Tax saving schemes

Performance of Tax Saving Schemes in Mutual Fund
Sambhram Academy of Management Studies, Bangalore Page 1
A STUDY ON PERFORMANCE OF TAX SAVING SCHEMES IN
MUTUAL FUND
Dissertation submitted in partial fulfillment of the requirements for the award
of the Degree of
MASTER OF BUSINESS ADMINISTRATION
of
BANGALORE UNIVERSITY
By
VIKAS KUMAR SONI
Reg. No: 11XWCMA117
Under the Guidance of
Dr. SUBHASREE KAR
Associate Professor
SCHOOL OF MANAGEMENT
SAMBHRAM ACADEMY OF MANAGEMENT STUDIES
BANGALORE – 560097
APRIL 2013

CERTIFICATE OF ORIGINALITY
This is to certify that the project titled “A STUDY ON PERFORMANCE OF
TAX SAVING SCHEMES IN MUTUAL FUND” is an original work of VIKAS
KUMAR SONI and is being submitted in partial fulfillment for the award of the
Master‟s Degree in Business Administration of Bangalore University. The report
has not been submitted earlier either to this University or elsewhere for the
fulfillment of the requirement of any course.
SIGNATURE OF SUPERVISOR SIGNATURE OF STUDENT
PLACE: PLACE:
DATE: DATE:

DECLARATION
I, VIKAS KUMAR SONI do hereby declare that the dissertation report entitled
“A STUDY ON PERFORMANCE OF TAX SAVING SCHEMES IN
MUTUAL FUND” is an outcome of my original work done under the guidance of
Dr. Subhasree Kar, Associate Professor, Sambhram Academy of Management
Studies, Bangalore. This report has not been submitted to any institution or
university for the award of any degree.
PLACE: SIGNATURE OF THE STUDENT
DATE:

ACKNOWLEDGEMENT
This is a great privilege to acknowledge each and everyone who are
associated with me while carrying out this study. I acknowledge each
one of them for their support.
First, I would like to thank Dr. K.C. John, Principal, and Dr. K.C. Mishra,
Director, School of Management, Sambhram Academy of Management Studies for
their encouragement and support throughout the completion of this study.
I wish to acknowledge with gratitude to my project guide Dr. Subhasree Kar,
Associate Professor, Sambhram Academy of Management Studies for her
guidance, encouragement, support and generous help to make this porjet work
successful.
I am equally thankful to my family and friends for their help and support for the
successful completion of this project.
Place: Bangalore VIKAS KUMAR SONI
Date:

EXECUTIVE SUMMARY
The Indian capital market has been growing tremendously with the reforms in
industry policy, reforms in public and financial sector and new economic policies
of liberalization, deregulation and restructuring. The Indian economy has opened
up and many developments have been taking place in the Indian capital market and
money market with the help of the financial system and financial institution or
intermediaries which faster saving and channel them to their most efficient use.
The measurement of fund performance has been a topic of increased interest
in both the academic and practitioner communities for the last four decades. It is
more so because of growing scale of mutual theory. The investment environment is
becoming increasingly complex.
The study is aimed to understand the organisation of mutual fund industry
and to examine the performance of tax saving schemes undertaken for study. It
evaluates the performance of selected schemes in comparison with benchmark
index S&P CNX Nifty, and also helps to the employ risk return measures.

ABSTRACT
Different investment avenues are available to investors. Mutual funds also offer
good investment opportunities to the investors. Like all investments, they also
carry certain risks. The investors should compare the risks and expected yields
after adjustment of tax on various instruments while taking investment decisions.
The investors may seek advice from experts and consultants including agents and
distributors of mutual funds schemes while making investment decisions. With an
objective to make the investors aware of performance of mutual funds, an attempt
has been made to provide information on the comparison of tax saving funds of
selected Asset Management Companies such as HDFC, FRANKLIN INDIA,
RELIANCE, SBI and ICICI which may help the investors in taking investment
decisions. The analysis is also compared with the calculations based on the
Standard deviation, Beta values, Correlation, Coefficient of determination, and also
Sharpe ratio, Treynors ratio, Jensen measures for the period 2008-12. This paper is
carried out to find out the returns of funds thereby studying the performance of the
selected tax saving schemes in the market. The investor invests the funds based on
the returns, net asset value and also the trend prevailing in the market.
KEYWORDS
Asset Management Companies, Performance, Tax saving schemes.

CONTENT
Chapter No. Topic
Page
No.
1 INTRODUCTION 1 - 19
2 REVIEW OF LITRATURE AND
RESERCH DESIGN
20 - 29
3 INDUSTRY PROFILE /
SELECTED ORGANISATION
30 - 46
4 RESULT, ANALYSIS AND
DISCUSSION
47 - 74
5 SUMMARRY OF FINDING,
SUGGESTION AND
CONCLUSION
75 - 78
BIBLIOGRAPHY 79

LIST OF TABLES
Table No. Title of the Tables Page
No.
1.1 Banks v/s Mutual fund 19
3.1 Assets under Management (AUM) 34
3.2 Schemes renamed in HDFC mutual fund 40
3.3 SBI mutual fund schemes offers 43
4.1 Standard Deviation for HDFC Tax Saver 47
4.2 Standard Deviation for Franklin India Tax Shield 48
4.3 Standard Deviation for Reliance Tax Saving Fund 49
4.4 Standard Deviation for SBI Magnum Tax Gain 50
4.5 Standard Deviation for ICICI Prudential Tax Plan 51
4.6 Return vs. Risk estimated of selected tax saving schemes 52
4.7 Return of Franklin India Tax Shield Vs Benchmark's Return 53
4.8 Return of HDFC Tax Saver Fund Vs Benchmark's Return 54
4.9 Return of Reliance Tax Saving Fund Vs Benchmark's Fund 55
4.10 Return of SBI Magnum Tax Gain Fund Vs Benchmark's Fund 56
4.11 Return of ICICI Prudential Tax Plan Vs Benchmark's Fund 57
4.12 Beta Calculation for Franklin India Tax Shield 58
4.13 Beta Calculation for HDFC Tax Saver 59
4.14 Beta Calculation for Reliance Tax Saving Fund 60
4.15 Beta Calculation for SBI Magnum Tax Gain 61
4.16 Beta Calculation for ICICI Prudential Tax Plan 62
4.17 Beta Values estimated of selected tax saving schemes 63

4.18 Correlation calculation for Franklin India Tax Shield 64
4.19 Correlation calculation for HDFC Tax Saver 65
4.20 Correlation calculation for Reliance Tax Saving Fund 66
4.21 Correlation calculation for SBI Magnum Tax Gain 67
4.22 Correlation calculation for ICICI Prudential Tax Plan 68
4.23 Correlation estimates of selected tax saving schemes 69
4.24 Coefficient of determination estimates of selected tax saving
schemes
70
4.25 Statistical Analysis of selected tax saving scheme Performance 74

LIST OF FIGURES
Figure
No. Title of the Figures
Page
No.
1.1 Concept of mutual fund 3
1.2 Organisation structure of mutual fund 4

LIST OF CHARTS
Charts
No. Title of the Charts Page No.
4.1 Showing returns Vs risk of selected tax saving
schemes
52
4.2 Return of Franklin India Tax Shield Vs Benchmark's
Return
53
4.3 Return of HDFC Tax Saver Fund Vs Benchmark's
Return
54
4.4 Return of Reliance Tax Saving Fund Vs Benchmark's
Fund
55
4.5 Return of SBI Magnum Tax Gain Fund Vs
Benchmark's Fund
56
4.6 Return of ICICI Prudential Tax Plan Vs Benchmark's
Fund
57
4.7 Beta value Plotted with the Selected tax saving
schemes
63
4.8 Correlation on selected tax saving schemes 69
4.9 Coefficient of determination on selected tax saving
schemes
70
4.10 Statistical Analysis of selected tax saving schemes
Performance
74

Chapter – 1
Introduction

INTRODUCTION
The Indian financial system based on four basic components like Financial Market,
Financial Institutions, Financial Service, Financial Instruments. All are play
important role for smooth activities for the transfer of the funds and allocation of
the funds. The main aim of the Indian financial system is that providing the
efficiently services to the capital market. The Indian capital market has been
increasing tremendously during the second generation reforms. The first generation
reforms started in 1991 the concept of LPG. (Liberalization, privatization,
Globalization).
Then after 1997 second generation reforms was started, still the it‟s going on, its
include reforms of industrial investment, reforms of fiscal policy, reforms of ex-
imp policy, reforms of public sector, reforms of financial sector, reforms of foreign
investment through the institutional investors, reforms banking sectors. The
economic development model adopted by India in the post independence era has
been characterized by mixed economy with the public sector playing a dominating
role and the activities in private industrial sector control measures emaciated form
time to time. The last two decades have been a phenomenal expansion in the
geographical coverage and the financial spread of our financial system.
The spared of the banking system has been a major factor in promoting financial
intermediation in the economy and in the growth of financial savings with
progressive liberalization of economic policies, there has been a rapid growth of
capital market, money market and financial services industry including merchant
banking, leasing and venture capital, leasing, hire purchasing. Consistent with the
growth of financial sector and second generation reforms its need to fruition of the
financial sector. Its also need to providing the efficient service to the investor

mostly if the investors are supply small amount, in that point of view the mutual
fund play vital for better service to the small investors. The main vision for the
analysis for this study is to scrutinize the performance of five star rated mutual
funds, given the weight of risk, return, and assets under management, net assets
value, book value and price earnings ratio.
Concept of Mutual Fund:
Mutual fund is the pool of the money, based on the trust who invests the savings of
a number of investors who shares a common financial goal, like the capital
appreciation and dividend earning. The money thus collect is then invested in
capital market instruments such as shares, debenture, and foreign market. Investors
invest money and get the units as per the unit value which we called as NAV (net
assets value). Mutual fund is the most suitable investment for the common man as
it offers an opportunity to invest in diversified portfolio management, good
research team, professionally managed Indian stock as well as the foreign market,
the main aim of the fund manager is to taking the scrip that have under value and
future will rising, then fund manager sell out the stock. Fund manager
concentration on risk – return trade off, where minimize the risk and maximize the
return through diversification of the portfolio. The most common features of the
mutual fund unit are low cost.

Mutual funds concept can be well understood with the following diagram
Figure: 1.1 Concept of mutual fund
Growth of Mutual Fund Industry
The history of mutual funds dates support to 19th century when it was introduced
in Europe, in particular, Great Britain. Robert Fleming set up in 1868 the first
investment trust called Foreign and colonial investment trust which promised to
manage the finances of the moneyed classes of Scotland by scattering the
investment over a number of different stocks. This investment trust and other
investment trusts which were afterward set up in Britain and the U.S., resembled
today‟s close – ended mutual funds. The first mutual fund in the U.S.,
Massachusetts investor‟s trust, was set up in March 1924. This was the open –
ended mutual fund.
The stock market crash in 1929, the Great Depression, and the outbreak of the
Second World War slackened the pace of growth of the mutual fund industry.
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Innovations in products and services increased the popularity of mutual funds in
the 1950s and 1960s. The first international stock mutual fund was introduced in
the US in 1940. In 1976, the first tax – exempt municipal bond funds emerged and
in 1979, the first money market mutual funds were created. The latest additions are
the international bond fund in 1986 arm funds in 1990. This industry witnessed
substantial growth in the eighties and nineties when there was a significant
increase in the number of mutual funds, schemes, assets, and shareholders. In the
US the mutual fund industry registered s ten – fold growth the eighties. Since
1996, mutual fund assets have exceeds bank deposits. The mutual fund industry
and the banking industry virtually rival each other in size.
ORGANISATION OF A MUTUAL FUND
There are many entities involved and the diagram below illustrates the
organisational set up of a mutual fund
Figure:1.2 Organisation structure of mutual fund
Mutual funds have a unique structure not shared with other entities such as
companies of firms. It is important for employees & agents to be aware of the
special nature of this structure, because it determines the rights & responsibilities

of the fund‟s constituents viz., sponsors, trustees, custodians, transfer agents & of
course, the fund & the Asset Management Company(AMC) the legal structure also
drives the inter-relationships between these constituents.
The structure of the mutual fund India is governed by the SEBI (Mutual Funds)
regulations, 1996. These regulations make it mandatory for mutual funds to have a
structure of sponsor, trustee, AMC, custodian. The sponsor is the promoter of the
mutual fund,& appoints the trustees. The trustees are responsible to the investors in
the mutual fund, & appoint the AMC for managing the investment portfolio. The
AMC is the business face of the mutual fund, as it manages all affairs of the mutual
fund. The mutual fund & the AMC have to be registered with SEBI. Custodian,
who is also registered with SEBI, holds the securities of various schemes of the
fund in its custody.
 Sponsor:- The sponsor is the promoter of the mutual fund. The sponsor
establishes the Mutual fund & registers the same with SEBI. He appoints the
trustees, Custodians & the AMC with prior approval of SEBI, & in
accordance with SEBI regulations. He must have at least five year track
record of business interest in the financial markets. Sponsor must have been
profit making in at least three of the above five years. He must contribute at
least 40% of the capital of the AMC.
 Trustees:- The Mutual Fund may be managed by a Board of trustees a of
individuals, or a trust company – a corporate body. Most of the funds in India
are managed by board of trustees. While the board of trustees is governed by
the provisions of the Indian trust act, where the trustee is the corporate body,
it would also be required to comply with the provisions of the companies act,
1956. the board of trustee company, as an independent body, act as protector

of the unit-holders interest. The trustees don‟t directly manage the portfolio
of securities. For this specialist function, they appoint an AMC. They ensure
that the fund is managed by AMC as per the defined objectives & in
accordance with the trust deed & SEBI regulations. The trust is created
through a document called the trust deed i.e., executed by the fund sponsor in
favor of the trustees. The trust deed is required to be stamped as registered
under the provision of the Indian registration act & registered with SEBI. The
trustees begin the primary guardians of the unit-holders funds & assets, a
trustee has to be a person of high repute & integrity.
 Asset Management Company (AMC):- The role of an Asset management
companies is to act as the investment manager of the trust. They are the ones
who manage money of investors. An AMC takes decisions, compensates
investors through dividends, maintains proper accounting & information for
pricing of units, calculates the NAV, & provides information on listed
schemes. It also exercises due diligence on investments & submits quarterly
reports to the trustees. AMCs have been set up in various countries
internationally as an answer to the global problem of bad loans. Bad loans are
essentially of two types: bad loans generated out of the usual banking
operations or bad lending, and bad loans which emanate out of a systematic
banking crisis. It is in the latter case that banking regulators or governments
try to bail out the banking system of a systematic accumulation of bad loans
which acts as a drag on their liquidity, balance sheets and generally the health
of banking. So, the idea of AMCs or ARCs is not to bail out banks, but to
bail out the banking system itself.

Types of AMCs in Indian Context
The following are the various types of AMCs we have in India.
 AMCs owned by banks.
 AMCs owned by financial institutions.
 AMCs owned by Indian private sector companies.
 AMCs owned by foreign institutional investors.
 AMCs owned by Indian & foreign sponsors.
 Custodian:- Often an independent organization, it takes custody all
securities & other assets of mutual fund. Its responsibilities include receipt &
delivery of securities collecting income-distributing dividends, safekeeping
of the unit & segregating assets & settlements between schemes. Mutual fund
is managed either trust company board of trustees. Board of trustees & trust
are governed by provisions of Indian trust act. If trustee is a company, it is
also subject Indian Company Act. Trustees appoint AMC in consultation
with the sponsors & according to SEBI regulation. All mutual fund schemes
floated by AMC have to be approved by trustees. Trustees review & ensure
that net worth of the company is according to stipulated norms, every quarter.
Though the trust is the mutual fund, the AMC is its operational face. The
AMC is the first functionary to be appointed, & is involved in appointment of
all other functionaries. The AMC structures the mutual fund products,
markets them & mobilizes fund, manages the funds & services to the
investors. A draft offer document is to be prepared at the time of launching
the fund. Typically, it pre-specifies investment objectives of the fund, the risk

associated, the cost involved in the process & the broad rules to enter & to
exit from the fund & other areas of operation. In India as in most countries,
these sponsors need approval from a regulator, SEBI in our case. SEBI looks
at track records of the sponsor & its financial strength granting approval to
the fund for commencing operations. A sponsor then hires an asset
management company to invest the funds according to the investment
objective. It also hires another entity to be the custodian of the assets of the
fund & perhaps the third one to handle registry work for the unit holder of
the fund.
 Registrars & Transfer Agent (R & T Agent):- The Registrars & Transfer
Agents(R & T Agents) are responsible for the investor servicing function, as
they maintain the records of investors in mutual funds. They process investor
applications; record details provide by the investors on application forms;
send out to investors details regarding their investment in the mutual fund;
send out periodical information on the performance of the mutual fund;
process dividend payout to investor; incorporate changes in information as
communicated by investors; & keep the investor record up-to-date, by
recording new investors & removing investors who have withdrawn their
funds.
TYPES OF MUTUAL FUND SCHEMES
1) 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.

 Closed ended Funds: A closed-end fund has a stipulated maturity period
which generally ranging from 3 to 15 years. The fund is open for
subscription only during a specified period. Investors can invest in the
scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed. In
order to provide an exit route to the investors, some close-ended funds give
an option of selling back the units to the Mutual Fund 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
2) By Investment Objective
 Growth Funds: The aim of growth funds is to provide capital appreciation
over the medium to long term. Such schemes normally invest a majority of
their corpus in equities. It has been proved that returns from stocks, have
outperformed most other kind of investments held over the long term.
Growth schemes are ideal for investors having a long term outlook seeking
growth over a period of time.
 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 Fund: 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. 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.
 MoneyMarketFunds: The aim of money market funds is to provide easy
liquidity, preservation of capital and moderate income. These schemes
generally invest in safer short-term instruments such as treasury bills,
certificates of deposit, commercial paper and inter-bank call money. Returns
on these schemes may fluctuate depending upon the interest rates prevailing
in the market. These are ideal for Corporate and individual investors as a
means to park their surplus funds for short periods.
3) Other Schemes
 Tax Saving Schemes: These schemes offer tax rebates to the investors
under specific provisions of the Indian Income Tax laws as the Government
offers tax incentives for investment in specified avenues. Investments made
in Equity Linked Savings Schemes (ELSS) and Pension Schemes are
allowed as deduction u/s 80C of the Income Tax Act, 1961. The Act also
provides opportunities to investors to save capital gains u/s 54EA and 54EB
by investing in Mutual Funds.
 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.

 Special Schemes
 Industry Specific Schemes: Industry Specific Schemes invest only in
the industries specified in the offer document. The investment of these
funds is limited to specific industries like InfoTech, FMCG, and
Pharmaceuticals etc.
 Sectoral Schemes: Sectoral Funds are those which invest exclusively
in a specified sector. This could be an industry or a group of industries
or various segments such as 'A' Group shares or initial public
offerings.
 Index Schemes Index Funds attempt to replicate the performance of a
particular index such as the BSE Sensex or the NSE 50.
TAX PLANNING AND MUTUAL FUND
Investors in India have option for the tax-saving mutual fund schemes for the
simple reason that it helps them to save money. The tax-saving mutual funds or the
equity-linked savings schemes (ELSS) receive certain tax exemptions under
Section 88 of the Income Tax Act. That is one of the reasons why the investors in
India add the tax-saving mutual fund schemes to their portfolio. The tax-saving
mutual fund schemes are one of the important types of mutual funds in India that
investors can option for. There are several companies in India that offer tax saving
mutual fund schemes in the country.
While planning our investments we spend a considerable amount of time
evaluating various options and determining which suits us the best. But when it
comes to planning out investments from a tax saving perspective, more often than
not, we simply go the traditional way and do the exact same thing that we did in

the earlier years. Well, in case you were not aware the guidelines governing such
investments are a lot different this year and lethargy on your part to rework your
investment plan could cost you dear.
TAX SAVING SCHEME
Equity Linked Saving Schemes (ELSS): Equity Linked Saving Scheme (ELSS)
is also a type of mutual fund and falls under the Equity Mutual Fund category. As
the name indicates, ELSS mutual fund invests major portion of its corpus into
equity and equity related instruments. But there are some distinct features which
makes ELSS plans different from other equity mutual funds.
Investments made in ELSS plans are eligible for deduction from the taxable
income under Section 80C of the Income Tax Act. There is no limit for
investments in ELSS plans, but investments of upto Rs 1,00,000 qualify for income
tax benefits. Investments made in normal mutual funds (other than ELSS plans) do
not qualify for income tax deduction.
Features of an ELSS Plan
 ELSS is an equity linked tax saving investment instrument.
 Money collected under ELSS plan is mainly invested in equity and equity
related instruments.
 This financial product is more suited to those investors who are willing to
take high risk and looking for high returns.
 There is no upper limit on investments that can be made in ELSS. However
investments upto INR 1,00,000 made in ELSS in a financial year qualify for
deduction from taxable income under Section 80C of the Income Tax Act.

 ELSS comes with a 3 year lock in period.
 Long term capital gains earned on investments from ELSS are tax free.
 Also dividends earned from ELSS plan are tax free in the hands of the
investor.
SWOT ANALYSIS
SWOT Analysis presents the information about external and internal environment
of mutual fund in structured from where by key external opportunity and threats
can be compared systematically with internal capabilities and weakness. The basic
objectives of SWOT analysis is provide a framework to reflect on the industry
capabilities to avail opportunities or to overcome thrats presented by environment.
Strength
 Full benefit of diversification
 Tax benefit
 Transparancy & flexibility
 Expert investment management
Weakness
 Lesser return compared to equity
 Poor technology & service level
 Lack of proper marketing
Opportunity
 Government policies & Tax
concession
 Setting up a specific fund
 Technology development
Threats
 Arrival of more private & foreign
players
 Introduction of more debt
instrument in market.

ADVANTAGES OF INVESTING IN MUTUAL FUNDS
There are several that can be attributed to the growing popularities and suitability
of mutual funds as an investment vehicle especially for retail investors.
a) Professional management: Mutual funds provide the services of
experienced and skilled professionals, backed by a dedicated investment
research team that analysis the performance and prospects of companies and
selects suitable investments to achieve the objectives of the scheme.
b) Diversification: Mutual funds invest in a number of companies across a
broad cross- section of industries and sectors. This diversification reduces
the risk because seldom do all stocks decline at the sane time and in the
same proportion. You achieve this diversification through a mutual fund
with far less money than you can do on your own.
c) Convenient administration: Investing in a mutual fund reduces paperwork
and helps you avoid many problems such as bad deliveries, delayed payment
and follow up with brokers and companies. Mutual funds save your time and
make investing easy and convenient.
d) Return potential: Over a medium to long term, mutual funds have the
potential to provide a higher return as they invest in a diversified basket of
selected securities.
e) Low costs: Mutual funds are a relatively less expensive way to invest
compared to directly investing in the capital markets because the benefits of
scale in brokerage, custodial and other fees translate into lower costs for
investors.

f) Liquidity: In open ended schemes, the investors get the money back
promptly at net asset value related prices from the mutual fund. In closed
end schemes, the units can be sold on a stock exchange at the prevailing
market price or the investor can avail of the facility of direct repurchase at
NAV related prices by mutual fund.
g) Transparency: You get regular information on the value of your investment
in addition to disclosure on the specific investments made by your scheme,
the proportion invested in each class of assets and the fund manager‟s
investment strategy and outlook.
h) Flexibility: Through features such as regular investment plans, regular
withdrawal plans and dividend reinvestment plans, you can systematically
invest or withdraw funds according to your needs and convenience.
i) Affordability: Investors individually may lack sufficient funds to invest in
high-grade stocks. A mutual fund because of its large corpus allows even a
small investor to take the benefit of its investment strategy.
j) Choice of schemes: Mutual funds offer a family of schemes to suit your
varying needs over a lifetime.
k) Safety: Mutual Fund industry is part of a well-regulated investment
environment where the interests of the investors are protected by the
regulator. All funds are registered with SEBI and complete transparency is
forced.

DISADVANTAGES OF INVESTING IN MUTUAL FUNDS
 No Guarantees :- No investment is risk free. If the entire stock market
declines in value, the value of mutual fund shares will go down as well, no
matter how balanced the portfolio.
 Dilution :- Although diversification reduces the amount of risk involved
in investing in mutual funds, it can also be a disadvantage due to dilution.
 Fees and Expenses :- Most mutual funds charge management and operating
fees that pay for the fund‟s management expenses (usually around 1.0% to
1.5% per year for actively managed funds). In addition, some mutual funds
charge high sales commissions, and redemption fees.
 Management risk :- When we invest in a mutual fund, we depend on the
fund's manager to make the right decisions regarding the fund's portfolio. If
the manager does not perform as well as we had hoped, we might not make
as much money on our investment as we expected.
 Taxes :- During a typical year, most actively managed mutual funds sell
anywhere from 20 to 70 percent of the securities in their portfolios. If our
fund makes a profit on its sales, we will pay taxes on the income we
receive, even if we reinvest the money made.
ASSOCIATION OF MUTUAL FUNDS IN INDIA
With the increase in mutual fund players in India, a need for mutual fund
association in India was generated to function as a non profit organisation.
Association of Mutual Funds in India (AMFI) was incorporated on 22nd August,
1995.

AMFI is a apex body of all Asset Management Companies (AMFI) which has been
registered with SEBI. Till date all the AMCs are that have launched mutual fund
schemes are its members. It functions under the supervision and guidelines of its
Board of Directors.
Association of Mutual Funds India has brought down the Indian Mutual Fund
Industry to a professional and healthy market with ethical lines enhancing and
maintaining standards. It follows the principle of both protecting and promoting
the interests of mutual funds as well as their unit holder.
SEBI Guidelines for Mutual Funds
Securities and Exchange Board of India (SEBI) is a board (autonomous body)
created by the Government of India in 1988 and given statutory form in 1992 with
the SEBI Act 1992 with its head office at Mumbai.
SEBI (MFs) Regulation 1993, defines Mutual Fund as follows; “Mutual fund
means a fund established in the form of a trust by a sponsor to raise money by the
Trustees through the sale of units to the public under one or more schemes for
investing in Securities in accordance with these Regulations”.
 The sponsor has to register the mutual fund with SEBI.
 To be eligible to be a sponsor, the body corporate should have a sound track
record and a general reputation of fairness and integrity in all his business
transactions.
 The sponsor should hold at least 40% of the net worth of the AMC.
 A party which is not eligible to be a sponsor shall not hold 40% or more of
the net worth of the AMC.

 The sponsor has to appoint the trustees, the AMC and the custodian.
 The trust deed and the appointment of the trustees have to be approved by
SEBI.
 An AMC or its officers or employees can not be appointed as trustees of the
mutual fund.
 At least two thirds of the business should be independent of the sponsor.
 Only an independent trustee can be appointed as a trustee of more than one
mutual fund, such appointment can be made only with the prior approval of
the fund of which the person is already acting as a trustees.
Recent Market Trends
India is at the first stage of a revolution that has already peaked in the U.S. The
U.S. boasts of an Asset base that is much higher than its bank deposits. In India,
mutual fund assets are not even 10% of the bank deposits, but this trend is
beginning to change. Recent figures indicate that in the first quarter of the current
fiscal year mutual fund assets went up by 115% whereas bank deposits rose by
only 17%. (Source: Thinktank, the Financial Express September, 2012).

Table 1.1 Banks v/s Mutual fund
Characterstics Banks Mutual Fund
Returns Low Better
Network High penetration Low but improving
Administrative exp. High Low
Liquidity At a cost Better
Risk Low Moderate
Quality of assets Not transparent Transparent
Interest calculation Minimum balance
between 10th
& 30th
of
every month
Everyday
Investment options Less More

Chapter – 2
Review of Literature
and Research Design

INTRODUCTION
Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. Mutual funds are one of the best investments ever created
because they are very cost efficient and very easy to invest in. Investors in India
opt for the tax-saving mutual fund schemes for the simple reason that it helps them
to save money. The tax-saving mutual funds or the equity-linked savings schemes
(ELSS) receive certain tax exemptions under Section 80C of the Income Tax Act.
That is one of the reasons why the investors in India add the tax-saving mutual
fund schemes to their portfolio. The tax-saving mutual fund schemes are one of the
important types of mutual funds in India that investors can opt for. The present
study is carried out to find out the returns of funds thereby studying the
performance of the tax saving funds in the market. The investor invests the funds
based on the returns, net asset value and also the trend prevailing in the market.
Since the market being high volatile there is a need to study the performance and
comparative statement of various tax saving funds performing in the market.
REVIEW OF THE LITERATURE
Early studies on mutual funds included the several works of Treynor (1965),
Sharp (1966) and Jensen (1968), who used the capital asset pricing model to
compare risk adjusted returns of funds with that of a benchmark market portfolio.
The findings of Sharpe and Jensen demonstrated that mutual funds under perform
market indexes and suggest that the returns were not sufficient to compensate
investors for the diverse mutual fund charges.
John and Donald (1974) examined the relationship between the stated fund
objectives and their risks-return attributes and concluded that on an average, the
fund managers appeared to keep their portfolios within the stated risk. It concludes

that mutual funds on aggregate offer superior returns but they are offset by
expenses and load charges.
Barua, Raghunathan and Varma (1991) evaluated the performance of Master
Share during the period 1987 to 1991 using Sharpe, Jensen and Treynor measures
and concluded that the fund performed better that the market, but not so well as
compared to the Capital Market Line. Although emerging markets such as India
have attracted the attention of investors all over the world, they have remained
devoid of much systematic research, especially in the area of mutual funds.
A study by Gupta and Aggarwal (2007) sought to check the performance of
mutual funds operation in India. In this regard, quarterly returns performance of all
the equity-diversified mutual funds during the period from January 2002 to
December 2006 was tested.
Guha (2008) focused on return-based style analysis of equity mutual funds in
India using quadratic optimization of an asset class factor model proposed by
William Sharpe. The study found the “Style Benchmarks” of each of its sample of
equity funds as optimum exposure to 11 passive asset class indexes. The study also
analyzed the relative performance of the funds with respect to their style
benchmarks. The results of the study showed that the funds have not been able to
beat their style benchmarks on the average.
Anand and Murugaiah (2008) examined the components and sources of
investment performance in order to attribute it to specific activities of Indian fund
managers. They also attempted to identify a part of observed return which is due to
the ability to pick up the best securities at given level of risk. For this purpose,
Fama's methodology is adopted here. The study covers the period between April
1999 and March 2003 and evaluates the performance of mutual funds based on 113

selected schemes having exposure more than 90percent of corpus to equity stocks
of 25 fund houses. The empirical results reported reveal the fact that the mutual
funds were not able to compensate the investors for the additional risk that they
have taken by investing in the mutual funds.
Devasenathipathi (2011) investigated the performance of public-sector and
private-sector mutual funds for the period of 2005 to 2007. Selected funds of LIC
(Public sector) and Reliance (Private sector) were chosen for the purpose of
analysis. Statistical techniques like Mean, Standard Deviation and Coefficient of
Variation were applied to study the consistency in returns subject to market risks of
each fund. The study revealed that performance of all the funds seemed to be
volatile during the study period; as such it was quite difficult to earmark one
particular fund that out performed consistently.
STATEMENT OF THE PROBLIEM
A The Indian capital market has been growing tremendously with the reforms in
industry policy, reforms in public and financial sector and new economic policies
of liberalization, deregulation and restructuring. The Indian economy has opened
up and many developments have been taking place in the Indian capital market and
money market with the help of the financial system and financial institution or
intermediaries which faster saving and channel them to their most efficient use.
The measurement of fund performance has been a topic of increased interest
in both the academic and practitioner communities for the last four decades. It is
more so because of growing scale of mutual theory. The investment environment is
becoming increasingly complex.

Markets for equity shares, debentures, bonds and other fixed income instruments;
real estate, derivatives and other assets have reached their maturity and are driven
by latest up-to-date information. A mutual fund is thus the ideal investment vehicle
for today‟s complex and modern financial scenario.
NEED FOR THE STUDY
Generally, most of the investors investing in mutual funds in order to avail tax
benefits and also to earn returns, in this connection they would park their funds in
the tax saving schemes. A study required to analyze the performance of selected
tax saving schemes to fulfill the objectives of the investors. Hence the study has
been undertaken.
SCOPE OF THE STUDY
The study is all about understanding the customer‟s perception to the tax benefit in
mutual fund. The purpose of this study of performance evaluation of tax saving
mutual funds by taking five selected companies which are ICICI, HDFC, SBI,
Relince and Franklin is to employ the resources in such a manner as to afford for
the investors combine benefits of low risk, steady returns, high liquidity and capital
appreciation through diversification and expert management.
OBJECTIVES OF THE STUDY
The main objective of the study is to make investors aware of performance and
provide information on the comparison of tax saving funds of selected asset
management companies. The specific objectives are:
 To understand the organisation of mutual fund industry.
 To employ performance evaluation measure using risk return models.

 To compare the performance of selected tax saving schemes in comparison
with market portfolio.
 To measure the comparative beta analysis of selected AMC.
 To offer suggestion based on the finding arrived from the study.
RESEARCH METHODOLOGY
The following research methodology has been adopted for assessing the
performance of tax saving funds of selected Asset Management Companies in the
market.
Sources of data
The present study is purely based on secondary data. Top five ELSS schemes were
as per their AUM as on 30th June 2012. The sample ELSS schemes are HDFC Tax
Saver, ICICI Prudential Tax Plan, Reliance Tax Saver, SBI Magnum Tax Gain and
Franklin India Tax shield. The data is collected from the fact sheets, reports,
websites, magazines, books and journals etc. are considered. The deviations are
properly analyzed. For each of the scheme, the risk ratios (Average return, Beta,
Standard Deviation, Correlation, Coefficient of Determination, Sharpe Ratio,
Treynor‟s Ratio and Jensen Model) were also observed carefully and correlated
with the returns. Accordingly, proper findings were found out and conclusions
were drawn about the best performance scheme among all.
TOOLS FOR PERFORMANCE MEASURES
In this study, the tools used for the analysis are Standard Deviation, Beta,
Correlation, Coefficient of Determination, Treynor‟s Ratio, Sharp Ratio and
Jensen Measure for a period of 5 years from 2008 to 2012.

 Average Mean: The most popular & widely used measure for representing
the entire data by one value is what most layman call an „average‟ & what
the statistician call the „arithmetic mean‟. It is obtained by adding together
all the items & by dividing this total by the number of items.
=
Where:
= Average Mean
ΣX = Sum of the frequency
N = Total number of frequency.
 Standard Deviation: The degree that a single value in a group of values
varies from the mean (average) of the distribution. Standard deviation is a
statistical measure that uses past performance of an investment or portfolio
to determine the potential range of future performance and assess the
probability of that performance. Standard deviations can be calculated for
an individual security or for the entire portfolio.
 Beta: It describes the relationship between the stock‟s return and the index
returns. The beta value may be interpreted in the following manner, „a 1%
change in Nifty index would cause a 1.042% (beta) change in the particular
fund. It is the slope of characteristic regression line. It signifies that a fund
with a beta of more than 1 will rise more than the market and also fall more
than market.

Where, Beta =
n – Number of year
x – Returns of the index
y – Returns of the fund
 Correlation: These correlation values indicate the degree to which the fund's
performance is related to its market (using the benchmark as a proxy for the
market). A high correlation to its benchmark is generally considered to be
favorable for the fund if their investment thesis closely follows the
benchmark.
r =
 Cefficent of Determination: the coefficent of determination is useful
because it gives the proportion of the variance (fluctuation) of one variable
that is predictable from the other variable. It is a measure that allows us to
determine how certain one can be in making prediction from the certain
model/graph. The coefficent of is the ratio of the explained variation to total
variation for e.g: if r = 0.922, then r2
= 0.850, which means 85% of the total
variation in y can be explained by the linear relationship between x and y.
the other 15% of the total variation are remain unexplained.
Coefficent of Determination = r2
 Treynor’s Ratio: The Treynor Ratio, named after Jack L. Treynor, one of
the fathers of modern portfolio theory, helps analyze returns in relation to
the market risk of the fund. The Ratio, also known as the reward-to-volatility
ratio, provides a measure of performance adjusted for market risk. Higher

the Treynor Ratio, the better the performance under analysis. It is a ratio that
helps the portfolio managers to determine the excess return generated as the
difference between the fund‟s return and the risk free return. The excess
return to beta ratio measures the additional return on a fund per unit of
systematic risk. Ranking of the funds is done based on this ratio.
Treynor‟s Ratio =
Where,
p – Avarage return on portfolio.
Rf – Risk free rate of return.
βp – Beta on portfolio
 Sharpe ratio: The Sharpe index measures the risk premium of the portfolio
relative to the total amount of risk in the portfolio. The Sharpe measure
should only be used for portfolios but not for single securities. The sharpe
ratio tells us whether the returns of a portfolio are because of smart
investment decisions or a result of excess risk. This risk premium is
difference between the portfolios average rate of return & the riskfree rate of
interest dividing the result by the standard deviation of the portfolio return.
Thus,
Where, Sharp ratio =
p – Avarage return on portfolio.
Rf – Risk free rate of return.
σ – Standard deviation on portfolio

 Jensens Model: Jansen‟s model proposes another risk adjusted performance
measure. Michael Jenson developed this measure and is something referred
as the differential return method. This measure involves evaluation of
returns that the fund has generated Vs the return actually out of the fund
given at that level of systematic risk. The surplus between the two returns in
called Alpha, which measures the performance of a fund compared with the
actual returns over the period. Required rate of return on fund at a given
level of Beta.
p-
Where:
p = Portfolio beta
Rp = Average return of portfolio
Rf = Risk free rate of return
Rm = Average market return
LIMITATIONS OF STUDY
 The study was limited by the time constraint; hence extent to study is not
possible.
 The study was limited to 5 companies only.
 The policy and application are applicable to the particular assessment year
only.

 The analysis and interpretation purely based on the data collected from
various website. The accuracy of interpretation depends upon the accuracy
of these data.
 The return from the mutual fund depends upon the returns of the securities
involved in the portfolio. The return from the market depends upon the
efficiency of the market and other various factor affecting the fund and
economy as a whole. So the researcher doesn‟t claim the 100% accuracy of
the result conducted from the study.
CHAPTER SCHEME
The study is structured into five chapters.
 Chapter one is deal with an overview of Mutual Funds. It covers the
aspects such as introduction, type of Mutual Funds, organisation setup,
regulation, risk and market trend, advantages of investing in Mutual Funds
and tax benefits.
 Chapter two reviews the literatures that focus on the performance of tax
saving schemes. This chapter provides insights into the tools they have used
and their findings that form the basis for the present study and Research
design for the study.
 Chapter three presents an overview of the industry profile and sample
companies selected for the purpose of this study.
 Chapter four is devoted to results, analysis and discussions.
 Chapter five provides the major findings of the study and the policy
implications.

Chapter – 3
Profile of Industry/
Selected Companies

INDUSTRY PROFILE
The origin of mutual fund industry in India is with the introduction of the concept
of mutual fund by UTI in the year 1963. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen a dramatic
improvement, both quality wise as well as quantity wise. Before, the monopoly of
the market had seen an ending phase, the Assets Under Management (AUM) was
Rs. 67bn. The private sector entry to the fund family rose the AUM to Rs. 470 bn
in March 1993 and till April 2004, it reached the height of 1,540 bn. Putting the
AUM of the Indian Mutual Funds Industry into comparison, the total of it is less
than the deposits of SBI alone, constitute less than 11% of the total deposits held
by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India
is new in the country. Large sections of Indian investors are yet to be intellectuated
with the concept. Hence, it is the prime responsibility of all mutual fund
companies, to market the product correctly abreast of selling.
History – The Landmarks
1963: UTI is India‟s first mutual fund.
1964: UTI launches US-64.
1971: UTI‟s ULIP (Unit-Linked Insurance Plan) is second scheme to be Launched.
1986: UTI Master share, India‟s first true „mutual fund‟ scheme, launched.

1987: PSU banks and insurers allowed floating mutual funds; State Bank of India
(SBI) first off the blocks.
1992: The Harshad Mehta-fuelled bull market arouses middle-class interest in
shares and mutual funds.
1993: Private sector and foreign players allowed; Kothari Pioneer first private fund
house to start operations; SEBI set up to regulate industry.
1994: Morgan Stanley is the first foreign player.
1996: Sebi‟s mutual fund rules and regulations, which forms the basis of most
current laws, come into force.
1998: UTI Master Index Fund is the country‟s first index fund.
1999: The takeover of 20th Century AMC by Zurich Mutual Fund is the first
acquisition in the mutual fund industry.
2000: The industry‟s assets under management crosses Rs 1, 00,000 crore.
2001: US-64 scam leads to UTI overhaul.
2002: UTI bifurcated, comes under SEBI purview; mutual fund distributors banned
from giving commissions to investors; floating rate funds and Foreign debt funds
debut.
2003: AMFI certification made compulsory for new agents; fund of funds
launched.

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.
1. First Phase - 1964-87 (UTI MONOPOLY)
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked
from the RBI and the Industrial Development Bank of India (IDBI) took over the
regulatory and administrative control in place of RBI. The first scheme launched
by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management.
2. Second Phase - 1987-1993 (Entry of Public Sector Funds)
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 marked
Rs.47,004 as assets under management.
3. 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.
4. Fourth Phase - since February 2003
This phase had bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with AUM of
Rs.29,835 crores (as on January 2003). 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 AUM 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 September, 2004, there were
29 funds, which manage assets of Rs.153108 crores under 421 schemes.

Table 3.1 Assets under Management (AUM)
AS ON 31st MARCH AUM (Rs. Crores)
1965 24.67
1970 88.30
1975 169.95
1980 455.30
1985 2,209.61
1990 19,130.92
1995 72,967.17
2000 103,452.98
2005 486,650
2010 7,15,466
2012 5,87,217
RISK FACTORS IN MUTUAL FUND
Just like in any other investment, Mutual Fund investment also carry certain risks,
the risks in particular scheme of a mutual fund is a basically a function of five
factor.
 Market Risk :- In generally, there are certain risks associated with every
kind of investments of shares. They are called market risks. The market risks
can be reduced. But cannot be completely eliminated even by good
investment management. The prices of shares are subjected to wide price
fluctuations depending upon market conditions. Eg, cycle – boom & slump
and recovery.

 Credit Risk :- The debt servicing ability of a company through its cash
flows determines the Credit Risk faced by you. This credit risk is measured
by independent rating agencies like CRISIL who rate companies and their
paper. A „AAA‟ rating is considered the safest whereas a „D‟ rating is
considered poor credit quality. A well – diversified portfolio might help
mitigate this risk.
 Scheme Risks :- There are certain risks inherent in the scheme itself. T all
depends upon the nature of the scheme. For instance, in a pure growth
scheme, risks are greater. It is obvious because if one expects more returns
an in the case of a growth scheme, one has to take more risks.
 Investment Risks :- Whether the Mutual Fund makes money in shares or
loses depends upon the investment expertise of the Asset management
Company (AMC). If the investment advice goes wrong, the fund has to
suffer a lot. The investment expertises of various funds are different and it is
reflected on the returns which they offer to investors.
 Business Risk :- The corpus of a Mutual Fund might have been invested in
company‟s shares. If the business of that company suffers any set back, it
cannot declare any dividend.
 Political Risk :- Successive Governments bring with them fancy new
economy ideologies and policies. It is often said that many economy
decisions are politically motivated. Changed in Government bring in the risk
of uncertainty which every player in the financial service industry has to
face. So Mutual Funds are no exception to it.

 Liquidity Risk :- Liquidity risk arises when it becomes difficult to sell the
securities that one has purchased. It can be partly mitigated by
diversification, staggering of maturities as well as internal risk controls that
lean towards purchase of liquid securities. It simply means that you must
spread your investment across different securities (stocks, bonds, money
market instruments, real estate, fixed deposits etc.). This kind of a
diversification may add to the stability of your returns, for example, during
one period of time equities might under perform but bonds and money
market instruments might do well enough to offset the effect of a slump in
the equity Markets.
 Inflation Risk :- Inflation is the loss of purchasing power over a time. A lot
of times people make conservative investment decisions to protect their
capital but end up with a sum of money that can buy less than what the
principal could, at the time of investment. A well–diversified portfolio with
some investment in equities might help mitigate this risk.
COMPANY PROFILE
ABOUT ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY
ICICI Prudential Asset Management Company Ltd. (IPAMC/ the Company) is the
joint venture between ICICI Bank, a well-known and trusted name in financial
services in India and Prudential Plc, one of UK‟s largest players in the financial
services sectors. IPAMC was incorporated in the year 1993. The Company in a
span of over 18 years since inception and just over 13 years of the Joint Venture,
has forged a position of preeminence in the Indian Mutual Fund industry as the
third largest asset management company in the country, contributing significantly
to the growth of the Indian mutual fund industry.

The Company manages significant Mutual Fund Asset Under Management
(AUM), in addition to Portfolio Management Services and International Advisory
Mandates for clients across international markets in asset classes like Debt, Equity
and Real Estate with primary focus on risk adjusted returns.
IPAMC has witnessed substantial growth in scale. From merely 2 locations and 6
employees during inception to the current strength of over 700 employees with
reach across around 150 locations, the growth momentum of the Company has
been exponential. The organization today is an ideal mix of investment expertise,
resource bandwidth & process orientation. IPAMC‟s Endeavour is to bridge the
gap between savings & investments to help create long term wealth and value for
investors through innovation, consistency and sustained risk adjusted performance
ICICI Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion
(US$ 93 billion) at March 31, 2012 and profit after tax Rs. 64.65 billion (US$
1,271 million) for the year ended March 31, 2012. The Bank has a network of
2,890 branches and 10,021 ATMs in India, and has a presence in 19 countries,
including India.
ICICI Bank offers a wide range of banking products and financial services to
corporate and retail customers through a variety of delivery channels and through
its specialised subsidiaries in the areas of investment banking, life and non-life
insurance, venture capital and asset management.
Prudential PLC
Established in London in 1848, Prudential plc, through its businesses in the UK
and Europe, the US and Asia, provides retail financial services products and
services to more than 26 million customers, policyholder and unit holders
worldwide. Today, Prudential has millions of customers worldwide and over £363

billion (as of 30 June 2012) of funds under management. In Asia, Prudential is the
leading European life insurance company with a vast network of life and fund
management operations in thirteen countries - China, Hong Kong, India, Indonesia,
Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand, Vietnam
and United Arab Emirates. The ICICI Prudential edge comes from our
commitment to our customers, in all that we do be it product development,
distribution, the sales process or servicing. Here's a peek into what makes us
leaders.
The AMC has secured a leading position in the Indian mutual fund industry with
AUM of Rs.1.5 lakh millions as on March 31, 2012. The AMC manages a
comprehensive range of Schemes to meet the varying investment needs of its
investors spread across various cities through its 264 Official Point of Transactions
in the country.
Starting with an AUM base of Rs. 160 crores in May 1998, ICICI prudential has
successfully managed to grow its assets by over 200 times to Rs. 1.5 lakh crore (as
on March 31, 2012). Having started with 2 schemes in 1998, the company
currently has over 30 schemes in its product portfolio. In order to address the issue
of penetration and to offer customer convenience, the company has expanded its
network from a presence in merely 2 cities to more than 80 cities across India.

ABOUT HDFC ASSET MANAGEMENT COMPANY LIMITED
HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset
Management Company for the HDFC Mutual Fund by SEBI vide its letter dated
July 3, 2000.
HDFC Mutual Fund is one of the largest mutual funds and well-established fund
house in the country with consistent fund performance across categories since its
incorporation on December 10, 1999. While our past experience does make us a
veteran, but when it comes to investments, we have never believed that the
experience is enough.
Investment Philosophy
The single most important factor that drives HDFC Mutual Fund is its belief to
give the investor the chance to profitably invest in the financial market, without
constantly worrying about the market swings. To realize this belief, HDFC Mutual
Fund has set up the infrastructure required to conduct all the fundamental research
and back it up with effective analysis. Our strong emphasis on managing and
controlling portfolio risk avoids chasing the latest "fads" and trends.
In terms of the Investment Management Agreement, the Trustee has appointed the
HDFC Asset Management Company Limited to manage the Mutual Fund. The
paid up capital of the AMC is Rs. 25.169 crore.
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund,
following a review of its overall strategy, had decided to divest its Asset
Management business in India. The AMC had entered into an agreement with ZIC
to acquire the said business, subject to necessary regulatory approvals.

On obtaining the regulatory approvals, the following Schemes of Zurich
India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These
Schemes have been renamed as follows:
Table 3.2 Schemes renamed in HDFC mutual fund
Former Name New Name
Zurich India Equity Fund HDFC Equity Fund
Zurich India Prudence Fund HDFC Prudence Fund
Zurich India Capital Builder Fund HDFC Capital Builder Fund
Zurich India TaxSaver Fund HDFC TaxSaver
Zurich India Top 200 Fund HDFC Top 200 Fund
Zurich India High Interest Fund HDFC High Interest Fund
Zurich India Liquidity Fund HDFC Cash Management Fund
Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund*
AWARDS & RECOGNITION
 ICRA Mutual Fund Awards 2012
 Bloomberg UTV Financial Leadership Awards, 2012
 Outlook Money Awards 2011
 CNBC-TV18-CRISIL Mutual Fund Awards 2012
HDFC TaxSaver (ELSS)
The nature of the scheme is open ended equity linked savings (ELSS) scheme with
a lock-in period of 3 years. It will be comes in market at March 31, 1996. The

minimum application amount is for new & existing investors Rs.500 and in
multiples of Rs. 500 thereafter.
FRANKLIN TEMPLETON MUTUAL FUND
FTMF has been constituted as a Trust on January 4, 1996 in accordance with the
provisions of the Indian Trusts Act, 1882 and the Deed of Trust is registered under
the Indian Registration Act, 1908. FTMF has been sponsored by Templeton
International Inc. (liability restricted to the seed corpus of Rs.l lakh) with Franklin
Templeton Trustee Services Pvt. Ltd. (“Trustee”) as the Trustee. The Trustee has
entered into an Investment Management Agreement dated January 5, 1996 with
Franklin Templeton Asset Management (India) Pvt. Ltd. (“AMC”) appointing the
AMC as the Investment Manager for all the schemes of FTMF. FTMF is registered
with SEBI on February 19, 1996.
Templeton International Inc. is a part of the Franklin Templeton Group, which is
one of the largest Investment Management Company with US$683.5 bln
(approximately Rs.3,856,478 crore) in assets under management as on May 31,
2012 and around 26 million Shareholder Accounts. Franklin Templeton has offices
in over 30 countries including the United States of America, Bahamas, Canada,
Argentina, France, Germany, Italy, Luxembourg, Poland, Russia, the United
Kingdom, Hong Kong, Singapore, Korea, India, China, Australia and South Africa.
Review of activities of Franklin Templeton Mutual Fund: During the year
under review, the Mutual Fund continued to focus on launching meaningful
products with investment objectives that are relevant to investors. The Mutual
Fund launched Templeton India Corporate Bond Opportunities Fund, an open end
debt fund investing in corporate bonds, mobilizing over Rs.250 crore, FT India
Feeder - Franklin U.S. Opportunities Fund, a fund of funds scheme investing in the

units of Franklin U. S. Opportunities Fund, an overseas fund that invests primarily
in U. S. securities, mobilizing over Rs.100 crore and Franklin Templeton Fixed
Tenure Fund Series XVI mobilizing over Rs.68 crore. As a part of product
rationalization process to make the offerings more meaningful and easy to
understand for investors and to reduce product overlap between similar schemes,
few schemes / plans were merged during the year. The Liquid Plan of Templeton
India Treasury Management Account (TITMA) was merged into Regular Plan of
TITMA effective September 4, 2011. Franklin FMCG Fund and Franklin Pharma
Fund merged into Franklin India Prima Plus effective September 9, 2011. Franklin
India Index Tax Fund (FITF) merged into Franklin India Index Fund – NSE Nifty
Plan effective September 9, 2011.
Franklin India Index Tax Fund (FITF) was launched in February 2001 as open end
passively managed ELSS scheme. The scheme invested in companies, whose
securities are part of the S&P CNX Nifty, with the aim to generate returns
commensurate with S&P CNX Nifty. As part of our product rationalization process
and with a view to reduce overlap between similar schemes, it was decided to
merge FITF with the Growth Option under the Nifty Plan of Franklin India Index
Fund. The effective date of the merger was September 9, 2011. As on March 31,
2012, the Mutual Fund served more than 20 lakh active investors through its 34
branches and 105 offices of our collection partners across India.
Frankline India Tax Sheild
a lock-in period of 3 years. It will be comes in market at April 10 1999. The
minimum application amount is for new & existing investors Rs.500 and in
multiples of Rs. 500 thereafter.

ABOUT SBI FUNDS MANAGEMENT LTD (SBIFM)
SBI Funds Management Ltd. is the investment manager of SBI Mutual Fund.
SBI Mutual Fund has been constituted as a trust, sponsored by State Bank
India. Today the Fund has an investor base of over 2.8 million spread over 23
schemes. With a large network of collecting branches and investor service
centers, SBI Mutual Fund constantly endeavors to get closer to its growing
family of investors. SBI is the largest public sector Bank in India with 8,836
branches all over India. SBI is the leader in providing loans to trade &
industry. It also provides related services, which generate significant fee-
based income. It has also identified project finance and consumer banking as
key areas.
Currently the SBI Mutual Fund offers 177 schemes in with different
investment objective and needs, as follows.
Table 3.3 SBI mutual fund schemes offers
No. of schemes including options 177
Equity Schemes 36
Debt Schemes 115
Short term debt Schemes 11
Equity & Debt 3
Money Market 0
Gilt Fund 12
SBI Mutual fund is India‟s largest bank sponsored mutual fund and has an
enviable track record in judicious investments and consistent wealth creation.
The fund traces its lineage to SBI India‟s largest banking enterprise. The

institution has grown immensely since its inception and today it is India‟s
largest bank patronized by over 80% of the top corporate houses of the
country.
Started in July 1987, the fund has launched 67 schemes and successfully redeemed
15 schemes. In the process, it has rewarded its investors handsomely with
consistently high returns. A total of over 3.5 million investors have reposed their
faith in the wealth generation expertise of the mutual fund. Schemes of the mutual
fund have consistently outperformed benchmarks indices and have emerged as the
preferred investment for the millions of investors.
Today the fund manages Rs.29492.9685 crore as on Mar 31, 2012 of assets and has
diversified profile of investors actively parking their investments across 37 active
schemes. The fund serves this vast family of investors by reaching out to them
through network of 100 collection branches, 26 investor service centers, 28
investor service desks, and 52 district organizers.
SBI Mutual fund is the first bank sponsored fund to launch an off-shore fund called
Resurgent India Opportunity Fund Growth through innovation and stable
investment policies is the SBI mutual fund.
SBI Magnum Tax Gain (ELSS)
a lock-in period of 3 years. It will be comes in market at 1996. The minimum
application amount is for new & existing investors Rs.500 and in multiples of Rs.
500 thereafter.

ABOUT RELIANCE MUTUAL FUND
Reliance Mutual Fund ('RMF') is one of India‟s leading Mutual Funds, with
Average Assets under Management (AUM) of Rs. 90,636 Crores and an investor
count of over 58.42 and 64.53 Lakh folios. (AUM and investor count as of Oct to
Dec '12).
Reliance Mutual Fund, a part of the Reliance Group, is one of the fastest growing
mutual funds in India. RMF offers investors a well-rounded portfolio of products
to meet varying investor requirements and has presence in 179 cities across the
country. Reliance Mutual Fund constantly endeavors to launch innovative products
and customer service initiatives to increase value to investors. Reliance Capital
Asset Management Limited („RCAM‟) is the asset manager of Reliance Mutual
Fund. RCAM is a subsidiary of Reliance Capital Limited (RCL). Presently, RCL
holds 65.23% of its total issued and paid-up equity share capital and the balance of
its issued and paid up equity share capital is held by other shareholders which
includes Nippon Life Insurance Company (“NLI”), holding 26% of RCAM‟s total
issued and paid up equity share capital. NLI acquired the said 26% share holding in
RCAM on August 17, 2012.
Reliance Capital Ltd. is one of India‟s leading and fastest growing private sector
financial services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital Ltd. has
interests in asset management, life and general insurance, private equity and
proprietary investments, stock broking and other financial services.
Reliance Mutual Fund (RMF) was initially set up as a Trust in accordance with the
provisions of the Indian Trust Act, 1882 by Reliance Capital Limited acting as a

Settler /Sponsor, vide a Trust Deed dated April 25, 1995 (the “Original Trust
Deed”).The Original Trust Deed was duly registered under the Indian Registration
Act, 1908. The Original Trust Deed was subsequently amended from time to time.
In order to consolidate all amendments to the Original Trust Deed in one
document, an Amended and Restated Trust Deed was executed on March 15, 2011
(the “Amended and Restated Trust Deed”). The Amended and Restated Trust Deed
was subsequently registered under the Indian Registration Act, 1908 and the
Amended and Restated Trust Deed was duly filed with SEBI. Reliance Capital
Trustee Co. Limited entered into an Investment Management Agreement dated
May 12, 1995 with Reliance Capital Asset Management Ltd. (RCAM) to function
as the Investment Manager for all the Schemes of RMF.

Chapter – 4
Results, Analysis and
Discussions

CALCULATION OF STANDARD DEVIATION OF SELECTED FUNDS
1. HDFC Tax Saver
Table 4.1 Standard Deviation for HDFC Tax Saver
Average Return ( y) =
= 77.91/5
= 15.58
∑dy
2
= 9962.43
Variance =
= 9962.43/4
= 2490.61
Standard Deviation (S.D) = = 49.90
YEAR RETURN
(Y)
AVERAGE
RETURN
( y)
dy = (Y- ) dy
2
2008 -51.55 15.58 -35.97 1293.84
2009 99.07 15.58 83.49 6970.58
2010 26.42 15.58 10.84 117.55
2011 -22.62 15.58 38.2 1459.24
2012 26.59 15.58 11.01 121.22
Total 77.91 9962.43

2. Franklin India Tax Shield
Table 4.2 Standard Deviation for Franklin India Tax Shield
= 67.25/5
= 13.45
∑dy
2
= 9373.86
Variance =
= 9373.86/4
= 2343.47
YEAR RETURN
(Y)
AVERAGE
RETURN
( y)
dy = (Y - ) dy
2
2008 -49.22 13.45 -62.67 3927.53
2009 78.81 13.45 65.36 4271.93
2010 23.47 13.45 10.02 100.40
2011 -15.19 13.45 -28.64 820.24
2012 29.38 13.45 15.93 253.76
Total 67.25 9373.86

3. Reliance Tax Saving Fund
Table 4.3 Standard Deviation for Reliance Tax Saving Fund
= 73.97/5
= 14.79
∑dy
2
= 11585.35
Variance =
= 11585.35/4
=2896.34
YEAR RETURN
(Y)
AVERAGE
RETURN
( y)
dy = (Y - ) dy
2
2008 -52.35 14.79 -67.14 4507.78
2009 82.01 14.79 67.22 4518.53
2010 22.49 14.79 7.7 59.29
2011 -24.23 14.79 -39.02 1522.56
2012 46.05 14.79 31.26 977.19
Total 73.97 11585.35

4. SBI Magnum Tax Gain
Table 4.4 Standard Deviation for SBI Magnum Tax Gain
= 55.32/5
= 11.06
∑dy
2
= 11759.78
Variance =
= 11759.78/4
= 2939.95
YEAR RETURN
(Y)
AVERAGE
RETURN
( y)
dy = (Y - ) dy
2
2008 -54.86 11.06 -65.92 4345.45
2009 86.41 11.06 75.35 5677.62
2010 12.98 11.06 1.92 2.69
2011 -23.50 11.06 -34.56 1194.39
2012 34.29 11.06 23.23 539.63
Total 55.32 11759.78

5. ICICI Prudential Tax Plan
Table 4.5 Standard Deviation for ICICI Prudential Tax Plan
= 93.75/5
= 18.75
∑dy
2
= 16496.93
Variance =
= 16496.93/4
= 4124.23
YEAR RETURN
(Y)
AVERAGE
RETURN
( y)
dy = (Y - ) dy
2
2008 -56.03 18.75 -74.78 5592.05
2009 112.00 18.75 93.25 8695.56
2010 24.11 18.75 5.36 28.73
2011 -23.96 18.75 -42.71 1824.14
2012 37.63 18.75 18.88 356.45
Total 93.75 16496.93

Standard deviation and return of selected tax saving schemes
Table 4.6 Return vs. Risk estimeted of selected tax saving schemes
Chart 4.1 Showing returns Vs risk of selected tax saving schemes
Inference: From the table 4.6 shows that average return and standard deviation
details. From the table it can be seen that ICICI fund making highest average return
of 18.75% during the period. However it‟s also facing highest risk of 64.22 of all
the four funds. The SBI fund, HDFC fund, Franklin india funds and Relience fund
are making similar amount average return but risk is not much higier.
0
10
20
30
40
50
60
70
Return
Standard Deviation
Fund Return Standard deviation
HDFC 15.58 49.90
Franklin 13.45 48.41
Reliance 14.49 53.82
SBI 11.06 54.22
ICICI 18.75 64.22

COMPARISION BETWEEN RETURNS OF FUND AND BENCHMARK
RETURNS
Table 4.7 Return of Franklin India Tax Shield Vs Benchmark's Return
Year Returns on fund (y) Returns on index(x)
2008 -49.22 -51.79
2009 78.81 75.76
2010 23.47 17.95
2011 -15.19 -24.62
2012 29.38 27.70
Chart 4.2 Return of Franklin India Tax Shield Vs Benchmark's Return
Inference: From table 4.7 show that that the fund yielded 78.81% return while
index return is 75.76% in 2009 will be higher as compare to all year. In the year
2008 index return is -51.79% while fund return is -49.22% that shows fund will not
perform well.
-60
-40
-20
0
20
40
60
80
100
2008 2009 2010 2011 2012
Return on Fund (Y)
Return on Index (X)

2. HDFC Tax Saver
Table 4.8 Return of HDFC Tax Saver Fund Vs Benchmark's Return
Year Returns on fund (y) Returns on index (x)
2008 -51.55 -51.79
2009 99.07 75.76
2010 26.42 17.95
2011 -22.62 -24.62
2012 26.59 27.70
Chart 4.3 Return of HDFC Tax Saver Fund Vs Benchmark's Return
Inference: From the table 4.8 it is found that the HDFC tax saver fund will be
performed well in 2009 which is 99.07% return of fund while index return is
75.76%.
-60
-40
-20
0
20
40
60
80
100
120
2008 2009 2010 2011 2012
Return on Fund (Y)
Return on Index (X)

3. Reliance Tax Saving Fund
Table 4.9 Return of Reliance Tax Saving Fund Vs Benchmark's Fund
2008 -52.35 -51.79
2009 82.01 75.76
2010 22.49 17.95
2011 -24.23 -24.62
2012 46.05 27.70
Chart 4.4 Return of Reliance Tax Saving Fund Vs Benchmark's Fund
Inference: In table 4.9 shows that the fund yielded 82.01% return while index
return is 75.76% in 2009. In the year 2008 index return is -51.79% while fund
return is -52.35%. so that in year 2009 Reliance fund performe well.
-60
-40
-20
0
20
40
60
80
100
2008 2009 2010 2011 2012
Return on Fund (Y)
Return on Index (X)

4. SBI MAGNUM TAX GAIN
Table 4.10 Return of SBI Magnum Tax Gain Fund Vs Benchmark's Fund
2008 -54.86 -51.79
2009 86.41 75.76
2010 12.98 17.95
2011 -23.50 -24.62
2012 34.29 27.70
Chart 4.5 Return of Sbi Magnum Tax Gain Fund Vs Benchmark's Fund
Inference: From the table 4.10 found that the fund yielded 86.41% return while
index return is 75.76% in 2009. In the year 2008 index return is -51.79% while
fund return is -54.86%. it shows that in 2008 fund and market are not performed.
-80
-60
-40
-20
0
20
40
60
80
100
2008 2009 2010 2011 2012
Return on Fund (Y)
Return on Index (X)

5. ICICI PRUDENTIAL TAX PLAN
Table 4.11 Return of ICICI Prudential Tax Plan Vs Benchmark's Fund
2008 -56.03 -51.79
2009 112.00 75.76
2010 24.11 17.95
2011 -23.96 -24.62
2012 37.63 27.70
Chart 4.6 Return of ICICI Prudential Tax Plan Vs Benchmark's Fund
Inference: Table 4.11 shows that the fund yielded 112% return while index return
is 75.76% in 2009. It shows higher return amoung all the year.
-80
-60
-40
-20
0
20
40
60
80
100
120
140
2008 2009 2010 2011 2012
Return on Fund (Y)
Return on Index (X)

CALCULATION OF BETA VLAUES
Table 4.12 Beta Calculation for Franklin India Tax Shield
Year
Returns on
Fund
(Y)
Returns on
Index
(X)
XY
2008 -49.22 -51.79 2549.10 2682.20
2009 78.81 75.76 5970.65 5739.58
2010 23.47 17.95 421.29 322.20
2011 -15.19 -24.62 373.98 606.14
2012 29.38 27.70 813.83 767.29
Total 67.25 45 10128.85 10117.41
Beta =
= 5(10128.85)-(45*67.25)/5*(10117.41)-(45)2
= 0.98

2. HDFC Tax Saver
Table 4.13 Beta Calculation for HDFC Tax Saver
Year
Returns on
Fund
(Y)
Returns on
Index
(X)
XY
2008 -51.55 -51.79 2669.77 2682.20
2009 99.07 75.76 7505.54 5739.58
2010 26.42 17.95 474.24 322.20
2011 -22.62 -24.62 556.90 606.14
2012 26.59 27.70 736.54 767.29
Total 77.91 45 11943 10117.41
Beta =
= 5(11943)-(45*77.91)/5(10117.41)-(45)2
=1.16

3. RELIANCE Tax Saving Fund
Table 4.14 Beta Calculation for Reliance Tax Saving Fund
Year
Returns on
Fund
(Y)
Returns on
Index
(X)
XY
2008 -52.35 -51.79 2711.21 2682.20
2009 82.01 75.76 6213.07 5739.58
2010 22.49 17.95 403.70 322.20
2011 -24.23 -24.62 596.78 606.14
2012 46.05 27.70 1275.59 767.29
Total 73.97 45 11200.35 10117.41
Beta =
= 5(11200.35)-(45*73.97)/5(10117.41)-(45)2
= 1.08

4. SBI Magnum Tax Gain
Table 4.15 Beta Calculation for SBI Magnum Tax Gain
Year
Returns on
Fund
(Y)
Returns on
Index
(X)
XY
2008 -54.86 -51.79 2841.20 2682.20
2009 86.41 75.76 6546.42 5739.58
2010 12.98 17.95 233 322.20
2011 -23.50 -24.62 578.57 606.14
2012 34.29 27.70 949.83 767.29
Total 55.32 45 11149.02 10117.41
Beta =
= 5(11149.02)-(45*55.32)/5(10117.41)-(45)2
= 1.10

5. ICICI Prudential Tax Plan
Table 4.16 Beta Calculation for ICICI Prudential Tax Plan
Year
Returns on
Fund
(Y)
Returns on
Index
(X)
XY
2008 -56.03 -51.79 2901.79 2682.20
2009 112.00 75.76 8485.12 5739.58
2010 24.11 17.95 432.77 322.20
2011 -23.96 -24.62 589.90 606.14
2012 37.63 27.70 1042.35 767.29
Total 93.75 45 13451.93 10117.41
Beta =
= 5(13451.93)-(45*93.75)/5(10117.41)-(45)2
= 1.29

BETA VALUES OF FIVE SCHEMES
Table 4.17 Beta Values estimated of selected tax saving schemes
Chart 4.7: Beta value plotted with the selected tax saving schemes
Inference: The result of beta is present in table 4.17. It shows that only Franklin
India tax shield fund beta value is (0.98< 1), that means only Franklin India tax
shield fund will be performed in defensive way as compare to all the other selected
tax saving schemes.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
ICICI Pru.
Tax Plan
SBI
Magnum
Tax Gain
HDFC Tax
Saver
Fund
Reliance
Tax
saving
Fund
Franklin
India Tax
Shield
Beta Value
Index
Fund Beta value Findings
ICICI Prudential
Tax Plan
1.29 Aggressive
SBI Magnum
Tax Gain
1.10 Aggressive
HDFC Tax Saver
Fund
1.16 Aggressive
Reliance Tax
saving Fund
1.08 Aggressive
Franklin India
Tax Shield
0.98 Defensive

CALCULATION OF CORRELATION
Table 4.18 Correlation calculation for Franklin India Tax Shield
Year
Returns
on Fund
(Y)
Returns
on Index
(X)
dy =
(Y - )
dx =
(X – )
dy
2
dx
2
dx dy
2008 -49.22 -51.79 -62.67 -60.79 3927.53 3695.42 3809.71
2009 78.81 75.76 65.36 66.76 4271.93 4456.89 4363.43
2010 23.47 17.95 10.02 8.95 100.40 80.10 89.68
2011 -15.19 -24.62 -28.64 -33.62 820.24 1130.30 964.22
2012 29.38 27.70 15.93 18.7 253.76 349.69 297.89
Total 67.25 45 9373.86 9712.4 5205.13
Average Return ( x) =
( x) = = 9
r =
r = = 0.732

2. HDFC TAX SAVER
TABLE 19 Correlation calculation for HDFC Tax Saver
Year
Returns
on Fund
(Y)
Returns
on Index
(X)
dy =
(Y - )
dx =
(X – )
dy
2
dx
2
dx dy
2008 -51.55 -51.79 -35.97 -60.79 1293.84 3695.42 2186.62
2009 99.07 75.76 83.49 66.76 6970.58 4456.89 5573.79
2010 26.42 17.95 10.84 8.95 117.55 80.10 97.02
2011 -22.62 -24.62 38.2 -33.62 1459.24 1130.30 1284.29
2012 26.59 27.70 11.01 18.7 121.22 349.69 205.89
Total 77.91 45 9962.43 9712.4 9347.61
( x) = = 9
r =
r = = 0.950

3. RELIANCE TAX SAVING FUND
TABLE 4.20 Correlation calculation for Reliance Tax Saving Fund
Year
Returns
on Fund
(Y)
Returns
on Index
(X)
dy =
(Y - )
dx =
(X – )
dy
2
dx
2
dx dy
2008 -52.35 -51.79 -67.14 -60.79 4345.45 3695.42 4081.44
2009 82.01 75.76 67.22 66.76 5677.62 4456.89 4487.61
2010 22.49 17.95 7.7 8.95 2.69 80.10 68.92
2011 -24.23 -24.62 -39.02 -33.62 1194.39 1130.30 1311.85
2012 46.05 27.70 31.26 18.7 539.63 349.69 584.56
Total 73.97 45 11759.78 9712.4 10534.38
( x) = = 9
r =
r = = 0.986

4. SBI MAGNUM TAX GAIN
TABLE 4.21 Correlation calculation for Sbi Magnum Tax Gain
Year
Returns
on Fund
(Y)
Returns
on Index
(X)
dy =
(Y - )
dx =
(X – )
dy
2
dx
2
dx dy
2008 -54.86 -51.79 -65.92 -60.79 4345.45 3695.42 4120.95
2009 86.41 75.76 75.35 66.76 5677.62 4456.89 4487.60
2010 12.98 17.95 1.92 8.95 2.69 80.10 68.92
2011 -23.50 -24.62 -34.56 -33.62 1194.39 1130.30 1311.85
2012 34.29 27.70 23.23 18.7 539.63 349.69 584.56
Total 55.32 45 11759.78 9712.4 10573.88
( x) = = 9
r =
r = = 0.989

5. ICICI PRUDENTIAL TAX PLAN
TABLE 4.22 Correlation calculation for ICICI Prudential Tax Plan
Year
Returns
on Fund
(Y)
Returns
on Index
(X)
dy =
(Y - )
dx =
(X – )
dy
2
dx
2
dx dy
2008 -56.03 -51.79 -74.78 -60.79 5592.05 3695.42 4545.87
2009 112.00 75.76 93.25 66.76 8695.56 4456.89 6225.37
2010 24.11 17.95 5.36 8.95 28.73 80.10 47.97
2011 -23.96 -24.62 -42.71 -33.62 1824.14 1130.30 1435.91
2012 37.63 27.70 18.88 18.7 356.45 349.69 353.06
Total 93.75 45 16493.93 9712.4 12608.18
( x) = = 9
r =
r = = 0.996

CORRELATION VALUES OF FIVE SCHEMES
Table 4.23 Correlation estimates of selected tax saving schemes
Chart 4.8 Correlation on selected tax saving schemes
Inference: Table 4.23 present the result of correlation estimated of selected tax
saving schemes the analysis reveals that all the scheme are highly correlated with
market index suggesting direct relationship between returns of tax saving schemes
and benchmark index. It shows that the results follow the market index.
Fund Correlation (r)
Franklin India
Tax Shield
0.732
HDFC Tax Saver
Fund
0.950
Reliance Tax
saving Fund
0.986
SBI Magnum
Tax Gain
0.989
ICICI Prudential
Tax Plan
0.996
0
0.2
0.4
0.6
0.8
1
1.2
Correlation
Correlation

COEFFICIENT OF DETERMINATION OF FIVE SELECTED SCHEMES
Table 4.24 Coefficient of determination estimates of selected tax saving
schemes
Chart 4.9 Coefficient of determination on selected tax saving schemes
Inference: The result of coefficient of determination is present in table 4.24. It
shows the percentage of variation attributes to the market movement. It is seen that
except Franklin India all other scheme are highest values of (r2
) indicates that
much of the variation in return of the scheme are return by market.
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
Franklin
India Tax
Shield
HDFC Tax
Saver Fund
Reliance
Tax saving
Fund
SBI
Magnum
Tax Gain
ICICI Pru.
Tax Plan
Correlation
Coefficient of
Determination
Fund Correlation
(r)
Coefficient of
Determination (r2
)
Franklin India
Tax Shield
0.732 0.535
HDFC Tax Saver
Fund
0.950 0.903
Reliance Tax
saving Fund
0.986 0.972
SBI Magnum
Tax Gain
0.989 0.978
ICICI Prudential
Tax Plan
0.996 0.992

MEASURING THE PERFORMANCE OF THE SCHEMES
1. Treynor Ratio
Treynor ratio =
Franklin =
= 5.56
HDFC =
= 6.53
Relience =
= 6.01
SBI =
= 2.78
ICICI =
= 8.33

2. Sharpe Ratio
Sharpe Ratio =
Franklin =
= 0.113
HDFC =
= 0.152
Relience =
= 0.121
SBI =
= 0.056
ICICI =
= 0.167

3. Jensen Model
Jensen model = p-[Rf+βp( m-Rf)]
Franklin = 13.45-[8+0.98(9-8)]
= 4.47
HDFC = 15.58-[8+1.16(9-8)]
= 6.42
Relience = 14.49-[8+1.08(9-8)]
= 5.41
SBI = 11.06-[8+1.06(9-8)]
= 2
ICICI = 18.75-[8+1.29(9-8)]
= 9.46

STATISTICAL ANALYSIS OF FUND PERFORMANCE
Table 4.25 Statistical Analysis of selected tax saving scheme Performance
Fund Treynor’s
Measure
Sharpe
Measure
Jensen
Measure
ICICI 8.33 0.167 9.46
HDFC 6.53 0.152 6.42
Reliance 6.01 0.121 5.41
Franklin 5.56 0.113 4.47
SBI 2.78 0.056 2
Chart 4.10 Statistical Analysis of selected tax saving schemes Performance
Inference: The result of Treynor‟s, Sharpe and Jensen method is present in table
4.18. It show the performance level of all the five selected tax saving schemes. It is
seen that analysis of returns in relation to the market risk of the fund.The higher
returns are ranked accordingly ICICI fund is ranked 1st
, HDFC fund 2nd
, Reliance
fund is 3rd
, Frankline fund is 4th
and SBI fund is 5th
by using all the three methods.
8.33
6.53
6.01
5.56
2.78
0.167 0.152 0.121 0.114 0.056
9.46
6.42
5.41
4.47
2
ICICI HDFC Relience Franklin SBI
Chart Title
Treynor's Measures Sharpe Measure Jensen Measure

Chapter – 5
Summary of Findings,
Suggestions and
Conclusion

Tax saving schemes

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