Summer training report On

HDFC BANK
mutual funds and their comparative analysis Submitted in partial fulfillment of the requirements of business management program. NATIONAL INSTITUTE OF TECHNOLOGY(kurukshetra)

SUBMITTED BY: NIDHI MITTAL MBA-IIsem 3023 DEPARTMENT OF BUSINESS ADMINISTRATION

ACKNOWLEDGEMENT No work is considered complete unless due acknowledgement is given to those who made it possible. Therefore, I am very thankful to the entire team of HDFC BANK for their cooperation, without which completion of this project would not have been possible. Words at my command are inadequate both in form and spirit to express my sincere and profound gratitude to Mr. Naveen Relan (branch manager) of HDFC ltd.. for having confidence in my abilities and giving me all the liberties to perform. Sirs meticulous guidance, keen supervision and whole hearted help has made me capable to complete this project. I would also like to thank Mr. Hitesh Mehta and Mr.Dinesh (Advisor- Mutual Funds) for sharing with me all the details of the project and providing me with valuable insights about the product. I would also like to thank Ms. Meenu (Advisor credit cards), Mr.Deepak bajaj(personal banker) for the patience shown by them and being of such a great help to all my queries and above all making the environment more comfortable for me. Last but not the least I would like to thank my co-trainees Ms sheetal and Ms rachna.they have been a great support in preparing this report as well as in discussing about the related data and creating a cosy environment for my research work.

MUTUAL FUNDS AND THEIR COMPARATIVE ANALYSIS

This report gives one an insight into the mutual funds in India. I have tried my level best to incorporate the readings and the information I collected through these readings during my Summer Internship in HDFC BANK. This report basically consists of all information regarding work which I had done in this project .So going ahead I would like to tell you in general actually what my project is? The Project Title i.e. MUTUAL FUNDS AND THEIR COMPARATIVE ANALYSIS. So under, First topic ofMutual Funds I had collected data from various resources and reference like facts sheets of various funds houses and secondary data from different websites and with total support of the bank staff and branch manager Mr.Naveen relan From these facts sheets of various companies I had analyzed the past track record of various funds of selected Fund houses..By this analysis I had seen the performance of different funds of different fund houses. So that it I can make this project helpful for the investor in selection of the right fund and guided the investor for his or her investment This project would help the investor in selecting best of best fund for making investment. This project basically concentrates on the study of Mutual Funds, which are currently attracting investors from all walks of life. This project also enhances my knowledge about the subject. and enable me to understand the terms more easily by knowing the funds behind the name and its implications This project aims at understanding the viability of best of best in different sections of mutual funds and banking scrips for future investment.

SUPERVISION: Mr. Naveen Relan (Branch manager) HDFC BANK

INTRODUCTION In todays world where people are more concerned about protecting their future, they need to plan out their investments in a judicious manner. Investment goals vary from person to person. While somebody wants security, others might give more weight age to returns alone. Somebody else might want to plan for his childs education while somebody might be saving for life after retirement. With different objectives their main aim is that they want their money to grow in a safe and secure manner. but there is a phrase which states that Higher the Risk Higher is the Return everyone is not that strong that he could risk his earning but they do want to earn at minimum possible risk This project would help the investor in selecting the Best fund for making investment. This project basically concentrates on the study of Mutual Funds and selected Banking Scrips as investment avenues, which are currently attracting investors from all walks of life. This project also enhance my knowledge about the subject. and enable me to understand the terms more easily by knowing the funds behind the name and its implications This project aims at understanding the viability of best of best in different sections of mutual funds and banking scrips for future investment This project would guide them as to how they can plan out there investment by providing investors with the research facts In this project a study for comparative analysis of various schemes offered by different Mutual fund companies Lastly Enough work has not been done on this subject hence I have chosen this project for further research to guide .This Analysis can help in relating the risk profile of an investor with the investment avenue that he is opting

ESSENTIAL OF THIS RESEARCH Managed assets to rise 6-fold by 2015 The total assets managed by all funds in the country--mutual funds, international funds, private banking, including portfolio management services, unit-linked insurance and pension funds--is likely to grow more than six-fold to US$ 1,300 billion by 2015, from US$ 170 billion, says the Boston Consulting Group. The potential of the Indian market is attracting many new entrants and this is likely to continue over the next five years. The opportunity for various fund categories to invest in India will grow exponentially; managed assets, excluding pension, are expected to grow at least 10 times over next 10 years Trends India--with its GDP approaching US$ 800 billion--is viewed as one of the biggest growth stories among emerging markets explains only part of the attraction for foreign banks. Credit off-take has grown 25-30 per cent annually in recent years, with retail consumer lending being the hunting ground for foreign banks. State Bank of India (SBI), the country's largest bank, has earmarked biotechnology, fisheries, food technology, dairy and horticulture as thrust areas. Its threeyear national plan, FY07-10, involves an outlay of US$ 2.66 billion. ICICI Bank says its 20 million customer base is growing by 35 per cent annually. The bank operates 2,680 automated teller machines, and its network of 670 branches is expanding by 50-100 every year. A growth machine in the past five years, the group held US$ 62 billion in assets for the year ended on March 31, 2006.

SCOPE OF THE PROJECT This project is not only for those people who are planning to invest there money in different Mutual Funds or Banking Scrips but also for them who had invested there money in either of the schemes which are being compared in the project . so that they could also use this report for there investments so as to yield maximum benefit out of this project As hdfc deals in various financial instruments where in which investors invest there money so by my research I could tell investors which Banking stock to buy or to sell with strong fundamental research . The prime objective of the project would be to identify and suggest people with proper research facts for investment in mutual fund and banking scripts prior to there investment so as to why they go for our recommendations OBJECTIVES OF THE PROJECT 1. To Appraise leading Mutual Fund companies 2. To Analyze returns generated by leading fund houses 3. To Study Scripts on Various parameters of Research 4. To Guide investors about there investments among these scrips 5. To give recommendations on the best Fund / Scrip

LIMITATIONS A large number of schemes around 590 are available in the market and it is difficult to analyze all of them. The analysis is completely based on the past performance and does not confirms the future performance. Lack of enthusiasm among investors due to fluctuations in market Difficulties in gathering desired information No Co-ordination between study and project Study is not very exhaustive and many concepts cannot be studied due to time and other constraints. Officials though very helpful, are not able to give much of their time due to their own time constraint. The results from the analysis is qualitative and not the quantitative. Limitations of stock market.

METHODOLOGY It is an Empirical study in which mostly secondary data will be used . The Primary data in this case is not required as such because investments are made according to the past trends and market value of an mutual fund or a scrip primary data The Secondary data has been collected from the followings Fact Sheets of all the AMCs Mutual Fund Insight Indian Mutual Funds Handbook Newspapers ( Economic Times , Business Line) Magazines ( Business World) Internet Web Sites

In this the Sample Size For Mutual Funds companies is 6 this size is selected out of 10 companies which are currently offering their products in the market these 6 companies are selected according to there market capitalization of the companies In the project of Banking Scrip the Sample Size is 6 out of 10. the companies which has been selected for analysis has large market capitalization and highest performing mutual fund categories. Analysis would be on those companies and banks which have large market capitalization and other parameters like performance, stability, etc.

ANALYTICAL STUDY OF MUTUAL FUNDS Introduction Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investment, they also carry certain risks. The investors should compare the risks and expected yield after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions. During the last few decades the global scenario has witnessed several significant developments, including initiation of new and innovative financial services. The phenomenal growth of the capital market has been accompanied by the advent of equity cult among the household sector. The household sector does not possess the surplus funds, but psychologically it is either risk-neutral or risk-averse. Therefore, institutional shields have been created, whose main role is to act as intermediaries between the people, who have the ability and propensity to save, and those who require money. This is a historical necessity, which has given rise to the concept of Mutual Funds. An investor normally prioritizes his investment needs before undertaking an investment. So different goals will be allocated different proportions of the total disposable amount. Investments for specific goals normally find their way into the debt market as risk reduction is of prime importance. This is the area for the risk-averse investors and here, mutual funds are generally the best option. Capital markets interest people, albeit not all for there are several problems associated. First issue is that of expertise. While investing directly into capital market one has to be analytical enough to judge the valuation of the stock and understand the complex undertones of the stock. One needs to judge the right valuation for exiting the stock too. It is very difficult for a small investor to keep track of the movements of the market. Entrusting the job to experts, who watch the trends of the market and analyze the valuations of the stocks will solve this problem for an investor. Mutual funds specialize in identification of stocks through dedicated experts in the field and this enables them to pick stocks at the right moment. Next problem is that of funds/money. A single person cant invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. This limits him from diversifying his portfolio as well as benefiting from multiple investments. Here again, investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. This not only diversifies the portfolio and helps in generating returns from a number of sectors but reduces the risk as well. Though 9

identification of the right fund might not be an easy task, availability of good investment consultants and counselors will help investors take informed decision. Why Mutual Fund ? A Mutual Fund is an institutional arrangement which mobilizes savings of millions of investors for investment in a diversified portfolio of securities, with a view to spread risk and to ensure adequate and consistent return, both in the form of dividend and capital appreciation. It is, in fact, a financial intermediary that receives money from shareholders, invest it, earn on it, and make it grow to share it with them. These institutions are managed by professional money managers who make portfolio investment decision on behalf of unsophisticated investors. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual funds issues units to the investors in accordance with quantum of money invested by them. Investors of Mutual funds are known as Unit Holders. The profits and losses are shared by the investors in proportion to their investments. Mutual funds normally comes out with a number of schemes with different investments objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India which regulates securities markets before it can collect funds from public.

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RISK RETURN GRID (types of funds)

Risk Tolerance/Return Focus Expected Low Debt Partially Debt, Partially Equity Suitable Products Bank/ Company Debt based Funds FD, Benefits offered by MFs

Liquidity, Better Post-Tax returns

Medium

Balanced Funds, Some Diversified Equity Liquidity, Better Post-Tax returns, Funds and some debt Better Management, Diversification Funds, Mix of shares and Fixed Deposits Capital Market, Equity Diversification, Expertise in stock Funds (Diversified as picking, Liquidity, Tax free well as Sector) dividends

High

Equity

Their appeal is not just limited to these categories of investors. Specific goals like career planning for children and retirement plans are also catered to by mutual funds. Children funds have found their way in a big way with many of the fund houses already having launched a children fund. Essentially debt oriented, these schemes invite investments, which are locked till the child attains majority and requires money for higher education. You can invest today and assure financial support to your child when he/she requires them. The schemes have given very good returns of around 14 percent in the last oneyear period. These schemes are also designed to provide tax efficiency. The returns generated by these funds come under capital gains and attract tax at concessional rates. Besides this, if the objective was to save taxes, the industry offers equity linked savings schemes as well. Equity-based funds, they can take long-term call on stocks and market conditions without having to worry about redemption pressure as the money is locked in for three years and provide good returns. Some of the ELSS have been exceptional performers in past and cater to equity investor with good performances. The industry offered tax benefits under various sections of the IT Act. For e.g. dividend income is free in the hands of the investor while capital gains are taxed after providing for cost inflation indexation. Hitherto, the benefits under section 54 EA/EB were 11

available to take benefits of the tax provisions for capital gains but have now been removed. The benefits listed so far have essentially been for the small retail investor but the industry can attract investments from institutional and big investors as well. Liquid funds offer liquidity as well as better returns than banks and so attract investors. Many funds provide anytime withdrawal enabling a big investor to take maximum benefits. The appeal of mutual funds cuts across investor classes. In other developed countries, mutual funds attract much more investments as compared to the banking sector but in India the case is reverse. We lack awareness about the benefits that are offered by these schemes. It is time that investors irrespective of their risk capacities, made intelligent decisions to generate better returns and mutual funds are definitely one of the ways to go about it. HISTORY OF INDIAN MUTUAL FUND INDUSTRY

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 the. The history of mutual funds in India can be broadly divided into four distinct phases: First Phase 1964-87 An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 nonUTI, public sector mutual funds set up by public sector banks and Life Insurance 12

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.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. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase since February 2003

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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 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 September, 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes.

GROWTH IN ASSETS UNDER MANAGEMENT

SOURCE : AMFI

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SOURCE : AMFI Role of Securities & Exchange Board of India To protect interest of investors in securities and to promote the development of securities market. As far as mutual funds are concerned, SEBI formulates the policy and regulates mutual funds to protect interest of investors. SEBI notified regulations for mutual funds in1993.Thereafter,mutual funds sponsored by private sector entities were allowed to enter capital market. The regulations were revised in 1996 ,and have been amended thereafter from time to time. All mutual funds whether promoted by public sector or private sector entities are governed by same set of regulations. There is no distinction in regulatory requirement for these monthly requirements and all are subject to monitoring by SEBI. The risks associated with the schemes launched by mutual funds sponsored by these entities are of similar type. Setting up of Mutual Fund A mutual fund is set up in form of a trust, which has sponsors, trustees, asset management companies and custodian. The trust is established by a sponsor who is like a promoter of a company. The trustees of mutual fund hold its property for benefit of unit holders. AMC approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the funds in the custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of the SEBI regulations by the mutual funds. 15

SEBI regulations require that at least two third of the directors of trustee company or board of trustee must be independent i.e. they should be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit trust of India(UTI) is not registered with SEBI (as on January 15, 2002). Net Asset Value (NAV) of A Scheme The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV). Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of the securities of a scheme divided by the total number of the unit of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs. 200 lakhs and the mutual funds has issued 10 lakhs units of Rs.10 each to the investors, then the NAV per unit fund is Rs. 20. NAV is required to be disclosed by the mutual funds on a regular basis- daily or weekly- depending on the type of the scheme.

Graphical Representation

SOURCE : AMFI

Mutual Fund Operation Flow Chart

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SOURCE : AMFI

STRUCTURE OF A MUTUAL FUND

SOURCE : AMFI

Why should you invest in Mutual Funds?

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1) Reduce your risks - Mutual Funds diversify your portfolio by investing in various
securities & minimise the risk.

2) Maximise your opportunities - The fund managers with the strong research
take explore new investment options make available opportunities for your investments to flourish.

3) Liquidity: (Quick access to your money) - Mutual Funds can be bought and
sold on any dealing day

4) Affordability - Of course you dont need to be millionaire to invest in mutual fund

as the minimum investment in mutual fund starts from Rs.500/-. A Mutual Fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

5) Low Costs - Mutual Funds are a relatively less expensive way to invest compared to
directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

6) Tax Benefits - The tax benefits that Mutual Funds investors enjoy at the moment is
the treatment of long-term capital gains. Investors have two options as regards long-term capital gains: Tax @ 10% on capital gains without indexation (plus surcharge) Tax @ 20% on capital gains after indexation (plus surcharge)

7) Transparency - The investor gets regular information on the value of his

investment in addition to disclosure on the specific investments made by the fund, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

8) Regulated for investor protection - All Mutual Funds in India are registered
with the regulator of the Indian securities industry - the Securities and Exchange Board of India (SEBI). The funds function within the framework of regulations designed by SEBI 18

and these regulations are intended to protect the interests of investors. The operations of the mutual funds are also regularly monitored by SEBI.

9)Professional Management you avail the services of experienced and skilled

who are backed by a dedicated investment research team which analysis the performance and prospects of companies and accordingly selects suitable investment archive

Risk Profiles
Equity Diversified Funds

Diversification - Mutual Funds reduces the risk by investing in all the sectors. Instead of putting all your money in one sector or company it's better to invest in various good performing sectors as you reduces the risk of getting involved in a particular sector/company which may perform or may not. Who should invest - This is an ideal category for those who want to participate in stock market & knows the risk involved in stock market but have few rupees to invest in bluechip stocks. How they performed - Though the short term out look is volatile in long-term equity diversified funds have outperformed other categories & stock markets will lesser amount of risk than stock markets. The average returns of equity diversified funds are 102%. Index Funds -

Follow the index - These are the index-based funds, which move with the likes of Sensex & Nifty. These fund charges NIL or very low entry/exit loads. Who should invest - if Nifty & Sensex have come down from their tops, it is a good time to invest in Index funds with the principal of "Investing at the lower levels". How they performed - Though the short term out look is volatile in long-term Sensex & Nifty could do well with improving economic conditions. It has been seen that these Index funds have outperformed the indices making them more attractive.

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Sector Fund -

Sector - Sector Schemes follow particular sector. Who should invest - You have to be selective while investing in these funds, as you need to select particular sector, which will perform better in the future. Investing in these funds carries some amount of risk but also give you more returns. How they performed - Sector funds have given average returns of 73% for 1 year period. Auto, Steel, Cement have done well the year '03 & the trend will continue in year '04 but IT, FMCG sectors are experiencing downward trend due to $ depreciation, price war in FMCG respectively. Though short-term trend for pharma sector looks down in long term we look forward to lot more action in the sector, as there exists a long-term, strong fundamental story backed by immense growth potential for the Indian pharmaceutical companies. Balanced Funds -

Balanced Act - Balanced funds gives you the stability with the potential to grow with the equity help of equity investments. These funds invest in both Equity & Debt markets. Who should invest - The balanced funds are for those, who want to enjoy the appreciation effects of equity market but at the same time like to play safe with less volatile debt market. In this volatile market it is good to invest in balanced funds as they carries less risk compare to equity funds. How they performed - In the last 12 months balanced funds have given descent returns with the up trend in the equity markets. Balanced funds average returns are 60% for 1year period.

Equity Linked Tax Savings Schemes (ELSS) -

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Enjoy tax benefits - These schemes are becoming more popular as traditional ways of tax saving becoming less interesting with declining interest rates. Who should invest - Equity Linked Savings Schemes (ELSS) is an ideal way to save on tax as well as staying invested in equity mutual funds. How they performed - In last 1 year these funds have given above average returns to keep you more & more interested in saving tax as well as counting returns on your investment. The average returns for this category are 98%. Debt Funds -

Banking on Debt Markets - Debt funds invest in the government securities, Corporate Bonds, Treasury Bills, etc. Who should invest - The conservative investors like to go for capital safety. How they performed - From Last 12 months in the declining interest rate scenario debt funds remained flat. In 3 years debt funds have given average returns of 12%. As equity market is looking volatile its better to invest part of your money in these funds. Gilt Funds -

Government Sec. - Gilt funds invest in government securities. Who should invest - The investors who like to avail the benefits of capital safety with government security. How they performed - From Last 6-12 months Gilt funds have given average returns. As equity market is looking volatile its better to invest part of your money in these funds as they provide adequate security to your investments. The average returns for 1-year period are 10.41% compare to the NSE G Sec Composite Index has given 12.60% returns.

MIP

Monthly Income - These schemes gives you monthly income. 21

Who should invest - Those who seek monthly income. In the current scenario where debt market is very volatile it's better to invest in hybrid funds like MIP with suitable time horizon for capital appreciation. How they performed - In Last 6-12 months MIP's have given descent returns compare to debt funds. The average returns of MIP's stands at 15.68%, which looks good, compared to income funds. STP

Short-term Plans - These schemes provides short-term saving option with more liquidity than FD's to park your investments. Who should invest - Those who seeking for income in short-term investments of 6-10 months with more liquidity than Bank fixed deposit. How they performed - While savings accounts would give you 3.5% per anum, bank FD's annually return up to 6.5%, Liquid funds would typically give you more than 5% and short-term plans 6 to 6.5% per anum. In Last 6-12 months STP's have given descent returns.

Various Types of Mutual Fund Schemes Schemes according to Maturity Period :A mutual fund scheme can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

Open-Ended Fund Or Scheme :-

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An open-ended scheme or fund is one that is available for subscription or repurchase on a continuous basis. These schemes do not have a fix maturity period. Investors can conveniently buy and sell units at net asset value related price which are declared on a daily basis. The key feature on an open-ended scheme is liquidity. Close-Ended Fund Or Scheme :-

A close-ended scheme of fund has a stipulated maturity period e.g. 5-7 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy and sell the units of the schemes on the stock exchanges where the units are listed. In order to provide the exit route to the investors, Some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI regulations stipulate that at least one of the two exit routes is provided to the investors i.e. either repurchase facility or through listing on the stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

Schemes According To Investment Objective :Considering its investment objective, a scheme can also be classified as : Growth Scheme Income Scheme Balanced Scheme Such schemes can be Open-ended or be Close-ended as described earlier. These schemes may be classified mainly as follows -:

Growth Or Equity Oriented Scheme :23

The aim of the Growth fund is to provide capital appreciation over the medium to long term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like dividend option, capital appreciation etc. and the investors may choose an option depending on their preferences. The investor must indicate the option in the application form. Mutual funds also allow the investors to change the options at the later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time. Income Or Debt Oriented Scheme

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as Bonds, Corporate Debentures, Government Securities and Money Market Instruments. Such funds are less risky compared to equity schemes. limited in such funds. The NAV of such funds are affected because of change in interest rates in country. If the interest rate falls, NAVs of such funds are likely to increase in the short run or vice-versa. However, Long-term investors may not bother about these fluctuations. Balanced Fund These funds are not affected because of fluctuations in equity markets. However opportunities of the capital appreciation are also

The Aim of the Balanced fund is to provide both regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40-60% in equity and debt instruments. These funds are also affected of fluctuation in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

Money market Or Liquidity Funds

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These funds are also income funds and their aim is to provide easy liquidity, preservation of the capital and moderate income. These schemes invest exclusively in safer short-term instruments such as Treasury Bills, Certificate of Deposit, Commercial Paper and Inter Bank Call money, Government Securities etc. Return on these schemes fluctuates much less compared to other funds. These funds are appropriate for corporate and individual investors as a means of park their surplus funds for short periods. Gilt Fund

These funds invest exclusively in government securities. Government securities have no default risk. NAVs of these schemes also fluctuate due to change in interest rates and economic factors as is the case with income or debt oriented schemes. Index Funds

Index Funds replicate the portfolio of a particular index such as the BSE sensitive index, S&P NSE 50 index(Nifty), etc. These schemes invest in the securities in the same weight age comprising of an index. NAVs of such schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as Tracking Error in technical terms. Necessary disclosure in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. Sector Specific Fund or Schemes

These are the funds or schemes which invest in the securities of only those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals, software, Fast Moving Consumers goods(FMCG), petroleum stocks, etc. the return on these funds are dependent on the performance of the respective sector/industries. While these funds may give higher returns, they are more risky compared to the diversified funds. Investors need to keep a watch on the performance of these sectors/industries and must exit at an appropriate time. They may seek an advice of an expert.

Tax Saving Schemes 25

These schemes offer tax rebate to the investors under the specific provisions of the Income tax act, 1961 as the government offers tax incentives for investment in the specific avenues. E.g. Equity Linked Saving Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risk associated are like any equity-oriented scheme. Load And No-Load Fund

A load fund is that charges a percentage of NAV for entry or exit. That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10.if the entry or exit load charged is 1% then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yield/returns. However, the investor should also consider the performance track record and service standards of mutual funds which are more important. Efficient funds may give higher returns in spite of loads. A Non-Load fund is one that does not charge for entry or exit. It means that the investors can enter the fund/scheme at NAV and no additional charges are payable on the purchase or sale of the units. Amendment in Mutual Fund to impose fresh load or increase the load beyond the level mentioned in the Offer Documents Mutual funds cant increase the load beyond the level mentioned in the offer document. Any change in the load will be applicable only to prospective investments and not to the original investments. In case of imposition of fresh loads or increasing in the exiting loads, the mutual funds are requires to amend their offer documents so that the new investors are aware of the loads at the time of investments.

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Sales Or Repurchase/Redemption Price The price or NAV a unit holder is charged while investing in an open scheme is called sales price. If applicable, it may include sales load. Repurchase or redemption price id the price or NAV at which an open-ended scheme purchases or redeems its units from the unitholders. It may include exit load, if applicable. Assured Return Scheme

Assured Return Schemes are those schemes that assure a specific return to the unit holders irrespective of performance of the scheme. A scheme cant promise returns unless such returns are fully guaranteed by the sponsor or the AMC and this is required to be disclosed in the offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for the certain period. Such schemes assures returns one year at a time and they review and change it at the beginning of next year. Impact of Mutual Fund on Asset Allocation while Deploying Funds of Investors Considering the market trends, any prudent fund manager can change the asset allocation i.e. he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short-term basis on defensive considerations i.e. to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual funds wants to change the asset allocation on the particular

27

basis, they are require to inform the unitholders and giving them option to exit the scheme at prevailing NAV without any load.

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Frequently Used Terms

NetAssetValue(NAV)
Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.

SalePrice
Is the price you pay when you invest in a scheme. Also called Offer price.

Repurchase Price
Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price
Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related.

Sales Load
Is a charge collected by a scheme when it sells the units. Also called, Front-end load. Schemes that do not charge a load are called No Load schemes.

Repurchase or Back-end Load

Is a charge collected by a scheme when it buys back the units from the unitholders.

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Procedure to be followed to Invest in a Mutual Fund Scheme

Mutual funds come out with an advertisement in newspapers publishing the launch of the new schemes. Investors can also contact the agents and distributors of the mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now a days, the post offices and banks also distribute the units of the mutual funds. However, the investor should note that the mutual funds being marketed by banks and post offices should not be taken as their own schemes and no assurance of return can be given by them. The only role of the banks is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission / gift given by agents / distributors for investing in a particular scheme. On the other hand they must consider the track record of mutual fund and should take objective decisions. Provision for Non Resident Indian to Invest in Mutual Funds Non Resident Indians can also invest in mutual funds. Necessary details in this respect are given in the offer documents of the schemes. Distribution of Portfolio between Debt or Equity oriented schemes An investor should take into account his risk taking capacity, age factor, financial position, etc. As already mentioned, the schemes invest in different type of securities as disclosed in the offer documents and offer different returns and risks. Investors may also consult financial experts before taking decisions. Agents and distributors may also help in this regard.

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Prospective of an Investor into an Offer document An abridged offer document, which contain very useful information, is required to be given to the prospective investor by the mutual fund. The application fund for subscription to a scheme is an integral part of the offer document. SEBI has prescribed minimum disclosures in the offer document. An investor, before investing in a scheme, should carefully read the offer document. Due care must be given to portions relating to main features of the scheme, risk factors, initial issue expenses and recurring expenses to be charged to the scheme, entry or exit loads, sponsors track record, educational qualification and work experience of litigations and penalties imposed, etc. Dispatch of Certificate or Statement of Statement of Account to the Investor, after Investing in a Mutual Fund Mutual funds are required to dispatch certificates or statements of accounts within six weeks from the date of closure of the initial subscription of the scheme. In case of close ended schemes, the investors would get either a Demat account statement or unit certificates as they are traded in the stock exchanges. In case of the open-ended schemes, a statement of account is issued by the mutual fund within 30 days from the date of closure of initial public offer of the scheme. The procedure of repurchase is mentioned in the offer document. Transfer of Units after Purchase from Stock Markets in case of Close Ended Schemes According to SEBI regulations, transfer of units is required to be done within thirty days from the date of lodgment of certificates with the mutual fund. key personnel including fund managers, performance of other schemes launched by the mutual funds in the past, pending

31

Mutual Fund Provides option to Transfer / Invest Periodically / Withdraw Periodically Systematic Transfer Plan (STP) Through STP you can transfer amounts at a weekly ( Every Friday ), monthly or quarterly frequency from one scheme of ours to another scheme. All you need to do is to give us a one-time instruction to do so. You may choose to regularly switch either a fixed sum or just the appreciation part of your investment. In brief it is the combination of SWP and SIP. Benefits from STP If you have investments or plan to invest in any of our debt schemes at the same time want to have a little exposure in any of our equity funds by investing regularly with out taking much of a risk. You may opt to take STP form the debt investment into the equity scheme. Both fixed and appreciation options would work for you it all depends on your requirements. If you wish to transfer an exact amount regularly then the Fixed Option is suitable for you. If do not want this transfer to disturb your capital contribution and would like only to switch the appreciation generated in the investment, you should opt for the appreciation option. For investors in our equity schemes STP is an excellent tool for booking the gains and transferring them to a less volatile debt scheme. Such investors may choose to opt the appreciation option of STP. Ideally, STP should be opted from the growth options of our schemes/plans.

Systematic Investment Plan (SIP) a) It provides you the convenience of investing in our schemes/plans regularly any day of the month a fixed amount by submitting post dated cheques along with the Kotak Facility form. In most of the schemes you can even start your investments though SIP. 32

b)

At least 5 cheques to be issued and the aggregate of such cheque not to be less than the the minimum purchase amount for opening Unit Account for the respective Scheme/Plan.

It is an ideal option for investors having salary incomes. If you have regular and consistent income flows, SIP becomes an ideal choice to discipline your savings by committing for them through post-dated cheques. Advantages of SIP Although SIP works well for both Debt and Equity funds, the advantage of opting it for investing in Equity funds is supported by the fact that volatility is inherent in equities. By investing regularly through SIP in our equity schemes, you would be averaging out on the NAV fluctuations. Over a period of time you would observe that by investing fixed amounts you have accumulated more units at lower NAV and lesser units at higher NAV. We are of the belief that it is difficult to time the stock market consistently, hence the best option is to invest regularly and average out on the market fluctuations. Systematic Withdrawal Plan (SWP) Through SWP you can redeem sums at a monthly or quarterly frequency by giving a onetime instruction to us. You may choose to regularly withdraw either a fixed sum or just the appreciation part of your investment. As the capital gain tax would be levied only on the number of units you withdraw, SWP becomes a tax efficient way of getting regular income from your investments. This facility is suitable for two types of needs : 1) Investors wanting regular funds inflow from their investments. 2) Investors interested in booking their gains at a regular interval.

If you require an exact amount regularly then the Fixed Option is suitable for you. If you do not want this withdrawal to disturb your capital contribution and would like only to 33

reap the appreciation generated in the investment, you should opt for the appreciation option. Ideally SWP should be opted from the growth options of our schemes. Advantages of SWP Apart from offering you a great convenience in managing your funds inflow and profit booking, you also benefit by saving on the tax liability if a similar inflow would have come from dividends. Time Required to Receive Dividends / Repurchase Proceeds A mutual fund is required to dispatch the dividend warrants within 30 days of the declaration of the dividend and the redemption or repurchase proceeds within 10 working days from the date of redemption or repurchase request made by the unit holder. In case of failures to dispatch the redemption/repurchase proceeds with in the stipulated time period, asset management company is liable to pay interest as specified by SEBI from time to time(15% at present).

Net Asset Value (NAV)

The net asset value of the fund is the cumulative market value of the assets fund net of its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the assets in the fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the fund. It is calculated simply by dividing the net asset value of the fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the "per unit". We also abide by the same convention.

Calculation of NAV
The most important part of the calculation is the valuation of the assets owned by the fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the asset value is given below. 34

Asset value is equal to

Sum of market value of shares/debentures + Liquid assets/cash held, if any + Dividends/interest accrued Amount due on unpaid assets Expenses accrued but not paid NAV= ASSET-LIABILITIES NO.OF UNITS

Details on the above items

For liquid shares/debentures, valuation is done on the basis of the last or closing market price on the principal exchange where the security is traded For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be estimated. For shares, this could be the book value per share or an estimated market price if suitable benchmarks are available. For debentures and bonds, value is estimated on the basis of yields of comparable liquid securities after adjusting for illiquidity. The value of fixed interest bearing securities moves in a direction opposite to interest rate changes Valuation of debentures and bonds is a big problem since most of them are unlisted and thinly traded. This gives considerable leeway to the AMCs on valuation and some of the AMCs are believed to take advantage of this and adopt flexible valuation policies depending on the situation. Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with every passing day, interest is said to be accrued, at the daily interest rate, which is calculated by dividing the periodic interest payment with the number of days in each period. Thus, accrued interest on a particular day is equal to the daily interest rate multiplied by the number of days since the last interest payment date.

35

Usually, dividends are proposed at the time of the Annual General meeting and become due on the record date. There is a gap between the dates on which it becomes due and the actual payment date. In the intermediate period, it is deemed to be "accrued ".

Parameter for Analysis Details of the Fund a. b. c. AMC Profile Return Absolute / Relative Risk & Volatility a)Analytical Tools applied for measuring Performance b) c) d) e) f)Alpha g) e. NAV f. Portfolio Turnover R Squared d. Load on Entry or Exit Standard Deviation The Treynor Measure The Sharpe Measure Beta

36

Global Scenario
Some basic facts

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 top 10 mutual funds worldwide, 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 just 277 schemes

Internationally, mutual funds are allowed to go short. In India fund managers do not have such leeway.

In the U.S. about 9.7 million households will manage their assets online by the year 2003, such a facility is not yet of avail in India.

On- line trading is a great idea to reduce management expenses from the current 2 % of total assets to about 0.75 % of the total assets.

72% of the core customer base of mutual funds in the top 50-broking firms in the U.S. are expected to trade on-line by 2003.

(Source: The Financial Express September, 99)

37

Regulatory Aspects Schemes of a Mutual Fund

The asset management company shall launch no scheme unless the trustees approve such scheme and a copy of the offer document has been filed with the Board. Every mutual fund shall along with the offer document of each scheme pay filing fees. The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor A close-ended scheme shall be fully redeemed at the end of the maturity period. "Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution".

Restrictions On Investments:
A mutual fund scheme shall not invest more than 15% of its NAV in debt instruments issued by a single issuer, which are rated not below investment grade by a credit rating agency authorized to carry out such activity under the Act. Such investment limit may be extended to 20% of the NAV of the scheme with the prior approval of the Board of Trustees and the Board of asset management company. A mutual fund scheme shall not invest more than 10% of its NAV in unrated debt instruments issued by a single issuer and the total investment in such instruments shall not exceed 25% of the NAV of the scheme. All such investments shall be made with the prior approval of the Board of Trustees and the Board of asset management company. No mutual fund under all its schemes should own more than ten per cent of any company's paid up capital carrying voting rights.

38

Such transfers are done at the prevailing market price for quoted instruments on spot basis. The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate interscheme investment made by all schemes under the same management or in schemes under the management of any other asset management company shall not exceed 5% of the net asset value of the mutual fund.

The initial issue expenses in respect of any scheme may not exceed six per cent of the funds raised under that scheme.

Every mutual fund shall buy and sell securities on the basis of deliveries and shall in all cases of purchases, take delivery of relative securities and in all cases of sale, deliver the securities and shall in no case put itself in a position whereby it has to make short sale or carry forward transaction or engage in badla finance.

Every mutual fund shall, get the securities purchased or transferred in the name of the mutual fund on account of the concerned scheme, wherever investments are intended to be of long-term nature.

Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks.

No mutual fund scheme shall make any investment in; i. Any unlisted security of an associate or group company of the sponsor; or ii. Any security issued by way of private placement by an associate or group company of the sponsor; or The listed securities of group companies of the sponsor which is in excess of 30% of the net assets [of all the schemes of a mutual fund]

39

No mutual fund scheme shall invest more than 10 per cent of its NAV in the equity shares or equity related instruments of any company. Provided that, the limit of 10 per cent shall not be applicable for investments in index fund or sector or industry specific scheme.

A mutual fund scheme shall not invest more than 5% of its NAV in the equity shares or equity related investments in case of open-ended scheme and 10% of its NAV in case of close-ended scheme.

Concept
Life makes many demands of us. Woven into different threads of life is the inescapable truth that money is a means to many an end. Mutual funds are investment products that operate on the principle of strength in numbers. They collect money from a large group of investors, pool it together, and invest it in various securities, in line with their objective. They are an alternative to investing directly. My project is to compare the returns of different equity diversified mutual funds. People invest in different mutual funds. Mutual funds are the next best thing if you think about investments. By investing in a mutual fund a person can get good returns on his/her investment. This project aims to find out the returns different mutual funds give and after analyzing the different returns we can know which mutual fund is good for the investors to invest. Typically, an equity fund holds 25-30 stocks and a debt fund holds 25-30 debt instruments. In the long term, equities have been known to outperform every other asset class. Its a truism, but one that merits iteration, such are the wonders equities can work into our personal finances. That is, when picked carefully and managed smartly. We can build and maintain a portfolio by ourselves research stocks, buy and sell them through a broker, and follow up regularly. Alternatively if we dont understand the market or dont want to expend time and energy in this pursuit, we can let equity funds go to work for us. They can be just as effective as direct investing and in many ways, a lot more convenient.

40

Equity funds pool savings of many investors, and invest this sum in a bunch of stocks typically 25-30 stocks, across various sectors. So, a portfolio of the average equity fund might look something like this: Reliance, Infosys, GE, Hindustan Lever and some more. For an affordable amount, starting from as little as Rs. 1000/-, we can pick up a stake in all these companies, and their fortunes, through an equity fund. The fund house does everything for us, for a nominal fee. Its fund managers and analysts track the market and sift through the universe of stocks, and construct portfolios capable of delivering returns characteristic of equities. If you are looking to maximize returns on your investment, and can bear the risk of it eroding temporarily in that pursuit, consider equity funds. The universe of equity funds comprises many kinds of schemes, each of which services a specific investment objective. Equity fund has been broken down into five categories, which collectively cover the risk-return spectrum of equities. They are:-

(1) Index Funds, Exchange Traded Funds (ETFS), (2) Equity Linked Savings Schemes (ELSS), (3) Diversified Equity Funds, (4) Sector Funds, and (5) Specialty Funds.
Of the various kinds of equity schemes, diversified equity funds are the most popular among investors. Their popularity stems from the broad and dynamic exposure to the market they offer. They invest in many stocks across many sectors, and because they have the freedom to chop and churn their portfolios as they like, diversified equity funds are a good proxy to the stock market. Diversified equity funds aim to outperform the market, which is represented by stock indices such as the BSEs (Bombay Stock Exchange) 30-share Sensex or the NSEs (National Stock Exchange) 50-share S&P CNX Nifty. In order to achieve this objective, they actively manage their portfolios. Compared to most other types of equity schemes, diversified funds are governed by fewer rules. They can invest in all listed stocks, and 41

even in unlisted stocks. They can invest in whichever sector they like, in whatever ratio they like. The deviations in equity funds can pay off handsomely or back-fire badly, as is reflected in the performance of actively managed diversified funds, which typically takes on a wide range. So, for instance, even when the Sensex or the Nifty has shot up 50%, some diversified schemes would have returned twice that much, while some would have risen just 5%. Thats why its important to choose our fund house and scheme well. This study aims to explore and compare the risk and returns of equity diversified mutual funds of different companies offered by ICICI Bank. Further it aims to give a comparative and descriptive analysis of their portfolios and top holdings. The project will find out the risk and return level of different equity diversified mutual funds. Comparison of different equity diversified mutual funds will help us to know which equity fund is doing very well and which one is the best to invest in.

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TOP FUNDS RANKED ON THE BASIS OF PERFORMANCE AS ON JUL 12, 2007 (ON 15 DAYS )
Top Debt Funds. Performance in % Scheme Name LIC MF Unit Linked Insurance scheme 15 Days 4.2059 3.4216 UTI CRTS 81 - Growth UTI CRTS 81 - Dividend 2.5024 2.5015 91days 1yr Inception Date Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007

16.3279 33.5011 9.9035 5.0968 17.6666 8.5095 7.5606 6.1855 0.6035 6.9797 10.9138 11.8637 3.8184 6.9803 6.5756

Birla Income Plus - Quarterly Dividend 2.2684 Top Balanced Funds. Performance in % Scheme Name JM Balanced - Dividend JM Balanced - Growth 15 Days 6.9186 6.9186

91days

1yr

Inception Date Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007

19.9063 40.8173 10.4134 19.9207 40.7902 12.492 24.5082 N.A 27.9275

Kotak Dynamic Asset Allocation Fund 6.3692 Growth LIC Balanced - Plan C (Growth) LIC Balanced - Plan A (Dividend) 4.8841 4.8838

11.9889 23.661 9.7864 11.9895 23.7693 8.344

Top Short Term Debt Funds. Performance in % 91Scheme Name 15 Days 1yr Inception Date days Templeton India Money Market Account Jul 12, 0.4755 2.0825 3.0923 0.291 - Chq Wri Acc - Growth 2007 Jul 12, Escorts Liquid Plan - Growth 0.3466 2.2258 7.2257 6.422 2007 Jul 12, Escorts Liquid Plan - Dly Dividend 0.3466 2.2258 7.2257 6.422 2007 Jul 12, Escorts Liquid Plan - Wkly Dividend 0.3466 2.2258 7.2257 6.422 2007 Jul 12, Escorts Liquid Plan - Mtly Dividend 0.3466 2.2258 7.2257 6.422 2007 Top Diversified Funds.

43

Performance in % Scheme Name JM Hi Fi Fund - Dividend JM Hi Fi Fund - Growth ABN AMRO Future Leaders Fund Dividend ABN AMRO Future Leaders Fund Growth ABN AMRO Opportunities Fund Growth Top Index Funds. Performance in % Scheme Name 15 Days 91days 1yr Inception Date Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 15 Days 91days 1yr Inception Date Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007

10.7888 29.8594 36.7559 16.313 10.7879 29.8798 36.7774 16.3275 9.2809 9.2801 8.3775 28.6221 58.9387 19.2463 28.6325 59.1155 19.2544 31.6251 67.9857 59.6113

LIC MF Index Fund - Sensex Advantage 4.4723 Plan - Growth LIC MF Index Fund - Sensex Advantage 4.4721 Plan - Div Birla Index Fund - Growth Birla Index Fund - Dividend HDFC Index Fund - Sensex Plus Plan Top Sector Funds. Performance in % Scheme Name JM Basic Fund Reliance Pharma Fund - Growth Reliance Pharma Fund - Bonus Reliance Pharma Fund - Dividend 15 Days 4.461 4.4608 4.2151

14.9884 30.6777 28.7861 14.9886 30.5386 22.9117 17.9996 36.1502 36.4652 18.0002 35.6255 26.513 17.023 41.0944 38.6479

91days

1yr

Inception Date Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007

11.1111 37.3546 85.3333 19.2188 9.2289 9.2289 9.228 35.8741 71.9033 38.4579 35.8741 71.9033 38.4579 35.8705 71.9549 36.5713 25.4339 48.626 32.3486

Birla SunLife Basic Industries - Growth 7.7014 Top Tax Planning Funds. Performance in % Scheme Name Lotus India Tax Plan - Dividend Lotus India Tax Plan - Growth Principal Personal Taxsaver JM Equity Tax Saver Fund - Series I Dividend JM Equity Tax Saver Fund - Series I Growth 15 Days 7.0822 7.0822 6.5917 6.4601 6.4601

91days

1yr

Inception Date 23.3167 23.3167 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007 Jul 12, 2007

23.127 N.A 23.127 N.A

28.8859 73.893 31.8699 N.A N.A N.A N.A 80.8454 80.8454

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DETAILS ON TOP DIVERSIFIED FUND

ABN AMRO FUTURE LEADERS FUND - GROWTH

Objective To seek to generate long-term capital appreciation by investing primarily in companies with high growth opportunities in the middle and small capitalization segment, defined as Future Leaders. The fund will emphasize on companies that appear to offer opportunities for long-term growth and will be inclined towards companies that are driven by dynamic style of management and entrepreneurial flair. Scheme Performance (%) as on Jul 12 , 2007 14 da 1 mon 3 mont 1 ye 3 yrs Inceptio ys th hs ar * n* 59.1 9.28 16.09 28.63 NA 19.25 2 Top 10 Holdings as on 2007 Company Northgate Technologies Ltd. Asian Electronics Ltd Television Eighteen India Ltd Hindustan Oil Exploration Company Ltd Unitech Ltd Dish TV India Ltd Aptech Ltd Phoenix Lamps India Ltd Jun 29, Value % (Cr.) 15.91 9.93 12.44 7.77 7.08 4.42 5.78 3.61 5.7 3.56 5.62 3.51 5.61 3.51 5.5 3.43

Email assetmanagement@in.abnamro Addres .com s Net Asset 12.3 Value As On Jul 12, 2007 41 (Rs/Uni t) Fund Information Type of Scheme Open Ended Nature of Scheme Equity Inception Date Apr 7, 2006 Face 10 Value(Rs/Unit) Fund Size (Rs. in 160.1794 on Jun crores) 29, 2007 Increase/Decrease since May 31, -37.995 2007 (Rs. in crores) Minimum 5000 Investment (Rs) Purchase Daily Redemptions NAV Calculation Daily Amount Bet. 0 to 49999999 then Entry load is 2.25%. and Entry Load Amount greater than 50000000 then Entry load is 0%. Exit Load If redeemed bet. 0 Month to 6 Month; and Amount Bet. 0 to 49999999 then Exit load is 1%. If

Nature EQ EQ EQ EQ EQ EQ EQ EQ

45

Deepak Fertilizers & Petrochemicals Corp Ltd India Infoline

EQ EQ

5.26 3.29 5.12 3.2

redeemed bet. 0 Month to 3 Month; and Amount greater than 50000000 then Exit load is 0.5%. Top Industry Allocation as on 29, 2007 Jun

Mutual Fund ABN AMRO Mutual Fund 101, 10th Floor Sakhar Bhavan Nariman Point Mumbai Tel.-56563862,, Asset Management Company ABN AMRO Asset Management (India) Limited 101, 10th Floor Sakhar Bhavan Nariman Point Mumbai - 400021 Tel.- 56563862, Registrar NA

Computers - Software & Education Entertainment Electricals & Electrical Equipments Engineering & Industrial Machinery Housing & Construction Auto & Auto ancilliaries Oil & Gas, Petroleum & Refinery Diversified Fertilizers, Pesticides & Agrochemicals Miscellaneous Asset Allocation as on 2007 Equity 96.17 Debt 0

24.354 1% 18.304 7% 7.7673 % 6.7487 % 5.3229 % 5.0047 % 4.7173 % 3.885 % 3.2851 % 2.9732 % Jun 29, Money Market 3.83

24 -

26

18

19

46

BIRLA INCOME PLUS - QUARTERLY DIVIDEND

Email Address Objective Aims to generate consistent income through superior yield with moderate level of risk. Scheme Performance (%) as on Jul 12 , 2007 14 da 1 mon 3 mont 1 ye 3 yr Inceptio ys th hs ar s* n* 2.27 2.49 3.82 6.98 3.99 6.58 Top 10 Holdings as on 2007 Company Jun 29, Value % (Cr.) 21.3 10.42 18.09 8.85 16.99 8.31 bmfmail@birlasunlife.com

Net Asset 10.310 Value As On Jul 12, 2007 7 (Rs/Unit) Fund Information Type of Scheme Open Ended Nature of Scheme Debt Inception Date Oct 21, 1995 Face 10 Value(Rs/Unit) Fund Size (Rs. in 204.3806 on Jun crores) 29, 2007 Increase/Decrease since May 31, -1.524 2007 (Rs. in crores) Minimum 5000 Investment (Rs) Purchase Daily Redemptions NAV Calculation Daily Fund Manager Navneet Munot Entry Load Entry Load is 0%. If redeemed bet. 0 Days to 180 Days; and Amount Bet. 0 to 1000000 then Exit Load Exit load is 0.6%. and Amount greater than 1000001 then Exit load is 0%. Last Dividend Declared 1.529 % On Jun 15, 2007

Nature

Export-Import Bank Debt of India Ltd State Bank of India Debt Housing Development Debt Finance Corporation Ltd Power Finance Debt Corporation Ltd Indian Railway Finance Corporation Debt Ltd GOI (Oil Bonds) Debt LIC Housing Finance Debt Ltd Citifinancial Consumer Finance Debt India Ltd. Auto Loan Securities Debt Trust

15.14 7.41 10 9.5 7 4.89 4.65 3.43

5.07 2.48 5.06 2.47

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Sundaram Finance Ltd Mutual Fund Birla Mutual Fund

Debt

5.03 2.46

Credit Quality as on Jun 29, 2007 Rating A1+ AA+ AAA LAA Sovereign Corpus(%) 30.0711 4.8451 55.3382 1.3226 4.6482

Ahura Centre , 2nd Floor, A. 96/A-D, Mahakali Caves Road, Andheri (E) Mumbai Tel.-56928000, , Asset Management Company Birla Sunlife Asset Management Company Ltd. 2nd Floor, Tower B Ahura Centre, 96 A D, Mahakali Caves Road, Andheri(E) Mumbai - 400093 Tel.- 56928000, Registrar NA *Returns are annualized
Change in Portfolio(Sector-Wise)(%age) 49 51 42 23 5 5 0 0 0 0 A B C D E

Average Maturity Profile as on Jun 29, 2007 -2212 DAYS Asset Allocation as on 2007 Equity 0 Debt 66.15 Jun 29, Money Market 33.85

Jun 29, 2007 May 31, 2007

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LIC MF UNIT LINKED INSURANCE SCHEME

Email jbsamc@bom3.vsnl.net.in Address Net Asset 12.159 As On Jul 13, 2007 To generate long term capital Value 5 appreciation and offer Tax rebate u/s 80 (Rs/Unit) C as well as additional benefits of a life Fund Information & insurance cover free accident Type of Scheme Open Ended insurance cover. Nature of Scheme Debt Scheme Performance (%) as on Jul Inception Date Jun 19, 1989 12 , 2007 14 da 1 mon 3 mont 1 ye 3 yr Inceptio Face 10 Value(Rs/Unit) ys th hs ar s* n* Fund Size (Rs. in 58.9179 on Jun 28.5 4.21 9.25 16.33 33.5 9.9 crores) 29, 2007 8 Increase/Decrease Top 10 Holdings as on Jun 29, since May 31, 2.813 2007 2007 (Rs. in Value crores) Company Nature % (Cr.) Minimum 10000 Omaxe Ltd Debt 5 8.49 Investment (Rs) Infosys Technologies EQ 4.63 7.85 Purchase Daily Ltd Redemptions Bharti Airtel Ltd EQ 4.18 7.09 NAV Calculation Daily Housing Development Fund Manager Bichitra Mahapatra Finance Corporation EQ 4.06 6.89 Entry Load is Entry Load Ltd 2.25%. First Leasing Exit Load is 0%. Debt 4 6.79 Exit Load Company of India Ltd Essar Power Ltd Debt 4 6.79 Last Dividend Declared 18 % On Jan 23, 2007 Grasim Industries Ltd EQ 3.43 5.82 Credit Quality as on Jun 29, 2007 Reliance Industries EQ 3.4 5.77 Ltd Rating Corpus(%) Bharat Heavy 8.4864 EQ 3.08 5.22 A Electricals Ltd AA 0.3403 HDFC Bank Ltd EQ 2.29 3.88 PR1 6.7891 Mutual Fund Average Maturity Profile as on Jun LIC Mutual Fund 29, 2007 Industrial Assurance Bldg. 190 days Objective 4th Floor, Opp.Churchgate Stn. Mumbai Tel.-22885971,55719750, Tax Benefits u/s 88,112 of Income Tax Act, 1961

Special Features Free accident cover equal to life Insurance cover worth 30000/-

49

Asset Management Company Jeevan Bima Sahyog Asset Management Company Ltd. Industrial Assurance Building, 4 th Floor Opp. Churchgate Station Mumbai - 400020 Tel.- 22885971,55719750 Registrar NA *Returns are annualized
Change in Portfolio(Sector-Wise)(%age) 19 19 15 12 13 14 -

Asset Allocation as on 2007 Equity 77.7 Debt 27.48

Jun 29, Money Market -5.18

10

10

F G

50

LIC BALANCED - PLAN C (GROWTH)

Objective The Scheme aims to provide regular flow of dividend and capital appreciation especially when the unit are held for a longer period. Scheme Performance (%) as on Jul 12 , 2007 14 day 1 mont 3 mont 1 yea 3 yrs Inception s h hs r * * 23.6 27.5 4.88 9.88 11.99 9.79 6 8 Top 10 Holdings as on Company Magma Leasing Ltd First Leasing Company of India Ltd Associated Cement Companies Ltd Mahindra & Mahindra Ltd DLF Universal Ltd Bharti Airtel Ltd Satyam Computer Services Ltd Reliance Communication Ventures Ltd. Industrial Finance Corporation of India Ltd Maruti Udyog Ltd Mutual Fund LIC Mutual Fund Industrial Assurance Bldg. 4th Floor, Opp.Churchgate Stn. Mumbai Tel.-22885971,55719750, Asset Management Company Jeevan Bima Sahyog Asset Management Company Ltd. Jun 29, 2007 Nature Debt Debt EQ EQ Debt EQ EQ EQ Debt EQ Value % (Cr.) 3 7.85 3 2.35 2.17 2.02 1.67 1.64 1.55 1.5 1.49 7.84 6.14 5.67 5.28 4.37 4.27 4.05 3.92 3.88

Email Address

jbsamc@bom3.vsnl.net.in

Net Asset 47.4509 As On Jul 13, 2007 Value (Rs/Unit) Fund Information Type of Scheme Nature of Scheme Inception Date Face Value(Rs/Unit) Fund Size (Rs. in crores) Increase/Decrease since May 31, 2007 (Rs. in crores) Minimum Investment (Rs) Purchase Redemptions NAV Calculation Open Ended Equity & Debt Jan 1, 1991 10 38.2693 on Jun 29, 2007 2.503 1000 Daily Daily Amount Bet. 0 to 10000000 then Entry load is 2.25%. and Amount greater than 10000001 then Entry load is 0%. Exit Load is 0%.

Entry Load

Exit Load

51

Industrial Assurance Building, 4 th Floor Opp. Churchgate Station Mumbai - 400020 Tel.- 22885971,55719750 Registrar NA

Top Industry Allocation as on 2007 Finance Telecom Auto & Auto ancilliaries Housing & Construction Cement Diversified Oil & Gas, Petroleum & Refinery Power Generation, Transmission & Equip Textiles

Jun 29, 27.0131% 11.8537% 9.5501% 7.8728% 6.1439% 4.8381% 4.1196% 3.6251% 3.2732%

Computers - Software & Education 7.3219%

Average Maturity Profile as on Jun 29, 2007 146 days Asset Allocation as on Equity 70.12 Debt 28.79 Jun 29, 2007 Money Market 1.09

Change in Portfolio(Sector-Wise)(%age) 27 28 12 13 10 10 A B

52

F G

RELIANCE PHARMA FUND GROWTH

Objective

Email Addres s

Net To generate consistent returns by inves Asset income securities of pharma and other Value Scheme Performance (%) as on Jul (Rs/Uni 14 days 1 month t) 9.23 14.09 Fund Top 10 Holdings asInformation on Type of Company Scheme Nature Ankur Drugs & Pharna Ltd. of Scheme Divis Laboratories Limited

Dishman Pharmaceuticals & Inception Chemicals Date Sun Pharmaceuticals Industries Ltd Face FDC Ltd Value(Rs Aurobindo Pharma Ltd /Unit) Lupin Ltd. Fund Aventis Pharma India Ltd. Size Ranbaxy Laboratories Ltd (Rs. in crores) Torrent Pharmaceuticals Ltd Increase/ Mutual Fund Decrease Reliance Mutual Fund since Kamala Mills Compound, Trade World, B 7th Floor, Senapati Bapat Marg, Lower 2007 . in Mumbai crores) Minimum Investme nt (Rs) Purchase Redempti ons

53

Tel.-30414800,,

NAV Calculatio n

HDFC INDEX FUND SENSEX PLUS PLAN

Objective The plan will invest between 80 90 percent of the money in 30 scrips comprising the SENSEX in the same proportion. The balance will be invested in the other nonindex scrips. Entry

Scheme Performance (%) as on Load Jul 12 , 2007 14 d 1 mo 3 mo 1 ye 3 ays nth nths ar s* 41. 46. 4.22 6.93 17.02 09 4 Top 10 Holdings as on 2007 Company Nature Value (Cr.) 1.69 1.3 1.22 1.1

Reliance EQ Industries Ltd Infosys Technologies EQ Ltd ICICI BANK EQ LTD. ABB Ltd EQ Bharti Airtel EQ Ltd Larsen & EQ Toubro Limited Housing Development EQ Finance Corporation Ltd ITC Ltd EQ Oil & Natural EQ Gas Corpn Ltd Reliance Communication EQ Ventures Ltd. Mutual Fund HDFC Mutual Fund

Exit Load

0.79

Top Industry Allocation as on 0.79

0.65

Pharmaceut icals us

Miscellaneo 0.58
0.55

Asset Allocation as on 0.53 2007 Equit y

Ramon House, 3rd Floor, H.T. Parekh Marg 94.25 169, Backbay Reclamation, Churchgate Mumbai Tel.-22029111,56316333, Asset Management Company HDFC Asset Management Company Limited

54

Ramon House, 3rd Floor, H.T. Parekh Marg 169, Backbay Reclamation, Churchgate Mumbai - 400020 Tel.- 22029111,56316333 Registrar NA *Returns are annualized

Change in Portfolio(Sector-Wise)(%age) 19 20 14 15 13 -

E F

55

Reliance Mutual Fund (RMF) is one of Indias leading Mutual Funds, with Assets Under Management (AUM) of Rs. 39019 crore (AUM as on 31st Jan 2007) and an investor base of over 3.1 million. Reliance Mutual Fund, a part of the Reliance - Anil Dhirubhai Ambani Group, is one of the fastest growing mutual funds in the country. RMF offers investors a well-rounded portfolio of products to meet varying investor requirements and has presence in 115 cities across the country. Reliance Mutual Fund constantly endeavors to launch innovative products and customer service initiatives to increase value to investors. Reliance Mutual Fund schemes are managed by Reliance Capital Asset Management Ltd., a wholly owned subsidiary of Reliance Capital Ltd. Reliance Capital Ltd. is one of Indias leading and fastest growing private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital Ltd. has interests in asset 56

management, life and general insurance, private equity and proprietary investments, stock broking and other financial services.

SBI Mutual Fund is Indias largest bank sponsored mutual fund and has an enviable track record in judicious investments and consistent wealth creation. The fund traces its lineage to SBI - Indias largest banking enterprise. The institution has grown immensely since its inception and today it is India's largest bank, patronised by over 80% of the top corporate houses of the country. SBI Mutual Fund is a joint venture between the State Bank of India and Socit Gnrale Asset Management, one of the worlds leading fund management companies that manages over US$ 330 Billion worldwide. Exploiting expertise, compounding growth In eighteen years of operation, the fund has launched thirty-two schemes and successfully redeemed fifteen of them. In the process it has rewarded its investors handsomely with consistently high returns. A total of over 3.5 million investors have reposed their faith in the wealth generation expertise of the Mutual Fund.Schemes of the Mutual fund have consistently outperformed benchmark indices and have emerged as the preferred investment for millions of investors and HNIs. Today, the fund manages over Rs. 16500 crores of assets and has a diverse profile of investors actively parking their investments across 30 active schemes. The fund serves this vast family of investors by reaching out to them through network of 100 collection branches, 26 investor service centres, 28 investor service desks and 52 district organisers. 57

Asset Management Company enjoys the strong parentage of Prudential plc, one of UK's largest players in the insurance & fund management sectors and ICICI Bank, a wellknown and trusted name in financial services in India. ICICI Prudential Asset Management Company, in a span of just over eight years, has forged a position of preeminence in the Indian Mutual Fund industry as one of the largest asset management companies in the country with assets under management of Rs. 37,906.24 crores (as of March 31, 2007). The Company manages a comprehensive range of schemes to meet the varying investment needs of its investors spread across 68 cities in the country. Key Indicators Assets Under Management Rs. 42,306.10 crores Number of Funds Managed 30 Established in London in 1848, Prudential plc, through its businesses in the UK, US and Asia, provides retail financial services products and services to more than 21 million customers, policyholders and unit holders worldwide with over US$400 (as of 31st December, 2005) billion in funds under management. Prudential employs some 23,000 staff worldwide. ICICI Bank is India's second-largest bank with total assets of about Rs. 2,513.89 bn (US$ 56.3 bn) at March 31, 2006 and profit after tax of Rs. 25.40 bn (US$ 569 mn) for the year ended March 31, 2006 (Rs. 20.05 bn (US$ 449 mn) for the year ended March 31, 2005). ICICI Bank has a network of about 614 branches and extension counters and over 2,200 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

58

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 HDFC Asset Management Company Limited (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 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 HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up capital of the AMC is Rs. 75.161 crore. The present share holding pattern of the AMC is as follows: Particulars HDFC Standard Life Investments Limited % of the paid up share capital 50.10 49.90

Funds which have been selected for the Analysis EQUITY Reliance Equity Fund (G) SBI Magnum Equity Fund (G) ICICI Pru Dynamic Plan (G) HDFC Equity Fund (G) 59

INCOME Reliance Income Fund (G) SBI Magnum Income Fund (G) ICICI Pru Income Plan (G) HDFC Income Fund (G)

BALANCED SBI Magnum Balanced Fund (G) ICICI Pru Balanced Fund (G) HDFC Balanced Fund (G) ELSS Reliance Tax Saver (ELSS) Fund (G) SBI Magnum Tax Gain Scheme ICICI Pru Tax Plan (G) HDFC Tax Saver (G)

Reliance Equity-G
Current Stats & Profile Latest NAV 11.77 (04/05/07) 52-Week High 12 (07/02/07) 52-Week Low 8.28 (14/06/06) Fund Category Equity: Diversified Type Open End Launch Date March 2006 Risk Grade Not Rated Return Grade Not Rated Net Assets (Cr) 4,061.18 (30/04/07) Benchmark S&P CNX Nifty Relative Performance (Fund Vs Category Average)

Fund Rating Not Rated

Trailing Returns As on 04 May 2007 Fund Category Year to Date 0.68 1.38 1-Month 9.08 10.11 3-Month -1.42 -2.87 1-Year 10.83 4.74 3-Year -37.01 5-Year -40.35 Return Since Launch 15.10 -Returns upto 1 year are absolute and over 1 year are annualised.

60

Portfolio Summary Top Holdings Name of Holding Reliance Communications Reliance Industries SBI Grasim Industries H C L Technologies As on 30/04/07 % Net Assets 7.60 7.54 4.95 4.47 4.12 Top 5 Sectors

As on 30/04/07 Equity Debt Others

% Net Assets

SBI Magnum Equity-G

Current Stats & Profile

Latest NAV 28.62 (04/05/07) 52-Week High 31.31 (10/05/06) 52-Week Low 21.82 (14/06/06) Fund Category Equity: Diversified Type Open End Launch Date Novemb 61

Trailing Returns As on 04 May 2007 Fund Category Year to Date 3.77 1.38 1-Month 9.70 10.11 3-Month -2.22 -2.87 1-Year 12.43 4.74 3-Year 39.30 37.01 5-Year 37.71 40.35 Return Since Launch 17.60 -Returns upto 1 year are absolute and over 1 year are annualised.

er 1990 Risk Grade Average Return Grade Average Net Assets (Cr) 272.56 (30/04/07) Benchmark BSE 100
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding Kotak Mahindra Bank Bharti Airtel BHEL Gujarat Ambuja Cements Infosys Technologies As on 30/04/07 % Net Assets 8.99 8.49 6.85 5.63 5.54 As on 30/04/07 Equity Debt Others % Net Assets Top 5 Sectors

ICICI Pru Dynamic-G

Current Stats & Profile Latest NAV 67.4442 (04/05/07) 52-Week High 69.0739 (07/02/07) 52-Week Low 40.2505 (14/06/06) Fund Category Equity: Diversified Type Open End Launch Date October 2002 Risk Grade Average Return Grade High Net Assets (Cr) 2,218.33 (30/04/07) Benchmark S&P CNX Nifty Relative Performance (Fund Vs Category Average) Trailing Returns As on 04 May 2007 Fund Category Year to Date 2.49 1.38 1-Month 9.82 10.11 3-Month -1.66 -2.87 1-Year 13.50 4.74 3-Year 50.95 37.01 5-Year -40.35 Return Since Launch 52.19 -Returns upto 1 year are absolute and over 1 year are annualised.

62

Portfolio Summary Top Holdings Name of Holding I C I C I Bank Reliance Industries Oil & Natural Gas Corpn. Tata Consultancy Services Infosys Technologies As on 30/04/07 % Net Assets 14.89 7.04 5.95 5.10 5.08 As on 30/04/07 Equity Debt Others % Net Assets Top 5 Sectors

HDFC Equity-G
Current Stats & Profile Latest NAV 151.523 (04/05/07) 52-Week High 155.345 (07/02/07) 52-Week Low 97.937 (14/06/06) Fund Category Equity: Diversified Type Open End Launch Date December 1994 Risk Grade Low Return Grade Above Average Net Assets (Cr) 4,195.38 (30/04/07) Benchmark S&P CNX 500 Relative Performance (Fund Vs Category Average) Trailing Returns As on 04 May 2007 Fund Category Year to Date 4.22 1.38 1-Month 8.23 10.11 3-Month -1.39 -2.87 1-Year 12.18 4.74 3-Year 40.51 37.01 5-Year 46.07 40.35 Return Since Launch 24.58 -Returns upto 1 year are absolute and over 1 year are annualised.

Portfolio Summary Top Holdings Name of Holding As on 31/03/07 % Net Assets Top 5 Sectors

63

Infosys Technologies Oil & Natural Gas Corpn. Reliance Industries Crompton Greaves Amtek Auto Fund Name HDFC Equity ICICI Prudential Dynamic Magnum Equity Reliance Equity Fund Name Launch Date Dec-1994 Oct-2002 Nov-1990 Mar-2006

6.08 6.00 5.63 5.30 4.73 Category Equity: Diversified Equity: Diversified Equity: Diversified Equity: Diversified As on 31/03/07 Equity Debt Others Risk Grade Low Average Average Not Rated 1-Year Rank 26/158 17/158 24/158 31/158 Return Grade Above Average High Average Not Rated 3-Year Return (%) 40.51 50.95 39.30 -3-Year Rank 18/78 7/78 21/78 -Assets (Rs Cr) 4,195.38 2,218.33 272.56 4,061.18 Beta 0.91 0.98 0.96 -Alpha 0.74 1.26 0.50 -Tenure (Yrs.) 4 1 1 1 As on % Net Assets

1 Year Return 12.18 13.50 12.43 10.83 5-Year Return (%) 46.07 -37.71 --

Expense Ratio 1.85 2.04 2.34 1.76 5-Year Rank 12/52 -31/52 --

1-Month 1-Month 6-Month 6-Month 1-Year Return Rank Return Rank Return (%) (%) (%) 8.23 9.82 9.70 9.08 144/168 91/168 96/168 125/168 7.32 11.91 10.42 5.37 66/162 16/162 25/162 98/162 12.18 13.50 12.43 10.83

HDFC Equity ICICI Prudential Dynamic Magnum Equity Reliance Equity Fund Name HDFC Equity-G ICICI Pru Dynamic-G Magnum Equity-G Reliance Equity-G Fund Name HDFC Equity ICICI Prudential Dynamic Magnum Equity Reliance Equity Fund Name HDFC Equity ICICI Prudential Dynamic Magnum Equity Reliance Equity Fund Name

P/E Ratio 33.53 23.87 42.77 29.22 Fund Risk Grade Low Average Average Not Rated Expense Ratio % 1.85 2.04 2.34 1.76 NAV

P/B Ratio 6.91 5.69 8.21 4.92 Standard Deviation 6.35 7.25 6.64 --

Market Cap (Rs Cr) 13,883.02 23,086.08 27,038.29 31,051.84

Turnover(%) 144.91 233.03 0.72 --

Top 5 Holdings (%) 27.74 38.06 35.50 28.67 R-Squared 0.90 0.80 0.92 --

Sharpe Ratio 0.42 0.46 0.38 --

Front-End Load % 2.25 2.25 2.25 2.25 As on

Back-End Load % 0.00 0.00 0.00 0.00

CDSC Mim Initial Portfolio Manager Inv. (Rs) 5000 Prashant Jain No

No Yes No

5000 1000 5000

Sankaran Naren Jayesh Shroff Sunil Singhania As on 52 Weeks Low 97.94 40.25 21.82 8.28

Chg. from 52 Weeks previous High -1.07 -0.50 -0.76 -0.08 155.35 69.07 31.31 12.00

HDFC Equity-G ICICI Pru Dynamic-G Magnum Equity-G Reliance Equity-G

151.523 67.4442 28.62 11.77

May 04, 2007 May 04, 2007 May 04, 2007 May 04, 2007

Feb 07, 2007 Feb 07, 2007 May 10, 2006 Feb 07, 2007

Jun 14, 2006 Jun 14, 2006 Jun 14, 2006 Jun 14, 2006

Analysis:
64

In the case of Equity funds Reliance has less expense ratio than other which means that investing in Reliance funds would cost less as compared to others P/E ratio specifies that investors would expect higher earnings in future as compared to others so in this case SBI Magnum takes the lead Higher P/B ratio shows that company is doing good in this SBI Magnum once again takes the lead Standard deviation of fund measures the risk by measuring the degree to which the fund fluctuates in relation to itz mean return in this ICICIPru has more standard deviation ICICI Pru has alpha of 1,26 followed by HDFC and SBI Magnum When market is rising it is better to invest in the funds which has beta of greater than one. So if market gives a return of 10%, a beta with 1.2 gives you the return of 12%. But if safety is also important, then it is better to invest in the fund with the value of beta with less than one. So if market falls then yours fund will fall less than the market. So beta with greater than one or less than one, both are equally important for different type of investors.ICICI Pru has beta value of .98 then SBI Magnum .96 , HDFC .91 & Reliance is not rated All the funds have the almost same beta except Reliance . The R-squared value shows how reliable the beta number is. It varies between zero and one. An R-squared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sensex should have an R-squared value of one when compared to the Sensex. SBI Mangnum has R squared value of .92 , ICICI Pru .80 , HDFC of .90 . A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much. In Equity plans, PRU ICICI is most volatile with standard deviation of 7.25 followed by SBI Magnum with standard deviation of 6.64 and HDFC 6.35. At times high returns are generally associated with a high degree of volatility. We accept this volatility only because we want higher returns. The Sharpe ratio represents this trade off between risk and returns. A higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk. In Equity , ICICI Pru has the more sharpe ratio of .46 followed by HDFC with 0.42 and then SBI Magnum with .38 . Reliance has changed less from its previous NAV close than others

So, SBI Magnum Equity scheme is a better performer in all of these.

65

Reliance Income-G
Current Stats & Profile Latest NAV 23.2521 (04/05/07) 52-Week High 23.3464 (25/04/07) 52-Week Low 22.1486 (05/05/06) Fund Category Debt: Medium-term Type Open End Launch Date December 1997 Risk Grade Average Return Grade Average Net Assets (Cr) 50.00 (30/04/07) Benchmark Crisil Comp BFI Relative Performance (Fund Vs Category Average) Trailing Returns As on 04 May 2007 Fund Category Year to Date 0.29 1.44 1-Month 0.57 0.51 3-Month 0.05 0.95 1-Year 5.00 5.28 3-Year 3.91 3.48 5-Year 6.52 5.98 Return Since Launch 9.44 -Returns upto 1 year are absolute and over 1 year are annualised.

66

Portfolio Summary Top Holdings Name of Holding GOI Retail ABS Trust Indian Retail ABS Trust Series 66 Tata Sons Power Finance Corpn. As on 30/04/07 % Net Assets 31.55 12.12 11.50 11.15 9.47 % Net Assets Top 3 Instruments

As on 30/04/07 Equity Debt Others

SBI Magnum Income-G

Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date 0.11 1.44 1-Month 0.25 0.51 3-Month -0.25 0.95 1-Year 3.92 5.28 3-Year 2.13 3.48 5-Year 5.09 5.98 Return Since Launch 8.33 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 19.7435 (04/05/07) 52-Week High 19.822 (07/03/07) 52-Week Low 19.002 (05/05/06) Fund Category Debt: Medium-term Type Open End Launch Date Novemb er 1998 Risk Grade 67

High Return Grade Below Average Net Assets (Cr) 70.66 (30/04/07) Benchmark Crisil Comp BFI
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding GOI Reliance Industries HDFC UTI Bank I C I C I Bank As on 30/04/07 % Net Assets 28.70 13.88 13.57 5.83 4.27 % Net Assets Top 3 Instruments

As on 30/04/07 Equity Debt Others

ICICI Pru Income Plan-G

Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date -0.22 1.44 1-Month 0.50 0.51 3-Month -0.20 0.95 1-Year 5.19 5.28 3-Year 2.91 3.48 5-Year 5.79 5.98 Return Since Launch 9.03 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 21.5434 (04/05/07) 52-Week High 21.7163 (08/12/06) 68

52-Week Low 20.4826 (05/05/06) Fund Category Debt: Medium-term Type Open End Launch Date June 1998 Risk Grade High Return Grade Average Net Assets (Cr) 227.62 (30/04/07) Benchmark Crisil Comp BFI
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding Power Finance Corpn. State Bank of Bikaner & Jaipur State Bank of Patiala UTI Bank Tata Sons As on 30/04/07 % Net Assets 14.36 10.51 10.50 8.77 8.72 % Net Assets Top 3 Instruments

As on 30/04/07 Equity Debt Others

69

HDFC Income-G
Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date -0.28 1.44 1-Month 0.57 0.51 3-Month -0.50 0.95 1-Year 2.35 5.28 3-Year 1.58 3.48 5-Year 5.33 5.98 Return Since Launch 7.83 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 16.6158 (04/05/07) 52-Week High 16.7508 (08/12/06) 52-Week Low 16.1742 (23/06/06) Fund Category Debt: Medium-term Type Open End Launch Date August 2000 Risk Grade High Return Grade Low Net Assets (Cr) 205.18 (30/04/07) Benchmark Crisil Comp BFI
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings As on 31/03/07 Top 3 Instruments

As

70

Name of Holding Loan Securitisation Trust - Grasim Industries Ltd. Indian Oil 9.39% G O I 2011 Loan Securitisation Trust - Bajaj Auto Ltd. JUS Trust - Jet Airways Ltd. Fund Name HDFC Income ICICI Prudential Income Magnum Income Reliance Income Fund Name Launch Date Aug-2000 Jun-1998 Nov-1998 Category Debt: Medium-term Debt: Medium-term Debt: Medium-term

% Net Assets 12.47

Bo Se Go % Net

As on 31/03/07 10.75 Equity 9.74 Debt 8.86 Others 8.17 Risk Grade High High High Return Grade Low Average Below Average 1 Year Return 2.35 5.19 3.92 Expense Ratio 2.10 2.04 1.51

HDFC Income ICICI Prudential Income Magnum Income Reliance Income

Dec-1997 Debt: Medium-term Average Average 5.00 1.49 1-Month 16-Month 61-Year 1-Year 3-Year 3-Year 5-Year 5-Year Return Month Return Month Return Rank Return Rank Return Rank (%) Rank (%) Rank (%) (%) (%) 0.57 20/49 0.16 46/48 2.35 46/48 1.58 41/43 5.33 22/27 0.50 0.25 0.57 24/49 44/49 19/49 0.88 0.92 1.41 44/48 43/48 37/48 5.19 3.92 5.00 22/48 39/48 25/48 2.91 2.13 3.91 27/43 36/43 17/43 5.79 5.09 6.52 14/27 25/27 6/27

Fund Name

P/E Ratio P/B Ratio

Market Cap Turnover(%) (Rs Cr) -----86.47 ---

Assets (Rs Cr) 205.18 227.62 70.66 50.00

Average Credit Quality AAA AAA AAA AAA

Average Top 5 Maturity Holdin (Yrs) (%) 4.91 3.58 4.95 8.81

HDFC Income-G ICICI Pru Income Plan-G Magnum Income-G Reliance Income-G

-----

-----

49.99

52.86

66.25

75.78

Fund Name HDFC Income ICICI Prudential Income Magnum Income Reliance Income

Fund Risk Grade High High High Average

Standard Deviation 0.21 0.23 0.21 0.14

Sharpe Ratio -0.30 -0.06 -0.19 -0.07

Beta 0.16 0.22 0.18 0.15

Alpha -0.05 -0.00 -0.03 -0.00

R-Squared 0.26 0.37 0.29 0.47

Fund Name HDFC Income ICICI Prudential Income Magnum Income Reliance Income Fund Name HDFC Income-G ICICI Pru Income Plan-G Magnum Income-G Reliance Income-G

Expense Ratio % 2.10 2.04 1.51 1.49 NAV

Front-End Load % 0.00 0.00 0.00 0.00 As on

Back-End Load % 0.00 0.00 0.00 0.00 Chg. from previous -0.04 -0.09 -0.06 -0.05

CDSC

Yes Yes Yes Yes

Mim Initial Inv. (Rs) 5000 5000 2000 5000

Portfolio Manager Shabbir Kapasi Pankaj Kaji Ganti N. Murthy Prashant R Pimple As on 52 Weeks Low 16.17

Tenure (Yrs.) 3 2 3 3 As on Jun 23, 2006

52 Weeks High

16.6158 May 04, 2007 21.5434 May 04, 2007 19.7435 May 04, 2007 23.2521 May 04, 2007

16.75 Dec 08, 2006 21.72 Dec 08, 2006 19.82 Mar 07, 2007 23.35 Apr 25, 2007

20.48 May 05, 2006 19.00 May 05, 2006 22.15 May 05, 2006

71

Analysis:
In the case of Income funds Reliance has less expense ratio than other which means that investing in Reliance funds would cost less as compared to others Standard deviation of fund measures the risk by measuring the degree to which the fund fluctuates in relation to itz mean return in this ICICIPru has more standard deviation SBI magnum has alpha of -.03 followed by HDFC and ICICI Pru & Reliance When market is rising it is better to invest in the funds which has beta of greater than one. But if safety is also important, then it is better to invest in the fund with the value of beta with less than one. So if market falls then yours fund will fall less than the market. All the funds have the almost same beta with ICICI Pru leading that with .22. The R-squared value shows how reliable the beta number is. It varies between zero and one. An Rsquared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sensex should have an R-squared value of one when compared to the Sensex. , an R-squared value greater than 0.8 is generally accepted to mean that the underlying beta value is reliable and can be used for the fund. In this Reliance has greater R squared value then others A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much. In Income plans, PRU ICICI is most volatile with standard deviation of .23 followed by SBI & HDFC with standard deviation of .21. At times high returns are generally associated with a high degree of volatility. We accept this volatility only because we want higher returns. The Sharpe ratio represents this trade off between risk and returns. A higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk. In , ICICI Pru has the sharpe ratio of -.06 followed by Reliance - 0.07 and then SBI with -.19 and HDFC -.38 . HDFC has changed less from its previous NAV close than others

So, ICICI Pru Income is a better performer in all of these.

72

Reliance Tax Saver-G

Current Stats & Profile Latest NAV 14.17 (04/05/07) 52-Week High 15.77 (08/02/07) 52-Week Low 9.16 (14/06/06) Fund Category Equity: Tax Planning Type Open End Launch Date August 2005 Risk Grade Not Rated Return Grade Not Rated Net Assets (Cr) 1,605.92 (30/04/07) Benchmark BSE 100 Relative Performance (Fund Vs Category Average)

Fund Rating Not Rated

Trailing Returns As on 04 May 2007 Fund Category Year to Date -3.87 0.69 1-Month 8.75 9.71 3-Month -7.45 -3.70 1-Year -0.63 1.33 3-Year -36.90 5-Year -38.97 Return Since Launch 22.82 -Returns upto 1 year are absolute and over 1 year are annualised.

73

Portfolio Summary Top Holdings Name of Holding Areva T&D India Punjab Tractors Tata Consultancy Services Alstom Projects Tata Motors Debt Others As on 30/04/07 % Net Assets 6.65 4.90 4.73 4.69 4.24 0.00 11.59 As on 30/04/07 Equity Top 5 Sectors As on 30/04/2007 Basic/Engineering Automobile Technology Construction Services % Net Assets 88.41

ICICI Pru Tax Plan-G

Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date -4.68 0.69 1-Month 8.59 9.71 3-Month -6.49 -3.70 1-Year -11.64 1.33 3-Year 45.89 36.90 5-Year 45.30 38.97 Return Since Launch 32.50 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 88.28 (04/05/07) 52-Week High 103.28 (10/05/06) 52-Week Low 62.04 (14/06/06) Fund Category Equity: Tax Planning Type Open End Launch Date August 1999 Risk Grade High Return Grade 74

Above Average Net Assets (Cr) 655.68 (30/04/07) Benchmark S&P CNX Nifty
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding I C I India Cadila Healthcare I C I C I Bank Infosys Technologies BHEL As on 30/04/07 Equity Debt Others % Net Assets 92.67 0.00 7.33 As on 30/04/07 % Net Assets 4.58 4.32 3.96 3.91 3.80 Top 5 Sectors As on 30/04/2007 Health Care FMCG Chemicals Financial Services Diversified % Net Asset 13.59 10.77 10.21 9.45 7.70

HDFC Taxsaver-G
Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date -1.66 0.69 1-Month 10.36 9.71 3-Month -3.82 -3.70 1-Year -1.13 1.33 3-Year 49.90 36.90 5-Year 48.71 38.97 Return Since Launch 41.55 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 144.071 (04/05/07) 52-Week High 151.412 (07/02/07) 52-Week Low 75

96.978 (14/06/06) Fund Category Equity: Tax Planning Type Open End Launch Date March 1996 Risk Grade Low Return Grade High Net Assets (Cr) 989.37 (30/04/07) Benchmark S&P CNX 500
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding Deccan Chronicle Holdings Infosys Technologies SBI Cards & Payment State Bank of Bikaner & Jaipur Bharti Airtel As on 31/03/07 Equity Debt Others % Net Assets 88.16 12.11 -0.27 As on 31/03/07 % Net Assets 6.05 5.80 5.52 5.49 4.99 Top 5 Sectors As on 31/03/2007 Technology Basic/Engineering Automobile Services Health Care % Net Asset 18.55 11.14 10.36 7.21 6.99

76

Fund Name HDFC Taxsaver ICICI Prudential Tax Plan Magnum Taxgain Reliance Tax Saver

Launch Date Mar-1996 Aug-1999 Mar-1993 Aug-2005

Category Equity: Tax Planning Equity: Tax Planning Equity: Tax Planning Equity: Tax Planning

Risk Grade Low High Below Average Not Rated

Return Grade High Above Average High Not Rated

1 Year Return -1.13 -11.64 14.33 -0.63

Expense Ratio 2.25 2.28 2.00 1.93

Fund Name HDFC Taxsaver ICICI Prudential Tax Plan Magnum Taxgain Reliance Tax Saver

1-Month 1-Month 6-Month 6-Month Return Rank Return Rank (%) (%) 10.36 9/29 2.40 22/26 8.59 23/29 -4.55 26/26 8.07 24/29 10.62 5/26 8.75 22/29 4.50 16/26

1-Year 1-Year Return Rank (%) -1.13 18/26 -11.64 24/26 14.33 1/26 -0.63 16/26

3-Year 3-Year Return Rank (%) 49.90 2/20 45.89 3/20 66.39 1/20 ---

5-Year 5-Year Return Rank (%) 48.71 3/19 45.30 5/19 55.19 1/19 ---

Fund Name

P/E P/B Ratio Market Cap Ratio (Rs Cr) 27.30 23.89 27.04 22.76 7.00 3.44 6.74 5.54 16,461.05 2,172.73 8,255.48 2,656.13

Turnover(%)

Assets (Rs Cr) 989.37 655.68 1,910.53 1,605.92

HDFC Taxsaver-G ICICI Pru Tax Plan-G Magnum Taxgain Reliance Tax Saver-G

59.53 120.69 0.77 --

Average Credit Quality -----

Average Maturity (Yrs) -----

Top 5 Holdings (%) 27.85 20.57 13.61 25.21

Fund Name HDFC Taxsaver ICICI Prudential Tax Plan Magnum Taxgain Reliance Tax Saver

Fund Risk Grade Low High Below Average Not Rated

Standard Sharpe Ratio Deviation 6.95 0.47 8.03 6.99 -0.38 0.58 --

Beta 0.91 0.95 0.82 --

Alpha 1.31 1.05 2.30 --

R-Squared 0.76 0.61 0.61 --

Fund Name HDFC Taxsaver ICICI Prudential Tax Plan Magnum Taxgain Reliance Tax Saver Fund Name HDFC Taxsaver-G ICICI Pru Tax Plan-G Magnum Taxgain Reliance Tax Saver-G

Expense Ratio % 2.25 2.28 2.00 1.93 NAV 144.071 88.28 45.25 14.17

Front-End Load % 2.25 2.25 2.25 2.25 As on May 04, 2007 May 04, 2007 May 04, 2007 May 04, 2007

Back-End Load % 0.00 0.00 0.00 0.00 Chg. from previous -0.79 -0.74 -0.09 -0.49

CDSC

Mim Initial Inv. (Rs) 500 500 500 500

Portfolio Manager Tenure (Yrs.) Vinay R. Kulkarni Sankaran Naren Sanjay Sinha Ashwani Kumar 52 Weeks Low 96.98 62.04 34.64 9.16 As on Jun 14, 2006 Jun 14, 2006 Jun 14, 2006 Jun 14, 2006 1 2 2 2

No No No No
52 Weeks High 151.41 103.28 59.41 15.77

As on Feb 07, 2007 May 10, 2006 Feb 06, 2007 Feb 08, 2007

Analysis:
In the case of tax funds Reliance has less expense ratio than other which means that investing in Reliance funds would cost less as compared to others P/E ratio specifies that investors would expect higher earnings in future as compared to others so in this case HDFC takes the lead 77

Higher P/B ratio shows that company is doing good in this HDFC once again takes the lead Standard deviation of fund measures the risk by measuring the degree to which the fund fluctuates in relation to itz mean return in this ICICIPru has more standard deviation SBI magnum tax gain has alpha of 2.3 followed by HDFC and ICICI Pru When market is rising it is better to invest in the funds which has beta of greater than one. So if market gives a return of 10%, a beta with 1.2 gives you the return of 12%. But if safety is also important, then it is better to invest in the fund with the value of beta with less than one. So if market falls then yours fund will fall less than the market. So beta with greater than one or less than one, both are equally important for different type of investors. All the funds have the same beta. The R-squared value shows how reliable the beta number is. It varies between zero and one. An R-squared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sensex should have an R-squared value of one when compared to the Sensex. HDFC has R squared value of .76 and ICICI Pru & SBI Magnum of .61 each . A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much. In tax plans, PRU ICICI Tax saver is most volatile with standard deviation of 8.03 followed by SBI Tax gain with standard deviation of 6.99. At times high returns are generally associated with a high degree of volatility. We accept this volatility only because we want higher returns. The Sharpe ratio represents this trade off between risk and returns. A higher Sharpe ratio is therefore better as it represents a higher return generated per unit of risk. In tax plans, SBI Magnum has the highest sharpe ratio of .58 followed by HDFC Tax gain with 0.47 and then ICICI pru with .38 . SBI Magnum has changed less from its previous NAV close than others

So, SBI Magnum Tax Saver is a better performer in all of these

78

SBI Magnum Balanced-G

Current Stats & Profile Trailing Returns As on 04 May 2007 Fund Category Year to Date 1.44 2.03 1-Month 7.46 6.89 3-Month -1.94 -1.17 1-Year 5.78 6.44 3-Year 37.08 26.11 5-Year 35.46 28.92 Return Since Launch 20.35 -Returns upto 1 year are absolute and over 1 year are annualised.

Latest NAV 35.88 (04/05/07) 52-Week High 36.76 (05/02/07) 52-Week Low 25.65 (14/06/06) Fund Category Hybrid: Equity-oriented Type Open End Launch Date October 1995 79

Risk Grade Average Return Grade High Net Assets (Cr) 289.77 (30/04/07) Benchmark Crisil Balanced
Relative Performance (Fund Vs Category Average)

Portfolio Summary Top Holdings Name of Holding Reliance Industries HDFC Citicorp Finance S K F India I V R C L Infra. & Projects Debt Others As on 30/04/07 % Net Assets 5.11 5.03 3.73 3.02 2.99 14.24 20.46 As on 30/04/07 Equity Top 5 Sectors As on 30/04/2007 Technology Construction Energy Basic/Engineering FMCG % Net Assets 65.30

ICICI Pru Balanced-G

Current Stats & Profile

Latest NAV 34.91 (04/05/07) 52-Week High 36.24 (08/02/07) 80

Trailing Returns As on 04 May 2007 Fund Category Year to Date 0.81 2.03 1-Month 5.69 6.89 3-Month -2.81 -1.17 1-Year 5.66 6.44 3-Year 28.56 26.11 5-Year 29.60 28.92 Return Since Launch 17.94 -Returns upto 1 year are absolute and over 1 year are

52-Week Low 25.53 (14/06/06) Fund Category Hybrid: Equity-oriented Type Open End Launch Date October 1999 Risk Grade Average Return Grade Average Net Assets (Cr) 471.06 (30/04/07) Benchmark Crisil Balanced
Relative Performance (Fund Vs Category Average)

annualised.

Portfolio Summary Top Holdings Name of Holding National Bank Agr. Rur. Devp Reliance Industries Credit Asset Tr. Sr.HSBC Nifty Futures Mahindra & Mahindra Financial Services Debt Others As on 30/04/07 Top 5 Sectors % Net Assets 6.88 6.54 6.43 As on 30/04/07 Equity 6.05 4.25 29.92 -2.99 As on 30/04/2007 Technology Energy Financial Services Metals & Metal Products Chemicals % Net Assets 73.07

HDFC Balanced-G
81

Current Stats & Profile

Latest NAV 30.975 (04/05/07) 52-Week High 32.72 (15/01/07) 52-Week Low 23.874 (14/06/06) Fund Category Hybrid: Equity-oriented Type Open End Launch Date August 2000 Risk Grade Above Average Return Grade Below Average Net Assets (Cr) 113.52 (30/04/07) Benchmark Crisil Balanced
Relative Performance (Fund Vs Category Average)

Trailing Returns As on 04 May 2007 Fund Category Year to Date -3.18 2.03 1-Month 7.55 6.89 3-Month -3.61 -1.17 1-Year 2.61 6.44 3-Year 21.98 26.11 5-Year 24.27 28.92 Return Since Launch 18.28 -Returns upto 1 year are absolute and over 1 year are annualised.

Portfolio Summary

82

Top Holdings Name of Holding Tata Consultancy Services Infosys Technologies Sun Pharmaceutical Inds. Loan Securitisation Trust - Grasim Industries Ltd. Larsen & Toubro Debt Others Fund Name HDFC Balanced ICICI Prudential Balanced Magnum Balanced Launch Date Aug-2000 Oct-1999 Oct-1995

As on 31/03/07 Top 5 Sectors % Net Assets 7.97 6.53 5.85 As on 31/03/07 Equity 5.67 5.23 29.68 3.47 Category Hybrid: Equity-oriented Hybrid: Equity-oriented Hybrid: Equity-oriented Risk Grade Return Grade 1 Year Return Above AverageBelow Average 2.61 Average Average Average High 5.66 5.78 Expense Ratio 2.23 2.25 2.35 As on 31/03/2007 Technology Health Care Metals & Metal Products Diversified Financial Services % Net Assets 66.85

Fund Name

1-Month 1-Month 6-Month 6-Month 1-Year Return Rank Return Rank Return (%) (%) (%) 7.55 5.69 7.46 8/32 24/32 11/32 -2.55 4.99 6.15 29/29 17/29 13/29 2.61 5.66 5.78

1-Year Rank 23/29 16/29 15/29

3-Year Return (%) 21.98 28.56 37.08

3-Year Rank 19/27 10/27 1/27

5-Year Return (%) 24.27 29.60 35.46

5-Year Rank 17/20 10/20 2/20

HDFC Balanced ICICI Prudential Balanced Magnum Balanced

Fund Name

P/E Ratio P/B Ratio Market Cap Turnover(%) (Rs Cr) 23.07 25.91 23.06 6.46 5.11 5.50 8,531.15 17,444.13 11,288.86 36.39 235.84 0.18

Assets (Rs Cr) 113.52 471.06 289.77

Average Credit Quality AAA AA AAA

Average Top 5 Maturity Holdings (Yrs) (%) -1.25 -31.25 30.15 19.88

HDFC Balanced-G ICICI Pru Balanced-G Magnum Balanced-G

Fund Name HDFC Balanced ICICI Prudential Balanced Magnum Balanced

Fund Risk Grade Above Average Average Average

Standard Deviation 4.56 4.76 5.09

Sharpe Ratio 0.30 0.38 0.46

Beta 1.04 1.11 1.16

Alpha 0.31 0.72 1.20

R-Squared 0.78 0.81 0.77

Fund Name HDFC Balanced ICICI Prudential Balanced Magnum Balanced

Expense Ratio % 2.23 2.25 2.35

Front-End Load % 2.25 2.25 2.25

Back-End Load % 0.00 0.00 0.00

CDSC

Mim Initial Inv. (Rs) 5000 5000 1000

Portfolio Manager Chirag Setalvad Pankaj Kaji Sanjay Sinha

Tenure (Yrs.) -2 2

No No Yes
52 Weeks High 32.72 36.24

Fund Name HDFC Balanced-G ICICI Pru Balanced-G

NAV 30.975 34.91

As on May 04, 2007 May 04, 2007

Chg. from previous -0.62 -0.74

As on Jan 15, 2007 Feb 08, 2007

52 Weeks Low 23.87 25.53

As on Jun 14, 2006 Jun 14, 2006

83

Magnum Balanced-G

35.88

May 04, 2007

-0.28

36.76

Feb 05, 2007

25.65

Jun 14, 2006

Analysis:
In the case of Balanced funds all the funds have almost same expense ratio but HDFC has less expense ratio than other which means that investing in HDFC fund would cost less as compared to others P/E ratio specifies that investors would expect higher earnings in future as compared to others so in this case ICICI Pru takes the lead Higher P/B ratio shows that company is doing good in this HDFC takes the lead Standard deviation of fund measures the risk by measuring the degree to which the fund fluctuates in relation to itz mean return in this SBI Magnum has more standard deviation SBI Magnum has alpha of 1.20 followed by ICICI Pru & HDFC .When market is rising it is better to invest in the funds which has beta of greater than one. So if market gives a return of 10%, a beta with 1.2 gives you the return of 12%. But if safety is also important, then it is better to invest in the fund with the value of beta with less than one. So if market falls then yours fund will fall less than the market. So beta with greater than one or less than one, both are equally important for different type of investors.SBI Magnum has beta value of 1.16 then ICICI Pru 1.11 , HDFC 1.04 . The R-squared value shows how reliable the beta number is. It varies between zero and one. An R-squared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sensex should have an R-squared value of one when compared to the Sensex. ICICI Pru has R squared value of .81 , HDFC .78 , SBI Magnum of .81 . A high Standard Deviation may be a measure of volatility, but it does not necessarily mean that such a fund is worse than one with a low Standard Deviation. If the first fund is a much higher performer than the second one, the deviation will not matter much. In Balanced plans, SBI Magnum is most volatile with standard deviation of 5.09 followed by ICICI Pru with standard deviation of 4.76 and HDFC 4.56 . At times high returns are generally associated with a high degree of volatility. We accept this volatility only because we want higher returns. The Sharpe ratio represents this trade off between risk and returns. A higher Sharpe ratio 84

is therefore better as it represents a higher return generated per unit of risk. In Balanced , SBI Magnum has the more sharpe ratio of .46 followed by HDFC with 0.30 and then ICICI Pru with .38 . SBI Magnum has changed less from its previous NAV close than others So, All the funds which have been compared are equally good among them One is better in something and other in something but have to give the pick to the investor

Either of them SBI Magnum or ICICI Pru Balanced fund

Banking: To take a breather The scurry of activities and developments in the Indian banking sector in FY07 were manifested in the government's and the RBI's efforts of reconciling the twin objectives of facilitating economic growth and controlling inflation. Both the governing bodies had their share of surprises in this fiscal. While the economic (GDP) growth of 9.2% in 85

1HFY07 was way beyond the targeted 7.0% to 7.5% rate, inflation (measured in terms of wholesale price index RBI: Walking the tight rope The RBI's monetary policy stance was attuned to blend a prohibitive interest rate environment with consistent growth momentum and price stability. The focus was on credit quality and supporting the export and investment demand in the economy. The RBI's deliberations were aimed at maintaining macroeconomic stability in general and responding swiftly to evolving global developments in particular.
The quarterly monetary reviews also spelt out the following three issues:

demand pressures appearing to have intensified, reflected in rising inflation, high credit growth, elevated asset prices, strains on capacity utilisation and widening of trade deficit increased supply-side pressures evident from rising prices of primary articles and the need of the monetary policies to contend with lagged response of productive capacity and infrastructure to the ongoing expansion in investment.

Rates on the spring board... With buoyancy in credit growth and corresponding shortfall in deposit accretion, the credit to deposit ratio in the banking sector shot up from 65% in January 2006 to 74% in January 2007. To bridge the widening gap between incremental credit disbursal and deposit accretion, banks chose to offload their excess SLR portfolio (above 25%). The monetary tightening initiatives by way of hike in the CRR (cash reserve ratio), repo and reverse repo rates also culminated in banks across the board raising their benchmark prime lending rates (BPLR) to counter the hike in funding costs and sustain net interest margins (NIMs). The RBI has attributed the high demand for non-food credit to the higher than expected economic (IIP) growth in the manufacturing sector. Having said that, the incremental disbursements to commercial real estate (grew 95% YoY in 1HFY07), home loans (grew 38% YoY) and capital market related activities (grew 39% YoY) were higher than credit to industry (grew 32% YoY) and credit to agriculture (grew 39% YoY).

Rates over the months

(%, per annum) Bank rate Cash Reserve Ratio (CRR)* Statutory Liquidity Ratio (SLR) PSU Banks Private sector banks Weighted call money rates Comm.Papers by companies 10 year GSec yield Deposit rate (> I year) Jan-05 6.00 5.00 25.00 10.25-11.25 11.00-14.00 4.72 5.20-7.25 6.67 5.25-6.25 Jan-06 6.00 5.00 25.00 10.25-11.25 11.00-13.50 7.40 6.20-7.75 7.20 5.50-6.50 Jan-07 6.00 6.50 25.00 11.50-12.25 11.75-15.50 7.76 7.74-10.00 7.73 7.25-8.50

86

Repo rate Reverse repo rate

6.00 4.75 Source: Economic Survey FY07

6.50 5.50

7.75 6.00

Banking First, Standard and Poor's upgraded India's sovereign credit ratings. Next, the Boston Consulting Group (BCG), in a report on opportunities for foreign banks, confirmed that with more than US$ 180 billion in long-term fixed deposits in banks and low penetration in the pension market, the opportunity for sustained double-digit growth is attractive. Obviously, expectations of foreign investors and multinational companies seeking to take advantage of the huge growth opportunities in India have risen. The RBI deems that the ongoing momentum in economic growth is likely to remain robust, along with expectations of lower increase in selling prices, exports and imports. In its Industrial Outlook Survey, it revised upwards the business expectations indices, based on assessment for October-December 2006 and on expectations for January-March 2007 by 2.7 per cent and 1 per cent, respectively, over the previous quarter, coupled with higher net responses for major parameters of the survey like overall business situation, production, order books, capacity utilisation, employment, and profit margins over the previous quarter. Banks and Consumer Finance Indians are on a spending--and borrowing--spree. According to a 2005 study by McKinsey, about 40 million households--or 215 million people--have an annual income of US$ 4,000-10,000. They can afford to rent an apartment, have a bank account and own a refrigerator, television and a small car or motorcycle. By 2010, this figure will be 65 million households or 350 million people. India's entire stock of financial assets--equity, corporate and government debt and bank deposits--is valued at US$ 1.1 trillion, the report adds. Spurred by the stock markets, 11 banks (six public sector and five private sector banks) raised US$ 2.46 billion from the equity market, states a RBI report on trend and progress of banking in India. While the Sensex gave a return of 10.4 per cent during the period, the bankex offered a return of 14.7 per cent.

Global banks are banking on India: Three top global asset management and investment banks--American International Group (AIG), JP Morgan Asset Management and Japan's Mitsubishi UFJ Securities--are competing for a place in the second fastest growing economy in the world. Yet another global firm to enter India is Mitsubishi UFJ Securities, the investment banking and brokerage arm of Japan's largest financial group. Moreover, leading Australian banks, including ANZ and St George, are planning to send their back office jobs to India. Indian banks are scaling up their overseas operations: State-owned Bank of India (BoI) announced the acquisition of a controlling 76 per cent stake in Indonesian bank PT Bank Swadesi, a mid-sized bank operating in Indonesia for the last 38 years, at an estimated cost of US$ 20-25 million. While this is its first overseas acquisition, other Indian banks are also aiming at boosting their share of 87

total income from international operations. Last year State Bank of India had acquired a 76 per cent stake in PT Bank IndoMonex of Indonesia. Indian banks in loan markets abroad: With the best of India Inc. flocking to overseas loan markets for funds, Indian banks have started following their top customers. For the first time, two Indian lenders--ICICI Bank and SBI--figure among the top five in the league tables for loan syndication. The role of Indian banks in loan syndication has grown, along with their growing global presence. Plus, they have the advantage of a closer relationship with the Indian corporate borrower vis-a-vis foreign banks.

EQUTIY RESEARCH IN SELECTED BANKING SCRIPS Objective To Appraise selected Banking Scripts for Analysis To Appraise Scripts on Various parameters of Research To Guide investors about there investments among these scrips To Enhance Knowledge on the Banking

In this part of my project I would be analyzing about the shares of some selected companies in Banking Sector . Analysis would be done on the basis of the trend and growth of selected companies in banking sectors in Indian stock market .On the basis of the analysis I would analyze and could know the future prospects of the selected companies The project will give the holistic view of the banking sector using equity research as a tool to provide insight in the field and this process would also enhance my knowledge and provide useful information to justify the objectives of the project In this research Fundamental and Technical analysis will be done i.e. company analysis and ratio analysis will be done

88

For financial parameters ratio analysis is best known & widely used tool of financial analysis and various other ratios like Spread ratio Deposit & Credit growth ratio Debt Asset ratio Interest coverage ratio Leverage ratio Etc

What is Scrip? In general: receipt, certificate, or other representation of value recognized by both payer and payee. Scrip is not currency, but may be convertible into currency. Securities: temporary document that is issued by a corporation and that represents a fractional share of stock resulting from a Split, exchange of stock, or Spin-Off. Scrip certificates may be aggregated or applied toward the purchase of full shares. Scrip dividends have historically been paid in lieu of cash dividends by companies short of cash. A criterion for selection and review of scrips for the SENSEX?

Quantitative Criteria
Market Capitalization: The scrip should figure in the top 100 companies listed by market capitalization. Also market capitalization of each scrip should be more than 0.5 % of the total market capitalization of the Index i.e. the minimum weight should be 0.5 %. Since the SENSEX is a market capitalization weighted index, this is one of the primary criteria for scrip selection. (Market Capitalization would be averaged for last six months) Liquidity: (i) Trading Frequency: The scrip should have been traded on each and every trading day for the last one year. Exceptions can be made for extreme reasons like scrip suspension etc. (ii) Number of Trades: Number of Trades: The scrip should be among the top 150 companies listed by average number of trades per day for the last one year. 89

(iii) Value of Shares Traded: Value of Shares Traded: The scrip should be among the top 150 companies listed by average value of shares traded per day for the last one year. Continuity: Whenever the composition of the index is changed, the continuity of historical series of index values is re-established by correlating the value of the revised index to the old index (index before revision). The back calculation over the last one-year period is carried out and correlation of the revised index to the old index should not be less than 0.98. This ensures that the historical continuity of the index is maintained. Industry Representation Scrip selection would take into account a balanced representation of the listed companies in the universe of BSE. The index companies should be leaders in their industry group. Listed History: The scrip should have a listing history of at least one year on BSE.

Qualitative Criteria:
Track Record: In the opinion of the Index Committee, the company should have an acceptable track record.

90

CASH RESERVE RATIO

A cash reserve ratio (or CRR) is the percentage of bank reserves to deposits and notes. The cash reserve ratio is also known as the cash asset ratio or liquidity ratio. India's central bank ordered commercial banks to hold a larger share of deposits in cash, and raised a key short-term lending rate in a bid to curb high inflation that has stoked fears of overheating. The reserve ratio is sometimes used as a tool in monetary policy, influencing the country's economy, borrowing, and interest rates . However, Central banks rarely alter the reserve requirements due to the fact that it would cause immediate liquidity problems for banks with low excess reserves. Instead, open market operations are used The Reserve Bank of India stipulates the cash reserve ratio the proportion of deposits that commercial banks must hold in cash to control the availability of money in the market and therby control the inflation..

Statutory Liquidity Ratio (SLR) is a term used in the regulation of banking in

India. It is the amount which a bank has to maintain in the form of cash, gold or approved securities. The quantum is specified as some percentage of the total demand and time liabilities of a bank. This percentage is fixed by the Reserve Bank of India. The date which is taken to calculate the demand and time liabilities of presently it is 25%. The 25% is the minimum SLR (the statutory requirements to park their money in government bonds)limit the RBI can fix at present. The objectives of SLR are 1) to restrict the expansion of bank credit 2) to augment the investment of the banks in Government securities 3) to ensure solvency of banks.

Reverse Repo Rate

The rate is the prevailing interest rate for a reverse repo. The deals are done as a way to borrow funds short term. No central bank involvement is required. The purchase of securities with the agreement to sell them at a higher price at a specific future date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other end of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement. Repos are classified as a money-market instrument. They are usually used to raise shortterm capital.

Ratios Analysis
Any successful business owner is constantly evaluating the performance of his or her company,

comparing it with the company's historical figures, with its industry competitors, and even with successful businesses from other industries. To complete a thorough 91

examination of your company's effectiveness, however, we need to look at more than just easily attainable numbers like sales, profits, and total assets. but must be able to read between the lines of financial statements and make the seemingly inconsequential numbers accessible and comprehensible. This massive data overload could seem staggering. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Comparative ratio analysis helps you identify and quantify your company's strengths and weaknesses, evaluate its financial position, and understand the risks you may be taking. As with any other form of analysis, comparative ratio techniques aren't definitive and their results shouldn't be viewed as gospel. Many off-the-balance-sheet factors can play a role in the success or failure of a company. But, when used in concert with various other business evaluation processes, comparative ratios are invaluable. This discussion contains descriptions and examples of the eight major types of ratios used in financial analysis: Income, Profitability, Liquidity, Working Capital, Bankruptcy, Long-Term Analysis, Coverage, and Leverage.

Financial Ratios
Financial ratios are a valuable and easy way to interpret the numbers found in statements. It can help to answer critical questions such as whether the business is carrying excess debt or inventory, whether customers are paying according to terms, whether the operating expenses are too high and whether the company assets are being used properly to generate income. When computing financial relationships, a good indication of the company's financial strengths and weaknesses becomes clear. Examining these ratios over time provides some insight as to how effectively the business is being operated. Many industries compile average industry ratios each year. Average industry ratios offer the small business owner a means of comparing his or her company with others within the same industry. In this manner, they provide yet another measurement of an individual company's strengths or weaknesses. Robert Morris & Associates is a good source of comparative financial ratios. Following are the most critical ratios for most businesses, though there are others that may be computed.

Some of the financial ratios

1. Interest Expended / Total Funds(%)
This ratio tell about the interest which an organization pays on the funds which it has raised from the market by the total funds basically this ratio give the idea that how much interest an organization pays on the money which It has raised Lesser this ratio is good for banks 92

2. Interest Income / Total Funds(%)

This ratio tell about the intrest which an organization receives from the funds which it has lended in the market by the total funds basically this ratio give the idea that how much interest an organization receives on the money which It has lended out in the market Greater this ratio is good for banks

3. Net Interest Income / Total Funds(%)

This ratio tell about the intrest which an organization receives from the funds which it has lended into the market by the total funds basically this ratio give the idea that how much interest an organization receives on the money which It has lended out in the market Greater this ratio is good for banks

4. Net Profit / Total Funds(%)

This ratio tell about the net profit which an organization has earned by parking its money into the market by the total funds basically this ratio give the idea that how much profit an organization has got on parking the money in the market Greater this ratio is good for banks

5. Non Interest Income / Total Funds(%)

Income earned other than interest which means that the income which has been earned from others sources except interest by the total funds Greater this ratio is good for banks

6. Operating Expense / Total Funds(%)

This ratio give us the idea that how much funds from the total funds are being used to run the business smoothly for an organization Lower the value of this is good for the organization coz this shows that an organization has lower operating cost than the others

7. Profit Before Provisions / Total Funds(%)

This ratio shows profit which an organization has earned prior to the provisions like tax and others If the ratio is high then there would be a lot of funds which would be left for the shareholder coz from this value tax ,and other provisions are to be deducted 93

Higher the ratio is good for the shareholder because ultimately they have to payed out of this value

8. Return On Equity ROE

A measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested. Calculated as:

Also known as "return on net worth (RONW)". The ROE is useful for comparing the profitability of a company to that of other firms in the same industry. higher the ratio is good for the company

9. Return On Assets - ROA

indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment".

ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or the ROA of a similar company.

10. Price-Earnings Ratio - P/E Ratio

A valuation ratio of a company's current share price compared to its per-share earnings. Calculated as:

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. The P/E ratio is an important indicator as to how the investing market views the health, performance, prospects and investment risk of a public company listed on a stock exchange (a listed company). 94

11. Earnings Per Share EPS

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. Calculated as:

In the EPS calculation, it is more accurate to use a weighted-average number of shares outstanding over the reporting term, because the number of shares outstanding can change over time. However, data sources sometimes simplify the calculation by using the number of shares outstanding at the end of the period. Diluted EPS expands on the basic EPS by including the shares of convertibles or warrants outstanding in the outstanding shares number.

12. Interest Expended / Interest Earned(%)

This ratio shows that how much intrest a company has payed on the money which it has raised from the market by the total funds which it has lended in the market Lesser the value is good for the organization

13. Operating Expense / Total Income(%)

This ratio shows that how much expense has been incurred on the day to day activities to the total income which has been generated Lesser the value is good for the organization

14. Other Income / Total Income(%)

This ratio shows the income which has been generated from other sources than intrest to the total income how much intrest a company has payed on the money which it has raised from the market by the total funds which it has lended in the market Greater the value is good for the organization

15. Total Debts to Assets

Provides information about the company's ability to absorb asset reductions arising from losses without jeopardizing the interest of creditors. Total Liabilities Total Assets Lesser value is good because lesser the value of this shows that company has to pay less Means that its liabilities are less 95

16. Interest Coverage Ratio

The Interest Coverage Ratio measures how readily the company can pay its Interest Expense payments on its debt obligations. The ratio is calculated by dividing a firm's earnings before interest and taxes (EBIT) of one period by the company's interest expenses of the same period. A high, or increasing Interest Coverage Ratio is usually a positive sign, showing the company is better able to pay its Interest Expense with its earnings. A ratio result of 1.0 is minimal, showing the company is barely able to meet its expense payments. Depending on the industry, a ratio value of 1.5 to 2.0 is desirable. In finance, an interest coverage ratio is used to determine a firm's ability to pay interest on outstanding debt. Application The lower the ratio, the more the company is burdened by debt. When a company's interest coverage ratio is 1.5 or lower, its ability to meet interest expenses may be questionable.

17. Cash Deposit Ratio(%)

This ratio indicate number of time cash avalibility with bank visa vis the total deposit with the bank Lower the ratio better it is

18.Credit Deposit Ratio(%)

It is the proportion of loan-assets created by banks from the deposits received. The higher the ratio, the higher the loan-assets created from deposits. Shows the % of credit lent to the borrowers vice vista total deposits with the bank Higher the ratio is good for the bank

19.Investment Deposit ratio(%)

This shows the % investment to the total deposit collected by the bank Higher the ratio

20. Debt to Equity:

Debt to equity is also called debt to net worth. It quantifies the relationship between the capital invested by owners and investors and the funds provided by creditors. The higher the ratio, the greater the risk to a current or future creditor. A lower ratio means your 96

client's company is more financially stable and is probably in a better position to borrow now and in the future. However, an extremely low ratio may indicate that your client is too conservative and is not letting the business realize its potential. The formula is: Total Liabilities (or Debt) _____________________ Net Worth (or Total Equity)

97

Punjab National Bank In India (PNB) Punjab National Bank with 4497 offices and the largest nationalised bank is serving its 3.5 crore customers Punjab National Bank has been ranked 38th amongst top 500 companies by The Economic Times. PNB has earned 9th position among top 50 trusted brands in India. Punjab National Bank India maintains relationship with more than 200 leading international banks world wide. PNB India has Rupee drawing arrangements with M/s UAE
Exchange Centre, UAE, M/s Al Fardan Exchange Co. Doha, Qatar,M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance Co, Bahrain,M/s Thomas Cook Al Rostamani Exchange Co. Dubai,UAE, and M/s Musandam Exchange, Ruwi, Sultanate of Oman

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the distinction of being the first Indian bank to have been started solely with Indian capital.The bank was nationalised in July 1969 along with 13 other banks. From its modest beginning, the bank has grown in size and stature to become a front-line banking institution in India at present. A professionally managed bank with a successful track record of over 110 years Largest branch network in India - 4525 Offices including 432 Extension Counters spread throughout the country. Strategic business area covers the large Indo-Gangetic belt and the metropolitan centres. Ranked as 248th biggest bank in the world by Bankers Almanac , London Strong correspondent banking relationships with more than 217 international banks of the world. More than 50 renowned international banks maintain their Rupee Accounts with PNB Well equipped dealing rooms; 20 different foreign currency accounts are maintained at major centres all over the globe. 98

Punjab national bank In this graph gross NPA is decreasing year by year

This graph shows the declining ratio of cost by total income

Asset quality amongst the best in the system

PNB has one of the cleanest loan books amongst the state-owned banks, with net NPAs close to zero (0.2% as of 2QFY07). PNB has enough floating provisions on its books (Rs9.8b as of FY06) as against its actual net NPAs, resulting in lower provisioning and possible write-back in future. Its higher provision coverage at 95%, and expected low incremental defaults would protect earnings in coming years. Higher recoveries of writtenoff accounts could be a possible upside . 99

Investment in technology is paying off:

PNB has made substantial investments in technology, which have begun reflecting in higher fee income. Further, the management claims that its risk assessment capabilities have improved, resulting in lower slippages.

Leverage to enhance RoA, RoE: With operating costs likely to grow at a slower pace,
and absence of / lower investment related provisions, there is huge leverage to grow profitability. PNB is likely to generate a 1.2%+ RoA in FY08. With higher recoveries and lower provisions, RoA could increase further, resulting in a higher sustainable RoE.

Asset quality amongst the best: PNBs net NPAs at 0.4% are amongst the lowest. With
slippages likely to remain low, NPA recoveries could provide upside to our estimates.

Concerns Investment yield at 8%: PNB continues to enjoy high yields on its investment book.
However, we expect the yields to decline as the bank churns its portfolio. We are uilding in a decline in investment yields in our projections.

Pension AS-15: On the AS-15 impact, PNB has already started making higher
provisions as per actuarial valuations (~Rs1.5b in 1HFY07). With regard to past arrears, management indicated that the gap is likely to be in the range of Rs4b-5b (~4% of FY07 book value). We have not built in pension related costs in our projections.
Holding Pattern Holding Pattern of Punjab National Bank as on 31-Dec-2006 Description Total Foreign Total Institutions Total Govt. Holding Total Non-Promoter Corporate Holdings Total Promoters Total Public & Others Total % of Holding 20.09 14.02 0.00 2.82 57.80 5.28 100.00

Punjab National Bank Chairman S C Gupta Company Secretary N.A.

100

List Of Directors Sr. No. Director's Name 1 S C Gupta 5 P K Nayar 6 Mohan Lal Bagga 7 Harsh Mahajan 8 Mohanjit Singh 9 Prakash Agarwal 10 K Raghuraman 11 Rakesh Singh 12 S R Khurana 13 L M Fonseca Designation Chairman & Managing Director Director Director Director Director Director Executive Director Nominee (Govt) Director Director

State Bank Of India (SBI) State Bank of India (SBI) was nationalized in July 1955 under the SBI Act of 1955. Seven banks of SBI formed subsidiary and was nationalised on 19th July, 1960. The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries -- a wide range of banking services. The Bank is actively involved since 1973 in non-profit activity called Community Services Banking. All our branches and administrative offices throughout the country sponsor and participate in large number of welfare activities and social causes. Our business is more than banking because we touch the lives of people anywhere in many ways. Our commitment to nation-building is complete & comprehensive.

101

NPAS are going down in each quarter which brings out a good position of bank

Government to acquire RBIs stake in SBI

The government is proposing to acquire the RBIs stake (59.8%) in a cash-neutral transaction at Rs1,300/share. SBI is the only state-owned bank, which is owned by the regulator and not directly by the government. Once the government acquires the stake, the SBI Act is also likely to be amended and government holding can be reduced to 51% (presently, the RBI holding cannot fall below 55%). State Bank of India (SBI) is the largest Indian bank having a network of over 14,000 branches and an asset base of over Rs7.5t (March 2008, consolidated). Apart from banking, SBI has floated subsidiaries for mutual funds, life insurance, merchant banking and credit cards.

Strong loan growth, but slow deposit growth:

In 9MFY06, SBIs loan book expanded by a robust 28% YoY to Rs3t, fuelled by strong growth in retail, SME and agriculture loans.

Margins to decline, as cost of funds increase: While margins are currently

sustaining ~3.25% for the bank, we believe that cost of funds is likely to increase over the next few quarters, resulting in lower margins over the next few quarters.

Operating leverage exists: Operating expenses growth is likely to be moderate on

account of large retirements over the next few years. We believe that this could be a key earnings driver for the bank.

102

Chairman O P Bhatt List Of Directors Sr. No. Director's Name 2 T S Bhattacharya 3 O P Bhatt 4 Ajay G Piramal 5 M S Swaminathan 6 Suman Kumar Bery 7 Ashok Jhunjhunwala 8 Ananta C Kalita 9 Amar Pal 10 Arun Singh 11 Rajiv Pandey 12 Piyush Goyal 13 Vinod Rai 14 Shyamala Gopinath 15 Yogesh Agarwal Holding Pattern

Company Secretary

Designation Managing Director Chairman & Managing Director Director Director Director Director Director Director Director Director Director Director Director Managing Director

Holding Pattern of State Bank of India as on 31-Dec-2006 Description Total Foreign Total Institutions Total Govt. Holding Total Non-Promoter Corporate Holdings Total Promoters Total Public & Others Total % of Holding 19.82 11.94 0.91 1.82 59.73 5.78 100.00

103

ICICI Bank India ICICI Limited, was established in 1955 by the World Bank, the Government of India and the Indian Industry, for the promotion of industrial development in India by giving project and corporate finance to the industries in India. ICICI Bank has grown from a development bank to a financial conglomerate and has become one of the largest public financial institutions in India. ICICI Bank has financed all the major sectors of the economy, covering 6,848 companies and 16,851 projects. As of March 31, 2000, ICICI had disbursed a total of Rs. 1,13,070 crores, since inception. ICICI Bank Fact Files Total assets : Rs.146,214 crore (December 31, 2004) Network : 530 branches ATMs : Over 1,880 ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees.

Steady balance sheet growth, with stable margins:

ICICI Bank has raised lending rates aggressively over the last 3 months, in line with its rise in deposits. We expect the bank to maintain its margins, even as we believe that incremental growth would slow down from current levels.

Fee income growth continues to be robust: Traction in core fees continues for
the bank. Fees to total assets was 2.3% in 3QFY07, almost as much as its NII. Of the current fees, 56% is from retail; 13% comes from international operations and the balance from corporates.

NPAs the key aspect to watch out for: The biggest concern for ICICI Bank in
the past had been its asset quality. While the NPA problems have subsided, over the last 104

couple of quarters, NPAs have resurfaced again. Increasing NPA provisions could impact profitability in the interim.

ICICI Holdings would unlock subsidiary values: ICICI Banks has formed a
100% holding company for life insurance, general insurance and asset management, ICICI Holdings Ltd. The listing of the holding company (expected by end of CY07) would also unlcok the true value of its successful insurance and asset management ventures.

Other investments: The bank owns 7% in NSE, 8% in NCDEX, 60% stake in its BPO arm
ICICI One-Source (pre-IPO) and a 54% stake in its software venture, 3-I Infotech. While we are not considering the value of these ventures in our valuation exercise, we believe that the unrealized gains on these ventures could result as a decent source for treasury gains, as and when ICICI Bank divests these holdings.
Holding Pattern

105

Holding Pattern of ICICI Bank as on 31-Dec-2006 Description Total Foreign Total Institutions Total Govt. Holding Total Non-Promoter Corporate Holdings Total Promoters Total Public & Others Total % of Holding 71.40 17.27 0.00 5.04 0.00 6.30 100.00

Concerns Deterioration in asset quality: Though the possibility is low, any slowdown in the economy could result in higher NPAs. Also, growth has been very fast for ICICI Bank over the last three years, which could result in asset quality issues in case of a downturn. ICICI Bank is known to have asset quality issues in previous economic slowdowns. Capital requirement: Strong growth and the present low RoE could result in the bank again requiring capital by FY08. Current capital adequacy is 13.4%, with a tier-I of 9.2%. The bank, however, could raise capital through hybrid instruments and resort to securitization (which has slowed down over the last six months). The management at this stage does not intend to raise any equity capital till FY08. Low RoE: As the bank has recently raised capital, its RoE is suppressed at 13-14%, which might result in lower discounting for the stock. However, as the bank leverages its capital, we expect RoE to increase. We estimate sustainable RoE at 17-18%.
Chairman N Vaghul Company Secretary Jyotin Mehta

106

List Of Directors Sr. No. Director's Name 1 N Vaghul 2 Sridar Iyengar 3 R K Joshi 4 L N Mittal 5 Narendra Murkumbi 6 Anupam Puri 7 Vinod Rai 8 M K Sharma 9 P M Sinha 10 Marti G Subrahmanyam 11 T S Vijayan 12 V Prem Watsa 13 K V Kamath 15 Kalpana Morporia 16 Chanda D Kocchar 17 Nachiket Mor 18 Jyotin Mehta 19 V Vaidyanathan Designation Chairman Director Director Director Director Director Director Director Director Director Director Director Managing Director & CEO Joint Managing Director Deputy Managing Director Deputy Managing Director Company Secretary Executive Director

HDFC Bank In India HDFC Bank 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 from Housing Development Finance Corporation Limited (HDFC), in 1994 during the period of liberalisation of the banking sector in India. HDFC India was incorporated in August 1994 in the name of 'HDFC Bank Limited'. HDFC India commenced operations as a Scheduled Commercial Bank in January 1995. 107

Network

More

than

468

branches

over

212

cities

across

the

country

Authorised capital : Rs. 450 crore Paid-up capital : Rs. 282 crore Equity : Holds 24.2% Listing : HDFC India has been 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".

Best placed bank in a rising rate scenario: With deposit cost on a rise, we believe
that banks with strong retail franchise, higher proportion of CASA deposits and thus lower cost of funds would be best placed. HDFC Bank emerges as our most preferred bank.

Margins set to improve: HDFC Bank has the highest CASA ratio in the industry (55% in
3QFY07). With yields likely to rise faster than cost of funds for HDFC Bank, margins could improve going forward. New branch additions - would ensure growth: After a long gap of one year due to regulatory issues, HDFC Bank has added 48 new branches during 3QFY07. Rapid branch expansion in future on removal of regulatory block, would ensure robust business growth.

Asset quality - already carrying adequate provisions: HDFC Banks net NPAs
of 0.4% are amongst the lowest and the bank already carries enough provisions to withstand likely increases in default rates.

Equity dilution in FY08 - likely to be book accretive: We expect capital raising

in FY08/FY09, which will again happen at a significant premium to book. Based on the past experiences, such dilution can improve the book value by almost 20%.

108

Conscious strategy to slow down growth

Over the last few quarters, HDFC Bank has slowed down its business (deposits and core customer assets) growth. Growth slowed down to 29% YoY in 3QFY07 from 37% in 2QFY07 and 50% in 1QFY07. Deposits growth (30% YoY in 3QFY07) has been slowing down each quarter, as the management has taken a conscious decision of not taking in incremental deposits at higher cost.
HDFC Bank Chairman Jagdish Capoor List Of Directors Sr. No. Director's Name 1 Jagdish Capoor 2 Aditya Puri 3 Keki Mistry 5 Vineet Jain 6 Renu Karnad 7 Arvind Pande 9 Gautam Divan 10 Ashim Samanta 11 Sanjay Dongre 12 C M Vasudev Holding Pattern Holding Pattern of HDFC Bank as on 31-Mar-2007 Description Total Foreign Total Institutions Total Govt. Holding Total Non-Promoter Corporate Holdings Total Promoters Total Public & Others Total % of Holding 51.46 5.59 0.79 7.92 21.56 12.68 100.00 Designation Chairman Managing Director Director Director Director Director Additional Director Director Company Secretary Additional Director Company Secretary Sanjay Dongre

Analysis
109

Balance sheet
PNB Mar '06 Total Share Capital Equity Share Capital Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt Other Liabilities & Provisions Total Liabilities Assets Cash & Balances with RBI 23,394.55 Balance with Banks, Money at Call Advances Investments Gross Block 1,397.14 74,627.37 41,055.31 2,158.12 21,652.70 22,907.30 261,641.5 162,534.2 7,424.84 4,751.73 2,673.11 79.82 22,512.51 493,921.3 228,881.3 20,592.95 525.25 8,934.37 8,105.85 146,163.1 71,547.39 5,968.56 1,987.85 3,980.71 0.00 13,327.24 252,058.6 395,033.6 4,338.46 249.55 3,306.61 3,612.39 35,061.26 28,393.96 1,589.47 734.39 855.08 0.00 2,357.57 73,586.87 214,782.3 2,828.89 169.24 315.30 0.00 0.00 8,758.68 302.38 9,376.36 119,684.9 6,687.18 126,372.1 9,601.33 145,349.7 SBI Mar '06 526.30 526.30 0.00 27,117.79 0.00 27,644.09 380,046.0 30,641.24 410,687.2 55,669.83 494,001.2 ICICI Ban Mar '06 1,239.83 889.83 350.00 21,316.16 0.00 22,555.99 165,083.1 38,521.91 203,605.0 25,897.60 252,058.6 HDFC Bank Mar '06 313.14 313.14 0.00 4,986.39 0.00 5,299.53 55,796.82 2,858.48 58,655.30 9,632.04 73,586.87

Accumulated Depreciation 1,127.89 Net Block Capital Work In Progress Other Assets Total Assets Contingent Liabilities Bills for collection Book Value (Rs) 1,030.23 0.00 3,845.19 145,349.7 53,035.43 5,704.17 287.79

P&L
PNB Mar '06 Income Interest Earned Other Income Total Income Expenditure Interest expended Employee Cost 4,917.39 2,114.97 20,159.29 8,123.04 9,597.45 1,082.29 1,929.50 486.82 9,584.15 1,508.71 11,092.86 35,794.93 7,448.74 43,243.67 13,784.50 5,036.62 18,821.12 4,475.34 1,213.64 5,688.98 SBI Mar '06 ICICI Ban Mar '06 HDFC Bank Mar '06

110

Selling and Admin Expenses Depreciation Miscellaneous Expenses Preoperative Exp Capitalised Operating Expenses Provisions & Contingencies Total Expenses Net Profit for the Year Extraordionary Items Profit brought forward Total Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs) Appropriations Transfer to Statutory Reserves Transfer to Other Reserves Proposed Dividend/Transfer to Govt Balance c/f to Balance Sheet Total

721.52 186.64 1,713.03 0.00 3,300.68 1,435.48 9,653.55 1,439.31 0.00 0.00 1,439.31 0.00 283.77 39.81

2,872.92 729.13 6,952.62 0.00 11,726.74 6,950.97 38,837.00 4,406.67 0.00 0.34 4,407.01 0.00 736.82 103.34

2,773.44 623.79 2,204.08 0.00 4,533.00 2,150.60 16,281.05 2,540.07 0.00 188.22 2,728.29 0.00 759.33 106.50

1,025.68 178.59 1,197.61 0.00 1,780.75 1,107.95 4,818.20 870.78 0.00 602.34 1,473.12 0.00 172.23 24.16

44.39 90.00 287.79

81.77 140.00 525.25

27.35 85.00 249.55

27.04 55.00 169.24

359.83 572.41 323.58 183.49 1,439.31

2,933.77 632.74 840.16 0.34 4,407.01

636.00 933.02 865.83 293.44 2,728.29

217.70 -395.99 196.39 1,455.02 1,473.12

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Quarterly results
PNB Dec '06 Sales Turnover Other Income Total Income Total Expenses Operating Profit Profit On Sale Of Assets Profit On Sale Of Investments Gain/Loss On Foreign Exchange VRS Adjustment Other Extraordinary Income/Expenses Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation Depreciation On Revaluation Of Assets PBT Tax Net Profit Prior Years Income/Expenses Depreciation for Previous Years Written Back/ Provided Dividend Dividend Tax Dividend (%) Earnings Per Share Book Value Equity Reserves Face Value 2,948.29 323.07 3,271.36 1,169.96 1,778.33 --------2,101.40 1,502.43 598.97 --598.97 169.10 429.87 --126.12 -40 % 13.63 -315.30 -10.00 SBI Dec '06 9,735.94 1,811.03 11,546.97 4,073.59 5,662.35 --------7,473.38 5,784.61 1,688.77 --1,688.77 623.71 1,065.06 -----20.24 -526.30 27,117.79 10.00 ICICI Ban Mar '07 6,661.58 1,833.94 8,495.52 2,796.93 3,864.65 --------5,698.59 4,786.86 911.73 --911.73 86.61 825.12 -----9.22 -899.34 23,413.92 10.00 HDFC Bank Mar '07 1,989.76 394.43 2,384.19 961.23 1,028.53 --------1,422.96 872.05 550.91 52.98 -497.93 154.36 343.57 -----10.90 -319.39 -10.00

KEY FINANCIAL RATIOS

112

PNB SBI ICICI HDFC Mar 06 Mar 06 Mar '06 Mar '06
Spread Ratios Interest Expended / Total Funds(%) Interest Income / Total Funds(%) Net Interest Income / Total Funds(%) Net Profit / Total Funds(%) Non Interest Income / Total Funds(%) Operating Expense / Total Funds(%) Profit Before Provisions / Total Funds(%) ROE or Return On Net Worth(%) ROA P/E EPS Profit And Loss Account Ratios Interest Expended / Interest Earned(%) Operating Expense / Total Income(%) Other Income / Total Income(%) Total Debt / Asset Ratio Coverage Ratios Interest Cover (EBIT/Intrest) Deposit And Credit Growth Ratios Cash Deposit Ratio(%) Credit Deposit Ratio(%) Investment Deposit ratio(%) Leverage Ratios Total Debt / Net Worth 13.47 14.85 9.02 11.06 14.74 60.60 41.16 5.15 62.11 48.14 5.77 89.68 46.07 6.46 65.79 51.81 1.292 1.218 1.264 1.451 51.31 29.76 13.60 .869 56.32 27.12 17.23 .831 69.62 24.08 26.76 .807 43.11 31.30 21.33 .797 3.63 7.07 3.44 1.06 1.11 2.44 2.12 16.4 1.1 9.4 45.6 4.23 7.50 3.28 0.92 1.56 2.46 2.38 17 0.9 11.1 83.7 4.56 6.56 1.99 1.21 2.40 2.16 2.23 14.6 1.3 28.2 28.5 3.08 7.16 4.07 1.39 1.94 2.85 3.16 17.7 1.4 32.4 27.8

Analysis Interest Expended / Total Funds(%) This ratio tell about the interest which an organization pays on the funds which it has raised from the market Lesser this ratio is good for banks in this case HDFC climbs up the having the least ratio among each other Interest Income / Total Funds(%) This ratio tell about the interest which an organization receives from the funds which it has lended in the market by the total funds Greater this ratio is good for banks in this case SBI comes up with max of the ratio of 7.5 Net Interest Income / Total Funds(%) This ratio tell about the income which an organization receives from the funds which it has lended into the market by the total funds Greater this ratio is good for banks in this case HDFC comes again Net Profit / Total Funds(%) This ratio tell about the net profit which an organization has earned by parking its money into the market by the total funds Greater this ratio is good for banks in this HDFC once again pull up and leave other banks behind Non Interest Income / Total Funds(%) Income earned other than interest which means that the income which has been earned from others sources except interest by the total funds Greater this ratio is good for banks in this case ICICI has make it mark Operating Expense / Total Funds(%) give us the idea that how much funds from the total

funds are being used to run the business smoothly for an organization Lower the value of 113

this is good for the organization coz this shows that an organization has lower operating cost than the others in this case ICICI has come up again Profit Before Provisions / Total Funds(%) it shows profit which an organization has earned prior to the provisions like tax and others If the ratio is high then there would be a lot of funds which would be left for the shareholder coz from this value tax ,and other provisions are to be deducted Higher the ratio is good for the shareholder because ultimately they have to payed out of this value HDFC once again a good ratio as compared to the others Return On Equity ROE A
measure of a corporation's profitability that reveals how much profit a company generates with the money shareholders have invested. higher the ratio is good for the company HDFC once again Return On Assets ROA indicator of how profitable a company is relative to its total assets. Higher the value good for the organization HDFC agains tops the chart . Earnings Per Share in this high value is desired in this SBI having highest EPS of 83.7 Price-Earnings Ratio - P/E Ratio . A valuation ratio of a company's current share price compared to its per-share earnings. Higher ratio is desired in this HDFC again is ahead of others . Interest Expended / Interest Earned(%) it shows that how much intrest a company has payed on the money

which it has raised from the market by the total funds which it has lended in the market Lesser the value is good for the organization HDFC again.Operating Expense / Total Income(%) ratio shows that how much expense has been incurred on the day to day activities to the total income which has been generated Lesser the value is good for the organization in this ICICI makes it mark . Other Income / Total Income(%) This ratio shows the income which has been generated from other sources than intrest to the total income how much intrest a company has payed on the money which it has raised from the market by the total funds which it has lended in the market Greater the value is good for the organization in this ICICI again top the chart among the others . Total Debts to Assets Lesser
value is good because lesser the value of this shows that company has to pay less Means that its liabilities are less in this HDFC again Interest Coverage Ratio A high, or increasing Interest Coverage Ratio is usually a positive

sign, showing the company is better able to pay its Interest Expense with its earnings.HDFC again .Cash Deposit Ratio(%) This ratio indicate number of time cash avalibility
with bank visa vis the total deposit with the bank Lower the ratio better it is SBI has lower ratio

It is the proportion of loan-assets created by banks from the deposits received. Shows the % of credit lent to the borrowers vice vista total deposits with the bank Higher the ratio is good for the bank ICICI has the highest ratio among four .Investment
.Credit Deposit Ratio(%) Deposit ratio(%) This shows the % investment to the total deposit collected by the bank Higher the ratio is preferable HDFC again .Debt to Equity: Debt to equity is also called debt to net worth. It

quantifies the relationship between the capital invested by owners and investors and the funds provided by creditors. The higher the ratio, the greater the risk to a current or future creditor. A lower ratio means your client's company is more financially stable and is probably in a better position to borrow now and in the future. ICICI this time

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Banking overview
Bank stocks have taken a hit following concerns that rising interest rates would lead to a slowdown in growth, pressure on margins and higher asset quality risks. With deposit growth also picking up, funding this credit growth should not be a problem. The challenge, however, lies in keeping the cost of deposits under control. Banks with strong liability franchise would be at an advantage in this regard. banks continue to have enough pricing power to maintain their margins at current levels. Yet, a few players that are weak on the liability management front could witness lower margins. While risks relating to asset quality have increased as long as the macro economic scenario remains robust, asset quality will remain good. In light of the sharp decline in valuations, we believe that the opportunities outweigh the nearterm concerns. Monetary tightening leads to sector underperformance Taming inflation has been the central regulatory theme over the last few months, leading to multiple hikes in CRR and repo rates, and other anti-inflation monetary measures. The result fears of a consequent slowdown in credit growth have led to a beating down of banking stocks. banking stocks to alleviate. Effective liability management the key differentiator Liability cost is becoming an important determinant of profitability. While deposit growth is picking up, and would help keep up the strong credit growth, raising deposits at the right price would be the key driver of profits. We believe that banks that have a strong liability franchise (and consequently, high CASA ratio) would be at an advantage.

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Margins pricing power to sustain margins Though deposit costs are going up, banks have aggressively raised lending rates in order to maintain margins. While private banks have been most aggressive in raising lending rates, even state-owned banks have increased their prime lending rates (PLR) by 175-200bp over the last 12 months. Further, banks have also curtailed sub-PLR lending and withdrawn all other forms of discount. We believe that banks would be able to sustain their margins at current levels over the near to medium term. However, banks that have low CASA deposit ratio could witness margin pressure. NPAs of almost all banks have fallen to 3-4% while net NPAs have declined to 0.51.5%.

Monetary tightening leads to sector underperformance

Taming inflation has been the central regulatory theme over the last few months, leading to multiple hikes in CRR and repo rates, and other anti-inflation monetary measures. The result fears of a consequent slowdown in credit growth have led to a beating down of banking stocks. However, as the regulatory measures begin having the desired impact, we expect the near-term concerns on banking stocks to alleviate. Inflation control has taken center stage Inflation management has become the central regulatory theme over the last few months. RBI has taken monetary measures like raising CRR and repo rate, and has also increased provisioning and capital requirements for certain asset classes. Yet inflation (6.5%) and money supply (22%) have continued to remain higher than RBIs comfort level of 5-5.5% and 16%, respectively. RBI and the Government have highlighted their intentions to control inflation at any cost. leading to further monetary tightening Over the last four months, RBI has raised CRR by 150bp, taking away about Rs450b of liquidity from the markets. It has even raised repo rates by 50bp, signaling higher borrowing and lending rates. This has resulted in banks aggressively raising deposit and lending rates over the last 4-5 months

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and consequent beating down of banking stocks On account of the increasing concerns of monetary tightening leading to a slowdown in growth, banking stocks have been declined sharply. The Bankex has declined by 19% from its highs in February.

Liability cost is becoming an important determinant of profitability. While deposit growth is picking up, and would help keep up the strong credit growth, raising deposits at the right price would be the key driver of profits. Indian banks have been witnessing robust credit growth over the last 24-36 months. Loan growth has accelerated to average ~30% in FY05-07 from average 18% in FY00-04. Key drivers for Indias credit growth story are:
Favorable macro environment strong GDP / industrial growth averaging 8%+ De-leveraged corporate balance sheets, with a lot of headroom to borrow at a time

of

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capacity expansions Under-leveraged consumers with rising disposable incomes and who are now more willing to borrow to fund consumption expenditure

With the economy on the growth path and increasing working capital requirements and investments for expanding existing capacities, corporate credit is expected to continue to witness strong growth. Investments by the corporate and infrastructure sectors have risen sharply over the past 2-3 years, driven by: 1. Low capex in the preceding 6-7 years (1997-2004); 2. Strong growth and higher capacity utilization across sectors; and 3. Significant infrastructure bottlenecks power, roads, ports, airports, etc. Infrastructure spend in India is likely to increase from 3.6% of GDP (US$28b) in FY06 to ~4.8% of GDP (US$50b) by FY09. Priority sector lending The governments continued thrust on priority sector lending particularly the agriculture sector has opened up major business propositions for the banking sector. The government has announced various measures to double credit flow to the agriculture sector over the next three years. The emergence of micro finance, tie-ups with non-government organizations (NGOs), and big corporate groups foraying into agriculture through contract farming etc., has provided a new dimension to agriculture lending. Citing the opportunity and commercial viability of the agriculture lending business, leading private banks have taken up agriculture lending as one of their focus areas. However, state-owned banks would benefit the most in the agriculture lending business due to their widespread reach in rural areas.

Cabinet has approved an ordinance to amend SLR ratio

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Recently, the Union Cabinet has approved an ordinance to amend the SLR ratio, which shall ensure greater credit availability. The ordinance shall empower the RBI to decide the quantum of SLR to be maintained by banks. There is a case for lower SLR, as incremental government deficit can easily be taken care of by the insurance, pension and provident funds and banks need not fund this deficit. Also, in the current scenario, it is difficult to raise resources at reasonable cost to match the credit growth in the system, resulting in deposit costs going up sharply. The SLR ratio has already reduced to ~27% for the banking sector. The minimum requirement currently is 25%. RBI unlikely to act in the near-term, as inflation is the prime concern RBI would not take any step in the direction of reducing banks SLR in the near-term, as it battles inflation. Immediate lowering of the SLR ratio would mean fuelling strong credit growth as well as inflation.

Cabinet approval is a medium-to-long-term positive When the SLR requirement for banks is reduced, it would have a favorable impact on their margins banks lending yields are higher than SLR yields A reduction in SLR ratio by 5% over the next 12-24 months could result in increase in margins. This would, in turn, have a positive effect on RoA, RoE and bank valuations. Additionally, lower SLR would also imply that sensitivity of banks financials to interest rate moves would reduce. On the same note, earnings volatility could reduce, which would be positive for bank valuations.

Asset quality risks increased, but still manageable

While risks relating to asset quality have increased with interest rates going up, Systemic NPAs are at an all-time low and are still declining. Further, banks are making high standard asset provisioning on various loans these are higher than actual delinquencies in several cases. On the back of windfall treasury profits over the last few years, banks have been proactively cleaning their balance sheet. Of late, the secondary market for stressed assets has further enabled banks to offload bad assets, resulting in improved asset quality, particularly for state-owned banks. There is growing concern now that the robust credit growth witnessed over last 2-3 years and the rising interest rates would once again lead to a scenario of increasing NPAs. Asset quality at its best Gross NPA levels in the system fell from a peak of 23% in 1994 to 3.3% in FY06 even as NPA recognition norms have gradually strengthened. Declining trend in NPAs has continued even in FY07.

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NPAs - factor of slowing economy rather than higher interest rates large scale NPAs are more of a factor of a slowing economy rather than higher interest rates. Nevertheless, owing to higher interest rates, risks on asset quality has increased. There is little to suggest that the broader asset quality environment is weakening or that asset prices have come off, lowering collateral cover. FY08 new wage agreement needs to be drawn: While overall employee related expenses are likely to grow at a slow rate, the new wage agreement due in FY08 would result in a one-time increase in salary costs. Going by the previous wage agreement, which was settled three years after which it was due, even this agreement could take its own time before it is acceptable to both management and the unions. However, the banks would be required to make provisions in lieu of higher salary costs in FY08. computerization would help plug leakages for state-owned banks With state-owned banks on a computerization / branch-networking spree, we believe that they too would begin to witness strong growth in core non-interest income. Besides the traditional feebased income business, banks are also targeting the under-penetrated Indian markets through various financial products like Equity Advisory, Wealth Management, Mutual Funds, Insurance, Credit Cards, Debit Cards, etc. They have also initiated services like Cash Management Services, Depository Services, Money Transfer, etc. to drive their fee-based income. Banks using distribution network/technology to enhance fee income With the state-owned banks having enabled core banking solutions (CBS) platforms to a great extent, they have started charging customers for minimum balance accounts/ debit cards, etc. Since the whole process is technology enabled, the leakages have also reduced. At the same time, these banks are leveraging their client relationships by offering a whole bouquet of services including third-party products.

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Hybrids cheaper than raising equity The RBI had earlier agreed to allow Indian banks to raise Innovative Capital via the following: 1. Perpetual debt instruments (IPDI) eligible for inclusion as Tier-I capital; 2. Debt capital instruments eligible for inclusion as upper Tier-II capital; 3. Perpetual non-cumulative preference shares eligible for inclusion as Tier-I capital 4. Redeemable cumulative preference shares eligible for inclusion as Tier-II capital. Some of the key features of perpetual bonds are:
Perpetual

bonds (IPDI) have no maturity date, i.e. these are redeemable but will pay interest forever. The interest payable to the investors may be either at a fixed rate or at a floating rate referenced to a market-determined rupee interest benchmark rate. However, in its guidelines, the RBI has put a caveat that such hybrid securities will cease to provide returns if the issuing banks CAR falls below regulatory requirements (9%). This makes perpetual debt instruments a risky option for investors, particularly in those banks where the CAR is low. Positive for banks to improve leverage; RoE raising capital through hybrids will not only help the banks meet Basel-2 norms, but also help improve their RoEs, as leveraging will tend to increase. Currently, most banks leverage their capital in the range of 11x-16x, which could increase to 14x-18x. This could lead to improve RoEs on Basel-2 norms. Overall, hybrids will be a positive for the larger banks, which can access perpetual debt at a reasonable rate. Also, as banks would like to raise these funds in the overseas markets, banks with an international presence would be at an advantage (as they can use these funds overseas).

2009 the year to watch out for The regulator is likely to allow foreign banks to acquire Indian banks in its next policy review on M&As within the industry in 2009. This throws opens a huge opportunity for foreign banks to expand their presence in India through acquisitions and we believe that banks like Yes Bank, Centurion Bank of Punjab, Karnataka Bank, Karur Vysya, Federal Bank would be the key targets these are relatively larger banks with healthy branch networks. With several foreign banks wanting to set up a larger presence in India, acquiring an Indian bank would be an ideal way to start the process.

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RECOMMENDATIONS & CONCLUSIONS In mutual funds different funds were compared on the 10 different parameters such as Expense ratio , P/E ratio , standard deviation , Alpha , Beta , Rsquared etc and accordingly points were given to the companies on the scale of number of companies in an analysis based on the marking the fund which has got maximum of the points is recommended to the investor for future investment although each have tough value for comparison which is better than the other one but the result has to be declared so that proper investment should be made Schemes which has been reviewed Best of Best 1.INCOME 2.BALANCED 3.ELSS 4.EQUITY ICICI Pru >SBI>RELIANCE >HDFC ICICI Pru >SBI>HDFC SBI Magnum>HDFC>ICICI>RELIANCE SBI Magnum>HDFC>ICICIPRU>RELIANCE

For banking project a ratio analysis of 20 different ratios has been done to know the exact position of the bank these ratio includes ROE , EPS, Spread ratios, Debt to Equity , Interest Coverage ratio , Growth ratios etc are included for the analysis And after getting the value these ratios were put on a 4 point rating scale and ranking was done according to the ratios and the top position were calculated by adding all the points SO in this Equity research HDFC comes out as a true winner out of four with excellent figures and stats which has contributed to the success to reach upto that place HDFC>ICICI>SBI>PNB

In End I would like to say that with all the analysis which had been conducted on different schemes and scrips under different parameters all of them has come out with one of the other strong points which offsets the others so for investing in 122

Income Funds Balanced Funds ELSS Funds Equtiy Funds Scrips REFERENCES

ICICI Pru ICICI Pru SBI Magnum SBI Magnum HDFC

Usha Arora (2007),Analysis of Public Sector Banks in India Finance India ver xxi No.1 pp 167-176 ICFAI press (April 2007)Professional Bankers R. H. Sharma (2004), Technical and Fundamental Analysis of Companies. Capital Market magazine (Dalal Street, Business India, Money Today) BalaKrishan Pulapre (2007) Trends in Saving ,Investment & ConsumptionEconomic & Polotical weekly vol XL11 No.18 Pg. 1591-96 Newspaper ( Economics times, Business standard) Research report of MotiLal Oswal Group www.investopeida.com www.amfi.com www.mutualfundindia.com www.ndtvprofit.com www.buzzingstocks.com www.indiaearning.com www.valueresearchonline.com www.bseindia.com www.mastermarts.com www.google.com www.rediff.com www.rbi.gov.in

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