CHAPTER-I

INTRODUCTION

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INTRODUCTION

Mutual fund indicates the fund where in numerous investors come together to
invest in various schemes of mutual fund. Mutual funds are dynamic institution,
which plays a crucial role in an economy by mobilizing savings and investing
them in the capital market, thus establishing a link between savings and the
capital market. A mutual fund is an institution that invests the pooled funds of
public to create a diversified portfolio of securities. Pooling is the key to mutual
fund investing. Each mutual fund has a specific investment objective and tries to
meet that objective through active portfolio management. Mutual fund as an
investment company combines or collects money of its shareholders and invests
those funds in variety of stocks, bonds, and money market instruments. The latter
include securities, commercial papers, certificates of deposits, etc.

Mutual funds provide the investor with professional management of funds and
diversification of investment. Investors who invest in mutual funds are provided
with units to participate in stock markets. These units are investment vehicle that
provide a means of participation in the stock market for people who neither have
time nor the money nor perhaps the expertise to undertake the direct investment
in equities. On the other hand they also provide a route into specialist markets
where direct investment often demands both more time and more knowledge than
an investor may possess. The price of units in any mutual fund is governed by the
value of underlying securities. The value of an investor’s holding in a unit can
therefore, like an investment in share, can go down as well as up. Hence it is said
that mutual funds are subjected to market risk. Mutual fund cannot guarantee a
fixed rate of return. If the particular scheme is performing well then more return
can be expected.

It also depends on the fund manager expertise knowledge. It is also seen that
people invest in particular funds depending on who is the fund manager. 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 invested by the fund
manager in different types of securities depending upon the objective of the
scheme.

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 Mutual Fund Operation Flow Chart

Thus a mutual fund is the most suitable investment for the common person as it
offers an opportunity to invest in a diversified, professionally managed basket of
securities at a relatively low cost. A collected corpus can be used to procure a
diversified portfolio indicating greater returns has also create Economies of scale
through cost reduction. This principle has been effective worldwide as more and
more investors are going the mutual fund way. This portfolio diversification
ensures risk minimization. The interest of the investors is protected by the SEBI,
which acts as a watchdog. Mutual funds are governed by SEBI (Mutual Funds)
regulations, 1996.

NEED FOR STUDY

Mutual Fund being an institutional investment agency is treated as a suitable

vehicle specifically for small investors, who normally feel shy of the capital
market and are unable to predict its conditions. Through different schemes,
mutual funds can provide expert advice and portfolio management by reducing
unsystematic risk while offering good returns it is essential to understand the
performance of the mutual funds for the investor to invest. The mutual fund is an
important financial institution if it performs in an efficient way then a large
number of investor can be attracted toward these funds. In India household

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sector’s savings is the largest among all the sectors. And mutual funds are
considered to be the best investment for small investors.

OBJECTIVES OF THE STUDY

 To study the various mutual fund schemes offered by Hdfc bank Bank so
that performance of each fund can be analysed.
 To evaluate the financial performance of selected major schemes of
different companies, so as to suggest the best to investors.
 To study the performance of mutual funds using Sharpe Ratio to depict
risk-return analysis.

SCOPE OF STUDY

● It is confined to Hdfc bank, Banjara Hills Branch.

● It is conducted for 45 days.
● The data collected and analysed for 5 years.

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RESEARCH METHODOLOGY

Research methodology helps in identifying the problem, collecting and analysing

the required information or data and providing an alternative solution to the
problem. It also helps in collecting the vital information that is required to assist
in better decision making.

Data Sources:-The data is collected from:

1. Primary Source-It is collected by interacting with the employees of Hdfc

bank.

2. Secondary Source-Secondary data is collected from

⮚ Website
⮚ HDFC BANK Journals
⮚ Security Analysis
⮚ Brochures

Sample Size :- The Sample Data is considered for 5 years.

Statistical Tools & Techniques for Data analysis

To analyse the information (or) data collected form Branch Manager and various
financial Statements the following tools are used:

1. Percentages
2. Averages
3. Range
4. Bar Chart
5. Sharpe Ratio

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LIMITATIONS OF THE STUDY

The following are the limitations of the study

1. The study is restricted only to the various mutual funds of few companies
alone.
2. Due to shortage of time an extensive study could not be carried out.
3. The study is mainly carried out based on the secondary data.
4. The study is based on the historical data and information provided in the
newspapers,magazines, journals and websites and from the host organizations
only.
5. The accuracy of the study dependson the accuracy of the data
provided. Hence had to depend fully on secondary data alone.
6. The study is limited to three funds and schemes i.e., tax saving funds,
large cap funds & small cap funds only.
7. The study is limited to only four AMCs. which are UTI, ICICI
PRUDENTIAL, SBI, and HDFC BANK.

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 CHAPTER-II

THEORETICAL FRAMEWORK

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THEORETICAL FRAMEWORK

Mutual funds are financial intermediaries which collect the savings of investors
and invest them in a large and well diversified portfolio of securities such as
money market instruments, corporate and Government bonds and equity shares of
joint stock companies. A mutual fund is a pool of commingle funds invested by
different investors, who have no contact with each other. Mutual funds are
conceived as institutions for providing small investors with avenues of investment
in the capital market. Since small investors generally do not have adequate time,
knowledge, experience and resources for directly accessing the capital market,
they have to rely on an intermediary which undertakes. By pooling their assets
through mutual funds, investors achieve economies of scale.

A mutual fund is nothing but a form of collective investment. It is formed by the

coming together of a number of investors who transfer their surplus funds to a
professionally qualifies organization to manage it. To get the surplus funds from
investors, the fund adopts a simple technique. Each fund is divided into a small
fraction called ‘Units’ of equal value. Each investor is allocated units in
proportion to the size of his investment. Thus, every investor, whether big or
small, will have a stake in the fund and can enjoy the wide portfolio of the
investment held by the fund. Hence, mutual funds enable millions of small and
large investors to participate in and derive the benefit of the capital market
growth. It has emerged as a popular vehicle of creation of wealth due to high
return, lower cost and diversified risk.

The securities and Exchange Board of India (Mutual funds) Regulations, 1993
defines a mutual fund as “A fund established in the form of a trust by a sponsor,
to raise money by the trustees through the sale of units to the public, under one or
more schemes, for investing in securities in accordance with these regulations”.

These mutual funds are referred to as Unit Trusts in the U.K. and as Open End
Investment companies in the U.S.A. therefore, Kamm, J.O. defines an open end
investment company as “an organization formed for the investment of funds
obtained from individuals and institutional investors who in exchange for the

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funds receive shares which can be redeemed at any time at their underlying asset
values”.

According to Weston J. Fred and Brigham, Eugene, F., Unit Trusts are
“corporations which accept dollars from savers and then use these dollars to buy
stocks, long term bonds, short term debt instruments issued by business or
government units; these corporations pool funds and thus reduce risk by
diversification’.

Concept of Mutual Fund

Concept of Mutual Fund

A Mutual Fund is a trust registered with the Securities and Exchange Board of
India (SEBI) which pools up the money from individual/corporate investors and
invests the same on behalf of the investors/units holders, in equity shares,
government securities, bonds, call money market etc. The income earned

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 through these investments and the capital appreciations realized are shared by its
unit holders in proportion to the number of units owned by them. This pooled
income is professionally managed on behalf the unit-holders, and each investor
holds a proportion of the portfolio.

Operational flow of Mutual Fund

The following diagram depicts the operational flow of Mutual Fund

Operational flow of Mutual Fund

Parties to Mutual fund

The following diagram illustrates various entities involve in organizational

structure of mutual fund:

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 Parties of Mutual Fund

Investors

Every investor, given his/her financial position and personal disposition, has a
certain inclination to take risk. The hypothesis is that by taking an incremental
risk, it would be possible for the investor to earn an incremental return.

Mutual fund is a solution for investors who lack the time, the inclination or the
skills to actively manage their investment risk in individual securities. They
delegate this role to the mutual fund, while retaining the right and the obligation
to monitor their investments in the scheme.

In the absence of a mutual fund option, the money of such “passive” investors
would lie either in bank deposits or other ‘safe’ investment options, thus
depriving them of the possibility of earning a better return. Investing through a
mutual fund would make economic sense for an investor if his/her investment,
over medium to long term, fetches a return that is higher than what would
otherwise have earned by investing directly.

Sponsors

Sponsor is the company, which sets up the Mutual Fund as per the provisions
laid down by the Securities and Exchange Board of India (SEBI). SEBI mainly

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fixes the criteria of sponsors based on sufficient experience, net worth, and past
track record.

Asset Management Company (AMC)

The AMC manages the funds of the various schemes and employs a large
number of professionals for investment, research and agent servicing. The AMC
also comes out with new schemes periodically. It plays a key role in the running
of mutual fund and operates under the supervision and guidance of the trustees.
An AMC’s income comes from the management fees, it charges for the schemes
it manages. The management fees, is calculated as a percentage of net assets
managed.

An AMC has to employ people and bear all the establishment costs that are
related to its activity, such as for the premises, furniture, computers and other
assets, etc. So long as the income through management fees covers its expenses,
an AMC is economically viable. SEBI has issued the following guidelines for
the formation of AMCs:

a) An AMC should be headed by an independent non-interested and non-

executive chairman.
b) The managing director and other executive staff should be full-time
employees of AMC.
c) Fifty per cent of the board of trustees of AMC should be outside directors
who are not in any way connected with the bank.
d) The board of directors shall not be entitled to any remuneration other than
the sitting fees.
e) The AMCs will not be permitted to conduct other activities such as
merchant banking or issue management.
Trustees

Trustees are an important link in the working of any mutual fund. They are
responsible for ensuring that investors’ interests in a scheme are taken care of
properly. They do this by a constant monitoring of the operations of the various
schemes. In return for their services, they are paid trustee fees, which are
normally charged to the scheme.

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Distributors

Distributors earn a commission for bringing investors into the schemes of a

mutual fund. This commission is an expense for the scheme. Depending on the
financial and physical resources at their disposal, the distributors could be:

a) Tier 1 distributors who have their own or franchised network reaching

out to investors all across the country; or
b) Tier 2 distributors who are generally regional players with some reach
within their region; or
c) Tier 3 distributors who are small and marginal players with limited
reach.
The distributors earn a commission from the AMC.

Registrars

An investor’s holding in mutual fund schemes is typically tracked by the schemes

Registrar and Transfer Agent. Some AMCs prefer to handle this role on their own
instead of appointing R & T. The Registrar or the AMC as the case may be
maintains an account of the investor’s investments and disinvestments from the
schemes.

Requests to invest more money into a scheme or to redeem money against

existing investments in a scheme are processed by the R & T.

Custodian

The custodian maintains custody of the securities in which the scheme invests.
This ensures an ongoing independent record of the investments of the scheme.
The custodian also follows up on various corporate actions, such as rights,
bonus and dividends declared by investee companies. At present, when the
securities are being dematerialized, the role of the depository for such
independent record of investments is growing. No custodian in which the
sponsor or its associates hold 50 percent or more of the voting rights of the share
capital of the custodian or where 50 per cent or more of the directors of the
custodian represent the interest of the sponsor or its associates shall act as

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 custodian for a mutual fund constituted by the same sponsor or any of its
associates or subsidiary company.

TYPES

TYPES OF MUTUAL FUND

1. Open-End Funds

Funds that can sell and purchase units at any point in time are classified as Open-
end Funds. The fund size (corpus) of an open-end fund is variable (keeps
changing) because of continuous selling (to investors) and repurchases (from the
investors) by the fund. An open-end fund is not required to keep selling new units
to the investors at all times but is required to always repurchase, when an investor
wants to sell his units. The NAV of an open-end fund is calculated every day.

2. Closed-End Funds

Funds that can sell a fixed number of units only during the New Fund Offer
(NFO) period are known as Closed-end Funds. The corpus of a Closed-end Fund
remains unchanged at all times. After the closure of the offer, buying and
redemption of units by the investors directly from the Funds is not allowed.
However, to protect the interests of the investors, SEBI provides investors with
two avenues to liquidate their positions.

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3. Load Funds/no-load funds
a. Load Funds

Mutual Funds incur various expenses on marketing, distribution, advertising,

portfolio churning & fund manager’s salary. Many funds recover these expenses
from the investors in the form of load. These funds are known as Load Funds. A
load fund may impose following types of loads on the investors:

b. Entry Load

It refers to the load charged to an investor at the time of his entry into a scheme.
Entry load is deducted from the investor’s contribution amount to the fund.

c. Exit Load

It is imposed on an investor when he redeems his units (exits from the scheme).
Exit load is deducted from the redemption proceeds to an outgoing investor.

d. Deferred Load

Deferred load is charged to the scheme over a period of time.

e. Contingent Deferred Sales Charge (CDSS)

In some schemes, the percentage of exit load reduces as the investor stays longer
with the fund.

4. No-load Funds

All those funds that do not charge any of the above mentioned loads are known as
No-load Funds.

5. Tax-exempt Funds/ Non-Tax-exempt Funds

a. Tax-exempt Funds

Funds that invest in securities free from tax are known as Tax-exempt Funds. All
open-end equity oriented funds are exempt from distribution tax (tax for distributing
income to investors). Long term capital gains and dividend income in the hands of
investors are tax-free.

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b. Non-Tax-exempt Funds

Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In

India, all funds, except open-end equity oriented funds are liable to pay tax on
distribution income. Profits arising out of sale of units by an investor within 12
months of purchase are categorized as short-term capital gains, which are taxable.
Sale of units of an equity oriented fund is subject to Securities Transaction Tax
(STT). STT is deducted from the redemption proceeds to an investor.

Broad Mutual Fund Types

6. Equity Funds

Equity funds are considered to be the more risky funds as compared to other fund
types, but they also provide higher returns than other funds. It is advisable that an
investor looking to invest in an equity fund should invest for long term i.e. for 3
years or more. There are different types of equity funds each falling into different

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risk bracket. In the order of decreasing risk level, there are following types of
equity funds:

1. Aggressive Growth Funds

In Aggressive Growth Funds, fund managers aspire for maximum capital

appreciation and invest in less researched shares of speculative nature. It is
because of speculative investments Aggressive Growth Funds become more
volatile and this prone to higher risk than other equity funds.

a. Growth Funds

Growth Funds also invest for capital appreciation (with time horizon of 3 to 5
years) but they are different from Aggressive Growth Funds in the sense that they
invest in companies that are expected to outperform the market in the future.
Without entirely adopting speculative strategies, Growth Funds invest in those
companies that are expected to post above average earnings in the future.

b. Specialty Funds

Specialty Funds have stated criteria for investments and their portfolio comprises
of only those companies that meet their criteria. Criteria for some specialty funds
could be to invest/not to invest in particular regions/companies. Speciality funds
are concentrated and thus are comparatively riskier than diversified funds. There
are following types of specialty funds:

c. Sector Funds

Equity funds that invest in a particular sector/industry of the market are known as
Sector Funds. The exposure of these funds is limited to a particular sector (say
Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving
Consumer Goods) which is why they are more risky than equity funds that invest
in multiple sectors.

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d. Foreign Securities Funds

Foreign Securities Equity Funds have the option to invest in one or more foreign
companies. Foreign securities funds achieve international diversification and
hence they are less risky than sector funds. However, foreign securities funds are
exposed to foreign exchange rate risk and country risk.

e. Mid-Cap or Small-Cap Funds

Funds that invest in companies having lower market capitalization than large
capitalization companies are called Mid-Cap or Small-Cap Funds. Market
capitalization of Mid-Cap companies is less than that of big, blue chip companies
(less than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap
companies have market capitalization of less than Rs. 500 crores.

Market Capitalization of a company can be calculated by multiplying the market

price of the company's share by the total number of its outstanding shares in the
market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of
Large-Cap Companies which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.

4. Diversified Equity Funds

Except for a small portion of investment in liquid money market, diversified

equity funds invest mainly in equities without any concentration on a particular
sectors. These funds are well diversified and reduce sector-specific or company-
specific risk. However, like all other funds diversified equity funds too are
exposed to equity market risk. One prominent type of diversified equity fund in
India is Equity Linked Savings Schemes (ELSS). As per the mandate, a minimum
of 90% of investments by ELSS should be in equities at all times.

1. Equity Index Funds

Equity Index Funds have the objective to match the performance of a specific
stock market index. The portfolio of these funds comprises of the same
companies that form the index and is constituted in the same proportion as the

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index. Equity index funds that follow broad indices (like S&P CNX Nifty,
Sensex) are less risky than equity index funds that follow narrow sectoral indices
(like BSEBANKEX or CNX Bank Index etc).

2. Debt/Income Funds

Funds that invest in medium to long-term debt instruments issued by private

companies, banks, financial institutions, governments and other entities belonging
to various sectors (like infrastructure companies etc.) are known as Debt / Income
Funds. Debt funds are low risk profile funds that seek to generate fixed current
income (and not capital appreciation) to investors. In order to ensure regular
income to investors, debt (or income) funds distribute large fraction of their
surplus to investors. To minimize the risk of default, debt funds usually invest in
securities from issuers who are rated by credit rating agencies and are considered
to be of "Investment Grade".

3. Diversified Debt Funds

Debt funds that invest in all securities issued by entities belonging to all sectors of
the market are known as diversified debt funds. The best feature of diversified
debt funds is that investments are properly diversified into all sectors which
results in risk reduction. Any loss incurred, on account of default by a debt issuer
is shared by all investors which further reduces risk for an individual investor.

4. Focused Debt Funds

Unlike diversified debt funds, focused debt funds are narrow focus funds that are
confined to investments in selective debt securities, issued by companies of a
specific sector or industry or origin. Some examples of focused debt funds are
sector, specialized and offshore debt funds, funds that invest only in Tax Free
Infrastructure or Municipal Bond. Although not yet available in India, these funds
are conceivable and may be offered to investors very soon.

A. Assured Return Funds

Although it is not necessary that a fund will meet its objectives or provide assured
returns to investors, but there can be funds that come with a lock-in period and
offer assurance of annual returns to investors during the lock-in period. Any

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shortfall in returns is suffered by the sponsors or the Asset Management
Companies (AMCs). These funds are generally debt funds and provide investors
with a low-risk investment opportunity. However, the security of investments
depends upon the net worth of the guarantor (whose name is specified in advance
on the offer document).

a. Fixed Term Plan Series

Fixed Term Plan Series usually are closed-end schemes having short term
maturity period (of less than one year) that offer a series of plans and issue units
to investors at regular intervals. Unlike closed-end funds, fixed term plans are not
listed on the exchanges. Fixed term plan series usually invest in debt / income
schemes and target short-term investors. The objective of fixed term plan
schemes is to gratify investors by generating some expected returns in a short
period. Also known as Government Securities in India, Gilt Funds invest in
government papers (named dated securities) having medium to long term
maturity period. Issued by the Government of India, these investments have little
credit risk (risk of default) and provide safety of principal to the investors.
However, like all debt funds, gilt funds too are exposed to interest rate risk.
Interest rates and prices of debt securities are inversely related and any change in
the interest rates results in a change in the NAV of debt/gilt funds in an opposite
direction.

4. Money Market/Liquid Funds

Money market / liquid funds invest in short-term (maturing within one year)
interest bearing debt instruments. These securities are highly liquid and provide
safety of investment, thus making money market / liquid funds the safest
investment option when compared with other mutual fund types. However, even
money market / liquid funds are exposed to the interest rate risk. The typical
investment options for liquid funds include Treasury Bills (issued by
governments), Commercial papers (issued by companies) and Certificates of
Deposit (issued by banks).

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5. Hybrid Funds

As the name suggests, hybrid funds are those funds whose portfolio includes a
blend of equities, debts and money market securities. Hybrid funds have an equal
proportion of debt and equity in their portfolio. There are following types of
hybrid funds in India:

a. Balanced Funds

The portfolio of balanced funds includes assets like debt securities, convertible
securities, and equity and preference shares held in a relatively equal proportion.
The objectives of balanced funds are to reward investors with a regular income,
moderate capital appreciation and at the same time minimizing the risk of capital
erosion. Balanced funds are appropriate for conservative investors having a long
term investment horizon.

b. Growth-and-Income Funds

Funds that combine features of growth funds and income funds are known as
Growth-and-Income Funds. These funds invest in companies having potential for
capital appreciation and those known for issuing high dividends. The level of
risks involved in these funds is lower than growth funds and higher than income
funds.

6. Commodity Funds

Those funds that focus on investing in different commodities (like metals, food
grains, crude oil etc.) or commodity companies or commodity futures contracts
are termed as Commodity Funds. A commodity fund that invests in a single
commodity or a group of commodities is a specialized commodity fund and a
commodity fund that invests in all available commodities is a diversified
commodity fund and bears less risk than a specialized commodity fund. “Precious
Metals Fund” and Gold Funds (that invest in gold, gold futures or shares of gold
mines) are common examples of commodity funds.

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7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest
in shares/securitized assets of housing finance companies, are known as
Specialized Real Estate Funds. The objective of these funds may be to generate
regular income for investors or capital appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end

and an open-end mutual fund. Exchange Traded Funds follow stock market
indices and are traded on stock exchanges like a single stock at index linked
prices. The biggest advantage offered by these funds is that they offer
diversification, flexibility of holding a single share (tradable at index linked
prices) at the same time. Recently introduced in India, these funds are quite
popular abroad.

9. Fund of Funds

Mutual funds that do not invest in financial or physical assets, but do invest in
other mutual fund schemes offered by different AMCs, are known as Fund of
Funds. Fund of Funds maintain a portfolio comprising of units of other mutual
fund schemes, just like conventional mutual funds.

IMPORTANCE

1. Portfolio Diversification Mutual Funds invest in a well-diversified portfolio

of securities which enables investor to hold a diversified investment portfolio
(whether the amount of investment is big or small).

2. Professional Management Fund manager undergoes through various research

works and has better investment management skills which ensure higher returns
to the investor than what he can manage on his own.

3. Less Risk Investors acquire a diversified portfolio of securities even with a

small investment in a Mutual Fund. The risk in a diversified portfolio is lesser
than investing in merely 2 or 3 securities.

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 4. Low Transaction Costs Due to the economies of scale (benefits of larger
volumes), mutual funds pay lesser transaction costs. These benefits are passed on
to the investors.

5. Liquidity An investor may not be able to sell some of the shares held by him
very easily and quickly, whereas units of a mutual fund are far more liquid.

6. Choice of Schemes Mutual funds provide investors with various schemes with
different investment objectives. Investors have the option of investing in a
scheme having a correlation between its investment objectives and their own
financial goals. These schemes further have different plans/options

PROCESS

● The recommended list of mutual funds is released on a half-yearly basis for

equity, and on a quarterly basis for debt. 
● The selection criterion takes into account factors like consistency of performance,
alpha generation and risk management, as well as fund manager skills. 
● Fund performance over the last 24 to 36 months is considered depending on the
asset class being evaluated.
● Various statistical tools are then applied to arrive at the final set of recommended
funds across various categories.

MERITS

Mutual funds have designed to provide maximum benefits to investors, and fund
manager have research team to achieve schemes objective. Assets Management
Company has different type of sector funds, which need to proper planning for
strategic investment and to achieve the market return

● Portfolio Diversification

Mutual Funds invest in a well-diversified portfolio of securities which enables

investor to hold a diversified investment portfolio.

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● Professional Management

Fund manager undergoes through various research works and has better
investment management skills which ensure higher returns to the investor than
what he can manage on his own.

● Less Risk

Investors acquire a diversified portfolio of securities even with a small investment

in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in
merely 2 or 3 securities.

● Low Transaction Costs

Due to the economies of scale, mutual funds pay lesser transaction costs. Where
the benefits are passed on to the investors.

● Liquidity

An investor may not be able to sell some of the shares held by him very easily
and quickly, whereas units of a mutual fund are far more liquid.

DEMERITS

● Professional Management

Many investors debate over whether or not the so-called professionals are any
better than you or I at picking stocks.

● Costs

Mutual funds don't exist solely to make life easier all funds are in it for a profit.
The mutual fund industry is masterful at burying costs under layers of jargon.
These costs are so complicated that in this tutorial have devoted an entire section
to the subject.

● Dilution

Dilution is also the result of a successful fund getting too big. The money pours
into funds that has strong success, the manager often has trouble finding a good
investment for all the new money.

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● Taxes

When making decisions about the money, fund managers don't consider the
personal tax situation. when a fund manager sells a security, a capital-gain tax is
triggered, which affects how profitable the individual is from the sale. It might
have been more advantageous for the individual to defer the capital gains
liability.

● Lack of Control

Investors typically cannot ascertain the exact make-up of a fund’s portfolio at any
given time, nor can they directly influence which securities the fund manager
buys and sells or the timing of those trades.

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 CHAPTER-II

REVIEW OF LITERATURE

26
REVIEW OF LITERATURE

Dr.Deepak Agarwal in his article titled “Measuring performance of Indian

Mutual Funds” gave the development of the Indian Capital Market and
deregulations of the economy in 1992 where there been structural changes in both
primary and secondary markets. Mutual funds are key contributors to the
globalization of financial markets and one of the main sources of capital flows to
emerging economies. Despite their importance in emerging markets, little is
known about their investment allocation and strategies. This article provides an
overview of mutual fund activity in emerging markets. It describes about their
size and asset allocation.

This paper is a process to analyse the Indian Mutual Fund Industry pricing
mechanism with empirical studies on its valuation. It also analyses data at both
the fund-manager and fund-investor levels. The study revealed that the
performance is affected by the saving and investment habits of the people and the
second side the confidence and loyalty of the fund Manager and rewards affects
the performance of the MF industry in India.

Mr.NarayanRaoSapar in this article titled “Performance Evaluation of Indian

Mutual Funds” explained the performance evaluation of Indian mutual funds in a
bear market is carried out through relative performance index, risk-return
analysis, Treynor's ratio, Sharpe's ratio, Sharpe's measure, Jensen's measure, and
Fama's measure. The data used is monthly closing NAVs. Then after excluding
the funds whose returns are less than risk-free returns, 58 schemes were used for
further analysis. Mean monthly (logarithmic) return and risk of the sample mutual
fund schemes during the period were 0.59% and 7.10%, respectively, compared
to similar statistics of 0.16% and 8.57% for market portfolio. The results of
performance measures suggest that most of the mutual fund schemes in the
sample of 58 were able to satisfy investor's expectations by giving excess returns
over expected returns based on both premium for systematic risk and total risk.

27
D.N. Rao in his article titled “A Study of Information Needs of Mutual Funds
Investors & Implications for Web Based Marketing of Mutual Fund Products”
gave that Mutual funds are one of the most important financial service vehicles
for investments.

In India, the Asset Management Companies market their investment products

largely through AMFI Certified Agents, Service Centres and company’s web
portals. There is little promotion in print media and in the recent times AMCs
have begun outdoor advertising through large size Bill Boards/Hoardings.

Mr. Sunil Madhav and Dr Prathap M Chauhan in their article titled

“Comparative study of mutual funds of select Indian Companies” India’s mutual
fund market has witnessed phenomenal growth over the last decade. The total of
390 schemes comprising of 198 Equity mutual funds, 138 debt schemes and 74
hybrid schemes are selected for the study. The performance of selected Indian
companies mutual fund is analysed with the help of return, risk. Selected Mutual
Fund are compared with their respective bench mark.

MS Shalini Goyal and MS Dauli Bansal in this article titled “A Study of

Mutual Funds in India”also says where and how we have to invest mutual fund,
why it dangerous to directly invest in stock market as you might have to face loss.
Investing in mutual funds helps you to diversify your risk. This study was
conducted to analyse and compare different types of mutual funds in India.

Y prabhavathi and N T Krishna Kishore in their article titled “Investor’s

preferences towards Mutual Fund and Future Investments” about the start of
Mutual Funds which gave an opportunity to the common man to hope of high
returns from their investments when compared to other traditional sources of
investments. The main focus of the study is to understand the attitude, awareness
and preferences of mutual fund investors. Most of the respondents prefer

28
systematic investment plans and got their sources of information primarily from
banks and financial advisors .Investors preferred mutual funds mainly for
professional fund management and better returns and assessed funds mainly
through Net Asset Values and past performance.

Dr.D.S. Chaubey in the article titled “A Study on Indian Mutual Funds Equity
Diversified growth schemes and their Performance evaluation”, about Indian
Mutual Fund industry has experienced tremendous growth due to infrastructure
and also supported by high saving of funds. After Liberalization and globalization
of Indian economy, market witness huge crowd towards the option of investing in
mutual funds but investment in a particular funds needs a lot of specifications like
investor’s objectives , cost, availability of funds, risk & return factors etc. and
thus invite fundamental study for better future and growth. This paper aims to
know how the performance of mutual funds is assessed and ranked after
analysing the NAV and their respective returns so as to measure investment
avenues.

Meenakshi Garg in her article titled “A Study on Performance Evaluations of

Selected Mutual funds in India” Here an attempt has been made to examine the
trends interms of growth, size,volume of mutual funds in India and evaluate the
financial performance of selected mutual funds in India. For evaluating the
financial performance of selected mutual funds, the period of the study was taken
by the researcher from April 2002 to March 2013. The sample was selected Tax
Saving Schemes, ETF, Growth (Equity Diversified) and Index/sectorial and
Contra Fund. She finds that Tax saving schemes out-performed the market in
terms of absolute return in different years of the study. However, these schemes
and market returns did not provide an adequate return to cover risk-free return
and total risk of the scheme. The market performance funds have a significant
positive influence on the entire sample schemes performance. The present NAV
is positively and significantly correlated with the past NAV all the time lags of
the selected schemes. The study also suggested that the mutual fund must ensure
not only good performance over the market but also consistency in their return.

29
Samar Mondal has given this in his article titled “Growth of Mutual  Fund in
India with Comparative Performance with SBI Equity & ICICI Prudential
Mutual Fund” about A Mutual fund is a investment plan into which investor place
their contribution that are to be invested in accordance with a stated objective.
Mutual Funds serve as a key financial intermediary to playing a crucial role in
converting the investors savings to capital market, thus establishing a link
between savings and the capital market. Small investors are unable to diversity
their investment because of their limited funds. Mutual Fund offer a way for these
investors to diversify their risk. The mutual fund industry in India came into
being in 1963 with the setting up of the Unit Trust of India (UTI).

Dr. Sandeep Bansal, Deepak Garg and Sanjeev K Saini (2012), havestudied
Impact of Sharpe Ratio & Treynor’s Ratio on Selected Mutual Fund Schemes.
This paper examines the performance of selected mutual fund schemes, that the
risk profile of the aggregate mutual fund universe can be accurately compared by
a simple market index that offers comparative monthly liquidity, returns,
systematic & unsystematic risk and complete fund analysis by using the special
reference of Sharpe ratio and Treynor’s ratio.

Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2017), conducted a

researchon Comparative Performance Analysis of Select Indian Mutual Fund
Schemes. This study analyzes the performance of Indian owned mutual funds and
compares their performance. The performance of these funds was analyzed using
a five year NAVs and portfolio allocation. Findings of the study reveals that,
mutual funds out perform naïve investment. Mutual funds as a medium-to-long
term investment option are preferred as a suitable investment option by investors.

30
Dr. Yogesh Kumar Mehta (Feb 2012), has studied Emerging Scenario ofMutual
Funds in India: An Analytical Study of Tax Funds. The present study is based on
selected equity funds of public sector and private sector mutual fund. Corporate
and Institutions who form only 1.18% of the total number of investors accounts in
the MFs industry, contribute a sizeable amount of Rs. 2,87,108.01 crore which is
56.55% of the total net assets in the MF industry. It is also found that MFs did not
prefer debt segment.

31
 CHAPTER-III

INDUSTRY PROFILE

&

COMPANY PROFILE

32
A bank is a financial institution that accepts deposits and channels those deposits into
lending activities. Banks primarily provide financial services to customers while enriching
investors. Government restrictions on financial activities by banks vary over time and
location. Banks are important players in financial markets and offer services such as
investment funds and loans. In some countries such as Germany, banks have historically
owned major stakes in industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies. In Japan, banks are
usually the nexus of a cross-share holding entity known as the keiretsu. In France,
bancassurance is prevalent, as most banks offer insurance services (and now real estate
services) to their clients.

Introduction

India’s banking sector is constantly growing. Since the turn of the century, there has been a
noticeable upsurge in transactions through ATMs, and also internet and mobile banking.

Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in
2019, the landscape of the banking industry began to change. The bill allows the Reserve
Bank of India (RBI) to make final guidelines on issuing new licenses, which could lead to a
bigger number of banks in the country. Some banks have already received licences from the
government, and the RBI's new norms will provide incentives to banks to spot bad loans and
take requisite action to keep rogue borrowers in check.

Over the next decade, the banking sector is projected to create up to two million new jobs,
driven by the efforts of the RBI and the Government of India to integrate financial services
into rural areas. Also, the traditional way of operations will slowly give way to modern
technology.

Market size

Total banking assets in India touched US$ 1.8 trillion in FY19and are anticipated to cross
US$ 28.5 trillion in FY25.

Bank deposits have grown at a compound annual growth rate (CAGR) of 21.2 per cent over
FY06–18. Total deposits in FY19were US$ 1,274.3 billion.

33
Total banking sector credit is anticipated to grow at a CAGR of 20.1 per cent (in terms of
INR) to reach US$ 2.4 trillion by 2021.

In FY17, private sector lenders witnessed discernable growth in credit cards and personal
loan businesses. HDFC Bank witnessed 171.6 per cent growth in personal loan disbursement
in FY17, as per a report by Emkay Global Financial Services. Axis Bank's personal loan
business also rose 49.8 per cent and its credit card business expanded by 31.1 per cent.

Investments

Bengaluru-based software services exporter Mphasis Ltd has bagged a five-year contract
from Punjab National Bank (PNB) to set up the bank’s contact centres in Mangalore and
Noida (UP). Mphasis will provide support for all banking products and services, including
deposits operations, lending services, banking processes, internet banking, and account and
card-related services. The company will also offer services in multiple languages.

Microfinance companies have committed to setting up at least 30 million bank accounts

within a year through tie-ups with banks, as part of the Indian government’s financial
inclusion plan. The commitment was made at a meeting of representatives of 25 large
microfinance companies and banks and government representatives, which included financial
services secretary Mr GS Sandhu.

Export-Import Bank of India (Exim Bank) will increase its focus on supporting project
exports from India to South Asia, Africa and Latin America, as per Mr Yaduvendra Mathur,
Chairman and MD, Exim Bank. The bank has moved up the value chain by supporting
project exports so that India earns foreign exchange. In 2019–18, Exim Bank lent support to
85 project export contracts worth Rs 24,255 crore (US$ 3.96 billion) secured by 47
companies in 23 countries.

Government Initiatives

The RBI has given banks greater flexibility to refinance current long-gestation project loans
worth Rs 1,000 crore (US$ 173.42 million) and more, and has allowed partial buyout of such
loans by other financial institutions as standard practice. The earlier stipulation was that
buyers should purchase at least 50 per cent of the loan from the existing banks. Now, they get
as low as 25 per cent of the loan value and the loan will still be treated as ‘standard’.

34
The RBI has also relaxed norms for mortgage guarantee companies (MGC) enabling these
firms to use contingency reserves to cover for the losses suffered by the mortgage guarantee
holders, without the approval of the apex bank. However, such a measure can only be
initiated if there is no single option left to recoup the losses.

SBI is planning to launch a contact-less or tap-and-go card facility to make payments in

India. Contact-less payment is a technology that has been adopted in several countries,
including Australia, Canada and the UK, where customers can simply tap or wave their card
over a reader at a point-of-sale terminal, which reads the card and allows transactions.

SBI and its five associate banks also plan to empower account holders at the bottom of the
social pyramid with a customer call facility. The proposed facility will help customers get an
update on available balance, last five transactions and cheque book request on their mobile
phones.

Road Ahead

India is yet to tap into the potential of mobile banking and digital financial services. Forty-
seven per cent of the populace have bank accounts, of which half lie dormant due to reliance
on cash transactions, as per a report. Still, the industry holds a lot of promise.

India's banking sector could become the fifth largest banking sector in the world by 2021 and
the third largest by 2025. These days, Indian banks are turning their focus to servicing clients
and enhancing their technology infrastructure, which can help improve customer experience
as well as give banks a competitive edge.

Exchange Rate Used: INR 1 = US$ 0.0173 as on October 28, 2021

The level of government regulation of the banking industry varies widely, with countries such
as Iceland, having relatively light regulation of the banking sector, and countries such as
China having a wide variety of regulations but no systematic process that can be followed
typical of a communist system.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy,
which has been operating continuously since 1772.

35
History

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the
Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk
covered by a green tablecloth. However, there are traces of banking activity even in ancient
times, which indicates that the word 'bank' might not necessarily come from the word 'banco'.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the foreign currency
into the only legal tender in Rome—that of the Imperial Mint.

The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC,
presented in the British Museum in London. The coin shows a banker's table (trapeza) laden
with coins, a pun on the name of the city.

In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.

Traditional banking activities

Banks act as payment agents by conducting checking or current accounts for customers,
paying cheques drawn by customers on the bank, and collecting cheques deposited to
customers' current accounts. Banks also enable customer payments via other payment
methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making installment loans, and by
investing in marketable debt securities and other forms of money lending.

36
Banks provide almost all payment services, and a bank account is considered indispensable
by most businesses, individuals and governments. Non-banks that provide payment services
such as remittance companies are not normally considered an adequate substitute for having a
bank account.

Banks borrow most funds from households and non-financial businesses, and lend most funds
to households and non-financial businesses, but non-bank lenders provide a significant and in
many cases adequate substitute for bank loans, and money market funds, cash management
trusts and other non-bank financial institutions in many cases provide an adequate substitute
to banks for lending savings to.

Entry regulation

Currently in most jurisdictions commercial banks are regulated by government entities and
require a special bank licence to operate.

Usually the definition of the business of banking for the purposes of regulation is extended to
include acceptance of deposits, even if they are not repayable to the customer's order—
although money lending, by itself, is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the
market, i.e. a government-owned (central) bank. Central banks also typically have a
monopoly on the business of issuing banknotes. However, in some countries this is not the
case. In the UK, for example, the Financial Services Authority licences banks, and some
commercial banks (such as the Bank of Scotland) issue their own banknotes in addition to
those issued by the Bank of England, the UK government's central bank.

Accounting for bank accounts

Bank statements are accounting records produced by banks under the various accounting
standards of the world. Under GAAP and IFRS there are two kinds of accounts: debit and
credit. Credit accounts are Revenue, Equity and Liabilities. Debit Accounts are Assets and
Expenses. This means you credit a credit account to increase its balance, and you debit a
debit account to decrease its balance.

37
This also means you debit your savings account every time you deposit money into it (and the
account is normally in deficit), while you credit your credit card account every time you
spend money from it (and the account is normally in credit).

However, if you read your bank statement, it will say the opposite—that you credit your
account when you deposit money, and you debit it when you withdraw funds. If you have
cash in your account, you have a positive (or credit) balance; if you are overdrawn, you have
a negative (or deficit) balance.

The reason for this is that the bank, and not you, has produced the bank statement. Your
savings might be your assets, but the bank's liability, so they are credit accounts (which
should have a positive balance). Conversely, your loans are your liabilities but the bank's
assets, so they are debit accounts (which should also have a positive balance).

Where bank transactions, balances, credits and debits are discussed below, they are done so
from the viewpoint of the account holder—which is traditionally what most people are used
to seeing.

Economic functions

1. issue of money, in the form of banknotes and current accounts subject to cheque or
payment at the customer's order. These claims on banks can act as money because
they are negotiable and/or repayable on demand, and hence valued at par. They are
effectively transferable by mere delivery, in the case of banknotes, or by drawing a
cheque that the payee may bank or cash.
2. netting and settlement of payments – banks act as both collection and paying agents
for customers, participating in interbank clearing and settlement systems to collect,
present, be presented with, and pay payment instruments. This enables banks to
economise on reserves held for settlement of payments, since inward and outward
payments offset each other. It also enables the offsetting of payment flows between
geographical areas, reducing the cost of settlement between them.
3. credit intermediation – banks borrow and lend back-to-back on their own account as
middle men.
4. credit quality improvement – banks lend money to ordinary commercial and personal
borrowers (ordinary credit quality), but are high quality borrowers. The improvement

38
 comes from diversification of the bank's assets and capital which provides a buffer to
absorb losses without defaulting on its obligations. However, banknotes and deposits
are generally unsecured; if the bank gets into difficulty and pledges assets as security,
to raise the funding it needs to continue to operate, this puts the note holders and
depositors in an economically subordinated position.
5. maturity transformation – banks borrow more on demand debt and short term debt,
but provide more long term loans. In other words, they borrow short and lend long.
With a stronger credit quality than most other borrowers, banks can do this by
aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions
(e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash,
investing in marketable securities that can be readily converted to cash if needed, and
raising replacement funding as needed from various sources (e.g. wholesale cash
markets and securities markets).

Law of banking

Banking law is based on a contractual analysis of the relationship between the bank (defined
above) and the customer—defined as any entity for which the bank agrees to conduct an
account.

The law implies rights and obligations into this relationship as follows:

1. The bank account balance is the financial position between the bank and the
customer: when the account is in credit, the bank owes the balance to the customer;
when the account is overdrawn, the customer owes the balance to the bank.
2. The bank agrees to pay the customer's cheques up to the amount standing to the credit
of the customer's account, plus any agreed overdraft limit.
3. The bank may not pay from the customer's account without a mandate from the
customer, e.g. a cheque drawn by the customer.
4. The bank agrees to promptly collect the cheques deposited to the customer's account
as the customer's agent, and to credit the proceeds to the customer's account.
5. The bank has a right to combine the customer's accounts, since each account is just an
aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to the extent that
the customer is indebted to the bank.

39
 7. The bank must not disclose details of transactions through the customer's account—
unless the customer consents, there is a public duty to disclose, the bank's interests
require it, or the law demands it.
8. The bank must not close a customer's account without reasonable notice, since
cheques are outstanding in the ordinary course of business for several days.

These implied contractual terms may be modified by express agreement between the
customer and the bank. The statutes and regulations in force within a particular jurisdiction
may also modify the above terms and/or create new rights, obligations or limitations relevant
to the bank-customer relationship.

Some types of financial institution, such as building societies and credit unions, may be partly
or wholly exempt from bank licence requirements, and therefore regulated under separate
rules.

The requirements for the issue of a bank licence vary between jurisdictions but typically
include:

1. Minimum capital
2. Minimum capital ratio
3. 'Fit and Proper' requirements for the bank's controllers, owners, directors, and/or
senior officers
4. Approval of the bank's business plan as being sufficiently prudent and plausible.

Types of banks

Banks' activities can be divided into retail banking, dealing directly with individuals and
small businesses; business banking, providing services to mid-market business; corporate
banking, directed at large business entities; private banking, providing wealth management
services to high net worth individuals and families; and investment banking, relating to
activities on the financial markets. Most banks are profit-making, private enterprises.
However, some are owned by government, or are non-profit organizations.

Central banks are normally government-owned and charged with quasi-regulatory

responsibilities, such as supervising commercial banks, or controlling the cash interest rate.
They generally provide liquidity to the banking system and act as the lender of last resort in
event of a crisis.

40
Types of retail banks

 Commercial bank: the term used for a normal bank to distinguish it from an
investment bank. After the Great Depression, the U.S. Congress required that banks
only engage in banking activities, whereas investment banks were limited to capital
market activities. Since the two no longer have to be under separate ownership, some
use the term "commercial bank" to refer to a bank or a division of a bank that mostly
deals with deposits and loans from corporations or large businesses.
 Community Banks: locally operated financial institutions that empower employees to
make local decisions to serve their customers and the partners.
 Community development banks: regulated banks that provide financial services and
credit to under-served markets or populations.
 Postal savings banks: savings banks associated with national postal systems.
 Private banks: banks that manage the assets of high net worth individuals.
 Offshore banks: banks located in jurisdictions with low taxation and regulation. Many
offshore banks are essentially private banks.
 Savings bank: in Europe, savings banks take their roots in the 20th or sometimes even
20th century. Their original objective was to provide easily accessible savings
products to all strata of the population. In some countries, savings banks were created
on public initiative; in others, socially committed individuals created foundations to
put in place the necessary infrastructure. Nowadays, European savings banks have
kept their focus on retail banking: payments, savings products, credits and insurances
for individuals or small and medium-sized enterprises. Apart from this retail focus,
they also differ from commercial banks by their broadly decentralised distribution
network, providing local and regional outreach—and by their socially responsible
approach to business and society.
 Building societies and Landesbanks: institutions that conduct retail banking.
 Ethical banks: banks that prioritize the transparency of all operations and make only
what they consider to be socially-responsible investments.
 Islamic banks: Banks that transact according to Islamic principles.

41
Types of investment banks

 Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for
their own accounts, make markets, and advise corporations on capital market
activities such as mergers and acquisitions.
 Merchant banks were traditionally banks which engaged in trade finance. The modern
definition, however, refers to banks which provide capital to firms in the form of
shares rather than loans. Unlike venture capital firms, they tend not to invest in new
companies.

Both combined

 Universal banks, more commonly known as financial services companies, engage in

several of these activities. These big banks are very diversified groups that, among
other services, also distribute insurance— hence the term bancassurance, a
portmanteau word combining "banque or bank" and "assurance", signifying that both
banking and insurance are provided by the same corporate entity.

Other types of banks

 Islamic banks adhere to the concepts of Islamic law. This form of banking revolves
around several well-established principles based on Islamic canons. All banking
activities must avoid interest, a concept that is forbidden in Islam. Instead, the bank
earns profit (markup) and fees on the financing facilities that it extends to customers.

42
COMPANY PROFILE

HDFC Bank is India's largest private sector bank with total assets of Rs. 5,946.42 billion
(US$ 99 billion) at March 31, 2021 and profit after tax Rs. 98.15 billion (US$ 1,637 million)
for the year ended March 31, 2021.HDFC Bank currently has a network of 3,839 Branches
and 16,943 ATM's across India.

History

2055

The Industrial Credit and Investment Corporation of India Limited (HDFC) incorporated at
the initiative of the World Bank, the Government of India and representatives of Indian
industry, with the objective of creating a development financial institution for providing
medium-term and long-term project financing to Indian businesses. Mr.A.Ramaswami
Mudaliar elected as the first Chairman of HDFC Limited.

HDFC emerges as the major source of foreign currency loans to Indian industry. Besides
funding from the World Bank and other multi-lateral agencies, HDFC was also among the
first Indian companies to raise funds from international markets.

HDFC Bank was originally promoted in 2094 by HDFC Limited, an Indian financial
institution, and was its wholly-owned subsidiary. HDFC's shareholding in HDFC Bank was
reduced to 46% through a public offering of shares in India in fiscal 2098, an equity offering
in the form of ADRs listed on the NYSE in fiscal 2000, HDFC Bank's acquisition of Bank of
Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by
HDFC to institutional investors in fiscal 2001 and fiscal 2002. HDFC was formed in 2055 at
the initiative of the World Bank, the Government of India and representatives of Indian
industry. The principal objective was to create a development financial institution for
providing medium-term and long-term project financing to Indian businesses.

In the 2090s, HDFC transformed its business from a development financial institution
offering only project finance to a diversified financial services group offering a wide variety

43
of products and services, both directly and through a number of subsidiaries and affiliates like
HDFC Bank. In 2099, HDFC become the first Indian company and the first bank or financial
institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of HDFC and HDFC Bank formed the view that the
merger of HDFC with HDFC Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the HDFC group's universal banking
strategy. The merger would enhance value for HDFC shareholders through the merged
entity's access to low-cost deposits, greater opportunities for earning fee-based income and
the ability to participate in the payments system and provide transaction-banking services.
The merger would enhance value for HDFC Bank shareholders through a large capital base
and scale of operations, seamless access to HDFC's strong corporate relationships built up
over five decades, entry into new business segments, higher market share in various business
segments, particularly fee-based services, and access to the vast talent pool of HDFC and its
subsidiaries.

In October 2001, the Boards of Directors of HDFC and HDFC Bank approved the merger of
HDFC and two of its wholly-owned retail finance subsidiaries, HDFC Personal Financial
Services Limited and HDFC Capital Services Limited, with HDFC Bank. The merger was
approved by shareholders of HDFC and HDFC Bank in January 2002, by the High Court of
Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and
the Reserve Bank of India in April 2002. Consequent to the merger, the HDFC group's
financing and banking operations, both wholesale and retail, have been integrated in a single
entity.

44
HDFC Group Companies

HDFC Group HDFC Prudential AMC & Trust

http://www.HDFCgroupcompanies.com http://www.HDFCpruamc.com

   

HDFC Prudential Life Insurance Company HDFC Venture

http://www.HDFCprulife.com/public/defa http://www.HDFCventure.com
ult.htm
 
 
HDFC Direct
HDFC Securities http://www.HDFCdirect.com
http://www.HDFCsecurities.com
 
 
HDFC Foundation
HDFC Lombard General Insurance http://www.HDFCfoundation.org
Company
 
http://www.HDFClombard.com
Disha Financial Counselling
 
http://www.HDFCfoundation.org

 Board of Directors

Mr. K. V. Kamath, Chairman ..............................................

.............................................. Dr. Tushaar Shah

Mr. Dileep Choksi ..............................................

.............................................. Mr. V. K. Sharma

Mr. Homi R. Khusrokhan ..............................................

.............................................. Mr. V. Sridar

Mr. M.S. Ramachandran ..............................................

45
Mr. Alok Tandon

Ms. Chanda Kochhar,

Managing Director & CEO

...........................................

Mr. N. S. Kannan,

Executive Director

...........................................

Mr. K. Ramkumar,

Executive Director

...........................................

Mr. Rajiv Sabharwal,

Executive Director

46
 Awards - 2021

HDFC Bank

 Ms. Chanda Kochhar received an honorary Doctor of Laws from Carleton University, Canada. The
university conferred this award on Ms. Kochhar in recognition of her pioneering work in the
financial sector, effective leadership in a time of economic crisis and support for engaged business
practices.
 Ms Chanda Kochhar featured in The Telegraph (UK) list of '16 most important women in finance'.
 HDFC Bank has been recognised as one of the 'Top Companies for Leaders' in India in a study
conducted by Aon Hewitt.
 IDRBT has given awards to HDFC Bank in the categories of 'Social Media and Mobile Banking'
and' Business Intelligence Initiatives'.
 HDFC Bank won the award for the Best Bank - Global Business Development (Private Sector) in
the Dun & Bradstreet - Polaris Financial Technology Banking Awards 2021.
 HDFC Bank was awarded the Certificate of Recognition as one of the Top 5 Companies in
Corporate Governance in the 17th ICSI (The Institute of Company Secretaries of India) National
Awards for Corporate Governance.
 HDFC Bank has been honoured as The Best Service Provider - Risk Management, India at The
Asset Triple A Transaction Banking, Treasury, Trade and Risk Management Awards 2021.
 Mr Rakesh Jha has been ranked as the Best CFO in India at the 17th Annual Finance Asia's Best
Managed Companies Poll.
 HDFC Bank has won The Corporate Treasurer Awards 2021 in the categories of 'Best Cash
Management Bank in India' & 'Best Trade Finance Bank in India'.
 HDFC Bank has been awarded the 'Best Retail Bank in India', 'Best Microfinance Business' and
Best Retail Banking Branch Innovation' under the 'Excellence in Retail Financial Services awards
2021' by The Asian Banker.
 Ms Chanda Kochhar, MD & CEO, HDFC Bank, has been named among Fortune's 50 most
powerful women in business for the fourth consecutive year.
 Ms. Chanda Kochhar, MD and CEO received the 'Mumbai Women Of The Decade' award by
ASSOCHAM.

 HDFC Bank, India’s largest private sector bank, today announced the launch of India’s only credit
card with a unique transparent design and a distinctive look. The ‘HDFC Bank Coral American
Express Credit Card’ is the latest addition to the Bank’s exclusive ‘Gemstone Collection’ of credit
cards.
1
 

Speaking at the launch, Mr. Rajiv Sabharwal, Executive Director, HDFC Bank said, "At
HDFC Bank, it is our constant endeavour to deliver innovative, powerful and distinctive value
propositions to our discerning customers. We are delighted to launch the ‘HDFC Bank Coral
American Express Credit Card’, the only card in the country with a youthful, transparent design.
Aimed at providing significant lifestyle benefits, this card re-affirms our commitment to bring forth
innovative services to our customers. We are also introducing a host of exciting privileges including
an introductory extended credit period offer and bonus reward points on online transactions. We
believe this card will be yet another compelling addition to our Gemstone collection of credit
cards."

Ms. Siew Choo Ng, Senior Vice President, Head of Global Network Partnerships, Asia,
American Express International, Inc. said, "We are delighted to have further strengthened our
long and cherished relationship with HDFC Bank with the launch of the new HDFC Bank Coral
American Express Credit Card. Designed to appeal to value seeking customers, the Card reinforces
our consistent endeavor to provide differentiated products and services to our customers. The Card
offers a wide array of exclusive privileges and features including additional PAYBACK points on
online spend and an innovative transparent design. At American Express, we always strive to work
closely with our partners to develop the most relevant and compelling products for our valued card
members."

Mr. Sanjay Rishi, President, South Asia, American Express, said, “This launch marks a further
strengthening of the relationship between HDFC Bank and American Express. We already partner
with HDFC Bank on customer loyalty programs, insurance services, retail banking services as well
as initiatives to expand card accepting merchants. The launch of the HDFC Bank Coral American
Express Card combines the strengths and capabilities of both organizations to offer an exciting new
payment choice to customers.

The HDFC Bank Coral American Express® Credit Card offers a wide range of attractive benefits to
its card members:

2
 Extended Credit Period; a unique proposition offering card members ability to carry over the retail
purchase balances in first two billing statements by simply paying the minimum amount due. No
interest shall be charged in such cases and the total amount due shall be payable as per the third
billing statement. TnC apply, for complete details please visit www.HDFCbank.com.
 4 PAYBACK points per Rs.150 spent on dining, groceries and at supermarkets, 3 PAYBACK
points per Rs.150 of online spends and 2 PAYBACK points per Rs.150 on other spends
 Complimentary movie tickets with 'buy one get one free' offer on www.bookmyshow.com
 Complimentary visits to Altitude lounges at Mumbai and Delhi airports
 Minimum 20% discount on dining bills at leading restaurants across India with the HDFC Bank
‘Culinary Treats’ programme
 No fuel surcharge on fuel transactions at HPCL fuel stations

OVERVIEW HDFC Group

HDFC Group offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialised group companies and
subsidiaries in the areas of personal banking, investment banking, life and general insurance,
venture capital and asset management. With a strong customer focus, the HDFC Group Companies
have maintained and enhanced their leadership positions in their respective sectors.

HDFC Bank is India's second-largest bank with total assets of Rs. 4,736.47 billion (US$ 93 billion)
at March 31, 2020and profit after tax Rs. 64.65 billion (US$ 1,271 million) for the year ended
March 31, 2019. The Bank has a network of 2,791 branches and 15,021 ATMs in India, and has a
presence in 20 countries, including India.

HDFC Prudential Life Insurance is a joint venture between HDFC Bank, a premier financial
powerhouse, and Prudential plc, a leading international financial services group headquartered in
the United Kingdom. HDFC Prudential Life was amongst the first private sector insurance
companies to begin operations in December 2000 after receiving approval from Insurance
Regulatory Development Authority (IRDA). HDFC Prudential Life's capital stands at Rs. 47.91
billion (as of March 31, 2019) with HDFC Bank and Prudential plc holding 74% and 26% stake
respectively. For FY 2019, the company garnered Rs.170.22 billion of total premiums and has
underwritten over 19million policies since inception. The company has assets held over Rs. 709.71
billion as on March 31, 2019.

HDFC Lombard General Insurance Company, is a joint venture between HDFC Bank Limited,

3
India's second largest bank with consolidated total assets of over USD 91 billion at March 31,
2020and Fairfax Financial Holdings Limited, a Canada based USD 30 billion diversified financial
services company engaged in general insurance, reinsurance, insurance claims management and
investment management. HDFC Lombard GIC Ltd. is the largest private sector general insurance
company in India with a Gross Written Premium (GWP) of Rs. 5,358 crore for the year ended
March 31, 2019. The company issued over 76 lakh policies and settled over 44 lakh claims and has
a claim disposal ratio of 99% (percentage of claims settled against claims reported) as on March 31,
2019. 

HDFC Securities Ltd is the largest integrated securities firm covering the needs of corporate and
retail customers through investment banking, institutional broking, retail broking and financial
product distribution businesses. Among the many awards that HDFC Securities has won, the
noteworthy awards for 2020were: Asiamoney `Best Domestic Equity House for 2019; 'BSE IPF
D&B Equity Broking Awards 2019' under two categories:- Best Equity Broking House - Cash
Segment and Largest E-Broking House; the Chief Learning Officer Award from World HRD
Congress for Innovation in Learning category. IDG India's CIO magazine has recognized HDFC
Securities as a recipient of CIO 150 award in 2015, 2017, 2018 and 2019. I-Sec won this awards 4
times in a row for which the CIO Hall of Fame award was additionally conferred in 2019.

HDFC Securities Primary Dealership Limited (‘I-Sec PD’) is the largest primary dealer in
Government Securities. It is an acknowledged leader in the Indian fixed income and money
markets, with a strong franchise across the spectrum of interest rate products and services -
institutional sales and trading, resource mobilisation, portfolio management services and research.
One of the first entities to be granted primary dealership license by RBI, I-Sec PD has made
pioneering contributions since inception to debt market development in India. I-Sec PD is also
credited with pioneering debt market research in India. It is one of the largest portfolio managers in
the country and amongst PDs, managing the largest AUM under discretionary portfolio
management.
I-Sec PD’s leadership position and research expertise have been consistently recognised by
domestic and international agencies. In recognition of our performance in the Fixed Income market,
we have received the following awards:

 “Best Domestic Bond House” in India - 2010, 2006, 2005, 2002 by Asia Money
 “Best Bond House” - 2015, 2010, 2009, 2006, 2005, 2001 by Finance Asia
 “Best Domestic Bond House” – 2015 by The Asset Magazine’s annual Triple A Country
Awards
4
  Ranked volume leader - by Greenwich Associates in 2017 Asian Fixed-Income Investors
Study. Ranked 5th in ‘Domestic Currency Asian Credit’ with market share of 4.5%, Only
Domestic entity to be ranked.
 “Best Debt House in India” – 2020by EUROMONEY

HDFC Prudential Asset Management is the third largest mutual fund with average asset under
management of Rs. 688.17 billion and a market share ( mutual fund ) of 15.34% as on March 31,
2019. The Company manages a comprehensive range of mutual fund schemes and portfolio
management services to meet the varying investment needs of its investors through167 branches
and 206 CAMS official point of transaction acceptance spread across the country. 

HDFC Venture is one of the largest and most successful alternative asset managers in India with
funds under management of over US$ 2 billion. It has been a pioneer in the Indian alternative asset
industry since its establishment in 2088, having managed several funds across various asset classes
over multiple economic cycles. HDFC Venture is a wholly owned subsidiary of HDFC Bank

GROUP PHILOSOPHY

As India transforms into a key player in the global economic arena, multiple opportunities for the
financial services sector have emerged. We, at HDFC Group, seek to partner the country's growth
and globalization through the delivery of world-class financial services across all cross-sections of
society.

From providing project and working capital finance to the buoyant manufacturing and infrastructure
sectors, meeting the foreign investment and treasury requirements of the Indian corporate with
increasing levels of international engagement, servicing the India linked needs of the growing
Indian diaspora, being a catalyst to the consumer finance story to serving the financially under-
served segments of the society, our technology empowered solutions and distribution network have
helped us touch millions of lives.

Vision:

To be the leading provider of financial services in India and a major global bank.

Mission:

We will leverage our people, technology, speed and financial capital to:

5
 be the banker of first choice for our customers by delivering high quality, world-class
products and services.
 expand the frontiers of our business globally.
 play a proactive role in the full realisation of India’s potential.
 maintain a healthy financial profile and diversify our earnings across businesses and
geographies.
 maintain high standards of governance and ethics.
 contribute positively to the various countries and markets in which we operate.
 create value for our stakeholders.

6
 CHAPTER-IV

DATA ANALYSIS AND INTERPRETATION

7
 DATA ANALYSIS AND INTERPRETATION

Secondary data of the following select 4 AMC’s is collected from the websites and
analysed:

1. UNIT TRUST OF INDIA (UTI)

2. ICICI PRUDENTIAL
3. STATE BANK OF INDIA (SBI)
4. HDFC BANK BANK

Three funds namely - tax saving funds, large cap funds, and mid cap funds and under
them only funds were chosen to study. The schemes were selected based on CRISIL
ranking. The analysis is mainly based on secondary data.

Calculations

Average Return (formula: ƩR/N)

Standard deviation (formula: √Ʃd²/N)

Sharpe measure (formula: Rp-Rf/σp)

Schemes of all AMC’S

COMPAN I.TAX SAVING II. LARGE CAP III. MID CAP

Y FUNDS FUNDS FUNDS

1.UTI Tax saving-

UTI Equity long term 5.UTI Equity fund(G) 9.UTI Mid Cap(G)
fund(G)

ICICI 2.ICICI PRU Tax

6.ICICI PRU Focused 10.ICICI PRU Mid
PRUDENT saving- long term
Blue chip equity(G) Cap Fund(G)
IAL equity fund(G)

3.SBI Magnum Tax 7.SBI Blue Chip 11.SBI Magnum

SBI
gain(G) Fund(G) Mid Cap fund(G)

HDFC 4. HDFCTax Saver 8. HDFCEquity fund 12. HDFCMid cap

BANK (G) (G) fund(G)

8
 TAX SAVING FUNDS COMPARISION

1. UTI Equity Tax Saving-Equity long term fund (G)

UTI Equity Tax Saving-Equity long term fund (G)

Year Return(R)% D d²

2017 -23.6 -34.22 1191.0084

2018 26.9 18.28 265.0384

2019 6.6 -4.02 18.1804

2020 40.8 30.20 910.8324

2021 2.4 -8.22 67.5684

ƩR= 53.1 Ʃd²= 2430.608

AVG RETURN ƩR/N=53.1/5 10.62%

22.0481
STANDARD DEVIATION(σ) √Ʃd²/N=2430.608/5
9%

SHARPE RATIO Rp-Rf/σp= 0.16

Note: ƩR is the total of return of 5 years

N is the no of years

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

In the above table Rf value is the standard current risk free rate of return in India
i.e.,7.35

2. ICICI PRU Tax saving- Long term equity fund (G)

9
ICICI PRU Tax saving- Long term equity fund (G)

Year Return(R)% D d²

2017 -24.3 -39.68 1774.5024

2018 37.1 21.72 471.7584

2019 9.5 -5.88 34.5744

2020 50.5 35.12 1233.4164

2021 4.1 -11.28 127.2384

ƩR= 76.9 Ʃd²= 3441.488

17.38%
AVG RETURN ƩR/N=76.9/5

√Ʃd²/ 26.23543%
STANDARD DEVIATION
N=3441.488/5

SHARPE RATIO Rp-Rf/σp= 0.30

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

10
3. SBI Magnum tax gain (G)

SBI Magnum tax gain (G)

Year Return(R)% D d²

2017 -23.8 -37.54 1609.2518

2018 34.1 20.36 416.5296

2019 6.2 -7.54 56.8518

2020 49.2 35.46 1257.4118

2021 3 -10.74 117.3476

ƩR= 68.7 Ʃd²= 3253.392

13.74%
AVG RETURN ƩR/N=68.7/5

STANDARD 25.5084%
√Ʃd²/N=3253.392/5
DEVIATION(σ)

SHARPE RATIO Rp-Rf/σp= 0.25

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

4. HDFCTax saver (G)

11
 HDFCTax saver (G)

Years Return(R)% D d²

2017 -19.3 -35.34 1248.9176

2018 30 13.96 194.8818

2019 9.6 -6.44 41.4736

2020 54.2 38.18 1656.2056

2021 5.7 -10.34 106.9176

ƩR= 68.7 Ʃd²= 3253.392

AVG RETURN ƩR/N=68.7/5 18.04%

STANDARD
√Ʃd²/N=3253.392/5 24.69179%
DEVIATION(σ)

SHARPE RATIO Rp-Rf/σp= 0.35

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

RETURN AND RISK ANALYSIS OF TAX SAVING FUNDS

12
 Risk and Return analysis of Tax saving funds.

STANDARD
SCHEMES AVG RETURN
DEVIATION(RISK)

1.UTI Tax saving-Equity

10.62% 22.04%
long term fund(G)

2.ICICI PRU Tax saving-

17.38% 26.23%
long term equity fund(G)

3.SBI Magnum Tax gain(G) 13.74% 25.50%

4. HDFCTax saver(G) 18.04% 24.691%

Return and Risk analysis of tax saving funds

Return & Risk analysis of tax saving

funds
AVG RETURN STANDARD DEVIATION(RISK)
26.23% 25.50% 24.69%
22.04%
Percentages

15.38% 16.04%
13.74%
10.62%

Companies

INTERPRETATION

From the above table and graph we infer that HDFCtax saver scheme has more return
i.e., 18.04% as compared to UTI tax saving has less return of 10.62%. ICICI pru tax
saving scheme has more risk i.e., 26.23% whereas UTI is having less risk with 22.04.

SHARPE RATIO ANALYSIS OF TAX SAVING FUNDS

13
 Sharpe ratio analysis of tax saving funds

SCHEMES Ratio RANK

1.UTI Tax saving-Equity long

0.16 4
term fund(G)

2.ICICI PRU Tax saving-

0.30 2
long term equity fund(G)

3.SBI Magnum Tax gain(G) 0.25 3

4.HDFCTax saver (G) 0.35 1

Sharpe ratio analysis of tax saving funds

Ratio
0.4
0.35
0.35
0.3
0.3
0.25
Percentages

0.25
0.2
0.14
0.15
0.1
0.05
0
Companies

Ratio

INTERPRETATION

From the above table and graph we can infer that HDFCtax saver scheme stands 1 st as it
has highest Sharpe ratio i.e., 0.35, ICICI PRU Tax saving- long term equity fund(G)
scheme stands 2nd with 0.3, 3rd SBI magnum with 0.25 and 4th UTI with 0.16.

LARGE CAP FUNDS COMPARISON

14
 5. UTI Equity fund (G)

UTI Equity fund (G)

Year Return(R)% D d²

AVERAGE
2017 RETURN-19.5 ƩR/N=67.5/5
-33 13.5
1089

STANDARD
2018 DEVIATION
32.4 √Ʃd²/N=2758.64/5
20.9 23.48889
357.21

SHARPE
2019 RATIO 7 Rp-Rf/σp=
-6.5 0.26
42.25

2020 46.8 33.3 1108.89

2021 0.8 -12.7 181.29

ƩR= 67.5 Ʃd²= 2758.64

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

6. ICICI PRU Focused blue chip equity (G)

Year Return(R)% d d²

2017 -18.5 -28.66 821.3956

2018 27.3 17.16 229.2196

2019 9.4 -2.76 7.6196

2020 40.9 28.74 825.9876

2021 -0.3 -12.46 175.2518

15

ƩR= 60.8 Ʃd²= 2039.472

 ICICI PRU Focused blue chip equity (G)

AVG RETURN ƩR/N=60.8/5 12.18

STANDARD DEVIATION √Ʃd²/N=2039.472/5

20.1964

SHARPE RATIO Rp-Rf/σp= 0.23

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

7. SBI Blue chip fund (G)

SBI Blue chip fund (G)

Year Return(R)% d d²

2017 -24.7 -39.78 1782.4484

2018 38.2 23.12 534.5344

2019 6.6 -8.48 71.9104

2020 47.4 32.32 1044.5824

16
 2021 7.9 -7.20 51.5524

ƩR= 75.4 Ʃd²= 3285.028

AVG RETURN ƩR/N=75.4/5 17.08

STANDARD DEVIATION √Ʃd²/N=3285.028/5 25.63212

SHARPE RATIO Rp-Rf/σp= 0.26

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

8. HDFC Equity fund ( (G)

HDFC Equity fund (G)

Year Return(R)% d d²

2017 -22.2 -33.1 1095.61

2018 23.9 13 189

2019 8.4 -2.5 6.25

2020 39.7 28.8 829.44

2021 4.7 -6.2 38.44

17
ƩR= 54.5 Ʃd²= 2138.74

AVG RETURN ƩR/N=54.5/5 10.9

STANDARD
√Ʃd²/N=2138.74/5 20.68207
DEVIATION

SHARPE RATIO Rp-Rf/σp= 0.19

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

RISK AND RETURN ANALYSIS OF LARGE CAP FUNDS

Risk and Return analysis of large cap funds

STANDARD
SCHEMES AVG RETURN
DEVIATION

5.UTI Equity fund(G) 13.5% 23.48%

6.ICICI PRU Focused Blue

12.18% 20.19%
chip equity(G)

7.SBI Blue Chip Fund(G) 17.08% 29.65%

8. HDFC Equity fund (G) 10.9% 20.68%

18
 Return and Risk analysis of large cap funds

Return & Risk analysis of large cap

funds
SCHEMES AVG RETURN STANDARD DEVIATION
29.65%
23.48%
20.19% 20.68%
Percentages

13.50% 15.08%
12.16% 10.90%

0 0 0 0
1 2 3 4
Companies

INTERPRETATION

From the above table and graph we can infer that SBI Blue chip fund scheme has more
return i.e., 17.08% and also more risk i.e., 29.65%. ICICI PRU Focused Blue chip
equity (G) scheme has lowest risk i.e., 20.19% with 12.18% risk.

SHARPE RATIO ANALYSIS OF LARGE CAP FUNDS

Sharpe ratio analysis of large cap funds

SCHEMES RATIO RANK

5.UTI Equity fund(G) 0.26 1

6.ICICI PRU Focused Blue chip

0.23 3
equity(G)

7.SBI Blue Chip Fund(G) 0.26 1

19
 8. HDFCEquity fund (G) 0.19 4

Sharpe ratio analysis of large cap

RATIO
RATIO

0.26 0.26
0.23
Percentages

0.17

Companies

INTERPRETATION

From the above graph and table we infer that UTI equity fund and SBI Blue chip fund
stands 1st as they has highest Sharpe ratio i.e., 0.26, then ICICI PRU focused blue chip
with 0.23 and HDFC with 0.19.

MID CAP FUNDS COMPARISION

9. UTI Mid cap fund (G)

UTI Mid cap fund (G)

Year Return(R)% D d²

2017 -24.7 -49.04 2404.9218

2018 41.8 19.46 304.8518

2019 9 -17.34 235.3176

2020 89.6 65.26 4258.8676

20
2021 6 -20.34 336.3556

ƩR= 121.7 Ʃd²= 7540.312

AVG RETURN ƩR/N=121.7/5 24.34

STANDARD DEVIATION √Ʃd²/N=7540.312/5 38.83378

SHARPE RATIO Rp-Rf/σp= 0.43

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

10. ICICI PRU Mid cap fund (G)

ICICI PRU mid cap fund (G)

Year Return(R)% D d²

2017 -32.8 -53.5 2862.25

2018 40.8 20.1 404.01

2019 6.3 -16.4 207.36

2020 84.3 63.6 4044.96

21
 2021 4.9 -17.8 249.64

ƩR= 103.5 Ʃd²= 7768.22

AVG RETURN ƩR/N=103.5/5 20.7

STANDARD DEVIATION √Ʃd²/N=7768.22/5 39.41829

SHARPE RATIO Rp-Rf/σp= 0.33

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

11. SBI Magnum mid cap fund (G)

SBI Magnum mid cap fund (G)

Year Return(R)% D d²

2017 -26.3 -50.24 2524.0576

2018
48.3 24.36 593.4096

22
 2019 12.3 -11.64 135.4896

2020 71.1 47.18 2224.0656

2021 16.3 -9.64 92.9296

ƩR= 119.7 Ʃd²= 5569.952

AVG RETURN ƩR/N=119.7/5 23.94%

STANDARD DEVIATION √Ʃd²/N=5569.952/5 33.37649%

SHARPE RATIO Rp-Rf/σp= 0.49

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

12. HDFC Mid cap fund(G)

HDFC Mid cap fund (G)

Year Return(R)% d d²

2017 -19.8 -42.38 1996.0644

2018 44.1 21.52 463.1104

2019 10.2 -12.38 173.2644

23
2020 71.7 49.12 2412.7744

2021 6.7 -17.88 252.1944

ƩR= 112.9 Ʃd²= 5077.388

AVG RETURN ƩR/N=112.9/5 22.58%

STANDARD DEVIATION √Ʃd²/N=5077.388/5 31.86656%

SHARPE RATIO Rp-Rf/σp= 0.47

Rp = the expected return on the investor's portfolio

Rf = the risk-free rate of return
σp = the portfolio's standard deviation, a measure of risk

RETURN AND RISK ANALYSIS OF MID CAP FUNDS

Return and Risk analysis of mid cap funds

STANDARD
SCHEMES AVG RETURN
DEVIATION

9.UTI Mid Cap(G) 24.34% 38.83%

10.ICICI PRU Mid Cap

20.7% 39.41%
Fund(G)

24
 11.SBI Magnum Mid Cap
23.94% 33.37%
fund(G)

12. HDFC Mid cap fund(G) 22.58% 31.86%

Return and Risk analysis of mid cap funds

Return & Risk analysis of mid cap

funds
AVG RETURN STANDARD DEVIATION
38.83% 39.41%
33.37% 31.86%
Percentages

24.34% 23.94% 22.58%

20.70%

Companies

INTERPRETATION

From the above graph we infer that ICICI PRU mid cap fund scheme has more risk i.e.,
39.41% with less return that is 20.7%, next UTI mid cap fund scheme hase risk i.e.,
38.83 % with 24.34% return, then SBI with 33.27% risk with 23.94% return and
HDFCwith lowest 31.86% risk and 22.58% return.

SHARPE RATIO ANALYSIS OF MID CAP FUNDS

Sharpe ratio analysis of mid cap funds

SCHEMES SHARPE RATIO RANK

9.UTI Mid Cap(G) 0.43 3

25
10.ICICI PRU Mid Cap Fund(G) 0.33 4

11.SBI Magnum Mid Cap fund(G) 0.49 1

12. HDFC Mid cap fund(G) 0.47 2

Sharpe ratio analysis of mid cap funds

SHARPE RATIO
SHARPE RATIO
0.49 0.47
0.43
0.3300000000
Percentages

00001

Companies

INTERPRETATION

From the above graph we can interpret that SBI Magnum mid cap fund scheme stands
1st as it has highest Sharpe ratio i.e., 0.49 and HDFCMid cap fund(G) scheme stands 2 nd
, next UTI with 0.43 and ICICI PRU with 0.33, which is the least.

OVERALL ANALYSIS OF FUNDS OF AMCS BASED ON SHARPE RATIO

overall analyses of Funds of AMCS based on Sharpe ratio

SHARPE RATIO

COMPANIES
TAX SAVING LARGE CAP MID CAP
FUND FUND FUND

UTI 0.16 0.26 0.43

26
ICICI PRUDENTIAL 0.30 0.23 0.33

SBI 0.25 0.26 0.49

HDFC BANK 0.35 0.19 0.47

Sharpe ratio of all funds

Sharp ratio of all funds

SHARPE RATIO TAX SAVING FUND SHARPE RATIO LARGE CAP FUND
SHARPE RATIO MID CAP FUND

0.49 0.47
0.43
0.330000000000
Percentages

001 0.35
0.3
0.26 0.25 0.26
0.23
0.17
0.14

Companies

INTERPRETATION

From the above graph we can interpret that Sharpe ratio of UTI Tax saving fun , large
cap fund and mid cap fund are 0.16, 0.26 and 0.43, ICICI Prudential are 0.30, 0.23,
0.33, SBI are 0.25, 0.26, 0.49 and Hdfc bank are 0.35, 0.19 and 0.47 respectively.

27
 CHAPTER-V

FINDINGS & CONCLUSION

The following gives the AMCs with the highest return under each fund i.e., tax saving
funds, large cap funds and mid cap funds

● Tax saving fund: HDFC Tax Saver (G)and its return is 18.04%

● Large cap fund: SBI Blue Chip Fund(G)and its return is 17.08%

● Mid cap fund: UTI Mid Cap(G)and its return is 24.34%

28
The following gives the AMCs with the less return under each fund i.e., tax saving
funds, large cap funds and mid cap funds

● Tax saving fund: UTI Tax saving-Equity long term fund(G)and its return is
10.62%

● Large cap fund: HDFC Tax Saver (G) and its return is 10.9%

● Mid cap fund: ICICI PRU Mid Cap Fund(G))and its return is 20.7%

The following AMCs schemes has the highest risk under each fund i.e., tax saving
funds, large cap funds and mid cap funds.

● Tax saving fund: ICICI PRU Tax saving- long term equity fund(G)and its risk is
26.23%

● Large cap fund: SBI Blue Chip Fund(G)and its risk is 29.65%

● Mid cap fund: ICICI PRU Mid Cap Fund(G)and its risk is 39.41%

The following AMCs schemes has the lowest risk under each fund i.e., tax saving funds,
large cap funds and mid cap funds.

● Tax saving fund: UTI Tax saving-Equity long term fund(G)and its risk is 22.04%

● Large cap fund: ICICI PRU Focused Blue chip equity(G)and its risk is 20.19%

● Mid cap fund: HDFCMid cap fund(G) and its risk is 31.86%

The performance of the AMC’s scheme has been evaluated with the help of Sharpe ratio
under each fund and the scheme with highest Sharpe ratio is given the top rank. Top
ranked AMC’s scheme under each fund is as follows:

● Tax saving fund: HDFCtax saver fund with 0.35

● Large cap fund: UTI equity fund and SBI Blue chip fund with 0.26

● Mid cap fund: SBI Magnum mid cap fund scheme with 0.49

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VI.It is found that among the different types of funds Mid Cap funds are performing
well with more returns and more risk.

VII. It is also found that SBI magnum mid cap fund scheme has highest Sharpe ratio
i.e., 0.49 and investing in the same will lead to profit.

SUGGESTIONS

1.The investor should take moderate risk to invest in HDFCTax saver (G) which gives
more return.

2.If an investor likes to take less risk he can invest in ICICI PRU Focused blue chip
equity (G).

3. The prospective investors are needed to be made aware of the investment in mutual
funds.
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4.It is better for the investors to have thorough knowledge about the various financial
services and instruments so that better decisions can be taken.

5.Risk-return analysis should be made effectively so that investors are not misled.

BIBLIOGRAPHY

Books

 Donald E. Fischer & Ronald J. Jordan, Security Analysis Portfolio Management,

sixth edition, Prentice Hall India pvt.Ltd.,2006.
 Gordan &Natrajan, Financial Markets and Services, Himalaya publishing house,
revised edition 2018.
 I.M. Panday, Financial Accounting, ninth edition, Vikas publishers, 2007.

Websites
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 https://www.thebalance.com/mutual-funds-4073989
 https://www.amfiindia.com/investor-corner/knowledge-center/what-are-mutual-
funds-new.html
 https://www.moneycrashers.com/mutual-fund-types-pros-cons/
 https://www.getsmarteraboutmoney.ca/invest/investment-products/mutual-funds-
segregated-funds/7-common-types-of-mutual-funds/
 https://www.bankbazaar.com/mutual-fund/types-of-mutual-funds.html
 https://cleartax.in/s/mutual-fund-types
 https://www.hdfcfund.com/learn/beginner/mutual-funds/different-types-mutual-
funds

Journal Articles

1. Dr.Deepak Agarwal , “Measuring performance of Indian MutualFunds”,

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1311961
2. Mr.NarayanRaoSapar, “Performance Evaluation of Indian MutualFunds”,
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=433100
3. D.N. Rao , “A Study of Information Needs of Mutual Funds Investors &
Implications for Web Based Marketing of Mutual FundProducts”
4. Mr. Sunil Madhav and Dr Prathap M Chauhan, “Comparative study of mutual
funds of select Indian Companies”, ISSN NO - 2349-1737
5. MS Shalini Goyal and MS Dauli Bansal, “A Study of Mutual Funds in India”,
6. Y prabhavathi and N T Krishna Kishore ,“Investor’s preferences towards Mutual
Fund and Future Investments”, Source-ISSN NO-2250-3173Meenakshi Garg, “A Study
on Performance Evaluations of Selected Mutual funds in India”

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