3. INTRODUCTION
What is Mutual Funds?- It is an investment vehicle that is made up of a pool of
funds collected from many investors for the purpose on investing in securities such
as stocks, bonds, money market instruments and similar assets.
Channels Through Which You Can Invest In MF’s are-
1. Online/Mobile
2. IFA
3. Bank
4. Broker or fund advisor
5. Wealth management firm
https://www.youtube.com/watch?v=MNEKXrCUV_0
4. MF’s are managed by professional fund managers.
Allows you to invest your savings across a variety of
securities and diversify your assets according to your
objectives and risk tolerance.
Provides investors to earn on their personal savings.
Offers relatively high liquidity.
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5.
6.
7. TYPES OF MUTUAL FUND
Equity Funds- Funds that invest in stocks represent the largest category of mutual
funds. Generally, the investment objective of this class of funds is long-term capital
growth with some income.
Fixed Income- Funds that invest primarily in government and corporate debt. While
fund holdings may appreciate in value, the primary objective of these funds is to
provide a steady cash flow to investors. Bond funds are likely to pay higher returns
than certificates of deposit and money market investments, but bond funds aren't
without risk.
Money market Funds- The money market consists of short-term debt instruments,
mostly Treasury bills. This is a safe place to park your money. You won't get great
returns, but you won't have to worry about losing your principal.
8.
9. An Equity Fund is an open or closed-end fund that
invests primarily in stocks, allowing investors to buy into
the fund and thus buy a basket of stocks more easily
than they could purchase the individual securities.
Equity fund categories are:
1. Large cap funds
2. Small and mid-cap funds
3. Multi-cap funds
4. Thematic funds
5. Tax saving funds
6. Equity oriented hybrid funds (ELSS)
11. FEES STRUCTURE Fund A Fund B Fund C
Shareholder Transaction Expenses
Sales load imposed on purchases None None 4.75%
Sales load imposed on reinvested dividends None None 4.75
Redemption fees None None None
Exchange fees None None None
Annual Fund Operating Expenses
Management and administrative expenses 0.22% 0.60% 0.70%
Investment advisory expenses 0.02 — —
Marketing fees — 0.30 —
Marketing and distribution costs 0.02 — —
Miscellaneous expenses 0.03 0.32 0.26
Total Operating Expenses 0.29% 1.22% 0.96%
Expenses on a Rs10,000 Investment
1 year Rs 30 Rs 124 Rs 587
3 years 93 387 823
5 years 163 670 1,077
10 years 368 1,477 1,805
12. MF investments are subject to market risks, no assurance and guarantee will be achieved.
NAV of units issued under the schemes can go up or down depending on the factors and
forces affecting the capital markets.
Past performance of Sponsors/AMC/MF does not indicate or guarantee future performance
of schemes of the MF and may not necessarily provide a basis of comparison with other
investments.
The names of the schemes do not indicate either the quality of the schemes, their future
prospects or the returns. Investors urged to study the terms of the offer carefully and consult
their Investment Advisor before they invest in the Schemes.
The Sponsors are not responsible or liable for any loss resulting from the operations of the
MF beyond the contribution of amount of Rs1 lacs towards setting up of the MF.
13. AMC has the right to limit repurchases / redemptions, under certain circumstances
Investments made by a unit holder in foreign currency in the Schemes are subject
to the risk of fluctuation in the value of the Rupee
A unit holder may invest in the Funds and acquire a substantial portion of the
scheme(s) units
In case of Fixed Income Investment, changes, in prevailing rates of interest will
likely affect the value of the Scheme(s) holdings and value of the Scheme(s') Units
Rate of interest leads to inflation NAV falls
Rate of interest leads to depression NAV rises
14. Prices of long-term securities fluctuate more in response to interest rate changes than do
short-term securities. Indian debt and government securities markets can be volatile leading
to the possibility of price movements up or down in fixed income securities and thereby to
possible movements in the NAV
Credit risk or Default risk refers to the risk that an issuer of a fixed income security may
default. The greater the credit risk, the greater the yield required for someone to be
compensated for the increased risk
The liquidity of the Scheme's investment may be inherently restricted by trading
volumes, transfer procedures and settlement periods.
15. Tracking errors are inherent in any index fund and such errors may cause the
scheme to generate returns which are not in line with the performance of
Nifty/SENSEX. To the extent that some funds may be deployed in Stock
Lending/Money Market Operations, the Scheme will be subject to risks relating to
such operations and may also contribute to tracking errors. The deviation of the
NAV of the respective plan from the SENSEX or Nifty is expected to be in the
range of 2-3% per annum
In case of Mid Cap Fund, Trading Volumes and Settlement Periods may restrict
liquidity in equity and debt investments. In case of mid cap companies such
liquidity risks is likely to be high. Further prices of stock in mid cap companies
are also likely to be more volatile
Pursuant to allotment of bonus units, the NAV of schemes would fall in
proportion to bonus allotted and as a result the total NAV held by investor would
remain same
16. POPULATION: India's population is young, with 54% under the age of 25 and 80% under 45
and the percentage of working population is rising rapidly.
Source: UN, CLSA global growth in working-age population (15-64) over next 5 yrs (bn)
A younger and working age population means –
* income levels to rise
* higher savings and consequent flows into equity markets
* increased household consumption
* significant increase of labour supply
* Large population and favourable demographics
MOVEMENT IN GLOBAL MARKETS: If we see the position of BSE SENEX as compared to
other major indexes in the world then we find that BSE has been the best performer.
Source: www.bloomberg.com
This is the major factor which has contributed to mutual fund emerging as a great investment
vehicle for every category of investors and made mutual fund one of the most preferable way to
generate return. Mutual fund invest in equity of various companies for long time and long
investment in equities can help investors in generating good returns, if we invest for long.
17. INDIA – POTENTIAL 'SERVICES CAPITAL' OF THE WORLD
With services becoming increasingly tradable, India is well placed in terms of costs and skill
sets and over the past 13 years. From 1991-2005, India’s services sector growth has averaged
7.6% year compared with 5.7% for manufacturing.
Source: www.rbi.org.in
INFLATION AFFECTS THE RETURN
Inflation has always been one of the most important macroeconomic factor affection the
country. It represents the general price level of the country inflation has always lowered the
actual return from bank savings except the year 2002
* returns on safe fixed income options such as bank deposits have been moderating.
* Assured' return products are being phased out.
* Inflation and taxes are impacting returns.
Source: bank deposit rate-RBI inflation- CITIGROUP
18. IMPACT OF VARIOUS CHANGES
In order to detect timely fault lines in the global financial markets and put in
place appropriate corrections, the adoption of international standards and
global benchmark becomes important.
Mutual funds have been a significant source of investment in both government
and corporate securities. It has been for decades the monopoly of the state with
UTI being the key player, with invested funds exceeding rs.300 bn.
The state-owned insurance companies also hold a portfolio of stocks. Presently,
numerous mutual funds exist, including private and foreign companies.
19. Beta
It measures the systematic risk i.e. the risk inherent to the entire market or an
entire market segment. This type of risk is both unpredictable and impossible to
completely avoid.
Β<1 less volatile than the market
Β>1 more volatile than the market
Standard Deviation
It measures the total risk i.e. systematic as well as unsystematic risk.
Sharpe Ratio: (E(r) – rf) / σ
This ratio provides the returns per unit of total risk.
Treynors Ratio: (E(r) – rf) / Β
This ratio measures the performance in terms of systematic risk.
Jenson Alpha: Actual Avg. Returns – Fair Returns(CAPM)
This ratio measures the abnormal returns that are generated.
20. Fund
Category
S.
No.
Fund Name
E(r) β σ Sharpe Ratio Treynors Ratio Jenson Alpha
Monthly NAV
(Oct12 to Sep15)
lower the β
lower the
volatility
lower the σ
lower the
volatility
higher the Sharpe
better the
performance in terms
of total risk
higher the treynors
better the
performance in terms
of systematic risk
positive=undervalued
negative=overvalued
Large Cap
1 Birla Sun Life Top 100 (G) 11.3828 1.0211 0.0452 0.8584 3.8027 0.0754
2 Franklin India Oppor.(G) 11.4176 1.0302 0.0470 0.8339 3.8027 0.0817
3 SBI Blue Chip Fund (G) 11.2327 0.9816 0.0437 0.8550 3.8027 0.0842
Small and Mid
Cap
4 Can Robeco Emerg-Equities (G) 11.7484 1.1172 0.0605 0.7017 3.8027 0.1739
5
JP Morgan(I) Mid and Small Cap
(G) 11.6019 1.0787 0.0549 0.7475 3.8027 0.1756
6 Principal Emerging Bluechip (G) 11.7162 1.1088 0.0553 0.7620 3.8027 0.1574
Diversified
Equity
7 Birla SL India GenNext (G) 11.2414 0.9839 0.0464 0.8058 3.8027 0.1003
8 Franklin High Growth Cos (G) 11.2446 0.9847 0.0475 0.7885 3.8027 0.1579
9
ICICI Pru Value Discovery Fund
(G) 11.2282 0.9804 0.0495 0.7538 3.8027 0.1436
10 L & T India Value Fund (G) 11.5537 1.0660 0.0528 0.7674 3.8027 0.1439
11 UTI MNC Fund (G) 10.8057 0.8693 0.0456 0.7248 3.8027 0.1520
Thematic-
Infrastructure
12 Can Robeco Infrastructure (G) 12.0166 1.1877 0.0584 0.7730 3.8027 0.0461
13 Franklin Build India Fund (G) 11.7547 1.1189 0.0531 0.8015 3.8027 0.1628
ELSS 14 Axis Long Term Equity Fund (G) 11.3737 1.0187 0.0471 0.8220 3.8027 0.1488
15 Religare Invesco Tax Plan (G) 10.9847 0.9164 0.0426 0.8175 3.8027 0.1038
Index
16 GS Nifty BeES 10.5621 0.8052 0.0442 0.6926 3.8027 0.0064
17 Kotak Nifty ETF 11.2345 0.9821 0.0419 0.8904 3.8027 -0.0043
Balanced 18 Tata Balanced Fund (G) 10.5293 0.7966 0.0373 0.8117 3.8027 0.0921
Benchmark CNX Nifty
Maximum 12.0166 1.1877 0.0605 0.8904 3.8027 0.1756
Minimum 10.5293 0.7966 0.0373 0.6926 3.8027 -0.0043
21. The top five mutual fund houses HDFC, ICICI Pru,
Reliance, Birla Sun Life and UTI AMC,
which together hold about 55 per cent market
share in the MF industry
have bought stocks that have been beaten down
and were trading at attractive levels in August.
HDFC Mutual Fund bought Tata Steel and
Vedanta, while ICICI Pru bought into NTPC and
Ambuja Cements
Among midcap stocks, fund houses bought stocks
such as Thomas Cook, Sun TV Network and Exide
Industries
Funds have invested Rs 10,533 crore in stocks in
August, while foreign institutional investors (FIIs)
sold stocks worth Rs 16,877 crore during the
same period — its highest monthly selloff in more
than seven years
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