A SUMMER INTERNSHIP PROJECT ON

“A STUDY ON CURRENCY DERIVATIVES (Options and its Strategies)”

SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE

TWO YEAR FULL TIME POST GRADUATE DIPLOMA IN MANAGEMENT

Prepared by:
Name : Garima Jain
Roll no. : 161212
Batch : 24th (2016-2018)

VIGNANA JYOTHI INSTITUTE OF MANAGEMENT

VJIM, Vignana Jyothi Nagar, Bachupally, (Via), Kukatpally, Hyderabad, Telangana 500090
Phone: 040 2304 4951, Website: www.vjim.edu.in

1
 Description of Internship

Title of SIP project : CURRENCY DERIVATIVES (Options and its Strategies)

Name of the student: Garima Jain
Name of the company: Sharekhan Ltd.
Department (where internship carried out):
Company mentor details:
Name: GVL Narayana Rao
Designation: Territory Manager
Contact details:
Email Id: [email protected]
Company address: Skill Spectrum, Flat No.202,
2nd floor, B/S TTD Temple,
Himayat Nagar, Hyderabad – 500 029
Contact number: 9701360910 / 9849930855
Website: www.sharekhan.com

2
 DECLARATION

I hereby declare that this project report titled “A STUDY ON CURRENCY DERIVATIVES”
Submitted by me is a bonafide work undertaken by me and it is not submitted to any other
institution or university for the award of any degree/ diploma certificate or published any time
before.

Name of the Student Signature of the student

Garima Jain

3
 COMPANY CERTIFICATE

This is to certify that Miss Garima Jain pursuing PGDM in VIGNANA JYOTHI INSTITUTE
OF MANAGMENT, BACUPALLY, HYDERABAD.

Has under gone the project work titled “A STUDY ON CURRENCY DERRIVATIVES
(OPTIONS AND ITS STRATEGIES)”

As a part of his PGDM programmed in our Organization during the period between 21.04.2017

to 24.06.2017.

Her conduct during the period is excellent, and we wish him all the best in his future endure.

For Sharekhan Ltd

GVL Narayana Rao

Territory Manager

CERTIFICATE

4
This is to certify that the Project Report titled _“A STUDY ON CURRENCY
DERRIVATIVES (OPTIONS AND ITS STRATEGIES)” being submitted to Vignana Jyothi
Institute of Management is a bonafide work done by MISS GARIMA JAIN, bearing roll
no.161212, under my guidance.

Date

Signature of the Guide

Name:

5
Executive Summary:-

“A STUDY ON CURRENCY DERRIVATIVES (OPTIONS AND ITS STRATEGIES)”

I have done my internship at Sharekhan Limited which is India’s second largest

retail broking house. The various services offered by the company include trading
in equities, commodities, futures and options as well as portfolio management
service.
The main purpose of the project is to study currency derivatives and how to use
options strategies profitably. During the project work, it was seen that there exists
a significant relation between spot price and option price.
Derivative is a contract between two or more parties whose value depends on
some other asset known as underlying asset. The underlying asset can be Metals
e.g. Gold, Silver, Copper, Zinc; Agricultural commodities such as wheat, sugar,
pulses, coffee; and financial assets like bonds and shares. When the underlying
asset is Currency Exchange rate, it is known as Currency Derivatives.
Currency Derivatives can be traded in futures as well as options. Four currency
pairs are available for futures trading (US Dollars, Japanese YEN, Great Britain
Pound and Euro). However, currency options are currently available only on US
Dollars.
Currency Derivatives segment was first set up by NSE after receiving approval
from SEBI. Futures trading platform was launched on 29 th August 2008 while
currency option trading was introduced on October 29, 2010.
Options is a contract in which the buyer of the option has the right not an
obligation to buy or sell the underlying asset. An option to buy is called the “Call”
option and the option to sell is called “Put” option. Spot price refers to the current
price of any security at which it can be bought or sold in the market. Strike price
or Exercise price is the price at which the option is to be exercised.
I am doing my internship at Sharekhan Limited which is India’s second largest
retail broking house. The various services offered by the company include trading
in equities, commodities, futures and options as well as portfolio management
service.
The main purpose of the project is to study currency derivatives and how to use
options strategies profitably. During the project work, it was seen that there exists
a significant relation between spot price and option price.

6
 TABLE OF CONTENTS

S.no Particulars Pg.no

1) Introduction of the company 9

2) Objective of study 10

3) PMCI Analysis 11

4) Management models 13

5)  Main report 21-62

 ULIP vs Mutual Funds

6) Relation between the conceptual learnings in the classroom and 63-65

observations in the market.

7) Result of the study in relation to the objective 70

8) Research methodology 71

9) Suggestion

10) Scope for further study 72

11) Bibliography

7
List of Tables

8
List of Figures

9
 PMCI Analyses of ShareKhan ltd.

PRODUCT

The following are the products and services of Sharekhan limited are as follows:

 Depository services
 Equity and derivatives trading
 Online services
 Commodity trading
 Dial and trade
 Portfolio management
 Share shops
 Fundamental research
 Technical research

Sharekhan also provides four in one account:

 Demat account
 Trading account for cash calculation

10
  Bank account for fund transfer
 Dial and trade for query related trading

MARKET

The stock broking market falls under monopolistic competition. There are many producers and
many consumers in the market, and no business has total control over the market price.
Consumers perceive that there are non-price differences among the competitor’s products and
there are few barriers to entry and exit. In stock broking market, there are various big companies
alongside Sharekhan they are- Karvy, ICICI direct, HDFC securities, Kotak securities etc.

The competition in this market is very stiff. At present Sharekhan major clients are trading
through online. Sharekhan has its branches all over the country and company is growing fast.

The stock broking companies not only do trading on behalf of its clients, but also provide them
important advice, which makes their work interesting.

COMPANY

Sharekhan is one of the top retail brokerage house in India with strong online trading platform.
The company provides equity based products (research, equities, derivatives, depository, margin
funding etc.). It is one of the largest networks in the country with 704 share shops in 280 cities
and India’s premier online trading portal. With their research expertise, customer commitment
and superior technology, they provide investors with end to end solutions in investments. They
provide trade execution services through multiple channels- an internet platform, telephone and
retail outlets.

Sharekhan has one of the best states of art web portal providing fundamental and statistical
information across mutual funds and IPOs. One can surf across 5500 companies in depth
information, details about more than 1500 mutual fund schemes and IPO data.

INDUSTRY:

The Financial Services (Diversified) Industry consists of a collection of companies that offer a

wide variety of products and services. Asset managers and credit card companies are the two
largest groups within the industry, but after that, little commonality exists. Banking, commercial
lending, insurance, student loan origination, pawn brokerage, tax preparation, and aircraft leasing
11
are just a few of the other businesses. Thus, given such a span of operating models and market
segments, it is important not to paint the industry with too narrow an investment brush.

12
\\\

13
 INTRODUCTION OF THE COMPANY:

 Sharekhan is India’s leading online retail broking house, founded by “Shripal Morakhia”
which was launched on February 8, 2000 as an online trading portal, Sharekhan has today
a pan-India presence with over 1,529 outlets serving 950,000 customers across 575 cities
in India.
 Sharekhan is ranked 2nd largest stock broker portal. It also has international presence
through its branches in the UAE and Oman.
 Sharekhan offers services like portfolio management, trade execution in equities, futures
& options, commodities, and distribution of mutual funds, insurance and structured
products.
 These services are backed by quality investment advice from an experienced research
team which offers investment and trading ideas based on fundamental and technical
research respectively, market related news, statistical information on equities,
commodities, mutual funds, IPOs and much more. Sharekhan is a member of the Bombay
Stock Exchange, the National Stock Exchange and the country’s two leading commodity
exchanges, the NCDEX and MCX.
 Sharekhan is also registered as a depository participant with National Securities
Depository and Central Depository Services.
 Sharekhan has set category leadership through pioneering initiatives like Trade Tiger, an
Internet-based executable application that emulates a broker terminal besides providing
information and tools relevant to day traders. Its second initiative, First Step, is targeted at
empowering the first-time investors.
 Sharekhan has also set its global footprint through the “India First” initiative, a series of
seminars conducted by Sharekhan to help the non-resident Indians participate and benefit
from the huge investment opportunities in India.

 MISSION:-
 To educate and empower the individual investor to make better investment decisions
through quality advice and superior service.

 VISION:-
 To be the best retail broking brand in the retail business of stock market.

 WEB ADDRESS: www.sharekhan.com

 SLOGAN: “Your guide to financial jungle”
 TYPE OF SITE: Business portal

14
  AVAILABLE IN: English
 OWNER: Shripal Morakhia

OBJECTIVE OF STUDY:-

 To measure and compare the performance of selected mutual funds schemes of different

fund house belonging to the same category.

 To analyse and compare performance of leaders and laggards using evaluation measures.

 And to study what differentiates leaders from laggards.

15
PMCI Analyses of ShareKhan ltd.
PRODUCT

The following are the products and services of Sharekhan limited are as follows:

 Depository services
 Equity and derivatives trading
 Online services
 Commodity trading
 Dial and trade
 Portfolio management
 Share shops
 Fundamental research
 Technical research

Sharekhan also provides four in one account:

 Demat account

16
  Trading account for cash calculation
 Bank account for fund transfer
 Dial and trade for query related trading

MARKET

The stock broking market falls under monopolistic competition. There are many producers and
many consumers in the market, and no business has total control over the market price.
Consumers perceive that there are non-price differences among the competitor’s products and
there are few barriers to entry and exit. In stock broking market, there are various big companies
alongside Sharekhan they are- Karvy, ICICI direct, HDFC securities, Kotak securities etc.

The competition in this market is very stiff. At present Sharekhan major clients are trading
through online. Sharekhan has its branches all over the country and company is growing fast.

The stock broking companies not only do trading on behalf of its clients, but also provide them
important advice, which makes their work interesting.

COMPANY

Sharekhan is one of the top retail brokerage house in India with strong online trading platform.
The company provides equity based products (research, equities, derivatives, depository, margin
funding etc.). It is one of the largest networks in the country with 704 share shops in 280 cities
and India’s premier online trading portal. With their research expertise, customer commitment
and superior technology, they provide investors with end to end solutions in investments. They
provide trade execution services through multiple channels- an internet platform, telephone and
retail outlets.

Sharekhan has one of the best states of art web portal providing fundamental and statistical
information across mutual funds and IPOs. One can surf across 5500 companies in depth
information, details about more than 1500 mutual fund schemes and IPO data.

INDUSTRY:

The Financial Services (Diversified) Industry consists of a collection of companies that offer a

wide variety of products and services. Asset managers and credit card companies are the two

17
largest groups within the industry, but after that, little commonality exists. Banking, commercial
lending, insurance, student loan origination, pawn brokerage, tax preparation, and aircraft leasing
are just a few of the other businesses. Thus, given such a span of operating models and market
segments, it is important not to paint the industry with too narrow an investment brush.

MANAGEMENT MODEL:-

ShareKhan : Incorporated in February 2000, Sharekhan is India’s 2nd largest stock broker as

per number of customers, providing brokerage services through its online trading website
Sharekhan.com and 1950 Share shops which includes branches & Franchises in more than 575
cities across India. They are full service broker and provide various other services like asset
management etc.

FULL SERVICE BROKER

 It is a financial institution that facilitates the buying and selling of financial securities
between a buyer and seller.
 Serves a clientele of investors who trade public stocks and other securities
  A traditional, or "full service," brokerage firm usually undertakes more than simply
carrying out a stock or bond trade.

MANAGEMENT:

 The staff of this type of brokerage firm is entrusted with the responsibility of
researching the markets to provide appropriate recommendations
 they direct the actions of pension fund managers and portfolio managers 

Primary Value Components

Investment services offered to individual investors come in many types of packaging and
delivery. Discount brokerage houses, full-service brokerage houses, load mutual fund firms, no-
load mutual fund firms, banks, insurance companies, private money management firms and fee-
based advisors all attempt to convince investors that they can provide the best available
alternatives when it comes to managing your money. Yet, despite their differences, each of these
delivery channels is "fishing from the same pond". Each is largely using the same broad asset
components - cash, bonds and stocks. The packaging may differ, but the components within the
package are largely the same. More importantly, they are each providing all or part of three
primary value components:
18
  Advice - The process of defining and implementing an appropriate investment strategy
given an investor's objectives and particular constraints.
 Portfolio Management -  The process of building and maintaining an investment portfolio
that properly addresses the strategy that the advisory component has defined.
 Administration - All the trading, clearing and reporting functions required to effectively
execute the portfolio management processes.

Interestingly, the pricing for these value components is remarkably similar regardless of the
delivery channel selected.

SWOT analysis of Sharekhan ltd:-

STRENGTHS:-

 Wide range of innovative financial products 

 Strong IT infrastructure and Intensive research on all industry sectors

 Have one of the largest network of branches across country

 Pan-India presence with over 1,500 outlets serving 950,000 customers across 450 cities

WEAKNESSES:-

 Penetration limited to urban areas

OPPORTUNITIES:-

 Growing rural market

 Earning Urban Youth
 Educating people about the benefits of investments to increase target audience

THEATS:-

 Stringent Economic measures by Government and RBI

 Entry of foreign finance firms in Indian Market

COMPETITION:-

 COMPETITORS:-
1) Reliance capital
2) India bulls

19
 3) Angel broking

PARENT COMPANY:- Sharekhan Financial services private. Ltd

INTRODUCTION:
 MUTUAL FUNDS:-
A mutual fund is a common pool of money into which investors place their contributions
that are to be invested in different types of securities in accordance with the stated
objective. An equity fund would buy equity assets – ordinary shares, preference shares,
warrants etc.

 EQUITY MUTUAL FUNDS:-

An equity fund is a mutual fund that invests principally in stocks. It can be actively or
passively (index fund) managed. Equity funds are also known as stock funds. Stock
mutual funds are principally categorized according to company size, the investment style
of the holdings in the portfolio and geography.

 HISTORY OF MUTUAL FUNDS:-

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank of India. The history
of mutual funds in India can be broadly divided into four distinct phases

First Phase - 1964-1987

Unit Trust of India (UTI) was established in 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)

20
1987 marked the entry of non-UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June
1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund
(Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set
up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004
crores.

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

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the
year in which the first Mutual Fund Regulations came into being, under which all mutual
funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer
(now merged with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive
and revised Mutual Fund Regulations in 1996. The industry now functions under the
SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets
of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under
management was way ahead of other mutual funds.

Fourth Phase - since February 2003

21
 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, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of
assets under management and with the setting up of a UTI Mutual Fund, conforming to
the SEBI Mutual Fund Regulations, and with recent mergers taking place among
different private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth.

 TYPES OF MUTUAL FUNDS:-

1) Money market funds:- These funds invest in short-term fixed income securities such as
government bonds, treasury bills, bankers’ acceptances, commercial paper and
certificates of deposit. They are generally a safer investment, but with a lower potential
return then other types of mutual funds. Canadian money market funds try to keep their
net asset value (NAV) stable at $10 per security.
2) Fixed income funds:- These funds buy investments that pay a fixed rate of return like
government bonds, investment-grade corporate bonds and high-yield corporate bonds.
They aim to have money coming into the fund on a regular basis, mostly through interest
that the fund earns. High-yield corporate bond funds are generally riskier than funds that
hold government and investment-grade bonds.
3) Equity funds:- These funds invest in stocks. These funds aim to grow faster than money
market or fixed income funds, so there is usually a higher risk that you could lose money.
You can choose from different types of equity funds including those that specialize in

22
 growth stocks (which don’t usually pay dividends), income funds (which hold stocks that
pay large dividends), value stocks, large-cap stocks, mid-cap stocks, small-cap stocks, or
combinations of these.
4) Balanced funds:- These funds invest in a mix of equities and fixed income securities.
They try to balance the aim of achieving higher returns against the risk of losing money.
Most of these funds follow a formula to split money among the different types of
investments. They tend to have more risk than fixed income funds, but less risk than pure
equity funds. Aggressive funds hold more equities and fewer bonds, while conservative
funds hold fewer equities relative to bonds.
5) Index funds:- These funds aim to track the performance of a specific index such as the
S&P/TSX Composite Index. The value of the mutual fund will go up or down as the
index goes up or down. Index funds typically have lower costs than actively managed
mutual funds because the portfolio manager doesn’t have to do as much research or make
as many investment decisions.

Active vs passive management:- Active management means that the portfolio manager
buys and sells investments, attempting to outperform the return of the overall market or
another identified benchmark. Passive management involves buying a portfolio of
securities designed to track the performance of a benchmark index. The fund’s holdings
are only adjusted if there is an adjustment in the components of the index.
6) Specialty funds:- These funds focus on specialized mandates such as real estate,
commodities or socially responsible investing. For example, a socially responsible fund
may invest in companies that support environmental stewardship, human rights and
diversity, and may avoid companies involved in alcohol, tobacco, gambling, weapons and
the military.
7) Fund-of-funds:- These funds invest in other funds. Similar to balanced funds, they try to
make asset allocation and diversification easier for the investor. The MER for fund-of-
funds tend to be higher than stand-alone mutual funds.
8) Sector Mutual Fund:-As the name implies, a sector fund is a mutual fund that invests in
a specific sector of the economy, such as energy or utilities. Sector funds come in many

23
 different flavours and can vary substantially in market capitalization, investment
objective (i.e. growth and/or income) and class of securities within the portfolio.

 Mutual funds are institutions that collect money from several sources - individuals or
institutions by issuing 'units', invest them on their behalf with predetermined investment
objectives and manage the same all for a fee. They invest the money across a range of
financial instruments falling into two broad categories – equity and debt. Individual
people and institutions no doubt, can and do invest in equity and debt instruments by
themselves but this requires time and skill on both of which there are constraints. Mutual
funds emerged as professional financial intermediaries bridging the time and skill
constraint. They have a team of skilled people who identify the right stocks and debt
instruments and construct a portfolio that promises to deliver the best possible
'constrained' returns at the minimum possible cost. In effect, it involves outsourcing the
management of money. More explicitly, the benefits of investing in equities and debt
instruments are supposedly much better if done through mutual funds.

This is because of the following reasons:-

 Firstly, fund managers are more skilled. They are trained to identify the best investment
options and to assess the portfolio on a continual basis.
 Secondly, they are able to invest in a diversified portfolio consisting of 15-20 different
stocks or bonds or a combination of them. For an individual such diversification reduces
the risk but can demand a lot of effort and cost.
 Each purchase or sale invites a cost in terms of brokerage or transactional charges such as
De-mat account fees in India. The need to possibly sell 'poor' stocks/bonds and buy 'good'
stocks/bonds demands constant tracking of news and performance of each company they
have invested in.
 Mutual funds are able to maintain and track a diversified portfolio on a constant basis
with lesser costs. This is because of the pecuniary economies that they enjoy when it
comes to trading and other transaction costs.
 Thirdly, funds also provide good liquidity. An investor can sell her/his mutual fund
investments and receive payment on the same day with minimal transaction costs as

24
 compared to dealing with individual securities, this totals to superior portfolio returns
with minimal cost and better liquidity.

This can be represented with the following flow chart:

Source: Association of Mutual Funds in India (AMFI)

In India one can gain additional benefit by investing through mutual funds tax savings.
Investment in certain types of funds such as Equity Linked Tax Savings Schemes (ELSS) allows
for certain amount of income tax benefits.

ASSET MANAGEMENT COMPANY:-

An asset management company (AMC) is a company that invests its clients' pooled fund into
securities that match its declared financial objectives. Asset management companies provide
investors with more diversification and investing options than they would have by themselves.
The term is most commonly used in the financial world to describe people and companies that
manage investments on behalf of others. These include, for example, investment managers that
manage the assets of a pension fund.

25
Equity : Large cap 5-year returns
Laggards Leaders
4.28 16.26
Sundaram Growth Fund SBI Bluechip Fund
6.24 14.34
IDFC Imperial Equity Fund Birla Sun Life Top 100 Fund
7.12 14.18
HSBC Dynamic Fund Birla Sun Life Frontline Equity Fund
7.75 13.69
HDFC Large cap Fund Quantum Long Term Equity Fund
7.75 12.97
Sundaram Select Focus Fund Reliance Top 200 Fund

SBI Blue chip Fund (G)

Investment Objective:
To provide investors with opportunities for long-term growth in capital through an active
management of investments in a diversified basket of equity stocks of companies whose market
capitalization is at least equal to or more than the least market capitalized stock of BSE 100
Index

Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Jan 20, 2006

Benchmark S&P BSE 100

Asset Size (Rs cr) 5,981.62 (Mar-31-2016)

Minimum Investment Rs.5000

Exit Load 1.00%

Load Comments Exit Load 1% if units are redeemed /

switched-out within 1 year from the

26
 date of allotment.

Asset Allocation:

Asset Allocation
4%
10%

86%

Equity Others Debt

Sectoral Portfolio

Sector Name Holding %

Bank - Private 12.57

Pharmaceuticals & Drugs 9.93

IT - Software 9.58

Refineries 7.13

Other 6.81

Finance NBFC 6.77

Automobiles - Passenger cars 5.03

Cement & Construction Materials 4.77

Pesticides & Agrochemicals 3.76

Engineering - Construction 3.39

Automobiles-Trucks/Lcv 3.20

27
Engineering - Industrial Equipments 2.43

Electronics - Components 2.03

Air Conditioners 1.92

Bearings 1.86

Diversified 1.80

Auto Ancillary 1.77

Finance - Housing 1.69

Hospital & Healthcare Services 1.56

Diamond & Jewelry 1.48

Bank - Public 1.39

Chemicals 1.22

Mining & Minerals 1.19

Consumer Food 1.04

Automobile Two & Three Wheelers 1.04

Unspecified 0.70

Household & Personal Products 0.65

Textile 0.65

Cigarettes/Tobacco 0.64

Power Generation/Distribution 0.35

28
TOP 10 HOLDINGS:
Equity Sector Value Asset %
(Rs cr)

CBLO(CCIL) Current Assets 7.37%

HDFC Bank Banking/Finance 419.53 6.62

Infosys Technology 346.21 5.46

Reliance Oil & Gas 283.68 4.47

Sun Pharma Pharmaceuticals 238.70 3.76

IndusInd Bank Banking/Finance 187.27 2.95

Larsen Engineering 173.18 2.73

HPCL Oil & Gas 168.98 2.66

UPL Chemicals 164.37 2.59

Maruti Suzuki Automotive 162.30 2.56

UltraTechCement Cement 160.04 2.52

29
Birla Sun life Top 100
Investment Objective
An open-ended growth scheme with the objective to provide medium to long term capital
appreciation, by investing predominantly in a diversified portfolio of equity and equity related
securities of top 100 companies as measured by market capitalization.
Scheme details

Fund Type Open-Ended

Investment Plan Growth

Launch date Sep 28, 2005

Benchmark NIFTY 50

Asset Size (Rs cr) 1,570.50 (Mar-31-2016)

Minimum Rs.5000
Investment

Exit Load 1.00%

Load Comments Exit load of 1% if redeemed within 365 days from the date of
allotment.

Asset Allocation

Asset Allocation
0%

Equity 99.87%
Debt 0.5%
C&C 0%

100%
30
Equity Debt C&C
Sectoral Allocation:

Sector %
Banking/Finance 25.84
Technology 12.51
Oil & Gas 9.17
Automotive 8.27
Pharmaceuticals 7.59
Engineering 6.16

Top Holdings 
Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 132.34 6.78

Infosys Technology 115.25 5.91

Reliance Oil & Gas 88.95 4.56

Larsen Engineering 79.00 4.05

ITC Tobacco 68.38 3.51

HCL Tech Technology 64.88 3.33

ICICI Bank Banking/Finance 60.03 3.08

Maruti Suzuki Automotive 56.32 2.89

IndusInd Bank Banking/Finance 55.78 2.86

31
Tata Motors Automotive 52.13 2.67

Birla Sun Life Frontline Equity Fund (G)

Investment Objective
An open-ended growth scheme with the objective of long term growth of capital, through a
portfolio with a target allocation of 100% equity by aiming at being as diversified across various
industries and or sectors as its chosen benchmark index, BSE 200.
Scheme details
Fund Type Open-Ended

Investment Plan Growth

Launch date Aug 30, 2002

Benchmark S&P BSE 200

Asset Size (Rs cr) 8,459.31 (Mar-31-2016)

Minimum Rs.5000
Investment

Exit Load 1.00%

Load Comments Exit Load of 1% if redeemed within 365 Days from the date of
allotment.

Asset Allocation:

32
 Asset Allocation

2%
3% Equity
Debt
Others

95%

Sector Allocation 

Sector %
Banking/Finance 28.37
Technology 11.07
Automotive 8.29
Oil & Gas 8.04
Pharmaceuticals 7.32
Engineering 7.11

Top Holdings (May 31, 16)

Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 840.82 7.10

Infosys Technology 704.95 5.95

Reliance Oil & Gas 525.61 4.44

33
Larsen Engineering 487.61 4.12

ITC Tobacco 437.11 3.69

ICICI Bank Banking/Finance 374.35 3.16

Maruti Suzuki Automotive 318.31 2.69

IndusInd Bank Banking/Finance 309.38 2.61

HCL Tech Technology 304.13 2.57

Tata Motors Automotive 287.67 2.43

Quantum Long Term Equity Fund (G)

Investment Objective
The investment objective of the Scheme is to achieve long-term capital appreciation by investing
primarily in shares of companies that will typically be included in the BSE 200 Index and are in
a position to benefit from the anticipated growth and development of the Indian economy and its
markets.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date Feb 25, 2006
Benchmark S&P BSE SENSEX
Asset Size (Rs cr) 957.80 (Mar-31-2016)
Minimum Rs.500
Investment

Asset Allocation (%)(May 31, 16)

Equity 95.55
Others 0.00
Debt 0.00
Mutual Funds N.A

34
Money Market 0.09
Cash / Call 4.36

Asset Allocation

4%
0%
Equity
Money Market
Cash/call

96%

Sector Allocation (May 31, 16)

Sector % 1-Year
HighLow
Automotive 24.22 24.22 8.19
Banking/Finance 15.16 16.10 8.75
Technology 15.14 15.94 2.91
Oil & Gas 13.05 13.86 5.88
Services 7.30 7.30 2.34
Utilities 6.55 6.86 2.68

Top Holdings (May 31, 16)

Equity Sector Value Asset %
(Rs cr)

Bajaj Auto Automotive 41.57 8.07

35
Infosys Technology 37.66 7.31

Hero Motocorp Automotive 35.13 6.82

HDFC Banking/Finance 33.15 6.43

TCS Technology 27.06 5.25

Indian Hotels Services 24.46 4.75

Tata Motors Automotive 22.51 4.37

Tata Chemicals Chemicals 20.72 4.02

Petronet LNG Oil & Gas 20.68 4.01

NTPC Utilities 20.06 3.89

36
Reliance Top 200 Fund
Investment Objective
The primary investment objective of the scheme is to seek to generate long term capital
appreciation by investing in equity and equity related instruments of companies whose market
capitalization is within the range of highest & lowest market capitalization of BSE 200 Index.
The secondary objective is to generate consistent returns by investing in debt and money market
securities.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date Jun 12, 2007
Benchmark S&P BSE 200
Asset Size (Rs cr) 3,460.84 (Mar-31-2016)
Minimum Rs.5000
Investment

Asset Allocation (%)(May 31, 16)

Equity 98.42
Others 1.29
Debt 0.00
Mutual Funds N.A
Money Market 0.63
Cash / Call -0.34

37
 Asset Allocation

1%
2%2%
Equity
Others
mone maarket
cash/call

95%

Sector Allocation (May 31, 16)

Sector % 1-Year
HighLow
Banking/Finance 23.97 26.94 22.43
Engineering 14.74 16.22 12.83
Oil & Gas 13.10 15.10 10.68
Automotive 12.36 13.91 9.47
Technology 8.40 10.85 8.40
Tobacco 5.75 5.75 1.98

Top Holdings (May 31, 16)

Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 141.84 6.64

SBI Banking/Finance 133.23 6.24

Larsen Engineering 125.25 5.86

38
ITC Tobacco 122.87 5.75

ICICI Bank Banking/Finance 110.08 5.15

Tata Motors Automotive 105.72 4.95

Axis Bank Banking/Finance 97.89 4.58

Reliance Oil & Gas 95.79 4.48

HCL Tech Technology 90.63 4.24

Infosys Technology 88.78 4.16

39
LAGGARDS:
Sundaram Growth Fund:
Investment Objective
To achieve capital appreciation by investing predominantly in equities and equity-related
instruments. Income Generation would be the secondary consideration.

Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date April-1997
Benchmark S&P BSE 200
Asset Size (Rs cr) 210 (Mar-31-2016)
Minimum Rs.5000
Investment

Asset Allocation (%)(May 31, 16)

Equity 88.61
Others 10.17
Debt 0.00
Mutual Funds N.A
Money Market 0.00
Cash / Call 1.24

40
 Asset Allocation

10% 1%
Equity
Others
Cash/Call

89%

Sector Allocation (May 31, 16)

Sector % 1-Year
HighLow
Banking/Finance 26.71 27.27 26.55
Technology 14.91 15.73 13.06
Automotive 10.33 10.33 7.39
Oil & Gas 7.01 8.89 7.01
Pharmaceuticals 6.10 7.33 5.99
Tobacco 5.90 6.19 5.09

41
Top Holdings (May 31, 16)
Equity Sector Value Asset %
(Rs cr)

Infosys Technology 15.86 7.51

HDFC Bank Banking/Finance 14.77 7.00
ITC Tobacco 12.46 5.90
HDFC Banking/Finance 12.38 5.86
Reliance Oil & Gas 9.58 4.54
TCS Technology 8.74 4.14
ICICI Bank Banking/Finance 8.69 4.11
Larsen Engineering 7.52 3.56
Tata Motors Automotive 6.71 3.18
Axis Bank Banking/Finance 5.46 2.59

42
IDFC Imperial Equity Fund:
Investment Objective: The investment objective of the Scheme is to seek to generate capital
appreciation and/or provide income distribution from a portfolio of predominantly equity and
equity related instruments. There is no assurance or guarantee that the objectives of the scheme
will be realized.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date March-2006
Benchmark NIFTY 50
Asset Size (Rs cr) 108 (Mar-31-2016)
Minimum Rs.5000
Investment

Asset Allocation (%)(May 31, 16)

Equity 90.79
Others 2.08
Debt 0.00
Mutual Funds N.A
Money Market 10.73
Cash / Call -3.60

43
 Asset Allocation

3%
10%
Equity
2%
Others
Money Market
Cash/call

85%

Sector Allocation (May 31, 16)

Sector % 1-Year
HighLow
Banking/Finance 27.32 30.80 22.55
Technology 12.53 14.69 10.35
Automotive 10.32 13.59 8.91
Media 7.12 7.12 3.08
Cons NonDurable 7.07 8.72 2.85
Pharmaceuticals 5.86 9.78 5.86

44
 Top Holdings (May 31, 16)
Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 10.64 9.59

Infosys Technology 9.99 9.01
ICICI Bank Banking/Finance 6.12 5.51
Maruti Suzuki Automotive 4.99 4.50
Tata Motors Automotive 4.60 4.14
Sun Pharma Pharmaceuticals 4.58 4.13
Zee Entertain Media 4.43 4.00
Axis Bank Banking/Finance 4.12 3.72
Kotak Mahindra Banking/Finance 3.73 3.37
UltraTechCement Cement 3.55 3.20

45
HSBC Dynamic Fund:

Investment Objective:
To provide long term capital appreciation by allocating funds in equity and equity related
instruments. It also has the flexibility to move, entirely if required, into debt instruments in times
that the view on equity markets seems.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date Sep-2007

Benchmark S&P BSE 200

Asset Size (Rs cr) 49 (Mar-31-2016)
Minimum Rs.10000
Investment
Asset Allocation (%)(Jun 30, 16)
Equity 80.92
Others 0.00
Debt 0.00
Mutual Funds N.A
Money Market 0.00
Cash / Call 19.09

46
 Asset Allocation

19% Equity
Cash/call

81%

Sector Allocation (Jun 30, 16)

Sector % 1-Year
HighLow
Banking/Finance 22.89 45.64 21.23
Technology 10.27 21.56 8.79
Automotive 9.35 19.52 7.36
Oil & Gas 6.40 12.74 4.30
Pharmaceuticals 6.30 12.20 5.84
Engineering 6.26 12.78 3.98

Top Holdings (Jun 30, 16)

Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 0.05 7.17

Infosys Technology 0.04 6.90
Reliance Oil & Gas 0.04 6.40
ITC Tobacco 0.04 5.99
ICICI Bank Banking/Finance 0.03 5.13

47
Larsen Engineering 0.03 4.41
Sun Pharma Pharmaceuticals 0.03 4.27
Tata Motors Automotive 0.03 4.20
HDFC Banking/Finance 0.02 3.82
IndusInd Bank Banking/Finance 0.02 3.39

48
Sundaram Select Focus Fund:

Investment Objective
To achieve capital appreciation by investing in equity and equity related instruments of select
stocks.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date July 2002
Benchmark NIFTY 50
Asset Size (Rs cr) 344 (Mar-31-2016)
Minimum Rs.5000
Investment

Asset Allocation (%)(May 31, 16)

Equity 88.77
Others 0.06
Debt 1.82
Mutual Funds N.A
Money Market 0.00
Cash / Call 9.34

49
 Asset Allocation

9%
2% Equity
Debt
Cash/Call

89%

Sector Allocation (May 31, 16)

Sector %
Banking/Finance 27.56
Technology 18.25
Oil & Gas 10.02
Tobacco 7.39
Automotive 5.98
Engineering 3.84

Top Holdings (May 31, 16)

Equity Sector Value Asset %
(Rs cr)

HDFC Bank Banking/Finance 34.28 9.91

Infosys Technology 31.84 9.21
ITC Tobacco 25.55 7.39

50
TCS Technology 19.27 5.57
Reliance Oil & Gas 16.28 4.71
Larsen Engineering 13.26 3.84
Kotak Mahindra Banking/Finance 13.10 3.79
ICICI Bank Banking/Finance 11.99 3.47
SBI Banking/Finance 11.27 3.26
Axis Bank Banking/Finance 10.30 2.98

HDFC Large Cap Fund:

Investment Objective: Seeks to generate long term capital appreciation by investing primarily
in equity and equity related securities.
Scheme details
Fund Type Open-Ended
Investment Plan Growth
Launch date Feb 18, 1994
Benchmark S&P BSE 100
Asset Size (Rs cr)  1,147 (Mar-31-2016)
Minimum Rs.5000
Investment
Asset Allocation (%)(May 31, 16)
Equity 90.59
Others 7.00
Debt 0.00
Mutual Funds N.A
Money Market 0.00
Cash / Call 2.41

51
 Asset Allocation

7% 2%
Equity
Others
Cash/Call

91%

Sector Allocation (May 31, 16)

Sector % 1-Year
HighLow
Banking/Finance 32.73 38.08 27.56
Oil & Gas 17.46 17.46 14.25
Automotive 12.94 12.94 10.85
Technology 11.60 12.74 9.47
Engineering 8.35 8.35 5.76
Telecom 3.27 5.09 3.27

Top Holdings (May 31, 16)

Equity Sector Value Asset %
(Rs cr)

Infosys Technology 100.00 8.74

SBI Banking/Finance 96.23 8.41
Larsen Engineering 95.54 8.35

52
Reliance Oil & Gas 89.55 7.82
HDFC Bank Banking/Finance 86.75 7.58
Axis Bank Banking/Finance 85.01 7.43
ICICI Bank Banking/Finance 82.94 7.25
Tata Motors (D) Automotive 73.15 6.39
BPCL Oil & Gas 63.11 5.51
Maruti Suzuki Automotive 41.62 3.64

53
Fund Fund Launched Sharpe SD Beta Value 3 Months Industry 5 Yr Industry
Name type Researc Returns(Sh Average Return Average 5
h ort term) 3 Months s(Long years
Ratings term)
SBI Blue Open- Jan20, 2006 1.17 14.31 0.90 ***** 11.34 8.1 16.26 15.7
Chip (G) ended(Gr
owth)
Birla Open- Sep 28, 2005 1.00 15.92 1.01 ***** 10.99 8.1 14.34 15.7
Sun life ended
Top (Growth)
100(G)

Birla Open- Aug 30, 0.95 15.46 0.99 ***** 11 8.1 14.16 15.7
Sun Life ended(Gr 2002
Frontline owth)
Equity
Fund (G)

Quantu Open- Feb 25, 0.94 15.73 0.96 ***** 12.81 8.1 13.69 15.7
m Long ended(Gr 2006
Term owth)
Equity
Fund (G)

Reliance Open- Jun 12, 0.93 17.34 1.06 ***** 10.35 8.1 12.97 15.7
Top 200 ended(Gr 2007
Fund owth)

54
Fund Fund type Launched Sharpe SD Beta Value 3 Months Industry 5 Yr Industr
Name Resear Returns(S Average Returns y
ch hort term) 3 Months (Long Average
Rating term) 5 years
s
Sundara Open- April- 0.26 17.77 1.13 * 9.09 8.1 4.28 15.7
m ended(Growth 1997
Growth )
Fund
IDFC Open-ended March- 0.56 14.34 0.92 * 9.25 8.1 6.24 15.7
imperial (Growth) 2006
equity
fund

HSBC Open- Sep-2007 0.65 12.18 0.78 ** 9.34 8.1 7.12 15.7
Dynamic ended(Growth
Fund )

Sundara Open- Jul-2002 0.55 15.52 0.99 ** 7.87 8.1 7.75 15.7
m Select ended(Growth
focus )
fund

HDFC Open- Feb-1994 0.37 15.51 0.98 Unrate 10.39 8.1 7.75 15.7
large cap ended(Growth d
fund )

55
 FUND SECTORAL ALLOCATION
BANKING/FINANC TECHNOLOGY OIL&GAS PHARMA AUTOMOTIVE ENGINEERING
E
SBI BLUE CHIP 12.57% 9.58% 7.13% 9.93% 8.23% 9.23%
BIRLA SUN 25.84% 12.51% 9.17% 7.59% 8.27% 6.16%
LIFE TOP 100
BIRLA SUN 28.37% 11.07% 8.29% 7.32% 8.29% 7.11%
LIFE
FRONTLINE
EQUITY
QUANTUM 15.16% 15.14% 13.05% SERVICES 24.22% UTILITIES
LONG-TERM (7.30%) (6.55%)
EQUITY
RELIANCE 23.97% 8.40% 13.10% Tabaco (5.75%) 12.36% 14.74%
TOP 200
SUNDARAM 26.71% 14.91% 7.01% 6.10% 10.33%
GROWTH
IDFC 27.32% 12.53% - 5.86% 10.32% -
IMPERIAL
EQUITY
HSBC 22.89% 10.27% 6.40% 6.30% 9.35% 6.26%
DYNAMIC
HDFC LARGE 32.73% 11.60% 17.46% 12.94% 8.35%
CAP
SUNDARAM 27.56% 18.25% 13.02% 5.98% 3.84%
SELECT
FOCUS

56
57
Sharpe Ratio

The Sharpe ratio represents tradeoff between risk and returns. At the same time it also factors in
the desire to generate returns, which are higher than those from risk free returns. Mathematically
the Sharpe ratio is the returns generated over the risk free rate, per unit of risk. Risk in this case
is taken to be the fund's standard deviation. As standard deviation represents the total risk
experienced by a fund, the Sharpe ratio reflects the returns generated by undertaking all possible
risks. It is thus one single number, which represents the tradeoff between risks and returns. A
higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk.

Sharpe ratio provides an unbiased look into fund's performance. This is because they are based
solely on quantitative measures. However, these do not account for any risks inherent in a fund’s
portfolio. For example, if a fund is loaded with technology stocks and the sector is performing
well, then all quantitative measures will give such a fund high marks. But the possibility of the
sector crashing and with it the fund sinking is not calculated. In view of these possibilities
quantitative tools should be used along with information on the nature of the funds strategies, its
fund management style and risk inherent in the portfolio. Quantitative tools can be used for
screening but they should not be the only indicator of a fund's performance.

The Sharpe ratio is one of the most useful tools for determining a fund's performance. This
measure is used the world over and there is no reason why you as an in investor should not use it.

What it indicates 

This ratio shows the return per unit of the total risk taken by the scheme. 

How is it calculated 

(Return - risk free return) ÷ standard deviation 

Implications for investors 

Compare only within categories. Higher than category average Sharpe ratio indicates that the
fund manager was able to generate higher return per unit of total risk. 

58
Standard Deviation

Standard deviation is a measure of total risks of a fund. In other words it measures the volatility
of returns of a fund. It indicates the tendency of the funds NAV to rise and fall in a short period.
It measures the extent to which the NAV fluctuates as compared to the average returns during a
period.

A fund that has a consistent four –year return of 3% for example would have a mean or average,
of 3%. The standard deviation for this fund would then be zero because the fund's return in any
given year does not differ from its four year mean of 3%. On the other hand, a fund that in each
of the last four years returned -5%, 17%, 2%, and 30% will have a mean return of 11%. The fund
will also exhibit a high standard deviation because each year the return of the fund differs from
the mean return. The fund is therefore more risky because it fluctuates widely between negative
and positive returns within a shorter period. A higher standard deviation means that the returns of
the fund have been more volatile than a fund having low standard deviation. In other words high
standard deviation means high risk.

What it indicates 

This is a measure of the volatility in a fund's returns and, therefore, indicates the risk in a fund’s
portfolio. 

How is it calculated 

First, calculate the average of daily returns. Deduct this average from each daily return and
square the difference. The sum of all these squared values is then divided by the number of days
to get the variance. And the square root of the variance is standard deviation. 

Implications for investor

Lower the deviation, the better it is. However, one needs to compare it only within categories.
The range can be below 1% for liquid funds and 20%-40% for equity funds. 

59
Beta

Beta is a statistical measure that shows how sensitive a fund is to market moves. If the Sensex
moves by 25 per cent, a fund's beta number will tell you whether the fund's returns will be more
than this or less. The beta value for an index itself is taken as one. Equity funds can have beta
values, which can be above one, less than one or equal to one. By multiplying the beta value of a
fund with the expected percentage movement of an index, the expected movement in the fund
can be determined. Thus if a fund has a beta of 1.2 and the market is expected to move up by ten
per cent, the fund should move by 12 per cent (obtained as 1.2 multiplied by 10). Similarly,  if
the market loses ten per cent, the fund should lose 12 per cent.

If you would like to beat the market on the upside, it is best to invest in a high-beta fund. But you
must keep in mind that such a fund will also fall more than the market on the way down.
Similarly, a low-beta fund will rise less than the market on the way up and lose less on the way
down. When safety of investment is important, a fund with a beta of less than one is a better
option. Such a fund may not gain much more than the market on the upside; it will protect
returns better when market falls.

Essentially, beta expresses the fundamental trade-off between minimizing risk and maximizing
return. A fund with a beta of 1 will historically move in the same direction of the market. A beta
above 1 is more volatile than the overall market, while a beta below 1 is less volatile. So while
you can expect a high return from a fund that has a beta of 2, you will have to expect it to drop
much more when the market falls. The effectiveness of the beta depends on the index used to
calculate it. It can happen that the index bears no correlation with the movements in the fund.
What it indicates 

It measures the fund's performance compared to the market. 

How is it calculated 

The variance of market index is calculated as explained for Standard Deviation. To calculate co-
variance between market index and the scheme, the difference between daily returns of the

60
scheme and the index is first squared. The sum of all these squared values is divided by the
number of days to get the covariance. Finally, beta is calculated by dividing the co variance
between market index and the scheme with the variance of market index. 

Implications for investors 

A beta value of one means the fund's NAV moves with the market. Less than one means the fund
is less volatile than the market, and above one indicates it is more volatile than the market. 

.. 

61
Leader Analysis:

1. SBI Blue Chip Fund:

 The objective of SBI Blue-chip Fund is to invest in a diversified basket of stocks
whose market capitalization is at least equal to or more than the benchmark BSE
100. 
 The fund has close to 85 per cent of its portfolio invested in large-cap stocks.
Since inception
 The fund invests predominately in large-cap companies with market
capitalization of ₹10,000 crore and above at any point in time. 
 The fund is overweight on the pharma, construction and engineering sectors,
compared with its benchmark weightage. Conversely, it is underweight in
financials and software.(most of the similar funds have more weights in financials
and software whereas it differs with its benchmark weightage).
 Cyclicals, such as cement and petroleum do share high sector allocations.
 Asset Allocation: The fund has an exposure of at least 70 per cent and maximum
100 per cent in the equity stocks of large companies, which are market leaders in
their industries. The fund invests in blue chips with less uncertainty in top line/
bottom line growth, good credit ratings and excellent brand equity amongst the
general public and widespread interest amongst investing public. The fund can
also invest up to 10 per cent of its assets in foreign securities/ADRs/GDRs
which are also blue chips. 
 The scheme may also consider investing up to 30 per cent in debt instruments or
in money market instruments on defensive considerations. As per the latest fact
sheet the fund had 71.49 per cent allocation to large cap stocks and 14.87 per
cent to mid-cap stocks and had 13.64 per cent in cash and other debt assets.

62
2. Birla Sun Life Top 100:
 Strategy: The fund predominantly invests in stocks of the top 100 companies as
measured by market capitalization. It is allowed to invest outside this basket as a
diversification measure. Funds focused on large cap stocks are considered to be a less
risky bet as returns tend to be less volatile and this fund may be suited to conservative
investors on that score.
 Low risk, high consistency in returns and a defensive strategy are facets which make
Birla Sun Life Top 100 (BSL Top 100) a suitable bet for conservative investors.
 Benchmarked to the Nifty 50, the fund maintains a large-cap focus in all market
conditions.
 It takes cash and debt calls as well as finds refuge in sectors, such as pharma and
consumer non-durables, to cut losses in tough times.
 BSL Top 100 beats its benchmark over one-, three- and five-year periods as well as in
rising and falling markets. 
 It also sports the highest Sharpe ratio the peer group, indicating the best risk adjusted
performance.
 Secondly, the fund also scores on consistency.
 The fund exhibits an ability to outperform its benchmark, the Nifty, in falling and
volatile markets. Two factors help in holding the fort in such conditions. One, its deft
reduction in equity holdings when markets seesaw; two, its appropriate sector choices.
 In the 2008-09 market crash, for instance, it brought down equity holdings to 80-85 per
cent, stepping up on cash and debt. Ditto in 2011. At the same time, it is quick to spot
the changing tide. This has helped the fund latch on to and gain from rallies — 2012
and 2014 being good examples. The fund outperformed the above mentioned peers by a
wide margin in these rallies.

 Appropriate sector choices — be it turning to the defensive pharma space in choppy

markets, or riding on industrial capital goods and construction in 2010 and 2014 — also
stand BSL Top 100 in good stead.

63
  The fund generally holds a diffused portfolio of 60-70 stocks. Rarely do bets on
individual stocks go above 5 per cent, thus bringing down concentration risk. Banks
and software are normally the top sectoral bets.
 But the fund has cautiously reduced holdings in this space in the last few months, with
issues such as stagnant loan growth and ballooning non-performing assets plaguing
many banks.
 With the IT sector too facing rough weather, holdings have been pared here. BSL Top
100 is now betting on a blend of cyclical defensive stocks through higher holdings in
the auto and pharma space.
 Smart moves :The fund has been nimble on its feet in the last few months, picking up
stocks with strong growth prospects

3. Birla Sun Life Frontline Equity Fund:

 The fund invests mostly in large-caps (more than 80 per cent of the
portfolio across market cycles for the past few years). 
 Skilful rotation:Birla Sun Life Frontline Equity holds stocks across
multiple sectors, with adept rotation holding it in good stead. For
instance, the fund was quick to increase exposure to cyclicals, such
as banks and autos when the market rally began in August 2013.
 Portfolio and strategy: Less-volatile large-cap stocks dominate the
fund’s portfolio, making up more than 90 per cent of its corpus —
this lends the fund much stability.
 Birla Sunlife Frontline Equity Fund has been quick on its feet,
increasing exposure to cyclical sectors such as banks and autos
since August 2013, when the bull-run had just started; this has held
the fund in good stead.
 It has also benefited from smart stock picks such as Bajaj Finance
and YES Bank which nearly tripled last year.
 The fund has remained mostly fully invested in equity and takes
cash calls to the tune of about 5 per cent during volatile periods. But

64
 it has also been nimble enough to shore up equity exposure in quick
time when the tide turns.
4. Reliance Top 200 Fund:
 Reliance Top 200 seeks to limit itself to stocks that are part of the benchmark, it
does take a few active calls outside the BSE200 Index.
 Some well-timed sector moves have also helped it tide over turbulence. For
instance, in 2011, it gradually reduced holdings in the banking space that took
the heat and instead found refuge in consumer non-durables, a pick that
reasonably defended it from the fall.
 he fund has stayed true to its large-cap focus over the past six years

 The fund strayed away from the norm in 2012 and didn’t add much to holdings
in bank stocks, but it already had a high exposure in the sector to begin with.
Banks and non-banking financials make up the biggest portfolio share, at 24 per
cent.
 The fund also didn’t add to the fancied pharmaceutical sector, just retaining
holdings there. Uncommon sector picks include entertainment it 2012 and retail
in 2011. Its selections have been market outperformers.
 The fund has got other sector calls right too. For instance, it built up holding in
auto stocks a little into the start of the 2009-10 uptrend. Similarly, it exited
underperformer steel early in 2012, which it had significantly picked up the year
before. It also gradually pulled out of the power sector over a period of two years
by 2011. The fund, however, has a strong focus on oil and refinery stocks, which
have been on a muted run for some time now. Similarly, it kept adding to holding
in the realty sector.
 Software up:While petroleum products, banks and software have always been
among the top sector picks, the fund has rightly increased holdings in the
software space from mid-2013 onwards, choosing large-caps such HCL, Wipro
and TCS.

65
 5. Quantum Long Term Equity Fund:
 Quantum Long-Term Equity Fund has managed to comfortably beat its
benchmark over one-, three- and five-year periods.
 Quantum Long Term Equity also scores on consistency. The scheme’s
annual returns over the past five years have been higher than its
benchmark almost three-fourths of the time.
  A value-based approach to investing has been adopted by the scheme,
with a predominantly large-cap bias.
 It takes heavy cash positions during the periods when markets run up too
quickly or if there are very limited value picks available. While this
provides adequate protection against losses, the fund may not be first off
the block in a rally. But sooner or later, it catches up.
 Quantum Equity adopts a ‘buy and hold’ strategy.
 In terms of sectors too, there is a fair degree of stability. Compared with
most other funds that have banking as their top sector, Quantum Equity
relies on auto and software.
 Due to its valuation-based strategy and defensive approach of moving to
cash or debt, the fund also contains downsides well during volatile
phases.

LAGGARDS:

1. Sundaram Growth Fund:

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  Sundaram Growth Fund (9.0% CAGR over 3-Yr, 19.9% CAGR over 5-Yr) was a
relative underperformer in the tech rally in 1999-2000.
 There was a simple reason behind this. Sundaram Growth Fund has a provision
that does not allow the fund manager to invest more than 5% of the fund's assets
in a single stock.
 In a rally, should the stock appreciate beyond 5%, the fund manger must sell the
stock to maintain the 5% cap.
 Likewise, the fund also has a sectoral cap. Obviously, this does not allow the fund
to 'participate' in a rally like its peers who do not have a cap on a stock/sector.
 This fund never recovered after the market crashes that occurred during 2008
period. “The past few years have been volatile for equity markets, and those funds
which have not been able to protect the downside risk well, have typically
underperformed.
 Funds that have stayed overweight on capital goods, infrastructure and financial
bets over the past couple of years have underperformed. However, those that were
able to quickly realign their portfolios to defensive themes like consumption and
healthcare were able to buffer losses during the market downturn of 2011. 

2. IDFC Imperial Equity Fund:

 The fund figures among the underperformers in the large-cap category on one-and three-
year basis.
 Sector and stock choices that didn’t pan out well, in addition to higher allocation towards
short-term debt instruments (call and money market instruments) took a toll on the fund’s
one- and three-year returns. The fund has delivered lower than the category average in
this period.
 Analysis of the fund’s historical asset allocation trend reveals that it has traditionally had
a higher allocation towards debt instruments.

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 While this did help the fund contain the downside in falling markets, it weighed on
performance in recovery phases.
 For instance, during the period January 2008 to April 2009, while Nifty lost over 43 per
cent, the fund managed to arrest the slide at 33 per cent. But, the fund lost out in the
recovery between April 2009 and December 2010.
 Reducing exposure in outperforming sectors such as healthcare, automobiles, and
consumer durables impacted the fund’s performance.
 Increasing holdings in high beta metal and oil stocks dragged the performance.
  BANKING AND FINANCE STOCKS ACCOUNT FOR ABOUT A THIRD OF THE
PORTFOLIO. TOP 10 STOCKS ACCOUNT FOR ALMOST 60 PER CENT OF THE
SCHEME’S TOTAL ASSETS, INCREASING CONCENTRATION RISKS.

3. Sundaram Select Focus Funds:

  Launched in July 2002, the fund aimed at focusing on only a select number of stocks.
 Typically, this would mean that the top ten stocks account for about 60-70 per cent of the
assets. Such a strategy provides scope for gains if concentrated bets are made on the right
stocks.
 The portfolio is akin to that of several other diversified funds. The top ten stocks account for
only about 50 per cent of the total assets, more or less the same as other funds.
 Taking a concentrated exposure in a few companies further adds to the risk of the portfolio.
 An error of judgment on either sector or stock positions could lead to substantial
underperformance with such a strategy.
 The fund was overweight in Energy (oil & Gas) during late 2008 and early 2009; it increased
its holding in this sector to as high as 31 per cent in May 2009. However, thereafter, the fund
reduced its exposure. Oil & Gas sector found its place in the top five sector allocation and the
fund has almost 13 per cent exposure to this sector.
 Reliance Industries has been the fund’s top pick consistently over the years. Over the years,
the stock has given a negative return of almost 5 per cent, underperforming Nifty and Sensex.
 The fund had earlier held exposure to real-estate sector, a heavy underperformer for the past
few years, Unitech and Sobha Developers. Further, the fund significantly reduced its
holdings in telecom and metals sectors.
 Compared to the benchmark average it has more % of scripts which are very sensitive.

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4. HSBC Dynamic Fund:

 Performance that lags both the benchmark and peers as well as and low consistency in its
track record of returns plague the HSBC Dynamic Fund.
 The scheme, which originally started out as a multi-cap fund in the market highs of 2007,
moved on to become a large-cap oriented one after the 2008 crash.
 But this orientation has not helped the fund do well even in rallies led by large-caps lead
rallies such as the one in 2013
 The fund’s equity allocations vary from 70-95 per cent across market cycles, and failure to
time the markets appropriately has had it lagging in rallies.
 Secondly, it holds 80 -90 per cent of its stocks in large-caps, missing out on any rallies lead
by mid-caps - 2012 being a good example.
 To its credit though, the large-cap focus came to its rescue in the 2011 fall, where it was able
to contain losses better than not only the benchmark, but also the Sensex and Nifty. This
good show in parts, fails to carry the fund safely home because of the lack of consistency
  It reduced exposure to winning software sector in 2013, paring holdings in stocks such as
HCL Technologies and TCS. Lupin was another stock in which it regrettably reduced
exposures during the year.
 Over the last five years, the fund figures steadily among the laggards

 ULIP VS MUTUAL FUNDS:-

 ULIP:-A Unit Linked Insurance Plan (ULIP) is a product offered by insurance

companies that, unlike a pure insurance policy, gives investors both insurance and
investment under a single integrated plan.
 Since ULIP (United Linked Plan) returns are directly linked to market performance and
the investment risk in investment portfolio is borne entirely by the policy holder, one
needs to thoroughly understand the risks involved and one’s own risk absorption capacity
before deciding to invest in ULIPs.
 In terms of structure and functioning, ULIPs as an investment avenue compares well with
mutual funds. Just like mutual funds, the insurance company allots units to its ULIP
investors and a net asset value (NAV) is declared on a regular basis. Along with that,
ULIPs have the liberty to invest across assets just like mutual funds. Of course, to say
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 that the two are similar except for the insurance is simplistic. Despite all the similarities,
there are several factors that set them apart. We evaluate the two avenues on the most
critical parameters to see how they measure up.

1) Ease of investment:-
Investors have greater flexibility while investing in a mutual fund. In most cases they can
start small with as little as Rs.500/- a month for as short a horizon as 12 months. This
feature known as SIP i.e. systematic investment plan, proves to be affordable for just
about anyone – even college students and is a great way to start saving for a goal. An
investor once he commits to an SIP can discontinue midway without any penalty or
financial implications and his investment remains intact. ULIPs on the other hand are
more structured in that sense. The insurance advisor will assess your income, your
financial responsibilities and will draw up an investment plan which will entail paying a
fixed premium for a minimum of 5 years. If the individual wants to exit the ULIP before
the minimum investment tenure, there is a financial implication and he stands to lose part
of his premium.

2) Expenses:-
As determined by the Securities and Exchange Board of India (SEBI), expenses charged
by mutual funds to investors for a range of activities like fund management, sales and
marketing, administration are subject to certain limits. For example, equity-oriented
funds can charge investors a maximum of 2.25% per annum for all expenses; if it exceeds
the limit, the expenses will be borne by the fund house instead of investors.
 The regulator for insurance companies the Insurance Regulatory and Development
Authority (IRDA) also prescribes limits on certain but not all ULIPs expenses. The most
expensive part about ULIPs is the high premium allocation charge usually not exceeding
10% of premium. This was even higher before IRDA clamped down to eschew mis-
selling in ULIPs.

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 Then there are mortality charges, fund management charges, policy administration
charges among others. Most of these charges are without limits and at the discretion of
the life insurer.
 Since higher expenses translate into lower return, expenses have far-reaching
consequences and must not be taken lightly. A big advantage mutual funds enjoy is that
the investor knows upfront what he is getting into from an expenses perspective because
the structure is very simple. ULIPs on the other hand have complex expense structure
comprehending which may not be for everyone. From a purely expense perspective,
mutual funds are more cost-effective which will reflect in their performance vis-à-vis
ULIPs, everything else being the same.
3) Portfolio disclosure:-
Based on SEBI guidelines, mutual funds are expected to disclose their portfolios on a
quarterly basis, although most disclose them monthly as best practices. This gives
investors a chance to study their portfolio and figure out where and how their money is
working for them. ULIPs are also required to disclose their portfolios on a quarterly basis
and like mutual funds many choose to do so monthly for greater transparency.
4) Flexibility in altering asset allocation:-
Mutual funds are not as flexible or friendly as ULIPs in giving investors the opportunity
to migrate across plans. The facility to switch across plans is particularly useful for
informed investors who want to migrate from equity to debt at peak market levels or from
debt to equity at the bottom.
 When an investor in a diversified equity fund wants to switch to another mutual fund
within the same fund house, there is usually a cost implication in terms of entry or exit
loads. Also, in most cases he is required to be invested, particularly in long-term equity
and debt-oriented firms, for a minimum investment tenure violating which entails an exit
load.
 ULIPs offer more freedom to investors in terms of migrating across various asset
allocation plans. Most insurers offer certain free switches a year on exceeding which
investors may be charged a nominal fee per switch.
5) Tax benefits:-

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 Under Section 80C of the Income Tax Act, premium on ULIP investments are allowed as
deduction from income up to a limit of Rs.1,00,000/- . Likewise ULIP proceeds are tax-
free in the hands of investors under Section 10(10D). There are detailed guidelines on the
percentage of the ULIP premium eligible for tax benefit.
 As far as Section 80C is concerned, only equity-linked savings schemes (ELSS) qualify
for tax benefit. So investments up to a maximum of Rs.1,00,000/- in ELSS are allowed
as deduction from income. ELSS proceeds are not tax-free in the sense that they attract
STT (Securities Transaction Tax) on redemption which at the time of writing the note is
0.125%.
 Non-ELSS mutual funds have varying tax implications on redemption depending on the
nature of the mutual fund viz. equity-oriented, debt-oriented, money-market/liquid fund.

Both ULIPs and mutual funds have their benefits and investors should ideally
consult their investment advisors before making an investment.

SECTOR:- Corporate Financial Sector

CATEGORY:- BFSI

My learnings during the internship in the organization:-

 Fundamental research is also known as scientific research which is aimed to improve

scientific theories for improved understanding or prediction of natural or other
phenomena.
 Fundamental research, as one looks at a large number of factors like the business
prospects, performance of the company, the overall economy etc. and then comes to a
point to take decision whether a stock is worth buying at the current price or not.

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 Technical research use charts and other technical tools to identify market patterns that
can indicate/suggest future activity and help you trade better.
 IPO is the sale of ownership through public by the company for the first time to raise the
expansion of capital or raising funds.
 First Step program is a unique initiative that takes you through the basics of the stock
market, helps you understand our research products and trade online.
 How savings should be utilized in proper way rather than keeping it at home, by investing
in stocks, bonds. As the assets and liabilities definition in simple terms are the amount
what we are saving and investing in stocks is asset because we get back the amount after
a certain period, whereas liabilities is spending from our savings for purchasing any
commodities or luxury items, where the value for them in the future reduces and does not
give any benefits.
 Derivative is a contract that derives its value from the performance of an underlying
entity. This underlying entity can be an asset, index, or interest rate, and is often simply
called the "underlying".
 Futures contract is a standardized forward contract which can be easily traded between
parties other than the two initial parties to the contract. The risk is more and investments
is also more.
 Hedging is a trading contract which can be traded both sides. Derivatives allow risk
related to the price of the underlying asset to be transferred from one party to another.
 Arbitrage is the practice of taking advantage of a price difference between two or more
markets: striking a combination of matching deals that capitalize upon the imbalance, the
profit being the difference between the market prices.
 Option is a contract which gives the buyer (the owner) the right, but not the obligation, to
buy or sell an underlying asset or instrument at a specified strike price on or before a
specified date. The risk is limited, only the premium investment is risk, it becomes zero
and there is no negative value.
 Commodity market is a market that trades in primary economic sector rather than
manufactured products. Soft commodities are agricultural products such as wheat, coffee,
cocoa and sugar. Hard commodities are mined, such as gold and oil.

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 METAL Aluminium, Aluminium Mini, Copper,
Copper Mini, Lead, Lead Mini, Nickel,
Nickel Mini, Zinc, Zinc Mini
BULLION Gold, Gold Mini, Gold Guinea, Gold Petal,
Silver, Silver Mini, Silver Micro
AGRICULTURE Cardamom, Cotton, Crude Palm Oil, Kapas,
Mentha Oil
ENERGY Brent Crude Oil, Crude Oil, Crude Oil
Mini, Natural Gas

 EXCHANGES:-
 Multi Commodity Exchange of India Ltd (MCX) (BSE: 534091) is an independent
commodity exchange based in India.
 National Commodity & Derivatives Exchange Limited (NCDEX) is an online commodity
exchange based in India.
 The lot sizes in commodity differs as they have 3 lots such as micro, mini and mega. It
differs from type of commodity. The commodities such as silver, gold, lead, aluminium,
nickel, zinc.
 Currency are of 4 types used in trading like dollar vs INR, GBP (Great Britain pound),
Euro and Yen. The currency timings are from 9 am to 5 pm. Yen is small currency
compared to Indian currency.
 One of the largest and most liquid in the world
 Main trading centers are London (38%), New York (22%), Tokyo (10%), Singapore
(9%).
 Markets: options, forwards and futures.

 MARKET PLAYERS:-
 Traders, import/export, banks and financial institution

 CURRENCY DERIVATIVE PRODUCTS:-

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 Currency futures (in MCX-SX and NSE):-
 USD/INR
 GBP/INR
 JPY/INR
 EUR/INR

 Currency options (NSE only):-

 USD/INR

 FACTORS AFFECTING CURRENCY (EXCHANGE RATES) :-

 Global and domestic economic indicators
 Global and domestic stock markets (movement in SENSEX, NASDAQ)
 Economic and political scenarios (change in government policies)
 Global currency movement (movement in EUR.USD, GBP.USD, JPY.USD)
 Policy decisions (increase/decrease in CRR, repo rate)
 RBI intervention
 Capital flows (FII, FDI)
 Fundamental factors (GDP, inflation, crude oil prices, trade balances)
 Actively managed funds are funds where the fund manager has the flexibility to choose
the investment portfolio, since this increases the role of the fund manager, the expenses
for running the fund turn out to be higher. Investors expect actively managed funds to
perform better than the market.
 Passive funds invest on the basis of a specified index, whose performance it seeks to
track. Thus, a passive fund tracking the BSE Sensex would buy only the shares that are
part of the composition of the BSE Sensex. Such schemes are also called index schemes.
Since the portfolio is determined by the index itself, the fund manager has no role in
deciding on investments. Therefore, these schemes have low running costs.
 Exchange Traded Funds (ETF) are also passive funds whose portfolio replicates an index
or benchmark such as an equity market index or a commodity index.

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  Debt funds are those schemes with an investment objective that limits them to
investments in debt securities like Treasury Bills, Government Securities, Bonds and
Debentures.
 Hybrid funds have an investment charter that provides for investment in both debt and
equity. Some of them invest in gold along with either debt or equity or both.
 Equity funds invest in equity instruments issued by companies. The funds target long-
term appreciation in the value of the portfolio from the gains in the value of the securities
held and the dividends earned on it.

RELATION BETWEEN THE CONCEPTUAL LEARNINGS IN THE CLASSROOM

AND OBSERVATIONS IN THE MARKET:-

 The learnings of classroom compliments the learnings from the market. Most of the
things which we learned is theoretically but when it comes to learning from stock
market, it was more fun as well as it enhanced to a great extent. We learned the various
investment techniques and the factors which are considered before going to investment.
 So we have related the risk and return concepts which we learned in the class and
various decisions which are taken before making an investment decision.
 There is possibility of losing money if an investor invests his money in mutual funds
because most mutual fund products (except capital guaranteed funds) have underlying
assets (Equities, Bonds etc.) that fluctuate on a daily basis. Hence capital loss due to
lower prices of the underlying assets or default on bonds is possible. Investing according

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 to an asset allocation plan, having enough exposure to other capital guaranteed
investment such as FDs, Government Guaranteed bonds etc., can to a large extent
mitigate these.
 The best thing about mutual fund is that in reality most if not all financial instruments
carry these risks but public is ignorant about it. For example, bank deposits are
guaranteed only up to one lakh rupees. Company FDs carry default risks. Price risk is the
only additional risk of investing in a MF. This is true for any investment that has a market
price (Real estate, Shares, Gold, etc.).
 Some specialty mutual funds focus on certain kinds of investments, such as emerging
markets, to try to earn a higher return. These kinds of funds also tend to have a greater
risk of a larger drop in value.

RESULT OF THE STUDY IN RELATION TO THE OBJECTIVE:-

 SBI blue chip,Birla sun life top 100, Reliance top 200, Birla Sun life frontline equity fund,

Quantum long term fund have outperformed than Sundaram Growth Fund, Sundaram

Select focus fund,IDFC Imperial equity fund, HSBC dynamic fund, HDFC large cap fund,

but also have performed their benchmarks and their peers it is evident from the evaluation

measures like sharpe ratio which tells the effectiveness of the fund managers of their

77
 respective schemes in diversifying the total risk and how they have revised and managed

their portfolios during upside and downside is worth acknowledging..

 The strategies used, Market timing judgement, Right stock picking keeping in the

objective in mind, and asset allocation are some of the differentiators of leaders and

laggards.

RESEARCH METHODOLOGY:-

1. Selection of Schemes:

 Selected 5 years return of 10 mutual funds for evaluation of their performance

 These schemes belong to equity large cap
 All the schemes are Open-ended

2. The reason for selecting open-ended funds schemes is that they have been of special interest
to investors and account for more than 80% of total funds in India.
Data Includes:

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  5 years return
 3 months return
 Value research ratings
 Sharpe ratio
 Beta
 Standard deviation
All the data were screened and collected from authorized data bases like;
 Value research
 Morning star
 Mutual funds India
 AMFI
 AMC portal
The data used in the study are screened thoroughly and are compared with various
authorized databases to give updated Values.

SCOPE FOR FUTHER STUDY:-

Needless to say no one can predict the future of markets. I have firm belief in the future

prospects of the Indian economy. If the Indian economy grows at 7.5-9% then the leading

companies tend to do well. When the companies do well their stock prices follows their

performance. So if you expect the economy to grow at 8% then you can expect top performing

mutual funds to give you returns in excess of 14%. 

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BIBLIOGRAPHY:-

Gupta, Amitabh, Mutual Funds in India: A Study of Investment Management, New

Delhi: Anmol Publications, 2010.

Gupta, L. C., Mutual Funds and Asset Preference, New Delhi: Society for Capital
Market Research and Development, 2008.

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Gupta, O.P. and Sehgal, S., Investment Performance of Mutual Funds. The Indian
Experience Indian Capital Market -Trends and Dimensions', New Delhi: Tata
McGraw Hill, 2011.

Finance India Journal

WEBSITES:-

www.sebi.gov.in
www.amfiindia.com
www.mutualfundindia.com
www.investopedia.com
www.sharekhan.com
www.fundsindia.com
WWW.valueresearch.com

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