“RISK RETURN ANALYSIS AND COMPARATIVE

STUDY OF MUTUAL FUNDS”

FOR HDFC Asset Management Company Ltd.
A Report on Project work In MASTER OF BUSINESS ADMINISTRATION (MBA) By Somesh Be
here
GUIDED BY: BY: PROF.GARGI NAIDU HOD ACADEMICS VIM BHOPAL
SUBMITTED
SOMESH BEHERE MBA IV Semester BHOPAL
VIDYASAGAR INSTITUTE OF MANAGEMENT BARKATULLAH UNIVERSITY BHOPAL(M.P.) SESSION (
2008-2010)
BONOFIDE CERTIFICATE
This is to certify that the Report on Project Work titled “RISK RETURN ANALYSIS AN
D COMPARATIVE STUDY OF MUTUAL FUNDS” for HDFC Asset Management Company Ltd. is a b
onafide record of the work done by
Somesh Behere
studying in Master of Business Administration in Vidhyasagar Institute of Manage
ment ,Bhopal during the year 2008-10.
Project Viva-Voce held on.....................
Internal examiner
External examiner
EXECUTIVE SUMMARY
The performance evaluation of mutual fund is a vital matter of concern to the fu
nd managers, investors, and researchers alike. The core competence of the compan
y is to meet objectives and the needs of the investors and to provide optimum re
turn for their risk. This study tries to find out the risk and return allied wit
h the mutual funds. This project paper is segmented into three sections to explo
re the link between conventional subjective and statistical approach of Mutual F
und analysis. To start with, the first section deals with the introductory part
of the paper by giving an overview of the Mutual fund industry and company profi
le. This section also talks about the theory of portfolio analysis and the diffe
rent measures of risk and return used for the comparison. The second section det
ails on the need, objective, and the limitations of the study. It also discusses
about the sources and the period for the data collection. It also deals with th
e data interpretation and analysis part wherein all the key measures related to
risk and return are done with the interpretation of the results. In the third se
ction, an attempt is made to analyse and compare the performance of the equity m
utual fund. For this purpose β-value, standard deviation, and risk adjusted perfor
mance measures such as Sharpe ratio, Treynor measure, Jenson Alpha, and Fema mea
sure have een used. The portfolio analysis of the selected fund has een done
y the measure return for the holding period. At the end, it illustrates the sugg
estions and findings ased on the analysis done in the previous sections and fin
ally it deals with conclusion part.
ACKNOWLEDGEMENT
I take this opportunity to express my deep sense of gratitude to all those who h
ave contri uted significantly y sharing their knowledge and experience in the c
ompletion of this project work. I am greatly o liged to, for providing me with t
he right kind of opportunity and facilities to complete this venture. My first w
ord of gratitude is due to Mr.Sidhartha Chattergee – Branch Manager, HDFC AMC,Allh
a ad, my corporate guide, for his kind help and support and his valua le guidanc
e throughout my project. I am thankful to him for providing me with necessary in
sights and helping me out at every single step. I am also thankful to Prof Ashok
Diwedi Executive Trainee, the former student of VIDHYASAGAR INSTITUTE OF MANAGE
MENT, Bhopal for her constant valua le assistance and consultancy. I also thank
Mr.Ankit Kumr, Unit Manager for his kind words of encouragement. A ove all, I ex
press my words of gratitude to HDFC AMC, Allaha ad Branch for proving me with al
l the knowledge resources and ena ling me to pass AMFI-MTUTUAL FUND (ADVISOR) MO
DULE; NSE’s CERTIFICATION IN FINANCIAL MARKETS (NCFM) with 74.5 percentages. I am
extremely thankful to Miss. Gargi Naidu – my internal faculty guide under whose a
le guidance this project work was carried out. I thank her for her continuous su
pport and mentoring during the tenure of the project. Finally, I would also like
to thank all my dear friends for their cooperation, advice and encouragement du
ring the long and arduous task of carrying out the project and preparing this re
port.
PREFACE
This is the age of technical up gradation. Nothing remains same for a long perio
d every thing change with a certain span of time. So it is must for every organi
zation to put a irds eye view on it’s over all functioning. This report was prepa
ring during practical training of Master of usiness administration (M.B.A.) fro
m Vidyasagar institute of management Bhopal (M.P.) .The student of M.B.A.essenti
ally required a practical training of 4to6 weeks in any organization. It gives a
n opportunity to the student to test their acquired knowledge through practical
experiences. The o jective of my study was Risk Return Analysis And Comparative
Study Of Mutual Funds “HDFC Asset Management Company Ltd.” I however present this re
port In all my modesty to the readers with a faith that it shall serve the cause
s of su ject. .
PLACE-……….. DATE…………..
SOMESH BEHERE
TABLE OF CONTENTS Part-I Executive Summary A. Mutual Fund Overview 1.1 Mutual Fu
nd an Investment Platform
1.2 Advantages of Mutual Fund
Page No. 1-37 Iii 1-19 1-2 3 4 4-8 8 9-11 12 12-19 20-37 20-21 22 22-25 26 26-28
28-29 29-37 38-40
1.3 Disadvantage of Investing Through Mutual Funds 1.4 Categories of Mutual Fund
1.5 Investment Strategies 1.6 Organisation of Mutual Fund 1.7 Distri ution Chan
nels 1.8 HDFC AMC Company Overview B. Measuring and Evaluating Mutual Funds Perf
ormance 1.2.1 1.2.2 1.2.3 Purpose of Measuring and Evaluating Financial Planning
for Investors referring to Mutual Funds Why Has It Become One Of The Largest Fi
nancial Instruments?
1.2.4 Evaluating Portfolio Performance 1.2.5 How to Reduce Risk While Investing
1.2.6 1.2.7 Part-II Research Methodology 2.1 Need For the Study 2.2 O jective of
the Study 2.3 Limitations of the Study 2.4 Data Collection Part-III Case Analys
is 3.1 Data Interpretation A Study of Portfolio Analysis from The Point Of Fund
Manager Measures of Risk and Return
38-39 39 40 40 41-102
41-87
3.2 Analysis of the o servation 3.3 Findings 3.4 Recommendations 3.5 Conclusion
References
87-97 98 99-100 101 102
PART-I
MUTUAL FUND OVERVIEW
MUTUAL FUND AN INVESTMENT PLATFORM
Mutual fund is an investment company that pools money from small investors and i
nvests in a variety of securities, such as stocks, onds and money market instru
ments. Most open-end Mutual funds stand ready to uy ack (redeem) its shares at
their current net asset value, which depends on the total market value of the f
und
s investment portfolio at the time of redemption. Most open-end Mutual funds
continuously offer new shares to
investors. It is also known as an open-end investment company, to differentiate
it from a closed-end investment company. Mutual funds invest pooled cash of many
investors to meet the fund
s stated investment o jective. Mutual funds stand re
ady to sell and redeem their shares at any time at the fund’s current net asset va
lue: total fund assets divided y shares outstanding.
MUTUAL FUND SHEMES
PROFIT/LOSS FORM PORTFOLIO OF INVESTMENT
PROFIT/LOSS FROM INDIVIDUAL
Figure: 1.1
In Simple Words, Mutual fund is a mechanism for pooling the resources y issuing
units to the investors and investing funds in securities in accordance with o j
ectives as disclosed in offer document. Investments in securities are spread acr
oss a wide cross-section of industries and sectors and thus the risk is reduced.
Diversification reduces the risk ecause not all stocks may move in the same di
rection in the same proportion at the same time. Mutual fund issues units t o th
e investors in accordance with quantum of money invested y them. Investors of M
utual fund are known as unit holders. The profits or losses are shared y the in
vestors in proportion to their investments. The Mutual funds normally come out w
ith a num er of schemes with different investment o jectives which are launched
from time to time.
MARKET (FLUCTUATIONS)
INVEST THEIR MONEY
INVEST IN VARIETY OF STOCKS/BONDS
INVESTOR
In India, A Mutual fund is required to e registered with Securities and Exchang
e Boa rd of India (SEBI) which regulates securities markets efore it can collec
t funds from the pu lic.
In Short , a Mutual fund is a common pool of money in to which investors with co
mmon investment o jective place their contri utions that are to e invested in a
ccordance with the state d investment o jective of the scheme. The investment ma
nager would invest the money collected from the investor in to assets that are d
efined/ permitted y the stated o jective of the scheme. For example, a n equity
fund would invest equity and equity related instruments and a de t fund would i
nvest in onds, de entures, gilts etc. Mutual fund is a suita le investment for
the common ma n a s it offers an Oporto unity to invest in a diversified, profes
sionally managed asket of securities at a relatively low cost.
1.2 ADVANTAGES OF MUTUAL FUND
Ta le:1.1 S. No. Advant age Portfoli o Diversif ication Professi onal Manage men
t
Particulars Mutual Funds invest in a well-diversified portfolio of securities wh
ich ena les investor to hold a diversified investment portfolio (whether the amo
unt of investment is ig or small). Fund manager undergoes through various resea
rch works and has etter investment management skills which ensure higher return
s to the investor than what he can manage on his own.
1.
2.
3.
Less Risk Low Transac tion Costs Liquidit y Choice of Scheme s Transp arency
Investors acquire a diversified portfolio of securities even with a small invest
ment in a Mutual Fund. The risk in a diversified portfolio is lesser than invest
ing in merely 2 or 3 securities. Due to the economies of scale ( enefits of larg
er volumes), mutual funds pay lesser transaction costs. These enefits are passe
d on to the investors. An investor may not e a le to sell some of the shares he
ld y him very easily and quickly, whereas units of a mutual fund are far more l
iquid. Mutual funds provide investors with various schemes with different invest
ment o jectives. Investors have the option of investing in a scheme having a cor
relation etween its investment o jectives and their own financial goals. These
schemes further have different plans/options Funds provide investors with update
d information pertaining to the markets and the schemes. All material facts are
disclosed to investors as required y the regulator. Investors also enefit from
the convenience and flexi ility offered y Mutual Funds. Investors can switch t
heir holdings from a de t scheme to an equity scheme and vice-versa. Option of s
ystematic (at regular intervals) investment and withdrawal is also offered to th
e investors in most open-end schemes. Mutual Fund industry is part of a well-reg
ulated investment environment where the interests of the investors are protected
y the regulator. All funds are registered with SEBI and complete transparency
is forced.
4.
5.
6.
7.
8.
Flexi ili ty
9.
Safety
1.3 DISADVANTAGE OF INVESTING THROUGH MUTUAL FUNDS
Ta le:1.2 S. No. Disadva ntage Costs Control Not in the Hands of an Investor Par
ticulars
1.
Investor has to pay investment management fees and fund distri ution costs as a
percentage of the value of his investments (as long as he holds the units), irre
spective of the performance of the fund.
2.
No Custom ized Portfoli os Difficult y in Selectin g a Suita le Fund Scheme
The portfolio of securities in which a fund invests is a decision taken y the f
und manager. Investors have no right to interfere in the decision making process
of a fund manager, which some investors find as a constraint in achieving their
financial o jectives.
3.
Many investors find it difficult to select one option from the plethora of funds
/schemes/plans availa le. For this, they may have to take advice from financial
planners in order to invest in the right fund to achieve their o jectives.
1.4 CATEGORIES OF MUTUAL FUND
BASED ON THEIR STURCTURE
OPEN ENDED FUNDS
CLOSE-ENDED FUNDS
Figure:1.2
2. BASED ON INVESTMENT OBJECTIVE
EQUITY FUNDS
BALANCED FUNDS
DEBT FUNDS
INDEX FUNDS DEVIDEND YEILD EQUITY DIVERSIFIED THEMANTIC FUND SECTOR FUND ELSS
LEQUID FUNDS DEBT ORIENTED EQUITY ORIENTED GUILT FUNDS INCOME FUNDS FMPS FUNDS F
LOATING RATE ARBITAGE FUNDS
Mutual funds can e classified as follow: Based on their structure:
Open-ended funds: Investors can uy and sell the units from the fund, at any poi
nt of
time.
Close-ended funds: These funds raise money from investors only once. Therefore,
after the offer period, fresh investments cannot e made into the fund. If the f
und is listed on a stocks exchange, the units can e traded like stocks (E.g., M
organ Stanley Growth Fund). Recently, most of the New Fund Offers of close-ended
funds provided liquidity window on a periodic asis such as monthly or weekly.
Redemption of units can e made during specified intervals. Therefore, such fund
s have relatively low liquidity. Based on their investment o jective:
Equity funds: These funds invest in equities and equity related instruments. Wit
h
fluctuating share prices, such funds show volatile performance, even losses. How
ever, short term fluctuations in the market, generally smoothens out in the long
term, there y offering higher returns at relatively lower volatility. At the sa
me time, such funds can yield great capital appreciation as, historically, equit
ies have outperformed
all asset classes in the long term. Hence, investment in equity funds should e
considered for a period of at least 3-5 years. It can e further classified as:
1. Index funds- In this case a key stock market index, like BSE Sensex or Nifty
is tracked. Their portfolio mirrors the enchmark index in terms of oth composi
tion and individual stock weightages. 2. Equity diversified funds- 100% of the c
apital is invested in equities spreading across different sectors and stocks. 3.
Dividend yield funds- it is similar to the equity-diversified funds except that
they invest in companies offering high dividend yields. 4. Thematic funds- Inve
st 100% of the assets in sectors which are related through some theme. e.g. -An
infrastructure fund invests in power, construction, cements sectors etc. 5. Sect
or funds- Invest 100% of the capital in a specific sector. e.g. - A anking sect
or fund will invest in anking stocks. 6. ELSS- Equity Linked Saving Scheme prov
ides tax enefit to the investors. Balanced fund: Their investment portfolio inc
ludes oth de t and equity. As a result, on the risk-return ladder, they fall e
tween equity and de t funds. Balanced funds are the ideal mutual funds vehicle f
or investors who prefer spreading their risk across various instruments. Followi
ng are alanced funds classes:
2 3
De t-oriented funds -Investment elow 65% in equities. Equity-oriented funds -In
vest at least 65% in equities, remaining in de t.
De t fund: They invest only in de t instruments, and are a good option for inves
tors
averse to idea of taking risk associated with equities. Therefore, they invest e
xclusively in fixed-income instruments like onds, de entures, Government of Ind
ia securities; and money market instruments such as certificates of deposit (CD)
, commercial paper (CP) and call money. Put your money into any of these de t fu
nds depending on your investment horizon and needs.
1.
Liquid funds- These funds invest 100% in money market instruments, a large porti
on eing invested in call money market.
2. Gilt funds ST- They invest 100% of their portfolio in government securities o
f and
T- ills.
3.
Floating rate funds - Invest in short-term de t papers. Floaters invest in de t
instruments, which have varia le coupon rate.
4. Ar itrage fund- They generate income through ar itrage opportunities due to m
iss-
pricing etween cash market and derivatives market. Funds are allocated to equit
ies, derivatives and money markets. Higher proportion (around 75%) is put in mon
ey markets, in the a sence of ar itrage opportunities.
5. Gilt funds LT- They invest 100% of their portfolio in long-term government
securities.
6. Income funds LT- Typically, such funds invest a major portion of the portfoli
o in
long-term de t papers.
7. MIPs- Monthly Income Plans have an exposure of 70%-90% to de t and an exposur
e
of 10%-30% to equities.
8. FMPs- fixed monthly plans invest in de t papers whose maturity is in line wit
h that
of the fund.
How are funds different in terms of their risk profile:
Ta le:1.3
Equity Funds De t funds Liquid and
High level of return, ut has a high level of risk too Returns comparatively les
s risky than equity funds Money Provide sta le ut low level of return
Market funds
INVESTMENT STRATEGIES
1. Systematic Investment Plan: Under this, a fixed sum is invested each month on
a fixed date of a month. Payment is made through post-dated cheques or direct d
e it facilities. The investor gets fewer units when the NAV is high and more uni
ts when the NAV is low. This is called as the enefit of Rupee Cost Averaging (R
CA) 2. Systematic Transfer Plan: Under this, an investor invest in de t-oriented
fund and give instructions to transfer a fixed sum, at a fixed interval, to an
equity scheme of the same mutual fund. 3. Systematic Withdrawal Plan: if someone
wishes to withdraw from a mutual fund then he can withdraw a fixed amount each
month.
1.6. ORGANISATION OF MUTUAL FUND:
Figure:1.4
THE STRUCTURE CONSISTS OF:
SPONSOR Sponsor is the person who acting alone or in com ination with another o
dy corporate esta lishes a mutual fund. Sponsor must contri ute at least 40% of
the net worth of the Investment managed and meet the eligi ility criteria prescr
i ed under the Securities and Exchange Board of India (Mutual Fund) Regulations,
1996. The sponsor is not responsi le or lia le for any loss or shortfall result
ing from the operation of the Schemes eyond the initial contri ution made y it
towards setting up of the Mutual Fund. TRUST The Mutual Fund is constituted as
a trust in accordance with the provisions of the Indian Trusts Act, 1882 y the
Sponsor. The trust deed is registered under the Indian Registration Act, 1908.
TRUSTEE Trustee is usually a company (corporate ody) or a Board of Trustees ( o
dy of individuals). The main responsi ility of the Trustee is to safeguard the i
nterest of the unit holders and ensure that the AMC functions in the interest of
investors and in accordance with the Securities and Exchange Board of India (Mu
tual Funds) Regulations, 1996, the provisions of the Trust Deed and the Offer Do
cuments of the respective Schemes. At least 2/3rd directors of the Trustee are i
ndependent directors who are not associated with the Sponsor in any manner. ASSE
T MANAGEMENT COMPANY (AMC) The AMC is appointed y the Trustee as the Investment
Manager of the Mutual Fund. The AMC is required to e approved y the Securitie
s and Exchange Board of India (SEBI) to act as an asset management company of th
e Mutual Fund. At least 50% of the directors of the AMC are independent director
s who are not associated with the Sponsor in any manner. The AMC must have a net
worth of at least 10 cores at all times. REGISTRAR AND TRANSFER AGENT
The AMC if so authorized y the Trust Deed appoints the Registrar and Transfer A
gent to the Mutual Fund. The Registrar processes the application form, redemptio
n requests and dispatches account statements to the unit holders. The Registrar
and Transfer agent also handles communications with investors and updates invest
or records.
ASSET UNDER MANAGEMENT:
Ta le1.4
ASSET UNDER MANAGEMENT OF TOP AMC,S as on Jun 30, 2009 Mutual Fund Name No. of C
orpus (Rs.Crores)
schemes Reliance Mutual Fund HDFC Mutual Fund ICICI Prudential Mutual Fund UTI M
utual Fund Birla Sun Life Mutual Fund SBI Mutual Fund LIC Mutual Fund Kotak Mahi
ndra Mutual Fund Franklin Templeton Mutual Fund IDFC Mutual Fund Tata Mutual Fun
d 263 202 325 207 283 130 70 124 191 164 175 108,332.36 78,197.90 70,169.46 67,9
78.19 56,282.87 34,061.04 32,414.92 30,833.02 25,472.85 21,676.29 21,222.81
The graph indicates the growth of assets over the years.
Figure:1.5
1.7 DISTRIBUTION CHANNELS:
Mutual funds posses a very strong distri ution channel so that the ultimate cust
omers doesn’t face any difficulty in the final procurement. The various parties in
volved in distri ution of mutual funds are:
1. Direct marketing y the AMCs: the forms could e o tained from the AMCs direc
tly. The investors can approach to the AMCs for the forms. some of the top AMCs
of India are; Reliance ,Birla Sunlife, Tata, SBI magnum, Kotak Mahindra, HDFC, S
undaram, ICICI, Mirae Assets, Canara Ro eco, Lotus India, LIC, UTI etc. whereas
foreign AMCs include: Standard Chartered, Franklin Templeton, Fidelity, JP Morga
n, HSBC, DSP Merill Lynch, etc.
2. Broker/ su roker arrangements: the AMCs can simultaneously go for roker/su
roker to popularize their funds. AMCs can enjoy the advantage of large network
of these rokers and su rokers. 3. Individual agents, Banks, NBFC: investors
can procure the funds through individual agents, independent rokers, anks and
several non- anking financial corporations too, whichever he finds convenient f
or him.
1.8 HDFC AMC COMPANY OVERVIEW
HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC) AMC was incorporated under the Compa
nies Act, 1956, on Decem er 10, 1999, and was approved to act as an AMC for the
Mutual Fund y SEBI on July 30, 2000.
The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T. Par
ekh Marg, 169, Back ay Reclamation, Church gate, Mum ai - 400 020. In terms of
the Investment Management Agreement, the Trustee has appointed HDFC Asset Manage
ment Company Limited to manage the Mutual Fund
As per the terms of the Investment Management Agreement, the AMC will conduct th
e operations of the Mutual Fund and manage assets of the schemes, including the
schemes launched from time to time.
The present share holding pattern of the AMC is as follows:
Ta le:1.5
Particulars
% of the paid up capital
Housing Development Finance Corporation Limited 50.10 Standard Life Investments
Limited 49.90
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, followi
ng a review of its overall strategy, had decided to divest its Asset Management
usiness in India. The AMC had entered into an agreement with ZIC to acquire the
said usiness, su ject to necessary regulatory approvals.
On o taining the regulatory approvals, the Schemes of Zurich India Mutual Fund h
as now migrated to HDFC Mutual Fund on June 19, 2003.
The AMC is also providing portfolio management / advisory services and such acti
vities are not in conflict with the activities of the Mutual Fund. The AMC has r
enewed its registration from SEBI vide Registration No. - PM / INP000000506 date
d Decem er 22, 2000 to act as a Portfolio Manager under the SEBI (Portfolio Mana
gers) Regulations, 1993. The Certificate of Registration is valid from January 1
, 2004 to Decem er 31, 2006.
Board of Directors
The Board of Directors of the HDFC Asset Management Company Limited (AMC) consis
ts of the following eminent persons.
Ta le:1.6
Mr. Deepak S. Parekh Mr. N. Keith Skeoch Mr. Keki M. Mistry Mr. James Aird Mr. P
. M. Thampi Mr. Humayun Dhanrajgir Dr. Deepak B. Phatak Mr. Hoshang S. Billimori
a Mr. Rajeshwar Raj Bajaaj Mr. Vijay Merchant Ms. Renu S. Karnad
Chairman of the oard CEO of Standard Life Investments Ltd. Associate director I
nvestment director Independent director Independent director Independent directo
r Independent director Independent director Independent director Joint managing
director
Mr. Milind Barve
Managing director
Mr. Deepak Parekh, the Chairman of the Board, is associated with HDFC Ltd. in hi
s capacity as its Executive Chairman. Mr. Parekh joined HDFC Ltd. in a senior ma
nagement position in 1978. He was inducted as Wholetime Director of HDFC Ltd. in
1985 and was appointed as the Executive Chairman in 1993.
Mr. N. Keith Skeoch is associated with Standard Life Investments Limited as its
Chief Executive and is responsi le for all company usiness and investment opera
tions within Standard Life Investments Limited.
Mr. Keki M. Mistry is an associate director on the Board. He is the Vice-Chairma
n & Managing Director of Housing Development Finance Corporation Limited (HDFC L
td.) He is with HDFC Ltd. since 1981 and was appointed as the Executive Director
of HDFC Ltd. in 1993. He was appointed as the Deputy Managing Director in 1999,
Managing Director in 2000 and Vice Chairman & Managing Director in 2007. SPONSO
RS HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC): HDFC was incorporated
in 1977 as the first specialised housing finance institution in India. HDFC pro
vides financial assistance to individuals, corporate and developers for the purc
hase or construction of residential housing. It also provides property related s
ervices (e.g. property identification, sales services and valuation), training a
nd consultancy. Of these activities, housing finance remains the dominant activi
ty. HDFC currently has a client ase of over 8, 00,000 orrowers, 12, 00,000 dep
ositors, 92,000 shareholders and 50,000 deposit agents. HDFC raises funds from i
nternational agencies such as the World Bank, IFC (Washington), USAID, CDC, ADB
and KFW, domestic term loans from anks and insurance companies, onds and depos
its. HDFC has received the highest rating for its onds and deposits program for
the ninth year in succession. HDFC Standard Life Insurance Company Limited, pro
moted y HDFC was the first life insurance company in
the private sector to e granted a Certificate of Registration (on Octo er 23, 2
000) y the Insurance Regulatory and Development Authority to transact life insu
rance usiness in India. HDFC is India
s premier housing finance company and enj
oys an impecca le track record in India as well as in international markets. Sin
ce its inception in 1977, the Corporation has maintained a consistent and health
y growth in its operations to remain the market leader in mortgages. Its outstan
ding loan portfolio covers well over a million dwelling units. HDFC has develope
d significant expertise in retail mortgage loans to different market segments an
d also has a large corporate client ase for its housing related credit faciliti
es. With its experience in the financial markets, a strong market reputation, la
rge shareholder ase and unique consumer franchise, HDFC was ideally positioned
to promote a ank in the Indian environment. STANDARD LIFE INVESTMENTS LIMITED T
he Standard Life Assurance Company was esta lished in 1825 and has considera le
experience in glo al financial markets. In 1998, Standard Life Investments Limit
ed ecame the dedicated investment management company of the Standard Life Group
and is owned 100% y The Standard Life Assurance Company. With glo al assets un
der management of approximately US$186.45 illion as at March 31, 2005, Standard
Life Investments Limited is one of the world
s major investment companies and i
s responsi le for investing money on ehalf of five million retail and instituti
onal clients worldwide. With its headquarters in Edin urgh, Standard Life Invest
ments Limited has an extensive and developing glo al presence with operations in
the United Kingdom, Ireland, Canada, USA, China, Korea and Hong Kong. In order
to meet the different needs and risk profiles of its clients, Standard Life Inve
stments Limited manages a diverse portfolio covering all of the major markets wo
rld-wide, which includes a range of private and pu lic equities, government and
company onds, property investments and various derivative instruments. The comp
any
s current holdings in UK equities account for approximately 2% of the market
capitalization of the London Stock Exchange.
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 Cor
e & Satellite Fund HDFC Premier Multi-Cap Fund HDFC Long Term Equity Fund HDFC M
id-Cap Opportunity Fund Balanced Funds HDFC Children
s Gift Fund Investment Plan
HDFC Children
s Gift Fund Savings Plan HDFC Balanced Fund HDFC Prudence Fund De
t Funds HDFC Income Fund HDFC Liquid Fund HDFC Gilt Fund Short Term Plan HDFC G
ilt Fund Long Term Plan HDFC Short Term Plan HDFC Floating Rate Income Fund Shor
t Term Plan HDFC Floating Rate Income Fund Long Term Plan HDFC Liquid Fund - PRE
MIUM PLAN HDFC Liquid Fund - PREMIUM PLUS PLAN
HDFC Short Term Plan - PREMIUM PLAN HDFC Short Term Plan - PREMIUM PLUS PLAN HDF
C 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 - Savin
gs Plan HDFC Sovereign Gilt Fund - Investment Plan HDFC Sovereign Gilt Fund - Pr
ovident Plan HDFC Cash Management Fund - Savings Plan HDFC Cash Management Fund
- Call Plan HDFCMF Monthly Income Plan - Short Term Plan HDFCMF Monthly Income P
lan - Long Term Plan HDFC Cash Management Fund - Savings Plus Plan HDFC Multiple
Yield Fund HDFC Multiple Yield Fund Plan 2005
ACHIEVEMENT AND AWARDS CNBC - TV 18 - CRISIL Mutual Fund of the Year Awards 2008
: HDFC Prudence Fund was the only scheme that won the CNBC - TV 18 - CRISIL Mut
ual Fund of the Year Award 2008 in the Most Consistent Balanced Fund under CRISI
L ~ CPR for the calendar year 2007 (from amongst 3 schemes). HDFC Cash Managemen
t Fund - Savings Plan was the only scheme that won the CNBC TV 18 - CRISIL Mutua
l Fund of the Year Award 2008 in the Most Consistent Liquid Fund under CRISIL ~
CPR for the calendar year 2007 (from amongst 5 schemes). HDFC Cash Management Fu
nd - Savings Plan was the only scheme that won the CNBC -
TV 18 - CRISIL Mutual Fund of the Year Award 2008 in the Liquid Scheme – Retail Ca
tegory for the calendar year 2007 (from amongst 19 schemes).
Lipper Fund Awards 2008: HDFC Equity Fund - Growth has een awarded the
Best Fu
nd over Ten Years
in the
Equity India Category
at the Lipper Fund Awards 2008
(form amongst 23 schemes). It was awarded the Best Fund over ten years in 2006
and 2007 as well. 2008 makes it three in a row. Lipper Fund Awards 2009 : HDFC E
quity Fund - Growth has een awarded the
Best Fund over Ten Years
in the
Equi
ty India Category
(form amongst 34 schemes) and HDFC Prudence Fund – Growth Plan
in the ‘Mixed Asset INR Aggressive Category’ (from amongst 6 schemes), have een awa
rded the ‘Best Fund over 10 Years’ y Lipper Fund Awards India 2009. ICRA Mutual Fun
d Awards – 2008 : HDFC MF Monthly Income Plan - Long Term Plan - Ranked a Seven St
ar Fund and has een awarded the Gold Award for "Best Performance" in the catego
ry of "Open Ended Marginal Equity" for the three year period ending Decem er 31,
2007 (from amongst 27 schemes) HDFC High Interest Fund - Short Term Plan - Rank
ed a Five Star Fund indicating performance among the top 10% in the category of
"Open Ended De t - Short Term" for one year period ending Decem er 31, 2007 (fro
m amongst 20 schemes). HDFC Prudence Fund - Ranked a Five Star Fund indicating p
erformance among the top 10% in the category of "Open Ended Balanced" for the th
ree year period ending Decem er 31, 2007 (from amongst 16 schemes)
B. MEASURING AND EVALUATING MUTUAL FUNDS PERFORMANCE:
1.2.1 PURPOSE OF MEASURING AND EVALUATING
Every investor investing in the mutual funds is driven y the motto of either we
alth creation or wealth increment or oth. Therefore it’s very necessary to contin
uously evaluate the funds’ performance with the help of factsheets and newsletters
, we sites, newspapers and professional advisors like HDFC AMC. If the investors
ignore the evaluation of funds’ performance then he can lose hold of it any time.
In this ever-changing industry, he can face any of the following pro lems:
1. Variation in the funds’ performance due to change in its management/ o jective.
2. The funds’ performance can slip in comparison to similar funds.
3. There may e an increase in the various costs associated with the fund. 4 .Be
ta, a technical measure of the risk associated may also surge. 5. The funds’ ratin
gs may go down in the various lists pu lished y independent rating agencies. 6.
It can merge into another fund or could e acquired y another fund house.
Performance measures:
Equity funds: the performance of equity funds can e measured on the asis of: N
AV Growth, Total Return; Total Return with Reinvestment at NAV, Annualized Retur
ns and Distri utions, Computing Total Return (Per Share Income and Expenses, Per
Share Capital Changes, Ratios, Shares Outstanding), the Expense Ratio, Portfoli
o Turnover Rate, Fund Size, Transaction Costs, Cash Flow, Leverage.
De t fund: Likewise, the performance of de t funds can e measured on the asis
of: Peer Group Comparisons, The Income Ratio, Industry Exposures and Concentrati
ons, NPAs, esides NAV Growth, Total Return and Expense Ratio.
Liquid funds: the performance of the highly volatile liquid funds can e measure
d on the asis of: Fund Yield, esides NAV Growth, Total Return and Expense Rati
o. Concept of enchmarking for performance evaluation: Every fund sets its ench
mark according to its investment o jective. The funds performance is measured in
comparison with the enchmark. If the fund generates a greater return than the
enchmark then it is said that the fund has outperformed enchmark , if it is eq
ual to enchmark then the correlation etween them is exactly 1. And if in case
the return is lower than the enchmark then the fund is said to e underperforme
d.
Some of the enchmarks are: 1. Equity funds: market indices such as S&P CNX nift
y, BSE100, BSE200, BSE-PSU, BSE 500 index, BSE ankex, and other sectoral indice
s. 2. De t funds: Interest Rates on Alternative Investments as Benchmarks, I-Bex
Total Return Index, JPM T-Bill Index Post-Tax Returns on Bank Deposits versus D
e t Funds. 3. Liquid funds: Short Term Government Instruments’ Interest Rates as B
enchmarks, JPM TBill Index.
To measure the fund’s performance, the comparisons are usually done with: I) with
a market index. ii) Funds from the same peer group. iii) Other similar products
in which investors invest their funds.
1.2.2 FINANCIAL PLANNING FOR INVESTORS REFERRING TO MUTUAL FUNDS:
Investors are required to go for financial planning efore making investments in
any mutual fund. The o jective of financial planning is to ensure that the righ
t amount of money is availa le at the right time to the investor to e a le to m
eet his financial goals. It is more than mere tax planning. Steps in financial p
lanning are:
Asset allocation. Selection of fund. Studying the features of a scheme.
In case of mutual funds, financial planning is concerned only with road asset a
llocation, leaving the actual allocation of securities and their management to f
und managers. A fund
manager has to closely follow the o jectives stated in the offer document, ecau
se financial plans of users are chosen using these o jectives.
1.2.3 WHY HAS IT BECOME ONE OF THE LARGEST FINANCIAL INSTRUMENTS?
If we take a look at the recent scenario in the Indian financial market then we
can find the market flooded with a variety of investment options which includes
mutual funds, equities, fixed income onds, corporate de entures, company fixed
deposits, ank deposits, PPF, life insurance, gold, real estate etc. all these i
nvestment options could e judged on the asis of various parameters such as- re
turn, safety convenience, volatility and liquidity. Measuring these form investm
ent options on the asis of the mentioned parameters, we get this in a ta ular
Ta le:1.7
Return
Safety
Volatility
Liquidity
Convenienc e
Equity
High
Low
High
High
Moderate
Bonds
Moderate
High
Moderate
Moderate
High
Co. De ent ures Co. FDs Bank Deposi ts
Moderate
Moderate
Moderate
Low
Low
Moderate
Low
Low
Low
Moderate
Low
High
Low
High
High
PPF
Moderate
High
Low
Moderate
High
Life Insura nce Gold
Low
High
Low
Low
Moderate
Moderate
High
Moderate
Moderate
Gold
Real Estate Mutual Funds
High
Moderate
High
Low
Low
High
High
Moderate
High
High
We can very well see that mutual funds outperform every other investment option.
On three parameters, it scores high whereas it’s moderate at one. comparing it wi
th the other options, we find that equities gives us high returns with high liqu
idity ut its volatility too is high with low safety which doesn’t makes it favour
ite among persons who have low risk- appetite. Even the convenience involved wit
h investing in equities is just moderate. Now looking at ank deposits, it score
s etter than equities at all fronts ut lags adly in the parameter of utmost i
mportant ie; it scores low on return , so it’s not an happening option for person
who can afford to take risks for higher return. The other option offering high r
eturn is real estate ut that even comes with high volatility and moderate safet
y level, even the liquidity and convenience involved are too low. Gold have alwa
ys een a favourite among Indians ut when we look at it as an investment option
then it definitely doesn’t gives a very right picture. Although it ensures high
safety ut the returns generated and liquidity are moderate. Similarly, the othe
r investment options are not at par with mutual funds and serve the needs of onl
y a specific customer group. Straightforward, we can say that mutual fund emerge
s as a clear winner among all the options availa le.
The reasons for this eing:
I)Mutual funds com ine the advantage of each of the investment products: mutual
fund is one such option which can invest in all other investment options. Its pr
inciple of diversification allows the investors to taste all the fruits in one p
late. just y investing in it, the investor can enjoy the est investment option
as per the investment o jective. II) Dispense the shortcomings of the other opt
ions: every other investment option has more or less some shortcomings. Such as
if some are good at return then they are not safe, if some are safe then either
they have low liquidity or low safety or oth….likewise, there exists no single op
tion which can fit to the need of every ody. But mutual funds have definitely so
rted out this pro lem. Now every ody can choose their fund according to their in
vestment o jectives.
III) Returns get adjusted for the market movements: as the mutual funds are mana
ged y experts so they are ready to switch to the profita le option along with t
he market movement. Suppose they predict that market is going to fall then they
can sell some of their shares and ook profit and can reinvest the amount again
in money market instruments. IV) Flexi ility of invested amount: Other then the
a ove mentioned reasons, there exists one more reason which has esta lished mutu
al funds as one of the largest financial intermediary and that is the flexi ilit
y that mutual funds offer regarding the investment amount. One can start investi
ng in mutual funds with amount as low as Rs. 500 through SIPs and even Rs. 100 i
n some cases.
Not all award-winning funds may e suita le for everyone Many investors feel tha
t a simple way to invest in Mutual funds is to just keep investing in award winn
ing funds. First of all, it is important to understand that more than the awards
; it is the methodology to choose winners t at is more relevant. A rating firm g
enerally ela orates on the criteria for deciding the winner’s i.e. consistent perf
ormance, risk adjusted returns, total returns and protection of capital. Each
of these factors is very important and ha s its significance for different categ
ories of funds. Besides, each of these factors has varying degree of significanc
e for different kinds of
investors. For example, consistent return re ally focuses on risk. If someone is
afraid of negative returns, consistency will e a more import ant measure than
tot al ret urn i.e. Growth in NAV as well as dividend received. A fund can have
very impressive total ret urns overtime, ut can e very volatile and tough for
a risk adverse investor. Therefore, all the ward winning funds in different cate
gories may not e suita le for everyone. Typically, when one has to select funds
, the first step should e to consider personal goals and o jectives. Invest ors
need to decide which element they value the most and the n prioritize the other
criteria Once one knows what one is looking for, one should go a out selecting
the funds according to the asset allocation. Most investors need just a few fund
s, carefully picked, watched and managed over period of time.
1.2.4 EVALUATING PORTFOLIO PERFORMANCE
It is important to evaluate the performance of the portfolio on an on-going asi
s. The following factors are important in this process: Consider long-term recor
d of accomplishment rather than short -term performance. It is important ecause
long-term track record moderates the effects which unusually good or ad short
-term performance can have on a fund
s track record. Besides, longer-term track
record compensates for the effects of a fund manager
s particular investment sty
le. Evaluate the record of accomplishment against similar funds. Success in mana
ging a small or in a fund focusing on a particular segment of the market cannot
e re lied upon as an evidence of anticipated performance in managing a large or
a road ased fund. Discipline in investment approach is an important factor as
the pressure to perform can make a fund manager suscepti le to have a n urge to
change tracks in terms of stock selection as well a s investment strategy.
The o jective should e to differentiate investment skill of the fund manager fr
om luck and to identify those funds with the greatest potential of future succes
s.
1.2.5 HOW TO REDUCE RISK WHILE INVESTING:
Any kind of investment we make
is su ject to risk. In fact we get return on our Well
investment purely and solely ecause at the very eginning we take the risk of p
arting with our funds, for getting higher value ack at a later date. Partition
it self is a risk. known economist and No el Prize recipient William Sharpe trie
d to segregate the total risk faced in any kind of investment into two parts - s
ystematic (Systemic) risk and unsystematic (Unsystematic) risk. Systematic risk
is that risk which exists in the system. Some of the iggest examples of systema
tic risk are inflation, recession, war, political situation etc. Inflation erode
s returns generated from all investments e .g. If return from fixed deposit is 8
percent and if inflation is 6 per cent then real rate of return from fixed depo
sit is reduced y 6 percent. Similarly if returns generated from equity market i
s 18 percent and inflation is still 6 per cent then equity returns will e lesse
r y the rate of inflation. Since inflation exists in the system there is no way
one can stay away from the risk of inflation. Economic cycles, war and politica
l situations have effects on all forms of investments. Also these exist in the s
ystem and there is no way to stay away from them. It is like learning to walk. A
nyone who wants to learn to walk has to first fall; you cannot learn to walk sys
tematic risk. without falling. Similarly, anyone who wants to invest has to firs
t face
Therefore, one can never make any kind of investment without systematic risk. An
other form of risk is unsystematic risk. This risk does not exist in the system
and hence is not applica le to all forms of investment. Unsystematic risk is ass
ociated with particular form of investment. Suppose we invest in
stock market and the market falls, then only our investment in equity gets affec
ted OR if we have placed a fixed deposit in particular ank and ank goes ankru
pt, than we only lose money placed in that ank. always reduce the While there i
s no way to keep away from risk, we can Diversification helps in reducing the im
pact of impact of risk.
unsystematic risk. If our investment is distri uted across various asset classes
, the impact of unsystematic risk is reduced. If we have placed fixed deposit in
several anks, then even if one of the anks goes ankrupt our entire fixed de
posit investment is not lost. Similarly if our equity To reduce the of oth inve
stment is in Tata Motors, HLL, Infosys, adverse news a out Infosys will only imp
act investment in Infosys, all other stocks will not have any impact . the impac
t of risk. impact of systematic risk, we should invest regularly. By investing r
egularly, we average out Mutual fund, as an investment vehicle gives us enefit
diversification and averaging. Portfolio of mutual funds consists of multiple se
curities
and hence adverse news a out single security will have nominal impact on overall
portfolio. By systematically investing in mutual fund, we get enefit of rupee
cost averaging. Mutual
fund as an investment vehicle helps reduce, oth, systematic as well a s unsyste
matic risk
1.2.6 A STUDY OF PORTFOLIO ANALYSIS FROM THE POINT OF FUND MANAGER:
Effective use of portfolio management disciplines improves customer satisfaction
, reduces the num er of risks pro lems, and increases success. The goal of portf
olio analysis is to realize these same enefits at the portfolio level y applyi
ng a consistent structured management approach. The considerations underlying th
e portfolio analysis is a matter of concern to the fund managers, investors, and
researchers alike. This study attempts to answer two questions relating to the
portfolio analysis: • Make an average (or fair) return for the level of risk in th
e portfolio
•
To find out the portfolio which est meets the purpose of the investor.
At a minimum, any comprehensive mutual fund selection and analysis approach shou
ld include the following generalized processes:
• • • • •
Fund selection Fund prioritize/ reprioritize Selection of the accepta le and req
uired fund Fund analysing and monitoring Corrective action management
The fund portfolio analysis gives the a ility to select funds that are aligned w
ith the investor’s strategies and o jectives. It helps the fund manager to make th
e est use of availa le opportunities y applying to the highest priority of the
investor. A fund manager can regularly assess how securities and stocks are con
tri uting to portfolio health and can make the corrective action to keep the por
tfolio in compliance with the investor’s interest and o jectives. Mutual funds do
not determine risk preference. However, once investor determines his/her return
preferences, he/she can choose a mutual fund a large and growing variety of alte
rnative funds designed to meet almost any investment goal. Studies have showed t
hat the funds generally were consistent in meeting investors stated goals for in
vestment strategies, risk, and return. The major enefit of the mutual fund is t
o diversify the portfolio to eliminate unsystematic risk. The instant diversific
ation of the funds is especially eneficial to the small investors who do not ha
ve the resources to acquire 100 shares of 12 or 15 different issues required to
reduce unsystematic risk. Mutual funds have generally maintained the sta ility o
f their correlation with the market ecause of reasona ly well diversified portf
olios. There are some measures for the analysis and each of them provides unique
perspectives. These measures evaluate the different components of performance.
1.2.7 MEASURES OF RISK AND RETURN:
Risk is varia ility in future cash flows. It is also known as uncertainty in the
distri ution of possi le outcomes. A risky situation is one, which has some pro
a ility of loss or unexpected results. The higher the pro a ility of loss or un
expected results is, the greater the risk. It is the uncertainty that an investm
ent will earn its expected rate of return. For an investor, evaluating a future
investment alternative expects or anticipates a certain rate of return is very i
mportant. Portfolio risk management includes processes that identify, analyse, r
espond to, track, and control any risk that would prevent the portfolio from ach
ieving its usiness o jectives. These processes should include reviews of projec
t level risks with negative implications for the portfolio, ensuring that the pr
oject manager has a responsi le risk mitigation plan. Additionally, it is import
ant to do a consolidated risk assessment for the portfolio overall to determine
whether it is within the already specified limits. Since portfolio and their env
ironments are dynamic, managers should review and update their portfolio risk ma
nagement plans on a regular asis through the fund life cycle.
Simple measure of returns:
The return on mutual fund investment includes oth income (in the form of divide
nds or investment payments) and capital gains or losses (increase or decrease in
the value of a security). The return is calculated y taking the change in a fu
nd’s Net Asset Value, which is the market value of securities the fund holds divid
ed y the num er of the fund’s shares during a given time period, assuming the rei
nvestment all income and capital gains distri utions, and dividing it y the ori
ginal net asset value. The return is calculated net of management fees and other
expenses charged to the fund. Thus, a fund’s monthly return can e expressed as f
ollows:
Rt= (NAVt- NAVt-1)/NAVt-1
Where, Rt is the return in month t NAVt is the closing net asset value of the fu
nd on the last trading day of the month NAVt-1 is the closing net asset value of
the fund on the last day of the previous month
Measure of risk
Investors are interested not only in fund’s return ut also in risk taken to achie
ve those returns. So risk can e thought as the uncertainty of the expected retu
rn, and uncertainty is generally equated with varia ility. Varia ility and the r
isk are correlated; hence high returns will tend to high varia ility.
Standard deviation:
in simple terms standard deviation is one of the commonly used statistical param
eter to measure risk, which determines the volatility of a fund. Deviation is de
fined as any variation from a mean value (upward & downward). Since the markets
are volatile, the returns fluctuate every day. High standard deviation of a fund
implies high volatility and a low standard deviation implies low volatility.
S.D. =√1/T× (Rt-AR) ²
Where, S.D. is the periodic standard deviation, AR is the average periodic retur
n, T is the num er of o servations in the period for which the standard deviatio
n is eing calculated. Rt is the return in month t
Beta analysis: ) β (Beta) Co-efficient:
Systematic risk is measured in terms of Beta, which represents fluctuations in t
he NAV of the fund vis-à-vis market. The more responsive the NAV of a Mutual Fund
is to the changes in the market; higher will e its eta. Beta is calculated y
relating the returns on a Mutual Fund with the returns in the market. While unsy
stematic risk can e diversified through investments in a num er of instruments,
systematic risk cannot. By using the risk return
relationship, we try to assess the competitive strength of the Mutual Funds vis-à-
vis one another in a etter way.
β (Beta) is calculated as = [N (Σ XY) – Σ XΣ Y]/ [N (Σ X2) – (Σ X) 2 ]
Beta is used to measure the risk. It basically indicates the level of volatility
associated with the fund as compared to the market. In case of funds, as compar
ed to the market. In case of funds, beta would indicate the volatility against t
he benchmark index. It is used as a short term decision making tool. A beta that
is greater than 1 means that the fund is more volatile than the benchmark index
, while a beta of less than 1 means that the fund is more volatile than the benc
hmark index. A fund with a beta very close to 1 means the fund’s performance close
ly matches the index or benchmark. The success of beta is heavily dependent on t
he correlation between a fund and its benchmark. Thus, if the fund’s portfolio doe
sn’t have a relevant benchmark index then a beta would be grossly inappropriate. F
or example if we are considering a banking fund, we should look at the beta agai
nst a bank index.
R- quared (R2):
R squared is the square of ‘R’ (i.e.; coefficient of correlation). It describes the
level of association between the fun’s market volatility and market risk. The valu
e of R- squared ranges from0 to1. A high R- squared (more than 0.80) indicates t
hat beta can be used as a reliable measure to analyze the performance of a fund.
Beta should be ignored when the rsquared is low as it indicates that the fund p
erformance is affected by factors other than the markets. For example: Case 1 R2
B 0.65 1.2 Case 2 0.88 0.9
In the above tableR2 is less than 0.80 in case 1, implies that it would be wrong
to mention that the fund is aggressive on account of high beta. In case 2, the
r- squared is more than 0.85 and beta value is 0.9. it means that this fund is l
ess aggressive than the market.
Portfolio turnover ratio:
Portfolio turnover is a measure of a fund
s trading activity and is calculated b
y dividing the lesser of purchases or sales (excluding securities with maturitie
s of less than one year) by the average monthly net assets of the fund. Turnover
is simply a measure of the percentage of portfolio value that has been transact
ed, not an indication of the percentage of a fund
s holdings that have been chan
ged. Portfolio turnover is the purchase and sale of securities in a fund
s portf
olio. A ratio of 100%, then, means the fund has bought and sold all its position
s within the last year. Turnover is important when investing in any mutual fund,
since the amount of turnover affects the fees and costs within the mutual fund.
Total expenses ratio: A measure of the total costs associated with managing and
operating an investment fund such as a mutual fund. These costs consist primari
ly of management fees and additional expenses such as trading fees, legal fees,
auditor fees and other operational expenses. The total cost of the fund is divid
ed by the fund
s total assets to arrive at a percentage amount, which represents
the TER: Total expense ratio = (Total fund Costs/ Total fund Assets)
The most important and widely used measures of performance are: The harpe Measu
re The Treynor’Measure Jenson Model Fama Model
The harpe Measure :-
In this model, performance of a fund is evaluated on the basis of harpe Ratio,
which is a ratio of returns generated by the fund over and above risk free rate
of return and the total risk associated with it. According to harpe, it is the
total risk of the fund that the investors are concerned about. o, the model eva
luates funds on the basis of reward per unit of total risk. ymbolically, it can
be written as:
harpe Ratio ( i) = (Ri - Rf)/ i

Where, i is standard deviation of the fund, Ri represents return on fund, and R

f is risk free rate of return.
While a high and positive harpe Ratio shows a superior risk-adjusted performanc
e of a fund, a low and negative harpe Ratio is an indication of unfavourable pe
rformance.
The Treynor Measure: Developed by Jack Treynor, this performance measure evaluat
es funds on the basis of Treynor
s Index. This Index is a ratio of return genera
ted by the fund over and above risk free rate of return (generally taken to be t
he return on securities backed by the government, as there is no credit risk ass
ociated), during a given period and systematic risk associated with it (beta). 
ymbolically, it can be represented as:
Treynor
s Index (Ti) = (Ri - Rf)/Bi.
Where, Ri represents return on fund, Rf is risk free rate of return, and Bi is b
eta of the fund.
All risk-averse investors would like to maximize this value. While a high and po
sitive Treynor
s Index shows a superior risk-adjusted performance of a fund, a l
ow and negative Treynor
s Index is an indication of unfavorable performance. Com
parison of harpe and Treynor harpe and Treynor measures are similar in a way,
since they both divide the risk premium by a numerical risk measure. The total r
isk is appropriate when we are evaluating the risk return relationship for well-
diversified portfolios. On the other hand, the systematic risk is the relevant m
easure of risk when we are evaluating less than fully diversified portfolios or
individual stocks. For a well-diversified portfolio the total risk is equal to s
ystematic risk. Rankings based on total risk ( harpe measure) and systematic ris
k (Treynor measure) should be identical for a well-diversified portfolio, as the
total risk is reduced to systematic risk. Therefore, a poorly diversified fund
that ranks higher on Treynor measure, compared with another fund that is highly
diversified, will rank lower on harpe Measure.
Jenson Model: Jenson
s model proposes another risk adjusted performance measure.
This measure was developed by Michael Jenson and is sometimes referred to as th
e differential Return Method. This measure involves evaluation of the returns th
at the fund has generated vs. the returns actually expected out of the fund1 giv
en the level of its systematic risk. The surplus between the two returns is call
ed Alpha, which measures the performance of a fund compared with the actual retu
rns over the period. Required return of a fund at a given level of risk (Bi) can
be calculated as:
E(Ri) = Rf + Bi (Rm - Rf)
Where, E(Ri) represents expected return on fund, and Rm is average market return
during the given period, Rf is risk free rate of return, and Bi is Beta deviati
on of the fund.
After calculating it, Alpha can be obtained by subtracting required return from
the actual return of the fund.
αp= Ri –[ Rf + Bi (Rm - Rf) ]
Higher lph  represents superior perform nce of the fund nd vice vers . Limit t
ion of this model is th t it considers only system tic risk not the entire risk
ssoci ted with the fund nd n ordin ry investor c nnot mitig te unsystem tic r
isk, s his knowledge of m rket is primitive.
F m  Model: The Eugene F m  model is n extension of Jenson model. This model co
mp res the perform nce, me sured in terms of returns, of  fund with the require
d return commensur te with the tot l risk ssoci ted with it. The difference bet
ween these two is t ken s  me sure of the perform nce of the fund nd is c lle
d Net Selectivity. The Net Selectivity represents the stock selection skill of t
he fund m n ger, s it is the excess returns over nd bove the return required
to compens te for the tot l risk t ken by the fund m n ger. Higher v lue of whic
h indic tes th t fund m n ger h s e rned returns well bove the return commensur
te with the level of risk t ken by him.
Selectivity: me sures the bility of the portfolio m n ger to e rn  return th t
is consistent with the portfolio’s m rket (system tic) risk. The selectivity me s
ure is:
Ri –[ Rf + Bi (Rm - Rf) ]
Diversific tion: me sures the extent to which the portfolio m y not h ve been co
mpletely diversified. Diversific tion is me sured s:
[Rf +(Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)]
If the portfolio is completely diversified, cont ins no unsystem tic risk, then
diversific tion me sure would be zero. A positive diversific tion me sure indic 
tes th t the portfolio is not completely diversified; it would cont in unsystem 
tic risk nd it represents the extr  return th t the portfolio should e rn for n
ot being completely diversified. The perform nce of the portfolio c n be me sure
d s: Net selectivity = selectivity – diversific tion Net selectivity me sures, ho
w well the portfolio m ngers did m n ger did t e rning  f ir return for the po
rtfolio’ system tic risk nd diversifying w y unsystem tic risk. Positive net sel
ectivity indic tes th t the fund e rned  better return. The comp rison, done b 
sed on sh rpe r tio, Treynor me sure, Jensen lph , nd Fem  me sure notifies th
t the portfolio perform nce c n be ev lu ted on the following b sis: S hrpe r t
io: me sures the rew rd to tot l risk tr de off Treynor: me sures the rew rd to
system tic risk tr de off Jensen’s lph : me sures the ver ge return over nd bo
ve th t predicted. Fem  me sure: me sures return of portfolio for its system tic
risk nd diversifying w y unsystem tic risk. Among the bove perform nce me su
res, two models n mely, Treynor me sure nd Jenson model use System tic risk is
b sed on the premise th t the Unsystem tic risk is diversifi ble. These models 
re suit ble for l rge investors like institution l investors with high risk t ki
ng c p cities s they do not f ce p ucity of funds nd c n invest in  number of
options to dilute some risks. For them,  portfolio c n be spre d cross  numb
er of stocks nd sectors.
However, Sh rpe me sure nd F m  model th t consider the entire risk ssoci ted
with fund re suit ble for sm ll investors, s the ordin ry investor l cks the n
ecess ry skill nd resources to diversify. Moreover, the selection of the fund o
n the b sis of superior stock selection bility of the fund m n ger will lso he
lp in s fegu rding the money invested to  gre t extent. The investment in funds
th t h ve gener ted big returns t higher levels of risks le ves the money ll
the more prone to risks of ll kinds th t m y exceed the individu l investors
r
isk ppetite.
PART-II
RESEARCH METHODOLOGY
2.1 NEED FOR THE STUDY
The Mutu l Fund Comp nies periodic lly build up  study, which c n prioritize n
d n lyse the portfolio of the mutu l funds. This study is helpful in h ving  c
omp rison mong the mutu l funds b sed on the risk be ring c p city nd expected
return of the investor nd will lso c rry out n n lysis of the portfolio of
the selected mutu l fund. The mutu l fund industry is growing glob lly nd new p
roducts re emerging in the m rket with ll c ptiv ting promises of providing hi
gh return. It h s become difficult for the investors to choose the best fund for
their needs or in other words to find out  fund which will give m ximum return
for minimum risk. Therefore, they turn to their fin nci l dviser to get precis
e direct investment. Hence, the comp ny sked me to prep re  model, which will
f cilit te them to n lyse the fund nd to h ve re son ble estim tion for the fu
nd perform nce. The driving force of Mutu l Funds is the ‘s fety of the princip l’ g
u r nteed, plus the dded dv nt ge of c pit l ppreci tion together with the in
come e rned in the form of interest or dividend. The v rious schemes of Mutu l F
unds provide the investor with  wide r nge of investment options ccording to h
is risk be ring c p cities nd interest besides; they lso give
h ndy return to the investor. Mutu l Funds offers n investor to invest even  s
m ll mount of money, e ch Mutu l Fund h s  defined investment objective nd st
r tegy. Mutu l Funds schemes re m n ged by respective sset m n ged comp nies,
sponsored by fin nci l institutions, b nks, priv te comp nies or intern tion l f
irms. A Mutu l Fund is the ide l investment vehicle for tod y’s complex nd modern
fin nci l scen rio.
The study is b sic lly m de to n lyze the v rious open-ended equity schemes of
HDFC Asset M n gement Comp ny to highlight the diversity of investment th t Mutu
l Fund offer. Thus, through the study one would underst nd how  common person
could fruitfully convert  me gre mount into gre t penny by wisely investing in
to the right scheme ccording to his risk t king bilities.
Sh rpe r tio is  perform nce me sure, which reflects the excess return e rned o
n  portfolio per unit of its tot l risk (st nd rd devi tion). Treynor me sure i
ndic tes the risk premium return per unit risk of the portfolio. While Jensen l
ph  t lks bout the devi tion of the ctu l return from its expected one. Fem  m
e sure decomposes the portfolio tot l return into two m in components: system ti
c return nd the unsystem tic return. It determines whether the portfolio is per
fectly diversified or not. Hence, it is  signific nt me sure to ev lu te the pe
rform nce of the fund m n ger. The n lysis of the fund portfolio h s been done
to find out the influence of the top holdings on the perform nce of the fund. Al
l these me sures give f ir implic tion nd results bout the portfolio perform n
ce nd c n show the ground re lity to  r tion l investor.
2.2 OBJECTIVE OF THE STUDY
Whether the growth oriented Mutu l Fund re e rning higher returns th n the benc
hm rk returns (or m rket Portfolio/Index returns) in terms of risk.
Whether the growth oriented mutu l funds re offering the dv nt ges of Diversif
ic tion, M rket timing nd Selectivity of Securities to their investors
This study provides  proper investig tion for logic l nd re son ble comp rison
nd selection of the funds.
It lso ssists in n lysing the portfolio of the selected funds.
2.3 LIMITATIONS OF THE STUDY
The study is limited only to the n lysis of different schemes nd its suit bili
ty to different investors ccording to their risk-t king bility. The study is b
sed on second ry d t  v il ble from monthly f ct sheets, websites nd other bo
oks, s prim ry d t  w s not ccessible.
The study is limited by the det iled study of six schemes of HDFFC.
M ny investors re ll price t kers. The ssumption th t ll investors h ve the
s me inform tion nd beliefs bout the distribution of returns.
B nks re free to ccept deposits t ny interest r te within the ceilings fixed
by the
Reserve B nk of Indi  nd interest r te c n v ry from client to client. Hence, t
here c n be in ccur cy in the risk free r tes. The study excludes the entry nd
the exit lo ds of the mutu l funds.
2.4 DATA COLLECTION
The Methodology involves the selected Open-Ended equity schemes of HDFC mutu l f
und for the purpose of risk return nd comp r tive n lysis the competitive fund
s. The d t  collected for this project is b sic lly from second ry sources, they
re; The monthly f ct sheets of HDFC AMC fund house nd rese rch reports from b
nks.
The NAVs of the funds h ve been t ken from AMFI websites for the period st rting
from 31 st j n 2007 to 31st M y, 2009. For the Benchm rk prices, d t  h s been
t ken from BSE nd NSE sites.
P rt-III
CASE ANALYSIS
3.1 DATA INTERPRETATION
Risk returns n lysis nd comp r tive study of funds In this section,  s mple o
f HDFC equity rel ted funds h ve been studied, ev lu ted nd n lysed. This stud
y could f cilit te to get  f ir comp rison. The expect tions of the study re t
o give v lue to the funds by keeping the risk in the view. Here equity funds re
t ken s they be r high return with high risk.
Following re the products of HDFC Mutu l Fund, which h ve been t ken the ev lu 
tion purpose. HDFC Equity Fund Growth option HDFC C pit l Builder HDFC Growth Fu
nd HDFC Long Term Adv nt ge Fund HDFC Top 200 Fund
HDFC EQUITY FUND
Investment Objective The investment objective of the Scheme is to chieve c pit 
l ppreci tion. B sic Scheme Inform tion
T ble:3.1
N ture of Scheme Inception D te Option/Pl n Entry Lo d (purch se / ddition l pu
rch se / switchin)
Open Ended Growth Scheme J n 01, 1995 Dividend Option, Growth Option, NIL (With
effect from August 1, 2009)
Exit Lo d. ( s  % of the Applic ble NAV) Minimum Applic tion Amount
Nil
Rs.5000 nd in multiples of Rs.100 thereof to open n ccount / folio. Addition 
l purch ses is Rs. 1000 nd in multiples of Rs. 100 thereof
Lock-In-Period Net Asset V lue Periodicity Redemption Proceeds
Nil Every Business D y Norm lly desp tched within 3 Business d ys
Investment P ttern The sset lloc tion under the Scheme will be s follows:
T ble:3.2
SR NO.
TYPE OF INSTRUMENTS
NORMAL ALLOCATION (%of net sset)
RISK PROFILE Medium to high
1
Equities & Equities rel ted instruments
80-100
2
Debt securities, money m rket instruments & c sh
0-100
Low to medium
Investment in Securitised debt, if undert ken, would not exceed 20% of the net 
ssets of the scheme. The Scheme m y lso invest upto 25% of net ssets of the Sc
heme in deriv tives such s Futures & Options nd such other deriv tive instrume
nts s m y be introduced from time to time for the purpose of hedging nd portfo
lio b l ncing nd other uses s m y be permitted under the Regul tions. Investme
nt Str tegy & Risk Control In order to provide long term c pit l ppreci tion, t
he Scheme will invest predomin ntly in growth comp nies. Comp nies selected unde
r this portfolio would s f r s pr ctic ble consist of medium to l rge sized co
mp nies which: re likely chieved bove ver ge growth th n the industry; enjoy
distinct competitive dv nt ges, nd h ve superior fin nci l strengths. The im
will be to build  portfolio, which represents  cross-section of the strong gr
owth comp nies in the prev iling m rket. In order to reduce the risk of vol tili
ty, the Scheme will diversify cross m jor industries nd economic sectors. Benc
hm rk Index : S&P CNX 500. HDFC Equity, which is benchm rked to S&P CNX 500 Inde
x is not sponsored, endorsed, sold or promoted by Indi n Index Service & Product
s Limited (IISL).
Fund M n ger : Mr. Pr sh nt J in
HDFC EQUITY FUND-GROWTH OPTION
T ble:3.3 NAV S&P CNX 500 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC
2008 JAN FEB MAR APL MAY JUN JULY AUG 187.594 165.788 178.191 169.605 143.171 15
1.715 158.924 6356.92 5762.88 6289.07 5937.81 4929.98 5297.47 5337.28 -0.43838 -
11.624 7.481241 -4.81843 -15.5856 5.967689 4.751673 1.784819 -9.34478 9.130678 -
5.58525 -16.9731 7.454188 0.751491 -0.78243 108.6241 68.3088 26.91209 264.5363 4
4.48428 3.570838 0.753707 -10.3759 8.099566 -6.61636 -18.0042 6.423076 -0.27962
0.568075 107.6591 65.60296 43.77619 324.1514 41.25591 0.078188 3.18558 87.32486
83.36928 31.19497 288.0859 55.56493 0.564738 141.228 142.602 151.16 161.281 165.
313 172.325 168.827 182.84 210.3 206.176 223.324 188.42 4504.73 4605.89 4934.46
5185.95 5223.82 5483.25 5411.29 6094.11 7163.3 6997.6 7461.48 6245.45 -6.71185 0
.972895 6.001318 6.695554 2.499984 4.241651 -2.02989 8.300213 15.0186 -1.96101 8
.317166 -15.6293 -8.05529 2.24564 7.133692 5.096606 0.730242 4.966289 -1.31236 1
2.61843 17.54465 -2.31318 6.62913 -16.2974 54.06587 2.184771 42.81156 34.1246 1.
825594 21.06526 2.663941 104.7357 263.4959 4.536164 55.13557 254.7177 -9.0864 1.
214527 6.10258 4.065494 -0.30087 3.935177 -2.34347 11.58732 16.51353 -3.34429 5.
598018 -17.3285 82.56268 1.475077 37.24148 16.52824 0.090523 15.48562 5.491863 1
34.266 272.6968 11.18429 31.3378 300.2786 64.88767 5.042897 50.88956 25.9754 0.5
33254 24.66403 1.72229 159.2248 307.8146 5.3508 43.94536 265.6065 151.389 4899.3
9 Ri Rm Ri Rm Rm-Rm v sqr(RmRm v) Rm2
SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY Tot l ver ge
145.721 110.322 101.808 112.377 103.754
4807.2 3539.57 3379.53 3635.87 3538.57
-8.30774 -24.2923 -7.71741 10.38131 -7.67328
-9.93165 -26.3694 -4.52145 7.585078 -2.67611
82.50962 640.5738 34.8939 78.74302 20.53456
-10.9628 -27.4005 -5.55257 6.553966 -3.70723
120.1822 750.7883 30.83098 42.95447 13.74352
98.63768 695.3455 20.44354 57.53341 7.161582
98.163 108.852 127.097 169.897
3403.33 3720.51 4278.54 5480.11
-5.38871 10.88903 16.76129 33.67507 29.7767 1.063454
-3.82188 9.319696 14.99875 28.08365 28.87114 1.031112
20.59501 101.4825 251.3984 945.7186 3533.466 126.1952
-4.85299 8.288584 13.96764 27.05253 0 0
23.55156 68.70062 195.0949 731.8396 3469.417 123.9077
14.60679 86.85673 224.9625 788.6911 3499.186
Figure:3.1
σm= √123.9077
=11.13239
β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (98937.047- 859.6872)/( 97977.214-
4264) = 98077.36/ 97143.672 = 1.0096114
Ta le:3.4 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2008 JAN -6.7
1185 0.972895 6.001318 6.695554 2.499984 4.241651 -2.02989 8.300213 15.0186 -1.9
6101 8.317166 -15.6293 -8.05529 2.24564 7.133692 5.096606 0.730242 4.966289 -1.3
1236 12.61843 17.54465 -2.31318 6.62913 -16.2974 1.34344 -1.27274 -1.13237 1.598
948 1.769742 -0.72464 -0.71753 -4.31822 -2.52605 0.352172 1.688036 0.668127 -1.3
111 1.305086 1.164715 -1.56661 0.75698 0.75698 0.749866 4.350562 2.558392 -0.319
83 -1.65569 -0.63579 1.71898 1.70325 1.356561 2.454256 0.573018 0.573018 0.5623
18.92739 6.545367 0.102291 2.741324 0.404223 Rm Ri-Rm Dev frm ave q of Dev frm
av
FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2009 JAN FEB MAR APL MAY Total avra
ge
-0.43838 -11.624 7.481241 -4.81843 -15.5856 5.967689 4.751673 -8.30774 -24.2923
-7.71741 10.38131 -7.67328
1.784819 -9.34478 9.130678 -5.58525 -16.9731 7.454188 0.751491 -9.93165 -26.3694
-4.52145 7.585078 -2.67611
-2.2232 -2.27926 -1.64944 0.76682 1.387467 -1.4865 4.000182 1.623906 2.077092 -3
.19596 2.796228 -4.99717
2.255543 2.311604 1.681778 -0.73448 -1.35513 1.518841 -3.96784 -1.59156 -2.04475
3.228297 -2.76389 5.029507
5.087475 5.343511 2.828377 0.539459 1.836366 2.306878 15.74376 2.533078 4.181006
10.4219 7.639067 25.29594
-5.38871 10.88903 16.76129 33.67507 29.7767 1.063454
-3.82188 9.319696 14.99875 28.08365 28.87114 1.031112
-1.56683 1.569336 1.76254 5.591422 0.90556 0.032341
1.599166 -1.53699 -1.7302 -5.55908
2.557333 2.362352 2.993588 30.90337 160.2354 5.722694
tandard Deviation for the fund’  exce  return ( .D.) σi=√5.722694 =2.392215
harpe Index ( i) = (Ri - Rf)/ i = (1.063454-5)/ 2.392215 =-1.64557
Treynor
 Index (Ti) = (Ri - Rf)/Bi. =(1.063454-5)/ 1.0096114 =-3.89907 Jen on a
lpha (αp)= Ri –[ Rf + Bi (Rm - Rf) ] = 1.063454 - [ 5+1.0096114 (1.031112-5)] =0.070
488
Expected return E(Ri) = Rf + Bi (Rm - Rf) =[ 5+1.0096114 (1.031112-5)] =0.992965
Fem  Me sures Selectivity =Ri –[ Rf + Bi (Rm - Rf) ] = 1.063454 - [ 5+1.0096114 (
1.031112-5)]
=0.070488
Diversific tion =[Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf) ] =[5+(1.031112-5)(2.39
2215/11.13139)]- [ 5+1.0096114 (1.031112-5)] =3.154092 Net selectivity= selectiv
ity- diversific tion =0.070488-3.15409 =-3.0836
HDFC CAPITAL BUILDER FUND
Investment Objective The Investment Objective of the Scheme is to chieve c pit 
l ppreci tion in the long term. B sic Scheme Inform tion
N ture of Scheme Inception D te Option/Pl n
Open Ended Growth Scheme Febru ry 01, 1994 Dividend Option,Growth Option. The Di
vidend Option offers Dividend P yout nd Reinvestment F cility.
Entry Lo d (purch se / ddition l purch se / switch-in)
NIL (With effect from August 1, 2009)
Exit Lo d ( s  % of the Applic ble NAV) (Other th n System tic Investment Pl n
(SIP)/ System tic Tr nsfer Pl n (STP))
•
In respect of e ch purch se / switch-in of Units less th n Rs. 5 crore in v lue,
n Exit Lo d of 1.00% is p y ble if Units re redeemed/switched-out within 1 ye
r from the d te of llotment.
•
In respect of e ch purch se / switch-in of Units equ l to or gre ter th n Rs. 5
crore in v lue, no Exit Lo d is p y ble. No Exit Lo d sh ll be levied on bonus u
nits nd units llotted on dividend reinvestment.
Minimum Applic tion Amount (Other th n System tic Investment Pl n (SIP)/ System 
tic Tr nsfer Pl n
For new investors :Rs.5000 nd ny mount there fter. For existing investors : R
s. 1000 nd ny mount there fter.
(STP)) Lock-In-Period Net Asset V lue Periodicity Redemption Proceeds Nil Every
Business D y. Norm lly desp tched within 3 business D ys
Current Expense R tio (#) (Effective D te 22nd M y 2009)
On the first 100 crores ver ge weekly net ssets 2.50% On the next 300 crores 
ver ge weekly net ssets 2.25% On the next 300 crores ver ge weekly net ssets
2.00% On the b l nce of the ssets 1.75%
P ttern The sset lloc tion under the Scheme will be s follows : Sr.No. 1 2 As
set Type (% of Portfolio) Risk Profile Medium to High
Equities nd Equity Rel ted Instruments Upto 100% Debt & Money M rket Instrument
s
Not more th n 20% Low to Medium
Investment in Securitised debt, if undert ken, would not exceed 20% of the net 
ssets of the scheme. Investment Str tegy This Scheme ims to chieve its objecti
ves by investing in strong comp nies t prices which re below f ir v lue in the
opinion of the fund m n gers. The Scheme defines  "strong comp ny" s one th t
h s the following ch r cteristics :
• • •
strong m n gement, ch r cterized by competence nd integrity strong position in
its business (prefer bly m rket le dership) efficiency of oper tions, s evidenc
ed by profit m rgins nd sset turnover, comp red to its peers in the industry
• • •
working c pit l efficiency consistent surplus c sh gener tion high profit bility
indic tors (returns on funds employed)
In common p rl nce, such comp nies re lso c lled
Blue Chips
. The Scheme defi
nes "re son ble prices" s :
•

 m rket price quote th t is round 30% lower th n its v lue, s determined by t

he discounted v lue of its estim ted future c sh flows
• • •
 P/E multiple th t is lower th n the comp ny
s sust in ble Return on funds empl
oyed  P/E to growth r tio th t is lower th n those of the comp ny
s competitors
in c se of comp nies in cyclic l businesses,  m rket price quote th t is roun
d 50% lower th n its estim ted repl cement cost
Fund M n ger Mr. Chir g Set lv d (since Apr 2, 07) Mr. An nd L ddh  - Dedic ted
Fund M n ger - Foreign Securities
HDFC CAPITAL BUILDER FUND
T ble:3.5 NAV S&P CNX 500 4899.39 4504.73 -4.9644 -8.05529 39.98964 -9.0864 82.5
626 8 64.88 767 Ri Rm Ri Rm Rm-Rm v sqr(RmRm v) Rm2
2007 JAN FEB
64.459 61.259
MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG S
EP OCT
60.3 65.818 69.818 73.27 76.914 76.323 83.09 96.061 99.034 106.53 8 88.367 87.43
9 75.967 79.418 75.065 64.169 67.228 70.149 63.365 47.587
4605.89 4934.46 5185.95 5223.82 5483.25 5411.29 6094.11 7163.3 6997.6 7461.48 62
45.45 6356.92 5762.88 6289.07 5937.81 4929.98 5297.47 5337.28 4807.2 3539.57
-1.56548 9.150912 6.077365 4.944284 4.973386 -0.76839 8.866266 15.61078 3.094908
7.577196 -17.0559 -1.05017 -13.12 4.542762 -5.48113 -14.5154 4.767099 4.344916
-9.67084 -24.9002
2.24564 7.133692 5.096606 0.730242 4.966289 -1.31236 12.61843 17.54465 -2.31318
6.62913 -16.2974 1.784819 -9.34478 9.130678 -5.58525 -16.9731 7.454188 0.751491
-9.93165 -26.3694
-3.51551 65.27979 30.97394 3.610525 24.69927 1.008405 111.8784 273.8857 -7.15908
50.23022 277.9672 -1.87436 122.6035 41.4785 30.61343 246.3716 35.53486 3.265164
96.04744 656.603
1.214527 6.10258 4.065494 -0.30087 3.935177 -2.34347 11.58732 16.51353 -3.34429
5.598018 -17.3285 0.753707 -10.3759 8.099566 -6.61636 -18.0042 6.423076 -0.27962
-10.9628 -27.4005
1.47507 7 37.2414 8 16.5282 4 0.09052 3 15.4856 2 5.49186 3 134.266 272.696 8 11
.1842 9 31.3378 300.278 6 0.56807 5 107.659 1 65.6029 6 43.7761 9 324.151 4 41.2
559 1 0.07818 8 120.182 2 750.788
5.042 897 50.88 956 25.97 54 0.533 254 24.66 403 1.722 29 159.2 248 307.8 146 5.
350 8 43.94 536 265.6 065 3.185 58 87.32 486 83.36 928 31.19 497 288.0 859 55.56
493 0.564 738 98.63 768 695.3
3 NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVERA GE 44.556 48.064 45.564 43.34 46.
604 53.006 67.6 3379.53 3635.87 3538.57 3403.33 3720.51 4278.54 5480.11 -6.36939
7.873238 -5.2014 -4.88105 7.531149 13.73702 27.53273 21.08029 0.752867 -4.52145
7.585078 -2.67611 -3.82188 9.319696 14.99875 28.08365 28.87114 1.031112 28.7988
8 59.71913 13.91953 18.65479 70.18802 206.0381 773.2195 3270.029 116.7868 -5.552
57 6.553966 -3.70723 -4.85299 8.288584 13.96764 27.05253 0 0 30.8309 8 42.9544 7
13.7435 2 23.5515 6 68.7006 2 195.094 9 731.839 6 3469.41 7 123.907 7
455 20.44 354 57.53 341 7.161 582 14.60 679 86.85 673 224.9 625 788.6 911 3499.
186
Figure:3.2
σm = √123.9077 =11.13239
β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (91560.82- 608.6119)/ (97977.21- 83
6) = 90952.21/ 97143.67 = 0.936265
Ta le:3.6
Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2008 JAN FEB MAR APL MA
Y JUN JULY AUG EP OCT NOV -4.9644 -1.56548 9.150912 6.077365 4.944284 4.973386
-0.76839 8.866266 15.61078 3.094908 7.577196 -17.0559 -1.05017 -13.12 4.542762 -
5.48113 -14.5154 4.767099 4.344916 -9.67084 -24.9002 -6.36939
Rm
Ri-Rm
Dev frm ave
q of Dev frm av

-8.05529 2.24564 7.13369 2 5.09660 6 0.73024 2 4.96628 9 -1.31236 12.6184 3 17.5

446 5 -2.31318 6.62913 -16.2974 1.78481 9 -9.34478 9.13067 8 -5.58525 -16.9731 7
.45418 8 0.75149 1 -9.93165 -26.3694 -4.52145
3.090893 -3.81112 2.01722 0.980759 4.214041 0.007097 0.54397 -3.75217 -1.93386 5
.408088 0.948066 -0.75845 -2.83499 -3.77523 -4.58792 0.10412 2.457673 -2.68709 3
.593425 0.260807 1.469223 -1.84793
-3.36914 3.532879 -2.29546 -1.259 -4.49229 -0.28534 -0.82221 3.473923 1.655617 -
5.68633 -1.22631 0.480204 2.55674 3.496982 4.309671 -0.38237 -2.73592 2.408844 -
3.87167 -0.53905 -1.74747 1.569689
11.35109 12.48124 5.269159 1.585089 20.18063 0.08142 0.676037 12.06814 2.741069
32.33438 1.503837 0.230596 6.536922 12.22888 18.57326 0.146203 7.485245 5.802531
14.98983 0.290577 3.053642 2.463923
DEC 2009 JAN FEB MAR APL MAY TOTAL AVERAGE
7.873238 -5.2014 -4.88105 7.531149 13.73702 27.53273 21.08029 0.75286 7
7.58507 8 -2.67611 -3.82188 9.31969 6 14.9987 5 28.0836 5 28.8711 4 1.03111 2
0.28816 -2.52528 -1.05916 -1.78855 -1.26173 -0.55091 -7.79085 -0.27824
-0.5664 2.24704 0.780919 1.510302 0.983487 0.272669
0.320814 5.049189 0.609834 2.281012 0.967247 0.074348 181.3761 6.477719
tandard Deviation for the fund’  exce  return ( .D.) σi=√6.477719 =2.545136 harpe I
ndex ( i) = (Ri - Rf)/ i = (0.752867-5)/ 2.545136 =-1.66872 Treynor
 Index (Ti)
= (Ri - Rf)/Bi. =(0.752867-5/ 0.936265 =-4.53625 Jen on alpha (αp)= Ri –[ Rf + Bi (
Rm - Rf) ] =0.752867 = [5+0.936265(1.031112-5)] -0.39357
Expected return E(Ri) = Rf + Bi (Rm - Rf) =[5+0.936265(1.031112-5)] =1.284069
Fem  Me sures Selectivity =Ri –[ Rf + Bi (Rm - Rf) ] =0.75286 7[5+0.936265(1.03111
2-5)]
=
-0.39357
Diversific tion =[Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf) ] =[5+(1.031112-5)( 2.5
45136/11.13139)]- [5+0.936265(1.031112-5)] =2.808464 Net selectivity= selectivit
y- diversific tion =-0.39357-2.808464 =-3.33967
HDFC GROWTH FUND Investment objective The prim ry investment objective of the Sc
heme is to gener te long term c pit l ppreci tion from  portfolio th t is inve
sted predomin ntly in equity nd equity rel ted instruments. B sic Scheme Inform
tion
T ble:3.7
N ture of Scheme Inception D te Option/Pl n Entry Lo d (purch se / ddition l pu
rch se / switchin)
Open Ended Growth Scheme Sep 11, 2000 Dividend Option, Growth Option, NIL (With
effect from August 1, 2009)
Exit Lo d. ( s  % of the Applic ble NAV) Minimum Applic tion Amount
Nil
Rs.5000 nd in multiples of Rs.100 thereof to open n ccount / folio. Addition 
l purch ses is Rs. 1000 nd in multiples of Rs. 100 thereof
Lock-In-Period Net Asset V lue Periodicity Redemption Proceeds
Nil Every Business D y Norm lly desp tched within 3 Business d ys
Investment p ttern The corpus of the Scheme will be invested prim rily in equity
nd equity rel ted instruments. The Scheme m y invest  p rt of its corpus in d
ebt nd money m rket instruments, in order to m n ge its liquidity requirements
from time to time, nd under cert in circumst nces, to protect the interests of
the Unit holders. The sset lloc tion under the Scheme will be s follows :
T ble:3.8
SR NO.
TYPE OF INSTRUMENTS
NORMAL ALLOCATION (%of net sset)
RISK PROFILE Medium to high
1
Equities & Equities rel ted instruments
80-100
2
Debt securities, money m rket instruments & c sh
0-100
Low to medium
Investment Str tegy & Risk Control The investment ppro ch will be b sed on  se
t of well est blished but flexible principles th t emph sise the concept of sust
in ble economic e rnings nd c sh return on investment s the me ns of v lu tio
n of comp nies. In summ ry, the Investment Str tegy is expected to be  function
of extensive rese rch nd b sed on d t  nd re soning, r ther th n current f sh
ion nd emotion. The objective will be to identify "businesses with superior gro
wth prospects nd good m n gement, t  re son ble price". Benchm rk Index : SEN
SEX Fund M n ger : Mr. Shriniv s R o
HDFC GROWTH FUND
T ble:3.9 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB
MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 48.917 45.047 45.461 48.581 53.198 54.
695 58.716 58.17 63.82 73.682 74.895 80.576 68.432 67.827 62.15 66.196 62.813 53
.472 56.819 58.871 54.54 42.283 40.089 41.652 SENSEX 14090.92 12938.09 13072.1 1
3872.37 14544.46 14650.51 15550.99 15318.6 17291.1 19837.99 19363.19 20286.99 17
648.71 17578.72 15644.44 17287.31 16415.57 13461.6 14355.75 14564.53 12860.43 97
88.06 9092.72 9647.31 -7.91136 0.91904 6.863025 9.503715 2.814016 7.351677 -0.92
99 9.71291 15.45284 1.646264 7.585286 -15.0715 -0.88409 -8.36982 6.510056 -5.110
58 -14.8711 6.259351 3.611468 -7.35676 -22.4734 -5.18885 3.898825 -8.18137 1.035
779 6.12197 4.84481 0.729144 6.146407 -1.49437 12.8765 14.72949 -2.39339 4.77090
8 -13.0048 -0.39657 -11.0035 10.5013 -5.04266 -17.9949 6.642227 1.45433 -11.7003
-23.8901 -7.10396 6.099275 64.72575 0.951922 42.01523 46.0437 2.051821 45.1864
1.389618 125.0683 227.6123 -3.94015 36.1887 196.0015 0.350606 92.09761 68.36407
25.77091 267.6048 41.57603 5.252267 86.07665 536.8922 36.86137 23.78001 -8.91997
0.297178 5.383369 4.106209 -0.00946 5.407806 -2.23298 12.1379 13.99088 -3.13199
4.032307 -13.7434 -1.13517 -11.7421 9.762702 -5.78126 -18.7335 5.903626 0.71572
9 -12.4389 -24.6287 -7.84256 5.360674 79.56584 0.088315 28.98066 16.86095 8.94E-
05 29.24437 4.986179 147.3287 195.7448 9.809352 16.2595 188.8807 1.28862 137.877
7 95.31035 33.42296 350.9451 34.8528 0.512268 154.7273 606.5731 61.50578 28.7368
3 66.93478 1.072838 37.47851 23.47219 0.53165 37.77832 2.233155 165.8043 216.957
7 5.728304 22.76156 169.1245 0.15727 121.0777 110.2774 25.4284 323.8174 44.11918
2.115076 136.898 570.737 50.46627 37.20116 Ri Rm Ri Rm Rm-Rm v sqr(RmRm v) Rm
2
2009 JAN FEB MAR APL MAY TOTAL AVG
38.443 36.429 38.73 44.131 56.982
9424.24 8891.61 9708.5 11403.25 14625.25
-7.70431 -5.23893 6.316396 13.94526 29.12012 30.39962 1.085701
-2.31225 -5.6517 9.1872 17.45635 28.2551 20.68083 0.738601
17.8143 29.60885 58.03 243.4334 822.792 3139.6 112.1286
-3.05085 -6.3903 8.448599 16.71775 27.5165 0 0
9.307696 40.83598 71.37883 279.4832 757.1579 3381.666 120.7738
5.346504 31.94174 84.40465 304.7242 798.3508 3396.941
Figure:3.3
σm= √120.7738 =10.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (87908.8-62
(95114.34-427.6966)
= 87280.12/ 94686.64 = 0.921779
Ta le:3.10 Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2008 JAN FEB
MAR APL MAY JUN JULY AUG EP OCT NOV -7.91136 0.91904 6.863025 9.503715 2.81401
6 7.351677 -0.9299 9.71291 15.45284 1.646264 7.585286 -15.0715 -0.88409 -8.36982
6.510056 -5.11058 -14.8711 6.259351 3.611468 -7.35676 -22.4734 -5.18885 -8.1813
7 1.035779 6.12197 4.84481 0.729144 6.146407 -1.49437 12.8765 14.72949 -2.39339
4.770908 -13.0048 -0.39657 -11.0035 10.5013 -5.04266 -17.9949 6.642227 1.45433 -
11.7003 -23.8901 -7.10396 0.270008 -0.11674 0.741056 4.658905 2.084872 1.20527 0
.564474 -3.16359 0.723351 4.039651 2.814378 -2.0667 -0.48752 2.633708 -3.99125 -
0.06792 3.123803 -0.38288 2.157138 4.34358 1.416689 1.915115 0.077092104 0.46383
8642 -0.393955855 -4.311805316 -1.737772055 -0.85817039 -0.217374552 3.510692544
-0.376251086 -3.692551406 -2.467278063 2.413797413 0.834616326 -2.286608411 4.3
38346289 0.415022146 -2.776702677 0.729975995 -1.810037944 -3.996480234 -1.06958
9295 -1.568014871 0.005943 0.215146 0.155201 18.59167 3.019852 0.736456 0.047252
12.32496 0.141565 13.63494 6.087461 5.826418 0.696584 5.228578 18.82125 0.17224
3 7.710078 0.532865 3.276237 15.97185 1.144021 2.458671 66.93478 1.072838 37.478
51 23.47219 0.53165 37.77832 2.233155 165.8043 216.9577 5.728304 22.76156 169.12
45 0.15727 121.0777 110.2774 25.4284 323.8174 44.11918 2.115076 136.898 570.737
50.46627 Rm Ri-Rm Dev frm ave q of Dev frm av Rm2
DEC 2009 JAN FEB MAR APL MAY TOTAL AVG
3.898825 -7.70431 -5.23893 6.316396 13.94526 29.12012 30.39962 1.085701
6.099275 -2.31225 -5.6517 9.1872 17.45635 28.2551 20.68083 0.738601
-2.20045 -5.39206 0.412777 -2.8708 -3.51109 0.865017 9.718797 0.3471
2.547549815 5.73916105 -0.065677352 3.217903695 3.858190515 -0.517917027 -4.4408
9E-15 -1.58603E-16
6.49001 32.93797 0.004314 10.3549 14.88563 0.268238 181.7403 6.490725
37.20116 5.346504 31.94174 84.40465 304.7242 798.3508 3396.941
tandard Deviation for the fund’  exce  return ( .D.) σi=√6.490725 =2.54769 harpe In
dex ( i) = (Ri - Rf)/ i = (1.085701-5)/ 2.54769 =-1.53641 Treynor
 Index (Ti) =
(Ri - Rf)/Bi. =(1.085701-5)/ 0.921779 =-4.24646 Jen on alpha (αp)= Ri –[ Rf + Bi (R
m - Rf) ] =1.08570 1= [5+0.921779 (0.738601-5)] 0.013767
Expected return E(Ri) = Rf + Bi (Rm - Rf) =[5+0.921779 (0.738601-5)]
=1.071934
Fem  Me sures Selectivity =Ri –[ Rf + Bi (Rm - Rf) ] =1.08570 1= [5+0.921779 (0.73
8601-5)] 0.013767
Diversific tion =[Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)] =[5+(0.738601-5)( 2.54
769/10.98971)]- [5+0.921779 (0.738601-5)] =2.940167 Net selectivity= selectivity
- diversific tion =0.013767-2.940167 =-2.9264
HDFC LONG TERM FUND
Investment Objective To chieve long term c pit l ppreci tion. B sic Scheme Inf
orm tion
N ture of Scheme
Close Ended Equity Scheme with  m turity period of 5 ye rs with utom tic conve
rsion into n open-ended scheme upon m turity of the Scheme.
Inception D te Closing D te Option/Pl n
10-Feb-06 27-J n-06 Dividend Option,Growth Option. Dividend Option currently off
ers p yout f cility only.
Entry Lo d (purch se / ddition l purch se / switch-in)
NIL (With effect from August 1, 2009)
Exit Lo d ( s  % of the Applic ble NAV) (Other th n System tic Investment Pl n
(SIP)/ System tic Tr nsfer Pl n (STP))
Redemption / Switch-out from the D te of Allotment :
• • • • • •
Upto 12 months 4% After 12 months upto 24 months 3% After 24 months upto 36 mont
hs 2% After 36 months upto 48 months 1% After 48 months upto 54 months 0.5% Afte
r 54 months upto M turity Nil
No Exit Lo d sh ll be levied on bonus units nd units llotted on dividend reinv
estment. Specified Redemption Period A Unit holder c n submit redemption/ switch
-out request only during the Specified Redemption Period. Presently, the
Specified Redemption Period is the first five Business D ys immedi tely fter th
e end of e ch c lend r h lf ye r. Minimum Applic tion Amount (Other th n System 
tic Investment Pl n (SIP)/ System tic Tr nsfer Pl n (STP)) Lock-In-Period Net As
set V lue Periodicity Redemption Proceeds Nil Every Business D y. Norm lly disp 
tched within 3 D ys Currently no purch ses/ switch-ins re llowed into this sch
eme.
Current Expense R tio (#) (Effective D te 22nd M y 2009)
On the first 100 crores ver ge weekly net ssets 2.50% On the next 300 crores 
ver ge weekly net ssets 2.25% On the next 300 crores ver ge weekly net ssets
2.00% On the b l nce of the ssets 1.75%
Investment P ttern The following t ble provides the sset lloc tion of the Sche
mes portfolio. Type of Instruments Minimum Alloc tion Minimum Alloc tion Risk Pr
ofile of the Instrument (% of Net Assets) Equity & Equity rel ted instruments Fi
xed Income Securities (including money m rket instruments) 0 30 Low 70 (% of Net
Assets) 100 High
Investment Str tegy The investment str tegy of the Scheme is to build nd m int 
in  diversified portfolio of equity stocks th t h ve the potenti l to ppreci t
e in the long run. Comp nies identified for selection in the portfolio will h ve
demonstr ted  potenti l bility to grow t  re son ble r te for the long term
. The im will be to build  portfolio th t dequ tely reflects  cross-section
of the growth re s of the economy from time to time. While the portfolio focuse
s prim rily on  buy nd hold str tegy t most times, it will b l nce the s me w
ith  r tion l ppro ch to selling when the v lu tions become too dem nding even
in the f ce of re son ble growth prospects in the long run. Fund M n ger Mr. Sr
iniv s R o R vuri (since Apr 3, 06) Mr. An nd L ddh  - Dedic ted Fund M n ger -
Foreign Securities
HDFC LONG TERM FUND
T ble:3.11 NAV 2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV 95.224 87.782 8
6.337 91.627 96.561 100.695 102.976 102.627 109.68 118.185 119.445 SENSEX 14090.
92 12938.09 13072.1 13872.37 14544.46 14650.51 15550.99 15318.6 17291.1 19837.99
19363.19 -7.81526 -1.64612 6.127153 5.384876 4.281232 2.265256 -0.33891 6.87246
7.754376 1.066125 -8.18137 1.035779 6.12197 4.84481 0.729144 6.146407 -1.49437
12.8765 14.72949 -2.39339 63.93949 -1.70502 37.51024 26.0887 3.121633 13.92319 0
.506464 88.49326 114.218 -2.55165 -8.91997 0.297178 5.383369 4.106209 -0.00946 5
.407806 -2.23298 12.1379 13.99088 -3.13199 79.56584 0.088315 28.98066 16.86095 8
.94E-05 29.24437 4.986179 147.3287 195.7448 9.809352 66.93478 1.072838 37.47851
23.47219 0.53165 37.77832 2.233155 165.8043 216.9577 5.728304 Ri Rm Ri Rm Rm-Rm
v sqr(RmRm v) Rm2
DEC 2008 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL M
AY TOTAL AVG
128.983 112.202 110.554 96.105 103.44 99.18 85.045 88.972 93.359 82.286 63.504 5
7.237 61.406 58.709 55.785 59.209 68.298 87.958
20286.99 17648.71 17578.72 15644.44 17287.31 16415.57 13461.6 14355.75 14564.53
12860.43 9788.06 9092.72 9647.31 9424.24 8891.61 9708.5 11403.25 14625.25
7.985265 -13.0102 -1.46878 -13.0696 7.632277 -4.11833 -14.2519 4.617555 4.930765
-11.8607 -22.8253 -9.86867 7.28375 -4.39208 -4.9805 6.137851 15.35071 28.78562
6.828943 0.243891
4.770908 -13.0048 -0.39657 -11.0035 10.5013 -5.04266 -17.9949 6.642227 1.45433 -
11.7003 -23.8901 -7.10396 6.099275 -2.31225 -5.6517 9.1872 17.45635 28.2551 20.6
8083 0.738601
38.09697 169.1954 0.582478 143.8121 80.14885 20.76733 256.4613 30.67085 7.17096
138.7739 545.298 70.10665 44.42559 10.15559 28.14829 56.38966 267.9674 813.3405
3065.056 109.4663
4.032307 -13.7434 -1.13517 -11.7421 9.762702 -5.78126 -18.7335 5.903626 0.715729
-12.4389 -24.6287 -7.84256 5.360674 -3.05085 -6.3903 8.448599 16.71775 27.5165
0 0
16.2595 188.8807 1.28862 137.8777 95.31035 33.42296 350.9451 34.8528 0.512268 15
4.7273 606.5731 61.50578 28.73683 9.307696 40.83598 71.37883 279.4832 757.1579 3
381.666 120.7738
22.76156 169.1245 0.15727 121.0777 110.2774 25.4284 323.8174 44.11918 2.115076 1
36.898 570.737 50.46627 37.20116 5.346504 31.94174 84.40465 304.7242 798.3508 33
96.941
Figure:3.4
σm= √120.7738 =10.98971 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (85821.57-
/ (95114.34- 427.6966) = 85680.34/ 94686.64 = 0.904883
Ta le:3.12
Ri 2007 JAN FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2008 JAN FEB MAR APL MA
Y JUN JULY AUG EP OCT NOV DEC 2009 JAN FEB MAR -7.81526 -1.64612 6.127153 5.384
876 4.281232 2.265256 -0.33891 6.87246 7.754376 1.066125 7.985265 -13.0102 -1.46
878 -13.0696 7.632277 -4.11833 -14.2519 4.617555 4.930765 -11.8607 -22.8253 -9.8
6867 7.28375 -4.39208 -4.9805 6.137851
Rm
Ri-Rm
Dev frm ave
q of Dev frm av
-8.18137 1.035779 6.12197 4.84481 0.729144 6.146407 -1.49437 12.8765 14.72949 -2
.39339 4.770908 -13.0048 -0.39657 -11.0035 10.5013 -5.04266 -17.9949 6.642227 1.
45433 -11.7003 -23.8901 -7.10396 6.099275 -2.31225 -5.6517 9.1872
0.366111 -2.6819 0.005183 0.540065 3.552088 -3.88115 1.15546 -6.00404 -6.97511 3
.459513 3.214357 -0.00545 -1.07221 -2.0661 -2.86903 0.924329 3.743063 -2.02467 3
.476435 -0.16032 1.064835 -2.76471 1.184475 -2.07983 0.671205 -3.04935
-0.860821325 2.187192079 -0.499893333 -1.034775537 -4.046798071 3.386440599 -1.6
50170515 5.509332488 6.48039862 -3.954222903 -3.709067209 -0.489256261 0.5774965
05 1.571389464 2.374315379 -1.419039116 -4.237772814 1.529961243 -3.971144712 -0
.334386466 -1.559545364 2.26999821 -1.679185121 1.585118054 -1.165915514 2.55463
9268
0.741013 4.783809 0.249893 1.07076 16.37657 11.46798 2.723063 30.35274 41.99557
15.63588 13.75718 0.239372 0.333502 2.469265 5.637374 2.013672 17.95872 2.340781
15.76999 0.111814 2.432182 5.152892 2.819663 2.512599 1.359359 6.526182
APL MAY TOTAL AVG
15.35071 28.78562 6.828943 0.243891
17.45635 28.2551 20.68083 0.738601
-2.10565 0.530513 -13.8519 -0.49471
1.610935739 -1.025223388 -4.44089E-15 -1.58603E-16
2.595114 1.051083 210.478 5.538895
tandard Deviation for the fund’  exce  return ( .D.) σi=√5.538895 =2.353486 harpe I
ndex ( i) = (Ri - Rf)/ i = (0.243891-5)/ 2.353486 =-2.02088 Treynor
 Index (Ti)
= (Ri - Rf)/Bi. =(0.243891-5)/ 0.904883 =-5.25605 Jen on alpha (αp)= Ri –[ Rf + Bi
(Rm - Rf) ] =0.243891- [5+0.904883 (0.738601-5)] = -0.90004
Expected return E(Ri) = Rf + Bi (Rm - Rf) =[5+0.904883 (0.738601-5)] =1.143932
Fem  Me sures Selectivity =Ri –[ Rf + Bi (Rm - Rf) ]
=0.243891- [5+0.904883 (0.738601-5)] = -0.90004
Diversific tion =[Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)] =[5+(0.738601-5)( 2.35
3486/10.98971)]- [5+0.904883 (0.738601-5)] =2.943474 Net selectivity= selectivit
y- diversific tion =-0.90004-2.943474 =-3.84352
HDFC TAXSAVER Investment Objective The investment objective of the Scheme is to
chieve long term growth of c pit l. B sic Scheme Inform tion
T ble:3.13
N ture of Scheme
Open Ended Equity Linked S ving Scheme
Inception D te Option/Pl n Entry Lo d (purch se / ddition l purch se / switchin
)
M r 31, 1996 Dividend Option, Growth Option, NIL (With effect from August 1, 200
9)
Exit Lo d. ( s  % of the Applic ble NAV) Minimum Applic tion Amount
Nil
Rs.5000 nd in multiples of Rs.100
thereof to open n ccount / folio. Lock-In-Period Net Asset V lue Periodicity R
edemption Proceeds 3 yrs Every Business D y Norm lly desp tched within 3 Busines
s d ys Investment P ttern The sset lloc tion under the Scheme will be s follo
ws:
T ble:3.14
SR NO.
ASSET TYPE
(% OF PORTFOLIO)
RISK PROFILE Medium to high
1
Equities & Equities rel ted instruments
Minimum 80%
2
Debt securities, money m rket instruments & c sh
Minimum 20%
Low to medium
Investment in Securitized debt, if undert ken, would not exceed 20% of the net 
ssets of the scheme.
The Scheme m y lso invest up to 25% of net ssets of the Scheme in deriv tives
such s Futures & Options nd such other deriv tive instruments s m y be introd
uced from time to time for the purpose of hedging nd portfolio b l ncing nd n
d other uses s m y be permitted under the regul tions nd guidelines.
The Scheme m y lso invest  p rt of its corpus, not exceeding 40% of its net s
sets, in overse s m rkets in Glob l Depository Receipts (GDRs), ADRs, overse s e
quity, bonds nd mutu l funds nd such other instruments s m y be llowed under
the Regul tions from time to time. The ELSS (Equity Linked S vings Scheme) guid
elines, s pplic ble, would be dhered to in the m n gement of this Fund. If th
e investment in equities nd rel ted
instruments f lls below 80% of the portfolio of the Scheme t ny point in time,
it would be ende voured to review nd reb l nce the composition. Benchm rk Inde
x : S&P CNX 500. HDFC T x s ver, which is benchm rked to S&P CNX 500 Index is no
t sponsored, endorsed, sold or promoted by Indi n Index Service & Products Limit
ed (IISL). Fund M n ger : Dh w l Meht 
HDFC TAX SAVER FUND
T ble:3.15 NAV S&P CNX 500 4899.39 4504.73 4605.89 4934.46 5185.95 5223.82 5483.
25 5411.29 6094.11 7163.3 6997.6 7461.48 6245.45 6356.92 5762.88 6289.07 -7.5280
2 -0.92575 7.787455 6.553344 1.80145 4.519756 -1.30127 7.300549 14.69787 -1.0073
6 3.837141 -15.1784 -0.82642 -11.5366 4.204052 -8.05529 2.24564 7.133692 5.09660
6 0.730242 4.966289 -1.31236 12.61843 17.54465 -2.31318 6.62913 -16.2974 1.78481
9 -9.34478 9.130678 60.64039 -2.07891 55.5533 33.39982 1.315495 22.44641 1.70772
9 92.12149 257.8689 2.330208 25.43691 247.3687 -1.47501 107.8066 38.38584 -9.086
4 1.214527 6.10258 4.065494 -0.30087 3.935177 -2.34347 11.58732 16.51353 -3.3442
9 5.598018 -17.3285 0.753707 -10.3759 8.099566 82.56268 1.475077 37.24148 16.528
24 0.090523 15.48562 5.491863 134.266 272.6968 11.18429 31.3378 300.2786 265.606
5 171.845 152.02 158.411 0.568075 107.6591 65.60296 3.18558 87.32486 83.36928 64
.88767 5.042897 50.88956 25.9754 0.533254 24.66403 1.72229 159.2248 307.8146 5.3
508 43.94536 Ri Rm Ri Rm Rm-Rm v sqr(RmRm v) Rm2
2007 JAN FEB MAR APL MAY JUN JULY AUG SEP OCT NOV DEC 2008 JAN FEB MAR APL
146.134 135.133 133.882 144.308 153.765 156.535 163.61 161.481 173.27 198.737 19
6.735 204.284 173.277
MAY JUN JULY AUG SEP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG
148.793 126.45 135.953 142.358 132.682 99.119 90.957 98.972 93.555 89.449 97.063
112.05 144.827
5937.81 4929.98 5297.47 5337.28 4807.2 3539.57 3379.53 3635.87 3538.57 3403.33 3
720.51 4278.54 5480.11
-6.07155 -15.0162 7.515223 4.711187 -6.79695 -25.2958 -8.23455 8.811856 -5.47327
-4.38886 8.512113 15.44049 29.25212 15.36369 0.548703
-5.58525 -16.9731 7.454188 0.751491 -9.93165 -26.3694 -4.52145 7.585078 -2.67611
-3.82188 9.319696 14.99875 28.08365 28.87114 1.031112
33.91109 254.8707 56.01989 3.540414 67.50492 667.0357 37.23212 66.83862 14.64708
16.77372 79.3303 231.588 821.5062 3293.627 117.6295
-6.61636 -18.0042 6.423076 -0.27962 -10.9628 -27.4005 -5.55257 6.553966 -3.70723
-4.85299 8.288584 13.96764 27.05253 0
43.77619 324.1514 41.25591 0.078188 120.1822 750.7883 30.83098 42.95447 13.74352
31.19497 288.0859 55.56493 0.564738 98.63768 695.3455 20.44354 57.53341 7.161582
23.55156 68.70062 195.0949 731.8396 3469.417 123.9077
14.60679 86.85673 224.9625 788.6911 3499.186
Figure:3.5
σm= √123.9077 =11.13139 β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ] = (92221.54-
/ (97977.21- 833.5426) = 91777.98/ 97143.67 = 0.944765
Ta le:3.16 Ri Rm Ri-Rm Dev frm ave q of Dev frm av
2007 JAN FEB MAR APL MAY JUN JULY AUG EP OCT NOV DEC 2008 JAN FEB MAR APL MAY -
7.52802 -0.92575 7.787455 6.553344 1.80145 4.519756 -1.30127 7.300549 14.69787 -
1.00736 3.837141 -15.1784 -0.82642 -11.5366 4.204052 -6.07155 -8.05529 2.24564 7
.133692 5.096606 0.730242 4.966289 -1.31236 12.61843 17.54465 -2.31318 6.62913 -
16.2974 1.784819 -9.34478 9.130678 -5.58525 0.527266 -3.17139 0.653763 1.456738
1.071208 -0.44653 0.011095 -5.31788 -2.84678 1.305818 -2.79199 1.119058 -2.61124
-2.19178 -4.92663 -0.4863 -1.00968 2.688985 -1.13617 -1.93915 -1.55362 -0.03588
-0.4935 4.835475 2.364366 -1.78823 2.30958 -1.60147 2.128833 1.709373 4.444217
0.003894 1.019444 7.230641 1.290886 3.760291 2.413726 0.001287 0.243546 23.38182
5.590227 3.197757 5.334158 2.564696 4.531929 2.921956 19.75106 1.52E-05
JUN JULY AUG EP OCT NOV DEC 2009 JAN FEB MAR APL MAY TOTAL AVG
-15.0162 7.515223 4.711187 -6.79695 -25.2958 -8.23455 8.811856 -5.47327 -4.38886
8.512113 15.44049 29.25212 15.36369 0.548703
-16.9731 7.454188 0.751491 -9.93165 -26.3694 -4.52145 7.585078 -2.67611 -3.82188
9.319696 14.99875 28.08365 28.87114 1.031112
1.956929 0.061035 3.959696 3.134702 1.073584 -3.71309 1.226778 -2.79715 -0.56698
-0.80758 0.441737 1.168474 -13.5075 -0.48241
-2.43934 -0.54344 -4.44211 -3.61711 -1.55599 3.230684 -1.70919 2.314743 0.08457
0.325174 -0.92415 -1.65088
5.950372 0.295331 19.7323 13.08349 2.421115 10.43732 2.921319 5.358035 0.007152
0.105738 0.854046 2.725415 147.1251 5.254467

tandard Deviation for the fund’  exce  return ( .D.) σi=√ 5.254467
= 2.292262

harpe Index ( i) = (Ri - Rf)/ i = (0.548703-5)/ 2.292262 =-1.94188 Treynor
 In

dex (Ti) = (Ri - Rf)/Bi. =(0.548703-5)/ 0.944765 =-4.71154
Jen on alpha (αp) = Ri –[ Rf + Bi (Rm - Rf) ] =0.548703- [5+0.944765 (1.031112-5)] =
-0.70163
Expected return E(Ri) = Rf + Bi (Rm - Rf) =[5+0.944765 (1.031112-5)] =1.250332 F
em  Me sure: Selectivity =Ri –[ Rf + Bi (Rm - Rf) ] =0.548703 = -0.70163 [5+0.9447
65 (1.031112-5)]
Diversific tion = [Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)] =[5+(1.031112-5)( 2.2
92262/11.13139)]- [5+0.944765 (1.031112-5)] =2.932363 Net selectivity= selectivi
ty- diversific tion =-0.70163-2.932363 =-3.63399
HDFC TOP 200 FUND
Investment Objective
The investment objective is to gener te long-term c pit l ppreci tion from  po
rtfolio of equity nd equity linked instruments. The investment portfolio for eq
uity nd equity-linked instruments will be prim rily dr wn from the comp nies in
the BSE 200 Index. Further, the Scheme m y lso invest in listed comp nies th t
would qu lify to be in the top 200 by m rket c pit lis tion on the BSE even tho
ugh they m y not be listed on the BSE This includes p rticip tion in l rge IPO’s w
here in the m rket c pit lis tion of the comp ny b sed on issue price would m ke
the comp ny  p rt of the top 200 comp nies listed on the BSE b sed on m rket c
pit lis tion. B sic Scheme Inform tion
T ble:3.17
N ture of Scheme Inception D te Option/Pl n Entry Lo d (purch se / ddition l pu
rch se / switchin)
Open Ended Equity Growth Scheme Oct 11, 1996 Dividend Option, Growth Option, NIL
(With effect from August 1, 2009)
Exit Lo d. Minimum Applic tion Amount
Nil Rs.5000 nd in multiples of Rs.100 thereof to open n ccount / folio. Addit
ion l purch ses is Rs. 1000 nd in multiples of Rs. 100 thereof.
Lock-In-Period
Nil
Investment P ttern The sset lloc tion under the Scheme will be s follows:
T ble:3.18
SR NO.
ASSET TYPE
(% OF PORTFOLIO)
RISK PROFILE
1
Equities & Equities rel ted instruments
Upto 100% (including use of deriv tives for hedging nd other uses s permitted
by prev iling SEBI Regul tions)
Medium to high
2
Debt securities, money m rket instruments & c sh
B l nce in Debt & Money M rket Instruments
Low to medium
Investment in Securitised debt, if undert ken, would not exceed 20% of the net 
ssets of the scheme. The Scheme m y lso invest upto 25% of net ssets of the Sc
heme in deriv tives such s Futures & Options nd such other deriv tive instrume
nts s m y be introduced from time to time for the purpose of hedging nd portfo
lio b l ncing nd other uses s m y be permitted under the regul tions nd guide
lines. Investment Str tegy & Risk Control The investment str tegy of prim rily r
estricting the equity portfolio to the BSE 200 Index scrips is intended to reduc
e risks while m int ining ste dy growth. Stock specific risk will be minimised b
y investing only in those comp nies / industries th t h ve been thoroughly rese 
rched by the investment m n ger
s rese rch te m. Risk will lso be reduced throu
gh  diversific tion of the portfolio. Benchm rk Index : BSE 200 Fund M n ger :
Mr. Pr sh nt J in
HDFC TOP 200 FUND
T ble:3.19 Ri Rm Ri Rm Rm-AvRm (RmAvRm)2 Rm2
2007 JAN FEB MAR APRI L MAY JUNE JULY AUG SEPT OCT NOV DEC 2008 JAN FEB MAR APRI
L MAY JUNE JULY AUG SEPT OCT NOV DEC 2009 JAN FEB MAR
112.359 103.269 104.504 111.805 119.096 120.34 127.614 126.201 140.49 160.215 15
8.356 169.794 147.718 147.689 131.544 143.025 137.675 115.424 123.902 129.235 11
8.754 92.324 86.546 92.798 88.074 84.379 92.552
1687.35 1545.27 1556.72 1666.14 1766.08 1804.81 1894.18 1857.7 2118.86 2439.87 2
454.23 2656.52 2230.39 2217.47 1932.41 2157.52 2038.22 1644.18 1749.11 1782.08 1
555.7 1145.68 1062.35 1156.59 1107.06 1044.94 1140.43 -8.09014 1.195906 6.986335
6.521175 1.044536 6.04454 -1.10725 11.32241 14.04015 -1.16032 7.222966 -13.0016
-0.01963 -10.9318 8.727878 -3.7406 -16.162 7.345093 4.304208 -8.11003 -22.2561
-6.25839 7.223904 -5.09063 -4.19534 9.686059 -8.4203 0.740971 7.028881 5.998295
2.192992 4.951768 -1.9259 14.05824 15.15013 0.588556 8.242504 -16.0409 -0.57927
-12.8552 11.64918 -5.5295 -19.3326 6.381905 1.884959 -12.7031 -26.356 -7.27341 8
.870899 -4.28242 -5.61126 9.138324 68.12144 0.886131 49.10612 39.11594 2.290658
29.93116 2.132443 159.1733 212.71 -0.68291 59.53532 208.5581 0.011372 140.5298 1
01.6727 20.68366 312.4523 46.87568 8.113254 103.0228 586.5812 45.51987 64.08253
21.80018 23.54111 88.51435 -9.34081 -0.17954 6.108374 5.077788 1.272485 4.031261
-2.84641 13.13774 14.22962 -0.33195 7.321997 -16.9614 -1.49978 -13.7757 10.7286
8 -6.45 -20.2531 5.461398 0.964452 -13.6236 -27.2765 -8.19392 7.950392 -5.20292
-6.53177 8.217817 87.25075 0.032233 37.31223 25.78393 1.619219 16.25106 8.10203
172.6001 202.4821 0.110192 53.61163 287.6897 2.249334 189.7699 115.1045 41.60255
410.1865 29.82686 0.930167 185.6036 744.0068 67.14027 63.20874 27.07041 42.6639
6 67.53251 70.90152 0.549038 49.40517 35.97955 4.809216 24.52 3.709088 197.6342
229.5264 0.346398 67.93887 257.3108 0.335555 165.2559 135.7035 30.57534 373.7477
40.72871 3.553069 161.3696 694.6377 52.90249 78.69286 18.33909 31.48622 83.5089
6
APRI L MAY Tot l Aver  ge
107.584 139.341
1339.38 1772.82
16.24168 29.51833 37.30138 1.332192
17.44517 32.36124 25.7742 0.920507
283.3389 955.2498 3632.867 129.7453
16.52467 31.44073 0 0
273.0646 988.5198 4141.326 147.9045
304.3341 1047.25 4165.051
Figure:3.6
σm= √147.9045 =12.1616
β (Beta) =[N (Σ XY) – Σ XΣ Y ]/[ N (Σ X2) – (Σ X) 2 ]
= (101720.3- 961.4133)/ (116621.4- 664.3093) = 100758.9/ 115957.1 = 0.868932
Ta le:3.20 Ri 2007 JAN FEB MAR APRIL MAY JUNE JULY AUG EPT OCT NOV DEC 2008 JAN
FEB MAR APRIL MAY -8.09014 1.195906 6.986335 6.521175 1.044536 6.04454 -1.10725
11.32241 14.04015 -1.16032 7.222966 -13.0016 -0.01963 -10.9318 8.727878 -3.7406
-8.4203 0.740971 7.028881 5.998295 2.192992 4.951768 -1.9259 14.05824 15.15013
0.588556 8.242504 -16.0409 -0.57927 -12.8552 11.64918 -5.5295 0.330164 0.454935
-0.04255 0.52288 -1.14846 1.092773 0.818654 -2.73583 -1.10998 -1.74887 -1.01954
3.039273 0.559639 1.923436 -2.92131 1.788892 0.081521 -0.04325 0.454231 -0.11119
1.560142 -0.68109 -0.40697 3.147515 1.521668 2.160557 1.431223 -2.62759 -0.1479
5 -1.51175 3.332991 -1.37721 0.006646 0.001871 0.206326 0.012364 2.434043 0.4638
8 0.165624 9.906851 2.315473 4.668006 2.048399 6.90422 0.02189 2.285389 11.10883
1.896699 70.90152 0.549038 49.40517 35.97955 4.809216 24.52 3.709088 197.6342 2
29.5264 0.346398 67.93887 257.3108 0.335555 165.2559 135.7035 30.57534 Rm Ri-Rm
dev frm av q of dev Rm2
JUNE JULY AUG EPT OCT NOV DEC 2009 JAN FEB MAR APRIL MAY
-16.162 7.345093 4.304208 -8.11003 -22.2561 -6.25839 7.223904 -5.09063 -4.19534
9.686059 16.24168 29.51833 37.30138 1.332192
-19.3326 6.381905 1.884959 -12.7031 -26.356 -7.27341 8.870899 -4.28242 -5.61126
9.138324 17.44517 32.36124 25.7742 0.920507
3.170579 0.963188 2.41925 4.593101 4.099889 1.015015 -1.647 -0.80821 1.415923 0.
547736 -1.20349 -2.84291 11.52718 0.411685
-2.75889 -0.5515 -2.00756 -4.18142 -3.6882 -0.60333 2.058681 1.219896 -1.00424 -
0.13605 1.615179 3.254597
7.611496 0.304156 4.030315 17.48424 13.60285 0.364007 4.238165 1.488145 1.008493
0.01851 2.608803 10.5924 107.7981 3.849932
373.7477 40.72871 3.553069 161.3696 694.6377 52.90249 78.69286 18.33909 31.48622
83.50896 304.3341 1047.25 4165.051
tandard Deviation for the fund’  exce  return ( .D.) σi=√3.849932 =1.962124 harpe I
ndex ( i) = (Ri - Rf)/ i = (1.332192-5)/ 1.962124 =-1.8693 Treynor
 Index (Ti)
= (Ri - Rf)/Bi. = (4.528901-5)/ 0.868932 =-4.22105 Jen on alpha (αp)= Ri –[ Rf + Bi
(Rm - Rf) ] =1.332192- [5+0.868932 (0.920507-5)] = -0.12301
Expected return E(Ri) = Rf + Bi (Rm - Rf)
=[5+0.868932 (0.920507-5)] =1.455198
Fem  Me sure: Selectivity =Ri –[ Rf + Bi (Rm - Rf) ] =1.332192- [5+0.868932 (0.920
507-5)] = -0.12301
Diversific tion =[Rf + (Rm - Rf)(αi/ αm)]-[Rf + Bi (Rm - Rf)] =[5+(0.920507-5)( 1.96
2124/12.1616)]- [5+0.868932 (0.920507-5)] =2.886626 Net selectivity= selectivity
- diversific tion =-0.12301-2.886626 =-2.87834
3.2 ANALYSIS OF THE OBSERVATION:
The t ble given below illustr tes the comp rison mong the n lysed funds b sed
on the different me sures of comp rison.
Perform nce of Fund portfolio nd Benchm rk return for 29 months (j n07-m y08)
T ble:3.21 FUND BENCHMARK RETURNS RETURN EQUITY FUND C pit l builder 12.22546 4.
872865 11.8529 11.8529
Growth fund Long term dv T x s ver Top 200
16.48711 -7.63043 -0.89438 24.0141
3.792016 3.792016 11.8529 5.065339
Figure:3.7
Perform nce Ev lu tion g inst Benchm rks The bove t ble presents return nd ri
sk of the six funds long with m rket return nd risk. From the t ble it is evid
ent th t, Top 200, Equity fund nd Growth fund h ve e rned gre ter return s g 
inst the m rket e rning. C pit l builder, Long term dv nt ge nd T x s ver fund
s h ve not e rned higher return th n the M rket portfolio. Long-term dv nt ge 
nd T x s ver funds h ve even neg tive returns.
Comp rison of r tios:
T ble:3.22 Fund n me S.D. m rket S.D. fund B v lue Sh rpe r tio Treynor r tio Je
nson’s lph  Fem  Retuns j n07m y08(29 months) 12.22546
HDFC Equity HDFC C pit l Builder
11.13239
2.392215
1.0096114
-1.64557
-3.89907
0.070488
-3.0836
11.13239
2.545136
0.936265
-1.66872
-4.53625
-0.39357
-3.33967
4.872865
HDFC Growth Fund
10.98971
2.54769
0.921779
-1.53641
-4.24646
0.013767
-2.9264
16.48711
HDFC Long Term Adv
10.98971
2.353486
0.904883
-2.02088
-5.25605
-0.90004
-3.84352
-7.63043
HDFC T x s ver HDFC Top 200
11.13139
2.292262
0.944765
-1.94188
-4.71154
-0.70163
-3.63399
-0.89438
12.1616
1.962124
0.868932
-1.8693
-4.22105
-0.12301
-2.87834
24.0141
St nd rd Devi tion of the M rket: High st nd rd devi tion of  fund implies high
vol tility nd  low st nd rd devi tion implies low vol tility. HDFC equity fun
d, HDFC c pit l Builder nd HDFC T x s ver t ke S&P CNX 500 s their benchm rk,
HDFC Growth fund nd HDFC long term h ve t ken Sensex s bench m rk nd HDFC Top
200 h s t ken BSE 200 s its bench m rk. We found out th t BSE 200’s S.D. is 12.1
616, which is gre ter th n Sensex nd S&P CNX 500 h ving 10.98971 nd 11.13139 S
.D. respectively. Therefore, BSE 200 is more vol tile th n Sensex nd S&P CNX 50
0. St nd rd devi tion of the Fund: It h s been found th t HDFC Top 200’s S.D. is l
esser th n ll other funds. Although benchm rk index (BSE 200) is more vol tile
s it h s higher S.D. th n other indexes still HDFC Top 200 is less vol tile bec
use of lesser fund S.D. This is might be bec use of diversific tion of unsystem
tic risk s it compens tes the system tic risk. β Value : A  we know in ca e of f
und , eta would indicate the volatility again t the enchmark index. It i  u ed
a  a hort term deci ion making tool. A eta that i  greater than 1 mean  that
the fund i  more volatile than the enchmark index, while a eta of le  than 1
mean  that the fund i  more volatile than the enchmark index. A fund with a et
a very clo e to 1 mean  the fund’  performance clo ely matche  the index or enchm
ark. The analy i  illu trate  that HDFC Equity fund’  i  le  volatile and it  per
formance i  very clo e to it  enchmark a  it  eta value i  1.0096114 compared
to other fund  which have eta value le er than 1 point. HDFC Top 200’  eta valu
e i  more volatile than the enchmark a  it  value i  0.868932, which i  very fa
r from point 1. harpe ratio: A fund with a higher harpe ratio mean  that the e
return  have een generated taking le er ri k. In other word , the fund i  le 
 volatile and yet generating good return. The analy i  how  that all the fund 
have negative harpe ratio therefore they are more ri ky. Comparing all the fun
d  HDFC growth fund ha  le er negative mark  that mean  it  return 16.48711 i 
generated taking le er ri k.
Treynor ratio: While a high and po itive Treynor
 Index how  a uperior ri k-a
dju ted performance of a fund, a low and negative Treynor
 Index i  an indicati
on of unfavoura le performance ( y tematic ri k a ociated with it ( eta)). All
the fund  are having negative Treynor’  ratio which mean  they are affected y the
volatility of the market ( y tematic ri k)or y the great rece ion. Jen on’  alp
ha: It  mea ure involve  evaluation of the return  that the fund ha  generated v
. the return  actually expected out of the fund given the level of it  y temat
ic ri k. Higher alpha repre ent  uperior performance of the fund and vice ver a
. The analy i  point  out that all the fund  are having negative alpha except HD
FC Equity fund and HDFC Growth fund which have po itive point . Jen on alpha rat
io ju tifie  that the e two fund  are at lea t a le to achieve the expected retu
rn given the level of their y tematic ri k. Fema mea ure: The Net electivity (
Fema) repre ent  the tock election kill of the fund manager, a  it i  the exc
e  return  over and a ove the return required to compen ate for the total ri k
taken y the fund manager. Higher value of which indicate  that fund manager ha 
earned return  well a ove the return commen urate with the level of ri k taken
y him. It ha  een that all the fund  are having negative net electivity ecau
e of the higher ri k found oth in y tematic ri k (B) and un y tematic ri k. T
hi  finding  point out, that the tock election of the fund manager ha  een fa
iled ecau e of the y tematic ri k i.e. rece ion. Comparing to other fund  HDF
C Growth fund (-2.9264) ha  le er negative point  in thi  time of great cri i .
Thi  indicate  that HDFC Growth fund i  getting enhanced return y nullifying 
y tematic ri k and un y tematic ri k.
From the a ove analy i  there i  no fund which ha  con i tency. The fund  are e
ing affected very adly either y the y tematic ri k or y the un y tematic ri 
k. A  we o erve clo ely, it i  the HDFC Growth fund, which ha  etter option fo
r the inve tment. It  harpe ratio i 
le er negative than other fund  which illu trate  that it  return i  le  affec
ted y overall ri k. It  alpha value i  more than 0 which mean  it  le  affecte
d y the market ri k ( y tematic ri k) and al o it  Fema value ( electivity) ha 
le er negative value which ha  managed to nullify y tematic ri k and un y tem
atic ri k during the time of rece ion. An inve tor who i  entering into the cap
ital market for making long-term inve tment, the volatility of the market i  imp
ortant to accompli h hi  or her goal and the e expectation  are often formed on
the a i  of hi torical record of monthly return , mea ured for holding period a
nd other important ratio . We will take thi  fund (HDFC Growth fund) for further
analy i  of it  portfolio.
HDFC Growth Fund Portfolio Analy i 
Ta le:3.23 Portfolio Name of In trument 31-May-09 Indu try + Quantity Market/ Fa
ir Value(R . In Lakh ) % toNAV
Equity & Equity Related (a) Li ted / awaiting li ting on tock Exchange  tate B
ank of India Zee Entertainment Enterpri e  Ltd. ICICI Bank Ltd. Bharti Airtel Lt
d. Crompton Greave  Ltd. Bharat Petroleum Corporation Limited Hou ing Developmen
t Finance Corporation Ltd.$ Exide Indu trie  Ltd. Divi  La oratorie  Ltd. Bank 
Media & Entertainment Bank  Telecom - ervice  Indu trial Capital Good  Petroleu
m Product  Finance Auto Ancillarie  Pharmaceutical  448,000 4,160,179 932,397 75
0,346 2,099,819 926,557 182,500 5,319,910 318,535 8,372.45 7,001.58 6,901.14 6,1
59.59 5,513.07 4,305.71 3,977.77 3,769.16 3,666.18 7.20 6.02 5.93 5.30 4.74 3.70
3.42 3.24 3.15
un Pharmaceutical Indu trie  Ltd. H T Media Ltd. olar Explo ive  Ltd. Ne tle I
ndia Ltd. Dr Reddy  La oratorie  Ltd. ITC Ltd. Coromandel Fertili er  Ltd. Bioco
n Limited Reliance Indu trie  Ltd. Hindu tan Petroleum Corporation Ltd. Da ur In
dia Ltd. Bank of Baroda Info y  Technologie  Ltd Mpha i  Limited Axi  Bank Ltd A
pollo Tyre  Ltd Tata teel Limited Hindu tan Unilever Ltd. Noida Toll Bridge Com
pany Ltd. Thermax Ltd. Oil & Natural Ga  Corporation Ltd. Nagarjuna Con truction
Co. Ltd. Ballarpur Indu trie  Ltd. Eimco Elecon (India) Ltd. Amara Raja Batteri
e  Ltd. C & C Con truction  Ltd
Pharmaceutical  Media & Entertainment Chemical  Con umer Non Dura le  Pharmaceut
ical  Con umer Non Dura le  Fertili er  Pharmaceutical  Petroleum Product  Petro
leum Product  Con umer Non Dura le  Bank  oftware oftware Bank  Auto Ancillari
e  Ferrou  Metal  Con umer Non Dura le  Tran portation Indu trial Capital Good 
Oil Con truction Project Paper Product  Indu trial Capital Good  Auto Ancillarie
 Con truction

272,365 2,307,000 913,257 160,268 420,000 1,462,305 1,433,271 1,319,006 104,250

633,721 2,050,115 469,151 120,000 569,000 220,000 5,367,120 400,000 653,355 3,60
7,000 367,366 111,353 711,738 3,967,287 276,428 836,454 396,496
3,305.83 2,861.83 2,807.81 2,766.79 2,719.50 2,685.52 2,608.55 2,397.95 2,368.46
2,300.09 2,264.35 2,058.63 1,926.12 1,916.96 1,713.69 1,682.59 1,621.40 1,507.9
4 1,441.00 1,345.29 1,301.99 990.03 987.85 811.18 705.97 635.78
2.84 2.46 2.41 2.38 2.34 2.31 2.24 2.06 2.04 1.98 1.95 1.77 1.66 1.65 1.47 1.45
1.39 1.30 1.24 1.16 1.12 0.85 0.85 0.70 0.61 0.55
Mayta  Infra Ltd KNR Con truction limited I MT Ltd. Ahmednagar Forging  Ltd. Di 
a India Ltd Technocraft Indu trie  (India) Ltd u total Total
Con truction Con truction Ferrou  Metal  Indu trial Product  Engineering Ferrou 
Metal 
761,912 710,597 1,175,668 424,234 12,612 538,745
552.01 531.53 413.25 245.21 207.85 199.07 101,548.67 101,548.67 1,000.00 5,072.0
0 8,679.32 116,299.99
0.47 0.46 0.36 0.21 0.18 0.17 87.33 87.33 0.86 4.36 7.45 100.00

hort Term Depo it  a  margin for Future  & Option  Ca h margin / Earmarked ca h
for Future  & Option  Other Ca h,Ca h Equivalent  and Net Current A et  Net A 
et 

Ta le:3.24 ectoral Allocation of A et (%) Bank  Pharmaceutical  Media & Entert
ainment Con umer Non Dura le  Petroleum Product  Indu trial Capital Good  Teleco
m - ervice  Auto Ancillarie  Finance oftware Chemical  Fertili er  Ferrou  Met
al  Con truction Tran portation 16.37 10.39 8.48 7.94 7.72 6.60 5.30 5.30 3.42 3
.31 2.41 2.24 1.92 1.48 1.24
Oil Con truction Project Paper Product  Indu trial Product  Engineering Ca h,Ca 
h Equivalent  and Net Current A et  TOTAL
1.12 0.85 0.85 0.21 0.18 12.67 100
Figure:3.8
Ta le:3.25 HDFC Growth Fund Date (NAV a  at evaluation date 30-June-09, R . 57.2
19 Per unit) Period NAV Per Unit (R .) Return  (%) ^ Benchmark Return  (%) en e
x
Decem er 30, 2008 June 30, 2008 June 30, 2006 June 30, 2004 June 30, 1999 eptem
er 11, 2000
La t ix month  (182 day ) La t 1 Year (365 day ) La t 3 Year  (1096 day ) La t
5 Year  (1826 day ) La t 10 Year  (3653 day ) ince Inception (3214 day )
41.697 53.472 36.034 16.439 N.A 10
37.23 7.01 16.65 28.31 N.A. 21.91
49.17 7.67 10.95 24.74 13.34 13.65
Figrure:3.9
HDFC Growth Fund - Analy i 
It require  a lot of re earch and con tant watch on the capital market for a fun
d manager to analyze the portfolio of the particular fund. I took the econdary
data from the fund review of the article corner from The Bu ine  Line we ite.
I comprehended the analy i  and concluded my view a  tated elow. HDFC Growth
Fund inve t  in tock  acro  market capitali ation . De pite a large-cap ia ,
mid and mall cap tock  account for 28 per cent of the portfolio. The fund ha 
managed to con i tently eat it  enchmark en ex over one-, three- and five-yea
r period . In the late t portfolio, the fund ha  inve ted in a  many a  52 tock
 acro  18 different ector  making it a fairly diver ified portfolio. Thi  may
indicate net inflow  into the fund. ector Move : There i  a fair it of ta il
ity in term  of top ector holding  in the portfolio. Bank  (16.39 per cent) and
pharmaceutical  (10.37 per cent) ector  continue to e the top two ector hold
ing , although expo ure  have een a it reduced. Bank  and con umer non-dura le
 al o figure among top holding  in the fund, and have een increa ed expo ure 
over the eptem er-Fe ruary period. While capital good  and ank  have done well
in the pa t year, they have een among the wor t hit in the recent meltdown. Th
e re pective ector indice  were eaten down y over 25 per cent in the la t cou
ple of month . Con truction and predicta ly, oftware expo ure  have een pared
in the ix-month period. Intere tingly, media and entertainment (8.48 per cent),
which were not part of the portfolio ix month  ago i  now in the top ten ecto
r holding  for the fund. The power ector ha  een exited, while telecom ervice
 and auto ancillarie  expo ure  have een increa ed u tantially. tock Move :
Mo t tock  are tho e who e price  have fallen during eptem er-Fe ruary, inclu
de tock  uch a  Zee Entertainment, HT Media and Dr Reddy
 La . The fund ha 
al o taken profit ooking opportunitie , with everal tock  who e price  ro e
etween 60-105 per cent have een exited. The e include, Axi  Bank, Hanung Toy  a
nd Tata Power. Other high-profile exit  include DLF, HPCL, Ran axy La , and Pun
j Lloyd. Reliance Indu trie , BI, ONGC and BHEL are the tock  retained y the
fund during the period and are among the fund
 top holding .
3.4 FINDING 
A  far a  analy i  i  concerned, we found out that the HDFC Growth Fund wa  amon
g
the e t performer  fund. Although all the fund  are affected y the glo al melt
down, (rece ion) till HDFC Growth Fund ha  etter performed comparing to other
fund  for it  y tematic and un y tematic ri k. It offer  advantage  of diver i
fication, market timing, and electivity. In the compari on of ample of fund ,
HDFC Growth fund i  found highly diver ified fund and ecau e of high diver ific
ation, it ha  reduced the total ri k of portfolio.
Further, other fund  were found very poor in diver ification, market timing, and
electivity. Although HDFC Top 200 Fund and Equity Fund performed etter in term
 of return  ut the e uffered y the y tematic ri k (market volatility) and l
ack of diver ification. For the further clarification, we too tudied the portfo
lio of HDFC Growth fund.
One of the finding  that I came acro  i  that generally, a good model of a et
cla e 
i  the one that can explain a large portion of the variance of return  on the a 
et  and there were ome tock  in the fund portfolio, which were not aligned wi
th trategy of the fund portfolio. The optimal ituation involve  the election
that proceed  from en i le a umption , i  carefully and logically con tructed,
and i  roadly con i tent with the data while collecting the tock  for the por
tfolio. The portfolio wa  howing con tructive outcome in long time horizon and
the re ult  can e improved y making the minor change  in fund portfolio.
Hence, the portfolio theory teache  u  that inve tment choice  are made on the
a i 
of expected ri k and return  and the e expectation  can e ati fied y having r
ight mix of a et .
3.5 RECOMMENDATION :
Con idering the a ove analy i , it can e noted that the three growth oriented m
utual fund  (HDFC Equity Fund, HDFC Growth Fund and HDFC Top 200 fund) have perf
ormed etter than their enchmark indicator . Other fund  uch a  HDFC Capital B
uilder Fund, HDFC Long term Advantage Fund did not perform well even ome perfor
med negatively. Though HDFC Equity Fund, HDFC Growth Fund and HDFC Top 200 fund
have performed etter than the enchmark of their y tematic ri k (volatility)
ut with re pect to total ri k the fund have not outperformed the Market Index. G
rowth oriented mutual fund  are expected to offer the advantage  of Diver ificat
ion, Market timing and electivity. In the ample, HDFC Equity Fund, HDFC Growth
Fund and HDFC Top 200 fund i  found to e diver ified fund and ecau e of high
diver ification, it ha  reduced total ri k of the portfolio. Wherea , other  are
low diver ified and ecau e of low diver ification their total ri k i  found to
e very high. Further, the fund manager  of the e under performing fund  are fo
und to e poor in term  of their a ility of market timing and electivity.
The fund manager of HDFC Equity Fund, HDFC Growth Fund and HDFC Top 200
fund can improve the return  to the inve tor  y increa ing the y tematic ri k
of the portfolio, which in turn can e done y identifying highly volatile hare
. Alternatively, the e can take advantage y diver ification, which goe  to red
uce the ri k if the ame return i  given to the inve tor at a reduced ri k level
, the compen ation for ri k might eem adequate. The fund manager of HDFC Capita
l Builder Fund, HDFC Long term Advantage Fund can earn etter return  y adoptin
g the marketing timing trategy and electing the under priced ecuritie .
The fund manager can divide all ecuritie  into everal a et cla e  and trie 
to
con truct an efficient portfolio a ed on expected return , ri k, and correlatio
n  of indexe  repre enting the e a et cla e . The inve tment hould e done in
the ench mark indexe  to get an “efficient” portfolio in uch a way that no other
com ination of the e indexe  would re ult in a portfolio with a higher return fo
r a given level of
ri k. It hould e empha ized, however, that thi  i  not a fully efficient portf
olio ecau e information a out correlation  among individual ecuritie  within a
n index and acro  the indexe  i  lo t in the tran ition from individual ecurit
ie  to the enchmark  that repre ent them.
The e mea ure  are more u eful to inve tor  who are putting their money into one
diver ified fund and are a le to u e leverage or inve t in the ri k-free a et.
When the inve tor i  inve ting in the different fund , the fund’  marginal contri
ution to the portfolio’  ri k and return i  more important than it  individual ec
urity characteri tic . To con truct an efficient portfolio, an inve tor mu t tak
e account of the correlation  among the eing con idered. It i  not advi a le to
apply ju t procedure or approach for all ituation  at lea t when it come  to i
nve tment  though the u ed mea ure  are highly relia le in the tudie  done on 
imilar vein . Even at thi  juncture it would till e recommended that in tead o
f going ahead only on the a i  of ri k and return, other indicator  like new pr
oject , ector impact, individual entiment  a out companie  etc e ide  ‘common 
en e and intuition’ may al o e looked into.
3.6 CONCLU ION :
Mutual fund ha  ecome one of the important ource  for inve ting. It i  quite l
ikely that a more efficient portfolio can e con tructed directly from fund . Th
u , the two- tep proce  of choo ing an a et allocation a ed on the informatio
n a out enchmark indexe  and then choo ing fund  in each category may e one of
the e t reali tically attaina le approache . To u e thi  approach to portfolio
election effectively, inve tor  would enefit from e timate  of future a et r
eturn , ri k  and correlation , a  well a  from fund management’  di clo ure of fu
ture a et expo ure  and appropriate enchmark . It ha  een a great opportunity
for me to get a fir t experience of Mutual Fund . My tudy i  to get the feel o
f how the work i  carried out in relation to fund’  portfolio a pect. I got an opp
ortunity in relation to the documentation and al o the portfolio analy i  that h
ave een carrying out in facilitating the inve tor and the fund manager.
REFERENCE 
Book :
1. ecurity Analy i  and Portfolio Management ( ixth Edition 1995) y Donald
E. Fi her and Ronald J. Jordan. Pu lication: Pear on education. 2. The Indian Fi
nancial y tem ( econd edition) y Bharati V. Pathak. Pu li hed y Dorling Kinde
r ley (India) Pvt. Ltd., licen ee  of Pear on Education in outh A ia. 3. ecuri
ty Analy i  and Portfolio Management y Khan and Jain. Magazine : • • Money Outlook
(May &June 2009) Bu ine  world (May & June 2009)
We ite 
• • • • • • • • • • • •
www.hdfcfund.com www.amfiindia.com www.moneycontrol.com www. e i.gov.in www. ei
ndia.com www.n eindia.com www.mutualfund india.com www.valuere earch.com www.ind
iainfoline.com www.in.finance.yahoo.com www.inve ting. u ine week.com www. u in
e line.com