A PROJECT REPORT ON In-depth analysis of mutual fund policy and strategy in Indian scenario

JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL, KALKAJI

BY: AVROHIT GUPTA (ROLL NO.17)

AT HDFC MUTUAL FUND ST (1 FLOOR, PRAKASH DEEP BUILDING CONNAUGHT PLACE NEW DELHI)

DATE: TO THE DEAN, JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL, KALKAJI, NEW DELHI-19 Dear sir, This is to certify that Mr. Avrohit Gupta, Student of PGDM (2011-2013) Batch has undergone summer internship from 10th May 2012 to 10th July 2012 with us. During the training he has successfully completed a project on In-depth analysis of mutual fund policy and strategy in Indian scenario. His performance during the training period was very good.

Authorized signatory

TO WHOMSOEVER IT MAY CONCERN

This is to certify that AVROHIT GUPTA Enrollment No. 17/PGDMA/KJ/2011/54, Student of PGDM (2011-2013) completed his Project on-In depth analysis of mutual fund policy and strategy in Indian scenario His work is up to my satisfaction and worth appreciation.

Mrs. Shalini Aggrawal Project Guide

ACKNOWLEGEMENT
I am deeply indebted to executive, Assistance Vice President MR. ASHISH ARORA, Assistant Manager MR. RIJU MINHAS and PSG Relationship executive MR. Love Kumar who have always been a source of great help, guidance and inspiration to me. I am greatly inspired by the very good response from a large number of consumers of mutual fund in India. I hope this report will fulfill your expectations. Every effort has been made to reduce to the minimum the printing and calculation mistakes. I sincerely believe that the road to improvement is never ending. Hence, I will look forward to and gratefully acknowledge all suggestions received.

AVROHIT GUPTA ROLL NO. 17SEC.A

s.n. 1 2 3 4

Table of contents particulars page list of illustration executive summary or synopsis objective of study introduction Overview of mutual fund History of mutual fund The role of SEBI in mutual fund INDUSTRY Party involved in mutual fund Nav Advantage of investing mutual fund Types of mutual funds Load or non load fund Pattern of investment Liquidity Asset allocation Investors get certificate or statement of account How do you find out Where can an investor look out for information on mutual funds Types of risks Other important concepts Choosing a funds 5 6 7 8 9 10 11 methodology analysis of mutual fund findings conclusion and recommendation limitation of the study appendix bibliograhy

ABSTRACT
The report titled In depth analysis of mutual fund policies and strategy in Indian scenario is mainly focused towards analyzing the performance of HDFC mutual fund in terms of its product, services and financial health. Product/Schemes were analyzed on the basis of returns, risk profile and portfolio characteristics and compared against best performing funds in the industry. Services offered were analyzed with the help of survey done and the interesting results were interpreted with the objection of suggesting recommendation to the organization for taking strategic decisions. Comparison was also done of mutual funds with other investment avenues like Bank Deposits, Shares, Gold etc. to enable retail investors for taking informed decision while investing. Financial health of the HDFC Funds Management Pvt. Ltd was also analyzed with the help of Ratio Analysis and compared against two other major players in the industry. Last, but not the least all experience and learning is mentioned in the report which I had during my summer training of 8weeks at HDFC Funds Management Pvt. Ltd and would not be possible in a class room education.

INTRODUCTION
All over the world mutual fund is one of the most popular instruments for investment. Its popularity with consumer has dramatically increased over the last couple of the years worldwide; the mutual fund has a large and successful history. In developed financial market like US, mutual fund has almost overtaken bank deposits and total assets of insurance funds. The mutual fund industry in India is regulated by SEBI (Security Exchange Board of India). The mutual fund industry in India is of Rs. 587,217 Crore. Which was shrinkage over 8.5% from Rs.641,937 Crore to Rs.587,217 Crore till march 2012, Out of which HDFC mutual fund size itself is for Rs.88,731.07 Crore.

OBJECTIVES :
The project is directed to some particular targets and the main objectives are stated below: To understand the profile of the Indian Mutual Fund industry (introduction, history, benefits, and types of Mutual Fund). To understand the mechanism of investments through Mutual Funds. To understand the Schemes, Plans and Options offered by HDFC Asset Management Co. Ltd. To compare the peer group in a particular segment and analyze similar schemes of different AMCs with respect to their risks and returns.

METHODOLOGY

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Introduction
A mutual fund is a collective investment that allows many investors, with a common objective, to pool individual investments and give to a professional manager who in turn would invest these monies in line with the common objective . It is the connecting bridge or a financial intermediary that allows a group of investors to pool their money together with a predetermined investment objective. The mutual fund will have a fund manager who is responsible for investing the gathered money into specific securities (stocks or bonds). When you invest in a mutual fund, you are buying units or portions of the mutual fund and thus on investing becomes a shareholder or unit holder of the fund.

Mutual funds are considered as one of the best available investments as compare to others they are very cost efficient and also easy to invest in, thus by pooling money together in a mutual fund, investors can purchase stocks or bonds with much lower trading costs than if they tried to do it on their own. But the biggest advantage to mutual funds is diversification, by minimizing risk & maximizing returns.
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HISTORY OF MUTUAL FUNDS The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases. First Phase 1964-87 Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 Crores of assets under management. Second Phase 1987-1993 (Entry of Public Sector Funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

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At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 Crores. Third Phase 1993-2003 (Entry of Private Sector Funds) With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and 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. 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 ahead of other mutual funds. Fourth Phase since February 2003 In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs.29, 835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The
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Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations. The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76, 000 Crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. At the end of September 2004, there were 29 funds, which manage assets of Rs.1, 53,108 Crores under 421 schemes. The graph indicates the growth of assets over the years.

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ADVANTAGES AND LIMITATION OF MUTUAL FUNDS:

ADVANTAGES :

There was a time when things were quite simple - the market went up with the arrival of the first monsoon showers and every year around Diwali. Since India started integrating with the world (with the start of the liberalization process), complex factors such as an increase in shortterm US interest rates, the collapse of the Brazilian currency or default on its debt by the Russian government, have started having an impact on the Indian stock market. Although it is possible for an individual investor to understand Indian companies (and investing) in such an environment, the process can become fairly time consuming. Mutual funds (whose fund managers are paid to understand these issues and whose asset Management Company invests in research) provide an option of investing without getting lost in the complexities.

Following are some benefits in investing in Mutual Funds:

Professional management

Mutual funds hire full-time, high-level investment professionals. Funds can afford to do so as they manage large pools of money. The managers have real-time access to crucial market information and are able to execute trades on the largest and most cost-effective scale.

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Diversification

Mutual funds invest in a broad range of securities. This limits investment risk by reducing the effect of a possible decline in the value of any one security.

Low Cost A mutual fund lets you participate in a diversified portfolio for as little as Rs.5, 000/-, and sometimes less. And with a no-load fund, you pay little or no sales charges to own them. Convenience and Flexibility

You own just one security rather than many; yet enjoy the benefits of a diversified portfolio and a wide range of services.

Personal Service Mutual fund also provide you a personal assistance that will help you a buying and selling your fund units and gives you a information regarding market. Liquidity In open-ended schemes, you can get your money back promptly at net asset value related prices from the mutual fund itself. With close-ended schemes you can sell your unit at stock exchange at prevailing market price or avail of the facility of direct purchase at NAV related prices which close-ended schemes offers periodically.

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Transparency

You get regular information on the value of your investment in addition to disclosure on the specific investments made by the mutual fund scheme. Tax Deferral Mutual funds offer options, whereby the investor can let the moneys grow in the scheme for several years. By selecting such options, it is possible for the investor to defer the tax liability. Tax benefits Some of the scheme in mutual fund gives you a benefit of deduction u/s80c. Interest and dividend income earned in mutual fund are exempt for Tax. Choice of schemes

Mutual Funds offer a family of schemes to suit your varying needs over lifetime. Well regulated

All mutual funds are register with SEBI and they functions within the provisions of strict regulation design to protect interest of investor. The operations of Mutual funds are regularly monitored by SEBI.

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LIMITATION OF MUTUAL FUND There are certainly some benefits to mutual fund investing, but you should also be aware of the drawbacks associated with mutual funds.

Lack of portfolio customization Some securities houses offer Portfolio Management Schemes (PMS) to large investors. In a PMS, the investor has better control over what securities are bought and sold on his behalf. On the other hand, a unit-holder is just one of several thousand investors in a scheme. Once a unit-holder has bought into the scheme, investment management is left to the fund manager (within the broad parameters of the investment objective). Choice overload Over 800 mutual fund schemes offered by 38 mutual funds and multiple options within those schemes make it difficult for investors to choose between them. Greater dissemination of industry information through various media and availability of professional advisors in the market should help investors handle this overload.

No control over costs All the investor's moneys are pooled together in a scheme. Costs incurred for managing the scheme are shared by all the Unit holders in proportion to their holding of Units in the scheme. Therefore, an individual investor has no control over the costs in a scheme.

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REGULATORY FRAMEWORK
SEBI - the Capital Markets Regulator The Government of India constituted Securities and Exchange Board of India, by an Act of Parliament in 1992, s the apex regulator of all entities that either raise funds in the capital markets or invest in capital market securities such as shares and debentures listed on stock exchanges. Mutual funds have emerged as an important institutional investor in capital market securities. Hence they come under the purview of SEBI. SEBI requires all mutual funds to be registered with them. It issues guidelines for all mutual fund operations including where they can invest, what investment limits and restrictions must be complied with, how they should account for income and expenses, how they should make disclosures of information to the investors and generally act in the interest of investor protection. To protect the interest of the investors, SEBI formulates policies and regulates the mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines from time to time. MF either promoted by public or by private sector entities including one promoted by foreign entities is governed by these Regulations. SEBI approved Asset Management Company (AMC) manages the funds by making investments in various types of securities. Custodian, registered with SEBI, holds the securities of various schemes of the fund in its custody. According to SEBI Regulations, two thirds of the directors of Trustee Company or board of trustees must be independent. The Association of

19

Mutual Funds in India (AMFI) reassures the investors in units of mutual funds that the mutual funds function within the strict regulatory framework. RBI the Money Markets Regulator RBI as Supervisor of Bank-owned Mutual Funds: Public sector banks started the first non-UTI mutual funds. Banks come under the regulatory jurisdiction of the RBL Therefore; the operations of bank-owned mutual funds were governed by guidelines issued by the Reserve Bank of India. Subsequently, it has been clarified that all mutual funds, being primarily capital market players, come under the regulatory umbrella of SEBI. It is generally understood that all market related and investor related activities of the funds are to be supervised by SEBI, while any issues concerning the ownership of the AMCs by banks fall under the regulatory ambit of the RBI. For example, if banks as fund sponsors have offered assured return schemes, RBI would have to review the capital adequacy and financial implications of the guaranteeing bank. Any fund mergers of banksponsored funds with others will also involve RBI approvals. However, the RBI no longer issues guidelines on bank-owned funds' operations. While RBI controls call market access and the money market instruments, liquid funds that invest in money market instruments are now governed by SEBI alone. MMMFs or liquid schemes of registered mutual funds a e regulated by SEBI through the same guidelines issued for other mutual funds, i.e. SEBI (MF) Regulations, 1996. Recently, the RBI has decided to disallow all non-banking entities access to the inter-bank call money market. This means that liquid funds cars no longer invest in the call money market. Earlier, RBI had given sufficient time for market participants on both lending and borrowing side to adjust their portfolios without any disruption in the market.
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Types of Funds: Types of Schemes Disclaimer

Open-ended funds Open ended funds are the fund where the investor enter and exit any time. When existing investors buy additional units or new investors buy units of the open ended scheme, it is called a sale transaction. It happens at a sale price, which is equal to the NAV. When investors choose to return any of their units to the scheme and get back their equivalent value, it is called a re-purchase transaction. This happens at a re-purchase price that is linked to the NAV. Close-ended funds Close ended funds have a fixed maturity. Investors can buy units of a closeended scheme, from the fund, only during its NFO. The fund makes arrangements for the units to be traded, post-NFO in a stock exchange. Therefore, after the NFO, investors who want to buy Units will have to find a seller for those units in the stock exchange. Similarly, investors who want
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to sell Units will have to find a buyer for those units in the stock exchange. Since post- NFO, sale and purchase of units happen to or from a counterparty in the stock exchange and not to or from the mutual fund the unit capital of the scheme remains stable. Interval funds Interval funds combine features of both open-ended and close ended schemes. They are largely close-ended, but become open ended at prespecified intervals.

Actively Managed Funds and Passive Funds : Actively managed funds:

Actively managed fund are funds where the fund manager has the flexibility to choose the investment portfolio, within the broad parameters of the investment objective of the scheme.

Passive funds:
Passive funds invest on the basis of a specified index, whose performance it seeks to track. Thus, a passive fund tracking the BSE Sensex would buy only the shares that are part of the composition of the BSE Sensex

Debt, Equity and Hybrid Funds :

A scheme might have an investment objective to invest largely in

equity shares and equity-related investments like convertible debentures. Such schemes are called equity schemes.
Schemes with an investment objective that limits them to investments in

debt securities like Treasury Bills, Government , Bonds and Debentures are called debt funds.
Hybrid funds have an investment charter that provides for a reasonable

level of investment in both debt and equity.

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Types of Debt Funds :

Gilt funds invest in only treasury bills and government securities, which do not have a credit risk (i.e. the risk that the issuer of the security defaults). Diversified debt funds on the other hand, invest in a mix of government and non-government debt securities. Junk bond schemes or high yield bond schemes invest in companies that are of poor credit quality. Fixed maturity plans are a kind of debt fund where the investment portfolio is closely aligned to the maturity of the scheme. Further, like close-ended schemes, they do not accept moneys post-NFO. Floating rate funds invest largely in floating rate debt securities i.e. debt securities where the interest rate payable by the issuer changes in line with the market. Liquid schemes or money market schemes are a variant of debt schemes that invest only in debt securities where the moneys will be repaid within 91days.

Types of Equity Funds

Diversified equity fund is a category of funds that invest in a diverse mix of securities that cut across sectors. Sector funds however invest in only a specific sector. Thematic funds invest in line with an investment theme. For example, an infrastructure thematic fund might invest in shares of companies that are into infrastructure construction, infrastructure toll-collection, cement, steel, telecom, power etc. Equity Linked Savings Schemes (ELSS), as seen earlier, offer tax benefits to investors. However, the investor is expected to retain the Units for at least 3 years.
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Equity Income / Dividend Yield Schemes invest in securities whose shares fluctuate less, and therefore, dividend represents a larger proportion of the returns on those shares. The NAV of such equity schemes are expected to fluctuate lesser than other categories of equity schemes. Arbitrage Funds take contrary positions in different markets / securities, such that the risk is neutralized, but a return is earned. For instance, by buying a share in BSE, and simultaneously selling the same share in the NSE at a higher price. Types of Hybrid Funds : Monthly Income Plan seeks to declare a dividend every month. It therefore invests largely in debt securities. However, a small percentage is invested in equity shares to improve the schemes yield. Capital Protected Schemes are close-ended schemes, which are structured to ensure that investors get their principal back, irrespective of what happens to the market. This is ideally done by investing in Zero Coupon Government Securities whose maturity is aligned to the schemes maturity.

Gold Funds :
These funds invest in gold and gold-related securities. They can be structured in either of the following formats: Gold Exchange Traded Fund, which is like an index fund that invests in gold. The structure of exchange traded funds is discussed later in this unit. The NAV of such funds moves in line with gold prices in the market. Gold Sector Funds i.e. the fund will invest in shares of companies engaged in gold mining and processing. Though gold prices influence these shares, the prices of these shares are more closely linked to the profitability and gold reserves of the companies.

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Real Estate Funds :

They take exposure to real estate. Such funds make it possible for small investors to take exposure to real estate as an asset class. Although permitted by law, real estate mutual funds are yet to hit the market in India.

International Funds :
These are funds that invest outside the country. One way for the fund to manage the investment is to hire the requisite people who will manage the fund. Since their salaries would add to the fixed costs of managing the fund, it can be justified only if a large corpus of funds is available for such investment. An alternative route would be to tie up with a foreign fund (called the host fund). If an Indian mutual fund sees potential in China, it will tie up with a Chinese fund. In India, it will launch what is called a feeder fund. Investors in India will invest in the feeder fund. The moneys collected in the feeder fund would be invested in the Chinese host fund. Thus, when the Chinese market does well, the Chinese host fund would do well, and the feeder fund in India will follow suit.

Fund of Funds :
The feeder fund was an example of a fund that invests in another fund. Similarly, funds can be structured to invest in various other funds, whether in India or abroad. Such funds are called fund of funds

Exchange Traded Funds :

Exchange Traded funds (ETF) are open-ended index funds that are traded in a stock exchange. A feature of open-ended funds, which allows investors to buy and sell units from the mutual fund, is made available only to very large investors in an ETF.
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INVESTMENT PLANS IN MUTUAL FUND INDUSTRY :

The term 'investment plans in context with mutual funds generally refers to the portfolio flexibility that the funds provide to investors offering different ways to invest or reinvest. The different investment plans are an important consideration in the investment decision, because they determine the level of flexibility available to the investor Alternate investment plans offered by a fund allow the investors freedom with respect to investing one time or at regular intervals, making transfers to different schemes within the same fund family, or receiving income at specified intervals or accumulating distributions. Below, are some of the investment plans offered by mutual funds in India:

Automatic Reinvestment Plans (ARP) Many funds offer two options under the same scheme - the Dividend Option and the Growth Option. The Automatic Reinvestment Plan allows the investor to reinvest the amount of dividends or other distributions made by the fund in the same fund and receive additional units, instead of receiving them in cash. Reinvestment takes place at the ex-dividend NAV. The ARP ensures that the investor reaps the benefit of compounding in his investments. Some funds allow reinvestment into other schemes offered by the same mutual fund. Systematic Investment Plans (SIP)

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These require the investor to invest a fixed sum periodically, thereby letting the investor save in a disciplined and phased manner. The mode of investment could be through direct debit to the investor's salary or bank account. Such plans are also known as Systematic Investment Plans. Systematic Withdrawal Plans (SWP) Such plans allow the investor to make systematic withdrawals from his fund investment account on a periodic basis, thereby providing the same benefit as regular income. The investor must withdraw a specific minimum amount with the facility to have withdrawal amounts sent to his residence by a cheque or credited directly into his bank account. Systematic Transfer Plans (STP) These plans allow the investor to transfer on a periodic basis a specified amount from one scheme to another within the same fund family-meaning two schemes managed by the same AMC and belonging to the same mutual fund.

RISK V/S. RETURN : The Risk-Return Trade-off

The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Market Risk:

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Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this risk. Credit Risk: The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cash flows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. A AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk. Inflation Risk: Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified portfolio with some investment in equities might help mitigate this risk. Interest Rate Risk: In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise, the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk. Political/Government Policy Risk:

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Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. or vice versa.

MEASURES OF PERFORMANCE OF A MUTUAL FUND : NAV Calculation :

Net Assets are calculated as = Market value of investments + Current assets and other assets + Accrued income Current Liabilities and other liabilities Accrued expenses.
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NAV = Net Assets of the fund / No. of units (outstanding in the books of the fund)

The major factors affecting the NAV of a fund are: Sale and purchase of securities. Sale and repurchase of units. Valuation of assets. Accrual of income and expenses.

Interpretation of Ratios :
Sharpe Ratio: Sharpe ratio gives a single value to be used for the performance ranking of various funds or portfolios. It measures the risk premium of the portfolio relative to the total amount of risk in the portfolio. This risk premium is the difference between the portfolio's average rate of return and the risk-free rate of return. Formula Where: (Rp- Irf) SDp Rp stands for return on portfolio : Irf means Risk free rate of return which in India is considered either to be the bond rate or 181 days Treasury bill. : SDp is the Standard deviation of portfolio, which is the total risk. The advantage of Sharpe ratio is that it assigns highest values to assets that
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have best risk adjusted average rate of return. It is also known as reward to volatility ratio.

Expense

ratio:

It measures expenses incurred by the investment company to operate mutual funds. The costs of owning a fund are called the expense ratio. This is distinct from the costs of buying a fund, which are the sales loads. The expense ratio represents the percentage of funds assets that go purely towards the expense of running the fund. The expense ratio covers the fees paid to fund manager, costs incurred in record keeping, custodial services, taxes, legal expenses, audit fees, accounting fees. It is also known as management expense ratio. Operating expense includes the fees paid to fund manager, costs incurred in record keeping; custodial services, taxes, legal expenses, audit fees accounting fees.

Alpha: Alpha takes the volatility in price of a mutual fund and compares its risk adjusted performance to a benchmark index. The excess return of the fund relative to the returns of benchmark index is a fundamental ALPHA. It is calculated as a return which is earned in excess of the return generated by CAPM. 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
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index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%. If a CAPM analysis estimates that a portfolio should earn 35% return based on the risk of the portfolio but the portfolio actually earns 40%, the portfolio's alpha would be 5%. This 5% is the excess return over what was predicted in the CAPM model. This 5% is ALPHA.

Beta measures the sensitivity of the stock to the market. For example if beta=1.5; it means the stock price will change by 1.5% for every 1% change in Sensex. It is also used to measure the systematic risk. Systematic risk means risks which are external to the organization like competition, government policies. They are non-diversifiable risks. The best index fund will have beta value equal to the market namely

If beta>1 then aggressive stocks If beta<1 then defensive stocks If beta=1 then neutral

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HDFC (AMC) ASSET MANAGEMENT COMPANY

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
33

letter

dated

July

3,

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 HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 25.169 crore. The present equity shareholding pattern of the AMC is as follows:

Particulars Housing Development Finance Corporation Limited Standard Life Investments Limited Other Shareholders (shares issued on exercise of Stock Options)

% of the paid up equity capital 59.98 39.99 0.03

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CONSTITUENTS: Products: SPONSOR: HDFC (HOUSING DEVELOPMENT Market Value of Investment: 1200*14.9=Rs.17800 FINANCECORPORATION) Children's Gift Fund of Fund Schemes Fund Invests primarily TRUSTEE: HDFC TRUSTEE COMPANY LIMITED in other Children's Gift scheme(s) of the same Fund mutual fund or AMC: HDFC Asset Management Company Limited other mutual funds Debt/ Income Fund Invest in money market Fixed Maturity Plan CUSTODIAN: The and debt instruments and Bank Of Nova Scotia Invest primarily in Debt / provide optimum balance Money Market of yield. Instruments and Government Securities. REGISTRAR AND TRANSFER AGENT: Computer Growth Fund Equity / Age Management Service Pvt.Ltd(CAMS) Invest primarily in equity and equity related instruments. IMPORTANT CONCEPT: Liquid Funds Provide high level of liquidity by investing in money market and debt instruments.

Exchange Traded Funds Systematic Investment Plan(SIP): Invest primarily in equity and equity related Quarterly Interval Fund A Systematic Investment Plan lets an Investor to invest in small amount in instruments. Generate regular income mutual funds on a regular basis. It gives you a lot of flexibility and is a very convenient way of building a large corpus overthrough investments in a period of time. In mutual Debt Money amount fund terminology, SIP allows the investors to invest/ a fixed Market every Instruments.. month or quarter for purchasing additional units of the scheme at NAV based prices. Also Investment in SIP offers a unique advantage of Rupee-Cost Averaging. Lets Explain it, Suppose if you invest an equal amount of money every month in a mutual fund, you engaging in Rupee-Cost Averaging. When price are high, NAV is high-so you get less units or Vice-Versa. At the end , If you were to buy all units at once you risk getting less for your money. Lets Take an example, Suppose an Investor Invest Rs.1000 per month under SIP. Using SIP strategy the investor can reduce his average cost per unit. The Investor Gets the advantage of getting more units when the market has turned downwards. MONTHLY INTIAL INVESTMENT AMOUNT 1000 PURCHASE PRICE 10 NO. OF UNITS 35 PURCHASED 100

One Time Investment Rs.12000 Benefit of Rs. 21395-17880=Rs.3515 Option available while investing in EQUITY SCHEME: Some confusion and misconceptions still persist in the mind of many investors regarding opt for GROWTH OPTION OR DIVIDEND OPTION; If the investor opt Dividend than further they have to opt either Payout or Reinvestment. Let us look at the detailed example below: Say you have Rs.10000 to invest You have two choices-Fund A (NAV Rs.10) and Fund B (NAV Rs. 40) After 1year both funds have appreciated by 30% Now under the Dividend Option Fund A declared 20% Dividend and Fund B declared 80% Dividend. After another 1year, both funds have appreciated by another 20%. FUND A: Growth option Amount Invested 10000 0 0 NAV UNITS Dividend Balance Total Payout Units Value 10 13 15.6 1000 0 0 0 0 0 1000 1000 10000 10000 13000 15600

1st Initial Investment JAN.05 1st 30% Appreciation JAN.06 1st 20% Appreciation JAN.07

Dividend Payout Option Amount NAV Units Invested

Dividend Balance Total Value Payout Units

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1st JAN.05 1st JAN.06

Initial Investment 30% Appreciation 20% Dividend

10000 0 0 0

10 13 11 13.2

1000 0 0 0

0 0 2000 2000

1000 1000 1000 1000

10000 13000 13000 15200

1st 20% JAN.07 Appreciation Dividend Reinvestment 1st Initial JAN.05 Investment 1st 30% JAN.06 Appreciation 20% Dividend 1st 20% JAN.07 Appreciation

10000 0 0 0

10 13 11 13.2

1000 0 181.8 1 0

0 0 0 0

1000 1000 1181.8 1 1181.8 1

10000 13000 13000 15600

As can be seen from the above example, its makes no difference to the final returns whether one invests in a Growth or a Dividend Reinvestment Option. The returns are low in Dividend Payout, because the dividend amount does not get reinvested. FUND B: Growth option 1st Jan.05 1st Jan.06 1st Jan.07 Amount NAV Units Dividend Balance Total Invested Payout Units Value 10000 40 250 0 250 10000 52 62.4 0 0 0 0 250 250 13000 15600

Initial Investment 30% 0 Appreciation 20% 0 Appreciation

Dividend

Payout Amount NAV Units Dividend Balance Total

37

Option 1st Jan.05 1st Jan.06

Initial Investment 30% 0 Appreciation 80% 0 Dividend st 1 20% 0 Jan.07 Appreciation Dividend Reinvestment 1st Initial Jan.05 Investment 1st 30% Jan.06 Appreciation 80% Dividend st 1 20% Jan.07 Appreciation

Invested 10000 40 52 44 52.8

250 0 0 0

Payout 0 0 2000 0

Units 250 250 250 250

Value 100000 13000 13000 15200

10000 0 0 0

40 52 44 52.8

250 0 45.5 0

0 0 0 0

250 250 295.45 295.45

10000 13000 13000 15600

IT will be clear that: Both Growth and Dividend Reinvestment Options are same return. Dividend Payout is somewhat inefficient as you lose the chance of compounding your return. NAV of the fund is also irrelevant. Your returns are same whether you invest in a low NAV fund or a high NAV fund.

CASE ANALYSIS:
38

3.1 DATA INTERPRETATION Risk Returns Analysis and comparison study of Funds In this section, a sample of HDFC Equity related Funds have been studied, evaluated and analysed. This study could facilitate to get a fair comparison. The expectations of the study are to give value to the funds by keeping the risk in the view. Here Equity Funds are taken as they bear high returns with high risk. Following are the products of HDFC Mutual Fund, Which have been taken the evaluation purpose. HDFC Equity Fund Growth Option HDFC Growth Fund HDFC Top 200 Fund

HDFC EQUITY FUND Investment objective The Investment objective of the scheme is to achieve long term capital appreciation. Basic scheme Information Nature of the Scheme Inception Date Option/Plan ENTRY LOAD (Purchase/Additional Purchase/Switch-In) EXIT LOAD Open Ended Growth Scheme Jan 01,1995 Dividend Option, Growth Option NIL (With Effect From August 1,2009) NIL(Except in case of short term)
39

Minimum Application Amount

Lock-In-Period Net Asset Value Periodicity Redemption proceeds

Rs.5000 and in multiple of Rs.100 Thereof to open an Account/Folio. Additional Purchase is Rs.1000 and in multiple of Rs.100 Thereof Nil Every Business Day Dispatched With-In 3-4 Working days

INVESTMENT PATTERN: The Asset allocation under the scheme will be as follows: SR. No. 1. 2. Types of Instruments Normal allocation(%of Net Asset) Equities and Equities 80-100 Related Instruments Debt Securities, Money market instrument & cash 0-100 Risk Profile Medium to High Low to Medium

Investment in Securitized debt, if undertaken, would not Exceed 20%of the asset of the Scheme. The Scheme may also invest upto 25% of net asset of the scheme in derivatives such as Future & Options and such other derivatives instruments as be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the regulations. INVESTMENT STRATEGY & RISK CONTROL In order to provide long term capital appreciation, the scheme will invest predominantly growth companies. Companies selected under this portfolio would as far as practicable consist of medium to large sized companies which are likely achieved above average growth. The aim will is to build a portfolio, which represent a cross-section of the strong growth companies in the prevailing market. In order to reduce the risk of volatility, the scheme will diversify across major industries and economic sectors.
40

BENCHMARK INDEX: S&P, CNX 500, HDFC Equity, Which is benchmarked to S&P CNX 500 Index, is not sponsored, Endorsed, Sold or Promoted By Indian Index Service & Products. Fund Manager: Mr. PRASANT JAIN PORTFOLIO Top 10 Holding NAV =Rs.242.224 Company Industry Equity & Equity Related State bank of India Banks ICICI Bank Ltd. Banks ITC Ltd. Consumer Non-Durable Infosys Ltd. Software Tata Motors Ltd . DVR Auto Oil & Natural Gas Oil Corporation Ltd. Larsen & Toubro ltd. Construction Project Bharti Airtel Ltd. Telecom Bank Of Baroda Banks Tata steel Ltd. Ferrous Metals Total of top 10 Equity & Equity Related Holdings Total Equity & Equity Related Holdings Cash, Cash Equivalents and Net Current Assets Grand Total Average AUM for the Quarter Ended March 31,2012(Rs. In lakhs) %to NAV 9.63 5.58 5.34 5.06 4.24 3.06 2.92 2.84 2.84 2.80 44.31 99.04 0.96 100 991636.92

SCHEME PERFORMANCE: A: Cumulative performance Date Period NAV Scheme Benchmar Additional Value RS.10000
41

per unit Returns k Returns Mar. 30,11 Mar. 30,10 Mar. 30,09 Jan 01,95 Last 1 year Last 2 year Last 3 year Since inceptio n 282.578 -7.40 235.826 5.33 106.712 34.81 10 20.83 -8.19 -1.06 23.14 8.87

Benchmar Of k Returns Investment -8.50 9,260 9,181 .031 21.13 N.A 11,096 9,788

9,150 10,063

24,521 18,685 17,781 261,67 43,349 N.A 3

B. Discrete 12Months returns (%) Period Mar30,11 Mar30,12 Mar30,10 Mar30,11 Mar30,09 Mar30,10 Scheme to -7.40 to 19.82 to 120.99 Benchmark -8.19 6.61 90.89 Additional Benchmark -8.50 9.98 76.70

HDFC GROWTH FUND: Investment objective The primary investment objective of the scheme is to generate long term capital appreciation from a portfolio that is invested predominantly in Equity & Equity related instruments. Basic Scheme Information from a portfolio that is invested predominantly in Equity & Equity related instruments. Basic Scheme Information Nature of scheme Inception Date Open Ended Growth Scheme Sep 11,2000
42

Option/Plan Entry Load (Purchase/Additional purchase/Switch-in) Exit Load (As a % of the Applicable NAV) Minimum Application Amount

Dividend Option, Growth option NIL (With effect from August 1,2009) NIL Rs.5000 and in Multiple of Rs100 thereof to open an account/folio. Additional purchase is Rs.1000 and in multiple of Rs.100 thereof Nil Every Business Day Normally Dispatched within 3 business days

Lock-In-Period Net Asset Value Periodicity Redemption Proceeds INVESTMENT PATTERN:

The corpus of the scheme will be invested primarily in Equity & Equity related instruments. The scheme may invest a part of its corpus in Debt and Money market instruments, in order to manage its Liquidity requirement from time to time, and under certain circumstances, to project the interest of the Units holders. The asset allocation under the scheme will be as follows: SR No. Type of Instrument 1 2. Normal allocation(%of net asset) Equities & Equities related 80-100 instruments Debt securities, Money 0-100 market Instrument & Cash Risk Profile Medium to High Low to Medium

INVESTMENT STRATEGY & RISK CONTROL The investment approach will be based on a set of well-established but flexible principles emphasis the concept of sustainable economic earnings and cash return on Investment as the means of valuation of companies. In summary, the Investment strategy is expected to be a function of extensive
43

research and based on data and reasoning, rather than current fashion and emotion. The objective will be to identify businesses with superior growth prospects good management, at a reasonable price. Benchmark Index: SENSEX Fund Manager: Mr. Shrinivas Rao PORTFOLIO Top 10 Holdings: NAV Growth option: 79.134 Dividend option: 25.286 Company Equity & Equity related Infosys Ltd. ICICI Bank Ltd. Reliance Industry Ltd. ITC Ltd. Industry % to NAV 8.09 6.38 6.05 5.80 5.79 5.47 5.17 4.60 4.32 3.18 54.85 97.83 2.17 100 126195.48

Software Banks Petroleum Consumer NonDurable Bharat petroleum Corporation Petroleum Ltd. SBI Banks Divis Laboratories Ltd. Pharmaceuticals HDFC Ltd. Finance Solar Industries India Ltd. Chemicals Bharti Airtel Ltd. Telecom Total of Top10 Equity & Equity related holdings Total Equity & Equity related Holdings Cash, Cash Equivalents and Net Current Asset Grand Total Average AUM For the Quarter Ended Mar31,2012(Rs.in Lakhs)

SCHEME PERFORMANCE:
44

A: CUMULATIVE PERFORMANCE B: Discrete 12month return (%) Date Period Period NAV Per Mar30,11 tounits Scheme Bench Scheme Returns mark return -2.61 (%) Additional Value of Investment of Rs.10000 Benchmark Additional Benchmark Benchmark Returns(%) -9.78 -8.50 9.66 83.84 -9.78 -0.53 22.05 12.00 -8.50 0.31 21.13 11.582 Scheme Benchmark Addition 9.98 al Benchma 76.70 rk 9,739 9,022 9,150 11,469 22,439 85,446 9,894 18,190 37,057 10,063 17,781 36,362

Mar30, 11 Mar30, 10 Mar30, 09 Sep11, 00

Mar30,12 Mar30,10 to 17.76 Mar30,11 Mar30,09 to 95.66 Mar30,10 Last 87.73 -2.61 1year 6 Last 74.50 7.08 2year 4 Last 38.07 30.89 3year 9 Since 1000 20.40 inception 0 HDFC TOP 200 FUND

INVESTMENT OBJECTIVE: The Investment objective is to generate long-term capital appreciation from a portfolio of Equity & Equity linked instruments. The investment portfolio for Equity & Equity linked instruments will we primarily drawn from the companies in the BSE 200 Index. Further the Scheme may also invest in listed companies the would quality to be in the top 200 by market capitalisation on the BSE even though they may not be listed on the BSE this includes participation in large IOPOs where in the market capitalisation of the company based on issue price would make the company a part of the Top 200 Companies Listed on the BSE based on Market capitalisation. Basic Scheme Information Nature of Scheme Inception Date Option/Plan Entry Load Open Ended Equity Growth Scheme Oct11,1996 Dividend Option, Growth Option NIL
45

(Purchase/Additional Purchase/Switch-In) Exit Load Minimum Application Amount

(With effect from August 1,2009) NIL Rs.5000 and in multiple of Rs.100 thereof to open an account/folio. Additional purchase is Rs.1000 and in multiple of Rs.100 thereof.. NIL

Lock-In-Period Investment Pattern:

The asset allocation under the scheme will be as follows: Sr. No. 1 Asset Type Equities & Equities related instruments (% of Portfolio) Risk Profile Upto 100% Medium to High (Including use of derivatives for hedging and other uses as permitted by prevailing SEBI Regulation) Debt securities, Balance in debt Low to Medium Money Market & Money Market Instruments & Instrument cash

Investment in securitized debt, If undertaken, Would not Exceeds 20% of the Net Assets of the Scheme. The Scheme may also invest upto25% of Net Asset of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of Hedging and Portfolio balancing and other uses as may be permitted under the regulations and guidelines. Investment Strategy & Risk Control The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risk while maintaining steady growth. Stock specific risk will be minimized by the investment managers
46

research team. Risk will also be reduced through diversification of the portfolio. Benchmark Index: BSE 200 FUND MANAGER: Mr. Prashant Jain PORTFOLIO-Top 10 Holdings Company Equity & Equity Related SBI Infosys Ltd. ITC Ltd. Industry % of NAV 8.96 5.95 5.80 5.69 4.03 309 3.08 3.07 2.96 2.81 45.44 98.52 1.48 100 1,138,105,57

Banks Software Consumer NonDurable ICICI Bank Ltd. Banks Tata Motors Ltd. DVR Auto Tata consultancy services Ltd. Software Larsen & Toubro Ltd. Construction Project HDFC Bank Ltd. Banks Bharti industries Ltd. Telecom Reliance industries Ltd. Petroleum Total of Top Ten Equity & Equity Related holdings Total Equity % Equity Related holdings Cash, Cash Equivalents and Net Current Assets Grand Total Average AUM for the quarter Ended Mar31,12(In-Lakhs) SCHEME PERFORMANCE: A: CUMULATIVE PERFORMANCE: Date

Period NAV Scheme Benchmar Additional Value of investment of Rs.10000 per Returns k Returns Benchmark units (%) (%) Scheme Benchmark Additional Benchmark
47

Mar3 0,11 Mar3 0,10 Mar3 0,09 Jan0 1,95

Last 1year Last 2year Last 3year Since Incept ion

282.5 78 235.8 26 106.7 12 10,00 0

-7.40 5.33 34.81 20.83

-8.19 -1.06 23.14 8.87

-8.50 0.31 21.13 N.A

9,260 11,096 24,521

9,181 9,788 18,685

9,150 10,063 17,781 N.A

261,673 43,349

B: Discrete 12 Months Returns (%) Period Mar30,11 Mar30,12 Mar30,10 mar30,11 Mar30,09 Mar30,10 Scheme to -7.40 to 19.82 to 120.99 Benchmark -8.19 6.61 90.89 Additional Benchmark -8.50 9.98 76.70

48

PEER GROUP COMPARISON AND ANALYSIS OF SCHEMES OF DIFFERENT AMCS (As on 1st July, 2011)

49

ANALYSIS In the diversified category, it can be seen that HDFC Equity Fund has the largest corpus when compared to its competitors. Reliance Growth fund follows next and HSBC Progressive Themes Fund has the smallest corpus.

50

ANALYSIS On analysis of the above graph,it can be clearly concluded that Hdfc equity fund gives the highest absolute return (%) followed by IDFC Premier Equity Fund- Plan A. zfor a period of 1 year ending July 1,2011 HSBC Progressive Themes Fund yields the lowest absolute returns when compared to its competitors.

51

ANALYSIS
52

UTI Master Value Fund gives the highest sharpe ratio and hence is the best performing fund amongst its peers. HSBC Progressive Themes Fund has a negative sharpe ratio indicating that a risk less asset would perform better than this fund. On further analysis it is also observed that HSBC Progressive Themes Fund have a comparatively higher beta coefficient indicating that they are considerably volatile and thus riskier than other funds.

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Equity Funds Midcap Funds

Pure Retur n%

Scheme Name / Index Name HDFC Mid-Cap Opportu nities Fund (G) Birla Sun Life Midcap Fund Plan A (G) HSBC Midcap Equity Fund (G) IDFC Small & Midcap Equity Fund (G) Franklin India Prima Fund (G) Average Min Max

NAV (Rs.)

Cor pus Incep Mar tion 2011 Date

30 Days Absol ute

180 Days Absol ute

1 Year Absol ute

5 Yea rs CA GR

10 Yea rs CA GR

Since Incep tion CAG R

Stand ard Devia tion

Sha rpe Rati Be o ta

16.2

1221 25 Jun .22 2007 1.74

-0.85

13.68

N.A N.A 12.75

29.46

0.75

0. 9

107.3 6 19.63 52

1687 3 Oct .81 2002 0.26 138. 69 19 May 2005

-9.61 19.66

-0.55

17.6 1 N.A 31.17

37.15

0.48

1. 12 1. 11

-0.26

-11.77 6.20 N.A 11.65

37.21

0.15

18.60 81

1108 7 Mar .41 2008 1.13 24 Dec 1993

-3.53

6.72

N.A N.A 20.58

25.2

0.9

0. 74

274.8 593

828. 79

0.04 0.582 -0.26 1.74

31.7 -6.39 4.33 3 31.7 8.008 2.482 3 31.7 19.66 -11.77 6.2 3 17.6 31.7 -0.85 13.68 1 3

11.1 4 11.6 5

20.57 19.34 4 11.65 31.17

34.3

0.51

1. 05

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55

ANALYSIS In the mid-cap segment, Birla Sun Life Mid Cap Fund- Plan A has the largest corpus constituting 34 % of the total corpus value. It is followed by HDFC Mid-Cap Opportunities Fund and IDFC Small and Midcap Equity Fund in terms of corpus value of funds.

56

ANALYSIS HDFC Mid-Cap Opportunities Fund gives a healthy return of 13.68% on its fund which is much more as compared to funds in the MidCap segment. Birla Sun Life Midcap Fund-Plan A and HSBC Midcap Equity Fund give a negative returns.

57

58

ANALYSIS On risk return analysis, it is observed that HDFC Mid-Cap Opportunities performs the best as it has a sharpe ratio of 0.75.With a beta ratio of 1.12 and 1.11 respectively, Birla Sun Life Midcap Fund-Plan A and HSBC Midcap Equity Fund are highly volatile to changes in the stock market and are not good for conservative investors.

Tax Plans Sinc e 5 10 Ince Yea Yea ptio rs rs n CA CA CA GR GR GR

Schem e Name / Index Name HDFC Tax Saver Fund (G) AXIS Tax Saver Fund (G) IDFC Tax Advan tage (ELSS

Cor pus NA Ma V r (Rs. 201 ) 1

30 Ince Day ptio s n Abs Dat olut e e 13 Jun 199 6

180 Day s Abs olut e

1 Yea r Abs olut e

Sta nda rd Dev iati on

Sh ar pe Ra tio

Bet a 0. 9 4

235. 309 85 3.1

15.4 30.7 23.3 29.6 0. 1.13 5.31 8.86 0 7 9 6 7

29 Dec 12.8 84.9 200 72 9 9 19.5 129. 26 95 07 Dec 200 8

13.8 18.2 2.72 1.01 7 N.A N.A 8 --0.27 7.16 N.A N.A 30.7 --7.51 0

---- --- --

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) Fund (G) Religa re Tax Plan (G) ICICI Pru Tax Plan (G) Avera ge Min Max

29 Dec 18.1 108. 200 2 27 6

0. 14.1 27.0 0. 8 2.66 2.58 9.09 N.A N.A 0 5 72 5 0. 14.1 29.8 25.0 31.9 0. 9 3 3 1 2 57 9 14.7 22.2 6 30.3 9 14.1 29.8 3 3 14.1 30.7 15.4 7 30.7

141. 125 66 1.5

19 Aug 199 9 0.38 1.43 2

6.20 4.52 0.27 7.51 2.72 1.01

7.91 9.37 8 7.16 13.8 7

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ANALYSIS From the pie chart it is clear that HDFC Tax Saver Fund has the largest corpus followed by ICICI Pru Tax Plan.Axis Tax Saver as well as Religare Tax Plan have the smallest corpus size.

61

62

ANALYSIS Although Axis Tax Saver has the smallest corpus size it yields maximum returns as compared to its peers giving a return of 13.87 %.It is followed by Religare Tax Plan and HDFC Tax Saver Plan.

63

ANALYSIS Religare Tax Plan and HDFC tax Saver Fund are the best performers amoungst the tax plans since they have the highest sharpe ratio (return adjusted for risk). The two funds have a beta value of less than 1 and thus are less volatile than the stock market.ICICI Pru Tax Plan has a beta of 0.99 indicating that the investments price would move in lock- step with the market

64

CONCLUSION

On analysis of the all the three categories of funds, the following can be concluded:
DIVERSIFIED SEGMENT (CORPUS > 300 CRS. AND PERIOD

> 2 YRS) HDFC Equity fund yields highest 1 year absolute returns. It has a satisfactory sharpe ratio (0.99) i.e. return adjusted for risk and a beta coefficient of 0.79 is less volatile than many of its peers. The UTI Master Value Fund gives a higher sharpe ratio (1.09) indicative of higher returns with less amount of risk undertaken. The beta coefficient of 0.63 also indicates that the value of stock changes less than proportionately with the changes in the market. An important stock to consider in this category is the HSBC Progressive Themes Fund. The fund yields alarmingly low returns in the past one year and is highly volatile to stock market changes. Also it has a negative sharpe ratio which basically suggest that a risk less asset would perform better than this fund.

EQUITY FUNDS - PURE MIDCAP FUNDS HDFC Mid Cap Opportunities Fund gives the highest 1 year absolute returns. In the Mid Cap segment it gives the highest return adjusted for risk ratio i.e. the sharpe ratio and is also less volatile to changes in stock market. With a beta ratio of 1.12,1.11 and 1.05 respectively, Birla Sun Life Midcap Fund-Plan A,HSBC Midcap Equity Fund and Franklin India Prima Fund are highly volatile to changes in the stock market and are not good for conservative investors HSBC Midcap Equity Fund gives negative absolute returns in the past 1 year.

65

 TAX PLANS Axis Tax Saver yields maximum 1 year absolute returns. Religare Tax Plan and HDFC Tax Saver Plan also give relatively high returns when compared with its peers. ICICI Pru Tax Plan has a beta of 0.99 indicating that the investments price would move in lock- step with the market

66

BIBLIOGRAPHY
The following were the sources of refrences:

www.moneycontrol.com www.valueresearchonline.com www.hdfcfund.com www.mutualfundsindia.com www.amfiindia.com

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