A STUDY ON PERFORMANCE OF MUTUAL FUNDS

Introduction to the study:

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, and
economies of scale, simplicity, and liquidity. 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.
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.
CONCEPTUAL FRAMEWORK
What is a Mutual Fund?
A mutual fund is just the connecting bridge or a financial intermediary that allows a
group of investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities (stocks or bonds). When you invest in a mutual
fund, you are buying units or portions of the mutual fund and thus on investing becomes
a shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as compare to others
they are very cost efficient and also easy to invest in, thus by pooling money together in a
mutual fund, investors can purchase stocks or bonds with much lower trading costs than
if they tried to do it on their own. But the biggest advantage to mutual funds is
diversification, by minimizing risk & maximizing returns.
Concept of Mutual Funds
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.
Diversification
Diversification is nothing but spreading out your money across available or different
types of investments. By choosing to diversify respective investment holdings reduces
risk tremendously up to certain extent.
Mutual Fund Operation Flow Chart
The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks. Beyond that, you can diversify even more by
purchasing different kinds of stocks, then adding bonds, then international, and so on. It
could take you weeks to buy all these investments, but if you purchased a few mutual
funds you could be done in a few hours because mutual funds automatically diversify in a
predetermined category of investments (i.e. - growth companies, emerging or mid size
companies, low-grade corporate bonds, etc).
Types of Mutual Funds Schemes in India
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety of
flavors, Being a collection of many stocks, an investors can go for picking a mutual fund
might be easy. There are over hundreds of mutual funds scheme to choose from. It is
easier to think of mutual funds in categories, mentioned below.
Overview of existing schemes existed in mutual fund category: BY STRUCTURE
1. Open - Ended Schemes:
An open-end fund is one that is available for subscription all through the year. These do
not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset
Value ("NAV") related prices. The key feature of open-end schemes is liquidity.
2. Close - Ended Schemes:
These schemes have a pre-specified maturity period. One can invest directly in the
scheme at the time of the initial issue. Depending on the structure of the scheme there are
two exit options available to an investor after the initial offer period closes. Investors can
transact (buy or sell) the units of the scheme on the stock exchanges where they are
listed. The market price at the stock exchanges could vary from the net asset value
(NAV) of the scheme on account of demand and supply situation, expectations of unit
holder and other market factors. Alternatively some close-ended schemes provide an
additional option of selling the units directly to the Mutual Fund through periodic
repurchase at the schemes NAV; however one cannot buy units and can only sell units
during the liquidity window. SEBI Regulations ensure that at least one of the two exit
routes is provided to the investor.
3. Interval Schemes:
Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale
or redemption during pre-determined intervals at NAV related prices.
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt
for bank FD, which provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out more return which is
slightly higher as compared to the bank deposits but the risk involved also increases in
the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual funds
provide professional management, diversification, convenience and liquidity. That
doesn’t mean mutual fund investments risk free. This is because the money that is pooled
in are not invested only in debts funds which are less riskier but are also invested in the
stock markets which involves a higher risk but can expect higher returns. Hedge fund
involves a very high risk since it is mostly traded in the derivatives market which is
considered very volatile.
Overview of existing schemes existed in mutual fund category: BY NATURE
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:
 Diversified Equity Funds
 Mid-Cap Funds
 Sector Specific Funds
 Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.
2. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income
to the investors. Debt funds are further classified as:
 Gilt Funds: Invest their corpus in securities issued by Government, popularly
known as Government of India debt papers. These Funds carry zero Default risk
but are associated with Interest Rate risk. These schemes are safer as they invest
in papers backed by Government.
 Income Funds: Invest a major portion into various debt instruments such as
bonds, corporate debentures and Government securities.
 MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market.
These scheme ranks slightly high on the risk-return matrix when compared with
other debt schemes.
 Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits
(CDs) and Commercial Papers (CPs). Some portion of the corpus is also invested
in corporate debentures.
  Liquid Funds: Also known as Money Market Schemes, These funds provides
easy liquidity and preservation of capital. These schemes invest in short-term
instruments like Treasury Bills, inter-bank call money market, CPs and CDs.
These funds are meant for short-term cash management of corporate houses and
are meant for an investment horizon of 1day to 3 months. These schemes rank
low on risk-return matrix and are considered to be the safest amongst all
categories of mutual funds.
3. Balanced funds:
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both the
worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment
parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in
the objectives of the fund. The investor can align his own investment needs with the
funds objective and invest accordingly.
By investment objective:
 Growth Schemes: Growth Schemes are also known as equity schemes. The aim
of these schemes is to provide capital appreciation over medium to long term.
These schemes normally invest a major part of their fund in equities and are
willing to bear short-term decline in value for possible future appreciation.
 Income Schemes: Income Schemes are also known as debt schemes. The aim of
these schemes is to provide regular and steady income to investors. These
schemes generally invest in fixed income securities such as bonds and corporate
debentures. Capital appreciation in such schemes may be limited.
 Balanced Schemes: Balanced Schemes aim to provide both growth and income
by periodically distributing a part of the income and capital gains they earn. These
schemes invest in both shares and fixed income securities, in the proportion
indicated in their offer documents (normally 50:50).
  Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in
safer, short-term instruments, such as treasury bills, certificates of deposit,
commercial paper and inter-bank call money.
Other schemes
 Tax Saving Schemes:
Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from time
to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity Linked
Savings Scheme (ELSS) are eligible for rebate.
 Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks
that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weight age. And hence, the returns from such schemes would
be more or less equivalent to those of the Index.

 Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast
Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds may
give higher returns, they are more risky compared to diversified funds. Investors need to
keep a watch on the performance of those sectors/industries and must exit at an
appropriate time.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed by
investors:
 Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the form of a
distribution.
  If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
 If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares.
Pros & cons of investing in mutual funds:
For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.
Advantages of Investing Mutual Funds:
 Professional Management - The basic advantage of funds is that, they are
professional managed, by well qualified professional. Investors purchase funds
because they do not have the time or the expertise to manage their own portfolio.
A mutual fund is considered to be relatively less expensive way to make and
monitor their investments.
 Diversification - Purchasing units in a mutual fund instead of buying individual
stocks or bonds, the investors risk is spread out and minimized up to certain
extent. The idea behind diversification is to invest in a large number of assets so
that a loss in any particular investment is minimized by gains in others.
 Economies of Scale - Mutual fund buy and sell large amounts of securities at a
time, thus help to reducing transaction costs, and help to bring down the average
cost of the unit for their investors.
 Liquidity - Just like an individual stock, mutual fund also allows investors to
liquidate their holdings as and when they want.
 Simplicity - Investments in mutual fund is considered to be easy, compare to
other available instruments in the market, and the minimum investment is small.
Most AMC also have automatic purchase plans whereby as little as Rs. 2000,
where SIP start with just Rs.50 per month basis.
Disadvantages of Investing Mutual Funds:
 Professional Management- Some funds doesn’t perform in neither the market, as
their management is not dynamic enough to explore the available opportunity in
 the market, thus many investors debate over whether or not the so-called
professionals are any better than mutual fund or investor himself, for picking up
stocks.
 Costs – The biggest source of AMC income, is generally from the entry & exit
load which they charge from an investors, at the time of purchase. The mutual
fund industries are thus charging extra cost under layers of jargon.
 Dilution - Because funds have small holdings across different companies, high
returns from a few investments often don't make much difference on the overall
return. Dilution is also the result of a successful fund getting too big. When
money pours into funds that have had strong success, the manager often has
trouble finding a good investment for all the new money.
UNDERSTANDING MUTUAL FUND
Mutual fund is a trust that pools money from a group of investors (sharing common
financial goals) and invest the money thus collected into asset classes that match the
stated investment objectives of the scheme. Since the stated investment objectives of a
mutual fund scheme generally forms the basis for an investor's decision to contribute
money to the pool, a mutual fund can not deviate from its stated objectives at any point of
time.

Every Mutual Fund is managed by a fund manager, who using his investment
management skills and necessary research works ensures much better return than what an
investor can manage on his own. The capital appreciation and other incomes earned from
these investments are passed on to the investors (also known as unit holders) in
proportion of the number of units they own.
When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the
corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual
fund shareholder or a unit holder.

Any change in the value of the investments made into capital market instruments (such as
shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is
defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV
of a scheme is calculated by dividing the market value of scheme's assets by the total
number of units issued to the investors.
For example:
A. If the market value of the assets of a fund is Rs. 100,000
B. The total number of units issued to the investors is equal to 10,000.
C. Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00
D. Now if an investor 'X' owns 5 units of this scheme
 E. Then his total contribution to the fund is Rs. 50 (i.e. Number of units held
multiplied by the NAV of the scheme)
ADVANTAGES OF MUTUAL FUND

S.No. Advantage Particulars

Mutual Funds invest in a well-diversified portfolio of securities

Portfolio
1. which enables investor to hold a diversified investment portfolio
Diversification
(whether the amount of investment is big or small).

Fund manager undergoes through various research works and has

Professional
2. better investment management skills which ensure higher returns
Management
to the investor than what he can manage on his own.

Investors acquire a diversified portfolio of securities even with a

3. Less Risk small investment in a Mutual Fund. The risk in a diversified
portfolio is lesser than investing in merely 2 or 3 securities.

Low Due to the economies of scale (benefits of larger volumes),

4. Transaction mutual funds pay lesser transaction costs. These benefits are
Costs passed on to the investors.

An investor may not be able to sell some of the shares held by

5. Liquidity him very easily and quickly, whereas units of a mutual fund are
far more liquid.

>Mutual funds provide investors with various schemes with

different investment objectives. Investors have the option of
Choice of
6. investing in a scheme having a correlation between its investment
Schemes
objectives and their own financial goals. These schemes further
have different plans/options

Funds provide investors with updated information pertaining to

7. Transparency the markets and the schemes. All material facts are disclosed to
investors as required by the regulator.

8. Flexibility Investors also benefit from the convenience and flexibility

 offered by Mutual Funds. Investors can switch their holdings
from a debt scheme to an equity scheme and vice-versa. Option
of systematic (at regular intervals) investment and withdrawal is
also offered to the investors in most open-end schemes.

Mutual Fund industry is part of a well-regulated investment

environment where the interests of the investors are protected by
9. Safety
the regulator. All funds are registered with SEBI and complete
transparency is forced.

DISADVANTAGES OF MUTUAL FUND

S.No. Disadvantage Particulars

Costs Control Investor has to pay investment management fees and fund
Not in the distribution costs as a percentage of the value of his investments
1.
Hands of an (as long as he holds the units), irrespective of the performance
Investor of the fund.

The portfolio of securities in which a fund invests is a decision

taken by the fund manager. Investors have no right to interfere
No Customized
2. in the decision making process of a fund manager, which some
Portfolios
investors find as a constraint in achieving their financial
objectives.

Difficulty in Many investors find it difficult to select one option from the
Selecting a plethora of funds/schemes/plans available. For this, they may
3.
Suitable Fund have to take advice from financial planners in order to invest in
Scheme the right fund to achieve their objectives.
TYPES OF MUTUAL FUNDS
Open-end Funds | Closed-end Funds
Open-end Funds
Funds that can sell and purchase units at any point in time are classified as Open-end
Funds. The fund size (corpus) of an open-end fund is variable (keeps changing) because
of continuous selling (to investors) and repurchases (from the investors) by the fund. An
open-end fund is not required to keep selling new units to the investors at all times but is
required to always repurchase, when an investor wants to sell his units. The NAV of an
open-end fund is calculated every day.
Closed-end Funds
Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period
are known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at
all times. After the closure of the offer, buying and redemption of units by the investors
directly from the Funds is not allowed. However, to protect the interests of the investors,
SEBI provides investors with two avenues to liquidate their positions.
Load Funds | No-load Funds
Load Funds
Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio
churning, fund manager's salary etc. Many funds recover these expenses from the
investors in the form of load. These funds are known as Load Funds.
No-load Funds
All those funds that do not charge any of the above mentioned loads are known as No-
load Funds.
Tax-exempt Funds | Non-Tax-exempt Funds
Tax-exempt Funds
Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-
end equity oriented funds are exempt from distribution tax (tax for distributing income to
investors). Long term capital gains and dividend income in the hands of investors are tax-
free.
Non-Tax-exempt Funds
Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all
funds, except open-end equity oriented funds are liable to pay tax on distribution income.
Profits arising out of sale of units by an investor within 12 months of purchase are
categorized as short-term capital gains, which are taxable. Sale of units of an equity
oriented fund is subject to Securities Transaction Tax (STT). STT is deducted from the
redemption proceeds to an investor.

BROAD MUTUAL FUND TYPES

 1. Equity Funds
Equity funds are considered to be the more risky funds as compared to other fund types,
but they also provide higher returns than other funds. It is advisable that an investor
looking to invest in an equity fund should invest for long term i.e. for 3 years or more.
There are different types of equity funds each falling into different risk bracket.

2. Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies,
banks, financial institutions, governments and other entities belonging to various sectors
(like infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are
low risk profile funds that seek to generate fixed current income (and not capital
appreciation) to investors. In order to ensure regular income to investors, debt (or
income) funds distribute large fraction of their surplus to investors. Although debt
securities are generally less risky than equities, they are subject to credit risk (risk of
default) by the issuer at the time of interest or principal payment. To minimize the risk of
default, debt funds usually invest in securities from issuers who are rated by credit rating
agencies and are considered to be of "Investment Grade". Debt funds that target high
returns are more risky.

3. Gilt Funds
Also known as Government Securities in India, Gilt Funds invest in government papers
(named dated securities) having medium to long term maturity period. Issued by the
Government of India, these investments have little credit risk (risk of default) and provide
safety of principal to the investors. However, like all debt funds, gilt funds too are
exposed to interest rate risk. Interest rates and prices of debt securities are inversely
related and any change in the interest rates results in a change in the NAV of debt/gilt
funds in an opposite direction.

4. Money Market / Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year) interest
bearing debt instruments. These securities are highly liquid and provide safety of
investment, thus making money market / liquid funds the safest investment option when
compared with other mutual fund types. However, even money market / liquid funds are
exposed to the interest rate risk. The typical investment options for liquid funds include
Treasury Bills (issued by governments), Commercial papers (issued by companies) and
Certificates of Deposit (issued by banks).
5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of
equities, debts and money market securities. Hybrid funds have an equal proportion of
debt and equity in their portfolio.

6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains,
crude oil etc.) or commodity companies or commodity futures contracts are termed as
Commodity Funds. A commodity fund that invests in a single commodity or a group of
commodities is a specialized commodity fund and a commodity fund that invests in all
available commodities is a diversified commodity fund and bears less risk than a
specialized commodity fund. "Precious Metals Fund" and Gold Funds (that invest in
gold, gold futures or shares of gold mines) are common examples of commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in
shares/securitized assets of housing finance companies, are known as Specialized Real
Estate Funds. The objective of these funds may be to generate regular income for
investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an
open-end mutual fund. Exchange Traded Funds follow stock market indices and are
traded on stock exchanges like a single stock at index linked prices. The biggest
advantage offered by these funds is that they offer diversification, flexibility of holding a
single share (tradable at index linked prices) at the same time. Recently introduced in
India, these funds are quite popular abroad.

9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other
mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of
Funds maintain a portfolio comprising of units of other mutual fund schemes, just like
conventional mutual funds maintain a portfolio comprising of equity/debt/money market
instruments or non financial assets. Fund of Funds provide investors with an added
advantage of diversifying into different mutual fund schemes with even a small amount
of investment, which further helps in diversification of risks. However, the expenses of
Fund of Funds are quite high on account of compounding expenses of investments into
different mutual fund schemes.

Risk Heirarchy of Different Mutual Funds

Thus, different mutual fund schemes are exposed to different levels of risk and investors
should know the level of risks associated with these schemes before investing. The
graphical representation hereunder provides a clearer picture of the relationship between
mutual funds and levels of risk associated with these funds:
MUTUAL FUND INDUSTRY PROFILE
The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen a dramatic imporvements, both
qualitywise as well as quantitywise. Before, the monopoly of the market had seen an
ending phase, the Assets Under Management (AUM) was Rs. 67bn. The private sector
entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it
reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is
less than the deposits of SBI alone, constitute less than 11% of the total deposits held by
the Indian banking industry.

The main reason of its poor growth is that the mutual fund industry in India is new in the
country. Large sections of Indian investors are yet to be intellectuated with the concept.
Hence, it is the prime responsibility of all mutual fund companies, to market the product
correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under.

First Phase - 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the
Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the
end of 1988 UTI had Rs.6,700 crores of assets under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by Canbank
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 in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under
management.
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
This phase had bitter experience for UTI. It was bifurcated into two separate entities. One
is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835 crores (as
on January 2003). 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
AUM 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 major players in the Indian Mutual Fund Industry are:

GROWTH IN ASSETS UNDER MANAGEMENT

COMPANIES PROFILES

UTI Mutual Fund

The setting up of the Unit Trust of India (UTI) in 1963 heralded the birth of the Indian
mutual fund industry. In 1964, UTI mutual fund launched its flagship scheme US-64 and
went on to become a generic term for the mutual fund sector till the government allowed
public sector banks to start mutual funds in 1987.

Despite being the trendsetter in the segment, the UTI mutual fund could not sustain the
initial tempo and was on the verge of a collapse in 2001, before the government bailed it
out and restructured the fund. After the restructuring, the fund has somewhat redeemed
its credibility through professional management and a booming market.

The fund's sponsors are public sector financial giants like Life Insurance Corporation,
SBI, Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the
asset management company, UTI Asset Management Company Private Limited. UTI
Mutual Fund remains the largest fund in the country with assets of over Rs.35,028 crore
under management as of Aug 2006.

In 2003, UTI was divided into two parts, UTI Mutual Fund (UTI MF) and a specified
undertaking of UTI or UTI-I. UTI MF was brought under SEBI regulations while UTI-I
was kept under direct government control since its schemes offered guaranteed returns.
Here is a list of mutual funds of UTI which includes Liquid Funds, Income Funds, Asset
Allocation Fund, Index Funds, Equity Funds and Balanced Fund.
Reliance Mutual Fund
About Us
Reliance Mutual Fund ('RMF'/ 'Mutual Fund') is one of India’s leading Mutual Funds,
with Average Assets Under Management (AAUM) of Rs. 86,327 Crores and an investor
count of over 61.06 and 67.03 Lakh folios. (AAUM and investor count as of July - Sep
'12) Source : http://www.amfiindia.com/
Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing mutual
funds in India. RMF offers investors a well-rounded portfolio of products to meet varying
investor requirements and has presence in 179 cities across the country. Reliance Mutual
Fund constantly endeavors to launch innovative products and customer service initiatives
to increase value to investors. Reliance Capital Asset Management Limited (‘RCAM’) is
the asset manager of Reliance Mutual Fund. RCAM is a subsidiary of Reliance Capital
Limited (RCL). Presently, RCL holds 65.23% of its total issued and paid-up equity share
capital and the balance of its issued and paid up equity share capital is held by other
shareholders which includes Nippon Life Insurance Company (“NLI”), holding 26% of
RCAM’s total issued and paid up equity share capital. NLI acquired the said 26% share
holding in RCAM on August 17, 2012.

Reliance Capital Ltd. is one of India’s leading and fastest growing private sector financial
services companies, and ranks among the top 3 private sector financial services and
banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset
management, life and general insurance, private equity and proprietary investments, stock
broking and other financial services

Vision & Mission Statement

Vision Statement
To be a globally respected wealth creator with an emphasis on customer care and a
culture of good corporate governance.
Mission Statement
To create and nurture a world-class, high performance environment aimed at delighting
our customers.
Corporate Governance
Our Corporate Governance Policy:
Reliance Capital Asset Management Limited has a vision of being a leading player in the
mutual fund business and has achieved significant success and visibility in the market.
However, an imperative part of growth and visibility is adherence to good conduct in the
marketplace. At Reliance Capital Asset Management Limited, the implementation and
observance of ethical processes and policies has helped us in standing up to the scrutiny
of our domestic and international investors.
Management:
The management at Reliance Capital Asset Management Limited is committed to good
corporate governance, which includes transparency and timely dissemination of
information to its investors and unit holders. The Board of Directors of RCAM is a
professional body constituting inter-alia of, well-experienced and knowledgeable
independent members. Regular audit committee meetings are conducted to review the
operations and performance of the company.
Employees:
Reliance Capital Asset Management Limited has at present, a code of conduct for all its
officers. It has a clearly defined prohibition on insider trading policy and regulations. The
management believes in the principles of propriety and utmost care is taken while
handling public money, making proper and adequate disclosures.
All personnel at RCAM are made aware of their rights, obligations and duties as part of
the Dealing Policy laid down in terms of SEBI guidelines. They are taken through a well-
designed HR program, conducted to impart work ethics, the Code of Conduct,
information security, Internet and e-mail usage and a host of other issues.
One of the core objectives of RCAM is to identify issues considered sensitive by global
corporate standards, and implement policies/guidelines in conformity with the best
practices as an ongoing process.
RCAM gives top priority to compliance in true letter and spirit, fully understanding its
fiduciary responsibilities.
About Reliance Mutual Fund
Reliance Mutual Fund (RMF) has been established as a trust under the Indian Trusts Act,
1882 with Reliance Capital Limited (RCL), as the Settler/Sponsor and Reliance Capital
Trustee Co. Limited (RCTCL), as the Trustee.
RMF has been registered with the Securities & Exchange Board of India (SEBI) vide
registration number MF/022/95/1 dated June 30, 1995. The name of Reliance Capital
Mutual Fund was changed to Reliance Mutual Fund effective 11th March 2004 vide
SEBI's letter no. IMD/PSP/4958/2004 date 11th March 2004. Reliance Mutual Fund was
formed to launch various schemes under which units are issued to the Public with a view
to contribute to the capital market and to provide investors the opportunities to make
investments in diversified securities.
The main objectives of the Reliance Mutual Fund are:
To carry on the activity of a Mutual Fund as may be permitted at law and formulate and
devise various collective Schemes of savings and investments for people in India and
abroad and also ensure liquidity of investments for the Unit holders;
To deploy Funds thus raised so as to help the Unit holders earn reasonable returns on
their savings and
To take such steps as may be necessary from time to time to realise the effects without
any limitation.
Management Team
Board of Directors
Kanu Doshi
Sushil Tripathi
Mr Yutaka Ideguchi
Soumen Ghosh
Management Team
Sundeep SikkaCEO
Himanshu VyapakDeputy CEO
Sunil B. SinghaniaHead - Equity Investments
Amit TripathiHead - Fixed Income
Equity Fund Managers
Shailesh Raj Bhan
Ashwani Kumar
Krishan Daga
Omprakash S. Kuckian
Govind Agrawal
Debt Fund Managers
Prashant Pimple
Anju Chhajer
Commodities
Hiren ChandariaFund Manager
Head Of Departments
Pradeep AndradeInfrastructure & Admin
Milind Gandhi Chief Financial Officer
Raghuvir MukherjiHead Risk Management
Rajesh Derhgawen Head - HR, Admin & Infrastructure
Vinay Nigudkar Information Technology
Bhalchandra Joshi Head - Service Delivery & Investor Relations
Muneesh SudLegal, Secretarial & Compliance
Sanjay Kumar Singh Head - Product Development
Zonal Heads
Gurbir ChopraNorthern Zone Head
Sanjiv Gudal Western Zone Head
Gopal Khaitan Southern Zone Head
Vikas Rathie Eastern Zone Head
Awards and Achievements
CNBC TV18 - CRISIL Mutual Fund of the Year Award for 2009:
Reliance Mutual Fund has won the ‘CNBC TV18 - CRISIL Mutual Fund of the Year’
Award in the Category – Mutual Fund House of the Year (Awarded by CRISIL Fund
Services, CRISIL Limited). In total 37 fund houses were considered as the award
universe. Fund Houses winning at least one award for their schemes in the category level
awards for 2009 were eligible to be in contention for the award. The award is based on
consistency of fund house’s performance across various scheme categories in the four
quarterly CRISIL Composite Performance Rankings (CPRs) released during the calendar
year 2009. The individual CRISIL CPR ranks for their schemes were aggregated on a
weighted average basis to arrive at the final ranks for fund houses. The mutual fund
house with the highest final score is the “Mutual Fund House of the Year”. The award
has been granted for the year 2009 and will be in vogue till the announcement of the
award for the next year in the same category. A detailed methodology of the CRISIL
CPR is available at www.crisilfundservices.com. Past performance is no guarantee of
future results.
Rankings and Award Source: CRISIL Fund Services, CRISIL Limited.
Disclaimer
Statutory Details : Reliance Mutual Fund has been constituted as a trust in accordance
with the provisions of the Indian Trusts Act, 1882. Sponsor : Reliance Capital
Limited.Trustee : Reliance Capital Trustee Co. Limited. Investment Manager : Reliance
Capital Asset Management Limited (Registered Office of Trustee & Investment
Manager: “Reliance House” Nr. Mardia Plaza, Off. C.G. Road, Ahmadabad 380 006).
The Sponsor, the Trustee and the Investment Manager are incorporated under the
Companies Act 1956. The Sponsor is not responsible or liable for any loss resulting from
the operation of the Scheme beyond their initial contribution of Rs.1 lakh towards the
setting up of the Mutual Fund and such other accretions and additions to the corpus. Risk
Factors : Mutual Funds and securities investments are subject to market risks and there is
no assurance or guarantee that the objectives of the Scheme will be achieved. As with any
investment in securities, the NAV of the Units issued under the Scheme can go up or
down depending on the factors and forces affecting the capital markets. The names of the
Schemes do not in any manner indicate either the quality of the Scheme; its future
prospects or returns. Past performance of the Sponsor/AMC/Mutual Fund is not
indicative of the future performance of the Scheme. The NAV of the Scheme may be
affected, interalia, by changes in the market conditions, interest rates, trading volumes,
settlement periods and transfer procedures. For details of scheme features apart from
those mentioned above and for Scheme specific risk factors, please refer to the Scheme
Information Document which is available at all the DISC / Distributors /
www.reliancemutual.com. Please read the Scheme Information Document and Statement
of Additional Information carefully before investing
Our Service Providers
Registrar to the schemes
Karvy Computershare Pvt. Ltd
Custodians to the schemes
Deutsche Bank AG
Bankers to the Schemes
Bankers to the Schemes to be notified from time to time.
Webservices
Reliance Infocomm
AXIS MUTUAL FUND
Axis Mutual Fund is wholly-owned Subsidiary of Axis Bank.
About Axis Bank Limited
Axis Bank was the first of the new private banks to have begun operations in 1994 after
the Government of India allowed new private banks to be established. The Bank was
promoted jointly by the Administrator of the specified undertaking of the Unit Trust of
India (UTI - I), Life Insurance Corporation of India (LIC) and General Insurance
Corporation of India (GIC) and other four PSU insurance companies, i.e. National
Insurance Company Ltd., The New India Assurance Company Ltd., The Oriental
Insurance Company Ltd. and United India Insurance Company Ltd.
The Bank today is capitalized to the extent of Rs. 359.76 crores with the public holding
(other than promoters) at 57.79%.
The Bank's Registered Office is at Ahmedabad and its Central Office is located at
Mumbai. The Bank has a very wide network of more than 853 branches and Extension
Counters (as on 30th June 2009). The Bank has a network of over 3723 ATMs (as on
30th June 2009) providing 24 hrs a day banking convenience to its customers. This is one
of the largest ATM networks in the country.
The Bank has strengths in both retail and corporate banking and is committed to adopting
the best industry practices internationally in order to achieve excellence.
Corporate Social Responsibility :
Axis Bank takes its corporate social responsibility seriously. It set up the Axis Bank
Foundation (registered as a public trust) in 2006 to support its philanthropy. Each year,
the Bank transfers 1% of its net profits of the previous year to the Foundation. The
Foundation focuses on education for underprivileged children
About Axis Mutual Fund
Axis Mutual Fund launched its first scheme in October 2009- a challenging period on any
account not just for the Indian but the global investor too. Despite this Axis Mutual Fund
in less than three years has got off to a good start. Some numbers that bear this out
Average assets of ` 10, 951 crores (as at 31 August 2012)
Now ranked 15th amongst 44 Indian Mutual Funds (source www.amfiindia.com as at 30
June 2012)
A well-rounded product suite that consists of 29 schemes – 4 Equity, 22 Debt, 1 Hybrid,
1 Gold FOF & 1 Gold ETF
Over 4,26,000 investor accounts - 30% are first time Mutual fund investors, 48 % reside
beyond the 10th city, over 1,26,000 Sleep In Peace(SIP) accounts
70 branches in 67 cities
31 Investor Service Centres
Relax. It’s Axis
Relax its Axis is not just our tag line but a philosophy that embodies our three founding
principles
Outside view (Speak the Consumer's language)
Long-term relationships – aim at building relationships rather than being transactional
Enduring wealth creation – encourage investors to build a long-term perspective
Our product, sales and service strategy is entirely guided by this.
HDFC Mutual Fund

HDFC Mutual Fund has been one of the best performing mutual funds in the last few
years. HDFC Asset Management Company Limited (AMC) functions as an Asset
Management Company for the HDFC Mutual Fund.

AMC is a joint venture between housing finance giant HDFC and British investment firm
Standard Life Investments Limited. It conducts the operations of the Mutual Fund and
manages assets of the schemes, including the schemes launched from time to time. As of
Aug 2006, the fund has assets of Rs.25,892 crores under management.

IN 2003, following a decision by the Zurich Insurance Company (ZIC), the Sponsor of
Zurich India Mutual Fund, to divest its asset management business in India, AMC had
entered into an agreement with ZIC to acquire the asset management business.
Consequently, all the schemes of Zurich Mutual Fund in India had been transferred to
HDFC Mutual Fund and renamed as HDFC schemes.

Here is a list of mutual funds of HDFC which includes Equity Funds, Balanced Funds
and Debt Funds.
RESEARCH METHODOLOGY
Need for the study:
In India very little work has been done to investigate fund managers forecasting abilities.
Active fund managers are expected to reward higher return. If the fund manager feels that
market on the whole overvalued, then he would get out the market. Hence the present
study has the objective of finding out the performance of mutual funds schemes in the
frame work of risk and returns.
Objectives of the study:
1. To understand the basic concepts of mutual funds and its benefits as an
investment avenue.
2. To understand the importance of mutual funds in investing money
3. To analyze the performance of different mutual funds on the basis of various
parameters
4. To analyze the alternative investment options for investing money
5. To analyze the risk, return, volatility of mutual funds.

Scope of the study:

The study Performance of Mutual Funds covers Equity linked schemes of UTI gold
scheme, Reliance Gold scheme, Axis gold scheme, HDFC gold scheme in which share
khan is a distributor and this study covers only open ended type schemes only and the
study covers the period of past one year only i.e. 2012. Because of the non availability of
data is restricted my research to 1 Year.
Data collection
The methodology followed for the collecting information are using two sources of data
namely
 Primary data
 Secondary data

Primary data: the data collected first hand by the researcher concerned with the
research problem refers to the primary data.
Secondary data
The information available at various sources made for some other purpose but facilitating
the study undertaken is called as secondary data.
Limitations of the study:
1. Time constraint
2. The data collected from the respondents may not be reliable. So the fluctuations in
the result might occur.
 DATA ANALYSIS AND INTERPRETATION

UTI EQUITY SHARE PRICES AS 2012

Month Open Pric High Low Close No. No. of Total

e Price Price Price of Shares Trades Turnover(Rs.)
Jan-12 2,622.40 2,680.00 2,562.00 2,676.04 13,888 2,604 3,66,24,200
Feb-12 2,667.55 2,724.98 2,615.00 2,716.61 17,896 2,735 4,78,08,989
Mar-12 2,651.00 2,694.99 2,630.00 2,668.89 15,168 2,513 4,04,21,665
Apr-12 2,661.25 2,773.50 2,650.00 2,766.16 16,573 3,778 4,50,98,598
May-12 2,767.05 2,788.99 2,669.35 2,759.99 13,410 3,019 3,66,70,768
Jun-12 2,758.00 2,870.63 2,736.80 2,815.91 14,942 2,822 4,21,57,452
Jul-12 2,818.50 2,897.10 2,750.00 2,831.39 11,706 2,780 3,29,44,381
Aug-12 2,839.00 2,939.99 2,770.99 2,924.84 14,287 2,933 4,08,25,414
Sep-12 2,950.00 3,125.00 2,950.00 3,010.78 27,833 4,206 8,46,86,153
Oct-12 3,009.80 3,020.00 2,945.00 2,965.08 20,727 3,776 6,17,25,522
Nov-12 2,970.00 3,090.00 2,916.00 3,012.60 19,852 5,250 5,99,58,290
Dec-12 3,005.00 3,050.00 2,889.00 2,912.90 19,737 3,963 5,82,23,834

Interpretation:
The NAV of UTI Gold Exchange over the years fluctuating and in the month Dec it is at
2889 which has slightly decreased from the previous year.
DETERMINATION OF RISK AND RETURNS AS ON 2012

Month BSE-500 UTI INDEX UTI

MUTUAL RETURNS MUTUAL
FUND FUND
Mutual RETURNS
Fund
Jan-12 6549.31 2,676.04 -0.04491 -0.01493
Feb-12 6857.28 2,716.61 0.014446 0.01788
Mar-12 6759.63 2,668.89 0.009124 -0.03516
Apr-12 6698.51 2,766.16 0.066635 0.002236
May-12 6280.04 2,759.99 -0.06022 -0.01986
Jun-12 6682.47 2,815.91 0.011622 -0.00547
Jul-12 6605.7 2,831.39 -0.00402 -0.03195
Aug-12 6632.34 2,924.84 -0.07967 -0.02854
Sep-12 7206.51 3,010.78 0.012325 0.015413
Oct-12 7118.77 2,965.08 -0.04733 -0.01577
Nov-12 7472.45 3,012.60 -0.00842 0.034227
Dec-12 7535.92 2,912.90 -0.13042 -0.08194

INDEX UTI COVARIANCE BETA SDX SDY ALPHA

VARIANCE MUTUAL
FUND
VARIANCE
0.001779 0.000509 0.000361 0.202793 0.04218 0.022565 -
0.05549

SYSTEMATIC UNSYSTEMATIC TOTAL RETURNS

RISK RISK RISK
7.32E-05 -0.17337 -0.1733 -0.081

Treynor Ratio = (Average Return of the Portfolio – Average Return of the Risk free rate)/
Beta
= -0.887604857

Sharpe Measure = (Average Return of the Portfolio – Average Return of the Risk free
rate)/S.D.
= -7.97709074
Jensen Measure = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return −
Risk Free Rate)]

= -0.117048042
Interpretation:
 The overall risk of the mutual fund as measured by the standard deviation of the
total returns of the fund returns for the period from 1 st Jan 2012 to 31st Dec 2012
is -0.17.
 The systematic Risk of the Mutual fund as given by the β coefficient for the
period from 1st Jan 2012 to 31st Dec 2012 is 0.20.
 Treynor’s Measure for the fund for the period from 1st Jan 2012 to 31st Dec 2012
is -0.88 which indicate that for every one unit change in the beta there will -0.88
unit charges in the returns.
 Sharpe’s Measure for the fund for the period from 1 st Jan 2012 to 31st Dec 2012
is -7.97 which indicates that for every one unit change in the standard deviation
there will be 0.02 units change in the returns.
 Jensen’s Measure for the fund for the period 1st Jan 2012 to 31st Dec 2012 is –
0.11.
RELIANCE MUTUAL FUNDS EQUITY SHARE PRICES AS ON 2012

Month Open High Price Low Close No. of No. of Total

Price Price Price Shares Trades Turnover(Rs.)
Jan-12 2,612.00 2,650.00 2,560.00 2,645.43 8,451 1,475 2,19,10,761
Feb-12 2,649.90 2,690.00 2,580.00 2,676.15 23,310 2,417 6,17,73,194
Mar-12 2,649.99 2,650.00 2,548.01 2,624.36 18,544 2,842 4,81,84,639
Apr-12 2,638.50 2,798.00 2,590.00 2,686.25 73,679 9,173 19,94,03,410
May-12 2,687.00 2,710.00 2,587.01 2,692.00 17,285 3,798 4,60,35,797
Jun-12 2,691.00 2,794.00 2,658.10 2,737.99 15,720 3,083 4,32,01,853
Jul-12 2,750.00 2,774.00 2,720.00 2,765.20 10,177 2,584 2,79,09,834
Aug-12 2,758.00 2,859.10 2,728.00 2,836.82 10,517 2,526 2,93,35,225
Sep-12 2,932.00 3,009.00 2,830.00 2,924.71 17,201 3,963 5,07,81,398
Oct-12 2,925.00 2,928.97 2,819.99 2,887.08 13,282 3,474 3,84,01,952
Nov-12 2,886.00 2,999.00 2,827.35 2,924.86 26,57,529 15,328 7,88,05,70,463
Dec-12 2,917.00 2,939.90 2,815.03 2,843.28 15,063 3,691 4,32,45,442

Interpretation:
Over the Period Reliance gold exchange has a steady increase in the NAV and has
reached its peak in the month Dec 2012.
DETEMINATION OF RISK AND RETURNS (2012)

Month BSE- Reliance INDEX Reliance

500 RETURNS RETURNS
Jan-12 6,549.31 2,645.43 -0.04491 -0.01148
Feb-12 6,857.28 2,676.15 0.014446 0.019734
Mar-12 6,759.63 2,624.36 0.009124 -0.02304
Apr-12 6,698.51 2,686.25 0.066635 -0.00214
May-12 6,280.04 2,692.00 -0.06022 -0.0168
Jun-12 6,682.47 2,737.99 0.011622 -0.00984
Jul-12 6,605.70 2,765.20 -0.00402 -0.02525
Aug-12 6,632.34 2,836.82 -0.07967 -0.03005
Sep-12 7,206.51 2,924.71 0.012325 0.013034
Oct-12 7,118.77 2,887.08 -0.04733 -0.01292
Nov-12 7,472.45 2,924.86 -0.00842 0.028692
Dec-12 7,535.92 2,843.28 -0.13042 -0.07005

INDEX Reliance COVARIANC BETA SDX SDY ALPH

VARIANC VARIANC E A
E E
0.001779 0.000369 0.000322 0.180921 0.0421 0.01920 -
8 9 0.0464
5

SYSTEMATIC UNSYSTEMATIC TOTAL RETURNS

RISK RISK RISK
5.82E-05 -0.1906 - -0.07
0.19054

Treynor Ratio = (Average Return of the Portfolio – Average Return of the Risk free rate)/
Beta
= -0.994906677

Sharpe Measure = (Average Return of the Portfolio – Average Return of the Risk free
rate)/S.D.
= -9.370494859

Jensen Measure = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return −
Risk Free Rate)]
 = -0.123837483
Interpretation:
 The overall risk of the mutual fund as measured by the standard deviation of the
total returns of the fund returns for the period from 1 st Jan 2012 to 31st Dec 2012
is -0.19.
 The systematic Risk of the Mutual fund as given by the β coefficient for the
period from 1st Jan 2012 to 31st Dec 2012 is 0.18.
 Treynor’s Measure for the fund for the period from 1st Jan 2012 to 31st Dec 2012
is -0.99 which indicate that for every one unit change in the beta there will -0.99
unit charges in the returns.
 Sharpe’s Measure for the fund for the period from 1 st Jan 2012 to 31st Dec 2012
is -9.37 which indicates that for every one unit change in the standard deviation
there will be -0.01 units change in the returns.
 Jensen’s Measure for the fund for the period 1st Jan 2012 to 31st Dec 2012 is –
0.012.
HDFC MUTUAL FUNDS EQUITY SHARE PRICES AS 2012

Month Open High Low Close No. No. Total

Price Price Price Price of Shares of Trades Turnover(Rs.)
Jan-12 2,670.00 2,759.96 2,650.00 2,757.30 6,319 1,131 1,71,16,458
Feb-12 2,760.00 2,814.97 2,714.90 2,794.85 7,842 1,176 2,16,19,660
Mar-12 2,786.00 2,799.96 2,710.00 2,755.96 5,305 1,086 1,45,68,210
Apr-12 2,800.00 2,928.00 2,730.00 2,877.57 7,414 1,272 2,07,39,077
May-12 2,878.00 2,939.00 2,755.00 2,851.12 6,234 1,074 1,76,89,195
Jun-12 2,851.00 2,960.00 2,830.03 2,896.65 5,835 1,108 1,70,00,644
Jul-12 2,900.05 2,970.00 2,855.70 2,925.00 6,748 1,383 1,96,06,915
Aug-12 2,925.00 3,029.98 2,851.40 2,999.99 6,546 1,240 1,93,75,468
Sep-12 3,040.00 3,290.00 3,030.00 3,106.93 7,662 2,538 2,41,14,189
Oct-12 3,107.00 3,175.00 3,030.00 3,079.97 11,383 2,471 3,50,27,653
Nov-12 3,078.49 3,204.00 3,009.00 3,118.34 13,556 4,068 4,22,07,148
Dec-12 3,115.50 3,140.00 2,995.00 3,013.68 7,904 2,095 2,41,05,439

Interpretation:
The NAV of HDFC Gold Exchange over the years fluctuating and in the month Dec it is
at 3013.68 which has slightly decreased from the previous year.
DETEMINATION OF RISK AND RETURNS (2012)

Month BSE- HDFC INDEX HDFC

500 RETURNS RETURNS
Jan-12 6,549.31 2,757.30 -0.04491 -0.01344
Feb-12 6,857.28 2,794.85 0.014446 0.014111
Mar-12 6,759.63 2,755.96 0.009124 -0.04226
Apr-12 6,698.51 2,877.57 0.066635 0.009277
May-12 6,280.04 2,851.12 -0.06022 -0.01572
Jun-12 6,682.47 2,896.65 0.011622 -0.00969
Jul-12 6,605.70 2,925.00 -0.00402 -0.025
Aug-12 6,632.34 2,999.99 -0.07967 -0.03442
Sep-12 7,206.51 3,106.93 0.012325 0.008753
Oct-12 7,118.77 3,079.97 -0.04733 -0.0123
Nov-12 7,472.45 3,118.34 -0.00842 0.034728
Dec-12 7,535.92 3,013.68 -0.13042 -0.08596

INDEX HDFC COVARIANCE BETA SDX SDY ALPHA

VARIANCE VARIANCE
0.001779 0.000516 0.000372 0.209246 0.04218 0.022726 -
0.05867

SYSTEMATIC UNSYSTEMATIC TOTAL RETURNS

RISK RISK RISK
7.79E-05 -0.18199 - -0.085
0.18191

Treynor Ratio = (Average Return of the Portfolio – Average Return of the Risk free rate)/
Beta
= -0.860231635

Sharpe Measure = (Average Return of the Portfolio – Average Return of the Risk free
rate)/S.D.
= -7.920489062

Jensen Measure = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return −
Risk Free Rate)]

= -0.115044863
Interpretation:
 The overall risk of the mutual fund as measured by the standard deviation of the
total returns of the fund returns for the period from 1 st Jan 2012 to 31st Dec 2012
is -0.18.
 The systematic Risk of the Mutual fund as given by the β coefficient for the
period from 1st Jan 2012 to 31st Dec 2012 is 0.20.
 Treynor’s Measure for the fund for the period from 1st Jan 2012 to 31st Dec 2012
is -0.86 which indicate that for every one unit change in the beta there will -0.86
unit charges in the returns.
 Sharpe’s Measure for the fund for the period from 1 st Jan 2012 to 31st Dec 2012
is -7.92 which indicates that for every one unit change in the standard deviation
there will be 0.22 units change in the returns.
 Jensen’s Measure for the fund for the period 1st Jan 2012 to 31st Dec 2012 is –
0.11.
AXIS EQUITY SHARE PRICE AS ON 2012
Month Open High Price Low Close No. of No. of Total
Price Price Price Shares Trades Turnover(Rs.)
Jan-12 2,651.00 2,799.00 2,615.00 2,769.28 408 76 11,01,795
Feb-12 2,750.00 2,800.00 2,700.00 2,775.22 519 81 14,19,209
Mar-12 2,786.00 2,800.00 2,685.00 2,738.75 326 64 8,91,818
Apr-12 2,787.00 2,999.00 2,679.00 2,823.01 717 171 20,11,833
May-12 2,859.90 3,434.00 2,722.01 2,874.00 1,162 183 32,79,954
Jun-12 2,807.31 2,964.99 2,807.31 2,864.18 618 145 17,97,872
Jul-12 2,962.00 2,962.00 2,802.03 2,941.87 715 115 20,59,828
Aug-12 2,890.01 3,064.83 2,853.03 3,020.00 1,295 211 38,07,093
Sep-12 3,020.00 3,369.00 3,020.00 3,075.00 1,910 273 60,15,029
Oct-12 3,118.98 3,118.98 2,981.20 3,036.99 831 191 25,24,512
Nov-12 3,042.99 3,200.00 2,975.00 3,070.00 15,075 452 4,73,05,487
Dec-12 3,139.95 3,139.95 2,930.00 2,980.36 1,223 315 36,84,851

Interpretation:
The NAV of AXIS Gold Exchange over the years fluctuating and in the month Dec it is
at 2930 which has slightly decreased from the previous year.
DETERMINATION OF RISK AND RETURNS AS ON 2012
Month BSE-500 Axis INDEX Axis Mutual
Mutual RETURNS Fund
Fund RETURNS
Jan-12 6549.31 2,769.28 -0.04491 -0.00214
Feb-12 6857.28 2,775.22 0.014446 0.013316
Mar-12 6759.63 2,738.75 0.009124 -0.02985
Apr-12 6698.51 2,823.01 0.066635 -0.01774
May-12 6280.04 2,874.00 -0.06022 0.003429
Jun-12 6682.47 2,864.18 0.011622 -0.02641
Jul-12 6605.7 2,941.87 -0.00402 -0.02587
Aug-12 6632.34 3,020.00 -0.07967 -0.01789
Sep-12 7206.51 3,075.00 0.012325 0.012516
Oct-12 7118.77 3,036.99 -0.04733 -0.01075
Nov-12 7472.45 3,070.00 -0.00842 0.030077
Dec-12 7535.92 2,980.36 -0.13042 -0.07131

INDEX Axis Mutual COVARIANCE BETA SDX SDY ALPHA

VARIANCE Fund
VARIANCE
0.001779 0.00038 -5.3E-05 - 0.04218 0.019495 -
0.02995 0.07522

SYSTEMATIC UNSYSTEMATIC TOTAL RETURNS

RISK RISK RISK
1.6E-06 -0.0047 -0.0047 -0.071

Treynor Ratio = (Average Return of the Portfolio – Average Return of the Risk free rate)/
Beta
= 6.010199433

Sharpe Measure = (Average Return of the Portfolio – Average Return of the Risk free
rate)/S.D.
 = -9.233172798

Jensen Measure = Portfolio Return − [Risk Free Rate + Portfolio Beta * (Market Return −
Risk Free Rate)]

= -0.18929694
Interpretation:
 The overall risk of the mutual fund as measured by the standard deviation of the
total returns of the fund returns for the period from 1 st Jan 2012 to 31st Dec 2012
is -0.004.
 The systematic Risk of the Mutual fund as given by the β coefficient for the
period from 1st Jan 2012 to 31st Dec 2012 is -0.02.
 Treynor’s Measure for the fund for the period from 1st Jan 2012 to 31st Dec 2012
is 6.01 which indicate that for every one unit change in the beta there will 6.01
unit charges in the returns.
 Sharpe’s Measure for the fund for the period from 1 st Jan 2012 to 31st Dec 2012
is -9.23which indicates that for every one unit change in the standard deviation
there will be 0.01 units change in the returns.
 Jensen’s Measure for the fund for the period 1st Jan 2012 to 31st Dec 2012 is –
0.18.
FINDINGS

1. RELIANCE Gold Scheme

Average Returns -0.070
Market Average Return -0.13
Standard Deviation 0.01
Beta 0.18

a. The average return of the fund is lower than that of the average market return
which indicates that the fund is not performing well as compared to the market
b. The standard deviation of 0.01 indicates the amount of risk involved in investing
in the fund.
c. The fund’s beta of 0.18 is relatively lower than that of the market index which
gives the idea that the proportionate change in the fund resulting from the change
in the market index is relatively low.

2. HDFC Gold Scheme

Average Returns -0.085
Market Average Return -0.13
Standard Deviation 0.022
Beta 0.21

a. The average return of the fund is lower than that of the average market return
which indicates that the fund is not performing well as compared to the market
b. The standard deviation of 0.022 indicates the amount of risk involved in investing
in the fund.
c. The fund’s beta of -0.21 is relatively lower than that of the market index which
gives the idea that the proportionate change in the fund resulting from the change
in the market index is relatively low.
3. AXIS Gold Scheme
Average Returns -0.07
Market Average Return -0.13
Standard Deviation 0.019
Beta -0.02

a. The average return of the fund is lower than that of the average market return
which indicates that the fund is not performing well as compared to the market
b. The standard deviation of 0.019 indicates the amount of risk involved in investing
in the fund.
c. The fund’s beta of -0.02 is relatively lower than that of the market index which
gives the idea that the proportionate change in the fund resulting from the change
in the market index is relatively low.
4. UTI Gold Scheme
Average Returns -0.081
Market Average Return -0.13
Standard Deviation 0.022
Beta 0.20

d. The average return of the fund is lower than that of the average market return
which indicates that the fund is not performing well as compared to the market
e. The standard deviation of 0.022 indicates the amount of risk involved in investing
in the fund.
f. The fund’s beta of 0.2 is relatively lower than that of the market index which
gives the idea that the proportionate change in the fund resulting from the change
in the market index is relatively low.
Treynor’s Index
Name Value Rankings
UTI Gold Scheme -0.88 3

AXIS Gold Scheme 6.01 1

RELIANCE Gold Scheme -0.99 4
HDFC Gold Scheme -0.86 2

Out of these 4, AXIS Gold scheme has high Treynor’s value. This implies that AXIS
Gold Scheme has been the most profitable when the relative risks involved in the
investments have been taken into account.
Sharpe’s Index
Name Value Rankings
UTI Gold Scheme -7.97 2
AXIS Gold Scheme -9.23 3
RELIANCE Gold Scheme -9.37 4
HDFC Gold Scheme -7.92 1

From the above Sharpe’s risk, compared to other Gold Schemes’ HDFC gold scheme is
giving more return for the same risk.
Jensen’s Index
Name Value Rankings
UTI Gold Scheme -0.117 3
AXIS Gold Scheme -0.18 4
RELIANCE Gold Scheme -0.12 1
HDFC Gold Scheme -0.115 2

Jensen’s alpha is used to determine the abnormal return of a security or a portfolio. From
the above table it is understood that HDFC, Reliance Gold scheme have high expected
returns with high risky assets.
Suggestions:

1. The investors who are ready to take risk can invest in HDFC and AXIS Gold
Scheme are suggested to invest because the risk is high and the returns are more.

2. The investors who are not much interested in taking risk can invest in UTI gold
scheme because it is giving high returns with a given risk.

3. The investor can also invest in HDFC gold scheme which is 2 positions in the
category of low risk- more returns and more returns- with a given risk.

4. Investors are suggested to not invest in Reliance Gold scheme which is highly
volatile.
Conclusion:
The study on performance of mutual funds was undertaken with an objective of
understanding the basic concepts of mutual funds and its benefits as an investment
avenue and to understand the importance of mutual funds in investing money. It was also
taken up with and objective of analyzing the performance of different mutual fund
schemes on the basis of various parameters and to analyze the alternative investment
options for investing money.
The study covers Equity linked schemes of Icici, Birla Sunlife, Kotak, Uti gold scheme in
which share khan is a distributor. The study was done using the closing and opening
prices of above schemes, Trenoys’ index, sharpen index and Jensens’ index. The entire
study is based on the secondary data only. The study is done at Hyderabad for a period of
60days. The study had few limitations which were taken care of.
The financial information obtained was analyzed using the appropriate techniques and it
was found that that the HDFC Gold Scheme has been the most profitable when the
relative risks involved in the investments have been taken into account and AXIS gold
scheme is giving more return for the same risk.
It is suggested to the investors who are ready to take risk can invest in AXIS Gold
Scheme are suggested to invest because the risk is less and the returns are more and to
invest HDFC gold scheme which is No. 2 position in the category of low risk- more
returns and more returns- with a given risk.
Bibliography:
1. S.Kelvin, Security analysis and portfolio management, 1st edition, phi-learning
publications, 2009.
2. Bhat Sudhindra, Security analysis and portfolio management, 1st edition, excel
books, 2007.
3. Rohini singh, Security analysis and portfolio management, 1st edition, Excel
Books, 2009
4. M. Ranganatham, R. Madhumathi, Security analysis and portfolio management,
2nd edition, Pearson publications, 2012.
Websites:
1. www.investopedia.com
2. www.managementparadise.com
3. www.wikipedia.com
4. www.iloveindia.com
5. www.icicibank.com
6. www.kotak.com
7. www.hdfc.com
8. www.sbi.co.in