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A SUMMER TRAINING REPORT ON

COMPARATIVE ANALYSIS OF MUTUAL FUNDS

AT HDFC BANK LTD.


IN PARTIAL FULFILLMENT FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION SESSION 2005-07

SUBMITTED TO KURUKSHETRA UNIVERSITY, KURUKSHETRA


UNDER THE GUIDANCE OF MR. SANJAY VIJ LECTURER MBA DEPARTMENT SUBMITTED BY MS. JASPREET KAUR ROLL NO. 4725 UNIVERSITY ROLL NO.

SWAMI DEVI DYAL INSTITUTE OF ENGINEERING AND TECHNOLOGY, BARWALA (PANCHKULA)

ACKNOWLEDGEMENT
It is a great privilege for me to work with HDFC Bank Ltd., Karnal. I convey my sincere thanks to Mr. Vinay Sharma, the branch manager who accepted me a trainee in their esteemed organization and gave me the opportunity to develop this project. I even thanks to my college for helping and giving guidance throughout. I am also thankful to all my colleague members who continuously helped and provided with some valuable information during the training period.

PREFACE
This project the comparative analysis of mutual funds can serve as useful information in the field of banking. It contains the concepts of mutual funds schemes of mutual funds, its analysis and interpretation and introduction to HDFC Bank Ltd. Maximum can have been taken to present the project in a lucid, simple and under stable language.

CONTENTS Title
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INTRODUCTION OF HDFC BANK 1 1. MUTUAL FUNDS: AN OVERVIEW. 2. LITERATURE REVIEW. 3. REASERCH METHODOLOGY 4. OBJECTIVES OF THE STUDY 5. MUTUAL FUND SCHEMES 6. ANALYSIS AND INTERPRETATIONS. 7. SUGGESTIONS 8. CONCLUSION. 9. LIMITATIONS OF THE SURVEY 10. APPENDIX AN APPRAISAL OF MUTUAL FUNDS.. 11. BIBLIOGRAPHY

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ABOUT HDFC BANK LTD.


The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in-principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBIs liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of HDFC Bank Limited, with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. PROMOTER HDFC is Indias premier housing fianc company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain a market leader in mortgages. It outstanding loan portfolio covers well over a million dwelling loans to different units. 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. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the India environment. BUSSINESS FOCUS HDFC Banks mission is to be a World-Class Indian Bank. The Banks aim is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services in the segments that the bank operates in and to healthy growth in profitability, consistent with the banks risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity and regulatory compliance. HDFC Banks business philosophy is based on four core value: Operational Excellence, Customer Focus, Product Leadership and People. CAPITAL STRUCTURE The authorized capital of HDFC Bank is Rs. 450 crore (Rs. 45 Billion). The paid-up capital is Rs. 282 crore (Rs. 28.2 billion). The HDFC group HOLDS 24.2% of the banks equity while about 13.1% of the equity is held by the depository in respect of the banks issue American Depository Shares (ADS/ADR Issue). The Indian Private Equity Fund Mauritius (IPEF) and Indocean Financial Holding Ltd. Mauritius (IFHL) (both funds advised by J P Morgan Partners, formerly Chase Capital Partners) together -1-

hold about 5.5 % of the banks equity. Roughly 27.5% of the equity is held by FLL, NRIs/OCBs while the balance is widely held by about 214,000 shareholders. The shares are listed on The Stock Exchange, Mumbai and the National Stock Exchange. The banks American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol HDB. TIMES BANK AMALGAMATION In the milestone transaction in the Indian banking industry, Times Bank Limited (another new private bank promoted by Bennett, Coleman & Co. /Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve bank of India, shareholders of Tomes Bank received one share of HDFC Bank for every 5.75 shares of Tomes bank. The amalgamation added significant value to HDFC Bank in terms of increased branch network, expended geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative channels. DISTRIBUTION NETWORK HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 331 branches spread over 170 cities across the country. All the branches are linked on a real-time basis. Customers in 90 locations are also serviced through Phone Banking. The Banks expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base. The bank also has a network of over 900 networked ATMs across these cities. Moreover, HDFC Banks ATM network can be accessed by all domestic and international Visa/Master Card, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

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MANAGEMENT Mr. Deepak Parekh is present chairman of HDFC Bank. The Managing Director Mr. Aditya Puri has been a professional banker for over 25 years and before joining HDFC Bank in 1994 was heading Citibanks operation in Malaysia. The Banks Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and aboard hear carious businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength. TECHNOLOGY HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the banks branches have connectivity which enables the bank to offer speedy funds transfer facilities to its customers. Multibranch across is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally to build the infrastructure for a world class bank. In terms of software, the Corporate Banking business is supported by Flex cube, while the Retail Banking business by Fin ware, both from I-Flex Solutions Ltd. The systems are open, scan able and web enables. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web enabling its core business. In each of its business, The Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

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BUSINESS PROFILE HDFC Bank caters to a wide range of banking services covering both commercial and investment banking on the wholesale side and transactional/ branch banking on the retail side. The Bank has three key business areas:a) Wholesale Banking Services The Banks target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, emerging mid-sized corporate. For these corporate, the bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management etc. The bank is also a leading provider of structured solutions which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery/ service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals companies from the domestic business houses and prime Public Sector Companies. It is recognized as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks. b) Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services giving the customers a one stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery like ATMs, Phone banking, Net banking and Mobile banking. RATING HDFC Bank has its deposit programmes rated by two rating agencies Credit Analysis & Research Limited (CARE) and Fitch Rating India Pvt. Ltd. The banks fixed deposit programme has been rated CARE AAA (FD) [Triple A] by CARE, which represents instruments considered being of the best quality, carrying negligible investment risk. CARE has also rated the Banks certificate of Deposit (CD) -4-

programmePR 1+ which represents superior capacity for repayment of short terms promissory obligations. Fitch Rating India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the AAA (ind.) rating to the Banks deposit programme, with the outlook on the rating as stable. This rating indicates highest credit quality where protection factors are very high. HDFC Bank also has its long-term unsecured, subordinated (Tier-II) Bonds Rated by CARE and Fitch Rating Pvt. Ltd. CARE has assigned the rating of CARE AAA for the Tier II Bonds while Fitch Rated India Pvt. Ltd. has assigned the rating AAA (ind) with the outlook on the rating as stable. In each case referred to above, the rating awarded were the highest assigned by the rating agency for those instruments. CORPORATE GOVENANCE RTAING The bank was one of the first four companies which subjected itself to a corporate Governance and Value Creation (GVC) rating by the rating agency. The credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entitys current performance and an exception on its balanced value creation and corporate governance practices in future. The bank has been assigned a CRISIL GVC Level 1 rating which indicates that the banks capability with respect to wealth for all its stakeholders while adopting sound corporate governance practices is the highest. PRODUCT RANGE Saving, fixed Deposits, current and Demat Accounts Saving Account: Apart from the usual facilities you get a free ATM Card, Inter branch banking, Net banking, Bill pay, Phone banking, Debit Card and Mobile Banking, among others. HDFC Bank Preferred: A preferential saving Account where you are assigned a dedicated Relationship Manger, who is your one point contact. You also get privilege like fee waivers, enhanced ATM withdrawal limit, priority locker allotment, free Demat Account and lower interest rates on loans, to name a few. -5-

Sweep-In Account: A fixed deposit linked to your saving account. So, even if your Saving account runs a bit short, you can issue a cheque (or use your ATM Card). The money is automatically swept in from your fixed deposit into your saving account. Super Saver Account: Gives you an overdraft facility up to 75% of your Fixed Deposit. In an emergency, you can access your funds while your Fixed Deposit continues to earn high interest. HDFC Bank PLUS: Apart from Regular and Premium Current accounts we also have HDFC Bank Plus, a Current Account and then some more. You can transfer up to 50 Lakh per month at no extra charge, between the four metros. You can also avail of cheque clearing between the four metros, get cash delivery/pickup up to Rs. 25000/- , home delivery of Demand Drafts, at par cheques, outstation cheques, clearance facility etc. Demat Account: Conduct hassle free transactions on your shares. You can also access your Demat Account on the Internet. INNOVATIVE SERVICES FOR YOUR CONVENIENCE Phone Banking: 24 hours automated banking services with 39 Phone banking numbers available. ATM: 24 Hours banking Apart from routine transactions, you can also pay your utility bills and transfer funds at any of our ATMs across the country all year round. Inter city/Inter branch Banking: Access your account from any of your 31 branches in 170 cities. -6-

Net banking: Access your bank account from anywhere in the world, at anytime your own convenience. You can also view your Demat Account through Net Banking. International Debit Card: An ATM card can shop with all over the country and in over 140 countries with. You can spend in any currency and pay in Rupees.

Mobile Banking: Access your account on your mobile phone screen at no airtime cost. Use SMS technology to conduct your banking transactions from your cell phone. Bill Pay: Pay your telephone, electricity and mobile phone bills through our ATMs, Internet, Phone or mobile phone. No more standing in long queues or writing cheques. LOANS FOR EVERY NEED: Now, our loans come to you in easy-to-pay monthly installments and are available with easy documentation and quick delivery. Personal Loan: Take a loan of up to 3 Lakh for a wedding, education, purchase of a computer or an existing holiday. New Car Loans and Used Car Loans: Finance up to 90 % of the Cost of a car new or used and the loans come to you with easy documentation and speedy processing at attractive interest rates.

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Loans against Shares: Get an overdraft up to Rs. 10 Lakh at an attractive interest rate against shares up to 50% of the market value of your shares. Incase of Demat Shares you can get a loans against Shares of up to 65% of the market value of your shares, till Rs. 20 Lakh. Two Wheeler & Consumer Loans: To help you buy the best durables for your. Current Account: Get a personalized cheque book, monthly account statement, inter branch banking and much more. Mutual Fund Apart from a wide choice of Mutual Funds to suit your individual needs, you benefit from expert advice on choosing the right funds based on in-depth market analysis. International Credit Card: Get an option of Silver, Gold or Health plus Credit card accepted world wise from a world class bank. If you have outstanding balance on your other credit card, you can transfer that balance to this card at a lower interest rate. NRI Services: A comprehensive range, backed by unmatched features and world class service, ensures NRIs all the banking support they need. Forex Facilities: Avail of foreign currency, travelers cheques, foreign exchange, demand drafts to meet your travel needs.

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Insurance*: HDFC Bank now brings you Life Insurance and Pension Solutions like Risk Cover Scheme, saving Scheme, Childrens Plan and Personal Plan from HDFC Standard Life Insurance Co. Ltd. *Insurance is the subject matter of solicitation.

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AWARDS AND ACHIEVEMENTS- BANKING SERVICES


HDFC Bank began operations in1995 with a simple mission to be a World class India Bank. We realized that only a single minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal. It is extremely gratifying that our efforts towards providing customer convenience have been recognized both nationally and internationally. In 2004 HDFC Bank was named Best Overall Local/Domestic Bank-India in the Corporate Cash Management Poll conducted by the Hong Kong based Asia money Magazine. In 2003 Forbes Global again named us in its ranking of Best Under a Billion, 200 Best Small Companies for 2003. Hong Kong based Finance Asia Magazine rated us Best Domestic Commercial Bank in India in 1999, 2000, 2001 respectively and Best Local Bank in India in 2002 and 2003. HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple A Country Awards 2003. Leading Indian business Magazine Today in a survey rated us Best Private Sector Bank in India in1999 and Best Bank in India in 2003. NASSCOM and economictimes.com have named us the Best IT User in Banking at the IT Users Awards 2003. Leading Personal Finance magazine in India Outlook Money named HDFC Bank the Best Bank in the Private Sector for the year 2003. Leading business newspaper The Financial Express named HDFC Bank the Best New Private Bank 2003 in the FE-Ernst & Young Best Banks Survey 2003. -10-

There have been some other proud moments as well:

Landon based Euro Money Magazine gave us the award for Best Bank India in 1999, Best Domestic Bank in India in 2000 and Best Bank in India in 2001 and 2002. Asia Money Magazine has named us Best Commercial Bank in India 2002 The economic Times have conferred on us The Economic Times Awards for Corporate Excellence as the Emerging Company of the Year 2000-01. For our use of information technology we have been recognized as a Computer world Honors Laureate and awarded the 21st Century Achievement Award in 2002 for Finance, Insurance & Real Estate category by Computerworld, Inc., USA. Our technology initiative has been included as a case study in their online global archives.

The Economics Times has conferred on us The Economics Times Awards for Corporate Excellence as the Emerging Company of the Year 2000-01.

Leading India business magazine Business India named us Indias Best Bank in 2000. In the year 2000 leading financial magazine Forbes Global named us in its list of The 300 Best Small Companies in the world and as one of the 20 for 2001 best small companies in the world.

We are aware that these awards are more milestones in the continuing, never ending journey of providing excellent services to our customers. We are confident, however, that with your feedback and support, we will able to maintain and improve our services.

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FINANCIAL INFORMATION
NEWS RELEASE HDFC BANK LTD. FINANCIAL RESULTS (INDIAN GAAP) FOR THE PERIOD APRIL-JUNE2004 The board of Directors of HDFC Bank Ltd. approved the banks account for the quarter ended june30, 2004 at its meeting on Wednesday July 14th 2004. The accounts have been subjected to limited review by the banks statutory auditors. FINANCIAL RESULTS: For the quarter ended June 30, 2004 the bank has earned total income of Rs. 810.6 crore as against Rs. 709.3 crore in the corresponding quarter ended year June 30, 2003. Net revenues (net interest income plus other income) were Rs. 506.8 crore for the quarter ended June 30, 2004 an increase of 23.7% over Rs.409.9 crore for the corresponding quarter of the previous year. Interest earned (net of loan origination costs) increased from Rs.577.1 crore in the corresponding quarter ended June 30, 2003 to Rs. 702.6 crore. Net interest income (interest earned less interest expended) for the quarter ended June 30, 2004 increased by 43.6% to 398.8 crore, with strong average asset growth of 33.9% and core net interest margin remaining healthy at just over3.8%. Other income for the quarter ended June 30, 2004 was Rs.108.0 crore consisting principally of fees and commissions of Rs. 144.0 crore, foreign exchange & derivatives revenues of Rs.27.9 crore and profit/(loss) on sale/revaluation of investments of (Rs. 65.2) crore as against Rs.60.8 crore, Rs. 28.8 crore and Rs. 42.3 crore respectively for the quarter ended June 30, 2003. Loss on revaluation of investment is primarily in respect of government (SLR) securities in the Available for sale (AFS) category, in particular, on account of the pull to par effect of a declining term to maturity as the security approach their redemption dates. Operating expanses for the quarter at Rs. 230.8 crore were 45.5% of net revenues and 28.5% of total income. Provisions and contingencies for the quarter were Rs. 69.0 crore, primarily comprising general & specific loan loss provisions of Rs. 40.0 crore and amortization of premia (for investment in the Held to Maturity category) of Rs. 28.8 crore. Profit before tax -12-

was Rs. 207.0 crore for the quarter ended June 30, 2004 an increase of 31.2% over the corresponding quarter in 2003. After providing Rs. 67.0 crore for taxation the bank earned a net profit of Rs. 140.0 crore a 30.5% increase over the quarter ended June 30, 2003. Balance sheet growth was also healthy, coming from both the retail and corporate segments. As on June 30, 2004 total deposits were Rs. 31406.00 crore, an increase of 34.6% over Rs.23340.00 crore as of June 30, 2003. Saving account deposits, which are core to the banks strategy of building stable, low cost source of funds and reflect the strength of the retail liability franchise, were at Rs. 8,729.00 crore an increase of 66.7% over June 30, 2003. The banks core customer assets (including advances, corporate debentures, CPs etc.) increased from Rs. 14,113.00 crore as on June 30, 2003 to Rs. 19543.00 crore as on June 30, 2004 a growth of 38.5%. Retail loans (net of Rs. 740.00 crore loans securities out) grew 82.4 on a yearon year basis to Rs. 7871.00 crore and new form 41% of gross advances as against 35% of gross advances as on June 30, 2003. In line with its entry into mortgages business, during the quarter, the bank made its first investment of Rs. 101.00 crore in mortgage backed securities (MBS) in respect and serviced by HDFC. BUSINESS UPDATES: During the current financial year so far, the branch network has been expended up 330 outlets in 169 cities from 241 outlets in 129 cities in June 2003. as of June 2004, the number of debit cards issued by the bank crossed 202 million while credit cards issued touched 640,000. The bank further consolidated its position in the merchant-acquiring segment of the cards business with the number of POS terminals deployed at over 30,000. Portfolio quality as of June30, 2004 remained healthy with net nonperforming assets at 0.2% of advances. General loan loss provisions were about 0.9% of standard advances as against the regulatory requirement of 0.25%. Capital Adequacy Ratio (CAR) was 11.0% against the regulatory minimum of 9%. Tier I CAR was at 7.7%. Note: (i) (ii) (iii) Rs. = Indian Rupees 1 crore = 10 million All figures and ratio are in accordance with Indian GAAP.

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Certain statement in this release which contain words or phrases such as continue to , remain, should, etc., and similar expressions or variation of these expressions or those concerning our future prospects are forward looking statements. Actual results may differ materially from those suggested by the forward-looking statement due to a number of risks or uncertainties associated with the expectations. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, future levels of non-performing loans, our growth and expansion, the adequacy of our allowances for investment and credit losses technological changes, volatility in investment income, our exposure to market risks as well as other risks detailed in the reports filed with the United State Securities and Exchange Commission. The bank may from time to time make additional written and oral forward looking statements, including statements contained in the banks filing with the Securities and Exchange Commission and our reports to shareholders. The bank does not undertake to update any forward looking statements that may be made from time to time by or on behalf of the bank, to reflect events or circumstances after the date thereof.

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BOARD OF DIRECTORS
Mr. Deepak Parekh (Chairman) Mr. Aditya Puri (Managing Director) Mr. Keki Mistry Dr. (Mrs.) Amla Samanta Mr. Venkat Rao Gadwal Mr. Anil Ahuja Mr. Vineet Jain Mr. Ranjan Kappoor Mr. Bobby Parikh Mrs. Renu Karnal Vice President (Legal) & co. Secretary Mr. Sanjay Dongre AUDITOR PC Honsolia & Co. (Chartered Accountant) REGISTERED OFFICE HDFC Bank House Senapati Bapat Marg Loveer Parel Mumbai- 400013 Telephone no. 56521000 Fax no. 24960739 Web site www.hdfcbank.com -15-

MUTUAL FUNDS: AN OVERVIEW


A Mutual Fund is a trust that pools the saving of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures of money market instruments. The income earned thorough these investments and the capital appreciation realized by the scheme are shared by its units holders in proportion to the number of units owned by them (prorate). Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. Anybody with an investible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. The flow chart below describes broadly the working of Mutual Fund:

Investors Passed back to Pool their money with

Returns

Fund Manager Invest in

Generates Securities WORKING OF MUTUAL FUND

A Mutual Fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and -16information driven. Price changes in these assets are driven by global events occurring in fare way places. A typical individual is unlikely to have the knowledge, skills, inclination and time to keep track of events, understand their implications and act

speedily. An individual also finds it difficult to keep track of ownership of his assets, investment, brokerage dues and bank transactions etc. A Mutual Fund is the answer to all these situations. It appoints professionally qualified and experienced staff tat manages each of these functions on full times basis. The large pool of money collected in the fund allows it to hire such at a very low cost to each investor. In effect, the mutual fund vehicle exploits economics of scale in all these areas research, investment and transaction processing. Mutual Funds gained popularity only after the second world war. Globally, there are thousands of firms offering ten thousand of mutual funds with different investment objectives. Today, Mutual funds collectively manage almost as much as or more money as compared to banks. A draft offer document is to be prepared at the time of launching the fund typically, it pre species the investment objectives or the fund, the risk associated , the cost involved in the process and the broad rules for entry in to and exit from the fund and other areas of operation. In India, as in countries, these sponsors need approval from a regulator, SEBI (Security and Exchange Board of India) in our Case SEBI looks at track records of the sponsor and its financial strength in granting approval to the fund for commencing operations. A sponsor then hires an asset management company to invest the fund according to the investment objective. It also hires another entity to be the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund. In the India context, the sponsors promote the Assets Management Company also, in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the Asset management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset management Ltd. which has floated different mutual funds schemes an also acts as an manager for the funds collected under the schemes.

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STRUCTURE OF THE INDIAS MUTUAL FUND INDUSTRY


The India mutual fund industry is dominated by the Unit trust of India which has a total corpus of Rs. 700 bn. collected from more than 20 million investors. Unit Trust of India (UTI) is the largest Mutual fund Organization. UTI manages funds over Rs. 58,221 crore as on 30.06.2001 and over 41.80 million investors account under 85 schemes. UTI was set up in 1964 by an act of parliament and commenced its operation from July 1964, with a view to encouraging saving and investment and participation in the income, profit and gain accruing to corporation form the acquisition, holding, management and disposal of securities. UTI is a trust without ownership capital and independent board of trustees. The first scheme was unit scheme 1964. The contributors of initial capital of Rs. 5crore for US64 scheme were RBI, SBI and some foreign banks. Under the provision of the act chairman of the board would be appointed by the government of India. Today it has 54 branches office, 266 representatives and about 67,000 agents. It provides complete range of services to its investors. UTI has set up associate in the field of banking, securities, trading, investor servicing advice and training, meeting investors varying needs under a common umbrella. UTI Bank Ltd. (1994) UTI Securities Exchange Ltd. (1994) UTI Investors Services Ltd. (1993) UTI Institute of Capital Market (1989) UTI Investment Advisory Services (1988) UTI Mutual Fund Growth Schemes

The second largest category of mutual funds are the floated by nationalized bank. Bank asset management floated by Canara Bank and SBI Funds management floated by the State Bank of India are the largest of these. GIC AMC Asset Management Companies floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The aggregate corpus of funds managed by this category of AMCs is about Rs. 150 bn.

-18The third largest categories of mutual fund are the ones floated by the private sector asset and by foreign asset management companies. The largest of these are Prudential ICICI AMC and Birla Sun Life AMC. The aggregate corpus of assets managed by this category of AMCs is in excess of Rs. 250 bn.

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TYPE OF MUTUAL FUNDS


Mutual fund schemes may be classified on the basis of its structure and its investment objectives.

By structure:
Open-ended Funds An open-end is one that is available for subscription all thorough the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at net asset value (NAV) related prices. The key feature of the open-end schemes is liquidity. Closed-ended Funds A closed-end fund has a stipulated maturity period generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investor can invest in the scheme at the time of the initial public issue and thereafter they can by or sell the units of the stock exchanges where they are listed. In order to provide an exit route to the investors, some close-ended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI regulations stipulate that at least one of the two exit routes is provided to the investor. Interval Funds Interval fund combine the features of open-ended and close-end schemes. They are open for sale or redemption during predetermined intervals at NAV related prices.

By Investment Objective:
Growth Funds The aims of growth are to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments holdover the long term. Growth schemes are ideal for investors having a long term out look seeking growth over a period of time.

-20Income Funds The aim of income fund is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate departures and Government securities. Income funds are ideal for capital stability and regular income. Balanced Income The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed securities in the proportion indicated in their offer documents. Ina rising market, the NAV of these schemes may not normally keep pace or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth. Money market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills. Certificates of deposits, commercial paper and inter-bank call money. Returns of these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a mean to park their surplus funds for short periods. Load Fund A load Fund is one that charges a commission for entry or exit. That is each time you buy or sell units in the fund, a commission will be payable. Typically entry or exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history. No-load Fund A No-load fund is one that does not charge a commission for entry or exit. That is no commission is payable on purchase or sale of units in the fund. The advantage of no load fund is that the entire corpus is put to work.

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Other schemes:
Tax Saving Schemes These schemes offer tax rebate to the investors under specific provision of the Indian income tax law as the government offers ax incentives for investment in specified avenues. Investment made inequity Linked saving Schemes (ELSS) and pension schemes are allowed as deduction under section 88 of Income tax Act 1961. The act also provides opportunities to investors to save capital gains U/S 54 EA and 54 EB by investing in Mutual Funds, providing the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special schemes:
Industry Specific schemes Industry Specific schemes invest only n the industries specified in offer document. The investment of these funds is limited to specific industries like Info Tech, HDFC Bank Ltd. etc. Index schemes Index funds attempt to replicate the performance of a particular index such as the BSE sensex or the NSE. Sectoral schemes Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as A group shares or initial public offering.

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BENEFITS OF MUTUAL FUND INVESMENT


Professional management Mutual funds provide the service of experienced and skilled professionals, backed by a dedicated investment research team that analyze the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. Diversification Mutual fund investment in a number of companies across a broad cross section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration Investing in Mutual Fund reduces paper work and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Potential Over a medium to a long term, Mutual Funds have the potential to provide a higher return as they invest in a diversified base of selected securities. Low cost Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity In open end schemes, the investor gets the money back promptly at net asset value related prices from the mutual funds. In closed end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by Mutual fund.
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Transparency You get regular information on the value of your investment in addition to disclosure on the specific investment made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. Flexibility Through features such as regular investment plans, regular withdrawal plans and divided reinvestment plan, you can systematically invest or withdraw funds according to your needs and convenience. Affordability Investors individually may lack sufficient funds to invest in high grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefits of its investment strategy. Choice of Schemes Mutual funds offer a family of schemes to suit your varying needs over a life. Well regulated All mutual funds are registered with SEBI and there function with the provisions of strict regulations designed to protect the investment of investors. The operations of mutual funds are regularly monitored by SEBI.

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NET ASSET VALUE (NAV)


The net asset value of the fund is the commulative market value of the fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV percent in NAV, ignoring the per unit. We also abide by the some convention. Asset value is equal to Sum of market value of shares/debentures + liquid assets/ cash held, if any + dividends/ interest accrued amount due on unpaid assets expenses accrued but not paid. Details on above items For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the principal exchange where the security is traded. For illiquid and unlisted and or thinly traded shares/ debentures, the value has to be estimated. For shares, this could be the book value per shares or an estimated market price if suitable benchmarks are available. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of fixed interest bearing securities moves in a direction opposite to interest rate changes valuation of debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives considerable leeway to the AMC on valuation and some of the AMC are believed to take advantage of this and adopt flexible valuation policies depending on the situation. Interest is payable on debentures/bonds on a periodic basis say every 6 months but with every passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic interest payment with the number of days in each period. Thus accrued interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date. -25-

Usually dividends are proposed at the time of the annual amount general meeting and become due on the record date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate period, it is deemed to be accrued. Expenses including management fees, custody etc. are calculated on a daily basis.

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RECENT TRENDS IN MUTUAL FUND INDUSTRY IN INDIA


Alone HDFC Bank Ltd. with just one scheme is 1964, now competes with as many as odd products and 34 players in the market. In spite of the stiff competition and losing market share. HDFC Bank Ltd. still remains a formidable force to recon with. Last six years have been the most turbulent as well as existing ones for the industry. New players have come in, while others have decided to close shop by either selling off or merging with others. Product innovation is now passed with the game shifted to performance delivery in fund management industry like distributors, registrars and transfer agents, and even the regulators have become more mature and responsible. The industry is also having a profound impact on financial markets. While HDFC Bank Ltd. has always been a dominant player on the bourses as well as the debt markets, the new generation of private funds which have gain substantial mass are now seen flexing their muscles. Fund managers, by their selection criteria for stock have forced corporate governance on the industry. By rewarding honest and transparent management with higher valuation, a system of risk reward has been created where the corporate sector is more transport than before. Funds have shifted focus to the recession free sectors like HDFC Bank Ltd., FMCG and technology sector. Funds performances are improving. Funds collection which averaged at less than Rs. 100 bn. per annum for five year period spanning 1993-98 doubled to Rs. 210 bn. in 1998-99. In the current year mobilizations till now have exceeded Rs. 300 bn. Total collection for the current financial year ending March, 2000 is expected to reach Rs.450 bn. What is particularly noteworthy is that bulk of the mobilization has been by the private sector mutual funds rather public sector mutual funds. Indeed private Mutual Funds saw a net inflow of Rs. 7819.34 crore during the first nine months of the year as against a net flow of Rs. 604.40 crore in the case of public sector funds. Mutual funds are competing with commercial banks in the race fir the investors saving and corporate float money. The power shift towards mutual funds has become obvious. The coming few years will show that the traditional saving avenues are

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losing out in the current scenario. Many investors are realizing that investments in saving accounts are as good as looking up their deposits in a closet. The fund mobilization trend by the mutual funds in the current year indicates that the money is going to mutual funds in a big way. The collection in the first half of the financial year 1999-2000 matches the whole of 1998-99. In India, mutual fund asset are not even 10 % of the bank deposits, but this trend is beginning to change. Recent figures indicates that in the first quarter of the current financial year mutual fund assets went up by 115 % whereas bank deposit rose by only 17 % (Source: Thick tank. The financial Express September, 99). This is forcing a large number of banks to adopt the concept of narrow banking where in the deposit are kept in Gifts and some other assets improve liquidity and reduces risk. The basic fact lies that banks cannot be ignored and they will not close down completely. Their role as intermediaries cannot be ignored. It is just that mutual funds are going to change the way banks do business in future. The most important trend in the mutual fund industry is the aggressive expansion of the foreign owned mutual fund companies and the decline of the companies floated by the nationalized banks and smaller private players. Many nationalized banks got in to the mutual fund business in the early nineties and got off to a good start due to the stock market boom prevailing then. These banks did not really understand the mutual fund business and they just viewed it as another kind of banking activity. Few hired specialized staff and generally choose to transfer staff from the parent organization. The performance of most of the schemes floated by these funds was not good. Some scheme are offered guaranteed returns and their parents organization had out these AMCs by paying large amount of money as the difference between the guarantee and the actual returns. The service level was also very bad. Most of these AMCs by paying large amount of money as the difference between the guaranteed and actual returns. The service levels were also very bad. Most of these AMC share not been able to retain staff, float new schemes etc. and it is doubtful whether, barren a few exceptions, they have serious plans of continuing the activity in the major way. The experience of some of the AMCs floated by private sector Indian companies. Indian companies were also very similar. They quickly realized that the AMC

-28-

business is a business, which makes money in the long term and required deep pocketed support in the intermediate years. Some have solved out to foreign owned companies, some have merged with others and there is general restructuring going on. The foreign owned companies have deep pockets and have come in here with the expectation of long haul. They can be crediting with introducing many new practices such as new product innovation, sharp improvement in service standards and disclosure, usage of technology, broker education and support etc. In fact, they forced the industry to upgrade itself and services levels of organizations like HDFC Bank Ltd. have improved dramatically in the last few years in response to the competition provided by these.

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FUND RANKING
Equity-Diversified Rank 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. Returns 1-yr Reliance Vision 155.2 Franklin Prima Fund73.87 177.1 46.5 HDFC Equity Fund 53.09 126.3 Franklin Bluechip 54.74 120.6 Reliance Growth 77.42 155.7 Templeton Growth (D) 22.49 138.6 Franklin Prima Plus 50.66 107.3 Alliance Equity 58.40 118.7 Tata Pure equity 24.25 140.6 HDFC Top 200 (D) 21.43 134.1 Scheme NAV (Rs.)* 67.07 (%) 5-yr 45.5 ------41.1 40.9 42.5 35.7 37.5 40.0 35.8 30.0 Star Rating ----------------------------------------------------------

*As on 03 march, 2004 5 year returns are compounded annual returns. Ranks based on 5 year risk adjusted returns Equity Sector Rank Technology 1. 2. 3. MNC 1. 2. 3. Birla MNC Fund UTI MNC Kotak MNC Scheme 53.55 18.37 14.66 93.8 80.2 98.3 23.2 17.3 17.3 Tata life SC & TEC Franklin Internet OPP DSP- ML Tecnology.com 18.96 8.81 7.94 120.5 83.8 66.7 25.9 14.2 9.4 Scheme NAV (Rs.)* Return 1-yr (%) 5yr Information

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FMCG 1. 2. 3. Franklin FMCG Fund PRU ICICI FMCG Fund SBI Magnum FMCG Fund 15.20 11.96 10.02 47.4 59.2 79.8 9.7 8.0 7.7

*As on 03 march, 2004 5 year returns are compounded annual returns. Ranks based on 5 year risk adjusted returns Income Funds Rank Scheme 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. PNB Debt Fund Principal Income Alliance Income HDFC Income Fund UTI Bond Fund DSP-ML Bond Fund Templeton GIP Templeton Income Birla Income Plus B HDFC High Interest NAV (Rs.)* 19.63 15.35 22.77 15.58 18.61 22.61 10.71 23.57 27.83 22.94 Returns 1-yr 9.6 8.4 8.3 8.9 6.3 7.9 4.8 8.2 8.1 8.3 (%) 5-yr 17.0 14.1 13.6 14.1 11.7 13.9 8.3 13.5 13.9 14.2 Star Rating --------------------------------------------

*As on 03 march, 2004 5 year returns are compounded annual returns. Ranks based on 5 year risk adjusted returns Gift Funds Rank Scheme 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. Alliance G-Sec Tata G-Sec Fund B Birla Gift Plus Kotak Gift Templeton Govt. Sec HDFC Gift Fund FT Gift fund HDFC Sov Gift LIC G-Sec Fund SBI Magnum Gift NAV (Rs.)* 18.43 21.93 21.93 21.52 22.13 14.62 14.62 15.27 17.38 15.87 Returns 1-Yr 12.5 11.9 12.3 12.0 11.9 15.7 15.7 08.0 07.8 09.1 (%) 5-Yr 17.1 19.2 17.6 16.5 17.5 20.1 20.1 09.9 14.8 13.8 Star Rating ------------------------------------------

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*As on 03 march, 2004 5 year returns are compounded annual returns. Ranks based on 5 year risk adjusted returns Liquid Funds Rank Scheme 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. First India Liquid Can Liquid Reliance Liquid IL&FS Liquid Fund Kotak Liquid JM High Liquidity Templeton Liquid SBI Magnum Insta (Cash) DSP-ML liquidity PRU ICICI Liquid NAV (Rs.)* 11.32 11.45 15.36 11.74 12.63 17.51 15.66 14.19 15.41 15.53 Returns (%) 1-Yr 5.7 5.7 5.5 5.4 5.3 5.3 5.3 5.3 5.3 5.2 Star Rating ---------------------------------------

*As on 3 March, 2004 Ranks based on one year risk adjusted returns Balanced Funds Rank Scheme 01. 02. 03. 04. 05. 06. 07. 08. 09. 10. Principal Child Templeton Pension HDFC Prudence Can Premium Franklin Balanced UTI CCP UTI US 95 JM Balanced Fund Sundaram Balanced UTI ULIP 71 25.02 28.33 46.8 19.59 17.85 15.43 30.47 11.61 16.95 14.28 NAV (Rs.)* 49.9 Returns 1-Yr 24.1 42.2 91.9 36.7 65.9 32.2 60.0 46.1 66.0 49.3 (%) 3-Yr ----19.5 32.5 24.4 24.5 16.6 21.1 31.3 21.9 16.4 -------------------------------------Star Rating

*As on 03 march, 2004 3 year returns are compounded annual returns. Ranks based on 3 year risk adjusted returns

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Monthly Income Plans Rank Scheme 01. 02. 03. 04. 05. 06. 07. 08. Birla MIP PRU ICICI MIP Templeton MIP Alliance MIP FT India MIP Templeton MIP Reliance Medium Term Sun F&C MIP NAV (Rs.)* 15.42 14.45 15.81 20.07 15.86 1026 15.06 13.87 Returns 1-Yr 16.0 14.6 17.3 20.1 18.0 05.8 06.9 06.5 (%) 3-Yr 14.9 12.3 13.5 15.2 15.2 09.7 10.6 10.7 Star Rating ---------------------------------

*As on 03 march, 2004 3 year returns are compounded annual returns. Ranks based on 3 year risk adjusted returns

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LITERATURE REVIEW
Chandra Prassana Managing Investments 1st Edition, 40-43, New Delhi, Tata Mc-Graw Hill, 1998. Mutual Fund is trust that pools the saving of a number of investors who share a common financial goal. Waghmare, Tushar, The Future of Fund Management in India, 91-96, New Delhi, Tata Mc-Graw Hill, 1998. The basic objective of a mutual fund is providing a diversified portfolio so as to reduce the risk in investment at a lower cost. Srivastava, R.M. & Nigam Divya, Management of Indian Financial Institute HDFC Bank Ltd. On edition III, 35-37, New Delhi, Himalaya Publication House, 1996. The Indian mutual fund industry is dominated by the HDFC Bank Ltd. which has a total corpus of. 700 billion collected from more than 20 million investors. Krishnamurthy, March2004. Suresh, Mutual Funds, Portfolio Organizer, 16-20,

Worldwide, good mutual fund companies are known by their AMCs and this fame is directly linked to their superior stock selection skills Adajania, Kayejad E., Best Mutual Funds 2004, Outlook Money, 26-31, March2004. Fund ranking.

-34-

REASERCH METHODOLOGY
Methodology is conceptual structure with in which research is conducted. It constitutes the blue prints for collection, measurement and analysis of data. Research is an academic activity and the term is used in a technical sense. According to CLIFFORD research comprises defining & refining problems, formulating hypothesis, collecting, organizing & evaluating data, making deductions and reaching conclusions and at last carefully testing the conclusion to determine whether it fits the formulating hypothesis or not. RESEARCH DESIGN The methodology adopted to achieve the project objective involved casual and descriptive research method. The information required for fulfilling the objective of the study was collected from various primary and secondary sources. SAMPLING The survey comprised of Judgment Sampling Technique for preferred insurance companies. SAMPLE DESIGN Number of Schemes studied: EQUITY FUNDS LIQUID FUNDS BALANCED EQUITY FUNDS MIP FUNDS GILT FUNDS

SOURCES OF DATA As the study is broadly in descriptive in nature, it requires collections of information both primary and secondary sources. -35-

Primary Data:Primary data needed for the purpose of study are collected through direct communication with respondents. Secondary Data:Secondary data needed for the purpose of study are collected from newspaper, journals, magazines and websites etc. DATA ANALYSIS For data analysis line charts & time series have been used.

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OBJECTIVE OF THE STUDY


Training is a practical & vital necessary because a part from theoretical knowledge, it enables the students to develop & raise their market value and earning power, the major training objectives are as follows:
To know the various product services provided by the bank.

To study all the different mutual funds schemes. To analyse and compare different mutual funds.

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MUTUAL FUNDS SCHEMES

NOTICE
Notice is hereby given that pursuant to SEBI circular no. SEBI/IMD/CIR NO. 8/5611/2004 dated March 19, 2004. I With effect from March 25, 2004, the cut off timings and the Applicable NAV of the schemes of the mutual fund have been revised as under Grindlays Super Saver Income Fund-Investment Plan, Short Term Plan, Medium Term Plan, Grindlays Government Securities Fund-Investment Plan, Short Term Plan, Provident Fund Plan & Grindlays Dynamic Bond Fund i) Purchases including switch ins

A.

In respect of valid applications received upto 3 p.m. by the Mutual Fund alongwith a local cheque or a demand draft payable at par at the place where the application is received, the closing NAV of the day on which application is received shall be applicable. In respect of valid applications received after 3 p.m. by the Mutual Fund alongwith a local cheque or a demand draft payable at par at the place where the application is received, the closing NAV of the next business day shall be applicable. However, in respect of valid applications with outstation cheques/ demand drafts not payable at par at the place where the application is received, closing NAV of the day on which cheque/demand draft is credited shall be applicable.

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ii)

Redemptions including switch outs

In respect of valid applications received upto 3 p.m. by the Mutual Fund, same days closing NAV shall be applicable. In respect of valid applications received after 3 p.m. by the Mutual Fund, the closing NAV of the next business day shall be applicable. In view of the above, the Mutual Fund shall ensure that there is an uniformity in time taken for issuing redemption proceeds to all investors. B) Grindlays Cash Fund & Grindlays Floating Rate Fund i) Purchases including switch ins

In respect of valid applications, closing NAV of the day immediately previous to the day on which funds are available for utilization by the fund shall be applicable. However, in respect of any application received after 1 p.m. by the Mutual Fund and the funds are available for utlisation by the fund on the same day, closing NAV of the same day shall be applied. ii) Redemptions including switch outs

In respect of valid applications received upto 10:00 a.m., by the Mutual Fund, previous days closing NAV shall be applicable. In respect of valid applications received after 10:00 a.m. by the Mutual Fund, same days closing NAV shall be applicable. II Investment pattern and Investment restrictions of GCF & GFRF have been revised to include following applicable requirements: Mark-to-Market component of the fund on a weekly average basis will be less than 10%. For a fixed rate asset, the remaining tenor will be 1 year or less. For a floating rate asset, the interest reset frequency will be 1 year or less.

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For a fixed rate/floating rate asset where the principal is paid in a staggered and/or on amortizing basis (e.g. securitized papers), the average maturity of such an asset will be 1 year or less. For a portfolio using Interest Rate Swaps, a) The composite floating rate asset will have an interest reset frequency up to 1 year. b) For Interest Rate Swaps used to convert a floating rate asset into a fixed rate asset, the fixed leg of the Interest Rate Swap will have remaining tenor upto 1 year.

For Forward Rate Agreements, the summation of the beginning and end dates of the period covered will be 1 year or less. For Interest Rate Futures and Bond Futures, the repricing risk will be 1 year or less.

-40-

CORPORATE

INVESTOR SCHOOL

PRODUCTS

NAV CORNER

DOWNLOADS

MF NEWS

HDFC MF Systematic Investment Plan (SIP) is similar to a Recurring Deposit. Every month an amount you choose is invested in a mutual fund scheme of your choice. Youll be amazed to learn about the many benefits of investing through HDFC MF SIP.

Being disciplined - Its the key to investing success. With the HDFC MF Systematic Investment Plan you commit an amount of your choice (minimum of Rs. 1000 and in multiples of Rs. 100 thereof*) to be invested every month in one of our schemes. Think of each SIP payment as laying a brick. One by one, youll see them transform into a building. Youll see your investments accrue month after month. Its as simple as giving at least 6 postdated monthly cheques to us for a fixed amount in a scheme of your choice. Its the perfect solution for irregular investors.
*Minimum amounts may differ for each Scheme. Please refer to SIP Enrolment Form for details.

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Imagine you want to buy a car a year from now, but you dont know where the down-payment will come from. HDFC MF SIP is a perfect tool for people who have a specific, future financial requirement. By investing an amount of your choice every month, you can plan for and meet financial goals, like funds for a childs education, a marriage in the family or a comfortable postretirement life. The table below illustrates how a little every month can go a long way. Monthly Savings - What Savings Total amount per month invested (for 15 years) (Rs. in Lacs) 5000 9.0 4000 7.2 3000 5.4 2000 3.6 1000 1.8 your savings may generate Rate of return 6.0% 8.0% 10.0% (rupees in lacs, 15 years later)* 14.6 17.4 20.9 11.7 13.9 16.7 8.8 10.4 12.5 5.8 7.0 8.3 2.9 3.5 4.2

*Monthly instalments, compounded monthly, for a 15-year period. Disclaimer: The illustration above is merely indicative in nature and should not be construed as investment advice. It does not in any manner imply or suggest performance of any HDFC Mutual Fund Scheme(s). Please read Risk Factors.

Most investors want to buy stocks when the prices are low and sell them when prices are high. But timing the market is timeconsuming and risky. A more successful investment strategy is to adopt the method called Rupee Cost Averaging. To illustrate this well compare investing the identical amounts through a SIP and in one lump sum. Imagine Suresh invests Rs. 1000 every month in an equity mutual fund scheme starting in January. His friend, Rajesh, invests Rs. 12000 in one lump sum in the same scheme. The following table illustrate how their respective investments would have performed from Jan to Dec:

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Month Jan-04 Feb-04 Mar-04 Apr-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Total

NAV 9.345 9.399 8.123 8.750 8.012 8.925 9.102 8.310 7.568 6.462 6.931 7.600

Sureshs Investment Amount Units 1000 107.0091 1000 106.3943 1000 123.1072 1000 114.2857 1000 124.8128 1000 112.0448 1000 109.8660 1000 120.3369 1000 132.1353 1000 154.7509 1000 144.2793 1000 131.5789 12000 1480.6012

Rajeshs Investment Amount Units 12000 1284.1091

12000

1284.1091

*NAV as on the 10th every month. These are assumed NAVs in a volatile market Disclaimer: The illustration above is merely indicative in nature and should not be construed as investment advice. It does not in any manner imply or suggest performance of any HDFC Mutual Fund Scheme(s). Rupee Cost Averaging neither ensures you profits nor protects you from making a loss in declining markets. Please read Risk Factors.

As seen in the table, by investing through SIP, you end up buying more units when the price is low and fewer units when the price is high. However, over a period of time these market fluctuations are generally averaged. And the average cost of your investment is often reduced.

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At the end of the 12 months, Suresh has more units than Rajesh, even though they invested the same amount. Thats because the average cost of Sureshs units is much lower than that of Rajesh. Rajesh made only one investment and that too when the per-unit price was high. Sureshs average unit price Rajeshs average unit price = Rs. 9.345 = 12000/1480.6012 = Rs. 8.105

It is far better to invest a small amount of money regularly, rather than save up to make one large investment. This is because while you are saving the lump sum, your savings may not earn much interest. With HDFC MF SIP, each amount you invest grows through compounding benefits as well. That is, the interest earned on your investment also earns interest. The following example illustrates this. Imagine Neha is 20 years old when she starts working. Every month she saves and invests Rs. 5,000 till she is 25 years old. The total investment made by her over 5 years is Rs. 3 lakhs.Arjun also starts working when he is 20 years old. But he doesnt invest monthly. He gets a large bonus of Rs. 3 lakhs at 25 and decides to invest the entire amount.

-44Both of them decide not to withdraw these investments till they turn 50. At 50, Nehas Investments have grown to Rs. 46,68,273* whereas Arjuns investments have grown to Rs. 36,17,084*. Nehas small contributions to a SIP and her decision to start investing earlier than Arjun have made her wealthier byover Rs. 10 lakhs.
*Figures based on 10% p.a. interest compounded monthly. Disclaimer: TheThe illustration above is merely indicative in nature and should not be construed as investment advice. It does not in any manner imply or suggest performance of any HDFC Mutual Fund Scheme(s). Please read Risk Factors.

Investing with HDFC MF SIP is easy. Simply give us post-dated cheques for an amount of your choice (minimum of Rs. 1000 and in multiples of Rs. 100 thereof*) and well invest the money every month in a fund of your choice. The plans are completely flexible. You can invest for a minimum of six months, or for as long as you want. You can also decide to invest quarterly and will need to invest for a minimum of two quarters. All you have to do after that is sit back and watch your investments accumulate. Please refer to the SIP Enrolment Form for terms and conditions before enrolment.
*Minimum amounts may differ for each Scheme.

The Proof of the Pudding To illustrate the advantages of SIP Investments, this is how your investments would have grown if you had invested say Rs. 1,000 systematically in the following schemes, on the first Business Day of Every Month over a period of time.
HDFC Growth Fund 10 Since Year Inception SIP 68.00 251.44 47.50 35.95 60.00 5 Year 3 Year SIP SIP HDFC Growth Fund 10 5 Year 3 Since 1 Year Year Year Inception SIP SIP SIP SIP 134.00 471.99 21.08 13.01 120.00 60.00 36.00 12.00 426.63 163.28 83.19 17.30 23.97 41.39 62.83 93.19% 15.01 26.54 40.32 76.61%

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

36.00 12.00

213.76 81.25 17.07 53.55 40.53 61.12 88.57 53.31 89.75

Past Performance may or may not be sustained in the future. Past Performance may or may not be sustained in the future. #SENSEX #S&P CNX500

-45HDFC Top 200 Fund 10 Since Year Inception SIP 115.00 691.26 35.44 23.65 60.00 5 Year 3 Year SIP SIP HDFC Capital Builder Fund 10 5 Year 1 Since 3 Year Year Year Inception SIP SIP SIP SIP 147.00 879.06 26.73 18.78 120.00 60.00 36.00 12.00

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

36.00 12.00

242.56 85.09 17.30 59.38 42.58 65.11 93.09 50.69 80.04

695.44 246.30 91.78 16.94 33.06 60.09 71.80% 86.21 23.28 44.16 51.97 76.61

Past Performance may or may not be sustained in the future. Past Performance may or may not be sustained in the future. #BSE 200 #S&P CNX500 HDFC Long Term Advantage Fund 10 Since Year Inception SIP 64.00 316.09 63.45 38.41 60.00 5 Year 3 Year SIP SIP HDFC TaxSaver SIP Investments Since 5 Year 3 Year 1 Year Inception SIP SIP SIP 12.00 17.82 103.03 76.61

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

36.00 12.00

280.41 90.37 16.27 66.20 41.15 70.42 73.55 53.51 89.75

Total Amount 118.00 60.00 36.00 Invested (Rs.000) Market Value as on Apr 28, 1,592.87 302.29 108.29 06 (Rs.000) Returns (Annualised)* (%) 50.07 69.80 87.02 Benchmark Returns 23.68 44.16 51.97 (Annualised)# (%)

Past Performance may or may not be sustained in the future. #SENSEX HDFC Balanced Fund 10 Since Year Inception SIP 68.00 156.03 29.58 N.A 60.00 5 Year 3 Year SIP SIP

Past Performance may or may not be sustained in the future. #S&P CNX500

HDFC Prudence Fund 10 5 Year 3 1 Since Year Year Year Inception SIP SIP SIP SIP 147.00 980.52 28.31 N.A 120.00 60.00 36.00 12.00 704.02 181.27 69.10 15.12 32.82 46.12 47.60 52.65 N.A N.A 29.48 45.71

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

36.00 12.00

132.06 60.21 15.00 32.30 N.A 36.66 50.46 29.48 45.71

Past Performance may or may not be sustained in the future. Past Performance may or may not be sustained in the future. #CRISIL Balanced Fund Index #CRISIL Balanced Fund Index

-46HDFC Children's Gift Fund - Savings Plan 10 5 Year 3 Year Since Year Inception SIP SIP SIP 62.00 87.44 13.31 N.A 60.00 36.00 12.00 83.57 43.25 12.60 13.26 12.37 N.A 9.60 HDFC Children's Gift Fund - Investment Plan SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%) Since 5 Year 3 Year 1 Year Inception SIP SIP SIP 62.00 133.14 30.12 N.A 60.00 36.00 12.00 14.27 37.72 45.71 SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

126.77 58.38 30.56 N.A 34.28 29.48

29.48 45.71

Past Performance may or may not be sustained in the future. Past Performance may or may not be sustained in the future. #CRISIL Balanced Fund Index #CRISIL Balanced Fund Index HDFC Index Fund - Sensex Plus Plan Since Inception 46.00 115.07 51.82 54.50 10 Year SIP 36.00 75.35 54.73 58.12 5 Year SIP 12.00 16.95 86.28 94.53 HDFC Index Fund - Sensex Plan SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%) Since 5 Year Inception SIP 46.00 106.33 46.94 54.50 36.00 71.59 50.48 58.12 3 Year SIP 12.00 16.92 85.75 94.56

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%)

Past Performance may or may not be sustained in the future. Past Performance may or may not be sustained in the future. #SENSEX (Total Returns Index) #SENSEX (Total Returns Index) HDFC Index Fund - Nifty Plan Since Inception 46.00 102.62 44.77 48.65 10 Year SIP 36.00 68.90 47.36 55.60 5 Year SIP 12.00 16.85 83.12 85.97

SIP Investments Total Amount Invested (Rs.000) Market Value as on Apr 28, 06 (Rs.000) Returns (Annualised)* (%) Benchmark Returns (Annualised)# (%) Past Performance may or may not be sustained in the future. #S&P CNX Nifty (Total Returns Index)

*Load is not taken into consideration and the Returns are of Growth Plan. Investors are advised to refer to the Relative Performance table furnished in our monthly newsletter In touch Mutually also available on our website - www.hdfcfund.com. Past Performance may or may not be sustained in the future. Please refer SIP enrolment form or contact nearest ISC for SIP load structure. Disclaimer: The above investment simulation is for illustrative purposes only and should not be construed as a promise on minimum returns and safeguard of capital. The AMC/Mutual Fund is not guaranteeing or promising or forecasting any returns. SIP does not assure a profit or guarantee protection against a loss in a declining market.

-47HDFC Capital Builder Fund, HDFC Equity Fund and HDFC Tax Saver which are benchmarked to S&P CNX 500 Index and HDFC Index Fund-Nifty Plan which is benchmarked to S&P CNX Nifty Index are not sponsored, endorsed, sold or promoted by India Index Services & Products Limited (IISL). IISL is not responsible for any errors or omissions or the results obtained from the use of such index and in no event shall IISL have any liability to any party for any damages of whatsoever nature (including lost profits) resulted to such party due to purchase or sale or otherwise of such product benchmarked to such index. Risk Factors: All mutual funds and securities investments are subject to market risks and there can be no assurance that the scheme's objectives will be achieved and the NAV of the schemes may go up or down depending upon the factors and forces affecting the securities market. Past performance of the Sponsors / AMC / Mutual Fund / Scheme(s) and their affiliates do not indicate the future performance of the Scheme of the Mutual Fund. There is no assurance or guarantee to unit holders as to the rate of dividend distribution nor that dividends will be paid regularly. Investors in the Scheme are not being offered any guaranteed / assured returns. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities. The NAV will inter-alia be exposed to Price / Interest Rate Risk and Credit Risk. HDFC Growth Fund (an open-ended growth scheme; the primary objective of the scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments), HDFC Equity Fund (an open ended growth scheme; the primary objective of the scheme is to achieve capital appreciation), HDFC Capital Builder Fund (an open ended growth scheme; the primary objective of the scheme is to achieve capital appreciation in the long term), HDFC Index Fund (an open ended index linked scheme; this scheme has 3 plans viz - Nifty Plan the primary objective of this Plan is to generate returns that are commensurate with the performance of the Nifty, subject to tracking error, Sensex Plan the primary objective of this Plan is to generate returns that are commensurate with the performance of the SENSEX, subject to tracking error, and Sensex Plus Plan the primary objective of this Plan is to invest 80 to 90% of the net assets of the Plan in companies whose securities are included in SENSEX and between 10% & 20% of the net assets in companies whose securities are not included in the SENSEX), HDFC Children's Gift Fund (an open ended balanced scheme; the primary objective of both the Plans under the Scheme is to generate long term capital appreciation), HDFC Balanced Fund (an open ended balanced scheme; the primary objective of the Scheme is to generate capital appreciation along with current income from a combined portfolio of equity and equity related and debt and money market instruments), HDFC Prudence Fund (an open ended balanced fund; the primary objective of the scheme is to provide periodic returns and capital appreciation over a long period of time from a judicious mix of equity and debt instruments with an aim to prevent / minimise any capital erosion), HDFC Long Term Advantage Fund (an open ended equity linked savings scheme with a lock in period of 3 years; the primary objective of the Scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in equity and equity related instruments), HDFC Tax Saver (an open ended equity linked savings scheme with a lock in period of 3 years; the primary objective of the scheme is to achieve long term growth of capital), HDFC Top 200 Fund (an open ended growth scheme; the primary objective of the scheme is to generate long term capital appreciation from a portfolio of equity and equity linked instruments primarily drawn from the companies in BSE 200 index) are only the names of the Scheme(s) and do not in any manner indicate either the quality of the Scheme(s), its future prospects and returns. In view of the individual nature of tax consequences, each investor is advised to consult his/her professional tax advisor. Please read the offer document(s) of the respective Scheme(s) before investing.

Statutory Details: HDFC Mutual Fund has been set up as a trust sponsored by Housing Development Finance Corporation Limited and Standard Life Investments Limited (liability restricted to their contribution of Rs. 1 lakh each to the corpus) with HDFC Trustee Company Limited as the Trustee (Trustee under the Indian Trusts Act, 1882) and with HDFC Asset Management Company Limited as the Investment Manager.

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SBI MUTUAL FUND SCHEMES


The investments of these schemes will predominantly be in the stock markets and endeavor will be to provide investors the opportunity to benefit from the higher returns which stock markets can provide. However they are also exposed to the volatility and attendant risks of stock markets and hence should be chosen only by such investors who have high risk taking capacities and are willing to think long term. Equity Funds include diversified Equity Funds, Sectoral Funds and Index Funds. Diversified Equity Funds invest in various stocks across different sectors while Sectoral funds which are specialized Equity Funds restrict their investments only to shares of a particular sector and hence, are riskier than Diversified Equity Funds. Index Funds invest passively only in the stocks of a particular index and the performance of such funds move with the movements of the index.

Magnum Equity Fund Magnum Tax Gain Magnum Index Fund Magnum Sector Funds Umbrella Magnum Multiplier Plus Scheme Magnum Global Fund Magnum Mid Cap Fund Magnum Comma Fund Magnum Multicap BLUE CHIP Fund

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Magnum Equity Fund This actively managed fund offers growth through investment in a portfolio of select blue chip stocks. The main features of the scheme are: A diversified equity fund, focusing on aggressive growth Minimum application of Rs. 1000 Entry Load: Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each installment - 1.00% Ideal for investors who wish to benefit from the growth of the equity markets and are comfortable with the attendant volatility SIP Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be at least 6 months. Magnum Tax Gain What is Magnum Tax Gain Scheme about? Magnum Tax Gain Scheme is an Equity Linked Savings Scheme (ELSS) from SBI Mutual Fund which offers investors tax benefits on an investment upto Rs 1 Lakh under Section 80C of Indian Income Tax Act 1961. The fund was launched in the year 1993 and is one of the top performers in the ELSS category.
Scheme Highlights:

Entry Load Investments below Rs. 5 crores 2.25%, Investments of Rs.5 crores and above NIL -50-

SIP/STP Entry Load - 2.25% Exit Load: NIL SIP: Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP: Minimum amount Rs.1000/- month - 6 months, Rs.3000/ Quarter - 6 months Asset Allocation 80-100% in Equity, partly convertible debentures and fully convertible debentures and bonds & 0 20% in Money market instruments. Minimum Application Amount Rs 500 for purchase & Multiples of Rs 500 for additional purchase. Plans & Options Dividend option with payout and reinvestment facility. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. Why should I invest in Magnum Tax Gain Scheme? Magnum Tax Gain Scheme offers you tax savings upto Rs 33,360 (Calculation based on applicable income slab, tax amount, surcharge & education cess) on an investment of upto Rs 1 Lakh. It also gives you equity market linked returns. Returns of Magnum Tax gain Scheme As on 31 January, 2006 BENCHMARK (BSE 100) 1-Years 3-Years 5-Years Return Since Launch 105.57% 99.60% 32.13% 59.77% 63.65% 29.82% 19.62% 48.36% 48.28% 18.77% 13.55% FUND CATEGORY

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What is the investment strategy of Magnum Tax Gain Scheme? Magnum Tax Gain Scheme follows the bottom up investment strategy. We have also kept the portfolio size limited to about 35 stocks in all. While we believe that India is a growth story, we feel that our strength lies in our ability to identify promising stocks and take them in the portfolio. This strategy has worked in favour of the funds in the last couple of years and we intend to pursue this strategy in future also Awards & Achievements: Magnum Tax Gain Scheme has been ranked CPR 1 by CRISIL which indicates very good performance It has recently bagged 2 gold awards in the 1 year & 3 year category for performance in the ICRA Online Awards. Magnum Tax Gain Scheme has consistently given dividends and the last dividend given was 102% in June 2005. Magnum Index Fund Magnum Index Fund invests only in the 50 stocks that constitute S&P CNX Nifty index in proportion to each stock's weightage in the index. Hence, who the portfolio Manager is or what his style is does not really matter in such funds. Volatility of such schemes will be in synchronization with the index. This investment is ideal for: Corporate, Institutions, Banks HNIs and Retail Investors desirous of investing in a basket of Nifty Index stocks for an investment as low as Rs. 5000/- with liquidity of Open-ended Mutual Fund Entry load: Investments below Rs. 50 Lakhs 1.25% Investments of Rs.50 Lakhs and above NIL SIP/STP - 1.00% Exit Load: Nil SIP /STP- < 12 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - 6 months ,Rs.3000/ Quarter - 6 months Dividend Option Available In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. -52-

Magnum Sector Funds Umbrella Launched in August 1999 Minimum investment of Rs. 2000 per sector Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months.
Magnum Multiplier Plus Scheme

A diversified equity fund, focussing on steady growth Open-ended from April 1998 Minimum application of Rs. 1000 Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. -53-

In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. Magnum Global Fund The Magnum Global Fund Scheme 1994 commenced from 24th August 1994. This scheme was launched as a close-ended scheme redeeming on 30th September 1999. the scheme was converted into an Open-Ended Fund from 1st October 1999. Main features of the scheme are: Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. Magnum MidCap Fund The latest investment option from SBI Mutual Fund enables you to benefit from our expertise in the intricacies of MidCap stocks. So you can leave the hard part of choosing the right stock to grow with and concentrate on enjoying your returns, now and in the long run:

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Open-ended growth shceme Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer anyamount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. Magnum Comma Fund A first of its kind scheme. COMMA is an acronym for Commodities in Oil, Metals, Materials and Agriculture. The objective of the scheme would be to generate opportunities for growth along with possibility of consistent returns by investing predominantly in a portfolio of stocks of companies engaged in the commodity business within the following sectors - Oil& Gas, Metals, Materials & Agriculture and in debt & money market instruments Key Features An open-ended equity scheme investing in stocks of commodity based companies Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00%

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SIP: Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months.

Magnum Multicap SBI Mutual Fund launches Magnum Mutlicap Fund (An open ended Growth Scheme) Objective Scheme objective - To provide investors with opportunities for long-term growth in capital along with the liquidity of an open-ended scheme through an active management of investments in a diversified basket of equity stocks spanning the entire market capitalization spectrum, debt and money market instruments. Fund to invest in large, medium and small cap segments in equity instruments. The fund would invest a minimum of 50 per cent of its equity/equity related instruments in large cap stocks and the balance 50 per cent would be dividend between mid cap and small caps with a provision to invest at least 10 per cent in mid cap stocks. Market Cap Segment Minimum Allocation Maximum Allocation Large Cap 50% 90% Mid Cap 10% 40% Small Cap 0% 10%

-56-

Key Features Launch date 22nd August 2005 Scheme opened for continuous sale and repurchase. Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50%Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months. BLUE CHIP Fund Launch date - 23rd December 2005 NFO open from 23rd December 2005 to 20th January 2006 Scheme reopens for continuous sale and repurchase from 17th February 2006 Minimum investment - Rs. 5000 and in multiples of Rs. 1000 Dividend and Growth options available. Reinvestment and payout facility available Dividends will be completely tax-free. Long term capital gains to be completely taxfree. Short -term capital gains to be taxed at 10% (plus applicable surcharge and cess) Scheme objective: To provide investors with opportunities for long-term growth in capital through an active management of investments in a diversified basket of equity stocks of companies whose market capitalization is atleast equal to or more than the least market capitalized stock of BSE 100 Index. Systematic Investment Plan available during the NFO. Asset allocation pattern -57-

Type of Instrument Normal Allocation (% of Net Assets) Risk Profile Equities and equity related instruments including derivatives 70% - 100% High Debt and Money Market instruments 0% - 30% Medium to Low Entry Load : Investments below Rs. 5 crores 2.25% Investments of Rs.5 crores and above NIL" SIP/STP - 2.25% Exit Load: Investments below Rs.5 crores < 6 months - 1.00% 6 months and < 12 months - 0.50% Investments of Rs.5 crores and above - NIL SIP /STP-< 6 months from the date of investment of each instalment - 1.00% SIP : Minimum amount Rs.500/month - 12 months Rs.1000/month - 6months, Rs.1500/quarter - 12 months STP : Minimum amount Rs.1000/- month - minimum period of 6 months Rs.3000/ Quarter - minimum period of 6 months Inter scheme switches to other equity schemes will not carry an Entry Load. However exit load will be applicable. In respect of STP transactions, an investor would now be permitted to transfer any amount from the switch-out scheme, subject to a minimum transfer of Rs.1000 pm or Rs.3000 per quarter, without any restriction on maintaining the minimum balance requirement as stipulated for the switch out scheme. The minimum period for STP will be atleast 6 months.

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ANALYSIS AND INTERPRETATIONS


TABLE -1 COMPARISON SHOWING EQUITY FUNDS FOR NAV COMPANY HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund VALUE 47.602 10.44 13.93 22.898 10.5755

EQUITY SHARES 10.5755 22.898

HDFC Equity Fund Franklin India Growth Fund 47.602 ING Vysya Equity Fund Kotak 30

13.93

10.44

LIC equity fund

From the above diagram it is clear that HDFC Equity Funds have 47.602, Franklin India Growth have 10.44, ING Vysya Equity Fund have 13.93, Kotak 30 have 22.898 and LIC Equity Fund have 10.5755 amount of share in market out of which HDFC Equity Fund have maximum share in the market for NAV.

-59TABLE -2 COMPARISON SHOWING EQUITY FUNDS FOR (14 DAYS) COMPANY HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund 2.91 2.76 3.65 0.58 1.95 VALUE

EQUITY SHARES

HDFC Equity Fund 2.91 Franklin India Growth Fund ING Vysya Equity Fund

1.95 0.58

3.65

2.76

Kotak 30 LIC equity fund

From the above diagram it is clear that HDFC Equity Funds have 2.91, Franklin India Growth fund have 2.76, ING Vysya Equity Fund have 3.65, Kotak 30 have 0.58 and LIC Equity Fund have 1.95 amount of share in market out of which HDFC Equity Fund dont have maximum share in the market for fourteen days.

-60TABLE -3 COMPARISON SHOWING EQUITY FUNDS FOR (6 MONTHS) COMPANY HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund VALUE -11.56 -7.77 -12.28 -6.40 -12.70

EQUITY SHARES

HDFC Equity Fund -11.56 Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund

-12.7

-6.4 -12.28

-7.77

From the above diagram it is clear that HDFC Equity Funds have -11.56, Franklin India Growth fund have -7.77, ING Vysya Equity Fund have -12.28, Kotak 30 have -6.40 and LIC Equity Fund have -12.70 amount of share in market out of which HDFC Equity Fund dont have maximum share in the market for six months.

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TABLE -4 COMPARISON SHOWING EQUITY FUNDS FOR (3 YEARS) COMPANY HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund 41.69 29.99 0.00 28.15 23.80 VALUE

EQUITY SHARES

HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 29.99 LIC equity fund

23.8 41.69

28.15 0.00

From the above diagram it is clear that HDFC Equity Funds have 41.69, Franklin India Growth fund have 29.99, ING Vysya Equity Fund have 0.00, Kotak 30 have 28.15 and LIC Equity Fund have 23.80 amount of share in market out of which HDFC Equity Fund have maximum share in the market for 3 years.

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TABLE -5 COMPARISON SHOWING EQUITY FUNDS FOR (SINCE INCEPTION)


COMPANY HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund Kotak 30 LIC equity fund 17.71 0.97 14.54 22.54 0.49 VALUE

EQUITY SHARES

HDFC Equity Fund Franklin India Growth Fund ING Vysya Equity Fund 0.97 14.54 Kotak 30 LIC equity fund

0.49 17.71 22.54

From the above diagram it is clear that HDFC Equity Funds have 17.71, Franklin India Growth fund have 0.97, ING Vysya Equity Fund have 14.54, Kotak 30 have 22.54 and LIC Equity Fund have 0.49 amount of share in market out of which HDFC Equity Fund dont have maximum share in the market since inception.

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Balanced Mutual Funds:


A balanced mutual fund generally consists of a mix of 60% stocks and 40% bonds. This is a traditional asset allocation model for investors who want exposure but want the security of fixed income securities. Although these mutual funds do allow investors to reach a certain asset mix, there are other investment methods for obtaining similar asset allocations. There are some drawbacks to investing in balanced mutual funds. The bond holding in a balanced fund may be of varying lengths; hence they can never match the individual needs of each investor. For instance a balanced fund may hold bonds for 3 years while you need a bond for 10 years. In that case you would significantly earn les on your bond investments. For a do-it-yourself investor not familiar or comfortable with making investment mix decisions, a balance fund may be suitable. Investors should consider building their own portfolio mix by owning stocks or stock index funds either bond funds or individual bonds that you hold to maturity. An independent fee- only financial adviser can help you do that.

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TABLE -6 COMPARISON SHOWING BALANCED FUNDS FOR (NAV) COMPANY HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog Prudential ICICI Balanced Fund VALUE 15.868 9.06 13.08 22.7933 15.22

Balanced Fund

HDFC Balanced Fund 15.868 ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog 13.08 Prudential ICICI Balanced Fund

15.22

9.06 22.7933

From the above graph it is clear that HDFC Balanced Fund have 15.868, ING Vysya balanced fund have 9.06, Kotak Balance have 13.08, LIC Dhanasahayog have 22.7933 and Prudential ICICI Balanced Fund have 15.22. Out of which HDFC Balanced dont have maximum value for NAV.

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TABLE -7 COMPARISON SHOWING BALANCED FUNDS FOR (14 DAYS) COMPANY HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog Prudential ICICI Balanced Fund 1.41 1.12 2.37 1.29 2.84 VALUE

Balanced Fund

1.41 2.84 1.12

HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog

1.29

2.37

Prudential ICICI Balanced Fund

From the above graph it is clear that HDFC Balanced Fund has 1.41, ING Vysya balanced fund have 1.12, Kotak Balance have 2.37, LIC Dhanasahayog have 1.29 and Prudential ICICI Balanced Fund have 2.84. Out of which HDFC Balanced dont have maximum value for 14 days.

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TABLE -8 COMPARISON SHOWING BALANCED FUNDS FOR (6 MONTHS) COMPANY HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog Prudential ICICI Balanced Fund -8.04 -7.93 -3.89 -8.43 -6.74 VALUE

Balanced Fund

HDFC Balanced Fund -8.04 ING Vysya Balanced Fund Kotak Balance

-6.74

-8.43 -3.89

-7.93

LIC Dhanasahayog Prudential ICICI Balanced Fund

From the above graph it is clear that HDFC Balanced Fund have -8.04, ING Vysya balanced fund have -7.93, Kotak Balance have -3.39, LIC Dhanasahayog have -8.48 and Prudential ICICI Balanced Fund have -6.74. Out of which HDFC Balanced dont have maximum value for 6 months.

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TABLE -9 COMPARISON SHOWING BALANCED FUNDS FOR (3 YEARS) COMPANY HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog Prudential ICICI Balanced Fund 18.83 16.35 21.00 0.00 20.89 VALUE

Balanced Fund

HDFC Balanced Fund 18.83 ING Vysya Balanced Fund Kotak Balance

20.89

0.00 21.00 16.35 LIC Dhanasahayog Prudential ICICI Balanced Fund

From the above graph it is clear that HDFC Balanced Fund has 18.83, ING Vysya balanced fund have 16.35, Kotak Balance have 21.00, LIC Dhanasahayog have 0.00 and Prudential ICICI Balanced Fund have 20.89. Out of which HDFC Balanced dont have maximum value for 3 years.

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TABLE -10 COMPARISON SHOWING BALANCED FUNDS FOR (SINCE INCEPTION) COMPANY HDFC Balanced Fund ING Vysya Balanced Fund Kotak Balance LIC Dhanasahayog Prudential ICICI Balanced Fund 12.45 -2.30 12.34 6.27 9.19 VALUE

Balanced Fund

HDFC Balanced Fund 12.45 ING Vysya Balanced Fund Kotak Balance

9.19

6.27 12.34

-2.30

LIC Dhanasahayog Prudential ICICI Balanced Fund

From the above graph it is clear that HDFC Balanced Fund has 12.45, ING Vysya balanced fund have -2.30, Kotak Balance have 12.34, LIC Dhanasahayog have 06.27 and Prudential ICICI Balanced Fund have 9.19. Out of which HDFC Balanced have maximum value since inception.

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MIPs:
For most individuals living away from their family, life tends to be tough. The situation is further complicated by concerns for the familys finance well-being. This is a condition those staying away from home will easily identify with (including NRIs). So what can be done to ease the financial burden on the family within the given constraints? The solution lies in providing regular income to family members using financial tools like monthly income plans (MIPs) and pension plans. Monthly income plans are a hybrid version of balanced funds; however the composition is lop-sided in favour of the debt component. The equity component (ranging from 0% to 20%) provides the much required impetus to the returns-while retaining the relative safety and stability from the debt element. Although MIPs dont assure monthly returns, their performance history seems to suggest otherwise. Leading MIPs (Templeton MIP, Principal MIP) have consistently offered tax free dividends to investors. More importantly for the investors, investing is a one time activity. All an investor needs to do is select a top-performing MIP and invest the appropriate amount for his/her dependants. The MIPs dividends will act as monthly income for the recipients. To make things even better, dividends can be credited directly to the unit holders bank account using the electronic clearing systems (ECS). Pension plans are touted as ideal retirement tools; however their utility clearly transcends the stated purpose. Like MIPs, pension plans can also be used to dependents. Heres what you need to do. Decide the amount you would like to gift your dependants, now opt for a pension plan which delivers the requisite amount in favour of your parents. Gifting a pension plan need not involve any inconvenience. If paying annual premiums seems like a tough chore, the option of paying a single premium is always available. Effectively a one-time payment can ensure that your parents back home are provided with a monthly income. If your dependent is currently 50 years of age, you can gift him/her a pension plan with a vesting of 10 years i.e. from the age of 60 years, he/she will start receiving a -70-

pension of approximately Rs.5,000 per month. This is what the pension plan will look like. Effectively making a one-time payment of Rs. 700,000 as a single premium towards the pension plan will provide nearly Rs. 5,000 as a monthly income to your dependents back home. Also a pure pension plan (Like the one offered by the HDFC Standard Life) works out to be very convenient vis--vis an insurance policy. The policy holder is not required to undertake medical check ups or grapple with cumbersome paper work. In both the above cases after the initial investment is made with the fund house/insurance company, the regular returns lies on the respective entities, which implies that you are spared the bother of drawing drafts, delivering them and hoping that they are credited promptly. Another aspect which needs to be highlighted is asset creation. By investing in a monthly plan or a pension plan, an asset is created which will provide for your dependents over a longer horizon. Clearly a MIP or a pension plan is a much smarter choice vis--vis a monthly draft.

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TABLE -11 COMPARISON SHOWING MIP FOR (NAV) COMPANY HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIP-Plan A LIC Monthly Income Plan Prudential ICICI MIP VALUE 10.2863 10.1063 10.2289 18.2316 14.4485

MONTHLY INCOME PLAN (MIP)


HDFC Monthly Income Plan-Long Term Plan 14.4485 10.2863 HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIPPlan A LIC Monthly Income Plan Prudential ICICI MIP

10.1063 18.2316

10.2289

From the above diagram it is clear that HDFC Monthly Income Plan-Long Term Plan have 10.2963, HDFC Bank Ltd.- MIS- Advantage Fund have 10.1063, ING Vysya MIP- Plan A have 10.2289, LIC Monthly Income Plan have 18.2316 and Prudential ICICI MIP have 14.4485. Out of which HDFC dont have maximum share for NAV. -72-

TABLE -12 COMPARISON SHOWING MIP FOR (14 DAYS) COMPANY HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIP-Plan A LIC Monthly Income Plan Prudential ICICI MIP VALUE 6.84 11.30 4.80 8.77 4.79

MONTHLY INCOME PLAN (MIP)


HDFC Monthly Income Plan-Long Term Plan 6.84 HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIPPlan A 11.3 4.80 LIC Monthly Income Plan Prudential ICICI MIP

4.79

8.77

From the above diagram it is clear that HDFC Monthly Income Plan-Long Term Plan have 6.84, HDFC Bank Ltd.- MIS- Advantage Fund have 11.30, ING Vysya MIPPlan A have 4.80, LIC Monthly Income Plan have 8.77 and Prudential ICICI MIP have 4.79. Out of which HDFC dont have maximum share for 14 days. -73-

TABLE -13 COMPARISON SHOWING MIP FOR (6 MONTHS) COMPANY HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIP-Plan A LIC Monthly Income Plan Prudential ICICI MIP VALUE 13.00 9.00 N.A 2.00 12.00

MONTHLY INCOME PLAN (MIP)


HDFC Monthly Income Plan-Long Term Plan 12.00 HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIPPlan A 2.00 0 9.00 LIC Monthly Income Plan Prudential ICICI MIP

13.00

From the above diagram it is clear that HDFC Monthly Income Plan-Long Term Plan have 13.00, HDFC Bank Ltd.- MIS- Advantage Fund have 9.00, ING Vysya MIPPlan A have 0.00, LIC Monthly Income Plan have 2.00 and Prudential ICICI MIP have 12.00. Out of which HDFC dont have maximum share for 6 months. -74-

TABLE -14 COMPARISON SHOWING MIP FOR (3 YEARS) COMPANY HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIP-Plan A LIC Monthly Income Plan Prudential ICICI MIP VALUE N.A. N.A. N.A. N.A. 9.59

MONTHLY INCOME PLAN (MIP)


HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIPPlan A LIC Monthly Income Plan 9.59 Prudential ICICI MIP

From the above diagram it is clear that HDFC Monthly Income Plan-Long Term Plan have 0.00, HDFC Bank Ltd.- MIS- Advantage Fund have 0.00, ING Vysya MIP- Plan A have 0.00, LIC Monthly Income Plan have 0.00 and Prudential ICICI MIP have 9.59. Out of which HDFC dont have maximum share for 3 years.

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TABLE -15 COMPARISON SHOWING MIP FOR (SINCE INCEPTION) COMPANY HDFC Monthly Income Plan-Long Term Plan HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIP-Plan A LIC Monthly Income Plan Prudential ICICI MIP VALUE 4.73 1.82 5.19 9.64 10.29

MONTHLY INCOME PLAN (MIP)


HDFC Monthly Income Plan-Long Term Plan 4.73 10.29 1.82 5.19 HDFC Bank Ltd. MIS- Advantage Fund ING Vysya MIPPlan A LIC Monthly Income Plan Prudential ICICI MIP

9.64

From the above diagram it is clear that HDFC Monthly Income Plan-Long Term Plan have 4.73, HDFC Bank Ltd.- MIS- Advantage Fund have 1.82, ING Vysya MIP- Plan A have 5.19, LIC Monthly Income Plan have 9.64 and Prudential ICICI MIP have 10.29. Out of which HDFC dont have maximum share since inception. -76-

SUGGESTIONS
The investors are basically influenced by the intrinsic qualities of products followed by efficient fund management and general image of the fund/scheme. Hence, it is suggested that HDFC Bank Ltd. should design products consciously to meet the inventors need and should be alert to capture the changing market moods and be innovative. Continuous product development and introduction of innovative products is a must to attract and retain this market segment, some suggestions are:1. since insurance business has now become upon, MFs can design more & more

2.

3.
4.

5.

products combining insurance and investment benefits to eater to the investors needs of safety and returns respectively. This will surely attract/ retain low and moderate risk profile investors who often resist their desire to pay directly in the capital market. Retirement scheme will attract the middle income group which seeks regular income after retirement. AMFI has suggested a similar scheme and submitted on monthly or yearly basis to select MFs which in turn will invest them. On retirement of the individual, his accumulated NAV will be converted into units of their monthly income schemes. The investors are influenced by the infrastructural facilities of the sponsor and the deputation enjoyed by the sponsor, in their selection of the schemes. Hence HDFC Bank Ltd. should take steps to develop their infrastructure facilities. Further investors are influenced by the extent by quality of disclosure for information subsequent to their investment regarding disclosure of NAV, profile investment and disclosure of deviation of investment from the stated objectives and attached fringe benefits to the scheme in their selection of the scheme. Hence HDFC Bank Ltd. should take steps to be as connection. In spite of having access to Internet, investors prefer Personal Communication mode to Automated Service Mode. This necessitates establishment or more manually operated services centers though out the length and breadth of the country.

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CONCLUSION
Thus mutual funds offers a relativity less expansive way to invest when compared to other avenues such as capital market operations. Investment in mutual funds also offers a lot of flexibility with features such as regular investment. Plans regular withdrawal plans and divided reinvestment plans enabling systematic investment.

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LIMITATIONS OF THE SURVEY


A study without shortcoming is like an illusion I have tried to put in maximum efforts to obtain the best possible data but despite of all hardships, I sincerely accept some limitations which were beyond my control in this research. The limitations of the present study can be summarized as follows: Due to the paucity of time, the data could not be collected in entirely The method adopted for forecasting ignores cyclical fluctuations Due to difficulty in selecting moving average period the result could be inaccurate and misleading.

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AN APPRAISAL OF MUTUAL FUND INDUSTRY


Q.1. Why had mutual funds in India performed so poorly in the past?

Asn.1. Most investors associate mutual funds with Master gain, Monthly equity plans of SBI mutual fund, HDFC Bank Ltd. and Can bank mutual fund and of course Morgan Stanley Growth Fund units trade below the original IPO price of Rs. 10.00. It is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return in the underlying asset class in which the fund invests. Goods funds can beat returns in their asset class to some extend but thats all. Take the case of a sector specific fund like a pharma fund which invests only in shares of pharmace HDFC Bank Ltd. If Govt. comes with new regulation that severely restrict the pricing freedom of these Companys resulting in several erosion in the NAV of the fund. No one can do anything about it. A good fund manger would probably sell part of the fund before prices too much and wait for an opportune time to reinvest at lower levels once the dust has settled. In that case, the NAV of the fund would to a lesser extend, but it will fall. If the investor in the fund has invested in some stocked in the sectors on his own, in all probability, his personal investment may have depreciated to a larger extent. Q.2. Should an investor invest in a mutual fund despite its limitations or not?

Ans.2. Yes, investor should invest some of part their investment portfolio in mutual funds. In fact some investors may be better off by putting their entire portfolio in mutual funds. This is on account of the following reasons:I. On their own, uninformed investors could perform much worse those mutual funds. II. Diversification of risks which is difficult for an investor to achieve with small amount of funds at his disposal. III. Possibility of investing in small amount as and when the investor has finds to invest. -80-

IV. Unquestioned service of transaction processing, tracking of investment, collecting dividend/ interest warrants etc. Q.3. Are mutual funds safe? Are returns on mutual funds guaranteed by Govt. of India or Reserve Bank or any other Govt. Body? Ans.3. Any mutual funds is as unsafe as the assets that it invest in there are two basic categories of mutual funds with other being variations or mixture of these. Firstly, these are those that invest purely in equity shares and secondly, there are those that invest purely in bonds, debentures and other interest bearing instrument called and secondly there are those that invest Income or debt funds. The NAV of growth funds fluctuates in time with the fluctuation of the shares held by them. They can also witness face substantial erosion in value, which could be permanent in some cases. On the other hand, prices of instruments fluctuate to a much lesser degree and income fund is extremely unlikely to face erosion in value especially of the permanent kind. Most mutual funds has qualified and experienced personnel, who under stand the risk of investing. But nobody is immune from making mistake. However funds diversify the investment portfolio substantially so that default in single investment will not affect the overall performance of a fund in a significant manner. In the event of default of a part of the portfolio, an income fund is extremely unlikely to face erosion in face value. Generally mutual funds are not guaranteed by any body. However in the India context, some of the mutual funds have floated Guaranteed or assured returns schemes which guarantee a certain annual return or guarantee a buy back a specified price after some times. Q.4. Why is the buy and sell price different from some mutual funds units and same for other? Ans.4. Buy and selling prices are different for those mutual funds which have up front sale charges or entry load. Usually, the selling price is the NAV while the buying price incorporates the service charge or the load. In case the funds are a no-load fund, there is no difference between the buying and selling prices. We have a detailed section on the characteristics of all mutual funds schemes, which tells you the exact load charge by respective funds. -81-

BIBLIOGRAPHY
BOOKS Chandra, Prasanna, Managing Investments 1st Edition, 40-43, New Delhi, Tata Megraw Hill, 1998 Bhole, LM, Financial Institutions & Markets IInd Edition, 180200, New Delhi, Tata Megraw Hill, 1998 Waghmare, Tushar, The Future of Fund Management in India, 15-17, 91-96, 161-165 Tata Megraw Hill,1998. Avadhani, VA, Securities Analysis and Portfolio Management Edition 1 511-554, New Delhi, Himalaya Publication House, 1997. Srivastava, RM, and Nigam Divya, Management of Indian Financial Institution Edition III, 35-37, New Delhi Himalaya Publication House, 1996. MAGAZINES Golkar, NA, Investors Perception of Mutual funds, Business Review vol. IX, No. 1 September, 2002. Krishnamurthi, Suresh, Mutual Funds, portfolio Organizer March2004. LIST OF WEBSITES www.unittrustfundai.com www.indiainfolie.com www.mutualfundsindia.com www.hdfcbank.com

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