A study on “Impact of Financial Crisis on Indian Mutual Funds”

7/29/2019 A study on Impact of Financial Crisis on Indian Mutual Funds

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CHAPTER- I

1:1 General Introduction

The term investment can be explained as if a person have surplus fund available then he caneither save that money or opt for an investment .i.e. when a person has more money than

required for current consumption then that individual is likely to be an investor whether he or

she invests in a bank deposits for earning interest or in stocks and shares, or purchase properly

,or gold or antique or a price of art, essentially the individual is investing his surplus in procuring

an asset, such that the present sacrifice will procure some future benefits.

1.1.1 Features of Investments:

Any decision or planning on investment or its management should the following factors.

Safety

Liquidity

Appreciation

Legality

Transferability

Risk factor

1.1.2 Some of the Major Investment Options:

1. Equity shares

2. Fixed income securities

3. Money market instruments

4. Mutual fund

5. Real estate

6. Non marketable financial asset

7. Precious object

8. Financial derivatives

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In the minds of every common man investing in stock market is a very risky affair. According to

basis financial theory, which states that an investor can reduce his total risk by holding a portfolio

of assets instead of only one asset. This is because by holding all your money in just one asset,

the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety

of assets, this risk is substantially reduced.

According to basis financial theory, which states that an investor can reduce his total risk by

holding a portfolio of assets instead of only one asset. This is because by holding all your money

in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a

portfolio of a variety of assets, this risk is substantially reduced.

Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis.

Much of economic and financial theory is based on the notion that individuals act rationally and

consider all available information in the decision making process. Since the competition in the

market is very high, it is the responsibility of the fund manager to analyze investor behavior and

understand their needs and expectations to gear up the performance to meet investor requirements

and also to fight competition.

A very important risk involved in mutual fund investments is the market risk. When the market is

in doldrums, most of the equity funds will also experience a downturn. However, the company

specific risks are largely eliminated due to professional fund management.This study reveals facts

about Indian Mutual Fund Industry in Brief.

Mutual Fund is an instrument of investing money. One of the options is to invest the money instock market. But a common investor is not informed and competent enough to understand the

intricacies of stock market. This is where mutual funds come to the rescue. A Mutual Fund is a

trust that pools the savings of a number of investors who share a common financial goal. The

money thus collected is then invested in capital market instruments such as shares, debentures

and other securities. The income earned through these investments and the capital appreciation

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realized is shared by its unit holders in proportion to the number of units owned by them. Thus a

Mutual Fund is the most suitable investment for the common man as it offers an opportunity to

invest in a diversified, professionally managed basket of securities at a relatively low cost.

A mutual fund is a group of investors operating through a fund manager to purchase a diverse

portfolio of stocks or bonds. Mutual funds are highly cost efficient and very easy to invest in. By

pooling money together in a mutual fund, investors can purchase stocks or bonds with much

lower trading costs than if they tried to do it on their own. Also, one doesn't have to figure out

which stocks or bonds to buy. But the biggest advantage of mutual funds is diversification.

A mutual fund is just the connecting bridge or a financial intermediary that allows a group of

investors to pool their money together with a predetermined investment objective. The mutual

fund will have a fund manager who is responsible for investing the gathered money into specific

securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions

of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others they

are very cost efficient and also easy to invest in, thus by pooling money together in a mutual

fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to

do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing

risk & maximizing returns.

1.2 MUTUAL FUNDS

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A Mutual Fund is a trust that pools the savings of a number of investors who share a common

financial goal. The money thus collected is invested by the fund manager in different types of

securities depending upon the objective of the scheme. These could range from shares to

debentures to money market instruments. The income earned through these investments and the

capital appreciations realized by the scheme are shared by its unit holders in proportion to the

number of units owned by them. Thus, a Mutual Fund is the most suitable investment for the

common man as it offers an opportunity to invest in a diversified, professionally managed

portfolio at a relatively low cost. The small savings of all the investors are put together to

increase the buying power and hire a professional manager to invest and monitor the money.

Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual

Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

You can buy mutual fund shares directly from the mutual fund company or from a stockbroker.

Either way buying and redeeming is relatively easy.

The following picture shows the operational flow of mutual funds

Figure 1.1

MUTUAL FUND OPERATIONAL FLOW CHART

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1.2.1 Features of Mutual Fund Investments

1. Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a

dedicated investment research team that analyses the performance and prospects of companies

and selects suitable investments to achieve the objectives of the scheme.

2.Diversification

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

and sectors.

This diversification reduces the risk because seldom do all stocks decline at the same time and in

the same proportion. You achieve this diversification through a Mutual Fund with far less moneythan you can do on your own.

3. Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such

as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds

save your time and make investing easy and convenient.

4. Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher return

as they invest in a diversified basket of selected securities.

5. Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly investing

in the capital markets because the benefits of scale in brokerage, custodial and other fees translate

into lower costs for investors.

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6. Liquidity

In open-end schemes, the investor gets the money back promptly at net asset Value related prices

from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the

prevailing market price or the investor can avail of the facility of direct repurchase at NAVrelated prices by the Mutual Fund.

7. Transparency

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

specific investments made by your scheme, the proportion invested in each class of assets and the

fund manager's investment strategy and outlook.

8. Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend

reinvestment plans, you can systematically invest or withdraw funds according to your needs and

convenience.

9.Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund

because of its large corpus allows even a small investor to take the benefit of its investment

strategy.

10. Choice of Schemes

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

1.2.2 Drawbacks of Mutual Funds:

Mutual funds have their drawbacks and may not be for everyone

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1) No Guarantees:

No investment is risk free. If the entire stock market declines in value, the value of mutual fund

shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer

risks when they invest in mutual funds than when they buy and sell stocks on their own.However, anyone who invests through a mutual fund runs the risk of losing money.

2) Fees and commissions:

All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge

sales commissions or "loads" to compensate brokers, financial consultants, or financial planners.

Even if you don't use a broker or other financial adviser, you will pay a sales commission if you

buy shares in a Load Fund.

3) Taxes:

During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent

of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on

the income you receive, even if you reinvest the money you made.

4) Management risk:

When you invest in a mutual fund, you depend on the fund's manager to make the right decisions

regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you

might not make as much money on your investment as you expected. Of course, if you invest in

Index Funds, you forego management risk, because these funds do not employ managers

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1.2.3 Types of Mutual Fund Schemes: Mutual fund schemes may be classified on the

basis of its structure and its investment objective.

By structure:

Open ended.

Close ended.

Interval schemes.

By investment objectives:

Growth schemes.

Income schemes.

Balanced schemes.

Money market schemes.

Other schemes:

Tax saving schemes.

Special schemes

Index schemes.

Sector specific schemes.

By Structure

1) Open-end Funds

An open-end fund is one that is available for subscription all through the year. These do not have

a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV")

related prices. The key feature of open-end schemes is liquidity.

2) Closed-end Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years.

The fund is open for subscription only during a specified period. Investors can invest in the

scheme at the time of the initial public issue and thereafter they can buy or sell the units of the

scheme on the stock exchanges where they are listed. In order to provide an exit route to the

investors, some close-ended funds give an option of selling back the units to the Mutual Fund

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through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of

the two exit routes is provided to the investor.

3) Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They

are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective

1) Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long term.

Such schemes normally invest a majority of their corpus in equities. It has been proved that

returns from stocks, have outperformed most other kind of investments held over the long

term. Growth schemes are ideal for investors having a long term outlook seeking growth over

a period of time.

2) Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes

generally invest in fixed income securities such as bonds, corporate debentures and Government

securities. Income Funds are ideal for capital stability and regular income.

3) Balanced Funds

The aim of balanced funds is to provide both growth and regular income. Such schemes

periodically distribute a part of their earning and invest both in equities and fixed income

securities in the proportion indicated in their offer documents. In a rising stock market, the NAV

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of these schemes may not normally keep pace, or fall equally when the market falls. These are

ideal for investors looking for a combination of income and moderate growth.

4) Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate

income. These schemes generally invest in safer short-term instruments such as treasury bills,

certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes

may fluctuate depending upon the interest rates prevailing in the market. These are ideal for

Corporate and individual investors as a means to park their surplus funds for short periods.

OTHER SCHEMES

1) Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income

Tax laws as the Government offers tax incentives for investment in specified avenues.

Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed

as deduction u/s 88 of the Income Tax Act, 1961.

2) Special Schemes

a) Industry Specific Schemes

Industry Specific Schemes invest only in the industries specified in the offer document. The

investment of these funds is limited to specific industries like InfoTech, FMCG, and

Pharmaceuticals etc.

b) Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or

the NSE 50.

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c) Sectoral Schemes

Sectoral Funds are those which invest exclusively in a specified sector. This could be an industryor a group of industries or various segments such as 'A' Group shares or initial public offerings.

Mutual Fund Structure

Figure 1.2.1

Sponsor

Sponsor is the person who acting alone or in combination with another body corporate establishes

a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed

and meet the eligibility criteria prescribed under the Securities and Exchange Board of India

(Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or

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shortfall resulting from the operation of the Schemes beyond the initial contribution made by it

towards setting up of the Mutual Fund.

Trust

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts

Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

Trustee

Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The

main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alias

ensure that the AMC functions in the interest of investors and in accordance with the Securities

and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed

and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are

independent directors who are not associated with the Sponsor in any manner.

Asset Management Company (AMC)

The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is

required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset

management company of the Mutual Fund. At least 50% of the directors of the AMC are

independent directors who are not associated with the Sponsor in any manner. The AMC must

have a net worth of at least 10 crore at all times.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the

Mutual Fund. The Registrar processes the application form, redemption requests and dispatches

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account statements to the unit holders. The Registrar and Transfer agent also handles

communications with investors and updates investor record.

1.2.2 RIGHTS OF A MUTUAL FUND UNIT HOLDER:

A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual Funds) Regulations is

entitled to:

1. Receive information about the investment policies, investment objectives, financial

position and general affairs of the scheme.

2. Receive unit certificates or statements of accounts confirming the title within 6 weeks

from the date of closure of the subscription or within 6 weeks from the date of request for

a unit certificate is received by the Mutual Fund.

3. Receive dividend within 42 days of their declaration and receive the redemption or

repurchase proceeds within 10 days from the date of redemption or repurchase.

4. Vote in accordance with the Regulations to:-

Approve or disapprove any change in the fundamental investment policies of the scheme, which

are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder

has a right to redeem the investment.

a. Change the Asset Management Company.

b. Wind up the schemes.

1.2.3 TAX BENEFITS OF MUTUAL FUNDS:

Section 94(6) of the Income Tax Act 1961:- Section 94(6) of the Income Tax Act 1961

now provides that any person who buys or acquires any securities or unit within a period

of three months prior to the record date and such person sells or transfers such securities

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or unit within a period of three months after such date and the dividend or income on such

securities or unit received or receivable by such person is exempt, then , the loss, if any,

arising to him on account of such purchase and sale of securities or unit, to the extent such

loss does not exceed the amount of dividend or income received or receivable on such

securities or unit, shall be ignored for the purposes of computing his income chargeable to

tax.

Section 10(33) of the Income Tax Act 1961

The dividend received by the investors from the scheme will be exempt from income tax for all

categories of investors under Section 10(33) of the Income Tax Act, 1961. The scheme will pay a

distribution tax currently @10% plus surcharge if the portfolio holds less than 50 percent debt

securities on an average during the last one year period.

Section 88 of the Income Tax Act 1961

Specified units of mutual fund schemes qualify for rebate under Section 88 of the Income Tax

Act, 1961, subscription to the Units of the Scheme by Individuals and Hindu Undivided Families,

not exceeding Rupees ten thousand would be eligible to a deduction, from income-tax, of an

amount equal to 20% of the amount so subscribed. In the case of subscription by an individual,

whose income is derived from the exercise of his profession as an author, playwright, artist,

musician, actor or sportsman (including an athlete), the deduction admissible would be at the rate

of 25%.

Tax Deduction at Source: There will not be any Tax Deduction at Source on payment to

resident unit-holders towards redemption or dividends.

Wealth tax benefits: Mutual Fund units are exempt from Wealth Tax.

Tax Deduction at Source (TDS):

Redemptions/Exchanges/Switches by non-residents, OCBs & FIIs will be subjected to tax

deduction at source at the rates in force and certificates for tax deducted will be issued.

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To Charitable Trusts:

Investment in the units of the scheme is an eligible mode of investment under Section 11(5) of

the Income Tax Act read with Income Tax Rule 17 C.

To the Fund:

Open Ended Mutual Funds are exempt from income tax under Section 10 [23D] of the Act.

CHAPTER - 2: RESEARCH DESIGN

2.1-Title of the Study:

A study on Impact of Financial Crisis on Indian Mutual Funds.

2.2- Statement of the Problem

Present study focuses on impacts affected to Indian MFs because of Recent Financial crisis.

Much of economic and financial theory is based on the notion that individuals act rationally and

consider all available information in the decision making process. Since the competition in the

market is very high, it is the responsibility of the fund manager to analyze investor behavior and

understand their needs and expectations to gear up the performance to meet investor requirements

and also to fight competition.

Because of Global Economic Recession almost all Sectors in the Country are get affected. Indian

Financial market faced a slowdown. People temporarily stopped investing, they lost the

trustworthiness of Indian market. As compared to other world markets Indian markets were less

affected. Impact were affected by Indian Mutual funds also.

A very important risk involved in mutual fund investments is the market risk. When the market is

in doldrums, most of the equity funds will also experience a downturn. However, the company

specific risks are largely eliminated due to professional fund management .This study reveals

facts about Indian Mutual Fund Industry in Brief.

2.3 Objectives of the study

To Study the Impact of Financial Crisis in Indian Mutual Funds

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To study performance of Indian MFs during Recession period.

To study the general Trend of Mutual Funds after recession Period.

To identify the preferred savings avenue among the investors in this juncture

To assess Mutual Fund selection behavior among the investors with specialconsideration with global financial crisis.

2.4 Methodology

Methodology here refers to the method as to how the researcher has done his

efforts towards the activity of reviewing the literature. For this study Secondary data are

readily available, because they were collected for some other purpose and which can also be

used to solve the present problem. They are the cheapest and the easiest means of access to

information.

2.4.1 Sources for Data Collection

Secondary Data: The various secondary data which will be used in this work includes

Internet

Periodicals

News Papers

Journals

Books related to mutual funds etc.

2:4.2 Sampling

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For the purpose of study and evaluation Various Mutual Fund schemes from various sectors

were selected randomly in order to analyze the effect of impact of recession in Indian Mutual

Funds. 10 Equity based Mutual Fund schemes were selected randomly.

2.4.3 Method of Analysis

Standard Deviation, Beta

Jenson Measure, Treyner Measure & Sharpe Measure

2.5 OPERATIONAL DEFINITION OF CONCEPTS

2.5.1 Net Asset Value or NAV

NAV is the total asset value (net of expenses) per unit of the fund and is calculated by the Asset

Management Company (AMC) at the end of every business day. Net asset value on a particular date

reflects the realizable value that the investor will get for each unit that he his holding if the scheme is

liquidated on that date.

Net asset Value of an investment company is the companys total assets minus its total liabilities. For

Example, if an investment company has securities and other assets worth $100 million and has liabilities

of $10 million, the investment companys NAV will be $90 million one day, $100 million the next, and

$80 million.

For Calculating NAV in Years

NAV Closing Value NAV Opening Value

= *100

NAV Opening Value

Entry Load

It is the load charged by the fund when one invests into the fund. It increases the price of the units to more

than the NAV and is expressed as a percentage of NAV.

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Exit Load

It is the load charged by the fund when one redeems the units from the fund. It reduces the price

of the units to less than the NAV and is expressed as a percentage of NAV.

Performance

Performance of an investment indicates the returns from an investment. The returns can come by

way of income distributions as well as appreciation in the value of the investment.

2.5.2 STANDARD DEVIATION

A measure of the dispersion of a set of data from its mean. The more spread apart the data is

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

investment to measure the investment Volatility (Risk). A volatile stock would have a high

standard deviation. In mutual funds, the standard deviation tells us how much the return on the

fund is deviating from the expected normalreturns. Standard deviation can also be calculated as

the square root of the variance.

Standard Deviation (Risk) of the Fund:

Where: p: Risk of the Fund.

Rp: Return of the fund.

Standard Deviation (Risk) of the benchmark index:

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n Rp2 - ( Rp)2

n2

p=1/2

n Rm2 -( Rm)2

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Where

Rm Index Return (Market Return)

m Risk of the Index

2.5.3 BETA

It is the measure of the relative sensitivity of a stock or mutual fund to the market. The market is

assigned a beta of 1. The higher the beta, the more sensitive the stock or fund is considered to be

relative to the market as a whole. In other words, funds with beta more than 1 will react more to

any fluctuations (whether upward or downward) in market than funds with beta less than 1.

Beta of the Fund:

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n2

m =

p=[(Rp - ARp) (Rm ARm]n

[Rm ARm]2

n

i = 1

Where:

p : Beta of the fund.Rp: Return of the fund.ARp: Average return of the MutualFund Scheme.ARm: Average return of thebenchmark index.


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2.6 Scope of the study:

For the Purpose of this study I considered 10 different Mutual Fund Schemes

All those Mutual Funds were Equity Mutual Funds

Only Indian Mutual Funds have Considered

NAV for a period of Five years was considered

2:7 Limitations of the Study

Since the study had to be conducted in a short span of time, the accuracy may be affected.

The results obtained during the period cannot be taken as a conclusive decision for

making a choice for investment

Conclusions were depends upon facts from secondary data.

Only 10 Equity funds were compared and analyzed.

Only funds, which are more than five years old, have been considered.

Only open-ended funds have been considered.

The NAV values and the Benchmark Index values obtained may not have been entirely

accurate.

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2.8 Chapter Scheme

CHAPTER- 1: INTRODUCTION

Introduction of the research topic

Subject background of the topic

CHAPTER- 2: RESEARCH DESIGN

Brief Introduction

Statement of the Problem

Review of Literature

Objective of the Study

Methodology

Sampling

Tools for data collection

Need for the Study

Limitation of the Study

CHAPTER- 3: INDUSTRY PROFILE

CHAPTER- 4: ANALYSIS AND INTERPRETATION OF DATA

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CHAPTER- 5: SUMMARY AND CONCLUSION

Findings

Conclusion from the study

Suggestions

Bibliography

Annexure

CHAPTER 3:- PROFILES

3.1History of the Indian Mutual Fund Industry

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the

initiative of the Government of India and Reserve Bank the. The history of mutual funds in India

can be broadly divided into four distinct phases

First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of

Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and

administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and

the Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of

1988 UTI had Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non-

UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of

India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first

non- UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87),

Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India

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(Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989

while GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual fund

industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund

industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in

which the first Mutual Fund Regulations came into being, under which all mutual funds, except

UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with

Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and

revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual

Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting

up funds in India and also the industry has witnessed several mergers and acquisitions. As at the

end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The

Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other

mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated

into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets

under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the

assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of

Unit Trust of India, functioning under an administrator and under the rules framed by

Government of India and does not come under the purview of the Mutual Fund Regulations. The

second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with

SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile

UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with

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the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with

recent mergers taking place among different private sector funds, the mutual fund industry has

entered its current phase of consolidation and growth.

Financial Services Industry:

Financial services organizations are striving to achieve increasingly ambitious profit and

growth targets against a background of heightened risk, regulation and market pressures. As of

2004, the financial services industry represented 20% of the market capitalization of the S&P 500

in the United States.

Financial services refer to services provided by the finance industry. The finance industry

encompasses a broad range of organizations that deal with the management of money. Among

these organizations are banks, credit card companies, insurance companies, consumer finance

companies, stock brokerages, investment funds and some government sponsored enterprises.

Customer needs and expectations are evolving in the face of increasing personal wealth,

more private funding of pensions and healthcare and the desire for ever more accessible andpersonalised financial products and services. In turn, intense competition has squeezed industry

margins and forced organisations to cut costs while still seeking to enhance the quality of client

choice and service. The battle for talent is also heating up as company seek to enhance

innovation, customer loyalty and investment returns.

The corollary of this market evolution is increasing risk as products become more

complex, organisations more diffuse and the business environment ever more uncertain.

Regulation is also tightening in the wake of public and government pressure for improved

governance, transparency and accountability. In this environment, the winners will be companies

that can turn the challenges into opportunities to build stronger and more enduring customer

relationships; sharpen process efficiency; unlock talent and creativity; use improved risk

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http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Stock_brokerhttp://en.wikipedia.org/wiki/Investment_managementhttp://en.wikipedia.org/wiki/Government_sponsored_enterprisehttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/S%26P_500http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Stock_brokerhttp://en.wikipedia.org/wiki/Investment_managementhttp://en.wikipedia.org/wiki/Government_sponsored_enterprise


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management processes to deliver more sustainable returns; and use new regulatory demands as a

catalyst for strengthening the business and enhancing market confidence.

Organisations will also need to identify and concentrate on core competencies where they

can exert maximum competitive advantage, be this particular product, service, process orgeographical territory. For some this will require a strategic re-orientation towards becoming a

specialist niche provider. Even larger groups will need to differentiate their offering and by

implication the associated brand.

In economics, a financial market is a mechanism that allows people to easily buy and sell

(trade) financial securities (such as stocks and bonds), commodities (such as precious metals or

agricultural goods), and otherfungible items of value at low transaction costs and at prices that

reflect the efficient market hypothesis. Financial markets have evolved significantly over several

hundred years and are undergoing constant innovation to improve liquidity.

Both general markets (where many commodities are traded) and specialized markets

(where only one commodity is traded) exist. Markets work by placing many interested buyers and

sellers in one "place", thus making it easier for them to find each other. An economy which relies

primarily on interactions between buyers and sellers to allocate resources is known as a market

economy in contrast either to a command economy or to a non-market economysuch as a gift

economy.

In finance, financial markets facilitate:

The raising ofcapital (in the capital markets)

The transfer ofrisk (in the derivatives markets)

International trade (in the currency markets)

and are used to match those who want capital to those who have it.

Typically a borrower issues a receipt to the lender promising to pay back the capital.

These receipts are securities which may be freely bought or sold. In return for lending money to

the borrower, the lender will expect some compensation in the form ofinterest ordividends.

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Definition of Financial Market:

The term financial markets can be a cause of much confusion.

Financial markets could mean:

1. Organizations that facilitate the trade in financial securities. i.e. Stock Exchanges facilitate the

trade in stocks, bonds and warrants.

2. The coming together of buyers and sellers to trade financial securities. i.e. stocks and shares

are traded between buyers and sellers in a number of ways including: the use of stock

exchanges; directly between buyers and sellers etc.

In academia, students of finance will use both meanings but students of economics will only use

the second meaning.Financial markets can be domestic or they can be international market.

Types of Financial Markets:

The financial markets can be divided into different subtypes:

Capital Market,which is the market forsecurities, where companies and governments

can raise long term funds. The capital market includes the stock market and the bond

market. Financial regulators, such as the U.S. Securities and Exchange Commission,

oversee the capital markets in their designated countries to ensure that investors are

protected against fraud. The capital markets consist of the primary market, where new

issues are distributed to investors, and the secondary market, where existing securities are

traded.

Capital Market which consists of:

1. Stock Markets, which provide financing through the issue of shares orcommon

stock, and enable the subsequent trading thereof.

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2. Bond Markets, which provide financing through the issue ofbonds, and enable

the subsequent trading thereof.

Commodity Markets, which facilitate the trading of commodities.

Money Markets, which provide short term debt financing and investment.

Derivatives Markets, which provide instruments for the management offinancial risk.

Futures Markets, which provide standardized forward contracts for trading products at

some future date; see also forward market.

Insurance Markets, which facilitate the redistribution of various risks.

Foreign Exchange Markets, which facilitate the trading offoreign exchange.

The capital markets consist ofprimary markets and secondary markets. Newly formed (issued)

securities are bought or sold in primary markets. Secondary markets allow investors to sell

securities that they hold or buy existing securities.

Raising Capital:

To understand financial markets, let us look at what they are used for, i.e. what is their

purpose?

Without financial markets, borrowers would have difficulty in finding lenders themselves.

Intermediaries such as banks help in this process. Banks take deposits from those who have

money to save. They can then lend money from this pool of deposited money to those who seek

to borrow. Banks popularly lend money in the form ofloans and mortgages.

More complex transactions than a simple bank deposit require markets where lenders and

their agents can meet borrowers and their agents, and where existing borrowing or lending

commitments can be sold on to other parties. A good example of a financial market is a stock

exchange. A company can raise money by selling shares to investors and its existing shares can

be bought or sold.

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The following table illustrates where financial markets fit in the relationship between

lenders and borrowers:

Figure 3.1

Relationship between lenders and borrowers

Lenders Financial Intermediaries Financial Markets Borrowers

Individuals

Companies

Banks

InsuranceCompanies

PensionFunds

Mutual Funds

Interbank

StockExchange

MoneyMarket

BondMarket

Foreign Exchange

Individuals

Companies

CentralGovernment

Municipalities

Public Corporations

Analysis of Financial Markets:

Much effort has gone into the study of financial markets and how prices vary with time.

Charles Dow, one of the founders of Dow Jones & Company and The Wall Street Journal,

enunciated a set of ideas on the subject which are now called Dow Theory. This is the basis of the

so-called technical analysis method of attempting to predict future changes. One of the tenets of

"technical analysis" is that market trends give an indication of the future, at least in the short

term. The claims of the technical analysts are disputed by many academics, who claim that the

evidence points rather to the random walk hypothesis, which states that the next change is not

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correlated to the last change.The scale of changes in price over some unit of time is called the

volatility. It was discovered by Benoit Mandelbrot that changes in prices do not follow a

Gaussian distribution, but are rather modeled better by Levy stable distributions. The scale of

change, or volatility, depends on the length of the time unit to a powera bit more than 1/2. Large

changes up or down are more likely than what one would calculate using a Gaussian distribution

with an estimated standard deviation.

The graph indicates the growth of assets over the years.

Figure 3.2

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3.1.2 Global Economic Recession

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A recession is a general slowdown in economic activity in a country over a sustained period of

time, or a business cycle contraction. A recession is when GDP growth slows, businesses stop

expanding, employment falls, unemployment rises, and housing prices decline. During

recessions, many macroeconomic indicators vary in a similar way. Production as measured by

Gross Domestic Product (GDP), employment, investment spending, capacity utilization,

household incomes and business profits all fall during recessions.Governments usually respond to

recessions by adopting expansionary macroeconomic policies, such as increasing money supply,

increasing government spending and decreasing taxation.

The technical definition of an economic recession is when GDP growth is negative for two

quarters or more. A recession is usually preceded by several quarters of slowing but positive

growth. It usually feels like a recession before it has officially started. Therefore, a recession is

also defined by a period when economic growth slows, businesses stop expanding, employment

falls, unemployment rises, and housing prices decline.

Economic recessions are caused by a decline in GDP growth, which is itself caused by a

slowdown in manufacturing orders, falling housing prices and sales, and a drop-off in business

investment. The result of this slowdown is falling employment, and rising unemployment, which

causes a slowdown in retail sales. This creates a downward spiral in manufacturing and increased

layoffs. A stock market decline, known as a bear market, can either be a result of a recession but

is often a cause itself.Each recession has its own specific causes, but all of them are usually

preceded by a period of irrational exuberance. This is also known as a business cycle.

Many experts state that it is only an economic recession when GDP growth is negative for two

consecutive quarters or more. However, for all practical purposes a recession starts when there

are several quarters of slowing but still positive growth. Often a quarter of negative growth will

occur, following by positive growth for several quarters, and then another quarter of negative

growth.

One of the causes of the current recession was that the Fed was also slow to raise interest rates

when the economy started to boom again in 2004. Low interest rates in 2004 and 2005 helped

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created the housing bubble. Irrational exuberance set in again as many investors took advantage

of low rates to buy homes just to resell. Others bought homes they couldn't afford thanks to

interest-only loans.

The crisis began one year ago in the US sub prime home-loan market and has spread into a global

credit squeeze, dragging down world economic growth. Sub-prime lending are loans made to

borrowers who are perceived to have high credit risk. While the US remains the focal point,

financial institutions in other countries have also been affected, reflecting unreliable global

financial conditions. The crisis happened due to weakness in risk management systems and

prudential supervision. The IMF warned that the global economy was being hit by a serious

slowdown and its report indicated that total losses related to US risky loans could reach $1.4

trillions. It predicted dire consequences for banks and financial systems if financial regulators and

banks did not act quickly.

About the only good thing about a recession is that it will cure inflation. The balancing act the

Federal Reserve must pursue is to slow economic growth enough to prevent inflation without

triggering a recession. Currently, it must do this without the help of fiscal policy, which is

generally trying to stimulate the economy as much as possible through lowering taxes, spending

on social programs and ignoring current account deficits.

Observation of economic recession:

The calculation of a country's gross domestic product or GDP is usually for two or more quarters

of a year, successively. Many economists judge recessions to better understand the causes and

find effective solutions to them. A period of recession is a significant decline in economic

activity. The decline could be observed over a period of a few months. The abstract decline that

affects real people is sensed via a fall in the GDP, actual income on record, employment data,

production and sales etc. A recession is measured from the time of initial decline, which is mostly

just after the economy reaches a peak of activity till the time the resultant trough shows up on

the graph. Most recessions are brief.

Figure 3.3

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Table 3.1


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Wider implications:

A recession documents simultaneous decline in employment, profit and investment, and an

upscale inflation. During the economic collapse, the periods of deflation and alternative inflation

are part of a process studied by economists as stagflation. A severe economic recession is a

devastating breakdown of an economy. Those economies that are market-oriented are usually

characterized by economic driving cycles and there it is debated whether or not, in such

economies, government intervention smoothes, exaggerates or creates it. A period of recession

witnesses a stock market drop at the onset. Sometimes, nearly half of the stock market declines

are recorded after the onset of the period. The period of economic recession can also be sensed

via the unemployment rate and subsequent claims, a housing recession and the use of the

indicator index.

Asia and the financial crisis

Countries in Asia are increasingly worried about what is happening in the West. A number of

nations urged the US to provide meaningful assurances and bailout packages for the US

economy, as that would have a knock-on effect of reassuring foreign investors and helping ease

concerns in other parts of the world.

Many believed Asia was sufficiently decoupled from the Western financial systems. Asia has not

had a subprime mortgage crisis like many nations in the West have, for example. Many Asian

nations have witnessed rapid growth and wealth creation in recent years. This lead to enormous

investment in Western countries. In addition, there was increased foreign investment in Asia,

mostly from the West.

However, this crisis has shown that in an increasingly inter-connected world means there are

always knock-on effects and as a result, Asia has had more exposure to problems stemming fromthe West. Many Asian countries have seen their stock markets suffer and currency values going

on a downward trend. Asian products and services are also global, and a slowdown in wealthy

countries means increased chances of a slowdown in Asia and the risk of job losses and

associated problems such as social unrest.

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India and China are the among the worlds fastest growing nations and after Japan, are the largest

economies in Asia. From 2007 to 2008 Indias economy grew by a whopping 9%. Much of it is

fueled by its domestic market. However, even that has not been enough to shield it from the

effect of the global financial crisis, and it is expected that in data will show that by March 2009

that Indias growth will have slowed quickly to 7.1%. Although this is a very impressive growth

figure even in good times, the speed at which it has droppedthe sharp slowdownis what is

concerning.

China, similarly has also experienced a sharp slowdown and its growth is expected to slow down

to 8% (still a good growth figure in normal conditions). However, China also has a growing crisis

of unrest over job losses. Both have poured billions into recovery packages.

Japan, which has suffered its own crisis in the 1990s also faces trouble now. While their banks

seem more secure compared to their Western counterparts, it is very dependent on exports. Japan

is so exposed that in January alone, Japans industrial production fell by 10%, the biggest

monthly drop since their records began.

Towards the end of October 2008, a major meeting between the EU and a number of Asian

nations resulted in a joint statement pledging a coordinated response to the global financial crisis.

However, as Inter Press Service (IPS) reported, this coordinated response is dependent on the

entry of Asias emerging economies into global policy-setting institutions.

This is very significant because Asian and other developing countries have often been treated as

second-class citizens when it comes to international trade, finance and investment talks . This

time, however, Asian countries are potentially trying to flex their muscle, maybe because they see

an opportunity in this crisis, which at the moment mostly affects the rich West.

Asian leaders had called for effective and comprehensive reform of the international monetary

and financial systems. For example, as IPSalso noted in the same report, one of the Chinese

state-controlled media outlets demanded that We want the U.S. to give up its veto power at the

International Monetary Fund and European countries to give up some more of their voting rights

in order to make room for emerging and developing countries. They also added, And we want

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America to lower its protectionist barriers allowing an easier access to its markets for Chinese

and other developing countries goods.

Whether this will happen is hard to know. Similar calls by other developing countries and civil

society around the world, for years, have come to no avail. This time however, the financial crisis

could mean the US is less influential than before. A side-story of the emerging Chinese

superpower versus the declining US superpower will be interesting to watch.It would of course

be too early to see China somehow using this opportunity to decimate the US, economically, as it

has its own internal issues. While the Western mainstream media has often hyped up a threat

posed by a growing China, the World Banks chief economist (Lin Yifu, a well respected Chinese

academic) notes Relatively speaking, China is a country with scarce capital funds and it is

hardly the time for us to export these funds and pour them into a country profuse with capital like

the U.S.

Asian nations are mulling over the creation of an alternative Asia foreign exchange fund, but

market shocks are making some Asian countries nervous and it is not clear if all will be able to

commit. What seems to be emerging is that Asian nations may have an opportunity to demand

more fairness in the international arena, which would be good for other developing regions, too.

The subprime mortgage crisis reached a critical stage during the first week of September 2008,

characterized by severely contracted liquidity in the global credit markets and insolvency threats

to investment banks and other institutions.

Reserve balances from banks in the Federal Reserve System began increasing over required

levels of about $10 billion at the beginning of September 2008, just after the Democratic and

Republican national conventions, and just before the stock market crash andpresidential debates.

Beginning October 6, Section 128 of the Emergency Economic Stabilization Act of 2008 allowed

the Federal Reserve System to pay interest on the excess balances, producing further pressure on

international credit markets. Excess on reserve balances topped $870 billion by the end of the

second week of January 2009. In comparison, the increase in reserve balances reached only $65

billion afterSeptember 11, 2001 before falling back to normal levels within a month.

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The root cause of the global financial crisis is deeply embedded in policy deficiencies in the

international financial system and in the unsustainable fundamentals of the world economy. The

prospect of a systemic world financial breakdown and, consequently, a long lasting economic

slowdown seems real. Now the complete financial deregulation of U.S. and Europe stands

discredited. The British Government has already bought shares in British banks and the US

Government has decided to buy. This will enable the Government to have a place on the boards

and to effectively control the financial institutions.

India and Recession

The contagion of the crisis has spread to India through various mechanisms by impacting

financial and real sectors of the economy, as well as affecting the business confidence.

Indias financial markets - equity markets, money markets, forex markets and credit markets -

came under pressure from a number of directions.

As a consequence of the global liquidity squeeze, Indian banks and corporate found their

overseas financing drying up, forcing corporates to shift their credit demand to the domestic

banking sector. The corporates withdrew their investments from domestic money market mutual

funds putting redemption pressure on the mutual funds and on non-banking financial companies

where the mutual funds companies had invested a significant portion of their funds.

The substitution of domestic financing for overseas financing affected money markets and credit

markets. The forex market also came under pressure because of reversal of capital flows as part

of the global de-leveraging process. Simultaneously, corporates were converting the funds raised

locally into foreign currency to meet their external obligations. These factors put downward

pressure on the rupee. Now with regard to the impact on the real sector, the transmission of the

crisis has been straight through the slump in demand for exports.

The United States, European Union and the Middle East, which account for three quarters of

Indias trade in goods and services, are in a downturn. Service export growth is also likely to be

affected adversely, as financial services firms traditionally large users of outsourcing services

are restructured. Remittances from migrant workers also will be downward, as the Middle East

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adjusts to lower crude prices and advanced economies go into a recession. The crisis also spread

through transmission of business sentiments - the-2- confidence levels. The ongoing turbulence in

the global markets prompted bankers to be risk averse and cautious about lending.

The Government and the RBI have responded to the unusual circumstances by way of

announcing fiscal and monetary stimulus packages.

There is evidence of domestic economic activity slowing down. Real GDP growth has moderated

in the first half of 2008/09. The services sector too, which has been our prime growth engine for

the last five years, is on the decline, mainly in construction, transport and communication, trade,

and hotels. For the first time in seven years, exports have declined in absolute terms during

October-December 2008. Recent data indicate that the demand for bank credit is slackening

despite comfortable liquidity in the system. Higher input costs and dampened demand have

dented corporate margins.

The index of industrial production has shown negative growth and investment demand has

decelerated. All these factors suggest that growth moderation may be steeper and more extended

than earlier projected. In addressing the crisis, India has several advantages also. Most notably,

the headline inflation, as measured by the wholesale price index, has fallen sharply, and recent

trends suggest a faster-than-expected reduction in inflation. The slowing domestic demand has

contributed to the disinflation. The decline in inflation will reduce input costs for corporates.

Furthermore, the decline in global crude prices and naphtha prices will reduce the size of

subsidies to oil and fertilizer companies, thus helping to earmark more funds for infrastructure

spending. It is also expected that imports will shrink more than exports keeping the current

account deficit modest. There are also several structural factors to our advantage.

First, notwithstanding the severity of the adverse shocks, Indias financial markets have shown

admirable resilience. The banking system remains sound, healthy, well capitalized and prudently

regulated. Second, our comfortable reserve position provides confidence to overseas investors.

Third, since a large majority of Indians do not participate in equity and asset markets, the

negative impact of the wealth loss effect that is plaguing the advanced economies will be quite

moderate. Consequently, consumption demand will prop up in course of time. Fourth, because of

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Indias mandated priority sector lending, institutional credit for agriculture will be unaffected.

The farm loan waiver package implemented by the Government will further insulate the

agriculture sector from the crisis. Finally, over the years, India has built an extensive network of

social safety-net programmes, including the flagship rural employment guarantee programme,

which will protect the poor from the extreme impact of the global crisis. Over the last five years,

India clocked an unprecedented nine per cent growth rate, driven largely by domestic

consumption, investment and foreign trade. At the heart of Indias growth were a growing

entrepreneurial spirit, rise in productivity and increase in savings. These fundamental strengths

continue to be in place. Nevertheless, the global crisis will dent Indias growth trajectory as

investments and exports will decline. However, once the global economy begins to recover,

Indias turn around will be swifter, backed by strong fundamentals. Meanwhile, the challenge for

the Government and the RBI is to manage the crisis, taking care of the poor and the vulnerable

sections of the population.

Figure 3.4

BSE sensex Changes During Recession Period

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3.2 COMPANY PROFILES

COMPANIES DESCRIPTION:

BIRLA SUNLIFE MUTUAL FUNDS

Birla Sun Life Asset Management Company Ltd. (BSLAMC), the investment managers of Birla

Sun Life Mutual Fund, is a joint venture between the Aditya Birla Group and the Sun Life

Financial Services Inc. of Canada. The joint venture brings together the Aditya Birla Group's

experience in the Indian market and Sun Life's global experience.

Since its inception in 1994, Birla Sun Life Mutual fund has emerged as one of India's leadingMutual Funds managing assets of a large investor base. The fund offers a range of investment

options, which include diversified and sector specific equity schemes, fund of fund schemes,

hybrid and monthly income funds, a wide range of debt and treasury products and offshore funds.

BSLAMC follows a long-term, fundamental research based approach to investment. The

approach is to identify companies, which have excellent growth prospects and strong

fundamentals. The fundamentals include the quality of the companys management, sustainability

of its business model and its competitive position, amongst other factors. Birla Sun Life Asset

Management Company has one of the largest team of research analysts in the industry, dedicated

to tracking down the best companies to invest in. Birla Sun Life AMC strives to provide

transparent, ethical and research-based investments and wealth management services.

Scheme: Birla Sun life Frontline Equity

Objective:Birla Sun Life Frontline Equity Fund is an open-ended diversified equity fund, which

invests in handpicked frontline stocks (i.e. stocks which have the potential of providing superior

growth opportunities) such that it is representative of all leading sectors of its chosen benchmark.

The scheme targets the same sectoral weights (+/- 5%) within its portfolio as the benchmark, the

BSE 200. However, the choice of stocks is not limited to the benchmark, thus providing a wider

universe of investible stocks.

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Investing across sectors ensures diversification and at the same time investing in frontline stocks

provides for a possibility of higher returns. Birla Sun Life Frontline Equity Fund is ideal for

investors looking at investing in quality stocks across the leading sectors of the economy.

The scheme aims to generate long-term capital growth, income generation and distribution of

dividend. It would target the same sectoral weights as BSE 200, subject to flexibility of selecting

stocks within a particular sector..

TABLE 3.1

Description of the Birla sun life frontline Equity

Mutual fund family Birla Sun life Mutual Fund

Fund class Equity Diversified

Launch Date August 2002

Fund Manager Mahesh Patil

Minimum Investment Rs.5000

Subsequent Investment Rs.1000

Minimum Withdrawal --

Minimum Balance --

Pricing Method Forward

Type Open End

Bench Mark BSE 200

Source: secondary data

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DSP Merrill Lynch Mutual Fund

DSP Merrill Lynch Limited (DSPML) - DSPML is a leading financial service provider in India.It is a culmination of a long standing relationship between DSP Financial Consultants Limited

(DSP), and Merrill Lynch and Co. (ML), the leading international capital raising, financial

management and advisory company.In India,

DSPML is the leading underwriter and broker for debt and equity securities and a leading advisor

to corporations and institutions. For private customers, our platform of products and services

provides access to a robust range of investing and wealth building tools with the personal

guidance of financial consultants. DSPML is also among the first firms to set up a full-fledged

research team in India. The Company is among the major players in the debt and equity markets

and is also a primary dealer of Government Securities.

DSP Merrill Lynch Limited is a full service investment banking and brokerage firm with a

leading position in helping clients to raise capital, mergers and acquisitions, securities research,

sales and trading and investment advisory activities. DSP Merrill Lynch Capital Limited is a

leading NBFC registered with the Reserve Bank of India. It offers solutions to clients in terms of

securities based loans, IPO financing, secured financing backed by receivables, real estate and

other collaterals and also structured products designed to meet the investment needs of clients. It

also makes principal investments in partnership with clients.

DSP Merrill Lynch Securities Trading Company Limited is an NBFC registered with the Reserve

Bank of India and carries on the activity of a primary dealer as permitted by the Reserve Bank of

India. It is one of the leading players in the sovereign, corporate bond and derivatives markets.

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Scheme: Opportunities Growth

Objective: The scheme seeks to achieve long-term capital appreciation by responding to the

dynamically changing Indian economy by moving across sectors such as the lifestyle, pharma,

cyclical and technology.

TABLE 3.2

Description about the fund:

Mutual fund family DSP Merillynch Mutual Fund


Launch Date August 2000

Fund Manager Anup Maheshwari



Minimum Withdrawal Rs.1000

Minimum Balance Rs.500


Type Open End

Bench Mark S & P CNX Nifty


ICICI Mutual Fund

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ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank - one of India's foremost

financial services companies-and Prudential plc - a leading international financial services group

headquartered in the United Kingdom. Total capital infusion stands at Rs. 47.80 billion, with ICICI Bank

holding a stake of 74% and Prudential plc holding 26%.Started their operations in December 2000 after

receiving approval from Insurance Regulatory Development Authority (IRDA). Today, our nation-wide

team comprises of 2099 branches (inclusive of 1,116 micro-offices), over 276,000 advisors; and 18

bancassurance partners.

ICICI Prudential is the first life insurer in India to receive a National Insurer Financial Strength rating of

AAA (Ind) from Fitch ratings. For three years in a row, ICICI Prudential has been voted as India's Most

Trusted Private Life Insurer, by The Economic Times - AC Nielsen ORG Marg survey of 'Most Trusted

Brands'. As we grow our distribution, product range and customer base, we continue to tirelessly uphold

our commitment to deliver world-class financial solutions to customers all over India.

Scheme: Prudential Growth

Objective :- The scheme seeks to generate long-term capital appreciation by investing predominantly in

equities that is 95% in equities while the rest would be invested in debt and money market instruments.

TABLE 3.3

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Description of the ICIC Prudential Growth

Mutual fund family ICICI Mutual Fund


Launch Date June 1998

Fund Manager Kaushik Roychaudhary






Type Open End

Bench Mark S & P CNX Nifty


HDFC Mutual Fund

HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,

1956, on December 10, 1999, and was approved to act as an Asset Management Company for the

HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.

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The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund

(HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF),

HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC CGF), HDFC

Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate

Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC

Capital Builder Fund (HCBF), HDFC TaxSaver (HTS), HDFC Prudence Fund (HPF), HDFC

High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF), HDFC MF Monthly

Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC Multiple Yield Fund

(HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005

(HMYF-Plan 2005), HDFC Quarterly Interval Fund (HQIF) and HDFC Arbitrage Fund (HAF).

The AMC is also managing 11 closed ended Schemes of the HDFC Mutual Fund viz. HDFC

Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure Fund, HDFC

Fixed Maturity Plans, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans -

Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V,

HDFC Fixed Maturity Plans - Series VI, HFDC Fixed Maturity Plans - Series VII and HFDC

Fixed Maturity Plans - Series VIII.

The AMC is also providing portfolio management / advisory services and such activities are not

in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from

SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio

Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration

is valid from January 1, 2007 to December 31, 2009.

Scheme : Equity Growth

Objective: The scheme seeks to provide long-term capital appreciation by predominantly investing in

high growth companies.

TABLE 3.4

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Description of the HDFC Equity Growth fund

Mutual fund family HDFC Mutual Fund


Launch Date December 1994

Fund Manager Prashanth Jain






Type Open End

Bench Mark S & P CNX 500


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J M Mutual Fund

JM Financial Asset Management Private Limited (AMC), Sponsored by J.M. Financial &

Investment Consultancy Services Pvt. Ltd. and JM Financial Ltd., JM Financial AssetManagement Pvt. Ltd. (formerly known as J.M. Capital Management Pvt. Ltd.) is registered

under the Companies Act, 1956 and was incorporated on June 9, 1994.

JM Financial Trustee Company Pvt. Ltd. has entered into an Investment Management Agreement

(IMA) on September 1, 1994 appointing JM Financial Asset Management Pvt. Ltd. as the AMC

for the Fund. The AMC has to submit quarterly reports and/or such other reports at such intervalsas may be prescribed by the Trustee or SEBI on the functioning of the Fund to the Trustee.

The AMC can be removed by the Trustee or by 75% of the Unit holders of the particular Fund,

subject to the approval of SEBI. The AMC will manage the Scheme(s) of the Fund, in accordance

with the provisions of Investment Management Agreement, the Trust Deed, the Regulations and

the investment objectives of the Schemes.

Scheme: Equity Growth

Objective: The scheme seeks long-term capital growth and appreciation through investment primarily in

equities.

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TABLE 3.5

Description of the JM Equity Growth

Mutual fund family J M Mutual Fund


Launch Date December 1994

Fund Manager Amandeep Chopra


Subsequent Investment --


Minimum Balance --


Type Open End

Bench Mark Sensex

Source: Secondary data

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Kotak Mutual Funds

Kotak Mahindra is one of India's leading financial institutions, offering complete financial

solutions that encompass every sphere of life. From commercial banking, to stock broking, to

mutual funds, to life insurance, to investment banking, the group caters to the financial needs of

individuals and corporates.

The group has a net worth of around Rs.3,200 crore and employs around 10,800 employees

across its various businesses servicing around 2.6 million customer accounts through a

A study on “Impact of Financial Crisis on Indian Mutual Funds”

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