ABSTRACT

Investments goals vary from person to person. While somebody wants security, others
might give more weight age to returns alone. Somebody else might want to plan for his
child's education while somebody might be saving for the proverbial rainy day or even life
after retirement. With objectives defying any range, it is obvious that the products required
will vary as well.

Indian Mutual Funds industry offers a plethora of schemes and serves broadly all tope
of investors. The range of products includes equity funds, debt, liquid, gilt and balanced
funds. There are also funds meant exclusively for young and old, small and large investors.
Moreover, the setup of a legal structure, which has enough teeth to safeguard investor’s
interests, ensures that the investors are not cheated out of their hard earned money. All in all,
benefits provided by them cut across the boundaries of investor category and thus create for
them, a universal appeal.

Investors of all categories could choose to invest on their own in multiple options but
opt for Mutual Funds for the sole reason that all benefits come in a package. The Mutual
Fund industry is having its hands full to cater to various needs of the investors by coming up
with new plans, schemes and options with respect to rate of returns, dividend frequency and
liquidity.

In view of the growing competition in the Mutual Funds industry, it was felt
necessary to study the investors orientation towards Mutual Funds i.e. their pattern of risk
apatite and preferences in various schemes, plans and options in order to provide a better
service.
 INDEX
S.No CHAPTER Page No
1 CHAPTER – I 01-13
INTRODUCTION
NEED OF THE STUDY
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
RESEARCH METHODOLOGY
2 CHAPTER – II 14-20
LITERATURE REVIEW
3 CHAPTER – III 21-38
INDUSTRY PROFILE
COMPANY PROFILE
4 CHAPTER – IV 39-59
DATA ANALYSIS &INTERPRETATION
5 CHAPTER – V 60-63
FINDINGS
SUGGESTIONS
LIMITATIONS
CONCLUSION
BIBLIOGRAPHY 64
 CHAPTER – I

INTRODUCTION

1
 INTRODUCTION

Mutual fund is a trust that pools the savings (or) investments of many investors who share a
common financial goal. This pool of money is invested in accordance with a stated objective.
The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to all investors. The
money collected is then invested in capital market instruments such as shares, debentures
bonds and other securities. The income earned through these investments and the capital
appreciations realized are shared by its unit holders in proportion the number of units owned
by them. Thus, a Mutual Fund is most suitable investment for the common man as it offers
opportunity to invest in a diversified, professionally managed basket of securities at a low
cost.

Mutual Fund is an investment tool that allows small investors access to a well-diversified
portfolio of equities, bonds and other secusrities. Each shareholder participates in the gain or
loss of the fund. Units are issued and can be redeemed as needed. The fund’s Net Asset value
(NAV) is determined each day. Investments in securities are spread across a wide cross-
section of industries and sectors and thus the risk is reduced. Diversification reduces the risk
because all stocks may not move in the same direction in the same proportion at the same
time. Mutual fund issues units to the investors for money invested by them, Investors of
mutual funds are known as unit holders.

When an investor gets units of a mutual fund, he becomes owner of the assets of the fund in
the same proportion as the contribution amount put by him/her with the corpus (the total
amount of the fund). Mutual Fund investor is also known as mutual fund shareholder. Any
change in the value of the investments made into capital market instruments (such as shares,
debentures) changes the Net Asset Value (NAV) of the scheme. Net asset value is defined as
the market value of the Mutual Fund scheme's assets net of its liabilities. NAV is calculated
by dividing market value of scheme's assets by the total number of units issued to the
investors.

2
TYPES OF MUTUAL FUNDS:

Most funds have a particular strategy they focus on when investing. For instance, some invest
only in Blue Chip companies that are more established and are relatively low risk. On the
other hand, some focus on high-risk start up companies that have the potential for double and
triple digit growth. Finding a mutual fund that fits your investment criteria and style is
important.

On the basis of their structure and objective, mutual funds can be classified into following
major types:

Closed-end funds
A closed-end mutual fund has a set number of shares issued to the public through an initial
public offering.

Open-end funds
Open end funds are operated by a mutual fund house which raises money from shareholders
and invests in a group of assets

Large cap funds

Large cap funds are those mutual funds, which seek capital appreciation by investing
primarily in stocks of large blue chip companies

Mid-cap funds
Mid cap funds are those mutual funds, which invest in small / medium sized companies. As
there is no standard definition classifying companies

Equity funds
Equity mutual funds are also known as stock mutual funds. Equity mutual funds invest
pooled amounts of money in the stocks of public companies.

Equity funds
Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a
combination of common stock, preferred stock, bonds, and short-term bonds

3
Growth funds
Growth funds are those mutual funds that aim to achieve capital appreciation by investing in
growth stocks.

No load funds
Mutual funds can be classified into two types - Load mutual funds and No-Load mutual
funds.

Exchange traded funds

Exchange Traded Funds (ETFs) represent a basket of securities that is traded on an exchange,
similar to a stock. Hence, unlike conventional mutual funds

Value funds
Value funds are those mutual funds that tend to focus on safety rather than growth, and often
choose investments providing dividends as well as capital appreciation.

Money market funds

A money market fund is a mutual fund that invests solely in money market instruments.
Money market instruments are forms of debt that mature in less than one year and are very
liquid.

International mutual funds

International mutual funds are those funds that invest in non-domestic securities markets
throughout the world.

Regional mutual funds

Regional mutual fund is a mutual fund that confines itself to investments in securities from a
specified geographical area, usually, the fund's local region.

Sector funds
Sector mutual funds are those mutual funds that restrict their investments to a particular
segment or sector of the economy.

The Mutual Fund Industry in India was started with a humble beginning by establishing the
Unit Trust of India in the year 1963, by the Government of India. “The main aim of the UTI
was to enable the common investors to participate in the prosperity of capital market through

4
portfolio management aimed at reasonable return, liquidity and safety and to contribute to
India’s industrial development by channelising household savings into corporate investment”
By the year 1993, UTI occupied nearly 80 per cent of the market share and developed
manifold in terms of number of investors, investable funds, reserves with wide marketing
network and efficient leadership The Chartered Financial Analyst had commented that,
“Mutual Funds today form 1/10th of the banking industry’s size. If we compare this an
indication in the current interest rate scenario, Mutual Fund has ample shelf-space to grow
into an industry like the banking industry in India.

Concept of Mutual Fund: under one or more schemes for investing in securities in accordance
with these regulations”. Frank Reilly defines, Mutual Funds “as financial intermediaries
which bring a wide variety of securities with in the reach of the most modest investors”.
Characteristics of Mutual Funds5 The specific characteristics of Indian Mutual Fund
Schemes, can be narrated as listed below.

 Assurance of minimum returns: In general mutual funds do not assure any minimum
returns to their investors. However, Indian Mutual Fund Schemes launched during
1987 to 1990 assured specific returns till 1991, when the SEBI and Union Ministry of
Finance order the mutual funds not to assure minimum returns. Recently, SEBI has
formulated a policy that, mutual funds with a track record of five years will be
allowed to offer fixed returns not exceeding one year period.

 Multiple Options: Most of the mutual fund schemes are offering different options to
the investors under one scheme. For example, a growth oriented scheme may offer
option of either regular income or re-investment of income. Under the regular income
plan, dividend shall be distributed to investors and under the second dividend will be
reinvested and total amount shall be paid at time of redumption.

 Lock in Period: Mutual Fund Schemes offer documents that contain a clause of lock-
in period ranging from one year to three years. Till the completion of the minimum
period the investors are to trade neither the units on the stock exchange nor to avail
themselves of repurchase facility.

 Liquidity : Generally open-ended funds offer the facility of repurchase and the
closeended are traded at stock exchange offering repurchase after a minimum lock in

5
 period of two to three years. Mutual funds also have a facility to pledge or mortgage
at banks to obtain loan and can be transferred in favour of any individual.

 Incentives to early subscribers: Most of the close-ended mutual fund schemes are
offering incentives to encourage early subscription to investors. This is more often in
the tax planning schemes. For instance, if the scheme is open for a period of three
months, the investor may be allowed a deduction from the amount to be invested at a
certain specified rate, if the subscriptions were during the specified time limits.

Capital Market – Indian Experience India has been following liberalized and open
economic policies since the advent of comprehensive economic reforms and structural
adjustment program in 1991. The balance of payments crisis of 1991 led to the
introduction of this new 4 program, which aimed at more liberal policy towards foreign
trade and investments. A continuous debate is taking place in this regard, particularly
with reference to benefits and costs of economic reforms.

Economists by and large, tend to view free trade and open investment policies as positive
forces and expect countries pursuing these policies to benefit significantly. Contrary to
this some argue that free trade and investment policies favour the rich and hold a different
view of globalisation of production process, market for goods and services as well as
financial markets has heightened the debate on the impact of trade and open economic
policies on economic growth, poverty and income distribution. In the early years of the
reforms, the Indian Capital Markets continued to display the growth and vibrancy that
have been presented since the mid 1980s. However, this soon petered out and the capital
markets ended a decade of reforms at a lower level on most dimensions than at the start of
the reforms. During the period from January 1984 to October 1992 the market delivered a
compounded annual returns at about 32 per cent in rupee terms (the market index went up
more than eleven times) and 16 per cent in dollar terms (the dollar adjusted index went up
nearly 4 times). By contrast, during the two decades from 1965 to 1984 the market had
delivered a compounded annual returns of less than 6 per cent in rupee terms and less
than one per cent in dollar terms.

As a consequence of this explosive growth, a number of investors was attracted to the

capital market. The capital market that used to attract only about 3 per cent of household
financial savings in the 1970s and early 1980s absorbed 10 per cent of household
6
financial savings by the end of the 1980s. This figure rose to a whopping 23 per cent in
1991-92. Most of this growth stopped or reversed in the later half of the 1990s. At the end
of February 2002, the market index in rupee terms was only about 7 per cent above the
post scam level of October 1992. The average market index during the first eleven
months of 2001-2002 was almost exactly the same as in October 1992. This means zero
return in rupee terms in about 9 years. In dollar terms, the average index in the first
eleven months of 2001-02 was less than half of what it was in October 1992.

The poor performance of stock market during the post reform period is due principally to
a sharp fall in the price-earning ratio. In the last couple of years, the P/E ratio has halved
from the levels of around 30 reached in the early years of the reforms. The P/E ratio is
now back to pre-reform (late 1980s) level. The share of households savings flowing into
the capital market (which had reached 23 per cent in 1992) fell back to about 5 per cent
by the late 1990s. This is approximately the same level as in the early 1980s and sharply
lower than in the late 1980s and early 1990s

As far as mutual funds are concerned they got Rs. 1,02,000 crore Assets Under
Management as on 30 September 2001. This represents about 20 per cent of the market
capitalization, but since 70 per cent of the mutual fund assets are in schemes that are
predominantly debt oriented, and other 17 per cent are in balanced funds, the actual
equity holding of the mutual funds probably amounts to only about 5.7 per cent of the
market capitalization

7
NEED OF THE STUDY

Nowadays many people want to save their money but they don’t know where to save.so, this
project fills the gap between the investors understanding and their objectives of savings.

The purpose of doing this project was to know about mutual funds, its functioning. This
helped me to know in details about mutual fund industry right from its inception stage,
growth and future prospectus.

It also helps in understanding different schemes of mutual funds, because my study depends
upon funds and their schemes.

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

8
SCOPE OF THE STUDY

The study is limited to the analysis made on two major types of schemes offered by banks. Each
scheme is calculated in term of their risk and return using different performance measurement
theories. The reasons for such performance in immediately analyzed in the commentary. Column
charts are used to reflect the portfolio risk and return.

9
OBJECTIVES OF THE STUDY

 To make a detailed study on the mutual funds and its development in India
 To study the working of mutual funds in its organization of HDFC Securities Limited.
 To know how investors are benefited from mutual funds rather than equity investors.
 To evaluate the performance of mutual funds.
 To create awareness about mutual funds and its benefits to the investors.

10
RESEARCH METHODOLOGY

Meaning of research: The method and technique that are used for conducting the research.
Research methodology is a systemic way of solving research problem this methodology
includes all the stages of research such as research process, research design, sampling design,
data collection, data analysis, data interpretation and data presentation.

Research Process: - This is the process of conducting entire research in such away to solve
the research problem. It includes identification of problem conducting the research and
interpretation of the data and reporting.

To test the Different Mutual fund Schemes and its effect on the Business with reference to the
Reliance Securities Mutual Funds.

Research design: - It indicates a design of research problem and research process

1. Information collected from the Questionnaire to the HDFC Securities

Limited, Hyderabad branch.

2. I collect all the Financial Statements from the HDFC Securities Limited
websites.

Data collection:-The objective of the present study can be accomplished by conducting a

systematic research to know the effect of HDFC Securities Limited Mutual Fund Schemes
on the Business.

Source of data

The primary source of data for the study is collected primarily through secondary source such
as.

Secondary data

Secondary data is taken from

• Website
• Security Analysis (sem-4)
• Brocuhers

11
Tools for data analysis:- To analyse the information (or) data collected form Branch
Manager and various financial Statements the following tools are used:

1. Percentages

2. Averages

3. Range

4. Graphs

5. Bar Chart

6. Sharpe ratio

7. Treynor ratio

12
LIMITATIONS OF THE STUDY:

 The period of study is of 5 years i.e. 2016-2020 and the performance evaluation is
also limited to 5 years.
 Analysis is only means and not an end itself; different people interpret the same
analysis in different ways.
 This study is conducted with in a short period.
 The time factor is also a limitation.

13
 CHAPTER-II
REVIEW OF LITERATURE

14
 REVIEW OF LITERATURE
Dr.Umarani.M.B-2012-Growth of Indian mutual fund industry in the past decade:
The mutual fund industry has grown satisfactorily over the past decade. From the days when
it was felt that a savings oriented institution like the unit trust of India needs to be established
in the early 1960’s, the industry has grown enormously in the past decade. In fact, the entire
nature of the industry has completely not only in quantitative aspects. The mutual fund
industry now proffers a very wide range of choices for investment to the potential investors.
The industry has grown in stature to such an extent that it now acts as a reasonably strong
counter-force to the foreign institutional investors in the stock markets during times of
high volatility which is the hall mark of the sustained intermediate bull-runs in the stock
markets This present paper makes an attempt to assess the growth of funds and suggests
certain steps that need to be initiated by all players of the industry in a concerted
manner to create an atmosphere that will take the Indian mutual fund industry to its next level
of growth.

Rizwan Ali-2014- Performance Evaluation of Mutual Funds:

The aim of conducting this research is to find out the investment tendency in mutual
funds of Pakistan, Conventional Vs Islamic. The study is also aimed at finding out the
role of mutual fund investment in Pakistan. This study also finds out the factors
effecting the investment in mutual funds and measure the performance of mutual funds
through the models which are used worldwide to evaluate the investment tendency in
the area of mutual funds through portfolio(Risk/Return) Sharpe Measure and Treynor
Measure, to make the best point for investment through graphical representation for
both conventional and Islamic, which is much easier to take better decision for investment
either sell or buy.

Shivangi Agarwal, Nawazish Mirza-2017- A STUDY ON THE RISK-ADJUSTED

PERFORMANCE OF MUTUAL FUNDS INDUSTRY IN INDIA:
Investing through mutual funds has gained interest in recent years as it offers optimal risk
adjusted returns to investors. The Indian market is no exception and has witnessed a
multi fold growth in mutual funds over the years. As of 2016, the Indian market is crowded
with over two thousand mutual fund schemes, each promising higher returns compared to
their peers. This comes as a challenge for an ordinary investor to select the best portfolio to
in-vest making it critical to analyse the performance of these funds. While understanding and
15
analysing the historical performance of mutual funds do not guarantee future performance,
however, this may give an idea of how the fund is likely to perform in different market
conditions. In this research we address multiple research issues. These include measuring the
performance of selected mutual schemes on the basis of risk and return and compare
the performance of these selected schemes with benchmark index to see whether the
scheme is outperforming or underperforming the benchmark. We also rank funds on the
basis of performance and suggest strategies to invest in a mutual fund and therefore, our
findings have significant relevance for investing public.

Reepu-2017- A STUDY OF MUTUAL FUNDS:

Three Boston executives in 1924 pooled their money with no idea of how popular the
assemblage would become. The formation of Unit Trust of India, 1963 along with the
inventiveness of Government of India and Reserve Bank, led to the dawn of new
industry i.e. mutual fund industry in India. Its huge corpus enables diversification,
thereby minimizing the risks and maximizing the returns. In order to become customer’s
preference now-a-days, numerous specialised plans in specific to retirement, children etc
have also been fabricated. The present paper is an attempt to know about Mutual Fund, it’s
various schemes and analyse the different risk factors involved.

Zhi Da, Pengjie Gao, and Ravi Jagannathan(2011) in the article“Impatient Trading,
Liquidity Provision, and Stock Selection by MutualFunds” showed that a mutual fund's stock
selection skill can be decomposedinto additional components that include liquidity-absorbing
impatient tradingand liquidity provision. The study proved that past performance
predictsfuture performance better among funds trading in stocks affected more byinformation
events Past winners earn a risk-adjusted after-fee excess returnof 35 basis points per month in
the future. Most of that superior performancecomes from impatient trading. The paper also
states that impatient trading ismore important for growth-oriented funds, and liquidity
provision is moreimportant for younger income funds.

Deepak Agrawal (2011) in the study “Measuring Performance ofIndian Mutual Funds”
touched the development of Indian capital market andderegulations of the economy in 1992.
Since the development of the IndianCapital Market and deregulations of the economy in 1992
there have beenstructural changes in both primary and secondary markets. Mutual funds
arekey contributors to the globalization of financial markets and one of themain sources of
capital flows to emerging economies. Despite theirimportance in emerging markets, little is
16
known about their investmentallocation and strategies. This article provided an overview of
mutual fundactivity in emerging markets. It described about their size and assetallocation.
The paper is a process to analyze the Indian Mutual FundIndustry pricing mechanism with
empirical studies on its valuation. The datais also analyzed at both the fund-manager and
fund-investor levels. Thestudy revealed that the performance is affected by the saving and
investmenthabits of the people and the second side the confidence and loyalty of thefund
Manager and rewards affects the performance of the MF industry inIndia.

Sanjay Kumar Mishra and Manoj Kumar (2011) “How mutualfund investors objective
and subjective knowledge impacts their informationsearch and processing behaviour” in the
article attempted to prove howContrary to the popular belief that objective knowledge (OK)
(that is, whatis actually stored in the memory) and subjective knowledge (SK) (that is,what
individuals perceive they know) differently impact information searchand information-
processing behavior, with an empirical study conducted on268 mutual funds (MF). Investors
suggest no significant difference in theimpact of OK and SK on the width and depth of
information search andinformation processing. The study suggested that OK and SK
significantlypositively impact the width and depth of information search andinformation-
processing behaviour, however, no significant difference existsin the way they impact. The
possible explanation put forward is that eventhough MF investors may suffer from self-
deception (that is, pseudoexpertise) and report high knowledge (that is, high SK), the impact
of SK onactual investment behaviour is not significantly different from that of OK.

Lakshmi N (2010) in the research paper entitled “performance of theIndian MF industry a

study with special reference to growth schemes” foundout that MF serve those individuals
including to invest but lack the newlinetechnical investment expertise. Funds mobilized by
the industry had grownnew here by 57 percent and AUM by 14 percent during 1997-
2006.Analysis of performance of newline seven schemes should that, all thesample schemes
outperformed the newline market in terms of absolutereturns without adequate returns to over
total newline risk. All the three riskadjective performance measures showed newline
underperformance ofsample schemes. Investors and fund Managers agreed newline that
investingin MF were less risky. Goodwill was the main newline criterion of choosingMF
organizations. Investors were moderately newline satisfied with theperformance & services
offered by the industry.

17
Dr.Susheel Kumar Mehta (2010) in the article named “SBI vs. UTI– a comparison of
performance of mutual funds schemes”. has taken 10 UTIand 10 SBI mutual funds and
analyzed their performance. The studyconcluded that preference of UTI & SBI mutual funds
has been better in2007 – 08. When compared to 2006-07 SBI performance was & good
inboth the years. No consistency for both the companies’ mutual funds interms of returns.
Consistency is observed for risk. UTI money market mutualfunds dividend & SBI magnum
income plus fund- saving plan growth arefound to be least risky among selected schemes of
UTI & SBI. UTI weremore defensive than SBI schemes. SBI magnum comma fund –
dividend hadbeen the most aggressive scheme & UTI money market mutual funds
dailydividend has been the most differential scheme. Aggressiveness was theright strategy.
SBI’s magnum comma fund dividend has preference verywell during both the years. During
2006-07 all the selected schemes gavedismal performance which gave same preference. As of
market based on riskadjusted measures of Sharpe, Treynor& Jensen. During 2007-08 only
oneof the selected UTI schemes master value fund growth option preformedbetter followed
by MEF – G. & MBF – G performed better than market.Whereas SBI – MCF dividend follow
by MEF – G & MBF-G – preformedbetter than Market. As superior stock selection is
concerned none of theportfolio Manager selected UTI & SBI showed skills during 2006-07. It
wasonly 2007-08 managers of SBI MCF – D- eructed some superior stockselection skills.

Mohamed.zaheeruddin(2013):
Abstract : Mutual Fund companies are financial intermediaries providing financial services
to small investors through mobilisation of funds, when the investors invest in a mutual fund
they are buying shares or units of the mutual fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost efficient
and very easy to invest in. Thus the Rupee is generated in the form of big returns to promote
financial excellence. The financial reforms and cut throat competition in the economic
environment the mutual fund industry has opened new vistas to interested investors and
imparted much needed liquidity to the Indian financial system. In a jungle evolution of
financial service sector in India investors are unable to recognise and select the benchmarking
companies. The study examines the performance of mutual funds based on their fund return,
risk and performance ratios.

Keywords : Small investors, Big Returns, Net Asset Value, Beta, Alpha, Financial
Excellence, Financial Assets, Asset classes.

18
Binod Kumar Singh(2014):

Abstract : In this paper, structure of mutual fund, operations of mutual fund, comparison
between investment in mutual fund and bank and calculation of NAV etc. have been
considered. In this paper, the impacts of various demographic factors on investors’ attitude
towards mutual fund have been studied. For measuring various phenomena and analyzing the
collected data effectively and efficiently for drawing sound conclusions, Chi-square ( ) test
has been used and for analyzing the various factors responsible for investment in mutual
funds, ranking was done on the basis of weighted scores and scoring was also done on the
basis of scale.

Key words: Hypothesis, Chi-square test, Rank, Weighted score and Scaling

Dr. J K Raju (2015)

Abstract : Investment in stock markets are mostly influenced by the keen analysis and
reasoning which help in predicting the market at least to some extent. Over the past years, a
number of technical and theories for analysis has evolved; these combined with modern
technology guides, which serve the purpose of an investor. The giant players in the market,
like Foreign Institutional Investors, Mutual Funds, etc. have the expertise skill and access for
various analytical tools and make use of them.

Most of the small investors are not in position to benefit out from market the way Mutual
Funds do. Generally small investor’s investments are based on the market sentiments, inside
information, through grapevine, tips and institution. The small investors heavily depend upon
brokers and broking house for their investments. They can invest through the Mutual Fund
who is more experienced and expert in this field than a small investor himself.

In recent years a large number of players have entered into this market. The paper has been
carried out to study an overview of Mutual Fund Industry and to understand investor’s
perception about Mutual Funds in the context of their trading performance, explore investors
risk perception and find out their preference over top Mutual Funds.

This study is to understand how to evaluate of mutual funds. The objective is to evaluate the
investment performance of Indian equity mutual fund with risk adjustment by using the
theoretical parameters as suggested by William, Sharpes, Treynor, and Jensen model.

Keywords: Sharpe measure, Treynor measure, mutual funds, Jensen measure, risk-return.

19
R. Venkataraman (2015):

Abstract : Investors are always baffled about the risk-return characteristics of their
investments. There is often the challenge of the alternative between active & passive
investments. In case of active mutual funds there are numerous categories of active funds
each tracking a different benchmark. It often leads to confusion about how the performance
can be compared between one fund to another. The growth of ETFs’ has been phenomenal in
the recent years due to various advantages of an exchange traded fund compared to the
mutual fund as lower cost of management, lesser dependence on fund manager, ease of
transaction to name a few. In this context the research analysed the passive ETF’s &
prominent Mutual funds both active and passive to justify superior returns at lower risk. The
research was based on secondary data, for a period of 5 years i.e. from 2010 to 2015.The
various tools used were Sharpe Ratio, Jenson’s Alpha, Treynor’s Ratio and Tracking error.
The study recommends fund houses to implement proactive strategies to reduce tracking error
and make ETF’s a better alternative for investment.

Keywords: Mutual Funds, Exchange Traded Funds, Tracking Error and Jenson’s Alpha.

Diane Del Guercio (2016):

Abstract : To rationalize the well-known underperformance of the average actively managed

mutual fund, we exploit the fact that retail funds in different market segments compete for
different types of investors. Within the segment of funds marketed directly to retail investors,
we show that flows chase risk-adjusted returns, and that funds respond by investing more in
active management. Importantly, within this direct-sold segment, we find no evidence that
actively managed funds underperform index funds. In contrast, we show that actively
managed funds sold through brokers face a weaker incentive to generate alpha, and
significantly underperform index funds.

20
 CHAPTER-III

INDUSTRY PROFILE

&

COMPANY PROFILE

21
 INDUSTRY PROFILE

Introduction

India has a diversified financial sector undergoing rapid expansion, both in terms of strong
growth of existing financial services firms and new entities entering the market. The sector
comprises commercial banks, insurance companies, non-banking financial companies, co-
operatives, pension funds, mutual funds and other smaller financial entities. The banking
regulator has allowed new entities such as payments banks to be created recently thereby
adding to the types of entities operating in the sector. However, the financial sector in India is
predominantly a banking sector with commercial banks accounting for more than 64 per cent
of the total assets held by the financial system.

The Government of India has introduced several reforms to liberalise, regulate and enhance
this industry. The Government and Reserve Bank of India (RBI) have taken various measures
to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs).
These measures include launching Credit Guarantee Fund Scheme for Micro and Small
Enterprises, issuing guideline to banks regarding collateral requirements and setting up a
Micro Units Development and Refinance Agency (MUDRA). With a combined push by both
government and private sector, India is undoubtedly one of the world's most vibrant capital
markets. In 2017,a new portal named 'Udyami Mitra' has been launched by the Small
Industries Development Bank of India (SIDBI) with the aim of improving credit availability
to Micro, Small and Medium Enterprises' (MSMEs) in the country. India has scored a perfect
10 in protecting shareholders' rights on the back of reforms implemented by Securities and
Exchange Board of India (SEBI).

Volatility in the financial markets has resulted in financial institutions struggling to maintain
their growth and profitability. Alongside, the global economic slowdown has taken a toll on
the Indian economy, pressurising margins as well as the very sustainability of financial
service companies. These dynamics call for the need to establish robust business models and
ensure quality management.

The sector is now at a point of inflection undergoing multiple regulatory and reporting
changes. One of the biggest challenges is the move to Basel III, which includes strengthening

22
bank capital requirements and adopting new regulatory requirements on liquidity and
leverage.

Basel III, together with the broader regulatory change agenda, is set to redraw the banking
landscape. It will have a profound impact on profitability and force banks to transform their
business models. Another key transformation in the financial services industry is the
transition to IFRS. The landscape of financial reporting will be transformed with the adoption
of IFRS, ultimately leading to an impact on business decisions.

Brief Overview

Indian financial services industry has been through the toughest of the times and yet stands
strong and robust among the world economies. Having a deep impact of the far-reaching
changes in the Indian economy since liberalization, the new face of this industry is evolving
in a strong, transparent and resilient system.

Over the last few years, financial markets have witnessed a significant broadening and
deepening of service baskets with the introduction of several new instruments and products in
banking, insurance and capital markets space. The sector was opened up to new private
players including foreign companies who embraced international best practices and modern
technology to offer a more sophisticated range of financial services to corporate, retail and
institutional customers. Financial sector regulators too have been visionaries to ensure that
new regulations and guidelines are in tandem with global norms. These developments have
given a robust boost to the development and modernisation of the financial services sector in
India.

Insurance Sector

Indian life insurance sector collected new business premiums worth Rs 11,742.7 crore (US$
1.92 billion) for April-May 2013, according to data from the Insurance Regulatory and
Development Authority (IRDA). Life insurers collected Rs 1, 07, 010.7 crore (US$ 17.47
billion) worth of new premiums for the financial year ended March 31, 2013.

Meanwhile, the general insurance industry grew by 19.6 per cent in April-May period of
FY14, wherein the non-life insurers collected premium worth Rs 13,552.46 crore (US$ 2.21
billion).

23
Banking Services

According to the Reserve Bank of India (RBI)'s 'Quarterly Statistics on Deposits and Credit
of Scheduled Commercial Banks', March 2013, Nationalised Banks accounted for 52.4 per
cent of the aggregate deposits, while the State Bank of India (SBI) and its Associates
accounted for 22 per cent. The share of New Private Sector Banks, Old Private Sector Banks,
Foreign Banks, and Regional Rural Banks in aggregate deposits was 13.6 per cent, 5.1 per
cent, 4 per cent and 2.9 per cent, respectively.

Nationalised Banks accounted for the highest share of 51 per cent in gross bank credit
followed by State Bank of India and its Associates (22.7 per cent) and New Private Sector
Banks (14 per cent). Foreign Banks, Old Private Sector Banks and Regional Rural Banks had
shares of around 4.9 per cent, 5 per cent and 2.5 per cent, respectively.

Banks' credit (loan) growth increased to 18 per cent for the fortnight ended September 6,
2013, while deposits grew by 13.37 per cent showed the data by RBI.

India's foreign exchange reserves increased to US$ 277.73 billion as of October 4, 2013.

Mutual Funds Industry in India

India's asset management companies (AMCs) have witnessed growth of 0.7 per cent in
August 2013 wherein their average assets under management (AUM) stood at Rs 7.66 lakh
crore (US$ 125.10 billion).

Private Equity, Mergers & Acquisitions in India

Private equity (PE) and venture capital (VC) firms remained bullish about India's consumer
goods and services sector. PE and VC investments increased by more than 46 per cent in the
first half of FY14, with consumer companies in retail, e-commerce, consumer packaged
goods and quick service restaurants raising US$ 609.39 million through 51 deals.

Meanwhile, Indian merger and acquisition (M&A) space witnessed substantial levels of deal
activity in the first nine months of 2013. There happened 377 deals amounting to US$ 23.9
billion, according to a survey by tax advisory firm Grant Thornton.

24
Foreign Institutional Investors (FIIs) in India

Investments in Indian markets (equity, debt and derivatives) through participatory notes (P-
Notes) increased to US$ 23.74 billion by the end of July 2013, according to the data released
by Securities and Exchange Board of India (SEBI).

P-Notes allow high net-worth individuals (HNI), hedge funds and other foreign institutions to
invest in Indian markets through registered FIIs.

The FIIs investments through P-Notes registered a growth of 11.45 per cent in July 2013 as
compared to 10.93 per cent in June 2013.

Overseas investors infused more than US$ 2 billion in the Indian stock market in the month
of September 2013. Since the beginning of 2013, they have pumped a net US$ 13.7 billion in
equities.

Moreover, given the higher yields offered by Government and corporate debt, the FIIs have
been aggressively buying bonds since the beginning of 2013. The debt market attracted a net
inflow of about Rs 25,000 crore (US$ 4.08 billion) in January-May 2013.

As of October 4, the number of registered FIIs in the country stood at 1, 744 and the total
number of sub-accounts at 6, 358.

Financial Services in India: Recent Developments

Bangalore-based online retailer Flipkart has raised US$ 200 million from its existing
investors including South African technology company Naspers Group and private equity
(PE) firms Accel Partners and Tiger Global. The investors have already placed investments to
the tune of US$ 181 million in the Indian e-commerce company and this fifth round of
funding has marked the single-largest round of investment infusion.

The funds would be used to build technology and will help the company strengthen its supply
chain and human resource base.

Private lender HDFC Bank is planning to launch 500 mini branches, to be handled by one to
three people, across India by the end of FY14. The bank has added about 219 mini branches
pan-India since 2012.

25
The basic motive behind such a initiative by the bank is to take the formal banking
experience to people in unbanked and under-banked areas. A mini branch, manned by one,
two or three persons, offers the entire range of products and services including savings and
current accounts, fixed deposits, recurring deposits, credit card, instant debit card and also
ATM facility. Products such as two wheeler loan, tractor loan, commercial vehicle loan,
agricultural and commodities loan among others are also offered.

Market Size

The Mutual Fund (MF) industry in India has seen rapid growth in Assets Under Management
(AUM). Total AUM of the industry stood at Rs 24.03 trillion (US$ 342.01 billion) between
April-November 2018. At the same time the number of Mutual fund (MF) equity portfolios
reached a high of 74.6 million as of June 2018.

Another crucial component of India’s financial industry is the insurance industry. The
insurance industry has been expanding at a fast pace. The total first year premium of life
insurance companies reached Rs 193,866.23 crore (US$ 30.10 billion) during FY18.

Along with the secondary market, the market for Initial Public Offers (IPOs) has also
witnessed rapid expansion. The total amount of Initial Public Offerings (IPO) increased to
US$ 1.2 billion raised from 37 between April – June 2018.

Over the past few years India has witnessed a huge increase in Mergers and Acquisition
(M&A) activity. In H12018, 74 deals of acquisition took place in financial sector. The total
value of such transactions was US$ 4.166 billion. *

Furthermore, India’s leading bourse Bombay Stock Exchange (BSE) will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in the country through
a new distribution exchange platform.

Investments/Developments

Investments by Foreign Portfolio Investors (FPIs) in Indian capital markets have reached Rs
6,310 crore (US$ 899.12 million) up to November 22, 2018.

As of October 2018, the Financial Inclusion Lab has selected 11 fintech innovators with an
investment of US$ 9.5 million promoted by the IIM-Ahmedabad's Bharat Inclusion Initiative

26
(BII) along with JP Morgan, Michael and Susan Dell Foundation, and the Bill and Melinda
Gates Foundation.

The private equity and venture capital (PE/VC) investments reached US$ 25.20 billion
between January to October 2018.*

Government Initiatives

In December, 2018, Securities and Exchange Board of India (SEBI) proposed direct overseas
listing of Indian companies and other regulatory changes.

Bombay Stock Exchange (BSE) introduced weekly futures and options contracts on Sensex
50 index from October 26, 2018.

In September 2018, SEBI asked for recommendations to strengthen rules which will enhance
the overall governance standards for issuers, intermediaries or infrastructure providers in the
financial market.

The Government of India launched India Post Payments Bank (IPPB), to provide every
district with one branch which will help increase rural penetration. As of August 2018, two
branches out of 650 branches are already operational.

Road Ahead

India is today one of the most vibrant global economies, on the back of robust banking and
insurance sectors. The relaxation of foreign investment rules has received a positive response
from the insurance sector, with many companies announcing plans to increase their stakes in
joint ventures with Indian companies. Over the coming quarters there could be a series of
joint venture deals between global insurance giants and local players.

The Association of Mutual Funds in India (AMFI) is targeting nearly five fold growth in
assets under management (AUM) to Rs 95 lakh crore (US$ 1.47 trillion) and a more than
three times growth in investor accounts to 130 million by 2025.

India's mobile wallet industry is estimated to grow at a Compound Annual Growth Rate
(CAGR) of 150 per cent to reach US$ 4.4 billion by 2022 while mobile wallet transactions to
touch Rs 32 trillion (USD $ 492.6 billion) by 2022.

27
Reports:

The country’s financial services sector consists of the capital markets, insurance sector and
non-banking financial companies (NBFCs). India’s gross national savings (GDS) as a
percentage of Gross Domestic Product (GDP) stood at 30 per cent in 2017. The total amount
of Initial Public Offerings increased to Rs 84,357 crore (US$ 13,089 million) by the end of
FY18. The total number of Initial Public Offerings (IPO) reached 128 and amounted to US$
5.24 billion between January-August 2018.@ In FY17, individual wealth in India expanded
to Rs 344 lakh crore (US$ 5,337.47 billion) from Rs 310 lakh crore (US$ 4,620.66 billion) in
FY16.

The asset management industry in India is among the fastest growing in the world. In
September 2018, corporate investors Assets Under Management AUM stood at US$ 127.33
billion, while HNWIs and retail investors reached US$ 99.28 billion and US$ 80.46 billion,
respectively. In the Asia-Pacific, India is among the top five countries in terms of HNWIs.

Bombay Stock Exchange (BSE) and National Stock Exchange of India (NSE) attained
permission from the Securities and Exchange Board of India (SEBI), to launch commodity
derivatives trading from October 1, 2018.

During April-November 2018, equity mutual funds have registered a record net inflow of Rs
754.46 billion (US$ 10.75 billion).Total equity funding's of microfinance sector grew at the
rate of 39.88 to Rs 96.31 billion (Rs 4.49 billion) in 2017-18 from Rs 68.85 billion (US$ 1.03
billion) in 2016-17.^The public deposit of NBFCs increased from US$ 293.78 million in
FY09 to Rs 319.05 billion (US$ 4.95 billion) in FY18, registering a compound annual growth
rate (CAGR) of 36.86 per cent.

In November 2018, Bombay Stock Exchange (BSE) has enabled offering live status of
applications filed by listed companies on its online portal and also introduced weekly futures
and options contracts on Sensex 50 index from October 26, 2018. The Government of India is
planning to launch a global exchange traded fund (ETF) in FY20 to raise long term
investments from overseas pension funds.

The Government of India has taken various steps to deepen the reforms in the capital
markets, including simplification of the Initial Public Offer (IPO) process which allows
qualified foreign investors (QFIs) to access the Indian bond markets.

28
Financial services in India

History and trends

The financial services sector in India, which accounts for 6 percent of the nation’s GDP, is
growing rapidly. Although the sector consists of commercial banks, development finance
institutions, nonbanking financial companies, insurance companies, cooperatives, mutual
funds, and the new “payment banks,” it is dominated by banks, which holds over 60 percent
share.

The Reserve Bank of India (RBI) is the apex bank of the country, controlling all activities in
the financial sector. Commercial banks include public sector and private sector banks and are
under the regulatory supervision of the RBI. Development finance institutions include
industrial and agriculture banks.

Non-banking finance companies (NBFC) provide loans, purchase stocks and debentures, and
offer leasing, hire purchase, and insurance services.

Insurance companies function in both public and private sectors and are controlled by the
Insurance Regulatory and Development Authority (IRDA).

India also has a vibrant capital market with stocks exchanges controlled by the Securities and
Exchange Board of India (SEBI).

According to “India in Business,” a website of the Union Government, India’s banking sector
assets were worth $1.8 trillion in the 2014-15 financial year.

According to a report by KPMG-CII, India’s banking sector is on the way to becoming the
fifth largest in the world by 2020. The country’s life insurance sector is the biggest in the
world, and the market size is expected to touch about $400 billion by 2020.

The assets of the mutual fund industry are worth $190 billion. The pension corpus fund is
projected to record $1 trillion by 2025. Reforms to put the financial services industry and the
economy on the fast track include measures to make finance available to medium, small, and
micro industries.

29
India once had a heavily government-dominated financial services industry, and most
services were provided by nationalised banks. Financial sector reforms were initiated in 1991
with the aim of accelerating economic growth.

In the following years, industry and service sectors were opened up for foreign direct
investment. The reforms ended the dominance of the public sector and reduced direct
government control on industrial investments.

Financial sector reforms in India have improved resource mobilisations and allocation. The
liberalisation of interest rates and the easing of cash reserve norms have helped make funds
available to various sectors.

However, prudential norms have been tightened and transparency and regulation increased to
avoid a systemic collapse that other countries have suffered.

Types of financial services-List and overview

Brief profiles of some of the services offered by the financial services sector are given below.

Accounting

Accounting is the process of measuring the financial parameters of a company and presenting
them to investors and managers of the company for making investment decisions and
evolving management strategies.

Brokerage

A firm that functions as an agent for the purchase of stocks or other financial securities is
known as a brokerage. Full-service brokerage firms study the market and advise their clients
on which securities to buy. Portfolio and pension fund managers are among their clients.

Consumer finance

The grant of loans or other credit lines to consumers is called consumer finance, and includes
auto loans and credit cards.

30
Credit cards

Credit cards are instruments that help the cardholder to make payments for goods or services
without using cash. The bank issuing a credit card offers the cardholder a line of credit on
which an interest is charged.

Foreign exchange

Foreign exchange is the conversion of one currency into another by individuals or

corporations for completing transnational deals. It is the biggest segment of the financial
market, and its daily turnover runs into trillions of dollars.

Hedge funds

Hedge funds are private limited investment partnerships that use a large initial investment.
They have low liquidity, and funds usually have a lock-up period of at least one year. Hedge
funds are flexible and help investors spread their risk through their diverse investment
opportunities.

Insurance

Insurance is a risk management tool that an individual or company uses to transfer risk of
financial loss to an insurance company in return for a one-time or periodic premium.

Investment banking

An investment bank enables corporations to raise capital and assists them in issuing stocks.
Investment banks underwrite new debts and equity securities for companies. They provide
their clients guidance in mergers and acquisitions.

Private banking

Private banking is the set of speciality financial services offered by banks to high-net-worth
individuals who make very large investments.

Private equity

Private equity is a method by which an investor takes control of a significant portion of a

company’s stock in the hope of maximising his or her returns. A typical method of operation

31
of a private equity fund is to take control of a company and use its returns to repay
themselves.

Retail banking

Retail banking services are offered to individuals rather than to organisations. Retail banking
helps people open savings accounts, take personal and housing loans, make deposits, and use
credit/debit and ATM cards.

Venture capital

Venture capital is the initial seed money provided by an investor to the holder of a new,
potentially financially rewarding business idea for a share in the returns of the start-up
business. Venture capital companies make investments from a long-term perspective. Venture
capital funds are a big boon for start-ups that do not have access to financial markets.

Wealth management

Wealth management (or asset management) is a strategy to help the affluent maximise returns
from their investments by alerting them to investment opportunities and helping them choose
appropriate financial products.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities, those
dealing in them found in the stock market as the only outlet for their activities. They were
anxious to join the trade and their number was swelled by numerous others. Many new
associations were constituted for the purpose and Stock Exchanges in all parts of the country
were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940)
and Hyderabad Stock Exchange Limited (1944) were incorporated.

32
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and the
Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.

Stock market:
A stock market, equity market or share market is the aggregation of buyers and sellers (a
loose network of economic transactions, not a physical facility or discrete entity) of stocks
(also called shares), which represent ownership claims on businesses; these may include
securities listed on a public stock exchange, as well as stock that is only traded privately.
Examples of the latter include shares of private companies which are sold to investors
through equity crowd funding platforms. Stock exchanges list shares of common equity as
well as other security types, e.g. corporate bonds and convertible bonds.

Size of the market

Stocks are categorized in various ways. One way is by the country where the company is
domiciled. For example, Nestlé and Novartis are domiciled in Switzerland, so they may be
considered as part of the Swiss stock market, although their stock may also be traded on
exchanges in other countries, for example, as American depository receipts (ADRs) on U.S.
stock markets.

As of 2017, the size of the world stock market (total market capitalization) was about
US$79.225 trillion. By country, the largest market was the United States (about 34%),
followed by Japan (about 6%) and the United Kingdom (about 6%). These numbers
increased in 2013.

As of 2015, there are a total of 60 stock exchanges in the world with a total market
capitalization of $69 trillion. Of these, there are 16 exchanges with a market capitalization of
$1 trillion or more, and they account for 87% of global market capitalization. Apart from the
Australian Securities Exchange, these 16 exchanges are based in one of three continents:
North America, Europe and Asia.

The BSE and NSE

Most of the trading in the Indian stock market takes place on its two stock exchanges: the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been
in existence since 1875. The NSE, on the other hand, was founded in 1992 and started
33
trading in 1994. However, both exchanges follow the same trading mechanism, trading
hours, settlement process, etc. At the last count, the BSE had about 4,700 listed firms,
whereas the rival NSE had about 1,200. Out of all the listed firms on the BSE, only about
500 firms constitute more than 90% of its market capitalization; the rest of the crowd
consists of highly illiquid shares.

Almost all the significant firms of India are listed on both the exchanges. NSE enjoys a
dominant share in spot trading, with about 70% of the market share, as of 2009, and almost a
complete monopoly in derivatives trading, with about a 98% share in this market, also as of
2009. Both exchanges compete for the order flow that leads to reduced costs, market
efficiency and innovation. The presence of arbitrageurs keeps the prices on the two stock
exchanges within a very tight range.

34
 COMPANY PROFILE

About HDFC securities

An Institution’s institution - HDFC securities Limited subsidiary of HDFC Bank, is one of

India’s premier broking houses offering Retail and Institutional broking businesses. Rated
AAA by Crisil and A1+ by ICRA (Highest Rating), HDFC securities has been voted the
Largest E-brokerage house (2011) by BSE (IPF)-Dun & Bradstreet. It has also received the
Best e-brokerage house award (runner-up) 2010 from Outlook Money. A top online Broking
portal (www.hdfcsec.com) blending Web 2.0 and customer centric technologies, with ability
for clients to Personalise, Manage, Customise and Share.

Benefits::

 Seamless Transactions: A integrated 4:1 investment account enabling seamless

movement of funds and shares, thereby giving clients dual ability to "Save" and "
Invest" with ease, convenience, security, speed and promptness.

 Multiple trading platforms: Transact with utmost convenience using the choicest of
platforms - Internet, Mobile, LITS (Low bandwidth site), Branches and Call N trade
centre.

 Powerful Tools: Based on Web 2.0 and Ajax based technology, the portal offers the
ability to Personalise, Manage, Customise and Share. Ingenious tools like Advanced
Portfolio Tracker, Watchlists, Stock Alerts, Calculators, Stock Screeners, Interactive
charting, Technical Analysis etc and much more, are a popular draw with our
discerning clients.

 Trusted Research: Insightful research assistance & technical views facilitates one’s
ability to take an informed trading decision. Independent Retail Research team
provides a host of reports that a client could avail of in his/her course of transactions.

 Safety and Security: HDFC securities offer the highest level of security with 128-bit
encryption technology in transactions.

 We are one of the leading stock broking companies in India and a subsidiary of
HDFC Bank- a renowned private sector bank.

35
  As a stock broking company, we have completed 15 years of operation serving a
diverse customer base of retail and institutional investors.

 There are millions of reasons why you can choose our services and here are a few of
them:

Your Interest is Our Priority:-

Your financial needs and interests are our priority. We simplify investing for you and provide
360-degree view on financial planning that suit your future goals and needs.

One Stop Shop for Your Investments :-

We offer a suite of products and services across various asset classes such as equity, gold,
debt and real estate. Be it stocks, derivatives, mutual fund, fixed deposits, NCDs, insurance,
bonds, currency derivatives or PMS, we have a product that suits each of your investment
needs.

Multiple Platforms & Seamless Trading:-

You can trade with us via online, mobile, telephone or any of our branches. These multiple
platforms make your trading experience highly convenient and hassle-free.

You can even place an order for IPO / NCD applications though your trading account online
or through our Customer Care. Similarly, there is no need to issue cheques or delivery
instructions.

Through our 4-in-1 Advantage account, you can seamlessly move funds and securities within
savings, demat and trading account. Our web portal is based on Web 2.0 technology and our
state-of-the art technology enables seamless trading experience on both the exchanges BSE
and NSE. Our mobile trading application is compatible to all smart phones such as smart
phones such as Android and iPhone. Once you activate mobile trading on your smart phone,
you can place order in Equities & Derivatives and get Stock Quotes on the move. You can
even create Multiple Personalized Market watch and track the stocks and other asset classes
such as gold, bonds etc the way you want.

36
Timely and Relevant Information:-

We offer the right news and views that impacts your money. Our views are backed by
extensive research. We believe in empowering you with accurate and unbiased research so
that you make an informed investment decision.

Tracking your Portfolio :-

Just investing money is not enough, you have to monitor your portfolio to ensure you money
works as hard as you to build a robust financial portfolio. You can use our portfolio tracker
to monitor your entire financial portfolio, which encompasses various asset classes. You can
also make a watchlist of stocks and enrol for SMS alerts, which will help you track the
markets closer to make a timely investment decision.

Transparency :-

We empower you to take the right decisions and handle your own portfolio. Backed by our
trusted pedigree, it is our constant endeavour to provide services in a transparent manner. We
believe in offering high quality investment services in a cost effective manner to achieve your
financial goals.

Our Background :-

We are a subsidiary of HDFC Bank – a renowned private sector bank of India. With a decade
of experience in trading and a rating of A1+1, we have a proven pedigree in the financial
services industry.

Our Reach :-

We cater to your investment needs through our 260 plus branches and growing. If you are
pressed for time, you can even get your investment and service relate queries answered
through our Customer Care.

REGISTERED OFFICE / CORPORATE OFFICE

HDFC Securities Limited
Office Floor 8, "I THINK" Bldg,
Jolly Board Campus,
Kanjurmarg (East),

37
Mumbai - 400042. India.
Tel : 022 - 30753400
Fax : 022 -30753435

We are a company of diverse, talented people with a passion for pursuing excellence in all
that we do.

To deliver the greatest results for our clients and our stakeholders we remain dedicated to
staying at the forefront of business and technology trends.

Our values are grounded in strong ethics, transparency, and delivering excellence through
simplicity. Clients trust us, and we generally form long lasting relationships that make us
integral contributors to them. We believe in keeping things simple, giving highest value to
ethics.

We are always looking for new entrants to the business world to energize, inspire and
rediscover ourselves, while yearning to work with old hands looking to make their mark with
us.

We are humbled by your interest in a career with us, and offer you a journey which will
enliven in you the passion to know more, do more and achieve more.

“Success brings more success.”

We abound in energy and have people who are brilliant at what they do and always wanting
to learn more. We offer you the scope to be successful each day. Each day you may find
yourself amidst challenges and opportunities, which will bring excitement, achievement and
satisfaction in your job.

We do not believe in labels. We believe diversity is essential for building a wholesome work
environment. We really look forward to working with simple and honest individuals, who are
committed to becoming successful. We want you to be yourself and find prospects to extend
and realize your potential.

38
 CHAPTER-IV

DATA ANALYSIS

&

INTERPRETATION

39
 DATA ANALYSIS AND INTERPRETATION

HDFC SECURITIES

Open-Ended Equity Growth Scheme:

A diversified aggressive equity scheme that has a flexibility to invest across market
capitalization and sectors. The investment strategy is to make strategic use of debt and
money market securities upto 35% with flexibility for large exposure in select sectors.

Sector Allocation:

15.21%
18.07% Consumer Non Durables
Pharmaceuticals
Collateral Borrowing & Lending obligation
4.31% 10.75% Banks
Industrial Capital Goods
4.74%
Cement

4.99% Industrial Products

10.16%
Auto
5.01% Software
Auto Ancilliaries
7.13% 9.83%
9.80% Rest

Interpretation:

From the above in 100% of sector allocation consumer Non-durables 15.21%,

pharmaceuticals 10.75%, collateral borrowing & lending obligation 10.16% Banks 9.83%,
Industrial capital goods 9.80%, Cement 7.13%, Industrial Products 5.01%, Auto 4.99%,
Software 4.74%, Auto Ancilliaries 4.31%, Rest 18.07% are allotted for this scheme.

40
Performance of the Scheme:

Period Returns % Benchmark Returns %

S&PCNX500

1 year 76.6 53.8

Since Allotment 73.9 58.4

( 9th Sept,2018)

90
80

70

60
Returns %
50

40 Benchmark Returns %
S&PCNX500
30

20

10

0
1 year Since Allotment ( 9th
Sept,2004)

HDFC CONTRA

Open-Ended Equity Growth Scheme:

A diversified equity scheme that invest in fundamentally strong companies which are
currently under-valued due to temporary/non recurring reasons, thus following the
Contrarians style of investing. The investment Strategy is to have 65%-100% in Equity and
equity related securities, 0% -35% in Debt & Money market securities.

41
Sector Allocation:

Debt Instruments
16.27%
Consumer Non-Durables
27.85%
Software
Ferrous Metals
12.04% Fertilisers
Banks
3.34% Industrial Capital Goods
8.26% Chemicals
3.77%
Pharmaceuticals
4.35%
7.11% Pesticides
4.51% 6.96% Rest
5.54%

Interpretation:

From the above, In 100% of sector allocation debt Instruments – 16.27%, Consumer non-
durables-12.04%, Software-8.26%, Ferrous metals-7.11%, Fertilisers-6.96%, Banks-5.54%,
Industrial Capital goods – 4.51%, chemicals -4.35%, Pharmaceuticals-3.77%, Pesticides -
3.34%, Rest-27.85% are allotted for this scheme.

42
Performance of the Scheme:

Period Returns % Benchmark Returns %

S&PCNX500

Since Allotment 10.1 12.2

( 29th July,2020)

HDFC Contra NAV Rs.10.8930 ( Growth option )

14
12
10
8
Since Allotment
6
( 29th July,2020)
4
2
0
Returns % Benchmark Returns %
S&PCNX500

43
HDFC GLOBAL INDIA

Open-Ended Equity Growth Scheme:

A diversified equity scheme which aims at capturing the growth potential of globally
competitive Indian companies. The scheme follows a bottom up approach to stock selection
with focus on Indian companies with a clear global / export strategy for incremental growth.
The investment strategy is to have a portfolio diversified across sectors.

Sector Allocations:

Software

Pharmaceuticals

13.59% 12.30% Consumerable non

durables
Industrial Products

3.73%
9.62% Textiles cotton
3.88%
Auto
4.20%
8.69% Pesticides
6.18%
6.46% Ferrous metals
6.32%

Auto anciviaries

Rest

Interpretation:

From the above, in 100% of sector allocation Industrial capital Goods – 25.03%, Software
12.30%, Pharmaceuticals 9.62%, Consumer non durables 8.69%, Industrial products 6.46%,
textiles cotton 6.32%, auto 6.18%, Pesticides 4.20%, Ferrous metals 3.88%, auto anciviaries
3.73%, rest 13.59% are allotted for this scheme.

44
Performance of the Scheme:

Period Returns % Benchmark Returns %

S&PCNX500

1 year 56.9 54.6

Since Allotment 42.6 28.3

( Jan 30,2019)

HDFC Global India NAV- Rs.18.083 ( Growth Option )

60

50

40
Returns %
30

20 Benchmark Returns %
S&PCNX500
10

0
1 year Since ( Jan
Allotment 30,2019)

45
HDFC MNC

Open – Ended Equity Growth Scheme

A scheme diversified across sectors, that invests in Multinational companies having business
in India. The scheme follows a bottom –up approach to stock selection and the investment
strategy is to make aggressive allocation across select sectors.

Sector Allocation:

Pharmaceuticals

3.97% Industrial Products

3.45%
3.78% consumer Non Durables
23.91%
3.95%
Industrial Capital Goods
5.06%
Pesticides
6.02%
Auto Ancilliaries
9.69% 15.76% Collateral Borrowing &
Lending obligations
10.81% Software
13.60%
Chemicals

Trading

Rest
Interpretation:

From the above, in 100% of sector allocation pharmaceuticals-23.91%, Industrial Products -

15.76%, Consumer non durables -13.60%, Industrial Capital Goods -10.81%, Pesticides -
9.96%, Auto Ancilliaries-6.02%, Collateral Borrowing & lending obligations -5.06%,
Software -3.95%, Chemicals-3.78%, Trading-3.45%, Rest-3.97% are allotted for this scheme
.

46
Performance of the Scheme:

Period Returns % Benchmark Returns %

BSE Sensex S&PCNX Nifty

1 year 54.0 54.6 49.0

3 year 51.5 42.9 39.6

5 year 22.0 16.1 15.4

Since allotment 19.2 11.7 11.5

(Apr-04-2019)

HDFC MNC NAV : Rs. 20.521

60
.

50

40

Returns %
30 Benchmark Returns % BSE Sensex
Benchmark Returns % S&PCNX Nifty

20

10

0
1 year 3 year 5 year Since allotment (Apr-04-2004)

47
HDFC 30

Open – Ended Equity

Growth Scheme:

A large Cap diversified scheme, which invests in companies with a medium to long-term
view. The scheme follows a bottom – up approach to stock selection. The investment strategy
is to take balanced exposure cross sectors while maintaining less than 30% exposure to mid-
cap stocks.

Industrial Capital Goods

15.94%
19.68% consumer Non Durables
Software
Banks
4.14% 13.51% Media & Entertainment
4.18% Telecom -services
Futures
4.30%
Chemicals
5.34% 12.16% Cement
Pharmaceuticals
6.63%
7.04% 7.08% Rest

Interpretation:

From the above, in 100% of sector allocation Industrial Capital Goods- 15.94%, Consumer
non durables – 13.51%, Soft ware – 12.16%, Banks – 7.08%, Media & entertainment –
7.04%, Telecom – Services – 6.63%, Futures – 5.34%, Chemicals – 4.3%, Cement – 4.18%,
Pharmaceuticals – 4.14%, Rest – 19.68% are allotted for this scheme.

48
Performance of the Scheme:

Period Returns % Benchmark Returns %

BSE Sensex S&PCNX Nifty

1 year 69.2 54.6 49.0

3 year 61.3 42.9 49.6

5 year 25.3 16.1 15.4

Since allotment 30.3 16.7 17.5

(Dec-29, 2019)

HDFC 30 Nav :Rs. 26.020 (Div. option)

70
60
50
40 Returns %
30
20 Benchmark Returns %
BSE Sensex
10
Benchmark Returns %
0 S&PCNX Nifty

49
HDFC MID - CAP

Open – Ended Equity Growth Scheme

A scheme that invests predominantly in madcap companies. Which are expected to be

tomorrow’s large cap companies. The Scheme follows a bottom up approach to stock
selection. The investment strategy is to have 65%-95% investments in midcap companies,
upto 30% in large cap/small cap companies, 5%-35% in debt and money market securities
with a portfolio diversified across sectors.

Sector Allocation:

Industrial Capital Goods

20.81% 19.70% Media & Entertainment
Consumer Non Durables
Auto Ancilliaries
3.18% Industrial Products
3.99% 11.35% Banks
Ferrous Metals
4.30%
Pharmaceuticals
4.99% Cement
11.07%
5.41% Construction
9.04% Rest
5.80%

Interpretation:

From the above, in 100% of sector allocation Industrial Capital Goods – 19.70%, Media &
Entertainment – 11.35%, Consumer non Durables – 11.07%, Auto Ancillaries – 9.40%,
Industrial Products – 5.80%, Banks – 5.41%, Ferrous Metals – 4.99%, Pharmaceuticals –
4.30%, Cement – 3.99%, Construction – 3.18%, Rest – 20.81% are allotted the this scheme.

50
Performance of the Scheme:

Period Returns % Bench mark Returns %

CNX Nifty Junior

Since Allotment 40.2 22.3

(Feb 24, 2018)

HDFC Mid cap Nav : Rs. 13.2180 (Growth option)

45
40
35
30
25
Since Allotment
20
(Feb 24, 2018)
15
10
5
0
Returns % Bench mark Returns
% CNX Nifty Junior

51
HDFC ELSS

Open – Ended Equity Linked Savings Scheme

A diversified equity scheme that invests in equity and equity related securities and enable
investors to avail the income tax rebate, as permitted form time to time. The investment
strategy is to have 80 – 100% in equity portion and 0.20% in non equity portion.

Sector Allocation:

Consumer Non Durables

14.40%
Industrial Capital Goods
27.30%
Media & Entertainment
Construction
10.50%
Auto Ancillaries
Debt Instruments
7.40% Finance
4.30%
Banks
5.00% Non - Ferrous Metals
7.20%
5.10% Software
6.70%
5.80% 6.30% Rest

Interpretation:

From the above, in 100% of sector allocation Consumer Non Durables – 14.4%, Industrial
Capital Goods – 10.5%, Media & Entertainment – 7.4%, Construction – 7.2%, Auto
Ancillaries – 6.7%, Debt Instruments – 6.3%, Finance – 5.8%, Banks – 5.1%, Non – Ferrous
Metals – 5.0%, Software – 4.3%, Rest – 27.3%, are allotted for this scheme.

52
Performance of the Scheme:

Period Returns % Bench mark Returns % S

& P CNX 500

Since Allotment 4.5 9.0

(Nov 23, 2018)

HDFC & LSS Nav : Rs. 10.4530 (Growth option).

9
8
7
6
5 Since Allotment
4
(Nov 23, 2018)
3
2
1
0
Returns % Bench mark Returns %
S & P CNX 500

53
Open – Ended Equity Growth Scheme

A Sector scheme, investing only in IT sector companies. The scheme follows a bottom up
approach to stock selection. The investment strategy is to invest with medium to long term
view on companies.

Sector Allocation:

2.30%
1.80%
1.80% -0.10%
Software

Debt Instruments

Money Market instruments

Reverse Repo & Term

Deposits
Net Current Liabilities

94.20%

Interpretation:

From the above, in 100% of sector allocation Software – 94.2%, Debt Instruments – 1.8%,
Money Market Instruments – 1.8%, Reverse Repo & Term Deposits – 2.3%, Net current
Liabilities – (-0.1%) are allotted for this scheme.

54
Performance of the Scheme:

Period Returns % Bench mark Returns % B

S E IT

1 Year 40.9 45.4

3 Year 32.8 30.6

5 Year 7.4 7.5

Since Allotment -4.0 -4.6

(April 04, 2019)

HDFC Nav : Rs. 7.9180

50
45
40
35
30
25
Returns %
20
15
10 Bench mark Returns % B S
5 E IT
0
-5

55
HDFC EQUITY FOF

Open – Ended Equity Fund of Funds Scheme

A multi manager FOF scheme that invests 90 – 100% in diversified equity schemes and rest
in liquid schemes. The scheme invests across multiple fund houses which invests 65% - 75%
of their portfolio in diversified large cap schemes and 15%-25% in diversified aggressive
equity schemes.

Sector Allocation:

Kotak 30 Growth
1.70%
0.01% HDFC Equity Fund -
7.90% Growth
24.50% Franklin India Blue chip
8.20% Fnd - Growth
Prudential ICICI power
8.30% Plan - Growth
Prudential ICICI
dynamic Plan - Growth
HDFC core & satellite
16.60% fund - growth
16.40%
Franklin India Prima
fund - growth
16.50%
Kotak Liquid Institutional
premium - growth
Net current Liabilities

Interpretation:

From the above, in 100% of sector allocation– 24.5%, HDFC equity fund – growth – 16.6%,
Franklin India blue chip fund – growth-16.5%, Prudential ICICI power plan – growth –
16.4%, Prudential ICICI dynamic plan – growth – 8.3%, HDFC core & satellite fund –
growth – 8.2%, Franklin India prima fund – growth – 7.9%, HDFC SECURITIES liquid
Institutional Premium – growth – 0.01%, Net current liabilities – 1.7% are allotted for this
scheme.

56
Performance of the Scheme:

Period Returns % Bench mark Returns % S

& P CNX Nifty

1 Year 45.3 37.7

Since Allotment 58.0 48.1

(Aug 09, 2018)

HDFC equity fof Nav : Rs. 18.903 (Growth option).

60

50

40
Returns %
30

20 Bench mark Returns % S &

P CNX Nifty
10

0
1 Year Since (Aug
Allotment 09, 2018)

57
HDFC BALANCE

Open – Ended Balanced Scheme:

A scheme, investing in equity, debt and money market instruments. The investment strategy
is to have 50%-70% in equity portion and 30%-50% in non equity portion.

Sector Allocation:

18.90% 18.30%
Debt instruments
Money market instruments
Consumer non durables
Industrial capital goods
4.30% Media & entertainment
Pharmaceuticals
12.30%
4.30% Non-Ferrous metals
Fertilisers
Chemicals
4.80%
Ferrous Metals
Rest
4.80%
11.20%
5.20%
5.30% 10.00%

Interpretation:

From the above, in 100% of sector allocation debt instruments – 18.3%, Money market
instruments – 12.3%, Consumer Non durables – 11.2%, Industrial Capital Goods – 10.0%,
Media & Entertainment- 5.3%, Pharmaceuticals – 5.2%, Non- Ferrous Metals – 4.8%,
Fertilisers – 4.8%, Chemicals – 4.3%, Ferrous Metals-4.3%, Rest-18.9% are allotted for this
scheme performance of the scheme.

58
Performance of the Scheme:

Period Returns % Bench mark Returns %

CRISIL Balanced Fund
Index

1 year 44.8 23.9

3 year 42.8 24.1

5 year 25.9 0

Since allotment 21.1 0

(Nov 25, 2018)

HDFC Balance NAV : Rs.21.797

45
40
35
30
25 Returns %
20
15
10 Bench mark Returns %
5 CRISIL Balanced Fund
0 Index
1 year 3 year 5 year Since
allotment
(Nov
25, 2018)

59
CHAPTER-V

FINDINGS

SUGGESTIONS

CONCLUSION

60
 FINDINGS

Through the analysis of my study, these are the findings of various schemes of Mutual funds;
1. HDFC Opportunities is an open-ended equity growth scheme, it has the flexibility of
investing in up coming sectors. If we take the performance of this scheme although it has
breached the bench mark index by 21.85% for one year.
2. HDFC Contra is a diversified equity growth scheme, by the peformance of this scheme we
can say that it is not even up to comfort level of returns. In this fund debt investments were
given priority thus foregoing equity related investment. This has happened the results badly.
3. HDFC Global India is a open-ended equity growth scheme mainly investes in globally
competitive Indian companies. The performance of his fund is quite good, with its returns
56.9% in one year allocation.
4. HDFC MNC is a open-ended equity growth scheme it is a scheme who will invest in
MNC’S, if we see the performance graph it is not performed well. Since allotment returns are
very low. The poor performance can be attributed to the higher allocation for
pharmaceuticals in which most Indian companies dominating the MNC.
5. HDFC 30 is a open-ended equity growth scheme is a large cap diversified scheme whose
investment mostly on large caps for medium and long term. They followed the strategy of
70-30. It has yielded almost double the return than BSE Sensex and Nifty.
6. HDFC ELSS is a open-ended equity linked savings scheme, this scheme is mainly meant for
to avail income tax rebate. The investment strategy is 80-100%.
7. This is open-ended equity growth scheme called HDFC TECH the investors in this scheme
only invest in IT sector, investment strategy between 90-100%.
8. Through my survey I observed HDFC Equity FOF is a multi manager FOF scheme. In this
scheme the investment is not invested in securities or stock. It is directly invested in other
schemes of mutual funds. The performance of this scheme is good.

61
 SUGGESTIONS
1. By adopting more flexible methods the overall performance will be more advisable.
2. The schemes have conservative allocation than it should be more dynamic.
3. HDFC Global India can be made more productive if the software allocation is more.
4. HDFC Contra should fallow aggressive strategy to get desired results.
5. HDFC Large Cap can be more attractive if the large cap mid cap ratio is 60 to 40 than 70-
30.
6. HDFC MNC scheme can be improved if the investment switches over to telecom,
industrial capital goods sector.
7. In HDFC TECH, if we made 60% on IT sector and 40% in money market instruments the
performance of schemes will give more returns than before.
8. I feel that the evergreen industry of this decade is software industry; if we made right share
allocation we will get good returns.

62
 CONCLUSION

1. HDFC Dynamic FOF is a closed multi managers FOF scheme with a maturity period of 3
years, mainly this scheme allocates assets across the diversified large cap schemes and
liquidity schemes in a specific proportion. The performance of the scheme breached bench
mark return by 9%.
2. HDFC Income Plus is a open-ended income with investment strategy of 80% to 100% in debt
and money market instruments. The performance of the scheme is very good with its returns
@ 11.14%.
3. An increased allocation of government securities may be advisable as allocation to gilt
portfolio helps in benefiting from additional liquidity.
4. HDFC should understand that in the period of market uncertainty it should emphasize the
benefits of maintaining a diversified portfolio.

63
 BIBLIOGRAPHY

BOOKS:

1. Financial Management Written by Prasanna Chandra 9th Edition in the year of 2015
Published by Mcgraw Higher Education.
2. Management Accounting written by R.K.Sharma & Shashi K.Gupta I st Edition in the
year of 2014 published by Kalyani Publishers.
3. Management Accounting Written by S.N.Maheshwary 6th edition in the year of 2018
published by vikas publications.
4. Financial Management Written by Khan and Jain 7th edition in the year of 2017
published by McGraw Hill Education
5. Research Methodology Written by K.R.Kothari 1st edition in the year of 2018 published
by New Age International Publishers.

WEBSITES:

1. www.sebi.gov.in
2. www.HDFC SECURITIESsecurities.com
3. www.HDFC SECURITIESmutualfunds.com
4. www.mutualfunds.com

NEWSPAPER:

The Econo

mics Times

64