INTRODUCTION TO MUTUAL FUND

Mutual fund is a trust that pools money from a group of investors (sharing common financial
goals) and invest the money thus collected into asset classes that match the stated investment
objectives of the scheme. Since the stated investment objective of a mutual fund scheme
generally forms the basis for an investor's decision to contribute money to the pool, a mutual
fund can not deviate from its stated objectives at any point of time.
Every Mutual Fund is managed by a fund manager, who using his investment management
skills and necessary research works ensures much better return than what an investor can
manage on his own. The capital appreciation and other incomes earned from these investments
are passed on to the investors (also known as unit holders) in proportion of the number of units
they own.

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When an investor subscribes for the units of a mutual fund, he becomes part owner of the
assets of the fund in the same proportion as his contribution amount put up with the corpus (the
total amount of the fund). Mutual Fund investor is also known as a mutual fund shareholder or
a unit holder.
Any change in the value of the investments made into capital market instruments (such as
shares, debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is
defined as the market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a
scheme is calculated by dividing the market value of scheme's assets by the total number of
units issued to the investors.
For example:
A.

If the market value of the assets of a fund is Rs. 100,000

B.

The total number of units issued to the investors is equal to 10,000.

C.

Then the NAV of this scheme = (A)/(B), i.e. 100,000/10,000 or 10.00

D.

Now if an investor 'X' owns 5 units of this scheme

E.

Then his total contribution to the fund is Rs. 50 (i.e. Number of units held multiplied by
the NAV of the scheme)

ADVANTAGES OF MUTUAL FUND

1. Portfolio Diversification: Mutual Funds invest in a well-diversified portfolio of securities
which enables investor to hold a diversified investment portfolio (whether the amount of
investment is big or small).
2. Professional Management: Fund manager undergoes through various research works and
has better investment management skills which ensure higher returns to the investor than what
he can manage on his own.
3. Less Risk: Investors acquire a diversified portfolio of securities even with a small
investment in a Mutual Fund. The risk in a diversified portfolio is lesser than investing in
merely 2 or 3 securities.
4. Low Transaction Costs: Due to the economies of scale (benefits of larger volumes), mutual
funds pay lesser transaction costs. These benefits are passed on to the investors.
5. Liquidity: An investor may not be able to sell some of the shares held by him very easily
and quickly, whereas units of a mutual fund are far more liquid.
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6. Choice of Schemes: Mutual funds provide investors with various schemes with different
investment objectives. Investors have the option of investing in a scheme having a correlation
between its investment objectives and their own financial goals. These schemes further have
different plans/options
7. Transparency: Funds provide investors with updated information pertaining to the markets
and the schemes. All material facts are disclosed to investors as required by the regulator.
8. Flexibility: Investors also benefit from the convenience and flexibility offered by Mutual
Funds. Investors can switch their holdings from a debt scheme to an equity scheme and viceversa. Option of systematic (at regular intervals) investment and withdrawal is also offered to
the investors in most open-end schemes.
9. Safety: Mutual Fund industry is part of a well-regulated investment environment where the
interests of the investors are protected by the regulator. All funds are registered with SEBI and
complete transparency is forced.
DISADVANTAGES OF MUTUAL FUND
1. Costs Control Not in the Hands of an Investor:

Investor has to pay investment

management fees and fund distribution costs as a percentage of the value of his investments (as
long as he holds the units), irrespective of the performance of the fund.
2. No Customized Portfolios: The portfolio of securities in which a fund invests is a decision
taken by the fund manager. Investors have no right to interfere in the decision making process
of a fund manager, which some investors find as a constraint in achieving their financial
objectives.
3. Difficulty in Selecting a Suitable Fund Scheme: Many investors find it difficult to select
one option from the plethora of funds/schemes/plans available. For this, they may have to take
advice from financial planners in order to invest in the right fund to achieve their objectives.

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TYPES OF MUTUAL FUNDS

General Classification of Mutual Funds
Open-end Funds / Closed-end Funds
Open-end Funds:
Funds that can sell and purchase units at any point in time are classified as Open-end
Funds. The fund size (corpus) of an open-end fund is variable (keeps changing) because of
continuous selling (to investors) and repurchases (from the investors) by the fund. An open-end
fund is not required to keep selling new units to the investors at all times but is required to
always repurchase, when an investor wants to sell his units. The NAV of an open-end fund is
calculated every day.
Closed-end Funds:
Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period
are known as Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all
times. After the closure of the offer, buying and redemption of units by the investors directly
from the Funds is not allowed. However, to protect the interests of the investors, SEBI provides
investors with two avenues to liquidate their positions:
1.

Closed-end Funds are listed on the stock exchanges where investors can buy/sell units

from/to each other. The trading is generally done at a discount to the NAV of the scheme. The
NAV of a closed-end fund is computed on a weekly basis (updated every Thursday).
2.

Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the

corpus of the Fund and its outstanding units do get changed.

Load Funds/no-load funds
Load Funds:
Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio
churning, fund managers salary etc. Many funds recover these expenses from the investors in
the form of load. These funds are known as Load Funds. A load fund may impose following
types of loads on the investors:

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Entry Load Also known as Front-end load, it refers to the load charged to an investor

at the time of his entry into a scheme. Entry load is deducted from the investors contribution
amount to the fund.

Exit Load Also known as Back-end load, these charges are imposed on an investor

when he redeems his units (exits from the scheme). Exit load is deducted from the redemption
proceeds to an outgoing investor.

Deferred Load Deferred load is charged to the scheme over a period of time.

Contingent Deferred Sales Charge (CDSS) In some schemes, the percentage of exit

load reduces as the investor stays longer with the fund. This type of load is known as
Contingent Deferred Sales Charge.
No-Load Fund:
All those funds that do not charge any of the above mentioned loads are known as No-load
Funds.
Tax-exempt Funds/ Non-Tax-exempt Funds
Tax-exempt Funds:
Funds that invest in securities free from tax are known as Tax-exempt Funds. All openend equity oriented funds are exempt from distribution tax (tax for distributing income to
investors). Long term capital gains and dividend income in the hands of investors are tax-free.
Non-Tax-exempt Funds:
Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all
funds, except open-end equity oriented funds are liable to pay tax on distribution income.
Profits arising out of sale of units by an investor within 12 months of purchase are categorized
as short-term capital gains, which are taxable. Sale of units of an equity oriented fund is subject
to Securities Transaction Tax (STT). STT is deducted from the redemption proceeds to an
investor.

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BROAD MUTUAL FUND TYPES

1. Equity Funds:
Equity funds are considered to be the more risky funds as compared to other fund types,
but they also provide higher returns than other funds. It is advisable that an investor looking to
invest in an equity fund should invest for long term i.e. for 3 years or more. There are different
types of equity funds each falling into different risk bracket. In the order of decreasing risk
level, there are following types of equity funds:
(1)Aggressive Growth Funds:

In Aggressive Growth Funds, fund managers aspire for

maximum capital appreciation and invest in less researched shares of speculative nature.
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Because of these speculative investments Aggressive Growth Funds become more volatile and
thus, are prone to higher risk than other equity funds.
a.

Growth Funds: Growth Funds also invest for capital appreciation (with time horizon of

3 to 5 years) but they are different from Aggressive Growth Funds in the sense that they invest
in companies that are expected to outperform the market in the future. Without entirely
adopting speculative strategies, Growth Funds invest in those companies that are expected to
post above average earnings in the future.
b.

Speciality Funds:

Speciality Funds have stated criteria for investments and their

portfolio comprises of only those companies that meet their criteria. Criteria for some
speciality funds could be to invest/not to invest in particular regions/companies. Speciality
funds are concentrated and thus, are comparatively riskier than diversified funds. There are
following types of speciality funds:
1. Sector Funds: Equity funds that invest in a particular sector/industry of the market are
known as Sector Funds. The exposure of these funds is limited to a particular sector (say
Information Technology, Auto, Banking, Pharmaceuticals or Fast Moving Consumer Goods)
which is why they are more risky than equity funds that invest in multiple sectors.
2. Foreign Securities Funds: Foreign Securities Equity Funds have the option to invest in one
or more foreign companies. Foreign securities funds achieve international diversification and
hence they are less risky than sector funds. However, foreign securities funds are exposed to
foreign exchange rate risk and country risk.
3.

Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower market

capitalization than large capitalization companies are called Mid-Cap or Small-Cap Funds.
Market capitalization of Mid-Cap companies is less than that of big, blue chip companies (less
than Rs. 2500 crores but more than Rs. 500 crores) and Small-Cap companies have market
capitalization of less than Rs. 500 crores. Market Capitalization of a company can be
calculated by multiplying the market price of the company's share by the total number of its
outstanding shares in the market. The shares of Mid-Cap or Small-Cap Companies are not as
liquid as of Large-Cap Companies which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.
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4. Diversified Equity Funds: Except for a small portion of investment in liquid money
market, diversified equity funds invest mainly in equities without any concentration on a
particular sector(s). These funds are well diversified and reduce sector-specific or companyspecific risk. However, like all other funds diversified equity funds too are exposed to equity
market risk. One prominent type of diversified equity fund in India is Equity Linked Savings
Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS should be
in equities at all times. ELSS investors are eligible to claim deduction from taxable income (up
to Rs 1 lakh) at the time of filing the income tax return. ELSS usually has a lock-in period and
in case of any redemption by the investor before the expiry of the lock-in period makes him
liable to pay income tax on such income(s) for which he may have received any tax
exemption(s) in the past.
c.

Equity Index Funds: Equity Index Funds have the objective to match the performance

of a specific stock market index. The portfolio of these funds comprises of the same companies
that form the index and is constituted in the same proportion as the index. Equity index funds
that follow broad indices (like S&P CNX Nifty, Sensex) are
d.

Less risky than equity index funds that follow narrow sectoral indices (like

BSEBANKEX or CNX Bank Index etc). Narrow indices are less diversified and therefore, are
more risky.
2. Debt/Income Funds:
Funds that invest in medium to long-term debt instruments issued by private companies,
banks, financial institutions, governments and other entities belonging to various sectors (like
infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk
profile funds that seek to generate fixed current income (and not capital appreciation) to
investors. In order to ensure regular income to investors, debt (or income) funds distribute large
fraction of their surplus to investors. Although debt securities are generally less risky than
equities, they are subject to credit risk (risk of default) by the issuer at the time of interest or
principal payment. To minimize the risk of default, debt funds usually invest in securities from
issuers who are rated by credit rating agencies and are considered to be of "Investment Grade".

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Debt funds that target high returns are more risky. Based on different investment objectives,
there can be following types of debt funds:
a. Diversified Debt Funds:

Debt funds that invest in all securities issued by entities

belonging to all sectors of the market are known as diversified debt funds. The best feature of
diversified debt funds is that investments are properly diversified into all sectors which results
in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared by all
investors which further reduces risk for an individual investor.
b. Focused Debt Funds: Unlike diversified debt funds, focused debt funds are narrow focus
funds that are confined to investments in selective debt securities, issued by companies of a
specific sector or industry or origin. Some examples of focused debt funds are sector,
specialized and offshore debt funds, funds that invest only in Tax Free Infrastructure or
Municipal Bonds. Because of their narrow orientation, focused debt funds are more risky as
compared to diversified debt funds. Although not yet available in India, these funds are
conceivable and may be offered to investors very soon.
c. Assured Return Funds: Although it is not necessary that a fund will meet its objectives
or provide assured returns to investors, but there can be funds that come with a lock-in period
and offer assurance of annual returns to investors during the lock-in period. Any shortfall in
returns is suffered by the sponsors or the Asset Management Companies (AMCs). These funds
are generally debt funds and provide investors with a low-risk investment opportunity.
However, the security of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the interests of investors,
SEBI permits only those funds to offer assured return schemes whose sponsors have adequate
net-worth to guarantee returns in the future. In the past, UTI had offered assured return
schemes (i.e. Monthly Income Plans of UTI) that assured specified returns to investors in the
future. UTI was not able to fulfill its promises and faced large shortfalls in returns. Eventually,
government had to intervene and took over UTI's payment obligations on itself. Currently, no
AMC in India offers assured return schemes to investors, though possible.
d. Fixed Term Plan Series: Fixed Term Plan Series usually are closed-end schemes having
short term maturity period (of less than one year) that offer a series of plans and issue units to
investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on the

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exchanges. Fixed term plan series usually invest in debt / income schemes and target shortterm investors. The objective of fixed term plan schemes is to
e. Gratify investors by generating some expected returns in a short period.
f. 1.Open-end 2.Closed-end 3.GiltFunds
g. Also known as Government Securities in India, Gilt Funds invest in government papers
(named dated securities) having medium to long term maturity period. Issued by the
Government of India, these investments have little credit risk (risk of default) and provide
safety of principal to the investors. However, like all debt funds, gilt funds too are exposed to
interest rate risk. Interest rates and prices of debt securities are inversely related and any
change in the interest rates results in a change in the NAV of debt/gilt funds in an opposite
direction.
4. Money Market/Liquid Funds:
Money market / liquid funds invest in short-term (maturing within one year) interest bearing
debt instruments. These securities are highly liquid and provide safety of investment, thus
making money market / liquid funds the safest investment option when compared with other
mutual fund types. However, even money market / liquid funds are exposed to the interest rate
risk. The typical investment options for liquid funds include Treasury Bills (issued by
governments), Commercial papers (issued by companies) and Certificates of Deposit (issued
by banks).
5. Hybrid Funds:
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of
equities, debts and money market securities. Hybrid funds have an equal proportion of debt and
equity in their portfolio. There are following types of hybrid funds in India:
a.

Balanced Funds The portfolio of balanced funds include assets like debt securities,

convertible securities, and equity and preference shares held in a relatively equal proportion.
The objectives of balanced funds are to reward investors with a regular income, moderate
capital appreciation and at the same time minimizing the risk of capital erosion. Balanced
funds are appropriate for conservative investors having a long term investment horizon.

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b.

Growth-and-Income Funds Funds that combine features of growth funds and income

funds are known as Growth-and-Income Funds. These funds invest in companies having
potential for capital appreciation and those known for issuing high dividends. The level of risks
involved in these funds is lower than growth funds and higher than income funds.
6. Commodity Funds:
Those funds that focus on investing in different commodities (like metals, food grains,
crude oil etc.) or commodity companies or commodity futures contracts are termed as
Commodity Funds. A commodity fund that invests in a single commodity or a group of
commodities is a specialized commodity fund and a commodity fund that invests in all
available commodities is a diversified commodity fund and bears less risk than a specialized
commodity fund. Precious Metals Fund and Gold Funds (that invest in gold, gold futures or
shares of gold mines) are common examples of commodity funds.
7. Real Estate Funds:
Funds that invest directly in real estate or lend to real estate developers or invest in
shares/securitized assets of housing finance companies, are known as Specialized Real Estate
Funds. The objective of these funds may be to generate regular income for investors or capital
appreciation.
8. Exchange Traded Funds (ETF):
Exchange Traded Funds provide investors with combined benefits of a closed-end and an
open-end mutual fund. Exchange Traded Funds follow stock market indices and are traded on
stock exchanges like a single stock at index linked prices. The biggest advantage offered by
these funds is that they offer diversification, flexibility of holding a single share (tradable at
index linked prices) at the same time. Recently introduced in India, these funds are quite
popular abroad.
9. Fund of Funds:
Mutual funds that do not invest in financial or physical assets, but do invest in other mutual
fund schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds
maintain a portfolio comprising of units of other mutual fund schemes, just like conventional
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mutual funds maintain a portfolio comprising of equity/debt/money market instruments or non

financial assets. Fund of Funds provide investors with an added advantage of diversifying into
different mutual fund schemes with even a small amount of investment, which further helps in
diversification of risks. However, the expenses of Fund of Funds are quite high on account of
compounding expenses of investments into different mutual fund schemes.
Risk Hierarchy of Different Mutual Funds:

Thus, different mutual fund schemes are

exposed to different levels of risk and investors should know the level of risks associated with
these schemes before investing. The graphical representation hereunder provides a clearer
picture of the relationship between mutual funds and levels of risk associated with these funds:

MUTUAL FUND STRUCTURE

The SEBI (Mutual Funds) Regulations 1993 define a mutual fund (MF) 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 in vesting in securities in accordance with these
regulations.

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These regulations have since been replaced by the SEBI (Mutual Funds) Regulations, 1996.
The structure indicated by the new regulations is indicated as under.
A mutual fund comprises four separate entitles, namely sponsor, mutual fund trust, AMC and
custodian. The sponsor establishes the mutual fund and gets its registered with SEBI.
The mutual fund needs to be constituted in the form of a trust and the instrument of the trust
should be in the form of a deed registered under the provisions of the Indian Registration Act,
1914.
The sponsor is required to contribute at lease 40% of the minimum net worth (Rs.10 crore) of
the asset management company. The board of trustees manages the MF and the sponsor
executes the trust deeds in favour of the trustees. It is the job of the MF trustees to see that
schemes floated and managed by the AMC appointed by the trustees are in accordance with the
trust deed and SEBI guide.

Sponsor Company
(E.g. Prudential, ICICI)

Establishes the MF as a trust

Registers the MF with SEBI

Managed by a Board of
Trustees
Mutual Fund
(E.g. Prudential, ICICI, Mutual
Fund)
AMC
(e.g. prudential ICICI Asset
Management Company)
Custodian

Hold unit-holders funds in MF

enter into an agreement with
SEBI and ensure compliance
Float MF funds
Manages the fund as per SEBI
guidelines and AMC agreement
Provide custodial services

Registrar

Provides registrar and transfer

services
Provides the network for
distribution of the scheme to the
investors

Distributors

CHOOSING A FUND
The first step to investing in Mutual Fund is to define the objective of investing. You should
clearly lay down the purpose for which you desire to invest. There are several schemes tailor
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made to meet certain personal financial goals (children's education, marriage, retirement etc.)
which can be availed of. You should define the tenure of investment and the risk appetite you
have. Thereafter, you can select a fund type that best meets your need i.e. income schemes,
liquid schemes, tax saving schemes, equity schemes etc. Given the plethora of fund options
available to you, you can then choose the particular fund that you are comfortable with.
You can choose the fund on various criteria but primarily these can be the following:
The track record of performance of schemes over the last few years managed by the fund
Quality of management and administration
Parentage of the Mutual Fund
Quality and adequacy of disclosures
Service levels
The price at which you can enter/exit (i.e. entry load / exit load) the scheme and its impact
on overall return
The market price of the units of the scheme (where available) to see the discount/premium
that the market .assigns to the stated NA V of the scheme
Independent rating of the schemes, if available
You could be investing in a mutual fund either at the initial stage when the mutual fund
approaches the market through an offer document route or at a subsequent stage.
If you choose to invest at the initial stage, the offer document would detail the schemes being
offered and the manner of investing. The manner is usually similar to that of investing any
public issue of any security (equity/debt).
If you are planning to purchase the units subsequently. Then the following choices exist:
A close ended scheme. If the desired, units are of a close-ended scheme, then the investor
would be able to purchase them at the stock exchange where the MF has listed them. This
purchase would resemble the purchase of an equity share wherein the investor would pay the
quoted price of the unit as well as a brokerage for the purchase transaction. In the case of a
close ended scheme, the sale also is affected through the stock exchange mechanism and
resembles the sale of equity share. The pricing for the transaction, as was mentioned earlier, is
driven by the price the units quote. This is driven by the NA V (Net Asset Value) of the
scheme. The price, however, may be either at a discount or premium to the NA V.
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Purchasing a unit in a open-ended scheme is different as there is no exchange where these

units are traded. Their price ret1ects the NA V of the scheme. The mutual fund in an open-ended
scheme sells these units to the investor at the NA V (plus a sale / entry load).
Selling units in an open-ended scheme is similar to the way they are purchased. It is the
mutual fund that buys back the units and at a price based on the NA V. The actual price is the
NA V less the exit load. The exit load is similar in concept to the entry load.
The Ground rules of Mutual Fund Investing:
Moses gave to his followers 10 commandments that were to be followed till eternity. The
world of investments too has several ground rules meant for investors who are novices in their
own right and wish to enter the myriad world of investments. These come in handy for there is
every possibility of losing what one has if due care is not taken.
1.

Assess yourself: Self-assessment of one's needs; expectations and risk profile is of prime

importance failing which; one will make more mistakes in putting money in right places than
otherwise. One should identify the degree of risk bearing capacity one has and also clearly
state the expectations from the investments. Irrational expectations will only bring pain.
2.

Try to understand where the money is going: It is important to identify the nature of

investment and to know if one is compatible with the investment. One can lose substantially if
one picks the wrong kind of mutual fund. In order to avoid any confusion it is better to go
through the literature such as offer document and fact sheets that mutual fund companies
provide on their funds.
3.

Don't rush in picking funds, think first: one first has to decide what he wants the

money for and it is this investment goal that should be the guiding light for all investments
done. It is thus important to know the risks associated with the fund and align it with the
quantum of risk one is willing to take. One should take a look at the portfolio of the funds for
the purpose. Excessive exposure to any specific sector should be avoided, as it will only add to
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the risk of the entire portfolio. Mutual funds invest with a certain ideology such as the "Value
Principle" or "Growth Philosophy". Both have their share of critics but both philosophies work
for investors of different kinds. Identifying the proposed investment philosophy of the fund
will give an insight into the kind of risks that it shall be taking in future.
4.

Invest. Don't speculate: A common investor is limited in the degree of risk that he is

willing to take. It is thus of key importance that there is thought given to the process of
investment and to the time horizon of the intended investment. One should abstain from
speculating which in' other words would mean getting out of one fund and investing in another
with the intention of making quick money. One would do well to remember that nobody can
perfectly time the market so staying invested is the best option unless there are compelling
reasons to exit.
5.

Don't put all the eggs in one basket: This old age adage is of utmost importance. No

matter what the risk profile of a person is, it is always advisable to diversify the risks
associated. So putting one's money in different asset classes is generally the best option as it
averages the risks in each category. Thus, even investors of equity should be judicious and
invest some portion of the investment in debt. Diversification even in money in the hands of
several fund managers. This might reduce the maximum return possible, but will also reduce
the risks.
6.

Be regular: Investing should be a habit and not an exercise undertaken at one's wishes, if

one has to really benefit from them. As we said earlier, since it is extremely difficult to know
when to enter or exit the market. It is important to beat the market by being systematic. The
basic philosophy of Rupee cost averaging would suggest that if one invests regularly through
the ups and downs of the market, he would stand a better chance of generating more returns
than the market for the entire duration. The SIPs (Systematic Investment Plans) offered by all
funds helps in being systematic.
Performance Measures of Mutual Funds
Mutual Fund industry today, with about 34 players and more than five hundred schemes, is one
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of the most preferred investment avenues in India. However with a plethora of schemes to
choose from the retail investor faces problems in selecting funds. Factors such as investment
strategy and management style are qualitative, but the funds record is an important indicator
too. Though past performance alone cannot be indicative of future performance, it is, frankly,
the only quantitative way to judge how good a fund is at present. Therefore, there is a need to
correctly assess the past performance of different mutual funds.
Worldwide, good Mutual fund companies over are known by their AMCs and this fame is
directly linked to their superior stock selection skills. For mutual funds to grow, AMCs must be
held accountable for their selection of stocks. In other words, there must be some performance
indicator that will reveal the quality of stock selection of various AMCs.
Return alone should not be considered as the basis of measurement of the performance of a
mutual fund scheme. It should also include the risk taken by the fund manager because
different funds will have different levels of risk attached to them. Risk associated with a fund,
in a general, can be defined as variability or fluctuations in the returns generated by it. The
higher the t1uctuations in the returns of a fund during a given period, higher will be the risk
associated with it. These fluctuations in the returns generated by a fund are resultant of two
guiding forces. First, general market fluctuations, which affect all the securities, present in the
market, called market risk or systematic risk and second, t1uctuations due to specific securities
present in the portfolio of the fund, called unsystematic risk. The Total Risk of a given fund is
sum of these two and is measured in terms of standard deviation of returns of the fund.
Systematic risk. On the other hand is measured in terms of Beta, which represents t1uctuations
in the NA V of the fund vis--vis market. The more responsive the NA V of a mutual fund is to
the changes in the market; higher will be its beta. Beta is calculated by relating the returns on a
mutual fund with the returns in the market. While unsystematic risk can be diversified through
investments in a number of instruments, systematic risk cannot.

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NEED FOR THE STUDY

OBJECTIVES OF THE STUDY

Statement of the problem:

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The study totally attempts to know the performance of diversified funds with reference to
HDFC Mutual Fund.
Objectives of the Project:
The various objectives of the study are
To evaluate the performance of diversified equity funds for the last six months.
To find out the perception of investors towards various mutual funds options.
To know concept of mutual fund industry in India.
To get exposure about mutual fund industry
To find out which funds is performing well.
Study the volatility in Fidelity mutual fund for the period July-2014 to Dec-2014
To measure return and risk of investing in UTI mutual fund
To measure the performance of UTI mutual fund using Sharpes Model, Treynors
Model.
To find out the correlation of UTI mutual fund
To measure the fund performance for (July 2014- Dec-2014)

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RESEARCH METHODOLOGY
Research design or research methodology is the procedure of collecting, analyzing and
interpreting the data to diagnose the problem and react to the opportunity in such a way where
the costs can be minimized and the desired level of accuracy can be achieved to arrive at a
particular conclusion.
The methodology used in the study for the completion of the project and the fulfillment of the
project objectives, is as follows:
Collection of Data:
Data can be collected on two types
1. Primary data
2. Secondary data.
Primary Data:
In this method I follow a structured questionnaire and this can be taken to Investors
perception towards various mutual funds schemes.
Secondary data:
In this method I collected the performance reports of the funds, company profile, Industry
profile, fund fact sheets, journals, and some information through internet.
Time Period
I collected; daily NAV data pertains to year (JULY 2014 to DEC- 2014)

LIMITATIONS OF THE STUDY

This study is restricted to Diversified funds only.
Different people may interpret the same analysis in different ways.
The study is made with in the geographical boundaries of Hyderabad only.
People may not be willing to spend their time in answering the questions.
The time period taken for doing the data analysis has been taken as a shorter

period.

20 | P a g e

HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of
India, at the initiative of the Government of India and Reserve Bank the. The history of mutual
funds in India can be broadly divided into four distinct phases

First Phase 1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was set up
by the Reserve Bank of India and functioned under the Regulatory and administrative control of
the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and administrative control in place
of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had
Rs.6,700 crores of assets under management.

Second Phase 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India
(GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in June 1987 followed
by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank
Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC
established its mutual fund in June 1989 while GIC had set up its mutual fund in December
1990.
At the end of 1993, the mutual fund industry had assets under management of Rs.47,004 crores.

Third Phase 1993-2003 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund
industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in
which the first Mutual Fund Regulations came into being, under which all mutual funds, except
UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with
Franklin Templeton) was the first private sector mutual fund registered in July 1993.

21 | P a g e

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and
revised Mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds setting
up funds in India and also the industry has witnessed several mergers and acquisitions. As at the
end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The
Unit Trust of India with Rs.44,541 crores of assets under management was way ahead of other
mutual funds.

Fourth Phase since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 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, assured return and certain other schemes. The Specified
Undertaking of Unit Trust of India, functioning under an administrator and under the rules
framed by Government of India and does not come under the purview of the Mutual Fund
Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of
the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets under
management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector funds, the
mutual fund industry has entered its current phase of consolidation and growth. As at the end of
September, 2004, there were 29 funds, which manage assets of Rs.153114 crores under 421
schemes.
The graph indicates the growth of assets over the years.

22 | P a g e

GROWTH IN ASSETS UNDER MANAGEMENT

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 onward

23 | P a g e

COMPANY PROFILE
VISION
To be a dominant player in the Indian mutual fund space recognized for its high levels of
ethical and professional conduct and a commitment towards enhancing investor interests.
SPONSORS
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 June 30, 2007. HDFC has raised funds from international agencies such as the World Bank,
IFC (Washington), USAID, DEG, ADB and KfW, international syndicated loans, 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 twelfth 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
24 | P a g e

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 10th 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$ 282 billion as at June 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. The
company's current holdings in UK equities account for approximately 1.8% of the market
capitalization of the London Stock Exchange.
MANAGEMENT:
HDFC Trustee Company Limited:
A company incorporated under the Companies Act, 1956 is the Trustee to the Mutual Fund
vide 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 (AMC):
Was incorporated under the Companies Act, 1956, on December 10, 1999, and was approved to
act as an Asset Management Company for the Mutual Fund by SEBI on July 3, 2000. The
registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg, 169,
Back bay 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 Fund. The paid up capital of the AMC is Rs. 45.161 crore.
The present equity shareholding pattern of the AMC is as follows:
Particulars % of the paid up equity capital
HDFC 60
25 | P a g e

Standard Life Investments Limited 40

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a
review of its overall strategy, had decided to divest its Asset Management business in India.
The AMC had entered into an agreement with ZIC to acquire the said business, subject to
necessary regulatory approvals. On obtaining the regulatory approvals, the Schemes of Zurich
India Mutual Fund has now migrated to HDFC Mutual Fund on June 19, 2003.
The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC Growth Fund
(HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC Liquid Fund (HLF),
HDFC Long Term Advantage Fund (HLTAF), 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 TaxSaver (HTS), HDFC Prudence
Fund (HPF), HDFC High Interest Fund (HHIF), HDFC Cash Management Fund (HCMF),
HDFC MF Monthly Income Plan (HMIP), HDFC Core & Satellite Fund (HCSF), HDFC
Multiple Yield Fund (HMYF), HDFC Premier Multi-Cap Fund (HPMCF), HDFC Multiple
Yield Fund . Plan 2005 (HMYF-Plan 2005), HDFC Quarterly Interval Fund (HQIF) and HDFC
Arbitrage Fund (HAF).
The AMC is also managing 8 closed ended Schemes of the HDFC Mutual Fund viz. HDFC
Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Fixed Maturity Plans,
HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans - Series III, HDFC Fixed
Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V and HDFC Fixed Maturity
Plans - Series VI.
The AMC is also providing portfolio management / advisory services and such activities are not
in conflict with the activities of the Mutual Fund. The AMC has renewed its registration from
SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a
Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of
Registration is valid from January 1, 2007 to December 31, 2009.

26 | P a g e

THE TRUSTEE
HDFC Trustee Company Limited, a company incorporated under the Companies Act, 1956 is
the Trustee to HDFC Mutual Fund vide the Trust deed dated June 8, 2000, as amended from
time to time. HDFC Trustee Company Ltd is wholly owned subsidiary of HDFC
The Board of Directors of HDFC Trustee Company Limited consists of the following
eminent persons.
Mr. James Aird
Mr. Anil Kumar Hirjee
Mr. Shishir K. Diwanji
Mr. Ranjan Sanghi
Mr. V. Srinivasa Rangan
HDFC Asset Management Company Limited (AMC)
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated June 30, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Parekh Marg,
169, Back bay Reclamation, Church gate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed the AMC to
manage the Mutual Fund.
As per the terms of the Investment Management Agreement, the AMC will conduct the
operations of the Mutual Fund and manage assets of the schemes, including the schemes
launched from time to time.
The present equity shareholding pattern of the AMC is as follows:
Particulars % of the paid up equity capital
Housing Development Finance Corporation Limited 60
Standard Life Investments Limited 40
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a
review of its overall strategy, had decided to divest its Asset Management business in India.
27 | P a g e

The AMC had entered into an agreement with ZIC to acquire the said business, subject to
necessary regulatory approvals.
On obtaining the regulatory approvals, the following Schemes of Zurich India Mutual Fund
have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes have been renamed as
follows:
The AMC is also managing 8 closed ended Schemes of the HDFC Mutual Fund viz. HDFC
Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Fixed Maturity Plans,
HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans - Series III,
HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V and HDFC
Fixed Maturity Plans - Series VI.
The AMC is also providing portfolio management / advisory services and such activities are
not in conflict with the activities of the Mutual Fund. The AMC has renewed its registration
from SEBI vide Registration No. - PM / INP000000506 dated December 8, 2006 to act as a
Portfolio Manager under the SEBI (Portfolio Managers) Regulations, 1993. The Certificate of
Registration is valid from January 1, 2007 to December 31, 2009.
The Board of Directors of the HDFC Asset Management Company Limited (AMC)
consists of the following eminent persons.
Mr. Deepak S Parekh
Mr. N. Keith Skeoch
Mr. Keki M. Mistry
Mr Mark Connolly
Mr. Hoshang S. Billimoria
Mr. Humayun Dhanrajgir
Mr. P. M. Thampi
Dr. Deepak B Phatak
Mr Rajeshwar Raj Bajaaj
Mr. Vijay Merchant
Ms. Renu S. Karnad
Mr. Milind Barve
28 | P a g e

What is a Mutual Fund? Disclaimer

A mutual fund is a common pool of money in to which investors with common investment
objective place their contributions that are to be invested in accordance with the stated
investment objective of the scheme. The investment manager would invest the money collected
from the investor in to assets that are defined/ permitted by the stated objective of the scheme.
For example, an equity fund would invest equity and equity related instruments and a debt fund
would invest in bonds, debentures, gilts etc.

29 | P a g e

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

INTRODUCTION:
The Organization
The National Stock Exchange of India Limited has genesis in the report of the High Powered
Study Group on Establishment of New Stock Exchanges, which recommended promotion of a
National Stock Exchange by financial institutions (FIs) to provide access to investors from all
across the country on an equal footing. Based on the recommendations, NSE was promoted by
leading Financial Institutions at the behest of the Government of India and was incorporated in
November 1992 as a tax-paying company unlike other stock exchanges in the country.
On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in
April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in
June 1994. The Capital Market (Equities) segment commenced operations in November 1994
and operations in Derivatives segment commenced in June 2000.
The National Stock Exchange of India Ltd. is the largest stock exchange of the country.
NSE is setting the agenda for change in the securities markets in India. The last 5 years have
seen us play a major role in bringing investors from 363 cities and towns online, ensuring
complete transparency, introducing financial guarantee of settlements, ensuring scientifically
designed and professionally managed indices and by nurturing the dematerialization effort
across the country. NSE is a complete capital market prime mover. Its wholly-owned
subsidiaries, National Securities Clearing Corporation Ltd. (NSCCL) provides clearing and
settlement of securities, India Index Services and Products Ltd. (IISL) provides indices and
index services with a consulting and licensing agreement with Standard & Poor's (S&P), and
NSE.IT Ltd. forms the technology strength that NSE works on.
Today, we are one of the largest exchanges in the world and still forging ahead. At NSE,
we are constantly working towards creating a more transparent, vibrant & innovative capital
market. This invariably implies that our need for competent people is continuous. As the
30 | P a g e

leading stock exchange and fiscal entity in the country, we believe in recruiting the finest of
talent in the industry.
We are looking for talent to be developed into future leaders of our organization by crossdepartmental exposure, continuous self-development opportunities and ongoing reinforcement
to develop & enhance customer orientation & leadership potential.
Awaiting you is an excellent compensation package including medical benefits, superannuation benefits and a reward system designed to promote merit and professionalism
Our Technology
Across the globe, developments in information, communication and network
technologies have created paradigm shifts in the securities market operations. Technology has
enabled organizations to build new sources of competitive advantage, bring about innovations
in products and services, and to provide for new business opportunities. Stock exchanges all
over the world have realized the potential of IT and have moved over to electronic trading
systems, which are cheaper, have wider reach and provide a better mechanism for trade and
post trade execution. NSE believes that technology will continue to provide the necessary
impetus for the organization to retain its competitive edge and ensure timeliness and
satisfaction in customer service. In recognition of the fact that technology will continue to
redefine the shape of the securities industry, NSE stresses on innovation and sustained
investment in technology to remain ahead of competition. NSE's IT set-up is the largest by any
company in India. It uses satellite communication technology to energize participation from
around 320 cities spread all over the country. In the recent past, capacity enhancement
measures were taken up in regard to the trading systems so as to effectively meet the
requirements of increased users and associated trading loads. With up gradation of trading
hardware, NSE can handle up to 6 million trades per day in Capital Market segment. In order
to capitalize on in-house expertise in technology, NSE set up a separate company, NSE.IT, in
October 1999. This is expected to provide a platform for taking up new IT assignments both
within and outside India and attaining global exposure.
NEAT is a state-of-the-art client server based application. At the server end, all trading
information is stored in an in-memory database to achieve minimum response time and
maximum system availability for users. The trading server software runs on a fault tolerant
31 | P a g e

STRATUS main frame computer while the client software runs under Windows on PCs.
The telecommunications network uses X.25 protocol and is the backbone of the automated
trading system. Each trading member trades on the NSE with other members through a PC
located in the trading member's office, anywhere in India.
The trading members on the various market segments such as CM / F&O , WDM are
linked to the central computer at the NSE through dedicated 64Kbps leased lines and VSAT
terminals. The Exchange uses powerful RISC -based UNIX servers, procured from Digital and
HP for the back office processing. The latest software platforms like ORACLE 7 RDBMS,
GUPTA - SQL/ORACLE FORMS 4.5 Front - Ends, etc. have been used for the Exchange
applications. The Exchange currently manages its data centre operations, system and database
administration, design and development of in-house systems and design and implementation of
telecommunication solutions.
NSE is one of the largest interactive VSAT based stock exchanges in the world. Today it
supports more than 3000 VSATs. The NSE- network is the largest private wide area network in
the country and the first extended C- Band VSAT network in the world. Currently more than
9000 users are trading on the real time-online NSE application. There are over 15 large
computer systems which include non-stop fault-tolerant computers and high end UNIX servers,
operational under one roof to support the NSE applications. This coupled with the nation wide
VSAT network

makes

NSE

the

country's

largest

Information

Technology

user.

In an ongoing effort to improve NSE's infrastructure, a corporate network has been

implemented, connecting all the offices at Mumbai, Delhi, Calcutta and Chennai. This
corporate network enables speedy inter-office communications and data and voice connectivity
between offices.
TRADING: NSE introduced for the first time in India, fully automated screen based trading.
It uses a modern, fully computerized trading system designed to offer investors across the
length and breadth of the country a safe and easy way to invest.
The NSE trading system called 'National Exchange for Automated Trading' (NEAT) is a fully
automated screen based trading system, which adopts the principle of an order driven market.

32 | P a g e

RISK MANAGEMENT
A sound risk management system is integral to an efficient clearing and settlement
system. NSE introduced for the first time in India, risk containment measures that were
common internationally but were absent from the Indian securities markets.
NSCCL has put in place a comprehensive risk management system, which is constantly
upgraded to pre-empt market failures. The Clearing Corporation ensures that trading member
obligations are commensurate with their net worth.
Risk containment measures include capital adequacy requirements of members,
monitoring of member performance and track record, stringent margin requirements, position
limits based on capital, online monitoring of member positions and automatic disablement
from trading when limits are breached, etc.
LISTING
NSE plays an important role in helping an Indian companies access equity capital, by
providing a liquid and well-regulated market. NSE has about 1016 companies listed
representing the length, breadth and diversity of the Indian economy which includes from hitech to heavy industry, software, refinery, public sector units, infrastructure, and financial
services. Listing on NSE raises a companys profile among investors in India and abroad.
Trade data is distributed worldwide through various news-vending agencies. More importantly,
each and every NSE listed company is required to satisfy stringent financial, public distribution
and management requirements. High listing standards foster investor confidence and also bring
credibility into the markets.
NSE lists securities in its Capital Market (Equities) segment and its Wholesale Debt
Market segment

33 | P a g e

RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC EQUITY

FUND FOR THE MONTH OF JUL-2014
S.No

Date

NAV

Return(X)

(X-x)

(X-x)2

2-Jul-14

166.65

1.43

1.14

1.31

3-Jul-14

167.92

0.76

0.48

0.23

4-Jul-14

167.16

-0.45

-0.74

0.55

5-Jul-14

166.71

-0.27

-0.56

0.31

6-Jul-14

167.91

0.72

0.43

0.19

9-Jul-14

169.81

1.13

0.84

0.7

10-Jul-14

169.19

-0.36

-0.65

0.42

11-Jul-14

169.53

0.2

-0.09

0.01

12-Jul-14

171.57

1.2

0.92

0.84

10

13-Jul-14

171.95

0.22

-0.07

11

16-Jul-14

171.71

-0.14

-0.43

0.18

12

17-Jul-14

170.31

-0.82

-1.1

1.22

13

18-Jul-14

170.13

-0.11

-0.4

0.16

14

19-Jul-14

172.02

1.11

0.83

0.68

15

20-Jul-14

172.56

0.31

0.02

16

23-Jul-14

174.41

1.07

0.78

0.61

17

24-Jul-14

174.39

-0.01

-0.3

0.09

18

25-Jul-14

172.96

-0.82

-1.11

1.23

Mean (x)

0.29

Variance

0.49

Average Returns

(x)

= 0.29

Variance

(2)

= 0.49

Standard Deviation ()

= 0.70

34 | P a g e

GRAPHICAL REPRESENTATION

In above table represents the performance of HDFC Equity fund for the July -2014.
Standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility. Standard deviation is also known as historical volatility and is used by
investors as a gauge for the amount of expected volatility.
Average returns of the Equity fund was around 29%, where as the risk involved in that fund
was 0.70.
This shows that the volatility of the stock was very less. i.e. the high risk stock posses , high
volatility.

35 | P a g e

(2) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC

EQUITY FUND FOR THE MONTH OF AUG-2014
S.No

Date

NAV

Return(x)

(X-x)

(X-x)2

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

1-Aug-14
2-Aug-14
3-Aug-14
6-Aug-14
7-Aug-14
8-Aug-14
9-Aug-14
10-Aug-14
13-Aug-14
14-Aug-14
16-Aug-14
17-Aug-14
20-Aug-14
21-Aug-14
22-Aug-14
23-Aug-14
24-Aug-14
27-Aug-14

165.82
167.25
169.18
167.66
168.46
171.66
168.5
166.58
167.49
167.41
160.87
158.65
161.45
156
157.77
156.45
158.57
163.29

-4.13
0.86
1.15
-0.9
0.48
1.9
-1.84
-1.14
0.55
-0.05
-3.91
-1.38
1.77
-3.38
1.14
-0.84
1.36
2.98

-3.83
1.16
1.45
-0.6
0.78
2.2
-1.55
-0.84
0.84
0.25
-3.61
-1.14
2.06
-3.14
1.44
-0.54
1.65
3.27

14.68
1.35
2.11
0.36
0.6
4.86
2.39
0.7
0.71
0.06
13.02
1.17
4.26
9.48
2.06
0.29
2.74
10.72

Average Return

(x)

= -0.299

Variance

(2)

=4.214

Standard Deviation ()

= 2.053

GRAPHICAL REPRESENTATION

36 | P a g e

The above table and graph shows that daily returns of the HDFC equity fund for the month of
AUG-2014 this shows changes of the daily returns, first market started negatively
After changed to positive values, Mean is (-0.299) it is negative, price variance is 4.214 and
risk factor is 2.053, it is near the 2 it is very high and Mean is very low.
Standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility. Standard deviation is also known as historical volatility and is used by
investors as a gauge for the amount of expected volatility.
The investing strategy was changed as compared to the earlier period, In the August month, the
fund shown negative performance.

37 | P a g e

(3) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC

EQUITY FUND FOR THE MONTH OF SEP-2014
S.No

Date

Close

Return (X)

(X-x)

(X-x)2

3-Sep-14

170.66

4.52

3.97

15.73

4-Sep-14

170.67

-0.55

0.3

5-Sep-14

170.55

-0.07

-0.62

0.39

6-Sep-14

171.93

0.81

0.26

0.07

7-Sep-14

172.11

0.11

-0.44

0.2

10-Sep-14

172.5

0.22

-0.33

0.11

11-Sep-14

171.56

-0.54

-1.09

1.19

12-Sep-14

171.16

-0.23

-0.78

0.61

13-Sep-14

171.69

0.31

-0.24

0.06

10

14-Sep-14

170.65

-0.61

-1.16

1.34

11

17-Sep-14

170.48

-0.1

-0.65

0.42

12

18-Sep-14

172.74

1.32

0.77

0.6

13

19-Sep-14

176.39

2.11

1.56

2.45

14

20-Sep-14

177.42

0.58

0.03

15

21-Sep-14

178.49

0.61

0.06

16

24-Sep-14

179.89

0.79

0.24

0.06

17

25-Sep-14

179.56

-0.18

-0.73

0.54

18

26-Sep-14

180

0.24

-0.31

0.09

Average Returns

(x)

0.594

Variance

(2)

1.421

Standard Deviation ()

1.192

38 | P a g e

GRAPHICAL REPRESENTATION

The above table and graph represents the daily returns of the HDFC equity fund for the month
of SEP-2014. First market started at high returns after it is getting down , Mean of this month
is 0.55, price variance is 1.34, risk factor is 1.2 it is also more than the mean.
Standard deviation is applied to the annual rate of return of an investment to measure the
investment's volatility. Standard deviation is also known as historical volatility and is used by
investors as a gauge for the amount of expected volatility.
When the returns are more than the risk that is benefit to the company.

39 | P a g e

(4) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC

EQUITY FUND FOR THE MONTH OF OCT-2014

S.No

Date

NAV

Return(X)

(X-x)

(X-x)2

1-Oct-14

184.17

2.31

1.78

3.16

3-Oct-14

186.14

1.04

0.5

0.25

4-Oct-14

185.77

-0.16

-0.7

0.49

5-Oct-14

186.05

0.15

-0.39

0.15

8-Oct-14

182.43

-1.94

-2.48

6.15

9-Oct-14

187.39

2.72

2.18

4.76

10-Oct-14

189.83

1.3

0.77

0.59

11-Oct-14

193.14

1.74

1.21

1.46

12-Oct-14

189.76

-1.75

-2.28

5.21

10

15-Oct-14

195.81

3.19

2.65

7.02

11

16-Oct-14

195.7

-0.06

-0.59

0.35

12

17-Oct-14

192.44

-1.66

-2.2

4.83

13

18-Oct-14

186.01

-3.35

-3.88

15.07

14

19-Oct-14

181.37

-2.49

-3.03

9.16

15

22-Oct-14

181.98

0.34

-0.2

0.04

16

23-Oct-14

191.23

5.14

4.54

20.64

17

24-Oct-14

193.97

1.44

0.9

0.81

18

25-Oct-14

197.38

1.76

1.22

1.49

Average Returns

(x)

= 0.537

Variance

(2)

= 4.804

Standard Deviation ()

= 2.192
40 | P a g e

(4) GRAPHICAL REPRESENTATION

The above table and graph represents the daily returns of the HDFC equity fund for the month
of OCT-2014 in this month company got the high positive returns. Standard deviation is
applied to the annual rate of return of an investment to measure the investment's volatility.
Standard deviation is also known as historical volatility and is used by investors as a gauge for
the amount of expected volatility.
Mean is 0.537 it is positive, price variance is 25.557, risk is 5.055 it is high and more than the
returns mean.
It is Observed that investment strategy towards on investment on HDFC Equity fund in
Oct2014 is risky taken, at the same time the returns is less.

41 | P a g e

(5) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC

EQUITY FUND FOR THE MONTH OF NOV-2014

S.No

Date

NAV

Return(X)

(X-x)

(X-x)2

1-Nov-14

209.25

6.01

5.81

33.7

2-Nov-14

211.37

1.02

0.81

0.65

5-Nov-14

214.3

-1.46

-1.66

2.76

6-Nov-14

205.49

-1.35

-1.55

2.41

7-Nov-14

204.62

-0.42

-0.63

0.39

8-Nov-14

201.74

-1.41

-1.62

2.61

12-Nov-14

199.97

-0.88

-1.14

1.18

13-Nov-14

203.63

1.83

1.62

2.64

14-Nov-14

209.76

3.01

2.81

7.87

10

15-Nov-14

210.78

0.49

0.28

0.14

11

16-Nov-14

210.36

-0.2

-0.41

0.17

12

19-Nov-14

212.45

0.79

0.63

13

20-Nov-14

209.1

-1.58

-1.79

3.19

14

21-Nov-14

200.77

-3.98

-4.19

17.55

15

22-Nov-14

199.73

-0.52

-0.72

0.52

16

23-Nov-14

201.55

0.91

0.7

0.49

17

26-Nov-14

204.86

1.65

1.44

2.07

18

27-Nov-14

204.04

-0.4

-0.61

0.37

Average Returns

(x)

= 0.207

Variance

(2)

= 4.664

Standard Deviation ()

= 2.160
42 | P a g e

GRAPHICAL REPRESENTATION

The above table and graph shows the total returns of HDFC equity fund for the month of Nov
this table and graph tells that how this returns increased and decreased what are the changes in
this month. First market started positive this starting is high after it is decreased. Mean is
0.207, It is very low variance is 4.664 and risk is 2.1 it is high and it is more than the Mean.

43 | P a g e

(6) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF HDFC

EQUITY FUND FOR THE MONTH OF DEC-2014
S.No

Date

NAV

Return(X)

(X-x)

(X-x)2

1-Nov-14

209.25

6.01

5.81

33.7

2-Nov-14

211.37

1.02

0.81

0.65

5-Nov-14

214.3

-1.46

-1.66

2.76

6-Nov-14

205.49

-1.35

-1.55

2.41

7-Nov-14

204.62

-0.42

-0.63

0.39

8-Nov-14

201.74

-1.41

-1.62

2.61

12-Nov-14

199.97

-0.88

-1.14

1.18

13-Nov-14

203.63

1.83

1.62

2.64

14-Nov-14

209.76

3.01

2.81

7.87

10

15-Nov-14

210.78

0.49

0.28

0.14

11

16-Nov-14

210.36

-0.2

-0.41

0.17

12

19-Nov-14

212.45

0.79

0.63

13

20-Nov-14

209.1

-1.58

-1.79

3.19

14

21-Nov-14

200.77

-3.98

-4.19

17.55

15

22-Nov-14

199.73

-0.52

-0.72

0.52

16

23-Nov-14

201.55

0.91

0.7

0.49

17

26-Nov-14

204.86

1.65

1.44

2.07

18

27-Nov-14

204.04

-0.4

-0.61

0.37

Average Returns

(x)

= 0.423

Variance

(2)

= 1.537

Standard Deviation ()

= 1.240

(6) GRAPHICAL REPRESENTATION

44 | P a g e

The above table and graph represents the total daily returns of HDFC equity fund for the
month of Dec2014 this month returns are started positively after fluctuations were started in
that Returns. Mean is 0.42, price variation is 1.537 and risk factor is 1.240 it is very high and it
is more than the returns.

45 | P a g e

RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE

MONTH OF JULY-2014

S.No

Date

NAV

Return(X)

(X-x)

(X-x)2

2-Jul-14

3631.6

1.05

0.7

0.48

3-Jul-14

3666.6

0.96

0.61

0.37

4-Jul-14

3669.3

0.07

-0.28

0.14

5-Jul-14

3652.4

-0.46

-0.81

0.66

6-Jul-14

3672.55

0.55

0.2

0.04

9-Jul-14

3703.65

0.85

0.49

0.24

10-Jul-14

3693.2

-0.28

-0.64

0.4

11-Jul-14

3690.95

-0.06

-0.42

0.17

12-Jul-14

3744.45

1.45

1.1

1.2

10

13-Jul-14

3780.75

0.97

0.62

0.38

11

16-Jul-14

3791.65

0.29

-0.07

12

17-Jul-14

3775.95

-0.41

-0.77

0.59

13

18-Jul-14

3774.65

-0.03

-0.39

0.15

14

19-Jul-14

3816.25

1.1

0.75

0.56

15

20-Jul-14

3819.3

0.14

-0.27

0.14

16

23-Jul-14

3859.9

1.06

0.71

0.5

17

24-Jul-14

3856.15

-0.1

-0.45

0.2

18

25-Jul-14

3828.65

-0.71

-1.07

1.14

Average Returns

(x)

= 0.354

Variance

(2)

= 0.426

Standard Deviation ()

= 0.652

GRAPHICAL REPRESENTATION
46 | P a g e

The above table and graph shows daily returns of the NSE SENSEX for the month of
JULY-2014, in this month market started positively it is ended negatively, Mean is 0.354
It is positive but it is low, price variance is 0.426, risk factor is 0.652 it is more than the Mean.

47 | P a g e

(2) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE
MONTH OF AUG-2014
S.No

Date

Close

Return(X)

(X-x)

(X-x)2

1-Aug-14

3628.85

-5.22

-4.86

23.66

2-Aug-14

3642.85

0.39

0.74

0.55

3-Aug-14

3688.4

1.25

1.6

2.57

6-Aug-14

3639.95

-1.31

-0.96

0.92

7-Aug-14

3660.55

0.57

0.92

0.85

8-Aug-14

3739.4

2.15

2.51

6.29

9-Aug-14

3684.1

-1.48

-1.12

1.26

10-Aug-14

3628.7

-1.5

-1.15

1.32

13-Aug-14

3659.9

0.86

1.21

1.47

10

14-Aug-14

3660.9

0.03

0.38

0.15

11

16-Aug-14

3506.1

-4.23

-3.87

15.01

12

17-Aug-14

3447.4

-1.67

-1.32

1.74

13

20-Aug-14

3519.95

2.1

2.46

6.04

14

21-Aug-14

3405.15

-3.26

-2.91

8.45

15

22-Aug-14

3450.8

1.34

1.69

2.87

16

23-Aug-14

3421.5

-0.85

-0.49

0.24

17

24-Aug-14

3478.95

1.68

2.03

4.13

18

27-Aug-14

3575.85

2.79

3.14

9.86

Average Returns

(x)

= -0.353

Variance

(2)

= 5.141

Standard Deviation ()

= 2.267

48 | P a g e

GRAPHICAL REPRESENTATION

The above table and graph represents the total monthly returns of the NSE SENSEX
For the month AUG-2014, market started negatively returns are changed daily, this
Month Mean is (-0.353), price variance is 5.141; risk factor is 2.267 it is very high.

49 | P a g e

(3) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE
MONTH OF SEP-2014
Sno

Date

Close

Return (X)

(X-x)

(X-x)2

3-Sep-14

170.66

4.52

3.97

15.73

4-Sep-14

170.67

-0.55

0.3

5-Sep-14

170.55

-0.07

-0.62

0.39

6-Sep-14

171.93

0.81

0.26

0.07

7-Sep-14

172.11

0.11

-0.44

0.2

10-Sep-14

172.5

0.22

-0.33

0.11

11-Sep-14

171.56

-0.54

-1.09

1.19

12-Sep-14

171.16

-0.23

-0.78

0.61

13-Sep-14

171.69

0.31

-0.24

0.06

10

14-Sep-14

170.65

-0.61

-1.16

1.34

11

17-Sep-14

170.48

-0.1

-0.65

0.42

12

18-Sep-14

172.74

1.32

0.77

0.6

13

19-Sep-14

176.39

2.11

1.56

2.45

14

20-Sep-14

177.42

0.58

0.03

15

21-Sep-14

178.49

0.61

0.06

16

24-Sep-14

179.89

0.79

0.24

0.06

17

25-Sep-14

179.56

-0.18

-0.73

0.54

18

26-Sep-14

180

0.24

-0.31

0.09

Average Returns

(x)

Variance

(2)

Standard Deviation ()

= 0.549
= 1.421
=1.192

50 | P a g e

(3) GRAPHICAL REPRESENTATION

The above table and graph shows total daily returns of the NSE SENSEX for the month
Of SEP-2014, market was started positively after it got the negative values this month
Ended positively, Mean of this month is 0.80 it is positive but it is low, price variance is
1.70, risk factor is 1.30 it is more than the Mean.

51 | P a g e

(4) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE
MONTH OF OCT-2014
S.No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

Date
1-Oct-14
3-Oct-14
4-Oct-14
5-Oct-14
8-Oct-14
9-Oct-14
10-Oct-14
11-Oct-14
12-Oct-14
15-Oct-14
16-Oct-14
17-Oct-14
18-Oct-14
19-Oct-14
22-Oct-14
23-Oct-14
24-Oct-14
25-Oct-14

Close

Return

(X-x))

(X-x)2

4237.8
4327.5
4335.25
4301.75
4195.25
4369.7
4454.55
4523.8
4451.4
4621.05
4634.05
4531.7
4372.85
4250.45
4238.35
4465.75
4494
4545.65

(X)
2.80
2.12
0.18
-0.77
-2.48
4.16
1.94
1.55
-1.60
3.81
0.28
-2.21
-3.51
-2.80
-0.28
5.37
0.63
1.15

2.22
1.54
-0.40
-1.35
-3.05
3.58
1.37
0.98
-2.17
3.24
-0.29
-2.78
-4.14
-3.37
-0.86
4.79
0.06
0.57

4.94
2.38
0.16
1.82
9.30
12.84
1.87
0.96
4.73
10.48
0.09
7.75
16.65
11.38
0.74
22.95
0.00
0.33

Average Returns

(x)

= 0.574

Variance

(2)

= 6.439

Standard Deviation ()

= 2.538

GRAPHICAL REPRESENTATION

52 | P a g e

The above table and graph represents the daily returns of the NSE SENSEX for the month of
OCT-2014, first market started positively after changed to negatively,
Ending returns are positive this month Mean is 0.57 it is positive but low, Variance is
6.14, risk factor is 2.46 it tells that risk is high it is more than the returns.

53 | P a g e

(5) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE
MONTH OF NOV-2014
S.No

Date

Close

Return(X)

(X-x)

(X-x)2

1-Nov-14

4757.85

4.67

4.33

18.73

2-Nov-14

4810.5

1.11

0.77

0.59

5-Nov-14

4775.4

-0.73

-1.07

1.15

6-Nov-14

4754.8

-0.43

-0.77

0.6

7-Nov-14

4747.45

-0.15

-0.5

0.25

8-Nov-14

4689.45

-1.22

-1.56

2.44

9-Nov-14

4673.75

-0.33

-0.68

0.46

12-Nov-14

4639.4

-0.73

-1.14

1.16

13-Nov-14

4717.15

1.68

1.34

1.78

10

14-Nov-14

4902.45

3.93

3.59

12.87

11

15-Nov-14

4923.85

0.44

0.1

0.01

12

16-Nov-14

4939.1

0.31

-0.03

13

19-Nov-14

4983.35

0.9

0.56

0.31

14

20-Nov-14

4883.15

-2.01

-2.35

5.53

15

21-Nov-14

4666.8

-4.43

-4.77

22.76

16

22-Nov-14

4620.75

-0.99

-1.33

1.76

17

23-Nov-14

4705.05

1.82

1.48

2.2

18

26-Nov-14

4814.3

2.32

1.98

3.93

Average Returns

(x)

= 0.342

Variance

(2)

=4.501

Standard Deviation ()

=2.121

54 | P a g e

(5) GRAPHICAL REPRESENTATION

The above table and graph shows that company monthly returns first it is started highly after it
got negative returns mean of the NSE is 0.34 it is very low price variance is 4.25
And risk factor of the company is 2.06 it shows risk is more in this month.

55 | P a g e

(6) RETURNS, MEAN, VARIANCE AND STANDARD DEVIATION OF NSE FOR THE
MONTH OF DEC-2014
S.No

Date

Close

Return(X)

(X-x)

(X-x)2

3-Dec-14

4969.95

3.23

2.7

7.29

4-Dec-14

5003.3

0.67

0.14

0.02

5-Dec-14

5141.2

1.56

1.02

1.05

6-Dec-14

5141.55

0.01

-0.53

0.28

7-Dec-14

5095.65

0.28

-0.26

0.07

10-Dec-14

5107.4

0.23

-0.3

0.09

11-Dec-14

5192.55

1.67

1.13

1.29

12-Dec-14

5263.8

1.37

0.84

0.7

13-Dec-14

5217.15

-0.89

-1.42

2.01

10

14-Dec-14

5224

0.13

-0.4

0.16

11

17-Dec-14

4980.85

-4.65

-5.19

26.91

12

18-Dec-14

4965.7

-0.3

-0.84

0.7

13

19-Dec-14

4969.15

0.07

-0.46

0.21

14

20-Dec-14

4971.05

0.04

-0.49

0.24

15

24-Dec-14

5126.4

3.13

2.59

6.72

16

26-Dec-14

5228.55

1.99

1.46

2.13

17

27-Dec-14

5234.3

0.11

-0.42

0.18

18

28-Dec-14

5284.2

0.95

0.42

0.18

Average Returns

(x)

= 0.533

Variance

(2)

= 2.9524

Standard Deviation ()

= 1.718

56 | P a g e

(6) GRAPHICAL REPRESENTATION

The above table and graph represents NSE SENSEX returns for the month of Dec-2014 returns
were started positively NSE returns are very low and negative, mean is very less it is 0.53,
variance is 2.79 and risk factor is 1.718 it means risk is high

57 | P a g e

(1) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
JUL-2014
SNO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

HDFC(X)
1.43
0.76
-0.45
-0.27
0.72
1.13
-0.36
0.2
1.2
0.22
-0.14
-0.82
-0.11
1.11
0.31
1.07
-0.01
-0.82

5.17

6.29

XY

9.75

X2

10.22

(X) 2

26.73

18

NSE(Y)
1.56
0.96
0.07
-0.46
0.55
0.85
-0.28
-0.06
1.45
0.97
0.29
-0.41
-0.03
1.1
0.14
1.06
-0.1
-0.71

(XY)
2.24
0.74
-0.03
0.12
0.4
0.95
0.1
-0.01
1.75
0.22
-0.04
0.34
0
1.23
0.02
1.14
0
0.58

X2
2.05
0.58
0.2
0.07
0.52
1.27
0.13
0.04
1.45
0.05
0.02
0.67
0.01
1.24
0.1
1.15
0
0.67

58 | P a g e

CALCULATION OF BETA RATIO

NXY-X.Y

---------------NX2-(X) 2

NXY

175.5

X.Y

35.62

NX2

183.96

(X) 2

26.73

NXY-X.Y

139.77

NX2-(X) 2

157.25

0.89

A fund with a beta very close to 1 means the fund's performance closely matches the index or
benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta
less than 1 indicates less volatility than the benchmark.
Here the beta value was 0.89; it shows that the fund has less volatility than the benchmark.
SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
0.27

JENSON
-0.43

TREYNOR'S
0.21

The above tables say to total HDFC and NSE returns for the month of July-2014, HDFC highest
Return is in this month (1.43) to lowest (-0.82), Mean is (5.19) and NSE highest return is (1.56)
to lowest (-0.71), Mean is (6.89). Market risk is (-0.06) and Beta is (0.89) it is less than 1.
Sharpes model (0.27) performance is better than Jensens (-0.43) and Treynors (0.21)
performances.

59 | P a g e

The higher the ratio, the better a portfolio's performance. A reading greater than 1.00 indicates
more units of return produced by an investment than units of risk.
Here in this case HDFC Equity fund, the Treynors Ratio was 0.29, the fund need to perform
well.
Sharpe Ratio, a ratio of 1.00 represents good compensation for risk, while a ratio of 2.00 earns
a very good rating, and 3.00 or better is outstanding.
Here in this case of HDFC Equity fund, the Sharpe Ratio was 0.27, this shows the performance
of the fund in this month of July-2014 was underperformed.
(2) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
AUG-2014
SNO

HDFC(X)

NSE(Y)

(XY)

X2

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

-4.13
0.86
1.15
-0.9
0.48
1.9
-1.84
-1.14
0.55
-0.05
-3.91
-1.38
1.77
-3.38
1.14
-0.84
1.36
2.98

-5.72
0.39
1.25
-1.31
0.57
2.15
-1.48
-1.5
0.86
0.03
-4.23
-1.67
2.1
-3.26
1.34
-0.85
1.68
2.79

23.62
0.33
1.44
1.18
0.27
4.1
2.73
1.71
0.47
0
16.52
2.31
3.72
11.02
1.52
0.71
2.28
8.29

17.06
0.75
1.33
0.81
0.23
3.63
3.4
1.29
0.3
0
15.27
1.9
3.12
11.42
1.29
0.7
1.84
8.85

-5.38

-6.86

XY

82.22

X2

73.19

(X) 2

28.94
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18

CALCULATION OF BETA RATIO

NXY-X.Y

---------------NX2-(X) 2

NXY

1479.96

X.Y

36.91

NX2

1317.42

(X) 2

28.94

NXY-X.Y

1443.05

NX2-(X) 2

1288.48

1.12

SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
-0.20

JENSON
-1.49

TREYNOR'S
-0.36

The above tables tells that HDFC equity fund and NSE SENSEX for the month of AUG-2014.
HDFC returns were started negatively in this month highest return is 2.98. To lowest (-4.13) and
NSE SENSEX returns shows highest is 2.79 to lowest (-5.72), Market risk is 0.05, Beta is 1.12 it
is greater than 1.HDFC equity fund Shapes model (-0.20) performance is more than Jensen
(-1.49) Treynors (-0.36) models.
A fund with a beta very close to 1 means the fund's performance closely matches the index or
benchmark. A beta greater than 1 indicates greater volatility than the overall market, and a beta
less than 1 indicates less volatility than the benchmark.
Here the beta value was 1.12; it shows that the fund has a greater volatility than the benchmark.
61 | P a g e

The higher the ratio, the better a portfolio's performance. A reading greater than 1.00 indicates
more units of return produced by an investment than units of risk.
Here in this case HDFC Equity fund, the Treynors Ratio was 0.29, the fund need to perform
well.
Sharpe Ratio, a ratio of 1.00 represents good compensation for risk, while a ratio of 2.00 earns
a very good rating, and 3.00 or better is outstanding.
Here in this case of HDFC Equity fund, the Sharpe Ratio was 0.27, this shows the performance
of the fund in this month of July-2014 was underperformed.

(3) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
SEP-2014
SNO

HDFC(X)

NSE(Y)

(XY)

X2

4.52

4.07

18.38

20.39
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0.23

-0.07

0.01

0.81

0.93

0.75

0.66

0.11

-0.19

-0.02

0.01

0.22

0.14

0.03

0.05

-0.54

0.3

-0.23

0.04

-0.01

0.05

0.31

0.87

0.27

0.1

10

-0.61

-0.57

0.35

0.37

11

-0.1

-0.2

0.02

0.01

12

1.32

1.09

1.45

1.75

13

2.11

3.36

7.1

4.47

14

0.58

0.61

0.36

0.34

15

0.61

1.22

0.74

0.37

16

0.79

1.68

1.32

0.62

17

-0.18

0.16

-0.03

0.03

18

0.24

0.28

0.07

0.06

9.89

13.72

XY

30.78

X2

29.59

(X) 2

97.81

18

CALCULATION OF BETA RATIO

NXY-X.Y

63 | P a g e

---------------NX2-(X) 2

NXY

554.04

X.Y

135.69

NX2

532.62

(X) 2

97.81

NXY-X.Y

418.35

NX2-(X) 2

434.81

0.96

SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
0.39

JENSON
-0.30

TREYNOR'S
0.47

The above tables tells that HDFC and NSE sensex returns, Mean of the Sep-2014.This
month HDFC returns started positive that is (4.52) this is the highest return of this month to
lowest (-0.61) And Mean is (9.89), NSE returns started positive (4.07) highest return of this
month is (4.07) to lowest (-0.57), Mean is 13.72.Market risk is (-0.25) and Beta is (0.96) it is
greater than 1.Treynors model (0.47) performance is better than Sharpes (0.39) and Jensen (0.30) models.
A fund with a beta very close to 1 means the fund's performance closely matches the
index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and
a beta less than 1 indicates less volatility than the benchmark.
Here the beta value was 0.96; it shows that the funds performance closely matches the index or
benchmark.
The higher the ratio, the better a portfolio's performance. A reading greater than 1.00
indicates more units of return produced by an investment than units of risk.
Here in this case HDFC Equity fund, the Treynors Ratio was 0.47, the fund need to perform
well.
64 | P a g e

Sharpe Ratio, a ratio of 1.00 represents good compensation for risk, while a ratio of
2.00 earns a very good rating, and 3.00 or better is outstanding.
Here in this case of HDFC Equity fund, the Sharpe Ratio was 0.39, this shows the performance
of the fund in this month of September-2014 was underperformed.
(4) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
OCT-2014
SNO
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

HDFC(X)
2.31
1.04
-0.16
0.15
-1.94
2.72
1.3
1.74
-1.75
3.19
-0.06
-1.66
-3.35
-2.49
0.34
5.14
1.44
1.76

17
18
X

9.66

9.65

XY

95.67

X2

86.81

(X) 2

93.52

18

NSE(Y)
2.11
2.12
0.18
-0.77
-2.48
4.16
1.94
1.55
-1.6
3.81
0.28
-2.21
-3.51
-2.8
-0.28
5.37
0.63
1.15

(XY)
4.89
2.2
-0.03
-0.11
4.81
11.3
2.53
2.71
2.8
12.14
-0.02
3.67
11.73
6.97
-0.1
27.25
0.91
2.02

X2
5.35
1.14
0.03
0.02
3.78
7.39
1.7
3.04
3.05
10.15
0
2.76
11.2
6.2
0.11
25.8
2.06
3.09

CALCULATION OF BETA RATIO

65 | P a g e

NXY-X.Y

---------------NX2-(X) 2

NXY

1722.06

X.Y

93.219

NX2

1562.58

(X) 2

93.31

NXY-X.Y

1628.84

NX2-(X) 2

1469.26

1.11

SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
0.20

JENSON
-0.53

TREYNOR'S
0.39

The above tables tells that HDFC equity fund and NSE SENSEX for the month of Oct-2014.
HDFC returns were started positively in this month highest return is 5.14. To lowest (-3.35) and
NSE SENSEX returns shows highest is 5.59 to lowest (-3.74), Market risk is (-0.16), Beta is 1.11
it is greater than 1.HDFC equity fund Treynors model (0.38) performance is more than Jensen
(-0.62) Sharpes (0.20) models.
A fund with a beta very close to 1 means the fund's performance closely matches the
index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and
a beta less than 1 indicates less volatility than the benchmark.
Here the beta value was 1.11; it indicates greater volatility than the overall market.
The higher the ratio, the better a portfolio's performance. A reading greater than 1.00
indicates more units of return produced by an investment than units of risk.

66 | P a g e

Here in this case HDFC Equity fund, the Treynors Ratio was 0.39, the fund need to perform
well.
Sharpe Ratio, a ratio of 1.00 represents good compensation for risk, while a ratio of
2.00 earns a very good rating, and 3.00 or better is outstanding.
Here in this case of HDFC Equity fund, the Sharpe Ratio was 0.20, this shows the performance
of the fund in this month of October-2014 was underperformed.

(5) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
NOV-2007
SNO
1
2
3
4
5
6
7
8
9
10
11

HDFC(X)
6.01
1.02
-1.46
-1.35
-0.42
-1.41
-0.88
1.83
3.01
0.49
-0.2

NSE(Y)
5.34
1.12
-1.43
-1.04
-0.05
-1.45
-0.62
-0.81
1.39
4.26
-0.43

(XY)
32.13
1.14
2.09
1.4
0.02
2.04
0.55
-1.49
4.2
2.07
0.09

X2
36.14
1.03
2.12
1.82
0.18
1.99
0.77
3.35
9.07
0.24
0.04
67 | P a g e

12
13
14
15
16
17
18

1
-1.58
-3.98
-0.52
0.91
1.65
-0.4

3.72

3.31

XY

55.74

X2

80.07

(X) 2

13.83

18

-0.09
0.01
-2.15
-3.8
-0.75
1.62
2.19

-0.09
-0.02
8.55
1.96
-0.68
2.66
-0.88

0.99
2.5
15.87
0.27
0.82
2.71
0.16

CALCULATION OF BETA RATIO

NXY-X.Y

---------------NX2-(X) 2

NXY

1003.32

X.Y

12.31

NX2

1441.26

(X) 2

13.83

NXY-X.Y

991.0068

NX2-(X) 2

1427.422

0.69

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SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
0.05

JENSON
0.01

TREYNOR'S
0.25

The above tables say that HDFC and NSE SENSEX returns of Nov-2014. This month
HDFC starting returns positive (6.01) and highest of this month to lowest (-3.98) this month
Mean is (3.72) and NSE SENSEX returns were started positive (5.34) after it is continuous fall
this month lowest return is (-3.80) it is ended positively. Market risk is (-0.13) and systematic
risk (BETA) is 0.69 it is less than 1.Treynors is (0.25) the better than Sharpes (0.05) and
Jensens (0.01) models.
A fund with a beta very close to 1 means the fund's performance closely matches the
index or benchmark. A beta greater than 1 indicates greater volatility than the overall market, and
a beta less than 1 indicates less volatility than the benchmark.
Here the beta value was 0.69; it indicates less volatility than the benchmark..
The higher the ratio, the better a portfolio's performance. A reading greater than 1.00
indicates more units of return produced by an investment than units of risk.
Here in this case HDFC Equity fund, the Treynors Ratio was 0.25, the fund need to perform
well.
Sharpe Ratio, a ratio of 1.00 represents good compensation for risk, while a ratio of
2.00 earns a very good rating, and 3.00 or better is outstanding.
Here in this case of HDFC Equity fund, the Sharpe Ratio was 0.05, this shows the performance
of the fund in this month of November-2014 was underperformed.
(6) SYSTEMATIC RISK OF HDFC AND NSE RETURNS FOR THE MONTH OF
DEC-2014
SNO

HDFC(X)

NSE(Y)

(XY)

X2

1
2
3
4
5

1.9
-0.1
1.97
0.13
0.54

3.43
0.67
1.56
0.01
0.28

6.52
-0.07
3.07
0
0.15

3.62
0.01
3.88
0.02
0.29
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6
7
8
9
10
11
12
13
14
15
16
17
18

0.1
1.64
0.65
-0.28
-0.41
-3.27
-0.17
0.22
0.09
2.24
1.37
0.51
0.48

7.61

9.81

XY

39.03

X2

57.91

(X) 2

29.44

18

0.23
1.67
1.37
-0.89
0.13
-4.65
-0.3
0.07
0.04
3.13
1.99
0.11
0.95

0.02
2.73
0.9
0.25
-0.05
15.21
0.05
0.01
0
6.99
2.73
0.06
0.46

0.01
2.68
0.43
0.14
0.17
10.68
0.03
0.05
0.01
5.01
1.88
0.26
0.23

CALCULATION OF BETA RATIO

NXY-X.Y

---------------NX2-(X) 2

NXY

702.54
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X.Y

74.578

NX2

528.12

(X) 2

57.91

NXY-X.Y

627.962

NX2-(X) 2

470.2079

0.69

SHARPES, JENSENS AND TREYNORS PERFORMANCE OF HDFC EQUITY FUND

SHARPE'S
0.27

JENSON
-1.12

TREYNOR'S
0.24

The above tables tells that HDFC equity fund and NSE SENSEX for the month of DEC-2014.
HDFC returns were started positively in this month highest return is 2.24 To lowest (-3.27) and
NSE SENSEX returns shows highest is (3.43) to lowest (-4.65), Market risk is (-0.15), Beta is
1.34 it is greater than 1.HDFC equity fund Sharpes model (0.27) performance is more than
Jensen (-1.12) Sharpes (0.24) models.

METHODOLOGY
Formulae used for Date Analysis:
Ve - Vb

1.

Return =

----------Vb

Ve = Value at the end

Vb = Value at the beginning
2. Variance (2) = (x-) 2
--------N
3. Standard Deviation (2) =
71 | P a g e

4. Beta () = (NXY - XY)

--------------------------NX^2 (X) ^2
5. Sharpes = RT Rf
-------------
6. Treynors = Rt Rf
------------

Rf
7. Jensens = Rf + * (Rm )

FINDINGS
1. Most people do not know what Mutual Funds are in the society. (Poor awareness).
2. It cannot meet low-level income people. This category people (tailors, fruit sellers and
small merchants) go to invest or save their money in unauthorized chit funds which are
locally existed.
3. Mutual funds agents do not approaching all category investors. Some investors cannot
meet MFs managers personally to invest.
4. Once who accustom to MFs they would like to invest in MFs again and again. They
become as if permanent investors of MFs.
5. Many investors invest money simultaneously more than one company and more schemes.
6. Investors do not bother much more about risk in MFs.
7. Retired people migrate from NSC to MFs.
8. MFs industry is being developed more than the existing private sector.
9. Some people are aware to invest. These people have illusions about MFs industry.
72 | P a g e

SUGGESTIONS
Buy stock with a disparity and discrepancy between the situation of the firm - and the
expectations and appraisal of the public (Contrarian approach vs. Consensus approach).
Buy stocks in companies with potential for surprises.
The investor must select the right advisory body which is has sound knowledge about
the product which they are offering.
Professionalized advisory is the most important feature to the investors.
Professionalized research, analysis which will be helpful for reducing any kind of risk
to overcome.

73 | P a g e

CONCLUSIONS
Buying and selling decision of mutual fund units is influenced by various factors. Before
taking any investment decision, popularly we consider the Average Return, Variance, Risk
(standard deviation), and Market Risk. Along with these while making an investment decision
about mutual funds we also consider the performance of the mutual fund scheme. For this
purpose we use, Sharpes, Treynors and Jensons portfolio performance measures.
In this study I calculated the Return, Individual Fund Risk, and Market Risk of select HDFC
mutual Fund Scheme. Portfolio performance has been measured using Sharpes Jensens and
Treynors models.
In the month of July, where the systematic risk () is 0.89 and market risk is -0.06 based on the
market risk the performance of Sharpes and Treynors is better when compared to Jensons
In the month of Aug, where the systematic risk () is 1.12 and market risk is 0.05 based on the
market risk the performance of Sharpes ,Jensens and Treynors is in negative values but
among them Sharpes is better when compared to Jensons and Treynors models.
In the month of September, where the systematic risk () is 0.96 and market risk is -0.25 based
on the market risk the performance of Sharpes and Treynors is better when compared to
Jensons
In the month of Oct, where the systematic risk () is 1.16 and market risk is -0.03 based on the
market risk the performance of Sharpes and Treynors is better when compared to Jensons
In the month of Nov,where the systematic risk () is 0.43 and market risk is 0.13 based on the
market risk the performance of Treynors and Sharpes is better when compared to Jensons

74 | P a g e

In the month of Dec,where the systematic risk () is 1.34 and market risk is 0.15 based on the
market risk the performance of Treynors and Sharpes is better when compared to Jensons
For the study period (JUL 14 to DEC 14) performance of all the three mutual fund schemes
are poor according to Sharpes and Treynors Model. However, Equity Growth Fund (EGF)
performed better than two other schemes.
Study results reveals that for the period JUL 14 to DEC 14, it is advisable to sell the units.
Cause they are not yielding any positive results.

75 | P a g e

BIBLIOGRAPHY
Books
Security Analysis & Portfolio Management - Fishers & Jordon
Financial Management M.Y. Khan
Financial Management Prasanna Chandra

News Papers
Business Line
Times of India
India Today

Magazines
Week
Business Daily

Websites
www.amfiindia.com
www.sebi.com
www.google.com
www.utimutualfund.com
www.hdfcfund.com
www.nseindia.com
www.mutualfundsindia.com

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