HDFC vs JM Equity Fund

8/14/2019 HDFC vs JM Equity Fund

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Equity Mutual Funds

Presented by: Lalita Tiwari

APR B, Roll No. 98

Consumer Behavior on

Presented to: Rohina Thomas

16 September, 2008


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9/16/2008 2Equity Mutual Funds

Concept of a Mutual Fund Before we start the comparison between two equity mutual funds its very important to

understand the concept of a Mutual Fund

The formation of Unit Trust of India marked the evolution of the Indian mutual fund industry inthe year 1963.

Its a common pool of money into which investors place their contributions to be invested inaccordance with a stated objective.

The ownership of the fund is joint or mutual.

The fund belongs to all investors.

Ownership is proportionate to contribution made by one.

Portfolio Diversification

Professional Management

Reduction/Diversification ofRisk

Liquidity

Flexibility & Convenience

Reduction in Transaction cost

Safety of regulatedenvironment

No Controlover Cost

No Tailor-madePortfolios

Managing aPortfolio Funds

Advantages Disadvantages

FundManager

Investin

Poolth

eir

Mone

y

with

Investors

Passed

Back

to

Returns

Securities

Generate

s


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History of Mutual Funds

Phase 1 (196487): Growth of UTI

Phase 2 (198793): Entry of PSU Banks and FinancialInstitutions MFs

Phase 3 (199396): Emergence of Private Sector Mutual Funds

Phase 4 (199699): SEBI Regulations for Investors Protection

Phase 5 (19992004): UTI Act 1963 repealed in Feb 2003

Phase 6 (2004 Onwards): Consolidation & Growth


4/289/16/2008 4Equity Mutual Funds

Types of Mutual Fund

Mutual Funds can be structurallyclassified as:

Close ended/Open-ended Funds

Load Fund/No-Load Funds Tax-exempt/Non-Tax exempt

Funds

Mutual Funds can be classified

based on asset class as: Equity Funds

Bond Funds

Money Market Funds

Balanced Funds Mutual Funds can be classified

based on investment objective:

Growth

Income Value

Risk High

Risk Low

MMMF

Gilt Funds

Debt Funds

Balanced Funds

Index Funds

Diversified Equity Funds

Sector Funds

Low return High return



What is an Offer Document?

Offer Document of a MF scheme is like a Prospectus issued by AMCinviting public to subscribe to units of MF scheme

Discloses adequate information for investors to take informedinvestment decisions

Offer Document A Legal document

Issued by AMC on behalf of Trustees Offer Document describes the Product/Scheme Very important document for prospective investor First time investors must read OD before deciding to invest For Close Ended Fund issued at the time of launching a scheme

For Open Ended Fund revised every 2 years

KIM A abridged version of Offer Document A part of the Application Form

To be in the format as prescribed by SEBI



Direct Marketing By Sales Officers

through

Mailers

Call Centers

Branch networks

Individual Agents as Distributors

and Advisors

Institutional Intermediaries

Fund distribution companies

Finance Companies Investment Advisory Companies

Banks and Institutions

Post Offices

Brokers and Sub-brokers

Different Distribution Channels

Private Sector MF preferestablished Fund distribution Cosas Fund DistributorsAMFI Registration No. (ARN) cardnecessary before sellingCommission can be paid upfront

or trail commission


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Funds to be managed in the

interest of unit holders

Unit holders to be treatedequally & fairly

Ensure meaningful disclosures

Avoid conflict of interest

Ensure segregate accounting

Stick to ethical standards andfairness in dealings

High standards of care,diligence, services anddisclosure announcements

Code of Ethics for MFs

No promises in the future without resources

backed guarantee

Standard measures to compare such asAnnual Yield, CAGR etc.

Annualised yields for at least one, three, fiveyears & since launch

For less than 1 year performance, AbsoluteReturn without annualisation

Past gains may not repeat in future

Risk factors prominently stated

No Celebrities

No add-ons during offer period

Appropriate benchmark to be chosen

Any ranking of fund to be explained

SEBI Advertisement Code for MFsAMFI Code for MFs


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Frequently Used Terms

Net Asset Value (NAV)Net Asset Value is the market value of the assets of the scheme minus its liabilities.The per unit NAV is the net asset value of the scheme divided by the number ofunits outstanding on the Valuation Date.

Sale PriceIs the price you pay when you invest in a scheme. Also called Offer Price. It may

include a sales load.

Repurchase Price

Is the price at which a close-ended scheme repurchases its units and it may includea back-end load. This is also called Bid Price.

Redemption PriceIs the price at which open-ended schemes repurchase their units and close-endedschemes redeem their units on maturity. Such prices are NAV related.

Sales LoadIs a charge collected by a scheme when it sells the units. Also called, Front-endload. Schemes that do not charge a load are called No Load schemes.

Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unitholders.


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HDFC and JM Equity Fund


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What is an Equity Mutual Fund??? Equity mutual funds are also known as stock mutual funds.

UTI Asset Management was the first company to launch this type of product on May 18,1992.

Theses mutual funds invest pooled amounts of money in the stocks of public companies.

Stocks represent part ownership, or equity, in companies, and the aim of stock ownershipis to see the value of the companies increase over time.

Stocks are often categorized by their market capitalization (or caps), and can beclassified in three basic sizes: small, medium, and large.

Many mutual funds invest primarily in companies of one of these sizes and are thusclassified as large-cap, mid-cap or small-cap funds.

Equity fund managers employ different styles of stock picking when they makeinvestment decisions for their portfolios.

Some fund managers use a value approach to stocks, searching for stocks that areundervalued when compared to other, similar companies.

Another approach to picking is to look primarily at growth, trying to find stocks that aregrowing faster than their competitors, or the market as a whole.

Some managers buy both kinds of stocks, building a portfolio of both growth and valuestocks.


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HDFC & JM Equity Mutual Funds

This project is about two equity mutual funds and they are as below:

HDFC Equity Fund

JM Equity Fund

8 December, 1994 and 12 December, 1994 was the launch date forHDFC and JM Equity fund respectively.

Common Features of the Funds are as below:

Fund Types : Open-Ended Which means investor can invest anytime inthe fund.

Investment plans: Dividend

Growth

Minimum investment amount. Lump Sum : Rs.5,000 and above

SIP : Rs.500 and above

Entry/Exit Load Entry 2.25%

Exit 0.00%[Note: Entry load of 2.25%, in respect of each purchase / switch-in of units less than Rs 5 crore in value.]


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History of HDFC AMC HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies

Act, 1956, on December 10, 1999, and was approved to act as an Asset ManagementCompany for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.

In terms of the Investment Management Agreement, the Trustee has appointed the

HDFC Asset Management Company Limited to manage the Mutual Fund. The paid upcapital of the AMC is Rs. 25.161 crore.

The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC GrowthFund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund(HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift Fund (HDFC

CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFCFloating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund(HT200), etc.

The AMC is also managing 11 closed ended Schemes of the HDFC Mutual Fund viz. HDFCLong Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure Fund,HDFC Fixed Maturity Plans I to VIII.

The AMC is also providing portfolio management/advisory services and such activitiesare not in conflict with the activities of the Mutual Fund. The AMC has renewed itsregistration from SEBI vide Registration No. - PM / INP000000506 dated December 8,2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations,1993. The Certificate of Registration is valid from January 1, 2007 to December 31,

2009. Mr. Deepak Parekh is the Chairman and Mr. Milind Barve is the MD & CEO of the AMC.


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History of JM AMC JM Financial Mutual Fund is one of India 's first private sector mutual funds-an integral

part of the first wave that commenced operations in 1993-94. Its a part of JM FinancialGroup, which has a rich heritage, built over three decade. They are one of the manysuccessful companies that have emerged out of JM Group's strong foundation in financial

services. Group's origins can be traced back to the 1950s when the Kampani family began to get

involved in India's then nascent capital markets. J.M. Financial & Investment ConsultancyServices was founded on September 15, 1973. Under the leadership of Chairman NimeshN. Kampani, the JM Financial Group has played a stellar and multi-faceted role in thedevelopment of India's capital markets. Apart from helping companies raise finance, theGroup has also been instrumental in educating a burgeoning and prospering middle classabout the advantages of investing in blue chip companies.

JM Financial Asset Management Private Limited, the Asset Management Company of JMFinancial Mutual Fund is sponsored by J.M. Financial and Investment ConsultancyServices Pvt. Ltd., and co-sponsored by JM Financial Ltd. JM Financial Asset Management

Private Limited started operations in December 1994 with a simultaneous launch of threefunds-JM Liquid Fund (now JM Income Fund), JM Equity Fund and JM balanced Fund.Today, JM Financial Mutual Fund offers a bouquet of funds that caters to the diverseneeds of both its institutional and individual investors.

Cos mission is to manage risk effectively while generating top quartile returns across allproduct categories.

Mr. V P Shetty is the Chairman and Mr. Nityanath Ghanekar is the MD & CEO of the AMC.


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USP (Unique Selling Proposition)

HDFC Equity MF

The scheme seeks to provide long-term capital appreciation by predominantly investing

in high growth companies.

Investment Strategy

In order to provide long term capital appreciation, the Scheme will invest predominantly in growthcompanies. Companies selected under this portfolio would as far as practicable consist of mediumto large sized companies which:

Are likely achieve above average growth than the industry; Enjoy distinct competitive advantages and

Have superior financial strengths.

The aim will be to build a portfolio, which represents a cross-section of the strong growthcompanies in the prevailing market. In order to reduce the risk of volatility, the Scheme willdiversify across major industries and economic sectors.

A part of the funds may be invested in debt and money market instruments.

The Scheme may also invest up to 25% of net assets of the Scheme in derivatives such as Futures& Options and such other derivative instruments as may be introduced from time to time for thepurpose of hedging and portfolio balancing and other uses as may be permitted under theRegulations.

The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseasmarkets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual fundsand such other instruments as may be allowed under the Regulations from time to time.


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USP (Unique Selling Proposition)

JM Equity MF

The scheme seeks long-term capital growth and appreciation through investment

primarily in equities. Investment Strategy

The corpus of these Schemes will be invested in equity and equity related instruments and also inhigh quality debt and money

Market instruments.

Subject to the Regulations, the corpus of the Scheme can be invested in any (but not exclusively)of the following securities:

Equity and Equity related securities including convertible bonds and debentures and warrants carrying the right to obtain equity

shares

ADRs, GDRs issued by Indian companies subject to condition issued by RBI and SEBI.

Securities created and issued by the Central and State Governments and/or repos/reverse repos in such Government, Securities

as may be permitted by RBI (including but not limited to coupon bearing bonds, zero coupon bonds and treasury bills).

Securities guaranteed by the Central and State Governments (including but not limited to coupon bearing bonds, zero coupon

bonds and treasury bills).

Debt obligations of domestic Government agencies and statutory bodies, which may or may not carry a Central/State Government

guarantee.

Corporate debt and securities (of both public and private sector undertakings) including Bonds, Debentures, Notes, Strips, etc.


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Fund Overview

HDFC Equity MF JM Equity MF

The Fund Size is Rs.3,776.03 Cr.

(08-29-08) HDFC Equity (G) fund is standing at

19th Rank as on 12 Sep, 2008 with33.45% returns in 5 years.

Last Dividend declared by the fund

is Rs. 5.50 (Mar-07-2008)

Fund is managed by PrashantJain

The Benchmark for the Scheme is

S&P CNX 500. Performancecomparisons will be made vis--visthe benchmark.

Current value as on 15th Sep 2008

Dividend Option: Rs. 35.32

Growth Option: Rs. 153.11

The Fund size is Rs.63.75 Cr. (07-

31-08) JM Equity (G) fund is standing at

44th Rank as on 12 Sep, 2008 with25.81% returns in 5 years.

Last Dividend declared by the fund

is Rs. 2.00 (Aug-28-2006)

Fund is managed by SandipSabharwal

The Benchmark for the Scheme is

BSE Sensex. Performancecomparisons will be made vis--visthe benchmark.

Current value as on 15th Sep 2008

Dividend Option: Rs. 14.74

Growth Option: Rs. 32.82

Source: hdfcfund.com, jmfinancialmf.com, amfiindia.com, Moneycontrol.com, valueresearchonline.com.


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Portfolio Analysis

Asset Allocation (%)Asset Allocation (%)

98.4%

1.0%

0.6%

Equity Money Market Cash/Call

96.3%

3.7%

Equity Cash/Call



96.3% of the total amount invested in thefund will be invested in the equitymarkets.

The remaining 3.7% amount will be kept asthe cash/call option.

98.4% of the total amount invested in thefund will be invested in the equitymarkets.

1.0% of the amount will be invested in theMoney Markets.

The remaining 0.6% amount will be kept asthe cash/call option.


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Portfolio Analysis

Top 5 Holdings (% Net Assets) Sector Allocation (%)

39.4725.47Other

6.77Oil & Gas

5.62Telecom

100%100%Total

7.01Food & Beverage

7.23Chemicals

7.76Media

9.98Manufacturing10.07Utilities

13.80Pharmaceuticals

16.36Technology

20.49Banking/Finance11.27%18.70%Engineering

JMHDFCSector


4.45Divi's Laboratories Ltd.

4.73Crompton Greaves

5.39SBI

5.96ONGC

8.94%ICICI Bank

HDFC Equity Fund (as on 31 Aug 2008)

5.42Tata Power

6.48B H E L

6.91United Phosphorus Ltd.

9.07Satyam Computers

11.35%Bombay Rayon Fashions

JM Equity Fund (as on 31 Aug 2008)


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Fund Performance


Absolute Returns (in % as on 12 Sep, 2008)

25.818.318.1-14.4-1.32004

61.213.425.28.10.72005

35.69.616.8-13.018.62006

51.621.39.720.9-3.22007

-13.1-26.22008

AnnualQtr 4Qtr 3Qtr 2Qtr 1Year

17.716.514.7-13.9-2.92004

51.14.819.99.12.62005

43.613.713.8-10.619.92006

44.417.417.928.8-17.52007

-17.8-32.02008

AnnualQtr 4Qtr 3Qtr 2Qtr 1Year


(1) Compounded Annualised Returns. (2) HDFC: S&P CNX 500. JM: BSE Sensex. (3) Inception Date for HDFC is January 1, 1995 & for JM is April 1, 1995.

10.8723.60Since Inception(3)

40.3549.35Last 5 years


21.51%16.16%Last 1 year

BenchmarkReturns (%)(2)(1)

Returns(% )(1 )

(as on 31/03/08)

15.4014.71Since Inception(3)



46.84%46.44%Last 1 year

BenchmarkReturns (%) (2)(1)

Returns(% )(1 )

(as on 31/12/08)

From the above table it is clear that the past returnsof the fund has been always good except last 1-yearreturns when compared to the benchmark returns.

From the above table it is clear that the past returnsof the fund has been always impressive whencompared to the benchmark returns.


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Fund Performance

HDFC Equity Mutual Fund JM Equity Mutual Fund

As per the above graph the funds performancewas always as per the sensex performance thatmeans the Fund manager has managed thefund well.

Appropriate selection of the sector is beenalways a positive point of this fund.

36.82711-Sep-088.5023-Jan-00

NAV (Rs.)To DateNAV (Rs.)From Date

15.71811-Sep-0812.6843-Jan-00

NAV (Rs.)To DateNAV (Rs.)From Date

As per the above graph the funds performancewas always as per the sensex performance till2004 but after that the fund never picked up.

Wrong selection of the sector by the FundManager was the reason for the fall in fundperformance specially in Q1 2007.


(1) Returns have been calculated after adjusting the NAV's for dividends, bonus & rights, if any.

Absolute Returns(1): 321.5 %.Absolute Returns(1): 540.9 %.


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Equity Fund Survey Analysis

The sample survey has been done on 10 Investors. It has 15 questions whichtalks about their investment patterns, knowledge about Mutual fund industry,objectives of investment, time horizon to stay invested, AMcs servicesprovided to the investors and Fund and Fund Managers performance over theyears.

According to the survey, before investing in mutual funds 50% investors wereinvesting in FDs, 30% in Saving accounts whereas Government Bond andbalanced Mutual Funds got 10-10% share each.

This survey reveled that almost 30% investors have invested in the HDFCEquity Mutual Funds and 20% in JM Equity Mutual Funds.

JM Equity Fund investors have invested a lump sum amount in growth optionin 2006 whereas, HDFC Equity Fund investors are into SIP with dividend

payout option with the mind frame of earning income over the years.

This survey also tells that 40% investors have an average knowledge ofmutual fund industry whereas 30% are with below average knowledge.

In terms of Customer services and regular updates from the AMC both thefunds got same rating.


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Equity Fund Survey Analysis

The Survey also says that all the HDFC Equity Mutual fund investors and otherInvestors are happy with their Funds and Fund Managers performance.Whereas 50% Investors in JM Equity Fund are not satisfied with theFund/Fund Managers performance.

Looking at the current market situation almost 90% Investors are happy withtheir current Fund Manager and they think none other manager could haveperformed better than the him.

10% investors think they should withdraw their money from the current fund(JM Equity Fund) and invest into Reliance Growth Fund which again is a EquityDiversified Fund which mostly invests in Large-caps.

Other suggestion which came into picture was for Online transaction.

10% investors say that HDFC AMCs online buying of mutual funds procedure islengthy and tedious.

Whereas 20% investors says JM AMC does not have online transact facility at alland they should come up with this facility.

According to the survey most Investors are satisfied with HDFC AMC services.


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Analysis HDFC Equity Fund The perpetual champion fund, HDFC Equity has been the first choice of investors and rightly so. Find

out the reason behind the fund's exemplary performance year after year.

This perennial winner has a massive fan following. And rightly so! Like a magician repeating a trick,HDFC Equity has beaten the category average every single calendar year since 1997.

Its ability to identify opportunities at the right time is the key factor contributing to its success. Forexample, when the Supreme Court halted PSU disinvestment in September 2003, the fund sold itsentire energy holding and built a fresh position in March 2004, when PSU stocks started rallying.

Though the fund maintains a large-cap bias, it does not hesitate to invest substantially in stocks ofsmaller companies, as and when there are opportunities to exploit. Currently, large-caps account for51 per cent of the assets while the mid- and small-cap allocations stand at 42 and 6 per centrespectively. The fund manager has always boldly ridden his convictions. He refrains from takingcash calls and prefers to remain fully invested at all times.

Historically, his portfolio has been a focused 25-30 stocks. But the complexion of the fund seems tobe changing on this front.

The number of stocks has increased to over 45. And, the concentration in the top five holdings hasbeen moderated from 35-40 per cent about a year ago, to just around 25 per cent now.

This is probably not reflective of his stance but rather an adjustment to the size. Investors haveflocked to this fund in droves making it the largest diversified equity offering of Rs 5,000 crore. Andthis very factor may be detrimental to the strategy of the fund.

The fund's ability to identify opportunities and take meaningful exposure in them will be neutralisedby its increasing size. The fund has displayed ample spunk till date, but it remains to be seen how itfares from here on.

Over all a better fund than JM to invest if one want to invest in equity market and dont want to getaffected directly by the market movements.


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Conclusion

From the portfolio analysis and other parameters it is very clear that boththe funds have always performed good and given impressive returns as pertheir benchmarks.

When both the funds are compared among each other, It has been clearedthat HDFC Equity fund has been outperformed over the years.

The JM Equity Fund is performing at par with the benchmark (Sensex) so asHDFC Equity Fund (S&P CNX 500) but when compared with the actual

returns HDFC Equity Funds returns has given impressive returns.

Even when compared with its peer Equity Funds HDFC Equity Fund standsat 19th Rank (as on 12 Sep, 2008) with 33.45% absolute returns in 5 yearswhereas JM Equity Fund stands at 44th Rank (as on 12 Sep, 2008) withonly 25.81% absolute returns in 5 years.

Both the funds are concentrating on Large and Mid cap stocks but its onlythe sector which affects the returns. Its where the Fund Managers rolecomes into picture. HDFC Equity Fund manager Mr. Prashant Jain scoresfull marks in sector switching as and when market situation permits.


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Conclusion

Dividend history table of both the funds from their date of inception:

From the above table its clear that HDFC Equity Fund has always given betterdividend to the investors.

Its always advisable to invest in Equity Fund rather than directly investinginto stock market for safe & good returns with the long term perspective.

Also keeping in mind the current market situation one should be advised togo for SIP (systematic Investment Plan) for safe investment.


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Thank YouNote: Mutual Fund investments are subject to market risks. Please read

the offer document carefully for details on risk factors before investment.

HDFC vs JM Equity Fund

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