2013

AN INTERIM REPORT
ON

Study Of Two Asset Classes Equity and

Gold in the context of Mutual Fund
Schemes
At

HDFC AMC
BY
ANMOL KARNANI
12BSPHH010161

Interim report is submitted in partial fulfillment of the

requirements of MBA
Program of IBS, Hyderabad.

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SUBMITTED TO:

FACULTY GUIDE

COMPANY GUIDE

Dr. Amlan Ghosh

Mr. Loknath Agarwalla

DATE OF SUBMISSION
03/05/2013

Abstract of work done

India is a developing country and the growth of the economy is only possible
through large scale investment into manufacturing and production sector
which will ensure not only self dependency but will also reduce the amounts
of our imports and Current and Capital Account Deficits. Large investment
into these sectors would mean large number of people investing money in
setting up plants and industry and development of stock markets and listings
of the shares of the companies on the stock exchanges. With a desire to see
ones own money making more money, people invest into shares of
companies, and for that is required help; which is basically the prime feature
of the Mutual Fund Industry wherein people from diverse backgrounds having
little or no knowledge about share prices or stocks but having money to
invest come together for a common goal and pool in their funds to form what
is known as Mutual Funds.
The stock vs. mutual funds has always been a tough choice for the investors.
The question of whether the money should be left alone to wherever it goes
or to let a professional manage it wisely today is even more critical today,
because of this uncertain economy and volatile market make the rewards for
success and cost of failure very high. The choice and answer of persons vary
because of a number of reasons citing from the amount to be invested,
knowledge of financial markets and the amount of time and effort required to
be put in.
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It is also evident that each approach has both advantages and

disadvantages, On one hand there is a diversified portfolio and the security
of having a experienced stock picker working full time to manage the funds
and on the other hand having less control over the stock chosen and also on
the gains realized from it when comes to taxation. Also extra care has to be
taken when managing stocks as one has to be alert to the changing market
conditions.
The existing Behavioral Finance studies undertaken are very few in number
and very little information is available about investor perception, attitudes
and preferences apart from it being fragmented.
In India, one of the early attempts was made by NCAER when a survey of
households was done to understand the motivation and attitude of savings of
individuals. Another NCAER study analyzed the structure of the Indian capital
markets and presented the attitudes and views of individual shareholders.
SEBI NCAER Survey (2000) was carried out to estimate the number of
households and investment preference for equity as well as other Savings
Instruments.
Households preference for savings instruments match their risk perception
which is clearly visible by the data that over 30% of households apparently
lack awareness about markets; and compared with low income groups, the
higher income groups have higher share of investments in Mutual Funds,
signifying that MFs have still not become truly the investment vehicle for
smaller investors.
But, with the development of markets, rising awareness about investment
avenues, higher savings and increasing risk appetite, Mutual Funds in India
are becoming a more favored choice today.
Mutual funds at first drew the public's attention in the years of 1980s and
'90s when the Mutual Fund investments hit all time record highs and the
investors saw incredible or almost unimaginable returns on the amounts
invested by them. However, the idea of pooling money/assets for the
purpose of investment has been around for a very long time. The Mutual
Fund Industry is a very attractive avenue for investment because not only
does one get returns on the amount invested over time to time. But one also
achieves the investment purpose which may be anything from capital
building to income generation.

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When we look at the early start or evolution of this investment vehicle, from
its roots in the Netherlands long back ago in the 18th century to its present
status as a steadily growing, international industry having over thousands of
Fund Schemes with fund holdings accounting for trillions of dollars in the
United States alone, we see that there lies a greater growth of this industry
in the times to come and the Silver Lining is yet to be achieved.

Despite the shocks in the year of 2003 on the mutual fund scandals and the global financial crisis
of 2008-2009, the story of Mutual Funds is far from being over. On the contrary, the industry is
still growing. In the U.S. alone, there are more than 10,000 mutual funds, whereas there are over
1200 Mutual Fund Schemes floated by 44 Mutual Fund houses in India, and if one accounts for
all share classes of similar type of funds, then the fund holdings are measured in trillions of
dollars. Despite the launch of separate accounts, exchange-traded funds (ETFs) and other
competing products, the mutual fund industry remains healthy and fund ownership (Asset under
Management) continues to grow.
In this project, the study is undertaken to analyze Two Asset Classes Equity and Gold based on
Mutual Fund Schemes. The Equity based Funds belong to the large cap sector and have been
chosen while considering the following criterias:

The funds compared for Equity Asset Class have been present for over a period of at least
5 (five) years each.

Each of the funds selected falls under the category of Large Cap Funds and has an AUM
(Asset under Management) of over Rs. 2000 crores each.

Each of them is either a 4 star or 5 stars Fund which means they fall under the Low or
Below average risk category and above average or high returns category.

The funds chosen for this project are:

HDFC Top 200 Fund with an AUM of Rs. 12016.83 crores.

Franklin India Bluechip with an AUM of Rs. 5150.18 crores.

Birla SL Frontline Equity with an AUM of Rs. 3043.64 crores

DSP Blackrock Top 100-Equity Fund with an AUM of Rs. 3529.71 crores
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L & T Equity Fund with an AUM of Rs. 2398.60 crores

UTI Mastershare with an AUM of Rs. 2321.94 crores

A comparison of the above mentioned funds will be done amongst each other. Apart from it,
Equity as an Asset Class in respect of Mutual Funds and Gold as an Asset Class in respect of
Mutual Funds will be studied which includes:

Gold exchange Traded Fund

Gold-Fund of Fund

After this, a comparison would be made among a better investment option between Equity and
Gold as an Asset Class of Mutual Fund Schemes and hence a conclusion would be drawn.
This report seeks to describe the current state of the industry, from the perspective of a basket of
selected Mutual Fund schemes and Gold as an investment avenue. It also seeks to draw a
comparison of the scheme with their corresponding benchmarks to evaluate their performance
and generalize a report of performance of their corresponding houses based on these schemes.

Introduction
A Mutual Fund is a pool of funds formed by various people coming together
and joining for a common purpose of an investment avenue to generate
returns in the long run. The Mutual Fund is offered by an Asset Management
Company (AMC) which is managed by a Fund Manager who is a technical
person having expertise and skill required to make investment decisions of
various companies. To hedge or protect the money of the investors, the
investment is not made into one stock only; instead the amount to be
invested is divided among the shares of various companies in various sectors
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so that in case of some industry not performing well, the investors money is
safe as some other company may give great returns.
The money so collected is then invested into the capital market instruments such as various kinds
of shares, debentures, gold and other securities. The income thus earned from such investments
and the appreciation of capital realized is shared by its unit holders in the proportion of the units
held by them. Thus it is the most suitable investment option for the common man as it provides
an opportunity to invest into a well-diversified, professionally managed basket of securities at a
relatively low cost. Mutual Funds thrive at minimizing the risk and maximization of returns
through diversification.

Mutual Funds can be classified into various categories and based on various parameters.

The broad classifications are:

On the basis of structure:

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Open Ended Schemes

Open Ended Funds have been in the market from long time back. Such schemes do
not have any particular maturity date and investment date. Usually investors can enter
and exit from these schemes at any particular time which is one of the most beneficial
feature of such schemes.

Close Ended Schemes

Close-ended mutual fund Schemes have a fixed or stipulated
maturity period wherein the investor can invest directly in the
scheme which is at the time of the initial issue and thereafter units
of the scheme can be traded (bought/ sold) on the stock exchanges
where the scheme is listed. The market prices at the stock
exchange could vary from the schemes NAV on account of demand
and supply in the market, expectations from unit holders and also
other market factors. Usually a characteristic feature of close-ended
schemes is that they are generally traded at a discount to NAV (Net
Asset Value); but closer to maturity date, the discount narrows.

Interval Schemes
Interval Schemes are those schemes that combine the features of
both open-ended and close-ended schemes. The units of such
scheme may be traded on the stock exchange or they may be open
for sale or even for redemption during pre-determined intervals at
NAV (Net Asset Value) related prices.

On the basis of Investment Objective:

Income Schemes

Growth Schemes

Money Market Schemes

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Tax Saving Schemes

Offshore Funds

Special Schemes like Index Schemes

Some popular objectives of a mutual fund are:

Fund Objective:

Fund Investment in:

Equity (Growth)

Only in stocks

Debt (Income)

Only in fixed-income securities

Money Market (including

Gilt)

In short-term money market instruments (including government securities)

Balanced

Partly in stocks and partly in fixed-income securities, in order to maintain a

'balance' in returns and risk

On the basis of nature of funds:

Equity based Funds

Debt based
Funds OF MUTUAL FUNDS SCHEMES Schemes
TYPES

Hybrid/Balanced Funds

By Structure

By Investment Objective

Open Ended Schemes

Close Ended Schemes
Interval Schemes

Other Schemes

Tax Saving Schemes

Special Schemes

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Growth Schemes
Balanced Schemes
Income Schemes
Money Market Schemes
Sector Specific Schemes
Index Schemes

Types of Schemes:
Equity Schemes
Equity schemes invest the amounts that they collect from investors into
stocks of various companies listed on the stock exchanges as well as those
that are unlisted. These schemes are also called Growth Schemes because
the idea behind such investments is to earn a high return through the rise in
the value of the investment. There is a general saying in the Indian Mutual
Fund Industry that a person should invest (100- current age) % of his
investments/savings into equity based funds as the person has a longer time
horizon for the investment.
Sectoral Schemes
These are a variant of equity oriented schemes where the risk for the
investor is higher than the diversified equity schemes. The funds of such
schemes are invested into the shares of a particular sector only or it could be
in companies that comply with a particular theme only. The amounts
collected by the Fund houses are deposited into one particular sector on
which the fund is based. Thus, there lies a significant risk of the investor if
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that particular sector does not perform well. But as is a saying Profit is the
reward for risk taking, therefore there is also greater chance that the
particular sector might do exceptionally well and the returns are more than
expected.
Equity linked savings scheme (ELSS)
Equity linked savings schemes are also known as tax savings schemes.
These are like diversified equity schemes in terms of their portfolio
composition but they give investors a tax benefit that other schemes do not.
Investors looking at earning a higher return on their investments and save on
the tax at the same time opt for such schemes. Unlike normal equity
schemes, ELSS carry a three year lock in period. If any withdrawal is made
before the lock-in period, then exit loads are charged to the amount of funds.
Index Funds
Index funds are known as passive schemes because here the fund manager
does not have to take active investment decisions regarding selection of
companies for investment. The corpus of these schemes is invested in such a
manner that it mimics an index that is being tracked by the fund. The
movement of the fund is almost as similar to the movement of the index. For
example, if the index goes up, then the NAV of the scheme goes up and vice
versa
Income Schemes
Income schemes invest their assets into debt instruments that are either of
medium to long term in duration. They main distinguishing factor of these
schemes is that they are different in terms of their investment objective.
They only seek to generate some income rather than building up capital. For
e.g. bonds, debentures, government securities and other debt instruments.
Liquid Schemes
Liquid schemes are meant for very short term investors where the investor
horizon ranges from a couple of days to around a week or slightly more. The
liquid schemes invest the money into overnight call money market and
extremely short term options. Such schemes are majorly used by corporate
when they have huge sums of money lying idle for a shorter period of time.
Gilt Schemes
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Gilt schemes invest their assets only in government securities. There can be
short term or long term schemes. These schemes have no credit risk which
means that there is no possibility of the investments of the scheme turning
out to be worthless because the issuing authority is the government itself.
They are most recommended for people in the higher age groups as they are
mostly interested in getting some fixed returns rather than taking risk by
investing a major chunk in equity schemes.
Balanced Schemes
Balanced schemes are a mixture of equity and income schemes
whereby they hold both equities and debt in their portfolio. Balanced
schemes need to hold an average 65% of assets as equity. These schemes
are meant for those who want to earn some returns on their investment but
would like a small element of stability built into the scheme. The major
advantage is that a portion of the savings will yield almost fixed and
guaranteed returns, thus the investor prefers such type of schemes.
Fixed Maturity Plans (FMP)
FMPs are plans that are in operation for a short period of time but they act
like a quasi fixed deposit for the investors. This is because the fund manager
selects the securities in the portfolio in such a manner that it matures on the
same date as that of the scheme. This results in the situation where the
investor will get a return near the yield of the investments when they were
purchased because of reduced risk in the investment. Unlike open ended
schemes, wherein the investor can invest and exist at almost any time
during the investment period, here such option is not available. These funds
mature after a particular time period.
Fund of Funds
This scheme invests its funds into another mutual fund scheme and is hence
known as fund of funds. Several funds invest their corpus into schemes of
their own fund house while another variety of fund of fund schemes invest
the amount into schemes from other fund houses too. Fund of Funds is
basically a feeder fund for the main funds. The underlying asset is the same
for both the main fund scheme and Fund of Fund scheme.
Offshore Funds
Offshore funds are specializing in investing in foreign companies or
corporations. These funds basically have non-residential investors and are
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regulated and guided by the provisions of the foreign countries in which they
are registered. These funds are regulated by RBI directives and certain
changes are introduced from time to time as and when necessary.
Tax-Saving Schemes
Tax-saving schemes offer attractive tax rebates to the investors under tax
laws prescribed from time to time to promote investments into such
schemes. Under Sec.88 of the Income Tax Act, any contributions made to any
Equity Linked Savings Scheme (ELSS) is eligible for rebate @ 20% for a
maximum investment on Rs10,000 per financial year which lures the
investors to invest in such schemes.
Money Market Schemes
Money Market Schemes aim to provide easy liquidity, preservation of capital
invested 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. They are invested for shorter
durations.

Mutual Fund Industry

The Mutual Fund Industry has a worldwide penetration of about 70% of GDP
in US, 60% of GDP in France and over 35% in Brazil and less than even 5% of
the GDP of India. Mutual funds as an investment tool has gained great
popularity in the current times, this is clearly reflected in the robust growth
levels of Assets under Management (AUM). Despite this growth, the level of
penetration of Mutual Funds in India is very low as compared to other global
economies.
The mutual fund industry started in India in the year of 1963 with the
establishment of Unit Trust of India (UTI), which was a combined initiative of
the Indian Government and Reserve Bank of India.
A new trend or new era started in the Indian industry with the entry of
private sector funds in Mutual Funds in 1993, allowing the Indian investors a
wider choice of fund schemes. The first private sector mutual fund company
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was registered in July 1993, the erstwhile Kothari Pioneer (now merged with
Franklin Templeton). The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
In the last few years, households income levels have grown significantly,
leading to commensurate increase in households savings. Household
financial savings (at current prices) registered growth rate of around 17.4%
on an average during the period FY04-FY08 as against 11.8% on an average
during the period FY99-FY03. The considerable rise in households financial
savings, point towards the huge market potential of the Mutual fund industry
in India.
Besides, SEBI has introduced various regulatory measures in order to protect
the interest of small investors that augurs well for the long term growth of
the industry. The tax benefits allowed on mutual fund schemes (for example
investment made in Equity Linked Saving Scheme (ELSS) is qualified for tax
deductions under section 80C of the Income Tax Act) also have helped
mutual funds to evolve as the preferred form of investment among the
salaried income earners.
Besides, the Indian Mutual fund industry that started with traditional
products like equity fund, debt fund and balanced fund has significantly
expanded its product portfolio. Today, the industry has introduced an array of
products such as liquid/money market funds, sector-specific funds, index
funds, gilt funds, capital protection oriented schemes, special category
funds, insurance linked funds, exchange traded funds, etc. It also has
introduced Gold ETF fund in 2007 with an aim to allow mutual funds to invest
in gold or gold related instruments. Further, the industry has launched
special schemes to invest in foreign securities. The wide variety of schemes
offered by the Indian Mutual fund industry provides multiple options of
investment to common man.
The Mutual Fund Industry has another regulator in India, namely Association of Mutual Funds in
India (AMFI) which is the body under which the distributors of Mutual Funds have to get
themselves registered to carry out distribution of Mutual Fund Schemes.

The Mutual Fund Industry is currently going through a transformation stage. On side we see
rigid and stringent norms of the governing bodies and on the other side we see the economy as
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whole still jostling out to recover from the world wide economic and financial crisis of 20082009.

The Indian Economy has a 7.4% growth rate of Gross Domestic Product (GDP) and has great
potential to reach into double digits backed by a strong support.

Mutual Fund From the Beginning

The historians are uncertain of the actual origins of the investment funds; some of them
cite the close-ended investment schemes by a couple of companies launched
in Netherlands in the year of 1822 by the then King, King William. Some others are of
the opinion that the first mutual funds refer to a Dutch Merchant named Adriaan van
Ketwich whose Investment Trust started in the year of 1774 may have given the idea to
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the king. Ketwich probably made people realize that by diversification, the Investment
Trust would increase the appeal of investments to small investors with minimal capital.
Ketwich's fund named, Eendragt Maakt Magt, essentially means that "Unity creates
Strength". The next major wave of investment avenues close to mutual funds included an
Investment Trust launched in Switzerland in the year of 1849, which was then followed
by similar such vehicles established in Scotland in the year of 1880s.

This idea of pooling resources and risk diversification using closed-ended investments
soon took form in Great Britain and also to France, ultimately making its way to United
States in the years of 1890s. Boston Personal Property Trust was the first closed-ended
fund formed in 1893 in the U.S. Thereafter, the creation of Alexander Fund in
Philadelphia in the early 20th century (1907) was an important step in the evolution
towards what we today know as the modern Mutual Fund. The Alexander Fund contained
features of semi-annual issues and also allowed investors to make withdrawals on
demand as and when required.

The creation of Massachusetts Investors' Trust in Boston, Massachusetts, heralded the

arrival of the modern mutual fund in the year of 1924. The fund went public in 1928,
eventually spawning the Mutual Fund firm known today as the MFS Investment
Management. State Street Investors' Trust was then the custodian of the Massachusetts
Investors' Trust. Later, State Street Investors started its own Mutual Fund in 1924 with
Richard Paine, Richard Saltonstall and Paul Cabot. Saltonstall was also affiliated with
Scudder, Stevens and Clark, an outfit that would launch the Worlds first no-load fund in
the year of 1928. 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 not only the
stocks but also the bonds, as opposed to direct merchant bank style of Investments in
trade and business.

By 1929, there were 19 open-ended mutual funds competing with nearly 700 closed-end
funds. With the stock market crash of 1929, there was an era of change as highlyleveraged closed-end funds were wiped out and small open-end funds managed to
survive.

Government regulators also began to take due notice of the fledging mutual fund
industry. The creation of Securities and Exchange Commission (SEC), passage of
the Securities Act of 1933 and the enactment of Securities Exchange Act of 1934 put in
place safeguards to protect investors: mutual funds were required to register with the SEC
and to provide disclosure in the form of a prospectus.

In 1971, William Fouse and John McQuown of Wells Fargo Bank established the very
first index fund, a concept that John Bogle would use as a foundation on which to have
build The Vanguard Group, a Mutual Fund powerhouse renowned for low-cost index
funds. The 1970s also saw the rise of the no-load fund. This new way of doing business
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had a major impact on the way mutual funds were sold and would make an enormous
contribution to the industry's success.

Evolution of the Mutual Fund Industry in India

The Unit Trust of India was formed which marked the evolution of the Mutual fund industry in
India in the year of 1963. The main objective at that time was to attract the smaller investor and
this was made possible through the combined efforts of the Government of India and the Reserve
Bank of India. The history of this Industry in India can be well understood by dividing it into
following phases:
Phase 1. Establishment & Growth of Unit Trust of India - 1964-87
The Unit Trust of India was set up by an act of Parliament in the year 1963 and it enjoyed
complete monopoly when it was first established. It was set up by the Reserve Bank of India and
it continued to function under the regulatory control of the Reserve Bank of India until the two
were de-linked in 1978 and the entire control and functioning was transferred to the Industrial
Development Bank of India (IDBI). UTI had launched its first scheme way back in 1964, named
as Unit Scheme 1964 (US-64), which attracted the highest number of individual investors in any
single investment scheme over the years.
More and more innovative schemes were launched by UTI in 1970s and 80s to suit the needs of
different investors. ULIP was launched in 1971, and between 1981-84, six more schemes were
launched, Children's Gift Growth Fund and India Fund (India's first offshore fund) was launched
in 1986, Mastershare (first equity diversified scheme in India) was launched in 1987 and
Monthly Income Schemes (offering assured returns) were launched during 1990s. UTI's assets
under management grew ten times to Rs 6700 crores by the end of 1988.
Phase II. Entry of Public Sector Funds - 1987-1993
Public Sector Mutual Funds grew enormously during the year of 1987. The first non UTI Mutual
Fund came from the State Bank of India in November 1987. The Mutual fund of SBI was later
followed by LIC Mutual Fund, Canbank Mutual Fund, GIC Mutual Fund, Bank of India Mutual
Fund, Indian Bank Mutual Fund and PNB Mutual Fund. The assets under management of the
industry increased seven times to Rs. 47,004 crores by 1993. UTI was still the market leader with
over 80% of the market share.
1992-93
UTI
Public Sector

Amount
Mobilized

Assets Under
Management

Mobilization as % of gross
Domestic Savings

11,057

38,247

5.2%

1,964

8,757

0.9%
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Total

13,021

47,004

6.1%

Phase III. Private Sector Funds emerged - 1993-96

Post the era of liberalization, privatization and globalization, permission was granted to private
sector funds which also included foreign fund management companies (majority of them
entering with Indian promoters as joint ventures) to enter the Indian mutual fund industry in
1993, which provided a wide range of choice to the investors and which further increased
competition in the industry. Private funds helped in introducing innovative products, investment
techniques and investor-servicing technology. About 11 private sector funds had launched their
Mutual Fund schemes by 1994-95.
Phase IV. Growth and SEBI Regulation - 1996-2004
The SEBI exercised greater control and regulated the Mutual Fund Industry from the year 1996.
Also, the industry witnessed robust growth during that time period. More and more guidelines
were introduced and one had to provide extra details in order to invest. More people began to
show interest in mutual funds and the Industry witnessed higher amounts of mobilization of
funds, and the number of players operating in the industry reached new heights. Mutual Fund
started getting greater acceptance in the Indian sub-continent.
SEBI took appropriate measures and stringent rules were introduced and utmost care was
undertaken to ensure that investors' interests were safeguarded and the Government offered tax
benefits to the investors in order to encourage them in investing or saving through Mutual Funds.
SEBI (Mutual Funds) Regulations, 1996 was introduced by SEBI which aimed to set uniform
standards for all the mutual funds in India. The Union Budget in 1999 exempted all dividend
incomes in the hands of the investors from income tax. Innumerable Investor Awareness
Programmes were launched during this phase, both by SEBI and AMFI, with an objective to
create awareness and educate investors and make them better informed about the mutual fund
industry.
February 2003 saw the UTI Act being repealed and UTI was finally stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective to do this was to make
the mutual fund industry as a same level field and to bring all mutual fund players on the same
level. UTI was then re-organized into two parts:
1. The Specified Undertaking,
2. The UTI Mutual Fund
Presently, the Unit Trust of India undertakes its operations under the name of UTI Mutual Fund
and is winding up its past schemes (like US-64, Assured Return Schemes). However, UTI
Mutual Fund is still the largest player in the Mutual Fund industry.
In the year of 1999, there was a significant rise in the mobilization of funds from investors and
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assets under management which is presented in the following table:

GROSS FUND MOBILISATION (RS. CRORES)
PUBLIC
SECTOR

UTI

PRIVATE
SECTOR

FROM

TO

TOTAL

01-April-98

31-March-99

11,679

1,732

7,966

21,377

01-April-99

31-March-00

13,536

4,039

42,173

59,748

01-April-00

31-March-01

12,413

6,192

74,352

92,957

01-April-01

31-March-02

4,643

13,613

1,46,267

1,64,523

01-April-02

31-Jan-03

5,505

22,923

2,20,551

2,48,979

01-Feb.-03

31-March-03

7,259*

58,435

65,694

01-April-03

31-March-04

68,558

5,21,632

5,90,190

01-April-04

31-March-05

1,03,246

7,36,416

8,39,662

01-April-05

31-March-06

1,83,446

9,14,712

10,98,158

Phase V. Growth & Consolidation - 2004 Onwards

The Mutual Fund Industry is changing rapidly, and there are a large number of mergers and
acquisitions in the Industry, for example Birla Sun Life took over Alliance Mutual Fund. Many
international Mutual Fund players have made way through to the Indian market like Fidelity,
Franklin Templeton Mutual Fund. There were 29 funds as at the end of March 2006. This is a
phase of growth of the Mutual Fund Industry through consolidation and entry of new
international and private sector players.

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HDFC ASSET MANAGEMENT COMPANY

Vision Statement

HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an
Asset Management Company for the HDFC Mutual Fund by SEBI vide its
letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T.
Parekh Marg, 169, Back bay Reclamation, Church gate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has
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appointed the HDFC Asset Management Company Limited to manage the

Mutual Fund. The paid up capital of the AMC is Rs. 25.169 crore.
The present equity shareholding pattern of the AMC is as follows:
Particulars

% of the paid up equity

capital

Housing Development Finance Corporation

Limited

59.98

Standard Life Investments Limited

39.99

Other Shareholders (shares issued on exercise of

Stock Options)

0.03

TRUSTEES
HDFC Trustee Company Limited, a company incorporated under the
Companies Act, 1956 is the Trustee to HDFC Mutual Fund vide the Trust deed
dated June 8, 2000, as amended from time to time. HDFC Trustee Company
Ltd is wholly owned subsidiary of HDFC.
SPONSORS
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC)
STANDARD LIFE INVESTMENTS LIMITED
The industry is facing a number of issues that could be characterized by lack of investor
awareness, high dependence on corporate sector, low penetration levels and spiraling cost of
operations along with the non-trust on the expertise of well-known Fund Managers.

Advantages of Mutual Funds

Professional Money Management

Fund managers are primarily responsible for implementing a consistent investment
strategy that synchronizes and reflects the goals of the fund. Fund managers constantly
monitor the market movements and economic trends and analyze securities in order to
make informed and better investment decisions. Professionals are always better than
novice people and hence add value to the investments.
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Diversification
Diversification is one of the worlds best ways to mitigate risk. Mutual funds offer
investors an opportunity to diversify their investments across various cadre of assets
depending on their investment needs. Instead of parking funds in any particular stock, it
is definitely better to diversify it into various avenues so that even if one sector is not
doing well, some other sectors profit will help to keep the investment intact.

Liquidity
Investors can sell off the mutual fund units held by them on any particular business day
and also receive the current market value on their sold investments within a very short
time period (normally three- to five-days). Non blockage of funds for a long time is a
major advantage of mutual funds.

Affordability
The minimum initial investment for a mutual fund is quite low for most funds (as low as
Rs 500 for some schemes), so one does not need to wait to save thousands before actually
saving through mutual funds.

Convenience
Most of the private sector funds provide the convenience of periodic purchase plans,
automatic withdrawal plans and also the automatic reinvestment of interest and dividends
Mutual funds also provide with the detailed reports and statements that make recordkeeping simple. One can easily monitor and periodically check the performance of the
funds simply by just reviewing the business pages of most newspapers or just by using
the online Mutual Funds section.

Flexibility and variety

One can pick from a variety of options to invest ranging from conservative, blue-chip
stock funds, sectoral funds, funds that aim to provide income with modest growth or even
those that take big risks in the search for returns. There is a choice of buying balanced
funds, or those which combine stocks and bonds in the same fund.

Tax benefits
Tax benefits on Investment in Mutual Funds
1) 100% Income Tax exemption on all Mutual Fund dividends

22 | P a g e

2) Equity Funds - Short term capital gains is taxed at 15%. Long term capital gains are
not applicable.
Debt Funds - Short term capital gains is taxed as per the slab rates applicable to
individual investor. Long term capital gains tax to be lower of either 10% on the capital
gains without factoring indexation benefit and 20% on the capital gains after factoring
indexation benefit.
3) Open-end funds with equity exposure of more than 65% (Revised from 50% to 65% in
Budget 2006) are exempt from the payment of dividend tax for a period of 3 years from
1999-2000.
An investor can get a tax benefit in schemes like ELSS (equity linked
saving scheme). Some schemes like the Tax Saver Schemes allow
people to get tax savings on their investments under various sections
of Chapter VI-A of the Income Tax Act.
Note: Equity Funds are those where the investible funds are invested in equity shares in domestic
companies to the extent of more than 65% of the total proceeds of such funds.

Main Text
Objective of the Project:

The project aims at comparing the returns and risks of the various
Equity funds of the various fund houses in the Large Cap Sector.

The project also focuses on Gold as a separate Asset Class in respect of

Mutual Fund Schemes and the avenues of investment available to an
investor.

The project also aims at comparing the returns of both the asset

classes of Gold and Equity and suggests the possible investment

options.
23 | P a g e

The project also aims at benchmarking the various funds to their

respective indices.

Value Addition to the company: The Company gets a clear picture of its
current market positioning according to the industry in which it
operates.

Methodology:

The projects covers Mutual Funds of 6 Fund Houses of the large and
midcap sector and a comparison and analysis will be done using financial
and statistical tools which include:
Sharpe Ratio: To measure the risk-return comparison of the fund.
Standard Deviation and Beta: To show the volatility and systematic risk
of a Portfolio/ Fund to the market as a whole.
Treynor Ratio: Risk adjusted measure of return based on systematic
risk. Treynor ratio is similar to Sharpe ratio, only that it uses Beta as
the measurement of volatility
Returns: The annualized year on year returns of the Mutual Funds.

Since the project also covers details of the investment opportunities in

Gold as an Asset Class, hence the various returns or fluctuations in price
of Gold over the years on a comparative analysis will be undertaken
based on the price of the underlying asset, which in this is Gold.

Statistical and numerical analysis tools will also be used to draw a

comparison between the returns of both the Asset Classes with one
another (Equity Mutual Funds and Gold)

24 | P a g e

The Equity based Mutual Fund Schemes taken for the studies are as
presented below:

Fund Name

Launch
Date

Category

Rating

Risk
Grade

Return
Grade

Birla Sun Life

Frontline Equity

Aug-2002

Equity: Large &

Mid Cap

Avg.

Above Avg.

DSPBR Top 100

Equity Reg

Feb-2003

Equity: Large Cap

Below Avg. Above Avg.

Franklin India
Bluechip

Nov-1993

Equity: Large Cap

Low

HDFC Top 200

Sep-1996

Equity: Large Cap

Avg.

L&T Equity

Apr-2005

Equity: Large &

Mid Cap

UTI Mastershare

Oct-1986

Equity: Large Cap

1
Expen
Year
se
Retur
Ratio
n
21.45
1.86
9.77

1.84

High

13.21

1.81

High

12.59

1.78

Below Avg. Above Avg.

9.89

1.85

Below Avg. Above Avg.

14.57

1.88

The category as mentioned in the table represents the investments made by

these funds fall under which category. Also since they are majorly large cap
funds, so they have a high rating of 4 or 5 stars which means that they have
been consistently being performing well.

Expense ratio is the amount of expenses per Rs. 100 invested in the scheme.
These schemes have a similar kind of expense ratio around 1.75 to 1.90
since they fall under same category.

25 | P a g e

The following table gives the details about the Price Earnings Ratio (P/E ratio)
and Assets under Management (AUM) of the Mutual Fund Schemes. It also
says the quantum of the top 5 holdings as a percentage of the total.

Birla Sun
Life Frontline
Equity

20.11

Marke
Asset
Avg.
t Cap
Turnove
s
Cred.
(Rs
r (%)
(Rs
Qual.
Cr)
Cr)
3.81 43,407.02
72.00 3,043.64 --

DSPBR Top
100 Equity
Reg

20.18

3.01 33,126.97

Franklin
India
Bluechip

18.48

HDFC Top
200

Fund
Name

Fund
Style

P/E
Rati
o

P/B
Rati
o

Average
Maturity
(Yrs)

Top 5
Holdings
(%)
--

22.94

291.00 3,529.71 --

--

33.21

3.69 51,379.18

24.94 5,150.18 --

--

31.72

17.14

3.43 37,975.64

21.63 12,016.8 -6

--

32.17

L&T Equity

20.09

4.03 60,281.08

0.00 2,398.60 --

--

29.62

UTI
Mastershare

23.47

4.55 64,836.16

--

29.89

13.48 2,321.94 GOI/Cash

The following table shows the expense ratio of each of the Mutual Fund
Schemes and also the load structure. It also mentions about the details
about the Fund Managers of the respective schemes.

Fund
Name
Birla Sun Life
Frontline
Equity

Expen
FrontBackse
End
End
CDS
Ratio
Load
Load
C
%
%
%
1.86
0.00
0.00 Yes

Mim
Initial
Portfolio Manager
Inv.
(Rs)
5,000 Samir Arora, Nishid Shah, Dhawal
Mehta, Taher Badshah, Ashit
Kothari, Mahesh Patil, Nimesh
Chandan

Tenure
(Yrs.)
11, 8, 10,
9, 9, 8, 8

DSPBR Top
100 Equity
Reg

1.84

0.00

0.00 Yes

5,000 S Naganath, Anup Maheshwari,

Rajesh Kothari, Apoorva Shah

8, 10, 8, 7

Franklin India
Bluechip

1.81

0.00

0.00 Yes

5,000 K N Sivasubramanian, Anand

Radhakrishnan, Anand Vasudevan

HDFC Top 200

1.78

0.00

0.00 Yes

5,000 Prashant Jain, Bobby Surendranath,

Miten Lathia

11, 17, 3

L&T Equity

1.85

0.00

0.00 Yes

5,000 Arun Mehra, Soumendra Nath

8, 1, 4, 1

20, 6, 2

26 | P a g e

Fund
Name

Expen
se
Ratio
%

FrontEnd
Load
%

BackEnd
Load
%

CDS
C

Mim
Initial
Inv.
(Rs)

Tenure
(Yrs.)

Portfolio Manager
Lahiri, Subramanian Balakrishnan,
Rajesh Pherwani

UTI
Mastershare

1.88

0.00

0.00 Yes

5,000 Manish Kumar, Sanjay Sinha, Swati

Kulkarni, Chandraprakash Padiyar

11, 9, 7, 8

The following table tells about the NAV (Net Asset Value) of the Mutual Fund
Schemes and the current NAVs as well as the highs and lows during the past
one year.

Fund Name
BSL Frontline Eqt-G

NA
As on
V
100.3 May 2,
9 2013

Chg. from
previous
0.86

52 Weeks
As on
High
102.33 Jan 15,
2013

52 Weeks
As On
Low
76.74 May 23,
2012

DSPBR Top 100 Eqt

Reg-G

108.6 May 2,
8 2013

1.21

113.88 Jan 3,
2013

91.34 Jun 1,
2012

Franklin India
Bluechip-G

235.3 May 2,
8 2013

1.30

244.20 Jan 21,

2013

193.25 May 23,

2012

HDFC Top 200-G

223.4 May 2,
7 2013

2.32

234.76 Jan 21,

2013

182.02 May 16,

2012

L&T Equity-G

37.00 May 2,
2013

0.39

38.58 Jan 21,

2013

31.31 Jun 4,
2012

UTI Mastershare-G

58.25 May 2,
2013

0.64

58.77 Jan 21,

2013

47.69 May 23,

2012

These tables provided a basic view of what the various Mutual Fund Schemes
have been performing and their history. Based on these the various ratios
and tools will be used.

The detailed description about the Schemes are as follows:

27 | P a g e

Birla SL Frontline Equity Fund

Current Stats & Profile

Latest NAV

100.39 (02/05/13)

52-Week High

102.33 (15/01/13)

52-Week Low

76.74 (23/05/12)

Fund Category

Equity: Large & Mid Cap

Type

Open End

Launch Date

August 2002

Risk Grade

Average

Return Grade

Above Average

Net Assets (Cr) *

Benchmark

3,043.64 (31/03/13)

S&P BSE 200

28 | P a g e

The scheme aims to generate long-term capital growth, income generation

and distribution of dividend. It would target the same sectoral weights as
BSE 200, subject to flexibility of selecting stocks within a particular sector.
Stated Asset Allocation
Min
75
0
0

Equity
Debt
Cash & Cash Eq.
DSP Black Rock Top 100 Equity Fund

Max
100
25
25

Current Stats & Profile

Latest NAV

108.676 (02/05/13)

52-Week High

113.878 (03/01/13)

52-Week Low

91.339 (01/06/12)

Fund Category

Equity: Large Cap

Type

Open End

Launch Date

February 2003

Risk Grade

Below Average

Return Grade

Above Average

Net Assets (Cr) *

Benchmark

3,529.71 (31/03/13)
S&P BSE 100
29 | P a g e

The scheme seeks to generate capital appreciation from a portfolio that

largely consists of equity and equity related securities of the 100 largest
corporates, by market capitalization, listed on either BSE or NSE.
Stated Asset Allocation
Min
90
0
0

Equity
Debt
Cash & Cash Eq.

Max
100
10
10

Franklin India Bluechip Fund

Current Stats & Profile
Latest NAV

235.3809 (02/05/13)

52-Week High

244.2003 (21/01/13)

52-Week Low

193.2501 (23/05/12)

Fund Category

Equity: Large Cap

Type

Open End

Launch Date

November 1993

Risk Grade

Low
30 | P a g e

Return Grade

High

Net Assets (Cr) *

5,150.18 (31/03/13)

Benchmark

S&P BSE Sensex

The scheme seeks aggressive growth and aims to provide medium to long term capital
appreciation through investment in shares of quality companies and by focusing on well
established large sized companies.
Stated Asset Allocation
Equity
Debt
Cash & Cash Eq.

Min
85
0
0

Max
100
10
15

HDFC Top 200 Fund

Current Stats & Profile

Latest NAV

223.472 (02/05/13)
31 | P a g e

52-Week High

234.759 (21/01/13)

52-Week Low

182.017 (16/05/12)

Fund Category

Equity: Large Cap

Type

Open End

Launch Date

September 1996

Risk Grade

Average

Return Grade

High

Net Assets (Cr) *

Benchmark

12,016.86 (31/03/13)
S&P BSE 200

The scheme seeks capital appreciation and would invest up to 90 per cent in
equity and the remaining in debt instruments. Also, the stocks would be
drawn from the companies in the BSE 200 Index as well as 200 largest
capitalized companies in India.
32 | P a g e

Stated Asset Allocation

Min
0
0
0

Equity
Debt
Cash & Cash Eq.

Max
100
0
5

L & T Equity Fund

Current Stats & Profile

Latest NAV

37.003 (02/05/13)

52-Week High

38.584 (21/01/13)

52-Week Low

31.312 (04/06/12)

Fund Category

Equity: Large & Mid Cap

Type

Open End

Launch Date

April 2005

Risk Grade

Below Average

Return Grade

Above Average

Net Assets (Cr) *

Benchmark

2,398.60 (31/03/13)
S&P BSE 200

33 | P a g e

The scheme aims to follow bottom up stock picking, without any bias for
sectors or market capitalizations. The scheme will attempt to be fully
invested in equities at all times; however, up to 20 per cent of its assets can
be invested in cash and cash equivalents.
Stated Asset Allocation
Equity
Debt
Cash & Cash Eq.

Min
80
0
0

Max
100
0
20

UTI Mastershare

Current Stats & Profile

Latest NAV

58.2495 (02/05/13)

52-Week High

58.77 (21/01/13)

52-Week Low

47.69 (23/05/12)

Fund Category

Equity: Large Cap

34 | P a g e

Type

Open End

Launch Date

October 1986

Risk Grade

Below Average

Return Grade

Above Average

Net Assets (Cr) *

Benchmark

2,321.94 (31/03/13)
S&P BSE 100

An open-end equity fund aiming to provide benefit of capital appreciation

and income distribution through investment in equity.
Stated Asset Allocation
Equity
Debt
Cash & Cash Eq.

Min
70
0
0

Max
100
30
30

Plan for Completion:

35 | P a g e

The following schedule is being been followed:

Project Component

Understanding
Funds

about

Time
Schedul
e
Mutual 1 week

Status
Date
Complete
12th March 2013
to
18th March 2013

Understanding
Industry

about

the 2 weeks

Complete
18th March 2013
to
1st April 2013

Understanding about Various 1 week

Schemes of HDFC AMC

Complete
1st April 2013 to
8th April 2013

Data Collection and Comparison 2 week

of Equity based Mutual Fund
Schemes of different Fund
Houses and Benchmarking with
the respective Indices.
Data Collection and Investment 2 weeks
options in Gold as an Asset Class
in respect of Mutual Fund
Schemes

Complete

Comparison between Equity 1 week

based and Gold Funds as an
Investment Option

Pending

Discussions
Recommendations

Pending

& 1 weeks

8th April 2013 to

22nd April 2013
Ongoing
22nd April 2013
to
6th May 2013
6th May 2013 to
13th May 2013
13th May 2013 to
20th May 2013

Formatting
Completion

&

Project 2 weeks

Pending
20th May 2013 to
36 | P a g e

1st June 2013

References
www.valueresearchonline.com
www.moneycontrol.com
www.amfiindia.com
www.hdfcfund.com
www.reliancemutual.com
www.sbimf.com
www.dspblackrock.com

www.franklintempletonindia.com

www.icicipruamc.com

www.economictimes.indiatimes.com

Fact Sheet (named Intouch Mutually) of HDFC AMC

Faculty Guide: Dr. Amlan Ghosh

Company Guide: Mr. Loknath Agarwalla
Date: 3rd May, 2013

Anmol Karnani
(Signature of Student)

37 | P a g e

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