Analysis of HDFC Mutual Fund

Analysis Of HDFC Mutual fund
ANALYSIS OF HDFC MUTUAL FUND
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I #IDNYASA $% $HOI& the student of M5 Com50II Accountancy )emester III (42,8042,1) here>y Declare that I ha9e completed the pro:ects on ANALYSIS OF HDFC MUTUAL FUND *he information su>mitted is true and original to the >est of my $nowledge5
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Ac5no67e"8ement
*o list who all ha9e helped me in difficult >ecause they are so numerous and the department is so enormous5 I would li?e to ac?nowledge the following as >eing idealistic channels and fresh dimension in completion of this pro:ect5 I ta?e this opportunity to than? the UNI'(&SITY OF MUM$AI for gi9ing me a chance to do this pro:ect5 I would li?e to than? my principal Smt% Nan"!ta &oy for pro9iding the necessary facilities for the completion of this pro:ect5 I ta?e this opportunity to than? our coordinator as well as my pro:ect guide 9rof%$:arat 9at:a"!a for his moral support and guidance5 I would li?e to than? my college li>rary for ha9ing pro9ided 9arious reference >oo?s and maga@ines related to my pro:ect5 %astly I would li?e to than? each and e9ery person who directly or indirectly helped me with the completion of the pro:ect especially my parents and peers who supported me throughout the pro:ect5
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6ID+7A)A HOI'
IND(;
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CHA9T(&
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Introduction
Analysis - II
41
Analysis - III
8,
)ummery( Conclusion and 'ecommendation
83
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CHA9T(& < Intro"uct!on
'!s!on Statement4
BTo e a "om!nant =7ayer !n t:e In"!an mutua7 fun" s=ace+ reco8n!>e" for !ts :!8: 7e?e7 of et:!ca7 an" =rofess!ona7 con"uct an" a comm!tment to6ar"s en:anc!n8 !n?estor !nterests5C HDFC Asset Management Company %td (AMC) was incorporated under the Companies Act( ,DA3( on Decem>er ,2( ,DDD( and was appro9ed to act as an Asset Management Company for the HDFC Mutual Fund >y )# I 9ide its letter dated 6uly 8( 42225 *he registered office of the AMC is situated at 'amon House( 8rd Floor( H5*5 ;are?h Marg( ,3D( ac? >ay 'eclamation( Churchgate( Mum>ai 0 122 2425 In terms of the In9estment Management Agreement( the *rustee has appointed the HDFC Asset Management Company %imited to manage the Mutual Fund5 *he paid up capital of the AMC is 's5 4A5,3, crore5 Vivek College Of Commerce Page 3
Analysis Of HDFC Mutual fund Eurich Insurance Company (EIC)( the )ponsor of Eurich India Mutual Fund( following a re9iew of its o9erall strategy( had decided to di9est its Asset Management >usiness in India5 *he AMC had entered into an agreement with EIC to acquire the said >usiness( su>:ect to necessary regulatory appro9als5 Following the decision >y Eurich Insurance Company (EIC)( the sponsor of Eurich India Mutual Fund( to di9est its Asset Management usiness in India( HDFC AMC acquired the schemes of Eurich India Mutual Fund effecti9e from 6une ,D( 42285 HDFC AMC has a strong parentage - CO )ponsored >y Housing De9elopment Finance Corporation %imited (HDFC %td5) and )tandard %ife In9estment %imited( the in9estment arm of *he )tandard %ife &roup( /$5 *he present equity shareholding pattern of the AMC is as follows< Housing De9elopment Finance Corporation %imited was incorporated in ,DFF as the first speciali@ed Mortgage Company in India( its acti9ities include housing finance( and property related ser9ices (property identification( 9aluation etc5)( training and consultancy5 HDFC %td5 contri>utes the 32G of the paid up equity capital of the AMC5 )tandard %ife Insurance %imited is a leading Asset management company with appro=imately /)H 4I4 >illion of asset under management as on 6une 82( 422F5 *he company operates in /$( Canada( Hong $ong( China( $orea( Ireland and /)A to ensure it is a>le to form a truly glo>al in9estment 9iew5 )%I %td5 contri>utes the 12G of the paid up equity capital of the AMC5 *he AMC is managing 41 open0ended schemes of the Mutual Fund 9i@5 HDFC &rowth Fund (H&F)( HDFC alanced Fund (H F)( HDFC Income Fund (HIF)( HDFC %iquid Fund (H%F)( HDFC %ong *erm Ad9antage Fund (H%*AF)( HDFC ChildrenJs &ift Fund (HDFC C&F)( HDFC &ilt Fund (H&I%*)( HDFC )hort *erm ;lan (H)*;)( HDFC Inde= Fund( HDFC Floating 'ate Income Fund (HF'IF)( HDFC #quity Fund (H#F)( HDFC *op 422 Vivek College Of Commerce Page F
Analysis Of HDFC Mutual fund Fund (H*422)( HDFC Capital uilder Fund (HC F)( HDFC *a= )a9er (H*))( HDFC
;rudence Fund (H;F)( HDFC High Interest Fund (HHIF)( HDFC Cash Management Fund (HCMF)( HDFC MF Monthly Income ;lan (HMI;)( HDFC Core K )atellite Fund (HC)F)( HDFC Multiple 7ield Fund (HM7F)( HDFC ;remier Multi0Cap Fund (H;MCF)( HDFC Multiple 7ield Fund 5 ;lan 422A (HM7F0;lan 422A)( HDFC Luarterly Inter9al Fund (HLIF) and HDFC Ar>itrage Fund (HAF)5*he AMC is also managing ,, closed ended )chemes of the HDFC Mutual Fund 9i@5 HDFC %ong *erm #quity Fund( HDFC Mid0Cap Opportunities Fund( HDFC Infrastructure Fund( HDFC Fi=ed Maturity ;lans( HDFC Fi=ed Maturity ;lans 0 )eries II( HDFC Fi=ed Maturity ;lans 0 )eries III( HDFC Fi=ed Maturity ;lans 0 )eries I"( HDFC Fi=ed Maturity ;lans 0 )eries "( HDFC Fi=ed Maturity ;lans 0 )eries "I( HFDC Fi=ed Maturity ;lans 0 )eries "II and HFDC Fi=ed Maturity ;lans 0 )eries "III5 *he AMC is also pro9iding portfolio management M ad9isory ser9ices and such acti9ities are not in conflict with the acti9ities of the Mutual Fund5 *he AMC has renewed its registration from )# I 9ide 'egistration +o5 0 ;M M I+;222222A23 dated Decem>er I( 4223 to act as a ;ortfolio Manager under the )# I (;ortfolio Managers) 'egulations( ,DD85 <% In"ustry 9rof!7e
I% Introduction
*he Indian mutual fund industry has witnessed significant growth in the past few years dri9en >y se9eral fa9oura>le economic and demographic factors such as rising income le9els( and the increasing reach of Asset Management Companies and distri>utors5 Howe9er( after se9eral years of relentless growth (the industry witnessed a fall of IG in the assets under management in the financial year 422I0422D that has impacted re9enues and profita>ility5 .hereas in 422D0,2 the industry is on the road of reco9ery5
II% History of Mutual Funds
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Analysis Of HDFC Mutual fund *he mutual fund industry in India started in ,D38 with the formation of /nit *rust of India( at the initiati9e of the &o9ernment of India and 'eser9e an? of India5 *he history of mutual funds in India can >e >roadly di9ided into four distinct phases5 First Phase 1964-87 /nit *rust of India (/*I) was esta>lished on ,D38 >y an Act of ;arliament5 It was set up >y the 'eser9e an? of India and functioned under the 'egulatory and administrati9e control of the 'eser9e an? of India5 In ,DFI /*I was de0lin?ed from the ' I and the Industrial De9elopment an? of India (ID I) too? o9er the regulatory and administrati9e control in place of ' I5 *he first scheme launched >y /*I was /nit )cheme ,D315 At the end of ,DII /*I had 's53( F22 Crores of assets under management5
Second Phase 1987-1993 !ntry of Pu"lic Sector Funds# ,DIF mar?ed the entry of non0 /*I( pu>lic sector mutual funds set up >y pu>lic sector >an?s and %ife Insurance Corporation of India (%IC) and &eneral Insurance Corporation of India (&IC)5 ) I Mutual Fund was the first non0 /*I Mutual Fund esta>lished in 6une ,DIF followed >y Can>an? Mutual Fund (Dec IF)( ;un:a> +ational an? Mutual Fund (Aug ID)( Indian an? Mutual Fund (+o9 ID)( an? of India (6un D2)( an? of aroda Mutual Fund (Oct D4)5 %IC esta>lished its mutual fund in 6une ,DID while &IC had set up its mutual fund in Decem>er ,DD25 At the end of ,DD8( the mutual fund industry had assets under management of 's51F( 221 Crores5 $hird Phase 1993-%&&3 !ntry of Pri'ate Sector Funds# .ith the entry of pri9ate sector funds in ,DD8( a new era started in the Indian mutual fund industry( gi9ing the Indian in9estors a wider choice of fund families5 Also( ,DD8 was the year in which the first Mutual Fund 'egulations came into >eing( under which all mutual Vivek College Of Commerce Page D
Analysis Of HDFC Mutual fund funds( e=cept /*I were to >e registered and go9erned5 *he erstwhile $othari ;ioneer (now merged with Fran?lin *empleton) was the first pri9ate sector mutual fund registered in 6uly ,DD85 *he ,DD8 )# I (Mutual Fund) 'egulations were su>stituted >y a more comprehensi9e and re9ised Mutual Fund 'egulations in ,DD35 *he industry now functions under the )# I (Mutual Fund) 'egulations ,DD35 *he num>er of mutual fund houses went on increasing( with many foreign mutual funds setting up funds in India and also the industry has witnessed se9eral mergers and acquisitions5 As at the end of 6anuary 4228( there were 88 mutual funds with total assets of 's5 ,( 4,(I2A Crores5 *he /nit *rust of India with 's511( A1, Crores of assets under management was way ahead of other mutual funds Fourth Phase since Fe"ruary %&&3 In Fe>ruary 4228( following the repeal of the /nit *rust of India Act ,D38 /*I was >ifurcated into two separate entities5 One is the )pecified /nderta?ing of the /nit *rust of India with assets under management of 's54D( I8A crores as at the end of 6anuary 4228( representing >roadly( the assets of /) 31 scheme( assured return and certain other schemes5 *he )pecified /nderta?ing of /nit *rust of India( functioning under an administrator and under the rules framed >y &o9ernment of India and does not come under the pur9iew of the Mutual Fund 'egulations5 *he second is the /*I Mutual Fund %td( sponsored >y ) I( ;+ ( O and %IC5 It is
registered with )# I and functions under the Mutual Fund 'egulations5 .ith the >ifurcation of the erstwhile /*I which had in March 4222 more than 's5F3(222 Crores of assets under management and with the setting up of a /*I Mutual Fund( conforming to the )# I Mutual Fund5 Assets of the mutual fund industry touched an all0time high of 's38D(222 crore (appro=imately H,83 >illion) in May( aided >y the spi?e in the stoc? mar?et >y o9er A2 per Vivek College Of Commerce Page ,2
Analysis Of HDFC Mutual fund cent in the last one month and fresh inflows in liquid funds( data released >y the Association of Mutual Funds in India (AMFI) shows yesterday5 *he countryJs >urgeoning mutual fund industry is e=pected to see its assets growing >y 4DG annually in the ne=t fi9e years5 *he total assets under management in the Indian mutual funds industry are estimated to grow at a compounded annual growth rate (CA&') of 4D per cent in the ne=t fi9e years(N the report >y glo>al consultancy Celent said5 Howe9er( the profita>ility of the industry is e=pected to remain at its present le9el mainly due to increasing cost incurred to de9elop distri>ution channels and falling margins due to greater competition among fund houses( it said5
III% (e)ulatory Fra*e+or,

)ecurities and #=change oard of India ()# I) *he &o9ernment of India constituted )ecurities and #=change oard of India( >y an Act of ;arliament in ,DD4( the ape= regulator of all entities that either raise funds in the capital mar?ets or in9est in capital mar?et securities such as shares and de>entures listed on stoc? e=changes5 Mutual funds ha9e emerged as an important institutional in9estor in capital mar?et securities5 Hence they come under the pur9iew of )# I5 )# I requires all mutual funds to >e registered with them5 It issues guidelines for all mutual fund operations including where they can in9est( what in9estment limits and restrictions must >e complied with( how they should account for income and e=penses( how they should ma?e disclosures of information to the in9estors and generally act in the interest of in9estor protection5 *o protect the interest of the in9estors( )# I formulates policies and regulates the mutual funds5 MF either promoted >y pu>lic or >y pri9ate sector entities including one promoted >y foreign entities are go9erned >y these 'egulations5 )# I appro9ed Asset Management Company (AMC) manages the funds >y ma?ing in9estments in 9arious types of securities5 Custodian( registered with )# I( holds the securities of 9arious schemes of the fund in its custody5 According to )# I 'egulations( two thirds of the directors of *rustee Company or >oard of trustees must >e independent5 Vivek College Of Commerce Page ,,
Analysis Of HDFC Mutual fund Association of Mutual Funds in India (AMFI) .ith the increase in mutual fund players in India( a need for mutual fund association in India was generated to function as a non0profit organisation5 Association of Mutual Funds in India (AMFI) was incorporated on 44nd August( ,DDA5 AMFI is an ape= >ody of all Asset Management Companies (AMC) which has >een registered with )# I5 *ill date all the AMCs are that ha9e launched mutual fund schemes are its mem>er5 It functions under the super9ision and guidelines of its oard of Directors5 Association of Mutual Funds India has >rought down the Indian Mutual Fund Industry to a professional and healthy mar?et with ethical line enhancing and maintaining standards5 It follows the principle of >oth protecting and promoting the interests of mutual funds as well as their unit holders5
The objectives of Association of Mutual Funds in India *he Association of Mutual Funds of India wor?s with 82 registered AMCs of the country5 It has certain defined o>:ecti9es which :u=taposes the guidelines of its Directors5 *he o>:ecti9es are as follows<
oard of
*his mutual fund association of India maintains high professional and ethical standards in all areas of operation of the industry5
It also recommends and promotes the top class >usiness practices and code of conduct which is followed >y mem>ers and related people engaged in the acti9ities of mutual fund and asset management5 *he agencies who are >y any means connected or in9ol9ed in the field of capital mar?ets and financial ser9ices also in9ol9ed in this code of conduct of the association5
AMFI interacts with )# I and wor?s according to )# Is guidelines in the mutual fund industry5
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Association of Mutual Fund of India do represent the &o9ernment of India( the 'eser9e an? of India and other related >odies on matters relating to the Mutual Fund Industry5
It de9elops a team of well qualified and trained Agent distri>utors5 It implements a program of training and certification for all intermediaries and other engaged in the mutual fund industry5
AMFI underta?es all India awareness program for in9estors in order to promote proper understanding of the concept and wor?ing of mutual funds5 At last >ut not the least association of mutual fund of India also disseminate information on Mutual Fund Industry and underta?es studies and research either directly or in association with other >odies5
I'% -once.t of Mutual Fund

A Mutual Fund is a trust that pools the sa9ings of a num>er of in9estors who share a common financial goal5 *he money thus collected is then in9ested in capital mar?et instruments such as shares( de>entures and other securities5 *he income earned through these in9estments and the capital appreciations reali@ed are shared >y its unit holders in proportion to the num>er of units owned >y them5 *hus a Mutual Fund is the most suita>le in9estment for the common man as it offers an opportunity to in9est in a di9ersified( professionally managed >as?et of securities at a relati9ely low cost5 *he flow chart >elow descri>es the wor?ing of a mutual fund<
Mutual fund operation flow chart Vivek College Of Commerce Page ,8
Analysis Of HDFC Mutual fund Mutual funds are considered as one of the >est a9aila>le in9estments as compare to others5 *hey are 9ery cost efficient and also easy to in9est in( thus >y pooling money together in a mutual fund( in9estors can purchase stoc?s or >onds with much lower trading costs than if they tried to do it on their own5 ut the >iggest ad9antage to mutual funds is di9ersification( >y minimi@ing ris? K ma=imi@ing returns5 /r)ani0ation of a Mutual Fund *here are many entities in9ol9ed and the diagram >elow illustrates the organi@ational set up of a mutual fund
'% $y.es of Mutual Fund sche*es in I12I3

.ide 9ariety of Mutual Fund )chemes e=ists to cater to the needs such as financial position( ris? tolerance and return e=pectations5
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/'er'ie+ of e4istin) sche*es e4isted in *utual fund cate)ory5 67 S$(8-$8(! Open - Ended Schemes5 An open0end fund is one that is a9aila>le for su>scription all through the year5 *hese do not ha9e a fi=ed maturity5 In9estors can con9eniently >uy and sell units at +et Asset "alue (N+A"N) related prices5 *he ?ey feature of open0end schemes is liquidity5 Close - Ended Schemes4 A closed0end fund has a stipulated maturity period which generally ranging from 8 to ,A years5 *he fund is open for su>scription only during a specified period5 In9estors can in9est in the scheme at the time of the initial pu>lic issue and thereafter they can >uy or sell the units of the scheme on the stoc? e=changes where they are listed5 In order to pro9ide an e=it route to the in9estors( some close0ended funds gi9e an option of selling >ac? the units to the Mutual Fund through periodic repurchase at +A" related prices5 )# I 'egulations stipulate that at least one of the two e=it routes is pro9ided to the in9estor5 Interval Schemes4 Inter9al )chemes are that scheme( which com>ines the features of open0 ended and close0ended schemes5 *he units may >e traded on the stoc? e=change or may >e open for sale or redemption during pre0determined inter9als at +A" related prices5
/'er'ie+ of e4istin) sche*es e4isted in *utual fund cate)ory5 67 13$8(! Vivek College Of Commerce Page ,A
Analysis Of HDFC Mutual fund E uit! fund4 *hese funds in9est a ma=imum part of their corpus into equities holdings5 *he structure of the fund may 9ary different for different schemes and the fund managerOs outloo? on different stoc?s5 *he #quity Funds are su>0classified depending upon their in9estment o>:ecti9e( as follows< 0Di9ersified #quity Funds 0Mid0Cap Funds 0)ector )pecific Funds 0*a= )a9ings Funds (#%))) #quity in9estments are meant for a longer time hori@on( thus #quity funds ran? high on the ris?0return matri=5 2e"t funds4 *he o>:ecti9e of these Funds is to in9est in de>t papers5 &o9ernment authorities( pri9ate companies( >an?s and financial institutions are some of the ma:or issuers of de>t papers5 y in9esting in de>t instruments( these funds ensure low ris? and pro9ide sta>le income to the in9estors5 9ilt Funds" In9est their corpus in securities issued >y &o9ernment( popularly ?nown as &o9ernment of India de>t papers5 *hese Funds carry @ero Default ris? >ut are associated with Interest 'ate ris?5 *hese schemes are safer as they in9est in papers >ac?ed >y &o9ernment5 Inco*e Funds< In9est a ma:or portion into 9arious de>t instruments such as >onds( corporate de>entures and &o9ernment securities5 Monthl! income plans # MI$s%< In9ests ma=imum of their total corpus in de>t instruments while they ta?e minimum e=posure in equities5 It gets >enefit of >oth equity and de>t mar?et5 *hese scheme ran?s slightly high on the ris?0return matri= when compared with other de>t schemes5 Vivek College Of Commerce Page ,3
Analysis Of HDFC Mutual fund Short Term $lans #ST$s#< Meant for in9estment hori@on for three to si= months5 *hese funds primarily in9est in short term papers li?e Certificate of Deposits (CDs) and Commercial ;apers (C;s)5 )ome portion of the corpus is also in9ested in corporate de>entures5 :i;uid Funds< Also ?nown as Money Mar?et )chemes( *hese funds pro9ides easy liquidity and preser9ation of capital5 *hese schemes in9est in short0term instruments li?e *reasury ills( inter0>an? call money mar?et( C;s and CDs5 *hese funds are meant for short0term cash management of corporate houses and are meant for an in9estment hori@on of ,day to 8 months5 *hese schemes ran? low on ris?0return matri= and are considered to >e the safest amongst all categories of mutual funds5 6alanced funds4 *hey in9est in >oth equities and fi=ed income securities( which are in line with pre0defined in9estment o>:ecti9e of the scheme5 *hese schemes aim to pro9ide in9estors with the >est of >oth the worlds5 #quity part pro9ides growth and the de>t part pro9ides sta>ility in returns5 Further the mutual funds can >e >roadly classified on the >asis of in9estment parameter5 It means each category of funds is >ac?ed >y an in9estment philosophy( which is pre0defined in the o>:ecti9es of the fund5 *he in9estor can align his own in9estment needs with the funds o>:ecti9e and can in9est accordingly 6y in'est*ent o"<ecti'e5 &rowth Schemes4 &rowth )chemes are also ?nown as equity schemes5 *he aim of these schemes is to pro9ide capital appreciation o9er medium to long term5 *hese schemes normally in9est a ma:or part of their fund in equities and are willing to >ear short0term decline in 9alue for possi>le future appreciation5 Income Schemes< Income )chemes are also ?nown as de>t schemes5 *he aim of these schemes is to pro9ide regular and steady income to in9estors5 *hese schemes generally
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Analysis Of HDFC Mutual fund in9est in fi=ed income securities such as >onds and corporate de>entures5 Capital appreciation in such schemes may >e limited5 'alanced Schemes4 alanced )chemes aim to pro9ide >oth growth and income >y
periodically distri>uting a part of the income and capital gains they earn5 *hese schemes in9est in >oth shares and fi=ed income securities( in the proportion indicated in their offer documents5 Mone! Mar(et Schemes< Money Mar?et )chemes aim to pro9ide easy liquidity( preser9ation of capital and moderate income5 *hese schemes generally in9est in safer( short0term instruments( such as treasury >ills( certificates of deposit( commercial paper and inter0>an? call money5 /ther sche*es Ta) Savin* Schemes4 *a=0sa9ing schemes offer ta= re>ates to the in9estors under ta= laws prescri>ed from time to time5 /nder )ec5I2C of the Income *a= Act( contri>utions made to any #quity %in?ed )a9ings )cheme (#%))) are eligi>le for re>ate5 Inde) Schemes4 Inde= schemes attempt to replicate the performance of a particular inde= such as the )#
)ense= or the +ifty A25 *he portfolio of these schemes will consist of only those stoc?s that constitute the inde=5 *he percentage of each stoc? to the total holding will >e identical to the stoc?s inde= weightage5 And hence( the returns from such schemes would >e more or less equi9alent to those of the Inde=5 Sector Specific Schemes4 *hese are the fundsMschemes which in9est in the securities of only those sectors or industries as specified in the offer documents5 #=0 ;harmaceuticals( )oftware( Fast Mo9ing Vivek College Of Commerce Page ,I
Analysis Of HDFC Mutual fund Consumer &oods (FMC&)( ;etroleum stoc?s( etc5 *he returns in these funds are dependent on the performance of the respecti9e sectorsMindustries5 .hile these funds may gi9e higher returns( they are more ris?y compared to di9ersified funds5 In9estors need to ?eep a watch on the performance of those sectorsMindustries and must e=it at an appropriate time5
'I% 3d'anta)es of Mutual Funds

Di9ersification - It can help an in9estor di9ersify their portfolio with a minimum in9estment5 )preading in9estments across a range of securities can help to reduce ris?5 A stoc? mutual fund( for e=ample( in9ests in many stoc?s 5*his minimi@es the ris? attri>uted to a concentrated position5 If a few securities in the mutual fund lose 9alue or >ecome worthless( the loss may >e offset >y other securities that appreciate in 9alue5 Further di9ersification can >e achie9ed >y in9esting in multiple funds which in9est in different sectors5 ;rofessional Management0 Mutual funds are managed and super9ised >y in9estment professional5 *hese managers decide what securities the fund will >uy and sell5 *his eliminates the in9estor of the difficult tas? of trying to time the mar?et5 .ell regulated0 Mutual funds are su>:ect to many go9ernment regulations that protect in9estors from fraud5 %iquidity0 ItJs easy to get money out of a mutual fund5 Con9enience0 we can >uy mutual fund shares >y mail( phone( or o9er the Internet5 %ow cost0 Mutual fund e=penses are often no more than ,5A percent of our in9estment5 #=penses for Inde= Funds are less than that( >ecause inde= funds are not acti9ely managed5 Instead( they automatically >uy stoc? in companies that are listed on a specific inde=
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Analysis Of HDFC Mutual fund *ransparency0 *he mutual fund offer document pro9ides all the information a>out the fund and the scheme5 *his document is also called as the prospectus or the fund offer document( and is 9ery detailed and contains most of the rele9ant information that an in9estor would need5 Choice of schemes - there are different schemes which an in9estor can choose from according to his in9estment goals and ris? appetite5 *a= >enefits - An in9estor can get a ta= >enefit in schemes li?e #%)) (equity lin?ed sa9ing scheme)
'II% $er*s used in Mutual Fund

Asset Management Company (AMC) An AMC is the legal entity formed >y the sponsor to run a mutual fund5 *he AMC is usually a pri9ate limited company in which the sponsors and their associates or :oint 9enture partners are the shareholders5 *he trustees sign an in9estment agreement with the AMC( which spells out the functions of the AMC5 It is the AMC that employs fund managers and analysts( and other personnel5 It is the AMC that handles all operational matters of a mutual fund - from launching schemes to managing them to interacting with in9estors5 Fund Offer document *he mutual fund is required to file with )# I a detailed information memorandum( in a prescri>ed format that pro9ides all the information a>out the fund and the scheme5 *his document is also called as the prospectus or the fund offer document( and is 9ery detailed and contains most of the rele9ant information that an in9estor would need *rust *he Mutual Fund is constituted as a *rust in accordance with the pro9isions of the Indian *rusts Act( ,II4 >y the )ponsor5 *he trust deed is registered under the Indian 'egistration Act( ,D2I5 *he *rust appoints the *rustees who are responsi>le to the in9estors of the fund5 *rustees Vivek College Of Commerce Page 42
Analysis Of HDFC Mutual fund *rustees are li?e internal regulators in a mutual fund( and their :o> is to protect the interests of the unit holders5 *rustees are appointed >y the sponsors( and can >e either indi9iduals or corporate >odies5 In order to ensure they are impartial and fair( )# I rules mandate that at least two0thirds of the trustees >e independent( i5e5( not ha9e any association with the sponsor5 *rustees appoint the AMC( which su>sequently( see?s their appro9al for the wor? it does( and reports periodically to them on how the >usiness >eing run5 Custodian A custodian handles the in9estment >ac? office of a mutual fund5 Its responsi>ilities include receipt and deli9ery of securities( collection of income( distri>ution of di9idends and segregation of assets >etween the schemes5 It also trac? corporate actions li?e >onus issues( right offers( offer for sale( >uy >ac? and open offers for acquisition5 *he sponsor of a mutual fund cannot act as a custodian to the fund5 *his condition( formulated in the interest of in9estors( ensures that the assets of a mutual fund are not in the hands of its sponsor5 For e=ample( Deutsche mutual fund arm5 +A" +et Asset "alue is the mar?et 9alue of the assets of the scheme minus its lia>ilities5 *he per unit +A" is the net asset 9alue of the scheme di9ided >y the num>er of units outstanding on the "aluation Date5*he +A" is usually calculated on a daily >asis5 In terms of corporate 9aluations( the >oo? 9alues of assets less lia>ility% *he +A" is usually >elow the mar?et price >ecause the current 9alue of the fundOs assets is higher than the historical financial statements used in the +A" calculation5 Mar(et +alue of the Assets in the Scheme , -eceivables , Accrued Income - .iabilities - Accrued E)penses /A+ 0 -----------------------------------------------------------------------------------------------/o1 of units outstandin* an? is a custodian( >ut it cannot ser9ice Deutsche Mutual Fund( its
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Analysis Of HDFC Mutual fund .here( 'ecei9a>les< .hate9er the ;rofit is earned out of sold stoc?s >y the Mutual fund is called 'ecei9a>les5 Accrued Income< Income recei9ed from the in9estment made >y the Mutual Fund5 %ia>ilities< .hate9er they ha9e to pay to other companies are called lia>ilities5 Accrued #=penses< Day to day e=penses such as postal e=penses( ;rinting( Ad9ertisement #=penses etc5 Ca7cu7at!on of NA' )cheme A + )cheme )i@e 's5 A( 22( 22(222 (Fi9e Crores) Face "alue of /nits 's5,2M0 )cheme )i@e 000000000000000000000000000 Face 9alue of units P A( 22( 22(222 0000000000000000000 ,2 P A2( 22(222
*he fund will offer A2( 22(222 units to ;u>lic5 In9estments< #quity shares of "arious Companies5 Mar?et "alue of )hares is 's5,2( 22( 22(222 (*en Crores) 's5 ,2( 22( 22(222 +A" P 00000000000000000000000000 A2( 22(222 units *hus each unit of 's5 ,2M0 is .orth 's542M0 It states that the 9alue of the money has appreciated since it is more than the face 9alue5 )ale price P 's542M0
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Analysis Of HDFC Mutual fund Is the price we pay when we in9est in a scheme5 Also called Offer ;rice5 It may include a sales load5 'epurchase price Is the price at which units under open0ended schemes are repurchased >y the Mutual Fund5 )uch prices are +A" related 'edemption ;rice Is the price at which close0ended schemes redeem their units on maturity5 )uch prices are +A" related )ales load Is a charge collected >y a scheme when it sells the units5 Also called( QFront0endO load5 )chemes that do not charge a load are called Q+o %oadO schemes5
'epurchase or Q ac?0endO %oad Is a charge collected >y a scheme when it >uys >ac? the units from the unit holders CA&' (compounded annual growth rate) *he year0o9er0year growth rate of an in9estment o9er a specified period of time5 *he compound annual growth rate is calculated >y ta?ing the nth root of the total percentage growth rate( where n is the num>er of years in the period >eing considered5
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Analysis Of HDFC Mutual fund 7ou *a,e *oney fro* your *utual fund in'est*ent +hen4
*he fund earns income on its in9estments( and distri>utes it to you in the form of di9idends5 *he fund produces capital gains >y selling securities at a profit( and distri>utes those gains to you5
7ou sell your shares of the fund at a higher price than you paid for them
'III% (is,
#9ery type of in9estment( including mutual funds( in9ol9es ris?5 'is? refers to the possi>ility that you will lose money (>oth principal and any earnings) or fail to ma?e money on an in9estment5 A fundJs in9estment o>:ecti9e and its holdings are influential factors in determining how ris?y a fund is5 'eading the prospectus will help you to understand the ris? associated with that particular fund5 &enerally spea?ing( ris? and potential return are related5 *his is the ris?Mreturn trade0off5 Higher ris?s are usually ta?en with the e=pectation of higher returns at the cost of increased 9olatility5 .hile a fund with higher ris? has the potential for higher return( it also has the greater potential for losses or negati9e returns5 *he school of thought when in9esting in mutual funds suggests that the longer your in9estment time hori@on is the less affected you should >e >y short0term 9olatility5 *herefore( the shorter your in9estment time hori@on( the more concerned you should >e with short0term 9olatility and higher ris?5
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CHA9T(& 2 ANALYSIS I
Def!n!n8 Mutua7 fun" r!s5 Different mutual fund categories as pre9iously defined ha9e inherently different ris? characteristics and should not >e compared side >y side5 A >ond fund with >elow0a9erage ris?( for e=ample( should not >e compared to a stoc? fund with >elow a9erage ris?5 #9en
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Analysis Of HDFC Mutual fund though >oth funds ha9e low ris? for their respecti9e categories( stoc? funds o9erall ha9e a higher ris?Mreturn potential than >ond funds5 Of all the asset classes( cash in9estments (i5e5 money mar?ets) offer the greatest price sta>ility >ut ha9e yielded the lowest long0term returns5 onds typically e=perience more short0term price swings( and in turn ha9e generated higher long0term returns5 Howe9er( stoc?s historically ha9e >een su>:ect to the greatest short0term price fluctuationsRand ha9e pro9ided the highest long0term returns5 In9estors loo?ing for a fund which incorporates all asset classes may consider a >alanced or hy>rid mutual fund5 *hese funds can >e 9ery conser9ati9e or 9ery aggressi9e5 Asset allocation portfolios are mutual funds that in9est in other mutual funds with different asset classes5 At the discretion of the manager(s)( securities are >ought( sold( and shifted >etween funds with different asset classes according to mar?et conditions5 Mutual funds face ris?s >ased on the in9estments they hold5 For e=ample( a >ond fund faces interest rate ris? and income ris?5 >y the change in interest rates5 ond 9alues are in9ersely related to interest rates5 If ond income is also affected interest rates go up( >ond 9alues will go down and 9ice 9ersa5
ond yields are directly related to interest rates falling as
interest rates fall and rising as interest rise5 Income ris? is greater for a short0term >ond fund than for a long0term >ond fund5 Following is a glossary of some ris?s to consider when in9esting in mutual funds5
Ca77 &!s55 *he possi>ility that falling interest rates will cause a >ond issuer to redeemRor callRits high0yielding >ond >efore the >ondJs maturity date Country &!s55 *he possi>ility that political e9ents (a war( national elections)( financial pro>lems (rising inflation( go9ernment default)( or natural disasters (an earthqua?e( a poor har9est) will wea?en a countryJs economy and cause in9estments in that country to decline5
Cre"!t &!s55 *he possi>ility that a >ond issuer will fail to repay interest and principal in a timely manner5 Also called default ris?5
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Currency &!s55 *he possi>ility that returns could >e reduced for Americans in9esting in foreign securities >ecause of a rise in the 9alue of the /5)5 dollar against foreign currencies5 Also called e=change0rate ris?5
Income &!s55 *he possi>ility that a fi=ed0income fundJs di9idends will decline as a result of falling o9erall interest rates5
In"ustry &!s55 *he possi>ility that a group of stoc?s in a single industry will decline in price due to de9elopments in that industry5
<% $as!s Of Com=ar!son Of 'ar!ous Sc:emes Of Mutua7 Fun"s $eta eta measures the sensiti9ity of the stoc? to the mar?et5 For e=ample if >etaP,5AS it means the stoc? price will change >y ,5AG for e9ery ,G change in )ense=5 It is also used to measure the systematic ris?5 )ystematic ris? means ris?s which are e=ternal to the organi@ation li?e competition( go9ernment policies5 *hey are non0di9ersifia>le ris?s5 eta is calculated using regression analysis( eta can also >e defined as the tendency of a securityJs returns to respond to swings in the mar?et5 A >eta of , indicates that the securityJs price will mo9e with the mar?et5 A >eta less than , means that the security will >e less 9olatile than the mar?et5 A >eta greater than , indicates that the securityJs price will >e more 9olatile than the mar?et5 For e=ample( if a stoc?Js >eta is ,54( itJs theoretically 42G more 9olatile than the mar?et5 etaT,,then=aggressi9e=stoc?s If,>etaU,=then,defensi9e,stoc?s If >etaP, then neutral )o( itOs a measure of the 9olatility( or systematic ris?( of a security or a portfolio in comparison to the mar?et as a whole5 Many utilities stoc?s ha9e a >eta of less than ,5 Con9ersely( most hi0tech +A)DAL0>ased stoc?s ha9e a >eta greater than ,( offering the possi>ility of a higher rate of return >ut also posing more ris?5 Vivek College Of Commerce Page 4F
Analysis Of HDFC Mutual fund A7=:a Alpha ta?es the 9olatility in price of a mutual fund and compares its ris? ad:usted performance to a >enchmar? inde=5 *he e=cess return of the fund relati9e to the returns of >enchmar? inde= is a fundamental A%;HA5 It is calculated as a return which is earned in e=cess of the return generated >y CA;M5 Alpha is often considered to represent the 9alue that a portfolio manager adds to or su>tracts from a fundJs return5 A positi9e alpha of ,52 means the fund has outperformed its >enchmar? inde= >y ,G5 Correspondingly( a similar negati9e alpha would indicate underperformanceof ,G5 5 If a CA;M analysis estimates that a portfolio should earn 8AG return >ased on the ris? of the portfolio >ut the portfolio actually earns 12G( the portfolioJs alpha would >e AG5 *his AG is the e=cess return o9er what was predicted in the CA;M model5 *his AG is A%;HA5 S:ar=e &at!o A ratio de9eloped >y +o>el %aureate ill )harpe to measure ris?0ad:usted performance5 It is calculated >y su>tracting the ris?0free rate from the rate of return for a portfolio and di9iding the result >y the standard de9iation of the portfolio returns5 *he )harpe ratio tells us whether the returns of a portfolio are >ecause of smart in9estment decisions or a result of e=cess ris?5 *his measurement is 9ery useful >ecause although one portfolio or fund can reap higher returns than its peers( it is only a good in9estment if those higher returns do not come with too much additional ris?5 *he greater a portfolioJs )harpe ratio( the >etter its ris?0ad:usted performance has >een5 Treynor &at!o *he treynor ratio( named after 6ac? *reynor( is similar to the )harpe ratio( e=cept that the ris? measure used is eta instead of standard de9iation5 *his ratio thus measures reward to 9olatility5 *reynor 'atio P ('eturn from the in9estment - 'is? free return) M in9estment5 Vivek College Of Commerce Page 4I eta of the
Analysis Of HDFC Mutual fund *he scheme with the higher treynor 'atio offers a >etter ris?0reward equation for the in9estor5 )ince *reynor 'atio uses eta as a ris? measure( it e9aluates e=cess returns only with respect to systematic (or mar?et) ris?5 It will therefore >e more appropriate for di9ersified schemes( where the non0systematic ris?s ha9e >een eliminated5 &enerally( large institutional in9estors ha9e the requisite funds to maintain such highly di9ersified portfolios5 Also since eta is >ased on capital asset pricing model( which is empirically tested for equity( *reynor 'atio would >e inappropriate for de>t schemes5 M. S@UA&(D Modigliani and Modigliani recogni@ed that a9erage in9estors did not find the )harpe ratio intuiti9e and addressed this shortcoming >y multiplying the )harpe ratio >y the standard de9iation of the e=cess returns on a >road mar?et inde=( such as the )K; A22 or the .ilshire A222( for the same time period5 *his yields the ris?0ad:usted e=cess return5 *his( too( is a significant and useful statistic( as it measures the return in e=cess of the ris?0free rate( which is the >asis from which all ris?y in9estments should >e measured5 M-)quaredP V ('i - 'f)M )d5 In9W X )d5 M?t Y 'f O' M-)quaredP )harpe 'atioX )d5 M?t Y 'f &! A 'eturn from the in9estment 'f P 'is? free return )d5 In9P )tandard De9iation In9estment )d5 M?tP )tandard De9iation Mar?et Le?era8e Factor4 It reports the comparison of the total ris? in the fund with the total ris? in the mar?et portfolio and can >e used in ma?ing in9estment decisions5 It is calculated >y di9iding mar?et standard de9iation >y the fund standard de9iation5
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Analysis Of HDFC Mutual fund %i P )tandard de9iation of the mar?et )tandard de9iation of the fund for e=ample a le9erage factor greater than one implies that standard de9iation of the fund is less than standard de9iation of the mar?et inde=( and that the in9estor should consider le9ering the fund >y >orrowing money and in9est in that particular fund5 while this would tend to increase the ris? of in9estment somewhat (there would >e an greater than proportional increase in returns5 On the other hand le9erage factor less than one implies that the ris? of fund is greater than ris? of mar?et inde= and the in9estor should consider unle9ering the fund >y selling of the part of the holding in the fund and in9esting the proceeds I a ris? free security( such as treasury >ill in this way returns on the in9estment reduce somewhat( there would >e an greater than proportional reduction in ris?5 Stan"ar" De?!at!on< A measure of the dispersion of a set of data from its mean5 *he more spread apart the data is( the higher the de9iation5 )tandard de9iation is applied to the annual rate of return of an in9estment to measure the in9estmentJs 9olatility (ris?)5 A 9olatile stoc? would ha9e a high standard de9iation5 *he standard de9iation tells us how much the return on the fund is de9iating from the e=pected normal returns5 )tandard de9iation can also >e calculated as the square root of the 9ariance5 2% Ho6 To 9!c5 T:e &!8:t Mutua7 Fun" Identifyin) 9oals and (is, $olerance efore acquiring shares in any fund( an in9estor must first identify his or her goals and desires for the money >eing in9ested5 Are long0term capital gains desired( or is a current income preferredZ .ill the money >e used to pay for college e=penses( or to supplement a retirement that is decades away5 One should consider the issue of ris? tolerance5 Is the in9estor a>le to afford and mentally accept dramatic swings in portfolio 9alueZ Or( is a Vivek College Of Commerce Page 82
Analysis Of HDFC Mutual fund more conser9ati9e in9estment warrantedZ Identifying ris? tolerance is as important as identifying a goal5 Finally( the time hori@on must >e addressed5 In9estors must thin? a>out how long they can afford to tie up their money( or if they anticipate any liquidity concerns in the near future5 Ideally( mutual fund holders should ha9e an in9estment hori@on with at least fi9e years or more5 Style and Fund $y.e If the in9estor intends to use the money in the fund for a longer term need and is willing to assume a fair amount of ris? and 9olatility( then the styleMo>:ecti9e he or she may >e suited for is a fund5 *hese types of funds typically hold a high percentage of their assets in common stoc?s( and are therefore considered to >e 9olatile in nature5 Con9ersely( if the in9estor is in need of current income( he or she should acquire shares in an income fund5 &o9ernment and corporate de>t are the two of the more common holdings in an income fund5 *here are times when an in9estor has a longer term need( >ut is unwilling or una>le to assume su>stantial ris?5 In this case( a >alanced fund( which in9ests in >oth stoc?s and >onds( may >e the >est alternati9e5 -har)es and Fees Mutual funds ma?e their money >y charging fees to the in9estor5 It is important to gain an understanding of the different types of fees that you may face when purchasing an in9estment5 )ome funds charge a sales fee ?nown as a load fee( which will either >e charged upon initial in9estment or upon sale of the in9estment5 A front0end loadMfee is paid out of the initial in9estment made >y the in9estor while a >ac?0end loadMfee is charged when an in9estor sells his or her in9estment( usually prior to a set time period5 *o a9oid these sales fees( loo? for no0load funds( which donJt charge a front0 or >ac?0end loadMfee5 Howe9er( one should >e aware of the other fees in a no0load fund( such as the management e=pense ratio and other administration fees( as they may >e 9ery high5 *he in9estor should loo? for the management e=pense ratio5 *he ratio is simply the total
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Analysis Of HDFC Mutual fund percentage of fund assets that are >eing charged to co9er fund e=penses5 *he higher the ratio( the lower the in9estorJs return will >e at the end of the year5 !'aluatin) Mana)ers=Past (esults In9estors should research a fundJs past results5 *he following is a list of questions that perspecti9e in9estors should as? themsel9es when re9iewing the historical record<
Did the fund manager deli9er results that were consistent with general mar?et returnsZ .as the fund more 9olatile than the >ig inde=es (it means did its returns 9ary dramatically throughout the year)Z
*his information is important >ecause it will gi9e the in9estor insight into how the portfolio manager performs under certain conditions( as well as what historically has >een the trend in terms of turno9er and return5 ;rior to >uying into a fund( one must re9iew the in9estment companyJs literature to loo? for information a>out anticipated trends in the mar?et in the years ahead5 Si0e of the Fund Although( the si@e of a fund does not hinder its a>ility to meet its in9estment o>:ecti9es5 Howe9er( there are times when a fund can get too >ig5 For e=ample 0 FidelityJs Magellan Fund5 ac? in ,DDD the fund topped H,22 >illion in assets( and for the first time( it was forced to change its in9estment process to accommodate the large daily (money) inflows5 Instead of >eing nim>le and >uying small and mid cap stoc?s( it shifted its focus primarily toward larger capitali@ation growth stoc?s5 As a result( its performance has suffered5 Fund $ransactional 3cti'ity ;ortfolio *urno9er Measure of how frequently assets within a fund are >ought and sold >y the managers5 ;ortfolio turno9er is calculated >y ta?ing either the total amount of new securities purchased or the amount of securities sold 0whiche9er is less 0 o9er a particular period(
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Analysis Of HDFC Mutual fund di9ided >y the total net asset 9alue (+A") of the fund5 *he measurement is usually reported for a ,40month time period Fund Perfor*ance Metrics Historical ;erformance *he in9estor should see the past returns of the fund and should compare it with the peer group fund5 .hate9er the o>:ecti9e( the mutual fund is an e=cellent medium to accumulate financial assets and grow them o9er time to achie9e any of these goals5
CHA9T(& B Ana7ys!s II
&(S(&CH M(THODOLO*Y <% 9ro 7em Statement Aim of the pro:ect is to analy@e the performance flagship equity di9ersified schemes of si= fund houses >y calculating different performance measures for the data of past three years5 *hrough this we aim to e9aluate the performance in terms of ris? and the returns of the schemes5 2% &esearc: O Cect!?e ,5 *o compare the performance of 9arious A star rated equity di9ersified mutual fund schemes o9er a period of three years5
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Analysis Of HDFC Mutual fund 45 *o compare the schemes with the returns of >enchmar? for the past three years5 85 *o identify the le9el of ris? in9ol9ed in in9esting in 9arious equity di9ersified mutual fund schemes5 B% Data Sources ;rimary data Most of the data a>out the schemes of HDFC has >een pro9ided >y the HDFC Asset Management Company5 My industry mentor helped me o>tain monthly portfolios and returns data of schemes which were a9aila>le to him and also helped me acquire data from companyOs intranet5 )econdary data Data collection< )econdary data is collected from 9arious pu>lished :ournals( company fact sheets( >oo?s and from Internet5
/% Data ana7ys!s *he data that has >een collected for this study has >een analy@ed >y widely used performance parameters as< *urno9er 'atio )harpe 'atio 6ensenOs Alpha M )quared %e9erage Factor Page 81
Analysis Of HDFC Mutual fund Other analysis are done >y using graphs( calculations( ta>les etc5 D%Sco=e *his study calculates different measures to compare equity di9ersified schemes of different fund houses 5 For this study past three years data of the schemes and their >enchmar?s ha9e >een ta?en into consideration5 It helps us see how the funds stand in comparison with each other5 1% L!m!tat!ons ,5 *ime constraints< Due to shortage or less a9aila>ility of time it may >e possi>le that all the related and concerned aspects may not >e co9ered in the pro:ect5 45 Only past three year data has >een ta?en in this pro:ect which might not gi9e complete scheme performance5 85 Analysis done is limited to the a9aila>ility of data5
E% F!n"!n8s An" Ana7ys!s Here si= funds of different companies are ta?en which are rated A star >y "alue 'esearch 'atings5 "alue research Funds ratings are a composite measure of historical ris? ad:usted returns5 In the case of equity and hy>rid funds this rating is >ased on the weighted a9erage monthly returns for the last 8 and A - year period5 In the case of de>t fund this rating is >ased on the weighted a9erage wee?ly returns for the last ,I months and 8 years period and in case of short term de>t funds -wee?ly returns for the last ,I months5 #ach category must ha9e a minimum of ,2 funds to >e rated5 #ffecti9e since 6uly 422I(additional qualifying
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Analysis Of HDFC Mutual fund criteria( where>y a fund with less than 's5 A crore of a9erage A/M in the past si= months will not >e eligi>le for rating5 Fi9e star indicate that a fund is in the ,2G of its category in terms of historical ris? ad:usted returns Four star indicate that fund is in the ne=t 445AG (middle 8AG recei9e 8 star( the ne=t 445AGare assigned 4 star >ottom ,2G recei9e , star5 For our study here si= schemes ha9e >een selected< HDFC #L/I*7 F/+D ICICI ;'/D#+*IA% DI)CO"#'7 F/+D /*I O;;/**/+I*I#) F/+D IDFC ;'#MI#' #L/I*7 ;%A+ A '#%IA+C# ')F F/+D )/+DA'A+ +; ;A'I A) )5M5I5%5# '#&0
SCH(M( 9&OFIL(4 HDFC (@UITY FUND HDFC Asset Management Company %td5 #quity di9ersified &rowth Page 83
AMC Fund Category )cheme ;lan
Analysis Of HDFC Mutual fund )cheme *ype %aunch Date Fund Manager enchmar? Assets (') crore)
Open #nded 6anuary 2,( ,DDA Mr5 ;rashant 6ain )K; C+[ A22 38AA5F
ICICI 9&UD(NTIAL DISCO'(&Y FUND
AMC Fund Category )cheme ;lan )cheme *ype %aunch Date enchmar? Fund Manager Assets (') crore)
ICICI ;rudential Asset Management Co5 %td5 #quity di9ersified &rowth Open #nded August ,3(4221 )K; C+[ +ifty Mr5 )an?aren +aren ,2II5D
UTI O99O&TUNITI(S FUND /*I Asset Management Co5 %td5 #quity di9ersified &rowth Open #nded 6uly ,3(422A )# ,22 Mr5 Harsh /padhyaya ,1845FI
IDFC 9&(MI(& (@UITY 9LAN A IDFC Asset Management Company %td5 #quity di9ersified &rowth Open #nded )eptem>er 4I( 422A )# A22 Mr5 $enneth Andrade
AMC Fund Category )cheme ;lan )cheme *ype %aunch Date enchmar? Fund Manager
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Assets (') crore) &(LIANC( &SF FUND
,11854A
'#%AI+C# Asset Management Co5 %td5 #quity di9ersified &rowth Open #nded 6une I(422A )# ,22 Mr5 Arpit Mala9iya 4F4458D
SUNDA&AM $N9 9A&I$AS S%M%I%L%( &(*.* ICICI ;rudential Asset Management Co5 %td5 #quity di9ersified &rowth Open #nded Fe>ruary ,A(422A C+[ midcap Mr5 ) $rishna $umar 3DA5,8D
CHA9T(& / Summery+ Conc7us!on an" &ecommen"at!on Summary4 .

*he topic of this pro:ect is Mutual Fund Comparison and Analysis5 *he mutual fund industry in India has seen dramatic impro9ements in quantity as well as quality of product and ser9ice offerings in recent years and hence here focus is on comparing schemes of different mutual fund companies on different performance parameters5 Along with this pro:ect also touches on the aspect of )ystematic In9estment ;lan and 'e>alancing5 Vivek College Of Commerce Page 8I
Analysis Of HDFC Mutual fund ;ro:ect analysis past three years data of different mutual fund schemes5 Different measures li?e >eta( )harpe( *reynor( 6ensen etc5 ha9e >een ta?en to analyses the performance5 An effort has >een made to wor? on the concepts that ha9e >een taught in class along with other useful parameters so that >etter study can >e done5
Conc7us!on4 .
In this study the performance of 9arious mutual fund schemes in the equity di9ersified segment was considered5 Analysis was >ased on the ris? and returns of 9arious schemes5 On analysis( it was re9ealed that there is a certain amount of ris? in9ol9ed( while in9esting in equity di9ersified schemes( as the >eta 9alues of schemes falls within a range of 25F, and ,5,25 *he study also re9ealed the fact that almost all the equity di9ersified schemes were affected in the year 422I02D when recession had hit the mar?et5 "alues for a9erage returns( )harpe and *reynor were lowest5 .hereas in the year 422D0,2 when the mar?et were reco9ering and in9estors were again showing faith in the mar?et schemes showed good ris? ad:usted performance( as most of the schemes were ha9ing positi9e 9alues in case of the performance measures5 )chemes li?e IDFC #quity ;lan A and HDFC #quity Fund were the top performing schemes in different parameters for 422F02I5 In 422I02D /*I Opportunities Fund( IDFC #quity ;lan A and ICICI ;rudential Disco9ery Fund were the >est of all and in 422D0,2 IDFC #quity ;lan A and ICICI ;rudential Disco9ery Fund performed the >est5 *he study is highly >eneficial to the in9estors as it gi9es them chance to compare and analy@e different scheme5 *hus( the it helps the in9estors of all classes( in seeing how the different fi9e star rated funds stand in comparison with each other5 Along with this we are also a>le to see that in the difference >etween )ystematic and %ump sum in9estment5 .e found out that if mar?ets are down then )I; helps us in securing more units5 In todays time when mar?et mo9ements cannot >e predicted in9estors tend to go for
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Analysis Of HDFC Mutual fund )I; as it does help them ta?e ad9antage of the low mar?et rates5 Also it remo9es the >urden of in9esting large amount of money at one time5 Further the effects of re>alancing showed that the returns that were earned when re>alancing was done was higher compared to the returns that were earned without re>alancing5 Hence setting rules for re>alancing your mutual fund portfolio and adhering to those rules will ensure that you sell high and >uy low in the process of maintaining the desired composition5 One need to decide up front how often heMshe will re>alance their portfolio5 One should plan on doing it at least once a year and possi>ly quarterly5 Also( one should set target ranges and re>alance any funds as soon as they >low through the upper or lower end of their ranges5
$! 7!o8ra=:y
1. Naresh Malhotra, Research Methodology 2. Reilly/Brown, Investment Analysis and Portfolio Management. . www.val!eresearchonline.com
Page 12

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