INDIAN MUTUAL FUND INDUSTRY

 Mutual Fund:
A mutual fund is an open-end professionally managed investment fund that pools money from
many investors to purchase securities. Mutual funds are "the largest proportion of equity of
U.S. corporations." Mutual fund investors may be retail or institutional in nature. The term is
typically used in the United States, Canada, and India, while similar structures across the globe
include the SICAV in Europe (‘Investment Company with variable capital') and open-ended
investment company (OEIC) in the UK.

Mutual funds have advantages and disadvantages compared to direct investing in individual
securities. The advantages of mutual funds include economies of scale, diversification, liquidity,
and professional management. However, these come with mutual fund fees and expenses.
Primary structures of mutual funds are open-end funds, unit investment trusts, closed-end
funds and exchange-traded funds (ETFs).

Mutual funds are often classified by their principal investments as money market funds, bond
or fixed income funds, stock or equity funds, hybrid funds, or other. Funds may also be
categorized as index funds, which are passively-managed funds that match the performance of
an index, or actively- managed funds. Hedge funds are not mutual funds as hedge funds cannot
be sold to the general public.

 HDFC Mutual Fund:

HDFC Asset Management Company Ltd. or HDFC Mutual Fund is currently the largest mutual
fund and actively managed equity mutual fund in India. It is the most profitable asset
management company (AMC) in the country as of 31 March, 2018. The company manages
assets worth Rs. 3.43 Lakh Crore as of 31 March 2019.

According to SEBI, its net worth stood at Rs. 61,402 Crore, total income at Rs. 35,229 Crore,
profit (after tax) at Rs. 12,163 Crore in March 2018.
During FY 2018-19, the AMC reported a YoY increase in profit of 61%. They registered a profit of
Rs. 930 Crore in March 2019, a 31% YoY growth. For the March 2019 quarter alone, their profits
stood at Rs. 276 Crore.

HDFC AMC recorded a 16.2% market share in the actively-managed equity oriented schemes in
FY 2018-19.

In the last 5 years, the CAGR of:

 Revenue from operators was 17.41%.

 Operating profit was 20.08%.
 Profit before tax was 21.35%.
 Profit after tax was 21.07%.
 Assets under management (AuM) were 25.86%.
 Active equity AuM was 32.27%.

The company has around 210 branches located in more than 200 cities around India. It has 53
Lakh investors with 91 Lakh live accounts.

HDFC Asset Management Company Ltd. received approval to act as an AMC from SEBİ back in
30 June 2000 under the registration number MF/044/00/6. It also offers portfolio
management/non-binding investment advisory services since 18 September 2016 under the
registration code PM /INPO00000506 from SEBI.

 Top performing HDFC Mutual Funds:

Some of the top performing HDFC Mutual Funds are listed below:

1D 1Y 3Y
1. HDFC Small Cap -0.37% 110.68% 13.14%
Fund Direct Growth
2. HDFC Short Term 0.00% 7.85% 9.22%
Debt Fund Direct Plan
Growth
3. HDFC Mid Cap -0.80% 80.65% 13.71%
Opportunities Direct
Plan Growth
 4. HDFC Top 100 Fund -0.79% 62.37% 12.54%
Direct Plan Growth
5. HDFC Index Fund -0.45% 60.37% 14.10%
Nifty 50 Plan Direct
Growth
6. HDFC Balanced -0.84% 58.04% 12.82%
Advantage Fund Direct
Plan Growth

7. HDFC Liquid Direct 0.00% 3.21% 5.43%

Plan Growth

8. HDFC Capital -0.68% 68.05% 10.21%

Builder Value Fund
Direct Plan Growth

9. HDFC Index Sensex -0.34% 57.81% 14.55%

Direct Plan Growth

10. HDFC Flexi Cap -0.99% 74.24% 13.99%

Direct Plan Growth

 Comparison of different schemes:

i. ELSS Mutual fund

 Expected rate of return is 15%
 Tax saving mutual fund, allows a tax deduction of up to Rs. 150,000
 It comes with the lock in period of 3 years for which ELSS funds are more liquid in
comparison to any other.
 Since ELSS is equity oriented thus it carries all the risks that an equity fund posses.
 Risk associated with ELSS- market risk and liquidity risk.

ii. Money Market Mutual fund

 Expected Return for 2021=0.00%.
Expected Return for 2020=0.39%.
Expected Return for 2019=0.61%.
 It invests in high quality, short term debt instruments, cash and cash equivalent.
  It is considered to as extremely low risk. Thus, carrying a close to the risk free rate of
return.

iii. Balanced fund

 Expected return for 3years is 4.8%.
 It provides stable returns by investing 35.40% of the assets in fixed income options.
 These mutual funds invest some across debt and equity investments.
 On the basis of allocation of assets, the returns on balanced funds are risk adjusted. By
investing in small Capital and mid capital stocks, the equity gains are much higher and
the associated risk factor is controlled by debt investment.

iv. Gold Fund

 Expected rate of return is 0.39%
 Gold mutual funds are ideal for investors who want to diversify their portfolio and lower
the risk of investment.
 It is regulated by SEBI which lowers the risk associated with investing in mutual fund.
 Due to varying gold prices, the performances of its underlying stocks offers differ greatly.
 The return of the best gold funds can even outgrow the actual price of the precious
metal itself, which can create a lucrative opportunity for investors.

v. Equity Funds
 The rate of return for 1year is 10%.
 The asset allocation is based on the type of equity fund and its alignment with the
investment objective. Depending upon the market condition, the asset allocation can be
made purely in stocks of small - cap, mid- cap or large-cap companies.
 After allocating a significant proportion to the equity segment, the remaining amount is
invested in debt and other money market instruments. This helps bring down the
element of risk and take care of sudden redemption requests.
 Among the various categories of mutual funds in India, equity mutual funds generally
deliver relatively higher returns.
 The returns can fluctuate on factors depending on the overall economic condition and
market movements.
 Equity funds have the potential to offer considerable returns to beat inflation.

vi. Debt fund

 The returns are low as compared to the equity funds.
 The debt fund also invests in low quality debt instruments. Sometimes choosing low
quality debt security offers an opportunity to earn higher returns on debt instruments,
and the fund managers take calculated risk.
 If any person is doing some short term investments for 3-12 months, in such a case, it
gives a return of 7-9% returns.
 Risk factor involved in debt funds
a. Credit risk.
b. Interest rate risk.
c. Liquidity risk.