INDUSTRY PROFILE

A bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money. Many other financial activities were allowed over time. For example banks are important players in financial markets and offer financial services such as investment funds. In some countries such as Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the zaibatsu. In France, bank assurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients. The level of government regulation of the banking industry varies widely, with countries such as Iceland, the United Kingdom and the United States having relatively light regulation of the banking sector, and countries such as China having relatively heavier regulation (including stricter regulations regarding the level of reserves). Origin of the word The name bank is derived from the Italian word banco "desk/bench", used during the Renaissance by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Romethat of the Imperial Mint.

Traditional Banking Activities Banks act as payment agents by conducting checking or Current Accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account. Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings to Definition Under English Common Law, a banker is defined as a person who carries on the business of banking, which is specified as:

Conducting current accounts for his customers Paying cheques drawn on him, and Collecting cheques for his customers.

In most English Common Law jurisdictions there is a Bills of Exchange Act that codifies the law in relation to negotiable instruments, including cheques, and this Act contains a statutory definition of the term banker: banker includes a body of persons, whether incorporated or not, who carry on the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is actually functional, because it ensures that the legal basis for bank transactions such as cheques do not depend on how the bank is organised or regulated. "Banking Business" means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act (Singapore), Section 2, Interpretation). "Banking Business" means the business of either or both of the following: 1. receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] ... or with a period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers

Economic Functions The economic functions of banks include:

1. Issue of money, in the form of banknotes and current accounts subject to cheque

or payment at the customer's order. These claims on banks can act as money because they are negotiable and/or repayable on demand, and hence valued at par. They are effectively transferable by mere delivery, in the case of banknotes, or by drawing a cheque that the payee may bank or cash.
2. Netting and settlement of payments banks act as both collection and paying

agents for customers, participating in interbank clearing and settlement systems to

collect, present, be presented with, and pay payment instruments. This enables banks to economies on reserves held for settlement of payments, since inward and outward payments offset each other. It also enables the offsetting of payment flows between geographical areas, reducing the cost of settlement between them. 3. credit intermediation banks borrow and lend back-to-back on their own account as middle men 4. Credit quality improvement banks lend money to ordinary commercial and personal borrowers (ordinary credit quality), but are high quality borrowers. The improvement comes from diversification of the bank's assets and capital which provides a buffer to absorb losses without defaulting on its obligations. However, banknotes and deposits are generally unsecured; if the bank gets into difficulty and pledges assets as security, to rise the funding it needs to continue to operate, this puts the note holders and depositors in an economically subordinated position.
5. Maturity Transformation banks borrow more on demand debt and short term

debt, but provide more long term loans. In other words, they borrow short and lend long. With a stronger credit quality than most other borrowers, banks can do this by aggregating issues (e.g. accepting deposits and issuing banknotes) and redemptions (e.g. withdrawals and redemptions of banknotes), maintaining reserves of cash, investing in marketable securities that can be readily converted to cash if needed, and raising replacement funding as needed from various sources (e.g. wholesale cash markets and securities markets)

Banking in India
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to

commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively

Early history
Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1925 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in

1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoires d Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madra and Pondichery, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The Bank of Bengal, which later became the State Bank of India. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans,

concentrated on financing foreign trade. Indian joint stock banks were generally undercapitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swedeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". From World War I to Independence The period during the Fist World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the Independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian Economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:

Years

Number of banks that failed 12 42 11 13 9 7

Authorized capital (Rs. Lakhs) 274 710 56 231 76 209

Paid-up Capital (Rs. Lakhs) 35 109 5 4 25 1

1913 1914 1915 1916 1917 1918

Post-Independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalisation of major banks in India on 19 July, 1969. Nationalisation By the 1960s, the Indian banking industry has become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a large employer, and a debate has ensued about the possibility to nationalise the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayam, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Paliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August, 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks

and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The nationalised banks were credited by some; including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009. Liberalisation In the early 1990s, the then Shri Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank (earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%, at present it has gone up to 49% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%; Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more.

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&A, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.

COMPANY PROFILE
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.

Capital Structure As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550 crore. The paid-up capital as on the said date is Rs. 425, 38, 41,090/- (42, 53, 84,109 equity shares of Rs 10/- each). The HDFC Group holds 19.38% of the Bank's equity and about 17.70 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.69 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 5, 48,774 shareholders. The shares are listed on the Bombay Stock Exchange Limited, and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002. On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP. The merged entity will have a strong deposit base of around Rs. 1, 22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1, 63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the

scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1416 branches spread over 550 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE has a strong and active member base. The Bank also has a network of about over 3382 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders. Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia. The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength. HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share. HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments:

Wholesale Banking Services The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporate and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks. Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for

retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. Credit Rating The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory

obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high" The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments. Corporate Governance Rating The bank was one of the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest. HDFC Bank began operations in 1995 with a simple mission: to be a "Worldclass Indian Bank". We realised that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal. It is extremely gratifying that our efforts towards providing customer convenience have been appreciated both nationally and internationally.

Credit Rating The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high" The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments?

Awards and Achievements Banking Services HDFC Bank began operations in 1995 with a simple mission: to be a "Worldclass Indian Bank". We realised that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal. It is extremely gratifying that our efforts towards providing customer convenience have been appreciated both nationally and internationally. 2009 Euromoney Awards 2009 'Best Bank in India' Economic Times Brand Equity & Nielsen Most Trusted Brand - Runner Up Research annual survey 2009 Asia Money 2009 Awards IBA Banking Technology Global Finance Award 'Best Domestic Bank in India' 'Best IT Governance Award - Runner up' 'Best Trade Finance Bank in India for

2009 IDRBT Banking Technology Excellence 'Best IT Governance and Value Delivery' Award 2008 Asian Banker Financial Services Excellence in Retail 'Asian Banker Best Retail Bank in India Award 2009 '

2008 Finance Asia Country Awards for 'Best Bank and Best Cash Management Bank' 'Indian of the Year (Business)' 'Best IT Adoption in the Banking Sector' 'Best Bank 2008' Fab 50 companies in Asia Pacific Retail Best Retail Bank 2008 Best local Cash Management Bank Award voted by Corporate Security Strategist Award 2008 For outstanding contribution international trade services. One of India's "Most Achievement 2008 CNN-IBN Nasscom IT User Award 2008 Business India Forbes Asia Asian Banker Excellence Financial Services Asiamoney Microsoft & Indian Express Group World Trade Center Award of honour Business Today-Monitor Group survey Financial Express-Ernst & Young Award

in

to

Innovative

Companies" Best Bank Award in the Private Sector

category Global HR Excellence Awards - Asia 'Employer Brand of the Year 2007 -2008' Pacific HRM Congress: Asian Banker Award - First Runner up, & many more 'Best Bank' Award

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

Board of Directors The Composition of the Board of Directors of the Bank is governed by the Companies Act, 1956, the Banking Regulation Act, 1949 and the listing requirements of the Indian Stock Exchanges where securities issued by the Bank are listed. The Board has strength of 12 Directors as on March 31, 2008. All Directors other than Mr. Aditya Puri, Mr. Harish Engineer and Mr. Paresh Sukthankar are non-executive directors. The Bank has five independent directors and six non-independent directors. The Board consists of eminent persons with considerable professional expertise and experience in banking, finance, agriculture, small scale industries and other related fields. None of the Directors on the Board is a member of more than 10 Committees and Chairman of more than 5 Committees across all the companies in which he/she is a Director. All the Directors have made necessary disclosures regarding Committee positions occupied by them in other companies. - Mr. Jagdish Capoor, Mr. Keki Mistry, Mrs. Renu Karnad, Mr. Aditya Puri, Mr. Harish Engineer and Mr. Paresh Sukthankar are non-independent Directors on the Board. - Mr. Arvind Pande, Mr. Ashim Samanta, Mr. Gautam Divan, Mr. C. M. Vasudev and Dr. Pandit Palande are independent directors on the Board. - Mr. Keki Mistry and Mrs. Renu Karnad represent HDFC Limited on the Board of the Bank. - The Bank has not entered into any materially significant transactions during the year, which could have a potential conflict of interest between the Bank and its promoters, directors, management and/or their relatives, etc. other than the transactions entered into in the normal course of business. The Senior Management have made disclosures to the Board confirming that there are no material, financial and/or commercial transactions between them and the Bank which could have potential conflict of interest with the Bank at large.

Mission and Business Strategy Our mission is to be "a World Class Indian Bank", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Our business strategy emphasizes the following : 1. Increase our market share in Indias expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. 2. Leverage our technology platform and open scaleable systems to deliver more products to more customers and to control operating costs 3. Maintain our current high standards for asset quality through disciplined credit risk management. 4. Develop innovative products and services that attract our targeted customers and address inefficiencies in the Indian financial sector. 5. Continue to develop products and services that reduce our cost of funds. 6. Focus on high earnings growth with low volatility.

RESEARCH DESIGN
NEED FOR THE STUDY In the changing complex business scenario, one has to update the information and review their present status against competitors. It is assumed that the investors show more dynamism while investing money. This study would certainly help both the researcher as well as the investor to assess the present status of company performance. It gives more information to researcher about which investment is better to pool their money. Thus the company can use data, provided by the researcher in planning and controlling financial efforts in future. The study is very much needed to prepare comparative charts of various investment distributions.

OBJECTIVES OF STUDY 1) The main objective of the study is to find out which mutual fund scheme is performing well in debt equity fund and hybrid fund category. 2) To study, why the public concentration has taken paradigm shift on to stock market, particularly in mutual fund sector. 3) To study the reasons of security seeking people to prefer mutual funds. 4) To study influencing factor behind the employees are choosing Equity linked Tax saving scheme rather than paying Income Tax.

SCOPE OF THE STUDY The scope of the study is limited. The main objective of the study is to analyze the performance of mutual funds schemes with special reference to HDFC Mutual Funds. The project is aimed to know the portfolio of Debt fund, Equity fund, and hybrid funds of mutual fund schemes. It is limited to these This three schemes with special reference to HDFC Mutual Funds.

project will be helpful to the company is measuring the performance of mutual funds. This study the company can make the demonstration easy to the investor; to compare various mutual funds and select the better to invest their money and company may assess risk and return of money. Only few factors are considered keeping in mind that time and other constraints. management. The study would help the researcher and academician to understand the practical aspects of mutual fund

RESEARCH METHODOLOGY The researcher has to decide both the primary and secondary data which is suitable for Research study. Primary Data: - The data which are collected for first time by researcher executives. Secondary data: - The research study has been based on secondary data. To gain an overview of the current trends of the Indian Mutual fund industry and also to identify which scheme is performing better secondary Data has been an important source and collected from the Internet, various asset management companys (AMC) fact sheets, etc. through observation and interaction with concerned

LIMITATIONS 1. This analysis is limited to certain mutual fund schemes, which are selected from the AMFI. 2. The data is collected from HDFC Mutual Funds and the data so collected is analyzed and charts are prepared. 3. The secondary data is collected from different mutual fund companies broachers, internet and magazines. 4. The data collected is not static. It is fluctuating. So the figures arrived are not totally dependable for future investments. in a particular scheme. All peripheral factors have to be taken into account while investing

MUTUAL FUND
It is a fund, managed by an investment company with the financial objective of generating high Rate of Returns. These asset management or investment management companies collects money from the investors and invests those money in different Stocks, Bonds and other financial securities in a diversified manner. Before investing they carry out thorough research and detailed analysis on the market conditions and market trends of stock and bond prices. These things help the fund managers to speculate properly in the right direction. The investors, who invest their money in the Mutual fund of any Investment Management Company, receive an Equity Position in that particular mutual fund. When after certain period of time, whether long term or short term, the investors sell the Shares of the Mutual Fund, they receive the return according to the market conditions.

HISTORY: The definition of a mutual fund is a form of collective investment that pools money from many investors and invests their money in stocks, bonds, short-term money market instruments, and/or other securities. In a mutual fund, the fund manager trades the funds underlying securities, realizing capital gains or losses, and collects the dividend or interest income. The investment proceeds are then passed along to the individual investors. The value of a share of the mutual fund, known as the net asset value per share (NAV), is calculated daily based on the total value of the fund divided by the number of shares currently issued and outstanding. Legally known as an open-end company under the Investment Company Act of 1940 (the primary regulatory statute governing investment companies), a mutual fund is one of three basic types of investment companies available in the United States. Outside of the United States (with the exception of Canada, which follows the U.S. model), mutual fund is a generic term for various types of collective investment vehicle. In the United Kingdom and western Europe

(including offshore jurisdictions), other forms of collective investment vehicle are prevalent, including unit trusts, open-ended investment companies (OEICs), SICAVs and unitized insurance funds. In Australia the term mutual fund is generally not used; the name managed fund is used instead. However, managed fund is somewhat generic as the definition of a managed fund in Australia is any vehicle in which investors money is managed by a third party (NB: usually an investment professional or organization). Most managed funds are open-ended (i.e., there is no established maximum number of shares that can be issued); however, this need not be the case. Additionally the Australian government introduced a compulsory superannuation/pension scheme which, although strictly speaking a managed fund, is rarely identified by this term and is instead called a superannuation fund because of its special tax concessions and restrictions on when money invested in it can be accessed. The Unit Trust of India with Rs.44, 541 crores of assets under management was way ahead of other mutual funds. The modern mutual fund was first introduced in Belgium in 1822. This form of investment soon spread to Great Britain and France. Mutual funds became popular in the United States in the 1920s and continue to be popular since the 1930s, especially open-end mutual funds. Mutual funds experienced a period of tremendous growth after World War II, especially in the 1980s and 1990s. Mutual funds really captured the publics attention in the 1980s and 90s when mutual fund investment hit record highs and investors saw incredible returns. However, the idea of pooling assets for investment purposes has been around for a long time. Here we look at the evolution of this investment vehicle, from its beginnings in the Belgium in the eighteenth century to its present status as a growing, international industry with fund holdings accounting for trillions of dollars in the United States alone. The Boston Personal Property Trust, formed in 1893, was the first closedend fund in the U.S. The creation of the Alexander Fund in Philadelphia, Pennsylvania, in 1907 was an important step in the evolution toward what we know as the modern mutual

fund. The Alexander Fund featured semi-annual issues and allowed investors to make withdrawals on demand. A momentous year in the history of the mutual fund, 1928 also saw the launch of the Wellington Fund, which was the first mutual fund to include stocks and bonds, as opposed to direct merchant bank style of investments in business and trade. By 1929, there were 19 open-end mutual funds competing with nearly 700 closed-end funds. With the stock market crash of 1929, the dynamic began to change as highly leveraged closed-end funds were wiped out and small open-end funds managed to survive. GROWTH IN ASSETS UNDER MANAGEMENT Fund Basics: A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from shares to debentures to money market instruments. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an invisible surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. STRUCTURE OF A MUTUAL FUND: A mutual fund is set up in the form of a trust, which has Sponsor, Trustees, Asset Management Company (AMC) and a Custodian. The trust is established by a sponsor or more than one sponsor who is like a promoter of a company. The trustees of the mutual

fund hold its property for the benefit of the unit-holders. The AMC, approved by SEBI, manages the funds by making investments in various types of securities. The custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. A typical mutual fund structure in India can be graphically represented as follows

SPONSOR: Sponsor is the person who acting alone or in combination with another body corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net worth of the investment Managed and meet the eligibility criteria prescribed under the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. The Sponsor is not responsible or liable for any loss or shortfall resulting from the operation of the Schemes beyond the initial contribution made by it towards setting up of the Mutual Fund. The Sponsor (or) any of its directors or the principal officer employed

by the mutual fund should not be guilty of fraud, not be convicted of an offence involving moral turpitude (or) should have not been found guilty of any economic offence. TRUST: The Mutual Fund is constituted as a trust in accordance with the provisions of the Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian Registration Act, 1908. TRUSTEE: Trustee is usually a company (corporate body) or a Board of Trustees (body of individuals). The main responsibility of the Trustee is to safeguard the interest of the unit holders and join together to ensure that the AMC functions in the interest of investors and in accordance with the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996. The provisions of the Trust Deed and the Offer Documents of the respective Schemes. At least 2/3rd directors of the Trustee are independent directors who are not associated with the Sponsor in any manner. An AMC or any of its officers or employees is not eligible to act as a trustee of any mutual fund. In case a company is appointed as a trustee then its directors can act as trustees of any other trust provided that the object of such other trust is not in conflict with the object of the mutual fund. ASSET MANAGEMENT COMPANY: The sponsor or the trustees are required to appoint an AMC to manage the assets of the mutual fund. Under the Mutual Fund Regulations, the applicant must satisfy certain eligibility criteria in order to qualify to register with SEBI as an AMC: The sponsor must have at least 40% stake in the AMC The directors of the AMC should be persons having adequate professional experience in finance and financial services related field and not found guilty of

moral turpitude or convicted of any economic offence or violation of any securities laws The AMC should have and must at all times maintain, a minimum net worth of Rs. 10 Crores The board of directors of such AMC has at least 50% directors, who are not associates of or associated in any manner with, the sponsor or any of its subsidiaries or the trustees. The Chairman of the AMC is not a trustee of any mutual fund. In addition to the above eligibility criteria and other ongoing compliance requirements laid down in the Mutual Fund Regulations, the AMC is required to observe the following restrictions in its normal course of business. Any director of the AMC cannot hold office of a director in another AMC unless such person is an independent director and the approval of the board of the AMC of which such person is a director, has been obtained; the AMC shall not act as a trustee of any mutual fund; the AMC cannot undertake any other business activities except activities in the nature of portfolio management services, management and advisory services to offshore funds, pension funds, provident funds, venture capital funds, management of insurance funds, financial consultancy and exchange of research on commercial basis if any of such activities are not in conflict with the activities of the mutual fund. CUSTODIAN: The mutual fund is required, under the Mutual Fund Regulations, to appoint a custodian to carry out the custodial services for the schemes of the fund. Only institutions with substantial organizational strength, service capability in terms of computerization, and other infrastructure facilities are approved to act as custodians. The custodian must be totally de-linked from the AMC and must be registered with SEBI. Under the Securities and Exchange Board of India (Custodian of Securities) Guidelines, 1996, any person proposing to carry on the business as a custodian of securities must register with

the SEBI and is required to fulfill specified eligibility criteria. Additionally, a custodian in which the sponsor or its associates holds 50% or more of the voting rights of the share capital of the custodian or where 50% or more of the directors of the custodian represent the interest of the sponsor or its associates cannot act as custodian for a mutual fund constituted by the same sponsor or any of its associate or subsidiary company. TRANSFER AGENTS: Transfer agents are responsible for issuing and redeeming units of the mutual fund and provide other related services such as preparation of transfer documents and updating investor records. A fund may choose to carry out this activity in-house and charge the scheme for the service at a competitive market rate. Where an outside Transfer Agent is used, the fund investor will find the agent to be an important interface to deal with, since all of the investor services that a fund provides (besides the investment management) are going to be dependent on the transfer agent. DISTRIBUTORS: Mutual funds operate as collective investment vehicles, on the principle of accumulating funds from a large number of investors and then investing on a big scale. For a fund to sell units across a wide retail base of individual investors, an established network of distribution agents is essential. (AMCs usually appoint Distributors or Brokers, who sell units on behalf of the fund. Some funds even require that all transactions be routed through such brokers. A sponsor or an associate (or in some cases, an employee) may act as a distributor for the AMC with which he or she is associated, only if adequate disclosure of such involvement and the brokerage/commission paid is made to unit-holders. A broker usually acts on behalf of several mutual funds simultaneously and may have several sub-brokers under him for the purpose of distribution of units. In India, besides brokers, independent individuals are appointed as agents for the purpose of selling the fund schemes to investors. These agents are not brokers in a

formal sense and do not belong to any stock exchange or, organized self regulatory body of brokers. While individuals constitute the largest segment in the category of mutual fund distributors, other distributors include banks, Non Banking Finance Companies, and corporate. It is important to note here that all mutual fund distributors - from individual agents to large banks - serve as much, if not more than, as investment advisors as fund salespersons. In fact, most investors look to the agents as advisors and in other countries the agents are called financial advisors. This is an important function and developed countries like the-U.S.A. require that the financial advisors be suitably trained in the advisory function and role. They are even required to pass a specifically designated examination, before being allowed to sell fund products to investors. Whether required by regulation or not, knowledge of financial advisory function is essential for fund agents.

ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI) Association of Mutual Funds in India (AMFI) is an apex body of asset management companies of the Mutual Fund registered in India. It was incorporated on the August 22nd 1995 as a non-profit making organization. It is dedicated to developing the Indian Mutual Fund industry on professional, healthy & ethical lines & to enhance and maintain standards in all areas with a view to protecting & promoting the interests of Mutual Funds & their unit holders. OBJECTIVES: To recommend & implement healthy business practices, ethical code of Conduct, standard principles & practices to be followed by the members of the company & others engaged in the activities of Mutual Funds & Asset Management

including agencies connected or involved in the field of capital Markets & financial Services. To promote high standards of commercial honor & encourage & promote among members & others the observance of securities laws including regulations & directives issued by Securities & Exchange Board of India (SEBI) & function in the best of interest of the investing public. To help in setting up professional standards for providing efficient services & establishing standard practices for Mutual Fund & Asset Management activities. To bring about better co-ordination in the field of Mutual Funds & Asset Management Industry. To promote & develop sound, progressive & dynamic principles, practices & conventions in the activities of Mutual Fund & Asset Management. To render assistance & provide common services & utilities to the persons engaged in the field of Mutual Funds & Asset Management.

How to Invest In Mutual Funds: Step one Identify your investment needs: Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, level of income and expenses among many other factors. Therefore, the first step is to assess your needs. Begin by asking yourself these questions. 1. What are my investment objectives and needs? Probable Answer: I need regular income or need to buy a home or finance a wedding or educate my children or a combination of all these needs.

2. How much risk am I willing to take? Probable Answer: I can only take a minimum amount of risk or I am willing to accept the fact that my investment value may fluctuate or that there may be a shortterm loss in order to achieve a long-term potential gain. 3. What are my cash flow requirements? Probable Answer: I need a regular cash flow or need a lump sum amount to meet a specific need after a certain period or dont require a current cash flow but I want to build my assets for the future. By going through such an exercise, you will know what you want out of your investment and can set the foundation for a sound mutual fund investment strategy Step Two Choose the right mutual fund: Once you have a clear strategy in mind, you now have to choose which mutual fund and scheme you want to invest in. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed by the same fund manager. Some factors to evaluate before choosing a particular mutual fund are: The track record of performance over the last few years in relation to the appropriate yardstick and similar funds in the same category. How well the mutual fund is organized to provide efficient, prompt and personalized service. Degree of transparency as a reflected in frequency and quality of their communications.

Step Three Select the ideal mix of schemes: Investing in just one mutual fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals. The following charts could prove useful in selecting a combination of schemes that satisfy your needs. Aggressive Plan: This plan may suit Investors in their prime earning years and willing to take more risk. Investors seeking growth over a long-term. Moderate Plan: This plan may suit Investors seeking income and moderate growth. Investors looking for growth and stability with moderate risk. Conservative Plan: This plan may suit Retired and other investors who need to preserve capital and earn regular income. Step Four Invest regularly: For most of us, the approach that works best is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment

strategy followed by investors all over the world. With many open-ended schemes offering systematic investment plane, this regular investing habit is made easy for you. Step Five Keep your taxes in mind: If you are in a high tax bracket and have utilized fully the exemptions under Section 80L of the Income Tax Act, investing in growth funds that do not pay dividends might be more tax efficient and improve your post-tax return. If you are in a low tax bracket and have not utilized fully the exemption available under Section 80L, selecting funds paying regular income could be more tax efficient. Further, there are other benefits available for investment in mutual funds under the provisions of the prevailing tax laws. You may therefore consult your tax adviser or Chartered Accountant for specific advice. Step Six The final step: All you need to do now is to get in touch with a mutual fund or your agent/broker and start investing. Reap the rewards in the years to come. Mutual funds are suitable for every kind of investor-whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking. ROLE OF MUTUAL FUND Mutual Funds & Financial Market: In the process of development Indian mutual funds have emerged as strong financial intermediaries & are playing a very important role in bringing stability to the financial system & efficiency to resource allocation. Mutual Funds have opened new vistas to investors & imparted a much-needed liquidity to the system. In the process they have challenged the hitherto role of commercial banks in the financial market & national economy.

Mutual Fund & Capital Market: The active involvement of Mutual Funds in promoting economic development can be seen not only in terms of their participation in the savings market but also in their dominant presence in the money & capital market. A developed financial market is critical to overall economic development, & Mutual Funds play an active role in promoting a healthy capital market. The asset holding pattern of mutual funds in the USA indicates the dominant role of Mutual Funds in the capital market & money market. Moreover, they have also rendered critical support to securities mortgage loans & municipal bond market in the USA. In the USA, Mutual Funds provide very active support to the secondary market in terms of purchase of securities. Investors preferences pattern in India has undergone a tremendous change during recent times, along with the changes in the share of financial assets in the total annual savings. Indian investors have moved towards more liquid & growth oriented trade able instruments likes shares/debentures & units of Mutual Funds. The shift is asset holding pattern of investors has been significantly influenced by the equity & unit culture while the holders of company shares & debentures are concentrated in the urban areas, small/medium investors in the semi-urban & rural areas are tending towards Mutual Funds. Mutual Funds in India have certainly created awareness among investors about equity oriented investments & its benefits.

CONCEPT OF MUTUAL FUND: A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

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 fund 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 or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public. A mutual fund is set up in the form of a trust, which has sponsor, trustees, asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (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 fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund. SEBI Regulations require that at least two thirds of the directors of trustee company or board of trustees must be independent i.e. they should not 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.

BENEFITS OF MUTUAL FUNDS: Professional Management: Qualified investment professionals who to maximize returns and minimize risk monitor investors money. When you buy in to a mutual fund, you are handing your money to an investment professional that has experience in making investment decisions. It is the fund managers job (a) find the best securities for the fund, given the funds stated investment objectives; and (b) keep track of investments and changes in market conditions and adjust the mix of portfolio, as and when required. Portfolio Diversification: It is a nuclear weapon in your arsenal for your fight against risk. It simply means that you must spread your investment across different securities (stocks, bonds, money market instruments, real estate etc.) and different sectors (auto, textile, information technology etc.). This kind of diversification may add to the stability of your returns. For example during one period of time equities might underperform but bonds and money market instruments might do well enough to offset the effect of a slump in the equity markets. Similarly the information technology sector might be faring poorly but the auto and textile sectors might do well and may protect your principal investment as well as help you meet your return objectives. Diversification of Risk: When an investor invests directly, all the risk of the potential loss is his own, whether he places a deposit with a company or a bank, or buys a share or debenture on his own or in any other form. While investing in a pool of funds shared with other investors, the potential losses are also shared with other investors. This risk reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.

Convenient Administration: Investing in a Mutual Fund reduces paperwork and helps to avoid many problems such as bad deliveries, delayed payments and unnecessary follow up with brokers and companies. Mutual Funds save time and make investing easy and convenient. Return Potential: Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Affordability and Low Costs: A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest Rs.500. this amount today would get you less than quarter of an Infosys share! Thus it would be affordable for an investor to build a portfolio of investment through a mutual fund rather than investing directly in the stock market. Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. Liquidity: In open-ended schemes, Investors can get their money back promptly at net asset value related prices from the Mutual Fund itself. With close-ended schemes, they can sell their units on a stock exchange at the prevailing market price or avail of the facility of direct repurchase at NAV related prices which some close-ended and interval schemes offer periodically.

Transparency: Investors get regular information on the value of their investment in addition to disclosure on the specific investments made by the scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook. This level of transparency were the investor himself sees the underlying assets bought with his money is unmatched by any other financial instrument. Thus the investor is in the know of the quality of portfolio and can invest further or redeem depending on the kind of portfolio that has been constructed by the investment manager.

Flexibility: Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, Investors can systematically invest or withdraw funds according to their needs and convenience. Choice of Schemes: Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways, first it offers different types of schemes to with different needs and risk appetites: secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example an investor can invest his money in a growth fund (equity scheme) and income fund (debt scheme) depending on his risk appetite and thus create a balanced portfolio easily or just buy a balanced scheme. Tax Benefits: In general, investors pay tax on a year-to year basis. So if they were to an income and then re-invest the income, what they would re-invest is the amount that is available after paying tax. Mutual fund schemes, on the other hand, do not pay a tax on their income. So the same earning in a mutual fund scheme could facilitate a higher reinvestment.

Well Regulated: All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI. LIMITATIONS OF MUTUAL FUNDS: No Control over costs: An investor in a mutual fund has no control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. No Tailor -made Portfolios: Investors who invest on their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. The very high net worth individuals or large corporate investors may find this to be a constraint in achieving their objectives. Managing a portfolio of funds: Availability of a large number of funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objective, quite similar to the situation when has to select individual shares or bonds to invest in. TYPES OF MUTUAL FUND SCHEMES: There are a wide variety of Mutual Fund schemes that cater to investors need, whatever your age, financial position, risk tolerance and return expectations. Whether as

the foundation of your investment program or as a supplement, Mutual Fund schemes can help you meet your financial goals. By Structure Schemes can be classified into 3 types OPEN-ENDED SCHEMES: These do not have a fixed maturity. Investors deal directly with the Mutual Fund for their investments and redemptions. The key feature is liquidity. They can conveniently buy and sell their units at Net Asset Value (NAV) related prices. CLOSE-ENDED SCHEMES: Schemes that have a stipulated maturity period (ranging from 2 to 15 years) are called close-ended schemes. Investors can invest directly in the scheme at the time of the initial issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. The market price at the stock exchange could vary from the schemes NAV on account of demand and supply situation, unit holders expectations and other market factors. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but closer to maturity, the discount narrows. Some close-ended schemes give them an additional option of selling their units directly to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations ensure that at least one of the two exit routes is provided to the investor. INTERVAL SCHEMES: These combine the features of open-ended and close- ended schemes. They may be traded on the stock exchange or may be open for sale or redemption during predetermined intervals at NAV related prices.

BY INVESTMENT OBJECTIVE: Growth/Equity Schemes: Aim to provide capital appreciation over the medium to long term. These schemes normally invest a majority of their funds in equities and are willing to bear short-term decline in value for possible future appreciation. These schemes are not for investors seeking regular income or needing their money back in the short-term. Income Schemes: Aim to provide regular and steady income to investors. These schemes generally invest in fixed income securities such as bonds and corporate debentures. Capital appreciation in such schemes may be limited. Balanced Schemes: Aim to provide both growth and income by periodically distributing a part of the income and capital gains they earn. They invest in both shares and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. Money Market Schemes: Aim to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer, short-term instruments, such as treasury bills, certificates of deposit, commercial paper and inter- bank call money. Returns on these schemes may fluctuate, depending upon the interest rates prevailing in the market. Tax Saving Schemes: These schemes offer tax rebates to the investors under tax laws as prescribed from time to time. This is made possible because the Government offers tax incentives for

investment in specified avenues. For example, Equity Linked Savings Schemes (ELSS) and Pension Schemes. Recent amendments to the Income Tax Act provide further opportunities to investors to save capital gains by investing in Mutual Funds. The details of such tax savings are provided in the relevant offer documents. Special Schemes: This category includes index schemes that attempt to replicate the performance of a particular index, such as the BSE Sensex or the NSE 50, or industry specific schemes (which invest in specific industries) or Sectoral schemes (which invest exclusively in segments such as A Group shares or initial public offerings). Index fund schemes are ideal for investors who are satisfied with a return approximately equal to that of an index. Sectoral fund schemes are ideal for investors who have already decided to invest in a particular sector or segment. Keeping in mind that any one scheme may not meet all the investors requirements for all time RISKS OF INVESTING IN MUTUAL FUNDS: Risk: Every type of investment, including mutual funds, involves risk. Risks refer to the possibility that you will lose money (both principal and any earnings) or fail to make money on an investment. Following is a glossary of some risks to consider when investing in mutual funds. Call Risk: The possibility that falling interest rates will cause a bond issuer to redeemor callits high-yielding bond before the bonds maturity date. Country Risk: The possibility that political events (a war, national elections), financial problems (rising inflation, government default), or natural disasters (an

earthquake, a poor harvest) will weaken a countrys economy and cause investments in that country to decline. Credit Risk: The possibility that a bond issuer will fail to repay interest and principal in a timely manner. Also called default risk. Currency Risk: The possibility that returns could be reduced for Americans investing in foreign securities because of a rise in the value of the U.S. dollar against foreign currencies. Also called as exchange-rate risk. Income Risk: The possibility that a fixed-income funds dividends will declines a result of falling overall interest rates. Industry Risk: The possibility that a group of stocks in a single industry will decline in price due to developments in that industry. Inflation Risk: The possibility that increases in the cost of living will reduce or eliminate a funds real inflation-adjusted returns. Interest Rate Risk: The possibility that a bond fund will decline in value because of an increase in interest rates. NET ASSET VALUE Mutual funds most relevant disclosure for investors is NAV.Net asset value is the mirror, depicting the worth of investment made per unit. NAV is the most sought after criterion for making decision. The NAV of scheme is an indicator of capital appreciation of the funds under the scheme as on the date of the NAV. Definition of NAV: Net Asset Value, or NAV, is the sum total of the market value of all the shares held in the portfolio including cash, less the liabilities, divided by the total number of units outstanding. Thus, NAV of a mutual fund unit is nothing but the book value.

NAV vs. Price of an equity share: In case of companies, the price of its share is as quoted on the stock exchange, which apart from the fundamentals is also dependent on the perception of the companys future performance and the demand-supply scenario. And hence the market price is generally different from its book value. There is no concept as market value for the MF unit. Therefore, when we buy MF units at NAV, we are buying at book value. And since we are buying at book value, we are paying the right price of the assets whether it is Rs 10 or Rs.100.There is no such thing as a higher or lower price. NAV and its impact on the returns: We feel that a MF with lower NAV will give better returns. This again is due to the wrong perception about NAV. The NAV is calculated by dividing the aggregate value of the net assets of the scheme by the number of outstanding units under the scheme. The NAV represent the value of the asset held by the fund, valued appropriately, by the liabilities and expenses incurred for the management of the scheme including expenses to cover the duties, taxes and other expenses to cover the deemed realization of the investment.
( M + O) U

NAV formula given by SEBI for calculation is = M=Market value of securities/investment trade O=other asset. L=Total liabilities U=Number of units outstanding

The other formula for calculation of NAV on daily basis is:NAV = Total Market Value of Assets - Liabilitie s Number of Fund' s Units Outstandin g

There is hardly any difference in NAV computation of an open-ended or closeended scheme.NAV can be calculated on total basis as well as per unit basis. Valuation system for NAV: To say the appropriate valuation system for assets is critical one. The listed securities are valued by some funds as per the closing prices at the stock exchange. Care is taken to see that in the case of thinly traded shares or newly listed the valuation is fair. The fixed income securities are valued at cost or on the basis of current yields and maturity value of comparable instruments. The accrued interest is added in case of these securities. All the other assets capable of being valued as above are value at book value. The NAV incorporates both the realized as well as unrealized capital appreciation. The realized capital joins the income stream. As unrealized capital appreciation is dependent upon the market prices, in case of listed securities the NAV could also mob up or down depending upon the market process for underlying securities. Thus, other things being the same, schemes having a regular distribution income by dividends would have a lower NAV than schemes which accumulate the income and do not make annual periodic payments. The longer a scheme has run, the more time it would have to plough back profit an build up reserves and is likely to have a higher NAV than a recent scheme. Performance of a scheme is reflected is its NAV and not in its market quote at a given time. It is also necessary to appreciate that NAV changes when any investment or disinvestment takes place. Similarly, when dividends and bonus are declared, the scheme has to resort to premature booking of profits and realize capital appreciation.

In close ended schemes although investor is free to transact in Stock Exchange his nits, but what he expects is value near to NAV of the unit. Buying and selling forces matter a lot. An investor when sells his unit feels satisfies if he realizes value nearer to NAV. But if realization to seller is below the buyer of unit is at an advantage especially if he wishes to retain the units up till redemption of the scheme. As mentioned fund portfolio is diversified, NAV of a fund is less vulnerable as compared to change in price of share on account of any development in the share market. Further, except the growth funds, other fund NAV does no increase as much as share prices may increase. The percentage of the premium or discount over the NAV shows how fancied mutual funds are in the market; investors in the mutual funds may be lost out because the units of various schemes may trade either below par or because the market price is very low. Pricing of units and NAV: SEBI regulations permit mutual funds to provide for the price at which the units may be subscribed or sold to the independent participants, once initial public offer is over, in the scheme and the price at which such units may at any time be repurchased by the mutual fund. Depending upon NAV, the prices may be termed as offer price or purchase price and bid price, or sale price respectively. The load is adjusted to NAV to calculate the offer price and bid price. To calculate these prices there can be many alternatives. Offer price = NAV per unit + Load Charges Bid price = NAV per unit Realization Calculation of sales load cumulative discount:

With respect to any subsequent purchase of units made by any investor, the sales load applicable to such subsequent purchase may be based on the aggregate amount of units held by such investor, including the amount of the subsequent purchase. Thus, for determining the sales load payable, the following will be aggregated:(a) The amount of the investors subsequent purchase & (b) The aggregate NAV of all units held by the investor. Is NAV Not Ascertainable or Not Available Value: Many reasons can be subscribed to such a state of affair but certainly one reason has been non-reliability or non-validity of NAV as the indicator or worth of mutual fund scheme. Thus the depicted worth has always been doubled. The reason is ask of uni forming in valuing assets. The problem is that there are so many accounting practices in vague, and which are all legally acceptable, thus the NAV of the same mutual fund may be higher or lower depending upon the amounting pattern utilized. The major variation is in NAV on account of the factors like value of assets, whether these are quoted or unquoted, whether these are convertible debenture or money market instruments. Moreover, should the issue cost of scheme or for that matter front end fee is to be amortized over the period of fund or to be written off at the start. Further, what happens when mutual funds do not adopt a valuation policy consistently? All these queries make NAV a doubtful signed for small investors. Not only valuation method but even accounting for income & expenses also influence the NAV. What more information is needed? Regulatory authorities may be doing Performance Evaluation for their own purpose. But to evaluate from the view point of investors, some information is needed. They are:(a) The most critical information which one investor can use us total returns provided by a scheme.

(b) These are all 3 ingredients i.e. NAV at the beginning, at the end and distribution per unit should also be made available in per unit statistics. (c) Mutual funds should also discount highest & lowest market prices & percentage of discount. This is important information. (d) The ratio of administrative expenses to average net asset should also be known to calculate for the investor. (e) Enabling the investors to measure the amount of buying and selling done by management, port folio turnover ratio is most desirable. (f) For an investor, the compounded annual total return on market repurchase price is obviously more important than the return on the NAV. Such information which may be calculated by the concerned mutual fund must also be communicated to investors. (g) In case of open-ended as well as close ended schemes what is cash flow, is another important indicator. Information should also be disclosed as to what is the net cash inflow. Thus, what is cash flow really also need be shared with the investors. Net Asset Value Application: NAVs represent a good way to keep track of price changes of your mutual fund. But you should keep in mind that NAVs are not representative of the performance of the fund, since the NAV decreases every time the fund pays distributions to its shareholders. These are required by law; therefore there is no need for worry if you see a substantial drop in the price of your shares. This can be attributed to the distributions that have been paid to the shareholders, not to a bad performance of the fund. Since mutual funds are required by law to distribute at least 90% of their capital gains annually, you should expect a drop in the NAV at some time. Remember that Net Asset Values Change daily! So, they are not a good performance indicator, since distributions and other factors obscure the exact state of your portfolio.

FREQUENTLY USED TERMS Net Asset Value (NAV): Net Asset value is the market value of assets of the scheme minus its liabilities. The unit NAV is the net asset value of the scheme divide by the number of units outstanding valuation date. Sale Price: The price you pay when you invest in a scheme. Also called offer price. It may include a sale load. Repurchase Price: Is the price at which a close-ended scheme repurchases its unit and it may include a back-end load? This is also called Bid Price Redemption Price: Is the price at which a open-ended schemes repurchases their units and closed ended schemes redeem their units on a maturity. Such prices are NAV related. Sales Load / Entry 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 chase / Back-End / Exit Load: Is a charge collected by a scheme when it buys back the units from the unit holders?

1. FRANKLIN PHARMA FUND

Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Average 26.792675 27.32574 27.897467 28.72524 29.182975 28.97766 29.06742 29.485275 29.28036 28.92016 29.22754 29.85474 28.46976 27.83506 27.89802 27.472 28.26838 28.47042

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Average 29.39024 29.561075 29.24075 29.330875 29.969375 29.50606 28.3982 28.37042 27.87455 25.766225 24.35442 23.26352 21.4059 22.1209 22.087925 20.78422 20.478925 20.66432

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Average 20.9271 21.57708 21.759375 22.3746 22.398975 21.76444 21.34262 21.39685 21.15624 21.52642 21.0706 21.0088 20.68916 20.4817 20.70604 21.1714

Graph 1

S IM P L E M O V IN G A V E R A G E F O R F R A N K L IN P H A R M A F U N D
30 29 28 27 26 25 24 23 22 21 20 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS A ve ra g e

Interpretation:
I came across the Franklin Pharma Fund with simple moving average as a tool and discover that the fund is gradually increasing in the initial weeks of the year and recorded as the maximum value in the 23rd week as 29.969375. It continues the same growth till the 28th week and starts declining slowly and recorded as the minimum value in the 35th week as 20.478925.

SIMPLE MOVING AVERAGE

2. UTI HEALTHCARE SECTOR FUND

Week 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Average 21.105 21.528 22.22 22.972 23.58 23.338 23.3 23.44 23.68 23.702 24.166 24.7 23.22 22.788 22.81 22.128 22.956 23.02

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Average 23.59 23.7575 23.86 23.772 24.082 23.924 22.73 23.044 22.4125 20.64 20.138 19.542 17.3166667 18.186 18.4825 17.636 17.6175 17.614

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Average 17.7725 18.146 18.0225 18.354 18.21 17.93 17.498 17.315 17.016 17.518 17.154 16.91 16.8483333 16.8133333 16.934 17.384

Graph 2

S IM P L E M O V IN G A V E R A G E F O R U T I H E A L T H C A R E S E C T O R F U N D
27 25 23 SIMPLE MOVING AVERAGE 21 19 17 15 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS A ve ra g e

Interpretation:
The UTI Healthcare Sector Fund starts with the value of 21.105 in the first week and slowly increased for further weeks and recorded as highest value in 11th week as 24.166. Later, the value is coming down and recorded as the lowest value in the 50th week as 16.813333.

3. SBI MSFU PHARMA FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Average 28.435 29.78 31.4566667 32.046 32.36 31.69 31.946 33.1575 32.778 32.248 32.148 32.706 30.808 30.074 30.472 29.226 30.14 30.49

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Average 31.512 31.7675 31.5225 31.246 31.692 31.14 28.972 28.016 26.48 23.8025 23.444 22.1 18.0133333 18.982 19.4025 18.158 17.9 17.806

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Average 17.85 18.654 19.0075 19.518 19.5975 18.538 17.836 17.54 17.476 17.994 17.248 16.81 16.12 15.3866667 16.06 16.596

Graph 3

S I M P L E M O V IN G A V E R A G E F O R S B I M S F U P H A R M A F U N D
35 33 31 29 27 25 23 21 19 17 15 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS A ve ra g e

Interpretation:
The SBI MSFU Pharma Fund signals the growth pattern till the 24th week with the maximum value of 33.1575 and there is a sudden fall from 25th week with the lowest value of 15.3866667 in the 50th week.

SIMPLE MOVING AVERAGE

4. JM HEALTHCARE SECTOR FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Average 17.4725 17.85 18.466667 19.008 19.4425 19.23 19.268 19.3125 19.246667 19.185 19.52 19.988 18.92 18.404 18.524 17.996 18.484 18.79

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Average 19.422 19.4225 19.312 19.284 19.55 19.31 18.202 17.92 17.08 15.4375 15.052 14.58 12.763333 13.246 13.375 12.25 11.8275 11.608

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Average 11.5625 12.086 12.23 12.48 12.5475 12.018 11.64 11.155 10.976 11.48 11.222 10.995 10.556 10.293333 10.488 10.814

Graph 4

S IM P L E M O V IN G A V E R A G E F O R J M H E A L T H C A R E S E C T O R F U N D
22 20 18 SIMPLE MOVING AVERAGE 16 14 12 10 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS A ve ra g e

Interpretation:
The JM Healthcare Sector Fund signals the growth in the initial weeks and followed the same pattern till the 24th week. It is recorded as the highest average of 19.988 in 12th week and progressively declining from then with the minimum value of 10.488 in 51st week.

5. FRANKLIN PHARMA FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Relative Strength Index 27.78 20.1 33.13 26.75 21.98 40.72 55.32 18.61 33.88 33.48 49.52 55.16 27.82 27.72 22.43 39.96 38.79 40.24

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Relative Strength Index 25.99 30.26 25.5 15 38.56 48.58 36.75 41.32 40.37 73.54 57.65 71.18 35.27 19.54 51.02 43.89 14.07 36.66

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Relative Strength Index 24.89 43.75 27.76 52.24 49.15 23.74 38.48 9.51 11.45 22.22 32 34.19 28.64 16.11 25.53 37.82

Graph 5

R S I F O R F R A N K L IN P H A R M A F U N D
69 59 49 RELATIVE STRENGTH INDEX 39 29 19 9 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 6 71 81 92 02 12 2 32 42 52 62 72 82 9 03 13 23 33 43 53 6 73 83 94 04 14 24 34 4 54 64 74 84 9 05 15 2 1 3 3 5 W EEKS R e l a t i v e S t r e n g t h In d e x

Interpretation: Relative strength index values ranges from 0-100. Values above 70 indicate overbought condition and values below 30 indicate oversold condition. Relative strength index signals that the Franklin Pharma Fund is majorly below 30. The RSI values are greatly fluctuating at the initial weeks and recorded as maximum value as 73.54 in the 28th week. There is a sudden fall then onwards with the minimum value of 9.51 in the 44th week.

6. UTI HEALTHCARE SECTOR FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

RSI 18.7 23.08 26.47 23.08 28.57 41.86 48.19 20.63 42.86 31.97 49.24 51.69 25.93 35.9 24.24 46.52 32.43 31.97

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Average 21.88 15.97 28.57 13.79 26.47 35.9 40.12 26.47 21.88 65.52 52.61 69.33 31.03 30.07 42.2 41.86 21.88 18.7

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Average 21.26 31.97 23.66 31.03 34.64 15.25 36.31 18.03 12.28 21.88 30.56 21.26 16.67 15.25 15.25 38.27

Graph 6

RSIFOR UTIH EALTHCARE SEC TOR FU ND

70 60 50 RELATIVE STRENGTH INDEX 40 30 20 10 1 2 3 4 5 6 7 8 9 1 01 1 21 31 41 51 61 71 81 92 02 12 2 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS RSI

Interpretation:
Relative strength index values ranges from 0-100. Values above 70 indicate overbought condition and values below 30 indicate oversold condition. Relative strength index signals below 30 for the UTI Healthcare Sector Fund. The fund is regarded as the down trend with the positive sign. It is recorded as 65.52 as the maximum value in the 28th week and 12.28 as minimum value in the 45th week.

7. SBI MSFU PHARMA FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 RSI 18.03 53.92 56.71 13.79 26.47 55.95 68.35 35.48 45.36 46.24 50 63.5 42.53 41.18 26.47 57.08 40.12 53.7 Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 RSI 37.5 25.37 31.51 20 40.12 50.98 56.33 71.35 52.61 71.83 65.87 79.04 27.01 43.82 50.98 43.18 25.93 26.47 Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 RSI 24.81 48.72 37.11 47.37 60 32.89 48.72 21.26 32.43 21.26 27.54 14.53 55.36 20.63 27.01 31.51

Graph 7

RSIFOR SBIM SFU PHARM A FUND

75 68 61 54 47 40 33 26 19 12 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 4 54 64 74 84 95 05 15 2 W EEKS RSI

Interpretation:
Relative strength index values ranges from 0-100. Values above 70 indicate overbought condition and values below 30 indicate oversold condition. Relative strength index signals that the SBI MSFU Pharma Fund is majorly below 30. The RSI values are greatly fluctuating at the initial weeks and recorded as maximum value as 79.05 in the 30th week and minimum value of 13.79 in the 4th week.

RELATIVE STRENGTH INDEX

8. JM HEALTHCARE SECTOR FUND

Weeks 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

RSI 25.93 14.53 8.257 30.07 12.28 21.26 13.79 19.35 22.48 42.2 18.03 47.09 41.18 21.88 26.47 11.5 21.26 15.97

Week 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

RSI 44.13 45.95 25.37 19.61 62.12 52.38 67.11 21.87 41.86 36.71 37.5 23.08 20.63 15.97 15.25 12.28 30.56 27.54

Week 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

RSI 4.762 15.97 27.01 24.81 45.36 42.53 20 36.71 28.06 43.82 37.11 24.81 22.48 29.08 18.03 13.04

Graph 8

R SI FOR JM H EALTH C AR E SEC TOR FU N D

63 53 RELATIVE STRENGTH INDEX 43 33 23 13 3 1 2 3 4 5 6 7 8 9 1 01 11 21 31 41 51 61 71 81 92 02 12 22 32 42 52 62 72 82 93 03 13 23 33 43 53 63 73 83 94 04 14 24 34 44 54 64 74 84 95 05 15 2 W EEKS RSI

Interpretation:
Relative strength index values ranges from 0-100. Values above 70 indicate overbought condition and values below 30 indicate oversold condition. Relative strength index signals that the JM Healthcare Sector Fund is majorly below 30. The RSI values are greatly fluctuating at the initial weeks and recorded as maximum value as 67.11 in the 25th week and minimum value of 11.5 in the 16th week.

FINDINGS
It is studied that the schemes of Mutual funds are confined to only certain sectors and the researcher mean to expand to the other sectors also.
It is observed that the selection processes of the funds are only done by the fund

manager. If the fund manager is not an efficient person, the investor has to bare the loss
The researcher observed that the fund rises at the beginning of the year and

fluctuate at the middle of the year and slowly declines in the end It is observed that the Aroon Indicator and Stothatic Oscillator show the positive sign in all 5 companies which gives the indication to invest. It is also observed that Relative Strength Index for Reliance Pharma Fund is Strong in five companies.
It is observed that the MACD for FRANKLIN, and UTI is signaling the positive

sign which indicates the bullish period for the price plot. The funds JM and SBI signal negative sign which indicates the bearish period.
It is analyzed that the funds are raising from the initial stages and recording as the

maximum value in 28th -30th week and declining from thereafter where the minimum value is recorded in 45th -50th week. It is opined that, though there are many benefits associated with the mutual funds they are enjoyed when the fund manager come across them in a right way.

Suggestions
It is suggested that the Asset management companies to introduce more

schemes to all the sectors that everyone can utilize its fruitful results. It is suggested that the decision making should not left only to the fund manager. The investor must gain some knowledge over the invested funds and involve in helping the manager to avoid losses.

It is suggested that, though there are many fluctuations in the fund it is due to the market conditions only. The funds are showing the positive sign to invest darely. The fund manager is suggested to have more concentration on the end week of the year as they are showing the declining trend.

It is suggested to the Asset management companies to recruit not only the experienced persons but also the candidates who think in a logical way according to the situation as the fund manager.

APPENDIX-A
FRANKLIN PHARMA FUND NAV VALUES April 26.6926 26.911 27.0446 26.7735 27.2067 27.3053 27.4615 27.3365 27.3154 27.65 27.8969 28.1455 28.6017 28.7172 28.6486 28.6904 28.9669 29.0494 29.0869 29.2633 May 29.3317 29.3812 28.9997 28.9038 28.9117 28.6931 28.5092 28.6756 29.0177 29.3858 29.748 29.5992 29.5705 29.4008 29.3706 29.1544 29.0283 29.4348 29.2481 29.5406 June 29.1575 29.1131 28.749 28.9221 28.6566 28.7186 29.0012 29.2377 29.4778 29.701 30.0774 30.3382 30.023 29.7243 29.1082 28.5512 28.3477 28.5612 28.6377 28.2522 27.9865 July 27.6065 27.9879 27.7935 27.7974 27.7406 27.7613 28.0292 27.9784 27.9812 27.8905 27.3955 27.2242 27.3544 27.4956 27.9143 28.1905 28.5436 28.4073 28.2905 28.3347 28.134 28.5324 28.5482 August 28.8075 29.2741 29.4507 29.2547 29.3699 29.6059 29.8051 29.5307 29.5275 29.3761 29.3708 29.174 29.3802 29.038 29.1558 29.2586 29.3089 29.3209 29.4351 29.7187 September 29.6971 29.9874 30.2496 29.8684 29.9647 29.7066 29.6243 29.2147 29.0232 28.5655 28.3926 28.1796 28.1359 28.717 28.6442 28.4299 28.4917 28.3463 27.9376 27.5131 27.9264

October 28.1898 27.8687 26.8735 26.5796 25.5245 24.0908 24.5238 25.0413 24.5489

November 22.218 22.2211 22.1759 21.9782 22.0093 22.6044 22.2549 21.9383 21.5585

NAV VALUES December January 20.4387 22.6369 20.4795 22.9538 20.4958 22.8498 21.0189 22.8326 20.8874 22.0298 20.7733 21.8835 21.1014 21.8664 20.9399 21.6601 20.8971 21.9136

February 21.167 21.1088 21.1118 21.1525 21.2381 21.3892 21.5517 21.4289 21.5859

March 20.8666 20.6895 20.8126 20.6119 20.4652 20.3983 20.4565 20.5903 20.6858

23.9781 23.6827 23.9223 24.2602 23.5587 22.7853 21.7898 21.137 21.3928 21.6849

21.1903 20.9594 20.7879 20.4077 20.5761 20.5331 20.394 20.4339 20.5578

21.2797 21.6711 21.3277 21.5487 22.0579 22.0358 21.6527 21.6558 21.685 21.8617 22.0876 22.3347

21.6023 21.7762 21.6412 21.5774 21.4146 21.0144 21.0667 21.3535 21.4586 21.3815 21.3938

21.6756 21.3156 21.1128 21.0246 21.0462 20.8494 20.7168 20.9343 21.2364 21.1477

20.4938 20.8366 20.836 20.678 21.1077 21.0294 20.9777 21.1563 21.5859 21.701 22.4516

APPENDIX-B
UTI HEALTHCARE SECTOR FUND

April 21.04 21.13 21.24 21.01 21.42 21.47 21.72 21.52 21.51 22.02 22.26 22.38 22.76

May 23.7 23.67 23.39 23.42 23.26 22.95 22.93 22.98 23.21 23.52 23.86 23.59 23.48

NAV VALUES June July 23.91 22.54 23.83 22.96 23.44 22.65 23.76 22.69 23.57 22.67 23.66 22.63 24.09 22.95 24.16 22.93 24.29 22.87 24.63 22.74 24.93 21.87 25.06 21.95 24.99 22

August 23.21 23.48 23.59 23.51 23.61 23.76 23.82 23.63 23.79 23.79 23.72 23.82 24.12

September 24.04 24.22 24.25 24.01 24.2 24.05 24.08 23.65 23.64 23.1 22.68 22.51 22.43

23.04 23.06 22.96 23.04 23.34 23.54 23.74

23.36 23.33 23.34 23.39 23.79 23.79 24.09

24.53 23.99 23.4 23.11 23.2 23.34 23.05 23.1

22.08 22.68 22.86 23.16 23.08 23 23.04 22.74 23.09 23.02

23.78 23.78 23.84 23.79 23.77 23.68 23.89

22.93 22.97 23.14 23.23 23.01 22.87 22.29 22.45

October 22.57 22.34 21.45 21.06 20.5 19.55 19.91 20.75 20.28 20.11 19.64 20.02 20.36 19.91 19.32 18.1 17.18 17.16 17.61

November 17.96 17.94 18.34 18.32 18.37 18.89 18.55 18.33 18.16 18.01 17.84 17.56 17.29 17.48 17.53 17.49 17.68 17.77

NAV VALUES December January 17.61 18.52 17.6 18.55 17.51 18.45 17.74 18.42 17.61 17.92 17.62 18.05 17.89 17.97 17.84 17.84 17.74 18.02 17.92 17.84 18.23 17.98 18.04 17.84 18.15 17.65 18.39 17.36 18.21 17.37 17.98 17.27 17.9 17.38 18 17.4 18.1 17.3 18.19 17.18 18.41

February 16.98 17.03 17.01 16.96 17.1 17.34 17.59 17.54 17.62 17.5 17.37 17.2 17.16 17.11 16.93 16.79 16.96 16.98 17.06

March 16.88 16.68 16.88 16.75 16.84 16.7 16.88 16.86 16.84 16.85 17.02 17 16.96 17.24 17.23 17.16 17.51 17.78 17.85 18.27

APPENDIX-C
SBI MSFU PHARMA FUND NAV VALUES June July 32.6 29.64 32.64 30.22 32.15 29.91 32.07 30.34 31.78 30.37 31.61 30.3 31.62 30.54 32.37 30.49 32.53 30.66 32.61 30.21 33.3 29.12 33.2 28.97 33.24 28.88 32.23 28.95 31.56 29.82 30.79 29.88 30.39 30.49 31.13 30.23 31.1 30.28 30.63 30.38 30.26 29.73 29.64 30.82 30.63 NAV VALUES December January 17.64 19.81 17.68 19.98 17.77 20.26 18 20.28 17.94 19.07 17.87 18.78 18.02 18.61 17.69 18.53 17.82 18.83 18.33 18.34 18.81 18.38

April 28.47 28.35 28.57 28.35 29.08 29.84 30.05 29.68 30.25 30.71 31.64 32.02 32 31.98 32.02 32.09 32.14 32.14 32.46 32.34

May 32.5 32.38 31.68 31.7 31.58 31.11 30.96 31.39 31.67 32.59 33.12 33.02 33.52 33.12 32.97 32.38 32.42 32.67 33.25 33.17

August 30.89 31.29 31.34 31.44 31.6 31.89 31.97 31.69 31.78 31.63 31.42 31.35 31.81 31.51 31.38 31.26 31.2 31.13 31.26 31.7

September 31.48 31.79 32.08 31.41 31.64 31.45 31.28 30.73 30.6 29.67 29.19 28.64 28.38 28.98 29.12 28.5 28.17 27.66 26.63 25.87 26.53

October 26.98 26.54 24.87 24.43 23.59 22.32 22.76 24.64 23.8 23.31 22.71

November 18.52 18.99 19.3 19.15 18.95 19.92 19.57 19.24 18.88 18.54 18.3

February 17.43 17.41 17.31 17.44 17.79 17.98 18.18 17.91 17.93 17.97 17.38

March 16.68 16.39 16.33 15.76 15.44 15.32 15.29 15.55 15.98 15.97 16.29

23.1 23.54 22.54 21.55 19.77 18.24 17.93 17.87

18.17 17.78 18 18.03 17.68 17.98 17.91

18.28 18.62 19.23 19.41 18.88 18.92 18.82 19.08 19.24 19.48

18.31 18.18 17.84 17.36 17.49 17.55 17.63 17.36 17.62

17.3 17.28 17.28 17 16.8 16.91 16.79 16.74

16.14 15.92 16.46 16.48 16.51 16.61 16.92 17.01 17.58

APPENDIX-D
JM HEALTHCARE SECTOR FUND April 19.55 19.43 19.23 19.11 19.06 19.01 19.04 18.82 18.64 18.53 18.23 17.84 17.8 18 17.83 17.78 17.45 17.56 May 19.55 19.34 19.31 18.97 18.97 19.16 19.2 19.34 19.55 19.74 19.46 19.15 19.03 18.96 18.99 19.13 19.24 19.21 NAV VALUES June July 18.6 18.88 18.69 18.93 18.98 18.52 19.01 18.66 18.9 18.62 19.02 18.54 19.44 18.63 19.84 18.38 20.2 18.25 20.27 17.93 20.19 17.89 19.92 17.86 19.63 17.83 19.48 18.47 19.39 18.61 19.18 18.51 19.09 18.61 19.18 18.42 August 19.44 19.26 19.18 19.24 19.3 19.31 19.23 19.42 19.3 19.3 19.35 19.42 19.39 19.53 19.41 19.41 19.41 19.51 September 17.15 17.01 17.51 17.84 18.02 18 18.23 18.27 17.9 18.08 18.28 18.48 18.99 19.04 19.48 19.45 19.59 19.44

17.47 17.41

19.58 19.56

19.21 19.26 19.34

18.47 18.46 18.28 18.45 18.23

19.37 18.96

19.74 19.58 19.44

NAV VALUES October 12.77 12.77 12.75 13.56 14.37 14.9 15.2 14.87 14.71 15.02 15.27 15.68 14.58 14.28 15.17 15.98 16.32 16.94 17.22 November 11.76 11.81 11.79 11.95 12 11.89 12.25 12.43 12.68 12.96 13.3 13.43 13.81 13.2 13.26 13.44 13.23 13.1 December 12.47 12.27 12.17 12.18 12.15 12.16 12.43 12.33 12.06 12 12.2 11.84 11.62 11.5 11.63 11.5 11.65 11.75 11.48 11.57 11.59 January 11.05 11.06 11.17 11.34 11.26 11.39 11.71 11.85 11.99 12.09 11.97 12.14 11.92 11.97 12.1 12.15 12.95 12.99 12.87 12.62 February 11 11.04 11.04 10.9 11.05 11.24 11.22 11.28 11.32 11.52 11.51 11.49 11.52 11.36 11.16 10.94 10.93 10.93 10.92 March 11.66 11.27 11.04 10.83 10.69 10.76 10.75 10.5 10.55 10.57 10.42 10.4 10.34 10.29 10.25 10.36 10.4 10.62 10.61 10.79

CONCLUSION
The analysis is worked out on the basis of technical analysis tools such as Relative Strength Index, MACD, Aroon Indicator, Simple Moving Average and Stothatic Oscillator. The study considered Growth scheme of mutual funds (FRANKLIN, UTI, SBI, JM FINANCIAL) to analyze and to suggest the investors to make appropriate decisions. The study is carried with analysis through NAV values of the selected Pharma funds to know the consistency in returns to the investors. This study reveals that the investors who invest in Pharma company funds can acquire high returns with minimum risk. The analysis through simple moving average and the Aroon indicator reveals the maximum and minimum values and their period of ups and downs. The study of the funds through the MACD reveals that the Franklin, and UTI funds are indicating the positive sign to invest in funds which has the bullish period. The funds SBI and JM signal the negative sign to invest which has the declining period. The Stothastic oscillator analysis and relative strength index reveals buying and selling conditions to the investors. These two indicate that all the funds that are selected for the study show the buying option to the investors. Thus the study is to ascertain the consistency of the returns to investors.

BIBLIOGRAPHY
Introduction Industry profile Company profile Data analysis Mutual funds of India - Nirmala Tripathy www.google search.com www.angeltrade.com www.mutualfundindia.com, www.amfiindia .com, www.bluechip.co.in