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As Partial Fulfilment of the Requirements for the Post Graduate Diploma in Management [April- May, 2012]
Under the Guidance of Mr. Pawan Paharia Faculty of XIMJ Submitted by SUSIM SAHAY PGDM (SEM III)
CONTENT
S. No.
Chapter1
PARTICULARS
Declaration by the Student Certificate by the Guide Acknowledgement List of Figures Abbreviation Executive Summary
PAGE NO.
i ii iii iv v vi
INTRODUCTION 1.1 Background of the Study 1.2 Risk Factor Involve 1.3Need of the Study 1.4 Objectives of the Study 1.5 Scope of the Project 1.6 Chapterization
1 1 2 2 3 3
Chapter2
RESEARCH METHODOLOGY 2.1 Research Design 2.2 Source and Type of Data 2.3 Method of Data Analysis 2.4 Research Constraints ORGANIZATION PROFILE 3.1 Mission 3.2 Vision 3.3 IDBI Mutual: Introduction ANALYSIS AND DISCUSSION 4.1 Mutual Fund: Introduction 4.2 Nifty Index Fund 4.3 Nifty Junior Index Fund SUMMARY AND CONCLUSION 5.1 Findings 5.2 Suggestions and Recommendation 5.3 Conclusion REFERENCES ANNEXURE
4 5 5 5
Chapter3
6 6 7
Chapter4
9 13 18 23 24 25
Chapter5
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I hereby declare that this project report titled ANALYSIS OF SIP FUND OF IDBI MUTUAL has been submitted by me for the award of the degree of Post Graduate Diploma in Management as partial fulfilment of the requirements for the Post Graduate Diploma in Management (2010-12). This is the result of the original work carried out by me. This report has not been submitted anywhere else for award of any other degree/diploma.
Susim Sahay
Signature: Date:
iii
This is to certify that Susim Sahay has carried out this project report titled ANALYSIS OF SIP FUND OF IDBI MUTUAL, as partial fulfilment of the requirements for the Post Graduate Diploma in Management (2010-2012), under my guidance during the academic session 2010-2011. It is also certified that the report presented embodies the original work of the student. The present report can be forwarded for evaluation.
Signature: Date:
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ACKNOWLEDGEMENT
My training at IDBI MUTUAL FUND, Pune has been truly a fulfilling and rewarding one. Many people have contributed towards making this project a success. The text below is my humble and heartfelt expression of gratitude to all those people who have contributed to this project by their valuable suggestions, inspiration, support and co-operation. I would sincerely like to thank Dr. Sebasti L. Raj, Ex-Director and Dr. Ranjit Tigga, Director, Xavier Institute of Management, Jabalpur for permitting me to carry out my research in IDBI MUTUAL FUND, Pune. I express my deep sense of gratitude to Mr. Prashant Latti, Regional Head Maharashtra & Goa, IDBI MUTUAL,Pune for giving me such an opportunity to flourish. He proved to be a pillar of support and inspiration, and provided me with all the possible resources I required during the course of training. I would like to thank Mr. Sanjay Thorat, Branch Manager IDBI Bank Nigdi, Pune and Mr. Saumitra Bhalekar, Manager- Retail Sales-IDBI MUTUAL, Pune & Rest of Maharashtra and Mr.Raman Pande, Investment Officer, Pune without whose encouraging guidance and co-operation this project was unimaginable. I also take this opportunity to thank all the people who have directly or indirectly helped me during the course of the training I would also thank IDBI Mutual and IDBI Bank employees and customers, whom I met during the course of this project, for their support and providing valuable information, which helped me to complete this project successfully. At this moment I also thank almighty God for the blessings showed upon me, my parents for their support and care and also my friends for their valuable suggestions. I would like to extend my sincere thanks to Mr. Pawan Paharia, Faculty of Xavier Institute of Management, Jabalpur my Summer Internship Project Guide, for his guidance and support in preparing the project, whose calm demeanour and willingness to teach has been a great help in successfully completing the project -SUSIM SAHAY
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ABBREVIATION
TRI CNX SIP NSE BSE NPA CAGR NAV DFI AMC IMA SWP STP TDS S&P IISL CRISIL IWSL SEBI
Total Return Index CRISIL NSE Index or Exchange Systematic Investment Plan National Stock Exchange Bombay Stock Exchange Non- Performing Assets Compound Annual Growth Rate Net Asset Value Development financial Institution Asset Management Company Investment Management Agreement Systematic Withdrawal Plan Systematic Transfer Plan Tax Deducted at Source Standard & Poor's India Index Services and Products Ltd. Credit Rating and Information Services of India Ltd . India Bulls Wholesale Services Ltd. Securities & Exchanges Board of India
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EXECUTIVE SUMMARY
The present study is about the ANALYSIS OF SIP FUND OF IDBI MUTUAL It is one of the leading enterprise of its kind in India, whose funds i.e. SIP (systematic investment plan) funds- NIFTY INDEX FUND and NIFTY JUNIOR INDEX FUND which follows NIFTY rigorously. The easy way to build wealth is to save small amounts regularly. IDBI NIFTY INDEX FUND SIP and IDBI NIFTY JUNIOR INDEX FUND is a systematic approach to investing and building wealth. The IDBI Nifty Index Fund is an open-ended fund that will invest only in the NIFTY stocks without trying to second guess the market i.e. we would not try to judge which stocks to buy and how much to buy. We would buy the entire basket in the same proportion as the basket. As a retail investor, if you want to participate in the India Growth Story and invest systematically catching the highs and lows, this is an efficient vehicle for doing so. You dont have to buy it from the stock market or pay brokerage (there is no entry load for mutual fund). Being an open-ended mutual fund scheme, liquidity is available on all working days. You can efficiently do a SIP on the Indian Economy (regular investing like a recurring deposit with a bank). What you see is what you get you know the portfolio even before you invest and there will be no surprises when you look at it at month end. So in a down-turn you will not be stuck up with shares that have no liquidity. In an upturn, you will still be buying only the best. NIFTY INDEX JUNIOR FUND is open- ended passively managed equity scheme tracking the CNX Nifty Junior Index. The investment objective of the scheme is to invest only in and all the stocks comprising the CNX Nifty junior index in the same weights of the stocks as in the Index with the objective to replicate the performance of the total returns index of CNX Nifty Junior Index. The scheme will adopt passive investment strategy and will seek to achieve the investment objective by minimizing the tracking error between CNX Nifty Junior and the scheme.
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CHAPTER- 1
INTRODUCTION
The Indian capital market has been increasing tremendously during last few years. With the reforms of economy, reforms of industrial policy, reforms of public sector and reforms of financial sector, the economy has been opened up and many developments have been taking place in the Indian money market and capital market. In order to help the small investors, mutual fund industry has come to occupy an important place. The main objective of this paper is to examine the importance and growth of mutual funds and evaluate the operations of mutual funds and suggest some measures to make it a successful scheme in India. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Anybody with an investible surplus of as little as a few hundred rupees can invest in Mutual Funds. These investors buy units of a particular Mutual Funds scheme that has a defined investment objective and strategy.
The project on mutual fund analysis was carried out in IDBI Mutual Fund, F.C Road,Pune Branch. The intention behind taking over this project with IDBI Mutual was to primarily understand the relation of Nifty with the funds of IDBI Mutual, and in providing investment solutions and advices to its customers. The project was carried out for the period of six weeks i.e. from May 16, 2011 to June 29.2011.The project was done by analyzing the two different investment options available i.e. NIFTY INDEX FUND and NIFTY JUNIOR INDEX FUND and to compare them with the mutual fund investments. For the purpose of analyzing the investment pattern and selecting effective and beneficial schemes of mutual funds different types of SIP schemes available were thoroughly analyzed and then an ideal data is interpreted that how these funds are beneficial for investors.
1. The funds are selected i.e. NIFTY INDEX FUND and NIFTY JUNIOR INDEX FUND for which IDBI Bank is a sponsor and advisor. The Schemes were categorized and selected on evaluating their performance and related risk. 2. The scope of the project is mainly concentrated on the SIP fund of the IDBI Mutual funds such as equity schemes (Nifty Index Fund & Nifty Junior Index Fund).
3. The ideal portfolio is created by analyzing the risk pattern of the schemes and distributing the overall risk to earn maximum returns.
1.6 CHAPTERIZATION
Present report has been divided into following chapters: Chapter 1. Focuses on the introduction part of the SIP report comprising of background, need of the study, objectives of the study and scope of the project. Chapter 2. Deals with the methodology followed for the study, description of the research tools and techniques, the methods used for study and also the constraints of the study. Chapter 3. Deals with IDBI MUTUAL FUND introduction, mission and vision, and the core activities. Chapter 4. Deals with the analysis and discussion part. Chapter 5. Deals with the summary, conclusion, suggestions and recommendations. The report besides all of the above chapters has References and Annexure.
CHAPTER- 2 METHODOLOGY
Research methodology is a very organized and systematic way through which a particular case or problem can be solved efficiently.
It is a step-by-step logical process, which involves: Defining the problem Laying the objectives of the research Sources of data Methods of data collection Data analysis & processing Conclusions & Recommendations
Research includes scientific and inductive thinking and it promotes the development of logical habits of thinking and organization.
3.1 VISION
To be the trusted partner in progress by leveraging quality human capital and selling global standards of excellence to build the most valued financial conglomerate.
3.2MISSION
investment choices, through mutual funds and thus bring to him, the prosperity of the capital markets.
3.3 INTRODUCTION
For over 40 years IDBI has essayed over a key nation building role. First as the apex Development financial Institution (DFI) in the realm of the industry and now as a full service commercial bank. Today IDBI as a new generation universal bank touches the lives of a millions of Indians through an array of corporate and retail products and services without diluting its mandated finance obligations. On April 2, 2005 IDBI merged its hitherto banking subsidiary (IDBI Bank Ltd.) with itself. The appointed date of merger was October 1, 2004. Boasting of a business size (deposit plus advances) of around 79000 crores, and a major Government shareholding (53%) the bank lays much store by its motto Technology redefines customer service As of April 30, 2011 IDBI delivery channels comprised of 867 branches, 4 extension counters and 1437 ATM s spread across 101 cities- clear evidence of its efforts to spread wings across the country. IDBI s financial strength has been recognized by international credit ratings agencies which reflect IDBI s strong market position as one of India s leading financial institutions, with its consistent profitability and sound capitalization.
A strong capital base (capital adequacy ratio 14.80% well above the regulatory minimum of 9%) ensures that it is well placed for growth of business and ready to adequately address the prospective enhanced Basel-II capital requirements. The bank which has consistently earned profits since its inception, has committed and competent human capital to power its aggressive growth plans. What s more, professionals like accountants, engineers, economists and experts in IT, law, management, agriculture and treasury operations form part of its HR talent pool. IDBI is a board managed organization. The responsibility for the day to day management of operations of the bank is vested with the Chairman and the Managing Director and two Deputy Managing Directors, who draw upon the support and expertise of a cross disciplinary Top Management Team.IDBI has a combined employee base of 7477, including professionals from the field of accountancy, management, engineering, law, computer technology, banking and economics. The net NPA ratio on April 26, 2011 was 2.2%; the Capital Adequacy Ratio was 14.80. The earnings per share was Rs.14.24 and the P/E ratio was 8.10 as on june,2011. The profit per employee was 9.52 lakhs and the business per employee was 20 crore. Today IDBI rides on the back of a robust business strategy, a highly competent and dedicated workforce and state of the art information technology platform, to structure and deliver personalized banking services and customized financial solutions to its clients.
IDBI Mutual Fund (the Mutual Fund) has been constituted as a Trust on the 19th February 2010 in accordance with the provisions of the Indian Trusts Act, 1882 (2 of 1882) with IDBI Bank Limited, as the Sponsor and IDBI MF Trustee Company Limited as the Trustees. The Trust Deed has been registered under the Indian Registration Act, 1908. The Mutual Fund was registered with SEBI on the 29thMarch 2010 under Registration Code MF/064/10/05. The company deals in different types of financial products like Equity Funds & Debt Funds, in equity funds it has SIP funds i.e. Nifty Index Fund and Nifty Junior Index Fund and in Debt Funds it has Short Term Bond Fund, Monthly Income Plan, Fixed Maturity Plan, Ultra Short Term Plan and Liquid Fund.
THE TRUSTEE
IDBI MF Trustee Company Limited (the Trustee), is a limited company incorporated under the Companies Act, 1956 having its Registered Office at IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai 400005 and its corporate office at IDBI Building, 2nd Floor, Plot No. 39- 41, Sector 11, CBD Belapur, Navi Mumbai 400 614. IDBI MF Trustee Company Limited shall through its Board of Directors, discharge its obligations as Trustee of the IDBI Mutual Fund. The Trustee shall ensure that the transactions entered into by the AMC are in accordance with the SEBI Regulations and will also review the activities carried on by the AMC.
This chapter Analysis and Discussion contains deep analysis about the IDBI MUTUAL FUND i.e. Nifty Index Fund and Nifty Junior Index, both the funds are of Systematic Investment Plan (SIP). This analysis is based on the various parameters: like risks and returns. For analysis, different charts, figures, and graphs are used to assess the performance of these two funds of IDBI Mutual.
Qualified and experienced professionals manage Mutual Funds. Generally, investors, by themselves, may have reasonable capability, but to assess a financial instrument, a professional analytical approach is required, in addition to access to research and information as well as time and methodology to make sound investment decisions and to keep monitoring them. Since Mutual Funds make investments in a number of stocks, the resultant diversification reduces risk. They provide small investors with an opportunity to invest in a larger basket of securities.
The investor is spared the time and effort of tracking investments, collecting income, etc. from various issuers, etc. It is possible to invest in small amounts as and when the investor has surplus funds to invest. Mutual Funds are registered with SEBI. SEBI monitors the activities of Mutual Funds. In case of open-ended Funds, the investment is very liquid as it can be redeemed at any time with the fund unlike direct investment in stocks / bonds.
Mutual Funds do not provide assured returns. Their returns are linked to their performance. They invest in shares, debentures and deposits. All these investments involve an element of risk. The unit value may vary depending upon the performance of the company and companies may default in payment of interest / principal on their debentures / bonds / deposits. Besides this, the government may come up with new regulations, which may affect a particular industry or class of industries. All these factors influence the performance of Mutual Funds.
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NIFTY Index is an important barometer of the mood of the Indian stock market, available on the National Stock Exchange (NSE). The Nifty is a well-diversified 50-stock value-weighted index representing 22 sectors of the Indian economy. The stocks are amongst the largest and the most liquid stocks in the Indian equity market. Started in 1995, it is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialized company focused upon the index as a core product.
Fig. 1.2
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The IDBI Nifty Index Fund is an open-ended fund that will invest only in the NIFTY stocks without trying to second guess the market i.e. we would not try to judge which stocks to buy/how much to buy. We would buy the entire basket in the same proportion as the basket. As a retail investor, if you want to participate in the India Growth Story and invest systematically catching the highs and lows, this is an efficient vehicle for doing so. You dont have to buy it from the stock market or pay brokerage (there is no entry load for mutual fund). Being an open-ended mutual fund scheme, liquidity is available on all working days. You can efficiently do a SIP on the Indian Economy (regular investing like a recurring deposit with a bank) What you see is what you get you know the portfolio even before you invest and there will be no surprises when you look at it at month end. So in a down-turn you will not be stuck with shares that have no liquidity. In an upturn you will still be buying only the best.
An open-ended passively managed equity scheme tracking the S&P CNX Nifty Index (Total Returns Index) Re-open for continuous sale and repurchase from June 30, 2010 Benchmark - S&P CNX Nifty Index (Total Returns Index) Dividend Plan and Growth Plan available. Option for Payout/Reinvestment available in Dividend Plan
Minimum investment: Rs. 5,000/- and in multiples of Rs.100/-. NAV, Sale and Repurchase price and liquidity on all business days No Entry load. Exit Load : 1% for exit ( repurchase/switch-out/SWP) on or before 1 year from the date of allotment Systematic Plan available with Monthly and Quarterly instalments for periodic investments Nomination facility available
Dividends are tax-free. Long-term capital gains tax-free. No TDS for resident
investors.
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Fig. 1.3
The average performance of Nifty Index Fund since inception (25th June, 2010) is 4.76% but there has been a downfall of -3.29% in the first month and -5.64 % in the sixth month after inception.
Fig.1.4
The performance of Nifty Index Fund (CAGR) on Total Return Index is 16% since inception, though 1st year it was 73% but due to market ups and down it has been fluctuating as the past performance will not be sustained in the future.
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Fig. 1.5
Dividend history of the fund has been good, as compare to 1st Sep.2010, Dividend Rs.0.4000 Cum Dividend NAV is Rs.11.5740 and Ex Dividend NAV is Rs.10.9628; as on 15th Oct.2010.
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IDBI NIFTY INDEX FUND has 20 different sectors were they invest the investors money, so the risk is diversified and every single sector has companies which have a highest growth rate. The company invest 21.93% in banking sector as there is immense growth in banking sector and 12.90% in industrial sector which are the highest and 1.19% in hospitality sector.
Fig. 1.6
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INTERPRETATION
Thus, the research about the fund shows that the Nifty Index Fund is invested in top companies so, the investors money is secured and the risk is diversified. The return is more or less moderate it does not give high return but the return is high against the normal fixed deposit, post office deposits or other method of investment. The future benefit of this fund will only come when the investors will invest their fund for minimum 5 years. This fund has the flexibility of Systematic Transfer Plan and Systematic Withdrawal Plan and investor can start investing with the amount as low as 500 per month for at least 1 year. There is no entry load but 1% exit load if withdrawn within a year, and investment option of monthly and quarterly.
RISK FACTORS
All mutual funds and securities investments are subject to market risks and there can be no assurance that the objective of the scheme will be achieved. The NAV of the units issued under the scheme may go up or down depending upon the factors and forces affecting the securities market.
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Nifty Junior Index Fund was introduced on January 1,97, with base date being November 3,96 and a base capitalization of Rs.0.43 trillion, indexed to a base value of 1000. Nifty Junior Index is the NEXT 50 i.e. the 50 most liquid stocks after S&P CNX Nifty, thus providing an index of large and mid cap stocks. The investment objective of the scheme is to invest only in and all the stocks comprising the CNX Nifty Junior Index in the same weights of these stocks as in the Index with the objective to replicate the performance of the Total Returns Index of CNX Nifty Junior Index. The scheme may also invest in derivatives instruments such as Futures and Options linked to stocks comprising the Index or linked to the CNX Nifty Junior Index as and when the derivative products on the same are made available. The scheme will adopt a passive investment strategy and will seek to achieve the investment objective by minimizing the tracking error between the CNX Nifty Junior Index (Total Returns Index) and the Scheme.
The top 10 stocks of Nifty Junior Index Fund are given below, Adani Enterprise being on top with 5.07% weight with Bank of Baroda 4.55% and Grasim Industries Ltd. 4.49%. These 10 stocks shows that these companies are emerging very fast and will give good return in future.
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% WEIGHT 5.07 4.55 4.49 3.68 3.49 3.42 3.42 3.28 3.08 3.02
5.07
3.49
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Fig. 1.9
Fig. 2.0
The scheme performance since inception is -10.60% which is low but it has shown growth in 1st month and 3rd month i.e.0.47% and 8.83% respectively, it is due to market fluctuations.
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Fig. 2.1
IDBI Nifty Junior Index Fund has 20 different sectors were the investors funds are invested it has 50 most liquid companies from above 20 sectors and all companies are top their sectors earning high returns, so systematically the risk is diversified over 50 companies. The funds of the investors are invested maximum in banking sector i.e.21.93% as the banking sector shows good growth over the years and it is less risky too.
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INTERPRETATION
Thus, the researcher can see that the Nifty Junior fund is invested in the Next 50 companies which are most liquid and comprise of mid cap and large cap funds. This fund is more volatile and gives higher return in compare to Nifty Index Fund. The return is high but the risk is more in compare to Nifty Index Fund. Though, the investors have to invest their capital for at least for 5 years to gain high returns. This fund has the flexibility of Systematic Transfer Plan and Systematic Withdrawal Plan and investor can start investing with the amount as low as 500 per month for at least 1 year. There is no entry load but 1% exit load if withdrawn within a year, and investment option of monthly and quarterly.
RISK FACTORS
All mutual funds and securities investments are subject to market risks and there can be no assurance that the objective of the scheme will be achieved. The NAV of the units issued under the scheme may go up or down depending upon the factors and forces affecting the securities market.
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The following are the humble suggestions to the organization IDBI MUTUAL FUND which might help in improving the overall marketability of these two funds and optimizing their market share structure which may eventually lead the organization to achieve the organization goals and targets on time and hence organization effectiveness can be improved in the national and international market.
The company should bring in some more funds of different kind to cater to the needs of investors which will offer to them more than a handful variety of funds. This will increase the market share of the company.
There should be more awareness of the Index fund, so the company should look into to generate more people awareness which could be done through advertisements and product promotions.
The company should not retain very high profits because it will affect the dividend distributed to the investors. There should be proper research in order to invest the funds in the long term investments. There should be proper and regular market research to optimize its marketability and to expand its market nationally as well as internationally. The company should also look into invest more in big companies and should make good portfolio of company, having best returns and growth. The company should also bring in some gifts and prizes linked to its funds to initiate investing and promote its products during festival seasons. The company should assess the performance of its employees regularly and efficiently to motivate them through giving bonus, prizes and other performance related incentives.
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5.3 CONCLUSION
It was a wonderful experience for me to be a part of IDBI MUTUAL, Pune for around 6 weeks and working on a research project in the company was a tremendously excellent experience that made me learn various aspects of an organization specially in finance & marketing, areas of concern for an organization, art of not just surviving but proving its potential and extra calibre from time to time in the Indian Financial & Capital Market Sector. I hope the organization will be benefited from this report and with the help of the Suggestions given, the organization can improve its working further more in the field of marketing and finance and the overall improvement in the organization might increase up to the excellent level. The data collected by me is from secondary sources and are analyzed graphically. Further from this report I hope the organization will be benefited and with the help of the suggestions given the organization can improve its functioning and the overall satisfaction level in the organization and its performance will increase. In the last, IDBI MUTUAL, through its highly ethical values will not only climb the ladder of growth year by year but also fulfil its responsibilities towards its investors, employees and society. It will become a largest company in the area of capital investment and enjoy an excellent marketability and may lead the capital investment sector.
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REFERENCES
WEBSITES:
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ANNEXURE- 1
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ANNEXURE- 2
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ANNEXURE- 3
PUNE MAP
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ANNEXURE- 4
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