a comparative study of selected schemes of hdfc …
TRANSCRIPT
A COMPARATIVE STUDY OF SELECTED SCHEMES OF HDFC MUTUAL FUNDS
1. Dr. Anil Kumar Goyal
Professor,
Rukmini Devi Institute of Advanced Studies, Delhi
2. Tamanna Madan
Student, Management Studies,
Rukmini Devi Institute of Advanced Studies, Delhi
ABSTRACT-
Mutual funds allow tax benefits, diversification and other various options through making an
investment in equity, debt or hybrid funds. Using different measures of scale this study aims at
evaluating the best performing HDFC mutual fund scheme by comparing among selected 10
HDFC mutual funds and NIFTY on the basis of their daily NAV.
Keyword: Mutual Funds, HDFC, NAV.
INTRODUCTION-
Mutual funds refers to the investment that is made with the purpose to earn more in long term
with an advantage of withdrawing money as and when needed or required. This money is further
invested by professionals in that company which will yield better returns in future.
Mutual fund investments are subject to market risks. Please read the offer document carefully
before investing.
The mutual funds are then further divided into 3 parts that are:
1. Equity funds
2. Debt funds
3. Hybrid funds
Equity funds: It refers to the funds that highly fluctuate in short span of period but the return is
also in this is high. Equity funds are also called Stock funds.
Debt funds: In this investor has an option whether to invest for shorter period of time or for
longer period of time and the return the investor would get is mostly fixed.
Hybrid funds: This is a mix of both Equity funds as well as Debt funds.
ADVANTAGES:
1. Professional management - As every person involved in this field is experienced they
know when the market goes up and when it is not stable. So they know better when to
invest and when not to.
2. Liquidity – If in any case you do not want to invest further in mutual funds you just
simply has to tell your broker or agent and if invested directly you just have to drop a
mail and maximum within 24 hours you can convert your mutual funds into cash.
3. Diversification – When you invest in mutual funds you don’t invest in Single
Corporation rather you invest in multiple corporations, so that you don’t have to bear
loss if the value of certain stock goes down through other shares you risk can be
minimized.
DISADVANTAGES:
1. Agent’s commission – The main disadvantage of mutual fund is that the investor has
to pay agent’s commission which is an add on cost for purchasing securities. So, that
has to be borne by investor only.
2. Blocking money – The money of investor is blocked for a longer period because in
short term no one would get more return so mostly people invest for longer period of
time which is considered as blocking self’s money.
3. Mutual fund charges – For smooth functioning of the funds invested by investors i.e
for smooth operations there is a certain fee that is charged by the name mutual fund
charges so as to maintain the account of the investor.
Net Asset Value – NAV is the sum total of the market value of all the shares held in the portfolio
including cash, less the liabilities, divided by the total number of units outstanding.
Thus, NAV of a mutual fund unit is nothing but the 'book value.'
NAV= (Market value of scheme’s investment + receivables + accrued income + other assets –
accrued expenses – payables – other liabilities) / No. of outstanding units
HDFC MUTUAL FUNDS: HDFC Mutual Fund has been constituted as a trust in accordance
with the provisions of the Indian Trusts Act, 1882, as per the terms of the trust deed dated June 8,
2000 with Housing Development Finance Corporation Limited (HDFC) and Standard Life
Investments Limited as the Sponsors / Settlors and HDFC Trustee Company Limited, as the
Trustee. The Trust Deed has been registered under the Indian Registration Act, 1908. The
Mutual Fund has been registered with SEBI.
HDFC Asset Management Company Ltd (AMC) was incorporated under the Companies Act,
1956, on December 10, 1999, and was approved to act as an Asset Management Company for
the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000.
In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset
Management Company Limited to manage the Mutual Fund.
Why only HDFC mutual funds?
HDFC is India's leading housing finance company, HDFC Bank is one of India's premier banks
providing a wide range of financial products and services to its over 18 million customers across
hundreds of Indian cities using multiple distribution channels including a pan-India network of
branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span
of time, the bank has emerged as a leading player in retail banking, wholesale banking, and
treasury operations, its three principal business segments. And as the bank has successfully
gained market share in its target customer franchises while maintaining healthy profitability and
asset quality so, I choose HDFC mutual funds.
LITERATURE REVIEW-
Pala & Chandani (2014) underwent a study of “A Critical Analysis of Selected Mutual Funds
in India”. Under this study their main objective was to know the performance of top 10 equity
mutual fund schemes in various categories, the best mutual fund house in Equity Mutual Fund
category, & finally to compare the performance of top 10 equity mutual fund schemes according
to the performance parameters.
Ashraf – In the study “Performance Evaluation of Indian Equity Mutual Funds against
Established Benchmarks Index” Ashraf studied about the return earned by the sample mutual
funds schemes and compare against the benchmark market returns and whether the degree of
correlation exist between fund and market return or not. He also studied the performance of
equity mutual fund scheme to understand the impact of benchmark index on mutual fund
performance & to find out the mutual fund schemes offering the advantages of diversification,
along with adequate systematic risk compared to market beta risk.
Panwar & Madhumathi (2006) on “CHARACTERISTICS AND PERFORMANCE
EVALUATION OF SELECTED MUTUAL FUNDS IN INDIA”, identified differences in
characteristics of public-sector sponsored & private-sector sponsored mutual funds and
compared their performance using traditional investment measures. Net Asset Value (NAV) for
the medium-term period May,2002 to May,2005 of selected mutual funds along with the index
value of the two benchmark market indices, namely S &P CNX NIFTY and CRISIL Balanced
Fund Index were taken.
Venkataraman and Venkatesan (2016) – studied about “Evaluation of Growth of Mutual
Funds and Exchange Traded Funds in India” studied the performance of different schemes of
mutual fund companies on the basis of risk and return so as to analyze the funds benchmarked to
their index and compare their performance to a common index & also to evaluate the investment
performance of the mutual funds with respect to standard deviation, Sharpe’s ratio, Treynor’s
ratio and Jenson’s alpha.
RESEARCH METHODOLOGY-
Research Objectives:
1. To compare the returns of 10 selected HDFC mutual funds scheme with that of the
NIFTY.
2. To compare the average returns of 10 selected HDFC mutual funds and find out the best
scheme from April’17 to March’18.
Research Approach:
In this particular research, quantitative approach has been used and the data is secondary which
was collected through company’s website and various other mutual funds websites. Observations
are analyzed and hence the result has been driven through applying various modes like tables,
charts etc.
Research Instrument:
Through yahoo finance I collected the data of 10 selected schemes of HDFC mutual funds for
their historical NAV. Then I collected the data from NSE of NIFTY for historical NAV. So, that
I could make a comparison of the returns of both and can compare that through which the returns
are more stable. And also to calculate that which scheme gives best return among all the 10.
The data of the following mutual fund schemes are collected:
1. HDFC Banking & PSU Direct plan- Dividend option
2. HDFC Balanced Fund Direct plan- Dividend option
3. HDFC Capital Builder Fund Direct plan- Dividend option
4. HDFC Cash mgt. Fund- Call plan Dividend option
5. HDFC Core & satellite fund direct plan- Dividend option
6. HDFC Equity Savings Fund-Direct plan Dividend Option
7. HDFC Growth fund- Dividend option
8. HDFC High interest fund short term plan direct plan-Normal dividend option
9. HDFC Income fund Regular plan-Normal Dividend option
10. HDFC Large cap. Fund- direct dividend option
DATA ANALYSIS AND INTERPRETATION-
Data is collected only through secondary mode which is collected through company’s website
and other mutual fund websites.
Analysis of data: Data that is collected has been analyzed & presented in the form of charts. I
have collected NAV of top 10 HDFC mutual funds schemes & that is compared with NAV of
NIFTY. After this I have also shown that among HDFC mutual funds schemes which one is
better.
1. This is the comparison of average returns of 10 selected HDFC mutual funds schemes
with NIFTY
Interpretation: In this we can clearly see that the average returns that all HDFC mutual funds
schemes we are getting is not much fluctuating in long term whereas the Average Returns of
NIFTY are fluctuating at a very high rate.
-20.00
-15.00
-10.00
-5.00
0.00
5.00
10.00
1 2 3 4 5 6 7 8 9 10 11
HDFC Banking & PSU Direct plan-Dividend option
HDFC Balanced Fund Direct plan-Dividend option
HDFC Capital Builder Fund Directplan- Dividend option
HDFC Cash mgt. Fund- Call planDividend option
HDFC Core & satellite fund directplan- Dividend option
HDFC Equity Savings Fund-Directplan Dividend Option
HDFC Growth fund- Dividendoption
HDFC High interest fund shortterm plan direct plan-Normaldividend option
HDFC Income fund Regular plan-Normal Dividend option
HDFC Large cap. Fund- directdividend option
NIFTY
2. This is the Average returns of all 10 selected HDFC mutual funds schemes to know
which one is best.
PLANS→
MONTHS
↓ HDFC
Banking
& PSU
Direct
plan-
Dividend
option
HDFC
Balanced
Fund
Direct
plan-
Dividend
option
HDFC
Capital
Builder
Fund
Direct
plan-
Dividend
option
HDFC
Cash
mgt.
Fund-
Call plan
Dividend
option
HDFC
Core &
satellite
fund
direct
plan-
Dividend
option
HDFC
Equity
Savings
Fund-
Direct
plan
Dividend
Option
HDFC
Growth
fund-
Dividend
option
HDFC
High
interest
fund short
term plan
direct
plan-
Normal
dividend
option
HDFC
Income
fund
Regular
plan-
Normal
Dividend
option
HDFC
Large
cap.
Fund-
direct
dividend
option NIFTY
APRIL -0.07 1.76 0.1 0 2.39 0.48 0.89 0.24 -0.13 1.33 -6.66
MAY 0.03 2.25 0.42 0 1.24 0.83 2.67 0.86 1.62 4.22 2.29
JUNE -0.17 -1.02 -0.36 0 -0.98 -1.47 -0.32 0.74 1.46 -2.22 6.33
JULY 0.29 3.64 4.83 0 4.45 1.88 4.38 0.93 0.98 4.65 2.88
AUGUST 0.05 -1.26 -0.97 0 -1.75 -0.31 -2.37 0.48 0.08 -2.87 4.96
SEPTEMBER -0.21 -2.96 -0.34 0 -2.47 -1.85 -1.57 0.18 -0.56 -3.22 1.52
OCTOBER -0.26 4.28 7.48 0 6.51 2.02 7.85 0.7 -0.36 7.36 -0.3
NOVEMBER -0.22 -0.09 1.22 0 3.3 0.34 -0.66 0.17 -0.47 -1.15 0.77
DECEMBER -0.3 1.87 4.72 0 5.61 -0.42 3.84 -0.11 -0.84 3.34 1.22
JANUARY 0.35 1.57 2.29 0 -1.24 1.17 3.35 0.29 -0.54 4.42 2.66
FEBRUARY -0.17 -2.68 -14 0 -1.39 -1.45 -14.17 0.24 -0.32 -6.15 -2.43
MARCH 0.65 -2.05 -3.33 0 -5.03 -0.88 -3.74 0.94 1.08 -11.38 -2.37
TOTAL 0 5.33 2.06 0 10.65 0.32 0.14 5.66 2.02 -1.68 10.87
Interpretation: So after comparison of all the 10 selected HDFC mutual funds schemes we see
the average return of HDFC Core & Satellite funds direct plan- Dividend option is best to invest
& the second best option would be HDFC high interest fund short term plan direct plan- Normal
dividend option after taking all the performance parameters into consideration.
CONCLUSION-
Based on the research of HDFC mutual funds, the following conclusion can be made-
It is found that while comparing 10 schemes of HDFC mutual funds i.e HDFC Banking & PSU
Direct plan- Dividend option, HDFC Balanced Fund Direct plan- Dividend option, HDFC
Capital Builder Fund Direct plan- Dividend option, HDFC Cash mgt. Fund- Call plan Dividend
option, HDFC Core & satellite fund direct plan- Dividend option, HDFC Equity Savings Fund-
Direct plan Dividend Option, HDFC Growth fund- Dividend option, HDFC High interest fund
short term plan direct plan-Normal dividend option, HDFC Income fund Regular plan-Normal
Dividend option, HDFC Large capital Fund-direct dividend option. The trend has been studied
from April 2017 to March 2018 & the average returns of all these schemes are compared with
the average return of NIFTY. Looking at the performance of these 10 selected HDFC mutual
funds schemes, in last one year, their performance has been barely beating the index. So, this
research proves that the schemes of HDFC mutual funds are not able to beat the benchmark of
NIFTY as they the return we are getting from NIFTY is comparatively higher than that of HDFC
mutual funds. Hence, according to my research it’s proved that in India it is a bit riskier to buy
10 selected HDFC mutual funds schemes according to what the index has been set.
The another point that this research proves is that HDFC Core & Satellite funds direct plan-
Dividend option is best to invest & the second best option for investment is HDFC high interest
fund short term plan direct plan- Normal dividend option.
HDFC Core & satellite fund direct
plan- Dividend option
References:
Ms. Shilpi Pal, Arti Chandani Prof. (2014) - A Critical Analysis of Selected Mutual Funds in
India. The journal of Procedia Economics & Finance, Volume 11, 481-494 DOI
https://doi.org/10.1016/S2212-5671 (14)00214-7
Syed Husain Ashraf and Dhanraj Sharma (2014)- Performance Evaluation of Indian Equity
Mutual Funds against Established Benchmarks Index. International Journal of Accounting
Research DOI: 10.4172/2472-114X.1000113
Panwar, Sharad and Madhumathi, R.(2006)- Characteristics and Performance Evaluation of
Selected Mutual Funds in India. Indian Institute of Capital Markets 9th Capital Markets
HDFC High interest fund short
term plan direct plan-Normal
dividend option
HDFC High interest fund short
term plan direct plan-Normal
dividend option
Conference Paper.
SSRN: https://ssrn.com/abstract=876402 or http://dx.doi.org/10.2139/ssrn.876402
R. Venkataraman, Thilak Venkatesan (2016)- Evaluation of Growth of Mutual Funds and
Exchange Traded Funds in India. Informatics Journal Volume 7, Issue 1, March 2016 DOI-
https://doi.org/10.18311/sdmimd/2016/8413
S. Narend, Dr. M. Thenmozhi Prof. (2014). Performance of ETFs and Index Funds: a
comparative analysis.
https://pdfs.semanticscholar.org/76af/b38b80c946734f17a76484220c6f1f77485d.pdf
Krishna Prasanna (2012) Performance of Exchange-Traded Funds in India. International
Journal of Business and Management, Volume 27 No. 23
DOI http://dx.doi.org/10.5539/ijbm.v7n23p122
Dr. S. Krishnaprabha (2012) - Risk and Return Analysis of Open-ended Equity Linked Mutual
Fund Schemes in India. The International Journal’s Research Journal of Economics & Business
Studies. Volume: 01, Number: 12, October-2012
Michael C. Jensen (1967)- The Performance Of Mutual Funds In The Period 1945-1964.
Journal of Finance, Vol. 23 No. 2 (1967) 389-416
Burton G. Malkiel (1995)- Returns from Investing in Equity Mutual Funds 1971-1991. Journal
of Finance, Volume 50, Issues (Jun.,1995), 549-572