2742509 Hdfc Mutual Fund | Mutual Funds | Investing

CHAPTER ONE: 1) INTRODUCTION: 1.1.

1 MUTUAL FUND: The SEBI regulations, 1993 defines a mutual fund as “a fund in the form of a trust by a sponsor, to raise money by the trustees trough the sale of units to the public, under one or more schemes, for investing in securities in accordance with these regulations” A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager, who is also known as the portfolio manager, trades the fund's underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. 1.1.2 HISTORY OF THE MUTUAL FUND: In the beginning: Historians are uncertain of the origins of investment funds; some cite the closed-end investment companies launched in the Netherlands in 1822 by King William I as the first mutual funds, while others point to a Dutch merchant named Adriaan van Ketwich whose investment trust created in 1774 may have given the king the idea. Van Ketwich probably theorized that diversification would increase the appeal of investments to smaller investors with minimal capital. The name of van Ketwich's fund, EENDRAGT MAAKT MAGT, translates to "unity creates strength". The next wave of near-mutual funds included an investment trust launched in Switzerland in 1849, followed by similar
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vehicles which is followed by many kind of companies created in Scotland in the 1880s. The idea of pooling resources and spreading risk using closed-end investments soon took root in Great Britain and France, making its way to the United States in the 1890s. The Boston Personal Property Trust, formed in 1893, was the first closed-end fund in the U.S. The creation of the Alexander Fund in Philadelphia, Pennsylvania, in 1907 was an important step in the evolution toward what we know as the modern mutual fund. The Alexander Fund featured semi-annual issues and allowed investors to make withdrawals on demand.

The Arrival of the Modern Fund :

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded the arrival of the modern mutual fund in 1924. The fund went public in 1928, eventually spawning the mutual fund firm known today as MFS Investment Management. State Street Investors' Trust was the custodian of the Massachusetts Investors' Trust. Later, State Street Investors started its own fund in 1924 with Richard Paine, Richard Saltonstall and Paul Cabot at the helm. Saltonstall was also affiliated with Scudder, Stevens and Clark, an outfit that would launch the first no-load fund in 1928. A momentous year in the history of the mutual fund, 1928 also saw the launch of the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of investments in business and trade.

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Regulation and Expansion:

By 1929, there were 19 open-end mutual funds competing with nearly 700 closedend funds. With the stock market crash of 1929, the dynamic began to change as highlyleveraged closed-end funds were wiped out and small open-end funds managed to survive. Government regulators also began to take notice of the fledgling mutual fund industry. The creation of the Securities and Exchange Commission (SEC), the passage of the Securities Act of 1933 and the enactment of the Securities Exchange Act of 1934 put in place safeguards to protect investors: mutual funds were required to register with the SEC and to provide disclosure in the form of a prospectus. The Investment Company Act of 1940 put in place additional regulations that required more disclosures and sought to minimize and minimize grievience of investor of different catogeries conflicts of interest. The mutual fund industry continued to expand. At the beginning of the 1950s, the number of open-end funds topped 100. In 1954, the financial markets overcame their 1929 peak, and the mutual fund industry began to grow in earnest, adding some 50 new funds over the course of the decade. The 1960s saw the rise of aggressive growth funds, with more than 100 new funds established and billions of dollars in new asset inflows. Hundreds of new funds were launched throughout the 1960s until the bear market of 1969 cooled the public appetite for mutual funds. Money flowed out of mutual funds as quickly as investors could redeem their shares, but the industry's growth later resumed. Massachusetts Investors Trust (now MFS Investment Management) was founded on March 21, 1924, and, after one year, had 200 shareholders and $392,000 in assets. The

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Also. Congress passed the Securities Act of 1933 and the Securities Exchange Act of 1934. They share the same risks associated They monitor the 2 . Asset management company (AMC) approved by SEBI managers the fund by making investments in various schemes of the in its custody. mutual funds are not immune to risks.1. 1.4 MUTUAL FUND VS OTHER INVESTMENT: Mutual funds offer several advantages over investing in individual stocks. trustees. SEBI regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i. despite the professional management. These laws require that a fund be registered with the (SEC) . In response to the stock market crash. For example.1. which included a few closed-end funds. All mutual funds are required to be registered with SEBI before they launch any scheme. The trustees of the mutual fund hold its property for the benefit of the unit holders. represented less than $10 million in 1924. The performance of a particular scheme of a mutual fund is denoted by net value (NAV). which has sponsor.3 SETUP OF MUTUAL FUNDS: A mutual fund is set up in the form of a trust.. the transaction costs are divided among all the mutual fund shareholders. The stock market crash of 1929 slowed the growth of mutual funds. who also benefit by having a third party (professional fund managers) apply expertise and dedicate time to manage and research investment options. 1. 50% of the directors of AMC must be independent. they should not be associated with the sponsors. The trustees are vested with the general power of superintendence and direction over AMC. Asset Management Company (AMC) and custodian.e. However. The trust is established by a sponsor or more than one sponsor who is like promoter of a company.entire industry. performance and compliance of SEBI regulations by the mutual fund.

or receive information through telephonic services provided by the company. processing of transaction. This includes monthly a/c statement. banking. About 10-20% of the total sales of an AMC come through this direct channel. the company does not provide any investment advice. this cahannel has also 2 . so these investors have to carry out their own research and select schemes themselves. • The banking channel: The large customer base of banks. in devolped countries. In most cases . corporate and indiual financial adviser. For example.5 SHARE CLASES: Many mutual funds offer more than one class of shares. it is usually subject to the same ups and downs and risks as the stock market.with the investments made. have played an important role in the selling MFs. The fund companies provide several tools to investors who invest through this channel. • The Direct Channels: In the direct channel.1. customers invest in the schemes directly through AMC. and maintaince of records. If the fund invests primarily in stocks.1. you may have seen a fund that offers "Class A" and "Class B" shares. Each class will invest in the same pool (or investment portfolio) of securities and will have the same investment objectives and policies. But each class will have different shareholder services and/or distribution arrangements with different fees and expenses 1. retail. In the recent years.6 DISTRIBUTION CHANNELS IN THE MUTUAL FUND INDUSTRY: In India. 1. AMCs work with five distinct distribution channels those are direct . In this channel most investors can invest through websites.

An additional advantage that banks provide is that the concerned customer becomes a permanent contact of the banks and therefore can be reached during launch of (new fund offer) NFO or new schemes any time in the future. private and foreign banks have established tie-up with various fund companies for providind distribution and servicing. • The corporate channel: 2 . Banks operating in india . The retail channel offer the benefits of specialist knowledge and established client contact and. The banking channel is likely to develop as the most vital distribution channel for fund companies there are several reaons for the same. Customers remain invested in banks for long periods of time and therefore banks maintain a relationship of trust with their customers. instead of taking trouble of dealing with several agents. The key factor for this channel to sell a company’s fund used to be the brokerage paid. Distribution companies sell the schemes of several fund houses simultaneously and brokerage is paid by the AMC whose funds they sell. Birla sunlife IL&FS and cholamandalam.opened up in india. • The retail channel: A customer can deal with directly with a sub broker belonging to a distribution company. Customers are rely on advice provided to them by bankers as they are always on the look out for better investment avenues. Some of the major players in India in this in this channel are national players lke Karvey. The banking and retail channel generally contribute to about 50-70% of the total Asset Under Management(AUM). therefore private fund houses are generally prefer this channel. Managers are guiding to customers about various funds. including public sector.

Corporate exhibit varying degrees ‘of awareness of mutual fund products. thus ensure larger market penetration and geographic coverage. In recent times with the emergence significantly decreased. Most of the established corporate. wherein several sub-brokers are working under one main broker. The IFA channel is the oldest channel for distribution and was widely employed at the time when UTI monopoly in the market. • Individual Financial Advisors(IFA) or Agents: i. and even state and local governments. over one lakh agents are registered to sell mutual funds and other financial products such as insurance across the country. fund companies usually organize presentation for these companies or set-up meetings with the finance managers. For institutional investors. The smaller companies and start-up firms. 2 . are wellversed with the performance and composition of various funds. In order to provide information to such clients. such as the TVS industries in Hyderabad.The corporate channel includes a variety of institutions that invest in shares on the company’s name. As per AMFI. Corporate can either invest directly in mutual funds. however. need to be educating on several aspects of mutual funds. trust. ii. An agent who basically acts as an interface between the customer and the fund house there is a unique systems in place in India . The huge network of sub-brokers. or through an intermediary such as a distribution house or a bank. fund managers prefer to create special funds and share classes. these are businesses.

7 SEBI REGULATION ON THE INVESTMENT OF A MUTUAL FUND: The investments of a mutual fund are subjected to a set of regulations prescribed by SEBI. redemption of units.1. b. • A mutual fund may borrow to meet liquidity needs. provided that the aggregate inter – scheme investment made by all the schemes under the same management. The securities so transferred shall be in conformity with the investment objectives of the schemes to which such transfer has been made. for the purpose of repurchase. • • No term loan shall be granted by a mutual fund scheme.1. A scheme may invest in another scheme under the same asset management company or any other mutual fund withought charging any fees. Such borrowings shall not exceed 20% of the net asset of the scheme and the duration of the borrowing shall not exceed 6 months. under all its schemes taken together. The registration and accounting of the transactions is completed and ratified in the next meeting of the board of trustees. The fund may borrow from permissible entities at prevailing market rates and may offer the assets of the schemes as collateral for such borrowings. A mutual fund. Such transfers are done at the prevailing market price for quoted instruments on spot basis. or repayment of interest or dividend to the unitholders. 2 . c. Presently following restrictions apply. will not own more than 10 % of any company’s paid up capital carrying voting rights. provided • A scheme may invest in another sheme under the same asset management company or any other mutual fund without charging any fees. • Transfers of investment from one scheme to another scheme of mutual fund permitted provided that: a.

however. A scheme shall not invest more than 5% of its NAV in unlisted euity shares or equity related instruments in case of an open ended schemes and 10% of its NAV in case a of closed ended scheme. This limit. Any security issued by way of private placement by an associate or group company of the sponsor c. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of Board of Trusttes and the Board of Asset Management Company. The listed securities of group companies of the sponsor in exess of 25% of the net assets. A scheme shall not make any investment in a. 1. • • A scheme shall not invest more than 10% of its NAV in the equity shares or equity related instruments of any one company. • A scheme shaal not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme.1. A scheme may invest in ADRs/GDRs of Indian companies listed on overseas stock exchanges to the extent and in a manner approved by RBI . • • A mutual fund will buy and sell securities on the basis of deliveries. The percentage of such investments to the total net assets may vary from time to time and can be upto 100% of the net assets of the schemes. It cannot make short sales or engage in carry forward transactions. is not applicable for investment in governments securities and money market instruments. b.8 TAX SAVING ON MUTUAL FUND: 2 .• A scheme shaal not invest more than 15% of its NAV in debt instruments issued by a single issuer which are rated not below investment grade by an authorized credit rating agencu. Any unlisted security of an associates or group company of the sponsor . • The investment manager may invest in a scheme from time to time.

As these are equity instruments they have the maximum risk-return potential among all asset classes. Franklin Templeton's Templeton India Pension Fund and UTI's Retirement Benefit Plan. Thus. Introduced for the first time in 1997. equity-linked savings schemes (ELSS) and pension funds. but somewhat more complex.36 per cent in 2002.61 per cent and the worst was down 3.16 per cent. the entire sale price is treated as capital gains. whenever they are sold.A. in that year. even though there are currently only two such funds in operation. Thus. By investing regularly every year in these funds one can set up a long-term systematic investment plan. The best way to overcome the vagaries of stock markets is to diversify.000—receive a tax rebate of 0 to 20 per cent depending on the income slab. The other route for saving taxes is pension funds. at the time of issue of bonus. the range of returns was extreme. If today you decide to sell 2 . What this means is that return has a propensity to vary with great intensity. Although an average tax-saving mutual fund delivered 16. more importantly. Here's an example. the NAV of the fund drops in a proportion that is identical to the ratio at which bonus funds are issued. You made the purchase less than a year ago at an NAV of Rs 12. The original units can be sold off with a capital loss. Diversification can be across funds and. However. and carry the same tax benefit as ELSS. bonus units are conceptually similar to dividend stripping. This fall in the NAV is a capital loss as far as the original units are concerned and it is here that tax benefits can be realised. across time periods. Bonus units that a fund issue is deemed to have been acquired at zero cost. Investments here—subject to a maximum of Rs 10. pension funds are hybrid schemes. ELSS schemes are basically diversified equity schemes. The bonus units carry a high tax liability though since you will pay taxes on the entire sale price.000 units of a fund whose NAV is Rs 15. the best tax-saving fund delivered 42. From the tax point of view. which have a debt orientation. There are two types of tax-saving funds. which have a three-year lock-in. Suppose you hold 10. which can be used to set off other capital gains.

On this. .9% in January 2000. have tended to play only a limited role in the stock market. out of which Rs 30. you will fetch Rs 1.1. 1.000 will be short-term capital gain. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date. It pools investments of small investors together increasingly thereby the participation in the stock market.these units. Mutual funds being institutional investors. i. can invest in market analysis generally not available or accessible to individual investors.5 lakh. Sale Price Is the price you pay when you invest in a scheme. iii.6% by January 2003.the share of mutual funds in total turnover of the stock market (BSE+NSE). providing therefore informed decisions to small investors. Mutual funds in india. ii. Also called Offer Price. you are likely to pay a tax of Rs 9. 1.10 Mutual Funds – FAQs: (NAV) Net Asset Value is the market value of the assets of the scheme minus its liabilities. because of their mall size and slower growth in the recent past. Mutual fund can diversify the portfolio in better way as compared with individual investors due to the expertise and availability of funds. It may include a sales load.000—30 per cent of gains.9 ROLE OF MUTUAL FUND IN STOCK EXCHANGE: Mutual funds are an ideal vehicle for investment by retail investors in the stock market for several reasons. 2 4.1. which was declined to 3.

Operating expenses also known as expenses ratio which 2 . Advisory fee is paid to investment managers. agent commission. trustee fees. register and transfer agent fees.11 COST INVOLVED IN MUTUAL FUNDS: An investor must know that there are certain costs involved while investing in mutual funds. Repurchase or ‘Back-end’ Load Is a charge collected by a scheme when it buys back the units from the unit holders. Also called. ‘Front-end’ load. custodial fees.Repurchase Price Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price. Redemption Price Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Sales Load Is a charge collected by a scheme when it sells the units. 1. Schemes that do not charge a load are called ‘No Load’ schemes. audit fees to charted accountant.1. OPERATING EXPENSES: These refer to cost incurred to operate a mutual fund. Such prices are NAV related.

100 crores and expenses Rs. Operating expenses Expenses ratio= Average net assets For instant. the trustees or sponsors. operating expenses are determined by limits mandated by SEBI mutual funds regulation act. Sales loads are used by mutual fund for the payment of agent’s commission.is annual expenses expressed as a percentage of these expenses is required to be reported in the schemes offer document or prospectus. FRONT-END LOAD: It is a one time fixed fee paid by an investor when buying a Mutual funds scheme. Depending upon scheme and net asset. these are charged directly to investor. Sales loads are usually expression percentage and or of two types front-end and back-end. Any excess over specified limits as to born by Management Company. 2 . It determines public offer price which intern decides how much of your initial investment actually get invested the standard practice of arriving a public offer price is as follows. if funds Rs. distribution and marketing expenses. 20 lakhs. SALES CHARGES: These are known commonly sale loads. Then expenses ratio is 2% expenses ratio is available in the offer document and fro historical per unit statistics included in the financial results of the fund which are published by annually. These charges have no effect on the performance of the scheme. un audited for the half year ending September 30th and audited for the physically year end 1st March 30th .

20. an investor invests Rs. 10. This means units worth 9800 are allotted to him an initial investment Rs. BACK END LOAD: 2 . 10.000 front end loads tend to decrease as initial investment amount increase.10.000 in a scheme that charges it 2% front end load at a NAV per unit Rs. 10.000/10.20= 980 units at a NAV of Rs.02) is Rs. 10 using the formula public offer price = 10/(1-0. Number of units allotted= Amount invested Public offer price 10.Net asset value Public offer price= (1-front end load) Let us assume. So only 980 units are allowed to the investor.

2 . CONTINGENT DEFERRED SALES CHARGES (CDSC): Contingent differed sales charges of a structured back end load.The real estate mutual funds sector is now being considered as the engine of economic growth.8*1000). what the investor gets in hand is 9800(9. 9. The longer remains in a fund the lower the CDSC.000 in a scheme that charges a 2% back. It is for a predetermined period only and reduced over the time you invested for a fund.8 s. end load at a NAV per units of Rs. TRANSACTION COST: Some funds may also impose a switch over fee which is charge on transfer of investment from one scheme to another within a same mutual funds family and also to switch from one plan to another within same scheme. 10 using the formula Redemption price 10/ (1+0.02)= Rs. 10. Net asset value Redemption price = (1+back end load) Let us assume an investor redeems units valued at Rs. It is paid when the units are reading during the initial years of ownership.May be fixed fee redemption or a contingent differed sales charged a redemption so load continues so long as the redeeming or selling of the units of a fund does not take place in the event of a back end load is applied. This is the SEBI mutual funds regulations 1996 do not allow either the front end load or back end load to any combination is higher than 7%. The redemption price is arrive or using following formula. The SEBI stipulate the a CDSC may be charge only for first four years after purchase of units and also stipulate the maximum CDSC that can we charge every year.

1. • AMFI undertakes all India awarness programme for investors inorder to promote proper understanding of the concept and working of mutual funds. • It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry.1. • AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. It has certain defined objectives which juxtaposes the guidelines of its Board of Directors. 2 .12 The objectives of Association of Mutual Funds in India: The Association of Mutual Funds of India works with 30 registered AMCs of the country. The objectives are as follows: • This mutual fund association of India maintains a high professional and ethical standards in all areas of operation of the industry. • It also recommends and promotes the top class business practices and code of conduct which is followed by members and related people engaged in the activities of mutual fund and asset management. • Association of Mutual Fund of India do represent the Government of India. the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association.

13 The sponsorers of Association of Mutual Funds in India: Bank Sponsored : • • • • SBI Fund Management Ltd. 1. Reliance Capital Asset Management Ltd. BOB Asset Management Co. Sahara Asset Management Co. Pvt. UTI Asset Management Company Pvt. Ltd. Private Sector: Indian:• • • • • • • • • • BenchMark Asset Management Co. Pvt.• At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.1. Cholamandalam Asset Management Co. 2 . Ltd. Ltd. Ltd Sundaram Asset Management Company Ltd. Escorts Asset Management Ltd. Institutions: • • GIC Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd. Jeevan Bima Sahayog Asset Management Co. Ltd. Ltd. Tata Asset Management Private Ltd. JM Financial Mutual Fund Kotak Mahindra Asset Management Co. Canbank Investment Management Services Ltd. Ltd.

Deutsche Asset Management (India) Pvt. Though the 1988 year saw 2 . Pvt. For 30 years it goaled without a single second player. Pvt. ING Investment Management (India) Pvt. Alliance Capital Asset Management (India) Pvt. Ltd. Ltd. Ltd. Morgan Stanley Investment Management Pvt. Standard Chartered Asset Mgmt Co.Predominantly India Joint Ventures:• • • Birla Sun Life Asset Management Co. Ltd.14 Performance of Mutual Funds in India: Let us start the discussion of the performance of mutual funds in India from the day the concept of mutual fund took birth in India. 1. Predominantly Foreign Joint Ventures:• • • • • • • • • • • ABN AMRO Asset Management (I) Ltd. (India) Pvt. Principal Asset Management Co. DSP Merrill Lynch Fund Managers Limited HDFC Asset Management Company Ltd. HSBC Asset Management (India) Private Ltd. Fidelity Fund Management Private Limited Franklin Templeton Asset Mgmt. Prudential ICICI Asset Management Co. The year was 1963. Ltd. Ltd.1. to park their money in UTI Mutual Fund. Ltd. Unit Trust of India invited investors or rather to those who believed in savings. Ltd. Ltd.

with funds trading at an average discount of 1020 percent of their net asset value. by the end of 1987. 1. people were miles away from the praparedness of risks factor after the liberalization. in March 1993 and the figure had a three times higher performance by April 2004.The performance of mutual funds in India suffered qualitatively. Partly owing to a relatively weak stock market performance. From Rs. but UTI remained in a monopoly position. Let me concentrate about the performance of mutual funds in India through figures. People rarely understood. It rose as high as Rs. some 24 million shareholders was accustomed with guaranteed high returns by the begining of liberalization of the industry in 1992. more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual fund. But yes. the Assets Under Management rose to Rs. The expectations of investors touched the sky in profitability factor. CRORES) FROM T U PUB PRIV TOT 2 .540bn. This good record of UTI became marketing tool for new entrants. 67bn. At last to mention. The performance of mutual funds in India in the initial phase was not even closer to satisfactory level. as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time. the losses by disinvestments and of course the lack of transparent rules in the whereabout rocked confidence among the investors. However. 470 bn. . The 1992 stock market scandal. 67bn. mutual funds have not yet recovered. The Assets Under Management of UTI was Rs. GROSS FUND MOBILISATION (RS. and of course investing was out of question.some new mutual fund companies.

2 67 1.6 13 1.64.O T I LIC SEC TOR ATE SECT OR AL 31 01April98 M ar ch 99 31 01April99 M ar ch 00 31 01April00 M ar ch 01 0131 4.19 2 74.73 2 7. 6 13.37 7 2 .966 21. 523 1 2. 5 3 6 4. 4 1 3 6.03 9 42.74 8 1 1.17 3 59. 6 7 9 1.95 7 1 3.46.35 2 92.

4 8.36.5 51 2. 5 0 5 22. 190 .90.69 4 - 68.25 9* 58.M April01 ar ch 02 31 01April02 Ja n03 31 01Feb.20.9 23 2.6 32 5.21. 979 * 7. 7.5 58 5. 2 4 3 5.03 M ar ch 03 31 01April03 M ar ch 04 0131 1.39.03.43 5 65.48.

now competes with as many as 400 odd products and 34 players in the market. 446 9.1.15 MARKET TREND: A lone UTI with just one scheme in 1964.M Aprilar ch 04 05 31 01April05 M ar ch 06 1.98 . New players have come in. Last six years have been the most turbulent as well as exiting ones for the industry. Product innovation is now passé with the game shifting to performance delivery in fund management as well as service. while others have decided to close shop by either selling off or merging with others.7 12 10.158 246 16 662 1. Those directly associated 2 . In spite of the stiff competition and losing market share.83.14. UTI still remains a formidable force to reckon with.

by their selection criteria for stocks have forced corporate governance on the industry. a system of risk-reward has been created where the corporate sector is more transparent then before. Total collection for the current financial year ending March 2000 is expected to reach Rs. but this trend is beginning to change.210bn in 1998-99. In India.450bn. India is at the first stage of a revolution that has already peaked in the U. The industry is also having a profound impact on financial markets. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. mutual fund assets are not even 10% of the bank deposits. Recent figures indicate that in the first quarter of the current fiscal year mutual fund assets went up by 115% whereas bank deposits rose by only 17%. Funds performances are improving. FMCG and technology sector. Fund managers. The fund mobilization trend by mutual funds in the current year indicates that money is going to mutual funds in a big way.300bn. 99) This is forcing a large number of banks to adopt 2 . In the current year mobilization till now have exceeded Rs. towards mutual funds has become obvious.100bn per annum over five-year period spanning 1993-98 doubled to Rs. which averaged at less than Rs. While UTI has always been a dominant player on the bourses as well as the debt markets. The Financial Express September. and even the regulators have become more mature and responsible.S. Funds collection. The U. Many investors are realizing that investments in savings accounts are as good as locking up their deposits in a closet.with the fund management industry like distributors. boasts of an Asset base that is much higher than its bank deposits. Funds have shifted their focus to the recession free sectors like pharmaceuticals. the new generation of private funds which have gained substantial mass are now seen flexing their muscles. The coming few years will show that the traditional saving avenues are losing out in the current scenario.S. By rewarding honest and transparent management with higher valuations. registrars and transfer agents. (Source: Thinktank.

Their role as intermediaries cannot be ignored.000 crore. • 100% growth in the last 6 years.1 1. In the last 5 years there is an annual growth rate of 9%. by year 2010. It is estimated that by 2010 March-end. 2 . PARTICULAR RETURN RISK INVESTMENT OPTION NETWORK LIQUIDITY QUALITY OF ASSETS INTEREST CALCULATION BANKS LOW HIGH LESS HIGH PENETRATION AT A COST NOT TRANSPARENT MINIMUM BALANCE 10TH MONTH. Mutual fund India assets will be double. According to the current growth rate.4% during the rest of the decade.16 FUTURE OF MUTUAL FUND: Indian mutual fund industry reached Rs 1. AND BETWEEN OF EVERY MUTUAL FUND BETTER LOW MORE LOW BUT IMPROVING BETTER TRANSPARENT EVERY DAY 30TH ADMINISTRATION EXPENSES GUARANTEE HIGH MAX. The annual composite rate of growth is expected 13.90.50.the concept of narrow banking wherein the deposits are kept in Gilts and some other assets which improves liquidity and reduces risk. It is just that Mutual Funds are going to change the way banks do business in the future.537 crore by March 2004. LOW RS 1LACK ON DEPOSIT NONE Table 1. the total assets of all scheduled commercial banks should be Rs 40. The basic fact lies that banks cannot be ignored and they will not close down completely.1.

with over US$1trillion assets under management worldwide • Our saving rate is over 23%. bonds etc) assets (e. 1.1 Investment management : Is the professional management of various securities (shares.• Number of foreign AMC's are in the queue to enter the Indian markets like Fidelity Investments. US based. mutual funds) .2. Only channelizing these savings in mutual funds sector is required. corporations etc.) or private investors (both directly via investment contracts and more commonly via collective investment schemes e. 2 . We have approximately 29 mutual funds. 'B' and 'C' class cities are growing rapidly. Soon they will find scope in the growing cities. real estate). SEBI allowing the MF's to launch commodity mutual funds. There is a big scope for expansion. which is much less than US having more than 800. to meet specified investment goals for the benefit of the investors.2) ABOUT SPECIFIC AREA OF THE TOPIC CHOOSEN: 1. Today most of the mutual funds are concentrating on the 'A' class cities.g. Some of the older public and private sector players will either close shop or be taken over. Investors may be institutions (insurance companies. • • • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. highest in the world.g. Trying to curb the late trading practices • • • The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investor’s shift their assets from banks and other traditional avenues. pension funds. Emphasis on better corporate governance.

The term asset management is often used to refer to the investment management of collective investments. Arguably. and different interaction effects. Investment managers who specialize in advisory or discretionary management on behalf of (normally wealthy) private investors may often refer to their services as wealth management or portfolio management often within the context of so-called "private banking". Asset classes exhibit different market dynamics. The provision of 'investment management services' includes elements of financial analysis. stock selection. the skill of a successful investment manager 2 .2. plan implementation and ongoing monitoring of investments.2 Investment managers and portfolio structures: At the heart of the investment management industry are the managers who invest and divest client investments. whilst the more generic fund management may refer to all forms of institutional investment as well as investment management for private investors. A certified company investment advisor should conduct an assessment of each client's individual needs and risk profile. • ASSET ALLOCATION: The different asset classes and the exercise of allocating funds among these assets (and among individual securities within each asset class) is what investment management firms are paid for. Some research suggests that allocation among asset classes has more predictive power than the choice of individual holdings in determining portfolio return. the allocation of monies among asset classes will have a significant effect on the performance of the fund. thus. asset selection. Coming under the remit of financial services many of the world's largest companies are at least in part investment managers and employ millions of staff and create billions in revenue. 1. Investment management is a large and important global industry in its own right responsible for caretaking of trillions of dollars. pounds and yen. euro. The advisor then recommends appropriate investments.

For example. institutions measure the performance of each fund (and usually for internal purposes components of each fund) under their management. so as to outperform certain benchmarks (e. The theory of portfolio diversification was originated by Markowitz and effective diversification requires management of the correlation between the asset returns and the liability returns. this is because equities are riskier (more volatile) than bonds which are themselves more risky than cash. equities have generated higher returns than bonds. and to holding period returns (the returns that accrue on average over different lengths of investment). bond and stock indices). over very long holding periods (eg. For that purpose.2. 1. • DIVERSIFICATION: Against the background of the asset allocation. and cross-correlations between the returns.3 Performance measurement: Fund performance is the acid test of fund management. The list will indicate what percentage of the fund should be invested in each particular stock or bond. The leading performance measurement firms 2 . • LONG TERM RETURN: It is important to look at the evidence on the long-term returns to different assets.resides in constructing the asset allocation. and bonds have generated higher returns than cash. and in the institutional context accurate measurement is a necessity. and separately the individual holdings. issues internal to the portfolio (individual holdings volatility). 10+ years) in most countries. and performance is also measured by external firms that specialize in performance measurement. the peer group of competing funds. fund managers consider the degree of diversification that makes sense for a given client (given its risk preferences) and construct a list of planned holdings accordingly.. According to financial theory.g.

g. it is probably appropriate for an investment firm to persuade its clients to assess performance over longer periods (e.g. Several other aspects are also part of performance measurement: The need to answer all these questions has led to the development of more sophisticated performance measures. Frank Russell in the USA) compile aggregate industry data.3% total return in US dollars)... many of which originate in modern portfolio theory. e. such as the measure of risk taken. • RISK ADJUSTED PERFORMANCE: Performance measurement should not be reduced to the evaluation of fund returns alone. information ratio) or differential returns compared to benchmarks (alphas). 3 to 5 years) to smooth out very short term fluctuations in performance and the influence of the business cycle. The Sharpe ratio is the simplest and best known performance measure. avoiding drawbacks related to a poor choice of benchmark. but investors' tax positions may vary. In a typical case (let us say an equity fund). be they risk-adjusted ratios (Sharpe ratio.g.g. The Capital Asset Pricing Model (CAPM) developed by Sharpe (1964) highlighted the notion of rewarding risk and produced the first performance indicators. This measure is said to be absolute.. +4. An enduring problem is whether to measure before-tax or after-tax performance. showing how funds in general performed against given indices and peer groups over various time periods.. then the calculation would be made (as far as the client is concerned) every quarter and would show a percentage change compared with the prior quarter (e. Aftertax measurement represents the benefit to the investor.(e. compared to the total risk of the portfolio. Generally speaking. 2 . but must also integrate other fund elements that would be of interest to investors. as it does not refer to any benchmark. It measures the return of a portfolio in excess of the risk-free rate. Modern portfolio theory established the quantitative link that exists between portfolio risk and return.

is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding 1. and/or other securities. under one or more schemes. short-term money market instruments. The first model. the fund manager. and collects the dividend or interest income.3 CONCEPT OF MUTUAL FUND: 2 . who is also known as the portfolio manager. trades the fund's underlying securities. 1. for investing in securities in accordance with these regulations” 1.3) ABOUT THE TOPIC: 1. In a mutual fund.2 DEFINITION: The SEBI regulations. The investment proceeds are then passed along to the individual investors. known as the net asset value per share (NAV). The value of a share of the mutual fund.3. proposed by Jensen (1968).3.Portfolio normal return may be evaluated using factor models. that one factor is not enough to explain the returns and that other factors have to be considered. It quickly becomes clear..1 MEANING: A mutual fund is a professionally-managed firm of collective investments that pools money from many investors and invests it in stocks. 1993 defines a mutual fund as “a fund in the form of a trust by a sponsor. to raise money by the trustees trough the sale of units to the public. realizing capital gains or losses. bonds.3. relies on the CAPM and explains portfolio normal returns with the market index as the only factor. however.

The income earned through these investments and the capital appreciation realised are shared by its unit holders in proportion to the number of units owned by them. The flow chart below describes broadly the working of a mutual fund.3.1 1. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified. The money thus collected is then invested in capital market instruments such as shares. professionally managed basket of securities at a relatively low cost. debentures and other securities.A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal.4 ENTITIES IN MUTUAL FUND OPERATIONS: 2 . Mutual Fund Operation Flow Chart: Figure1.

the trustees can be either individuals or a corporate body. the asset management company. and hold the properties of the various schemes in trust for the benefits of investors. The trusees appoint the asset management company(AMC). Typically it is the latter. or a financial service company. periodically monitor how the AMC fuctions. The AMC should have a certificate from sebi to act as portfolio manager under SEBI rules and regulations. 1993. • Trustees: A trust is a notional entity that cannot contract in its own name. 2 . • Sponsor: The sponsor of a mutual fund is like the promoter of a company. is a separate company appointed by the trustees to run the mutual fund. The sponsor delegates the trustee fuction to the trustees. and registered with SEBI. the mutual fund. the trustees. the trust enters into contracts in the name of the trustees. and the registrars and transfer agents. the custodian. The sponsor is responsible for setting up and establishing the mutual fund. It may be indian or foreign. • Mutual fund : The mutual funds constitued as a trust under the Indian trust act. a financial institution. Appointment by the sponsor. The sponsor may be a bank. The sponsor is the settler of the mutual fund trust. the following are involved in a mutual fund operations: the sponsor. • Asset Management Company: It also reffered to as the investment manager.In India. so. 1881. secure necessary approval.

Some funds handle such fuctions in house. ASSET COMPANY MANAGEMENT ACTUAL IMPLIMENTATION OF THE POLICY AND INVESTMENT OPERATIONS.The legal structure and organization of mutual funds as laid down by SEBI guidelines is as follows. It looks after the receipt and delivery of securities. and so on. distribution of dividends. • Registrars and transfer agents: The registrars and transfer agents handle investor related services such as issuing units. collection of income.• Custodian: The custodian handles the investment back office operations of a mutual fund. andsegregation of assets between schemes. while others outsource it tobSEBI approved registrars and transfer agents like karvy and CAMS. redeeming units. sending fact sheets and annual reports. The sponsor of a mutual fund cannot act as its custodian. ORGANISATION OF MUTUAL FUND: SPONCER OF MUTUAL FUND- (COMPANY . 2 OF MAKING BODY FOR FUND .BANK) BORD TRUSEE POLICY RAISING.

liquid.3. INVESTOR Figure 1.5 Schemes of Mutual funds : Types of mutual fund scheme: Operational classification portfolio classification Open ended Return based: close ended (income.CUSTODIAN ACTING AS REGISTRAR. TRANSFER AGENT AND RELATED SERVICE FOR MUTUAL FUND. balanced funds) 2 .growth.2 1. &income and growth fund) Investment based (equity.

3.g. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. In order to provide an exit route to the investors. Close-ended Scheme: A close-ended fund or scheme has a stipulated maturity period e. The fund is open for subscription only during a specified period at the time of launch of the scheme. special.Sector based (real estate. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed.5 Schemes according to Maturity Period OR by structure: A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period. The key feature of open-end schemes is liquidity. These schemes do not have a fixed maturity period. index-linked funds) Leverage based Others Figure 1. 2 .3 (hedge and offshore funds) 1. Open-ended Scheme: An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. 5-7 years.

Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes generally invest in fixed income securities such as bonds. Income / Debt Oriented Scheme: The aim of income funds is to provide regular and steady income to investors. Such funds have comparatively high risks. Balanced Scheme: The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their 2 .6 Schemes according to Investment Objective: A scheme can also be classified as growth scheme. These mutual funds schemes disclose NAV generally on weekly basis. etc. income scheme.some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. either repurchase facility or through listing on stock exchanges.e. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor i. Such schemes may be classified mainly as follows: Growth / Equity Oriented Scheme: The aim of growth funds is to provide capital appreciation over the medium to longterm. and the investors may choose an option depending on their preferences. These schemes provide different options to the investors like dividend option.3. capital appreciation. or balanced scheme considering its investment objective. 1. Such schemes normally invest a major part of their corpus in equities. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. Government securities and money market instruments. corporate debentures.

certificates of deposit. Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE Sensitive index. Returns on these schemes fluctuate much less compared to other funds. Money Market or Liquid Fund: These funds are also income funds and their aim is to provide easy liquidity. these schemes invest in the securities in the same weightage comprising of an index. preservation of capital and moderate income. NAVs of these schemes also fluctuate due to change in interest rates and other economic factors as is the case with income or debt oriented schemes. though not exactly by the same percentage due to some factors known as "tracking error" in technical terms. etc. These schemes invest exclusively in safer short-term instruments such as treasury bills. However. government securities. These are appropriate for investors looking for moderate growth. These funds are appropriate for corporate and individual investors as a means to park their surplus funds for short periods. S&P NSE 50 index (Nifty). These funds are also affected because of fluctuations in share prices in the stock markets. They generally invest 40-60% in equity and debt instruments. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. NAVs of such funds are likely to be less volatile compared to pure equity funds. NAV’s of such schemes would rise or fall in accordance with the rise or fall in the index. Load Funds 2 . Gilt Fund: These funds invest exclusively in government securities. etc. commercial paper and interbank call money. Government securities have no default risk.offer documents.

if the fund has a good performance history. The advantage of a no load fund is that the entire corpus is put to work. a commission will be payable.A Load Fund is one that charges a commission for entry or exit. No-Load Funds A No-Load Fund is one that does not charge a commission for entry or exit. no commission is payable on purchase or sale of units in the fund. Typically entry and exit loads range from 1% to 2%. That is. 2 . That is. It could be worth paying the load. each time you buy or sell units in the fund.

Fast Moving Consumer Goods (FMCG).3. etc.g. Petroleum stocks. • Index Schemes Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50 • Sectoral Schemes Sectoral Funds are those. Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Pharmaceuticals etc. e. Software. which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings Tax Saving Schemes: These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act. Special Schemes • Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. 1. Pharmaceuticals.8 IMPORTANCE OR BENEFITS OF MUTUAL FUND: The mutual fund industry has grown at a phenomenal rate in the recent past. The investment of these funds is limited to specific industries like InfoTech.g. Equity Linked Savings Schemes (ELSS). The following are some of the important advantages of mutual funds. 1961 as the Government offers tax incentives for investment in specified avenues. FMCG.3. Indian academy school of management studies 38 . The returns in these funds are dependent on the performance of the respective sectors/industries.7 Sector Specific Schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. Their growth opportunities and risks associated are like any equity-oriented scheme. e.1.

In the absence of MFs these savings would have remained idle. So they provide better yield to their customers . Indian academy school of management studies 39 . This is investors. • Providing research services: Each fund maintains large research team. Thus. The intermediation fee is the lowest being 1% in the case of a mutual fund. which constantly analyses the companies and the industries and recommends the fund to buy or sell a particular share. investor are assured of quality services in there best interest.• Channelizing savings for investment: A number of schemes are being offered by MFs so as to meet the varied requirements of the peoples and savings are directed towards capital investments directly. The fund diversifies its risks by investing in large varieties of shares and bonds which cannot be done by small and medium investor.they also enjoy the economics of large scale and can reduce the cost of capital market participation • Redering expertise investment service at low cost: The management of the fund is generally assigned to professionals who are well trained and have adequate experience in the field of investment. • Offering wide portfolio investment: Now the investors can enjoy the wide portfolio investment held by the mutual fund. Mutual funds are able buy cheaper and sell dearer than the small and medium investors. Thus they are able to the command better market rates and lower rates of brokerage.This is in accordance with the maximum ‘not to lay all eggs in one basket • Providing better yields: Due to the large funds. Thus investment are made purely on the basis of a thorough research.

Indian academy school of management studies 40 . • Supporting capital market: The savings of the people are directed towards investments in capital market through these mutual funds. Even if he does not keep a record. • Simplified record keeping: The investor has to keep a record of only one deal with the mutual fund. • Providing greater affordability and liquidity: Even a very small investor can afford to invest in mutual funds. Mutual funds also provide a valuable liquidity to the capital market. 5 lakhs. • Promoting industrial development: All industrial units have to raise their funds by resorting to the capital market by the issue of shares and debentures. investments in MFs are exempted up to Rs. The mutual funds not only create a demand for these capital market instruments but also supply a large source of funds to the market. Again there is greater liquidity. the MF sends statements very often to the investors. Under the wealth tax act. interest and capital appreciation. Thus. branches of the sponsoring bank are always ready to provide loan facility against the unit certificates. and thus the market is made very active and stable. They provide an attractive and cost effective alternative to direct purchase of shares. investors also stand to get the benefit of tax concession. Besides. • Introducing flexible investment schedule: Some mutual funds are permitted the investor exchange their units from one schemes to another and this flexibility is a great boon to investors. apart from dividend. Units can be sold to the fund at any time at the net asset value and thus quick access to liquid cash is assured.• Offering tax benefits: Certain funds offer tax benefits to its customers.

If the manager does not perform as well as you had hoped. • Management risk: When you invest in a mutual fund. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. For example.• Diversification: The best mutual funds design their portfolios so individual investments will react differently to the same economic conditions. if you invest in Index Funds. 1. Indian academy school of management studies 41 . economic conditions like a rise in interest rates may cause certain securities in a diversified portfolio to decrease in value. most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales. financial consultants. because these funds do not employ managers. Some funds also charge sales commissions or "loads" to compensate brokers. • Taxes: During a typical year. However. the value of the overall portfolio should gradually increase over time. anyone who invests through a mutual fund runs the risk of losing money.3. you will pay a sales commission if you buy shares in a Load Fund. • Fees and commissions: All funds charge administrative fees to cover their day-today expenses.8 Drawbacks of Mutual Funds: Mutual funds have their drawbacks and may not be for everyone: • No Guarantees: No investment is risk free. Even if you don't use a broker or other financial adviser. Other securities in the portfolio will respond to the same economic conditions by increasing in value. you will pay taxes on the income you receive. When a portfolio is balanced in this way. even if some securities lose value. no matter how balanced the portfolio. If the entire stock market declines in value. even if you reinvest the money you made. you depend on the fund's manager to make the right decisions regarding the fund's portfolio. you forego management risk. Of course. the value of mutual fund shares will go down as well. you might not make as much money on your investment as you expected. or financial planners.

the investor buys more units when the price is low and fewer units when the price is high. ii. Dividend and growth options When you join a scheme. ii. • Options: With respect to a number of schemes.9 OPTIONS AND VALUE-ADDED SERVICES: Thanks to the heightened competition in the mutual fund industry.3. the investor can invest regular sums of money every month to buy units of a mutual fund scheme. Cheque book facility Fund houses take few days to process a redemption request and then further time is lost when the redemption cheque is in transit. The SWP allows the investor to withdraw a fixed amount every month. the tax implications may be different. you can shoose the dividend option or the growth option. weekly. Systematic withdrawal plan A systematic withdrawal plan (SWP) works like a systematic investment plan in the opposite direction. Funds may offer daily. systematic investment plan. Under the dividend option. monthly.2 Value-added services : Mutual funds offer value-added services like redemption over phone. mutual funds offer the following: dividend and growth options. i. Though the returns from both the dividend and growth options will be the same. • 8. Systematic investment plan Under the systematic investment plan (SIP).1. investment gains are ploughed back into the scheme and no dividends are declared. the gains of the scheme are paid out at regular intervals in the form of dividends. quarterly. and new points of purchase. and systematic withdrawal plan. i. cheque book facility. Redemption over phone Prudential ICICI for example offers investors the facility of making a redemption request or switch between schemes over the phone. and annual dividend options. iii. half-yearly. mutual funds now offer various options and value-added services to attract and retain customers. To cut down this Indian academy school of management studies 42 . Under the growth option. triggers and alerts. iv. As the investment is made regularly.

• The fund’s performance: The return clocked by a fund are an important parameter to judge its worth as an investment avenue. the fund showing on the risk-adjusted return front is vital as well. 1.3.delay. Encashment of the cheque is deemed as withdrawal. similarly the portfolio should be a well-spread one.e. • The fund offering: Investors having wide range of offering to choose from different fund each fund is a distinct offering. • Risk-adjusted return and volatility: We havw discussed about importance of a fund’s performance i. however. Indian academy school of management studies 43 . • The fund manager/management style: The fund manager and his approach to fund management play a vital role in determining the fund’s success or otherwise. at the scheme’s NAV on the day the cheque is deposited. It serves as an indicator of what the fund is capable of performing.9 HOW TO PICK UP CHOOSEN ONE: There are few tips which helps the investors to choose right fund. at the time of investment itself. Ideally a fund should display a high degree of consistency in its holdings. the return it has delivered. A higher sharp ratio is indicative of the fact that the fund has adequately compensated its investors for risk borne. pick the one that suits your risk – appetite and profile the best. while the fund’s return are historical in nature. • Portfolio management: The fund’s portfolio can reveal a lot about the fund. Evaluate the fund manager’s past track record in the schemes he manages. the some limit. some fund houses give investors in certain schemes (typically debt scemes).

• The PMS option: Investors who have a large investible surplus can explore the option of utilizing a portfolio performance management services (PMS) can be explored. Investors comfort levels would surely be higher if the fund house is a reputed one has a history of producing funds that have superior returns.• Expense ratio and load: Expenses incuured by the fund have a significant impact on its performance. The expenses are incurred for a variety of reasons ranging from management fees to marketing and selling expenses. The right investment plan an important role in enabling you to achieve you financial goals and objectives. • The fund house: The fund house is an important entity and due attention must be to it as well. Indian academy school of management studies 44 . An entry load reduces the amount invested proportionately and only the balance is utilized for generating returns. • Seek advice: Utilize the services of a financial planner before making investments in mutual funds. A financial planner will help you create a portfolio comprising of schemes that are “right” for you. Similarly entry/exit load are vital too.

” Research methodology is a way to systematically solve the research problem.CHAPTER TWO: RESEARCH DESIGN: 2. It may be understood as a science of studying how research is done scientifically. are relevant and which are not. In it we study the various steps that are generally adopted by a research in studying his research problem along with the logic behind them. Introduction: Research refers to a search for knowledge. The advanced learner’s dictionary of current english lays down the meaning of research as “ a careful investigation or enquiry specially through search for new facts in any branch of knowledge. It is necessary for the researcher to know how to develop certain indices or tests. and what would they mean and Indian academy school of management studies 45 . but they also need to know which of these methods or techniques. how to apply particular research technique. the median or the standard deviation or chi-suare. the mode.1. how to calculate the mean.

Jenson’s (1968) study on mutual fund performance of 115 funds over a period spanning from 1945 60 1964. These results were in sync with the findings of Treynor 91965) and Sharpe (1966). 2. All this means that it is necessary for the researcher to design his methodology. when we talk of research methodology we not only talk of research methods but also consider the logic behind the methods we use in the context of our research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique and why we are not using other so that research results are capable of being evaluated either by the researcher himself or by others. confirmed the efficient market hypothesis. Performance of professionally managed funds also was not any better than the performance of risk-adjusted index portfolio. His analysis has shown that the performance of expense-adjusted fund returns was markedly lower than those randomly chosen portfolios of a similar risk category.indicate and why. Initially. Thus. Later. Indian academy school of management studies 46 . came out with contradictory conclusions. several academicians have tried to study the performance of various funds. The research methodology has wider dimension and wider scope than that of research methods. to the personal characteristics of fund managers. several researchers have tried to study the various factors and their impact on fund performance. the results of the early studies prevailed as general conclusions in the erstwhile literature.2 Review of literature: A research should be preliminary orientation and background knowledge about the topic and he should collect the basic concept and information regarding the final in which the topic includes due to this reasons review of the literature has an important role in research study. Researchers also by which they can decide that certain techniques and procedures will be applicable to certain problems and other will not. their studies have focused on timing and investment abilities of fund managers. These factors include potential measurement errors from survivorship bias and misspecification of the benchmark. which also indicated that managers of these funds did not appear to possess private information. the impact of fund expenses and economies of scale. Thus. Various studies that focused on factors such as the ability of fund managers to consistently outperform the market and the fund specific organizational and managerial aspects. Considering the importance of mutual funds.

the mutual fund managers may produce such excess returns that can offset the expenses of the fund. Taxable distribution can be either ordinary income or capital schems which are equity schemes .” 2. debt and hybrid schems. in fact. Mutual fund is a professionally managed form of collective investment that pools money from many investors and invest it in stocks. enabled the managers to cover their costs. short-term money market instruments and other securities. On the other hand the Malkiel (1995) study considers both benchmark errors and survivorship bias and concludes that the previous results indicating market inefficiency were affected by these factors. go against the early findings. a number of later studies on the topic. Scope of the study: The study of mutual fund has the wider scope. Recently. carhart (1997) has shown that the common factors that drive stock returns are responsible for consistency in mutual fund performance.However. which indicated that mutual fund managers may have access to the useful private information. features of stockholding and trading costs and expenses. Malkiel (1995) and Carhart (1997) reinforce the early conclusion of Jensen (1968). Other studies by Elton. Wermers (2000) decomposed mutual fund returns into a stock picking talent. a study by Ippolity (1993) found mutual fund returns after expenses (before loads) to be superior than the returns offered by risk-adjusted market indices. Patel and Zeckhauser (1993). 2. For instance. The decomposition helped him show that stock picking of funds. Further studies by Grinblatt and Titman (1992). Goetzmann and Ibbotson (1994). Mutual fund distributors of tax free municipal bonds income are also tax free to the share holders. Thus. While doing away with survivorship bias. nonetheless. Indian academy school of management studies 47 . Hendricks. bonds.4. Gruber. Das and Hlavka (1993). and Volkman and Wohar (1995) were in support of market efficiency as they discovered instances of repeated winners amongst fund managers.3 Statement of the problem: “ A study on Analysis of the performance of mutual fund with reference to mutual fund industry.

Treynor Index and Jensen’s Alpha measure.  To appraise investment performance of mutual funds with risk adjustment. Treynor and Jensen. xii. To evaluate the performance of schemes and funds. ING domestic opportunities fund. INg dividend yield fund. ix.N fund . the theoretical parameters as suggested by Sharpe. 2. ING L. ING Tax saving fund.  To find out the financial performance of mutual fund schemes. v.  To evaluate investment performance of mutual funds in terms of risk and return.5. HDFC top 200 fund. HDFC Index fund(Nifty plan). ING nifty plus fund. viii. x. xi. ii. the researcher applied Sharpe Index.O. Indian academy school of management studies 48 .The present study includes five-year return of the mutual fund companies and funds in India. and only those schemes and funds are included in this study. HDFC Capital builder fund. vii. HDFC Equity fund.  To examine the funds sensitivity to the market fluctuations in terms of beta. HDFC Growth fund. HDFC index fund(Sensex plan). The schemes covered under the study are: i.I. iv. which are performed well during from last few years. ING selected stock fund. Out of all mutual fund companies we have selected only two companies those are ING mutual fund and HDFC mutual fund. vi. iii. Objectives of the problem: The major objectives of study are as follows.

It is possible to develop to valid standards of comparison.6. It tends itself to the verifiable procedure of collection and analysis of data. Descriptive study objective aim at identifying the various characteristics of a company problem under study. 2. In it we study the various steps that are generally adopted by a research in studying his research problem along with the logic behind them. It can reveal potential relationships between variables with exploratory research. as it exists at present. There is a cause effective relationship. It may be understood as a science of studying how research is done scientifically. Methodology refers to methods adopted to carry out the research and steps adopted to solve the problem finding solution 2. the problem of the project must be described and not arguable.  To provide valuable suggestions and recommendations. To analyze the performance of various schemes of mutual funds. It mainly involves surveys and facts findings enquiries of different kinds. Thus a descriptive study is a fact finding investigation with adequate interpretation. It focuses on particular aspects or dimensions of the problem studied. It is the simplest type of research.1 Type of the study: • Descriptive study: The type of the study or research used in this project is a descriptive research design. The main objective of descriptive research is to describe the state of affairs as it exists at present. It is designed that it gathers descriptive information and provides information for formulating more sophisticated studies. The major purpose of descriptive research is a description of the state of the affairs. Indian academy school of management studies 49 .6.  To identify the sector where the mutual fund and how invested. The criteria for selecting this particular design are that. Methodology: Methodology is a way to systematically solve the research problem. The data collected is amenable to statistical analysis and has accuracy and significance.

2. ii.2 Type of data: Secondary data: The data which is used for the research is secondary data. wages expenses. Central and state government publication publishes the various statistics like crop production. Indian academy school of management studies 50 . The second agency if and when it publishes and files such data becomes the secondary source to anyone who later uses these data.3 Sources of data: Unpublished sources: i. “The data (published or unpublished) which have already been collected and processed by some agency or person and taken over from there and used by any other agency for their statistical work are termed as person and taken over from there and used by any other agency for their statistical work are termed as secondary data” as far as second agency is concerned. 2.6. Published sources: i. The secondary data is the data which is duplicate of primary data. The data can be governments or private offices can be collected from these are unpublished data. In other words secondary source is the agency who publishes for use by others the data which was not originally collected and processed by it. the secret documents. The research work. population.6. statistic.

more volatile or less volatile. 2.com News papers: financial express Company journals: Factsheets of ING investment and HDFC.ii. market will have beta 1. The commerce association.0 Mutual fund is said to be volatile.3 Sharpe index: Indian academy school of management studies 51 . Standard deviation is used in the concept of risk of a portfolio of investments. higher standard deviation means a greater fluctuation in expected return.1 Standard deviation: It is used to measure the variation in individual returns from the average expected return over a certain period.7 Tools for analysis: 2.com AMFI. Indian chamber of commerce federation are publishes several data. journals. iii. If beta is greater than 1 the stock is said to be riskier than market. periodicals etc. If beta is zero then the risk is the same as that of the market. Periodicals: ICFAI journals Internet: google.com Value research online. research berceuse. universities publishes several data’s. It is calculated by relating the return on a security with return for the market.7. iv. News paper. Negative beta is rare. 2. By convention.com Nytimes. commerce and trade association. the indication is that stock is less risky in comparison to market.7. Some private organization. 2.2 Beta: Beta measures the systematic risk and shows how prices of securities respond to the market forces.7. If beta is less than 1. publishes the several data.

4 Treynor’s Index : Treynor’s model is on the concept of the characteristics straight line. The larger the Sharpe Index.7. relative to the total amount for risk in the portfolio. Portfolio Average Return (R ) – Risk Free Rate of Interest (R ) p t Standard Deviations of the Portfolio Return Sharpe Index = 2.7.Sharpe index measures risk premium of a portfolio.5 Jensen Measures: It measures the difference between market risk and actuel performance of the fund. JM = Average return of the portfolio – SML Indian academy school of management studies 52 . the portfolio over performance the market and vice versa. It is also known as reward to volatility ratio and is defined as: Treynor Index = Portfolio Average Return (R )-Risk Free Rate of p Interest (R ) t Beta Coefficient of Portfolio 2. Sharpe index summarizes the risk and return of a portfolio in a single measure that categorizes the performance of funds on the risk-adjusted basis. The characteristics line has drawn a relationship between the market return and a specific portfolio without taking into consideration any direct adjustment for risk.

 The support from the management side may be limited due to their pre occupied meetings and work.  Mutual fund industries are so developed as compared to stock market.9. 1 2 3 4 5 Contents Introduction Research Design Profile of the organization Analysis and interpretation of data Summary suggestions.  Not possible to get whole information because of their business secret and lack of awareness among people. CHAPTER SCHME: Chapter NO.2. of findings. conclusion and Indian academy school of management studies 53 .8 Limitations of the study: The study also has the some limitations which are as follows:  The study is restricted to secondary data only  The time is the main constraint so limited period of time is spent on this study. 2.

000 cr during the year 1999-2000 recording a growth rate fo 65%. Today.1 PROFILE OF THE INDUSTRY: The Indian mutual fund industry has evolved over distinct stages.600 cr (Table1). which was the only player in the mutual fund industry up to 1987. 2005 with Assets under Management (AUM) of rs. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Phase III (1992-1997) and Phase IV (beyond 1997). Mutual fund industry started in India with the establishment of Unit Trust of India (1964). mutual funds are one of the fast-growing sectors in India. The growth of the mutual fund industry in India can be divided into four phases: Phase I (1964-87). 1. Thus. it is the prime responsibility of all mutual fund Indian academy school of management studies 54 . In 1987. Phase II (19871992). the government permitted public sector banks and financial institutions to join the fray. From 1993 onwards the industry was opened up for private participation. The Indian Mutual Fund industry has grown tremendously in the last decade. Besides. The origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. a vast majority of equity schemes outperformed the market. Hence. private and foreign players have started setting up mutual funds in India.6 Bibliography (Annexure) CHAPTER THREE: 3.49. 1. Large sections of Indian investors are yet to be intellectuated with the concept. AUM crossed Rs. There are 29 mutual funds as on March 31st.00.

LIC in 1989 and GIC in 1990.2 Second Phase . with many foreign mutual funds Indian academy school of management studies 55 .1. Punjab National Bank Mutual Fund (Aug 89).6.47. except UTI were to be registered and governed. 3. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulations in 1996. At the end of 1988 UTI totally had Rs.700 crores of assets under management.1 First Phase – from 1964-87: Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. Bank of Baroda Mutual Fund (Oct 92).companies. Each phase is briefly described as under. a new era started in the Indian mutual fund industry. Bank of India (Jun 90). The first scheme launched by UTI was Unit Scheme 1964. The end of 1993 marked Rs. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The mutual fund industry can be broadly put into four phases according to the development of the sector. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. 3. The industry now functions under the SEBI and (MutualFund)Regulations1996. The number of mutual fund houses went on increasing.3 Third Phase . Indian Bank Mutual Fund of (Nov 89). SBI Mutual Fund was the first followed by Canbank Mutual Fund (Dec 87). giving the Indian investors a wider choice of fund families.004 as assets under management. 3. under which all mutual funds. the up with condition to market the product correctly abreast of selling.1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993. 1993 was the year in which the first Mutual Fund Regulations came into being.1.1.1987-1993 (Entry of Public Sector Funds): Entry of non-UTI mutual funds. Also.

153108 crores under 421 schemes. functioning under an and administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. One is the Specified Undertaking of the Unit Trust of India with AUM of Rs. there were 29 funds.805 crores.2 The major players in the Indian Mutual Fund Industry are: Indian academy school of management studies 56 .29. conforming to the SEBI Mutual Fund Regulations. It is with registered with SEBI and functions under the Mutual Fund Regulations.4 Fourth Phase .835 crores (as on January 2003). 2004. the mutual fund can industry has entered its current phase of consolidation and growth.44.1. It was bifurcated into two separate entities.76.21. 1. and with recent mergers taking place among different private sector funds. BOB and LIC. there were 33 mutual funds with total assets of Rs. As at the end of September.setting up funds in India and also industry has witnessed several mergers and acquisitions. 3. sponsored by SBI.541 crores of assets under management was way ahead of other mutual funds. As at the end of January 2003. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. PNB.since February 2003 This phase had bitter experience for UTI. The second is the UTI Mutual Fund Ltd. 3. The Specified Undertaking of Unit Trust of India.000 crores of AUM and with the setting up of a UTI Mutual Fund. which manage assets of Rs. The Unit Trust of India with Rs.

4 STRUCTURE OF MUTUAL FUND INDUSTRY IN INDIA: MUTUAL FUND INDUSTRY Indian academy school of management studies 57 .GROWTH IN ASSETS UNDER MANAGEMENT: Figure 1.

3 Rating of Mutual fund schemes in mutual fund industry: Indian academy school of management studies 58 .5 3.SEBI ASSOCIATION OF MUTAUL FINDS MUTUAL FUNDS SPONSOR BOARD OF TRUSTEES ASSET MANAGEMENT COMPANY CUSTODIA N INVESTOR S PUBLIC SECTOR PRIVATE SECTOR FI SPONSORED UTI BANKS SPONSORE D MUTUAL FUND SCHEMES Figure 1.

Mutual fund schemes are periodically evaluated by independent institutions. Indian academy school of management studies 59 . Value research India like CRISIL. viz.. liquidity. • 'B' and 'C' class cities are growing rapidly. • We have approximately 29 mutual funds which is much less than US having more than 800. and Economic Times are three such institiutions whose rankings or evaluations are currently very popular. thenext 20 percent good. Debt Schemes. the top 10 percent are considered vbery good.5 percent four star. Value Research India.5 percent two star. The weights assigned to these criteria vary from category to category. Balanced Schemes. the next 40 percent average.within each category. and the last 10 percent one star. the next 35 percent three star. Each scheme is assigned a risk grade and a return grade and a composite measure of performance is calculated by subtracting the risk grade from the return grade. • Our saving rate is over 23%. Its ranking is based on four criteria. Number of foreign AMC's are in the que to enter the Indian markets like Fidelity Investments. value research India rates schemes in different categories..4 Some facts for the growth of mutual fund industry in India: • • 100% growth in the last 6 years. and Liquid Schemes. CRISIL. 3. • Mutual fund can penetrate rurals like the Indian insurance industry with simple and limited products. There is a big scope for expansion. CRISIL Credit Rating nd Information Services of India Limited (CRISIL) carries out Composite Performance Rankings that cover all open-ended schemes that disclose their entire portfolio composition and have NAV information for at least two years. the next 22. and the last 10 percent poor. Within each category. the next 22. risk-adjusted return of the scheme’s NAV. the next 20 percent below average. Equity Schemes. US based. with over US$1trillion assets under management worldwide. Only channelizing these savings in mutual funds sector is required. Today most of the mutual funds are concentrating on the 'A' class cities. viz. and asset size. the top 10 percent are consideree five star. Soon they will find scope in the growing cities. It currently ranks schemes in five categories. highest in the world. diversification of the portfolio. Gllit Schemes.

3. corporate and institutional clients in 50 countries. 3. The AMC.• • • • SEBI allowing the MF's to launch commodity mutual funds.5.AMFIINDIA. Emphasis on better corporate governance.COM ). was incorporated on April 6.2 ING Investment Management: In India ING Investment Management (I) Pvt Ltd has an investor base of over 1.52.5. ING Vysya Mutual Fund aims to provide investors with the most practical and secure investment opportunities to invest their valuable savings. This is combined with a range of innovative options to deliver healthy returns combined with a high degree of security. It is the world's fourth largest financial services group. Ltd.5 FOLLOWED BY THAT OF COMPANY Here in this project we considered two companies for analysis part ING Investment pvt. ING Group is known for its philosophy of 'keeping it simple' covering some 60 million private. Currently. 1998.677 with Rs.97 crores as of June 30th. we currently manage 21 schemes. ING Investment Management (India) Pvt.ltd.1 ING Group management structure: ING Vysya Mutual Fund: ING Vysya Mutual Fund was setup on February 11. five debt and two hybrid schemes to its investors. 1999 with the same named Trustee Company. 5080. Trying to curb the late trading practices. the fund offers four equity. Indian academy school of management studies 60 . ’07 (SOURCE: WWW. It is a joint venture of Vysya and ING. With a presence in 34 locations. (ING Group) and HDFC mutual fund(HDFC GROUP) 3. Introduction of Financial Planners who can provide need based advice.

(Mahilanivesh) ING Dynamic Asset Allocation Fund was awarded “Most Innovative Product” by Asia Asset Monitor. The rating of the fund is not an opinion of the asset management company’s willingness or ability to make timely payments to the investor. First Private Sector Mutual Fund to launch a concept dedicated to women. ING Mutual Fund recently launched India’s first DAILY TRANSFER PLAN called Zoom Investment Pac (ZIP). Two CRISIL AAAf * products in Debt Fund space. Supported by state-of-the-art systems and the capabilities of the ING Group. ING Investment Management has enjoyed many firsts and has always maintained a pioneering outlook. (ING Liquid Fund & ING Floating Rate Fund). Financial markets: ING Vysya Bank Financial Markets is a leading player in the Indian Financial Markets providing one of the widest ranges of products for large corporate. we offer competitive pricing and efficient execution across markets and a comprehensive suite of products. • • • • • • • * The assigned rating of AAAf is valid only for ‘ING Floating Rate Fund’ and ‘ING Liquid Fund’. Awarded “Abby Gold 2006” for its advertising Campaign for ING LION Fund. 61 Indian academy school of management studies . (ING Select Debt Fund). ING Investment Management has sealed a position of strength and is considered as one of the top contenders to challenge the market leaders. The rating is also not an opinion on the stability if the NAV of the fund.ING Investment Management (I) Pvt Ltd has been associated with innovation and responsive adaptability with sharp minds at work. ING Mutual Fund has also pioneered a new reality show on television called Indian Investor of the Year. A few achievements are highlighted below: • First Investment Manager to launch a packaged concept in Asset Management Industry. First Asset Manager to launch a debt fund based on Credit risk with a portfolio based on credit monitor. small and medium enterprises as well as individual needs. which could vary with market developments.

foreign exchange and cash management. This includes onshore as well as offshore. For cross border transactions involving global clients. Our services include advisory. lead manage and place. Isnvestment banking. The bank offers a wide array of client-focused corporate banking services. Financial advisory service: for mergers and acquisitions. the investment-banking group works closely with ING Bank's global corporate finance and investment banking office. The product suite. Local debt distributin: both in loan and bond forms.Wholesale banking: Wholesale Banking is a reflection of ING Vysya Bank's ability to provide its corporate clients in India a full range of commercial. transactional and electronic banking products. including plain vanilla debt and structured dedt. thus giving the customer the advantage of being a full fledged Commercial Bank along with investment banking. capital and debt structuring and restructuring. to name a few. investment banking services are provided to a range of Indian as well as offshore clients. structuring portfolios. offered in close coordination with the ING global network of structured trade finance units includes Indian academy school of management studies 62 . Securitization: We advise our clients on securitising their assets with a view to sell them. assist in obtaining ratings for the portfolios & sell-down of the portfolio. private capital raising and structured financing. including working capital finance. Trade finance and commodities: As an innovative solution provider of international and domestic trade flows of our clients. local debt syndication and securitization: The bank is uniquely positioned to be able to advise. As a Category I merchant banker registered with SEBI. we offer an entire range of trade finance products. the bank has an advanced product portfolio that includes the following. trade and transactional services.

Bill Discounting: Bill discounting involves financing of short-term trade receivables through negotiable instruments/ invoices discounting. Letter of credit: letter of credit facilities (inland/ foreign) are provided to the customers for meeting working capital requirement needs as well as for capital requirements purchases. consumed by big manufacturers and thereafter sold to ultimate consumers through dealers. This has gained considerable importance in recent past in view of self-liquidating in nature. We also arrange discounting of bills under export LCs by overseas banks at competitive pricing with/ without recourse to the exporters. bills/ invoices discounting. ING Asia Private Banking has been ranked as # 1 for Best quality advice in the Asia Money 2007 survey amongust clients with AUM exceeding 25 million."-Michel Tilmant. Supply chain financing: SCF refers to trade credit extended by the Bank to partners involved in comprehensive supply chain process (commodities to cash) commencing from conversion of raw material into parts/ components. Private Banking Division. supply chain financing. Accounts and deposits: • • • Rupee savings accounts NRE and NRO savings accounts NRE and NRO current accounts Indian academy school of management studies 63 .documentary credit. Private banking: believe that trust can be built over time by continuously providing quality advice to our customers. Chairman. Our integrated global business in insurance. guarantees. pre/postexport finance and structured commodity finance. Core objective is to provide integrated financial solution to the supply and distribution channels of our corporate clients. asset management and banking enables us to offer clients innovative financial solutions few others can match. ING Group Welcome to ING Vysya Bank. Export credit: ING Vysya provides extensive export credit for pre-shipment and postshipment requirements of exporter borrowers in rupees and foreign currencies.

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. The Trustee Company of HDFC Mutual Fund is HDFC Trustee Company Limited and AMC is HDFC Asset Management Company Limited. HDFC Mutual Fund: HDFC Mutual Fund was setup on June 30. 2000 with two sponsorers nemely Housing Development Finance Corporation Limited and Standard Life Investments Limited. as part of the RBI's liberalisation of the Indian Banking Industry in 1994.2 HDFC GROUP: The housing development finance corporation (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector.1999. HDFC Bank commenced operations as a Scheduled Commercial Bank in january 1995. The products of HDFC Mutual Fund are as follows: • • • Equity Funds Balance Funds Debt Funds Apart from this it also provides the following value added services: Indian academy school of management studies 64 . The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited'. With global assets under management of approximately US$126 billion as at May 15. 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. In 1998. incorporated with the SEBI on December 10. The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. with its registered office in Mumbai. 2003. India.Foregn currency deposit: Earn Indian Interest Rates on your Foreign Currency deposits with our Foreign Currency Non-Resident deposit.5. 3.

2006 was Rs. governnments. Net Profit for the year ended March 31.141 crores. 1.716 ATMs. indicate that the bank continues to grow in a steady manner. insurance companies. trusts. a premier housing finance company (set up in 1977) of India. Results of the latest quarter ended June 2007. in 320 cities in India. and all branches of the bank are linked on an online real-time basis. mutual funds. partnerships. corporates. The bank offers many innovative products & services to individuals. after the Reserve Bank of India allowed setting up of Banks in the private sector. 1. was incorporated in August 1994. financial institutions.• • • SIP (Systematic Investment Plan) STP (Systematic Transfer Plan) SWAP (Systematic Withdrawal Advantage Plan) HDFC Bank : (NYSE: HDB). one amongst the firsts of the new generation. HDFC PRODUCT RANGE: HDFC Bank India provides the following range of products: • Savings Account 65 Indian academy school of management studies . HDFC bank also have the different banking fuction: • • • Personal banking Wholesale banking NRI banking Branch network: Currently HDFC Bank has 753 branches. It is the pathbreaker in the indian banking sector. tech-savvy commercial banks of India. The Bank was promoted by the Housing Development Finance Corporation Limited.

3 SPECIFIC DEPARTMENT WHICH YOU STUDIED: Indian academy school of management studies 66 .• • • • • • • HDFC Bank Preferred Sweep-In Account Super Saver Account HDFC Bank Plus Demat Account HDFC Mutual Fund HDFC Standard Life Insurance HDFC India innovative services • • • • • • • HDFC Phone Banking HDFC ATM HDFC Inter-city/Inter-branch Banking HDFC Net Banking HDFC International Debit Card HDFC Mobile Banking HDFC Bill Pay HDFC Bank Loans • • • • • HDFC Personal Loan HDFC New Car Loan and Used Car Loan HDFC Loan Against Shares HDFC Two Wheeler & Consumer Loan HDFC Home Loan 3.

3. it has been decided that the share registration and allied operations relating to the equity shares of the Company will be outsourced to Karvy Computershare Private Limited (Karvy) who are Category I Registrars & Transfer Agents registered with SEBI and possess almost 20 years experience in handling share registry operations. Accordingly. factory buildings. utilities. operating licenses. the Company has come to the conclusion that it will benefit the shareholders if the investor service function is outsourced to an outside agency which has in addition to specialised expertise.3. social prerequisites. 3. This facility operates with liaison officers from various government and parastatal institutions that have a direct bearing in providing services to investors. investors are paid periodic visits which enable interactions necessary to preempt any difficulties that they may encounter in their day to day operations. which is registered with the SEBI as a Category 2 Registrar.1 Investment service department: The Department provides investor needs and aftercare to both new and existing foreign and citizen enterprises through its One Stop Service Centre (link to How can we help you). The assistance provided includes company registration. It is a well equipped department which endeavours to provide efficient and timely services to its shareholders in share transfers and related operations. After a careful evaluation.3.2 INVESTOR SERVICES All share transfers and related operations have so far been conducted in-house by Hindustan Lever's Investor Service Department. residence and work permits as well as infrastructural facilities such as land. The Company has evaluated the option of outsourcing the investor service function in order to add further value and to overcome certain limitations like not being able to service shareholders directly across the counter at various places across the Country where the shareholders are based. power and telephone connections. visitors visa. Karvy serves over 250 corporate clients and renders service to an investor base of Indian academy school of management studies 67 . The main focus of activity is to enable investors in the manufacturing and services sectors to secure all clearances and approvals necessary to set up and operate business in the country from under one roof. The Department literally takes the investor by the hand and helps them walk through all formalities until the business is established. Thereafter. better infrastructure to serve the investors across the Country.

2004. request for issue of duplicate share certificates. The Company has appointed M/s. ING select stock fund (an open ended growth scheme) Objective: to provide long term capital appreciation from a portfolio that is invested predominately in equity and equity related securities.. We are happy to inform you that all requisite steps in connection with shifting the investor service operations from Company's office at Navi Mumbai to Karvy's central office at Hyderabad have been completed and Karvy is fully operational in respect of the Company's share registry work with effect from 16th July. payment of dividend etc.2004. requested to send all documents/correspondence in relation to the above to Karvy at the following address after the said date: 3. transmission of shares.4 DISCUSSION ABOUT THE PRODUCTS THEY PRODUCE IS DESIRABLE: ING domestic opportunity fund:(an open ended equity scheme) Objective: to provide long-term capital appreciation from a portfolio that is primarily invested in companies. amongst the primary investment opportunities amongst the general investment universe. It is the largest Registrar & Share Transfer Agents in the Country and serves the investors through its 193 branches across 135 cities. exchange of merged Company's shares. change of address.over 16 million.Karvy Computershare Private Limited (Karvy) as Registrars and Transfer Agents with effect from 1st July. ING dividend yield fund :( an open ended equity scheme) Indian academy school of management studies 68 .2004. demat. You are. therefore. which derive significant propotion of their revenue from domestic Indian market place/economy. Accordingly all operations/correspondence relating to share transfers and allied operations e.g. In case adequate investment opportunities are not available due to valuation considerations etc. will be handled by Karvy and not by Company's office at Navi Mumbai wih effect from 16th July .

O. ING tax saving fund :( an open ended indexed equity savings scheme) Objective: to generate medium to long-term growth of capital along with income tax rebates ING ATM (against money market): (open-ended diversified equity scheme) Objective: to generate capital appreciation from a diversified portfolio of equity and equity related instruments by investing in the stock of companies. ING C.U. seeking to provide long-term growth of capital at controlled level of risky by investing primarily in midcap stocks.I.Objective: to provide medium to long term capital appreciation and / or dividend distribution by investing predominantly in equity and equity related instruments. which offer high dividend yield. ING L. The level of risk is somehow what higher than a fund focused on large and liquid schemes. ING midcap fund :( an open ended equity scheme) Objective: an open-ended scheme. ING nifty plus fund :( an open ended indexed equity scheme) Objective: the objective of fund is to invest in companies whose securities are included in the S&P CNX Nifty index.N. which are financially sound but are undervalued. :( Open ended diversified equity scheme) Objective: it seeks to provide medium to long-term capital appreciation by investing in stocks across the entire market capitalization.B (competitive upcoming businesses): (open-ended balanced scheme) Indian academy school of management studies 69 .

The aim is to optimize returns while providing liquidity. Exposure to debt securities would be in line with the fund manager’s caution on the equity market. ING Dynamic asset: Objective: the primary investment objective of scheme is to seek to generate capital appreciation by actively investing in equity/ equity related securities. ING liquid plus fund: Objective: The scheme would aim to provide an investment avenue for investors preferring good liquidity and an investment horizon of 2 to 6 months. The scheme would be able to achieve its objectives by investing in a portfolio of money market and debt instruments. ING liquid fund: Objective: to provide reasonable returns while providing a high level of liquidity and low risky by investing primarly in money market and debt securities. ING floating rate fund: Indian academy school of management studies 70 . ING liquid call fund: Objective: The aim is to optimize returns and take advantage of phases of high overnight rates and inverted curves while providing liquidity . money market instruments. In case of –ve view on equity markets the fund manager may choose to have 100% allocation to debt securities. The scheme may invest in debt. to the extent permitted under the regulations.Objective: seeking to provide long-trm capital appreciation by investing predominantly in a diversified portfolio of equity and equity related securities of companies of small market capitalization.

Objective: the primary objective of scheme is to provide income consistent with the prudent risk from a portfolio comprising substantially of floating rate instruments. The scheme will not make investment in any other type of security such shares. ING select debt fund: Objective: To generate income by investing in higher yielding fixed income securities by maintaining a higher expose in AA rated securities and money market instruments of varying maturity dates with view to maximize income while maintaining optimum balance of yield. Under plan B the scheme will also seek to generate capital appreciation by investing a smaller portion of corpus in equity and equity related securities. debentures etc. ING MIP Fund plan-A and ING MIP Fund plan-B Objective: The primary objective of the scheme is to generate regular income by investing in diversified portfolio of debt and money market instruments of varying maturities and at the same provide continuous liquidy along with adequate safety. safety and liquidity. and at the same time provide continuous liquidity along with adequate safety. ING Global Real Estate fund: Indian academy school of management studies 71 . ING Gilt fund: Objective: The primary objective of the scheme is to generate relatively risk free return by investing in sovereign instruments issued by the central/state government as defined u/s of public debt act 1944. ING income fund: Objective: to generate attractive income by investing in a diversified portfolio of debt and money market instruments of varying maturities. Under normal circumstances 65% of corpus will be invested in floating rate instruments and upto 35% in fixed rate instruments.

HDFC Equity fund: Objective: To achieve capital appreciation. HDFC Premier Multi-Cap fund: Objective: To generate capital appreciation in long term through equity investment by investing in a diversify portfolio of MidCap and Large Cap ‘blue chip’ companies. HDFC Index fund: Indian academy school of management studies 72 . HDFC Capital Builder fund: Objective: To achieve capital appreciation in long term.Objective: The primary aim of the scheme is to seek capital appreciation by investing predominantly in ING Global Real Estate Securities Fund. HDFC MUTUAL SCHEMES: HDFC Growth fund: Objective: To generate long term capital appreciation from a portfolio that is predominantly invested equity and equity related instruments. HDFC Top 200 schemes: Objective: To generate long term capital appreciation from a portfolio of equity and equity related instruments primarily drawn from the companies in BSE 200 index. HDFC Core & Satellite Fund: Objective: To generate capital appreciation through equity investment in companies whose shares are quoting at prices below their true value. The scheme may invest a certain portion of its corpus in money market instruments in order to meet liquidity.

HDFC Balanced fund: Objective: To generate capital appreciation along with current income from a combined portfolio of equity. HDFC Prudence Fund: Objective: To provide periodic returns and capital appreciation over a long period of time from a judicious mix of equity and debt to minimize capital erosion. HDFC Children’s gilt fund: Objective: To generate long term capital appreciation. Sensex plan: to generate returns those are commensurate with the performance of nifty. debt and money market instruments. Sensex Plus Plan: to invest 80 to 90% of the assets of the plan in companies whose securities are included in sensex and between 10 to 20% of the net assets in companies whose securities are not included in the sensex.Objective: Nifty plan: to generate returns those are commensurate with the performance of nifty. HDFC Arbitrage fund: Objective: To generate income through arbitrage opportunities between cash and derivative segment and by deployment of surplus cash in debt securities and money market instruments. subject to tracking errors. subject to tracking errors. HDFC Long Term Advantage fund: Indian academy school of management studies 73 .

HDFC Multiple Yield Fund: Objective: To generate positive returns over medium time frame with low risk of capital loss over medium time frame. HDFC Liquid Fund (HLF): Indian academy school of management studies 74 . HDFC High Interest Fund (HHIF) Objective: To generate income by investing in a range of debt and money market instruments of various maturity dates with a view to maximize income with safety. yield and liquidity. HDFC Short Term Plan (STP): Objective: To generate regular income through investment in debt securities and money market instruments. HDFC Income Fund: Objective: To optimize returns while maintaining a balance of safety. HDFC Tax Saver: Objective: To achieve long term growth of capital.Objective: To generate long term capital appreciation from a portfolio that is predominantly invested equity and equity related instruments. HDFC MF Monthly Income Plan: Objective: To generate the regular return through investment primarily in debt and money market instruments. yield and security.

HDFC Cash Management Fund: Objective: Savings and call plan. through a judicious portfolio mix comprising of money market and debt instruments. fixed rate debt/ money market instruments swapped for floating rate return and fixed rate debt securities and money market instruments.Objective: To enhance income consistent with a high level of liquidity. CHAPTR FOUR:- Indian academy school of management studies 75 . HDFC Gilt Fund: Objective: To generate credit risk-free return through instruments in sovereign securities issued by the central government and or a state govern. HDFC Floating Rate Income Fund: Objective: To generate regular income through investment in a portfolio comprising substantially of floating rate debt/money market instruments.

The main objective of descriptive research is to describe the state of affairs as it exists at present.” 2. the theoretical parameters as suggested by Sharpe. Objectives:  To evaluate investment performance of mutual funds in terms of risk and return. It mainly involves surveys and facts findings enquiries of different kinds.  To find out the financial performance of mutual fund schemes. • Type of data: o Secondary data: “The data (published or unpublished) which have already been collected and processed by some agency or person and taken over from there and used by any other agency for their statistical work are termed as person and taken over from there and used by any other agency for their statistical work are termed as secondary data”. 1. Methodology: Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. Treynor and Jensen. Statement of the problem: “Analyses the performance of mutual fund with reference to mutual fund industry.  To analyze the performance of various schemes of mutual funds. • Type of the study: o Descriptive study: The type of the study or research used in this project is a descriptive research design.  To examine the funds sensitivity to the market fluctuations in terms of beta.“DATA ANALYSIS AND INTERPRETATION”. 3.  To appraise investment performance of mutual funds with risk adjustment. Indian academy school of management studies 76 .

5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr. Exit load/CDSC : 1% on the investment below 1 cr. No entry load on Investment of more than 1 cr.1 ING Domestic Opportunities Fund: Nature of the scheme: An open ended equity scheme Scheme objective : To provide long term capital appreciation from a portfolio that is Primarily invested in companies. 36.1 Date of launch Fund size : 12-09-2002 : 112.69 : Rs. which derive significant Proportion of their revenues from domestic Indian market economy.28 : BSE-100 Indian academy school of management studies 77 . Investment pattern: Minimum Rs. 16.5000 and in multiples of Rs. And redeemed within 180 days. : Rs.29 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus Option Benchmark Load structure Entry load : 2. 0.1 cr.ANALYSIS AND DISCUSSION: 4.28 : Rs. 36.25% for investment of less than Rs.

40 3.82 1.4.15 2.11 2.64 2.79 1.74 4.29 crores.1 Sectors and companies Banks Refineries/marketing Telecom – services Power equipments Diversified. 112.01 1.1Port folio construction as on 31th January 2008: Assets under Management: Rs.34 2.construction steel Passenger / utility vehicles cigarettes Transmission towers Oil exploration/production Construction projects Consumer electronics Housing finance Plastic products NBFC Cement Computer-hardware Pharmaceuticals Gas transmission/marketing Fabrics and garments Fertilizers-nitrogenous Power Industrial equipment and others % of portfolio 15.08 4.70 3.98 i.27 9.80 1.5 Indian academy school of management studies 78 .92 1. Table 1.64 1.68 5.50 2.76 6.59 17.09 2.49 3.1.

1.99 Interpretation: By comparing these three ratios the fund giving fair return that is 0.69 -4.2 Fund performance as on 31th January 2008: Table 1.31 Benchmark rturn 17.918 23.4.92 42.918 by taking into consideration of total risk of 23.10 31.95 32.69 returns by talking into consideration of total market risk this fund gave the good return but it can’t perform up to the benchmark return for last two years so it gave negative result in the Jensen ratio.58 42. By evaluating treynor ratio this fund performing well it gives 23. Indian academy school of management studies 79 .3 Sharpe ratio Treynor ratio Jensen ration 0.04 4.19 because it measures the reward to the total risk.19 43.28 46.3 Quantitative data: Table 1.1.02 41.12 38.2 Period Last one year Last two year Last three year Last four year Last five year Actual return 16.

Exit load/CDSC : 1% on the investment below 1 cr.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.25% for investment of less than Rs.2 ING Select Stock Fund: Nature of the scheme: An open ended growth scheme Scheme objective : To provide long term capital appreciation from a portfolio that is Primarily invested in equity and equity related securities. Investment pattern: Minimum Rs.55 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2.44 : BSE-100 Indian academy school of management studies 80 . 19.1 cr. : Rs.4.5000 and in multiples of Rs. And redeemed within 180 days. No entry load on Investment of more than 1 cr. 0. 36.1 Date of launch Fund size : 06-05-1999 : 36.80 : Rs.

5 Period Last one year Last two year Actual return 17.99 1.49 8.47 2.88 6.27 6.2 Fund performance as on 31th January 2008: Table 1.67 2.90 1.27 1.44 2.86 1.55crores: Table 1.88 2.72 31.33 4.81 1.04 5.56 4.50 3.84 1.4 Sectors and companies Banks Refiniries/marketing Computers-software Telecom-services Steel Financial institutions Diversified-constructions Power equipments Housing finance Construction projects Cement Oil exploration/production Industrial minarals Cigarates Residential/commercial/sez projects Construction civil Plastic products Fabrics and garments NBFC Passenger/utility vehicles Pharmaceuticals Printing and publishing Ship building Stock broking and allied Oil exploration CBLO/Repo/FD/Cash/Other assets % portfolio 11.69 3.24 4.12 81 Indian academy school of management studies .95 32.81 2.2.4.84 1.2.06 3.85 Benchmark return 17.1 Portfolio construction as on 31th January 2008: Asset under management Rs.86 1.36 8.80 2.36.90 1.

83 16.Last three year Last four year Last five year 41.07 38.6 Sharp ratio Treynor ratio Jensen ratio 0.01. Scheme objective : To provide long term capital appreciation and / or dividend Indian academy school of management studies 82 .17 38.49 4.9466.9466 23.88 -1.94. This fund consistently performing well.3 Quantitative data: Table 1.2. it shows that fund generating good returns.94 Interpretation: By comparing these ratios the sharp ratio shows that the fund performing better and giving fair return that is 0. 4.3 ING Dividend Yield Fund: Nature of the scheme: An open ended equity scheme. by evaluating treynor ratio this fund able to give good returns that is 23.92 42.58 22. Because it gave less negative value -1.88 by considering market risk of 1.

74 : Rs.1 cr.89 crores: Table 1. No entry load on investment of more than 1 cr.distribution by investing predominantly in equity and equity related instruments.12 : BSE-100 4. Exit load/CDSC : 1% on the investment below 1 cr.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr : Rs.7 Indian academy school of management studies 83 . 15.89 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus option Benchmark Load structure Entry load : 2.5000 and in multiples of Rs. 15. 0.1 Portfolio construction as on 31th January 2008: Asset under management Rs. And redeemed within 180 days.3.1 Date of launch Fund size : 24-10-2001 : 28.28.12 : Rs. 13.25% for investment of less than Rs. Investment pattern: Minimum Rs. which offer high dividend yield.

Sectors and companies Banks Refineries/marketing Fertilizers-nitrogenous Electrodes Computer software Fertilizers-phosphatic LPG/CNG/PNG/LNG SUPPLIERS Motor cycles/scooters Shipping Diversified consumer goods Oil exploration/ production Industrial minerals Axles Ship building Spinning cotton/blended Steel Steel products Cement Stock broking and allied Petrochemicals NBFC CBLO/Repo/FD/Cash/Other assets

% Portfolio 15.26 8.71 7.14 5.79 5.40 4.70 4.53 4.49 4.48 4.30 4.27 3.68 3.08 2.85 2.04 1.90 1.87 1.62 1.11 0.70 0.09 5.11

4.3.2 Performance of fund as on 31 th 2008: Table 1.8 Period Actual return Benchmark return

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Last one year Last two year Last three year Last four year Last five year

15.77 28.14 35.08 40.02 19.97

17.95 32.12 38.92 42.58 43.03

4.3.3 Quantitative data: Table 1.9 Sharp ratio Treynor ratio Jensen ration 0.874 33.48 -6.19

Interpretation: By comparing these ratios the sharp ratios shows that the fund performing well and gives return like 0.874 by taking total risk 26.07 by evaluating treynor ratio this fund able to give good return 33.48 by considering market risk of 0.83. This fund gave Jensen of -6.19 more – ve value because first and last year it perform poor.

4.4 ING L.I.O.N: (Large cap, Intermediate cap, Opportunities, New Offering) Fund:
Nature of the scheme: An open ended diversified equity scheme.

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Scheme objective

: To provide medium to long term capital appreciation by investing In stocks across the entire capital market capitalization range.

Investment pattern: Minimum Rs.5000 and in multiples of Rs.1 Date of launch Fund size : 28-12-2001 : Rs.53.96 Crores

NAV per unit as on 31th January 2008 Growth Option Dividend Option Bonus option Benchmark Load structure Entry load : 2.25% for investment of less than Rs,1 cr. No entry load on investment of more than 1 cr. Exit load/CDSC : 1% on the investment below 1 cr. And redeemed within 180 days, 0.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr. : Rs. 16.07 : Rs. 16.07 : Rs. 16.07 : BSE-100

4.4.1 Portfolio construction as on 31th January 2008: Asset under management Rs. 53.96 crores: Table 1.10
Indian academy school of management studies 86

36 2.85 2.14 0.35 1.03 3.2 Performance of fund as on 31 th 2008: Table 1.44 7.07 4.12 38.3 Quantitative Data: Indian academy school of management studies 87 .96 1.92 42.72 3.76 2.74 35.Sectors and companies Banks Refineries/marketing Computer –software Telecom-services Steel Financial institutions Diversified-construction Power equipment Housing finance Pharmaceuticals Construction projects Cement Residential/commercial/sez projects cigarettes Oil exploration/production Fabrics and garments Gas transmission/marketing Industrial minerals Passenger/utility vehicles Ship building Plastic products NBFC Stock broking/allied Oil exploration Fertilizers-phosphatic Transmission towers CBLO/Repo/FD/Cash/Other assets % portfolio 13.79 1.36 2.95 32.16 5.4.20 26.11 4.78 2.12 25.75 4.52 2.91 5.48 1.35 1.84 6.20 8.78 2.08 4.25 2.00 1.82 40.06 3.58 37.44 Benchmark return 17.4.09 4.11 Period Last one year Last two year Last three year Last four years Last five years Actual return 15.

Table 1.08. 25.64 -3. 4. Investment pattern: Minimum Rs.1 Date of launch Fund size : 23-02-2002 : Rs. By compairing treynor ratio it shows that the fund gave the more return of -3.5 ING Nifty plus Fund: Nature of the scheme: An open ended index linked equity scheme.10.90 Crores NAV per unit as on 31th January 2008 Growth Option : Rs.982 24.78 Indian academy school of management studies 88 .92 Interpretation: This fund gave the return of 0. Scheme objective : The objectives of the fund is to invest in companies whose Securities are included in the S & P CNX Nifty Index.12 Sharp ratio Treynor ratio Jensen ratio 0.982 with total risk of 24.5000 and in multiples of Rs.92 which shows that the fund can’t out perform even for one time. shows that this fund is performing well.

16 : Rs.20 10. Exit load/CDSC : 1% on the investment below 1 cr.Dividend Option Bonus option Benchmark Load structure Entry load : Rs.47 7.07 8.60 Indian academy school of management studies 89 .5.25% for investment of less than Rs.1 Portfolio construction as on 31th January 2008: Asset under management Rs.36 11.78 : S & p CNX Nifty Index.13 Sectors and companies Banks Telecom-services Refineries/marketing Computers-software Oli exploration/production Power % Portfolio 11.70 9. No entry load on investment of more than 1 cr.1 cr.90 crores: Table 1. 25. 4. 10. 0. : 2.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr. 17. And redeemed within 180 days.

89 1.53 0.09 1.38 1.17 Benchmark return 13.44 25.44 35.57 3.2 Performance of fund as on 31 th 2008: Table 1.39 7.60 2.66 37.35 4.3 Quantitative Data: Indian academy school of management studies 90 .14 Period Last one year Last two year Last three year Last four year Last five year Actual return 11.70 33.53 1.26 22.18 1.10 0.39 4.46 1.83 35.85 27.5.69 1.57 30.5.Power equipments Steel Diversified-construction Cigarettes Housing finance Pharmaceuticals Cement Residential/commercial/sez project Aluminium Diversified-consumer goods Copper & copper products Passenger/utility vehicles Motor cycles/scooters Gas transmission/marketing Commercial vehicles T V broadcosting and software production CBLO/Repo/FD/Cash/Other assets 6.30 1.86 2.21 4.43 2.

37 Indian academy school of management studies 91 .07.939 showed that. 29. by evaluating treynor ratio.58.91 and fund performing well during five years of history because it gaves very less difference between actual and benchmark return -0.Table 1.356. the fund gave return of 23.5000 and in multiples of Rs. 4.939 23.76 Crores NAV per unit as on 31th January 2008 Growth Option : Rs.16 -0.6 ING Tax Savings Fund: Nature of the scheme: An open ended equity linked savings scheme. Scheme objective : The objectives of the fund is to generate medium to long term Growth of capital along with income tax rebate.1 Date of launch Fund size : 28-03-2002 : Rs. Investment pattern: Minimum Rs. fund performing well during five years history with total risk of 26.16 with little more market risk of 0.356 Interpretation: This fund gave the more sharp ratio that is 0.15 Sharp ratio Treynor ratio Jensen ratio 0.

And redeemed within 180 days.40 6.41 3. 14.69 4.36 92 .76 crores: Table 1.77 4.4 : CNX Midcap : 2.5% if Redeemed after 180 but before 365 days and no exit load on the investment of more than 1 cr.Dividend Option Bonus option Benchmark Load structure Entry load : Rs. 58.45 3. No entry load on investment of more than 1 cr. 0.28 5.49 : Rs.45 3.64 4.25% for investment of less than Rs.1 cr. 29.1 Portfolio construction as on 31th January 2008: Asset under management Rs. 4.70 7.54 3.16 Sectors and companies Construction projects Pharmaceuticals Banks LPG/CNG/LNG SUPPLIER Refineries/marketing Power equipments Trading Personal care Paints Fertilizers-phosphate Residential/commercial/sez projects Indian academy school of management studies % Portfolio 8.6. Exit load/CDSC : 1% on the investment below 1 cr.

90 1.89 2.03 3.95 2.3 Quantitative data: Table 1.64 Indian academy school of management studies 93 .49 1.03 3.93 1.60 4.6.2 Performance of fund as on 31 th 2008: Table 1.63 2.30 38.37 46.50 1.33 0.741 20.31 33.89 1.17 2.38 2.28 32.18 Sharp ratio Treynor ratio 0.39 38.52 1.06 1.94 1.32 Benchmark return 18.17 Period Last one year Last two year Last three year Last four year Last five year Actual return 0.Financial institution Ship building Industrial minerals Plastic products Fabrics and garments Hotels Stockbroking and allieds Steel Fertilizers and nitrogeneous Steel products Retailing Industrial equipment Printing and publishing Sugar Electrodes Computer software Oil exploration Air conditioner NBFC Aluminium CBLO/Repo/FD/Cash/Other assets 3.62 5.02 2.55 2.6.42 36.63 49.36 4.09 0.50 1.

432 : Rs.714 : Sensex . 4. Investment pattern: for new investor Rs. 33.518 Interpretation:Sharp ratio shows the reward to total risk associated with fund.1000 and in multiples of Rs. For existing investor Rs.518 shows that fund performance not able to beat the benchmark return.Jensen ratio -9. Date of launch Fund size : 11-09-2000 : Rs.64 because they have to create awqrness of the fund to the people.100 thereafter.7 HDFC Growth Fund: Nature of the scheme: An open ended growth scheme. That is this fund gave the return of 0.714 with risk of 26. Because of new category og fund the Jensen ratio also very less that is -9.5000 and in multiples of Rs.894.100 thereafter.707 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Indian academy school of management studies 94 : Rs.01. Scheme objective : The objectives of the fund is to generate long term capital Appreciation from a portfolio that is invested predominantly in Equity and equity related instruments. 68. the treynor ratio shows that the fund performance by considering market risk it gave less return 20.

Entry load : 2.88 5. 4.1 Portfolio construction as on 31th January 2008: Asset under management Rs. and no exit load on the investment of more than 5 cr.15 3.66 95 .68 4. And redeemed within 365 days.02 4.80 3.5 cr.707 crores: Table 1. Exit load/CDSC : 1% on the investment below 5 cr.14 5.60 93.25% for investment of less than Rs.33 1. Jindal Saw ltd.32 4.19 Sectors or industry Petroleum products Banks (state bank of india) Consumer non durable goods Pharmaceuticals Finance Banks (icici bank) Telecom services Industrial capital goods Industrial capital goods Industrial capital goods Total of ten equity holdings Total equity and equity related holdings ICICI Bank ltd.7. Indian academy school of management studies % Portfolio 6. 894.30 3. No entry load on investment of more than 5 cr.53 5.58 47.35 4.

20 Period Last one year Last two year Last three year Last four year Last five year Actual return 16.42 29.55 39.89 42. 4.86 100 894.3 Quantitative data: Table 1.32 51.11 40.25 39.2 Performance of fund as on 31 th 2008: Table 1. by evaluating Treynor ratio the fund gave the return of Indian academy school of management studies 96 .99 1.00 30.21 Sharp ratio Treynor ratio Jensen ratio 4.7.49 25.72 Benchmark return 13.39 Interpretation: This fund gave the more sharp ratio.89 8.707cr 4.75.61 4.Tatal debt/money market instrument Other current assets (Repo and CBLO) Grand total Net assets 4.24 19.006 shows that the fund performing better during five year history with the tatal risk of 7.7.

Scheme objective : The objectives of the fund is to generate long term capital appreciation Investment pattern : For new investor Rs. for existing investor Rs.420 : Rs. No entry load on investment of more than 5 cr.1000 and in multiples of Rs.100 thereafter. 716 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure: Entry load : 2. 4.25% for investment of less than Rs.5000 and in multiples of Rs. Date of launch Fund size : 01-01-1995 : Rs. 188.100 thereafter.003 it shows that even though in volatile condition the fund perform well.30 it shows that actual return is more than benchmark return during 5 year history because it is difference between actual and benchmark return. the Jensen gave the positive return of 8. 49.5 cr.444 : S & P CNX 500 Indian academy school of management studies 97 .4.30.89 by considering the beta value of 1.8 HDFC Equity Fund: Nature of the scheme: An open ended growth scheme. Exit load/CDSC : Nil : Rs.

8.1 Portfolio construction as on 31th January 2008: Asset under management Rs.14 3.29 3.716 crores: Table 1.09 43. 4.42 4.27 98.68 1. Total debt/money market instrument % Portfolio 9.63 4.22 Sectors and industry banks Media and entettainment Industrial capital goods Industrial capital goods Banks Pharmaceuticals Consumer non durables Pesticides Pharmaceuticals Industrial capital goods Total equity holdings Total equity and equity related holdings Jindal saw ltd.01 1.73 4.30 3.92 3.50 3.4.20 3.68 Indian academy school of management studies 98 .

98 means it gave the good Indian academy school of management studies 99 .8.43 53.46 43.94 28.2 Performance of fund as on 31 th 2008: Table 1.44 Interpretation: This fund gave the sharp ratio of 3.74 that is reward of 3.34 24.31 100 4716 cr 4.8.74 32.98 8.3 Quantitative data: Table 1.02 40.42 Benchmark return 14.47 with risk of 7-77% and giving good return to the investor.17 34.Other Current Aseets Grand total Net assets 0.23 Period last one year last two year Last three year Last four year Last five year Actual return 9.13 21. Treynor ratio gave the value of 32.99 4.98 42.24 Sharp ratio Treynor ratio Jensen ratio 3.

5 cr. for existing investor Rs.858 : BSE Sensex . No entry load on investment of more than 5 cr.26 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2. Indian academy school of management studies 100 : Rs.883 and succeed in the performance.100 thereafter.100 thereafter. 4. Scheme objective : The objectives of the fund is to generate long term capital Appreciation from a portfolio of equity and equty-linked Instruments primarily drawn from the companies in BSE 200 index Investment pattern: For new investor Rs.1000 and in multiples of Rs.44.2. Date of launch Fund size : 11-10-1996 : Rs.return with overcoming market risk of 0.25% for investment of less than Rs.9 HDFC Top 200 Fund: Nature of the scheme: An open ended growth scheme.718 : Rs. 147.5000 and in multiples of Rs.363. 48. The Jensen ratio measure that fund beat the benchmark return and gave the return of 8.

65 3.9.75 6.Exit load/CDSC : 1% on the investment below 5 cr. ICICI bank Ltd.26 crores: Table 1.48 Indian academy school of management studies 101 . and no exit load on the investment of more than 5 cr.25 Sectors and industry Banks (ICICI Bank) Petroleum products Software Consumer non durables Industrial capital goods Banks(SBI) Pharmaceuticals Telecom services Total of top ten equity holdings total equity and equity related holdings Debt/money market instrument Rabo india finance privaye ltd. 2.65 41. 4.363.70 2.1 Portfolio construction as on 31th January 2008: Asset under management Rs.42 1.63 0.10 96.66 3. And redeemed within 365 days.29 4.52 3.05 % Portfolio 8. total debt/money market instrument 0.15 2.

75 31.23 21.79 32.363.75 31.93 42.86 36.326.26 236.17 4.09 53.47 100.2 Performance of fund as on 31 th 2008: Table 1.65 4.3 Quantitative data: Table 1.22 Interpretation: This fund perform well and gave the sharp value of 4.47 43.9.00 2.43 8.24 Benchmark return 17.25 and treynor ratio shows that the fund succeed in overcoming market risk and gave return of Indian academy school of management studies 102 .9.27 Sharp ratio Treynor ratio Jensen ratio 4.11 by considering total risk 7.Other Current Assets(including reverse repos’/CBLO Grand total Net Assets Net assets (in laks) 2.17 34.26 Period Last one year Last two year Last three year Last four year Last five year Actual return 15.

4.100 thereafter.367 : Rs. for existing investor Rs. 31.100 thereafter. : Rs.5 cr. Scheme objective : The objectives of the fund is to generate long term capital appreciation in long term Investment pattern: for new investor Rs.750.63 Crores NAV per unit as on 31th January 2008 Growth Option Dividend Option Benchmark Load structure Entry load : 2.510 : S & P CNX 500 Indian academy school of management studies 103 .43. 88.5000 and in multiples of Rs.22 means that fund beat the benchmark return in it’s five year history.25% for investment of less than Rs. Date of launch Fund size : 01-02-1994 : Rs.1000 and in multiples of Rs.10 HDFC Capital Builder Fund: Nature of the scheme: An open ended growth scheme. No entry load on investment of more than 5 cr.43% and Jensen gave positive return 8.

46 4.94 3.Exit load/CDSC : Nil 4.26 crores: Table 1.43 46.74 104 .11 6.54 4.1 Portfolio construction as on 31th January 2008: Asset under management Rs.12 4.10.2.28 Sectors and industry Banks Industrial products Banks Industrial capital goods Auto ancillaries Industrial capital goods Pharmaceuticals Ferrous metals Industrial products Chemicals Total top ten equity holdings Total equity and equity related holdings Indian academy school of management studies % portfolio 6.06 5.02 3.363.18 95.93 3.47 4.

treynor gave the return of 33.13 21. Indian academy school of management studies 105 .50 52.56 30.28 100.63 4.17 34.20 Interpretation: This fund able to compensate the risk and possible of giving return of 4.10.89 37. Total debt/money market instruments Other current Assets(Including reverse repo’s/CBLO Grand total Net assets 1.98 42.00 750.94 28.27 Benchmark return 14.29 Period Last one year Last two year Last three year Last four year Last five year Actual return 14.30 Sharp ratio Treynor ratio Jensen ratio 4.3 Quantitative data: Table 1.Debt/money market instruments Jindal saw Ltd.99 4.2 Performance of fund as on 31 th 2008: Table 1.98 2.29 33.98 1.10.17% with considering market risk of 0.29.8708 and able to beat the market risk .09 36.17 -9.

100 thereafter. Scheme objective : The objectives of the fund is to generate returns that are commensurate With the performance of the sensex.20 shows that the fund beat the benchmark return and gave the good return to the investors.2977 : Sensex Exit load/CDSC : 1% on the investment below 5 cr.78. Date of launch Fund size : 17-07-2002 : Rs.5000 and in multiples of Rs. And redeemed within 365 days. for existing investor Rs.02 Crores NAV per unit as on 31th January 2008 Growth Option Benchmark Load structure Entry load : Nil : Rs.100 thereafter. subject to tracking record.11 HDFC Index Fund:(Sensex plan): Nature of the scheme: An open ended index linked scheme. Investment pattern: for new investor Rs. Indian academy school of management studies 106 .Jensen gave the value of 9. 4. 154.1000 and in multiples of Rs.

95 6.68 (Reliance 3. 4.85 10.11.and no exit load on the investment of more than 5 cr. 78.02 crores: Table 1.1 Portfolio construction as on 31th January 2008: Asset under management Rs.31 Sectors and industry Pertrolium products Banks(ICICI) Industrial capital goods Software Finance Telecom services Banks(SBI) Consumer Non durables Bank(HDFC) Telecom communication) services % Portfolio 14.24 3.73 4.02 5.58 Indian academy school of management studies 107 .39 7.58 4.29 4.

37 36.43 39.33 Sharp ratio Treynor ratio Jensen ratio 2.50 4.34 32.68 35.02 crs.37 27.47 18.75 42.59 1. 4.68 Benchmark return 14.62 22.3 Quantitative data: Table 1.29 98.69 108 Indian academy school of management studies .2 Performance of fund as on 31 th 2008: Table 1.11.Total top ten equity holdings Total equity and equity related holdings Other Current Assets(Repo/CBLO) Grand total Net Assets 65.41 100 78.11.45 -10.32 Period Last one year Last two year Last three year Last four year Last five year Actual return 8.64 44.

for existing investor Rs. Investment pattern: for new investor Rs. Date of launch Fund size : 17-07-2002 : Rs.12 HDFC Index Plan (Nifty Plan).49.949 by considering Jensen ratio we come to know that the fund has not performed well during five year of history which gave the –ve value of -10.100 thereafter.100 thereafter.6758 : S & P CNX Nifty .1000 and in multiples of Rs. Scheme objective : The objectives of the fund is to generate returns that are commensurate with the performance of the nifty subject to tracking record. 46. Nature of the scheme: An open ended index linked scheme. treynor gave the normal return of 22.5000 and in multiples of Rs.6.42 crores NAV per unit as on 31th January 2008 Growth Option Benchmark Load structure Indian academy school of management studies 109 : Rs.Interpretation: This fund able to compensate the risk and possible to give the return of 2.69.45 with beta of 0. 4.

83 6.14 4.Entry load : Nil Exit load/CDSC : 1% on the investment below 5 cr.05 3. 4. and no exit load on the investment of more than 5 cr.1 Portfolio construction as on 31th January 2008: Asset under management Rs.50 Indian academy school of management studies 110 .34 Sectors and industry Pertoleum products Oil Telecom services(Bharati airtel) Power Banks(ICICI Bank) Telecom services(reliance communication) Banks(SBI) Industrial capital goods(Larsen and Turbo) % Portfolio 11.35 5. And redeemed within 365 days. 49.42 crores: Table 1.31 4.12.87 3.94 5.

31 2.13 35.35 Period Last one year Last two year Last three year Last four year Last five year Actual return 7.06 Indian academy school of management studies 111 .12.90 27.21 96.06 17.45 23.Industrial capital goods(BHEL) Ferrous metals Total of top ten equity holdings Total of equity and equity related holdings Other Current Assets(Includind Repo/CBLO) Grand total Net Assets 3.42 crs.86 34.47 37.85 31.91 31.3 Quantitative data: Table 1.91 51.2 Performance of fund as on 31 th 2008: Table 1.66 3.34 100 49. 4.85 4.12.67 40.26 Benchmark return 13.36 Sharp ratio Treynor ratio 2.

the fund not able to provide better return to the investor.49 Interpretation: This fund gave the return of 2. Jensen ratio provide that the fund performing well and not so good and it gave the negative value of -2. CHAPTER FIVE: 5.1 SUMMARY OF FINDINGS: Following are the findings of the ING and HDFC funds: • Sharp ratio indicates that fund performance by considering overall total risk.49. • Because of volatility in the market conditions. So it is not possible to diversify the risk associated with funds.894. The funds are not able to cross the benchmark return so fund houses should concentrate on the market conditions. Some funds are not able to perform well because of total risk involved in the funds.45% with risk of 7. so they having more standard deviation.06 with beta of 0.98. • ING investing funds in the some selected sectors. Indian academy school of management studies 112 . by compairing the treynor ratio this fund gave the normal return of 23.Jensen ratio -2.

• By considering Jensen ratio it shows that no fund has not crossed more time benchmark return so that’s why Jensen ratio can’t give the +ve return for many funds. • From portfolio construction shows that. • In HDFC all funds are having very less standard deviation and it helps the fund to generate good returns on the fund. the fund diversifies it’s risk for some extent so the fund able to give +ve return based on Jensen ratio. 5. the mutual fund is one of the way to development of country and helps to mobilizing dead money in the economy which helps to develop the economic conditions of the country and people.2 CONCLUSION: “Mutual fund is booming sector now a days and it has lot of scope to generate income and providing return to the investor. Indian academy school of management studies 113 . • Out of six funds last two funds that is sensex and index got –ve value based on Jensen ratio because they gave more preference for bank deposits. • By considering treynor ratio it shows that the fund performs well during 5 years of history and able to overcome the market risk. • Out of six equity schemes many funds are crossed the benchmark return because of the well management of funds and well diversifying of risk.

Mutual fund helps the people for studying the market conditions, it providing lot of opportunities to the people for research work and helps the people to know the new things going on around the world. It gave the more knowledge to the person, because it diversifies the risk by investing in different securities.”

5.3 SUGGESSTIONS: Following are the suggestions for the both funds. • The fund house has to reduce the total risk involved in the fund in order to increase the return with good portfolio construction.

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The fund house should select the innovative way of portfolio construction and should see the attracting areas of investing funds.

The fund houses should concentrate on the market conditions according to that they have to set the benchmark and invest in different sectors.

The fund houses should invest in good and attracting sectors to reduce standard deviation.

The fund house should try to reduce little more beta in order to generate more returns to investors.

In ING Jensen never gave the +ve value so fund house try to cross the benchmark return and achieve the objectives of the fund.

HDFC fund house gave the good return it showed by sharp ratio even though they have to reduce the total risk by diversifying their portfolio and achieving objectives.

The HDFC investing in diversifies areas but not in upcoming areas like real estate and infrastructure better to invest in those areas to increase return.

HDFC still it has to reduce the standard deviation to generate more return by reducing total risk factors associating with mutual funds, and analyses all the factors.

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HDFC has to concentrate on those funds which are performing less than thir benchmark return and take actions and analyse the market conditions and take correct steps

5.4 BIBLIOGRAPHY: BOOK REFERENCES: V.A.AVADHANI (2006): Security analysis and portfolio management, Himalaya publishing house. 6th Edition. L.M.BHOLE (2005) : Financial institutions and market, Tata Mcgraw – hill. FISHER AND JORDEN (2000): Security analysis and portfolio management, Prentice hall. WEBSITES: www.valueresearchonline.com www.amfindia.com www.google.com www.ingim.co.in www.hdfcfund.com www.investorsideas.com Company’s fact sheet and journals. PUBLISHED MAGAZINES AND ARTICLES: Thomos davenport (2007): “Mutual fund investment”, investors India. Sanjay j bhayani ss(2008): “An empirical analysis of performance evaluation of mutual fund schemes in india”, capital market(Icfai journals): P.Prasad Rao(2007): “distribution channels in the mutual fund industry”, Money market(Icfai journals).

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Siddhartha Srivastava(2008): “real estate fund . Indian academy school of management studies 117 . present conditions and future of the fund” Capital market(Investment management).

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