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PROJECT REPORT A CRITICAL ANALYSIS OF HDFC MUTUAL FUND (RISK AND RETURN)
FOR FULFILLMENT OF SUMMER INTERNSHIP REPORT
SUBMITTED BY: CHANDER REKHA A3104609003 BATCH-2009-12 B.COM(HONS) SUBMITTED TO: Dr ADARSH ARORA

AMITY SCHOOL OF ECONOMICS AMITY UNIVERSITY UTTAR PRADESH AUUP SECTOR 125 NOIDA

ACKNOWLEDGEMENT
It took great deal of help, tolerance and understanding on the part of a variety of people and organization to prepare this project report. I would particularly thank Mr Amit Shrivastava (HDFC/ AMC) for providing me guide line and support during my training. I am also indebted to my economics teacher Dr Gargi Bandyopadhyay who trusted me and provided me with such an opportunity I would also like to thank all staff members of different branches of HDFC, all my colleagues whose ideas and practice I adopted in the project I wish to express my warmest appreciation for their help and support along the way.

SCOPE OF THE STUDY


In my project the scope is limited to HDFC mutual funds. I analyzed the funds depending on their schemes like equity, income, balance. But there is so many other schemes in mutual fund industry like specialized (banking, infrastructure, pharmacy) funds, index funds etc The research was carried on in New Delhi. I had been sent to one of the branches of HDFC Asset Management Company where I completed the project. I surveyed on my project topic critical analysis of mutual fund (risk & return) on the visiting customers of HDFC mutual fund Connought Place Branch, New Delhi. The study will help to know preference of customers/investors towards mutual fund and analyse the risk and return on mutual fund. This project report may help the company for further planning and strategy

CONTENTS
1.CHAPTER 1 INTRODUCTION

2.CHAPTER 2

LITERATURE SURVEY

3.CHAPTER 3

RESEARCH METHODOLOGY

4.CHAPTER 4

DATA INTERPRETATION AND ANALYSIS

5.CHAPTER 5

FINDINGS AND CONCLUSION

6.CHAPTER 6

BIBLIOGRAPHY

7.CHAPTER 7

ANNEXURE-DATA COLLECTION

CHAPTER 1

INTRODUCTION
There are a lot of investment avenues available today in the financial market for an investor with an investable surplus Mutual fund is a trust that pools the savings of a number of investors who share a common financial goal. This pool of money is invested in accordance with a stated objective. 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 appreciations realized are shared by its unit holders in proportion the number of units owned by them. NEED FOR THE STUDY The main purpose of doing this project was to know about mutual fund and its

functioning. This helps to know in details about mutual fund industry right from its inception stage, growth and future prospects. It also helps in understanding different schemes of mutual funds. Because my study depends upon prominent funds in India and their schemes like equity, income, balance as well as the returns associated with those schemes OBJECTIVES OF THE STUDY TO ANALYZE THE PERFORMANCE OF HDFC MUTUAL FUND SCHEMES ON THE BASIS OF DIFFERENT PARAMETERS

TO STUDY AND ANALYSE INVESTORS PREFERENCE TOWARDS MUTUAL FUNDS OVER OTHER INVESTMENT OPTIONS

TO FIND OUT AWARENESS ABOUT MUTUAL FUNDS AND ITS OPERATIONS

TO EVALUATE INVESTMENT PERFORMANCE OF SELECTED MUTUAL FUNDS SCHEMES IN TERMS OF RISK AND RETURN

My study gives an overview of mutual funds definition, types, benefits, risks, limitations, history of mutual funds in India, latest trends, global scenarios. I have analyzed a few prominent mutual funds schemes and have given my findings

CHAPTER 2

LITERATURE SURVEY

Concept of a 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:-

Investors earn from a Mutual Fund in three ways:

1. Income is earned from dividends declared by mutual fund schemes from time
to time.

2. If the fund sells securities that have increased in price, the fund has a capital
gain. This is reflected in the price of each unit. When investors sell these units at prices higher than their purchase price, they stand to make a gain.

3. If fund holdings increase in price but are not sold by the fund manager, the
fund's unit price increases. You can then sell your mutual fund units for a profit. This is tantamount to a valuation gain. Though still at a nascent stage, Indian MF industry offers a plethora of schemes and serves broadly all type of investors. The range of products includes equity funds, debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young and old, small and large investors. Investors of all categories could choose to invest on their own in multiple options but opt for mutual funds for the sole reason that all benefits come in a package.

Advantages of Mutual Funds 1. Professional Management Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme. 2. Diversification Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. 3. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. 4. 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. Apart from liquidity, these funds have also provided very good post-tax returns on year to year basis 5. Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors. 6. Liquidity In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund. 7. Transparency

Investors get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. 8. Flexibility Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans; you can systematically invest or withdraw funds according to your needs and convenience. 9. Affordability A single person cannot invest in multiple high-priced stocks for the sole reason that his pockets are not likely to be deep enough. This limits him from diversifying his portfolio as well as benefiting from multiple investments. Here again, investing through MF route enables an investor to invest in many good stocks and reap benefits even through a small investment. Well Regulated DISADVANTAGES OF MUTUAL FUNDS Mutual funds have their following drawbacks: 1. No Guarantees No investment is risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well, no matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy and sell stocks on their own. 2. Fees and Commissions All funds charge administrative fees to cover their day to day expenses. Some funds also charge sales commissions or loads to compensate brokers, financial consultants, or financial planners. Even if you dont use a broker or other financial advisor, you will pay a sales commission if you buy shares in a Load Fund. 3. Taxes During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its

sales, you will pay taxes on the income you receive, even you reinvest the money you made. 4. Management Risk When you invest in mutual fund, you depend on fund manager to make the right decisions regarding the funds portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in index funds, you forego management risk because these funds do not employ managers.

STRUCTURE OF MUTUAL FUND There are many entities involved and the diagram below illustrates the structure of mutual funds: -

SEBI The regulation of mutual funds operating in India falls under the preview of authority of the Securities and Exchange Board of India (SEBI). Any person proposing to set up a mutual fund in India is required under the SEBI (Mutual Funds) Regulations, 1996 to be registered with the SEBI.

Sponsor The sponsor should contribute at least 40% to the net worth of the AMC. However, if any person holds 40% or more of the net worth of an AMC shall be deemed to be a sponsor and will be required to fulfill the eligibility criteria in the Mutual Fund Regulations. The sponsor or any of its directors or the principal officer employed by the mutual fund should not be guilty of fraud or guilty of any economic offence. Trustees The mutual fund is required to have an independent Board of Trustees, i.e. two third of the trustees should be independent persons who are not associated with the sponsors in any manner. An AMC or any of its officers or employees are not eligible to act as a trustee of any mutual fund. The trustees are responsible for - inter alia ensuring that the AMC has all its systems in place, all key personnel, auditors, registrar etc. have been appointed prior to the launch of any scheme. Asset Management Company The sponsors 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.

1. The sponsor must have at least 40% stake in the AMC. 2. The chairman of the AMC is not a trustee of any mutual fund. 3. The AMC should have and must at all times maintain a minimum net worth of Cr. 100 million. 4. The director of the AMC should be a person having adequate professional experience. 5. The board of directors of such AMC has at least 50% directors who are not associate of or associated in any manner with the sponsor or any of its subsidiaries or the trustees.

The Transfer Agents

The transfer agent is contracted by the AMC and is responsible for maintaining the register of investors / unit holders and every day settlements of purchases and redemption of units. The role of a transfer agent is to collect data from distributors relating to daily purchases and redemption of units. 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 delinked from the AMC and must be registered with SEBI. Unit Holders They are the parties to whom the mutual fund is sold. They are ultimate beneficiary of the income earned by the mutual funds.

TYPES OF MUTUAL FUND SCHEMES In India, there are many companies, both public and private that are engaged in the trading of mutual funds. Wide varieties of Mutual Fund Schemes exist to cater to the needs such as financial position, risk tolerance and return expectations etc.

Investment can be made either in the debt Securities or equity .The table below gives an overview into the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEME

Generally two options are available for every scheme regarding dividend payout and growth option. By opting for growth option an investor can have the benefit of longterm growth in the stock market on the other side by opting for the dividend option an investor can maintain his liquidity by receiving dividend time to time. Some time people refer dividend option as dividend fund and growth fund. Generally decisions regarding declaration of the dividend depend upon the performance of stock market and performance of the fund.

OPTION REGARDING DIVIDEND

Systematic Investment Plan (SIP) Systematic investment plan is like Recurring Deposit in which investor invests in the particular scheme on regular intervals. In the case it is convenient for salaried class and middle-income group. In this case on regular interval units of specified amount is created. An investor can make payment by regular payments by issuing cheques, post dated cheques, ECS, standing Mandate etc. SIP can be started in the any open-ended fund if there is provision of it. There are some entry and exit load barriers for discontinuation and redemption of the fund before the said period.

According to Structure

Open Ended Funds An open ended fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices. The key feature of open ended schemes is liquidity.
Close Ended Funds A close ended fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period.

Investors can invest in the scheme at the same time of the initial public issue and thereafter they can buy and sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some close ended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. Interval Funds

Interval funds combine the features of open ended and close ended schemes. They are open for sales or redemption during pre-determined intervals at their NAV.

According to Investment Objective: Growth Funds The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks are much better than the other investments had over the long term. Growth schemes are ideal for investors having a long term outlook seeking growth over a period of time.

Income Funds The aim of the income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Income funds are ideal for capital stability and regular income. Balanced Funds The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities 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. These are ideal for investors looking for a combination of income and moderate growth. Money Market Funds The main aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safe 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. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

Other Schemes Tax Saving Schemes These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Saving Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains. Special Schemes: Index Schemes Index funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50. Sector Specific Schemes

Sector funds are those which invest exclusively in a specified industry or a group of industries or various segments such as A group shares or initial public offerings. Bond Schemes It seeks investment in bonds, debentures and debt related instrument to generate regular income

Market capitalization Market capitalization in simple words is defined as number of shares outstanding multiplied by the current share price of the share. Basically there are three methods or style of capitalization that a mutual fund adopts for the investment of its capital. They are Investment in: Large cap funds Mid cap funds Small cap funds

Large cap funds:Large cap funds invest their money primarily in companies, which have a sizable

market capitalization. Companies below this threshold were categorized as mid/small caps. Investing in large caps is a lower risk-lower return proposition (vis--vis mid cap stocks), because such companies are usually widely researched and information is widely available. HDFC Top 200 Fund, Franklin India Blue chip Fund, HSBC Equity Fund for instance, invest predominantly in large caps.

Mid cap funds:-

These funds invest in companies that have a lower market capitalization than the large caps. Investments in mid caps are a riskier proposition as compared to investments in large cap funds. There are several reasons for the same. One, the mid cap companies are usually under-researched. Fund managers often find it difficult to exit these stocks in a falling market or enter when interest in the stock is building up. The upside - the fund can generate a superior return as mid cap stocks have the potential to give a higher return vis--vis large cap companies. This is mainly because many of these companies are in a growth phase as opposed to large caps that have attained relative stability Small Cap funds:As the name suggests, small cap funds invest in companies with a smaller market capitalization investing in small cap funds is fraught with considerable risk. To begin with, small cap companies in most cases are just evolving

FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give professional advice on the funds investments and to supervise the management of its asset. Diversification The policy of spreading investments among a range of different securities to reduce the risk. Net Asset Value (NAV) - Net Asset Value is the market value of the assets of the scheme minus its liabilities. The per unit NAV is the net asset value of the scheme divided by the number of units outstanding on the Valuation Date.
Sales Price - Is the price you pay when you invest in a scheme. Also called Offer Price. It may include a sales load. Repurchase Price - Is the price at which a close-ended scheme repurchases its units and it may include a back-end load. This is also called Bid Price.

Redemption Price - Is the price at which open-ended schemes repurchase their units and close-ended schemes redeem their units on maturity. Such prices are NAV related. Sales Load - Is a charge collected by a scheme when it sells the units. Also called Front-end load. Schemes that do not charge a load are called No Load schemes.

Securities and Exchange Board of India (SEBI): In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The objectives of SEBI are to protect the interest of investors in securities and to promote the development of and to regulate the securities market. As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual funds to protect the interest of the investors. SEBI notified regulations for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interests of investors. All mutual funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of Regulations. There is no distinction in regulatory requirements for these mutual funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the mutual funds sponsored by these entities are of similar type. Broad Guidelines Issued by SEBI for Mutual Funds in India

SEBI has the following broad guidelines pertaining to mutual funds:

Mutual funds should be formed as a Trust under Indian Trust Act and should be operated by Asset Management Companies (AMCs). Mutual funds need to set up a Board of Trustees and Trustee Companies. They should also have their Board of Directors. The net worth of the AMCs should be at least Rs.5 crore. AMCs and Trustees of a MF should be two separate and distinct legal entities. The AMC or any of its companies cannot act as managers for any other fund. AMCs have to get the approval of SEBI for its Articles and Memorandum of Association. All Mutual fund schemes should be registered with SEBI. Mutual funds should distribute minimum of 90% of their profits among the investors. Trends in Transactions on Stock Exchanges by Mutual Funds (as on Debt/Equi Gross ty Equity Debt Crores) 352.40 1904.20 Purchases(Rs Gross Crores) 397.40 603.10 19-MAR-2009) Sales(Rs Net Investment (Rs (Provisional and subject to revision) April 2007)

Trading Date 19-MAR2009

Crores) (45.00) 1301.20

Trends in Transactions on Stock Exchanges by Mutual Funds (since January 2000 Gross Purchases(Rs Crores) 11070.54 2764.72 Gross Sales(Rs Crores) 11492.19 1864.29

Period

Debt/Equi ty 2000-Mar Equity Debt

Net

Investment

(Rs Crores) -421.65 900.43

Jan

2000 April 2001 April 2002 April 2003 April 2004 Debt April 2005 Debt April 2006 Debt April 2007 2006-Mar Equity 109804.91 135948.16 73003.67 126885.82 36801.24 9062.34 2005-Mar Equity 62186.46 100435.90 45199.17 86133.70 16987.29 14302.20 2004-Mar Equity 63169.93 45045.25 40469.18 44597.23 22700.75 448.02 2003-Mar 2000-Mar Equity Debt 2001-Mar Equity Debt 2002-Mar Equity Debt Equity 11375.78 13512.17 12098.11 33583.64 14520.89 46663.83 36663.58 20142.76 8488.68 15893.99 22624.42 16587.59 34059.41 35355.67 -2766.98 5023.49 -3795.88 10959.22 -2066.70 12604.42 1307.91

Debt

153733.05

101189.59

52543.

According to Mutualfundsindia Research Team, Performance Measures of Mutual Funds are: Mutual Fund industry today, with about 34 players and more than five hundred schemes, is one of the most preferred investment avenues in India. However, with a plethora of schemes to choose from, the retail investor faces problems in selecting funds. Factors such as investment strategy and management style are qualitative, but the funds record is an important indicator too. Though past performance alone can

not be indicative of future performance, it is, frankly, the only quantitative way to judge how good a fund is at present. Therefore, there is a need to correctly assess the past performance of different mutual funds. Worldwide, good mutual fund companies over are known by their AMCs and this fame is directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must be held accountable for their selection of stocks. In other words, there must be some performance indicator that will reveal the quality of stock selection of various AMCs. Return alone should not be considered as the basis of measurement of the performance of a mutual fund scheme, it should also include the risk taken by the fund manager because different funds will have different levels of risk attached to them. Risk associated with a fund, in a general, can be defined as variability or fluctuations in the returns generated by it. The higher the fluctuations in the returns of a fund during a given period, higher will be the risk associated with it. These fluctuations in the returns generated by a fund are resultant of two guiding forces. First, general market fluctuations, which affect all the securities, present in the market, called market risk or systematic risk and second, fluctuations due to specific securities present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is sum of these two and is measured in terms of standard deviation of returns of the fund. Systematic risk, on the other hand, is measured in terms of Beta, which represents fluctuations in the NAV of the fund vis--vis market. The more responsive the NAV of a mutual fund is to the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a mutual fund with the returns in the market. While unsystematic risk can be diversified through investments in a number of instruments, systematic risk can not. By using the risk return relationship, we try to assess the competitive strength of the mutual funds vis--vis one another in a better way. In order to determine the risk-adjusted returns of investment portfolios, several eminent authors have worked since 1960s to develop composite performance indices to evaluate a portfolio by comparing alternative portfolios within a particular risk class.

Mutual fund- an investment option Mutual fund in simple terms is money managing institutions that pool the money received from the general public having limited financial means but similar financial goals. The money collected from the public is then invested in capital market instruments like shares, debentures and other securities under several mutual funds schemes. It is established in the form of trust and managed by Asset Management Companies (AMC). Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual fund unit gets a proportional share of the funds gains, losses, income and expenses. At present there are 32 mutual funds in India as per AMFI.

Each mutual fund has a specific stated objective Fund Objective Equity (Growth) Debt (Income) Money (including Gilt) Balanced What the fund will invest in Only in stocks Only in fixed-income securities MarketIn short-term money market instruments (including government securities) Partly in stocks and partly in fixed-income securities, in order to maintain a 'balance' in returns and risk

Investment options: Category Equity Bonds Return High Moderate Safety Low High Volatility High Moderate Liquidity High Moderate

Corporate Debentures Company F.D Bank Deposits PPF Life Insurance Gold Real Estate Mutual Funds

Moderate

Moderate

Moderate

Low

Moderate

Low

Low

Low

Low

High

Low

High

Moderate Low

High High

Low Low

Moderate Low

Moderate High High

High Moderate High

Moderate High Moderate

Moderate Low High

Tips for investing in mutual fund Select a long or short term investment horizon- equity, debt, or balanced option depending on your age and income. Match your objective with that of fund scheme. Go for less aggressive Fund if you want steady returns. Checks how high are the expense incurred on the fund management Charged to investors. Choose dividend options if you want a regular income on your investment Or else opt for growth option. Opt for Systematic Transfer Plan (STP). If you want to make lump-sum investment in installments to another scheme.

Expert guidelines on Mutual Funds


Consistency and low volatility are very important. It is very important to keep in mind the investment philosophy of the fund house. Investors should redeem only if the reason to save changes drastically.

Performance evaluation of mutual fund


Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investment, they also carry certain risks. Risk factor is an important aspect while investing with the mutual fund schemes. So, it is very important from the investors point of view to choose the right kind of scheme based on different parameters of performance evaluation. To help investors in evaluating the performance of a scheme , a comparative analysis of 28 equity growth schemes has been made on certain set parameters which has been discussed below: For the purpose of analyzing the various schemes following parameters has been used: Portfolio Expenses Risk and Volatility Risk Adjusted Return Returns

A valuable judging parameter for any scheme is its portfolio. It tells us the exposure the fund has to various stocks and also various sectors. Careful analysis of the funds portfolio would help an investor in making valuable insights into the investment strategy of the fund manager. For analysis of the performance of the various mutual funds on the basis of portfolio, Portfolio turnover rate has been considered which has been explained as under: By definition Portfolio Turnover is the lesser of annual purchases or annual sales, divided by the average portfolio value. It measures the amount

of buying and selling done by the fund manager and hence tells us the weighted average holding period of a given security. For example, if a fund produced a turnover of 50%, it is presumed that the average holding period for any given security is 2 years and that 50% of the portfolios total assets were replaced every year. This number varies by the type of fund and the investment philosophy of the manager. A high turnover ratio means high transaction costs. Expenses

From an investor point of view, it is very important to know about the expenses related with the buying, selling, transferring fees and any other costs you may incur if you invest in a specific fund .So for analyzing the expenses of the various mutual funds; the expense ratio of the funds has been considered. By definition Expense ratio is the ratio of total expenses to average net assets. An investor can check information on schemes expenses ratio in its offer document. Depending upon the type of scheme, expense ratio may vary from scheme to scheme. The lowest expense ratio is observed among index funds and ETFs. Stock funds have higher expense ratio than fixed income funds. Funds that invest internationally tend to have significantly higher expense ratio than to domestic portfolios, due to greater research and other costs associated with foreign investing .Expense ratios of the schemes in same category are to be compared .Low expense ratio is desirable. Risk and Volatility Risk Risk is the key dimension of performance measurement, and a decisive factor in determining a fund managers skill .One cannot make a judgment about how skilful a manger is in a particular period by looking at return only.

Risk in a generic sense is the possibility of loss, damage, or harm. For investment a more specific definition of risk can be given .It refers to variability in the expected return. For a mutual fund the following factors cause variability of the investment performance: The kind of securities in the portfolio. For e.g., small cap stocks may be more volatile than large cap stock The degree of diversification. For e.g., a portfolio of only 5 stocks may be more volatile than a portfolio comprising of 15 stocks The extent to which the portfolio manager times the market. For e.g., an index fund tends to be less volatile than an aggressive growth fund.

Risk is neither good nor bad rather as it is viewed in some context. The difference between the required rate of return on a mutual fund investment and the risk free rate is the risk premium. There are many sources that determine appropriate risk premium including market risk, business risk, liquidity risk, financial risk (leverage), duration, and credit risks for bonds and political and currency risk for international assets. Broadly, the market risk can be divided into 2 following categories:

Systematic

Risk

- Systematic risk is market related or non-

diversifiable. It is the risk that influences a large number of assets. An example is political events. It is virtually impossible to protect yourself against this type of risk.

Unsystematic Risk Unsystematic risk is one that is unique to given particular mutual fund portfolio and is diversifiable. It is the risk that affects a very small number of assets. An example is news that affects a specific stock such as a sudden strike by employees.

Volatility Volatility is a measure of the variability of returns over a chosen time-period. It reveals the extent by which the daily/weekly/monthly price changes from the average. Low percentage volatility shows that the price has stayed quite close to the average whereas high percentage volatility shows that the price has moved up and down a lot over the time-period. The higher the volatility of a fund, the greater the difference between the highest and lowest returns and the higher the risk of the investment. So volatility is a market measure of uncertainty investors keep changing their minds as to the value of the share, which reflects uncertainty surrounding the companys future profit potential. As such, it's an excellent indicator of investment risk. So for measuring the risk in context of volatility of the fund, following measures has been used:

Funds Volatility () i.e; variation from the average. Funds Resemblance (R2) i.e; the extent to which the movement in the
fund can be explained by corresponding benchmark index.

Funds Volatility as regards the market index () i.e; the extent of comovement of fund with that of benchmark index. Returns

Returns referred to total returns that an investor gets by investing into particular schemes. Higher the return better it is from an investor point of view. .For the purpose of our analysis last 3 years return shas been taken into consideration so as to have true picture of the average return that a particular schemes fetched. For comparing the returns earned by the schemes, BSE 30 has been taken as the benchmark index...Return for both benchmark market index i.e; BSE 30 and the schemes has been calculated from the daily index value and net asset value (NAV) respectively. Then the average of the series so developed has been taken. By comparing last 3 years average returns with the benchmark one can know how much returns were given by particular schemes

in comparison to the return given by the market on the schemes under that same category. Risk-free return
Risk-free rate of return refers to the minimum return on investment that has no risk of loosing the investment over which it is earned. For the present study, it has been marked around 5.75% per annum as the banks provides at the same rate on fixed deposits on an average during the period under the study

CHAPTER 3

RESEARCH METHODOLOGY
SCOPE OF THE STUDY:
Subject matter is related to the investors preference towards investment in mutual funds People of age between 20 to 60

Area is limited to New Delhi Demographics include names, age, qualification, occupation, marital status and annual income.

INFORMATION NEEDED:

This first step states that what is the information that is

actually

required. Information in this case we require is that what is the approach of investors while investing their money in HDFC mutual funds e.g. what do they consider while deciding as to invest in mutual funds .Also, it studies the extent to which the investors are aware of the various costs that one bears while making any investment. So, the information sought and information generated is only possible after defining the information needed.

RESEARCH METHODOLOGY AND SURVEY


An in depth analysis of the data generated by own observation and collected from primary and secondary sources has been carried out. Primary sources :Secondary data: (a) Questionnaire technique (a) Mutual funds related Organizations website. (b) Journals (c) Newspapers and other magazines.

RESEARCH DESIGN
Descriptive Research

Under this type the research the facts and information already available has been used and analysed them to make evaluation of the market. Data has been collected from the Fact sheet of the various mutual fund schemes and used those data s for the research.

SAMPLE DESIGN
Population All the clients of HDFC Mutual

SAMPLE UNIT Investors and non-investors. SAMPLE SIZE This study involves 50 respondents.

SAMPLING TECHNIQUE Convenience Sampling: In convenience sampling, the selection of units from the population is based on easy availability and/or accessibility.

DATA COLLECTION

Primary Research: Primary data was obtained through questionnaires


filled by people

Secondary Research: The secondary sources of data were taken from the
various websites , books, journals, reports, articles etc. This mainly provided information about the mutual fund

ANALYSIS
All the data from primary and secondary sources, is studied and have been analyzed with the help of different techniques and presented graphically in the form of pie charts, bar diagram, line graph etc. Reasonable assumptions have been made where data is found lacking. Based on finding conclusion, a suitable suggestion has been provided in this report.

LIMITATIONS

1. Some people were not responsive 2. Possibility of error in data collection because many investors may not have given actual answer of the questionnaire 3. Sample size is limited to 50 visitors of HDFC mutual fund branch Connought Place. The sample size may not adequately represent the whole market 4. Some respondents were reluctant to divulge personal information which may affect the validity of responses

CHAPTER 4

DATA ANALYSIS
HDFC Index Fund - Sensex Plan
Fund Type Asset Size (Rs cr) Minimum Investment Launch Date Benchmark Open-Ended 47.14 (Jun-30-2011) Rs.5000 Jul 10, 2002 BSE Sensitive Index

Returns (as on Aug 23, 11) Period 1 mth 3 mths 6 mths 1 year 2 year 3 year 5 year

Re

Absol ute Return s (in %) Year 2011 2010 2009 2008 2007 2006 V Qtr 1 Qtr 2 Qtr 3 Qtr 4 -6.4 -0.7 -3.3 -2.4 0.3 44.0 15.0 16.9 0.4 1.7

-24.7 -14.1 -6.7 19.1 17.1 -5.4

-0.1 -27.0 16.6 13.6 14.9 10.6

HDFC Prudence Fund


Investment Objective | Scheme Information & NAV | Investment Pattern & Strategy | Portfolio | Returns and benchmarks | Systematic Investment Plan (SIP) Details | Fund Manager | Offer Document / Scheme Information Document (SID) | Application Form | Leaflets Value Research Rating *
HYBRID EQUITY - ORIENTED CATEGORY (24 schemes) for 3 and 5 year periods ending July 31, 2011 *Past performance is no guarantee of future results. Please click here for details on the Rating Methodology. CRISIL Mutual Fund Rank

HDFC Prudence Fund Growth Option was assigned CRISIL Mutual Fund Rank 1# in the Open End Balanced Schemes Category (out of 17 schemes) for the 2 year period ending March 31, 2011 by CRISIL. HDFC Prudence Fund Growth Option was assigned CRISIL Mutual Fund Rank 1# in the Open End Consistent Balanced Category (out of 14 schemes) for the 5 year period ending March 31, 2011 by CRISIL. # Past Performance is no guarantee of future results. Ranking Methodology The criteria used in computing the CRISIL Mutual Fund Rank are Superior Return Score based on NAVs over the 1/ 2/ 5-year period ended 31 March 2011, Sectoral concentration, Company concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL Mutual Fund Rank is no indication of the performance that can be expected from the scheme in future. Please click here for Crisil Ranking Methodology and Disclaimer for the ranking.

Investment Objective The investment objective of the Scheme is to provide periodic returns and capital appreciation over a long period of time, from a judicious mix of equity and debt investments, with the aim to prevent/ minimise any capital erosion. Basic Scheme Information

Nature of Scheme Open Ended Balanced Scheme Inception Date February 01, 1994 Option/Plan Dividend Option,Growth Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. Entry Load (For Lumpsum Purchases and investments through SIP/STP) NIL Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder. Please click here to go through the addendum. Exit Load (as a % of the Applicable NAV)

In respect of each purchase / switchin of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment.. No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

Minimum Application Amount (click here for SIP Details) For new investors :Rs.5000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter. Lock-In-Period Nil Net Asset Value Periodicity Every Business Day. Redemption Proceeds Normally dispatched within 3-4 Business days Tax Benefits (As per present Laws) Please click for details

Current Expense Ratio (#) (Effective Date 22nd May 2009)

On the first 100 crores average weekly net assets 2.50% On the next 300 crores average weekly net assets 2.25% On the next 300 crores average weekly net assets 2.00% On the balance of the assets 1.75% (#) Any change in the expense ratio will be updated within two working days.

Plan Name Dividend Option Growth Option

NAV Date 23 Aug 2011 23 Aug 2011

NAV Amount 27.9280 204.8760 TOP Pattern portfolio.

Investment The following table provides the asset The asset allocation under the respective Plans will be as follows : Sr.No. 1 2 Type of Instruments

allocation

of

the

Scheme's

Equities & Equity related instruments Debt Securities, Money Market instruments(including cash/call money)

Normal Allocation (% of Net Assets) 40 - 75% 25 - 60%

Risk Profile Medium to High Low to Medium

(Investment

in

Securitised

debt,

if

undertaken,would

not

exceed

10%

of

the

net

assets

of

the

Scheme.)

In such times when the interest rates are high, investment in debt would be more attractive versus equities and accordingly the Fund is likely to increase the debt component in the Scheme's portfolio. Similarly in times when the interest rates are low and the equity valuations are cheap,

the Scheme is likely to reduce exposure to debt and increase exposure to equities. In addition to debt and equities the scheme will also invest in money market instruments. The exact proportion in money market instruments will be a function of the liquidity needs and the attractiveness of the debt/ equity markets. At times when neither the debt market nor equities are attractive for investment, more resources may be temporarily invested in money market investments to be invested in debt/ equities at a more appropriate time. The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted under the Regulations and Guidelines. The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time. Also refer to the Section on Policy on off-shore Investments by the Scheme(s). Subject to the Regulations and the applicable guidelines, the Scheme may, engage in Stock Lending activities. Also refer to Section on Stock Lending by the Fund. If the investment in equities and related instruments falls below 40% of the portfolio or rises above 60% of the portfolio of the Scheme at any point in time, it would be endeavoured to review and rebalance the composition. Notwithstanding anything stated above, subject to the regulations, the asset allocation pattern indicated above may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It may be clearly understood that the percentages stated above are only indicative and are not absolute and that they can vary substantially depending upon the perception of the AMC, the intention being at all times to seek to protect the NAV of the scheme. Such changes will be for short term and defensive considerations. Provided further and subject to the above, any change in the asset allocation affecting the investment profile of the Scheme and amounting to a change in the Fundamental Attributes of the Scheme shall be effected in accordance with sub-regulation (15A) of regulation 18 of SEBI regulations. TOP Investment Strategy As outlined above, the investments in the Scheme will comprise both debt and equities. The Fund would invest in Debt instruments such as Government securities, money market instruments, securitised debts, corporate debentures and bonds, preference shares, quasi Government bonds, and in equity shares. In the long term, the mix between debt instruments and equity instruments is targeted between 60:40 and 40:60 respectively. The exact mix will be a function of interest rates, equity valuations, reserves position, risk taking capacity of the portfolio without compromising the consistency of dividend pay out (in the case of Dividend Plan), need for capital preservation and the need to generate capital appreciation. TOP Systematic Investment Plan (SIP) Details

Serial No. Scheme Name Minimum Application Amount(Rs.) Entry Load # Exit Load # 1 HDFC Prudence Fund - Dividend / Growth Rs.500 for Monthly & Rs.1500 for Quarterly NIL

In respect of each purchase / switch-in of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment. No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

# Applicable for SIPs registered w.e.f from August 1, 2009 Fund Mr. Prashant Jain (since Mr. Miten Lathia - Dedicated Fund Manager - Foreign Securities TOP Manager Jun 19, 03) TOP

Portfolio - Holdings (as on July 31, 2011)


Company / Issuer EQUITY & EQUITY RELATED State Bank of India ICICI Bank Ltd. Infosys Ltd. Tata Consultancy Services Ltd. Coal India Ltd. Bank of Baroda Page Industries Ltd. Bharti Airtel Ltd. Tata Motors Ltd. DVR Bharat Petroleum Corporation Ltd. Total of Top Ten Equity Holdings Total Equity & Equity Related Holdings Total Government Securities & Other Credit Exposure (aggregated holdings in a single issuer) Cash, Cash Equivalents and Net Current Assets Grand Total Average AUM for the quarter ended June 30, 2011 (Rs In Lakhs) Note : $ Sponsor TOP Returns Industry+ / Rating Banks Banks Software Software Minerals/Mining Banks Textile Products Telecom - Services Auto Petroleum Products

HDFC Prudence Fund


Date March 30, 2007 January 28, 2011 July 29, 2010 July 29, 2008 July 28, 2006 July 27, 2001 July 29, 1996 February 1, 1994

(NAV as at evaluation date 29-Jul-11, Rs.217.771 Per unit)


Period Last 1582 days Last 182 days Last 1 Year (365 days) Last 3 Years (1095 days) Last 5 Years (1827 days) Last 10 Years (3654 days) Last 15 Years (5478 days) Since Inception (6387 days) NAV Per Unit (Rs.) 110.132 206.492 202.267 113.973 89.404 16.980 8.570 10.000 Returns (%) $$ ^ 17.03** 5.46* 7.67* 24.09** 19.47** 29.03** 24.82** 21.01** Returns future

* Absolute Returns ** Compounded Annualised # CRISIL Balanced Fund Index ^ Past performance may or may not be sustained in the $$ Adjusted for the dividends declared under the scheme prior to its splitting into the Dividend and Growth Plans

TOP SIP Returns SIP Investments Total Amount Invested (Rs.) Market Value as on July 29, 2011 (Rs.) Returns (Annualised)*(%) Benchmark Returns (Annualised)(%)# Market Value of SIP in Benchmark# Since Inception 210,000 2,357,367.83 23.95% N.A. N.A. 15 Year 180,000 1,563,914.63 25.57% N.A. N.A. 10 Year 120,000 477,608.75 26.08% N.A. N.A. 5 Year 60,000 96,058.07 18.95% 8.50% 74,286.53 3 Year 36,000 52,956.15 26.90% 11.12% 42,484.74 1 Year 12,000 12,207.33 3.26% -3.10% 11,800.87

HDFC Index Fund - SENSEX Plus Plan


Investment Objective | Scheme Information & NAV | Investment Pattern & Strategy | Portfolio | Returns and benchmarks | Systematic Investment Plan (SIP) Details | Fund Manager | Offer Document / Scheme Information Document (SID) | Application Form
Value Research Rating

EQUITY - LARGE CAP CATEGORY (40 schemes) for 3 and 5 year periods ending July 31, 2011

*Past performance is no guarantee of future results. Please click here for details on the Rating Methodology. CRISIL Mutual Fund Rank

HDFC Index Fund - SENSEX Plus Plan was assigned CRISIL Mutual Fund Rank 2 # in the Open End Large Cap Oriented Equity Schemes Category (out of 30 schemes) for the 2 year period ending December 31, 2010 by CRISIL. #Past Performance is no guarantee of future results, please click here for Crisil Ranking Methodology and Disclaimer for the ranking.

Investment Objective The objective of this Plan is to invest 80 to 90% of the net assets of the Plan in companies whose securities are included in SENSEX and between 10% & 20% of the net assets in companies whose securities are not included in the SENSEX. Basic Scheme Information

Nature of Scheme Inception Date Option/Plan Entry Load (For Lumpsum Purchases and investments through SIP/STP)

Open Ended Index Linked Scheme July 17, 2002 Growth Plan. NIL Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder. Please click here to go through the addendum. NIL No Entry/ Exit Load shall be levied on bonus units For new investors :Rs.5000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter. Nil Every Business Day. Normally dispatched within 3-4 Business days Please click for details

Exit Load (as a % of the Applicable NAV) Minimum Application Amount (click here for SIP Details) Lock-In-Period Net Asset Value Periodicity Redemption Proceeds Tax Benefits (As per present Laws)

Current Expense Ratio (#) 1.00% (Effective Date 22nd May 2009) (#) Any change in the expense ratio will be updated within two working days.

Plan Name Sensex Plus Plan (Growth)

NAV Date 23 Aug 2011

NAV Amount 206.9235

TOP Investment Pattern The net assets of the Plan would be invested in such a manner that 80% to 90% of the net assets are invested in almost all stocks constituting the SENSEX in approximately the same weightage that they represent in the SENSEX. The balance 10% to 20% of the net assets of the Plan would be invested in stocks that do not form part of the SENSEX in a manner that individual stock exposures do not exceed the SEBI stipulated limits. A small portion of the net assets will be invested in money market instruments permitted by SEBI/RBI including call money market or in alternative investment for the call money market as may be provided by the RBI, to meet the liquidity requirements of the Plan. Instruments Normal Allocation Risk Profile of the Instrument Medium to High Medium to High Low to Medium

Securities covered by the SENSEX 80 to 90 Securities other than covered by SENSEX 10 to 20 Money Market Instruments, convertible bonds & cash including money at call but 0 to 5 excluding Subscription and Redemption Cash Flow Subscription Cash Flow is the subscription money in transit before deployment and Redemption Cash Flow is the money kept aside for meeting

redemptions. TOP Investment Strategy The SENSEX Plan and the Nifty Plan will be managed passively with investments in stocks in a proportion that is as close as possible to the weightages of these stocks in the respective indices. The investment strategy would revolve around reducing the tracking error to the least possible through regular rebalancing of the portfolio, taking into account the change in weights of stocks in the indices as well as the incremental collections / redemptions from these Plans. The SENSEX Plus Plan will be passively managed to the extent of 80-90% of the net assets of the Plan and would follow similar investment strategy as for the SENSEX and the Nifty Plan, for this component. The actively managed portion of 10-20% of net assets of the Plan would be invested in stocks that have been identified as having high probability to outperform the SENSEX. The Investment Manager would follow the process of in-depth research to identify such candidates from stocks other than those comprising the SENSEX, for potential investment. Pursuant to the SEBI Regulations, the respective Plans shall not make any investment in:


Risk

any unlisted security of an associate or group company of the Sponsor; or any security issued by way of private placement by an associate or group company of the Sponsor; or the listed securities of group companies of the Sponsor which is in excess of 25% of the net assets.

Control

For the SENSEX Plan, the Nifty Plan and the proportion of the SENSEX Plus Plan that would be managed similar to the SENSEX Plan, risks would be the impact cost on securities, the delayed communication of weightage changes by the index service providers and the delayed calculation of net change in assets of each of the Plans, amongst others. It is proposed to manage the risks by placing limit orders for basket trades and other trades, proactive follow-up with the service providers for daily change in weights in the respective indices as well as monitor daily inflows and outflows to and from the Fund closely. While these measures are expected to mitigate the above risks to a large extent, there can be no assurance that these risks would be completely eliminated. Risk control for the actively managed portion of the SENSEX Plus Plan would entail setting limits for single stock and single industry exposures by the Investment committee for this portion, subject to SEBI Regulations. TOP Systematic Investment Plan (SIP) Details

Serial No. 1

Scheme Name HDFC Index Fund - Sensex Plan Plus

Minimum Application Amount(Rs.) Rs.500 for Monthly & NIL Rs.1500 for Quarterly

Entry Load # NIL

Exit Load #

# Applicable for SIPs registered w.e.f from August 1, 2009 Fund Mr. Vinay Kulkarni (since Nov 21, 06) TOP Manager TOP

Portfolio - Holdings (as on July 31, 2011)


Company EQUITY & EQUITY RELATED Infosys Ltd. Reliance Industries Ltd. ICICI Bank Ltd. ITC Ltd. Housing Development Finance Corporation Ltd. $ Industry+ Software Petroleum Products Banks Consumer Non Durables Finance

Larsen & Toubro Ltd. HDFC Bank Ltd. State Bank of India Tata Consultancy Services Ltd. Bharti Airtel Ltd. Total of Top Ten Equity Holdings Total Equity & Equity Related Holdings Total Money Market Instrument & Other Credit Exposures (aggregated holdings in a single issuer) Other Cash, Cash Equivalents and Net Current Assets Grand Total Average AUM for the quarter ended June 30, 2011 (Rs In Lakhs) Note : $ Sponsor

Construction Project Banks Banks Software Telecom - Services

TOP Returns

HDFC Index Fund - Sensex Plus Plan

(NAV as at evaluation date 29Jul-11, Rs.225.752 7 Per unit)


Period Last 1582 days Last Six months (182 days) Last 1 Year (365 days) Last 3 Years (1095 days) Last 5 Years (1827 days) Last 10 Years (3654 days) Since Inception (3299 days) ** Compounded Returns NAV Per Unit (Rs.) 139.6805 223.0872 217.3504 148.078 113.466 N.A 32.161 Annualised Index) Returns (%) ^ 11.71** 1.19* 3.87* 15.09** 14.73** N.A. 24.06** Returns

Date March 30, 2007 January 28, 2011 July 29, 2010 July 29, 2008 July 28, 2006 July 27, 2001 July 17, 2002

* Absolute Returns # SENSEX (Total ^ Past performance may or may not be sustained in the future

TOP SIP Returns SIP Investments Total Amount Invested (Rs.) Market Value as on July 29, 2011 (Rs.) Returns (Annualised)*(%) Benchmark Returns (Annualised)(%)# Market Value of SIP in Benchmark# Since Inception 109,000 305,986.64 21.79% 20.14% 282,623.92 15 Year N.A. N.A. N.A. N.A. N.A. 10 Year N.A. N.A. N.A. N.A. N.A. 5 Year 60,000 81,106.05 12.04% 9.52% 76,199.03 3 Year 36,000 46,600.28 17.60% 14.89% 44,848.39 1 Year 12,000 11,669.98 -5.13% -7.49% 11,516.16

HDFC Top 200 Fund Investment Objective | Scheme Information & NAV | Investment Pattern & Strategy | Portfolio | Returns and benchmarks | Systematic Investment Plan (SIP) Details | Fund Manager | Offer Document / Scheme Information Document (SID) | Application Form | Leaflets
Value Research Rating

EQUITY - LARGE & MID CAP CATEGORY (60 schemes) for 3 and 5 year periods ending July 31, 2011 *Past performance is no guarantee of future results. Please click here for details on the Value Research Rating Methodology Morningstar Rating- Elite #

"'Elite' Rating: These funds represent Morningstar analysts' highest conviction picks. Morningstar awards the rating to funds that it believes are capable of outperforming their peers over the long term. To earn this rating, a fund must be significantly better than its peers in most key respects. #Past performance is no guarantee of future results, please click here for details on the Morningstar Rating Methodology & Desclaimer. CRISIL Mutual Fund Rank

HDFC Top 200 Fund Growth Option was assigned CRISIL Mutual Fund Rank 1 # in the Open End Large Cap Oriented Equity Schemes Category (out of 34 schemes) for the 2 year period ending March 31, 2011 by CRISIL. HDFC Top 200 Fund Growth Option was assigned CRISIL Mutual Fund Rank 1 # in the Open End Consistent Equity Category (out of 40 schemes) for the 5 year period ending March 31, 2011 by CRISIL. # Past Performance is no guarantee of future results. Ranking Methodology The criteria used in computing the CRISIL Mutual Fund Rank are Superior Return Score based on NAVs over the 1/ 2/ 5-year period ended 31 March 2011, Sectoral concentration, Company concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied by the scheme. The CRISIL Mutual Fund Rank is no indication of the performance that can be expected from the scheme in future. Please click here for Crisil Ranking Methodology and Disclaimer for the ranking.

Investment Objective To generate long term capital appreciation from a portfolio of equity and equity-linked instruments primarily drawn from the companies in BSE 200 index. Basic Scheme Information

Nature of Scheme Open Ended Growth Scheme Inception Date October 11, 1996 Option/Plan Dividend Option,Growth Option. The Dividend Option offers Dividend Payout and Reinvestment Facility. Entry Load (For Lumpsum Purchases and investments through SIP/STP) NIL Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment of various factors including the service rendered by the ARN Holder. Please click here to go through the addendum. Exit Load (as a % of the Applicable NAV)

In respect of each purchase / switchin of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment.. No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

Minimum Application Amount (click here for SIP Details) For new investors :Rs.5000 and any amount thereafter. For existing investors : Rs. 1000 and any amount thereafter. Lock-In-Period Nil Net Asset Value Periodicity Every Business Day. Redemption Proceeds Normally dispatched within 3-4 Business days Tax Benefits (As per present Laws) Please click for details

Current Expense Ratio (#) (Effective Date 22nd May 2009)

On the first 100 crores average weekly net assets 2.5000% On the next 300 crores average weekly net assets 2.25% On the next 300 crores average weekly net assets 2.00% On the balance of the assets 1.75% (#) Any change in the expense ratio will be updated within two working days.

Plan Name Dividend Option Growth Option

NAV Date 23 Aug 2011 23 Aug 2011

NAV Amount 40.9000 188.8910 TOP Pattern

Investment The asset allocation under the Scheme will be as follows : Sr.No. 1 2 Asset Type Equities and Equity Related Instruments Debt & Money Market Instruments

(% of Portfolio) Risk Profile Upto 100% (including use of derivatives for hedging and other uses as Medium to High permitted by prevailing SEBI Regulations) Balance in Debt & Money Market Instruments Low to Medium

Investment

in

Securitised

debt,

if

undertaken,

would

not

exceed

20%

of

the

net

assets

of

the

scheme.

The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and and other uses as may be permitted under the regulations and guidelines. The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time. Subject to the Regulations and the applicable guidelines, the Scheme may, engage in Stock Lending activities. Also refer to Section on Stock Lending by the Fund. If the investment in equities and related instruments falls below 65% of the portfolio of the Scheme at any point in time, it would be endeavoured to review and rebalance the composition. Notwithstanding anything stated above, subject to the regulations, the asset allocation pattern indicated above may change from time to time, keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It may be clearly understood that the percentages stated above are only indicative and are not absolute and that they can vary substantially depending upon the perception of the AMC, the intention being at all times to seek to protect the NAV of the scheme. Such changes will be for short term and defensive considerations. The Trustee may from time to time at their absolute discretion review and modify the strategy, provided such modification is in accordance with the Regulations or in the event of a discontinuation of or change in the compilation or the constituents of the BSE 200 Index. Provided further and subject to the above, any change in the asset allocation affecting the investment profile of the Scheme and amounting to a change in the Fundamental Attributes of the Scheme shall be effected in accordance with sub-regulation (15A) of regulation 18 of SEBI regulations. TOP Investment Strategy The investment strategy of primarily restricting the equity portfolio to the BSE 200 Index scrips is intended to reduce risks while maintaining steady growth. Stock specific risk will be minimised by investing only in those companies / industries that have been thoroughly researched by the investment manager's research team. Risk will also be reduced through a diversification of the portfolio TOP Systematic Investment Plan (SIP) Details

Serial No. Scheme Name Minimum Application Amount(Rs.) Entry Load # Exit Load # 1 HDFC Top 200 Fund - Dividend / Growth Rs.500 for Monthly & Rs.1500 for Quarterly NIL

In respect of each purchase / switch-in of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year from the date of allotment No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

# Applicable for SIPs registered w.e.f from August 1, 2009 Fund Mr. Prashant Jain (since Mr. Miten Lathia - Dedicated Fund Manager - Foreign Securities TOP Manager Jun 19, 03) TOP

Portfolio - Holdings (as on July 31, 2011)


Company EQUITY & EQUITY RELATED State Bank of India ICICI Bank Ltd. Infosys Ltd. ITC Ltd. Bharti Airtel Ltd. Reliance Industries Ltd. Tata Consultancy Services Ltd. Bank of Baroda Coal India Ltd. Tata Motors Ltd. DVR Total of Top Ten Equity Holdings Total Equity & Equity Related Holdings Total Money Market Instrument & Other Credit Exposures (aggregated holdings in a single issuer) Cash margin Other Cash, Cash Equivalents and Net Current Assets Grand Total Average AUM for the quarter ended June 30, 2011 (Rs In Lakhs) Note : $ Sponsor TOP Returns Industry+ Banks Banks Software Consumer Non Durables Telecom - Services Petroleum Products Software Banks Minerals/Mining Auto

HDFC Top 200 Fund


Date March 30, 2007 January 28, 2011 July 29, 2010 July 29, 2008 July 28, 2006 July 27, 2001 July 29, 1996 October 11, 1996

(NAV as at evaluation date 29-Jul-11, Rs.208.584 Per unit)


Period Last 1582 days Last Six months (182 days) Last 1 Year (365 days) Last 3 Years (1095 days) Last 5 Years (1827 days) Last 10 Years (3654 days) Last 15 Years (5478 days) Since Inception (5404 days) NAV Per Unit (Rs.) 104.504 204.957 200.034 119.685 86.673 12.980 N.A 10.000 Returns (%) $$ ^ 17.29** 1.77* 4.27* 20.34** 19.18** 31.97** N.A. 24.43** Returns future

* Absolute Returns ** Compounded Annualised # BSE 200 ^ Past performance may or may not be sustained in the $$ Adjusted for the dividends declared under the scheme prior to its splitting into the Dividend and Growth Plans

TOP SIP Returns SIP Investments Total Amount Invested (Rs.) Market Value as on July 29, 2011 (Rs.) Returns (Annualised)*(%) Benchmark Returns (Annualised)(%)# Market Value of SIP in Benchmark# Since Inception 178,000 1,562,060.58 26.00% 16.09% 658,853.59 15 Year N.A. N.A. N.A. N.A. N.A. 10 Year 120,000 567,107.75 29.26% 18.70% 320,525.97 5 Year 60,000 91,324.07 16.87% 8.76% 74,766.95 3 Year 36,000 49,799.86 22.38% 14.50% 44,601.11 1 Year 12,000 11,683.94 -4.91% -10.02% 11,349.69

The survey is done to find out the major among investment alternative, investment objectives and the factor which effect the investment decision in mutual fund of investors in HDFC AMC, New Delhi, Connought Place The questionnaire was prepared and administrated to the investors to collect the views and opinion for the research.

From the above table it can be seen that T.V & newspapers (23%) has an upper edge awareness of the mutual fund followed by magazines (20%). Do you have any future plan for investment?

Yes No

32 18

From the above table it is quite clear that mostly respondents are interested to invest in mutual fund in future. As the above graph show that 64% respondents are interested to invest in future. If yes, in which scheme?

Nature of scheme Equity Balanced Debt

No. of respondents 15 31 17

From the above table it is quite clear that 48.48% respondents have investment in Balanced Fund followed by debt fund (27.27%) and equity fund (24.24%).

If not, then what other option(s) do you prefer to invest? Fixed deposits Recurring deposits If others, please specify. post office schemes

Options
Fixed deposits Post office schemes Recurring deposits Total

frequency 22 18 8 48

what is the mode of information that you use for investment in mutual funds?
a) Advertisement b) Agents c) Seminar d) Work shops Options
Advertisements Agents Seminar Workshop total Frequency 22 12 7 9 50 percentage 44% 24% 14% 18% 100

Interpretation: It means that all the modes of information are not the same. Advertisement is more popular

In which sector do you prefer to invest your money? Options


Government sector Private sector total Frequency 27 23 50 Percentages 54 46 100

frequency

46% 54%

government sector private sector

The Risk-Return Trade-off The most important relationship to understand is the risk-return trade-off. Higher the risk greater the returns/loss and lower the risk lesser the returns/loss. Hence it is upto you, the investor to decide how much risk you are willing to take. In order to do this you must first be aware of the different types of risks involved with your investment decision. Market Risk: Sometimes prices and yields of all securities rise and fall. Broad outside influences affecting the market in general lead to this. This is true, may it be big corporations or smaller mid-sized companies. This is known as Market Risk. A Systematic Investment Plan (SIP) that works on the concept of Rupee Cost Averaging (RCA) might help mitigate this risk. Credit Risk: The debt servicing ability (may it be interest payments or repayment of principal) of a company through its cashflows determines the Credit Risk faced by you. This credit risk is measured by independent rating agencies like CRISIL who rate companies and their paper. A AAA rating is considered the safest whereas a D rating is considered poor credit quality. A well-diversified portfolio might help mitigate this risk. Inflation Risk: Things you hear people talk about: "Rs. 100 today is worth more than Rs. 100 tomorrow." "Remember the time when a bus ride costed 50 paise?" "Mehangai Ka Jamana Hai." The root cause, Inflation. Inflation is the loss of purchasing power over time. A lot of times people make conservative investment decisions to protect their capital but end up with a sum of money that can buy less than what the principal could at the time of the investment. This happens when inflation grows faster than the return on your investment. A well-diversified

portfolio with some investment in equities might help mitigate this risk. Interest Rate Risk: In a free market economy interest rates are difficult if not impossible to predict. Changes in interest rates affect the prices of bonds as well as equities. If interest rates rise the prices of bonds fall and vice versa. Equity might be negatively affected as well in a rising interest rate environment. A well-diversified portfolio might help mitigate this risk. Political/Government Policy Risk: Changes in government policy and political decision can change the investment environment. They can create a favorable environment for investment or vice versa. Liquidity Risk: Liquidity risk arises when it becomes difficult to sell the securities that one has purchased. Liquidity Risk can be partly mitigated by diversification, staggering of maturities as well as internal risk controls that lean towards purchase of liquid securities. Various investment options in Mutual Funds offer To cater to different investment needs, Mutual Funds offer various investment options. Some of the important investment options include: Growth Option: Dividend is not paid-out under a Growth Option and the investor realises only the capital appreciation on the investment (by an increase in NAV). Dividend Payout Option Dividends are paid-out to investors under the Dividend Payout Option. However, the NAV of the mutual fund scheme falls to the extent of the dividend payout. Dividend Re-investment Option Here the dividend accrued on mutual funds is automatically re-invested in

purchasing additional units in open-ended funds. In most cases mutual funds offer the investor an option of collecting dividends or re-investing the same. Retirement Pension Option Some schemes are linked with retirement pension. Individuals participate in these options for themselves, and corporates participate for their employees. Insurance Option Certain Mutual Funds offer schemes that provide insurance cover to investors as an added benefit. Systematic Investment Plan (SIP) Here the investor is given the option of preparing a pre-determined number of post-dated cheques in favour of the fund. The investor is allotted units on a predetermined date specified in the offer document at the applicable NAV.

Systematic Withdrawal Plan (SWP) As opposed to the Systematic Investment Plan, the Systematic Withdrawal Plan allows the investor the facility to withdraw a pre-determined amount / units from his fund at a pre-determined interval. The investor's units will be redeemed at the applicable NAV as on that day. Future of Mutual Funds in India By December 2004, Indian mutual fund industry reached Rs 1,50,537 crore. It is estimated that by 2010 March-end, the total assets of all scheduled commercial banks should be Rs 40,90,000 crore. The annual composite rate of growth is expected 13.4% during the rest of

the decade. In the last 5 years we have seen annual growth rate of 9%. According to the current growth rate, by year 2010, mutual fund assets will be double.

Basis for Analysis Net Asset Value (NAV) is the best parameter on which the performance of a mutual fund can be studied. We have studied the performance of the NAV based on the compounded annual return of the Scheme in terms of appreciation of NAV, dividend and bonus issues. WE have compared the Annual returns of various schemes to get an idea about their relative standings. VALUATION OF MUTUAL FUND The net asset value of the Fund is the cumulative market value of the assets Fund net of its liabilities. In other words, if the Fund is dissolved or liquidated, by selling off all the assets in the Fund, this is the amount that the shareholders would collectively own. This gives rise to the concept of net asset value per unit, which is the value, represented by the ownership of one unit in the Fund. It is calculated simply by dividing the net asset value of the Fund by the number of units. However, most people refer loosely to the NAV per unit as NAV, ignoring the per unit. We also abide by the same convention. Calculation of NAV The most important part of the calculation is the valuation of the assets owned by the Fund. Once it is calculated, the NAV is simply the net value of assets divided by the number of units outstanding. The detailed methodology for the calculation of the net asset value is given below. The net asset value is the actual value of a unit on any business day. NAV is the barometer of the performance of the scheme. The net asset value is the market value of the assets of the scheme minus

its liabilities and expenses. The per unit NAV is the net asset value of the scheme divided by the number of the units outstanding on the valuation date.

CHAPTER 5

FINDINGS AND CONCLUSION


In the last decade we have seen enormous growth in the size of mutual fund industry in India. Especially the private sector has shown tremendous growth. With unmatched advances on the information technology, increased role of the institutional investors in the stock market and the SEBI

still in its infancy, the mutual fund industry players gained unparalleled and unchecked power. To ensure the safety of investment of small investors against whims and fancies of professional fund managers have become the need of the hour. The present study has been undertaken to impart awareness of the functioning of mutual funds and also to provide information, knowledge and insight for taking investments decision pragmatically and also simultaneously ward off the impending risk in taking investments decision. People have started considering mutual funds as an investment option in comparison with other investment avenues. Hence, it can be said that Indian mutual funds industry is expected to increase, but there are lot of challenges ahead for the various AMCs to get an edge over the other. The managers of these mutual funds needs to sharpen their skills further so as to manage the pooled money in total professional way. Market timing, during both the bull and the bear run, is the sole factor that would ensure their long-term survival in the trade. SEBI and other controlling bodies of capital markets have started monitoring the market movements more closely. A consistent effort is being made by them to refine the working of capital markets and mutual funds. This is expected to go a long way to further strengthen the confidence of investors in the mutual funds. Precisely, mutual funds invest their funds in the stock markets, which in turn depend upon the economic performance and political stability of that economy on one hand and funds professional management on the other. Hence, with flourishing business of mutual funds in India, conclusive environment for capital markets expected to be provided by the government and positive initiatives being taken by SEBI to streamline mutual funds business, all now rest upon the professional fund managers that how they sharpen their market timing skills and diversify product range so to make funds tailor made to the needs of every investor to provide handsome returns to them who entrust their hard earned money to the fund managers

As reported in the study, mutual funds, too, can earmark and try to improve upon their weak areas regarding the factors that influence investors decision making as regards choice of mutual fund, the facilities or options they expect from a mutual fund, the criteria they generally believe to be the best for performance appraisal of a fund, their general perception towards mutual funds at present and the problems which they encountered that resulted in development of aversion towards mutual funds in the minds of investors

SUGGESTIONS AND RECOMMENDATIONS

I have surveyed the investment behavior of people in HDFC AMC, New DelhiConnought Place.I interacted with them and try to analyze their behavior and the various factors on which the final investment decision depends. Because of improper knowledge, improper guidance and lack of awareness they dont get the proper return that can fulfill their opportunity cost, time value of money and inflation requirement. According to market observation, it is time now to translate the knowledge, insights and perspectives gained so far into specific guidelines for investment decision making. Project leads to approach the recommendation for wrathful investment in two ways: 1. Organizational concern 2. Investors concern

Suggestions to Organizational concern: The organization should only work with defined goals and cannot take up larger objectives that are not well defined. A fund manager should closely follow the objectives stated in the offer document, because financial plans of investors are chosen using these objectives. The basis of genuine investment advice should be financial planning to suit the investor's situation The scheme should be more flexible or tailor-made if possible. Organization should recommend the appropriate asset allocation and specific investments Transparency should be maintained regarding investment of funds. Suggestions to Investor concern:

The investor should rank their priorities for investment. The investor should carefully examine different aspects of the scheme. They should clear about their risk taking capacity. In the initial stage of their career, they should not take high risk in enthusiasm. They should consider their opportunity cost and time value of money while deciding their expected return. They should invest in more units when the market is low; less when the markets are high so that the average cost of purchase reduces. They should periodically review and revise the portfolio.

BIBLIOGRAPHY
HDFC Fund Factsheet http://www.mutualfundsindia.com/

http://www.hdfcfund.com/indexHome.jsp http://www.valueresearchonline.com/ Value Research, Mutual Fund Insight, 15 Jan-14 Feb issue 2007 http://www.investorideas.com/IiI/News/022007.asp HDFC mutual fund Magazine www.hseindia.com www.nseindia.com

REFERENCE BOOKS FINANCIAL INSTITUTIONS AND MARKETS - L.M.BHOLE INVESTMENT MANAGEMENT - V.K.BHALLA

ANNEXURE

ANNEXURE
DETAILS OF QUESTIONNAIRE

1. 2. 3. 4.

Name: Address: Contact No.: Age group: 35-25 50-35 50 onwards

5. Income range (Annually)

Up to 1.5lakhs 3.0-1.5 lakhs 5lakh 6. At present you invest in

5.0-3.0 lakhs

<

a. FD e. Stock market b. PF f. Mutual funds c. Bonds g. Real estates d. Post Office h. Insurance (i) LIC, (ii) Others(mediclaim,general insurance, etc) __________ ii. gold 7. Among various investment alternatives you think is best for you and why? __________________________________________________________________

8. Objective of your investment is? a. Rate of return. b. Security c. Tax shelter d. Marketability e. All the above 9. Who influence your investment decision the most? a. Financial experts b. Friends c. Attractive advertisements d. Your own decision 10. Awareness towards mutual fund through a. T.V & Newspapers _________ b. Magazines c. Friends & Relatives d. Financial Advisor e. Others I. Below 1 year _________ _________ _________ _________ _________ _________ _________ _________

11. What is the most preferred period of investment in the mutual fund? II. 1-3 year III. 3-5 year IV. Above 5 year

12. Do you have any future plan for investing in mutual funds? Yes No

13. IF yes, in which fund Equity Balanced Debt

14. Any other information or suggestions ____________________________________________________________________________ __________________________________________________

The respondents were given the names of all the major investment alternatives, objective behind investment and the factors influencing the investment decision. They were asked to choose the option which according to them is the best in questionnaire. The surveyed data is collected based on three categories. 1. Age group. a. 25-35 b. 35-50 c. 50 onwards 2. Profession a. Business b. Employee 3. Income a. Up to 1.5 Lakhs b. 5- 3.0 Lakhs c. 3.0-5.0 Lakhs d. 5.0 Lakhs onwards

In this report, age group is considered for analysis. No. Of respondent In this report, the no of respondent 100 has been considered for survey on the basis of three different age groups. Graph shows respondents, falling in different Age group.

N . O R SP N E T O F E O DN

50O W D N AR S 20%

25-35 25%

35-50 55%

25-35

35-50

50- O W D N AR S

shows respondents, base on different Age group. Age group v/s profession: The survey looks at the representative sample of 100 people in three key Age groups of 25-35, 35-50 and 50 onwards. The Graph shows the classification of respondents based on profession (business and employee) respectively. The graph shows the

NO. OF RESPONDENT

AGE VS PROFESSION
40 30 20 10 0 25-35 35-50 AG G E ROUP BUSINESS EM PLOYEE 50- ONWARDS 9 16 26 29 12

classification of respondents on the basis of profession.

Age group v/s income: The survey looks at the representative sample of 100 people in three key Age groups of 25-35, 35-50 and 50 onwards. The Graph shows the classification of respondents based on income (up to 1.5 lakhs, 1.5-3.0 lakhs, 3.0-5.0 lakhs and 5.0 lakhs onwards) respectively.

AGE VS. INCOME


NO. OF RESPONDENT 25 20 15 10 5 0 25-35 35-50 AGE GROUP INCOME 0-1.5LAKS 1.5-3.0LAKHS 3.0-5.0LAKHS 5.0 ONWARDS 50- ONWARDS 6 10 4 5 8 3 15 20 12 7 6 4

classification of respondents on the basis of income.

Analysis of age groups-i (25-35): The survey looks at the representative sample of 25 people in first Age group. Investment alternative plan

INVESTMENT ALT. IN GROUP-I

INSURANCE 1 8%

FD 6%

PF 1 6% BONDS 2% P OST OFFICE 9%

REAL ESTATE 1% 1

MUTUAL FUND 1 6%

STOCK MRK. 21 %

FD

PF

BONDS

POST OFFICE

STOCK MRK.

MUTUAL FUND

REAL STATE

INSURANCE

It has been found that people in this age group mostly prefer stock market 21%and mutual funds18% among investment alternatives their next preference is insurance, as they want to secure the future in initial period of earnings. PF 16%, real estate 11%, post office 9%, and FD 6% are also in the list of investors of this age group. Bonds 2% are the least preferred alternative. This is mostly because people in this age group have no dependents and they pursue growth aggressively as risk taking ability is high at this stage.

Ranking of investment objectives

RANKING OF INVESTM ENT OBJECTIVES

A LL THE A B OVE 1 2% T A X SHELT ER 8% SEC UR ITY 1 2% R A TE OF R ET UR N 44%

M A R KE T A B ILIT Y 24%

R ATE OF R ETURN MARKETABILITY SECURITY TAX SHELTER ALL THE ABOVE

The above graph shows that rate of return 44% is top priority among people in this age group followed by marketability 24%. People of this age group are more aggressive so that they do not take much care on security factor i.e; 12% because they want high returns and are ready to take risk. 8% people of this age group take their investment decision keeping tax benefits in mind.

Ranking of influencing factor, in investment decision The graph shows that investment decision in this age group are mostly influenced by friends and relatives 40% followed by their own decision 32%. After that, financial expert 20% influence them, and they are very little 8% influenced by attractive advertisements.

RANKING O F INFL UENCING FACTO RS

A T T R A C T IVE A D VE R T IS E M E N T 8% F IN A N C IA L E XP E R T S 20% F R IE N D S & R E LA T IVE S 40%

O WN D E C IS IO N 32%

FRIENDS & RELA TIV ES N DECISION FINA NCIA L EXPERTS TTRA CTIV E A DV ERTISEMENT OW A

Analysis of age groups -II (35-50): The survey looks at the representative sample of 55 people in second Age group.

Investment alternative plan


INVESTMEN ALT. IN GROUP-II

INSURANCE 20%

FD 20%

REAL ESTATE 1 3% MUTUAL FUND 1% 1 STOCK MRK. 1 0%

PF 1 4% BONDS 7% P OST OFFICE 5%

FD

PF

BONDS

POST OFFICE

STOCK MRK.

MUTUAL FUND

REAL ESTATE

INSURANCE

From the above graph, we find that insurance 20% and FD 20% is the first choice among people in this age group followed by real estate 13%. Mutual funds 11%, stock market 10%, bonds 7% are the other investment alternatives. This shows that people in this age group have start lowering risk in investment portfolio by moving funds to safer options. Ranking of investment objectives

RANKING OF INVESTM ENT OBJECTIVES


ALL THE ABOVE 1 8% MARKETABILITY 1 2%

SECURITY 28%

RATE OF RETURN 1 8%

TAX SHELTER 24%

SECURITY TAX SHELTER RATE OF RETURN MARKETABILITY ALL THE ABOVE

The above graph shows that security 28% is top priority among people in this age group followed by tax shelter24%. In this stage, their earnings are now balanced that is why they are giving near about equal preference to all the objectives. That is why marketability 18%, rate of return and all the above option (both 18%) are not varying too much.

Ranking of influencing factor, in investment decision


RANKING OF INFLUENCING FACTORS
ATTRACTIVE ADVERTISEMENT 4% FINANCIAL EXP ERTS 1 8% OWN DECISION 25%

FRIENDS & RELATIVES 53%

OWN DECISION

FRIENDS & RELATIVES

FINANCIAL EXP ERTS

ATTRACTIVE ADVERTISEMENT

The above graph shows that investment decision in this age group are mostly influenced by friends and relatives 53% followed by their own decision 25%. After that, financial expert 18% influence them, and they are very little 4% influenced by attractive advertisements.

Analysis of age groups-iii (50 onwards): The survey looks at the representative sample of 20 people in third Age group. Investment alternative plan

RANKING ON INVESTMENT ALTERNATIVES


INSURANCE 4% REAL ESTATE 1 7% M UTUA L FUND 1 4% STOCK M RK. 6%

FD 1 0% PF 1 9% BONDS 8%

P OST OFFICE 22%

FD ST OC K M R K.

PF

B ON DS

P OST OF F IC E

M UT UA L F UN D R E A L E ST A T E IN SUR A N C E

From the above graph, we find that people in this age group are investing more in non-marketable financial assets i.e; Post office 22%, PF 19%, FD 10%, Bonds 9 %. This is mainly because people in this age group are planning for retirement and they are not in mood of taking risk. That is why they are going for safe and secure investment option alternatives.

Ranking of investment objectives

RANKING OF INVESTMENT OBJECTIVES


M A R KE T A B ILIT Y 4% A LL T H E A B OVE 7% R A T E OF R E T UR N 9% S E C UR IT Y 51 % T A X S H E LT E R 29%

SECURITY TA X SHELTER RA TE OF RETURN A LL THE A BOV E MA RKETA BILITY

The above graph shows that security 51% is top priority among people in this age group followed by tax shelter29%. They are very less interested towards marketability 4%, as they want a fixed return with minimum risk as they are concentrating more on security so they do not expecting high rate of return i.e; 9%. Ranking of influencing factor, in investment decision

RANKING O F INF L U EN CING F ACT O R

A TTRA CTIV E A DV ERTISEMENT FINA NCIA L EXPERTS 0% 20% OW N DECISION 50% FRIENDS & RELA TIV ES 30%

OW N DECISIONFRIENDS & RELA TIV ES FINA NCIA L EXPERTS TTRA CTIV E A DV ERTISEMENT A

The above graph shows that investment decision in this age group are mostly made by investors themselves i.e; 50%, after that friends and relatives 30% comes into the picture. After that, financial expert 20% influence them, and they are not at all influenced by attractive advertisements.

According to SEBI (Securities and Exchange Board of India), following information is available with regard to mutual funds: Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from experts and consultants including agents and distributors of mutual funds schemes while making investment decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions. What is 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. How is a mutual fund set up? 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. What is Net Asset Value (NAV) of a scheme? The performance of a particular scheme of a mutual fund is denoted by Net Asset Value (NAV).

Mutual funds invest the money collected from the investors in securities markets. In simple words, Net Asset Value is the market value of the securities held by the scheme. Since market value of securities changes every day, NAV of a scheme also varies on day to day basis. The NAV per unit is the market value of securities of a scheme divided by the total number of units of the scheme on any particular date. For example, if the market value of securities of a mutual fund scheme is Rs 200 lakhs and the mutual fund has issued 10 lakhs units of Rs. 10 each to the investors, then the NAV per unit of the fund is Rs.20. NAV is required to be disclosed by the mutual funds on a regular basis - daily or weekly - depending on the type of scheme. What are sector specific funds/schemes? These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents. E.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/industries. While these funds may give higher returns, they are more risky compared to diversified funds. Investors need to keep a watch on the performance of those sectors/industries and must exit at an appropriate time. They may also seek advice of an expert. What are Tax Saving Schemes? These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues. E.g. Equity Linked Savings Schemes (ELSS). Pension schemes launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest pre-dominantly in equities. Their growth opportunities and risks associated are like any equity-oriented scheme. What is a Fund of Funds (FoF) scheme? A scheme that invests primarily in other schemes of the same mutual fund or other mutual funds is known as a FoF scheme. A FoF scheme enables the investors to achieve greater diversification through one scheme. It spreads risks across a greater universe. What is a sales or repurchase/redemption price?

The price or NAV a unit holder is charged while investing in an open-ended scheme is called sales price. It may include sales load, if applicable. Repurchase or redemption price is the price or NAV at which an open-ended scheme purchases or redeems its units from the unit holders. It may include exit load, if applicable. What is an assured return scheme? Assured return schemes are those schemes that assure a specific return to the unit holders irrespective of performance of the scheme. A scheme cannot promise returns unless such returns are fully guaranteed by the sponsor or AMC and this is required to be disclosed in the offer document. Investors should carefully read the offer document whether return is assured for the entire period of the scheme or only for a certain period. Some schemes assure returns one year at a time and they review and change it at the beginning of the next year.

Can a mutual fund change the asset allocation while deploying funds of investors? Considering the market trends, any prudent fund managers can change the asset allocation i.e; he can invest higher or lower percentage of the fund in equity or debt instruments compared to what is disclosed in the offer document. It can be done on a short term basis on defensive considerations i.e; to protect the NAV. Hence the fund managers are allowed certain flexibility in altering the asset allocation considering the interest of the investors. In case the mutual fund wants to change the asset allocation on a permanent basis, they are required to inform the unit holders and giving them option to exit the scheme at prevailing NAV without any load. How to invest in a scheme of a mutual fund? Mutual funds normally come out with an advertisement in newspapers publishing the date of launch of the new schemes. Investors can also contact the agents and

distributors of mutual funds who are spread all over the country for necessary information and application forms. Forms can be deposited with mutual funds through the agents and distributors who provide such services. Now a day, the post offices and banks also distribute the units of mutual funds. However, the investors may please note that the mutual funds schemes being marketed by banks and post offices should not be taken as their own schemes and no assurance of returns is given by them. The only role of banks and post offices is to help in distribution of mutual funds schemes to the investors. Investors should not be carried away by commission/gifts given by agents/distributors for investing in a particular scheme. On the other hand they must consider the track record of the mutual fund and should take objective decisions. How much should one invest in debt or equity oriented schemes? An investor should take into account his risk taking capacity, age factor, financial position, etc. As already mentioned, the schemes invest in different type of securities as disclosed in the offer documents and offer different returns and risks. Investors may also consult financial experts before taking decisions. Agents and distributors may also help in this regard. Can a mutual fund change the nature of the scheme from the one specified in the offer document? Yes. However, no change in the nature or terms of the scheme, known as fundamental attributes of the scheme e.g. structure, investment pattern, etc. can be carried out unless a written communication is sent to each unit holder and an advertisement is given in one English daily having nationwide circulation and in a newspaper published in the language of the region where the head office of the mutual fund is situated. The unit holders have the right to exit the scheme at the prevailing NAV without any exit load if they do not want to continue with the scheme. The mutual funds are also required to follow similar procedure while converting the scheme form close-ended to open-ended scheme and in case of change in sponsor. How will an investor come to know about the changes, if any, which may occur in the mutual fund?

There may be changes from time to time in a mutual fund. The mutual funds are required to inform any material changes to their unit holders. Apart from it, many mutual funds send quarterly newsletters to their investors. At present, offer documents are required to be revised and updated at least once in two years. In the meantime, new investors are informed about the material changes by way of addendum to the offer document till the time offer document is revised and reprinted. How to know the performance of a mutual fund scheme? The performance of a scheme is reflected in its net asset value (NAV) which is disclosed on daily basis in case of open-ended schemes and on weekly basis in case of close-ended schemes. The NAVs of mutual funds are required to be published in newspapers. The NAVs are also available on the web sites of mutual funds. All mutual funds are also required to put their NAVs on the web site of Association of Mutual Funds in India (AMFI) www.amfiindia.com and thus the investors can access NAVs of all mutual funds at one place The mutual funds are also required to publish their performance in the form of halfyearly results which also include their returns/yields over a period of time i.e; last six months, 1 year, 3 years, 5 years and since inception of schemes. Investors can also look into other details like percentage of expenses of total assets as these have an affect on the yield and other useful information in the same half-yearly format. The mutual funds are also required to send annual report or abridged annual report to the unit holders at the end of the year. Various studies on mutual fund schemes including yields of different schemes are being published by the financial newspapers on a weekly basis. Apart from these, many research agencies also publish research reports on performance of mutual funds including the ranking of various schemes in terms of their performance. Investors should study these reports and keep themselves informed about the performance of various schemes of different mutual funds.

Investors can compare the performance of their schemes with those of other mutual funds under the same category. They can also compare the performance of equity oriented schemes with the benchmarks like BSE Sensitive Index, S&P CNX Nifty, etc. On the basis of performance of the mutual funds, the investors should decide when to enter or exit from a mutual fund scheme. How to choose a scheme for investment from a number of schemes available? As already mentioned, the investors must read the offer document of the mutual fund scheme very carefully. They may also look into the past track record of performance of the scheme or other schemes of the same mutual fund. They may also compare the performance with other schemes having similar investment objectives. Though past performance of a scheme is not an indicator of its future performance and good performance in the past may or may not be sustained in the future, this is one of the important factors for making investment decision. In case of debt oriented schemes, apart from looking into past returns, the investors should also see the quality of debt instruments which is reflected in their rating. A scheme with lower rate of return but having investments in better rated instruments may be safer. Similarly, in equities schemes also, investors may look for quality of portfolio. They may also seek advice of experts. If mutual fund scheme is wound up, what happens to money invested? In case of winding up of a scheme, the mutual funds pay a sum based on prevailing NAV after adjustment of expenses. Unit holders are entitled to receive a report on winding up from the mutual funds which gives all necessary details. How can the investors redress their complaints? Investors would find the name of contact person in the offer document of the mutual fund scheme that they may approach in case of any query, complaints or grievances. Trustees of a mutual fund monitor the activities of the mutual fund. The names of the directors of asset Management Company and trustees are also given in the offer documents. Investors should approach the concerned Mutual Fund / Investor Service Centre of the Mutual Fund with their complaints,

If the complaints remain unresolved, the investors may approach SEBI for facilitating redressal of their complaints. On receipt of complaints, SEBI takes up the matter with the concerned mutual fund and follows up with it regularly.