“RISK RETURN ANALYSIS AND COMPARATIVE

STUDY OF MUTUAL FUNDS”
FOR HDFC Asset Management Company Ltd.

A Report on Project work In MASTER OF BUSINESS ADMINISTRATION (MBA) By Somesh Behere

GUIDED BY: BY: PROF.GARGI NAIDU HOD ACADEMICS VIM BHOPAL

SUBMITTED

SOMESH BEHERE MBA IV Semester BHOPAL

VIDYASAGAR INSTITUTE OF MANAGEMENT BARKATULLAH UNIVERSITY BHOPAL(M.P.) SESSION (2008-2010)

BONOFIDE CERTIFICATE

This is to certify that the Report on Project Work titled “RISK RETURN ANALYSIS AND COMPARATIVE STUDY OF MUTUAL FUNDS” for HDFC Asset Management Company Ltd. is a bonafide record of the work done by

Somesh Behere

studying in Master of Business Administration in Vidhyasagar Institute of Management ,Bhopal during the year 2008-10.

Project Viva-Voce held on.....................

Internal examiner

External examiner

EXECUTIVE SUMMARY

The performance evaluation of mutual fund is a vital matter of concern to the fund managers, investors, and researchers alike. The core competence of the company is to meet objectives and the needs of the investors and to provide optimum return for their risk. This study tries to find out the risk and return allied with the mutual funds. This project paper is segmented into three sections to explore the link between conventional subjective and statistical approach of Mutual Fund analysis. To start with, the first section deals with the introductory part of the paper by giving an overview of the Mutual fund industry and company profile. This section also talks about the theory of portfolio analysis and the different measures of risk and return used for the comparison. The second section details on the need, objective, and the limitations of the study. It also discusses about the sources and the period for the data collection. It also deals with the data interpretation and analysis part wherein all the key measures related to risk and return are done with the interpretation of the results. In the third section, an attempt is made to analyse and compare the performance of the equity mutual fund. For this purpose β-value, standard deviation, and risk adjusted performance measures such as Sharpe ratio, Treynor measure, Jenson Alpha, and Fema measure have been used. The portfolio analysis of the selected fund has been done by the measure return for the holding period. At the end, it illustrates the suggestions and findings based on the analysis done in the previous sections and finally it deals with conclusion part.

I thank her for her continuous support and mentoring during the tenure of the project. I also thank Mr. . Unit Manager for his kind words of encouragement. I am thankful to him for providing me with necessary insights and helping me out at every single step. Finally. I am extremely thankful to Miss. I am greatly obliged to. My first word of gratitude is due to Mr.5 percentages. NSE’s CERTIFICATION IN FINANCIAL MARKETS (NCFM) with 74.Ankit Kumr. I would also like to thank all my dear friends for their cooperation. Above all. I express my words of gratitude to HDFC AMC. I am also thankful to Prof Ashok Diwedi Executive Trainee. Allahabad Branch for proving me with all the knowledge resources and enabling me to pass AMFI-MTUTUAL FUND (ADVISOR) MODULE. advice and encouragement during the long and arduous task of carrying out the project and preparing this report.ACKNOWLEDGEMENT I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project work.Sidhartha Chattergee – Branch Manager. for his kind help and support and his valuable guidance throughout my project. Gargi Naidu – my internal faculty guide under whose able guidance this project work was carried out. Bhopal for her constant valuable assistance and consultancy. the former student of VIDHYASAGAR INSTITUTE OF MANAGEMENT. my corporate guide. for providing me with the right kind of opportunity and facilities to complete this venture.Allhabad. HDFC AMC.

Nothing remains same for a long period every thing change with a certain span of time.. PLACE-……….The student of M.) .. SOMESH BEHERE .PREFACE This is the age of technical up gradation.essentially required a practical training of 4to6 weeks in any organization.B. The objective of my study was Risk Return Analysis And Comparative Study Of Mutual Funds “HDFC Asset Management Company Ltd.P. So it is must for every organization to put a birds eye view on it’s over all functioning.A.) from Vidyasagar institute of management Bhopal (M. DATE…………. It gives an opportunity to the student to test their acquired knowledge through practical experiences.B.A.” I however present this report In all my modesty to the readers with a faith that it shall serve the causes of subject. This report was preparing during practical training of Master of business administration (M. .

5 Investment Strategies 1.8 HDFC AMC Company Overview B.1 Mutual Fund an Investment Platform 1.1 Data Interpretation A Study of Portfolio Analysis from The Point Of Fund Manager Measures of Risk and Return 38-39 39 40 40 41-102 41-87 .2.1 1.TABLE OF CONTENTS Part-I Executive Summary A.3 Disadvantage of Investing Through Mutual Funds 1.2.7 Part-II Research Methodology 2.2.1 Need For the Study 2.4 Data Collection Part-III Case Analysis 3.4 Evaluating Portfolio Performance 1. 1-37 Iii 1-19 1-2 3 4 4-8 8 9-11 12 12-19 20-37 20-21 22 22-25 26 26-28 28-29 29-37 38-40 1. Mutual Fund Overview 1.6 Organisation of Mutual Fund 1.2.7 Distribution Channels 1.4 Categories of Mutual Fund 1.5 How to Reduce Risk While Investing 1.2 1.6 1.2.2. Measuring and Evaluating Mutual Funds Performance 1.2.2 Advantages of Mutual Fund Page No.2 Objective of the Study 2.3 Limitations of the Study 2.3 Purpose of Measuring and Evaluating Financial Planning for Investors referring to Mutual Funds Why Has It Become One Of The Largest Financial Instruments? 1.

bonds and money market instruments. Most open-end Mutual funds continuously offer new shares to .3.5 Conclusion References 87-97 98 99-100 101 102 PART-I MUTUAL FUND OVERVIEW MUTUAL FUND AN INVESTMENT PLATFORM Mutual fund is an investment company that pools money from small investors and invests in a variety of securities. Most open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset value. such as stocks.2 Analysis of the observation 3. which depends on the total market value of the fund's investment portfolio at the time of redemption.4 Recommendations 3.3 Findings 3.

Mutual funds stand ready to sell and redeem their shares at any time at the fund’s current net asset value: total fund assets divided by shares outstanding. It is also known as an open-end investment company.investors. MARKET (FLUCTUATIONS) INVEST THEIR MONEY INVEST IN VARIETY OF STOCKS/BONDS INVESTOR .1 In Simple Words. The Mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. Mutual funds invest pooled cash of many investors to meet the fund's stated investment objective. MUTUAL FUND SHEMES PROFIT/LOSS FORM PORTFOLIO OF INVESTMENT PROFIT/LOSS FROM INDIVIDUAL Figure: 1. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Diversification reduces the risk because not all stocks may move in the same direction in the same proportion at the same time. The profits or losses are shared by the investors in proportion to their investments. Mutual fund issues units t o the investors in accordance with quantum of money invested by them. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. to differentiate it from a closed-end investment company. Investors of Mutual fund are known as unit holders.

a n equity fund would invest equity and equity related instruments and a debt fund would invest in bonds. No. Advant age Portfoli o Diversif ication Professi onal Manage ment Particulars Mutual Funds invest in a well-diversified portfolio of securities which enables investor to hold a diversified investment portfolio (whether the amount of investment is big or small). Fund manager undergoes through various research works and has better investment management skills which ensure higher returns to the investor than what he can manage on his own. A Mutual fund is required to be registered with Securities and Exchange Boa rd of India (SEBI) which regulates securities markets before it can collect funds from the public.1 S. The investment manager would invest the money collected from the investor in to assets that are defined/ permitted by the stated objective of the scheme. professionally managed basket of securities at a relatively low cost. 2. gilts etc. In Short . .In India. a Mutual fund is a common pool of money in to which investors with common investment objective place their contributions that are to be invested in accordance with the state d investment objective of the scheme. 1. debentures. 1. For example. Mutual fund is a suitable investment for the common ma n a s it offers an Oporto unity to invest in a diversified.2 ADVANTAGES OF MUTUAL FUND Table:1.

No. . Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units). 5. Safety 1. 4.2 S. Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. All funds are registered with SEBI and complete transparency is forced. Disadva ntage Costs Control Not in the Hands of an Investor Particulars 1. Less Risk Low Transac tion Costs Liquidit y Choice of Scheme s Transp arency Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. 8.3. irrespective of the performance of the fund. 7. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. whereas units of a mutual fund are far more liquid. An investor may not be able to sell some of the shares held by him very easily and quickly. Due to the economies of scale (benefits of larger volumes). Flexibili ty 9. All material facts are disclosed to investors as required by the regulator. Mutual funds provide investors with various schemes with different investment objectives. Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. These schemes further have different plans/options Funds provide investors with updated information pertaining to the markets and the schemes.3 DISADVANTAGE OF INVESTING THROUGH MUTUAL FUNDS Table:1. These benefits are passed on to the investors. 6. mutual funds pay lesser transaction costs. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. Investors also benefit from the convenience and flexibility offered by Mutual Funds.

1. Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives.4 CATEGORIES OF MUTUAL FUND BASED ON THEIR STURCTURE OPEN ENDED FUNDS CLOSE-ENDED FUNDS Figure:1.2 2. which some investors find as a constraint in achieving their financial objectives. 3. BASED ON INVESTMENT OBJECTIVE EQUITY FUNDS BALANCED FUNDS DEBT FUNDS . For this. Investors have no right to interfere in the decision making process of a fund manager. No Custom ized Portfoli os Difficult y in Selectin g a Suitable Fund Scheme The portfolio of securities in which a fund invests is a decision taken by the fund manager.2.

g. Therefore. Based on their investment objective:  Equity funds: These funds invest in equities and equity related instruments. Morgan Stanley Growth Fund). With fluctuating share prices. historically. short term fluctuations in the market. such funds have relatively low liquidity.  Close-ended funds: These funds raise money from investors only once. fresh investments cannot be made into the fund. at any point of time.INDEX FUNDS DEVIDEND YEILD EQUITY DIVERSIFIED THEMANTIC FUND SECTOR FUND ELSS LEQUID FUNDS DEBT ORIENTED EQUITY ORIENTED GUILT FUNDS INCOME FUNDS FMPS FUNDS FLOATING RATE ARBITAGE FUNDS Mutual funds can be classified as follow: Based on their structure:  Open-ended funds: Investors can buy and sell the units from the fund. the units can be traded like stocks (E. At the same time. Redemption of units can be made during specified intervals. such funds can yield great capital appreciation as. Therefore. after the offer period. equities have outperformed . If the fund is listed on a stocks exchange.. such funds show volatile performance. generally smoothens out in the long term. most of the New Fund Offers of close-ended funds provided liquidity window on a periodic basis such as monthly or weekly. However. Recently. even losses. thereby offering higher returns at relatively lower volatility.

Therefore.Equity Linked Saving Scheme provides tax benefit to the investors. they invest exclusively in fixed-income instruments like bonds.In this case a key stock market index. cements sectors etc. like BSE Sensex or Nifty is tracked. . and money market instruments such as certificates of deposit (CD).Invest 100% of the capital in a specific sector. Dividend yield funds. they fall between equity and debt funds. remaining in debt. investment in equity funds should be considered for a period of at least 3-5 years. e. 3. . As a result. Equity-oriented funds -Invest at least 65% in equities. 6. -An infrastructure fund invests in power. e. debentures. Hence. and are a good option for investors averse to idea of taking risk associated with equities.it is similar to the equity-diversified funds except that they invest in companies offering high dividend yields. Their portfolio mirrors the benchmark index in terms of both composition and individual stock weightages. construction. Put your money into any of these debt funds depending on your investment horizon and needs. 4. 5.all asset classes in the long term.g.Invest 100% of the assets in sectors which are related through some theme. Balanced funds are the ideal mutual funds vehicle for investors who prefer spreading their risk across various instruments. commercial paper (CP) and call money. Thematic funds.  Debt fund: They invest only in debt instruments.A banking sector fund will invest in banking stocks. Equity diversified funds. It can be further classified as: 1. Government of India securities.  Balanced fund: Their investment portfolio includes both debt and equity. Following are balanced funds classes: 2 3 Debt-oriented funds -Investment below 65% in equities. Index funds.100% of the capital is invested in equities spreading across different sectors and stocks. Sector funds. ELSS. 2. on the risk-return ladder.g.

such funds invest a major portion of the portfolio in long-term debt papers. FMPs. 3. Liquid funds. Gilt funds ST. 2. a large portion being invested in call money market.They invest 100% of their portfolio in government securities of and T-bills. Floating rate funds .Invest in short-term debt papers. Floaters invest in debt instruments.Typically. Gilt funds LT.3 Equity Funds Debt funds Liquid and High level of return.These funds invest 100% in money market instruments. 8.fixed monthly plans invest in debt papers whose maturity is in line with that of the fund. Income funds LT. in the absence of arbitrage opportunities. 4. 6. Arbitrage fund. MIPs. Higher proportion (around 75%) is put in money markets. 5.They invest 100% of their portfolio in long-term government securities.Monthly Income Plans have an exposure of 70%-90% to debt and an exposure of 10%-30% to equities. 7.They generate income through arbitrage opportunities due to miss- pricing between cash market and derivatives market. Funds are allocated to equities. derivatives and money markets.1. How are funds different in terms of their risk profile: Table:1. but has a high level of risk too Returns comparatively less risky than equity funds Money Provide stable but low level of return Market funds . which have variable coupon rate.

Systematic Investment Plan: Under this. at a fixed interval. an investor invest in debt-oriented fund and give instructions to transfer a fixed sum. The investor gets fewer units when the NAV is high and more units when the NAV is low. Payment is made through post-dated cheques or direct debit facilities. 1. Systematic Transfer Plan: Under this. a fixed sum is invested each month on a fixed date of a month.4 THE STRUCTURE CONSISTS OF: .6. to an equity scheme of the same mutual fund. Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month. 3. ORGANISATION OF MUTUAL FUND: Figure:1. This is called as the benefit of Rupee Cost Averaging (RCA) 2.INVESTMENT STRATEGIES 1.

At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner. TRUST The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act. 1996. 1882 by the Sponsor. REGISTRAR AND TRANSFER AGENT . ASSET MANAGEMENT COMPANY (AMC) The AMC is appointed by the Trustee as the Investment Manager of the Mutual Fund. The AMC must have a net worth of at least 10 cores at all times. The main responsibility of the Trustee is to safeguard the interest of the unit holders and ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations. The AMC is required to be approved by the Securities and Exchange Board of India (SEBI) to act as an asset management company of the Mutual Fund. 1996. At least 50% of the directors of the AMC are independent directors who are not associated with the Sponsor in any manner. 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. TRUSTEE Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). the provisions of the Trust Deed and the Offer Documents of the respective Schemes. 1908. The trust deed is registered under the Indian Registration Act.SPONSOR Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the Investment managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Fund) Regulations.

87 34.92 30.19 56.90 70.222.Crores) schemes Reliance Mutual Fund HDFC Mutual Fund ICICI Prudential Mutual Fund UTI Mutual Fund Birla Sun Life Mutual Fund SBI Mutual Fund LIC Mutual Fund Kotak Mahindra Mutual Fund Franklin Templeton Mutual Fund IDFC Mutual Fund Tata Mutual Fund 263 202 325 207 283 130 70 124 191 164 175 108.332.833.29 21.85 21.02 25.169.197.061. The Registrar and Transfer agent also handles communications with investors and updates investor records.676.978.S as on Jun 30. redemption requests and dispatches account statements to the unit holders. 2009 Mutual Fund Name No. ASSET UNDER MANAGEMENT: Table1. . of Corpus (Rs.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.46 67.282.81 The graph indicates the growth of assets over the years.36 78.472.04 32.4 ASSET UNDER MANAGEMENT OF TOP AMC.414.

Direct marketing by the AMCs: the forms could be obtained from the AMCs directly. DSP Merill Lynch.7 DISTRIBUTION CHANNELS: Mutual funds posses a very strong distribution channel so that the ultimate customers doesn’t face any difficulty in the final procurement. Tata. Franklin Templeton. Sundaram. Fidelity. SBI magnum.Figure:1. Reliance . Canara Robeco. some of the top AMCs of India are. JP Morgan.Birla Sunlife.5 1. Kotak Mahindra. Mirae Assets. HDFC. etc. The investors can approach to the AMCs for the forms. UTI etc. . Lotus India. LIC. The various parties involved in distribution of mutual funds are: 1. whereas foreign AMCs include: Standard Chartered. HSBC. ICICI.

Mumbai . 1999. 1. whichever he finds convenient for him. 2000. including the schemes launched from time to time.90 . Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/subbroker to popularize their funds. banks and several non. Parekh Marg. 3rd Floor.10 Standard Life Investments Limited 49. 3. NBFC: investors can procure the funds through individual agents. Individual agents. In terms of the Investment Management Agreement.8 HDFC AMC COMPANY OVERVIEW HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC) AMC was incorporated under the Companies Act. Church gate.400 020. 169. Back bay Reclamation.5 Particulars % of the paid up capital Housing Development Finance Corporation Limited 50. on December 10. independent brokers.banking financial corporations too. AMCs can enjoy the advantage of large network of these brokers and sub brokers. the AMC will conduct the operations of the Mutual Fund and manage assets of the schemes. the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund As per the terms of the Investment Management Agreement. Banks. The registered office of the AMC is situated at Ramon House.T. and was approved to act as an AMC for the Mutual Fund by SEBI on July 30.2. 1956. The present share holding pattern of the AMC is as follows: Table:1. H.

6 Mr. the Schemes of Zurich India Mutual Fund has now migrated to HDFC Mutual Fund on June 19. had decided to divest its Asset Management business in India. Hoshang S. The AMC has renewed its registration from SEBI vide Registration No. M. Table:1. Karnad Chairman of the board CEO of Standard Life Investments Ltd. subject to necessary regulatory approvals. 1993. P. Deepak S. N. 2004 to December 31. Associate director Investment director Independent director Independent director Independent director Independent director Independent director Independent director Joint managing director .PM / INP000000506 dated December 22.Zurich Insurance Company (ZIC). . Rajeshwar Raj Bajaaj Mr. Billimoria Mr. Keith Skeoch Mr. Vijay Merchant Ms. On obtaining the regulatory approvals. Renu S. Parekh Mr. Mistry Mr. Humayun Dhanrajgir Dr. Deepak B. 2003. 2006. The Certificate of Registration is valid from January 1. following a review of its overall strategy. Keki M. 2000 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations. Phatak Mr. James Aird Mr. Thampi Mr. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. the Sponsor of Zurich India Mutual Fund. The AMC had entered into an agreement with ZIC to acquire the said business. Board of Directors The Board of Directors of the HDFC Asset Management Company Limited (AMC) consists of the following eminent persons.

00. Parekh joined HDFC Ltd. in 1993. Deepak Parekh. HDFC provides financial assistance to individuals. CDC. Mistry is an associate director on the Board. is associated with HDFC Ltd. Keki M. HDFC currently has a client base of over 8.g. sales services and valuation).000 shareholders and 50. Keith Skeoch is associated with Standard Life Investments Limited as its Chief Executive and is responsible for all company business and investment operations within Standard Life Investments Limited. corporate and developers for the purchase or construction of residential housing. USAID. IFC (Washington).000 depositors. domestic term loans from banks and insurance companies. bonds and deposits. since 1981 and was appointed as the Executive Director of HDFC Ltd. property identification. HDFC Standard Life Insurance Company Limited. training and consultancy. 12. ADB and KFW.000 deposit agents. Mr. He was appointed as the Deputy Managing Director in 1999.Mr. 92.000 borrowers. HDFC has received the highest rating for its bonds and deposits program for the ninth year in succession. in a senior management position in 1978. the Chairman of the Board. He is the Vice-Chairman & Managing Director of Housing Development Finance Corporation Limited (HDFC Ltd. 00. in 1985 and was appointed as the Executive Chairman in 1993. It also provides property related services (e. N. HDFC raises funds from international agencies such as the World Bank. Mr. Managing Director in 2000 and Vice Chairman & Managing Director in 2007. He was inducted as Wholetime Director of HDFC Ltd. housing finance remains the dominant activity. SPONSORS HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC): HDFC was incorporated in 1977 as the first specialised housing finance institution in India. Of these activities. in his capacity as its Executive Chairman. promoted by HDFC was the first life insurance company in . Milind Barve Managing director Mr.) He is with HDFC Ltd. Mr.

STANDARD LIFE INVESTMENTS LIMITED The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. With its experience in the financial markets. a strong market reputation. 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India. government and company bonds. the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Korea and Hong Kong.the private sector to be granted a Certificate of Registration (on October 23. Canada. In 1998. China. HDFC was ideally positioned to promote a bank in the Indian environment. Standard Life Investments Limited became the dedicated investment management company of the Standard Life Group and is owned 100% by The Standard Life Assurance Company. Its outstanding loan portfolio covers well over a million dwelling units. Ireland. large shareholder base and unique consumer franchise. 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.45 billion as at March 31. Since its inception in 1977. The company's current holdings in UK equities account for approximately 2% of the market capitalization of the London Stock Exchange. Standard Life Investments Limited manages a diverse portfolio covering all of the major markets world-wide. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. 2005. With global assets under management of approximately US$186. property investments and various derivative instruments. HDFC MUTUAL FUND PRODUCTS . USA. Standard Life Investments Limited has an extensive and developing global presence with operations in the United Kingdom. With its headquarters in Edinburgh. which includes a range of private and public equities. In order to meet the different needs and risk profiles of its clients. Standard Life Investments Limited is one of the world's major investment companies and is responsible for investing money on behalf of five million retail and institutional clients worldwide.

Equity Funds HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Index Fund HDFC Equity Fund HDFC Capital Builder Fund HDFC Tax saver HDFC Top 200 Fund HDFC Core & Satellite Fund HDFC Premier Multi-Cap Fund HDFC Long Term Equity Fund HDFC Mid-Cap Opportunity Fund Balanced Funds HDFC Children's Gift Fund Investment Plan HDFC Children's Gift Fund Savings Plan HDFC Balanced Fund HDFC Prudence Fund Debt Funds HDFC Income Fund HDFC Liquid Fund HDFC Gilt Fund Short Term Plan HDFC Gilt Fund Long Term Plan HDFC Short Term Plan HDFC Floating Rate Income Fund Short Term Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Liquid Fund .PREMIUM PLAN HDFC Liquid Fund .PREMIUM PLUS PLAN .

HDFC Cash Management Fund .Provident Plan HDFC Cash Management Fund .Savings Plan HDFC Sovereign Gilt Fund .PREMIUM PLAN HDFC Short Term Plan .Long Term Plan HDFC Cash Management Fund .Savings Plan HDFC Cash Management Fund .Savings Plan was the only scheme that won the CNBC TV 18 .HDFC Short Term Plan .Investment Plan HDFC Sovereign Gilt Fund .TV 18 .CRISIL Mutual Fund of the Year Awards 2008 : HDFC Prudence Fund was the only scheme that won the CNBC . HDFC Cash Management Fund .CRISIL Mutual Fund of the Year Award 2008 in the Most Consistent Liquid Fund under CRISIL ~ CPR for the calendar year 2007 (from amongst 5 schemes).Savings Plan was the only scheme that won the CNBC - .TV 18 .Savings Plus Plan HDFC Multiple Yield Fund HDFC Multiple Yield Fund Plan 2005 ACHIEVEMENT AND AWARDS CNBC .Short Term Plan HDFCMF Monthly Income Plan .Call Plan HDFCMF Monthly Income Plan .PREMIUM PLUS PLAN HDFC Income Fund Premium Plan HDFC Income Fund Premium plus Plan HDFC High Interest Fund HDFC High Interest Fund .Short Term Plan HDFC Sovereign Gilt Fund .CRISIL Mutual Fund of the Year Award 2008 in the Most Consistent Balanced Fund under CRISIL ~ CPR for the calendar year 2007 (from amongst 3 schemes).

It was awarded the Best Fund over ten years in 2006 and 2007 as well.Growth has been awarded the 'Best Fund over Ten Years' in the 'Equity India Category' (form amongst 34 schemes) and HDFC Prudence Fund – Growth Plan in the ‘Mixed Asset INR Aggressive Category’ (from amongst 6 schemes). Lipper Fund Awards 2008: HDFC Equity Fund . 2007 (from amongst 20 schemes).Short Term" for one year period ending December 31. have been awarded the ‘Best Fund over 10 Years’ by Lipper Fund Awards India 2009.CRISIL Mutual Fund of the Year Award 2008 in the Liquid Scheme – Retail Category for the calendar year 2007 (from amongst 19 schemes).Short Term Plan . 2008 makes it three in a row.Ranked a Seven Star Fund and has been awarded the Gold Award for "Best Performance" in the category of "Open Ended Marginal Equity" for the three year period ending December 31.Ranked a Five Star Fund indicating performance among the top 10% in the category of "Open Ended Balanced" for the three year period ending December 31. Lipper Fund Awards 2009 : HDFC Equity Fund .Growth has been awarded the 'Best Fund over Ten Years' in the 'Equity India Category' at the Lipper Fund Awards 2008 (form amongst 23 schemes).Long Term Plan . ICRA Mutual Fund Awards – 2008 : HDFC MF Monthly Income Plan . 2007 (from amongst 27 schemes) HDFC High Interest Fund .Ranked a Five Star Fund indicating performance among the top 10% in the category of "Open Ended Debt . HDFC Prudence Fund .TV 18 . 2007 (from amongst 16 schemes) .

he can face any of the following problems: 1.1 PURPOSE OF MEASURING AND EVALUATING Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth increment or both. 2. If the investors ignore the evaluation of funds’ performance then he can lose hold of it any time. Therefore it’s very necessary to continuously evaluate the funds’ performance with the help of factsheets and newsletters.B. Variation in the funds’ performance due to change in its management/ objective. MEASURING AND EVALUATING MUTUAL FUNDS PERFORMANCE: 1. newspapers and professional advisors like HDFC AMC. In this ever-changing industry.2. . The funds’ performance can slip in comparison to similar funds. websites.

Beta. Annualized Returns and Distributions. Cash Flow. besides NAV Growth. If the fund generates a greater return than the benchmark then it is said that the fund has outperformed benchmark . Leverage. Total Return with Reinvestment at NAV. And if in case the return is lower than the benchmark then the fund is said to be underperformed. Total Return and Expense Ratio. Debt fund: Likewise. 5. Concept of benchmarking for performance evaluation: Every fund sets its benchmark according to its investment objective. 6. the performance of debt funds can be measured on the basis of: Peer Group Comparisons. Liquid funds: the performance of the highly volatile liquid funds can be measured on the basis of: Fund Yield. There may be an increase in the various costs associated with the fund. a technical measure of the risk associated may also surge. Total Return and Expense Ratio. Ratios. Performance measures: Equity funds: the performance of equity funds can be measured on the basis of: NAV Growth. the Expense Ratio. Shares Outstanding). Total Return. Transaction Costs. if it is equal to benchmark then the correlation between them is exactly 1. The Income Ratio. 4 . Per Share Capital Changes. NPAs. Fund Size. . Industry Exposures and Concentrations.3. The funds performance is measured in comparison with the benchmark. Portfolio Turnover Rate. The funds’ ratings may go down in the various lists published by independent rating agencies. besides NAV Growth. Computing Total Return (Per Share Income and Expenses. It can merge into another fund or could be acquired by another fund house.

iii) Other similar products in which investors invest their funds. In case of mutual funds. 3. I-Bex Total Return Index. Selection of fund. It is more than mere tax planning. Liquid funds: Short Term Government Instruments’ Interest Rates as Benchmarks.2 FINANCIAL PLANNING FOR INVESTORS REFERRING TO MUTUAL FUNDS: Investors are required to go for financial planning before making investments in any mutual fund.2. financial planning is concerned only with broad asset allocation.Some of the benchmarks are: 1. A fund . leaving the actual allocation of securities and their management to fund managers. Steps in financial planning are: Asset allocation. To measure the fund’s performance. the comparisons are usually done with: I) with a market index. JPM T-Bill Index Post-Tax Returns on Bank Deposits versus Debt Funds. JPM TBill Index. BSE 500 index. BSE200. 1. BSE bankex. Debt funds: Interest Rates on Alternative Investments as Benchmarks. 2. Equity funds: market indices such as S&P CNX nifty. ii) Funds from the same peer group. BSE-PSU. The objective of financial planning is to ensure that the right amount of money is available at the right time to the investor to be able to meet his financial goals. BSE100. and other sectoral indices. Studying the features of a scheme.

manager has to closely follow the objectives stated in the offer document. equities.7 Return Safety Volatility Liquidity Convenienc e Equity High Low High High Moderate Bonds Moderate High Moderate Moderate High Co. corporate debentures. fixed income bonds. life insurance.return. because financial plans of users are chosen using these objectives. Measuring these form investment options on the basis of the mentioned parameters. real estate etc. 1. bank deposits. all these investment options could be judged on the basis of various parameters such as. Debent ures Co. FDs Bank Deposi ts Moderate Moderate Moderate Low Low Moderate Low Low Low Moderate Low High Low High High .3 WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS? If we take a look at the recent scenario in the Indian financial market then we can find the market flooded with a variety of investment options which includes mutual funds. company fixed deposits. PPF. volatility and liquidity.2. safety convenience. gold. we get this in a tabular Table:1.

we find that equities gives us high returns with high liquidity but its volatility too is high with low safety which doesn’t makes it favourite among persons who have low risk. Now looking at bank deposits. it scores high whereas it’s moderate at one. we can say that mutual fund emerges as a clear winner among all the options available. comparing it with the other options. it scores low on return . Even the convenience involved with investing in equities is just moderate.PPF Moderate High Low Moderate High Life Insura nce Gold Low High Low Low Moderate Moderate High Moderate Moderate Gold Real Estate Mutual Funds High Moderate High Low Low High High Moderate High High We can very well see that mutual funds outperform every other investment option. it scores better than equities at all fronts but lags badly in the parameter of utmost important ie. On three parameters. Gold have always been a favourite among Indians but when we look at it as an investment option then it definitely doesn’t gives a very bright picture. The reasons for this being: . The other option offering high return is real estate but that even comes with high volatility and moderate safety level. the other investment options are not at par with mutual funds and serve the needs of only a specific customer group. Straightforward. Although it ensures high safety but the returns generated and liquidity are moderate.appetite. so it’s not an happening option for person who can afford to take risks for higher return. even the liquidity and convenience involved are too low. Similarly.

500 through SIPs and even Rs.likewise. consistent performance.I)Mutual funds combine the advantage of each of the investment products: mutual fund is one such option which can invest in all other investment options. First of all. 100 in some cases. Its principle of diversification allows the investors to taste all the fruits in one plate. II) Dispense the shortcomings of the other options: every other investment option has more or less some shortcomings. just by investing in it. Suppose they predict that market is going to fall then they can sell some of their shares and book profit and can reinvest the amount again in money market instruments. total returns and protection of capital. III) Returns get adjusted for the market movements: as the mutual funds are managed by experts so they are ready to switch to the profitable option along with the market movement. the investor can enjoy the best investment option as per the investment objective. Now everybody can choose their fund according to their investment objectives.e. Not all award-winning funds may be suitable for everyone Many investors feel that a simple way to invest in Mutual funds is to just keep investing in award winning funds. Each . A rating firm generally elaborates on the criteria for deciding the winner’s i. But mutual funds have definitely sorted out this problem. IV) Flexibility of invested amount: Other then the above mentioned reasons. there exists one more reason which has established mutual funds as one of the largest financial intermediary and that is the flexibility that mutual funds offer regarding the investment amount. risk adjusted returns. it is the methodology to choose winners t at is more relevant. Such as if some are good at return then they are not safe. it is important to understand that more than the awards. One can start investing in mutual funds with amount as low as Rs. there exists no single option which can fit to the need of everybody. if some are safe then either they have low liquidity or low safety or both….

For example. each of these factors has varying degree of significance for different kinds of investors.of these factors is very important and ha s its significance for different categories of funds. Typically. Evaluate the record of accomplishment against similar funds. all the ward winning funds in different categories may not be suitable for everyone. but can be very volatile and tough for a risk adverse investor. carefully picked. longer-term track record compensates for the effects of a fund manager's particular investment style. Success in managing a small or in a fund focusing on a particular segment of the market cannot be re lied upon as an evidence of anticipated performance in managing a large or a broad based fund. 1. when one has to select funds. Growth in NAV as well as dividend received. watched and managed over period of time.2. consistent return re ally focuses on risk. one should go about selecting the funds according to the asset allocation. consistency will be a more import ant measure than tot al ret urn i.e. A fund can have very impressive total ret urns overtime. Besides. the first step should be to consider personal goals and objectives. If someone is afraid of negative returns. Invest ors need to decide which element they value the most and the n prioritize the other criteria Once one knows what one is looking for. Most investors need just a few funds. It is important because long-term track record moderates the effects which unusually good or bad short -term performance can have on a fund's track record. Therefore. The following factors are important in this process: Consider long-term record of accomplishment rather than short -term performance. . Discipline in investment approach is an important factor as the pressure to perform can make a fund manager susceptible to have a n urge to change tracks in terms of stock selection as well a s investment strategy. Besides.4 EVALUATING PORTFOLIO PERFORMANCE It is important to evaluate the performance of the portfolio on an on-going basis.

Partition it self is a risk. one can never make any kind of investment without systematic risk. Similarly if returns generated from equity market is 18 percent and inflation is still 6 per cent then equity returns will be lesser by the rate of inflation. Systematic risk is that risk which exists in the system. then only our investment in equity gets affected OR if we have placed a fixed deposit in particular bank and bank goes bankrupt.5 HOW TO REDUCE RISK WHILE INVESTING: Any kind of investment we make is subject to risk. .g. Another form of risk is unsystematic risk. Also these exist in the system and there is no way to stay away from them. war.systematic (Systemic) risk and unsystematic (Unsystematic) risk. without falling. for getting higher value back at a later date. known economist and Nobel Prize recipient William Sharpe tried to segregate the total risk faced in any kind of investment into two parts . Since inflation exists in the system there is no way one can stay away from the risk of inflation. Some of the biggest examples of systematic risk are inflation. anyone who wants to invest has to first face Therefore. Inflation erodes returns generated from all investments e . If return from fixed deposit is 8 percent and if inflation is 6 per cent then real rate of return from fixed deposit is reduced by 6 percent. political situation etc. Anyone who wants to learn to walk has to first fall. Similarly. Economic cycles. Suppose we invest in stock market and the market falls.The objective should be to differentiate investment skill of the fund manager from luck and to identify those funds with the greatest potential of future success. always reduce the While there is no way to keep away from risk. war and political situations have effects on all forms of investments.2. you cannot learn to walk systematic risk. recession. This risk does not exist in the system and hence is not applicable to all forms of investment. Unsystematic risk is associated with particular form of investment. we can Diversification helps in reducing the impact of impact of risk. than we only lose money placed in that bank. 1. It is like learning to walk. In fact we get return on our Well investment purely and solely because at the very beginning we take the risk of parting with our funds.

as an investment vehicle gives us benefit diversification and averaging.2. Similarly if our equity To reduce the of both investment is in Tata Motors. impact of systematic risk. HLL. and researchers alike. By systematically investing in mutual fund. all other stocks will not have any impact . adverse news about Infosys will only impact investment in Infosys.6 A STUDY OF PORTFOLIO ANALYSIS FROM THE POINT OF FUND MANAGER: Effective use of portfolio management disciplines improves customer satisfaction. The goal of portfolio analysis is to realize these same benefits at the portfolio level by applying a consistent structured management approach. the impact of risk. any comprehensive mutual fund selection and analysis approach should include the following generalized processes: . reduces the number of risks problems. Portfolio of mutual funds consists of multiple securities and hence adverse news about single security will have nominal impact on overall portfolio. By investing regularly. both. the impact of unsystematic risk is reduced.unsystematic risk. If our investment is distributed across various asset classes. investors. and increases success. Infosys. The considerations underlying the portfolio analysis is a matter of concern to the fund managers. then even if one of the banks goes bankrupt our entire fixed de posit investment is not lost. At a minimum. systematic as well a s unsystematic risk 1. If we have placed fixed deposit in several banks. This study attempts to answer two questions relating to the portfolio analysis: • Make an average (or fair) return for the level of risk in the portfolio • To find out the portfolio which best meets the purpose of the investor. Mutual fund as an investment vehicle helps reduce. we average out Mutual fund. we should invest regularly. we get benefit of rupee cost averaging.

However. These measures evaluate the different components of performance. The instant diversification of the funds is especially beneficial to the small investors who do not have the resources to acquire 100 shares of 12 or 15 different issues required to reduce unsystematic risk. Mutual funds have generally maintained the stability of their correlation with the market because of reasonably well diversified portfolios.7 MEASURES OF RISK AND RETURN: . and return. The major benefit of the mutual fund is to diversify the portfolio to eliminate unsystematic risk.2. A fund manager can regularly assess how securities and stocks are contributing to portfolio health and can make the corrective action to keep the portfolio in compliance with the investor’s interest and objectives. It helps the fund manager to make the best use of available opportunities by applying to the highest priority of the investor. he/she can choose a mutual fund a large and growing variety of alternative funds designed to meet almost any investment goal.• • • • • Fund selection Fund prioritize/ reprioritize Selection of the acceptable and required fund Fund analysing and monitoring Corrective action management The fund portfolio analysis gives the ability to select funds that are aligned with the investor’s strategies and objectives. 1. Mutual funds do not determine risk preference. risk. once investor determines his/her return preferences. There are some measures for the analysis and each of them provides unique perspectives. Studies have showed that the funds generally were consistent in meeting investors stated goals for investment strategies.

Risk is variability in future cash flows. Portfolio risk management includes processes that identify. It is the uncertainty that an investment will earn its expected rate of return. which has some probability of loss or unexpected results. assuming the reinvestment all income and capital gains distributions. Since portfolio and their environments are dynamic. Rt is the return in month t NAVt is the closing net asset value of the fund on the last trading day of the month NAVt-1 is the closing net asset value of the fund on the last day of the previous month . and dividing it by the original net asset value. Additionally. These processes should include reviews of project level risks with negative implications for the portfolio. For an investor. It is also known as uncertainty in the distribution of possible outcomes. it is important to do a consolidated risk assessment for the portfolio overall to determine whether it is within the already specified limits. The return is calculated net of management fees and other expenses charged to the fund. analyse. A risky situation is one. evaluating a future investment alternative expects or anticipates a certain rate of return is very important. the greater the risk. ensuring that the project manager has a responsible risk mitigation plan. track. which is the market value of securities the fund holds divided by the number of the fund’s shares during a given time period. and control any risk that would prevent the portfolio from achieving its business objectives. The return is calculated by taking the change in a fund’s Net Asset Value.NAVt-1)/NAVt-1 Where. respond to. Thus.  Simple measure of returns: The return on mutual fund investment includes both income (in the form of dividends or investment payments) and capital gains or losses (increase or decrease in the value of a security). The higher the probability of loss or unexpected results is. a fund’s monthly return can be expressed as follows: Rt= (NAVt. managers should review and update their portfolio risk management plans on a regular basis through the fund life cycle.

and uncertainty is generally equated with variability. Deviation is defined as any variation from a mean value (upward & downward). T is the number of observations in the period for which the standard deviation is being calculated.Measure of risk Investors are interested not only in fund’s return but also in risk taken to achieve those returns. While unsystematic risk can be diversified through investments in a number of instruments. Variability and the risk are correlated. S. which determines the volatility of a fund. the returns fluctuate every day. S. AR is the average periodic return. The more responsive the NAV of a Mutual Fund is to the changes in the market. which represents fluctuations in the NAV of the fund vis-à-vis market. By using the risk return . systematic risk cannot. High standard deviation of a fund implies high volatility and a low standard deviation implies low volatility. is the periodic standard deviation.D. So risk can be thought as the uncertainty of the expected return. Rt is the return in month t  Beta analysis: ) β (Beta) Co-efficient: Systematic risk is measured in terms of Beta. Since the markets are volatile.  Standard deviation: in simple terms standard deviation is one of the commonly used statistical parameter to measure risk. higher will be its beta.D. =√1/T× (Rt-AR) ² Where. hence high returns will tend to high variability. Beta is calculated by relating the returns on a Mutual Fund with the returns in the market.

if the fund’s portfolio doesn’t have a relevant benchmark index then a beta would be grossly inappropriate. A beta that is greater than 1 means that the fund is more volatile than the benchmark index. coefficient of correlation). Beta should be ignored when the rsquared is low as it indicates that the fund performance is affected by factors other than the markets.88 0. Thus.80) indicates that beta can be used as a reliable measure to analyze the performance of a fund.squared ranges from0 to1. beta would indicate the volatility against the benchmark index. while a beta of less than 1 means that the fund is more volatile than the benchmark index.2 Case 2 0. It is used as a short term decision making tool. A fund with a beta very close to 1 means the fund’s performance closely matches the index or benchmark.e. In case of funds. For example if we are considering a banking fund.  R-Squared (R2): R squared is the square of ‘R’ (i. we try to assess the competitive strength of the Mutual Funds vis-à-vis one another in a better way. β (Beta) is calculated as = [N (Σ XY) – Σ XΣ Y]/ [N (Σ X2) – (Σ X) 2 ] Beta is used to measure the risk. In case of funds. The value of R.relationship.9 . It describes the level of association between the fun’s market volatility and market risk. It basically indicates the level of volatility associated with the fund as compared to the market. as compared to the market..squared (more than 0.65 1. For example: Case 1 R2 B 0. we should look at the beta against a bank index. The success of beta is heavily dependent on the correlation between a fund and its benchmark. A high R.

the r. then. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount.  Portfolio turnover ratio: Portfolio turnover is a measure of a fund's trading activity and is calculated by dividing the lesser of purchases or sales (excluding securities with maturities of less than one year) by the average monthly net assets of the fund. In case 2. auditor fees and other operational expenses. since the amount of turnover affects the fees and costs within the mutual fund. implies that it would be wrong to mention that the fund is aggressive on account of high beta. Turnover is important when investing in any mutual fund. These costs consist primarily of management fees and additional expenses such as trading fees. Total expenses ratio: A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. legal fees.squared is more than 0.In the above tableR2 is less than 0.85 and beta value is 0. Turnover is simply a measure of the percentage of portfolio value that has been transacted.9. Portfolio turnover is the purchase and sale of securities in a fund's portfolio. which represents the TER: Total expense ratio = (Total fund Costs/ Total fund Assets) The most important and widely used measures of performance are: The Sharpe Measure The Treynor’Measure Jenson Model Fama Model  The Sharpe Measure :- . means the fund has bought and sold all its positions within the last year.80 in case 1. A ratio of 100%. not an indication of the percentage of a fund's holdings that have been changed. it means that this fund is less aggressive than the market.

and Rf is risk free rate of return.Rf)/Si Where. during a given period and systematic risk associated with it (beta). According to Sharpe. Symbolically.  The Treynor Measure: Developed by Jack Treynor. which is a ratio of returns generated by the fund over and above risk free rate of return and the total risk associated with it. as there is no credit risk associated). Symbolically. it is the total risk of the fund that the investors are concerned about. This Index is a ratio of return generated by the fund over and above risk free rate of return (generally taken to be the return on securities backed by the government. performance of a fund is evaluated on the basis of Sharpe Ratio. this performance measure evaluates funds on the basis of Treynor's Index. it can be represented as: . Ri represents return on fund. it can be written as: Sharpe Ratio (Si) = (Ri . While a high and positive Sharpe Ratio shows a superior risk-adjusted performance of a fund.In this model. So. Si is standard deviation of the fund. a low and negative Sharpe Ratio is an indication of unfavourable performance. the model evaluates funds on the basis of reward per unit of total risk.

as the total risk is reduced to systematic risk. the systematic risk is the relevant measure of risk when we are evaluating less than fully diversified portfolios or individual stocks. since they both divide the risk premium by a numerical risk measure. Required return of a fund at a given level of risk (Bi) can be calculated as: . Rf is risk free rate of return. compared with another fund that is highly diversified. Rankings based on total risk (Sharpe measure) and systematic risk (Treynor measure) should be identical for a well-diversified portfolio. a poorly diversified fund that ranks higher on Treynor measure. This measure was developed by Michael Jenson and is sometimes referred to as the differential Return Method. The surplus between the two returns is called Alpha. For a well-diversified portfolio the total risk is equal to systematic risk. Therefore. The total risk is appropriate when we are evaluating the risk return relationship for well-diversified portfolios. On the other hand.Rf)/Bi. which measures the performance of a fund compared with the actual returns over the period.Treynor's Index (Ti) = (Ri . This measure involves evaluation of the returns that the fund has generated vs. Comparison of Sharpe and Treynor Sharpe and Treynor measures are similar in a way. While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund. Ri represents return on fund. and Bi is beta of the fund. the returns actually expected out of the fund1 given the level of its systematic risk. Where. a low and negative Treynor's Index is an indication of unfavorable performance.  Jenson Model: Jenson's model proposes another risk adjusted performance measure. will rank lower on Sharpe Measure. All risk-averse investors would like to maximize this value.

. This model compares the performance. and Bi is Beta deviation of the fund. After calculating it. Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. The Net Selectivity represents the stock selection skill of the fund manager. The difference between these two is taken as a measure of the performance of the fund and is called Net Selectivity. measured in terms of returns. E(Ri) represents expected return on fund. as it is the excess returns over and above the return required to compensate for the total risk taken by the fund manager. as his knowledge of market is primitive. Rf is risk free rate of return. Limitation of this model is that it considers only systematic risk not the entire risk associated with the fund and an ordinary investor cannot mitigate unsystematic risk.E(Ri) = Rf + Bi (Rm .Rf) ] Higher alpha represents superior performance of the fund and vice versa.Rf) Where. of a fund with the required return commensurate with the total risk associated with it. αp= Ri –[ Rf + Bi (Rm . Alpha can be obtained by subtracting required return from the actual return of the fund. and Rm is average market return during the given period.  Fama Model: The Eugene Fama model is an extension of Jenson model.

Selectivity: measures the ability of the portfolio manager to earn a return that is consistent with the portfolio’s market (systematic) risk. The selectivity measure is:

Ri –[ Rf + Bi (Rm - Rf) ]
Diversification: measures the extent to which the portfolio may not have been completely diversified. Diversification is measured as:

[Rf +(Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)]
If the portfolio is completely diversified, contains no unsystematic risk, then diversification measure would be zero. A positive diversification measure indicates that the portfolio is not completely diversified; it would contain unsystematic risk and it represents the extra return that the portfolio should earn for not being completely diversified. The performance of the portfolio can be measured as: Net selectivity = selectivity – diversification Net selectivity measures, how well the portfolio mangers did manager did at earning a fair return for the portfolio’ systematic risk and diversifying away unsystematic risk. Positive net selectivity indicates that the fund earned a better return. The comparison, done based on sharpe ratio, Treynor measure, Jensen alpha, and Fema measure notifies that the portfolio performance can be evaluated on the following basis: Sahrpe ratio: measures the reward to total risk trade off Treynor: measures the reward to systematic risk trade off Jensen’s alpha: measures the average return over and above that predicted. Fema measure: measures return of portfolio for its systematic risk and diversifying away unsystematic risk. Among the above performance measures, two models namely, Treynor measure and Jenson model use Systematic risk is based on the premise that the Unsystematic risk is diversifiable. These models are suitable for large investors like institutional investors with high risk taking capacities as they do not face paucity of funds and can invest in a number of options to dilute some risks. For them, a portfolio can be spread across a number of stocks and sectors.

However, Sharpe measure and Fama model that consider the entire risk associated with fund are suitable for small investors, as the ordinary investor lacks the necessary skill and resources to diversify. Moreover, the selection of the fund on the basis of superior stock selection ability of the fund manager will also help in safeguarding the money invested to a great extent. The investment in funds that have generated big returns at higher levels of risks leaves the money all the more prone to risks of all kinds that may exceed the individual investors' risk appetite.

PART-II

RESEARCH METHODOLOGY
2.1 NEED FOR THE STUDY
The Mutual Fund Companies periodically build up a study, which can prioritize and analyse the portfolio of the mutual funds. This study is helpful in having a comparison among the mutual funds based on the risk bearing capacity and expected return of the investor and will also carry out an analysis of the portfolio of the selected mutual fund. The mutual fund industry is growing globally and new products are emerging in the market with all captivating promises of providing high return. It has become difficult for the investors to choose the best fund for their needs or in other words to find out a fund which will give maximum return for minimum risk. Therefore, they turn to their financial adviser to get precise direct investment. Hence, the company asked me to prepare a model, which will facilitate them to analyse the fund and to have reasonable estimation for the fund performance. The driving force of Mutual Funds is the ‘safety of the principal’ guaranteed, plus the added advantage of capital appreciation together with the income earned in the form of interest or dividend. The various schemes of Mutual Funds provide the investor with a wide range of investment options according to his risk bearing capacities and interest besides; they also give

handy return to the investor. Mutual Funds offers an investor to invest even a small amount of money, each Mutual Fund has a defined investment objective and strategy. Mutual Funds schemes are managed by respective asset managed companies, sponsored by financial institutions, banks, private companies or international firms. A Mutual Fund is the ideal investment vehicle for today’s complex and modern financial scenario.

The study is basically made to analyze the various open-ended equity schemes of HDFC Asset Management Company to highlight the diversity of investment that Mutual Fund offer. Thus, through the study one would understand how a common person could fruitfully convert a meagre amount into great penny by wisely investing into the right scheme according to his risk taking abilities.

Sharpe ratio is a performance measure, which reflects the excess return earned on a portfolio per unit of its total risk (standard deviation). Treynor measure indicates the risk premium return per unit risk of the portfolio. While Jensen alpha talks about the deviation of the actual return from its expected one. Fema measure decomposes the portfolio total return into two main components: systematic return and the unsystematic return. It determines whether the portfolio is perfectly diversified or not. Hence, it is a significant measure to evaluate the performance of the fund manager. The analysis of the fund portfolio has been done to find out the influence of the top holdings on the performance of the fund. All these measures give fair implication and results about the portfolio performance and can show the ground reality to a rational investor.

2.2 OBJECTIVE OF THE STUDY

 Whether the growth oriented Mutual Fund are earning higher returns than the benchmark returns (or market Portfolio/Index returns) in terms of risk.

2. The data collected for this project is basically from secondary sources.  The study excludes the entry and the exit loads of the mutual funds.4 DATA COLLECTION The Methodology involves the selected Open-Ended equity schemes of HDFC mutual fund for the purpose of risk return and comparative analysis the competitive funds. as primary data was not accessible. Market timing and Selectivity of Securities to their investors  This study provides a proper investigation for logical and reasonable comparison and selection of the funds. Hence. websites and other books.  The assumption that all investors have the same information and beliefs about the distribution of returns. .  The study is based on secondary data available from monthly fact sheets.  Banks are free to accept deposits at any interest rate within the ceilings fixed by the Reserve Bank of India and interest rate can vary from client to client.  The study is limited by the detailed study of six schemes of HDFFC. there can be inaccuracy in the risk free rates. they are.  Many investors are all price takers. The monthly fact sheets of HDFC AMC fund house and research reports from banks.  It also assists in analysing the portfolio of the selected funds. 2.3 LIMITATIONS OF THE STUDY  The study is limited only to the analysis of different schemes and its suitability to different investors according to their risk-taking ability. Whether the growth oriented mutual funds are offering the advantages of Diversification.

This study could facilitate to get a fair comparison. HDFC Equity Fund Growth option HDFC Capital Builder HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Top 200 Fund . The expectations of the study are to give value to the funds by keeping the risk in the view.The NAVs of the funds have been taken from AMFI websites for the period starting from 31 st jan 2007 to 31st May. For the Benchmark prices. evaluated and analysed. Following are the products of HDFC Mutual Fund. which have been taken the evaluation purpose. Here equity funds are taken as they bear high return with high risk. data has been taken from BSE and NSE sites. 2009.1 DATA INTERPRETATION Risk returns analysis and comparative study of funds In this section. Part-III CASE ANALYSIS 3. a sample of HDFC equity related funds have been studied.

(as a % of the Applicable NAV) Minimum Application Amount Nil Rs. NIL (With effect from August 1. Basic Scheme Information Table:3. 100 thereof Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day Normally despatched within 3 Business days . Additional purchases is Rs. 1995 Dividend Option. 1000 and in multiples of Rs.1 Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Open Ended Growth Scheme Jan 01.100 thereof to open an account / folio. Growth Option. 2009) Exit Load.5000 and in multiples of Rs.HDFC EQUITY FUND Investment Objective The investment objective of the Scheme is to achieve capital appreciation.

money market instruments & cash 0-100 Low to medium Investment in Securitised debt. . TYPE OF INSTRUMENTS NORMAL ALLOCATION (%of net asset) RISK PROFILE Medium to high 1 Equities & Equities related instruments 80-100 2 Debt securities.2 SR NO. the Scheme will invest predominantly in growth companies. if undertaken. Companies selected under this portfolio would as far as practicable consist of medium to large sized companies which: are likely achieved above average growth than the industry. would not exceed 20% of the net assets of the scheme. which is benchmarked to S&P CNX 500 Index is not sponsored. sold or promoted by Indian Index Service & Products Limited (IISL). and have superior financial strengths. enjoy distinct competitive advantages.Investment Pattern The asset allocation under the Scheme will be as follows: Table:3. Investment Strategy & Risk Control In order to provide long term capital appreciation. which represents a cross-section of the strong growth companies in the prevailing market. endorsed. HDFC Equity. Benchmark Index : S&P CNX 500. In order to reduce the risk of volatility. the Scheme will diversify across major industries and economic sectors. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the Regulations. The aim will be to build a portfolio.

3088 26.751491 -0.564738 141.3 6997.84 210.423076 -0.788 178.2248 307.536164 55.065494 -0.54465 -2.02989 8.24564 7.5363 44.82 5483.58732 16.36928 31.2786 64.481241 -4.7177 -9.8146 5.570838 0.96101 8.25591 0.18558 87.10258 4.2974 54.491863 134.096606 0.25 5411.533254 24.042897 50.60296 43.27962 0.47 5337.06526 2.31318 6.19497 288.52824 0.389 4899.72229 159.48562 5.191 169.95 5223.61636 -18.0186 -1.73 4605.07 5937.0042 6.1514 41.568075 107.214527 6.784819 -9.317166 -15.130678 -5.827 182.11 7163.454188 0.5856 5.6 7461.228 142.7357 263.13557 254.0864 1.605 143.42 4504.05529 2.81 4929.39 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .967689 4.45 -6.751673 1.090523 15.88956 25.078188 3.3759 8.3378 300.6065 151.3 206.34429 5.966289 -1.099566 -6.77619 324.475077 37.24148 16.18429 31.9731 7.51353 -3.499984 4.66403 1.48428 3.753707 -10.715 158.29 6094.3508 43.Fund Manager : Mr.30087 3.241651 -2.61843 17.34347 11.71185 0.6241 68.81843 -15.31236 12.133692 5.1246 1.624 7.695554 2.89 4934.92 5762.98 5297.48 6245.001318 6.663941 104.81156 34.62913 -16.43838 -11.184771 42.602 151.56268 1.46 5185.825594 21.3285 82.171 151.6591 65.598018 -17.56493 0.266 272.730242 4.94536 265.594 165.88 6289.6293 -8.300213 15. Prashant Jain HDFC EQUITY FUND-GROWTH OPTION Table:3.176 223.78243 108.28 -0.0859 55.58525 -16.9754 0.91209 264.972895 6.325 168.34478 9.06587 2.6968 11.935177 -2.32486 83.3 NAV S&P CNX 500 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG 187.924 6356.4959 4.324 188.313 172.88767 5.16 161.281 165.

4005 -5.85673 224.54 5480.05253 0 0 23.163 108.186 Figure:3.322 101.8396 3469.74302 20.031112 20.161582 98.67328 -9.1822 750.7767 1.319696 14.1952 -4.53 3635.70723 120.93165 -26.53341 7.721 110.0949 731.288584 13.5738 34.87 3538.83098 42.52145 7.33 3720.76129 33.754 4807.9077 =11.30774 -24.SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY Total average 145.13239 .38871 10.95447 13.2923 -7.59501 101.57 -8.50962 640.377 103.7186 3533.2 3539.51 4278.63768 695.585078 -2.87114 1.08365 28.7883 30.466 126.88903 16.74352 98.11 -5.6911 3499.3984 945.38131 -7.417 123.897 3403.67507 29.53456 -10.67611 82.44354 57.57 3379.85299 8.852 127.70062 195.55257 6.55156 68.097 169.9625 788.1 σm= √123.3694 -4.8939 78.063454 -3.82188 9.808 112.3455 20.96764 27.60679 86.71741 10.9077 14.553966 -3.99875 28.4825 251.9628 -27.

52605 0.356561 2.6872)/( 97977.31236 12.404223 Rm Ri-Rm Dev frm ave sq of Dev frm av .71898 1.β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (98937.454256 0.75698 0.499984 4.71753 -4.749866 4.096606 0.61843 17.352172 1.730242 4.71185 0.300213 15.047.75698 0.62913 -16.305086 1.672 = 1.0186 -1.3111 1.5623 18.102291 2.350562 2.769742 -0.598948 1.741324 0.24564 7.31318 6.72464 -0.31822 -2.688036 0.92739 6.972895 6.668127 -1.6293 -8.241651 -2.56661 0.96101 8.70325 1.0096114 Table:3.31983 -1.164715 -1.573018 0.558392 -0.573018 0.34344 -1.2974 1.966289 -1.13237 1.54264) = 98077.54465 -2.36/ 97143.695554 2.859.05529 2.545367 0.133692 5.27274 -1.65569 -0.001318 6.833.4 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN -6.02989 8.317166 -15.214.63579 1.

2354 5.454188 0.99875 28.7767 1.56683 1.76389 5.228297 -2.4219 7.90556 0.38871 10.796228 -4.087475 5.19596 2.71741 10.FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY Total avrage -0.67328 1.27926 -1.255543 2.387467 -1.58525 -16.722694 Standard Deviation for the fund’s excess return (S.032341 1.518841 -3.623906 2.67507 29.96784 -1.557333 2.3694 -4.319696 14.93165 -26.591422 0.533078 4.7302 -5.99717 2.74376 2.392215 Sharpe Index (Si) = (Ri .30774 -24.76129 33.53699 -1.481241 -4.59156 -2.81843 -15.76254 5.181006 10.Rf)/Si = (1.2232 -2.88903 16.392215 =-1.76682 1.67611 -2.751491 -9.2923 -7.87114 1.29594 -5.73448 -1.722694 =2.343511 2.967689 4.04475 3.08365 28.) σi=√5.569336 1.64557 .599166 -1.90337 160.43838 -11.64944 0.9731 7.55908 2.585078 -2.D.82188 9.828377 0.836366 2.639067 25.993588 30.4865 4.5856 5.34478 9.063454-5)/ 2.35513 1.539459 1.031112 -1.38131 -7.130678 -5.681778 -0.311604 1.000182 1.077092 -3.029507 5.784819 -9.362352 2.624 7.306878 15.751673 -8.52145 7.063454 -3.

0836 .070488 Expected return E(Ri) = Rf + Bi (Rm .392215/11.031112-5)] =0.070488 Diversification =[Rf + (Rm .031112-5)(2.[ 5+1.031112-5)] =0.031112-5)] =3.15409 =-3.Rf)/Bi.063454-5)/ 1.diversification =0.[ 5+1.992965 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .Rf) ] = 1.0096114 (1.89907 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .0096114 =-3.[ 5+1.Rf) ] =[5+(1.070488-3.031112-5)] =0.063454 .Treynor's Index (Ti) = (Ri . =(1.Rf) =[ 5+1.13139)].0096114 (1.154092 Net selectivity= selectivity.0096114 (1.0096114 (1.063454 .Rf)(αi/ αm)]-[Rf + Bi (Rm .Rf) ] = 1.

No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment. 2009) Exit Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) • In respect of each purchase / switch-in of Units less than Rs. Minimum Application Amount (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan For new investors :Rs. an Exit Load of 1. The Dividend Option offers Dividend Payout and Reinvestment Facility. • In respect of each purchase / switch-in of Units equal to or greater than Rs. 5 crore in value. 1000 and any amount thereafter.Growth Option. 5 crore in value. no Exit Load is payable. Basic Scheme Information Nature of Scheme Inception Date Option/Plan Open Ended Growth Scheme February 01. . Entry Load (purchase / additional purchase / switch-in) NIL (With effect from August 1.HDFC CAPITAL BUILDER FUND Investment Objective The Investment Objective of the Scheme is to achieve capital appreciation in the long term. For existing investors : Rs.00% is payable if Units are redeemed/switched-out within 1 year from the date of allotment.5000 and any amount thereafter. 1994 Dividend Option.

00% On the balance of the assets 1. 1 2 Asset Type (% of Portfolio) Risk Profile Medium to High Equities and Equity Related Instruments Upto 100% Debt & Money Market Instruments Not more than 20% Low to Medium Investment in Securitised debt. characterized by competence and integrity strong position in its business (preferably market leadership) efficiency of operations. as evidenced by profit margins and asset turnover. compared to its peers in the industry .75% Pattern The asset allocation under the Scheme will be as follows : Sr. The Scheme defines a "strong company" as one that has the following characteristics : • • • strong management.25% On the next 300 crores average weekly net assets 2. if undertaken.No. Investment Strategy This Scheme aims to achieve its objectives by investing in strong companies at prices which are below fair value in the opinion of the fund managers.50% On the next 300 crores average weekly net assets 2. would not exceed 20% of the net assets of the scheme. Normally despatched within 3 business Days Current Expense Ratio (#) (Effective Date 22nd May 2009) On the first 100 crores average weekly net assets 2.(STP)) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day.

• • • working capital efficiency consistent surplus cash generation high profitability indicators (returns on funds employed) In common parlance. a market price quote that is around 50% lower than its estimated replacement cost Fund Manager Mr.98964 -9.5 NAV S&P CNX 500 4899. as determined by the discounted value of its estimated future cash flows • • • a P/E multiple that is lower than the company's sustainable Return on funds employed a P/E to growth ratio that is lower than those of the company's competitors in case of companies in cyclical businesses.73 -4.9644 -8. Chirag Setalvad (since Apr 2.259 .5626 8 64. 07) Mr. The Scheme defines "reasonable prices" as : • a market price quote that is around 30% lower than its value.88 767 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 2007 JAN FEB 64.05529 39.0864 82.Foreign Securities HDFC CAPITAL BUILDER FUND Table:3.459 61.Dedicated Fund Manager .39 4504. such companies are also called 'Blue Chips'. Anand Laddha .

47507 7 37.278 6 0.5154 4.077365 4.34429 5.34347 11.58732 16.151 4 41.323 83.3 6997.82 5483.49186 3 134.46 5185.2 3539.3716 35.11 7163.24564 7.061 99.87436 122.3 65.034 106.07 5937.3694 -3.09 96.418 75.34478 9.0042 6.27962 -10.76839 8.042 897 50.2559 1 0.31236 12.28 4807.MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT 60.767099 4.439 75.973386 -0.98 5297.454188 0.133692 5.30087 3.099566 -6.67084 -24.818 69.344916 -9.266 272.29 6094.008405 111.0559 -1.62913 -16.36 928 31.182 2 750.722 29 159.05017 -13.51551 65.214527 6.56548 9.45 6356.88 6289.818 73.9002 2.95 5223.0 859 55.914 76.150912 6.23022 277.866266 15.53 8 88.9672 -1.4856 2 5.6029 6 43.542762 -5.8857 -7.58525 -16.130678 -5.27979 30.603 1.730242 4.4785 30.53486 3.9731 7.61843 17.97 54 0.423076 -0.4005 1.788 5.096606 0.12 4.598018 -17.93165 -26.2414 8 16.07818 8 120.6 7461.25 5411.97394 3.065 64.6 065 3.48 6245.533 254 24.10258 4.69927 1.57 -1.751491 -9.94 536 265.63 768 695.5282 4 0.7761 9 324.56807 5 107.61636 -18.04744 656.149 63.19 497 288.564 738 98.6035 41.89 4934.577196 -17.88 956 25.61078 3.967 79.61343 246.094908 7.2 248 307.587 4605.09052 3 15.32 486 83.27 76.51353 -3.1842 9 31.784819 -9.935177 -2.48113 -14.9628 -27.54465 -2.966289 -1.8 146 5.610525 24.365 47.265164 96.065494 -0.3285 0.31318 6.3 .15908 50.56 493 0.8784 273.696 8 11.350 8 43.2974 1.81 4929.3759 8.659 1 65.169 67.367 87.753707 -10.47 5337.66 403 1.3378 300.944284 4.92 5762.185 58 87.228 70.

67611 -3.36939 7.73702 27.96764 27.71913 13.65479 70.53 341 7.87114 1.11 -6.6 3379.82188 9.873238 -5.531149 13.18802 206.60 679 86.53273 21.839 6 3469.031112 28.556 48.094 9 731.7006 2 195.88105 7.564 43.553966 -3.907 7 455 20.08029 0.319696 14.7435 2 23.029 116.064 45.55257 6. 186 .0381 773.85299 8.2014 -4.44 354 57.604 53.05253 0 0 30.54 5480.752867 -4.52145 7.51 4278.8309 8 42.288584 13.53 3635.57 3403.5515 6 68.34 46.161 582 14.79888 59.9 625 788.7868 -5.3 NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVERA GE 44.87 3538.99875 28.85 673 224.33 3720.585078 -2.6 911 3499.2195 3270.08365 28.41 7 123.9544 7 13.70723 -4.006 67.91953 18.

9077 =11.Figure:3.6119)/ (97977.833.936265 Table:3.608.21.13239 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (91560.82.6 .2 σm = √123.67 = 0.5426) = 90952.21/ 97143.

469223 -1.34478 9.48113 -14.31318 6.532879 -2.290577 3.38237 -2.480204 2.61078 3.58525 -16.980759 4.593425 0.76839 8.45418 8 0.05529 2.269159 1.36939 Rm Ri-Rm Dev frm ave sq of Dev frm av -8.62913 -16.485245 5.82221 3.230596 6.408088 0.077365 4.09660 6 0.577196 -17.9002 -6.49229 -0.344916 -9.01722 0.12 4.56548 9.93386 5.68633 -1.767099 4.053642 2.87167 -0.75217 -1.408844 -3.24564 7.094908 7.78481 9 -9.58792 0.536922 12.9731 7.259 -4.54397 -3.96628 9 -1.08142 0.18063 0.6184 3 17.457673 -2.75845 -2.3694 -4.Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV -4.75149 1 -9.35109 12.13067 8 -5.150912 6.84793 -3.585089 20.74747 1.67084 -24.5446 5 -2.866266 15.655617 -5.83499 -3.569689 11.06814 2.146203 7.73592 2.473923 1.98983 0.73024 2 4.05017 -13.53905 -1.48124 5.68709 3.93165 -26.542762 -5.22888 18.948066 -0.77523 -4.260807 1.090893 -3.463923 .81112 2.2974 1.944284 4.9644 -1.52145 3.36914 3.496982 4.28534 -0.741069 32.33438 1.22631 0.802531 14.0559 -1.55674 3.13369 2 5.5154 4.973386 -0.503837 0.29546 -1.31236 12.57326 0.214041 0.007097 0.676037 12.309671 -0.10412 2.

477719 Standard Deviation for the fund’s excess return (S.03111 2 0.73702 27.936265(1.0836 5 28.545136 Sharpe Index (Si) = (Ri .) σi=√6. =(0.52528 -1.967247 0.28816 -2.8711 4 1.88105 7.074348 181.58507 8 -2.752867 = [5+0.531149 13.9987 5 28.510302 0.3761 6.609834 2.75286 7 7.873238 -5.031112-5)] -0.79085 -0.DEC 2009 JAN FEB MAR APL MAY TOTAL AVERAGE 7.39357 .26173 -0.53625 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .08029 0.545136 =-1.82188 9.66872 Treynor's Index (Ti) = (Ri .272669 0.67611 -3.281012 0.31969 6 14.320814 5.Rf)/Si = (0.05916 -1.983487 0.2014 -4.53273 21.752867-5/ 0.24704 0.27824 -0.780919 1.55091 -7.049189 0.477719 =2.D.Rf) ] =0.752867-5)/ 2.5664 2.78855 -1.936265 =-4.Rf)/Bi.

75286 7[5+0.808464 =-3.936265(1.Rf) ] =[5+(1.545136/11.33967 .284069 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .39357-2.936265(1.diversification =-0.936265(1.Rf)(αi/ αm)]-[Rf + Bi (Rm .031112-5)] =1.Expected return E(Ri) = Rf + Bi (Rm .Rf) ] =0.031112-5)] = -0.[5+0.808464 Net selectivity= selectivity.031112-5)] =2.39357 Diversification =[Rf + (Rm .Rf) =[5+0.13139)].031112-5)( 2.

Additional purchases is Rs. 100 thereof Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day Normally despatched within 3 Business days .5000 and in multiples of Rs.HDFC GROWTH FUND Investment objective The primary investment objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. Basic Scheme Information Table:3. (as a % of the Applicable NAV) Minimum Application Amount Nil Rs.100 thereof to open an account / folio.7 Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Open Ended Growth Scheme Sep 11. 2000 Dividend Option. 1000 and in multiples of Rs. 2009) Exit Load. NIL (With effect from August 1. Growth Option.

8 SR NO. the Investment Strategy is expected to be a function of extensive research and based on data and reasoning. in order to manage its liquidity requirements from time to time. Benchmark Index : SENSEX Fund Manager : Mr. money market instruments & cash 0-100 Low to medium Investment Strategy & Risk Control The investment approach will be based on a set of well established but flexible principles that emphasise the concept of sustainable economic earnings and cash return on investment as the means of valuation of companies. The asset allocation under the Scheme will be as follows : Table:3. and under certain circumstances. The objective will be to identify "businesses with superior growth prospects and good management. to protect the interests of the Unit holders. Shrinivas Rao . The Scheme may invest a part of its corpus in debt and money market instruments.Investment pattern The corpus of the Scheme will be invested primarily in equity and equity related instruments. In summary. rather than current fashion and emotion. TYPE OF INSTRUMENTS NORMAL ALLOCATION (%of net asset) RISK PROFILE Medium to high 1 Equities & Equities related instruments 80-100 2 Debt securities. at a reasonable price".

99088 -3.76156 169.04266 -17.1 13872.198 54.283 40.407806 -2.11918 2.47851 23.13199 4.56584 0.36407 25.82 73.297178 5.389618 125.6287 -7.9949 6.9577 5.13517 -11.6 17291.72949 -2.50578 28.088315 28.7448 9.94015 36.84256 5.512268 154.4734 -5.8174 44.903626 0.18137 1.99 15318.2774 25.6123 -3.106209 -0.863025 9.73683 66.8528 0.8901 -7.93478 1.35676 -22.15727 121.47219 0.827 62.383369 4.0777 110.8807 1.951922 42.49437 12.032307 -13.09761 68.770908 -13.898 570.716 58.5731 61.0048 -0.6048 41.75 14564.17 63.54 42.813 53.350606 92.7335 5.646264 7.07665 536.46627 37.78126 -18.0035 10.7434 -1.4284 323.461 48.09 13072.146407 -1.31035 33.259351 3.196 62.28862 137.5013 -5.729144 6.737 50.472 56.819 58.31 -7.9 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 48.77832 2.23298 12.715729 -12.510056 -5.0015 0.18885 3.360674 79.98066 16.871 54.1 19837.91904 6.06 9092.84481 0.10396 6.809352 16.4389 -24.91997 0.576 68.20116 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .0715 -0.986179 147.8765 14.8777 95.44 17287.652 SENSEX 14090.42296 350.53 12860.88409 -8.46 14650.99 19363.43 9788.581 53.682 74.57603 5.814016 7.503715 2.917 45.1864 1.9451 34.898825 -8.695 58.39657 -11.072838 37.0683 227.11058 -14.91136 0.7273 606.585286 -15.53165 37.611468 -7.432 67.00946 5.39339 4.99 17648.78001 -8.8043 216.15 66.71 17578.45433 -11.86095 8.6 14355.3287 195.12197 4.115076 136.1245 0.71291 15.051821 45.92 12938.HDFC GROWTH FUND Table:3.233155 165.351677 -0.7003 -23.86137 23.895 80.1887 196.2595 188.51 15550.24437 4.1379 13.8922 36.047 45.77091 267.19 20286.37 14544.01523 46.31 16415.642227 1.45284 1.72575 0.9299 9.72 9647.252267 86.762702 -5.72 15644.728304 22.099275 64.36982 6.035779 6.57 13461.0437 2.089 41.94E-05 29.8711 6.7421 9.

982 9424.8143 29.738601 17.6893)/ (95114.60885 58.5165 0 0 9.23893 6.8-628.131 56.666 120.3508 3396.83598 71.5 11403.085701 -2.6 112.94526 29.61 9708.792 3139.12012 30.39962 1.25 14625.31225 -5.1286 -3.6517 9.4832 757.34-427.7242 798.94174 84.45635 28.6966) .2009 JAN FEB MAR APL MAY TOTAL AVG 38.2551 20.448599 16.1872 17.307696 40.429 38.443 36.316396 13.7738 =10.941 Figure:3.71775 27.25 -7.68083 0.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (87908.24 8891.40465 304.37883 279.3 σm= √120.4334 822.3903 8.346504 31.05085 -6.7738 5.1579 3381.70431 -5.73 44.03 243.

0048 -0.646264 7.123803 -0.97185 1.039651 2.215146 0.069589295 -1.35676 -22.915115 0.863025 9.0667 -0.458671 66.233155 165.658905 2.77832 2.834616326 -2.= 87280.019852 0.11058 -14.503715 2.8711 6.696584 5.82125 0.351677 -0.921779 Table:3.46627 Rm Ri-Rm Dev frm ave sq of Dev frm av Rm2 .36982 6.642227 1.93478 1.737 50.16359 0.814016 7.723351 4.71291 15.376251086 -3.072838 37.810037944 -3.084872 1.20527 0.7003 -23.91136 0.338346289 0.47851 23.99125 -0.10396 0.416689 1.115076 136.157138 4.729144 6.11674 0.087461 5.45284 1.59167 3.39339 4.0715 -0.467278063 2.84481 0.286608411 4.144021 2.72949 -2.826418 0.276237 15.0035 10.9577 5.770908 -13.2774 25.729975995 -1.91904 6.8043 216.9949 6.64 = 0.76156 169.88409 -8.776702677 0.10 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV -7.585286 -15.39657 -11.311805316 -1.510056 -5.32496 0.38288 2.141565 13.155201 18.633708 -3.12/ 94686.898 570.47219 0.611468 -7.217374552 3.85817039 -0.18885 -8.996480234 -1.8901 -7.415022146 -2.005943 0.814378 -2.463838642 -0.736456 0.532865 3.04266 -17.077092104 0.568014871 0.4284 323.0777 110.63494 6.4734 -5.12197 4.228578 18.172243 7.5013 -5.53165 37.728304 22.047252 12.34358 1.564474 -3.146407 -1.8765 14.49437 12.06792 3.692551406 -2.259351 3.8174 44.413797413 0.510692544 -0.48752 2.737772055 -0.035779 6.741056 4.18137 1.11918 2.710078 0.9299 9.15727 121.393955855 -4.270008 -0.1245 0.45433 -11.

20045 -5.08570 1= [5+0.31225 -5.738601-5)] 0.004314 10.3471 2.40465 304.346504 31.93797 0.39962 1.085701 6. =(1.68083 0.44089E-15 -1.3508 3396.865017 9.3549 14.58603E-16 6.898825 -7.2551 20.51109 0.738601-5)] .54769 =-1.065677352 3.73916105 -0.7242 798.738601 -2.24646 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .49001 32.23893 6.8708 -3.54769 Sharpe Index (Si) = (Ri .268238 181.316396 13.Rf)/Si = (1.490725 =2.70431 -5.858190515 -0.DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 3.941 Standard Deviation for the fund’s excess return (S.217903695 3.490725 37.D.12012 30.) σi=√6.Rf)/Bi.517917027 -4.39206 0.Rf) =[5+0.45635 28.085701-5)/ 2.53641 Treynor's Index (Ti) = (Ri .94526 29.921779 =-4.6517 9.718797 0.099275 -2.88563 0.1872 17.921779 (0.Rf) ] =1.085701-5)/ 0.412777 -2.94174 84.547549815 5.20116 5.013767 Expected return E(Ri) = Rf + Bi (Rm .7403 6.921779 (0.

9264 HDFC LONG TERM FUND .98971)].diversification =0.738601-5)( 2.738601-5)] =2.Rf)] =[5+(0.071934 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .921779 (0.013767 Diversification =[Rf + (Rm .013767-2.940167 =-2.[5+0.Rf)(αi/ αm)]-[Rf + Bi (Rm .08570 1= [5+0.921779 (0.54769/10.738601-5)] 0.=1.Rf) ] =1.940167 Net selectivity= selectivity.

Inception Date Closing Date Option/Plan 10-Feb-06 27-Jan-06 Dividend Option. Specified Redemption Period A Unit holder can submit redemption/ switch-out request only during the Specified Redemption Period. 2009) Exit Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) Redemption / Switch-out from the Date of Allotment : • • • • • • Upto 12 months 4% After 12 months upto 24 months 3% After 24 months upto 36 months 2% After 36 months upto 48 months 1% After 48 months upto 54 months 0. the . Entry Load (purchase / additional purchase / switch-in) NIL (With effect from August 1. Dividend Option currently offers payout facility only.Investment Objective To achieve long term capital appreciation. Basic Scheme Information Nature of Scheme Close Ended Equity Scheme with a maturity period of 5 years with automatic conversion into an open-ended scheme upon maturity of the Scheme.5% After 54 months upto Maturity Nil No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment. Presently.Growth Option.

00% On the balance of the assets 1.25% On the next 300 crores average weekly net assets 2.Specified Redemption Period is the first five Business Days immediately after the end of each calendar half year. Normally dispatched within 3 Days Currently no purchases/ switch-ins are allowed into this scheme. Minimum Application Amount (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day. Type of Instruments Minimum Allocation Minimum Allocation Risk Profile of the Instrument (% of Net Assets) Equity & Equity related instruments Fixed Income Securities (including money market instruments) 0 30 Low 70 (% of Net Assets) 100 High .50% On the next 300 crores average weekly net assets 2.75% Investment Pattern The following table provides the asset allocation of the Schemes portfolio. Current Expense Ratio (#) (Effective Date 22nd May 2009) On the first 100 crores average weekly net assets 2.

445 SENSEX 14090.77832 2.729144 6.Investment Strategy The investment strategy of the Scheme is to build and maintain a diversified portfolio of equity stocks that have the potential to appreciate in the long run.1379 13.68 118.986179 147.94E-05 29.281232 2.93949 -1.37 14544.728304 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .561 100.49326 114.64612 6.47219 0.18137 1.70502 37.265256 -0.99088 -3.695 102.121633 13.09 13072.Foreign Securities HDFC LONG TERM FUND Table:3.127153 5.8765 14.24437 4.99 15318.Dedicated Fund Manager .407806 -2.627 109.12197 4.297178 5.8043 216.9577 5.93478 1.84481 0.146407 -1.46 14650.19 -7. Srinivas Rao Ravuri (since Apr 3. it will balance the same with a rational approach to selling when the valuations become too demanding even in the face of reasonable growth prospects in the long run.224 87.23298 12.39339 63.6 17291. Fund Manager Mr.72949 -2.1 13872.99 19363.87246 7.384876 4.86095 8.33891 6.072838 37.3287 195.81526 -1.49437 12.185 119.47851 23.337 91.506464 88. Companies identified for selection in the portfolio will have demonstrated a potential ability to grow at a reasonable rate for the long term.233155 165.218 -2.809352 66.383369 4.066125 -8.0887 3.035779 6. Anand Laddha .088315 28.1 19837. The aim will be to build a portfolio that adequately reflects a cross-section of the growth areas of the economy from time to time.782 86.00946 5.98066 16.754376 1.91997 0.7448 9.92319 0. While the portfolio focuses primarily on a buy and hold strategy at most times. 06) Mr.976 102.106209 -0.55165 -8.11 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV 95.13199 79.627 96.51024 26.51 15550.92 12938.56584 0.53165 37.

2774 25.8777 95.406 58.512268 154.94174 84.4832 757.86867 7.9451 34.632277 -4.554 96.67085 7.941 .10665 44.5731 61.31 9424.84256 5.2551 20.14885 20.3508 3396.0696 7.8807 1.72 15644.770908 -13.42296 350.8528 0.46878 -13.209 68.0102 -1.44 99.642227 1.8607 -22.0035 10.45433 -11.1245 0.1579 3381.045 88.617555 4.243891 4.898 570.24 8891.11833 -14.44 17287.4284 323.8901 -7.5013 -5.76156 169.15727 121.39208 -4.0048 -0.7273 606.78562 6.237 61.06 9092.6 14355.25 14625.68083 0.46627 37.8174 44.307696 40.4389 -24.50578 28.5 11403.3405 3065.359 82.78126 -18.20116 5.056 109.738601 38.7421 9.8253 -9.115076 136.11918 2.286 63.09697 169.45635 28.57 13461.37883 279.71775 27.31225 -5.9805 6.7434 -1.298 87.448599 16.15559 28.666 120.985265 -13.8121 80.1872 17.42559 10.2595 188.38966 267.785 59.31 16415.40465 304.1954 0.6517 9.2519 4.25 7.099275 -2.71 17578.762702 -5.346504 31.10396 6.05085 -6.4663 4.5165 0 0 16.18 85.105 103.28375 -4.4613 30.28862 137.14829 56.53 12860.04266 -17.6287 -7.72 9647.983 112.972 93.35071 28.202 110.31035 33.61 9708.3903 8.13517 -11.504 57.99 17648.7738 22.DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 128.0777 110.137851 15.930765 -11.17096 138.715729 -12.7003 -23.903626 0.298 70.582478 143.9674 813.9949 6.737 50.43 9788.7739 545.73683 9.75 14564.360674 -3.83598 71.828943 0.7242 798.76733 256.709 55.7335 5.032307 -13.39657 -11.958 20286.

427.6966) = 85680.57.4 σm= √120.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (85821.34.12 .Figure:3.7738 =10.141.2282)/ (95114.34/ 94686.64 = 0.904883 Table:3.

86867 7.137851 Rm Ri-Rm Dev frm ave sq of Dev frm av -8.64612 6.152892 2.146407 -1.8253 -9.02467 3.45433 -11.165915514 2.6819 0.6517 9.860821325 2.632277 -4.10396 6.9949 6.709067209 -0.770908 -13.35274 41.366111 -2.819663 2.334386466 -1.39657 -11.249893 1.81526 -1.099275 -2.16032 1.28375 -4.384876 4.07983 0.46878 -13.559545364 2.374315379 -1.07076 16.642227 1.7003 -23.741013 4.783809 0.340781 15.265256 -0.333502 2.00404 -6.12197 4.04266 -17.0102 -1.489256261 0.637374 2.0048 -0.729144 6.585118054 -1.066125 7.571389464 2.214357 -0.76471 1.33891 6.Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR -7.930765 -11.237772814 1.84481 0.432182 5.239372 0.469265 5.04935 -0.63588 13.013672 17.49437 12.5013 -5.679185121 1.95872 2.419039116 -4.281232 2.26999821 -1.8765 14.671205 -3.187192079 -0.526182 .577496505 1.985265 -13.97511 3.9805 6.111814 2.954222903 -3.07221 -2.386440599 -1.8901 -7.499893333 -1.2519 4.39339 4.46798 2.39208 -4.99557 15.743063 -2.359359 6.31225 -5.617555 4.509332488 6.971144712 -0.8607 -22.924329 3.15546 -6.127153 5.184475 -2.75718 0.0035 10.1872 0.476435 -0.512599 1.0661 -2.72949 -2.552088 -3.00545 -1.86903 0.046798071 3.035779 6.37657 11.76999 0.529961243 -3.48039862 -3.005183 0.650170515 5.064835 -2.18137 1.459513 3.11833 -14.034775537 -4.723063 30.754376 1.0696 7.87246 7.88115 1.554639268 0.540065 3.

738601 -2.243891.44089E-15 -1.35071 28.Rf)/Si = (0.828943 0.538895 Standard Deviation for the fund’s excess return (S.025223388 -4.243891-5)/ 0.738601-5)] = -0.595114 1.Rf) ] =0. =(0.904883 (0.610935739 -1.APL MAY TOTAL AVG 15.143932 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .25605 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .353486 Sharpe Index (Si) = (Ri .Rf) =[5+0.051083 210.478 5.58603E-16 2.243891-5)/ 2.Rf)/Bi.Rf) ] .10565 0.78562 6.353486 =-2.2551 20.68083 0.904883 (0.90004 Expected return E(Ri) = Rf + Bi (Rm .45635 28.904883 =-5.49471 1.8519 -0.) σi=√5.538895 =2.243891 17.738601-5)] =1.D.530513 -13.[5+0.02088 Treynor's Index (Ti) = (Ri .

904883 (0.[5+0.943474 =-3.[5+0. Basic Scheme Information Table:3.100 .738601-5)] = -0.=0.Rf)] =[5+(0. 2009) Exit Load.904883 (0.13 Nature of Scheme Open Ended Equity Linked Saving Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Mar 31.Rf)(αi/ αm)]-[Rf + Bi (Rm . (as a % of the Applicable NAV) Minimum Application Amount Nil Rs.diversification =-0.90004 Diversification =[Rf + (Rm .98971)].943474 Net selectivity= selectivity. NIL (With effect from August 1.738601-5)( 2. 1996 Dividend Option.84352 HDFC TAXSAVER Investment Objective The investment objective of the Scheme is to achieve long term growth of capital.738601-5)] =2.353486/10.5000 and in multiples of Rs.90004-2. Growth Option.243891.

If the investment in equities and related . as applicable. overseas equity. The ELSS (Equity Linked Savings Scheme) guidelines. The Scheme may also invest up to 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and and other uses as may be permitted under the regulations and guidelines. money market instruments & cash Minimum 20% Low to medium Investment in Securitized debt. not exceeding 40% of its net assets. in overseas markets in Global Depository Receipts (GDRs). Lock-In-Period Net Asset Value Periodicity Redemption Proceeds 3 yrs Every Business Day Normally despatched within 3 Business days Investment Pattern The asset allocation under the Scheme will be as follows: Table:3. would not exceed 20% of the net assets of the scheme. bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time. would be adhered to in the management of this Fund.14 SR NO. if undertaken. ADRs. The Scheme may also invest a part of its corpus.thereof to open an account / folio. ASSET TYPE (% OF PORTFOLIO) RISK PROFILE Medium to high 1 Equities & Equities related instruments Minimum 80% 2 Debt securities.

130678 60. sold or promoted by Indian Index Service & Products Limited (IISL).042897 50.89 4934.315495 22.1784 -0.44641 1.27 198.30087 3.533254 24.82642 -11.284 173.6968 11.39982 1.411 0.46 5185.737 196.18429 31.69787 -1.31236 12.92575 7.966289 -1.34429 5.0864 1.935177 -2.481 173.133692 5.25 5411. Fund Manager : Dhawal Mehta HDFC TAX SAVER FUND Table:3.3508 43.787455 6.58732 16.34478 9.9754 0.8689 2.3285 0.845 152.05529 2.090523 15. HDFC Tax saver. Benchmark Index : S&P CNX 500.48562 5.88 6289.735 204.15 NAV S&P CNX 500 4899.43691 247.3 6997.73 4605.82 5483.300549 14.5366 4.62913 -16.099566 82.18558 87.80145 4.8066 38. it would be endeavoured to review and rebalance the composition.837141 -15.214527 6.92 5762.553344 1.88767 5.2786 265.39 4504.3378 300.277 .94536 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL 146.32486 83.204052 -8.48 6245.45 6356.24148 16.3687 -1.5533 33.882 144.34347 11. which is benchmarked to S&P CNX 500 Index is not sponsored. endorsed.61843 17.475077 37.765 156.753707 -10.56268 1.6 7461.61 161.88956 25.3759 8.730242 4.31318 6.54465 -2.36928 64.11 7163.491863 134.330208 25.12149 257.07891 55.24564 7.133 133.8146 5.519756 -1.38584 -9.72229 159.6065 171.10258 4.52824 0.47501 107.598018 -17.00736 3.2248 307.535 163.29 6094.30127 7.784819 -9.707729 92.64039 -2.07 -7.2974 1.308 153.134 135.6591 65.instruments falls below 80% of the portfolio of the Scheme at any point in time.065494 -0.60296 3.95 5223.52802 -0.02 158.51353 -3.66403 1.096606 0.568075 107.266 272.

555 89.957 98.57 3379.67611 -3.25591 0.553966 -3.47 5337.9731 7.55257 6.512113 15.6295 -6.0859 55.751491 -9.61636 -18.01989 3.682 99.38886 8.585078 -2.85673 224.83862 14.0357 37.3455 20.3303 231.93165 -26.972 93.564738 98.05 144.2 3539.44049 29.74352 31.627 117.6911 3499.9077 14.7883 30.79695 -25.53341 7.423076 -0.64708 16.45 135.3694 -4.87 3538.70723 -4.85299 8.50492 667.454188 0.99875 28.63768 695.58525 -16.8396 3469.1822 750.19497 288.9625 788.23455 8.36369 0.548703 -5.793 126.83098 42.0042 6.56493 0.588 821.27962 -10.96764 27.0162 7.2958 -8.8707 56.95447 13.08365 28.23212 66.28 4807.031112 33.57 3403.54 5480.52145 7.449 97.186 .515223 4.81 4929.07155 -15.540414 67.47327 -4.33 3720.82188 9.77372 79.91109 254.078188 120.53 3635.9628 -27.11 -6.4005 -5.119 90.161582 23.77619 324.70062 195.MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 148.5062 3293.55156 68.1514 41.44354 57.05253 0 43.288584 13.063 112.319696 14.953 142.87114 1.827 5937.25212 15.711187 -6.60679 86.98 5297.0949 731.358 132.51 4278.417 123.811856 -5.

58525 0.Figure:3.564696 4.00736 3.82642 -11.75106 1.204052 -6.93915 -1.2974 1.69787 -1.52802 -0.833.61843 17.52E-05 .54.5 σm= √123.4863 -1.527266 -3.30127 7.305818 -2.197757 5.98/ 97143.837141 -15.54465 -2.130678 -5.92575 7.835475 2.38182 5.24564 7.03588 -0.00968 2.55362 -0.5671)/ (97977.30958 -1.16 Ri Rm Ri-Rm Dev frm ave sq of Dev frm av 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY -7.4935 4.62913 -16.133692 5.944765 Table:3.5426) = 91777.34478 9.019444 7.787455 6.19178 -4.709373 4.364366 -1.966289 -1.07155 -8.290886 3.80145 4.784819 -9.78823 2.60147 2.456738 1.61124 -2.011095 -5.67 = 0.334158 2.5366 4.921956 19.590227 3.230641 1.13617 -1.519756 -1.31318 6.13139 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (92221.128833 1.553344 1.243546 23.44653 0.760291 2.443.05529 2.688985 -1.119058 -2.531929 2.096606 0.79199 1.001287 0.21.1784 -0.413726 0.444217 0.31236 12.653763 1.003894 1.17139 0.300549 14.071208 -0.92663 -0.9077 =11.84678 1.31788 -2.730242 4.

031112 1.319696 14.254467 = 2.43732 2.08349 2.JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG -15.061035 3.44211 -3.548703-5)/ 2.358035 0.56698 -0.007152 0.292262 Sharpe Index (Si) = (Ri .47327 -4.134702 1.314743 0.92415 -1.295331 19.454188 0.956929 0.548703 -16.80758 0.99875 28.36369 0.67611 -3.82188 9.0162 7.515223 4.2958 -8.959696 3.D.073584 -3. =(0.) σi=√ 5.7323 13.711187 -6.230684 -1.512113 15.38886 8.751491 -9.585078 -2.548703-5)/ 0.52145 7.65088 5.25212 15.79695 -25.08457 0.421115 10.725415 147.93165 -26.43934 -0.325174 -0.Rf)/Bi.54344 -4.23455 8.48241 -2.9731 7.94188 Treynor's Index (Ti) = (Ri .08365 28.79715 -0.105738 0.944765 =-4.3694 -4.71154 .168474 -13.61711 -1.55599 3.44049 29.226778 -2.811856 -5.1251 5.70919 2.Rf)/Si = (0.254467 Standard Deviation for the fund’s excess return (S.87114 1.292262 =-1.854046 2.441737 1.71309 1.950372 0.921319 5.5075 -0.

Rf) ] =0.Rf)(αi/ αm)]-[Rf + Bi (Rm .031112-5)] Diversification = [Rf + (Rm .70163-2.63399 HDFC TOP 200 FUND Investment Objective .944765 (1.13139)].[5+0.[5+0.932363 Net selectivity= selectivity.944765 (1.944765 (1.Rf) =[5+0.Rf) ] =0.Rf)] =[5+(1.944765 (1.diversification =-0.70163 Expected return E(Ri) = Rf + Bi (Rm .70163 [5+0.031112-5)] = -0.932363 =-3.250332 Fema Measure: Selectivity =Ri –[ Rf + Bi (Rm .548703 = -0.031112-5)] =2.Jenson alpha (αp) = Ri –[ Rf + Bi (Rm .031112-5)( 2.292262/11.031112-5)] =1.548703.

5000 and in multiples of Rs.The investment objective is to generate long-term capital appreciation from a portfolio of equity and equity linked instruments. Lock-In-Period Nil Investment Pattern The asset allocation under the Scheme will be as follows: . Minimum Application Amount Nil Rs. 1996 Dividend Option. 100 thereof. Growth Option. NIL (With effect from August 1. 1000 and in multiples of Rs.100 thereof to open an account / folio. Additional purchases is Rs.17 Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Open Ended Equity Growth Scheme Oct 11. The investment portfolio for equity and equity-linked instruments will be primarily drawn from the companies in the BSE 200 Index. Further. Basic Scheme Information Table:3. the Scheme may also invest in listed companies that would qualify to be in the top 200 by market capitalisation on the BSE even though they may not be listed on the BSE This includes participation in large IPO’s where in the market capitalisation of the company based on issue price would make the company a part of the top 200 companies listed on the BSE based on market capitalisation. 2009) Exit Load.

money market instruments & cash Balance in Debt & Money Market Instruments Low to medium Investment in Securitised debt. Stock specific risk will be minimised by investing only in those companies / industries that have been thoroughly researched by the investment manager's research team. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the regulations and guidelines. if undertaken. Prashant Jain HDFC TOP 200 FUND Table:3.18 SR NO. would not exceed 20% of the net assets of the scheme. Investment Strategy & Risk Control The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. Benchmark Index : BSE 200 Fund Manager : Mr. Risk will also be reduced through a diversification of the portfolio.19 Ri Rm Ri Rm Rm-AvRm (RmAvRm)2 Rm2 . ASSET TYPE (% OF PORTFOLIO) RISK PROFILE 1 Equities & Equities related instruments Upto 100% (including use of derivatives for hedging and other uses as permitted by prevailing SEBI Regulations) Medium to high 2 Debt securities.Table:3.

87568 8.805 119.718 147.25106 8.794 147.28242 -5.72871 3.80018 23.66396 67.108374 5.97955 4.740971 7.162 7.0228 586.1045 41.10203 172.14 1766.69286 18.3696 694.2561 -6.619219 16.215 158.754 92.43 -8.2765 -8.096 120.84641 13.08253 21.59 1107.7035 30.7 2118.07041 42.9259 14.82686 0.335555 165.87 2454.01963 -10.20874 27.78393 1.20292 -6.32241 14.19392 7.90152 0.53251 70.2559 135.6897 2.192992 4.553069 161.884959 -12.39 2217.324 86.8552 11.549038 49.798 88.04015 -1.7757 10.044536 6.35 1545.08 1804.41 2157.356 -7.217817 87.359 103.57534 373.4203 0.272485 4.48622 83.4523 46.032233 37.06 1044.51435 -9.424 123.10725 11.68291 59.727878 -3.22962 -0.5812 45.028881 5.2531 5.7477 40.461398 0.379 92.269 104.201 140.33195 7.05824 15.709088 197.138324 68.31223 25.2007 JAN FEB MAR APRI L MAY JUNE JULY AUG SEPT OCT NOV DEC 2008 JAN FEB MAR APRI L MAY JUNE JULY AUG SEPT OCT NOV DEC 2009 JAN FEB MAR 112.10612 39.930167 185.11594 2.011372 140.3326 6.16032 7.5295 -19.04454 -1.93116 2.18 1749.222966 -13.223904 -5.1865 29.986335 6.64918 -5.09063 -4.7 1145.27 1556.34081 -0.544 143.675 115.235 118.33909 31.22 1644.23 2656.346398 67.68 1062.870899 -4.809216 24.552 1687.68366 312.290658 29.0409 -0.0068 67.1733 212.11 1782.53532 208.93887 257.47 1932.9614 -1.09014 1.113254 103.86 2439.7031 -26.19534 9.521175 1.902 129.5298 101.12144 0.52 3.57927 -12.49 160.686059 -8.321997 -16.110192 53.546 92.7406 -16.25075 0.074 84.964452 -13.51987 64.14027 63.077788 1.81 1894.34 127.9318 8.3108 0.6001 202.18 1857.53177 8.304208 -8.951768 -1.72868 -6.60255 410.72 1666.132443 159.998295 2.356 169.11003 -22.195906 6.17954 6.6727 20.242504 -16.45 -20.6036 744.249334 189.031261 -2.35 1156.61163 287.4821 0.381905 1.504 111.15013 0.345093 4.71 -0.25839 7.5264 0.950392 -5.689 131.61126 9.886131 49.27341 8.614 126.94 1140.5581 0.6342 229.6236 -27.52 2038.49978 -13.6377 52.50896 .13774 14.08 1555.40517 35.0016 -0.588556 8.90249 78.54111 88.7699 115.52 2230.025 137.

44073 0 0 273.25 4165.051 Figure:3.38 1772.APRI L MAY Total Avera ge 107.36124 25.341 1339.1616 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] .24168 29.332192 17.82 16.5198 4141.584 139.3341 1047.30138 1.920507 283.326 147.7742 0.2498 3632.0646 988.867 129.9045 304.52467 31.6 σm= √147.3389 955.7453 16.9045 =12.51833 37.44517 32.

04015 -1.14795 -1.206326 0.521175 1.10725 11.90152 0.001871 0.32241 14.15013 0.006646 0.709088 197.222966 -13.14846 1.160557 1.048399 6.9318 8.896699 70.028881 5.01963 -10.68109 -0.818654 -2.9259 14.51175 3.0409 -0.332991 -1.986335 6.1 = 0.10998 -1.195906 6.= (101720.04454 -1.4203 0.242504 -16.434043 0.97955 4.559639 1.02189 2.40697 3.4133)/ (116621.560142 -0.998295 2.454935 -0.05824 15.809216 24.90422 0.961.3093) = 100758.7406 -8.192992 4.3.7035 30.4.039273 0.951768 -1.521668 2.664.37721 0.0016 -0.315473 4.5264 0.454231 -0.788892 0.431223 -2.668006 2.52 3.40517 35.46388 0.906851 2.346398 67.588556 8.335555 165.10883 1.5295 0.165624 9.01954 3.092773 0.73583 -1.04255 0.147515 1.868932 Table:3.330164 0.57534 Rm Ri-Rm dev frm av sq of dev Rm2 .74887 -1.20 Ri 2007 JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC 2008 JAN FEB MAR APRIL MAY -8.740971 7.8552 11.04325 0.923436 -2.6342 229.3108 0.64918 -5.52288 -1.012364 2.727878 -3.57927 -12.044536 6.2559 135.92131 1.549038 49.11119 1.62759 -0.93887 257.9/ 115957.09014 1.081521 -0.285389 11.16032 7.

30138 1.25 4165.69286 18.647 -0.36124 25.030315 17.884959 -12.238165 1.3341 1047.90249 78.3696 694.13605 1.962124 Sharpe Index (Si) = (Ri .60285 0.60333 2.254597 7.138324 17.7477 40.5515 -2.3326 6.364007 4.84291 11.528901-5)/ 0.686059 16.345093 4.51833 37.332192-5)/ 1.61126 9.304208 -8.00424 -0.608803 10.170579 0.50896 304.611496 0.80821 1.411685 -2.008493 0.870899 -4.00756 -4.962124 =-1.615179 3.72871 3.162 7.52718 0.24168 29.963188 2.01851 2.920507-5)] = -0.[5+0.6882 -0.920507 3.12301 Expected return E(Ri) = Rf + Bi (Rm .223904 -5.051 Standard Deviation for the fund’s excess return (S.6377 52.Rf) ] =1.D.8693 Treynor's Index (Ti) = (Ri .868932 (0.099889 1.28242 -5.356 -7.849932 373.593101 4.381905 1.48622 83.11003 -22.219896 -1.058681 1.48424 13.332192.27341 8.JUNE JULY AUG SEPT OCT NOV DEC 2009 JAN FEB MAR APRIL MAY -16.22105 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .44517 32.015015 -1.Rf)/Bi.415923 0.304156 4.41925 4.7981 3.75889 -0.553069 161.5924 107.332192 -19.2561 -6.) σi=√3.7031 -26.547736 -1.18142 -3. = (4.7742 0.33909 31.Rf) .09063 -4.849932 =1.19534 9.488145 1.868932 =-4.20349 -2.Rf)/Si = (1.25839 7.

886626 =-2.332192.920507-5)] = -0.1616)].868932 (0.Rf)] =[5+(0.920507-5)] =2.868932 (0.962124/12.455198 Fema Measure: Selectivity =Ri –[ Rf + Bi (Rm .12301 Diversification =[Rf + (Rm .Rf) ] =1.21 FUND BENCHMARK RETURNS RETURN EQUITY FUND Capital builder 12.886626 Net selectivity= selectivity.diversification =-0.8529 11. Performance of Fund portfolio and Benchmark return for 29 months (jan07-may08) Table:3.872865 11.=[5+0.920507-5)] =1.87834 3.[5+0.[5+0.868932 (0.920507-5)( 1.8529 .Rf)(αi/ αm)]-[Rf + Bi (Rm .12301-2.2 ANALYSIS OF THE OBSERVATION: The table given below illustrates the comparison among the analysed funds based on the different measures of comparison.22546 4.

065339 Figure:3.792016 11. . Equity fund and Growth fund have earned greater return as against the market earning.Growth fund Long term adv Tax saver Top 200 16. Long-term advantage and Tax saver funds have even negative returns.0141 3. Top 200.792016 3.7 Performance Evaluation against Benchmarks The above table presents return and risk of the six funds along with market return and risk.48711 -7.63043 -0. Long term advantage and Tax saver funds have not earned higher return than the Market portfolio.89438 24.8529 5. Capital builder. From the table it is evident that.

13239 2.90004 -3.63043 HDFC Tax saver HDFC Top 200 11.22546 HDFC Equity HDFC Capital Builder 11.292262 0.353486 0.0836 11.48711 HDFC Long Term Adv 10.868932 -1.13139 2.8693 -4.94188 -4. fund B value Sharpe ratio Treynor ratio Jenson’s alpha Fema Retuns jan07may08(29 months) 12.63399 -0.71154 -0.D.84352 -7.545136 0.Comparison of ratios: Table:3.33967 4.12301 -2.D.962124 0.392215 1.22 Fund name S.87834 24.13239 2.921779 -1.24646 0.89907 0.013767 -2.54769 0.070488 -3.64557 -3.02088 -5.53625 -0.98971 2. market S.0096114 -1.904883 -2.98971 2.89438 12.872865 HDFC Growth Fund 10.1616 1.9264 16.25605 -0.936265 -1.944765 -1.66872 -4.22105 -0.0141 .39357 -3.70163 -3.53641 -4.

Standard Deviation of the Market: High standard deviation of a fund implies high volatility and a low standard deviation implies low volatility. HDFC equity fund, HDFC capital Builder and HDFC Tax saver take S&P CNX 500 as their benchmark, HDFC Growth fund and HDFC long term have taken Sensex as bench mark and HDFC Top 200 has taken BSE 200 as its bench mark. We found out that BSE 200’s S.D. is 12.1616, which is greater than Sensex and S&P CNX 500 having 10.98971 and 11.13139 S.D. respectively. Therefore, BSE 200 is more volatile than Sensex and S&P CNX 500. Standard deviation of the Fund: It has been found that HDFC Top 200’s S.D. is lesser than all other funds. Although benchmark index (BSE 200) is more volatile as it has higher S.D. than other indexes still HDFC Top 200 is less volatile because of lesser fund S.D. This is might be because of diversification of unsystematic risk as it compensates the systematic risk. β Value : As we know in case of funds, beta would indicate the volatility against the benchmark index. It is used as a short term decision making tool. A beta that is greater than 1 means that the fund is more volatile than the benchmark index, while a beta of less than 1 means that the fund is more volatile than the benchmark index. A fund with a beta very close to 1 means the fund’s performance closely matches the index or benchmark. The analysis illustrates that HDFC Equity fund’s is less volatile and its performance is very close to its benchmark as its beta value is 1.0096114 compared to other funds which have beta value lesser than 1 point. HDFC Top 200’s beta value is more volatile than the benchmark as its value is 0.868932, which is very far from point 1. Sharpe ratio: A fund with a higher Sharpe ratio means that these returns have been generated taking lesser risk. In other words, the fund is less volatile and yet generating good return. The analysis shows that all the funds have negative Sharpe ratio therefore they are more risky. Comparing all the funds HDFC growth fund has lesser negative marks that means its return 16.48711 is generated taking lesser risk.

Treynor ratio: While a high and positive Treynor's Index shows a superior risk-adjusted performance of a fund, a low and negative Treynor's Index is an indication of unfavourable performance (systematic risk associated with it (beta)). All the funds are having negative Treynor’s ratio which means they are affected by the volatility of the market (systematic risk)or by the great recession. Jenson’s alpha: Its measure involves evaluation of the returns that the fund has generated vs. the returns actually expected out of the fund given the level of its systematic risk. Higher alpha represents superior performance of the fund and vice versa. The analysis points out that all the funds are having negative alpha except HDFC Equity fund and HDFC Growth fund which have positive points. Jenson alpha ratio justifies that these two funds are at least able to achieve the expected return given the level of their systematic risk. Fema measure: The Net Selectivity (Fema) represents the stock selection skill of the fund manager, as it is the excess returns over and above the return required to compensate for the total risk taken by the fund manager. Higher value of which indicates that fund manager has earned returns well above the return commensurate with the level of risk taken by him. It has been that all the funds are having negative net selectivity because of the higher risk found both in systematic risk (B) and unsystematic risk. This findings point out, that the stock selection of the fund manager has been failed because of the systematic risk i.e. recession. Comparing to other funds HDFC Growth fund (-2.9264) has lesser negative points in this time of great crisis. This indicates that HDFC Growth fund is getting enhanced return by nullifying systematic risk and unsystematic risk.

From the above analysis there is no fund which has consistency. The funds are being affected very badly either by the systematic risk or by the unsystematic risk. As we observe closely, it is the HDFC Growth fund, which has better option for the investment. Its Sharpe ratio is

lesser negative than other funds which illustrates that its return is less affected by overall risk. Its alpha value is more than 0 which means its less affected by the market risk (systematic risk) and also its Fema value (selectivity) has lesser negative value which has managed to nullify systematic risk and unsystematic risk during the time of recession. An investor who is entering into the capital market for making long-term investment, the volatility of the market is important to accomplish his or her goal and these expectations are often formed on the basis of historical record of monthly returns, measured for holding period and other important ratios. We will take this fund (HDFC Growth fund) for further analysis of its portfolio.

HDFC Growth Fund Portfolio Analysis
Table:3.23 Portfolio Name of Instrument 31-May-09 Industry + Quantity Market/ Fair Value(Rs. In Lakhs) % toNAV

Equity & Equity Related (a) Listed / awaiting listing on Stock Exchanges State Bank of India Zee Entertainment Enterprises Ltd. ICICI Bank Ltd. Bharti Airtel Ltd. Crompton Greaves Ltd. Bharat Petroleum Corporation Limited Housing Development Finance Corporation Ltd.$ Exide Industries Ltd. Divis Laboratories Ltd. Banks Media & Entertainment Banks Telecom - Services Industrial Capital Goods Petroleum Products Finance Auto Ancillaries Pharmaceuticals 448,000 4,160,179 932,397 750,346 2,099,819 926,557 182,500 5,319,910 318,535 8,372.45 7,001.58 6,901.14 6,159.59 5,513.07 4,305.71 3,977.77 3,769.16 3,666.18 7.20 6.02 5.93 5.30 4.74 3.70 3.42 3.24 3.15

861.397.365 2.607. Thermax Ltd. Eimco Elecon (India) Ltd. Nagarjuna Construction Co.38 2.63 1. H T Media Ltd.83 2.65 1.000 913.050. C & C Constructions Ltd Pharmaceuticals Media & Entertainment Chemicals Consumer Non Durables Pharmaceuticals Consumer Non Durables Fertilisers Pharmaceuticals Petroleum Products Petroleum Products Consumer Non Durables Banks Software Software Banks Auto Ancillaries Ferrous Metals Consumer Non Durables Transportation Industrial Capital Goods Oil Construction Project Paper Products Industrial Capital Goods Auto Ancillaries Construction 272.685.45 1.000 220. Biocon Limited Reliance Industries Ltd.77 1.50 2.319. Oil & Natural Gas Corporation Ltd. Ballarpur Industries Ltd.16 1.301.621.95 1.268 420.81 2.721 2.12 1.09 2.66 1.345.55 .307.967.000 569.52 2.355 3.98 1.271 1.367.441.366 111.96 1.264.70 0.06 2.34 2.29 1.507.766.78 2.85 0. Dr Reddys Laboratories Ltd.31 2.03 987. ITC Ltd.46 2.04 1. Dabur India Ltd.120 400.287 276.250 633.35 2.926.00 1.55 2.305 1.454 396.95 2. Bank of Baroda Infosys Technologies Ltd MphasiS Limited Axis Bank Ltd Apollo Tyres Ltd Tata Steel Limited Hindustan Unilever Ltd.24 1.40 1.000 5. Amara Raja Batteries Ltd.807. Ltd.46 2.000 1.84 2.30 1. Solar Explosives Ltd.608.496 3.18 705. Coromandel Fertilisers Ltd.99 990.47 1.428 836.368.353 711.59 1. Nestle India Ltd.305.41 2.39 1.462.682. Noida Toll Bridge Company Ltd.300. Hindustan Petroleum Corporation Ltd.000 367.916.433.24 2.94 1.738 3.000 653.713.Sun Pharmaceutical Industries Ltd.85 811.257 160.69 1.61 0.719.79 2.12 0.83 2.151 120.006 104.058.97 635.85 0.115 469.

42 3.299.612 538.912 710.85 199.01 531.92 1.21 207.36 0.24 Sectoral Allocation of Assets(%) Banks Pharmaceuticals Media & Entertainment Consumer Non Durables Petroleum Products Industrial Capital Goods Telecom .60 5.00 Short Term Deposits as margin for Futures & Options Cash margin / Earmarked cash for Futures & Options Other Cash.548.30 3.Services Auto Ancillaries Finance Software Chemicals Fertilisers Ferrous Metals Construction Transportation 16.45 100.668 424.Maytas Infra Ltd KNR Construction limited ISMT Ltd.32 116.94 7.00 5.000.17 87.00 8.46 0. Disa India Ltd Technocraft Industries (India) Ltd Sub total Total Construction Construction Ferrous Metals Industrial Products Engineering Ferrous Metals 761.072.67 1.Cash Equivalents and Net Current Assets Net Assets Table:3.33 0.86 4.31 2.39 8.41 2.24 .36 7. Ahmednagar Forgings Ltd.548.679.597 1.47 0.48 7.07 101.48 1.72 6.37 10.745 552.25 245.234 12.67 101.21 0.24 1.30 5.99 0.18 0.175.33 87.53 413.

21 0.18 12.85 0.8 .85 0.12 0.67 100 Figure:3.Cash Equivalents and Net Current Assets TOTAL 1.Oil Construction Project Paper Products Industrial Products Engineering Cash.

91 49.) Returns (%) ^ Benchmark Returns (%) Sensex December 30.17 7. 2004 June 30. Rs.A 10 37. 2006 June 30. 1999 September 11.A. 2000 Last Six months (182 days) Last 1 Year (365 days) Last 3 Years (1096 days) Last 5 Years (1826 days) Last 10 Years (3653 days) Since Inception (3214 days) 41.472 36. 57.95 24.67 10.219 Per unit) Period NAV Per Unit (Rs.Table:3.31 N.439 N.65 .034 16. 21.74 13.697 53.23 7.01 16.25 HDFC Growth Fund Date (NAV as at evaluation date 30-June-09.65 28. 2008 June 30.34 13. 2008 June 30.

This may indicate net inflows into the fund. . Other high-profile exits include DLF. software exposures have been pared in the six-month period. Construction and predictably. Hanung Toys and Tata Power. Sector Moves: There is a fair bit of stability in terms of top sector holdings in the portfolio. HDFC Growth Fund invests in stocks across market capitalisations. HT Media and Dr Reddy's Labs.9 HDFC Growth Fund . ONGC and BHEL are the stocks retained by the fund during the period and are among the fund's top holdings.39 per cent) and pharmaceuticals (10. and Punj Lloyd. Axis Bank.Analysis It requires a lot of research and constant watch on the capital market for a fund manager to analyze the portfolio of the particular fund. In the latest portfolio. The fund has managed to consistently beat its benchmark Sensex over one-. HPCL. Banks and consumer non-durables also figure among top holdings in the fund. Banks (16. The power sector has been exited. Interestingly.37 per cent) sectors continue to be the top two sector holdings.48 per cent). with several stocks whose prices rose between 60-105 per cent have been exited. SBI. While capital goods and banks have done well in the past year. I took the secondary data from the fund review of the article corner from The Business Line web site. Despite a large-cap bias. three. while telecom services and auto ancillaries exposures have been increased substantially. mid and small cap stocks account for 28 per cent of the portfolio. media and entertainment (8. and have seen increased exposures over the September-February period. The fund has also taken profit booking opportunities. Reliance Industries.Figrure:3. Stock Moves: Most stocks are those whose prices have fallen during September-February. although exposures have been a bit reduced. Ranbaxy Labs. the fund has invested in as many as 52 stocks across 18 different sectors making it a fairly diversified portfolio. These include. I comprehended the analysis and concluded my view as stated below.and five-year periods. The respective sector indices were beaten down by over 25 per cent in the last couple of months. include stocks such as Zee Entertainment. which were not part of the portfolio six months ago is now in the top ten sector holdings for the fund. they have been among the worst hit in the recent meltdown.

other funds were found very poor in diversification. which were not aligned with strategy of the fund portfolio.3. the portfolio theory teaches us that investment choices are made on the basis of expected risk and returns and these expectations can be satisfied by having right mix of assets. a good model of asset classes is the one that can explain a large portion of the variance of returns on the assets and there were some stocks in the fund portfolio. is carefully and logically constructed.  Hence. The portfolio was showing constructive outcome in long time horizon and the results can be improved by making the minor changes in fund portfolio. It offers advantages of diversification. market timing.  One of the findings that I came across is that generally. Although all the funds are affected by the global meltdown.  The optimal situation involves the selection that proceeds from sensible assumptions. and selectivity. HDFC Growth fund is found highly diversified fund and because of high diversification. (recession) still HDFC Growth Fund has better performed comparing to other funds for its systematic and unsystematic risk. and is broadly consistent with the data while collecting the stocks for the portfolio. it has reduced the total risk of portfolio. we too studied the portfolio of HDFC Growth fund. market timing. For the further clarification. we found out that the HDFC Growth Fund was among the best performers fund.  Further. and selectivity. Although HDFC Top 200 Fund and Equity Fund performed better in terms of returns but these suffered by the systematic risk (market volatility) and lack of diversification.4 FINDINGS  As far as analysis is concerned. In the comparison of sample of funds. .

Other funds such as HDFC Capital Builder Fund. In the sample. these can take advantage by diversification.  The fund manager can divide all securities into several asset classes and tries to construct an efficient portfolio based on expected returns. HDFC Long term Advantage Fund can earn better returns by adopting the marketing timing strategy and selecting the under priced securities. which goes to reduce the risk if the same return is given to the investor at a reduced risk level. Growth oriented mutual funds are expected to offer the advantages of Diversification. which in turn can be done by identifying highly volatile shares. HDFC Growth Fund and HDFC Top 200 fund is found to be diversified fund and because of high diversification. HDFC Growth Fund and HDFC Top 200 fund) have performed better than their benchmark indicators. the compensation for risk might seem adequate. Whereas. risk.  The fund manager of HDFC Equity Fund.3. others are low diversified and because of low diversification their total risk is found to be very high. HDFC Growth Fund and HDFC Top 200 fund can improve the returns to the investors by increasing the systematic risk of the portfolio. it can be noted that the three growth oriented mutual funds (HDFC Equity Fund. Alternatively. HDFC Long term Advantage Fund did not perform well even some performed negatively. HDFC Growth Fund and HDFC Top 200 fund have performed better than the benchmark of their systematic risk (volatility) but with respect to total risk the fund have not outperformed the Market Index.5 RECOMMENDATIONS: Considering the above analysis. and correlations of indexes representing these asset classes. Further. The investment should be done in the bench mark indexes to get an “efficient” portfolio in such a way that no other combination of these indexes would result in a portfolio with a higher return for a given level of . HDFC Equity Fund. Market timing and Selectivity. it has reduced total risk of the portfolio. Though HDFC Equity Fund. The fund manager of HDFC Capital Builder Fund. the fund managers of these under performing funds are found to be poor in terms of their ability of market timing and selectivity.

Even at this juncture it would still be recommended that instead of going ahead only on the basis of risk and return. It is not advisable to apply just procedure or approach for all situations at least when it comes to investments though the used measures are highly reliable in the studies done on similar veins. . It should be emphasized. sector impact. however.  These measures are more useful to investors who are putting their money into one diversified fund and are able to use leverage or invest in the risk-free asset.risk. other indicators like new projects. When the investor is investing in the different funds. individual sentiments about companies etc besides ‘common sense and intuition’ may also be looked into. that this is not a fully efficient portfolio because information about correlations among individual securities within an index and across the indexes is lost in the transition from individual securities to the benchmarks that represent them. To construct an efficient portfolio. an investor must take account of the correlations among the being considered. the fund’s marginal contribution to the portfolio’s risk and return is more important than its individual security characteristics.

To use this approach to portfolio selection effectively. investors would benefit from estimates of future asset returns. My study is to get the feel of how the work is carried out in relation to fund’s portfolio aspect.6 CONCLUSIONS: Mutual fund has become one of the important sources for investing. . Thus. It is quite likely that a more efficient portfolio can be constructed directly from funds. as well as from fund management’s disclosure of future asset exposures and appropriate benchmarks. the two-step process of choosing an asset allocation based on the information about benchmark indexes and then choosing funds in each category may be one of the best realistically attainable approaches. It has been a great opportunity for me to get a first experience of Mutual Funds. risks and correlations. I got an opportunity in relation to the documentation and also the portfolio analysis that have been carrying out in facilitating the investor and the fund manager.3.

gov. Security Analysis and Portfolio Management (sixth Edition 1995) by Donald E..yahoo.amfiindia.com www. 2.hdfcfund.com www.in.moneycontrol.REFERENCES Books: 1. The Indian Financial System (second edition) by Bharati V. Pathak.com www. Magazines: • • Money Outlook (May &June 2009) Business world (May & June 2009) Websites • • • • • • • • • • • • www. 3.valueresearch.com www. licensees of Pearson Education in South Asia.businessweek.com .bseindia. Fisher and Ronald J.in www. Published by Dorling Kindersley (India) Pvt.com www.sebi.mutualfundsindia.com www.com www.com www. Publication: Pearson education.com www. Ltd. Jordan.com www.investing.businessline. Security Analysis and Portfolio Management by Khan and Jain.nseindia.indiainfoline.finance.

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