Bunty Sip Org

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CHAPTER-1


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EXECUTIVE SUMMARY

The project has been carried out at Share Khan Ltd with the titleComparative Analysis ofSelected Mutual Fund. The main function of having analysis of Mutual fund is to pinpoint the

strong points and weaknesses of mutual fund schemes For this I have taken the following

parameters: Analyzing Mutual Fund using:-

Beta: - By comparing Mutual Fund on the basis of beta we come to know how volatile a

particular Mutual Fund as related to stock market .

Standard Deviation: - The standard deviation of a fund measures this risk by measuring the

degree to which the fund fluctuates in relation to its mean return.

Sharpe Ratio: - Sharpe ratio is used to measure risk-adjusted performance. It tells us whether a

portfolios return are due to smart investment decision or a result of excess risk.

The schemes selected for project are:

1. Equity Diversified2. Tax saver funds

Thus concluded from the project that from the above schemes tax saver schemes has a better

performance than the equity funds as the risk observed in tax saver funds are less than the equity

funds risk and they are giving comparatively better returns than the equity funds.


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OBJECTIVES OF STUDY

To measure the risk & return associated with the mutual funds. To compare the mutual fund schemes on the basis of various

parameters.


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RESEARCH METHODOLOGY

Research Methodology is a very organized and systematic medium through which aparticular case or problem can be solved.

It is analytical, descriptive and quantitative research where the comparison betweenthe different mutual fund scheme is made on the basis of risk, volatility and return.

For data collection purpose the secondary source was used like mutual fund factsheet,Books and websites.

Methodology Used:

Descriptive Analytical Research

Under this type the researcher has to use the facts and information already availableand analyze them to make evaluation of the market.

In analytical research the researcher has to use the facts already available, and analyzethese to make the critical evaluation data of the material.

Data has been collected from the Fact sheet of the various mutual fund schemes andused those datas for the research. In fact sheet past returns were given of different

funds.

Data also included value of risk measuring instruments like Standard Deviation, Beta etc.Comparisons of mutual funds are done by using following measures:

Beta Standard Deviation Sharpe Index


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Beta

Beta is useful statistical measure, which determines the volatility, or risk, of a fund in

comparison to that of its index or benchmark. A fund with a beta very close to 1 means the fund's

performance closely matches the index or benchmark. A beta greater than 1 indicates greater

volatility than the overall market, and a beta less than 1 indicates less volatility than the

benchmark.

Standard Deviation

The standard deviation essentially reports a fund's volatility, which indicates the tendency of thereturns to rise or fall drastically in a short period of time. A security that is volatile is also

considered higher risk because its performance may change quickly in either direction at any

moment. The standard deviation of a fund measures this risk by measuring the degree to which

the fund fluctuates in relation to its mean return.

Sharpe Index

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.


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SCOPE OF THE STUDY

The funds are selected to which Share khan is advisor. The Schemes were categorizedand selected on evaluating their performance and relative risk.

The scope of the project is mainly concentrated on the different categories of the mutualfunds such as equity schemes and equity linked savings schemes etc.

LIMITATIONS OF THE STUDY

The project is unable to analyze each and every scheme of mutual funds. All the datas were not available in the websites. Selection of the schemes for the study is also a very difficult task because of the wide

variety of schemes.

Time is the critical factor limiting the study.


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Chapter 2:


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Literature Review

CONCEPTUAL STUDY

Since 1990 there has been a tremendous growth in the investment in international mutual funds.

This growth is likely to continue as domestic stock market cools down and more U.S. investors

seek higher returns as well as the diversification benefits of foreign assets. Investors are also

attracted to international funds in the belief that such funds earn abnormally high returns because

of the previous relative inefficiency in those markets. This study examines the annual risk-

adjusted returns using Sharpes Index for ten portfolios of international mutual funds for the

period September 2000 through September 2006. The international funds were analyzed by

combining the funds into individual portfolios based on sector, geographic and company size.

The benchmarks for comparison were the U.S. mutual fund performance reported by

Morningstar. The risk-adjusted returns were then determined and compared to each other and to

the U.S. market. During this period, nine out of ten of the international mutual fund portfolios

outperformed the U.S. market. The portfolio that contained all International Mutual Funds (IMF)

significantly outperformed on a risk-adjusted basis the fund that was made up of all of the U.S.

stock mutual funds, (All U.S. Stock Funds- USSF). Additionally, the Foreign Small Value (FSV)

portfolio, Foreign Small Growth (FSG) portfolio, Emerging Markets (EM) portfolio, Latin

America (LA) portfolio, and the Pacific Asia without Japan (PA-J) portfolio all had average

annual returns (not adjusted for risk) that exceeded USMFs returns by more than 10 percent.

In the aftermath of the 1997 Asian crisis and the 1998 Russian debacle, investors began to

question the benefits of international diversification and in particular investing in emerging

markets. After a short period of lower investing rates, investors returned strongly to international

mutual fund investments. The market responded. As of 2005, almost one-half of the total net

asset value of mutual funds is in non-U.S. funds. Most economists believe that the recent trend

for investors to increase the holding of international stocks and mutual funds will continue.

There are of course advantages and also unique risks for investors to include non-U.S. mutual

funds in their portfolios. Many of the best-known brands in the U.S. are actually owned by

foreign firms. The majority of these firms are focused on maximizing shareholder value. There

are a large number of firms, and of course their stocks domiciled outside of the U.S., that have


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extraordinary growth and earning potential. New technologies, advancements in transportation,

communication and political changes have created a global economy where currencies are

merging and borders are more transparent. With the globalization of the world, competition will

be more formidable, which will provide more equity opportunities. Companies outside the U.S.

dominate major industries in the world. Worldwide economic expansion has sparked growth of

many foreign companies making them increasingly attractive with large cash holdings and

aggressive expansion plans.

Investing in international markets provides greater investment diversification that may reduce the

overall portfolio risk. Markets of the world are not perfectly correlated and do not move in

lockstep. A downturn in one countrys economy may be offset by a rise in another.

Including non-U.S. stocks in domestic portfolios does result in an increase in the standard

deviation of the portfolio. Though, the higher risk is usually associated with a higher portfolio

return. There is evidence that foreign markets are more volatile and emerging markets are

especially instable. However, volatility measures upward movement as well as downward.

Foreign governments can change quickly and with the change in power there can be a disruption

in the business environment. Currency risk is a concern. Changes in the exchange rate with

respect to the dollar can impact valuations and returns.

Evaluation of the performance of mutual fund managers is a topic of considerable interest to

practitioners and academics alike. To date, most mutual fund performance evaluations have been

fairly simplistic: how has a fund performed relative to "the market"? The Standard & Poor's 500

Stock Index is usually used as a proxy for the market, despite the fact that it accounts for only

about 70% of the capitalization of the U.S. stock market and is dominated by corporations with

gigantic market capitalizations. The decision is normally based on historical returns without any

further analysis of relevant risks. When risk is considered, if at all, it is generally in the context

of comparing the return of a fund to its peer group; for example, a small cap growth fund is

compared with other small cap growth funds or relevant Exchange Traded Funds (such as I

Shares Russell 2000 growth index, IWO or I Shares S&P Small Cap 600/BARRA Growth (IJT))

or some official benchmark index. This method also ignores extremely different risk/return

profiles of funds. Sharpes Reward to Variability ration (R/V), a useful measure of performance

is utilized in this empirical study of mutual funds. The numerator shows the difference between


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the funds average annual return and the risk free interest rate; it is thus the reward provided for

investor for bearing risk. The denominator measures the standard deviation of the annual rate of

return; it shows the amount of risk actually borne. The ratio is thus the reward per unit of

variability and the purpose of this study is to quantify this reward to variability ratio, which is

also known as risk-adjusted performance, of international mutual funds relative to U.S. mutual

funds for the period 2000 to 2005. This study examines the R/V ratios for ten portfolios made up

of foreign mutual funds. The international portfolios were formed by combining funds into

individual portfolios based on sector, geographics and company size. The benchmark for

comparison was the U.S. mutual fund performance reported by Morningstar

Investors have a large array of mutual funds to select from to form their investment portfolio.

Mutual fund offerings have grown in numbers and many funds are very specialized. There are

over 10,000 mutual funds; the majority concentrates on specific industries, firm size, geography

or growth expectations (risk). Investors may not fully take advantage of possible portfolio risk

reduction and higher returns if they exclude international mutual funds from their portfolio. This

study shows that performance can be evaluated with a simple, yet theoretically meaningful

measure that considers both average return and risk. During the study period, foreign mutual

funds appear to have more volatility and higher risk but have outperformed U.S. mutual funds in

nominal and risk-adjusted terms. Predicting in advance which mutual funds would outperform is

difficult and the cost of selecting the "wrong" mutual fund is very high. Investors have to keep in

mind that sound investment decision-making combines the science of quantitative analysis with

the art of qualitative judgment and reason.

Literature on mutual fund performance evaluation is enormous. A few research studies that have

influenced the preparation of this paper substantially are discussed in this section. Sharpe,

William F. (1966) suggested a measure for the evaluation of portfolio performance .Drawing on

results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new

predictor of mutual fund performance, one that differs from virtually all those used previously by

incorporating the volatility of a fund's return in a simple yet meaning full manner .Michael C.

Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensens alpha) that

estimates how much a managers forecasting ability contributes to funds returns. As indicated


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by Stat man (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the

return of the benchmark index, where the portfolio is leveraged to have the benchmark indexs

standard deviation.S.Narayan Rao, etc. al., evaluated performance of Indian mutual funds in a

bear market through relative performance index, risk-return analysis, Treynors ratio, Sharpes

ratio, Sharpes measure , Jensens measure, and Famas measure. The study used 269 open -

ended schemes (out of total schemes of 433) for computing relative performance index. Then

after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used

for further analysis. The results of performance measures suggest that most of mutual fund

schemes in the sample of 58were able to satisfy investors expectations by giving excess returns

over expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al.,

conducted an empirical study on conditional performance of Indian mutual funds. This paper

uses a technique called conditional performance evaluation on a sample of eighty-nine Indian

mutual fund schemes .This paper measures the performance of various mutual funds with both

unconditional and conditional form of CAPM, Treynor- Mazuy model and Henriksson-Merton

model. The effect of incorporating lagged information variables into the evaluation of mutual

fund managers performance is examined in the Indian context. The results suggest that the use

of conditioning lagged information variables improves the performance of mutual fund schemes,

causing alphas to shift towards right and reducing the number of negative timing coefficients.

Mishra, et al.,(2002) measured mutual fund performance using lower partial moment. In this

paper, measures of evaluating portfolio performance based on lower partial moment are

developed. Risk from the lower partial moment is measured by taking into account only those

states in which return is below a pre-specified target rate like risk-free rate.

According to Fernandez (2003) evaluated index fund implementation in India. In this paper,

tracking error of index funds in India is measured .The consistency and level of tracking errors

obtained by some well-run index fund suggests that it is possible to attain low levels of tracking

error under Indian conditions. At the same time, there do seem to be periods where certain index

funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction

of mutual fund portfolios, developed a multi-criteria methodology and applied it to the Greek

market of equity mutual funds. The methodology is based on the combination of discrete and

continuous multi-criteria decision aid methods for mutual fund selection and composition.

UTADIS multi-criteria decision aid method is employed in order to develop mutual funds


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performance models. Goal programming model is employed to determine proportion of selected

mutual funds in the final portfolios.

According to Antonella Basso and Stefanie Funari of Dipartimento di Matematica

Applicata B.de Finetti, Universit di Trieste, Piazzale Europa, 1, 34127 Trieste, Italy and

Dipartimento di Matematica Applicata, Universit Ca' Foscari di Venezia, Dorsoduro 3825/E,

30123 Venezia, Italy respectively discussed in this paper about A data envelopment analysis

approach to measure the mutual fund performance.In this paper they present a model which can

be used to evaluate the performance of mutual funds. This model applies an operational research

methodology, called data envelopment analysis (DEA), which allows to measure the relative

efficiency of decision making units. This approach allows defining mutual fund performance

indexes that can take into account several inputs and thus consider different risk measures and,

above all, the investment costs (subscription costs and redemption fees).

According to Treynor and Mazuy (1966). Jensen (1968). Kon and Jen

(1979). Henriksson and Merton (1981), Chang and Lewellen (1984), Henriksson (1984), and

Jagannathan and Korajczyk (1986). to name but a few. These studies have generally concluded

that mutual fund managed can not consistently time the market or select under-priced securities.

This has led to the conclusion that long-term individual mutual fund performance can best be

described as random. Very few studies have attempted to explain the flow of money into and out

of mutual funds. The remaining pages of this chapter are devoted to a review of the studies

related to this topic.

According to Harry Markowitz (1952) atheory about how investors should

select securities for their investment portfolio given beliefs about future performance. He claims

that rational investors consider higher expected return as good and high variability of those

returns as bad. From this simple construct, he says that the decision rule should be to diversify

among all securities, securities which give the maximum expected returns. His rule recommends

the portfolio with the highest return is not the one with the lowest variance of returns and that

there is a rate at which an investor can increase return by increasing variance. This is the

cornerstone of portfolio theory as we know it. His portfolio theory shows that an investor has a

choice of combinations of return and variance depending on the percentage of wealth invested in

various combinations of risky assets. From this, he shows that a plot of all possible combinations

of wealth divided among possible combinations of securities will result in a circle. This circle


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mill be plotted on an xy grid with return planed on one axis and risk, as measured by variance on

the other axis. The notion that investors desire to maximize return for a given risk gives rise to

some combinations of securities dominating others in terms of risk and return characteristic.

These dominant portfolios are said to lie on the "efficient frontier" When an asset with no risk is

added as an investment option, it shows that investors can mvtde their wealth between the risk

free asset and a portfolio of the risky assets.

According to William Sharpe (1964)' and John Lintner (1965) show that the

theory implies that the rates of return from efficient combinations of risky assets move together

perfectly (will be perfectly correlated). This could result from their common dependence on

general economic activity. If this is so, diversification among risky assets enables investors to

escape from all risks except the risk resulting from changes in economic activity. Therefore, only

the responsiveness of an asset return to changes in economic activity is relevant in assessing its

risk. Investor only needs to be concerned with systematic risk [beta], not the total risk proposed

by Markowitz. Thus gave birth to the "Security Market Line" (SML). The difference between the

Capital Market Line (CML) and SML is the measure of risk used for the horizontal axis. The

CML uses the variance of returns, whereas the SML uses the systematic risk termed beta. Beta 1s

defined as the covariance between a security (or portfolio of securities) and the market as a

whole, divided by the variance of the market. The market as a whole is considered the point of

tangency between the SML and the efficient frontier this is the foundation for the Capital Asset

Pricing Model (CAPM).

According to Swaminnthan and Bhaskaran (1994)' made on attempt to

focus on the implications of individual investor behavior for the pricing of close-ended fundsand

small firms. Specifically, they developed a two security, noisy rational expectations model of

closed-end funds and compare its predictions to that of a model of investor sentiment. The

rational model shows that the estimation errors of rational but imperfectly informed small,

individual investors can give rise to average discounts. However, discounts cannot track time

variation in expected returns induced by mean reversion in small investor estimation errors. In

contrast, in a model of investor sentiment, discounts can track time variation in expected returns

induced by mean reversion is small investor sentiment. This implies that discounts can forecast

stock returns either if they are a proxy of investor sentiment or if they are a proxy of some

fundamental factor. Their empirical tests examine the time series implications of the two models.


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The results indicate that discounts forecast small firm returns. They also show that the

forecasting power of discounts is not related to that of any known fundamental forecasting

variable. This evidence provides support for the investor sentiment explanation of the pricing of

closed-end Funds and small firms, and suggests that there may be sentiment related variation in

small firm expected returns.


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EVOLUTION OF STOCK BROKERAGE

INTRODUCTION

Stock exchanges to some extent play an important role as indicators, reflecting the performance

of the countrys economic state of health. Stock market is a place where securities are bought

and sold. It is exposed to a high degree of volatility; prices fluctuate within minutes and are

determined by the demand and supply of stocks at a given time. Stock brokers are the ones who

buys and sells securities on behalf of individuals and institutions for some commission .The

Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the

operations of stock exchanges, banks and other financial institutions .The past performances in

the capital markets especially the securities scam by Hasrshad Mehta has led to tightening of

the operations by SEBI. In addition the international trading and investment exposure has made

it imperative to better operational efficiency. With the view to improve, discipline and bring

greater transparency in this sector, constant efforts are being made and to a certain extent

improvements have been made.

HISTORY OF THE STOCK BROKING INDUSTRY

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly200 years ago.

The earliest records of security dealings in India are meager and obscure. By 1830's business on

corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the

trading list was broader in 1839, there were only half a dozen brokers recognized by banks and

merchants during 1840 and 1850. The1850's witnessed a rapid development of commercial

enterprise and brokerage business attracted many men into the field and by 1860 the number of

brokers increased into 60.In 1860-61 the American Civil War broke out and cotton supply from

United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number ofbrokers increased to about 200 to 250. However, at the end of the American Civil War, in1865, a

disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could

only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of

Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they

would conveniently assemble and transact business. In 1887, they formally established in


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Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as

"The Stock Exchange"). In 1895, the Stock Exchange acquired a premise in the same street and it

was inaugurated in1899. Thus, the Stock Exchange at Bombay was consolidated. Thus in the

same way, gradually with the passage of time number of exchanges were increased and at

currently it reached to the figure of 24 stock exchanges

Development

An important early event in the development of the stock market in India was the formation of

the Native Share and Stock Brokers Association at Bombay in 1875, the precursor of the

present-day Bombay Stock Exchange. This was followed by the formation of associations

/exchanges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). IN addition, a large

number of ephemeral exchanges emerged mainly in buoyant periods to recede into oblivion

during depressing times subsequently. In order to check such aberrations and promote a more

orderly development of the stock market, the central government introduced a legislation called

the Securities Contracts (Regulation) Act, 1956. Under this legislation, it is mandatory on the

part of stock exchanges to seek government recognition. As of January 2002 there were23 stock

exchanges recognized by the central Government. They are located at Ahemdabad, Bangalore,

Baroda, Bhubaneswar, Calcutta, Chennai,(the Madras stock Exchanges ), Cochin, Coimbatore,

Delhi, Guwahati, Hyderabad, Indore, Jaipur,Kanpur, Ludhiana, Mangalore, Mumbai(theNational Stock Exchange or NSE),Mumbai (The Stock Exchange), popularly called the Bombay

Stock Exchange, Mumbai (OTC Exchange of India), Mumbai (The Inter-connected Stock

Exchange of India), Patna, Pune, and Rajkot. Of course, the principle bourses are the National

Stock Exchange and The Bombay Stock Exchange, accounting for the bulk of the business done

on the Indian stock market .While the recognized stock exchanges have been accorded a

privileged position, they are subject to governmental supervision and control. The rules of a

recognized stock exchanges relating to the managerial powers of the governing body, admission,

suspension, expulsion, and re-admission of its members, appointment of authorized

representatives and clerks, so on and so forth have to be approved by the government. These

rules can be amended, varied or rescinded only with the prior approval of the government.


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BSE (BOMBAY STOCK EXCHANGE)

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875as "The

Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the

Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making

Association of Persons (AOP) and is currently engaged in the process of converting itself into

demutualised and corporate entity. It has evolved over the years into its present status as the

premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have

obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts

(Regulation) Act, 1956.The Exchange, while providing an efficient and transparent market for

trading insecurities, debt and derivatives upholds the interests of the investors and ensures

redressal of their grievances whether against the companies or its own member-brokers. It also

strives to educate and enlighten the investors by conducting investor education program and

making available to them necessary informative inputs. A Governing Board having 20 directors

is the apex body, which decides the policies and regulates the affairs of the Exchange. The

Governing Board consists of 9elected directors, who are from the broking community (one third

of them retire ever year by rotation), three SEBI nominees, six public representatives and an

Executive Director & Chief Executive Officer and a Chief Operating Officer.

NSE (NATIONAL STOCK EXCHANGE)

NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It

started operations in June 1994, with trading on the Wholesale Debt Market Segment.

Subsequently it launched the Capital Market Segment in November 1994 as a trading platform

for equities and the Futures and Options Segment in June 2000 for various derivative

instruments.NSE has been able to take the stock market to the doorsteps of the investors. The

technology has been harnessed to deliver the services to the investors across the country at the

cheapest possible cost. It provides a nation-wide, screen-based, automated trading system, with a

high degree of transparency and equal access to investors irrespective of geographical location.

The high level of information dissemination through on-line system has helped in integrating

retail investors on a nation-wide basis. The standards set by the exchange in terms of market


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practices, Products, technology and service standards have become industry benchmarks and are

being replicated by other market participants. Within a very short span of time, NSE has been

able to achieve all the objectives for which it was set up. It has been playing a leading role as a

change agent in transforming the Indian Capital Markets to its present form. The Indian Capital

Markets are a far cry from what they used to be a decade ago in terms of market practices,

infrastructure, technology, risk management, clearing and settlement and investor service.


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MUTUAL FUND CONCEPT

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

financial goal. This pool of money is invested in accordance with a stated objective. The joint

ownership of the fund is thus Mutual, i.e. the fund belongs to all investors. The money thus

collected is then invested in capital market instrument such as shares, debentures and other

securities. The income earned through these investments and the capital appreciations realized

are shared by its unit holders in proportion 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 basket of securities at a relatively low cost. A Mutual Fund

is an investment tool that allows small investors access to a well diversified portfolio of equities,bonds and other securities. Each share holder participants in the gain or loss of the fund. Units

are issued and can be redeemed as needed. The funds Net Asset value (NAV) is determined

each day. Investment in securities are spread across a wide cross-section of industries and sectors

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

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

accordance with quantum of money invested by them. Investors of mutual funds are known as

unit holders.


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Evolution of Mutual Funds

The first mutual funds were established in Europe. One researcher credits a Dutch merchant with

creating the first mutual fund in 1774.]The first mutual fund outside the Netherlands was the

Foreign & Colonial Government Trust, which was established in London in 1868. It is now the

Foreign & Colonial Investment Trust and trades on the London stock exchange.

Mutual funds were introduced into the United States in the 1890s. They became popular during

the 1920s. These early funds were generally of the closed-end type with a fixed number of shares

which often traded at prices above the value of the portfolio.

The first open-end mutual fund with redeemable shares was established on March 21, 1924. This

fund, the Massachusetts Investors Trust, is now part of the MFS family of funds. However,

closed-end funds remained more popular than open-end funds throughout the 1920s. By 1929,

open-end funds accounted for only 5% of the industry's $27 billion in total assets.

After the stock market crash of 1929, Congress passed a series of acts regulating the securities

markets in general and mutual funds in particular. The Securities Act of 1933 requires that all

investments sold to the public, including mutual funds, be registered with the Securities andExchange Commission and that they provide prospective investors with a prospectus that

discloses essential facts about the investment. The Securities and Exchange Act of 1934 requires

that issuers of securities, including mutual funds, report regularly to their investors; this act also

created the Securities and Exchange Commission, which is the principal regulator of mutual

funds. The Revenue Act of 1936 established guidelines for the taxation of mutual funds, while

the Investment Company Act of 1940 governs their structure.

When confidence in the stock market returned in the 1950s, the mutual fund industry began to

grow again. By 1970, there were approximately 360 funds with $48 billion in assets. The

introduction of money market funds in the high interest rate environment of the late 1970s

boosted industry growth dramatically. The first retail index fund, First Index Investment Trust,

was formed in 1976 by The Vanguard Group, headed by John Bogle; it is now called the
http://en.wikipedia.org/wiki/Mutual_fund#cite_note-4http://en.wikipedia.org/wiki/Mutual_fund#cite_note-4http://en.wikipedia.org/wiki/Mutual_fund#cite_note-4http://en.wikipedia.org/wiki/Mutual_fund#cite_note-4


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Vanguard 500 Index Fund and is one of the world's largest mutual funds, with more than $100

billion in assets as of January 31, 2011.

Fund industry growth continued into the 1980s and 1990s, as a result of three factors: a bull

market for both stocks and bonds, new product introductions (including tax-exempt bond, sector,

international and target date funds) and wider distribution of fund shares. Among the new

distribution channels were retirement plans. Mutual funds are now the preferred investment

option in certain types of fast-growing retirement plans, specifically in 401(k) and other defined

contribution plans and in individual retirement accounts (IRAs), all of which surged in popularity

in the 1980s. Total mutual fund assets fell in 2008 as a result of the credit crisis of 2008.

In 2003, the mutual fund industry was involved in a scandal involving unequal treatment of fund

shareholders. Some fund management companies allowed favored investors to engage in late

trading, which is illegal, or market timing, which is a practice prohibited by fund policy. The

scandal was initially discovered by then-New York State Attorney General Eliot Spitzer and

resulted in significantly increased regulation of the industry.

At the end of 2010, there were over 15,000 mutual funds of all types in the United States with

combined assets of $13.1 trillion, according to the Investment Company Institute (ICI), a

national trade association of investment companies in the United States. The ICI reports thatworldwide mutual fund assets were $24.7 trillion on the same date.

Mutual funds play an important role in U.S. household finances. At the end of 2010, they

accounted for 23% of household financial assets. Their role in retirement planning is particularly

significant. Roughly half of assets in 401(k) plans and individual retirement accounts were

invested in mutual funds.


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MUTUAL FUNDS IN INDIA

The first introduction of a mutual fund in India occurred in 1963, when the Government of India

launched Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual

fund market. Then a host of other government-controlled Indian financial companies came up

with their own funds. These included State Bank of India, Canara Bank, and Punjab National

Bank. This market was made open to private players in 1993, as a result of the historic

constitutional amendments brought forward by the then Congress-led government under the

existing regime of Liberalization, Privatization and Globalization (LPG). The first private sector

fund to operate in India was Kothari Pioneer, which later merged with Franklin Templeton.

History of Mutual Funds in India

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

initiative of the Government of India and Reserve Bank. Though the growth was slow, but it

accelerated from the year 1987 when non-UTI players entered the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,

both qualities wise as well as quantity wise. Before, the monopoly of the market had seen an

ending phase; the Assets Under Management (AUM) was Rs67 billion. The private sector entry

to the fund family raised the Aum to Rs. 470 billion in March 1993 and till April 2004; it reached

the height if Rs. 1540 billion. The Mutual Fund Industry is obviously growing at a tremendous

space with the mutual fund industry can be broadly put into four phases according to the

development of the sector. Each phase is briefly described as under.

First Phase1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament 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 crores of assets

under management.


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Second Phase1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and

Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC).

SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by

Canara 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

established its mutual fund in June 1989 while GIC had set up its mutual fund in December

1990.At the end of 1993, the mutual fund industry had assets under management of Rs.47,004

crores.

Third Phase1993-2003 (Entry of Private Sector Funds)

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 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. As at the end of January 2003, there were 33 mutual funds with total

assets of Rs. 1, 21,805 crores.

Fourth Phasesince February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated

into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets

under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other 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. Consolidation and growth. As at the end of September, 2004, therewere 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

STRUCTURE OF MUTUAL FUNDS

Every Mutual fund will comprise a sponsor, trustee, AMC, custodian and registrar, and is

regulated by SEBI .The structure of mutual fund is discussed in detail.


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Sponsor

The company that sets up the MF is called the sponsor. It is typically a financial institution, bank,

investment house or even an individual that contributes at least 40 per cent to the net worth of theasset management company (AMC) .The sponsor initiates the fund's activities by appointing the

trustees, the AMC and custodians.

Trustee

The trustee monitors the operations of the various schemes and safeguards investor interests. The

trustees can also review the AMCs operations and transactions, including contracts with various

agencies such as custodians and registrars.

Asset management company

.The AMC seeks to multiply the invested money in the fund in line with the scheme's investment

objective. It should have a net worth of at least Rs 10 crore. The AMC is a key player in the MF

game and does everything to make the most of your investment. It launches new schemes,

manages them, and employs the fund management team, including the fund manager. The

sponsor appoints the AMC and the trustees review its operations.

Custodian

.A Mutual funds needs to store and record transactions, for which it relies on banks or financial

institutions that are designated custodians. The custodian maintains custody of the securities in

which the scheme invests (as distinct from the registrar who tracks the investment by investors in

the scheme).The custodian also follows up on various corporate actions, such as rights, bonus

and dividends declared by investor companies.


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R&t agents

Registrars and transfer agents (R&T agents) handle all paperwork involving investor

servicing. Their services include processing initial public offerings, dispatch of certificates,

account statements, annual reports and dividend warrants.

TYPES OF MUTUAL FUNDS


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BY STRUCTURE

a) Open Ended Schemes:As the name implies the size of the scheme (Fund) is openi.e., not specified or pre-determined.

Entry to the fund is always open to the investor who can subscribe at any time. Such fund stands

ready to buy or sell its securities at any time. It implies that the capitalization of the fund is

constantly changing as investors sell or buy their shares. Further, the shares or units are normally

not traded on the stock exchange but are repurchased by the fund at announced rates .Open-

ended schemes have comparatively better liquidity despite the fact that these are not listed. The

reason is that investor can any time approach mutual fund for sale of such units. No

intermediaries are required. Moreover, the realizable amount is certain since repurchase is at a

price based on declared net asset value (NAV). No minute-to-minute fluctuations in rates haunt

the investors .The portfolio mix of such schemes has to be investments, which are actively traded

in the market. Otherwise, it will not be possible to calculate NAV. This is the reason that

generally open-ended schemes are Equity Based .Moreover, desiring frequently traded securities,

open-ended schemes hardly have in their portfolio shares of comparatively new and smaller

companies since these are not generally traded. In such funds, option to reinvest its dividend is

also available. Since there is always a possibility of withdrawals, the management of such funds

becomes more tedious as managers have to work from crisis to crisis. Crisis may be on two

fronts, one is, that unexpected withdrawals require funds to maintain a high level of cash

available every time implying thereby idle cash. Fund managers have to face questions like

what to sell. He could very well have to sell his most liquid assets. Second, by virtue of this

situation such funds may fail to grab favorable opportunities. Further, to match quick cash

payments, funds cannot have matching realization from their portfolio due to intricacies of the

stock market. Thus, success of the open-ended schemes to a great extent depends on the

efficiency of the capital market. The holders of the shares in the fund can resell them to issuing

Mutual Fund Company at any time they receive in turn the net asset value (NAV) of the shares at

the time of resale. Such mutual funds companies place their funds in the secondary securities

market. They do not participate in new issue markets to pension funds or life insurance


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investment companies. Can sell an unlimited number of shares and thus keep going larger. The

open end mutual funds by or sell their own share. These companiesell new shares at NAV plus

a loading or management fee and redeem scheme at NAV. UTIS Unit scheme, 1964 and

CANCIGO and CANGICT are few examples of such funds. The minimum corpus for and open-

ended fund is fifty crores a per SEBI guidelines.

b) Close Ended Schemes:Such schemes have a definite period after which their shares/units can be redeemed. Unlike

open-ended funds, these funds have fixed capitalization, i.e., their corpus normally does not

change throughout its life period. Close ended fund units trade among the investors in the

secondary market since these are to be quoted on the stock exchanges. Their price is determined

on the basis of demand and supply in the market. Their liquidity depends on the efficiency and

understanding of the engage broker. Their price is free to deviate from NAV, i.e., there is every

possibility that the market price may be above or below its NAV. If one takes into account the

issue expenses, conceptually close ended fund units cannot be traded at a premium or over NAV

because the price of a package of investments, i.e., cannot exceed the sum of the prices of the

investments constituting the package. Whatever premium exists that may exist only on account

of speculative activities. In India as per SEBI (MF) Regulations every mutual fund is free to

launch any or both types of schemes. Closeended mutual funds are different form the open-

ended mutual fund. Close-ended and investment company has definite target amount for the

funds and cannot sell more shares after its initial offering. Its growth in terms of numbers is

limited. Its shares are issued like together companys new issue listed and quoted at stock

exchange. That minimum corpus for Close-ended fund is Rs20 crores. Close-ended funds

changed funds the secondary market acquisition of corporate securities. There is no necessary

relationship between the price of close-ended mutual fund share and its NAV. Its shares may les

per the current NAV per share, per more,(at a premium) as per less(at discount). Investors

doubts about the abilities of the funds management lack of sales effort (brokers earn less

commission of close ended schemes then open ended schemes) risk ness of the fund.

c) Interval Funds:


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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 Funds:

The aim of growth funds 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 proven that

returns from stocks, have outperformed most other kind of investments held over the long

term. Growth schemes are ideal for investors having a long-termoutlook seeking growth over

a period of time.

Income Funds:

The aim of income funds is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures and

Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds:

The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market, the

NAVof these schemes 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.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and

moderate income. These schemes generally invest in safer short-term instruments such as

treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on

these schemes may fluctuate depending upon the interest rates prevailing in the market.


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These are ideal for Corporate and individual investors as a means to park their surplus funds

for short periods.

Load Funds:

A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or

sell units in the fund, a commission will be payable. Typically entry and exit loads range

from 1% to 2%. It could be worth paying the load, if the fund has a good performance

history.

No-Load Funds:

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no

commission is payable on purchase or sale of units in the fund. The advantage of a no load

fund is that the entire corpus is put to work.

OTHER SCHEMES:

Tax Saving Schemes:

These schemes offer tax rebates to the investors under specific provisions of the

Indian Income Tax laws as the Government offers tax incentives for investment in

Specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) andPension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also

provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in

Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount

is invested before September 30, 2000.

Industry Specific Schemes:

Industry Specific Schemes invest only in the industries specified in the offer document. The

investment of these funds is limited to specific industries like InfoTech, FMCG, and

Pharmaceuticals etc.

Index Schemes:

Index Funds attempt to replicate the performance of a particular index such as the BSE

Sensex or the NSE 50.

Sectoral Schemes:


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Sectoral Funds are those, which invest exclusively in a specified industry or a group of

industries or various segments such as 'A' Group shares or initial public offerings.

BENEFITS OF MUTUAL FUND INVESTMENT

Professional Management:

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

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

and selects suitable investments to achieve the objectives of the scheme.

Diversification:

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

sectors. This diversification reduces the risk because seldom do all stocks decline at the same

time and in the same proportion. You achieve this diversification through a Mutual Fund with far

less money than you can do on your own.

Convenient Administration:

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

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

your time and make investing easy and convenient.

Return Potential:

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

invest in a diversified basket of selected securities.

Low Costs:

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

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

lower costs for investors.Liquidity:

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

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

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

related prices by the Mutual Fund.


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Transparency:

You get regular information on the value of your investment in addition to disclosure on the

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

the fund manager's investment strategy and outlook.

Flexibility:

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

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

convenience.

Affordability:

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

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

strategy.

Choice of Schemes:

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

LIMITATION OF MUTUAL FUND INVESTMENT

No Control over Cost:

An Investor in mutual fund has no control over the overall costs of investing. He pays an

investment management fee (which is a percentage of his investments) as long as he remains

invested in fund, whether the fund value is rising or declining. He also has to pay fund

distribution costs, which he would not incur in direct investing. However this only means that

there is a cost to obtain the benefits of mutual fund services. This cost is often less than the cost

of direct investing.

No Tailor-Made Portfolios:

Investing through mutual funds means delegation of the decision of portfolio composition to the

fund managers. The very high net worth individuals or large corporate investors may find this to

be a constraint in achieving their objectives. However, most mutual funds help investors

overcome this constraint by offering large no. of schemes within the same fund.


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Managing A Portfolio Of Funds:

Availability of large no. of funds can actually mean too much choice for the investors. He may

again need advice on how to select a fund to achieve his objectives. AMFI has taken initiative in

this regard by starting a training and certification program for prospective Mutual Fund

Advisors. SEBI has made this certification compulsory for every mutual fund advisor interested

in selling mutual fund.

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 fund makes a profit on its sales, you will pay taxes on

the income you receive, even if you reinvest the money you made.

Cost of Churn:The portfolio of fund does not remain constant. The extent to which the portfolio changes is a

function of the style of the individual fund manager i.e. whether he is a buy and hold type of

manager or one who aggressively churns the fund.


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Chapter 3:


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COMPANY PROFILE

About the Company:

Sharekhan is one of the top retail brokerage houses in India with a strong online trading

platform. The company provides equity based products (research, equities, derivatives,

depository, margin funding, etc.). It has one of the largest networks in the country with 1200+

share shops in 400 cities and Indias premier online trading portal www.sharekhan.com. With

their research expertise, customer commitment and superior technology, they provide investors

with end-to-end solutions in investments. They provide trade execution services through multiple

channels - an Internet platform, telephone and retail outlets.

Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to

remain the largest shareholder. It is the retail broking arm of the Mumbai-based SSKI

[SHRIPAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is

established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years

in the stock markets, the SSKI group ventured into institutional broking and corporate finance

over a decade ago. Presently SSKI is one of the leading players in institutional broking and

corporate finance activities. Sharekhan offers its customers a wide range of equity related

services including trade execution on BSE, NSE, and Derivatives. Depository services, online

trading, Investment advice, Commodities, etc.

Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is

having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking

Brand by Awaaz Consumer Vote. It is first brokerage Company to go online. The Company's

online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000.

This site gives access to superior content and transaction facility to retail customers across the

country. Known for its jargon-free, investor friendly language and high quality research, the

content-rich and research oriented portal has stood out among its contemporaries because of itssteadfast dedication to offering customers best-of-breed technology and superior market

information.


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Sharekhan has one of the best states of art web portal providing fundamental and statistical

information across equity, mutual funds and IPOs. One can surf across 5,500 companies for in-

depth information, details about more than 1,500 mutual fund schemes and IPO data. One can

also access other market related details such as board meetings, result announcements, FII

transactions, buying/selling by mutual funds and much more.

Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan

to take advantage of the growing consumer demand for financial services products in India

through investments in research, pan-Indian branch network and an outstanding technology

platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique

position to understand and leverage the growth of the financial services sector. We look forward

to providing strategic counsel to Sharekhan's management as they continue their expansion for

the benefit of all shareholders.

SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with

strong research-driven focus. Their team members are widely respected for their commitment to

transactions and their specialized knowledge in their areas of strength. The team has completed

over US$5 billion worth of deals in the last 5 years - making it among the most significant

players raising equity in the Indian market. SSKI, a veteran equities solutions company has over

8 decades of experience in the Indian stock markets.

If we experience their language, presentation style, content or for that matter the online trading

facility, we'll find a common thread; one that helps us make informed decisions and simplifies

investing in stocks. The common thread of empowerment is what Sharekhan's all about.

"Sharekhan has always believed in collaborating with like-minded Corporate into forming

strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan

Limited.

Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.

Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he

says that investing in stocks should not be confused with trading in stocks or a portfolio-based

strategy is better than betting on a single horse, it is something that is spoken with years of

focused learning and experience in the stock markets. And these beliefs are reflected in

everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial


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services power house, with strong presence in Retail equities Institutional equities Investment

banking.

In Ahmedabad, It is having the branch at Dynamic house, opp. Child care hospital, Navrangpura

road and over 40 franchisees in Ahmedabad. We have been given the centre at Navrangpura

road, Ahmedabad.


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MISSION:

To educate and empower the individual investor to make better investment decisionsthrough quality advice and superior service.

VISION:

To be the best retail brokering Brand in the retail business of stock market.

REASON TO CHOOSE SHAREKHAN LIMITED

Experience

SSKI has more than eight decades of trust and credibility in the Indian stock market. In the Asia

Money broker's poll held recently, SSKI won the for 2004' award. Ever since it launched

Sharekhan as its retail broking division in February 2000, it has been providing institutional

individual investors.

Technology

With its online trading account one can buy and sell with an internet connection. One can get

access to its powerful online trading tools that will help him take complete control over his

investment in shares.

Accessibility

Sharekhan provides ADVICE, EDUCATION, TOOLS AND EXECUTION services for

investors. These services are accessible through its centers across the country over the internet(through the website www.sharekhan.com) as well as over the Voice Tool.


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Customer Service

Sharekhan limiteds customer service team will assist one for any help that one may require

relating to transactions, billing, demat and other queries. Its customer service can be contacted

via a toll-free number, email or live chat on www.sharekhan.com.

Investment Advice

Sharekhan has dedicated research teams of more than 30 people for fundamental and technical

researches. Its analysts constantly track the pulse of the market and provide timely investment

advice to its clients in the form of daily research emails, online chat, printed reports and SMS on

their mobile phone.


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PRODUCT AND SERVICES

SHAREKHAN LTD. PROVIDE DIFFERENT PRODUCT AS FOLLOWS

Share online & offline Derivatives Mutual fund online Commodities online IPO online Portfolio Management Services Insurance Fixed deposits Advisory products Currency trading


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Share Online

Sharekhan provide online facilities.

BENEFIT

I. Freedom from paperwork:-Integrated trading, bank and de-mat account with digitalcontracts removers all paperwork.

II. Instant credit and transfer:-instant transfer of funds from bank account of the choice toSharekhan trading account.

III. Trade anywhere:-enjoy the ease of trading from any part of the world in a completelysecure environment.

IV. Dial n Trade:-call toll free number (1-800-22-7050) to place orders through telebrokers.V. Timey advice:-make informed decisions with expert advice, investment calls and live

market commentary.

VI. Real-time portfolio tracking:-benefit from real-time information for investment andcurrent portfolio value.

VII. After-hour orders:-place order after market hours, which get executed as soon as themarkets opens.

Sharekhan provide two different accounts:

1) Classic account2) Trade Tiger

CLASSIC ACCOUNT:

The Classic Account enables customers to trade online on the NSE and the BSE, invest in IPO

and Mutual Funds and access all the research and transaction reports through Sharekhans

website. This account is suitable for the retail investors.

In this account Shown the maximum script are 25 in the terminal and the technical chart are not

shown in this account.

The life time registration charge for this account is 750 rupees.


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Features:

Online trading account for investing in Equities and Derivatives Free trading through Phone (Dial-n-Trade)

o Two dedicated numbers for placing your orders with your cell phone or landline.o Automatic funds transfer with phone banking (for Citibank and HDFC bank

customers)

o Simple and Secure Interactive Voice Response based system for authenticationo Get the trusted, professional advice of our telebrokers.o After hours order placement facility between 8.00 am and 9.30 am

Integration of: Online trading + Bank + Demat account Instant cash transfer facility against purchase & sale of shares IPO investments Instant order and trade confirmations by e-mail Single screen interface for cash and derivatives

TRADE TIGER:

Trade tiger is a next-generation online trading product that brings the power of brokers terminal

to customer pc. It is session to capitalize on intra-day price movement. Trade tiger is an internet

based application available on a CD, which provides everything a trader needs on one screen.

Key Features:-

A single platformfor multiple exchange BSE & NSE (Cash & F&O), MCX, NCDEX,Mutual Funds, IPOs

Multiple Market Watchavailable on Single Screen Multiple Charts with Tick by Tick Intraday and End of Day Charting powered with

various Studies

Graph Studiesinclude Average, Band- Bollinger, Know Sure Thing, MACD, RSI, etc


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Apply studiessuch as Vertical, Horizontal, Trend, Retracement & Free lines User can save his own defined screen as well as graph template, that is, saving the

layout for future use

User-defined alert settingson an input Stock Price trigger Tools available to gauge marketsuch as Tick Query, Ticker, Market Summary, Action

Watch, Option Premium Calculator, Span Calculator

Shortcut key for FAST accessto order placements & reportsADVANTAGES:

Live Streaming Quotes Access all Trading Calls Advanced Charting features Create your own technical rules for trading A Single Trading Screen for all segments

Share Offline:

As the internet has taken over the physical trade, the same is the situation in trading in shares.

Even the internet has not spared trading in shares and still the conventional system of offline

trading continues in todays world.

Merits of Offline Trading:

Low brokerage Less margin Flexibility in credit period Customized advice

Demerits of Offline Trading:

Problems in getting in touch with the broker Limited clientele


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Problem of attention from the broker due to load Reliance on the brokers information Customer has to believe what the broker says Broker Might not give the best price Reconciliation of account and cash settlements Paperwork Geographical Restriction

Dial-n-trade

Sharekhan provides complete trading facility like they are giving Toll free numbers the phone

trading facility as an alternative of net trading where a customer can call n number of times.

Toll Free numbers: 1800-22-7500

1800-22-7050

Local number : 079-30307600 (chargeable)

Exposure: For Intraday = 10 times

For Delivery = 04 times

Sharekhan is also providing the Margin on DP balance.

Derivatives

Derivatives are financial contracts whose value/price is depends on the behavior of price of one

or more basic underling assets. These contracts are legally binding agreement, made on the

trading screen of stock exchange, buy or sell an asset in future. The assets can be share, index,

interest rate, bond, rupee- dollar exchange rate, sugar, crude oil, soybean, cotton, coffee etc.

Commodities Online

Commodities are agreements to buy and sell virtually anything except, for some reason,onions.

The primary commodities that are traded are oil, gold and agricultural products. Commodity
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derivatives comprise of raw materials and products that can be traded on special commodity

exchanges across the country. Commodities expands customer investing horizon from investing

in a metal company to trading in the metal itself. Trading in commodity derivative provides

unique market opportunities for a wider section of participants like: investor, hedgers,

arbitragers, traders, manufactures planters, exporters and importers. While trading commodities

through an exchange, there are no transportation charges, no insurance costs, no storage charges

and complete security when customer trade though an exchange. Customer can trade in

commodities at nominal costs and carry the investment in paper from as customer want. The

fundamentals for commodities are quite simple: price is a function of demand and supply.

Sharekhan provides commodity facility. Sharekhan trades on two major commodity exchanges in

India.

1) MCX2) NCDEX

Insurance

Insurance is a policy from a largeFinancial Institutionthat offers a person, company, or other

entity reimbursement or financial protection against possible future losses or damages.

Life insurance ensures that your family will receive financial support in your absence Put simply;

life insurance provides your family with a sum of money should something happen to you. It

protects your family from financial crises. In addition to serving as a protective cover, life

insurance acts as a flexible money-saving scheme, which empowers you to accumulate wealth-to

buy a new car, get your children married and even retire comfortably. Life insurance also triples

up as an ideal tax-saving scheme. To know more, read the Key Benefits of Life Insurance.

Mutual Funds

Mutual Fund is an investment company that pools money from shareholders and invests in a

variety of securities, such as stocks, bonds and money market instruments. Most open-

end mutual funds stand ready to buy back (redeem) its shares at their current net asset value,
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which depends on the total market value of the fund's investment portfolio at the time of

redemption. Most open-end mutual funds continuously offer new shares to investors.

Initial Public offering(IPO)

Initial Public Offering, the firstsale ofstockby acompany to thepublic.

Companiesoffering anIPO are sometimes new, young companies, or sometimes companies

which have been around for many years but are finally deciding to go public. IPOs are often

riskyinvestments,but often have the potential for significant gains. IPOs are often used as a way

for a young company togainnecessarymarket capital.

From an investor point of view, IPO gives a chance to buy shares of a company, directly from

the company at the price of their choice (In book build IPO's). Many a times there is a bigdifference between the price at which companies decides for its shares and the price on which

investor are willing to buy share and that gives a good listing gain for shares allocated to the

investor in IPO.

From a company prospective, IPO help them to identify their real value which is decided by

millions of investor once their shares are listed in stock exchanges. IPO's also provide funds for

their future growth or for paying their previous borrowings.

Sharekhan provides to their customer the Online IPO facility. In this facility, the customer has to

feel only the bid price and the quantity for which he/she wants to buy the stock.

Portfolio Management Services

Sharekhan unfolds for customer an enable of PMS to choose from that helps customer sit back,

relax and see customer money grow without worrying about the ups and downs at the stock

market. Talks to Sharekhan specialists and theyll help customer choose a PMS plan that suits

customer risk taking appetite and expectation from the market.

There are two types of PMS in Sharekhan Limited

A) PRO PRIMEB) PROTECH
http://www.investorwords.com/2475/Initial_Public_Offering.htmlhttp://www.investorwords.com/4363/sale.htmlhttp://www.investorwords.com/4725/stock.htmlhttp://www.investorwords.com/992/company.htmlhttp://www.investorwords.com/3930/public.htmlhttp://www.investorwords.com/3390/offering.htmlhttp://www.businessdictionary.com/definition/initial-public-offering-IPO.htmlhttp://www.investorwords.com/2599/investment.htmlhttp://www.investorwords.com/2143/gain.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/5915/market_capital.htmlhttp://www.investorwords.com/5915/market_capital.htmlhttp://www.businessdictionary.com/definition/necessaries.htmlhttp://www.investorwords.com/2143/gain.htmlhttp://www.investorwords.com/2599/investment.htmlhttp://www.businessdictionary.com/definition/initial-public-offering-IPO.htmlhttp://www.investorwords.com/3390/offering.htmlhttp://www.investorwords.com/3930/public.htmlhttp://www.investorwords.com/992/company.htmlhttp://www.investorwords.com/4725/stock.htmlhttp://www.investorwords.com/4363/sale.htmlhttp://www.investorwords.com/2475/Initial_Public_Offering.html


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PROPRIME (FUNDAMENTAL):-

ProPrime uses in-depth independent fundamental research through primary analysis in high-

quality companies. The ProPrime line is designed for varying risk-return profiles and investment.

Ideal for investors looking at steady and superior returns with low to medium risk appetite. Thisportfolio consists of a blend of quality blue chip and growth stocks ensuring a balanced portfolio

with relatively medium risk profile. The portfolio will mostly have large capitalization stocks

based on sectors & themes that have medium to long term growth potential.

PROTECH (TECHNICAL):-

Protech uses the knowledge of technical analysis and the power of derivatives market to identify

trading opportunities in the market. The Protech lines of products are designed around various

risk/reward/volatility profiles for different kinds of investment needs.

Fixed Deposits

Fixed deposits are loan arrangements where a specific amount of funds is placed on deposit

under the name of the account holder. The money placed on deposit earns a fixed rate of interest,

according to the terms and conditions that govern the account. The actual amount of the fixed

rate can be influenced by such factors at the type of currency involved in the deposit, the

duration set in place for the deposit, and the location where the deposit is made.

The most unusual characteristic of a fixed deposit is that the funds cannot be withdrawn for a

specified period of time. In most cases, fixed deposits carry duration of five years. During that

time, the money remains in the account and cannot be withdrawn for any reason. Individuals,

corporate entities, and even non-profit organizations that wish to set aside funds and limit their

access to the funds for a period of time often find that fixed deposits are a simple way to

accomplish this goal. As an added benefit, the monies in the account will earn a fixed rate of

interest regardless of any fluctuations in interest rates that apply to other types of accounts.

Currency Trading

Currency trading means to trade in currency of different countries and price variesbecause of supply and demand.


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Page | 48

Currency trading is mostly done by large companies or by people who is import-exportbusiness.

In price of currency there is always fluctuation. So it can be dangerous for people whohave import-export business. So they make reverse position or it is also known as

hedging.

So by this way people minimize their risk with the help of currency trading. Currency trading is not much useful to individual investors. Sharekhan is providing offline currency trading to interested customers. Online currency trading is not given because individual investors still not prefer currency

trading.


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Page | 49

Chapter 4:


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Data Analysis & Interpretation

DSP BLACK ROCK TIGER (G)

RIOD NAVFUND

RETURN(Y) BSE Index

MARKET

RETURN(X) X*Y 10 50.17 6191.51

11 44.49 -11.32150688 5550.03 -10.360639 117.2980457 107.3428 12

11 41.96 -5.686671162 5370.5 -3.23475729 18.395001 10.46365 32

11 45.03 7.316491897 5855.53 9.031375105 66.07798277 81.56574 5

11 45.42 0.866089274 5795.29 -1.028771093 -0.89100761 1.05837 0

-11 43.97 -3.192426244 5638.16 -2.711339726 8.655752097 7.351363 1

11 44.02 0.113713896 5686.26 0.853115201 0.097011053 0.727806 0

1 43.24 -1.771921854 5531.7 -2.718131074 4.816315851 7.388237 3

11 39.84 -7.863089732 5062.17 -8.487987418 66.74180671 72.04593 6

11 39.24 -1.506024096 4995.67 -1.313665878 1.978412468 1.725718 2

11 40.23 2.52293578 5334.14 6.775267382 17.09356449 45.90425 6

11 36.53 -9.19711658 4831.73 -9.418762912 86.62546054 88.71309 84

11 33.79 -7.500684369 4598.21 -4.833051516 36.25119396 23.35839 5

12 39.57 17.10565256 5202.65 13.14511516 224.8557729 172.7941 2

l -20.11455751 -14.30223306 647.9953119 620.4394 7

1.034994478


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Page | 51


PERIOD NAVFUND

RETURN(Y) Y-Y'

Dec-10 50.17

Jan-11 44.49 -11.32150688-

9.774306877 95.53707492

Feb-11 41.96 -5.686671162-

4.139471162 17.1352215

Mar-11 45.03 7.316491897 8.863691897 78.56503405

Apr-11 45.42 0.866089274 2.413289274 5.823965119

May-11 43.97 -3.192426244-

1.645226244 2.706769394

Jun-11 44.02 0.113713896 1.660913896 2.758634969

Jul-11 43.24 -1.771921854

-

0.224721854 0.050499912

Aug-11 39.84 -7.863089732-

6.315889732 39.8904631

Sep-11 39.24 -1.506024096 0.041175904 0.001695455

Oct-11 40.23 2.52293578 4.07013578 16.56600527

Nov-11 36.53 -9.19711658 -7.64991658 58.52122368

Dec-11 33.79 -7.500684369-

5.953484369 35.44397613

Jan-12 39.57 17.10565256 18.65285256 347.9289086

TOTAL -20.11455751 -0.00095750 700.9294721


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Page | 52


N=number of observationYF= risk free return

Y= average return of fundsX= average return of market= beta= standard deviation

N=13, =9%Y=-20.11

Y= =-1.5472X=-14.30

=700.93Rate of return (fund) =

Rate of return (market) =

=

=1.034

=()

=7.642

Sharpe measures=

=-1.38


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Page | 53

HDFC INDEX FUND (G)

PERIOD NAVFUND

RETURN(Y)

S&P CNX MNC

INDEX

MARKET

RETURN(X) X*Y Dec-10 53.16 6134.5

Jan-11 47.735 -10.20504138 5505.9 -10.24696389 104.5707 105.0003 104.1

Feb-11 46.1844 -3.248350267 5333.25 -3.135727129 10.18594 9.832785 10.55

Mar-11 50.47 9.279323754 5833.75 9.384521633 87.08201 88.06925 86.10

Apr-11 49.7331 -1.460075292 5749.5 -1.444182558 2.108615 2.085663 2.13

May-11 48.08 -3.323943209 5560.15 -3.293329855 10.94684 10.84602 11.0

Jun-11 48.9867 1.885815308 5647.4 1.56920227 2.959226 2.462396 3.556

Jul-11 47.59 -2.851182056 5487.75 -2.826964621 8.060191 7.991729 8.129

Aug-11 43.43 -8.741332213 5001 -8.869755364 77.53348 78.67256 76.41

Sep-11 52.53 20.95325812 4943.25 -1.154769046 -24.1962 1.333492 439.

Oct-11 46.15 -12.1454407 5326.6 7.755019471 -94.1881 60.14033 147.5

Nov-11 41.8 -9.425785482 4832.05 -9.284534224 87.51403 86.20258 88.84

Dec-11 39.45 -5.622009569 4624.3 -4.299417432 24.17137 18.48499 31.60

Jan-12 44.89 13.7896071 5199.25 12.43323314 171.4494 154.5853 190.1

TOTAL -11.1151559 -13.41366761 468.1975 625.7073 1199.

BETA 0.74645104


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Page | 54

HDFC INDEX FUND (G)

PERIOD NAVFUNDRETURN(Y) Y-Y'

Dec-10 53.16

Jan-11 47.735 -10.20504138-

9.349961384 87.42177789

Feb-11 46.1844 -3.248350267-

2.393270267 5.727742571

Mar-11 50.47 9.279323754 10.13440375 102.7061395

Apr-11 49.7331 -1.460075292-

0.604995292 0.366019304

May-11 48.08 -3.323943209

-

2.468863209 6.095285544Jun-11 48.9867 1.885815308 2.740895308 7.512507088

Jul-11 47.59 -2.851182056-

1.996102056 3.984423416

Aug-11 43.43 -8.741332213-

7.886252213 62.19297396

Sep-11 52.53 20.95325812 21.80833812 475.6036114

Oct-11 46.15 -12.1454407 -11.2903607 127.4722447

Nov-11 41.8 -9.425785482-

8.570705482 73.45699246

Dec-11 39.45 -5.622009569-

4.766929569 22.72361752

Jan-12 44.89 13.7896071 14.6446871 214.4668602

TOTAL -11.1151559 0.000884103 1189.730196


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Page | 55

HDFC INDEX FUND (G)

N=number of observationYF= risk free returnY= average return of fundsX= average return of market= beta= standard deviation

N=13, =9%Y=-11.11

Y=

=-0.855X=-13.41

=1189.73Rate of return (fund) = Rate of return (market) =

=

=0.746

=()

=9.95

Sharpe measures=

=-0.99


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Page | 56

ICICI FUND (G)

PERIOD NAVFUND

RETURN(Y)

S&P CNX MNC

INDEX

MARKET

RETURN(X) X*Y Dec-10 151.03 6134.5

Jan-11 137.29 -9.097530292 5505.9 -10.24696389 93.22206 105.0003 82.765

Feb-11 132.57 -3.437978003 5333.25 -3.135727129 10.78056 9.832785 11.819

Mar-11 140.93 6.306102436 5833.75 9.384521633 59.17975 88.06925 39.766

Apr-11 143.91 2.114524941 5749.5 -1.444182558 -3.05376 2.085663 4.4712

May-11 140.39 -2.445973178 5560.15 -3.293329855 8.055396 10.84602 5.9827

Jun-11 141.72 0.947360923 5647.4 1.56920227 1.486601 2.462396 0.8974

Jul-11 141.06 -0.465707028 5487.75 -2.826964621 1.316537 7.991729 0.2168

Aug-11 127.98 -9.272649936 5001 -8.869755364 82.24614 78.67256 85.982

Sep-11 126.88 -0.859509298 4943.25 -1.154769046 0.992535 1.333492 0.7387

Oct-11 134.22 5.784993695 5326.6 7.755019471 44.86274 60.14033 33.466

Nov-11 121.75 -9.290716734 4832.05 -9.284534224 86.25998 86.20258 86.317

Dec-11 114.85 -5.667351129 4624.3 -4.299417432 24.36631 18.48499 32.118

Jan-12 130.73 13.82673052 5199.25 12.43323314 171.911 154.5853 191.17

TOTAL -11.55770308 -13.41366761 581.6258 625.7073 575.72

BETA 0.93108549


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Page | 57

ICICI FUND (G)

PERIOD NAVFUND

RETURN(Y) Y-Y' Dec-10 151.03

Jan-11 137.29 -9.097530292-

8.208530292 67.37996955

Feb-11 132.57 -3.437978003-

2.548978003 6.497288859

Mar-11 140.93 6.306102436 7.195102436 51.76949907

Apr-11 143.91 2.114524941 3.003524941 9.021162074

May-11 140.39 -2.445973178-

1.556973178 2.424165476

Jun-11 141.72 0.947360923 1.836360923 3.37222144

Jul-11 141.06 -0.465707028 0.423292972 0.17917694

Aug-11 127.98 -9.272649936-

8.383649936 70.28558625

Sep-11 126.88 -0.859509298 0.029490702 0.000869701

Oct-11 134.22 5.784993695 6.673993695 44.54219184

Nov-11 121.75 -9.290716734-

8.401716734 70.58884407

Dec-11 114.85 -5.667351129-

4.778351129 22.83263952

Jan-12 130.73 13.82673052 14

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