INDEX

Sr. Topic Page

No No.
1. INTRODUCTION OF MUTUAL FUNDS
1.1 Overview of Mutual Funds 1
1.2 Mutual Funds operation 2
1.3 Glossaries 3
1.4 Definitions 7
1.5 History 8
1.6 Characteristics of Mutual Funds 12
1.7 Important/Advantages of Mutual Funds 13
1.8 Disadvantages of Mutual Fund 16
1.9 Growth in AUM 17
1.10 Organisation of Mutual Funds 21
1.11 Types of Mutual Funds 22
1.12 Regulatory Authority 28
1.13 Global Scenario 31
1.14 Housing Development Financial Corporation 32
1.15 Leading HDFC Mutual Funds for Short Term Investing 41

2. RESEARCH METHODOLOGY
2.1 Objectives of study 46
2.2 Hypothesis of the study 47
2.3 Scope of the study 48
2.4 Limitations of the study 49
2.5 Significance of the Study 50
2.6 Selection of the problem 51
2.7 Sample size 51
2.8 Sampling method 51
2.9 Data Collection 52
2.10 Techniques and Tools 53
3. LITERATURE REVIEW 58
4. DATA ANALYSIS AND INTERPRETATION
4.1 Data Interpretation 64
5. SUMMARY AND CONCLUSION
5.1 Findings 75
5.2 Suggestion 77
5.3 Conclusion 79
 BIBLIOGRAPHY 80
 WEBLIOGRAPHY 82
 ANNEXURE 84
SR. PAGE
TOPIC LIST OF CHARTS
NO NO.
1 1.1 Mutual Fund Operations 2
2 1.5 History of Mutual Funds 11
3 1.9 Growth in Assets under Management 19
4 1.10 Organization of Mutual Funds 21
5 1.11 Types of Mutual Funds 22

SR. PAGE
LIST OF GRAPHS
NO TOPIC NO.
1 1.9 Growth in Assets under Management 20
2 1.13 Global Scenario of Mutual Funds 31
3 1.14 HDFC Asset Management Company Ltd 23
INTRODUCTION OF MUTUAL FUNDS
 1.1 OVERVIEW OF MUTUAL FUNDS
To state in simple words, a mutual fund collects the savings from small investors,
invest them in Government and other corporate securities and earn income through
interest and dividends, besides capital gain. It works on the principle of” small drop of
water makes a big ocean’.
Mutual funds are pools of money that are managed by an investment company.
They offer investors a variety of goals, depending on the fund and its investment charter.
Some funds, for example, seek to generate income on a regular basis. Others seek to
preserve an investor's money. Still others seek to invest in companies that are growing at
a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell
shares. Many funds these days are no load and impose no sales charge. Mutual funds are
investment companies regulated by the Investment Company Act of 1940. Related:
opened fund, closed-end fund.
The Mutual Fund Industry in India was started with a humble beginning by
establishing the Unit Trust of India in the year 1963, by the Government of India. “The
main aim of the UTI was to enable the common investors to participate in the prosperity
of capital market through portfolio management aimed at reasonable return, liquidity and
safety and to contribute to India’s industrial development by channelizing household
savings into corporate investment”. By the year 1993, UTI occupied nearly 80 per cent of
the market share and developed manifold in terms of number of investors, investable
funds, reserves with wide marketing network and efficient leadership. The Chartered
Financial Analyst had commented that, “Mutual Funds today form 1/10th of the banking
industry’s size. If we compare this an indication in the current interest rate scenario,
Mutual Fund has ample shelf-space to grow into an industry like the banking industry in
India”

1
 1.2 MUTUAL FUNDS OPERATIONS
The flow chart below describes broadly the working of a Mutual Fund.

Figure: 1.2 Mutual Fund Operations

The simplest mutual funds definition is that they are an investment group set up by
[professional investors and headed by an investment manager. Individuals are then able
to invest small amounts of money into the fund for making a reasonable profit. There are
an incredibly large number of mutual funds. While some mutual funds aim to produce
short term, high yield profits, others look for the long term profit.

Mutual funds are seemingly the easiest and least stressful way to invest in the stock
market. Briefly put, a mutual fund is a pool of money contributed to by individual
investors, companies and other organizations. There will be a fund. The manager usually
diversifies in a manner such that the net average earning is expected to be considerably
positive. But that is what any successful investor attempts to do, and anyone with a
similar approach can expected to make the same earnings.

2
 1.3 GLOSSARIES

➢
NET ASSET VALUE ( NAV)

Definition: The Net Asset Value or NAV is simply a measure of the current rupee
value of one share of a mutual fund. It’s the fund’s assets minus its liabilities divided bby
the number of outstanding shares.

NAV’s are calculated at the end of each trading day. If the NAV increases, then it
means the value of your holdings increase(if you are a shareholder.)

Net Asset Value (NAV)

In simple words, NAV of a mutual fund is nothing but its PRICE PER UNIT. The
NAV of mutual fund is to be calculated on a daily basis that is based on its performance
with relation to other mutual funds. Technically speaking NAV of a fund is the
cumulative market value of the assets fund net of its liabilities. In other words, if the fund
is dissolved or liquidated by selling off all the assets in the fund, this is the amount that
the shareholders would collectively own.
This gives rise to concept of net asset value per unit, which is the value,
represented by the ownership of one unit in the fund. However, most people refer loosely
to the NAV per unit as NAV, ignoring the “per unit”. NAV is computed on a daily basis
for Open-ended funds and on a weekly basis for Close-ended listed funds whereas for
close-ended unlisted fund’s NAV is computed once a month or once in 3 months as
permitted by SEBI.
Thus, if one sees a fund NAV as Rs. 10 then one can expect to buy the fund for
Rs. 10 or sell it for Rs. 10(although some loaded funds don’t follow this logic). Since
mutual funds hold a number of securities, the net asset value must be calculated at the
end of the day on daily basis (as opposed to stocks that change prices by the second).

3
 CALCULATING NET ASSET VALUE (NAV)
Calculating mutual fund net asset values is easy. Simply take the current market value of
the fund’s net assets (securities held by the fund minus any liabilities) and divide by the
number of shares outstanding. So if a fund had net assets of Rs. 50 crore and there are 10
lakh shares of the fund, then the price per share (or NAV) is Rs. 50.00
The following formula is utilized for calculating NAV per unit:
NAV= Total Assets - Total Liabilities
Total no. of Outstanding Shares
It is calculated simply by dividing the net asset value of the fund by the number of units.
However, most people refer loosely to the NAV per unit as NAV, ignoring the “per unit”.
We also abide by the same convention.

FORMULA OF THE CALCULATION OF NAV

Market Value of Investments - Liabilities

Net Asset Value= __________________________________

No. of units Outstanding

Illustration:
For instance, HDFC mutual fund has introduced a scheme called Millionaire
Scheme. The scheme size is Rs. 100 crore. The value of each unit is Ts, 10/-. It has
invested all the funds in shares and the market value of the investment comes to Rs. 200
crore.

200 crore value of each unit

Now NAV=100 crore
= 2 x 10
= 20
Thus, the value of each unit of Rs. 10/- is worth Rs.
20/-Hence the NAV = Rs. 20/-

4
 HOW TO USE THE NET ASSET VALUES
NAV’s are helpful in keeping an eye on your mutual fund’s price movement, but
NAV’s are not the best way to keep track of performance. The reason for this is mutual
fund distribution. Mutual funds are forced by law to distribute at least 90% of its realized
capital gains and dividend income each year. When a fund pays out this distribution, the
NAV drops by the amount paid. This is important because an investor may become
frightened when they see their fund’s NAV drop by Rs. 3 even though they haven’t lost
any money (the Rs. 3 wa paid out to the shareholder).

The most important thing to keep in mind is that NAV’s change daily and are not a good
indicator on how your portfolio is doing because things like distribution mess with the
NAV (it also makes mutual funds hard to track)

➢ ENTRY LOAD

Definition:
Mutual fund companies collect an amount from investors when they join or
leave a scheme. This fee is generally referred to as a 'load'. Entry load can be said to be
the amount or fee charged from an investor while entering a scheme or joining the
company as an investor.

Description:

Generally, an entry load is collected to cover costs of distribution by the company.

Different mutual funds houses charge different fees as an entry load. In India, this charge
was usually of about 2.25% of the value of investment. From August 2009, however, SEBI
has done away with this practice of charging entry load for mutual funds.

5
 ➢
EXIT LOAD

Definition:

Mutual funds companies collect an amount from investors when they join or
leave a scheme. This fee charged is generally referred to as a 'load'. Exit load is a fee or
an amount charged from an investor for exiting or leaving a scheme or the company as an
investor.

Description:

The aim behind the collection of this commission at the time investors exit the
scheme is to discourage them from doing so, i.e. to reduce the number of withdrawals
by the investors from the schemes of mutual funds. Different mutual funds houses
charge different fees as an exit load.

➢
BROKERAGE/COMMISSION

Definition:
Commission is the incentive received by the insurance agent or salesperson for
the sales achieved in a given period.

Description:
Commission is generally paid as a percentage of the premium on the insurance
policies. This proves as an efficient way of rewarding the concerned person wherein
his rewards are directly proportional to the policies sold by him.

➢
SIP
SIP works on the principle of regular investments. It is like your recurring deposit where
you put in a small amount every month. It allows you to invest in a MF by making
smaller periodic investments (monthly or quarterly) in place of a heavy one-time
investment i.e. SIP allows you to pay 10 periodic investments of Rs 500 each in place of
a one-time investment of Rs 5,000 in an MF. Thus, you can invest in an MF without
altering your other financial liabilities. It is imperative to understand the concept of rupee
cost averaging and the power of compounding to better appreciate the working of SIPs.

6
 1.4 DEFINATIONS

SEBI (Mutual Funds) Regulations 1993, define Mutual Fund as follows

“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”

Frank Reilly defines, Mutual Funds “as financial intermediaries which bring a
wide variety of securities within the reach of the most modest investors”.

According to Weston J. Fred and Eugene F. Brigham Unit trusts are “corporations
which accept dollars from savers and then use these dollars to buy stock, long term
bonds, short term debt instruments issued by business or government units; these
corporations pool funds and thus reduce risk by diversification”.

7
 1.5 HISTORY OF MUTUAL FUNDS

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India (UTI)

at the initiative of the Reserve Bank of India (RBI) and the Government of India. The objective

then was to attract small investors and introduce them to market investments. Since then, the

history of mutual funds in India can be broadly divided into six distinct phases.

Phase I (1964-87): Growth Of UTI:

In 1963, UTI was established by an Act of Parliament. As it was the only entity offering
mutual funds in India, it had a monopoly. Operationally, UTI was set up by the Reserve Bank
of India (RBI), but was later delinked from the RBI. The first scheme, and for long one of the
largest launched by UTI, was Unit Scheme 1964.

Later in the 1970s and 80s, UTI started innovating and offering different schemes to suit the
needs of different classes of investors. Unit Linked Insurance Plan (ULIP) was launched in
1971. The first Indian offshore fund, India Fund was launched in August 1986. In absolute
terms, the investible funds corpus of UTI was about Rs 600 crores in 1984. By 1987-88, the
assets under management (AUM) of UTI had grown 10 times to Rs 6,700 crores.

Phase II (1987-93): Entry of Public Sector Funds:

The year 1987 marked the entry of other public sector mutual funds. With the opening up of the

economy, many public sector banks and institutions were allowed to establish mutual funds. The

8
State Bank of India established the first non-UTI Mutual Fund, SBI Mutual Fund in
November 1987. This was followed by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank
Mutual Fund, Bank of India Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. From
1987-88 to 1992-93, the AUM increased from Rs 6,700 crores to Rs 47,004 crores, nearly
seven times. During this period, investors showed a marked interest in mutual funds,
allocating a larger part of their savings to investments in the funds.

Phase III (1993-96): Emergence of Private Funds:

A new era in the mutual fund industry began in 1993 with the permission granted for the entry of
private sector funds. This gave the Indian investors a broader choice of 'fund families' and
increasing competition to the existing public sector funds. Quite significantly foreign fund
management companies were also allowed to operate mutual funds, most of them coming into
India through their joint ventures with Indian promoters.

The private funds have brought in with them latest product innovations, investment management
techniques and investor-servicing technologies. During the year 1993-94, five private sector fund
houses launched their schemes followed by six others in 1994-95.

Phase IV (1996-99): Growth and SEBI Regulation:

Since 1996, the mutual fund industry scaled newer heights in terms of mobilization of funds
and number of players. Deregulation and liberalization of the Indian economy had introduced
competition and provided impetus to the growth of the industry.

9
A comprehensive set of regulations for all mutual funds operating in India was introduced with
SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for all funds.
Erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the budget of
the Union government in 1999 took a big step in exempting all mutual fund dividends from
income tax in the hands of the investors. During this phase, both SEBI and Association of
Mutual Funds of India (AMFI) launched Investor Awareness Program aimed at educating the
investors about investing through MFs.

Phase V (1999-2004): Emergence of a Large and Uniform Industry:

The year 1999 marked the beginning of a new phase in the history of the mutual fund industry
in India, a phase of significant growth in terms of both amount mobilized from investors and
assets under management. In February 2003, the UTI Act was repealed. UTI no longer has a
special legal status as a trust established by an act of Parliament. Instead it has adopted the same
structure as any other fund in India - a trust and an AMC.

UTI Mutual Fund is the present name of the erstwhile Unit Trust of India (UTI). While UTI
functioned under a separate law of the Indian Parliament earlier, UTI Mutual Fund is now
under the SEBI's (Mutual Funds) Regulations, 1996 like all other mutual funds in India.

The emergence of a uniform industry with the same structure, operations and regulations make it

easier for distributors and investors to deal with any fund house. Between 1999 and 2005 the size

10
of the industry has doubled in terms of AUM which have gone from above Rs 68,000 crores
to over Rs 1,50,000 crores.

Phase VI (From 2004 Onwards): Consolidation and Growth:

The industry has lately witnessed a spate of mergers and acquisitions, most recent ones being
the acquisition of schemes of Allianz Mutual Fund by Birla Sun Life, PNB Mutual Fund by
Principal, among others. At the same time, more international players continue to enter India
including Fidelity, one of the largest funds in the world.

Figure 1.5 History of mutual funds

11
 1.6 Characteristics of Mutual Funds

➢
Assurance of minimum returns:
In general mutual funds do not assure any minimum returns to their investors.
However, Indian Mutual Fund Schemes launched during 1987 to 1990 assured specific
returns till 1991, when the SEBI and Union Ministry of Finance order the mutual funds
not to assure minimum returns. Recently, SEBI has formulated a policy that, mutual
funds with a track record of five years will be allowed to offer fixed returns not
exceeding one year period.

➢
Multiple Options:
Most of the mutual fund schemes are offering different options to the investors
under one scheme. For example, a growth oriented scheme may offer option of either
regular income or re-investment of income. Under the regular income plan, dividend shall
be distributed to investors and under the second dividend will be reinvested and total
amount shall be paid at time of redemption.

➢
Lock in Period:
Mutual Fund Schemes offer documents that contain a clause of lock-in period
ranging from one year to three years. Till the completion of the minimum period the
investors are to trade neither the units on the stock exchange nor to avail themselves of
repurchase facility.

➢ Liquidity:
Generally open-ended funds offer the facility of repurchase and the close ended
are traded at stock exchange offering repurchase after a minimum lock in period of two to

12
 three years. Mutual funds also have a facility to pledge or mortgage at banks to obtain
loan and can be transferred in favor of any individual.

➢
Incentives to early subscribers:
Most of the close-ended mutual fund schemes are offering incentives to
encourage early subscription to investors. This is more often in the tax planning schemes.
For instance, if the scheme is open for a period of three months, the investor may be
allowed a deduction from the amount to be invested at a certain specified rate, if the
subscriptions were during the specified time limits.

1.7 IMPORTANCE/ADVANTAGES OF MUTUAL FUNDS

Very often, we think we don’t need mutual funds in our portfolio and that our
existing investments are enough to meet our future goals. But, to reach our goals we need
a vehicle. Mutual funds are the only vehicle for reaching your goals, but they are
certainly one of them.
❖
Emergency corpus:
Long-term goals are important, but how do we cover unexpected calamities? Enter an
emergency corpus, which can take care of sudden expenses that we couldn’t have
planned for.
❖
Windfall gains:
When salaried employees get a bonus or when someone inherits a large amount, what to
do with it? Finding a vehicle to invest this money is crucial, else it could get spent.

❖
Funding down payments:
Many of us want a house of our own. A combination of reasonable income and a housing
loan can help you to pay your equated monthly installments (EMIs). But what about the

13
 down payment, which is a lump sum that you need to pay while, booking your house?
Enter mutual funds again.

❖
Funding your goals:
We all have dreams and financial goals. But how to realize them is always a big
question. What if you want to send your child to a premier college for post-graduation,
like an Indian Institute of Management (IIM)?

❖
Beat Inflation :

Mutual Funds help investors generate better inflation-adjusted returns, without spending
a lot of time and energy on it. While most people consider letting their savings 'grow' in a
bank, they don't consider that inflation may be nibbling away its value. Mutual Funds
provide an ideal investment option to place your savings for a long-term inflation
adjusted growth, so that the purchasing power of your hard earned money does not
plummet over the years.

❖
Low Cost:

Probably the biggest advantage for any investor is the low cost of investment that mutual
funds offer, as compared to investing directly in capital markets. Most stock options
require significant capital, which may not be possible for young investors who are just
starting out. Mutual funds, on the other hand, are relatively less expensive. The benefit of
scale in brokerage and fees translates to lower costs for investors. One can start with as
low as Rs. 500 and get the advantage of long term equity investment.

❖ Convenience:
Mutual funds are an ideal investment option when you are looking at convenience and
timesaving opportunity. With low investment amount alternatives, the ability to buy or

14
 sell them on any business day and a multitude of choices based on an individual's goal
and investment need, investors are free to pursue their course of life while their
investments earn for them.

❖ Diversification
Going by the adage, 'Do not put all your eggs in one basket', mutual funds help mitigate
risks to a large extent by distributing your investment across a diverse range of assets.
Mutual funds offer a great investment opportunity to investors who have a limited
investment capital.

❖ Liquidity
Investors have the advantage of getting their money back promptly, in case of open-
ended schemes based on the Net Asset Value (NAV) at that time. In case your investment
is close-ended, it can be traded in the stock exchange, as offered by some schemes

❖ Higher Return Potential

Based on medium or long-term investment, mutual funds have the potential to generate
a higher return, as you can invest on a diverse range of sectors and industries.

❖ Safety &Transparency
Fund managers provide regular information about the current value of the investment,
along with their strategy and outlook, to give a clear picture of how your investments are
doing.
Moreover, since every mutual fund is regulated by SEBI, you can be assured that your
investments are managed in a disciplined and regulated manner and are in safe hands.
Every form of investment involves risk. However, skilful management, selection of
fundamentally sound securities and diversification can help reduce the risk, while
increasing the chances of higher returns over time.

15
 1.8 DISADVANTAGES OF MUTUAL FUNDS
1. No Control Over Costs:
An investor in a mutual fund has no control of the overall costs of investing. The investor
pays investment management fees as long as he remains with the fund, albeit in return for
the professional management and research. Fees are payable even if the value of his
investments is declining. A mutual fund investor also pays fund distribution costs, which
he would not incur in direct investing. However, this shortcoming only means that there
is a cost to obtain the mutual fund services.

2. No Tailor-Made Portfolio:
Investors who invest on their own can build their own portfolios of shares and bonds and
other securities, Investing through fund means he delegates this decision to the fund
managers, The very high-net-worth individuals or large corporate investors may find this
to be a constraint in achieving their objectives. However, most mutual fund managers
help investors overcome this constraint by offering families of funds - a large number of
different schemes -within their own management company. An investor can choose from
different investment plans and constructs a portfolio to his choices.

3. Managing a Portfolio of Funds:

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

4. The Wisdom of Professional Management:

That's right, this is not an advantage. The average mutual fund manager is no better at
picking stocks than the average nonprofessional, but charges fees.

16
5. No Control:
Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat
of somebody else's car.

6. Dilution:
Mutual funds generally have such small holdings of so many different stocks that
insanely great performance by a fund's top holdings still doesn't make much of a
difference in a mutual fund’s total performance.

7. Buried Costs:
Many mutual funds specialize in burying their costs and in hiring salesmen who do not
make those costs clear to their clients.

1.9 GROWTH IN ASSET UNDER MANAGEMENT

Assets under management (AUM) are the total market value of assets that an investment
company or financial institution manages on behalf of investors. Assets under
management definitions and formulas vary by company.

Some financial institutions include bank deposits, mutual funds and cash in their
calculations. Others limit it to funds under discretionary management, where the
investor assigns responsibility to the company.

Assets under management describe how much of investors’ money an investment

company controls. Investments are held in various investment vehicles including
mutual funds, exchange-traded funds (ETFs) and hedge funds. Products are managed by
a venture capital company, brokerage company or portfolio manager.

17
AUM can be segregated in many ways. It is used to indicate the size of a fund and can
refer to the total amount of assets managed for all clients or the total assets managed for a
specific client. It includes the funds the manager can use to make transactions. For
example, if an investor has $50,000 invested in a mutual fund, those funds become part of
the total AUM and the fund manager can buy and sell shares in accordance with the
fund's investment objective using all of the invested funds without obtaining any special
permissions.

Fluctuating daily, AUM depends on the flow of investor money in and out of a particular
fund and asset performance. Increased investor flows, capital appreciation and
reinvested dividends will increase the AUM of a fund. Adversely, decreased investor
flows and market value losses will decrease the AUM of a fund. In the United States,
once a firm has more than $30 million in assets under management, it must register with
the Securities and Exchange Commission.

Methods of calculating assets under management vary among companies. Total firm
assets under management will increase when investment performance increases or
when new customers and new assets are acquired. Factors causing decreases in AUM
include decreased market value from investment performance losses, fund closures and
client redemptions. Assets under management includes all of the investor capital
invested across all of the firm’s products and can include capital owned by the
investment company executives.

Apr- %
Mutual Funds 03 Sep-17 Change Change
ICICI Prudential
Mutual Fund 10,623 279,066 268,443 2,527

HDFC Mutual Fund 7,706 269,781 262,075 3,401

Reliance Mutual Fund 3,344 231,425 228,081 6,821

18
 Aditya Birla Sun Life
Mutual Fund 6,278 224,650 218,372 3,478

SBI Mutual Fund 3,651 188,030 184,379 5,050

UTI Mutual Fund 13,532 150,669 137,137 1,013

Kotak Mahindra
Mutual Fund 3,182 110,630 107,448 3,377
Franklin Templeton
Mutual Fund 9,713 94,747 85,034 875
DSP BlackRock
Mutual Fund 2,706 77,819 75,113 2,776

IDFC Mutual Fund 5,179 66,361 61,182 1,181

L&T Mutual Fund 929 52,749 51,820 5,578

Tata Mutual Fund 1,275 44,897 43,622 3,421

Sundaram Mutual Fund 1,292 33,150 31,858 2,466

LIC Mutual Fund 3,083 22,871 19,788 642

JM Financial Mutual
Fund 134 13,952 13,818 10,312
Canara Robeco Mutual
Fund 1,163 11,845 10,682 918
Baroda Pioneer Mutual
Fund 212 11,138 10,926 5,154

HSBC Mutual Fund 1,077 10,179 9,102 845

PRINCIPAL Mutual
Fund 1,848 5,826 3,978 215

Taurus Mutual Fund 77 575 498 647

Escorts Mutual Fund 86 247 161 188

Sahara Mutual Fund 2,530 66 (2,464) (97)

Total 79,620 1,900,672 1,821,052 96

Figure: 1.9 Growth of ASSET UNDER MANAGEMENT

(http://www.moneycontrol.com/mutual-funds/amc-assets-monitor)

19
Figure 1.9 : Growth In Asset Under Management

20
 1.10 ORGANISATION OF MUTUAL FUNDS
An organization (or organization — see spelling differences) is a social group which
distributes tasks for a collective goal. The word itself is derived from the Greek word
organon, itself derived from the better-known word ergon - as we know `organ` - and
it means a compartment for a particular job.

Management is interested in organization mainly from an instrumental point of view. For

a company, organization is a means to an end to achieve its goals, which are to create
value for its stakeholders (stockholders, employees, customers, suppliers, community).
Moreover, (Samson, p 25. 2005) describes organizing as “the management function
concerned with assigning tasks, grouping tasks into departments, and allocating
resources to departments

Figure: 1.10 Organization of Mutual Funds

21
 1.11 TYPES OF MUTUAL FUNDS

Wide variety of Mutual Fund Schemes exists to cater to the needs such as
financial position, risk tolerance and return expectations etc. thus mutual funds has
Variety of flavors, Being a collection of many stocks, an investors can go for picking a
mutual fund might be easy. There are over hundreds of mutual funds scheme to choose
from. It is easier to think of mutual funds in categories, mentioned below.

Figure: 1.11 Types of Mutual Funds

22
➢ BY STRUCTURE:

1. Open - Ended Schemes:

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

2. Close - Ended Schemes:

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the schemes on the stock exchanges: where they are listed. In order to
provide an exit route t0 the investors, some close-ended funds give an option of selling
back the units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least One of the two exit routes is provided t0 the
investor.

3. Interval Schemes:

Interval Schemes are that scheme, which combines the features of open-ended and
close ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices.

23
➢
BY NATURE

1. Equity Fund:

These funds invest the maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:

• Diversified Equity Funds

• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)

Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.

2. Debt Funds

The objective of these Funds is to invest in debt papers, Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income
to the investors. Debt funds are further classified as:

•Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are associated
with Interstate risk. These schemes are safer as they invest in papers backed by
Government.

• Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.

24
• MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.

•Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.

•Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital, These schemes invest in short-term instruments
like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant
for short-term cash management of corporate houses and are meant for an investment
horizon of 1 day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.

•Balanced Funds: As the name suggest they are a mix of both equity and debt funds.
They invest in both equities and fixed income securities, which are in line with pre-
defined investment objective of the scheme. These schemes aim to provide investors
with the best of both the worlds. Equity part provides growth and the debt part provides
stability in returns. Further the mutual funds can be broadly classified on the basis of
investment parameter viz; each category of funds is backed by an investment philosophy,
which is pre-defined in the objectives of the fund. The investor can align his own
investment needs with the funds objective and invest accordingly.

25
➢
BY INVESTMENT OBJECTIVES

•Growth Schemes:
Growth Schemes are also known as equity schemes. The aim of these schemes is to
provide capital appreciation over medium to long term. These schemes normally invest a
major part of their fund in equities and are willing to bear short-term decline in value for
possible future appreciation.

•Income Schemes:
Income Schemes are also known as debt schemes. The aim of these schemes is to provide
regular and steady income to investors. These schemes generally invest in fixed income
securities such as bonds and corporate debentures. Capital appreciation in such schemes
may be limited.

•Balanced Schemes:
Balanced Schemes aim to provide both growth and income by periodically distributing a
part of the income and capital gains they can. These schemes invest in both shares and
fixed income securities, in the proportion indicated in their offer documents(normally
50:50).

•Money Market Schemes:

Money Market Schemes aim to provide easy liquidity, preservation of capital and
moderate income. These schemes generally invest in safer, short-term instruments, such
as treasury bills, certificates of deposit, commercial paper and inter-bank call money.

26
➢
OTHER SCHEMES

•Tax Saving Schemes:

Tax-saving schemes offer tax rebates to the investors under tax laws prescribed from
time to time. Under Sec.88 of the Income Tax Act, contributions made to any Equity
Linked Savings Scheme(ELSS) are eligible for rebate.

•Index Schemes:
Index schemes attempt to replicate the performance of a particular index such as the BSE
Sensex or the NSE 50. The portfolio of these schemes will consist of only those stocks
that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weightage. And hence, the returns from such schemes would
be more or less equivalent to those of the Index.

•Sector Specific Schemes:

These are the funds/schemes which invest in the securities of only those sectors or
industries as specified in the offer documents, e.g., Pharmaceuticals, Software, Fast
Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are
dependent on the performance of the respective sectors/industries. While these funds may
give higher returns, they are more risky compared to diversified funds. Investors need to
keep a watch on the performance of those sectors/industries and must exit at an
appropriate time.

27
 1.12 REGULATORY AUTHORITY

A mutual fund is a trust made up of money collected from public or investors

through the sale of units for investment in securities such as stocks, bonds, and money
market instruments. Mutual Funds in India are governed by the Securities Exchange
Board of India (Mutual Fund) Regulations 1996 with the exception of Unit Trust of
India (UTI) as it was created by the UTI Act passed by the Parliament of India. All
mutual funds must be registered with SEBI.

Mutual Funds in India primarily have a 3-tier structure i.e. Sponsor (1st tier),

Public Trust (2nd tier) and Asset Management Company (3rd tier). Sponsor is any person
who himself or in association with another corporate, establishes a mutual fund. The
Sponsor seeks approval from the Securities & Exchange Board of India (SEBI). Once
SEBI approves it, the sponsor creates the Public Trust as per the Indian Trusts Act, 1882.
Since Trusts have no legal identity in India, the Trust itself cannot enter into contracts.
Thus, Trustees are appointed who are authorized to act on behalf of the Trust. The
instrument of trust must be in the form of a deed between the Sponsor and the trustees of

28
the mutual fund registered under the provisions of the Indian Registration Act. The Trust
is then registered with SEBI leading to formation of mutual fund. Henceforth, the Trust is
known as mutual fund. Sponsor and the Trust are two separate entities.

The Trustee’s role is only to act as internal regulators of mutual fund where they
see, whether the money is being managed as per the objectives. Trustees appoint the
Asset Management Company (AMC), to manage money collected through sale of mutual
fund’s units. The AMC’s Board of Directors have at least 50% of independent directors.
The AMC is also approved by SEBI. The AMC functions under the supervision of its
Board of Directors, the direction of the Trustees and SEBI. AMC in the name of the Trust
floats new schemes and manage these schemes by buying and selling securities. In order
to do this, the AMC needs to follow all rules and regulations prescribed by SEBI and as
per the Investment Management Agreement it signs with the Trustees.

Regulation of mutual funds

Mutual funds are regulated primarily by Securities and Exchange Board of India
(SEBI). In 1996, SEBI formulated the Mutual Fund Regulation. SEBI is also the apex
regulator of capital markets and its intermediaries. Issuance and trading of capital market
instruments also comes under the purview of SEBI. Along with SEBI, mutual funds are
regulated by RBI, Companies Act, Stock exchange, Indian Trust Act and Ministry of
Finance. RBI acts as a regulator of Sponsors of bank-sponsored mutual funds, especially
in case of funds offering guaranteed returns. In order to provide a guaranteed returns
scheme, mutual fund needs to take approval from RBI. The Ministry of Finance acts as
supervisor of RBI and SEBI and appellate authority under SEBI regulations. Mutual
funds can appeal to Ministry of finance on the SEBI rulings.

29
Some SEBI regulations for mutual funds

Mutual funds must set up AMC with 50% independent directors, a separate board
of trustee companies with minimum 50% of independent trustees and independent
custodians to ensure an arm’s length relationship between trustees, fund managers, and
custodians. As the funds are managed by AMCs and the custody of assets are with
trustees, a counter balancing of risks exists as both can keep tabs on each other.

SEBI takes care of the track record of a Sponsor, integrity in business transactions and
financial soundness while granting permission. The particulars of schemes are required to
be vetted by SEBI. Mutual funds must adhere to a code of advertisement.

As per the current SEBI guidelines, mutual funds must have a minimum of Rs. 50 crore
for an open-ended scheme, and Rs. 20 crore corpus for the closed-ended scheme. Within
nine months, mutual funds must invest money raised from the saving schemes. This
protects the mutual funds from the disadvantage of investing funds in the bullish market
and suffering from poor NAV after that. Mutual funds can invest a maximum of 25% in
money market instruments in the first six months after closing the funds and a maximum
of 15% of the corpus after six months to meet short-term liquidity requirements. SEBI
inspects mutual funds every year to ensure compliance with the regulations.

30
 1.13 GLOBAL SCENARIO
A mutual fund is a pool of money from numerous investors who wish to save or make
money. Investing in a mutual fund can be a lot easier than buying and selling
individual stocks and bonds on your own. Investors can sell their shares when they
want. First started by Massachusetts Investors Trust In Boston in 1924

The statistic presents the distribution of global mutual fund worldwide in 2016, by
selected region. The United States accounted for almost half of the mutual fund and
ETF (Exchange Traded Funds) assets in 2016.

Figure : 1.13 Global scenario of Mutual Funds

(https://www.statista.com/statistics/255595/share-of-total-global-mutual-fund-net-assets-
by-selected-region/)

31
1.14 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 July 3, 2000.

The registered office of the AMC is situated at “HDFC House”, 2nd Floor, H. T. Parekh
Marg, 165-166, Backbay Reclamation, Churchgate, Mumbai - 400 020. The Company
Identification Number (CIN) is U65991MH1999PLC123027.

In terms of the Investment Management Agreement, the Trustee has appointed the HDFC
Asset Management Company Limited to manage the Mutual Fund. The paid up capital of
the AMC is Rs. 26.319 crore as on September 30, 2017.

Figure: 1.14 HDFC Assets Management Company Ltd

32
1.9. % Board of Directors

The Band of Directors of the HDFC Asset Management Company Limited

(AMC) consists of the following eminent persons.

Mr. Deepak S. Parekh Chairman of the board

Mr. N Keith Skeoch CEO of Standard Life Investments Ltd.
Mr.Keki M. Mistry Vice-Chairman & CEO
Mr. James Aird Investment Director
Mr. P. M. Thampi Independent Director
Mr.HumayunDhanrajgir Independent Director
Dr. Deepak Pathak Independent Director
Mr.Hoshang S. Billimoria Independent Director
Mr.Rajeshwar Raj Bajaaj Independent Director
Mr. Vijay Marchant Independent Director
Ms.Renu S. Karnad Joint Managing Director
Mr.MilindBarve Managing Director
1.9.

Mr. Deepak Parekh,

the Chairman of the Board, is associated with HDFC Ltd. in his capacity as its Executive
Chairman. Mr. Parekh joined HDFC Ltd. in a senior management position in 1978. He
was inducted as whole time Director of HDFC Ltd. in 1985 and was appointed as the
Executive Chairman in1993.

Mr. N. Keith Skeoch

is associated with Standard Life Investments Limited as its Chief Executive and is
responsible for all company business and investment operations within Standard Life
Investments Limited.

Mr. Keki M. Mistry

is an associate director on the Board. He is the Vice-Chairman &Managing Director of

Housing Development Finance Corporation Limited (HDFC Ltd.) He is with HDFC Ltd.
since 1981 and was appointed as the Executive Director of HDFC Ltd. in1993. He was
appointed as the Deputy Managing Director in 1999, Managing Director in2000 and Vice
Chairman & Managing Director in 2007

33
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC):

HDFC or the Housing Development Finance Corporation Limited is one of India’s

premier financial conglomerates. It was established in 1977 as a mortgage company and
has since grown into a financial giant that has major subsidiaries like HDFC Bank,
HDFC Standard Life Insurance Company Limited and even HDFC Asset Management
Company among others. The services provided by the company range from mortgages
to insurance to Mutual Funds.

HDFC was incorporated in 1977 as the first specialized housing finance institution 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
currently has a client base of over 8, 00,000 borrowers, 12, 00,000 depositors,
92,000shareholders and 50,000 deposit agents. HDFC raises funds from international
agencies such as the World Bank, IFC (Washington), USAID, CDC, ADB and KFW,
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 ninth 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. HDFC is India's premier housing
finance company and enjoys an impeccable track record in India as well as in
international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in
its operations to remain the market leader in mortgages. Its outstanding loan portfolio
covers well over a million dwelling units. HDFC has developed significant expertise in
retail mortgage loans to different market segments and a ls o h a s a la r g e c o r p o r a t
e c l i e n t b a s e f o r it s h o u s i n g r e la t e d c r e d i t f a c i l i t i e s . W it h i t s
experience in the financial markets, a strong market reputation,

34
large shareholder base and unique consumer franchise, HDFC was ideally positioned to
promote a bank in the Indian environment.

In a recent move, HDFC Mutual Fund, which is India’s largest Mutual Funds manager,
acquired Morgan Stanley’s business when they exited the country. The eight schemes of
Morgan Stanley that were bought by HDFC had a combined value of Rs. 3,290 crore.
This move has put HDFC Mutual Fund even further ahead of its competitors in the
Mutual Funds market

HDFC MUTUAL FUND PRODUCTS

Equity Funds

HDFC Growth Fund

HDFC Long Term Advantage Fund

HDFC Index Fund

HDFC Equity Fund

HDFC Capital Builder Fund

HDFC Tax saver HDFC Top 200 Fund

HDFC Core & Satellite Fund

HDFC Premier Multi-Cap Fund

HDFC Long Term Equity Fund

HDFC Mid-Cap Opportunity Fund

Balanced Funds

HDFC Children's Gift Fund Investment Plan

HDFC Children's Gift Fund Savings Plan

35
HDFC Balanced Fund

HDFC Prudence Fund

Debt Funds

HDFC Income Fund

HDFC Liquid Fund

HDFC Gilt Fund Short Term Plan

HDFC Gilt Fund Long Term Plan

HDFC Short Term Plan

HDFC Floating Rate Income Fund Short Term Plan

HDFC Floating Rate Income Fund Long Term Plan

HDFC Liquid Fund - PREMIUM PLAN

HDFC Liquid Fund - PREMIUM PLUS PLAN

HDFC Short Term Plan - PREMIUM PLAN

HDFC Short Term Plan - PREMIUM PLUS

PLAN HDFC Income Fund Premium Plan HDFC

Income Fund Premium plus Plan

HDFC High Interest Fund

HDFC High Interest Fund - Short Term Plan

HDFC Sovereign Gilt Fund - Savings Plan

HDFC Sovereign Gilt Fund - Investment Plan

HDFC Sovereign Gilt Fund - Provident Plan

36
 HDFC Cash Management Fund - Savings Plan

HDFC Cash Management Fund - Call Plan

HDFCMF Monthly Income Plan - Short Term Plan

HDFCMF Monthly Income Plan - Long Term Plan

HDFC Cash Management Fund - Savings Plus Plan

HDFC Multiple Yield Fund

HDFC Mutual Fund offers a wide variety of Mutual Funds for investors to choose
from. They range from the regular equity and debt funds to funds of funds schemes,
liquid funds, etc.

 Equity

Equity funds are designed to invest mostly in the equity markets. The management of
these funds can be active or passive (index funds). The various fund options offered
under this scheme are meant to meet the long-term investment needs of the customers.

 Debt / Income

The debt funds, or income funds invest in short or long-term bonds, the money market,
floating rate investments, etc. The purpose of these investments is to generate an income for
the investor and that is exactly what the plans offered by HDFC Mutual Fund do. 

 Liquid

Liquid funds are funds that make investments in fixed-income, short-term securities that
come with maturity periods of 91 or less days. This makes them a low-risk investment
option. These funds come without exit loads.

 Children's Gift Fund

The Children’s Gift Fund offered by HDFCMF is a scheme that has been designed
to provide a chance for the investor’s capital to grow over the long term. The fund
was launched for investors to meet the goals set for their children.

37
  Exchange Traded Funds

HDFC Mutual Fund’s Exchange Traded Funds or ETFs are funds that are traded on
the stock market. They offer higher liquidity and come with lower fees when
compared to other Mutual Funds. HDFC Mutual Fund offers 3 different types of funds
in this category.

 Annual Interval Fund - Series 1

The investment objective of the plan under the scheme is to generate income through
investments in Debt / Money Market Instruments and Government Securities maturing
on or before the opening of the immediately following specified transaction period.

 Rajiv Gandhi Equity Savings Scheme

The Rajiv Gandhi Equity Savings Scheme (RGESS) is an equity investment scheme
that offers investors tax benefits. It is meant to encourage small investors to start
investing in the capital markets.

 Fixed Maturity Plan

The Fixed Maturity Plans offered by the company are Mutual Funds that invest in
government securities and debt markets. They involve low risk and are close-
ended schemes.

 Fund of Fund Schemes

This scheme invests in other Mutual Funds. HDFC Mutual Fund offers Gold Fund and
Dynamic PE Ratio Fund under this category.

 HDFC Capital Protection Oriented Schemes

This is a scheme that is aimed at generating income for investors by investing in the
debt market. The instruments that they invest in come with fixed maturity dates.




Why choose HDFC Mutual Fund?





Infrastructure mutual fund schemes have delivered the highest average return of 43.6 per
cent among all sectorial schemes, including banking and financial services, energy and
power, FMCG, pharma and technology, in 2017. According to mutual fund advisors,

38
 infrastructure schemes are likely to offer superior returns in the coming years, provided if
the investor is prepared to hold on to investments for five to seven years.

HDFC Mutual Fund has a lot of offer to potential investors. The company boasts of
offering customers a chance to invest profitably. This is made obvious by the
following observations about the company.

 Many of the products offered by the company come with CRISIL ratings of 3 and above.

 The company offers investors a huge variety of funds to invest in.

 Investors can get tax advantages by investing with HDFC MF’s ELSS.

 The funds on offer range from short-term to long-term and can be used to meet investor
goals. They offer both close and open-ended funds.

 The company offers low, medium and high-risk products.

HDFC MF gets board’s nod for IPO

The board of directors of HDFC Asset Management Company, the sponsor of HDFC
Mutual Fund, has cleared a proposal to initiate the process of filing for its initial
public offer.

HDFC Mutual Fund will become the second fund house to list after Reliance Mutual
Fund, the IPO of which was subscribed 81 times earlier this month. As of September
quarter, HDFC MF is the second-largest fund house with assets worth ₹2.69 lakh crore
under its management.

The promoters of the asset management company — Housing Development Finance

Corporation and Standard Life Investments — have also, in principle, approved the
IPO by offering their shares to the public in one or more tranches. Post dilution in
tranches, the shareholding of HDFC and SLI in HDFC AMC will be at least 50.01 per
cent and 24.99 per cent, respectively, said HDFC MF in a statement on Thursday.

39
Standard Life Aberdeen plc. (the promoter of Standard Life Investments), HDFC and
HDFC AMC also confirmed their intention to enter into a collaboration agreement to
work together to develop new products in India, which they believe will further
enhance their successful long-term relationship.

Unlocking biz value

Deepak Parekh, Chairman, HDFC AMC, said the listing would unlock value for the
shareholders and provide investors an opportunity to participate in the emerging
asset management space within the group.

Milind Barve, Managing Director, HDFC AMC, said the Indian asset management
industry has seen strong inflows with increasing awareness of mutual fund products.

The improving penetration levels of mutual fund products provide an interesting

opportunity to channelize investments more productively, he said.

40
 1.15 LEADING HDFC MUTUAL FUNDS FOR SHORT TERM
INVESTING

One of the most common bits of advice that investment experts tend to offer new mutual
fund investors is to keep a long term investment horizon of 5 years or more. However
mutual funds are an extremely flexible investment tools hence investors do have quite a
few options if they are seeking short term investment options ranging from a year to less
than 5 years. At present, HDFC Mutual Fund AMC offers investors a range of debt funds
that investors – both retail and institutional can choose from. The following is a short list
of HDFC debt funds that can offer investors high ROI in case they choose to make a
short term investment.

Launched in 2013, this relatively new debt fund from HDFC Mutual Funds AMC has
offered investors with returns of close to 9.5% since its launch. Officially, the fund seeks
to provide investors with regular income through investments made into a range of
money market and debt investments. Officially designated as a short term debt fund, you
have to consider the fund’s an exit load of 0.75% of total amount redeemed in case unit
redemption is made within 180 days of unit allotment. This exit load is however not
applicable in case the redemption is less than 15% of total units allocated. As per recent
portfolio records, the fund has invested around 86% of its available capital in high quality
bonds with money market instruments accounting for the rest of this fund’s investment
portfolio.

HDFC Corporate Debt Opportunities Fund

The HDFC Corporate Debt Opportunities Fund is a scheme focused on providing

investors with capital appreciation as well as income generation through investments
focused primarily on corporate bonds. Historically most analysts have designated this
fund to have an overall medium quality portfolio which includes both high quality AAA-

41
rated bonds along with relatively lower quality BBB– rated bonds. The higher quality
bonds provide stability to the overall fund portfolio while the lower quality bonds feature
a higher coupon rate which helps the fund generate higher accrual income. In case you
plan to invest in this debt fund, you should be aware of exit loads that are applicable in
case you redeem your investments prior to completion of 540 days from the unit
allotment date. The fund’s exit load is 1% for redemptions made within 365 days of unit
allotment and 0.5% for redemptions made between 366 and 540 days. Your redemptions
will however be exempt from exit load in case you are redeeming less than 15% of total
units held in the scheme.

HDFC Cash Management Fund – Treasury Advantage Plan

This HDFC mutual fund is specifically designed to fulfill the short to medium term
investment objectives of investors. In order to provide a viable alternative to traditional
investments such as fixed deposits and savings accounts, the HDFC Cash Management
Fund – Treasury Advantage Plan primarily invests in various corporate debt as well as
money market investments. Classified as an ultra-short term debt fund, this scheme does
not have any exit load no matter how long or short a period you remain invested in
scheme. Launched in 1999, this scheme has gone through multiple economic cycles and
has provided returns of close to 7.5% since its launch. In terms of investment quality, this
scheme primarily invests in high quality bonds with residual maturity of less than a year
which is a key reason for the low interest rate sensitivity of this scheme. What’s even
better for you in case you decide to invest in this scheme is the fact that it features a low
expense ratio of less than 1% which sets it apart from many of its peers. In case you are
interested in purchasing units of this fund, as a new investor, the minimum lump sum
investment amount is fixed at Rs. 5000.

42
HDFC Short Term Opportunities Fund

This HDFC mutual fund scheme is designed to provide investors with regular income by
making investments in various money market instruments and debt securities. Since its
launch in 2013, this fund has emerged as one of the most popular short term investment
options offered by HDFC Mutual Fund AMC. If you are investing in HDFC Short Term
Opportunities Fund, you should know that this scheme is mostly invested in short term
corporate debt securities along with a smaller portion of capital invested in sovereign
debt instruments. The average residual maturity of this scheme’s investments ranges from
1.4 year to 1.7 year which leads to most of these investments being held till maturity.
Thus the overall portfolio of this fund features high credit quality along with relatively
low levels of interest rate sensitivity. This has promoted the fund’s overall perception of a
low volatility investment alternative making it one of the largest funds (in terms of AUM)
within its category. In case you are new investor in this scheme, the minimum initial
lump sum deposit amount required is Rs. 5000.

HDFC Cash Management Fund – Savings Plan

The HDFC Cash Management Fund – Savings Plan is a specialized investment option for
investors seeking short term or medium term debt investment. This HDFC mutual fund
scheme is mainly focused on making money market and corporate debt securities. As per
its stated objective, this scheme endeavors to provide regular dividends from the income
generated by the fund’s investments. Historically, this scheme has featured low levels of

43
volatility and relatively consistent returns which have made this fund a popular
investment choice among retail as well as institutional investors with short term
investment horizons. Designated as a liquid fund, this scheme has zero entry and exit
loads. It is mainly invested in money market instruments such as commercial papers,
certificate of deposit and treasury bills that feature maturities of 90 days or less. In case
you invest in this scheme, you will also receive the benefit of its extremely low expense
ratio which was recorded at 0.30% on October 31, 2017.

44
RESEARCH METHODOLOGY
45
 2.1 OBJECTIVES OF THE STUDY

Objectives are the base and foundation of any research. The above study is undertaken on
the basis of certain objectives which are as follows.

1. To understand the concept of Mutual Funds.

2. To overview organization structure, types and History of Mutual Funds.
3. To understand the benefits, Terms associated with Mutual Funds and
disadvantages of Mutual Funds.
4. To know the growth trend of Mutual Funds and Assets Under Management
(AUM).
5. To understand the investors behaviour towards Mutual Fund investments.
6. To find out necessary facts related to selected HDFC Mutual Funds Schemes
which can benefits investors and fund managers.
7. To come out with suggestions and recommendation enhancing the growth of
Mutual Funds.

46
 2.2 HYPOTHESIS OF THE STUDY

In order to fulfill and achieve the above stated objectives of the research the study has
been made on the basis of certain hypothesis bifurcated according to the various
dimensions of the Indian mutual funds industry. The hypotheses of the study have been
made according to the need and importance of the study. The study has taken into
consideration the growth and development of Indian mutual funds industry in to and in
term of net resource mobilization related to the Indian mutual funds industry, the
performance evaluation of HDFC mutual fund schemes and its diversification as criteria
for hypothesis. For testing purpose the following hypotheses have been formulated.

Hypothesis
H0: The investment performance of HDFC mutual funds schemes is not superior to the
relevant benchmark portfolio, while the alternate hypothesis of the study assumes,

H1: The investment performance of HDFC mutual funds schemes is superior to the
relevant benchmark portfolio.

47
 2.3 SCOPE OF THE STUDY
The scope has grown enormously over the years. In the first age of mutual funds, when

the investment management companies started to offer mutual funds, choices were few.

Even though people invested their money in mutual funds as these funds offered them

diversified investment option for the first time. By investing in these funds they were able

to diversify their investment in common stocks, preferred stocks, bonds and other

financial securities. At the same time they also enjoyed the advantage of liquidity. With

Mutual Funds, they got the scope of easy access to their invested funds on requirement.

But, in today’s world, Scope of Mutual Funds has become so wide, that people

sometimes take long time to decide the mutual fund type, they are going to invest in.

Several Investment Management Companies have emerged over the years who offer

various types of Mutual Funds, each type carrying unique characteristics and different

beneficial features.

48
 2.4 LIMITATIONS OF THE STUDY
1. Data limitations
All the sources, from where the data of the present study has been extracted do not
provide the complete data, often data available is only for the recent two or three years,
not enough for analysis. A few private corporate bodies are providing data but getting
those data is also very difficult and often they charge exorbitantly in their coverage.

2. Sampling Errors
The study is mainly based on secondary sources of the primary surveys conducted by
AMFI and SEBI therefore error of primary surveys bound to be occurred.

3. Impact of Time
The study on impact of policy measures on the growth and development of AMFI cannot
be seen in a short span of time where the reforms are an on-going process.

4. Frequent Changes
The world is very fast and changes are happening frequently due to the globalization and
liberalization. The researcher may not be able to consider all the changes and therefore
there will be a gap of time span for further studies in future. However, the researcher is of
strong opinion, that the result of the study in no way would be affected.

5. Sample size
The above study is based on the 100 investors of Kalyan city only, which indicates
their attitude towards the Mutual Fund Investments. Hence this study is restricted to the
selected area only.

49
 2.5 SIGNIFICANCE OF STUDY
Mutual funds are the vehicle through which an investor can achieve his financial

goals. Mutual Funds are subject to market risk it requires continuous study of market

fluctuations.

❖
Mutual Funds helps investors to generate better inflating adjusted returns
without spending lot of time and energy on it.

❖
Mutual Fund investment is the low cost of investment as the brokerage charges are
lower for investors.

❖
Mutual Fund investments provide opportunity to investors to diversify their
investments in different portfolios.

❖
Mutual Fund investments generate higher returns on investments in different
schemes offered by different companies.

❖
Fund Managers provide regular information about current value of investments
along with their strategy and outlook.

❖
HDFC Mutual Fund schemes offer better opportunities to investors in terms of
growth and returns.

50
 2.6 SELECTION OF THE PROBLEM
The study on investor’s behaviour toward mutual fund investments is undertaken in order

to know their attitudes, investment patterns and buying habits of them.

The study is undertaken to know overview of Mutual Funds industry and working of

HDFC Mutual Fund Investment. The study is undertaken to understand various terms

associated to Mutual Funds. It helps to know the benefits and growth of Mutual Fund

investment.

It is undertaken in order to identify the problems associated with it and the possible

solutions relating to Mutual Fund investments.

2.7 SAMPLE SIZE

Sample size for above study is 100. Different area of investors are considered for
the study purpose. The data is collected from 100 people of different age, gender
and different education background of Kalyan city.

2.8 SAMPLING METHOD

For the purpose of study convenience non probably sampling method is used. The data is
collected from different people who are selected randomly on the basis of convenience.

51
 2.9 DATA COLLECTION

The study is an empirical work based on the secondary data and primary data collected
from various sources for the fulfillment of truthfulness of the analysis and interpretation
and then to ensure the quality of research study.

a) Primary Data
The primary source is the outcome of personal interviews with experts, fund manager,
brokers and agents. Data is collected from group of 100 people of different age, different
gender, different education background and different occupations.

b) Secondary Data
The secondary data for the study have been collected from various secondary sources of
information such as published reports of AMFI, SEBI, RBI annual reports and bulletin.
The annual reports of various mutual funds and their monthly fact sheets have also been
used. Other reports such ad various reports from Ministry of Finance, Department of
Company Affairs etc. are also collected for supporting the literature references.
Altogether relevant books, journals and periodicals, research papers, published thesis,
articles, financial dailies, websites, are also consulted by the researcher for better
referencing.

52
 2.10 TECHNIQUES AND TOOLS

The statistical tools used for the analysis and interpretation are: Mean, variance, standard
deviation and linear regression. Beside these the following six measures were used to
evaluate performance:

(a) Rate of Return

(b) Sharpe Ratio
(c) Treynor Ratio

(e) Sharpe Differential Measure

(f) Famas‟ Composite of Investment Performance.

Considering the technical nature of certain statistical tools and the frequent use of these
tools in the study a brief discussion of some relevant tools are as follows:

R-Squared
R-squared values range from 0 to 100.R-squared of 100 means that all movements of a
security are completely explained by movements in the index. A high R-squared
(between 85 and 100) indicates the fund's performance patterns have been in line with the
index. A fund with a low R-squared (70 or less) doesn't act much like the index. A higher
R-squared value will indicate a more useful beta figure. For example, if a fund has an R-
squared value of close to 100 but has a beta below 1, it is most likely offering higher risk-
adjusted returns. A low R-squared means you should ignore the beta.

53
Treynor Ratio
The Treynor‟s reward to volatility ratio measures the excess return per unit of market
(systematic) risk. We calculate Treynor ratios for the sample funds by using: TI = (Rp -
Rf)/ βp
TI = Treynor‟s ratio
Rp = Average return on fund p
Rf = Return on risk free asset
βp = Sensitivity of fund return on market return
It measures portfolio risk in terms of beta, which is the weighted average of individual
security beats. The ratio is relevant to investors, for whom the fund represents only a
fraction of their total assets. The higher the ratio better is the performance.

Jensen Differential Measure

Jensen attempts to construct a measure of absolute performance on a risk-adjusted basis
that a definite standard against which performance of various funds can be measured.
This standard is based on CAPM measures the portfolio manager’s predictive ability to
achieve higher return than expected for the given riskiness. The basic model is Rpt - Rf =
α + β (Rm - Rf) + ei
Where Alpha (α) = the intercept
βp = Systemic risk
Rm = Market return
Rpt = Fund return on time period t
Rf = Return on risk free asset
A positive value of Alpha for a portfolio would indicate that the portfolio has an average
return greater than the benchmark return indicating the superior performance.

54
Alternatively, a negative value of alpha would indicate that the fund has a return less than
the benchmark.

Sharpe Differential Return Measure

Sharpe has applied this measure to know the incremental returns earned by the mutual
fund manager for the given level of risk. The Sharpe differential return is computed by
using the following equation:
Rpt - Rft = α + β [Rmt - Rft ] + Σpt
Rpt = Return for the portfolio
Rft = Risk – free return
Rmt = Return on the market portfolio
Σpt = Random error term, and α and β are parameters of the model
The Sharpe measure is based on the Capital Market Line (CML). One of the
major characteristics of CML is that only efficient portfolio can be plotted here. So it is
assumed that, a managed portfolio (mutual fund scheme) is an efficient portfolio. In
terms of CML, the risk premium expected to be earned by the portfolio is in relation to
the total risk of the portfolio rather than the systematic risk. Thus, the differential return
will be the difference between the actual average return of the fund and its expected
return for the given level of risk. If a portfolio is well diversified, the two measures
(Jensen and Sharpe) should indicate same level of differential return. If the portfolio is
imperfectly diversified, the Sharpe differential return will be smaller. The differential
return will be the difference between the actual average return of the mutual fund scheme
and its expected return for the given level of risk. Sharpe measure therefore takes into
consideration not only the manager’s stock selection ability but also his ability to provide
diversification. A comparison of Sharpe’s differential returns and Jensen’s alpha reveals
the impact of selectivity and diversification on the fund returns.

55
Fama’s Components of Investment Performance
The performance of the funds is also examined in terms of Fama’s Components of
Investment Performance Measure. In terms of Fama’s framework, portfolio return
constitutes the following four components: (a) Risk-free return, (b) compensation for
systematic risk, (c) compensation for diversification and (d)net selectivity. The different
components have been worked out using the following: Risk – free return: Given

Compensation for systematic risk: [β (Rm – Rf) ],

Compensation for diversification: [Rm – Rf] [σ p/ σ m - β],
Net Selectivity: [Rp – Rf] – [σ p/ σ m ] [Rm – Rf]
The rationale for using this measure is that, the difference between return on an
active bet and return on a passive bet, which is obtained from the security market line,
may arise due to selectivity skills of fund managers. This difference is analogous to
Jensen‟s alpha. Fama developed a methodology that helps us to decompose selectivity
skills into diversification return and net selectivity. The former is nothing but a
compensation for diversifiable risk to which the active bet is exposed, while the latter
reflects the true stock selection ability of the fund managers. A positive net selectivity
indicates superior performance for a fund. However, in case of well diversified funds,
both the net selectivity and selectivity are not likely to be significantly different from
each other.

56
LITURATURE REVIEW
57
 CHAPTER 3: LITURATURE REVIEW
Performance evaluation of mutual funds is one of the preferred areas of research where a
good amount of study has been carried out. The area of research provides diverse views
of the same.

Abhishek Kumar (October 2012), have studied Trend in Behavioral Finance and Asset
Mobilization in Mutual Fund Industry of India. This paper tries to analyze some of the
key issues noted below:
1. To understand the growth and the potential of Mutual Fund industry and analyze its
success.
2. An exhaustive cross performance study of Mutual fund industry by analyzing around
1025 mutual fund schemes of India.
3. Performance analyses of various mutual fund schemes and its contributions to assets
management during the study period (2002-2009).
4. Insight about the performance of the mutual fund under short term and long-term
period and
5. Investor’s behavior in allocating their investments among various assets available in
the market compared to Mutual funds in the changing economic Scenario.

Dr. B. Saritha, (Feb 2012) has studied Mutual Fund Investment Decisions by Using
Fama Decomposition Models. Mutual Funds are dynamic Financial Institutions (FI)
which play a crucial role in an economy by mobilizing savings and investing them in the
capital market. Thus, establishing a link between savings and capital market. Therefore,
the activities of mutual funds have both short and long term impact on the savings &
capital markets and the national economy.

B. Raja Manner and Dr. B. Ramachandra Reddy (Oct 2012), Review and
Performance of Select Mutual Funds Operated By Private Sector Banks: Axis Equity and
Kotak 50 Funds – Growth Option. The two mutual funds (i) Axis Equity (G) and (ii)
Kotak 50 (G) are reviewed in detail with a brief introduction of the fund houses itself.
The funds are then statistically evaluated by correlation with the benchmark. S&P CNX

58
Nifty, standard deviation, Sharpe’s Index. Treynor’s Ratio,Jenson’s alpha, Fama’s
Measure and M2.

Dr. R. Narayanasamy and V. Rathnamani (Apr 2013), have done Performance

Evaluation of Equity Mutual Funds (On Selected Equity Large Cap Funds). This study,
basically, deals with the equity mutual funds that are offered for investment by the
various fund houses in India. This study mainly focused on the performance of selected
equity large cap mutual fund schemes in terms of risk- return relationship. The main
objectives of this research work are to analysis financial performance of selected mutual
fund schemes through the statistical parameters such as (alpha, beta, standard deviation,
r-squared, Sharpe ratio).

Dr. D. Rajasekar (Sep 2013), has done a Study on Investor`s Preference Towards
Mutual Funds With Reference To Reliance Private Limited, Chennai -An Empirical
Analysis. The data was analyzed using the statistical tools like percentage analysis, chi
square, weighted average. The report was concluded with findings and suggestions and
summary. From the findings, it was inferred overall that the investor are highly
concerned about safety and growth and liquidity of investments. Most of the respondents
are highly satisfied with the benefits and the service rendered by the Reliance mutual
funds.

Rajiv G. Sharma (Aug 2013) has done a Comparative Study on Public and Private
Sector Mutual Funds in India. The study at first tests whether there is any relation
between demographic profile of the investor and selection of mutual fund alternative
from among public sector and private sector. For the purpose of analysis perceptions of
selected investors from public and private sector mutual funds are taken into
consideration. The major factors influencing the investors of public and private sectors
mutual funds are identified. The factors under consideration to compare between

59
perceptions of public and private sector mutual fund investors are Liquidity, Security,
Flexibility, Management fee, Service Quality, Transparency, Returns and Tax benefits.

Dr. E. Priyadarshini (2013),has done Analysis of the Performance of Artificial Neural

Network Technique for Forecasting Mutual Fund Net Asset Values. In this paper, the Net
Asset Values of four Indian Mutual Funds were predicted using Artificial Neural
Network after eliminating the redundant variables using CA and the performance was
evaluated using standard statistical measures such as MAPE, RMSE, etc.

S. Palani and P. Chilar Mohamed (Dec 2013) have done study of Public and Private
Sector Mutual Fund in India. Development of capital market in country is an important
prerequisite which only would enable industrial development, Business growth and there
by contribution towards economic development. Without any doubt it could be stated that
economic development, measured in the form of growth in GDP or NNP is one of the
objectives of every country in the world. A well-integrated Financial System alone could
hasten economic growth which it does through channelizing productive resources
towards industrial growth and development.

JafriArshadHasan, (2013), has studied The Performance Evaluation of Indian Mutual

Fund Industry past, Present and Future. This article will discuss the past performance of
the Indian mutual fund industry and the pace of growth it achieved after being succumbed
to regulatory changes by SEBI,international factors and its nonperformance that affected
the industry and its sentiments. It will also analyze the future implications of the current
changes that are being implemented by the regulator.

C.Vijendra and D. Sakriya, (June 2013) have done a Study of Investor Behavior
regarding Investment Decisions in Mutual Funds. A survey was conducted among 384
mutual funds investors from the twin cities of Hyderabad &Secundrabad to study the
factors influencing the fund/schemes election behavior of these investors. It is hoped that
this survey will underpin the AMCs with regards to planning and implementation of
designing, marketing and selling of innovative products.

60
Dr. K. Veeraiah and Dr. A. Kishore Kumar (Jan 2014), conducted a research on
Comparative Performance Analysis of Select Indian Mutual Fund Schemes. This study
analyzes the performance of Indian owned mutual funds and compares their performance.
The performance of these funds was analyzed using a five year NAVs and portfolio
allocation. Findings of the study reveals that, mutual funds out perform naïve investment.
Mutual funds as medium-to-long term investment option are preferred as a suitable
investment option by investors.

C.SrinivasYadav and Hemanth N C (Feb 2014), have studied Performance of Selected

Equity Growth Mutual Funds in India: An Empirical Study during 1stJune 2010 To 31st
May 2013. The study evaluates performance of selected growth equity funds in India,
carried out using portfolio performance evaluation techniques such as Sharpe and
Treynor measure. S&P CNX NIFTY has been taken as the benchmark. The study
conducted with 15 equity growth Schemes(NAV ) were chosen from top 10 AMCs (
based on AUM) for the period 1st June2010 to 31st may 2013(3 years).

VibhaLamba (Feb 2014), has done an analysis of Portfolio Management in India. The
purpose of present study is to analyze the scope and importance of portfolio management
in India. This paper also focuses on the types and steps of portfolio management which a
portfolio manager should take to provide maximum returns and minimum risk to his
clients for their investments.

Mrs.V. Sasikala and Dr. A. Lakshmi (Jan 2014) have studied The Mutual Fund
Performance Between 2008 And 2010: Comparative Analysis. The paper entitled
“comparative analysis of mutual fund performance between 2008 &2010. The paper was
undertaken to know the after meltdown period risks and returns of 2008 top hundred
mutual funds and compare with 2010 top hundred mutual funds published in Business
today. The analysis of alpha, beta, standard deviation, Sharpe ratio and R-squared are
declare high, low, average, above average and below average of risks and return of funds.

61
Sowmiya. G, (Jan 2014), has studied Performance Evaluation of Mutual Funds in India.
The objectives of this are to know the basic concepts and terminologies of the mutual
funds in public limited companies and private limited companies. To analyze
performance and growth of selected mutual funds schemes with their NAV and their
returns. To identify the return variance and to provide suggestions based on the analysis.

62
DATA ANALYSIS, INTERPRETATION
AND PRESENTATION
63
1.What kind of investments you prefer most? Pl tick (√). All applicable

Investment No. of People % of people

Fixed Deposits 19 19%
Insurance 15 15%
Mutual Funds 25 25%
Post Office 19 19%
Shares/Debentures 12 12%
Real Estate 10 10%
TOTAL 100 100%

Investment

Fixed Deposits
Insurance
Mutual Funds
Post Office
Shares/Debentures
Real Estate

Interpretation:

According to above study, 19% of investors prefer to deposit their money in bank FD’s. Whereas
19% of the investors want to invest in postal scheme, 10% invest in Real estate, and 25% of
investors prefer mutual fund.

64
2. While investing your money, which factor you prefer most? Any one

Risk Pattern No. of People % of people

Liquidity 20 20%

Low Risk 40 40%

High Return 22 22%

Company 18%
Reputation 18

TOTAL 100 100%

PREFERENCE OF PEOPLE TO CHOOSE THE

RISK FACTOR

Company Reputation

High Return

PREFERENCE OF PEOPLE TO
Low Risk
CHOOSE THE RISK FACTOR

Liquidity

INTERPRETATION:

According to people, about 40% of investors would like to invest their earnings in lower
risk funds, almost same amount of people will invest in liquidity funds and higher risk funds
and 18% of investors will invest according to the company’s reputation in market.

65
3. More attractive about mutual funds?

Particulars No. of people % of people

Returns 13 13%
Moderate Risk 11 11%
Tax Benefits 20 20%
Hassle Free 10 10%
Past Performance 30 30%
Well Regulated 12 12%
Others 4 4%
TOTAL 100 100%

35

30

25

20

15

10 Attract

Interpretation:-

According to people they attract with past performance of the company if company past
records is good then they interested to invest. After that people attract with tax benefit then
return on investment.

66
4. Percentage of entire investment includes mutual funds?

Groups % of Investments
Below 20% 20
20 to 50% 55
50 to 80% 15
80% above 10

% of Investments

100
90
80
70
60
50 % of Investments
40
30
20
10
0
Below 20% 20 to 50% 50 to 80% 80% above

Interpretation:-

By this we come to know that most of the people use to go for mutual fund as we can see
by the above graph that 55 people from 100 goes for 20%to50% investment in Mutual
Funds

67
5. For Investments in Mutual Fund, which company investors prefer?

% of
Particulars People
HDFC MF 35%
ICICI PRUDENTIAL MF 17%
BIRLA SUNLIFE 12%
RELIANCE MF 27%
Others 9%

BIRLA SUNLIFE 12%

ICICI
PRUDENTIAL MF
17% RELIANCE MF 27%

OTHERS 9%

HDFC MF 35%

INTERPRETATION:-

According to the Investors, 35% of investors prefer to invest in HDFC mutual fund, 27%
of investors prefer Reliance mutual fund whereas Birla share 12% and ICICI by
17%.and 9% investors invest in other mutual funds. I have compared these five fund
house because they are the most known competitors in market.

68
6. When you invest in Mutual Funds which mode of investment will you prefer?

Particulars No. of % of
People people
One Time Investment 32 32%
Systematic Investment Plan (SIP) 68 68%

MODE OF INVESTMENT

ONE TIME INVESTMENT

SIP

Interpretation:

According to study about 68% of people will go for Systematic Investment Plan and
32% people said they will invest their money in One Time Investment.

69
7. How do investors manage his investment portfolio?

Manage by No. of People % of People

OWN 35 35%
FRIEND 5 5%
BANKER 20 20%
AGENT 15 15%
MF HOUSE 25 25%
TOTAL 100 100%

Manage by
100
90
80
70
60
50
40
30
20
10
0
OWN FRIEND BANKER AGENT MF HOUSE

INTERPRETATION:-

According to my survey most no of people manage his investment portfolio by own, 35

people out of 100 manage his portfolio by own and 20 & 25 people manage with the help
of bankers and MF house respectively.

70
8. Among the huge number of people going for mutual fund, in which kind of
fund they normally invest?

Age Equity Debt Balance Others

Group Fund Fund Fund
18 to 30 52% 18% 20% 10%
30 to 40 40% 30% 16% 14%
40 to 50 22% 40% 20% 18%
50 8%
above 22% 50% 20%

120

100

80

Balance Fund
60
Debt Fund
Equity Fund
40

20

0
18 to 30 30 to 40 40 to 50 50 above

INTERPRETATION:-

In the city like Kalyan in between the age group 18-30, 52% investor invested in equity
oriented, and only 18% people invest in debt fund. But group of people more than 50 year
50% investor invest in debt fund and only 22% people invest in equity fund. It means
younger people attract with equity fund and old man attract with debt fund. But in
balanced fund every group is equally interested to invest.

71
9. How would you like to receive the returns every year?
% of
Types of Returns No. of People
People
Dividend Payout 40 40%
Dividend Re-investment 30 30%
Growth in NAV 30 30%
TOTAL 100 100%

Dividend Payout
Dividend Re-investment
Growth in NAV

INTERPRETATION:-

According to above study, 40% of people will like to get their returns in forms of
Dividend Payout, 30% of people would like to reinvest their interest on investment
in another investment and 30% people go for growth in NAV.

72
10. What financial goals do you plan to achieve through the money
you will get from Mutual Funds?

Financial Goal No. of People % of People

Marriage 7 7%
Child Education 25 25%
Tax Savings 28 28%
Retirement 30 30%
Any Other 10 10%
TOTAL 100 100%

30

25

20

15 Series 1

10

0
Marriage Child Tax Savings Retirement Any Other
Education

Interpretation:

According to study, about 30% people said they are investing for retirement support,
28% people will do invest for tax saving and 25% people said they do investment for
their children education.

73
CONCLUSION AND SUGGESTIONS

74
 CHAPTER 5 : CONCLUSION AND SUGGESTIONS

5.1 FINDINGS

As far as analysis is concerned, we found out that the HDFC Growth Fund was among
the best performers fund. Although all the funds are affected by the global
meltdown,(recession) still HDFC Growth Fund has better performed comparing to other
funds for its systematic and unsystematic risk. It offers advantages of diversification,
market timing, and selectivity. In the comparison of sample of funds, HDFC Growth fund
is found highly diversified fund and because of high diversification, it has reduced the
total risk of portfolio.

Further, other funds were found very poor in diversification, market timing, and
selectivity. Although HDFC Top 200 Fund and Equity Fund performed better in terms of
returns but these suffered by the systematic risk (market volatility) and lack of
diversification. For the further clarification, we too studied the portfolio of HDFC
Growth fund.

One of the findings that I came across is that generally, a good model of asset classes is
the one that can explain a large portion of the variance of returns on the assets and there
were some stocks in the fund portfolio, which were not aligned with strategy of the fund
portfolio.

75
The optimal situation involves the selection that proceeds from sensible assumptions, is
carefully and logically constructed, and is broadly consistent with the data
whilecollecting the stocks for the portfolio. The portfolio was showing constructiveoutco
me in long time horizon and the results can be improved by making the minor changes in
fund portfolio.

Hence, the portfolio theory teaches us that investment choices are made on the basis of
expected risk and returns and these expectations can be satisfied by having right mix of
assets.

76
 5.2 SUGGESTION

Considering the above analysis, it can be noted that the three growth oriented mutual
funds(HDFC Equity Fund, HDFC Growth Fund and HDFC Top 200 fund) have
performed better than their benchmark indicators. Other funds such as HDFC Capital
Builder Fund, HDFC Long term Advantage Fund did not perform well even some
performed negatively. Though HDFC Equity Fund, HDFC Growth Fund and HDFC Top
200 fund have performed better than the benchmark of their systematic risk (volatility)
but with respect to total risk the fund have not outperformed the Market Index. Growth
oriented mutual funds are expected to offer the advantages of Diversification, Market
timing and Selectivity. In the sample, HDFC Equity Fund, HDFC Growth Fund and
HDFC Top 200 fund is found to be diversified fund and because of high diversification, it
has reduced total risk of the portfolio. Whereas, others are low diversified and because of
low diversification their total risk is found to be very high. Further, the fund managers of
these under performing funds are found to be poor in terms of their ability of market
timing and selectivity.

➢
The fund manager of HDFC Equity Fund, HDFC Growth Fund and HDFC Top 200fund
can improve the returns to the investors by increasing the systematic risk of the portfolio,
which in turn can be done by identifying highly volatile shares.Alternativel y, these can
take advantage by diversification, which goes to reduce the risk if the same return is
given to the investor at a reduced risk level, thecompensation for risk might seem
adequate. The fund manager of HDFC Capital Builder Fund, HDFC Long term
Advantage Fund can earn better returns by adopting the marketing timing strategy and
selecting the under-priced securities.

➢
The fund manager can divide all securities into several asset classes and tries to construct
an efficient portfolio based on expected returns, risk, and correlations of indexes

77
 representing these asset classes. The investment should be done in the benchmark indexes
to get an “efficient” portfolio in such a way that no other combination of these indexes
would result in a portfolio with a higher return for a given level of risk. It should be
emphasized, however, that this is not a fully efficient portfolio because information about
correlations among individual securities within an index and across the indexes is lost in
the transition from individual securities to the benchmarks that represent them.

➢
These measures are more useful to investors who are putting their money into one
diversified fund and are able to use leverage or invest in the risk-free asset. When the
investor is investing in the different funds, the fund’s marginal contribution to the
portfolio’s risk and return is more important than its individual security characteristics.
To construct an efficient portfolio, an investor must take account of the correlations
among the being considered.

It is not advisable to apply just procedure or approach for all situations at least when it
comes to investments though the used measures are highly reliable in the studies done on
similar veins. Even at this juncture it would still be recommended that instead of going
ahead only on the basis of risk and return, other indicators like new projects, sector
impact, individual sentiments about companies etc. besides ‘common sense and intuition’
may also be looked into.

78
 5.3 CONCLUSION

The ride through these 54 years is not been smooth. Investors opinion is still divided
while some are for the mutual funds and others are against it.

Mutual Funds (MF) have become one of the most attractive ways for the average person
to invest his money. It is said that Bank investment is the first priority of people to invest
their savings and the second place is for investment in Mutual Funds and other avenues.
A mutual fund pools resources from thousands of investors and diversifies its investment
into many different holdings such as stocks, bonds or Government Securities in order to
provide high relative safety and returns. Also generate leads of the prospective investors
in Mutual Funds for the Asset Management Company (AMC)

There are many improvements pending the field and it has to happen as soon as
possible so as to call the MF industry as an Organized and well-developed sector.

Mutual fund has become one of the important sources for investing. It is quite likely that
a more efficient portfolio can be constructed directly from funds. Thus, the two-step
process of choosing an asset allocation based on the information about benchmark
indexes and then choosing funds in each category may be one of the best realistically
attainable approaches. To use this approach to portfolio selection effectively, investors
would benefit from estimates of future asset returns, risks and correlations, as well as
from fund management’s disclosure of future asset exposures and appropriate
benchmarks. It has been a great opportunity for me to get a first experience of Mutual
Funds. My study is to get the feel of how the work is carried out in relation to fund’s
portfolio aspect. I got an opportunity in relation to the documentation and also the
portfolio analysis that have been carrying out in facilitating the investor and the fund
manager.

79
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 Webliography

http://www.hdfcfund.com

www.mutualfundindia.com

www.mututalfunds.com

www.moneycontrol.com

www.rbi.org.in

www.capitalmarket.com

www.shamdham.org

www.cybersurat.com

www.amfi.com

www.bseindia.com

www.sebi.gov.in

www.nseindia.com

www.valueresearch.com

82
83
 ANNEXURE

SECTION-I PERSONAL DATA

Please fill up the questionnaire according to the questions asked. (Just put on a tick mark [√]
wherever needed)

Name-_______________________________________________________

1. SEX:
Male
Fem
ale

2. Marital Status:
Married
Unmarried
Other

3. Age:
  <20-30>
  <30-40
  <40-50
 <50-above

4. Educational Qualification:
Under
GraduateGra
duate
Post-
GraduatePr
ofessionalO
ther

5. Occupation:
  Service (Govt.)
  Service (Pvt.)
  Business
  Self-employed
 Retired

6. Annual Income:
Below 1
lakh1–
3
lakh3–
5
lakhAbove
5 lakh

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 SECTION-II MUTUAL FUNDS RELATED INFORMATION

7. What kind of investments you prefer most? Pl tick (√). All applicable

  Fixed Deposits
  
Insurance
  
Mutual Funds
  
Post Office
  
Shares/Debentures
 
Real Estate


8. While investing your money, which factor you prefer most? Any one
 
 Liquidity
 
 Low Risk
 
 High returns
 
Company Reputation

9. More attractive about mutual funds?


Returns
 
 Moderate Risk
 
 Tax Benefits
 
 Hassle Free
 
 Past Performance
 
 Well Regulated
 
No Idea

10. Percentage of entire investment includes mutual funds?

 
 Below 20%
 
 20 to 50%
 
 50 to 80%
 
80% above

85
 11. For Investments in Mutual Fund, which company investors prefer?

HDFC MF
 
 ABN AMRO MF
 
 ICICI PRUDENTIAL MF
 
 BIRLA SUNLIFE
 
RELIANCE MF

12. When you invest in Mutual Funds which mode of investment will you prefer?

One Time Investment

Systematic Investment Plan

13. How do investors manage his investment portfolio?

 
 Solely of my own
 
 On advise of a friend
 
 On advise of a distributor/agent
 
 On advise of your banker
 
On advise of Mutual Fund House people

14. Among the huge number of people going for mutual fund, in which kind of fund
they normally invest?
  Equity Oriented
  
Debt Oriented
 
Balance Oriented

86
 15. How would you like to receive the returns every year?
  Dividend Payout
  
Dividend Re-investment
 
Growth in NAV

16. What financial goals do you plan to achieve through the money you will get from
Mutual Funds?

  Marriage
  
Child Education
  
Tax Savings
  
Retirement
 
Any Other

87