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Training project Training project Document Transcript

  • A WINTER TRAININGPROJECT REPORT On“A study on performance Comparison of Equity Schemes of HDFC Mutual Fund with others.” atSUBMITTED IN PARTIAL FULFILLMENT FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION (SESSION 2010-2012)Submitted To:Submitted byHPUBS, SHWETA SOODSummerhill MBA (3rd Semester)Shimla. Class Roll No-2408 Univ.Roll No -2315
  • CONTENTS  Statement of the problem  Objective of the study  Scope of the study  Introduction to mutual fund Organization profile  Brief history of HDFC Bank  Introduction of HDFC mutual fundAnalysis  Techniques of Analysis  Findings  Annexure  Bibliography
  • ACKNOWLEDGEMENTI owe my deepest gratitude to all the people associated with this project and helpedme in the successfully completing this work.I wish to extend my sincere thanks to Mr. Dhruv Braghta – The Branch Managerat HDFC Bank for giving me an opportunity to work for the organization. I wouldalso like to extend my thanks to Mr. Yogendra Sudarshan, Sales Manager forhis constant guidance and support all throughout the project duration. He hasconstantly encouraged and challenged me to deliver nothing less than the best.I would also like to express my gratitude to all the staff members at HDFC Bankfor their support and co-operation during the period.Lastly I would like to thank all the members of the HPUBS family, my Parents, mySister and the Lord Almighty for helping and supporting me all throughout thisproject.Thank You AllShweta Sood
  • Executive summaryThe main aims of the investor is to minimize the risk involved in investment &maximize return and today there are number of options available to investor likePost office investment, bank deposit, Real estate, debentures, Governmentsecurities, stock market, insurance & gold etc. Among these, Mutual Fund & ULIPintroduced by the insurance companies are the two options which require lesscapital & give the benefit of Professional Management& suitable for all especiallyto the persons who do not have time to watch the market regularly.HDFC Mutual Fund is one of Indias largest brokerage and securities distributionhouse in India. It is considered to be one of the leading investment broking housescatering to the needs of both institutional and non-institutional investor categorieswith presence all over the country through franchisees and co-coordinators.In this project I studied the schemes of HDFC Mutual fund and their returns invarious period of time by comparing risk and returns of other 2 companies MutualFund, which helped me in knowing how the various schemes are performing andthe risk and return associates with them. Hence my topic of study is “A study onperformance Comparison of Equity Schemes of HDFC Mutual Fund withothers.”
  • Title of project“A study on performance Comparison of HDFC Mutual Fund equity schemeswith others companies mutual fund schemes.” At HDFC Bank, Shimla. Research problemTo find out the different types of equity scheme performance of HDFC andcompare it with other 2 competitors by evaluating risk & returns with the help ofindex. Purpose of the studyThe study will help the organization in knowing how the company‟s equity isperforming.
  • Scope of the studyThe present study includes the 5 years average returns of the mutual funds, whichhave the total corpus value, is more than 10000 crores. For the study three mutualfunds companies have been scan and only those scheme are include in the studywhich are having the corpus value of more than 400 crores and age of the fundmust be more than 3 years. The study cover only equity diversified which is havingmore fluctuations risk and returns. Objective of the study To understand the concept of Mutual Fund, working and mechanism and types of Mutual Funds traded in India. To know the Performance of HDFC Mutual Fund scheme compared to the other companies mutual fund scheme. To evaluate performance of mutual funds in the terms of risk and return. To appraise investment performance of mutual funds with risk adjustment, the theoretical parameters as suggested by Sharpe, Treynor
  • IntroductionAn investment means employment of funds on assets (i.e. securities or mutualfunds or any of the investment avenues) with the aim of earning of income as wellas capital appreciation. There are mainly two attributes while investing to any ofthe means, i.e. time and risk. There are mainly four objectives, which theinvestments activities will carry on those are: Return Risk Liquidity Safety There are many alternatives which investment avenues are open to the investors to suit their needs and nature .The selection of investment alternatives are depends up on the required level of return and the risk tolerance level. These alternatives range from financial securities to traditional non-securities investment. Following are the various investment alternatives.
  • Negotiable and fixed income securities Equity shares Preference share Debentures Bonds Government securitiesNon-negotiable securities Bank deposit Post office deposit NBFC deposit Tax saving schemes Public provident fund scheme National saving scheme Life insurance Mutual funds Real estate Securities Companies raise funds to finance their projects through various methods. The promoters can bring their own money or barrow from the financial institutions or Mobilizes capital by issuing securities. The funds `may be raised through issue of fresh share at per or premium. Preference shares debenture or global depository
  • receipts. These are mainly two markets which any company can raise their funds;those are primary market and secondary market .the companies raise funds for thefollowing purposes: To promote a new company To expand an existing company To diversify the production To meet the regular working capital requirement To capitalize the reserves. New Issue Market (Primary Market)Stock available for the first time is offered through new issue market. The issuermay be a new company or an existing company. These issues may be of new typeor the secure used in the past. In the new market the issuer can be consider as amanufacturers. The issuing house, investing banker and broker act as the channelof distributing for new issue. They take the responsibility of selling the stock tothe public.The main survives function of the primary market are:1. Origination2. Underwriting3. Distribution
  • The main objectives of NSE are as follows. To establish the nationwide trading facility for Equities, Debt instruments and hybrids. To ensure equal access to investors all over the country through appropriate communication network. To enable shorter settlement cycle and book entry settlement system. Introduction of mutual fundConcept of mutual fundsA Mutual Fund is a trust that pools the savings of a number of investors who sharea common financial goal. The money thus collected is then invested in capitalmarket instruments such as shares, debentures and other securities. The incomeearned through these investments and the capital appreciation realised are sharedby its unit holders in proportion to the number of units owned by them. Thus aMutual Fund is the most suitable investment for the common man as it offers anopportunity to invest in a diversified, professionally managed basket of securitiesat a relatively low cost. The flow chart below describes broadly the working of amutual fund:
  • Mutual Fund Operation Flow Chart Mutual Funds Industry in IndiaThe origin of mutual fund industry in India is with the introduction of the conceptof mutual fund by UTI in the year 1963. Though the growth was slow, but itaccelerated 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 quality wise as well as quantity wise. Before, the monopoly of the market hadseen an ending phase, the Assets Under Management (AUM) was Rs. 67bn. Theprivate sector entry to the fund family rose the AUM to Rs. 470 bn in March 1993
  • and till April 2004, it reached the height of 1,540 bn.Putting the AUM of theIndian Mutual Funds Industry into comparison, the total of it is less than thedeposits of SBI alone, constitute less than 11% of the total deposits held by theIndian banking industry.The main reason of its poor growth is that the mutual fund industry in India is newin the country. Large sections of Indian investors are yet to be intellectuated withthe concept. Hence, it is the prime responsibility of all mutual fund companies, tomarket the product correctly abreast of selling.The mutual fund industry can be broadly put into four phases according to thedevelopment of the sector. Each phase is briefly described as under.First Phase - 1964-87Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It wasset up by the Reserve Bank of India and functioned under the Regulatory andadministrative control of the Reserve Bank of India. In 1978 UTI was de-linkedfrom the RBI and the Industrial Development Bank of India (IDBI) took over theregulatory and administrative control in place of RBI. The first scheme launchedby UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6, 700 crores ofassets under management.Second Phase - 1987-1993 (Entry of Public Sector Funds)Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed byCanbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
  • Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of BarodaMutual Fund (Oct 92). LIC in 1989 and GIC in 1990. The end of 1993 markedRs.47,004 as assets under management.Third Phase - 1993-2003 (Entry of Private Sector Funds)With the entry of private sector funds in 1993, a new era started in the Indianmutual 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 intobeing, under which all mutual funds, except UTI were to be registered andgoverned. 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 morecomprehensive and revised Mutual Fund Regulations in 1996. The industry nowfunctions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual fund houses went on increasing, with many foreign mutualfunds setting up funds in India and also the industry has witnessed several mergersand acquisitions. As at the end of January 2003, there were 33 mutual funds withtotal assets of Rs. 1, 21,805 crores. The Unit Trust of India with Rs.44, 541 croresof assets under management was way ahead of other mutual funds.Fourth Phase - since February 2003This phase had bitter experience for UTI. It was bifurcated into two separateentities. One is the Specified Undertaking of the Unit Trust of India with AUM of
  • Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust ofIndia, functioning under an administrator and under the rules framed byGovernment of India and does not come under the purview of the Mutual FundRegulations.The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. Itis registered with SEBI and functions under the Mutual Fund Regulations. With thebifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000crores of AUM and with the setting up of a UTI Mutual Fund, conforming to theSEBI Mutual Fund Regulations, and with recent mergers taking place amongdifferent private sector funds, the mutual fund industry has entered its currentphase of consolidation and growth. As at the end of September, 2004, there were29 funds, which manage assets of Rs.153108 crores under 421 schemes. Major Mutual Fund Companies in India Prudential Mutual Fund UTI Mutual Fund Reliance Mutual Fund HDFC Mutual Fund Franklin Mutual Fund Birla sun Mutual Fund SBI Mutual Fund
  • DSP Merrill Lynch Mutual FundKotak Mutual FundTata Mutual FundHSBC Mutual FundPRINCIPAL Mutual FundStandard chartered Mutual FundLIC Mutual FundSundaram Mutual FundDeutsche Mutual FundFidelity Mutual FundABN AMRO Mutual FundING Vysya Mutual FundCanbank Mutual FundJM Mutual FundChola Mutual FundBenchmark Mutual FundBOB Mutual FundTaurus Mutual FundSahara Mutual FundEscorts Mutual FundQuantum Mutual Fund
  • What is a Mutual FundCapital appreciations realized by the scheme are shared by its unit holders inproportion to the number of A Mutual Fund is a trust that pools the savings of anumber of investors who share a common financial goal. The money thus collectedis invested by the fund manager in different types of securities depending upon theobjective of the scheme. These could range from shares to debentures to moneymarket instruments. The income earned through these investments and the unitsowned by them. Thus a Mutual Fund is the most suitable investment for thecommon man as it offers an opportunity to invest in a diversified, professionallymanaged portfolio at a relatively low cost. The small savings of all the investorsare put together to increase the buying power and hire a professional manager toinvest and monitor the money. Anybody with an investible surplus of as little as afew thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has adefined investment objective and strategy.
  • Mutual Fund StructureThe structure consists of :SponsorSponsor is the person who acting alone or in combination with another bodycorporate establishes a mutual fund. Sponsor must contribute at least 40% of thenet worth of the Investment Managed and meet the eligibility criteria prescribedunder the Securities and Exchange Board of India (Mutual Funds) Regulations,1996.The Sponsor is not responsible or liable for any loss or shortfall resultingfrom the operation of the Schemes beyond the initial contribution made by ittowards setting up of the Mutual Fund.
  • TrustThe Mutual Fund is constituted as a trust in accordance with the provisions of theIndian Trusts Act, 1882 by the Sponsor. The trust deed is registered under theIndian Registration Act, 1908TrusteeTrustee is usually a company (corporate body) or a Board of Trustees (body ofindividuals). The main responsibility of the Trustee is to safeguard the interest ofthe unit holders and inter alia ensure that the AMC functions in the interest ofinvestors and in accordance with the Securities and Exchange Board of India(Mutual Funds) Regulations, 1996, the provisions of the Trust Deed and the OfferDocuments of the respective Schemes. Atleast 2/3rd directors of the Trustee areindependent directors who are not associated with the Sponsor in any manner.Asset Management Company (AMC)The AMC is appointed by the Trustee as the Investment Manager of the MutualFund. The AMC is required to be approved by the Securities and Exchange Boardof India(SEBI) to act as an asset management company of the Mutual Fund. Atleast 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 atleast 10 corers at all times.Registrar and Transfer AgentThe AMC if so authorized by the Trust Deed appoints the Registrar and TransferAgent to the Mutual Fund. The Registrar processes the application form,redemption requests and dispatches account statements to the unit holders. TheRegistrar and Transfer agent also handles communications with investors andupdates investor recordsThe AMC if so authorized by the Trust Deed appoints the Registrar and TransferAgent to the Mutual Fund. The Registrar processes the application form,redemption requests and dispatches account statements to the unit holders. TheRegistrar and Transfer agent also handles communications with investors andupdates investor records.
  • Types of Schemes Investment ObjectiveSchemes can be classified by way of their stated investment objective such asGrowth Fund, Balanced Fund, Income Fund etc.
  • Equity Oriented SchemesThese schemes, also commonly called Growth Schemes, seek to invest a majorityof their funds in equities and a small portion in money market instruments. Suchschemes have the potential to deliver superior returns over the long term. However,because they invest in equities, these schemes are exposed to fluctuations in valueespecially in the short term.Equity schemes are hence not suitable for investors seeking regular income orneeding to use their investments in the short-term. They are ideal for investors whohave a long-term investment horizon. The NAV prices of equity fund fluctuateswith market value of the underlying stock which are influenced by external factorssuch as social, political as well as economic.HDFC Growth Fund, HDFC Tax Plan2000 and HDFC Index Fund are examples of equity schemes.
  • General PurposeThe investment objectives of general-purpose equity schemes do not restrict themto invest in specific industries or sectors. They thus have a diversified portfolio ofcompanies across a large spectrum of industries. While they are exposed to equityprice risks, diversified general-purpose equity funds seek to reduce the sector orstock specific risks through diversification. They mainly have market riskexposure. HDFC Growth Fund is a general-purpose equity scheme. Sector SpecificThese schemes restrict their investing to one or more pre-defined sectors, e.g.technology sector. Since they depend upon the performance of select sectors only,these schemes are inherently more risky than general-purpose schemes. They aresuited for informed investors who wish to take a view and risk on the concernedsector. Special SchemesIndex schemesThe primary purpose of an Index is to serve as a measure of the performance of themarket as a whole, or a specific sector of the market. An Index also serves as arelevant benchmark to evaluate the performance of mutual funds. Some investorsare interested in investing in the market in general rather than investing in anyspecific fund. Such investors are happy to receive the returns posted by themarkets. As it is not practical to invest in each and every stock in the market in
  • proportion to its size, these investors are comfortable investing in a fund that theybelieve is a good representative of the entire market. Index Funds are launched andmanaged for such investors. An example to such a fund is the HDFC Index Fund.Tax saving schemesInvestors (individuals and Hindu Undivided Families (“HUFs”)) are beingencouraged to invest in equity markets through Equity Linked Savings Scheme(“ELSS”) by offering them a tax rebate. Units purchased cannot be assigned /transferred/ pledged / redeemed / switched – out until completion of 3 years fromthe date of allotment of the respective Units.The Scheme is subject to Securities & Exchange Board of India (Mutual Funds)Regulations, 1996 and the notifications issued by the Ministry of Finance(Department of Economic Affairs), Government of India regarding ELSS.Subject to such conditions and limitations, as prescribed under Section 88 of theIncome-tax Act, 1961, subscriptions to the Units not exceeding Rs.10, 000 wouldbe eligible to a deduction, from income tax, of an amount equal to 20% of theamount subscribed. HDFC Tax Plan 2000 is such a fund.Real Estate FundsSpecialized real estate funds would invest in real estates directly, or may fund realestate developers or lend to them directly or buy shares of housing financecompanies or may even buy their securitized assets.
  • Debt Based SchemesThese schemes, also commonly called Income Schemes, invest in debt securitiessuch as corporate bonds, debentures and government securities. The prices of theseschemes tend to be more stable compared with equity schemes and most of thereturns to the investors are generated through dividends or steady capitalappreciation. These schemes are ideal for conservative investors or those not in aposition to take higher equity risks, such as retired individuals. However, ascompared to the money market schemes they do have a higher price fluctuationrisk and compared to a Gilt fund they have a higher credit risk
  • Income SchemesThese schemes invest in money markets, bonds and debentures of corporates withmedium and long-term maturities. These schemes primarily target current incomeinstead of capital appreciation. They therefore distribute a substantial part of theirdistributable surplus to the investor by way of dividend distribution. Such schemesusually declare quarterly dividends and are suitable for conservative investors whohave medium to long term investment horizon and are looking for regular incomethrough dividend or steady capital appreciation. HDFC Income Fund, HDFC ShortTerm Plan and HDFC Fixed Investment Plans are examples of bond schemes.Liquid Income SchemesSimilar to the Income scheme but with a shorter maturity than Income schemes.An example of this scheme is the HDFC Liquid Fund.Money Market SchemesThese schemes invest in short term instruments such as commercial paper (“CP”),certificates of deposit (“CD”), treasury bills (“T-Bill”) and overnight money(“Call”). The schemes are the least volatile of all the types of schemes because oftheir investments in money market instrument with short-term maturities. Theseschemes have become popular with institutional investors and high networthindividuals having short-term surplus funds.Gilt FundsThis scheme primarily invests in Government Debt. Hence the investor usuallydoes not have to worry about credit risk since Government Debt is generally creditrisk free. HDFC Gilt Fund is an example of such a scheme
  • Hybrid SchemesThese schemes are commonly known as balanced schemes. These schemes investin both equities as well as debt. By investing in a mix of this nature, balancedschemes seek to attain the objective of income and moderate capital appreciationand are ideal for investors with a conservative, long-term orientation. HDFCBalanced Fund and HDFC Children‟s Gift Fund are examples of hybrid schemes. ConstitutionSchemes can be classified as Closed-ended or Open-ended depending uponwhether they give the investor the option to redeem at any time (open-ended) orwhether the investor has to wait till maturity of the schemeOpen ended SchemesThe units offered by these schemes are available for sale and repurchase on anybusiness day at NAV based prices. Hence, the unit capital of the schemes keepschanging each day. Such schemes thus offer very high liquidity to investors andare becoming increasingly popular in India. Please note that an open-ended fund isNOT obliged to keep selling/issuing new units at all times, and may stop issuingfurther subscription to new investors. On the other hand, an open-ended fund rarelydenies to its investor the facility to redeem existing units.
  • Closed-ended schemesThe unit capital of a close-ended product is fixed as it makes a one-time sale offixed number of units. These schemes are launched with an initial public offer(IPO) with a stated maturity period after which the units are fully redeemed atNAV linked prices. In the interim, investors can buy or sell units on the stockexchanges where they are listed. Unlike open-ended schemes, the unit capital inclosed-ended schemes usually remains unchanged. After an initial closed period,the scheme may offer direct repurchase facility to the investors. Closed-endedschemes are usually more illiquid as compared to open-ended schemes and hencetrade at a discount to the NAV. This discount tends towards the NAV closer to thematurity date of the scheme.Interval SchemesThese schemes combine the features of open-ended and closed-ended schemes.They may be traded on the stock exchange or may be open for sale or redemptionduring pre-determined intervals at NAV based prices.
  • RISKThe Risk-Return Trade-offThe most important relationship to understand is the risk-return trade-off. Higherthe risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it isupto you, the investor to decide how much risk you are willing to take. In order todo this you must first be aware of the different types of risks involved with yourinvestment decision
  • Market RiskSometimes prices and yields of all securities rise and fall. Broad outside influencesaffecting the market in general lead to this. This is true, may it be big corporationsor smaller mid-sized companies. This is known as Market Risk. A SystematicInvestment Plan (“SIP”) that works on the concept of Rupee Cost Averaging(“RCA”) might help mitigate this risk.Credit RiskThe debt servicing ability (may it be interest payments or repayment of principal)of a company through its cash flows determines the Credit Risk faced by you. Thiscredit risk is measured by independent rating agencies like CRISIL who ratecompanies and their paper. A „AAA‟ rating is considered the safest whereas a „D‟rating is considered poor credit quality. A well-diversified portfolio might helpmitigate this risk.Inflation RiskThings you hear people talk about:“Rs. 100 today is worth more than Rs. 100 tomorrow.”“Remember the time when a bus ride coated 50 paise?”“Mehangai Ka Jamana Hai.”The root cause, Inflation. Inflation is the loss of purchasing power over time. A lotof times people make conservative investment decisions to protect their capital butend up with a sum of money that can buy less than what the principal could at thetime of the investment. This happens when inflation grows faster than the return onyour investment.
  • Interest Rate RiskIn a free market economy interest rates are difficult if not impossible to predict.Changes in interest rates affect the prices of bonds as well as equities. If interestrates rise the prices of bonds fall and vice versa. Equity might be negativelyaffected as well in a rising interest rate environment. A well-diversified portfoliomight help mitigate this risk.Political/Government Policy RiskChanges in government policy and political decision can change the investmentenvironment. They can create a favorable environment for investment or vice versaLiquidity RiskLiquidity risk arises when it becomes difficult to sell the securities that one haspurchased. Liquidity Risk can be partly mitigated by diversification, staggering ofmaturities as well as internal risk controls that lean towards purchase of liquidsecurities. DiversificationThe nuclear weapon in your arsenal for your fight against Risk. It simply meansthat you must spread your investment across different securities (stocks, bonds,money market instruments, real estate, fixed deposits etc.) and different sectors(auto, textile, information technology etc.). This kind of a diversification may addto the stability of your returns, for example during one period of time equitiesmight underperform but bonds and money market instruments might do well
  • enough to offset the effect of a slump in the equity markets. Similarly theinformation technology sector might be faring poorly but the auto and textilesectors might do well and may protect you principal investment as well as help youmeet your return objectives Benefits of Investing in Mutual FundsProfessional ManagementMutual Funds provide the services of experienced and skilled professionals,backed by a dedicated investment research team that analyses the performance andprospects of companies and selects suitable investments to achieve the objectivesof the scheme.DiversificationMutual Funds invest in a number of companies across a broad cross-section ofindustries and sectors. This diversification reduces the risk because seldom do allstocks decline at the same time and in the same proportion. You achieve thisdiversification through a Mutual Fund with far less money than you can do on yourown.Convenient AdministrationInvesting in a Mutual Fund reduces paperwork and helps you avoid manyproblems such as bad deliveries, delayed payments and follow up with brokers andcompanies. Mutual Funds save your time and make investing easy and convenient.
  • Return PotentialOver a medium to long-term, Mutual Funds have the potential to provide a higherreturn as they invest in a diversified basket of selected securities.Low CostsMutual Funds are a relatively less expensive way to invest compared to directlyinvesting in the capital markets because the benefits of scale in brokerage,custodial and other fees translate into lower costs for investors.LiquidityIn open-end schemes, the investor gets the money back promptly at net asset valuerelated prices from the Mutual Fund. In closed-end schemes, the units can be soldon a stock exchange at the prevailing market price or the investor can avail of thefacility of direct repurchase at NAV related prices by the Mutual Fund.Transparencyyou get regular information on the value of your investment in addition todisclosure on the specific investments made by your scheme, the proportioninvested in each class of assets and the fund managers investment strategy andoutlook.FlexibilityThrough features such as regular investment plans, regular withdrawal plans and
  • dividend reinvestment plans, you can systematically invest or withdraw fundsaccording to your needs and convenience.AffordabilityInvestors individually may lack sufficient funds to invest in high-grade stocks. Amutual fund because of its large corpus allows even a small investor to take thebenefit of its investment strategy. Choice of SchemesMutual Funds offer a family of schemes to suit your varying needs overa lifetime.Well RegulatedAll Mutual Funds are registered with SEBI and they function within the provisionsof strict regulations designed to protect the interests of investors. The operations ofMutual Funds are regularly monitored by SEBI.Drawbacks of Mutual Funds No Guarantees:No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when
  • they invest in mutual funds than when they buy and sell stocks on their own.However, anyone who invests through a mutual fund runs the risk of losingmoney.Fees and commissions:All funds charge administrative fees to covertheir day-to-day expenses. Some funds also charge sales commissions or"loads" to compensate brokers, financial consultants, or financial planners.Even if you dont use a broker or other financial adviser, you will pay a salescommission if you buy shares in a Load Fund.Taxes:During a typical year, most actively managed mutual funds sellanywhere from 20 to 70 percent of the securities in their portfolios. If yourfund makes a profit on its sales, you will pay taxes on the income youreceive, even if you reinvest the money you made.Management Risk: When you invest in a mutual fund, you depend onthe funds manager to make the right decisions regarding the funds portfolio.If the manager does not perform as well as you had hoped, you might notmake as much money on your investment as you expected. Of course, if youinvest in Index Funds, you forego management risk, because these funds donot employ managers
  • Rights of a Mutual Fund Unit holderA unit holder in a Mutual Fund scheme governed by the SEBI (MutualFunds) Regulations is entitled to: 1. Receive unit certificates or statements of accounts confirming the title within 6 weeks from the date of closure of the subscription or within 6 weeks from the date of request for a unit certificate is received by the Mutual Fund. 2. Receive information about the investment policies, investment objectives, financial position and general affairs of the scheme. 3. Receive dividend within 42 days of their declaration and receive the redemption or repurchase proceeds within 10 days from the date of redemption or repurchase. 4. Vote in accordance with the Regulations to:- a. Approve or disapprove any change in the fundamental investment policies of the scheme, which are likely to modify the scheme or affect the interest of the unit holder. The dissenting unit holder has a right to redeem the investment. b. Change the Asset Management Company. c. Wind up the schemes.
  • Brief history of CompanyHDFC is Indias premier housing finance company and enjoys an impeccable trackrecord in India as well as in international markets. Since its inception in 1977, theCorporation has maintained a consistent and healthy growth in its operations toremain the market leader in mortgages. Its outstanding loan portfolio covers wellover a million dwelling units. HDFC has developed significant expertise in retailmortgage loans to different market segments and also has a large corporate clientbase for its housing related credit facilities. With its experience in the financialmarkets, a strong market reputation, large shareholder base and unique consumerfranchise, HDFC was ideally positioned to promote a bank in the Indianenvironment.The Housing Development Finance Corporation Limited (HDFC) was amongst thefirst to receive an in principle approval from the Reserve Bank of India (RBI) toset up a bank in the private sector, as part of the RBIs liberalization of the IndianBanking Industry in 1994. The bank was incorporated in August 1994 in the nameof HDFC Bank Limited, with its registered office in Mumbai, India. HDFC Bankcommenced operations as a Scheduled Commercial Bank in January 1995.
  • Registered officeHdfc bank HouseSenapati Bapat MargLower ParelMumbai 400013Tel No: 56521000Fax No: 24960739Web –site : www.hdfcbank.comBoard of DirectorsC M Vasudev Non Executive ChairmanAditya Puri Managing DirectorHarish Engineer Executive DirectorParesh Sukthankar Executive DirectorAnami N Roy DirectorAshim Samanta DirectorBobby Parikh DirectorPartho Datta DirectorRenu Karnad DirectorPandit Palande Director
  • Vice president (legal) & company secretary Mr. Sanjay DongreAuditors Mr. P.C. Hansotia&Co (Chartered accountants) Broad Areas in Which it OperatesThe Bank operates in three segments: retail banking, wholesale banking andtreasury services. The retail banking segment serves retail customers through abranch network and other delivery channels. The wholesale banking provides loansand transaction services to corporate and institutional customers. The treasuryservices segment undertakes trading operations on the proprietary account, foreignexchange operations and derivatives trading. The Bank operates in India.Retail BankingThis segment raises deposits from customers and makes loans and providesadvisory services to such customers. The objective of the Retail Bank is toprovides its target market customers a range of financial products and banking
  • services, giving the customer a one-stop window for all his/her bankingrequirements. The products are backed by service and delivered to the customersthrough the growing branch network, as well as through alternative deliverychannels like automated teller machines (ATMs), phone banking, net banking andmobile banking.The HDFC Bank Preferred program for high net worth individuals, the HDFCBank Plus and the Investment Advisory Services programs have been designedkeeping in mind needs of customers who seek distinct financial solutions,information and advice on various investment avenues. The Bank also has an arrayof retail loan products, including auto loans, loans against marketable securities,personal loans and loans for two-wheelers. It is also a provider of depositoryparticipant (DP) services for retail customers, providing customers the facility tohold their investments in electronic form.HDFC Bank has launched an international debit card in association with VISA(VISA Electron) and also issues the MasterCard Maestro debit card. The Banklaunched its credit card business during the fiscal year ended March 31, 2001. BySeptember 30, 2005, the bank had a total card base (debit and credit cards) of 5.2million cards. The Bank is also engaged in the merchant acquiring business withover 50,000 point-of-sale (POS) terminals for debit/credit cards acceptance atmerchant establishments.
  • Wholesale BankingThe Banks target market ranges from large, blue-chip manufacturing companies inthe Indian corporate to small and mid-sized corporates and agri-based businesses.For these customers, the Bank provides a range of commercial and transactionalbanking services, including working capital finance, trade services, transactionalservices and cash management. The bank is also a provider of structured solutions,which combine cash management services with vendor and distributor finance forfacilitating superior supply chain management for its corporate customers. Itprovides cash management and transactional banking solutions to corporatecustomers.Treasury ServicesWithin this business, the bank has three main product areas: Foreign Exchange andDerivatives, Local Currency Money Market & Debt Securities, and Equities. Riskmanagement information, advice and product structures, as well as fine pricing onvarious treasury products are provided through the Banks Treasury team. TheTreasury business is responsible for managing the returns and market risk on thisinvestment portfolio.
  • Customer focusHDFC Banks mission is to be a “World-Class Indian Bank.”The objective is to build sound customer franchises across distinct businesses so asto be the preferred provider of banking services for target retail and wholesalecustomer segments, and to achieve healthy growth in profitability, consistent withthe banks risk appetite. The bank is committed to maintain the highest level ofethical standards, professional integrity, corporate governance and regulatorycompliance. HDFC Banks business philosophy is based on four core values – Operational Excellence, Customer Focus, Product Leadership and PeopleCapital structureAuthorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-upcapital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of thebanks equity and about 19.4% of the equity is held by the ADS Depository (inrespect of the banks American Depository Shares (ADS) Issue). Roughly 31.3% of
  • the equity is held by Foreign Institutional Investors (FIIs) and the bank has about190,000 shareholders. The shares are listed on the The Stock Exchange, Mumbaiand the National Stock Exchange. The banks American Depository Shares arelisted on the New York Stock Exchange (NYSE) under the symbol "HDB Various ServicesForex and trade servicesHDFC Bank has a range of products and services that one can choose from totransact smoothly.The following are different methods of transacting in foreignexchange and remitting money. Travelers cheques Foreign currency cash. Foreign currency drafts Cheque deposits Remittances Cash to master Trade services Foreign services branch locator
  • Important guidelines and schedulesAll Foreign Exchange transactions are conducted by strictly adhering to RBIguidelines. Depending on the nature of your transaction or point of travel, you willneed to understand your Foreign Exchange limits. Loans Whatever your need, our range of loans can help Home Loans Personal Loans Two Wheeler Loans New Car Loans Used Car Loans
  • Overdraft Against Car Express Loans Loans Against Securities Loans Against Property Personal BankingSavings AccountsThese Accounts are primarily meant to inculcate a sense of saving for the future,accumulating funds over a period of time. Whatever may be the occupation, bankis confident that customer will find the perfect banking solution. Open an accountin your name (customer‟s name) or register for one jointly with a family membertoday.Current AccountsNow, with an HDFC Bank Current Account, experience the freedom of multi-citybanking! Customer can have the power of multi-location access to his accountfrom any of banks 500 branches in 220 cities. Not only that, he can do most of hisbanking transactions from the comfort of his office or home without stepping out.
  • At HDFC Bank, it understands that running a business requires time and money,also that customers business needs are constantly evolving. Thats where it comein. It provideshim with a choice of Current Account options to exclusively suit hisbusiness - whatever the size or scope.Fixed DepositsLong-term investments form the chunk of everybodys future plans. An alternativeto simply applying for loans, fixed deposits allow the customer to borrow from hisown funds for a limited period, thus fulfilling his needs as well as keeping hissavings secure.As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tarriffs,Charges or Fees Brochures will attract Service Tax @10% & Education Cess @2%of the service tax amount effective 10th September 2004. The same will appear asseparate debits in the statements. Private bankingHDFC Bank offers Private Banking services to high net worth individuals andinstitutions. Banks team of seasoned financial and investment professionalsprovide objective guidance backed by thorough research and in-depth analysiskeeping in mind customer‟s financial goals.
  • Multiple Recognition from Euro moneyAt HDFC Bank, they have always strived towards providing exceptional service toeach of their esteemed customers. As testament to this dedication, they have earnedthe following ranks in a recently conducted Euromoney Survey. Rated as the best private bank in the super effluent category in India HDFC Bank Investment Advisory Services - Helping you take your Investment portfolio further. Dedicated investment advisorHDFC Private Banking service involves a high degree of personalization. Whencustomer avail of this facility, a dedicated Investment Advisor serves him. Thisseasoned finance professional adds value to his portfolio by keeping him up to datewith financial markets and investment opportunitiesPayment servicesWith HDFC Banks payment services, one can bid goodbye to queues and paperwork. Its range of payment options make it easy for customer to pay for a varietyof utilities and services. Verified by visa If one wants to be worry free for his online purchases. Now he can shop securely online with his existing Visa Debit/Credit card.
  • Net safeNow shop online without revealing your (customers) HDFC Bank Credit Cardnumber. Prepaid refillIf a person is a HDFC Bank Account holder and a prepaid customer, he cannow refill his Prepaid Mobile card with this service. Bill payOne can pay his telephone, electricity and mobile phone bills at hisconvenience. Through the Internet, ATMs, his mobile phone and telephone -with Bill Pay, bank‟s comprehensive bill payments solution Visa Bill PayOne can pay his utility bills from the comfort of his home! Pay using his HDFCBank Visa credit card and forget long queue and late payments forever Insta payOne can Pay his bills, make donations and subscribe to magazines withoutgoing through the hassles of any registration. Direct payShop or Pay bills online without cash or card. Debit your (customers) accountdirectly with bank‟s Direct Pay service!
  • Smart pay(with credit cards)With Smart Pay, paying customer‟s r electricity, telephone, mobile phone,water bills, gas and insurance premia payments becomes easy like never before. Visa money transferOne can transfer funds to any Visa Card (debit or credit) within India at hisown convenience through HDFC Banks Net Banking facility. E-Monies Electronic Funds TransferTransfer funds from customers account to any account in any Bank in India at15 locations - FREE of cost Online payment of excise and service taxOne can make his Excise and Service Tax payments at his own convenience.Preferred/classic bankingIf a customer expects more from everything, even HDFC bank, will invite himinto the world of exclusive banking. Where he will never again have to wait tobe served. With HDFC Bank Preferred Programme, his comfort always comesfirst.Ideal for seasoned professionals or businessmen, this programme will providehim with a banker dedicated to take care of all his banking and investment
  • needs. It also means he get preferential rates on various banking products and other exclusive benefits. Hdfc bank classic banking If a person wants to experience banking beyond the ordinary, our HDFC Bank Classic Programme is just for him. Becoming an HDFC Bank Classic customer entitles him to a host of benefits, including a bouquet of preferentially priced products and specialized wealth management solutions. Awards and AchievementsHDFC Bank began operations in 1995 with a simple mission: to be a "World-classIndian Bank". They realized that only a single-minded focus on product quality andservice excellence would help them get there. Today, they are proud to say thatthey are well on the way towards that goal.2010Business Today:Best Bank in India.Forbes Top 2000 Companies: Bank at 632nd Position
  • Business world: Best Bank (large)The Banker Magazine: Word‟s Top 1000 bankAsia money Awards: Best Local Cash Management Bank in Large and MediumsegmentsEuro money Awards: "Best Bank" in India2009Asia money Awards: Best Domestic Commercial BankAsia money Awards: Best Cash Management Bank – IndiaGlobal Finance Award : Best Trade Finance Bank.The Asian Banker Excellence: Retail Banking Risk Management Award in India:Best Bank IndiaEconomic Times Awards: Best Bank in India 20092008Finance Asia Country Awards For Achievement 2008: Best Bank and BestCash and Management Bank.Buisness India: Best bank 2008Forbes Asia: Fab 50 Companies in pacific Asia.
  • Buisness Today: Best Bank AwardTill Year 2007HDFC Bank named the "Most Customer Responsive Company - Banking andFinancial Services in The Economic Times - Avaya Global IT User in Banking atthe IT Users Awards 2003. Outlook Money & NDTV Profit : Best Bank in thePrivate sector category.The Asian Banker Excellence in Retail Financial Services Award : Best RetailBank in India.Asian Banker : Managing Director Aditya Puri wins the Leadership Award Forindia.Most Improved Company for Best Management Practices in India 2004HDFC Bank has been named Best Domestic Bank in India in The Asset Triple ACountry Awards 2005.The Business Today-KPMG Survey published in the leading Indian businessmagazine Business Today has named HDFC Bank "Best Bank in India" for thethird consecutive year in 2005.The Asset magazine named HDFC Bank "Best Cash Management Bank" and "BestTrade Finance Bank" in India, in 2006.Connect Customer Responsiveness Awards 2005"HDFC Bank has been named Best Domestic Bank in India Region in The AssetTriple A Country Awards 2004 and 2003.In 2004, HDFC Bank was selected by BusinessWorld as "One of Indias MostRespected Companies" as part of The Business World Most Respected CompanyAwards 2004.
  • In 2004, Forbes Global again named us in its listing of Best under a Billion, 100Best Smaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004issue.In 2004, HDFC Bank won the award for "Operational Excellence in RetailFinancial Services" - India as part of the Asian Banker Awards 2003.In 2003, Forbes Global named us in its ranking of "Best under a Billion, 200 BestSmall Companies for 2003".Leading business newspaper The Financial Express named HDFC Bank the "BestNew Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey2003.Leading Personal Finance Magazine in India Outlook Money named HDFC Bankthe "Best Bank in the Private Sector" for the year 2003.Leading Indian business magazine Business Today in a survey rated us "Best Bankin India" 2003, and "Best Private Sector Bank" in India in 1999.NASSCOM and economictimes.com have named us the BestThere have been some other proud moments as wellLondon-based Euromoney magazine gave us the award for "Best Bank - India" in1999, "Best Domestic Bank" in India in 2000, and "Best Bank in India" in 2001and 2002Asia money magazine has named us "Best Commercial Bank in India 2002".For our use of information technology we have been recognized as a"Computerworld Honors Laureate" and awarded the 21st Century AchievementAward in 2002 for Finance, Insurance & Real Estate category by Computerworld,Inc., USA.
  • Our technology initiative has been included as a case study in their online globalarchives.The Economic Times has conferred on us The Economic Times Awardsfor Corporate Excellence as the Emerging Company of the Year 2000-01.Leading Indian business magazine Business India named us "Indias Best Bank" in2000.In the year 2000, leading financial magazine Forbes Global named us in its list of"The 300 Best Small Companies" in the world and as one of the "20 for 2001" bestsmall companies in the world.Corporate GovernanceHDFC Bank recognizes the importance of good corporate governance, which isgenerally accepted as a key factor in attaining fairness for all stakeholders andachieving organizational efficiency. This Corporate Governance Policy, therefore,is established to provide a direction and framework for managing and monitoringthe bank in accordance with the principles of good corporate governance.Profile of HDFC Mutual FundHDFC Asset Management Company Ltd (AMC) was incorporated under theCompanies Act, 1956, on December 10, 1999, and was approved to act as an AssetManagement Company for the HDFC Mutual Fund by SEBI vide its letter datedJune 30, 2000.The registered office of the AMC is situated at Ramon House, 3rdFloor, H.T. Parekh Marg, 169, Back bay Reclamation, Church gate, Mumbai - 400020.
  • In terms of the Investment Management Agreement, the Trustee has appointed theAMC to manage the Mutual Fund.As per the terms of the Investment Management Agreement, the AMC willconduct the operations of the Mutual Fund and manage assets of the schemes,including the schemes launched from time to time.The present shareholding pattern of the AMC is as followsParticulars Percentage of the Paid Capital Housing Development Finance 50.10 Corporation LimitedStandard Life Investments Limited 49.90Vision“To be a dominant player in the Indian mutual fund space, recognized for its highlevels ofethical and professional conduct and a commitment towards enhancinginvestor interests”
  • The Board of Directors of the HDFC AssetManagement Company Limited (AMC) Mr. Deepak S Parekh Mr. N. Keith Skeoch Mr Mark Connolly Mr. Hoshang S. Billimoria Mr. Humayun Dhanrajgir Mr. P. M. Thampi Dr. Deepak Phatak Mr Rajeshwar Raj Bajaaj Ms. Renu S. Karnad Mr. Milind BarveThe AMC is managing 3 close ended schemes HDFC Fixed Investment Plan HDFC Long Term Equity Fund and HDFC Fixed Maturity Plans
  • 22 open-ended schemes of the Mutual Fund HDFC Growth Fund (HGF) HDFC Balanced Fund (HBF) HDFC Income Fund (HIF) HDFC Liquid Fund (HLF) HDFC Long Term Advantage Fund (formerly HDFC Tax Plan 2000)(HTP) HDFC Childrens Gift Fund (HDFC CGF) HDFC Gilt Fund (HGILT) HDFC Short Term Plan (HSTP) HDFC Index Fund HDFC Floating Rate Income Fund (HFRIF) HDFC Equity Fund (HEF) HDFC Top 200 Fund (HT200) HDFC Capital Builder Fund (HCBF) HDFC TaxSaver (HTS) HDFC Prudence Fund (HPF) HDFC High Interest Fund (HHIF) HDFC Cash Management Fund (HCMF) HDFC MF Monthly Income Plan (HMIP) HDFC Core & Satellite Fund (HCSF) HDFC Multiple Yield Fund (HMYF) HDFC Premier Multi-Cap Fund. (HPM) HDFC Multiple Yield Fund - Plan 2005 (HMY2005)
  • The AMC is also providing portfolio management / advisory services and suchactivities are not in conflict with the activities of the Mutual Fund.The AMC hasrenewed its registration from SEBI vide Registration No. - PM / INP000000506dated December 4, 2003 to act as a Portfolio Manager under the SEBI (PortfolioManagers) Regulations, 1993.The Certificate of Registration is valid from January1, 2004 to December 31, 2006 .
  • Techniques Used 1) ReturnReturn on a typical investment consists of two components. The basic is theperiodic cash receipts (or income) on the investment, either in the form of interestor dividends. The second component is the change in the price of the assets-commonly called the capital gain or loss. This element of return is the differencebetween the purchase price and the price at which the assets can be or is sold;therefore, it can be again or a loss.The return has been calculated as under NAVt – NAVt-1Portfolio return: Rit =--------------------------------- NAV t-1Where Rit is the difference between Net Asset Values for two consecutive daysdivided by the NAV of the preceding day.
  • M.indt – M.indt-1Market return: Rmt =-------------------------------- M.indt-1Where Rmt is the difference between market indices of two consecutive day‟sdividend by the market index for the preceding day 2) Risk Risk is neither good nor bad. Risk in holding securities is generally associatedwith the possibility that realized returns will be less than expected returns. Thedifference between the required rate of returns on mutual fund investment and therisk free return is the risk premium. Risk can be measured in terms of Beta &standard deviations. Standard deviationIt is used to measure the variation in individual returns from the average expectedreturns over a certain period. Standard deviation is used in the concept of risk of aportfolio of investments. Higher standard deviation means a greater fluctuation inexpected return.Standard deviation (SD) =/ varWhere Var = varianceVar=  p (r-E(r)) 2 i
  • BetaBeta measures the systematic risk and shows how prices of securities respond tothe market forces. It is calculated by relating the return on a security with return forthe market. By convention, market will have beta 1.0.Mutual fund is said to bevolatile, more volatile or less volatile. If beta is grater than 1 the stock is said to beriskier than market. If beta is less than 1,the indication is that stock is less risky incomparison to market. If beta is zero then the risk is the same as that of the market.Negative beta is rare. = n xy-( x)( y) n x2-( x) 2 Where, n= number of days X =rolling returns of the NSE index Y= rolling returns of the schemes 3) Sharpe indexSharpe index measures risk premium of a portfolio, relative to the total amount ofrisk in the portfolio. Sharpe index summarizes the risk and return of a portfolio in asingle measure that categorizes the performance of funds on the risk- adjusted
  • basis. The larger the Sharpe‟s index the portfolio over performs the market andvise versa.Where,St = Sharpe‟s indexRp= portfolio returnRf= Risk free rate of return (7.59%)SD= Standard Deviation of the port folio St= RP-Rf 4) Treynor’s IndexTreynor‟s model is on the concept of the characteristics straight line. Thecharacteristics line has drawn a relationship between the market return and aspecific portfolio without taking into consideration any direct adjustment for risk.It is also known as reward to volatility ratio and is defined as:The formula for Treynor‟s Index is: Portfolio avg return (Rp) – risk-free rate of interest (Rf)
  • Treynor index (Tn) = --------------------------------------------------------------------- Beta coefficient of portfolio (Bp) Rp -Rf Tn = ------------------------- BpIt measures portfolio risk in terms of beta, which is weighted average of individualsecurity beta. The ratio is investors, for who the fund represents only a fraction oftheir total assets. The higher the ratio better is the performance.Criteria 2&3 Equity diversified schemesThere is lot of variety schemes offered by AMCs. Equity diversified is one of thescheme offered by the AMC .the selection criteria of schemes is totally depend onthe fund size and age of the fund. The scheme, which has the corpus value, ismore than 400Crs and the age of the fund is more than 3yrs only that fund isqualified for analysis
  • The following are the equity-diversified schemes in the selected funds: Fund size DOI HDFC Equity Fund (G) 2887.39 12/08/94 HDFC Top 200 Fund (G) 1131.45 08/19/96 HDFC Long Term Advantage 424.53 01/02/01 Fund (G) HDFC Tax Saver (G) 475.99 12/18/95 Reliance Growth Fund (G) 2524.13 09/08/95 Reliance Vision Fund (G) 1719.35 09/07/95 Pru ICICI Dynamic plan 1044.27 10/18/02 Pru ICICI Power 1359.04 10/05/01 Pru ICICI Tax Plan 421.75 08/09/99 Tables for fund size and DOI Absolute returns Scheme Name DOI RT1y RT2y RT3y RT4y RT5y navPru ICICI Dynamic 47.375 61.468 180.655 0.000 - -Plan (G)Pru ICICI Power (G) 61.740 55.870 143.262 267.719 381.967 475.933Pru ICICI Tax Plan 73.120 36.316 190.389 344.498 453.101 603.077(G)Reliance Growth 199.520 48.210 186.379 416.624 557.181 909.717Fund (G)
  • Reliance Vision Fund 137.650 50.454 144.668 292.837 428.002 857.898 (G) HDFC Equity Fund 113.822 54.314 149.500 279.913 416.668 575.101 (G) HDFC Top 200 Fund 85.834 49.693 138.335 267.597 427.560 530.206 (G) HDFC Long Term 74.137 39.146 139.926 310.959 467.665 712.015 Advantage Fund (G) HDFC Tax Saver (G) 115.193 47.475 205.147 366.936 505.960 615.484 The selected funds returns from date of launch to date of inceptionCriteria 4Methodology 1. ReturnName of Scheme DOI Returns(annualized) Avg 1 yr 2yr 3yr 4yr 5yr returnReliance Growth 199.52 48.21 93.23 80.40 27.21 53.64 60.54Fund (G)Reliance Vision 137.65 50.45 62.62 60.56 34.41 81.42 57.89Fund (G)HDFC Equity 113.822 54.31 61.68 52.27 36.00 30.66 46.99Fund(G)HDFC Long Term 74.137 39.15 72.43 71.29 38.13 43.04 52.81Advantage Fund(G)HDFC Tax Saver(G) 115.193 47.48 106.91 53.02 29.77 18.07 51.05
  • HDFC Top 200 Fund 85.834 49.69 59.22 54.24 43.52 19.46 45.22 (G) Pru ICICI Dynamic 47.3746 61.47 73.82 31.67 0 0 55.65 Plan (G) Pru ICICI Power (G) 61.74 55.87 56.07 51.16 31.07 19.50 42.73 Pru ICICI Tax Plan 73.12 36.32 113.03 53.07 24.43 27.12 50.79 (G) NAVt – NAVt-1Portfolio return: Rit =--------------------------------- NAV t-1Where Rit is the difference between Net Asset Values for two consecutive daysdividend by the NAV of the preceding day.Risk Beta Scheme Name 5 years avg return* Beta Pru ICICI Tax Plan (G) 50.79 1 Pru ICICI Dynamic Plan 55.65 0.99 (G) Reliance Vision Fund (G) 57.89 0.98 Pru ICICI Power (G) 42.73 0.97 HDFC Top 200 Fund (G) 45.22 0.96 HDFC Tax Saver (G) 51.05 0.93 Reliance Growth Fund (G) 60.54 0.91 HDFC Equity Fund (G) 46.99 0.9 HDFC Long Term 52.81 0.75 Advantage Fund (G
  • Returns are annualized = nxy-(x)( y) nx -(x)2 2Where,n= number of daysX =rolling returns of the NSE indexY= rolling returns of the schemesBeta describes the relationship between the stock‟s return and the index returns. itdescribes the risk in the portfolio with comparing market risk as 1 .If beta =1One percent changes in market index return causes exactly one percent change inthe stock returns. it indicates that the stock moves in randem with the market .If Beta <1Then the stock is less volatile compared to the market.If Beta >1Then the stock is more volatile compared to the market. The stock valueWith more then 1 beta value is considered to be risky.If Beta –ve: nagative Beta indicates that the stock returns moves in the oppositedirection to the market return.
  • Standard deviationIt is used to measure the variation in individual returns from the average expectedreturns over a certain period. Standard deviation is used in the concept of risk of aportfolio of investments. Higher standard deviation means a greater fluctuation inexpected return. Name of Scheme DOI Returns (annualized) 5yrs SD 1 yr 2yr 3yr 4yr 5yr Avg returnPru ICICI Dynamic 47.3746 61.47 73.82 31.67 0 0 55.65 30.51Plan (G)Pru ICICI Power 61.74 55.87 56.07 51.16 31.07 19.50 42.73 14.81(G)Pru ICICI Tax Plan 73.12 36.32 113.03 53.07 24.43 27.12 50.79 32.69(G)Reliance Growth 199.52 48.21 93.23 80.40 27.21 53.64 60.54 23.55Fund (G)Reliance Vision 137.65 50.45 62.62 60.56 34.41 81.42 57.89 15.43Fund (G)HDFC Equity Fund 113.822 54.31 61.68 52.27 36.00 30.66 46.99 11.70(G)HDFC Top 200 85.834 49.69 59.22 54.24 43.52 19.46 45.22 13.88Fund (G)HDFC Long Term 74.137 39.15 72.43 71.29 38.13 43.04 52.81 15.64Advantage Fund(G)HDFC Tax Saver 115.193 47.48 106.91 53.02 29.77 18.07 51.05 30.59(G)Standard deviation (SD) =/ varWhere Var = variance Var=  p (r-E(r)) 2 i
  • Return & Risk for top 10 average returns Name of Scheme DOI 5yrs Sd Beta avg returns Reliance Growth Fund (G) 199.52 60.54 23.55 0.91 Reliance Vision Fund (G) 137.65 57.89 15.43 0.98 Pru ICICI Dynamic Plan (G) 47.3746 55.65 30.51 0.99 HDFC Long Term Advantage 74.137 52.81 15.64 0.75 Fund (G) HDFC Tax Saver (G) 115.193 51.05 30.59 0.93 Pru ICICI Tax Plan (G) 73.12 50.79 32.69 1 HDFC Equity Fund (G) 113.822 46.99 11.70 0.94 HDFC Top 200 fund 85.834 45.22 13.88 0.96 Pru ICICI power 61.74 42.73 14.81 0.97Sharpe’sSharpe‟s index measures the risk premium of the portfolio relative to the total amtof risk in the portfolio. This risk premium is the difference between the portfolio‟saverage rate of return and the risk less rate of return. The index assigns the highestvalues to assets that have best risk-adjusted average rate of returns. Name of Scheme DOI 5 yrs avg Rf sd St returns RpReliance Growth Fund (G) 199.52 60.54 8.00 23.55 2.23Reliance Vision Fund (G) 137.65 57.89 8.00 15.43 3.23Pru ICICI Dynamic Plan (G) 47.3746 55.65 8.00 30.51 1.56HDFC Long Term Advantage 74.137 52.81 8.00 15.64 0.59
  • Fund (G)HDFC Tax Saver (G) 115.193 51.05 8.00 30.59 1.41Pru ICICI Tax Plan (G) 73.12 50.79 8.00 32.69 1.31HDFC Equity Fund (G) 113.822 46.99 8.00 11.70 3.33HDFC Top 200 fund 85.834 45.22 8.00 13.88 2.68Pru ICICI power 61.74 42.73 8.00 14.81 2.34Where st =Sharpe‟s index Rp=portfolio return Rf=Risk free rate of return (8.00%) SD= standard deviation of the port folio St= RP-Rf SDTreynor’s Index Name of Scheme DOI Rf Beta Tn Rp Reliance Growth Fund (G) 199.52 60.54 8.00 0.91 57.73 Reliance Vision Fund (G) 137.65 57.89 8.00 0.98 50.91 Pru ICICI Dynamic Plan (G) 47.3746 55.65 8.00 0.99 48.13 HDFC Long Term Advantage 74.137 52.81 8.00 0.75 59.75 Fund (G) HDFC Tax Saver (G) 115.193 51.05 8.00 0.93 46.29 Pru ICICI Tax Plan (G) 73.12 50.79 8.00 1 42.79 HDFC Equity Fund (G) 113.822 46.99 8.00 0.94 43.32 HDFC Top 200 fund 85.834 45.22 8.00 0.96 38.77 Pru ICICI power 61.74 42.73 8.00 0.97 35.80
  • In Treynor‟s higher the ratio higher the performance.Tn =Treynor‟s indexRp=portfolio returnRf=Risk free rate of return (7.59%)Formula Tn= RP-Rf BetaPerformance Evaluation Tables Name of DOI) Rp Beta SD Sharpe’s Treynors Scheme Reliance 199.52 60.54 0.91 23.55 2.23 57.73 Growth Fund (G) Reliance 137.65 57.89 0.98 15.43 3.23 50.91 Vision Fund (G) Pru ICICI 47.3746 55.65 0.99 30.51 1.56 48.13 Dynamic Plan (G) HDFC Long 74.137 52.81 0.75 15.64 0.59 59.75 Term Advantage Fund (G) HDFC Tax 115.193 51.05 0.93 30.59 1.41 46.29 Saver (G)
  • Pru ICICI 73.12 50.79 1 32.69 1.31 42.79Tax Plan(G)HDFC 113.822 46.99 0.94 11.70 3.33 43.32Equity Fund(G)HDFC Top 85.834 45.22 0.96 13.88 2.68 38.77200 fundPru ICICI 61.71 42.73 0.97 14.81 2.34 35.80powerRanking Ranking on the basis of Sharpe’s Name of the scheme DOI Rp Sharpe’s Ranks Hdfc equity fund 113.822 46.99 3.33 1 Reliance vision fund 137.65 57.89 3.23 2 Hdfc top 200 fund 85.834 45.22 2.68 3 Pru ICICI power 61.74 42.73 2.34 4 Reliance growth fund 199.52 60.54 2.23 5 Pru ICICI dyanamic fund 47.37 55.65 1.56 6 Hdfc tax saver fund 115.193 51.05 1.41 7 Pru icici tax plan 73.12 50.79 1.31 8 Hdfc long tern advantage 74.134 52.81 0.59 9 fund
  • Hdfc equity fund 3.5 Reliance vision fund 3 Franklin india prima 2.5 Hdfc top 200 fund 2 Pru ICICI power 1.5 Reliance growth fund 1 Pru ICICI dyanamic fund Hdfc tax saver fund 0.5 Pru icici tax plan 0 Sharpe’s Hdfc long tern advantage fundRanking on the basis of Treynor’sName of Scheme DOI Treynor’s Ranks RpHdfc long tern advantage 74.134 51.81 60.29 1fundReliance growth fund 199.52 60.54 58.18 2Reliance vision fund 137.65 57.89 57.33 3Pru ICICI dyanamic fund 47.3746 55.65 51.33 4Hdfc tax saver fund 115.193 51.05 48.55 5Hdfc equity fund 113.822 46.99 46.73 6Pru icici tax plan 73.12 50.79 43.20 7Hdfc top 200 fund 85.834 45.22 41.91 8Pru ICICI power 61.74 42.73 38.61 9
  • 70 Hdfc long tern60 advantage fund Reliance growth50 fund Reliance vision fund40 Pru ICICI dyanamic fund30 Hdfc tax saver fund20 Hdfc equity fund Pru icici tax plan10 Hdfc top 200 fund 0 Treynor’s Pru ICICI power Limitations of the study The data collection was strictly confined to secondary sources. No primary Data was not associated with the project Collecting historical NAV is very difficult Selection of schemes for study is very difficult because lot of verities of schemes.
  • ConclusionThe above evaluation according to Sharpe index the HDFC equity scheme fallsunder 1st rank & according to traynor HDFC long term advantage fund falls under1st rank but here only diff was 2.11 as compare reliance.I would like to conclude that HDFC schems are performing well as compare toother competitors even time factor it was started late but its returns is high ascompared to competitor.As HDFC mutual fund has to concentrate more on marketing their scheme, as itsschemes are performing well, and it should maintain its rank 1 position.
  • AnnexureDetails about top SchemesHDFC Equity fund Fund manager Prasanth jain Investment objective To achive capital apprecition Date of allotment 12-8-94 Growth plan 151.389 Dividend plan 45.193 Entry load < 5 cr 2.25%,> 5cr no entry load Less than or =to rs 5crs nil;rs <5crs :1%(if Exit load redeemed within 1 year of allotment Minimum investment 5000 Fund size 2887.39 Portfolio holding top 10 holdings industry %NAV Infosys technologies ltd software 8.27 Oil& natural gas corp ltd oil 6.09 ITC ltd consumer non durables 5.31 Larsen & toubro ltd diversified 5.17 Cropton greaves ltd industrial capital goods 4.95
  • Amrtech auto ltd auto ancilaries 4.33 Reliance industry ltd petrolium prod 4.26 Punj lioyod ltd construction 3.87 Hindustan petroleum petroliun prod 3.77 CMCltd hardware 3.48HDFC Top 200 Funds Fund manager Prasanth jain objective To genarate long term capital appriciation from portfolio of equity &equity linked instruments Date of 19-8-1996 inception Growth plan 151.386 Dividend plan 45,193 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 1131.45Portfolio- top 10 holdings Company/issuer industry % to nav Equity &equity related Oil& natural gas corp ltd oil 7.90 Reliance industry ltd petrolium prod 6.11 Infosys technologies ltd software 4.97 Tata consultancy service ltd software 4.29 Bharati airtel ltd Telecom 4.06 service Hindustan petroleum petroliun prod 4.01
  • coporation ltd Larsen & toubro ltd diversified 3.73 Icici bank bank 3.16 Wipro software 3.16 State bank fo india bank 3.03HDFC long term advantage fund Fund manager Vinay kulkarni objective To achive long term grpwth capital Date of 1-2-01 inception Growth plan 95.254 Dividend plan 41.458 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 424.53Portfolio- top 10 holdings Company/issuer industry % to nav Equity &equity related Maharastra seemless ltd Ferrous metals 5.07 Container corporation of transportation 5.04 india ltd Heritage foods india ltd Consumer non durables 4.97 Reliance industry ltd petrolium prod 4.54 Blue star ltd Consumer durable 4.19 State bank fo india bank 3.79 AIA enginneering ltd Industrial capital goods 3.31
  • Kansai nerolac paints ltd Consumer non durables 3.29 Infosys technologies ltd software 3.11 Bharati elestronic ltd Industrial capital goods 3.09HDFC Tax saver Fund manager Vinay kulkarni objective To achive long term grpwth capital Date of 18-12-95 inception Growth plan 146.134 Dividend plan 69.916 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 475.99Portfolio- top 10 holdings Company/issuer industry % to nav Equity &equity related Oil& natural gas corp ltd oil 7.90 Reliance industry ltd petrolium prod 6.11 Infosys technologies ltd software 4.97 Tata consultancy service ltd software 4.29 Bharati airtel ltd Telecom 4.06 service Hindustan petroleum petroliun prod 4.01 coporation ltd Larsen & toubro ltd diversified 3.73 Icici bank bank 3.16 Wipro software 3.16 State bank fo india bank 3.03
  • Reliance vision fund Fund manager Ashwani kumar objective The primary investment objective 0f the scheme is to achive long term growth of capital by investment in equity & its related securities. Date of 9-7-1995 inception Growth plan 160.53 Dividend plan 49.81 Entry load < 2 r 2.25%,>/= to 2 cr.5 cr -1.25%:_> 5 cr - nil Exit load Nil Minimum amt 5000 Fund 1719.35Portfolio- top 10 holdings Holdings % weightage Reliance indutries ltd 5.14 JSW steel ltd 4.12 Bharath earth mover ltd 3.91 Bomby dyeing 7 mfg co ltd 3.23 Crompton greaves ltd 3.18 Bank of borada 3.09 Jindal saw ltd 2.71 Divis laboratieas 2.68 Jaipk sh association 2.61 associtiongujarath state 2,44 fertimliser
  • Reliance growth fund Fund manager Sunil singania objective The primary investment objective 0f the scheme is to achive long term growth of capital by investment in equity & its related securities. Date of 9-8-95 inception Growth plan 234.80 Dividend plan 52.22 Entry load < 2 r 2.25%,>/= to 2 cr.5 cr -1.25%:_> 5 cr - nil Exit load Nil Minimum amt 5000 Fund 2524.13Portfolio- top 10 holdings Holdings Weightage(%) Equity 90.52 Siemens ltd 5,48 Grasim industries ltd 5.15 Divis laboraters ltd 5.07 Reliance comm ltd 4.42 India hotels ltd 4.42 Infosys technology ltd 4.25 Indian oil corporation ltd 3.73 Tata tea ltd 3.68 Reliance industries ltd 3.59 Auomative axies 3.55
  • PruICICI power Fund manager Sankaran naren objective To achive long term grpwth capital Date of 10-05-2001 inception Growth plan 76.66 Dividend plan 20.65 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 1359.04Portfolio- top 10 holdings Company/issuer (%)NAV ITC LTD 6.38 Reliance indutries ltd 5.77 Hindalco industries ltd 4.91 Patni computer system ltd 4.71 Grasim industries ltd 3.69 Mahindra & mahindra ltd 3.68 Tata consultancy service ltd 3.43 Infosys technologies ltd 3.17 Bharath electronic ltd 2.98 Deccan chronicle holdings 2.96 ltd
  • PruICICI dynamic plan Fund manager Sankaran naren objective To achive long term grpwth capital Date of 18-10-2002 inception Growth plan 59.1741 Dividend plan 20.2430 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 1044.27Portfolio- top 10 holdings Company/issuer (%)NAV ITC ltd 5.86 Decan chronicle holdings ltd 5.31 Reliance indutries ltd 4.95 i-fex solution ltd 4.17 Tata consultancy service ltd 399 Jain irrigation systems ltd 3.13 Bharati airtel ltd 3.11 Mahinra & mahindra ltd 3.03 Oil & natural gas company 2.69 ltd Sterlite indutries (india) ltd 2.68
  • PruICICI tax plan Fund manager Sankaran naren objective To achive long term grpwth capital Date of 18-9-99 inception Growth plan 91.23 Dividend plan 29.29 Entry load < 5 cr 2.25%,> 5cr no entry load Exit load - Minimum amt 5000 Fund 421.75Portfolio- top 10 holdings Company/issuer (%)NAV H.E.G LTD 5.06 Cadila health care 5.04 Kesoram industries ltd 4.99 ITC ltd 4.51 Sundaram clayton ltd 4.44 Aventis pharma ltd 4.12 Trent ltd 3.49 Raymonds ltd 3.35 IBP company ltd 3.32 Orient peper & indutries ltd 3.16
  • Bibliography Reference books security analysis & portfolio managementBy Punithavathy pandian Websites www.hdfcmutualfund.com www.amfi.com www.myirish.com www.indiainfoline.com