Indepth analysis of mutual Fund

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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


33/67

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

33


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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

34


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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-59b9054f1f81


36/67

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/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

43


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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


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 (%)


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


46/67


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

46


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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


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 (%)


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)

49


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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.

50


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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.

51


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ANALYSIS

52


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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.

53


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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


55/67

55


56/67

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.

56


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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.

57


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58


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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

--- --- --

-

59


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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

60


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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.

61


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62


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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/

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