Manali Report

download Manali Report

of 35

Embed Size (px)

Transcript of Manali Report

  • 8/7/2019 Manali Report



    Mutual Fund is the fund that pools the savings, which are then invested in capital market instruments

    such as shares, debentures and other securities. It works in a different manner as compared to other

    savings organizations such as banks, national saving, post office, non banking financial

    companies etc. As most if not all capital market instruments have an element of risk, it is very

    essential that the investors have a clear understanding of how a mutual fund operates and what are its

    advantages as well as limitations. The understanding has to be created in the investors by the

    distributors engaged in the market of mutual fund products. The distributors should also be

    knowledgeable enough to answer fundamental and basic questions that will be raised by the

    investors. It is thus essential that those engage in marketing of mutual funds such as individual

    agents, distributors companies, and others have a comprehensive, clear and correct understanding

    of the concept and working of mutual funds as well as essential operational and technical details.

    Company also gets knowledge that from its competitors whom schemes perform better on the bases

    of return. Here we take different companys schemes and compare with Birlas good performing

    schemes on the base of Return.

    Industry Information


  • 8/7/2019 Manali Report


    THE CONCEPT OF MUTUAL FUNDDifferent investment avenues are available to investors. Mutual funds also offer good investment

    opportunities to the investors. Like all investments, they carry certain risks. The investors should

    compare the risks and expected yields after adjustment of tax on various instruments while taking

    investment decisions. The investors may seek advice from experts and consultants including agents

    and distributors of mutual funds schemes while making investment decisions.

    With an objective to make the investors aware of functioning, of mutual funds, anattempt has been made to provide information in question-answer format which may

    help the investors in taking investment decisions.

    Mutual Funds.

    Mutual Fund Operation Flow Chart:

    Mutual fund is a Mechanism for pooling the resources by issuing units to the investors

    and investing funds in securities in accordance with objectives as disclosed in offer


    Investments in securities are spread across a wide cross-section and sectors thus the

    risk is reduced. Diversification reduces the risk because all stocks may not move in the

    same direction in the same proportion at the same time. Mutual fund issues units to the

    investors in accordance with quantum of money invested by them Investors of mutual

    funds are known as unit holders.

    The profits or losses are shared by the investors in proportion to their investments. The mutual funds

    normally come out with a number of schemes with different investment objectives, which are

    launched from time to time. A mutual fund is required to be registered with Securities and Exchange

    Board of India (SEBI) which regulates securities markets before it can collect funds from the public.


  • 8/7/2019 Manali Report


    Mutual Funds Industry in India

    Investment in India:

    India among the European investors is considered to be a good investment despite the political

    uncertainty, bureaucracy troubles, shortage of power and infrastructural inefficiencies. India is a

    potential market for overseas investment and is actively welcoming the foreign investors in the

    market. It will emerge as one of the top three emerging economies. While calculating the potential

    and correct estimation and possibilities, one needs to consider such factors as the inherent hurdles

    and uncertainties of functioning in the Indian system. Once you enter India's marketplace, you will

    have a well-designed plan that should be supported by a serious thought and careful research. Those

    who look at India as a long-term growth will reap more profits rather than those who will see only

    short-term profit making opportunities.

    India is the fifth largest economy in the world and it ranks above France, Italy, the United Kingdom,

    and Russia. It has the third largest GDP in Asia. It is the second largest of the emerging nations.

    India is also one of the few markets in the world which offer high prospects of growth and earning

    potential in all sectors of business. However, despite the numerous advantages on its side, India has

    failed to generate the same kind of curiosity and attention that China has gathered for it.

    Indian Mutual Funds

    The origin of the mutual funds industry goes back to the time when mutual fund was introduced by

    UTI in the year 1963. Though the growth has been relatively slow, it accelerated since 1987 when

    there were players outside the UTI, who entered the industry. In the past decade, Indian mutual fund

    industry had seen a remarkable improvement both quality wise and quantity wise. Before the end of

    the monopoly in market, the Assets under Management (AUM) were Rs.67 bn.

    History of Mutual Fund in India

    The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

    initiative of the Reserve Bank & Government of India. The objective then was to attract the small

    investors and introduce them to market investments. Since then, the history of mutual fund in India

    can be broadly divided in to six distinct phases.

    Phase 1 1964- 1987: Growth of Unit Trust of India


  • 8/7/2019 Manali Report


    In 1963, UTI was established by an Act of Parliament. As it was the only entity offering mutual

    funds in India, it was monopoly. Operationally, UTI was set up by the Reserve Bank of India, but

    was later de-linked from the RBI. The first scheme and for long one of the largest number of

    investors in any single investment scheme. It was also at least partially the first open end scheme in

    the country.

    Later in 1970s and 80s, UTI started innovating and different schemes to suit the needs of different

    classes of investors. Unit Linked Insurance Plan (ULIP) was launched in1971. Six new schemes

    were introduced between 1981 & 1984. During 1981-84, new scheme such as Childrens Gift

    Growth Fund (1986) & Master share (1987) were launched. Master share could be termed as the first

    diversified equity investment scheme in India. The first Indian offshore fund, India fund, was

    launched in August 1986. During 1990s, UTI catered to the demand for income oriented schemes by

    launching monthly income Schemes, a somewhat unusual mutual fund product offering assured


    In absolute terms, the investible funds corpus of UTI was about Rs. 600 Crores in 1984. By 1987-88

    assets under management of UTI had grown ten times to Rs 6700 cr.

    Phase-2 1987- 1993: Entry of Public Sector Funds

    1987 marked the entry of public sector mutual funds. With the opening of the economy, many public

    sector banks financial institutions were allowed to establish mutual fund. State Bank of India

    established the first non-UTI mutual. Fund- SBI mutual fund in Nov 1987. this was followed by

    canbank Mutual fund , LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund,GIC Mutual Fund & PNB Mutual Fund. These funds helped in enlarging the investor community &

    investible funds. From 1987-88 to 1992-93, the assets under management increased from Rs. 6700

    cr. To Rs. 47004 Cr. nearly seven times.

    During this period, investor showed a marked interest in mutual funds, allocating a larger part of

    their savings to investment in the funds. UTI was still the largest segment of the industry, with about

    80% market share.

    Phase 3 -1993-96: Emergence of Private Funds

    A new era in the mutual fund industry began in 1993 with the permission granted for the entry of

    private sector funds. This gave the Indian investors a broader choice of fund families and

    increasing competition to the existing public sector funds. Quite significantly, foreign fund

    management companies were also allowed to operate mutual funds, most of them coming into India

    through their joint ventures with Indian promoters. These private funds have brought in with them


  • 8/7/2019 Manali Report


    the latest product innovations, investment management techniques and investor-servicing technology

    that make the Indian mutual fund industry today a vibrant and growing financial intermediary.

    During the year 1993-94, five private sector mutual funds launched their schemes followed by six

    others in 1994-95. Initially, mobilization of funds by the private mutual funds was slow. But, this

    segment of the fund industry began to witness much greater investor confidence in due course. One

    influencing factor was the development of SEBIs regulatory framework for the Indian mutual fund

    industry. Yet another important factor has been the steadily improving performance of several fund

    houses. Investors in India now clearly saw the benefits of investing through mutual funds and

    became discerning and selective.

    Phase-4 1996-99: Growth and SEBI Regulation

    Since 1996, the mutual fund industry in India saw tighter regulation and higher growth. It scaled new

    heights in terms of mobilization of funds & no. of players. Deregulation & liberalization of Indian

    economy had introduce competition provide impetus to the growth of the industry. Finally most

    investors small or large started showing interest in mutual funds.

    Measures were taken both by SEBI to protect the investor & by the government to enhance

    investors returns through tax benefits. A comprehensive set of regulation for all mutual funds

    operating in India was introduced with SEBI (Mutual Fund) Regulations 1996. these regulations set

    uniform standard for all the funds. The erstwhile UTI voluntary adopted SEBI guidelines for its new

    schemes. Similarly the budget of union Government in 1999 took a big step in exempting all mutual

    fund dividends from income tax in the hands of investors. Both the 1996 Regulation & the 1999Budget must be considered of historic importance, given their far reaching impact on the fund


    Phase 5 -1999-2004: Emergence of Large & Uniform Industry

    The major development in the fund industry has been the creation of a level playing field for all

    mutual funds operating in India. This happened in February 2003, when the UTI Act was repealed.

    UTI has no longer legal status as a trust established by Act of Parliament. Instead, it has also adopted

    the same structure as any other fund in India- a Trust and an Asset Management Company. UTIMutual Fund is present name of the erstwhile Unit trust of India. While UTI functioned under

    separate law of Indian Parliament earlier, UTI Mutual Fund is now under the SEBIs Regulation,

    1996 like all other Mutual Funds in India. UTI Mutual Fund is still the largest player in the Indian

    fund industry. All SEBI compliant schemes of the erstwhile UTI are under its charge. All new

    schemes offered by UTI Mutual Fund are SEBI approved. Other schemes of erstwhile UTI have


  • 8/7/2019 Manali Report


    been paced with a special undertaking administered by the Government of India. These schemes are

    being gradually wound up.

    The emergence of a uniform industry with the same structure, operations & regulation makes it

    easier for distributors & investors to deal with any fund house in India.1999 marked the beginning of

    a new phase in history of mutual fund Industry in India, phase of significant growth in terms of both

    amounts mobilized from investors and assets under management.

    Between 1999 to 2005, the size of the industry has doubled in terms of AUM which has gone from

    about Rs. 68000 cr to over Rs. 150000 cr. Within the growing industry the relative market share of

    different players in terms of amount mobilized and AUM have also undergone changes.

    Phase 6 -From 2004 Onwards: Consolidation & Growth

    The industry has lately witnessed a spate of mergers & acquisitions, most recent ones being the

    acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C Mutual Fund by

    Principal & PNB Mutual Fund by Principal. At the same time, more international players continue to

    enter India, Including Fidelity, one of the largest fund in world. The stage is set now for growth

    through consolidation and entry of new international and private sector players. At the end of March

    2006, there were 29 Funds.


  • 8/7/2019 Manali Report


    Performance of Mutual Fund Industry From 1965 To 2008


  • 8/7/2019 Manali Report


    Here in above graph we can see that investment in mutual fund is increasing

    continuously. Only January 2003 to March 2003 there is slight decrease in investment. But overallwe can say that mutual fund industry is now in Growth stage in India and it will perform well in nearfuture.

    Major Players of Mutual Fund in India:

    The number of Indians putting their money on mutual fund investments is steadily increasing. More

    and more people are being lured by the prospect of handsome profits that investments in mutual

    funds carry for the investors. In recent years, many mutual fund companies have sprung up in India.

    Now the investors have lots of mutual fund companies in India to choose from. Currently there are

    30 mutual fund companies operating in India. They are as follow;

    NO. Mutual Fund Company

    1 AIG Global Investment Group Mutual Fund2 Baroda Pioneer Mutual Fund3 Benchmark Mutual Fund4 Bharti AXA Mutual Fund5 Birla Sun Life Mutual Fund6 Canara Robeco Mutual Fund7 DBS Chola Mutual Fund8 Deutsche Mutual Fund9 DSP BlackRock Mutual Fund10 Edelweiss Mutual Fund11 Escorts Mutual Fund12 Fidelity Mutual Fund13 Fortis Mutual Fund14 Franklin Templaton Mutual Fund

    15 HDFC Mutual Fund16 HSBC Mutual Fund

    17 ICICI Prudential Mutual Fund18 IDFC Mutual Fund

    19 ING Mutual Fund20 JM Financial Mutual Fund

    21 JPMorgan Mutual Fund22 Kotak Mahindra Mutual Fund23 LIC Mutual Fund24 Lotus India Mutual Fund25 Mirae Asset Mutual Fund26 Morgan Stanley Mutual Fund27 Principal Mutual Fund28 Quantum Mutual Fund29 Reliance Mutual Fund30 Sahara Mutual Fund31 SBI Mutual Fund


  • 8/7/2019 Manali Report


  • 8/7/2019 Manali Report


    populous country in the world after china & third largest economy in Asia accounts for only 2.9%

    share in regions mutual fund industry.

    India is a nation of saver. As a nation we save $450 bn (Rs. 22.7 lacs Cr) per annum & mutual fund

    industry account for only 7 to 8% of household savings.

    Reasons for the low penetration of mutual fund industry.

    Concentration of mutual fund business in metro and Tier I cities.

    Low level of awareness among investors about mutual fund as an investment product.

    Lower number of distributors. According to AMFI, in India there are less than 60000 mutual

    fund distributors compared to over 2 million life insurance agents. Lower distribution

    network restricts the reach of mutual fund industry.

    Conceptual misunderstanding about mutual fund investing among investors. Mutual fund is

    widely viewed as an investing option to invest in equity. Investors are not aware about the

    wide variety of options available under the mutual fund umbrella.

    Higher concentration on corporate/institutional money in race to increase AUM.

    Indian mutual fund industry has grown at rapid pace of 43% year on year for a period from 2003-

    2007. This growth has outpaced other nations. The US witnessed industry growth of 13%, UK 29%

    and Brazil 44% during the same period. However Russia and China Outpaced India with AUM

    growth of 97% and 67% respectively.


  • 8/7/2019 Manali Report


    Indian mutual fund industry is dominated by institutional investors specially banks and corporate.

    Put together they account for more than 55% share of total industry.

    Compared to mutual fund industry worldwide the size of Indian mutual fund industry is just 0.41%.

    the size of Indian mutual fund industry is smaller than countries like Belgium and Italy where

    population base is much smaller than India.

    Market share of Different companies in India


  • 8/7/2019 Manali Report


  • 8/7/2019 Manali Report


    Birla Sun Life Mutual Fund was setup on December 24, 1994. The sponsorers of Birla Mutual Fund

    are Birla Global Finance Limited and Sun Life (India) AMC Investments Inc. Sun Life Financial

    Group of Companies is a financial services organization headquartered in Toronto, Canada.


    The AMC of Birla Sun Life Mutual Fund is Birla Sun Life Asset Management Company Limited

    which was incorporated on September 5, 1994. Recently Birla Mutual Fund crossed AUM of Rs.

    10,000 crores. .

    Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leading mutual

    funds managing assets of a large investor base. The fund offers a range of investment options, which

    include diversified and sector specific equity schemes, fund of fund schemes, hybrid and monthly

    income funds, a wide range of debt and treasury products and offshore funds..

    BSLAMC follows a long-term, fundamental research based approach to investment. The approach is

    to identify companies, which have excellent growth prospects and strong fundamentals. The

    fundamentals include the quality of the companys management, sustainability of its business model

    and its competitive position, amongst other factors. Birla Sun Life Asset Management Company has

    one of the largest team of research analysts in the industry, dedicated to tracking down the best

    companies to invest in.

    BSLAMC strives to provide transparent, ethical and research-based investments and wealth

    management services.

    The Joint Venture of Birla & Sun Life.

    About Sun Life Financial Inc.

    Sun Life Financial Inc. is a leading international financial services organization providing a diverse


  • 8/7/2019 Manali Report


    range of wealth accumulation and protection products and services to individuals and corporate

    customers. Tracing its roots back to 1865, Sun Life Financial and its partners today have operations

    in key markets worldwide, including Canada, the United States, the United Kingdom, Hong Kong,

    the Philippines, Japan, Indonesia, India, China and Bermuda. As of 31 December 2004, the Sun Life

    Financial group of companies had total assets under management of USD 299 billion.


    Sun Life Financial Inc. trades on the Toronto (TSX), New York (NYSE) and Philippine (PSE) stock

    exchanges under ticker symbol "SLF".

    On the other side it is Birla group of companies which is known for its diversified business and

    Indias largest business group.

    Birla Sun Life Mutual fund is joint venture of Birla & Sun Life Financial Inc.


    To be the most trusted name in investment and wealth management, to be the preferred employer in

    the industry and to be a catalyst for growth and excellence of the asset management business in



    To consistently pursue investor's wealth optimization by:

    Achieving superior and consistent investment results.

    Creating a conducive environment to hone and retain talent.

    Providing customer delight.

    Institutionalizing system-approach in all aspects of functioning.

    Upholding highest standards of ethical values at all times.






  • 8/7/2019 Manali Report




    The diversified schemes are as follows:

    Debt Schemes

    Balanced Schemes

    Offshore Schemes

    Investment Plans


    Gift Certificates

    Organization Structure of Birla Sun Life Mutual Fund


    Anil KumarCEO

    A BalasubramanianCIO

    Ashok SuvamaCOO

    Abhay PalnitkarCFO

    Navin TiwariCo-Head Retail Sales

    North & East

  • 8/7/2019 Manali Report


    Key Highlights of Market Share of Birla Sun Life Mutual fund.

    Scaling up infrastructure to support growth Distribution network more than doubled in last one year to reach 78 branches and 18K

    financial advisors Investor folios grew by 65% during the year to 1.9 million Multi Channel non-polarized distribution network

    Superior fund performance 69% of AUM is in top quartile of performance, based on one

    year returns

    Recognized and awarded Mutual Fund House of the Year by CNBC TV18-CrisilBranches (Nos.) Financial Advisors (000) Investor Folios (Mn)


    Kalpen ParekhCo-Head Retail Sales

    West & South

    Sarb Preet Singh

    VP SalesInstitutional

    Chandrasekhar ChavanHead-HR & Admin

    Rajiv JoshiHead-Legal &



    Laxmikant GuptaHead Risk


    Molly KapoorHead Customer Service

    Krishna KumarHead-PAS

  • 8/7/2019 Manali Report


    5th largest in India with 6.8% share in average domestic AUM in Mar08 up from 5.8%share in end of period (EOP) AUM in Mar07

    Achieved 89% growth in last one year 2nd highest AUM growth amongst top 7 players Only AMC to show positive month on month growth in average AUM in Mar08

    Total AUM (EOP) grew 4 times in 3 years to Rs. 45,247 Cr. in Apr08 Includes offshore equity AUM of Rs. 2,543 Cr. in Apr08 Equity AUM grew 5 times in 3 years to Rs. 10,838 Cr. in Apr08

    Offering 92 Mutual Fund schemes including 2 offshore funds Product portfolio strengthened through launch of new funds 4 equity NFOs launched collecting Rs. 2,700 Cr. Focus on high margin fixed income funds

    Track Record

    With a proven track record of over 14 years, Birla Sun Life Mutual Fund has been a catalyst towards

    the growth of the private sector asset management business


    Birla Sun Life Mutual Fund was the first to launch:

    Birla Sun Life Cash Plus, a liquid fund.

    Birla Sun Life Dividend Yield Plus which is a dividend yield fund.

    Birla Bond Index Fund (a debt index fund) which replicates the Crisil Composite Bond Fund

    Index has been assigned AAAF rating by Crisil.


    Diversified Fund

    1) Birla Sun Life Pure Value Fund


  • 8/7/2019 Manali Report


    2) Birla Sun Life Equity Fund

    3) BSL Frontier Equity

    4) BSL Mid cap Fund

    5) BSL Special Situation Fund

    6) BSL Top 100 Fund

    7) BSL Life Advantage Fund

    8) BSL Long Term Advantage Fund

    9) BSL Dividend Yield Fund

    10) Birla Sun Life Tax Plan (BSLTP)

    11) BSL Index Fund

    Theme Based Fund

    1) BSL India GenNext Fund

    2) Birla Sun Life India Opportunities Fund (BSLIOF)

    3) Birla Sun Life MNC Fund

    4) BSL Basic Industry Fund

    5) BSL Infrastructure Fund

    6) BSL Buy India Fund

    7) Birla Sun Life New Millennium Fund

    Debt Schemes

    Long Term Fund

    1) Birla Sun Life Income Plus

    2) Birla Sun Life Income Fund


  • 8/7/2019 Manali Report


    2) Birla Sun Life Income Fund

    3) Birla Sun Life Dynamic Bond Fund

    Gilt Fund

    1) Birla Sun Life Gilt Fund

    2) BSL Govt Security Fund

    Short Term Fund

    1) BSL Savings Fund

    2) BSL Short Term Fund

    Floating Rate Fund

    1) BSL Floating Rate Fund

    Cash Fund

    1) BSL Cash Plus

    2) BSL Cash Manager

    Fixed Maturity Plan

    1) BSL Fixed Maturity Fund Annual Yearly Series 3

    Fixed Term Fund

    Interval Income Fund

    Hybrid Schemes

    Balanced Fund

    1) BSL Balanced

    2) BSL 95 Fund

    3) Birla Sun Life MIP- I


  • 8/7/2019 Manali Report


    4) BSL MIP- II

    5) BSL Monthly Income

    Fund Of Funds

    1) Birla Sun Life Asset Allocation Fund

    Functional information

    Emergence of Mutual Funds:Mutual Funds now represent perhaps the most appropriate investment opportunity for most small

    investors. As financial markets become more sophisticated and complex, investors need a financial

    intermediary who provides the required knowledge and professional expertise on successful

    investing. It is no wonder then that in the birthplace of mutual funds- the U.S.A the fund industry

    has already overtaken the banking industry, with more money under mutual fund management than

    deposited with banks.

    The Indian mutual fund industry has already opened up many exciting investment opportunities toIndian investors. We have started witnessing the phenomenon of more savings now being entrusted

    to the funds. Despite the expected continuing growth in the industry, mutual fund is still a new

    financial intermediary in India.



  • 8/7/2019 Manali Report


    A Mutual Fund is a trust that pools the savings of a number of investors who share a common

    financial goal. The money thus collected is invested by the fund manager in different types of

    securities depending upon the objective of the scheme. These could range from shares to debentures

    to money market instruments. The income earned through these investments and the capital

    appreciations realized by the scheme are shared by its unit holders in proportion to the number of

    units owned by them (pro rata). Thus a Mutual Fund is the most suitable investment for the common

    man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a

    relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can

    invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

    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. Price changes in these assets are driven by

    global events occurring in faraway places. A typical individual is unlikely to have the knowledge,skills, inclination and time to keep track of events, understand their implications and act speedily. An

    individual also finds it difficult to keep track of ownership of his assets, investments, brokerage dues

    and bank transactions etc.

    A mutual fund is the answer to all these situations. It appoints professionally qualified and

    experienced staff that manages each of these functions on a full time basis. The large pool of money

    collected in the fund allows it to hire such staff at a very low cost to each investor. In effect, the

    mutual fund vehicle exploits economies of scale in all three areas - research, investments and

    transaction processing. While the concept of individuals coming together to invest money

    collectively is not new, the mutual fund in its present form is a 20 th century phenomenon. In fact,

    mutual funds gained popularity only after the Second World War. Globally, there are thousands of

    firms offering tens of thousands of mutual funds with different investment objectives. Today, mutual

    funds collectively manage almost as much as or more money as compared to banks.

    A draft offer document is to be prepared at the time of launching the fund. Typically, it pre specifies

    the investment objectives of the fund, the risk associated, the costs involved in the process and the

    broad rules for entry into and exit from the fund and other areas of operation.

    There are different entities involved in the Mutual Fund, like Sponsor, Asset Management Company,

    Trustee, Custodian, Registrar, Bankers, Transfer Agent Unit Holder & SEBI.

    Mutual Fund simply pool the saving from investors, invest them in different securities, Generate

    good return and finally pass it in the hands of investors. So there is one chain, which we can see



  • 8/7/2019 Manali Report


    Structure of Mutual Funds in India:

    Like other countries, India has a legal framework within which Mutual Funds must be constituted.

    India has unique structure as Unit Trusts, all the funds open end or closed end, are governed by the

    same regulation and the regulatory body, the SEBI. The structure that is required to be followed by

    mutual funds in India is laid down under SEBI (Mutual Fund) Regulations, 1996.


  • 8/7/2019 Manali Report


    Organization of Mutual Fund:


    Unit holder is the beneficiaries, who invest their money in the different schemes of Mutual Fund, as

    per their own investment objectives. Mutual Fund in India are open for investment by;

    a) Residents including

    Resident Indian individuals, including high net worth individuals and the retail or

    small investors


  • 8/7/2019 Manali Report


    Indian Companies

    Indian Trust/ Charitable Institutions


    Non-Banking Finance Companies.

    Insurance Companies

    Provident Funds

    a) Non-Residents, including

    Non-Resident Indians

    Other Corporate Bodies

    c) Foreign Entities Namely Foreign institutional Investors (FIIs) registered with SEBI.


    Sponsor is defined under SEBI regulations, as any person who, acting alone or in combination with

    another body corporate, establishes a mutual fund. The sponsor of a fund is akin a promoter of a

    company as he gets the fund registered with SEBI. The sponsor will form a Trust and appoint a

    Board of Trustees. The sponsor generally appoints Asset Management Company as fund managers.

    The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the

    fund assets. All these appointments are made in accordance with SEBI Regulations.

    As per the existing SEBI regulations, for a person to qualify as a sponsor, he must contribute at least40% of the net worth of the AMC and possess a sound financial track record over five years prior to


    Mutual Funds as Trusts

    A mutual fund in India is constituted in the form of a Public Trust created under the Indian Trusts

    Act, 1882.the fund sponsor acts as the settler of the Trust, contributing to its initial capital, and

    appoints a Trustee to hold the assets of the trust for the benefit of the unit-holders, who are the

    beneficiaries of the Trust. The fund then invites investors to contribute their money in the common

    pool, by subscribing to units issued by various schemes established by the trust, units being the

    evidence of their beneficial interest in the fund.

    The Trust the mutual fund may be managed by a Board of Trustees- a body of individuals or a

    Trust Company- a corporate body. Most of the funds in India are managed by Board of Trustees.


  • 8/7/2019 Manali Report


    While the Board of Trustees are governed by the provision of Indian Trust Act, where the trustee is

    the corporate body, it would also required to comply with the provisions of companies Act 1956.

    The Board or the Trustee company, as an independent body act as protector of the unit-holders

    interest. The Trustees do not directly manage the portfolio of securities. For this specialist function,

    they appoint an Asset management Company. They ensure that the fund is managed by the AMC as

    per the defined objectives and in accordance with the Trust Deed and SEBI Regulations.

    The trust is created through the document called Trust Deed that is executed by the fund sponsor in

    the favor of the Trustees. The Trust deed is required to be stamped as registered under the provisions

    of the Indian Registration Act and registered with SEBI.

    The Trustees being the primary guardians of unit-holders funds & assets, a Trustee has to be a

    person of high repute & integrity. Trustees must ensure that thee investors interests are safeguarded

    and that the AMCs operations are along professional lines. SEBI mandates a minimum of 2/3

    independent directors on the Board of the Trustee company.

    The Asset Management Company

    The role of an AMC is to act as the Investment Manager of the Trust. The sponsors, or the trustees,

    if so authorized by the Trust Deed, appoint the AMC. The AMC so appointed is required to be

    approved by SEBI. Once approved, the AMC functions under the supervision of its own Board of

    Directors and also under the direction of the Trustees & SEBI.

    The AMC would, in the name of the Trust, float & then manage the different investment schemes

    as per SEBI Regulations and as per the Investment Management Agreement it signs with the

    Trustees. The AMC of a mutual fund must have a net worth of at least Rs. 10 Crores at all times.

    Directors of the AMC, both independent & non-independent, should have adequate professional

    experience in financial service and should be individuals of high moral standing, a condition also

    applicable to other key personnel of the AMC. The AMC con not act as a trustee of any other Mutual

    Fund. Besides its role as the fund manager, it may undertake specified activities such as advisory

    services and financial consulting, provided these activities are run independently of one another and

    the AMCs resources (such as personnel, systems, etc.)are properly segregated by activity. The

    AMC must always act in the interest of the unit-holders and report to the trustees with respect to its

    activities. To ensure the independence of the asset management company, SEBI mandates that a


  • 8/7/2019 Manali Report


    minimum of 50% of the directors of the board of the asset management company should be

    independent directors.

    Custodian and Depositories

    Mutual funds are in the business of buying and selling of securities in large volumes. Handling these

    securities in terms of physical delivery and eventual safekeeping is therefore a specialized activity.

    The custodian is appointed by the Board of Trustees for safekeeping of physical securities or

    participating in any clearing system through approved depository companies on behalf of the mutual

    fund in case of dematerialized securities. A custodian must fulfill its responsibilities in accordance

    with its agreement with the mutual fund. The custodian should be an entity independent of the

    sponsors and is required to be registered with SEBI. (Please refer to Chapter IV of SEBI (MF)

    Regulations, 1996).

    Note that the Indian capital markets have moved away from having physical certificates for

    securities, to ownership of these securities in dematerialized from with a depository. Thus, a

    mutual funds dematerialized securities holdings are held by a custodian. Thus, deliveries of a funds

    securities are given or received by a custodian or a depository participant, at the instruction of the

    AMC, although under the overall direction and responsibility of the Trustee

    Merits of Mutual Fund investment:


  • 8/7/2019 Manali Report


    Professional Management

    Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated

    investment research team that analyses the performance and prospects of companies and selects

    suitable investments to achieve the objectives of the scheme.


    Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors.

    This diversification reduces the risk because seldom do all stocks decline at the same time and in the

    same proportion. You achieve this diversification through a Mutual Fund with far less money than

    you can do on your own.

    Convenient Administration

    Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad

    deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your

    time and make investing easy and convenient.

    Return Potential

    Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they

    invest in a diversified basket of selected securities

    Low Costs

    Mutual Funds are a relatively less expensive way to invest compared to directly investing in the

    capital markets because the benefits of scale in brokerage, custodial and other fees translate into

    lower costs for investors.


  • 8/7/2019 Manali Report



    In open-end schemes, the investor gets the money back promptly at net asset value related prices

    from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the

    prevailing market price or the investor can avail of the facility of direct repurchase at NAV related

    prices by the Mutual Fund.


    one can get regular information on the value of his investment in addition to disclosure on the

    specific investments made by his scheme, the proportion invested in each class of assets and the fund

    manager's investment strategy and outlook.


    Through features such as regular investment plans, regular withdrawal plans and dividend

    reinvestment plans, you can systematically invest or withdraw funds according to your needs and



    Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund

    because of its large corpus allows even a small investor to take the benefit of its investment strategy.

    Mutual Funds offer a family of schemes to suit your varying needs over a lifetime.

    Well Regulated

    All Mutual Funds are registered with SEBI and they function within the provisions of strict

    regulations designed to protect the interests of investors. The operations of Mutual Funds are

    regularly monitored by SEBI.

    Demerits of Mutual Fund investment:

    Professional Management

    Many investors debate over whether or not the so-called professionals are any better than you or I at

    picking stocks. Management is by no means infallible, and, even if the fund loses money, the

    manager still takes his/her cut.


    It's possible to have too much diversification. Because funds have small holdings in so many

    different companies, high returns from a few investments often don't make much difference on the


  • 8/7/2019 Manali Report


  • 8/7/2019 Manali Report


    manager or one who aggressively churns the fund. It is also dependent on the volatility of the fund

    size i.e. whether the fund constantly receives fresh subscriptions and redemptions. Such portfolio

    changes have associated costs of brokerage, custody fees, registration fees etc. which lowers the

    portfolio return commensurately

    Change of index composition

    World over, the indices keep changing to reflect changing market conditions. There is an inherent

    survivorship bias in this process, with the bad stocks weeded out and replaced by emerging blue

    chips. This is a severe problem in India with the Sensex having been changed twice in the last 5

    years, with each change being quite substantial. Another reason for change index composition is

    Mergers & Acquisitions. The weight ages of the shares of a particular company in the index changes

    if it acquires a large company not a part of the index.

    Research Methodology

    Research Problem Definition:1. The measurement & analysis of performance of different Equity schemes that is Large cap,

    Mid Cap, small cap, Tax Saving Scheme, , of four selected companies i.e. Birla Sun Life

    Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund & Reliance Mutual Fund

    through comparative study by using statistical tools & techniques.

    About The Study

    This study is all about measurement & analysis of performance of different Mutual Funds,

    and this has been done by comparative study between them.

    There are around 35 mutual funds in India, among them only 4 companies taken for study

    purpose. And again they are among top 5 mutual funds in terms of market share in India.

    They are Birla Sun Life M.F., Reliance Mutual Fund, and ICICI Prudential Mutual Fund &

    HDFC Mutual Fund.

    This study is done for the month of June 2010

    There is no. of schemes offered by different mutual funds like Equity, Debt, Balanced,

    International schemes & fund of funds etc. but among them, only Equity Schemes chosen for

    research Study.


  • 8/7/2019 Manali Report


    Again among equity schemes only those schemes have been chosen which are common for

    all mutual fund selected for study. Those Equity Schemes are Large Cap Schemes, Mid Cap

    Schemes, Small Cap Schemes, Tax Saving Schemes.

    Objectives of Study:

    Secondary Objectives:

    To increase my knowledge regarding what are the parameters which seems very important

    before making investment decision particularly in mutual fund & in that for equity schemes?

    To share my knowledge/experience of study with others.

    Primary Objectives:

    To know how to measure & analyses the performance of Equity Schemes of different Mutual

    Fund Company.

    To study what is the performance of Birla Sun Life Mutual Fund.

    To find which company perform well among selected four companies.


    Useful to Investor:


  • 8/7/2019 Manali Report


    The investor naturally would be interested in tracking the value of his investment, whether he invests

    directly in the markets or indirectly through mutual funds. He would have to make intelligent

    decisions on whether he gets an acceptable return on his investments in the funds selected by him, or

    if he needs to switch to another fund.

    He therefore needs to understand the basis of appropriate performance measurement for the fund, &

    acquire the basic knowledge of the different measures of evaluating the performance of a fund. Only

    then would he be in position to judge correctly whether his fund is performing well or not and make

    the right decisions.

    Useful to advisor:

    If person is an intermediary recommending a mutual fund to a potential investor, he would expect

    advisor to give him proper advice on which fund have a good performance track record. If advisor

    want to be an effective investment advisor, then he too have to know how to measure and evaluate

    the performance of the different funds that are available to the investor. The need to compare

    different funds performance requires the advisor to have the knowledge of the correct and

    appropriate measures of evaluating the fund performance.

    Useful to company

    The performance of any company become meaningful when it is compared with other companies for

    same period so this comparative study is definitely useful as this study provide very important data

    to company & can adopt competitive strategy for improvement or increase the performance &

    thereby its sales & market share in industry.


    Data used in the comparative study is secondary data. In other word comparative study is based on

    secondary data. Data is collected from Factsheet other required information through internet.


  • 8/7/2019 Manali Report



    It is the monthly report of all schemes of Mutual Fund Company. It involves data

    like Investment Performance, Portfolio and Asset Allocation, Investment Objectives, Entry and Exit

    Load, AUM and much important information.


    What is the performance of different schemes in terms of return?


    Large Cap Schemes Return (in %)

    1 year 3 year 5 year

    Birla Sun Life Equity Fund 26.45 6.88 22.27

    HDFC Top 200 35.37 17.34 27.67

    ICICI Prudential Growth Fund 27.23 7.79 21.42

    Reliance Vision Fund 26.17 7.81 22.28


    From the above chart we can see that the in the 1 st year Birla Sun Life Equity fund

    give around 26% return from its investment Which is less as compare to HDFC Top 200 schemes by

    around 9%. It is also less as compare to ICICI Prudential Growth Fund by around 1%. We can also

    see that in 3rd year also Birla Sun Life Equity fund give less return as compare to other three

    schemes. In the 5th year Birla Sun Life Equity fund give around 22% return which is around 6% less

    as compare to HDFC Top 200 schemes. But it is around 6% higher as compare to ICICI Prudential

    Growth Fund. So from this I can conclude that in all the year HDFC Top 200 scheme give higher

    return when it invest in Large Cap scheme.



  • 8/7/2019 Manali Report


    Mid Cap Schemes Return (in %)

    1 year 3 year 5 year

    Birla Sun Life Mid Cap 40.92 12.95 24.66

    HDFC Capital Builder 49.38 12.12 22.54

    ICICI Prudential Emerging Star 56.11 1.04 19.98

    Reliance Equity Opportunity. 54.43 10.93 24.79

    Interpretation:The above chart shows that in mid cap scheme in 1 st year ICICI Prudential Emerging

    star gave higher return which is around 56%. Birla Sun Life gave return of around 41% which is less

    as compare to other companys scheme. From the 3rd year Birla Sun Life Mid cap gave higher return

    as compare to others. It give higher return by .83% as compare to HDFC Capital Builder and around

    10% higher than ICICI Prudential Emerging star and around 11% higher than Reliance Equity

    Opportunity. In 5th year we can see that Birla Sun Life give around 24% return which is more or less

    same as compare to Reliance Equity Opportunity. So I can conclude that as the investment become

    less HDFC and ICICI give less return. Whereas Birla Sunlife is gave higher return in the mid cap



    Blend Equity Schemes Return (in %)

    1 year 3 year 5 year

    Birla Sun Life Basic Industry Fund 27.70 9.93 20.92HDFC Growth Fund 42.02 14.08 26.07ICICI Dynamic Fund 43.32 12.06 27.67

    Reliance Growth 35.54 14.47 27.22



  • 8/7/2019 Manali Report


    Here, we can see that in the Blend Equity scheme in the 1 st year HDFC and ICICI

    gave higher return which is more or less similar. Birla sun life industry fund gave around 28%

    return. Which is less as compare to other companys scheme in Blend Equity scheme? In 2 nd year

    Birla Sun life gave return around 10% which is less as compare to other companys scheme. It is less

    by around 4% with compare to HDFC, 2% as compare to ICICI, and 15% as compare to Reliance

    Growth. In 3d year also Birla Sun Life Basic Industry fund gave less return as compare to other

    companys scheme. So we can conclude that Birla Sun Life give less return in Blend Equity Scheme.


    Equity Linked Saving Schemes Return (in %)

    1 year 3 year 5 year

    Birla Sun Life Tax Relief 96 29.21 6.05 21HDFC Tax Saver 48.75 11.71 22.80ICICI Tax Plan 53.74 12.25 19.75

    Reliance Tax Saver 33.91 8.55 -


    The above chart shows that in Equity Linked Saving Scheme ICICI give higher

    return as compare to other companys scheme which is around 54%. And the return given by Birla

    Sun Life is around 29% which is 25% less as compare to ICICI. It is also lesser than HDFC by 20%

    and lesser than Reliance by 5%. In the 2nd year also Birla Sun Life Tax Relief 96 give lesser return as

    compare to other companys scheme. In 3rd year Birla sun Life give 21% return which is around 2%

    lesser as compare to HDFC. It is higher than ICICI by around 1% and higher than Reliance by

    around 12%.