New Balanced Fund

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CHAPTER-1

INTRODUCTION

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INTRODUCTION

Mutual Funds are professionally managed pool of money from a group of

investors. A Mutual fund manager invests your funds in securities including

stocks and bonds, Money Market instruments or some combination and

decides the best time to buy and sell. By pooling your resources with other

investors in Mutual Funds, you can diversify even a small investment over a

wide spectrum.

With the emergence of the capital market at the center stage of the Indian

financial system from its marginal role a decade earlier, the Indian capital market also

witnessed during the same period a significant institutional development in the form of

diversified structure of Mutual Funds. A Mutual fund is a special type of investment

institution which acts as an investment conduit.

It pools the savings, particularly of the relatively small investors, and invests them

in a well-diversified portfolio of sound investment. As an investment intermediary, it

offers a variety of services/advantages to the relatively small investors who on their own

cannot successfully construct and manage investment portfolio mainly due to the small

size of their funds, lack of expertise and experience, and so on. These services include the

diversification of portfolio, expertise of the professional management, liquidity of

investment, tax shelter, reduced risk and reduced cost.

Mutual fund is the most suitable investment mode for the common man as it

offers an opportunity to invest in a diversified, professionally managed portfolio at a

relatively low cost. Any body with an investible surplus of as little as a few thousand

rupees can invest in mutual funds. Each Mutual fund scheme has a defined investment

objective and strategy.

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The most important trend in the Mutual Fund industry is the aggressive expansion

of the foreign owned Mutual Fund companies and the decline of the companies floated by

nationalized banks and smaller private sector players.

Funds issue and redeem shares on demand at the fund's net asset value (NAV).

Mutual fund management fees typically range between 0.5% and 2% of assets per year,

exchange fees and other administrative charges also apply.

According to SEBI - Mutual Fund is defined as - A fund established in the form

of a trust to raise moneys through the sale of units to the public or a section of the

public under one or more schemes for investing in securities, including money market

instruments.

Mutual Fund is a mechanism for pooling the resources by issuing units to the

investors and investing funds in securities in accordance with objectives as disclosed in

the offer document.

NEED OF THE STUDY

The basic purpose of the study is to give broad idea on Mutual Funds and analyze

various schemes to highlight the diversified investment that Mutual Fund offers to its

investors. Through this study one can understand how to invest in Mutual Funds and turn

the raw investment into ripen fruits by taking wise decisions, taking the risk factors into

account.

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SIGNIFICANCE OF THE STUDY

(1) The Study presents basic concept and trends in the Mutual fund Industry.

(2) The Study enables a fresh investor to understand easily the various benefits

offered by Mutual Funds and their working in the Market.

(3) The Study provides a clear idea on growth of Mutual Funds from past to the

present scenario and its scope in the future.

[

(4) The Study gives a brief idea on the Open- Ended Balanced Growth Schemes

of five major organizations.

(5) At the end of the study, one can conclude what type of investments would be

ideal with reference to the risk taking abilities of the investors and which type of

investments would suit their financial needs and goals.

OBJECTIVES OF THE STUDY

(1) The Main objective of this project is to study and analyze Open-Ended Balanced

growth schemes of five Mutual Funds and to compare and Rank each of them.

(2) To give a broad idea on basics, structure, constituents, characteristics, advantages,

disadvantages, types, and risk associated with Mutual Funds.

(3) To give investor an idea on Mutual Funds and its working in the market with

illustrations.

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(4) To help and guide investors to take wise investment decisions.

(5) To help the investors have an understanding of the Risks associated with Mutual

fund investment.

(6) The Tax benefits of investing in Mutual Funds under various schemes.

(7) To understand the recent trends in the world of Mutual Funds.

(8) The project gives a detailed idea which enables even a common man or fresh

investor to understand the functioning of Mutual Funds and to take wise investment

decisions.

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METHODOLOGY OF THE STUDY

All information related to the topic needs to be carefully scrutinized to avoid the

risk of biased analysis. Having once identified which information is relevant and need to

be collected, we will have to define how this will be done.

The Method employed in the investigation depends on the purpose and scope of the

study.

Research Design :

Research design is some statement or specification of procedures for collecting

and

analyzing the information required for the solution of some specific problem. Here, the

exploratory research is used as investigation and is mainly concerned with determining

the trends and returns in Mutual Funds and Bank returns.

Data Collection Methods :

The key for creating useful system is selectivity in collection of data and linking

that selectivity to the analysis and decision issue of the action to be taken. The accuracy

of collected data is of great significance for drawing correct and valid conclusions from

the research.

Sources of Information :

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Data available in marketing research are either primary or secondary. Primary

Data is not included in this study, only secondary data is taken in to account since, it is a

comparative analysis.

Secondary Data:

Secondary data can be defined as - data collected by some one else for purpose

other than solving the problem being investigated. Secondary data is collected from

external sources which include information from published material of SEBI and some of

the information is collected online. The data sources also include various books,

magazines, newspapers, websites etc. The organization profile is collected from the

Hyderabad Stock Exchange.

SCOPE OF THE STUDY

1) The Study covers the basic meaning, concept, structure and the organization of the

Mutual Funds.

2) The Study is restricted to explain only the returns provided by the Mutual Funds

from various schemes.

3) Under this study investments relating to Open-Ended Balanced Growth Fund of

Mutual Funds are taken into account.

4) The theoretical part of the study include the following concepts:-

Characteristics of Mutual Funds.

Advantages/ Disadvantages of Mutual Funds.

Net Asset Value (NAV).

Investment Process.

Risk return grid of Mutual Funds.

SEBI guidelines.

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5) The tools used for graphical representation of data include Pie charts, Bar diagrams,

and other accessories.

6) The Study is made to equip the investors with the information, which will enable

them to choose the type of Scheme depending upon their investing objective and

respective Risk return grid.

TOOLS USED FOR ANALYSIS

TABULATION:

A Table is a systematic arrangement of statistical data in rows and columns.

Rows are horizontal arrangements whereas columns are vertical arrangements.

Tabulation is a systematic presentation of data in a form suitable for analysis and

interpretation.

PRESENTATION OF DATA:

The impression created by a picture has much greater impact than detailed explanation.

Statistical data can be effectively presented in the form of diagrams and graphs. Graphs

and Diagrams make complex data simple and easily understandable. They help to

compare related data and bring out subtle data with amazing clarity. The diagrams used

are as follows

PIE CHARTS:The Pie charts are used to represent a component on a percentage

basis. Each part of a component is shown as the percentage of whole component.

Pie Charts are used to represent the percentage share of Equity, Debt & Money

Market components of Balanced Growth Fund.

BAR DIAGRAMS: The Bar Diagrams are used specifically for categorical data

series. They consist of the group of equidistant rectangles, one for each group or

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category of data in which the values of magnitudes are represented by length or

height of rectangles.

LIMITATIONS OF THE STUDY

The data that is considered for the Comparative analysis of various Mutual Funds

returns of Open-Ended Balanced Growth Fund are only for a short period of one

year and performance during this period may not be same in future. Project period

is only 45 days , so I have taken two months portfolios into consideration

As the project period is limited, the long-term data of Mutual Funds are not taken

into consideration in analysis section.

Mutual Funds of only five organizations are taken into account for analyzing their

performance, because the time duration of the project is short and limited. The

performance of these funds since inception is not considered.

This study on Mutual Funds is restricted to Open-Ended Balanced Schemes only.

The core details are untouched.

The data taken into account for analysis is very general. confidential data is

ignored as it is highly sensitive. As a result the information presented in the

research report is limited.

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Chapter-2

LITERATURE REVIEW

DEFINITION

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A Mutual Fund is a financial intermediary which acts as an instrument of

investment. It collects the funds from different investors to a common pool of investible

funds and then invest these funds in a wide variety of investment opportunities in

diversified portfolios of securities such as Money Markets instrument, corporate and

government bonds and equity shares of joint stock companies.

The investment may be diversified to spread risk and to ensure good return to the

investors. The Mutual Funds employ professional, experts and investment consultants to

conduct investment analysis and then to select the portfolio of securities where the funds

are to be invested.

Each investor owns units, which represent a portion of the holdings of the fund. You can

make money from a MF in three ways:-

1. Income is earned from dividends on stocks and interest on bonds. A Fund pays

out nearly all income it receives over the year to fund owners in the form of a

distribution.

2. If the fund sells securities that have increased in price, the fund has a capital gain.

Most funds also pass on these gains to investors in the form of dividends.

3. If fund holdings increase in price but are not sold by the fund manager, the funds

shares increase in price. You can then sell your Mutual Fund units for a profit. Funds

will also usually give you a choice either to receive a cheque for dividends or to re-

invest the same and get more units.

FIGURE SHOWING THE WORKING OF MUTUAL FUND

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STRUCTURE AND CONSTITUENTS OF FUND

SPONSOR:

Establishes the MUTUAL FUND

Need to have sound financial track record.

Appoints TRUSTEES.

Appoints Asset Management Company.

Must contribute 40% of the net worth of the AMC.

Sometimes this power is given by the sponsor to the trustees through the trust

deed.

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MUTUAL

FUND

Sponsor Trustee AMC Custodian


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At least 50% of directors on the board of Asset Management Company should be

independent of the sponsor.

Asset Management Company shall not deal with any broker or firm associated

with sponsor beyond 5% of daily gross business of the Mutual Fund.

All securities transactions of the Asset Management Company with its associates

should be disclosed.

TRUSTEE:

Manages the Mutual Fund and look after the operation of the appointed AMC.

The investments are held by the Trustees, in a fiduciary responsibility.

Trustees approve each Mutual Fund Scheme floated by AMC.

Furnish report to SEBI on half yearly basis on AMC and Fund Functioning.

ASSET MANAGEMENT COMPANY:

AMC acts as investment manager of the trust under the board supervision and

direction of the trustees.

AMC floats the different Mutual Fund schemes.

Submits report to the Trustees on quarterly basis, mentioning activity and

compliance factor.

AMC is responsible to the trustees.

AMC fees have a ceiling, decided by SEBI.

Should have a net worth of at least Rs.10 crores at all the times.

CUSTODIAN:

Appointed by board of trustees for safekeeping of securities.

Its an entity independent of sponsors.

SEBI regulates the securities market in India. According to SEBI every Mutual Fund

require that at least two thirds of the directors of trustee company or board of trustees

must be independent i.e. they should not be associated with the sponsors. Also, 50% of

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the directors of AMC must be independent. All Mutual Fund are required to be registered

with SEBI before they launch any Scheme.

ORGANISATION OF MUTUAL FUND:

CHARACTERISTICS OF MUTUAL FUNDS:

A Mutual Fund actually belongs to the investors who have pooled their funds. The

ownership of the Mutual Fund is in the hands of the investors.

Mutual funds are trusts or registered associations managed by investment

professionals and other service providers, who earn a fee for their services from the

fund.

The pools of the funds are invested in a portfolio of marketable investments

(Shares and Securities). The value of the portfolio is updated everyday.

Mutual funds collect money from small investors and in return, they will issue a

certificate in units.

The investors share in the fund is denoted by UNITS". The value of the units

changes with the change in the portfolios value every day.

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The profits of investments will be distributed to the unit holders. The unit holders

can sell their units in the open market at Net Asset Value (NAV).

NET ASSET VALUE (NAV):

Mutual Funds invest the money collected from the investors in securities markets.

In simple words, Net Asset Value is the market value of the securities scheme also varies

on day to day basis. The NAV per unit is the market value of securities of a scheme

divided by the total number of units of the scheme on any particular date. The

performance of a particular scheme of a Mutual Fund is denoted by Net Asset Value.

For example; if the market value of securities of a MF Scheme is Rs. 200 lakhs

and the Mutual Fund has issued 10 lakhs units of Rs. 10 each to the investors, then the

NAV per unit of the fund is Rs. 20. NAV is required to be disclosed by the MF on a

regular basis daily or weekly depending on the type of scheme.

NAV = Market value of the funds investments + Receivables + Accrued Income Liabilities Accrued Expenses

Number of Outstanding units

OBJECTIVES OF MUTUAL FUNDS:

The objectives sought to be achieved by Mutual funds are as follows :-

To provide an opportunity for lower income groups to acquire without much

difficulty property in the form of shares.

To cater mainly to the need of individual investors whose means are small?

To Manage investors portfolios in a manner that provides regular income,

growth, safety, liquidity and diversification.

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SCHEMES OF MUTUAL FUNDS:

Mutual fund schemes are usually open-ended (Perpetually open for investors and

redemption) or close-ended (with a fixed term). A Mutual Fund scheme issues units that

are normally priced at Rs.10/- during the initial offer. The number of units you own

against the total number of units issued by a Mutual Fund scheme determines your share

in the profits or losses in the scheme.

TYPES OF MUTUAL FUND SCHEMES

The Mutual Funds can be classified under the following types:

ACCORDING TO STRUCTURE:

OPEN - ENDED SCHEME

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STRUCTURE

OPEN-ENDEDSCHEME

CLOSED-ENDEDSCHEME

INTERVALSCHEME


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An open-ended scheme is a scheme in which an investor can buy and sell units on

a daily basis. The scheme has a perpetual existence and flexible, ever changing corpus.

Open-Ended schemes do not have a fixed maturity period. The investors are free to buy

and sell any number of units, at any point of time, at prices that are linked to the NAV of

the units.

In these schemes the investor can invest and disinvest any amount, any time after

a short initial lock in period. This scheme gives investors with instant liquidity and fund

announces sale and repurchase price from time to time. The units can be bought from and

sold to any Mutual Fund.

Advantages of Open-ended funds over Close-ended funds:

Any time Entry Option.

This provides ready liquidity to the investors and avoids reliance on transfer

deeds, signature verifications and bad deliveries.

Allows to enter the fund at any time and even to invest at regular intervals.

Any time Exit Option.

CLOSE ENDED SCHEME

A Close-ended scheme has a stipulated maturity period. E.g. 5-7 years. A Close-

ended scheme is one in which the subscription period for the Mutual Fund remains open

only for a specific period, called the redemption period. At the end of this period, the

entire corpus is disinvested and the proceeds distributed to unit holders. After final

distribution the scheme ceases to exist. Such schemes can be rolled over by approval of

unit holders.

Reasons for fluctuations in NAV

Investors doubts about the abilities of the funds management.

Lack of sales effort (Brokers earn less commission on closed end schemes than on

open ended schemes).

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Riskiness of the fund.

Lack of marketability of the funds units.

INTERVAL SCHEMES

Interval schemes are those that combine both the features of both open-ended and

close-ended schemes. The units may be traded on the stock exchange or may be open for

sale redemption during during predetermined intervals at NAV related prices.

ACCORDING TO INVESTMENT OBJECTIVE

ADVANTAGES OF MUTUAL FUNDS

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INVESTMENT

OBJECTIVE

EQUITY SCHEME

DEBT OR BOND SCHEME

BALANCED SCHEME

MONEY MARKETSCHEME

GROWTH & INCOME

FUND

OTHER SCHEMES


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The key advantages of both open and close-end Mutual Funds is that they put

professional managers with experience and access to sophisticated financial research to

work for you this, and other wide range of key benefits are as follows :-

1) Professional Management

Experienced portfolio managers carefully select a funds holdings according to the

funds seated investment objective. The portfolio management team continuously

monitors and evaluates the funds holdings to help make sure it keeps pace with

changing market conditions. The team decides when to buy and sell securities. There

is a fee associated with this professional management.

2) Diversification

A Single diversified Mutual Fund may invest in dozens even hundreds of different

holdings. This approach may reduce the impact on your return if any one investment

held by the fund declines. Diversification spreads your assets among different types

of holdings and may be one of the best ways to protect yourself amid the complexity

and uncertainty of the financial markets.

3) Compounding

In a Mutual Fund, you may choose to reinvest your earnings automatically to buy

more shares. When you reinvest, not only do you have the potential to earn money on

your initial investment, you may also have the opportunity to earn money on the

dividends and capital gains you accumulate. Compounding may increase the impact

of what you contribute and can help your money grow faster. And the longer you

invest, the greater the potential growth.

4) Systematic Investing

You can invest in most mutual funds automatically through regular payments directly

from your bank account; you can start building a long-term investment program. With

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systematic investing you invest a fixed amount of money at regular intervals

regardless of market conditions, helping out market fluctuations.

5) Hassle-free operations

With most Mutual Funds, buying and selling shares, changing distribution options,

and obtaining information can be accomplished conveniently by telephone, by mail,

or online. Although a funds shareholder is relieved of the day-to-day tasks involved

in researching, buying and selling securities, an investor will still need to evaluate a

Mutual Fund based on investment goals and risk tolerance before making a purchase

decision. Investors should always read the prospectus carefully before investing in

any Mutual Fund.

6) Buying Power

When you invest in a mutual fund, you join the other investors in a pool of

investment money. The result is that you have a partial stakein each company the

fund holds for a relatively small amount of principal invested, while potentially

offsetting some of the risk associated with holding individual securities.

7) Choice

There is an incredible array of mutual funds more than 10,000 available to meet

your specific Investment objective. Funds have different investment objectives and

degrees of investment risk often indicated through asset classes and sub-classes,

such as money market funds, fixed income funds, balanced funds, growth and income

funds, growth funds and aggressive growth funds.

8) Liquidity

Mutual fund shares are liquid and orders to buy or sell are placed during market

hours. However, orders are not executed until the close of business when the NAV

(Net Asset Value) of the fund can be determined. Fees or commissions may or may

not be applicable. Fees and commissions are determined by the specific fund and the

Institution that executes the order.

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9) Transparency

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

on the specific investments made by your scheme, the proportion invested in each

class of assets and the fund managers investment strategy and outlook.

DISADVANTAGE OF MUTUAL FUNDS:

1) Over Diversification

Diversification is usually a good thing because it reduces risk, but Mutual Funds

sometimes make small investments in so many securities that they become over

diversified. In other words, the Mutual Funds holdings in each security may be so

small that it is difficult to realize substantial return from any of those holdings, which

in turn means that the overall return for each investor is small.

2) Unused Cash

Your cash may occasionally serve as liquidity insurance rather than work for you as

an investment. The constant availability of shares is certainly convenient for investors

in a mutual fund, but it can also operate as a disadvantage. A Mutual Fund manager

must always prepare for the possibility than an investor will cash in his or her shares.

As a result Mutual Funds must maintain a ready cash supply at all times.

3) Fluctuating Returns

Mutual funds are like many other investments without a guaranteed return. There is

always the possibility that the value of your mutual fund will depreciate. Unlike

fixed-income products, such as Bonds and Treasury Bills, mutual funds experience

price fluctuations along with stocks that make up the fund.

4) Costs Despite Negative Returns

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Investors must pay sales charges, annual fees, service charges and other expenses

regardless of how the fund performs. In addition, depending on the timing of their

investment, investors may also have to pay taxes on any capital gains distribution

they receive even if the fund went on to perform poorly after they bought shares.

5) Misleading Advertisements

The misleading advertisements of different funds can guide investors down the wrong

path. Some funds may be incorrectly labeled as growth funds, while others are

classified as small-cap or income.

6) Evaluating Funds

Not offer investors the opportunity to compare the P/E ratio, sales growth, earnings

share, etc. A Mutual Funds Net Asset Value gives the investors the total value of the

Another limitation of mutual fund is the difficulty they pose for investors interested in

researching and evaluating the different funds. Unlike stocks, mutual funds do funds

portfolio less liabilities.

7) Poor Transparency

Technology used for servicing of investors and for portfolio management and

investment decision making is poor and general efficiency and timeliness are lacking

as a result of antiquated methods of operation. Telex, telephone and communication

systems are poor and antiquated.

RISK ASSOCIATED WITH MUTUAL FUND INVESTMENT

The Principal that the greater risk you take, the greater the potential reward.

Typically, risk is defined as short term price variability. But on a long term basis, risk

is the possibility that your accumulated real capital will be insufficient to meet your

financial goals. And if you want to reach your financial goals, you must start with an

honest.

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At the cornerstone or investing is the basic appraisal of your own personal

comfort zone with regard to risk. Individual tolerance for risk varies, creating a distinct

investment personality for each investor. Some investors can accept short-term

volatility with ease, others with near panic. So whether you consider you investment

temperament to be conservative, moderate or aggressive, you need to focus on how

comfortable or uncomfortable you will be as the value of your investment moves up or

down

TYPES OF RISK

All investments involve some form of risk. Even an insured band account is subject to the

possibility that inflation will rise faster than your earnings, leaving you with less real

purchasing power than when you started (Rs.1000 gets you less than it got your father

when he was your age). Consider these common types of risks and evaluate them against

potential rewards when you select an investment.

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1) Market Risk: At times the prices or yields of the all the securities in a particular

market rise or fall due to broad outside influences. When this happens, the stock

prices of both an outstanding, highly profitable company and a fledging corporation

may be affected. This change in price is due to Market Risk.

2) Inflation R isk: Some times referred to as loss of purchasing power. Whenever

inflation sprints forward faster than the earnings on your investment, you run the risk

that youll actually be able to buy less, not more. Inflation risk also occurs when

prices rise faster than your return.

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TYPE OF

RISKS

Market

Inflation

Credit

Interest Rate

Employees

Exchange Rate

Investment

Government Policies


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3) Credit Risk: In short, how stable is the company or entity to which you lend

your money when you invest. How certain are you that it will be able to pay the

interest you are promised, or repay your principal when the investment matures.

4) Interest Risk: Changing interest rates affect both equities and bonds in many

ways. Investors are minded that predicting which way rates Effect of loss rev

professionals and inability to adapt:

An industries key asset is often the personnel who run the business i.e.

intellectual properties or the key employees of the respective companies. Given the

ever-changing complexion of few industries and the high obsolescence levels,

availability of qualified, trained and motivated personnel is very critical for the

success of industries in few sectors. It is, therefore, necessary to attract key personnel

and also to retain them to meet the changing environment and challenges the sector

offers. Failure or inability to attract/retain such qualified key personnel may impact

the prospects of the companies in the particular sector in which fund invests.

5) Exchange risk: A number of companies generate revenues in foreign currencies

and may have investments or expenses also denominated in foreign currencies.

Changes in exchange rates may, therefore, have a positive negative impact on

companies which in turn would have an effect on the investment of the fund.

6). Changes in government policy: Changes in government policy especially in regard

to the tax benefits may impact business prospects of the companies leading to an

impact on the investments made by the fund.

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RISK RETURN GRID

RISK

TOLERANCE/

RETURN

EXPECTED

FOCUSSUITABLE

PRODUCTS

BENEFITS

OFFERED BY

MFS

Low DebtBank/company FD,

Debt based Funds

Liquidity, Better

Post-Tax return

MediumPartially Debt,

Partially Equity

Balanced Funds, some

Diversified EquityFunds are some debt

Funds, Mix of share and

Fixed Deposits

Liquidity, Better

Post-Tax returns,Better Management,

Diversification

High Equity

Capital Market, Equity

Funds (Diversified as

well as Sector)

Diversification,

Expertise in stock

picking, Liquidity,

Tax free dividends

COST INVOLVED IN MUTUAL FUNDS

An investor must know that there are certain costs can be classified into 2 broad

categories:

Operating expenses - Which are paid out of the funds earningsSales charges - That are directly deducted from your investment. It is not

compulsory that every mutual fund levy sales charges but

they certainly have operating expenses. No doubt they

influence returns on investment in a fund.

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Operating expenses

These referred to cost incurred to operate a mutual fund. Advisory fees paid to

investment mangers, Audit fees to chartered accountant, custodial fees, register and

transfer agent fees, trustee fee, agent commission. Operating expenses also known as

expenses ratio which is annual expenses expressed as a percentage of the funds average

daily net assets mutual funds. The break up of these expenses is required to be reported in

the schemes offer document (or) prospectus

Operating expenses

Expenses Ratio = -----------------------------

Average Net Assets

For instant, if funds Rs. 100 Crores and expenses 20 lakhs. Then expenses ratio is2% expenses ratio is available in the offer document and from historical per unit statistics

included in the financial results of the fund which are published by annually. UN audited

for the half year ending Sep30 and audited for the physically year end in March 30.

Depending upon schemes and net asset, operating expenses are determined by

limits mandated by SEBI Mutual fund regulation Act. Any excess over specified limits as

to be born by Asset Management Company, the trustees or sponsors.

Sales charges :

These are known commonly sales loads; these are charged directly to investor.

Sales loads are used by mutual fund for the payment of agents commission, distribution

and marketing expensed. These charges have not effect on the performance of the

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scheme. Sales loads are usually express in percentage and or of two types front-end and

back end.

Front-end load: It is a one time fixed fee paid by an investor when buying

a mutual fund scheme. It determines public offer price which intern decides

how much of your initial investment actually get invested the standard

practice of arriving a public offer price is as follows:

Net Asset Value

Public offer price = ---------------------------

(1- front end load)

Let us assume, an investor invests Rs.10, 000 in a scheme that charges a 2%front

end load at a NAV per unit RS. 10 using the formula public offer price =10/ (1-0.02) is

Rs. 10.20. So only 980 units are allotted to the investor

Amount invested

Number of units allotted = --------------------------

Public offer price

10,000/10..20= 980 units at a NAV of Rs. 10This means units worth 9800 are allotted to him on an initial investment of Rs. 10,000.

Front end loads tent to decrease as initial investment amount increase.

Back end load :

May be a fixed fee redemption (or) a contingent deferred sales charges-a

redemption load continues so long as the redeeming or selling of the units of the units of

a fund does not take place in the event of back end load is applied. The redemption price

is arriving at using following formula.

Net Asset Value

Redemption price = ------------------------------

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(1+ back end load)

Let us assume an investor redeems units valued at Rs. 10,000 in a scheme that charges a

2% back end load at a NAV per unit of Rs. 10. Using the formula redemption price 10/

(1+0.02) = Rs. 9.8

So, what the investor gets in hand is 9800(908*1000)

Contingent Deferred Sales Charges (CDSC) :

Contingent deferred sales charges are a structured back end load. It is paid when

the units are redeemed during the initial years of ownership. It is for a pre determined

period only and reduced over the time youre invested for a fund. The longer the investor

remains in fund the lower the CDSC.

The SEBI (mutual fund Regulation 1996) stipulate that a CDSC may be charge

only for first 4 years after purchase of units and also stipulate the maximum CDSC that

can we charge every year. The SEBI Mutual funds Regulation 1996 do not allow either

the front end load or back end load to any combination is higher that 7%.

Transaction cost :

Some funds may also impose a switch over fee which is a charge on transfer of

investment from one scheme to another with in a same mutual fund family and also to

switch from on plan (short term) to another (long term) within same scheme.

SYSTEMATIC INVESTING PLANS (SIPs)

It is an investment vehicle, where you need to deposit a fixed amount at regular

intervals (monthly, quarterly, etc.) in a MF scheme; just like you do in a recurring deposit

account with a bank or the post office.

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Regular Investing is not easy. Owing to lack of time, most people invest

sporadically. The result? The returns are rarely optimal. However, there is a foolproof

way of investing a fixed amount of money at regular intervals: Chola Mutual Funds

Systematic Investment Plan (SIP). SIP uses the concept of rupee cost averaging,

ensuring investors buy more when prices are low; and fewer units when prices are high.

Benefits of Systematic Investment Plans

Discipline Saving:

Inculcating discipline in your investment has been easier. Your investment is done

on a regular basis by the mutual fund without any intervention required by you. The best

part is that you will not feel the pain of having to save since the money will move from

your bank account automatically.

Rupee Cost Averaging:

The SIP helps you take advantage of the fluctuation in the stocks market by rupee

cost averaging. The investor buys more units when the prices are low and fewer

units cost. Assume you are investing Rs.1000/- each for next four months.

Month Amount Invested Purchase Price No of Units Purchased

1 1000 10 100

2 1000 09 111.11

3 1000 10 100

4 1000 11 90.9Table 2 (b)

Total Investment = Rs. 4000; No of units purchased is 402.21. The average cost per units

work out to be Rs9.95.

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As illustrated, over time you have a lower average cost per unit. By investing a

fixed amount of money at regular intervals, you as an investor stand to gain reasonable

returns and create significantly wealth-over time.

Lower Cost of Investing:

Getting into SIP program does not required large investment amounts at regular

intervals. Even as small as Rs. 1000 can be invested at regular intervals.

Builds Investment Kitty:

You have to give Post-Dated cheque (PDCs) to the mutual fund for deposit on

specific dates, for the amount you want to invest. These cheques are presented to your

bank account on these dates and the funds are withdrawn from your account for

investment in the mutual fund scheme at the prevailing NAV. Other than making the

initial investment and issuing the cheques at the beginning, no further efforts are required

from you.

Overcoming market volatility:

SIPs help you avoid missing market falls because of lack of time to track the

market. You dont have the responsibility of actively monitoring market movement to be

able to enter during falls.

Market timing doesnt work:

Trying to time the markets, i.e. entering when the markets fall and exiting when

the markets rise, usually does not work. It is best to take the systematic investment

approach to stay above market

Redemption of Units:

The units can be redeemed (i.e. sold back to the mutual fund) or switched-out

subject to completion of lock in period, on every business day at the redemption price.

The redemption/switch out request can be made by way of a written request, on a pre

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printed form or by using the relevant tear off section of the transaction slip enclosed with

the account statement, which should be submitted at/may be sent by mail to any of the

ISCs.

Redemption price:

Redemption price will be calculated on the basis of the loads of different plans/options.

The redemption price per unit will be calculated using the following formula:

Redemption Price = Application NAV * (1 exit Load, if any)

Example for calculation of redemption Price

If the application NAV is Rs.10.00; Exit/redemption load is 2%, then the redemption

price will be calculated as follows:

= Rs.10.00 *(1-0.02)

= Rs.10.00 * (0.98)

= Rs.9.80

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Chapter-3

THE INDUSTRY & COMPANY PROFILE

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INDUSTRY PROFILE

GROWTH AND HISTORY OF MUTUAL FUNDS

The First investment trust (now called Mutual Fund) began in the Netherlands in

the early 1800s. The first in the U.S. was the New York Stock Trust, which started in

1889. Since Boston was the economic center of the nation until the turn of the century,

the majority of funds started thereFidelity, Pioneer and Putnum Fund, to name a few. A

Fund that was comprised of both stocks and bonds (the Wellington Fund) started in 1928

and is still part of Vanguard. As the 20's crashed to a close, there were 10 Mutual Funds

in the nation.

Foundation for the Mutual Fund in India was laid by the parliament in 1963. With

the enactment of Unit Trust of India (UTI) Act the then Finance Minister Mr. T.T.

Krishnamacharya who initiated the act made it clear to the parliament act UTI would

provide an opportunity for the middle and lower income groups to acquire property

in the form of share. Thus UTI came out with the mission of catering to the needs of

individuals investors whose means are small, with its maiden fund, an open ended fund in

1964.

The Indian Mutual Fund Industry can be studied in four phases:-

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FIRST PHASE BETWEEN 1964 1987

The genesis of the Mutual Fund industry in India can be traced back to 1964 with

the setting up of the Unit Trust of India (UTI) by the Government of India. Since then

UTI has grown to be a dominant player in the industry. UTI is governed by a special

legislation, the Unit Trust of India Act, 1963. It was setup by the Reserve Bank of India

and functioned under the regulatory and administrative control of RBI. In 1978, UTI was

de-linked from the RBI and the administrative control in place of RBI. The first scheme

launched by UTI was unit Scheme 1964. At the end of 1988, UTI had Rs. 6700 crores of

assets under the management.

SECOND PHASE 1987-1993 (Entry of Public Sector Funds)

Till 1986, UTI was the only mutual player in India. The industry was opened up

for wider participation in 1987 when public sector banks and insurance companies were

permitted to setup Mutual Funds.

Since then, many public sector banks have setup Mutual Funds. SBI Mutual Fund

was the first non-UTI Mutual Funds established in June 1987 followed by can bank

Mutual Funds, Punjab National Bank Mutual Fund, India bank Mutual Funds, Bank of

India, Bank of Boroda Mutual Funds. Also the two Insurance companies LIC (June 1987)

and GIC (December 1990) have established Mutual Funds. At the end of 1993, the

Mutual Fund industry had assets under management of Rs. 47004 crores. This phase

changed the mind set of the investors.

THIRD PHASE 1993-2003

With the entry of private sector funds in 1993, a new era started in the Indian

Mutual Fund Industry, giving the Indian investors a wider choice of fund families. Also,

1993 was the year in which the first Mutual Funds 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 sector Mutual Fund

registered in July 1993.

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Securities Exchange Board of India (SEBI) formulated the Mutual Fund

(Regulation) 1993, which for the first time established a comprehensive regulatory

framework for the Mutual Fund Industry. Since then several Mutual Funds have been

setup by the private and joint sectors.

FOURTH PHASE - Since February 2003

In February 2003, following the repeal of the Unit Trust of India act 1963, UTI

was bifurcated into separate entities. One is the specified undertaking of the UTI with

asset under management of Rs. 29835 crores as at the end of January 2003, representing

broadly, the assets of US 64 schemes, assured return and certain other schemes.

The second is UTI Mutual Fund ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered in SEBI and functions under the Mutual Fund regulations. With the bifurcation

of the erstwhile UTI which had in March 2000 more than Rs. 76000 crores of assets

under management and with the setting up of the UTI Mutual Fund. At the end of

October 31, 2006 there were 39 funds which manage assets of Rs. 176726 crores under

426 schemes.

PRESENT SCENARIO

The decade of 80s witnessed the emergence of stock markets as major source of

finance for trade and industry. The process of liberalization and deregulation had led to a

pace of growth almost unparallel in the history of any nation.

Average annual capital mobilization from the marked, which used to be about

Rs.70 crores in the 60s and Rs.90 crores in the 70s increased manifold during the 8-s

with the amount raised in 1989-90 being of the order of Rs.647.3 crores. The number of

listed companies rose from 2265 in 1980 to over 8600 at the end of 2006; the daily

turnover accordingly shot up from Rs.25 crores in 1979-80 to about Rs.585 crores in

2007-2008.

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Distribution of Worldwide Mutual Fund Assets by Region, 2008:

(Percentage of Total Assets)

At present, there are 20 stock exchanges recognized under the Securities

Contracts (Regulation) Act, 1956. These recognized stock exchanges mobilize and direct

the flow of savings of the general public into productive channels of investment.) .

According the latest statistics the market capitalization (assets) of Mutual Funds in

India is amounting to Rs. 3, 00,000 Crores.

ASSOCIATION OF MUTUAL FUNDS OF INDIA

With the increase in Mutual Fund players in India, a need for mutual fund

association in India was generated to function as a non-profit organization. Association of

Mutual Funds in India (AMFI) was incorporated on 22nd August 1995.

AMFI is an APEX body of all Asset Management Companies (AMC), which has

been registered with SEBI. Till date all the AMCs are that have launched mutual fund

schemes are its members. It functions under the supervision and guidelines of its Board

of Directors.

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Association of Mutual Funds of India has brought down the Indian Mutual Fund

Industry to a professional and healthy market with ethical lines enhancing and

maintaining standards. It follows the principle of both protecting and promoting the

interests of mutual funds as well as their unit holders.

Objectives :

The AMFI works with 30 registered AMCs of the country. It has certain defined

objectives, which juxtaposes the guidelines of its Board of Directors. The objectives are

as follows:

This mutual fund association of India maintains high professional and ethical

standards in all areas of operation of the industry.

It also recommends and promotes the top class business practices and code of

conduct which is followed by members and related people engaged in the activities of

MF and asset management. The agencies who are by any means connected or

involved in the field of capital markets and financial services also involved in this

code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the

mutual fund industry.

AMFI do represent the Government of India, the Reserve Bank of India and other

related bodies on matters relating to the Mutual Fund Industry.

It develops a term of well-qualified and trained Agent distributors. It implements

a programmed of training and certification for all intermediaries and other engaged in

the mutual fund industry.

AMFI undertakes all India awareness programmed for investors in order to

promote proper understanding of the concept and working of mutual funds.

At last but not the least association of mutual fund of India also disseminate

information on Mutual funds Industry and undertakes studies and research either

directly or in association with other bodies.

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BEFORE INVESTING IN MUTUAL FUNDS:

1) First choose a scheme (equity/debt/balanced) according to your returns/risk

profile.

2) Select the scheme which is giving income according to your requirements.

(Short term returns like income fund, long term returns like growth fund).

3) Select the fund which gives maximum returns and high security and liquidity

and low risk.

4) Then compare similar schemed offered by various MFs and their track

record. Examine the track record of the mutual fund and its sponsors.

5) Study the track record of the fund manager.

6) Examine the investment strategy of the scheme.

7) Check the load (entry/exit).

8) Check out on special facilities like switching options, account statements,

sale/repurchases policy etc.

9) Do not buy in to new schemes that are deceptively being offered at par.

RIGHTS AND OBLIGATIONS OF INVESTORS:

1) Right to proportionate beneficial ownership.

2) Right to timely service.

3) Right to information.

4) Right to approve changes in fundamental attributes.

5) Rights to wind up a scheme.

6) Right to terminate the AMC.

LEGAL LIMITATIONS TO INVESTORS RIGHTS:

1) Investors cannot sue the trust.

2) Investors can initiate legal proceedings against the trustees.

3) Sponsors of mutual funds have no obligations to meet the shortfall in non-

assured schemes.

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4) Only if the OD has specifically provided such guarantee by a named sponsor,

the investors have the right to sue the sponsor.

5) Prospective investors cannot sue the trust/the AMC or any other constituent.

Companies act cannot protect investors as fund investors are neither share holders in

the

AMC nor depositors.

ORIGIN

Rapid growth in industries in the erstwhile Hyderabad State saw efforts at starting

the Stock Exchange. In 1942, Mr. Gulag Mohammad, the Finance Minister formed a

committee for the purpose of constituting Rules and Regulations of the Stock Exchange.

Sri Purushothamas Thakurdas, present and Founder Member of the Hyderabad Stock

Exchange performed and the opening ceremony of the Exchange on 14-11-1943 under

the Hyderabad Securities Contract Act Mr. Kamal Yar Jung Bahadur was the first

President of the Exchange.

The HSE started functioning under Hyderabad Securities Contract Act of No.21

of 1352 under H.E.H Nizams Government as a Company Limited by guarantee. It was

the 6th Stock Exchange recognized under Securities Contract Act, after the premier Stock

Exchange, Ahmedabad, Bombay, Calcutta, Madras and Bangalore Stock Exchange. All

the deliveries were completed every Monday or the next working day.

The Securities Contract Act, 1956 was enacted by the Parliament passed into Law

and Rules were also framed in 1957. The Act and Rules were brought into force from 20 th

February 1957 by the Government of India.

The HSE was first recognized by the Government of India on 29 th September 1958

as Securities Regulation Act was made applicable to twin cities as Hyderabad and

Secunderabad from that date. In View of Substantial growth in trading activities, and for

the Yeoman services rendered by the Exchange was bestowed a permanent recognition

with effect from 29th September 1983.

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OBJECTIVES

The Exchange was established on 18th October, 1943 with the main objective to

create, protect and develop a healthy Capital Market in the State of Andhra Pradesh to

effectively serve the Public and the investors interests.

The property, Capital and Income of the Exchange, as per the Memorandum and

Articles of Association of the Exchange, shall have to be applied solely towards the

promotion of the objects of the Exchange. Even in case of dissolution, the surplus funds

shall have to be devoted to any activity having the same objects, as Exchange or be

distributed in Charity, as may be determined by the Exchanged or the High Court of

Judicature.

Thus, in short it is a Charitable Institution. The Hyderabad Stock Exchange

Limited is now on its stride of completing its 57 th year in the history of Capital Markets

serving the cause of saving and investments.

The Exchange has made its beginning in 1943 and today occupies a prominent

place among the Regional Stock Exchange in India. It thus, promotes the mobilization of

the funds to the Industry and develops the industrialization in the state of Andhra

Pradesh.

GROWTH

The HSE Ltd was established in the year 1943 as a non-profit making

organization catering to the needs of investing population in a small way in a rented

building in Koti area. In September 1989, then Vice-President of India Honorable Dr.

Shanker Dayal Sharma had inaugurated the own building of the Stock Exchange at

Himayat nagar, Hyderabad. Considerably, there has been a tremendous perception

growth that could be observed from statistics.

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The number of members of the Exchange was 55 in 1943, 117 in 1193, and 295 in

1995 and increased to 413 in 2006. The business turnover stood more than Rs.1200

crores in 2006. The Exchange has got a very weekly settlement system earlier and now a

daily Rolling settlement.

GOVERNING BOARD

At present, the Governing Board consists of the following:

Members of the Exchange

Sri Hari Narayan Rathi

Sri Rajendra V Naniwadekari

Sri Raj Kishore Harkut

Sri Ram Swaroop Agarwal

Sri Dattatraya

SEBI Nominee Directors

Shri R.P Singh IAS Joint Secretary of Department of Defence Production and Supplies,

Ministry of Defence, New Delhi.

Shri N.S Ponnunambi Register of Companies, Hyderabad.

Public Nominee Directors

Shri D. Seetharamaiah - Practicing CA

Dr. Braj Kishore - Professor (Retd.)Shri S. Dasaratharama Reddy - Retired Judge

Dr. B. Brahmaiah - Professor

Shri M. Subramanyam - Executive Director

COMPUTERISATION:

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The Stock Exchange business operations are equipped with modern

communications systems. Online computerization for simultaneously carrying out the

trading transactions, monitoring functions have been introduced at this Exchange since

1988 and the settlement and the Delivery System has become simple and easy to the

Exchange members.

The HSE in-line Securities Trading system was built around the most

sophistication state of the Art Computers, Communication System, the proven VECTOR

Software from CMC and was one of the most powerful SBT Systems in the Country,

operating in a WAN environment, connected through 9.6 KBPS 2 wire leased lines from

the offices of the Members to the office of the Stock Exchange at Somajiguda, where the

Central System CHALLENGE-L DESK SIDE SERVER made of silicon graphics (SGI

Model No. 95602-S2) was located and connected to all the members who were provided

with COMPAQ DESKPRO 2000/DESKTOP 5120 computers connected through

MOTOROLA 3265 V 34 MANAGEABLE STAND ALONE MODEMS (28.8KBPS) for

carrying out business from computer terminal located in the offices of the Members.

HSE is the only Exchange in the country which has provided infrastructure to its

members for its members for trading through WAN and leased lines from the day one.

The HOST system exchange not only to expand its operations later to other Prime

Trading Centers outside the twin cities of Hyderabad and Secunderabad but also to link

itself into the inter-connected market system (ECMS) proposed by the federation of

Indian Stock Exchange (FISE) to inter-connect various Regional Stock Exchanges in

various States.

In the age of electronic Trading on-line information on rates from other major

markets was an essential input for efficiency. HSE provided on-line rates from BSE and

NSE which not only enhanced the ability of HOST terminals to attract the investors but

also enable the members to avail arbitraging opportunities between Exchanges.

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Clearing Houses:

The Exchange set-up a Clearing House to collect the Securities from all the

Members and distribute to each member, all the securities due in respect of every

settlement. The whole of the operations of the Clearing House were also computerized.

Inter-Connected Market System (ICMS):

The HSE was the convener of a committee constituted by the Federation of Indian

Stock Exchanges for implementing an Inter-connected by Market System (ICMS) in

which the Screen Based Training System of Various Stock Exchanges was inter-

connected to create a large National Market. SEBI welcomed the creation of ICMS.

The HOST provided the networks for HSE to hook itself into the ISE. The ISE

provided the members of HSE and their investors, access to a large National network of

Stock Exchange.

The inter-connected Stock Exchanges is a National Exchange and all HSE

members could have Trading terminals with access to the National market without any

fee, which was a boon to the members of an exchange to have the Trading rights on a

National Stock Exchange (NSE), without any fee or expenditure.

Stock Brokers Insurance Policy:

HSE had taken a comprehensive Stock Brokers Insurance Policy covering the

members to an extent of Rs.10 lakhs each and also insured the Clearing house. HSE was

one of the few to have such comprehensive Insurance policy coverage.

On-Line Surveillance:

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HSE pays special attention to Market Surveillance and monitoring exposures of

the members, particularly the mark to market losses. By taking prompt steps to collect the

margins to mark the market losses, the risk of default by members is avoided in any

settlement. It is heartening that there have been no defaults by members since the

introduction of Screen Based Trading.

The Exchange restricted the effective Trading volumes and linked to the Capital

deposited with the Exchange, to obviate defaults and losses and contain speculation.

BASE MINIMUM GROSS EXPOSURE INTRA-DAY

CAPITAL LIMIT TRADING LIMIT

Rs. 4.00 lakhs Rs.40.00 lakhs Rs.132.00 lakhs

ADDITIONAL CAPITAL:

Upto Rs. 6.00 lakhs Rs.60.00 lakhs Rs.120.00 lakhs

FURTHER ADDITIONAL CAPITAL:

Upto Rs. 8.00 lakhs Rs. 48.00 lakhs Rs. 96.00 lakhs

Settlement Guarantee Fund

The Exchange has introduced Trade Guarantee fund on 25.01.2000. This will

insulate the trading member from the counter-party risks while trading with another

member. The trading member and his investors will be assured of the timely completion

of the pay-out of funds and securities not with standing the default, if any, of any trading

member of the Exchange.

The short falls, if any, arising from the default of any member will be met out of

the settlement guarantee fund. Several pay-ins worth of crores of rupees in all the

settlement have been successfully completed after the introduction of the Settlement

Guarantee fund, without utilizing any amount from the Settlement Guarantee Fund.

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This Trade Guarantee Fund will be a major step in rebuilding this confidence of

the members and the investors in HSE. HSEs Trade Guarantee Fund had a corpus of

rupees 2 crores initially which would be raised to Rs 5 crores.

CURRENT PLANS:

Depository Participant

The Exchange had also become a Depository Participant with National Securities

Depository Limited (NSDL) and Central Depository Services Limited (DCSL). The

depository functions can be undertaken by the Exchange by opening the accounts of

investors, members of the Exchange etc.

Floating of a Subsidiary Company For The Membership of Major Stock

Exchange Of The Country

The Exchange has already floated a Subsidiary Company in the name and style ofHSE Securities Limited for obtaining the Membership of NSE and BSE. The process of

acquiring the Membership of NSE has already been completed and SEBI was kind

enough to grant its registration to HSE Securities Limited.

Facility To Trade At NSE, Derivatives Trading, Net Trading Etc

The Exchange Incorporated a Subsidiary HSE Securities Limited with a paid up

capital of Rs.4.00 crores to NSE Membership, so that the members of the Exchanges had

access to the NSEs Trading Screen as Sub-brokers, Derivatives Trading and Bet Trading

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etc. The Members of this Exchange had equal opportunity of participating in such trading

like any other NSDE member. The Subsidiary of the exchange commenced trading with

HSE members sub-brokers on NSE segment. During the year, the Exchange also acquired

the membership if BSE and Trading will commence soon.

Commodity Exchange

The Exchange by seeking the support of the State Government is planning to set

up online commodities Exchange to trade in certain Commodities since our State is one

of the major Agriculture Economies. The Online Commodity Trading with WAN

connectivity will minimize the middle men operation and provide price support to the

producers.

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COMPANY PROFILE

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Northeast Broking Services Ltd, founded in 1995, is one of the largest Investment

companies based in Andhra Pradesh, with 75 Professionals, 150 support staff and

extensive network in Andhra Pradesh, Gujarat, Karnataka, Kerala, Maharashtra,Tamilnadu and rapidly entering into all over India.

Northeast is a premier broking, trading and clearing member of BSE CASH AND F&O,NSE CASH, NSE CURRANCY SEGMENT AND F&O, and HSE and as well as the two

leading commodity exchanges in the country NCDEX and MCX. And it is also registered

as a Depository Participant (DP) with NSDL and CDSL.

With nearly 10 years in business, Northeast is known for its financial strength andstability, superior customer service, and continued operation excellence.

Mission Vision & Quality

Our aim is to provide you with a reliable, secure, fast and most importantly

cost effective stock broking and demat services to enable you to gain better

returns on your investment. We wish to work together with you to maximize

your assets and secure your future.

Northeast offers its clients most competitive brokerage with wide choice ofproducts and services

Stock Broking:. Northeast offers trading in equities in NSE and BSE cash marketsegment. Northeast provides offline facilities like excellent trading atmosphere,

individual terminal and instant execution and confirmation

Derivatives Broking: Northeast provides facility to trade in futures and options inNSE F&O and BSE F&O market. Our efficient risk management takes adequate

care and precaution in monitoring the margin positions of the clients.

Commodities Broking: You can buy and sell commodities in both the leadingMCX and NCDEX commodity exchanges through our subsidiary Northeast

commodities private limited.

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Mutual Funds: Northeast offers a wealth of mutual fund choices along with the

competitive advice to help you invest wisely

Depository Services: Northeast as a Depository participant of NSDL and CDSL

offers effective demat services at all times, with economic fee structure forIndividuals, traders and sub brokers.

IPOs: Northeast enables you to invest prudently in the prospective and lucrative

public issues. Our research team would guide you to choose appropriate IPO that

suit your objective.

Internet Trading: A new value added product from Northeast designed for Traders

and Investors enabling to operate from any location, by using the state of art of

internet trading by logging on to www.northeastltd.com.

Research and Advisory Service: Northeast has well qualified and experiencedresearch team, who would constantly keep informing the Investors with wise

investment decisions. The information would be provided free of cost to our clients,

who can access the information using the user name and password that is given to

them.

Protection of Security Code(s) :

The Client shall immediately notify the Member in writing, delivered via-e-mail

and Registered AD, if the Client becomes aware of any loss, theft or unauthorized

use of the Client's Security code (s) and account number or any failure by the Client

to receive the confirmation of an execution including the contract note for the same;

or any receipt by the Client of confirmation of an order and/or execution which the

Client did not place; or any inaccurate information in the Client's account balances,

securities position, or transaction history. In the case where the Client notifies such

loss, theft or unauthorized use of the Client's Security code (s) password andaccount number to the Member, it shall suspend the use of the account of the Client,

however the Client shall be responsible and liable for all transaction that are carried

out by using the Client password. When any of the above circumstances occur,

neither the Member nor any of its officers, directors, employees, agents or

subsidiaries will have any responsibility or liability to the Client or to any other

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person whose claim may arise through the Client with respect to any circumstance

described above.

Password Protection :

We give you a unique user name and two passwords for transaction purposes. When

you place an order we ask you for the transaction password, which authenticates

your identity from our highly secured database. The system also has a feature,

which automatically expires your transaction password in 30 days. This would

mean we force you to change your password every month for ensuring high security

for all your transactions. You can also change your password online at any time. In

addition, you can use the Log Off button located throughout the site to securely exit

your account without closing your browser.

Internet Scanners and Intrusion Detection System :

The system maintains a database of attack signatures which is continuously updated

and against which it will scan all incoming traffic to detect any malicious activity or

hacking attempts into the site. In the event of a possible attack, it will terminate that

session, log the attack details and also alert the administrators

Identity Protection

Please do not reply/respond to any communication, including email, SMS or phone

call informing you that your accounts will be closed unless you provide your

personal information by responding to such communication or other email

address/website/mobile number/phone number, or any communication requiring

furnishing of any information personal or otherwise, and representing to be from

CSL.

Avoid sending or furnishing personal and financial information on email. Also prior

to providing any information (financial or personal) on a website, verify the

bonafides of the website, its address and of the owners/operators of such websites.

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Make sure that the URL (Uniform Resource Locator) that appears in the "address"

or "location" box on your browser window is the one you wish to access.07

Surveillance :

NORTHEAST BROKING SERVICES LTD.,. has a very scientific risk

management system in place. The company has a separate surveillance and

monitoring department, where highly efficient and experienced personnel are in

charge of close monitoring of terminal operations throughout the trading hours.

Each and every branch/franchisee is under continuous watch as regards exposures,

margins, timely payment of cash and shares, turnover, mark to market profits/losses

and so on.

You agree and understand that the information and material contained in this

website implies and constitutes your consent to the terms and conditions mentioned

below. You also agree that NORTHEAST BROKING SERVICES LTD., can

modify or alter the terms and conditions of the use of this service without any

liability. NORTHEAST BROKING SERVICES LTD., has launched e-broking

services. It reserves the right to decide the criteria based on which customers wouldbe allowed to avail of these services. The content of the site and the interpretation of

data are solely the personal views of the contributors. NORTHEAST BROKING

SERVICES LTD., reserves the right to make modifications and alterations to the

content of the website. Users are advised to use the data for the purpose of

information only and rely on their own judgment while making investment

decisions.

The investments discussed or recommended may not be suitable for all investors.

NORTHEAST BROKING SERVICES LTD., does not guarantee the timeliness,

accuracy or quality of the electronic content. The content of the website cannot be

copied, reproduced, republished, uploaded, posted, transmitted or distributed for

any non-personal use without obtaining prior permission from NORTHEAST

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BROKING SERVICES LTD., We reserve the right to terminate the accounts of

subscribers/customers, who violate the proprietary rights, in addition to necessary

legal action. NORTHEAST BROKING SERVICES LTD., and its

owners/affiliates are not liable for damages (monetary or otherwise) caused by any

performance, failure of performance, error, omission, interruption, deletion, defect,

delay in transmission or operations, computer virus, communications line failure,

and unauthorized access to the personal accounts. NORTHEAST BROKING

SERVICES LTD., is not responsible for any technical failure or malfunctioning of

the software or delays of any kind. We are also not responsible for non-receipt of

registration details or e-mails. Users shall bear all responsibility of keeping the

password secure. NORTHEAST BROKING SERVICES LTD., is not responsiblefor the loss or misuse of the password.

NORTHEAST BROKING SERVICES LTD., is not responsible for the content

of any of the linked sites. By providing access to other web-sites, NORTHEAST

BROKING SERVICES LTD., is neither recommending nor endorsing the content

available in the linked websites. You agree that the information gathered from your

profile will be used to enhance your experience on the website. We will not rent or

sell the profile/contents to any third party. In case of a contest or a promotion

scheme, we reserve the right to share the users profile with the sponsors.

In the event of necessary credit checks and collection of payments, NORTHEAST

BROKING SERVICES LTD., can disclose such information to other authorities

in good faith. NORTHEAST BROKING SERVICES LTD., will use all or any

part of the service and change terms without any obligation. NORTHEAST

BROKING SERVICES LTD., is not in any manner answerable, responsible or

liable to any person or persons for any acts of omissions or commission, errors,

mistakes and/or partners, agents associates etc., of any of the Rules, regulations,

bye-laws of the National Stock Exchange, Bombay Stock Exchange of India

Limited or SEBI Act or any other laws in force from time to time. NORTHEAST

BROKING SERVICES LTD., is not answerable, responsible or liable for any

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information on this website or for any services rendered by us, our employees and

our servants. This website is for the exclusive purpose of transactions to be carried

out within the territorial jurisdiction of India and all such transactions shall be

governed by the laws in India. Notice is hereby given that Non Resident Indians

(NRI's) and Foreign Nationals accessing this web site and opting to transact thereon

shall do so after due verification at their end of their eligibility to do so.

NORTHEAST BROKING SERVICES LTD., Limited undertakes no

responsibility for such pre-eligibility of qualification on part of Non-Resident

Indians (NRI's) or Foreign Nationals to transact on this website

Registered Office

8-2-276, Indradhanush,Pavani Estate, Road No.2,

Banjara Hills,Hyderabad - 500 034

Phone: 040-30680167, 30680168. Mobile: 9246815720

Email: [email protected]

Corporate Office

5-9-22, My Home Sarovar Plaza,

3rd Floor Secretariat Road, Saifabad,

HYDERABAD - 500 063,

Phone:040-30216666, 040-23210894 Fax:040-23210895Email: [email protected], [email protected]

DP Office

5-9-22, My Home Sarovar Plaza,

3rd Floor Secretariat Road, Saifabad,

HYDERABAD - 500 063,

Phone:040-23210894, Fax:040-23210895

Email: [email protected], [email protected]

54
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Chapter-4

DATA ANALYSIS & INTERPRETATION

FUND : TATA OPEN-ENDED BALANCED GROWTH FUND

OBJECTIVE: Aims to invest in equity and debt oriented securities so as to give

investor balanced returns.

PORTFOLIO OF THE FUND

SectorApr 2011 May 2011

A Energy 13.08 12.65

B Finance 14.92 13.92C Technology 5.12 5.47

D Automobile 4.85 5.31

E Health care 7.08 6.87

F Engineering 5.04 6.86

G Diversified 4.91 4.26

H FMCG 9.06 8.96

I Metals 0.68 1.12

J Construction 1.08 0.71

Note: Reasons for taking two months portfolio details in above mentioned fund are

1. If you observe two months portfolio April and May, you can see some

differences in values. Reason is Fund Manager will churn portfolio every

month. So asset allocation changes every month. But investors units will

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be same.

2. Portfolio of equity is 72.77%, but the above portfolio shows less than

72.77% reason, is here I have taken only 10 sectors for every fund. This

will not get any affect for the analysis.

Sector wise chart

Portfolio allocation chart:

0

2

4

6

810

12

14

16

Apr-11

May-11

72.77

11.35

15.88

0

CHART SHOWING ASSET ALLOCATION OF

TATA BALANCED FUND

EQUITY

DEBT

OTHERS

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The TATA Balanced Fund Portfolio consists of 72.77% Equity holdings, 11.35%

Debt, 15.88% Money Market. It is evident from the data that though the investors

have risk taking ability, they balanced their investments by investing in Debt also.

The advantage of balanced fund based on market conditions, portfolio allocations can

decrease to 50% also. It is evident that fund manager is bullish side on market.

FUND : BIRLA OPEN-ENDED BALANCED GROWTH FUND

OBJECTIVE : The Scheme aims to balance income requirements with growth of

capital through balanced mix of investment in equity and debt.


Sector April

2011

May 2011

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A Finance 13.08 14.55

B ENERGY 8.07 10.07

C HEALTH CARE 7.85 6.7

D TECHNOLOGY 10.08 8.98

E ENGINEERING 4.82 5.45

F DIVERSIFIED 8.2 5.2

G METALS 1.08 2.19

H AUTOMOBILES 3.81 2.79

I FMCG 3.28 2.61

J CHEMICALS 1.73 0.73

K COMMUNICATION 1.08 1.77


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02468

10121416

Apr-11

May-11

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65.64

23.44

10.92

0


BIRLA BALANCED FUND

EQUITY

DEBT

OTHERS

The BIRLA Balanced Fund Portfolio consists of 65.64% Equity holdings,

23.44% Debt, 10.92% Money Market. It is evident from the data that though the

Investors have risk taking ability, they balanced their investments by investing in

Debt also. Here fund manager, behaving portfolio very conservatively, so equity

proportion selected less when compare to remaining four funds.

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FUND : Pru ICICI OPEN-ENDED BALANCED GROWTH FUND

OBJECTIVE : Aims to invest in equity and debt oriented securities so as to give

Investor balanced returns.


Sector April 11 May11

A FINANCIAL 14.81 15.39

B TECHNOLOGY 8.81 6.79

C Automobile 10.08 8.78

D Energy 9.21 8.85



G Fmcg 8.72 6.13

H Diversified 1.08 1.34

I Services 4.08 5.19

J Communication 3.02 2.67

K Metals 2.08 3.82


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0

2

46

8

10

12

14

16

18

Apr-11May-11

70.4

17.83

11.77

0


PRU ICICI BALANCED FUND

EQUITY

DEBT

OTHERS

The Pru ICICI Balanced Fund Portfolio consists of 70.4% Equity holdings,

17.83% Debt and 11.77% others. It is evident from the data that though the fund

manager is taking high risk even in balanced fund for this particular period. And at

the same time have given priority to debt and other safety investment products.

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FUND : DSP BLACK ROCK OPEN-ENDED BALANCED

GROWTH FUND

OBJECTIVE : Seeks to generate long term capital appreciation and current income from

a portfolio constituted of equity and equity related securities as well as fixed income

securities.


Sector APR 2011 MAY2011

A financial 14.08 13.2

B Energy 8.21 9.69

C Technology 7.08 6.8

D Engineering 6.81 6.09


F FMCG 6.01 5.83

G SERVICES 4.86 5.1

H AUTOMOBILE 2.85 3.7

I CHEMICALS 3.85 3.1

J CONSTRUCTION 2.08 3.29

K DIVERSIFIED 4.08 5.81

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0

2

4

6

8

10

12

14

16

Apr-11

May-11

73.69

24.29

2.020

CHART SHOWING ASSET ALLOCATION OF DSP

BLAKROCK BALANCED FUND

EQUITY

DEBT

OTHERS

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The DSP Black Rock Balanced Fund Portfolio consists of 73.69% Equity

holdings, 24.29% Debt, 2.02% Money Market. It is evident from the data that though

the Investors have risk taking ability more here also, their investment is not getting

balanced properly, so risk element is there.

FUND : JM FINANCIAL OPEN-ENDED BALANCED GROWTH

FUND

OBJECTIVE : Aims to provide investors with liquidity and current income alongwith capital appreciation.


Sector Apr 2011 May 2011

A Energy 8.03 7.67

B Automobile 14.01 14.79

C Diversified 8.01 7.47

D Metals 12.86 11.86

E Financials 10.65 5.99

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G Technology 9.63 8.05

H FMCG 9.61 7.64

I HEALTH CARE 3.15 3.20

J Construction 6.01 4.16

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0

2

4

6

8

10

12

14

16

Apr-11

May-11

70.58

22.49

6.93

0

CHART SHOWING ASSET ALLOCATION OF JM

BALANCED FUND

EQUITY

DEBT

OTHERS

The JM Balanced Fund Portfolio consists of 70.58% Equity holdings, 22.49% Debt,

6.93% Money Market. It is evident from the data that though the Investors have risk

taking ability, they balanced their investments by investing in Debt also. When

compare to last year portfolio, fund manager has taken less exposure towards equity ,

so its clearly understanding that fund manager is aggressive on equity markets.

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TATA OPEN-ENDED BALANCED GROWTH FUND

ATE 1st

APR09

1st JULY

2009

1ST OCT

2009

1ST JAN

2010

1ST APR

2010

1ST JULY

2010

1ST OCT

2010

1ST JAN

2011

1ST APR

2011

AV 44.094

6

60.79 68.87 75.35 76.67 78.60 86.70 86.17 82.67

Fund performance and NAV values over a period of 1 year.

BIRLA OPEN-ENDED BALANCED GROWTH FUND

68

DATE 1st

APR09

1ST

JULY

2009

1st

OCT

2009

1st

JAN

2010

1ST

APR

2010

1ST

JULY

2010

1ST

OCT

2010

1ST

JAN

2011

1ST

APR

2011

NAV 120.92 201.90 232.51 253.81 255.14 256.39 296.86 289.47 260.69

0

10

20

30

40

50

60

70

80

90

1/4/20

09

1/7/

2009

1/10

/200

9

1/1/20

100

1/4/20

10

1/7/

2010

1/10

/201

0

1/1/20

11

1/4/20

11

0

50

100

150

200

250

300

1/4/200

9

1/7/200

9

1/10/200

9

1/1/2

0100

1/4/201

0

1/7/201

0

1/10/201

0

1/1/201

1

1/4/201

1


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Prudential ICICI OPEN-ENDED BALANCED GROWTH FUND

69

DATE 1st APR

2009

1ST

JULY

2009

1st

OCT

2009

1st

JAN

2010

1ST

APR

2010

1ST

JULY

2010

1st

OCT

2010

1ST

JAN

2011

1ST

APR

2011

NAV 27.10 34.38 38.21 40.28 41.6 42.21 46.97 47.5

7

46.43


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DSP MERRILL LYNCH OPEN-ENDED BALANCED GROWTH FUND


70

DATE 1st APR

2009

1ST

JULY

2009

1st

OCT

2009

1st

JAN

2010

1ST

APR

2010

1ST

JULY

2010

1ST

OCT

2010

1ST JAN

2011

1ST

APR

2011

NAV 36.13 48.06 55.79 60.05 60.25 62.35 70.11 69.16 66.39

0

5

10

15

20

25

30

35

40

45

50

1/4/20

09

1/7/

2009

1/10

/200

9

1/1/20

100

1/4/20

10

1/7/

2010

1/10

/201

0

1/1/20

11

1/4/20

11

0

10

20

30

40

50

60

70

80

1/4/200

9

1/7/200

9

1/10/200

9

1/1/2

0100

1/4/201

0

1/7/201

0

1/10/201

0

1/1/201

1

1/4/201

1


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JM FINANCIAL OPEN-ENDED BALANCED GROWTH FUND

Fund performance and NAV values over a period of 2 years.

71

DATE 1st APR

2009

1ST

JULY

2009

1st

OCT

2009

1st

JAN

2010

1ST

APR

2010

1ST

JULY

2010

1ST

OCT

2010

1ST JAN

2011

1ST

APR

2011

NAV 14.03 20.32 21.89 21.80 21.50 23 25.04 24.30 23

0

5

10

15

20

25

30

1/4/200

9

1/7/200

9

1/10/200

9

1/1/2

0100

1/4/201

0

1/7/201

0

1/10/201

0

1/1/201

1

1/4/201

1


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PERFORMANCE EVALUATION

We are interested in discovering if the management of a mutual fund is

performing well; that is, has management done better through its selective buying and

selling of securities than would have been achieved through merely buying the market

picking a large number of securities randomly and holding them throughout the period?

One of the most popular ways of measuring managements performance is by

comparing the yields for the managed portfolio with the market or with a random

portfolio.

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The following formula can be used to evaluate Mutual fund performance:-

Where:

NAV t = per-share net asset value at the end of year t

D t = Capital appreciation during two years.

NAV t-1 = per-

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