India (AMFI) launched Investor Awareness
Programme aimed at educating the investors about investing through MFs.

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2.4.5 Phase V (1999-2004)
Emergence of a Large and Uniform Industry:
The year 1999 marked the beginning of a new phase in the history of the mutual fund
industry in India, a phase of significant growth in terms of both amount mobilized from
investors and assets under management. In February 2003, the UTI Act was repealed. UTI
no longer has a special legal status as a trust established by an act of Parliament. Instead it
has adopted the same structure as any other fund in India - a trust and an AMC.

UTI Mutual Fund is the present name of the erstwhile Unit Trust of India (UTI). While
UTI functioned under a separate law of the Indian Parliament earlier, UTI Mutual Fund is
now under the SEBI's (Mutual Funds) Regulations, 1996 like all other mutual funds in
India.

The emergence of a uniform industry with the same structure, operations and regulations
make it easier for distributors and investors to deal with any fund house. Between 1999 and
2005 the size of the industry has doubled in terms of AUM which have gone from above
Rs.68,000 crores to over Rs.1,50,000 crores.

2.4.6 Phase VI (From 2004 Onwards)

Consolidation and Growth:
The industry has lately witnessed a spate of mergers and acquisitions, most recent ones
being the acquisition of schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual
Fund by Principal, among others.

At the same time, more international players continue to enter India including Fidelity, one
of the largest funds in the world. UTI Mutual Fund is still the largest player in the industry.
In 1999, there was a significant growth in mobilization of funds from investors and assets
under management which is supported by the following data:

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 RECENT GROWTH UNDER ASSET MANAGEMENT

Fig. Assets under Management Growth.

The Assets under Management (AUM) of the Indian mutual fund (MF) industry witnessed
an exceptional growth of 20% in FY2017. According to Association of Mutual Funds in
India (AMFI) data, AUM grew from Rs. 16.3 lakh crore in March 2016 to Rs. 17.5 lakh
crore in March 2017. Mutual funds' asset base rose to Rs 23.40 lakh crore in April-June
quarter 2018, a 20% surge from the year-ago period driven by participation from retail
investors and a spirited investor awareness campaign by the industry. 

The asset base of the industry, comprising 42 players, was Rs 23.05 lakh crore in the

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preceding quarter, showing a growth of just 1.5 per cent on quarterly basis, according to
the data by Association of Mutual Funds in India (AMFI). 

2.5 The Function of Exchanges

Exchanges provide a marketplace for traders to buy and sell securities. In years past,
trading took place on large open floors, where buyers and sellers engaged in face-to-face
transactions. Today, most exchanges utilize electronic systems, which allow for fast,
efficient trading. A few still use traditional trading floors, but in conjunction with an
electronic system.

Exchanges generate revenue in several ways. Those that concentrate on the equities market
collect fees from listed companies. Both equity and derivative exchanges receive a
payment for each trade that takes place on their platform. The top lines of these companies
perform quite well during volatile markets. Another source of revenue comes from
supplying market data to financial information providers. Too, revenue may be produced
from developing, marketing and distributing technology used in trading and information
processing. Among other means of generating revenue, an exchange may clear third-party
or in-house trades.

Compared with those of brokerages, the cost structures of exchanges are more fixed in
nature. Operating performance is linked to transaction volume. Margins expand as trading
increases, and the reverse is true when activity slows. Reductions in fixed costs enhance
operating leverage. Generally, exchanges do not assume heavy debt burdens. Substantial
debt, however, will be taken on to complete a promising acquisition. Managements
endeavour to quickly lighten the burden with improved cash flow.

This sector of the industry has, indeed, undergone consolidation. Domestic exchanges have
merged with foreign bourses to gain diversification. Also, many have acquired small
competitors that offer attractive market niches complementing existing operations. For
instance, companies that focus on equity trading have expanded the scope of business by
acquiring options exchanges.

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Mutual funds are considered as one of the best available investment options as compare to
others alternatives. They are very cost efficient and also easy to invest in. The biggest
advantage of mutual funds is they provide diversification, by reducing risk & maximizing
returns.

The financial planning, taxation & advisory firm of SJ ADVISORS was formed June 1,
2017 to serve as individual financial advisors and business consultants.

Mutual Fund has emerged as one of India's leading flagships of Mutual Funds business
managing assets of a large investor base. As financial planners, our firm offers a range of
investment options, including 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.

As financial advisors we offer tax planning and compliance, estate and gift planning and
compliance, wealth accumulation and preservation planning, and retirement planning and
consulting.

As business consultants we offer closely held business planning, tax consulting and
compliance, accounting services including financial statement reviews and compilations
and accounting assistance, and general business advisory services such as compensation
planning, transaction planning, and retirement plan selection.

With more than one year of combined public accounting experience, our team has come to
realize an accountant’s greatest value to their client is not as a “reporter” or
“historian” reporting on events of the past but as a “coach” or “business partner” helping to
plan and shape the future. As such, at SJ ADVISORS, the traditional accounting services
such as payroll processing and reporting, financial statement preparation, and income tax
return preparation are offered in conjunction with business strategic planning services
and/or individual personal financial planning services.

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3.1 Our Commitment

SJ ADVISORS works effectively with individuals and businesses to successfully identify

and address present and future challenges and opportunities.  Our clients have our
commitment that our team at SJ ADVISORS will demonstrate initiative, anticipate
problems, propose solutions and communicate effectively throughout the year. Our clients
have our commitment that there will be timely coordination of tax and accounting planning
and strategy needs.

3.2 Our Mission

SJ ADVISORS will provide quality accounting, consulting and tax services on a timely
basis. 

3.3 Our Core Values

Fulfilment of this mission is enhanced through constant adherence to our culture as defined
by our strongly held beliefs.

 We are a team and everyone makes a vital contribution to our success.

 Our primary goal is to help our clients succeed.
 We provide high quality and timely accounting, tax and consulting services.
 We honour our responsibilities to our clients, our community and each other.
 We will not compromise our honesty, integrity or reputation.
 We have a duty to foster each other’s professional growth.
 We recognize the importance of balance between our personal and professional
lives.
 We applaud each other’s successes.
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  We are proud of our history and culture; we are confident of our future.

3.4 Team Approach

"A master of everything is a master of nothing."  Our firm recognizes the benefits to our
clients of a specialized team of business advisors and we welcome the chance to work with
other professionals to provide the best possible combination of services for our client. This
team of advisors normally includes an attorney, a CPA, an insurance agent, an investment
advisor or broker, a banker, and a trust advisor. Our goal is to communicate with our
client’s team on an ongoing basis to allow for the proactive solution to issues and
challenges instead of the reactive “patch” to unexpected problems. We will blaze our trail,
not follow an already beaten path.

3.5 What you can expect from SJ Advisors:

 Sound, research-based advice.

 Unbiased, independent and need-based advice Prompt, courteous service
 Honest, ethical dealings, accessibility.

3.6 Services Offered:

3.6.1 Income Tax Return Filing Services

We provide you expert advisory services to optimize your overall tax savings by focusing
on two major Tax Saving areas i.e.:-

 Availing all the possible available Tax Benefits under the tax laws.
 Well thought out sec 80C Investment plans.

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 We will consult you on how to restructure your Salary; will provide you with multiple
options with detailed computation. A dedicated CA appointed for professional review to
create a customized plan & save taxes using various methods.

Some of the other of Tax Saving Plan are as follows:

o Back up of your ITR data & Acknowledgment for Life – Both in Hard copy & Soft
Copy.
o Advance Tax Payment at regular intervals
o Round the year support for any Income Tax queries
o Reconciliation of form 26 AS
o Balance Sheet Preparation
o Help in Refund follow ups
o 100% Online Filing from our end only

3.6.2 Financial Planning Services

“The Individual Investor should act consistently as an Investor and not as a Speculator.”

Ben Graham
The Financial Planning process consists of the following basic eight steps:

Stage 1: Complementary Meeting:

At RPFAS we offer you a first complimentary meeting which will last for around 30 to 45
Minutes. In this meeting we will understand your financial history, goals and expectations.
This meeting will be very helpful to make you and we stand on the same platform from
where we can start your blissful financial journey. You can fix an appointment and pay us
a visit or our financial experts can meet you at your place to decide the further course of
action.

Stage 2: Scope of Services:

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Having examined your financial priorities, objectives and concerns in detail we can arrive
at the scope of services and our nominal professional fees for the same. You can be rest
assured for the quality of the services & the amount thus spend by you would be the best
investment of your lifetime.

Stage 3: Financial Health Check-Up:

Review of Current financial position, we will review & analyse your current financial
position and your existing assets and liabilities to check that are you on the Road to
Financial Freedom. We would suggest if any investment needed to be modified, identify
and quantify particular needs and prepare specific recommendations. As it is prudent to
first set existing things right and then only move ahead to achieve our ultimate financial
goals.

Stage 4: Term selection of your financial plan:

This stage will let you select a plan as in- will you be opting for a Short term investment or
a Long term investment.

Stage 5: Final Plan Presentation:

We will prepare final written reports outlining and quantifying your financial goals and
objectives, identifying any deficiencies and providing specific recommendations. We will
present our report to you, along with an in-depth discussion to answer any questions that
you may have. We encourage you to schedule a minimum of one hour and preferably two
hours to allow for a thorough plan review.

Stage 6: Actual Plan implementation:

Once you approve the final plan presentation we will start implementing the actual plan.
We will guide you the complete financial strategies like where, when and how to invest.

Stage 7: Regular Monitoring:

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 The financial plan should be reviewed regularly after implementation to determine your
progress on achieving the plan recommendations. This stage monitoring will be performed
in quarterly basis. In addition, we will address any investment or tax law changes that may
impact our original recommendations. We recommend a formal annual review of the plan.

Stage 8: Online access to Your Portfolio:

24/7; 365 Days Now you are just a click away from all the information about your
investments. You will be provided with an exclusive portfolio management tool & with
user id – password to access your portfolio any time anywhere. Plus it will also give you
regular reminders through sms alerts or mails about all your renewals for your car/bike
insurance premium, mutual funds sips, life insurance premium due, mediclaim renewal,
ppf deposit date etc.

Our motto for financial planning:

 Stay Simple
 Think Long
 Be consistent
 Stay focussed

3.6.3 Home Loan and Business Loan Services

We help in sourcing good deals in buying commercial real estate. If anyone is looking for
buying pre-leased properties in Pune, then you mail us the requirement.

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The basic objective of all economic entities is to maximize the wealth of its shareholders
who belong to different sources with different quantum and have different levels of risks
which are compensated for by the different levels of returns on investment. The main
sources of capital for a company are shareholders and suppliers who forgo their present
consumption and save to provide the funds for future gain and capital appreciation. The
provider of funds and its users comes together in open market for their mutual benefit
under certain negotiated values in form of debt, equity or mutual fund with different
maturity periods.

Survey of literature in mutual fund industry revealed that a large numbers of study and
research have been carried out extensively in this field which explored its merits and
limitations and highlighted important facts which became ultimate strength for MF
industry. With passing time industry need more systematic studies for better growth and to
test the potential in emerging economies like India. Thus the present study seeks to make a
humble initiative in these respects in which attempt has been made to analyse the
performance of selected schemes of mutual funds based on risk-return relationship.

For this purpose, apart from standard measure like mean return, beta and coefficient of
determination, the time-tested models of mutual funds’ performance evaluation given by
Sharpe, Treynor and Jensen (Alpha) have also been applied.

4.1 Rasheed Haroon, Qadeer Abdul (2012) in their study investigates the performance of
survivorship biased twenty five open ended mutual fund schemes in Pakistan and
managers ability of stock selection and also measured the diversification. The study
revealed that overall performance of the funds remains best as compare to market but

24
mismanagement observed in mutual fund industry during the study period.

Further study also revealed that portfolio was not completely diversified and contains
unsystematic risk, Nishant Patel (2011) In his study examined fund sensitivity to the
market fluctuations in term of Beta and found that the risk and return of mutual funds
schemes were not in conformity with their stated investment objectives further sample
schemes were not found to be adequately diversified.

4.2 Kundu Abhijit (2009) In his study examines the fund manager’s ability to outperform
the market and to appraise the schemes in the context of ex-post risk, return and
diversification and found that over ‘the period’ mutual fund schemes on an average have
failed to outperform the market even after taking a risk higher than that of the market and
concluded that fund manager though have succeeded to some extent on the diversification
front, but failed to earn significant positive returns by selecting disvalued securities in their
portfolios, Anand and Murugaiah (2008) in their study examined the components and
sources of investment performance in order to attribute it to specific activities of Indian
fund managers by using Fama's methodology and revealed the fact that the mutual funds
failed in expectations to compensate the investors for the additional risk taken by them.
The study also observed that from the selectivity, expected market risk and market return
factors have shown closer correlation with the fund return,

4.3 Guha (2008) in his study found the “Style Benchmarks” of each of its sample of equity
funds as optimum exposure to 11 passive asset class indexes. Further the study also
revealed the relative performance of the funds with respect to their style benchmarks and
found that the funds never been able to beat their style benchmarks on the average,
Agarwal (2007) in his study provides an overview of mutual fund performance in
emerging markets and analysed prevailing pricing mechanism, their size and asset
allocation, Ming-Ming Lai and Siok-Hwa Lau (2006) in their study examined the
performance of mutual fund in Malaysia from January 1990 to December 2005 and found
that private mutual funds gained higher average annualized returns than government
sponsored funds, Ivkovich, Sialm and Weisbenner (2006) in their witnessed that stock
25
investments made by households that choose to concentrate their brokerage accounts in a
few stocks outperform those made by households with more diversified accounts
(especially among those with large portfolios),

4.4 Zakri (2005) in his study investigated the differences in characteristics of assets;
degree of portfolio diversification and variable effects of diversification on investment
performance by matching a sample of socially responsible stock mutual funds to randomly
selected conventional funds of similar net assets and found that socially responsible funds
do not differ significantly from conventional funds in terms of any of these attributes,
Kacperczyk, Sialm and Zheng (2005) in his study found that mutual funds with higher
levels of industry concentrations yield an average abnormal return of 1.58 percent per year
before deducting expenses and 0.33 percent per year after deducting expenses, Ferruz and
Ortiz (2005) in their study attempted to examine the mutual fund in India by employing
factor analysis and cluster analysis, Denis O. Boudreaux, S. P. Uma Rao, Dan Ward and
Suzanne Ward (2004) in their study examines that investors have multiple choices to select
from to form their investment portfolio and also found that it is very difficult to make a
prediction in advance about mutual fund performance,

4.5 M. M. Ibrahim (2003) in his study analysed the role of M F and evaluated the
performance of the Nigerian mutual fund industry between 1990 and 2002. The study
produced the fact that some fund managers were able to offer better yields to investors and
even beat the NSE index occasionally not on a consistent basis, Jin Xue-jun and Yang NG
Xiao-lan (2003) in their study examined and evaluated mutual fund objective classification
in China by using statistical methods of distance analysis and discriminant analysis. The
objective of the study was to justify the stated investment objectives of mutual funds
weather they adequately represented their attributes to investors or deviate. The study
revealed that there existed no significant differences between different objective groups;
and 50% of mutual funds were not consistent with their objective groups, Keith
Cuthbertson, Dirk Nitzsche, & Niall O’ Sullivan (2003) in their study evaluated the funds
investing trend and performance of open-end mutual funds in UK equity during the period
‘April 1975 to December 2002’ and revealed that an unconditional three-factor Fama and
26
French type model with market, size and value risk factors fits well as a model of
equilibrium returns,

4.6 Mishra and Mahmud (2002) in their study evaluated the performance of mutual fund
by using lower partial moment which was based on lower partial moment. They evaluated
portfolio performance and risk from the lower partial moment by taking into account only
those states in which return is below a prespecified “target rate” like risk-free rate,

4.7 Amanulla (2001) in his study evaluated portfolio performance and tested the
efficiency of mutual funds of Unit Trust of India (UTI) through Jensen, Treynor and
Sharpe's methodology and also Employed Granger Causality and Cointegration tests. The
study revealed mixed evidence of performance evaluation while the evidence from
Granger causality suggested the existence of uni-directional causality in BSE sensitive
index and bi-directional causality in Nifty index. Further the study found market index and
mutual funds were co-integrated, indicating a long-run relationship,

4.8 Gupta (2000) in his study evaluated the investment performance of Indian mutual
funds using weekly NAV data and found that the schemes showed mixed performance
during 1994-1999, Rania Ahmed Azmi (2000) in their study witnessed significant relations
between mutual fund performance (the dependent variable), and fund's manager gender,
expense ratio, objective, total risk and type (independent variables), Sethu (1999)
conducted a study examining 18 open-ended growth schemes during 1985-1999 and found
that majority of the funds showed negative returns and no fund exhibited any ability to
time the market, Copen et al. (1996) investigated the behaviour of investors in decision
making for selecting mutual funds. Study found that some investors consider many non-
performance related variables as they have good knowledge about the funds and market
conditions. However, most investors appeared to be naive, having little knowledge of the
investment strategies or financial details of their investments.

4.9 Kaura and Jayadev (1995) evaluated the performance of growth oriented schemes by
using Jensen, Treynor, Sharp measures and found that the schemes have not performed
27
well, Ewe (1994), and Shamsher & Annuar, (1995) in their study witnessed that unit trusts
produce lower returns than the market portfolio, Ajay Shah and Susan Thomas (1994) in
their study examined the performance of 11 mutual funds schemes and produced the fact
that among the selected schemes only one scheme has better performance and other have
underperformed and have earned inferior returns than the market in general,

4.10 R. A. Yadav and Biswadeep Mishra (1996) in their study evaluated performance of
14 mutual fund schemes using monthly data and concluded that generally funds performed
well in terms of non-risk adjusted measure of average returns and the fund manager of
growth schemes adopted a conservative investment policy and maintained a low profile
beta, Barua, Raghunathan and Varma (1991) evaluated the performance of Master Share
during the period 1987 to 1991 using Sharpe, Jensen and Treynor measures and concluded
that the fund performed better that the market, but not so well as compared to the Capital
Market Line, Finney and Logue (1988) studied mutual fund performance using quarterly
data over the 1976-83 periods. They measured a higher alpha for growth funds, they
assumed the findings are evidence of the small firm that effect, Friend, Marshal and
Crocket (1970) in their study on mutual funds found that there is a negative correlation
between fund performance and management expense measure,

4.11 Peasnell, Skerratt and Taylor (1979) in their study remarked the Jensen
investigation into mutual fund performance using the insights of arbitrage theory and this
exercise appeared to provide independent confirmation of Jenson findings that
professionally managed funds are systematically unable to outperform the market, James
RF Guy (1978) evaluated the risk adjusted performance of UK investment trusts by
applying Sharpe and Jensen Measure. The study concludes that no trust had exhibited
superior performance compared to the London stock exchange index,

4.12 Treynor (1965), Sharpe (1966) and Jensen (1968)’ studied the mutual funds at early
stages by using the capital asset pricing model to compare risk-adjusted returns of funds
with that of a benchmark market portfolio and produced the fact that mutual funds under
perform market indexes and suggest that the returns were not sufficient to compensate
28
investors for the diverse mutual fund charges, Friends and Vickers (1965) evaluated the
performance of mutual funds against the randomly constructed portfolios and concluded
that mutual funds on the whole have not performed superior to random portfolio.

5.1 OBJECTIVE OF THE STUDY

To ascertain the various fluctuations in different schemes of MFs.
To examine MF investment with equity shares.
To study the performance of selected MF companies in 5 year time period.
To find out what should do to boost MF Industry.

5.2 SCOPE OF THE STUDY

 This project is based on the Equity funds, which is a brief analysis on the equity or
growth mutual funds. As the project report is fully based on secondary data and it
can be used to have the exact figure of investment in Mutual Funds, especially in
equity funds.
 The proper analysis on the equity funds and the past performance of these funds
will help the lay man to take decision for investing in mutual funds and maximizing
the percentage of equity funds in his portfolio.

5.3 LIMITATION OF THE STUDY

 It is not sure that collected data are accurate and complete. Because of the
time limitation, it may be possible that some important data are left out.
 There is vast information about mutual funds, which cannot be given at a time in
the report.
 New funds are entering the market and booming, so their past records cannot be
given for their non-existence in the market.
29
  As mutual funds’ performance is calculated by comparing the current records with
its past performances of a long period (i.e. 5 years) one cannot do research by
giving only current data.
 Today’s stock market is totally running on the investor’s perception so the
conclusion derived on the basis of analysis would not viable in long run.
 Some comparisons cannot be done due to the nature of the funds.

The study makes a comprehensive evaluation of equity diversified –growth schemes of 6

funds over a period of 5 years (2013-2017).The required data has been collected from the
www.amfiindia.com and www.moneycontrol.com and the risk is calculated on the basis of
day end NAV of each concerned fund. Further, NIFTY MIDCAP 100, S&P BSE
SENSEX, S&P BSE 500, NIFTY 500 & NIFTY MNC indices has been taken as the
benchmark index and its historical data is used for computation market return. Yield on
Fixed Deposit has been taken as the surrogate for the risk free rate of return viz.6.5% p.a.

The various constituents of this research are as laid below;

Research design: The research was exploratory in nature.

Data collection: Secondary data about NAV collected from

www.amfiindia.com, www.moneycontrol.com & www.valueresearchonline.com

Data type: The data used was secondary in nature.

Sampling universe: All Mutual fund schemes of India

Sampling technique: Purposive Sampling

Sample Size: 6 India mutual fund (equity diversified-growth)

The risk free rate is assumed to be 6.5 % p.a.

30
The core of the research started with the collection of raw data w.r.t NAV & historical data
for the NIFTY MIDCAP 100, S&P BSE SENSEX, S&P BSE 500, NIFTY 500 & NIFTY
MNC indices for the period of 2013 - 2017.

6.1 RESEARCH DESIGN

A research design is the set of methods and procedures used in collecting and analysing
measures of the variables specified in the research problem research. The design of a study
defines the study type (descriptive, correlation, semi-experimental, experimental, review,
meta-analytic) and sub-type (e.g. descriptive-longitudinal case study), research
problem, hypotheses, independent and dependent variables, experimental design, and, if
applicable, data collection methods and a statistical analysis plan. A research design is a
framework that has been created to find answers to research questions.

Research means search for facts in order to find answers to certain questions or to find
solutions to certain problems. It is often referred as ‘Scientific Inquiry’ or ‘Scientific
Investigation’. Research is considered to be the more formal, systematic and intensive
process of carrying on a scientific method of analysis by which researchers go through
their work of describing, explaining and predicting phenomenon are called methodology.

Data collection is an important step in methodology of any project and success of any
project will be largely depend upon how much accurate you will be able to collect and
how much time, money and efforts will be required to collect the necessary data.

6.1.1 Types of Research

1. Qualitative research
2. Quantitative research
3. Applied research
4. Fundamental research
5. Descriptive research
6. Exploratory research
31
 7. Correlation research
8. Explanatory research

Fig. Types of Research Design.

6.1.1.1 Descriptive Research Design

Descriptive research studies are those studies which are concerned with describing
the characteristics of a particular individual, or of a group. Studies concerned with specific
predictions, with narration of facts and characteristics concerning individual, group or
situation are all examples of descriptive research. Most of the social researches come under
this category. For this study descriptive research is used as it describes the performance of
the selected equity mutual funds based on which certain predictions can be made.

6.2 Population
32
All the Equity Direct Growth Mutual Funds in India.

6.3 Sampling

In statistics, quality assurance, and survey methodology, sampling is the selection of a

subset (a statistical sample) of individuals from within a statistical population to estimate
characteristics of the whole population.

For this project six equity oriented mutual funds are taken as a sample size to carry this
project effectively.

Types of Sampling

6.3.1 Probability Sampling

A probability sampling method is any method of sampling that utilizes some form of
random selection. In order to have a random selection method, you must set up some
process or procedure that assures that the different units in your population have equal
probabilities of being chosen.

Types of Probability Sampling:

 Simple Random Sampling (SRS)

 Stratified Sampling.
 Cluster Sampling.
 Systematic Sampling.
 Multistage Sampling

6.3.2 Non Probability Sampling

Non-probability sampling is a sampling technique where the odds of any member being
selected for a sample cannot be calculated. It’s the opposite of probability sampling,
where you can calculate the odds. In addition, probability sampling involves random
33
selection, while non-probability sampling does not, it relies on the subjective judgement of
the researcher.

Types of Non Probability Sampling

 Quota sampling
 Convenience sampling
 Purposive sampling
 Self-selection sampling
 Snowball sampling

A purposive sampling also referred to as a judgmental or expert sample, is a type of non-

probability sample. The main objective of a purposive sample is to produce a sample that
can be logically assumed to be representative of the population. For this study the method
of purposive sampling is used.

I have selected top performing equity mutual funds those established more than ten years
in the Indian Market and given more than 15% overall return in the span of 5 years.

6.4 Sources of Data

 Primary Data
 Secondary Data

6.4.1 Primary Data

Primary data means original data that has been collected specially for the purpose in mind.
It means someone collected the data from the original source first hand. Data collected this
way is called primary data.

The people who gather primary data may be an authorized organization, investigator,
enumerator or they may be just someone with a clipboard. Those who gather primary data
may have knowledge of the study and may be motivated to make the study a success. As
34
for this study there is no primary data all data has been taken from various platforms like
money control, investing.com, stock screener etc. which is nothing but secondary data.

6.4.2 Secondary Data

Secondary data is a data that has been collected earlier for some purpose other than the
purpose of the present study. I have collected data i.e. yearly returns, expense ratio, 5 years
return by referring various sites like, money control, investing.com, stock screener etc.

Also, secondary data can be useful benchmark against which the findings of the study can
be tested. This study is highly dependent on the secondary data for various facts and
figures.

6.5 PARAMETERS USED FOR PERFORMANCE MEASUREMENT

This study estimates risk-return profiles for tax saving mutual funds that have been varied
from five-year period to one-year period. Daily returns are used for computing Annual
returns and measures of return and risk. Mean returns are calculated by averaging the
monthly returns over the relevant time period.

6.5.1 Net Asset Value (NAV)

NAV return is the change in the net asset value of mutual fund over a given time period.

NAV Return = Current value of units – Previous value of units X 100

Previous value of units

Total risk measures by the standard deviation of returns. Systematic (market) risk is
estimated by beta. Risk premium related to the total risk is measures by Sharpe index.
Fund’s performance in relation to the market performance is measured by Treynor index.
Jensen’s Alpha is used to compare the actual or realized return of the portfolio with the
predicted or calculated return.

35
 The standard deviation is a measure of variability which is used as the standard
measure of the total risk of individual assets and the residual risk of portfolios of assets.
This can be calculated by using the formula

 
σ = Standard Deviation
Xi = each data value
µ = Mean value of data
N = Sample Size

6.5.2 Beta
It measures a fund's volatility compared to that of a benchmark. It tells you how much a
fund's performance would swing compared to a benchmark.
Computation:

Standard Deviationof Fund

Beta= × R−Square
Standard Deviation of Benchmark

6.5.3 Sharpe Ratio

Sharpe measures developed by William Sharpe are referred to as the Sharpe ratio of the
reward variability ratio. It is the ratio of the reward or risk premium to the variability of
return or risk as measured by the standard deviation of return. The index assigns the
highest values to assets that have best risk-adjusted average rate of return. The formula for
calculating Sharpe ratio may be stated as:

rp – rf
Sharpe Ratio (SR) = ----------
σp

Where,
36
 rp = Realized return on the portfolio
rf = Risk free rate of return
σp = Standard deviation of the portfolio

6.5.4 Treynor Ratio

Treynor Ratio is the performance measure developed by Jack Treynor is referred to as
Treynor ratio or reward to volatility ratio. It is the ratio of the reward or risk premium to
the volatility of return as measured by the portfolio beta. The formula for calculating
Treynor ratio may be stated as:

rp – rf
Treynor ratio (TR) = ---------
βp
Where,
rp = Realized return on the portfolio
rf = Risk free rate of return
β p = Portfolio Beta

6.5.5 Alpha/Jensen Ratio

Alpha/Jensen Ratio is another type of risk adjusted performance measure has been
developed by Michael Jensen and is referred to as the Jensen measure or ratio. This ratio
attempts to measure the differential between the actual return earned on a portfolio and the
return expected from the portfolio given its level of risk. The formula for calculating
Jensen ratio may be stated as:

Alpha (α) = rp – rf + β p (rm - rf)

Where,
rp = Realized return on the portfolio
rf = Risk free rate of return
β p = Portfolio Beta
rm = Market Return

37
The higher Sharpe, Treynor and Jenson perform shows the better performance of the funds
in the market. The highest standard deviation has high volatility in the market.

7.1 The funds selected for the purpose of the research are as laid below;

Principal Emerging Bluechip Fund D(G)

38
 Reliance Focused Equity Fund D(G)

ICICI Prudential Value Discovery Fund D(G)

DSP BlackRock Equity Opportunities Fund D(G)

Tata Equity P/E Fund - Regular Plan D(G)

UTI MNC Fund D(G)

Tab. List of Selected Funds.

7.2 Selected Equity Mutual Funds

For the purpose of this study, I have selected top six direct growth equity mutual
funds scheme. They are as follows:

7.2.1 Principal Emerging Bluechip Fund D(G)

Investment Objective

39
 The primary objective of the Scheme is to achieve long-term capital appreciation by
investing in equity & equity related instruments of large cap & midcap companies.
Registrars

 Fund Type: Open-Ended

 Investment Plan: Growth
 Launch Date: Oct 20, 2008
 Benchmark: NIFTY MIDCAP 100
 Asset size (Rs Cr): 1409.23 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.5000
 Last Dividend: N.A.
 Bonus: N.A.
 Fund Manager: Dhimant Shah 
Notes: N.A.
Load Details

Entry Load:  N.A

 Exit Load:  1.00%

 Load Comments: Exit Load 1% if units are redeemed / switched-out
within 1 year from the date of allotment.

7.2.2 Reliance Focused Equity Fund D(G)

40
 Investment Objective

The primary investment objective of the scheme is to generate long-term capital growth by
predominantly investing in an active and concentrated portfolio of equity & equity related
instruments up to 30 companies across market capitalization. The secondary objective of
the scheme is to generate consistent returns by investing in debt, money market securities,
REITs and InvITs. There is no assurance or guarantee that the investment objective of the
scheme will be achieved.
Registrars

 Fund Type: Open-Ended

 Investment Plan: Growth
 Launch Date: Feb 01, 2013
 Benchmark: S&P BSE 500
 Asset size (Rs Cr): 205.82 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.5000
 Last Dividend: Rs.2.50
 Bonus: N.A.
 Fund Manager: Vijay Sharma 
 Notes: Reliance Focused Large Cap Fund has merged with
Reliance Mid & Small Cap Fund and the merged scheme is being renamed as Reliance
Focused Equity Fund w.e.f. April 28, 2018
Load Details

 Entry Load:  N.A

 Exit Load: 1.00%
 Load Comments:  Exit load of 1% if redeemed/switched out on or
before completion of 1 year from the date of allotment.

41
 7.2.3 ICICI Prudential Value Discovery Fund D(G)

Investment Objective

To generate returns through a combination of dividend income and capital appreciation by

investing primarily in a well-diversified portfolio of value stocks. However, there can be
no assurance or guarantee that the investment objective of the Scheme would be achieved.

Registrars

 Fund Type: Open-Ended

 Investment Plan: Growth
 Launch Date: Feb 01, 2013
 Benchmark: S&P BSE 500
 Asset size (Rs Cr): 2820.26 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.500
 Last Dividend: N.A.
 Bonus: N.A.

42
 Fund Manager: Mrinal Singh 
Notes: N.A.

Load Details

 Entry Load:  N.A

 Exit Load:  1.00%
 Load Comments:  Exit Load 1% if units are redeemed / switched-out for
a period of up to 12 months from the date of allotment

7.2.4 DSP BlackRock Equity Opportunities Fund D(G)

Investment Objective

The primary investment objective is to seek to generate long term capital appreciation from
a portfolio that is substantially constituted of equity and equity related securities of large
and midcap companies. From time to time, the fund manager will also seek participation in
other equity and equity related securities to achieve optimal portfolio construction. There is
no assurance that the investment objective of the Scheme will be realized.

Registrars

 Fund Type: Open-Ended

43
 Investment Plan: Growth
 Launch Date: Jan 03, 0001
 Benchmark: Nifty 500
 Asset size (Rs Cr): 686.39 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.5000
 Last Dividend: N.A.
 Bonus: N.A.
 Fund Manager: Rohit Singhania / Jay Kothari 
 Notes: DSP Opportunities Fund has been renamed as DSP
Equity Opportunities Fund w.e.f March 16, 2018.

Load Details

 Entry Load:  N.A

 Exit Load:  1.00%
 Load Comments:  Exit Load 1% if redeemed within 12 months from the
date of allotment.

7.2.5 Tata Equity P/E Fund - Regular Plan D(G)

44
 Investment Objective

The investment objective of the Scheme is to provide reasonable and regular income
and/or possible capital appreciation to its Unitholder.
Registrars

 Fund Type: Open-Ended

 Investment Plan: Growth
 Launch Date: Feb 01, 2013
 Benchmark: S&P BSE SENSEX
 Asset size (Rs Cr): 248.37 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.5000
 Last Dividend: N.A.
 Bonus: N.A.
 Fund Manager: Sonam Udasi 
Notes: N.A.
Load Details

 Entry Load:  N.A

 Exit Load:  1.00%
 Load Comments:  Exit load - 1% if redeemed/switched out within 18
months from the date of allotment.

7.2.6 UTI MNC Fund D(G)

45
 Investment Objective

The primary objective of the scheme is to generate long term capital appreciation by
investing predominantly in equity and equity related securities of multinational companies.
However, there can be no assurance or guarantee that the investment objective of the
scheme would be achieved.

Registrars

 Fund Type: Open-Ended

 Investment Plan: Growth
 Launch Date: Feb 01, 2013
 Benchmark: Nifty MNC
 Asset size (Rs Cr): 201.9 ( Mar 31, 2018 )
 Asset Date: Mar 31, 2018
 Minimum Investment: Rs.5000
 Last Dividend: N.A.
 Bonus: N.A.
 Fund Manager: Swati Kulkarni 
 Notes: N.A.

Load Details

 Entry Load:  N.A

 Exit Load:  1.00%
 Load Comments:  Exit Load 1% if redeemed within 1 Year from the
date of allotment.

Comparison of the Mutual fund’s performance with NIFTY MIDCAP 100, S&P BSE
SENSEX, S&P BSE 500, NIFTY 500 & NIFTY MNC indices & ultimately ranking of the
46
funds has been done. All the above tools & parameters have been applied henceforth to
analyse & conclude the performance of the funds in the form of tables 7.3 to 7.7 as laid
below;

7.3 Calculated Standard Deviation of Selected Diversified Equity Mutual

Funds – Direct (G)

Standar
d
Annual Returns (%) Deviati Rank
Name of the Scheme on
(%)
201 201 201 201 201
3 4 5 6 7

               

47
 Principal Emerging Bluechip 80. 11. 49.
4.4 7 33.389 2
Fund D(G) 5 3 4
Reliance Focused Equity Fund 81. 42.
1.9 8.5 3.1 34.513 1
D(G) 5 9
ICICI Prudential Value 73. 24.
5.6 6.3 5.3 29.531 4
Discovery Fund D(G) 9 7
DSP BlackRock Equity 45. 11. 41.
4.9 6.4 19.975 6
Opportunities Fund D(G) 9 2 3
Tata Equity P/E Fund - Regular 70. 16. 40.
-0.2 0.6 30.01 3
Plan D(G) 3 1 6
11. 64. 13. 37.
UTI MNC Fund D(G) -2.6 26.295 5
2 1 2 1

Tab. Calculated Standard Deviation.

48
 STANDARD DEVIATION
40

35

30

25

20

15

10

0
STANDARD DEVIATION

PRINCIPAL RELIANCE ICICI

DSP BLACKROCK TATA EQUITY UTI

Fig. Calculated Standard Deviation.

Interpretation:
 Standard deviation (SD) measures the volatility the fund's returns in relation to its
average. It tells you how much the fund's return can deviate from the historical
mean return of the scheme.
 All the Ratio for the schemes are comparatively high, they are ranked accordingly.
 The best performing mutual fund is Reliance Focused Equity Fund D(G) having
Standard Deviation as 34.513%.
 The most underperforming mutual fund is DSP BlackRock Equity Opportunities
Fund D(G) having Standard Deviation as 19.975%.

49
7.4 Calculated Beta of Selected Diversified Equity Mutual Funds – Direct
(G)

Annual Returns (%) Beta Rank

Name of the Scheme
201 201 201 201 201
3 4 5 6 7

               

Principal Emerging Bluechip 80. 11. 49.

4.4 7 1.00 2
Fund D(G) 5 3 4
Reliance Focused Equity Fund 81. 42.
1.9 8.5 3.1 1.00 2
D(G) 5 9
ICICI Prudential Value 73. 24.
5.6 6.3 5.3 1.06 1
Discovery Fund D(G) 9 7
DSP BlackRock Equity 45. 11. 41.
4.9 6.4 1.00 2
Opportunities Fund D(G) 9 2 3
Tata Equity P/E Fund - Regular 70. 16. 40.
-0.2 0.6 1.06 1
Plan D(G) 3 1 6
11. 64. 13. 37.
UTI MNC Fund D(G) -2.6 1.00 2
2 1 2 1

Tab. Calculated Beta Value.

50
 Beta
1.07

1.06

1.05

1.04

1.03

1.02

1.01

0.99

0.98

0.97
Beta

Principal Reliance ICICI DSP BlackRock Tata UTI

Fig. Calculated Beta Value.

Interpretation:
 Beta, also known as the "beta coefficient," is a measure of the volatility, or
systematic risk, of a security or a portfolio in comparison to the market as a whole.
 All the Beta for the schemes are comparatively high, they are ranked accordingly.
 The most volatile mutual funds are ICICI & Tata having Beta as 1.06 than the
market.
 Four mutual funds i.e. Principal, Reliance, DSP BlackRock & UTI have same
volatility as the market at Beta value 1.

51
7.5 Calculated Sharpe Ratio of Selected Diversified Equity Mutual Funds
– Direct (G)

Annual Returns (%) Sharpe

Ratio
Name of the Scheme Rank
201 201 (Sp)
2013 2015 2016 (%)
4 7

               

Principal Emerging Bluechip Fund

4.4 80.5 7 11.3 49.4 0.7193 2
D(G)
Reliance Focused Equity Fund
1.9 81.5 8.5 3.1 42.9 0.6107 5
D(G)
ICICI Prudential Value Discovery
5.6 73.9 6.3 5.3 24.7 0.5641 6
Fund D(G)
DSP BlackRock Equity
4.9 45.9 6.4 11.2 41.3 0.7729 1
Opportunities Fund D(G)
Tata Equity P/E Fund - Regular
-0.2 70.3 0.6 16.1 40.6 0.6323 4
Plan D(G)

UTI MNC Fund D(G) 11.2 64.1 13.2 -2.6 37.1 0.6883 3

Tab. Calculated Sharpe Ratio.

52
 SHARPE RATIO
0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
Sharpe Ratio

Principal Reliance ICICI DSP BlackRock Tata Equity UTI MNC

Fig. Calculated Sharpe Ratio.

Interpretation:
 As Sharpe Ratio represents mutual fund's excess return to its standard deviation
high Sharpe ratio indicates more attractive fund.
 All the Ratio for the schemes compared are high, they are relatively ranked
accordingly.
 The best performing mutual fund is DSP BlackRock Equity Opportunities Fund
D(G) having Sharpe Ratio (Sp) as 0.7729%.
 The most underperforming mutual fund is ICICI Prudential Value Discovery Fund
D(G) having Sharpe Ratio (Sp) as 0.5641%.

53
 7.6 Calculated Treynor Ratio of Selected Diversified Equity Mutual
Funds – Direct (G)

Treynor
Ratio
Annual Returns (%) Rank
(Tp)
Name of the Scheme (%)
201 201
2013 2015 2017
4 6

             
 
Principal Emerging Bluechip
4.8 79.4 5.9 10.3 47.8 24.02 1
Fund D(G)

Reliance Focused Equity Fund

2.2 80 7.8 2.1 41.4 21.08 2
D(G)

ICICI Prudential Value

7.1 72.6 5.1 3.9 23.4 16.66 5
Discovery Fund D(G)

DSP BlackRock Equity

5.3 45.1 5.8 10.2 39.7 15.44 6
Opportunities Fund D(G)

Tata Equity P/E Fund - DG) 0.9 69.1 -0.1 15.3 39.3 18.98 3

UTI MNC Fund D(G) 10.5 62.9 12.2 -3.5 35.9 18.1 4

Tab. Calculated Treynor Ratio.

54
 TREYNOR RATIO
30

25

20

15

10

0
Treynor Ratio

Principal Reliance ICICI DSP BlackRock Tata Equity UTI MNC

Fig. Calculated Treynor Ratio.

Interpretation:
 As Treynor Ratio represents mutual fund's excess return to its standard deviation
high Treynor ratio indicates more attractive fund.
 All the Ratio for the schemes compared are high, they are relatively ranked
accordingly.
 The best performing mutual fund is Principal Emerging Bluechip Fund D(G)
having Treynor Ratio (Tp) as 24.02%.
 The most underperforming mutual fund is DSP BlackRock Equity Opportunities
Fund D(G) having Treynor Ratio (Tp) as 15.44%.

55
7.7 Calculated Alpha (α) of Selected Diversified Equity Mutual Funds –
Direct (G)

Annual Returns (%)

Alpha (α)
Name of the Scheme Rank
(%)
2013 2014 2015 2016 2017

             
 
Principal Emerging Bluechip
4.8 79.4 5.9 10.3 47.8 7.72 3
Fund D(G)
Reliance Focused Equity Fund
2.2 80 7.8 2.1 41.4 10.48 2
D(G)
ICICI Prudential Value
7.1 72.6 5.1 3.9 23.4 0.36 6
Discovery Fund D(G)
DSP BlackRock Equity
5.3 45.1 5.8 10.2 39.7 4.64 4
Opportunities Fund D(G)

Tata Equity P/E Fund – D(G) 0.9 69.1 -0.1 15.3 39.3 11.28 1

UTI MNC Fund D(G) 10.5 62.9 12.2 -3.5 35.9 3.1 5

Tab. Calculated Alpha Value.

56
 ALPHA

12

10

0
ALPHA ...
Principal Reliance ICICI DSP BlackRock Tata Equity UTI MNC

Fig. Calculated Alpha Graph.

Interpretation:
 All the funds outperformed their respective benchmark indices.
 The best performing mutual fund is Tata Equity P/E Fund – D(G) having Alpha (α)
as 11.28%.
 The most underperforming mutual fund is ICICI Prudential Value Discovery Fund
D(G) having Alpha (α) as 0.36%.

57
• While investing, one should consider both NAV and also total returns. They cannot
completely rely on the ranks based on either NAV/ returns.

• It is also found that when the period of investment is higher, the returns are
comparatively better than shorter period of investment, in case of open - end
schemes.

• Equity funds are the funds having both high risk and high return.

• When Sharpe ratio is compared (which gives relative measure of return/risk)

performance of funds is superior to their respective benchmark indices.

• Fund managers’ strategies, published in the fact book may be analysed so that the
investor may choose according to one’s objectives.

• When diversified equity fund returns are compared to the related benchmark of the
stock index, mutual funds are performing better, especially when the period of
investment is more than five years.

• Lower penetration of mutual funds in India will drive growth along with increasing
levels of financial literacy. 

58
 The fund names must also be made simpler to understand and give an idea of the
risk return trade-off to be borne by investor and minimum investment horizon so
that investor is able to make informed investment decisions.

 More tax incentives should be given to investor of mutual fund.

 Designing schemes tailored to the needs and preferences of people.

 Investors who want to create wealth but can also bear more risk should invest in
Mutual Funds.

 Mutual fund should give emphasis to technology wave. It will bring flexibility and
convenience to investors. It will widen the reach of mutual fund. Advantages of
technology wave include lower distribution cost through on line transaction more
customized and personal advice to customer.

E.g. Groww App

59
This study also creates awareness among the investor community. Before choosing the
mutual fund scheme, the investor should study the fact sheet thoroughly and he has to
choose the best one.

This project evaluated the risk-adjusted performance of equity mutual funds in India.
Analyzing the seasonality of funds return and benchmark return volatility in terms of the
mean adjusted. Yearly standard deviation from the daily return obtained from AMFI
reports and NSE reports. Examining the fund volatility, it is found that the highest
volatility occurs in the period of 2012-13.

Risk- Adjusted performance is measure by Sharpe, Treynor and Alpha. From these
measures it is found that there are certain schemes which underperform than the
benchmark index that show a strong negative risk–return relation. There are certain
schemes that outperform than the benchmark index with positive risk-return relation.

Investor who wants to invest into equity mutual funds needs to make two decisions. One is
which fund to hold and how much money to invest each. This study helps the investors to
choose the suitable schemes for investment. It can also be stated the past performance of
the funds does not reflect in future. Most of the schemes performed well in the initial
period.

This study analysis shows all the equity mutual funds is having volatility but not all the
schemes volatility is lesser than the benchmark indices. Most of the schemes are given
higher return than the benchmark indices. All the schemes are performed in same pattern
towards market.

Even though the fund movements are similar, the degree of change is not same in all the
schemes. Investors’ interest and keen knowledge of the market will help them to attain
their expected return from the equity mutual funds.
60
BOOKS & JOURNALS
1. Agrawal, D. (2007). Measuring Performance of Indian Mutual Funds. Prabhandan
Tanikniqui, 1, 1: 43-52.

2. Aneel Keswani and David Stolin, (February 2004, JEL) Determinants of Mutual Fund
Performance Persistence: A Cross-Sector Analysis.

3. Agrawal G D (1992), "Mutual Funds and Investors' Interest", Chartered Secretary, Vol.
22, No. 1 (Jan), p. 23.

4. Barua, S. K., Raghunathan, V. and Verma, J. R. (1991). Master Share: A Bonanza for
Large Investors. Vikalpa, 17, 1: 29-34.

5. Barua S K, Varma J R, Venkiteswaran N (1991), "A Regulatory Framework for Mutual

Funds", Economic & Political Weekly, Review of Management & Industry, Vol. 26, No.
21, May 25, p. 55-59.

6. Bhole L M (1992), "Proposals for Financial Sector Reforms in India: An Appraisal

(Perspectives)", Vikalpa, Vol. 17, No. 3 (Jul-Sep), p. 3-9.

7. Bal R K, Mishra B B (1990), "Role of Mutual Funds in Developing Indian Capital

Market", Indian Journal of Commerce, Vol. XLIII, p. 165

8. Bhole, L.M. 1995 The Indian Market at crossroads, Vikalpa: The Journal for Decision
makers,

9. Friend, I., Marshal, B. and Crocket, J. (1970). Mutual Funds and Other Institutional
Investors: A New Perspective. New York: McGraw Hill Book Company.

10. Gupta, M. and Aggarwal, N. (2007). Performance of Mutual Funds in India: An

Empirical Study. The ICFAI Journal of Applied Finance, 13, 9: 5-16.

11. Ippolito, R. A. (1993). On Studies of Mutual Fund Performance: 1962-1991. Financial

Analyst Journal, 49, 1 42: 50.

61
12. Ivkovich, Zoran, Clemens Sialm and Scott J. Weisbenner. (2006), “Portfolio
Concentration and the Performance of Individual Investors.” Available at SSRN:
http://ssrn.com abstract=568156 (Journal of Financial and Quantitative Analysis).

13. Jhamb Mahendra (1991), "Mutual Funds Dominate Market Capital", Yojana, Vol. 35,
July, 15, p. 8-9.

14. Kundu Abhijit, (2009) Stock Selection Performance of Mutual Fund Managers in
India: An Empirical Study, Journal of Business and Economics Issue Vol. 1 No.1 January
2009.

15. Mishra, B. and Mahmud, R. (2002). Measuring mutual fund performance using lower
partial moment. Global Business Trends, Bhubaneswar, India.

16. Mohinder N Kaura, and M. Jaydev, “Performance of Growth Oriented Mutual Funds:
An Evaluation”, the ICFAI Journal of Applied Finance, January 1995.

REFERRED WEBSITES:
http://www.miraeassetmf.co.in/uploads/TermofWeek/Beta_SD_RSquared.pdf

https://www.crisil.com/content/dam/crisil/our-analysis/views-and-
commentaries/insights/2018/crisil-fund-insights-new-mutual-fund-reclassification-to-help-
investors-choose-and-compare-funds-march-2018.pdf

https://www.reliancemutual.com/mutual-fund-articles/what-are-the-benefits-of-investing-in-
equity-funds

https://www.kotaksecurities.com/ksweb/Research/Investment-knowledge-Bank/introduction-to-
mutual-funds

https://economictimes.indiatimes.com/mf/mf-news/mf-aum-rises-20-to-rs-23-4-lakh-crore-in-april-
june-quarter/articleshow/64864583.cms

https://www.amfiindia.com/indian-mutual

www.finance.indiamart.com

www.bseindia.com

www.nseindia.com

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