“RISK RETURN ANALYSIS AND COMPARATIVE

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

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

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

SUBMITTED

SOMESH BEHERE MBA IV Semester BHOPAL

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

BONOFIDE CERTIFICATE

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

Somesh Behere

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

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

Internal examiner

External examiner

EXECUTIVE SUMMARY

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

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

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

2.4 Categories of Mutual Fund 1.8 HDFC AMC Company Overview B.1 Need For the Study 2. 1-37 Iii 1-19 1-2 3 4 4-8 8 9-11 12 12-19 20-37 20-21 22 22-25 26 26-28 28-29 29-37 38-40 1.3 Limitations of the Study 2.3 Disadvantage of Investing Through Mutual Funds 1.4 Data Collection Part-III Case Analysis 3.6 Organisation of Mutual Fund 1.1 Mutual Fund an Investment Platform 1.2.5 How to Reduce Risk While Investing 1.2.2 1.2.2. Mutual Fund Overview 1.3 Purpose of Measuring and Evaluating Financial Planning for Investors referring to Mutual Funds Why Has It Become One Of The Largest Financial Instruments? 1.7 Part-II Research Methodology 2.2.2 Advantages of Mutual Fund Page No.4 Evaluating Portfolio Performance 1.1 Data Interpretation A Study of Portfolio Analysis from The Point Of Fund Manager Measures of Risk and Return 38-39 39 40 40 41-102 41-87 .5 Investment Strategies 1.TABLE OF CONTENTS Part-I Executive Summary A.2.1 1.7 Distribution Channels 1.6 1.2 Objective of the Study 2. Measuring and Evaluating Mutual Funds Performance 1.

3 Findings 3.3.2 Analysis of the observation 3. bonds and money market instruments. which depends on the total market value of the fund's investment portfolio at the time of redemption.5 Conclusion References 87-97 98 99-100 101 102 PART-I MUTUAL FUND OVERVIEW MUTUAL FUND AN INVESTMENT PLATFORM Mutual fund is an investment company that pools money from small investors and invests in a variety of securities. Most open-end Mutual funds stand ready to buy back (redeem) its shares at their current net asset value. such as stocks. Most open-end Mutual funds continuously offer new shares to .4 Recommendations 3.

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

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

3. Disadva ntage Costs Control Not in the Hands of an Investor Particulars 1. 8. Investors have the option of investing in a scheme having a correlation between its investment objectives and their own financial goals. The risk in a diversified portfolio is lesser than investing in merely 2 or 3 securities. 4. Due to the economies of scale (benefits of larger volumes). Investors can switch their holdings from a debt scheme to an equity scheme and vice-versa. Investors also benefit from the convenience and flexibility offered by Mutual Funds. mutual funds pay lesser transaction costs. Option of systematic (at regular intervals) investment and withdrawal is also offered to the investors in most open-end schemes. 5. 7.2 S. These benefits are passed on to the investors. All funds are registered with SEBI and complete transparency is forced. Flexibili ty 9. whereas units of a mutual fund are far more liquid.3 DISADVANTAGE OF INVESTING THROUGH MUTUAL FUNDS Table:1. Investor has to pay investment management fees and fund distribution costs as a percentage of the value of his investments (as long as he holds the units). Safety 1. An investor may not be able to sell some of the shares held by him very easily and quickly. irrespective of the performance of the fund. These schemes further have different plans/options Funds provide investors with updated information pertaining to the markets and the schemes. 6. Mutual funds provide investors with various schemes with different investment objectives. Mutual Fund industry is part of a well-regulated investment environment where the interests of the investors are protected by the regulator. Less Risk Low Transac tion Costs Liquidit y Choice of Scheme s Transp arency Investors acquire a diversified portfolio of securities even with a small investment in a Mutual Fund. No. . All material facts are disclosed to investors as required by the regulator.

3.4 CATEGORIES OF MUTUAL FUND BASED ON THEIR STURCTURE OPEN ENDED FUNDS CLOSE-ENDED FUNDS Figure:1. they may have to take advice from financial planners in order to invest in the right fund to achieve their objectives. BASED ON INVESTMENT OBJECTIVE EQUITY FUNDS BALANCED FUNDS DEBT FUNDS . which some investors find as a constraint in achieving their financial objectives. 1. Many investors find it difficult to select one option from the plethora of funds/schemes/plans available. For this. Investors have no right to interfere in the decision making process of a fund manager. No Custom ized Portfoli os Difficult y in Selectin g a Suitable Fund Scheme The portfolio of securities in which a fund invests is a decision taken by the fund manager.2.2 2.

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

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

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

Systematic Transfer Plan: Under this. to an equity scheme of the same mutual fund. Payment is made through post-dated cheques or direct debit facilities. an investor invest in debt-oriented fund and give instructions to transfer a fixed sum. a fixed sum is invested each month on a fixed date of a month. 1.4 THE STRUCTURE CONSISTS OF: . Systematic Withdrawal Plan: if someone wishes to withdraw from a mutual fund then he can withdraw a fixed amount each month.INVESTMENT STRATEGIES 1. The investor gets fewer units when the NAV is high and more units when the NAV is low. at a fixed interval. This is called as the benefit of Rupee Cost Averaging (RCA) 2. 3.6. Systematic Investment Plan: Under this. ORGANISATION OF MUTUAL FUND: Figure:1.

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

2009 Mutual Fund Name No.676.282.222.414.46 67. ASSET UNDER MANAGEMENT: Table1.061.87 34.472. redemption requests and dispatches account statements to the unit holders.833. .Crores) schemes Reliance Mutual Fund HDFC Mutual Fund ICICI Prudential Mutual Fund UTI Mutual Fund Birla Sun Life Mutual Fund SBI Mutual Fund LIC Mutual Fund Kotak Mahindra Mutual Fund Franklin Templeton Mutual Fund IDFC Mutual Fund Tata Mutual Fund 263 202 325 207 283 130 70 124 191 164 175 108. The Registrar and Transfer agent also handles communications with investors and updates investor records.S as on Jun 30.29 21.90 70.19 56. The Registrar processes the application form.332.36 78.169.02 25.The AMC if so authorized by the Trust Deed appoints the Registrar and Transfer Agent to the Mutual Fund.04 32.4 ASSET UNDER MANAGEMENT OF TOP AMC.197.978.85 21. of Corpus (Rs.81 The graph indicates the growth of assets over the years.92 30.

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

Back bay Reclamation. Broker/ sub broker arrangements: the AMCs can simultaneously go for broker/subbroker to popularize their funds. banks and several non.10 Standard Life Investments Limited 49. on December 10.banking financial corporations too. 1. and was approved to act as an AMC for the Mutual Fund by SEBI on July 30.8 HDFC AMC COMPANY OVERVIEW HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC) AMC was incorporated under the Companies Act. H. 169. including the schemes launched from time to time. Banks. 3rd Floor. The present share holding pattern of the AMC is as follows: Table:1. Church gate. NBFC: investors can procure the funds through individual agents.5 Particulars % of the paid up capital Housing Development Finance Corporation Limited 50. independent brokers. 1999. The registered office of the AMC is situated at Ramon House.T. 1956. 3. Individual agents. In terms of the Investment Management Agreement. Parekh Marg. 2000. whichever he finds convenient for him. the Trustee has appointed HDFC Asset Management Company Limited to manage the Mutual Fund As per the terms of the Investment Management Agreement. the AMC will conduct the operations of the Mutual Fund and manage assets of the schemes.2.90 . AMCs can enjoy the advantage of large network of these brokers and sub brokers. Mumbai .400 020.

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

housing finance remains the dominant activity. training and consultancy. Of these activities. is associated with HDFC Ltd. Keith Skeoch is associated with Standard Life Investments Limited as its Chief Executive and is responsible for all company business and investment operations within Standard Life Investments Limited. SPONSORS HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC): HDFC was incorporated in 1977 as the first specialised housing finance institution in India. USAID. Parekh joined HDFC Ltd. He is the Vice-Chairman & Managing Director of Housing Development Finance Corporation Limited (HDFC Ltd. 00. N. Mistry is an associate director on the Board. Managing Director in 2000 and Vice Chairman & Managing Director in 2007. bonds and deposits.000 shareholders and 50. Deepak Parekh. He was appointed as the Deputy Managing Director in 1999. HDFC provides financial assistance to individuals. HDFC has received the highest rating for its bonds and deposits program for the ninth year in succession.Mr. IFC (Washington). corporate and developers for the purchase or construction of residential housing. Milind Barve Managing director Mr.000 borrowers. Mr. HDFC raises funds from international agencies such as the World Bank.000 deposit agents. since 1981 and was appointed as the Executive Director of HDFC Ltd. the Chairman of the Board. sales services and valuation).000 depositors. 00. promoted by HDFC was the first life insurance company in . in 1985 and was appointed as the Executive Chairman in 1993. ADB and KFW. in his capacity as its Executive Chairman. in a senior management position in 1978. HDFC currently has a client base of over 8. domestic term loans from banks and insurance companies.) He is with HDFC Ltd. It also provides property related services (e. in 1993. HDFC Standard Life Insurance Company Limited. He was inducted as Wholetime Director of HDFC Ltd. 92. property identification. CDC. 12. Keki M. Mr. Mr.g.

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

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

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

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

websites.B. MEASURING AND EVALUATING MUTUAL FUNDS PERFORMANCE: 1. he can face any of the following problems: 1. In this ever-changing industry. . The funds’ performance can slip in comparison to similar funds.1 PURPOSE OF MEASURING AND EVALUATING Every investor investing in the mutual funds is driven by the motto of either wealth creation or wealth increment or both. newspapers and professional advisors like HDFC AMC. If the investors ignore the evaluation of funds’ performance then he can lose hold of it any time. Therefore it’s very necessary to continuously evaluate the funds’ performance with the help of factsheets and newsletters. 2.2. Variation in the funds’ performance due to change in its management/ objective.

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

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

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

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

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

Typically. Discipline in investment approach is an important factor as the pressure to perform can make a fund manager susceptible to have a n urge to change tracks in terms of stock selection as well a s investment strategy. Besides.of these factors is very important and ha s its significance for different categories of funds. carefully picked. Besides. watched and managed over period of time. consistent return re ally focuses on risk. Therefore. For example. Success in managing a small or in a fund focusing on a particular segment of the market cannot be re lied upon as an evidence of anticipated performance in managing a large or a broad based fund. . Evaluate the record of accomplishment against similar funds. A fund can have very impressive total ret urns overtime. one should go about selecting the funds according to the asset allocation. Growth in NAV as well as dividend received. It is important because long-term track record moderates the effects which unusually good or bad short -term performance can have on a fund's track record. longer-term track record compensates for the effects of a fund manager's particular investment style. the first step should be to consider personal goals and objectives. each of these factors has varying degree of significance for different kinds of investors. 1.4 EVALUATING PORTFOLIO PERFORMANCE It is important to evaluate the performance of the portfolio on an on-going basis. but can be very volatile and tough for a risk adverse investor. all the ward winning funds in different categories may not be suitable for everyone. Most investors need just a few funds.2.e. The following factors are important in this process: Consider long-term record of accomplishment rather than short -term performance. when one has to select funds. If someone is afraid of negative returns. consistency will be a more import ant measure than tot al ret urn i. Invest ors need to decide which element they value the most and the n prioritize the other criteria Once one knows what one is looking for.

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

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

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

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

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

It basically indicates the level of volatility associated with the fund as compared to the market. The success of beta is heavily dependent on the correlation between a fund and its benchmark. as compared to the market. A beta that is greater than 1 means that the fund is more volatile than the benchmark index. while a beta of less than 1 means that the fund is more volatile than the benchmark index. β (Beta) is calculated as = [N (Σ XY) – Σ XΣ Y]/ [N (Σ X2) – (Σ X) 2 ] Beta is used to measure the risk. It describes the level of association between the fun’s market volatility and market risk.2 Case 2 0.88 0.80) indicates that beta can be used as a reliable measure to analyze the performance of a fund.9 . The value of R.e.squared ranges from0 to1. we should look at the beta against a bank index. For example: Case 1 R2 B 0. For example if we are considering a banking fund. In case of funds..  R-Squared (R2): R squared is the square of ‘R’ (i.65 1. coefficient of correlation). if the fund’s portfolio doesn’t have a relevant benchmark index then a beta would be grossly inappropriate. It is used as a short term decision making tool.squared (more than 0. A fund with a beta very close to 1 means the fund’s performance closely matches the index or benchmark. A high R. we try to assess the competitive strength of the Mutual Funds vis-à-vis one another in a better way. Beta should be ignored when the rsquared is low as it indicates that the fund performance is affected by factors other than the markets. Thus. beta would indicate the volatility against the benchmark index.relationship. In case of funds.

These costs consist primarily of management fees and additional expenses such as trading fees.80 in case 1.9. it means that this fund is less aggressive than the market. Total expenses ratio: A measure of the total costs associated with managing and operating an investment fund such as a mutual fund. implies that it would be wrong to mention that the fund is aggressive on account of high beta. Portfolio turnover is the purchase and sale of securities in a fund's portfolio. auditor fees and other operational expenses. since the amount of turnover affects the fees and costs within the mutual fund. Turnover is important when investing in any mutual fund.In the above tableR2 is less than 0. the r.  Portfolio turnover ratio: Portfolio turnover is a measure of a fund's trading activity and is calculated by dividing the lesser of purchases or sales (excluding securities with maturities of less than one year) by the average monthly net assets of the fund. then.squared is more than 0. legal fees.85 and beta value is 0. means the fund has bought and sold all its positions within the last year. The total cost of the fund is divided by the fund's total assets to arrive at a percentage amount. not an indication of the percentage of a fund's holdings that have been changed. Turnover is simply a measure of the percentage of portfolio value that has been transacted. which represents the TER: Total expense ratio = (Total fund Costs/ Total fund Assets) The most important and widely used measures of performance are: The Sharpe Measure The Treynor’Measure Jenson Model Fama Model  The Sharpe Measure :- . In case 2. A ratio of 100%.

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

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

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

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

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

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

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

PART-II

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

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

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

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

2.2 OBJECTIVE OF THE STUDY

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

The monthly fact sheets of HDFC AMC fund house and research reports from banks. .  Many investors are all price takers. they are. websites and other books. 2.  The study is limited by the detailed study of six schemes of HDFFC.  It also assists in analysing the portfolio of the selected funds. there can be inaccuracy in the risk free rates.  The study excludes the entry and the exit loads of the mutual funds. 2.  Banks are free to accept deposits at any interest rate within the ceilings fixed by the Reserve Bank of India and interest rate can vary from client to client.4 DATA COLLECTION The Methodology involves the selected Open-Ended equity schemes of HDFC mutual fund for the purpose of risk return and comparative analysis the competitive funds. The data collected for this project is basically from secondary sources.  The assumption that all investors have the same information and beliefs about the distribution of returns.  The study is based on secondary data available from monthly fact sheets. as primary data was not accessible. Hence.3 LIMITATIONS OF THE STUDY  The study is limited only to the analysis of different schemes and its suitability to different investors according to their risk-taking ability. Whether the growth oriented mutual funds are offering the advantages of Diversification. Market timing and Selectivity of Securities to their investors  This study provides a proper investigation for logical and reasonable comparison and selection of the funds.

1 DATA INTERPRETATION Risk returns analysis and comparative study of funds In this section. Part-III CASE ANALYSIS 3. which have been taken the evaluation purpose. 2009. HDFC Equity Fund Growth option HDFC Capital Builder HDFC Growth Fund HDFC Long Term Advantage Fund HDFC Top 200 Fund . Following are the products of HDFC Mutual Fund. a sample of HDFC equity related funds have been studied. For the Benchmark prices. Here equity funds are taken as they bear high return with high risk.The NAVs of the funds have been taken from AMFI websites for the period starting from 31 st jan 2007 to 31st May. data has been taken from BSE and NSE sites. This study could facilitate to get a fair comparison. evaluated and analysed. The expectations of the study are to give value to the funds by keeping the risk in the view.

1995 Dividend Option. 2009) Exit Load. Growth Option. Additional purchases is Rs.5000 and in multiples of Rs. Basic Scheme Information Table:3. 100 thereof Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day Normally despatched within 3 Business days . 1000 and in multiples of Rs. (as a % of the Applicable NAV) Minimum Application Amount Nil Rs.100 thereof to open an account / folio.HDFC EQUITY FUND Investment Objective The investment objective of the Scheme is to achieve capital appreciation. NIL (With effect from August 1.1 Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Open Ended Growth Scheme Jan 01.

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

10258 4.2974 54.11 7163.9731 7.663941 104.66403 1.3 6997.6591 65.18429 31.25591 0.317166 -15.300213 15.130678 -5.34347 11.825594 21.61636 -18.34478 9.58732 16.730242 4.1246 1.02989 8.48428 3.972895 6.171 151.56493 0.13557 254.81156 34.82 5483.30087 3.096606 0.598018 -17.52824 0.751673 1.42 4504.695554 2.78243 108.0859 55.5856 5.96101 8.47 5337.499984 4.3 NAV S&P CNX 500 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG 187.6968 11.324 188.935177 -2.91209 264.98 5297.389 4899.9754 0.3759 8.31236 12.60296 43.2248 307.570838 0.624 7.7357 263.924 6356.784819 -9.454188 0.325 168.214527 6.6065 151.605 143.31318 6.536164 55.19497 288.3088 26.475077 37.43838 -11.0042 6.0186 -1.51353 -3.27962 0.73 4605.3508 43.92 5762.564738 141.266 272.3285 82.042897 50.34429 5.28 -0.2786 64.481241 -4.3378 300.8146 5. Prashant Jain HDFC EQUITY FUND-GROWTH OPTION Table:3.84 210.133692 5.61843 17.16 161.77619 324.7177 -9.18558 87.533254 24.95 5223.5363 44.81 4929.48 6245.184771 42.001318 6.07 5937.594 165.46 5185.715 158.241651 -2.6 7461.58525 -16.71185 0.753707 -10.065494 -0.078188 3.491863 134.228 142.6241 68.3 206.89 4934.313 172.602 151.81843 -15.39 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .966289 -1.54465 -2.45 -6.24564 7.48562 5.88 6289.06526 2.88956 25.751491 -0.6293 -8.0864 1.281 165.25 5411.32486 83.Fund Manager : Mr.176 223.090523 15.24148 16.36928 31.06587 2.568075 107.1514 41.099566 -6.62913 -16.788 178.56268 1.72229 159.191 169.29 6094.4959 4.05529 2.827 182.967689 4.94536 265.423076 -0.88767 5.

67507 29.67328 -9.3984 945.322 101.13239 .88903 16.70723 120.87114 1.8939 78.7883 30.063454 -3.377 103.1952 -4.721 110.SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY Total average 145.319696 14.53456 -10.031112 20.1 σm= √123.186 Figure:3.96764 27.9077 =11.57 3379.55257 6.808 112.585078 -2.3694 -4.0949 731.754 4807.55156 68.7767 1.9625 788.50962 640.85673 224.2923 -7.38131 -7.1822 750.83098 42.53 3635.60679 86.11 -5.5738 34.3455 20.7186 3533.08365 28.87 3538.852 127.897 3403.288584 13.097 169.553966 -3.9077 14.51 4278.52145 7.95447 13.05253 0 0 23.4005 -5.33 3720.76129 33.54 5480.44354 57.82188 9.163 108.71741 10.466 126.74352 98.57 -8.4825 251.9628 -27.85299 8.38871 10.8396 3469.67611 82.99875 28.93165 -26.2 3539.74302 20.70062 195.53341 7.63768 695.161582 98.30774 -24.59501 101.6911 3499.417 123.

545367 0.71753 -4.65569 -0.2974 1.52605 0.300213 15.31236 12.241651 -2.27274 -1.71898 1.3111 1.598948 1.352172 1.96101 8.5623 18.54264) = 98077.75698 0.72464 -0.356561 2.305086 1.404223 Rm Ri-Rm Dev frm ave sq of Dev frm av .096606 0.6872)/( 97977.317166 -15.70325 1.61843 17.24564 7.164715 -1.02989 8.36/ 97143.102291 2.833.13237 1.0096114 Table:3.62913 -16.54465 -2.0186 -1.454256 0.75698 0.499984 4.769742 -0.730242 4.966289 -1.214.63579 1.133692 5.749866 4.972895 6.β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (98937.31318 6.350562 2.741324 0.92739 6.047.695554 2.672 = 1.56661 0.31983 -1.688036 0.573018 0.573018 0.4 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN -6.558392 -0.859.31822 -2.6293 -8.71185 0.668127 -1.001318 6.05529 2.34344 -1.

30774 -24.9731 7.3694 -4.76389 5.76254 5.52145 7.751491 -9.96784 -1.4219 7.73448 -1.7767 1.53699 -1.5856 5.722694 =2.681778 -0.82188 9.34478 9.031112 -1.38131 -7.58525 -16.04475 3.27926 -1.539459 1.181006 10.74376 2.343511 2.387467 -1.836366 2.2232 -2.828377 0.569336 1.99875 28.993588 30.306878 15.4865 4.59156 -2.087475 5.76682 1.796228 -4.623906 2.88903 16.64944 0.228297 -2.319696 14.722694 Standard Deviation for the fund’s excess return (S.29594 -5.38871 10.2354 5.81843 -15.08365 28.71741 10.454188 0.7302 -5.255543 2.90337 160.D.90556 0.130678 -5.967689 4.76129 33.19596 2.64557 .518841 -3.751673 -8.99717 2.029507 5.67328 1.077092 -3.533078 4.557333 2.67611 -2.591422 0.) σi=√5.362352 2.063454-5)/ 2.032341 1.Rf)/Si = (1.599166 -1.063454 -3.FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY Total avrage -0.55908 2.311604 1.481241 -4.43838 -11.35513 1.392215 Sharpe Index (Si) = (Ri .93165 -26.2923 -7.624 7.639067 25.585078 -2.392215 =-1.000182 1.784819 -9.87114 1.56683 1.67507 29.

[ 5+1.15409 =-3.154092 Net selectivity= selectivity.063454-5)/ 1.Rf)/Bi.Treynor's Index (Ti) = (Ri .0096114 (1.diversification =0.392215/11.0096114 (1.Rf) ] = 1.031112-5)] =0.[ 5+1.0836 .063454 .992965 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .031112-5)] =0.0096114 (1.031112-5)] =3.063454 .0096114 (1.070488 Diversification =[Rf + (Rm .Rf) ] = 1.Rf)(αi/ αm)]-[Rf + Bi (Rm .Rf) =[ 5+1.070488-3. =(1.Rf) ] =[5+(1.031112-5)] =0.89907 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .[ 5+1.0096114 =-3.13139)].070488 Expected return E(Ri) = Rf + Bi (Rm .031112-5)(2.

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

1 2 Asset Type (% of Portfolio) Risk Profile Medium to High Equities and Equity Related Instruments Upto 100% Debt & Money Market Instruments Not more than 20% Low to Medium Investment in Securitised debt. characterized by competence and integrity strong position in its business (preferably market leadership) efficiency of operations.00% On the balance of the assets 1.50% On the next 300 crores average weekly net assets 2. The Scheme defines a "strong company" as one that has the following characteristics : • • • strong management.75% Pattern The asset allocation under the Scheme will be as follows : Sr. as evidenced by profit margins and asset turnover.(STP)) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day. Normally despatched within 3 business Days Current Expense Ratio (#) (Effective Date 22nd May 2009) On the first 100 crores average weekly net assets 2. compared to its peers in the industry . if undertaken.No. would not exceed 20% of the net assets of the scheme.25% On the next 300 crores average weekly net assets 2. Investment Strategy This Scheme aims to achieve its objectives by investing in strong companies at prices which are below fair value in the opinion of the fund managers.

such companies are also called 'Blue Chips'.Foreign Securities HDFC CAPITAL BUILDER FUND Table:3. a market price quote that is around 50% lower than its estimated replacement cost Fund Manager Mr.259 . Chirag Setalvad (since Apr 2.88 767 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 2007 JAN FEB 64.9644 -8. 07) Mr.39 4504.98964 -9.05529 39.73 -4.5 NAV S&P CNX 500 4899.• • • working capital efficiency consistent surplus cash generation high profitability indicators (returns on funds employed) In common parlance.0864 82. as determined by the discounted value of its estimated future cash flows • • • a P/E multiple that is lower than the company's sustainable Return on funds employed a P/E to growth ratio that is lower than those of the company's competitors in case of companies in cyclical businesses. The Scheme defines "reasonable prices" as : • a market price quote that is around 30% lower than its value.Dedicated Fund Manager .459 61.5626 8 64. Anand Laddha .

0 859 55.11 7163.54465 -2.099566 -6.454188 0.3 65.69927 1.0042 6.061 99.23022 277.61636 -18.93165 -26.48113 -14.88 6289.34478 9.47507 7 37.10258 4.87436 122.9731 7.818 73.7761 9 324.36 928 31.533 254 24.598018 -17.034 106.66 403 1.58525 -16.564 738 98.2559 1 0.9672 -1.05017 -13.228 70.866266 15.603 1.2414 8 16.6 7461.265164 96.967 79.587 4605.98 5297.92 5762.04744 656.042 897 50.07 5937.61343 246.09052 3 15.767099 4.944284 4.065494 -0.133692 5.169 67.24564 7.58732 16.57 -1.350 8 43.34347 11.45 6356.9628 -27.266 272.19 497 288.6035 41.818 69.214527 6.577196 -17.51551 65.95 5223.973386 -0.48 6245.34429 5.151 4 41.9002 2.935177 -2.659 1 65.27 76.28 4807.914 76.365 47.966289 -1.094908 7.97394 3.49186 3 134.4856 2 5.8857 -7.88 956 25.278 6 0.29 6094.12 4.09 96.751491 -9.130678 -5.3378 300.67084 -24.542762 -5.610525 24.149 63.696 8 11.32 486 83.82 5483.8 146 5.185 58 87.46 5185.53486 3.63 768 695.182 2 750.1842 9 31.97 54 0.3 .3716 35.788 5.344916 -9.31318 6.2 248 307.2 3539.27979 30.07818 8 120.61843 17.6029 6 43.94 536 265.81 4929.367 87.418 75.27962 -10.4005 1.6 065 3.51353 -3.096606 0.3694 -3.30087 3.150912 6.76839 8.62913 -16.0559 -1.47 5337.4785 30.008405 111.89 4934.065 64.3285 0.077365 4.61078 3.5154 4.56548 9.56807 5 107.784819 -9.2974 1.722 29 159.8784 273.56 493 0.323 83.3 6997.730242 4.439 75.31236 12.753707 -10.25 5411.3759 8.53 8 88.423076 -0.MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT 60.5282 4 0.15908 50.

36939 7.05253 0 0 30.2014 -4.79888 59.9544 7 13.57 3403.51 4278.288584 13.031112 28.907 7 455 20. 186 .41 7 123.08365 28.0381 773.319696 14.2195 3270.11 -6.53 3635.7868 -5.53 341 7.65479 70.34 46.9 625 788.85299 8.6 3379.87 3538.18802 206.3 NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVERA GE 44.7006 2 195.6 911 3499.161 582 14.029 116.52145 7.88105 7.08029 0.54 5480.53273 21.094 9 731.67611 -3.44 354 57.585078 -2.5515 6 68.7435 2 23.82188 9.006 67.60 679 86.91953 18.556 48.99875 28.8309 8 42.839 6 3469.064 45.55257 6.531149 13.87114 1.96764 27.553966 -3.85 673 224.752867 -4.873238 -5.71913 13.73702 27.70723 -4.33 3720.564 43.604 53.

5426) = 90952.Figure:3.21.13239 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (91560.67 = 0.9077 =11.6119)/ (97977.833.608.936265 Table:3.2 σm = √123.6 .21/ 97143.82.

13369 2 5.259 -4.75217 -1.309671 -0.09660 6 0.96628 9 -1.593425 0.150912 6.36914 3.58525 -16.948066 -0.469223 -1.Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV -4.53905 -1.676037 12.973386 -0.73592 2.68709 3.344916 -9.408844 -3.77523 -4.214041 0.75845 -2.93386 5.81112 2.053642 2.38237 -2.9002 -6.457673 -2.87167 -0.473923 1.542762 -5.22888 18.76839 8.73024 2 4.98983 0.503837 0.05017 -13.944284 4.08142 0.485245 5.67084 -24.24564 7.463923 .82221 3.532879 -2.48124 5.980759 4.28534 -0.55674 3.866266 15.9644 -1.74747 1.49229 -0.78481 9 -9.5446 5 -2.36939 Rm Ri-Rm Dev frm ave sq of Dev frm av -8.45418 8 0.05529 2.34478 9.146203 7.54397 -3.18063 0.536922 12.802531 14.13067 8 -5.62913 -16.2974 1.61078 3.29546 -1.090893 -3.230596 6.83499 -3.569689 11.48113 -14.6184 3 17.68633 -1.31236 12.408088 0.3694 -4.12 4.260807 1.33438 1.06814 2.58792 0.93165 -26.35109 12.52145 3.84793 -3.577196 -17.10412 2.22631 0.5154 4.57326 0.9731 7.75149 1 -9.01722 0.31318 6.585089 20.56548 9.741069 32.007097 0.269159 1.767099 4.655617 -5.0559 -1.094908 7.496982 4.290577 3.077365 4.480204 2.

281012 0.82188 9.53625 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .0836 5 28.08029 0.) σi=√6.477719 Standard Deviation for the fund’s excess return (S.752867 = [5+0.936265(1.531149 13.03111 2 0.31969 6 14.545136 =-1.DEC 2009 JAN FEB MAR APL MAY TOTAL AVERAGE 7.752867-5/ 0.074348 181.9987 5 28.Rf)/Si = (0.049189 0.031112-5)] -0.5664 2.Rf) ] =0.75286 7 7.8711 4 1.79085 -0.88105 7.752867-5)/ 2.52528 -1.39357 . =(0.477719 =2.78855 -1.983487 0.05916 -1.873238 -5.27824 -0.55091 -7.272669 0.780919 1.Rf)/Bi.3761 6.24704 0.967247 0.73702 27.67611 -3.26173 -0.545136 Sharpe Index (Si) = (Ri .D.609834 2.936265 =-4.58507 8 -2.28816 -2.2014 -4.53273 21.510302 0.320814 5.66872 Treynor's Index (Ti) = (Ri .

Rf) ] =[5+(1.808464 Net selectivity= selectivity.031112-5)] = -0.13139)].39357-2.031112-5)( 2.39357 Diversification =[Rf + (Rm .284069 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .808464 =-3.75286 7[5+0.936265(1.diversification =-0.33967 .[5+0.936265(1.545136/11.Expected return E(Ri) = Rf + Bi (Rm .031112-5)] =1.936265(1.Rf) ] =0.Rf) =[5+0.Rf)(αi/ αm)]-[Rf + Bi (Rm .031112-5)] =2.

2000 Dividend Option. (as a % of the Applicable NAV) Minimum Application Amount Nil Rs.100 thereof to open an account / folio.5000 and in multiples of Rs. 2009) Exit Load. Basic Scheme Information Table:3.7 Nature of Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Open Ended Growth Scheme Sep 11. Additional purchases is Rs.HDFC GROWTH FUND Investment objective The primary investment objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments. NIL (With effect from August 1. Growth Option. 1000 and in multiples of Rs. 100 thereof Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day Normally despatched within 3 Business days .

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

7335 5.350606 92.4284 323.198 54.813 53.72949 -2.642227 1.581 53.576 68.46 14650.91136 0.503715 2.71291 15.8777 95.86095 8.951922 42.75 14564.047 45.42296 350.5013 -5.78126 -18.46627 37.283 40.18137 1.715729 -12.HDFC GROWTH FUND Table:3.146407 -1.94E-05 29.297178 5.86137 23.432 67.8043 216.8765 14.09 13072.15727 121.76156 169.72 9647.72 15644.4734 -5.407806 -2.351677 -0.510056 -5.1887 196.00946 5.035779 6.49437 12.8711 6.3287 195.35676 -22.56584 0.24437 4.233155 165.585286 -15.072838 37.7273 606.809352 16.7003 -23.13517 -11.88409 -8.11918 2.54 42.20116 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .106209 -0.13199 4.898 570.716 58.43 9788.78001 -8.47851 23.7448 9.11058 -14.51 15550.50578 28.1864 1.6 17291.7434 -1.729144 6.827 62.99088 -3.77091 267.71 17578.9451 34.871 54.461 48.99 17648.91997 0.45433 -11.9 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 48.39657 -11.47219 0.819 58.77832 2.82 73.84481 0.0015 0.898825 -8.9949 6.31035 33.986179 147.01523 46.6287 -7.728304 22.31 -7.1 13872.737 50.07665 536.91904 6.196 62.895 80.695 58.37 14544.051821 45.259351 3.6048 41.8174 44.23298 12.28862 137.9577 5.0683 227.36407 25.917 45.92 12938.04266 -17.94015 36.1245 0.8922 36.99 19363.0715 -0.389618 125.9299 9.5731 61.4389 -24.0035 10.12197 4.93478 1.17 63.762702 -5.814016 7.646264 7.53 12860.19 20286.72575 0.0437 2.6123 -3.032307 -13.36982 6.10396 6.1 19837.512268 154.44 17287.099275 64.252267 86.09761 68.360674 79.115076 136.903626 0.45284 1.15 66.611468 -7.31 16415.8901 -7.99 15318.472 56.57 13461.2774 25.8528 0.18885 3.088315 28.98066 16.863025 9.1379 13.682 74.0048 -0.7421 9.6 14355.8807 1.73683 66.2595 188.652 SENSEX 14090.383369 4.53165 37.089 41.770908 -13.84256 5.57603 5.06 9092.0777 110.39339 4.

39962 1.6966) .346504 31.7242 798.8-628.68083 0.83598 71.05085 -6.71775 27.4334 822.738601 17.4832 757.429 38.8143 29.448599 16.5165 0 0 9.94174 84.23893 6.982 9424.94526 29.941 Figure:3.25 14625.3508 3396.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (87908.666 120.1872 17.7738 5.03 243.443 36.7738 =10.34-427.6893)/ (95114.40465 304.5 11403.307696 40.60885 58.2551 20.3903 8.6517 9.792 3139.31225 -5.37883 279.2009 JAN FEB MAR APL MAY TOTAL AVG 38.1579 3381.61 9708.70431 -5.316396 13.6 112.73 44.12012 30.45635 28.085701 -2.131 56.24 8891.3 σm= √120.25 -7.1286 -3.

5013 -5.286608411 4.770908 -13.776702677 0.0035 10.696584 5.20527 0.146407 -1.9577 5.0715 -0.737 50.10 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV -7.64 = 0.463838642 -0.2774 25.115076 136.8711 6.91904 6.85817039 -0.338346289 0.215146 0.611468 -7.9299 9.532865 3.36982 6.97185 1.141565 13.63494 6.047252 12.11918 2.18885 -8.59167 3.0667 -0.10396 0.996480234 -1.736456 0.91136 0.45284 1.11058 -14.04266 -17.77832 2.834616326 -2.376251086 -3.351677 -0.123803 -0.467278063 2.729144 6.155201 18.729975995 -1.728304 22.311805316 -1.039651 2.18137 1.0048 -0.826418 0.9949 6.510692544 -0.810037944 -3.069589295 -1.259351 3.564474 -3.863025 9.393955855 -4.270008 -0.233155 165.72949 -2.06792 3.915115 0.47219 0.814016 7.11674 0.34358 1.15727 121.47851 23.48752 2.4284 323.642227 1.416689 1.646264 7.46627 Rm Ri-Rm Dev frm ave sq of Dev frm av Rm2 .741056 4.12/ 94686.39339 4.172243 7.16359 0.99125 -0.510056 -5.921779 Table:3.1245 0.737772055 -0.035779 6.8765 14.82125 0.710078 0.76156 169.276237 15.005943 0.157138 4.35676 -22.413797413 0.692551406 -2.32496 0.49437 12.0777 110.568014871 0.084872 1.38288 2.45433 -11.88409 -8.658905 2.53165 37.144021 2.898 570.8174 44.503715 2.228578 18.077092104 0.39657 -11.8043 216.458671 66.072838 37.087461 5.12197 4.019852 0.814378 -2.71291 15.84481 0.8901 -7.7003 -23.633708 -3.93478 1.217374552 3.4734 -5.415022146 -2.585286 -15.723351 4.= 87280.

2551 20.217903695 3.51109 0.94174 84.23893 6.3471 2.40465 304.68083 0.412777 -2.08570 1= [5+0.Rf) ] =1.3549 14.941 Standard Deviation for the fund’s excess return (S.490725 37.490725 =2.20045 -5.3508 3396.54769 =-1.Rf) =[5+0.316396 13.547549815 5.268238 181.013767 Expected return E(Ri) = Rf + Bi (Rm .39206 0.085701-5)/ 2.865017 9.88563 0.DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 3.Rf)/Si = (1.921779 (0.004314 10.58603E-16 6.065677352 3.738601-5)] 0.70431 -5.53641 Treynor's Index (Ti) = (Ri .099275 -2.6517 9.31225 -5.) σi=√6.718797 0.20116 5.Rf)/Bi.94526 29.7242 798.858190515 -0.921779 (0.93797 0. =(1.085701-5)/ 0.738601-5)] .1872 17.44089E-15 -1.73916105 -0.346504 31.D.8708 -3.24646 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .085701 6.921779 =-4.517917027 -4.49001 32.7403 6.45635 28.12012 30.738601 -2.39962 1.898825 -7.54769 Sharpe Index (Si) = (Ri .

921779 (0.940167 Net selectivity= selectivity.Rf) ] =1.071934 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .940167 =-2.013767 Diversification =[Rf + (Rm .738601-5)] 0.98971)].738601-5)] =2.921779 (0.diversification =0.738601-5)( 2.08570 1= [5+0.Rf)(αi/ αm)]-[Rf + Bi (Rm .9264 HDFC LONG TERM FUND .[5+0.013767-2.Rf)] =[5+(0.=1.54769/10.

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

50% On the next 300 crores average weekly net assets 2. Current Expense Ratio (#) (Effective Date 22nd May 2009) On the first 100 crores average weekly net assets 2. Type of Instruments Minimum Allocation Minimum Allocation Risk Profile of the Instrument (% of Net Assets) Equity & Equity related instruments Fixed Income Securities (including money market instruments) 0 30 Low 70 (% of Net Assets) 100 High .25% On the next 300 crores average weekly net assets 2.Specified Redemption Period is the first five Business Days immediately after the end of each calendar half year. Normally dispatched within 3 Days Currently no purchases/ switch-ins are allowed into this scheme.75% Investment Pattern The following table provides the asset allocation of the Schemes portfolio.00% On the balance of the assets 1. Minimum Application Amount (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Nil Every Business Day.

49437 12. Srinivas Rao Ravuri (since Apr 3.49326 114.383369 4.86095 8. Companies identified for selection in the portfolio will have demonstrated a potential ability to grow at a reasonable rate for the long term.233155 165.56584 0.55165 -8.121633 13.218 -2. 06) Mr.94E-05 29.00946 5.224 87.695 102.99 15318.729144 6.627 96.986179 147.37 14544.11 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV 95.18137 1.627 109.51024 26.809352 66.1379 13.407806 -2.035779 6.7448 9.92 12938.506464 88.53165 37.91997 0.3287 195.561 100.68 118.72949 -2.23298 12.12197 4.445 SENSEX 14090.70502 37.1 19837.39339 63.98066 16.384876 4.92319 0.1 13872.Dedicated Fund Manager .072838 37.146407 -1.728304 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 .24437 4.09 13072.976 102.13199 79.99 19363.6 17291.Foreign Securities HDFC LONG TERM FUND Table:3.19 -7.8043 216.64612 6.93949 -1. Fund Manager Mr.87246 7.33891 6.782 86.297178 5.84481 0.337 91.51 15550.754376 1.8765 14.47219 0.81526 -1.93478 1.185 119.127153 5.9577 5.46 14650.281232 2.99088 -3.106209 -0.77832 2. it will balance the same with a rational approach to selling when the valuations become too demanding even in the face of reasonable growth prospects in the long run.Investment Strategy The investment strategy of the Scheme is to build and maintain a diversified portfolio of equity stocks that have the potential to appreciate in the long run.088315 28. While the portfolio focuses primarily on a buy and hold strategy at most times.066125 -8. The aim will be to build a portfolio that adequately reflects a cross-section of the growth areas of the economy from time to time.265256 -0.47851 23.0887 3. Anand Laddha .

346504 31.44 99.7421 9.25 7.9805 6.18 85.0102 -1.31035 33.78562 6.709 55.1245 0.43 9788.115076 136.57 13461.86867 7.2774 25.554 96.11918 2.7434 -1.632277 -4.930765 -11.2551 20.45433 -11.828943 0.105 103.582478 143.0048 -0.7242 798.11833 -14.9674 813.17096 138.61 9708.31225 -5.78126 -18.359 82.39657 -11.9949 6.24 8891.4613 30.972 93.045 88.84256 5.0777 110.298 70.762702 -5.99 17648.75 14564.14885 20.0696 7.898 570.5731 61.72 9647.46878 -13.2519 4.68083 0.202 110.38966 267.15559 28.06 9092.25 14625.76156 169.31 16415.83598 71.8528 0.67085 7.3405 3065.7738 22.099275 -2.5013 -5.985265 -13.94174 84.DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 128.512268 154.1579 3381.14829 56.617555 4.20116 5.448599 16.642227 1.3903 8.8121 80.2595 188.28375 -4.44 17287.1872 17.666 120.76733 256.71775 27.941 .137851 15.406 58.738601 38.10665 44.72 15644.8253 -9.5 11403.504 57.0035 10.286 63.5165 0 0 16.40465 304.4663 4.8174 44.237 61.13517 -11.7003 -23.715729 -12.46627 37.360674 -3.50578 28.8901 -7.10396 6.71 17578.6517 9.298 87.7739 545.7335 5.737 50.770908 -13.056 109.37883 279.6 14355.42296 350.4284 323.28862 137.42559 10.39208 -4.31 9424.3508 3396.209 68.8807 1.032307 -13.958 20286.73683 9.8607 -22.8777 95.6287 -7.05085 -6.09697 169.903626 0.1954 0.243891 4.983 112.45635 28.15727 121.4389 -24.4832 757.307696 40.7273 606.53 12860.785 59.04266 -17.35071 28.9451 34.

4 σm= √120.6966) = 85680.141.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (85821.Figure:3.34/ 94686.64 = 0.57.34.2282)/ (95114.7738 =10.904883 Table:3.427.12 .

152892 2.04266 -17.013672 17.066125 7.9805 6.819663 2.359359 6.26999821 -1.84481 0.16032 1.064835 -2.046798071 3.187192079 -0.954222903 -3.97511 3.28375 -4.577496505 1.035779 6.Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR -7.632277 -4.12197 4.540065 3.39339 4.489256261 0.432182 5.281232 2.005183 0.384876 4.729144 6.86867 7.111814 2.637374 2.1872 0.671205 -3.723063 30.099275 -2.45433 -11.333502 2.48039862 -3.783809 0.04935 -0.95872 2.930765 -11.754376 1.39657 -11.237772814 1.971144712 -0.00404 -6.07076 16.8765 14.509332488 6.239372 0.334386466 -1.72949 -2.642227 1.526182 .924329 3.265256 -0.386440599 -1.37657 11.49437 12.419039116 -4.512599 1.81526 -1.0661 -2.33891 6.0696 7.2519 4.585118054 -1.499893333 -1.340781 15.10396 6.554639268 0.741013 4.07221 -2.5013 -5.571389464 2.07983 0.86903 0.709067209 -0.127153 5.76471 1.39208 -4.6517 9.0102 -1.7003 -23.88115 1.679185121 1.8253 -9.6819 0.650170515 5.02467 3.87246 7.35274 41.76999 0.985265 -13.75718 0.0035 10.476435 -0.374315379 -1.552088 -3.770908 -13.146407 -1.459513 3.8607 -22.9949 6.469265 5.46878 -13.214357 -0.31225 -5.034775537 -4.63588 13.46798 2.249893 1.743063 -2.529961243 -3.15546 -6.860821325 2.64612 6.165915514 2.184475 -2.99557 15.617555 4.11833 -14.366111 -2.137851 Rm Ri-Rm Dev frm ave sq of Dev frm av -8.559545364 2.18137 1.0048 -0.00545 -1.8901 -7.

610935739 -1.Rf) ] =0.[5+0.353486 Sharpe Index (Si) = (Ri .538895 Standard Deviation for the fund’s excess return (S.8519 -0.49471 1.02088 Treynor's Index (Ti) = (Ri .025223388 -4.738601 -2.90004 Expected return E(Ri) = Rf + Bi (Rm . =(0.353486 =-2.738601-5)] =1.738601-5)] = -0.243891 17.243891.530513 -13.35071 28.243891-5)/ 0.45635 28.2551 20.68083 0.051083 210.Rf)/Bi.APL MAY TOTAL AVG 15.78562 6.828943 0.58603E-16 2.Rf)/Si = (0.904883 =-5.10565 0.D.904883 (0.904883 (0.Rf) ] .44089E-15 -1.538895 =2.595114 1.) σi=√5.25605 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .478 5.243891-5)/ 2.Rf) =[5+0.143932 Fema Measures Selectivity =Ri –[ Rf + Bi (Rm .

2009) Exit Load.Rf)] =[5+(0. Growth Option.5000 and in multiples of Rs.943474 Net selectivity= selectivity.904883 (0.904883 (0.[5+0.13 Nature of Scheme Open Ended Equity Linked Saving Scheme Inception Date Option/Plan Entry Load (purchase / additional purchase / switchin) Mar 31. NIL (With effect from August 1.353486/10.738601-5)( 2.90004-2.84352 HDFC TAXSAVER Investment Objective The investment objective of the Scheme is to achieve long term growth of capital.738601-5)] = -0.Rf)(αi/ αm)]-[Rf + Bi (Rm .738601-5)] =2.943474 =-3.=0.diversification =-0.[5+0.90004 Diversification =[Rf + (Rm . (as a % of the Applicable NAV) Minimum Application Amount Nil Rs.100 . 1996 Dividend Option.243891. Basic Scheme Information Table:3.98971)].

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

88956 25.3378 300. endorsed.56268 1.1784 -0.80145 4.24564 7.07891 55.204052 -8.34347 11.784819 -9.737 196.69787 -1.315495 22.300549 14.30127 7.491863 134.277 .266 272.6968 11.58732 16.44641 1.11 7163.133 133.24148 16.535 163.8146 5.308 153.54465 -2.099566 82.82642 -11.45 6356.31236 12.34478 9.52802 -0.12149 257.73 4605.27 198. Benchmark Index : S&P CNX 500.05529 2.765 156.15 NAV S&P CNX 500 4899.25 5411.133692 5.18558 87.845 152.3 6997.32486 83.92575 7.52824 0.3508 43.3687 -1.481 173.8689 2.533254 24.39982 1.042897 50.5366 4.753707 -10.88 6289.30087 3.553344 1.2974 1.214527 6.instruments falls below 80% of the portfolio of the Scheme at any point in time.598018 -17. Fund Manager : Dhawal Mehta HDFC TAX SAVER FUND Table:3.6065 171.519756 -1.94536 Ri Rm Ri Rm Rm-Rm av sqr(RmRm av) Rm2 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL 146.07 -7.10258 4.62913 -16.065494 -0. sold or promoted by Indian Index Service & Products Limited (IISL).92 5762.707729 92.134 135.29 6094.60296 3.82 5483.36928 64.966289 -1.411 0.72229 159.3285 0.61 161.935177 -2.284 173.43691 247.130678 60.882 144. HDFC Tax saver.31318 6.38584 -9.18429 31.730242 4.39 4504.568075 107.64039 -2.51353 -3.48 6245.02 158.95 5223.330208 25.3759 8.47501 107.88767 5.61843 17.475077 37. it would be endeavoured to review and rebalance the composition.735 204.89 4934.096606 0.9754 0.2248 307.46 5185.34429 5.837141 -15.787455 6.48562 5.00736 3.5533 33.6591 65.66403 1.090523 15.0864 1.8066 38.6 7461.2786 265. which is benchmarked to S&P CNX 500 Index is not sponsored.

588 821.33 3720.77619 324.55257 6.23455 8.6911 3499.07155 -15.9077 14.56493 0.82188 9.45 135.957 98.8707 56.70062 195.57 3379.1822 750.553966 -3.81 4929.811856 -5.4005 -5.9731 7.7883 30.288584 13.0949 731.MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG 148.50492 667.3455 20.186 .682 99.0042 6.417 123.51 4278.19497 288.063 112.85299 8.827 5937.38886 8.358 132.711187 -6.67611 -3.751491 -9.953 142.2 3539.793 126.91109 254.01989 3.0357 37.54 5480.57 3403.23212 66.87114 1.449 97.28 4807.627 117.564738 98.83098 42.05 144.9625 788.11 -6.25591 0.25212 15.96764 27.74352 31.36369 0.55156 68.53341 7.47 5337.515223 4.60679 86.44049 29.078188 120.47327 -4.319696 14.454188 0.548703 -5.61636 -18.44354 57.52145 7.93165 -26.99875 28.512113 15.95447 13.540414 67.5062 3293.2958 -8.98 5297.27962 -10.8396 3469.031112 33.08365 28.83862 14.0859 55.9628 -27.53 3635.64708 16.161582 23.70723 -4.119 90.3303 231.585078 -2.6295 -6.58525 -16.79695 -25.1514 41.555 89.77372 79.423076 -0.87 3538.85673 224.0162 7.63768 695.972 93.05253 0 43.3694 -4.

787455 6.290886 3.54.760291 2.2974 1.119058 -2.835475 2.54465 -2.001287 0.62913 -16.03588 -0.92663 -0.204052 -6.653763 1.197757 5.4863 -1.444217 0.07155 -8.688985 -1.133692 5.60147 2.5426) = 91777.38182 5.784819 -9.31236 12.833.5671)/ (97977.16 Ri Rm Ri-Rm Dev frm ave sq of Dev frm av 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY -7.52E-05 .553344 1.17139 0.9077 =11.305818 -2.1784 -0.75106 1.230641 1.21.82642 -11.837141 -15.55362 -0.243546 23.52802 -0.527266 -3.011095 -5.00736 3.61124 -2.019444 7.30127 7.130678 -5.44653 0.79199 1.19178 -4.944765 Table:3.84678 1.13617 -1.Figure:3.564696 4.24564 7.5366 4.364366 -1.128833 1.003894 1.4935 4.590227 3.730242 4.31318 6.456738 1.921956 19.34478 9.334158 2.67 = 0.80145 4.05529 2.93915 -1.13139 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (92221.92575 7.966289 -1.5 σm= √123.443.519756 -1.98/ 97143.69787 -1.78823 2.61843 17.58525 0.531929 2.00968 2.709373 4.096606 0.071208 -0.30958 -1.413726 0.31788 -2.300549 14.

Rf)/Bi.548703 -16.061035 3.5075 -0.226778 -2.725415 147.79715 -0.711187 -6.358035 0.79695 -25. =(0.47327 -4.82188 9.43934 -0.921319 5.87114 1.08457 0.93165 -26.71154 .454188 0.254467 Standard Deviation for the fund’s excess return (S.134702 1.314743 0.292262 =-1.52145 7.105738 0.71309 1.44211 -3.515223 4.585078 -2.92415 -1.1251 5.) σi=√ 5.007152 0.421115 10.292262 Sharpe Index (Si) = (Ri .94188 Treynor's Index (Ti) = (Ri .325174 -0.441737 1.512113 15.99875 28.9731 7.3694 -4.319696 14.48241 -2.168474 -13.751491 -9.25212 15.7323 13.80758 0.0162 7.38886 8.23455 8.2958 -8.44049 29.944765 =-4.54344 -4.959696 3.36369 0.D.67611 -3.08365 28.55599 3.254467 = 2.Rf)/Si = (0.65088 5.950372 0.56698 -0.548703-5)/ 0.073584 -3.811856 -5.031112 1.230684 -1.08349 2.61711 -1.70919 2.956929 0.43732 2.548703-5)/ 2.JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG -15.295331 19.854046 2.

944765 (1.932363 Net selectivity= selectivity.944765 (1.Rf) ] =0.Rf)(αi/ αm)]-[Rf + Bi (Rm .13139)].Rf) =[5+0.944765 (1.Jenson alpha (αp) = Ri –[ Rf + Bi (Rm .031112-5)] = -0.031112-5)( 2.[5+0.292262/11.Rf) ] =0.[5+0.70163 Expected return E(Ri) = Rf + Bi (Rm .031112-5)] Diversification = [Rf + (Rm .548703.63399 HDFC TOP 200 FUND Investment Objective .031112-5)] =1.250332 Fema Measure: Selectivity =Ri –[ Rf + Bi (Rm .Rf)] =[5+(1.031112-5)] =2.70163-2.548703 = -0.diversification =-0.944765 (1.70163 [5+0.932363 =-3.

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

ASSET TYPE (% OF PORTFOLIO) RISK PROFILE 1 Equities & Equities related instruments Upto 100% (including use of derivatives for hedging and other uses as permitted by prevailing SEBI Regulations) Medium to high 2 Debt securities. Benchmark Index : BSE 200 Fund Manager : Mr.19 Ri Rm Ri Rm Rm-AvRm (RmAvRm)2 Rm2 . Prashant Jain HDFC TOP 200 FUND Table:3.Table:3. money market instruments & cash Balance in Debt & Money Market Instruments Low to medium Investment in Securitised debt. Risk will also be reduced through a diversification of the portfolio. if undertaken. would not exceed 20% of the net assets of the scheme. Investment Strategy & Risk Control The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the regulations and guidelines.18 SR NO. Stock specific risk will be minimised by investing only in those companies / industries that have been thoroughly researched by the investment manager's research team.

7699 115.356 -7.25106 8.40517 35.84641 13.2559 135.6036 744.805 119.108374 5.552 1687.72871 3.886131 49.798 88.110192 53.59 1107.1045 41.3696 694.3108 0.546 92.9614 -1.504 111.5298 101.6897 2.215 158.249334 189.614 126.2531 5.72868 -6.549038 49.11594 2.94 1140.31223 25.90249 78.0068 67.68 1062.25075 0.80018 23.588556 8.27 1556.242504 -16.48622 83.356 169.902 129.7031 -26.57927 -12.6001 202.08 1555.044536 6.359 103.7477 40.09014 1.04454 -1.41 2157.2765 -8.81 1894.05824 15.51987 64.950392 -5.740971 7.19534 9.345093 4.10203 172.7035 30.27341 8.381905 1.754 92.235 118.66396 67.335555 165.686059 -8.201 140.521175 1.32241 14.544 143.22962 -0.71 -0.04015 -1.424 123.33909 31.19392 7.45 -20.7 1145.15013 0.113254 103.61163 287.321997 -16.23 2656.2561 -6.346398 67.998295 2.324 86.870899 -4.52 2230.379 92.16032 7.272485 4.78393 1.162 7.7 2118.18 1857.619219 16.809216 24.884959 -12.6236 -27.6727 20.718 147.10612 39.675 115.51435 -9.025 137.57534 373.4523 46.304208 -8.13774 14.60255 410.06 1044.35 1545.97955 4.64918 -5.82686 0.7757 10.39 2217.986335 6.54111 88.18 1749.68366 312.727878 -3.709088 197.08253 21.028881 5.0409 -0.53251 70.0016 -0.077788 1.28242 -5.9318 8.4203 0.12144 0.20292 -6.87 2454.5812 45.269 104.217817 87.52 3.69286 18.192992 4.138324 68.93116 2.6377 52.3326 6.35 1156.14027 63.11 1782.1733 212.4821 0.68291 59.930167 185.25839 7.290658 29.22 1644.5295 -19.553069 161.17954 6.53532 208.34 127.61126 9.032233 37.72 1666.20874 27.10725 11.031261 -2.08 1804.01963 -10.011372 140.074 84.5581 0.1865 29.09063 -4.90152 0.53177 8.93887 257.794 147.49978 -13.52 2038.33195 7.195906 6.096 120.49 160.6342 229.223904 -5.86 2439.222966 -13.11003 -22.9259 14.461398 0.50896 .964452 -13.8552 11.14 1766.47 1932.34081 -0.0228 586.7406 -16.2007 JAN FEB MAR APRI L MAY JUNE JULY AUG SEPT OCT NOV DEC 2008 JAN FEB MAR APRI L MAY JUNE JULY AUG SEPT OCT NOV DEC 2009 JAN FEB MAR 112.87568 8.689 131.07041 42.43 -8.951768 -1.132443 159.5264 0.

5198 4141.7453 16.44073 0 0 273.051 Figure:3.52467 31.9045 =12.1616 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] .920507 283.44517 32.51833 37.24168 29.36124 25.25 4165.6 σm= √147.9045 304.341 1339.332192 17.APRI L MAY Total Avera ge 107.7742 0.584 139.2498 3632.3341 1047.82 16.30138 1.38 1772.326 147.867 129.3389 955.0646 988.

10725 11.961.740971 7.4.986335 6.044536 6.10883 1.092773 0.3108 0.206326 0.039273 0.57534 Rm Ri-Rm dev frm av sq of dev Rm2 .315473 4.74887 -1.64918 -5.285389 11.147515 1.923436 -2.454935 -0.560142 -0.906851 2.04015 -1.4133)/ (116621.04454 -1.16032 7.14795 -1.73583 -1.001871 0.68109 -0.05824 15.330164 0.434043 0.40697 3.346398 67.92131 1.11119 1.028881 5.10998 -1.559639 1.46388 0.5264 0.2559 135.332991 -1.40517 35.8552 11.006646 0.7406 -8.7035 30.868932 Table:3.01954 3.14846 1.51175 3.896699 70.52 3.02189 2.521668 2.048399 6.788892 0.549038 49.90152 0.57927 -12.37721 0.1 = 0.335555 165.081521 -0.998295 2.454231 -0.192992 4.52288 -1.0016 -0.160557 1.20 Ri 2007 JAN FEB MAR APRIL MAY JUNE JULY AUG SEPT OCT NOV DEC 2008 JAN FEB MAR APRIL MAY -8.222966 -13.9259 14.668006 2.04255 0.195906 6.62759 -0.90422 0.431223 -2.242504 -16.012364 2.521175 1.809216 24.4203 0.3.01963 -10.09014 1.= (101720.5295 0.664.165624 9.15013 0.9/ 115957.818654 -2.727878 -3.951768 -1.32241 14.709088 197.3093) = 100758.04325 0.9318 8.0409 -0.93887 257.97955 4.6342 229.588556 8.

356 -7.868932 =-4.00756 -4.27341 8.364007 4.13605 1.528901-5)/ 0.332192-5)/ 1.12301 Expected return E(Ri) = Rf + Bi (Rm .099889 1.[5+0.7742 0.332192 -19.36124 25.6882 -0.015015 -1.962124 =-1.963188 2.3696 694.JUNE JULY AUG SEPT OCT NOV DEC 2009 JAN FEB MAR APRIL MAY -16.Rf)/Bi.) σi=√3.75889 -0.01851 2.030315 17.60333 2.Rf) .2561 -6.608803 10.30138 1.488145 1.52718 0.Rf) ] =1.553069 161.381905 1.33909 31.84291 11.Rf)/Si = (1.884959 -12.3341 1047.870899 -4.223904 -5.5515 -2.138324 17.44517 32.90249 78.5924 107.611496 0.7031 -26.920507 3.008493 0.22105 Jenson alpha (αp)= Ri –[ Rf + Bi (Rm .058681 1.D.547736 -1.411685 -2.415923 0.051 Standard Deviation for the fund’s excess return (S.60285 0.304208 -8.7477 40.48622 83.11003 -22.920507-5)] = -0.3326 6.332192.20349 -2.19534 9.615179 3.51833 37.238165 1.593101 4.7981 3.50896 304.72871 3.962124 Sharpe Index (Si) = (Ri .647 -0.254597 7.849932 =1.24168 29.304156 4.28242 -5.69286 18.6377 52.25839 7.219896 -1.686059 16.162 7.61126 9.41925 4.849932 373.345093 4.868932 (0.80821 1.18142 -3.170579 0.48424 13. = (4.09063 -4.25 4165.8693 Treynor's Index (Ti) = (Ri .00424 -0.

886626 Net selectivity= selectivity.920507-5)] =1.Rf)] =[5+(0.[5+0.21 FUND BENCHMARK RETURNS RETURN EQUITY FUND Capital builder 12.868932 (0.886626 =-2.868932 (0.8529 11.87834 3.2 ANALYSIS OF THE OBSERVATION: The table given below illustrates the comparison among the analysed funds based on the different measures of comparison.872865 11.[5+0.868932 (0.962124/12.Rf) ] =1.22546 4.8529 .1616)].920507-5)( 1.Rf)(αi/ αm)]-[Rf + Bi (Rm .920507-5)] =2.12301 Diversification =[Rf + (Rm .=[5+0.455198 Fema Measure: Selectivity =Ri –[ Rf + Bi (Rm .12301-2. Performance of Fund portfolio and Benchmark return for 29 months (jan07-may08) Table:3.332192.920507-5)] = -0.diversification =-0.

792016 3.0141 3.065339 Figure:3.63043 -0.7 Performance Evaluation against Benchmarks The above table presents return and risk of the six funds along with market return and risk. . Top 200.792016 11. Equity fund and Growth fund have earned greater return as against the market earning. Long-term advantage and Tax saver funds have even negative returns. Long term advantage and Tax saver funds have not earned higher return than the Market portfolio.89438 24.48711 -7.8529 5.Growth fund Long term adv Tax saver Top 200 16. Capital builder. From the table it is evident that.

53625 -0.13239 2.90004 -3.25605 -0.22 Fund name S.872865 HDFC Growth Fund 10.22105 -0.292262 0.962124 0.0836 11.54769 0.84352 -7.48711 HDFC Long Term Adv 10.944765 -1.904883 -2.936265 -1.1616 1.53641 -4.12301 -2.39357 -3.0096114 -1.545136 0.868932 -1.02088 -5.89438 12.353486 0.392215 1.63399 -0.87834 24.Comparison of ratios: Table:3.71154 -0.8693 -4.22546 HDFC Equity HDFC Capital Builder 11.013767 -2.94188 -4.070488 -3.D.89907 0.98971 2.63043 HDFC Tax saver HDFC Top 200 11.921779 -1.70163 -3. fund B value Sharpe ratio Treynor ratio Jenson’s alpha Fema Retuns jan07may08(29 months) 12.D.0141 .13139 2.66872 -4.64557 -3.24646 0.98971 2.13239 2.9264 16. market S.33967 4.

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

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

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

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

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

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

12 1.721 2. Nestle India Ltd. ITC Ltd.06 2. Solar Explosives Ltd.507.30 1.69 1.50 2.97 635.366 111.120 400.66 1.807. Oil & Natural Gas Corporation Ltd.40 1.441.428 836.115 469.257 160.78 2.368.12 0.926.861.77 1.85 0.00 1.496 3.85 811. Nagarjuna Construction Co.47 1.738 3. Bank of Baroda Infosys Technologies Ltd MphasiS Limited Axis Bank Ltd Apollo Tyres Ltd Tata Steel Limited Hindustan Unilever Ltd. Eimco Elecon (India) Ltd.95 2.99 990.18 705.000 367.151 120.621.355 3.967.81 2.52 2.31 2.94 1.006 104. H T Media Ltd.65 1.307.24 1.719.59 1. Dabur India Ltd.84 2.83 2. C & C Constructions Ltd Pharmaceuticals Media & Entertainment Chemicals Consumer Non Durables Pharmaceuticals Consumer Non Durables Fertilisers Pharmaceuticals Petroleum Products Petroleum Products Consumer Non Durables Banks Software Software Banks Auto Ancillaries Ferrous Metals Consumer Non Durables Transportation Industrial Capital Goods Oil Construction Project Paper Products Industrial Capital Goods Auto Ancillaries Construction 272.16 1.38 2. Dr Reddys Laboratories Ltd.000 653.61 0.058.03 987.713.Sun Pharmaceutical Industries Ltd.63 1. Ltd.24 2.000 913.000 569. Coromandel Fertilisers Ltd.345.95 1.45 1.04 1.050.367.39 1.46 2.916.34 2.454 396.000 5.000 1.353 711.268 420.319.35 2.83 2. Thermax Ltd.250 633. Amara Raja Batteries Ltd.287 276. Hindustan Petroleum Corporation Ltd.55 . Ballarpur Industries Ltd.09 2.766.300.264.000 220.41 2.607.55 2.79 2.397.85 0.305.462.301.271 1.46 2.433. Biocon Limited Reliance Industries Ltd.682.305 1.98 1.365 2.70 0.29 1.96 1.608. Noida Toll Bridge Company Ltd.685.

597 1.92 1.745 552.47 0.30 3.31 2.36 7.299.99 0.36 0.32 116.18 0.60 5.24 1.Cash Equivalents and Net Current Assets Net Assets Table:3.21 0.21 207.07 101.67 101.72 6.072. Ahmednagar Forgings Ltd.548.00 5.46 0.612 538.00 Short Term Deposits as margin for Futures & Options Cash margin / Earmarked cash for Futures & Options Other Cash.000.86 4.85 199.548.17 87. Disa India Ltd Technocraft Industries (India) Ltd Sub total Total Construction Construction Ferrous Metals Industrial Products Engineering Ferrous Metals 761.30 5.37 10.668 424.48 1.67 1.94 7.33 87.175.33 0.24 .39 8.Maytas Infra Ltd KNR Construction limited ISMT Ltd.53 413.912 710.24 Sectoral Allocation of Assets(%) Banks Pharmaceuticals Media & Entertainment Consumer Non Durables Petroleum Products Industrial Capital Goods Telecom .01 531.25 245.45 100.234 12.41 2.48 7.00 8.42 3.Services Auto Ancillaries Finance Software Chemicals Fertilisers Ferrous Metals Construction Transportation 16.679.

85 0.18 12.67 100 Figure:3.21 0.Cash Equivalents and Net Current Assets TOTAL 1.12 0.8 .Oil Construction Project Paper Products Industrial Products Engineering Cash.85 0.

) Returns (%) ^ Benchmark Returns (%) Sensex December 30. 2008 June 30.23 7.Table:3.74 13.034 16.01 16. 2000 Last Six months (182 days) Last 1 Year (365 days) Last 3 Years (1096 days) Last 5 Years (1826 days) Last 10 Years (3653 days) Since Inception (3214 days) 41.A.25 HDFC Growth Fund Date (NAV as at evaluation date 30-June-09.67 10.17 7.439 N. 2008 June 30.65 28. 2006 June 30.95 24. Rs.34 13. 2004 June 30.472 36. 1999 September 11. 21.91 49. 57.697 53.219 Per unit) Period NAV Per Unit (Rs.31 N.65 .A 10 37.

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

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

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

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

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

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

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