SBI STUDY Mutual Funds

A PROJECT REPORT

ON COMPARITIVE ANALYSIS OF TOP FIVE ELSS MUTUAL FUNDS IN INDIA

IN

SBI MUTUAL FUNDS, DELHI

Under The Guidance of

Mr. S

Report Submitted by,

P

For the partial fulfillment of

MASTERS IN BUSINESS ADMINISTRATION (2009-11)

UNIVERSITY INSTITUTE OF MANAGEMENT BANGALORE [1]

ACKNOWLEDGEMENT

I express my gratitude to Mr. S, Chief Manager, SBI Mutual Fund, Industrial Service Centre, New Delhi, who helped as my guide and provide his valuable support in the completion of my project.

It has been a great and valuable experience for me and I was able to get a clear idea of the budgeting system of the company. This experience will wil l be of great help in my future.

I would like to pay my gratitude g ratitude to SBI MUTUAL FUNDS, which gave me a chance to undergo the summer training in Analysing the Mutual Fund Market scenario in India.

Finally, I would like to thank Christ University Institute of Management, Bangalore for providing me an opportunity to do the summer internship project in a company of my interest.

Thanking you,

P

[2]

ACKNOWLEDGEMENT

I express my gratitude to Mr. S, Chief Manager, SBI Mutual Fund, Industrial Service Centre, New Delhi, who helped as my guide and provide his valuable support in the completion of my project.

It has been a great and valuable experience for me and I was able to get a clear idea of the budgeting system of the company. This experience will wil l be of great help in my future.

I would like to pay my gratitude g ratitude to SBI MUTUAL FUNDS, which gave me a chance to undergo the summer training in Analysing the Mutual Fund Market scenario in India.

Finally, I would like to thank Christ University Institute of Management, Bangalore for providing me an opportunity to do the summer internship project in a company of my interest.

Thanking you,

P

[2]

TABLE OF CONTENTS

Chapter 1 – INTRODUCTION 1.1 DEFINTION & CONCEPT 1.2 ADVANTAGES OF MUTUAL MUTUAL FUND FUND 1.3 DISADVANTAGES OF MUTUAL MUTUAL FUND FUND 1.4 FREQUENTLY USED TERMS 1.5 HISTORY 1.6 TYPESOF MUTUAL FUND

Chapter 2 – ORGANIZATIONAL STRUCURE 2.1 ROLE OF SPONSOR 2.2 ROLE OF BOARD OF TRUSTEES 2.3 ROLE OF ASSET MANAGEMENT MANAGEMENT COMPANY 2.4 ROLE OF CUSTODIAN 2.5 ROLE OF REGISTRAR & TRANSFER TRANSFER AGENT

Chapter 3 – COMPANY PROFILE & OVERVIEW 3.1 COMPANY PROFILE 3.2 FUNDS EXPERTISE 3.3 ACHIEVEMENTS & AWARDS

Chapter 4 - RESEARCH OBJECTIVES AND SCOPE OF RESEARH PROJECT 4.1 OBJECTIVE OF THE STUDY

4.2 SCOPE OF STUDY [3]

4.3 METHODOLOGY 4.4 SOURCES OF DATA 4.5 LIMITATIONS OF STUDY 4.6 PERIOD OF THE THE STUDY STUDY 4.7 CORPORATE OFFICE

Chapter 5 – ELSS FUNDS 5.1 What are ELSS Funds..?? 5.2 Top 5 ELSS ELSS funds in Indian Indian Manrket 5.2.1 SBI MAGNUM TAX GAIN 5.2.2 SAHARA TAX GAIN 5.2.3 HDFC TAX SAVER 5.2.4 SUNDARAM PNB PARIBAS TAXSAVER 5.2.5 ICICI PRUDENTIAL TAX PLAN

Chapter 6 – LEARNING EXPERIENCE Chapter 7 – CONCLUSION Chapter 8 - BIBLIOGRAPHY

[4]

CHAPTER 1

INTRODUCTION

[5]

1.1 MUTUAL FUND : DEFINITION AND 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 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:

[6]

1.2 ADVANTAGES OF MUTUAL FUNDS

The advantages of investing in a Mutual Fund are: 

Professional Management



Diversification



Convenient Administration



Return Potential



Low Costs



Liquidity



Transparency



Flexibility



Choice of schemes



Tax benefits



Well regulated

1.3 DISADVAN TAGES OF MUTUAL FUNDS The Disadvantages of Investing through Mutual Funds over Direct Investments



No Control Over Cost



No tailor Made portfolios



Managing a portfolio Funds

[7]

1.4FREQUENTLY USED TERMS

(i) Net Asset Value (NAV)

Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

(ii) Sale Price

Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load.

(iii) Repurchase Price

Is the price at which units under open-ended schemes are repurchased by the Mutual Fund. Such prices are NAV related.

(iv) Redemption Price

Is the price at which close-ended schemes redeem their units on maturity. Such prices are NAV related.

(v) Sales Load

Is a charge collected by a scheme when it sells the units. Also called, ‗Front -end‘ load. Schemes that do not charge a load are called ‗No Load‘ schemes.

[8]

1.5 HISTORY OF MUTUAL FUND IN INDIA History of the Indian Mutual Fund Industry 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 of India. The history of mutual funds in India can be broadly divided into four distinct phasesFirst 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 delinked 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)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) 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 [9]

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, 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. The graph indicates the growth of assets over the years.

Note : Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

[10]

1.6 TYPES OF MUTUAL FUND Mutual Fund can be classified as : 

Close Ended / Open Ended Funds



Loan Fund / No-Load Funds



Tax-Exempt / Non-Tax exempt Funds

Open-ended fund or 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. CGISH‘s composite performance ranking (CPR) measures the performance for each of the open-ended scheme of Mutual Fund. There are four parameters considered to measure the performance of a mutual fund such as Risk-adjusted returns of the scheme‘s NAV, Diversification of Portfolio, Liquidity and Asset Size. Closed-end 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 exist 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.

Schemes according to investment objective :

A scheme can also be classified a 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. [11]

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 bond, 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 [12]

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 ordebt oriented schemes. Index Funds :

Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSI. 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

[13]

CHAPTER 2

ORGANIZATIONAL STRUCTURE

[14]

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

2.1 ROLE OF SPONSOR :

Sponsor is a person who sets up a Mutual Fund. Sponsor settles the trust and executes the trust deed. Sponsor contributes to the initial capital of the Trust. Sponsor appoints the Board of Trustees. Sponsor appoints the Board of Trustees. Sponsor also appoints the Asset Management Company. Sponsor contributes minimum 40% of net worth of AMC. 2.2 ROLE OF BOARD OF TRUSTEES :

Trustees are appointed by the Sponsor with approval from SEBI. Atleast two third Trustees must be Independent. The Trustees have FUDUCIARY responsibility towards unit holders. Trustees not liable for acts done in good faith and if they have exercised adequate due diligence. Trustees oversee the functioning of AMC. Trustees approve each MF scheme floated by AMC. The investments in MF‘s are held by the Trustees. Trustees receive fees for their services. Trustees have the obligation to undertake General & specific due diligence. 2.3 ASSET MANAGEMENT CO. AND ITS ROLE :

AMC is constituted as a company under the Indian Companies Act with minimum net worth of Rs. 10 crore. Minimum Contribution of a sponsor should be 40% of share capital of AMC. [15]

Atleast 50% of Directors of AMC to be independent. AMC can be terminated/changed with the consent of 

Majority of Trustees or



At least 75% majority of Unit Holders

Following are the basic activities of an AMC : 

Asset Management Services



Portfolio Management Services



Portfolio Advisory Services

ROLE OF AMC

AMC is the fund Manager for Managing Mutual Fund Assets. AMC floats different MF schemes. AMC are accountable to the Trustees.AMC works on fee based system which are subjected to ceiling prescribed by SEBI. 2.4 ROLE OF A CUSTODIAN

Custodian is appointed by Board of Trustees. Custodian keeps the record of Securities and Investments. It collects benefits under Securities. A sponsor and a Custodian cannot be same identity needs to be different. A custodian needs to be registered with SEBI. 2.5 ROLE OF REGISTRAR & TRANSFER AGENT

Registrar Issues, redeems, transfers units of MF scheme. They keep unit Holders A/C‘s upto

date. Registrar and transfer agent both needs to be registered with SEBI.

[16]

CHAPTER 3

SBI MUTUAL FUNDS : COMPANY PROFILE & OVERVIEW

[17]

3.1 COMPANY PROFILE – SBI MUTUAL FUNDS 

Proven Skills in Wealth Generation. 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, patronised 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 Société Générale Asset Management, one of the world‘s leading fund management companies that

manages over US$ 500 Billion worldwide. 

Exploiting expertise, compounding growth In twenty years of operation, the fund has launched 38 schemes and successfully redeemed fifteen of them. In the process it has rewarded it‘s investors handsomely with consistent returns. A total of over 5.8 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. 38,782 crores of assets and has a diverse profile of investors actively parking their investments across 38 active schemes. The fund serves this vast family of investors by reaching out to them through network of over 130 points of acceptance, 28 investor service centers, 46 investor service desks and 56 district organisers. SBI Mutual is the first bank-sponsored fund to launch an offshore fund – Resurgent India Opportunities Fund. Growth through innovation and stable investment policies is the SBI MF credo.

[18]

3.2 FUND HOUSE EXPERTISE The investment environment is becoming increasingly complex. Innumerable parameters need to be factored in to generate a clear understanding of market movement and performance in the near and long term future. At SBIMF, we devote considerable resources to gain, maintain and sustain our profitable insights into market movements. We consistently push the envelope to ensure our investors get the maximum benefits year after year. Research - the backbone of our Performance

Our expert team of experienced and market savvy researchers prepare comprehensive analytical and informative reports on diverse sectors and identify stocks that promise high performance in the future. This team works in tandem with a compliance and risk-monitoring department, which ensures minimisation of operational risks while protecting the interests of the investors. Quite naturally many of our equity funds have delivered consistent returns to investors and have repeatedly out performed benchmark indices by wide margins.

[19]

3.3 AWARDS AND ACHIEVEMENTS Our expertise and excellent performance is frequently recognized by the mutual fund industry. SBI Mutual Fund (SBIMF) has been the proud recipient of the ICRA Online Award - 8 times, CNBC TV - 18 Crisil Award 2006 - 4 Awards, The Lipper Award (Year 2005-2006) and most recently with the CNBC TV - 18 Crisil Mutual Fund of the Year Award 2007 and 5 Awards for our schemes. 

2010 - ICRA – MUTUAL FUND AWARDS



2009 o

o







ICRA – MUTUAL FUND AWARDS LIPPER AWARD – THE LIPPER INDIA FUNDS AWARDS

2008 o

OUTLOOK MONEY – NDTV PROFITS AWARDS

o

ICRA – MUTUAL FUND AWARDS

o

LIPPER AWARD – THE LIPPER INDIA FUNDS AWARDS

2007 o

CNBC – AWAAZ CONSUMER AWARDS

o

CNBC TV18 – CRISIL – MUTUAL FUND OF THE YEAR AWARD

o


o


o


2006 o

CNBC – AWAAZ CONSUMER AWARDS

o

CNBC TV18 – CRISIL – MUTUAL FUND OF THE YEAR AWARD [20]

o


o


o


3.4 CORPORATE OFFICE

191, Maker Tower 'E', Cuffe Parade, Mumbai - 400 005 Tel

: +91 22 22180221

Fax

: +91 22 22189663

Email : [email protected]

[21]

CHAPTER 4

RESEARCH OBJECTIVES AND SCOPE OF RESEARH PROJECT

[22]

4.1 OBJECTIVE OF THE STUDY The objective of the study is to ―Compare Top 5 ELSS funds available in Market‖ by different AMC and enlist their features and Facts.

4.2 SCOPE OF THE STUDY The scope of the study is to show the growing market for mutual funds products in the Indian Market. Also how can an investment in any Mutual fund could help an individual in saving tax and get exemption from IT department.

4.3 METHODOLOGY The methodology used is basically explorative type, where the study has been based under available financial data and discussion with the Fund managers & Market Watch officials.

4.4 SOURCES OF DATA The sources of information in this projec were :•

Primary Data

Primary data has been obtained from the discussion with the Fund and Portfolio managers. •

Secondary Data

Mostly the secondary data were used in conducting the study. They were a)

Records and Research Files of SBI

b)

Official documents

c)

Website of SBI Mutual Funds

d)

Press release of SBI Mutual Funds

[23]

4.5 LIMITATION OF THE STUDY

The only Limitation of my study which I observed was that the performance of each Fund was dependent on condition of Stock market. A thorough knowledge about the share market & its whereabouts is also very necessary.

4.6 PERIOD OF THE STUDY

The period of study which I have selected under my project is not fixed for each Fund. It may vary depending upon the date of establishment for that product. I have analysed the performance of each fund from date of its start or past 5 years, whichever is earlier & compared them with each other.

[24]

CHAPTER 5

ELSS MUTUAL FUNDS

[25]

5.1 ELSS FUNDS - What Are ELSS Funds ? As the name suggests ELSS (equity linked savings scheme), invests primarily in equity shares of companies. As per financial regulations, the scheme Fund manager has to invest 80% of the total amount in the equity shares and the remaining 20% per cent can be invested in other instruments like bonds, debentures, government securities and others. When you invest in ELSS your money is locked for a period of three years (minimum). Once you invest in tax saver funds you cannot withdraw the amount for three years, this acts as a blessing in disguise as tax saving funds generally yield high returns during a 3year period. The common man is basically afraid of investing his money in equity shares as he is afraid of loosing money. But a look at the recent past shows that investors who have invested in tax saver funds have never lost out on their money, rather tax saver funds have been the front runners in terms of returns to investors. A small illustration will clarify comprehensions. If you make an investment of Rs 1,00,000/ ( 1 lac), then under section 80c this complete amount is deducted from your gross income for that particular year. If your annual income puts you in the highest tax paying zone, i.e -34%, then the investment of Rs 1,00,000/ will ensure that you get an annual tax deduction of Rs, 34,000/. So logically speaking you invest Rs 66,000/ considering the deduction. Assuming that the Mutual Fund declares an annual dividend of 10% then your total return on Rs 66,000 is [(10,000/66000)* 100] = 15.15%. This particular dividend earned is also tax-free, hence more profit. Another profitable venture out of this investment is that after a period of 3 years the capital gain that you obtain out of the investment is also tax-free. This is what makes ELSS the most attractive investment for those who have the appetite for moderate risk. However, prior to making an investment selecting a good fund house based on its reputation and track record is important. ELSS are considered to be the best tax saving mutual funds in India. ELSS is a good option to save tax and generate long term capital gains. These gains are obtained from the equity market only if you are investing in a long time horizon. Adding money in a disciplined manner creates a good corpus. The basic confusion that the average investor could have is that they consider Equity Mutual Funds and ELSS to be the same, which in true sense isn‘t correct. Normal

equity funds could be purchased today and disposed off tomorrow. Incase of ELSS there is a compulsory 3 year lock in period. As per the rules related to long-term capital gains, profit from equity MFs after one year becomes tax-free.

[26]

5.2 TOP FIVE ELSS FUNDS IN INDIAN MARKET : i.

SBI MAGNUM TAX GAIN

ii.

SAHARA TAX GAIN

iii.

HDFC TAX SAVER

iv.

SUNDARAM BNP PARIBAS TAXSAVER

v.

ICICI PRUDENTIAL TAX PLAN

5.2.1 SBI MAGNUM TAX GAIN 5.2.1.1 Current Stats & Profile



Latest NAV - 57.76 (20/04/10)



52-Week High - 59.25 (06/01/10)



52-Week Low - 34.33 (22/04/09)



Fund Category : Equity: Tax Planning



Type : Open End



Launch Date : March 1993



Risk Grade : Below Average



Return Grade : Average



Net Assets (Cr) : 5,347.97 (31/03/10)



Benchmark : BSE 100

[27]

5.2.1.2 Trailing Returns

As on 20 Apr 2010

Fund

Category

Year to Date

-0.02

3.07

1-Month

0.02

1.85

3-Month -

1.08

1.22

1-Year

65.55

72.24

3-Year

9.16

10.18

5-Year

25.72

20.64

Return Since Launch

19.44

--

Returns upto 1 year are absolute and over 1 year are annualised.

5.2.1.3 Best and Worst Performance

Month

Best (Period)

Worst (Period)

60.94 (03/12/1999 - 04/01/2000)

-52.41 (31/03/2000 - 02/05/2000)

Quarter 117.12 (03/12/1999 - 03/03/2000)

-61.55 (25/02/2000 - 26/05/2000)

Year

-74.61 (13/03/2000 - 13/03/2001)

371.36 (05/03/1999 - 06/03/2000)

5.2.1.4 ANNUAL RETURNS

YEAR

2009

2008

2007

2006

2005

Fund Return

86.42

-54.86

55.27

44.96

96.06

Rank In Category

13/32

14/29

16/26

23-Jan

20-Jan

Category Average

81.79

-55.56

59.25

30.18

50.08

S&P CNX Nifty

75.76

-51.79

54.77

39.83

36.34

Sensex

81.03

-52.45

47.15

46.7

42.33

[28]

5.2.1.5 QUATERLY RETURNS Q1 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

Q2 0.05 --0.26 -25.6 -4.07 20 15.51 -6.67 -15.3 10.48 -37.7 28.4 57.46 11.29

Q3 --

47.69 -17.06 13.48 -11.85 22.48 -6.59 33.55 4.63 -3.88 -43.87 2.16 -12.02

[29]

Q4 --

18.58 -4.58 15.68 16.38 27.6 30.81 33.19 -13.6 -24.2 -13 53.72 16.21

6.72 -23.33 23.29 17.75 8.6 34.98 54.7 5.62 20.02 -14.84 73.95 -1.01

5.2.1.6 ANALYSIS

Magnum Taxgain has generated a bit of an up-and-down performance In the seven years spanning 1996 to 2002, the fund underperformed the category average every single year, barring 1999 when it delivered a mesmerizing 330 per cent (category average: 219%). However, from 2003 onwards, it has been on steroids. After an excellent performance that year, it was the best performing fund in its category till 2006. But the year 2007 proved to be a dent in its performance when the fund was not even in the top two quartiles. However in the meltdown of 2008, it managed to get away with an average fall. The fund manager tends to tilt towards growth stocks, but sticks largely to a buy-and-hold strategy without overlooking opportunistic bets. But recently, the fund has undergone a transformation into a more conservative offering. The fund has increased allocation to cash and debt from 2006 onwards. While the mid- and small-cap allocation began to decrease that year, the fund took on a large-cap orientation towards the middle of 2007. Simultaneously, the fund also broadened its portfolio. It was from 2006 onwards that it really changed when it rose from a holding of 51 stocks to 77 by 2007. The top five holdings too are not as concentrated. These changes hindered the fund's performance in 2007. In the bear hug of 2008 and first quarter of 2009, it once again took refuge in debt and cash. While it witnessed an average fall last year, it succeeded in falling less than the c ategory in the first quarter this year.

[30]

In the recent rally from March 9 - June 30, 2009, the fund has managed to beat its category, although by a small margin. Its timely shift to equity and presence in metals, financial and engineering sectors helped it gain 68 per cent (category: 67%). Its conservative tilt may appeal to investors looking for a tax saving avenue in turbulent market conditions. 5.2.1.7 Returns and Risk Aggregates

Rating & Risk

Fund Rating

***

Fund Risk Grade

Below Average

Fund Return Grade

Average

Modern Portfolio Stat

R-Squared

0.98

Alpha

0.13

Beta

0.88

Volatility Measures

Mean

16.13

Standard Deviation

34.92%

Sharpe Ratio

0.39

[31]

5.2.2 SAHARA TAX GAIN 5.2.2.1 Current Stats & Profile 

Latest NAV

:

33.8336 (21/04/10)



52-Week High :

33.8371 (09/04/10)



52-Week Low :

18.6978 (28/04/09)



Fund Category :

Equity: Tax Planning



Type

:

Open End



Launch Date

:

March 1997



Risk Grade

:

Average



Return Grade :

Above Average



Net Assets (Cr):

9.41 (31/03/10)



Benchmark

BSE 200

:


As on 21 Apr 2010

Fund

Category

Year to Date

2.32

3.72

1-Month

4.10

2.49

3-Month

4.32

4.08

1-Year

75.98

74.33

3-Year

18.49

10.39

5-Year

25.72

20.48

Return Since Launch

29.21

--


[32]

Top Holdings

As on 31 Mar

Name of Holding

% Net Assets

Bajaj Auto

4.22

ICICI Bank

3.79

Aurobindo Pharma

3.72

Reliance Industries

3.72

ITC

3.58

Top 5 Sectors

% Net Asset

As on 31/03/2010

FMCG

17.85

Health Care

16.94

Financial

14.96

Energy

12.32

Automobile

11.74


Best (Period)

Worst (Period)

Month

49.95 (13/03/1998 - 17/04/1998)

-32.18 (09/02/2001 - 13/03/2001)

Quarter

103.71 (19/11/1999 - 18/02/2000)

-43.56 (25/02/2000 - 26/05/2000)

Year

294.09 (24/12/1998 - 24/12/1999)

-69.29 (12/04/2000 - 12/04/2001)

[33]

5.2.2.4 ANNUAL RETURNS 2009

2008

2007

2006

2005

90.57

-49.56

64.65

25.64

50.3

Rank In Category

7/32

5/29

10/26

18/23

8/20

Category Average

81.79

-55.56

59.25

30.18

50.08

S&P CNX Nifty

75.76

-51.79

54.77

39.83

36.34

Sensex

81.03

-52.45

47.15

46.7

42.33

Fund Return

5.2.2.5 QUATERLY RESULTS Q1

Q2

Q3

Q4

--

--

--

2010

-1.13

2009

-3.45

51.31

25.17

4.23

2008

-27.88

-15.7

-0.7

-16.45

2007

-7.84

18

14.04

32.77

2006

20.45

-16.54

14.52

9.14

2005

-2.9

9.41

32.82

6.52

2004

-8.68

-8.51

18.25

21.95

2003

-8.38

14.48

34.49

39.84

2002

9.34

-3.22

-8.77

11.1

[34]

5.2.2.6 ANALYSIS

Sahara Tax Gain has an asset size of Rs. 8.77 crore spread over a portfolio of 32 stocks. The fund was launched in April, 97 and thus it has withered many market phases. The fund has limited it‘s investment to less than 5% in any individual stock. The fund is mainly largecap based given it‘s high exposure of 71.74% in large-cap stocks (Market capitalisation > Rs. 5000 crores) followed by 25.22% in Mid-caps and 3.04% in Smallcaps and the top-ten holdings constitutes 32.06% of the total assets. The assets are allocated between equity and cash with no investment in debt. The proportion of asset invested in equity & cash equivalents being 83.57% & 16.43% respectively. The sector allocation is also very conservative and it‘s top investments are in FMCG, Financial, Energy, Technology, Healthcare aggregating to 62.23%. Sahara Tax Gain FundGrowth has been ranked among the Top 10 best performing equity schemes in the world over, as per Lipper global fund data. The scheme also has the facility of SIP (Systematic Investment Plan) offered to its investors to counter volatility and invest regularly to benefit from the growth. The fund is a defensive fund considering it‘s Beta of less than market. The expense ratio of the fund is moderate considering that the portfolio was churned in the last one year.

5.2.2.7 Returns and Risk Aggregates

Rating & Risk

Fund Rating

****

Fund Risk Grade

Average

Fund Return Grade

Above Average


R-Squared

0.94

Alpha

8.27

Beta

0.97

Volatility Measures

Mean

22.73 [35]

Standard Deviation

35.53

Sharpe Ratio

0.51

[36]

5.2.3 HDFC TAX SAVER 5.2.3.1 Current Stats & Profile

Latest NAV

:

209.581 (23/04/10)

52-Week High :

210.919 (09/04/10)

52-Week Low :

109.318 (28/04/09)

Fund Category :


Type

:

Open End

Launch Date

:

March 1996

Risk Grade

:

Below Average

Return Grade

:

Above Average

Net Assets (Cr) :

2,290.57 (31/03/10)

Benchmark

S&P CNX 500

:

5.2.3.2 Trailing Return As on 23 Apr 2010

Fund

Category

Year to Date

6.37

4.40

1-Month

2.62

3.56

3-Month

6.74

5.77

1-Year

90.51

73.99

3-Year

14.00

10.65

5-Year

25.00

20.44

Return Since Launch

35.08

--


[37]

5.2.3.3 Portfolio Summary

Top Holdings As on 31 Mar Name of Holding

% Net Assets

ICICI Bank

5.48

Dr. Reddy's Lab

4.45

Crompton Greaves

4.43

Sun Pharmaceutical Inds.

4.18

State Bank of India

4.11

Top 5 Sectors

% Net Asset As on

31/03/2010

Financial

20.13

Health Care

16.00

Energy

9.44

Technology

9.36

Engineering

8.87


2009

2008

2007

2006

2005

Fund Return Rank In Category Category Average

99.07

-51.55

39.44

34.12

74.84

3/32

8/29

24/26

10/23

2/20

81.79

-55.56

59.25

30.18

50.08

S&P CNX Nifty

75.76

-51.79

54.77

39.83

36.34

Sensex

81.03

-52.45

47.15

46.7

42.33

[38]

5.2.3.5 QUATERLY RETURNS

Q1

Q2

Q3

Q4

--

--

--

2010

4.39

2009

-1.93

51.17

24.92

7.48

2008

-25.58

-16.82

4.93

-25.41

2007

-8.62

16.92

11.97

16.56

2006

20.13

-12.22

14.31

11.26

2005

8.13

15.63

27.14

9.99

2004

-4.07

-5.9

30.66

26.65


Best (Period)

Worst (Period)

Month

34.19 (15/12/1999 - 14/01/2000)

-32.30 (26/09/2008 - 27/10/2008)

Quarter

78.93 (09/03/2009 - 10/06/2009)

-39.75 (02/09/2008 - 02/12/2008)

Year

272.59 (24/02/1999 - 24/02/2000)

-55.57 (03/12/2007 - 02/12/2008)

[39]

5.2.3.7 Returns and Risk Aggregates Rating & Risk

Fund Rating

**** (4 star)

Fund Risk Grade

Below Average

Fund Return Grade

Above Average

Modern Portfolio Statistics

R-Squared

:

0.94

Alpha

:

4.05

Beta

:

0.93

Volatility Measures

Mean

:

20.14

Standard Deviation : 34.13 Sharpe Ratio

:

0.45

5.2.3.8 ANALYSIS

The best fund in good and bad times.

HDFC Taxsaver continues to be the first choice in the category of tax-planning funds. In its history spanning over 10 years, the fund has displayed tremendous ability to race ahead during the good times, while protecting the downside well when the markets fell. The fund has been doing this consistently year after year.

Its glorious performance also gets reflected in its star ratings — it has never been rated below four-star in the 82 months of its rated life. In the nine completed calendar years of its existence, the fund marginally under-performed its category only in 2002, while beating an average peer by more than 10 per cent in each of the remaining years. This year, the fund is up 26.68 per cent as on April 7, ahead of an average peer‘s 22.72 per cent. Some smart stock picks and some quality sector moves enabled this fund to steer clear of the technology collapse with ease. The fund booked profits and [40]

reduced exposure to the technology sector at the right time before the market turned bearish in March 2000. With the exposure to tech sector down from 35.19 per cent in previous month to 12.2 per cent, the fund was sitting comfortably with 41.9 per cent of its assets in cash when the meltdown began. Though it erred in re-entering the sector a bit too early, the key contributor to the positive returns generated by the fund in 2000 was Raymond Ltd, its top holding (accounting for more than 10 per cent) from August 2000 till February 2001. While the markets were bleeding, the stock price doubled from Rs 70 in May 2000 to Rs 140 by February 2001. A high exposure to fast moving consumer goods (FMCG) stocks would have also helped. Then in 2001, the fund‘s dependence on pharma stocks and some select companies, like Ashok Leyland and Associated Cement Companies, saved the day for this fund. An average 10 per cent investment in bonds from the second quarter of 2000 till mid 2001 also provided a good cushion to this star fund. The fund has been quite selective in its picks in which it invests with conviction. The number of stocks in the portfolio is generally restricted to 20-25 (though of late, that has gone up to 30), with the top five accounting for more than 30 per cent. Hindustan Zinc is the fund‘s top holding. After making the full use of the mid-cap rally in the last two-and-a-half years or so, the fund has started to get back to large-caps. In short, HDFC Taxsaver is an apt core holding for an equity portfolio.

[41]

5.2.4 SUNDARAMBNP PARIBAS TAXSAVER-G

5.2.4.1 Current Stats & Profile

Latest NAV

42.5166 (30/04/10)

52-Week High

43.9725 (06/01/10)

52-Week Low

26.9263 (11/05/09)

Fund Category


Type

Open End

Launch Date

November 1999

Risk Grade

Average

Return Grade

Above Average

Net Assets (Cr)

1,283.66 (31/03/10)

Benchmark

BSE 200

[42]


As on 30 Apr 2010

Fund

Category

Year to Date

0.55

4.60

1-Month

3.36

2.88

3-Month

6.52

9.28

1-Year

61.87

72.44

3-Year

15.58

10.38

5-Year

26.23

20.96

Return Since Launch

22.68

--



Top Holdings

As on 31 Mar

Name of Holding

% Net Assets

Reliance Industries

4.70

Adani Power

4.19

State Bank of India

3.66

ONGC

3.62

Aban Offshore

3.60

[43]

Top 5 Sectors

% Net Asset

As on 31/03/2010

Energy

26.37

Financial

18.31

Construction

6.76

Engineering

6.60

Health Care

5.58


Best (Period)

Worst (Period)

Month

34.04 (28/04/2009 - 28/05/2009)

-34.05 (15/05/2006 - 14/06/2006)

Quarter

74.93 (09/03/2009 - 10/06/2009)

-32.65 (24/02/2000 - 25/05/2000)

Year

112.20 (02/01/2003 - 02/01/2004)

-49.92 (14/01/2008 - 13/01/2009)

5.2.4.5 ANNUAL RETURNS 2009

2008

2007

2006

2005

Fund Return

72.02

-47.58

68.38

31.97

59.61

Rank In Category

25/32

2/29

7/26

11/23

5/20

Category Average

81.79

-55.56

59.25

30.18

50.08

S&P CNX Nifty

75.76

-51.79

54.77

39.83

36.34

Sensex

81.03

-52.45

47.15

46.7

42.33

[44]

5.2.4.6 QUATERLY RETURNS Q1

Q2

Q3

Q4

--

--

--

2010

-2.72

2009

-7.87

45.53

24.69

2.9

2008

-28.95

-10.12

-3.3

-15.1

2007

-6.05

11.7

20.22

33.46

2006

18.92

-16.5

13.92

16.66

2005

0.04

7.98

27.54

15.85

2004

-11.83

-5

31.45

30.58

2003

-4.52

23.93

27.2

37.66

2002

13

1.96

-8.01

8.59

2001

-13.64

-1.28

-17.17

20.72

2000

14.17

-14.88

-13.64

-2.38

1999

--

--

--


Fund Rating

****

Fund Risk Grade

Average

Fund Return Grade

Above Average


R-Squared

--

Alpha

6.86

Beta

.91

Volatility Measures

Mean

24.83

Standard Deviation

29.59

Sharpe Ratio

0.58

[45]

--

5.2.4.8 ANALYSIS

Sundaram BNP Paribas Taxsaver‘s adaptability has given it an edge

This fund's adaptability is appealing. Its approach has translated into a competitive long-term record. It has also often displayed the ability to protect the downside. Typical of this fund's style is flexibility in every aspect. Its 48 per cent large-cap allocation (March 2007) shot up to almost 70 per cent by June 2007 before sliding down to 54.75 per cent by the end of that year. It's also nimble in its asset allocation. More so in 2008, when the cash and debt allocation total went up to 36 per cent. Also, when markets took a U-turn for an upward journey in March 2009, the fund was quick to cut down its cash exposure from March (26.81 per cent) to June (2.70 per cent). The fund did benefit from this move as it turned in 71.20 per cent compared to the category‘s 67.71 per cent over the rally (09/03/2009 to 31/05/2009). But in the next month the fund had the highest fall (5.52 per cent) in the category. If the fund manager sees an opportunity, he is quick to capitalise on it, be it in stocks or sectors. In 2007, for instance, the metals allocation jumped from 8.86 per cent (August) to 20.87 per cent in just two months. Five months down the road it was down to 4 per cent. Similarly, financial services went from 21 per cent in December 2007 to 5.49 per cent in June 2008 and up to 28.09 per cent in December 2008. One can also, see a similar treatment meted out to stocks, with a number of them making short opportunistic appearances in the portfolio. But rarely does the fund manager take an exposure of more than 5 per cent to a single stock. In fact, this actively-managed fund has the third-highest Sharpe Ratio amongst the tax planning funds, meaning it generates higher returns for every unit of risk taken.

[46]

5.2.5 ICICI PRU TAX PLAN-G 5.2.5.1 Current Stats & Profile

Latest NAV

130.84 (30/04/10)

52-Week High

130.84 (30/04/10)

52-Week Low

67.13 (11/05/09)

Fund Category


Type

Open End

Launch Date

August 1999

Risk Grade

Average

Return Grade

Above Average

Net Assets (Cr)

1,123.08 (31/03/10)

Benchmark

S&P CNX Nifty

5.2.5.2 Trailing Returns As on 30 Apr 2010 Fund

Category

Year to Date

7.52

4.60

1-Month

2.75

2.88

3-Month

10.06

9.28

1-Year

101.35

72.44

3-Year

14.24

10.38

5-Year

22.56

20.96

Return Since Launch

27.08

--


[47]


Top Holdings

As on 31 Mar

Name of Holding

% Net Assets

Reliance Industries

8.24

Infosys Technologies

5.58

Sterlite Industries

4.92

Bharti Airtel

4.80

Cadila Healthcare

4.59

Top 5 Sectors

% Net Asset

As on 31/03/2010

Energy

18.34

Financial

14.33

Technology

11.90

Engineering

9.48

Health Care

8.34


Best (Period)

Worst (Period)

Month

41.05 (03/12/1999 - 04/01/2000)

-38.84 (11/04/2000 - 12/05/2000)

Quarter

85.19 (22/11/1999 - 22/02/2000)

-55.59 (22/02/2000 - 23/05/2000)

158.38 (05/03/2009 - 05/03/2010)

-57.93 (13/03/2000 - 13/03/2001)

Year

[48]


2009

2008

2007

2006

2005

112

-56.03

40.95

26.15

68.8

Rank In Category

1/32

16/29

22/26

17/23

3/20

Category Average

81.79

-55.56

59.25

30.18

50.08

S&P CNX Nifty

75.76

-51.79

54.77

39.83

36.34

Sensex

81.03

-52.45

47.15

46.7

42.33

Fund Return

5.2.5.6 QUATRELY RESULTS

Q1

Q2

Q3

Q4

--

--

--

2010

4.64

2009

-0.91

51.11

25.62

12.71

2008

-28.95

-9.83

-7.51

-25.78

2007

-10.92

13.19

7.89

29.56

2006

18.23

-15.75

23.35

2.68

2005

8.92

13.24

28.84

6.22

2004

-18.36

-3.23

32.76

30.09

2003

-10.13

43.79

40.24

38.14

2002

15.86

1.69

-13.24

10.99

2001

-13.41

0.68

-13.46

24.67

2000

6.97

-34.73

-7.42

-8.09

1999

--

--

-[49]

55.78


Fund Rating

***

Fund Risk Grade

Average

Fund Return Grade

Above Average

Modern Portfolio Statistics

R-Squared

0.87

Alpha

5.60

Beta

0.97

Volatility Measures

Mean

20.09

Standard Deviation

36.95

Sharpe Ratio

0.42

[50]

COMPARISON OF THESE FUNDS

Fund

Sundaram BNP Paribas Tax Saver

Sahara Tax Gain

Magnum Tax Gain

HDFC Taxsaver

Nov-99

Mar-97

Mar-93

Mar-96

4 Star 5 Star Gold

4 Star NR Platinum

4 Star 4 Star Gold

4 Star 4 Star Silver

Below Avg. Above Avg.

Avg. Above Avg.



large-cap

mid-caps

large-cap

large-cap

81.18 14.97 28.74 37.92 23.37

94.06 15.47 25.62 32.14 15.6

94.81 8.5 32.8 44.98 19.1

108.73 9.09 27.71 40.15 29.36

20 / 30 4 / 26 2 / 20 3 / 19 3 / 15

12 / 30 3 / 26 5 / 20 8 / 19 11 / 15

10 / 30 10 / 26 1 / 20 1 / 19 7 / 15

4 / 30 8 / 26 4 / 20 2 /19 1 / 15

66.31 -47.58 68.38 31.97 59.61

82.19 -49.56 64.65 25.64 50.3

79.15 -54.86 55.27 44.95 96.06

91.83 -51.55 39.44 34.12 74.84

--2005

25/32 2 / 29 7 / 26 11 / 23 5 / 20

7 / 32 5 / 29 10 / 26 18 / 23 8 / 20

12 / 32 14 / 29 16 / 26 1 / 23 1 / 20

3 / 32 8 / 29 24 / 26 10 / 23 2 / 20

Top 5 Scrips (%)

21.79%

17.22%

21.44%

24.08%

Corpus (Size) (30 nov)

1213.02

8.59

4961.62

1946.94

Launch Date Value Research Rating (Nov 2009) OM Morningstar Rating (May 09) ET Quartely MF Tracker (Sept' 09) Risk Grade Return Grade

Trailing Returns (30 Nov 09) --1 YR --3YR (CAGR) --5YR (CAGR) --7YR (CAGR) --10YR (CAGR)

Rank --1 YR --3YR --5YR --7YR --10YR

Calender Year Returns --2009 (Till 30 Nov' 09) --2008 --2007 --2006 --2005

Rank --2009 --2008 --2007 --2006

[51]

40

38

70

51

84.08

85.12

94.99

95.34

2.06

2.5

2.5

1.94

20.42

16.01

25.35

21.18

Turnover Ratio

96%

134.10%

30%

29.06%

Sharpe Ratio

0.42 0.96 0.92 6.02

0.44 0.97 0.94 6.52

0.26 0.95 0.96 0.13

0.28 0.94 0.94 0.77

No. of Stocks Equity holdings (%) Expense Ratio P/E Ratio

Beta R-Squared Alpha

[52]

CHAPTER 6

LEARNING EXPERIENCE

[53]

LEARNING EXPERIENCE Studying this project was very useful as it helped me learn several aspects of a stock market and its effects on several industries.











The selection of fund is the most important factor in Mutual Fund Industry. Every Fund cater different needs. Selection must be purely based on individual‘s requirements. Working in Mutual Fund industry is very much complimented by constant watch on stock market. Every move in stock market could affect your money invested in fund Mutual funds are for those people who think of future and can make investment which may lock their money for longer period in order to get better returns. E.g. In case of growth funds money may be locked for upto 10 years. Various aggregate factors and returns rates are very important indicators for the growth of the fund. Besides looking to the past year‘s returns factors such as Mean, Standard Deviation, Beta value are also very important in studying the growth of a particular fund. SBI Mutual Fund itself is a well established company with very experienced Fund managers handling several products of SBI which includes several Equity funds, Debt Funds, Balanced Funds, Exchange trade funds.

[54]

CHAPTER 7

CONCLUSIONS

[55]

CONCLUSION

Since my project study was restricted to 60 days only so I considered taking up just the Analysis of Top ten tax saving ELSS mutual fund in the market. ELSS funds are basically an option where an individual can get Tax exemption over its income by investing in such funds. Under ELSS funds an individual get an exemption of over Rs. 1 Lakh on its income. To review and handle every Mutual fund, there is a Fund Manager appointed. Every Fund manager keeps a thorough watch on the market in order to regulate the money invested in different stocks. This reduces the risk of an investor who has invested in different portfolios. Though investing in mutual funds provides fewer returns as compared to investing in Shares but here risk is reduced as compared to direct investment in stock market. Since the money is blocked for the period of 3 years, its positive aspect as it takes at 3years mutual fund to grow. Above mentioned Funds are all Defensive in nature since there BETA is less than 1, i.e. they maintain a secured and low risk factor assuring low but guaranteed returns. Also basic motive is to get the Tax exemption. Hence low risk profile is maintained. The 2009 downturn took every fund beneath the ground but Indian market having a strong debt base helped these fund to recover even faster with the economy. Mutual Funds are good option for individual having high income and who are looking forward to save their taxes. It is a good option to safeguard yo ur money and helps it grow more. In the end, I would like to say that my experience at SBI Mutual Fund was extraordinary. I experienced and learned certain extra knowledge within my field and fields related to them. Mutual funds are also subject to market. The offer document must be read very carefully by an investor before investing the money.

[56]

CHAPTER 8

BIBLIOGRAPHY

[57]

SBI STUDY Mutual Funds

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