MUTUAL FUNDS

CHAPTER-I

INTRODUCTION TO MUTUAL FUNDS

A Mutual Fund is a trust that pools the savings of a number 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 appreciation realized is 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 a diversified, professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of mutual funds.

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 that are launched from time to time.

Different investment avenues are available to investors. Mutual funds also

offer good investment opportunities to the investors. Like all investments, they also
carry certain risks. The investors should compare the risks and expected yields after
adjustment of tax on various instruments while taking investment decisions.

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CHAPTER-II
LITERATURE REVIEW

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Literature on mutual fund performance evaluation is enormous. A few research

studies that have influenced the preparation of this paper substantially are discussed in
this section. Sharpe, William F. (1966) suggested a measure for the evaluation of
portfolio performance. Drawing on results obtained in the field of portfolio analysis,
economist Jack L. Treynor has suggested a new predictor of mutual fund
performance, one that differs from virtually all those used previously by incorporating
the volatility of a fund's return in a simple yet meaningful manner.

Michael C. Jensen (1967) derived a risk-adjusted measure of portfolio

performance (Jensen’ salpha) that estimates how much a manager’s forecasting ability
contributes to fund’s returns. As indicated by Statman (2000), the e SDAR of a fund
portfolio is the excess return of the portfolio over the return of the benchmark index,
where the portfolio is leveraged to have the benchmark index’s standard deviation.

S.Narayan Rao , et. al., evaluated performance of Indian mutual funds in a bear
marketthroughrelative performance index, riskreturn analysis, Treynor’s ratio, Sharpe’
s ratio, Sharpe’smeasure , Jensen’s measure, and Fama’s measure. The study used 269
open-ended schemes (outof total schemes of 433) for computing relative performance
index. Then after excluding funds whose returns are less than risk-free returns,
58 schemes are finally used for further analysis. The results of performance measures
suggest that most of mutual fund schemes in the sample of 58were able to satisfy
investor’s expectations by giving excess returns over expected returns based on both
premium for systematic risk and total risk. Bijan Roy, et. al., conducted an empirical
study on conditional performance of Indian mutual funds. This paper uses a technique
called conditional performance evaluation on a sample of eighty-nine Indian mutual
fund schemes .This paper measures the performance of various mutual funds with
both unconditional and
conditionalform of CAPM, Treynor- Mazuy model and Henriksson-

Merton model. The effect of incorporating lagged information variables into the evalu
ation of mutual fund managers’ performance is examined in the Indian context. The
results suggest that the use of conditioninglagged information variables improves the
performance of mutual fund schemes, causing alphasto shift towards right and

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reducing the number of negative timing coefficients. Mishra, et al.,(2002) measured

mutual fund performance using lower partial moment. In this paper, measuresof
evaluating portfolio performance based on lower partial moment are developed. Risk
from thelower partial moment is measured by taking into account only those states in
which return is below a pre-specified “target rate” like risk-free rate. Kshama
Fernandes(2003) evaluated index fund implementation in India. In this paper, tracking
error of index funds in India is measured. The consistency and level of tracking errors
obtained by some well-run index fund suggests that it is possible to attain low levels
of tracking error under Indian conditions. At the same time,there do seem to be
periods where certain index funds appear to depart from the discipline of indexation.
K. Pendaraki et al. studied construction of mutual fund portfolios, developed a multi-
criteria methodology and applied it to the Greek market of equity mutual funds. Them
ethodology is based on the combination of discrete and continuous multi-criteria
decision aid methods for mutual fund selection and composition. UTADIS multi-
criteria decision aid method is employed in order to develop mutual fund’s
performance models. Goal programming model is employed to determine proportion
of selected mutual funds in the final portfolios.

Zakri Y.Bello (2005) matched a sample of socially responsible stock mutual funds
matchedto randomly selected conventional funds of similar net assets to investigate di
fferences incharacteristics of assets held, degree of portfolio diversification and variab
le effects of diversification on investment performance. The study found that socially
responsible funds donot differ significantly from conventional funds in terms of any
of these attributes. Moreover, theeffect of diversification on investment performance
is not different between the two groups. Bothgroups underperformed theDomini 400
Social Index and S & P 500 during the study period

CHAPTER-III
NEED FOR THE STUDY

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 A mutual fund is a special type of financial service organization. It acts as an

investment intermediary.
 It channels savings of a large no of people to the corporate securities in such a
way that investors get steady return, capital appreciation and a low risk.
 The need for the study is investors who got the specific return with a low risk
and also suggest which funds to choose invest his capital.
 The study provides an opportunity for theoretical knowledge and also practical
experience for the investing the capital in to the mutual funds with a low risk
and get steady return. And also know the various practical aspects in
marketing and financial area.

OBJECTIVES OF THE STUDY

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 To make a more informed investment decision while selecting a specific

scheme.

 To know briefly about the History of Mutual Fund in India.

 To make a detailed study about the funds available in Mutual Fund Industry.

 To know about the Market Trends of the Mutual Fund investment.

 To know the comparative study of HDFC & UTI schemes of Mutual Fund.

 To study the recent trends and future scenario of Mutual Fund performance in
the market.

SCOPE OF THE STUDY

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The scope of the study is to know whether the schemes are performing really
well, than can be known by looking annualized returns earned by the Study that is
taken into consideration, in this respect five growth fund schemes taken viz., HDFC
Growth Fund, Reliance Growth Fund and Franklin Growth Fund. The study covers
the randomly selected three companies’ growth funds for the period of 4 years i.e.
(July 2008 to March 2012).

HYPOTHESIS
For doing dissertation of this topic “STUDY ON MUTUAL FUNDS” I took the
hypothesis of UTI and HDFC mutual funds.
 UTI mutual fund is the one who launched the first mutual funds in India
doing its best performance in last 5 years.
 HDFC mutual fund leading the first place in last 3 years showing
competitive performance with UTI mutual funds.

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LIMITATIONS OF THE STUDY

 This study is under taken as a part of M.B.A course curriculum during the
summer vacation. Short span of time 8 weeks is a limitation of the study.

 The comparative study of performance is taken for selecting three schemes in

HDFC and three schemes in UTI.

 This study covers mostly on customers and not covers the agents and
corporate agents of mutual fund. Because of time constraint.

 The limitation of the study is entire schemes are not taken into consideration
only limited are taken each type of the mutual funds for the study.

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CHAPTER-IV
INDUSTRY AND COMPANY PROFILE

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

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

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and General
Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI
Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87),
Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89),
Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its
mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At
the end of 1993, the mutual fund industry had assets under management of Rs.47,004
crores.

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 Regulations were

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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

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.

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COMPANY PROFILE

HDFC Bank Limited

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.

Promoter
HDFC is India’s premier housing finance company and enjoys an impeccable
track record in India as well as in international markets. Since its inception in 1977,
the Corporation has maintained a consistent and healthy growth in its operations to
remain the market leader in mortgages. Its outstanding loan portfolio covers well
over a million dwelling units. HDFC has developed significant expertise in retail
mortgage loans to different market segments and also has a large corporate client
base for its housing related credit facilities. With its experience in the financial
markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian
environment.

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, and corporate governance and
regulatory.Compliance. HDFC Bank’s business philosophy is based on four core
values - Operational Excellence, Customer Focus, Product Leadership and People.

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Capital Structure
The authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The
paid-up capital is Rs.309.9 crore (Rs.3.09 billion). The HDFC Group holds 22.2% of
the bank’s equity and about 19.5% of the equity is held by the ADS Depository (in
respect of the bank’s American Depository Shares (ADS) Issue). Roughly 31.7% of
the equity is held by Foreign Institutional Investors (FIIs) and the bank has about
190,000 shareholders. The shares are listed on the Stock Exchange, Mumbai and the
National Stock Exchange. The bank’s American Depository Shares are listed on the
New York Stock Exchange (NYSE) under the symbol “HDB”.

Times Bank Amalgamation

In a milestone transaction in the Indian banking industry, Times Bank
Limited (another new private sector bank promoted by Bennett, Coleman & Co.
/Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As
per the scheme of amalgamation approved by the shareholders of both banks and the
Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank
for every 5.75 shares of Times Bank. The acquisition added significant value to
HDFC Bank in terms of increased branch network, expanded geographic reach,
enhanced customer base, skilled manpower and the opportunity to cross-sell and
leverage alternative delivery channels.

Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an
enviable network of over 495 branches spread over 218 cities across India. All
branches are linked on an online real-time basis. Customers in over 120 locations are
also serviced through Telephone Banking. The Bank’s expansion plans take into
account the need to have a presence in all major industrial and commercial centers
where its corporate customers are located as well as the need to build a strong retail
customer base for both deposits and loan products. Being a clearing/settlement bank
to various leading stock exchanges, the Bank has branches in the centers where the
NSE/BSE has a strong and active member base.
The Bank also has a network of about over 1054-networked ATMs across these
cities. Moreover, HDFC Bank’s ATM network can be accessed by all domestic and

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International Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American

Express Credit/Charge cardholders.

Technology
HDFC Bank operates in a highly automated environment in terms of
information technology and communication systems. All the bank’s branches have
online connectivity, which enables the bank to offer speedy funds transfer facilities
to its customers. Multi-branch access is also provided to retail customers through the
branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world class
bank. In terms of software, the Corporate Banking business is supported by
Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions
Ltd. The systems are open, scaleable and web-enabled.

The Bank has prioritized its engagement in technology and the Internet as
one of its key goals and has already made significant progress in web-enabling its
core businesses. In each of its businesses, the Bank has succeeded in leveraging its
market position, expertise and technology to create a competitive advantage and
build market share.

Business Profile
HDFC Bank caters to a wide range of banking services covering commercial
and investment banking on the wholesale side and transactional / branch banking on
the retail side. The bank has three key business segments:

a) Wholesale Banking Services

The Bank’s target market is primarily large, blue chip manufacturing
companies in the Indian corporate sector and to a lesser extent, small & mid-sized
corporate and agri-based businesses. For these customers, the Bank provides a wide
range of commercial and transactional banking services, including working capital
finance, trade services, transactional services, cash management, etc. The bank is
also a leading provider of structured solutions, which combine cash management
services with vendor and distributor finance for facilitating superior supply chain

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management for its corporate customers. Based on its superior product delivery /
service levels and strong customer orientation, the Bank has made significant
inroads into the banking consortia of a number of leading Indian corporate including
multinationals, companies from the domestic business houses and prime public
sector companies. It is recognized as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock
exchange members and banks.

b) Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a
full range of financial products and banking services, giving the customer a one-stop
window for all his/her banking requirements. The products are backed by world-
class service and delivered to the customers through the growing branch network, as
well as through alternative delivery channels like ATMs, Phone Banking, Net
Banking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the
HDFC Bank Plus and the Investment Advisory Services programs have been
designed keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has a wide
array of retail loan products including Auto Loans, Loans against marketable
securities, Personal Loans and Loans for Two-wheelers.

HDFC Bank was the first bank in India to launch an International Debit Card
in association with VISA (VISA Electron) and issues the MasterCard Maestro debit
card as well. The Bank launched its credit card business in late 2001. By March
2005, the bank had a total card base (debit and credit cards) of 4.2 million cards. The
Bank is also one of the leading players in the “merchant acquiring” business with
over 42,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at
merchant establishments. The Bank is well positioned as a leader in various net
based B2C opportunities including a wide range of internet banking services for
Fixed Deposits, Loans, Bill Payments, etc.

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c) Treasury
Within this business, the bank has three main product areas - Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities, and
Equities. With the liberalization of the financial markets in India, corporate need
more sophisticated risk management information, advice and product structures.
These and fine pricing on various treasury products are provided through the bank’s
Treasury team. To comply with statutory reserve requirements, the bank is required
to hold 25% of its deposits in government securities. The Treasury business is
responsible for managing the returns and market risk on this investment portfolio.

RATINGS/AWARDS
a) Credit Rating
HDFC Bank has its deposit programmers rated by two rating agencies -
Credit Analysis & Research Limited. (CARE) and Fitch Ratings India Private
Limited. The Bank’s Fixed Deposit programmed has been rated ‘CARE AAA (FD)’
[Triple A] by CARE, which represents instruments considered to be “of the best
quality, carrying negligible investment risk”. CARE has also rated the Bank’s
Certificate of Deposit (CD) programmed “PR 1+” which represents “superior
capacity for repayment of short term promissory obligations”. Fitch Ratings India
Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the “AAA (Ind)” rating to the
Bank’s deposit programmed, with the outlook on the rating as “stable”. This rating
indicates “highest credit quality” where “protection factors are very high”. HDFC
Bank also has its long term unsecured, subordinated (Tier II) Bonds of Rs.4 billion
rated by CARE and Fitch Ratings India Private Limited. CARE has assigned the
rating of “CARE AAA” for the Tier II Bonds while Fitch Ratings India Pvt. Ltd. has
assigned the rating “AAA(ind)” with the outlook on the rating as “stable”. In each of
the cases referred to above, the ratings awarded were the highest assigned by the
rating agency for those instruments?

b) Corporate Governance Rating

The bank was one of the first four companies, which subjected itself to a
Corporate Governance and Value Creation (GVC) rating by the rating agency, The
Credit Rating Information Services of India Limited (CRISIL). The rating provides
an independent assessment of an entity’s current performance and an expectation on
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its “balanced value creation and corporate governance practices” in future. The bank
has been assigned a ‘CRISIL GVC Level 1’ rating which indicates that the bank’s
capability with respect to wealth creation for all its stakeholders while adopting
sound corporate governance practices is the highest.

c) Awards and Accolades

Over the years, HDFC Bank has received recognition and awards from
various leading organizations and publications, both domestic and international.

Awards and achievements-Bank services

 In June 2005, HDFC Bank won Asia money magazine’s “Best Domestic
Commercial Bank Award 2005” for India.

 The Bank was awarded The Asian Banker’s, “Excellence in Retail Banking
Risk Management Award for 2004”, and pan-Asia recognition of the bank’s
risk management abilities.

 The Asset (Triple a Country Awards) rated HDFC Bank as the “Best Domestic
Bank in India – 2004” and “Best Domestic Bank in India – 2003”.

 Forbes Global again named the Bank in its listing of ‘Best under a Billion,
100 Best Smaller Size Enterprises in Asia/Pacific and Europe”, in its
November 2004 issue.

 The Bank was rated as the “Best Overall Local/Domestic Bank – India” in
the Corporate Cash Management Poll conducted by the Hong Kong based
Asia money magazine.

 The said magazine also awarded the Bank with the titles of “Overall Most
Improved Company for Best Management Practices in India” in the Best
Managed Companies poll 2004, “Best Local Cash Management Bank”, Best
Overall Domestic Trade Finance Services Award”, and also awarded the
Managing Director, Mr. Aditya Puri as the “Best Chief Executive Officer in
India”. In May 2004, the Bank also won the “Operational Excellence in

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 Retail Financial Services – India” award as part of the Asian Banker

Excellence in Retail Financial Services Program 2003.

 HDFC Bank was selected by Finance Asia as the “Best Local Bank – India
2003”, “Best Local Bank in India 2002”, “Best Domestic Commercial
Bank – India 2001”, “Best Domestic Commercial Bank – India 2000” and
“Best Domestic Commercial Bank – India 1999”.

 Euro money rated HDFC Bank as “Best Bank in India 2002”, “Best Bank –
India 2001”, “Best Domestic Bank – India 2000” and “Best Bank – India
1999”.

 For its use of information technology the bank has been recognized as a
“Computer world Honors Laureate” and awarded the 21st Century
Achievement Award in 2002 for Finance, Insurance & Real Estate category by
Computer world, Inc., USA.

 Closer home, HDFC Bank was selected as the “Best Bank in India” for the
second consecutive year in 2004 by Business Today.

 The Bank was selected by Business World as "one of India's Most Respected
Companies" as part of The Business World Most Respected Company
Awards 2004.

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CHAPTER-V
RESEARCH METHODOLOGY

Data collection method:

The collection of data refers to a planned gathering of information relevant to
the subject matter of the study from the units under investigation. The method of
collection of data depends mainly upon the nature, objectives and scope of the inquiry
on one hand and available of resources and time on the other hand. Data may be
classified into primary and secondary data, depending upon the nature and mode of
collection.

Primary data:-
Primary data is collected directly from the prospective customers, agents, and
staff of HDFC BANK employees. Primary data is collected through interaction with
various respondents.

Secondary data:-
Secondary data collected from the published magazines and websites to collect
the data. The secondary data is collected form the following sources.

 Business magazines
 Journals
 Published Books
 Websites
 Company broachers and books

Research Instrument:-
Questionnaire has been used in this research to collect the necessary
information. Questionnaire is the most common instrument, in collecting the primary
data. The questionnaire consists of a set of questions presented to the respondents for
their valuable answers.

The questionnaire consist of questions, were used to obtain necessary

information from customers. In designing the questionnaire for the data collection,

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effort was made to avoid unnecessary questions and to include all the necessary
questions.

Most of the questions in the questionnaire are closed-end questions i.e., they
pre- specify all possible answers and respondents make a choice among them. There
are only few questions which are opened questions, i.e. That allows the respondents
to answers in their own words. Care has been taken to make the wording of question
as simple, direct and unbiased as possible, so that, the customer can feel easy.

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THEORY OF FRAMEWORK

A Mutual Fund is a trust that pools the savings of a number 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 appreciation realized is 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 a diversified professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a Mutual Fund:

Investor

Invest/pool profit/loss from

Invest their Money portfolio

Mutual Fund Company

(Pool of Money)

Invest in a no. of Profit/Loss from

Stocks/Bonds Individual investment

Market (Fluctuates)

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ORGANISATION OF A MUTUAL FUND

There are man entities involved and the diagram below illustrates the organizational
set up of a mutual fund:

HDFC Mutual Fund Products

Schemes:
Equity Funds
HDFC Growth Fund
HDFC Long Term Advantage Fund
HDFC Index Fund
HDFC Equity Fund
HDFC Capital Builder Fund
HDFC Tax Saver

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HDFC Top 200 Fund

HDFC Core & Satellite Fund
HDFC Premier Multi-Cap Fund
Balanced Funds
HDFC Children's Gift Fund Investment Plan
HDFC Children's Gift Fund Savings Plan
HDFC Balanced Fund
HDFC Prudence Fund

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

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HDFC Multiple Yield Fund

HDFC Multiple Yield Fund Plan 2005

Value Added Services

SIP (Systematic Investment Plan)
STP (Systematic Transfer Plan)
SWAP (Systematic Withdrawal Advantage Plan)

Awards:
HDFC Mutual Fund awarded “Fund House of The Year” in three years
category & “Best Performing Open-Ended Balance Fund” at the Annual CNBC TV
18 - BNP Paribas Awards 2004.

Sponsors:
Housing development Finance Corporation (HDFC):
HDFC was incorporated in 1977 as the first specialized housing finance
institution in India. HDFC provides financial assistance to individuals, corporate and
developers for the purchase or construction of residential housing. It also provides
property related services (e.g. property identification, sales services and valuation),
training and consultancy. Of these activities, housing finance remains the dominant
activity. HDFC currently has a client base of over 5, 00,000 borrowers, 13, 00,000
depositors, 1, 00,000 shareholders and 52,000 deposit agents. HDFC raises funds
from international agencies such as the World Bank, IFC (Washington), USAID,
CDC, ADB and KFW, domestic term loans from banks and insurance companies,
bonds and deposits. HDFC has received the highest rating for its bonds and deposits
program for the eighth year in succession. HDFC Standard Life Insurance Company
Limited, promoted by HDFC was the first life insurance company in the private sector
to be granted a Certificate of Registration (on October 23, 2000) by the Insurance
Regulatory and Development Authority to transact life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has
considerable experience in global financial markets. In 1998, Standard Life

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Investments Limited became the dedicated investment management company of the

Standard Life Group and is owned 100% by The Standard Life Assurance Company.
With global assets under management of approximately US$126 billion as at May 15,
2003, Standard Life Investments Limited is one of the world's major investment
companies and is responsible for investing money on behalf of five million retail and
institutional clients worldwide. With its headquarters in Edinburgh, Standard Life
Investments Limited has an extensive and developing global presence with operations
in the United Kingdom, Ireland, Canada, USA and Hong Kong. In order to meet the
different needs and risk profiles of its clients, Standard Life Investments Limited
manages a diverse portfolio covering all of the major markets world-wide, which
includes a range of private and public equities, government and company bonds,
property investments and various derivative instruments. The company's current
holdings in UK equities account for approximately 2% of the market capitalization of
the London Stock Exchange. The Standard Life Assurance Company was present in
the Indian life insurance market from 1847 to 1938 when agencies were set up in
Kolkata and Mumbai. The Standard Life Assurance Company was therefore keen to
re-enter the Indian market and in 1995, signed an agreement with HDFC to launch an
insurance joint venture. HDFC and Standard Life Investments Limited are neither
responsible nor liable for any loss resulting from the operation of the Scheme(s)
beyond their contribution of an amount of Rs. 1 lakh each made by them towards the
corpus of the Mutual Fund.

Management:
HDFC Trustee Company Limited:
It is a company incorporated under the Companies Act, 1956 is the Trustee to
the Mutual Fund vide the Trust deed dated June 8, 2000, as amended from time to
time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC
Limited.

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. The registered office of the AMC is situated at Ramon

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 MUTUAL FUNDS

House, 3rd Floor, H.T. Parekh Marg, 169, Back bay Reclamation, Church gate,
Mumbai
400 020. 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 crore.
The present share holding pattern of the AMC is as follows:

% of The Paid Up
PARTICULARS
Share Capital
HDFC 50.10

Standard Life Investments

49.90
Limited

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund,
following a review of its overall strategy, had decided to divest its Asset Management
business in India. The AMC had entered into an agreement with ZIC to acquire the
said business, subject to necessary regulatory approvals. On obtaining the regulatory
approvals, the Schemes of Zurich India Mutual Fund has now migrated to HDFC
Mutual Fund on June 19, 2003. The AMC is managing 18 open-ended schemes of the
Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC
Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Tax Plan 2000 (HTP), HDFC
Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term
Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC
Equity Fund (HEF), HDFC Top 200 Fund, (HT200), HDFC Capital Builder Fund
(HCBF), HDFC Tax Saver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest
Fund (HHIF), HDFC Sovereign Gilt Fund (HSGF) and HDFC Cash Management
Fund (HCMF). The AMC is also managing the respective Plans of HDFC Fixed
Investment Plan, a closed ended Income Scheme. The AMC has obtained registration
from SEBI vide Registration No. - PM / INP000000506 dated December 22, 2000 to
act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993.
The Certificate of Registration is valid from January 1, 2001 to December 31, 2003.

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The AMC is also providing portfolio management / advisory services and such
activities are not in conflict with the activities of the Mutual Fund.
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.

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 crore
at all times.

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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.

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

TYPES OF MUTUAL FUND SCHEMES

Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectation etc. Functional classification of mutual
funds is based on the basic characteristics of mutual fund schemes opened for the
public for subscription. On this account mutual funds are classified into two broad
types:
(i) Open ended mutual funds and
(ii) Closed ended mutual funds.

OPEN ENDED MUTUAL FUNDS:

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An open-ended fund (scheme) is characterized by:

 Unlimited Capitalization.
 No predetermined date of redemption.
 Sale & purchase of units at current Net Asset Value( NAV )
 No restriction on Entry and Exit.
 Purchase of units directly from the funds.
 Sale of units directly to the funds.
The open-ended mutual fund companies place their funds in the Secondary Securities
Market. They don’t participate in New Issue market. They influence market price of
corporate securities.

CLOSED ENDED MUTUAL FUNDS:

A closed-ended fund (scheme) is characterized by:
 Constant Capitalization.
 Predetermined date of redemption.
 Predetermined date of closing subscription.
 Frequent lock in period.

TYPES OF MUTUAL FUND SCHEMES

BY STRUCTURE
. Open-Ended Schemes
. Close-Ended Schemes
. Interval Schemes
BY INVESTMENT OBJECTIVE
. Growth Schemes
. Income Schemes
. Balanced Schemes

OTHER SCHEMES
 Tax Saving Schemes
 Special Schemes
 Index Schemes
 Sector Specific Schemes

INTERVAL SCHEMES:
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These schemes are a combination of the features of open-ended and closed-

ended scheme. Which will be traded on the Stock Exchange at a time or will be open
for sale or redemption during the predetermined intervals at NAV related prices?
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. HDFC Growth Fund, HDFC Tax Plan 2000 and
HDFC Index Fund are examples of equity schemes.

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 general-purpose 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.

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

Special Schemes:
Index schemes:

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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.

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.

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.

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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.

Gilt Funds:-

This scheme primarily invests in Government Debt. Hence the investor

usually does not have to worry about credit risk since Government Debt 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 Children’s Gift Fund are examples of hybrid schemes.

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

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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.

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. The Risk-Return
Trade-off The most important relationship to understand is the risk-return trade-off.
Higher the risk greater the returns/loss and lower the risk lesser the returns/loss.
Hence it is up to the investor to decide how much risk you are willing to take. In order
to do this you must first be aware of the different types of risks involved with your
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

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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 the risk Things you hear
people talk about: “Rs 100 Today is a worth more than Rs 100 tomorrow.”
“Remember the time when a bus ridecosted50paise?” The root cause Inflation.
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 than the return on your investment. A well-
diversified portfolio with some investment in equities might help.

OPERATING EXPENSES:

These referred to cost incurred to operate a mutual fund. Advisory fees paid to
Investment managers, audit fees to charted accountant, custodial fees, register and
transfer agent fees, trustee fee, agent commission. Operating expenses also known as
expenses expressed as a percentage of the funds average daily net Assets mutual
funds.

The breakup of these expenses is required to be reported in the schemes offer

document or prospectus.

Operating expenses

Expenses Ratio  …………………….

Average Net Assets

For instant if funds Rs.100 crores and expenses 20 laces then expenses ratio is
20% expenses ratio is available in the offer document and historical per unit statistics
included in the financial results of the fund which are published by annually. UN
audited for the half year ending Sep ’30 and audited for the physically year end March
30.

Depending upon scheme and net asset, operating expenses are determined by
limits mandated by SEBI mutual fund regulation Act. Any excess over specified limits
as to be born by asset Management Company, the trustees or sponsors.

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SALES CHARGES;

There are known commonly sales loads, these are charged directly to investor.
Sales loads are used by mutual fund for the payment of agent’s commission,
distribution and marketing expenses. These charges have no effect on the performance
of the scheme. Sales loads are usually expression percentage and or of two types
front-end and back-end.

Front-End Load: -

It is a one time fixed fee paid by an investor when buying a mutual funds
scheme. It determines public offer price which in term decides how much of your
initial investment actually get invested the standard practice of arriving a public offer
price is as follows.

Net Asset Value

Public offer price  …………………………

(1  front-end load)

Let us assume, an investor invests RS.10000 in a scheme that charges a 2%

front-end load at a NAV per unit Rs. 10 using the formula public offer price = 10/(1-
0.02) is Rs. 10.20. So only 980units are allotted to the investor.

Amount invested

Number of units allotted = …………………………………

Public offer price

10000/10.20 =980 units at a NAV of Rs. 10

This means units worth 9800 are allotted to him an initial investment of Rs. 10000.
Front end loads trend to decrease as initial investment amount increase.

BACK END LOAD:

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May be affixed fee redemption or a contingent deferred sales charges- redemption

Load continues so long as the redeeming or selling of units of the units of a fund does
not take place in the event of a back end load is applied. The redemption price is
arrive are using following formula.

Net Asset Value

Redemption price = …..……………………

(1 + back end load)

Let us assume an investor redeems units valued at rs 10000 in a scheme that charges a
2% back end load at a NAV per units of Rs. 10. Using the formula redemption price
10/(1+0.02)= Rs9.08. so, what the investor gets in hand is 9800(9.8*1000)

CONTINGENT DEFERRED SALES CHARGES (CDSC):

Contingent deferred sales charges are a structured back end load. It is paid
when the Units are determined period only and reduced over the time you invested for
a fund. The longer the investor remains in a fund the lower the CDSC.

The SEBI (Mutual Funds Regulation 1996) stipulate that a CDSC may be
charge only for first 4 years after purchase of units and also stipulate the maximum
CDSC that can we charge every year. The SEBI mutual funds regulation 1996 do not
allow either the front end load or back end load to any combination is higher than 7%.

TRANSACTION COST:

Some funds may also impose a switch over fee, which is a charge on transfer
of investment from one scheme to another with a same mutual funds family and also
to switch from one plan (short term) to another (long term) within same scheme

For the purpose of Analysis, I have taken below mentioned names of

the funds

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 HDFC EQUITY FUND

 HDFC INCOME FUND
 HDFC LIQUID FUND

CHAPTER – 6

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CHAPTER-VI

DATA ANALYSIS AND INTERPRETATION

For the purpose of data analysis and interpretation the following mutual funds
have been chosen;
a) SBI Magnum Equity Fund Growth
b) Birla Sun life 95 Growth
c) HDFC Aggressive Plan - Dir - Growth
d) LIC Nomura Children’s Fund

Each product has been analyzed using the following tools

and the results tabulated, presented graphically and the evaluation of the same
has been given under the caption 'Interpretation' below the graph.

The fund NAVs are compared with the bench mark of nifty for the analysis.

For analysis Net Asset Value (NAV) of the Four AMC’For the period of 26 th
December to 22nd January 2015

SBI HDFC
LIC
Market Magnum Birla Sun Prudential
Nomura
Date Level Equity life 95 Aggressive
Children’s
( NIFTY) fund Growth Plan - Dir -
Fund
Growth Growth
26-Dec-14 8200.7 22.6 153.49 33.28 10.95
29-Dec-14 8246.3 24.7 171.83 39.49 10.93
30-Dec-14 8248.25 24.19 169.29 36.63 11.06
31-Dec-14 8282.7 24.36 166.42 36.59 10.87
1-Jan-15 8284 23.2 156.96 36.6 10.93
2-Jan-15 8395.45 22.68 157.06 36.59 10.96
5-Jan-15 8378.4 22.25 155.27 36.54 10.95

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6-Jan-15 8127.35 22.14 155.17 36.59 10.96

7-Jan-15 8102.1 22.5 157.86 36.65 10.99
8-Jan-15 8234.6 22.06 155.48 36.7 11.02
9-Jan-15 8284.5 22.37 156.85 36.5 10.94
12-Jan-15 8323 22.48 158.7 36.6 10.96
13-Jan-15 8299.4 22.13 158.3 36.59 10.94
14-Jan-15 8277.55 21.68 155.66 36.65 10.93
15-Jan-15 8494.15 21.61 154.46 36.62 10.9
16-Jan-15 8513.8 21.21 153.25 36.54 10.9
19-Jan-15 8550.7 21.74 154.09 36.22 10.87
20-Jan-15 8695.6 22.12 154.91 36.44 10.94
21-Jan-15 8729.5 21.97 154.34 36.22 10.95
22-Jan-15 8761.4 22.21 155.49 36.22 11.04
Average 8371.473 22.51 157.744 36.513 10.9495

Calculations of Risk of SBI Magnum Equity fund Growth

For the period of 26th December to 22nd January 2015

SBI Magnum
Market Level Equity fund
( NIFTY) returns Growth Returns
26-Dec-14 8200.7 22.6
29-Dec-14 8246.3 45.6 24.7 2.1
30-Dec-14 8248.25 1.95 24.19 -0.51
31-Dec-14 8282.7 34.45 24.36 0.17
1-Jan-15 8284 1.3 23.2 -1.16
2-Jan-15 8395.45 111.45 22.68 -0.52
5-Jan-15 8378.4 -17.05 22.25 -0.43
-
6-Jan-15 8127.35 251.05 22.14 -0.11
7-Jan-15 8102.1 -25.25 22.5 0.36
8-Jan-15 8234.6 132.5 22.06 -0.44
9-Jan-15 8284.5 49.9 22.37 0.31
12-Jan-15 8323 38.5 22.48 0.11
13-Jan-15 8299.4 -23.6 22.13 -0.35
14-Jan-15 8277.55 -21.85 21.68 -0.45
15-Jan-15 8494.15 216.6 21.61 -0.07
16-Jan-15 8513.8 19.65 21.21 -0.4
19-Jan-15 8550.7 36.9 21.74 0.53
20-Jan-15 8695.6 144.9 22.12 0.38
21-Jan-15 8729.5 33.9 21.97 -0.15
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22-Jan-15 8761.4 31.9 22.21 0.24

Average 28.035 -0.0195

Stranded Deviation (SD) 2.71 2.01

Beta 0.21
Graphical Presentation of SBI Magnum Equity Fund-Growth For the
month of January 15

Interpretation:

SBI Magnum Equity Fund-Growth has been analyzed and it is found that
there is a negative growth. However on the basis of the Avg returns of SBI there is a
negative growth 0.41 as against the index Avg of negative 0.28 the beta being less
than 1 the stock is not highly volatile.

Calculations of Risk of Birla Sun life 95 Growth

For the period of 26th December to 22nd January 2015

Market Level Birla Sun life

( NIFTY) returns 95 Growth Returns
26-Dec-14 8200.7 153.49
29-Dec-14 8246.3 45.6 171.83 18.34
30-Dec-14 8248.25 1.95 169.29 -2.54
31-Dec-14 8282.7 34.45 166.42 -2.87
1-Jan-15 8284 1.3 156.96 -9.46
2-Jan-15 8395.45 111.45 157.06 0.1
5-Jan-15 8378.4 -17.05 155.27 -1.79

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6-Jan-15 8127.35 -251.05 155.17 -0.1

7-Jan-15 8102.1 -25.25 157.86 2.69
8-Jan-15 8234.6 132.5 155.48 -2.38
9-Jan-15 8284.5 49.9 156.85 1.37
12-Jan-15 8323 38.5 158.7 1.85
13-Jan-15 8299.4 -23.6 158.3 -0.4
14-Jan-15 8277.55 -21.85 155.66 -2.64
15-Jan-15 8494.15 216.6 154.46 -1.2
16-Jan-15 8513.8 19.65 153.25 -1.21
19-Jan-15 8550.7 36.9 154.09 0.84
20-Jan-15 8695.6 144.9 154.91 0.82
21-Jan-15 8729.5 33.9 154.34 -0.57
22-Jan-15 8761.4 31.9 155.49 1.15
Average 28.035 0.1
Stranded Deviation (SD) 2.71 0.91
Beta 0.32

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Graphical Presentation of Birla Sun life 95 Growth For the month of January
15

Interpretation:

Birla Sun life 95 Growth have been analyses and it is found that there is a
negative growth. However on the basis of the Avg returns of Birla Sun life there is a
negative growth 0.14as against the index Avg of negative 0.26 the beta being less than
1 the stock is not highly volatile.

Calculations of Risk of HDFCAggressive Plan - Dir - Growth

For the period of 26th December to 22nd January 2015

HDFC
Market Level Aggressive Plan –
( NIFTY) returns Dir - Growth returns
26-Dec-14 8200.7 33.28
29-Dec-14 8246.3 45.6 39.49 6.21
30-Dec-14 8248.25 1.95 36.63 -2.86
31-Dec-14 8282.7 34.45 36.59 -0.04
1-Jan-15 8284 1.3 36.6 0.01
2-Jan-15 8395.45 111.45 36.59 -0.01

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5-Jan-15 8378.4 -17.05 36.54 -0.05

6-Jan-15 8127.35 -251.05 36.59 0.05
7-Jan-15 8102.1 -25.25 36.65 0.06
8-Jan-15 8234.6 132.5 36.7 0.05
9-Jan-15 8284.5 49.9 36.5 -0.2
12-Jan-15 8323 38.5 36.6 0.1
13-Jan-15 8299.4 -23.6 36.59 -0.01
14-Jan-15 8277.55 -21.85 36.65 0.06
15-Jan-15 8494.15 216.6 36.62 -0.03
16-Jan-15 8513.8 19.65 36.54 -0.08
19-Jan-15 8550.7 36.9 36.22 -0.32
20-Jan-15 8695.6 144.9 36.44 0.22
21-Jan-15 8729.5 33.9 36.22 -0.22
22-Jan-15 8761.4 31.9 36.22 0
Average 28.035 0.147

Stranded Deviation (SD) 2.71 0.84

Beta 0.28
Graphical Presentation of HDFC Aggressive Plan - Dir - Growth
For the month of January 15

Interpretation:

HDFC Aggressive Plan - Dir - Growth has been analyzed and it is found
that there is a positive growth. However on the basis of the Avg returns of HDFC
Aggressive Plan - Dir - Growth there is a negative growth 0.11 as against the index
Avg of negative 0.29 the beta being less than 1.21 the stock is not highly volatile.

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Calculations of Risk of LIC Nomura Children’s Fund

For the period of 26th December to 22nd January 2015

Market Level LIC Nomura

DATE ( NIFTY) returns Children’s Fund returns
26-Dec-14 8200.7 10.95
29-Dec-14 8246.3 45.6 10.93 -0.02
30-Dec-14 8248.25 1.95 11.06 0.13
31-Dec-14 8282.7 34.45 10.87 -0.19
1-Jan-15 8284 1.3 10.93 0.06
2-Jan-15 8395.45 111.45 10.96 0.03
5-Jan-15 8378.4 -17.05 10.95 -0.01
6-Jan-15 8127.35 -251.05 10.96 0.01
7-Jan-15 8102.1 -25.25 10.99 0.03
8-Jan-15 8234.6 132.5 11.02 0.03
9-Jan-15 8284.5 49.9 10.94 -0.08
12-Jan-15 8323 38.5 10.96 0.02
13-Jan-15 8299.4 -23.6 10.94 -0.02
14-Jan-15 8277.55 -21.85 10.93 -0.01
15-Jan-15 8494.15 216.6 10.9 -0.03
16-Jan-15 8513.8 19.65 10.9 0
19-Jan-15 8550.7 36.9 10.87 -0.03
20-Jan-15 8695.6 144.9 10.94 0.07
21-Jan-15 8729.5 33.9 10.95 0.01
22-Jan-15 8761.4 31.9 11.04 0.09
Average 28.035 0.0045

Stranded Deviation (SD) 2.71 0.66

Beta 0.27
Graphical presentation of Fund For the month of January 15

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Interpretation:

LIC Nomura Children’s Fund has been analyzed and it is found that there is
a negative growth. However on the basis of the Avg returns of LIC Nomura
Children’s Fund there is a negative growth 0.13 as against the index Avg of negative
0.42 the beta being less than 1 the stock is not highly volatile.

Comparative Study of the performance of the Selected

AMC’s
Sharp index and Trey nor index are calculated
For the month of January 15

Sharp’s Treynor’s
Return Risk(std Beta
Name of the fund Rf (Rm- (Rm-
(Rm) dev) (β)
Rf)/σ Rf)/β

SBI Magnum
Equity Fund -0.0195 2.01 0.21 0.06
Growth
-0.03955 -0.37857
Birla Sun life 95
0.1 0.91 0.32 0.06
Growth
0.043956 0.125
HDFC Aggressive
0.14 0.84 0.28 0.06
Plan- Dir - Growth
0.095238 0.285714
0.0045 0.66 0.27 0.06
-0.08409 -0.20556

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LIC Nomura
Children’s Fund

The graphical representation of Sharp Index:

Interpretation:

From the above table and graph we can know that Birla sun life and ICICI are
giving good returns and they are in first position, and the second position is
SBI

The graphical representation of TREYNER Index:

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Interpretation:

The general trend in the reduction of the market price for various mutual funds
studied is not encouraging the stock market index has also been falling continuously
because of general economic slowdown however the funds are ranked considering
sharp and tenors in the order of performances.

CHAPTER-VII
FINDINGS:
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 MUTUAL FUNDS

1. SBI Magnum Equity Fund-Growth has been analyzed and it is found that
there is a negative growth. However on the basis of the Avg returns of SBI
there is a negative growth 0.41 as against the index Avg of negative 0.28 the
beta being less than 1 the stock is not highly volatile.

2. Birla Sun life 95 Growth have been analyses and it is found that there is a
negative growth. However on the basis of the Avg returns of Birla Sun life
there is a negative growth 0.14as against the index Avg of negative 0.26 the
beta being less than 1 the stock is not highly volatile.

3. HDFC Aggressive Plan - Dir - Growth has been analyzed and it is found that
there is a positive growth. However on the basis of the Avg returns of HDFC
Aggressive Plan - Dir - Growth there is a negative growth 0.11 as against the
index Avg of negative 0.29 the beta being less than 1.21 the stock is not
highly volatile.

4. LIC Nomura Children’s Fund has been analyzed and it is found that there is a
negative growth. However on the basis of the Avg returns of LIC Nomura
Children’s Fund there is a negative growth 0.13 as against the index Avg of
negative 0.42 the beta being less than 1 the stock is not highly volatile.

5. As per Sharpe performance measure, a high Sharpe ratio is preferable as it

indicates a superior risk adjusted performance of a fund. From the above table
Birla sun life and ICICI show a better risk-adjusted performance out of top4
AMC’S.

6. As per TREYNOR’S ratio the Treynor’s reward to volatility - having high

positive index is favorable. Therefore, as per this ratio also HDFC MUTUAL
FUND is preferable.

SUGGESTIONS:

 In terms of equity share and bond weightings, downside risk

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 MUTUAL FUNDS

 protection, tax benefits offered, dividend payout policy, sector focus

 Performance of various funds with similar objectives for at least 3-5 years

 Think hard about investing in sector funds For relatively aggressive investors

 Management fees, annual expenses of the fund and sales loads

 Asset size less than Rs. 25 Crores

 Diversify, but not too much

 MF- an integral part of your savings and wealth building plans.

CONCLUSION:

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From the study analysis conducted it is clear that in EQUITY FUNDS-BIRLA

SUNLIFE MUTUAL FUND is performing very well. Investing in the HDFC
MUTUAL FUND (GROWTH) will leads to profits.

By seeing the overall performance HDFC MUTUAL FUND is performing

very well. The prospective investors are needed to be made aware of the investment in
mutual funds.

The Industry should keep consistency and transparency in its management and
investors objectives. There is 100% growth of mutual fund as foreign AMCS are in
queue to enter the Indian markets. Mutual funds can also portrait in to rural areas.

BIBLIOGRAPHY:

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TEXT BOOKS:

 R.P.Rustagi, Financial Management, Tata MC graw hill publishing

Co LTD, 5 t h edition,(Pg.no.390-396)
 E.Gordon & k.Natajan, financial Market and Services, Himalaya
publish house, 6thedition (pg.no.330-365)

 Ravi M.kishore, Financial management, Vikas publication house PVT Ltd,

9thedition,(Pg.no.335-340)

 P.K.Jain, Total project management, S.Chand & co Ltd, 10 th edition,

(pg.no.260-265)

WEBSITES:

www.amfiindia.com

www.iciciproFDG.com

www.bseindia.com

www.nseinda.com

www.bluechipinda.co.in

DETAILS OF SECONDARY DATA:

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For analysis Net Asset Value (NAV) of the Four AMC For the period of 26 th
December to 22nd January 2015

SBI
HDFC LIC
Market Magnum Birla Sun
Aggressive Nomura
Date Level Equity life 95
Plan - Dir - Children’s
( NIFTY) fund Growth
Growth Fund
Growth
26-Dec-14 8200.7 22.6 153.49 33.28 10.95
29-Dec-14 8246.3 24.7 171.83 39.49 10.93
30-Dec-14 8248.25 24.19 169.29 36.63 11.06
31-Dec-14 8282.7 24.36 166.42 36.59 10.87
1-Jan-15 8284 23.2 156.96 36.6 10.93
2-Jan-15 8395.45 22.68 157.06 36.59 10.96
5-Jan-15 8378.4 22.25 155.27 36.54 10.95
6-Jan-15 8127.35 22.14 155.17 36.59 10.96
7-Jan-15 8102.1 22.5 157.86 36.65 10.99
8-Jan-15 8234.6 22.06 155.48 36.7 11.02
9-Jan-15 8284.5 22.37 156.85 36.5 10.94
12-Jan-15 8323 22.48 158.7 36.6 10.96
13-Jan-15 8299.4 22.13 158.3 36.59 10.94
14-Jan-15 8277.55 21.68 155.66 36.65 10.93
15-Jan-15 8494.15 21.61 154.46 36.62 10.9
16-Jan-15 8513.8 21.21 153.25 36.54 10.9
19-Jan-15 8550.7 21.74 154.09 36.22 10.87
20-Jan-15 8695.6 22.12 154.91 36.44 10.94
21-Jan-15 8729.5 21.97 154.34 36.22 10.95
22-Jan-15 8761.4 22.21 155.49 36.22 11.04

Average 22.51 157.744 36.513 10.9495

8371.473
Calculations of Risk of SBI Magnum Equity fund Growth
For the period of 26th December to 22nd January 2015

SBI Magnum
Market Level Equity fund
Date ( NIFTY) returns Growth Returns
26-Dec-14 8200.7 22.6

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29-Dec-14 8246.3 45.6 24.7 2.1

30-Dec-14 8248.25 1.95 24.19 -0.51
31-Dec-14 8282.7 34.45 24.36 0.17
1-Jan-15 8284 1.3 23.2 -1.16
2-Jan-15 8395.45 111.45 22.68 -0.52
5-Jan-15 8378.4 -17.05 22.25 -0.43
-
6-Jan-15 8127.35 251.05 22.14 -0.11
7-Jan-15 8102.1 -25.25 22.5 0.36
8-Jan-15 8234.6 132.5 22.06 -0.44
9-Jan-15 8284.5 49.9 22.37 0.31
12-Jan-15 8323 38.5 22.48 0.11
13-Jan-15 8299.4 -23.6 22.13 -0.35
14-Jan-15 8277.55 -21.85 21.68 -0.45
15-Jan-15 8494.15 216.6 21.61 -0.07
16-Jan-15 8513.8 19.65 21.21 -0.4
19-Jan-15 8550.7 36.9 21.74 0.53
20-Jan-15 8695.6 144.9 22.12 0.38
21-Jan-15 8729.5 33.9 21.97 -0.15
22-Jan-15 8761.4 31.9 22.21 0.24
Average 28.035 -0.0195
Calculations of Risk of Birla Sun life 95 Growth For the period of 26th
December to 22nd January 2015

Market Level Birla Sun life

Date ( NIFTY) returns 95 Growth returns
26-Dec-14 8200.7 153.49
29-Dec-14 8246.3 45.6 171.83 18.34
30-Dec-14 8248.25 1.95 169.29 -2.54
31-Dec-14 8282.7 34.45 166.42 -2.87
1-Jan-15 8284 1.3 156.96 -9.46
2-Jan-15 8395.45 111.45 157.06 0.1
5-Jan-15 8378.4 -17.05 155.27 -1.79
6-Jan-15 8127.35 -251.05 155.17 -0.1
7-Jan-15 8102.1 -25.25 157.86 2.69
8-Jan-15 8234.6 132.5 155.48 -2.38
9-Jan-15 8284.5 49.9 156.85 1.37
12-Jan-15 8323 38.5 158.7 1.85
13-Jan-15 8299.4 -23.6 158.3 -0.4
14-Jan-15 8277.55 -21.85 155.66 -2.64
15-Jan-15 8494.15 216.6 154.46 -1.2

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16-Jan-15 8513.8 19.65 153.25 -1.21

19-Jan-15 8550.7 36.9 154.09 0.84
20-Jan-15 8695.6 144.9 154.91 0.82
21-Jan-15 8729.5 33.9 154.34 -0.57
22-Jan-15 8761.4 31.9 155.49 1.15
Average 28.035 0.1

Calculations of Risk of HDFC Aggressive Plan - Dir - Growth

For the period of 26th December to 22nd January 2015

HDFC
Market Level Aggressive Plan –
Date ( NIFTY) returns Dir - Growth returns
26-Dec-14 8200.7 33.28
29-Dec-14 8246.3 45.6 39.49 6.21
30-Dec-14 8248.25 1.95 36.63 -2.86
31-Dec-14 8282.7 34.45 36.59 -0.04
1-Jan-15 8284 1.3 36.6 0.01
2-Jan-15 8395.45 111.45 36.59 -0.01
5-Jan-15 8378.4 -17.05 36.54 -0.05
6-Jan-15 8127.35 -251.05 36.59 0.05
7-Jan-15 8102.1 -25.25 36.65 0.06
8-Jan-15 8234.6 132.5 36.7 0.05
9-Jan-15 8284.5 49.9 36.5 -0.2
12-Jan-15 8323 38.5 36.6 0.1
13-Jan-15 8299.4 -23.6 36.59 -0.01
14-Jan-15 8277.55 -21.85 36.65 0.06
15-Jan-15 8494.15 216.6 36.62 -0.03
16-Jan-15 8513.8 19.65 36.54 -0.08
19-Jan-15 8550.7 36.9 36.22 -0.32
20-Jan-15 8695.6 144.9 36.44 0.22
21-Jan-15 8729.5 33.9 36.22 -0.22
22-Jan-15 8761.4 31.9 36.22 0
Average 28.035 0.147
Calculations of Risk of LIC Nomura Children’s Fund

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For the period of 26th December to 22nd January 2015

Market Level LIC Nomura

Date ( NIFTY) returns Children’s Fund returns
26-Dec-14 8200.7 10.95
29-Dec-14 8246.3 45.6 10.93 -0.02
30-Dec-14 8248.25 1.95 11.06 0.13
31-Dec-14 8282.7 34.45 10.87 -0.19
1-Jan-15 8284 1.3 10.93 0.06
2-Jan-15 8395.45 111.45 10.96 0.03
5-Jan-15 8378.4 -17.05 10.95 -0.01
6-Jan-15 8127.35 -251.05 10.96 0.01
7-Jan-15 8102.1 -25.25 10.99 0.03
8-Jan-15 8234.6 132.5 11.02 0.03
9-Jan-15 8284.5 49.9 10.94 -0.08
12-Jan-15 8323 38.5 10.96 0.02
13-Jan-15 8299.4 -23.6 10.94 -0.02
14-Jan-15 8277.55 -21.85 10.93 -0.01
15-Jan-15 8494.15 216.6 10.9 -0.03
16-Jan-15 8513.8 19.65 10.9 0
19-Jan-15 8550.7 36.9 10.87 -0.03
20-Jan-15 8695.6 144.9 10.94 0.07
21-Jan-15 8729.5 33.9 10.95 0.01
22-Jan-15 8761.4 31.9 11.04 0.09
Average 28.035 0.0045

Comparative Study of the performance of the Selected

AMC’s
Sharp index and Trey nor index are calculated
For the month of January 15

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Sharp's Trey nor

Name of Return Risk(std Beta
Rf (Rm-
the Fund (Rm) dev) (β)
Rf)/σ (Rm-Rf)/β

SBI
Magnum
Equity -0.0195 2.01 0.21 0.06
Fund
Growth
-0.03955 -0.37857
Birla Sun
life 95 0.1 0.91 0.32 0.06
Growth
0.043956 0.125
HDFC
Aggressive
0.14 0.84 0.28 0.06
Plan - Dir
- Growth
0.095238 0.285714
LIC
Nomura
0.0045 0.66 0.27 0.06
Children’s
Fund
-0.08409 -0.20556

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