STUDY ON IDEAL PORTFOLIO OF MUTUAL FUND

Submitted in partial fulfillment of the requirements for Master of Management (MMS)

Submitted By Prasad Chandrasen Dhumal 1128 Finance Batch of 2010-12

ORIENTAL INSTITUTE OF MANAGEMENT , PLOT NO -149 Sector 12, Navi Mumbai - 400703
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ACKNOWLEDGEMENT

This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this project. At the time of making this report I express my sincere gratitude to all of them. I would like to express my sincere gratitude to Mr. Kapil Kishor (Prudent Corporate Advisory Services ltd) for giving me this opportunity to undergo this lucrative project with Prudent Corporate Vashi. I am extremely thankful and obliged to Dr. Rashmi Soni (Internal Project Guide) for providing streamed guidelines since inception, till the completion of the project. I would also thank prudent employees, whom I met during the course of this Project, for their support and for providing valuable information, which helped me, complete This project successfully. At this moment I would also like to thank the Almighty and my parents for their support and care and also my friends for their valuable suggestions. This project report is a collective effort of all and I sincerely remember and acknowledge all of them for their excellent help and assistance throughout the project.

CERTIFICATE

This is to certify that Mr./ Prasad Chandrasen Dhumal Roll no1128 is a full time bonafide student of Oriental Institute of Management and pursuing Masters Of Management Studies(MMS) . The project report Title Ideal Portfolio of Mutual Fund is completed by him/her under the guidance of DR.Rashmi Soni , in the partial fulfillment of the requirements for the award of the degree of Master in Management Studies of Mumbai University is an original work done.

_______________________ (Signature of Project Guide)

_______________________ (Signature of Director) Oriental Institute of Management Vashi, Navi Mumbai 400703

DECLARATION

I Prasad Chandrasen Dhumal Roll No 1128 student of MMS 1st Year is hereby to certify that this project work titled Ideal Portfolio of Mutual Fund Carried out by me , in partial fulfillment of the requirements of the program is an original work of mine under the guidance of Industry mentor Kapil Kishor Institute mentor Dr.Rashmi Soni I further declare that it is not a reproduction from any existing work of any person and it has not been submitted to any other university or institute for the award of a degree or diploma or any other similar title of recognition.

(Students signature) Date ____________ 2011

Contents

Sr.no

Particular

Page no

EXECUTIVE SUMMARY

6 7 11

2 3

COMPANY PROFILE

OBJECTIVE THEREOTICAL BACKGROUND

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PRODUCT PROFILE RESERCH METHOLOGY

16

26

DATA ANALYSIS

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IDEAL PORTFOLIO

33

FINDINGS

41

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LIMITATIONS

42

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CONCLUSION

43

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BIBLIOGRAPHY

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EXECUTIVE SUMMARY

The Project on Ideal Portfolio of mutual fund analysis was carried out for PRUDENT CAS LTD from 2nd May to 30th June 2011.

Introduction

The project on Ideal Portfolio of mutual fund analysis was carried out in prudent Cas Ltd Vashi Branch. The intention behind taking over this project with prudent cas ltd was to Primarily understand the role of corporate in providing investment solutions and advices to its Customers. The project was carried out for the period of two months i.e. from 2nd may to 30th June 2011. The project was done by analyzing the different investment options available and to compare them with the mutual fund investments. For the purpose of analyzing the investment pattern and selecting effective and beneficial schemes of mutual funds different available schemes were thoroughly analyzed and then a ideal portfolio of those investment options available was made. Finally the ideal portfolio was created to understand the importance of portfolio management and to ease the selection of different mutual fund schemes and the weight age to be given to them.

COMPANY PROFILE

Incorporated in year 2000 with a clear vision of providing professional services in the area of personal and corporate investment. It has created a niche segment over a period to time with an excellent quality client base. Over the past few years Prudent Corporate Advisory Services has created in-house capabilities of analyzing funds on various parameters before suggesting them to clients. The team approach worked wonders and in the short-span of just one decade, the Prudent Group expanded its horizon by offering specialized services in the areas of Personal and Corporate Investment Planning through Mutual Funds, Equities, Derivatives, Third Party Products, Fixed Income Products, Life/General Insurance and Real Estate through various companies listed below. Prudent Corporate Advisory Services Ltd. As the flagship company, Prudent Corporate Advisory Services remains the primary arm of the Prudent Group. It offers specialized services in the area of Personal and Corporate Investment Planning through Mutual Funds, Debt and Third party products. Besides having a large pool of their own clients, the company also manages its geographicallyspread business operations through a unique platform for independent financial advisors(IFA) which helps them to grow and expand their services & support through sales and marketing, technology, operations, back- office support, training & consultation. Prudent Broking Services Pvt. Ltd. Incorporated in 2004, Prudent Broking Services Pvt. Ltd is a Stock Broking and Depository Participant service provider. Company is a member with Bombay Stock Exchange (BSE) & National Stock exchange (NSE) & Central depository services (India) Limited (CDSL). Company is in the process of creating its national presence by opening offices in various parts of the country. Prudent Properties. The Property sector is an important part of the asset class, but the effort and paperwork involved in purchasing the same can be intimidating. Prudent Property provides real estate solutions not only in creating an asset class but is also helping the customers in buying their dream realty, whether it be homes or offices.

Prudent The group started in 2000 as mutual fund distribution house , expanded multifold in all aspects of wealth management in just one decade. The group provides integrate wealth management solutions through Mutual funds, Equities, Commodity & Derivatives, Bonds, Insurance, Properties and Margin Funding through various group companies and widespread branch Network across India.

ORGANIZATION STRUCTURE

COMPANY SNAPSHOT

No of Branches No of states covered Present Personnel Banker Mutual Fund No of Present SIPs Mutual Fund Assets Mutual Fund Registration No. IRDA License (KotakLife) BSE Membership No NSE Membership No CDSL DP Membership No

46 9 323 HDFC Bank Ltd / AXIS Bank Ltd Live Folios Approximately 3.9 lacs 76109 AUM Appr. 2918 crore ARN 9992 3913883 INB 011318038 13180 12063800

TEAM PRUDENT
Team Prudent is uniquely positioned to be a part of the clients inner trust-circle and helps them to arrive at independent investment decisions

Achievements

Won CNBC-TV18 Financial Advisor Awards 2008-2009

In regional category

Won 2 awards from Fidelity for best regional distributor

across India and for mobilizing highest no. of SIPs across

India for the year 2007!

Accredited multiple times by various AMCs for outstanding performance in fund mobilizations!

Won the Prudential ICICI Chairman Gold Award FY 2002, 2003, 2004, 2005 and 2006 5 Years in a Row!

Rated 9th best Financial Advisor across India by Templeton for the year 2002.

SBI Mutual Fund in FY 2002, FY 2004 and FY 2006

Selected as a chairman club member!

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OBJECTIVE Of STUDY

Primarily to understand the basic concepts of Ideal Portfolio and Mutual funds and its benefits as an investment avenue Secondly, to compare and evaluate the performance of different equity mutual fund schemes of different companies on the basis of risk, return and volatility Finally to create and ideal portfolio in which risk will be distributed towards different schemes and will earn higher rate of return.

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THEREOTICAL BACKGROUND

What is Portfolio Management?

An investor considering in securities is faced with the problem of choosing from among a large number of securities. His choice depends upon the risk return characteristics of individual securities. He would attempt to choose the most desirable securities and like to allocate his funds over this group of securities. Again he is faced with problem of deciding which securities to hold and how much to invest in each. The investor faces an infinite number of possible portfolios or groups of securities. The risk and return characteristics of portfolios differ from those of individual securities combining to form a portfolio. The investor tries to choose the optimal portfolio taking into consideration the risk return characteristics of all possible portfolios. Phases of Portfolio Management

Security Analysis Portfolio Analysis Portfolio Selection Portfolio Revision Portfolio Evaluation

Security Analysis
(a) Fundamental analysis: This analysis concentrates on the fundamental factors affecting the company such as EPS (Earning per share) of the company, the dividend payout ratio, competition faced by the company, market share, quality of management

(b) Technical analysis: The past movement in the prices of shares is studied to identify trends and patterns and then tries to predict the future price movement. Current market price is compared with the future predicted price to determine the mispricing. Technical analysis concentrates on price movements and ignores the fundamentals of the shares.

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(c) Efficient market hypothesis: This is comparatively more recent approach. This approach holds that market prices instantaneously and fully reflect all relevant available information. It means that the market prices will always be equal to the intrinsic value. Portfolio Analysis

A portfolio is a group of securities held together as investment. It is an attempt to spread the risk allover. The return & risk of each portfolio has to be calculated mathematically and expressed quantitatively. Portfolio analysis phase of portfolio management consists of identifying the range of possible portfolios that can be constituted from a given set of securities and calculating their risk for further analysis.

Portfolio Selection

The goal of portfolio construction is to generate a portfolio that provides the highest returns at a given level of risk. Harry Markowitzh portfolio theory provides both the conceptual framework and the analytical tools for determining the optimal portfolio in a disciplined and objective way.

Portfolio Revision The investor/portfolio manager has to constantly monitor the portfolio to ensure that it continues to be optimal. As the economy and financial markets are highly volatile dynamic changes take place almost daily. As time passes securities which were once attractive may cease to be so. New securities with anticipation of high returns and low risk may emerge. Portfolio Evaluation Portfolio evaluation is the process, which is concerned with assessing the performance of the portfolio over a selected period of time in terms of return & risk. The evaluation provides the necessary feedback for better designing of portfolio the next time around INVESTMENT OPTIONS:

Savings form an important part of the economy of any nation. With the savings invested in various options available to the people, the money acts as the driver for growth of the country. Indian financial scene too presents a plethora of avenues to the investors. Though certainly not the best or deepest of markets in the world, it has reasonable options for an ordinary man to invest his savings. Let us examine several of them:

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Banks Considered as the safest of all options, banks have been the roots of the financial systems in India. Promoted as the means to social development, banks in India have indeed played an important role in the rural upliftment. For an ordinary person though, they have acted as the safest investment avenue wherein a person deposits money and earns interest on it. The two main modes of investment in banks, savings accounts and Fixed deposits have been effectively used by one and all. However, today the interest rate structure in the country I headed southwards, keeping in line with global trends. With the banks offering little above 9 percent in their fixed deposits for one year, the yields have come down substantially in recent times. Add to this, the inflationary pressures in economy and you have a position where the savings are not earning. The inflation is creeping up, to almost 8 percent at times, and this means that the value of money saved goes down instead of going up. This effectively mars any chance of gaining from the investments in banks. Post Office schemes

Just like banks, post offices in India have a wide network. Spread across the nation, they offer financial assistance as well as serving the basic requirements of communication. Among all saving options, Post office schemes have been offering the highest rates. Added to it is the fact that the investments are safe with the department being a Government of India entity. So the two basic and most sought for features, those of return safety and quantum of returns were being handsomely taken care of. Though certainly not the most efficient systems in terms of service standards and liquidity, these have still managed to attract the attention of small, retail investors. However, with the government announcing its intention of reducing the interest rates in small savings options, this avenue is expected to lose some of the investors. Public Provident Funds act as options to save for the post retirement period for most people and have been considered good option largely due to the fact that returns were higher than most other options and also helped people gain from tax benefits under various sections. This option too is likely to lose some of its sheen on account of reduction in the rates offered.

Company Fixed Deposits Another oft-used route to invest has been the fixed deposit schemes floated by companies. Companies have used fixed deposit schemes as a means of mobilizing funds for their operations and have paid interest on them. The safer a company is rated, the lesser the return offered has been the thumb rule. However, there are several potential roadblocks in these. First of all, the danger of financial position of the company not being understood by the investor lurks. The investors rely on intermediaries who more often than not, don t reveal the entire truth.
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Secondly, liquidity is a major problem with the amount being received months after the due dates. Premature redemption is generally not entertained without cuts in the returns offered and though they present a reasonable option to counter interest rate risk (especially when the economy is headed for a low interest regime), the safety of principal amount has been found lacking. Many cases like the Kuber Group and DCM Group fiascoes have resulted in low confidence in this option. The options discussed above are essentially for the risk-averse, people who think of safety and then quantum of return, in that order. For the brave, it is dabbling in the stock market. Stock markets provide an option to invest in a high risk, high return game. While the potential return is much more than 10-11 percent any of the options discussed above can generally generate, the risk is undoubtedly of the highest order. But then, the general principle of encountering greater risks and uncertainty when one seeks higher returns holds true. However, as enticing as it might appear, people generally are clueless as to how the stock market functions and in the process can endanger the hard-earned money. For those who are not adept at understanding the stock market, the task of generating superior returns at similar levels of risk is arduous to say the least. This is where Mutual Funds come into picture.

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Product profile

A mutual fund is just the connecting bridge or a financial intermediary that allows group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund. Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to 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. The flow chart below describes broadly the working of a mutual fund:

What are the benefits of investing in Mutual Funds

Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument, a professional analytical approach is required, in addition to access to research and information as well as time and methodology to make sound investment decisions and to keep monitoring them. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide small investors with an opportunity to invest in a larger basket of securities. The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. It is possible to invest in small amounts as and when the investor has surplus funds to invest. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds. In case of open-ended Funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks / bonds.

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Risk involved in investing in Mutual Funds Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest / principal on their debentures / bonds / deposits. Besides this, the government may come up with new regulations, which may affect a particular industry or class of industries.

History of Mutual Funds

the mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management. Second Phase 1987-93(Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores. Third Phase 1993-2003(Entry of Private Sector Funds) 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 Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund)
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Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of March 2009, there were 35 mutual funds, which managed assets of Rs. 4,17,300crores under 1,001 schemes

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This fast growing industry is regulated by the Securities and Exchange Board of India (SEBI). In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of March 2009, there were 35 mutual funds, which managed assets of Rs. 4,17,300crores under 1,001 schemes

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Organisation of MF in India
The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund established in the form of a trust by a sponsor to raise monies by the Trustees through the sale of units to the public under one or more schemes for investing in securities in accordance with these regulations. These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996. The structure indicated by the new regulations is indicated as under. A mutual fund comprises four separate entities, namely sponsor, mutual fund trust, AMC and custodian. The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favour of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines.

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Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC). Different business groups/ financial institutions/ banks have sponsored these AMCs, either alone or in collaboration with reputed international firms. Several international funds like Alliance and Templeton are also operating independently in India. Many more international Mutual Fund giants are expected to come into Indian markets in the near future. The benefits on offer are many with good post-tax returns and reasonable safety being the hallmark that we normally associate with them. Some of the other major benefits of investing in them are :-

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Number of available options Mutual funds invest according to the underlying investment objective as specified at the time of launching a scheme. So, we have equity funds, debt funds, gilt funds and many others that cater to the different needs of the investor. The availability of these options makes them a good option. While equity funds can be as risky as the stock markets themselves, debt funds offer the kind of security that is aimed for at the time of making investments. Money market funds offer the liquidity that is desired by big investors who wish to park surplus funds for very short-term periods. Balance Funds acter to the investors having an appetite for risk greater than the debt funds but less than the equity funds. The only pertinent factor here is that the fund has to be selected keeping the risk profile of the investor in mind because the products listed above have different risks associated with them. So, while equity funds are a good bet for a long term, they may not find favour with corporates or High Networth Individuals (HNIs) who have short-term needs. Diversification Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because all stocks don t move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own. Professional Management Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment. Potential of Returns Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period of time. People can pick their investment horizon and stay put in the chosen fund for the duration. Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the portfolio.

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Liquidity Fixed deposits with companies or in banks are usually not withdrawn premature because there is a penal clause attached to it. The investors can withdraw or redeem money at the Net Asset Value related prices in the open-end schemes. In closed-end schemes, the units can be transacted at the prevailing market price on a stock exchange. Mutual funds also provide the facility of direct repurchase at NAV related prices. The market prices of these schemes are dependent on the NAVs of funds and may trade at more than NAV (known as Premium) or less than NAV (known as Discount) depending on the expected future trend of NAV which in turn is linked to general market conditions. Bullish market may result in schemes trading at Premium while in bearish markets the funds usually trade at Discount. This means that the money can be withdrawn anytime, without much reduction in yield. Some mutual funds however, charge exit loads for withdrawal within a period. Besides these important features, mutual funds also offer several other key traits. Important among them are: Well Regulated Unlike the company fixed deposits, where there is little control with the investment being considered as unsecured debt from the legal point of view, the Mutual Fund industry is very well regulated. All investments have to be accounted for, decisions judiciously taken. SEBI acts as a true watchdog in this case and can impose penalties on the AMCs at fault. The regulations, designed to protect the investors interests are also implemented effectively. Transparency Being under a regulatory framework, mutual funds have to disclose their holdings, investment pattern and all the information that can be considered as material, before all investors. This means that the investment strategy, outlooks of the market and scheme related details are disclosed with reasonable frequency to ensure that transparency exists in the system. This is unlike any other investment option in India where the investor knows nothing as nothing is disclosed.

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Flexible, Affordable and a Low Cost affair

Mutual Funds offer a relatively less expensive way to invest when compared to other avenues such as capital market operations. The fee in terms of brokerages, custodial fees and other management fees are substantially lower than other options and are directly linked to the performance of the scheme. Investment in mutual funds also offers a lot of flexibility with features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans enabling systematic investment or withdrawal of funds. Even the investors, who could otherwise not enter stock markets with low investible funds, can benefit from a portfolio comprising of high-priced stocks because they are purchased from pooled funds. As has been discussed, mutual funds offer several benefits that are unmatched by other investment options. Post liberalization, the industry has been growing at a rapid pace and has crossed Rs. 100000 crore size in terms of its assets under management. However, due to the low key investor awareness, the inflow under the industry is yet to overtake the inflows in banks. Rising inflation, falling interest rates and a volatile equity market make a deadly cocktail for the investor for whom mutual funds offer a route out of the impasse. The investments in mutual funds are not without risks because the same forces such as regulatory frameworks, government policies, interest rate structures, performance of companies etc. that rattle the equity and debt markets, act on mutual funds too. But it is the skill of the managing risks that investment managers seek to implement in order to strive and generate superior returns than otherwise possible that makes them a better option than many others.

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Research methodology
Research methodology is a very organized and systematic way through which a particular case or problem can be solved efficiently. It is a step-by-step logical process, which involves: Defining a problem Laying the objectives of the research Sources of data Methods of data collection Data analysis & processing Conclusions & Recommendations

Research inculcates scientific and inductive thinking and it promotes the development of logical habits of thinking and organization.

Methodology Used: Descriptive Analytical Research Under this type the researcher has to use the facts and information already available and analyse them to make evaluation of the market. In analytical research the researcher has to use the facts already available, and analyse these to make the critical evaluation data of the material. Data has been collected from the Fact sheet of the various mutual fund schemes and used those data s for the research. In fact sheet past returns were given of different funds.

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List of best mutual funds to invest in 2011.

1. Best mutual funds to invest in 2011 : DSPBR Top 100 Equity Reg

DSPBR Top 100 Equity Reg is an open ended large cap equity fund bench-marked against BSE 100 running for 7 years now. It has returned a staggering 35% since launch that is no small feat for a fund whose net assets have now swelled to Rs 2,773 /- crores. With a low risk taking capacity and an above average return, this fund should be on the top of your shopping cart in 2011. Returns in % DSPBR Top 100 Since Eqt Reg Launch Fund Category 35.11 5 yr 3 yrs 1 yr 21.99 3.78 17.23 16.38 18.2 0.09

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2. Best mutual funds to invest in 2011 : DSPBR Balanced DSPBR Balanced is a hybrid equity oriented mutual fund that is bench marked against CRISIL Balanced. With a track record of 11 years and a below average risk profile, the returns have been above average around 18%. The corpus of around Rs 790/- crores makes it easy for the fund manager to manage the fund. As of writing, the portfolio allocation between equity and debt stood at 75% and 25% approx. Returns in % DSPBR Balanced Since Launch 5 yr 3 yrs 1 yr Fund Category 18.06 18.57 5.22 16.11 14.28 2.02 16.49

3. Best mutual funds to invest in 2011 : Franklin India Bluechip

Franklin India Bluechip fund is a veteran of a fund its running for some 17 years now. Bench marked against the Sensex, the returns have been high, around 26.5% since launch. With a low risk profile and a steep orientation towards large cap stocks, this fund is a great gem to have. Its long term outlook on stocks and ability to give returns to investors without taking unnecessary risks makes it a top contender in your portfolio for 2011. Returns in % Franklin India Bluechip Since Launch 5 yr 3 yrs 1 yr Fund Category 26.64 19.24 4.89 19.87 15.39 -1.15 14.32

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4. Best mutual funds to invest in 2011 : Birla Sun Life Frontline Equity

Bench marked against the BSE 200 this 9 year old fund has come in the lime light since 2006. Birla Sun Life Frontline Equity has an allocation to both large caps and mid caps in fact, its allocation to mid caps has risen of late currently mid caps account for 20% of the portfolio while the rest is held by large caps. With a below average risk profile and a great fund manager at the helm of affairs, Birla Sun Life Frontline Equity should feature as a must have open ended diversified equity fund in your portfolio for 2011. Returns in % Birla Sun Life Frontline Since Equity Launch Fund Category 30.66 5 yr 3 yrs 1 yr 21.79 3.83 14.66 15.39 13.13 2.31

5. Best mutual funds to invest in 2011 : HDFC Top 200

This 14 year old fund needs no introduction. Up against BSE 200, it has delivered 26% returns since launch and has always maintained a low risk profile. This should form the core part of your portfolio nearly 80% of its holdings are held in large cap and the rest in mid and small caps. A long term track record and process oriented management makes it one of the best equity diversified mutual funds for every portfolio in 2011. Returns in % HDFC Top 200 Fund Category Since Launch 25.89 5 yr 3 yrs 1 yr

22.06 8.53 20.86 15.39 -2.31 13.13

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6. Best mutual funds to invest in 2011 : HDFC Prudence HDFC Prudence has been in existence since 1994 and with an annual return of around 22%, it has exhibited prudence in delivering returns for investors. It did falter in 2007 and 2008 but has come back strongly to show it can be relied upon. Nearly 50% of its portfolio is in large caps while the rest is in small and mid caps. As of writing, it has maintained a 75% allocation to equity and 25% in debt. A great choice in the hybrid category for year 2011. Returns in % HDFC Prudence Fund Category Since Launch 21.99 5 yr 3 yrs 1 yr

20.23 9.21 22.79 13.74 1.27 13.07

7. Best mutual funds to invest in 2011 : HDFC Tax Saver Another one from the HDFC stable, this ELSS (Equity Linked Saving Scheme) fund has returned a staggering 35% since its launch 15 years ago. Bench marked against S&P CNX 500, it has delivered high returns with a moderate risk profile. As of writing it has maintained 60% allocation to large cap stocks and the rest to mid and small cap. Nearly 90% of its holding is in equity. Returns in % HDFC Taxsaver Fund Category Since Launch 5 yr 34.5 3 yrs 1 yr

16.84 5.35 21.39 13.42 -2.75 14.53

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8. Best mutual funds to invest in 2011 : Canara Robeco Equity Tax Saver

This 17 year old ELSS (Equity Linked Savings Scheme) mutual fund has delivered returns of 16% year on year. Its bench marked against BSE 100 and nearly 60% of its holding is in large cap stocks and the rest in mid cap and small cap. A small net asset of Rs 230 crores makes it easier for the fund manager to manage this fund well. With a mantra of long term investment strategy and well diversified portfolio, its hard to avoid this fund this year. Returns in % Canara Equity Tax Saver Fund Category Robeco Since Launch 16.22 5 yr 3 yrs 1 yr 21.44 6.51 21.15 13.42 14.53 2.75

9. Best mutual funds to invest in 2011 : Canara Robeco Income Like Sahara Income (No. 10 down below), Canara Robeco Income is bench marked against CRISIL Comp BFI and is 9 years old. Majority of its holdings are in debentures, GOI securities and commercial paper. Certificate of deposits and treasury bills also feature in the portfolio. The average credit rating of AAA makes it a safe parking avenue for investors. With a return of 8.8% in the debt category, Canara Robeco Income makes for a great asset in your 2011 portfolio. Returns in % Canara Robeco Income Since Launch 5 yr 3 yrs 1 yr Fund Category 8.89 10.16 13.37 4.98 6.32 6.35 4.74

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10. Best mutual funds to invest in 2011 : Sahara Income

As the name goes, the intent of this open ended fund is to generate regular income through investments in debt instruments most of its investments are in certificate of deposits and commercial paper. The average credit rating of holdings is AAA which makes it a safe mutual fund hence the risk profile of the fund is very very low. The returns have been above average when compared to the benchmark CRISIL Comp BFI. Around for some 9 years now, Sahara Income is a must have debt oriented mutual fund in your portfolio in 2011. Returns in % Sahara Income Fund Category Since Launch 7.09 5 yr 3 yrs 1 yr 8.63 9.86 5.46 6.32 6.35 4.74

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IDEAL PORTFOLIO

Profile Age Group Earning Expenditure Savings Equity Debt Profile

25-30 Less Less Less 100% 0% Very Risky

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Equity

What is equity A company organises money to do business with through borrowings and owners contribution. The owners contribution is called equity capital or simply equity. Equity is accumulation of small, equal amounts against which the company issues certificates, which are called shares, stock or again equity. Shares have indefinite life with a face value, which can be changed if the shareholders decide, and no guaranteed return.

Debt

What is debt An amount owed to a person or organization for funds borrowed. Debt can be represented by a loan note ,bone, mortgage or other form stating repayment terms and ,if applicable ,interest requirement .These different form all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment term

DEBT Vs. EQUITY Why does a company issue stock? Why would the founders share the profits with thousands of people when they could keep profits to themselves? The reason is that at some point every company needs to raise money. To do this, companies can either borrow it from somebody or raise it by selling part of the company, which is known as issuing stock. A company can borrow by taking a loan from a bank or by issuing bonds. Both methods fit under the umbrella of debt financing. On the other hand, issuing stock is called equity financing. Issuing stock is advantageous for the company because it does not require the company to pay back the money or make interest payments along the way. The first sale of a stock, which is issued by the private company itself, is called the initial public offering (IPO).

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It is important that you understand the distinction between a company financing through debt and financing through equity. When you buy a debt investment such as a bond, you are guaranteed the return of your money (the principal) along with promised interest payments. This isn't the case with an equity investment. By becoming an owner, you assume the risk of the company not being successful - just as a small business owner isn't guaranteed a return, neither is a shareholder. As an owner, your claim on assets is less than that of creditors. This means that if a company goes bankrupt and liquidates, you, as a shareholder, don't get any money until the banks and bondholders have been paid out; we call this absolute priority.

Mid-Cap Fund
A type of stock fund that invests in mid-sized companies. A company's size is determined by its market capitalization, with mid-sized firms generally ranging from $2 billion to $10 billion in marketcap.

Opportunity fund
A not for profit organization that strives to improve financial stability of working class people who are earning below the poverty line through assistance with earning ,saving and investing through financial education programs ,affordable housing financing, micro-savings accounts and micro-finance loans.Diversified Fund An investment fund that contains a wide array of securities to reduce the amount of risk in the fund. Actively maintaining diversification prevents events that affect one sector from affecting an entire portfolio, make large losses less likely

Large cap fund

Large cap is an abbreviation of the term "large market capitalization". Market capitalization is calculated by multiplying the number of a company's shares outstanding by its stock price per share

Short term fund

STIF A fund comprised of low-risk investment with the goal of protecting capital and providing a return that beats a benchmark rate, such as Treasuries. Short-term investment can include cash notes and other short-term debt

Long-Term Debt
Loans and financial obligations lasting over one year
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Medium-Term
A type of fixed income security with a maturity, or date of principle repayment, that is set to occur in the next 3-10 years. Bonds and other fixed income products tend to be classified by maturity date, as it is the most important variable in the yield calculations. In a standard (or positive) yield curve environment intermediate-term bonds pay a higher yield for a given credit quality than short-term bonds, but a lower yield compared to long-term (10+ years) bond

Gilt Fund
A mutual fund that invests in several different types of medium and long-term government securities in addition to top quality corporate debt. Gilts originated in Britain

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FINDINGS

The collection of information is based on the secondary data. The information has been collected through various books, studies and annual reports of various institutions like PRUDENT, ICICI, HDFC etc. In addition various journals, magazines, articles, books, published documents have also been considered in the project work. An attempt has been made to evaluate the performance of the selected mutual fund schemes.

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LIMITATIONS

To get an insight in the process of portfolio allocation and deployment of funds by fund manager is difficult.
The project is unable to analyze each and every scheme of mutual funds to create the ideal portfolio

The portfolio of mutual fund investments can change according to the market conditions. This project is carried out and evaluated on the basis of the market conditions from 2nd May to 31st July 2011 The report only analyses equity mutual fund schemes of only some funds and there are around 44 AMCs offering wide range of scheme but to analyze them is a tedious task.

Lack of proper knowledge and awareness about advantages and disadvantages associated with various schemes among the investors. The big question is how to judge a mutual fund before investing? It is important for an investor to consider a fund s performance over several years.
Different fund managers adopt different strategies to improve performance.

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Conclusion

There are various schemes in mutual fund by Prudent Cas Ltd. Equity which includes mid-cap, diversified, Opportunity and Large cap fund. Equity profile consist of 100% within age group 25-30 because they invest less and earn higher returns and includes a very risky profile and they do not invest in debt because they get very less returns. The age group 30-40 have diversified the fund in the ratio of 7:3 and earn nominal returns. The age group 40-50 use to diversify the fund in the ratio of 1:1 by taking less risk and earn more returns. The people belonging to the age group of 50-60 are mostly senior citizens so they like to save more money by taking less risk in mutual funds.

A person belonging to the age of 60+ is not capable to take risk, he like to save more money and may invest money in debt intending less risk.

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BIBLIOGRAPHY

1. From the following websites:

www.mutualfundsindia.com www.google.com

www.prudentcorporate.com www.thewealthwisher.com

2. From the Prudent cas ltd Prudent Daily return report Prudent debt & equity return report

3. Books
Security analysis & Portfolio management by Prasanna Chandra

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