A PROJECT REPORT ON COMPARITIVE ANALYSIS ON BALANCED MUTUAL FUND

SUBMITTED IN PARTIAL FULFILLMENT FOR

POST GRADUATE DIPLOMA IN BANKING

Programme of

GOA

Submitted by :BRENDA COELHO QUEENIE COELHO PRANITA PILANKAR STEFFIE NICHOL MALBERT MONSERRATE

Under Guidance :MR.TREVOR FERNANDES MR.ROHIT CHOPRA

CERTIFICATE
This is to certify that MS BRENDA COELHO,QUEENIE COELHO,PRANITA PILANKAR,STEFFIE NICHOL ,MALBERT MONSERRATE. Students of Institute of Finance,Banking and Insurance-Goa has completed project work On COMPARITIVE ANALYSIS ON BALANCED MUTAL FUND under my guidance and supervision. I certify that this is an original work and has not been copied from any source.

Name and Signature of Guide :

MR.TREVOR FERNANDES

MR.ROHIT CHOPRA

Name of Project: COMPARITIVE ANALYSIS ON BALANCED MUTUAL FUND

Date

DECLARATION I hereby declare that this Project Report entitled COMPARITIVE ANALYSIS ON BALANCED MUTUAL FUND submitted in the partial fulfilment of the requirement of POST GRADUATE DIPLOMA IN BANKING Of INSTITUTE OF FINANCE,BANKING & INSURANCE GOA. Is based on COMPARITIVE ANALYSIS OF BALANCED MUTUAL FUND, The Data was collected from Different Business books and Magazines & Business websites. SUBMITTED BY

BRENDA COELHO

QUEENIE COELHO

PRANITA PILANKAR STEFFIE NICHOL MALBERT MONSERRATE

CONTENTS

Sr.No.

Chapter Name Page no. 1-25

1.

Introduction 26-32

2. 3. 4. 5. 6. 7. 8.

Mutual Fund in India 33-36 Balanced Mutual Fund 37-38 ICICI PRUDENTIAL BALANCED MUTUAL FUND 39-40 CANARA ROBECO BALANCED MUTUAL FUND 41-44 HDFC BALANCED MUTUAL FUND 45-46 RELIANCE BALANCED MUTUAL FUND 47-48 SBI MAGNUM BALANCED MUTUAL FUND 49-55

9.

COMPARITIVE ANALYSIS ON BALANCED MUTUAL FUND

CHAPTER NO 1

Introduction of Mutual Fund

INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS ASPECTS.

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 instruments such as shares,
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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 shareholder participates 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. Investments 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 same 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.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

What is Net Asset Value (NAV) of a scheme? The performance of a particular scheme of a mutual fund is denoted by 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 held by the scheme. Since market value of securities changes every day, NAV of a 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. For example, if the market value of securities of a mutual fund 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 mutual funds on a regular basis - daily or weekly - depending on the type of scheme. The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable. If schemes in the same category of different mutual funds are available, should one choose a scheme with lower NAV? Some of the investors have the tendency to prefer a scheme that is available at lower NAV compared to the one available at higher NAV. Sometimes, they prefer a new scheme which is issuing units at Rs. 10 whereas the existing schemes in the same category are available at much higher NAVs. Investors may please note that in case of mutual funds schemes, lower or higher NAVs of similar type schemes of different mutual funds have no relevance. On the other hand, investors should choose a scheme based on its merit considering performance track record of the mutual fund, service standards, professional management, etc. This is explained in an example given below. Suppose scheme A is available at a NAV of Rs.15 and another scheme B at Rs.90. Both schemes are diversified equity oriented schemes. Investor has put Rs. 9,000 in each of the two schemes. He would get 600 units (9000/15) in scheme A and 100 units (9000/90) in scheme B. Assuming that the markets go up by 10 per cent and both the schemes perform equally well and it is reflected in their NAVs. NAV of scheme A would go up to Rs. 16.50 and that of
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scheme B to Rs. 99. Thus, the market value of investments would be Rs. 9,900 (600* 16.50) in scheme A and it would be the same amount of Rs. 9900 in scheme B (100*99). The investor would get the same return of 10% on his investment in each of the schemes. Thus, lower or higher NAV of the schemes and allotment of higher or lower number of units within the amount an investor is willing to invest, should not be the factors for making investment decision. Likewise, if a new equity oriented scheme is being offered at Rs.10 and an existing scheme is available for Rs. 90, should not be a factor for decision making by the investor. Similar is the case with income or debtoriented schemes. On the other hand, it is likely that the better managed scheme with higher NAV may give higher returns compared to a scheme which is available at lower NAV but is not managed efficiently. Similar is the case of fall in NAVs. Efficiently managed scheme at higher NAV may not fall as much as inefficiently managed scheme with lower NAV. Therefore, the investor should give more weight age to the professional management of a scheme instead of lower NAV of any scheme. He may get much higher number of units at lower NAV, but the scheme may not give higher returns if it is not managed efficiently.

ORGANISATION OF A MUTUAL FUND There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:

MUTUAL FUND SET UP A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations 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 the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before

they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002). The formation and operations of Mutual Funds in India is solely guided by SEBI (Mutual Funds) Regulations, 1993, which came into force on 20th January, 1996, through a notification on 9th December, 1996. these Regulations make it mandatory for Mutual Funds to have a three-tier structure of :

A Sponsor Institution to promote the Fund. A team of Trustees to oversee the operations and to provide checks for the efficient, profitable and transparent operations of the fund and An Asset Management Company (AMC) to actually deal with the funds. Sponsoring Institution: The Company, which sets up the mutual fund, is called the Sponsor. SEBI has laid down certain criteria to be met by the sponsor. The criterion mainly deals with adequate experience, good past track record, net worth etc. Sponsor appoints the Trustees, Custodian and the AMC with the prior approval of SEBI, and in accordance with SEBI Regulations. Sponsor must have at least 5-year track record of business interest in the Financial Markets. Trustees: Trustees are the people with long experience and good integrity in the respective fields carry the crucial responsibility in safeguarding the interests of the investors. For this purpose, they monitor the operations of the different schemes. They have wide ranging powers and they can even dismiss AMC with the approval of SEBI. The Indian Trust Act governs them.

Asset Management Company: The AMC actually manages the funds of the various schemes. The AMC employs a large number of professionals to make investments, carry out research &to do agent and investor servicing. In fact, the success of any Mutual Fund depends upon the efficiency of this AMC. The AMC submits a quarterly report on the functioning of the mutual fund to the trustees who will guide and control the AMC. The AMC is usually a private limited company, in which the sponsors and their associations or joint venture partners are shareholders. The AMC has to be registered by SEBI and should have a minimum Net worth of Rs.10 cores all times. The role of the AMC is to act as the Investment Manager of the Trust along with the following functions: It manages the funds by making investments in accordance with the provision of the Trust Deed and Regulations The AMC shall disclose the basis of calculation of NAV and Repurchase price of the schemes and disclose the same to the investors. Funds shall be invested as per Trust Deed and Regulations. Registrars and Transfer Agents: The Registrars and Transfer Agents are responsible for the investor servicing functions, as they maintain the records of investors in the mutual funds. They process investor applications , record details provided by the investors on application forms, send out periodical information on the performance of the mutual fund; process dividend pay-out to the investors; incorporate changes in information as communicated by investors; and keep the investor record up to date, by recording new investors and removing investors who have withdrawn their funds.

Custodian: Custodians are responsible for the securities held in the mutual funds portfolio. They discharge an important back-office function, by ensuring that securities that are bought are delivered and transferred to the books of mutual funds, and that funds are paid-out when mutual fund buys securities. They keep the investment account of the mutual fund, and also collect the dividends and interest payments due on the mutual fund investments. Custodians also track corporate actions like bonus, issues, right offers, offer for sale, buy back and open offers for acquisition.

ADVANTAGES OF MUTUAL FUND Portfolio Diversification: - Mutual Funds invest in a well-diversified portfolio of securities which enables to hold a diversified investment portfolio (whether the amount of investment is big or small). Professional Management: - Fund manager undergoes through various research works and has better investment management skills which ensure higher returns than what he can manage on his own. Less Risk: - Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Low Transaction: - Costs due to economies of scale (benefits of larger volumes), mutual funds pay lesser transaction costs. These benefits are passed on to the investors. Liquidity: - An investor may not be able to sell some of the shares held by him very easily and quickly, whereas units of a mutual fund are far more liquid. Choice of Schemes: - Mutual Funds provide investors with various schemes with different investment objectives. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. These schemes further have different plans/options. Transparency: - Funds provide investors with updated information pertaining to the markets and the schemes. All material facts are disclosed to the investors as required by the regulator.

Flexibility: - Investors also benefit from the convenience and flexibility offered by Mutual Funds. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Option of systematic (at regular intervals) investment and withdrawal is offered to the investors in most open-end schemes. Safety: - Mutual Fund industry is a part of a well-regulated investment environment where the interests of the investors are protected by the regulator. All funds are registered with SEBI and complete transparency is forced.

Disadvantages of Mutual Funds Professional Management - Many investors debate whether or not the professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still gets paid. Costs - Creating, distributing, and running a mutual fund is an expensive proposition. Everything from the managers salary to the investors statements cost money. Those expenses are passed on to the investors. Since fees vary widely from fund to fund, failing to pay attention to the fees can have negative long-term consequences. Remember, every dollar spend on fees is a dollar that has no opportunity to grow over time. Dilution - It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

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Taxes - When a fund manager sells a security, a capital-gains tax is triggered. Investors who are concerned about the impact of taxes need to keep those concerns in mind when investing in mutual funds. Taxes can be mitigated by investing in tax-sensitive funds or by holding non-tax sensitive mutual fund in a tax-deferred account.

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TYPES OF MUTUAL FUNDS Open-end Funds Funds that can sell and purchase units at a point in time are classified as Openend Funds. The fund size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to investors) and repurchases (from the investors) by the fund. An open-end fund is not required to keep selling new units to the investors at all times but is required to always repurchase, when an investor wants to sell his units. The NAV of an open-end fund is calculated every day. Close-end Funds Funds that can sell a fixed number of units only during the New Fund offer (NFO) period are known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times. After the closure of the offer, buying redemption of units by the investors directly from the funds is not allowed. However, to protect the interests of the investors, SEBI provides investors with two avenues to liquidate their positions: Closed-end Funds are listed on the stock exchanged where investors can buy/sell units from/to each other. The trading is generally done at a discount to the NAV of the scheme. The NAV of a closed-end fund is computed on a weekly basis (updated every Thursday). Closed-end Funds may also offer buy-back of units to the units holders. In this case, the corpus of the Fund and its outstanding units do get changed.

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Load Funds Mutual funds incur various expenses on marketing, distribution, advertising, portfolio churning, fund managers salary etc. Many funds recover these expenses from the investors in the form of load. These funds are known as Load Funds. A load fund may impose following types of loads on the investors: Entry Load- Also Known as Front-end load, it refers to the load charged to an investor at the time of his entry into a scheme. Entry load is deducted from the investors contribution amount to the fund. Exit Load- Also known as Back-end load, these charges are imposed on an investor when he redeems his units (exits from the scheme). Exit load is deducted from the redemption proceeds to an outgoing investor. Deferred Load- Deferred load is charged to the scheme over a period of time. Contingent Deferred Sales Charge (CDSC) - In some schemes, the percentage of exit load reduces as the investor stays longer with the fund. This type of load is known as Contingent Deferred Sales Charge. No-load Funds All those funds that do not change any of the above mentioned loads are known as No-load Funds. Tax-exempt Funds Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity oriented funds exempt from distribution tax (tax for distribution income to investors). Long term capital gains and dividend income in the hands of investors are tax-free. Non-Tax-exempt Funds

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Funds that invest in taxable securities are known as Non-Tax-Exempt Funds. In India, all funds, except open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of units by an investor within 12months of purchase are categorized as short-term capital gains, which are taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is deducted from the redemption proceeds to an investor.

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1. Equity Funds Equity funds are considered to be the more risky funds as compared to the other types of fund, but they also provide higher returns than any other funds. It is advisable that an investor looking to invest in an equity fund should invest for long term i.e. for 3years or more. There are different types of equity funds each falling into different risk bracket. In the order if decreasing risk level, there are following types of equity funds: a. Aggressive Growth Funds: - in Aggressive Growth Funds, fund managers aspire for maximum capital appreciation and invest in less researched shares of speculative nature. Because of these speculative investments Aggressive Growth Funds become more volatile and thus, are prone to higher risk than other equity funds.

b. Growth Funds: - Growth Funds also invest for capital appreciation(with time horizon of 3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest I companies that are
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expected to outperform the market in the future. Without entirely adopting speculative strategies, Growth Funds invest in those companies that are expected to post above average earnings in the future.

c. Specialty Funds: - Specialty Funds have stated criteria for investments and their portfolio comprises of only those companies that meet their criteria. Criteria for some specialty funds could be to invest/ not to invest in particular regions/companies. Specialty funds are concentrated and thus, are comparatively riskier than diversified funds. There are following types of specialty funds:

i.

Sector Funds:

Equity Funds that invest in a particular

sector/industry of the market are known as Sector Funds. The exposure of these funds is limited to a particular sector (say Information Technology, Banking, pharmaceuticals or Fast Moving Consumer Goods) which is why they are more risky than equity funds that invest in multiple sectors.

ii.

Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one or more foreign companies. Foreign securities fund achieve international diversification and hence they are less risky than sector funds. However, foreign securities funds are exposed to foreign exchange rate risk and country risk.

iii.

Mid-Cap or Small-Cap Funds:

Funds that invest in companies

having lower market capitalization than larger capitalization companies are called Mid-Cap or Small-Cap Funds. Market

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capitalization of Mid-Cap companies is less than that if big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market capitalization of less than Rs. 500 crores. Market Capitalization of a company can be calculated by multiplying the market price of the companys share by the total number of its outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as Large-Cap Companies which gives rise to volatility in share prices of these prices of these companies and consequently, investment gets risky.

iv.

Option Income Funds: While not yet available in India, Option Income Funds write options on a large fraction of their portfolio. Proper use of options can help to reduce volatility, which is otherwise considered as a risky instrument. These funds invest in big, high dividend yielding companies, and then sell options against their stock positions, which generate stable income for investors.

d. Diversified Equity Funds- Except for a small portion of investment in liquid money market, diversified equity funds invest mainly in equities without any concentration on a particular sector(s). These funds are well diversified and reduce sector-specific or company-specific risk. However, like all other funds diversified equity funds too are exposed to equity market risk. One prominent type of diversified equity fund in India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be in equities at all times. ELSS

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investors are eligible to claim deduction from taxable income (up to Rs 1lakh) at the time of filing the income tax return. ELSS usually has a lockin period and in case of any redemption by the investor before the expiry of the lock-in period makes him liable to pay income tax on such income(s) for which he may have received any tax exemption(s) in the past.

e. Equity Index Funds- Equity Index Funds have the objective to match the performance of a specific stock market index. The portfolio of these funds comprises of the same companies that form the index and is constituted in the same proportion as the index. Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank Index etc). narrow indices are less diversified and therefore, are more risky.

f. Value Funds- Value Funds invest in those companies that have sound fundamentals and whose share prices are currently under-valued. The portfolio of the funds comprises of share that are trading at a Low Price to Earning Ratio ( Market Price per share/ Earning per share) and a low Market to Book Value ( Fundamental Value) Ratio. Value Funds may select companies from diversified sectors and are exposed to lower risk level as compared to growth funds or specialty funds. Value stocks are generally from cyclical industries ( such as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is advisable to invest in Value Funds with a long-term time horizon as risk in the long term, to a large extent, is reduced.

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g. Equity Income or Dividend Yield Funds- The objective of Equity Income or Dividend Yield Equity Funds is to generate high recurring income and steady capital appreciation for investors by investing in those companies which issue high dividends (such as Power or Utility companies share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the lowest risk level as compared to other equity funds.

2. Debt/Income Funds Funds that invest in medium to long-term debt instruments issued by private companies, banks, financial institutions, governments and other entities belonging to various sectors(like infrastructure companies etc.) are known as Debt/Income Funds. Debt funds are low risk profile funds that seek to generate fixed current income (and not capital appreciation) to investors. In order to ensure regular income to investors, debt (or income) funds distribute large fraction of their surplus to investors. Although debt securities are generally less risky than equities, they are subject to credit risk ( risk of default) by the issuer at the time of interest or principal payment. To minimize the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating agencies and are considered to be of Investment Grade. Debt funds that target high returns are more risky. Based on different investment objectives, there can be following types of debt funds:
a. Diversified Debt Funds- Debt Funds that invest in all securities issued by

entities belonging to all sectors of the market are known as diversified debt funds. The best feature of diversified debt funds is that investments are properly diversified into all sectors which results in risk reduction.
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Any loss incurred, on account of default by a debt issuer, is shared by all investors which further reduces risk for an individual investor.

Focused Debt Funds- Unlike diversified debt funds, focused debt funds are narrow focus that are confined to investments in selective debt securities, issued by companies of a specified sector or industry or origin. Some examples of focused debt funds are sector, specialized and offshore debt funds, funds that invest only in Tax.
b. Free Infrastructure or Municipal Bonds. Because of their narrow

orientation, focused debt funds are more risky as compared to diversified debt funds. Although not yet available in India, these funds are conceivable and may be offered to investors very soon.

c. High Yield Debt Funds- As we now understand that risk of default is

present in all debt funds and therefore, debt funds generally try to minimize the risk of default by investing in securities issued by only those borrowers who are considered to be of investment grade. But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those issuers who are considered to be of below investment grade. The motive behind adopting this art of risky strategy is to earn higher interest returns from these issuers. These funds are more volatile and bear higher default risk, although they may earn at times higher returns for investors.

d. Assured Return Funds- Although it is not necessary that a fund will meet

its objectives or provide assured to investors, but there can be funds that come with a lock-in period and offer assurance of annual returns to

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investors during the lock-in period. Any shortfall in returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds are generally debt funds and provide investors with a low-risk investment opportunity. However, the security of investments depends upon the net worth of the guarantor (whose name is specified in the advance on the offer document). To safeguard the interests of investors, SEBI permits only those funds to offer assured return schemes whose sponsors have adequate net-worth to guarantee returns in the future. In the past, UTI had offered assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in the returns. Eventually, government had to intervene and took over UTIs payment obligations on itself. Currently, no AMC in India offers assured returns schemes to investors, though possible.
e. Fixed Term plan Series- Fixed Term plan Series usually are closed-end

schemes having short term maturity period( of less than one year) that offer a series of plans and issue units to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the exchanges. Fixed term plan series usually invest in debt/income schemes and target short-term investors. The objective of fixed term plan schemes is to gratify investors by generating some expected returns in a short period.

1. Gilt FundsAlso known as Government Securities on India, Gilt Funds invest in Government papers(named dated securities ) having medium to long term maturity period. Issued by the Government of India, these

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investments have little credit risk (risk of default) and provide safety of principal to the investors. However, like all debt funds, gilt funds are exposed to interest rate risk. Interest rates and prices of debt securities are inversely related and any change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite direction.

2. Money Market/Liquid Funds Money market / liquid funds invest in short-term (maturity within one year) interest bearing debt instruments. These securities are highly liquid and provide safety of investments, thus making money market/ liquid funds the safest investment option when compared with other mutual fund types. However, even money market/ liquid funds are exposed to the interest rate risk. The typical investment options for liquid funds include Treasury Bills (issued by Governments), Commercial papers (issued by companies) and Certificates of Deposit (issued by Banks).

3. Hybrid Funds As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities, debt and money market securities. Hybrid funds have an equal proportion of debt and equity in their portfolio. There are following types of hybrid funds in India:
a. Balanced Funds- The portfolio of balanced funds include assets like

debt securities, convertible securities and equity and preference shares held in a relatively equal proportion. The objectives of balanced funds are to reward investors with a regular income, moderate capital appreciation and at the same time minimizing the

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risk of capital erosion. Balanced funds are appropriate for conservative investors having a long term investment horizon.
b. Growth-and-Income Funds- Funds that combine features of growth

funds and income funds are known as Growth-and-Income Funds. These funds invest in companies having potential for capital appreciation and those known for issuing high dividends. The level of risks involved in these funds is lower than growth funds and higher than income funds.
c. Asset Allocation Funds- Mutual Funds may invest financial assets like

equity, debt, money market or non-financial (physical)assets like real estate, commodities etc.. Asset allocation funds adopt a variable asset allocation strategy that allows fund managers to switch over from one asset class to another at any time depending upon their outlook for specific markets. In other words, fund managers may switch over to equity if they expect equity market to provide good returns and switch over to debt if they expect debt market to provide better returns. It should be noted that switching over from one asset class to another is a decision taken by the fund manager on the basis of his own judgment and understanding of specific markets and therefore, the success of these funds depends upon the skill of a fund manager in anticipating market trends.

4. Commodity Funds Those funds that focus on investing in different commodities (like metals, food grains, crude oil etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A commodity fund that invests in a single commodity or a group of

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commodities is a specialized commodity fund and a commodity fund that invests in all available commodities is a diversified commodity fund and bears less risk than a specialized commodity fund. Precious Metals Fund and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of commodity funds.

5. Real Estate Funds Funds that invest directly in real estate or lend to real estate developers or invest in shares/securitized assets of housing finance companies, are known as Specialized Real Estate Funds. The objective of these funds may be to generate regular income for investors or capital appreciation.

6. Exchange Traded Funds(ETF) Exchange Traded Funds provide investors with combined benefits of a closed-end and an open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock exchanges like a single stock at index liked prices. The biggest advantage offered by these funds is that they offer diversification, flexibility of holding a single share (tradable at index linked prices) at the same time. Recently introduced in India, these funds are quite popular abroad.

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7. Fund of Funds Mutual Funds that do not invest in financial or physical assets, but do invest in other mutual fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non-financial assets. Fund of funds provide investors with an added advantage of diversifying into different mutual fund schemes with even an added advantage of diversifying into different mutual fund schemes with even a small amount of investment, which further helps in diversification of risks. However, the expenses of Fund of Funds are quite high on account of compounding expenses of investments into different mutual fund schemes.

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CHAPTER NO 2

MUTUAL FUND IN INDIA

The Evolution of the Mutual Fund in India is with different Phases: In 1963, the Unit Trust of India enjoyed complete monopoly by an act of Parliament. UTI was set up by the Reserve Bank of India and continued to operate under the regulatory control of the RBI till the two were de-linked in 1978 and the entire control was transferred in the hands of Industrial Development Bank of India (IDBI). In 1964 the UTI launched its first scheme named as Unit Scheme 1964 (US-64), which attracted the largest number of investors in any single investment scheme over the years In 1970's and 1980's UTI launched more innovative schemes to suit the needs of different investors. In 1971 it launched ULIP, between 1981-84 six more schemes between, in 1986 the Children's Gift Growth Fund and India Fund which was the first offshore fund for India. In 1987 the Mastershare and in 1990's the Monthly Income Schemes which were offering assured returns. By the end of 1987, UTI's assets under management grew ten times to Rs 6700 crores.

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Phase II. Entry of Public Sector Funds - 1987-1993 In the year 198, The Indian Mutual Fund industry witnessed many public sector players entering the market. In November 1987, SBI Mutual Fund from the State Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was later found by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under management of the industry increased seven times to Rs. 47,004 crores. However, UTI remained to be the leader with about 80% market share. Phase III. Emergence of Private Sector Funds - 1993-96 The permission given to private sector funds including foreign fund management companies to enter the Mutual Fund Industry was in the year 1993. Phase IV. Growth and SEBI Regulation - 1996-2004 In the year 1996 the mobilization of funds and the number of players operating in the industry reached new heights as investors started showing more interest in mutual funds. Investors' interests were safeguarded by SEBI and the Government offered tax benefits to the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards for all mutual funds in India. The Union Budget in 1999 exempted all dividend incomes in the hands of investors from income tax. Various Investor Awareness Programmes were launched during this phase, both by SEBI and AMFI, with an objective to educate investors and make them informed about the mutual fund industry. Today there are plenty of investment avenues open. Some of them include banks deposits, bonds, stocks, mutual fund investments and corporate debentures. Investors may invest money in banks, bonds and corporate debentures where the risk is low and so are the returns. On the contrary, stocks of companies have high risk but the returns are also proportionately high. Mutual fund investments carry low risk because of their diversified nature. It is important to understand the benefits of mutual funds before investing the money you really care about.

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The size of Indian mutual fund industry has grown in recent few years. India can now boast of having dominance in this industry. The total Asset Under Management popularly known as AUM has increased from Rs.1, 01, 565 crores in January 2000 to Rs.5, 67, 601.98 crores in April 2008. According to the Association of Mutual Funds in India, the growth of mutual fund industry has been exceptional. This industry has indeed come a very long way with only 34 players in the market and more than 480 schemes. One of the major factors contributing to the growth of this industry has been the booming stock market with an optimistic domestic economy. Second most important reason for this growth is a favorable regulatory regime which has been enforced by SEBI. This regulatory board has improved the market surveillance to protect the investor's interest. NAV is directly proportionately to the bearish trends of the market. Top mutual funds also suffer because of the fluctuations in the market. The pooled money is invested in shares, debentures and treasury bills and thus has high risk involved. Indian mutual funds however reveal this multi-dimensional avenue and all the intricacies in a highly fashionable manner. It provides a lot of scope to understand the scenario and make some thoughtful investments for decent return

Some of the top mutual funds in India are:

* Reliance Mutual Fund * UTI Mutual Fund * Kotak Mutual Fund * HDFC Mutual Fund * Prudential ICICI Mutual Fund

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29

BENEFITS OF MUTUAL FUND INVESTMENT

Affordable Almost everyone can buy mutual funds. Even for a sum of Rs 1,000 an investor can invest in a mutual fund. Professional Management For an average investor, it is a difficult task to decide what securities to buy, how much to buy and when to sell. By buying a mutual fund, you acquire a professional fund manager who manages your money. This is the person who decides what to buy for you, when to buy it and when to sell. The fund manager takes these decisions after doing adequate research on the economy, industries and companies, before buying stocks or bonds. Most mutual fund companies charge a small fee for providing this service which is called the management fee. Diversification According to finance theory, when your investments are spread across several securities, your risk reduces substantially. A mutual fund is able to diversify more easily than an average investor across several companies, which an ordinary investor may not be able to do. With an investment of Rs 5000, you can buy stocks in some of the top Indian companies through a mutual fund, which may not be possible to do as an individual investor. Liquidity Unlike several other forms of savings like the public provident fund or National Savings Scheme, you can withdraw your money from a mutual fund on immediate basis.

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Mutual Fund Not So Popular In India:Why?? Mutual funds are supposed to tap savings of the common man. Yet, in a country of 120 crore people or 1.2 billion people, there are only 4 crore or 40 million (3.5 per cent) mutual fund unit investors. In US, every second citizen is a mutual fund unit holder. Poor investor interest: Assets managed by mutual funds are falling. For the month ended March 2012, assets under management with all mutual funds plunged 13 per cent to Rs. 5,87,000 crore, according to Association of Mutual funds in India (Amfi) data. This is the lowest since June 2009. This means investors have pulled out money. While March usually sees a high outflow of funds as corporate India pulls out money to meet tax and other working capital requirement, the absence of a diverse retail base hurts. The industry needs more common people to own mutual fund units and not just large corporates to park their money. Other attractive investment avenues: For the common man, the Indian government offers saving schemes with sovereign guarantee. With high interest rates and tax rebates, post office schemes like public provident fund or National Saving certificate offer better returns to investors. Individuals have Rs. 5,19,162 crore invested in the post office or government guarantee schemes, according to Karvy, securities firm. Employee Provident fund and public provident funds manage another Rs. 2,81,000 crore. This is more than the size of the total mutual fund industry in India. High bank deposit rates also reduce the risk appetite. Indian individuals own fixed deposits and government guaranteed bonds worth Rs.22,16,307 crore, according to Karvy. Another Rs. 6,20,000 crore is held in savings bank accounts with public and private sector banks Equity assets stagnant: Mutual funds manage Rs. 1,82,000 crore in equity assets, according to the Amfi data. This is barely 3 per cent of the total market capitalization of the Bombay Stock Exchange. Foreign institutional investors control five times that. A successful asset management business is evaluated on the basis of the equity assets it manages. However, with sovereign guarantee schemes dominating most of the household investible surplus, it is a challenge to ask individuals to take risks. Individuals prefer direct equity investment: Direct equity holding is estimated at Rs. 22,73,043 crore, more than 11 times equity assets managed

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by mutual funds and a third of the BSE market cap. This means investors prefer to buy or sell shares on their own and not rely on mutual funds. Mutual funds have failed to educate this segment to allocate resources to them. Tough business to be in: Fidelity, one of the biggest mutual fund manager in the world, sold its India business to L&T Finance Holdings recently. They are not the first foreign company to exit. Most of the foreign exits from India were due to global restructuring or M&A. Fidelitys exit from a loss-making India business highlights problems of doing business in India. It is not clear yet why Fidelity decided to exit. However, an exit by one of the largest mutual fund company in the world should not be taken lightly. Restrictive mandate: The mutual fund industry in US relies heavily on US state and private pension funds to manage a large amount of money. So Fidelity and Templeton are engaged by state pension funds to manage a portion of the pension money. In India, pension reforms are part of a major political wrangle. Politicians do not allow government pension funds to invest in equity markets. Even if some agree, they are not able to push through any reforms that could push up assets under management for mutual funds.

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CHAPTER NO 3

Balanced Mutual Fund

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Balanced funds are mutual funds that invest in both equities and debt instruments. They normally keep their equity component in the range of 60%75% and the rest in debt products or cash. Some balanced mutual funds are considered to be more aggressive in that they have a larger equity component. For example, HDFC Prudence keeps its equity allocation around 75% in most of the cases and rest 25% in debt or cash. However, others like Reliance Regular Savings Balanced are considered less aggressive and have a lower equity component around 60-65% . From the taxmans point of view, any mutual fund which has equity component more than 65% is considered as an Equity Fund and so long term capital gains from sale of balanced mutual fund units too are exempted from tax after one year just like in the case of pure equity mutual funds . As balanced funds have to maintain their ratios between equity and debt by a fixed percentage, they have to periodically adjust their asset allocation. So, if a balanced fund has a ratio of 70:30 (Equity: Debt) and suppose it reaches 77:23, the fund manager will make sure that he sells the excess equity portion to rebalance the fund back to 70:30.This asset allocation by balanced funds leads to superior returns over the longer term. But in the short term, balanced funds will not out perform pure equity based funds especially in bull runs. So you always have to give balanced funds a long time to see the performance. As balanced funds are not exposed to equity in the same way as regular equity diversified funds whose equity exposure is generally 95% or more in an average scenario, their fall in case of market crash is lower than pure diversified funds. This is why these funds do better in downturns than diversified equity funds

How Do Balanced Mutual Funds Work? Investment in Stocks: One can draw some similarity of balanced funds with well diversified funds. Asset allocated for stocks are diversified into different sectors which are performing with high returns. Fund allocation weightage is determined by the stocks' return potentials. The top stock, for example may get an allocation of say 10% and the lesser the potential the lesser is the percentage allocation of funds. The same pattern is then repeated for another sector of stocks. Sectors are chosen subject to various parameters.
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Investment in Bonds: The allocation to bonds is distributed among bonds issued by governments and banks. Municipal bonds, called as munis, sometimes find their way into this. This investment provides guaranteed returns at a steady rate over a period. This gives the stability to the entire fund cushioning the violent fluctuations of aggressive stock investment.

Balanced Fund v/s Other Types of Funds Blend of Growth and Safety: The unique proposition of spreading the investment into two broad divisions of mutual fund investing is hard to find in other class of funds. Freedom to decide allocation: freedom to switch over from one proportion to the other, which is from 60:40 to 40:60 patterns. You can switch over when you perceive a growth opportunity or a threat into the other from the existing. This you can reverse when you perceive the situation leading to it has changed. No other type of fund has this freedom, having chosen the fund, you have to go through the mandate of the fund. Best balanced mutual funds keep allocation flexible and open to changes as per demands of market conditions but subject to regulations by laws of government and SEC (Securities & Exchange Commission). Risky Proposition: Consider a situation when the stock market is having a bull run (long rally). Then you can expect a great appreciation in its principal. Naturally any manager would be tempted to divert as much cash at his command to stocks as possible. It could go as high as 80% with just 20% for

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debt instruments. Other types of funds differ here because of SEC regulations and funds' own mandate.

Advantages of Balanced Mutual Funds: The most striking advantage is being able to switch over from one combination to the other available to a more aggressive growth oriented stocks when the market is bullish and vice versa It provides diversity in true sense with portfolio containing top stocks and bonds for a blend of growth and safety. There is no trouble in managing an assortment of investments yourself. The one fund gives it all and reduces your overall problem of managing the investment. Disadvantages of Balanced Mutual Funds: Dependent on the expertise of fund manager with respect to changes in portfolio. May not give high returns as equity funds and underperform in bull market.

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CHAPTER NO 4

ICICI PRUDENTIAL BALANCED MUTUAL

FUND

ICICI Prudential Balanced Fund is an open-ended balanced fund. It takes care of the asset allocation by constantly investigating market outlook and performance and accordingly by increasing / decreasing equity exposure based on the market outlook and using a core debt portfolio to do the rebalancing. This fund seeks to optimize the risk-adjusted return by distributing assets between both equity and debt markets. In bullish markets equity allocation can go upto 80%. In bearish markets equity allocation can go down to 65%. This dynamic allocation along with core debt portfolio reduces the volatility of return

Investor Profile This Plan is ideal for

Investors seeking exposure to both equity and debt markets through one fund Investors considering reasonable returns with and lower risk through diversification. Key Benefits

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Provides the twin benefits of growth from equity markets and steady income from debt markets. Lower volatility of returns and lower risk through diversification.

Key Features Type: Open ended Balanced Fund Application Amount: Rs.5,000 (plus in multiples of Rs.1) Min. Additional Investment: Rs.500/- and in multiples thereof Entry Load: Nil. Exit Load: a) If the amount, sought to be redeemed/switched out within a period of 15 Months from the date of allotment, an exit load of 1% of the applicable Net Asset Value shall be charged.(b) If the amount, sought to be redeemed or switched out, is invested for a period of more than 15 Months from the date of allotment - Nil. Redemption Cheques Issued: generally within 3 business day for Specified RBI locations and additional 3 Business Days for Non-RBI locations. Minimum Redemption Amt.: Rs. 500 and in multiples of Re. 1, Systematic Investment Plan: Monthly: Minimum Rs. 1000 + 5 post-dated cheques for a miminum of Rs. 1000 each. Quarterly: Minimum Rs.5000 + 4 post-dated cheques of Rs. 5000 each. Systematic Withdrawal Plan: Minimum of Rs.500/- and Multiples thereof Net Asset Value Periodicity: Calculated & Declared on every Business day Tax Benefits: Capital Gains Tax and Indexation benefit

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CHAPTER NO 5

CANARA ROBECO BALANCED MUTUAL FUND

To seek to generate long term capital appreciation and / or income from a portfolio constituted of equity and equity related securities as well as fixed income securities (debt and money market securities). Minimum Investment: Lump sum Investment: Rs 5000 and multiples of Re.1/- thereafter, NRI / FII / OCBs: Rs.50,000/- & in multiples of Rs.1,000/-, Corporate / Trusts & Institutional Investors: Rs.50,000/- & in multiples of Rs.10,000/-, Additional Purchase: Rs.3,000/- Repurchase: Minimum of 300 units or with a minimum repurchase value of Rs 3000. Systematic Investment Plan (SIP) Minimum instalment amount - Rs. 1,000.00 and Rs. 2,000.00 respectively for Monthly and Quarterly frequency respectively and in multiples of Re 1.00 thereafter. Systematic Transfer Plan (STP) / Systematic withdrawal plan(SWP) Minimum instalment amount - Rs. 1,000.00 and Rs. 2,000.00 respectively for Monthly and Quarterly frequency respectively and in multiples of Re 1.00 thereafter.

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Asset Allocation:

Instruments Equity & Equity related instruments Debt Securities including Securitied debt having rating above AA or equivalent, Money market Instruments, Govt. Securities Plans & Options:
Plan Name

Minimum Maximum 40% 25% 75% 60%

Canara Robeco Balance - Dividend Option Canara Robeco Balance - Growth Option

Load Structure: Entry Load: Nil Exit Load: Lump Sum / SIP / STP: 1% - If redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed / switched out after 1 year from the date of allotment. Scheme Liquidity/Switch: Liquidity by way of repurchases facility through CR AMC Branches or offices of the Registrar and Transfer Agents (R & T). Switch-over option to the investors within the fund to/from other open ended Scheme(s) or to/from new Scheme(s) that may be launched from time to time.

40

CHAPTER NO 6

HDFC BALANCED MUTUAL FUND

Investment Objective The primary objective of the Scheme is to generate capital appreciation along with current income from a combined portfolio of equity and equity related and debt and money market instruments.
Basic Scheme Information

Nature of Scheme Inception Date Option/Plan

Open Ended Balanced Scheme September 11, 2000 Dividend Option, Growth Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. NIL Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder.

Entry Load (For Lumpsum Purchases and investments through SIP/STP)

Exit Load (as a % of the Applicable NAV)

In respect of each purchase / switchin of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment.. No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of
41

allotment. Minimum Application Amount For new investors: Rs.5000 and any amount thereafter. For existing investors: Rs. 1000 and any amount thereafter. Nil Every Business Day. Normally dispatched within 3-4 Business days

Lock-In-Period Net Asset Value Periodicity Redemption Proceeds

Investment Pattern The Scheme will be invested in equity and equity related instruments as well as in debt and in money market instruments in normal circumstances. The following table provides the asset allocation of the Scheme's portfolio. The asset allocation under the Scheme will be as follows: Sr. Type of Instruments Normal Normal Deviation No. Allocation (% of Normal (% of Net Allocation) Assets) 1 2 Equity and Equity Related Instruments Debt Securities (including securitised debt) and Money Market instruments 60 40 20 30

Risk Profile of the Instrument Medium to High Low to Medium

Investment Strategy The balanced product is positioned as a lower risk alternative to a pure equities scheme, while retaining some of the upside potential from equities exposure. The Scheme provides the Investment Manager with the flexibility to shift allocations in the event of a change in view regarding an asset class. Asset allocation between equities and debt is a critical function in a balanced fund. It is proposed to continuously monitor the potential for both debt and equities to arrive at a dynamic allocation between the asset classes. The equity and debt portfolios of the Scheme would be managed as per the respective investment strategies detailed herein.
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Equity Investments: The investment approach would be based on the concept of economic earning power and cash return on investments. Five basic principles serve as the foundation for this investment approach. They are as follows: Focus on the long term View our investments as conferring a proportionate ownership of the business. Maintain a margin of safety (i.e. the price of purchase represents a discount to the intrinsic value of that business). Maintain a balanced outlook on the market by regularly monitoring economic trends and investor sentiment. The decision to sell a holding would be based on one of three reasons : The anticipated price appreciation has been achieved or is no longer probabe. Alternative investments offer superior total return prospects, or A fundamental change has occurred in the company or the market in which it competes. In summary, the assessment of investment value is a function of extensive research and based on data and reasoning, rather than current fashion and emotion. The idea is to develop a model that allows us to identify "businesses with superior growth prospects and good management, at a reasonable price". In order to implement the investment approach effectively, it would be important to periodically meet the management face to face. This would provide an understanding of thei broad vision and commitment to the longterm business objectives. These meetings would also be useful in assessing key determinants of management quality such as orientation to minority shareholders, ability to cope with adversity and approach to allocating surplus cash flows. Discussions with management would also enable benchmarking actual performance against stated commitments. Debt Investments : Debt securities (in the form of non-convertible debentures, bonds, secured premium notes, zero interest bonds, deep discount bonds, floating rate bond / notes, securitised debt, pass through certificates, asset backed securities, mortgage backed securities and any other domestic fixed income securities including structured obligations etc.) include, but are not limited to:

43

Debt obligations of / Securities issued by the Government of India, State and local Governments, Government Agencies and statutory bodies (which may or may not carry a state / central government guarantee). Securities that have been guaranteed by Government of India and State Governments. Securities issued by Corporate Entities (Public / Private sector undertakings). Securities issued by Public / Private sector banks and development financial institutions. Risk Control Investments made from the net assets of the Scheme(s) would be in accordance with the investment objective of the Scheme(s) and the provisions of the SEBI (MF) Regulations. The AMC will strive to achieve the investment objective by way of a judicious portfolio mix comprising of Debt Securities and Money Market Instruments and equity / equity related instruments. Every investment opportunity in Debt Securities and Money Market Instruments would be assessed with regard to credit risk, interest rate risk and liquidity risk.
Systematic Investment Plan (SIP) Details Serial No. 1 Scheme Name Minimum Application Amount(Rs.) Entry Load # NIL Exit Load #

HDFC Balanced Rs.500 for Fund Monthly & Dividend/Growth Rs.1500 for Quarterly

In respect of each purchase / switch-in of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment. No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

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CHAPTER NO 7

RELIANCE BALANCED MUTUAL FUND

Reliance Regular Savings Fund (An open ended Scheme) Balanced Option: The primary investment objective of this Option is to generate consistent return and appreciation of capital by investing in mix of securities comprising of Equity, Equity related Instruments & Fixed income instruments. Reliance Regular Savings Find-Hybrid Option was launched on June 9,2005 and subsequently Hybrid Option has been changed to Balanced Option w.e.f January 13,2007. Consequently, benchmark of Reliance Regular Savings Fund Balanced option has been changed to Crisil Balanced Fund Index from Crisil MIp Index with effect from February 21, 2008. Accordingly performance of the scheme is from January 13, 2007 Investment ObjectiveInvestment Objective (Balanced Option): The primary investment objective of this Option is to generate consistent return and appreciation of capital by investing in mix of securities comprising of Equity, Equity related Instruments & Fixed income instruments.
Asset Allocation

Instruments Equity and Equity Related Securities Debt and Money Market Instruments

Asset Allocation 50 -75% 25- 50%

Risk Profile Medium to High Low to Medium

The average maturity of the debt portfolio will normally be maintained between 1 and 7 years.

Minimum Application Amount: Rs.500/- and in multiple of Re.1 thereafter. Investors can also avail of the Systematic Investment Plan (SIP) with an option to invest as low as Rs.100/-per month.

45

Minimum additional purchase amount:Rs. 500/- and in multiples of Re. 1 thereafter. Load Structure *In terms of SEBI circular no. SEBI/IMD/CIR No.4/ 168230/09 dated June 30, 2009, no entry load will be charged by the Scheme to the investor effective August 1, Entry Load 2009. Upfront commission shall be paid directly by the NIL investor to the AMFI registered Distributors based on the investors' assessment of various factors including the service rendered by the distributor. Under both Retail and Institutional Plan exit load is applicable as below: if redeemed or switched out on or before completion of 1 Exit Load 1% year from the date of allotment of units. if redeemed or switched out after the completion of 1 year NIL from the date of allotment of units.

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CHAPTER NO 8 SBI MAGNUM BALANCED MUTUAL FUND

This Fund invests in a mix of equity and debt investments. It provides a good investment opportunity to investors who do not wish to be completely exposed to equity markets, but are looking for relatively higher returns than those provided by debt funds. Key Benefit SBI Magnum Balanced Fund invests in a equities across market capitalisation/ money market instruments. To provide investors long term capital appreciation along with the liquidity of an open-ended scheme by investing in a mix of debt and equity. The scheme will invest in a diversified portfolio of equities of high growth companies and balance the risk through investing the rest in a relatively safe portfolio of debt. Asset Allocation Instrument Equities & equity related instruments Debt Instruments like debentures, bonds, khokas, etc. Securitized debt Normal Allocation (% of Net Assets) Not less than 50% Risk Profile Medium to High Medium to Low Medium

Upto 40%

Not more than 10% of

47

investments in debt instruments Money Market Instruments Balance

to High

Low

Date of Inception Minimum Application Entry Load Exit Load SIP SWP

31/12/1995 Rs.1,000/NA For exit within 1 year from the date of allotment - 1 %; For exit after 1 year from the date of allotment - Nil Rs.500/month - 12 months Rs.1000/month - 6months Rs.1500/quarter - 12 months Rs. 500/- per month or quarter

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CHAPTER NO.9 COMPARISON OF DIFFERENT BALANCED MUTUAL FUNDS

Comparison of different types of Mutual funds will be done on the basis of

1) PERFORMANCE

Performance of Various Funds depending upon the Returns (%),during 1

month,6months,1year,3years,and five years respectively.

2) NAV (NET ASSET VALUE):

NET ASSET VALUE OF DIFFERENT FUNDS AS ON OCTOBER 12,2012,AND ALSO

AS ON DECEMBER 20,2011.

3) INVESTMENT DETAILS

Investment Details on Basis of Expenses Ratio (%),Front-End Load,Back-End

Load,Minimun Initial Investment(Rs),Tenure(yrs)

49

Quantitative Measures a) Assets under Management (AUM) This denotes the size of the fund or the scheme. Larger funds have higher AUM and vice versa. b) Annual Return A return is a measurement of how much an investment has increased or decreased in value over any given time period. In particular, an annual return is the percentage by which it increased or decreased over any twelve-month period. Return = ((End_price + Start_price) / Start_price)*100 Eg: Date January, 2005 January, 2006 January, 2007 January, 2008 c) Expense Ratio NAV 18.12 30.07 34.91 42.95 Returns 65.95 % 16.10 % 23.03 %

Mutual funds too charge a fee for managing your money. This involves the fund management fee, agent commissions, registrar fees, and selling and promoting expenses. All this falls under a single basket called expense ratio or annual recurring expenses that is disclosed every March and September and is expressed as a percentage of the fund's average weekly net assets. Expense ratio states how much you pay a fund in percentage term every year to manage your money.

50

d) Price Earnings Ratio A companys PE is the ratio of the share price of a company to its earnings per share (EPS). If EPS is one, the PE ratio will reflect the price that an investor will pay for this one rupee of the company's profits. An equity fund is a collection of shares. Therefore, a fund's PE is the average of the PEs of all stocks, in proportion to their presence in the portfolio. Because fund portfolios change, the PE will also change and this will not reflect the growth prospects of the underlying assets. A fund's PE is the weighted average PE of its stocks. A fund's PE ratio can tell us whether the fund has more growth stocks or value stocks compared to another fund. e) Turnover Ratio The turnover ratio represents the percentage of a fund's holdings that change every year. To put it simply, a turnover rate of 100 per cent implies that the fund manager has replaced his entire portfolio during the period given.

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DATA ANALYSIS OF VARIOUS BALANCED MUTUAL FUND 1) IN TERMS PERFORMANCE (FIG NO 1)

FUND NAME Canara Robeco Balance HDFC Balanced ICICI Prudential Balanced. Reliance Regular Savings Balanced SBI Magnum Balanced 1MONTH 6MONTH 1YEAR 3YEAR 5YEAR RETURN RETURN RETURN RETURN RETURN (%) (%) (%) (%) (%) 3.49 8.67 14.61 10.47 7.07

4.67 4.42

6.01 7.12

12.21 15.82

14.62 11.37

11.73 4.75

4.65

10.62

18.55

10.12

10.29

4.29

11.38

15.80

4.86

2.99

As per the fig no1 In terms of Returns over a Short Period of Time, Reliance Balanced Plan gives an impressive Returns, but however its Returns over long period of time reduces. In terms of Returns Over a longer Period of Time, HDFC Balanced Mutual gives good returns.

52

20 18 16 14 12 10 8 6 4 2 0 1MONTH Return 6MONTH RETURN 1YEAR RETURN 3YEARS RETURN 5YEAR RETURN Reliance Regular Savings Balanced SBI Magnum Balanced HDFC Balanced ICICI Prudential Balanced. Canara Robeco Balance

53

2) IN TERMS OF NAV (Net Asset value) FIG 1.1

Fund Name NAV AS ON OCT 12 2012

AS ON DEC 20,2011
55.64

Canara Robeco BalanceG HDFC BalancedG ICICI Prudential BalancedG Reliance Regular Savings BalancedG SBI Magnum BalancedG

68.15

62.22

50.07

52.65

42.60

24.40

18.82

52.77

41.65

80 70 60 50 40 30 20 10 0 Canara Robeco Balance-G HDFC Balanced-G ICICI Prudential Balanced-G Reliance SBI Magnum Regular Balanced-G Savings Balanced-G NAV AS ON OCT 12 2012 NAV AS ON DEC 20,2011

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3) IN TERMS OF INVESTMENTS DETAILS fig 1.2 Fund Name Canara Robeco Balance HDFC Balanced ICICI Prudential Balanced Reliance Regular Savings Balanced SBI Magnum Balanced Expense Ratio % FrontBackMin Tenure (Yrs.) End End Initial Load % Load % Inv. (Rs) 1.66 0.00 0.00 5,000 7, 5, 19, 9, 9, 6, 4, 2, 4, 2, 0, 0, 3, 1 1.98 0.00 0.00 5,000 6, 12, 5, 9, 2, 0 2.28 0.00 0.00 5,000 13, 7, 12, 7, 4, 7, 3, 0, 4, 4, 4, 1, 3, 3, 0, 0 2.19 0.00 0.00 500 7, 2, 7, 5, 5, 0

2.32

0.00

0.00

1,000

11, 17, 7, 7, 7, 0, 6, 5, 2, 3, 1

As per the Fig 1.2 SBI MAGNUM Balanced Has the Highest Expense Ratio and the Minimum Investment. Reliance Balanced Mutual Fund has the Average Expense Ratio, but the lowest Minimum investment.

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