Portfolio management and Mutual fund analysis

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  • A Project Report On Portfolio management and Mutual fund analysis Submitted by Sweti Kejariwal At IDBI Bank From 1 June, 2013 to 31 July, 2013 Under the Guidance of CA ShilpaBhide Mr .. fund manager PUMBA IDBI Bank In partial fulfilment for the award of the degree of MASTERS IN BUSINESS ADMINISTRATION FINANCE Department of Management Sciences (PUMBA) University of Pune (2012-2014)
  • 2 Department of Management Sciences (PUMBA) University of Pune (2012-2014) Department of Management Sciences (PUMBA) University of Pune CERTIFICATE This is to certify that the Summer Project report titled Portfolio Management and Mutual Fund analysiscarried out by Sweti Kejariwal atIDBI Bankhas beensubmitted by 2nd yearMBA++ Finance, student of The Department of Management Sciences (PUMBA), University of Pune, towards the partial fulfilment of the requirement for the award of the Masters in Business Administration (MBA) and the same has been satisfactorily carried out under the guidance of CA ShilpaBhideduring the academic year. CA ShilpaBhideDr. (Capt.) C. M. Chitale Project Guide External Prof. and HOD PUMBA Examiner PUMBA
  • 3 ACKNOWLEDGEMENT I am delighted to have undertaken the equity analysis project at the IDBI Bank. I take immense pleasure in submitting the final project report which is a reflection of my work for the past two months at IDBI Bank. I am grateful to my guides Mrs at IDBI Bank whose scholarly guidance, constant encouragement and untiring patience have been the pillars of my success in this effort. I would also take this opportunity to thank my mentor CA ShipaBhidewhose constant motivation helped me to finish the project efficiently. I would also like to express my gratitude to our Dr. (Capt.) C. M. Chitale, Head of the Department, PUMBA. Last but not the least, I am thankful to all those who have directly or indirectly extended their support to me. Without their help this project could not have been completed. - Sweti Kejariwal
  • 4 Preface Theprojecton portfolio management and mutual fund analysis wascarriedoutinIDBIbankF.CRoadBranch.TheintentionbehindtakingoverthisprojectwithIDBIbankwasto primarily understandtheroleofbanksinprovidinginvestmentsolutionsandadvicestoitscustomers.Theprojectwascarriedo utfortheperiodoftwomonthsi.e.fromJune1,2013toJuly31,2013.Theprojectwasdonebyanalyzingthediffere ntinvestmentoptionsavailableandtocomparethemwiththemutualfundinvestments.Forthepurposeofanalyzi ngtheinvestmentpatternandselectingeffectiveandbeneficialschemesofmutualfundsdifferentavailablesche meswerethoroughly*analyzedandthenaidealportfolioofthoseinvestmentoptionsavailablewasmade. Finallytheidealportfoliowascreatedtounderstandtheimportanceofportfoliomanagementandtoeasetheselect ionofdifferentmutualfundschemesandtheweightagetobegiventothem.
  • 5 SR.NO. PARTICULARS PAGE NO. 1. Companys Profile 6 2. Objective 7 3. Theoretical background 7 4. Portfolio management 10 5. History of mutual fund 12 6. Mutual fund 20 7. Measures of risk 22 8. Research Methodology 26 9. Data analysis 35 10. Findings 37 11. Limitations 38 12. Conclusion 39
  • 6 Companys profile IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank has essayed a key nation-building role, first as the apex Development Financial Institution (DFI) (July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas beyond mere project financing to cover an array of services that contributed towards balanced geographical spread of industries, development of identified backward areas, emergence of a new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004, the erstwhile IDBI Bank converted into a Banking company (as Industrial Development Bank of India Limited) to undertake the entire gamut of Banking activities while continuing to play its secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new generation Bank with majority Government shareholding today touches the lives of millions of Indians through an array of corporate, retail, SME and Agri products and services. Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a highly competent and dedicated workforce and a state- of-the-art information technology platform, to structure and deliver personalised and innovative Banking services and customised financial solutions to its clients across various delivery channels As on March 31, 2013 IDBI Bank has a balance sheet of Rs. 3,22,769 crore and business size (deposits plus advances) of Rs 4,23,423 crore. As an Universal Bank, IDBI Bank, besides its core banking and project finance domain, has an established presence in associated financial sector businesses like Capital Market, Investment Banking and Mutual Fund Business. Going forward, IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most valued financial conglomerate', besides generating wealth and value to all its stakeholders.
  • 7 Objectives o PrimarilytounderstandthebasicconceptsofPortfoliomanagementandMutual funds anditsbenefitsasaninvestmentavenue. o Secondly,tocompareandevaluatetheperformanceofdifferentequitymutualf und schemesofdifferentcompaniesonthebasisofrisk,returnandvolatility. o Thirdly,tosuggesttheschemeswhichareoutperformersandlaggards. o Finallytocreateanidealportfolioinwhichriskwillbedistributedtowardsdiffer ent schemesandwillearnhigherrateofreturn. THEREOTICAL BACKGROUND INVESTMENT OPTIONS: Investment options are savingsformanimportantpartoftheeconomyofanynation.Withthesavingsinveste dinvarious options available to the people, the money acts as the driver forgrowth of the country.Indianfinancialscenetoopresentsaplethoraofavenuestotheinvestors.Thou ghcertainlynotthebestordeepestofmarketsintheworld,ithasreasonableoptionsfor anordinarymantoinvesthissavings.Letusexamineseveralofthem. Banks Banks are consideredasthesafestofalloptions,bankshavebeentherootsofthefinancialsyste msin India.Promotedasthemeanstosocialdevelopment,banksinIndiahaveindeedplay edan importantroleintheruralupliftment.Foranordinarypersonthough,theyhaveacted asthe safestinvestmentavenuewhereinapersondepositsmoneyandearnsinterestonit.T
  • 8 hetwomain modes of investment inbanks, savings accounts and Fixed deposits have beeneffectivelyusedbyoneandall.However,todaytheinterestratestructureinthec ountryisheadedsouthwards,keepinginlinewithglobaltrends.Withthebanksoffer inglittleabove9 percentintheirfixeddepositsforoneyear,theyieldshavecomedownsubstantiallyi nrecenttimes.Addtothis,theinflationarypressuresineconomyandyouhaveapositi onwherethe savingsarenotearning.Theinflationiscreepingup,toalmost8percentattimes,andt hismeansthatthevalueofmoneysavedgoesdowninsteadofgoingup.Thiseffective lymarsanychanceofgainingfromtheinvestmentsinbanks. Post office Justlikebanks,postofficesinIndiahaveawidenetwork.Spreadacrossthenation,th eyoffer financialassistanceaswellasservingthebasicrequirementsofcommunication.A mongall savingoptions,Postofficeschemeshavebeenofferingthehighestrates.Addedtoiti sthefactthattheinvestmentsaresafewiththedepartmentbeingaGovernmentofInd iaentity.Sothetwobasicandmostsoughtforfeatures,thoseofreturnsafetyandquan tumofreturns werebeinghandsomelytakencareof.Thoughcertainlynotthemostefficientsyste msintermsofservicestandardsandliquidity,thesehavestillmanagedtoattractthea ttentionofsmall,retailinvestors.However,withthegovernmentannouncingitsint entionofreducingthe interest rates insmall savings options, this avenue is expected to lose some of theinvestors.PublicProvidentFundsactasoptionstosaveforthepostretirementpe riodformostpeopleandhavebeenconsideredgoodoptionlargelyduetothefactthat returnswerehigherthanmostotheroptionsandalsohelpedpeoplegainfromtaxben efitsundervarioussections.Thisoptiontooislikelytolosesomeofitssheenonacco untofreductionintheratesoffered. Company Fixed Deposits Anotheroft- usedroutetoinvesthasbeenthefixeddepositschemesfloatedbycompanies. Companies have used fixed deposit schemes as a means of mobilizing funds
  • 9 for their operationsandhavepaidinterestonthem.Thesaferacompanyisrated,thelesserthe return offeredhasbeenthethumbrule.However,thereareseveralpotentialroadblocksint hese.Firstofall,thedangeroffinancialpositionofthecompanynotbeingunderstoo dbythe investorlurks.Theinvestorsrelyonintermediarieswhomoreoftenthannot,dontre vealthe entiretruth.Secondly,liquidityisamajorproblemwiththeamountbeingreceived monthsaftertheduedates.Prematureredemptionisgenerallynotentertainedwitho utcutsinthereturnsoffered andthough they presentareasonableoptionto counterinterestraterisk(especiallywhentheeconomyisheadedforalowinterestre gime),thesafetyofprincipal amounthasbeenfoundlacking.ManycasesliketheKuberGroupandDCMGroupf iascoeshaveresultedinlowconfidenceinthisoption. Theoptionsdiscussedaboveareessentiallyfortherisk- averse,peoplewhothinkofsafety andthenquantumofreturn,inthatorder.Forthebrave,itisdabblinginthestockmark et.Stock marketsprovide an option to invest in a high risk, high retu