INTRODUCTION

The Indian financial market is one of the fastest growing emerging markets of the world, thanks to the new economic policy - liberalization, deregulation and measures of restructuring - which has dismantled entry barriers in the financial markets, allowed the entry of new players and created an environment for efficient allocation of resources. The major investors in the markets are the Individual Investors, Corporate Sectors, Charitable Trusts, etc. The individual investors are now aware about of the other sources of the investment avenues rather than the traditional investment avenue. They are aware about the modern investment avenues. One of the important investment avenues in the financial market is the Mutual Fund. Through out the world, Mutual Funds have played a significant role as far as an investment is concerned. Mutual Funds play a pivotal role in transforming savings into investments and thereby improving financial health of a country. One way to measure this role is to analyze performance of mutual fund schemes. Also understanding of mutual fund structure and advantages etc. is very important. A Mutual Fund is the ideal instrument vehicle for todays complex and modern financial scenario. Mutual funds offer many benefits to the small investors such as Diversification, liquidity, low transaction cost, low risk, transparency, more options and more schemes, professional management, flexibility, convenience to switch and many more. Other than Mutual Funds, Bank Deposits, Post Office Schemes, RBI Relief Bond, Public Provident Fund, Unit Trust of India, Life Insurance, and Equity are the investment avenues where generally investors invest their savings.

The survey conducted to understand about the Mutual Fund as an investment Avenue and also generate the awareness of mutual funds in the minds of individual investors & corporate.

COMPANY DETAILS

MAN WITH A MISSION

If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and ChairmanEmeritus, of HDFC Group who left this earthly abode on November 18, 1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure on the Indian financial scene.

In 1956 he began his lifelong financial affair with the

economic world, as General Manager of the newly formed Industrial Credit and

Investment Corporation of India (ICICI). He rose to become Chairman and continued so till his retirement in 1972.

At the ripe age of 60, started his

Hasmukhbhai

second dynamic life, even more illustrious than his first. His vision for mortgage finance for housing gave birth to the Housing Finance for housing Development trendsetter Mr. H.T. PAREKH is conferred the Padma Bhushan by the Government of India in the year 1992. continent.

Corporation it was a finance in the whole Asian

Background and Objective of HDFC group

Background
HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

Business Objectives
The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets...

Organizational Goals
HDFCs main goals are to a) Develop close relationships with individual households, b) Maintain its position as the premier housing finance institution in the country, c) Transform ideas into viable and creative solutions,

d) Provide consistently high returns to shareholders, and e) To grow through diversification by leveraging off the existing client base.

Key group Companies and their business

HDFC Reality

HDFC Bank

HDFC Standard Life Insurance

HDFC Mutual Fund

HDFC Chubb General Insurance

Credit Information Bureau (INDIA) Limited

HDFC Securities

HDFC Consultancy Services

 Intel net Global

HDFC REALTY

Profile
The property market in India abounds with possibilities and potential but for the large part, it is still highly fragmented and disorganized. HDFCrealty.com is a / your new, organized electronic

marketplace for properties. We/ It provides the entire gamut of real estate services, bringing together the "clicks world" and the "bricks world" in a revolutionary and user-friendly way. Making available the best guidance and the most professional, transparent, efficient service to the real estate customer HDFCrealty.com brings together India's most exhaustive

database of properties. It acts as a one-stop online hub for information, comparative analyses, transactions, and market reach and comprehensive professional services. For property anywhere in India. For customers anywhere in the world

HDFCrealty.com, Housing Development Finance Corporation Limited (HDFC) has formed the company behind this site. HDFC is Indias largest Housing Finance Company and is an expert on the housing sector, property markets and the real estate business.. This expertise and service orientation has developed and strengthened over the last 22 years. Today HDFC has an office network of 63 offices all over the country and an overseas office in Dubai. HDFC has financed over 1.5 million dwelling units with loan approvals and disbursements amounting to Rs. 225 billion and Rs. 186 billion respectively.

HDFC Bank
Profile
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

Business Focus
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in

profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People.

Business
HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: 1. Wholesale Banking Services 2. Retail Banking Services 3. Treasury

HDFC Standard Life Insurance

Profile
HDFC Standard Life Insurance Company Ltd. is one of Indias leading private life insurance companies, which offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC Ltd.), Indias leading housing finance institution and The Standard Life Assurance Company, a leading provider of financial services from the United Kingdom. Both the promoters are well known for their ethical dealings and financial strength and are thus committed to being a long-term player in the life

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insurance industry all-important factors to consider when choosing your insurer.

Vision
'The most successful and admired life insurance company, which means that we are the most trusted company, the easiest to deal with, offer the best value for money, and set the standards in the industry'.

Values
Values that we observe while we work: Integrity, Innovation Customer centric, People Care One for all and all for one, Team work, Joy and Simplicity

Parentage HDFC Limited.

HDFC is Indias leading housing finance institution and has helped build more than 23, 00,000 houses since its incorporation in 1977.

Standard Life Assurance Company

Standard Life has been looking after the financial needs of customers for more than 180 years. It currently has a customer base of over 7

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million people who rely on the company for their insurance, pension, investment, banking and health-care needs. Leader in the employee benefit market in both the UK and Canada. Rated by Standard & Poor as 'strong' with a rating of A+ and as 'good' with a Moodys. rating of A1 by

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HDFC Mutual Fund

VISION
To be a dominant player in the Indian mutual fund space recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

Sponsors

Housing Development Finance Corporation Limited (HDFC) The Standard Life Assurance Company

Management

HDFC Trustee Company Limited HDFC Asset Management Company Limited (AMC)

The present share holding pattern of the AMC is as follows

PARTICULARS

% OF THE PAID UP SHARE CAPITAL

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HDFC Standard Life Investments Limited

50.10 49.90

HDFC Chubb General Insurance Company Limited

HDFC CHUBB
With over one century of experience in the field of non-life insurance from Chubb and HDFC's expertise from the financial segment, HDFC Chubb General Insurance Company Limited has the consumer insight to make its product range world class and comprehensive. HDFC Chubb brings you Insurance solutions that you can rely on. Their offerings are classified into three categories. 1. The categories comprise 2. Personal Insurance, Accident and Health Insurance and 3. Commercial Insurance.

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HDFC LTD
HDFC was incorporated in 1977 with two primary objectives - to enhance housing stock in the country through housing finance systematically and professionally and promote home ownership. They also aim to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets. HDFC is also the largest mobiliser of retail deposits in the private sector outside the banking circle. Our deposits have been awarded the highest safety credit rating 'FAAA' & 'MAAA' by CRISIL and ICRA respectively for eight consecutive years.

CHUBB Corporation
With more than $30billion in assets, The Chubb Corporation is one of the worlds largest, financially strongest, non-life insurance companies. It is noted for its quality service and innovative insurance products geared to meeting the changing needs of a broad range of customers in diverse markets. Founded in New York in 1882, Chubb today provides property and casualty insurance through more than 10,000 employees in 32 countries of North America, South America and Asia. Chubb also works closely with 5000 independent agents and brokers worldwide.

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Credit Information Bureau (INDIA) Limited

Profile
Credit Information Bureau (India) Limited (CIBIL) was incorporated in 2000. CIBILs aim is to fulfill the need of credit granting institutions for comprehensive credit information by collecting, collating and disseminating credit information pertaining to both commercial and consumer borrowers, to a closed user group of Members. Banks, Financial Institutions, Non Banking Financial Companies, Housing Finance Companies and Credit Card Companies use CIBILs services. Data sharing is based on the Principle of Reciprocity, which means that only Members who have submitted all their credit data, may access Credit Information Reports from CIBIL. The relationship between CIBIL and its Members is that of close interdependence.

Integral Solution

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The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors portfolio quality. CIBIL provides a vital service, which allows its Members to make informed, objective and faster credit decisions.

MISSION Statement
To be the leader and trendsetter in India, in providing comprehensive credit information services and related products conforming to global standards, while adhering to the best practices in terms of confidentiality, propriety and fair reporting, with a strong technology orientation and seeking to afford the highest level of customer satisfaction.

HDFC SECURITIES
Profile
HDFCsec is a brand brought to you by HDFC Securities Ltd, which has been promoted by the HDFC Bank & HDFC with the objective of providing the diverse customer base of the HDFC Group and other investors a capability to transact in the Stock Exchanges &other financial market transactions. HDFCsec will equip you with the necessary tools to allocate, select and manage your investments wisely, and also support it with the highest standards of service, convenience and hassle-free trading tools.

Mission Statement

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Mission is to provide our customers with the most useful investment guidance and investment-related services available in the country. We want to become a one-stop solution for all your investment needs, one that will help you get the most out of your money.

What HDFC SECURITIES

HDFC SECURITIES services comprise online buying and selling of equity shares on the National Stock Exchange (NSE).

HDFCsec helps you manage your money in every possible way. We understand your time is valuable and that convenience is important. So were here to provide high quality investment services, in a simple, direct and cost-effective way to help you achieve your financial goals.

HDFC Consultancy Services

HDFC is a unique example of a housing finance company, which has demonstrated the viability of market-oriented housing finance in a developing country. It is viewed as an innovative institution and a market leader in the housing finance sector in India. The World Bank considers HDFC a model private sector housing finance company in developing countries and a provider of technical assistance for new and existing institutions, in India and abroad. HDFCs executives have undertaken consultancy assignments related to housing finance and urban development on behalf of multilateral agencies all over the world. HDFC has also served as consultant to international agencies such as World Bank, United States Agency for International Development (USAID), Asian Development Bank, United Nations Center for Human

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Settlements, Commonwealth Development Corporation (CDC) and United Nations Development Programmed (UNDP). HDFC has also undertaken assignments for the United Nations Capital Development Fund in Ethiopia, for the UNCHS in Nairobi, for USAID in Russia and Bulgaria, and projects of the World Bank in Indonesia and Ghana. At the national level, HDFC executives have played a key role in formulating national housing policies and strategies. Recognizing HDFCs expertise, the Government of India has invited HDFCs executives to join a number of committees and task forces related to housing finance, urban development and capital markets.

INTELENET GLOBAL

Profile
Two leading global investors - HDFC and Barclays - provide the financial backing Intelenet needs to lead in a global marketplace. HDFC is India's leading financial services conglomerate, while Barclays is a venerable financial services group headquartered in the United Kingdom, ranking among the Top 10 banks in the world based on market capitalization. At the same time, their combined financial

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strength provides Intelenet with the ability to remain on the cutting edge of BPO processes while simultaneously maintaining corporate growth and achieving the goals and objectives set forth by our customers.

What intelenet global do

100% BPO FOCUS

Mission
To add value to our clients' business by providing cost-effective, premium quality Customer Management services and be the preferred vendor for off shored, outsourced BPO services.

Social Responsibilities

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The year 2004-05 saw HDFC making renewed efforts in fulfilling its social commitment by way of several ongoing as well as new initiatives. The latter included innovative financing of slum up-gradation and lowincome housing projects, dialoguing with key stakeholders on policy issues, responding to the tsunami tidal wave disaster and staff volunteering and participation in varied community development activities.

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SWOT Analysis
Strength

Well-regained and reputed brand of HDFC. Experience of Standard Life Investment. Young and well qualified staff. Well aware of customer need.

Weakness

Less marketing. Presence of HDFC MF in very less places. Comparatively very less staff and very heavy work load.

Opportunities

Day by day increasing knowledge about Mutual Fund. Only instrument with proper corporate governance and comparatively high return with lesser risk. Rural market is totally untapped.

Threat

Presence of nationalized player like UTI and many more.

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Increase in competition and competitor.

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INDUSTRY DETAILS

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Mutual Fund Sector And Financial Market Overview

Mutual funds have played a significant role in financial intermediation, the development of capital markets and the growth of the Indian Economy. The Indian mutual fund industry has been no exception. Though it is relatively new, it has grown at a dynamic speed, influencing various sectors of the financial market and the national economy. The Indian economy is under transition on account of the on going structural adjustment programs and liberalization. The corporate sector and the investment community play a major role in the markets today. Economic transition is usually marked by changes in the market mechanics, institutional integration, market regulations, relocation of savings and investments and changes in inter-scrotal relationships. These changes often include negativity and shake investors confidence in the capital market. Mutual funds as efficient allocates of resources play a crucial role in this transitional period. They have opened new vistas to investors and imparted much needed liquidity to the system. In the process, they have challenged the hitherto dominant role of commercial banks in the financial market and national economy. Mutual funds are dynamic financial institutions that play a crucial role in an economy by mobilizing savings and investing them in the capital markets, thus establishing a link between savings and capital market. Therefore, the activities of mutual funds have both short and long term impact on the savings and capital markets and the national economy. They mobilize funds in the savings market and act as complementary to banks.

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Emergence Of Mutual Fund

Mutual funds now represent perhaps the most appropriate investment opportunity for most investors. As financial markets become more sophisticated and complex, investors need a financial intermediary who provides the required knowledge and professional expertise on successful investing. It is no wonder then that in the birthplace of mutual funds the U.S.A. the fund industry has already overtaken the banking industry, more funds being under mutual fund management than deposited with banks. The Indian mutual fund industry has already started opening up many of the exciting investment opportunities to Indian investors. We have started witnessing the phenomenon of more savings now being entrusted to the funds than to the banks. Despite the expected continuing growth in the industry, mutual funds are still a new financial intermediary in India.

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Place of Mutual Funds in Financial Markets

Indian households started allocating more of their savings to the capital markets in 1980s, with investments flowing into equity and debt instruments, besides the conventional mode of bank deposits. Until 1992, primary market investors were effectively assured good returns, as the issue price of new equity issues was controlled and low. After introduction of free pricing of shares, new issue prices were higher and with greater volatility in the stock markets, many investors who bought highly priced shares lost money, and withdrew from the markets altogether. Even those investors who continued as Direct investors in the stock markets realized that the key to successful investing in the capital markets lay in building a diversified portfolio, which in turn required substantial capital. Besides, selecting securities with growth and income potential from the capital market involved careful research and monitoring of the market, which was not possible for all investors. Under similar circumstances in other countries, mutual funds had emerged as professional intermediaries. Besides providing the expertise in stock market investing, these funds allow investing in small amounts and yet holding a diversified portfolio to limit risk, while providing the potential for income and growth that is associated with the debt and equity instruments. In India, Unit Trust of India occupied this place as the only capital markets intermediary from 1964 until late 1987, when the Government started allowing other sponsors also to set up mutual funds. With some ups and downs, this new class of intermediary

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institutions has emerged, in India as elsewhere, as a good alternative to direct investing in capital markets. Mutual Funds serve as a link between the saving public and the capital markets, as they mobilize savings from investors and bring them to borrowers in the capital markets.

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Concept of Mutual Fund: Summary

A mutual fund is a common pool of money into which investors place their contributions that are to be invested in accordance with a stated objective. The ownership of the fund is thus joint or mutual; the fund belongs to all investors. He or her bears in the same proportion as the amount of the contribution make a single investors ownership of the fund to the total amount of the fund. A mutual fund uses the money collected from investors to buy those assets, which are specifically permitted by its stated investment objective. Thus, an equity fund would buy mainly equity assets ordinary shares, preference shares, warrants etc. A bond fund would mainly buy debt instruments such as debentures, bonds, or government securities. It is these assets, which are owned by the investors in the same proportion as their contribution bears to the total contributions of all investors put together.

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COMPETITORS DETAILS

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Mutual Fund Player In India

A) Bank Sponsored 1. Joint Ventures - Predominantly Indian a. SBI Funds Management Private Ltd. 2. Others a. BOB Asset Management Co. Ltd. b. Can bank Investment Management Services Ltd. c. UTI Asset Management Co. Private Ltd. B) Institutions a. Jeevan Bima Sahayog Asset Management Co. Ltd. C) Private Sector 1. Indian a. Benchmark Asset Management Co. Private Ltd. b. Cholamandalam Asset Management Co. Ltd. c. Credit Capital Asset Management Co. Ltd. d. Escorts Asset Management Ltd. e. J. M. Financial Asset Management Private Ltd. f. Kotak Mahindra Asset Management Co. Ltd. g. Reliance Capital Asset Management Ltd. h. Sahara Asset Management Co. Private Ltd i. Sundaram Asset Management Co. Ltd. j. Tata Asset Management Ltd. 2. Joint Ventures - Predominantly Indian a. Birla Sun Life Asset Management Co. Ltd. b. DSP Merrill Lynch Fund Managers Ltd. c. HDFC Asset Management Co. Ltd. d. Prudential ICICI Asset Management Co. Ltd. 3. Joint Ventures - Predominantly Foreign a. ABN AMRO Asset Management (India) Ltd. b. Deutsche Asset Management (India) Private Ltd. c. Fidelity Fund Management Private Ltd. d. Franklin Templeton Asset Management (India) Private Ltd.

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e. HSBC Asset Management (India) Private Ltd. f. ING Investment Management (India) Private Ltd. g. Morgan Stanley Investment Management Private Ltd. h. Principal Pnb Asset Management Co. Private Ltd. i. Standard Chartered Asset Management Co. Private Ltd.

AUM OF COMPETITORS

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Assets Under Management (AUM) as at the end of Feb-2006 (Rs in Lakhs) Average AUM For The AUM Month Mutual Fund Name Excluding Fund Of Funds Fund Of Funds Excluding Fund Of Funds Fund Of Funds

1. ABN AMRO Mutual Fund 2. Benchmark Mutual Fund 3. Birla Sun Life Mutual Fund 4. BOB Mutual Fund 5. Can bank Mutual Fund 6. Chola Mutual Fund 7. Deutsche Mutual Fund 8. DSP Merrill Lynch Mutual Fund 9. Escorts Mutual Fund 10. Fidelity Mutual Fund 11. Franklin Templeton Mutual Fund 12. HDFC Mutual Fund 13. HSBC Mutual Fund 14. ING Vysya Mutual Fund 15. JM Financial Mutual Fund 16. Kotak Mahindra Mutual Fund 17. LIC Mutual Fund 18. Morgan Stanley Mutual Fund 19. PRINCIPAL Mutual Fund 20. Prudential ICICI Mutual Fund 21. Reliance Mutual Fund 22. Sahara Mutual Fund 23. SBI Mutual Fund 24. Standard Chartered Mutual Fund 25. Sundaram Mutual Fund 26. Tata Mutual Fund 27. Taurus Mutual Fund 28. UTI Mutual Fund Total

REGULATROY ENVIRONMENT DETAILS

307401.78 96154.29 0 0 294394.15 0 0 0 0 0 0 0 0 294759.13 0 5281.52 1229567.8 16086.69 292803.03 189609.82 268426.04 995316.22 16253.85 298476.72 2214.97 0 0 0 0 0 0 6098.08 285732.35 0 275141.94 1799634.31 38459.31 1810251.23 38321.47 2012162.62 906041.96 192205.91 360249.19 0 0 0 0 1993357.05 904766.43 0 0 0 0 50690.9 0 254479.13 0 0 0 33578.84 1320080.51 0 0 0 0

782165.04 51312.36 772800.56 723932.06 260283.97 693529.86 0 0 0

2136649.99 4621.34 1685928.32 32750.34 1289213.82 0 0 0

1181321.66 4408.68

324969.66 0 344641.09 0 872429.36 0 0 21734.89 0 21584.28 0 34 2761883.26 0 2751832.55 0 21747182.46 107114.74 11357399.24 94293.89

Regulators in India
AMFI (Association of Mutual Fund in India)
AMFI not a Self Regulatory Organization (SRO). Its made to promote mutual fund in the masses and give recommendation in order to uphold the interest of the investor.

SEBI (Security Exchange Board of India)

Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors. All Mutual Funds are registered with SEBI and they function within the provision of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

RBI (Reserve Bank of India)

Reserve bank of India was the regulator of Mutual Fund before SEBI. It regulated mutual fund initially and there were only few schemes in the market. But now with coming of SEBI, it has now become the main

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regulator of the Mutual Fund. RBI now only governs Bank Sponsored Mutual Fund.

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Investors Rights
assets Right to obtain information from trustees Entitled to receive dividend warrants within 30 days of Inspect major documents of the fund Appointment of the AMC can be terminated by 75% of the Right to approve of changes in fundamental attributes of a Proportionate right to beneficial ownership of schemes

declaration of dividend

unit holders of the scheme present and voting close ended scheme (75 % of unit holders should approve) - right to be informed so in open ended schemes so that they can redeem Right to receive a copy of annual financial statements of 75% of the unit holders can resolve to wind up the fund and periodic transaction statements scheme

Legal Limitations to Investors Rights

Unit holders can not sue the trust Can initiate legal proceedings against trustees Sponsor of mutual funds have no obligation to meet any

shortfall in the assured return - unless explicitly guaranteed in the offer document No rights to a prospective investor

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Investors obligations
Carefully study the offer document before investing Monitor his investment in a scheme by referring financial statements, performance updates and research reports sent by the AMC

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ORGANIZATIONAL STUDY

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MARKETING DEPARTMENT

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Marketing Scenario
The last few years have seen an increased attention to mutual funds across all genres of investors big or small, individuals or corporate. The growing awareness of the advantages that mutual funds offer over other investments avenues have been better communicated and more understood A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in faraway places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act speedily. A mutual fund is answer to all these situations. It appoints professionally qualified and experienced staff that manages each of these functions on a fulltime basis. Now, Mutual Fund is new developing market. In fact, the mutual fund vehicle exploits economies of scale in all three areas research, investment and transaction processing.

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Market Segmentation
Market segmentation is an effort to increase a companys precision marketing. A market segment consists of large identifiable group within a market with similar wants, purchasing power, buying attitudes or buying habits. As HDFC mutual fund is a service sector industry they introduce different schemes for different people. Each person is different in nature and each have differ criteria for investment like risk factor, return, liquidity, tax benefits etc. So that HDFC Asset management company have introduced varieties of scheme like debt scheme, balanced scheme, equity related scheme and each schemes have option to invest in SIP (Systematic Investment Plan) which help investor to invest a specific amount for a continuous period, at regular intervals so that investor has the advantage of rupee cost averaging and also helps him save compulsorily a fixed amount each amount.

Target Market
HDFC Asset Management Company is a joint venture of HDFC BANK (50.10%) and Standard Life Investment Limited (49.90%). The joint venture was formed with the key objective of providing the Indian investor mutual fund products to suit a variety of investment needs. HDFC Asset Management Company, have variety of scheme both open ended and close ended scheme. Both have different objective and different target market. Equity Mutual Fund Scheme has target market of person who wants to take high risk and also expect high

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return. Balanced scheme have target market of person who wants to take moderate risk and expect average return and Debt scheme have target market of person who wants to take less risk. Closeended scheme have target market of person who wants long-term equity investment.

Customers Profile
HDFC Asset Management Company, have variety scheme and each scheme have different customer profile. For Equity related scheme customer profile is young generation, for liquid scheme customer profile is business man who wants to utilize their money in effective manner for shorter period, in SIP (Systematic Investment Plan) customer basically are serviced person who invest regularly and want to earn more than average return. Thus, HDFC Asset Management Company, have introduced variety of scheme to suit need of variety of customer.

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Positioning Strategy

Positioning is the act of designing the companys offering and image to occupy a distinctive place in the target markets mind. Positioning starts with a product. A piece of merchandise, a service, a company, an institution, or even a person. But positioning is not what you do to a product. Positioning is what you do the mind of the prospect. That is, you position the product in the mind of prospect. A companys differentiating and positioning strategy must change as the product, market, and competitors change over time. Once the company has developed a clear positioning strategy, it must communicate that positioning effectively. There should be no under positioning, over positioning, confused positioning or doubtful positioning.

HDFC Asset Management Company, have positioning strategy of Continuing a Tradition of Trust. It is accurate positioning strategy

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because it signifies a trust with its clients. Here is special Relationship Manager dedicated towards customer service and satisfaction and give them guidance about various schemes which helps them to get right scheme which suit their investment needs. In this way it continues to maintain a trust with its clients.

Product Details

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What is a Mutual Fund?

A mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the stated investment objective of the scheme. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. For example, an equity fund would invest equity and equity related instruments and a debt fund would invest in bonds, debentures, gilts etc.

Invest / Pool Their Money Profit / Loss From Portfolio of Investment

Invest in number Of Stocks & Bonds

Profit / Loss From Individual Investment

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Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives, which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI), which regulates securities markets before it can collect funds from the public.

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History of the Indian Mutual Fund Industry in India

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

First Phase 1964-87

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

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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.

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

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

Fourth Phase since February 2003

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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 September 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

The graph indicates the growth of assets over the years.

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Structure of Mutual Fund

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The Structure Consists of

Sponsor
Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund.

Trust
The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908.

Trustee
Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and inter alia ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner.

54

Asset Management Company (AMC)

The Trustee as the Investment Manager of the Mutual Fund appoints the AMC. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. The AMC must have a net worth of at least 10 crores at all times.

Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the application form; redemption requests and dispatches account statements to the unit holders. The Registrar and Transfer agent also handles communications with investors and updates investor records.

55

Benefits of Investing through Mutual Funds

There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the

56

range of benefits they offer, which are unmatched by most other investment avenues. The benefits have been broadly split into universal benefits, applicable to all schemes and benefits applicable specifically to openended schemes.

57

Affordability
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.5000/-. This amount today would get you less than quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.

Diversification
The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns, for example during one period of time equities might under performs but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives.

Variety
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme)

58

depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme.

Professional Management
Qualified investment professionals who seek to maximize returns and minimize risk monitor investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional that has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.

Tax Benefits
Any income distributed after March 31, 2002 will be subject to tax in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction up to Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.

Regulations
Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and

59

also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors.

Disadvantages of Mutual Funds

No control over costs:
The funds are managed in huge volume and so the control on expenses cannot be exercised, as there is lot of formalities and administrative expenses attached. Though the limit of incurring expenses is predetermined but still it cannot be kept in control.

No tailor made portfolio:

There is no tailor made portfolio available to any individual. The products and scheme that is designed by the fund managers is on their philosophy and is floated in the market with a common goal. No individual can have their own portfolio maintained separately from the other investors.

Delay in redemption:
The redemption of the funds though has liquidity in 24-hours to 3 days takes formal application of redemption as well as needs time for redemption. This becomes cumbersome for the investors.

60

Non-availability of loans:
Mutual funds are not accepted as security against loan. The investor cannot deposit the mutual funds against taking any kind of bank loans though they may be his assets.

Risk in Investing through Mutual Fund

61

The Risk-Return Trade-off

62

The most important relationship to understand is the risk-return tradeoff. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is up to investor, the investor to decide how much risk individual is willing to take. In order to do this investor must first be aware of the different types of risks involved with particular investment decision.

Market Risk
Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this risk.

Credit Risk
The debt servicing ability (may it be interest payments or repayment of principal) 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. An AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk.

Inflation Risk
Inflation is the loss of purchasing power over 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 the investment. This happens when inflation grows faster

63

than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk.

Interest Rate Risk

In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk.

Political/Government Policy Risk

Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa.

Liquidity Risk
Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities.

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Types of Schemes in Mutual Fund

65

A.

Investment Objective

Schemes can be classified by way of their stated investment objective such as Growth Fund, Balanced Fund, and Income Fund etc.

Equity Oriented Schemes

These schemes, also commonly called Growth Schemes, seek to invest a majority of their funds in equities and a small portion in money market instruments. Such schemes have the potential to deliver superior returns over the long term. However, because they invest in equities, these schemes are exposed to fluctuations in value especially in the short term. Equity schemes are hence not suitable for investors seeking regular income or needing to use their investments in the short-term. They are ideal for investors who have a long-term investment horizon. The NAV prices of equity fund fluctuates with market value of the underlying stock which are influenced by external factors such as social, political as well as economic.

66

A.General Purpose
The investment objectives of general-purpose equity schemes do not restrict them to invest in specific industries or sectors. They thus have a diversified portfolio of companies across a large spectrum of industries. While they are exposed to equity price risks, diversified generalpurpose equity funds seek to reduce the sector or stock specific risks through diversification. They mainly have market risk exposure. HDFC Growth Fund is a general-purpose equity scheme.

B.Sector Specific
These schemes restrict their investing to one or more pre-defined sectors, e.g. technology sector. Since they depend upon the performance of select sectors only, these schemes are inherently more

67

risky than general-purpose schemes. They are suited for informed investors who wish to take a view and risk on the concerned sector.

C.Special Schemes
Index schemes
The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. An example to such a fund is the HDFC Index Fund.

Tax saving schemes

Investors (individuals and Hindu Undivided Families (HUFs)) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance (Department of Economic Affairs), Government of India regarding ELSS.

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Subject to such conditions and limitations, as prescribed under Section 88 of the Income-tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 would be eligible to a deduction, from income tax, of an amount equal to 20% of the amount subscribed. HDFC Tax Plan 2000 is such a fund.

Real Estate Funds

Specialized real estate funds would invest in real estates directly, or may fund real estate developers or lend to them directly or buy shares of housing finance companies or may even buy their securitized assets.

69

 Debt Based Schemes

These schemes, also commonly called Income Schemes, invest in debt securities such as corporate bonds, debentures and government securities. The prices of these schemes tend to be more stable compared with equity schemes and most of the returns to the investors are generated through dividends or steady capital appreciation. These schemes are ideal for conservative investors or those not in a position to take higher equity risks, such as retired individuals. However, as compared to the money market schemes they do have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit risk.

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A. Income Schemes
These schemes invest in money markets, bonds and debentures of corporate with medium and long-term maturities. These schemes primarily target current income instead of capital appreciation. They therefore distribute a substantial part of their distributable surplus to the investor by way of dividend distribution. Such schemes usually declare quarterly dividends and are suitable for conservative investors who have medium to long term investment horizon and are looking for regular income through dividend or steady capital appreciation. HDFC Income Fund, HDFC Short Term Plan and HDFC Fixed Investment Plans are examples of bond schemes.

B. Liquid Income Schemes

Similar to the Income scheme but with a shorter maturity than Income schemes. An example of this scheme is the HDFC Liquid Fund.

C. Money Market Schemes

These schemes invest in short term instruments such as commercial paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and overnight money (Call). The schemes are the least volatile of all the types of schemes because of their investments in money market instrument with short-term maturities. These schemes have become popular with institutional investors and high net worth individuals having short-term surplus funds.

D. Gilt Funds
This scheme primarily invests in Government Debt. Hence the investor usually does not have to worry about credit risk since Government Debt

71

is generally credit risk free. HDFC Gilt Fund is an example of such a scheme.

Hybrid Schemes
These schemes are commonly known as balanced schemes. These schemes invest in both equities as well as debt. By investing in a mix of this nature, balanced schemes seek to attain the objective of income and moderate capital appreciation and are ideal for investors with a conservative, long-term orientation. HDFC Balanced Fund and HDFC Childrens Gift Fund are examples of hybrid schemes.

B. Constitution
Schemes can be classified as Closed-ended or Open-ended depending upon whether they give the investor the option to redeem at any time (open-ended) or whether the investor has to wait till maturity of the scheme.

Open ended Schemes

The units offered by these schemes are available for sale and repurchase on any business day at NAV based prices. Hence, the unit capital of the schemes keeps changing each day. Such schemes thus offer very high liquidity to investors and are becoming increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop issuing further subscription to new investors. On the other hand, an open-ended fund rarely denies to its investor the facility to redeem existing units.

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 Closed ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to open-ended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.

Interval Schemes
These schemes combine the features of open-ended and closed-ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during pre-determined intervals at NAV based prices.

73

Product Portfolio

74

Investment Strategy
INVESTMENT PROTECTION VS. INVESTMENT GROWTH Investor Characteristic Time Horizon Future Income Requirements Volatility Limit (Risk Averseness) Inflation Protection Investor take on Equity Market Investment Growth Short-term Steady / High Low Low Protection Needed Mostly Bearish Investment Protection Long-term Variable / Low High High Protection Needed Mostly Bullish

If you are a person who broadly falls into the Investment Growth category you might be interested in looking at an Aggressive portfolio. On the other hand if you are leaning towards an interest income with minimal risk investments you might look at a Conservative asset allocation. Someone who wants a bit of steady income as well as asset growth might go in for a moderate or a balanced asset allocation. AGGRESSIVE PORTFOLIO

75

MODERATE PORTFOLIO

CONSERVATIVE PORTFOLIO

Another way to ascertain the right asset allocation is by looking at your life cycle. The basis of this theory lies in the simple maxim that younger people with secure jobs will normally opt for higher returns and take higher risks compared to older retired people. One must remember that these are only indicative strategies and will probably have to be finetuned to meet your individual needs.

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Portfolio Strategy
AGE MAIN OBJECTIVES PORTFOLIO STRATEGY 50% - Growth Funds 30% - Balanced Funds 20% - Money Markets / Cash 45% - Growth Funds 30% - Balanced Funds 05% - Blue Chip Stocks 20% - Money Markets / Cash

20-29 Aggressive Growth Sow the seeds, plan for housing and create a safety cushion 30-39 Growth Save for housing, childrens expenses (present and future education etc.) and safety cushion

40-49 Growth Childrens expenses 40% - Growth Funds (present and future education 30% - Balanced Funds etc.) and safety cushion 10% - Blue Chip Stocks 20% - Money Markets / Cash 50-59 Retirement Save for retirement and build on safety cushion 60-69 Safety Preserve investments/ savings and opt for minimal growth 30% - Growth Funds 40% - Balanced Funds 10% - Blue Chip Stocks 20% - Money Markets / Cash 10% - Balanced Funds 15% - Income Funds 10% - Blue Chip Stocks 20% - Dividend Stocks 30% - Certificates of Deposits (Shorter-term) 15% - Money Markets / Cash 30% - Income Funds 25% - Dividend Stocks 35% - Certificates of Deposits (Shorter-term) 10% - Money Markets / Cash

70-

Safety Preserve investments/ savings

77

HDFC Mutual Fund Products

Equity Funds HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Index Fund HDFC Equity Fund HDFC Capital Builder Fund HDFC Tax saver HDFC Top 200 Fund HDFC Core & Satellite Fund HDFC Premier Multi-Cap Fund HDFC Long Term Equity Fund

Balanced Funds
HDFC Children's Gift Fund Investment Plan HDFC Children's Gift Fund Savings Plan

HDFC Balanced Fund HDFC Prudence Fund

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Debt Funds
HDFC Income Fund HDFC Liquid Fund HDFC Gilt Fund Short Term Plan HDFC Gilt Fund Long Term Plan HDFC Short Term Plan HDFC Floating Rate Income Fund Short Term Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Liquid Fund - PREMIUM PLAN HDFC Liquid Fund - PREMIUM PLUS PLAN HDFC Short Term Plan - PREMIUM PLAN HDFC Short Term Plan - PREMIUM PLUS PLAN HDFC Income Fund Premium Plan HDFC Income Fund Premium plus Plan HDFC High Interest Fund HDFC High Interest Fund - Short Term Plan HDFC Sovereign Gilt Fund - Savings Plan HDFC Sovereign Gilt Fund - Investment Plan HDFC Sovereign Gilt Fund - Provident Plan HDFC Cash Management Fund - Savings Plan HDFC Cash Management Fund - Call Plan HDFCMF Monthly Income Plan - Short Term Plan HDFCMF Monthly Income Plan - Long Term Plan HDFC Cash Management Fund - Savings Plus Plan

79

 HDFC Multiple Yield Fund HDFC Multiple Yield Fund Plan 2005

80

81

Distribution channel
Individual Agents
Use of agents has been the most widely prevalent practice for distribution of funds over the years. By definition an agent acts on behalf of principal in this case of mutual funds. An agent is essentially a broker between the fund and the investor. In India we also have the unique system where by a broker has a number of sub brokers working under him. The vast sub broker network ensures a large geographic coverage then otherwise.

Distribution Companies
Availing of the services of established distribution companies is practice accepted by mutual fund internationally. This practice evolves with a view to provide the huge administrative mechanism require supporting a large agent force. Instead of having to deal with several agents, a fund can interact with distribution companies that have several employees or sub brokers under it.

Bank & NBFCs

In developed countries, bank are an important marketing vehicles for mutual funds given that banks themselves had large depositors/ clients base of their own. We can see the opening up of this new channel now in India. Several banks, particularly private and foreign banks are involved in fund distribution by

82

providing services similar to those of distribution companies, on a commission basis.

Direct Marketing
Direct marketing means that the mutual funds sell their own products without any use of intermediateries. Usually, this takes the form of the sales officer and employees of the AMC who approach the investor and accept their contribution directly. However in India, independent agents may really be created as a direct marketing channel in a sense that they do not form a well knit independent and organized a single entity and act more like fund employees. Others channel like distribution companies or banks or even stockbrokers are clearly distinct and independent intermediaries.

Pricing Policy
HDFC Asset Management Company is service Provider Company so There is Entry Load and Exit Load for each scheme.

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NO 1

Scheme name Equity Funds

Entry load 2.25% <=5 crores Nil above 5 crores

Exit load Nil

2 3

SIP MIP

1% Nil

1.25% before 6 months 0.5% up to 10 lacs within 6 months 0.25 % above 10 lacs within 3 months

Thus each scheme has different Entry Load and Exit Load.

Promotional Tools
The objective of advertising of HDFC AMC is to create awareness about services and scheme of HDFC among investors and sub-brokers and increases sub-brokers of HDFC AMC. Company does give advertisement in media like Newspapers, and Magazines etc. when in introduce new scheme or mutual fund IPO and through direct marketing they advertise and create awareness about their services and new schemes. HDFC also do presentation about various schemes so that investors can know more about their product and services. Another tool of promotion of HDFC AMC is Public Relation involves a variety of programs designed to promote or protect a companys image or its individual products. HDFC has PR department monitors the attitudes of the organizations publics and distributes information and communications to build goodwill. They also perform following function:

84

1. Press relation: Presenting news and information about the HDFC AMC in the most positive light. 2. Product publicity: Sponsoring efforts to publicize specific products. 3. Counseling: Advising management about public issues and company positions and image.

Innovative Practices
Relationship Manager for all client base more than 5 lacs. Relationship marketing is based on the premise that important accounts need focused and continuous attention. Relationship marketing helps to judge which segments and which specific customers will respond profitably to relationship management.

85

OPERATIONS DEPARTMENT

86

Location Details
HDFC AMC is located at Yagnik road which is in the heart of the city where service is easily available for all customer and easy access compare with other place that available in city. Location has major impact on success or failure of operation. Advantages of this type of location are that service cost and distribution cost is minimum comparison with other place.

REGISTERED OFFICE OF HDFC ASSET MANAGEMENT COMPANY LIMITED IS: RAMON HOUSE, 3RD FLOOR, H.T. PAREKH MARG, 169, BACK BAY RECLAMATION, CHURCHGATE, MUMBAI 400 020

87

The major investor service centers of HDFC MUTUAL FUND are as below.

88

Layout Details
There is a plan of all the act of planning & optimum arrangement of planning including flow of man & material and customer, operating equipment, storage space, material handling equipments and all other supporting services along with the design of best structure to contain all these facilities.

Planning & Controlling

It is useful for effective utilization of resources, to achieve organization goal and objectives with respect to quality service, cost control timely service. Other objective is to co-ordinate with other department to ensure continuous quality service. There is a proper planning and planning with respect o which type of scheme to be introduced, what are expenses of R&D for finding out feasibility of that scheme, how many people will work on that particular job, before introducing new scheme. There is special research department who carries out analysis of market and there is a fund manager who carrier out all planning for investing in various sector and he is also responsible controlling cost of transaction so that it can give return to investors.

89

Maintenance
HDFC AMC is the service sector industry so all the work is carried out with the help of computer System. There is contract given to service provider and staff itself does other maintenance.

Procurement
HDFC AMC is the service sector industry so procurement is only for computer machinery and computer stationary and other stationary include brochures of all the schemes and monthly fact sheet is used in daily work. Procurement of computer machinery is done through central contract of main branch and procurement for stationary is done through local stationary distributor

Store Management
HDFC AMC is the service sector industry so storage is only for files and fact sheet and other document that published by AMC.

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91

FINANCIAL DEPARTMENT

92

Acquisition of Funds & Utilization of Funds

HDFC Asset Management Company is a service sector industry so acquisition of funds is done by introducing various schemes and utilization of fund is done by Fund Manager and fund is invested in market and following is the total AUM (Asset Under Management) and also given % of utilization in equity and debt.

HDFC AUM Report

Assets Under Management (AUM) as at the end of Feb-2006 (Rs in Lakhs) Average AUM For AUM The Month Scheme Name Excluding Excluding Fund Of Fund Of Fund Of Fund Of Funds Funds Funds Funds Open Ended HDFC Long Term Advantage Fund formerly 18837.15 0 18176.73 0 HDFC Tax Plan 2000 Dividend HDFC Long Term Advantage Fund formerly 16001.7 0 15159.28 0 HDFC Tax Plan 2000 Growth HDFC Balanced Fund 7953.72 0 7851.97 0 Dividend Plan HDFC Balanced Fund 2857.69 0 2796.92 0 Growth Plan HDFC Capital Builder Fund 70590.44 0 76976.59 0 Dividend Plan HDFC Capital Builder Fund 24691.35 0 25654.36 0 Growth Plan

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HDFC Cash Management Fund - Call Plan Daily Dividend Plan HDFC Cash Management Fund - Call Plan Growth Option HDFC Cash Management Fund - Savings Plan Daily Dividend Option HDFC Cash Management Fund - Savings Plan Growth Option HDFC Cash Management Fund - Savings Plan Weekly Dividend Option HDFC Cash Management Savings Plus Dividend Plan HDFC Cash Management Savings Plus Growth Plan HDFC Children Gift Fund Investment HDFC Children Gift Fund Savings HDFCS CORE & SATELLITE FUND HDFCS CORE & SATELLITE FUND - DIVIDEND HDFCS CORE & SATELLITE FUND HDFCS CORE & SATELLITE FUND - GROWTH HDFC Equity Fund Dividend Plan HDFC Equity Fund Growth Plan HDFC Floating Rate Income Fund-Long Term Plan DIVIDEND HDFC Floating Rate Income Fund-Long Term Plan GROWTH HDFC Floating Rate

148.81

156.64

3397.31 130922.49

3438.46 109881.82

54090.94

53109.16

51955.64

54077.05

39576.21 14270.33 10131.06 6009.48 33363.33

0 0 0 0 0

41937.17 15070.69 10040.36 6040.56 33190.64

0 0 0 0 0

20344.35 179864.79 85925.42 10615.43

0 0 0 0

19764.95 172451.54 81732.37 10945.51

0 0 0 0

23219.71 77092.97

0 0

23460.81 79566.73

0 0

94

Income Fund-Short Term Plan Dividend HDFC Floating Rate Income Fund-Short Term Plan Dividend - Daily HDFC Floating Rate Income Fund-Short Term Plan Dividend - Monthly HDFC Floating Rate Income Fund-Short Term Plan Growth HDFC Gilt Fund-Long Term Dividend HDFC Gilt Fund-Long Term Growth HDFC Gilt Fund-Short Term Dividend HDFC Gilt Fund-Short Term Growth HDFC Growth Fund Dividend Plan HDFC Growth Fund Growth Plan HDFC High Interest Fund Growth Plan HDFC High Interest Fund Half Yearly Dividend Plan HDFC High Interest Fund Quarterly Dividend Plan HDFC High Interest Fund Yearly Dividend Plan HDFC High Interest Fund Short Term Plan Dividend Option HDFC High Interest Fund Short Term Plan Growth Option HDFC Income Fund Dividend HDFC Income Fund Growth

11315.25

10054.04

4593.55

4309.17

41352.36 1757.25 4386.49 290.39 877.8 18083.17 12106.39 4944.97 118.22 1485.87 36.23 5575.07

0 0 0 0 0 0 0 0 0 0 0 0

40895.19 1776.05 4587.9 281.14 929.13 18064.68 12123.31 5002.29 119.1 1569.07 40.28 5901.1

0 0 0 0 0 0 0 0 0 0 0 0

1731.71 12679.8 16067.16

0 0 0

1919.08 12940.41 16442.68

0 0 0

95

HDFC Income Fund Premium Plan Dividend HDFC Income Fund Premium Plan Growth HDFC Income Fund Premium Plus Dividend HDFC Income Fund Premium Plus Growth HDFC Index Fund-Nifty Plan(FV Rs 10.326) HDFC Index Fund-Sensex Plus( FV-Rs32.161) HDFC Index FundSensex Plan( FV Rs 32.161) HDFC Liquid Fund DIVIDEND HDFC Liquid Fund Dividend - Daily HDFC Liquid Fund Dividend - Monthly HDFC Liquid Fund GROWTH HDFC Liquid Fund Premium Plan - DividendDaily HDFC Liquid Fund Premium Plan - DividendMonthly HDFC Liquid Fund Premium Plus Plan Dividend-Daily HDFC Liquid Fund PREMIUM PLUS- Dividend HDFC Liquid Fund PREMIUM PLUS- Growth HDFC Liquid Fund PREMIUM- Dividend HDFC Liquid Fund PREMIUM- Growth HDFC MF Monthly Income

0 0 0 0 445.49 581.89 477.65 45079.48 2745.5 528.33 30447.49 15527.11

0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0.01 441.24 594.26 466.37 42692.99 2162.67 452.44 27852.59 6835.86

0 0 0 0 0 0 0 0 0 0 0 0

0 34376.46 44970.15 7121.82 8485.41 37408.25

0 0 0 0 0 0

0 49412.79 42239.93 6822.45 8985.3 38162.77

0 0 0 0 0 0

96

Plan Long Term Plan Growth Option HDFC MF Monthly Income Plan Long Term Plan Monthly Dividend Option HDFC MF Monthly Income Plan Long Term Plan Quarterly Dividend Option HDFC MF Monthly Income Plan Short Term Plan Growth Option HDFC MF Monthly Income Plan Short Term Plan Monthly Dividend Option HDFC MF Monthly Income Plan Short Term Plan Quarterly Dividend Option HDFC MULTIPLE YIELD HDFC MULTIPLE YIELD DIVIDEND HDFC MULTIPLE YIELD HDFC MULTIPLE YIELD GROWTH HDFC Multiple Yield Fund Plan 2005 Dividend HDFC Multiple Yield Fund Plan 2005 Growth HDFC Premier Multi-Cap Fund Dividend HDFC Premier Multi-Cap Fund Growth HDFC Prudence Fund Dividend Plan HDFC Prudence Fund Growth Plan HDFC Short Term Plan DIVIDEND HDFC Short Term Plan GROWTH HDFC Short Term Plan PREMIUM -Dividend

15724.56

15840.77

25848.35

25567.83

25455.85

25893.1

4855.8

4928.51

10083.57

10106.27

13356.83

13660.44

42746.02 12806.04 45516.13 79709.8 38533.13 125069.82 39287.52 2682.58 4581.45 0

0 0 0 0 0 0 0 0 0 0

45112.66 14046.78 45699.21 81862.4 39056.86 123103.3 39609.62 2732.03 4668.24 0

0 0 0 0 0 0 0 0 0 0

97

HDFC Short Term Plan PREMIUM PLUS -Dividend HDFC Short Term Plan PREMIUM PLUS -Growth HDFC Short Term Plan PREMIUM-Growth HDFC Sovereign Gilt Fund - Investment Plan Dividend Option HDFC Sovereign Gilt Fund - Investment Plan Growth Option HDFC Sovereign Gilt Fund - Provident Plan Dividend Option HDFC Sovereign Gilt Fund - Provident Plan Growth Option HDFC Sovereign Gilt Fund - Savings Plan Dividend Option HDFC Sovereign Gilt Fund - Savings Plan Growth Option HDFC Tax saver Dividend Plan HDFC Tax saver Growth Plan HDFC Top 200 Fund Dividend Plan HDFC Top 200 Fund Growth Plan Close Ended HDFC LONG TERM EQUITY FUND Dividend HDFC LONG TERM EQUITY FUND Growth

0 0 0 28.59

0 0 0 0

0 0 0 29.65

0 0 0 0

39.59

39.97

72.53

72.56

136.52

139.57

10.49

10.55

41.69 16825.11 15502.62 69327.15 31010.76

0 0 0 0 0

41.68 15754.16 14184.14 70913.26 29917.44

0 0 0 0 0

46242.76 99210.33

0 0

46038.13 98771.32

0 0

98

HDFC has total AUM (Asset under Management) 21,602.31crores

Equity & Balance Debt & MIP -

11,334.55.crores 10,267.76crores

99

E q u ity a n d D e b t c o m p o s it io n

D e b t (%) 48%

E q u it y (% ) E q u it y ( % ) 52% D e b t (%)

Financial Performance (BALANCE SHEET AND P & L)

100

101

102

103

104

105

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COMPARATIVE ANALYSIS OF 3 YEARS (RATIO ANALYSIS)

Name
N. P. Ratio Current Ratio Return on investment Earning per share (EPS)

Formula
Net profit/ Sales * 100 Current assets / current Liabilities Net profit / Total invt * 100 Profit available to equity shareholder / No. Of equity

2005
50.24 % 0.71: 1 56.59 % 10.78

2004
46.67 % 0.81:1 44.58 % 10.02

2003
30.43 % 0.74:1 45.67 % 10.05

Note: In absence of any information about sales we have calculated N. P. ratio based on their main income.

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HUMAN RESOURCE DEPARTMENT

108

Human Resource Management function that helps managers recruits select, train and develop members for an organization. Obviously, HRM is concerned with the peoples dimension in organizations

In all business concerns, there is one common element. I.e., HUMAN RESOURCE. Work force of an Organization is one of the most important inputs of components. It is said that people are our single most important assets. Because of the unique importance of HUMAN RESOURCE and its complexity due to ever changing psychology, behavior and attitudes of men and women at work, personnel function, i.e., manpower management function is becoming increasingly specialized. The personnel function or system can be broadly defined as the management of people at work- management of managers and management of workers. Personnel function is particularly interested in personnel relationship and interaction of employees-human relations. In a sense, management is personnel administration. Management is the development of people, and not mere direction of material resources. Human capital is the greatest asset of a business enterprise. The essential ingredient of management is the leadership and direction of people. Each manager of people has to be his own personnel man. Personnel management is not something you really turn over to personnel department staff.

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Manpower Planning
Human Resource Planning is the processes by which an organization ensures that it has the right number and kind of people, at the right place, at the right time, capable of effectively and efficiently competing those tasks that will help the organization achieve its overall objectives. Human Resource Planning translates the organizations objectives and plans into the number of workers meet those objectives. Without a clear-cut planning, estimation of an organizations human resource need is reduced to mere guesswork Manpower planning is needed with respect to persons who can work as sub-broker for the companies. Companies focus on Advisors of Mutual Fund product and ELSS schemes of HDFC AMC and focused on Insurance Advisor and post office agent, Tax consultants and CAs for making sub-broker. HDFC AMC follows the following process: 1) The first step is forecasting the need of manpower in terms of divisions, department or functions. Along with the estimate of the number of the people required in different departments it is also decided that at which level they will be needed. 2) After estimating the manpower requirement, next step is to have a look at the current human resource. The current human resource is assessed so as to know whether the existing personnel can fill the requirement or not.

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3)

At last detailed policies for recruitment, selection, training, promotion, retirement, replacement etc. of existing and new employees to meet the forecasted needs is made.

Recruitment & Selection

The upper level members like zonal managers, regional managers, branch managers and senior executives are recruited by publishing recruitment advertisement in leading national level newspaper. The qualified applicant are then called for interview and selected. The regional manager has authority to select lower level employee like peon, marketing executives, financial accountant etc. by approval of zonal manager.

THE RECRUITMENT PROCESS

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Step 1: Prospecting Identify as many prospective candidates as possible from multiple sources. Step 2: Attracting talent Be prepared to talk passionately about the opportunities of this career. Step 3: selecting talent Select quality talents through effective interviewing, evaluation & hiring practices.

Step 1: Prospecting
It consists of the following steps: Generating leads of potential candidates Contacting the leads and finding out their prima facie interest

Step 2: Attracting talent

Developing your own recruiting style Developing a resource pool of talent

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Creating interest in the potential advisor

Step 3: Selecting talent

Conducting an initial interview Administrating the candidate Managing Director conducts final Selection interview.

Training
Continuous training and upgrading technical, behavioral and managerial skills is a way of life in HDFC AMC. HDFC AMC encourages agent or subbroker to hone their skills regularly to enable them to face the challenges of the changing requirements of customers that fit market up and down.

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Training needs analysis is done on a regular basis and systematic methodologies are ensured that skills and capabilities of all agents are constantly upgraded to enable them to perform in the challenging work. There is special training session at regular time period in local branch to all financial consultant and agents about new scheme and to improve their effectiveness.

The successful candidates of the AMFI Exam are given the product training. The primary purpose is to become quite conversant with the product that one sells. In other words, product knowledge is very important for any advisor. Product knowledge is not just about knowing the broad terms and conditions of the various schemes of mutual fund. The advisors are explained about the schemes, the terms related with it, the benefits it provides to investor. This training is aimed at making the advisors fully equipped with the companies product information. This training is aimed at making the advisors experts in selling the mutual fund products. This gives the advisors a systematic framework, which they can follow so as to attract the customers and be effective in their work. Later the agents are trained on products; need analyses and how to deliver the message to the market.

Performance Appraisal
Objective of Performance appraisal if for Developmental uses for agents and financial consultants, for wages, transfer, promotion, for

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documentation and for organizational purpose like Human Resource Planning, Job analysis and for training and development. For Performance Appraisal modern method is used like MBO (Management By Objectives).

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RESEARCH

116

INTRODUCTION TO RESEARCH
ALL PROGRESS IS BORN OF INQUIRY

Research inculcates scientific and inductive thinking and it promotes the development of logical habits of thinking and organization. The research methodology has gone through which path to solve the research problem and which tools have been adopted to achieve the desired objective and more importantly it tells why only that path or tools have been chosen and not other? Many marketing writers confuse the term 'market research' with the term 'marketing research', and sometimes these two terms are used interchangeably. Thus, it is important to differentiate between the two terms. Marketing research is defined as "the function that brings the consumer, customer and public to the market through information information used to identify and define marketing objectives and problems; generate, refine and evaluate marketing actions, monitor marketing performance; and improve understanding of the marketing process". This clearly shows that marketing research is wide ranging in its concerns. The term 'market research' according to Adcock et al is "used to define the specialist activities involved in collecting information directly through the use of questionnaires and other associated techniques". They then emphasize that "it is useful to consider market research as a specialist activity which is within the scope of the marketing research function" and that it is "concerned with collecting primary information".

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TITLE OF THE STUDY

COMPARISION OF HDFC EQUITY SCHEMES WITH COMPETITORS EQUITY SCHEMES

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RESEARCH PROBLEM
HDFC is one of the leading Asset Management Company, which has wide range of funds to suit variety of investment needs of investors. Facts suggest that mutual fund industry is a growing industry and there is also increase in competition. The performance of various funds will decide the preference of AMC as well as funds offered by the company. The competition is ever increasing in Mutual Fund Industry. The number of AMC operating is increasing and there is also increase in the funds offered by the existing AMC. Every year various AMC floats new funds in the market and there is a tough competition to get investors money. In such a competitive scenario the past performance of the fund will definitely affect the future prospects of that fund. If in the past the performance of the fund is good than investors would be motivated to invest in that funds in spite of the fact that past performance does not guarantee future performance of the funds. Equity fund is offered by almost all AMC. Equity funds are able to gather large funds and it constitutes larger part of total Asset under Management of the company. In such a situation the company needs to compare its own fund with that of fund offered by other AMC. Such a comparison will guide the company in making necessary changes in investment style and thus can improve the performance of the funds. The company also needs to know the preference of investors for Equity funds.

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Research Objective
Any activity done without any objective in a mind cannot turn fruitful. An objective provides a specific direction to an activity. Objectives may range form very general to very specific, but they should be clear enough to point out with reasonable accuracy what researcher wants to achieve through the study and how it will be helpful to the decision maker in solving problem.

In context of this project study

The main objective of this research is Comparative Analysis of HDFC equity schemes with competitors equity schemes. However the following are the sub objectives: To analyze the portfolio composition of various selected equity funds. To evaluate the performance of the various selected equity funds. To identify the top 10 holdings for equity funds. To compare the funds NAV. To know which fund provide best results

120

Research Design
A research design is pattern or an outline of a research projects working. It is a statement of only the essential elements of a study, those that provide the basic guidelines for the details of the project. It comprises a series of prior decisions that taken together provide a master plan for executing a research project. A research design serves as a bridge between what has been established i.e. the research objective and what is to be done, in conduct of the study to realize those objectives. If there were no research design, the research would have only foggy notion about what is to be done. There are numerous specific designs, which can be classified into three broad categories. Research design is the conceptual structure within which the research would be conducted. In fact, it is the general blueprint for the collection, measurement and analysis of data.

In context of this project study

The object of study is to gain familiarity with a phenomenon or to achieve new insights into it. So, the research design is EXPLORATORY type.

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Sources Of Data
Collecting the required information from the right source is very important. Sources from which the data are collected differ as per the required of researcher. Basically there are two types of data collection sources:

1) Primary data source

This data is gathering for the first time for the problem solution. Primary data has to be collected through well-equipped instruments, as they are first hand information collected for the research.

2) Secondary data source

It refers to already gathered and collected data. These may be internal sources within the clients firms. Externally, these sources may include books or periodicals, data services, reports and computer data banks.

In context of this project study

Secondary data about Mutual Fund have been collected
from the fact sheets of various AMC. Information is also gathered from various Mutual Fund Reviews, books, magazines and websites.

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Unit Of Analysis
Collecting the required information from the right source is very important. Sources from which the data are collected differ as per the required of researcher. Basically there are two types of data collection sources:

1) Sampling Unit:
The sampling unit consists of various schemes of Mutual funds.

2) Sample Size:
Here I have collected the data of 4 different schemes of different mutual fund companies. They are as follows. HDFC MUTUAL FUND RELIANCE MUTUAL FUND FRANKLIN MUTUAL FUND TATA MUTUAL FUND

3) Sampling Method:
Stratified random sampling method of choosing the samples has been adopted.

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Sampling Design
A sample design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt in selecting items for the sample. Sample design may as well lay down the number of items to be included in the sample i.e. the size of sample. Sample design is determined before the data are collected. There are many sample designs from which a researcher can choose. Some designs are relatively more precise and easier to apply than others. Researcher must select the sample design, which should be reliable and appropriate for his research study. There are different types of sample design based on two factors namely: the representation basis and element selection technique. On the representation basic, the PROBABILITY SAMPLING OR NON PROBABILITY SAMPLING.

In context of this project study

A random sample gives every unit of the population a known and nonzero probability of being selected. Since random sampling equal probability to every unit in the population, it is necessary that the selection of the sample must be free from human judgment. So the sampling procedure that selected for research is PROBABILITY sampling.

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Data Collection Methods

Data, which is required for any research, is to be collected very systematically. Data collection procedure is carried out into order to know the exact information for the research work. Data collection is done basically in three ways, which are mentioned as under:

In context of this project study

For the purpose of gathering the data, different fact sheets and brochures are used.

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Basic Information Of The Selected Asset Management Companies

1. HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC): HDFC AMC was incorporated under the companies Act 1956, on December 10, 1999 and was approved to act as an Asset Management Company for the Mutual Fund by SEBI on July 3, 2000. In terms of the Investment Management Agreement, the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs 75.161 crores.

Name Scheme HDFC Equity Fund

of Minimum Amount 5000

Entry Load 2.25

Exit Load Nil

Launch Date

Benchmark

Fund Manager

1 January S & P CNX Prashant 1995 500 Jain

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2. RELIANCE CAPITAL ASSET MANAGEMENT LIMITED: Reliance Capital Asset Management LTD is a part of the Reliance Group. Reliance Mutual Fund was established as a Trust in 1995 with Reliance Capital Asset Management Ltd as the Investment Manager. With total Assets under Management of 10555.44 crores. It is amongst the fastest growing mutual fund companies in India. Its vision is to be Indias largest and most trusted wealth creator.

Name Scheme Reliance equity

of Minimum Amount 5000

Entry Load 2.25

Exit Load Nil

Launch Date 31 March 2005

Benchmark

Fund Manager

BSE 100 Index

Sunil Singhania

opportunitie s fund

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3. FRANKLIN TEMPLETON ASSET MANAGEMENT PRIVATE LIMITED: Franklin Templeton Investment is one of the largest financial services groups in the world based at San Mateo, California USA. The group has US $ 402.2 billion in asset under management globally. Franklin Templeton has set up offices in 33 locations nationwide and manages Rs 15630.06 crores assets.

Name of Scheme Franklin India Blue chip Fund

Minimum Amount 5000

Entry Load 2.25

Exit Load Nil

Launch Date 1 Decembe r 1993

Benchmark

Fund Manager

BSE SENSEX

K.N. Shivasubra maniam

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4. TATA ASSET MANAGEMENT LIMITED:

Tata Asset Management Ltd. is a part of the Tata group - one of India's largest and most respected industrial groups. The Tata Group is one of India's best-known conglomerates in the private sector with a turnover of around US $ 14.25 billion (equivalent to 2.6 % of India's GDP). Long known for its adherence to business ethics, it is India's most respected private business group. With 220,000 employees across 91 companies, it is also India's largest employer in the private sector Tata Asset Management Limited, having Rs. 10464.37 crores (as on May 31, 2006) of assets under management.

Name Scheme

of Minimum Amount

Entry Load

Exit Load

Launch Date

Benchmark

Fund Manager

Tata Equity Opportunit ies fund

5000

2.25

Nil

25 February 1993

SENSEX

Prashant Jain

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DATA ANALYSIS

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Portfolio Composition
1. HDFC EQUITY FUND Objective:
The investment objective of the scheme is to achieve capital appreciation.

Asset allocation:
Type of instruments Equities & Equity related instruments Debt & Money Market instruments Normal Allocation (% of Net Asset) 80- 100 0 20

2. RELIANCE EQUITY OPPORTUNITEIS FUND Objective:

The primary investment of objective of the scheme is to Seek to generate capital appreciation and provide long-term growth opportunities by investing in portfolio constituted of equity securities and equity related securities.

Asset allocation:
Type of instruments Equities & Equity related instruments Debt & Money Market instruments Normal Allocation (% of Net Asset) 90- 100 0 10

131

3. FRANKLIN INDIA BLUE CHIP FUND Objective:

An open-end growth scheme with an objective primarily to provide medium to long-term capital appreciation.

Asset allocation:
Type of instruments Equities & Equity related instruments Debt & Money Market instruments Normal Allocation (% of Net Asset) Above 60 Up to 40

4. TATA EQUITY OPPORTUNITIES FUND Objective:

The scheme focuses on capitalizing on opportunities offered by equity market from time to time with a proactive fund management strategy.

Asset allocation:
Type of instruments Equities & Equity related instruments Debt & Money Market instruments Normal Allocation (% of Net Asset) 95 5

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Performance of Different Equity Schemes

Name of Scheme 1 year RETURN RANK (%) 46.99 15/122 43.20 44.65 30/122 23/122 3 year RETURN RANK (%) 58.03 15/70 -----52.93 ----29/70 5 year RETURN RANK (%) 43.55 6/55 ----34.95 ---22/55

HDFC equity fund Reliance equity opportunities fund Franklin India blue chip Fund Tata equity opportunities fund

37.72

48/122

66.28

6/70

------

------

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1 Year Return
HDFC equity fund Reliance equity opportunities fund Franklin India blue chip Fund Scheme Name Tata equity opportunities fund

50 40 % of 30 Return 20 10 0

Here the return of HDFC Equity Scheme is more than other equity scheme because the fund manager has invested the money in only that shares which offer higher return.

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3 Year Return

70 60 50 % of 40 Return 30 20 10 0 Scheme Name

HDFC equity fund Franklin India blue chip Fund Tata equity opportunities fund

Here the return of HDFC Equity Scheme decreases but they have maintained the same rank in the market as it was before though the competitors of the scheme increase.

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5 Year Return

45 40 35 30 % of 25 Return 20 15 10 5 0 Scheme Name

HDFC equity fund Franklin India blue chip Fund

Here return of HDFC Equity is higher compared to its competitors because of less number of competitors.

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Top 10 Holdings of Each Scheme

HDFC EQUITY FUND
Company Infosys Technologies Ltd State bank of India ITC Ltd Satyam computers services Ltd Tata motors Ltd Bharat Heavy Electrical Ltd Maruti Udhyog Ltd Crompton Greabes Ltd Siemens Ltd Amtek Auto Ltd Industry Software Bank Consumer non durable Software Auto Industrial capital goods Auto Industrial Capital Goods Industrial Capital Goods Auto Ancillaries % Of NAV 8.72 7.88 7.81 6.86 5.87 5.71 5.50 5.06 4.78 4.57

RELIANCE EQUITY OPPORTUNITIS FUND

Company Reliance Industries Ltd Tata Motors Siemens Ltd Aurobindo Pharma Ltd HCL Technologies Ltd Tata Consultancy Service Ltd Bharat Heavy Electrical Ltd ONGC Corporation Ltd ITC Ltd Industry Petroleum Products Auto Telecom Pharmaceutical Software Software Industrial Capital Goods Petroleum Consumer non durable % Of NAV 6.26 4.30 4.19 3.71 3.18 2.63 2.60 2.58 2.22

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India Bulls Financial Service Ltd

Financial Service

2.13

FRANKLIN INDIA BLUE CHIP FUND

Company HCL Technologies ICICI Bank Larson & Toubro Reliance Industries Ltd Infosys Technologies Ltd Grasim Industries ITC Ltd Tata Motors Hindalco Industries Maruti Udhyog Ltd Industry Software Bank Auto Petroleum Software Textile Consumer non durable Auto Auto Auto % Of NAV 7.18 6.48 6.13 5.64 4.94 4.88 4.88 4.85 4.52 3.76

TATA EQUITY OPPORTUNITIES FUND

Company Bharat Heavy Electrical Ltd ACC Ltd ITC Ltd Subex System Ltd Arbindo Pharma Ltd Jay Prakash Associated Ltd Mahindra & Mahindra Ltd Kec International Ltd Sterlite Industry Ltd Pantaloon Retail India Ltd Industry Industrial Capital Goods Cement Consumer non Durable Software Pharmaceuticals Construction Auto Power Ferrous Metals Textile % Of NAV 12.16 11.34 10.33 7.91 6.71 5.33 4.97 3.57 3.03 2.82

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Comparing Funds NAV

Scheme Name
HDFC Equity Fund Reliance Equity Opportunities Fund Franklin Blue chip Fund Tata Equity Opportunities Fund

NAV
107.22 19.36 94.31 42.55

NAV COMPARISION
120 100 80 NAV in Rs 60 40 20 0 HDFC Equity 107.22 Relianc Franklin e Equity Blue 19.36 94.31 Scheme name Tata Equity 42.55

Here in spite of having higher NAV then that of competitors, HDFC Equity Scheme has offered higher return to the investor.

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Comparison of Scheme returns with Benchmark

HDFC EQUITY FUND
Period
Last 1 year Last 3 year Last 5 Year Last 10 Year Since inception

Returns (%)
90.24 78.66 50.48 33.48 25.36

Benchmark Return (%)

64.16 60.63 30.97 15.29 10.22

R e la tiv e P e r fo rm a n c e
100 50 0 Last 1 year Last 3 year Last 5 Year Last 10 Year Since inceptio n T im e P e rio d
140

Returns

Period

In this fund return against its Benchmark has been very good. In the last year it has given 90.24 % return and overall return of its benchmark was 64.16. So the average return of the fund than its benchmark is almost 30%.

RELIANCE EQUITY OPPORTUNITIES FUND

Period
Last 1 year Since inception

Returns (%)
98.39 85.81

Benchmark Return (%)

82.00 69.52

R e la tiv e P erfo rm a n c e
150 100 50 0 P eriod Las t 1 y ear T im e P e rio d S inc e inc eption

In this fund return against its Benchmark has been good. In the last year it has given 98.39 % return and overall return

Return

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of its benchmark was 82 % .So the overall return of the fund than its benchmark is almost 16 % more.

FRANKLIN INDIA BLUE CHIP FUND

Period
Last 1 year Last 3 years Last 5 years Since inception

Returns (%)
54.69 60.08 30.75 28.73

Benchmark Return (%)

54.64 42.34 16.10 08.49

R elative Performance
80 60 40 20 0 Last 1 year Last 3 years Last 5 years Since inceptio n Return

Returns (% ) Benchmark Return (% )

Tim e Pe riod

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In this fund return against its Benchmark has been same only. In the last year it has given 54.69 % return and overall return of its benchmark was 54.64 %. And average return of the fund than its benchmark is almost 14%.

TATA EQUITY OPPORTUNITIES FUND

Period
Last 1 year Last 3 years Last 5 years Since inception

Returns (%)
103.79 94.28 44.86 14.13

Benchmark Return (%)

95.67 59.58 27.88 11.70

R e la tiv e P e rfo rm a n c e
150 100 50 0 Last 3 years Last 1 year Period Last 5 years Since inceptio n
143

Return

T im e P e rio d

In this fund return against its Benchmark has been good. In the last year it has given 103.79 % return and overall return of its benchmark was 95.67 %. And the average return of the fund than its benchmark is almost 18 %.

Findings
Following are the findings of the research-: 1) It is found that Tata Equity Opportunities fund have its maximum investment 95 % in Equity related Instrument with higher return and higher risk. 2) In HDFC Equity fund return of 1 year is 46.99 %, 3 year is 58.03 % and 5 year is 43.55 %, which is quite high compared to other equity schemes. 3) It is also found that because of higher return the rank of HDFC equity Fund is gradually increased from rank 15 to rank 6. 4) From top 10 holdings of each equity scheme, it is seen that the major sector in which each scheme has invested are as follows. Automobile Sector Software Sector Industrial Capital Goods

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Construction Petroleum Industry

5) Regarding NAV it is found that the NAV of HDFC Equity Scheme is very high compared to other Equity Scheme because fund manager have invested in those sector, which gives higher return and it also, maintains the portion of equity and debt related instruments. 6) The 1-year return of HDFC Equity Scheme against its Benchmark is 30% more because it maintains its position in the volatile market.

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Conclusions
Here from the study we can conclude about overall study through some sorting of products and the most likely invested sector and also the good performance of the funds among our sample size and asset allocation of the fund and the overall return of the fund against its benchmark. Following are the conclusions of the research study-: 1) To achieve long-term capital appreciation, most of the Equity Schemes have invested its large portion in equity & equity related instruments. 2) The last 5-year return of HDFC Equity Scheme is more than any other Equity Schemes. 3) The Position of HDFC equity scheme increases gradually. 4) Each of the Schemes has diversified sectorial allocation of investment to achieve safe return as far as possible. 5) The NAV is HDFC Scheme is very high compared to other Equity Schemes. 6) The overall return of HDFC Equity Scheme against its Benchmark is more because it maintains its position in the volatile market.

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Limitations of the Study

1. This exploratory research is done focusing on the investment scenario of Rajkot of Saurashtra region of equity schemes only and therefore findings are suggestions given on the basis of this research and cannot be considered for the entire Mutual fund Industry. 2. Due to limitation of time and cost constraints a sample size of only 4 equity schemes are chosen. 3. Data Analysis and interpretation done may not be that strong due to small sample and random sampling method. 4. Major source of data collected is secondary which might limit the study. 5. My own inexperience in the research field might have affected the results.

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Recommendations

HDFC MF is doing comparatively very less marketing in MF industry in compare to other players. Due to this other player are getting the advantage. Thus it should try to increase the marketing and advertising related activities time to time or at least at the time of new NFOs, at the time when they are declaring dividends or at the peak time (i.e. January - March) last quarter of financial year when people are searching for investing instruments.

A very small part market has been cover by HDFC MF. It can increase the circle of its business in small and rural areas of every state and cities of India where they can find a huge business.

To uproot the investment level the company should give training programme to financial agents who approach the investor for the investments. And they should be aware of all the benefits of the mutual Funds.

Company should undertake the Campaign, Road shows, Advertisement and other type of Publicity for the effective awareness of different schemes that are available in the market.

The company should arrange seminars and presentations, giving detail idea about securities and benefits of investment in mutual fund.

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The interface among the investors and the Mutual Fund Companies is the agents. The company should be conducting special training and motivation programmed so that they are being motivated to work and their quality of performance is maintained.

Appendixes

149

LIST OF TABLES
Sr. No. Name of Table Page No.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

SHARE HOLDING OF AMC MUTUAL FUND PLAYERS AUM OF COMPETITORS INVESTMENT STRATEGY PORTFOLIA STRATEGY PRICING POLICY HDFC AUM REPORT RATIO ANALYSIS HDFC EQUITY SNAPSHOT RELIANCE EQUTIY SNAPSHOT FRANKLIN INDIA SNAPSHOT TATA EQUITY SNAPSHOT ASSET ALLOCATION (H & R) ASSET ALLOCATION (F & T) PERFORMANCE OF EQUITY SCHEMES

11 26 27 62 64 69 77 90 108 109 110 111 113 114 115

150

16 17 18 19 20 21 22

TOP 10 HOLDINGS (H & R) TOP 10 HOLDINGS (T & F) NAV DETAILS HDFC EQUITY VS BENCHMARK RELIANCE EQUITY VS BENCHMARK FRANKLIN BLUECHIP VS BENCHMARK TATA EQUTIY VS BENCHMARK

118 119 120 121 122 123 124

151

LIST OF GRAPHS
Sr. No. Name of Graph Page No. 18 42 54 57 62 63 67 83 115 116 117 120 121 122 123 124

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

SOCIAL RESPONSIBLITIES GROWTH OF ASSETS EQUTIY RISK VS RETURN DEBT RISK VS RETURN AGGRESSIVE PORTFOLIO MODERATE & CONSERVATIVE PORTFOLIO RISK VS RETURN INVESTMENT EQUITY & DEBT COMPOSITION 1 YEAR RETURN 3 YEAR RETURN 5 YEAR RETURN NAV COMPARISION HDFC RELATIVE PERFORMANCE RELIANCE RELATIVE PERFORMANCE FRANKLIN RELATIVE PERFORMANCE TATA RELATIVE PERFORMANCE

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GLOSSARY
Account Statement: Statement issued by the mutual fund, in lieu of the unit certificate, giving details of transactions and holdings of an investor in the different schemes of the fund. Adjusted NAV: The Net Asset Value after adjusting for all changes caused due to dividend declaration, bonus etc. assuming reinvestment of distributions made to the investors at the prevailing NAV. Annual Report: The yearly record of scheme's performance, and is distributed to investors and/or shareholders under SEBI regulations. Applicable NAV: It is the NAV that will be applied for a transaction depending upon the cutoff time specified by the Mutual Fund. All investments or redemptions are processed at that particular NAV. A different NAV holds if received after the cutoff time. Asset Allocation: The distribution of total funds available with the scheme into instruments of various types such as stocks, bonds etc. based on the scheme's investment objective as detailed in the offer document.

153

Benchmark: The investment performance of the scheme needs to be compared in relative terms against some indicator, which is called as the benchmark for the scheme. For example, the performance of an equity fund be benchmarked against the BSE Sensex. Capital Gains: The profit realizations on sale of securities and certain other capital assets (including units of mutual funds) are called capital gains. The gains can be classified into long-term, if the investments are held for more than one year, or short-term, otherwise, and are charged at different tax rates. Current Load: It refers to the load structure applicable currently on any fund. Funds keep revising the load structures from time to time.

Current Yield: The ratio of coupon interest to the actual market price, prevailing in the market, of the bond expressed as a percentage: annual interest/ current market value = current yield. Custodian:

154

SEBI mandates that a Custodian be appointed for safekeeping of a fund's securities and other assets. Diversification/Spreading the risk: Diversification, i.e. investing across a number of asset classes, assets within a asset class, helps in reducing the risk. Dividend Plan: Generally a scheme has two plans, Growth Plan and Dividend plan. In the latter earnings of the scheme are declared as dividends, as and when there is a distributable surplus available with the scheme as per the Trustees. Dividend Payout: Under the Dividend plan of a scheme there are two options available to the investor, viz. Dividend Payout option Under the Dividend Payout option, the dividend declared is also actually distributed i.e. given to the investor. Dividend Reinvestment option Under the Dividend plan of a scheme there are two options available to the investor, viz. Dividend Payout option and Dividend Reinvestment option. Under the Dividend Reinvestment option, the dividend declared is not distributed i.e. given to the investor. but reinvested in the scheme itself. Dividend yield:

155

It refers to the dividend earned per unit in Rupees of a scheme at the prevailing NAV. Duration: This is a tool used to calculate the average holding period of the assets in a debt scheme, and can help, particularly Modified Duration, in estimating the sensitivity of a fund to incremental yield movements.

Entry Load: It is the load charged by the fund when one invests into the fund. It increases the price of the units to more than the NAV and is expressed as a percentage of NAV. For example a 1 % entry load will increase the NAV from Rs 11 to Rs 11.11 and therefore the number of units allotted will be lesser to that extent. Expense Ratio: The Expenses of a scheme include management fees and all the fees associated with the scheme's daily operations. Expense Ratio refers to the annual percentage of fund's assets that is paid out in expenses and can affect the performance of the scheme. Exit Load: It is the load charged by the fund when one redeems the units from the fund. It reduces the price of the units to less than the NAV and is expressed as a percentage of NAV.

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Face Value: The original issue price of one unit of a scheme, generally Rs 10. First In First Out: It is an accounting method which assumes that the units purchased first are the units sold/redeemed first. Gilts/Government Securities: Securities created and issued by the Central Government and/or State Government, and may include securities unconditionally guaranteed by the Government. An auction process determines the coupon on these securities. Guaranteed Returns: Returns from mutual fund schemes are subject to market and other investment risks. As such there is no assured/guaranteed return in mutual funds. This applies even to debt schemes. The launch of scheme/fund offering guaranteed returns is now subject to certain restrictions imposed by the SEBI, and generally SEBI does not allow guaranteed returns. Inflation Risk: The probability of the value of an asset being eroded on account of inflation. Lock-in period: The cooling period after investment in fresh units during which the investor cannot redeem the units.

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Management Fee: The fees charged to a scheme for investment management of the funds under the scheme, usually expressed as percentage of assets, and are subject to limits prescribed by SEBI. Market Risk: It refers to the risk posed by the market in itself i.e. the risk that the price of a security will raise or fall due to changing economic, political, or market conditions. Money Market: It refers to a market for very short-term securities less than a year, such as Treasury Bills and Call Money make up the bulk of trading in the money markets.

No Load: It refers to the fund that does not charge any load for buying or selling its units, i.e. the investor can transact at the NAV. Non Performing Assets: Assets that do not provide returns are classified as NPAs as per the provisions of SEBI regulations. Offer Document: It is the official document issued by mutual funds prior to the launch of a fund describing the characteristics of the proposed scheme/fund to all its prospective investors. It contains information

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required by SEBI pertaining to issues such as investment objective and policies, services, and fees. Open Ended Fund/Scheme: It is a type of a scheme/fund where purchase or sale of units is offered on a continued basis at NAV related prices. Redemption: An investor wishing to withdraw his/her investment from a scheme/fund gives a redemption transaction. The investor is paid a NAV linked price. Risk Adjusted Returns: For the purpose of comparing returns across schemes involving varying levels of risk, the returns are adjusted for the level of risk before comparison. Such returns (reduced for the level of risk involved) are called risk-adjusted returns. Sale Price: The price at which a fund offers to sell one unit of its scheme to investors. This NAV is grossed up with the entry load applicable, if any. Sponsors: A sponsor is the person who, acting alone or in combination with another body or corporate, establishes a mutual fund and applies to SEBI for its registration. As per SEBI regulations, the sponsor has to contribute a minimum of 40% of the net worth of the AMC.

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Systematic Withdrawal Plan (SWP): It is the opposite of SIP and facilitates regular withdrawals. This helps investors in meeting their regular financial needs. Total Return: Return on investment, calculated after taking into account capital appreciation, dividends or interest, and individual tax considerations adjusted for present value and expressed on an annualized basis. Trustee: The Trustees comprise the Trust and having an overall supervisory authority over the AMC. They ensure that the AMC follow the trust deed, the SEBI regulations and the offer document and the assets of the funds are held safely. Yield Curve: The curve gives the relationship between yields on a group of fixedincome securities with varying maturities viz. treasury bills, notes, and bonds. The curve typically slopes upward since longer maturities normally have higher yields, although it can be flat or even inverted.

BIBLIOGRAPHY
BERI G. C. MARKETING RESEARCH 3RD EDITION TATA MC. GRAW HILL PUBLISHING CO. LTD.

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 FACT SHEETS OF HDFC AMC, FRANKLIN TEMPLETON AMC, TATA AMC, RELIANCE AMC MUTUAL FUND REVIEW OF 2006 K.ASWATHAPPA HUMAN RESOURCE MANAGEMENT

Websites
www.hdfcfund.com www.mutualfundsindia.com www.amfiindia.com www.sebi.gov.in www.valuresearchonline.com www.moneycontrol.com

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