A STUDY ON

MUTUAL FUNDS WITH REFERANCE

IN

TO HDFC BANK. LTD (GUNTUR)

A Project Submitted

By

N. SAM SONU

Regd. No: Y24BU03051

Under the guidance of

Dr. U. RAVI KUMAR

M.B.A., M. Com., Ph. D.

A Project Report Submitted in partial fulfillment of the requirement for the

award of degree of

MASTER OF BUSINESS ADMINISTRATION From ACHARYA NAGARJUNA UNIVERSITY

2023-2025

DEPARTMENT OF MANAGEMENT STUDIES

T. J. P.S COLLEGE (P.G. COURSES)

 CERTIFICATE

This is to certify that the Project Report entitled " A STUDY ON

MUTUAL FUNDS WITH REFERENCE TO HDFC BANK. LTD GUNTUR," is
a Bonafide work submitted for the partial fulfillment of award of
"MASTER OF DEGREE IN BUSINESS ADMINISTRATION, ACHARYA
NAGARJUNA UNIVERSITY, GUNTUR by N. SAM SONU
(Regd.No.Y24BU03051)

Place:
Date:

Head of the Department : Project Guide :

(Dr.B.V.H.KAMESWARA SASTRY) ( Dr .U. RAVI KUMAR)

 ACKNOWLEDGEMENT
It gives me immense pleasure to acknowledge all those who
have extended their helping hand in bringing out this project.

I owe my sincere thanks to Dr. S. ANITHA DEVI Madam Principal,

T.J.P.S. COLLEGE (P.G. Courses), for granting me permission to do this
project.

I Feel happy to thank Dr. B.V.H. KAMESWARA SASTRY, Head of the

Department, Department of Management Studies, for providing me her
valuable guidance and expertise in successful completion of this project.

I thank Dr . U. Ravi Kumar, Associate Professor,

Department of Management Studies, for guiding me in this project.

I express my sincere gratitude to Sri P. Harish, HR manager for giving

me this opportunity to do the project in this prestigious organization.

I thank all my family members & friends for their valuable support
regarding the completion of my project work.

(N. SAM SONU)

DECLARATION
I declare that the project report entitled "A STUDY ON MUTUAL
FUNDS WITH REFERENCE TO HDFC BANK LTD” is original and has not
been submitted either in part or full for any other degree or diploma from any
other university or institution.

Place: Signature of the candidate

Date: (N. SAM SONU)

CONTENT
CHAPTER PARTICULAR PAGE

NO

1 INTRODUCTION 1-26

2 OBJECTIVES & METHODOLOGY OF STUDY 27-32

3 INDUSTRY PROFILE & COMPANY PROFILE 35-56

4 A STUDY ON MUTUAL FUNDS WITH REFERENCE 57-79

TO HDFC BANK LTD

5 SUMMARY, FINDINGS & SUGGESTIONS 80-82

BIBLIOGRAPHY ANNEXURE

S.NO NAME OF THE TABLE PAGE

 NO
4.1 HDFC Equity Fund 58
4.2 HDFC NRI Equity Fund 60
4.3 HDFC Growth Fund 62
4.4 HDFC Long Term Equity Fund 64
4.5 HDFC Equity Opportunities Fund 66
4.6 HDFC Natural Resources Fund 68
4.7 HDFC Quant Plus Fund 70
4.8 HDFC Banking Fund 72
4.9 HDFC Pharma Fund 74
4.10 HDFC Vision Fund 76
LIST OF TABLES

LIST OF THE GRAPHS

GRAPH NAME OF THE GRAPHS PAGE
NO NO
4.11 Graph representation of Funds according 79
Sharp Ratio
 CHAPTER – 1
INTRODUCTION

INTRODUCTION
FINANCIAL MANAGEMENT:

Financial management is a process of identification, accumulation, analysis,

preparation, interpretation communication of financial information and
communication of financial information to plan, evaluate, and control business
firms.

Financial management is the specialized function of general management,

which, is relates to the procurement of finance, and its effective utilization for
the achievement of the go of the organization.

Financial Management is an organizational activity that is concerned with the

management of financial resources. In common parlance is described as
providing monetary resources at the time they are required. But financial
management covers the mobilization and effective utilization of funds.

Financial Management is defined as "that business activity which is concerned

with the acquisition and conservation of capital funds in meeting the financial
needs and overall objectives of business enterprises"

"Business finance can be broadly defined as the activity concerned with the
planning, raising. controlling and administrating the funds used in the business",
"Finance Management is concerned with the efficient use of an important
economic resource, namely capital funds".
"Financial management is an area of financial decision-making harmonizing
motives and enterprises goals", individual

Financial management is concerned with the effective use of an economic

resource namely capital fund.

SCOPE OF FINANCIAL MANAGEMENT:

➤Financial management is a branch of business management, which is
associated future planning, Organization, co-ordination and control.

➤Financial management provides a sound base to all managerial decisions.

►Production, research and development decisions based on financial

management.

➤Financial management is scientific and analytical analysis.

➤In the process of decision making and financial analysis modern mathematical
thus are used. Managing a firm is and an art.

➤An analysis of the various definitions mentioned above make it clear that financial
management is concerned with the proper management of funds keeping in view the
enterprise objectives.

➤The financial manager should look after that the funds are procured in a manner that le risk
and cost consideration are properly balanced and there is optimum. utilization of funds.

NATURE OF FINANCIAL MANAGEMENT:

➤Financial management is a branch of business management, which is associated future

planning, organization, co-ordination and control.
➤Financial management provides a sound base to all managerial decisions.

►Production, research and development decisions based on financial management.

➤Financial management is a scientific and analytical analysis.

In the process of decision making and financial analysis modern mathematical techniques are
used. Managing a firm is both science and an art.

An analysis of the various definitions mentioned above make it clear that financial
management is concerned with the proper management of funds keeping in view the
enterprise objectives.

The financial manager should look after that the funds are procured in a manner that the risk
and cost consideration are properly balanced and there is optimum utilization of funds.

Financial Management Functions:

Initially the finance managers were considered advent of an event requiring funds. The
finance manager was given a target amount of funds to raise and was given a target amount of
funds to raise and was given the responsibility of procuring those funds. So, his function was
limited to raising funds as and when the need arises. Once the funds were procured, his
function was over

However, over a period the scope function has tremendously widened. His presence is
required at every moment whenever any decision having involvement of funds is to be taken.
Now it is the F.M require looking into the financial implication, of any decision in the firm.

The functions of F.M are to manage the funds. Any act, procedures, decision relating to funds
comes under the purview of the F.M. since every activity in the business, organization, be it
purchases, production marketing or capital expenditure has a financial implication, the
finance function is interlinked with all other areas. In particular, the F.M has to focus his
attention on:
►Procurement the required quantum of funds as and when necessary, at the lowest cost.

➤Investing those funds in various assets in the most profitable way, and

►Distribute returns to the shareholders in order to satisfy their expectations from the firm.

►The FM is usually faces with the following distinct scenario

► What should be the size of a firm and how fast should it grow?

► What are the various types of assets to be acquired? (Investment decision)

► What should be the pattern of raising funds from various sources? (Financing don
FUNCTIONS OF FINANCE:

The important functions of the finance are.

Investment decision: This relates to the section of assets in which funds will be invested by a
firm. The assets selection decision of firm is of two types.

Capital budgeting: It is long-term investment decision, involving long-term assets, which

will yield a return over a period of time in future.

Working capital management: It is a short term invested decision involving short term of
current assets, in the normal cause of business these short-term current assets convertible into
cash, within a year.

Financing decision: The second major decision involving in financial management is

the financing decision. It is concerned with the financing capital structure or leverage.
The financing decision covers to inter-related aspects.
Capital structure and capital structure decision.
Finance is an important function of any business as money is required to meet various
activities of it. It has given birth to "financial management" as a separate subject. The
subject is of recent origin. It draws heavily on "economics" for its theoretical
concepts. The scope of financial management is now very wide and it is not merely
restricted to rising of capital. It also covers other aspects of financing such as
assessing the needs of capital, rising sufficient amount of funds, cost of financing,
budgeting, maintaining liquidity, lending and borrowing policies, dividend policy, and
so on.
Finance is considered to be the life-blood of any business. It is defined as the
provision of money at the time it is needed. All the plans of a business may remain a
mere dream unless adequate money is available to convert plans to reality. Financial
management refers to the part of managerial activity which is considered with
procurement and utilization of funds for business purposes.

Financial management occupies a significant place because it has an impact on all the
activities of a firm. It is primary responsibility is to discharge the finance function
successfully thus financial management is an appendage of the finance function. No
one can think of any business activity is isolation from its financial implication. The
management may accept or reject a business proposition on the basis of its financial
availabilities. In other words, the executives who are directly involved in the decision-
making process should give supreme importance to financial considerations.

Dividend Decision: Earning profit or a positive return is a common aim of all the
businesses. But the key function a financial manger performs in case of profitability is
to decide whether to distribute all the profits to the shareholder or retain all the profits
or distribute part of the profits to the shareholder and retain the other half in the
business. It's the financial manager's responsibility to decide a optimum dividend
policy which maximizes the market value of the firm. Hence an optimum dividend
payout ratio is calculated. It is a common practice to pay regular dividends in case of
profitability another way is to issue bonus shares to existing shareholders.
Liquidity Decision: It is very important to maintain a liquidity position of a firm to
avoid insolvency .Firm's profitability, liquidity and risk all are associated with the
investment in current assets. In order to maintain a trade-off between profitability and
liquidity it is important to invest sufficient funds in current assets. But since current
assets do not earn anything for business therefore a proper calculation must be done
before investing in current assets. Current assets should properly be valued and
disposed of from time to time once they become non profitable. Currents assets must
be used in times of liquidity problems and times of insolvency.

INTRODUCTION TO MUTUAL FUNDS

There are a lot of investment avenues available today in the financial market for an
investor with an investable surplus. He can invest in Bank Deposits, Corporate
Debentures, and Bonds where there is low risk but low return. He may invest in Stock
of companies where the risk is high and the returns are also proportionately high. The
recent trends in the Stock Market have shown that an average retail investor always
lost with periodic bearish tends. People began

opting for portfolio managers with expertise in stock markets who would invest on
their behalf. Thus, we had wealth management services provided by many institutions.
However, they proved too costly for a small investor. These investors have found a
good shelter with the mutual funds.

Mutual fund industry has seen a lot of changes in past few years with multinational
companies coming into the country, bringing in their professional expertise in
managing funds worldwide. In the past few months there has been a consolidation
phase going on in the mutual fund industry in India. Now investors have a wide range
of Schemes to choose from depending on their individual profiles.

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money collected & invested by the fund manager in
different types of securities depending upon the objective of the scheme. These could
range from shares to debentures to money market instruments. The income earned
through these investments and its unit holders in proportion, to the number of units
owned by them (pro rata) shares the capital appreciation realized by the scheme. Thus,
a Mutual Fund is the most suitable investment for the common person as it offers an
opportunity to invest in a diversified, professionally managed portfolio at a relatively
low cost. Anybody with an investible surplus of as little as a few thousand rupees can
invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective
and strategy

My study gives an overview of mutual funds-definition, types, benefits, risks,

limitations, history of mutual funds in India, latest trends, global scenarios. I have
analyzed a few prominent mutual funds schemes and have given my findings.

A mutual fund is a financial intermediary that pools the savings of investors for
collective investment in a diversified portfolio of securities. A fund is "mutual" as all
of its returns, minus its expenses, are shared by the fund's investors. The Securities
and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a mutual fund
as a 'a fund established in the form of a trust to raise money through the sale of units
to the public or a section of the public under one or more schemes for investing
insecurities, including money market instruments".

According to the above definition, a mutual fund in India can raise resources through
sale of units to the public. It can be set up in the form of a Trust under the Indian Trust
Act. The definition has been further extended by allowing mutual funds to diversify
their activities in the following areas:

1. Portfolio management services

2. Management of off shore funds

3. Providing advice to offshore funds

4. Management of pension or provident funds

5. Management of venture capital funds.

6. Management of money market funds
7. Management of real estate funds

A mutual fund serves as a link between the investor and the securities market by
mobilizing savings from the investors and investing them in the securities
market to generate returns. Thus, a mutual fund is akin to portfolio management
services (PMS). Although, both are conceptually same, they are different from
each other. Portfolio management services are offered to high-net-worth
individuals, taking into account their risk profile, their investments are managed
separately. In the case of mutual funds, savings of small investors are pooled
under a scheme and the returns are distributed in the same proportion in which
the investments are made by the investors/unit-holders. Mutual fund is a
collective savings scheme. Mutual funds play an important role in mobilizing
the savings of small investors and channelizing the same for productive
ventures in the Indian.

An overview on MUTUAL FUNDS:

A mutual fund is a type of financial intermediary that pools the funds of investors who
seek the same general investment objective and invests them in number different types
of financial claims (e.g., equity shares, bonds, money market instruments). These
pooled funds provide thousands of investors with proportional ownership of
diversified portfolios managed by professional investment managers. The term mutual
is used in the sense that all its returns, minus is expenses are shared by the fund's unit
holder. Mutual funds are money-managing institutions set up to professionally invest
the money pooled in from the public. These schemes are managed by Asset
Management Companies (AMC), which are sponsored by share of investors in the
respective fund and its appreciation is judged by the Net Asset Value (NAV) of the
scheme.

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

THE SECURITY AND EXCHANGE BOARD OF INDIA (Mutual Funds)

REGULATIONS, 1996 defines a mutual fund as a "a fund establishment in the form
of a trust to raise money through the sale of units to the public or a section of the
public under one or more schemes for investing in securities, including money market
instruments."

Mutual Funds have been a significant source of investment in both government and
corporate securities. It has been for the decades the monopoly of the state with UTI
being the key player with invested funds exceeding Rs. 300 bn. (US$10 bn.). The stat
owned insurance companies also hold a portfolio of stocks. Presently, numerous
mutual funds exist,

including private and foreign companies. Banks mainly state owned too have
established Mutual Funds (MFs). Foreign participation in mutual funds and asset
management companies permitted on a case-by-case basis. The method of investing in
mutual funds can be shown in the form of the following:

Concept of mutual fund

Many investors with common financial objectives pool

their money

Investors, on a proportionate basis, get mutual fund units for the sum contributed to
the pool

Investors, on a proportionate basis, get mutual fund units for the sum contributed to
the pool

The money collected from investors is invested into shares, debentures and other
securities by the fund manager

The fund manager realizes gains or losses, and collects dividend or interest income

Any capital gains or losses from such investments are passed on to the investor in
proportion of the number of units held by them

HOW TO INVEST IN MUTUAL FUNDS:

STEP-1 Identify your investments need:

Your financial goals will vary, based on your age, lifestyle, financial independence,
family communications and level of income and expenses among many other factors.
Therefore, the first step is to assess your needs. You can begin by defining your needs
and investment objective such as buying a house, financing a weeding or educating
your children etc....

STEP-2 Choose the right mutual fund:

The important thing is choosing the right mutual fund scheme which suits your
requirements. The document of the scheme tells you its objective and provides
supplementary details like the track record of other schemes managed by the same
fund manager. Some factors to evaluate before choosing a particular mutual fund is
the track record of the performance of the fund in relation to the appropriate yardstick
and similar funds in the same category.

STEP-3 Select the ideal mix of schemes:

Investing in just one mutual fund scheme may not meet all your investment needs. So
you may consider investing in a combination of scheme to your specific goals

STEP-4 Invest regularly

The best approach is to invest a fixed amount at specific intervals, say every month.
By investing a fixed sum each month, you buy fewer units when the price is higher
and more units when the price is low. So you can also avail the systematic investment
plan facility offered by many open-ended funds.

STEP-5 Start early

It is desirable to start investing early and stick to a regular investment plan. If you start
now, you will make more than if you wait and invest later. The power of compounding
lets you earn income on income and your money multiples at a compounded rate of
return.

DEFINITIONS:

"Mutual fund is a non-depository, non-banking financial intermediary, which acts as

an important vehicle for bringing wealth holders and deficit units together indirectly"

Pierce. James

Mutual fund is a corporation, which accepts money from the investors and uses the
same to buy the stock, long-term bonds, and short-term debt instruments issued by
issuers"

Weston J. Fred & Brigham

"Mutual fund means fund established in the form of a trust to raise money through the
sale of units to the public under one or more schemes for investing in the securities
including money market instruments".

CHARACTERISTICS:

As per the SEBI Regulations. The following are the characteristics of mutual funds.

a) A mutual fund actually belongs to the investors who have pooled their funds. The
ownership of the mutual fund is in the hands of the investors.
b) A mutual fund is managed by investment professionals and other service providers,
who earn a fee for their services, from the fund. The pool of funds is invested in a
portfolio of marketable investments. The value of the portfolio is up dated every day.
c) The investors share in the fund is denominated by "units". The value of the units
changes with change in the portfolio's value every day. The value of one unit of
investment is called as NET ASSET VALUE (NAV).

One can make money from a mutual fund in three ways

1) Income is earned from dividends on stocks and interest on bonds. A Mutual fund
pays out nearly all income it receives over the year to fund owners in the form of
distribution.

2) If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also on these gains to investors in the form of dividends.

3) If fund holdings increase in price but are not sold by the manager, the fund's share
increase in price. You can them sell your mutual fund units for a profit funds will
also usually give you a choice either to receive cheque for dividends or to reinvest the
same and get more units.

MUTUAL FUND OPERATIONAL FLOWCHART:

 INVESTOR FUND
HOUSE

RETURNS
FUND
INVESTMENT
SECURITIES
BASED ON
COMMON
FINANCIAL
GOAL

This operational flow chart of mutual funds explains the process of investing to
attaining results from mutual funds. Since the stated investment objectives of a mutual
fund scheme generally form the basis for an investor's decision to contribute money to
the pool, a mutual fund can not deviate from its stated objectives at any point of time.

MUTUAL FUND STRUCTURE:

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) as a fund
established in the form of a trust by a sponsor to raise monies by the Trustees through
the sale of units to the public under one or more schemes for investing in securities in
accordance with these regulations.

These regulations have since been replaced by the SEBI (Mutual Funds) Regulations,
1996.The structure indicated by the new regulations is indicated as under.
A mutual fund comprises four separate entities, namely sponsor, mutual fund trust,
AMC and custodian. The sponsor establishes the mutual fund and gets it registered
with SEBI

The mutual fund needs to be constituted in the form of a trust and the instrument of
the trust should be in the form of a deed registered under the provisions of the Indian
Registration Act, 1908.

SEBI

SPONSOR
TRUSTEE

OPERATIONS

AMC

FUND MANAGER

MKT./SALES
MUTUAL FUND
MKT./SALES

SCHEMES
DISTRIBUTOR

INVESTOR
Sponsor is the person who acting alone or in combination with another body corporate
establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the
Investment Managed and meet the eligibility criteria prescribed under the Securities
and Exchange Board of India (Mutual Funds) Regulations, 1996. The Sponsor is not
responsible or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.

Trust:

The Mutual Fund is constituted as a trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. Its deed is registered under the Indian
Registration Act, 1908.

Trustee:

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

individuals). The main responsibility of the Trustee is to safeguard the interest of the
unit holders and inter alia ensure that the AMC functions in the interest of investors
and in accordance with the Securities and Exchange Board of India (Mutual Funds)
Regulations, 1996, the provisions of the Trust Deed and the Offer Documents of the
respective Schemes. At least 2/3rd directors Of the Trustee are independent directors
who are not associated with the Sponsor in any manner Asset

Management Company:

independent directors who are not associated with the Sponsor in any manner. The
AMC must have a net worth of at least 10 crores at all times.

Registrar or Transfer agent:

The AMC if so, authorized by the Trust Deed appoints the Registrar and Transfer
Agent to the Mutual Fund. The Registrar processes the application form; redemption
requests and dispatches account statements to the unit holders. The Registrar and
Transfer agent also handles communications with investors and updates investor
records.
RISK FACTORS OF INVESTING IN A MUTUAL FUND SCHEME: -

The risk factor of investing in a mutual fund can be categorized in to two as follows:

1) Standard risk factors

2) Scheme specific risk factors

1. Standard risk factors:

The standard risk factors are the one, which are common for any kind of mutual fund
scheme.

They are uniformly applicable for any mutual fund scheme. The following are few of
the standard risk factors:

1. Mutual funds and securities investments are subject to market risks and there is no
assurance or guarantee that the objective of the mutual fund will be achieved.

2. As with any investment in securities, the Net Asset Value (NAV) of the units issued
under the scheme can go up or down depending on the factors and forces affecting the
capital/debt markets.

3. Past performance of the sponsors the asset management company/mutual fund does
not indicate the future performance of the scheme of the mutual fund.

4. Abed mutual fund is the name of the scheme and in any manner does not indicate
either the quality of the scheme or its future prospects and returns.

5. The sponsor is not responsible or liable for any loss resulting from the operation of
the scheme beyond the initial contribution of Rs 1,00,000/-made by it towards setting
up the fund.
6. There is no guarantee or assurance on the frequency or quantum of dividends
although there is every intention to declare dividends in dividend plan.

7. Investors in the schemes are not being offered any guaranteed/assured

returns.

2. Scheme specific risk factors:

Scheme specific risk factors are those factors, which are applicable to a
particular scheme it might arise because of a specific nature of the scheme.

►Trading volumes and settlements periods may restrict in equity and debt
investments.

► Investments in debt are subject to price, credit and interest rate risk.

The NAV of the scheme may be affected inter alia, by changes in the market
conditions. interest rates trading volumes settlement periods and transfer
procedures.

The liquidity of the scheme's investments may be inherently restricted by

trading volumes settlement periods and transfer procedures. In the event of an
inordinately large number of redemption request or of a restructuring of the
scheme's investment portfolio, these periods may become significant. Please
read the sections of this offer document entitled special considerations "and"
"Right to limit redemptions".

What is risk in mutual funds investment?

Risk can be understood in mutual fund investment in two ways:

1. The investor expects a certain percentage of return from the fund.

2. Known as market risk.

COMMON MEASURES OF RISK OF A MUTUAL FUND INVESTMENT

Common measures areas follow:

1. Standard deviation

2. Beta

Standard deviation: Standard deviation is a measure of total risk of a fund. In

other words, it measures the volatility of returns of a fund it indicates the
tendency of the funds NAV to rise and fall in a short period it measure the
extent to which the NAV fluctuates as compared to the average returns during a
period a fund that has a consistent four-year return of 3%, for example would
have a mean or a average, of 3% this SD for this fund would then be zero
because the fund returns in any given year does not differ from its four year
mean of 3% on the other hand a fund that in each of the last four years returned-
5%, 17%, 2% and 30% will have a mean return of 11% the fund will also
exhibit a high SD because each year the return of the fund.

differs from the mean return this fund is therefore riskier because it fluctuates
widely between negative and positive returns with in a short period.

A higher standard deviation means that the returns of the fund have been more
volatile than a fund having low standard deviation in other words high standard
deviation mean high risk.
Beta: Beta determines the volatility or risk of a fund in comparison to that of its
index or benchmark fund with a beta very close to I means the fund
performance closely matches the index or bench mark a beta greater than 1
indicates greater volatility than the overall market a beta less than 1 indicates
less volatility than the bench mark.

METHODS OF RISK MEASUREMENT

In the risk measurement mainly three points are there:

1) Subjective estimates

2) Standard deviation

3) Co-efficient of variation.

1. Subjective estimates:
Some times as a rule of thumb qualitative rather than quantitative, estimates
may be made as measures of risks expressions such as low, moderate, or high
risk may be used in different situations when variability of returns will not be
wide it may be called low level of risk when forecast returns are liable to say
widely it may represent high level and variability of returns is likely to be a
moderate nature, the investment may be said to involve moderate risk only this
method of risk evaluation has its own limitations

2. Standard deviation:
This represents the variability of forecast returns when such returns approximate
a normal probability distribution. Standard deviation is generally regarding as
one of the best measures of variability or dispersion because it has certain
desirable properties the greater the value of standard deviation the greater would
be the risk and vice versa. Standard Deviation is a measure of how much the
actual performance of a fund over a period of time deviates from the average
performance.
Since Standard Deviation isa measure of risk, a low Standard Deviation is good.

A=V variance-VE (X-Bar)

(X-Bar)/N

(0)

3. Co-efficient of variation:

Cv is relative measure of dispersion which measures the risk per unit of return it
is calculated as the standard deviation divided by the expected return

Cv = στ/R bar

MEASURING OF RETURN

The return should be calculated in two types:

a) Historical return

b) Expected rate of return

a) Historical return:

The following formula can be used to calculate the historical return

R=[C+(PE-PB)]/PB

where R total return over the period

C-cash payment received during the period

PE-ending price of the investment

PB-beginning price

b) Expected rate of return:

The following formula can be used to calculate the expected rate of return E (R)
ERIPI were

E(R) expected return from stock Ri return from stock under state

Pi probability that the state occurs

N-number of possible states of the world

MEASURES OF CALCULATING INVESTMENT RETURNS:

1. Percentage change in NAV method:

As the name suggests, in this method only change in the NAV over a period is
calculated and expressed. This method is used to calculate the Ri values, which
are used in the data analysis process

The following formula can be used to calculate the return under this method:

(Absolute change in NAV/NAV at the beginning) 100

Example: -NAV of a scheme of 1st Jan 2006 is Rs. 12 NAV

of the scheme on 31st Jan 2006 is Rs. 15

Absolute change in NAV-NAV-initial NAV

-15-12-3

Therefore, percentage return absolute change in NAV/initial NAV 100

=3/12*100

-25%

In percentage change in NAV method some advantages and disadvantages.

Advantage:
1) It is very simple to use.

2) Quite useful and easy to calculate returns for growth option investors.

Disadvantage:

1) Does not given an indication of long term returns

2) May not provide returns on compounded basis

3) It does not consider dividend therefore cannot be used to calculate returns of

investors who have chosen the dividend payout and the dividend reinvestment
option.

2. Simple total return method:

In this method both dividend and change in NAV is added to get the returns of
the investor, In other words:

Absolute returns dividend + change in NAV

Returns returns/initial NAV* 100

Example: - NAV of a scheme of 1 Jan 2006 is Rs. 12.

Scheme gives a dividend of 10% (mutual fund always taken as Rs. 10)
The return in rupee is dividend + change in NAV=-1+3 Therefore percentage
return

absolute change in NAV/initial NAV 100 4/12 100

-4/12*100

-33.33

Therefore, annualized returns-absolute returns/number of months 12

33.33%/6*12

=66.67%

3. Return on investment method or ROI method:

In this method it is assumed that the dividend is again re invested in the same
scheme at the dividend NAV and the return are calculated accordingly

Recall that after dividend is announced by a mutual fund scheme its NAV is
reduced by the amount of dividend and dividend distribution tax if any. This
reduced NAV is known as Return(absolute)

-final value of investment opening value of investment Where, final value of

investment-final units closing NAV
Where final units initial units + new units obtained on reinvestment
Where new units received on reinvestment dividend/ex dividend NAV
Compounded annual growth rate (CAGR):

This can be calculated by using the following formula

CAGR-[(A/P)1/n]-1

Were

A- Final amount

P-Initial amount

N-Initial amount

ex-dividend NAV or post dividend NAV.

SEBI REGULATIONS REGARDING CALCULATION AND PUBLICATION

OF RETURNS BY MUTUAL FUND:

In order to ensure uniformity and comparability across funds, SEBI has stipulated
some norms for return data that is published by mutual funds. These are measures like
annual dividend on face value annual yield on purchase price, and annual
compounded rate of return.

For return of periods less than a year return can be shown only on absolute basis the
returns cannot be annualized. However, a liquid fund can annualize returns provided
the returns are not misleading.

For returns of periods more than year CAGR has to be used.

 CHAPTER-II
OBJECTIVES
RESEARCH
METHODOLOGY

NEED FOR THE STUDY

1. The main purpose of doing this project was to know about mutual fund and
its functioning.

2. This helps to know in details about mutual fund industry right from its
inception stage, growth and future prospects.

3. It also helps in understanding different schemes of mutual funds. Because my

study depends upon prominent funds in India and their schemes like equity,
income, balance as well as the returns associated with those schemes.

4. The project study was done to ascertain the asset allocation, entry load, exit
load, associated with the mutual funds. Ultimately this would help in
understanding the benefits of mutual funds to investors.

OBJECTIVES OF THE STUDY

The following are the objectives of the study:

1. To understand various types of mutual funds offered by the HDFC Mutual

Funds.

2. To compare the returns of a particular fund with the other funds.

3. To analysis and evaluate the performance of funds based on past data and
rank them.

5. To understand the recent trends in Mutual Funds,

6. To know different types of schemes available.

METHODOLOGY OF THE STUDY:

The collection of data refers to gathering the information relevant to subject

matter of study... The method of collecting the data depends mainly on the
objectives, scope on one hand and resources available and time on other hand.
Mainly the data is being collected as follows.

Mainly the data is collected from

1) Primary data

2) Secondary data

Primary data:

Primary data are obtained by a study specifically designed to fulfil the data
needs of the problem at hand. Such data are original in character and are
generated in large number of survey conducted mostly by government and also
by some individuals, institutions and research bodies.

The primary data is collected through direct interaction with the managers and
staff members of HDFC Mutual Fund.

Secondary data:
Secondary data are those already in existence for some other purpose than the
answering of the question in hand. This type of data is generally taken from
newspapers, magazines, bulletins. reports, journal sets

The secondary data is collected from the following sources. They are

Websites
Fact Sheets
Company Boucher's
Text Books

SCOPE OF THE STUDY:

The scope of study is to evaluate the performance of HDFC Mutual Funds, as
mutual funds are one of the types of investments. In mutual funds they can
purchase and redeem at any time. But most of the people are not aware of
mutual funds. Nowadays a greater number of employees and business men are
having knowledge about mutual funds when compared to others. As the mutual
fund industry is the growing investment sector, many investors are trying to
shift their investment plans into mutual funds. Even though there is a risk in
investing in mutual funds many of them have interest to invest in mutual funds
due to its high returns.

LIMITATIONS OF THE STUDY

The following are the limitations of the study:

1. The study is based only on selected funds; it is not extensive.

2. As the study period if limited it cannot be conducted intensively.

3. The study is depending on secondary data i.e, gathered the data from various
websites and factsheets.

4. As the study is based on three years data only, entire findings cannot be
generalized.

5. It is very difficult to understand the market trends.

 CHAPTER - III
INDUSTRY PROFILE&
COMPANY PROFILE

INDUSTRY PROFILE

A Mutual Fund is a trust that pools the savings of a number of investors who
share a common financial goal. The money thus collected is invested by the
fund manager in different types of securities depending upon the objective of
the scheme. These could range from shares to debentures to money market
instruments. The income earned through these investments and the capital
appreciation realized by the scheme is shared by its unit holders in proportion to
the number of units owned by them (pro rata).

Thus, a Mutual Fund is the most suitable investment for the common man as it
offers an opportunity to invest in a diversified, professionally managed portfolio
at a relatively low cost. Anybody with an inventible surplus of as little as a few
thousand rupees can invest in Mutual Funds.

Each Mutual Fund scheme has a defined investment objective and strategy. A
mutual fund is the ideal investment vehicle for today's complex and modern
financial scenario. Markets for equity shares, bonds and other fixed income
instruments, real estate, derivatives and other assets have become mature and
information driven. Price changes in these assets are driven by global events.
occurring in faraway places. A typical individual is unlikely to have the
knowledge, skills, inclination and time to keep track of events, understand their
implications and act speedily. An individual also finds it difficult to keep track
of ownership of his assets. investments, brokerage dues and bank transactions
etc. A mutual fund is the answer to all these situations. It appoints.
professionally qualified and experienced staff that manages each of these
functions on a full-time basis. The following are the phases which explain the
mutual fund industry from its beginning stage to till now. It also says about the
growth in the industry.

THE EVOLUTION:

The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India. The history of mutual fund industry in India can
be better understood divided into following phases:

PHASE. 1 Establishment and Growth of Unit Trust of India-1964-1987

Unit Trust of India enjoyed complete monopoly when it was established in the year
1963 by an act of Parliament. UTI was set up by the Reserve Bank of India and it
continued to operate under the regulatory control of the RBI until the two were DE-
linked in 1978 and the entire control was transferred in the hands of Industrial
Development Bank of India (IDBI). UTI launched its first scheme in 1964, named as
Unit Scheme 1964 (US-64), which attracted the largest number of investors in any
single investment scheme over the years.

UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981 to 1984
Children's Gift Growth Fund and India Fund (India's first offshore fund) in 1986,
Master share (India's first equity diversified scheme) in 1987 and Monthly Income
Schemes (offering assured returns) during 1990s. By the end of 1987, UTT's assets
under management grew ten times to Rs 6700 crore.

PHASE 2 Entry of Public Sector Funds-1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State
Bank of India became the first non-UTI mutual fund in India. SBI Mutual Fund was
later followed by Can bank Mutual Fund, LIC Mutual Fund. Indian Bank Mutual
Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993,
the assets under management of the industry increased seven times to Rs. 47,004
crores. However, UTI remained to be the leader with about 80% market share.
1992-93 Amount Asset under Mobilization as %
mobilized management Gross domestic
savings

UTI 11.057 38.247 5.2%

 Public sector 1.964 8.757 0.9%
total 13.021 47.004 6.1%

PHASE.3 Emergence of Private Sector Funds-1993-1996

The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to
enter the mutual fund industry in 1993, provided a wide range of choice to investors
and more competition in the industry. Private funds introduced innovative products,
investment techniques and investor-servicing technology. By 1994-95, about 11
private sector funds had launched their schemes.

PHASE.4 Growth and SEBI Regulation-1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the
SEBI after the year 1996. The mobilization of funds and the number of players
operating in the industry reached new heights as investors started showing more
interest in mutual funds. Investors' interests were safeguarded by SEBI and the
Government offered tax benefits to the investors in order to encourage them. SEBI
(Mutual Funds) Regulations, 1996 was introduced by SEBI that set uniform standards
for all mutual funds in India. The Union Budget in 1999 exempted all dividend
incomes in the hands of investors from income tax. Various Investor Awareness
programs were launched during this phase, both by SEBI and AMFI, with an objective
to educate investors and make them informed about the mutual fund industry.

In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this
was to bring all mutual fund players on the same level. UTI was re-organized into two
parts:
The Specified Undertaking:

►The UTI Mutual Fund. Presently Unit Trust of India operates under the name of
UTI Mutual Fund and its past schemes (like US-64, Assured Return Schemes) are
being gradually wound up. However, UTI Mutual Fund is still the largest player in the
industry. In 1999, there was a significant growth in mobilization of funds from
investors and assets under management which is supported by the following data:

BASICS OF MUTUALFUNDS

The information mentioned below, is for the investors who have not yet started
investing in mutual funds, but willing to explore the opportunity and also for those
who want to clear their basics for what is mutual fund and how best it can serve as an
investment tool.

Getting Started

Before we move further, it's very important to know the area in which mutual funds.
works, the basic understanding of stocks and bonds.

Stocks

Stocks represent shares of ownership in a public company. Examples of public

companies include HDFC, ONGC and Infosys. Stocks are considered to be the most
common owned investment traded on the market.

Bonds

Bonds are basically the money which you lend to the government or a company, and
in
return you can receive interest on your invested amount, which is back over
predetermined amounts of time. Bonds are considered to be the most common
lending investment traded on the market. There are many other types of
investments other than stocks and bonds (including annuities, real estate, and
precious metals), but the majority of mutual funds invest in stocks and/or bonds.

REGULATORY AUTHORITIES:

To protect the interest of the investors, SEBI formulates policies and regulates
the mutual funds. It notified regulations in 1993 (fully revised in 1996) and
issues guidelines from time to time. MF either promoted by public or by private
sector entities including one promoted by foreign entities is governed by these
Regulations.

SEBI approved Asset Management Company (AMC) manages the funds by

making investments in various types of securities. Custodian, registered with
SEBI, holds the securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company
or board of trustees must be independent. The Association of Mutual Funds in
India (AMFI) reassures the investors in units of mutual funds that the mutual
funds function within the strict regulatory framework. Its objective is to increase
public awareness of the mutual fund industry.

AMFI also is engaged in upgrading professional standards and in promoting

best industry practices in diverse areas such as valuation, disclosure,
transparency etc.....

TYPES OF MUTUAL FUND;

Wide variety of mutual fund schemes exist to enter to the needs such as
financial position risk, tolerance and return expectation etc. The table below
gives an overview into existing types of schemes in the industry.

SCHEMES OF MUTUAL FUNDS:

Based on Based on Based on Based on

Open Ended Scheme: The units offered by these schemes are available for sale and

repurchase on any business day at NAV based prices. Hence, the unit capital of the
schemes keeps changing each day. Such schemes thus offer very high liquidity to
investors and are becoming increasingly popular in India. Please note that an open-
ended fund is NOT obliged to keep selling/issuing new units at all times, and may stop
issuing further subscription to new investors.

Closed Ended Schemes: The unit capital of a close-ended product is fixed as it makes
a one-time sale of fixed 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 at NAV linked prices. In the interim, investors can buy or sell units on the
stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in
closed-ended schemes usually remains unchanged. After an initial closed period, the
scheme may offer direct repurchase facility to the investors. Closed- ended schemes
are usually more illiquid as compared to open-ended schemes and hence trade at a
discount to the NAV. This discount tends towards the NAV closer to the maturity date
of the scheme.
Interval Schemes: These 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
redemption during pre- determined intervals at NAV based prices.

INVESTMENT BASED CLASSIFICATION:

Equity Fund Scheme: A kind of mutual fund whose strength is derived from equity
based investments is called 'equity fund scheme. They carry a high degree of risk.
Such funds do well in periods of favorable capital market trends. A variation of the
equity fund schemes is the 'index fund' or 'never beat market fund" which are involved
in transacting only those scripts which are included in any specific index e.g. the
scripts which constituted the BSE-30 Sensex or 100 shares National index. These
funds involve low transaction cost.

Bond Fund Scheme: it is a type of mutual fund whose strength is derived from bond
based investments. The portfolio of such funds comprises bonds, debenture etc. this
type of fund carries the advantage of secured & steady income. However, such funds
have little or no chance of capital appreciation, & carry low risk. A variant of this type
of fund is called 'Liquid Funds." This specializes in investing in short term money
market instruments. This focus on liquidity delivers the twin features of lower risks &
low returns. Balanced Fund Scheme: a scheme of mutual fund that has a mix of debt
& equity in the portfolio of investment may be referred to as a "Balanced Fund
Scheme. The portfolio of such funds will be often shifted between debt & equity,
depending upon the prevailing market trends.

Sectoral Fund Schemes: when the managers of mutual fund invest the collected from a
wide variety of small investors directly in various specific sectors may include gold &
silver, real estate, specific industry such as oil & gas companies, offshore investments,
etc.

Fund-Of-Fund Scheme: There can also be funds of funds, where funds of one mutual
fund invested in the units of other mutual funds. There are a number of funds that
direct investment into a specified sector of the economy. This makes diversified & yet
intensive investment of funds possible.

MARKET BASED CLASSIFICATION:

Stock Funds: Stock funds are the most common type of mutual fund and they invest
exclusively in common and preferred stocks. They are the most volatile type of mutual
fund. This category includes many different types of funds, which are designed for
investors with various objectives. Typical stock funds include growth funds that seek
capital appreciation through companies that are likely to experience significant
growth, value funds that look for companies whose stock maybe undervalued, and
balanced funds that seek a combination of the two. Other popular types include sector
funds that invest in particular industries, and index funds that seek to mimic the
performance of a particular index like the Dow Jones Industrial Average or the
Standard & Poor's 500, by investing in all the stocks in one of those indexes.

Money Market Schemes: These 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 of their investments in money market instrument with short-term
maturities. These schemes have become popular with institutional investors and high
net worth individuals having short-term surplus funds.

Load vs. No-load: Some stock and bond funds have a sales charge (or load) that the
investor must pay to buy shares in the fund. This charge is deducted from both the
initial and any subsequent purchases that the investor makes in the fund and reduces
the value of her investment. Typical load charges range from I percent to 3 percent of
the amount invested. Load funds tend to be specialized, such as sector funds, but also
may be funds run by a successful or popular fund manager. By contrast, no-load funds
have no sales charge and the full amount invested is used to purchase shares.

RETURN BASED CLASSIFICATION:

Income Fund Scheme: The scheme that is tailored to suit the needs of investors who
are

particular about regular returns is known as 'income fund scheme. The scheme offers
the maximum current income, whereby the income earned by units is distributed
periodically. Such funds are offered in two forms, the first scheme earns a target
constant income at relatively low risk, while the second scheme offers the maximum
possible income. This obviously implies that the higher expected return comes with a
higher potential risk of the investment.

Growth Fund Scheme: it is a mutual fund scheme that offers the advantage of capital

appreciation of the underlying investment. For such funds, investment is made in

growth-oriented securities that are capable of appreciating in the long run. Growth
funds are also known as nest eggs or long-haul investment. In proportion to such
capital appreciation, the amount of risk to be assumed would be far greater.

TYPES OF RETURNS:

There are three ways, where the total returns provided by mutual funds can be enjoyed
by investor:

1. Income is earned from dividends on stocks and interest on bonds. A fund pays out
nearly all income it receives over the year to fund owners in the formula distribution.
2. If the fund sells securities that have increased in price, the fund has a capital gain.
Most funds also pass on these gains to investors in a distribution.
3.If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit. Funds
will also usually give you a choice either to receive a check for distributions or to
reinvest the earnings and get more shares.

PROS & CONS OF INVESTINGIN MUTUAL FUNDS:

For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund. The advantages and disadvantages are as follows.

ADVANTAGES OF MUTUAL FUNDS:

Affordability diversification

ADVANTAGES OF MUTUAL FUNDS

regulator variety

tax benefit professional management

There are numerous benefits of investing in mutual funds and one of the key reasons
for its phenomenal success in the developed markets like US and UK is the range of
benefits they offer, which are unmatched by most other investment avenues. The
benefits have been broadly split into universal benefits, applicable to all schemes and
specifically to open-ended schemes.

Affordability:

A mutual fund invests in a portfolio of assets, i.e. Bonds, shares, etc. Depending upon
the investment objective of the scheme, an investor can buy in to a portfolio of
equities, which would otherwise be extremely expensive. Each unit holder thus gets an
exposure to such portfolios with an investment as modest as Rs. 500/-. This amount
today would get you less than quarter of an Infosys share! Thus it would be affordable
for an investor to build a portfolio of investments through a mutual fund rather than
investing directly in the stock market.

Diversification:

It simply means that 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 add to the stability of your returns, for example during one period
of time equities might underperform but bonds and money market instruments might
do well enough to offset the effect of a slump in the equity markets. Similarly, the
information technology sector might be faring poorly but the auto and textile sectors
might do well and may protect your principal investment as well as help you meet
your return objective.

Variety:
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two
ways:
first, it offers different types of schemes to investors with different needs and risk
appetites: secondly, it offers an opportunity to an investor to invest sums across a
variety of schemes, both debt and equity. For example, an investor can invest his
money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending
on his risk appetite and thus create a balanced portfolio easily or simply just buy a
Balanced Scheme.
Professional Management:
Qualified investment professionals who seek to maximize returns and minimize risk
monitor investor's money. When you buy into a mutual fund, you are handling your
money to an investment professional that has experience in making investment
decisions. It is the Fund Manager's job to (a) find the best securities for the fund,
given the fund's stated investment objectives; and (b) keep track of investments and
changes in market conditions and adjust the mix of the portfolio, as and when
required.

Tax Benefits:
Any income distributed after March 31, 2002 will be subject to tax in the assessment
of all Unit holders. However, as a measure of concession to Unit holders of open-
ended equity-oriented funds, income distributions for the year ending March 31, 2003,
will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu
Undivided Families a deduction up to Rs. 9,000 from the Total Income will be
admissible in respect of income from investments specified in Section 80L, including
income from Units of the Mutual Fund. Units of the schemes are not subject to
Wealth-Tax and Gift-Tax

Regulations:
Securities Exchange Board of India ("SEBI"), the mutual funds regulator has clearly
defined rules, which govern mutual funds. These rules relate to the formation,
administration and management of mutual funds and also prescribe disclosure and
accounting requirements. Such a high level of regulation seeks to protect the interest
of investors.

Liquidity: In open-ended mutual funds, you can redeem all or part of your units any
time you wish. A peculiar advantage of a mutual fund is that investment made in its
schemes can be converted.
back in to cash promptly without heavy expenditure on brokerage, delays etc.
According to the regulations of SEBI, a mutual fund in India is required to ensure
liquidity. For open ended schemes, investors can always approach the mutual fund to
repurchase units at declared 'Net Asset Value' (NAV). In case of close ended schemes,
unit can easily be sold in the stock market.
Convenience: An investor can purchase or sell fund units directly from a fund,
through a broker or a financial planner. The investor may opt for a Systematic
Investment Plan (SIP) or a Systematic Withdrawal Advantage Plan (SWAP)

Flexibility: Mutual funds offering multiple schemes allow investors to switch easily
between various schemes. This flexibility gives the investor a convenient way to
change the mix of his portfolio over time.

Transparency: Open-ended mutual funds disclose their 'Net Asset Value' (NAV) daily
and the entire portfolio monthly. This level of transparency, where the investor himself
sees the underlying assets bought with his money, is unmatched by any other financial
instrument.

DISADVANTAGES OF MUTUAL FUNDS

Professional Management:
Some funds don't perform in the market, as their management is not dynamic enough
to explore the available opportunity in the market, thus many investors debate over
whether or not the so-called professionals are any better than mutual fund or investor
himself, for picking up stocks.

Costs:
The biggest source of AMC income is generally from the entry & exit load which they
charge from investors, at the time of purchase. The mutual fund industries are thus
charging extra cost under layers of jargon.

Dilution:
Because funds have small holdings across different companies, high returns from a
few investments often don't make much difference on the overall return. Dilution is
also the result of a successful fund getting too big. When money pours into funds that
have had strong success, the manager often has trouble finding a good investment for
all the new money.

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

Management risk:
When you invest in a mutual fund, you depend on the fund's manager to make the
right decisions regarding the fund's portfolio. If the manager does not perform as well
as you had hoped, you might not make as much money on your investment as you
expected.

MAJOR MUTUAL FUND COMPANIES IN INDIA:

RELIANCE Mutual Fund securities.

HDFC Mutual Fund (RMF) was established as trust under Indian Trusts Act, 1882.
The sponsor of RMF is HDFC Capital Limited and HDFC Capital Trustee Co.
Limited is the Trustee. It was registered on June 30, 1995 as HDFC Capital Mutual
Fund which was changed on March 11, 2004. HDFC Mutual Fund was formed for
launching of various schemes under which units are issued to the Public with a view
to contribute to the capital market and to provide investors the opportunities to make
investments in diversified

Trust of India Unit Mutual Fund:

UTI Mutual Fund
UTI Asset Management Company Private Limited, established in Jan 14, 2003,
manages the UTI Mutual Fund with the support of UTI Trustee Company Private
Limited. UTI Asset Management Company presently manages a corpus of over
Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB),
Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance
Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,
Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance
Funds.

Birla Sun Life Mutual Fund:

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan,

Birta Sun Life Mutual Fund

Indonesia and Bermuda apart from India. Birla Sun Life Mutual Fund follows a
conservative long-term approach to investment. Recently it crossed AUM of Rs.
10,000 crores.

ABN AMRO Mutual Fund:

ABN AMRO Mutual Fund was setup on April 15, 2004 with ABN AMRO Trustee
(India) Pvt. Ltd. as the Trustee Company. The AMC, ABN AMRO Asset Management
(India) Ltd. was incorporated on November 4, 2003. Deutsche Bank AG is the
custodian UTI Asset Management Company Private Limited, established in Jan 14,
2003, manages the UTI Mutual Fund with the support of UTI Trustee Company
Private Limited. UTI Asset Management Company presently manages a corpus of
over Rs.20000 Crore. The sponsors of UTI Mutual Fund are Bank of Baroda (BOB),
Punjab National Bank (PNB), State Bank of India (SBI), and Life Insurance
Corporation of India (LIC). The schemes of UTI Mutual Fund are Liquid Funds,
Income Funds, Asset Management Funds, Index Funds, Equity Funds and Balance
Funds. ABN AMRO

Birla Sun Life Mutual Fund:

Birla Sun Life Mutual Fund is the joint venture of Aditya Birla Group and Sun Life
Financial. Sun Life Financial is a global organization evolved in 1871 and is being
represented in Canada, the US, the Philippines, Japan, Indonesia and Bermuda apart
from India. Birla Sun Life Mutual Fund follows a conservative long-term approach to
investment. Recently it crossed AUM of Rs. 10,000 crores.

Birla Sun Life Mutual Fund

Bank of Baroda Mutual Fund (BOB Mutual Fund):
Bank of Baroda Mutual Fund or BOB Mutual Fund was set upon October 30, 1992
under the sponsorship of Bank of Baroda. BOB Asset Management Company Limited
is the AMC of BOB Mutual Fund and was incorporated on November 5, 1992.
Deutsche Bank AG is the custodian.

HDFC Mutual Fund:

HDFC Mutual Fund was setup on June 30, 2000 with two sponsor namely Housing
Development Finance Corporation Limited and Standard Life Investments Limited.
COMPANY PROFILE

Profile of HDFC Bank:

The Housing Development Finance Corporation Limited (HDFC) was among

the first to receive an 'in-principle' approval from the Reserve Bank of India
(RBI) to setup a bank in the private sector, as part of the Rub's liberalization of
the Indian Banking Industry in 1994. The bank was incorporated in August 1994
in the name of 'HDFC Bank Limited, with its registered office in Mumbai,
India. HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1995.

Promoter:
HDFC is India's premier housing finance company and enjoys an impeccable
track record in India as well as in international markets. Since its inception in
1977, the Corporation has maintained a consistent and healthy growth in its
operations to remain a market leader in mortgages. Its outstanding loan portfolio
covers well over a million dwelling units. HDFC has developed significant
expertise in retail mortgage loans to different market segments and also has a
large corporate client base for its housing related credit facilities. With its
experience in the financial markets, a strong market reputation, large
shareholder base and unique consumer franchise, HDFC was ideally positioned
to promote a bank in the Indian environment.

Business focus:
HDFC Bank's mission is to be a World-class Indian Bank. The Bank's aim is to
build sound customer franchise across distinct businesses so as to be the
preferred provider of banking services in the segments that the bank operates in
and to achieve healthy growth in profitability, consistent with the bank's
appetite. The bank is committed to maintain the highest level of ethical
standards, professional integrity and regulatory compliance. HDFC Bank's
business philosophy is based on four core values; operational excellence,
customer focus, product leadership and people Capital Structure:
The authorized capital of HDFC Bank is Rs 450 crore (45 billion). The paid-up capital
is Rs. 282 crores (Rs. 28.2 billion). The HDFC Group holds 24.4% of the bank's
equity while about 13.2% of the equity is held by the depositor in respect of the bank's
issue of American depository shares (ADS/ ADR Issue). The Indian private equity
fund, Mauritius (IPEF) and Indocin financial holdings Ltd... Mauritius (IFHL) (both
funds advised by j p Morgan partner, formally chase capital partners) together hold
about 5.5% of the bank's equity. Roughly 23% of the equity is held by Fills NRIs.
OCBs while the balance is widely held by about 250,000 shareholders. The shares are
listed on the depository shares are listed on the New York Exchange, Mumbai and the
National Stock Exchange. The bank's American Depository shares ate listed on the
New York Stock (NYSE) under the symbol "HDFC".

Times Bank Amalgamation:

In a milestone transaction in the Indian banking industry, Times bank Limited (another
new private sector bank promoted by Bennett, Coleman & co./Times Group) was
merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of
amalgamation approved by the shareholders of both banks and the reserve bank of
India, shareholders of tomes bank received 1 share or HDFC for every 5.75 shares of
increased branch network, expanded geographic reach, enhanced customer base,
skilled manpower and the opportunity to cross-sell and leverage alternative delivery
channels.
HDFC Bank is head quartered in Mumbai. The Bank at present has an enviable
network of over 289 branches spread over 151 cities across the country. All branches
are linked on an Distribution network:

online real-time basis. Customer in 80 locations is also serviced through phone

banking. The bank's expansion plans take into account the need to have a presence in
all major industrial and commercial centers where its corporate customers are located
as well as need to build a strong retail customer base for both deposits and loan
product.

Being a clearing/settlement bank to various leading stock exchanges, the bank has
branches in the centers were the NSE.BSE have a strong and active member base.
The bank also has a network of over 750 networked ATM s across these cities.
Moreover, HDFC Bank's ATM network can be accessed by all domestic and
international Visa/MasterCard, /maestro, plus/cirrus and American Express
Credit/charge cardholders.
Management:
Mr. Jadish Kapoor took over as the bank's chairman in July 2001. Prior to this, Mr.
Kapoor was a Deputy Governor of the reserve bank of India.
The managing Director, Mr. Aditya purl has been professional banker for over 25
years, and before joining HDFC Bank in 1994 was heading Citibank's operation in
Malaysia.
The bank's board of directors is composed of individuals with a wealth of experience
in public policy, administration, and industry and commercial banking senior
executives representing HDFC are also on the board. Senior banking professional with
substantial experience in India and abroad heads various business and functions and
report to the managing directors. Given the professional expertise of the management
team and the overall focus on recruiting and retaining the best talent in the industry,
the bank believed that its people are significant competitive strength.

Technology:
HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems. All the bank's branches have connectivity,
which enables the bank to offer speedy funds transfer facilities to its customer. Multi
branch access is also provided to retail customer through the branch network and
Vision:
To be a dominant player in the Indian mutual fund space, recognized for its high levels
of ethical and professional conduct and a commitment towards enhancing investor
interests.

Housing Development Finance Corporation Limited (HDFC):

HDFC was incorporated in 1977 as the first specialized Mortgage Company in India.
HDFC provides financial assistance to individuals, corporates and developers for the
purchase or construction of residential housing. It also provides property related
services (e.g. property identification, sales services and valuation), training and
consultancy. Of these activities, housing finance remains the dominant activity, HDFC
has a client base of around 10,00,000 borrowers, around 8,50,000 depositors, over
92,000 shareholders and 50,000 deposit agents, as at December 31, 2006. HDFC has
raised funds from international agencies such as the World Bank, IFC (Washington),
USAID, DEG, ADB and KFW, international syndicated loans, domestic term loans
from banks and insurance companies, bonds and deposits. HDFC has received the
highest rating for its bonds and deposits program for the twelfth year in succession,
HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first
life insurance company in the private sector to be granted a Certificate of Registration
(on October 23, 2000) by the Insurance Regulatory and Development Authority to
transact life insurance business in India.
The Trustee:
HDFC Trustee Company Limited, a company incorporated under the Companies Act,
1956 is the Trustee to HDFC Mutual Fund vide the Trust deed dated June 8, 2000, as a
mended from time to time. HDFC Trustee Company Ltd is wholly owned subsidiary
of HDFC
HDFC Asset Management Company Limited (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
Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June
30, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh
Marg, 169, Backpay Reclamation, Church gate, Mumbai -400020.
In terms of the Investment Management Agreement, the Trustee has appointed the
AMC to manage the Mutual Fund.
As per the terms of the Investment Management Agreement, the AMC will conduct
the operations of the Mutual Fund and manage assets of the schemes, including the
schemes. launched from time to time.
Amalgamations
In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a private sector
bank promoted by Bennett, Coleman & Co./ Times Group). With this, HDFC and
Times became the first two private banks in the New Generation Private Sector Banks
to have gone through a merger. In 2008, RBI approved the amalgamation of Centurion
Bank of Punjab with HDFC Bank. With this, the Deposits of the merged entity
became Rs. 1,22,000 crores,
while the Advances were Rs. 89,000 crore and Balance Sheet size was Rs. 1,63,000
crores. Tech-Savvy HDFC Bank has always prided itself on a highly automated
environment, be it in terms. of information technology or communication systems. All
the branches of the bank boast of online connectivity with the other, ensuring speedy
funds transfer for the clients. At the same time, the bank's branch network and
Automated Teller Machines (ATMs) allow multi-branch access to retail clients. The
bank makes use of its up-to-date technology, along with market position and expertise,
to create a competitive advantage and build market share.
Capital Structure
At present, HDFC Bank boasts of an authorized capital of Rs 550 crore (Rs5.5
billion), of this the paid-up amount is Rs 424.6 crore (Rs.4.2 billion). In terms of
equity share, the HDFC Group holds 19.4%. Foreign Institutional Investors (FIIs)
have around 28% of the equity and about 17.6% is held by the ADS Depository (in
respect of the bank's American Depository Shares (ADS) Issue). The bank has about
570,000 shareholders. Its shares find a listing on the Stock Exchange, Mumbai and
National Stock Exchange, while its American Depository Shares are listed on the New
York Stock Exchange (NYSE), under the symbol
'HDB'.
Products & Services

➤Personal Banking

►Savings Accounts

►Salary Accounts.

►Current Accounts

►Fixed Deposits

➤ Demat Account

➤Safe Deposit Lockers

➤ Loans
►Credit Cards

➤ Debit Cards

➤ Prepaid Cards

➤Investments & Insurance

>Forex Services

>Payment Services.

>Net Banking

>Insta Alerts

>Mobile Banking

Insta Query

>ATM

>Phone Banking

>NRI Banking

>Rupee Savings Accounts

>Rupee Current Accounts

>Rupee Fixed Deposits

>Foreign Currency Deposits

>Accounts for Returning Indians
>Quick rem it (North America, UK, Europe, Southeast Asia)

India Link (Middle East, Africa)

Cheque Lock Box

>Telegraphic/Wire Transfer

>Funds Transfer through Cheques/DDs/TCs

>Mutual Funds

>Private Banking

>Portfolio Investment Schemes

>Loans

)Payment Services

>Net Banking

>Insta Alerts
>Mobile Banking

Insta Query

>ATM

>Phone Banking
This above table shows the difference between the one-time investment and
systematic investment plan and here Mr. Suresh is investing 1,000 Rs every month
and Mr. Rajesh is going for one time investment of the amount 12000 Rs. From the
above table we can easily understand how SIP works in the falling market and how it
works in

the rising market and we can understand the number of units which Mr. Suresh is
getting is higher than Mr. Rajesh.

Definition in SIP

Systematic Investment Plan allows the investors to invest affixed amount of money of
every month in specifically chosen mutual funds. This helps the investor to invest
regularly and in manageable amounts.

Mr. Rajesh Naidu-Financial Express

Since the purchase is made at various point of time, investors are better protected
against price fluctuations and the volatility of the market.

Mr NirmalJain-investhubs.com
advantage of disciplined investor; investor always ask themselves the same question
that am I going to be the buyer or a seller of the stocks/ mutual funds over the next
few years. Systematic investment plan is the best scheme to invest.

CHAPTER – IV
DATA ANALYSIS
AND
INTERPRETATION
Table no 4.1. calculation of Shape ratio of HDFC Equity Fund

s.no MONTH Ri ∑ (Ri – R)2

Ri - R
1 Sep 20 0.9514 1.1354 1.2891
2 Oct 20 -7.3781 -7.1941 51.7551
3 Nov 30 -23.1770 -22.993 528.6781
4 Dec 20 -7.6368 -7.4578 55.5442
5 Jan 21 8.161 8.345 69.6390
6 Feb 21 -9.8956 -9.7116 94.3152
7 Marc 21 -1.6425 -1.4585 2.1272
8 Apr 21 10.1921 10.3761 107.6635
9 May 21 9.2581 9.4421 89.1533
10 Jun 21 22.2102 22.396 501.5808
11 Jul 21 -1.4003 -1.2163 1.4794
12 Aug 21 5.1111 5.2951 28.0381
13 Sep 21 -0.8421 -0.6581 0.4331
14 Oct 21 7.2795 7.1635 51.1316
15 Nov 21 -6.4043 -6.2203 38.6921
 16 Dec 21 7.6579 7.8419 61.4954
17 Jan 22 1.5028 1.6868 2.8453
18 Feb 22 -4.9344 -4.7504 22.5663
19 Mar 22 -1.2167 -1.0327 1.06647
20 Apr 22 1.5576 1.7416 3.0332
21 May 22 0.2394 0.4234 0.1793
22 Jun 22 -3.1223 -2.9383 8.6336
23 July 22 6.1973 6.3813 40.7210
24 Aug 22 0.7421 0.9261 0.8577
25 Sep 22 -0.8913 -0.7076 0.5007
26 Oct 22 2.7208 2.9048 8.4379
27 Nov 22 -0.7781 -0.5941 0.3530
28 Dec 22 -7.3401 -7.1561 51.2098
29 Jan 23 0.9788 1.1628 1.3498
30 Feb 23 -9.7013 -9.5173 90.5790
31 Marc 23 -4.3603 -4.1763 17.4415
32 Apr 23 4.5956 4.7796 22.8446
33 May 23 -0.5023 -0.3183 0.1013
34 Jun 23 -3.1346 -2.9506 8.7060
35 Jul 23 0.6399 0.8239 0.6788
36 Aug 23 -2.2614 -2.0774 4.3156
∑Ri= -6.6242 ∑ (Ri – R)2 =1969.4361
Average Return ():

R = ∑ Ri ÷ N
= -6.6242
= -0.1840

Standard Deviation ( ) :

√ = 1969.4361÷36 σ = √∑ (Ri – R )2 ÷N
=7.3964

Sharp Method:
 S = (Rp – Rf) ÷ σ p

= (-0.1840-0.07) ÷7.3964
=0.254÷7.3964
=-0.0343

Table No.4.2. Calculation of Sharp ratio of HDFC NRI Equity Fund

s.no MONTH Ri ∑ (Ri – R)2
Ri - R
1 Sep 20 -0.3271 -1.3802 1.9050
2 Oct 20 -9.2028 -10.2559 105.1835
3 Nov 30 -25.2196 -26.2727 690.2548
4 Dec 20 -11.0509 -12.104 146.5068
5 Jan 21 15.0004 13.9473 194.5272
6 Feb 21 -7.0935 -8.1466 66.3671
7 Marc 21 -2.2601 -3.3132 10.9773

8 Apr 21 14.1605 13.1074 171.8039

9 May 21 13.5867 -8.1466 157.0911
10 Jun 21 27.6082 -3.3132 705.1733
11 Jul 21 -1.1252 13.1074 4.7450
12 Aug 21 4.8022 -8.1466 4.0558
13 Sep 21 1.5480 -3.3132 0.2449
14 Oct 21 8.7687 13.1074 59.5305
15 Nov 21 -5.2778 12.5336 40.0803
16 Dec 21 9.0395 26.5551 63.7826
17 Jan 22 2.7701 -2.1783 2.9481
18 Feb 22 -5.9244 3.7491 48.6841
19 Mar 22 -0.3193 0.4949 2.3972
20 Apr 22 7.3790 7.7156 0.9452
21 May 22 1.5739 -6.3309 7.2506
22 Jun 22 1.8884 7.9864 1.8835
23 July 22 7.3278 1.717 39.3719
24 Aug 22 -1.4351 -6.9774 6.1911
25 Sep 22 -3.6305 -1.5483 21.3961
26 Oct 22 0.3436 6.3178 0.5034
27 Nov 22 -7.9021 -2.4882 80.1956
28 Dec 22 -2.3776 -4.6836 11.7697
29 Jan 23 4.0861 -0.7906 9.1991
30 Feb 23 0.9347 -8.9552 0.0140
31 Marc 23 -2.5197 -3.4307 12.7679
32 Apr 23 -0.9474 3.033 4.0020
33 May 23 -1.5603 -0.1184 6.8299
34 Jun 23 -0.5545 -3.4307 55.2598
35 Jul 23 1.5521 3.033 12.2202
36 Aug 23 0.5984 -0.1184 5.2895
∑Ri= 37.9122 ∑ (Ri – R)2 2=2729.999

Average Return ( ):
R = ∑Ri ÷ N
=37.9122÷36
= 1.0531

Standard Deviation ( );

σ = √∑ (Ri – R )2 ÷N
√2729.999 ÷36
=√75.8333
 =8.7082

Sharp Method:

S = (Rp – Rf) ÷ σ p

=(1.0531-0.07)÷8.7082
=0.9831÷8.7082
=0.1129

=0.0654

S.NO FUND NAME Sharp Ratio Rank

1 HDFC Equity Fund -0.343 10
2 HDFC NRI Equity Fund 0.1129 5
INTERPRETATION
Graph. Graphical Representation of Funds According to Sharp Ratio
➤ According to performance evaluation of Funds of HDFC Mutual Fund through
Sharpe

➤ HDFC Pharma Fund was out performed with 0.2725% and occupied first position
among ten funds.

➤ Natural Resources Fund showed 0.2289% of Sharpe Ratio and occupied second
rank
➤ when compared with other funds.

➤ HDFC Banking Fund was resulted in 0.2145% of the Sharpe Ration and ranked as
third among ten funds.

➤ HDFC Equity Opportunities Fund occupied fourth rank by resulting 0.1508% of

Sharpe Ratio when compared with other funds.
➤ HDFC NRI Equity Fund resulted in 0.1129% of the Sharpe Ratio and it was placed
in fifth rank among ten funds.

➤ HDFC Long Term Equity Fund was occupied sixth rank with a Sharpe Ratio of
0.1034%.
➤ HDFC Quant Plus Fund resulted 0.0917% of Sharpe Ratio and therefore it was
ranked as seventh rank when compared with other funds.

➤ HDFC Vision Fund has secured eighth position with a 0.0654% Sharpe Ratio when
compared with other funds.

➤ HDFC Growth Fund, which has a biggest NAV, occupied ninth rank with 0.0589%
Sharpe ratio among other funds.

CHAPTER-V
SUMMARY, FINDINGS &
SUGGESTIONS

FINDINGS
>HDFC Mutual Funds is presenting Zero balance Folio
to the investors. This will help the company to attract
the investors.

>HDFC Equity fund is in negative value i.e., -0.343%,

which is not suitable for investment.

>HDFC Pharma Fund was performing well according

to past three years data. It has resulted 0.2725% of
Sharpe Ratio.

>Most of the investors prefer to invest in Mutual Funds

on a medium-term basis and everyone anticipates a
moderate return.

>Most of the investors prefer open ended funds because

of the flexibility in their entry &exit.

SUGGESTIONS
>A market research is to be done by the company
before they launch any scheme. They should understand
the need of the customer i.e., the investment plan & the
purpose.

>The company has to provide adequate information and

material to the investors about the available funds &
plans in the company.

>The company should come up in the future with some

more schemes in such a way that should give returns,
safer & liquidity, so that the investors should get better
confidence & believe it.

>Mutual funds should launch investor's education

programs and expand their activities to rural areas.

>Mutual funds should concentrate on rural sector

investors and convert them into potential investors.

CONCLUSION
All investments whether in shares, debentures or deposits involve risk.
Share value may go down depending upon the performance of the
company, the industry, state of capital markets and the economy.
Generally, however, longer the term, lesser the risk. Companies may
default in payment of interest and principal on their
debentures/bonds/deposits. While risk cannot be eliminated, skill full
management can minimize risk. Mutual Funds help to reduce risk through
diversification and professional management. The experience and
expertise of Mutual Fund managers in selecting fundamentally sound
securities and timing their purchases and sales help them to build a
diversified portfolio that minimizes risk and maximizes returns. All mutual
funds in India are regulated by the Securities and Exchange Board of India
(SEBI).

Mutual fund Industry has shown an impressive growth in the performance

over the last few years and is continuing to do so. It is considered
portfolio; mutual funds' performance is comparatively better now when
compared with their previous year's performance. Advertisement is an
effective tool to create awareness.

Now-a-days customers are getting idea about mutual funds, there is a great
chance to invest further and really mutual funds industry will be in a
profit-oriented manner in future also.
BIBILOGRAPHY

BIBLIOGRAPHY
The readings listed here had proved to be helpful in learning and completion of
my project.
Referred Books:
>Security Analysis, Douglas Hamilton Bellemore, 2007.
>Financial Management, IM Pandey, Vikas Publications, 9th edition.
>Investment Analysis & Portfolio, Prasanna Chandra, Tata Mc Graw Hill
Publications, 2nd edition.
Security Analysis and Portfolio Management, S. Kevin, PHI, 10th edition.
Magazines:
>Business world - The Mutual Fund Industry.

Annual Reports:

>HDFC Mutual Fund.

>Offer Documents & Fact sheets.

Websites:
>www.HDFCmutual.com

www.mutualfundsindia.com

>www.amfiindia.com

www.sebi.com

>www.valueresearch.com