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PARIL INSTITUTE OF MANAGEMENT AND RESEARCH MBA PROGRAMME Affiliated to Gujarat Technological University Ahmedabad August, 2012-2013

Many individuals own mutual funds today. Indeed, the mutual fund industry which reached $3.64 trillion in assets by 2013,comprises the bulk of many investors financial assets, whether for retirement or taxable savings purposes .To a large extent, mutual funds are the investment vehicle for the majority of households in the India. In the introductory chapter, I have consider the role of mutual fund in todays investing environment, learn just how popular mutual funds have become and consider why investors have chosen to put so much money into funds. Clearly, mutual funds are a major financial asset for numerous investors, and in many ways they play the dominant role in todays investing world for millions of households. I have also told about the basics of mutual funds, defining terms and discussing the mechanics about how funds work. I have also considered other alternatives .I have mainly focused up on the study that which companys mutual investments are mostly preferable by investors. Today investors are becoming rational & they see all the parameters before investing .I had also reviewed the types of mutual funds, structure of mutual funds and their current scenario. The overall objective of my study on this project is to know which company provides better investment opportunities from HDFC & ICICI and make the investors to be able to take better decisions .Of course, as every study needs, Id adopted an objective view of overall situation that examines both sides of the issue situated in HDFC &ICICI. MBA SEM IV PIMR

I am indebted to our Director, Dr. P. G. K. MURTHY and the management of PARUL INSTITUTE OF MANAGEMENT AND RESEARCH for providing an environment with all facilities that helped me in completing my seminar. I wish to express my sincere gratitude to my seminar guide, PROF. MITAL THAKAR, professor, Department of Masters In Business Administration for her guidance and suggestions. I take this opportunity to convey my gratitude to all teaching and non-teaching staff of the department of Masters in Business Administration for their help. I thank the Almighty for everything and also my parents for their support. There is no doubt. In spite of my efforts there might be errors. I take full responsibility for any lack of clarity or inexactness that may occur.

S.NO. 1 2 3 4 5 6 7 8 9 10 11 12 13

Contents Introduction To Topic Introduction to Companies Review of literature Need/Scope of Study 0bjective of the study Research Methodology Analysis Findings Limitations Recommendations Conclusion Bibliography Annexure 40

Page No. 5 32 35 36 37 38

51 51 51 52 53 54

What is mean by mutual fund? Mutual funds are pools of money that are managed by an investment company. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940. Related: openend fund, closed-end fund. The securities and exchange board of India regulation, 1993 defines Mutual Funds asA fund established in the formed of a trust by a sponsor to raise monies by the trustee through the sale of unit to the public under one or more schemes investing in securities in accordance with these regulations. Concept of mutual funds Not all people understand the dynamic and the complexities of the financial markets- whether it is the share market or any other financial market. The retail investor goes on the sentiments of the market without actually studying the fundamental of the security in which an investment is being made. Moreover the retail investor usually does not have large sum of money and this can be done on a regular basis. A Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed portfolio at a relatively low cost. The small savings of all the investors are put together to increase the buying power and hire a professional manager to invest and monitor the money. Anybody with an investable surplus of as little as a few thousand rupees can invest in Mutual Funds. Each Mutual Fund scheme has a defined investment objective and strategy. In simple words, A Mutual Fund collects the savings from small investors, invest them in government and other securities and earn income through interest and dividends besides capital gains. It works on the principle of small drops of water make a high earn.

Historical Aspect When three Boston securities executives pooled their money together in 1924 to create the first mutual fund, they had no idea how popular mutual funds would become.

The idea of pooling money together or investing purpose started in Europe in the mid-1800s. The first pooled fund in the U.S. was created in1893 for the faculty and staff of Harvard University. On March 21st, 1924 the first official mutual fund was born. It was called the Massachusetts investors trust.

After one year, the Massachusetts investors trust grew from $50000 in assets in 1924 to $392000 in assets with round 200 shareholders. In contrast, there are over 10000 mutual funds in the U.S. today totaling around $7 trillion with approximately 83 million individual investors according to the investment company institute.

Indian Scenario of Mutual Fund The origin of mutual fund industry in India iswith the introduction of the concept of by UTI in the year 1963. Through the growth was slow, but it accelerated from the year 1987 when non-UTI players entered in industry. The mutual fund industry goes through four phases: First phase 1964-87 (Establishment of UTI). Second phase 1987-93 (Entry of public sector funds). Third phase 1993-2003 (Entry of a private sector funds). Fourth phase since feb.2003 (Bifurcated of UTI).

First Phase- 1964-87

An Act of Parliament established Unit Trust of India (UTI) on 1963. 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 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 corers 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 Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian bank Mutual Fund (Nov89), Bank Of India (Jun90), bank of Baroda (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. 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 Fund)

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 Regulation came into being, which all Mutual Fund, except UTI were to be registered and governed. The erstwhile kotharipioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. In 1993 comprehensive and revised mutual fund 7

regulation in 1996 .The industry now functions under the SEBI (mutual fund) regulation 1996.

The number of mutual fund houses went on increasing, with many foreign mutual fund setting up funds in India and also the industry has witness several mergers and acquisitions. As the end of January 2003, there were 33 mutual fund 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 fund.

Fourth phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI 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 return and certain other schemes. The specified Undertaking of Unit trust of India, functioning under an administration and under an administration and under the rules framed by government of India and does not come under the purview of the mutual fund regulation.

The second is the UTI mutual fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and function under the mutual fund regulation. 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 SERB mutual fund regulations, and with resent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth .As at the end of September 2004, there were 29 funds, which manage assets of Rs.153108 crores under 421 schemes. Note: Erstwhile UTI was bifurcated into UTI mutual fund and the specified undertaking of the Unit trust of India effective from February 2003. The Assets under management of

the specified undertaking of the unit trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.

In the year 1992, securities and exchange board of India (SEBI) Act was passed .The objective of SEBI are to protect the interest of development of and to promote the development of and to regulate the securities market. As far as mutual fund are concerned, SEBI formulates policies and regulates the mutual fund to protect the interest of the investors. SEBI notified regulation for the mutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities were allowed to enter the capital market. The regulations were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the mutual funds from time to time to protect the interest of investors. It may be mentioned here that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund. There was no uniform regulation of the mutual funds industry till a few years ago. The UTI was regulated by a special Act of Parliament while funds promoted by public sector banks were subject to RBI Guidelines of July 1989. The SEBI was formed in 1993 as a capital market regulator. One of its responsibilities was to regulate the mutual fund industry and it came up with comprehensive regulations for the industry in 1993. The rules for the formation, administration and management of mutual funds in India were clearly laid down. Regulations also prescribed disclosure requirements. The regulations were thoroughly reviewed and re-notified in December 1996. The revised guidelines tighten the accounting and disclosure requirements in line with recommendations of The Expert Committee on Accounting policies, Net Asset Values and Pricing of Mutual Funds. The SEBI (Mutual Funds) Regulations 1996 have been further amended in 1997, 1998 and 1999. Today, all mutual funds are regulated by SEBI. Efforts have been made to bring UTI schemes under SEBIs ambit with result that the capital market regulator now regulates all schemes, with the exception of Unit 64.


It is a trust that pools savings of a number of investors who share common financial goal. Professional managers than invest this fund in a way that helps the investor achieve their goal. Many investors join together and entrust their funds to professional money managers. These funds are then invested in securities. The capital gains, dividend and interest income are they passed back to investors either through dividends or as increase in the value of the fund.



There are many entities involved and the diagram above illustrates the organizational set up of a mutual fund. A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. AMC approved by SEBI manages the fund by making investments in various types of securities. A custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI regulations by the mutual fund. Sponsor Mutual Fund as Trust Asset Management Company Other Fund Constituents 11

SEBI Trustee AMC Operations Fund Manager Sponsor


Mutual Fund





Any person acting alone or in concert with another body corporate comparable to a promoter of a company as he gets fund registered with SEBI. For person to qualify as sponsor at least 40% of the initial Net worth of AMC should be contributed by him should be in the financial services business for a period of not less than five years should 12

possess sound financial track record of over five years & should have positive net worth in all the immediately preceding five years form a trust and appoint Board of Trustees appoint AMC directly or in concert with Trustees.

Mutual Fund as Trust

Constituted as Trust under Indian Trust Act, 1882 (and registered under Indian Registration Act, 1908). Sponsor acts as Settler of trust contributes initial trustee to hold the investors assets in trust. Trust deed to be executed by the sponsor in favor of trustees.


Eligibility of Board of Trustees or a Trustee Company

Not guilty of moral turpitude Not convicted (economic offence and securities laws) Not part of AMC (director, employee or officer of AMC) Appointment approved by SEBI More than one trusteeship (in mutual fund industry; approved by SEBI) At least two third should be independent Meaning of Independence

Trust Deed
Registered under provisions of Indian Registration Act Clauses necessary to safeguard interest of unit holders Circumstances when approval of unit holders required Allocation of capital and income Minimum no. Of Trustee (4) 13

Meeting and related requirements (Once in tree months; and at least one independent director or trustee to form quorum) Not to assume unlimited liability and illegal encumbrance on trust property

Rights of Trustees
Appoint AMC with SEBI approval Approve schemes floated by AMC Right to necessary information Remedial action to ensure that business is conducted as per SEBI regulation right to dismiss AMC with approval from SEBI and in accordance with regulations Ensure based on quarterly review that any shortfall in NW of AMC is made up.

Obligations of Trustee
Investment Management Agreement between trustee and AMC with approval from SEBI (4th schedule) Monitoring of AMC by trustees right to information Right to dismiss the AMC with approval SEBI Must ensure transactions are in accordance with trust deed Ensure AMC has proper systems and procedures Due diligence in appointment of brokers Ensure AMC is managing funds independent of other activities Half yearly report of fund activities and certificate that AMC has been managing funds independent of other activities


Appointment of AMC Eligibility

At least 50% of BOD not associated with sponsor Minimum NW of Rs. 10 crores Directors Directorship in the other AMC unless independent one Change in controlling interest in AMC with prior approval of Board, Trustee and unit holders Restrictions on business activities of AC not to act as trustee of other MF, no other activities other than Investment Advisory Services and Portfolio Management Services All the transaction of the fund with the associates of the AMC had to be fully disclosed to the unit holders.

Obligations of AMC
Not more than 5% (aggregate purchase and sales under its entire scheme) from one broker (for a block of 3 months). Due disclosure of transactions with a company, which has invested, more than 5% of NAV in any scheme. All transaction with the associates has to be disclosed Appointment of Registrar Appointment of Custodian Not more than 50% voting rights by sponsor in the custodian share holding Agreement with custodian.

Other Fund Constituents


Custodian and Depositories

For safekeeping of securities and participating in clearing system through approved depository companies.Entity independent of the sponsors direction and responsibility of the Trustees.

Bankers are dealing with money for buy and sale of units, paying and receiving funds for investments, discharging obligations for operational expenses.

Transfer Agent
Transfer agents are used for used for issuing and redeeming units, preparation of transfer documents, updating investor records, in-house or external agency.

Distributor enable fund to sell units over a wide bas of investors, brokers, banks, individual agents.


Types of Mutual funds


On the basis of Execution and Operation

On the basis of yield and investment pattern


Open Ended

Income Fund

Growth FundFund




Taxation Fund Market Fund


Open-ended Funds:An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Features: - The main features of the Open-ended funds are:

There is complete flexibility with regard to one's investment or disinvestment. These units are not publicly traded but the Fund is ready to repurchase them and resell them at any time. The investor is offered install liquidity in the sense that the unit can be sold on any working day to the Fund. The main objective of this fund is income generation. The inventors get dividend, right or bonuses as rewards for their investment. Generally, the listed prices are close to their Net Asset Value. The Fund fixes a different price for their purchases and sales.


Close-ended Funds:The unit capital of a close-ended product is fixed as it makes a one-time sale of fixed number of units. These schemes are launched with an initial public offer (IPO) with a stated maturity period after which the units are fully redeemed at NAV linked prices. In the interim, investors can buy or sell units on the stock exchanges where they are listed. Unlike open-ended schemes, the unit capital in closed-ended schemes usually remains unchanged. After an initial closed period, the scheme may offer direct repurchase facility to the investors. Closed-ended schemes are usually more illiquid as compared to openended schemes and hence trade at a discount to the NAV. This discount tends towards the NAV closer to the maturity date of the scheme.

Features: - The main features of the close-ended funds are: The period and/or the target amount of the fund are definite and fixed beforehand. Once the period is over and/or the target is reached, the door is closed for the investors. They cannot purchase any more units. These units are publicly traded through stock exchange and generally, there is no repurchase facility by the fund. The main objective of this fund is capital appreciation. The whole fund is available for the entire duration of the scheme and there will not be any redemption demands before its maturity. At the time of redemption, the entire investment pertaining to a closed-end scheme is liquidated and the proceeds are distributed among the unit holders.


On The Basis Of Income Income Funds:The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

Features: - The main features of the Income funds are:

The investor is assured of regular income at periodic intervals, says Half- yearly or years and so on. The main objective of this type fund is to declare regular dividends and not capital appreciation. The pattern of investment is oriented towards high and fixed income yielding securities like debentures, bonds etc. This is best suited to the old and retired people who may not have any regular income. It concerns itself with short run gains only.


Growth Funds:The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

Features: - The main features of the Growth funds are:

The Growth oriented fund aims at meeting the investors' need for capital appreciation. The Investment strategy therefore, conforms to the Fund objective by investing the fund predominantly on equities with high growth potential. The Fund tries to get capital appreciation by taking much risk and investing on risk bearing equities and high growth equity shares. The Fund may declare dividend, but its principal objective is only capital appreciation. This is best suited to salaried and business people who have high risk bearing capacity and ability to defer liquidity. They can accumulate wealth for future needs.

Balance Funds:The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising 21

stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Specialised Funds: Index schemes:The primary purpose of an Index is to serve as a measure of the performance of the market as a whole, or a specific sector of the market. An Index also serves as a relevant benchmark to evaluate the performance of mutual funds. Some investors are interested in investing in the market in general rather than investing in any specific fund. Such investors are happy to receive the returns posted by the markets. As it is not practical to invest in each and every stock in the market in proportion to its size, these investors are comfortable investing in a fund that they believe is a good representative of the entire market. Index Funds are launched and managed for such investors. An example to such a fund is the HDFC Index Fund.

Tax Saving schemes:

Investors (individuals and Hindu Undivided Families HUFs) are being encouraged to invest in equity markets through Equity Linked Savings Scheme (ELSS) by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged / redeemed / switched out until completion of 3 years from the date of allotment of the respective Units.

Money Market Funds:

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and interbank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods. 22

Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.



Portfolio Diversification
Each investor in a fund is a part owner of all the funds assets, thus enabling investor to hold a diversified portfolio even with a small amount of investment to achieve the objective of the scheme.

Professional Management
Mutual Fund provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyze the performance and prospect of companies and selects suitable investments to achieve the objective of the scheme.

Reduction of Transaction Costs

The investors bear all the cost of investing such as brokerage or custody of securities. When going through the fund investor has the benefit of economies of scale; the funds pay lesser cost because of larger volume, a benefit passed on to its investors.

Tax Benefit
The investors totally exempt from paying any tax on the income they receive from the mutual fund.

By investing in mutual fund the investors can cash their investment by selling their units to the fund if open-ended, or selling them in the stock market if the fund is close-ended.

Mutual funds invest in a number of companies across a cross-section of industries and sectors. This diversification reduces the risk because all stock cannot go through a downtrend at the same time and same proportion. You achieve this diversification through a mutual fund with powerless money that you can do your own. 24

Mutual funds offer a tremendous variety of schemes. This variety is beneficial in two ways: First, it offers different types of schemes to investors with different needs and risk appetites; Secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a Growth Fund (equity scheme) and Income Fund (debt fund) depending on his risk appetite and thus create a balanced portfolio easily or simply just buy a Balanced Scheme.

Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Convenient Administration
Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential
Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Costs
Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.



You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund managers investment strategy and outlook.

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Well Regulated
All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.



An investor in a mutual fund has no control over the overall cost of investing. He / she has to pay investment management fees as long as he / she remains with the fund. Fees are payable even while the value of the investment may be declining.

No Tailor Made Portfolios

Investors who invest on their own can build their own portfolios of shares and bonds and other securities. Investing through fund means he / she delegates this decision to the fund manager.

Managing a Portfolio of Funds

Availability of a large number of funds can actually mean too much choice for the investor. He / she may again need advice on how to select a fund to achieve his / her objectives, quite similar to the situation when he / she has to select individual shares or bonds to invest in.

Entry and Exit Cost

When large bodies like a fund invest in shares, the concentrated buying or selling often result in adverse price movements i.e. at the time of buying, fund has to pay high and vice-versa.



Mutual Funds and securities investments are subject to market risks and there can be no assurance or guarantee that the schemes of the Schemes objectives will be achieved. As with any investment in securities, the Net Asset Value of Units issued under the schemes may go up or down depending on the various factors and forces affecting the capital markets and debt markets. Past performance of the Sponsor/AMC/Mutual Fund, does not indicate the future performance of the schemes of the Mutual Fund. The NAV of the schemes may be affected, internally, by changes in the markets interest rates, trading volumes, settlement periods and transfer procedures. The Sponsor is not responsible or liable for any loss or shortfall resulting from the operations of the schemes beyond the initial contribution of Rs. 2 lakhs made by them towards setting up of the Mutual Fund, which has been invested in the Equity Fund. The names of the schemes do not in any manner indicate either the quality of the schemes, their future prospects or returns.



As with all debts securities, changes in interest rates will affect the schemes Net Asset Value as the prices of securities generally increase as interest rates decline and generally decrease as interest rates rise. Prices of long-term securities generally fluctuate more in response to interest rate changes than do shorter-term securities. Interest rates movement in the Indian Debt Markets can be volatile leading to the possibility of large price movement up or down in Debt and Money market securities and thereby to possibly large movements in the Net Asset Value.

Liquidity or Marketability Risk

This refers to the ease at which a security can be sold at or near its true value. The primary measure of liquidity risk is the spread between the bid price and the offer price quoted by a dealer. Liquidity risk is characteristics of the Indian fixed income market.

Credit Risk
Credit risk or default risk refers to the risk that an issuer of a fixed income security may default (i.e., will be unable to make timely principle and interest payments on the security). Because of this risk debentures are sold at a yield spread above those offered on Treasury securities, which are sovereign obligations and generally considered to be free of credit risk. Normally, the value of a fixed income security will fluctuate depending upon the actual changes in the perceived level of credit risk as well as the actual event of default. 29

Reinvestment Risk
This risk refers to the interest rate levels at which cash flows received from the securities in the schemes or from maturities in the scheme is reinvested. The additional income from reinvestment is the interest on interest component. The risk is that the rate at which interim cash flows can be reinvested will fall.

OPTIONS OF VARIOUS MUTUAL FUNDS Suspension of Sale / Redemption / Switching of Units

The Mutual Fund at its sole direction reserves the right to withdraw sale and repurchase or switching of the units in the schemes. The unit holders will have the option to switch all or part of their investment in the scheme to any other scheme established by the mutual fund or with the same scheme from one plan to another, which is available for investment at that time, at the prevailing terms of the scheme to which the switch is taking place.

Growth Option
The scheme will not declare any dividend under this option. The income earned by the scheme will remain invested in the scheme and will be reflected in the NAV. This option is suitable for investors who are not looking for regular income. There will be no distribution of income and return to investors will be only by way of capital gains.

Dividend Option
Under the option the trustee may declare dividends. Such dividend shall be declared monthly and unless the trustee determines otherwise the record date for the purpose shall be the 12th of the month concerned and 12th of the month is not a working day. The dividend shall not be paid out. Any dividend declared shall be re-invested in the plan.

Dividend Reinvestment

The investors opting for dividend option may choose to reinvest the dividend to be received by them in additional units of the scheme. Under this provision, the dividend due and payable to the unit holders will be compulsory and without any further act by unit holder reinvested in the scheme dividend to the unit holders and constructive receipt of the same amount from each unit holder, for investment in units.


SIP is available for planned and regular investments under this plan unit holders can benefit by investing specified rupee amounts periodically for a continuous period. This concept is called rupee cost averaging. The program allows unit holders to save month by purchasing additional units of the scheme. New investors can enroll for SIP facility on opening an account with an initial minimum amount of Rs.1000/- However, for the HDFC Equity Fund- liquid option, the initial minimum amount for SIP facility is Rs.10, 000/- and HDFC Equity Fund money at call option, the initial minimum amount for SIP facility is Rs. 1,00,000/-.

Systematic Withdrawal Plan

The unit holder can option for systematic withdrawal plan on monthly, quarterly, semiannual or annual bases to. Redeem a fixed number of units Redeem enough units to provide a fixed amount of money


Introduction to Companies:
HDFC Mutual Fund HDFC mutual fund was set up on June 30, 2000 with two sponsors namely Housing Development Finance Corporation ltd. and Standard Life Insurance ltd. HDFC mutual fund came into existence on 10 Dec. 1999 and got approval from the SEBI on 3rd July 2000. Housing Development Finance Corporation Limited, more popularly known as HDFC Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle' approval from RBI, for setting up a bank in the private sector. The bank was incorporated with the name 'HDFC Bank Limited', with its registered office in Mumbai. The following year, it started its operations as a Scheduled Commercial Bank. Today, the bank boasts of as many as 1412 branches and over 3275 ATMs across India.

Products and Schemes of HDFC mutual fund Equity funds. Balanced funds. Debt funds. Liquid funds.


Prudential ICICI Mutual Fund

The mutual fund of ICICI is a joint venture with Prudential PLC. Of America, one of the largest life insurance companies in the USA. Prudential ICICI mutual fund was set up on 13th of Oct. 1993 with two sponsors. ICICI Bank started as a wholly owned subsidiary of ICICI Limited, an Indian financial institution, in 1994. Four years later, when the company offered ICICI Bank's shares to the public, ICICI's shareholding was reduced to 46%. In the year 2000, ICICI Bank offered made an equity offering in the form of ADRs on the New York Stock Exchange (NYSE), thereby becoming the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. In the next year, it acquired the Bank of Madura Limited in an all-stock amalgamation. Later in the year and the next fiscal year, the bank made secondary market sales to institutional investors

Products and Schemes of ICICI mutual fund Equity funds. Balanced funds. Debt funds. Liquid funds. Childrens gift fund


Other Players in Mutual Fund

Bank of Baroda mutual fund (BOB MF) 30OCT. 1992. Benchmark mutual funds (June 12, 2001). Birla Sun life MF (1871). Chola mutual fund (3 Jan. 1997). Can bank mutual fund (Dec. 19, 1987). LIC mutual fund (19th June, 1989). Reliance mutual fund (30June, 1995). Sahara mutual fund (18 July, 1996). GIC (General Insurance Corporation of India). Etc.


Literature Review:

ICICI Bank is India's second-largest bank with total assets of about Rs. 1 trillion and a network of about 540 branches and offices and over 1,000 ATMs. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-Banking , venture capital, asset management and information technology. ICICI Bank's equity shares are listed in India on stock exchanges at Chennai, Muzaffarnagar, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

HDFC Banks exposure to market risk a function of its trading and asset and liability management activities and its role as a financial intermediary in customer-related transactions. HDFC had tried its best in mutual fund sector. It has grown up its market share in a meanwhile time. The objective of market riskmanagement is to minimize the impact of losses due to market risks on earning and equity capital.


Need of the study: The need of study arises for learning the variables available that distinguish the mutual fund of two companies. To know customer perception about the products of HDFC & ICICI. To know the risk & return associated with mutual fund. To choose best company for mutual investment between HDFC & ICICI. To project mutual fund as the productive avenue for investing activities.

Scope of the study:

To make people aware about concept of mutual fund. To provide information regarding advantages and demerits of mutual fund. To advice where to invest or not to invest. To provide information regarding types of mutual fund which is beneficial for whom.


Objectives of studies: . To know whether peoples is aware about Mutual Funds. To knowwhether investor interested to invest in Mutual Funds. To determine in which private sector Mutual Fund, the investors will invest more and reason behind it. To determine whether the investor like to invest in HDFC or ICICI Mutual funds and to find out reason behind it. To determine which age group and income class invest in mutual funds and in which company. To find out the how investor gets information about companies Mutual funds schemes. To find out the time duration of investment in Mutual fund. To find out whether the existing customers of HDFC&ICICI is satisfied with its services or not. To know what level of risk investor is ready to take To analysis which provides better returns from HDFC &ICICI. To analyze the concept and parameters of mutual fund. To know how many people are satisfied by their investment (in HDFC or ICICI). To know people behavior regarding risk factor involved in mutual fund. .


Research Methodology: Research refers to search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. It is an art of scientific investigation. Research Methodology:It is the way to systematically solve a problem. The methodology adopted in this study is explained below: Research Design A. Problem Defining: In a competitive situation with multiple mutual funds operating in Indian market, it is necessary to know about the performance of different mutual funds as the performance of mutual fund decides about the future of Mutual Fund Company. In this study my focus is upon performance of investors regarding HDFC &ICICI. This is my problem to be studied for research. B. Literature Survey: I have used newspapers, magazines related to business & finance & apart from websites. C. Type of research: The research is qualitative & descriptive in nature. Qualitative research is that talk about the quality of the subject to be researched and Descriptive research is one that describes things as exists in present. D. Data collection Design: I. Sources of data = Primary Sources I have used questionnaire as primary source for collecting data for my study. 38

Secondary sources I had collected my secondary data from websites & journals.

II. Sampling = It represents whole population. It is the processes of choosing a sample from whole population .I have choose a sample of high class & middle class people who have invested in mutual funds and customer of ICICI or HDFC as a sample. III. Tools = I have used some charts (Pie chart, column chart, cylinder chart, cone chart) IV. Sampling Size = It represents that how many candidates youve chosen to be filled up your questionnaire or candidates upon whom you can study. I had chosen sample of 200 candidates. V. Sampling Techniques = Deliberate & Convenience Sampling. VI. Data Interpretation = Data interpretation is that in which we analysis the whole collected data & tries to give it in simple words to be understandable.



1. Do you invest in mutual fund? .


60 40

120 100 100

60 40 20 0 0


Interpretation:As we are interested to know about Mutual Funds, so we had taken into consideration only those peoples who invest in mutual funds.

2. With which company do you have invested in mutual funds? A ) HDFC B) ICICI




40% 30% 20% 10%



Interpretation: Out of 200 candidates up to 110 have invested in mutual fund with HDFC & 90 have invested with ICICI.So it good for HDFC because its market share is more in Mutual funds. 3. What is your age? . 8% 15-25 25-35 35-45 More than 45 12% 60% 20%


60% 60% 50% 40% 30%

15-25 25-35 35-45

20% 12% 10% 0% 8%

More than 45

Interpretation: 120 investors are of age between 35-45. 40 are of age more than 45. 24 are of between of 25-35. 16 are of 15-25. This data shows that many investors are of middle age & there are less investors of young age in mutual fund.

4. What is your income? (Yearly based)

1 lakh 2-4 lakh 4-5 lakh More than 5

0% 10% 20% 70%


70 60 50


1 lakh

40 30 20 20 10 0

2-4 lakh 4-5 lakh More than 5


Interpretation: Up to 70% investors have income more than 5 lakh. 20% have between 4-5 lakh. 10%investors have income between 2-4 lakh & there is no investor who have income up to 1akh. 5. From where you come to know about this companys mutual fund schemes?

Family & relatives Friends & peers Company employee Others

35% 40% 15% 10%


40% 40% 35% 35% 30%

Family & relatives Friends & peers

20% 15% 15% 10% 10% 5% 0%

Company employee Others

Interpretation: Many investors (up to 40%) have been come to know about the company to be invested by their friends & peers.35% have been known by their family & relatives .15%have been come to know by company employees & 10% by others. This means many have come to know by their friends & peers. 6. What is the time duration of your investment?

0-1 year 1-2 year 2-4year more than 4

15% 35% 30% 20%


35 30 25 20 15

35 30


0-1 year 1-2 year 2-4year more than 4


5 0

Interpretation: 15% investors have time of investment less than one year. 20% have time duration of their investment between of 1-2 year. 30% have between 2-4 year & 35% have more than 4 years. So, we can say that 35% investors have more experience than others.

7. Are you satisfied by service of the companys employees / peoples behavior?

Highly satisfied Satisfied Neutral Dissatisfied Highly Dissatisfied

15% 35% 30% 15% 5% 46

35 35 30 30 25 20 15 15 10 5
Highly Dissatisfied Highly satisfied





Interpretation: Out of 200 investors 15% are highly satisfied. 35% are satisfied. 30% are neutral towards employee behavior of a company. 15% are dissatisfied. 5% are highly dissatisfied. We say that many people are satisfied by employee behavior.

8. What is your risk profile?

Innovator Moderate Risk adverse

20% 65% 15%


70 60 50 40 30 20 20 10 0 Innovator


Innovator Moderate Risk adverse 15


Risk adverse

Interpretation: 20% investors are innovator means they like to take risk for more returns. 15% are moderate towards risk means they are indifferent towards risk. 65% are risk adverse means they mainly try to avoid risk. 9. What you feel about the company norms, documentation & formalities?

Highly Satisfied Satisfied Neutral Dissatisfied Highly dissatisfied

15% 25% 40% 15% 5%


5% 15%


Highly Satisfied Satisfied Neutral 25% Dissatisfied


Highly Dissatisfied

Interpretation: Out of 200 investors 15% are highly satisfied. 25% are satisfied. 40% are neutral towards the company norms, documentation & formalities. 15% are dissatisfied. 5% are highly dissatisfied. 10. What you say which provides better returns?






70 60 50 40


32 30 20 10 0


Interpretation: Out of 200 investors 68% of investors responds in favors of HDFC and 32% of investors responds in favors of ICICI.

11. Would you like to exchange your investment with one another between HDFC & ICICI?

Yes No

15% 85%


90 80 70 60 50 40 30 20 10 0 15

, 85

Yes No

15% investors said that they would like to change their investment with each another between HDFC & ICICI. But 85% investors say that they are ok with their companies and they wouldnt like to exchange their investment.

Findings: In my research I have founded following things: Investors have more faith HDFCs mutual fund. As the age increases investors are much satisfied, see more risk & become more risk adverse. Old people &Widows prefer lower risk. Investors are not highly satisfied by company rules & employee behavior. Investors think that HDFC provides better returns than ICICI.

Limitations: 51

There are some limitations of my study, those are as Following: Sample limitation: - which sample is taken by me is very small in size to Compare mutual fund of two companies. Reliability: - The data collected by me is not much reliable because many investors chosen by me have invested in HDFC. Parameters: - All the parameters have not been taken. Time limitation: - I had the shortage of time because of that I was not able to do my study in a good manner. Awareness: - Investors chosen for study are not fully aware of all the terms and conditions related to mutual fund .So, it is very difficult to construct right information from them.

Recommendations / Suggestions: In my study I have found some limitations. For that I can suggest both companies following suggestions or areas of improvement: ICICI bank should try to provide better returns to its investors as compare to HDFC. Both companies should try to invest in better securities for better profits. Both companies should try to satisfy their customer by better customer service or by improving customer relationship management. Companies should try to make people initiative towards risk. Investors should be made fully aware of the concept of mutual fund & all the terms and conditions. It should more emphasize in advertising, as it is the most Powerful tool to position ant brand in the mindsets of customers

Conclusion: To conclude we can say that mutual fund is a very much profitable tool for investment because of its low cost of acquiring fund, tax benefit, and diversification of profits & reduction of risk. Many investors who have invested in mutual fund have invested with HDFC and them also thinks that it provides better returns than ICICI .There is also an effect of age on mutual fund investors like; old people & widows want regular returns than capital appreciation. Companies can adopt new techniques to attract more & more investors. In my study I was supposed to do comparative analyses the mutual fund of HDFC &ICICI and I had found that people consider HDFC better than ICICI. But ICICI have also respondents and it can increase its investors by improving itself in some terms.


To conclude we can say mutual fund is a best investment vehicle for old & widow, as well as to those who want regular returns on their investment. Mutual fund is also better and preferable for those who want their capital appreciation. Both the companies are doing considerable achievements in mutual fund industry. There are also so many competitors involved those affects on both companies.

Bibliography: Books:53

ICICI and HDFC Brochure . Websites:www.wiki.answers.com www.scribd.com www.hdfc.com www.icici.com

Name ________________________ Age _________ Adress_____________________________________ Pin ___________ Sex _________ Phone _________

1. Do you invest in mutual fund? Yes No .

2. With which company do you have invested in mutual funds? HDFC ICICI 54

3. What is your age? 15-25 35-45 25-35 above 45 .

4. What is your income? (Yearly based) 1 lakh 4-5 lakh 2 - 4lakh more than 5

5. From where you come to know about this companys mutual fund schemes? Family members & relatives Friends & peers Companys employees

Others Please specify 6. What is the time duration of your investment? 0-1 year 2-4year 1-2 year more than 4 . .

7. Are you satisfied by service of the companys employees / peoples behavior? Highly satisfied Satisfied Neutral


Highly dissatisfied 8. What is your risk profile?




Risk adverse

9. What you feel about the company norms, documentation & formalities? Highly satisfied



Dissatisfied Highly dissatisfied

10. What you say which provides better returns? HDFC ICICI

11. Would you like to exchange your investment with one another between HDFC & ICICI? YESNO