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1 INTRODUCTION A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a Mutual Fund.

A Mutual Fund is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in Equity shares, Government securities, Bonds, Call Money Markets etc, and distributes the profits. In the other words, a Mutual Fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders.
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Mutual Funds are essentially investment vehicles where people with similar investment objective come together to pool their money and then invest accordingly. Each unit of any scheme represents the proportion of pool owned by the unit holder (investor). Appreciation or reduction in value of investments is reflected in net asset value (NAV) of the concerned scheme, which is declared by the fund from time to time. Mutual fund schemes are managed by respective Asset Management Companies (AMC). Every AMC assigns a fund manager the duties and responsibilities with regard to the schemes. As we all know that mutual funds are pools of savings of investors, these investors in proportion to their investments share the profits or losses. Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the funds gains, losses, income and expenses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A Mutual Fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. 1.2 MUTUAL FUNDS - THE GLOBAL PERSPECTIVE Mutual Funds as a concept developed in the early 20th century. But the idea of pooling together money for investment purposes started in Europe in the mid-1800s mainly in Netherlands and Scotland followed by Belgium, England and France. Though today the largest market of Mutual Funds is USA yet the first Mutual Fund that was launched in USA is the New York Stock Trust in 1889 followed by the widely known open-ended Massachusetts Investors Trust in 1924, now called the MFS. These developments led to the establishment of Fidelity Investments which today is the worlds largest Mutual Fund Company and other companies like Pioneer, Scudder and Putnam funds. Mutual Funds were initially termed as trusts. 1.3 MUTUAL FUNDS INDUSTRY INDIA

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Mutual Fund industry started in India in 1963 at the initiative of the Government of India and the Reserve Bank of India which led to the formation of UTI (Unit Trust of India). The Mutual fund industry can be broadly put into four phases:

First Phase (1964-87) - UTI commenced its operations from July 1964 with a view to encouraging savings and investment and participation in the income, profits and gains accruing to the corporation from the acquisition, holding management and disposal of
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securities. The first scheme launched by UTI was called the UNIT Scheme 1964 more popularly US-64.

Second Phase (1987-1993) - Initially, the growth was slow but it accelerated from the year 1987. In 1987, public sector Mutual Funds were setup by public sector banks, the LIC (Life Insurance Corporation of India) and the GIC (General Insurance Corporation of India). SBI (State Bank of India) launched the first non-UTI Mutual Fund in 1987 followed by other public sector banks.

Third Phase (1993-2003) - In 1993 the first private sector Mutual Fund was launched by Kothari Pioneer which now has merged with Franklin Templeton. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase (Since February 2003) - UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

The first Mutual Fund regulations were formed in 1993 which was the SEBI (Mutual Fund) Regulations 1993. The present day Mutual Fund industry is governed by the SEBI (Mutual Fund) Regulations 1996.The following figure shows the growth in AUM (Asset Under Management) of the Indian Mutual Fund Industry as on March 2009. 1.4 NEED AND IMPORTANCE OF THE STUDY: The projects idea is to project Mutual Fund as a better avenue for investment on a long-term basis. Mutual Fund is a productive package for a lay-investor with limited finances, this project creates an awareness that the Mutual Fund is worthy investment practice. Mutual Fund is a Globally proven instrument. Mutual funds are Unit Trust as it is called in some parts of the word has a long and successful history, of late Mutual Funds have become a hot favorite of millions of people all over the world The driving force of Mutual is the safety of the principal guaranteed plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. The various schemes of Mutual funds provide the investor with a wide range of investment options according to his risk bearing capacities and interest besides; they also give handy return to the investor. Mutual Funds offers and investor to invest even a small amount of money, each Mutual Fund has a defined investment objective and strategy. Mutual Funds schemes are managed by respective asset managed companies sponsored by financial institutions, banks, private companies or international firms. A Mutual Fund is the ideal investment vehicle for todays complex and modern financial scenario. The study is basically made to analyze the various open-ended equity scheme of different Asset Management Companies to highlight the diversity of funds. Therefore, there is a need and importance to study the performance of Mutual Funds.

1.5 OBJECTIVES OF THE STUDY: The broad objective of the study is to examine the performance of mutual funds in HDFC & ICICI and sub objectives of the study are as follows:

To analyse the performance of HDFC. To analyse the performance of ICICI stock. To know the risk and return of the HDFC & ICICI stock. To carrelate the perfomance of HDFC with ICICI with the help of returns. To identify the factors influencing the indices.

1.6 SCOPE OF THE STUDY: The study here has been focused to analyze an open ended equity fund of Asset Management Company namely ICICI Prudential Mutual Fund. The Fund performance is analyzed based on the tools Arithmetic average or mean, Return, Standard Deviation, Variance, Correlation, The sharp Measure Alpha Returns and providing the investor with better returns than he could otherwise manage. Since they can reshuffle their portfolio as per market conditions, they are likely to generate moderate returns even in pessimistic market conditions. Next comes the risk takers, risk takers by their nature, would not be averse to investing in high-risk avenues. Capital markets find their fancy more often than not, because they have historically generated better returns than any other avenue, provided, the money was judiciously invested. Though the risk associated is generally on the higher side the spectrum, the returnpotential compensates for the risk attached. 1.7 RESEARCH METHODOLOGY: Data Sources: The study is to examine the performance of Mutual Funds in HDFC and ICICI. The relevant data has been collected from the secondary sources comprising published journals, magazines, published books, Internet, Companies websites, broachers and their applications etc.,
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Statistical Tools: The collected data on mutual funds in HDFC and ICICI is classified, tabulated and analysed in a systematic manner. For the data analysis various simple statistical techniques such as average, standard deviation, variance etc., have been used to examine the performance of mutual funds on HDFC and ICICI with the help of spread sheets for simple calculation and the same has been also presented in diagrammatic representation. Sample Design: The study is pertaining to the micro level analysis, for which the samples of two selected Mutual Funds Schemes over the period of study. 1.8 PERIOD OF THE STUDY: For an in depth examination of the performance of mutual funds in HDFC and ICICI is collected period of 6 years of the data i.e., from 2005 to 2010, for relevance of the study which will see impact of the market on the presence of the investment. 1.9 CHAPTERIZATION SCHEME Chapter- I Introduction deals with Introduction, Importance, Objectives, Scope of the study, Methodology and Limitations, Chapter -II COMPANY PROFILE concentrate on the profile of Right Horizon and also the HDFC and ICICI. Chapter- III Conceptual frame work of mutual funds focuses on the various concepts of mutual funds and its importance. Chapter -IV performance analysis of HDFC and ICICI mutual funds discuss the analysis and interpretation of performance analysis of HDFC& ICICI mutual funds and also their comparison. Chapter-V Suggestions And Conclusion.
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1.10 LIMITATIONS: Through the present study is very compressive in nature, following Limitations are subject to the study.
I. The study related to only the period of 6 years of market fluctuation.

II. The market fluctuation one only input the individual investors. III. The present study carried on the basis of secondary data only. IV. The accuracy of the data depends upon the availability of the data collected from secondary sources.
V. The performance of the mutual funds is related to only two. companies i.e. ICICI and

HDFC.