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On Comparative Analysis of Portfolio And Performance of Selected Mutual Fund And Investment Pattern of Investor In India. In Partial Fulfillment of Masters in Business Administration. Study undertaken at
PREFACE
The Summer Internship Program forms an important component of education. It is an attempt to bridge the gap between the academic institution and the corporate world. It provides us an opportunity to apply the concepts learnt in real life situations. The perfect combination of Project and OJT help us in exploring our skills and capabilities. This internship program makes a mark of hard work, sincerity, knowledge and ethics on the host organization. It would also be a great learning experience since it enables us to apply theory to practice and observe and learn the current trends in the market. It provides an opportunity for us to satisfy our inquisitiveness about corporate, provides exposure to technical skills, and helps us to acquire social skills by being in constant interaction with the professionals of other organizations. It helps us in developing a network, which will be useful in enhancing in career prospects. This will help to gain a deeper understanding of the work, culture, deadlines, pressures etc. of an organization. Thus, it helps to develop the qualities of a Manager by involving teamwork, goal orientation and managing interpersonal relationships and by creating awareness about strengths and weaknesses in the work environment.
ACKNOWLEDGEMENT
Words are often to be a mode of expression for ones deep feelings. I take this opportunity to express my deepest gratitude to those who have generously helped me in providing the valuable knowledge and expertise during my training. At the very outset, I bow my head to thank the God Almighty, whose kind grace has made it possible for me to bring this report. I, hereby express my sincere gratitude to my Company Guide Ms. SHAILJA SHARMA for the valuable guidance and immense cooperation right from the day 1st till the end of the training without which this project would not have become a successful one. I shall also like to specially thank Mrs. MANDEEP KAUR (Faculty Guide) for giving me the required guidance and removing any difficulties faced by me during training. Last but not the least I would like to thank Company staff to help me write this report by providing full cooperation and continuous support during the course of this assignment. Thanks to my parents and GURU NANAK DEV UNIVERSITY Faculty Members for their belief and constant support. And finally, I would like to thank each and every person who has contributed in any of the ways in my training.
SORABH AGGARWAL
CONTENTS
Chapter-1- Introduction (A)Company profile- HDFC AMC LTD. (B)Introduction to project (C)Introduction to mutual funds Meaning
1 8 9
11 22 22 26 32 39 42 43 44 45 48 99 104 105
Performance of mutual funds in India Benefits of mutual funds Drawbacks of mutual funds Future of mutual funds in India
Chapter-2- Objective of study Chapter-3- Research methodology Chapter-4- Comparative Analysis Chapter-5- Inferences drawn Chapter-6- Swot Analysis Chapter-7- Conclusion
106 109
CHAPTER 1 INTRODUCTION (A) COMPANY PROFILE- HDFC AMC LTD. HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC)
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset Management Company for the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000. The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020. In terms of the Investment Management Agreement, the Trustee has appointed the AMC to manage the Mutual Fund. As per the terms of the Investment Management Agreement, the AMC will conduct the operations of the Mutual Fund and manage assets of the schemes, including the schemes launched from time to time. The present shareholding pattern of the AMC is as follows: Particulars Housing Development Finance Corporation Limited Standard Life Investments Limited % of the paid up capital 60 40
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a review of its overall strategy, had decided to divest its Asset Management business in India. The AMC had entered into an agreement with ZIC to acquire the said business, subject to necessary regulatory approvals. On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as follows: Former Name Zurich India Equity Fund Zurich India Prudence Fund Zurich India Capital Builder Fund Zurich India TaxSaver Fund Zurich India Top 200 Fund Zurich India High Interest Fund Zurich India Liquidity Fund Zurich India Sovereign Gilt Fund New Name HDFC Equity Fund HDFC Prudence Fund HDFC Capital Builder Fund HDFC TaxSaver HDFC Top 200 Fund HDFC High Interest Fund HDFC Cash Management Fund HDFC Sovereign Gilt Fund
The AMC is managing 23 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Childrens Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF), HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF), HDFC TaxSaver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF), HDFC MF Monthly Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC
Multiple Yield Fund (HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005 (HMYF-Plan 2005) and HDFC Quarterly Interval Fund (HQIF). The AMC is also managing 6 closed ended Schemes of the HDFC Mutual Fund viz. HDFC Fixed Maturity Plans, HDFC Long Term Equity Fund, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans - Series III, HDFC Fixed Maturity Plans - Series IV and HDFC Fixed Maturity Plans - Series V. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of Registration is valid from January 1, 2007 to December 31, 2009 The Board of Directors of the HDFC Asset Management Company Limited (AMC) consists of the following eminent persons. Mr. Deepak S Parekh Mr. N. Keith Skeoch Mr Mark Connolly Mr. Hoshang S. Billimoria Mr. Humayun Dhanrajgir Mr. P. M. Thampi Dr. Deepak Phatak Mr Rajeshwar Raj Bajaaj Ms. Renu S. Karnad Mr. Milind Barve
LIMITED (HDFC)
HDFC was incorporated in 1977 as the first specialized mortgage company in India. HDFC provides financial assistance to individuals, corporates and developers for the purchase or construction of residential housing. It also provides property related services (e.g. property identification, sales services and valuation), training and consultancy. Of these activities, housing finance remains the dominant activity. HDFC has a client base of around 9.5 lac borrowers, over 1 million depositors, over 91,000 shareholders and 50,000 deposit agents as at March 31, 2008. HDFC has raised funds from international agencies such as the World Bank, IFC (Washington), USAID, DEG, ADB and KFW, international syndicated loans, domestic term loans from banks and insurance companies, bonds and deposits. HDFC has received the highest rating for its bonds and deposits program for the twelfth year in succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance company in the private sector to be granted a Certificate of Registration (on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India.
The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. The company was present in the Indian life insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch an insurance joint venture. On April 2006, the Board of The Standard Life Assurance Company recommended that it should demutualise and Standard Life plc float on the London Stock Exchange. At a Special General Meeting held in May voting members overwhelmingly voted in favour of this. The Court of Session in Scotland approved this in June and Standard Life plc floated on the London Stock Exchange on 10 July 2006. Standard Life Investments was launched as an investment management company in 1998. It is a wholly owned subsidiary of Standard Life Investments (Holdings) Limited, which in turn is a wholly owned subsidiary of Standard Life plc. Standard Life Investments is a leading asset management company, with approximately US$ 300 billion as at March 30, 2008, of assets under management. The company operates in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA to ensure it is able to form a truly global investment view. In order to meet the different needs and risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering all of the major markets world-wide, which includes a range of private and public equities,
HDFC MUTUAL FUND PRODUCTS SCHEMES EQUITY FUNDS HDFC Capital Builder Fund HDFC Core & Satellite Fund HDFC Equity Fund HDFC Growth Fund HDFC Long Term Equity Fund HDFC Premier Multi-Cap Fund HDFC Top 200 Fund HDFC Mid-Cap Opportunities Fund HDFC Index Fund HDFC Index Fund Nifty Plan HDFC Index Fund SENSEX Plan HDFC Index Fund SENSEX Plus Plan Equity Linked Savings Scheme HDFC Long Term Advantage Fund HDFC Tax Saver
BALANCED FUNDS HDFC Balanced Fund HDFC Children's Gift Fund Investment Plan HDFC Children's Gift Fund Savings Plan
DEBT FUNDS
HDFC Cash Management Fund - Savings Plus Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Floating Rate Income Fund Short Term Plan HDFC Gilt Fund Short Term Plan HDFC Gilt Fund Long Term Plan HDFC High Interest Fund HDFC High Interest Fund - Short Term Plan HDFC Income Fund HDFC MF Monthly Income Plan - Short Term Plan HDFC MF Monthly Income Plan - Long Term Plan HDFC Multiple Yield Fund HDFC Multiple Yield Fund Plan 2005 HDFC Short Term Plan HDFC Quarterly Interval Fund - Plan A HDFC Quarterly Interval Fund - Plan B HDFC Quarterly Interval Fund - Plan C
LIQUID FUNDS-
HDFC Cash Management Fund - Call Plan HDFC Cash Management Fund - Savings Plan HDFC Liquid Fund HDFC Liquid Fund - PREMIUM PLAN HDFC Liquid Fund - PREMIUM PLUS PLAN HDFC Fixed Maturity Plan
FMP
(B)INTRODUCTION TO PROJECTThe name of the project is comparative Analysis of Performance and portfolio of Selected mutual Fund and Investment Pattern of Investor in India. Analysis is being done at HDFC MUTUAL FUNDS CHANDIGARH. A MUTUAL FUND is an investment company designed to pool the funds of smaller investors and place them under professional management. A mutual fund allows small investors to diversify their portfolios. When a mutual fund is formed, it issues a prospectus detailing its intended investment strategy, and it is not permitted to deviate from that strategy without public disclosure. A mutual fund prospectus also details the fees investors will be charged, which can be substantial. In the US, a mutual fund is regulated by the SEC. A mutual fund may invest in stocks, bonds, options, futures, currencies, and commodities. Although any specific mutual fund is required to follow a specific investing strategy, the range of strategies available is wide. A mutual fund such as an index fund may attempt to replicate market or sector index. A mutual fund may specialize in large-cap, small-cap or even micro-cap stocks. Investors seeking regular income can invest in a mutual fund that specializes in government bonds or, for the more aggressive corporate debt. For comparative analysis of performance of mutual funds in India I have taken 4 INDIAN AMCS EQUITY MUTUL FUND SCHEMES. These are 1. HDFC Equity Fund 2. FIDELITY Equity Fund 3. RELIANCE Vision Fund 4. FRANKLIN INDIA Blue Chip Fund For comparing the performance of these mutual fund schemes, I have used four different financial ratios, which generally depicts risk and return relationship, concerned with these
funds then performance will be deduced by interpreting the result of the ratios that which fund is performing well on the financial basis.
A MUTUAL FUND is an investment company designed to pool the funds of smaller investors and place them under professional management. A mutual fund allows small investors to diversify their portfolios. When a mutual fund is formed, it issues a prospectus detailing its intended investment strategy, and it is not permitted to deviate from that strategy without public disclosure. A mutual fund prospectus also details the fees investors will be charged, which can be substantial. In the US, a mutual fund is regulated by the SEC. A mutual fund may invest in stocks, bonds, options, futures, currencies, and/or commodities. Although any specific mutual fund is required to follow a specific investing strategy, the range of strategies available is wide. A mutual fund such as an index fund may attempt to replicate market or sector index. A mutual fund may specialize in large-cap, small-cap or even microcap stocks. Investors seeking regular income can invest in a mutual fund that specializes in government bonds or, for the more aggressive, corporate debt.
STOCKS
Stocks represent shares of ownership in a public company. Examples of public companies include IBM, Microsoft, Ford, Coca-Cola, and General Motors etc. Stocks are the most common ownership investment traded on the market.
BONDS
Bonds are basically a chance for you to lend your money to the government or a company. You can receive interest and your principle back over predetermined amounts of time. Bonds are the most common lending investment traded on the market. There are many other types of investments other than stocks and bonds (including annuities, real estate, and precious metals), but the majority of mutual funds invest in stocks and/or bonds. A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the
capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. 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 basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund
In the working of mutual fund, there are following steps1. 2. 3. 4. 5. First of all, Asset Management Company issues new fund offer. Interested investors invest the money with fund manager. Then fund manager invests the money in different profitable securities. Then securities generate returns. These returns are passed back to investors.
Returns are given to investors according to the units given to them which is determined according to the investment made by them in the mutual funds.
ORGANIZATION OF MUTUAL FUNDFor organization of mutual fund there is a set criterion which has to be opted. There are many entities involved and the diagram below illustrates the organizational set up of a mutual fund:
SPONSORS
The sponsor establishes the mutual fund and gets it registered with SEBI. The mutual fund needs to be constituted in the form of a trust and the instrument of the trust should be in the form of a deed registered under the provisions of the Indian Registration Act, 1908. The sponsor is required to contribute at least 40% of the minimum net worth (Rs. 10 crore) of the asset management company. The board of trustees manages the MF and the sponsor executes the trust deeds in favor of the trustees. It is the job of the MF trustees to see that schemes floated and managed by the AMC appointed by the trustees are in accordance with the trust deed and SEBI guidelines.
BOARD OF TRUSTEES
The board of trustees is responsible for protecting the investors interests. Under the SEBI regulation 1996, trustee means a person who holds the property of the mutual fund in trust, for the benefit of the unit holders. The word trustee can be used to denote board of trustees. In case a trustee company governs the trust, it can be used to denote either the trustee company or its directors.
CUSTODIANS
The custodians are appointed by the sponsor to look after the transfer and storage of securities. Only a registered custodian under the SEBI Regulation can act as a custodian of a mutual fund. The functions of custodian a cover a wider range of services like safe keeping of securities bid settlement, corporate action, and transfer agent. In addition, they may be contracted to perform administrative functions like fund accounting, cash management and other similar functions
TYPES OF MUTUAL FUNDS SCHEMESWide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the Industry.
Equity / Growth Fund Invest primarily in equity and equity related instruments. Children's Gift Fund Children's Gift Fund
Liquid Funds Provide high level of liquidity by investing in money market and debt instruments. Debt/ Income Fund Invest in money market and debt instruments and provide optimum balance of yield, ...
Fixed Maturity Plan Invest primarily in Debt / Money Market Instruments and Government Securities...
2. By Investment Objective Growth Schemes Income Schemes Balanced Schemes Money Market Schemes
3. Other Schemes
Tax Saving Schemes Special Schemes Index Schemes Sector specific schemes
trade on stock exchanges like stocks or bonds. The market price of closed-end funds is determined by supply and demand and not by net-asset value (NAV), as is the case in openend funds. Usually closed mutual funds trade at discounts to their underlying asset value.
have a market capitalization between Rs. 500 crores and Rs. 1,000 crores are classified as medium sized. Big investors like mutual funds and Foreign Institutional Investors are increasingly investing in mid caps nowadays because the price of large caps has increased substantially. Small / mid sized companies tend to be under researched thus they present an opportunity to invest in a company that is yet to be identified by the market. Such companies offer higher growth potential going forward and therefore an opportunity But mid cap funds are very volatile and tend to fall like a pack of cards in bad times. So, caution should be exercised while investing in mid cap mutual funds.
BALANCED FUND
Balanced fund is also known as hybrid fund. It is a type of mutual fund that buys a combination of common stock, preferred stock, bonds, and short-term bonds, to provide both income and capital appreciation while avoiding excessive risk. Balanced funds provide investor with an option of single mutual fund that combines both growth and income objectives, by investing in both stocks (for growth) and bonds (for income). Such diversified holdings ensure that these funds will manage downturns in the stock market without too much of a loss. But on the flip side, balanced funds will usually increase less than an all-stock fund during a bull market
GROWTH FUNDS
Growth funds are those mutual funds that aim to achieve capital appreciation by investing in growth stocks. They focus on those companies, which are experiencing significant earnings or revenue growth, rather than companies that pay out dividends. Growth funds tend to look for the fastest-growing companies in the market. Growth managers are willing to take more risk and pay a premium for their stocks in an effort to build a portfolio of companies with above-average earnings momentum or price appreciation.In general, growth funds are more volatile than other types of funds, rising more than other funds in bull markets and falling more in bear markets. Only aggressive investors, or those with enough time to make up for short-term market losses, should buy these funds.
On the other hand, no-load funds are those funds that can be purchased without commission. No load funds have several advantages over load funds. Firstly, funds with loads, on average, consistently under perform no-load funds when the load is taken into consideration in performance calculations. Secondly, loads understate the real commission charged because they reduce the total amount being invested. Finally, when a load fund is held over a long time period, the effect of the load, if paid up front, is not diminished because if the money paid for the load had invested, as in a no-load fund, it would have been compounding over the whole time period.
Exchange traded funds rely on an arbitrage mechanism to keep the prices at which they trade roughly in line with the net asset values of their underlying portfolios.
VALUE FUNDS
Value funds are those mutual funds that tend to focus on safety rather than growth, and often choose investments providing dividends as well as capital appreciation. They invest in companies that the market has overlooked, and stocks that have fallen out of favour with mainstream investors, either due to changing investor preferences, a poor quarterly earnings report, or hard times in a particular industry. Value stocks are often mature companies that have stopped growing and that use their earnings to pay dividends. Thus value funds produce current income (from the dividends) as
well as long-term growth (from capital appreciation once the stocks become popular again). They tend to have more conservative and less volatile returns than growth funds.
infrastructure, heath care, utilities, pharmaceuticals etc. The idea is to allow investors to place bets on specific industries or sectors, which have strong growth potential. These funds tend to be more volatile than funds holding a diversified portfolio of securities in many industries. Such concentrated portfolios can produce tremendous gains or losses, depending on whether the chosen sector is in or out of favour.
INDEX FUNDS
An index fund is a type of mutual fund that builds its portfolio by buying stock in all the companies of a particular index and thereby reproducing the performance of an entire section of the market. The most popular index of stock index funds is the Standard & Poor's 500. An S&P 500 stock index fund owns 500 stocks-all the companies that are included in the index. Investing in an index fund is a form of passive investing. Passive investing has two big advantages over active investing. First, a passive stock market mutual fund is much cheaper to run than an active fund. Second, a majority of mutual funds fail to beat broad indexes such as the S&P.
FUND OF FUNDS
A fund of funds is a type of mutual fund that invests in other mutual funds. Just as a mutual fund invests in a number of different securities, a fund of funds holds shares of many different mutual funds. Fund of funds are designed to achieve greater diversification than traditional mutual funds. But on the flipside, expense fees on fund of funds are typically higher than those on regular funds because they include part of the expense fees charged by the underlying funds.
MUTUAL FUND INDUSTRY IN INDIA (A)HISTORY GLOBAL HISTORY- Introduced in Belgium in 1822. This form of investment soon
spread to Great Britain and France. Mutual funds became popular in the United States in the 1920s and continue to be popular since the 1930s, especially open-end mutual funds. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 1990s.
HISTORY OF MUTUAL FUND INDUSTRY IN INDIAThe origin of mutual fund industry in India is with the introduction of the concept of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. UTI remained the only fund till the government allowed public sector banks to start mutual funds in 1987. Major PSU banks like SBI, Canara Bank, Indian Bank and Punjab National Bank started offering their products. Insurance giants LIC and GIC also started their own mutual fund subsidiaries. They were all reasonably successful as equity investments gained popularity during the bull market of the early nineties. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. Before, the monopoly of the market had seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The private sector entry to the fund family raised the AUM to Rs. 470 ban in March 1993 and till Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the con April 2004; it reached the height of 1,540 ban Putting the AUM of the Indian Mutual Funds Industry into comparison, the total of it is less than the deposits of SBI alone, constitute less than. 11% of the total deposits held by the Indian banking industry. The main reason of its poor growth is that the mutual fund industry in India is new in the country. Large sections of Indian investors are yet to be intellectuated with the concept. Hence, it is the prime responsibility of all mutual fund companies, to market the product correctly abreast of selling. Private sector players were allowed into the industry in 1993 after SEBI was established as the market regulator. A host of private banks and international fund houses started their operations and investors could chose from many innovative products. SEBI brought out comprehensive guidelines for establishment and management of mutual funds in 1996. In 2003, the Unit Trust of India, which was not under SEBI regulation, was split into two parts, UTI Mutual Fund (UTI MF) and a specified undertaking of UTI or UTI-I. UTI MF was brought under SEBI regulations while UTI-I was kept under direct government control since its schemes offered guaranteed returns. From just Rs.25 crore under management in 1965, the total funds managed by the mutual fund industry stood at over Rs.2,91,000 crore as of September 2006. The industry has matured very fast over the last few years with a large number of players and diverse product The mutual fund industry can be broadly put into four phases according to the development of the sector. Each phase is briefly described as under.
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way
Prudential ICICI Asset Management co. Ltd Reliance Asset Management co. Ltd Sahara Asset Management co. Ltd SBI Asset Management co. Ltd Standard Chartered Asset Management co. Ltd Sundaram Asset Management co. Ltd Tata Asset Management co. Ltd Taurus Asset Management co. Ltd UTI Asset Management co. Ltd
THE MAJOR MUTUAL FUND HOUSES IN INDIA ARE: HDFC MUTUAL FUND
HDFC Mutual Fund has been one of the best performing funds in recent years. The sponsors of the fund are housing finance major HDFC and British investment company Standard Life Investments. The paid up capital of the AMC is Rs. 25.161 crore. Standard Life is one of the better known investment companies in the UK. The company offers pension fund management, money market funds and private equity among other products. The Standard Life group has a history of over 175 years and has over $190 billion in assets under management globally. The trustee of the fund is HDFC Trustee Company Limited, a subsidiary of HDFC Limited. The chairman of the board of trustees is Anil Kumar Hirjee, vice chairman of Bombay Burmah Trading Corporation. Other members of the board include Keki Mistry of HDFC and James Aird of Standard Life.
The AMC, HDFC Asset Management Company Limited, is owned between HDFC and Standard Life with HDFC holding slightly more than 50 per cent of the shares. The board of directors has among its members Alexander Crombie of Standard Life, former head of Kodak India H Dhanrajgir, former head of BASF India P M Thampi, and Renu S Karnad of HDFC. The management of the AMC is headed by Milind Barve, managing director. In 2003, HDFC Asset Management Company took over the asset management business of Zurich India Mutual Fund. Subsequently, all the schemes of Zurich Mutual Fund in India had been transferred to HDFC Mutual Fund and renamed as HDFC schemes
PRUDENTIAL ICICI
Prudential ICICI is the largest private sector mutual fund in the country with assets of over Rs.43,281 crore under management as of February 2007. The sponsors of the fund are Prudential Plc, one of the largest insurance companies in Europe, and ICICI Bank, the second largest Indian bank. Prudential group has assets of over $300 billion under management globally. Apart from the main insurance operations, the group also owns fund management firm M&G and internet bank Egg. In all, 55 per cent of the asset management company, Prudential ICICI Asset Management Company, is held by Prudential Plc and the balance by ICICI Bank. There are reports that ICICI Bank is trying to acquire a 6 per cent stake in the AMC from Prudential and gain majority control.
FRANKLIN TEMPLETON
One of the largest and most high profile mutual funds in the country, Franklin Templeton has over Rs.22,102 crore under management as of February 2007. The sponsor of the fund is Templeton International.
Templeton is one of the largest mutual funds globally. Its parent company Franklin Resources and Subsidiaries have over $400 billion under management. The trustee of the fund is Franklin Templeton Trustee Services Private Limited. The board of directors of the trustee includes Gregory McGowan and Stephen Dover of Templeton and Bharat Doshi of the Mahindra group. Franklin Templeton Asset Management Private Limited acts as the fund manager. A majority of 75 per cent of the asset management company's equity is held by Templeton and the balance by the Raheja group. The board of directors of the company has Gregory Johnson, president of Franklin Templeton USA as its chairman. Deepak Satwalekar of HDFC and Rajan Raheja are the other prominent members. The fund management is headed by Mark Mobius, who is also a director of the AMC. Rated as one of the best fund managers in the world, Mark Mobius is probably the best known emerging markets fund manager.
FIDELITY INDIA
A recent entrant into the Indian mutual fund industry, Fidelity launched its first domestic fund in April this year. However, Fidelity has been managing India specific funds for overseas investors for over 10 years now. Its exposure to Indian markets through such funds stands at over $2.5 billion at present, which makes Fidelity one of the largest FIIs investing in the country. Globally, Fidelity is the grand daddy of all mutual funds with assets of over $1.2 trillion under management. In the US alone it has over $850 billion under management and accounts for 3 to 5 per cent of the daily trading volumes on the New York stock exchange. Privately owned Fidelity is the best known brand in the fund management business and its flagship fund Magellan is probably the best known fund among American investors. The sponsor of the fund is Fidelity International Investment Advisors. The trustee is Fidelity Trustee Company Private limited and has Ann Stock of Fidelity Investments and former TRAI chairman Justice S S Sodhi on its board among others. The AMC of the fund is Fidelity Fund Management Private Limited. Simon Haslam of Fidelity International, former Castrol India CEO Ramesh Savoor and former CEO of Bank of America Arun Duggal are among the directors of the company. Fidelity International Investment Advisors holds 75 per cent stake in the AMC. Arun Mehra, who was earlier with Fidelity UK, heads fund management. As of February 2007, Fidelity India had over Rs.5,671 crore under its management.
The fund's sponsors are public sector financial giants like Life Insurance Corporation, SBI, Bank of Baroda and Punjab National Bank. The sponsors hold equal stakes in the asset management company, UTI Asset Management Company Private Limited. The asset management company has R H Patil, the former managing director of the National Stock Exchange, as its chairman. The current SEBI chairman M Damodaran was his predecessor. The fund management team is headed by A K Sridhar, chief investment officer. The company employs four different registrars for its various schemes. Associate company UTI Technology Consultants and Karvy Computershare act as registrars and transfer agents for majority of the schemes. Citibank, HDFC Bank and Stock Holding Corporation are the fund's cu stodians.
rather no choice apart from holding the cash or to further continue investing in shares. One more thing to be noted, since only closed-end funds were floated in the market, the investors disinvested by selling at a loss in the secondary market. The performance of mutual funds in India suffered qualitatively. The 1992 stock market scandal, the losses by disinvestments and of course the lack of transparent rules in the where about rocked confidence among the investors. Partly owing to a relatively weak stock market performance, mutual funds have not yet recovered, with funds trading at an average discount of 1020 percent of their net asset value. The supervisory authority adopted a set of measures to create a transparent and competitve environment in mutual funds. Some of them were like relaxing investment restrictions into the market, introduction of open-ended funds, and paving the gateway for mutual funds to launch pension schemes. The measure was taken to make mutual funds the key instrument for longterm saving. The more the variety offered, the quantitative will be investors. At last to mention, as long as mutual fund companies are performing with lower risks and higher profitability within a short span of time, more and more people will be inclined to invest until and unless they are fully educated with the dos and donts of mutual funds. The year 1993 was a remarkable turning point in the Indian Mutual Fund industry. The stock investment scenario till then was restricted to UTI (Unit Trust of India) and public sector. This year marked the entry of private sector mutual funds, giving the Indian investors a wider choice of selecting mutual funds. From then on, the graph of mutual fund players has been on the rise with many foreign mutual funds also setting up funds in India. The industry has also witnessed several mergers and acquisitions proving it advantageous to the Indian investors. Are mutual funds emerging as preferred investment option? Are they safe and will your money be secured with them? Before proceeding to answer these questions, a look at the February 2006, Indian bull market scenario is worth a mention For the first time ever, stock market indices in India are at a record high. The Bombay Stock Exchange closed above the 10,000-mark for the first time ever, an ecstatic event in the history of the Stock exchange. Market savvy Indian investors have been busy transacting across sectors such as banking automobile, sugar, consumer durable, fast moving consumer goods
(FMCG) and pharmaceutical scripts. And, the Union Finance Minister, Mr.P.Chidambaram, has responded positively and advised investors to take informed decisions or invest through mutual funds. Mutual funds are not considered any more as obscure investment opportunities. The mutual funds assets have registered an annual growth rate of 9% over the past 5 years. Considering the current trend and the relative positive response of the Indian economy, a much bigger jump is on the anvil. With the Sensex on a scorching bull rally, many investors prefer to trade on stocks themselves. Mutual funds are more balanced since they diversify over a large number of stocks and sectors. In the rally of 2000, it was noticed that mutual funds did better than the stocks mainly due to prudent fund management based on the virtues of diversification Different Indian mutual funds allow investors various solutions ranging from retirement planning and buying a house to planning for child's education or marriage. Tax-wise stocks and mutual funds work similarly since long-term capital gains from both stocks and equityoriented mutual funds are tax-free. Well, what are the charges, fees and expenses associated with investing in Indian mutual funds? At the time of entry into a mutual fund, you have to pay an additional charge or entry load along with the value of units purchased When you exit from the scheme, you will get back the value of the units less the exit load charges. If you want to switch from one type of mutual fund investment to another, you will be required to pay the exchange fees. Advisory fees, broker fees, audit fees and registrar fees are some of the other recurring expenditures that would be charged to you. These expenses involve administrative and other running costs. In India, SEBI (The Securities and Exchange Board of India) is the regulating authority that SEBI formulates policies and regulates the mutual funds to protect the interest of the Indian investors.
management. The agencies who are by any means connected or involved in the field of capital markets and financial services also involved in this code of conduct of the association. AMFI interacts with SEBI and works according to SEBIs guidelines in the mutual fund industry. Association of Mutual Fund of India do represent the Government of India, the Reserve Bank of India and other related bodies on matters relating to the Mutual Fund Industry. It develops a team of well qualified and trained Agent distributors. It implements a programme of training and certification for all intermediaries and other engaged in the mutual fund industry. AMFI undertakes all India awarness programme for investors inorder to promote proper understanding of the concept and working of mutual funds. At last but not the least association of mutual fund of India also disseminate informations on Mutual Fund Industry and undertakes studies and research either directly or in association with other bodies.
6.GIC Asset Management Co. Ltd. 7.Jeevan Bima Sahayog Asset Management Co. Ltd.
PRIVATE SECTOR INDIAN:(a) BenchMark Asset Management Co. Pvt. Ltd. (b) Cholamandalam Asset Management Co. Ltd. Credit Capital Asset Management Co. Ltd. (d) Escorts Asset Management Ltd. (e) JM Financial Mutual Fund (f) Kotak Mahindra Asset Management Co. Ltd. (g) Reliance Capital Asset Management Ltd. (h) Sahara Asset Management Co. Pvt. Ltd (i)_Sundaram Asset Management Company Ltd. (j)Tata Asset Management Private Ltd.
PREDOMINANTLY INDIA JOINT VENTURES:1.Birla Sun Life Asset Management Co. Ltd. 2.DSP Merrill Lynch Fund Managers Limited 3.HDFC Asset Management Company Ltd.
PREDOMINANTLY FOREIGN JOINT VENTURES:1.ABN AMRO Asset Management (I) Ltd. 2.Alliance Capital Asset Management (India) Pvt. Ltd. 3.Deutsche Asset Management (India) Pvt. Ltd. 4.Fidelity Fund Management Private Limited 5.Franklin Templeton Asset Mgmt. (India) Pvt. Ltd. 6.HSBC Asset Management (India) Private Ltd. 7.ING Investment Management (India) Pvt. Ltd. 8.Morgan Stanley Investment Management Pvt. Ltd. 9.Principal Asset Management Co. Pvt. Ltd. 10.Prudential ICICI Asset Management Co. Ltd. 11.Standard Chartered Asset Mgmt Co. Pvt. Ltd.
ASSOCIATION PUBLICATIONS
OF
MUTUAL
FUNDS
IN
INDIA
AMFI publices mainly two types of bulletin. One is on the monthly basis and the other is
quarterly. These publications are of great support for the investors to get intimation of the knowhow of their parked money.
There are numerous benefits of investing in mutual funds and one of the key reasons for its phenomenal success in the developed markets like US and UK is the range of benefits they offer, which are unmatched by most other investment avenues. We have explained the key benefits in this section. The benefits have been broadly split into universal benefits, applicable to all schemes, and benefits applicable specifically to open-ended schemes.
A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. This amount today would get you less than quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.
DIVERSIFICATION
The nuclear weapon in your arsenal for your fight against Risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate, fixed deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a diversification may add to the stability of your returns, for example during one period of time equities might underperform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives
VARIETY
Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme.
PROFESSIONAL MANAGEMENT
Qualified investment professionals who seek to maximise returns and minimise risk monitor investor's money. When you buy in to a mutual fund, you are handing your money to an investment professional who has experience in making investment decisions. It is the Fund Manager's job to (a) find the best securities for the fund, given the fund's stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of the portfolio, as and when required.
TAX BENEFITS-
in the assessment of all Unit holders. However, as a measure of concession to Unit holders of open-ended equity-oriented funds, income distributions for the year ending March 31, 2003, will be taxed at a concessional rate of 10.5%. In case of Individuals and Hindu Undivided Families a deduction upto Rs. 9,000 from the Total Income will be admissible in respect of income from investments specified in Section 80L, including income from Units of the Mutual Fund. Units of the schemes are not subject to Wealth-Tax and Gift-Tax.
REGULATIONS
Securities Exchange Board of India (SEBI), the mutual funds regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors.
CONVENIENCE-
through a broker or a financial planner. The investor may opt for a Systematic Investment
Plan (SIP) or a Systematic Withdrawal Advantage Plan (SWAP). In addition to this an investor receives account statements and portfolios of the schemes.
FLEXIBILITY -
easily between various schemes. This flexibility gives the investor a convenient way to change the mix of his portfolio over time
TRANSPARENCY
Open-ended mutual funds disclose their Net Asset Value (NAV) daily and the entire portfolio monthly. This level of transparency, where the investor himself sees the underlying assets bought with his money, is unmatched by any other financial instrument. Thus the investor is in the know of the quality of the portfolio and can invest further or redeem depending on the kind of the portfolio that has been constructed by the investment manager.
NO GUARANTEES:
No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. However, anyone who invests through a mutual fund runs the risk of losing money.
TAXES:
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.
MANAGEMENT RISK:
When you invest in a mutual fund, you depend on the fund's manager to make the right decisions regarding the fund's portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index Funds, you forego management risk, because these funds do not employ managers.
Mutual fund can penetrate rural like the Indian insurance industry with simple and limited product. SEBI allowing the MF's to launch commodity mutual fundse,emphasis on better corporate governance trying to curb the late trading practices. Introduction of Financial Planners who can provide need based advice.
The ratios used for comparison on the basis of risk are Beta ratio Sharpe ratio Treynor ratio
Alpha ratio
CHAPTER-3 RESEARCH METHODOLOGY ResearchResearch comprises defining and redefining problems ,formulating
hypothesis or suggested solutions, collecting, organizing and evaluating data; making deductions and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit the formulating hypothesis.
-clifford woody
Research methodology has many dimensions. It includes not only research methods but also consists the logic behind the methods used in the context of the study and explains why only a particular method of technique had been used so that search lend themselves to proper evaluation. Thus in a way it is a written game plan for concluding research. Therefore in order to solve our research problem, it is necessary to design a research methodology for the problem as the same may differ from problem to problem.
RESEARCH DESIGN-
the research is conducted. Its function is to provide for the collection of relevant evidence with minimum expenditure of effort, time and money. But how this can be achieved depends on the research purpose, Research design is of mainly three types-
Descriptive Research-
characteristics of a particular individual or of a group. In this kind of research primary and secondary both type of data is used. As my project is comparative analysis of performance of mutual fund schemes on the basis of past data about NAVS and PAST RETURNS. I have collected data from secondary sources. So my research study is based on Descriptive Research Design.
Experimental research-
Data collection- The objectives of the project are such that secondary data is required to
achieve them. So secondary data was used for the project. The mode of collecting secondary data are magazines, books, newspapers, and websites companys brochures. So my project contains the Descriptive Research Design. So data is taken from secondary sources.
Target Population:
Sample Size: 250 customers. Sample Area: Sector-46 and Sector- 35 Chandigarh and Sohana (Mohali). Type of data used: Primary data. Tools Used: Questionnaire Gender: Males and Females Age: 25 years to 70 years.
1. Do you make investment? This question was asked to know how much percentage of people makes investments in financial products.
This figure represents that 89% of 250 i.e. 223 people make investments in financial products such as bank, equity, mutual funds, etc. 2. What kind of investment do you make? This question is asked to find out the investment patterns of people in financial products.
Investment Avenues Bank Govt. Securities/Debts Insurance Mutual Fund Equity Real Estate
depicts that 18% of the respondents save their money in saving accounts, 14% invest in Govt. Securities/Debts like FDs, Post Savings etc., 23.6% of the respondents buy insurance for their safety, 32.4% invest in Mfs, 18.4% in Equities and only 10.81% people invest in Real Estate.
The table depicts that 13% people are investing from less than 2 years and 29% people are investing from last 3-5 years, and majority of the people i.e. 35% of the people are investing since last 5-10 years and remaining 23% of people are investing from last more than 10 years.
4. What is your main investment objective? This question is to find out the criteria of respondents behind investment.
From the figure it can be see that out of sample size of 223 people, 52% of the respondents have returns as their main investment consideration because everybody wants good income on their saved income, 34% respondents save their money for the purpose of tax saving so that they can pay less tax to the government and only 9% look safety perspective. Majority of the people main consideration of investment is returns, they want higher returns on their investment. 5. Time Horizon of investments: This question is to find out whether people think for short term or for long term.
The above figure shows that 62% of the respondents think for long term i.e. above 5 years, 18% respondents invest for middle term i.e. 1-5 years and only 20% respondents save their money for short term i.e. up to 1 year. 6. How much return are you getting? Less than 10%-20% 20%-30% More than 10% 30% ======== ======== ======= ======= ======= ======= ========
(a) Bank (b) Government Securities/Debts (c) Insurance (d) Mutual funds (e) Equity (f) Real Estate
The above pie diagram shows that 17% respondents are getting returns less than 10% due to saving accounts, 44% of the respondents between 10%-20% per annum due to their insurance policies,24% respondents who invested in equities or in mutual funds get between 20%-30% returns and only 15% respondents get very good returns that is more than 30%. The people invested in Equity, Mutual Funds and Real Estates get good returns due to the boom in these sectors. 7. How much risk are you ready to assume in following? This question was asked to find out the risk appetite of people. (a) Bank (b) Government securities/Debts (c) Insurance (d) Mutual funds (d) Equity (e) Real Estate
The above diagram shows that 11% respondents dont want to take risk at all, 39% respondents are ready to take moderate returns, 34% invest their money at low risk and only 11% respondents have high risk appetite to get high returns. 8. Have you ever invested in HDFC Mutual Funds?
The above diagram depicts that 148 people out of 180 i.e. 82% people who does investment in mutual funds are known to the HDFC Mutual Funds and they have been investing in this company and only 18% i.e. 32 out of 180 people have never invested in HDFC Mutual Funds. 9. In which plan of HDFC Mutual Funds, are you doing investment? (a)Equity (i) Mid-cap (ii) Tax-saver (iii) Small-cap (iv) Any other (1) Top 200 (b) Debt
In the above diagram, maximum people i.e. 70 out of 148 people (47%) wants more returns in a short period or they prioritize returns as their main investment consideration, Next main consideration for people for investment is to save tax, 58 people out of 148 i.e. 39% of people wants to save tax or wants to get tax rebate from govt. Only 4 people or just 3% people invest in small-cap and 11% people invest in other plans other than tax-saver or mid-cap like Top 200 which is a large-cap, less risky and good for longer period. 10. In HDFC Mutual Funds, in which plan have you opted?
Looking at the above diagram, we can find out that majority of the people go for SIP (Systematic Investment Plan) and these people do not want to take risk and mostly are middle-class people. Rest 46% of the remaining people opt the lump sum payment plan as they want more returns on their investment.
In the above diagram, we find that majority of the people (56% i.e. 45 out of 80 people) go for the option of monthly saving, 31% people i.e. 25 of them wants to reduce the risk of fluctuating market and rest 13% wants to do SIP for long term purpose. 12. Why have you opted lump sum for doing investment?
In the above diagram it is shown the preference of the people regarding investment in lump sum plan and it is found that majority of the people (60% i.e. 41 out of 68 people) invest for the purpose of getting higher returns, they give first preference of investing in lump sum plan to getting higher returns and they give preference to the fluctuating market or arbitrage i.e. buying in lower market and selling in higher market (30% i.e. 20 people) and lastly they want to invest for short period (only7 out of 68 people). As they earn profit or get returns maximum returns they sell the fund.
13. Are you doing investment in any other company mutual funds? 1. 2. 3. 4. 5. 6. Reliance Tata Kotak Mahindra Sundaram BNP SBI Fidelity
According to the diagram, maximum people (108 out of 180 people) want to do taxsaving. They want to get tax rebate under Section 80 C up to Rs. One lakh and wants to get dividend tax-free so they invest in tax-saver plan. Rest 40% i.e. 72 out of 180 people invest in Mid-cap as these days Mid-cap is a good option to invest. 15. Is HDFC products better than any other companys products? If Yes how and which product? Top 200 1. More returns 2. Award-winning product 3. Declared maximum dividend i.e. 85% in last financial year 4. Best Diversified Scheme 5. 5 star plan, given by value research team TAX-SAVER 1. Given 50%-60% dividend consequently in past 4 years. 2. Investing in blue chip companies 3. More returns 4. Prioritize in banking sector 5. 4 star plan, given by value research team.
GROWTH FUND 1. Invest in top 30 companies 2. Award-winning product 3. Declared maximum dividend i.e. 85% in last financial year 16. What you expect from the HDFC Mutual funds? (a) Good returns (b) Monthly statements (c) High dividend (d) Safety (e) Tax-rebate (f) Liquidity (g) Security DEMOGRAPHICS Age (in years) : - Age was divided into five categories i.e. o o o o o 20-25 25-30 30-35 35-40 Above 40
Figure: Age Group Out of total sample of 250 people, 10 are in the category of 20-25, 36 falls in the category of 25-30, 65 people are in the age group of 30-35 years, 86 falls in the category of 35-40 and rest 53 are above 40 years of age.
In the sample, the occupation of people shows that 47% i.e. 118 are from Business class and 53% i.e. 132 people are salaried people. Income : o o o o Less than Rs.100000 Between Rs.100000- Rs.250000 Between Rs.250000- Rs.500000 Above Rs.500000
48% respondents are having an annual income between Rs. 2.5 Lacs and Rs. 5 Lacs, 35% respondents are having an annual income between Rs. 1 Lac and Rs. 2.5 Lacs, 10% respondents are earning above Rs. 5 Lacs and only 7% are in the category of below 1 Lac.
Observations Some people consider stock trading as a type of gambling and some do trading as a hobby. People dont have enough knowledge about trading and they are scared off from stock market. People who had lost their money in Harshad Mehtas scam do not want to invest again in equity. People, who are into the Real Estate business, are not interested in equity at all because they think that investment in Real Estate is much safer and giver good returns than investment in stock market.
COMPARATIVE ANALYSIS
The project contains the study of comparative analysis of performance of selected mutual fund schemes in India. Project includes the equity diversified schemes of 4 AMCS. These four schemes are1 .HDFC Equity Fund 2. Fidelity Equity Fund 3. Reliance Vision Fund 4. Franklin India Blue Chip Fund For doing comparison we have taken past years returns and reached the result regarding the performance of the funds.
NAV-
Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis-daily or weekly - depending on the type of scheme. Formula of calculating NAV- Market value of total assets of funds Total no. of units issued to investors.
Refers to the
year over year growth rate of an investment over a specific period of time. Calculated by taking the nth root of the total percentage growth rate where n is the number of years in the period being considered. Formula for CAGR = (1+r/100)n Here in the table, NAV means Net Asset Value and CAGR means Compounded Annual Growth Rate.
Scheme name
NAV
Incepti
CAGR
CAGR
CAGR 5year s
50.98
CAGR r
37.15
CAGR 2008
25.76
10Yea July
HDFC Equity 168.74 Fund Reliance Vision Fund Franklin IndiaBlue Chip Fund Fidelity Equity Fund
24.67 215.51
10Aug1995
56.88
53.04
54.57
32.68
29.7
147.75
12Jan1993
46.24
44.59
47.19
35.85
28.75
19April 2005
60..39
NA
NA
NA
50.77
1. In the past one year, Fidelity Equity Fund has given highest returns. 2. In the past three years, Reliance Vision Fund has given highest returns. 3. In the past five years also, Reliance Vision Fund has given highest returns. 4. In the past 10 years, HDFC Equity Fund has performed well. 5. Since inception, fidelity equity fund has highest Compounded annual growth returns. So Fidelity Equity Fund and Reliance Vision Fund are performing well in the market and growing at a rapid pace.
ON THE BASIS OF RISK FACTOR INVOLVED IN THEMRisk and Return go hand n hand n investments and finance. One cant talk about returns without talking about risk, because investment decisions always involve a trade off between risk and return. Risk can be defined as the chance that the actual outcome from an investment
will differ from the expected income this means that the more variable the possible outcomes that can occur, the greater the risk. For determining the risk-return relationship of the funds following four technical ratios have been used which depict which fund has performed well in the market despite the risk factor involved in them: Ratios1.Beta ratio 2.Sharpe ratio 3.Treynor ratio 4 Alpha ratio
Formulas used1. Beta ratioFormula of BETA = COVARIANCE(X,Y) VARIANCE OF Y Where X = Annualized Return of Fund Y = Annualized Return of Market Index
2. Sharpe ratioSharpe ratio- Mean of the fund- Assured return (risk free return) Standard deviation (Risk= variability of returns=standard deviation)
3. Treynor ratioTreynor ratio- Mean of the fund- Assured return (risk free return) Beta of portfolio
4. Alpha ratio-
Beta ratioA measure of the volatility or systematic risk, of a security or a portfolio in comparison to the market as a whole. Also known as "beta coefficient". Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2, it's theoretically 20% more volatile than the market. Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk.
Sharpe ratioThe Sharpe Ratio is a measure of the risk-adjusted return of an investment. It was derived by Prof. William Sharpe, now at of Stanford University who was one of three economists who received the Nobel Prize in Economics in 1990 for their contributions to what is now called "Modern Portfolio Theory. He introduced a measure for the performance of mutual funds And proposed the term reward-to-variability ratio to describe it The calculation is pretty straightforward. You invest money in some investment. You then calculate the value of your investment account (including the initial investment plus the profit/loss) periodically, say for example, every month. You then calculate the percentage return in each month. It doesn't matter what kind of investment. It could be simply buying and holding a single stock, or trading several different commodities with several different trading systems. All that matters is the account value at the end of each month.
Then calculate the average monthly return over some number of months, say for example, 24 months, by averaging the returns for the 24 months. You also calculate the standard deviation of the monthly returns over the same period.
Mutual Funds
If the investment was in buying and holding a mutual fund, you will get a number between about 0.5 and 3. They say that a Sharpe Ratio of over 1.0 is "pretty good". Outstanding funds achieve something over 2.0.
Trading Systems
If you are "investing" in a system for trading, you still measure the value of your account with the profit/loss resulting from the trades. You are, in effect sampling the value of the equity curve (plus the initial investment as defined above). An example will clarify this. As above, a Sharpe Ratio of a system of over 2.0 is considered very good. Sharpe Ratios above 3.0 are outstanding. (The Sharpe Ratio reported by services such as Future Truth are calculated in some other way and get other numbers.)
Treynor ratioA ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a risk less investment per each unit of market risk. The Treynor ratio is calculated as: (Average Return of the Portfolio - Average Return of the Risk-Free Rate) / Beta of the Portfolio. In other words, the Treynor ratio is a risk-adjusted measure of return based on systematic risk. It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility. Also known as the "reward-to-volatility ratio".
Alpha ratio1. A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.
2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). 1. Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared, and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these indicators are intended to help investors determine the risk-reward profile of a mutual fund. Simply stated, alpha is often considered to represent the value that a portfolio manager adds to or subtracts from a fund's return. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. 2. If a CAPM analysis estimates that a portfolio should earn 10% based on the risk of the portfolio but the portfolio actually earns 15%, the portfolio's alpha would be 5%. This 5% is the excess return over what was predicted in the CAPM model.
Housing Development Finance Corporation Ltd.$ Finance Bharat Heavy Electricals Ltd. Biocon Ltd. Sun Pharmaceutical Industries Ltd. Total of Top Ten Equity Holdings Total Equity Related Holdings Other Current Assets (Including Reverse Repos' / CBLO) Grand Total Net Assets (Rs. In Lakhs) Industrial Goods
Pharmaceuticals Pharmaceuticals
Portfolio Holdings
Returns
HDFC Growth (NAV as at evaluation date,62.813 Fund Rs. Per unit) Date Period NAV 45.461 Returns(%) $$ ^ 31.83** -16.13* 19.85** 35.31** 45.59** N.A. 26.87** 13.87** 35.02** 38.8** 16.09** 17.6** Benchmark Returns(%)# 21.49** -15.22*
30, Last Six months (18274.895 days) Last 1 Year (36652.3840 days) Last 3 Years (109625.332 days) Last 5 Years (18279.583 days) Last 10 Years (3654N.A days)
May 30, 2007 May 30, 2005 May 30, 2003 May 29, 1998 September 2000
* Absolute Returns ** Compounded Annualised ~ Due to an over all sharp rise in ^ Past performance may or may not be sustained in the future
Fund Size as on Jun 30, 2008 - Fund Size ( Rs. in crores) 4516.6 Asset Allocation as on Jun 30, 2008 Equity Debt Other 98.09% 0.66% 1.25% portfolio diversification
Equity
Company Name Crompton Greaves Ltd Larsen & Toubro Limited Amtek Auto Ltd Reliance
Instrument
No. of Shares
of
Net
Equity Industries Ltd Punj Lloyd Ltd Equity Bharat Heavy Equity
Equity
Equity India CMC Ltd Equity Divis Laboratories Equity Limited Bharti Airtel Ltd Equity Sun Pharmaceuticals Equity Industries Ltd Bank of Baroda Equity Oil & Natural Gas Equity Corpn Ltd United Phosphorus Equity Limited (New) Siemens Ltd Equity Zee Entertainment Equity Enterprises Ltd Hindustan Petroleum Corporation Ltd HT Media Equity
4375741
118.4294
2.62
Equity Limited. Nestle India Ltd Equity Tata Consultancy Equity Services Ltd. Bharat Electronics Equity Ltd AIA Engineering Equity Limited. Wipro Ltd Equity Glaxo Smithkline Equity Consumer Ltd
Dishman Pharmaceuticals & Chemicals Biocon Ltd. ISMT Ltd. Himatsingka Seide Ltd Balkrishna Industries Ltd Reliance Petroleum Ltd Exide Industries Ltd ICICI LTD. Britannia Industries Ltd Infotech Enterprises Limited Jagran Prakashan Ltd Television Eighteen Ltd HDFC BANK Equity Equity Equity Equity Equity Equity Equity Equity Equity 2331574 1595271 7430000 4950245 945640 5000000 10140000 483895 280878 71.2529 70.2557 68.2074 57.7199 57.6651 55.55 48.9762 46.2337 44.2509 1.58 1.56 1.51 1.28 1.28 1.23 1.08 1.02 0.98
Equity
851531
33.8271
0.75
Equity
662436
31.7439
0.7
335000
30.1869
0.67
Fund Pidilite Industries Ltd J K Industries Ltd TV Today Network Ltd ASC Enterprises Ltd Indo
Rama Equity
Synthetics (India)
Ltd Sun
Equity Ltd Shoppers Stop Ltd Equity Motherson Sumi Equity Systems Ltd
OTHERS
Ratios calculated Beta Ratio Sharpe Ratio Alpha Ratio 1.182 1.748 4.170
Objective-
Scheme Performance (%) as on Jul 26 , 200814 days 2.53 1 month 6.78 3 months 14.83 1 year 67.99 3 yrs NA * Inception* 52.98
Fund information-
Type of Scheme Nature of Scheme NAV Inception Date Face Value(Rs/Unit) Fund Size (Rs. in crores) Increase/Decrease (Rs. In crores) Minimum Investment (Rs) Purchase Redemptions NAV Calculation Entry Load
Open Ended Equity 25.419 As On Jul 26, 2008 Apr 19, 2005 10 2989.2549 on Jun 29, 2008 98.181(since May 31, 200) 5000 Daily Daily Amount Bet. 0 to 49999999 then Entry Load is 2.25% and amount greater than rs.5,00,000 then entry load is 0%.
Exit Load
Banks Diversified Computers - Software & Education Pharmaceuticals Electricals & Electrical Equipments Oil & Gas, Petroleum & Refinery Entertainment Telecom Auto & Auto ancilliaries Engineering & Industrial Machinery
17.202% 17.0982% 14.0135% 7.4767% 5.6582% 4.8271% 4.6937% 4.6794% 4.3711% 3.5491%
portfolio diversification
Equity
Market Value % (Rs. in crores) 152.5771 127.2064 110.7267 107.2265 102.2242 94.4443 85.1036 80.8615 69.9941 of Net
Instrument Equity Equity Equity Equity Equity Equity Equity Equity Equity
No. of Shares 867507 1497867 791414 792129 531449 1027518 704296 402316 3218860
Assets 5.28 4.4 3.83 3.71 3.54 3.27 2.94 2.8 2.42
Heavy
Electricals Ltd State Bank of India Infosys Technologies Ltd ICICI BANK LTD. Tata Consultancy Services Ltd. Larsen & Toubro Limited Cipla Ltd
Bank of Baroda Equity Punjab National Equity Bank Grasim Industries Equity Ltd Kotak Mahindra Equity Bank Ltd. Aditya Birla Nuvo Equity Limited. Zee Entertainment Equity Deccan Chronicle Equity Holdings Ltd Hindustan Lever Equity Ltd Satyam Computer Equity Services Ltd Everest Kanto Equity Cylinder Ltd. Dr Reddys Equity
2368973 1170390 238921 993123 399249 1755403 2596088 2622283 1077179 452878
65.3126 62.7153 59.7374 56.8364 55.9547 55.0582 54.388 53.3372 50.6166 48.7931
2.26 2.17 2.07 1.97 1.94 1.9 1.88 1.84 1.75 1.69
739328
47.8456
1.65
Equity Aluminium Ltd HDFC Bank Ltd Equity Gas Authority Of Equity India Ltd UTI Bank Ltd Equity Financial Equity Technologies Crompton Equity Greaves Ltd Jagran Prakashan Equity Ltd Television Equity Eighteen India Ltd Reliance Equity Petroleum Ltd
Tata Motors Ltd Equity Max India Ltd Equity Network Eighteen Equity Fincap Ltd ONGC Equity Aurobindo Equity Pharma Ltd. Gujarat Flourochemicals Ltd HCL technologies Equity
467308
29.2511
1.01
Equity ltd. Raymond Ltd Equity NIIT Ltd Equity ING Vysya Bank Equity Ltd Motherson Sumi Equity Systems Ltd SKF Bearings Equity India Ltd C M C Ltd Equity Gujarat Ambuja Equity Cements Ltd JSW Steel Equity Limited. Lupin Ltd. NTPC Limited. Equity Equity
848958 829675 293500 965130 1972630 524946 199556 2066127 386300 328307 1424059 496607 945915 199201 1273246 1160555 923233
29.2254 27.1096 25.3892 25.1561 24.4606 23.9874 23.7661 23.4299 23.3731 23.3525 22.5713 21.4038 20.8622 20.7956 20.2064 19.0099 17.9615
1.01 0.94 0.88 0.87 0.85 0.83 0.82 0.81 0.81 0.81 0.78 0.74 0.72 0.72 0.7 0.66 0.62
Pantaloo(India) Equity HT Media Equity Limited. Bharat Earth Equity Movers Ltd Power Finance Equity Corporation Ltd ITC Ltd Equity McNally Bharat Equity Engineering
Corporation Marico Industries Ltd Bajaj Auto Ltd Radico-Khaitan Ltd Nucleus Software Exports Ltd KEC International Ltd. Dish TV India Ltd Texmaco Ltd Eicher Motors Ltd Hindustan Construction Company Ltd Infrastructure Leasing LTD Sintex & Financial Services Industries
Equity
643145
13.7762
0.48
Equity
Equity Transformers Ltd) MRF Ltd Equity Aventis Pharma Equity India Ltd. TVS Motor Equity Company Suven Life Equity Science Ltd. Container Corporation Of Equity India Ltd Idea Cellular
36075
8.2383
0.28
641830 1035352.5
8.0774 7.672
0.28 0.27
India Ltd. Shoppers Stop Ltd Equity V I P Industries Equity Ltd McDowell Holdings Equity
Others
Name Cash Instrument Cash Market Value (Rs. in crores) 111.1341 % of Net Assets 3.84
1/4/2007
18.283
1/4/2008
BENCHMARK-BSE200
DATE 1/5/2006 1/6/2006 1/7/2006 1/8/2006 1/9/2006 1/10/2006 1/11/2006 1/12/2006 1/1/2007 1/2/2007 1/3/200 1/4/2007 Index 824.62 890.25 926.4 984.62 1020.29 1108.83 1007.59 1132.92 1187.26 1240.72 1318.85 1446.09 DATE 1/5/2007 1/6/2007 1/7/2007 1/8/2007 1/9/2007 1/10/2007 1/11/2007 1/12/2007 1/1/2008 1/2/2008 1/3/2008 1/4/2008 Index 1521.68 1247.92 1278.05 1273.99 1411.2 1489.46 1569.1 1665.53 1669.59 1711.74 1564.49 1487.13 MEAN SD VARIANCE ANNUALISED RETURN 84.53 40.18 37.96 29.39 38.31 34.33 55.73 47.01 40.63 37.96 18.63 2.84 38.96 18.84 355.06
4.946
3.Reliance Vision fund - Growth Factsheet Objectiveoriented stocks. Seeks to provide long term capital appreciation primarily investing in growth
Top 10 Holdings as on Jun 29, 2008Company Divis Laboratories Limited Larsen & Toubro Limited Reliance Industries Ltd Infosys Technologies Ltd Alstom Projects India Ltd. Reliance Communication. Siemens Ltd Other Equities HDFC Bank Ltd JaiPrakash Associates Ltd. Nature EQ EQ EQ EQ EQ EQ EQ EQ EQ EQ Value (Cr.) 263.27 175.84 173.89 173.61 144.23 139.71 139.54 115.18 114.68 111.15 % 8.48 5.67 5.6 5.59 4.65 4.5 4.5 3.71 3.7 3.58
Fund InformationType of Scheme Nature of Scheme Inception Date Face Value(Rs/Unit) Net Asset Value (Rs/Unit) Fund Size (Rs. in crores) Open Ended Equity Oct 7, 1995 10 220.86 on july2007-2008 3103.37 on Jun 29, 2008
Increase/Decrease since May 31, 2007 (Rs. 133 in crores) Minimum Investment (Rs) Purchase Redemptions NAV Calculation Fund Manager Entry Load 5000 Daily Daily Kunj Bansal Amount Bet. 0 to 19999999 then Entry load is 2.25%. and Amount Bet. 20000000 to 49999999 then Entry load is 1.25%. and Amount greater than 50000000 then Entry load is 0%. If redeemed bet. 0 Months to 6 Months; and Amount Bet. 0 to 49999999 Exit Load then Exit load is 1%. If redeemed bet. 6 Months to 12 Months; and Amount Bet. 0 to 49999999 then Exit load is 0.5%. and Amount greater than 50000000 then Exit load is 0%.
Diversified Computers - Software & Education Pharmaceuticals Auto & Auto ancilliaries Power Generation, Transmission & Equip Banks Telecom Electronics Miscellaneous Housing & Construction
14.2423% 10.3082% 8.4834% 6.4516% 5.889% 5.4907% 4.5019% 4.4962% 3.7114% 3.5816%
portfolio diversification
EQUITY
Company Name Divis Laboratories Limited Larsen & Toubro Limited Reliance Industries Ltd Infosys Technologies Ltd Alstom Projects India Ltd. Reliance Communication Ventures Ltd. Siemens Ltd HDFC Bank Ltd JaiPrakash Associates Ltd. Equity 450000 263.2726 8.48 Instrument No. of Shares Market Value % (Rs. in crores) of Net Assets
Grasim
Equity Industries Ltd Tata Consultancy Equity Television Eighteen Ltd Maruti India Equity Udyog
Ltd Tata Motors Ltd Network Ltd Automotive Axles Ltd State Bank India Hindustan Petroleum Corporation Ltd Gujarat State Fertilizers of
Equity Equity
1200000 365187
58.782 55.7203
1.89 1.8
Equity
2000001
54.13
1.74
Chemicals Ltd Tata Tea Ltd ITC Ltd Bharat Forge Ltd Apollo Tyres Ltd Gujarat Ambuja Cements Ltd Reliance Energy Ltd Deccan Aviation Ltd.
Benchmark-BSE100
DATE Index DATE Index ANNUALISED RETURN 1/5/2006 1/6/2006 1/7/2006 1/8/2006 1/9/2006 1/10/2006 1/11/2006 1/12/2006 1/1/2007 1/2/2007 1/3/2007 3332.31 3611.25 3822.89 4090.31 4218.18 4610.17 4191.1 4731.96 4951.69 5182.28 5523.69 1/5/2007 1/6/2007 1/7/2007 1/8/2007 1/9/200 1/10/2007 1/11/2007 1/12/2007 1/1/2008 1/2/2008 1/3/2008 6344.04 5210.33 5415.86 5418.86 5983.43 6295.82 6639.14 7018.37 7059.84 7233.71 6614.12 90.38 44.28 41.67 32.48 41.85 36.56 58.41 48.32 42.57 39.59 19.74
1/4/2007
6046.49
1/4/2008
4.Franklin India Blue Chip Fund-Factsheet-ObjectiveAims to achieve a high degree of capital appreciation through investments in well-established, large size blue chip companies.
Kotak Mahindra Bank Ltd. Larsen & Toubro Limited Siemens Ltd BHEL HDFC Ltd
EQ EQ EQ EQ EQ
Asset Allocation as on
Equity Debt Money Market
95.41
4.59
Fund Information
Type of Scheme Nature of Scheme Inception Date Face Value(Rs/Unit Net Asset Value (Rs/Unit) Fund Size (Rs. in crores) Open Ended Equity Nov 30, 1993 10 149.1463 As On Jul 16, 2008 2544.3445 on Jun 29, 2008
Increase/Decrease since May 31, 2007 (Rs. -28.7 in crores) Previous Name Pioneer ITI Bluechip - Growth
Minimum Investment (Rs) Purchase Redemptions NAV Calculation Fund Manager Entry Load Exit Load Last Dividend Declared
5000 Daily Daily K. N. Siva Subramanian Entry Load is 2.25%. Exit Load is 0%. 1:1 Bonus / Rights On Mar 24, 2000
portfolio diversification
EQUITY
Company Name Reliance Industries Ltd Grasim Industries Ltd Bharati Tele Ventures Infosys Technologies Ltd Kotak Mahindra Bank Ltd. Larsen & Toubro Limited Instrument No. of Shares Market Value % of Net
(Rs. in crores) Equity Equity Equity Equity Equity Equity 1000000 589837 1759892 734944 2000000 550000 170.03 155.5961 147.1182 141.7854 134.5 120.7827
Siemens Ltd Equity Aditya Birla Equity Nuvo Limited. Bharat Heavy Equity Electricals Ltd Housing Development Finance Corporation Ltd Zee Entertainment Equity Equity
500000
101.51
3.99
Enterprises Ltd ITC Ltd Equity ICICI BANK Equity LTD. Maruti Udyog Equity Ltd Infrastructure Development Finance company Cummins India Equity
5227676
68.7439
2.7
Equity Ltd MICO Equity Tata Consultancy Equity Services Ltd. HDFC Bank Ltd Equity Dr Reddys Equity Laboratories Ltd Hindustan Lever Equity Ltd ABB Ltd Equity Tata Motors Ltd Equity Satyam Computer Services Ltd Reliance Communication Equity Equity
1902806 141376 500000 500000 820874 2845042 480955 765281 1083721 800000
64.6859 63.364 57.4625 57.205 53.8452 53.7286 52.679 51.2547 50.6423 41.364
2.54 2.49 2.26 2.25 2.12 2.11 2.07 2.01 1.99 1.63
Equity
Equity Ltd Cipla Ltd Equity Dish TV India Equity Ltd Nestle India Ltd Equity State Bank of Equity India Asian Paints Equity Limited Canara Bank Ltd Equity
DATE
DATE
Redemption NAV
ANNUALISED RETURN
1/5/2006 1/6/2006 1/7/2006 1/8/2006 1/9/2006 1/10/2006 1/11/2006 1/12/2006 1/1/2007 1/2/2007 1/3/2007 1/4/2007
60.13 63.8 67.8 73.18 77.57 83.91 77.89 87.46 90.68 96.51 104.26 114.84
1/5/2007 1/6/2007 1/7/2007 1/8/2007 1/9/2007 1/10/2007 1/11/2007 1/12/2007 1/1/2008 1/2/2008 1/3/2008 1/4/2008
121.08 98.22 100.88 101.39 111.75 116.9 125.01 130.49 132.85 135.42 123.16 118.0375 Mean SD
101.3637 53.94984 48.79056 38.54878 44.06343 39.31593 60.49557 49.19963 46.50419 40.31707 18.12776 2.784309 45.288 22.604
11778.02 12366.39 13033.04 13844.78 13942.24 14267.18 13159.55 12455.37 Mean SD Variance
49.54 42.18 64.06 54.78 48.48 44.71 24.55 7.70 47.62 20.43 417.54
Ratios calculatedBeta ratioSharpe ratioAlpha ratio CHAPTER 5 INFERENCES DRAWN Table Containing Ratios For Drawing Inferences
Fund name Beta ratio HDFC Equity 1.182 Fund Fidelity Equity 0.959 Sharpe ratio 1.748 1.989 1.638 1.760 Treynor ratio 34.048 38.379 43.707 36.255 Alpha ratio 4.170 4.946 7.604 -6.969
1.097 1.760
Bluechip Fund
Beta Ratio
1.4 1.2 percentages 1 0.8 0.6 0.4 0.2 0 BETA RATIO HDFC Equity Fund Fidelity Equity Fund Reliance Vision Fund Franklin India Blue Chip Fund
return of an investment and it is a measure for the performance of mutual funds and it is also
Higher the ratio, better the fund performance. A Sharpe Ratio of a system of over 2.0 is considered very good. Sharpe Ratios above 3.0 are outstanding. So from the ratios calculated, Fidelity Equity Fund has higher sharpe ratio with lowest standard deviation means with less risk. Sharpe Ratio
2.5 2 percentage 1.5 1 0.5 0 Sharpe Ratio HDFC Equity Fund Fidelity Equity Fund Reliance Vision Fund Franklin India Blue Chip Fund
return based on systematic risk. It is similar to the Sharpe ratio, with the difference being that the Treynor ratio uses beta as the measurement of volatility.it measures returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. Higher the Treynor Ratio,better the fundperformance. So Reliance Vision fund has the highest treynor ratio in comparison to other funds.
Treynor ratio
50 45 40 35 30 25 20 15 10 5 0 Treynor Ratio
HDFC Equity Fund Fidelity Equity Fund Reliance Vision Fund Franklin India Blue Chip Fund
percentage
and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. Higher the alpha ratio,better the funds performance Reliance Vision Fund has highest alpha ratio. So this fund has outperformed its benchmarks index by 7.6%. but franklin India blue chip fund has a negative alpha so this fund is not performing well.
Alpha Ratio
10 8 6 percentage 4 2 0 -2 -4 -6 -8 Alpha Ratio Franklin India Blue Chip Fund HDFC Equity Fund Fidelity Equity Fund Reliance Vision Fund
Threats: Substitute products like bank FDs, RDs etc. New entrants
CHAPTER-7 CONCLUSION
Mutual fund industry is on growth now a days. People are becoming more interested in purchasing mutual funds because they find it less risky and more beneficial compared to direct equity investment. In this project, comparison have been done on the basis of technical ratios which depict riskreturn relationship and by analyzing past years returns of the funds. By analyzing the ratios it has been found out that Fidelity Equity Fund and reliance vision fund is less risky and also giving fair returns. HDFC Equity Fund had performed above average and given consistent returns year over year. Number of foreign AMC's are in the queue to enter the Indian markets.we have approximately 29 mutual funds which is much less than US. There is a big scope for expansion. Mutual fund can penetrate rural like the Indian insurance industry with simple and limited products.
CHAPTER-8 COMPARATIVE STUDY OF THE PRODUCTS OF HDFC AMC WITH ITS COMPETITORS
NAME: NAME OF THE COMPANY: DESIGNATION IN THE COMPANY: CONTACT NO: 1. What is your age? (a) 20-25 (b) 25-30 (c) 30-35 (d) 35-40 (e) Above 40
2. What is your annual income? (a) Less than Rs.100000 (b) Between Rs.100000- Rs.250000 (c) Between Rs.250000- Rs.500000 (d) Above Rs.500000 3. From last how many years are you doing investment? (a) Less than 2 years (b) 3-5 years (c) 5-10 years (d) More than 10 years 4. What kind of investment do you make? (You can tick more than one) (a) Bank (b) Government Securities/Debts (c) Insurance (d) Mutual funds (d) Equity (e) Real Estate (f) Others (please specify) 5. What is your main investment objective? Ranking (1 to 10) (a) Safety (b) Tax saving (c) Returns (d) Capital appreciation
6. For what time period do you do investment? (a) Short term (Up to 1 year) (b) Middle term (1-5 years) (c) Long term (Above 5 years) 7. How much return are you getting? (a) Bank (b) Government Securities/Debts (c) Insurance (d) Mutual funds (d) Equity (e) Real Estate 8. How much risk are you ready to assume in following? (a) Bank (b) Government Securities/Debts (c) Insurance (d) Mutual funds (d) Equity (e) Real Estate 9. Have you ever invested in HDFC Mutual Funds? (a) Yes (b) No 10. In which plan of HDFC, are you doing investment? (a)Equity (i) Mid-cap (ii) Tax-saver (iii) Small-cap (iv) Any other (b) Debt (c) Liquid Fund 11. In HDFC Mutual Funds, in which plan have you opted? (a) SIP (Systematic Investment Plan) (b) Lump sum 12. Why have you choose SIP for doing investment? (a) Long term purpose (b) Monthly saving (c) To reduce risk of fluctuating market (d) Any other
13. Why have you opted lump sum for doing investment? (a) Short period investment (b) Greater returns (c) To take the advantage of arbitrage (buying in lower market and selling in higher market) 14. Are you doing investment in any other company mutual funds? ___________________________ 15. In which plan are you doing investment? ___________________________ 16. Is HDFC products better than any other companys products? If Yes how which product? ___________________________ 17. What you expect from the HDFC Mutual funds? (a) Good returns (b) Monthly statements (c) High dividend (d) Safety (e) Tax-rebate (f) Liquidity (g) Any other and
CHAPTER-9 BIBLIOGRAPHY
1. Books on mutual fundAMFI publications, Investment Analysis and Portfolio
Management by Prasanna Chandra. 2. Journals- ICFAI Publications- Overview on Mutual Funds. 3. Newspapers- The Economic Times, Business Standard. 4. Internet sites a) www.Google.com b) www.mutualfundsindia.com c) www.amfi.com d) www.valueresarchonline.com e) www.investopedia.com f) www.wikipedia.com g) www.answers.com h) www.hdfcfund.com i) www.nribanks.com j) www.mutualfunds.about.com/cs/history/a/fundhistory.htm 5. Mutual fund insight magazine