Company Profile and Body

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C O M PA N Y P R O F I L E :
KARVY is a premier integrated financial services provider, and ranked among the top
five in the country in all its business segments, services over 16 million individual
investors in various capacities, and provides investor services to over 300 corporate.
KARVY covers the entire spectrum of financial services such as Stock broking,
Depository Participants, Distribution of financial products like mutual funds, bonds,
fixed deposit, Merchant Banking & Corporate Finance, Insurance Broking,
Commodities Broking, Personal Finance Advisory Services, placement of equity, IPOs,
among others. Karvy has a professional management team and ranks among the best in
technology, operations, and more importantly, in research of various industrial
segments
TOP MANAGEMENT:
Mr. C Parthasarthy, Chairman & Managing Director
He is the leader in the financial service industry in India and is
responsible for building Karvy as one of the India’s truly Integrated
Financial Services Provider.
Mr. M Yugandhar, Managing Director
Founder member of the Karvy Consultants Ltd. and has a varied
knowledge in the field of financial services spanning over 20 years.
Institute of Management and Information Science, Bhubaneswar, Karvy Stock Broking Ltd.
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Mr. M S Ramakrishna, Executive Director
Founder member of KARVY Consultants Limited is the orchestrator of
technology initiatives such as the call centre in the service of the
customer.
ACHIEVEMENTS:
Among the top 5 stock brokers in India (4% of NSE volumes).
India's No. 1 Registrar & Securities Transfer Agents.
Among the top 3 Depository Participants.
Largest Network of Branches & Business Associates.
ISO 9002 certified operations by DNV.
Among top 10 Investment bankers.
Largest Distributor of Financial Products.
Adjudged as one of the top 50 IT uses in India by MIS Asia.
Full fledged IT driven operations.
K A RV Y G R O U P C O M PA N Y :
K A RV Y C O N S U LTA N T S L I M I T E D .
K A RV Y S T O C K B R O K I N G L I M I T E D .
K A RV Y I N V E S T O R S E RV I C E S L I M I T E D .
K A RV Y THE FINAPOLIS.
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K A RV Y C O M P U T E R S H A R E P R I VAT E L I M I T E D .
K A RV Y G L O B A L S E RV I C E S LIMITED.
K A RV Y M U T U A L F U N D .
K A RV Y C O M T R A D E L I M I T E D .
K A RV Y I N S U R A N C E B R O K I N G LIMITED.
K A RV Y R E A LT Y & S E RV I C E S (I N D I A ) L I M I T E D .
ABOUT MUTUAL FUNDS:
Mutual Funds constitute a part of a wide spectrum of financial services involving
management of funds by investing in various financial instruments on behalf of various
individuals among others. A mutual fund is a single large professionally managed
organization that combines the fund raised from individual investors who have the
same investment objective. The money raised is invested in a diversified portfolio of
securities including stocks, bonds, debentures and other instruments thus spreading
and reducing the risk. Mutual Funds are the ideal investment vehicle for today’s
complex and modern financial scenario. Markets for equity shares, bonds, derivatives
and other assets have become mature and information-driven. A typical individual is
not likely to have the knowledge, skills, inclination and time to keep track of and
understand the causes and implications of the price changes and trends.These
organizations also gain economies of scale because of the large pool of money from
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investors; this lowers the cost of analyzing securities, managing portfolio and trading in
stocks and bonds.
Fig 1: Mutual Fund Flow Chart
The figure 1 – “Mutual Fund Flowchart” depicts the flow of monetary resources and
information from one security to another in the MF Industry. The investors invest
money with the AMCs, which have professional fund managers having knowledge
about the various investment instruments like the stock market, the money market, and
government securities. Based on the objective of a specific mutual fund scheme the pool
of money is invested. This investment generates returns in the form of dividend or
capital appreciation, which in turn is passed on to the investors.
ADVANTAGES OF MUTUAL FUNDS
Some advantages of mutual funds are:-
Diversification
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This is the idea of spreading your eggs around more than one basket. Mutual
funds invest money into many companies, thus decreasing the risk because in
case even some companies get unexpected loss in the value of their shares, the
rise in the value of other companies might nullify this loss.
Professional management
One of the most important benefits is the availability of low cost, highly
professional management services. Mutual funds are managed by highly skilled
managers who have a sound knowledge of the market and wide experience in
investment.
Convenient record-keeping
Mutual funds simplify the process of record-keeping. Bookkeeping
of the investments is handled by the fund.
Switching
Many mutual funds allow investors to switch from one fund to other.
Investment protection
Mutual funds work under the strict regulations of SEBI. They are required to
submit several reports to these agencies and to publish details of their operations
for public information.
More returns
Though risk is more, returns are also very high.
Low initial investment
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The initial amount that a person has to invest is very low in mutual funds. One
can start investing with a mere amount of Rs 500.
Easy liquidity
Schemes of mutual funds can be sold or bought any time in the stock market
according to the convenience of the investor.
Tax benefits
Depending on the schemes, investors of mutual funds get tax benefits. Some
schemes of mutual funds are 100% tax free.
Variety of investments
Mutual funds cater to any type of investor- those interested in regular income,
long-term or short-term growth, liquidity, capital gains, tax benefits etc.
Accessibility
Funds can be purchased directly by an investor or through an authorized
broker/agent, with a low (or no) sales charge.
Retirement benefits
Retirement and pension benefits are another attractive feature of investing in
mutual funds.
DISADVANTAGES OF INVESTING IN MUTUAL FUNDS
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Although what one person may view as a disadvantage another may see as a desirable
quality, below are some factors which may be disadvantages depending on your point
of view:
All mutual funds charge expenses. Whether they are marketing, management or
brokerage fees fund expenses are generally passed back to the investors.
Investors exercise no control over what securities the fund buys or sells.
The buying and selling of securities within the mutual fund portfolio
generates capital gains and losses which are passed back to investors even if
they have not sold any of their mutual fund shares
C L A S S I F I C AT I O N O F M U T U A L F U N D :
S C H E M E S A C C O R D I N G T O M AT U R I T Y P E R I O D :
A mutual fund scheme can be classified into open-ended scheme or close-ended scheme
depending on its maturity period.
Open-ended Fund/ Scheme:
An open-ended fund or scheme is one that is available for subscription and repurchase
on a continuous basis. These schemes do not have a fixed maturity period. Investors
can conveniently buy and sell units at Net Asset Value (NAV) related prices which are
declared on a daily basis. The key feature of open-end schemes is liquidity.

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Close-ended Fund/ Scheme:
A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund
is open for subscription only during a specified period at the time of launch of the
scheme. Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges where the
units are listed. In order to provide an exit route to the investors, some close-ended
funds give an option of selling back the units to the mutual fund through periodic
repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two
exit routes is provided to the investor i.e. either repurchase facility or through listing on
stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.
SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:
A scheme can also be classified as growth scheme, income scheme, or balanced scheme
considering its investment objective. Such schemes may be open-ended or close-ended
schemes as described earlier. Such schemes may be classified mainly as follows:
Growth / Equity Oriented Scheme:
The aim of growth funds is to provide capital appreciation over the medium to long-
term. Such schemes normally invest a major part of their corpus in equities. Such funds
have comparatively high risks. These schemes provide different options to the investors
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like dividend option, capital appreciation, etc. and the investors may choose an option
depending on their preferences. The investors must indicate the option in the
application form. The mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-term outlook seeking
appreciation over a period of time.
Income / Debt Oriented Scheme:
The aim of income funds is to provide regular and steady income to investors. Such
schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are less
risky compared to equity schemes. These funds are not affected because of fluctuations
in equity markets. However, opportunities of capital appreciation are also limited in
such funds. The NAVs of such funds are affected because of change in interest rates in
the country. If the interest rates fall, NAVs of such funds are likely to increase in the
short run and vice versa. However, long term investors may not bother about these
fluctuations.
Balanced Fund:
The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated
in their offer documents. These are appropriate for investors looking for moderate
growth. They generally invest 40-60% in equity and debt instruments. These funds are
also affected because of fluctuations in share prices in the stock markets. However,
NAVs of such funds are likely to be less volatile compared to pure equity funds.
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Money Market or Liquid Fund:
These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in safer
short-term instruments such as treasury bills, certificates of deposit, commercial paper
and interbank call money, government securities, etc. Returns on these schemes
fluctuate much less compared to other funds. These funds are appropriate for corporate
and individual investors as a means to park their surplus funds for short periods.
Gilt Fund:
These funds invest exclusively in government securities. Government securities have no
default risk. NAVs of these schemes also fluctuate due to change in interest rates and
other economic factors as is the case with income or debt oriented schemes.
Index Funds:
Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index,
S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight
age comprising of an index. NAVs of such schemes would rise or fall in accordance
with the rise or fall in the index, though not exactly by the same percentage due to
some factors known as “tracking error” in technical terms. Necessary disclosures in this
regard are made in the offer document of the mutual fund scheme. There are also
exchange traded index funds launched by the mutual funds which are traded on the
stock exchanges.
Asset allocation funds:
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Asset allocation funds contain two or more different classes of assets in their portfolio.
Their objective is to reduce the portfolio risk. Most such funds include domestic and
foreign stocks, bonds, currencies and money market instruments. The portfolio is very
often relocated on the basis of expected changes in the economy and industry, as well as
expected performance of the stocks.
Bond funds:
Bond funds seek to provide investors with safety, liquidity as well as a satisfactory
yield. They are the safest option as the money under such funds is invested in
government and corporate debt securities, which offer predetermined rates of interest.
Bond funds reduce the interest rate, credit opportunity and foreign currency risks. The
various types of bond funds include government bonds (which invest in the
government yield or the treasury portfolio), municipal bond funds (which invest in
municipal securities), adjustment rate bond funds (which invest in mortgage bonds tied
to adjustable rate mortgage), and corporate bond funds (which invest in corporate
debentures). Bond funds are ideal for those who want a regular income together with a
little capital appreciation as they may be placed in a category that falls between low-
risk savings in banks and high-risk savings in equities.
Sector funds:
These are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents. For example Pharmaceuticals, Software,
Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. Sector funds are the
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most sophisticated investment vehicle, their investment strategy being focused on a
particular sector which is likely to grow at a faster rate in the near/intermediate future,
due to the emergence of a particular industry or economic phenomenon. They invest in
the companies of such industry or industrial sector with the aim of guaranteeing high
capital appreciation, high income, or both. The portfolio is based on the intensive
research.
Money market funds:
Money market funds (MMMFs) are also known as cash funds. The portfolio of MMMFs
consists of short term debt instruments, such as treasury notes, commercial papers,
certificates of deposit and the call money market. They are able to provide better
returns than short-term bank deposits. MMMFs are best suited for investors who want
maximum returns for short-term investments with a minimum of risk.
Venture capital funds:
Venture capital funds seek to provide tax benefits and long-term growth. They usually
invest in unlisted and unquoted companies. They also invest in start-up business,
management buy-outs and new technologies. Investments in such areas are very risky
and it usually takes longer to realize the returns which, of course, may be much higher
than those accruing from other types of funds. The special tax benefits are an attraction
for investors who opt for venture capital funds.
Fund of funds:
Some mutual funds invest the money (received by issuing units) in other close or open-
ended funds. The investment risks of these funds are very low as they get spread at two
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points, but then such funds also involve double charge. However the investment costs
are relatively lower because the fund manager need not incur costs for stock selection
such funds invests in other mutual funds which are performing well. They are suitable
for cautious investors who want to minimize risks.
Load funds:
A Load Fund is one that charges a percentage of NAV for entry or exit. That is, each
time one buys or sells units in the fund, a charge will be payable. This charge is used by
the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is
Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would
be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual
fund will get only Rs.9.90 per unit. The investors should take the loads into
consideration while making investment as these affect their yields/returns. However,
the investors should also consider the performance track record and service standards
of the mutual fund which are more important. Efficient funds may give higher returns
in spite of loads.
No-load funds:
A no-load fund is one that does not charge for entry or exit. It means the investors can
enter the fund/scheme at NAV and no additional charges are payable on purchase or
sale of units.
Mutual funds cannot increase the load beyond the level mentioned in the offer
document. Any change in the load will be applicable only to prospective investments
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and not to the original investments. In case of imposition of fresh loads or increase in
existing loads, the mutual funds are required to amend their offer documents so that
the new investors are aware of loads at the time of investments.
THE GLOBAL PERSPECTIVE:
Mutual Fund plays an important role in the development of the financial market and
this has been proved in the developed countries like United States, United Kingdom
and Japan. Mutual Funds as a concept developed in the early 20th century. The first
modern American mutual fund opened in 1924 now called the MFS whereas in India it
was first started in 1963. But the idea of pooling together money for investment
purposes started in Europe in the mid-1800s mainly in Netherlands and Scotland
followed by Belgium, England and France. These developments led to the
establishment of Fidelity Investments that today is the world’s largest MF Company
and other companies like Pioneer, Scudder and Putnam funds. Mutual Funds were
initially termed as trusts.
In the global context Mutual funds have long been a popular investment avenue with
assets under management (AUM) exceeding 60% of the gross domestic product (GDP)
in developed markets like the US. Historically, US investors have been net buyers of
equity mutual funds. Major drivers for that behavior have been the need to build
capital for retirement and the knowledge that the average historical returns on equities
have exceeded that of bond funds. As in prior years, US households remain net buyers
of socks and bond through mutual funds and net sellers of these securities through
other means. The number of US households owning mutual funds reached 54.9 million
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as of December 2006. As a result, close to half of the estimated 114.37 million US
households now own mutual funds, and an estimated 96 million individual
shareholders in those households invest in funds.
THE INDIAN MUTUAL FUND I N D U S T RY :
In India mutual funds have been able to command significant investor appetite only in
the recent past with the increasing presence of private sector mutual funds and a
distinct shift in investor preferences towards mutual funds. This has resulted in the
AUM of mutual funds growing around 3.5 times from March 1999. Further the share of
the Indian mutual fund industry in the global pie has doubled in this period. The shift
in investor preference towards mutual funds has been facilitated by fiscal incentives,
availability of higher choices to investors, the gradual change in risk profile of the
investors, increasing returns from equity funds due to good performance of equity
markets as well as the attempts by the SEBI.
Unit Trust of India was the first mutual fund set up in India in the year 1963. In early
1990s, Government allowed public sector banks and institutions to set up mutual funds.
In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The
objectives of SEBI are – to protect the interest of investors in securities and to promote
the development of and to regulate the securities market.
As far as mutual funds are concerned, SEBI formulates policies and regulates the
mutual funds to protect the interest of the investors. SEBI notified regulations for the
mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities
were allowed to enter the capital market. The regulations were fully revised in 1996 and
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have been amended thereafter from time to time. SEBI has also issued guidelines to the
mutual funds from time to time to protect the interests of investors.
All mutual funds whether promoted by public sector or private sector entities including
those promoted by foreign entities are governed by the same set of Regulations. There
is no distinction in regulatory requirements for these mutual funds and all are subject
to monitoring and inspections by SEBI. The risks associated with the schemes launched
by the mutual funds sponsored by these entities are of similar type. It may be
mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual
fund (as on January 15, 2002).
D E V E L O P M E N T O F T H E I N D I A N M U T U A L F U N D I N D U S T RY :
The Mutual fund Industry can be broadly put into four phases:
First Phase (1964-87) - UTI commenced its operations from July 1964 with a view
to encouraging savings and investment and participation in the income, profits
and gains accruing to the corporation from the acquisition, holding management
and disposal of securities. The first scheme launched by UTI was called the UNIT
Scheme 1964 more popularly US-64.
Second Phase (1987-1993) - Initially, the growth was slow but it accelerated from
the year 1987. In 1987, public sector Mutual Funds was setup by public sector
banks, the LIC (Life Insurance Corporation of India) and the GIC (General
Insurance Corporation of India). SBI (State Bank of India) launched the first non-
UTI Mutual Fund in 1987 followed by other public sector banks.
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Third Phase (1993-2003) - In 1993 the first private sector Mutual Fund was
launched by Kothari Pioneer, which now has merged with Franklin Templeton.
Fourth Phase (Since February 2003) - UTI was bifurcated into two separate entities.
STRUCTURE OF INDIAN MUTUAL FUND:
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A U M O F T H E I N D I A N M U T U A L F U N D I N D U S T RY :
The following figure shows the growth in AUM of the Indian MF Industry from March,
1965 to March, 2007. There has been a decrease in the AUM of the industry from
January, 2003 to March, 2003. The reason for the fall in the AUM from Rs 121805 crores
in Jan 2003 to Rs 79464 crores in March 2003 was because of the bifurcation of UTI into
two separate entities – UTI and UTI Mutual Fund.
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Source:www.amfiindia.com
Fig 2: Growth in AUM of the Indian Mutual Fund Industry
The industry's Asset Under Management (AUM) was Rs 326,388 crore on March 2007,
and swelled by nearly 68 per cent to Rs 548,063 crore till January 2008. During the last
two years, the country's stock markets have grown by nearly 40 per cent each year,
while MFs have out-smarted them by growing at around 50-60 per cent. The size of
AUM in India is around $ 68 billion, which is much below the country's GDP of $ 780
billion. In many developed economies, the AUM size is more than that of the nation's
GDP. The analysts interpret the existing gap as an opportunity for the industry to grow
in the coming years. "In the next three years, the AUM size would go up by roughly
three times to cross the $200 billion mark. The number of players will also double from
today's 32. Many firms will go for consolidation and will add new partners or sell off
their business to foreign partners," Ajay Bagga, CEO of Lotus AMC said.
Assets Under Management (AUM) as at the end of Jan-2008 (Rs in Lakhs)
Average AUM For The
AUM
Month
Mutual Fund Name Excluding Excluding
Fund Of Fund Of
Fund Of Fund Of
Funds Funds
Funds Funds
1. ABN AMRO Mutual Fund 852984.07 25064.19 810089.12 29070.23
2. AIG Global Investment Group
294329.22 0 330416.02 0
Mutual Fund
3. Benchmark Mutual Fund 561099.88 0 643574.29 0
4. Birla Sun Life Mutual Fund 3593135.76 1873.23 3207689.2 1989.24
5. BOB Mutual Fund 8876.69 0 9887.54 0
6. Canara Robeco Mutual Fund 286313.3 0 320093.77 0
7. DBS Chola Mutual Fund 301573.78 0 379825.16 0
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8. Deutsche Mutual Fund 1338870.7 7133.83 1343322.6 7536.55

9. DSP Merrill Lynch Mutual Fund 1913600.42 157490.3 2037804.05 157861.37
10. Escorts Mutual Fund 17580.08 0 17533.36 0
11. Fidelity Mutual Fund 950915.89 3230.72 1042527.28 5304.69
12. Franklin Templeton Mutual Fund 2960433.33 25043.01 3161168.91 26133.15
13. HDFC Mutual Fund 4376269.85 0 4954432.65 0
14. HSBC Mutual Fund 1631527.14 0 1721244.48 0
15. ICICI Prudential Mutual Fund 6404507.55 3814.73 5710911.35 4411.23
16. ING Mutual Fund 953827.11 80586.12 977759.17 89179.64
17. JM Financial Mutual Fund 1392470.09 0 1432673.79 0
18. JPMorgan Mutual Fund 251672.89 0 262206.78 0
19. Kotak Mahindra Mutual Fund 2229571.73 36937.07 2273682.41 40730.51
20. LIC Mutual Fund 1338739.76 0 1504366.72 0
21. Lotus India Mutual Fund 1005709.88 0 905972.4 0
22. Mirae Asset Mutual Fund N/A N/A N/A N/A
23. Morgan Stanley Mutual Fund 367023.71 0 405938.54 0
24. PRINCIPAL Mutual Fund 1423489.88 0 1443140.34 0
25. Quantum Mutual Fund 5681.6 0 6530.49 0
26. Reliance Mutual Fund 7721003.73 0 8390538.13 0
27. Sahara Mutual Fund 22004 0 22739.99 0
28. SBI Mutual Fund 2758154.06 0 2981139.82 0
29. Standard Chartered Mutual Fund 1311812.64 3504.5 1434491.07 3540.73
30. Sundaram BNP Paribas Mutual
1329182.56 26867.61 1481302.15 28731.92
Fund
31. Tata Mutual Fund 1898825.97 0 2133244.76 0
32. Taurus Mutual Fund 39545.01 0 43627.62 0
33. UTI Mutual Fund 5265619.27 0 5687816.14 0
Grand Total 54806351.55 371545.31 57077690.1 394489.26
RECENT TRENDS IN THE I N D U S T RY :
The important recent development in the Mutual Fund Industry in India has been the
aggressive explosion of the private players. This has been accompanied by the decline
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of companies floated by UTI and other Nationalised banks. UTI saw its “death” when
their fiasco came to light in the form of two big blows in 1997 and 2001.
Many nationalized banks got into the mutual funds business in the early nineties and
got of to a good start due to the stock market boom prevailing then. These banks did
not really understand the mutual funds business and they viewed it as another kind of
banking activity. The performance of most of the schemes floated by these organisations
was not good.
The recent years have seen a spate in the opening up of the sector, and a large number
of companies have come in to participate in the Mutual Fund Industry. The experience
of some of the AMC’s floated by the private sector Indian companies was also very
similar. They quickly realised that the AMC business requires a lot of financial support
as returns are seen only in the long run.
Another major change in the last few years has been that some Mutual Funds have sold
out to foreign owned companies, while some have merged with others and there is a
general restructuring going on right now.
There has been a lot of foreign participation too with many major financial institutions
from abroad coming to the country. The foreign owned companies have deep pockets
and have come here with the expectations of a long haul. They can be credited with the
introduction of many new practices such as new product innovation, sharp
improvement in the service standards and disclosure, usage of technology, broker
education and support etc. The latest trend that has been catching up has been the
tremendous increase in the Joint ventures between Indian MNCs and foreign MNCs for
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conducting the mutual fund business with the Mutual fund being able to leverage the
foreign partner’s expertise and the domestic player’s network.
SOME FACTS FOR THE GROWTH OF MUTUAL FUND IN INDIA:
250% growth in the last 5 years.
Emphasis on better corporate governance.
Trying to curb the late trading practices.
Number of foreign AMC's are in the que to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management
worldwide.
Our saving rate is over 23%, highest in the world. Only channelizing these
savings in mutual funds sector is required.
We have approximately 29 mutual funds which is much less than US having
more than 800. There is a big scope for expansion.
'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.
Mutual fund can penetrate rural like the Indian insurance industry with simple
and limited products.
SEBI allowing the MF's to launch commodity mutual funds.
Introduction of Financial Planners who can provide need based advice.
L I T E R AT U R E R E V I E W :
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The number of researches in field of mutual funds in India is low as compared to the
other developed and developing nation. There is wide range of quantitative and
technical tools which helps to evaluate, manage and compare the performance of
different portfolios. In this area the pioneer work was by Sharpe (1966) who had
developed a composite measure that considers return and risk for the performance
evaluation of mutual funds. He evaluated the performance of 34 open-ended mutual
funds during the period 1944-1963 the method developed by him for the evaluation. In
his study he revealed the fact that the average mutual fund performance was markedly
inferior to an investment in the market. He also said that the good performance was
associated with low expense ratio and only little relationship was discovered between
the fund size and performance. A study carried out by Treynor & Mazuy (1966) didn’t
find any statistical evidence that investment managers of around 57 funds were unable
to predict the market movement in advance. The study suggested that investment in
mutual fund was highly dependent on fluctuation in the general market. The main crux
of the study was that the improvement in the rate of return was due to the fund
managers’ ability to identify the under priced share in the market. Jensen M C (1968)
assesses the ability of the fund managers in selecting the undervalued securities. In his
study he took a sample of 115 mutual funds and concluded that the fund managers’
were unable to forecast the price of the security well enough to recover research
expenses and fees. E. Fama (1970) developed a method for evaluating the investment
performance of the portfolios. He revealed the fact that the overall performance of the
managed portfolio can be divided into several components. He backed the fund
managers for picking up the best securities at a stated level of risk (ability of selection)
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for higher returns and also due to the prediction of general market movement (timing
ability). He further subdivided the return on portfolio into two parts namely the
security selection and return for bearing risk. The model developed by him combined
concepts from modern theories of portfolio selection and capital market equilibrium
with those of the traditional concept.
Some of the important studies in this area were also done in India. These were by M
Jayadev (1996), S. A. Dave (1998), Susan Thomas (1998), Vivek kulkarni, Anjan
Chakrabarti & Harsha Rungta, Amitab Gupta, S Vijayalakshmi, Biswadeep Mishra,
Ramesh Chander, M S Narasimhan and many more as well. Jyadev (1996) evaluated the
performance of 62 mutual fund schemes using Net Asset Value (NAV) data for period
from 1987-1995. He reported fine performance for many schemes when total risk was
considered. However 50% of the schemes outperformed the standard portfolio in terms
of systematic risk. His study concluded that Indian mutual funds were not properly
diversified and also the Fama’s selectivity ability was lacking in the Indian fund
managers. S. A. Dave (1998) discussed the performance on the mutual fund industry
and then analyzes the individual fund as well. Susan Thomas (1998) studied the
performance of Master share and MSGF for the period 1994-1995 and used Jensen
methodology for evaluating performance of the funds. Vivek kulkarni in his article
explained the framework for performance evaluation, criteria for selecting benchmark,
CRISIL methodology for measuring risk and the effect of fund management fees in a
performance evaluation. Anjan Chakrabarti & Harsha Rungta (2000) in their study
attempts to identify and evaluate the performance of mutual fund by focusing on
private sector equity fund. The study reveals that there was no one to one link between
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performance by return and performance by risk-adjusted return. Amitab Gupta (2001)
in his study evaluates selected schemes with respect to the broad based BSE national
Index to observe whether these schemes were able to beat the market. He also observed
whether the returns match the risk undertaken and the market timing ability of the
fund managers. The results indicate that 52% schemes earned higher returns as
compare to the market return whereas 48% generated low return. The results
pertaining to market timing abilities of the fund managers in context of the two
different models, the Treynor & mazuy and Heniksson & Merton do not provide
support to the hypothesis that the Indian Fund Manager are able to time the market
correctly. M. S. Narasimhan and S Vijayalakshmi (2001) studied 76 mutual funds of
around 25 fund houses evaluating time performance and diversification. The study uses
two alternative methods for observation. First, the portfolio return & risk and
correlation between the stocks of each scheme computed and compare with each other.
Second, the method to understand the correlation among the frequently appearing
stocks in the portfolio. The standard deviation, average return and coefficient of
variation of these stocks when compared reveal that in almost all cases the risk is higher
compare to return. The study also observes the fund managers ability to predict the
near future. Portfolios of the fund were compared with the top 100 performers of that
period. The result shows that there is a shift in the investment strategy for holding a
diversified portfolio and in optimizing the risk return of investment in the specific
period. Biswadeep Mishra evaluated the timing and selectivity skills of the mutual
funds. In his research paper he tries to examine the non-stationary of mutual fund betas
and find its causes as well. He used Chen & Stockum (1986) model, which uses
Mutual Fund 27
generalized varying parameters regression procedure to evaluate mutual fund’s
selectivity, beta instability and timing skills. This model also removes some of the
limitation that was there in the Jensen’s measures. He concluded that the selected
mutual fund had no timing ability but at individual level some of the schemes had
timing skills. The generalized varying parameters (GVP) reveal that the systematic risk
of Indian mutual fund did not remain stable over time. The study also examined the
portfolio management practices of the mutual fund manager with respect to portfolio
management, portfolio evaluation, portfolio construction and disclosure practices.
Thus, many of these studies evaluated the performance of the mutual fund in terms of
risk and return parameters. However all the studies conducted so far with respect to
performance evaluation of Indian mutual fund are subject to some criticism on the fact
that there were relatively small sample size, short time period, limited scope of
schemes, etc. Thus the literature survey reveals that there is still vast scope for advance
research in this field.
RISK TOLERANCE:
Risk tolerance is a complex psychological concept that is a key feature of financial
outlook and planning. Risk tolerance is the level of risk that an individual believes he or
she is willing to accept. It is important to note that risk tolerance is a complex attitude,
and like any attitude, it has multiple levels of interpretation. Risk tolerance reflects an
individual’s values, beliefs and personal goals, and overlaps with feelings of wanting to
feel confident and in control (Young & O’Neill, 1992). Financial risk tolerance involves
Mutual Fund 28
perceptions about how confident people are in their ability to make good financial
decisions, their views about borrowing money, and how much of a risk in terms of
financial loss they believe they could accept in achieving financial gains in the longer
term.
In summary, risk tolerance is the degree to which a client is willing and able to accept
the possibility of uncertain outcomes being associated with their financial decisions.
For the purpose of my research I have developed a questionnaire containing eight
questions. Each question in the questionnaire has some pre defined options (either
three or four). Each option carries some weight age. After the client fills up the
questionnaire, a score is calculated to determine the Risk Tolerance Level of each
client.
The following table shows the range of scores with their corresponding risk tolerance
levels.
Score Risk Tolerance Level
0-07 Low tolerance for risk
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08-12 Below-average tolerance for risk
13-17 Average/moderate tolerance for risk
18-23 Above average tolerance for risk
24-28 High tolerance for risk
Now after the risk tolerance score is known and the client profiling has been
successfully done, one can use this information to make investment decisions.
For this, the top mutual fund schemes (based on the return generated by them) will be
evaluated using various financial parameters like:
NAV (Rs.): The Net Asset Value is the market value of the assets of the scheme
minus its liabilities. The net asset value per unit on any business day is
computed as follows:
NAV = Receivables + Accrued Income – Liabilities –Accrued Liabilities
Number of shares or unit outstanding
% Return as on NAV date: This is the most important way to tell how well a
fund has performed. It includes the impact of appreciation of its value and
dividends, if any.
Fund Management: The return on a fund depends not only on the quality of the
portfolio but also on the quality of the management. The performance of the
Mutual Fund 30
mutual fund depends on the amount of expertise available with the managing
company.
Initial Investment: Every mutual fund has a minimum investment. Generally,
this minimum investment is a few thousand rupees, but for some funds it may
be as high as one lakh. For instance, the minimum application amount for HDFC
Liquid Fund was rupees one lakh. Investors should check the minimum
investment limits and delete the fund from his/her list, if the minimum is above
his/her intended investment.
Entry / Exit Load: Load is charged to the investor when the investor buys or
redeems (repurchases) units. It is an adjustment to the NAV, to arrive at the
price. It is primarily used to meet the expenses related to sale and distribution of
units.
Load that is charged on sale of units is called as entry load. An entry load will
increase the price above the NAV, for the investor.
Load that is charged when the investor redeems his units is called as exit load.
Exit load reduces the redemption proceeds of the investor.
An exit load that varies with the holding period of an investor is called as CDSC
(Contingent deferred sales charge).
Expense Ratio: This important statistic helps to shed light on a fund’s efficiency
and cost effectiveness. By definition, it is the ratio of total recurring expenses to
average net assets. Lower numbers are desirable.
Mutual Fund 31
Apart from these parameters, the method adopted by Karvy Stock Broking Ltd. will
also be used to analyze the performance of the various funds.
After evaluating the different schemes, the risks involved in these investments will be
studied. 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.
VARIOUS KINDS OF RISK:
Instrument Risk: What are the risks and opportunities in the three general
groups of mutual funds – money market, bond, and stock – as well as in the
different sub classifications within those groups?
Market Risk: How do market forces affect the inherent risk exposure of different
types of funds?
Portfolio Risk: What special characteristics of the make-up of a specific fund –
its holdings and the investment techniques used by the manager – define its
unique risk profile?
Business Risk: What type of business risk (like competitive position) affects the
earnings of a company whose shares are a part of a fund portfolio?
Different strategies can be followed for reducing these risks. Some of these risks can be
controlled by diversifying the portfolio. But all risks may not be totally eliminated. An
appropriate investment strategy is, thus, necessary in order to control the risks
associated with selection of investment instruments.
S T R AT E G I E S F O R R I S K R E D U C T I O N :
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Diversification by Investment Style: An investment style is simply a set of
rules, guidelines, or procedures followed by fund managers when selecting
stocks. Each investment manager has a special style of investing. It is always best
to diversify into funds with different approaches to the market because these
funds can produce significantly different results.
Diversification by Investment Objective: There are different types of funds like:
industry specific fund (aggressive fund), diversified and balanced fund
(moderate fund), bond fund (conservative fund) and money market fund
(extremely conservative). Each of these funds has different objectives. An
investor should invest a proportion of his/her investible resources among all
these funds so that his/her risk is further reduced.
Finally, choosing the right mutual fund scheme on a portfolio level will be done i.e.
determine which scheme is best for a particular client. Certain points need to be kept in
mind while choosing the right mutual fund:
• Do not be swayed by peripherals.
• Go through the investment mix carefully
• Past record is not always reliable
• Know the fund managers of the company.
P E R F O R M A N C E E VA L U A T I O N :
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Mutual Fund industry today, with about 34 players and more than five hundred
schemes, is one of the most preferred investment avenues in India. However, with a
plethora of schemes to choose from, the retail investor faces problems in selecting
funds. Factors such as investment strategy and management style are qualitative, but
the funds record is an important indicator too. Though past performance alone cannot
be indicative of future performance, it is, frankly, the only quantitative way to judge
how good a fund is at present. Therefore, there is a need to correctly assess the past
performance of different mutual funds.
Worldwide, good mutual fund companies over are known by their AMCs and this fame
is directly linked to their superior stock selection skills. For mutual funds to grow,
AMCs must be held accountable for their selection of stocks. In other words, there must
be some performance indicator that will reveal the quality of stock selection of various
AMCs.
Return alone should not be considered as the basis of measurement of the performance
of a mutual fund scheme, it should also include the risk taken by the fund manager
because different funds will have different levels of risk attached to them. Risk
associated with a fund, in a general, can be defined as variability or fluctuations in the
returns generated by it. The higher the fluctuations in the returns of a fund during a
given period, higher will be the risk associated with it. These fluctuations in the returns
generated by a fund are resultant of two guiding forces. First, general market
fluctuations, which affect all the securities, present in the market, called market risk or
systematic risk and second, fluctuations due to specific securities present in the
Mutual Fund 34
portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of
these two and is measured in terms of standard deviation of returns of the fund.
Systematic risk, on the other hand, is measured in terms of Beta, which represents
fluctuations in the NAV of the fund vis-à-vis market. The more responsive the NAV of a
mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by
relating the returns on a mutual fund with the returns in the market. While
unsystematic risk can be diversified through investments in a number of instruments,
systematic risk cannot be. By using the risk return relationship, we try to assess the
competitive strength of the mutual funds vis-à-vis one another in a better way.
In order to determine the risk-adjusted returns of investment portfolios, several
eminent authors have worked since 1960s to develop composite performance indices to
evaluate a portfolio by comparing alternative portfolios within a particular risk class.
The most important and widely used measures of performance are:
The Treynor Measure
Developed by Jack Treynor, this performance measure evaluates funds on the basis of
Treynor's Index. This Index is a ratio of return generated by the fund over and above
risk free rate of return (generally taken to be the return on securities backed by the
government, as there is no credit risk associated), during a given period and systematic
risk associated with it (beta). Symbolically, it can be represented as:
Treynor's Index (TI) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return and Bi is beta of the
fund.
Mutual Fund 35
All risk-averse investors would like to maximize this value. While a high and positive
Treynor's Index shows a superior risk-adjusted performance of a fund, a low and
negative Treynor's Index is an indication of unfavorable performance.
The Sharpe Measure
In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is
a ratio of returns generated by the fund over and above risk free rate of return and the
total risk associated with it. According to Sharpe, it is the total risk of the fund that the
investors are concerned about. So, the model evaluates funds on the basis of reward per
unit of total risk. Symbolically, it can be written as:
Sharpe Index (SI) = (Ri - Rf)/Si. Where, Si is standard deviation of the fund.
While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a
fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. For a well-diversified portfolio the total risk is
equal to systematic risk. Rankings based on total risk (Sharpe measure) and systematic
risk (Treynor measure) should be identical for a well-diversified portfolio, as the total
risk is reduced to systematic risk. Therefore, a poorly diversified fund that ranks higher
on Treynor measure, compared with another fund that is highly diversified, will rank
lower on Sharpe Measure.
Jenson Model
Jenson's model proposes another risk adjusted performance measure. This measure was
developed by Michael Jenson and is sometimes referred to as the Differential Return

Mutual Fund 36
Method. This measure involves evaluation of the returns that the fund has generated
vs. the returns actually expected out of the fund given the level of its systematic risk.
The surplus between the two returns is called Alpha, which measures the performance
of a fund compared with the actual returns over the period. Required return of a fund
at a given level of risk (Bi) can be calculated as:
Ri = Rf + Bi (Rm - Rf)
Where, Rm is average market return during the given period. After calculating it, alpha
can be obtained by subtracting required return from the actual return of the fund.
Higher alpha represents superior performance of the fund and vice versa. Limitation of
this model is that it considers only systematic risk not the entire risk associated with the
fund and an ordinary investor cannot relieve unsystematic risk, as his knowledge of
market is primitive.
If you're a typical investor, you want to know how well your investments are doing
over time. If you only buy one stock and then hold onto it, it's pretty easy to figure out
how you're doing by simply comparing the current value of the stock to the amount
you initially invested.
NAV (NET ASSET VALUE):
Things get a lot more complicated once you have multiple stocks in your portfolio and
you're buying and selling shares at different times for different prices. Performance gets
even harder to measure if you invest additional cash or take money out of the portfolio
every once in a while: adding cash to the portfolio increases its value, but not its
performance. Net Asset Value provides a way to objectively measure your performance
Mutual Fund 37
over time in spite of all the changes you make to your portfolio. Since other investment
vehicles like mutual funds use NAV, it also provides a way to compare your
performance to professionally managed funds and indices, like the S&P 500.
The performance of a scheme is reflected in its net asset value (NAV) which is disclosed
on daily basis in case of open-ended schemes and on weekly basis in case of close-
ended schemes. The NAVs of mutual funds are required to be published in
newspapers. The NAVs are also available on the web sites of mutual funds. All mutual
funds are also required to put their NAVs on the web site of Association of Mutual
Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of
all mutual funds at one place.
The mutual funds are also required to publish their performance in the form of half-
yearly results which also include their returns/yields over a period of time i.e. last six
months, 1 year, 3 years, 5 years and since inception of schemes.
FACTORS TO CONSIDER:
As an investor you need to consider factors like your own risk profile, the fund's
management style and performance.
1. Risk profile
Investors have a risk profile that dictates how much risk they can take on to achieve
their investment objective. In this backdrop, they must identify mutual funds that can
help them meet their investment objectives at the desired risk level.
For instance, some equity funds adhere to the growth style of investment (aggressively
managed funds), while others follow the value style of investment (conservatively
Mutual Fund 38
managed funds). So it is important for investors to select a fund that takes on risk in
line with their own risk appetite.
2. Fund management style
Fund houses have varying fund management styles and processes. Some pursue the
individualistic style, where the fund manager rather than the investment process plays
a dominant role in the investment process. As opposed to this, there are fund houses
that pursue a team-based investment approach where the investment process holds
sway over the individual.
Our preference is for the team-based style of investing since it is more stable and the
mutual fund (and its investors) is not over-dependent on an individual.
3. Mutual fund performance
Mutual Fund 39
It is imperative for investors to evaluate a mutual fund on parameters related to risk
like Standard Deviation and Sharpe Ratio as also NAV appreciation. The risk
parameters evaluate the volatility in performance (Standard Deviation) and returns
generated by the fund per unit of risk borne (Sharpe Ratio).
The best deal for an investor will come from a mutual fund that has higher NAV
appreciation and Sharpe Ratio and lower Standard Deviation.
IMPORTANCE OF BENCHMARKING
Financial journalists are not equipped to analyze mutual funds. In most cases they are
simply reporting the performance figures they received from the managers themselves
or the marketing/public relations people. Mutual fund rating services are good data
collectors but lack any real sophistication in fund analysis. These services are oriented
toward the retail fund investor. Consequently sophisticated advisors, plan sponsors and
consultants must perform their own mutual fund analysis.
(The two biggest mistakes in quantitative mutual fund analysis are improper
benchmarking and end point bias. How can you avoid these mistakes?
A benchmark is a standard of measurement for mutual fund performance. Benchmarks
come in many different varieties, but an index or index mutual fund is the preferred
benchmark for most professional money managers and financial advisors. For example,
the Standard & Poor 500 stock index or the Vanguard 500 Index mutual fund can be
good benchmarks for evaluating the performance of a mutual fund that invests in large
capitalization. If we classify mutual funds by the capitalization of stocks that they own
(e.g., large-cap, small-cap), we would probably want benchmarks classified by
Mutual Fund 40
capitalization. Since we view benchmarking as only the first step in the potential sell
decision, we believe you should seek a benchmark that is reasonably close to the fund
you are evaluating; however, there is little point in seeking the "perfect" benchmark The
most common error made when measuring a manager’s performance is the selection of
an improper benchmark. Morningstar’s star ratings, for example, are based on fund’s
performance relative to a broad group of fund returns, as opposed to a more specific
benchmark that reflects the manager's true style. Because of this, on February 28, 2000,
at the very peak of the growth stock bubble, most of Morningstar’s five star funds were
growth funds while there were no five star value funds. Two years later, after the value
funds did well and the growth funds crashed, most of the five star funds were value
funds.
KEY TERMINOLOGY:
ALPHA - The alpha ratio illustrates the effect of the portfolio manager’s choice on the
fund's return. The greater the alpha, the better a return has the investment yielded
compared with other investment objects with the same market risk. Alpha is an
annualized return measure of how much better or worse a fund’s performance is
relative to an index of funds in the same category, after allowing for differences in risk.
BETA – A ratio that measures the market risk of securities or a fund. If the beta ratio
exceeds one, the fund is more sensitive than funds in general to the fluctuations of the
stock market. The beta may also be negative, which means that the value of the fund
will, on average, move to the opposite direction than the general market development.
Beta measures the sensitivity of rates of return on a fund to general market movements.
Mutual Fund 41
Beta measures the volatility of the fund, as compared to that of the overall market. The
Market's beta is set at 1.00; a beta higher than 1.00 is considered to be more volatile than
the market, while a beta lower than 1.00 is considered to be less volatile.
Beta measures the volatility of the fund’s value relative to the volatility of the fund’s
benchmark value. The Beta coefficient indicates the percentage change of the fund’s
value when the benchmark value changes by one percentage point.
Example: When the beta of the fund is 0.8, the value of the fund rises by 0.8 % when the
benchmark index rises by one percent. Correspondingly, when the benchmark index
falls by one percent, the value of the fund falls on average by 0.8 %.
The Beta coefficient is a key parameter in the capital asset pricing model (CAPM). It
measures the part of the asset's statistical variance that cannot be mitigated by the
diversification provided by the portfolio of many risky assets, because it is correlated
with the return of the other assets that are in the portfolio.
For example, if every stock in the New York Stock Exchange was uncorrelated with
every other stock, then every stock would have a Beta of zero, and it would be possible
to create a portfolio that was nearly risk free, simply by diversifying it sufficiently so
that the variations in the individual stocks' prices averaged out. This would be like
owning a casino royale: essentially none of the business risk of owning a casino comes
from the uncertain outcomes of the games of chance played by the customers, because
Mutual Fund 42
those are uncorrelated, and average out over any significant period of time. In reality,
investments tend to be correlated, more so within an industry, or when considering a
single asset class (such as equities), as was demonstrated in the Wall Street crash of
1929. This correlated risk, measured by Beta, is what actually creates almost all.
Standard Deviation: Statistic that measures the tendency of data to be spread out.
Accountants can make important inferences from past data with this measure. The
standard deviation, denoted with S and read as sigma, is defined as follows:
For example, one-and-one-half years of quarterly returns for XYZ stock follow:
From the preceding table, note that
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The XYZ stock has returned on the average 10% over the last six quarters and the
variability about its average return was 11.40%. The high standard deviation (11.40%)
relative to the average return of 10% indicates that the stock is very risky,
Correlation shows the linear dependency between fund returns and the returns of the
benchmark index. Correlation may vary between -1 and 1. The dependency is complete
if the fund’s correlation to the benchmark index is 1. If the correlation is zero, there is no
dependency.
Mutual Fund 44
PERFORMANCE OF TOP 10 MUTUAL FUNDS
DWS IN VE STME N T OPPO RTUN I TY FUN D:

Trailing Returns Column1 Column2
As of 09 May 2008 Fund Return Category Return
Year-to-Date -20.81 -24.66
1-Week -3.11 -3.98
1-Month 8.3 5.37
3-Month -3.72 -7.59
1-Year 51.39 19.67
2-Year 24.97 10.6
3-Year 43.75 32.47
5-Year -- 46.21
Mutual fund industry is one of the attracting industries in most recent few years. DWS
Investment Opportunity fund is one of the most promising funds in last one - two
years. One-year return of the fund is about 52% which makes it top performer within
the diversified category. Since its inception, the fund has been among the better
opportunity within the range of flexi-cap funds (funds which can invest across the
market capitalization range). The funds return is more than the market return of the
category in which it belongs. Even the returns of Nifty and Sensex are comparatively
less than the return of the fund for all the different time period taken into consideration.
Mutual Fund 45
Risk
Mean 1.38 Treynor 1.33
Standard Deviation 3.7 Sortino 0.57
Sharpe 0.35 Correlation 0.95
Beta 0.96 Fama 0.44
The fund's risk profile would be similar to that of a normal diversified equity fund. The
fund has performed really well as it is seen from the results of the different method
used to calculate the risk of the fund. The Treynor Ratio, the Sharpe Ratio, Fama etc
have all been positive and the Treynor ratio being more than 1 is significant for the fund
as the investor prefers higher and positive Treyor Ratio which shows the lesser risk and
higher return. The beta value is close to 1 which is again a good sign for the fund as the
fund is moving along with trend in the market.
NAV (Net Asset Value)

Latest Nav 12-May-08
Benchmark Index - BSE200 9-May-08
52 - Week High 4-Jan-08
52 - Week Low 15-May-07
The NAV of the DWS Investment opportunity fund has outperformed the expectation
of the market that is the BSE200 which is the benchmark index. From the chart we can
make out that over the NAV of the fund has performed well but in the past few months
due to the high fluctuation in the market the NAV of the fund has decreased. The fund
still looks technically and fundamentally sound enough to continue better return for the
investors.
Mutual Fund 46
Portfolio Characteristic As on 30/04/08

Avg Mkt. Cap (Rs Cr) 13,111.12
Market Capitalization % of Portfolio
Large 50.36
Mid 30.32
Small 17.32
The table shows the percentage of money invested in the Large, Mid and Small Cap
companies. More than 50% of the market cap of the company is invested in Large Cap
and then around 30% is invested in the Mid Cap. This shows that the fund manager
trusts creditability of the Large and Mid Cap segment profoundly and had invested
more than 75% in this segment. As in the last few years the Mid Cap had performed
better which had engrossed the fund manager to shift lightly between large-cap and
mid-cap stocks more. A good stock selection and active churning of the portfolio have
helped managers to get better return for their fund.
Top 10 Holdings
Stock Sector % of NAV
Reliance Industries Ltd. Oil & Gas, Petroleum Refinery 6.86
Mutual Fund 47
Tata Steel Ltd. Steel 4.25
HDFC Ltd. Finance 3.68
Sintex Industries Ltd. Plastic 3.41
Bombay Dyeing & Manuf. Co. Ltd. Chemical 0.36
Deep Industries Ltd. Oil & Gas, Petroleum Refinery 3.32
Chennai Online Computer - Software & Education 3.32
ITC Ltd. Tobacco & pan Masala 3.24
Jain Irrigation System Ltd. Plastic 3.16
BHEL Electrical & Electrical Equipments 3.11
The funds timely move to mid-cap stocks, with a slight preference for capital goods,
metals and banks in the past six months had proven to be advantageous for company.
As a proportion of the overall portfolio, the mid-cap exposure has climbed to 34 per
cent from 23 per cent over the last six months. In the past few quarter, for example,
large-cap names such as Tata Power, ITC, and Reliance were shed in favour of new ads
such as Marg Construction, HCC and Gujarat Industries Power. The fund’s holdings in
some of the top companies of both the large and mid cap had made their way more
influential. If we take a look at return and the earning of these companies we can say
that the funds return are expected to go higher in the near future.
Unlike other funds labeled as "Opportunities" products, DWS Investment Opportunity
does not hold concentrated exposures in its top sectors. Instead, the fund's consent
allows it to dynamically allocate its portfolio between equity and other assets. Its
holding in the Oil & Gas, Steel and Engineering Sector is around 40% and is benefited
with it in its return which in turn had resulted in a better return for the fund. This
Mutual Fund 48
requires timing skills and can add an additional layer of risk to the fund. In practice,
though, the fund has remained fully invested in recent times and hasn't taken recourse
to timing calls. However, it has been quite aggressively managed in active churning of
the portfolio and a flexible allocation to mid-cap stocks. The portfolio also appears to be
quite actively churned, with 21 of the total of 39 stocks held in the portfolio replaced in
a six month time frame. An active profit-booking strategy of the fund managers and the
regular check of sharp run-ups in select mid-cap stocks are behind the success story so
far.
As on 30/04/08 % of NAV
Energy 26.53
Metals & Metal Products 12.92
Chemicals 8.98
Consumer Non-Durable 8.37
Mutual Fund 49
Diversified 8.22
Technology 6.16
Financial Services 5.82
Services 5.09
Basic/Engineering 4.53
Automobile 4.16
Mutual Fund 50
Remarks for the fund:
Investors in the DWS Investment Opportunity Fund can retain their units in the fund,
given its strong performance since launch. With a compounded annual return of about
45 per cent, the fund has kept comfortably ahead of its benchmark BSE-200 as well its
peer group of diversified equity funds. As we know that the banking sector is booming
up and with the opening up of the banking sector in 2009 the fund is expected to
outperform in the upcoming years.
R E L I A N C E R E G U L A R S AV I N G E Q U I T Y :
Year-to-Date -24.59 -25.01
1-Month 3.24 4.07
3-Month -4.24 -3.25
1-Year 46.06 18.69
3-Year -- 32.07
5-Year -- 45.58
The fund has been performing well in its segment and has provided a competitive
environment for the other funds in the same category. The returns from the fund have
been increasing over the years. One-year return of the fund is about 46% which makes it
one of the top performers within the diversified category. The proceeds of the Sensex,
Nifty and the category are less than the return offered by the fund.
Risk
Mutual Fund 51

Beta 0.83 Fama 0.48
The riskiness of the fund is similar to that of the equity market because the beta value of
the firm is close to 1 which means that the fund follows the trend prevailing in the
market. The different ratios are positive which means that the fund has less risk and the
fund is more likely to be preferred by the investors.
NAV (Net Asset Value) Column1

Latest Nav 22.76 - 5/12/2008
Benchmark Index - BSE200 8850 - 5/9/2008
52 - Week High 31.97 - 1/4/2008
52 - Week Low 15.97 - 5/16/2007
Similarly like the other funds the NAV of the fund was increasing till Jan 2008 but there
after with fall in the market i.e. with the bearish trend in the market the fund’s NAV has
also fallen down. From the chart we can make out that the affect of the bench mark
index on the performance of the fund. But now it is more likely to have bullish run as
the effect of it will be reflected with increase in the returns for the investors.
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Large 33.02
Mid 39.92
Small 27,06
Unlike other funds the combination or the mix of the segments by the fund managers is
being of high quality. The fund manager trust the companies as the investors will be
benefited with the outstanding performance. The investment in the large cap , mid cap
and small cap has been extraordinary and the amount invested by the fund managers
had provided better combination as the distribution of the market cap had made the
fund a diversified I different sector.
Top 10 Holdings
Pratibha Industries ltd. Oil & Gas, Petroleum Refinery 6.86
SBI Bank 4.25
Tata Steel Steel 3.41
Divis Laboratories Ltd. Chemical 0.36
Maruti Udyog ltd. Automobiles 3.32
Radico - Khaitan Ltd. Energy & Electrical 3.32
Reliance Energy Ltd. Energy & Electrical 3.24
Bharat Electronics Ltd. Energy & Electrical 3.16
The investment of the fund in the selected companies had made it one of the best
performing funds. Being the flagship company of the Reliance Group, the fund have
key advantages over the other funds. Investment in the diversified companies had
resulted in the better returns for the investors. As many of the top rated funds have a
Mutual Fund 53
prime investment in the Reliance Industries so as the fund had managed to do the same
as the fund is the scheme of the sister company of the Reliance Industries. Other
companies had also performed well over the years which had benefited the fund to
provide high returns to the investors.

Sector Weightings
As on 30/04/08 % Net Assets
Energy 13.39
Construction 11.55
Technology 9.80
Services 4.88
Chemicals 4.26
Textiles 3.32
Health Care 3.26
Automobile 3.22
Diversified 1.86
Mutual Fund 54
Energy sector was chosen over the other sectors by the fund managers by investing in
some of the big companies like the Reliance Energy, BHEL, BEL etc. had made the
portfolio of the fund strong enough to provide high returns to the investors. The other
sectors like the Metal, Chemical, and Technology have also performed well which had
resulted in the overall performance of the fund.
The fund being the flagship of the Reliance Group, one of the biggest corporate houses
in India has an X-factor with it. The fund is anticipated to continue high returns in the
future as the market started gearing up. The environment for the fund is supportive
and had benefited the fund performance.
DBS CH OL A OPPO RTUN I TY FUN D:

Trailing Returns Column2 Column3 Column4 Column2
As on 13/05/08 Fund Return S &P Nifty Sensex Category Return
Year-to-Date -25.01 -18.34 -16.89 -24.66
1-Week -3.49 -3.46 -3.6 -3.98
1-Month 4.07 4.92 6.66 5.37
3-Month -3.25 3.6 1.52 -7.59
1-Year 18.69 22.96 22.21 19.67
2-Year 10.99 17.19 17.15 10.6
3-Year 32.07 35.99 37.71 32.47
5-Year 45.58 39.88 41.78 46.21
DBS being the one of the best performing in the recent time had made its impact on
funds in the category. Though the fund didn’t started well as the market was fluctuating
in nature and had shown down trend at that time, but now the market has smoothen
up and the recent returns from the fund has been outperforming the other mutual fund.
The returns from the fund are higher than that of the Nifty, Sensex and the category the
Mutual Fund 55
fund belongs to. In the long run it is expected that the returns from the funds will be
higher than what it is currently are.
Risk
Beta 0.96 Fama 0.39
Risks provided by these mutual funds are more or less similar to that of the risk
prevailing in the equities. The fund have manage to have low risk and higher return
which attracts the fund manager to put in the money in these funds and have higher
returns for the investors. Beta value of the fund is close to 1 which means that the
market has some serious impact on the fund and in turn fund is reacting to the trend.
The Sharpe Ratio, Fama Ratio, Treynor Ratio all being positive and Treynor ration being
more than 1 has made the mark in the minds of the investor and the fund managers.

Latest Nav 17.63 - 5/13/2008
52 - Week High 34.58 - 1/4/2008
52 - Week Low 14.63 - 3/24/2007
NAV of the fund has performed better than that of the other fund. The fund that clearly
pass away the benchmark index BSE200 and the results seem to be good till February.
From the chart we can make out that the fund has pretty similar trend that to off the
benchmark index but later on the fluctuation has increased a lot this is due to the high
volatility in the market which had made the fund a bit slower but the returns had been
good.
Mutual Fund 56

Large 38.19
Mid 34.75
Small 13.28
From the table we can identify that the fund managers have almost equally trusted the
Large and Mid Cap for the investment of the funds collection. Though some small per
cent of money is also invested in small Cap but the returns and earnings of those
companies have been outstanding which had added to the beats to the music of the
performance of the stock. Fund managers make sure that they invest in those stocks
that provide timely returns for the market.
Top 10 Holdings
Mutual Fund 57
Videocon Leasing & Industrial Finance Ltd. Electrical & Electrical Equipments 2.82
J P Associates Ltd. Construction 2.71
Kotak Mahindra Bank Ltd. Bank 2.53

ICICI Bank Ltd. Bank 2.48
DLF Ltd. Construction 2.4

Reliance Comm. Venture Ltd. Telecom 2.12
Mahindra & Mahindra Ltd. Ancillaries 2.08

Hindustan Construction Co. Ltd. Construction 1.9
Great Offshore Ltd. Shipping 1.86
The fund managers had a great role to play in the performance of the mutual fund. The
right selection of the investment will make the fund more attractive and becomes an eye
catcher for investor. Reliance Industries is one of the favourite pick for any fund and
DBS too had invested 4.27% of its NAV in the company. The returns of the Reliance
Industries are around 25% which had benefited the fund and been able to provide
better returns for the investors. The other companies had also provided with good
returns which had a immensely supported the fund in providing good returns.
When we take a glance at the sectors the fund has invested, we find some interesting
facts. More than 20 % of the NAV has been invested in the Construction sector which
we rarely find, as maximum fund managers invest in Oil & petroleum or Steel sector
but here the scenario is different as the investment in these sectors is even less than 10
per cent of the total investment. Many of the financial service providing companies
have been selected by the mangers for the better returns and the banks in particular
have been the sector of choice for the fund. Nearly 10 per cent is invested in the Energy
Mutual Fund 58
sector which is a booming sector as the crude oil prices are at its heights. Overall the
selection of the sectors and the companies in them has been good for the fund managers
and it will contribute to provide high returns.
Since the fund’s investment areas are superior and the returns are of high quality the
fund is expected to continue the returns that it is providing. The sectors such as the
construction, energy and the banks which are currently rated high had been the prime
areas of the investment for the fund. The opening up of banking rules and regulation in
2009 and the requirement of high quality infrastructure will prolong the returns and
will continue to perform in the future as well. It is suggested that the investor should
hold their investments in this sector as the fund seems to be brighter in the long run.
ICICI PRUDENTIAL INFRASTRUCTURE INST 1:

Year-to-Date -22.3 -25.01
1-Month 3.12 4.07
3-Month -1.07 -3.25
1-Year 42.28 18.69
3-Year -- 32.07
5-Year -- 45.58
ICICI prudential is one Fund house which had achieved a great elevation in the field of
Mutual Fund. Banking being the primary area of action had helped the company to
evaluate the fund in a better way and had able to provide higher returns to the investor.
There are many fund is a particular segment but there are very few fund which
Mutual Fund 59
performs outstanding in the category which they belongs. ICICI Infrastructure Instant
Fund is one of the top infrastructure funds of the recent time not only due to its
performance but also due to the returns they provide to their investors.
Risk
Mean NA Treynor NA
Standard Deviation NA Sortino NA
Sharpe NA Correlation NA
Beta NA Fama NA
The risk table that we have calculated for the other fund in the analysis doesn’t seem to
be applicable to the ICICI Infrastructure Inst. 1 fund. The different ratio and the
correlation are also not applicable here as the fund is new to the investor and the
completion of the year will have the ratio and the risk ability of the fund.

Latest Nav 14.71 - 5/12/2008
52 - Week High 19.36 - 1/4/2008
52 - Week Low 10.49 - 6/13/2007
NAV of the different fund looks alike. The different schemes almost follow the market
and fluctuation in the market is seen in there NAV. The fund NAV has fallen after Jan
2008 due the Down trend in the Indian equity market which had badly affected the
mutual fund market. From the chart we can see that the NAV of the fund has fallen but
the fall is less than that of the equity market. But it is observed that the fund has done
well compare to the other fund even well the bearish trend was prevailing in the
market.
Mutual Fund 60
As far as the portfolio is concern the fund manager had full reliance over the Large Cap
companies. The amount of money invested in the large cap is significantly higher than
that of the other caps. The managers had managed to increase the investment in the

Large 77.34
Mid 15.33
Small 7.33
large cap by disinvesting in the Mid and Small Cap scripts. Average Market Cap of the
fund has fallen from Jan 2008 but they had later on cope up with the circumstances to
grant high returns to the investors.
Top 10 Holdings
L & T Ltd. Electrical & Electrical Equipments 7.76
BHEL ltd. Electrical & Electrical Equipments 7.63
Jindal Steel & Power Ltd. Steel 5.03
Mutual Fund 61
Bharti Airtel Ltd. Telecom 4.76
ICICI bank Ltd. Banks 4.37
Oil & Natural Gas Corp. Oil & Gas, Petroleum Refinery 3.33
Grasim Industries Ltd. Cement 2.97
Reliance Industries has been the most favorite script for the fund managers in the past
one to two years. Almost all the top rated fund had made a huge investment in the
Reliance Industries. If we take a look at the table above we find that the fund managers
have done their homework in an elegant way as the scripts selected by the fund
managers have been the top performing companies of the recent time. The companies
like L&T, BHEL, Bharti Airtel, ICICI Bank etc all have provided higher returns to the
investor.
The fund manager had used the fund in an efficient way by diversifying the portfolio in
the different sectors. Energy sector had performed well in the recent period of time and
is expected to provide better returns in the future also. One upcoming sector the Metal
sector had provided higher returns to the investor and had fascinated fund managers as
well as an area of investment.
Sector Weightings
Energy 17.58
Diversified 17.41
Mutual Fund 62
Technology 6.58
Construction 5.65
Services 2.46
Automobile 0.82
The fund being a flagship of ICICI limited is expected to continue the performance in
the future also. The development of the Infrastructure in India will also boost up the
fund. The opening up of Banking Sector in the year 2009, the scope for the fund is
seems to be good as the ICICI Prudential is the group company of the ICICI bank.
ICICI PRUDENTIAL INFRASTRUCTURE:

As of 09 May 2008 Fund Category
Year-to-Date -22.3 -25.01
1-Month 3.12 4.07
3-Month -1.07 -3.25
1-Year 42.28 18.69
3-Year -- 32.07
5-Year -- 45.58
With the success of ICICI Prudential in the fund management space, it shouldn't come
as a surprise to find the AMC's flagship infrastructure fund in the lists as one of the
best-performing infrastructure funds. As the returns of the fund are concern the fund
Mutual Fund 63
had proven to be the best infrastructure fund in the last one to two years. The returns
provided by the funds are remarkably well and are ahead of those of the other fund in
this category. Even the return of the different indexes doesn’t match with the funds
return.
Risk
Beta 0.93 Fama 0.49
The fund is less risky compare to the other fund in the same category. Due to the less
risk the fund is among the top preference for the investors as fund with less risk
provides high returns is suitable for the investor. The different ratios like Treynor Ratio,
Sharpe Ratio are both positive which shows that the fund is favorable for the investor.
The beta of the fund is 0.93 which is close to 1. It means that the fund follows the
market movement and any fluctuation in the market will also affect the movement of
the fund.

Latest Nav 27.73 - 5/13/2008
52 - Week High 36.61 - 1/4/2008
52 - Week Low 19.92 - 5/15/2007
The fund NAV had increased at an increasing rate since its inception till Jan 2008 but
has reduced since then. NAV has reduced from Jan 2008 due to the fact that the market
had suffered from some bearish run. The down trend in the market has affected the
Mutual Fund 64
returns of the fund and has hit the NAV of the fund so hard that the funds return and
stability was questioned. However the fund seems to be fundamentally strong and is
expected to carry on high returns.

Large 66.1
Mid 14.59
Small 2.19
Fund manager have to do a tough job in selecting the area of investment. Here in this
fund it seems that the fund manager had invested around 2/3 rd of it’s in the Large Cap
companies and around 15 per cent in the Mid Cap. They don’t trust the small fund as
the investment in the Small Cap is just 2 per cent. The funds average market cap has
increased about 20 – 30 per cent which reflects the increase in preference in the fund by
the investors.
Mutual Fund 65
The selection of the companies by the fund managers has been outstanding as the
selected companies had performed really well. The returns provided by the fund
managers to the investors have increased over the years due to the returns availed from
these companies. The companies selected by the managers had been performing
healthy
Top 10 Holdings
L & T Ltd. Electrical & Electrical Equipments 7.76
BHEL ltd. Electrical & Electrical Equipments 7.63
Jindal Steel & Power Ltd. Steel 5.03
Bharti Airtel Ltd. Telecom 4.76
ICICI bank Ltd. Banks 4.37
Oil & Natural Gas Corp. Oil & Gas, Petroleum Refinery 3.33
Grasim Industries Ltd. Cement 2.97
SAIL Steel 2.86
in their respective sectors and with the gear up in the market the companies are
expected to perform better in the future.
The sector selection of the fund has been different than those of the other funds of
similar category. Energy sector was selected over the other sector as the investment in
this sector was higher than any other sector. The Metal and Metal Products sector was
the second best sector chosen for the investment and these sectors has executed
relatively higher returns than many of the other sectors.

Sector Weightings

Energy 17.58
Mutual Fund 66
Diversified 17.41
Technology 6.58
Construction 5.65
Services 2.46
Automobile 0.82
The fund has performed well in the past few years and is expected to perform healthy
in the future. The returns have proven the funds creditability and as the fund is the
flagship of ICICI Prudential. With flourishing expected in the banking sector the fund is
likely to execute better returns.
TA UR U S DI SCO V ERY STO CK :

As of 09/05/ 2008 Fund Category S&P Nifty Sensex
Year-to-Date -25.38 -22.57 -15.89 -14.06
1-Week 1.8 2.74 3.51 4.17
1-Month 3.85 5.29 5.53 7.33
Mutual Fund 67
3-Month -7.5 -6.37 2.74 -3.76

1-Year 41.11 19.22 23.66 23.41
2-Year 23.91 15.08 20.99 21.18
3-Year 30.52 33.09 36.85 38.74
5-Year 43.71 45.81 39.59 41.66
The fund at the beginning of its career has disappointed the fund managers and was
unable to attract many investors towards it. At initial stages the fund was way below
the other fund in the same category. Even the bench mark indexes were far ahead of the
fund. But later on the fund take the drive and with the changes in the portfolio the fund
was able to surpass the category returns. Soon it came to the top position in the same
category and was among the top 10 fund for the year. The one year return of more than
41 per cent has made the fund a favourable choice for the fund investors.
Risk
Beta 0.98 Fama 0.41
Every fund is first judge on the basis of the risk that fund carries with it. The risk is one
of the important factors that the fund manager and the investor look in a fund before
investing in it. The beta value close to 1 had made the fund reliable to the market and
any fluctuation in the market had an impact on the fund. Different ratios being positive
had made the fund among the preferred script than others.
Mutual Fund 68

Latest NAV 23.17 - 5/12/2008
Benchmark Index - BSE200 2163.6 - 5/9/2008
52 - Week High 32.64 - 1/4/2008
52 - Week Low 16.63 - 5/15/2007
The NAV of the fund had been increasing over the years at an increasing rate. But in
January’08 the fund had suffered due to the high volatility in the market. With starting
of new financial year the fund had gained the momentum and since then the fund has
performed well. The 52 week low of the fund was seen last year; the fall in the current
year was due to the market fluctuation which had affected the performance of the fund
but fund had resisted well to make an impact on the mind of the investors.

Large 38.73
Mid 31.53
Small 29.38
Mutual Fund 69
The reaction of the fund manager gives the mix impression. The amount of money
invested by the other fund manager in the same category and the investment done by
the Fund manager are different. The fund manager had invested almost equally in all
the three caps. The Large cap funds have the till more investment is due the returns the
Large Cap funds are providing in the recent times. The interesting to see was the
investment in the Small Cap which shows that the fund manager trust the Small cap
companies.
Top 10 Holdings
Reliance Capital Ltd. Finance 10.45
J P Associates Ltd. Housing & Construction 6.58
New Delhi Television Entertainment 4.67
Welspun Gujrat Stahl Rohren Ltd, Steel 4.48
Hindustan Oill Exploration Oil & Gas, Petroleum Refinery 3.19
Mangalore Refinery Ltd. Oil & Gas, Petroleum Refinery 3.05
Uflex Ltd. Packaging 2.67
GMR Infrastructure Ltd. Housing & Construction 2.34
Bharat Forge Ltd. Steel 2.16
Entertainment Network (India) Entertainment 2.08
Many of the investment done in the companies are rarely seen as these are the
companies from Small Cap. The investment in these companies has helped the fund to
achieve high returns as many of these companies have managed to earn good returns
for their investors. The fund manager had invested in some of the big names as well
like Reliance Capital, GMR Infrastructure; J P Associates etc had provided higher
returns to the investors and the fund managers.

Sector Weightings
Energy 14.47
Mutual Fund 70
Services 10.95
Diversified 8.50
Construction 5.39
Automobile 3.23
Mutual Fund 71
Chemicals 2.67
Textiles 1.03
Looking at the table we can say that the fund managers top preference were the Energy
sector, Financial Services Sector and Services Sector. These sectors had performed well
enough throughout the year to execute higher returns for the investors and the fund
managers who had revealed their interest in the sectors. One interesting feature about
the table is the Diversified Sector standing fourth in the table which shows that the
fund managers are also looking at the small sectors to earned higher returns.
The fund look to be at an interesting stage as the mutual fund industry in India is
growing at a speedy pace. The fund is fundamentally strong enough to perform in the
future. As at current state the fund seems to be in a good position and the returns are
high enough to attract investors.
Mutual Fund 72
S TA N D A R D C H A R T E R P R E M I E R E Q U I T Y F U N D :
As of 09 May 2008 Fund Category
Year-to-Date -23.93 -25.01
1-Month 3.36 4.07
3-Month -2.35 -3.25
1-Year 42.66 18.69
3-Year -- 32.07
5-Year -- 45.58
The fund seems to be fundamentally strong enough to provide high profits to the fund
managers which in turn prolong the profits to the investors. Though the returns were
not that good at the initial stage up later on the fund had taken the pace to award
higher returns to the investors. The category returns were less than the funds return
and the fund was among the top performer in the segment which attracted the pools of
investor toward it.
Risk
Beta 0.76 Fama 0.63
In terms of risk the fund was well ahead of the other fund in the same segment. The risk
of the fund was more likely that of the equity market which shows the affect of the
Mutual Fund 73
market on the fund. The beta of the company was 3/4 th which is good for the fund but
the beta value of the fund was comparatively less than the beta value of the other top
funds. The Treynor Ratio, Sharpe Ratio etc. were positive which shows that the fund is
less risky and especially the Treynor Ratio which is 1.84 is marvellous for the fund to
attract the investors.

Latest Nav 35.64 - 5/12/2008
52 - Week High 46.93 - 1/4/2008
52 - Week Low 23.47 - 5/15/2007
The NAV of the fund is some way mixing up with the benchmark index. The fund had
performed well in the last few years and the NAV has increased over the years. The
fund has managed to attract large pool of investors for investment in the fund as the
returns are higher compared to the other fund in the same segment. NAV has fallen in
the first quarter of the calendar year but had managed to gather momentum to attract
further investment.
Mutual Fund 74

Large 27.02
Mid 46.24
Small 16.8
In the portfolio characteristic we find some amazing results being displayed to us as the
composition of the portfolio is quite different than the other funds. The fund managers
of the Standard Charter have trusted the Mid Cap over the Large unlike the other
funds. The investment in the Small Cap is much higher than any other scheme shows
that the managers expects to have higher returns from the small cap companies.
Top 10 Holdings
Debt Instruments 5.99
Educomp Solution Ltd. Computer - Software & Education 5.78
UTI Bank Ltd. Bank 4.99
Shree Renuka Sugar Ltd. FMCG 4.93
Kaveri Seed Co. Ltd. FMCG 4.58
Shriram Transport Finance Co. Ltd. Transportation 4.4
SREI International FinanceLtd. Finance 4.31
Pantaloon Retail (India) Ltd. Fmcg 4
Tata Steel Steel 3.78
Exide Industries Ltd. Electrical & Electrical Equipments 3.75
Nearly 6 % of the NAV has been invested in the Debt Instrument which indicates that
the fund manager has different plans for the investment. The investment in the debt
instrument shows that the managers want to have a fixed income for some amount of
NAV and for the rest the fund has been invested in the companies with higher returns.
For example, UTI Bank, SREI Finance etc. all these company are performing well in
Mutual Fund 75
their respective sectors and with the upcoming boom and the bullish period in the
Indian equity market the fund will enjoy the earnings generated by these companies.
Sector Weightings
Services 21.58
Technology 3.68
Energy 3.47
Textiles 3.23
Construction 2.22
Automobile 1.95
Health Care 1.81
Chemicals 1.80
Sector wise we can say that the fund had invested in the Banking sector which seems to
be an area where the easing of rules and regulation in 2009 will help to extract higher
returns than now. The investment in the FMCG companies has also generated high
earnings and had made the portfolio strong enough to generate high returns.
Mutual Fund 76
The mutual fund industry is at the booming stage in India. The fund had outperformed
the other funds in the same category and is expected to continue the shower in the
future as well. The fund had made possible to offer higher returns to the investor by
investing in the diversified sectors to earn the confidence of the investor.
BOB GROWTH FUND:

As of 09/05/2008 Fund Category S&P Nifty Sensex
Year-to-Date -11.65 -22.57 -15.89 -14.06
1-Week 4.45 2.74 3.51 4.17
1-Month 5.61 5.29 5.53 7.33
3-Month 1.06 -6.37 2.74 -3.76
1-Year 39.47 19.22 23.66 23.41
2-Year 26.75 15.08 20.99 21.18
3-Year 37.35 33.09 36.85 38.74
5-Year -- 45.81 39.59 41.66
BOB Growth fund has performed well enough to be featured in the top 10 funds in the
last one year. The return provide by the fund is stellar in this segment. Growth in the
BOB Growth fund was far ahead of the returns provided by the other fund existing in
this category. The performance of the fund has also overwhelmed the benchmark index
and the other indexes in the country.
Risk
Beta 0.91 Fama 0.24
Coming to the risk part of the fund the fund had surprised many fund managers and
the investors with the amount of risk that the fund have. The fund with minimum risk
Mutual Fund 77
had been among the favorites for the investors. The beta value being close to 1 means
that the fund reacts to the happenings in the market. All ratios are positive which
means that the fund is less risky and execute higher returns for the investors.

Latest Nav 43.89 - 5/12/2008
Benchmark Index - BSE200 17434.94 - 5/9/2008
52 - Week High 52.48 - 1/4/2008
52 - Week Low 31.55 - 5/15/2007
In terms of NAV the fund had outperformed the market with an increasing NAV since
its inception. The only fall came in the mid of Jan ‘08 as the bearish trend was seen in
the market but later on the fund took the pace back and was among the top gainer
when the market started recovery. If we look at the graph the fund had reached its high
in early weeks of Jan’08 but the down fall thereafter was strongly resist by the fund as
the NAV falls however it didn’t reached its lowest point. The fund gained the
momentum and seems to reach new heights in the short period of time.

Mutual Fund 78

Large 84.77
Mid 7.86
Small 7.38
Fund managers strongly back the Large Cap companies as the 85 per cent of the Market
capitalization is invested in it. The timely move from the Mid Cap and Small Cap has
resulted in a positive way for the fund managers as the returns provided by those
newly entered stock on large cap is much higher than that of the Mid Cap and Small
Cap companies. Currently the investment in the Mid and Small cap is around 7.5
percent respectively.
Top 10 Holding as on Apr 30, 2008

Company Name Instrument Market Value (Rs. in cr) % of Net Assets
Reliance Industries Ltd Equity 1.05 14.18
Reliance Energy Ltd Equity 0.64 8.7
Reliance Communication Ventures Ltd. Equity 0.64 8.65
Larsen & Toubro Limited Equity 0.60 8.14
Hindustan Lever Ltd Equity 0.60 8.12
Ranbaxy Laboratories Ltd Equity 0.53 7.16
Tata Steel Ltd. Equity 0.29 3.99
Infosys Technologies Ltd Equity 0.26 3.57
UTV Software Communication Ltd Equity 0.20 2.73
NTPC Limited. Equity 0.20 2.67
BOB fund managers had trusted India’s one of the biggest corporate house as the top
three holding of the funds are the group companies of the Reliance Group. The three
companies namely, Reliance Industries, Reliance Energy and Reliance Communication
Venture together constitute 32 per cent of the total holding. The other big names into
belongings are L&T, TISCO, Infosys, Ranbaxy, HLL; NTPC etc. had made the portfolio
Mutual Fund 79
strong enough to earn high returns. The performance of these companies had really
made the fund a strong contender in the field of investment.
Change in Portfolio(Sector-Wise)(%)
Sector Name % of NAV
A Oil & Gas, Petroleum & Refinery 15.49
B Power Generation, Transmission & Equip 11.82
C Telecom 11.09
D Engineering & Industrial Machinery 8.14
E Diversified 8.12
F Pharmaceuticals 7.16
G Computers - Software & Education 6.93
H Steel 3.99
I Metals 3.49
J Housing & Construction 3.1
Oil & Gas, Petroleum has undoubtedly been the favorite pick for the fund managers
over the years. The there is not a surprise change in the sector holding. Only few
changes that also small in nature is seen in the sector holding. These changes can also
be attributed due to the fluctuation in the market that is being seen since January 2008.
The diversified portfolio of the company had made it possible for the fund manger to
present their point of investment.
Mutual Fund 80
The bar chart reflects the changes made by the fund manager in the month on April’08
within the sectors for which the fund has able to earned higher returns. The fund
managers had made it possible for by the timely entry and exit in different sectors and
the scripts in them.
The fund had been performing well and is expected to accelerate the returns in the
future as well. The holding of the fund are exceptionally incredible for the growth of
the fund. With the flourishing infrastructure expected in the near future and the bullish
run in the Indian stock market will further improvise the fund to its new heights.
T ATA I N F R A S T R U C T U R E :

As of 09/05/08 Fund Category S&P Nifty Sensex
Year-to-Date -25.31 -24.66 -18.83 -17.5
Mutual Fund 81
1-Month 5.97 5.37 4.96 5.99
3-Month -7.28 -7.59 -2.69 -4.17
1-Year 39.22 19.67 22.14 21.45
2-Year 20.53 10.6 15.72 15.65
3-Year 44.21 32.47 35.55 37.19
5-Year -- 46.21 39.66 41.5
The trailing returns table shows that the fund had made a steady progress since its
inception. The returns that the fund generated for its investors had revealed the
curtains from the fund. The fund was the third best performer in the year 2006-07 and
this year it slipped down to number 10 but the fund still looks strong as the
infrastructure in currently at the growth stage of its PLC. The last year return is around
40 per cent and which had influenced many big corporate fund manager for the
investment. The market returns in this segment are high but the fund had performed
even better then the expectation of many of the fund managers.
Risk
Standard Deviation 29.29 Sortino
Beta 1.07 Fama
Being an infrastructure fund the risk associated with the fund has reduced. From the
table we can say that the fund will perform better in the upcoming years. The beta
value being more than one had made the fund following the trend existing in the
Mutual Fund 82
market. The other ratio are positive are favouring the investor for investing.
Correlation shows the relation with that the fund has with the market.
The figure shows that the fund has outperformed the market every time over the years
and the growth in the NAV has shown that the fund has made it possible to attract
investor over the years and the fund will continue to attract pools of investors. The fund

Latest Nav 35.64 - 5/12/2008
52 - Week High 46.93 - 1/4/2008
52 - Week Low 23.47 - 5/15/2007
had followed the market but has performed better than the other fund due to the stellar
effect of booming infrastructure in India.
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Large 66.53
Mid 26.65
Small 7.72
The portfolio of the fund is a very important for any fund. The fund manager needs to
take proper care and have to do the research work before investing in any company.
The fund had achieved this stage due to the back of a large-cap growth oriented focus
with some help of mid caps as well. The investment in the in the large cap companies
had done the job for the fund manager by providing higher returns to the investor.
Another fire cracker from the infrastructure theme is the Tata Infrastructure which
provides awesome returns from year on year basis. To some extent one can attribute
this stellar performance to the sector exposure that most infrastructure funds maintain.
But the real clincher had been the fund manager’s ability to identify the different scripts
which had truly augmented the fund’s return. Reliance Industries being one of the
prime scripts for the fund manager had churned higher returns to the investor. Tata
Group Company had also provided with high returns which benefited the fund and the
fund being a flagship of Tata group has an advantage over the other fund.
Top 10 Holding as on 30/04/08

Company Name Instrument No. of Shares Mkt. Value (Rs. Cr) % of NAV
Reliance Industries Ltd Equity 442782 115.77 4.37
Larsen & Toubro Limited Equity 289099 86.82 3.28
Bharat Heavy Electricals Ltd Equity 411624 78.30 2.96
Tata Power Company Ltd Equity 500287 69.84 2.64
Tata Steel Ltd. Equity 764392 62.55 2.36
Reliance Communication Ventures Equity 990747 57.25 2.16
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Jindal Steel and Power Ltd. Equity 236809 56.83 2.15

Oil & Natural Gas Corpn Ltd Equity 548185 56.63 2.14
Punjab National Bank Equity 1000863 55.09 2.08
Welspun Gujarat Stahl Rohren Ltd Equity 1308327 52.59 1.99
Change in Portfolio(Sector-Wise)(%)
Sector Name Current Month Previous Month
A Oil & Gas, Petroleum & Refinery 13.25 13.29
B Steel 10.1 10.4
C Banks 8.63 8.24
D Engineering & Industrial Machinery 8.38 10.54
E Housing & Construction 7.98 8.18
F Power Generation, Transmission & Equip 7.6 7.59
G Electricals & Electrical Equipments 6.69 9.43
H Telecom 3.78 4.15
I Cement 3.03 2.52
J Finance 2.48 2.31
The fund managers had cut back the exposure to financial services; this was a lucrative
move as the sector was among the biggest losers in that period. Later on in early 2007
the managers re-entered in this sector earning high returns with this timely entry into
the sector. Similarly the flawless entry in the metal sector was also significant. This in
turn had resulted in the 23.3 per cent return in June 2007.
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The fund has performed well over the years and is expected to perform further in the
coming years as well. It is suggested to the investors that he fund is a infrastructure
fund and with the booming of infrastructure in the country the fund has mange to gain
momentum and is expected to continue higher returns.
TOP 10 SECTORS HOLDING BY FUND HOUSES:

For any mutual fund the investment in the market is a crucial work to do. The fund
managers are often seen in dilemma for investing the money received from the investor
and provide them with high quality return. Mutual Fund Industry has been there in
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Indian from the long time but the desirability of the investor to invest in the mutual
fund has been from the preceding few years. The investors who invest in these funds
have an expectation from the fund and this anxiety among the investor is due to the
returns that funds offers. The higher returns come from the diversified investment that
the fund managers had to do from time to time.
Investment in different sectors and the selection of the sectors and the companies in
them is an area where a high end research work is required to be done by the fund
before investing in them. The sectors which are performing well are the often the prime
choice for the funds and the superior scripts are the principal pick in it. If any sector is
underperforming than with proper research the fund managers often pick that script in
anticipation that in future the returns will be higher and help the fund to offer higher
returns to the holders.
In my research I have picked 60 funds that have been producing stellar performance in
the past few years. The funds have higher returns for the investors and the risk that
they had in them is minimal due to which the fund has gained the attention of the large
number of investors. The following are the few sectors and the scripts in them that are
among the top priority for the fund managers.
Oil & Gas, Petroleum & Refinery Sector
The crude oil prices has started boiling up again and with the continual rise in the
inflation had made the sector seen with twinkling stars all around it. The rising crude
price has become a fear factor for the market. Crude prices had touch all time high of
$126 per barrel and in the past 3-4 years the prices had jumped by nearly 150% which
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has made the sector a flashy one. Almost all the companies are performing well in this
sector specially the Reliance Industries which had outperformed the market in all
aspects. Reliance is one of the favorable companies for almost all the top fund and it is
rightly so as the returns and the earning generated by the fund has made the company
an obvious choice for the fund managers. One company that was not seen is many
portfolios are the Essar Oil which had made a remarkable journey in the last one year or
so. ONGC, India biggest company in this sector is also among the major pick for many
of the fund as the returns provided by the company is somewhat ok but the scripts is
fundamentally strong enough to offers higher earnings to the investors.
Banking Sector
Banking companies had continued to perform and attract large pool of investors from a
long period of time. Selection of the banking sector is positive move by the fund
managers as the banking sector had performed well in the last few years.
Housing & Construction
Infrastructure is one sector in which the country lacks from the other developed
nations. Infrastructure needs to be improved and the steps have been taken by the
government and big firms to develop the infrastructure in India. Property prices have
gone up in the last 2-3 years and in some states the price has increased by more than
100 per cent. This increased prices shows the energetic move that the people of the
country have taken to improve their standard of living and the raise the curtail from the
sector which was left un touch for number of years.
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The companies that drawn attentions in this sector are L&T, IVRCL Infrastructure, DLF,
Gujrat Ambhuja etc were among the top picks. Looking at the audited financial result of
these company it was revealed that the fund had maintain a all round performance over
the years and is expected to continue in the future as well as the fundamentally the
stocks are strong to execute higher earnings.
Metals & Metal product Sector
Metal are always in demand for the investors. The metal and metal products include
Steel, Copper, and Aluminum many other as well. Steel sector is one sector in the metal
sector which had always influenced many investors and the fund manages to invest in
the stock of the companies. The fund managers are keen about the Tata Steel and Jindal
Steel and if we take a look at the career of these companies we can say that the fund has
managed to retain the trust of the investors over the years.
Engineering and Industrial Equipments Sector
Though this sector was selected by many of the funds houses but it was seen that only
few companies were preferred by the fund managers to invest the money in it. The
scripts had positive outlook as the demand for the industrial equipment and products
are there and with the development of infrastructure the scripts are expected to
perform well in the future as wee.
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CONCLUSION:
Savings form an important part of the economy of any nation. With savings invested in
various options available to the people, the money acts as the driver for growth of the
country. Indian financial scene too presents multiple avenues to the investors. Though
certainly not the best or deepest of markets in the world, it has ignited the growth rate
in mutual fund industry to provide reasonable options for an ordinary man to invest
his savings.
Investment goals vary from person to person. While somebody wants security, others
might give more weightage to returns alone. Somebody else might want to plan for his
child’s education while somebody might be saving for the proverbial rainy day or even
life after retirement. With objectives defying any range, it is obvious that the products
required will vary as well.
Though still at a nascent stage, Indian MF industry offers plenty of chemes and serves
broadly all type of investors. The risk of default by any company that one has chosen to
invest in, can be minimized by investing in mutual funds as the fund managers analyze
the companies’ financials more minutely than an individual can do as they have the
expertise to do so.
Moreover, mutual funds are better placed to absorb the fluctuations in the prices of the
securities as a result of interest rate variation and one can benefits from any such price
movement.
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Factors such as investment strategy and management style are qualitative, but the
funds record is an important indicator too. Though past performance alone can not be
indicative of future performance, it is, frankly, the only quantitative way to judge how
good a fund is at present. Therefore, there is a need to correctly assess the past
performance of different mutual funds.
In a Mutual Fund managerial efficiency and investment skills and know-how
determine returns to the investors. Successful Mutual Funds are those wherein
marketing creates confidence among potential investors and strengthens their desire to
invest in the fund.
The fact that the Mutual Fund industry can be viewed as a ‘Service industry’ makes it
imperative to analyze the seven ‘Ps’ of marketing which form the pillars of modern day
marketing strategies.
R E C O M M E N D AT I O N :
A) THE GROUND RULES OF MUTUAL FUND INVESTING
The following are the 10 commandments that were to be followed till eternity. The
world of investments too has several ground rules meant for investors who are novices
in their own right and wish to enter the myriad world of investments. These come in
handy for there is every possibility of losing what one has if due care is not taken.
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Assess yourself: Self-assessment of one’s needs; expectations and risk profile is
of prime importance failing which; one will make more mistakes in putting
money in right places than otherwise. Irrational expectations will only bring
pain.
Try to understand where the money is going: One can lose substantially if one
picks the wrong kind of mutual fund. In order to avoid any confusion it is better
to go through the literature such as offer document and fact sheets that mutual
fund companies provide on their funds.
Don't rush in picking funds, think first: one first has to decide what he wants
the money for and it is this investment goal that should be the guiding light for
all investments done. It is thus important to know the risks associated with the
fund and align it with the quantum of risk one is willing to take. One should
take a look at the portfolio of the funds for the purpose. Excessive exposure to
any specific sector should be avoided, as it will only add to the risk of the entire
portfolio.
Invest. Don’t speculate: A common investor is limited in the degree of risk that
he is willing to take. It is thus of key importance that there is thought given to
the process of investment and to the time horizon of the intended investment.
One should abstain from speculating which in other words would mean getting
out of one fund and investing in another with the intention of making quick
money
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Don’t put all the eggs in one basket: This old age adage is of utmost
importance. No matter what the risk profile of a person is, it is always advisable
to diversify the risks associated. So putting one’s money in different asset classes
is generally the best option as it averages the risks in each category.
Be regular: Investing should be a habit and not an exercise undertaken at one’s
wishes, if one has to really benefit from them. As we said earlier, since it is
extremely difficult to know when to enter or exit the market, it is important to
beat the market by being systematic. The SIPs (Systematic Investment Plans)
offered by all funds helps in being systematic. All that one needs to do is to give
post-dated cheques to the fund and thereafter one will not be harried later.
Do your homework: It is important for all investors to research the avenues
available to them irrespective of the investor category they belong to. This is
important because an informed investor is in a better decision to make right
decisions. Having identified the risks associated with the investment is
important and so one should try to know all aspects associated with it. Asking
the intermediaries is one of the ways to take care of the problem.
Find the right funds: Finding funds that do not charge many fees is of
importance, as the fee charged ultimately goes from the pocket of the investor.
This is even more important for debt funds as the returns from these funds are
not much. Funds that charge more will reduce the yield to the investor. Finding
the right funds is important and one should also use these funds for tax
efficiency.
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Keep track of your investments: Finding the right fund is important but even
more important is to keep track of the way they are performing in the market. If
the market is beginning to enter a bearish phase, then investors of equity too will
benefit by switching to debt funds as the losses can be minimized. One can
always switch back to equity if the equity market starts to show some buoyancy.
Know when to sell your mutual funds: Knowing when to exit a fund too is of
utmost importance. One should book profits immediately when enough has
been earned i.e. the initial expectation from the fund has been met with. Other
factors like non-performance, hike in fee charged and change in any basic
attribute of the fund etc. are some of the reasons for to exit.
B) WHEN TO SAY GOODBYE TO YOUR MUTUAL FUND
While there are many investment consultants, some by profession, some self-professed,
who suggest on when to invest in a particular avenue, there is a certain paucity of
people who talk of when to exit. Here are some situations when the investor should
consider withdrawing their investments from the funds.
Fund is not performing
This reason for selling, although valid in certain conditions, is where most
investors make a mistake. When calculating performance one shouldn’t look at
too short a period and make a mistake by comparing apples to oranges. One
should compare the returns posted by his fund with that of the peers across
various horizons such as 1-year, 3-year and above. A short-term view can often
lead to committing hara-kiri, as it doesn’t present the full picture. If it has

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underperformed the average of its peers in all cases, then it sure is one of the
better reasons to exit from the fund.

A change in life stage
Investments are done with a certain objective in mind and life stages are often a
determining factor of what a person needs. A young man can afford to take more
risks than a person nearing his retirement can. In such cases, it pays to withdraw
money from the equity investments made earlier and put them in safer, more
conservative debt funds that offer stable returns without compromising on risk.
So a change in life stages would be one such reason to consider switching into a
fund that matches with one’s needs.

A major change in any basic attribute of the fund
When the fund changes any basic attribute as mentioned by it in its offer
documents, the investors have a choice of getting out of it. Even SEBI has
provided for an exit route being made available to the investors. Changes like a
change in Asset Management Company or in investment style of fund or change
of structure say from closed-end to open-end etc. are good enough reasons for an
investor to consider switching or exiting from it as they are certainly likely to
affect the fund in a major way.

Fund doesn’t comply with its objective
One of the important parameters in the selection of the fund is alignment of the
risk profiles of the investor and fund. The objective of the fund says a lot about
how the fund plans to invest. If the objective is not being complied with, it is one
of the exit points worth considering.
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The Fund’s Expense Ratio Rises
A small rise in an expense ratio is not a big deal, however a significant rise can
result in substantial reduction of yields and so it would be better to exit the fund.
In the case of bond funds or money market funds, it is highly unlikely that the
fund can increase its returns enough to justify an increase in the fund's expenses.
The Fund Manager has changed
A simple change of fund managers, in itself, is not enough reason to sell a fund
on a short-term basis. If it is a positively managed fund (index fund) then one
has no reason to worry. However, if it is an actively managed fund, then has to
keep the eyes open on the new manager.
Enough has been earned
However, nothing is as important as to rein the horses in time. The primary
principle behind safety of investment is to take risks that can be tolerated. The
principle also is specific on the expectations that the investor must have from
any investment. Just as it is important to set realistic targets that one hopes to
achieve from the investment, it is also important to exit when target as expected
has been achieved irrespective of the fact that it might be generating better
returns in a short-term. Waiting longer might not prove beneficial, as one need
not be lucky all the time. The above list is certainly not exhaustive and
individuals will have other better reasons to quit as well. It’s just that most don’t
know when to apply thought and so these would come in handy.
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REFERENCES:
M Jayadev “Mutual Fund Performance: An Analysis of Monthly Returns”
Finance India Vol. X, No. 1, (March 1996).
Susan Thomas “Performance evaluation of Indian Funds” (Edited volume ‘The
Future of Fund Management in India’ Editor Tushar Waghmare), Tata McGraw
Hills, New Delhi (1998).
Dr. S. Anand and Dr. V. Murugaiah “Analysis of componemts of Investment
Performance – An Empirical Study of Mutual Fund in India”
S. A. Dave “The Challenges of the Mutual Fund Industry” (Edited volume ‘The
Future of Fund Management in India’ Editor Tushar Waghmare), Tata McGraw
Hills, New Delhi (1998).
Anjan Chakrabarti and Harsha Rungta “Mutual Funds Industry in India: An In-
depth Look into the Problems of Credibility, Risk and Brand” The ICFAI Journal
of Applied Finance, Volume 6, No. 2.
Vivek Kulkarni “Fund Evaluation at CRISIL” (Edited volume ‘The Future of
Fund Management in India’ Editor Tushar Waghmare), Tata McGraw Hills, New
Delhi(1998).
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Amitab Gupta “Mutual Funds in India: A study of Investment Management”
Finance India Vol. XV No. 2 (June 2001).
M S Narasimhan and S Vijayalakshmi “Performance Analysis of Mutual Funds
in India” Finance India Vol XV No. 1, (March 2001).
Prof. M S Turan, Dr. B S Bodla and Sh. Sushil Kumar Mehta “Performance
Evaluation of Listed Schemes of Mutual Funds” Management Researcher, Vol.
VIII, No. 1 & 2 (July-December 2001).
Dr. S. Narayan Rao (IIT, Mumbai) and M Ravindran (Tata Power) “Performance
Evaluation of Indian Mutual Funds”.
Seth C. Anderson and Parvez Ahmed “Mutual Funds Fifty years of research
findings” University of Florida. (March 2005).
Graciela Kaminsky, Richard Lyons and Sergio Schmukler “Managers, Investors,
and Crises – Mutual Fund Strategies in Emerging Markets” The World Bank
(July2000).
www.karvymfs.com
www.mutualfundsindia.com
www.amfiindia.com
www.indiacapital.com/mfunds_m.htm
www.mutualfundinsight.com
www.valueresearchonline.com
www.mutualfundstategies.com
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GLOSSARY OF MUTUAL FUNDS
Account Statement - A physical document, similar to a bank account statement,
representing the mutual fund units owned is issued to the unit holder every time
he/she carries out a transaction.
Annual Report - Unabridged financial results that comprise historical per unit statistics
and complete portfolio of schemes of a mutual fund for a certain period. It is sent to
unit holders once in a year.
Appreciation - An increase in an investment’s value.
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Asset Allocation - The process of diversifying investments among different types of
assets like stocks, bonds and cash in order to optimize risk / return tradeoff based on a
person’s financial situation and goals.
Asset Class - Different types of investments such as stocks, bonds, real estate and cash.
Asset Management Company - A firm that invests the pooled funds of retail investors
in securities in line with the stated investment objectives. For a fee, the investment
company provides more diversification, liquidity, and professional management service
than is normally available to individual investors.
Asset-Backed Security - A debt instrument backed by loan paper or accounts receivable
from banks, companies or other providers of credit.
Assets - An item of value owned by an individual or an organization. It could be stocks,
cash, house or a car.
Automatic Investment Plan - Periodic investment of a fixed amount by a unitholder,
either directly from his bank account or by issuing post-dated cheques, in his mutual
fund account. It allows the investor to benefit from rupee-cost averaging.
Automatic Withdrawal Plan - Allows an investor to receive periodic payments of fixed
amount or units from his investment in a mutual fund scheme. Retirees who want a
regular income supplement often choose this.
Average Portfolio Maturity - The average maturity of all the bonds in a bond fund’s
portfolio.
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Back-End/Redemption/Exit Load - One of two possible sales charge imposed by funds
that charge fees. Redemption load is a charge an investor pays when units are
redeemed or sold back to the fund. It sometimes depends on how long the investment
is held -- generally the longer the time period, the smaller the charge.
Balanced/Hybrid Scheme - A mutual fund scheme with an investment objective of both
long-term growth and Income, through investment in stocks and bonds. Typically, the
stock-bond ratio ranges around 60%-40% in an effort to obtain the highest returns
consistent with a low risk strategy.
Basis Point (BP) - The smallest measure used in quoting yields on fixed income
securities. One basis point is one percent of one percent, or 0.01%.
Bear Market - A prolonged period of falling securities prices in a stock market.
Benchmark - A standard used for comparison. It usually provides a point of reference
for evaluating a fund's performance. The common benchmark for equity-oriented funds
is the BSE 200 index or the BSE Sensex.
Bond - A debt security, or an IOU, issued by a company or government agency. A bond
investor lends money to the issuer and, in exchange, the issuer promises to repay the
loan amount on a specified maturity date; the issuer usually pays the bondholder
periodic interest payments over the period of the loan.
Bond Scheme - A scheme that invests primarily in bonds with the general emphasis on
income over growth.
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Bottom-Up - An investment strategy that first seeks individual companies with
attractive investment potential, then considers the economic and industry trends
affecting those companies.
Bull Market - A prolonged rise in the price of stocks, bonds or commodities
characterized by high trading volumes.
Call Risk - The risk that bonds will be redeemed (or "called") before maturity. This
possibility increases during periods of falling interest rates.
Capital Appreciation - An increase in the value of an investment, measured by the
increase in a fund unit's value from the time of purchase to the time of redemption.
Capital Gain - The amount by which an investment’s selling price exceeds its purchase
price.
Capital Market - A market where debt or equity securities are traded.
Contingent Deferred Sales Charge (CDSC) - A type of back-end sales load charged
when shares are redeemed within a specific period following their purchase. Usually
assessed on a sliding scale, these charges reduce, the longer the units are held.
Closed-End Scheme - A mutual fund scheme that offer a limited number of units
which have a lock-in period normally for three to five years. ELSS schemes are closed-
ended schemes. The units of closed-end funds are often listed on one of the major stock
exchanges and traded like securities at prices which may be higher or lower than its net
asset value.
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Commercial Paper - Debt instruments issued by corporations to meet their short-term
financing needs. Such instruments are unsecured and have maturities ranging from 15
to 365 days.
Commission - A fee charged by a broker or distributor for his/her service in facilitating
a transaction.
Compound Interest - Interest earned not only on the initially invested principal but
also on accumulated interest during the period.
Coupon - Interest rate on a debt security that the issuer promises to pay to the holder
until maturity. Usually expressed as a percentage of the face value of the security.
Credit Rating - A measure of a bond issuer's creditworthiness or the ability to repay the
loan as rated by an independent rating agency, such as CRISIL, ICRA and CARE.
Credit Risk - The possibility that a bond issuer will default, and fail to repay principal
or interest as promised. Also known as "default risk".
Cumulative Quantitative Discount (CQD) - Cumulative quantitative discount (CQD)
is discount on sales load to investors on increasing purchase of units.
Currency Risk - The possibility that fluctuating currency exchange rates will affect the
rupee value of an investment.
Custodian - The organization (usually a bank) that keeps and safeguards the custody of
securities and other assets of a fund.
Depreciation - A decline in an investment's value.
Distribution - The payment of dividends to unit holders by a mutual fund.
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Diversification - The strategy of spreading investments among different securities to
reduce risk. By nature, mutual funds are a diversified investment.
Dividend - Profits, stock dividends or interest income which fund’s distribute to its unit
holders.
Dividend Reinvestment - A unit holder service that allows dividend distributions to be
reinvested automatically to purchase more fund units.
Equity Schemes - A scheme that invests primarily in stocks while seeking to provide
relatively high long-term growth of capital.
Ex-Dividend Date - The date following the record date for a scheme. When a fund's net
asset value reduces by an amount equal to a dividend distribution.
Expense Ratio - A fund's operating expenses, expressed as a percentage of its average
net assets.
Family Of Schemes - A set of schemes with different investment objectives from a
single asset management company usually allowing investors to switch their
investments from one scheme to another at a no charge or a nominal charge.
Fixed Income Security - A security that pays a fixed rate of interest such as a bond but
do not offer an investor much potential for growth.
Front-End Load - A one-time charge that an investor pays at the time of buying units of
a scheme.
Fully Invested - The investment of nearly all available assets in securities as per the
stated objective of the scheme and having no cash or cash equivalents in one’s portfolio.
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Fund Manager - The individual responsible for making portfolio decisions for a mutual
fund.
Growth - An investment objective of equity funds which seek to provide capital gains,
rather than dividend income.
Growth Investing - An investment style that seeks stocks with the belief they will go
up in price, regardless of the stock's current price relative to its underlying value. Often
discussed in contrast to value investing.
Historical Yield - Yield provided by a scheme, typically a money market fund, over a
specific time period.
Inception Date - The date when a scheme’s initial offering period ends and the
scheme’s formation takes place.
Income /Debt Scheme - A scheme that invests primarily in fixed income securities.
Typically, income schemes seek to provide current income rather than growth of
capital.
Index - A benchmark against which the performance of a scheme is measured. Usually,
equity funds use BSE 30 or BSE 200 as the benchmark. For fixed-income funds it is a
bond index. The benchmark index must consist of securities similar to which the
scheme invests in.
Index Fund - A fund that tries to mirror the performance of an index by investing in
securities making up that index. (Note: it is not possible for investors to actually invest
in the actual index, such as the BSE 30).
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Inflation Risk - The possibility that the value of assets or income will be eroded by
inflation affecting the purchasing power of a currency. Often mentioned in relation to
fixed income funds as while they may minimize the possibility of losing principal, they
expose an investor to inflation risk.
Initial Public Offer (IPO) - The first sale of units of a scheme by a mutual fund to the
public. Usually, for a fixed time period. Also called NFO (New Fund Offering).
Investment Grade - High quality bonds that are rated AAA or higher by a rating
agency. Investment grade bonds are considered safe. However, the higher the bond's
rating, the lower the interest it offers.
Investment Objective - A scheme’s investment goal. Say, a growth scheme typically has
an investment objective of providing long-term growth of capital.
Load - A one-time sales charge paid by an investor while buying or selling units of a
scheme. Typically, there are two types of loads front-end, charged at the time of
purchase and back-end, charged at the time of redemption.
Liquidity - The ease with which an investment can be converted into cash or cash
equivalents. Mutual fund units are generally considered highly liquid investments as
they can be sold on any business day at their current net asset value.
Management Fee - The amount a scheme pays to its asset management company for its
services. Typically, a certain percentage of assets under management. A fund's
management fee is listed in its offer document.
Market Timing - Attempting to time the purchase and sale of securities or mutual fund
units to coincide with market conditions.

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Maturity Date - The date on which the principal amount of a bond is to be paid in full.
Minimum Purchase - The smallest investment amount a scheme will accept to open a
new unitholder account.
Money Market Fund - A fund that invests in the short-term, high-grade securities sold
in the money market including government securities, treasury bills, certificates of
deposit, and commercial paper.
Mutual Fund - An investment company through which an investor can pool his money
with other investors who have a similar objective. Professional investment managers,
then invest the pool in securities which in their judgement will help investors achieve
their objective. Mutual funds offer the benefits of portfolio diversification (which
provides greater safety and reduced volatility), professional management, liquidity and
convenience.
Net Asset Value (NAV) - The market value of a mutual fund unit. It is calculated daily
by taking the funds total assets, securities, cash and any accrued earnings, deducting
liabilities, and dividing the remainder by the number of units outstanding.
Net Assets - The net worth of a fund.
No Load Fund - A fund that sells its units to investors without a sales load/charge.
Offer Document / Prospectus - A legal document that describes a mutual fund scheme.
It contains information required by the Securities and Exchange Board of India
explaining the offer, including the terms, issuer, objectives, historical financial
statements, and other information that could help an individual decide whether the
investment is appropriate for him.

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Open-Ended Scheme - A scheme where investors can buy and redeem their units on
any business day. Its units are not listed on any stock exchange but are bought from and
sold to the mutual fund.
Operating Expenses - The day-today costs a mutual fund incurs in conducting
business, such as for maintaining offices, staff, and equipment. These expenses are paid
from the fund's assets before any earnings are distributed.
Performance - A measure of how well a fund is doing. Typically, mutual fund
performance measures are yield (for dividends) and total return (which measures
dividends plus changes in net asset value) and increase in the Net Asset Value (NAV).
Portfolio - A collection of securities owned by a mutual fund. A fund's portfolio may
include a combination of stocks, bonds, and money market securities.
Portfolio Manager - The individual responsible for managing a mutual fund's
portfolio.
Portfolio Turnover - The rate of trading activity in a fund's portfolio of investments. In
other words, how often securities are bought and sold.
Principal - The original amount initially invested, exclusive of earnings.
Public Offer Price - The price at which an investor can buy units of a mutual fund
scheme. It includes the current net asset value plus any sales load.
Real Return - The rate return earned on an investment after adjusting for the rate of
inflation.
Mutual Fund 108
Record Date - The date on which a unitholder must officially own a scheme's units in
order to receive declared dividend.
Redeem - To cash in units by selling them back to the mutual fund.
Redemption Price - The price at which a mutual fund’s units are redeemed, or bought
back, by the fund. It is usually the current net asset value per unit less exit load, if any.
Reinstatement Privilege - A facility which allows unit holders who have redeemed
units, and then wish to reinvest, to reinvest without paying the sales load. There is
generally a 30-day time limit for this service.
Rollover - A movement of funds from one investment to another, often similar,
investment. Typically used when securities are maturing.
Rupee Cost Averaging - An investment strategy that involves investing a fixed amount
in a scheme at regular intervals - say, monthly or quarterly. As a result, more fund units
are bought when prices are low than at high prices, usually bringing down an investor's
average cost per share over time.
Sector Fund - A fund that invests primarily in securities of companies engaged in a
specific industry. Sector funds entail more risk, but may offer greater potential returns
than funds that diversify their portfolios.
Settlement Date - The date by which a transaction must be settled, that is, to make the
payment of funds and the delivery of securities.
Standard Deviation - A measure of the degree to which a fund's return varies from the
average of the scheme’s own return.
Mutual Fund 109
Stock Fund - A fund that invests primarily in stocks.
Switching - The movement of investment from one scheme to another usually within
the family of schemes. An investor may switch schemes because of market conditions.
Top Down - An investment method that first defines major economic and industry
trends, and then identifies specific companies that are likely to benefit from those
trends.
Total Return - A fund's performance that takes into account: income from dividends
and unit price appreciation/depreciation over a time period.
Transfer - The process of changing ownership of a unitholder account within the same
scheme.
Transfer Agent - A firm employed by a mutual fund to maintain unitholder records,
including purchases, sales, and account balances.
Treasury Bill (T-bill) - A debt security issued by the Indian government, having a
maturity of less than a year.
Turnover Rate - Based on the corpus, it is the number of times at which the fund buys
and sells securities each year.
Unit holder - An investor, owning units of a mutual fund.
Unrealized Gain Or Loss - Increase or decrease in the prices of securities held by the
fund.
Value Investing - The investment approach which favors buying under priced stocks
that have the potential to perform well and increase in price.
Mutual Fund 110
Volatility - The rate by which the price of a security fluctuates in changing market
conditions.
Withdrawal Plan - A plan in which a mutual fund investor receives regular payments
from the fund by systematically liquidating shares.
Year To Date (YTD) - A period in a calendar year starting January 1 of that year and
ending on that date.
Yield - The annual rate of return on an investment usually expressed as a percentage.
Yield Curve - A graph depicting yield vis-à-vis maturity. If short-term rates are lower
than long-term rates, it is a positive yield curve, if short-term rates are higher; it is a
negative or inverted yield curve. If there isn’t much difference, it is a flat yield curve.
Yield To Maturity (YTM) - The yield earned by a bond if held to maturity.
Zero Coupon Bond - A bond issued at a discount which accrues interest that is paid in
full at maturity.

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Mutual Fund 1

Depository Participants, Distribution of financial products like mutual funds, bonds,

fixed deposit, Merchant Banking & Corporate Finance, Insurance Broking,

Commodities Broking, Personal Finance Advisory Services, placement of equity, IPOs,

technology, operations, and more importantly, in research of various industrial

Mr. C Parthasarthy, Chairman & Managing Director

He is the leader in the financial service industry in India and is

responsible for building Karvy as one of the India’s truly Integrated

Financial Services Provider.

Mr. M Yugandhar, Managing Director

Founder member of the Karvy Consultants Ltd. and has a varied

knowledge in the field of financial services spanning over 20 years.

Mr. M S Ramakrishna, Executive Director

Founder member of KARVY Consultants Limited is the orchestrator of

technology initiatives such as the call centre in the service of the

Among the top 5 stock brokers in India (4% of NSE volumes).

India's No. 1 Registrar & Securities Transfer Agents.

Among the top 3 Depository Participants.

Largest Network of Branches & Business Associates.

ISO 9002 certified operations by DNV.

Among top 10 Investment bankers.

Largest Distributor of Financial Products.

Adjudged as one of the top 50 IT uses in India by MIS Asia.

Full fledged IT driven operations.

ABOUT MUTUAL FUNDS:

Mutual Funds constitute a part of a wide spectrum of financial services involving

management of funds by investing in various financial instruments on behalf of various

individuals among others. A mutual fund is a single large professionally managed

same investment objective. The money raised is invested in a diversified portfolio of

stocks and bonds.

Fig 1: Mutual Fund Flow Chart

of money is invested. This investment generates returns in the form of dividend or

capital appreciation, which in turn is passed on to the investors.

ADVANTAGES OF MUTUAL FUNDS

Some advantages of mutual funds are:-

rise in the value of other companies might nullify this loss.

professional management services. Mutual funds are managed by highly skilled

Mutual funds simplify the process of record-keeping. Bookkeeping

of the investments is handled by the fund.

for public information.

Though risk is more, returns are also very high.

Low initial investment

can start investing with a mere amount of Rs 500.

according to the convenience of the investor.

schemes of mutual funds are 100% tax free.

long-term or short-term growth, liquidity, capital gains, tax benefits etc.

Funds can be purchased directly by an investor or through an authorized

broker/agent, with a low (or no) sales charge.

Retirement and pension benefits are another attractive feature of investing in

DISADVANTAGES OF INVESTING IN MUTUAL FUNDS

they have not sold any of their mutual fund shares

depending on its maturity period.

Open-ended Fund/ Scheme:

declared on a daily basis. The key feature of open-end schemes is liquidity.

Close-ended Fund/ Scheme:

SCHEMES ACCORDING TO INVESTMENT OBJECTIVE:

considering its investment objective. Such schemes may be open-ended or close-ended

schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme:

appreciation over a period of time.

Income / Debt Oriented Scheme:

schemes generally invest in fixed income securities such as bonds, corporate

in equity markets. However, opportunities of capital appreciation are also limited in