CONTENTS

CHAPTER I
INTRODUCTION

1. Introduction on mutual funds 2. Objectives of the study 3. Scope of the study 4. Application of the study 5. Methodology of the study 6. Tools used for analysis 7. Limitations of the study

CHAPTER II CHAPTER III CHAPTER IV

REVIEW OF LETERATURE COMPANY PROFILE ANALYSIS & INTERPRETATION

CHAPTER V CONCLUSIONS & SUGGESTIONS

1. Conclusions 2. Suggestions

CHAPTER VI

BIBILOGRAPHY

CHAPTER 1
INTRODUCTION

INTRODUCTION
Last two decades have witnessed a phenomenal growth in trade and industry the world over. The days are passed when capital used to remain within the boundaries of nations. In this era of globalization and liberalization, technology, capital and other resources are not only crossing the borders of nation but also increasing the volume of international trade. The rapidity with which the concept of corporate finance, bank finance and investment finance have changed in recent years have given birth to new financial products known as Mutual funds. As the name suggests, this is financial instrument that pools the savings of number of investors who share a common financial goal. The money thus collected is invested by the funds manager in different types of securities depending on the objective of the scheme. Mutual funds have become increasingly importance in the world of finance. Mutual funds legally known as open-ended companies are subject to regulations set forth by the Investment Company Act 1940, when deciding how to invest. Mutual funds are attractive because they require less of investors, as they offer diversification, experts talk and bond selection, low cost and preferential tax treatment. Additionally Mutual funds do not have a predetermined number of stocks to sell; rather stocks are added to the fund as required by the demand. 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. This 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 mutual fund is the most suitable investment for the common man as it offers the opportunity to invest in a diversified professionally managed portfolio at a relatively low cost. Any body with an investible surplus of as little as a few thousand rupees can invest in mutual funds. A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate derivatives and other assets have become mature and information driven. A typical 3

individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. Thus a mutual fund is the sum total of many parts, each of which is designated to perform a specific function. SEBI, the market regulator has outlined clearly the role and responsibilities of each entity. How well they function determines, in part, the quality of your experience with the mutual fund. As investment vehicles go, mutual funds are unique being the only ones to operate on the principle of pooling resources. The element of novelty extends to their working also in the kind of investment exposures they offer, the terms they use, the norms for pricing they follow, and lots more. These character traits will unravel through the course of this book. Life makes many demands of us. Theres so much to indulge in and deal with. At work or at home. With family, friends or self. Woven into these threats is the inescapable truth that money is a means to many an end. A house in the sub-urbs, good education for the kids, a set of four wheels to zip around and early retirement. The ends might differ but the means at least one of them to reach them remain the same: money. Earned wisely, saved regularly, and invested smartly. People say that they dont have the discipline, they dont understand investing, especially the stock market. They dont have time and dont really care. Well they should, even if just a little. After all its their money and their life and it helps to have their saving working for you. They dont need to get neck deep in to their personal finances, but the least they can do, and should do, is get a fix on the big picture. Explore and understand what they want from their investments, and leave the rest to the money managers: mutual funds. These investment vehicles dont demand them to have a deep understanding of financial matters; they dont even demand oodles of your time.

OBJECTIVES OF THE STUDY

1) The main purpose is to study whether mutual fund is investors best choice or not. 2) The objective of doing this project is to make a study of various investment schemes in the secondary market. 3) To ascertain the various fluctuation in different sect oral schemes of mutual funds 4) To know how various schems effect mutual fund investment and its performance taking past record 5) To study the performance of selected mutual fund companies and equity companies and their performance in 1 years 6) To reveal the current situation of mutual funds and equites as well as index in last one year in india.

SCOPE OF THE STUDY

1) The study covers the concept and details of mutual funds and introduction on

equity, derivatives and index. 2) The study also includes returns of equity, mutual funds and relative index of

different sectors. 3) 4) Equities year high and low is also included in the study. The project report covers the study of Net Asset Value (NAV) of mutual funds

in different sectors. 5) The analysis part includes the Net Asset Value (NAV) charts which gives the

clear picture of the present value of the mutual fund company. 6) The study includes the information regarding the selection of portfolio for

different funds in theory part. 7) The theory part also includes following information related to mutual fund : History of mutual funds Concept of mutual funds Why mutual funds Net Asset Value (NAV) Types and benefits of mutual funds Trends in mutual funds Future scenario Problem of mutual fund industry in India.

NEED &IMPORTANTS OF THE STUDY

1) The study helps the investor to compare various investment schemes and the

returns from those investments. 2) funds. 3) The study helps to have the knowledge of various schemes and working of The reader can have thorough knowledge on concepts and trends of mutual

mutual funds. 4) User can make proper analysis of returns in different schemes comparing the

performance of the study period. 5) The study enables the readers to assess the Net Asset Value (NAV) by seeing

the charts. 6) 7) Nifty Researchers can think of further study by including the data of large period. The study also enables us to understand the fluctuations related to Sensex and

METHODOLOGY OF THE STUDY

All information related to the topic needs to be carefully scrutinized to avoid the risk of biased analysis. Having once identified which information is relevant and need to be collected, we will have to define how this will be done. The method employed in the investigation depends on the purpose and scope of the study. Let us try to understand methodology. 1) RESEARCH DESIGN: Research design is some statement or specification of procedures for collecting and analyzing the information required for the solution of some specific problem. Here the exploratory research is used as investigation is mainly concerned with determining the trends and positive and negative returns in different sectors of mutual funds and equities. Exploratory research is generally carried out by three sources of information A) Study of secondary sources B) Discussion with individuals C) Analyzing some specific areas 2) DATA COLLECTION METHODS: The key for creating useful system are selectivity in collection of data and linking that selectivity to the analysis and decision issue of the action to be taken. The accuracy of collected data is of great significance for drawing correct and valid conclusions from the investigation. The following are the main steps in data collection process a) Type of information required in the investigation b) Establishing the facts that are available at present and additional facts required. c) Identification of sources from where the information can be available. d) Selection of appropriate information i.e. collection method. e)

3) SOURCES OF INFORMATION: Data available in marketing research are either primary or secondary. Primary data: primary data are generated in an investigation according to the needs of problem in head. Primary data is collected using case study methods. There are some set of Qualitative techniques used for collection of some socio economic information about some phenomenon. Secondary data: Secondary data can be defined as data collected by some one else for purpose other than solving the problem being investigated. Secondary data is collected from external sources which include information from published material of SEBI and some of the information is collected online. The data sources also include various books, journals, magazines, news papers, etc. The organization profile is collected from Branch Manager.

TOOLS USED FOR ANALYSIS

A Table is a systematic arrangement of statistical data in rows and columns. Rows are horizontal arrangements whereas columns are vertical. Tabulation is a systematic presentation of data in a form suitable for analysis and interpretation. The tables used are as follows: 1) One way table: It presents only one characteristic and hence in answering one or more independent questions with regard to those characteristics. 2) Two-way table: It contains sub divisions of a total and is able to answer two dependent questions. 3) Three-way table: It sub-divides the total in to three distinct categories It is capable of answering three mutually dependent questions mutually

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GRAPHICAL REPRESENTATION OF DATA

A picture is worth a thousand words. The impression created by a picture has much greater impact than any amount of detailed explanation. Statistical data can be effectively presented in the form of diagrams and graphs. Graphs and Diagrams make complex data simple and easily understandable. They help to compare related data and bring out subtle data with amazing clarity. The Diagram used is as follows: 1) Bar diagrams: Bar diagrams are used specifically for categorical data or series. They consist of the group of equidistant rectangles, one for each group or category of data in which the values of magnitudes are represented by length or height of rectangles. 2) Sample Bar diagram: It is used of comparative study of two or more aspects of a single variable or single category of data. 3) Percentage bar diagram: If sub-divided bar diagrams are presented on a percentage basis i.e. each component as a percentage of whole, it is said to be a percentage bar diagram.

COMPARATIVE STUDY
Comparative study is made by comparing the different investment schemes including mutual funds, equity and relative indexes. The returns of mutual funds and equity are compared for different sectors. The Net Asset Value of different mutual fund companies is also shown in the study. Overall the study is done by comparing different investment schemes and what returns they give in the period of 1 year.

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LIMITATIONS
1) 2) 3) 4) Equity return is not taken from NSE stock exchange. The data of mutual fund companies and equity companies is taken only for 3& Due to limitation of time all sectors are not studied, only selected sectors have Data for mutual funds available on website is day to day basis data. Data is

6 months and 1 year due to non availability of data. been studied. updated daily. Hence the data is available as on 31 marches 2012 5) only growth funds are taken. 6) Due to non availability of data NSE scrip Tata consultancy information has not taken.

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CHAPTER 2

13

INTRODUCTION ON MUTUAL FUND

The concept of Mutual fund is a new feature in the cap of Indian capital market but not to international market. The concept of mutual fund spread to USA in the beginning of 20th century and three mutual fund companies were started in 1924. Mutual funds have been successfully working in the USA and some western countries. These funds have been useful in filling the gap between the demand and supply of capital in the market. A mutual fund motivates small and big investors to entrust their savings to it so that these are professionally employed in sharing good return. A large number of investors have small savings with them. They can at the most buy shares of one or two companies. When small savings are pooled and entrusted to mutual fund then these can be used to buy blue chips where regular returns and capital appreciation are ensured. Fund is an American concept. The terms like investment company, money fund investment trust and mutual funds are used interchangeably and used to describe the same thing in American literature. In British literature mutual funds has not been explained but is considered as a synonym of investment trust of USA.

DEFINITION & MEANING

A mutual fund is an investment vehicle for investors, who pool their savings for investing in diversified portfolio of securities with the aim of attractive yields and appreciation in their value. As per mutual fund book published by investment company institute of US, Mutual fund is a financial service organization that receives money from shareholders, invests it, earns return on it, attempt to make it grow and agree to pay the shareholder cash on demand for the current value of investment SEBI (mutual fund) regulations, 1996 defines mutual funds as A fund established in the form of a trust to raise monies through the sale of units to the public or a section of public under one or more schemes for investing in securities including money market instruments A mutual fund is a special type of institution a trust or an investment company which acts as an investment intermediary and channelises the savings of large number

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of people to the corporate securities in such a way that investors get a steady return, capital appreciation and low risk A mutual fund is a trust that pools the savings of a number of investors who wish to start investing but do not have a large amount of capital to work with or who want to take hands of approach and let the professional take all decisions. Mutual funds are basically large funds operated by investment companies and pull money from many different people and then invest according to a certain goal for the fund. This allows for greater diversification than would be possible for a single person with less-than-generous assets and also removes the burden of researching market conditions and constantly adjusting investments accordingly from the individual.

HISTORY OF 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 delinked 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 Canara Bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (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.

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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 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. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. The graph indicates the growth of assets over the years.

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GROWTH IN ASSETS UNDER MANAGEMENT

ZZZ

Note: Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

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CONCEPT OF MUTUAL FUND

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 realised 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 basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart

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ORGANISATION OF A MUTUAL FUND

There are many entities involved and the diagram below illustrates the organisational set up of a mutual fund:

WHY MUTUAL FUNDS

Let's suppose you're just getting started as an investor and have $5,000 to invest and you have three important goals you want to achieve. First, you don't want to lose your money in a risky venture so you want security, like that found in a certificate of deposit or other fixed income investment. But you also want to make the most money you can, so you want the prospect for growth potential, too. Finally, since you don't have the time or knowledge to actively manage your money, you want professional money management -occasionally diversifying your investments into promising new opportunities. That sounds like a very good plan, but where can you invest your money and have a chance to meet all three criteria? Certificates of deposit and other fixed income investments offer security, but often with low rates of interest and a fixed potential for growth. Individual stocks may carry greater potential for growth, but $5,000 isn't a lot to invest and if you put it all in one stock, you risk everything if it performs poorly. And, brokers and investment advisors can offer you advice and money management, but at a price -you pay for their services, which reduces further the amount you have available to invest. More than 80 million people, or one out of every two households in America, invest in mutual funds. Currently, over $6 trillion is invested in mutual funds. While funds have been around since the 1920's, their popularity over the past 25 years has soared. The reasons:

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 Mutual

funds make it easy and less costly for investors to satisfy their need for capital growth, income and/or income preservation Mutual funds bring diversification and professional money management to the individual investor A mutual fund is a company that pools the money of many investors -- its shareholders -- to invest in a variety of different securities. Investments may be in stocks, bonds, money market securities or some combination of these. Those securities are professionally managed on behalf of the shareholders, and each investor holds a pro rata share of the portfolio -- entitled to any profits when the securities are sold, but subject to any losses in value as well. For the individual investor, mutual funds provide the benefit of having someone else manage your investments, take care of record keeping for your account, and diversify your dollars over many different securities that may not be available or affordable to you otherwise. Today, minimum investment requirements on many funds are low enough that even the smallest investor can get started in mutual funds. A mutual fund, by its very nature, is diversified -- its assets are invested in many different securities. Beyond that, there are many different types of mutual funds with different objectives and levels of growth potential, furthering your chances to diversify.

NET ASSET VALUE

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention. The price measured per unit is called the Net asset value NAV of the unit. Just as a share or a bond is brought at a price, a mutual fund is bought and sold at its NAV. If for example u were to invest Rs.10000 in a scheme when its NAV is Rs.10 you will be

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allotted 1000 units (10000/10) roughly the fund charges a nominal processing fee. The NAV of any scheme tells how much each unit of it is worth at any point in time, and is therefore the simplest measure of how it is performing. A schemes NAV is its Net assets (market value of the securities is owns minus whatever it owes) divided by the number of units it has issued. a. schemes NAV is a dynamic figure. The market value of the schemes portfolio changes from day to day as prices of shares and bonds move up or down. The number of units outstanding also changes, as new investors come into the scheme and old ones leave. If the NAV of your schemes rises from Rs.10 to Rs.11 over a period of time, your scheme is said to have generated a return of 10 percent. Similarly if its Net NAV falls form Rs.10 to Rs. 9, it is said to have lost 10 percent. Fund houses have to calculate and disclose, the NAVs of their schemes daily. Fund NAVs can be easily looked up. While the general dailies give a random listing of schemes, the financial papers are more exhaustive in their coverage. When invested in a scheme, its NAV is the figure to track, as it quantifies your returns, and your purchase price will be based on it. Random listing of schemes, the financial papers random listing

TYPES OF MUTUAL FUNDS

This section provides descriptions of the characteristics -- such as investment objective and potential for volatility of your investment -- of various categories of funds. These descriptions are organized by the type of securities purchased by each fund: equities, fixed-income, money market instruments, or some combination of these. This table organizes these fund types by how aggressive or conservative they are and by investment objective. Because mutual funds have specific investment objectives such as growth of capital, safety of principal, current income or tax-exempt income, you can select one fund or any number of different funds to help you meet your specific goals.

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In general mutual funds fall into these general categories:

Equity Funds invest in shares of common stocks. Fixed-Income Funds invest in government or corporate securities which offer fixed rates of return. Balanced Funds invest in a combination of both stocks and bonds. Money Market Funds for high stability of principal, liquidity and income. Bond Funds, both tax-exempt and taxable funds to generate income. Specialty/Sector Funds to diversify holdings within an industry.

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Equity Funds

Aggressive Growth Funds What they invest in: These funds seek maximum growth of capital with secondary emphasis on dividend or interest income. They invest in common stocks with a high potential for rapid growth and capital appreciation. Because they invest in stocks which can experience wide swings up or down, these funds have a relatively low stability of principal. They often invest in the stocks of small emerging growth companies and generally provide low current income because these companies usually reinvest their profits in their businesses and pay small dividends, if any. Aggressive growth funds generally incur higher risks than growth funds in an effort to secure more pronounced growth. These funds may invest in a broad range of industries or concentrate on one or more industry sectors. Some use borrowing, short-selling, options and other speculative strategies to leverage their results. Suitable for: Investors who can assume the risk of potential loss in value of their

investment in the hope of achieving substantial and rapid gains. They are not suitable for investors who must conserve their principal or who must maximize current income. Growth Funds

What they invest in: Generally invest in stocks for growth rather than current income. Growth funds are more likely to invest in well-established companies where the company itself and the industry in which it operates are thought to have good long-term growth potential. Growth funds provide low current income, but the investor's principal is more stable than it would be in an aggressive growth fund. While the growth potential may be less over the short term, many growth funds have superior long-term performance records. They are less likely than aggressive growth funds to invest in smaller companies which may provide short-term substantial gains at the risk of substantial declines. Suitable for: Although growth funds are more conservative than aggressive

growth funds, they are still relatively volatile. They are suitable for growth23

oriented investors but not investors who are unable to assume risk or who are dependent on maximizing current income from their investments.

International/Global Funds What they invest in: International funds seek growth through investments in companies outside the United States. Global funds seek growth by investing in securities around the world, including the United States. Both provide investors with another opportunity to diversify their mutual fund portfolio, since foreign markets do not always move in the same direction as the U.S.

The best way to invest abroad is through mutual funds, rather than direct investment in a foreign security. Most investors are unfamiliar with foreign investment practices and currencies and may not have a clear understanding of how economic or political events can affect foreign securities. An investor in an international mutual fund doesn't have to worry about trading practices, recordkeeping, time zones or other laws and customs of a foreign country -- that is all handled by the fund's money manager. International and global funds can invest in common stocks or bonds of foreign firms and governments. Many international funds invest in a particular country or region of the world. Suitable for: While international and global funds offer opportunities for growth

and diversification, these types of funds do carry some additional risks over domestic funds and should be carefully evaluated and selected according to the investor's objectives, timeframe and risk profile. Because most international and global funds are considered to be aggressive growth funds or growth funds, investors must be willing to assume the risk of potential loss in value in the hope of achieving substantial gains. They are not suitable for investors who must conserve their principal or maximize current income.

Growth and Income Funds What they invest in: Growth and income funds seek long-term growth of capital as well as current income. The investment strategies used to reach these goals vary among funds Some invest in a dual portfolio consisting of growth stocks and income stocks, or a combination of growth stocks, stocks paying high dividends, preferred stocks,

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convertible securities or fixed-income securities such as corporate bonds and money market instruments. Others may invest in growth stocks and earn current income by selling covered call options on their portfolio stocks.

Suitable for:

Growth and income funds have low to moderate stability of

principal and moderate potential for current income and growth. They are suitable for investors who can assume some risk to achieve growth of capital but who also want to maintain a moderate level of current income.

Fixed-Income Funds What they invest in: The goal of fixed income funds is to provide high current income consistent with the preservation of capital. Growth of capital is of secondary importance Income funds that invest primarily in common stocks are classified as equity income funds (see next listing). Those that invest primarily in bonds and preferred stocks are classified as fixed-income funds. These funds invest in corporate bonds or government-backed mortgage securities that have a fixed rate of return. Since bond prices fluctuate with changing interest rates, there is some risk involved despite the fund's conservative nature. When interest rates rise, the market price of fixed-income securities declines and so will the value of the income funds' investments. Conversely, in periods of declining interest rates, the value of fixed-income funds will rise and investors will enjoy capital appreciation as well as income Fixed-income funds offer a higher level of current income than money market funds, but a lower stability of principal. They are generally more stable in price than funds that invest in stocks. Within the fixed-income category, funds vary greatly in their stability of principal and in their dividend yields. High-yield funds, which seek to maximize yield by investing in lower-rated bonds of longer maturities, entail less stability of principal than fixed-income funds that invest in higher-rated but lower-yielding securities. Some fixed-income funds seek to minimize risk by investing exclusively in securities whose timely payment of interest and principal is backed by the full faith and credit of the U.S. Government. These include securities issued by the U.S. Treasury, the Government National Mortgage Association ("Ginnie Mae" securities), the Federal National Mortgage Association ("Fannie Maes") and

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Federal Home Loan Mortgage Corporation ("Freddie Macs"). All are backed by pools of mortgages.

Suitable for:

Fixed-income funds are suitable for investors who want to

maximize current income and who can assume a degree of capital risk in order to do so. Again, carefully read the prospectus to learn if a fund's investment policy with respect to yield and risk coincides with your own objectives.

Balanced/Equity Income funds What they invest in: Equity income funds seek high current yield by investing primarily in equity securities of companies which pay high dividends. Unlike interest payments on bonds, dividends on equity securities can change as companies raise or lower their dividends. Since yield-oriented stocks are more volatile than comparably rated fixed-income securities, equity income funds offer less stability of principal than fixed-income funds. Balanced funds are more evenly invested in equities and income securities. Suitable for: Balanced and equity income funds are suitable for conservative

investors who want high current yield with some growth.

Money Market Funds What they invest in: For the cautious investor, these funds provide a very high stability of principal while seeking a moderate to high current income. They invest in highly-liquid, virtually risk-free, short-term debt securities of agencies of the U.S. Government, banks and corporations and U.S. Treasury Bills. They have no potential for capital appreciation. Tax-exempt money market funds invest in securities that provide safety of principal, liquidity and income exempt from federal income taxes by investing in short-term, high-rated municipal obligations. Because of their short-term investments, money market mutual funds are able to keep a constant share price; only the yield fluctuates. Therefore, they are an attractive alternative to bank accounts. With yields that are generally competitive with -- and usually somewhat higher than -- yields on bank certificates of deposit (CDs), they offer several advantages: Money can be withdrawn any time without penalty. Money market funds also offer check writing privileges. Although not insured by the FDIC or FSLIC, money market funds invest only in highly-liquid, short-term, top-rated money market instruments.

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Money market funds are suitable for conservative investors who want high

stability of principal and moderate current income with immediate liquidity.

Suitable for: liquidity.

Money market funds are suitable for conservative investors who

want high stability of principal and moderate current income with immediate

Municipal Bond Funds What they invest in: "Muni" bond funds provide higher tax-exempt income than tax-exempt money market funds by investing in longer-maturity (and often lowerrated) securities, which generally offer higher yields than the short-term, highrated securities in which tax-exempt money market funds invest Municipal bond funds vary greatly in the quality and maturity of the municipal bonds they invest in. The longer the maturity, the higher the yield. Also, the lower the credit rating of the issuer, the greater the risk and the higher the yield While municipal bond funds generally provide lower yields than income funds with debt obligations of similar maturities and ratings, for an investor in a high marginal tax bracket the after-tax yields of municipal bond funds will be higher. The price and yield of municipal bond funds will fluctuate moderately with interest rates. As interest rates decline, the value of principal increases while yield decreases; as rates increase, bond prices decline but yields increase. Suitable for: Suitable for investors in medium to higher tax brackets who want

current income free from federal income tax.

Double & Triple Tax-Exempt Bond Funds What they invest in: These bond funds provide the investor with an even greater tax advantage by investing in municipal bonds of a single state. Triple tax-exempt funds are exempt from income tax in a specific city. Thus they generate income exempt from not only federal income tax but also from state and/or city income tax for residents of those jurisdictions. Like all bond funds, the value of the shares will fluctuate with interest rates, as will the current yield. Also, the stability of principal and yield levels vary with the quality and maturity length of the bonds in which the funds invest. Lack of geographic diversification increases credit risk of these funds compared with national funds.

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Suitable for: taxes.

These funds are suitable for investors in medium to high tax

brackets in high tax states who want income with maximum exemption from Specialty/Sector Funds What they invest in: These funds invest in securities of a specific industry or sector of the economy such as health care, high technology, leisure, utilities or precious metals

Because such funds invest primarily in one sector, they do not offer the element of downside risk protection found in mutual funds that invest in a broad range of industries. However, the funds do enable investors to diversify holdings among many companies within an industry, a more conservative approach than investing directly in one particular company Sector funds offer the opportunity for sharp capital gains in cases where the fund's industry is "in favor" but also entail the risk of capital losses when the industry is out of favor While sector funds restrict holdings to a particular industry, other specialty funds such as index funds give investors a broadly-diversified portfolio and attempt to mirror the performance of various market averages. Index funds generally buy shares in all the companies composing the S&P 500 Stock Index or other broad stock market indices Asset allocation funds move funds among a variety of markets and instruments in response to the fund manager's view of relative market prospects. They are broadly diversified and sometimes have higher management fees since there may be a variety of securities in the portfolio. These funds are suitable for investors who can tolerate a moderate to high degree of risk, are seeking capital appreciation and to whom dividend income is secondary in importance. And whatever the instruments, social responsibility funds apply moral and ethical as well as economic principles in the selection of securities. Suitable for: Specialty funds are suitable for investors seeking to invest in a

particular industry who can monitor industry performance regularly and alter investment strategies accordingly. Investors must be willing to assume the risk of potential loss in value of their investment in the hope of achieving substantial gains. They are not suitable for investors who must conserve their principal or maximize current income.

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BENEFITS OF MUTUAL FUNDS

1) Professional Investment Management: By pooling the funds of thousands of investors, mutual funds provide full-time, high-level professional management that few individual investors can afford to obtain independently. Such management is vital to achieving results in today's complex markets. Your fund managers' interests are tied to yours, because their compensation is based not on sales commissions, but on how well the fund performs. These managers have instantaneous access to crucial market information and are able to execute trades on the largest and most costeffective scale. In short, managing investments is a full-time job for professionals. 2) Diversification: Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security. Mutual fund shareowners can benefit from diversification techniques usually available only to investors wealthy enough to buy significant positions in a wide variety of securities. 3) Low Cost: If you tried to create your own diversified portfolio of 50 stocks, you'd need at least $100,000 and you'd pay thousands of dollars in commissions to assemble your portfolio. A mutual fund lets you participate in a diversified portfolio for as little as $1,000, and sometimes less. And if you buy a no-load fund, you pay or no sale charges to own them. 4) Convenience and Flexibility: You own just one security rather than many, yet enjoy the benefits of a diversified portfolio and a wide range of services. Fund managers decide what securities to trade, clip the bond coupons, collect the interest payments and see that your dividends on portfolio securities are received and your rights exercised. It's easy to purchase and redeem mutual fund shares, either directly online or with a phone call. 5) Quick, Personalized Service: Most funds now offer extensive websites with a host of shareholder services for immediate access to information about your fund account. Or a phone call puts you in touch with a trained investment specialist at a mutual fund company who can provide information you can use to make your own investment choices, assist you with buying and selling your fund shares, and answer questions about your account status.

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6) Ease of Investing: You may open or add to your account and conduct transactions or business with the fund by mail, telephone or bank wire. You can even arrange for automatic monthly investments by authorizing electronic fund transfers from your checking account in any amount and on a date you choose. Also, many of the companies featured at this site allow account transactions online. 7) Total Liquidity, Easy Withdrawal: You can easily redeem your shares anytime you need cash by letter, telephone, bank wire or check, depending on the fund. Your proceeds are usually available within a day or two. 8) Life Cycle Planning: With no-load mutual funds, you can link your investment plans to future individual and family needs -- and make changes as your life cycles change. You can invest in growth funds for future college tuition needs, then move to income funds for retirement, and adjust your investments as your needs change throughout your life. With no-load funds, there are no commissions to pay when you change your investments. 9) Market Cycle Planning: For investors who understand how to actively manage their portfolio, mutual fund investments can be moved as market conditions change. You can place your funds in equities when the market is on the upswing and move into money market funds on the downswing or take any number of steps to ensure that your investments are meeting your needs in changing market climates. A word of caution: since it is impossible to predict what the market will do at any point in time, staying on course with a long-term, diversified investment view is recommended for most investors. 10) Investor Information: Shareholders receive regular reports from the funds, including details of transactions on a year-to-date basis. The current net asset value of your shares (the price at which you may purchase or redeem them) appears in the mutual fund price listings of daily newspapers. You can also obtain pricing and performance results for the all mutual funds at this site, or it can be obtained by phone from the fund. 11) Periodic Withdrawals: If you want steady monthly income, many funds allow you to arrange for monthly fixed checks to be sent to you, first by distributing some or all of the income and then, if necessary, by dipping into your principal.

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12) Dividend Options: You can receive all dividend payments in cash. Or you can have them reinvested in the fund free of charge, in which case the dividends are automatically compounded. This can make a significant contribution to your longterm investment results. With some funds you can elect to have your dividends from income paid in cash and your capital gains distributions reinvested. 13) Automatic Direct Deposit: You can usually arrange to have regular, third-party payments -- such as Social Security or pension checks -- deposited directly into your fund account. This puts your money to work immediately, without waiting to clear your checking account, and it saves you from worrying about checks being lost in the mail. 14) Recordkeeping Service: With your own portfolio of stocks and bonds, you would have to do your own recordkeeping of purchases, sales, dividends, interest, short-term and long-term gains and losses. 15) Safekeeping: When you own shares in a mutual fund, you own securities in many companies without having to worry about keeping stock certificates in safe deposit boxes or sending them by registered mail. You don't even have to worry about handling the mutual fund stock certificates; the fund maintains your account on its books and sends you periodic statements keeping track of all your transactions. 16) Retirement and College Plans: Mutual funds are well suited to Individual Retirement Accounts and most funds offer IRA-approved prototype and master plans for individual retirement accounts (IRAs) and Keogh, 403(b), SEP-IRA and 401(k) retirement plans. Funds also make it easy to invest -- for college, children or other long-term goals. Many offer special investment products or programs tailored specifically for investments for children and college. 17) Online Services: The internet provides a fast, convenient way for investors to access financial information. A host of services are available to the online investor including direct access to no-load companies. 18) Sweep Accounts: With many funds, if you choose not to reinvest your stock or bond fund dividends, you can arrange to have them swept into your money market fund automatically. You get all the advantages of both accounts with no extra effort.

31

19) Asset Management Accounts: These master accounts, available from many of the larger fund groups, enable you to manage all your financial service needs under a single umbrella from unlimited check writing and automatic bill paying to discount brokerage and credit card accounts. 20) Margin: Some mutual fund shares are marginable. You may buy them on margin or use them as collateral to borrow money from your bank or broker. Call your fund company for details.

MARKET TRENDS
Alone UTI with just one scheme in 1964, now competes with as many as 400 odd products and 34 players in the market. In spite of the stiff competition and losing market share, UTI still remains a formidable force to reckon with. Last six years have been the most turbulent as well as exiting ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now pass with the game shifting to performance delivery in fund management as well as service. Those directly associated with the fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While UTI has always been a dominant player on the bourses as well as the debt markets, the new generation of private funds which have gained substantial mass are now seen flexing their muscles. Fund managers, by their selection criteria for stocks have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuations, a system of risk-reward has been created where the corporate sector is more transparent then before. Funds have shifted their focus to the recession free sectors like pharmaceuticals, FMCG and technology sector. Funds performances are improving. Funds collection, which averaged at less than Rs100bn per annum over five-year period spanning 1993-98 doubled to Rs210bn in 1998-99. In the current year mobilization till now have exceeded Rs300bn. Total collection for the current financial year ending March 2000 is expected to reach Rs450bn.

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What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather than public sector mutual funds. Indeed private MFs saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against a net inflow of Rs.604.40 crore in the case of public sector funds. Mutual funds are now also competing with commercial banks in the race for retail investors savings and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are losing out in the current scenario. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. India is at the first stage of a revolution that has already peaked in the U.S. The U.S. boasts of an Asset base that is much higher than its bank deposits. In India, mutual fund assets are not even 10% of the bank deposits, but this trend is beginning to change. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. (Source: Thinktank, The Financial Express September, 99) This is forcing a large number of banks to adopt the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that Mutual Funds are going to change the way banks do business in the future.

33

COMPARISON OF BANKS, MUTUAL FUNDS, EQUITY & DERIVATIVES BANKS Returns Administrati ve exp. Risk Investment options Network Low High Low Less High penetration MUTUAL FUNDS Better Low Moderate More Low but improving Better Transparent Everyday EQUITY Better Low High More DERIVATIVES Better Low High Less

High penetration High penetration Better Transparent NA Better NA

Liquidity At a cost Quality of Not transparent assets Interest Minimum balance calculation between 10th. & 30th. Of every month

Guarantee

Maximum Rs.1 lakh on deposits

None

NA

NA

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RECENT TRENDS IN MUTUAL FUND INDUSTRY

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. Many nationalized banks got into the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally chose to transfer staff from the parent organizations. The performance of most of the schemes floated by these funds was not good. Some schemes had offered guaranteed returns and their parent organizations had to bail out these AMCs by paying large amounts of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMCs have not been able to retain staff, float new schemes etc. and it is doubtful whether, barring a few exceptions, they have serious plans of continuing the activity in a major way. The experience of some of the AMCs floated by private sector Indian companies was also very similar. They quickly realized that the AMC business is a business, which makes money in the long term and requires deep-pocketed support in the intermediate years. Some have sold out to foreign owned companies, some have merged with others and there is general restructuring going on. The foreign owned companies have deep pockets and have come in here with the expectation of a long haul. They can be credited with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc.

In fact, they have forced the industry to upgrade itself and service levels of organizations like UTI have improved dramatically in the last few years in response to the competition provided by these.

35

SELECTING FUNDS FOR YOUR PORTFOLIO

The chart below can be used to identify the types of funds best suited to your particular investment objectives. Refer to it as you begin to formulate your portfolio. If Your Basic You Want The These Funds Invest Objective Is Following Primarily In Fund Type Common stocks Aggressive with potential for Maximum Growth very rapid growth. Capital May employ certain Growth International aggressive strategies Growth High Capital Specialty/ Growth Sector International Current Income & Capital Growth Common stocks with potential for Moderate high dividends and capital appreciation Fixed Income Both high-dividendHigh Current paying stocks and Very Low Income Equity Income bonds Current General Income & Money market Money Market None Protection of instruments Funds Principal Tax-Free Short-term Income & Tax-Exempt municipal notes and None Protection of Money Market bonds Principal Current U.S.Treasury and Income & U.S. agency issues Maximum Government None guaranteed by the Safety of Money Market U.S. Government Principal Growth & Income Moderate Moderate to High Common stocks with long-term growth potential Potential Capital Appreciation Potential Current Income Potential Risk

Very High

Very Low

High to Very High

High to Very Very Low High High

High to Low to Very High Moderate Moderate to High

Very Low

Moderate to High

Low

Moderate to High

Low

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FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investors shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over. Out of ten public sector players five will sell out, close down or merge with stronger players in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutters in the near future to come. But this does not mean there is no room for other players. The market will witness a flurry of new players entering the arena. There will be a large number of offers from various asset management companies in the time to come. Some big names like Fidelity, Principal, and Old Mutual etc. are looking at Indian market seriously. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind. The mutual fund industry is awaiting the introduction of derivatives in India as this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV). SEBI is working out the norms for enabling the existing mutual fund schemes to trade in derivatives. Importantly, many market players have called on the Regulator to initiate the process immediately, so that the mutual funds can implement the changes that are required to trade in Derivatives.

PROBLEMS & PROSPECTS OF MUTUAL FUNDS

1) Wrong positioning : The mutual funds in India have been quite wrongly promoted as an alternative to equity industry. Thus creating very high expectations in the minds of the investors. In a falling market, these expectations have been belied. Only the pure equity schemes can be compared with the stock market index. However pure equity schemes are few in India, further, investment is not purely linked to a particular index. Therefore returns form mutual funds cannot really be compared with stock market index.

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2)

Limited product range: Indian mutual funds have remained centered around a limited product range basically income, income-cum-growth and tax saving schemes. Efforts to develop and expand the market through innovative new products have been negligible. These have happened due to the tendency to avoid risk, inability to understand future market developments, and change in investor preference. Therefore the extent of mutual funds market has remained limited.

3) Confused market situation: probably the introduction and implementation of new regulatory norms has contributed in some measure to market sluggishness, as the emerging market was, initially, not able to respond to the regulatory objectives. 4) Absence of Innovative Marketing Network: The absence of product diversification and a confused market situation has been made worse by the absence of an innovative marketing network for mutual funds. The agent oriented network has largely been failure because most of the agents have not been specifically trained to sell mutual funds products, 5) Lack of adequate research infrastructure: the passive approach of some mutual funds in managing investors funds is compounded by the lack of adequate research infrastructure. Consequently, returns commensurate with the market movement could not be realized by many schemes, which has tended to show up Indian mutual funds in a bad light. 6) Inefficient management: Management is considered to be a key factor for the operational efficiency of any business venture. This factor becomes even more crucial for service ventures such as mutual funds. What mutual funds require are managers who have a clear understanding of prevailing and emerging market potential, investor preference and macro economic fundamentals. 7) Lack of investors education: The market success of any new product particularly a financial product depends largely on its acceptance by consumers, in this case investors. Mutual funds must undertake a well design and comprehensive program of investor education especially aimed at investors in rural and semi-urban areas. However this has been mostly neglected in India.

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8) Lack of media support: investors understanding about mutual funds product and it feature must be increased as it was found to be very low so far. This problem requires quick and structured attention. This can be solved with effective use of media. A positive media support is also required and mutual funds need to be media friendly. A very closer coordination between AMFI, mutual funds and the media to promote investor education in India. 9) Ignorance of liquidity management: over emphasis on asset management has often ignored the crucial importance of liability management in mutual funds, leading many Indian funds into a liquidity trap at the time of redemption. A more scientific approach needs to be adopted by the funds. 10) Risk management ignored: Derivatives have been widely used by the mutual funds as a measure of risk management as a complex and competitive market place. Further the practice of stock lending, used widely in the western market has induced efficiency in funds management a regulatory environment for mutual funds need to encouraged this practices in India.

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INTRODUCTION ON EQUITY SHARES

Equity is a term commonly used to describe the ordinary share capital of the business. Ordinary share in the equity capital of the business entitle the holders to all distributed profits after the holders of debentures and preference shares have been paid. Ordinary shares are issued to the owners of the company. It is important to understand the market values of companys shares have little relationship to their nominal or face value. The market value of the company share is determined by the price another investor is prepared to pay for them. In the case of publicly quoted companied, this is reflected in the market value of the ordinary shares traded on the stock exchange. In case of privately owned companies, where there is unlikely to be much trading in shares, market value is often determined when the business is sold or when the minority share holding is valued for taxation purpose. Differed ordinary shares are a form of ordinary shares which are entitled to a dividend only after a certain date or only if profits rise above a certain amount. Voting rights might also differ from those attach to other ordinary shares. Financing a company through the sale of stock in accompany is known as equity financing. Alternatively debt financing can be done to avoid giving up shares of ownership of the company. Equity financing are usually used for longer term investment projects such as investment in a new factory or a new foreign market. Equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and funds in anticipation of income from dividends and capital gain as the value of stock rises. It also sometimes refers to the acquisition of equity (ownership) participation in a private (unlisted) company or a start up. (A company being created or newly created). When the investment is in infant companies it is refer to as venture capital investing and is generally understood to be higher risk than investment in listing, going concern situations.

40

ON INDEX INTRODUCTION
Stock market talk is everywhere, from T.V and radio, to the newspapers and the web. But what does it mean? When people say that the market turned a great performance today. What is the market anyway? As it turns out, when most people talk about the market they are actually referring to an index. With the growing importance of the stock market in our society the names of indexes such as S & P 500, NIFTY, and SENSEX have become part of our every vocabulary. Index can be defined as a statistical measure of changes in the portfolio of stocks representing the portion of the overall market. It would be difficult to track every single security trading in the country. To get around this we take a smaller sample of the market that is representative of the whole. Thus, just a pollsters use a political survey to gauge the sentiment of population, the investors use indexes to track the performance of the stock market. Ideally change in price of an index would represent and exactly proportionate change in the stocks included in the index. Indexes are great tools for telling us what direction the market is taking, what trends are prevailing. An index is a number use to represent the changes in a set of values between a base time period and another time period A stock index is number that helps you measure the levels of the market. Most stock indexes attempt to be proxies for the market they exist in. returns on the index are thus supposed to represent the returns on the market i.e the returns that u could get if u had the entire market in your portfolio.

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CHAPTER 3
COMPANY PROFILE

42

COMPANY PROFILE
OVERVIEW: Tata Capital Limited is a subsidiary of Tata Sons Limited. The Company is registered with the Reserve Bank of India as a Systemically Important Non Deposit Accepting Core Investment Company and offers through itself and its subsidiaries fund and fee-based financial services to its customers. Tata Capital Financial Services Limited ("TCFSL") is a subsidiary of Tata Capital Limited. The Company is registered with the Reserve Bank of India as a Systemically Important Non Deposit Accepting Non Banking Financial Company (NBFC) and offers fund and fee-based financial services to its customers, under the Tata Capital brand. A trusted and customer-centric, one-stop financial services provider, TCFSL caters to the diverse needs of retail, corporate and institutional customers, across various areas of business namely the Commercial Finance, Infrastructure Finance, Wealth Management, Consumer Loans and distribution and marketing of Tata Cards. TCFSL has over 100 branches spanning all critical markets in India. We only do whats right for you The Tatas are amongst the most respected business houses in the world. Tata Capital aims to bring the trust and expertise of the Tatas to an economically and socially relevant sector like financial services. The essence of brand Tata Capital is encapsulated in our brand proposition We only do whats right for you'. The proposition reflects our strong resolve to deliver financial solutions that are right for our customers and the society at large. Tata Capital seeks to build strong relationships with its customers and deliver superior and consistent customer experience across all products and touch-points. At Tata Capital, our wide product suite comprises of the following:

COMMERCIAL FINANCE
The Commercial Finance business helps small, medium and large corporates grow their business. Our range of offerings includes Term Loans, Working Capital Loans, Channel

43

Finance, Equipment Finance, Lease Rental Discounting, Bill Discounting, Letter of Credit* and Bank Guarantee*. * Offered through arrangement made with select banks. ^ Originated and serviced by Tata Capital Financial Services Limited.

INVESTMENT BANKING
Tata Securities Limited (TSL), a wholly-owned subsidiary of Tata Capital Limited holds a Category | Merchant Banking license from the Securities and Exchange Board of India (SEBI ) to carry out merchant banking business. Our Investment banking business provides a broad range of services, including equity capital markets transaction execution, underwriting, mergers, and acquisitions advisory, structured finance advisory, private equity advisory and infrastructure advisory. * Brought to you by Tata Securities Limited (TSL), a wholly-owned subsidiary of Tata Capital Limited. TSL holds a Category I Merchant Banking license from the Securities and Exchange Board of India. Private Equity Tata Capital acts as Investment Manager to Private Equity Funds which identify and invest into target companies with significant growth potential, nurture them and exit profitable. Infrastructure Finance The Infrastructure Finance business caters to the specialized needs of the infrastructure sector. Our range of offerings includes Equipment Finance, Project Finance, Equipment Rentals, Working Capital Loans, Bill Discounting/ Factoring, Refinance, Top Up Loans and Loan Syndication. ^ Originated and serviced by Tata Capital Financial Services Limited. Securities Tata Securities Limited, a wholly owned subsidiary of Tata Capital Limited, offers, both institutional and retail customers, quality products and services like equity trading and research. Wealth Management

44

Tata Capital Wealth Management offers a range of Investment Advisory services and markets third party investment products like Portfolio Management Services, Private Equity and Venture Capital Funds, Structured Products, Mutual Funds, Fixed Deposits and Bonds. ^Marketed by Tata Capital Financial Services Limited Consumer Loans Our wide range of consumer loans such as Home Loans*, Auto Loans, Personal Loans, Business Loans, Education Loans, Loans against Property, Loans against Shares#. * Brought to you by Tata Capital Housing Finance Limited, a wholly-owned subsidiary of Tata Capital Limited. # Currently available in select cities only. ^ Originated and serviced by Tata Capital Financial Services Limited. Tata Cards The Tata Card* combines the convenience of a powerful credit card with a rewarding membership to the Empower program. The credit card allows customers to earn points and membership to the Empower program, India's first multi-brand loyalty program, offering them the advantage of redeeming these points across several loyalty partners. * Tata Card is the White Label Card issued, operated and serviced by the State Bank of India with Tata Capital only marketing the card. ^ Marketed by Tata Capital Financial Services Limited. Travel Related Services TC Travel and Services Limited, a wholly - owned subsidiary of Tata Capital Limited, offers a wide range of services that includes airline ticketing, Visa & passport facilitation, booking hotel accommodation, Cars-hire and surface transport Foreign Exchange TT Holdings & Services Limited, a wholly-owned subsidiary of Tata Capital Limited offers travel related foreign exchange products such as travelers cheques, foreign currency notes, foreign currency denominated pre-paid travel cards, arrangement for inward money transfer service and other associated travel related products. Alliances

45

Tata Capitals alliances and partnerships are based on and are an extension of the Companys core objects and values. These include: With Mizuho Securities Co. Ltd. to foster business cooperation in private equity, investment banking including cross border mergers and acquisitions, securities business including broking and distribution, structured finance and other business areas such as wealth management. With Mizuho Corporate Bank Limited (MHCB) to foster business cooperation, enhancing cross-market value creation capabilities, strengthening competitive advantages in addition to aiding each other in gaining a deeper understanding of the Indian and Japanese markets. As part of the understanding, Tata Capital and MHCB will cooperate in a wide-range of business areas. Some of these include Ninja Loans, Project and Infrastructure Finance and Treasury Products.

With Mitsubishi UFJ Securities Co., Limited to establish a basis of cooperation in a wide range of strategic business areas that include cross-border investment banking, global offering of Indian equities and working towards development of the local bond market.

46

47

Leaders with a vision Tata Capital Board consists of valuable and extensively experienced individual experts in their domains. They direct and nurture the Company with their priceless guidance, foresight and vision. Farrokh K. Kavarana Farrokh K. Kavarana is a Director of Tata Sons Limited and Tata Industries Limited, the apex holding companies of the Tata Group. He is the Chairman of several Tata Companies in India and abroad notably Tata AIG Life and General Insurance Companies, Tata Asset Management Ltd., Trent Ltd. and Tata Projects Ltd. Between 2000 and 2005, he served as the Executive Chairman of Tata Infotech Ltd. (now merged with Tata Consultancy Services), and from 1994 to 2000 he was the Executive Director of Tata Motors Limited, Indias largest automobile manufacturer. Prior to that, he shared his experience and vision as the Vice-Chairman and Managing Director of Tata International AG, Switzerland, responsible for the Tata Groups overseas operations and investments. Before joining the Tata Group in 1975, he held key positions with McKinsey & Co. Inc., in London and Washington D.C. as well as The Bowater Corporation in UK and Europe. Farokh Nariman Subedar Mr. F N Subedar is a qualified chartered accountant and company secretary and has vast experience in the matters of company administration, taxation, accounts and finance. He is the senior Vice President - Finance and Company Secretary of Tata Sons Ltd. and is on the board of various Tata companies. Mr. Subedar has served as the Chairman of the Direct Taxation Committee of the Bombay Chambers of Commerce and Industry. Hoshang Noshirwan Sinor Hoshang Noshirwan Sinor was the Chief Executive, Indian Banks Association, Mumbai, India till July 31, 2008. With 46 years of extensive experience in the banking sector, he has had exposure to the working of both public sector and private sector banks in India and has hence, had the experience of both the phases of nationalization and liberalization in this sector in India. He started his career in 1965 with Central Bank of India and in 1969 moved to Union Bank of India where his career grew with the company for 28 long years. In 1996, he was appointed as the Executive Director of Central Bank of India. Thereafter, he moved to ICICI Bank in July 1997 as Executive Director. On 1st June 1998, he took over as Managing Director and CEO of ICICI Bank. During his tenure,

48

ICICI Bank emerged from a marginal player to a major player in banking fraternity. During this period, ICICI Bank also became the first bank from India to be listed on New York Stock Exchange. This was followed by an acquisition of an old private sector bank namely Bank of Madura in 2001 which gave ICICI Bank size and the geographic reach. Mr. Sinor has also worked on various committees of the Govt. of India, Reserve Bank of India (RBI) and Confederation of Indian Industry (CII) and has contributed to numerous policy and decision making processes. Ishaat Hussain Ishaat Hussain, the Finance Director of Tata Sons Ltd. since July 2000, joined the Board of Tata Sons as an Executive Director on 1st July 1999. Prior to joining Tata Sons, he served as the Senior Vice-President and Executive Director Finance in Tata Steel where he served for almost 10 years. Besides being on the Board of Tata Sons Ltd., he is also the Chairman of Voltas Limited and Tata Sky Limited. He serves on the Boards of several Tata Companies like Tata Steel, Tata Industries, Tata Teleservices and Titan Industries Limited. Mr. Hussain is a member on the Primary Markets Advisory Committee of the Securities and Exchange Board of India (SEBI). In April 2005, he was appointed a Member of the Board of Trade and in November 2006 he was appointed a Public Interest Director of Bombay Stock Exchange Limited. Janki Ballabh Janki Ballabh joined the State Bank of India in July 1966 and served in several important positions which included assignments at the New York Branch of the Bank, Chief Executive Officer of the Bank's Branch at Singapore, Chief General Manager (Product Development, Marketing and Personal Banking) at the Corporate Office and Deputy Managing Director and Group Executive (International Banking), before taking over as Chairman, State Bank Group in November 1, 2000. Besides heading the State Bank of India, Shri Ballabh was also the chairman of the Seven Associate Banks of the State Bank of India, 4 banking subsidiaries of the Bank abroad and seven non-banking subsidiaries of the Bank in India. On retirement from State Bank of India, Shri Ballabh was appointed by the President of India as Vigilance Commissioner in the Central Vigilance Commission, New Delhi for 3 years from November 2002 to October 2005. Shri Ballabh worked as Chairman, Reserve Bank of India Services Board from 8th December 2005 to 23rd October 2007. He is presently the Chairman, UTI Trustee Co. of UTI Mutual Fund. He also serves as the Director on the Boards of Tata AIG Life Insurance Co. and Small

49

Industries Development Bank of India (SIDBI). He is also a Member of the Asia Pacific Advisory Committee of Barclays Bank PLC, London since June 1, 2007. Praveen P Kadle Praveen P Kadle, the Managing Director of Tata Capital Limited, has been associated with the Tata Group for over 18 years in various important capacities. For the first 5 years, he served as the Chief Financial Officer of Tatas joint venture with IBM in India. Thereafter, he joined Tata Motors Limited as Vice-President (Finance) and in the year 2001 he joined the Board of Tata Motors Limited as Executive Director Finance and Corporate Affairs.

50

SECURITIES The securities and trading business is brought to you by Tata Securities Limited, a wholly owned subsidiary of Tata Capital Limited. Tata Securities Limited is engaged in the business of providing Broking and Distribution services to both Retail and Institutional customers. Tata Securities Limited distributes third-party investment products and offers stock broking services in its capacity as a member of the Bombay Stock Exchange Limited (BSE), the National Stock Exchange of India Limited (NSEIL) and Association of Mutual Funds of India (AMFI). Tata Securities Limited is also a Depository Participant with the Central Depository Services (India) Limited (CDSL) and National Securities Depository Limited (NSDL). Retail Broking We offer a 3-in-1 account which brings to you a seamless platform for trading in Equities and investing in Mutual Funds and IPOs at very attractive brokerage rates. Institutional Broking We provide a suite of products and services to Institutional customers supported with comprehensive and incisive research on companies and their sectors.

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CHAPTER 4
ANALYSIS & INTERPRETATION

52

ANALYSIS & INTERPRETATION

PREFACE
The analysis is done to know whether, Mutual fund, is it investors best choice. The information is collected of different sectors which include FMCG Sector, , Pharma Sector and Index sector. The returns of selected Mutual funds and selected Equities are calculated for 3&6 months and 1year period. Equities closing price are also given for half year and annually. The information collected is shown in graphical form to make it more simple and easy to understand by the Reader. The information regarding all Mutual Funds and Equities is given in the Table. The Analysis is done by comparing the Particular Sector Mutual Funds with Equities and also with Relative Sensex and Nifty, index of BSE and NSE. The average of Particular Sector Mutual Funds and Equities is taken and returns are calculated. Let us take for example, In FMCG Sector the Returns of ICICI Prudential FMCG Fund, Franklin FMCG fund and Magnum FMCG Fund are added and then divided by 3 hence the average is taken as returns of FMCG Mutual Funds in the same way Returns of HLL Equity, Dabur Equity, Colgate Equity, Tata tea Equity and Britannia Equity are also added and divided by 5 and the average is taken as the returns of FMCG sector Equities. The Returns of Relative Sensex and Nifty is Calculated and then the Analysis is done to know the position of Mutual Funds in the market in long term and short term period. The period of 3 months and 6 months is taken as short term and period of 1 year is taken as long term period. The comparison of aggregate Mutual Funds and Equities is shown in Table.

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FMCG SECTOR MUTUAL FUNDS & EQUITIES (TABLE: 4.1) RETURNS OF FMCG SECTOR EQUITIES & MUTUAL FUNDS
NAME Franklin FMCG Fund Pru ICICI FMCG Fund Magnum FMCG Fund Hind Lever ltd Equity Dabur equity Colgate Equity Britannia Equity Tata tea Equity

Absolute returns %
3 MONTHS 15.12 0.57 0.21 0.84 -0.82 0.72 0.0019 0.014 6 MONTHS -9.9 0.30 0.04 0.95 0.38 0.48 0.08 0.05 1 YEAR 55.20 0.12 0.10 0.84 0.01 0.79 0.0013 0.06

RETURNS OF EQUITIES (BAR DIAGRAM 4.1) RETURNS OF MUTUAL FUNDS & EQUITIES

RETURNS O FM SECTO F CG R EQ UITIES & M UTUA FUNDS L

60 40 20 0 -20 1 2 3 Franklin FM G C Fund Pru IC I IC FM G Fund C M agnum FM G Fund C

54

60 50 40 30 20 10 0 -10 -20 1 2 3 Franklin FMCG Fund Pru ICICI FMCG Fund Magnum FMCG Fund

1.2 1 0.8 0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 -1

Series1 Series2 Hind Lever ltd Equity Dabur equity Colgate Equity Britannia Equity Tata tea Equity Series3

55

60 50 40 30 20 10 Britannia Magnum Franklin Dabur FMCG FMCG equity 0 -10 -20 Equity Series1 Series2 Series3

60

50

40

30

20

Series1 Series2 Series3

10

0 Franklin FMCG Fund -10 Pru ICICI FMCG Fund Magnum FMCG Fund Hind Lever ltd Equity Dabur equity Colgate Equity Britannia Equity Tata tea Equity

-20

56

(TABLE: 4.1A)

FMCG MUTUAL FUNDS VS EQUITIES & RELATIVE INDEX

ABSOLUTE RETURNS IN % NAME FMCG SECTOR MUTUAL FUNDS FMCG SECTOR EQUITIES RELATIVE TO SENSEX RELATIVE TO NIFTY 3 MONTHS 0.15 0.023 594.13 6561.00 6 MONTHS 0.10 0.019 1476.18 9965.46 1 YEAR 0.55 0.017 1725.89 9830.72

FMCG Mutual Funds includes Franklin FMCG Fund, Prudential ICICI FMCG FMCG Equities includes Hindustan lever ltd, Dabur, Colgate, Tata Tea and

Fund and Magnum FMCG fund. Britannia

ABSOLUTE RETURNS OF MUTUAL FUNDS AND EQUITIES

0.6 0.5 0.4 0.3 0.2 0.1 0 1 2 3 FMCG SECTOR MUTUAL FUNDS

(LINE DIAGRAM 4.1)

FMCG SECTOR EQUITIES

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ABSOLUTE RETURNS OF INDEX

12000 10000 8000 6000 4000 2000 0 1 2 3 RELATIVE TO SENSEX RELATIVE TO NIFTY

ABSOLUTE RETURNS OF INDEX

12000 10000 8000 6000 4000 2000 0 1 2 3 RELATIVE TO SENSEX RELATIVE TO NIFTY

58

(ANALYSIS)
As observed from the Table, we can say that ICICI Prudential FMCG Fund, Franklin FMCG Fund and Magnum FMCG Fund Gives good Return. The Bar diagram representation makes it very clear. In FMCG Equities from Table and Bar Diagram we can see that Hindlever gives maximum Returns then any other Equities. The next comes Colgate and TataTea which gives almost the same Returns. Tata tea Equities shows good Returns only in long term period Whereas Dabur gives Negative Returns in short term period.. The Returns of individual Mutual Fund of FMCG Sector in particular period is summed up and then average is taken as the Returns of FMCG Mutual Funds. In the same manner individual Equity is summed up and the average is taken as FMCG Equities. These aggregated Mutual funds and Equities are now compared in Table with the Nifty and Sensex, the Index of NSE and BSE. FMCG Mutual funds, as observed from the Table and Line Diagram grows

rapidly. FMCG Equities show very good Returns in long term and short term period i.e. in 3 & 6 months and 1 years period . But Dabur shows negative returns in 3 months from the Table . When comparison is made between Mutual Funds and Equities, Returns are not similar in both short term and long term period as we can see clearly from the Line Diagram .

As Sensex and Nifty grows in the Market, FMCG Mutual Funds shows upward trend where as equities shows down ward. Both Sensex and Nifty is going at

59

different level having different Exchanges. We can see Mutual Funds , Equities , Nifty and Sensex all together in the line Diagram . Overall Performance of Equities and Mutual Funds is not satisfactory, mutual funds shows better yieldings compare to equities. Equities shows negative returns. If investor dont want to take risk then he must go for Mutual funds as we can observe form the Table that in individual Equity sometimes returns are negative for example in Dabur Equity, but in Mutual Funds we can see negative Returns but compare to equities mutual funds are risk minimising.

PHARMA-SECTOR MUTUAL FUNDS & EQUITIES

(TABLE :4.4) HIGH/LOW & RETURNS OF PHARMA SECTOR EQUITIES & MFS ABSOLUTE RETURS % NAME
Franklin Pharma Fund Magnum Pharma Fund
UTI Pharma & health fund

3MONTHS 0.07 0.29 0.08 0.083 0.027 0.013 0.025 0.022

6MONTHS 0.05 -0.74 0.01 0.072 0.027 -0.012 0.029 0.024

1 YEAR 0.46 -0.02 0.27 0.062 0.042 0.010 0.26 0.030

Dr Reddys Equity Ranbaxy Equity Orchid equity Cipla equity Sun Pharma Equity

(BAR DIAGRAM) RETURNS OF MUTUAL FUNDS

60

0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 1 2 3 Franklin Pharma Fund Magnum Pharma Fund UTI Pharma & health fund

(BAR DIAGRAM) RETURNS OF MUTUAL FUNDS

0.6 0.4 0.2 0 -0.2 -0.4 -0.6 -0.8 1 2 3 Franklin Pharma Fund Magnum Pharma Fund UTI Pharma & health fund

(BAR DIAGRAM 4.8) RETURNS OF EQUITIES

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0.3

0.25

0.2

0.15 Series1 Series2 Series3 0.1

0.05

0 Dr Reddys Equity Ranbaxy Equity Orchid equity Cipla equity Sun Pharma Equity

-0.05

60

50

40

30

20

Series1 Series2 Series3

10

0 Franklin FMCG Fund -10 Pru ICICI FMCG Fund Magnum FMCG Fund Hind Lever ltd Equity Dabur equity Colgate Equity Britannia Equity Tata tea Equity

-20

62

0.6

0.4

0.2

0 Franklin Pharma Fund -0.2 Magnum Pharma Fund UTI Pharma & health fund Dr Reddys Equity Ranbaxy Equity Orchid equity Cipla equity Sun Pharma Equity Series1 Series2 Series3

-0.4

-0.6

-0.8

63

(TABLE :4.4A)
PHARMA SECTOR MUTUAL FUNDS VS EQUITIES & RELATIVE INDEX ABSOLUTE RETURNS IN % NAME PHARMA MUTUAL FUNDS PHARMA EQUITIES RELATIVE TO SENSEX RELATIVE TO NIFTY 3 MONTHS 0.44 0.17 594.13 6561.00 6 MONTHS 0.80 0.16 1476.18 9965.46 1 YEAR 0.75 0.40 1725.89 9830.72

Pharma Sector Mutual Funds include UTI Pharma & Healthcare Fund, Franklin Pharma Sector Equities includes Dr Reddy Labs, Ranbaxy, orchid and cipla Sun

Pharma Fund, Magnum Pharma Fund. Pharma.

0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1 2 3

PHARMA MUTUAL FUNDS PHARMA EQUITIES

(LINE DIAGRAM 4.4)

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0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 1 2 3

PHARMA MUTUAL FUNDS PHARMA EQUITIES

12000 10000 8000 6000 4000 2000 0 1 2 3 RELATIVE TO SENSEX RELATIVE TO NIFTY

12000 10000 8000 6000 4000 2000 0 1 2 3 RELATIVE TO SENSEX RELATIVE TO NIFTY

65

ABSOLUTE RETURNS OF MUTUAL FUNDS, EQUITIES & INDEX

350

300

250

ABSOLUTE RETURNS

200

150

PHARMA MF PHARMA EQUITIES RELATIVE SENSEX RELATIVE NIFTY

100

50

0 3 MTHS 6 MTHS PERIOD 1 YR 3 YRS

66

(ANALYSIS)
Pharma Sector fund, as, we can see clearly that all Mutual Funds performance in long term period and short term period is very good. From Table we can also see that Dr Reddys Equity, Sun Pharma Equity and Ranbaxy & cipla equit also performs well. But we can also notice that Pharma Sector Equity such as orchid gives negative Returns in the period of 6months . In the same way equity also gives very poor Returns during the study period. The Returns of individual Mutual Fund of Pharma-sector in particular period is summed up and then average is taken as the Returns of Pharma Sector Mutual Funds. In the same way individual Equity are summed up and average is taken as Pharma Sector Equities. These aggregated Mutual funds and Equities are now compared in Table with the Nifty and Sensex . Pharma Sector Mutual Funds performs well in both short term and long term period as noticed form the Table. But sbi pharma sector shows negetive returns in 6months and 1 year. equities gives good Returns in short term but in short term Orchid Equity shows negative returns in 6 months. When Both Pharma Sector Mutual Funds and Equities are compared, Mutual Funds perform better than Equities in long term period. In short term Equities gives good result but in lone term the performance shows downward trend as we can observe from the Line Diagram . As relative Sensex and Nifty grows in the Market, Pharma Sector Mutual Funds also shows upward trend but Equities does not show any upward trend in long term period as we can clearly observe in the Line Diagram showing Comparison between Mutual Funds, Equities, Sensex and Nifty. In long and short Pharma Sector Mutual Funds performs better than Pharma Sector Equities. It is advisable to invest in Pharma Sector Mutual Fund rather than Equity, because we can notice from the Line Diagram that Equities does not show any upward trend with the growth in Mutual Funds, Sensex, and Nifty as we have seen from Table that Individual Pharma Equity gives negative Returns whereas the case is never done with Mutual Funds. 67

CHAPTER - 5
CONCLUSIONS & SUGGESTIONS

CONCLUSIONS & SUGGESTIONS

The Mutual funds shows better yields compare to equities.

68

Even though mutual funds show in short term negative returns but it is better to invest in mutual funds.

in FMCG sector Franklin fmcg fund shows negative returns in 6 months. In pharma sector sbi mutual fund shows negative returns both in short & long term.

In fmcg sector in short term dabur gives negative returns in 3 months. In pharma sector orchid shows negative returns in 6 months.

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CHAPTER - 6
BIBILIOGRAPHY

70

I. TEXT BOOK
1. Security Analysis Portfolio Management Donald Fisher Ronald A Jordan 2. II. Mutual Fund In India H.Sadhak

WEB SITES
www.mutualfundsindia.com www.amfiindia.com www.utimf.com www.bseindia.com

III. MAGAINES
Business India Business World

IV. NEWS PAPERS

Economic Times Business Standard.

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