A STUDY ON MUTUAL FUND-(RAJNI) MBA(FIN),RDIAS..................DELHI CANTT-110010

8/9/2019 A STUDY ON MUTUAL FUND-(RAJNI) MBA(FIN),RDIAS..................DELHI CANTT-110010

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CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION TO MUTUAL FUND

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.These could range from shares to debentures to money market instruments. The

income earned in these investments and the capital appreciation realized by the scheme is

shared by its unit holders in proportion to the number of units owned by them. Thus a

Mutual Fund is the most suitable investment for the common man as it offers an

opportunity to invest in a diversified, professionally managed portfolio at a relatively low

cost. Anybody with an invest able surplus of a few thousand rupees can invest in Mutual

Funds. Each Mutual Fund scheme has a defined investment objective and strategy.

A mutual fund is the ideal investment vehicle for todays complex and modern

financial scenario. Markets for equity shares, bonds and other fixed income instruments,

real estate, derivatives and other assets have become mature and information driven.

Price changes in these assets are driven by global events occurring in faraway places. A

typical individual is unlikely to have the knowledge, skills, inclination and time to keep

track of events, understand their implications and act speedily.

A mutual fund is answer to all these situations. It appoints professionally

qualified and experienced staff that manages each of these functions on a fulltime basis.

The large pool of money collected in the fund allows it to hire such staff at a very low

cost to each investor. In fact, the mutual fund vehicle exploits economies of scale in all

three areas research, investment and transaction processing.

A draft offer document is to be prepared at the time of launching the fund.

Typically, it pre specifies the investment objective of the fund, the risk associated, the

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cost involved in the process and the broad rules for entry into and exit from the fund and

other areas of operation. In India, as in most countries, these sponsors need approval

from a regulator, SEBI in our case. SEBI looks at track records of the sponsor and its

financial strength in granting approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds

according to the investment objective. It also hires another entity to be the custodian of

the assets of the fund and perhaps a third one to handle registry work for the unit holders

of the fund.In the Indian context, the sponsors promote the Asset Management Company

also,in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in

the Asset Management Company (AMC). E.g. Birla Global Finance is the sponsor of the

Birla Sun Life Asset Management Company Ltd., which has floated different mutual

funds schemes and also acts as an asset manager for the funds collected under the

schemes.

As per SEBI regulations, mutual funds can offer guaranteed returns for a

maximum period of one year. In case returns are guaranteed, the name of the guarantor

and how the guarantee would be honored is required to be disclosed in the offer

document.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all stocks

may not move in the same direction in the same proportion at the same time. Mutual fund

issues units to the investors in accordance with quantum of money invested by them.

Investors of mutual funds are known as unit holders.



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1.2 THE CONCEPT OF MUTUAL FUND IN DETAIL :-

A mutual fund uses the money collected from investors to buy those assets which

are specifically permitted by its stated investment objective. Thus, an equity fund would

buy equity assets ordinary shares, preference shares, warrants etc. A bond fund would

buy debt instruments such as debentures, bonds or government securities. It is these

assets which are owned by the investors in the same proportion as their contribution

bears to the total contributions of all investors put together.

Any change in the value of the investments made into capital market instruments

(such as shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme.

NAV is defined as the market value of the Mutual Fund scheme's assets net of its

liabilities. NAV of a scheme is calculated by dividing the market value of scheme's assets

by the total number of units issued to the investors.

A Mutual Fund is an investment tool that allows small investors access to a well-

diversified portfolio of equities, bonds and other securities. Each shareholder participates

in the gain or loss of the fund. Units are issued and can be redeemed as needed. The

funds Net Asset value (NAV) is determined each day.

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When an investor subscribes to a mutual fund, he or she buys a part of the assetsor the pool of funds that are outstanding at that time. It is no different from buying

shares of joint stock Company, in which case the purchase makes the investor a part

owner of the company and its assets. In fact, in the USA, a mutual fund is constituted as

an investment company and an investor buys in to the fund, meaning he buys the

shares of the fund. In India, a mutual fund is constituted as a Trust and the investor

subscribes to the units issued by the fund, which is where the term Unit Trust comes

from. However, whether the investor gets fund shares or units is only a matter of legal

distinction. In any case, a mutual fund shareholder or unit-holder is a part owner of the

funds assets. The term unit-holder includes the mutual fund account-holder or close-end

fund shareholder.



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A Mutual Fund is a trust that pools the savings of a number of investors who

share a common financial goal. The money thus collected is then invested in capital

market instruments such as shares, debentures and other securities. The income earned

through these investments and the capital appreciation realized is shared by its unit

holders in proportion to the number of units owned by them. Thus Mutual fund is 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.

1.3 MUTUAL FUND OPERATION FLOW CHART :-

CHART 1.2

From the above chart , it can be observed that how the money from the investors

flow and they get returns out of it. With a small amount of fund, investors pool their

money with the funds managers. Taking into consideration the market strategy the funds

managers invest this pool of money into reliable securities. With ups and downs inmarket returns are generated and they are passed on to the investors. The above cycle

should be very clear and also effective.

The fund manager while investing on behalf of investors takes into consideration

various factors like time, risk, return, etc. so that he can make proper investment

decision.



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1.4 ADVANTAGES OF MUTUAL FUND :-

The following are the major advantages offered by mutual funds to all investors:-

PROFESSIONAL EXPERTIS E : -

Fund managers are professionals who track the market on an on goingbasis. With heir mix of professional qualification and market knowledge, they are

better placed than the average investor to understand the markets.

DIVERSIFICATIO N :-

Since a mutual fund scheme invests in number of stocks and/or

debentures, the ssociated risks are greatly reduced.

RELATIVELY LESS EXPENSIVE :-

When compared to direct investments in the capital market, mutual funds

cost less. This is due to savings in brokerage costs, demat costs, depository costs

etc.

LIQUIDITY :-

Investments in mutual funds are completely liquid and can be redeemed at

Net Assets Value (NAV) related price on any working day.

TRANSPARENCY :-

You will always have access to up-to-date information on the value of

your investment in addition to the complete portfolio of investments, the

proportion allocated to different assets and the fund managers investment

strategy.

FLEXIBILITY :-

Through features such as regular investment plans, regular withdrawal

plans and dividend investment plans, you can systematically invest or withdraw

funds according to your needs and convenience.



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SEBI REGULATED :-

All mutual funds are registered with SEBI and function within the provisions and

regulations that protect the interests of investors.

1.5 DISADVANTAGES OF MUTUAL FUND :-

The main disadvantages of mutual fund are high lightened as below:-

NO CONTROL OVER COST :-

Any investor in a mutual fund has no control over the overall cost of investing.

He pays investment management fees as long as he remains with fund, albeit in return for

the professional management and research. Fees are payable even in declining stage. A

mutual fund investor also pays fund distribution costs, which he would not incur in directinvesting. However, this shortcoming only means that there is a cost to obtain the

benefits of mutual fund services.

NO TAILOR-MADE PORTFOLIOS :-

Investors who invest on there own can build their own portfolios of shares and

bonds and other securities. Investing through funds means he delegates this decision to

the fund managers. The very high-net-worth individuals or large corporate investors may

find this to be a constraint in achieving their objectives. However, most mutual fund

managers help investors overcome this constraint by offering families of funds- a large

number of different schemes within their own management company. An investor can

choose form different investment plans and construct a portfolio of his own.

MANAGING A PORTFOLIO OF FUNDS :-

Availability of a large number of funds can actually mean too much choice for the

investor. He may again need advice on how to select a fund to achieve his objectives,

quite similar to the situation when he has to select individual shares or bonds to invest in.



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ENTRY AND EXIT COST :-

Mutual funds are a victim of their own success. When a large body like a fund

invests in shares, the concentrated buying and selling often results in adverse price

movement i.e. at the time of buying, the fund ends up paying a high price and by selling

it realizes a lower price. For obvious reasons, this problem is even more severe for funds

investing in small capitalization stocks. However, given the large size of debt market,

excluding UTI, most debt funds do not face this problem.

CHANGE OF INDEX COMPOSITION :-

The indices changing over the world to reflect changing market conditions. There

is an inherent survivorship bias in this process, with the bad stocks bided out and

replaced by emerging blue chips. This is a severe problem in India with the sensex

having being changing twice in last 5 years, with each change being quite substantial.

Another reason for change index composition is Mergers and Acquisitions. The weight

age of the shares of a particular company in the index changes if it acquires a large

company not a part of the index.

1.6 WHY INVESTOR NEEDS MUTUAL FUND:-

Mutual funds offer benefits, which are too significant to miss out. Any investment

has to be judged on the yardstick of return, liquidity and safety. Convenience and tax

efficiency are the other benchmarks relevant in mutual fund investment. In the wonderful

game of financial safety and returns are the tows opposite goals and investors cannot be

nearer to both at the same time. The crux of mutual fund investing is averaging the risk.

Many investors possibly dont know that considering returns alone, many mutual

funds have outperformed a host of other investment products. Mutual funds have

historically delivered yields averaging between 9% to 25% over a medium to long time

frame. The duration is important because like wise, mutual funds return taste bitter with

the passage of time. Investors should be prepared to lock in their investments preferably

for 3 years in an income fund and 5 years in an equity funds. Liquid funds of course,

generate returns even in a short term.



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1.7 MUTUAL FUND RISK :-

Mutual funds face risks based on the investments they hold. For example, a bond

fund faces interest rate risk and income risk. Bond values are inversely related to interest

rates. If interest rates go up, bond values will go down and vice versa. Bond income is

also affected by the changes in interest rates. Bond yields are directly related to interest

rates falling as interest rates fall and rising as interest rates.

Similarly, a sector stock fund is at risk that its price will decline due to developments

in its industry. A stock fund that invests across many industries is more sheltered from

this risk defined as industry risk.

Followings are glossary of some risks to consider when investing in mutual funds:-

COUNTRY RISK :-The possibility that political events (a war, national election), financial problems

(rising inflation, government default), or natural disasters will weaken a countrys

economy and cause investments in that country to decline.

INCOME RISK :-

The possibility that political events (a war, national election), financial problems

(rising inflation, government default), or natural disasters will weaken a countrys

economy and cause investments in that country to decline.

MARKET RISK :-

The possibility that stock fund or bond fund prices overall will decline over short or

even extended periods. Stock and bond markets tend to move in cycles, with periods

when prices rise and other periods when prices fall.



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GRAPH 1.3:- RISK RETURN REWRAD IN MUTUAL FUND

Liquid Fun

Short Ter

Fund

Incom e Fun

MIP

Balance Fun

Equity Fun

This graph shows risk and return impact on various mutual funds. There is a direct

relationship between risks and return, i.e. schemes with higher risk also have potential to

provide higher returns.



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CHAPTER-2

OBJECTIVES OF THE STUDY

The present study has been undertaken with the object of examining, analyzing and

inferring the performance of the mutual funds, The main objectives of the study are as

follows :-

1) Analyzing mutual fund awareness in retail investors of HDFC assets Management

Company in DELHI.

2) To know the Preferences for the portfolios.

3) To find out the most preferred channel.

4) To find out what should do to boost Mutual Fund Industry.

5) To know why one has invested or not invested in HDFC Mutual fund

6)6) To analyze the history of HDFC mutual fundTo analyze the history of HDFC mutual fund

7) To learn about various aspect of HDFC mutual fundTo learn about various aspect of HDFC mutual fund

8) To understand the best way to attract customer investing in mutual fund by

understanding the factors responsible for making a mutual fund successful.

2.1 PURPOSE OF THE STUDY

With liberalization, privatization and globalization there has been a major change in the

Indian Mutual Funds Industry. The momentum is on and one is sure to see similar hectic

activity at the offices of the new entrants especially after the 90s as private sector gained

entry in the Indian markets.

With the private sector penetration, a large number of schemes have also been introduced

due to which the average consumer has become vary sensitive to the new schemes

coming its way. So to ensure about the various consumer attitudes, a survey was

undertaken.



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De facto, to ensure what the consumer thinks & what it thinks the best we undertook

a consumer survey, to get a clear picture of the future of the Mutual Funds companies

who are busy wooing the customers, with their lucrative schemes, to survive the rat race

& emerge as no.1 in this field. The main purpose of the study are as follows:-

To understand the best way to attract customer investing in mutual fund by

understanding the factors responsible for making a mutual fund successful.

To find out what should do to boost Mutual Fund Industry.

Analyzing mutual fund awareness in retail investors of HDFC assets Management

Company in DELHI.

To find out the most preferred channel.

2.2 SCOPE OF THE STUDY

A big boom has been witnessed in Mutual Fund Industry in resent times. A large number

of new players have entered the market and trying to gain market share in this rapidly

improving market.

The study will help to know the preferences of the customers, which company, portfolio,

mode of investment, option for getting return and so on they prefer. This project report

may help the company to make further planning and strategy.



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CHAPTER-3

RESEARCH METHODOLOGY OF THE STUDY

RESEARCH METHODOLOGY:-

Research methodology is a way to systematically show the research problem. It

may be understood as a science of studying how research is done scientifically. It is

necessary for the researcher to know not only the research methods but also the

methodology. This Section includes the methodology which includes. The research

design, objectives of study, scope of study along with research methodology and

limitations of study etc.

3.1- RESEARCH DESIGN:-

Research design can be described as an out line of a research project working or a

pattern. In a research design there are series of prior decision that together provide a

master plan for completing a research project. Research design is proved to be a bridge

between what has been established and what is to be done in conduct of the studies.

Research design should be compressive and it should provide which method to be used

and what work to be done.

Research design describes as a master plan a series of key decisions that serves a

model for conducting a research project. There are the main components of research

design.

Objective of research

Data inputs

Analysis of data collected

The research design was exploratory type and the focus was on getting

mutual funds employees views for various products, expectations from market.



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EXPLORATORY RESEARCH:-

Exploratory study goes beyond description and attempts to explain the reasons for

the phenomenon that the descriptive study only observed. The researcher uses theories or

at least hypotheses to account for the forces that caused a certain phenomenon to occur.

3.2 SOURCES OF DATA:-

The gathering of data may range from a simple observation at one location to a

grandiose survey of multinational corporations at sites in different parts of the world. The

method selected will largely determine how the data are collected. DATA is the facts

presented to the researcher from the studys environment. Characteristics of the data are

as follows:

Data are more metaphorical than real

Data are processed by our senses-often limited in comparison to

The senses of other living organisms.

Capturing data are said to be trustworthy because they may be

Verified.

Data classify their verity by closeness to the phenomena

There are two kinds of data that can be collected for research purpose. Based on

the requirement in the research appropriate data is collected.

A - PRIMARY SOURCE:-

Primary data are collected and gathered for the first time. Primary data are sought

for their proximity to the truth and controls over error. Advantages of primary data are:

Researchers can collect precisely the information they want.

They usually can specify the operational definitions used and can eliminate, or at

least monitor and record the extraneous influences on the data as they are

gathered.



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B SECONDARY SOURCE:-

Someone else collects secondary data. So, it becomes secondary information for the

research. Secondary data have had least one level of interpretation inserted between the

event and its recording. The secondary data was collected on the basis of organizational

file, official records, news papers, magazines, management books, preserved information

in the companys database and website of the company.

Reasons for using the secondary data are listed below:

They fill a need for specific reference or citation on some point

Secondary data are an integral part of a larger research study

Secondary data may be used as the sole basis for a research study, since

In many research situations one cannot conduct primary research

Because of physical, legal, or cost influences.

Analyzing the requirement of data, it was found that primary data is more important for

achieving Research Objective. Primary data is collected with the help of interviews .

3.3- SAMPLING :-

Sampling refers to the method of selecting a sample from a given universe with a view to

draw conclusions about that universe. A sample is a representative of the universe

selected for study.

SAMPLE SIZE:-

Large sample gives reliable result than small sample. However, it is not feasible to target

entire population or even a substantial portion to achieve a reliable result. So, in this

aspect selecting the sample to study is known as sample size. Hence, for my project my

sample size was 50.

The Sample Size consists of both the Professional and Business class people. IT peoples,

Doctors, Jewelers, Timber Merchants & Real estate Agents are taken as Sample.



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SAMPLING TECHNIQUE:-

Random sampling technique was used in the survey conducted.

TOOLS OF ANALYSIS:-

Data has been presented with the help of bar graph, pie charts, line graphs etc.

PLAN OF ANALYSIS:-

Tables were used for the analysis of the collected data. The data is also neatly

presented with the help of statistical tools such as graphs and pie charts. Percentages and

averages have also been used to represent data clearly and effectively.

3.4 - DATA COLLECTION INSTRUMENT DEVELOPMENT:-

The mode of collection of data will be based on Survey Method and Field Activity.

Primary data collection will base on personal interview. I have prepared the questionnaire

according to the necessity of the data to be collected.

3.5 LIMITATIONS OF THE STUDY:-

This study also includes some limitations which have been discussed as follows:

Though every one used to be very co-operative but every detail was unable to be

disclosed to me as the officials has to maintain secrets of the company.

It is difficult to cover all the function of the company.

Because of the limited time period, the survey work was conducted in the Delhi

region and the sample size was taken as 20 respondents only.

Some of the persons were not so responsive.

Some respondents were reluctant to divulge personal information which can

affect the validity of all responses.



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Possibility of error in data collection because many of investors may have not

given actual answers of my questionnaire.

CHAPTER 4

REVIEW OF LITERATURE

All information pertaining to mutual fund has been collected through vast source of

literature which includes books, journals, websites and some topics have been picked

from newspaper as well.

BOOKS: - Books have proved to be the most important source of information contained

in the project most theoretical aspects related to mutual funds have been taken from it,

topics like advantages and disadvantage of mutual fund, types of mutual fund and

structure have been directly from there.

WEBSITES:- Guidelines of SEBI and other aspects of mutual fund which are subject to

change over time have been collected from websites of securities and exchange board of

India national stock exchange and mutual fund sites.

NEWSPAPER:-Newspaper have provided with the fresh updates and other information

related to what investment strategies can be recommended to the investors.

JOURNAL:- Bostan journal have also provided with some valuable informationpertaining to model portfolios which has helped in better understanding of the subjectconcerned.



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CHAPTER-5

INTRODUCTION TO THE INDUSTRY

5.1 THE HISTORY OF INDIAN MUTUAL FUND:-

The mutual fund industry in India started in 1963 with the formation of Unit Trust

of India, at the initiative of the Government of India and Reserve Bank. Though the

growth was slow, but it accelerated from the year 1987 when non-UTI players entered

the Industry.

In the past decade, Indian mutual fund industry had seen a dramatic improvement,

both qualities wise as well as quantity wise. Before, the monopoly of the market had seen

an ending phase; the Assets Under Management (AUM) was Rs67 billion. The private

sector entry to the fund family raised the Aum to Rs. 470 billion in March 1993 and till

April 2004; it reached the height if Rs.1540 billion.

The Mutual Fund Industry is obviously growing at a tremendous space with the

mutual fund industry can be broadly put into four phases according to the development of

the sector. Each phase is briefly described as under.

FIRST PHASE -1964-87 (MONOPOLY OF UTI) :-

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up

by the Reserve Bank of India and functioned under the Regulatory and administrative

control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the

Industrial Development Bank of India (IDBI) took over the regulatory and administrative

control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the

end of 1988 UTI had Rs.6, 700 crores of assets under management.

SECOND PHASE -1987-93( ENTRY OF PUBLIC SECTOR FUNDS) :-



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1987 marked the entry of non- UTI, public sector mutual funds set up by public

sector banks and Life Insurance Corporation of India (LIC) and General Insurance

Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund

established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National

Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun

90), and Bank of Baroda

Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set

up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs.47,

004 crores.

THIRD PHASE-1993-2003(ENTRY OF PRIVATE SECTOR FUNDS):-

With the entry of private sector funds in 1993, a new era started in the Indian mutual

fund industry, giving the Indian investors a wider choice of fund families. Also, 1993

was the year in which the first Mutual Fund Regulations came into being, under which all

mutual funds, except UTI were to be registered and governed. The erstwhile Kothari

Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund

registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive

and revised Mutual Fund Regulations in 1996. The industry now functions under the

SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds

setting up funds in India and also the industry has witnessed several mergers and

acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets

of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 crores of assets under

management was way ahead of other mutual funds.

FOURTH PHASE-(SINCE FEBRUARY 2003) :-

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was

bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust



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of India with assets under management of Rs.29, 835 crores as at the end of January

2003, representing broadly, the assets of US 64 scheme, assured return and certain other

schemes. The Specified Undertaking of Unit Trust of India, functioning under an

administrator and under the rules framed by Government of India and does not come

under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is

registered with SEBI and functions under the Mutual Fund Regulations. With the

bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 crores of

assets under management and with the setting up of a UTI Mutual Fund, conforming to

the SEBI Mutual Fund Regulations, and with recent mergers taking place among

different private sector funds, the mutual fund industry has entered its current phase of

consolidation and growth. As at the end of October 31, 2003, there were 31 funds, which

manage assets of Rs.126726 crores under 386 schemes.

GRAPH:-5.1:- The following figure shows the growth in AUM (Asset under

Management) of the Indian Mutual Fund Industry as on March 2009



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Erstwhile UTI was bifurcated into UTI Mutual fund and the Specified Undertaking of the

Unit Trust of India effective from February 2003. The Assets under management of the

Specified Undertaking of the Unit Trust of India has thereof been executed from the total

assets of the industry as a whole from February 2003 onwards. Today there are over 30

AMCs offering a huge number of schemes giving the investor a huge horizon to choose

from. The market has become very competitive with the companies fighting tooth and

nail to attract and keep the investor from investing in their competitors schemes.

5.2 STRUCTURE OF A MUTUAL FUND :-

CHART-5.2:-



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THE STRUCTURE CONSISTS OF:-

SPONSOR:-

Sponsor is the person who acting alone or in combination with another body corporate

establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the

Investment managed and meet the eligibility criteria prescribed under the Securities and

Exchange Board of India (Mutual Fund) Regulations, 1996. The sponsor is not

responsible or liable for any loss or shortfall resulting from the operation of the Schemes

beyond the initial contribution made by it towards setting up of the Mutual Fund.

TRUST

The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian

Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian

Registration Act, 1908.

TRUSTEE

Trustee is usually a company (corporate body) or a Board of Trustees (body of

individuals). The main responsibility of the Trustee is to safeguard the interest of the unit

holders and ensure that the AMC functions in the interest of investors and in accordance



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with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, the

provisions of the Trust Deed and the Offer Documents of the respective Schemes. At

least 2/3rd directors of the Trustee are independent directors who are not associated with

the Sponsor in any manner

FOLLOWING ARE THE RIGHTS OF TRUSTEES:-

Approve each of the schemes floated by the assets Management Company.

Right to request any necessary information from assets Management

Company.

Right to take corrective action if they believe that of funds business.

Right to dismiss the assets Management Company.

Ensure that any shortfall in net worth of the assets Management Company is

made up.

FOLLOWING ARE THE OBLIGATIONS OF TRUSTEES:-

Enter in to an investment management agreement with the assets Management

Company.

Ensure that the funds transactions are in accordance with the trust deed.

Furnish to SEBI on a half yearly basis, a report on the funds activities.

Ensure that no change in the fundamental attributes of any scheme or the trust

or any other change, which would affect the interest of unit holder, happens

with informing to unit holder.

Review the investor complaints received and redressed of the same by assets

Management Company

ASSET MANAGEMENT COMPANY (AMC)



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The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund.

The AMC is required to be approved by the Securities and Exchange Board of India

(SEBI) to act as an asset management company of the Mutual Fund. At least 50% of the

directors of the AMC are independent directors who are not associated with the Sponsor

in any manner. The AMC must have a net worth of at least 10 cores at all times.

FOLLOWING ARE THE OBLIGATIONS OF ASSETS MANAGEMENT

COMPANY:-

Float investment schemes only after getting approval from the trustees and SEBI.

Send quarterly reports to trustees.

Make the required disclosures to the investors in the area such as calculation ofNAV and repurchase price.

Must maintain a net worth of at least Rs.10 crores at all the times

Will not purchase or sale securities through any broker with the brokerage of 5 %

or more of the aggregate purchases and sale of securities made by the Mutual

Fund in all its schemes.

Assets Management Company cannot act as trustees of any other Mutual Fund.

Do not undertake any other activity conflicting with managing the fund.

FOLLOWING ARE THE BODIES APPOINTED BY THE TRUSTEES/AMC:-

Custodian is the responsible person for physical handling and safe keeping of the

securities. He should be independent of the sponsor and registered with SEBI.



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Indian capital market is moving away from physical certificates for securities to

dematerialized form with a depository. He holds dematerialized security holdings

of Mutual Fund.

REGISTRAR AND TRANSFER AGENT

The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent

to the Mutual Fund. The Registrar processes the application form, redemption requests

and dispatches account statements to the unit holders. The Registrar and Transfer agent

also handles communications with investors and updates investor records.

5.3 INVESTORS PROFILE:-

An investor normally prioritizes his investment needs before undertaking an

investment. So different goals will be allocated to different proportions of the total

disposable amount. Investments for specific goals normally find their way into the debt

market as risk reduction is of prime importance, this is the area for the risk-averse

investors and here, Mutual Funds are generally the best option. One can avail of the

benefits of better returns with added benefits of anytime liquidity by investing in open-

ended debt funds at lower risk, this risk of default by any company that one has chosen

to invest in, can be minimized by investing in Mutual Funds as the fund managers

analyze the companies financials more minutely than an individual can do as they have

the expertise to do so.

Moving up the risk spectrum, there are people who would like to take some risk and

invest in equity funds/capital market. However, since their appetite for risk is also

limited, they would rather have some exposure to debt as well. For these investors,

balanced funds provide an easy route of investment, armed with expertise of investment

techniques, they can invest in equity as well as good quality debt thereby reducing risks

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



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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 of

the spectrum, the return-potential compensates for the risk attached.

5.4 POSITIONING STRATEGY OF MUTUAL FUND INDUSTRY: -

Positioning starts with a product. But positioning is not what you do to a product.

Positioning is what you do to the mind of the prospect. That is, you position the product

in the mind of prospect. A companys differentiating and positioning strategy must

change as the product, market, and competitors change over time. . There should be no

under positioning, over positioning, confused positioning or doubtful positioning.

CHANNEL OF DISTRIBUTION:-

In Every asset Management Companys distribution channel played very important roles.

Here assets management companies have distributors like:-

Consultants

Agents

Distributors

Advisers

Broker

Their role is very important for Assets Management Companys Office.

5.5 PROMOTIONAL TOOLS EMPLOYED BY VARIOUS MUTUAL FUND

COMPANIES:-

Some specific other document help to increase selling product like: -

BANNERS:-

Banners define brief idea of scheme, it should be very attractive with specific

objective & its related picture in city, and Banners keep in specific places which very

help to do good publicity. It distributes only by AMCs office.



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When any new scheme is launched or any new NFO coming up that times company

make banners before few days. Its helps to good advertising & easy cover to

customer or people.

APPLICATION FORM :-

Any product like Equity, debt and balance, investor should fill up its common

Application forms.

Form define acknowledge slip which give return to customer. Actually 3-time stamp

done in form, one of them is acknowledged slip These forms are distributed by Assets

Management Companys office. It is all Assets Management Companys office duty

to dispatch forms to their customer like agents, brokers, and advisers time to time.

BROACHERS:-

Broachers include brief history of company. It defines when and where assets

management Company invests investors money.

This defines performance of each scheme product & also defines its comparison to

last 3 months to more than 5 years.

In end of every month Assets Management Companys office send Boucher to their

investors, brokers, agents, advisers regularly.

5.6 MUTUAL FUND INVESTING STRATEGIES:

Systematic Investment Plans (SIPs)

These are best suited for young people who have started their careers and need to

build their wealth. SIPs entail an investor to invest a fixed sum of money at regular

intervals in the Mutual fund scheme the investor has chosen, an investor opting for

SIP in xyz Mutual Fund scheme will need to invest a certain sum on money every

month/quarter/half-year in the scheme.

Systematic Withdrawal Plans (SWPs)



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These plans are best suited for people nearing retirement. In these plans, an investor

invests in a mutual fund scheme and is allowed to withdraw a fixed sum of money

at regular intervals to take care of his expenses

Systematic Transfer Plans (STPs)

They allow the investor to transfer on a periodic basis a specified amount from one

scheme to another within the same fund family meaning two schemes belonging

to the same mutual fund. A transfer will be treated as redemption of units from the

scheme from which the transfer is made. Such redemption or investment will be at

the applicable NAV. This service allows the investor to manage his investments

actively to achieve his objectives. Many funds do not even charge any transaction

fees for his service an added advantage for the active investor.

5.7 NET ASSET VALUE:-

The Net Asset Value or NAV is a term used to describe the value of an entity's

assets less the value of its liabilities. The term is commonly used in relation to collective

investment schemes. It may also be used as a synonym for the book value of a firm.

NAV covers the company's current asset and liability position. Investors might

expect the company to have large growth prospects, in which case they would beprepared to pay more for the company than the NAV suggests.

The NAV is usually below the market price because the current values of the

funds assets are higher than the historical financial statements used in the NAV

calculation.

CALCULATING NET ASSET VALUE

Unit capital is the investors subscriptions. In MF it is not treated as a liability.

Investments made on behalf of the investors are assets side of the balance sheet. There

are liabilities of short-term nature.

FUNDS NET ASSET = ASSET LIABILITIES

http://en.wiktionary.org/wiki/less#Prepositionhttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Book_valuehttp://en.wikipedia.org/wiki/Financial_statementshttp://en.wiktionary.org/wiki/less#Prepositionhttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Collective_investment_schemehttp://en.wikipedia.org/wiki/Book_valuehttp://en.wikipedia.org/wiki/Financial_statements


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According to the SEBI - NCAER Survey of Indian Investors about 15 million or

8.7% of the households have invested in Mutual Funds and there are nearly 23

million unit holders in India.

30% of investors fall in the income group of investors having monthly income up to

Rs. 10,000/-.

In U.S.A there are more deposits in the mutual funds than in bank deposits.

The truth is, as investors we should always pay attention to our mutual funds and

continue to monitor them.

5.9 PERFORMANCE MEASURES OF MUTUAL FUNDS:

Mutual Fund industry today, with about 30 players and more than six hundred schemes,

is one of the most preferred investment avenues in India. However, with a plethora of

schemes to choose from, the retail investor faces problems in selecting funds. Factors

such as investment strategy and management style are qualitative, but the funds record

is an important indicator too.

Though past performance alone cannot be indicative of future performance, it is,

frankly, the only quantitative way to judge how good a fund is at present. Therefore,

there is a need to correctly assess the past performance of different Mutual Funds.

Worldwide, good Mutual Fund companies over are known by their AMCs and this

fame is directly linked to their superior stock selection skills. For Mutual Funds to

grow, AMCs must be held accountable for their selection of stocks. In other words,

there must be some performance indicator that will reveal the quality of stock selection

of various AMCs.

Return alone should not be considered as the basis of measurement of the performance

of a Mutual Fund scheme, it should also include the risk taken by the fund manager

because different funds will have different levels of risk attached to them. Risk

associated with a fund, in a general, can be defined as Variability or fluctuations in the



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returns generated by it. The higher the fluctuations in the returns of a fund during a

given period, higher will be the risk associated with it. These fluctuations in the returns

generated by a fund are resultant of two guiding forces. First, general market

fluctuations, which affect all the securities, present in the market, called Market risk or

Systematic risk and second, fluctuations due to specific securities present in the

portfolio of the fund, called Unsystematic risk. The Total Risk of a given fund is sum

of these two and is measured in terms of standard deviation of returns of the fund.

Systematic risk, on the other hand, is measured in terms of Beta, which represents

fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of

a Mutual Fund is to the changes in the market; higher will be its beta. Beta is calculated

by relating the returns on a Mutual Fund with the returns in the market. While

Unsystematic risk can be diversified through investments in a number of instruments,

systematic risk cannot. By using the risk return relationship, we try to assess the

competitive strength of the Mutual Funds one another in a better way. In order to

determine the risk-adjusted returns of investment portfolios, several eminent authors

have worked since 1960s to develop composite performance indices to evaluate a

portfolio by comparing alternative portfolios within a particular risk class.

The most important and widely used measures of performance are:

The TreynorMeasure

The Sharpe Measure

Jenson Model

Fama Model

THE TREYNOR MEASURE:-

Developed by Jack Treynor, this performance measure evaluates funds on the basis of

Treynor's Index.This Index is a ratio of return generated by the fund over and above risk free rate of

return (generally taken to be the return on securities backed by the government, as there

is no credit risk associated), during a given period and systematic risk associated with it

(beta). Symbolically, it can be represented as:



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Treynor's Index (Ti) = (Ri - Rf)/Bi.

Where,

Ri represents return on fund,

Rf is risk free rate of return, and

Bi is beta of the fund.

All risk-averse investors would like to maximize this value. While a high and positive

Treynor's Index shows a superior risk-adjusted performance of a fund, a low and

negative Treynor's Index is an indication of unfavorable performance.

THE SHARPE MEASURE:-

In this model, performance of a fund is evaluated on the basis of Sharpe Ratio, which is

a ratio of returns generated by the fund over and above risk free rate of return and the

total risk associated with it.

According to Sharpe, it is the total risk of the fund that the investors are concerned

about. So, the model evaluates funds on the basis of reward per unit of total risk.

Symbolically, it can be written as:

Sharpe Index (Si) = (Ri - Rf)/Si

Where,

Si is standard deviation of the fund,

Ri represents return on fund, and

Rf is risk free rate of return

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a

fund, a low and negative Sharpe Ratio is an indication of unfavorable performance.

Comparison of Sharpe and Treynor

Sharpe and Treynor measures are similar in a way, since they both divide the risk

premium by a numerical risk measure. The total risk is appropriate when we are



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evaluating the risk return relationship for well-diversified portfolios. On the other hand,

the systematic risk is the relevant measure of risk when we are evaluating less than

fully diversified portfolios or individual stocks. For a well-diversified portfolio the total

risk is equal to systematic risk. Rankings based on total risk (Sharpe measure) and

systematic risk (Treynor measure) should be identical for a well-diversified portfolio,

as the total risk is reduced to systematic risk. Therefore, a poorly diversified fund that

ranks higher on Treynor measure, compared with another fund that is highly

diversified, will rank lower on Sharpe Measure.

Calculation of Treynor and sharp ratio for selected mutual funds schemes:-

TABLE-5.3:-

Measures/ schemes HDFC equity fund

(Growth)

SBI Magnum

comma fund( Growth)

LICMF Equity Fund-

(Growth)

Return on fund (Ri) 7.2% 6% 5%

Risk free rate of return

(Rf)

9% 8% 7%

Beta 0.85 0.92 1.08

Standard deviation 5.09 5.71 6.48Treynor ratio

(Ti) = (Ri - Rf)/Bi.

7.2-9/0.85

= -2.11

6-8/0.92

= -2.17

5-7/1.08

= -1.85

Sharp ratio

(Si) = (Ri - Rf)/Si

7.2-9/5.09

= -0.353

6-8/5.71

= -0.350

5-7/6.48

= -0.308

All risk-averse investors would like to maximize this value. While a high and positive Treynor's

Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index

is an indication of unfavorable performance.

While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund, a

low and negative Sharpe Ratio is an indication of unfavorable performance.

Findings:

http://licmutual.com/MutualFund/MFSchProfile.aspx?sch=99&cat=1http://licmutual.com/MutualFund/MFSchProfile.aspx?sch=99&cat=1http://licmutual.com/MutualFund/MFSchProfile.aspx?sch=99&cat=1http://licmutual.com/MutualFund/MFSchProfile.aspx?sch=99&cat=1


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All these three mutual fund shows the unfavorable performance but HDFC equity

growth plan having the low negative value so it will be the greater performer over the

past three year.

Same as sharp ratio for SBI magnum comma fund growth and LIC equity fund

growth are having high negative value that depicts the performance of these plans are

lower comparison to HDFC equity growth plan.

JENSON MODEL :-

Jenson's model proposes another risk adjusted performance measure. This measure was

developed by Michael Jenson and is sometimes referred to as the differential Return

Method. This measure involves evaluation of the returns that the fund has generated vs.

the returns actually expected out of the fund1 given the level of its systematic risk. The

surplus between the two returns is called Alpha, which measures the performance of a

fund compared with the actual returns over the period. Required return of a fund at a

given level of risk (Bi) can be calculated as:

Ri = Rf + Bi (Rm - Rf)

Where,

Ri represents return on fund, and

Rm is average market return during the given period,Rf is risk free rate of return, and

Bi is Beta deviation of the fund.

After calculating it, Alpha can be obtained by subtracting required return from the

actual return of the fund.

Higher alpha represents superior performance of the fund and vice versa. Limitation of

this model is that it considers only systematic risk not the entire risk associated with the

fund and an ordinary investor cannot mitigate unsystematic risk, as his knowledge of

market is primitive.

FAMA MODEL:-



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The Eugene Fama model is an extension of Jenson model. This model compares the

performance, measured in terms of returns, of a fund with the required return

commensurate with the total risk associated with it. The difference between these two

is taken as a measure of the performance of the fund and is called Net Selectivity.

The Net Selectivity represents the stock selection skill of the fund manager, as it is the

excess returns over and above the return required to compensate for the total risk taken

by the fund manager. Higher value of which indicates that fund manager has earned

returns well above the return commensurate with the level of risk taken by him.

Required return can be calculated as: Ri = Rf + Si/Sm*(Rm - Rf)

Where,

Ri represents return on fund,

Sm is standard deviation of market returns,

Rm is average market return during the given period, and

Rf is risk free rate of return.

The Net Selectivity is then calculated by subtracting this required return from the

actual return of the fund.

Among the above performance measures, two models namely, Treynor measure and

Jenson model use Systematic risk is based on the premise that the Unsystematic risk isdiversifiable. These models are suitable for large investors like institutional investors

with high risk taking capacities as they do not face paucity of funds and can invest in a

number of options to dilute some risks. For them, a portfolio can be spread across a

number of stocks and sectors. However, Sharpe measure and Fama model that consider

the entire risk associated with fund are suitable for small investors, as the ordinary

investor lacks the necessary skill and resources to diversify. Moreover, the selection of

the fund on the basis of superior stock selection ability of the fund manager will also

help in safeguarding the money invested to a great extent. The investment in funds that

have generated big returns at higher levels of risks leaves the money all the more prone

to risks of all kinds that may exceed the individual investors' risk appetite.



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5.10 RECENT TRENDS IN THE MUTUAL FUND INDUSTRY:-

The most important in the mutual fund industry is the aggressive expansion of the foreign

owned mutual fund companies and the decline of the companies floated by the

nationalized bank and smaller private sector players. Many nationalized banks got into

the mutual fund business in the early nineties and go off to a good start due to the stock

market boom prevailing then. These banks did not really understand the mutual fund

business and they just viewed it as another kind of banking activity. Few hired

specialized staff and generally choose to transfer staff from the parent organization.

Some schemes had offered guaranteed returns and their patent organization had to bail

out these AMCs by paying large amount of money the difference between the guaranteed

and actual returns. The service level was also bad. Most of these AMCs have not been

able to retain staffs, float, and new schemes etc. and it is doubtful whether barring a few

expectations, they have serious plans of continuing the activity in a major way.

The experience of some of the AMCs floated by private sector Indian companies was

also very similar. They quickly realized that the AMCs business is a business, which

makes money in the long term and requires deep pocketed support in the intermediate

years. Some have sold out to foreign owned companies, some have merged with the

others and there is general restructuring going on.

The foreign owned companies have deep pockets and have come in here with the

expectation of a long haul. They can be credited with introducing many new practices

such as new product innovation, sharp improvement in the service standards and

disclosure, usage of technology, broker education etc. In fact, they have forced the

industry to upgrade itself and service levels of the organization like UTI have improved

dramatically in the last few years in response to the competition provided by these.

5.11 FUTURE SCENARIO:-The asset base will continue to grow at an annual rate of about 30 to 35% over the next

few years as investors shift their asset from banks and other traditional avenues. Some of

the older public and private sector players will either close or be taken over. Out of ten

public sectors players five will sell out, close down or merge with strong players in three



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to four years. In the private sector this trend has already started with two mergers and one

takeover. Here too some of them will down their shutter in the near future to come.

But this does not mean there is no room for other players. The market will witness a

flurry of new players entering the area. There will be a large number of offers from

various asset management companies in times to come. Some big names like Fidelity,

Principal and Old Mutual etc. are looking at Indian market seriously.

The mutual fund industry is awaiting the derivation in India as this would enable it to

hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund scheme to trade in

derivatives. Importantly, many market players have called on the Regulator to initiate the

process immediately, so that the mutual funds can implement the changes that are

required to trade in derivates.



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CHAPTER-6

COMPANY PROFILE

OF

HDFC MUTUAL FUND

INTRODUCTION:-

HDFC Mutual Fund is governed by HDFC Asset Management Company Limited

(AMC). The HDFC mutual fund was approved by SEBI in June 2000. Equity Funds,

Balanced Funds, and Debt Funds are the mutual fund schemes offered by HDFC Mutual

Fund.

HDFC Mutual Fund has witnessed significant growth in the past few years. It is

regulated by HDFC Asset Management Company Limited (AMC) which works as an

Asset Management Company (AMC) for HDFC Mutual Fund. HDFC Asset

Management Company Limited (AMC) is a Joint Venture concern between the large-

scale housing finance company HDFC and British investment firm Standard Life

Investments Limited.

The HDFC Asset Management Company Limited conducts the activities carried out by

the HDFC Mutual Fund and manages the assets of various mutual fund schemes. TheAugust 2006 report states that the fund has assets of Rs. 25,892 crores under (AMC)

HDFC Asset Management Company Limited (AMC) entered into an agreement with

Zurich Insurance Company (ZIC) with the aim to develop the asset management business

in India in the year 2003. Following to this, all the mutual fund schemes of Zurich

Mutual Fund in India got transferred to HDFC Mutual Fund and gained the name of

HDFC schemes.

HDFC Asset Management Company Ltd (AMC) was set up on December 10, 1999 under

the Companies Act, 1956. It got the approval to function as an Asset Management

Company for the HDFC Mutual Fund by SEBI on June 30, 2000. AMC was appointed in

order manage the HDFC Mutual Fund. The registered office of HDFC Asset

Management Company Limited (AMC) is located at Ramon House, 3rd Floor, H.T.

Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.



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As per the terms of the Investment Management Agreement, the AMC will conduct the

operations of the Mutual Fund and manage assets of the schemes, including the schemes

launched from time to time.

The present share holding pattern of the AMC is as follows:

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a

review of its overall strategy, had decided to divest its Asset Management business in

India. The AMC had entered into an agreement with ZIC to acquire the said business,

subject to necessary regulatory approvals.

On obtaining the regulatory approvals, the Schemes of Zurich India Mutual Fund has

now migrated to HDFC Mutual Fund on June 19, 2003. These schemes have been

renamed as follows:

FORMER NAME NEW NAME

Zurich India Equity Fund HDFC Equity Fund

Zurich India Prudence Fund HDFC Prudence Fund

Zurich India Capital Builder Fund HDFC Capital Builder Fund

Zurich India Tax Saver Fund HDFC Tax Saver Fund

Zurich India Top 200 Fund HDFC Top 200 Fund

Zurich India High Interest Fund HDFC High Interest Fund

Zurich India Liquidity Fund HDFC Liquidity Fund

Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund

Rukmini Devi Institute of Advanced Studies

Particulars % of the paid up capital

Housing Development Finance Corporation Limited 50.10

Standard Life Investments Limited 49.90

39


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HDFC assets Management Company Provide good services to investors.



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SNAPSHOT-I

CHART-6.1

HDFC Standard Life insurance Company- HDFC holds 72.26 %.

HDFC Asset Management Company HDFC holds 60%

HDFC Bank- HDFC holds 23.26%.

Intelenet Global (Business Process Outsourcing) HDFC holds 50%.

HDFC Chubb General Insurance Company HDFC holds 74%.

MAN WITH A MISSION

If ever there was a man with a mission it was Hasmukhbhai Parekh,

Founder and Chairman-Emeritus, of HDFC Group who left this

earthly abode on November 18, 1994. Born in a traditional banking

family in Surat, Gujarat, Mr. Parekh started his financial career at

Harkisandass Lukhmidass a leading stock broking firm. The firm

closed down in the late seventies, but, long before that, he went on

to become a towering figure on the Indian financial scene.

In 1956 he began his lifelong financial affair with the economic

world, as General

Rukmini Devi Institute of Advanced Studies

HDFC

LTD

72.26%

HDFC

STANDARDLIFE

60%

HDFC

ASSETMANAGEMENT

23.26%

HDFC

BANK (inclusive

42


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Manager of the newly-formed Industrial Credit and Investment Corporation of India

(ICICI). He rose to become Chairman and continued so till his retirement in 1972.At the

ripe age of 60, Hasmukhbhai started his second dynamic life, even more illustrious than

his first. His vision for mortgage finance for housing gave birth to the Housing

Development Finance Corporation it was a trend-setter for housing finance in the

whole Asian continent.

He was also a writer in his own right. There are over 200 published articles by him... In

1992, the Government of India honoured him with the Padma Bhushan Award. The

London School of Economics & Political Science conferred on him an Honorary

Fellowship.

He was one of the Founder Members of the Centre for Advancement of Philanthropy,

and its Chairman till 1993.

He took active interest in the Bombay Community Public Trust, designed specifically to

serve the needs of the citys underprivileged citizens.

When Mr. Deepak Parekh took over as Chairman from Hasmukhbhai, he said: Taking

over from H.T. Parekh is a formidable task; his vision brought about not only an

institution, but an entire concept which has proved itself to be of lasting importance.

Today we are the largest residential mortgage finance institution in India, with a net

worth of Rs. 2,703 cores as of March 31, 2006 and an asset base of over Rs. 22,000cores. We also aim to increase the flow of resources to the housing sector by integrating

the housing finance sector with the overall domestic financial markets.

Over a span of 25 years, HDFC has become the pioneer in housing finance in India and

made it possible for over two million Families to own their homes, through housing loans

worth over Rs. 42,000 cores.

VISION

To be a dominant player in the Indian mutual fund

space, recognized for its high levels of ethical and

professional conduct and a commitment towards

enhancing investor interests.



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ORGANIZATION AND MANAGEMENT

HDFC is a professionally managed organization with a board of directors consisting of

eminent persons who represent various fields including finance, taxation, construction

and urban policy & development. The board primarily focuses on strategy formulation,

policy and control, designed to deliver increasing value to shareholders.

Name and Designation Location Contact Number

Mr. Deepak S. Parekh is the executive Chairman of the

Corporation. He is fellow of the Institute of Chartered

Accountants (England & Wales).Mr. Parekh joined the

Corporation in a senior management position in 1978.He was

inducted as a whole time director of the Corporation in 1985

and was appointed as the Chairman in 1993. He is the chief executive officer of the

Corporation Mumbai.

Mr. K. M. Mistry the Managing Director of the Corporation. Is

a Fellow of the Institute of Chartered Accountants of India? He

has been employed with the Corporation since 1981 and was

the executive director of the Corporation since 1993. He wasappointed as the deputy managing director in 1999 and the

Managing Director in 2000. He is also a member of the

Investors Grievance Committee of Directors.

Ms. Renu S. Karnad the Executive Director of the Corporation.

Is a graduate in law and holds a Masters degree in economics

from Delhi University. She has been employed with the

Corporation since 1978 and was appointed as the Executive

Director of the Corporation in 2000. She is responsible for

overseeing all aspects of lending operations of HDFC.New

Delhi.



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BOARD OF DIRECTORS

Mr. D S Parekh - Chairman Mr. D N Ghosh

Mr. Keshub Mahindra - Vice Chairman Dr. S A Dave

Ms. Renu S. Karnad - Executive Director Mr. S Venkitaramanan

Mr. K M Mistry - Managing Director Dr. Ram S Tarneja

Mr. Shirish B Patel Mr. N M Munjee

Mr. B S Mehta Mr. D M Satwalekar

SPONSORS OF HDFC ASSETS MANAGEMENT COMPANY:-

HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC):-

HDFC was incorporated in 1977 as the first specialized Mortgage Company in India.HDFC provides financial assistance to individuals, corporates and developers for the

purchase or construction of residential housing. It also provides property related services

(e.g. property identification, sales services and valuation), training and consultancy. Of

these activities, housing finance remains the dominant activity. HDFC has a client base

of around 9.5 lack borrowers, around 1 million depositors, over 91,000 shareholders and

50,000 deposit agents as at March 31, 2007. HDFC has raised funds from international

agencies such as the World Bank, IFC (Washington), USAID, DEG, ADB and KfW,

international syndicated loans, domestic term loans from banks and insurance companies,

bonds and deposits. HDFC has received the highest rating for its bonds and deposits

program for the twelfth year in succession. HDFC Standard Life Insurance Company

Limited, promoted by HDFC was the first life insurance company in the private sector to



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be granted a Certificate of Registration (on October 23, 2000) by the Insurance

Regulatory and Development Authority to transact life insurance business in India.

STANDARD LIFE INVESTMENTS LIMITED:-

The Standard Life Assurance Company was established in 1825 and has considerable

experience in global financial markets. The company was present in the Indian life

insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai.

The company re-entered the Indian market in 1995, when an agreement was signed with

HDFC to launch an insurance joint venture. On April 2006, the Board of The Standard

Life Assurance Company recommended that it should demutualise and Standard Life plc

float on the London Stock Exchange. At a Special General Meeting held in May voting

members overwhelmingly voted in favor of this. The Court of Session in Scotland

approved this in June and Standard Life plc floated on the London Stock Exchange on 10

July 2006. Standard Life Investments was launched as an investment management

company in 1998. It is a wholly owned subsidiary of Standard Life Investments

(Holdings) Limited, which in turn is a wholly owned subsidiary of Standard Life plc.

Standard Life Investments is a leading asset management company, with approximately

US$ 269 billion as at March 30, 2007, of assets under management. The company

operates in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA to ensure itis able to form a truly global investment view. In order to meet the different needs and

risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio

covering all of the major markets world-wide, which includes a range of private and

public equities, government and company bonds, property investments and various

derivative instruments.



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PRODUCT DETAILS:-

Different Types of Products:-

EQUITY BALANCED DEBT

EQUITY SCHEMES OF HDFC ASSET MANAGEMENT

COMPANY:-

1. HDFC Equity Fund:-

Investment Objective: The investment objective of the Scheme

Is to achieve capital appreciation.

Investment Options: Dividend & Growth Option

Nature of Scheme: - Open Ended Growth Scheme

Inception Date: - January 01, 1995

2. HDFC growth fund:-

Investment Objective: - The primary investment objective of the Scheme

is to generate long term capital appreciation from a portfolio that is

invested predominantly in equity and equity related instruments.




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7.HDFC premier multicape fund:-

Investment Objective: - The primary objective of the Scheme is to

generate capital appreciation in the long term through equity investmentsby investing in a diversified portfolio of Mid Cap and Large Cap `bluechip` companies.

Investment Options: Dividend Plan, Growth Plan, The Dividend Plan

offers Dividend Payout and Reinvestment Facility.

Nature of Scheme: - Open Ended Growth Scheme

Inception Date: - April 06, 2005

BALANCED SCHEMES OF HDFC ASSET MANAGEMENT

COMPANY:-

1) HDFC balanced fund: -


generate capital appreciation along with current income from a combined

portfolio of equity and equity related and debt and money market

instruments.


Nature of Scheme: - Open Ended balanced fund

Inception Date: - September 11, 2000

2) HDFC prudence fund:-

Investment Objective: - The investment objective of the Scheme is to

provide periodic returns and capital appreciation over a long period of

time, from a judicious mix of equity and debt investments, with the aim to

prevent/ minimize any capital erosion


Nature of Scheme: - Open Ended balanced fund

Inception Date: - February 01, 1994



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3. HDFC short term plan:-

Investment Objective: - The primary objective of the HDFC Short Term

Plan is to generate regular income through investment in debt securitiesand money market instruments.

Investment Options: Growth Plan, Dividend Plan. The Dividend Plan


Nature of Scheme:- Open Ended income fund

Inception Date: - February 28, 2002

4. HDFC multi yield fund:-

Investment Objective: - The primary objective of the Scheme is togenerate positive returns over medium time frame with low risk of capital

loss over medium time frame.

Investment Options: Growth Plan, Dividend Plan. The Dividend Plan


Nature of Scheme: - Open Ended income fund


DEBT SCHEMES OF HDFC ASSET MANAGEMENT COMPANY :-

1. HDFC Income Fund:-


optimize returns while maintaining a balance of safety, yield and liquidity.


Nature of Scheme: - Open Ended Income Scheme


2. HDFC Income Fund: -

Investment Objective: - The investment objective of HDFC High

Interest Fund is to generate income by investing in a range of debt and

money market instruments of various maturity dates with a view to



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maximizing income while maintaining the optimum balance of yield,

safety and liquidity.


Nature of Scheme: - Open Ended Income Scheme

Inception Date: - April 28, 1997

3. HDFC MF Monthly Income Plan - Short Term Plan:-

Investment Objective: - The primary objective of Scheme is to generate

regular returns through investment primarily in Debt and Money Market

Instruments. The secondary objective of the Scheme is to generate long-

term capital appreciation by investing a portion of the Schemes assets inequity and equity related instruments. However, there can be No

assurance that the investment objective of the Scheme will be achieved.

Investment Options: Quarterly Dividend Option, Monthly Dividend

Option, and Growth Plan. The Dividend Plan offers Dividend Payout and

Reinvestment Facility

Nature of Scheme: - An open-ended income scheme. Monthly income is

not assured and is subject to availability of distributable surplus

Inception Date:- December 26, 2003

4. HDFC MF Monthly Income Plan - Long Term Plan:-

Investment Objective: - The primary objective of Scheme is to generate

regular returns through investment primarily in Debt and Money Market

Instruments. The secondary objective of the Scheme is to generate long-

term capital appreciation by investing a portion of the Schemes assets in

equity and equity related instruments. However, there can be no assurance

that the investment objective of the Scheme will be achieved

Investment Options: Growth Plan, Quarterly Dividend Option, Monthly

Dividend Option. The Dividend Plan offers Dividend Payout and

Reinvestment Facility.



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Nature of Scheme: - An open-ended income scheme. Monthly income is

not assured and is subject to availability of distributable surplus

Inception Date: - December 26, 2003

5. HDFC Floating Rate Income Fund Long Term Plan:-


generate regular income through investment in a portfolio comprising

substantially of floating rate debt / money market instruments, fixed rate

debt / money market instruments swapped for floating rate returns, and

fixed rate debt securities and money market instruments.

Investment Options: Dividend Plan, Growth Plan. The Dividend Plan

offers Reinvestment Facility only

Nature of Scheme: - An open-ended income scheme.

Inception Date: - January 16, 2003

LOCATION DETAILS

HDFC AMC is located at Yagnik road which is in the heart of the city where

service is easily available for all customer and easy access compare with other

place that available in city. Location has major impact on success or failure of

operation. Advantages of this type of location are that service cost and

distribution cost is minimum comparison with other place.

The major investor service centres of HDFC MUTUAL FUND are as below.



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Locations of HDFC Assets Management Company

ACHIEVEMENT AND AWARDS

HDFC Prudence fund has been ranked ICRA-MFR 1, and Has Been awarded the

Gold Award for Best Performance in the category of Open Ended Balanced

Scheme for one year Period Ending Dec 31, 2005.



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HDFC Tax saver fund has been ranked ICRA-MFR 1, and Has Been Silver award

for Second Best Performance in the category of Open Ended Equity Linked

Saving Scheme(ELSS) for Three year Period Ending Dec 31, 2005.

HDFC MIP~LTP has been ranked ICRA-MFR 1, and Has been awarded the Gold

Award For Best Performance in the category of Open Ended Marginal Equity

Scheme for one year Period Ending Dec 31, 2005.

FUTURE SCENARIO:-

The asset base will continue to grow at an annual rate of about 35 to 40% over the

next five year as investors shift their assets from banks and other traditional avenues.

Some of the older public and private sector players will either close shop or be taken

over.

Out of ten public players five will sell out, close down or merge with stronger player

in three to four years. In the private sector this trend has already started with two

mergers and one take over. Here too some of them will down their shutters in the near

future to come.

But this does not mean that there is no room for other players. The market will

witness a flurry of new players entering the areas. There will be a large no. of offers

from various asset management companies in the time to come, some big names like

Principle, SBI, Fidelity, old mutual etc are looking at Indian market seriously. One

important reason for it is that most major players have presence here and hence these

big names would hardly like to get left behind.

The mutual fund industry is awaiting the introduction of derivatives in India as thiswould enable it to hedge its risk and this in turn would be reflected in its Net Asset

Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to

trade in derivatives. Importantly, many market players have called on the Regular to



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initiate the process immediately, so that the mutual funds can implement the changes

that are required to trade in Derivatives.

CHAPTER- 7

TYPES OF MUTUAL FUNDS

TYPES OF MUTUAL FUND:-

There are a wide variety of Mutual Fund schemes that cater to your needs, whatever your

age, financial position, risk tolerance and return expectation. Whether as the foundation

of your investment program or as a supplement, Mutual Fund schemes can help you meet

your financial goals. The different types of Mutual Funds are as follows:-

CHART-7.1



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or weekly. Redemption of units can be made during specified intervals. Therefore,

such funds have relatively low liquidity.

BASED ON THEIR INVESTMENT OBJECTIVE:-

EQUITY FUNDS : - These funds invest in equities and equityrelated instruments. With fluctuating share prices, such funds show volatile

performance, even losses. However, short term fluctuations in the market,

generally smoothens out in the long term, thereby offering higher returns

A STUDY ON MUTUAL FUND-(RAJNI) MBA(FIN),RDIAS..................DELHI CANTT-110010

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Transcript of A STUDY ON MUTUAL FUND-(RAJNI) MBA(FIN),RDIAS..................DELHI CANTT-110010