ABSTRACT

This project aims to conduct a comparative analysis of investment opportunities in mutual

funds and equity markets. It explores the performance, risk, and returns associated with
investing in both avenues over a specified period. Using historical data and statistical
methods, the study evaluates factors such as volatility, correlation, and alpha to provide
insights into the suitability of each investment option for different types of investors. The
findings of this research can guide investors in making informed decisions tailored to their
financial goals and risk preferences.
This project delves into the nuanced aspe
cts of investing in mutual funds and equity markets by conducting a thorough comparative
analysis. It involves gathering historical data on the performance of mutual funds and various
equity instruments over a defined time frame.
The analysis encompasses several key metrics such as returns, volatility, correlation with
market indices, and risk-adjusted returns (alpha). These metrics are crucial for understanding
the potential rewards and risks associated with each investment option.
Through statistical methods and financial models, the project aims to quantify the
performance of mutual funds and equity investments and compare them side by side. It will
assess how each type of investment performs in different market conditions and economic
environments.
Furthermore, the study will explore factors such as expense ratios, fund manager expertise,
and diversification benefits in mutual funds, and company fundamentals, market trends, and
sectoral analysis in equity investments.
By synthesizing these findings, the project aims to provide actionable insights for investors to
make informed decisions based on their financial objectives, risk tolerance, and investment
horizon. Ultimately, the goal is to offer a comprehensive understanding of the pros and cons
of investing in mutual funds versus equity markets, empowering investors to optimize their
investment portfolios effectively.
KEY WORDS:
Mutual Funds
Fund Performance
Market Capitalization
Equity Investments
Investment Analysis

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 CHAPTER-1

INTRODUCTION

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1.1 INTRODUCTION:

Investing is an integral part of financial planning, serving as a means for individuals to build
wealth and achieve their long-term financial goals. Among the multitude of investment
avenues available, equity and mutual funds emerge as popular choices due to their potential
for attractive returns and accessibility to a broad range of investors. However, despite sharing
similarities as vehicles for participating in the financial markets, equity investments and
mutual funds possess distinct characteristics that warrant careful consideration by investors.

Equity Investments

Equity investments represent ownership stakes in publicly traded companies, where investors
purchase shares of stock in exchange for a portion of ownership and potential profits. The
allure of equity investments lies in their capacity to deliver substantial returns over time,
driven by factors such as company growth, earnings potential, and overall market
performance. Yet, this potential for high returns is accompanied by higher levels of volatility
and risk compared to other asset classes. Market fluctuations, economic cycles, and
company-specific developments can lead to significant fluctuations in the value of equity
investments, underscoring the importance of diligent research and risk management for
investors in this asset class.

Mutual Fund Investments

Mutual funds function as collective investment vehicles that pool money from multiple
investors to create diversified portfolios of securities, managed by professional fund
managers. Unlike individual equity investments, mutual funds offer investors exposure to a
broader array of assets, including stocks, bonds, and alternative investments, thereby
reducing idiosyncratic risk and enhancing portfolio diversification. Moreover, mutual funds
come in various types, catering to different investment objectives and risk preferences,
ranging from equity funds focused on growth to fixed-income funds emphasizing stability
and income generation. The hands-off approach to portfolio management provided by mutual
funds appeals to investors seeking professional expertise and convenience in managing their
investments.

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1.2 LIMITATIONS TO THE STUDY:

1.Data Availability and Quality: Gathering comprehensive and accurate data for
both equity and mutual funds can be challenging. Mutual fund data, in particular, can be
more difficult to obtain due to the varying reporting standards of different funds and the
unavailability of historical data for some funds.

2.Subjectivity in Analysis: Comparative analysis often involves subjective judgments,

especially when comparing the performance of different investment vehicles. Different
analysts may use different methodologies and criteria for comparison, leading to potentially
biased results.

3.Market Conditions: The performance of both equity and mutual funds can be heavily
influenced by market conditions, economic factors, and geopolitical events. Conducting a
comparative analysis during a period of market volatility may not provide representative
results.

4.Risk Profiles: Equity investments and mutual funds have different risk profiles. Equity
investments are generally riskier and more volatile than mutual funds, which typically
diversify across various assets. Ignoring risk factors or failing to adequately account for risk
differences can skew the comparative analysis.
5.Sample Selection Bias: The selection of specific equity investments and mutual
funds for comparison can introduce bias if the sample is not representative of the broader
market. It's important to carefully select a diverse range of investments to ensure the results
are meaningful.
6.Investor Preferences and Goals: Investors have different preferences, goals, and
risk tolerances, which influence their investment decisions. A comparative analysis may not
fully capture these individual differences and may not be applicable to all investors.

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7.Performance Metrics: Choosing appropriate performance metrics for comparison
can be challenging. Metrics such as return on investment (ROI), volatility, Sharpe ratio, and
maximum drawdown are commonly used, but they may not fully capture the nuances of
different investment strategies.

8.Regulatory Constraints: Regulatory changes or constraints may impact the

comparative analysis, especially if there are changes in tax laws, investment regulations, or
reporting requirements for equity or mutual funds.

9.Time Horizon: The time period chosen for the analysis can significantly impact the
results. Short-term fluctuations may not accurately reflect the long-term performance
potential of either equity or mutual funds.

10.Lack of Control Variables: It can be difficult to control for all relevant variables
that may affect the performance of equity and mutual funds. Factors such as management
fees, fund size, investment style, and market conditions may confound the analysis if not
properly accounted for.

1.3

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1.3 NEED AND IMPORTANCE:

Mutual Funds:

Diversification: Mutual funds pool money from multiple investors to invest in a

diversified portfolio of securities such as stocks, bonds, and other assets. This diversification
helps spread risk and reduce exposure to any single investment.

Accessibility: Mutual funds provide an accessible and affordable way for retail investors
to participate in the financial markets. With relatively low minimum investment
requirements, they allow individuals to invest in a professionally managed portfolio without
needing substantial capital.

Professional Management: Mutual funds are managed by professional fund managers

who have expertise in selecting and managing investments. This expertise can be particularly
beneficial for individual investors who may not have the time or knowledge to research and
manage their investments effectively.

Liquidity: Most mutual funds offer liquidity, allowing investors to buy or sell their units on
any business day at the prevailing net asset value (NAV). This liquidity makes mutual funds a
flexible investment option, enabling investors to access their money relatively quickly if
needed.

Variety of Investment Options: Mutual funds offer a wide range of investment options
catering to different risk profiles, investment objectives, and time horizons. From equity
funds to debt funds, hybrid funds, and specialized sector funds, investors have the flexibility
to choose funds that align with their preferences and goals.

Tax Efficiency: Certain types of mutual funds, such as Equity Linked Savings Schemes
(ELSS), offer tax benefits under Section 80C of the Income Tax Act, making them attractive
options for tax planning and wealth accumulation.

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Equity:

Long-Term Wealth Creation: Equity investments have historically delivered higher

returns compared to other asset classes over the long term. Investing in equities provides an
opportunity for wealth creation and capital appreciation, especially when held for extended
periods to ride out market fluctuations.

Ownership in Companies: When investors buy shares of a company's stock, they

become partial owners of that company. This ownership entitles them to a share of the
company's profits through dividends and potential capital gains as the company grows and
prospers.

Inflation Hedge: Equities have the potential to outpace inflation over time, helping
investors preserve the purchasing power of their wealth and achieve real returns.

Portfolio Diversification: Including equity investments in a diversified portfolio can

help spread risk and reduce overall portfolio volatility. Equities often have low or negative
correlations with other asset classes such as bonds and real estate, making them valuable
diversification tools.

Market Participation: Investing in equities allows individuals to participate directly in

the growth and performance of the economy. As companies expand and innovate,
shareholders benefit from their success through increased stock prices and dividends.

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 1.4 OBJECTIVES:

 To compare average returns of top 5 equity and mutual funds

 To compare equity and mutual funds return schemes in respect of their risk and return
 Analysing pros and cons of investing in mutual funds and equity
 To study the performance of growth schemes of selected mutual funds

NATURE OF DATA AND METHOD OF DATA COLLECTION:

Collection of data is the essential part of the research. The research is based on descriptive
type of research design used in this research project. The sources of data are collected from
the based on secondary data. Data collected through sources like NSE,BSE, and Money
control etc.
DATA COLLECTION:
Secondary data has been used for this research, collected from various research papers. The
study consider the period of 5 years from 2019-2023

TOOLS AND TECHNIQUES:

Statistical tools and techniques used in this study is Alpha, Beta, standard deviation, Sharpe
ratio to measure volatility of returns.

Standard Deviation:
Measures the volatility of returns.
Indicates how much the returns of the fund fluctuate around the average return.
Higher standard deviation implies higher volatility and potentially higher risk.

Beta:
Measures the sensitivity of the fund's returns to movements in the broader market.
A beta greater than 1 indicates the fund is more volatile than the market.
A beta less than 1 suggests lower volatility compared to the market.

Sharpe Ratio:
Assesses the risk-adjusted return of the fund.
Compares the fund's return to the level of risk taken.

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Higher Sharpe ratio indicates better risk-adjusted performance, balancing returns with the
level of risk undertaken.

Alpha:
Measures the excess return of the fund relative to its benchmark index.
Positive alpha suggests the fund has outperformed its benchmark after adjusting for risk.
Negative alpha indicates underperformance compared to the benchmark.

SCOPE OF STUDY:

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BIBLIOGRAPHY

https://shodhgangotri.inflibnet.ac.in/bitstream/20.500.14146/3579/3/03_literature
%20review.pdf

https://www.indmoney.com/mutual-funds/compare/axis-elss-tax-saver-fund-direct-plan-
growth-option-vs-sbi-bluechip-fund-direct-growth

https://economictimes.indiatimes.com/mutual-funds

https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=4587330

https://www.sebi.gov.in/sebi_data/commondocs/siep_h.html

https://www.amfiindia.com/investor-corner/knowledge-center/risks-in-mutual-
funds.html

https://www.adityabirlacapital.com/abc-of-money/history-of-mutual-fund

https://www.morningstar.com/

https://www.google.com/finance/

https://www.morningstar.in/mutualfunds/f00000pdtt/sbi-small-cap-fund-direct-plan-
growth/performance.aspx

https://www.morningstar.in/mutualfunds/f00000sc5y/abc/risk-ratings.aspx

https://www.valueresearchonline.com/

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 CHAPTER-2

LITERATURE REVIEW

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1.DR. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012),
have studied Impact of Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes.
This paper examines the performance of selected mutual fund schemes, that the risk profile of
the aggregate mutual fund universe can be accurately compared by a simple market index that
offers comparative monthly liquidity, returns, systematic & unsystematic risk and complete
fund analysis by using the special reference of Sharpe ratio and Treynor’s ratio.

2. Dr K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014)

conducted a research on Comparative Performance Analysis of Select Indian Mutual Fund
Schemes. This study analyses the performance of Indian owned mutual funds and compares
their performance. The performance of these funds was analysed using a five year NAVs and
portfolio allocation. Findings of the study reveals that, mutual funds out perform naïve
investment. Mutual funds as a medium-to-long term investment option are preferred as a
suitable investment option by investors.

3. DR. Yogesh Kumar Mehta (Feb 2012)

has studied Emerging Scenario of Mutual Funds in India: An Analytical Study of Tax Funds.
The present study is based on selected equity funds of public sector and private sector mutual
fund. Corporate and Institutions who form only 1.16% of the total number of investors
accounts in the MFs industry, contribute a sizeable amount of Rs. 2,87,108.01 crore which is
56.55% of the total net assets in the MF industry. It is also found that MFs did not prefer debt
segment.

4. DR. Surender Kumar Gupta and DR. Sandeep Bansal (Jul 2012)
have done a Comparative Study on Debt Scheme of Mutual Fund of Reliance and Birla
Sunlife. This study provides an overview of the performance of debt scheme of mutual fund
of Reliance, and Birla Sunlife with the help of Sharpe Index after calculating Net Asset
Values and Standard Deviation. This study reveals that returns on Debt Schemes are close to
Benchmark return (Crisil Composite Debt Fund Index: 4.34%) and Risk Free Return: 6%
(average adjusted for last five year).

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5. Prof. V. Vanaja and DR. R. Karrupasamy (2013)

have done a Study on the Performance of select Private Sector Balanced Category Mutual
Fund Schemes in India. This study of performance evaluation would help the investors to
choose the best schemes available and will also help the AUM’s in better portfolio
construction and can rectify the problems of underperforming schemes. The objective of the
study is to evaluate the performance of select Private sector balanced schemes on the basis of
returns and comparison with their bench marks and also to appraise the performance of
different category of funds using risk adjusted measures as suggested by Sharpe, Treynor and
Jensen.

6. E. Priyadarshini and DR.A. Chandra Babu (2011)

have done Prediction of The Net Asset Values of Indian Mutual Funds Using Auto-
Regressive Integrated Moving Average (Arima). In this paper, some of the mutual funds in
India had been moulded using Box-Jenkins autoregressive integrated moving average
(ARIMA) methodology. Validity of the models was tested using standard statistical
techniques and the future NAV values of the mutual funds have been forecasted.

7.DR. Ranjit Singh, DR. Anurag Singh and DR. H. Ramananda Singh
(August 2011)

have done research on Positioning of Mutual Funds among Small Town and Sub-Urban
Investors. In the recent past the significant proportion of the investment of the urban investor
is being attracted by the mutual funds. This has led to the saturation of the market in the
urban areas. In order to increase their investor base, the mutual fund companies are exploring
the opportunities in the small towns and sub-urban areas. But marketing the mutual funds in
these areas requires the positioning of the products in the minds of the investors in a different
way. The product has to be acceptable to the investors, it should be affordable to the
investors, it should be made available to them and at the same time the investors should be
aware of it. The present paper deals with all these issues. It measures the degree of influence

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on acceptability, affordability, availability and awareness among the small town and sub-
urban investors on their investment decisions.

8.Prof. Kalpesh P Prajapati and Prof. Mahesh K Patel (Jul 2012)

have done a Comparative Study On Performance Evaluation of Mutual Fund Schemes Of

Indian Companies. In this paper the performance evaluation of Indian mutual funds is carried
out through relative performance index, risk-return analysis, Treynor's ratio, Sharp's ratio,
Sharp's measure, Jensen's measure, and Fama's measure. The data used is daily closing
NAVs. The source of data is website of Association of Mutual Funds in India (AMFI). The
study period is 1st January 2007 to 31st December, 2011. The results of performance
measures suggest that most of the mutual fund have given positive return during 2007 to 2011

9.C. Srinivas Yadav and Hemanth N C (Feb 2014)

, have studied Performance of Selected Equity Growth Mutual Funds in India: An Empirical
Study during 1st June 2010 To 31st May 2013. The study evaluates performance of selected
growth equity funds in India, carried out using portfolio performance evaluation techniques
such as Sharpe and Treynor measure. S&P CNX NIFTY has been taken as the benchmark.
The study conducted with 15 equity growth Schemes (NAV ) were chosen from top 10 AMCs
( based on AUM) for the period 1st June 2010 to 31st may 2013(3 years).

10.Rashmi Sharma and N. K. Pandya (2013)

have done an overview of Investing in Mutual Fund. In this paper, structure of mutual fund,
comparison between investments in mutual fund and other investment options and calculation
of NAV etc. have been considered. In this paper, the impacts of various demographic factors
on investors’ attitude towards mutual fund have been studied. For measuring various
phenomena and analysing the collected data effectively and efficiently for drawing sound

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conclusions, drawing pie charts has been used and for analysing the various factors
responsible for investment in mutual funds.

11.Rahul Singal, Anuradha Garg and Dr Sanjay Singla ( 2013)

have done Performance Appraisal of Growth Mutual Fund. The paper examines the
performance of 25 Growth Mutual Fund Schemes. Over the time period Jan 2004 to Dec
2008. For this purpose three techniques are used (I) Beta (II) Sharpe Ratio (III) Treynor
Ratio. Rank is given according to result drawn from this scheme and comparison is also made
between results drawn from different schemes and normally the different are insignificant.

12.Dhimen Jani and Dr. Rajeev Jain (Dec 2013)

have studied Role of Mutual Funds in Indian Financial System as a Key Resource Mobiliser.
This paper attempts to identify, the relationship between AUM mobilized by mutual fund
companies and GDP growth of the India. To find out correlation coefficient Kendall’s tau b
and spearman’s rho correlation ship was applied, the data range was selected from 1998-99 to
2009-10.

13.Dr. R. Narayanasamy and V. Rathnamani (Apr 2013)

have done Performance Evaluation of Equity Mutual Funds (On Selected Equity Large Cap
Funds). This study, basically, deals with the equity mutual funds that are offered for
investment by the various fund houses in India. This study mainly focused on the
performance of selected equity large cap mutual fund schemes in terms of risk- return
relationship. The main objectives of this research work are to analysis financial performance
of selected mutual fund schemes through the statistical parameters such as (alpha, beta,
standard deviation, r-squared, Sharpe ratio)

14.Ashok Khurana and Kavita Panjwani (Nov, 2010)

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have analysed Hybrid Mutual Funds. Mutual fund returns can be compared using Arithmetic
mean & Compounded Annual Growth Rate. Risk can be analyzed by finding out Standard
Deviation, Beta while performance analysis is based on Risk-Return adjustment. Key ratios
like Sharpe ratio and Treynor ratio are used for Risk-Return analysis. Funds are compared
with a benchmark, industry average, and analysis of volatility and return per unit to find out
how well they are performing with respect to the market Value at Risk analysis can be done to
find out the maximum possible losses in a month given the investor had made an investment
in that month. Based on the quantitative study conducted company a fund is chosen as the
best fund in the Balance fund growth schemes.

15.D. Rajasekar (Sep 2013)

has done a Study on Investor`s Preference Towards Mutual Funds With Reference To
Reliance Private Limited, Chennai - An Empirical Analysis. The data was analyzed using the
statistical tools like percentage analysis, chi square, weighted average. The report was
concluded with findings and suggestions and summary. From the findings, it was inferred
overall that the investor are highly concerned about safety and growth and liquidity of
investments. Most of the respondents are highly satisfied with the benefits and the service
rendered by the Reliance mutual funds.

16.Mamta Shah (Dec 2012)

has done research on Marketing Practices of Mutual Funds. Development of an economy

necessarily depends upon its financial system and the rate of new capital formation which can
be achieved by mobilizing savings and adopting an investment pattern, be its self-financing
(i.e. direct or indirect) where financial intermediaries like banks, insurance and other
financial companies come in the picture and mediate between savers and borrowers of funds.
In the same way there are different types of investors and each category of investors differs in
its objectives and hence it is imperative for investment managers to choose an appropriate
investment policy for the group they are dealing with, further managing the investment is a
dynamic and an ongoing process.

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17.Rajiv G. Sharma (Aug 2013)

has done a Comparative Study on Public and Private Sector Mutual Funds in India. The
study at first tests whether there is any relation between demographic profile of the investor
and selection of mutual fund alternative from among public sector and private sector. For the
purpose of analysis perceptions of selected investors from public and private sector mutual
funds are taken into consideration. The major factors influencing the investors of public and
private sectors mutual funds are identified. The factors under consideration to compare
between perceptions of public and private sector mutual fund investors are Liquidity,
Security, Flexibility, Management fee, Service Quality, Transparency, Returns and Tax
benefits

18.Dr.S. Vasantha, Uma Maheswari and K.Subashini, (Sep 2013)

Evaluating the Performance of some selected open ended equity diversified Mutual fund in
Indian mutual fund Industry. The main objective of this research paper is to evaluate the
performance of selective open ended equity diversified Mutual fund in the Indian equity
market. For the purpose of conducting this study HDFC top 200 fund(g).Reliance top
200(g).ICICI Prudential top 200(g). Canara Robeco equity diversified fund(g).Birla Sun Life
frontline equity (g) mutual funds have been studied over the period of 60 months data which
is from January 2008 to December 2012.The analysis has been made on the basis of Sharpe
ratio, Treynor ratio and Jenson .

19.Vibha Lamba (Feb 2014)

has done an analysis of Portfolio Management in India. The purpose of present study is to
analyse the scope and importance of portfolio management in India. This paper also focuses
on the types and steps of portfolio management which a portfolio manager should take to
provide maximum returns and minimum risk to his clients for their investments.

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20.Dr. N. K. Sathya Pal Sharma and Ravikumar. R (2013)

have done the Analysis of the Risk and Return Relationship of Equity Based Mutual Fund in
India. In this paper an attempt has been made to analyse the performance of equity based
mutual funds. A total of 15 schemes offered by 2 private sector companies and 2 public sector
companies, have been studied over the period April 1999 to April 2013 (15years). The
analysis has been made using the risk-return relationship and Capital Asset Pricing model
(CAPM). Abhishek Kumar (October 2012), have studied Trend in Behavioural Finance.

21.Ms. K. HemaDivya (Apr 2012)

has done A Comparative study on Evaluation of Selected Mutual Funds in India. Mutual
Funds industry has grown up by leaps & bounds, particularly during the last 2 decades of the
20th century. Proper assessment of fund performance would facilitate the peer comparison
among investment managers, help average investors successfully identify skilled managers.
Further the growing competition in the market forces the fund managers to work hard to
satisfy investors & management. Therefore regular performance evaluation of mutual funds is
essential for investors and fund managers also. The present study is confined to evaluate the
performance of mutual funds on the basis of yearly returns compared with BSE Indices.

22.Deepika Sharma, Poonam loothra and Ashish Sharma (May 2011)

Comparative Study of Selected Equity diversified Mutual Fund Schemes. The present
investigation is aimed to examine the performance of safest investment instrument in the
security market in the eyes of investors i.e., mutual funds by specially focusing on equity-
diversified schemes. Eight mutual fund schemes have been selected for this purpose. The
examination is achieved by assessing various financial tests like Sharpe Ratio, Standard
Deviation and Alpha.

23.Dr. Nishi Sharma (Aug 2012)

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 has done research on Indian Investor’s Perception towards Mutual Funds. This paper
attempts to investigate the reasons responsible for lesser recognition of mutual fund as a
prime investment option. It examines the investor’s perception with reference to distinct
features provided by mutual fund companies to attract them for investing in specific
funds/schemes. The study uses principal component analysis as a tool for factor reduction.
The paper explored three factors named as fund/scheme related attributes, monetary benefits
and sponsor’s related attributes (having respectively six, four and four variables) which may
be offered to investors for securing their patronage. The results are expected to provide
fruitful insight to mutual fund companies for tailoring their offers suitable to cater the needs
and expectations of Indian investors.

24.C. Vijendra and D. Sakriya, (June 2013)

have done a Study of Investor Behaviour regarding Investment Decisions in Mutual Funds. A
survey was conducted among 384 mutual funds investors from the twin cities of Hyderabad
& Secundrabad to study the factors influencing the fund/scheme selection behaviour of these
investors. It is hoped that this survey will underpin the AMCs with regards to planning and
implementation of designing, marketing, and selling of innovative products.

25.Ms. Archana Patro and Prof. A. Kanagaraj (Jun 2012)

have done Exploring the Herding Behaviour in Indian Mutual Fund Industry. The study
analyses the trading activity of Indian mutual funds and investigates whether Indian mutual
fund managers are engaged in herding behaviour. Results are compared with previous studies
in mature as well as developing markets to determine the level of maturity of the Indian
capital market. Measure of herding developed by Lakonishok et al. (1992) has been us.

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 CHAPTER-4

THEORITICAL FRAME WORK

SEBI( SECURITY BOARD OF EXCHANGE)

Establishment Of SEBI

The Securities and Exchange Board of India was constituted as a non-statutory body on April
12, 1988 through a resolution of the Government of India.

The Securities and Exchange Board of India was established as a statutory body in the year
1992 and the provisions of the Securities and Exchange Board of India Act, 1992 (15 of
1992) came into force on January 30, 1992

Reasons for the Establishment of SEBI

During the fall of the 1970s and the rise of the 1980s, the people of India were preferring to
work in the Capital Market as the market was trending. Without any authority, problems like
unofficial private placements, the rigging of prices, unofficial self-styled merchant bankers
started violating the rules and regulations of the stock exchange which caused delays in the
delivery of shares.

The Government felt an immediate need to establish a regulatory body to regulate its working
and to find solutions for all the problems the market was going through, as the people were
losing interest in the market. This led to the establishment of the Security and Exchange
Board of India.

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 Purpose and Role of SEBI

SEBI helps in creating a healthy environment to facilitate an effective mobilization between

the market participants and investors. It helps in locating the resources with the help of the
securities market. SEBI establish rules and regulations, policy framework and infrastructure
to meet the needs of the market.

The financial market majorly comprises of three groups:

The Issuer of Securities

Issuers are the group that works in the corporate department to easily raise funds from the
various sources of the market. So, SEBI helps the issuers by providing them a healthy and
open environment to work efficiently.

Investors

The investors are the soul of the market as they keep the market alive by providing accurate
supplies, correct information, and protection to the people on a daily basis. SEBI helps
investors by creating a malpractice free environment to attract and protect the money of the
people who invested in the market.

Financial Intermediaries

The intermediaries are the people who act as middlemen between the issuers and the investors.
SEBI helps in creating a competitive professional market which gives a better service to the
issuers and the investors. They also provide efficient infrastructure and secured financial
transactions.

Organizational Structure of SEBI

The members of the Security and Exchange Board of India are:

 The Chairman who is appointed by the Union Government of India.

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 Two members who are selected from the officers of the Union Finance Ministry.

 One member who is appointed from the Reserve Bank of India.

 The other five members are appointed by the Union Government of India, out of five three must
be whole-time members.
Dr. S.A. Dave was the first Chairman of SEBI who was appointed on 10th April 1988. Ajay
Tyagi is the present Chairman appointed on 10th February 2017 replacing U K Sinha.

Functions of SEBI

SEBI basically protects the interest of the investors in the security market, promotes the
development of the security market and regulates the business. The functions of the Security and
Exchange Board of India can primarily be categorized into three parts:

 Protective Function

Protective functions are used to protect the interest of investors and other financial participants.
These functions are:

 Prevent Insider Trading: When the people working in the market like director, promoters or
employees working in the company starts to buy or sell the securities because they have access to
the confidential price which results in affecting the price of the security is known as insider
trading. SEBI restricted companies to buy their own shares from the secondary market and SEBI
also regulates regular check-ups to prevent insider trading and avoid malpractices.

 Checks price rigging: The malpractices which create unreasonable fluctuations in the price of the
securities with the help of increasing or decreasing the market price of stocks which results in an
immense loss for the investors or traders are known as price rigging. To prevent price rigging,
SEBI keeps active surveillance on the factors which can promote price rigging.

 Promotes fair trade practices: SEBI established rules and regulations and a certain code of
conduct in the securities market to restrict fraudulent and unfair trade practices.

 Providing awareness/financial education for investors: SEBI conducts seminars both online and
offline to educate the investors about insights into the financial market and money management.

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 Regulatory Function

Regulatory functions are generally used to check the functioning of the financial business in the
market. They establish rules to regulate the financial intermediaries and corporates for the
efficiency of the market. These functions are:

 SEBI designed guidelines and code of conduct for efficient working of financial intermediaries
and corporate.

 Established rules for taking over a company.

 Conducts regular inquiries and audits of stock exchanges.

 Regulates the process of mutual funds.

 Registration of brokers, sub-brokers, and merchant bankers is controlled by SEBI.

 Levying of fees is regulated by SEBI.

 Restrictions on private placement.

 Development Function

The development functions are the steps taken by SEBI to improve the security of the market
through technology. The functions are:

 By providing training sessions to the intermediaries of the market.

 By promoting fair trading and restrictions on malpractices of any kind.

 By introducing the DEMAT format.

 By promoting self-regulating organizations.

 By introducing online trading through registered stock brokers.

 By providing discount brokerage.

Objectives of SEBI

The objectives of SEBI are:

23
 Protection of investors: The primary objective of SEBI is to protect the rights and interests of the
people in the stock market by guiding them to a healthy environment and protecting the money
involved in the market.

 Prevention of malpractices: The main objective for the formation of SEBI was to prevent fraud
and malpractices related to trading and to regulate the activities of the stock exchange.

 Promoting fair and proper functioning: SEBI was established to maintain the functioning of the
capital market and to promote functioning of the stock exchange. They are ordered to keep eyes
on the activities of the financial intermediaries and regulate the securities industry efficiently.

 Establishing Balance: SEBI has to maintain a balance between the statutory regulation and self-
regulation of the securities industry.

 Establishing a code of conduct: SEBI is required to develop and regulate a code of conduct to
avoid frauds and malpractices caused by intermediaries such as brokers, underwriters and other
people.

Features of SEBI

Sebi is an organization that is responsible for maintaining an environment that is free from
malpractices to restore the confidence of the general public who invest their hard-earned money
in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI keeps an
eye on all the books of accounts related to the stock exchange and financial intermediaries to
check their irregularities. The features of the Security and Exchange Board of India are given
below:

 Quasi-Judicial

SEBI is allowed to conduct hearings and can pass judgments on unethical cases and fraudulent
trade practices. This feature of SEBI helps to protect transparency, accountability, reliability, and
fairness in the capital market.

 Quasi-Legislative

SEBI is allowed to draft legislatures with respect to the capital market. SEBI drafts rules and
regulations to protect the interests of the investors. For eg: SEBI LODR or Listing Obligation and
Disclosure Requirements. This helps in consolidating and streamlining the provisions of existing

24
 listing agreements for several segments of the financial market like equity shares. This helps in
protecting the market from malpractices and fraudulent trading activities happening at the bay.

 Quasi-Executive

SEBI covers the implementation of the legislation. They are allowed to file a complaint against
any person who violates their rules and regulations. They also have the power to inspect all the

books and records to check for wrongdoings.

SEBI Act
The Parliament established the Securities and Exchange Board of India Act,1992 or SEBI Act,
1992 to regulate and develop the securities market in India. It was further amended to meet the
changes in the developing requirements of the securities market.

Features and Regulations of the Act

Sebi is an organization that is responsible for maintaining an environment that is free from
malpractices to restore the confidence of the general public who invest their hard-earned
money in the market. SEBI controls the bylaws of every stock exchange in the country. SEBI
keeps an eye on all the books of accounts related to the stock exchange and financial
intermediaries to check their irregularities. SEBI Act defines and gives powers to the body.
The SEBI Act is divided into seven chapters that provide the rules and regulations associated
with the capital market.

 The First Chapter is an introductory or preliminary chapter of the Act which provides the
title, extent, and definitions of the terms used in the Act.

 The Second Chapter is the establishment of the Securities and Exchange Board of India. This
chapter deals with management, employees, meetings, and the office of the board. This
provides the necessary details of the board established by this Act.

 The Third Chapter is the transfer of assets, liabilities, etc. of the existing Security and
Exchange Board to the Board, which means it declares the provisions to be used to transfer
the assets in the case of the formation of a new board.

25
 The Fourth Chapter is the powers and functions of the Board. This chapter helps in
mentioning the powers and functions of the board which are given by the Act. The Board is
bound to follow the instructions given by the act and is not allowed to exploit their powers.

 The Fifth Chapter is the Registration Certificate. It deals with the documentation involved in
the registration of the stockbrokers, sub-brokers, and share transfer agents, etc.

 The Sixth Chapter is finance, accounts, and audits. This chapter controls all the grants given
by the Central Government, funds and accounts, to ensure the productivity of the board as
well as the capital market.

 The Seventh Chapter miscellaneous, which discusses other topics that are relevant to the
board and the market. To help the board from avoiding mistakes.
The laws and regulations of the Security and Exchange Board of India are very important and
must be followed seriously by the people who are entitled or registered with the stock
exchange and capital market of India. The SEBI Act, 1992 is the supreme power of the
securities market of India and has the authority to make laws and regulations. And these rules
and regulations are applied to all the listed companies, their board of directors, key
managerial personnel of such companies, investors, and all the other companies who are
associated with the security market sector.

The most valuable regulations promoted by SEBI are:

 Regulations on the Issue of Capital and Disclosure Requirements, 2009

These regulations helped with the issues related to capital and disclosure by improving the
trading in securities of the listed companies and investors in India.

 Regulations on Substantial Acquisition of Shares and Takeovers, 2011

These regulations of SEBI were established to solve difficulties related to the legal and fair
acquisition of shares and takeovers.

26
 Regulations on Prohibition of Insider Training, 2015

These regulations introduced new provisions for prohibiting the insider training of securities and
tries to protect the laws for lawful and fair trading in India.

 The Equity Listing Agreement

These provisions were a reminder of the clauses which mainly dealt with the mandatory
compliances to be made between the stock exchange of India and the listed companies.

SEBI helped the market participants by consolidating their settlement functions at a single
clearing meeting and by reducing the effective trading cost for investors. The board improved the
market by allowing the contributions of the foreign participants through certain background
checks before entering the Indian Market.

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HISTORY OF MUTUAL FUNDS

Mutual funds have a long history, dating back to 1963. It happened when the Unit Trust of
India (UTI), the nation's first mutual fund, was introduced by the Indian government. It was a
collaborative initiative by the Government of India and the Reserve Bank of India. UTI was
founded to encourage modest investors to participate in the stock market, which was
previously thought to be solely the domain of wealthy individuals and institutions. It was
established in order to promote saving, investing, and participation in the revenue, profits,
and gains generated by the Corporation through the purchase, holding, management, and sale
of securities.

The Mutual Fund Industry has expanded considerably over the past few years. In those days,
UTI dominated the market in the nation, but in recent years, the Mutual Fund Industry has
experienced substantial growth. The development of mutual funds in India can be roughly
divided into the following five phases:

FIRST PHASE OF MF - 1964-1987

In India, the first mutual fund company, UTI, was established in 1963 by a parliamentary act,
and it operated under the administrative and regulatory oversight of the Reserve Bank of
India. (RBI). UTI was cut off from the RBI in 1978, and the Industrial Development Bank of
India (IDBI) replaced the RBI as the body in charge of regulation and administration. UTI
had Rs. 6,700 crores in assets under management by the end of 1988. (AUM).

SECOND PHASE OF MF - 1987-1993

This was the phase of entry of public sector mutual funds. Public sector banks, Life Insurance
Corporation of India (LIC), and General Insurance Corporation of India (GIC) established
mutual funds in the public sector, and they began operating in 1987. The first "non-UTI"
mutual fund was created in June 1987 by SBI Mutual Fund, which was followed by Canbank
Mutual Fund in December 1987, Punjab National Bank Mutual Fund in August 1989, Indian

28
Bank Mutual Fund in November 1989, Bank of India in June 1990, and Bank of Baroda
Mutual Fund in Oct. 1992.

While LIC launched its mutual fund in June 1989, GIC formed its mutual fund nearly a year
and a half later in December 1990. Assets under management (AUM) in the Mutual Fund
sector totalled Rs. 47,004 crores at the end of 1993. It was discovered that the second stage
not only provided the framework for industry growth but also inspired investors to put more
of their money into mutual funds. As a result, India's mutual fund market was anticipated to
grow more rapidly.

THIRD PHASE OF MF - 1993-2003

This was the phase in which the Private sector entered the Mutual Funds market. The
foundation of SEBI in April 1992 to protect the interests of investors in the securities market
and to support the development and regulation of the securities market increased the
prominence of the Indian securities industry. The first set of SEBI Mutual Fund Regulations,
which apply to all mutual funds except for UTI, came into effect in 1993. The first private
sector Mutual Fund registered in July 1993 was the former Kothari Pioneer, which was later
since amalgamated with Franklin Templeton Mutual Fund. A new era in the Indian Mutual
Fund business began with the arrival of private sector funds in 1993, providing Indian
investors with a greater selection of Mutual Fund products.

The original SEBI Mutual Fund regulations were updated in 1996 and replaced with a
comprehensive set of regulations known as the SEBI (Mutual Fund) Regulations, 1996,
which are still in effect today. Over the years, more and more international
sponsorsestablished mutual funds in India, increasing the number of Mutual Funds. During
this decade, the Mutual Fund business also saw several mergers and acquisitions. There were
33 Mutual Funds as of the end of January 2003, with a combined Assets under management
(AUM) of Rs. 1,21,805 crores, of which UTI alone had an AUM of Rs. 44,541 crores.

FOURTH PHASE OF MF - SINCE FEBRUARY 2003 – APRIL 2014

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After the Unit Trust of India Act of 1963 was repealed in February 2003, UTI was split into two
distinct organizations: the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI Mutual
Fund, which operates in accordance with the SEBI Mutual Fund Regulations. The Mutual Fund
business entered its fourth phase of consolidation with the division of the former UTI and several
mergers among various private sector funds. Securities markets all around the world collapsed after
the global financial crisis in 2009, and India's market also suffered.

Majority of investors who had entered the capital market at its peak had lost money, and their
confidence in Mutual Fund products had been severely undermined. As a result of the global financial
crisis' aftermath and SEBI's elimination of Entry Load, the Indian Mutual Fund Industry suffered
more harm than it already had. The industry spent more than two years trying to rebuild and transform
itself in order to maintain its economic viability, as evidenced by the slow growth in Mutual Fund
Industry Assets under management (AUM) from 2010 to 2013.

FIFTH (CURRENT) PHASE OF MF - SINCE MAY 2014

To "re-energize" the Indian mutual fund industry and increase MFs' penetration, SEBI
introduced a number of ambitious initiatives in September 2012. This was done in awareness
of the low penetration of Mutual Fund, particularly in tier II and tier III cities, and the need
for a better alignment of the interests of various stakeholders. After the worldwide meltdown,
things began to turn around positively thanks to the measures, and things dramatically got
better once the new government was established in the centre. AUM and the number of
investor folios have both increased steadily since May 2014, and the industry has seen sustain
findings, investors can make knowledgeable choices depending on their investing objectives and risk
tolerance.

PARTIES INVOLVED IN MUTUAL FUNDS:

It is the governing authority of stock market.

SEBI Mutual funds legal framework is regulated by
SEBIs guidelines.
Investor is another speculator (who takes on
INVESTORS high risks for high rewards) but one whose
primary objective are to safeguard the principle
investment, a steady income and capital

30
 appreciation.
The mutual fund has been formed as a public
trust and trustees manage the trust. They are

TRUSTEES primarily accountable for protecting the interest

of mutual fund investors.
SEBI approved asset management company
manage the fund by making investment in
various types of securities. It manages the
investment portfolios of the schemes and
ASSET MANAGEMENT COMPANY
handles various other routine activities
incidental to the mutual fund business. Its
income comes from the management fees it
charges for schemes it manages
They earn commission for bringing in investors
DISTRIBUTORS into the schemes of mutual fund. This
commission is an expense for the schemes.
An investor holding in mutual fund schemes is
REGISTERS typically followed by the schemes RTA
(Registrar and transfer Agent). Some AMC‟s
prefer to handle it in house.
As the name suggests, a custodian of the
securities preserves the custody of the securities
CUSTODIAN\DEPOSITORY in which the scheme invests. Therefore, for an
investment transaction of mutual fund,
custodian receives or gives delivery

INTRODUCTION TO MUTUAL FUNDS

MUTUAL FUNDS:

A mutual fund is a collective investment vehicle that collects & pools money from a number
of investors and invests the same in equities, bonds, government securities, money market
instruments.

The money collected in mutual fund scheme is invested by professional fund managers in
stocks and bonds etc. in line with a scheme’s investment objective. The income / gains

31
 generated from this collective investment scheme are distributed proportionately amongst the
investors, after deducting applicable expenses and levies, by calculating a scheme’s “Net
Asset Value” or NAV. In return, mutual fund charges a small fee.

In short, mutual fund is a collective pool of money contributed by several investors and
managed by a professional Fund Manager.

Mutual Funds in India are established in the form of a Trust under Indian Trust Act, 1882, in
accordance with SEBI (Mutual Funds) Regulations, 1996.

The fees and expenses charged by the mutual funds to manage a scheme are regulated and are
subject to the limits specified by SEBI.

WORKING OF MUTUAL FUNDS:

One should avoid the temptation to review the fund's performance each time the market falls
or jumps up significantly. For an actively-managed equity scheme, one must have patience
and allow reasonable time - between 18 and 24 months - for the fund to generate returns in
the portfolio.

When you invest in a mutual fund, you are pooling your money with many other investors.
Mutual fund issues “Units” against the amount invested at the prevailing NAV. Returns from
a mutual fund may include income distributions to investors out of dividends, interest, capital
gains or other income earned by the mutual fund. You can also have capital gains (or losses)
if you sell the mutual fund units for more (or less) than the amount you invested.

Mutual funds are ideal for investors who –

a. lack the knowledge or skill / experience of investing in stock markets directly.

b. want to grow their wealth, but do not have the inclination or time to research the stock
market.

c. wish to invest only small amounts.

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 REASOM FOR INVESTING IN MUTUAL FUNDS:
As investment goals vary from person to person – post-retirement expenses, money for
children’s education or marriage, house purchase, etc. – the investment products required to
achieve these goals too vary. Mutual funds provide certain distinct advantages over investing
in individual securities. Mutual funds offer multiple choices for investment across equity
shares, corporate bonds, government securities, and money market instruments, providing an
excellent avenue for retail investors to participate and benefit from the uptrends in capital
markets. The main advantages are that you can invest in a variety of securities for a relatively
low cost and leave the investment decisions to a professional manager.

TYPES OF MUTUAL FUND SCHEMES

MUTUAL SCHEME CLASSIFICATION FUND
Mutual funds come in many varieties, designed to meet different investor goals. Mutual funds
can be broadly classified based on –

1. Organisation Structure – Open ended, Close ended, Interval

2. Management of Portfolio – Actively or Passively

3. Investment Objective – Growth, Income, Liquidity

4. Underlying Portfolio – Equity, Debt, Hybrid, Money market instruments, Multi Asset

5. Thematic / solution oriented – Tax saving, Retirement benefit, Child welfare, Arbitrage

6. Exchange Traded Funds

7. Overseas funds

8. Fund of funds

SCHEME CLASSIFICATION BY ORGANIZATION STRUCTURE

• Open-ended schemes are perpetual, and open for subscription and repurchase on a
continuous basis on all business days at the current NAV.

• Close-ended schemes have a fixed maturity date. The units are issued at the time of the
initial offer and redeemed only on maturity. The units of close-ended schemes are
mandatorily listed to provide exit route before maturity and can be sold/traded on the stock
exchanges.

33
 • Interval schemes allow purchase and redemption during specified transaction periods
(intervals). The transaction period has to be for a minimum of 2 days and there should be at
least a 15-day gap between two transaction periods. The units of interval schemes are also
mandatorily listed on the stock exchanges.

SCHEME CLASSIFICATION BY PORTFOLIO MANAGEMENT

Active Funds
In an Active Fund, the Fund Manager is ‘Active’ in deciding whether to Buy, Hold, or Sell
the underlying securities and in stock selection. Active funds adopt different strategies and
styles to create and manage the portfolio.

 The investment strategy and style are described upfront in the Scheme Information document
(offer document)

 Active funds expect to generate better returns (alpha) than the benchmark index.

 The risk and return in the fund will depend upon the strategy adopted.

 Active funds implement strategies to ‘select’ the stocks for the portfolio.

Passive Funds
Passive Funds hold a portfolio that replicates a stated Index or Benchmark e.g. –

 Index Funds

 Exchange Traded Funds (ETFs)

In a Passive Fund, the fund manager has a passive role, as the stock selection / Buy, Hold,
Sell decision is driven by the Benchmark Index and the fund manager / dealer merely needs
to replicate the same with minimal tracking error.

ACTIVE V/S PASSIVE FUNDS

Active Fund –

 Rely on professional fund managers who manage investments.

 Aim to outperform Benchmark Index

34
 Suited for investors who wish to take advantage of fund managers' alpha generation potential.

Passive Funds –

 Investment holdings mirror and closely track a benchmark index, e.g., Index Funds or
Exchange Traded Funds (ETFs)

 Suited for investors who want to allocate exactly as per market index.

 Lower Expense ratio hence lower costs to investors and better liquidity

CLASSIFICATION BY INVESTMENT OBJECTIVES

Mutual funds offer products that cater to the different investment objectives of the investors
such as –

a. Capital Appreciation (Growth)

b. Capital Preservation

c. Regular Income

d. Liquidity

e. Tax-Saving

Mutual funds also offer investment plans, such as Growth and Dividend options, to help tailor
the investment to the investors’ needs.

GROWTH FUNDS

 Growth Funds are schemes that are designed to provide capital appreciation.

 Primarily invest in growth oriented assets, such as equity

 Investment in growth-oriented funds require a medium to long-term investment horizon.

 Historically, Equity as an asset class has outperformed most other kind of investments held
over the long term. However, returns from Growth funds tend to be volatile over the short-
term since the prices of the underlying equity shares may change.

 Hence investors must be able to take volatility in the returns in the short-term.

INCOME FUNDS

 The objective of Income Funds is to provide regular and steady income to investors.

35
 Income funds invest in fixed income securities such as Corporate Bonds, Debentures and
Government securities.

 The fund’s return is from the interest income earned on these investments as well as capital
gains from any change in the value of the securities.

 The fund will distribute the income provided the portfolio generates the required returns.
There is no guarantee of income.

 The returns will depend upon the tenor and credit quality of the securities held.

LIQUID / OVERNIGHT /MONEY MARKET MUTUAL FUNDS

 Liquid Schemes, Overnight Funds and Money market mutual fund are investment options for
investors seeking liquidity and principal protection, with commensurate returns.
– The funds invest in money market instruments* with maturities not exceeding 91 days.
– The return from the funds will depend upon the short-term interest rate prevalent in the
market.

 These are ideal for investors who wish to park their surplus funds for short periods.
– Investors who use these funds for longer holding periods may be sacrificing better returns
possible from products suitable for a longer holding period.

* Money Market Instruments includes commercial papers, commercial bills, treasury bills,
Government securities having an unexpired maturity up to one year, call or notice money,
certificate of deposit, usance bills, and any other like instruments as specified by the Reserve
Bank of India from time to time.

CLASSIFICATION BY INVESTMENT PORTFOLIO

 Mutual fund products can be classified based on their underlying portfolio composition
– The first level of categorization will be on the basis of the asset class the fund invests in,
such as equity / debt / money market instruments or gold.
– The second level of categorization is on the basis of strategies and styles used to create the
portfolio, such as, Income fund, Dynamic Bond Fund, Infrastructure fund, Large-cap/Mid-
cap/Small-cap Equity fund, Value fund, etc.
– The portfolio composition flows out of the investment objectives of the scheme.

36
 RISK FACTORS
STANDARD RISK FACTORS

 Mutual Fund Schemes are not guaranteed or assured return products.

 Investment in Mutual Fund Units involves investment risks such as trading volumes,
settlement risk, liquidity risk, default risk including the possible loss of principal.

 As the price / value / interest rates of the securities in which the Scheme invests fluctuates,
the value of investment in a mutual fund Scheme may go up or down.

 In addition to the factors that affect the value of individual investments in the Scheme, the
NAV of the Scheme may fluctuate with movements in the broader equity and bond markets
and may be influenced by factors affecting capital and money markets in general, such as, but
not limited to, changes in interest rates, currency exchange rates, changes in Government
policies, taxation, political, economic or other developments and increased volatility in the
stock and bond markets.

 Past performance does not guarantee future performance of any Mutual Fund Scheme.

SPECIFIC RISK FACTORS

RISKS ASSOCIATED WITH INVESTMENTS IN EQUITIES
Risk of losing money:
Investments in equity and equity related instruments involve a degree of risk and investors
should not invest in the equity schemes unless they can afford to take the risk of possible loss
of principal.

Price Risk:
Equity shares and equity related instruments are volatile and prone to price fluctuations on a
daily basis.

Liquidity Risk for listed securities:

The liquidity of investments made in the equities may be restricted by trading volumes and
settlement periods. Settlement periods may be extended significantly by unforeseen
circumstances. While securities that are listed on the stock exchange carry lower liquidity
risk, the ability to sell these investments is limited by the overall trading volume on the stock
exchanges. The inability of a mutual fund to sell securities held in the portfolio could result in
potential losses to the scheme, should there be a subsequent decline in the value of securities

37
held in the scheme portfolio and may thus lead to the fund incurring losses till the security is
finally sold.

Event Risk:
Price risk due to company or sector specific event.

RISKS ASSOCIATED WITH INVESTMENT IN DEBT SECURITIES AND MONEY

MARKET INSTRUMENTS
Debt Securities are subject to the risk of an issuer’s inability to meet principal and interest
payments on the obligation (Credit Risk) on the due date(s) and may also be subject to price
volatility due to such factors as interest rate sensitivity, market perception of the
creditworthiness of the issuer and general market liquidity (Market Risk).

The timing of transactions in debt obligations, which will often depend on the timing of the
Purchases and Redemptions in the Scheme, may result in capital appreciation or depreciation
because the value of debt obligations generally varies inversely with the prevailing interest
rates.

Interest Rate Risk:

Market value of fixed income securities is generally inversely related to interest rate
movement. Generally, when interest rates rise, prices of existing fixed income securities fall
and when interest rates drop, such prices increase. Accordingly, value of a scheme portfolio
may fall if the market interest rate rise and may appreciate when the market interest rate
comes down. The extent of fall or rise in the prices depends upon the coupon and maturity of
the security. It also depends upon the yield level at which the security is being traded.

Credit Risk:
This is risk associated with default on interest and /or principal amounts by issuers of fixed
income securities. In case of a default, scheme may not fully receive the due amounts and
NAV of the scheme may fall to the extent of default. Even when there is no default, the price
of a security may change with expected changes in the credit rating of the issuer. It may be
mentioned here that a government security is a sovereign security and is safer. Corporate
bonds carry a higher amount of credit risk than government securities. Within corporate
bonds also there are different levels of safety and a bond rated higher by a rating agency is
safer than a bond rated lower by the same rating agency.

38
Spread Risk:

Credit spreads on corporate bonds may change with varying market conditions. Market value
of debt securities in portfolio may depreciate if the credit spreads widen and vice versa.
Similarly, in case of floating rate securities, if the spreads over the benchmark security /
index widen, then the value of such securities may depreciate.

Liquidity Risk:

Liquidity risk refers to the ease with which securities can be sold at or near its valuation
yield-to-maturity (YTM) or true value. Liquidity condition in market varies from time to
time. The liquidity of a bond may change, depending on market conditions leading to changes
in the liquidity premium attached to the price of the bond. In an environment of tight
liquidity, necessity to sell securities may have higher than usual impact cost. Further,
liquidity of any particular security in portfolio may lessen depending on market condition,
requiring higher discount at the time of selling.

The primary measure of liquidity risk is the spread between the bid price and the offer price
quoted by a dealer. Trading volumes, settlement periods and transfer procedures may restrict
the liquidity of some of these investments. Different segments of the Indian financial markets
have different settlement periods, and such periods may be extended significantly by
unforeseen circumstances. Further, delays in settlement could result in temporary periods
when a portion of the assets of the Scheme are not invested and no return is earned thereon or
the Scheme may miss attractive investment opportunities.

At the time of selling the security, the security may become illiquid, leading to loss in value
of the portfolio. The purchase price and subsequent valuation of restricted and illiquid
securities may reflect a discount, which may be significant, from the market price of
comparable securities for which a liquid market exists.

Counterparty Risk:

39
This is the risk of failure of the counterparty to a transaction to deliver securities against
consideration received or to pay consideration against securities delivered, in full or in part or
as per the agreed specification. There could be losses to the fund in case of a counterparty
default.

Prepayment Risk:
This arises when the borrower pays off the loan sooner than the due date. This may result in a
change in the yield and tenor for the mutual fund scheme. When interest rates decline,
borrowers tend to pay off high interest loans with money borrowed at a lower interest rate,
which shortens the average maturity of Asset-backed securities (ABS). However, there is
some prepayment risk even if interest rates rise, such as when an owner pays off a mortgage
when the house is sold or an auto loan is paid off when the car is sold. Since prepayment risk
increases when interest rates decline, this also introduces reinvestment risk, which is the risk
that the principal may only be reinvested at a lower rate.

Re-investment Risk:
Investments in fixed income securities carry re-investment risk as the interest rates prevailing
on the coupon payment or maturity dates may differ from the original coupon of the bond
(the purchase yield of the security). This may result in final realized yield to be lower than
that expected at the time

The additional income from reinvestment is the "interest on interest" component. There may
be a risk that the rate at which interim cash flows can be reinvested are lower than that
originally assumed.

ADVANTAGES OF INVESTING IN MUTUAL FUNDS

1. Professional Management — Investors may not have the time or the required knowledge
and resources to conduct their research and purchase individual stocks or bonds. A mutual
fund is managed by full-time, professional money managers who have the expertise,
experience and resources to actively buy, sell, and monitor investments. A fund manager
continuously monitors investments and rebalances the portfolio accordingly to meet the
scheme’s objectives. Portfolio management by professional fund managers is one of the most
important advantages of a mutual fund.

40
2. Risk Diversification — Buying shares in a mutual fund is an easy way to diversify your
investments across many securities and asset categories such as equity, debt and gold, which
helps in spreading the risk - so you won't have all your eggs in one basket. This proves to be
beneficial when an underlying security of a given mutual fund scheme experiences market
headwinds. With diversification, the risk associated with one asset class is countered by the
others. Even if one investment in the portfolio decreases in value, other investments may not
be impacted and may even increase in value. In other words, you don’t lose out on the entire
value of your investment if a particular component of your portfolio goes through a turbulent
period. Thus, risk diversification is one of the most prominent advantages of investing in
mutual funds.

3. Affordability & Convenience (Invest Small Amounts) — For many investors, it could
be more costly to directly purchase all of the individual securities held by a single mutual
fund. By contrast, the minimum initial investments for most mutual funds are more
affordable.

4. Liquidity — You can easily redeem (liquidate) units of open ended mutual fund schemes
to meet your financial needs on any business day (when the stock markets and/or banks are
open), so you have easy access to your money. Upon redemption, the redemption amount is
credited in your bank account within one day to 3-4 days, depending upon the type of scheme
e.g., in respect of Liquid Funds and Overnight Funds, the redemption amount is paid out the
next business day.

However, please note that units of close-ended mutual fund schemes can be redeemed only
on maturity. Likewise, units of ELSS have a 3-year lock-in period and can be liquidated only
thereafter.

5. Low Cost — An important advantage of mutual funds is their low cost. Due to huge
economies of scale, mutual funds schemes have a low expense ratio. Expense ratio represents
the annual fund operating expenses of a scheme, expressed as a percentage of the fund’s daily
net assets. Operating expenses of a scheme are administration, management, advertising
related expenses, etc. The limits of expense ratio for various types of schemes has been
specified under Regulation 52 of SEBI Mutual Fund Regulations, 1996.

41
6. Well-Regulated — Mutual Funds are regulated by the capital markets regulator, Securities
and Exchange Board of India (SEBI) under SEBI (Mutual Funds) Regulations, 1996. SEBI
has laid down stringent rules and regulations keeping investor protection, transparency with
appropriate risk mitigation framework and fair valuation principles.

7. Tax Benefits —Investment in ELSS upto ₹1,50,000 qualifies for tax benefit under section
80C of the Income Tax Act, 1961. Mutual Fund investments when held for a longer term are
tax efficient.

EQUITY FUNDS

Equity Mutual Funds invest in stocks as per the fund’s investment mandate. The advantage of
investing in Equity Funds is that you hold a diversified portfolio.

There are more than 3,000 listed companies on BSE. It is practically difficult for novice
investors to track so many companies and decide which stocks would do well in the future.
Thus, Equity Funds are ideal for retail investors as they are managed by experienced fund
managers. Fund managers are supported by analysts who keep a hawk’s eye on sectors,
stocks, economy and, comb through company balance sheets to study important trends
shaping the market.

Why Invest In Equity Mutual Funds?

Equity Mutual Funds invest in shares of publicly listed companies across market
capitalization based on the fund’s investment objective. Equities reward investors through
dividends, bonus shares and capital gains through rise in stock price, which is linked to
company’s earnings growth. As opposed to investing in bonds, which rewards investors
largely through coupon interest and carries relatively less risk as compared to equities,
equities provide a high-risk high-return potential as stock prices swing up and down due to a
variety of reasons linked to the company, industry and economy in general.

That said, equities may offer the potential to beat inflation in the long run. India’s retail
inflation as measured by Consumer Price Index (CPI) has hovered around 6.04% average
over the last ten years. (Source: Trading Economics.) Over the last ten years, Nifty 100 Total

42
 Return Index (TRI) has grown by 13.23% CAGR as of January 23, 2023. During the same
period, S&P BSE 500 Index has grown at a CAGR of 13.18%. (Source: Bloomberg)

In the above example you can see that equities have the potential to beat inflation over the
long run. For a long term goal like retirement or children’s higher education/wedding,
equities can have the potential to compound your wealth. Since equities can be volatile in the
short run, one should preferably invest in Equity Mutual Funds only if the investment horizon
is at least five years or more.

The risk is mitigated in equity funds over a long period of time. Equity Funds are inherently
volatile as the underlying holdings are stocks that tend to react to news and other events
daily. You would be familiar with the correction we witnessed in 2008-09 (global financial
crisis) and 2020 (pandemic-induced slowdown) and how markets have recovered from the
crisis. Thus, patience is key to creating wealth in Equity Funds.

There are broadly two types of risk inherent in any security:

 Systemic Risk: This risk affects the entire sector or the economy. For instance, the 2008-09
global financial crisis impacted economies around the world. This risk is difficult to
diversify.
 Unsystematic Risk: This risk affects one company; the entire industry is not impacted. This
risk can be diversified by holding multiple stocks from different industries.

In addition to these two broad types of risks, other risks include Business Risk, Credit Risk,
Country Risk, Foreign Exchange Risk, Interest Rate Risk, Political Risk, Counterparty Risk,
Liquidity Risk, among others.

To mitigate these types of risks, Equity Funds typically hold 40 to 50 or even more stocks
across sectors. (Focused Funds can only invest in up to 30 stocks.) Further, mutual funds are
bound by regulations that prevent them from taking overexposure to a single stock and sector
which helps in minimizing risk. For instance, a fund cannot hold more than 10% of its net
assets in a single stock.

43
Types Of Equity Funds

Equity Funds can be classified as active or passive. Actively managed Equity Funds aim to
outperform their benchmark through active stock and sector selection. In simple words, an
actively managed fund will try to generate returns in excess of the benchmark, which can be
S&P BSE 100 or S&P BSE 500 as per the fund’s investment mandate. On the other hand, a
passively managed Equity Fund will mimic its benchmark. In other words, the returns
generated by a passively managed equity fund will be close to the benchmark, subject to
tracking error.

Equity Funds are ideal to meet long-term goals like retirement, buying a house, saving for a
kid’s higher education, and so on. There are 11 categories of actively managed Equity Funds.

Each category follows a distinct mandate in terms of the quantum of exposure to equities,
market capitalization, theme/sector allocation, tax benefits, and more. They are broadly
classified into:

Large & Mid-Cap Fund: These funds invest a minimum of 35% each in Large and Mid-
Cap stocks.

Flexi Cap Funds: Unlike Multi Cap Funds that have a fixed exposure to each market cap
(Large, Mid, and Small), Flexi Cap Funds can freely manoeuvre across market capitalisation
as per the fund manager’s discretion.

Large Cap Fund: Large Cap Funds invest a minimum of 80% of assets in large-cap
companies which are the top 100 companies by market capitalisation.

Equity Linked Savings Scheme (ELSS): These funds invest at least 80% of assets in equity
and qualify for tax saving under Section 80C of the Income Tax Act. One can save tax of Rs
46,800 (assuming the highest tax bracket) on investment of up to Rs 1,50,000 in a financial
year. They come with a lock-in period of three years.

Mid Cap:

Mid Cap Funds invest at least 65% of assets in mid-cap companies.

44
Small Cap Fund: These funds invest at least 65% of assets in small-cap companies.

Multi-Cap Funds: Multi-Cap Funds invest a minimum of 25% of assets each in Large, Mid,
and Small Cap stocks at all times.

Dividend Yield: These funds invest at least 65% of assets in dividend-yielding stocks.

Value Funds: These funds invest at least 65% of assets in equities with a focus on a value
investing strategy. Contra Funds: These funds invest at least 65% of assets in equities with a
focus on contra investing strategy.

Focused Fund: Focused Funds invest a minimum of 65% of assets in equity and invest in a
maximum of 30 stocks.

Sectoral/Thematic: These funds invest a minimum of 65% of assets in equity with a focus
on a particular sector or theme like Pharma/Healthcare, Technology, Banking, Financial
Services, Infrastructure, Consumption, PSU, and so on.

How To Invest In Equity Mutual Funds?

You can invest in Equity Funds through lumpsum or Systematic Investment Plan (SIP). You
can also use features like Systematic Transfer Plan (STP) and Switch.

Depending on your cash flows, you can choose to invest through one of the modes. Since
markets tend to be volatile, retail investors should ideally stagger their investments in equity,
which helps in averaging out investments. Whether you invest through SIP or lumpsum, it is
advisable to have a long-term horizon while investing in equity mutual funds.

What Are The Tax Benefits Of Equity Funds?

Two types of taxes are applicable in Equity Funds. The first is short-term capital gains tax
and the second is long-term capital gains tax.

Short-Term Capital Gains Tax: Gains on investments redeemed before 12 months from
Equity Funds attract a short-term capital gains tax of 15%.
Long-Term Capital Gains Tax: Gains on investments redeemed after 12 months attract
LTCG tax of 10% on gains above Rs 1 lakh without any indexation benefit.

45
Investments made in Equity Linked Savings Scheme (ELSS) can be only redeemed after
three years as they qualify for tax-saving under Section 80C of the Income Tax Act.

Benefits
Liquidity: Except for ELSS, solution oriented funds like Retirement and Children’s Funds
which come with a lock-in period, investors get the credit of money on the number of units
redeemed at the applicable Net Asset Value (NAV) from Domestic Equity Mutual Funds in 3
business days.
Start Small: You don’t need much money to invest in Equity Mutual Funds. You can start
with an investment of Rs 1,000 to Rs, 5,000 depending on the minimum investment required
in a scheme.
Flexibility: You can choose to invest monthly or quarterly through SIPs as per your cash
flows. You can redeem your money at any time (except for ELSS and solution oriented funds
which have a lock-in).
Transparency: The portfolios of the schemes are published monthly on the AMC website.
You get to see where your money has been invested.
Investment Value: You can see the latest value of your investments as against your original
investment on AMC websites.
Growth: Equity Funds can help you build long-term wealth as they may beat inflation.

CHAPTER-III

46
INDUSTRY AND COMPANY PROFILE

47
 INDUSTRY PROFILE

Asset Management Company (AMC):

An asset management company (AMC) is a firm that invests a pooled fund of capital on
behalf of its clients. The capital is used to fund different investments in various asset
classes. Asset management companies are commonly referred to as money managers or
money management firms as well.

Different Types of Asset Management Companies

Asset management companies come in many different forms and structures, such as:

 Hedge funds
 Mutual funds
 Index funds
 Exchange-traded funds
 Private equity funds
 Other funds

In addition, they invest on behalf of various types of clients, such as:

 Retail investors

48
 Institutional investors
 Public sector (government organizations)
 Private sector
 High-net-worth clients
Asset Management Companies Explained

Individual investors usually lack the expertise and resources to consistently produce
strong investment returns over time. Therefore, many investors rely on asset
management companies to invest capital on their behalf.

Asset management companies are usually a group of investment professionals with

broad market expertise. With a large amount of pooled capital, they are able to
utilize diversification and complex investment strategies to generate returns for
investors.

AMCs generally charge a fee to their clients that is equal to a percentage of total
assets under management (AUM). AUM is simply the total amount of capital
provided by investors.

An asset management fund may charge a 2% fee on AUM. Consider as an example

an asset manager who oversees a $100 million fund. The fees for one year or another
time period will be $2 million ($100 million x 2.0%).

Hedge funds are notorious for charging much higher fees, sometimes upwards of
20%. However, hedge funds utilize more unorthodox and aggressive investment
strategies to generate returns.

Buy-Side vs. Sell-side

Asset management companies are referred to as “buy-side” firms. It means that they
help clients to buy investments. They make decisions based on which investments to
purchase.

In contrast, “sell-side” firms, such as investment banks and stockbrokers,

will sell investment services to buy-side companies and other investors. Sell-side

49
companies provide market research and help to inform buy-side firms with valuable
information to entice the buy-side firms to execute transactions with them.

Benefits to Asset Management Companies:

There are various benefits to pooling capital together, including

1. Economies of scale

Economies of scale are the cost advantages that a company can gain from
increasing the scale of operations. With larger operations, the per-unit costs
of operating are lower.

For example, asset management companies can purchase securities in larger

quantities and can negotiate more favorable trading commission prices.
Also, they can invest a lot of capital in a single office, which
reduces overhead costs.

2. Access to broad asset classes

Access to broad asset classes means that asset management companies can
invest in asset classes that an individual investor will not be able to. For
example, an AMC can invest in multi-billion-dollar infrastructure projects,
such as a power plant or a bridge. The investments are so large that an
individual investor will not usually be able to access them.

3. Specialized expertise

Specialized expertise refers to asset management companies hiring finance

professionals with extensive experience in managing investments that most
individual investors lack. For example, an AMC can hire various
professionals who specialize in certain asset classes, such as real estate,
fixed income, sector-specific equities, etc.

50
Downsides to Asset Management Companies

Asset management companies come with a few downsides as well, such as:

1. Management fees

Most asset managers charge flat fees that are collected no matter what their
performance was. As a result, over time, the fees can become very
expensive for investors. Because of the costs for the resources and expertise
required to run an AMC, the fees are high to compensate for such costs and
to provide asset managers with a profit as well.

2. Inflexible

Asset managers can become too large to a point where they are
cumbersome and unresponsive to the dynamic market. Managing too large
of an amount of capital creates operational problems at times.

3. Risk of underperforming

Typically, the performance of AMCs is evaluated in comparison to a

benchmark. A benchmark is a standard to compare performance against,
usually in the form of a broad market index. There is the risk that asset
managers underperform the markets, and if including the management fees
mentioned earlier, it can become very costly for investors.

COMPANY PROFILE

1.STATE BANK OF INDIA(SBI)

51
 State Bank of India (SBI) a Fortune 500 company, is an Indian Multinational, Public Sector
Banking and Financial services statutory body headquartered in Mumbai. The rich heritage
and legacy of over 200 years, accredits SBI as the most trusted Bank by Indians through
generations.

SBI, the largest Indian Bank with 1/4th market share, serves over 48 crore customers through
its vast network of over 22,405 branches, 65,627 ATMs/ADWMs, 76,089 BC outlets, with an
undeterred focus on innovation, and customer centricity, which stems from the core values of
the Bank - Service, Transparency, Ethics, Politeness and Sustainability.

The Bank has successfully diversified businesses through its various subsidiaries i.e SBI
General Insurance, SBI Life Insurance, SBI Mutual Fund, SBI Card, etc. It has spread its
presence globally and operates across time zones through 235 offices in 29 foreign countries.

Vision:

To be the bank of choice for individuals, businesses, and government entities, providing
innovative financial solutions, fostering economic growth, and contributing to the prosperity
of India.

Mission:

 To offer a comprehensive range of financial products and services tailored to the diverse
needs of customers.

 To leverage technology and digital initiatives to enhance customer experience and

operational efficiency.

 To maintain the highest standards of corporate governance, transparency, and integrity in all
business dealings.

52
 Objective:

 To achieve sustainable growth by expanding the customer base, increasing market share, and
maximizing shareholder value.

 To maintain a strong capital base and prudent risk management practices to ensure financial
stability and resilience.

 To foster a culture of excellence, innovation, and continuous learning among employees,

enabling them to deliver superior service and value to customers.

TARGET:

 SBI remains one of our preferred ideas in the sector and we reiterate our BUY rating with a
target price of Rs 860. SBI is well positioned to deliver 13-14% loan growth over FY23-26E,
aided by an improved disbursement rate for sanctioned loans and a recovery in corporate
demand,” said Motilal Oswal

ACHIEVEMENTS:

 SBI has a track record of achieving its financial targets and consistently reporting robust
financial performance, including healthy growth in total assets, deposits, and profits.
 The bank has successfully expanded its business operations both domestically and
internationally, strengthening its position as a leading player in the Indian banking sector.
 The bank has demonstrated effective risk management practices, maintaining a healthy loan
portfolio quality and compliance with regulatory requirements.

AWARDS:

 SBI and its employees regularly receive awards and recognition from industry bodies,
government institutions, and independent agencies for various achievements, including
financial performance, customer service excellence, innovation, and corporate social
responsibility.

53
 Some notable awards received by SBI include "Best Bank in India" awards from prestigious
international publications and organizations, recognition for innovation in banking
technology, and awards for corporate governance and sustainability practices.

Strengths:
 Market leader in India
 Strong brand reputation
 Diversified product portfolio
 Government support
 Advanced technology integration
Weaknesses:
 Bureaucratic structure
 Non-performing assets (NPAs)
 Dependency on government policies
 Legacy systems
 Intense competition
Opportunities:
 Expansion in rural markets
 Growth in digital banking
 Cross-selling opportunities
 International expansion
 Strategic partnerships
Threats:
 Economic instability
 Regulatory compliance
 Cybersecurity risks
 Disintermediation
 Talent retention challenges

54
 2.Axis Bank:

Axis Bank is a prominent private sector bank in India, established in 1993. Known for its
customer-focused approach and innovative banking solutions, Axis Bank offers a
comprehensive range of financial products and services to retail, corporate, and institutional
clients. The bank operates through a vast network of branches and ATMs across India and
has a growing presence in international markets. Axis Bank's offerings include retail and
corporate banking, wealth management, treasury operations, investment banking, and
insurance services. The bank is recognized for its digital initiatives, seamless customer
experience, and strong commitment to corporate social responsibility.

Vision:

To be the preferred banking partner for individuals and businesses, known for our
commitment to customer satisfaction, innovation, and ethical business practices.

Mission:

 To leverage technology and digital solutions to enhance operational efficiency, streamline

processes, and deliver superior customer experience.

 To maintain a strong focus on risk management, compliance, and corporate governance,

ensuring trust and confidence among stakeholders.

 To drive sustainable growth and profitability while adhering to the highest standards of
integrity, transparency, and social responsibility.

Objective:

 To achieve leadership in key business segments through customer-centric strategies, product

innovation, and service excellence.

55
 To expand the reach and accessibility of banking services through a network of branches,
ATMs, and digital channels across India and international markets.

 To build strong relationships with customers, employees, and partners based on trust, mutual
respect, and shared values.

Target:

Axis Bank's targets typically encompass growth in key performance indicators such as total
assets, deposits, loans, and profitability. These targets are aligned with its vision to become
the bank of choice for customers across segments while maintaining a robust financial
position and contributing to stakeholders' value.

Achievements:

Over the years, Axis Bank has achieved significant milestones in various areas. It has
expanded its branch network, diversified its product offerings, and strengthened its digital
capabilities to enhance customer experience and accessibility. Additionally, the bank has
successfully executed strategic initiatives to improve operational efficiency and risk
management, resulting in sustained growth and profitability.

Awards:

Axis Bank's commitment to excellence and innovation has been recognized through
numerous awards and accolades. These include recognition for its customer service, digital
initiatives, corporate governance practices, and social responsibility efforts. Such awards not
only validate the bank's efforts but also serve as motivation to continue delivering best-in-
class services and solutions.

56
 SWOT ANALYSIS OF AXIS BANK:
Strengths:
 Strong brand presence in India
 Technologically advanced with robust digital banking platforms
 Strong focus on customer service and experience

Weaknesses:
 Relatively smaller market share compared to larger competitors
 Vulnerability to economic fluctuations and interest rate changes
 High competition in the Indian banking sector

Opportunities:
 Expansion into untapped markets, especially in rural and semi-urban areas
 Growth potential in digital banking and fintech collaborations
 Increasing demand for specialized financial services such as wealth management and
insurance

Threats:
 Intense competition from domestic and international banks
 Regulatory changes impacting banking operations and profitability
 Cybersecurity threats and data breaches
 Economic downturns affecting asset quality and loan portfolios

57
 3.ICICI Bank:

ICICI Bank is a leading private sector bank in India, established in 1994. With a strong
presence in retail and corporate banking, ICICI Bank offers a wide range of financial
products and services to individuals, businesses, and government entities. The bank operates
through a network of branches, ATMs, and digital channels across India and serves millions
of customers. ICICI Bank's offerings include retail banking, corporate banking, wealth
management, investment banking, and insurance services. The bank is recognized for its
technological innovations, customer-centric approach, and commitment to financial inclusion
and social development initiatives.

Vision:
To be the most preferred bank for customers, employees, and investors, known for our
customer-centric approach, innovation, and operational excellence.

Mission:

 To maintain a strong focus on risk management, compliance, and corporate governance,

ensuring trust and confidence among stakeholders.
 To foster a culture of meritocracy, diversity, and inclusivity, empowering employees to
deliver exceptional service and value to customers.
 To contribute to the economic development of India by supporting entrepreneurship,
infrastructure projects, and financial inclusion initiatives.

Objective:

58
 To achieve sustainable growth and profitability by expanding the customer base, deepening
relationships, and optimizing the product mix.
 To enhance market share and competitive positioning through strategic partnerships,
alliances, and digital ecosystem collaborations.
 To build long-term relationships with customers, shareholders, and communities by
delivering on promises, creating shared value, and driving positive social impact.

TARGETS:
 Expansion of digital banking services to enhance customer experience and accessibility.
 Increasing market share in various banking segments, including retail, corporate, and SME
banking.
 Strengthening the bank's presence in both domestic and international markets through
strategic partnerships and collaborations.

ACHIEVEMENTS:
 Pioneered innovative digital banking solutions, such as internet banking, mobile banking, and
digital wallets, catering to evolving customer needs.
 Successfully navigated challenging economic environments and regulatory changes while
maintaining robust financial performance.
 Expanded its branch and ATM network across India and abroad, ensuring wider reach and
convenience for customers.

AWARDS:

 Received numerous awards and recognitions for excellence in various banking categories,
including Retail Banking, Corporate Banking, and Digital Banking.
 Recognized for its commitment to customer service, innovation, and corporate governance by
leading industry bodies and publications.
 Awarded for its CSR initiatives and sustainability practices, contributing to social
development and environmental conservation.

SWOT ANALYSIS OF ICICI BANK:

59
 Strengths:

 Strong brand image domestically and internationally.

 Extensive network of branches and ATMs nationwide.
 Embracing technology for enhanced customer service and operational efficiency.
 Consistent financial performance with steady revenue growth.

Weaknesses:

 Vulnerability to economic fluctuations due to dependency on Indian economy.

 Concentration risk in certain sectors.
 Challenges with non-performing assets (NPAs) and loan quality.

Opportunities:

 Capitalizing on India's growing economy.

 Expanding digital banking services.
 Penetrating rural and semi-urban markets.

Threats:

 Regulatory changes impacting operations.

 Intense competition from various banks and financial institutions.
 Economic volatility affecting loan quality and profitability.

4.Aditya Birla Sun life insurance company limited (ABSLI):

60
 Aditya Birla Sun Life Insurance Company Limited (ABSLI) is a leading life insurance
provider in India, established as a joint venture between the Aditya Birla Group and Sun Life
Financial Inc., a leading international financial services organization based in Canada. Since
its inception in 2000, ABSLI has been dedicated to offering a wide range of life insurance
products and services to meet the evolving needs of its customers, providing financial
protection, wealth accumulation, and retirement solutions.

Vision:

"To be a leader and preferred choice in providing protection and wealth management
solutions, delivering superior value to customers, shareholders, and society."

Mission:

 To offer comprehensive life insurance solutions that cater to the diverse needs and aspirations
of customers at every stage of life.
 To leverage technology, data analytics, and digital platforms to enhance customer experience,
streamline operations, and drive innovation.
 To maintain the highest standards of ethics, integrity, and transparency in all business
dealings, fostering trust and confidence among stakeholders.

Objectives:

 To achieve leadership in key segments of the life insurance market by offering innovative
products, personalized solutions, and superior customer service.
 To expand market reach and distribution network through strategic partnerships, alliances,
and digital channels, ensuring accessibility and convenience for customers across India.

61
 To drive sustainable growth and profitability while maintaining a strong focus on risk
management, capital efficiency, and shareholder value creation.

SWOT Analysis of Aditya Birla Sun Life Insurance Company

(ABSLIC):

Strengths:
 Diversified business portfolio spanning various industries including cement, metals, textiles,
and financial services.
 Strong brand recognition and reputation in India.
 Extensive distribution network and presence across multiple geographies.
 Focus on innovation and sustainability in operations.
Weaknesses:
 Exposure to cyclical industries which can be affected by economic downturns
 Reliance on debt financing for expansion and growth.
 Vulnerability to fluctuations in commodity prices.
 Limited international presence compared to some competitors.
Opportunities:
 Expansion into emerging markets with high growth potential.
 Diversification into new industries or sectors.
 Strategic partnerships and acquisitions to enhance market position.

Threats:
 Economic volatility impacting demand and profitability in key sectors.
 Intense competition in both domestic and international markets.
 Regulatory changes affecting operations and compliance costs.
 Currency fluctuations and geopolitical risks in global markets.

5.TATA MUTUAL FUND COMPANY:

62
 Tata Mutual Fund is a leading mutual fund company in India, offering a diverse range of
investment products across equity, debt, and hybrid categories. It operates under the Tata
Group and emphasizes innovation, customer-centricity, and transparency in its operations.
With a robust distribution network and a focus on generating consistent returns while
managing risks, Tata Mutual Fund has earned recognition for its performance and service
excellence in the industry.
Objective:
Tata Mutual Fund aims to offer innovative investment solutions to investors, catering to their
diverse financial goals and needs. It focuses on providing consistent returns while managing
risks effectively.

Mission:
The mission of Tata Mutual Fund is to empower investors by offering them a range of
investment products and services that help them achieve their financial objectives. It
emphasizes transparency, integrity, and customer-centricity in its operations.

Vision:
Tata Mutual Fund envisions becoming a leading provider of investment solutions in India,
known for its performance, innovation, and customer satisfaction. It aims to be a trusted
partner for investors in their wealth creation journey.

Achievements:

 Consistent track record of delivering competitive returns across various mutual fund schemes.
 Recognition for excellence in fund management and customer service.

63
 Expansion of the product portfolio to cater to different investor needs.

Awards:

 Various mutual fund schemes under Tata Mutual Fund have received accolades from industry
bodies and rating agencies for their performance and consistency.
 Recognition for innovative initiatives and customer-centric approach in the mutual fund
industry.

SWOT Analysis of Tata Mutual Fund:

Strengths:

 Strong brand reputation backed by the Tata Group.

 Diverse range of investment products catering to various investor needs.
 Robust distribution network for wide market reach.
 Focus on innovation and customer-centric approach.

Weaknesses:

 Vulnerability to market fluctuations and economic conditions.

 Dependency on regulatory compliance for operations.
 Competition from other mutual fund houses.

Opportunities:

 Growing demand for investment products in India.

 Expansion into untapped markets and segments.
 Adoption of digital platforms for enhanced customer engagement.

Threats:

64
 Economic volatility impacting investor sentiment.
 Regulatory changes affecting fund operations.
 Intense competition in the mutual fund industry.

65
CHAPTER-5
DATA ANALYSIS AND INTERPRETATION

PERFORMANCE OF SBI SMALLCAP MUTUAL FUNDS OVER 5

YEARS:
TOTAL 2019 2020 2021 2022 2023
REURN%
INVESTMENT 6.10 33.62 47.56 8.14 25.30

66
 CATEGORY -1.11 31.09 63.34 1.78 41.49

INDEX 9.69 19.99 32.84 2.47 26.07

SBI SMALL CAP MUTUAL FUND

70

60

50

40

30

20

10

0
INVESTMENT CATEGORY INDEX
-10

2019 2020 2021 2022 2023

From 2019 to 2023, the total returns on investments, a measure of overall performance,
experienced notable fluctuations. The investment outperformed both the category and the
index in 2020 and 2021, with particularly significant gains of 33.62% and 47.56%
respectively, surpassing the category's 31.09% and 63.34% and the index's 19.99% and
32.84%. However, in 2019 and 2023, while the investment still yielded positive returns of
6.10% and 25.30%, it fell short compared to the category's -1.11% and 41.49% and the
index's 9.69% and 26.07%. Overall, despite periods of underperformance, the investment
demonstrated competitive returns, albeit with fluctuations across the years compared to the
category and index.
2.Table showing Risk and volatility measures of tata small cap mutual
fund:

Trailing investment category index

67
 alpha 5.00 1.72 8.82
beta 0.82 0.89 0.75
R^2 91.30 91.03 37.90
Sharpe ratio 1.04 0.88 0.70
Standard 20.63 22.54 18.53
deviation

GRAPH SHOWING RISK AND VOLATILITY MEASURES OF TATA

SMALLCAP MUTUAL FUND:

TATA SMALLCAP MUTUAL FUNDS

100
90
80
70
60
50
40
30
20
10
0
alpha beta R^2 Sharpe ratio Standard
deviation

investment category index

INTERPRETATION:

The trailing performance metrics reveal distinct characteristics of the investment compared to
its category and index. The investment demonstrated a higher alpha of 5.00, indicating it
outperformed its benchmark and category by a significant margin, with the category and
index trailing with 1.72 and 8.82 respectively. However, the investment's beta of 0.82
suggests it experienced slightly less volatility compared to both the category and index, with
beta values of 0.89 and 0.75 respectively. The investment also exhibited a higher R^2 of

68
91.30, indicating a strong correlation with its benchmark index, while the category and index
trailed with 91.03 and 37.90 respectively. Additionally, the investment boasted a higher
Sharpe ratio of 1.04, reflecting better risk-adjusted returns compared to the category and
index's ratios of 0.88 and 0.70 respectively. Despite a marginally lower standard deviation of
20.63, the investment maintained competitive performance relative to its peers, showcasing a
balanced risk-return profile.

TABLE SHOWING RETURN OF TATA LARGE CAP FUNDS AND

EQUITY

Fund YTD 1 1 3 6 1 3 5
name D M M M Y Y Y

Tata 6.34 0. 1.24 6.22 20.76 38.38 18.91 16.85

large 36
cap
direct
S&P 5.34 0. 0.94 5.29 18.67 35.03 17.57 16.33
BSE 26
100 TRI
Equity: 8.23 0. 1.33 7.72 23.94 43.23 18.54 16.47
Large 16
cap

GRAPH OF TATA SMALL CAP DIRECT MUTUAL FUNDS

69
 TATA SMALL CAP DIRECT MUTUAL FUNDS
RETURNS
50
45
40
35
30
25
20
15
10
5
0
Fund YTD 1D 1M 3M 6M 1Y 3Y 5Y
name

Series1 Series2 Series3 Series4 Series5 Series6

INTERPRETATION:

The Tata Large Cap Direct fund has demonstrated strong performance across various
timeframes compared to its benchmark, the S&P BSE 100 TRI, and the Equity: Large
Cap category. Year-to-date, the fund has returned 6.34%, outperforming both the
benchmark (5.34%) and the category (8.23%). Over the past year, the fund's returns
of 38.38% have surpassed both the benchmark (35.03%) and the category (43.23%),
indicating its ability to generate significant returns for investors. Additionally, the
fund's performance over longer periods such as 3 years and 5 years remains robust,
showcasing consistent growth and outperforming both the benchmark and the
category. These results suggest that the Tata Large Cap Direct fund has been
successful in delivering strong returns to investors and maintaining its competitive
position within the large-cap equity space.

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3.ADITYA BIRLA SUN LIFE INSURANCE COMPANY RISK ANALYSIS
FOR PAST 5 YEARS

TRAILING INVESTMENT CATEGORY INDEX

ALPHA 3.14 4.48 8.59

BETA 1.15 1.05 0.77

R^2 78.14 82.29 38.90

SHARPE RATIO 0.73 0.83 0.68

STANDARD 24.78 21.94 18.97

DEVIATION

RISK ANALYSIS OF ABSLIC

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INTERPRETATION:

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Over the trailing period, the investment has shown positive alpha, indicating its
ability to outperform its benchmark by 3.14, albeit to a lesser extent than the
category's alpha of 4.48. The investment displayed a beta of 1.15, suggesting slightly
higher volatility compared to both the category (1.05) and the index (0.77), indicating
potential for greater fluctuations in returns. With an R-squared value of 78.14%, the
investment's performance is moderately correlated with its benchmark, although
slightly less correlated than the category, which had an R-squared of 82.29%. The
investment's Sharpe ratio of 0.73 indicates relatively lower risk-adjusted returns
compared to the category (0.83) but still higher than the index (0.68). Additionally,
the investment exhibited a higher standard deviation (24.78) compared to both the
category (21.94) and the index (18.97), suggesting higher volatility. Overall, while
the investment has demonstrated positive alpha and relatively high correlation with
its benchmark, investors should consider its higher volatility and slightly lower risk-
adjusted returns compared to peers in the category.

ICICI PRUDENTIAL MIDCAP MUTUAL FUND RISK ANALYSIS

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 TRAILING INVESTMENT CATEGORY INDEX
ALPHA 0.24 -0.10 12.21

BETA 0.93 0.87 0.41

R^2 84.76 83.86 20.02

SHARPE RATIO 1.24 1.21 0.98

STANDARD 14.72 13.99 13.30

DEVIATION

ICICI MIDCAP MUTUAL FUND RISK

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ALPHA BETA R^2 SHARPE STANDARD
-10 RATIO DEVIATION

INVESTMENT CATEGORY INDEX

INTERPRETATION:

Over the trailing period, the investment demonstrated positive alpha, indicating it outperformed its
benchmark by 0.24, while the category showed a slight underperformance with a negative alpha of -
0.10. The investment also displayed a beta of 0.93, suggesting its volatility is slightly higher than the
benchmark but still relatively close, whereas the category exhibited a slightly lower beta of 0.87.
Additionally, with a high R-squared value of 84.76%, the investment's performance appears closely
correlated with its benchmark, though less so than the category, which had an R-squared of 83.86%.
Notably, the investment achieved a superior Sharpe ratio of 1.24, indicating strong risk-adjusted

73
returns compared to both the category (1.21) and the index (0.98). While the investment showed
slightly higher standard deviation (14.72) compared to the category (13.99) and the index (13.30), its
superior risk-adjusted returns and positive alpha highlight its favorable performance relative to its
peers and the broader market.

ICICI PRUDENTIAL BLUECHIP EQUITY FUND ANALYSIS:

TRAILING INVESTMENT CATEGORY INDEX

ALPHA 2.17 -0.43 8.82

BETA 0.94 0.97 0.75

R^2 97.15 95.27 37.90

SHARPE RATIO 0.74 0.59 0.70

STANDARD 17.63 18.37 18.53

DEVIATION

GRAPH SHOWING ICICI BLUECHIP EQUITY FUND ANALYSIS:

ICICI BLUECHIP EQUITY FUND ANALYSIS

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INTERPRETATION:

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The investment demonstrated strong performance relative to its benchmark, with an alpha of
2.17% indicating outperformance and a beta of 0.94 suggesting slightly lower volatility than
the benchmark. The high R-squared value of 97.15% indicates a close correlation between
the investment's performance and the benchmark. Additionally, the investment's Sharpe ratio
of 0.74 reflects positive risk-adjusted returns, indicating favourable performance relative to
risk. Despite slightly lower volatility compared to its category and index, as indicated by a
standard deviation of 17.63 versus 18.37 and 18.53, respectively, the investment showcases
competitive performance and risk management within its asset class.

PERFORMANCE OF ICICI PRUDENTIAL BLUECHIP EQUITY FUND:

TOTAL 2019 2020 2021 2022 2023

RETURN %
INVESTMENT 9.77 13.49 29.17 6.85 27.39

CATEGORY 9.15 15.27 26.02 2.69 23.19

INDEX 9.69 19.99 32.84 2.47 26.07

PERFORMANCE OF ICICI PRUDENTIAL BLUECHIP EQUITY

FUND:

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INVESTMENT CATEGORY INDEX

2019 2020 2021 2022 2023

INTERPRETATION:

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In the span of five years from 2019 to 2023, the investment has shown consistent positive
total returns, starting at 9.77% in 2019 and gradually increasing to peak at 29.17% in 2021,
before slightly decreasing to 27.39% in 2023. Despite experiencing fluctuations, it generally
outperformed both its category and the index, especially notable in 2021 where its returns
surpassed those of the category and came close to the index. The investment's performance
was generally aligned with the index's movements, displaying similar trends over the period,
but it managed to outpace both the category and the index in three out of the five years,
indicating strong relative performance.

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