"Mutual Funds": T.Surendra Chary

A
PROJECT REPORT
ON
MUTUAL FUNDS
WITH SPECIAL REFERENCE TO HDFC LIFE INSURANCE
Submitted by
T.SURENDRA CHARY
(Ht.No: 98-06-114)
Submitted to
OSMANIA UNIVERSITY
In partial fulfillment of the Award of
MASTERS DEGREE IN BUSINESS

ADMINISTRATION
St.PAULS P.G. COLLEGE

(Affiliated to Osmania University & Approved by AICTE )
Sy.No. 603,604 & 605,Thurka Yamjal (vill), Hayath Nagar (Mdl.), R.R.
Dist.
( 2006-2008 )
DECLARATION
I here by declare that this project report titled MUTUAL FUNDS
with special reference to HDFC LIFE INSURANCE submitted by
me to the dept. of business management Hyderabad is a bonafide work
under taken by me and it is submitted to any other university or institution
for the award of any degree/ diploma certificate or published any time
before.
Name and Address of the Student
Signature of the Student
ACKNOWLEDGEMENT
At the outset, I wish to thank the management of
HDFC LIFE INSURANCE for their kind gesture of allowing me to
undertake this project and its various employees who lent their helping
hand towards the completion of the study.
I am practically indebted to Mr.VINOD RAO, B.M., HDFC
LIFC for allowing me to carry out my project work in the origination
and Mr.VISHWANATH, faculty member for apprising me of the
situation with necessary guidance & help me to complete this project. .
I would like to thank Mrs. INDIRA , Principal
of St.Pauls P.G. College, who have given her co-operation and
encouragement during the course of the project work.
Place: Hyderabad
Date:
T. SURENDRA CHARY
(Ht. No: 98-06-114)
TABLE CONTENT
Page no.
Chapter-01 :-
03
Design of study
Chapter-02
:-
10
Industrial Profile
Chapter-03
:-
17
Profile of HDFC Bank &

Mutual Funds
Chapter-04
:-
33
Mutual Funds
Chapter-05
:-
48
Legal structure of Mutual Funds
Chapter-06
:-
61
Mutual Funds the best investment
option
Chapter-07 :-
67
Risk in mutual Funds
Chapter-08 :-
72
HDFC Mutual Funds Products
Chapter-09 :-
100
Analysis & interpretation

Chapter-10 :-
110
Findings
Suggestions
Conclusion
Bibliography
CHAPTER-01
DESIGN OF STUDY
CHAPTER - 1
DESIGN OF STUDY
INTRODUCTION:
Investors have always been in search of new investment options,
which can give more rate of interest or seek for the value appreciation.
In this era of high stock market volatility, people are unable to read
the market properly. So a mutual fund is an option to invest in stock
market. People are interested in government securities, company
bonds and money market instruments, which are less volatile and give
constant returns. Being a nave in instrument arena he cant directly
invest in these areas. So mutual funds provide an option.
As you probably know, mutual funds have become extremely popular
over the last 20 years. What was once just another obscure financial
instrument is now a part of our daily lives. More than 80 million
people, or one half of the households in America, invest in mutual
funds. That means that, in the United States alone, trillions (yes, with
a "T") of dollars are invested in mutual funds.
Mutual funds became popular in India only in the early nineties during
the Bull Run in the stock market but even today they are number of
comparison to their popularity in current market where recourses
mobilized by them have often overtaken the bank deposits.
As a whole, mutual funds cater to the most of financial needs of the
investors basing on his risk taking ability. This project mainly attempts
to understand mutual funds, its advantages and disadvantages. It is
7
also aimed to measure the performance of various equity schemes for

the current year.
A study is also conducted to understand the different investment
options people know in respect to mutual funds.
SCOPE:
Understand the benefits of investing in mutual Funds over other

forms of investments.
Portfolio of Mutual Funds
To understand the risk taking ability of different investors

according to their age, salary, and dependents.
OBJECTIVES:
To understand the MUTUAL FUNDS.
To help investor understand the concept of mutual fund and the

benefits that it offers.
To give a brief idea about the market trends of the mutual fund
investment.
To make a more informed investment decision while selecting a

specific scheme.
To study the performance of the HDFC mutual fund schemes

regarding to their annualized returns.
METHODOLOGY AND DATA COLLECTION:

Methodology is the way in which we find out the information. It
describes how the project is done. The methodology includes the
methods, procedures and techniques used to collect and analyze
information. The total project is divided into two modules the first
module deals with investors opinions and their investment options.
The second module deals with the performance of the HDFC mutual
funds.
Sampling procedure:
Random
sampling
was
used
as
method
for
selecting
the
interviewees.
Sampling Size:
The collected data consists of both the primary and secondary data.
PRIMARY SOURCE
SECONDARY SOURCE
METHODLOGY AND DATA COLLECTION
PRIMARY DATA
SECONDARY DATA
RAW DATA
COMPANIES PUBLISHED DATA

ANNUALREPORTS
QUESTIONNAIRES
MAGAZINES
PRIMARY SOURCE
It is the first hand information on any happening or event collected
mainly by observation and communication. Communication is mainly
done by the structured.
10
Structured questioner is the formal list of questions formed so as to

get the facts. Hence the questions are asked strictly in accordance with
pre analyzed order
I gathered information by interacting with Sri Sai Charan

investment relationship manager HDFC and Vishvanad
manager HDFC.
SECONDARY SOURCE
It is very difficult to collect entire data through primary sources it is
also very costly process to collect all the data from the primary source.
Any data that have been gathered either for some other purpose is
known as secondary data is collected from past records, magazines,
newspapers, and net.
I referred MUTUAL FUNDS related articles from various

magazines, newspapers and journals.
Material provided by HDFC.
Browsing the concerned sites.
The collected data was analyzed by using graphs relative

rating methods.
We did a sample survey for to find how many people

aware of mutual funds and how many people invested in
11
mutual funds and how many people invested in mutual

funds and their savings patterns etc
For any survey to be successful the objectives need to be very clear.
Firstly the objectives were set which gave a sense of direction
LIMITATIONS:
Information relating to the internal aspects regarding various

items is not provided.
Study is limited to HDFC schemes only.
Most of the information is from secondary data.
People not willing to spend their time for answering the

questionnaire.
The schemes have been compared only on the basis on one

performance parameter.
12
CHAPTER-02
INDUSTRIAL
PROFILE
CHAPTER - 2
13
INDUSTRIAL PROFILE
MARKET TRENDS
UTI with just one scheme in 1964 now competes with as many as 400
odd products and 37 players in their market. In spite of the stiff
competition and losing market share. UTI still remains a formidable
force to reckon with.
Last six years have been the most turbulent as well as existing ones
for the industry. New players have come in, while others have decided
to close ship b either selling off or merging with others. Product
innovation is now pass with the game shifting to performance delivery
in fund management was well as service. Those directly associated
with the fund management industry like distributors, registrars and
transfer agents, and even the regulators have become more mature
and responsible.
The industry is also having a profound impact on financial markets.
While UTI has always been a dominant player on the bourses as well
as the debt markets, the new generations of private funds which have
gained substantial mass are now seen flexing their muscles. Fund
managers by their selection criteria for stocks have forced corporate
governance on the industry. By rewarding honest and transparent
management with higher valuations, a system of risk-reward has been
created where the corporate sector is more transparent then before.
14
Funds have shifted their focus to the recession free sectors like
pharmaceuticals, FMCG and technology sector. Funds performance is
improving. Funds collection, which averaged at less than Rs.
100bn per annum over five-year period spanning 1993-98 doubled to
Rs. 210bn in 1998-99. In the current year mobilization till now have
exceeded Rs. 300bn. Total collection for the current financial year
ending March 2000 is expected to reach Rs. 450bn.
What is particularly note-worth is that bulk of the mobilization has
been by the private sector mutual funds rather than public sector
mutual funds. Indeed private mutual funds saw a net inflow of Rs.
7819.34crore during the first nine months of the year as against a net
inflow of Rs. 604.40crore in the case of public sector funds.
Mutual funds are also competing with commercial banks in the race for
retail investors saving and corporate float money. The power shift
towards mutual funds has become obvious. The coming few years will
show that the traditional saving avenues are losing out in the current
scenario. Many investors are realizing that investments in savings
account are as good as looking up their deposits in a closet.
The fund mobilization trend by mutual funds in the current year
indicates that money is going to mutual funds in a big way. The
collection in the first half of the financial year 1999-2000 matches the
whole of 1998-99.
India is at the first stage of a revolution that has already peaked in the
U.S. The U.S. boasts of an Asset base that is much higher than its
bank deposits. In India, mutual fund assets are not even 10% of the
15
bank deposits, but this trend is beginning to change. Recent figures

indicate that in the first quarter of the current fiscal year mutual fund
assets went up b 115% where bank deposits rose by only 17%. This is
forcing la large number of banks to adopt the concept of narrow
banking where in the deposits is kept in gilts and some other assets
which improves liquidity and reduces risk. The basic fact lies that
banks cannot be ignored and the will not close down completely. Their
role as intermediaries cannot be ignored. It is just that mutual funds
are going to change the way banks do business in the future.
GLOBAL SCENARIO
The money market mutual fund segment has a total corpus of
$1.48 trillion
in the U.S against a corpus of $100 million in India.
Out of the 10 mutual funds world wide, eight are bank-sponsored.
Only fidelity and capital are non-bank mutual funds in this group.
In the U.S the total number of schemes is higher than that of the
listed companies while in India we have 277 schemes.
Internationally, mutual funds are allowed to go short. Indian fund
managers do not have such leeway.
In the U.S about 9.5 million house holds will manage their assets
on-line by the ear 2003 ,such a facility is not yet of avail in India.
16
On-line trading is great idea to reduce management expenses from
the current 2% of total assets to about 0.75% of the total assets.
RECENT TRENDS IN MUTUAL FUND INDUSTRY
The most important trend in the mutual fund industry is the aggressive
expansion of foreign owned mutual fund companies and the decline of
the companies floated by nationalized banks and smaller private sector
players.
Many nationalized banks got into the mutual fund business in the early
nineties and got off to a good start due to the stock market boom
prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of banking activity.
Few hired specialized staff and generally chose to transfer staff from
the parent organizations. The performance of most of the schemes
floated parent originations had to bail out these AMCs b paying large
amounts of money as the difference between the guaranteed and
actual returns. The service levels were also very bad. Most of these
AMCs have not been able to retain staff float new schemes etc. and it
is doubtful whether, barring a few exceptions, they have serious plans
of continuing the activity in a major way.
The experience of some of the AMCs floated by private sector Indian
companies was also very similar. They quickly realized that the private
sector Indian companies were also very similar. They quickly realized
that the AMC business is a business, which makes money in the long
17
term and requires deep-pocketed support in the intermediated years.

Some have sold out to foreign owned companies some have merged
with others and there is general restructuring going on.
The foreign owned companies have deep pockets and have come in
here with the expectation of a long haul. They can be credited with
introducing many new practices such as new product innovation, sharp
improvement in service standards and disclosure, usage of technology,
broker education and support etc. Infact, they have forced the industry
to upgrade itself and service levels of organizations like UTI have
improved dramatically in the last few ears of originations like UTI have
improved dramatically in the last few years in the competition provided
b these.
FUTURE PROSPECTS
Mutual funds have a bright future. There are basically four reasons for
this optimistic outlook.
The Indian stock markets are undergoing a basic structural change
where market dominance is shifting from a vast number of small
investors to a smaller number of institutional investors like mutual
funds, banks, finance companies and foreign institutional investors. In
the market dominated by institutional players, the small investor is
likely to be put to a disadvantage in terms of adequacy of capital,
equity research, risk taking ability, holding capacity and service from
brokers this will force small investors to invest through mutual fund.
18
The secondary market is getting too large and too complex for the
small investor who does not have the time or the knowledge to
undertake extensive reach.
Free pricing of new issues, the requirement for a minimum investment
of Rs. 5000 and the proportional allotment formula will drive the small
investor of the primary market.
The creation of an active bond market through the national stock
exchange combined with the expected fall interest rates will push up
the NAVS of all mutual funds since almost all of them have invested
around 30 -70 % of their funds in debentures and bonds. This will
enhance the attractiveness of mutual funds in the eyes of small
investors.
19
CHAPTER-03
PROFILE OF HDFC
BANK & MUTUAL
FUNDS
CHAPTER - 3
20
PROFILE OF HDFC BANK AND HDFC MUTUAL FUNDS

PROFILE OF HDFC BANK
OVER VIEW
The Housing Development Finance Corporation Limited (HDFC) was
amongst the first to receive an 'in-principle' approval from the Reserve
Bank of India (RBI) to set up a bank in the private sector, as part of
the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank
commenced operations as a Scheduled Commercial Bank in January
1995.
Promoter
HDFC is India's premier housing finance company and enjoys an
impeccable track record in India as well as in international markets.
Since its inception in 1977, the Corporation has maintained a
consistent and healthy growth in its operations to remain a market
leader in mortgages. Its outstanding loan portfolio covers well over a
million dwelling units.
Objective
HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's
aim is to build sound customer franchises across distinct businesses so
as to be the preferred provider of banking services in the segments
that the bank operates in and to achieve healthy growth in profitability,
consistent with the bank's risk appetite. The bank is committed to
maintain the highest level of ethical standards, professional integrity
21
and regulatory compliance. HDFC Bank's business philosophy is based

on four core values: Operational Excellence, Customer Focus, Product
Leadership and People.
Capital structure
The authorized capital of HDFC Bank is Rs.450 crore (Rs.45 billion).
The paid-up capital is Rs.282 crore (Rs.28.2 billion). The HDFC Group
holds 24.2% of the bank's equity while about 13.1% of the equity is
held by the depository in respect of the bank's issue of American
Depository Shares (ADS/ADR Issue). The Indian Private Equity Fund,
Mauritius (IPEF) and Indocean Financial Holdings Ltd., Mauritius (IFHL)
(both funds advised by J P Morgan Partners, formerly Chase Capital
Partners) together hold about 5.5% of the bank's equity. Roughly
27.5% of the equity is held by FIIs, NRIs/OCBs while the balance is
widely held by about 214,000 shareholders. The shares are listed on
The Stock Exchange, Mumbai and the National Stock Exchange. The
bank's American Depository Shares are listed on the New York Stock
Exchange (NYSE) under the symbol "HDB".
Times Bank Amalgamation
In a milestone transaction in the Indian banking industry, TimesBank
Limited (another new private sector bank promoted by Bennett,
Coleman & Co./Times Group) was merged with HDFC Bank Ltd.,
effective February 26, 2000. As per the scheme of amalgamation
approved by the shareholders of both banks and the Reserve Bank of
India, shareholders of TimesBank received 1 share of HDFC Bank for
every 5.75 shares of TimesBank. The amalgamation added significant
22
value to HDFC Bank in terms of increased branch network, expanded

geographic reach, enhanced customer base, skilled manpower and the
opportunity to cross-sell and leverage alternative delivery channels.
Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an
enviable network of over 468 branches spread over 212 cities across
the country. All branches are linked on an online real-time basis.
Customers in 90 locations are also serviced through Phone Banking.
Being a clearing/settlement bank to various leading stock exchanges,
the Bank has branches in the centres where the NSE/BSE have a
strong and active member base.
The Bank also has a network of over 1054 networked ATMs across
these cities. Moreover, HDFC Bank's ATM network can be accessed by
all domestic and international Visa/MasterCard, Visa Electron/Maestro,
Plus/Cirrus and American Express Credit/Charge cardholders.
Management
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001.
Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of
India.
The Managing Director, Mr. Aditya Puri, has been a professional banker
for over 25 years, and before joining HDFC Bank in 1994 was heading
City banks operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with
a wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC are also on
the Board.
23
Senior banking professionals with substantial experience in India and

abroad head various businesses and functions and report to the
Managing
Director.
Given
the
professional
expertise
of
the
management team and the overall focus on recruiting and retaining

the best talent in the industry, the bank believes that its people are a
significant competitive strength.
Technology :
HDFC Bank operates in a highly automated environment in terms of
information technology and communication systems. All the bank's
branches have connectivity which enables the bank to offer speedy
funds transfer facilities to its customers. Multi-branch access is also
provided
to retail
customers through the branch network
and
Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring
the best technology available internationally to build the infrastructure
for a world-class bank. In terms of software, the Corporate Banking
business is supported by Flexcube, while the Retail Banking business
by Finware, both from i-flex Solutions Ltd. The systems are open,
scaleable and web-enabled.
The Bank has prioritized its engagement in technology and the internet
as one of its key goals and has already made significant progress in
web-enabling its core businesses. In each of its businesses, the Bank
has succeeded in leveraging its market position, expertise and
technology to create a competitive advantage and build market share.
BUSINESS PROFILE
HDFC Bank caters to a wide range of banking services. The bank has
three key business areas: -
24
a. Wholesale banking services

b. Retail Banking Services
c. Treasury Operations
RATING
HDFC Bank has its deposit programmers rated by two rating agencies Credit Analysis & Research Limited (CARE) and Fitch Ratings India Pvt.
Ltd. The Bank's Fixed Deposit programmer has been rated 'CARE AAA
(FD)' [Triple A] by CARE, which represents instruments considered to
be "of the best quality, carrying negligible investment risk". CARE has
also rated the Bank's Certificate of Deposit (CD) programme "PR 1+"
which represents "superior capacity for repayment of short term
promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary
of Fitch Inc.) has assigned the "tAAA (ind)" rating to the Bank's
deposit programme, with the outlook on the rating as "stable". This
rating indicates "highest credit quality" where "protection factors are
very high". HDFC Bank also has its long-term unsecured, subordinated
(Tier-II) Bonds rated by CARE and Fitch Ratings India Pvt. Ltd. CARE
has assigned the rating of "CARE AAA" for the Tier-II Bonds while Fitch
Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the
outlook on the rating as "stable". In each case referred to above, the
ratings awarded were the highest assigned by the rating agency for
those instruments.
Corporate Governance Rating
The bank was one of the first four companies which subjected itself to
a Corporate Governance and Value Creation (GVC) rating by the rating
agency, The Credit Rating Information Services of India Limited
25
(CRISIL). The rating provides an independent assessment of an

entitys current performance and an expectation on its "balanced value
creation and corporate governance practices" in future. The bank has
been assigned a CRISIL GVC Level 1' rating which indicates that the
bank's capability with respect to wealth creation for all its stakeholders
while adopting sound corporate governance practices is the highest.
PRODUCT RANGE
Savings, Fixed Deposits, Current and Demat Account
Savings Account.
HDFC Bank Preferred
Sweep-In Account.
Super Saver Account.
HDFC Bank Plus
Demat Account
INNOVATIVE SERVICES FOR YOUR CONVENIENCE
Phone Banking
ATM 24-hour banking
26
Inter-city/Inter-branch Banking
Net Banking
International Debit Card.
Mobile Banking
Bill Pay.
LOANS FOR EVERY NEED

Now, our loans come to you in easy-to-pay monthly installments, and
are available with easy documentation and quick delivery.
Personal Loans
New Car Loans and Used Car Loans
Loans Against Shares
Two Wheeler & Consumer Loans
Demat Account
Current Account
Mutual Funds
27
International Credit Card
NRI Services
Forex Facilities
PROFILE
Insurance OF HDFC MUTUAL FUNDS
Vision of HDFC mutual funds:

To be a dominant player in the Indian mutual fund space, recognized
for its high levels of ethical and professional conduct and a
commitment towards enhancing investor interests.
Name of the Mutual Fund
HDFC Mutual Fund
Date Of Setup Of Mutual Fund
June 30, 2000
Names of Sponsors
HDFC Limited;
Standard Life Investments
Limited
Name of Trustee Company
28
HDFC Trustee Company
Limited
Names of Trustees
Mr. Anil Kumar Hirjee

Chairman
Mr. James Aird
Mr. Keki Mistry
Mr. Ranjan Sanghi
Mr. Shishir Diwanji
Name of the Asset Mgt. Co.
HDFC Asset Mgt. Co. Ltd.
Date Of Incorporation Of AMC
December 10, 1999
Names of Board Directors
Mr. Deepak Parekh

Chairman
Dr. Deepak Phatak
Mr. Alexander Maxwell
Crombie
Mr. Hoshang Billimoria
Mr. Humayun Dhanrajgir
Mr. Milind Barve
Mr. P. M. Thampi
Ms. Renu S. Karnad
Name of Chief Executive Officer
Name of Chief Invt. Officer
Mr. Prashant Jain
29
Mr. Milind Barve - MD
Names of Fund Managers
Mr. Anil Bamboli

Mr. Dhawal Mehta
Mr. Prashant Jain
Mr. Shabbir S. Kapasi
Mr. Shobhit Mehrotra
Mr. Tushar Pradhan
Name of Compliance Officer :
Ms. Sonal Barot
Name of Investor Service Office
Address Of AMC
Mr. John Mathews

Ramon House,3rd Floor,
H.T. Parekh Marg, 169
Backbay Reclamation,
Churchgate, Mumbai 400020.
Telephone Number
5631 6300
Fax Number
2282 1144
Internet Web site Address
www.hdfcfund.com
Email Address
cliser@hdfcfund.com
Names of Auditors
M/s Haribhakti & Co., (HDFC

Asset Management Company
Ltd.)
30
M/s. S.B.Billimoria & Co.,

Chartered Acc. (HDFC Mutual
Fund)
Names of Custodians
HDFC Bank Limited &

Citibank N.A
Names of Registrar
and Transfer Agents
Computer Agent Mgt.

Services Pvt. Ltd.
Note: Information As On March 1, 2005
MANAGEMENT OF HDFC MUTUAL FUNDS

HDFC Asset Management Company Limited (AMC)
HDFC TRUSTEE COMPANY LIMITED
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 Mutual Fund by SEBI
on June 30, 2000.
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.
31
The present shareholding pattern of the AMC is as follows

Particulars
% Of the paid up capital
HDFC
50.10
Standard Life Investments Limited
49.90
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,
2007 These Schemes have been renamed as follows
Zurich
Zurich
Zurich
Zurich
Zurich
Zurich
Zurich
Zurich
Former Name
India Equity Fund
India Prudence Fund
India Capital Builder Fund
India Tax Saver Fund
India Top 200 Fund
India High Interest Fund
India Liquidity Fund
India Sovereign Gilt Fund
HDFC
HDFC
HDFC
HDFC
HDFC
HDFC
HDFC
HDFC
New Name
Equity Fund
Prudence Fund
Capital Builder Fund
Tax Saver
Top 200 Fund
High Interest Fund
Cash Management Fund
Sovereign Gilt Fund
The AMC is managing 21 open-ended schemes of the Mutual Fund .The

AMC is also managing the respective Plans of HDFC Fixed Investment
Plan, a closed ended Income Scheme.
The AMC has renewed its registration from SEBI vide Registration No. PM / INP000000506 dated December 4, 2007to act as a Portfolio
Manager under the SEBI (Portfolio Managers) Regulations, 1993. The
Certificate of Registration is valid from January 1, 2007to January 8
The AMC is also providing portfolio management / advisory services
32
and such activities are not in conflict with the activities of the Mutual
Fund.
HDFC TRUSTEE COMPANY LIMITED:
A company incorporated under the Companies Act, 1956 is the Trustee
to the Mutual Fund vide the Trust deed dated June 8, 2000, as
amended from time to time. HDFC Trustee Company Limited is a
wholly owned subsidiary of HDFC Limited.
SPONSORS OF HDFC MUTUAL FUNDS
Housing development finance corporation limited (HDFC)
Standard life investments limited
Housing development Finance Corporation limited (HDFC) :

HDFC was incorporated in 1977 as the first specialized housing finance
institution 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 currently has a client base of over 5,00,000 borrowers,
13,00,000 depositors, 1,00,000 shareholders and 52,000 deposit
agents. HDFC raises funds from international agencies such as the
World Bank, IFC (Washington), USAID, CDC, ADB and KfW, 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 eighth year in succession. HDFC Standard Life
33
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.
Standard life investments limited:

The Standard Life Assurance Company was established in 1825 and
has considerable experience in global financial markets. In 1998,
Standard Life Investments Limited became the dedicated investment
management company of the Standard Life Group and is owned 100%
by The Standard Life Assurance Company. With global assets under
management of approximately US$126 billion as at May 15, 2003,
Standard Life Investments Limited is one of the world's major
investment companies and is responsible for investing money on
behalf of five million retail and institutional clients worldwide. With its
headquarters in Edinburgh, Standard Life Investments Limited has an
extensive and developing global presence with operations in the United
Kingdom, Ireland, Canada, USA and Hong Kong. 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, government and company bonds, property investments
and various derivative instruments. The company's current holdings in
UK equities account for approximately 2% of the market capitalization
of the London Stock Exchange. The Standard Life Assurance Company
was present in the Indian life insurance market from 1847 to 1938
when agencies were set up in Kolkata and Mumbai. The Standard Life
34
Assurance Company was therefore keen to re-enter the Indian market

and in 1995, signed an agreement with HDFC to launch an insurance
joint venture. HDFC and Standard Life Investments Limited are neither
responsible nor liable for any loss resulting from the operation of the
Scheme(s) beyond their contribution of an amount of Rs. 1 lakh each
made by them towards the corpus of the Mutual Fund
35
CHAPTER-04
MUTUAL FUNDS
CHAPTER - 4
MUTUAL FUNDS
36
DEFINITION OF MUTUAL FUNDS:
A mutual fund is a special type of company that pools the money of

many investors who share common investment objective or financial
goal. Mutual funds raise the money by selling shares of the fund to the
public .The money thus collected is then invested in capital market
instruments such as shares (stocks), debentures (bounds) and other
money market securities or some combination of these investments.
Mutual fund acts as an intermediary between the investors and capital
market. Such a kind of investment is ideal for small investors who
want to invest in stock market but cant invest in most of the scrips
because of limited amount of capital at their disposal.
Mutual funds is also suitable for those investors who do not have
sufficient knowledge of capital market and by investing through a
mutual fund it can make use of knowledge of specialized people which
the mutual funds employs.
Every mutual funds has a sponsor who establishes the fund and can be
considered as similar to a promoter of company
The combined holdings the mutual fund owns are known as its
portfolio. The investment manager would invest the money collected
from the investors in to assets (securities) that are defined/permitted
by stated objective of scheme.
37
For example an equity fund would be invested in equity and equity

related instrument and debt fund would be invested in debentures,
bonds, gilts etc. Those securities are professionally managed on behalf
of the shareholder or unit holder.
The flow chart below describes broadly the working of a mutual fund:
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.
HISTORY OF MUTUAL FUNDS IN INDIA:

The mutual fund industry in India started in 1963 with the foundation
of Unit Trust of India, at the initiative of the Reserve Bank and the
38
Government of India. The objective then was to attract the small

investors and introduce them to market investments. Since then, the
history of mutual funds in India can be broadly divided into three
distinct phases.
Phase 1: 1964-87 (Unit Trust of India)
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.
Phase 2: 1987-93 (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 Canbank 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.
39
At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores.
Phase 3: 1993-2007 (Entry of Private Funds and SEBI Regulation for
Mutual 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. As at the end of
January 2007, 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.
Phase 4: (since December 2007)
In February 2007, 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
40
management of Rs.29,835 crores as at the end of November 2007,

representing broadly, the assets of US 64 scheme, assured return and
certain other schemes. The 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. As at the
end of January, 2008, there were 29 funds, which manage assets of
Rs.153108 crores under 421 schemes
GROWTH IN ASSETS UNDER MANAGEMENT (AUM)
41
TYPES OF MUTUAL FUNDS
There are many types of mutual funds available to the investor.

However these different types of funds can be grouped into certain
classifications
for
better
understanding.
From
the
investors
perspective, we would follow three basic classifications.

Firstly, funds are usually classified in terms of their constitution-as
closed-ended or open-end. The distinction depends upon whether they
give the investor the option to redeem and buy units at any time form
the fund itself (open end) or whether the investors have to await a
given maturity before they can redeem their units to the fund (closed
end).
42
Funds can also be grouped in terms of whether they collect from

investors any charges at the time of entry or exit or both, thus
reducing the investible amount or the redemption proceeds. Funds that
make these charges are classified as load funds, and funds that do not
make any of these charges are termed no-load funds.
Finally, funds can also be classified as being tax-exempt or non-taxexempt, depending on whether they invest in securities that give taxexempt returns or not. Currently in India, this classification may be
somewhat less important, given the recent tax exemptions to investors
receiving any dividends from all mutual funds.
Under each broad classification, we may then distinguish between
several types of funds on the basis of the nature of their portfolios,
meaning whether they invest in equities or fixed income securities or
some combination of both. Every type of fund has a unique risk-profile
that is determined by its portfolio, for which reason funds are often
separated into more or less risk bearing. We first look at the fund
classification and then understand the various types of funds under
them.
43
Investment Objective
Schemes can be classified by way of their stated investment objective

such as Growth Fund, Balanced Fund, Income Fund etc
Equity Oriented Schemes
These schemes, also commonly called Growth Schemes, seek to invest
a majority of their funds in equities and a small portion in money
market instruments. Such schemes have the potential to deliver
superior returns over the long term. However, because they invest in
equities, these schemes are exposed to fluctuations in value especially
in the short term
44
General Purpose
The investment objectives of general-purpose equity schemes do not
restrict them to invest in specific industries or sectors. They thus have
a diversified portfolio of companies across a large spectrum of
industries. While they are exposed to equity price risks, diversified
general-purpose equity funds seek to reduce the sector or stock
specific risks through diversification. They mainly have market risk
exposure. HDFC Growth Fund is a general-purpose equity scheme
45
Sector Specific
These schemes restrict their investing to one or more pre-defined
sectors,
e.g.
technology
sector.
Since
they
depend
upon
the
performance of select sectors only, these schemes are inherently more

risky than general-purpose schemes. They are suited for informed
investors who wish to take a view and risk on the concerned sector.
SPECIAL SCHEMES
Index schemes
The primary purpose of an Index is to serve as a measure of the
performance of the market as a whole, or a specific sector of the
market. An Index also serves as a relevant benchmark to evaluate the
performance of mutual funds. Some investors are interested in
investing in the market in general rather than investing in any specific
fund. Such investors are happy to receive the returns posted by the
markets. As it is not practical to invest in each and every stock in the
market in proportion to its size, these investors are comfortable
investing in a fund that they believe is a good representative of the
entire market. Index Funds are launched and managed for such
investors. An example to such a fund is the HDFC Index Fund
Tax saving schemes
Investors (individuals and Hindu Undivided Families (HUFs)) are
being encouraged to invest in equity markets through Equity Linked
Savings Scheme (ELSS) by offering them a tax rebate. Units
purchased cannot be assigned / transferred/ pledged / redeemed /
switched out until completion of 3 years from the date of allotment
of the respective Units.
46
Real Estate Funds

Specialized real estate funds would invest in real estates directly, or
may fund real estate developers or lend to them directly or buy shares
of housing finance companies or may even buy their securitized assets
Debt Based Schemes
These schemes, also commonly called Income Schemes, invest in debt

securities such as corporate bonds, debentures and government
securities. The prices of these schemes tend to be more stable
47
compared with equity schemes and most of the returns to the

investors
are
generated
through
dividends
or
steady
capital
appreciation. These schemes are ideal for conservative investors or

those not in a position to take higher equity risks, such as retired
individuals. However, as compared to the money market schemes they
do have a higher price fluctuation risk and compared to a Gilt fund
they have a higher credit risk
Income Schemes
These schemes invest in money markets, bonds and debentures of
corporates with medium and long-term maturities. These schemes
primarily target current income instead of capital appreciation. They
therefore distribute a substantial part of their distributable surplus to
the investor by way of dividend distribution. Such schemes usually
declare quarterly dividends and are suitable for conservative investors
who have medium to long term investment horizon and are looking for
regular income through dividend or steady capital appreciation. HDFC
Income Fund, HDFC Short Term Plan and HDFC Fixed Investment Plans
are examples of bond schemes
Money Market Schemes
These schemes invest in short term instruments such as commercial
paper (CP), certificates of deposit (CD), treasury bills (T-Bill) and
overnight money (Call). The schemes are the least volatile of all the
types of schemes because of their investments in money market
instrument with short-term maturities. These schemes have become
48
popular with institutional investors and high networth individuals

having short-term surplus funds
Gilt Funds :
This scheme primarily invests in Government Debt. Hence the investor
usually does not have to worry about credit risk since Government
Debt is generally credit risk free. HDFC Gilt Fund is an example of such
a scheme
Hybrid Schemes :
These schemes are commonly known as balanced schemes. These
schemes invest in both equities as well as debt. By investing in a mix
of this nature, balanced schemes seek to attain the objective of
income and moderate capital appreciation and are ideal for investors
with a conservative, long-term orientation. HDFC Balanced Fund and
HDFC Childrens Gift Fund are examples of hybrid schemes
Open ended Schemes :
The units offered by these schemes are available for sale and
repurchase on any business day at NAV based prices. Hence, the unit
capital of the schemes keeps changing each day. Such schemes thus
offer very high liquidity to investors and are becoming increasingly
popular in India. Please note that an open-ended fund is NOT obliged
to keep selling/issuing new units at all times, and may stop issuing
further subscription to new investors. On the other hand, an openended fund rarely denies to its investor the facility to redeem existing
units.
49
Closed ended Schemes :

The unit capital of a close-ended product is fixed as it makes a onetime sale of fixed number of units. These schemes are launched with
an initial public offer (IPO) with a stated maturity period after which
the units are fully redeemed at NAV linked prices. In the interim,
investors can buy or sell units on the stock exchanges where they are
listed. Unlike open-ended schemes, the unit capital in closed-ended
schemes usually remains unchanged. After an initial closed period, the
scheme may offer direct repurchase facility to the investors. Closedended schemes are usually more illiquid as compared to open-ended
schemes and hence trade at a discount to the NAV. This discount tends
towards the NAV closer to the maturity date of the scheme.
Interval Schemes :
These schemes combine the features of open-ended and closed-ended
schemes. They may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV based
prices.
50
CHAPTER-05
LEAGAL STRUCTURE
OF
MUTUAL FUNDS
51
CHAPTER - 5
LEGAL STRUTURE OF MUTUAL FUNDS
Mutual funds have a unique structure not shared with other entities
such as companies or firms. It is important for employees and agents
to be aware of the special nature of this structure, because it
determines the rights and responsibilities of the funds constituents viz.
sponsors, trustees, custodians, transfer agents and of course, the fund
and the asset management company. The legal structure also drives
the interrelationships between these two constituents.
STRUCTURE OF THE MUTUAL FUNDS IN INDIA

Like other countries, India has a legal framework within which mutual
funds must be constituted. Unlike in the UK, where two distinct trust
and corporate structures are followed with separate regulations, in
India, open and close-end funds operate under the same regulatory
structure, and are constituted along one unique structure-as unit trust.
A mutual fund in India is allowed to issue open-end and closed-end
schemes under a common legal structure. Therefore, a mutual fund
52
may have several different schemes under it i.e. under one unit trust,
at any point of time.
The structure, which is required to be followed by mutual funds in
India, is laid down under SEBI regulations, 1996.
There are many entities involved and the diagram below illustrates the
organizational set up of a mutual fund:
SPONSOR
SPONSOR is defined under SEBI SPONSOR regulations as any
person who acting alone or in combination with another body
corporate, establishes a mutual fund. The sponsor of a fund is akin to
the promoter of a company he gets the fund registered with SEBI. The
sponsor will form a Trust and appoint a board of trustees. The sponsor,
either directly or acting through the trustees, will also appoint a
custodian to hold the fund assets. All these appointments are made in
accordance with SEBI Regulations.
53
As per the existing SEBI Regulations, for a person to qualify as a

sponsor, he must contribute at least 40% of the net worth of the AMC,
meet the eligibility criteria prescribed under the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996 and posses
a sound financial track record over five years prior to registration.
The Sponsor is not responsible or liable for any loss or shortfall
resulting from the operation of the Schemes beyond the initial
contribution made by it towards setting up of the Mutual Fund
TRUST
A mutual fund in India is constituted in the form of a public trust
created under the Indian Trusts Act, 1882 by sponsor. The trust deed
is registered under the Indian Registration Act, 1908 .The fund sponsor
acts as the settler of the trust, contributing to its initial capital and
appoints a trustee to hold the assets of the trust for the benefits of the
unit holders, who are the beneficiaries of the trust. The fund then
invites investors to contribute their money in the common pool, by
subscribing to the units issued by various schemes established by
the trust, units being the beneficial interest in the fund.
TRUSTEES
Trustee is usually a company (corporate body) or a Board of Trustees
(body of individuals). The trust and the mutual fund may be managed
by a board of trustees, a body of individuals, or a trust company-,a
corporate body. Most of the funds in India are managed by board of
trustees. While the board of the trustees is governed by the provisions
of the Indian Trusts Act, where the trustee is a corporate body, it
would also required to comply with the provisions of the companies
54
act, 1956. The main responsibility of the board or the trustee

company, as an independent body is to safeguard the interest of the
unit holders and. The trustees do not directly manage the portfolio of
the
securities.
For
this
specialist
function,
appoint
an
asset
management company and ensure that the AMC functions in the

interest of investors and in accordance with the Securities and
Exchange Board of India (Mutual Funds) Regulations, 1996, the
provisions of the Trust Deed and the Offer Documents of the respective
Schemes
The trustees being the primary guardians of the unit holders funds
and assets, a trustee has to be a person of high repute and integrity.
SEBI has laid down a set of conditions to be fulfilled by the individuals
being proposed as trustees of mutual funds- both independent and
non-independent.
At least 2/3rd directors of the Trustee are independent directors who
are not associated with the Sponsor in any manner.
RIGHTS OF THE TRUSTEES
The trustees appoint the AMC with the prior approval of SEBI.
They also approve each of the schemes floated by the AMC.
They hate the right to request any necessary information from

the AMC concerning the operations of various schemes managed
by the AMC as often as required, to ensure that the AMC is in
compliance with the Trust Deed and the regulations.
55
OBLIGATIONS OF TRUSTEES
The trustees must enter into an investment management

agreement
with
the
AMC.
This
agreement
must
be
in
accordance with the Fourth Schedule of SEBI (MF) Regulations,

1996.
They must ensure that the funds transactions are in accordance

with the regulations.
THE ASSET MANAGEMENT COMPANY (AMC)-ITS APPOINTMENT AND

FUNCTIONS
The role of an AMC is to act as the investment manager of the trust.
The trustees, authorized by the trust deed, appoint the AMC. The AMC
so appointed is required to be approved by the SEBI. Once approved,
the AMC functions under the supervision of its own board of directors,
and also under the direction of the trustees and SEBI. The trustees are
empowered to terminate the appointment of the AMC by majority and
appoint a new AMC with prior approval of SEBI and unit holders. The
AMC then in the name of the trust float different investment schemes
and manage them. Chapter IV of the SEBI (MF) Regulations, 1996
56
describes the issues relevant to appointment, eligibility criteria, and

restrictions of business activities and obligations of the AMC. These
have summarized in Mutual Funds in India by sadhak.
Mutual Funds schemes are managed by respective Asset Management
Companies
sponsored
by
financial
institutions,
banks,
private
companies or international firms. The biggest Indian AMC is UTI while

Alliance, Franklin Templeton etc are international AMC's.
Obligations of AMC and its Directors

The AMC and the directors must ensure that
Investments of funds in accordance with SEBI Regulations and

the Trust Deed.
They take the responsibility for the acts of its employees and
other whose services it has procured.
They are answerable to the trustees and submit quarterly

reports to them on AMC activities and compliance with SEBI
Regulations
57
Registrar and Transfer Agent

The AMC if so authorized by the Trust Deed appoints the Registrar and
Transfer Agent to the Mutual Fund. The Registrar processes the
application
form;
redemption
requests
and
dispatches
account
statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.
RIGHTS OF A MUTUAL FUND UNIT HOLDER

A unit holder in a Mutual Fund scheme governed by the SEBI (Mutual
Funds) Regulations, is entitled to
1. Receive unit certificates or statements of accounts confirming the
title within 6 weeks from the date of closure of the subscription or
within 6 weeks from the date of request for a unit certificate is
received by the Mutual Fund.
2 Receive information about the investment policies, investment
objectives, financial position and general affairs of the scheme.
58
3. Receive dividend within 42 days of their declaration and receive the

redemption or repurchase proceeds within 10 days from the date of
redemption or repurchase.
NET ASSET VALUE :

NAV refers to the net asset value per unit. On any given day NAV
represents the actual value of one unit of fund. The performance of a
particular scheme of a mutual fund is denoted by NAV. In simple words
NAV is the market value of the securities held by the scheme. Since
the market value of the scheme every day, NAV of the scheme also
varies on day-to-day basis. Thus NAV is required to be disclosed by the
mutual funds on a regular basis - daily or weekly - depending on the
type of scheme.
The performance of a particular scheme of a mutual fund is denoted by
Net Asset Value (NAV).
Net Asset Value (NAV) is the actual value of one unit of a given
scheme for a given business day.
Units in the schemes are alloted on the basis of the Sale Price, which is
calculated as follows:
Sale Price = NAV *(1+ Entry Load)
59
Units in the schemes are repurchased on the basis of Repurchase

Price, which is calculated as follows:
Repurchase Price = NAV *(1- Exit Load)
NAV of the scheme will be calculated as the closing of every business
day. Calculation of the schemes NAV will be subject to such values and
regulations that SEBI may issue from time and will be subject to audit
on an annual basis. Based on the investments made and other
transactions carried out the NAV of the fund either goes up or comes
down.
These are various affecting the value of the NAV:
POSITIVE FACTORS:
The NAV can increase due to following factors
A) Dividend
B) Interest
C) Capital gains shares
D) Capital gains bonds
E) Capital gains Right issue
F) Capital gains Bonus issue
NEGATIVE FACTORS:
The NAV can decrease due to following factors.
A) Interest
B) Capital losses Shares
C) Capital losses - Bonds
D) Corpus reduction Redemptions
E) Corpus Reduction Inter scheme transfers.
60
COST INVOLVED IN MUTUAL FUNDS:

An Investor must know that there are certain costs involved while
investing in Mutual funds. Mutual funds costs can be classified into 2
brad categories:
Operating expenses: Which are paid out of the funds earnings. These referred to cost
incurred to operate a Mutual fund. Advisory fees paid to investment
managers, Audit fees to chartered accountant, custodial fees, register
and transfer agent fees, trustee fee, agent commission. Operating
expenses also known as expenses ratio, which is annual expanses,
expressed as a percentage of the funds average daily net assets
Mutual funds. The break up of these expenses is required to be
reported in the schemes offer document or prospectus.
Operating expenses
Expenses Ratio
-------------------------Average Net Assets
Sales charges: - sales charges are directly deducted from your

investment. It is not compulsory that every Mutual funds levy sales
charges but they certainly have operating expenses. No doubt they
influence returns on investment in a fund.
There are known commonly sales loads, these are charged directly to
investor. Sales loads are used by mutual fund for the payment of
agents commission, distribution and marketing expenses. These
charges have no effect on the performance of the scheme. Sales loads
are usually expression percentage and or of two types
61
Front-end
Back-end
Front-end Load: - It is a one time fixed fee paid by an investor when

buying Mutual funds scheme. It determines public offer price which
intern decides how much of your initial investment actually get
invested the standard practice of arriving a public offer price is as
follows.
Net Asset Value
Public offer price =
---------------------(1 front end load)
Let us assume, An investor invests Rs. 10,000 in a scheme that

charges a 2% front end load at a NAV per unit Rs. 10 using the
formula public offer price = 10/(1-0.02) is Rs.10.20. So only 980 units
are allotted to the investor
Amount invested
Number of units allotted
-----------------------Public offer price
10,000/10.20 =980 units at a NAV of Rs.10

This means units worth 9800 are allotted to him o an initial investment
of Rs10,000. Front-end loads tend to decrease as initial investment
amount increase.
BACK END LOAD: - May be a fixed fee redemption or a contingent
deferred sales charges- A redemption load continues so long as the
redeeming or selling of the units of the units of a fund does not take
62
place in the event of a back end load is applied. The redemption price
is arrive are using following formula.
Net asset value
Redemption price =
----------------------(1 + back end load)
Let us assume an investor redeems units valued at Rs 10, 000 In a

scheme that charges a 2% back end load at a NAV per units of Rs.10.
using the formula redemption price 10/(1+0.02)= Rs.9.8. So, what the
investor gets in hand is 9800(9.8*1000)
CONTINGENT DEFERRED SALES CHARGES (CDSC):
Contingent deferred sales charges are a structured back end load. It is
paid when the units are redeemed during the initial years of
ownership. It is for a pre-determined period only and reduced over the
time you invested for a fund. The longer the investor remains in a fund
the lower the CDSC.
63
CHAPTER-06
MUTUAL FUNDS THE
BEST INVESTMENT
OPTION
64
CHAPTER - 6
MUTUAL FUNDS THE BEST INVESTMENT OPTION
From the comparative analysis, it can be known that each investment

option has its own strengths and weakness depending on the safety
and the returns. Options like bank deposits offer safety and liquidity,
but at the cost of return, Mutual funds seek to combine the
advantages of investing in each of these alternatives while dispensing
with the shortcomings. Clearly, it is in the investors interest to focus
his investment on mutual funds.
While the mutual funds are one of the best options for the individual
small investor, there are many mutual funds already available for the
investor to choose from.
INVESTORS UNDERSTANDING OF MUTUAL FUNDS:
65
Basing on the total survey it was found that mutual funds have not
been properly accepted by people due to less knowledge of different
schemes.
So how can smart investing in mutual funds give good returns?
Diversify with Funds
Invest in your understanding:
Beat the market
Kick the Index hugging fund
Set targets.
SELECTING THE RIGHT MUTUAL FUND:

Mutual fund is the best investment tool for the retail investor as it
offers the twin benefits of good returns and safety as compared with
other avenues such as bank deposits or stock investing. Having looked
at the various types of mutual funds, one has to now go about
selecting a fund suiting your requirements. Choose the wrong fund and
you would have been better off keeping money in a bank fixed deposit.
Keep in mind the points listed below and you could at least marginalise
your investment risk.
66
Past performance
Know your fund manager
Does it suit your risk profile
TAX ASPECTS OF MUTUAL FUNDS

Tax Implications of Dividend Income
Dividends received from all mutual funds are tax free in the hands of
investors, irrespective of the kind of scheme they have invested in.
Equity Schemes
Equity Schemes are schemes, which have less than 50 per cent
investments in Equity shares of domestic companies.
As far as Equity Schemes are concerned no Distribution Tax is payable
on dividend. In the hands of the investors, dividend is tax-free.
Other Schemes
For schemes other than equity, in the hands of the investors, dividend
is tax-free. However, Distribution Tax on dividend @ 12.81 per cent to
be paid by Mutual Funds.
Tax Implications of Capital Gains
67
The difference between the sale consideration (selling price) and the
cost of acquisition (purchase price) of the asset is called capital gain. If
the investor sells his units and earns capital gains he is liable to pay
capital gains tax.
Capital gains are of two types:
Short Term Capital Gains
Long Term Capital Gains.
The holding period of the Mutual Fund units is less than or equal to 12
months from the date of allotment of units then short-term capital
gains is applicable.
On Short-Term capital gains no Indexation benefit is applicable.
Tax and TDS Rate (excluding surcharge)
Resident Indians and Domestic Companies
The Gain will be added to the total income of the Investor and taxed at
the marginal rate of tax. No TDS.
NRIs: 30 per cent TDS from the gain.
Long Term Capital Gains
All units held for a period of more than 12 months will be classified as
long-term capital assets. The investor has to pay long-term capital
gains on the units held by him for period of more than 12 months
On long-term capital gains Indexation benefit is applicable.
Tax and TDS Rate (excluding surcharge)
68
Resident Indians and Domestic Companies

The Gain will be taxed
A) at 20 per cent with Indexation benefit or
B) at 10 per cent without Indexation benefit, whichever is lower. No
TDS.
NRIs: 20 per cent TDS from the Gain
Surcharge
Resident Indians: If the Gain exceeds Rs 8.5 lakhs, surcharge is
payable by investors @ 10 per cent.
Domestic Companies: Payable by the investor @ 2.5 per cent.
NRIs: If the Gain from the Fund exceeds Rs 8.5 lakhs, surcharge is
deducted at source @ 2.5 per cent.
Indexation
Indexation means that the purchase price is marked up by an inflation
index resulting in lower capital gains and hence lower tax.
Inflation index for the year of transfer
Inflation index =
---------------------------------------------------Inflation index for the year of acquisition
TDS ON REDEMPTION:
No TDS is required to be deducted from capital gains arising at the
time of redemptions incase of Mutual funds.
SECTION 88 OF INCOME TAX ACT:
69
20% of the amount invested (Not exceeding Rs.10,000) in specified

Mutual funds (Called equity linked savings schemes or ELSS) is
deductible from the tax payable by the investor in a particular year
subject to a maximum tax saving of Rs. 2000 per investor. How ever,
an investor has to stay invested or there is lock-in period of three
years.
CHAPTER-07
RISK IN MUTUAL
FUNDS
70
CHAPTER - 7
RISK IN MUTUAL FUNDS
RISK FACTORS
Mutual funds and securities investments are subject to market

risk and there is no assurance or guarantee that the objectives
of the schemes will be achieved.
As with any securities investment, the net asset value (NAV)

may go up or down depending on the factors and forces affecting
the capital and money markets.
Past performance of the sponsor/AMC or that of existing

schemes of the fund does not indicate the future performance of
the schemes.
71
Technology stocks particularly run on risk of high volatility, high

valuation and obsolescence.
THE RISK-RETURN TRADE-OFF

The most important relationship to understand is the risk-return tradeoff. Higher the risk greater the returns/loss and lower the risk lesser
the returns/loss. Hence it is unto you, the investor to decide how much
risk you are willing to take. In order to do this you must first be aware
of the different types of risks involved with your investment decision.
TYPES OF RISKS
72
Market Risk :
Sometimes prices and yields of all securities rise and fall. Broad
outside influences affecting the market in general lead to this.. 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 where as a D rating is considered poor
credit quality. A well-diversified portfolio might help mitigate this risk.
73
Inflation Risk :
The root cause,
Inflation. Inflation is the loss of purchasing power
over time. A well-diversified portfolio with some investment in equities

might help mitigate this risk.
Interest Rate Risk :
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 :
Changes in government policy and political decision can change the
investment environment. They can create a favorable environment for
investment or vice versa.
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.
Diversification :
The nuclear weapon
in your arsenal for your fight against risk. It
simply means that you must spread your investment across different
74
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.
CHAPTER-08
75
HDFC MUTUAL
FUND PRODUCTS
CHAPTER - 8
HDFC MUTUAL FUND PRODUCTS

HDFC MUTUAL FUND SCHEMES
Equity fund
HDFC growth fund
HDFC long-term advantage fund
HDFC index fund
HDFC equity fund
HDFC tax saver
76
Balanced fund
HDFC Children's Gift Fund Investment Plans
HDFC Balanced Funds
HDFC Prudence Funds
Debt fund
HDFC income fund
HDFC liquidity fund
HDFC floating rate income fund short-term plan
HDFC floating rate income fund long-term plan
HDFC liquidity fund premium plan
HDFC liquidity fund premium plus plan
HDFC short-term plan - premium plan
HDFC short-term plan - premium plus plan
HDFC income fund - premium plan
HDFC Growth Fund
Name of the Scheme

:
:
Open-ended Growth Fund
To generate long term capital

appreciation from a portfolio
That is invested in equity and
Equity related instruments.
Fund Manager
Inception Date
:
:
77
Tushar Pradhan
September 11,2000
Entry/Sale Load
In respect of each purchase/

Switch-in of units less than
Rs 5 crore in value, an Entry
Load of 2.25% is payable.
Switch-in of units equal to
or
Greater than Rs 5 crore in
Value, no Entry Load is
Payable
Exit Load
Investment Plan/Options
:
:
Minimum Application Amount :
NIL
Growth/Dividend
For new investors:
Rs.5000 and in multiples
Of Rs.100 thereof
For existing investors:
Of Rs.100 thereof
Lock-in Period
NIL
Net Asset Value (NAV)
Every business day.
Redemption Proceeds
Normally despatched
78
With in 3 Business Days.

Tax Benefits/Consequences
Income distributed by the

Scheme will be exempt from
Income tax in the hands of
Investors. Distribution tax,
Applicable, shall be payable
by the respective scheme(s)/
Plan(s). Units of the Schemes
Are not subjected to WealthTax an Gift-tax.
HDFC Equity Fund
Name of the Scheme

:
:
To achieve capital
Appreciation.
Fund Manager
Inception Date
:
:
79
Prashant Jain
December 8, 1994
Entry/Sale Load

or
value, no Entry Load is
payable
Exit Load
:
:
NIL
Growth/Dividend
For new investors:
of Rs.100 thereof
of Rs.100 thereof
Lock-in Period
NIL
Net Asset Value(NAV)
Every business day.
Redemption Proceeds
Normally despatched
80

By the respective scheme(s)/
Are not subjected to WealthTax an Gift-tax.
HDFC Index Fund

Name of the Scheme
Open-ended Index Linked

Scheme
Nifty & SENSEX Plan: To

Generate returns that are
Commensurate with
Performance of the Nifty,
Subjected to tracking errors.
SENSEX Plus Plan: To
Invest 80% to 90% of the
Net assets of the plan in
Companies whose securities
Are included in SENSEX and
Between 10% to 20% of the
Net assets in companies
Whose securities are not
Included in the SENSEX.
81
Fund Manager
Tushar Pradhan
Inception Date
July 17, 2007
Entry/Sale Load
NIL
Exit Load

switch-in of units less than
Rs 5 Lakh in value, an Exit
Load of 1.00% is payable if
The Units are redeemed with
In one year from the date of
Allotment.
switch-in of units equal to
or
greater than Rs 5 Lakh in
value, no Exit Load is
payable
Nifty Plan, SENSEX Plan, and

SENSEX Plus Plan.
For new investors:

of Rs.100 thereof
of Rs.100 thereof
82
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally despatched

investors. Distribution
tax, if applicable, shall be
payable by the respective
Scheme(s) / Plan(s). Units of
the Scheme(s) are not
subject to Wealth-tax an Gifttax.
HDFC Childrens Gift Fund
Name of the Scheme
Open-ended Balanced
Scheme
Objective of both the plans

Under the Scheme is to
generate long term capital
appreciation.
83
Fund Manager
Investment Plan: Dhawal

Mehta
Savings Plan: Tushar
Pradhan
Inception Date
March 2, 2001
Entry/Sale Load
Investment Plan: 2.25%

Savings Plan: 1.25%
Exit Load
For Units subject to Lock-in

Period: NIL
For Units not subject to
Lock-in Periods: 3% if the
Units are redeemed/
switched-out within one year
from the date of allotment.
2% if the Units are
redeemed /switched-out
between First and Second
year of the date of allotment
1% if the Units are redeemed
/switched-out between First
and Second year of the date
of allotment
Investment Plan: Equity
84
Oriented.
Savings Plan: Debt
Oriented.
For new investors:

of Rs.100 thereof
of Rs.100 thereof
Lock-in Period
If opted: Until the Unit holder

(Being the beneficiary child)
attains the age of 18 years
or completion of 3 years
from date of allotment.
Every business day.
Redemption Proceeds
Normally despatched

investors. Distribution
tax, if applicable, shall be
payable by the respective
Scheme(s) / Plan(s). Units of
the Scheme(s) are not
subject to Wealth-tax an Gift85
tax.
HDFC Balanced Fund

Name of the Scheme

appreciation along with
current income from a
combined equity & equityrelated and debt & money
market instruments.
Fund
Manager
Inception
Date
Entry/Sale Load
Tushar Pradhan
September 11,2000
:

or
greater than Rs 5 crore in
payable
86
Exit Load
NIL
Growth/Dividend
For new investors:

of Rs.100 thereof
of Rs.100 thereof
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally despatched

applicable, shall be payable
are not subjected to Wealthtax an Gift-tax.
87
HDFC Prudence Fund
Name of the Scheme
To provide periodic returns

capital appreciation over a
long period of time from a
judicious mix of equity and
debt investments with an
aim to prevent/minimize any
capital erosion.
Fund Manager
Prashant jain
Inception Date
December 16, 1993
Entry/Sale Load

or
greater than Rs 5 crore in
payable
Exit Load
:
88
NIL
Growth/Dividend
For new investors:
Of Rs.100 thereof
of Rs.100 thereof
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally despatched

are not subjected to WealthTax a Gift-tax.
HDFC Long Term Advantage Fund
89
Name of the Scheme
Open-ended Equity linked

Savings Scheme with a LockIn period of 3 years

Appreciation from a portfolio
that is invested
Predominantly in equity and
Equity-related instruments.
Fund Manager
Tushar Pradhan
Inception Date
January 2, 2001
Entry/Sale Load

or
Payable
Exit Load
:
:
NIL
Growth/Dividend
90
For new & existing

Investors: Rs. 500 and in
Multiples of Rs.100 thereof
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally despatched

Are not subjected to WealthTax a Gift-tax.
HDFC Tax Saver Fund
Name of the Scheme
Open-ended Linked Savings

Scheme with a lock-in period
Of 3 years
91
To achieve long term growth

Of capital.
Fund Manager
Dhawal Mehta
Inception Date
December 18, 1995
Entry/Sale Load

or
Payable
Exit Load
:
:
NIL
Growth/Dividend
For new & existing
Investors: Rs. 500 and in
Multiples of Rs.100 thereof
Lock-in Period
92
NIL
Every business day.
Redemption Proceeds
Normally despatched

Are not subjected to WealthTax a Gift-tax.
HDFC Income Fund
Name of the Scheme
Open-ended income
Scheme.
To optimise
returns while
Maintaining a balance of
Safety yield and liquidity.
93
Fund Manager
:
Shabbir Kapasi
Inception Date
HIF: September
11, 2000
Entry/Sale Load
NIL
Exit Load
In respect of
each purchase/
switch-in of units upto and
including Rs.10 lakh in
Value, an Exit Load of 0.50%
Is payable if Units are
Redeemed/switched-out with
In 1 year from the date of
Allotment.
In respect of
each purchase/
switch-in of units greater
than Rs.10 Lakh in value
no Exit Load is payable on
switch/redemption.
94
Growth/Dividend
Minimum Application Amount
For new investors:

Rs 5000 and in
multiples of Rs.1000
thereof
Rs 1000 and in
multiples of Rs.100 thereof
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally
despatched

95
HDFC Short Term Plan (STP)
Name of the Scheme
: Open-ended
income Scheme.
To generate
regular income
Through Investing in debt
security money market
Instruments.
Fund Manager
Inception Date
Anil Bamboli
STP: February
28, 2002
Entry/Sale Load
NIL
Exit Load
In respect of
each purchase/
including Rs.25 crore in
Value, no Exit Load
Is payable
In respect
of each purchase/
96

than Rs.25 crore in value
an Exit Load of 0.25%
payable if Units are switched
-out/redemption with in 15
days of allotment.
:
:
Growth/Dividend
For new investors:

Rs 5000 and in
thereof
Rs 1000 and in
multiples of Rs.100 thereof
Lock-in Period
NIL
Every business day.
Redemption Proceeds
Normally
despatched

97

HDFC Liquid Fund (HLF)
Name of the Scheme
: Open-ended income
Scheme.
: To enhance income
Consistent with a high level
Of liquidity Through judicious
Portfolio mix comprising of
money market & debt
Instruments.
Fund Manager
:
Shobhit Mehrotra
Inception Date
HLF: October 17,
2000
HLF-Premium Plan & HLFPremium Plus Plan:
February 24, 2003
Entry/Sale Load
:
98
NIL
Exit Load
NIL
HLF, HLF-Premium Plan
&
HLF- Premium Plus Plan:
Offers Growth/Dividend
HLF-Premium Plan &
Offers Dividend Payout
facility
HLF: Growth Option:

Rs 10000 and in multiples
of Rs.1000 thereof
Dividend Option:
of Rs.1000 thereof
HLF-Premium Plan:
Rs 50000000 and in
Multiples of Re. 1 thereof
Opening an account/foilo
(under each option)
of Rs.1000 thereof
Lock-in Period
NIL
All Year Round.
99
Redemption Proceeds
HLF: Normally
despatched
(1 Business Day subject to
certain conditions)
HLF-Premium Plan &
Normally despatched
With in 3 Business Days

HDFC Floating Rate Income Fund
100
Name of the Scheme
: Open-ended Income
Scheme.
To generate regular income

Through investment in a
Portfolio comprising
Substantially of floating rate
Debt/money market
Instruments swapped for
Floating rate returns and
Fixed rate debt securities
Money market instruments.
Fund Manager
:
Shabbir Kapasi
Inception Date
January 16,
2003
Entry/Sale Load
STP: NIL
LTP: NIL
Exit Load
STP: NIL
LTP
including Rs.10 lakh in
Value, an Exit Load 0.50
101
Is payable if the units are

Redeemed/switched-out
Within 6 months from the
Date of allotment.
than Rs.10 lakh in value, no
Exit load is payable.
STP: for investors who
wish
to invest for short period
LTP: for investors who wish
to invest for long time period
STP : Growth Option:

Rs 10000 and in
thereof
Dividend reinvestment
Option:
of Rs.1000 thereof
LTP:
of Rs.1000 thereof
New investors: Rs 5000
and in Multiples of Rs 100
thereof
102
Existing Investors:
Rs 1000 and in Multiples of
Rs 100
Lock-in Period
NIL
STP: All Year Round.

LTP: Every business day
Redemption Proceeds
Normally
despatched
(1 Business Day subject to
certain conditions)

103
CHAPTER-09
ANALYSIS
&
INTERPRETATION
104
CHAPTER - 9
ANALYSIS & INTERPRETATION

HDFC Balanced-G
Annual returns 2007
Fund Return
14.64
2006
59.79
2005
14.51
2004
-3.81
2003
-
Annual Returns
70
60
59.79
50
40
30
20
14.64
14.51
10
0
-10
2007
2006
2005
-3.81
200
4
2003
HDFC Balanced, despite being invested in equities upto 60% in the

bearish markets, has been able to limit its downside risk. However, it is
too early to talk about sustainability of performance
105
HDFC Children's Gift Inv :

Annual returns 2007
Fund Return
13.54
2006
53.93
2005
15.40
2004
-
2003
-
Annual Returns
53.93
60
50
40
30
20
15.4
13.54
10
0
2007
2006
2005
2003
2004
HDFC Children's Gift Sav :

Annual returns
Fund Return
2007
7.12
2006
20.66
2005
15.52
2004
-
Annual Returns
25
20
20.66
17.12
15.52
15
10
5
0
2007
2006
2005
HDFC Equity-G :
106
2004
2003
2003
-
Annual returns 2007

2006
Fund Return
27.53 126.30
2005
24.20
2004
-2.81
2003
-20.00
Annual Returns
150
126.3
100
50
27.53
24.2
0
2007
2006
2005
-2.8
2004
-50
2003
-20
This fund has successfully managed the risks of a concentrated

portfolio and with average volatility, it merits a place in all long-term
portfolios
HDFC Floating Rate Income LT-G :

Annual returns 2007
Fund Return 4.33
2006
-
2005
-
2004
-
Annual Returns
5
4.33
4
3
2
1
0
2007
2006
2005
HDFC Floating Rate Income ST-G :
107
2004
2003
2003
-
Annual returns
Fund Return
2007
4.70
2006
-
2005
-
2004
-
2003
-
Annual Returns
4.7
5
4
3
2
1
0
2007
2006
2005
2004
2003
HDFC Growth-G :
Annual returns 2007
Fund Return 25.64
2006
2005
120.72 20.82
2004
-25.59
Annual Returns
150
120.72
100
50
25.64
20.82
0
2007
2006
2005
-50
HDFC Income-G :
108
2004
-25.59
2003
2003
-
Annual returns 2007

Fund Return
-0.01
2006
2005
8.90 16.71
2004
17.21
2003
-
Annual Returns
20
16.71
17.21
2005
2004
15
8.9
10
5
-0.01
0
-5
2007
2006
2003
HDFC Index Nifty-G :

Annual returns
Fund Return
2007
7.58
2006
2005
73.91 -
2004
-
2003
-
Annual Returns
80
70
60
50
40
30
20
10
0
73.91
7.58
2007
2006
2005
2004
2003
HDFC Index Sensex-G :

Annual returns 2007
Fund Return
12.49
2006
2005
63.91 -
109
2004
-
2003
-
63.91
Annual Returns
63.91
70
60
50
40
30
20
12.49
10
0
2007
2006
2005
2004
2003
HDFC Liquid-G :
Annual returns
Fund Return
2007
4.36
2006
2005
4.96 7.10
2004
8.84
2003
-
Annual Returns
10
8.84
7.1
8
6
4.36
4.96
4
2
0
2007
2006
2005
2004
2003
HDFC Liquid Premium-G :

Annual returns
Fund Return
2007
4.57
2006
2005
-
110
2004
-
2003
-
Annual Returns
5
4.57
4
3
2
1
0
2007
2006
2005
2004
2003
HDFC Liquid Premium Plus-G :

Annual returns
Fund Return
2007
4.65
2006
2005
-
2004
-
2003
-
Annual Returns
5
4.65
4
3
2
1
0
2007
2006
2005
2004
2003
HDFC Prudence-G :
Annual returns 2007
Fund Return
25.38
2006
2005
91.92 24.68
111
2004
-2.88
2003
-8.75
Annual Returns
91.92
100
80
60
40
25.38
24.68
20
0
-20
2007
2006
2005
-2.88
2004
2003
-8.75
HDFC Short Term Plan-G :

Annual returns 2007
Fund Return 3.40
2006
2005
5.85 -
2004
-
2003
-
Annual Returns
7
6
5.85
5
4
3
3.4
2
1
0
2007
2006
2005
2004
2003
HDFC Tax saver-G :

Annual returns 2007
Fund Return 49.38
2006
2005
121.06 13.09
112
2004
-4.51
2003
5.74
Annual Returns
140
120
121.06
100
80
60
40
49.38
13.09
20
0
-20
2007
2006
2005
113
5.74
-4.51
2004
2003
CHAPTER-10
FINDINGS
SUGGESTION
CONCLUSION
BIBLOGRAPHY
FINDINGS
Most of the people are not aware of mutual funds.
114
Mutual funds simplifies investors investment experience and allows

him to depend on the expertise and experience of professional
money managers freeing up his time to be used for more enjoyable
pursuits.
Mutual funds generally invest in stocks, bonds and money markets.
The equity schemes perform very well compared from inception to

last one year. Debt schemes is also perform well but not good
because the interest rates are falling in market. This is the main
reason
Performance of HDFC schemes in 2007 is not good when compare

to the other years.
Most of the schemes have good returns in the year 2003 and 2004.
SUGGESTION
The company has to maintain better long-term relationship with

the customers.
115
Drastic measures have to be taken immediately for improvement

of advertising all kind media.
It is found out from the survey that most of the respondents give
priority to the services and risk factors. There fore the firm
should concentrate on better services and interacting with the
customers as well as investors.
Company should consider the present competition market and

should act according to the customer needs while launching a
new fund.
No doubt HDFC signed more standard and safety needs, but at

the same time it is the responsibility of the company to
cooperate with the distributors and their channels in serving the
customers, once the customer is dissatisfied with service
oriented, there are chances he/ she may shift to other
companies.
Marketing campaigns should be organized in the crowded areas.
It is better, if the company create awareness in rural areas of the

HDFC mutual funds.
CONCLUSION
It can be concluded that mutual funds are better investment option.
Investing in portfolio of mutual funds can minimize risk. The market is
116
growing day by day and websites provide the investors with much
information. Investing has easier with the introduction of technology.
Though the public is interested in better investment opportunities,
they are not aware of the process involved in investing in mutual
funds. This has to be overcome.
It can also be said that it is suitable to people from all backgrounds
and all age groups
This project is helpful for both the investors and the company because
the information collected through the first module of the survey is
useful for the company to find the investors opinions and their
investment options. In the second module is benefited for the
investors to choose the better performance schemes in the HDFC
mutual funds according to the annualized return.
117
BIBLOGRAPHY
Authors :
John C. Bogle common sense on mutual funds: new imperatives for
the intelligent investors
H. Sadhak mutual funds in India: marketing strategies and
investment practices
CHANG.E
AND
W.LEVELLEN
market
timing
and
mutual
fund
investment performance. (January 1984)

an update on mutual funds: better grades.(November 1982)
VEIT.T
AND
J.CHENEY.
ARE
TIMERS?(NOVEMBER 1982)
JOURNALS AND MAGAZINES :
Dalal Street
Journal on portfolio management
Harvard business review
Business standard
Business today
Websites :
www.hdfcfund.com
www.google.com
www.amfiindia.com
www.mutualfunds.about.com
www.clipart.com
118
MUTUAL
FUNDS
MARKET
119

"Mutual Funds": T.Surendra Chary

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A

In partial fulfillment of the Award of

MASTERS DEGREE IN BUSINESS

St.PAULS P.G. COLLEGE

Name and Address of the Student

Signature of the Student

Profile of HDFC Bank &

Analysis & interpretation

also aimed to measure the performance of various equity schemes for

Understand the benefits of investing in mutual Funds over other

Portfolio of Mutual Funds

To understand the risk taking ability of different investors

To understand the MUTUAL FUNDS.

To help investor understand the concept of mutual fund and the

To make a more informed investment decision while selecting a

To study the performance of the HDFC mutual fund schemes

METHODOLOGY AND DATA COLLECTION:

METHODLOGY AND DATA COLLECTION

COMPANIES PUBLISHED DATA

Structured questioner is the formal list of questions formed so as to

I gathered information by interacting with Sri Sai Charan

I referred MUTUAL FUNDS related articles from various

Material provided by HDFC.

Browsing the concerned sites.

The collected data was analyzed by using graphs relative

We did a sample survey for to find how many people

mutual funds and how many people invested in mutual

Information relating to the internal aspects regarding various

Study is limited to HDFC schemes only.

Most of the information is from secondary data.

People not willing to spend their time for answering the

The schemes have been compared only on the basis on one

bank deposits, but this trend is beginning to change. Recent figures

The money market mutual fund segment has a total corpus of

in the U.S against a corpus of $100 million in India.

Out of the 10 mutual funds world wide, eight are bank-sponsored.

listed companies while in India we have 277 schemes.

Internationally, mutual funds are allowed to go short. Indian fund

managers do not have such leeway.

On-line trading is great idea to reduce management expenses from

the current 2% of total assets to about 0.75% of the total assets.

RECENT TRENDS IN MUTUAL FUND INDUSTRY

term and requires deep-pocketed support in the intermediated years.

PROFILE OF HDFC BANK AND HDFC MUTUAL FUNDS

and regulatory compliance. HDFC Bank's business philosophy is based

value to HDFC Bank in terms of increased branch network, expanded

Senior banking professionals with substantial experience in India and

management team and the overall focus on recruiting and retaining

customers through the branch network

Automated Teller Machines (ATMs).

a. Wholesale banking services

(CRISIL). The rating provides an independent assessment of an

HDFC Bank Preferred

Super Saver Account.

HDFC Bank Plus

INNOVATIVE SERVICES FOR YOUR CONVENIENCE

ATM 24-hour banking

International Debit Card.

LOANS FOR EVERY NEED

New Car Loans and Used Car Loans

Loans Against Shares

Two Wheeler & Consumer Loans