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A PROJECT REPORT
ON
In-depth analysis of mutual fund policy and strategy in
Indian scenario
JAGANNATH INTERNATIONAL
MANAGEMENT SCHOOL, KALKAJI
BY:
AVROHIT GUPTA
(ROLL NO.17)
AT
HDFC MUTUAL FUND(1ST FLOOR, PRAKASH DEEP BUILDING
CONNAUGHT PLACE NEW DELHI)
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DATE:
TO
THE DEAN,
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL,
KALKAJI,
NEW DELHI-19
Dear sir,
This is to certify that Mr. Avrohit Gupta, Student of PGDM (2011-2013)
Batch has undergone summer internship from 10 th May 2012 to 10th July
2012 with us. During the training he has successfully completed a project on
In-depth analysis of mutual fund policy and strategy in Indian scenario.
His performance during the training period was very good.
Authorized signatory
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TO WHOMSOEVER IT MAY CONCERN
This is to certify that AVROHIT GUPTA Enrollment No.
17/PGDMA/KJ/2011/54, Student of PGDM (2011-2013) completed
his Project on-In depth analysis of mutual fund policy and strategy
in Indian scenario
His work is up to my satisfaction and worth appreciation.
Mrs. Shalini Aggrawal
Project Guide
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ACKNOWLEGEMENT
I am deeply indebted to executive, Assistance Vice President MR. ASHISH
ARORA, Assistant Manager MR. RIJU MINHAS and PSG Relationship
executive MR. Love Kumar who have always been a source of great help,
guidance and inspiration to me.
I am greatly inspired by the very good response from a large number of
consumers of mutual fund in India. I hope this report will fulfill your
expectations.
Every effort has been made to reduce to the minimum the printing and
calculation mistakes.
I sincerely believe that the road to improvement is never ending. Hence, I
will look forward to and gratefully acknowledge all suggestions received.
AVROHIT GUPTA
ROLL NO. 17SEC.A
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Table of contents
s.n. particulars page
1 list of illustration2 executive summary or synopsis
3 objective of study
4 introduction
Overview of mutual fund History of mutual fund
The role of SEBI in mutual fund INDUSTRY
Party involved in mutual fund
Nav
Advantage of investing mutual fund
Types of mutual funds
Load or non load fund
Pattern of investment
Liquidity
Asset allocation
Investors get certificate or statement of account
How do you find out
Where can an investor look out for information on mutual funds
Types of risks
Other important concepts
Choosing a funds
5 methodology
6 analysis of mutual fund
7 findings
8 conclusion and recommendation9 limitation of the study
10 appendix11 bibliograhy
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ABSTRACT
The report titled In depth analysis of mutual fund policies and strategy in
Indian scenario is mainly focused towards analyzing the performance ofHDFC mutual fund in terms of its product, services and financial health.
Product/Schemes were analyzed on the basis of returns, risk profile and
portfolio characteristics and compared against best performing funds in the
industry.
Services offered were analyzed with the help of survey done and the
interesting results were interpreted with the objection of suggesting
recommendation to the organization for taking strategic decisions.
Comparison was also done of mutual funds with other investment avenueslike Bank Deposits, Shares, Gold etc. to enable retail investors for taking
informed decision while investing.
Financial health of the HDFC Funds Management Pvt. Ltd was also
analyzed with the help of Ratio Analysis and compared against two other
major players in the industry.
Last, but not the least all experience and learning is mentioned in the report
which I had during my summer training of 8weeks at HDFC Funds
Management Pvt. Ltd and would not be possible in a class room education.
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INTRODUCTION
All over the world mutual fund is one of the most popular
instruments for investment. Its popularity with consumer has
dramatically increased over the last couple of the years worldwide;the mutual fund has a large and successful history. In developed
financial market like US, mutual fund has almost overtaken bank
deposits and total assets of insurance funds.
The mutual fund industry in India is regulated by SEBI (Security
Exchange Board of India). The mutual fund industry in India is of
Rs. 587,217 Crore. Which was shrinkage over 8.5% from
Rs.641,937 Crore to Rs.587,217 Crore till march 2012, Out ofwhich HDFC mutual fund size itself is for Rs.88,731.07 Crore.
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OBJECTIVES :
The project is directed to some particular targets and the main objectives are
stated below:
To understand the profile of the Indian Mutual Fund industry
(introduction, history, benefits, and types of Mutual Fund).
To understand the mechanism of investments through Mutual Funds.
To understand the Schemes, Plans and Options offered by HDFC
Asset Management Co. Ltd.
To compare the peer group in a particular segment and analyze similar
schemes of different AMCs with respect to their risks and returns.
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METHODOLOGY
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Introduction
A mutual fund is a collective investment that allows many investors, with a
common objective, to pool individual investments and give to a professionalmanager who in turn would invest these monies in line with the common
objective
.
It is the connecting bridge or a financial intermediary that allows a group of
investors to pool their money together with a predetermined investment
objective. The mutual fund will have a fund manager who is responsible for
investing the gathered money into specific securities (stocks or bonds).
When you invest in a mutual fund, you are buying units or portions of the
mutual fund and thus on investing becomes a shareholder or unit holder of
the fund.
Mutual funds are considered as one of the best available investments as
compare to others they are very cost efficient and also easy to invest in, thus
by pooling money together in a mutual fund, investors can purchase stocks
or bonds with much lower trading costs than if they tried to do it on their
own. But the biggest advantage to mutual funds is diversification, by
minimizing risk & maximizing returns.
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HISTORY OF MUTUAL FUNDS
The mutual fund industry in India started in 1963 with the formation of Unit
Trust of India, at the initiative of the Government of India and Reserve Bank
of India. The history of mutual funds in India can be broadly divided into
four distinct phases.
First Phase 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament.
It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of the Reserve Bank of India. In 1978
UTI was de-linked from the RBI and the Industrial Development Bank of
India (IDBI) took over the regulatory and administrative control in place of
RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end
of 1988 UTI had Rs.6,700 Crores of assets under management.
Second Phase 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by Can bank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda
Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while
GIC had set up its mutual fund in December 1990.
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At the end of 1993, the mutual fund industry had assets under management
of Rs.47,004 Crores.
Third Phase 1993-2003 (Entry of Private Sector Funds)With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund
families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI were
to be registered and governed. The erstwhile Kothari Pioneer (now merged
with Franklin Templeton) was the first private sector mutual fund registered
in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996. The industry
now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign
mutual funds setting up funds in India and also the industry has witnessed
several mergers and acquisitions. At the end of January 2003, there were 33
mutual funds with total assets of Rs.1, 21,805 crores. The Unit Trust of India
with Rs.44, 541 crores of assets under management was way ahead of other
mutual funds.
Fourth Phase since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29, 835 crores as at the end of January 2003, representing broadly, the
assets of US 64 scheme, assured return and certain other schemes. The
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Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and does
not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and
LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76, 000 Crores of assets under management and with the
setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private
sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. At the end of September 2004, there were 29
funds, which manage assets of Rs.1, 53,108 Crores under 421 schemes.
The graph indicates the growth of assets over the years.
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ADVANTAGES AND LIMITATION OF MUTUAL FUNDS:
ADVANTAGES :
There was a time when things were quite simple - the market went up
with the arrival of the first monsoon showers and every year around
Diwali. Since India started integrating with the world (with the start of
the liberalization process), complex factors such as an increase in short-
term US interest rates, the collapse of the Brazilian currency or default
on its debt by the Russian government, have started having an impact
on the Indian stock market.Although it is possible for an individual investor to understand
Indian companies (and investing) in such an environment, the process
can become fairly time consuming. Mutual funds (whose fund
managers are paid to understand these issues and whose asset
Management Company invests in research) provide an option of
investing without getting lost in the complexities.
Following are some benefits in investing in Mutual Funds:
Professional management
Mutual funds hire full-time, high-level investment professionals. Fundscan afford to do so as they manage large pools of money. The managers
have real-time access to crucial market information and are able to
execute trades on the largest and most cost-effective scale.
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Diversification
Mutual funds invest in a broad range of securities. This limitsinvestment risk by reducing the effect of a possible decline in the value
of any one security.
Low Cost
A mutual fund lets you participate in a diversified portfolio for as little
as Rs.5, 000/-, and sometimes less. And with a no-load fund, you pay
little or no sales charges to own them.
Convenience and Flexibility
You own just one security rather than many; yet enjoy the benefits of a
diversified portfolio and a wide range of services.
Personal Service
Mutual fund also provide you a personal assistance that will help you abuying and selling your fund units and gives you a information
regarding market.
Liquidity
In open-ended schemes, you can get your money back promptly at net
asset value related prices from the mutual fund itself. With close-ended
schemes you can sell your unit at stock exchange at prevailing market
price or avail of the facility of direct purchase at NAV related prices
which close-ended schemes offers periodically.
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Transparency
You get regular information on the value of your investment in addition
to disclosure on the specific investments made by the mutual fund
scheme.
Tax Deferral
Mutual funds offer options, whereby the investor can let the moneys grow in
the scheme for several years. By selecting such options, it is possible for the
investor to defer the tax liability.
Tax benefits
Some of the scheme in mutual fund gives you a benefit of deduction u/s80c.
Interest and dividend income earned in mutual fund are exempt for Tax.
Choice of schemes
Mutual Funds offer a family of schemes to suit your varying needs overlifetime.
Well regulated
All mutual funds are register with SEBI and they functions within the
provisions of strict regulation design to protect interest of investor. The
operations of Mutual funds are regularly monitored by SEBI.
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LIMITATION OF MUTUAL FUND
There are certainly some benefits to mutual fund investing, but you
should also be aware of the drawbacks associated with mutual funds.
Lack of portfolio customization
Some securities houses offer Portfolio Management Schemes (PMS) to large
investors. In a PMS, the investor has better control over what securities are
bought and sold on his behalf.
On the other hand, a unit-holder is just one of several thousand investors in a
scheme. Once a unit-holder has bought into the scheme, investment
management is left to the fund manager (within the broad parameters of the
investment objective).
Choice overload
Over 800 mutual fund schemes offered by 38 mutual funds and multiple
options within those schemes make it difficult for investors to choose
between them. Greater dissemination of industry information through
various media and availability of professional advisors in the market should
help investors handle this overload.
No control over costs
All the investor's moneys are pooled together in a scheme. Costs incurred for
managing the scheme are shared by all the Unit holders in proportion to theirholding of Units in the scheme.
Therefore, an individual investor has no control over the costs in a
scheme.
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REGULATORY FRAMEWORK
SEBI - the Capital Markets Regulator
The Government of India constituted Securities and Exchange Board of
India, by an Act of Parliament in 1992, s the apex regulator of all entities
that either raise funds in the capital markets or invest in capital market
securities such as shares and debentures listed on stock exchanges. Mutual
funds have emerged as an important institutional investor in capital market
securities. Hence they come under the purview of SEBI. SEBI requires all
mutual funds to be registered with them. It issues guidelines for all mutual
fund operations including where they can invest, what investment limits and
restrictions must be complied with, how they should account for income and
expenses, how they should make disclosures of information to the investors
and generally act in the interest of investor protection. To protect the interest
of the investors, SEBI formulates policies and regulates the mutual funds. It
notified regulations in 1993 (fully revised in 1996) and issues guidelines
from time to time. MF either promoted by public or by private sector entities
including one promoted by foreign entities is governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by
making investments in various types of securities. Custodian, registered with
SEBI, holds the securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee
Company or board of trustees must be independent. The Association of
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Mutual Funds in India (AMFI) reassures the investors in units of mutual
funds that the mutual funds function within the strict regulatory framework.
RBI the Money Markets Regulator
RBI as Supervisor of Bank-owned Mutual Funds: Public sector
banks started the first non-UTI mutual funds. Banks come under the
regulatory jurisdiction of the RBL Therefore; the operations of bank-owned
mutual funds were governed by guidelines issued by the Reserve Bank of
India. Subsequently, it has been clarified that all mutual funds, being
primarily capital market players, come under the regulatory umbrella of
SEBI. It is generally understood that all market related and investor relatedactivities of the funds are to be supervised by SEBI, while any issues
concerning the ownership of the AMCs by banks fall under the regulatory
ambit of the RBI. For example, if banks as fund sponsors have offered
assured return schemes, RBI would have to review the capital adequacy and
financial implications of the guaranteeing bank. Any fund mergers of bank-
sponsored funds with others will also involve RBI approvals. However, the
RBI no longer issues guidelines on bank-owned funds' operations. While
RBI controls call market access and the money market instruments, liquid
funds that invest in money market instruments are now governed by SEBI
alone. MMMFs or liquid schemes of registered mutual funds a e regulated
by SEBI through the same guidelines issued for other mutual funds, i.e.
SEBI (MF) Regulations, 1996. Recently, the RBI has decided to disallow all
non-banking entities access to the inter-bank call money market. This means
that liquid funds cars no longer invest in the call money market. Earlier, RBI
had given sufficient time for market participants on both lending and
borrowing side to adjust their portfolios without any disruption in the
market.
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Types of Funds :
Types of Schemes Disclaimer
Open-ended funds
Open ended funds are the fund where the investor enter and exit any time.
When existing investors buy additional units or new investors buy units of
the open ended scheme, it is called a sale transaction. It happens at a sale
price, which is equal to the NAV.
When investors choose to return any of their units to the scheme and get
back their equivalent value, it is called a re-purchase transaction. This
happens at a re-purchase price that is linked to the NAV.
Close-ended funds
Close ended funds have a fixed maturity. Investors can buy units of a close-
ended scheme, from the fund, only during its NFO. The fund makes
arrangements for the units to be traded, post-NFO in a stock exchange.
Therefore, after the NFO, investors who want to buy Units will have to find
a seller for those units in the stock exchange. Similarly, investors who want
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to sell Units will have to find a buyer for those units in the stock exchange.
Since post- NFO, sale and purchase of units happen to or from a counter-
party in the stock exchange and not to or from the mutual fund the
unit capital of the scheme remains stable.
Interval funds
Interval funds combine features of both open-ended and close ended
schemes. They are largely close-ended, but become open ended at pre-
specified intervals.
Actively Managed Funds and Passive Funds :
Actively managed funds :Actively managed fund are funds where the fund manager has the flexibility
to choose the investment portfolio, within the broad parameters of the
investment objective of the scheme.
Passive funds:
Passive fundsinvest on the basis of a specified index, whose performance it
seeks to track. Thus, a passive fund tracking the BSE Sensex would buy onlythe shares that are part of the composition of the BSE Sensex
Debt, Equity and Hybrid Funds :
A scheme might have an investment objective to invest largely in
equity shares and equity-related investments like convertible
debentures. Such schemes are called equity schemes.
Schemes with an investment objective that limits them to investments in
debt securities like Treasury Bills, Government , Bonds and Debentures are
called debt funds.
Hybrid funds have an investment charter that provides for a reasonable
level of investment in both debt and equity.
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Types of Debt Funds :
Gilt fundsinvest in only treasury bills and government securities, which do
not have a credit risk (i.e. the risk that the issuer of the security defaults).
Diversified debt fundson the other hand, invest in a mix of government
and non-government debt securities.
Junk bond schemesor high yield bond schemes invest in companies that
are of poor credit quality.
Fixed maturity plansare a kind of debt fund where the investment portfolio
is closely aligned to the maturity of the scheme. Further, like close-ended
schemes, they do not accept moneys post-NFO.
Floating rate funds invest largely in floating rate debt securities i.e. debt
securities where the interest rate payable by the issuer changes in line with
the market.
Liquid schemesor money market schemes are a variant of debt schemes
that invest only in debt securities where the moneys will be repaid within 91-
days.
Types of Equity Funds
Diversified equity fundis a category of funds that invest in a diverse mix of
securities that cut across sectors.
Sector fundshowever invest in only a specific sector.
Thematic funds invest in line with an investment theme. For example, an
infrastructure thematic fund might invest in shares of companies that are into
infrastructure construction, infrastructure toll-collection, cement, steel,
telecom, power etc.
Equity Linked Savings Schemes(ELSS), as seen earlier, offer tax benefits
to investors. However, the investor is expected to retain the Units for at least
3 years.
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Equity Income / Dividend Yield Schemesinvest in securities whose shares
fluctuate less, and therefore, dividend represents a larger proportion of the
returns on those shares. The NAV of such equity schemes are expected to
fluctuate lesser than other categories of equity schemes.
Arbitrage Funds take contrary positions in different markets / securities,
such that the risk is neutralized, but a return is earned.
For instance, by buying a share in BSE, and simultaneously selling the same
share in the NSE at a higher price.
Types of Hybrid Funds :
Monthly Income Planseeks to declare a dividend every month. It thereforeinvests largely in debt securities. However, a small percentage is invested in
equity shares to improve the schemes yield.
Capital Protected Schemes are close-ended schemes, which are structured
to ensure that investors get their principal back, irrespective of what happens
to the market. This is ideally done by investing in Zero Coupon Government
Securities whose maturity is aligned to the schemes maturity.
Gold Funds :
These funds invest in gold and gold-related securities. They can be
structured in either of the following formats:
Gold Exchange Traded Fund, which is like an index fund that invests in
gold. The structure of exchange traded funds is discussed later in this unit.
The NAV of such funds moves in line with gold prices in the market.
Gold Sector Funds i.e. the fund will invest in shares of companies engagedin gold mining and processing. Though gold prices influence these shares,
the prices of these shares are more closely linked to the profitability and gold
reserves of the companies.
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Real Estate Funds :
They take exposure to real estate. Such funds make it possible for small
investors to take exposure to real estate as an asset class. Although permittedby law, real estate mutual funds are yet to hit the market in India.
International Funds :
These are funds that invest outside the country.
One way for the fund to manage the investment is to hire the requisite
people who will manage the fund. Since their salaries would add to the fixed
costs of managing the fund, it can be justified only if a large corpus of funds
is available for such investment.
An alternative route would be to tie up with a foreign fund (called the host
fund). If an Indian mutual fund sees potential in China, it will tie up with a
Chinese fund. In India, it will launch what is called afeeder fund. Investors
in India will invest in the feederfund. The moneys collected in the feeder
fund would be invested in the Chinese host fund. Thus, when the Chinese
market does well, the Chinese host fund would do well, and the feeder fund
in India will follow suit.
Fund of Funds :
The feeder fund was an example of a fund that invests in another fund.
Similarly, funds can be structured to invest in various other funds, whether
in India or abroad. Such funds are calledfund offunds
Exchange Traded Funds :
Exchange Traded funds (ETF) are open-ended index funds that are traded in
a stock exchange.
A feature of open-ended funds, which allows investors to buy and sell units
from the mutual fund, is made available only to very large investors in an
ETF.
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INVESTMENT PLANS IN MUTUAL FUND INDUSTRY :
The term 'investment plans in context with mutual funds generally refers to
the portfolio flexibility that the funds provide to investors offering different
ways to invest or reinvest. The different investment plans are an important
consideration in the investment decision, because they determine the level of
flexibility available to the investor Alternate investment plans offered by a
fund allow the investors freedom with respect to investing one time or at
regular intervals, making transfers to different schemes within the same fund
family, or receiving income at specified intervals or accumulating
distributions. Below, are some of the investment plans offered by mutual
funds in India:
Automatic Reinvestment Plans (ARP)
Many funds offer two options under the same scheme - the Dividend Option
and the Growth Option. The Automatic Reinvestment Plan allows the
investor to reinvest the amount of dividends or other distributions made by
the fund in the same fund and receive additional units, instead of receiving
them in cash. Reinvestment takes place at the ex-dividend NAV. The ARP
ensures that the investor reaps the benefit of compounding in his
investments. Some funds allow reinvestment into other schemes offered by
the same mutual fund.
Systematic Investment Plans (SIP)
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These require the investor to invest a fixed sum periodically, thereby letting
the investor save in a disciplined and phased manner. The mode of
investment could be through direct debit to the investor's salary or bank
account. Such plans are also known as Systematic Investment Plans.
Systematic Withdrawal Plans (SWP)
Such plans allow the investor to make systematic withdrawals from his fund
investment account on a periodic basis, thereby providing the same benefit
as regular income. The investor must withdraw a specific minimum amount
with the facility to have withdrawal amounts sent to his residence by acheque or credited directly into his bank account.
Systematic Transfer Plans (STP)
These plans allow the investor to transfer on a periodic basis a specified
amount from one scheme to another within the same fund family-meaning
two schemes managed by the same AMC and belonging to the same mutual
fund.
RISK V/S. RETURN :
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.
Market Risk:
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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 cash flows determines the Credit Risk
faced by you. This credit risk is measured by independent rating agencies
like CRISIL who rate companies and their paper. A AAA rating is
considered the safest whereas a D rating is considered poor credit quality.
A well-diversified portfolio might help mitigate this risk.
Inflation Risk:
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:
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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.
MEASURES OF PERFORMANCE OF A MUTUAL FUND :
NAV Calculation :
Net Assets are calculated as = Market value of investments + Current assets
and other assets + Accrued income Current Liabilities and other
liabilities Accrued expenses.
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NAV = Net Assets of the fund / No. of units (outstanding in the books of the
fund)
The major factors affecting the NAV of a fund are:
Sale and purchase of securities.
Sale and repurchase of units.
Valuation of assets.
Accrual of income and expenses.
Interpretation of Ratios :
Sharpe Ratio:
Sharpe ratio gives a single value to be used for the performance ranking of
various funds or portfolios. It measures the risk premium of the portfolio
relative to the total amount of risk in the portfolio. This risk premium is the
difference between the portfolio's average rate of return and the risk-free rate
of return.
Formula (Rp- Irf)
SDp
Where: Rp stands for return on portfolio
: Irf means Risk free rate of return which in India is considered either to be
the bond rate or 181 days Treasury bill.
: SDp is the Standard deviation of portfolio, which is the total risk.
The advantage of Sharpe ratio is that it assigns highest values to assets that
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have best risk adjusted average rate of return. It is also known as reward to
volatility ratio.
Expense ratio:
It measures expenses incurred by the investment company to operate mutual
funds. The costs of owning a fund are called the expense ratio. This is
distinct from the costs of buying a fund, which are the sales loads. The
expense ratio represents the percentage of funds assets that go purely
towards the expense of running the fund. The expense ratio covers the fees
paid to fund manager, costs incurred in record keeping, custodial services,
taxes, legal expenses, audit fees, accounting fees. It is also known as
management expense ratio. Operating expense includes the fees paid to fund
manager, costs incurred in record keeping; custodial services, taxes, legal
expenses, audit fees accounting fees.
Alpha:
Alpha takes the volatility in price of a mutual fund and compares its risk
adjusted performance to a benchmark index. The excess return of the fund
relative to the returns of benchmark index is a fundamental ALPHA. It is
calculated as a return which is earned in excess of the return generated by
CAPM. Alpha is often considered to represent the value that a portfolio
manager adds to or subtracts from a fund's return.
A positive alpha of 1.0 means the fund has outperformed its benchmark
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index by 1%. Correspondingly, a similar negative alpha would indicate
an underperformance of 1%.
If a CAPM analysis estimates that a portfolio should earn 35% return based
on the risk of the portfolio but the portfolio actually earns 40%, the
portfolio's alpha would be 5%. This 5% is the excess return over what was
predicted in the CAPM model. This 5% is ALPHA.
Beta measures the sensitivity of the stock to the market. For example if
beta=1.5; it means the stock price will change by 1.5% for every 1% change
in Sensex.
It is also used to measure the systematic risk. Systematic risk means risks
which are external to the organization like competition, government policies.
They are non-diversifiable risks.
The best index fund will have beta value equal to the market namely
If beta>1 then aggressive
stocks
If beta
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HDFC (AMC)
ASSET
MANAGEMENTCOMPANY
HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an
Asset Management Company for the HDFC Mutual Fund by SEBI vide its
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letter dated July 3, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor,
H.T. Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400
020.
In terms of the Investment Management Agreement, the Trustee has
appointed the HDFC Asset Management Company Limited to manage the
Mutual Fund. The paid up capital of the AMC is Rs. 25.169 crore.
The present equity shareholding pattern of the AMC is as follows:
Particulars % of the paid up
equity capital
Housing Development Finance Corporation
Limited
59.98
Standard Life Investments Limited 39.99
Other Shareholders (shares issued on exercise
of Stock Options)
0.03
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Market Value of Investment: 1200*14.9=Rs.17800
35
CONSTITUENTS:
SPONSOR: HDFC (HOUSING DEVELOPMENT
FINANCECORPORATION)
TRUSTEE: HDFC TRUSTEE COMPANY LIMITED
AMC: HDFC Asset Management Company Limited
CUSTODIAN: The Bank Of Nova Scotia
REGISTRAR AND TRANSFER AGENT:
Computer Age Management Service Pvt.Ltd(CAMS)
IMPORTANT CONCEPT:
Systematic Investment Plan(SIP):
A Systematic Investment Plan lets an Investor to invest in small amount in
mutual funds on a regular basis. It gives you a lot of flexibility and is a veryconvenient way of building a large corpus over a period of time. In mutual
fund terminology, SIP allows the investors to invest a fixed amount every
month or quarter for purchasing additional units of the scheme at NAV
based prices.
Also Investment in SIP offers a unique advantage of Rupee-Cost Averaging.
Lets Explain it, Suppose if you invest an equal amount of money every
month in a mutual fund, you engaging in Rupee-Cost Averaging. When
price are high, NAV is high-so you get less units or Vice-Versa. At the end ,
If you were to buy all units at once you risk getting less for your money.
Lets Take an example, Suppose an Investor Invest Rs.1000 per month under
SIP. Using SIP strategy the investor can reduce his average cost per unit.
The Investor Gets the advantage of getting more units when the market has
turned downwards.
MONTHLY AMOUNT PURCHASE
PRICE
NO. OF UNITS
PURCHASED
INTIALINVESTMENT
1000 10 100
Products:
Children's Gift
Fund
Children's GiftFund
Debt/ Income Fund
Invest in money market
and debt instruments and
provide optimum balance
of yield.
Equity / Growth Fund
Invest primarily in equity
and equity related
instruments.
Exchange Traded Funds
Invest primarily in equity
and equity related
instruments.
Fund of Fund Schemes
Invests primarily in other
scheme(s) of the samemutual fund or other
mutual funds
Fixed Maturity Plan
Invest primarily in Debt /
Money Market
Instruments and
Government Securities.
Liquid Funds
Provide high level of
liquidity by investing in
money market and debt
instruments.
Quarterly Interval Fund
Generate regular incomethrough investments in
Debt / Money Market
Instruments..
http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=1eec86b8-02ff-4bc4-9557-58bafbcb2ae1http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=09ce5a0f-6a28-4fc8-88fc-7e5544fca014http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=f6b4d7de-50ab-4216-939f-59b9054f1f81http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=3903d9f0-737d-43cc-af8c-f49fa01dc138http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=3903d9f0-737d-43cc-af8c-f49fa01dc138http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=b8b13ca0-60e9-4aaf-ae60-284cac9d9dd8http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=1eec86b8-02ff-4bc4-9557-58bafbcb2ae1http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=09ce5a0f-6a28-4fc8-88fc-7e5544fca014http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=c02aa9aa-e943-47b3-a824-924767cd9e96http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=ef2d7196-18b8-42d1-b1e8-981df943ea4dhttp://www.hdfcfund.com/Products/SchemeList.aspx?FundID=e11cbbf0-8a15-4104-871d-835014344bf9http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=f6b4d7de-50ab-4216-939f-59b9054f1f81http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=3903d9f0-737d-43cc-af8c-f49fa01dc138http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=3903d9f0-737d-43cc-af8c-f49fa01dc138http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=b8b13ca0-60e9-4aaf-ae60-284cac9d9dd8http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=1eec86b8-02ff-4bc4-9557-58bafbcb2ae1http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=09ce5a0f-6a28-4fc8-88fc-7e5544fca014http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=c02aa9aa-e943-47b3-a824-924767cd9e96http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=ef2d7196-18b8-42d1-b1e8-981df943ea4dhttp://www.hdfcfund.com/Products/SchemeList.aspx?FundID=e11cbbf0-8a15-4104-871d-835014344bf9http://www.hdfcfund.com/Products/SchemeList.aspx?FundID=f6b4d7de-50ab-4216-939f-59b9054f1f817/31/2019 Indepth analysis of mutual Fund
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One Time Investment Rs.12000
Benefit of Rs. 21395-17880=Rs.3515
Option available while investing in EQUITY SCHEME:
Some confusion and misconceptions still persist in the mind of many
investors regarding opt for GROWTH OPTION OR DIVIDEND OPTION;
If the investor opt Dividend than further they have to opt either Payout or
Reinvestment.
Let us look at the detailed example below:
Say you have Rs.10000 to invest
You have two choices-Fund A (NAV Rs.10) and Fund B (NAV Rs.
40) After 1year both funds have appreciated by 30%
Now under the Dividend Option Fund A declared 20% Dividend and
Fund B declared 80% Dividend.
After another 1year, both funds have appreciated by another 20%.
FUND A:
Growth option AmountInvested
NAV UNITS DividendPayout
BalanceUnits
TotaValu
1st
JAN.05
Initial Investment 10000 10 1000 0 1000 1000
1st
JAN.06
30% Appreciation 0 13 0 0 1000 1300
1st
JAN.07
20% Appreciation 0 15.6 0 0 10000 1560
Dividend Payout Option Amount
Invested
NAV Units Dividend
Payout
Balance
Units
Total Valu
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1st
JAN.05
Initial
Investment
10000 10 1000 0 1000 10000
1st
JAN.06
30%
Appreciation
0 13 0 0 1000 13000
20% Dividend 0 11 0 2000 1000 13000
1st
JAN.07
20%
Appreciation
0 13.2 0 2000 1000 15200
Dividend Reinvestment
1st
JAN.05
Initial
Investment
10000 10 1000 0 1000 10000
1st
JAN.06
30%
Appreciation
0 13 0 0 1000 13000
20% Dividend 0 11 181.8
1
0 1181.8
1
13000
1st
JAN.07
20%
Appreciation
0 13.2 0 0 1181.8
1
15600
As can be seen from the above example, its makes no difference to the final
returns whether one invests in a Growth or a Dividend Reinvestment Option.
The returns are low in Dividend Payout, because the dividend amount does
not get reinvested.
FUND B:
Growth option Amount
Invested
NAV Units Dividend
Payout
Balance
Units
Total
Value
1st
Jan.05
Initial
Investment
10000 40 250 0 250 10000
1st
Jan.06
30%
Appreciation
0 52 0 0 250 13000
1
st
Jan.07 20%Appreciation 0 62.4 0 0 250 15600
Dividend Payout Amount NAV Units Dividend Balance Total
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Option Invested Payout Units Value
1st
Jan.05
Initial
Investment
10000 40 250 0 250 100000
1st
Jan.06
30%
Appreciation
0 52 0 0 250 13000
80%
Dividend
0 44 0 2000 250 13000
1st
Jan.07
20%
Appreciation
0 52.8 0 0 250 15200
Dividend
Reinvestment
1st
Jan.05
Initial
Investment
10000 40 250 0 250 10000
1st
Jan.0630%Appreciation
0 52 0 0 250 13000
80%
Dividend
0 44 45.5 0 295.45 13000
1st
Jan.07
20%
Appreciation
0 52.8 0 0 295.45 15600
IT will be clear that:
Both Growth and Dividend Reinvestment Options are same return.Dividend Payout is somewhat inefficient as you lose the chance of
compounding your return.
NAV of the fund is also irrelevant. Your returns are same whether you
invest in a low NAV fund or a high NAV fund.
CASE ANALYSIS:
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3.1 DATA INTERPRETATION
Risk Returns Analysis and comparison study of Funds
In this section, a sample of HDFC Equity related Funds have been studied,
evaluated and analysed. This study could facilitate to get a fair comparison.
The expectations of the study are to give value to the funds by keeping the
risk in the view.
Here Equity Funds are taken as they bear high returns with high risk.
Following are the products of HDFC Mutual Fund, Which have been taken
the evaluation purpose.
HDFC Equity Fund Growth Option
HDFC Growth Fund
HDFC Top 200 Fund
HDFC EQUITY FUND
Investment objective
The Investment objective of the scheme is to achieve long term capital
appreciation.
Basic scheme Information
Nature of the Scheme Open Ended Growth Scheme
Inception Date Jan 01,1995Option/Plan Dividend Option, Growth Option
ENTRY LOAD
(Purchase/Additional
Purchase/Switch-In)
NIL
(With Effect From August 1,2009)
EXIT LOAD NIL(Except in case of short term)
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Minimum Application Amount Rs.5000 and in multiple of Rs.100
Thereof to open an Account/Folio.
Additional Purchase is Rs.1000 and
in multiple of Rs.100 Thereof
Lock-In-Period NilNet Asset Value Periodicity Every Business Day
Redemption proceeds Dispatched With-In 3-4 Working
days
INVESTMENT PATTERN:
The Asset allocation under the scheme will be as follows:
SR.No.
Types of Instruments Normalallocation(%of
Net Asset)
Risk Profile
1. Equities and Equities
Related Instruments
80-100 Medium to High
2. Debt Securities, Money
market instrument & cash 0-100
Low to Medium
Investment in Securitized debt, if undertaken, would not Exceed 20%of the
asset of the Scheme. The Scheme may also invest upto 25% of net asset ofthe scheme in derivatives such as Future & Options and such other
derivatives instruments as be introduced from time to time for the purpose of
hedging and portfolio balancing and other uses as may be permitted under
the regulations.
INVESTMENT STRATEGY & RISK CONTROL
In order to provide long term capital appreciation, the scheme will invest
predominantly growth companies. Companies selected under this portfolio
would as far as practicable consist of medium to large sized companies
which are likely achieved above average growth.
The aim will is to build a portfolio, which represent a cross-section of the
strong growth companies in the prevailing market. In order to reduce the risk
of volatility, the scheme will diversify across major industries and economic
sectors.
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BENCHMARK INDEX: S&P, CNX 500, HDFC Equity, Which is
benchmarked to S&P CNX 500 Index, is not sponsored, Endorsed, Sold or
Promoted By Indian Index Service & Products.
Fund Manager: Mr. PRASANT JAIN
PORTFOLIO Top 10 Holding
NAV =Rs.242.224
Company Industry %to NAV
Equity & Equity
Related
State bank of India Banks 9.63ICICI Bank Ltd. Banks 5.58
ITC Ltd. Consumer Non-Durable 5.34
Infosys Ltd. Software 5.06
Tata Motors Ltd . DVR Auto 4.24
Oil & Natural Gas
Corporation Ltd.
Oil 3.06
Larsen & Toubro ltd. Construction Project 2.92
Bharti Airtel Ltd. Telecom 2.84
Bank Of Baroda Banks 2.84Tata steel Ltd. Ferrous Metals 2.80
Total of top 10 Equity & Equity Related Holdings 44.31
Total Equity & Equity Related Holdings 99.04
Cash, Cash Equivalents and Net Current Assets 0.96
Grand Total 100
Average AUM for the Quarter Ended March
31,2012(Rs. In lakhs)
991636.92
SCHEME PERFORMANCE:
A: Cumulative performance
Date Period NAV Scheme Benchmar Additional Value RS.10000
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per unit Returns k Returns Benchmar
k Returns
Of
Investment
Mar.
30,11
Last 1
year
282.578 -7.40 -8.19 -8.50 9,260 9,181 9,150
Mar.30,10 Last 2year 235.826 5.33 -1.06 .031 11,096 9,788 10,063
Mar.
30,09
Last 3
year
106.712 34.81 23.14 21.13 24,521 18,685 17,781
Jan
01,95
Since
inceptio
n
10 20.83 8.87 N.A 261,67
3
43,349 N.A
B. Discrete 12Months returns (%)
Period Scheme Benchmark Additional
Benchmark
Mar30,11 to
Mar30,12
-7.40 -8.19 -8.50
Mar30,10 to
Mar30,11
19.82 6.61 9.98
Mar30,09 to
Mar30,10
120.99 90.89 76.70
HDFC GROWTH FUND:
Investment objective
The primary investment objective of the scheme is to generate long term
capital appreciation from a portfolio that is invested predominantly in Equity
& Equity related instruments.
Basic Scheme Information from a portfolio that is invested predominantly inEquity & Equity related instruments.
Basic Scheme Information
Nature of scheme Open Ended Growth Scheme
Inception Date Sep 11,2000
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Option/Plan Dividend Option, Growth option
Entry Load
(Purchase/Additional
purchase/Switch-in)
NIL
(With effect from August 1,2009)
Exit Load
(As a % of the Applicable NAV)
NIL
Minimum Application Amount Rs.5000 and in Multiple of Rs100
thereof to open an account/folio.
Additional purchase is Rs.1000 and
in multiple of Rs.100 thereof
Lock-In-Period Nil
Net Asset Value Periodicity Every Business DayRedemption Proceeds Normally Dispatched within 3
business days
INVESTMENT PATTERN:
The corpus of the scheme will be invested primarily in Equity & Equity
related instruments. The scheme may invest a part of its corpus in Debt and
Money market instruments, in order to manage its Liquidity requirement
from time to time, and under certain circumstances, to project the interest of
the Units holders. The asset allocation under the scheme will be as follows:
SR No. Type of Instrument Normal
allocation(%of
net asset)
Risk Profile
1 Equities & Equities related
instruments
80-100 Medium to High
2. Debt securities, Money
market Instrument & Cash
0-100 Low to Medium
INVESTMENT STRATEGY & RISK CONTROL
The investment approach will be based on a set of well-established but
flexible principles emphasis the concept of sustainable economic earnings
and cash return on Investment as the means of valuation of companies. In
summary, the Investment strategy is expected to be a function of extensive
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research and based on data and reasoning, rather than current fashion and
emotion. The objective will be to identify businesses with superior growth
prospects good management, at a reasonable price.
Benchmark Index: SENSEX
Fund Manager: Mr. Shrinivas Rao
PORTFOLIO Top 10 Holdings:
NAV Growth option: 79.134
Dividend option: 25.286
Company Industry % to NAV
Equity & Equity related
Infosys Ltd. Software 8.09
ICICI Bank Ltd. Banks 6.38
Reliance Industry Ltd. Petroleum 6.05
ITC Ltd. Consumer Non-
Durable
5.80
Bharat petroleum Corporation
Ltd.
Petroleum 5.79
SBI Banks 5.47
Divis Laboratories Ltd. Pharmaceuticals 5.17HDFC Ltd. Finance 4.60
Solar Industries India Ltd. Chemicals 4.32
Bharti Airtel Ltd. Telecom 3.18
Total of Top10 Equity & Equity related holdings 54.85
Total Equity & Equity related Holdings 97.83
Cash, Cash Equivalents and Net Current Asset 2.17
Grand Total 100
Average AUM For the Quarter Ended
Mar31,2012(Rs.in Lakhs)
126195.48
SCHEME PERFORMANCE:
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A: CUMULATIVE PERFORMANCE
B: Discrete 12month return (%)
Period Scheme Benchmark Additional
BenchmarkMar30,11 to
Mar30,12
-2.61 -9.78 -8.50
Mar30,10 to
Mar30,11
17.76 9.66 9.98
Mar30,09 to
Mar30,10
95.66 83.84 76.70
HDFC TOP 200 FUND
INVESTMENT OBJECTIVE:
The Investment objective is to generate long-term capital appreciation froma portfolio of Equity & Equity linked instruments. The investment portfolio
for Equity & Equity linked instruments will we primarily drawn from the
companies in the BSE 200 Index. Further the Scheme may also invest in
listed companies the would quality to be in the top 200 by market
capitalisation on the BSE even though they may not be listed on the BSE
this includes participation in large IOPOs where in the market capitalisation
of the company based on issue price would make the company a part of the
Top 200 Companies Listed on the BSE based on Market capitalisation.
Basic Scheme Information
Nature of Scheme Open Ended Equity Growth Scheme
Inception Date Oct11,1996
Option/Plan Dividend Option, Growth Option
Entry Load NIL
45
Date Period NAV
Perunits
Scheme
Returns
(%)
Bench
markreturn
Additional
BenchmarkReturns(%)
Value of Investment of Rs.10000
Scheme Benchmark Addition
al
Benchma
rk
Mar30,
11
Last
1year
87.73
6
-2.61 -9.78 -8.50 9,739 9,022 9,150
Mar30,
10
Last
2year
74.50
4
7.08 -0.53 0.31 11,469 9,894 10,063
Mar30,
09
Last
3year
38.07
9
30.89 22.05 21.13 22,439 18,190 17,781
Sep11,
00
Since
inception
1000
0
20.40 12.00 11.582 85,446 37,057 36,362
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(Purchase/Additional
Purchase/Switch-In)
(With effect from August 1,2009)
Exit Load NIL
Minimum Application Amount Rs.5000 and in multiple of Rs.100
thereof to open an account/folio.
Additional purchase is Rs.1000 and
in multiple of Rs.100 thereof..
Lock-In-Period NIL
Investment Pattern:
The asset allocation under the scheme will be as follows:
Sr. No. Asset Type (% of Portfolio) Risk Profile1 Equities &
Equities related
instruments
Upto 100%
(Including use of
derivatives for
hedging and
other uses as
permitted by
prevailing SEBI
Regulation)
Medium to High
2 Debt securities,
Money MarketInstruments &
cash
Balance in debt
& Money MarketInstrument
Low to Medium
Investment in securitized debt, If undertaken, Would not Exceeds 20% of the
Net Assets of the Scheme. The Scheme may also invest upto25% of Net
Asset 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.
Investment Strategy & Risk Control
The investment strategy of primarily restricting the equity portfolio to the
BSE 200 Index scrips is intended to reduce risk while maintaining steady
growth. Stock specific risk will be minimized by the investment managers
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research team. Risk will also be reduced through diversification of the
portfolio.
Benchmark Index: BSE 200
FUND MANAGER: Mr. Prashant Jain
PORTFOLIO-Top 10 Holdings
Company Industry % of NAV
Equity & Equity Related
SBI Banks 8.96
Infosys Ltd. Software 5.95
ITC Ltd. Consumer Non-
Durable
5.80
ICICI Bank Ltd. Banks 5.69
Tata Motors Ltd. DVR Auto 4.03
Tata consultancy services Ltd. Software 309
Larsen & Toubro Ltd. Construction
Project
3.08
HDFC Bank Ltd. Banks 3.07
Bharti industries Ltd. Telecom 2.96
Reliance industries Ltd. Petroleum 2.81
Total of Top Ten Equity & Equity Related
holdings
45.44
Total Equity % Equity Related holdings 98.52
Cash, Cash Equivalents and Net Current Assets 1.48
Grand Total 100
Average AUM for the quarter Ended
Mar31,12(In-Lakhs)
1,138,105,57
SCHEME PERFORMANCE:
A: CUMULATIVE PERFORMANCE:
Date Period NAV
per
units
Scheme
Returns
(%)
Benchmar
k Returns
(%)
Additional
Benchmark
Value of investment of Rs.10000
Scheme Benchmark Additional
Benchmark
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Mar3
0,11
Last
1year
282.5
78
-7.40 -8.19 -8.50 9,260 9,181 9,150
Mar3
0,10
Last
2year
235.8
26
5.33 -1.06 0.31 11,096 9,788 10,063
Mar30,09 Last3year 106.712 34.81 23.14 21.13 24,521 18,685 17,781
Jan0
1,95
Since
Incept
ion
10,00
0
20.83 8.87 N.A 261,673 43,349 N.A
B: Discrete 12 Months Returns (%)
Period Scheme Benchmark Additional
Benchmark
Mar30,11 toMar30,12
-7.40 -8.19 -8.50
Mar30,10 to
mar30,11
19.82 6.61 9.98
Mar30,09 to
Mar30,10
120.99 90.89 76.70
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PEER GROUP COMPARISON AND ANALYSIS OF SCHEMES OF
DIFFERENT AMCS
(As on 1st July, 2011)
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ANALYSIS
In the diversified category, it can be seen that HDFC Equity Fund has thelargest corpus when compared to its competitors. Reliance Growth fund
follows next and HSBC Progressive Themes Fund has the smallest corpus.
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ANALYSIS
On analysis of the above graph,it can be clearly concluded that Hdfc equity
fund gives the highest absolute return (%) followed by IDFC Premier Equity
Fund- Plan A. zfor a period of 1 year ending July 1,2011 HSBC Progressive
Themes Fund yields the lowest absolute returns when compared to itscompetitors.
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ANALYSIS
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UTI Master Value Fund gives the highest sharpe ratio and hence is the best
performing fund amongst its peers. HSBC Progressive Themes Fund has a
negative sharpe ratio indicating that a risk less asset would perform better
than this fund. On further analysis it is also observed that HSBC Progressive
Themes Fund have a comparatively higher beta coefficient indicating that
they are considerably volatile and thus riskier than other funds.
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54
uity Funds - Pure
dcap Funds
Retur
n%
heme
me /
dex
me
NAV
(Rs.)
Cor
pus
Mar
2011
Incep
tion
Date
30
Days
Absol
ute
180
Days
Absol
ute
1
Year
Absol
ute
5
Yea
rs
CA
GR
10
Yea
rs
CA
GR
Since
Incep
tion
CAG
R
Stand
ard
Devia
tion
Sha
rpe
Rati
o
Be
ta
DFC
d-Cap
pportu
ies
nd (G) 16.2
1221
.22
25 Jun
2007 1.74 -0.85 13.68 N.A N.A 12.75 29.46 0.75
0.
9
rla Sunfe
dcap
nd -
an A
)
107.3
6
1687
.81
3 Oct
2002 0.26 -9.61 -0.55
17.6
1 N.A 31.17 37.15 0.48
1.
12
SBC
dcap
uity
nd (G)
19.63
52
138.
69
19
May
2005 -0.26
-
19.66 -11.77 6.20 N.A 11.65 37.21 0.15
1.
11FC
mall &
dcap
uity
nd (G)
18.60
81
1108
.41
7 Mar
2008 1.13 -3.53 6.72 N.A N.A 20.58 25.2 0.9
0.
74
anklin
dia
ima
nd -
)
274.8
593
828.
79
24
Dec
1993 0.04 -6.39 4.33
11.1
4
31.7
3 20.57 34.3 0.51
1.
05
erage 0.582
-
8.008 2.482
11.6
5
31.7
3
19.34
4
n -0.26
-
19.66 -11.77 6.2
31.7
3 11.65
ax 1.74 -0.85 13.68
17.6
1
31.7
3 31.17
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ANALYSIS
In the mid-cap segment, Birla Sun Life Mid Cap Fund- Plan A has the
largest corpus constituting 34 % of the total corpus value. It is followed by
HDFC Mid-Cap Opportunities Fund and IDFC Small and Midcap Equity
Fund in terms of corpus value of funds.
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ANALYSIS
HDFC Mid-Cap Opportunities Fund gives a healthy return of 13.68% on itsfund which is much more as compared to funds in the MidCap segment.
Birla Sun Life Midcap Fund-Plan A and HSBC Midcap Equity Fund give a
negative returns.
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ANALYSIS
On risk return analysis, it is observed that HDFC Mid-Cap Opportunities
performs the best as it has a sharpe ratio of 0.75.With a beta ratio of 1.12 and
1.11 respectively, Birla Sun Life Midcap Fund-Plan A and HSBC Midcap
Equity Fund are highly volatile to changes in the stock market and are not
good for conservative investors.
Tax Plans
Schem
e
Name
/
IndexName
NA
V
(Rs.)
Cor
pus
Ma
r
2011
Ince
ptio
n
Date
30
Day
s
Abs
olute
180
Day
s
Abs
olute
1
Yea
r
Abs
olut
e
5
Yea
rs
CAGR
10
Yea
rs
CAGR
Sinc
e
Ince
ptio
n
CAGR
Sta
nda
rd
Dev
iation
Sh
ar
pe
Ratio Beta
HDFC
Tax
Saver
Fund
(G)
235.
85
309
3.1
13
Jun
199
6 1.13
-
5.31 8.86
15.4
0
30.7
7
23.3
9
29.6
6
0.
7
0.
9
4
AXIS
Tax
Saver
Fund(G)
12.872
84.99
29
Dec
2009 2.72
-1.01
13.87 N.A N.A
18.28 --- ---
---
IDFC
Tax
Advan
tage
(ELSS
19.5
95
129.
07
26
Dec
200
8
0.27 -
7.51
7.16 N.A N.A 30.7
0
--- --- --
-
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) Fund
(G)
Religa
re TaxPlan
(G)
18.1
2
108.
27
29
Dec200
6 2.66
-
2.58 9.09 N.A N.A
14.1
0
27.0
5
0.
72
0.8
5
ICICI
Pru
Tax
Plan -
(G)
141.
66
125
1.5
19
Aug
199
9 0.38
-
6.20 7.91
14.1
3
29.8
3
25.0
1
31.9
2
0.
57
0.
9
9
Avera
ge
1.43
2
-
4.52
9.37
8
14.7
6 30.3
22.2
9
Min 0.27-
7.51 7.16
14.1
3
29.8
3 14.1
Max 2.72
-
1.01
13.8
7 15.4
30.7
7 30.7
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ANALYSIS
From the pie chart it is clear that HDFC Tax Saver Fund has the largest
corpus followed by ICICI Pru Tax Plan.Axis Tax Saver as well as ReligareTax Plan have the smallest corpus size.
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ANALYSIS
Although Axis Tax Saver has the smallest corpus size it yields maximum
returns as compared to its peers giving a return of 13.87 %.It is followed by
Religare Tax Plan and HDFC Tax Saver Plan.
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ANALYSIS
Religare Tax Plan and HDFC tax Saver Fund are the best performers
amoungst the tax plans since they have the highest sharpe ratio (return
adjusted for risk). The two funds have a beta value of less than 1 and thus
are less volatile than the stock market.ICICI Pru Tax Plan has a beta of 0.99
indicating that the investments price would move in lock- step with themarket
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CONCLUSION
On analysis of the all the three categories of funds, the following can
be concluded:
DIVERSIFIED SEGMENT (CORPUS > 300 CRS. AND PERIOD
> 2 YRS)
HDFC Equity fund yields highest 1 year absolute returns. It has
a satisfactory sharpe ratio (0.99) i.e. return adjusted for risk and
a beta coefficient of 0.79 is less volatile than many of its peers.
The UTI Master Value Fund gives a higher sharpe ratio (1.09)indicative of higher returns with less amount of risk undertaken.
The beta coefficient of 0.63 also indicates that the value of
stock changes less than proportionately with the changes in the
market.
An important stock to consider in this category is the HSBC
Progressive Themes Fund. The fund yields alarmingly low
returns in the past one year and is highly volatile to stock
market changes. Also it has a negative sharpe ratio which
basically suggest that a risk less asset would perform better thanthis fund.
EQUITY FUNDS - PURE MIDCAP FUNDS
HDFC Mid Cap Opportunities Fund gives the highest 1 year
absolute returns. In the Mid Cap segment it gives the highest
return adjusted for risk ratio i.e. the sharpe ratio and is also less
volatile to changes in stock market.
With a beta ratio of 1.12,1.11 and 1.05 respectively, Birla Sun
Life Midcap Fund-Plan A,HSBC Midcap Equity Fund andFranklin India Prima Fund are highly volatile to changes in the
stock market and are not good for conservative investors
HSBC Midcap Equity Fund gives negative absolute returns in
the past 1 year.
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TAX PLANS
Axis Tax Saver yields maximum 1 year absolute returns.
Religare Tax Plan and HDFC Tax Saver Plan also give
relatively high returns when compared with its peers. ICICI Pru Tax Plan has a beta of 0.99 indicating that the
investments price would move in lock- step with the market
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BIBLIOGRAPHY
The following were the sources of refrences:
www.moneycontrol .com
www.valueresearchonline .com
www.hdfcfund .com
www.mutualfunds india.com
www.amfiindia.com
http://www.moneycontrol.com/http://www.moneycontrol.com/http://www.valueresearchonline.com/http://www.valueresearchonline.com/http://www.hdfcfund.com/http://www.hdfcfund.com/http://www.mutualfundsindia.com/http://www.mutualfundsindia.com/http://www.moneycontrol.com/http://www.valueresearchonline.com/http://www.hdfcfund.com/http://www.mutualfundsindia.com/Recommended