COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

SUBMITTED TO:Mr. Anirudh durafe Lech. Of Financial Institution & services SUBMITTE D BY:Raghvendra shukla BATCH- III PGDM

DECLARATION

I, Raghvendra shukla here-by declare that the Term paper COMPARATIVE ANALYSIS OF MUTUAL FUND OF HDFC & ICICI for the fulfillment of the requirement of my course from CHIMC is an original work of mine and the data provided in the study is authentic, to the best of my knowledge.

It is a matter of Great Pleasure for me in submitting the term paper on Comparative an Analysis of Mutual Fund of HDFC & ICICI For the fulfillment of the requirement of my course from CHIMC, Indore I am thankful to and owe a deep dept. gratitude to all those who have helped me in preparing this report. Words seem to be inadequate to express my sincere thanks to Mr. Anirudh durafe for his valuable guidance, constructive4 criticism, untiring efforts and immense encouragement during the entire course of the study due to which my efforts have been rewarded.

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

Raghvendra shukla

S.NO. 1 2 3 4 5

Contents Introduction To Topic Introduction to Companies Review of literature Need/Scope of Study 0bjective of the study

Page No. 5 09 12 14 14

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

Need of the study

The need of study arises for learning the variables available that distinguish the mutual fund of two companies. To know the risk & return associated with mutual fund. To choose best company for mutual investment between HDFC & ICICI. To project mutual fund as the productive avenue for investing activities.

Scope of the study

To make people aware about concept of mutual fund. To provide information regarding advantages and demerits of mutual fund. To advice where to invest or not to invest. To provide information regarding types of mutual fund which is beneficial for whom.

Objectives
. . To analysis which provides better returns from HDFC &ICICI. To analyze the concept and parameters of mutual fund. To know how many people are satisfied by their investment (in HDFC or ICICI). To know people behavior regarding risk factor involved in mutual fund.

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

What is mean by mutual fund?

an Mutual funds are pools of money that are managed by investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act 1940. Related: open-end fund, closed-end fund.

of

Concept of mutual funds

A mutual fund is a trust that pools the savings of a no. of investors, who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified, professionally managed basket of securities at a relatively low cost.

Historical Aspect
Mutual fund firstly was established in 1822 in the form of Society General De Belguique. It mainly gains the progress in Switzerland & little in franc and Germany in its initial days. The first investment trust The foreign and colonial govt. trust Was founded in London in 1868.

Indian Scenario of Mutual Fund

The origin of mutual fund industry in India is with the introduction of the concept of by UTI in the year 1963. Through the growth was slow, but it accelerated from the year 1987 when non-UTI players entered in industry. The mutual fund industry goes through four phases: First phase 1964-87 (Establishment of UTI). Second phase 1987-93 (Entry of public sector funds).

 Third phase 1993-2003 (Entry of a private sector funds). Fourth phase since feb.2003 (Bifurcated of UTI). In the first phase, UTI was established in 1963 by an act of parliament. In 1978 it was delinked from RBI & the IDBI took over the control of UTI. In second phase, SBI entered as first non-UTI mutual fund provider then it was followed by can bank (Dec. 87). PNB (Aug 89) & LIC in 1989. In third phase, the private sector entered in it. The Erstwhile Kothari pioneer (now merged with Franklin Templeton) was first registered in July 1993 in mutual fund. In revised registration of SEBI I n 1993 the industry functions under SEBI. And the fourth phase had bitter experience for UTI. It was bifurcated into two separate entities. One is the specified under taking of UTI with AUM of 29,835cr. The second is UTI mutual fund ltd. Sponsored by SBI, PNB, BOB and LIC& it is registered with SEBI.

Advantages of Mutual Funds

Diversification. Professional Management. Liquidity (mainly in case of opened mutual funds). Regulatory. Convenience. Low cost. Reduction of transaction cost.

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI Diverse returns. Advantages to Industrial concern. Tax relief. Attract foreign Capital. Reduction / Diversification of risk.

Drawbacks of Mutual fund

No guaranties. Fees & Commission. Taxes. Management Risk.

Comparison between an open-end and a closed-end mutual fund schemes?

Both open-end and closed-end mutual funds comprise a portfolio of securities (such as stocks and bonds) that is managed by a professional money manager. If you wish to invest in the fund, you buy shares. Basically, however, that is where the similarities end. A key difference between the two types of funds is that the number of outstanding shares of an open-end fund can vary dramatically from day to day, whereas shares of a closed-end fund are fixed in number. An open-end fund will issue new shares, or repurchase old shares, as needed to meet investor demand, depending on whether money is being added to the fund or shares are being redeemed. The per share price is determined by the net value of all assets held by the fund, divided by the number of shares. As mentioned, a closed-end fund has a fixed number of shares. You don't purchase new shares from the fund; instead, you purchase existing shares from other investors. Shares are typically traded on an open market (stock exchange) where they sell at either a premium or a discount, depending on demand. Open-end funds are by far the most popular among typical investors. With an open-end fund, you can participate in the markets and have a great deal of flexibility regarding how and when you purchase shares. Also, you are never required to purchase shares at a premium. Closed-end funds are typically more volatile and behave more like individual stocks. You need to buy them through a broker, and if you want out (or in), you are bound by whatever price the market bears.

Open-ended Fund/ Scheme

An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity. An open end mutual fund generally continues to accept investment after the fund is started. As this happens, the fund can grow larger as more investors buy shares in the fund. The open end fund then takes those new dollars and buys additional securities. Shares are priced at the end of day by taking the value of the fund's net asset value divided by the number of shares outstanding. Each share is thus priced at par

value to the underlying investments in the fund. To "cash-out" of one's investment, the shares are redeemed by the fund itself, usually after trading is over for the day at the net asset value price for that day. Occasionally, if management of an open end fund feel cash is flowing into the fund to quickly, they may close the fund to new investment, but is still classified as an open end fund. Open-ended schemes do not have a fixed maturity period. Investors can buy or sell units at NAV-related prices from and to the mutual fund on any business day. These schemes have unlimited capitalization, openended schemes do not have a fixed maturity, there is no cap on the amount you can buy from the fund and the unit capital can keep growing. These funds are not generally listed on any exchange.

Open-ended schemes are preferred for their liquidity. Such funds can issue and redeem units any time during the life of a scheme. Hence, unit capital of open-ended funds can fluctuate on a daily basis. The advantages of Open-ended funds over close-ended are as follows: Any time exit option, the issuing company directly takes the responsibility of providing an entry and an exit. This provides ready liquidity to the investors and avoids reliance on transfer deeds, signature verifications and bad deliveries. Any time entry option, an open-ended fund allows one to enter the fund at any time and even to invest at regular intervals.

Buying and Selling: Open funds sell and redeem shares at any time directly to shareholders. To make an investment, you purchase a number of shares through a representative, or if you have an account with the investment firm, you can buy online, or send a check. The price you pay per share will be based on the funds net asset value as determined by the mutual fund company. Open funds have no time duration, and can be purchased or redeemed at any time, but not on the stock market. An open fund issues and redeems shares on demand, whenever investors put money into the fund or take it out. Since this happens routinely every day, total assets of the fund grow and shrink as money flows in and out daily. The more investors buy a fund, the more shares there will be. There's no limit to the number of shares the fund can issue. Nor is the value of each individual share affected by the number outstanding, because net asset value is determined solely by the change in prices of the stocks or bonds the fund owns, not the size of the fund itself. Some open-ended funds charge an entry load (i.e., a sales charge), usually a percentage of the net asset value, which is deducted from the amount invested.

Advantages: Open funds are much more flexible and provide instant liquidity as funds sell shares daily. You will generally get a redemption (sell) request processed promptly, and receive your proceeds by check in 3-4 days. A majority of open mutual funds also allow transferring among various funds of the same family without charging any fees. Open funds range in risk depending on their investment strategies and objectives, but still provide flexibility and the benefit of diversified investments, allowing your assets to be allocated among many different types of holdings. Diversifying your investment is key because your assets are not impacted by the fluctuation price of only one stock. If a stock in the fund drops in value, it may not impact your total investment as another holding in the fund may be up. But, if you have all of your assets in that one stock, and it takes a dive, youre likely to feel a more considerable loss.

Risks: Risk depends on the quality and the kind of portfolio you invest in. One unique risk to open funds is that they may be subject to inflows at one time or sudden redemptions, which leads to a spurt or a fall in the portfolio value, thus affecting your returns. Also, some funds invest in certain sectors or industries in which the value of the in the portfolio can fluctuate due to various market forces, thus affecting the returns of the fund.

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

Close-ended Fund/ Scheme a close-ended fund or scheme has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i.e. either repurchase facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis. A close-ended mutual fund scheme clearly stipulates the maturity period, which could be anywhere between 2 to 15 years of time. You can make investments on a close-ended mutual fund scheme as soon as they are issued. Later on, you are free to buy or sell close-ended mutual fund scheme units when they are listed on the stock exchange. A closed end mutual fund generally accepts investment only during initial setup. After that, shares in the fund are bought and sold similar to a stock on one of the exchanges. The shares may sell at a discount or a premium to the underlying securities owned by the fund, depending on the market. To "cash-out", an investor sells the shares on the exchange at the market price during the trading day. The fund itself is not involved in the day-today sale and purchase of fund shares. Close-ended schemes have fixed maturity periods. Investors can buy into these funds during the period when these funds are open in the initial issue. After that such schemes cannot issue new units except in case of bonus or rights issue. However, after the initial issue, you can buy or sell units of the scheme on the stock exchanges where they are listed. The market price of the units could vary from the NAV of the scheme due to demand and supply factors, investors expectations and other market factors.

Important details Once the units are listed on the stock exchange, the market price of the close-ended mutual fund scheme units could vary depending on factors like:

The expectations of the unit holders Demand for and supply of scheme units

Generally, the units of the close-ended mutual fund schemes are traded on the stock exchange at a price less than its Net Asset Value or NAV. On nearing maturity, the difference between the scheme unit's trading price and NAV may narrow significantly. How a close-ended mutual fund scheme benefits the fund manager? Liquidity management since a close-ended mutual fund scheme has a fixed tenure before it matures, the fund manager does not have to worry about the corpus at his disposal. In an open-ended scheme, the fund manager will have to deal with inflow and outflow of money on a continual basis, leaving the person with only a vague idea of how the corpus would look over a certain period of time. In other words, a close-ended mutual fund scheme benefits a fund manager in terms of efficient liquidity management. Security from short-term market fluctuations Close-ended mutual funds offer a certain security from short-term market fluctuations vis-a-vis the

investments managed by the fund managers. The fixed tenure for maturity allows fund managers to work with investments on a long-term perspective
Close-ended or closed mutual funds are really financial securities that are traded on the stock market. Similar to a company, a closed-ended fund issues a fixed number of shares in an initial public offering, which trade on an exchange. Share prices are determined not by the total net asset value (NAV), but by investor demand. A sponsor, either a mutual fund company or investment dealer, will raise funds through a process commonly known as underwriting to create a fund with specific investment objectives. The fund retains an investment manager to manage the fund assets in the manner specified.

Buying and Selling: Unlike standard mutual funds, you cannot simply mail a check and buy closed fund shares at the calculated net asset value price. Shares are purchased in the open market similar to stocks. Information regarding prices and net asset values are listed on stock exchanges, however, liquidity is very poor. The time to buy closed funds is immediately after they are issued. Often the share price drops below the net asset value, thus selling

At a discount. A minimum investment of as much as $5000 may apply, and unlike the more common open funds discussed below, there is typically a five-year commitment.

Advantages: The prospect of buying closed funds at a discount makes them appealing to experienced investors. The discount is the difference between the market price of the closed-end fund and its total net asset value. As the stocks in the fund increase in value, the discount usually decreases and becomes a premium instead. Savvy investors search for closed-end funds with solid returns that are trading at large discounts and then bet that the gap between the discount and the underlying asset value will close. So one advantage to closed-end funds is that you can still enjoy the benefits of professional investment management and a diversified portfolio of high quality stocks, with the ability to buy at a discount. Risks: Investing in closed-end funds is more appropriate for seasoned investors. Depending on their investment objective and underlying portfolio, closed-ended funds can be fairly volatile, and their value can fluctuate drastically. Shares can trade at a hefty discount and deprive you from realizing the true value of your shares. Since there is no liquidity, investors must buy a fund with a strong portfolio, when units are trading at a good discount, and the stock market is in position to rise.

Introduction to Companies COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF And Review of Literature HDFC & ICICI

HDFC Mutual Fund

HDFC mutual fund was set up on June 30, 2000 with two sponsors namely Housing Development Finance Corporation ltd. and Standard Life Insurance ltd. HDFC mutual fund came into existence on 10 Dec. 1999 and got approval from the SEBI on 3rd July 2000. Housing Development Finance Corporation Limited, more popularly known as HDFC Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle' approval from RBI, for setting up a bank in the private sector. The bank was incorporated with the name 'HDFC Bank Limited', with its registered office in Mumbai. The following year, it started its operations as a Scheduled Commercial Bank. Today, the bank boasts of as many as 1412 branches and over 3275 ATMs across India. Products and Schemes of HDFC mutual fund Equity funds. Balanced funds. Debt funds. Liquid funds.

Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential PLC. Of America, one of the largest life insurance companies in the USA. Prudential ICICI mutual fund was set up on 13th of Oct. 1993 with two sponsors. ICICI Bank started as a wholly owned subsidiary of ICICI Limited, an Indian financial institution, in 1994. Four years later, when the company offered ICICI Bank's shares to the public, ICICI's shareholding was reduced to 46%. In the year 2000, ICICI Bank offered made an equity offering in the form of ADRs on the New York Stock Exchange (NYSE), thereby becoming the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. In the next year, it acquired the Bank of Madura Limited in an all-stock amalgamation. Later in the year and the next fiscal year, the bank made secondary market sales to institutional investors Products and Schemes of HDFC mutual fund Equity funds. Balanced funds. Debt funds. Liquid funds. Childrens gift fund

COMPARATIVE ANALYSIS OF OPEN ENDED & CLOSE ENDED SCHEMES AND MUTUALFUND OF HDFC & ICICI

HDFC Banks exposure to market risk a function of its trading and asset And liability management activities and its role as a financial intermediary In customer-related transactions. HDFC had tried its best in mutual fund sector. It has grown up its market share in a meanwhile time. The objective of market risk management is to minimize the impact of losses due to market risks on earning and equity capital ICICI Bank is India's second-largest bank with total assets of about Rs. 1 Trillion and a network of about 540 branches and offices and over 1,000 ATMs. ICICI Bank offers a wide range of banking products and financial Services to corporate and retail customers through a variety of delivery Channels and through its specialized subsidiaries and affiliates in the areas Of investment banking, life and non-Banking, venture capital, asset Management and information technology. ICICI Bank's equity shares are Listed in India on stock exchanges at Chennai, Muzaffarnagar, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange Of India Limited and its American Depositary Receipts (ADRs) are listed on The New York Stock Exchange (NYSE). Other Players in Mutual Fund
Bank of Baroda mutual fund (BOB MF) 30OCT. 1992. Benchmark mutual funds (June 12, 2001). Birla Sun life MF (1871). Chola mutual fund (3 Jan. 1997). Can bank mutual fund (Dec. 19, 1987). LIC mutual fund (19th June, 1989). Reliance mutual fund (30June, 1995). Sahara mutual fund (18 July, 1996). GIC (General Insurance Corporation of India). Etc.

COMPANY PROFILE