“The Analysis and Comparative Study of SBI and HDFC Mutual Fund”

Index

Contents

sl.no Particulars Page no.

1 Executive summary 02-06

2 Industry analysis 07-08

Company analysis.  
3.1) Way to Gain investment co.ltd. 09-10
3.2) HDFC MF. 11-13
3 3.3) .SBI MF 14-19

4 Introduction to the topic. 20

4.1) back ground 20
a. Mutual fund concept. 20
b. Schemes according to maturity period 20-21
c. Schemes according to investment objective 21-24
d. Benefits of mutual funds 25-27
  e. History of mutual fund 27-32
4.2) important variables 33
a) risk measurements 33-36
b) return measurements 37-39
c) performance measures/ratio 40-40
  d) related terms 41- 48

  4.3) importance of the project 49

  4.4) objectives 50-51

5 Analysis 52-67

6 Findings 68-69

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7 Conclusions  70

8 Suggestions  71

9 Bibliography  72

1) Executive summary

“The Analysis and Comparative Study of SBI and HDFC Mutual Fund”

Name of the Company, where the project is undertaken:

“WAY TO GAIN INVESTMENT CONSULTANCY (P) LTD”

P.B Road,
Opposite Canara bank,
Achyutha Complex, Dharwad.

a) Back ground of the project

Mutual fund is a very hot concept in two tier cities because these cities are
growing at a faster rate. And at the equal rate the standard of living also increasing,
people getting higher exposures in their jobs means they are getting higher salaries that’s
why they are now looking new investment opportunities. There for This project report is
written in such away that the reader of the project get clear understanding of concept i.e.
the mutual fund concept, types of mutual funds in India, explains the pros and cons of the
concept and the four phases of mutual fund industry in India.

b) Variables

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In the project the risk, return and performance measurements are calculated for
making analysis and comparison of two mutual fund schemes. The calculations are done
in excel sheet then it is turned to word document the followings are the measures for the
risk and return calculations.

Risk measurements

Standard deviation.
Beta.
R squire.
Alpha.

c) Significance of the project

 This project involves evaluating the performance of two mutual fund scheme.

 States the advantages and disadvantages to invest in the mutual fund.

 This project will helps the company (i.e. “way to gain”) to recommend the good
scheme in selected two mutual fund schemes.

 In this project risk, return and performance measures are calculated, so that it will
be easy to recommend better scheme.

Main Objective:

“Evaluating the Performance of SBI and HDFC Mutual Fund Scheme”

Sub Objectives of the study:

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 Comprehensive study of mutual fund concept

 Applying the various parameters to measure and evaluate the risk and the
respective returns of selected mutual fund schemes.
 Recommending good mutual fund scheme to invest and earn more returns on
selected mutual fund schemes.

Methodology:

The study is generally exploratory in nature, as it studies the performances of two

mutual fund schemes based on the performance measures.

Methods of Performance measure/ratio;

Treynor measure/ratio
Sharpe measure/ratio
Jensen measure/ratio

Sources of Data:
The data (i.e. NAV) for the study has been downloaded from the internet (i.e.
websites of the mutual funds) and is converted to returns and used for the study which
formed the primary data for the study.

Research Tools:

The research has been done by using the following statistical techniques

Average
Standard Deviation
Variance

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Co-variance
Correlation
Beta
Systematic and Unsystematic Risk measure
Measure of Alpha

Analysis and findings

In the analysis part I have calculated risk, return and performance measures of the
two schemes and the same is compared with each other.

1) Here between our chosen scheme Magnum Equity Fund-Growth is having higher
average return of 0.1234 as compare to that of HDFC Equity Fund-Growth which is
having only 0.09177 so it is obvious to conclude that Magnum Equity Fund-Growth is
on an average performing well in terms of Average Daily Returns.

2) In the above case the Magnum Equity Fund-Growth is having 1.998246472 as a

Standard deviation as compare to that of HDFC Equity Fund-Growth which is having
Standard Deviation of 1.714523761 so here we can conclude that Magnum Equity Fund-
Growth is having more fluctuation so there will be higher risk.

3) Here one more thing we can observe that both the scheme having perfect positive
correlation. But Magnum Equity Fund-Growth is having 0.938181407 which is more as
compare to that of HDFC Equity Fund-Growth which is having 0.874566887.

4) Variance of the Magnum Equity Fund-Growth is 4.096683202 and 3.459706829 is for

HDFC Equity Fund-Growth means HDFC Equity Fund-Growth is consistent compare to
the Magnum Equity Fund-Growth.

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5) So it should be noted that HDFC Equity Fund-Growth having less risk and less return
as compare to Magnum Equity Fund-Growth which is having high risk and high return.

6) Performance ratios show the excess return of the schemes over and above risk free rate
of return and here we can see that Magnum Equity Fund-Growth is comparatively having
good excess return than the HDFC Equity Fund-Growth.

Conclusions:
In the conclusion part I have compared the two schemes with each other and suggested
that which schemes is having high risk compare to other scheme.

1) From the project report we can conclude that Magnum Equity Fund-Growth is having
high risk with high returns and also performing good compare to HDFC Equity Fund-
Growth

2) HDFC Equity Fund-Growth is having less risk and less return compare to Magnum
Equity Fund-Growth.

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3) Here from the calculations we can conclude that the one may get approximately 30 to
35% returns from the Magnum Equity Fund-Growth. Where as investing in HDFC
Equity Fund-Growth he may get 24 to 28% returns.

4) At present both schemes are underperforming means not meeting the investor’s
expectations.

5) Magnum Equity Fund-Growth is more volatile than that of HDFC Equity Fund-
Growth.

Suggestions:

• Here I would like to suggest, the company i.e. Way to Gain also consider the risk
returns and performance measurements to its unit holder when they come to
investment into their company.

• From this project report it is clear that who wants to take higher risk and higher
return they can go for Magnum Equity Fund-Growth

• Who wants a less risk and less return they can invest in HDFC Equity Fund-
Growth

• Here I also suggest the company to make some awareness campaign because
many people who are interested in earnings through this investment companies
don’t know the concept only.

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2) Industry analysis

Mutual fund industry today is a booming investment sector with more than 30
players. And these players bring plenty of schemes to there investor. Some of them
gained the trust of there investors, and still some gained the mutual fund awards from the
industry. Between these healthy competitions the investors are getting some good
investment schemes. However with a plethora of schemes to choose from, the investor
faces many problems that is he will get struck in thinking that should I take more risk or
should I invest in some other investment sector for ex. In Banking.

World wide good mutual companies over are known by their AMC’s and this
fame is directly linked to their superior stocks selection skill. For mutual fund to grow,
AMC’s must be held accountable for their selection of stocks. In other words there must
be some performance indicator that will reveal th equality of stock selection of various
AMC’s

We have seen that many of the mutual fund schemes are giving good returns to its
investors, here we should not assume that the good return giving schemes are better to
invest, because return alone should not be consider as the basis of measuring of the
performance of a mutual fund sachem. It should also include the risk taken by the fund
manager, because as we know that the fund manager invest the pooled fund into
securities in this securities there are many companies like large cap companies small cap
companies and mid cap companies while investing into these share market the fund
manager has to study the companies and invest, if he invest in high risk yielding
companies then there will be very risk in investing into such type of fund.

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Risk associated with a fund, in a general, can be defined as variability or

fluctuations in the returns generated by it. The higher the fluctuation in the returns of a
fund during a given period, higher will be the risk associated with it. These fluctuations
in the returns generated by a fund are result of two guiding forces. First, general market
fluctuations, which affect all the securities, present in the market, called market risk or
systematic risk and second, fluctuations due to specific securities present In the portfolio
of the fund, called unsystematic risk.

The total risk of a given fund is sum of these two and is measured in terms of
standard deviation of returns of the fund. Systematic risk, on the other hand, is measured
in terms of BETA, which represents fluctuations in the NAV of the fund visa versa
market. Beta is calculated by relating the returns on a mutual fund with the returns in the
market. While unsystematic risk can be diversified through investments in a number of
instruments, by using risk return relationship, we try to assess the competitive strength of
the mutual funds visa versa one another in a better way.

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3) Company Analysis

3.1 WAY TO GAIN

P.B. Road, Opp. Canara Bank,
Achuta Complex, Dharwad.

Brief History:

The company is founded by N.S. Kongi, Ishwar Yenagi and Ningappa Yenagi
with a share of 40%, 40% and 20% respectively. Company was established on April
2006.

It was Ishwar Yenagi at first who initiated this initiative to establish the company
with a dealership certificate of AMFI in hand. So he involved two more persons to build
this company i.e., N.S. Kongi, Ningappa Yenagi. So it is a collective effort from all the
three personalities to venture into this Way to Gain. The company is mainly dealing into
Mutual Funds of all AMC’s.

Organizational structure:

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DIRECTORS

N.S. KONGI ISHWAR YENAGI NINGAPPA YENAGI

BACK OFFICER
HEMA

MARKETING OFFICER
Shashidar

ASSISTANT
ABDUL

ASSISTANT
Mahantesh

Service offered by the Company:

The company is mainly into Mutual Fund which forms the chunk of its revenue.
And as a subsidiary business they provide stock broking of equities. And this broking is
fraternized from Kotak Securities.

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Charges and Commissions:

As per SEBI regulations an AMFI qualified agents can charge upto 2% on the
investment into Mutual Fund. And usually this 2% is paid by AMC’s of the respective
Mutual Fund Companies.

Service Promotions:

Marketing and Promotional activities of the company are done by circulating

pamphlets and also through local News Paper advertisements.

Targeted Segment

The company and its operations are confined to the region of Hubli-Dharwad,
Haveri and Belgaum.

Sales and Profitability of the Company

Way to Gain is making approximately 30 lac revenue from sale of Mutual Funds
for every month.

Competitors

Way to gain is growing at a faster rate in the twine city but at the same time
facing many competitors like Karvey, geojit, SHCIL, HDFC bank, ICICI bank, and many
more.

In the next pages I have written introduction of the two selected AMC and
their respective other products.

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3.2 HDFC Trustee Company Limited:

A company incorporated under the Companies Act, 1956 is the Trustee to

the Mutual Fund vides the Trust deed dated June 8, 2000, as amended from time to time.
HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

HDFC Asset Management Company Limited (AMC):

It was incorporated under the Companies Act, 1956, on December 10,

1999, and was approved to act as an Asset Management Company for the Mutual Fund
by SEBI on July 3, 2000. The registered office of the AMC is situated at Ramon House,
3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400
020. In terms of the Investment Management Agreement, the Trustee has appointed
HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up
capital of the AMC is Rs. 75.161 crore.

Products:
Open Ended

HDFC Arbitrage Fund

HDFC Balanced Fund
HDFC Capital Builder Fund
HDFC Cash Management Fund - Call Plan

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HDFC Cash Management Fund - Savings Plan

HDFC Cash Management Fund - Savings Plus Plan
HDFC Children's Gift Fund Investment Plan
HDFC Children's Gift Fund Savings Plan
HDFC Core & Satellite Fund
HDFC Equity Fund
HDFC Floating Rate Income Fund Long Term Plan
HDFC Floating Rate Income Fund Short Term Plan
HDFC Gilt Fund Long Term Plan
HDFC Gilt Fund Short Term Plan

“HDFC Growth Fund”

HDFC High Interest Fund

HDFC High Interest Fund - Short Term Plan
HDFC Income Fund
HDFC Index Fund Nifty Plan
HDFC Index Fund SENSEX Plan

HDFC Index Fund SENSEX Plus Plan

HDFC Liquid Fund
HDFC Liquid Fund Premium Plan
HDFC Liquid Fund Premium Plus Plan
HDFC Long Term Advantage Fund
HDFC MF Monthly Income Plan - Long Term Plan
HDFC MF Monthly Income Plan - Short Term Plan
HDFC Multiple Yield Fund
HDFC Multiple Yield Fund Plan 2005
HDFC Premier Multi Cap Fund
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HDFC Prudence Fund

HDFC Short Term Plan
HDFC TaxSaver
HDFC Top 200 Fund

Close Ended

HDFC Long Term Equity Fund

HDFC Quarterly Interval Fund

Awards & Accolades:

 The Annual CNBC – TV 18 – BNP Paribas Awards 2004.

 The Outlook Money Awards 2004.

 The CRISIL Best Fund Awards 2003.

 The ICRA Online Mutual Fund Awards 2004.

Selected Scheme in HDFC Mutual Fund

Mutual Fund HDFC Mutual Fund

Scheme Name HDFC Equity Fund
Scheme Type Open Ended
Scheme Category Growth

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Latest Net Asset Value

Scheme NAV Net Asset Repurchase Sale
Name Value Price Price Date
HDFC Equity
Fund-Growth
Plan 167.296 167.296 171.06 11-Apr-08
Latest Assets Under Management (AUM Rs in Lacs)
Average AUM
Scheme NAV Name For The Month As At The End Of
HDFC Equity Fund-Growth
Plan 189583.2 Mar-08

Minimum Investment;

For new investors: Rs.5000 and in multiples of Rs.100 thereafter

For existing investors: Rs. 1000 and in multiples of Rs. 100 thereafter

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Entry Load:

For investments below Rs. 5 crores, Entry load is 2.25%.

For Investments of Rs. 5 crores and above, Entry Load is Nil.

Exit Load: Nil.

3.3 SBI MUTUAL FUND;

SBI Mutual Fund is India’s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.

The fund traces its lineage to SBI - India’s largest banking enterprise. The
institution has grown immensely since its inception and today it is India's largest bank,
patronized by over 80% of the top corporate houses of the country.

SBI Mutual Fund is a joint venture between the State Bank of India and Society
General Asset Management, one of the world’s leading fund management companies that
manages over US$ 330 Billion worldwide.

In eighteen years of operation, the fund has launched thirty-two schemes and
successfully redeemed fifteen of them. In the process it has rewarded it’s investors
handsomely with consistently high returns.

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A total of over 3.5 million investors have reposed their faith in the wealth
generation expertise of the Mutual Fund. Schemes of the Mutual fund have
consistently outperformed benchmark indices and have emerged as the preferred
investment for millions of investors and HNI’s.

Today, the fund manages over Rs. 16500 crores of assets and has a diverse
profile of investors actively parking their investments across 30 active schemes.

The fund serves this vast family of investors by reaching out to them
through network of 100 collection branches, 26 investor service centers, 28 investor
service desks and 52 districts organize.

SBI MUTUAL FUND PRODUCTS

Equity scheme

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The investments of these schemes will predominantly be in the stock markets and
endeavor will be to provide investors the opportunity to benefit from the higher returns
which stock markets can provide. However they are also exposed to the volatility and
attendant risks of stock markets and hence should be chosen only by such investors who
have high risk taking capacities and are willing to think long term. Equity Funds include
diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds
invest in various stocks across different sectors while sectoral funds which are specialized
Equity Funds restrict their investments only to shares of a particular sector and hence, are
riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of
a particular index and the performance of such funds move with the movements of the
index.

Magnum COMMA Fund

Magnum Equity Fund-growth

Magnum Global Fund

Magnum Index Fund
Magnum MidCap Fund
Magnum Multicap Fund
Magnum Sector Funds Umbrella
   MSFU - FMCG Fund
         MSFU - Emerging Businesses Fund
         MSFU - IT Fund
         MSFU - Pharma Fund
         MSFU - Contra Fund
Magnum Multiplier Plus 1993
SBI Arbitrage Opportunities Fund
SBI Blue chip Fund
SBI Infrastructure Fund - Series I
SBI Magnum Tax gain Scheme 1993

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SBI ONE India Fund

Selected Scheme in SBI Mutual Fund

Mutual Fund SBI Mutual Fund

Launch Date 29-Oct-93
Minimum Subscription Amount 1000
an open ended equity scheme, the objective of the
scheme is to provide the investor long-term capital
appreciation by investing in high growth
Objective of Scheme companies along with the liquidity of an open-
ended scheme through investments primarily in
equities and the balance in debt and money market
instruments.

Scheme Category Growth

Scheme Name Magnum Equity Fund – Growth
Scheme Type Open Ended

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Latest Net Asset Value

Scheme NAV Name Net Asset Value Date

Magnum Equity Fund-
Growth 32.77 11-Apr-08

Latest Assets Under Management (AUM Rs in Lacs)

Scheme NAV Name Average AUM For The Month

Magnum Equity Fund- Growth 7243.69

DEBT FUNDS SCHEMES

Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any investments in
the stock markets as in Income Funds or Gilt Funds or having a small exposure to
equities as in Monthly Income Plans or Children's Plan. Hence they are safer than equity
funds. At the same time the expected returns from debt funds would be lower. Such
investments are advisable for the risk-averse investor and as a part of the investment
portfolio for other investors.

Magnum Children’s Benefit Plan

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Magnum Gilt Fund

         Magnum Gilt Fund (Long Term)
         Magnum Gilt Fund (Short Term)
Magnum Income Fund
Magnum Income Plus Fund
   Magnum Income Plus Fund (Saving Plan)
         Magnum Income Plus Fund (Investment Plan)
Magnum Insta Cash Fund
Magnum InstaCash Fund -Liquid Floater Plan
Magnum Institutional Income Fund
Magnum Monthly Income Plan
Magnum Monthly Income Plan Floater
Magnum NRI Investment Fund
SBI Debt Fund Series
         SDFS 15 Months Fund
         SDFS 90 Days Fund
         SDFS 13 Months Fund
         SDFS 18 Months Fund
         SDFS 24 Months Fund
         SDFS 60 Days Fund
         SDFS 180 Days Fund
SBI Premier Liquid Fund

Balance funds scheme

Magnum Balanced Fund invests in a mix of equity and debt investments. Hence
they are less risky than equity funds, but at the same time provide commensurately lower
returns. They provide a good investment opportunity to investors who do not wish to be
completely exposed to equity markets, but is looking for higher returns than those
provided by debt funds.

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Magnum Balanced Fund

Magnum NRI Investment Fund Flexi Asset Plan

SBI Mutual FUNDS AWARDS

LIPPER AWARD

THE LIPPER INDIA FUND AWARDS 2008

ICRA

MUTUAL FUND AWARDS 2008

OUTLOOK MONEY

NDTV PROFIT AWARDS

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LIPPER AWARDS

  THE LIPPER INDIA FUNDS AWARDS 2007

CNBC TV18 – CRISIL

MUTUAL FUND OF THE YEAR AWARD 2007

CNBC

AWAZ CONSUMER AWARDS 2006

LIPPER AWARDS

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THE LIPPER INDIA FUND AWARDS 2006

ICRA

MUTUAL FUND AWARDS 2005

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4) Introduction to project

4.1 Background of the project topic

4.1.a Mutual Fund Concept

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 realized is 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

4.1.b Schemes according to Maturity Period:

A mutual fund scheme can be classified into open-ended scheme or close-ended

scheme depending on its maturity period.

Open-ended Fund/ Scheme:

An open-ended fund or scheme is one that is available for subscription and

repurchase on a continuous basis. These schemes do not have a fixed maturity period.
Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices
which are declared on a daily basis. The key feature of open-end schemes is liquidity.
Close-ended Fund/ Scheme:

A close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The
fund is open for subscription only during a specified period at the time of launch of the
scheme. Investors can invest in the scheme at the time of the initial public issue and
thereafter they can buy or sell the units of the scheme on the stock exchanges where the
units are listed. In order to provide an exit route to the investors, some close-ended funds
give an option of selling back the units to the mutual fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is
provided to the investor i.e. either repurchase facility or through listing on stock
exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

4.1.c Schemes according to Investment Objective:

A scheme can also be classified as growth scheme, income scheme, or balanced

scheme considering its investment objective. Such schemes may be open-ended or close-
ended schemes as described earlier. Such schemes may be classified mainly as follows:

Growth / Equity Oriented Scheme:

The aim of growth funds is to provide capital appreciation over the medium to
long- term. Such schemes normally invest a major part of their corpus in equities. Such
funds have comparatively high risks. These schemes provide different options to the
investors like dividend option, capital appreciation, etc. and the investors may choose an
option depending on their preferences. The investors must indicate the option in the
application form. The mutual funds also allow the investors to change the options at a
later date. Growth schemes are good for investors having a long-term outlook
seeking appreciation over a period of time.
Income / Debt Oriented Scheme:

The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds, corporate
debentures, Government securities and money market instruments. Such funds are less
risky compared to equity schemes. These funds are not affected because of fluctuations in
equity markets. However, opportunities of capital appreciation are also limited in such
funds. The NAVs of such funds are affected because of change in interest rates in the
country. If the interest rates fall, NAVs of such funds are likely to increase in the short
run and vice versa. However, long term investors may not bother about these fluctuations.

Balanced Fund

The aim of balanced funds is to provide both growth and regular income as such
schemes invest both in equities and fixed income securities in the proportion indicated in
their offer documents. These are appropriate for investors looking for moderate growth.
They generally invest 40-60% in equity and debt instruments. These funds are also
affected because of fluctuations in share prices in the stock markets. However, NAVs of
such funds are likely to be less volatile compared to pure equity funds.

Money Market or Liquid Fund

These funds are also income funds and their aim is to provide easy liquidity,
preservation of capital and moderate income. These schemes invest exclusively in safer
short-term instruments such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money, government securities, etc. Returns on these schemes fluctuate
much less compared to other funds. These funds are appropriate for corporate and
individual investors as a means to park their surplus funds for short periods.
Gilt Fund:

These funds invest exclusively in government securities. Government securities

have no default risk. NAVs of these schemes also fluctuate due to change in interest rates
and other economic factors as is the case with income or debt oriented schemes.

Index Funds:

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive
index, S&P NSE 50 index (Nifty), etc These schemes invest in the securities in the same
weightage comprising of an index. NAVs of such schemes would rise or fall in
accordance with the rise or fall in the index, though not exactly by the same percentage
due to some factors known as "tracking error" in technical terms. Necessary disclosures
in this regard are made in the offer document of the mutual fund scheme.
There are also exchange traded index funds launched by the mutual funds which are
traded on the stock exchanges.

Sector specific funds/schemes:

These are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents. e.g. Pharmaceuticals, Software, Fast
Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds may
give higher returns, they are more risky compared to diversified funds. Investors need to
keep a watch on the performance of those sectors/industries and must exit at an
appropriate time. They may also seek advice of an expert.
Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the
Income Tax Act, 1961 as the Government offers tax incentives for investment in
specified avenues. e.g. Equity Linked Savings Schemes (ELSS). Pension schemes
launched by the mutual funds also offer tax benefits. These schemes are growth oriented
and invest pre-dominantly in equities. Their growth opportunities and risks associated are
like any equity-oriented scheme.

Fund of Funds (FoF) scheme:

A scheme that invests primarily in other schemes of the same mutual fund or
other mutual funds is known as a FoF scheme. An FoF scheme enables the investors to
achieve greater diversification through one scheme. It spreads risks across a greater
universe.

Load or no-load Fund:

A Load Fund is one that charges a percentage of NAV for entry or exit. That is,
each time one buys or sells units in the fund, a charge will be payable. This charge is used
by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is
Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would
be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual
fund will get only Rs.9.90 per unit. The investors should take the loads into consideration
while making investment as these affect their yields/returns. However, the investors
should also consider the performance track record and service standards of the mutual
fund which are more important. Efficient funds may give higher returns in spite of loads.
4.1.d Benefits of mutual funds

Affordability:

Investors individually may lack sufficient funds to invest in high grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the benefits
of its investment strategy.

Convenient administration:

Investment in mutual fund reduces paper work and helps in avoiding many
problems such as bad deliveries, delayed payments and follow up with brokers and
companies. Mutual fund saves time and makes investing easy and convenient.

Diversification:

Mutual funds invest in number of companies across a broad cross- section of

industries and sectors. This diversification reduces the risk
because seldom do all stocks decline at the same time and in the same proportion. You
achieve this diversification through a mutual fund with far less money than you can do on
your own.

Flexibility:

Through features such as regular investment plans, regular withdrawal plans and
dividend reinvestment plans you can systematically invest or withdraw funds according
to your needs and convenience.
Liquidity:

In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the mutual fund. In closed-end schemes the units can be sold on
a stock exchange at the prevailing market price or the investor can avail of the facility of
direct repurchase at NAV related prices by the mutual fund.

Low costs:

Mutual funds are a relatively less expensive way to invest capital markets because
the benefits of scale in brokerage, custodial and other fees transaction into lower costs for
investors

Professional management:

Mutual funds provide the services of experienced and skilled professionals,

backed by a dedicated investment research team that analyses the performance and
prospects of companies and selects suitable investments to achieve the objectives of the
scheme.

Return potential:

Over a medium to long term mutual funds have the potential to provide a higher
return as they invest in a diversified basket of selected securities.

Choice of scheme:

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

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

disclosure on the specific investments made by your scheme, the proportion invested in
each class of assets and the fund managers investment strategy and outlook

Well regulated:

All mutual funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interest of investors. The
operations of mutual funds are regularly monitored by SEBI.

4.1.e History of Mutual Fund Industry

The origin of mutual fund industry in India is with the introduction of the concept of
mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from
the year 1987 when non-UTI players entered the industry.

In the past decade, Indian mutual fund industry had seen dramatic improvements,
both quality wise as well as quantity wise. Before, the monopoly of the market had seen an
ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry
to the fund family raised the AUM to Rs. 470 bn in March 1993 and till April 2004; it
reached the height of 1,540 bn.

Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it
is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by
the Indian banking industry. The main reason of its poor growth is that the mutual fund
industry in India is new in the country. Large sections of Indian investors are yet to be
intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund
companies, to market the product correctly abreast of selling.

The mutual fund industry can be broadly put into four phases according to the development
of the sector. Each phase is briefly described as under.

First 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 - 1987-1993 (Entry of Public Sector Funds)

Entry of non-UTI mutual funds. SBI Mutual Fund was the first 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 in 1989
and GIC in 1990. The end of 1993 marked Rs.47, 004 as assets under management.

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) 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

This phase had bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs.29,835
crores (as on January 2003). 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
AUM 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 September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under
421 schemes.
Some facts for the growth of mutual funds in India

 100% growth in the last 6 years.

 Our saving rate is over 23%, highest in the world. Only chanalising these savings
in mutual funds sector is required.

 We have approximately 29 mutual funds which is much less than US having more
than 800. There is a big scope for expansion.

 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing
cities.

 Mutual fund can penetrate rurals like the Indian insurance industry with simple
and limited products.

 SEBI allowing the MF's to launch commodity mutual funds.

 Emphasis on better corporate governance.

 Trying to curb the late trading practices.

 Introduction of Financial Planners who can provide need based advice.

CHART SHOWING FUNCTIONING OF MUTUAL FUNDS IN INDIA

Asset Management Company:

It is a company set up primarily for managing the investment of mutual funds and
makes investment decisions in accordance with the scheme objectives, deed of Trust and
other provisions of the Investment Management Agreement. For Tata Mutual Fund, Tata
Asset Management Limited is the Asset Management Company.
GROWTH IN ASSETS UNDER MANAGEMENT

SEBI Regulations:

Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 or

such other SEBI (MF) Regulations as may be in force from time to time and would
include Circulars, Guidelines etc., unless specifically mentioned to the contrary.
4.2. Variables in the project topic

In the project the risk and return measurements are calculated for making
comparison between two sector funds the calculations are done in excel sheet then it is
turned to word document the followings are the measures for the risk and return
calculations.

4.2. A. Risk measurements

1) Standard deviation.
2) Beta.
3) R squire.
4) Alpha.

Standard deviation

The square root of the variance in a series. It shows how the data are spread out.
A measure of the dispersion of a set of data from its mean. The more spread apart the
data is, the higher the deviation.

In finance, standard deviation is applied to the annual rate of return of an

investment to measure the investment’s volatility (risk).

A volatile stock would have a high standard deviation. In mutual funds the
standard deviation tells us how much the return on the fund is deviating from the
expected normal returns. Standard deviation can also be calculated as the square root of
the variance. To determine how well a fund is maximizing the return received for its
volatility, you can compare the fund to another with a similar investment strategy and
similar returns. The fund with the lower standard deviation would. Be more optimal
because it is maximizing the return received for the amount of risk acquired

Formula for calculating standard deviation

BETA

Beta describes the relationship between the securities return and the index. A
measure of the volatility or systematic risk of a security or a portfolio in comparison to
the market as a whole is known as "beta coefficient".

While standard deviation determines the volatility of a fund according to the

disparity of its returns over a period of time, beta another useful statistical measure,
determines the volatility, or risk, of a fund in comparison to that of its index or
benchmark. A fund with a beta very close to 1 means the fund's performance closely
matches the index or benchmark. A beta greater than 1 indicates greater volatility than
the overall market, and a beta less than 1 indicates less volatility than the benchmark.

If, for example, a fund has a beta of 1.05 in relation to the S&P 500, the fund has
been moving 5% more than the index. Therefore, if the S&P 500 increased 15%, the fund
would be expected to increase 15.75%. On the other hand, a fund with a beta of 2.4
would be expected to move 2.4 times more than its corresponding index. So if the S&P
500 moved 10%, the fund would be expected to rise 24%, and, if the S&P 500 declined
10%, the fund would be expected to lose 24%. Investors expecting the market to be
bullish may choose funds exhibiting high betas, which increase investors' chances of
beating the market. If an investor expects the market to be bearish in the near future, the
funds that have betas less than 1 are a good choice because they would be expected to
decline less in value than the index. For example, if a fund had a beta of 0.5 and the S&P
500 declined 6%, the fund would be expected to decline only 3%.

Formula for Beta calculation

R- Square

The R-squared of a fund advises investors if the beta of a mutual fund is measured
against an appropriate benchmark. Measuring the correlation of a fund's movements to
that of an index, R-squared describes the level of association between the fund's volatility
and market risk, or more specifically, the degree to which a fund's volatility is a result of
the day-to-day fluctuations experienced by the overall market. R-squared values range
between 0 and 100, where 0 represents the least correlation and 100 represents full
correlation. If a fund's beta has an R-squared value that is close to 100, the beta of the
fund should be trusted. On the other hand, an R-squared value that is close to 0 indicates
that the beta is not particularly useful because the fund is being compared against an
inappropriate benchmark.

For example, a bond fund was judged against the S&P 500, the R-squared value
would be very low. A bond index such as the Lehman Brothers Aggregate Bond Index
would be a much more appropriate benchmark for a bond fund, so the resulting R-
squared value would be higher. Obviously the risks apparent in the stock market are
different than the risks associated with the bond market. Therefore, if the beta for a bond
were calculated using a stock index, the beta would not be trustworthy.
 An inappropriate benchmark will skew more than just beta. Alpha is calculated
using beta, so if the R-squared value of a fund is low, it is also wise not to trust the figure
given for alpha. We'll go through an example in the next section.

Alpha coefficient:

It is the excess return of the fund above risk adjusted market return, given its
level of risk as measured by beta. An investment with a positive alpha indicates that the
fund has performed better than expected, given its beta. And a negative alpha indicates
that the fund has under performed.

For example, if a fund has an alpha of 1, it means that the fund outperformed the
benchmark by 1%. Negative alphas are bad in that they indicate that the fund
underperformed for the amount of extra, fund-specific risk that the fund's investors
undertook.

Calculation of Alpha
Alpha = Excess Return - ((Beta x (Benchmark - RFR))

Benchmark = Total Return of Benchmark Index

RFR = Risk free return or Treasury bill

4. 2. B. RETURN ANALYSES OF MUTUAL FUNDS

The various methods for measuring mutual fund returns are as follows.

1. Percentage change in NAV

2. Simple total returns.
3. ROI or Total return with dividend re- investment.

1) Percentage change in NAV

Percentage change in NAV is an absolute measure of return, which finds the NAV
appreciation between two points of time, as a percentage.

Calculation is as follows

(Absolute change in NAV/NAV at the beginning)*100

In case the period is not equal to one year then there will be change calculation.
Converting a return value for a period other than one year, into a value for 1 year is called
as annualisation. In order to annualize a rate, we find out what the return would be for a
year, if the return behaved for a year, in the same manner it did, for any other fractional
period.

Calculation is as follows

(End period NAV/beginning period NAV)-1)*12/n*100

Pros and cons of the method:

This method is simple and very easy to calculate and understand. However,
examining return over a single period may not provide an indication of long term returns.
An important limitation also is that this method is more useful for computing returns on
growth options of mutual fund schemes. It may not be suitable for computing returns on
schemes with dividend distributions or withdrawal plans.

2) Simple total returns

It is customary to represent return as percent per annum. This makes it easier to

compare the returns from various investment options, for a standard holding period. The
investment in a mutual fund can choose to keep his investment for a period of time, not
necessarily 1 year. Therefore, if the holding period is different from 1 year, we have to
normalize the computation shown above, as % p.a.

The total return method takes into account the dividends distributed by the mutual
fund, and adds it to the NAV appreciation, to arrive at returns.

Calculation is as follows
(End period NAV- beginning period NAV)+dividend received) /beginning period
NAV)*100

This return is called the simple annualized return from investing in mutual fund.

Pros and cons of the method

The total return method takes into account the dividend distributions and is
therefore comparable across various kinds of mutual fund classes. The most important
limitation of this method is that it does not take into account the re – investment of
dividends received at the intervening period.

3. Total return with dividend re- investment

This method is also called the return of investment (ROI) method. In this method,
we assume that dividend are re- invested into the scheme as soon as they are received at
the then prevailing NAV (ex-dividend NAV).

Total returns with reinvestment are calculated as:

(Value of the holding at the end of the period/value of the holdings at the beginning
of the period)-1)* 100

Value of holding at the beginning of the period = number of units at the beginning *
beginning NAV.

Value of holding at the end of the period = number of units at the end * end NAV.
Number of units reinvested = dividends/ ex dividend NAV.

This methodology of computing returns is widely used by many mutual fund

tracking agencies.

SEBI regulations regarding reporting of returns by mutual funds

A return earned by a mutual fund scheme is a very important indicator used by

mutual funds in their publicity literature and advertisements. In order to ensure
uniformity and comparability across funds, SEBI has stipulated some norms for return
data that is published by mutual funds. These are.

1. Mutual funds can only use standard return computations such as annual dividend
on face value, annual yield on purchase price, and annual compounded rate of
return.
2. If the scheme has been in existence for over a year, compounded annual yield is
the accepted method of calculating return.
3. return calculations for funds with payouts should assume that dividend are
reinvested at the ex- dividend NAV
4. Return should be shown for the past 1,3 and 5 years of the scheme, or since
inception, which ever is lower.
5. For funds in existence for less than one year, total returns should be shown, and
such returns should not be annualize or compounded.
4.2. C. PERFORMANCE MEASURES/RATIO

Treynor Measure/ Ratio;

According to Jack Treynor, systematic risk or beta is the appropriate measure of

risk, as suggested by Capital Asset Pricing Model CAPM. The Treynormeasure of
portfolio performance relates the excess return on a portfolio to the portfolio beta.
 Treynor Measure= Excess Return on Portfolio (Fund)
Beta of Portfolio (Fund)

=Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment

Beta of Fund

Sharpe Measure/ Ratio;

The Sharpe Measure is similar to the Treynor Measure except that it employs
Standard Deviation, not beta, as the measure of risk. Thus

Sharpe Measure = Excess Return on Portfolio (Fund)

Standard Deviation of Portfolio (Fund)

= Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment

Standard Deviation of Portfolio (Fund)

Jensen Measure/ Ratio:

Like the Trynor Measure, the Jensen Measure or Jensen’s Alpha is based on
CAPM. It reflects the difference between the return actually earned on a portfolio (Fund)
and the return portfolio was suppose to earn, given its beta as per CAPM. Jensen Measure
is
Jensen Measure = Avg. Return on Fund–[Risk Free Return + Fund Beta
(Avg.Market Return – Risk Free Return)]

4.2. D. Some more related terms

Annual Return:
 The percentage of change in net asset value over a year's time, assuming
reinvestment of distribution such as dividend payment and bonuses.

Annualized Return:

This is the hypothetical rate of return, if the fund achieved it over a year's time,
would produce the same cumulative total return if the fund performed consistently over
the entire period. A total return is expressed in a percentage and tells you how much
money you have earned or lost on an investment over time, assuming that all dividends
and capital gains are reinvested.

Benchmark:

A parameter against which a scheme can be compared. For example, the

performance of a scheme can be benchmarked against an appropriate index.

Capital Appreciation:

As the value of the securities in a portfolio increases, a fund's Net Asset Value
(NAV) increases, meaning that the value of your investment rises. If you sell units at a
higher price than you paid for them, you make a profit, or capital gain. If you sell units at
a lower price than you paid for them, you'll have a capital loss.

Compounding:
 When you deposit money in a bank, it earns interest. When that interest also
begins to earn interest, the result is compound interest. Compounding occurs if bond
income or dividends from stocks or mutual funds are reinvested. Because of
compounding, money has the potential to grow much faster.

Entry Load:

Load on purchases/ switch-out of units.

Equity Schemes:

Schemes where more than 50% of the investments are made in the equity shares
of various companies. The objective is to provide capital appreciation over a period of
time.

Expense Ratio:

It is the percentage of fund's value that is paid as expenses. Expenses include

management fees and all the other fees associated with the fund's daily operations.

Exit Load:

Load that is charged on redemptions i.e. during the exit of the fund.

Fund Category:

It is a type of scheme which the mutual fund company invests its corpus in a
particular category. It could be a growth, debt, balanced, gilt or liquid scheme

Fund Family:
 It is the AMC which manages the various types of funds.

Fund Management Costs:

It is the charge levied by an AMC on the investors for managing their funds.

Fund Manager:

The person who makes all the final decisions regarding investments of a scheme,
i.e. the person who makes all the investment decisions.

Investment Objective:

The identification of attributes associated with an investment or investment

strategy, designed to isolate and compare risks, define acceptable levels of risk, and
match investments with personal goals.

Information Ratio:

It measures average return in excess of benchmark portfolio divided by the

standard deviation of this excess return.

Load:
A charge that is levied as a percentage of NAV at the time of entry into the
Scheme/Plans or at the time of exiting from the Scheme/Plans.

No-Load Scheme:
 A Scheme where there is no initial Entry or Exit Load.

Mutual Funds:

An investment company/trust that pools money from unitholders and invests that
money into a variety of securities, including stocks, bonds, and money-market
instruments in line with the funds objective.

NAV: Net Asset Value:

NAV is the value of the fund which is obtained by the following formula
Market/Fair Value of Scheme's investments (+) Receivables (+)
Accrued Income (+) Other Assets (-) Accrued Expenses
(-) Payables (-) Other Liabilities
NAV =
Number of Units outstanding

NAV Change:

The difference between today's closing net asset value (NAV) and the previous
day's closing net asset value (NAV).

NAV %Change:

The percentage change between today's closing net asset value (NAV) and the
previous day's closing net asset value (NAV)

Net Worth:
 A person's net worth is equal to the total value of all possessions, such as a house,
stocks, bonds, and other securities, minus all outstanding debts, such as mortgage and
revolving credit lines.

Net Yield:

Rate of return on a security net of out-of-pocket costs associated with its

purchase, such as commissions or markups.

Offer Document Or Prospectus:

The official document issued by mutual funds prior to the launch of a fund
describing the characteristics of the proposed fund to all its prospective investors. It
contains all the information required as per the Securities and Exchange Board of India,
such as investment objective and policies, services, and fees. Individual investors are
encouraged to read and understand the fund's prospectus.

Risk Adjusted Returns%:

Generally, the expected returns from an investment are dependent on the risk
involved in the investment. For the purpose of comparing returns from investments
involving varying levels of risk, the returns are adjusted for the level of risk before
comparison. Such returns (reduced for the level of risk involved) are called risk-adjusted
returns.

Sale Price:
 The price at which a fund offers to sell one unit of its scheme to investors. This
NAV is grossed up with the entry load applicable, if any.

Sales Charge:

Fee on the purchase of new shares of a mutual fund. A sales charge is similar to
paying a premium for a security in that the customer must pay a higher offering price.
Sometimes, it is called a load.

Scheme:

It is a fund or plan where the money contributed by the unit holders are
maintained and managed and the profit/loss from the scheme accrue only to the unit
holders. A mutual fund can launch more than one scheme.

Sharpe Ratio:

The Sharpe ratio measures the risk-adjusted return of a fund. Simply put, the ratio
measures the variability of ' excess returns' (defined by returns of the fund over the 'risk
free return). Mathematically, the formula takes a fund's return in excess of a risk-free
investment and divides this by the standard deviation of the returns. Higher the Sharpe
ratio better is the fund.

Spread:

The difference between the rates at which money is deposited in a financial

institution and the higher rates at which the money is lent out. Also, the difference
between the bid and ask price for a security.

Total Return%:
 Return on an investment, taking into account capital appreciation, dividends or
interest, and individual tax considerations adjusted for present value and expressed on an
annual basis.

Unit:

Unit representing a share in the assets of the corresponding plan of the Scheme.

Unit Holder:

A person who holds Unit(s) under any plan of the Scheme.

Valuation:

Calculating the market value of the assets of a mutual fund scheme at any point of
time.

Volatility:

In investing, volatility refers to the ups and downs of the price of an investment.
Greater the ups and downs, more volatile the investment is.

Volatility Measures:

Volatility measures the variability of historical returns. Relative Volatility, Beta,

and R2 compare a portfolio's total return to those of a relevant market, represented by the
benchmark index. Standard Deviation is calculated independent of an index.

Yield:
 The percentage of return an investor receives based on the amount invested or on
the current market value of holdings.

Yield Curve:

The relationship at a given point in time between yields on a group of fixed-

income securities with varying maturities -- commonly, Treasury bills, notes, and bonds.
The curve typically slopes upward since longer maturities normally have higher yields,
although it can be flat or even inverted.

Yield to Maturity:

Used to determine the rate of return an investor will receive if a long-term,

interest-bearing investment, such as a bond is held to its maturity date. It takes into
account purchase price, redemption value, time to maturity, coupon yield and the time
between interest payments.
4.3 Importance of the project

I. Mutual fund is very hot subject in two tier cities like Hubli-Dharwad so one should
first understand the concept roughly before investing. This project report helps the
reader about mutual fund concept and the related terms involved in it.

II. In this project report I have calculated the risk measures that is BETA, Standard
Deviation, Alpha and R-Square, by this an investor come to know the concepts,
and even they can also calculate using the spread sheet.

III. In this report I have analyze the mutual fund schemes i.e. Magnum Equity Fund-
Growth and HDFC Equity Fund-Growth and also stated the advantages and
disadvantages of investing in the mutual fund.

IV. This project helps the company i.e. “way to gain” to recommend the good scheme
to its valued customers.

V. In this project I have calculated the returns of two mutual fund schemes i.e.
Magnum Equity Fund-Growth and HDFC Equity Fund-Growth, so that reader can
also understand the way of calculating returns.

VI. This project report helps the investor to understand the investment opportunities in
the mutual fund industry.
4.4 Objectives

Main Objective:

“Evaluating the Performance of SBI and HDFC Mutual Fund Scheme”

Sub Objectives of the study:

 Comprehensive study of mutual fund concept

 Applying the various parameters to measure and evaluate the risk and the
respective returns of selected mutual fund schemes.
 Recommending good mutual fund scheme to invest and earn more returns on
selected mutual fund schemes.
Type of the Study

The study is generally exploratory in nature, as it studies the performances of two

mutual fund schemes i.e. HDFC Equity Fund-Growth Plan and Magnum Equity Fund-
Growth based on the performance measures.

Sources of Data

The data (i.e. NAV) for the study has been downloaded from the internet (i.e.
websites of the mutual funds) and is converted to returns and used for the study which
formed the primary data for the study.

Research Tools

The research has been done by using the following statistical techniques;

 Average
 Standard Deviation
 Variance
 Co-variance
 Correlation
 Compounded return
 Beta
 Systematic and Unsystematic Risk measure
 Measure of Alpha
Plan of Analysis

 One year annualized returns are calculated based on the daily returns
 S&P CNX NIFTY index is benchmark index and the risk free return is calculated
using NAV’s of respective schemes.
 All the above mentioned Statistical measures are calculated to get the results.

Limitations of the Study

The following are the limitations of the study:

 As many statistical tools are used, the limitations of these subjects cannot be
denied.
 Each evaluation measure or variable has its own drawbacks.
 There are very few funds available as the industry hasn’t expanded considerably.

5) Analysis of the study

In analysis part I have shown the calculations of Risk, Returns

and Performance Measures of both the schemes i.e. Megnum Equity
Fund-Growth and HDFC Equity Fund-Growth.

Following are the Returns calculations of Megnum Equity Fund-

Growth and HDFC Equity Fund-Growth.

Percentage change in NAV

 (For period equals to one year)

Fund name: Magnum Equity Fund-Growth

NAV as on 1st mar 2007 --------------------------------- 26.56

NAV as on 3rd mar 2008 ---------------------------------- 35.16

Formula
Absolute change in NAV
NAV at the beginning

= 8.6 100
26.56

= 32.38

Fund name: HDFC Equity Fund-Growth

NAV as on 1st mar 2007 --------------------------------- 143.68

NAV as on 3rd mar 2008 ---------------------------------- 180.72

37.04 100
143.68

= 25.78
Percentage change in NAV
(For period not equals to one year)

Fund name: Magnum Equity Fund-Growth

NAV as on 2nd jan 2007 --------------------------------- 27.87

NAV as on 31st mar 2008 ---------------------------------- 33.05

Formula

(End period NAV/beginning period NAV)-1)*12/n*100

(33.05/27.87)-1)*12/15*100

=14.86

Fund name: HDFC Equity Fund-Growth

NAV as on 2nd jan 2007 ----------------------------------- 147.29

NAV as on 31st mar 2008 ----------------------------------165.79

(165.79/147.29)-1*12/15*100

= 10.05

The following are the NAVs of SBI Magnum Equity Fund-

Growth and HDFC Equity Fund-Growth and there respective returns.

HDFC
Date Index SBI HDFC Index Returns SBI Returns Returns
2-Apr-
07 4379.37 25.6 136.747
3-Apr-
07 4448.12 25.84 137.879 1.569860505 0.9375 0.827806094
4-Apr-
07 4499.91 26.13 140.005 1.164312114 1.122291022 1.541931694
5-Apr- 4522.51 26.32 141.044 0.502232267 0.727133563 0.742116353
07
9-Apr-
07 4632.8 26.93 144.217 2.438690019 2.317629179 2.249652591
10-Apr-
07 4638.41 27.03 144.475 0.121093075 0.371333086 0.178897079
11-Apr- -
07 4655.88 26.97 144.623 0.376637684 0.221975583 0.102439868
12-Apr- -
07 4616.35 26.83 143.395 -0.84903391 0.519095291 -0.849104223
13-Apr-
07 4721.82 27.22 146.359 2.284705449 1.45359672 2.067017678
16-Apr-
07 4837.53 27.85 149.17 2.45053814 2.314474651 1.920619846
17-Apr- -
07 4803.3 27.77 148.129 -0.707592511 0.287253142 -0.6978615
18-Apr- -
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19-Apr-
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20-Apr-
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23-Apr- -
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24-Apr-
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25-Apr-
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26-Apr-
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27-Apr- -
07 4929.15 28.25 150.19 -2.258166221 1.430565248 -1.033223949
30-Apr-
07 4934.46 28.44 151.16 0.107726484 0.672566372 0.645848592
3-May-
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4-May- -
07 4970 28.64 151.523 -0.807114744 0.762300762 -1.074629984
7-May- -
07 4962.52 28.51 151.31 -0.150503018 0.453910615 -0.140572718
8-May- -
07 4921.3 28.31 150.17 -0.830626375 0.701508243 -0.753420131
9-May- -
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10-May- -
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11-May-
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14-May-
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15-May-
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16-May-
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17-May-
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18-May- -
07 5087.8 28.98 154.665 -0.119751075 0.549073439 -0.270819228
21-May-
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22-May-
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23-May- -
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24-May- -
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25-May-
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28-May-
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29-May-
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30-May- -
07 5130.23 29.35 159.282 -1.015653489 1.011804384 -0.554410938
31-May- 5185.95 29.6 161.281 1.086111149 0.851788756 1.255006843
07
1-Jun-
07 5188.58 29.74 161.903 0.050713948 0.472972973 0.385662291
4-Jun- -
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5-Jun-
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6-Jun- -
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7-Jun- -
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8-Jun- -
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11-Jun- -
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12-Jun- -
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13-Jun- -
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14-Jun-
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15-Jun-
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18-Jun- -
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19-Jun-
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20-Jun-
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21-Jun-
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22-Jun- -
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25-Jun-
07 5151.26 29.87 163.479 0.172682688 0.100536193 0.291403892
26-Jun-
07 5183.07 29.95 164.292 0.617518821 0.267827251 0.497311581
27-Jun- -
07 5156.77 29.9 163.61 -0.507421277 0.166944908 -0.415114552
28-Jun-
07 5179.91 30.14 163.509 0.448730504 0.802675585 -0.061732168
29-Jun-
07 5223.82 30.61 165.313 0.847698126 1.559389516 1.103303182
2-Jul-07 5218.32 30.67 166.647 -0.105286936 0.196014374 0.806954081
3-Jul-07 5271.3 31.06 167.92 1.015269282 1.271600913 0.763890139
4-Jul-07 5273.42 31.15 167.161 0.040217783 0.289761751 -0.452000953
5-Jul-07 5267.33 31.07 166.71 -0.115484828 -0.25682183 -0.269799774
6-Jul-07 5304.84 31.36 167.913 0.712125498 0.933376247 0.721612381
9-Jul-07 5346.64 31.49 169.806 0.787959675 0.414540816 1.127369531
10-Jul- -
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11-Jul- -
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12-Jul-
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13-Jul-
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16-Jul-
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17-Jul- -
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18-Jul-
07 5447.23 32.31 170.129 0.06227222 0.654205607 -0.10803638
19-Jul-
07 5522.95 32.82 172.024 1.390064308 1.578458682 1.113860659
20-Jul-
07 5527.74 32.86 172.56 0.086729013 0.121876904 0.31158443
23-Jul-
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24-Jul-
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25-Jul- -
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26-Jul- -
07 5592.81 32.98 173.457 0.677748256 0.241984271 0.28619003
27-Jul-
07 5381.97 31.88 168.741 -3.769840206 -3.33535476 -2.718829451
30-Jul-
07 5375.74 31.93 168.101 -0.11575687 0.156838143 -0.379279487
31-Jul-
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1-Aug- -
07 5261.69 31.53 165.817 -4.040669311 3.518971848 -3.776584941
2-Aug-
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3-Aug-
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6-Aug- -
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7-Aug-
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8-Aug-
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9-Aug- -
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10-Aug- -
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13-Aug-
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14-Aug- -
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16-Aug- -
07 5063.42 30.5 160.869 -4.378435849 3.785488959 -3.907747997
17-Aug- -
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20-Aug-
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21-Aug-
07 4938.51 29.65 155.995 -3.187351748 -3.13622999 -3.378755033
22-Aug-
07 5033.64 30.26 157.769 1.926289508 2.057335582 1.137215936
23-Aug- 4987.63 30.1 156.451 -0.91405027 - -0.835398589
07 0.528750826
24-Aug-
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27-Aug-
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28-Aug-
07 5237.01 31.62 164.074 0.419933616 0.476644423 0.480127381
29-Aug-
07 5283.81 31.74 164.406 0.893639691 0.379506641 0.202347721
30-Aug-
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31-Aug-
07 5411.29 32.42 168.827 1.171325795 1.630094044 1.86132664
3-Sep-
07 5424.33 32.73 170.663 0.24097766 0.956199877 1.087503776
4-Sep-
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5-Sep-
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6-Sep-
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7-Sep- -
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10-Sep-
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11-Sep- -
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12-Sep-
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13-Sep-
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14-Sep- -
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17-Sep-
07 5454.74 33.31 170.482 -0.517044221 0.391802291 -0.096105388
18-Sep-
07 5517.33 33.67 172.737 1.147442408 1.08075653 1.322720287
19-Sep-
07 5743.32 34.51 176.388 4.096002958 2.494802495 2.113617812
20-Sep-
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21-Sep-
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24-Sep-
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25-Sep- -
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26-Sep-
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27-Sep-
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28-Sep-
07 6094.11 36.1 182.838 0.416554756 1.120448179 1.040590202
1-Oct-
07 6151.88 36.52 184.165 0.94796451 1.163434903 0.725779105
3-Oct-
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4-Oct-
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5-Oct-
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8-Oct- -
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9-Oct-
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10-Oct-
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11-Oct-
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12-Oct- -
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15-Oct-
07 6881.82 40.76 195.809 4.461512773 2.82542886 3.185535718
16-Oct- 6878.92 40.75 195.696 -0.042140015 - -0.057709298
07 0.024533857
17-Oct-
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18-Oct- -
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19-Oct- -
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22-Oct-
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23-Oct-
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24-Oct-
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25-Oct-
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26-Oct-
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29-Oct-
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30-Oct-
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31-Oct-
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1-Nov- -
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2-Nov-
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5-Nov- -
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6-Nov- -
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7-Nov- -
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8-Nov- -
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9-Nov- -
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12-Nov- -
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13-Nov-
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14-Nov-
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15-Nov-
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16-Nov- -
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19-Nov-
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20-Nov- -
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21-Nov- -
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22-Nov-
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23-Nov-
07 6810.16 42.38 204.862 1.616727421 2.764306499 1.64528197
26-Nov-
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27-Nov- -
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28-Nov- -
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29-Nov- -
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30-Nov-
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3-Dec-
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4-Dec-
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5-Dec-
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6-Dec- 7230.63 45.78 213.228 0.246921454 - 0.542727406
07 0.239703639
7-Dec-
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10-Dec- -
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11-Dec-
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12-Dec-
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13-Dec- -
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14-Dec- -
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17-Dec- -
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18-Dec- -
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19-Dec-
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20-Dec-
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24-Dec-
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26-Dec-
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27-Dec-
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28-Dec-
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31-Dec-
07 7461.48 47.24 217.45 0.968619332 1.264737406 -2.630259175
-
1-Jan-08 7468.49 47.22 224.592 0.09394919 0.042337003 3.284433203
2-Jan-08 7511.06 48.23 226.239 0.569994738 2.138924185 0.733329771
-
3-Jan-08 7510.02 47.97 225.043 -0.013846248 0.539083558 -0.528644487
4-Jan-08 7626.41 48.49 227.097 1.549796139 1.08401084 0.912714459
 -
7-Jan-08 7632.26 48.36 227.613 0.076707127 0.268096515 0.227215683
-
8-Jan-08 7642.89 47.88 225.209 0.139277226 0.992555831 -1.056178689
-
9-Jan-08 7623.64 47.65 223.089 -0.251868076 0.480367586 -0.941347815
10-Jan- -
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11-Jan-
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14-Jan-
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15-Jan- -
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16-Jan- -
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17-Jan-
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18-Jan- -
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21-Jan- -
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22-Jan- -
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23-Jan-
08 6325.66 38.98 192.228 6.220425106 6.415506416 5.731320954
24-Jan- -
08 6119.07 37.52 186.269 -3.265904269 3.745510518 -3.099964625
25-Jan-
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28-Jan- -
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29-Jan-
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30-Jan- -
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31-Jan- 6245.45 39.04 188.42 -0.584194901 0.334104343 -0.783014844
08
1-Feb- -
08 6465.46 38.69 191.075 3.522724543 0.896516393 1.409086084
4-Feb-
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5-Feb-
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6-Feb- -
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7-Feb- -
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8-Feb- -
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11-Feb- -
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12-Feb- -
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13-Feb-
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14-Feb-
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15-Feb-
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18-Feb-
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19-Feb- -
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20-Feb- -
08 6272.88 36.43 184.9 -2.392844806 3.522245763 -2.15015638
21-Feb-
08 6318.3 36.67 185.551 0.724069327 0.658797694 0.352082207
22-Feb- -
08 6219.66 36.06 183.174 -1.561179431 1.663485138 -1.281049415
25-Feb-
08 6329.13 36.63 184.251 1.760064055 1.580698835 0.587965541
26-Feb-
08 6413.55 37.3 186.915 1.333832612 1.829101829 1.445853754
27-Feb-
08 6411.53 37.54 186.959 -0.031495817 0.643431635 0.023540112
28-Feb- -
08 6431.87 37.52 188.246 0.317240971 0.053276505 0.688386224
29-Feb- -
08 6356.92 36.91 187.594 -1.165290965 1.625799574 -0.346355301
3-Mar-
08 6027.69 35.16 180.716 -5.179080435 -4.74126253 -3.666428564
4-Mar- -
08 5919.69 34.27 176.827 -1.791731161 2.531285552 -2.151995396
5-Mar-
08 5989.23 34.34 178.118 1.174723676 0.204260286 0.730092124
7-Mar- -
08 5806.95 33.3 173.18 -3.043463016 3.028538148 -2.772319474
10-Mar-
08 5842.02 33.28 171.579 0.603931496 -0.06006006 -0.924471648
11-Mar-
08 5921.71 34.41 175.113 1.364082971 3.395432692 2.05969262
12-Mar-
08 5929.12 34.46 172.954 0.125132774 0.145306597 -1.232918173
13-Mar- -
08 5626.82 32.26 165.452 -5.098564374 6.384213581 -4.337569527
14-Mar-
08 5775.57 32.97 167.99 2.643589097 2.200867948 1.533979644
17-Mar- -
08 5481.22 31.05 158.401 -5.096466669 5.823475887 -5.708077862
18-Mar- -
08 5517.59 30.91 158.694 0.663538409 0.450885668 0.18497358
19-Mar-
08 5567.43 31.08 157.98 0.903292923 0.549983824 -0.449922492
24-Mar-
08 5611.17 31.12 158.076 0.785640771 0.128700129 0.060767186
25-Mar-
08 5936.92 32.83 166.059 5.805384617 5.494858612 5.050102482
26-Mar- -
08 5877.72 32.67 165.856 -0.997150037 0.487359123 -0.122245708
27-Mar- 5879.4 32.83 166.306 0.028582512 0.489745944 0.271319699
08
28-Mar-
08 6015.47 34.1 171.142 2.314351805 3.868413037 2.90789268
31-Mar- -
08 5762.88 33.05 165.788 -4.199006894 3.079178886 -3.128396302

Following are the risk measures of SBI Magnum Equity Fund-

Growth and HDFC Equity Fund-Growth.

SBI % HDFC %
BETA 0.964116814 0.750390035
CORRL 0.938181407 0.874566887
VAR 4.096683202 3.459706829
COVAR 3.834309858 2.984316853
Std. Dev 1.998246472 1.998246472
Systematic
Risk 0.938182321 93.81823207 0.874568384 87.45684
Unsystematic
Risk 0.061817679 6.18176793 0.125431616 12.54316
RSQ 0.880184353 0.76486724
ALPHA -0.001728715 -0.005654814
 Following are the PERFORMANCE MEASURES of SBI
Magnum Equity Fund-Growth and HDFC Equity Fund-Growth.

Treynor Ratio;

Formula

Treynor Measure= Excess Return on Portfolio (Fund)

 Beta of Portfolio (Fund)

=Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment

Beta of Fund

SBI Magnum Equity Fund-Growth:-

= 0.123454698 – 0.08
0.964116814

= 0.0450 or 4.50%

HDFC Equity Fund-Growth:-

= 0.091777762 – 0.08
0.750390035

= 0.0156 or 1.56%

Sharpe Measure/ Ratio;

Formula;

Sharpe Measure = Excess Return on Portfolio (Fund)

Standard Deviation of Portfolio (Fund)
=Avg. Rate of Return on Fund – Avg. Rate of Return on a Risk-Free Investment
Standard Deviation of Portfolio (Fund)

SBI Magnum Equity Fund-Growth:-

= 0.123454698 – 0.08
1.998246472

= 0.02174 or 2.174%

HDFC Equity Fund-Growth:-

= 0.091777762 – 0.08
1.714523761

= 0.00686 or 0.68%

Jensen Measure/ Ratio;

Formula;

Jensen Measure = Avg. Return on Fund–[Risk Free Return + Fund Beta(Avg.Market

Return – Risk Free Return)]

SBI Magnum Equity Fund-Growth:-

= 0.123454698 - (0.08 + 0.964116814 (0.129842578 - 0.08)
= 0.123454698 - (1.044116814(0.049842578)
= 0.123454698 - 0.05204147374
= 0.07141322426 or 7.14 %

HDFC Equity Fund-Growth:-

= 0.091777762 - (0.08 + 0.750390035 (0.049842578)

= 0.091777762 - (0.830390035(0.049842578)
= 0.091777762 - 0.04138878008
= 0.05038898192 or 5.038898192 %

6) Findings

Following table shows the findings of the project report.

Magnum
Equity Fund- HDFC Equity
1) returns calculations Growth Fund-Growth
% Change in NAV (for period equals to one year)  32.38 25.78
% Change in NAV (for period not equals to one
year) 14.86 10.05
2) risk calculations    
BETA 0.964116814 0.750390035
CORRL 0.938181407 0.874566887
VAR 4.096683202 3.459706829
COVAR 3.834309858 2.984316853
Std. Dev 1.998246472 1.714523761
Systematic Risk 0.938182321 0.874568384
Unsystematic Risk 0.061817679 0.125431616
RSQ 0.880184353 0.76486724
ALPHA -0.001728715 -0.005654814

3)performance measures
Treynor Measure/ Ratio 4.50% 1.56%
Sharpe Measure/ Ratio 2.1746% 0.68%
Jensen Measure/ Ratio 7.14% 5.039%
Findings

1) Here between our chosen scheme Magnum Equity Fund-Growth is having higher
average return of 0.1234 as compare to that of HDFC Equity Fund-Growth which is
having only 0.09177 so it is obvious to conclude that Magnum Equity Fund-Growth is
on an average performing well in terms of Average Daily Returns.

2) In the above case the Magnum Equity Fund-Growth is having 1.998246472 as a

Standard deviation as compare to that of HDFC Equity Fund-Growth which is having
Standard Deviation of 1.714523761 so here we can conclude that Magnum Equity Fund-
Growth is having more fluctuation so there will be higher risk.

3) Here one more thing we can observe that both the scheme having perfect positive
correlation. But Magnum Equity Fund-Growth is having 0.938181407 which is more as
compare to that of HDFC Equity Fund-Growth which is having 0.874566887.

4) Variance of the Magnum Equity Fund-Growth is 4.096683202 and 3.459706829 is for

HDFC Equity Fund-Growth means HDFC Equity Fund-Growth is consistent compare to
the Magnum Equity Fund-Growth.

5) Even Beta value of the HDFC Equity Fund-Growth is less i.e. 0.750390035 as
compare to that of Magnum Equity Fund-Growth which is 0.964116814 so we can say
that the HDFC Equity Fund-Growth is less varying with that of the Magnum Equity
Fund-Growth.

6) Here Magnum Equity Fund-Growth and HDFC Equity Fund-Growth is under

performed means unable to meet the investor expectations and alpha of both the schemes
are
-0.001728715 and -0.005654814
7) As stated above R-Square ranges from 0-100 so here HDFC Equity Fund-Growth is
having only 0.76486724 i.e.76.486724% that of the Magnum Equity Fund-Growth which
is having 0.880184353 i.e.88.0184353%

8) So it should be noted that HDFC Equity Fund-Growth having less risk and less return
as compare to Magnum Equity Fund-Growth which is having high risk and high return.

9) Performance ratios show the excess return of the schemes over and above risk free rate
of return and here we can see that Magnum Equity Fund-Growth is comparatively having
good excess return than the HDFC Equity Fund-Growth.

7) Conclusions of the project report

1) From the project report we can conclude that Magnum Equity Fund-Growth is having
high risk with high returns and also performing good compare to HDFC Equity Fund-
Growth

2) HDFC Equity Fund-Growth is having less risk and less return compare to Magnum
Equity Fund-Growth.

3) Here from the calculations we can conclude that the one may get approximately 30 to
35% returns from the Magnum Equity Fund-Growth. Where as investing in HDFC
Equity Fund-Growth he may get 24 to 28% returns.
4) At present both schemes are underperforming means not meeting the investor’s
expectations.

5) Magnum Equity Fund-Growth is more volatile than that of HDFC Equity Fund-
Growth.
8) Suggestions of the project report

• Here I would like to suggest, the company i.e. Way to Gain also consider the risk
returns and performance measurements to its unit holder when they come to
investment into their company.

• From this project report it is clear that who wants to take higher risk and higher
return they can go for Magnum Equity Fund-Growth

• Who wants a less risk and less return they can invest in HDFC Equity Fund-
Growth

• Here I also suggest the company to make some awareness campaign because
many people who are interested in earnings through this investment companies
don’t know the concept only.

• As we know that Dharwad- Hubli is of many villages so the company should go

for awareness campaign.

• As company is growing rapidly, so I suggest the company to hire some marketing

officers to increase the company revenue.
9) Bibliography

Web sites:-

www.amfiindia.com
www.google.com
www.mutualfundsindia.com
www.bseindia.com
www.nseindia.com
www.ask.com
www.sbimf.com
www.hdfcfund.com

News papers:-

Business line
Business standard
Mutual Fund Insight

Books:-

Investment analysis and portfolio management ----

Prasanna chandra