Analysis Of Mutual Funds in Indian Market

CASIRJ Volume 5 Issue 2 [Year - 2014] ISSN 2319 – 9202

International Research Journal of Commerce Arts and Science http:www.casirj.com Page 293

Analysis Of Mutual Funds in Indian Market

Mr. Naveen Chaudhary

Assistant Professor

Lakshmibai College

(Departmentt of Economics)

University of Delhi

Ms. Shuchita Verma Assistant Professor

Daulat Ram College

(Department of Commerce)

University of Delhi

Abstract

In today‟s competitive era every individual tries to secure their future, as they understand the

importance of Financial Planning.Every rational individual keeps on searching for new

investment avenues so that they can grow their money and at the same time ensuring that their

money is in safe hands.Mutual Funds are a good option for such category of individuals.But

there are so many mutual funds in the market,how should a customer choose the best among

all.This Paper focuses on understanding the functioning of mutual funds and benefits of mutual

funds to investors. It also helps in understanding different schemes of prominent funds in India


International Research Journal of Commerce Arts and Science http:www.casirj.com 94

such as equity, income, balance as well as the returns associated with those schemes.The study

was done to ascertain the asset allocation, entry load, exit load, associated with the mutual funds.

OBJECTIVE:

To study a brief idea about the types of schemes and benefits available thereof.

To discuss about the market trends of Mutual Fund investment.

To study some mutual fund companies and their funds

Explore the recent developments in the mutual funds in India

MUTUAL FUND

What is Mutual Fund?

Mutual funds are financial intermediaries/investment institutions which act as investment

conduit. Mutual Funds are associate of trusts of people who wish to make investments in the

financial instruments or assets of the business sector or corporate sector for mutual benefit of its

members. The fund collects the money from these members from their savings and invest them

in a diversified portfolio of financial assets with a view to reduce risk and to maximize capital

appreciation for distribution to its members on pro-rata basis. They enjoy collectively the

benefits of expertise in investment by specialist in the trust, which no single individual by

himself could enjoy. Mutual fund if thus is a concept of mutual Help of subscribers for portfolio

investment and management of these investments by experts in the field.

Mutual funds are important segment of the financial system of the country. The financial system

comprises the financial institutions, banks, investment bodies, the capital market and money

market intermediaries the instruments used in the capital and money markets through which

money resources are mobilized from savers of funds to users of funds. Mutual funds act as

intermediaries who link the savor and the capital market.



How Mutual Funds Operate?

Government allows private public and joint sectors to establish mutual fund. The company

fulfilling the government regulations sponsors the mutual funds. One the mutual funds have been

sponsored it issues its unit or shares to the public by issuing an offer document and prospects. It

should be noted as A.N. Shahbhag, CEO, Wonderland Investment Consultancy points out

(Business Today, April 22, 1998) that mutual funds is not a fixed deposit of a company neither is

mutual fund an equity share in the company nor a initial public offering what mutual fund is. A

trust, whatever profit mutual fund earns have to be distributed amongst unit holders in mutual

funds on equitable basis”. Mutual fund issues are classified in different type in respect to their

redemption i.e. (i) Open ended (ii) close ended. The mutual funds can be classified in three main

categories i.e. (i) Income (ii) Growth (iii) Balanced schemes in respect to the aim of the fund.

They are further many other classification of mutual funds. These nurture and aim the investment

objective as stated in the offer document) prospectus. Fund then raises a substantial amount of

money for itself to make an investment. Mutual Funds then invest the funds collected according

to the investment objective stated in the offer document by expertise investment management.

The returns yields from the investments are distributed to the unit holders after deducting the

fees of Asset Management Company.



Typically a mutual fund scheme is initiated by a sponsor who organizes and markets the fund. It

pre-specifies the investment objective of the fund risk associated the cost involved in the process

broad rules of entry and exist from the fund and other areas of operation. The sponsor then hires

an asset management company to manage funds according to the investment objective.

The sponsor hires the asset management company which makes investment decisions and managers the funds for the sponsor. These asset

management companies are managed by fund managers. Many a time‟s most of the asset management companies themselves are sponsors of

mutual fund as in India, hence rendering the services of portfolio managers to investors.

Banks and insurance companies also receive saver funds as principals. These institutions make

profits by not precisely matching their underlying assets with their obligation, but in case of

mutual fund saver is direct beneficiary of underlying assets and own a proportionate share of

these assets. In fact these assets are not even held by the fund managers, but and independent

custodian. Fund manager cannot make profits as a principle but can only charge a predetermined

level of fees for his services.

SCOPE OF MUTUAL FUND

Scope of Mutual Funds has grown enormously over the years. In the first age of mutual funds,

when the investment management companies started to offer mutual funds, choices were few.

Even though people invested their money in mutual funds as these funds offered them diversified

investment option for the first time. By investing in these funds they were able to diversify their

investment in common stocks, preferred stocks, bonds and other financial securities. At the same

time they also enjoyed the advantage of liquidity. With Mutual Funds, they got the scope of easy

access to their invested funds on requirement.



But, in today‟s world, Scope of Mutual Funds has become so wide, that people sometimes take

long time to decide the mutual fund type, they are going to invest in. Several Investment

Management Companies have emerged over the years who offer various types of Mutual Funds,

each type carrying unique characteristics and different beneficial features.

To understand the broad scope of Mutual Funds we need to discuss the main types of Mutual

Funds that are normally offered by the Mutual Companies. The wide choices in Mutual Funds go

as the following:

Equity Funds or Stock Funds: These types of Mutual Funds generally invest in stocks which

are publicly traded. Amount of risk, involved with these funds vary according to different types

of Equity Funds.

Types of Equity Funds are;

Growth Funds-These funds invest in the stocks, which are under valued compared to their

worth. As these stock prices tend to rise in future and carry good growth potential, Growth Funds

go for these kinds of stocks.

Value Funds-These funds go for long term investment and aims at increase of value over the

years.

International Equity Funds-These funds invest in the stocks of foreign companies.

Global Equity Funds-These funds invest in stocks of both the domestic market and the foreign

markets.

Sector Funds or Specialty Funds-These funds invest in specific sectors like Health care and in

specific commodities like Gold.

Index Funds-These funds reflect the performance of stock market indexes.



MUTUAL FUNDS IN INDIA

The end of millennium marks 36 years of existence of mutual funds in this country. The ride

through these 36 years is not been smooth. Investor opinion is still divided. While some are for

mutual funds others are against it.UTI commenced its operations from July 1964 .The impetus

for establishing a formal institution came from the desire to increase the propensity of the middle

and lower groups to save and to invest. UTI came into existence during a period marked by great

political and economic uncertainty in India. With war on the borders and economic turmoil that

depressed the financial market, entrepreneurs were hesitant to enter capital market. The already

existing companies found it difficult to raise fresh capital, as investors did not respond

adequately to new issues. Earnest efforts were required to canalize savings of the community

into productive uses in order to speed up the process of industrial growth. The then Finance

Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or

institution to purchase the units offered by the trust. However, this institution as we see it, is

intended to cater to the needs of individual investors, and even among them as far as possible, to

those whose means are small."

His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the

twin objectives of mobilizing retail savings and investing those savings in the capital market and

passing on the benefits so accrued to the small investors.

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. Different provisions of the UTI

Act laid down the structure of management, scope of business, powers and functions of the Trust

as well as accounting, disclosures and regulatory requirements for the Trust.

One thing is certain – the fund industry is here to stay. The industry was one-entity show till

1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the

arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public

sector banks. Starting with an asset base of Rs. 0.25 bn in 1964 the industry has grown at a

compounded average growth rate of 26.34% to its current size of Rs. 1130 bn.

The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From

one player in 1985 the number increased to 8 in 2004. The party did not last long. When the

private sector made its debut in 2004-05, the stock market was booming.

The opening up of the asset management business to private sector in 2004 saw international

players like Morgan Stanley, Jardine Fleming, JP Morgan, George Soros and Capital

International; along with the host of domestic players join the party. But for the equity funds, the

period of 2004-05 was one of the worst in the history of Indian Mutual Funds.

2004-2005 Year of the funds



Mutual funds have been around for a long period of time to be precise for 36 yrs but the year

2004 saw immense future potential and developments in this sector. This year signaled the year

of resurgence of mutual funds and the regaining of investor confidence in these MF‟s. This time

around all the participants are involved in the revival of the funds ----- the AMC‟s, the unit

holders, the other related parties. However the sole factor that gave lift to the revival of the funds

was the Union Budget. The budget brought about a large number of changes in one stroke. An

insight of the Union Budget on mutual funds taxation benefits is provided later.

It provided cent restage to the mutual funds, made them more attractive and provides

acceptability among the investors. The Union Budget exempted mutual fund dividend given out

by equity-oriented schemes from tax, both at the hands of the investor as well as the mutual fund.

No longer were the mutual funds interested in selling the concept of mutual funds they wanted to

talk business which would mean to increase asset base, and to get asset base and investor base

they had to be fully armed with a whole lot of schemes for every investor .So new schemes for

new IPO‟s were inevitable. The quest to attract investors extended beyond just new schemes.

The funds started to regulate themselves and were all out on winning the trust and confidence of

the investors under the aegis of the Association of Mutual Funds of India (AMFI). One can say

that the industry is moving from infancy to adolescence, the industry is maturing and the

investors and funds are frankly and openly discussing difficulties opportunities and compulsions.

THE CONCEPT OF MUTUAL FUNDS



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.

The new entries of mutual fund companies in India were SBI Mutual Fund, Canbank 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 billion. 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 IN INDIA



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 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 organisation 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 crores.

http://finance.indiamart.com/india_business_information/abn_amro.html



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.

HDFC Mutual Fund

HDFC Mutual Fund was setup on June 30, 2000 with two sponsorers namely Housing

Development Finance Corporation Limited and Standard Life Investments Limited.

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

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 sponsorers, Prudential Plc. and ICICI Ltd. The Trustee Company formed

http://finance.indiamart.com/india_business_information/bank_of_baroda.html

http://finance.indiamart.com/india_business_information/hdfc.html

http://finance.indiamart.com/india_business_information/hsbc.html

http://finance.indiamart.com/india_business_information/prudential_icici.html



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.

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 Crores 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 Company Pvt. Limited. Tata Asset

http://finance.indiamart.com/india_business_information/sahara.html

http://finance.indiamart.com/india_business_information/sbi.html

http://finance.indiamart.com/india_business_information/tata.html



Management Limited's is one of the fastest in the country with more than Rs. 7,703 crores (as on

April 30, 2005) of AUM.

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.

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 Crore. The sponsorers 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.

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.

Franklin Templeton India Mutual Fund

The group, Frnaklin 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.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 Liquid

schemes, closed end Income schemes and Open end Fund of Funds schemes to offer.

Morgan Stanley Mutual Fund India

Morgan Stanley is a worldwide financial services company and it‟s 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.



REGULATORY FRAMEWORK OF MUTUAL FUNDS

SEBI, the regulatory authority for the Indian Mutual fund industry has consistently introduced

several regulatory measures and amendments in order to protect the interests of small investors.

The Securities Exchange Board of India (Mutual Funds) Regulations, 1996, is the principal

regulation for the Mutual fund industry in India. This was amended several times with the latest

amendment being issued in 2006.

The key provisions of the „SEBI Regulations, 1996‟ include:

All the schemes to be launched by the AMC needs to be approved by the Board of Trustees and

copies of offer documents of such schemes are to be filed with SEBI. The offer documents shall

contain adequate disclosures to enable the investors to make informed decisions.

The listing of close-ended schemes is mandatory and they should be listed on a recognized stock

exchange within six months from the closure of subscription. However, the listing is not

mandatory in case (i) the scheme provides for monthly income or caters to senior citizens,

women, children and physically handicapped; (ii) if the scheme discloses details of repurchase in

the offer document; or (iii) if the scheme opens for repurchase within six months of closure of

subscription.

Units of a close-ended scheme can be opened for sale or redemption at a predetermined fixed

interval if the minimum and maximum amount of sale, redemption and periodicity is disclosed in

the offer document.



Units of a close-ended scheme can be converted into an open-ended scheme with the consent of a

majority of the unit-holders and disclosure is made in the offer document about the option and

period of conversion.

No scheme other than unit-linked scheme can be opened for subscription for more than 45 days.

Further, the minimum subscription and the extent of over-subscription that is intended to be

retained should be specified in the offer document. In the case of over-subscription, all applicants

applying up to 5,000 units must be given full allotment subject to over subscription.

The AMC is required to refund the application money if minimum subscription is not received,

and also the excess over subscription within six weeks of closure of subscription. A close-ended

scheme shall be wound up on redemption date, unless it is rolled over, or if 75% of the unit-

holders of a scheme pass a resolution for winding up of the scheme; if the trustees on the

happening of any event require the scheme to be wound up; or if SEBI, so directs in the interest

of investors.

Some of the provisions in the “SEBI Regulations, 1996” were amended in the guidelines issued

in 2001-02. Highlights of “SEBI Guidelines (2001-02)” relating to mutual funds are as follows:

Initial offer period to be reduced to a maximum of 30 days from 45 days

To invest in mortgage backed securities of investment grade given by credit rating agency.

To identify and make provision for the non-performing assets (NPAs) according to criteria

for classification of NPAs and treatment of income accrued on NPAs.



All the schemes shall be launched within six months from the date of letter containing

observations from SEBI on the scheme offer document.

To disclose large unit-holdings in the scheme, which are over 25% of the NAV.

In addition, the SEBI took various measures and issued guidelines to facilitate operations of

mutual funds. As part of these measures, mutual funds were allowed to invest in foreign debt

securities in the countries with full convertible currencies and with highest foreign currency

credit rating by accredited credit rating agencies. They were also allowed to invest in

government securities where the countries are AAA rated. Moreover, guidelines were issued for

valuation of unlisted equity shares in order to bring about uniformity in the calculation of NAVs

of mutual fund schemes. In order to allow mutual funds to invest in both gold and gold related

instruments, the SEBI amended its regulation in 2006. The amended regulation, “Securities and

Exchange Board of India (Mutual Funds) (Amendment) Regulation, 2006” permits introduction

of Gold Exchange Traded Fund (GETF) Schemes by mutual fund. The new mutual fund scheme

can invest primarily in gold and gold related instruments, subject to certain investment

restrictions.



DATA ANALYSIS

EQUITY LARGE CAP FUNDS

These are the funds which have investment predominantly in large cap stock. These are the

stocks which has a solid track record and sound fundamentals. These are the less risky stocks and

hence generally have low growth rates when compares to small and mid-cap stocks.

In this category fund from SBI, Magnum Equity has been taken, since it has significant exposure

to large cap stocks (92.16%).

The following are the top performing funds in the category:

a) Birla sun life frontline equity

b) DSP Merill Lynch Top 100 Equity

c) SUNDARAM BNP Paribas Select Focus

d) RELIANCE VISION

e) KOTAK 30

f) Magnum Equity



ANALYSIS

1. FUNDS‟ RETURNS

INT

ERP

RET

ATI

ON:

In

past

six months, Birla sun life frontline equity is the winner, since it has fallen by only (9.53%)

compared to highest fall in SUNDARAM BNP Paribas select Focus (17.66%).Also, Magnum

Equity from SBI was not able to withstand ups and downs in the market witnessed in last six

months since it has fallen by 16.33% which is the second highest fall.

In one year category, SUNDARAM BNP Paribas Select Focus tops the charts, giving the

highest return of 33.05%, when compared to the lowest of 16.26% given by RELIANCE

VISION.



In three year category SUNDARAM BNP Paribas Select Focus top the charts giving solid

return of 43.6% followed closely by DSP Merrill Lynch Top 100 Equity giving a return of

41.42% and KOTAK 30 giving a return of 40.82%.

In five year category KOTAK 30 top the chars giving a return of 50.13% while Magnum

Equity stands at only 5thPosition giving the return of 47.22%

2. RISK ANALYSIS

Source : Value Research Online

Standard Deviation is the measure which shows variability in returns from the main return.

Therefore, it is considered to be a direct measure to the risk. As per the Standard Deviation,



SUNDARAM BNP PARIBAS SELECT FOCUS (29.85%) is having the highest risk in the

category compared to lowest risk Birla Sun Life Frontline Equity (21.9%).

Sharpe Ratio means returns per unit of risk that a firm is able to generate. The higher the

ratio better it is. The return per unit of risk is highest in case of Birla Sun Lire frontline

Equity (1.51) while RELIANCE VISION is having one of the lowest Sharpe Ratio

(1.18)indicating that fund is not able o generate enough return compared to the risk is taking

while investing.

Beta shows the co-movement of funds return with Market rate of return. It measures

volatility or risk. SUNDARAM BNP PARIBAS SELECT FOCUS is having highest Beta

(1.15) in category signifying its aggressive nature. Since Beta is more than 1 it signifies the

fund is highly sensitive to the rise or fall in the stock market. Birla Sunlife Frontline Equity is

having lowest Beta (0.84) again signifying that it has the least risky profile in the category.

Alpha measures the excess return over and above the market return. A positive Alpha is

good sign for the fund. As per Alpha measure of risk, Birla Sun life Frontline equity is again

the best fund in the category, giving the highest excess returns than the market fund, in the

category, giving the highest excess returns than the market (6.46%). On the other hand

RELIANCE VISION is not able to generate Alpha returns with lowest alpha generating fund

in the category (0.09%).



R-Squared explains the change in return caused by market volatility. A moderate R-squared

valued ranging between (65% - 85%) is considered good for portfolio. Among the funds DSP

Merill Lynch Top 100 Equity is having highest values of 0.96 which tells us that all funds are

significantly influenced by Market and thus not taking help of Professional Management at

its optimum.

3. PORTFOLIO ANALYSIS

INTERPRETATION:

As per P/E Ratio Magnum Equity is the winner in the category, it is having highest ratio of

48.58 which means the investors are really confident about the fund and they are paying

much higher than the earnings.



Portfolio Turnover measures the extent to which the fund is active in terms of dealings in the

market. However, high turnover also implies that high transaction costs are charged to funds.

In this category Magnum Equity has lowest turnover ratio (5) suggesting that Fund Manager

managing the Fund without much changing in the portfolio and saving the transaction cost.

On the other hand DSP Merrill Lynch is having the highest portfolio turnover ratio of

(321.82) thus incurring the highest transaction cost.

As per the fund size RELIANCE VISION is managing the highest fund of (3,864.67crores)

indicating its brand name and penetration in the market.

Concentration Level: As per this criterion, Magnum Equity is having highest Top five

holdings in the category (36.09%) indicating that it is the least diversified fund in the

category. Birla Sun life Frontline equity is having lowest (20.45%) top five holdings

indicating that is the most diversified fund in the category thus taking advantage

of diversification.

CONCLUSION

The idea of mutual funds came into existence for the layman to get a piece of the market. For this

purpose, they were created by professionals who built a portfolio of stocks based on their

understanding of the market, so that its investors need not spend time buried in financial pages

of wall street journal or any other financial daily. The underlying benefit was risk diversification

without having the need to dedicate any time to studying and following the markets.



CLAIMS OF SUPERIOR PERFORMANCE ARE FREQUENTLY MADE BY FINANCIAL

COMPANIES TO ATTRACT INVESTORS TO BUY SHARES IN THEIR FUNDS. THE

FUND MANAGERS CLAIM THAT THEY BEAT THE MARKET IN THE PAST USING

THEIR TIMING AND SELECTIVITY SKILLS. STUDIES FIND THAT THERE IS LITTLE

EVIDENCE FOR SUPERIOR PERFORMANCE BY MUTUAL FUNDS OR THEIR

MANAGERS ON AN AVERAGE. THERE ARE, HOWEVER, PERIODS DURING WHICH A

FUND OR A GROUP OF FUNDS MAY PERFORM WELL. FOR EXAMPLE, FIDELITY'S

MAGELLAN FUND PRODUCED EXCELLENT RESULTS DURING THE 1980'S. THE

CONCLUSION MOST PERFORMANCE MEASUREMENT STUDIES DRAW FROM LONG

TERM STUDIES IS THAT THE RETURNS AN INVESTOR EARNS BY INVESTING IN

MUTUAL FUNDS ARE IN-LINE WITH OR LESS THAN WHAT THE INVESTOR

SHOULD HAVE EARNED BASED ON THE RISK TAKEN. EVEN IF SOME MUTUAL

FUND MANAGERS HAVE SUPERIOR SKILLS, THEY CHARGE FEES

COMMENSURATE WITH THEIR SKILLS, SO THAT THE BENEFITS OF THEIR SKILLS

ACCRUE TO THEM AND NOT TO THE INVESTORS. INVESTORS, THEREFORE,

SHOULD INVEST IN MUTUAL FUNDS FOR REASONS OF DIVERSIFICATION, AND

NOT NECESSARILY FOR SUPERIOR PERFORMANCE.

After considering all three parameters for data analysis birla sunlife frontline equity tops the

chart in investment by investors due to many reasons like highly diversified portfolio, high return

per unit of risk, low standard deviation and its low volatility with change in the market.

List of Abbreviations

Abbreviations Full Forms

SBI State Bank Of India

CEO Chief Executive Officer

UTI Unit Trust Of India



REFRENCES

1. How Mutual Funds Work by Albert J . Fredman & Russ Wiles.

2. AMFI –Mutual Fund Testing Programme for Distributors & Employees of

Mutual Funds in India.

3. Fact Sheets of various Mutual Funds December 2005

4. Economic Times

LIC Life Insurance Corporation of India

GIC General Insurance Corporation Of India

BOI Bank Of India

AMC Asset Management Company

ABN Algamene Bank Nederland

RBI Reserve Bank Of India

IPO Initial Public Offering

AUM Assets Under Management

AMRO Amsterdam-Rotterdam

MF Mutual Fund

SEBI Securities And Exchange Board Of India

PMF Public Sector Mutual Funds



5. www.mutualfundindia.com

6. www.amfiindia.com

7. http://www.vsrdjournals.com/MBA/Issue/2012_04_Apr/Web/5_Sarish_652

_Research_Communication_Apr_2012.pdf

8. http://rspublication.com/ijrm/march%2012/6.pdf

http://www.mutualfundindia.com/

http://www.amfiindia.com/

http://www.vsrdjournals.com/MBA/Issue/2012_04_Apr/Web/5_Sarish_652_Research_Communication_Apr_2012.pdf

http://www.vsrdjournals.com/MBA/Issue/2012_04_Apr/Web/5_Sarish_652_Research_Communication_Apr_2012.pdf

Analysis Of Mutual Funds in Indian Market

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