Srinivas Akula College of Management Research & Engineering, Pune-52 1

A
PROJECT
ON
“CREATI NG AWARE NESS ABOUT MUTUAL FU NDS
AND
UNIT LI NK I NSURAN CE PLA N
AS AN IN VE STMEN TO PTIO N & A GATE WAY TO
OP TIMIZE YOUR EAR NIN GS”
FOR
KAR VY STO CK BR OKING LTD.
IN PARTIAL FULFILLMENT
OF
MASTER IN BUSINESS ADMINISTRATION (MBA)
-<< SUBMITTED BY >>-

SRINI VAS AKULA
MBA
CO LL EGE OF MA NAGEM ENT RES EARC H &
ENG IN EERI NG
(CMRE), PUNE-52
(2005-2007)
SRINIVAS AKULA 1
College of Management Research & Engineering, Pune-52
ACKNOWLDGEMENT
I wish to express my Thankful to one and all who helped me while I

complete this project as a part of my Master Business Administration (MBA)
course.
It was a great learning experience and I came to know about the various
sides of the finance business and the marketing also.
I wish to express my acknowledgment to Mr. Ravi Gaikwad for giving me a
good opportunity to fully explore in his company. A successful project can never be
prepared by a singular effort of person, It’s a group efforts.
I wish to express my sincere Thankful to our Director Mr.Anshul Sharma
for allowing me to carry on this project.
Finally, I would like to thank Prof. Shusmita Nande and co-ordinator
Mr.Chanrdashaker Ranade for always being there when I needed them during the
project.
SRINIVAS AKULA
2 SRINIVAS AKULA
INDEX
S.NO CONTENTS PAGE NO
1 EXCUTIVE SUMMARY 4
2 COMPANY PROFILE 7
3 OBJECTIVE & SCOPE 10
4 INTRODUTION 11
5 WHAT IS MUTUAL FUND 14
6 ORGANISATION OF A MUTUAL FUND 16
7 MUTUAL FUND INDUSRIES IN INDIA 18
8 TYPES OF MUTUAL FUND SCHEMES 23
9 MUTUAL FUND COMPANIES 28
10 ADVANTAGES OF MUTUAL FUNDS 38
11 DISADVANTAGES OF MUTUAL FUNDS 41
12 PROJECT PROFILE 42
13 RESEARCH METHODOLOGY 45
14 OPERATIONS AND DATA COLLECTION 47
15 RISK MANAGEMENT AND THE MUTUAL FUND 51
16 PERFOMENCE OF MUTUAL FUNDS 55
17 SUGGESTION 61
18 UNIT LINK INSURANCE POLICY(ULIP) 65
19 ULIP DOES THE MARRIAGE WORK? 68
20 AWARENESS OF THE RISKIN ULIP 72
21 CONCLUSION 73
22 PERSONAL INFORMATION 75
23 BIBLIOGRAPHY 76
SRINIVAS AKULA 3
EXCUTIVE SUMMARY
4 SRINIVAS AKULA
EXCUTIVE SUMMARY
Today an investor is interested in tracking the value of his investments, whether he

invests directly in the market or indirectly through Mutual Funds. This dynamic
change has taken place because of Liberalization, Privatization and globalization
and the growing competition in the investments opportunity available he would
have to make guided and rational decisions on whether he gets an acceptable
return on his investments in the funds selected by him, or if he needs to switch to
another fund.
The basis of appropriate In order to achieve such an end the investor has to
understand preference measurement for the fund, and acquire the basic
knowledge of the different measures of evaluating the performance of the fund.
Only then would he be in a position to judge correctly whether his fund is
performing well or not, and make the right decision.
This project t is undertaken to help the investors in tracking the performance of

their investments in Mutual Funds and has been carried out with the objective of
giving and understanding of Mutual Fund as a financial product, the meaning,
importance, working etc. of Mutual Fund, the current position of Mutual Fund
Industry in India, the number of competitors and other Mutual Fund position.
The methodology for carrying out the project was very simple that is through
secondary data obtained through various mediums like fact sheet of the funds, the
Internet, Business magazines, Newspaper, etc. the analysis of Principal PNB
Funds has been done with respect to its various competitors on the basis of its
ranking system mentioned in the ‘Analysis and Findings’ part, which is formulated
keeping the benefits and convenience to the investors in mind. The funds have
been analyzed under various types such as Equity Funds, Income Funds and
Balanced Funds.
It is of paramount importance to keep in mind the risk involved while investment as

bearing or rather being able to bear risks is as important as analyzing the profit of
SRINIVAS AKULA 5
the investment. Investments that have the greatest return potential tend to give the
greatest risk potential.
This project represents a information regarding company’s brand
awareness and the customer perceptions about the various services which the
organization provides. The main objective of the project is to understand the
customer investment preferences more effectively and efficiently. For execution of
the project methodology adopted is the collection of data through questionnaire,
processing and analyzing the data.
The natures of respondent, which are selected, are the professionals and
having a handsome salary. The area of the project work is pune city and its location
where the survey has been undertaken those are Hinjewadi IT Park, Magarpatta IT
Park, WNS, Baner Symphony Soft Ware, Zenser IT Park, and Senapati Bapat
Road. Karvy is the only personalized service provider offering a range of
investment services depending on the customer needs and wants.
The idea behind the project is to find the customer awareness and
perception regarding mutual funds that are available in market.
6 SRINIVAS AKULA
COMPANY PROFILE
COMPANY PROFILE
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, comprising the who is who of Corporate India. KARVY covers the
entire spectrum of financial services such as Stock broking, Depository
Participants, Distribution of financial products - mutual funds, bonds, fixed deposit,
SRINIVAS AKULA 7
equities, Insurance Broking, Commodities Broking, Personal Finance Advisory
Services, Merchant Banking & Corporate Finance, placement of equity, IPOs,
DEMAT services, PAN card application, among others. Karvy has a professional
management team 6500 employees and ranks among the best in technology,
operations and research of various industrial segments. All this complimented with
a nationwide network of 500 Branches, spanned across 350 cities and growing.
The KARVY Group main Branch in Andhra pradesh in Hyderabad,
Mr.C.Parthasarathy is a chairman of KARVY group.
The birth of Karvy was on a modest scale in 1981. It began with the vision and
enterprise of a small group of practicing Chartered Accountants who founded the
flagship company …Karvy Consultants Limited. They started with consulting and
financial accounting automation, and carved inroads into the field of registry and
share accounting by 1985. Since then, they have utilized their experience and
superlative expertise to go from strength to strength…to better their services, to
provide new ones, to innovate, diversify and in the process, evolved Karvy as one
of India’s premier integrated financial service enterprise.
Thus over the last more than two decades Karvy has traveled the success route,
towards building a reputation as an integrated financial services provider, offering a
wide spectrum of services. And its employees have made this journey by taking the
route of quality service, path breaking innovations in service, versatility in service
and finally…totality in service.
Karvy’s highly qualified manpower, cutting-edge technology, comprehensive

infrastructure and total customer-focus has secured for it the position of an
emerging financial services giant enjoying the confidence and support of an
enviable clientele across diverse fields in the financial world.
On market trends, investment options, opinions etc. Thus empowering the

investor to base every financial move on rational thought and prudent analysis and
embark on the path to wealth creation. Their monthly magazine, Finapolis,
provides up-dated market information.
8 SRINIVAS AKULA
The major achievements of Karvy are:
1. Ranking among the top 3 stock broking firms in India

2. India's No. 1 Registrar & Securities Transfer Agents
3. Among the to top 3 Depository Participants
4. Largest Network of Branches & Business Associates
5. First ISO- 9002 certified operations by DNV
6. Among top 10 Investment bankers
7. Largest Distributor of Financial Products
8. Adjudged as one of the top 50 IT uses in India by MIS Asia
9. Full Fledged IT driven operations
10.The most admired and preferred financial advisor
Basic Strategy of Karvy

1. Focus on retail segment.
2. Build a strong pan-India network managed by experienced
Professionals build presence across metros & class A/B town.
3. Build full-service capabilities leveraging the network-offer the
Entire gamut of financial services, backed by strong transaction
Processing and high volume handling capability.
4. Established a high degree of customer ownership and top-of-mind recall
in the local markets- ensures steady customer traffic and repeat
business.
5. Build a trusted brand; ensure high visibility.
OBJECTIVES AND SCOPE
The project was conducted for the following objective: -
• To gain an understanding and knowledge of Mutual Funds as an

Investment Tool.
SRINIVAS AKULA 9
• To study the product profile of the company.
• To evaluate the performance of selected schemes of Mutual Fund of
different companies.
• To compare the Mutual fund schemes on different parameters such as
Annualized Returns, Standard Deviation and Sharpe Ratio.
• To analyze the performance factor of the Fund based on different drivers
associated with the specific fund.
SCOPE
The Indian securities market is the scope of this project and funds floated therein
.The whole project was based with the agenda to analyze existing mutual funds
and determine their performance factors .In depth analysis of individual fund is not
the scope but on the other hand Performance of funds and finding their reasons as
in general is the primary motive behind this project
10 SRINIVAS AKULA
INTRODUCTION
INTRODUCTION
Mutual funds are being perceived as a complete service provider for the investing
public. The stature of mutual funds has been growing among the professional
investors in recent times unlike earlier times when mutual funds were associated
with risk. Today mutual funds are considered to be vehicles for risk control and the
SRINIVAS AKULA 11
entire focus has been on this theme. Also, as regards risk, the investing community
has begun to realize that even debt carries nominal risk. Specialization of money
management, which has an impact on all aspects of life, is being instilled and is
beginning to dawn on investors. Mutual funds are no longer a matter of choice but
are rather imperative to the investment decision. Mutual funds provide critical
advantages such as risk control-by which safety is ensured, convenience-wherein
professional investment management is facilitated, flexibility-by which switch over
from debt to equity and vice-versa is facilitated and transparency-whereby
investors know on a day to day basis what their investment is worth.
The response has been stronger from the generally uninformed investing
population. As ironical again it has been found that for financial advisors, brokers,
chartered accountants etc, the awareness level was low even in the case of this
community which one would expect to be enlightened to these facts.
Expectation management is one of the most crucial aspects of running a mutual

fund. At present, the mutual fund IPO segment is witnessing the same frenzy that
the IPO market was witnessing in the early to mid-nineties. However, the potential
investor should be fully aware that there exists no common cure for all ailments.
Mutual funds are a vehicle for managing the investment goals of an individual
provided he/she does his/her homework as to identifying the needs and goals that
are to be attained. The philosophy to work on is that the investor should buy rather
than the funds sell.
Mutual fund-Concept
Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is then invested
in capital market instruments such as shares, debentures and other
securities. The income earned through these investments and the capital
appreciation realized are shared by its unit holders in proportion to the
12 SRINIVAS AKULA
number of units owned by them. Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low
cost. The flow chart below describes broadly the working of a mutual fund:
SRINIVAS AKULA 13
WHAT IS MUTUAL FUND?
What is a Mutual Fund…?

A Mutual Fund is a trust that pool of the savings of a number of investors who
share a common financial goal. The money thus collected is invested by the fund
manager in different types of securities depend upon the objective of the scheme.
These could range from shares to the debentures to money market instruments.
The income earned through these investments and the capital appreciation
realized by the scheme is shared by its unit holders in proportion to the number of
units owned by them. Thus a mutual fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified, professionally
managed portfolio at a relatively low cost. The small savings of all the investors are
14 SRINIVAS AKULA
put together to increase the buying power and hire a professional manager to
invest and monitor the money. Anybody with an investible surplus of as a little as a
few thousand rupees can invest in mutual fund. Each Mutual Fund scheme has a
defined investment objective and strategy.
Characteristics of Mutual Funds

 A Mutual Fund actually belongs to the investors who have pool their funds.
The mutual fund is in the hands of the investors.
 Investment professionals and other service providers, who earn a fee for
their service from the fund, manage a mutual fund.
 The pool of fund is invested in a portfolio of marketing investments. The
value of the portfolio is updated every day.
 The investor’s shares in the fund is denominated by “units” . The value of
the unit changes with change in the portfolio value, every day. The value of
one unit of investment is called as the net asset value (NAV).
 The investment portfolio of the mutual fund is created according to the
stated investment objectives of the fund.
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the organisation
al set up of a mutual fund:
SRINIVAS AKULA 15
Legislation, the Unit Trust of India Act, 1963. In 1987 public sector banks and
insurance companies were permitted to set up mutual funds and accordingly since
1987, 6 public sector banks have set up mutual funds. Also the two Insurance
companies LIC and GIC established mutual funds. Securities Exchange Board of
India (SEBI) formulated the Mutual Fund (Regulation) 1993, which for the first time
established a comprehensive regulatory framework for the mutual fund industry.
Since then several mutual funds have been set up by the private and joint sectors.
16 SRINIVAS AKULA
MUTUAL FUND INDUSTRIES IN
INDIA
Mutual Funds Industry in India
The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. The initiative of the Government of India and
The mutual fund industry in India began with the setting up of the Unit Trust In India
(UTI) in 1964 by the Government of India. During the last 36 years, UTI has grown
SRINIVAS AKULA 17
to be a dominant player in the industry with assets of over Rs. 76,547 Crores as of
March 31, 2000. A special Reserve Bank of India governs the UTI. The history of
mutual funds can be divided into four distinct phases.
First Phase - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from
the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched by
UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 corers of assets
under management.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by could
bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund
(Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47, 004 as
assets under management.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into
being, under which all mutual funds, except UTI were to be registered and
18 SRINIVAS AKULA
governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton)
was the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

comprehensive and revised Mutual Fund Regulations in 1996. The industry now
functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual
fund houses went on increasing, with many foreign mutual funds setting up funds
in India and also the industry has witnessed several mergers and acquisitions. As
at the end of January 2003, there were 33 mutual funds with total assets of Rs.
1,21, 805 corers. The Unit Trust of India with Rs.44, 541 corers of assets under
management was way ahead of other mutual funds.
Fourth Phase - Since February 2003
This phase had bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with AUM of
Rs.29, 835 corers (as on January 2003). The Specified Undertaking of Unit Trust of
India, functioning under an administrator and under the rules framed by
Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It
is registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI, which had in March 2000 more than Rs.76, 000
corers of AUM, and with the setting up of a UTI Mutual Fund, conforming to the
SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current
phase of consolidation and growth. As at the end of September 2004, there were
29 funds, which manage assets of Rs.153108 corers under 421 schemes.
The second is the UTI Mutual Fund Ltd., sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations. With
the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76000
Crores of assets under management and with the setting up of a UTI Mutual Fund,
conforming to the SEBI Mutual Fund Regulations and with recent mergers taking
SRINIVAS AKULA 19
place among different private sector funds, the mutual fund industry has entered its
current phase of consolidation and growth. As at the end of September, 2004,
there were 29 funds, which manage assets of Rs.153108 Crores under 421
schemes.
The Graph indicates the growth of assets over the years.
GROWTH IN ASSETS UNDER MANAGEMENT
20 SRINIVAS AKULA
Note: Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified
Undertaking of the Unit Trust of India Effective from February 2003. The Assets
under management of the Specified Undertaking of the Unit Trust of India has
therefore been excluded from the total assets of the industry as a whole from
February 2003 on wards.
TYPES OF MUTUAL FUND

SCHEMES
SRINIVAS AKULA 21
TYPES OF MUTUAL FUND SCHEMES
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. The table below gives an
overview into the existing types of schemes in the Industry.
TYPES OF MUTUAL FUND SCHEMES
 By Structure
 Open - End Schemes
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell units at
net asset value (NAV) related prices. The key feature of open-end scheme is
liquidity.
 Close - Ended Schemes
A close-end fund has a stipulated maturity period which generally ranging from
3 to 15 years. The fund open for subscription only during a specified period.
Investors can invest in the scheme at the time of initial public issue and
thereafter they can buy and sell the units of the scheme on the stock
exchanges where they 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
investors.
22 SRINIVAS AKULA
 Interval Schemes
Interval funds combine the features of open-ended and close-ended schemes.

They are open for sale or redemption during pre-determined intervals at NAV
related prices.
 By Investment Objective
 Growth Schemes
The aim of growth fund is to provide capital appreciation over the medium to
long term. Such schemes normally invest a majority of their corpus in equities. It
has been provided that returns from stock, have out performed most other kind of
investments held over the long term outlook seeing growth over a period of time.
 Income Schemes
The aim of income fund is to provide regular and steady income to

investors. Such schemes generally invest in fixed income securities
such as Bonds, Corporate Debentures and Government securities.
Income funds are ideal for capital stability and regular income.
 Balanced Schemes
The aim of balanced fund is to provide both growth and regular income.
Such schemes periodically distribute a part of their earnings and invest
both equities and fixed income securities in the proportion indicated in
their offer documents. Ina rising stock market, the NAV of these scheme
may not normally keep pace, or fall equally when the market falls.
These are ideal for investors looking for a combination of income and
moderate growth.
SRINIVAS AKULA 23
 Money Market Schemes
The aim of money market fund is to provide easy liquidity, preservation

of capital and moderate income. These schemes generally invest in
safer short-term instruments such as treasury bills, certificate of
deposits, commercial papers and inter bank call money. Returns on this
scheme may fluctuate depending upon the interest rate prevailing in the
market. These are ideal for Corporate and individual investors as a
means to park their surplus funds for short period.
 Other Schemes
 Tax Saving Schemes
These schemes offer tax rebate to the investors under specific

provisions of the Indian income tax laws as the Government offers tax
incentives for the investment in specified avenue. Investment made in
Equity linked Savings schemes (ELLS) and pension schemes are
allowed as deduction under section 88 of the Income Tax Act, 1961. The
Act also provides opportunities to investors to save capital gains under
section 54EA and 54EB by investing in Mutual Funds.
 Special Schemes
 Index Schemes
Index funds attempts to replicate the performance of a particular

index such as BSE sensex or the NSE 50.
24 SRINIVAS AKULA
 Sector Specific Schemes
Sectoral funds are those, which invest exclusively in a specific

sector. This could be an Industry or a group of industries or
various segments such as ‘A’ Group shares or initial public
offerings.
 Industry specific schemes

Industry specific Schemes invest in only in the offer document.
The investment of these funds is limited to specific industries like
InfoTech, FMCG, pharmaceuticals etc.
SRINIVAS AKULA 25
MUTUAL FUND COMPANIES
Mutual Fund companies

The concept of mutual funds in India dates back to the year 1963. The era between
1963 and 1987 marked the existence of only one mutual fund Company in India
with Rs. 67bn assets under management (AUM), by the end of its monopoly era, the
Unit Trust of India (UTI). By the end of the 80s decade, few other mutual fund
companies in India took their position in mutual fund market.
26 SRINIVAS AKULA
The new entries of mutual fund companies in India were SBI Mutual Fund, Can
bank Mutual Fund, Punjab National Bank Mutual Fund, Indian Bank Mutual Fund,
Bank of India Mutual Fund.
The succeeding decade showed a new horizon in Indian mutual fund industry. By
the end of 1993, the total AUM of the industry was Rs. 470.04 bn. The private
sector funds started penetrating the fund families. In the same year the first Mutual
Fund Regulations came into existence with re-registering all mutual funds except
UTI. The regulations were further given a revised shape in 1996.
Kothari Pioneer was the first private sector mutual fund company in India, which
has now merged with Franklin Templeton. Just after ten years with private sector
players’ penetration, the total assets rose up to Rs. 1218.05 bn. Today there are 33
mutual fund companies in India.
Major Mutual Fund Companies: -

Franklin Templeton India Mutual Fund
HDFC Mutual Fund
Reliance Mutual Fund
State Bank of India Mutual Fund
Tata Mutual Fund
Unit Trust of India Mutual Fund
Bank of Baroda Mutual Fund (BOB Mutual Fund)
HSBC Mutual Fund
ABN AMRO Mutual Fund
Birla Sun Life Mutual Fund
SRINIVAS AKULA 27
ING Vysya Mutual Fund
Prudential ICICI Mutual Fund
Sahara Mutual Fund
Kotak Mahindra Mutual Fund
Standard Chartered Mutual Fund
Morgan Stanley Mutual Fund India
Escorts Mutual Fund
Alliance Capital Mutual Fund
Benchmark Mutual Fund
Chola Mutual Fund
Can bank Mutual Fund
LIC Mutual Fund
GIC Mutual Fund
Franklin Templeton India Mutual Fund

The group, Franklin Templeton Investments is a California (USA) based company
with a global AUM of US$ 409.2 bn. (as of April 30, 2005). It is one of the largest
financial services groups in the world. Investors can buy or sell the Mutual Fund
through their financial advisor or through mail or through their website. They have
Open end Diversified Equity schemes, Open end Sector Equity schemes, Open
end Hybrid schemes, Open end Tax Saving schemes, Open end Income and
28 SRINIVAS AKULA
Liquid schemes, Closed end Income schemes and Open end Fund of Funds
schemes to offer.
HDFC Mutual Fund
HDFC Mutual Fund was setup on June 30, 2000 with two sponsors namely
Housing Development Finance Corporation Limited and Standard Life Investments
Limited.
Reliance Mutual Fund
Reliance Mutual Fund (RMF) was established as trust under Indian Trusts Act,
1882. The sponsor of RMF is Reliance Capital Limited and Reliance Capital
Trustee Co. Limited is the Trustee. It was registered on June 30, 1995 as Reliance
Capital Mutual Fund, which was changed on March 11, 2004. Reliance Mutual
Fund was formed for launching of various schemes under which units are issued to
the Public with a view to contribute to the capital market and to provide investors
the opportunities to make investments in diversified securities.
State Bank of India Mutual Fund
State Bank of India Mutual Fund is the first Bank sponsored Mutual Fund to launch
offshore fund, the India Magnum Fund with a corpus of Rs. 225 cr. approximately.
Today it is the largest Bank sponsored Mutual Fund in India. They have already
launched 35 Schemes out of which 15 have already yielded handsome returns to
investors. State Bank of India Mutual Fund has more than Rs. 5,500 Corers as
AUM. Now it has an investor base of over 8 Lakhs spread over 18 schemes.
Tata Mutual Fund
Tata Mutual Fund (TMF) is a Trust under the Indian Trust Act, 1882. The sponsors
for Tata Mutual Fund are Tata Sons Ltd., and Tata Investment Corporation Ltd. The
investment manager is Tata Asset Management Limited and its Tata Trustee
SRINIVAS AKULA 29
Company Pvt. Limited. Tata Asset Management Limited is one of the fastest in the
country with more than Rs. 7,703 corers (as on April 30, 2005) of AUM.
Unit Trust of India Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company Private
Limited. UTI Asset Management Company presently manages a corpus of over
Rs.20000 Corer. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB),
Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance
Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,
Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance
Funds.
Bank of Baroda Mutual Fund (BOB Mutual Fund)
Bank of Baroda Mutual Fund or BOB Mutual Fund was setup on October 30, 1992
under the sponsorship of Bank of Baroda. BOB Asset Management Company
Limited is the AMC of BOB Mutual Fund and was incorporated on November 5,
1992. Deutsche Bank AG is the custodian.
HSBC Mutual Fund
HSBC Mutual Fund was setup on May 27, 2002 with HSBC Securities and Capital
Markets (India) Private Limited as the sponsor. Board of Trustees, HSBC Mutual
Fund acts as the Trustee Company of HSBC Mutual Fund.
ABN AMRO Mutual Fund
ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee
(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset
30 SRINIVAS AKULA
Management (India) Ltd. was incorporated on November 4, 2003. Deutsche Bank
A G is the custodian of ABN AMRO Mutual Fund.
Birla Sun Life Mutual Fund
Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda
apart from India. Birla Sun Life Mutual Fund follows a conservative long-term
approach to investment. Recently it crossed AUM of Rs. 10,000 corers.
ING Vysya Mutual Fund
ING Vysya Mutual Fund was setup on February 11, 1999 with the same named
Trustee Company. It is a joint venture of Vysya and ING. The AMC, ING Investment
Management (India) Pvt. Ltd. was incorporated on April 6, 1998.
Prudential ICICI Mutual Fund
The mutual fund of ICICI is a joint venture with Prudential Plc. of America; one of
the largest life insurance companies in the US of A. Prudential ICICI Mutual Fund
was setup on 13th of October 1993 with two sponsors, Prudential Plc. and ICICI
Ltd. The Trustee Company formed is Prudential ICICI Trust Ltd. and the AMC is
Prudential ICICI Asset Management Company Limited incorporated on 22nd of
June 1993.
Sahara Mutual Fund
Sahara Mutual Fund was set up on July 18, 1996 with Sahara India Financial
Corporation Ltd. as the sponsor. Sahara Asset Management Company Private
Limited incorporated on August 31, 1995 works as the AMC of Sahara Mutual
Fund. The paid-up capital of the AMC stands at Rs 25.8 crore.
SRINIVAS AKULA 31
Kotak Mahindra Mutual Fund
Kotak Mahindra Asset Management Company (KMAMC) is a subsidiary of KMBL.

It is presently having more than 1,99,818 investors in its various schemes. KMAMC
started its operations in December 1998. Kotak Mahindra Mutual Fund offers
schemes catering to investors with varying risk - return profiles. It was the first
company to launch dedicated gilt scheme investing only in government securities.
Standard Chartered Mutual Fund
Standard Chartered Mutual Fund was set up on March 13, 2000 sponsored by
Standard Chartered Bank. The Trustee is Standard Chartered Trustee Company
Pvt. Ltd. Standard Chartered Asset Management Company Pvt. Ltd. is the AMC
which was incorporated with SEBI on December 20,1999.
Morgan Stanley Mutual Fund India
Morgan Stanley is a worldwide financial services company and its leading in the
market in securities, investment management and credit services. Morgan Stanley
Investment Management (MISM) was established in the year 1975. It provides
customized asset management services and products to governments,
corporations, pension funds and non-profit organizations. Its services are also
extended to high net worth individuals and retail investors. In India it is known as
Morgan Stanley Investment Management Private Limited (MSIM India) and its
AMC is Morgan Stanley Mutual Fund (MSMF). This is the first close end diversified
equity scheme serving the needs of Indian retail investors focusing on a long-term
capital appreciation.
Escorts Mutual Fund
Escorts Mutual Fund was setup on April 15, 1996 with Escorts Finance Limited as
its sponsor. The
32 SRINIVAS AKULA
Trustee Company is Escorts Investment Trust Limited. Its AMC was incorporated
on December 1, 1995 with the name Escorts Asset Management Limited.
Alliance Capital Mutual Fund
Alliance Capital Mutual Fund was setup on December 30, 1994 with Alliance
Capital Management Corp. of Delaware (USA) as sponsor. The Trustee is ACAM
Trust Company Pvt. Ltd. and AMC, the Alliance Capital Asset Management India
(Pvt) Ltd. with the corporate office in Mumbai.
Benchmark Mutual Fund
Benchmark Mutual Fund was setup on June 12, 2001 with Niche Financial
Services Pvt. Ltd. as the sponsor and Benchmark Trustee Company Pvt. Ltd. as
the Trustee Company. Incorporated on October 16, 2000 and headquartered in
Mumbai, Benchmark Asset Management Company Pvt. Ltd. is the AMC.
Can bank Mutual Fund
Can bank Mutual Fund was setup on December 19, 1987 with Canara Bank acting
as the sponsor. Can bank Investment Management Services Ltd. incorporated on
March 2, 1993 is the AMC. The Corporate Office of the AMC is in Mumbai.
Chola Mutual Fund

Chola Mutual Fund under the sponsorship of Cholamandalam Investment &
Finance Company Ltd. was setup on January 3, 1997. Cholamandalam Trustee
Co. Ltd. is the Trustee Company and AMC is Cholamandalam AMC Limited.
LIC Mutual Fund
Life Insurance Corporation of India set up LIC Mutual Fund on 19th June 1989. It
SRINIVAS AKULA 33
contributed Rs. 2 Corers towards the corpus of the Fund. LIC Mutual Fund was
constituted as a Trust in accordance with the provisions of the Indian Trust Act,
1882. . The Company started its business on 29th April 1994. The Trustees of LIC
Mutual Fund have appointed Jeevan Bima Sahayog Asset Management Company
Ltd as the Investment Managers for LIC Mutual Fund.
GIC Mutual Fund
GIC Mutual Fund, sponsored by General Insurance Corporation of India (GIC), a

Government of India undertaking and the four Public Sector General Insurance
Companies, viz. National Insurance Co. Ltd (NIC), The New India Assurance Co.
Ltd. (NIA), The Oriental Insurance Co. Ltd (OIC) and United India Insurance Co.
Ltd. (UII) and is constituted as a Trust in accordance with the provisions of the
Indian Trusts Act, 1882
34 SRINIVAS AKULA
ADVANTAGES AND
DISADVANTAGES OF MUTUAL
FUNDS
ADVANTAGES OF INVESTIN IN MUTUAL FUNDS
 Diversification: Mutual Funds invest in a broad range of securities.

This limits investment Risk by reducing the effect of a possible decline in
the value of any one security. Mutual Fund shareowners can benefits from
diversification techniques usually available only to buy significant positions
in a wide variety of securities.
SRINIVAS AKULA 35
 Low cost: If you tried to create your own diversified portfolio of stocks,
you’d need at least $100000 and you’d pay thousands of dollars in
commission to assemble your portfolio. A mutual fund lets you participate in
a diversified portfolio for as little as 1000, and sometimes less. And if you
buy a no-load, you pay or no sales changes own them.
 Professional Management: Most mutual funds pay topflight

professionals to manage their investments. These managers decide what
securities the fund will buy and sell.
 Liquidity: It's easy to get your money out of a mutual fund. Write a
check, make a call, and you've got the cash.
 Regulatory oversight: Mutual funds are subject to many government

regulations that protect investors from fraud.
 Convenience: You can usually buy mutual fund shares by mail, phone,
or over the Internet.
 Online service: The Internet provides facts, convenient way or

investors’ access financial information. Hosts of service are available to the
online investors including direct access to no-load companies.
 Automatic Direct Deposit: You can usually arrange to have regular,

third party payments—such as social security or pension checks—
deposited directly into your fund account. This puts your money to work
immediately, without waiting to clear your checking account, and it saves
you from worrying about cheques being lost in mail.
 Record keeping Service
With your own portfolio of stocks and bonds, you would have to do your own
record keeping of purchases, sales, dividends, interest, short-term and long-
term gains and losses. Mutual funds provide confirmation of your transactions
36 SRINIVAS AKULA
and necessary tax forms to help you keep track of your investments and tax
reporting.
 Safekeeping
When you own shares in a mutual fund, you own securities in many companies
without having to worry about keeping stock certificates in safe deposit boxes
or sending them by registered mail. You don’t even have to worry about
handling the mutual fund stock certificates; the fund maintains your account on
its books and sends you periodic statements keeping track of all year
transactions.
 Retirement and College Plans
Mutual funds are well suited to Individual Retirement Accounts and most funds
offer IRA-approved prototype and master plans for individual retirement accounts
(IRAs) and Keogh. 403(b), SEP-IRA and 401(k) retirement plans. Funds also
make it easy to Invest-for College. Children or other long-term goals. Many offer
special investment products or programs tailored specifically for investments for
children and college.
 Asset Management Accounts
These master accounts, available from many of the larger fund groups, enable you
to manage all your financial service needs under a single umbrella from unlimited
check writing and automatic bill paying to discount brokerage and credit card
accounts.
 Margin
Some mutual fund shares are marginal. You may buy them on margin or use them
as collateral to borrow money from your bank or broker. Call your fund company
for details.
SRINIVAS AKULA 37
 Market Cycle Planning
For investors who understand how to actively manage their portfolio, mutual fund
investments can be moved as market conditions change. You can place your
funds in equities when the market is on the upswing and move into money market
funds on the downswing or take any number of steps to ensure that your
investments are meeting your needs in changing market climates. A word of
caution: since it is impossible to predict what the market will do at any point in time,
staying on course with a long-term, diversified investment view is recommended for
most investors.
 Transparency
Regulations for mutual funds have made the industry very transparent. You can
track the investments that have been made on you behalf and the specific invest
DI SAD VANT AGES O F MU TU AL F UN DS
Mutual funds have their disadvantages and may not be for everyone:
 No Guarantees: No investment is risk free. If the entire stock market

declines in value, the value of mutual fund shares will go down as well, no
matter how balanced the portfolio. Investors encounter fewer risks when
they invest in mutual funds than when they buy and sell stocks on their
own. However, anyone who invests through a mutual fund runs the risk of
losing money.
 Taxes: During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If your
38 SRINIVAS AKULA
fund makes a profit on its sales, you will pay taxes on the income you
receive, even if you reinvest the money you made.
 Fees and commissions: All funds charge administrative fees to

cover their day-to-day expenses. Some funds also charge sales
commissions or "loads" to compensate brokers, financial consultants, or
financial planners. Even if you don't use a broker or other financial adviser,
you will pay a sales commission if you buy shares in a Load Fund.
 Management risk: When you invest in a mutual fund, you depend on

the fund's manager to make the right decisions regarding the fund's
portfolio. If the manager does not perform as well as you had hoped, you
might not make as much money on your investment as you expected. Of
course, if you invest in Index Funds, you forego management risk, because
these funds do not employ managers
SRINIVAS AKULA 39
PROJECT PROFILE
PROJECT PROFILE
A major portion of the people in India is not aware of the mutual funds and its
benefits. The main objective of the project was to educate the people about mutual
fund industry and to make them aware about the different types of mutual funds
and also educate them for AMFI examination. Which is mandatory to clear for
becoming a mutual fund advisor. A major portion of the household savings in India
40 SRINIVAS AKULA
is concentrated in bank, providents, life insurance funds etc. Only 2-3 in invested in
mutual fund and stock market. The following graph gives an idea of distribution of
household savings.
Distribution of Household Savings 2001
Shares&mutual
fund
Currency
13% 2% 6%
Bank Deposits
21%
Non Bank Deposits
42%
13% Life Insurance
3%
Provident&Pension
Government
Securities
Unlike the other developed markets where bank deposits constitutes around 10%,
in India the concentrated of the savings is highly towards currency and bank
deposits (Approximately 50%). A shift of only 10% of the house hold savings
towards mutual funds can give a growth of over 25000 Crores on a year on year
basis with the current base. The motive of the project was to change the mind set
of the people regarding the mutual funds and to move their savings from deposits
and currency to mutual funds. Keeping this in view our company in to the training
and development of independent financial advisor who can give advise on mutual
funds and create awareness among the household about his investment
opportunity. To know response and to gather knowledge about the various financial
advisors we have conducted a survey.
SRINIVAS AKULA 41
42 SRINIVAS AKULA
RESEARCH
METHODOLOGY
SRINIVAS AKULA 43
RESEARCH METHODOLOGY
A research is a careful investigation or enquiry, especially through search foe

new facts in any branch of knowledge. It is a systemized effort to gain more
knowledge.”
Research Methodology is a way to systematically solve the research problem.
It includes not only the research methods, but also the logic behind using the
methods.”
The methods of research used in this project were as follows:-
 Analytical Research
 Applied Research
Analytical Research: -
In analytical research the researcher has to use the facts already available,
and analyze these to make the critical evaluation of the material.
In this project I have used many raw data from the various
sources and analyzed it for underlying trends.
Applied Research:-
Applied Research aims at finding a solution for an immediate problem.
Research aimed at certain conclusions (say a solution) facing a concrete social or
business problem is an example of applied research. Thus the central aim of
applied research is to find a solution for some pressing practical problem.
In this project, in the last section, by means of assumptions I have found the
feasibility of a project that the organization means to undertake.
The analysis of the trends followed by the mutual funds was Analytical
Research.
44 SRINIVAS AKULA
OPERATIONS AND DATA
COLLECTION
SRINIVAS AKULA 45
OPERATIONS & DATA COLLECTION
From the secondary data available from the fact sheet, Internet etc. Analyses
between three different types of funds are as follows:-
 Equity Diversified Fund
 Income Fund
 Balanced Fund
PARAMETERS USED FOR COMPARISION

The parameters that are used for comparison of Principal PNB Mutual Fund
Schemes with other Mutual Fund Schemes are done on the following basis:-
• Annualized Returns
• Standard Deviation
• Sharpe Ratio
• Beta Ratio
• Alpha Ratio
• R-Squared
• Annualized Returns
46 SRINIVAS AKULA
Top 10 Funds - Period (Last 1 Month)
% Return
R NAV
Scheme Name Date as on NAV
ank (Rs.)
date
May 30,
1 UTI Mahila Unit Scheme 25.9723 2.0266
2006
Franklin India May 29,
2 10.1491 1.8444
International Fund 2006
Reliance Regular Savings May 30,
3 11.0149 1.728
Fund - Hybrid - Growth 2006
Prudential ICICI Blended
May 30,
4 Plan - Option A - 10.5433 1.3711
2006
Dividend
Prudential ICICI Blended May 30,
5 10.8058 1.3687
Plan - Option A - Growth 2006
HDFC Fixed Maturity
Plan - 13 Month - March May 30,
6 10.1898 1.0722
2006 - Regular Plan - 2006
Growth
HDFC Fixed Maturity
7 10.1898 1.0722
2006 - Regular Plan - 2006
Dividend
HDFC Fixed Maturity
8 10.1898 1.0722
2006 - Institutional Plan - 2006
Growth
HDFC Fixed Maturity
9 10.1898 1.0722
2006 - Institutional Plan - 2006
Dividend
10 Kotak Cash Plus - May 30, 10.5198 1.0625
SRINIVAS AKULA 47
Growth 2006
Some facts for the growth of mutual funds in India
 100% growth in the last 6 years.
 Number of foreign AMC's are in the queue 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 canalizing 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.
 Emphasis on better corporate governance.
 Trying to curb the late trading practices.
48 SRINIVAS AKULA
RISK MANAGEMENT AND
MUTUAL FUNDS
SRINIVAS AKULA 49
RISK MANAGEMENT AND THE MUTUAL FUNDS
The basic objective of a mutual fund is to provide a diversified portfolio so as to

reduce the risk in investments at a lower cost. The mutual fund industry worldwide
is based on this premise. Investors who take up mutual fund route for investments
believe that their risk is minimized at lower costs, and they get an optimum portfolio
of securities that match their risk appetite. They are ignorant about the diverse
techniques and hedging products that can be used for minimizing the market
volatility and hence take the help of the fund managers. It is very daunting to note
that the drop in the NAV of some of the schemes is higher than the erosion of value
in some of the ICE stocks. The recent survey conducted by Price water house
Coopers (PWC) on risk management by mutual funds has posted interesting as
well as worrying results. According to the survey, as many as 50 percent of the
respondent mutual funds are not managing risk properly. If this is not all, 50
percent of the respondents did not even have documented risk procedures or
dedicated risk managers. The respondents included among others, some of the
heavyweights of the Indian MF industry viz. Templeton, Alliance, Prudential and
IDBI Principal MF.
50 SRINIVAS AKULA
The Beta of some of the favorite 2.09 Taurus Libra Leap (5.68%), DSP
stocks is shown below. The Table ML Tech. (6.06%)
contains the Beta of some of the
ICE scrips that constitute the top
10 holdings across various
equity funds. DSQ Software Ltd.
Satyam Computer Services Ltd. 2.00 ING Growth Port (11.2%), Alliance
Equity Fund (9.7%), Chola freedom
Tech (11.51%)
SSI Ltd. 1.98 IL&FS eCom (9.63%), LIC
Dhansamridhi (9.18%)
Wipro Ltd. 1.87 ING Growth (23.8%), Magnum
Sector Fund -InfoTech (15%),
Alliance Alliance New Millennium
(10%)
Himachal Futuristic 1.82 UTI Sector- Services (9.48%),
Communications Ltd. Taurus Discovery Stock (10.45%)
Global Tele-Systems Ltd. 1.81 UTI US 92 (7.02%), ING Growth
Portfolio (3.8%)
Zee Telefilms Ltd. 1.70 UTI Sector- Services (7.21%), ING
Growth Portfolio (10.06%),
Infosys Technologies Ltd. 1.54 ING Growth Portfolio
(20.5%), Alliance New
Millennium (11.5%)
SRINIVAS AKULA 51
As can be seen, some of the stocks are too volatile and can cause wild movements
in the NAVs of funds that have taken exposures in them. The standard deviation of
the returns in some of these funds points to it. While Alliance Equity Fund has a
Standard Deviation of 2.53, Birla Advantage has its Standard Deviation at 2.57.
ING Growth has a standard deviation of 3.3, which is relatively high due to its
exposure to two volatile ICE scrips. Birla Advantage has reduced its exposures to
Infosys drastically in the last two months and taken steps to contain volatility. SBI
Mutual Fund that is recasting its equity portfolio to reduce risks as they can scare
investors is planning similar steps.
52 SRINIVAS AKULA
PERFORMANCE MEASURES OF
MUTUAL FUNDS
SRINIVAS AKULA 53
PERFOMANCE MEASURES OF MUTUAL FUNDS
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 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
54 SRINIVAS AKULA
fund with the returns in the market. While unsystematic risk can be diversified
through investments in a number of instruments, systematic risk cannot. 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

• The Sharpe Measure
• Jenson Model
• Fama Model
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.
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.
SRINIVAS AKULA 55
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.
Comparison of Sharpe and Treynor
Sharpe and Treynor measures are similar in a way, since they both divide the risk
premium by a numerical risk measure. The total risk is appropriate when we are
evaluating the risk return relationship for well-diversified portfolios. On the other
hand, the systematic risk is the relevant measure of risk when we are evaluating
less than fully diversified portfolios or individual stocks. 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 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)
56 SRINIVAS AKULA
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 mitigate unsystematic
risk, as his knowledge of market is primitive.
Fama Model
The Eugene Fama model is an extension of Jenson model. This model compares
the performance, measured in terms of returns, of a fund with the required return
commensurate with the total risk associated with it. The difference between these
two is taken as a measure of the performance of the fund and is called net
selectivity.
The net selectivity represents the stock selection skill of the fund manager, as it is
the excess return over and above the return required to compensate for the total
risk taken by the fund manager. Higher value of which indicates that fund manager
has earned returns well above the return commensurate with the level of risk taken
by him.
Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where, Sm is standard deviation of market returns. The net selectivity is then
calculated by subtracting this required return from the actual return of the fund.
Among the above performance measures, two models namely, Treynor measure
and Jenson model use systematic risk based on the premise that the unsystematic
risk is diversifiable. These models are suitable for large investors like institutional
investors with high risk taking capacities as they do not face paucity of funds and
can invest in a number of options to dilute some risks. For them, a portfolio can be
spread across a number of stocks and sectors. However, Sharpe measure and
Fama model that consider the entire risk associated with fund are suitable for small
investors, as the ordinary investor lacks the necessary skill and resources to
diversified. Moreover, the selection of the fund on the basis of superior stock
SRINIVAS AKULA 57
selection ability of the fund manager will also help in safeguarding the money
invested to a great extent. The investment in funds that have generated big returns
at higher levels of risks leaves the money all the more prone to risks of all kinds
that may exceed the individual investors' risk appetite
58 SRINIVAS AKULA
SUGGESTIONS
SUGGESTIONS
SRINIVAS AKULA 59
 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. One should identify the degree of risk bearing
capacity one has and also clearly state the expectations from the
investments. Irrational expectations will only bring pain.
 The quality of service should be improved with they are providing to the
existing customer.
 They have to educate Advisors through conducting seminars, distributing
free broachers, informing about financial planning, mutual fund etc.
 Proper care should be taken to motivate the advisor so that they can also
make effort from their side to increase their AUM. Some incentive should be
provided to them for Advertisement and their sales should be measured so
that they can do the promotional activities and regular follow-ups.
 The company should take due care in selecting an advisor because they
are the most important person in the process of all. The company should
push them regularly so that they can make their effort to increase their AUM
in their area which at present is not. Advisors are not taking due care, they
are even hesitating to spend small amount on doing a promotional activity.
 It is important to identify the nature of investment and to know if one is
compatible with the investment. 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.
 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.
Mutual funds invest with a certain ideology such as the "Value Principle" or
"Growth Philosophy". Both have their share of critics but both philosophies
work for investors of different kinds. Identifying the proposed investment
60 SRINIVAS AKULA
philosophy of the fund will give an insight into the kind of risks that it shall
be taking in future.
 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.
One would do well to remember that nobody could perfectly time the market
so staying invested is the best option unless there are compelling reasons
to exit.
 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 basic philosophy of Rupee cost
averaging would suggest that if one invests regularly through the ups and
downs of the market, he would stand a better chance of generating more
returns than the market for the entire duration. 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. The Automatic investment Plans offered by
some funds goes a step further, as the amount can be directly/electronically
transferred from the account of the investor.
 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.
SRINIVAS AKULA 61
 Finding funds that do not charge much 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. Investors of equity should keep in mind that all dividends are
currently tax-free in India and so their tax liabilities can be reduced if the
dividend payout option is used. Investors of debt will be charged a tax on
dividend distribution and so can easily avoid the payout options.
 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.
 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.
62 SRINIVAS AKULA
UNIT LINK INSURANCE PLAN
(ULIP)
SRINIVAS AKULA 63
UNIT LINK INSURANCE POLICIES
(ULIPs)
Most insurers in the year 2004 have started offering at least a few unit-
linked plans. Unit-linked life insurance products are those where the benefits are
expressed in terms of number of units and unit price. They can be viewed as a
combination of insurance and mutual funds. The number of units, which the
customer would get, would depend on the unit price when he pays his premium.
The daily unit price is based on the market value of the underlying assets (equities,
bonds, government securities etc.) and computed from the net asset value.
The advantages of Unit linked plans are that they are simple, clear, and
easy to understand. Being transparent the policyholder gets the entire upside on
64 SRINIVAS AKULA
the performance of his fund. Besides all the advantages they offer to the
customers, unit-linked plans also lead to an efficient utilization of capital.
According to the IRDA, a company offering unit linked plans must give the
investor an option to choose among debt, balanced and equity funds. If you opt for
a unit-linked endowment policy, you can choose to invest your premiums in debt,
Balanced or equity plans. If you choose a debt plan, the majority of your premiums
will get invested in debt securities like gilts and bonds. If you choose equity, then a
Major portion of your premiums will be invested in the equity market. The plan you
choose would depend on your risk profile and your investment need.
The ideal time to buy a unit-linked plan is when one can expect long-term
growth ahead. This is especially so if one also believes that current market values
(stock valuations) are relatively low. So if you are opting for a plan that invests
primarily in equity, the buzzing market could lead to windfall returns. However,
should the buzz die down, investors could be left stung.
If one invests in a unit-linked pension plan early on, say 25, one can afford
to take the risk associated with equities, at least in the plan's initial stages.
However, as one approaches retirement the quantum of returns should be
subordinated to capital preservation. At this stage, investing in a plan that has an
equity tilt may not be a good idea. Onside ring that unit-linked plans are relatively
new launches, their short history does not permit an assessment of how they will
perform in different phases of the stock market. Even if one views insurance as a
SRINIVAS AKULA 65
long-term commitment, investments based on performance over such a short time
span may not be appropriate.
ULIPs: DOES THE MARRIAGE WORK?
Unit-linked insurance plans (ULIPs) have become something of a rage with

their 'promise' of market-linked returns combined with the dual benefit of insuring
your life from eventualities.
To put it simply, ULIPs attempt to fulfill investment needs of an investor with
protection/insurance needs of an insurance seeker. ULIPs work on the premise
that there is class of investors who regularly invest their savings in products like
fixed deposits (FDs), coupon-bearing bonds, debt funds, diversified equity funds
and stocks. There is another class of individuals who take insurance to provide for
their family in case of an eventuality. So typically both these categories of
individuals (which also overlap to a large extent) have a portfolio of investments as
well as life insurance. ULIP as a product combines both these products
(investments and life insurance) into a single product. This saves the
investor/insurance-seeker the hassles of managing and tracking a portfolio of
products.
66 SRINIVAS AKULA
Novel and noble as it appears, investor/insurance-seekers rarely
understand the cost implications of the marriage between investments and life
insurance. To be sure, it is intricate and not everyone is able to unravel it. Abhishek
Bhatia (Head – Marketing ICICI Prudential Life Insurance) explains, ‘Unit-linked
products are designed to put control in the hands of the customer. While some
customers are comfortable with this, there are others who require some more
explanation about the features. This is provided by the insurance agent. All the
charges are clearly disclosed in the product brochures that are given to customers.
Moreover, customers get a benefit illustration, which clearly illustrates the up-front,
investment and mortality charges that are levied on the premium, and shows how
the monies will grow over time, under a certain set of assumptions.’
In this backdrop let’s understand the costs of owning a ULIP. For illustration
purpose, we have taken ULIPs of ICICI Prudential and HDFC Standard Life, two
leading private insurers. Investors need to understand that this should only give
them an indicative idea about the costs associated with a ULIP as different insurers
have varying cost structures.
We will start with the investment costs. Since ULIPs manage a portfolio of
investments for clients, they incur a cost known as the fund management cost. This
is similar to a mutual fund that incurs costs on managing the equity and debt
portfolio for investors. In this regard, ICICI Prudential ULIP has a three-tier cost
structure.
SRINIVAS AKULA 67
SO INVESTORS OPT FOR ULIPs?
First and foremost, investors need to understand that a ULIP is a bundled

product of their investments and their insurance proceeds. So if you have a ULIP
invested in equities, you are exposing your life insurance monies as well as your
investible surplus to the vagaries of equity markets. While it is fine and even
sensible to let your investible assets get an equity flavor, the same cannot be said
about your life insurance monies, which to a large extent should be sacred. The
volatility in equity markets can disturb the calmest of minds and the last thing you
want to see is your nest egg being eroded by the latest slide in equity markets.
Abhishek Bhatia elaborates, ‘A ULIP policyholder has the option to invest in a
variety of funds, depending on his risk profile. If one does not have the appetite to
invest in equity, they can choose a debt or balanced fund.’
However, the structure of a ULIP takes care of quite a bit of the uncertainty
in the markets. Insurance companies understand the need to give insurance-
seekers the flexibility to rethink their investment strategy in view of market
histrionics. There is an option for the insurance-seeker to switch to another plan
with a lower or zero equity component to stem the loss in a falling equity market.
Abhishek points out, ‘the switch option allows customers to switch between fund
68 SRINIVAS AKULA
options, thereby making adjustments to any perceived risks.’ ICICI Pru allows
policyholders to make this switch four times a year at no cost, with Rs 100 at every
additional switch after that. HDFC Standard Life allows policyholders to make as
many switches as they like. However, for investors to make the right switch they
need to track markets actively and be well informed, which is actually the job of the
investment advisor/consultant.
ULIPs are suitable for individuals who are already adequately insured and
are reasonably well-informed and savvy to take active investment decisions by
using the ‘switch option’ that is provided to a ULIP policyholder. Also policyholders
with regular endowment plans who are not satisfied with the 4-6% returns can
consider taking a ULIP with a lower equity component. It is best if insurance-
seekers tread the middle path and choose balanced plans (with about 50-60%
equity component). Ideally they need to avoid taking the aggressive 100% equity
ULIP, which could needlessly expose their assets to market volatility. So if
insurances-seekers/investors play their cards right, they can make this marriage
work.
SRINIVAS AKULA 69
AWARENESS OF THE RISK IN ULIPs
Unit Linked Insurance Plans (ULIPs) all of sudden became a popular

investment vehicle with investors in the past one year. The reason: perhaps the
bull phase or the lure of market-linked returns that insurance companies have been
advertising. But with the markets now having corrected significantly, many
investors are wondering whether they should have opted for a ULIP in the first
place.
A single cornerstone advantage ULIPs offer is that they leave the asset
allocation decision in the hands of investors themselves. You are in control of how
you want to distribute your money across the broad asset classes and how and
when you want to reallocate. You can withdraw from these plans (after the initial
lock in period) without any tax implication as withdrawals and death claim proceeds
under ULIPs qualify for (capital gains) tax exemption under Section 10 (10D) of the
Income Tax Act.
But such flexibility can be a big disadvantage if you are not ‘an expert’. You
could choose to be more in equities (like you probably did late last year or early
this year), when the time is probably right to go into low risk debt. Or vice versa.
The impact of such incorrect decisions could be significant.
70 SRINIVAS AKULA
CONCLUSION
SRINIVAS AKULA 71
CONCLUSION
 From the data base of advisors we have collected during the survey
255 of them interested to come in the mutual fund. We were able to
convert more than 50% of them for the AMFI Examination.
 We have seen that 75% people were not interested to come in to
the field of mutual fund. The reason was that they don’t want to
come out of their shell and don’t want to diversify their field of
service. They also don’t have the proper knowledge of mutual funds.
 There is a scarcity of independent financial advisors are not taking
advisory service as a full time profession.
 Life insurance as a form of protection is the single-most important

financial product any earning member of a family must have. Having
said this, a well-diversified portfolio is one of the first rules of
financial planning, and as such one should consider different
instruments as the ability to save increases. Certainly ULIPs
successfully combine the first and most important need of
protection, with savings, and hence are an excellent addition to your
portfolio. These can be combined with various other products, after
taking into account your risk appetite, financial goals and need for
portfolio diversification. Possible investment options range from
bank deposits and government small saving schemes to mutual
funds, stocks and property.
72 SRINIVAS AKULA
PERSONAL INFORMATION
1) NAME:
2) ADDRESS:
3) MOBILE NO:
4) HOW MANY CLIENTS DO YOU HAVE:
1) 0-50 2) 50-200 3) 200-500 4) 500-Above
5) HOW MANY YEARS YOU ARE IN THIS FIELD:
1) 0-3 2) 3-5 3) 5-10 4) 10-Above
6) WHAT TYPE OF SERVICE DO YOU PROVIDE:
1,INSURANCE a) LIFE b) GENERAL
2) MUTUAL FUND a) EQUITY MARKET
b) RBI RELIEF BONDS c) POSTAL SCHEMES
7) ARE YOU INTERESTED FOR TAKING AMFI EXAM?
1) YES 2) NO
SRINIVAS AKULA 73
8) OTHER ADVISORS WHOM YOU KNOW
BIBLIOGRAPHY
 COMPANY PRODUCT CATALOGUES & WEBSITE.
 SEBI WEBSITE.
 WWW.MUTUALFUNDINDIAN.COM.
 WWW.KARVY.COM.
 AMFI INDIAN WEBSITE.
74 SRINIVAS AKULA

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I wish to express my Thankful to one and all who helped me while I

Today an investor is interested in tracking the value of his investments, whether he

This project t is undertaken to help the investors in tracking the performance of

It is of paramount importance to keep in mind the risk involved while investment as

Karvy’s highly qualified manpower, cutting-edge technology, comprehensive

On market trends, investment options, opinions etc. Thus empowering the

1. Ranking among the top 3 stock broking firms in India

Basic Strategy of Karvy

OBJECTIVES AND SCOPE

The project was conducted for the following objective: -

• To gain an understanding and knowledge of Mutual Funds as an

Expectation management is one of the most crucial aspects of running a mutual

What is a Mutual Fund…?

Characteristics of Mutual Funds

ORGANISATION OF A MUTUAL FUND

Mutual Funds Industry in India

First Phase - 1964-87

Second Phase - 1987-1993 (Entry of Public Sector Funds)

Third Phase - 1993-2003 (Entry of Private Sector Funds)

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more

Fourth Phase - Since February 2003

The Graph indicates the growth of assets over the years.

GROWTH IN ASSETS UNDER MANAGEMENT

TYPES OF MUTUAL FUND

TYPES OF MUTUAL FUND SCHEMES

 Open - End Schemes

 Close - Ended Schemes

Interval funds combine the features of open-ended and close-ended schemes.

The aim of income fund is to provide regular and steady income to

The aim of money market fund is to provide easy liquidity, preservation

 Tax Saving Schemes

These schemes offer tax rebate to the investors under specific

Index funds attempts to replicate the performance of a particular

Sectoral funds are those, which invest exclusively in a specific

 Industry specific schemes

Mutual Fund companies

Major Mutual Fund Companies: -

HDFC Mutual Fund

Reliance Mutual Fund

State Bank of India Mutual Fund

Tata Mutual Fund

Unit Trust of India Mutual Fund

Bank of Baroda Mutual Fund (BOB Mutual Fund)

HSBC Mutual Fund

ABN AMRO Mutual Fund

Birla Sun Life Mutual Fund

Prudential ICICI Mutual Fund

Sahara Mutual Fund

Kotak Mahindra Mutual Fund

Standard Chartered Mutual Fund

Morgan Stanley Mutual Fund India

Escorts Mutual Fund

Alliance Capital Mutual Fund

Benchmark Mutual Fund

Chola Mutual Fund

Can bank Mutual Fund

LIC Mutual Fund

GIC Mutual Fund

Franklin Templeton India Mutual Fund

HDFC Mutual Fund