Systematic Investment Plan- SIP Project Report

“A STUDY ON MANAGING INVESTMENT PORTFOLIO THROUGH SYSTEMATIC INVESTMENT PLAN IN MUTUAL FUNDS” By:-

Jyothi Acharya -122601056 Nikita L. D’Souza- 122602032

Department of Commerce BBM (E-Banking and Finance) & (Financial Markets)

DEPARTMENT OF COMMERCE, MANIPAL UNIVERSITY, MANIPAL- 576104, KARNATAKA, INDIA.

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DECLARATION

We, Jyothi Acharya (122601056), student of BBM [e-Banking & Finance], and Nikita L. D‘Souza(122602032), student of BBM [Financial Markets], Department of Commerce, Manipal University, declare that the Project Report entitled ―A Study On Managing Investment Portfolio Through Systematic Investment Plan In Mutual Funds‖, being submitted to the Department of Commerce, Manipal University in partial fulfillment of the requirements for the award of BBM [e-Banking & Finance] & [Financial Markets], is our original work and the same was not earlier submitted to any other Degree/Diploma/Fellowship or any other similar title or prizes.

Name: Jyothi Acharya

Name: Nikita L. D‘Souza

Registration No:- 122601056

Registration No:- 122602032

Date:-

Date:-

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ACKNOWLEDGEMENT A summer project is a golden opportunity for learning and self-development. We consider ourselves very lucky and honored to have so many wonderful people lead us through in completion of this project. We Nikita L. D’Souza and Jyothi Acharya, students of Department Of Commerce, Manipal University, BBM (E-Banking & Finance) & (Financial Markets) take this opportunity to express our profound gratitude and deep regards to Mr. Sandeep Shenoy, Head of Department (HOD), who has kept the internship as part of our degree which has led to great experience and immense attained knowledge which has helped us attain corporate experience. And we would like to thank our guide Mr. Vikram Baliga Sir for his exemplary guidance, monitoring and constant encouragement throughout the course of this thesis. The blessing, help and guidance given by him time to time shall carry us a long way in the journey of life on which we are about to embark. We are highly indebted to Canara Robeco for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in completing the project. We are obliged to the staff members of Canara Robeco, for the valuable information provided by them in their respective fields. We are grateful for their cooperation during the period of our assignment. We express our deepest thanks to the Mrs. Upasna Saboo, Head of Human Resource for giving us the opportunity to work in this company. Mr. Sharath Shetty Sir, our project guide, Mr. K. Gopi Sir and Mr. Ravi Kumar Sir for taking part in useful decision & giving us necessary advices and guidance and making the resources available at the right time and providing valuable insights leading to the successful completion of our project. We would also like to thank all the faculty members of Department Of Commerce, Manipal University for their critical advice and guidance without which this project would not have been possible. Last but not the least we place a deep sense of gratitude to our family members and friends who have been constant source of inspiration during the preparation of this project work. With the help of all the people mentioned above we now have greater confidence in the things that we are capable of achieving in the near future.

Jyothi Acharya

Nikita D‘Souza 3|Page

LIST OF TABLES AND CHARTS Sr. No.

Tables and Charts

Page No.

1

Structure of Mutual Funds

11

2

Concept of Mutual Funds

16

3

Classification of Mutual Funds on the basis of its structure

21

4

Classification on types of Mutual Funds

26

5

Assets Under Management- Growth Chart

36

6

Table 1: AUM of Indian Mutual Fund Industry

37

7

AUM of Indian Mutual Fund Industry Chart

38

8

Net inflow/outflow of AUM

40

9

Table 2: Resource mobilization by private and public sector by Mutual Fund

41

10

Growth in Mutual Fund

41

11

Market share of leading Mutual Funds

42

12

AUM composition by product category

43

13

AUM composition by investor segment

44

14

Industry AUM comparison

45

15

Mutual Fund Industry

16

Business module

17

Canara Robeco Schemes

18

Benefit of SIP over Lumpsum

19

Canara Robeco– Emerging Equities

20

SIP– Building wealth

87

21

Comparing SIP with other investment

87

22

Comparing SIP with Lumpsum

88-89

23

Steps in SIP

91-92

24

Case study of SIP

95-97

25

SIP Calculator

97-98

26

Auto Debit Form

99-100

46-47 53 59-77 83 84-87

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TABLE OF CONTENTS Chapters

Topics

Pages

Introduction

7

Introduction to Mutual Funds

8

Characteristics of Mutual Funds

10

Structure of Mutual Funds

11

Advantages of Mutual Funds

14

Disadvantages of Mutual Funds

15

Concept of Mutual Funds

16

History of Mutual Funds

17

Classification of Mutual Fund

20

Classification on the basis of structure

22

Classification on the basis of types of Mutual Funds

26

Classification according to investment objective

27

How investors choose between funds

30

Mutual Fund Industry trends

34

Mutual Fund Industry trends

35

AUM growth

36

Mutual Fund industry crosses Rs 10 lakh crores in May

39

Market share of leading Mutual Funds

42

AUM distributions by AMC‘s

45

Chapter 4

Review of Literature

48

Chapter 5

Company Profile

51

Canara Robeco

52

Business Module

53

Performance measure

56

Products of Canara Robeco

58

Schemes of Canara Robeco

59

Facilities provided by Canara Robeco

78

Systematic Investment Plan

81

Chapter 1

Chapter 2

Chapter 3

Chapter 6

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Systematic Investment Plan- Introduction

82

Canara Robeco- NAV Emerging Equities

84

Comparing SIP

87

Comparison between sip and Lumpsum investment

88

Why SIP

90

Steps in SIP

91

Benefits of SIP

93

Disadvantages of SIP

94

Case study – SIP

95

Sip calculator

97

SIP Auto Debit Form

98

Conditions under which sip would yield /no0t yield positive results

101

Common misconception of SIP

103

Findings from the study

104

Conclusion

105

Bibliography

106

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NEED FOR THE STUDY

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OBJECTIVE OF THE STUDY



To study and understand the workings of Systematic Investment Planning in Mutual Funds with special reference to Canara Robeco.



To make a comparison of Systematic Investment Planning and Lumpsum investments in the Portfolio of customers.

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Chapter 1 Introduction

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Introduction to Mutual Funds Mutual fund is a pool of funds which is divided into units of equal value and sold to investing public and the funds so collected are utilized for collective investments in various capitals and money market instrument. In today‘s market people invest money to gain more. So when they take into account, they mostly look out for Investment Company where they can get more income. Investment companies can be classified into closed-end and open-end investment companies. Closed-end is when it is readily transferable in the market. Open-end funds sell their own shares to investors and ready to buy back their old shares. If we talk about the investment options today, in India we have so many investment companies like UTI, LIC etc., all have their own special ways of servicing the customers. The investors also feel that they are worth to be the part of that company. These days‘ people mainly look for avoiding tax so normally they look out for some investments which can help them in doing so. When it comes to this point of view, people mainly look out for mutual fund. Mutual fund is a trust at law; it is a special type of managed, pooled portfolio financial company or financial service organization that sells shares/units/stocks in itself, to the public to obtain its resources and it invests the savings so mobilized or pooled in a large, diversified, & sound portfolio of equity shares, bonds, money market instruments etc., Redeemable trust certificates are sold to investors at net asset value (NAV) plus a small commission. All interest/dividend and principal repayments are distributed to the holders of the certificates. Mutual Funds are a vehicle for retail and institutional investors to benefit from the capital markets. They offer different kinds of schemes to cater to various types of investors, retail, companies and institutions. Mutual fund schemes are offered to investors for the first time through a New Fund Offering (NFO). Thereafter, close-ended schemes stop receiving money from investors, though these can be bought on the stock exchanges where they are listed. Openended schemes sell and re-purchase their units on an ongoing basis. Know Your Client (KYC) process is centralized in the mutual fund industry. Therefore, the Investor needs to complete the formalities only once with the designated KYC service provider. The KYC confirmation thus obtained is valid for investment with any mutual fund. 10 | P a g e

A feature of mutual fund schemes is the low minimum investment amount – as low as Rs.1,000 for some schemes. This makes it possible for small investors to invest. The expense ratio (which is not more than 2.5% in many schemes, especially liquid and index funds and goes below 0.05% in some schemes being low also helps in making mutual funds a good instrument for building wealth over the long term. Mutual funds are closely regulated by the Securities & Exchange Board of India (SEBI). The applicable regulation is the SEBI (Mutual Fund) Regulations, 1996. Under the regulations, the Board of Trustees performs an important role in protecting the interests of investors in mutual fund schemes. Another protective feature is the checks and balances in the mutual fund system. For instance, while the Asset Management Company (AMC) handles the investment management activity, the actual custody of the investments is with an independent custodian. Investor records are mostly maintained by the registrar and transfer agents (RTAs), who offer their services to multiple mutual funds. In some cases, the AMC itself maintains the investor records. SEBI also regulates the investments that mutual fund schemes can make. For instance, commodities other than gold are not permitted. Even within the permissible investments, SEBI has prescribed limits for different kinds of schemes. Rigorous standards of disclosure and transparency make sure that investors get a complete view of their investments on a regular basis. Consolidated Account Statements, mandated by SEBI, ensure that the investor‘s investments across various mutual funds in the industry are consolidated into a single monthly statement. Even those investors, who do not transact, receive their statement of accounts every 6 months.

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Characteristics of MF 

A mutual fund actually belongs to the investors who have pooled their funds. The ownership of the MF is in the hands of the investors.



A MF is managed by investment professionals and other service providers, who earn a fee for their services from the fund.



The pool of funds is invested in a portfolio of marketable investment. The value of the portfolio is updated every day.



The investor‘s share in the fund is denominated by units. The value of the units changes with change in the portfolio‘s value, every day. The value of one unit of investment is called as the net assets value or NAV.



The investment portfolio of the Mutual fund is vested according to the stated Investment objectives of the fund.



Investors purchase mutual fund shares from the fund itself (or through a broker for the fund) instead of from other investors on a secondary market such as the New York Stock Exchange or Nasdaq Stock Market.



Mutual fund shares are ―redeemable,‖ meaning investors can sell their shares back to the fund (or to broker acting for the fund).



Mutual Funds generally create and sell new shares to accommodate new investors. IN other words, it sells its shares on a continuous basis, although some funds stop selling when, for example, they become too large.



The investment portfolios of mutual funds typically are managed by separate entities known as ―investment advisers‖ that are registered with the SEC.

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Structure of Mutual Funds A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

The Structure of Mutual Funds

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Securities Exchange Board of India – Set up in the year 1992, SEBI Act was passed. The objectives of SEBI are – ―to protect the interest of investors in securities and to promote the development of and to regulate the securities market‖ Role of SEBI – 

Formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993.



SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors.



All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations.



All mutual funds are subject to monitoring and inspections by SEBI.

Sponsor 

They are the Promoters of the Mutual Fund



They are given the charge to form a Trust and appoint Trustees. They are also responsible for appointing the Custodian and AMC



Eligibility Criteria for Selection of Sponsors: Over5 year of sound financial Track Record 3 Year Profit making record at least 40% contribution to AMC Capital



He must have net worth in the immediate preceding year more than the capital contribution in AMC.

Trustees Trustee Company 

Fiduciary Responsibility for investor funds as a Board of Trustees or Trustee Company Appointed by Sponsor with SEBI approval.



They in turn appoint an Asset Management Company (AMC) to manage the portfolio of securities registered ownership of investments is with Trust. Trustees hold the Unit Holders‘ money in ―fiduciary capacity‖.



There should be at least 4 Trustees (2/3 should be independent) right to seek regular information and remedial action. All major decisions need trustee approval.

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Asset Management Company 

The AMC is responsible for the operational aspects of the Mutual Fund. It holds an Investment Management agreement with Trustees.



It is a SEBI registered entity Requirement of minimum 10 crores of net worth to be maintained at all times at least 1/2 of the board members to be independent and it cannot have any other business interest Structured as a private limited company (Sponsors and Associates hold capital)



AMC of one Mutual Fund cannot be trustee of another Mutual Fund. 75% of the Unit Holders jointly can terminate the AMC appointment.



To define and maintain high professional and ethical standards in all areas of operation of mutual fund industry.



To interact with the Securities and Exchange Board of India (SEBI) and to represent to SEBI on all matters concerning the mutual fund industry.



To represent to the Government, Reserve Bank of India and other bodies on all matters relating to the Mutual Fund Industry.



To undertake nationwide investor awareness programme so as to promote proper understanding of the concept and working of mutual funds.



To disseminate information on Mutual Fund Industry and to undertake studies and research directly and/or in association with other bodies.

Custodian 

Responsible for the safe keeping of investments of the funds and receipt of all benefits due to the fund. Participates in Clearing System on behalf of the Fund



Registered with SEBI

Registrar & Transfer Agent 

Responsible for unit holders record maintenance and servicing including purchase,



repurchase and transfer of units



Responsible for updating Investor Records and Transactions.

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Advantages of Mutual Funds 

Portfolio diversification: is a benefit derived from investment in securities spread across various companies, industries, issuers and maturities. The portfolio will not be affected by the performance of one or few of the securities.

 Mutual funds feature low transaction cost from economies of scale. Since the fund invests large sums of money, the costs of research, broking, demat and custodial services come down. Small amounts invested in a fund get the benefits of the large pool. 

Professional Management by mutual funds offers expertise in managing the investors‘ funds, bringing the benefits of research, analysis and process-driven approach to investing.



Portfolio diversification and the professional management of funds offer reduction in risk for the investors. The investment is always in a managed portfolio and not a single stock or sector. Instead of a large outlay of funds to achieve these objectives directly, investors can choose mutual funds, investing as little as Rs. 500 to get these benefits at a low cost.

 Investors can choose their investment to suit their particular needs and preferences. Mutual funds offer closed and open-ended schemes, offer options to stay invested, receive or reinvest dividends. These variations offer higher flexibility of when to invest, how to receive the returns, how to stay invested and when to redeem the units.

 Investor’s interests are protected while investing in mutual funds as they are governed by the Securities and Exchange Board of India (SEBI) (Under the SEBI mutual funds) Regulations, 1996, which require extensive disclosures and fair business practices. 

Mutual funds encourage systematic investments .Investors can choose systematic investment plans to invest regularly ,systematic withdrawal plans to withdraw regularly in order to structure regular cash flow from the investment account or systematic transfer plans to transfer money from one scheme to another.



Mutual fund transactions are convenient, flexible and easy to conduct. Investors are assigned a folio when they buy units and they can use transactions slips to conduct various transactions, including purchasing more units from the folio. Mutual funds also offer convenience of part withdrawal of investments and make additional investments in the account.

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

Mutual funds structure the portfolio in such a way that they are able to provide liquidity to the investor. Investors can take their money out when they need it by redeeming their units with the fund, or by selling units on the stock exchange where they are listed.



Mutual funds‘ investments offer significant tax advantages to investors. Incomes that are taxable when earned directly, such as interest income, can be left invested in the fund to grow over years .incidence of tax is only when the investor transacts in a fund and as capital gains rather than interest income.



Mutual fund distributors have to be registered with AMFI obtain an ARN and abide by the prescribed code of ethics .The structure of mutual funds is also well regulated, offering a high level of information disclosure ,investor protection and regulatory controls.

Disadvantages of Mutual Funds 

Mutual funds are not customized portfolios: Mutual Funds are like pre-plated meals; there is no customized assembling of the meal by the customer. Mutual funds are standard products, managed centrally, offering significant advantages to investors who are not equipped to make complex investment choices. Investors do not exercise any direct control on how the portfolio is managed, but participate equitably in it. Customized portfolios are usually offered as portfolio management services (PMS).



No direct control over cost: investors in a mutual fund participate in the pool of funds, according to the proportion they have contributed. The costs for managing the fund are centrally incurred and apportioned to every unit. Investors cannot directly determine what cost can be incurred and how it would be apportioned. SEBI has however, imposed limits on the amount and type of cost a mutual fund can incur.



Mutual funds offer too many products: to the investors, making a choice among many funds become tough when so many variants of the same product are available in the market. Mutual funds try to vary their products, even if slightly, to provide a choice to customers. If these are similar in objective and performance, investors may find it tough to differentiate the products and make the right choice for their needs.

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Concept of Mutual Funds

Concept of Mutual Funds

Many investors with common financial objectives pool their money

Investors, on a proportionate basis, get mutual fund units for the sum contribution to the pool

The money collected from investors is invested into shares, debentures and other securities by the fund manager.

the fund manager realizes gains or losses, and collects dividend or interst income.

any capital gains or losses from such investments are passed on to the investors in proportion of the number of units held by them.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of the fund in the same proportion as his contribution amount put up with the corpus (the total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder. Any change in the value of the investments made into capital market instruments (such as shares, debentures etc.) is reflected in the Net Asset Value (NAV) of the scheme. NAV is 18 | P a g e

defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets by the total number of units issued to the investors.

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

First Phase – 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank 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.

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AMOUNT 1992-93

MOBILIZED

11,057

1,964

UTI

PUBLIC SECTOR

13,021

TOTAL

ASSETS UNDER MANAGEMENT

MOBILIZATION AS % OF GROSS DOMESTIC SAVINGS

38,247

5.2%

8,757

0.9%

47,004

6.1%

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.

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Fourth Phase – since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with 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. As at the end of October 31, 2003, there were 31 funds, which manage assets of Rs.126726 crores under 386 schemes.

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Chapter 2 Classification of Mutual Funds

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Mutual funds may be classified on the basis of its structure and its investment objective:

MUTUAL FUNDS

STRUCTURE

OTHERS

OPEN ENDED SCHEMES

CLOSE ENDED SCHEMES

SECTOR SPECIFIC SCHEMES

BY INVESTMENT

GROWTH SCHEME

TAX SAVINGS SCHEMES BALANCED SCHEMES SPECIAL SCHEMES

INTERVAL SCHEMES

INDEX SCHEMES

INCOME SCHEMS

MONEY MARKET SCHEMES

.

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By Structure  Open-ended Funds An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Benefits of Open Ended Funds: i.

Liquidity In open-ended mutual funds, you can redeem all or part of your units any time you wish. Some schemes do have a lock-in period where an investor cannot return the units until the completion of such a lock-in period.

ii.

Convenience An investor can purchase or sell fund units directly from a fund, through a broker or a financial planner. The investor may opt for a Systematic Investment Plan (―SIP‖) or a Systematic Withdrawal Advantage Plan (―SWAP‖). In addition to this an investor receives account statements and portfolios of the schemes.

iii.

Flexibility Mutual Funds offering multiple schemes allow investors to switch easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time.

iv.

Transparency Open-ended mutual funds disclose their Net Asset Value (―NAV‖) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the know of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the investment manager.

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 Closed-ended Funds A closed-end fund has a stipulated maturity period which generally ranging from 3- 15 years. It can be subscribed only during a specified period. Investors can invest in the scheme at the time of initial public issue and then they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route, it provides an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor.

 Interval Funds Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective  Growth Funds Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. It is ideal for investors with long-term outlook seeking growth over a period of time.

 Income Funds The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

 Balanced Funds The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV

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of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

 Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as T-bills, C.D‘s, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors to park their surplus funds for short periods.

 Load Funds A Load Fund is one that charges a commission for entry or exit for purchase or sale of units in the fund. It ranges from 1%- 2%, worth paying if the fund has a good performance history.

 No-Load Funds A No-Load Fund is one that does not charge a commission for entry or exit for the purchase or sale of units in the fund. The advantage is that the entire corpus is put to work.

Other Schemes  Tax Saving Schemes These schemes offer tax rebates under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Saving Schemes and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. It also provides opportunities to save capital gains u/s 54EA and 54EB provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

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Special Schemes  Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

 Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50.

 Sectorial Schemes Sectorial Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings.

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Classification or types of mutual fund Mutual funds in India offer a wide array of schemes that cater to needs suitable to any age, financial position, risk tolerance and return expectations. Mutual funds may be classified on the basis of its structure and its investment objective: BROAD MUTUAL FUNDS TYPE

EQUTIY

DEBT/ INCOME FUNDS

HYBRID

DIVERSIFIED DEBT PLAN DIVERSIFI ED EQUITY FUNDS (ELSS)

ASSET ALLOCATTIO N

FOCUSED DEBT FUNDS

OTHERS

COMMODITY FUNDS

REAL ESTATE FUNDS

VALUE FUNDS GROWTH AND INCOME FUND

HIGH YEILD DEBT FUND

EXCHANGE TRADED FUNDS

SECTOR FUNDS BALANCED FUNDS GROWTH FUNDS

SPECIALITY FUNDS

FIXED TERM PLAN SERIES

FUNDS OF FUNDS

ASSURED RETURN FUND

INDEX FUNDS

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Classification according to Investment Objective: The schemes can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. These schemes can be open-ended or close-ended schemes. Such schemes may be classified mainly as follows:

 Equity/Growth Oriented Scheme The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation, etc. and the investors may choose an option depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time.

 Income Oriented Scheme The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations.

 Balanced Fund These funds are considered moderate since investors seek growth and stability but with moderate risk. The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. 29 | P a g e

They generally invest 40-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

 Money Market or Liquid Fund These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods.

 Gilt Fund These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes.

 Index Funds Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index, S&P NSE 50 index (Nifty), etc. These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges.

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 Hybrid funds Hybrid funds invest in both bonds and stocks or in convertible securities. Balanced funds, asset allocation funds, target date or target risk funds and lifecycle or lifestyle funds are all types of hybrid funds. Hybrid funds may be structured as funds of funds, meaning that they invest by buying shares in other mutual funds that invest in securities. Most fund of funds invest in affiliated funds (meaning mutual funds managed by the same fund sponsor), although some invest in unaffiliated funds (meaning those managed by other fund sponsors) or in a combination of the two.

 Sector specific funds/schemes These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert

 Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme.

 Exchange Trade Funds These are new variety of mutual funds that first became available in 1993. The exchange-traded fund or ETF is often structured as an open-end investment company, though ETFs may also be structured as unit investment trusts, partnerships, investments trust, grantor trusts or bonds (as an 31 | P a g e

exchange-traded note). ETFs combine characteristics of both closed-end funds and open-end funds. Like closed-end funds, ETFs are traded throughout the day on a stock exchange at a price determined by the market. However, as with open-end funds, investors normally receive a price that is close to net asset value. To keep the market price close to net asset value, ETFs issue and redeem large blocks of their shares with institutional investors.

 Special Schemes Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment is limited to specific industries like InfoTech, FMCG, and Pharmaceuticals etc.

Net Asset Value (NAV) of a scheme: The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV).Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of

Rs. 10

each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme.

How do investors choose between funds? When the market is flooded with mutual funds, it‘s a very tough job for the investors to choose the best fund for them. Whenever an investor thinks of investing in mutual funds, he must look at the investment objective of the fund. Then the investors sort out the funds whose investment objective matches with that of the investor‘s. Now the tough task for investors start, they may carry on the further process themselves or can go for advisors like SBI. Of course the investors 32 | P a g e

can save their money by going the direct route i.e. through the AMCs directly but it will only save 1-2.25% (entry load) but could cost the investors in terms of returns if the investor is not an expert. So it is always advisable to go for MF advisors. The MF advisors‘ thoughts go beyond just investment objectives and rate of return. Some of the basic tools which an investor may ignore but an MF advisor will always look for are as follow:

1. Rupee cost averaging: The investors going for Systematic Investment Plans (SIP) and Systematic Transfer Plans (STP) may enjoy the benefits of RCA (Rupee Cost Averaging). Rupee cost averaging allows an investor to bring down the average cost of buying a scheme by making a fixed investment periodically, like Rs 5,000 a month and nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at a profit, even if the market falls. In case if the NAV of fund falls, the investors can get more number of units and vice-versa. This results in the average cost per unit for the investor being lower than the average price per unit over time. The investor needs to decide on the investment amount and the frequency. More frequent the investment interval, greater the chances of benefiting from lower prices. Investors can also benefit by increasing the SIP amount during market downturns, which will result in reducing the average cost and enhancing returns. Whereas STP allows investors who have lumpsums to park the funds in a low-risk fund like liquid funds and make periodic transfers to another fund to take advantage of rupee cost averaging.

2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up and investing in the asset class that is down. Trigger and switching are tools that can be used to rebalance a portfolio. Trigger facilities allow automatic redemption or switch if a specified event occurs. The trigger could be the value of the investment, the net asset value of the scheme, level of capital appreciation, level of the market indices or even a date. The funds redeemed can be switched to other specified schemes within the same fund house. Some fund houses allow such switches without charging an entry load.

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To use the trigger and switch facility, the investor needs to specify the event, the amount or the number of units to be redeemed and the scheme into which the switch has to be made. This ensures that the investor books some profits and maintains the asset allocation in the portfolio.

3. Diversification: Diversification involves investing the amount into different options. In case of mutual funds, the investor may enjoy it afterwards also through dividend transfer option. Under this, the dividend is reinvested not into the same scheme but into another scheme of the investor's choice. For example, the dividends from debt funds may be transferred to equity schemes. This gives the investor a small exposure to a new asset class without risk to the principal amount. Such transfers may be done with or without entry loads, depending on the MF's policy.

4. Tax efficiency: Tax factor acts as the ―x-factor‖ for mutual funds. Tax efficiency affects the final decision of any investor before investing. The investors gain through either dividends or capital appreciation but if they haven‘t considered the tax factor then they may end loosing. Debt funds have to pay a dividend distribution tax of 12.50 per cent (plus surcharge and education cess) on dividends paid out. Investors who need a regular stream of income have to choose between the dividend option and a systematic withdrawal plan that allows them to redeem units periodically. SWP implies capital gains for the investor. If it is short-term, then the SWP is suitable only for investors in the 10-per-cent-tax bracket. Investors in higher tax brackets will end up paying a higher rate as short-term capital gains and should choose the dividend option. If the capital gain is long-term (where the investment has been held for more than one year), the growth option is more tax efficient for all investors. This is because investors can redeem units using the SWP where they will have to pay 10 per cent as long-term capital gains tax against the 12.50 percent DDT paid by the MF on dividends. In equity oriented schemes the short term capital gains to Individuals, Domestic Companies and NRI‘s is 15%, while schemes other than equity oriented schemes for Individuals, Domestic Companies an NRI‘s is 30%.

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In equity oriented schemes, the long term capital gain for Individuals, Domestic Companies and NRI‘s is NIL, while schemes other than the equity oriented schemes for Individuals Domestic Companies and NRI‘s is 10% without indexation and 20% with indexation. All the tools discussed over here are used by all the advisors and have helped investors in reducing risk, simplicity and affordability. Even then an investor needs to examine costs, tax implications and minimum applicable investment amounts before committing to a service.

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Chapter 3 Mutual Fund Industries Trends

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Mutual Fund Industry Trends Though India‘s savings rate has been between 30-35 per cent since last few years, investment in mutual funds have been minimal as compared to other avenues for investment. Emphatically speaking, mutual fund business follows a business to business model (B2B) rather than a business to consumer (B2C) model and hence, distribution is a critical success factor for any mutual fund. Despite the efforts, the mutual fund products continue to remain a ‗push‘ product rather than a ‗pull‘ product. Indian mutual fund industry has evolved over the years. Though, it has grown at a Compounded Annual Growth Rate (CAGR) of 15 per cent from FY07 to FY13, the growth performance in the recent years have been rather subdued. However, Assets Under Management (AUM) as a per cent of GDP for India is about 5 to 6 per cent, significantly lower than some other emerging economies, for example, 40 per cent for Brazil and around 33 per cent for South Africa. This indicates significant headroom for growth. However, the industry growth will continue to be characterized by external factors such as volatility and performance of the capital markets, and macro-economic drivers such as GDP growth, inflation and interest rates. The Indian Mutual fund industry has evolved over the years from a single player in 1964 to a fast growing competitive market on the back of strong regulatory framework by Association of Mutual Funds in India (AMFI). The Assets under Management (AUM) have relatively grown at 14.17% CAGR in last 15 years since March 2000. The AUM growth has been considerable in terms of debt assets which have risen from 47% to 73% in a span of last 15 years. However, equity assets have been in the range of 20% to 40% in the last few years. At the same time there has been drastic fall of other schemes from 24% to as low as 4% currently. Industry recorded an AUM of INR 8,800 billion. The highest AUM was recorded in August 2013 as INR 9,580 billion. Though on the whole, the mutual fund industry witnessed a decline in AUM in December 2013, the AUM of equity funds increased by 4.5 per cent3 on account of rising stock prices. One could see a shift with the changing demographic profile of the Indian population, with new products being launched (for example, products being linked to pensions), coupled with financial awareness and literacy initiatives for investors both by the industry and the regulator, and with the onus of expanding the market falling on the distributors—the first point of contact for investors. Distributors would have to convince and guide the investors about using mutual funds

37 | P a g e

as a tool for financial goals rather than as just mere investments. Technology could definitely act as an enabler in reaching out to investors in far and distant places.

Assets under Management (AUM) Growth

Equity (Equity, ELSS); Debt (Income, Gilt, Money market); Others (Hybrid, ETFs, Gold ETFS, FOFs overseas) For the current financial year the AUM was at Rs. 8,25,240 crore as on 31st March 2014 and rose by 17.65% or Rs. 1,23,797 crore Y-o-Y vis-à-vis Rs. 7,01,443 crore the previous financial year. Currently, there are 44 Asset Management Companies (AMCs) and approx. 2,300+ schemes having equity assets of around Rs. 1,91,107 crore and debt assets of around Rs. 6,00,945 crore. The quantum of mutual fund assets in financial savings is very low - at less than 5% - as most Indian savings are locked in bank fixed deposits, small savings (postal savings) and insurance. With growing disposable incomes, rising inflation (cost of living), improving lifestyles and growing aspirations, there is a noticeable shift in preference for mutual funds though it has still a long way to go.

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TABLE I: ASSET UNDER MANAGEMENT OF INDIAN MUTUAL FUND INDUSTRY

Year

AUM in CRORES

Mar-65

25

Mar-87

4,554

Mar-93

47,000

Mar-01

1,21,805

Mar-02

87,190

Mar-03

79,464

Mar-04

1,39,616

Mar-05

1,49,554

Mar-06

2,31,862

Mar-07

3,26,388

Mar-08

50,512

Mar-09

4,17,900

Mar-10

6,13,979

Mar-11

5,92,250

Mar-12

5,87,217

Mar-13

7,01,443

Feb-14

9,16,393 SOURCE: SEBI

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SOURCE: SEBI

Above TABLE-I indicates after privatization in 1993, asset under management increased up to 47,000 crores. In year Mar-01 assets mobilized through mutual funds was 1,21,805 crores and in year Feb-14 assets mobilized is 9,16,393 crores. During last decade there is growth in assets under management more than 500 percent, in India.

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MF industry’s assets crosses Rs. 10 lakh crore mark in May Industry‘s AUM went up to Rs. 10.11 lakh crore in May from Rs. 9.45 lakh crore in April due to inflows in liquid, income and equity funds. Thanks to the roaring markets and inflows in equity as wells as liquid funds, the mutual fund industry‘s assets under management scaled to a new high of Rs. 10.11 lakh crore in May, up 7% from Rs. 9.45 lakh crore in April, shows the latest AMFI data. It was the third consecutive growth in AUM since March 2014. Both key indices S&P BSE Sensex and CNX Nifty went up by 8% or 1800 points and 544 points respectively in May. While S&P BSE Sensex breached 24k mark in May, CNX Nifty closed at it‘s the then all-time high of 7200 points in May.

Debt Debt funds continued to remain the flavour of the season. Both income and liquid funds received close to Rs. 32,000 crore in May. 72 new fund offers, mostly FMPs, collectively mopped up Rs. 6,064 crore in May. Equity Equity funds saw a net inflow of Rs. 2,452 crore in May. Six new funds offers helped equity funds garner close to Rs. 1,000 crore. While two open ended equity schemes - ICICI Prudential Dividend Yield Fund and Principal Index Fund - Midcap collected Rs.289 crore, a few close ended funds like Birla Sun Life Emerging Leader Fund, ICICI Prudential Value Fund Series 4, L&T Emerging Businesses Fund and Reliance Closed Ended Equity Fund mopped up Rs. 681 crore in May. In fund of funds category, Franklin India Feeder - Franklin European Growth Fund and Religare Invesco Global Equity Income Fund collected Rs. 79 crore.

41 | P a g e

Gold Due to gloomy outlook on gold, investors are continuously moving out of gold ETF. It is evident from the fact that the AUM of Gold ETFs fell to Rs. 7,781 crore in May from close to Rs. 11,000 crore levels some months back. India Ratings & Research (Ind-Ra), a part of Fitch group, has predicted that gold prices are further expected to decline in FY15 in the range of Rs. 25,500 to Rs. 27,500/10 g. It expects gold prices to fall due to the gradual winding up of unconventional monetary policy (UMP) in US which would cause interest rates to go up and consequently discourage investments in gold.

Net inflow/outflow and AUM data Net Category

inflow/outflow

AUM

in May Income

10,096

473887

IDF

-

1082

Equity

2452

189200

Balanced

-83

14728

22010

282700

Gilt

-318

5694

ELSS

-430

28034

Gold ETFs

-341

7781

Other ETFs

576

4829

Fund of Funds

-

3167

Total

33962

1011102

Liquid/Money market

42 | P a g e

TABLE 2:- RESOURCE MOBILISATION BY PRIVATE AND PUBLIC SECTOR BY MUTUAL FUNDS

$ indicates as on February 28, 2014. SOURCE: SEBI Above TABLE II indicates mobilization of funds from private and public sectors other than UTI investment to Indian mutual fund industry. Funds mobilized from 54,928 crores in 2009-10 to 1,33,697 crores in 2013-14 by private sector. Public sector contributed from 12,499 crores in 2009-10 to 16,216 crores in 2013-14. Private sector contributed greater than public sector to mutual funds. As per above data, it is observed that private sector is playing a vital role in economic development.

Growth in Markets

* Source: BSE Sensex and NSE Nifty data as on December 2013

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In comparison to global markets, India‘s AUM penetration as a per cent of GDP is between 5-6 per cent while it is around 77 per cent for the U.S., 40 per cent for Brazil and 31 per cent for South Africa. Despite the relatively low penetration of mutual funds in India, the market is highly concentrated. Though, there are 44 AMCs operating in the sector, approximately 80 per cent of the AUM is concentrated with 8 of the leading players in the market. There have been recent instances of consolidation in the market and market concentration is expected to remain in the near-term.

Market Share of leading Mutual Funds (basis AUM)

* SOURCE: AMFI

Products and Investors Indian stock markets have experienced inconsistent returns in the recent past. Higher inflation and inconsistent economic growth has worried the retail investor who is now concerned about assured returns in such a scenario, the investor would divert their funds from the equity market to liquid/money market and debt AUM as also depicted in Figure 3.

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Fig. 3: AUM Composition by Product Category

SOURCE: AMFI (Data as of September 2013) The equity-debt mix is determined largely by the performance of the capital markets and interest rate cycles. AUMs in debt and liquid money market funds have seen an increase in FY14 due to the anticipation of RBI rate cuts and desire for investors to seek a fixed return. Debt oriented products (investing in debt instruments with maturity > 3 months) have gained most traction in terms of absolute net new money, with an absolute increase in AUM of ~INR 1,000 billion indicating a clear shift in investor interest from equity in recent times. Gold ETF‘s have grown at an extremely fast pace over the last few years albeit from a much smaller base (CAGR of over 90 per cent from FY10- FY13). These have gained popularity due to the popularity of gold as an investment for Indians as well as due to the lowering of administrative charges and distribution expenses which makes it easier for the product to be distributed as well. As Figure 4 indicates, industry composition of AUM is driven primarily by the corporate segment.

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Fig. 4: AUM Composition by Investor Segment

Source: AMFI (Data as of September 2013)

Corporate investments constitute around 49 per cent of AUM with a focus on debt/money market funds for the purpose of short term returns and liquidity management. Retail share of AUM is 20 per cent and is expected to rise driven by increased investor awareness, product penetration and greater distribution reach. High Net worth Individual (HNIs) have emerged as the fastest growing investor segment growing at a rate of ~ 20 per cent over the period of FY10- FY13 with a preference for debt oriented funds. However, AUM growth largely remains restricted to the top 5 cities in India viz. Mumbai, Delhi, Bangalore, Chennai and Kolkata (contributing ~ 74 per cent of AUM as of September 2013). The top 35 cities continue to contribute around 90-92 per cent of the industry AUM.

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AUM distribution by AMCs Industry AUM composition by Geography

SOURCE: AMFI (Data as of September 2013) Despite constant endeavor of the regulator to increase penetration of mutual fund products beyond top 15 cities, the AUM composition has only marginally changed since SEBI directive on additional TER on inflows from smaller cities was implemented in October 1st, 2012. Contribution from the B-15 cities has remained at around 13 per cent for the last two years. Drivers like lack of financial education and awareness, limited distribution network, cultural bias towards physical assets are some of the key impediments to growth in B-15 cities. In order to increase the geographical reach of mutual funds, the fund houses are now allowed to charge an extra load of 30 basis points from existing schemes1 subject to meeting certain conditions. The regulation has incentivized fund houses to push mutual fund products in cities beyond the top 15. The term B-15; it is short for beyond top 15 cities

The B-15 cities are: Jaipur, New Delhi, Chandigarh, Kanpur, Lucknow, Hyderabad, Bangalore, Chennai, Kolkata, Ahmedabad, Surat, Vadodara, Panjim, Pune, Mumbai.

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There are total 44 mutual funds. A brief snapshot of the balance 26 fund houses are listed below sorted on the AUM. 0Mutual Fund

No. Of

QAAUM

Industries

Schemes

Date

QAAUM

Prev. Date

Prev.

Inc./

QAAUM

Dec.

HDFC Mutual Fund

1066

Mar-14

109890.71

Dec-13

104326.69

5564.02

Reliance Mutual Fund

809

Mar-14

100979.16

Dec-13

99083.55

1895.61

ICICI Prudential Mutual

1168

Mar-14

100145.64

Dec-13

89660.6

10485.0

Fund Birla Sun Life Mutual

4 829

Mar-14

86098.59

Dec-13

79891.01

6207.58

UTI Mutual Fund

752

Mar-14

70587.17

Dec-13

69990.51

596.66

SBI Mutual Fund

515

Mar-14

62631.69

Dec-13

60691.46

1940.23

Franklin Templeton

224

Mar-14

46363.88

Dec-13

45212.75

1151.13

IDFC Mutual Fund

593

Mar-14

39777.04

Dec-13

38826.63

950.41

Kotak Mahindra Mutual

364

Mar-14

31242.11

Dec-13

33671.94

-2429.83

456

Mar-14

27968.66

Dec-13

26997.13

971.53

Tata Mutual Fund

412

Mar-14

20028.43

Dec-13

17524.87

2503.56

L&T Mutual Fund

280

Mar-14

17495.33

Dec-13

15941.35

1553.98

Deutsche Mutual Fund

440

Mar-14

17264.66

Dec-13

16938.81

325.85

Axis Mutual Fund

236

Mar-14

16123.6

Dec-13

14470.74

1652.86

Fund

Mutual Fund

Fund DSP Blackrock Mutual Fund

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JP Morgan Mutual Fund

155

Mar-14

15196.56

Dec-13

11825.65

3370.91

Sundaram Mutual Fund

391

Mar-14

15153.01

Dec-13

14270.41

882.6

Religare Invesco Mutual

270

Mar-14

13523.65

Dec-13

12363.52

1160.13

195

Mar-14

8989.6

Dec-13

8348.48

641.12

104

Mar-14

7701.78

Dec-13

6586.74

1115.04

HSBC Mutual Fund

173

Mar-14

7483.98

Dec-13

7482.17

1.81

Canara Robeco Mutual

124

Mar-14

6603.96

Dec-13

7009.99

-406.03

125

Mar-14

5977.56

Dec-13

7068.66

-1091.1

IDBI Mutual Fund

131

Mar-14

5698.74

Dec-13

4829.82

868.92

Principal Mutual Fund

128

Mar-14

4121.49

Dec-13

4526.72

-405.23

Peerless Mutual Fund

56

Mar-14

3924.29

Dec-13

3297.74

626.55

Goldman Sachs Mutual

24

Mar-14

3764.11

Dec-13

3846.74

-82.63

Fund LIC Nomura Mutual Fund Baroda Pioneer Mutual Fund

Fund JM Financial Mutual Fund

Fund

49 | P a g e

Chapter 4 Review of literature

50 | P a g e

Literature on mutual fund performance evaluation is enormous. A few research studies that have influenced the preparation of this paper substantially are discussed in this section. Sharpe, William F. (1966) suggested a measure for the evaluation of portfolio performance. Drawing on results obtained in the field of portfolio analysis, economist Jack L. Treynor has suggested a new predictor of mutual fund performance, one that differs from virtually all those used previously by incorporating the volatility of a fund's return in a simple yet meaningful manner. Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio performance (Jensen‘s alpha) that estimates how much a manager‘s forecasting ability contributes to fund‘s returns. As indicated by Statman (2000), the e SDAR of a fund portfolio is the excess return of the portfolio over the return of the benchmark index, where the portfolio is leveraged to have the benchmark index‘s standard deviation. S. Narayan Rao , evaluated performance of Indian mutual funds in a bear market through relative performance index, risk return analysis, Treynor‘s ratio, Sharpe‘s ratio, Sharpe‘s measure , Jensen‘s measure, and Fama‘s measure. The study used 269 open-ended schemes (out of total schemes of 433) for computing relative performance index. Then after excluding funds whose returns are less than risk-free returns, 58 schemes are finally used for further analysis. The results of performance measures suggest that most of mutual fund schemes in the sample of 58were able to satisfy investor‘s expectations by giving excess returns over expected returns based on both premium for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical study on conditional performance of Indian mutual funds. This paper uses a technique called conditional performance evaluation on a sample of eighty-nine Indian mutual fund schemes .This paper measures the performance

of

various

form of CAPM,

mutual funds

Treynor-Mazuy

with

both

model

unconditional and

and

conditional

Henrikson

Merton

model. T h e e f f e c t o f incorporating lagged information variables into the evaluat 51 | P a g e

i o n o f m u t u a l f u n d m a n a g e r s ‘ performance is examined in the Indian context. The results suggest that the use of conditioning lagged information variables improves the performance of mutual fund schemes, causing alphas to shift towards right and reducing the number of negative timing coefficients. Mishra, et al., (2002) measured mutual fund performance using lower partial moment. In this paper, measures of evaluating portfolio performance based on lower partial moment are developed. Risk from the lower partial moment is measured by taking into account only those states in which return is below a pre-specified ―target rate‖ like risk-free rate. Kshama Fernandes (2003) evaluated index fund implementation in India. In this paper, tracking error of index funds in India is measured. The consistency and level of tracking errors obtained by some well-run index fund suggests that it is possible to attain low levels of tracking error under Indian conditions. At the same time, there do seem to be periods where certain index funds appear to depart from the discipline of indexation. K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multicriteria methodology and applied it to the Greek market of equity m u t u a l f u n d s . T h e methodology is based on the combination of discrete and continuous multi-criteria decision aid methods for mutual fund selection and composition. UTADIS multicriteria decision aid method is employed in order to develop mutual fund‘s performance models. Goal programming model is employed to determine proportion of selected mutual funds in the final portfolios

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Chapter 5 Company Profile

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Canara Robeco Canara Bank Canara Bank is one of the most prominent commercial banks of India. Canara Bank is an Indian bank headquartered in Bangalore, Karnataka. It was established in 1906, making it one of the oldest banks in the country. Widely known for customer centricity, Canara Bank was founded in 1906 by Shri Ammembal Subba Rao Pai, a great visionary and philanthropist, at Mangalore, then a small port in Karnataka. The bank was nationalised in 1969. Today, Canara Bank occupies a premier position in the comity of Indian banks with an unbroken record of profits since its inception.

RobecoRobeco was established in Rotterdam (the Netherlands) in 1929. Today the company is one of the largest European asset management firms, with a solid pan-European presence, prominence in the US, and offices throughout Asia. The company offers investment products and services to institutional and private investors worldwide. It manages $255 billion USD in assets under management (as of March 31, 2013).

About Canara Robeco Canara Robeco Asset Management Company Limited (CRAMC), the investment managers of Canara Robeco Mutual Fund, is a joint venture between Canara Bank and Robeco of the Netherlands, a global asset management company that manages about US$180 Billion worldwide. The joint venture brings together Canara Bank's experience in the Indian market and Robeco's global experience in asset management. Canara Robeco Mutual Fund is the oldest Mutual Fund in India, established in December 1987 as Canbank Mutual Fund. Subsequently, in 2007, Canara Bank partnered Robeco and the mutual fund was renamed as Canara Robeco Mutual Fund. Canara Robeco AMC manages the assets of Canara Robeco Mutual Fund by virtue of an Investment management agreement dated 16th June 1993 (as amended from time to time).The equity shareholding of the AMC consists of Canara bank having 51% and Robeco having 49% 54 | P a g e

Business Module of Canara Robeco

ASSET MANAGEMENT COMPANY(CANARA ROBECO)

THIRD PARTY DISTRIBUTOR

CORE BANKING CHANNEL

BANKS

NATIONAL DISTRIBUTORS/ REGIONAL DISTRIBUTORS

INDIVIDUAL FINANCIAL ADVISORS

INSTITUTIONAL

Asset Management Company 

AMC is responsible for the operational aspects of the mutual funds.



It holds an investment management agreement with trustees



AMC educate the distributors about the market events and about their products.



AMC is a SEBI registered entity



AMC of one mutual fund cannot be trustee of another mutual fund.



Canara Robeco educates the Third Party Distributors and the Core banking Channels.

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

Professional managers run an AMC. The AMC conducts the necessary research & based on it, manages the fund or portfolio. It is responsible for floating, managing, redeeming the schemes; it receives the fees for the services rendered by it.

Core banking channel 

Banks collect money through investors and sells the money to AMC‘s to give to the fund managers.



For Canara Robeco the core banking channel is Canara Bank.



Canara bank collects the money and sells mutual fund products.



Canara Bank has 4750 branches all over India in 33 states.



It has 51 branches in the rural district of Bangalore and 220 in the urban district.

Third Party Distributors 

These are channels other than their main bank through which they sell the Canara Robeco Mutual Fund products.



The Third Party Distributors includes: ⁻

Banks

⁻

National distributors/ Regional Distributors

⁻

Individual Financial Advisor.

Banks 

The AMC educates private, local or regional banks on information regarding Canara Robeco‘s mutual fund products. These banks are then expected to sell and promote their mutual fund products on a certain management fee (such as revenues).



Banks are managing about 11875 crs of AUM in Bangalore as on 30th April‘14



They are:

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⁻

Private Banks

⁻

Public Sector Undertakings (PSU‘s)

⁻

Multi-National Companies (MNC‘s)

⁻

Domestic Banks



There are 31 private and MNC‘s in Bangalore.



The PSU‘s manages about 148 crs of AUM in Bangalore as on 30th April‘14

ND /RD / CD 

National Distributors and Regional Distributors and Corporate Distributors sell financial products like: ⁻

Insurance

⁻

Mutual funds

⁻

FD‘s

⁻

Demat a/c

⁻

Portfolio Management Services (PMS)



There are 111 National, Regional and Corporate distributors in Bangalore.



They manage about 11,963 crs of AUM as on 30th April‘14

Individual Financial Advisors 

They are individual entities who sell and promote mutual funds to customers.



There are 665 IFA‘s in Bangalore.



IFA‘s manage 6,922 crs of AUM as on 30th April‘14

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Institutions 

They are organisations which pool large sums of money and invest them in securities, real property and other investment assets.



They have about 20613 crs of AUM.

Credit recognitions and awards: 

CNBC TV 18 – CRISIL Mutual Fund award 2011



ICRA Mutual Fund Award 2011



NDTV Profit Mutual Fund Award 2011 (Equity Diversified)



NDTV Profit Mutual Fund Award 2011 (Equity Tax Saver)



Lipper Fund Award 2010



ICRA Mutual Fund Award 2010



CNBC TV 18 – CRISIL Mutual Fund of the year Award for 2009



Lipper Award 2009

Performance measures: Equity funds: the performance of equity funds can be measured on the basis of: NAV Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Returns and Distributions, Computing Total Return (Per Share Income and Expenses, Per Share Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfolio Turnover Rate, Fund Size, Transaction Costs, Cash Flow, Leverage. Hybrid Funds: Funds that a combination of asset and classes such as debt ,equity and in some cases gold in their portfolio are called hybrid funds .they may serve the needs of investors who look for a combination of income oriented and growth oriented investments. 

Monthly Income Plans

These funds invest a larger proportion of the portfolio in debt securities ,with a smaller allocation to equity .they are pre-dominantly debt oriented hybrids , generating income from the debt securities and adding equity to generate some benefits of long term growth to the portfolio.

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These funds also feature periodic(monthly, quarterly ,or annual) distribution of dividends ,through there is no assurance of the same. 

Balanced Funds

Balanced funds are equity- oriented hybrids that invest at least 65% in equity and the rest in debt securities to offer a cushion from the risk of an all equity portfolio. They are sought by investor who seeks growth with some protection from volatility. They balance between equity and debt. 

Asset Allocation Funds

Also called as dynamic funds, these funds invest in both equity and debt ,but can change the proportion of equity and debt in their portfolio depending on the fund managers perception of the market .they have the flexibility to invest up to 100% in debt or in equity ,depending on the view of the manager. 

Capital Protection- Oriented Funds

These are closed – end hybrids that club debt securities with a derivative instrument or equity shares. The portfolio is structured such that a large portion of the principle amount is invested in debt instruments .the interest that accumulates during the period of the scheme would grow to the amount that the investor invested at the start . for example ,rs 90 may be invested for 3 years to grow into rs 100 at maturity .A small portion of the principle amount (RS 100 – RS 90 in our example ) is invested in equity or derivatives .even if the equity or derivative component return a loss ,the investor will get back the principle invested in the debt securities Debt fund: likewise the performance of debt funds can be measured on the basis of: Peer Group Comparisons, The Income Ratio, Industry Exposures and Concentrations, NPAs, besides NAV Growth, Total Return and Expense Ratio. Liquid funds: the performance of the highly volatile liquid funds can be measured on the basis of: Fund Yield, besides NAV Growth, Total Return and Expense Ratio.

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Various Products of Canara Robeco Equity Schemes 

Canara Robeco Infrastructure



Canara Robeco Equity Diversified



Canara Robeco Emerging Equities



Canara Robeco Nifty Index



Canara Robeco Equity Tax Saver



Canara Robeco F.O.R.C.E Fund



Canara Robeco Large Cap+ Fund

Hybrid schemes 

Canara Robeco Balance



Canara Robeco INDIGO Fund



Canara Robeco Monthly Income Plan



Canara Robeco Yield Advantage Fund

Debt Schemes  

Canara Robeco Floating Rate Canara Robeco Liquid



Canara Robeco Treasury Advantage Fund

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Canara Robeco Gilt Advantage Fund

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Canara Robeco Income



Canara Robeco Gilt PGS



Canara Robeco Dynamic Bond Fund

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Canara Robeco Short Term Fund



Canara Robeco Interval Scheme –

Fund OF Fund 

Canara Robeco Gold Saving Fund 60 | P a g e

SCHEME DETAILS OF CANARA ROBECO 1. Canara Robeco Equity Diversified : Category:

Open Ended Equity Scheme

Scheme Objective:

To generate capital appreciation by investing in equity and equity related securities.

Avg Aum:

Rs. 614.82 crs.

NAV:

Direct Plan- Dividend Option- Rs. 30.56 Regular Plan- Dividend Option - Rs. 28.28 Direct Plan- Growth Option- Rs. 70.64 Regular Plan- Growth Option- Rs. 70.20

Date of allotment:

September 16,2003

Asset Allocation:

Equity and Equity related instruments: 85% - 100%. Money market instruments: 0% - 15%.

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

S&P BSE 200

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2. Canara Robeco F.O.R.C.E Fund : Category:

Open Ended Equity Scheme

Scheme Objective:

The objective of the fund is to provide long-term capital appreciation by primarily investing in equity and equity related securities of companies in finance, Retail and Entertainment sectors. Rs. 86.86 crs. Direct Plan- Dividend Option- Rs. 15.75

Avg Aum: NAV:

Regular Plan- Dividend Option - Rs. 14.70 Institutional option- Growth Option- Rs 16.79 Direct Plan- Growth Option- Rs. 16.90 Regular Plan- Growth Option- Rs. 16.77 Date of allotment: Asset Allocation:

Minimum Investment: Lumpsum: Subsequent Purchases: SIP/SWP/STP:

September 14,2009 Equity and Equity related instruments of companies in finance, Retail and Entertainment sector: 65% - 100%. Other Equity and equity related instruments: 0% - 35%. Domestic debt and money market instruments: 0% - 35%. RS. 5000 in multiples of Re. 1 thereafter Minimum amount of Rs. 1000 and in multiples of Re. 1 thereafter. For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

CNX nifty. 62 | P a g e

3. CANARA ROBECO INFRASTRUCTURE : Category:

Open Ended Equity Scheme

Scheme Objective:

To generate Income/capital appreciation by investing in equity and equity related instruments of companies in the infrastructure sector.

Avg Aum:

Rs. 68.33 crs.

NAV:

Direct Plan- Dividend Option- Rs. 18.90 Regular Plan- Dividend Option - Rs. 17.64 Direct Plan- Growth Option- Rs. 23.75 Regular Plan- Growth Option- Rs. 23.60

Date of allotment:

December 2, 2005

Asset Allocation:

Equity and Equity related instruments of companies in the infrastructure sector including derivative of such companies: 75% 100%. Domestic debt and money market instruments: 0% - 25%.

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

S&P BSE 100

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4. Canara Robeco Equity Tax Saver: Category:

Open Ended Equity linked Tax Saving Scheme.

Scheme Objective:

ELSS seeking to provide long term capital appreciation by predominantly investing in equities and to facilitate the subscribers to seek tax benefits as provided under section 80 C of the income Tax Act 1961.

Avg Aum:

Rs. 621.23 crs.

NAV:

Direct Plan- Dividend Option- Rs. 22.10 Regular Plan- Dividend Option - Rs. 19.44 Direct Plan- Growth Option- Rs. 33.08 Regular Plan- Growth Option- Rs. 32.92

Date of allotment:

March 31, 1993

Asset Allocation:

Equity and Equity related instruments: 80% - 100%. Money market instruments: 0% - 25%.

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 500 and multiples of re.1 thereafter For quarterly frequency – Rs. 1000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

NIL.

Benchmark:

S&P BSE 100

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5. Canara Robeco Emerging Equities: Category:

Open Ended Equity Scheme

Scheme Objective:

To generate capital appreciation by primarily investing in diversified mid-cap stocks.

Avg Aum:

Rs. 38.60 crs.

NAV:

Direct Plan- Dividend Option- Rs. 22.13 Regular Plan- Dividend Option - Rs. 20.76 Direct Plan- Growth Option- Rs. 32.29 Regular Plan- Growth Option- Rs. 31.94

Date of allotment:

March 11, 2005

Asset Allocation:

Mid & small cap equity and equity related instruments: 65%-100%. Equity and equity related instruments of companies other than the above: 0%-35%. Domestic debt and Money Market instruments: 0%-35%

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

CNX Mid Cap

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6. Canara Robeco Nifty Index: Category:

Open Ended nifty linked equity scheme

Scheme Objective:

To generate Income/capital appreciation by investing in companies whose securities are included in the S&P CNX Nifty

Avg Aum:

Rs. 4.38 crs.

NAV:

Direct Plan- Dividend Option- Rs. 22.0407 Regular Plan- Dividend Option - Rs. 22.0219 Direct Plan- Growth Option- Rs. 34.7428 Regular Plan- Growth Option- Rs. 34.9047

Date of allotment:

October 8, 2004

Asset Allocation:

Equities covered by the nifty in the same percentage weightage as in the Nifty: 90% - 100%. Money market instruments including 0% - 10%.

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

CNX Nifty.

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7. Canara Robeco Large Cap+ Fund : Category:

Open Ended equity scheme

Scheme Objective:

The investment Objective of the fund is to provide capital appreciation by predominantly investing in companies having a large market capitalization. However, there can be no assurance that the investment objective of the scheme will be realized.

Avg Aum:

Rs. 99.24 crs.

NAV:

Direct Plan- Dividend Option- Rs. 13.43 Regular Plan- Dividend Option - Rs. 13.35 Direct Plan- Growth Option- Rs. 13.43 Regular Plan- Growth Option- Rs. 13.34

Date of allotment:

August 21, 2010

Asset Allocation:

Large cap equity and equity related instruments: 65% - 100%. Domestic Debt and Money Market Instruments: 0% - 35%.

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

Subsequent Purchases:

Minimum amount of Rs.1000 and multiples of Re. 1 thereafter.

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

S&P BSE 100

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8. Canara Robeco Balance: Category:

Open Ended Balanced scheme

Scheme Objective:

Avg Aum:

To seek to generate long term capital appreciation and/or income from a portfolio constituted of equity and equity related securities as well as fixed income securities (debt and money market securities). Rs. 194.17 crs.

NAV:

Direct Plan- Quarterly Dividend Option- Rs. 60.52 Regular Plan- Quarterly Dividend Option - Rs. 60.37 Direct Plan- Growth Option- Rs. 78.41 Regular Plan- Growth Option- Rs. 78.28

Date of allotment: Asset Allocation:

Minimum Investment: Lumpsum: Subsequent Purchases: SIP/SWP/STP:

February 1, 1993 Equity and Equity related Instruments: 40% - 75%. Debt securities including securitized debt having rating above AA or equivalent, money market instruments and Govt. securities: 25% - 60%. RS. 5000 in multiples of Re. 1 thereafter Minimum amount of Rs.1000 and multiples of Re. 1 thereafter. For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Quarterly Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Quarterly Dividend Reinvestment Option/ Payout Option.

Entry Load: Exit Load:

NIL. 1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

CRISIL balanced fund Index. 68 | P a g e

9. Canara Robeco Monthly Income Plan: Category:

Open Ended debt scheme

Scheme Objective: Avg Aum:

To generate income by investing in debt instruments, MMI and small portion in equity. Rs. 207.29 crs.

NAV:

Direct Plan- Dividend Option- Rs. 38.4438 Regular Plan- Dividend Option - Rs. 38.0131 Direct Plan- Monthly Dividend Option- Rs. 14.0345 Regular Plan- Monthly Dividend Option- Rs. 13.8713 Direct Plan- Quarterly Growth Option- Rs. 14.1533 Regular Plan- Quarterly Growth Option- Rs. 14.3334

Date of allotment: Asset Allocation: Minimum Investment: Lumpsum: Subsequent Purchases: SIP/SWP/STP:

Plans/ Options:

Entry Load: Exit Load:

April 24, 1988 Equity and Equity related instruments: 10% - 25%. Debt securities with Money market Instruments: 70%- 90%. RS. 5000 in multiples of Re. 1 thereafter Minimum amount of Rs.1000 and multiples of Re. 1 thereafter. For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter Regular Plan- Growth Option Regular Plan- Monthly Dividend Reinvestment Option/ Payout Option Regular Plan- Quarterly Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Monthly Dividend Reinvestment Option/ Payout Option. Direct Plan- Quarterly Dividend Reinvestment Option/ Payout Option. NIL. 1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

CRISIL MIP blended Index. 69 | P a g e

10.Canara Robeco INDIGO Fund: Category:

Open Ended debt scheme

Scheme Objective:

To generate Income from a portfolio Constituted of debt and money market securities along with investment in gold ETF‘s.

Avg Aum:

Rs. 224.15 crs.

NAV:

Direct Plan- Quarterly Dividend Option- Rs. 10.9563 Regular Plan- Quarterly Dividend Option - Rs. 13.3801 Direct Plan- Growth Option- Rs. 11.1910 Regular Plan- Growth Option- Rs. 10.9563

Date of allotment:

July 9, 2010

Asset Allocation:

Indian Debt and Money market Instruments: 65% - 90%. Gold ETF‘s: 10% - 35%.

Minimum Investment: Lumpsum: Subsequent Purchases: SIP/SWP/STP:

RS. 5000 in multiples of Re. 1 thereafter Minimum amount of Rs.1000 and multiples of Re. 1 thereafter. For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Quarterly Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Quarterly Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% - if redeemed/switched out within 1 year from the date of allotment, Nil - if redeemed/switched out after 1 year from the date of allotment.

Benchmark:

Canara Robeco blended Gold Index.

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11.Canara Robeco GILT PGS Category:

Open Ended Gilt Scheme

Scheme Objective:

To provide risk free return (except interest rate risk) and long term capital appreciation by investing only in Govt. Securities.

Avg Aum:

Rs. 18.79 crs.

NAV:

Direct Plan- Dividend Option- Rs. 12.5029 Regular Plan- Dividend Option - Rs. 12.4623 Direct Plan- Growth Option- Rs. 32.6861 Regular Plan- Growth Option- Rs. 32.5810

Date of allotment:

December 29,1999

Asset Allocation:

Govt. Securities Money Market Instruments Call Money : 0% - 100%

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

Nil

Benchmark:

1-sec-li-bex

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12.Canara Robeco Income Fund Category:

Open Ended Debt Scheme

Scheme Objective:

To generate income through investment in Debt and Money Market securities of different maturity and issuers of different risk profiles.

Avg Aum:

Rs. 298.84 crs

NAV:

Direct Plan- Quarterly Dividend Option- Rs. 13.1933 Regular Plan- Quarterly Dividend Option - Rs. 13.1032 Direct Plan- Growth Option- Rs. 26.2690 Regular Plan- Growth Option- Rs. 26.0978

Date of allotment:

September 19,2002

Asset Allocation:

Debt (including Securitized Debt): 50% - 100%. Money Market Instruments / Call Money : 0% - 50%

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan-Quarterly Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan-Quarterly Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

1% if redeemed / switched out within 12 months from the date of allotment, Nil – If redeemed / switched out after 12 months from the date of allotment.

Benchmark:

CRISIL Composite Bond Fund Index

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13.Canara Robeco Dynamic Bond Fund Category:

Open Ended Debt Scheme

Scheme Objective:

The objective of the fund is to seek to generate income from a portfolio of debt and money market securities.

Avg Aum:

Rs. 318.83 crs

NAV:

Direct Plan- Dividend Option- Rs. 12.4141 Regular Plan- Dividend Option - Rs. 13.9235 Direct Plan- Growth Option- Rs. 12.3659 Regular Plan- Growth Option- Rs. 13.8738

Date of allotment:

May 29,2009

Asset Allocation:

Govt. Of India & Corporate Debt Securities (including Securitized Debt) : 0% - 100% Money Market Instruments : 0% - 100%

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

Subsequent Purchases:

Min amount of Rs. 1000 and multiples of Rs 1 thereafter.

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

0.50% - If redeemed / switched out within 6 months from the date of allotment. Nil – If redeemed / switched out after 6 months from the date of allotment.

Benchmark:

CRISIL Composite Bond Fund Index 73 | P a g e

14.Canara Robeco Short Term Fund Category:

Open Ended Debt Scheme

Scheme Objective:

To generate income from a portfolio constituted of short to medium term debt and money market securities. There is no assurance that the objective of the fund will be realized and the fund does not assure or guarantee any returns. Rs. 225.33 crs

Avg Aum: NAV:

Date of allotment: Asset Allocation: Minimum Investment: Lumpsum: Subsequent Purchase: SIP/SWP/STP:

Plans/ Options:

Entry Load: Exit Load:

Benchmark:

Direct Plan- Growth Option- Rs. 14.6954 Institutional Plan- Growth Option- Rs. 14.8549 Institutional Plan- Monthly Dividend Option- Rs. 10.1302 Direct Plan- Monthly Dividend Option- Rs. 10/1308 Regular Plan- Growth Option- Rs. 14.6162 Regular Plan- Monthly Dividend Option- Rs. 10.1302 Regular Plan- Weekly Dividend Option- Rs. 10.1268 Direct Plan- Weekly Dividend Option- Rs. 10.1200 March 31, 2009 Money Market Instruments: 60% - 100%. Government of India & Debt Securities (including Securitized Debt): 0% - 40%. RS. 5000 in multiples of Re. 1 thereafter Min. amount of Rs. 1000 and multiples of Rs. 1 thereafter. For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter Regular Plan- Growth Option Regular Plan- Weekly Dividend Reinvestment Regular Plan- Monthly Dividend Reinvestment Regular Plan- Monthly Dividend Payout Direct Plan- Growth Option Direct Plan- Weekly Dividend Reinvestment Direct Plan- Monthly Dividend Reinvestment Direct Plan- Monthly Dividend Payout NIL. 0.50% - If redeemed / switched out within 6 months from the date of allotment, Nil – If redeemed / switched out after 6 months from the date of allotment CRISIL Liquid Fund Index 74 | P a g e

15.Canara Robeco Liquid Category:

Open Ended cash management scheme

Scheme Objective:

Enhancement of Income, while maintaining a level of liquidity though, investment in a mix of MMI & Debt securities. Rs. 2737.90 crs

Avg Aum: NAV:

Date of allotment:

Asset Allocation: Minimum Investment: Lumpsum: Subsequent purchases: SIP/SWP/STP:

Direct Plan- Daily Dividend Reinvestment Option- Rs 1,005.5000 Direct Plan –Dividend Option- Rs 1,125.6596 Direct Plan – Growth Option- Rs 1,572.2879 Institutional Plan-Growth Option- Rs 2,310.8890 Institutional Plan- Daily Dividend Option- Rs 1005.5000 Direct Plan- Monthly Dividend Option Retail Plan- Rs 1000.0149 Retail Plan- Monthly Dividend Option- Rs 1,005.5000 Retail Plan- Daily Dividend Option- Rs 1,007.0000 Retail Plan- Growth Option- Rs 2,261.0199 Retail Plan- Weekly Dividend Option- Rs 1,005.5000 Regular Plan- Daily Dividend Reinvestment Option- Rs 1,005.5000 Regular Plan – Growth Option- Rs1,571.1164 Regular Plan –Monthly Dividend Option- Rs 1,000.0000 Regular Plan – Weekly Dividend Option- Rs 1,000.0000 Direct Plan – Weekly Dividend Option- Rs 1,000.0000 Retail Plan- January 15, 2002 Institutional Plan- May 31, 2004 Regular Plan- July 15, 2008 Money Market Instruments / Call money: 65% - 100%. Debt (including Securitized Debt): 0% - 35% Minimum amount : Rs 5000and in multiplies of rs1 thereafter Minimum amount of Rs 1000 and multiples of Rs 1 thereafter. Minimum installment amount – Rs 1000 and Rs 2000 for monthly and quarterly frequency and in multiplies of Rs 1 thereafter

Entry Load:

Regular Plan- Growth Option Regular Plan – Dividend Option :Daily Dividend Reinvestment Regular Plan- Weekly Dividend Reinvestment Regular Plan-Monthly Dividend Payout Direct Plan – Growth Option Direct Pan – Dividend Option :Daily Dividend Reinvestment Direct Plan – Weekly Dividend Reinvestment Direct Plan – Weekly Dividend Payout Direct Plan – Monthly Dividend Reinvestment Direct Plan – Monthly Dividend Payout Direct Plan - Dividend Payout NIL.

Exit Load: Benchmark:

NIL CRISIL Liquid Fund Index

Plans/ Options:

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16.Canara Robeco Treasury Advantage Fund Category: Scheme Objective: Avg Aum: Nav:

Date Of Allotment: Asset Allocation:

Minimum Investment: Lumpsum: Subsequent Purchases : Sip/SWP/STP: Plans/ Options:

Entry Load: Exit Load: Benchmark:

Open Ended Debt Scheme To Generate Income / Capital Appreciation Through A Low Risk Strategy In Investment In Debt Securities And Money Market Instruments. Rs. 171.86 Crores Direct Plan – Daily Dividend Reinvestment Option - Rs 1,240.7100 Direct Plan – Dividend Option – Rs 1,125.5801 Direct Plan – Growth Option – Rs 1,965.3857 Institutional Plan- Daily Dividend Option - Rs 1,240.7100 Institutional Plan- Growth Option - Rs 2,102.9699 Institutional Plan – Weekly Dividend Option - Rs 1,240.7100 Direct Plan – Monthly Dividend Option - Rs 1,000.0000 Retail Plan – Daily Dividend Option – Rs 1,240.7100 Retail Plan- Dividend Option – Rs 1,419.0274 Retail Plan- Growth Option - Rs 2,061.8540 Retail Plan – Monthly Dividend Option – Rs 1,240.7100 Retail Plan – Weekly Dividend Option – Rs 1,240.7100 Regular Plan – Daily Dividend Reinvestment Option – Rs 1,240.7100 Regular Plan- Growth Option- Rs 1,962.5526 Regular Plan – Monthly Dividend Option – Rs 1,000.7075 Regular Plan – Weekly Dividend Option - Rs 1,240.7100 Direct Plan – Weekly Dividend Option – Rs 1,240.7100 September 16,2003 MMI/ Call/ Debt Instruments With Residual Average Maturity Or Equal Or Less Than 1 Year: 20% - 100%. Debt Instruments With Residual Average Maturity Of More Than 1 Year (Including Securitized Debt): 0% - 80% RS. 5000 In Multiples Of Re. 1 Thereafter For Monthly Frequency – Rs. 1000 And Multiples Of Re.1 Thereafter Minimum Installment Amount – Rs 1000 And 2000 For Monthly And Quarterly Frequency And In Multiples Of Rs1 Thereafter Regular Plan- Growth Option Regular Plan – Dividend Option :Daily Dividend Reinvestment Regular Plan – Weekly Dividend Reinvestment Regular Plan – Weekly Dividend Payout Regular Plan – Monthly Dividend Reinvestment Regular Plan – Monthly Dividend Payout Direct Plan- Growth Option Direct Plan- Dividend Option Daily Dividend Reinvestment Direct Plan- Weekly Dividend Reinvestment Direct Plan- Weekly Dividend Payout Direct Plan- Monthly Dividend Reinvestment Direct Plan- Monthly Dividend Payout Direct Plan - Dividend Payout Nil. Nil Crisil Liquid Fund Index 76 | P a g e

17.Canara Robeco Floating Rate Category:

Open Ended Debt Scheme

Scheme Objective:

The fund seeks to generate income by investing in a portfolio comprising of short term debt instruments and money market instruments with weighted average portfolio duration of equal to or less than 1 year. Rs. 188.15crs

Avg Aum: NAV:

Date of allotment: Asset Allocation: Minimum Investment: Lumpsum: SIP/SWP/STP:

Plans/ Options:

Entry Load: Exit Load:

Benchmark:

Regular plan-daily dividend reinvestment option- Rs 10.2600 Direct plan-daily dividend reinvestment option –Rs 10.2600 Direct plan-dividend option- Rs 18.0318 Regular plan-dividend option- Rs 18.0124 Direct plan-growth option-Rs 20.1344 Regular plan –growth option-Rs 20.1124 Direct plan-monthly dividend option- Rs 10.2600 Regular plan-monthly dividend option –Rs 10.2600 Direct plan – weekly dividend option – Rs 10.2600 March 4, 2005 Indian Money Market Instruments: 70% - 100% Indian Debt Securities (including Securitized Debt): 0 -30% RS. 5000 in multiples of Re. 1 thereafter For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter Regular Plan- Dividend Reinvestment Option/ Payout Option Regular Plan- Daily Dividend Reinvestment Option Regular plan – weekly dividend payout/reinvestment option Regular plan –monthly dividend payout/reinvestment option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option. Direct Plan – weekly dividend payout/reinvestment option Direct Plan – monthly dividend payout/reinvestment option NIL. 0.25% - If redeemed / switched out within 30 days from the date of allotment. NIL – If redeemed / switched out after 60 days from the date of allotment. CRISIL Liquid Fund Index

77 | P a g e

18.Canara Robeco Gilt Advantage Fund Category:

Open Ended Gilt Scheme

Scheme Objective:

To

generate

returns

commensurate

with

low

credit

risk

predominantly investing in the portfolio comprising of short to medium term Government securities guaranteed by Central and State Government with a weighted average portfolio duration not exceeding 3 years. However, there can be no assurance that the investment objective of the scheme is realized. Avg Aum:

Rs. 1.26 Rs

NAV:

Direct Plan- Dividend Option- Rs. 12.0552 Regular Plan- Dividend Option - Rs. 11.9985 Direct Plan- Growth Option- Rs. 12.8050 Regular Plan- Growth Option- Rs. 12.7483

Date of allotment:

March 1, 2011

Asset Allocation:

Govt. Securities/ Call Money: 0% - 100%

Minimum Investment: Lumpsum:

RS. 5000 in multiples of Re. 1 thereafter

SIP/SWP/STP:

For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter

Plans/ Options:

Regular Plan- Growth Option Regular Plan- Dividend Reinvestment Option/ Payout Option Direct Plan- Growth Option Direct Plan- Dividend Reinvestment Option/ Payout Option.

Entry Load:

NIL.

Exit Load:

Nil

Benchmark:

I-Sec-Si-Bex

78 | P a g e

19.Canara Robeco Yield Advantage Fund Category:

Open Ended Debt Scheme

Scheme Objective:

To generate regular income by investing in a wide range of debt securities and MMI‘s of various maturities and risk profile and a small portion of investment in Equity and Equity related instruments. However there can be no assurance that the investment objective of the scheme will be realized. Rs. 2.96 Rs direct plan – growth option –Rs 12.6209 regular plan – growth option – Rs 12.4750 direct plan – monthly dividend option – Rs 12.6216 regular plan – monthly dividend option – Rs 12.4750 regular plan- quarterly dividend option – Rs 12.4749 direct plan quarterly dividend option – Rs 12.6214 April 25, 2011 Indian Debt and Money Market instruments: 90% - 100% Equity and Equity related instruments: 0% - 10%

Avg Aum: NAV:

Date of allotment: Asset Allocation: Minimum Investment: Lumpsum: SIP/SWP/STP:

Plans/ Options:

Entry Load: Exit Load:

Benchmark:

RS. 5000 in multiples of Re. 1 thereafter For monthly frequency – Rs. 1000 and multiples of re.1 thereafter For quarterly frequency – Rs. 2000 in multiples of re. 1 thereafter Regular Plan- Growth Option Regular plan- monthly dividend payout/reinvestment option Regular plan – quarterly dividend payout/reinvestment option Direct plan – growth option Direct plan – monthly dividend payout/reinvestment option Direct plan – quarterly dividend payout /reinvestment option NIL. % if redeemed / switched out within 1 year from the date of allotment. Nil if redeemed /switched out after 1 year from date of allotment CRISIL MIP Blended Index

79 | P a g e

Facilities Provided By Canara Robeco 1. Systematic Investment Plan (SIP): Management of one's finances to attain a defined goal calls for a lot of discipline, many a times self-imposed. Our Systematic Investment Plan is a tool, which can help you, inject this discipline in your financial management efforts. Our Systematic Investment Plan (SIP) provides you the facility to periodically invest a fixed sum over any defined period of time (6 months or more) in a disciplined manner. SIPs help in arresting uncertainties associated with trying to time the market and thus, in the long term tends to iron out market fluctuations. It brings down your average cost of acquisition of units. As you would allocate a fixed sum every month, you would buy more units when the prices of our units are lower than when they are higher. 2. Systematic Withdrawal Plan (SWP): Our Systematic Withdrawal Plan (SWP) is designed receive a regular stream of payouts in a defined frequency and to book profits periodically Through our SWP you can redeem defined sums at a pre-defined frequency by giving a one-time instruction to us. You may choose to regularly withdraw either a fixed sum or just the appreciation on your investments. This facility caters to two segments of investor needs: 1) Investors wanting defined, regular funds inflow from their investments. 2) Investors interested in booking gains at a regular interval.

3. Systematic Transfer Plan (STP): Systematic Transfer Plan (SWP) caters a phased entry into the Equity markets rather than putting in all your money at one trench and to book profits from your equity holdings. Through our STP you can choose to switch your investments from one Kotak Mutual scheme to another at a predefined frequency by giving a one-time instruction to us. You also have a choice between switching a fixed sum or only the appreciation on your investments. You can choose to transfer either a fixed sum every defined period or only the appreciation on your investments over that period from one scheme to another. The latter is helpful, where you do not want the transfer to disturb your capital contribution. 80 | P a g e

4. ECS of Dividends: ECS (Electronic Clearing Service) is a Reserve Bank of India offering to facilitate, among others, faster and seamless payout of dividends directly into your bank account. ECS as a mechanism for payout of Dividends is faster, convenient, cost-effective and hassle-free. Besides, you don't run the risk of loss of dividend instruments in transit and the associated delays in obtaining a duplicate instrument. This facility is currently offered across all banks in over 48 locations.

5. Online Transactions Facility: Our Online Transactions Facility allows you to have instant access to your investments at anytime from anywhere just at the click of a button. Here's a list of all facilities you can avail by signing in for our Online Transactions Facility: 

Redemption.



Switch Over.



Account Statement.

6. Email Communication: The world over, e-mail has been revolutionizing communication. No more need to have paper trails; e-mail makes communication real-time, easy to store and retrieve and cost-effective. You can now opt to receive all your communication from us over e-mail:  

Account Statement for your investments. Transaction Confirmations.



Daily NAVs and Dividend Updates.



Market Reviews.



Information on product launches, service initiatives, dividends, etc.



Annual Reports.



Other Statutory Communication. 81 | P a g e

7. SMS Services: With cell phones fast qualifying for an assured parking in every pocket, we could not resist allowing you that extra convenience to be in touch with your investments whenever you wish, wherever you are. Try our SMS facility to: 

Access the latest NAVs and Dividends for our various schemes on SMS.



Receive information on product launches, service initiatives, dividends, etc. on SMS.



Post your queries to our Dedicated Services Desk.

82 | P a g e

Chapter 6 Systematic investment plans

83 | P a g e

Systematic Investment Plans (SIP) “Every drop makes an Ocean”SIP‘s enable investors to invest a fixed sum periodically into a mutual fund scheme. Units are bought at the NAV related price prevailing on the date of investment. The investment is thus staggered over time, reducing the risk of investing a lump sum at a specific time. Since a fixed amount is being invested, larger number of units is bought when price is low and smaller number of units is bought when price is high. Systematic investment plan thus lowers the average cost of purchases. The strategy is called Rupee Cost Averaging. The mutual fund specifies the minimum amount that must be invested every period .This may be as low as Rs 50 (micro slips) though most funds have the minimum amount at Rs 500 or 1000 per month. Investors commit to the periodic investment over a chosen length of time. SIPs can be committed for six months, one year, or even more. AMC‘s offer specific intervals in which SIP investment can be made. These can be monthly, quarterly, half yearly or annual. SIPs are to be made on dates specified by the AMC, for example 5th, 15th, or 25th of a month.an investor can invest over a year by selecting a date specified by the AMC. Example: You invest Rs 1,000 each, on the 15th of every month for the entire year. SIPs can be initiated along with an NFO. The first installment is at the NFO purchase price and is allotted like an NFO. The second instalment begins after the scheme reopens for continuous purchase transactions. Payment instruments for SIPs can be post-dated cheques (PDCs), ECS (electronic clearing service) mandate or standing instruction for direct transfer. The applicable NAV for an SIP is the NAV on the installment date or if that day is on holiday, then the NAV of the next business day.

How does it work? A SIP is a flexible and easy investment plan. Your money is auto-debited from your bank account and invested into a specific mutual fund scheme. You are allocated certain number of units based on the ongoing market rate (called NAV or net asset value) for the day. Every time you invest money, additional units of the scheme are purchased at the market rate and added to your account. Hence, units are bought at different rates and investors benefit from Rupee-Cost Averaging and the Power of Compounding. 84 | P a g e

Rupee-Cost averaging With volatile markets, most investors remain skeptical about the best time to invest and try to 'time' their entry into the market. Rupee-cost averaging allows you to opt out of the guessing game. Since you are a regular investor, your money fetches more units when the price is low and lesser when the price is high. During volatile period, it may allow you to achieve a lower average cost per unit.

Power of Compounding Albert Einstein once said, "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." The rule for compounding is simple - the sooner you start investing, the more time your money has to grow.

An illustration below explains the benefit of an SIP over a lump sum:SIP - Rupee Cost Averaging Lump-Sum Investor Month

Unit Price (Rs.)

1

50

2

Investment (Rs.) 9,000

Unit Purchased^ 180

SIP Investor Investment (Rs.) 1,000

Units Purchased^ 20

47

1,000

21

3

45

1,000

22

4

44

1,000

23

5

46

1,000

22

6

48

1,000

21

7

49

1,000

20

8

50

1,000

20

9

52

1,000

19

Total Investment

Rs.9,000

Rs.9,000

Total Units Purchased

180

188

Average Unit Price

Rs.50

Rs.48

Value After 9 Months

Rs.9,360

Rs.9,799

In long term, SIP investors gain as his investment and unaffected by market volatility. 85 | P a g e

Example If you started investing Rs. 10,000 a month on your 40th birthday, in 20 years‘ time you would have put aside Rs. 24 lakhs. If that investment grew by an average of 7% a year, it would be worth Rs. 52.4 lakhs when you reach 60. However, if you started investing 10 years earlier, your Rs. 10,000 each month would add up to Rs. 36 lakh over 30 years. Assuming the same average annual growth of 7%, you would have Rs. 1.22 Cr on your 60th birthday - more than double the amount you would have received if you had started ten years later.

Canara Robeco- NAV for Emerging Equities For Example: You start investing Rs 5000 every year for 8 year starting from 5 th April‘ 06. The NAV on that particular day was 17.03, so you receive Rs. 11,306.52. By the end of 8 years you will receive Rs.1054153.00 with a profit of Rs. 5,64,153.00.

CANARA ROBECO-Emerging Equities

DATE 5-Apr-06 5-May-06 5-Jun-06 5-Jul-06 7-Aug-06 5-Sep-06 5-Oct-06 6-Nov-06 5-Dec-06 5-Jan-07 5-Feb-07 5-Mar-07 5-Apr-07 7-May-07 5-Jun-07 5-Jul-07 6-Aug-07

CANARA ROBECO – GROWTH 17.03 17.41 13.67 13 12.76 14.33 14.71 15.43 16.22 16.45 16.51 13.88 14.34 15.97 17.43 18.94 18.52

AMOUNT 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

UNIT 293.60 287.19 365.76 384.62 391.85 348.92 339.90 324.04 308.26 303.95 302.85 360.23 348.68 313.09 286.86 263.99 269.98

CURRENT NAV 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51

CURRENT VALUE 11306.52 11059.74 14085.59 14811.54 15090.13 13436.85 13089.73 12478.94 11871.15 11705.17 11662.63 13872.48 13427.48 12056.98 11047.05 10166.31 10396.87

PROFIT/ LOSS 6306.52 6059.74 9085.59 9811.54 10090.13 8436.85 8089.73 7478.94 6871.15 6705.17 6662.63 8872.48 8427.48 7056.98 6047.05 5166.31 5396.87 86 | P a g e

5-Sep-07 5-Oct-07 5-Nov-07 5-Dec-07 7-Jan-08 5-Feb-08 5-Mar-08 7-Apr-08 5-May-08 5-Jun-08 7-Jul-08 5-Aug-08 5-Sep-08 6-Oct-08 5-Nov-08 5-Dec-08 5-Jan-09 5-Feb-09 5-Mar-09 6-Apr-09 5-May-09 5-Jun-09 6-Jul-09 5-Aug-09 7-Sep-09 5-Oct-09 5-Nov-09 7-Dec-09 5-Jan-10 5-Feb-10 5-Mar-10 5-Apr-10 5-May-10 7-Jun-10 5-Jul-10 5-Aug-10 6-Sep-10 5-Oct-10 8-Nov-10

19.41 20.32 22.6 24.21 26.24 21.37 18.67 16.65 18.62 16.43 14.28 15.22 14.89 11.16 8.72 7.94 9.26 7.73 6.93 8.35 9.92 14.34 13.34 15.1 16.08 16.55 15.7 17.28 18.98 17.89 18.94 20.22 20.29 20.1 21.48 22.81 23.88 24.84 24.77

5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

257.60 246.06 221.24 206.53 190.55 233.97 267.81 300.30 268.53 304.32 350.14 328.52 335.80 448.03 573.39 629.72 539.96 646.83 721.50 598.80 504.03 348.68 374.81 331.13 310.95 302.11 318.47 289.35 263.44 279.49 263.99 247.28 246.43 248.76 232.77 219.20 209.38 201.29 201.86

38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51

9920.14 9475.89 8519.91 7953.33 7338.03 9010.29 10313.34 11564.56 10341.03 11719.42 13483.89 12651.12 12931.50 17253.58 22081.42 24250.63 20793.74 24909.44 27784.99 23059.88 19410.28 13427.48 14434.03 12751.66 11974.50 11634.44 12264.33 11142.94 10144.89 10763.00 10166.31 9522.75 9489.90 9579.60 8964.15 8441.47 8063.23 7751.61 7773.52

4920.14 4475.89 3519.91 2953.33 2338.03 4010.29 5313.34 6564.56 5341.03 6719.42 8483.89 7651.12 7931.50 12253.58 17081.42 19250.63 15793.74 19909.44 22784.99 18059.88 14410.28 8427.48 9434.03 7751.66 6974.50 6634.44 7264.33 6142.94 5144.89 5763.00 5166.31 4522.75 4489.90 4579.60 3964.15 3441.47 3063.23 2751.61 2773.52 87 | P a g e

6-Dec-10 5-Jan-11 7-Feb-11 7-Mar-11 5-Apr-11 5-May-11 6-Jun-11 5-Jul-11 5-Aug-11 5-Sep-11 5-Oct-11 8-Nov-11 5-Dec-11 5-Jan-12 6-Feb-12 5-Mar-12 9-Apr-12 7-May-12 5-Jun-12 5-Jul-12 6-Aug-12 5-Sep-12 5-Oct-12 5-Nov-12 5-Dec-12 7-Jan-13 5-Feb-13 5-Mar-13 5-Apr-13 6-May-13 5-Jun-13 5-Jul-13 5-Aug-13 5-Sep-13 7-Oct-13 5-Nov-13 5-Dec-13 6-Jan-14 5-Feb-14

23.62 23.82 21.33 21.06 22.82 22.62 23.09 23.17 22.63 21.72 20.43 21.57 20.03 18.83 21.86 22.29 23.43 22.75 21.9 23.86 23.41 23.45 25.35 25.53 27.28 28.07 26.47 25.06 24.35 25.29 24.62 23.57 22.3 22.17 23.66 25.78 26.58 28.28 27.08

5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

211.69 209.91 234.41 237.42 219.11 221.04 216.54 215.80 220.95 230.20 244.74 231.80 249.63 265.53 228.73 224.32 213.40 219.78 228.31 209.56 213.58 213.22 197.24 195.85 183.28 178.13 188.89 199.52 205.34 197.71 203.09 212.13 224.22 225.53 211.33 193.95 188.11 176.80 184.64

38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51 38.51

8151.99 8083.54 9027.19 9142.92 8437.77 8512.38 8339.11 8310.32 8508.62 8865.10 9424.87 8926.75 9613.08 10225.70 8808.33 8638.40 8218.10 8463.74 8792.24 8069.99 8225.12 8211.09 7595.66 7542.11 7058.28 6859.64 7274.27 7683.56 7907.60 7613.68 7820.88 8169.28 8634.53 8685.16 8138.21 7468.97 7244.17 6808.70 7110.41

3151.99 3083.54 4027.19 4142.92 3437.77 3512.38 3339.11 3310.32 3508.62 3865.10 4424.87 3926.75 4613.08 5225.70 3808.33 3638.40 3218.10 3463.74 3792.24 3069.99 3225.12 3211.09 2595.66 2542.11 2058.28 1859.64 2274.27 2683.56 2907.60 2613.68 2820.88 3169.28 3634.53 3685.16 3138.21 2468.97 2244.17 1808.70 2110.41 88 | P a g e

5-Mar-14 7-Apr-14 5-May-14

28.71 31.17 31.9 TOTAL

5,000 5,000 5,000 4,90,000

174.16 160.41 156.74

38.51 38.51 38.51

6706.72 6177.41 6036.05 10,54,153.00

1706.72 1177.41 1036.05 5,64,153.00

Systematic Investment Plan – Building wealth Regular investing for long periods of time delivers healthy returns

An Illustration: Monthly Savings - What your savings may generate Savings per month (Rs.)

Total amount

Assumed Rate of return (per annum)

invested (for 15 years)

(Rs. in Lacs)

6.00%

8.00%

10.00%

(Rupees in lacs, 15 years later)* 9

14.6

17.4

20.9

7.2

11.7

13.9

16.7

3,000

5.4

8.8

10.4

12.5

2,000

3.6

5.8

7

8.3

1,000

1.8

2.9

3.5

4.2

5,000

4,000

Comparing SIP with any other method of investing SIP

Other methods of investing



Uncomplicated and largely automatic



Good amount of research and market tracking required



Small amounts of funds required



Lump sum funds required



No need to time the market



Make your best attempt to time the market

89 | P a g e





Averages out cost per unit

Cost per unit depends on your market timing

Comparison between SIP and Lumpsum investment- Equity Diversified Canara Robeco- Equity Diversified- SIP Method.

DATE 5-Jan-10 5-Feb-10 5-Mar-10 5-Apr-10 5-May 7-Jun-10 6-Jul-10 5-Aug 6-Sep-10 5-Oct-10 8-Nov-10 6-Dec-10 5-Jan-11 7-Feb-11 7-Mar-11 5-Apr-11 5-May-11 6-Jun-11 5-Jul-11 5-Aug-11 5-Sep-11 5-Oct-11 5-Nov-11 5-Dec-11 5-Jan-12 7-Feb-12 5-Mar-12

Canara Robeco Equity Diversifiedgrowth Amount Units 48.15 5,000 103.8422 45.52 5,000 109.8418 47.96 5,000 104.2535 50.66 5,000 98.6972 50.56 5,000 98.89241 52.25 5,000 95.69378 50.21 5,000 99.58176 54.12 5,000 92.38729 56.27 5,000 88.8573 59.26 5,000 84.37395 59.21 5,000 84.4452 56.48 5,000 88.52691 57.24 5,000 87.3515 52.38 5,000 95.45628 52.31 5,000 95.58402 55.93 5,000 89.39746 53.66 5,000 93.17928 54.7 5,000 91.40768 55.99 5,000 89.30166 53.83 5,000 92.88501 52.3 5,000 95.60229 50.01 5,000 99.98 53.73 5,000 93.05788 51.58 5,000 96.9368 48.79 5,000 102.48 54.22 5,000 92.21689 54.35 5,000 91.99632

Current NAV 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31

Current value 8131.8795 8601.7135 8164.0951 7728.9775 7744.2642 7493.7799 7798.2474 7234.8485 6958.4148 6607.3237 6612.9032 6932.5425 6840.4962 7475.1814 7485.1845 7000.7152 7296.8692 7158.1353 6993.2131 7273.825 7486.6157 7829.4341 7287.3627 7591.1206 8025.2101 7221.505 7204.2318

Profit/Loss 3,132 3,602 3,164 2,729 2,744 2,494 2,798 2,235 1,958 1,607 1,613 1,933 1,840 2,475 2,485 2,001 2,297 2,158 1,993 2,274 2,487 2,829 2,287 2,591 3,025 2,222 2,204 90 | P a g e

9-Apr-12 7-May-12 5-Jun-12 5-Jul-12 5-Aug-12 5-Sep-12 5-Oct-12 5-Nov-12 5-Dec-12 7-Jan-13 5-Feb-13 5-Mar-13 5-Apr-13 5-May-13 5-Jun-13 5-Jul-13 5-Aug-13 5-Sep-13 7-Oct-13 5-Nov-13 5-Dec-13 6-Jan-14 5-Feb-14 5-Mar-14 7-Apr-14 5-May-14

55.13 53.93 52.02 56.8 56.19 55.43 60.99 60.87 63.11 64.52 63.04 60.56 58.26 62.09 61.53 60.64 59.28 58.62 61.65 64.79 64.62 65.4 62.92 65.96 69.96 70.29

5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000

90.69472 92.71278 96.11688 88.02817 88.9838 90.20386 81.98065 82.14227 79.22675 77.49535 79.31472 82.56275 85.82218 80.52827 81.26117 82.45383 84.34548 85.29512 81.103 77.1724 77.37543 76.4526 79.46599 75.80352 71.46941 71.13387

TOTAL

605,000

18401.32

78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31 78.31

7102.3036 7260.3375 7526.9127 6893.4859 6968.3218 7063.8643 6419.9049 6432.5612 6204.2466 6068.6609 6211.1358 6465.4888 6720.7346 6306.1685 6363.5625 6456.9591 6605.0945 6679.4609 6351.176 6043.3709 6059.2696 5987.0031 6222.9816 5936.1734 5596.7696 5570.4937

2,102 2,260 2,527 1,893 1,968 2,064 1,420 1,433 1,204 1,069 1,211 1,465 1,721 1,306 1,364 1,457 1,605 1,679 1,351 1,043 1,059 987 1,223 936 597 570

1441007.5

836,007

Canara Robeco- Equity Diversified- Lumpsum Investment Method Scheme Name (Growth Options)

Scheme Theme

Launch Date

Purchase NAV

Amount Invested During NFO

Units Allotted

NAV As On 2/6/2014

Current Growth On Inventory

% Growth

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Canara Robeco Equity Diversified

Large Cap

16-Sept03

10.00

100000

10000

78.31

803400

803.4

SIP and Lumpsum are the two techniques to invest in mutual funds. Any investor can choose one out of them and can invest their money into mutual funds. Systematic Investment Plan is very helpful to salaried and middle class men. They can invest their saving into SIP and can collect huge funds for future. SIP is paid in monthly or quarterly as per the scheme. But Lumpsum is paid only one time and the whole transaction is based on this investment. Opting SIP, an investor can invest their saving into it and can save his money doing that. SIP is good because if it seems that market will go down in a few days, the investor can safely withdraw his money.

Why SIP?

Disciplined Saving

Long Term Gains

Flexibility

Convenience

The Systematic Investment Plan is a unique plan that allows you to fulfil all your dreams efficiently. With salient benefits and features, the SIP becomes a wise choice for investments. An investor can make regular investments and follow a disciplined approach towards investing in MF schemes. He can also peruse the Systematic Investment Plan according to pre-opted schedules. Systematic Investment Planning (SIP) SIP is similar to a Recurring Deposit. Every 92 | P a g e

month on a specified date an amount you choose is invested in a mutual fund scheme of your choice. The dates currently available for SIPs are the 5th, 10th, 15th, 20th and the 25th of a month. SIP helps to: 

Build your future: To meet the more exhaustive expenses of your life like marriages, education or a house, you need to start investing early. Save a small amount every month/quarter with SIP and look forward to a bright future.

 Relax and accumulate wealth: With SIP, you don't need to invest a huge sum of money i.e. you can start with an amount as little as Rs. 500. Gradually, you can accumulate wealth over the long-term.

 Reduce risks: For efficient participation in this volatile market, SIP helps you average out your cost by generating superior returns in the long run. It reduces the risk associated with lump sum investments.

 Enjoy the convenience: Set yourself free from cumbersome paperwork. Just identify the amount and scheme that you wish to invest in and then choose from options like Auto Debit/ECS. The amount will automatically get debited on a date of your choice. You can also give monthly/quarterly post-dated cheques for the amount you wish to invest. 

Build your investment at regular intervals: With SIP, you can invest a pre-determined amount of money in chosen schemes at the applicable NAV based Sale Price on each transaction date. Each transaction will fetch you additional units that will be added to your investment accounts.

Approach: It is important to remember that an early investor builds more than the one who comes in later. The simple reasoning being; the accumulated investment increases with fresh capital which is invested at periodic intervals.

Steps: 1) Start Early – be the first to take the first step Consider the following scenarios where different investors start investments at different age levels and invest Rs 2000 per month till the age of 60 years. The person who started investing at 93 | P a g e

the age of 25 years stands benefitted more as he has started early and can benefit from power of compounding. Even a higher investment amount may not compensate for the growth potential of starting early.

2) Invest in the Right asset class – Risk return balance to optimize growth Inflation for the past 18 years has been on an average at 7.80% on CAGR basis; an investor should always look at an asset class which has the potential to generate positive inflation adjusted returns. Historically on analysis for the past 25 years, equity as an asset class has the potential to beat inflation and generate positive post tax and inflation adjusted returns. (Refer to the chart below)

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3) Investing with a plan – Consistent and continuous investment Systematic Investment Plans (SIPs) in mutual funds has long been considered one of the better ways for the common man to invest in Mutual Funds

Fees:-A number of mutual funds do not charge an entry load for an SIP. If not exited (selling the units) within a year of buying the units, they may not charge an exit load. However, if units are sold within a year, there may be an exit load. Different fees charged by different MF companies.

Benefits of Systematic Investment Plans 

Disciplined Saving - Discipline is the key to successful investments. When you invest through SIP, you commit yourself to save regularly. Every investment is a step towards attaining your financial objectives.



Flexibility - While it is advisable to continue SIP investments with a long-term perspective, there is no compulsion. Investors can discontinue the plan at any time. One can also increase/ decrease the amount being invested.



Long-Term Gains - Due to rupee-cost averaging and the power of compounding SIPs have the potential to deliver attractive returns over a long investment horizon.



Convenience - SIP is a hassle-free mode of investment. You can issue a standing instruction to your bank to facilitate auto-debits from your bank account.



Reduces risk by spreading investment over a longer period of time at various levels of the market.



Reduces cost of investment in fluctuating markets.

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SIPs have proved to be an ideal mode of investment for retail investors who do not have the resources to pursue active investments.

Disadvantage of Systematic Investment Plans 

No downside Protection- Investors should remember that despite of all the advantages

that SIP‘s have, they are subject to market risks and do not protect investors from making a loss or ensure them profits in falling markets. 

Portfolio risk remains- SIP‘s are also subject to security risk. Mutual fund schemes

investing in portfolios that turns out to generate negative returns are bound to make investors incur a loss even if the investment is made through SIP‘s. 

Ideal Profile of investors- Investors opting to invest through an SIP option should have a

long- term investment horizon, be willing to invest regularly, keep patience; and who cannot invest enough amount at one go before opting for SIP‘s. 

Defining the investment objective- Investors should invest with a clear objective in their

mind. It helps to figure out an indicative time period for which the investments would have to be made. 

Determining the investment surplus- investors should estimate the amount that they

can afford to invest on a periodical basis. Investors should be conservative while making this estimate as an over estimated periodical investment amount may turn out to be a burden for investors. 

Matching periodicity to fund flows- SIP‘s are available in monthly and quarterly

options. Investors should opt for an option that is in tandem with the periodicity of cash inflows. 

Selecting an appropriate scheme category- before investing investors should take the

risk- return profile of a scheme into consideration. Investors should choose a scheme that suits their investment objective.

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

Periodical review of investments- after selecting an appropriate scheme and making

investment in it, investors should continuously monitor the performance of similar schemes to the one in which the investment is done. This enables investors to compare the performance of their scheme with correspondence schemes and make necessary adjustments, if required.

Case Study on SIP – Real Life Situation Assume that you are 30 years of age and have a wife and kid. Your Current Annual expenditure is of Rs.5,00,000. And you are expected to retire at the age of 60 years. The average prices (i.e. inflation) will rise by 7% pa. After 30 years when you retire, the low risk rate of return will be 6% pa (Considering you put all your accumulated corpus post retirement in a bank deposit). You will live for 20 years more post retirement. So let‘s see what will be the corpus required at the time of your retirement to maintain the same current lifestyle additionally with enhanced medical expenses.

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current expenditure Rs. 5,00,000 p.a Inflated @ 7% p.a. for 30 years expenditure at the time of retierment Rs. 36,00,000 p.a.

income to be generated post retirement Rs. 36,00,000 p.a. corpus required at the time of retirement

therefore to generate this income every year post retirement you need to accumulate a corpus

your first reaction immopsible! it cannot be acheived. but then there is a solution

8 crore

So what‘s the Solution…Just one simple thing. Subscribe for an SIP of Rs.15,000 per month in a good diversified equity fund for 30 years and forget it. You still don‘t believe it that it can be that simple; let us validate our conviction with actual returns generated in an equity fund over the years.

Equity Fund SIP Investments

15 year SIP

10 year SIP

5 year SIP

3 year SIP

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Total Amount Invested @ Rs.15000 per

2,700,000

1,800,000

900,000

540,000

Market Value as on July 29, 2011 (Rs.)

34,379,093

8,682,024

1,427,405

798,522

Returns (Annualized)*(%)

29.87%

29.64%

18.56%

27.29%

Benchmark Returns (Annualized) (%) #

15.87%

18.42%

8.36%

14.08%

Market Value of SIP in Benchmark#

9,967,057

4,737,423

1,110,339

664,982

month (Rs.)

From the table it is crystal clear that if an investor did an SIP of Rs.15000 per month in Equity Fund for 15 years, he would have invested 27 lacs and that would have grown to a whopping number of 3.4 crore as on date; in spite of so many pitfalls in equity markets in last 15 years. Still need to think; No pressure but see this what the delay can cost in the same case study

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Current Age: 30 years, Retirement Age: 60 years Retirement Corpus to be accumulated: 8 crores Assumed Rate of Return on Investment: 15% p.a.

With every passing year the time to retirement is reducing and increasing the burden of investment required. Now the choice is whether we want TO START NOW OR STILL WAIT...

SIP Calculator With the help of the SIP calculator you can find out how much you can receive from your investment after a number of years, or you can find out how much you need to invest to get his desired amount.

For example: 1.

Suppose you want to invest per month is Rs. 1,000 for 10 years, and the expected rate of return is 12%. At the end of 10 years you will receive Rs. 2,30,039.

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2.

Suppose you want to receive Rs. 5,00,000 by the end of 10 years, and the expected rate of return is 12%. You will need to invest Rs. 2174 per month.

SIP Auto Debit Form This form needs to be filled in case the investor wants to have the periodic investment through SIP deducted automatically through the Auto Debit Facility, if the investor doesn‘t have an account at Canara Bank, the first SIP installment can be paid through cheque only (which is mentioned on the form). If the investor does have an account at Canara Bank, he can have the first installment process automatically, it will take around 3 weeks before this will be effective.

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Conditions under which SIP would yield positive results SIP route would ideally yield positive results only under the following conditions: 

Bull or Rising Market: SIP would yield positive results in a bull or rising market as every new purchase, although made at a higher cost, is ultimately valued at an even higher price. However, as seen earlier, in such a case it would be wiser to buy the entire investment lump sum rather than keep "averaging upwards" through the SIP route.



Volatile but rising market: SIP should finally perform well in a volatile but ultimately rising or bull market. This would be the market kind in which the "rupee cost averaging" would work most favorably for the investor as the volatility would lead to the best possible average price. The final rising or subsequent bull market would ensure that the end price is higher than the average price.



Market in Median range, corrects downwards and then moves up: This would be another case in which SIP would perform well and in all likelihood better than initial lump sum investment. This is because the investor will get the assistance of the intermediate correction to "lower his average cost".

But then does this mean that SIP works under all market conditions. Certainly no, so let us now examine the market conditions under which SIP would not work.

Conditions under which SIP would not yield positive results SIP route would not work under the following market conditions: 

Bear or falling Market: SIP would not work and in fact yield negative returns in a bear or falling market as every new purchase, although made at a lower cost would eventually be valued at an even lower price. In such a market scenario, SIP might outperform lump sum investments as the investor will get the benefit of "averaging downwards" but the investor will still lose money - I believe it should be the endeavor of every investor to make money by investing and not simply "lose less".



Sideways Market: SIP would not work in a sideways market as you will not get the benefit of rupee cost averaging and the final value would be closer to the average cost. In a sideways market, the difference between the performance of SIP and lump sum might not be material. 104 | P a g e



Market in Median range, moves upwards and then moves down: This would yet be one more case in which SIP would not perform because the investor will actually be hurt by the SIP as he would be "averaging northwards" while the final value would be much lower due to the subsequent market correction. In fact, in this scenario, lump sum would perform much better than SIP as it would not be subjected to the "negative effects of higher rupee cost averaging".

Therefore it has been proved beyond doubt that SIP might not always be a best investment route. So, not let us move forward and examine when it would be ideal to invest through SIP or when just buy it lump sum.

Market Condition

Superior Investment Option

Comments

Rising Market

or

Bull Lump sum

Since the investor buys lump sum at a lower price rather than "averaging upwards" through the SIP route.

Falling Market

or

Bear Neither of the two

Simply because in a bear market an investor is going to lose money in equities - whether SIP or lump sum.

Sideways Market

Indifferent the two

between Both will lead to somewhat similar results since there is neither any benefit nor suffering due to using either of the methods.

Market in median SIP range, corrects downwards and then moves up.

SIP would in most probabilities perform well because the investor will get the assistance of the intermediate correction to "lower his average cost".

Market in Median Lump sum range, moves upwards and then moves down.

Lump sum should in most likelihood perform better since the investor will not average higher.

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Common misconceptions about SIPs Misconception: SIPs

generate

higher

return

than

lump

sum

investment

Truth: As explained earlier, this is just a misconnection disseminated by vested interests like mutual funds and their distributors. SIP can be as good or as bad as lump sum – in all depends on which market condition you are in.

Misconception: SIPs

always

generate

positive

return

over

the

long

term

Truth: There can be nothing further away from truth. This statement is made under the assumption that equity markets always go up over the long term. If for whatever reasons equity markets don‘t go up over the long term then there is no way in which SIP would be able to generate positive return. And if equity markets indeed always go up over the long term, then whether SIP or lump sum or any other method, the investor will always get positive return.

Misconception: SIP would always give positive return because of "rupee cost averaging" Truth: This is a stupid statement. Rupee cost averaging can work in the investor‘s favor or against him, depending on which market condition it is. If it‘s a bull market then rupee cost averaging actually works against the investor and vice versa.

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FINDINGS FROM THE STUDY By the study and analysis of SIP we can conclude that investing by SIP investment is better than Lump sum investment as it is a more disciplined method and you don‘t have to time the market for the best NAV. You don‘t have to spend a lot all at once. SIP is better than Lumpsum in the long run as you tend to gain more profits since the NAV changes every time you invest. For example:

You invest Rs 5,000 on 5th-Jan‘05 with NAV of 48.15, after 10 years you will receive Rs 1441007.5 (calculation on Pg. 88) But in Lumpsum if you invest Rs. 6,05,000 on 5th jan‘05 with NAV of 48.15, you will receive Rs. 9,83,957.31. [6,05,000 / 48.15 = 12,564.90 12,564.90 * 78.31 (NAV as on 2nd Jun‘14) = 9,83,957.31]

Thus you will get a profit of Rs. 4,57,050.19 when you invest in SIP. [14,41,007.5 – 9,83,957.31 = 4,57,050.19]

Investors can also discontinue the plan at any time they want and can also increase or decrease the amount being invested. With the help of Rupee Cost Averaging a person does not need to worry about the share prices as he is investing on regular intervals. So he buys few units in a declining market and more is a rising market. Although SIP does not guarantee profit but it can reduce the effects of investing in a volatile market in the long way.

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CONCLUSION Systematic Investment Plan lets the investors to invest a fixed amount of money in a Mutual Fund Scheme and reduces the risk of investing in Lumpsum all at once. You don‘t need to time the market, since you invest in the NAV of that particular day. SIP is more feasible to low salaried and middle class men. It helps to save regularly. Thus SIP is considered as a wise choice when compared to Lumpsum investment since you don‘t have to invest a huge sum of money all at once and can help you generate superior returns in a long run.

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BIBLIOGRAPHY WWW.CANARAROBECO.COM WWW.CANARABANK.COM WWW.REBECO.COM WWW.VALUERESEARCHONLINE.COM WWW.MUTUALFUNDSINDIA.COM WWW.MONEYCONTROL.COM WWW.AMFIINDIA.COM WWW.RBI.ORG.IN WWW.INDIAINFOLINE.COM WWW.CRISIL.COM WWW.CIEL.CO.IN WWW.KPMG.COM WWW.UTIMF.COM WWW.EQUITYMASTER.COM WWW.INVESTOPEDIA.COM WWW.ECONOMICTIMES.COM Book on Understanding Mutual Funds. Canara Robeco Product Handbook. Canara Robeco Fact Sheet.

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