INTRODUCTION TO THE TOPIC

Mutual Fund are one such avenue for investment where there is a lot of
flexibility available with the professional services of the experts who work in
the capacity of fund managers. In today's dynamic scenario where the
interest rates on small savings are reducing and the market linked
instruments have become the main theme of any investment vehicle, mutual
fund serve the most of the investment needs.

WHAT IS MUTUAL FUND..???

As the name suggests, a mutual fund is an investment tool that allows several investors to
pool their resources in order to purchase stocks, bonds and other securities.
These collective funds (referred to as AssetUnder Management or AUM) are then invested by
an expert fund manager appointed by a mutual fund company (called Asset Management
Company or AMC).
The combined underlying holding of the fund is known as the 'portfolio', and each investor
owns a portion of this portfolio in the form of units.
Systematic Investment Plan (SIP) is also a very preferable mode of Investment in Mutual
Funds that help to create health by investing small amount of money every month, over a
period of time.

A mutual fund is simply 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 pooled money into specific securities (usually
stocks or bonds). When you invest in a mutual fund, you are buying shares (or portions) of
the mutual fund and become a shareholder of the fund. Thus it is a mechanism for pooling the
resources by issuing units to the investors and investing funds in securities (such as share
debentures etc.) in accordance with objectives as disclosed in offer document.
Investment in security is spread across a wide cross-section of industries and sectors and thus
the risk is reduced. Diversification reduces the risk because all stocks may not move in the
same proportion at the same time. Mutual fund issues units to the investors in accordance

with quantum of money invested by them. Investors of mutual funds are known as unit
holders. The profit and losses are shared by the investors in proportion to their investments.
It is a planned approach to investment technique for future by investing small amount of
money in Mutual Fund Schemes of your choice.
A Mutual Fund normally come out with a number of schemes with different investment
objective which are launched from time to time. A mutual fund is required to be registered
with Securities Exchange Board of India (SEBI) which regulates before it can collect fund
from the public.

INTRODUCTION TO THE MUTUAL FUNDS INDUSTRY

Concept of Mutual Funds :

Mutual Fundsis a vehicle to mobilize money from investors, to invest in different markets
and securities, in line with the investment objectives agreed upon, between the Mutual Funds
and the investors. In other words, through investment in a Mutual Funds, a small investor can
avail of professional fund management services offered by an Asset Management Company.
1. Investors with common financial objectives pool their money,
2. Investors on a proportionate basis, get Mutual Funds units for the sum contributed to
the pool,
3. The money collected from investors is invested into shares, debentures and
Othersecurities by the fund manager .
4. The fund manager realises gains or losses, and collects dividend or interest income,
5. Any capital gains or losses from such investments are passed on to investors in
proportion of the number of units held by them.
The securities and Exchange Board of India (Mutual Funds) Regulations, 1993 defines a
Mutual Funds as a fund established in the form of a trust by a sponsor, to raise monies by
the trustees through the sale of units to the public ,under one or more schemes , for investing
in securities in accordance with these regulations.

MUTUAL FUNDS CYCLE

From the above chart, it can be observed that how the money from the investors flowinto
Mutual Funds and they get returns out of it. Fund manager pool money from the small
investors in the market for investments in the specific fund. Taking into consideration the
market strategy the fund managers invest this pool of money into reliable securities. With ups
and downs in market returns are generated and they are passed on to the investors. The above
chart should be very clear and also effective.
The fund manager while investing on behalf of investors takes into consideration various
factors like time, risk, return, etc. so that he can make proper investment decision.

AMFI (ASSOCIATION OF MUTUAL FUNDS IN INDIA)

AMFI is not a Self Regulatory Organization (SRO).
Its made to promote Mutual Funds in the masses and give recommendation in order
to uphold the interest of the investor.
ASSET MANAGEMENT COMPANY

This acts as investment manager of the trust under the board supervision and direction of
trustees. In has to be approved and registered with SEBI.
This will float and manage different investment schemes in the name of trust and in
accordance with SEBI regulations. These acts in the interest of holders and reports to the
4

trustees. At least 50% of the directors on the board are independent of the sponsor or the
trustees.
.
CUSTODIAN
Often an independent organization, it takes custody of securities and other Asset of Mutual
Funds. Its responsibilities include receipt and delivery of securities, collecting incomedistributing dividends, safekeeping of the units and segregating Asset and settlements
between schemes. Their charges range between 0.15-0.2 percent of the net value of the
holding. Custodians can service more than one fund.
DEPOSITORY
Indian capital markets are moving away from having physical certificates for securities, to
ownership of these securities in dematerialized form with a Depository. Thus, a Mutual
Funds dematerialized securities holdings will be held by a Depository through a Depository
Participant. A funds physical securities will continue to be held by a Custodian. Thus,
deliveries of a funds securities are given or received by a custodian or a depository
participant, at the instruction of the AMC, although under the overall direction and
responsibility of the Trustees.

FUND SPONSER
Any person or corporate body that establishes the Fund with a net worth of Rs. 10 crores and
has paid out consistent returns to its investors for last three years consistently and registers it
with SEBI can be a fund sponsor. The fund sponsor forms a trust and appoints board of
trustees. He appoints Custodian and Asset Management Company (AMC) either directly or
through trust in accordance with SEBI regulations.
SEBI regulations also define that a sponsor must contribute at least 40 % to the net worth of
the Asset Management Company.

Understanding of various agencies, by taking the example of the constitution

of HDFC Mutual Funds:

Mutual Funds Trust

HDFC Mutual Funds

Sponsor

HDFC Ltd.

Trustee

HDFC Trustee Company Limited

AMC

HDFC Asset Management Company Limited

Custodian

HDFC Bank Limited, Mumbai

CITI BANK N.A., Mumbai
The Bank Of Nova Scotia, Mumbai

RTA
Computer Age Management Services Pvt. Ltd
The names of any market entities used in this Dissertation are for the purpose of
illustration only. No other Meaning should be construed in the choice of illustrations.
We do not recommend any market entity or any product.

WHY INVESTOR NEED MUTUAL FUNDS?

Mutual Funds offer benefits, which are too significant to miss out. Any investment has to be
judged on the yardstick of return, liquidity and safety. Convenience and tax efficiency are the
other benchmarks relevant in Mutual Funds investment. In the wonderful game of financial
safety and returns are the tows opposite goals and investors cannot be nearer to both at the
same time. The crux of Mutual Funds investing is averaging the risk.
Many investors possibly dont know that considering returns alone, many Mutual Funds have
outperformed a host of other investment products. Mutual Funds have historically delivered
yields averaging between 9% to 25% over a medium to long time frame. The duration is
important because likewise, Mutual Funds return taste bitter with the passage of time.
Investors should be prepared to lock in their investments preferably for 3 years in an income
fund and 5 years in an equity funds. Liquid funds of course, generate returns even in a short
term.
Professional Management:

Mutual Funds offer investors the opportunity to earn an income or build their wealth
Through professional management of their investible funds. There are several aspects to such
professional management viz. investing in line with the investment objective, investing based
on adequate research, and ensuring that prudent investment processes are followed.
Affordable Portfolio Diversification:
Units of a scheme give investors exposure to a range of securities held in the investment
portfolio of the scheme. Thus, even a small investment of Rs. 5,000 in a Mutual Funds
scheme can give investors a diversified investment portfolio. With diversification, an investor
ensures that all the eggs are not in the same basket. Consequently, the investor is less likely to
lose money on all the investments at the same time. Thus, diversification helps reduce the risk
in investment. In order to achieve the same diversification as a Mutual Funds scheme,
investors will need to set apart several lakhs of rupees. Instead, they can achieve the
diversification through an investment of a few thousand rupees in a Mutual Funds scheme.

Economies of Scale:
The pooling of large sums of money from so many investors makes it possible for the Mutual
Funds to engage professional managers to manage the investment. Individual investors with
small amounts to invest cannot, by themselves, afford to engage such professional
management. Large investment corpus leads to various other economies of scale. For
instance, costs Related to investment research and office space get spread across investors.
Further, the higher transaction volume makes it possible to negotiate better terms with
brokers, bankers and other service providers. Thus, investing through a Mutual Funds offers a
distinct economic advantage to an investor as compared to direct investing in terms of cost
saving.
Liquidity:
At times, investors in financial markets are stuck with a security for which they cant find a
buyer worse; at times they cant find the company they invested in! Such investments,
whose value the investor cannot easily realize in the market, are technically called illiquid
investments and may result in losses for the investor.
Investors in a Mutual Funds scheme can recover the value of the moneys invested, from the
Mutual Funds itself. Depending on the structure of the Mutual Funds scheme, this would be
possible, either at any time, or during specific intervals, or only on closure of the scheme.
Schemes, where the money can be recovered from the Mutual Funds only on closure of the
scheme, are listed in a stock exchange. In such schemes, the investor can sell the units in the
stock exchange to recover the prevailing value of the investment.
Tax Deferral:
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Mutual Funds are not liable to pay tax on the income they earn ifthe same income were to be
earned by the investor directly, and then tax may have to be paid in the same financial year.
Mutual Funds offer options, whereby the investor can let the moneys grow in the scheme for
seven years. By selecting such options, it is possible for the investor to defer the tax liability.
This helps investors to legally build their wealth faster than would have been the case, if they
were to pay tax on the income each year.
Tax benefits:
Specific schemes of Mutual Funds (Equity Linked Savings Schemes) give investors the
benefit of deduction of the amount invested (up toRs. 10,000 in a financial year), from their
income that is liable to tax. This reduces their taxable income, and therefore the tax liability.
The Rajiv Gandhi Equity Savings Scheme (RGESS) offers a rebate to first time retail
investors (in equity or Mutual Funds) with annual income below rest 10 lakhs. Mutual Funds
announce specific listed equity-oriented schemes that are eligible for the RGESS benefit.
The RGESS benefit is linked to amount invested (excluding brokerage, securities transaction
tax, service tax, stamp duty and all taxes appearing in the contract note). Rebate of 50% of
the amount invested up toRs. 50,000, can be claimed as a deduction from taxable income.
The investment limit of Rs. 50,000 is applicable for a block of three financial years, starting
with the year of first investment.
Thus, if an investor invests Rs. 30,000 in RGESS schemes in a financial year, then he can
reduce his taxable income for that previous year by 50% of Rs. 30,000 i.e. Rs. 15,000. In the
following year, he still has an investment limit of Rs. 20,000 available. The maximum
deduction that can be made from the taxable income over the period of three financial years is
50% of Rs. 50,000 i.e. Rs. 25,000.
Dividends received from Mutual Funds schemes are tax-free in the hands of the investors.
However, dividends from certain categories of schemes are subject to dividend distribution
tax, which is paid by the scheme before the dividend is distributed to the investor. Long term
capital gains arising out of sale of debt and liquid funds are subject to long term capital gains
tax, which may be taxed at a different (and often lower) rate of tax.
Convenient Options:
The options offered under a scheme allow investors to structure their investments in line with
their liquidity preference and tax position.There is also great transaction conveniences like
the ability of withdraw only part of the Money from the investment account, ability to
invest additional amounts to the account, setting up systematic transactions, etc.
Investment Comfort:
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Once an investment is made with Mutual Funds, they make it convenient for the investor to
make further purchases with very little documentation. This simplifies subsequent investment
activity.
Regulatory Comfort:
The regulator, Securities & Exchange Board of India (SEBI), has mandated strict checks and
balances in the structure of Mutual Funds and their activities. These are detailed in the
subsequent units. Mutual Funds investors benefit from such protection.
Systematic Approach to Investments:
Mutual Funds also offer facilities that help investor invest amounts regularly through
aSystematic Investment Plan (SIP); or withdraw amounts regularly through a
SystematicWithdrawal Plan (SWP); or move moneys between different kinds of schemes
through Systematic Transfer Plan (STP). Such systematic approaches like SIP and STP
promote an investment discipline, which is useful in long-term wealth creation and
protection. SWPs allow the investor to structure a regular cash flow from the investment
account.

Advantages of Mutual Funds

The advantages of investing in a Mutual Fund are:
1) Diversification
The best mutual funds design their portfolios so individual investments will react
differently to the same economic conditions. For example, economic conditions like a
rise in interest rates may cause certain securities in a diversified portfolio to decrease
in value. Other securities in the portfolio will respond to the same economic
conditions by increasing in value. When a portfolio is balanced in this way, the value
of the overall portfolio should gradually increase over time, even if same securities
lose value.

2) Professional Management

Most mutual funds pay topflight professionals to manage their investments. These
managers decide what securities the fund will buy and sell.
3) Liquidity
Its easy to get your money out of a mutual fund. Write a check, make a call, and you
will have got the cash.
4) Low cost
Mutual fund expenses are often no more than 15 percent of your investment.
Expenses for Index Funds are less than that, because index funds are not actively
managed. Instead, they automatically buy stock in companies that are listed on a
specific investment.

DRAWBACKS OF MUTUAL FUND

1) No Guarantees
All mutual fund investments are subject to market risks. If the entire stock market
declines in value, the value of mutual fund units will go down as well, no matter
how balanced the portfolio. Investors encounter fewer risks when they invest in
mutual funds than when they buy and sell stocks on their own.
2) Fees and commission
All funds charge administrative fees to cover their day to day expenses.Some
funds also charge sales commissions or loads to compensate Brokers , financial
consultants , or financial planners. Even if you dont use a Broker or other
financial advisor, you will pay a sales commission if you buy shares in a load
fund.

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3) Management risk
When you invest in a mutual fund , you depend on the funds manager to Make
the right decisions regarding the funds portfolio. If the manager does not perform
as well as you had hoped, you might not make as much money On your
investment as you expected .of course , if you invest in index funds. You forego
management risk because these fund do not employ manager.

LIMITATIONS OF 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.The investor can get a customized portfolio in case of PMS.
On the other hand, a unit-holder in a Mutual Funds 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). Thus, the unitholder cannot influence what securities or investments the scheme would buy.Large sections
of investors lack the time or the knowledge to be able to make portfolio choices. Therefore,
lack of portfolio customization is not a serious limitation in most cases.
Choice overload:
Over 800 Mutual Funds schemes offered by more than 40 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 their holding of Units in the
scheme. Therefore, an individual investor has no control over the costs in a scheme. SEBI has
however imposed certain limits on the expenses that can be charged to any scheme.
CHANGE OF INDEX COMPOSITION:
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The indices changing over the world to reflect changing market conditions. There is an
inherent survivorship bias in this process, with the bad stocks bided out and replaced by
emerging blue chips. This is a severe problem in India with the Sensex having being
changing twice in last 5 years, with each change being quite substantial. Another reason for
change index composition is Mergers and Acquisitions. The weight age of the shares of a
particular company in the index changes if it acquires a large company not a part of the index.

HDFC ASSET MANAGEMENT COMPANY

An HDFC Asset Management Company limited is well-established fund house. HDFC Asset
Management Company limited is sponsored by Housing Development Finance Corporation
Limited (HDFC) and Standard life investments limited.
HDFC Asset Management Company limited launched its scheme HDFC EQUITY FUND in
the year January 1995. Since then it focused on different class of schemes for many years and
launched several innovative products that went to become bourgeoning categories in the
Indian Mutual Funds industry.
Some of these were HDFC GROWTH FUND, HDFC TOP 200 FUND, and HDFC
BALANCED FUND, HDFC PRUDENCE FUND etc.
HDFC asset Management Company limited have offices in more than 90 cities and currently
manage assets in excess of Rs 108990 cores. (December 2013.)

Sponsors of HDFC Asset Management Company

Housing Development Finance Corporation Limited (HDFC)
HDFC was incorporated in 1977 as the first specialized Mortgage Company in India. HDFC
provides financial assistance to individuals, corporate and developers for the purchase or
construction of residential housing. It also provides property related services (e.g. property
identification, sales services and valuation), training and consultancy. Of these activities,
housing finance remains the dominant activity. HDFC has a client base of around 9.5 lack
borrowers, around 1 million depositors, over 91,000 shareholders and 50,000 deposit agents
as at March 31, 2007. HDFC has raised funds from international agencies such as the World
Bank, IFC (Washington), USAID, DEG, ADB and KFW, international syndicated loans,
12

domestic term loans from banks and insurance companies, bonds and deposits. HDFC has
received the highest rating for its bonds and deposits program for the twelth year in
succession. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the
first life insurance company in the private sector to be granted a Certificate of Registration
(on October 23, 2000) by the Insurance Regulatory and Development Authority to transact
life insurance business in India.

Standard Life Investments Limited

The Standard Life Assurance Company was established in 1825 and has considerable
experience in global financial markets. The company was present in the Indian life insurance
market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company
re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch
an insurance joint venture. On April 2006, the Board of The Standard Life Assurance
Company recommended that it should demutualise and Standard Life plc float on the London
Stock Exchange. At a Special General Meeting held in May voting members overwhelmingly
voted in favour of this. The Court of Session in Scotland approved this in June and Standard
Life plc floated on the London Stock Exchange on 10 July 2006. Standard Life Investments
was launched as an investment management company in 1998. It is a wholly owned
subsidiary of Standard Life Investments (Holdings) Limited, which in turn is a wholly owned
subsidiary of Standard Life plc. Standard Life Investments is a leading Asset management
company, with approximately US$ 269 billion as at March 30, 2007, of assets under
management. The company operates in the UK, Canada, Hong Kong, China, Korea, Ireland
and the USA to ensure it is able to form a truly global investment view. In order to meet the
different needs and risk profiles of its clients, Standard Life Investments Limited manages a
diverse portfolio covering all of the major markets world-wide, which includes a range of
private and public equities, government and company bonds, property investments and
various derivative instruments.

Management of HDFC Asset Management Company

HDFC Trustee Company Limited:
A company incorporated under the Companies Act, 1956 is the Trustee to the Mutual Funds
vides the Trust deed dated June 8, 2000, as amended from time to time. HDFC Trustee
Company Limited is a wholly owned subsidiary of HDFC Limited.
HDFC Asset Management Company Limited:

13

HDFC Asset Management Company limited was incorporated under the Companies Act,
1956, on December 10, 1999, and were approved to act as an Asset Management Company
for the Mutual Funds by SEBI on July 3, 2000. The registered office of the HDFC Asset
Management Company limited is situated at Ramon House, 3rd Floor, H.T. Parekh Marg,
169, Backbay Reclamation, Church gate, Mumbai - 400 020. In terms of the Investment
Management Agreement, the Trustee has appointed HDFC Asset Management Company
Limited to manage the Mutual Funds. The paid up capital of the HDFC Asset Management
Company limited is Rs.75.161 crore.
The present share holding pattern of the HDFC Asset management company is as follows:
Particulars
HDFC
Standard Life Investments
Limited

% of the paid up
share capital
50.10
49.90

At present The HDFC Asset Management company is managing 18 open-ended schemes of

the Mutual Funds viz. HDFC Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC
Income Fund (HIF), HDFC Liquid Fund (HLF), HDFC Tax Plan 2000 (HTP), HDFC
Children's Gift Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan
(HSTP), HDFC Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity
Fund (HEF), HDFC Top 200 Fund, (HT200), HDFC Capital Builder Fund (HCBF), HDFC
Tax Saver (HTS), HDFC Prudence Fund (HPF), HDFC High Interest Fund (HHIF), HDFC
Sovereign Gilt Fund (HSGF) and HDFC Cash Management Fund (HCMF). HDFC Asset
Management Company limited is also managing HDFC Fixed Investment Plan, as well as
closed ended Income Scheme.
The HDFC Asset Management Company has obtained registration from SEBI vide
Registration No. - PM / INP000000506 dated December 22, 2000 to act as a Portfolio
Manager under the SEBI (Portfolio Managers) Regulations, 1993.
The HDFC Asset management company is also providing portfolio management / advisory
services and such activities are not in conflict with the activities of the Mutual Funds
HDFC Asset Management Companys punch line is continuing a tradition of
trust.
In Gujarat HDFC Asset Management Company is located at Ahmedabad, Surat,
Vadodara, Rajkot, Anand, Bhavnagar, Bharuch.
HDFC Asset Management Company is working from 9:30 a.m. onwards.
HDFC Asset Management Company Have around 450-500 active distributors in
Vadodara.

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 HDFC Asset Management Company Provide account statements to investors

according to investors requirement.
HDFC Asset Management Company Provide good services to investors.

PRODUCTS OFFERED BY HDFC ASSET MANAGEMENT COMPANY

EQUITY

BALANCED

DEBT

(Different Types of Products Offered by HDFC Asset Management Company)

EQUITY SCHEMES OF HDFC ASSET MANAGEMENT COMPANY
1. HDFC Equity Fund:Investment Objective: The investment objective of the Schemeis to achieve capital
appreciation.
Investment Options: Dividend & Growth Option
Nature of Scheme: -Open Ended Growth Scheme

2. 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 and equity related instruments.
Investment Options: Dividend & Growth Option
Nature of Scheme: - Open Ended Growth Scheme

3. HDFC Top 200 fund:15

Investment Objective: - To generate long-term capital appreciation from a portfolio

of equity and equity-linked instruments primarily drawn from the companies in BSE
200 index.
Investment Options: Dividend & Growth Option
Nature of Scheme: -Open Ended Growth Scheme
4. HDFC midcap opportunity fund:Investment Objective: - To generate long-term capital appreciation from a portfolio
that is substantially constituted of equity and equity related securities of small and
Mid-Cap companies.
Investment Options: Dividend & Growth Option
Nature of Scheme: -Open Ended Growth Scheme

5. HDFC capital builder fund:Investment Objective: - To generate long-term capital appreciation from a portfolio
that is substantially constituted of equity and equity related securities of small and
Mid-Cap companies.
Investment Options: Dividend & Growth Option
Nature of Scheme: -Open Ended Growth Scheme
6.

HDFC core and satellite fund:Investment Objective: - The primary objective of the Scheme is to generate capital
appreciation through equity investment in companies whose shares are quoting at
prices below their true value.
Investment Options: Dividend & Growth Option
Nature of Scheme: -Open Ended Growth Scheme

7. HDFC premier multicape fund:Investment Objective: - The primary objective of the Scheme is to generate capital
appreciation in the long term through equity investments by investing in a diversified
portfolio of Mid Cap and Large Cap `blue chip` companies. Investment Options:
Dividend Plan, Growth Plan, The Dividend Plan offers Dividend Payout and
Reinvestment Facility.
Nature of Scheme: - Open Ended Growth Scheme

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BALANCED SCHEMES OF HDFC ASSET MANAGEMENT COMPANY

1.HDFC balanced fund: Investment Objective: - The primary objective of the Scheme is to generate capital
appreciation along with current income from a combined portfolio of equity and
equity related and debt and money market instruments.
Investment Options: Dividend & Growth Option
Nature of Scheme: - Open Ended balanced fund
2.HDFC prudence fund:Investment Objective: - The investment objective of the Scheme is to provide
periodic returns and capital appreciation over a long period of time, from a judicious
mix of equity and debt investments, with the aim to prevent/ minimize any capital
erosion
Investment Options: Dividend & Growth Option
Nature of Scheme: - Open Ended balanced fund
3. HDFC short term plan:Investment Objective: - The primary objective of the HDFC Short Term Plan is to
generate regular income through investment in debt securities and money market
instruments.
Investment Options: Growth Plan, Dividend Plan. The Dividend Plan offers
Dividend Pay-out and Reinvestment Facility.
Nature of Scheme: -Open Ended income fund
4. HDFC Multiple yield fund:Investment Objective: - The primary objective of the Scheme is to generate positive
returns over medium time frame with low risk of capital loss over medium time
frame.
Investment Options: Growth Plan, Dividend Plan. The Dividend Plan offers
Dividend Pay-out and Reinvestment Facility.
Nature of Scheme: - Open Ended income fund

DEBT SCHEMES OF HDFC ASSET MANAGEMENT COMPANY

1.HDFC Income Fund:Investment Objective: - The primary objective of the Scheme is to optimize returns
while maintaining a balance of safety, yield and liquidity.
Investment Options: Dividend & Growth Option
Nature of Scheme: - Open Ended Income Scheme
17

2.HDFC High Interest Fund (HHIF): Investment Objective: - The investment objective of HDFC High Interest Fund is to
generate income by investing in a range of debt and money market instruments of
various maturity dates with a view to maximizing income while maintaining the
optimum balance of yield, safety and liquidity.
Investment Options: Dividend & Growth Option
Nature of Scheme: - Open Ended Income Scheme
3. HDFC MF Monthly Income Plan - Short Term Plan:Investment Objective: - The primary objective of Scheme is to generate regular
returns through investment primarily in Debt and Money Market Instruments. The
secondary objective of the Scheme is to generate long-term capital appreciation by
investing a portion of the Schemes assets in equity and equity related instruments.
However, there can be No assurance that the investment objective of the Scheme will
be achieved.
Investment Options: Quarterly Dividend Option, Monthly Dividend Option, and
Growth Plan. The Dividend Plan offers Dividend Pay-out and Reinvestment Facility
Nature of Scheme: - An open-ended income scheme. Monthly income is not assured
and is subject to availability of distributable surplus
4. HDFC MF Monthly Income Plan - Long Term Plan:Investment Objective: - The primary objective of Scheme is to generate regular
returns through investment primarily in Debt and Money Market Instruments. The
secondary objective of the Scheme is to generate long-term capital appreciation by
investing a portion of the Schemes assets in equity and equity related instruments.
However, there can be no assurance that the investment objective of the Scheme will
be achieved
Investment Options: Growth Plan, Quarterly Dividend Option, Monthly Dividend
Option. The Dividend Plan offers Dividend Pay-out and Reinvestment Facility.
Nature of Scheme: - An open-ended income scheme. Monthly income is not assured
and is subject to availability of distributable surplus
5. HDFC Floating Rate Income Fund Long Term Plan:Investment Objective: - The primary objective of the Scheme is to generate regular
income through investment in a portfolio comprising substantially of floating rate
debt / money market instruments, fixed rate debt / money market instruments
swapped for floating rate returns, and fixed rate debt securities and money market
instruments.
Investment Options: Dividend Plan, Growth Plan. The Dividend Plan offers
Reinvestment Facility only
Nature of Scheme: - An open-ended income scheme.
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Inception Date: - January 16, 2003

Performance ofHDFC Floating Rate Income Fund Long Term Plan (G):-Not
Ranked by CRISIL(Ranking by CRISIL)
NAV: - Every business day

RESEARCH METHODOLOGY
It is method adopted for collecting information for this project. The researcher started the
project by preparing questionnaires and respondents were asked to fill it . In the project only
primary data were used that was collected through a survey conducted on customer .
Research methodology is a way to systematically solve the researcher problem . It may be
understood as a science of studying how research is to be done scientifically. In research
methodology, we not only talk about the research method but only considered the logic
behind them methods we used in the context of our research study , and explain why we are
using a particular method or the technique and why we are not using others so that research
results are capable of being evaluate either by the research results are capable of being
evaluate either by the researcher himself or by the others.

RESEARCH DESIGN
I have used Descriptive research design in my report.
Descriptive research design
Provides information that helps the executive take rational decisions Typically concerned
with determining frequency with which something occurs or how to variables vary
together.
There are three types of research design :
Exploratory research design
Descriptive research design
Experimental research design

COLLECTION OF DATA
The task of data collection beings after a research for problem is defined and research
design / plan chalked out. While deciding about research should keep in mind two types are
data viz: primary and secondary.
19

I.

SOURCES OF DATA
1) Primary data
The primary data are those which are collected a fresh and for the first time as these
happen to be original in character. I have collected the primary data throughsurvey.
2) Secondary Data
The secondary data on the other hand are those which have already been passed through
statistical process. Qualitative and quantitative data are collected through newspaper,
articles, previous record files etc. I have collected secondary data through books,
websites, and office manuals.

II. DATA COLLECTION TECHNIQUE

I have used
1) Observation method
The observation method implies the collection of information by way of investigators own
observation, without interviewing the respondents. This method is no doubt an expensive
method and information is provided by this method is also very limited.

CASE STUDY
All of us want our kids to have a successful career and a joyful life but successful career does
not come with ease. We all know there is a huge competition and to ensure successful career,
we need to provide quality education to our children. While we do our best to give our
children the best food, clothing etc. then why not give them the best education. After all
education is the path to success which will make the child financially independent.
Having similar thought in mind, one of our clients Mr. X &Mrs Y wanted to secure the future
of their child, by planning for his education and marriage.
Let's take up their case and see how proper planning can help one plan for their child's
education and marriage.

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Personal Details
Name

Age

Income

Mr. X's Salary 30 years Rs 40,000 per month

Mrs Y's Salary 27 years Rs 25,000 per month
Daughter

3 years N.A.

Expenses

Rs 42,000 per month

Surplus

Rs 23,000 per month

Personal Details
Mr. X a 30 year old married individual and his wife whose age was 27 years had a 3 year old
Daughter. Mr. X was earning Rs 40,000 per month while his wife was earning Rs 25,000 per
month, thus having a total family income of Rs 65,000 per month. As their expenses were
around Rs 42,000 per month, they could have a surplus of around Rs 23,000 on a monthly
basis.
He had the following assets as depicted in the table below.

Sr.No.
1
2
3
4
5
6
7
8

Assets
Type of Assets
EPF (Self)
EPF (Spouse)
PPF (Self)
PPF (Spouse)
FD (Mature after 10
yrs.)
Physical Gold
Cash in Bank (Self)
Cash in Bank
(Spouse)
Total

Amount (Rs)
200,000
75,000
500,000
250,000
15,00,000
8,00,000
1,20,000
80,000
35,25,000

Assets...
So, you can see that Mr. X &Mrs Y had total assets worth Rs 35 lakhs, of which Fixed
Deposit comprises of more than 40% of his total assets. They had small amount of investment
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physical gold which was mostly in the form of gold ornaments of Mrs Y. They also had their
individual EPF, PPF and Cash in Bank accounts. The Cash in Bank was mainly kept for
contingency purpose.
However Mr. X &MrsY did not have any liabilities.
And here was Mr. X &Mrs Y's Financial Objectives!
They were very concerned about their Daughter's future. So they wanted to plan for his
graduation at the age of 18 years' worth Rs 9 lakhs, post-graduation at the age of 21 years'
worth Rs 15 lakhs and marriage at the age of 22 years' worth Rs 12 lakhs. (All costs are
current values), they want their own car and flat in next 5 years on EMI basis from bank.

Financial Goal

Current Cost
(Rs)

Time to Goal
(Years)

Future Cost
(Rs)

Graduation
Post-Graduation

900,000
1,500,000

15
18

2483100
5069850

Marriage

1,200,000

22

5316480

Car(72 months
@10.95%)

500000

Required Per
Month
Investment (Rs)
4970
6690
4143

4727
15144

Flat(120 month @
30,00,000
10.25% )
Total
35674
(Note: Inflation considered at 7% per annum and investment return considered at 12% per
annum, Interest rate is according to SBI Loan Scheme)

Mr. X &Mrs Y needed to make a total investment of Rs 35674 per month to achieve just
these goals, while they had a surplus of Rs 23,000 per month. They wanted to know how they
can plan for their child's goals.
We recommended them the following:
1. Accommodation Goal: As they already pay rent of 12000 per month for
accommodation now they have to pay 15144 for EMI purpose so in near future they own
their flat.
2. Graduation Goal: Since Graduation is the highest priority goal, we advised them to a
start a SIP of Rs 4970 per month. SIP was advised across Equity, Debt & Gold in the
allocation of 80%, 10% and 10% respectively for 15 years

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3. Post-Graduation Goal: Post-Graduation is the next priority goal, but the amount
required for this goal was very high. If they were to start a SIP of such a high amount,
they would have sacrificed on all other financial goals. So, we advised them to start a
SIP of Rs 4000 per month and increase it by 25% after every 3 years. They could easily
do so as their salaries would increase in future and they can easily increase their
investment amount for this goal as well. SIP was advised across Equity, Debt & Gold in
the allocation of 80%, 10% and 10% respectively for 18 years.

4. Marriage Goal: Marriage was the least priority goal among these 3 goals and it was
difficult for them to start a SIP for this goal immediately. So we advised them to start a
SIP of Rs. 12000 per month after 7 years and increase it by 20% after every 3 years. SIP
was advised across Equity, Debt & Gold in the allocation of 80%, 10% and 10%
respectively for 15 years.

5. Other Financial Goals: After planning for the child goals, their total investment is just
Rs 12114 per month while they had surplus of Rs 23,000 per month. So they can still
invest Rs 10886 (Rs 23,000 - Rs 12114) for other financial goals such as retirement,
vacation or any other financial goal they might have.
We did not utilize any of their current assets as cash in bank was kept for contingency
purpose, physical gold was mostly gold ornaments and EPF & PPF account can be
dedicated
to
other
financial
goals
such
as
retirement.
Even though Mr. X & Mrs.Y thought their surplus amount is insufficient to fund for their
child goals leaving aside all other goals, but proper planning helped them not only to
plan for their child goals but also plan for other financial goals.
Amount received as bonus at every year is utilized for other luxury need like this year
this amount is utilized in purchasing a car.
Loan amount is 1500000 as 1500000 down payments are done by FD withdrawal.

CONCLUDING REMARKS
Equity Instruments like shares form only a part of the securities held by Mutual
Funds. Mutual Funds also invest in debt securities, which are relatively much safer.
23

 The biggest advantage of Mutual Funds is their ability to diversify the risk.
Mutual Funds are there in India since 1964. Mutual Funds market is much evolved in
U.S.A and is there for last 60 years.
Mutual Funds are the best solution for people who want to manage risk and get good
returns.
The size of Mutual Funds market in India is Rs. 107728 crores and that in U.S.A is
many times higher.
According to the SEBI - NCAER Survey of Indian Investors about 15 million or 8.7%
of the households have invested in Mutual Funds and there are nearly 23 million unit
holders in India.
30% of investors fall in the income group of investors having monthly income up to
Rs. 10,000/-.
In U.S.A there are more deposits in the Mutual Funds than in bank deposits.
The truth is, as investors we should always pay attention to our Mutual Funds and
continue to monitor them.
The names of any market entities used in this Dissertation are for the purpose of
illustration only. No other Meaning should be construed in the choice of illustrations.
We do not recommend any market entity or any product.

BIBLIOGRAPHY

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BOOKS:
1) KOTHARI C.R., Research Methodology tools and techniques( New Age International
Publishers, 2nd Edition, 2004 )
2) Information Memorandum

WEBSITES:
http://www.moneycontrol.com/mutual-funds/nav/hdfc-top-200-fund/MZU009
http://www.moneycontrol.com/mutual-funds/amc-details/HD
http://www.hdfcbank.com/personal/products/investments/investmentproducts/mutual-funds
http://economictimes.indiatimes.com/hdfc-mutual-fund/mutual_funds_search/amcid302.cms
http://profit.ndtv.com/mutual-funds/hdfcmutualfund-amc-details_hdfc-mf
NEWSPAPERS,MAGAZINES, JOURNALS:
ECONOMIC TIMES
BUSINESS LINE
BUSINESS TODAY
HDFC Asset Management Companys Fact Sheet (February-2014).

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