Abhinav Hdfc Mutual Fund

Preface
This project report is submitted for the partial fulfillment of MBA (Master of Business Administration) degree from Uttarakhand Technical University, undertaken at HDFC Mutual Fund office, Lucknow. Mutual Fund as the name suggests are the investment products that operate on the principle of strength in numbers. They collect money from large group of investors, pool it together and invest in various securities. Mutual Funds are not magic investments vehicles that do it all. One has to come to terms with the fact that neither they assure returns nor the value of an original investment. It has to be accepted as a reality that even the experts in investments matter, can go wrong their assessments. Mutual Fund offers several features that make them a powerful and convenient wealth creation vehicle worthy of consideration. One can invest his money in allied ways in mutual funds such as small investments, diversified portfolio, liquidity, tax brakes etc. I have done my study on mutual fund of HDFC.

1

CONTENTS

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

INDEX OBJECTIVE OVERVIEW INDUSTRY PROFILE MUTUAL FUNDS TYPES OF MUTUAL FUND SCHEME ADVANTAGES OF MUTUAL FUND DISADVANTAGE OF MUTUAL FUND HDFC MUTUAL FUND PRODUCT RESEARCH METHODOLOGY DATA COLLECTION ANALYSIS AND INTERPRETATION FINDINGS SUGGESTION AND RECOMMENDATION CONCLUSION QUESTIONNAIRE BIBLIOGRAPHY

PAGE NO. 4 7 11 16 19 26 30 36 56 60 63 72 74 78 80 83

2

1. OBJ 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.ECTIVES 12.OVERVIEW 13.INTRODUCTION TO MUTUAL FUNDS 14.FUNDS STRUCTURE AND CONSTITUENTS 15.MUTUAL FUND STRUCTURE IN INDIA 16.ORGANISATION OF A MUTUAL FUND 17.ORGANISATION OF MUTUAL FUND 17.1. 17.2. 17.3. 17.4. 17.5. First phase: Second phase: Third phase: Fourth phase: Fifth phase: 1964 – 1987 1987 – 1993 1993 – 1996 1996 – 1999 1999 – 2004

18.MUTUAL FUNDS

3

19.TYPES OF MUTUAL FUND SCHEMES 19.1. 19.2. 19.3. By Structure By Investment Objectives Other Schemes

20. ADVANTAGES OF MUTUAL FUNDS 21. DISADVANTAGE OF MUTUAL FUNDS 22. HDFC MUTUAL FUNDS 23. HDFC ASSET MANAGEMENT COMPANY (AMC) 24. HDFC MUTUAL FUND PRODUCTS 24.1. 24.2. 24.3. Equity Funds Balanced Funds Debt Funds

25. COPARITIVE STUDY OF HDFC MUTUAL FUND WITH OTHER COMPANY’S MUTUAL FUND 26. RESEARCH METHODOLOGY 27. DATA COLLECTION 28. STEP BY STEP ANALYSIS AND INTERPRETATION 29. FINDINGS 30. SUGGESTIONS AND RECOMMENDATIONS 31. CONCLUSION 32. QUESTIONNAIRE 33. BIBLIOGRAPHY

4

5

OBJECTIVE
For the project to be successful it is important to define its objective. The main objective of the project undertaken was:  To do the comparative analysis of HDFC’s mutual fund with other respective companies  To find out the investment pattern of the consumers.  To create the awareness about mutual funds.  To spread awareness about HDFC’s mutual funds.

Significance of the study
The underlying motivates of the research were to furnish the organization with vital information and facilitate the researcher to gain a practical insight to the market scenario. The study proved significant in terms of catering to the interests of both the company and the researcher.

Significance of the organization
The study enabled the organization to know about the perception of investors for investment. Further, company will be benefited with the systematic database of the study conducted to find out investment decisions made by the potential investors.

6

OVERVIEW
Overview of the Indian mutual fund industry
The unit trust of India dominates the Indian mutual funds industry. The UTI has many funds/ schemes in all categories i.e. equity, debt (income) etc. with some being open ended and some being close ended. UTI was floated by financial institutions and is governed by a special act of parliament. Most of its investors believe that the UTI is government owned and controlled, while legally incorrect, is true for all practical purposes. The second category of mutual fund in the ones floated by nationalized banks. Can bank asset management floated by Canara bank and SBI funds management floated by the state bank of India are the largest of these. GIC, AMC floated by General Insurance Corporation and Jeevan Bima Sahayog AMC floated by the LIC are some of the other prominent ones. The third largest category of mutual funds is the ones floated by the private sector and by foreign asset management companies. The largest of these are Birla sun life, standard chartered AMC etc.

7

8

INTRODUCTION TO MUTUAL FUNDS
Different investment avenues are available to investors. Mutual funds also offer good investment opportunities to the investors. Like all investments, they also carry certain risks. The investors should compare the risks and expected yields after adjustment of tax on various instruments while taking investment decisions. The investors may seek advice from the experts and consultants including agents and distributors of mutual funds schemes while making investments decisions. With an objective to make the investors aware of functioning of mutual funds, an attempt has been made to provide information in question-answer format which may help the investors in taking investment decisions.

CONCEPT
A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

9

The flow chart below describes broadly the working of a mutual fund:

Mutual Fund Operation Flow Chart
Mutual funds is a body corporate registered with the securities and exchange board of India (SEBI) that pools up the money from individual/corporate investors and invests the same on behalf of the investors/unit holders, in equity shares, government securities, bonds, call money markets etc, and distributes the profits. In the other words, a mutual fund allows investors to indirectly take a position in a basket of assets. Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at same time. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with

10

Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

11

12

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

First Phase – 1964-87 (Growth of Unit Trust of India)

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

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



1987 marked the entry of non- UTI, public sector mutual funds set up by public sector banks and Life Insurance corporation of India (LIC) and General Insurance Corporation of India (GIC).



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

13

Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 121,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.

Fourth Phase- 1996-1999 (Growth of SEBI Regulation)
Since 1996, the mutual fund industry in India saw tighter regulation and higher growth. It scaled new heights in terms of mobilization of funds and number of players. Deregulation and liberalization of the Indian economy had introduced competition and provided impetus to the growth of the industry. Finally, most investors - small or large - started showing interest in mutual funds.

14

Measures were taken both by SEBI to protect the investor and by the Government to enhance investors' returns through tax benefits. A comprehensive set of regulations for all mutual funds operating in India was introduced with SEBI (Mutual Fund) Regulations, 1996. These regulations set uniform standards for all funds. The erstwhile UTI voluntarily adopted SEBI guidelines for its new schemes. Similarly, the budget of Union Government in 1999 took a big step in exempting all mutual fund dividends from income tax in the hands of investors. Both the 1996 regulations and the 1999 Budget must be considered of historic importance, given their far-reaching impact on the fund industry. During this phase, both SEBI and AMFI launched Investor Awareness Programmed aimed at educating the investors about investing through mutual funds. AMFI published its booklet titled "MAKING MUTUAL FUNDS WORK FOR YOU - The Investors' Guide."

Fifth Phase – 1999-2004 (Emergence of a Large and Uniform Industry)
The other major development in the fund industry has been the creation of a level playing field for all mutual funds operating in India. This happened in February 2003, when the UTI Act was repealed. Unit Trust of India no longer has a special legal status as a trust established by an Act of Parliament. Instead, it has also adopted the same structure as any other fund in India - a Trust and an Asset Management Company. UTI Mutual Fund is the present name of the erstwhile Unit Trust of India. While UTI functioned under a separate law of Indian parliament earlier, UTI Mutual Fund is now under the SEBI's (Mutual Funds) Regulations, 1996 like all other mutual funds in India. UTI Mutual Fund is still the largest player in the Indian fund industry. All SEBI compliant schemes of the erstwhile UTI are under its charge. All new schemes offered by UTI Mutual Fund are SEBI approved. Other schemes (US 64, Assured Return Schemes) of erstwhile UTI have been placed with a special undertaking administered by the Government of India. These schemes are being gradually wound up.

15

The emergence of a uniform industry with the same structure, operations and regulations makes it easier for distributors and investors to deal with any fund house in India. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised mutual Fund Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 121,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than Rs. 76,000 crores of assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth. As at the end of September 20, 2004 there were 29 funds, which manage assets of Rs. 153108 crores under 421 schemes.

16

17

MUTUAL FUNDS
Dictionary definition of a mutual fund might go something like this: a single portfolio of stocks, bonds, and / or cash managed by an investment company on behalf of many investors. The Investment Company is responsible for the management of the fund and it sells shares in the fund to individual investors. When you invest in a mutual fund, you become a part owner of the large investment portfolio, along with all the other shareholders of the fund. When you purchase shares, the fund manager invests your hands, along with the money contributed by the other shareholders. Every day, the fund manager counts up the value of all the fund’s holdings, figures out how many shares have been purchased by shareholders, and then calculate the Net Asset Value (NAV) of the mutual fund, the price of a single share of the fund on that day. If the fund manager is doing a good job, the NAV of the will usually gets bigger- your shares will be worth more. But exactly how does mutual fund’s NAV increase? There are a couple of ways that a mutual fund can make money in its portfolio. A mutual fund can receive dividends from the stocks that it owns. Dividends are shares of corporate profits paid to the stockholders of public companies. The fund might have money in the blank that earns interest, or it might receive interest payments from bonds that it owns. These are all sources of income for the fund. Mutual funds are required to hand out (or “distribute”) this income to shareholders. Usually they do this twice a year; in a move that’s called an income distribution. At the end of the year, a fund makes another kind of distribution, this time from the profits they might make by selling stocks or bonds that have gone up in price. These profits are known as capital gains, and the act of passing them out is called a capital gains distribution. You can make money from a mutual fund in three ways:

18



Income is earned from dividends on stocks and interest on bonds. A fund manager pays out nearly all income it receives over the year to fund owners. If the fund sells securities that have increased in price, the fund have a capital gain most funds also pass on these gains to investors in a distribution. If fund holdings increase in price but are not sold by the fund manager, the funds shares increase in price. You can sell your mutual fund shares for a profit. Funds will also usually give you a choice either to receive a check for





distributions or to reinvest the earnings and get more shares. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

19

TYPES OF MUTUAL FUND SCHEMES
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial position, risk tolerance and return expectations etc. The table below gives an overview into the existing types of schemes in the industry.

TYPES OF MUTUAL FUND SCHEMES BY STURUCTURE
• • • Open – Ended Schemes Close – Ended Schemes Interval Schemes

BY INVESTMENT OBEJECTIVE
• • • Growth Schemes Income schemes Money Market Schemes

OTHER SCHEMES
• • • • Tax Saving Schemes Special Schemes Index Schemes Sector Specific Schemes

20

TYPES OF MUTUAL FUNDS
SCHEMES ACCORDING TO STURUCTURE:
A mutual fund schemes can be classified into open-ended scheme or close-ended scheme depending on its maturity period.

1. Open-ended Fund/ Scheme
An open-ended fund or scheme is one that is available for subscription and repurchase on a continuous basis. These schemes do not have a fixed maturity period. Investors can conveniently buy and sell units at Net Asset Value (NAV) related prices which are declared on a daily basis. The key feature of open-end schemes is liquidity.

2. Close-ended Fund/ Scheme
A close-ended fund or scheme has a stipulated maturity period e.g. 3 years. The fund is open for subscription only during a specified period at the time of launch of the scheme. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where the units are listed. In order to provide an exit route to the investors, some closeended funds give an option of selling back the units to the mutual fund through periodic repurchase at NAV related prices. SEBI regulations stipulated that at least one of the two exits routes is provided to the investor i.e. either repurchases facility or through listing on stock exchanges. These mutual funds schemes disclose NAV generally on weekly basis.

21

SCHEMES ACCORDING TO INVESTMENT OBJECTIVES:
A scheme can also be classified as growth scheme, income scheme, or balanced scheme considering its investment objective. Such schemes may be open-ended or close-ended schemes as described earlier. Such schemes may be classified mainly as follows:

1. Growth / Equity Oriented Scheme
The aim of growth funds is to provide capital appreciation over the medium to long term. Such schemes normally invest a major part of their corpus in equities. Such funds have comparatively high risks. These schemes provide different options to the investors like depending on their preferences. The investors must indicate the option in the application form. The mutual funds also allow the investors to change the options at a later date. Growth schemes are good for investors having a long-term outlook seeking appreciation over a period of time, some major types of equity funds according to higher to lower risks level are as follows: Aggressive Growth funds Growth funds Specialty funds Sector funds Offshore funds Small Cap equity funds 22

Option income funds Diversified Equity funds Equity Linked Saving Schemes-An Indian Variant Equity Index funds Value funds Equity Income funds

2. Income / Debt Oriented Scheme
The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures, Government securities and money market instruments. Such funds are less risky compared to equity schemes. These funds are not affected because of fluctuations in equity markets. However, opportunities of capital appreciation are also limited in such funds. The NAVs of such funds are affected because of change in interest rates in the country. If the interest rates fall, NAVs of such funds are likely to increase in the short run and vice versa. However, long term investors may not bother about these fluctuations. Some major types of debt funds with different risk profiles: Diversified debt funds Focused debt funds Higher Yield Debt funds Assured Return Funds- An Indian Variant Fixed Term Plan Series-Another Indian Variant

23

3. Balanced Fund
The aim of balanced funds is to provide both growth and regular income as such schemes invest both in equities and fixed income securities in the proportion indicated in their offer documents. These are appropriate for investors looking for moderate growth. They generally invest 40%-60% in equity and debt instruments. These funds are also affected because of fluctuations in share prices in the stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.

4. Money Market or Liquid Fund
These funds are also income funds and their aim is to provide easy liquidity, preservation of capital and moderate income. These schemes invest exclusively in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter bank call money, government securities, etc. Returns on these schemes fluctuate much less compared to other funds. These funds are appropriate for corporate and individual investors as a means to park their surplus to park their surplus funds for short periods.

OTHERS SCHEMES: 1. Tax Saving Fund
These schemes offer tax rebates to the investors under specific provisions of the Income Tax Act, 1961 as the Government offers tax incentives for investment in specified avenues e.g. Equity Linked Saving Schemes (ELSS). Pension schemes

24

launched by the mutual funds also offer tax benefits. These schemes are growth oriented and invest predominantly in equities-oriented scheme.

2. Special schemes:
a) Index Funds: Index Funds replicate the portfolio of a particular index such as the BSE sensitive index, S&P NSE 50 index (Nifty), etc. These schemes would rise or fall in accordance with the rise or fall in the index, though not exactly by the same percentage due to some factors known as “tracking error” in technical terms. Necessary disclosures in this regard are made in the offer document of the mutual fund scheme. There are also exchange traded index funds launched by the mutual funds which are traded on the stock exchanges. b) Sector Specific schemes: These are the funds/schemes which invest in the securities of only those sectors or industries as specified in the offer documents e.g. Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks, etc. The returns in these funds are dependent on the performance of the respective sectors/ industries and must exit at an appropriate time. They may also seek advice of an expert.

25

What is a Load or no-load Fund?
A “Load Fund is one that charges a percentage of NAV of entry or exit.” That is, each time one buys or sells units in the fund, a charge will be payable. This charge is used by the mutual fund for marketing and distribution expenses. Suppose the NAV per unit is Rs.10. If the entry as well as exit load charged is 1%, then the investors who buy would be required to pay Rs.10.10 and those who offer their units for repurchase to the mutual fund will get only Rs.9.90 per unit. The investors should take the loads into consideration while making investment as these affect their yields/returns. However, the investors should also consider the performance track records and standards of the mutual fund which are more important. Efficient funds may give higher returns in spite of loads. A “no-load fund is one that does not charge for entry or exit.” It means the investors can enter the fund/scheme at NAV and no additional charges are payable on purchase or sale or units.

26

ADVANTAGES OF INVESTING IN MUTUAL FUNDS • Return Potential:
Mutual funds offer a higher return potential than banking products as they invest in various instruments of the financial markets. Mutual funds investing in equity linked schemes are able to offer higher returns to their investor because of the performance of the markets

• Tax Benefit:
Some Mutual funds schemes offer you tax rebates under section 80 C. In addition, the returns from mutual funds (dividends and capital appreciation) are also eligible for favorable tax treatment.

• Convenient Administration:
Investing in mutual funds enables the investor to be mentally free of any troubles. An investor leaves all decisions up to the fund manager, and is only required to decide the entry and exit from a particular scheme.

• Well Regulated:
Mutual fund industry is well regulated. SEBI has issued strict guidance Well Regulated Mutual fund industry is well regulated. SEBI has issued strict declines governing the operations of a mutual fund. From time to time SEBI keeps updating the rules and regulations governing the mutual fund industry. Mutual fund industry is well regulated. SEBI has issued strict guidelines governing the operations of a mutual fund. From time to time SEBI keeps updating the rules and regulations governing the mutual fund industry.

• Diversification:

27

One rule of investing that both large and small investors should follow is asset diversification. Used to manage risk, diversification involves the mixing of investments within a portfolio. To achieve a truly diversified portfolio, you may have to buy stocks with different capitalization from different industries and bonds having varying maturities from different issuers. By purchasing mutual funds, you are provided with the immediate benefit of instant diversification and asset allocation without the large amounts of cash needed to create individual portfolios.

•

Economies of Scale:

Mutual funds are able to take advantage of their buying and selling size and thereby reduce transaction costs for investors. When you buy a mutual fund, you are able to diversify without the numerous commission charges. Imagine if you had to buy the 10-20 stocks needed for diversification. The commission charges alone would eat up a good chunk of your savings. Add to this the fact you would have to pay more transaction fees every time you wanted to modify your portfolio as you can see the costs begin to add up. Mutual funds are able to make transactions on a much larger scale.

• Liquidity:
Another advantage of mutual funds is the ability to get in and out with relative ease. You can sell mutual funds at any time as they are as liquid as regular stocks. Both the liquidity and smaller denominations of mutual funds provide mutual fund investors the ability to make periodic investments through monthly purchase plans while taking advantage of Rupee cost averaging.

• Professional Management:
When you buy a mutual fund, you are also choosing a professional money manager. This manager will use the money that you invest to buy and sell stocks that he or she has carefully researched. Therefore, rather than having to research thoroughly every

28

investment before you decide to buy or sell, you have a mutual fund’s money manager to handle it for you.

•

Transparency:

You will always have access to up-to-date information on the value of your investment in addition to the complete portfolio of investments, the proportion allocated to different assets and the fund manager’s investment strategy.

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

• SEBI regulated:
All mutual funds are registered with SEBI and function within the provisions and regulations that protect the interests of investors AMFI is the supervisory body of Mutual Fund Industry While most investment options provide most of these features, only Mutual Funds provide all of these options. 1. Returns on mutual fund vary according to the scheme opted. Equity Funds can provide high but inconsistent returns depending on the market performance. Debt funds provide relatively stable returns. (Past performance is not a guarantee for future return.) 2. Debt funds are subject to interest rate risk and credit risk. Debt funds are

comparatively safer invest in government securities and highly rated corporate and government papers. 3. Liquidity in mutual funds is high, as it promises to pay on demand.

29

4. Diversification is important parameter for mutual funds as they invest in diverse securities, which is not available with others. This also reduces the risk factor.

30

DISADVANTAGES OF INVESTING THROUGH MUTUAL FUNDS
While the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of a few shortcomings of using the mutual funds as investment vehicles.

• No Control over Costs:
An investor in a mutual fund has any control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are usually payable as a percentage of the value of his investments, whether the fund value is rising or declining. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the benefits of mutual fund services. However, this cost is often less than the cost of direct investing by the investors.

• No Tailor-made Portfolios:
Investors who invest to their own can build their own portfolio of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. The very high-net-worth individuals or large corporate investors may find this to be a constraints in achieving their objectives. However, most mutual funds help investors overcome these constraints by offering families of schemes – a large number of different schemes – within the same fund. An investor can choose from different investment plans and construct a portfolio of his choice.

• No Guarantees:
No investments are risk free. If the entire stock market declines in value, the value of mutual fund shares will go down as well. No matter how balanced the portfolio. Investors encounter fewer risks when they invest in mutual funds than when they buy 31

and sell stocks on their own. However, any one who invests through a mutual fund runs the risk of losing money.

• Fees and commissions:
All funds charge administrative fees to cover their day-to-day expenses. Some funds also charge sales commissions or “loads” to compensate brokers, financial consultants, or financial planners. Even if you don’t use a broker or other financial advisor, you will pay a sales commission if you buy shares in a load fund.

• Taxes:
During a typical year, most actively managed mutual funds sell anywhere from 20 to 70 percent of the securities in their portfolios. If your fund makes a profit on its sales, you will pay taxes on the income you receive, even if you reinvest the money you made.

• Management Risk:
When you invest in a mutual fund, you depend on the fund manager to make the right decisions regarding the fund’s portfolio. If the manager does not perform as well as you had hoped, you might not make as much money on your investment as you expected. Of course, if you invest in Index funds, you forego management risk, because these funds do not employ managers.

32

33

HDFC MUTUAL FUND
VISION
To be a dominant player in the Indian MF industry recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

SPONSOR
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC) The sponsor of the HDFC MF is the housing development finance corporation Limited (HDFC). HDFC was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for purchase or construction of residential housing. As on December 31st, 2002, HDFC’s cumulative loan disbursement are Rs 40,060 crore financing over 2.1 million units all over India.

PARTNERS
Standard Life Insurance Company of UK set up base in 1825. It is today the largest pension fund in UK and the largest Mutual life assurance company in Europe. Standard Life Investment was set up as a dedicated investment management company.

MANAGEMENT
HDFC Trustee Company Limited A company incorporated under companies act 1956, is the trustee to the Mutual Fund vide the trust deed dated June 8th, 2000 as amended from time to time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

34

HDFC ASSET MANAGEMENT COMPANY (AMC)

LIMITED

It was incorporated under the company’s act 1956, on December 10th 1999 and was approved to act as an asset management company for the MF by SEBI on July 3rd, 2000. The registered office of the AMC is situated at Ramon house, 3 rd floor, H.T Parekh marg, 169 Bacbey Reclamation, Church gate, Mumbai-400020. In terms of the joint participation agreement dated October 29 th, 1999 entered between Housing Development Finance Corporation Limited (HDFC) and standard life investment limited, 25.6% of the paid up share capital of the AMC had been transferred by HDFC to the standard life assurance company, the parent company of standard life investments limited, on April 17th, 2001. Pursuant to the shareholders agreement dated October 17 th, entered between Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited. 13.9% of the paid up share capital of the AMC had been transferred by HDFC to standard life investments limited on January 31st, 2002. The present share holding pattern of the AMC is as follows HDFC Standard life investments 50.1% 49.9%

The AMC is managing many schemes as per the requirements of varied class of investors. The AMC has obtained registration from SEBI vide registration no. PM/inp0000000506 dated December 22nd, 2000 to act as a portfolio manager under the SEBI (portfolio managers) regulations, 1993. The certificate of registration is valid from January 1st, 2003 to December 31st, 2003. The AMC is also providing portfolio management /advisory services and such activities are not in conflict with the activities of the mutual funds. INVESTMENT PHILOSOPHY:

35

 Consider above average return.  Conservative investment decisions.  Premium services.  Essentially positioned as a “No Surprise Fund”

36

HDFC Capital builder fund

HDFC MUTUAL FUND PRODUCTS

EQUITY FUNDS
HDFC Growth fund HDFC Long term advantage fund HDFC Index fund HDFC Equity fund HDFC Tax saver HDFC top 200 funds HDFC Core & satellite fund HDFC Premier Multi-cap fund HDFC Long term equity fund

BALANCED FUNDS
HDFC Children’s gift fund investment plan HDFC Children’s gift fund savings plan HDFC Balanced fund HDFC Prudence fund

DEBT FUNDS
HDFC Income fund HDFC Liquid fund HDFC Gilt fund short term plan HDFC Guilt fund long term plan HDFC Short term plan HDFC Floating rate income fund short term plan HDFC Floating rate income fund long term plan

37

HDFC Liquid fund –PREMIUM PLAN HDFC Liquid fund –PREMIUM PLUS PLAN HDFC Short term plan –PREMIUM PLAN HDFC Short term plan –PREMIUM PLUS PLAN HDFC Income fund premium plus plan HDFC High interest fund HDFC High interest fund –Short term plan HDFC Cash management fund-Savings plan HDFC Cash management fund –Call plan HDFC MF Monthly income plan –Short term plan HDFC MF Monthly income plan –Long term plan HDFC Cash management fund –Savings plus plan HDFC Multiple yield fund plan

38

HDFC TAX SAVER
NATURE OF SCHEME: OPEN ENDED EQUITY LINKED SAVINGS SCHEME
WITH A LOCK IN PERIOD OF 3 YEARS.

INVESTMENT OBJECTIVE: TO ACHIEVE LONG TERM
CAPITAL.

GROWTH OF

FUND MANAGER: VINAY KULKARNI INCEPTION DATE: DECEMBER 18, 1995 ENTRY/ SALES LOAD (NON SIP/STP): In respect of each purchase / switchin of units less than Rs. 5 crore in value, an entry load of 2.25% is payable. In respect of each purchase / switch in of units equal to or greater than Rs. 5 crore in value, no entry load is payable.

EXIT LOAD (NON-SIP/ STP): NIL INVESTMENT PLAN/OPTIONS: Growth and dividend. The dividend plan
offers dividend pay out and reinvestment facility.

MINIMUM APPLICATION AMOUNT: For new & existing investors: Rs. 500
and in multiples thereafter.

LOCK-IN-PERIOD: 3 YEARS FROM THE DATE OF ALLOTMENT OF THE
RESPECTIVE UNITS.

39

NET ASSET VALUE (NAV): EVERY BUSINESS DAY. REDEMPTION PROCEEDS: Normally dispatched within 3 business days.
(Subject to completion of lock-in-period)

PORTFOLIO: TOP 10 HOLDINGS (As at may 31st 2007)
COMPANY
RELIANCE INDUSTRIES LTD. DECCAN CHRONICLE HOLDINGS LTD. INFOSYS TECHNOLOGIES LTD. SATYAM COMPUTER SERVICES LTD. LARSEN & TURBO LTD. BHARAT AIRTEL LTD. THERMAX LTD. CROMPTON GREAVES LTD. SIEMANS LTD.

INDUSTRY
PETROLEUM MEDIA & ELECTRONICS SOFTWARE SOFTWARE INDUSTRIAL CAPITAL GOODS TELECOM SERVICES INDUSTRIAL CAPITAL GOODS INDUSTRIAL CAPITAL GOODS INDUSTRIAL CAPITAL GOODS

% TO NAV
7.54% 6.29% 4.98% 4.91% 4.87% 4.64% 4.37% 4.23% 4.09%

40

BHARAT HEAVY ELECTRICALS LTD. TOTAL OF TOP 10 EQUITY HOLDINGS TOTAL EQUTIY & EQUITY HOLDINGS OTHER CURRENT ASSETS (Including reverse Repos/ CBLO)

INDUSTRIAL CAPITAL GOODS

3.39%

49.31%

94.66%

1.34%

GRAND TOTAL
NET ASSETS (Rs. In Lacs) PORTFOLIO TURNOVER RATIO (Last 1 Year) *COMPOUNDED ANNUAL RATE OF RETURN SINCE INCEPTION (31st March 1996)

100%

107263.09

123.32%

38.92%

41

HDFC MUTUAL FUND MONTHLY INCOME PLAN

NATURE OF SCHEME: An open ended income scheme. Monthly income is not
assured and subject to availability of distributable surplus.

INVESTMENT OBJECTIVE: The primary objective of scheme is to generate
regular income through investment primarily in debt and money market instruments. The secondary objective of the scheme is to generate long term capital appreciation by investing a portion of the scheme assets in equity and equity related instruments. However, there can be no assurance that the investment objective of the scheme be achieved.

FUND MANAGERS: LTP- PRASHANT JAIN (EQUITIES)
SHABBIR KAPASI (DEBT) STP- VINAY KULKARNI (EQUITIES) SHOBIT MEHROTRA (DEBT)

INCEPTION DATE: DECEMBER 26, 2003. ENTRY / SALES LOAD (NON-SIP/STP): NIL EXIT LOAD (NON-SIP/STP):
FOR SHORT TERM PLAN In respect of each purchase/ switch- in of units up to and including Rs.10 lakhs in value, an Exit load of 0.50% is payable if units are redeemed/ switched out within 6 months from the date of allotment. In respect of each purchase/ switch –in of units greater than Rs. 10 lakhs in value an exit load of 0.25% is payable if units are redeemed/ switched- out within 3 months from the date of allotment.

42

FOR LONG –TERM PLAN In respect of each purchase/ switch- in of units less than Rs. 5 crore in value, an exit load of 1% is payable if units are redeemed/ switched out within 1 year from the date of allotment. In respect of each purchase/ switch in of units equal to or greater than Rs. 5 crore in value, no exit load is payable.

INVESTMENT PLAN / OPTIONS : SHORT TERM PLAN (STP) & LONG
TERM PLAN (LTP). Each plan offers Growth, Monthly Dividend option. The dividend option offers dividend pay out and reinvestment facility.

MINIMUM APPLICATION AMOUNT: STP for new investors: (growth &
quarterly dividend option) - Rs. 5,000 and in multiples of Rs. 100 thereafter under each option. (Monthly Dividend Option)- Rs. 25,000 and in multiples of Rs. 100 thereafter.

For existing investors: Rs.1000 and in multiplies of Rs.100 thereafter. LTP: For new investors: (Growth & quarterly dividend option)-Rs. 5,000 and in multiples of Rs.100 thereafter under each option. (Monthly Dividend Option)- Rs. 25,000 and in multiples of Rs.100 thereafter. For existing investors: Rs. 1,000 and in multiples of Rs. 100 thereafter.

LOCK- IN PERIOD: NIL NET ASSET VALUE (NAV): EVERY BUSINESS DAY. REDEMPTION PROCEEDS: NORMALLY DESPATCHED WITHIN 3
BUSINESS DAYS.

43

PORTFOLIO- TOP 10 HOLDINGS (AS AT MAY 31, 2007) COMPANY
AMTEK AUTO LTD. BANK OF BARODA KEC INTERNATIONAL LTD. CMC LTD. CROMPTON GREAVES GLAXOSMITHKLINE CONSUMER HEALTH STATE BANK OF INDIA THE FEDERAL BANK LTD. NESTLE INDIA EXIDE INDUSTRIES TOTAL OF TOP 10 EQUITY HOLDINGS TOTAL EQUTIY & EQUITY HOLDINGS OTHER CURRENT ASSETS (Including reverse Repos/ CBLO)

INDUSTRY
AUTO ANCILLARIES BANKS POWER HARDWARE INDUSTRIAL CAPITAL GOODS CONSUMER NON DURABLES BANKS BANKS CONSUMER NON DURABLES AUTO ANCILLARIES

% TO NAV
1.83% 1.65% 1.52% 1.50% 1.48% 1.40% 1.37% 1.22% 1.04% 1.04% 14.05%

26.88%

3.28%

44

GRAND TOTAL
NET ASSETS (Rs. In Lacs) *COMPOUNDED ANNUAL RATE OF RETURN SINCE INCEPTION (8th December, 2003)

100%

111,537.67 13.28%

45

SYSTEMATIC INVESTMENT PLAN (SIP)

A systematic Investment Plan (SIP) is a simple method of investing, used across the world as a means to invest savings and accumulate wealth. It works much the same way as a recurring deposit account. Periodically, you invest a fixed sum of money into a specific investment vehicle, for a pre-determined number of periods.

“Small-Small Drops makes an Ocean”

Procrastination is human nature. But waiting to start investing can be costly. Starting early is an important element for successful investing. Another key element is investing at regular intervals. Investing the same amount at regular intervals (e.g., every month) is known as Systematic Investing.

Systematic Investing is perhaps the simplest and most disciplined way to create wealth over the long term. By investing modest amounts regularly, you will find that in a while you will be on your way to creating great wealth.

SIP (SYSTEMATIC INVESTMENT PLAN) is a scientific and superior way of investing small amounts every month, in order to get a substantial amount after a certain period.

46

Benefits of SYSTEMATIC INVESTMENT PLANS are:
 SAFETY – The SIP schemes are floated inter-alia by various

Mutual Funds like SBI Mutual Fund, Sundaram Mutual Fund, Birla Mutual Fund, TATA Mutual Fund, Reliance Mutual Fund, all have a very large fund base and a reputation in the market.

 LIQUIDITY – During the period of investment, one can withdraw the amount anytime in part or in whole.



TRANSPARENCY- The amount invested by you in Mutual Fund

Schemes is, in turn, invested by them in shares of blue-chip companies like ONGC, Indian Oil, Maruti Ltd, The TATA Group, The Birla Group, The Reliance Group Companies, etc. The fact-sheet of these is declared every month, so that you are aware where your money is parked.



PROFESSIONALS MANAGE YOUR INVESTMENTS- Your

investments are supervised by high profile investment experts, who thoroughly analyze the health of companies, before they buy shares or bonds.

 of diversification.

DIVERSIFIED INVESTMENTS- The investment made by you

is spread over 20 or more different companies, and thus, inherently follows the principle



GOVERNMENT CONTROL- Mutual funds are subject to SEBI

rules and regulations who keep a close watch on their working.

47



DISCIPLINED INVESTMENT - Investment in SIP is not

affected by booms and depressions in the share market and gives you good returns by the laws of average. Investments in SIP of various Mutual Fund Companies inculcate a disciplined habit of investing in a regular way.



SAVING WAS NEVER SO EASY - A SIP scheme can be started

with convenient monthly installments of as little as Rs. 250/- per month and as many accounts can be opened in the name of husband, wife and children.



HELP YOU SHAPE YOUR FUTURE - Most of us have needs

that involve significant amounts of money, like a child’s education, a daughter’s marriage, buying a house or a car. Money for such milestones can be easily accumulated through SIP as a regular amount is being set aside for such goals.



LOWERS THE AVERAGE COST- SIPs work better as opposed

to one-time investing. This is because of rupee cost averaging. Under rupee-cost averaging, an investor typically buys more of a Mutual Fund unit when prices are low. On the other hand, he will buy fewer mutual fund units when prices are high. This is a good discipline, since it forces the investors around him are wary and exiting the market. Investors may even be pleased when prices fall because the fixed rupee investment would now fetch more units.  investor. TAX FREE RETURNS- After 365 days from the date of last

transaction, if the entire amount is withdrawn then it becomes tax free in the hands of the

48

Hence, invest early, Regular as small-small drops, Make a mighty ocean.

THE DISCIPLINED APPROACH
 Helps you to invest disposable funds each month.  Gives you the benefits of “rupee cost averaging.”  Relieves you of trying to time the market.  Helps you to reach your financial goals.

Here is how you start:
 Fill up a single SIP form, and a single application form.  Draw post-dated cheques (minimum 5 cheques).  Per cheque minimum SIP amount, can be as low as Rs. 500/-

How is SIP Better?
» Your periodic investments can be as small as you want, providing your overall investment is at least Rs. 5000/The day/date option ensures that you get to pick the time of month/quarter that best suits you, given your cash flow patterns. Minimum paperwork – start an SIP by filling a single form.

»

»

49

» schemes) »

If you invest through SIP, you do not pay entry load (in most of the

If you exit in less than the specified period (usually, 6 months for debt schemes, 1 year for equity schemes), you pay exit load as applicable.

50

BENEFITS FROM SYSTEMATIC INVESTMENT PLANS
SIP in Tax saving schemes (ELSS)
People having time horizon of more than 3-4 years may choose Tax saving schemes (ELSS) over pure diversified or focused equity fund schemes.

IT PROVIDES Relief from one lump sum investment at the year end (e.g., Rs. 1000 every month, rather than Rs. 10,000 lump sum)  Tax relief u/s 80 c  Accumulating Insurance Premium through SIP. Open two SIPs of 6 month each and repeat the same after 6 months.

IT PROVIDES: Ready premium at the end of six months every one year.  Relief from one lump sum investment at one go (e.g., Rs. 1000 every month, rather than Rs. 10,000 lumpsom at the time of premium payment date).

51

COMPARISION BASED ON RETURNS FOR ALL FUNDS TAKEN UNDER GROWTH OPTION WITH NAV AS ON 6TH JULY 2007

DIVERSIFIE D EQUITY FUNDS
HDFC EQUITY FUND GROWTH DSPML TOP 100 EQITY FUND GROWTH HSBC EQUITY FUND GROWTH ICICI PRUDENTIAL DISCOVERY FUND RELIANCE EQUITY FUNDGROWTH

NAV (as on 6th July, 07)
167.91

COMPOUNDED ANNUALIZED 1st Year 45.45 3rd Year 53.61

INCEPTION DATE

SINCE INCEPTION IN CAGR

24th December, 94 10th February, 03

25.13%

66.40

50.35

49.28

54.90%

78.15

41.41

44.54

14th November, 02 18th August, 04

56.78%

28.97

31.56

-

44.43%

12.97

34.96

-

7th March, 06

22.75%

52

MIDCAP EQUITY FUNDS

NAV (as on 6th July, 07)

COMPOUNDED ANNUALIZED 1st Year 46.65 3rd Year 48.25

INCEPTION DATE

SINCE INCEPTION IN CAGR

HDFC CAPITAL BUILDER FUND GROWTH DSPML SMALL & MIDCAP FUND IPGROWTH HSBC MID CAP EQUITY FUNDGROWTH ICICI PRUDENTIAL EMERGING STAR FUND GROWTH RELIANCE GROWTH

74.27

30th October, 98

25.92%

11.81

-

-

16th October, 06 12th April, 05

18.09%

22.04

51.05

-

44.87 %

32.99

58.53

-

1st November, 05

55.91%

314.03

56.66

64.18

25th September, 95

34.09%

53

EQUITY LINKED SAVING SCHEMES (ELSS)
HDFC TAX SAVER GROWTH ICICI PRUDENTIAL TAX PLAN GROWTH RELIANCE TAX SAVER FUND GROWTH

NAV (as on 6th July, 07)

COMPOUNDED ANNUALIZED 1st Year 3rd Year

INCEPTION DATE

SINCE INCEPTION IN CAGR

159.36

37.21

60.40

31st March, 96

38.92%

94.18

27.25

54.39

19th August, 99

32.90%

15.80

46.16

-

23rd August, 05

29.55%

54

MONTHLY INCOME PLAN (MIP)
HDFC MIP LONG TERM PLAN DSPML SAVING PLUS AGGRESSIVE FUND ICICI PRUDENTIAL MIP CUMULATIVE HSBC MIP SAVING PLUS RELIANCE MIP

ABSOLUTE RETURN FOR LAST YEAR 15.13%

INCEPTION DATE

SINCE INCEPTION IN CAGR 13.28%

8th December, 03 20th May, 04

15.02%

13.02%

10.26 %

10th October, 04 10th September, 04 29th December, 03

10.56%

15.78% 9%

10.75% 9.66%

55

BALANCE FUND
HDFC PRUDENCE FUND DSPML BALANCE FUND ICICI PRUDENTIAL BALANCE FUND

ABSOLUTE RETURN FOR LAST YEAR 40.15%

INCEPTION DATE

SINCE INCEPTION CAGR 22.87%

31st January, 94 14th May, 99

39.51%

20.05%

28.42%

7th October, 99

18.55%

56

57

RESEARCH METHODOLOGY:
OBJECTIVE
When we talk of Research Methodology, we not only talk of the research methods but also consider the logic behind the methods we use in the context of our research study and explain why we are using a particular method or technique and why we are not using so that research results are capable of being evaluated either by research himself or by others. As the project is about the comparative study of HDFC’s mutual funds with other respective companies, so my objective is to compare the few products of HDFC’s mutual fund with other companies.

SAMPLE SIZE
The sample size refers to the number of employees selected from the heterogeneous group which constitutes of doctors, engineers, working employees, housewives etc. It consists of 50 individuals.

SAMPLING
The sampling used is judgmental sampling. Judgmental sampling is a form of convince samplings in which the population elements are selected based on the judgment of the researcher.

58

METHOD OF SAMPLING

Sampling Procedure: The samples were taken from the heterogeneous people,
asking about their financial goal and the kind of financial planning they want to have in order to achieve their financial goal. On the representation basis, the sample may be probability sampling or it may be nonprobability sampling.

Probability sampling: Probability sampling is also known as ‘Random sampling’ or
‘Chance sampling’. Under this sampling design, every item of the universe has an equal chance of inclusion in the sample. (i.e., once an item is selected for the sample, it cannot appear in the sample again)

Non Probability sampling: Non Probability sampling is also known by different
names such as deliberate sample, purposive sampling and judgment sampling. In this type of sampling, items remain supreme.

59

Type of research:
(1) (2) EXPLORATORY RESEARCH DESCREPTIVE RESEARCH

Various different research methodologies was used in the study

Exploratory Research: Exploratory research was used in corporate and individual
investors’ .It seeks to discover new relationships. Exploratory research is a natural step. It is useful to find the most likely alternatives, which are then turned into hypothesis. Exploratory research may also be involved when the perceived problem is much less general .it is useful to develop the most promising hypotheses. They define hypotheses, which are then tested by conclusive research

60

DATA COLLECTION
In dealing with any real life problem it is often found that data at hand are inadequate and hence, it becomes necessary to collect data that are appropriate. There are several ways of collecting the appropriate data which differ considerably in context of money costs, time and other resources at the disposal of the researcher.

The collection of data was done both from primary and secondary sources.

Primary Data
Primary data can be collected either through experiment or through survey. If the researcher conducts an experiment, he observes some quantitative measurements, or the data, with the help of which he examines the truth contained in his hypothesis, but in the case of survey, data can be collected by any one or more of following ways. • • • • By Demonstration. Through personal interview. Through telephone interview. By questionnaires.

It was collected through the survey in which the questionnaire was prepared and was asked to answer by the heterogeneous people. They were also personally interviewed. The data collected was totally original and did not exist before. The data was flexible and reliable too.

Secondary Data
The data, which already exist in the nature, is called secondary data. It provides a slating point for research and offers the advantage of low costs and ready availability. The

61

historic literature and other information regarding the company profile and strategic planning were taken from the secondary sources like Economic Times, Business Today; investor India and through websites.

Sample size: The sample size chosen was 50 keeping in view the availability of time
and the convenience of the other people with whom the contacts were to be made.

62

TOOLS
The tool used in the research is ‘QUESTIONNAIRE’.

What is a questionnaire?
A questionnaire a list of question to be asked from the respondents. It also contains a suitable space where the answer can be offered a better questionnaire form, which has completed, by an interviewer

Why questionnaire?
Now a days questionnaire are commonly used to collect data that is specific are crucial to the success of business venture. Without doubt questionnaire allows gathering information that cannot be found any where, like from other secondary data such as Manuals, Books and internet resources. That is why information collected is fresh and unique. Here I have used close ended questionnaire in which the person has to only select the options which he/she thinks is most suitable.

63

64

DATA ANALYSIS AND INTERPRETATION 1. Annual income
This is the attempt to understand the sample population’s financial conditions like under which income slab individual invest the most. a) <Rs.1lac b) Rs.1lac-Rs.3lacs c)>Rs.3lacs

Income <1 lac 1-3 lac >3 lac

Frequency 10 35 20

Percentage 49 30 21

Interpretation:
According to their responses, we analyzed that 85% sample population come under the slab of 1lac to 3 lac only 15% sample population annual income is >3lacs who are interested in investment.

65

2. Where do you invest your savings?
(a) Savings (b) Real estate (c) Insurance (d) Mutual funds (e) Gold/Arts

Analysis and Interpretation:
INVESTMENTS Gold/Arts, 3%

Mutual funds, 34%

Savings, 36% Real Estate, 10%

Insurance, 17%

The results show that the maximum percentage of the sample has their investments in savings a/c, PPF & FD’S. This clearly underlines the fact that most Indians are inclined towards investing in safe investment avenues, which are backed by government and offer suitable returns over a period of time. Thus, Indians are conservative investors by nature. 36% of the sample had invested in savings. Only 17% of sample had invested in insurance sector and 34% in mutual funds. Most people who invest in mutual funds are professionals, who have awareness about their benefits and are well versed with these investments.

3. What percentage of the above do you invest in equities?
a) 10%-25% b) 25%-35% c) 35%-45% d) 45%-55% e) 55%&above

Income 10-25 25-35 35-45 45-55

Percentage 20 30 20 20

66

55>

10

Interpretation:
44% sample invest 25%-35% in equities, 24% sample invest 10%-25% in equities, 16% sample invest 35%-45% in equities, 12% sample invest 45%-55% in equities & only 4% sample invest 55% & above in equities. This result shows that the investors are very careful while doing the investment in equities.

4. What is the average time frame you normally envisage your investments?
a) Less than 6 months b) 6 months to 1 year c) 1 year to 3 years d) More than 3 years

Duration < 6 month 6-12 month 1- 3 year

Percentage 20 30 20
67

 3 year

30

Interpretation:
The results clearly highlight that a major proportion of the sample are long term investors and seek the returns to grow over a period of time to give them suitable returns. People who are short-term investors (5%) are basically those investors, who engage in quick returns from the equity markets.

5. What do you measure while investing?
a) Time period b) Return on investment c) Tax benefits 30 40 30

68

Interpretation:
Most of the individual are interested in the returns from the investment no matter how that happens. Many individual also give importance to the time duration till they have to invest. Very moderate individuals are interested to take tax benefits.

6. How much return are you getting from your investment?
a) 5%-10% b) 10%-20% c) >20% 30 50 20

According to the 71% individual, good returns is the first priority for them. The individual (17%) who comes under the income tax slab rate, measure tax benefit while doing the investment. Rest of the investor’s measure the time period.

69

Interpretation:
59% sample are getting >20% return which is good in today’s low bank investment rates situation, only 41% sample are getting 10%-20% return from their investment.

7. What return are you expecting from your investments?
The purpose was to ask individuals in the sample about the average returns which they expect from their investments. a) 8% b) 8- 15% c) > 15% 50 20 30

70

Interpretation:
The study shows that more than 22% of the sample expects their returns to be between 8% - 15%. The fact is that the fixed securities give a return of just about 10%. To get better results one has to invest in riskier avenues. These avenues are equity, mutual funds etc. thus, as the expectations are rising, more and more people are heading towards equity markets. The people who expect more than 15% are 78% of sample size, aggressive investors and represent the young professionals in the sample. They are ready to take risks and thus, expect high returns on their investors. The attitude of most of the investors is changing towards the financial markets due to robust growth and norms of SEBI. There is a growing investor trust in the markets.

8. How much do you agree that systematic financial planning can help you to achieve your financial goals in an efficient manner?
a) Strongly disagree b) Disagree c) Agree d) Strongly Agree 60 20 10

10

71

Interpretation:
The results clearly state that 68% of the sample agrees that systematic financial planning can help them to achieve their financial goals in an efficient manner. 18% of the sample strongly believes on this statement. Only 13% of the people disagree to this statement but none of the people strongly disagreed to this statement.

9. Are you aware of mutual funds?
The reason behind asking this question was that we want to know that how many people have the knowledge about mutual funds besides the other investment tools. a) Yes b) No

Analysis and Interpretation: Awareness about Mutual funds
No, 10%

72

Yes, 90%

The result is very positive approximately 90% respondents are aware about the mutual funds.

10. If ‘yes’ then please specify of which company?
a) HDFC OTHERS b) ICICI c) DSPML d) HSBC e) RELIANCE f)

Investment on various company

10% 2% 3% 15%

5%

65%

HDFC HSBC

ICICI RELIANCE

DSPML OTHERS

73

74

FINDINGS
• From the above observation it was found that most of the people are of the conservative view and they generally invest their money in government securities like fixed deposit or post office or saving accounts etc. It was not found in the people who are well educated and are working as professionals. These people generally take advice from the financial advisor and invest their money into various schemes of mutual fund and earn profits. • Most of the people are aware of mutual fund but the thing that goes behind their mind is the fear of loosing their money. Each individual wants to earn money but it is their risk taking ability that becomes the biggest hindrance during the time of investments. Most of the people relate mutual fund with the UTI scam that happened many years ago. It is the after math affect of that scam that even today small investor and generally income grade people hesitate to invest in mutual fund with the fear of loosing it. • With the increase in the awareness about the mutual funds many people such as servicemen, housewives, businessmen etc. are taking more interest in investing in mutual funds. The first and the most favorite question that each individual ask is that what benefits and returns does mutual funds will give to them. The second most favorite question that they ask is about the time duration till they have to invest and how much. There are people that don’t take advice from anybody and does their investment on their own. When it was asked that what do they know about the mutual funds then a satisfactorily answer was not found which shows the lack of knowledge amongst the people about mutual fund. • Mutual fund is owned by almost all of them but the difference between them is the amount of money they have invested and the time duration till the investment is made. While doing the studies about the mutual funds it was found that most of the people owned HDFC mutual fund comparatively to other companies. This is because of the brand name and the image that the company has created in the minds of the people.

75

76

SUGGESTIONS & RECOMMENDATIONS
The suggestions and recommendations are on the basis of the entire study. This includes knowledge gained through books and websites i.e. the secondary data and the primary data collected through questionnaire and its analysis.

•

Mutual Funds in Future:

Through survey and analysis of the

questionnaire we came to know that there are people who are aware of mutual funds and want to invest into it, but the fear of the loss of capital also resides within them. No doubt the investors totally comply that the mutual fund gives a higher return than the bank returns on fixed deposit or saving a/c. This being the weak point of most of the banks makes mutual fund very lucrative. In the near future we can vision it out that mutual funds will be the best instruments for the investors to invest. After all what an investor want is high returns with less risk of losing capital and mutual fund is exactly giving them the same. Therefore the future of mutual funds is really very bright.

•

Maintaining the performance pace:

Mutual Funds need to

maintain its performance record. The findings show that Mutual Funds have been rated well by both investors and distributors/advisors by and large on all the attributes, which implies overall satisfaction. Sustaining the performance in future is a major challenge for the industry. Past few years have been favorable for capital market and money market in the country and Mutual Funds have cashed upon the same and complemented it with generating good returns. The markets are highly volatile in the country and the Mutual Funds have to take care of the same.

77

•

Efficient Management of Founds: Mutual Funds have been able to
retain its customers as the findings showed that investors associated with Mutual Funds for longer duration constitute a major portion of the sample size. The Companies must take the advantage of this favorable fact and should work upon to make the schemes generate good returns i.e. good management of funds. Maximum returns on the investment are the only underlying aim of the investors and this should be taken the utmost care of by the Mutual Fund Companies.

•

Awareness of Mutual Funds: The survey found that the majority of
the respondents in the survey were associated with Mutual Funds for a longer duration front. Looking upon it the other way, it is revealed that new entrants in Mutual Fund are miserable low. In the investor’s survey, Novice investors (investor for less than 6 months) formed only 28% of the respondents, which is fairly low. This shows that awareness of people about Mutual Funds is low and the Industry needs to look into it. With highly penetrating distribution channel of the Mutual Funds, it is suggested that the same can be used for creating awareness campaigns where the distributors/advisors can make best use of their clienteles and make the masses aware of this feasible investment option and validating its success story by the performance record. The companies can make a joint effort and can go in for campaigns that aim at educating the masses about the investment option.

•

Opportunity for New Entrants in Mutual Funds :

The survey

findings shows that 90% respondents in the investor survey belong to Moderate Investor category implying that investors prefer to invest across the various funds offered by the companies. The Investors have invested in same type of schemes across the companies. Also, observations found that investors have diversified across the companies on the basis that some Companies are pioneer in management of funds some specific type of funds. This brings an opportunity for 78

the new entrants as the only benchmark of evaluation is the management of funds and the returns generated and there is no dearth of investors.

•

Target Age Bracket 30yrs to 45 yrs:

The investors in the age

bracket of 30 yrs to 45 yrs has come out to be the most attractive age bracket for Mutual Funds as the survey reveals that this age bracket is the most diversified and involved investors. This age bracket is investor of all type of schemes. Hence, this age bracket can be a probable target for the Mutual Funds. The fund houses should target this bracket and specific strategies should be made to tap them.

•

Scope for Equity based funds:

Equity funds have been the choice of

almost all the investors belonging to all age brackets, all occupation and all income brackets. This suggests that with variations in equity schemes, it can be a feasible preposition to make an extra effort on the distribution of these schemes. The variations in equity in equity schemes can be schemes with aggressive stocks portfolio, mixture of aggressive & passive stocks portfolio, value stocks portfolio, portfolio with large number of stocks (to diversify the risk) etc.

79

80

CONCLUSION
After doing my study and research on the project I found that HDFC’s mutual funds are most popular amongst the people due to their brand name and loyalty. With the increase in the awareness about mutual funds, people are now a days showing interest towards it and are willing to invest in the instruments of mutual funds. What is necessary is to provide proper knowledge and guidance to them as people in India are conservative in nature. In the research I found that the people who are well educated like doctors, retired engineers and IAS etc. show more interest towards mutual funds because they have knowledge about it. On the other hand people who are conservative like employees of some companies, housewives etc. spend their money more in the government FD’s and PPF (public provident fund). They are more cautious about their money and don’t know that they can earn more money just by investing in the mutual fund instruments. But yes! When we provide the knowledge to them the same thing (mutual fund) become very lucrative and fascinating to them too. Mutual fund industry is growing on very fast as more and more people are becoming aware of it with the passage of time. In the near future to come we can conclude that, most of the families will invest their money in mutual funds.

81

82

QUESTIONNAIRE
NAME: GENDER: Male ( ) Female ( ) ADDRESS: OCCUPATION: CONTACT NO.: 1. Annual Income a) < Rs. 1 lac

b) Rs. 1 lac – Rs. 3 lacs c) Insurance

c) > Rs. 3 lacs d) Gold/ Arts

2. Where do you invest your savings? a) Saving a/c b) Real Estate e) Mutual Funds

3. What percentage of the above do you invest in equities? a) 10% – 25% b) 25% - 35% c) 35% - 45% e) 55% & above

d) 45% - 55%

4. What is the average time frame you normally envisage your investment? a) < 6 months b) 6 months – 1 year c) 1 year – 3 years d) > 3 years 5. What do you measure while investing? a) Time period b) Return on investment c) Tax benefits

6. How much return are you getting from your investments? a) 5% - 10% b) 10% - 20% c) > 20% 7. What returns are you expecting from your investments? a) < 8% b) 8% - 15% c) > 15% 8. How much do you agree that systematic financial planning can help you to achieve your financial goals? a) Strongly Disagree b) Disagree c) Agree d) Strongly Agree 9. How do you manage your funds? a) Take help of information available/ by yourself b) Do whatever my friends or family suggest c) No, I have a professional financial planner 83

10. Are you aware of Mutual Funds? a) Yes b) No 11. What is your perception about mutual funds? a) A Vehicle to pool money from investors in a basket of securities by professional manager. b) Invest the money by mutually co-operative group c) Term associated with UTI scam d) High returns with moderate risks e) Safe vehicle for investment purposes. 12. Do you own any mutual fund? a) Yes b) No 13. If “YES” then please specify of which company? a) HDFC b) ICICI c) DSPML e) RELIANCE f) OTHERS d) HSBC

14. Are you interested in knowing the investment product of mutual funds? a) Yes b) No 15. Do you know about mutual funds as an investment tax saving option? a) Yes b) No

84

85

BIBLIOGRAPHY
1) Kar Pratip; Natrajan, I and Singh, J.P. (2000) Survey of Indian Investors, SEBI and NCAER 2) 3) Financial management by I.M. PANDEY Reid Brian K and Rea John D, (2003 July), Perspective, Mutual Fund Distribution Channel and Distribution Costs, Investment Company Institute 4) Bevis Charles, W, (2002 November), The Future of Mutual Fund Industry, Financial Research Corporation 5) 6) 7) 8) 9) <http://www.researchandmarkets.com> <http://www.bimaonline.com Marketing research / Dr. Berry /ajayshah/MEDIA/1997/eqprem.html> <http://www.valueresearchonline.com>

86

10) <http://www.amfiindia.com> 11) http://www.moneycontrol.com <http://moneycontrol.com> 12) <http://www.bseindia.com> 13) Primary Data from Questionnaire’s

87