a critical analysis of mutual fund 1[1]

7/31/2019 A Critical Analysis of Mutual Fund 1[1]

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Other SchemesBy structureBy Investment Objectives

Tax saving fundEquity SchemesDebt SchemesOpen-ended SchemesLarge cap fundSector specific fundMM Mutual fundClose Ended SchemesIndex SchemesMid cap FundFMPInterval SchemesSmall cap fundOther Debt SchemesAny Other Equity FundGrowthDividendReinvestedPayout

44%

24.%

14%

18%

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PROJECT

REPORT

A CRITICAL ANALYSIS OF

HDFC MUTUAL FUND (RISK

AND RETURN)

FOR FULFILLMENT OF SUMMER INTERNSHIP

REPORT

SUBMITTED BY: SUBMITTED TO:Dr ADARSH ARORA

CHANDER REKHAA3104609003BATCH-2009-12B.COM(HONS)

AMITY SCHOOL OF ECONOMICSAMITY UNIVERSITY UTTAR PRADESH

AUUP SECTOR 125 NOIDA


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ACKNOWLEDGEMENT

It took great deal of help, tolerance and understanding on the partof a variety of people and organization to prepare this projectreport. I would particularly thank Mr Amit Shrivastava (HDFC/AMC) for providing me guide line and support during my training. Iam also indebted to my economics teacher Dr GargiBandyopadhyay who trusted me and provided me with such anopportunityI would also like to thank all staff members of different branches

of HDFC, all my colleagues whose ideas and practice I adopted in

the project I wish to express my warmest appreciation for their

help and support along the way.


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SCOPE OF THE STUDYIn my project the scope is limited to HDFC mutual funds. I

analyzed the funds depending on their schemes like

equity, income, balance. But there is so many other

schemes in mutual fund industry like specialized (banking,

infrastructure, pharmacy) funds, index funds etc

The research was carried on in New Delhi. I had been sentto one of the branches of HDFC Asset Management

Company where I completed the project. I surveyed on my

project topic critical analysis of mutual fund (risk &

return) on the visiting customers of HDFC mutual fund

Connought Place Branch, New Delhi. The study will help to

know preference of customers/investors towards mutual

fund and analyse the risk and return on mutual fund. Thisproject report may help the company for further planning

and strategy


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CONTENTS

1.CHAPTER 1 INTRODUCTION

2.CHAPTER 2 LITERATURE SURVEY

3.CHAPTER 3 RESEARCH METHODOLOGY

4.CHAPTER 4 DATA INTERPRETATION AND

ANALYSIS


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5.CHAPTER 5 FINDINGS AND CONCLUSION

6.CHAPTER 6 BIBLIOGRAPHY

7.CHAPTER 7 ANNEXURE-DATA COLLECTION


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CHAPTER 1

INTRODUCTIONThere are a lot of investment avenues available today in the financial market

for an investor with an investable surplus Mutual fund is a trust that pools the

savings of a number of investors who share a common financial goal. This pool

of money is invested in accordance with a stated objective. 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 the number of units owned by them.

NEED FOR THE STUDY

The main purpose of doing this project was to know about mutual fund and its


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functioning. This helps to know in details about mutual fund industry right

from its inception stage, growth and future prospects.

It also helps in understanding different schemes of mutual funds. Because my

study depends upon prominent funds in India and their schemes like equity,

income, balance as well as the returns associated with those schemes

OBJECTIVES OF THE STUDY

TO ANALYZE THE PERFORMANCE OF HDFC MUTUAL FUND SCHEMES ON

THE BASIS OF DIFFERENT PARAMETERS

TO STUDY AND ANALYSE INVESTORS PREFERENCE TOWARDS MUTUAL

FUNDS OVER OTHER INVESTMENT OPTIONS

TO FIND OUT AWARENESS ABOUT MUTUAL FUNDS AND ITS OPERATIONS

TO EVALUATE INVESTMENT PERFORMANCE OF SELECTED MUTUAL

FUNDS SCHEMES IN TERMS OF RISK AND RETURN

My study gives an overview of mutual funds definition, types, benefits, risks,

limitations, history of mutual funds in India, latest trends, global scenarios. I

have analyzed a few prominent mutual funds schemes and have given my

findings


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CHAPTER 2

LITERATURE SURVEY


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Concept of a Mutual Fund

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 appreciation

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. The flowchart below describes broadly the working of a mutual fund:-

Investors earn from a Mutual Fund in three ways:

1. Income is earned from dividends declared by mutual fund schemes from time

to time.


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2. If the fund sells securities that have increased in price, the fund has a capital

gain. This is reflected in the price of each unit. When investors sell these units

at prices higher than their purchase price, they stand to make a gain.

3. If fund holdings increase in price but are not sold by the fund manager, the

fund's unit price increases. You can then sell your mutual fund units for a profit.

This is tantamount to a valuation gain.

Though still at a nascent stage, Indian MF industry offers a plethora of schemes and

serves broadly all type of investors. The range of products includes equity funds,

debt, liquid, gilt and balanced funds. There are also funds meant exclusively for young

and old, small and large investors. Investors of all categories could choose to invest

on their own in multiple options but opt for mutual funds for the sole reason that all

benefits come in a package.


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Advantages of Mutual Funds

1. Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by

a dedicated investment research team that analyses the performance and prospects

of companies and selects suitable investments to achieve the objectives of the

scheme.

2. Diversification

Mutual Funds invest in a number of companies across a broad cross-section of

industries and sectors. This diversification reduces the risk because seldom do all

stocks decline at the same time and in the same proportion. You achieve this

diversification through a Mutual Fund with far less money than you can do on your

own.

3. Convenient Administration

Investing in a Mutual Fund reduces paperwork and helps you avoid many problems

such as bad deliveries, delayed payments and follow up with brokers and companies.

Mutual Funds save your time and make investing easy and convenient.

4. Return Potential

Over a medium to long-term, Mutual Funds have the potential to provide a higher

return as they invest in a diversified basket of selected securities. Apart from liquidity,

these funds have also provided very good post-tax returns on year to year basis

5. Low Costs

Mutual Funds are a relatively less expensive way to invest compared to directly

investing in the capital markets because the benefits of scale in brokerage, custodial

and other fees translate into lower costs for investors.

6. Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value

related prices from the Mutual Fund. In closed-end schemes, the units can be sold on

a stock exchange at the prevailing market price or the investor can avail of the facility

of direct repurchase at NAV related prices by the Mutual Fund.

7. Transparency


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Investors get regular information on the value of your investment in addition to

disclosure on the specific investments made by your scheme, the proportion invested

in each class of assets and the fund manager's investment strategy and outlook.

8. Flexibility

Through features such as regular investment plans, regular withdrawal plans and

dividend reinvestment plans; you can systematically invest or withdraw funds

according to your needs and convenience.

9. Affordability

A single person cannot invest in multiple high-priced stocks for the sole reason that

his pockets are not likely to be deep enough. This limits him from diversifying his

portfolio as well as benefiting from multiple investments. Here again, investing

through MF route enables an investor to invest in many good stocks and reap benefits

even through a small investment.

Well Regulated

DISADVANTAGES OF MUTUAL FUNDS

Mutual funds have their following drawbacks:

1. No Guarantees

No investment is risk free. If the entire stock market declines in value, the value ofmutual 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

and sell stocks on their own.

2. 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 dont use a broker or other financialadvisor, you will pay a sales commission if you buy shares in a Load Fund.

3. 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


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sales, you will pay taxes on the income you receive, even you reinvest the money you

made.

4. Management Risk

When you invest in mutual fund, you depend on fund manager to make the right

decisions regarding the funds 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.

STRUCTURE OF MUTUAL FUND

There are many entities involved and the diagram below illustrates the structure of mutual

funds: -


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SEBI

The regulation of mutual funds operating in India falls under the preview of

authority of the Securities and Exchange Board of India (SEBI). Any personproposing to set up a mutual fund in India is required under the SEBI (Mutual Funds)

Regulations, 1996 to be registered with the SEBI.


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Sponsor

The sponsor should contribute at least 40% to the net worth of the AMC. However,

if any person holds 40% or more of the net worth of an AMC shall be deemed to be a

sponsor and will be required to fulfill the eligibility criteria in the Mutual Fund

Regulations. The sponsor or any of its directors or the principal officer employed by

the mutual fund should not be guilty of fraud or guilty of any economic offence.

Trustees

The mutual fund is required to have an independent Board of Trustees, i.e. two

third of the trustees should be independent persons who are not associated with the

sponsors in any manner. An AMC or any of its officers or employees are not eligible to

act as a trustee of any mutual fund. The trustees are responsible for - inter alia ensuring that the AMC has all its systems in place, all key personnel, auditors,

registrar etc. have been appointed prior to the launch of any scheme.

Asset Management Company

The sponsors or the trustees are required to appoint an AMC to manage the

assets of the mutual fund. Under the mutual fund regulations, the applicant must

satisfy certain eligibility criteria in order to qualify to register with SEBI as an AMC.

1. The sponsor must have at least 40% stake in the AMC.

2. The chairman of the AMC is not a trustee of any mutual fund.

3. The AMC should have and must at all times maintain a minimum net

worth of Cr. 100 million.

4. The director of the AMC should be a person having adequate

professional experience.

5. The board of directors of such AMC has at least 50% directors who are

not associate of or associated in any manner with the sponsor or any of

its subsidiaries or the trustees.

The Transfer Agents


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The transfer agent is contracted by the AMC and is responsible for maintaining

the register of investors / unit holders and every day settlements of purchases and

redemption of units. The role of a transfer agent is to collect data from distributors

relating to daily purchases and redemption of units.

Custodian

The mutual fund is required, under the Mutual Fund Regulations, to appoint a

custodian to carry out the custodial services for the schemes of the fund. Only

institutions with substantial organizational strength, service capability in terms of

computerization and other infrastructure facilities are approved to act as custodians.

The custodian must be totally delinked from the AMC and must be registered with

SEBI.

Unit Holders

They are the parties to whom the mutual fund is sold. They are ultimate

beneficiary of the income earned by the mutual funds.

TYPES OF MUTUAL FUND SCHEMES

In India, there are many companies, both public and private that are engaged in the

trading of mutual funds. Wide varieties of Mutual Fund Schemes exist to cater to the

needs such as financial position, risk tolerance and return expectations etc.


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Investment can be made either in the debt Securities or equity .The table below gives

an overview into the existing types of schemes in the Industry.

TYPES OF MUTUAL FUND SCHEME

Generally two options are available for every scheme regarding dividend payout and

growth option. By opting for growth option an investor can have the benefit of long-

term growth in the stock market on the other side by opting for the dividend option

an investor can maintain his liquidity by receiving dividend time to time. Some timepeople refer dividend option as dividend fund and growth fund. Generally decisions

regarding declaration of the dividend depend upon the performance of stock market

and performance of the fund.

OPTION REGARDING DIVIDEND


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Systematic Investment Plan (SIP)

Systematic investment plan is like Recurring Deposit in which investor invests inthe particular scheme on regular intervals. In the case it is convenient for salaried class

and middle-income group. In this case on regular interval units of specified amount is

created. An investor can make payment by regular payments by issuing cheques, post

dated cheques, ECS, standing Mandate etc. SIP can be started in the any open-ended

fund if there is provision of it. There are some entry and exit load barriers for

discontinuation and redemption of the fund before the said period.

According to Structure

Open Ended Funds

An open ended fund is one that is available for subscription all through the

year. These do not have a fixed maturity. Investors can conveniently buy and

sell units at Net Asset Value (NAV) related prices. The key feature of open ended schemes is liquidity.

Close Ended Funds

A close ended fund has a stipulated maturity period which generally ranging from

3 to 15 years. The fund is open for subscription only during a specified period.


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Investors can invest in the scheme at the same time of the initial public issue and

thereafter they can buy and sell the units of the scheme on the stock exchanges

where they are listed. In order to provide an exit route to the investors, some close

ended funds give an option of selling back the units to the mutual fund through

periodic repurchase at NAV related prices.

Interval Funds

Interval funds combine the features of open ended and close endedschemes. They are open for sales or redemption during pre-determinedintervals at their NAV.

According to Investment Objective:

Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to

long term. Such schemes normally invest a majority of their corpus in equities.

It has been proven that returns from stocks are much better than the other

investments had over the long term. Growth schemes are ideal for investors

having a long term outlook seeking growth over a period of time.

Income Funds

The aim of the income funds is to provide regular and steady income to

investors. Such schemes generally invest in fixed income securities such as

bonds, corporate debentures and government securities. Income funds are

ideal for capital stability and regular income.

Balanced Funds

The aim of balanced funds is to provide both growth and regular income.

Such schemes periodically distribute a part of their earning and invest both in

equities and fixed income securities in the proportion indicated in their offer

documents. In a rising stock market, the NAV of these schemes may not


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normally keep pace or fall equally when the market falls. These are ideal for

investors looking for a combination of income and moderate growth.

Money Market Funds

The main aim of money market funds is to provide easy liquidity,

preservation of capital and moderate income. These schemes generally invest

in safe short term instruments such as treasury bills, certificates of deposit,

commercial paper and inter bank call money. Returns on these schemes may

fluctuate depending upon the interest rates prevailing in the market. These are

ideal for corporate and individual investors as a means to park their surplus

funds for short periods.

Other Schemes

Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of

the Indian Income Tax laws as the government offers tax incentives for

investment in specified avenues. Investments made in Equity Linked SavingSchemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the

Income Tax Act, 1961. The Act also provides opportunities to investors to save

capital gains.

Special Schemes:

Index Schemes

Index funds attempt to replicate the performance of a particular index such

as the BSE Sensex or the NSE 50.

Sector Specific Schemes


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Sector funds are those which invest exclusively in a specified industry or a

group of industries or various segments such as A group shares or initial

public offerings.

Bond Schemes

It seeks investment in bonds, debentures and debt related instrument to

generate regular income

Market capitalization

Market capitalization in simple words is defined as number of shares outstanding

multiplied by the current share price of the share. Basically there are three methods

or style of capitalization that a mutual fund adopts for the investment of its capital.

They are Investment in:

Large cap funds

Mid cap funds

Small cap funds

Large cap funds:-

Large cap funds invest their money primarily in companies, which have a sizable

market capitalization. Companies below this threshold were categorized as mid/small

caps. Investing in large caps is a lower risk-lower return proposition (vis--vis mid cap

stocks), because such companies are usually widely researched and information is

widely available. HDFC Top 200 Fund, Franklin India Blue chip Fund, HSBC Equity Fund

for instance, invest predominantly in large caps.

Mid cap funds:-


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These funds invest in companies that have a lower market capitalization

than the large caps. Investments in mid caps are a riskier proposition as compared to

investments in large cap funds. There are several reasons for the same. One, the mid

cap companies are usually under-researched. Fund managers often find it difficult to

exit these stocks in a falling market or enter when interest in the stock is building up.

The upside - the fund can generate a superior return as mid cap stocks have the

potential to give a higher return vis--vis large cap companies. This is mainly because

many of these companies are in a growth phase as opposed to large caps that have

attained relative stability

Small Cap funds:-

As the name suggests, small cap funds invest in companies with a smaller

market capitalization investing in small cap funds is fraught with considerable risk. Tobegin with, small cap companies in most cases are just evolving

FREQUENTLY USED TERMS

Advisor - Is employed by a mutual fund organization to give professional

advice on the funds investments and to supervise the management of its

asset.

Diversification The policy of spreading investments among a range of

different securities to reduce the risk.

Net Asset Value (NAV) - Net Asset Value is the market value of the assets of

the scheme minus its liabilities. The per unit NAV is the net asset value of the

scheme divided by the number of units outstanding on the Valuation Date.

Sales Price - Is the price you pay when you invest in a scheme. Also called Offer

Price. It may include a sales load.

Repurchase Price - Is the price at which a close-ended scheme repurchases its units

and it may include a back-end load. This is also called Bid Price.


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Redemption Price - Is the price at which open-ended schemes repurchase their

units and close-ended schemes redeem their units on maturity. Such prices are NAV

related.

Sales Load - Is a charge collected by a scheme when it sells the units. Also called

Front-end load. Schemes that do not charge a load are called No Load schemes.

Securities and Exchange Board of India (SEBI):

In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The

objectives of SEBI are to protect the interest of investors in securities and to

promote the development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the

mutual funds to protect the interest of the investors. SEBI notified regulations for themutual funds in 1993. Thereafter, mutual funds sponsored by private sector entities

were allowed to enter the capital market. The regulations were fully revised in 1996

and have been amended thereafter from time to time. SEBI has also issued guidelines

to the mutual funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities

including those promoted by foreign entities are governed by the same set of

Regulations. There is no distinction in regulatory requirements for these mutual funds

and all are subject to monitoring and inspections by SEBI. The risks associated with

the schemes launched by the mutual funds sponsored by these entities are of similar

type.

Broad Guidelines Issued by SEBI for Mutual Funds in India


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SEBI has the following broad guidelines pertaining to mutual funds:

Mutual funds should be formed as a Trust under Indian Trust Act and should be

operated by Asset Management Companies (AMCs).

Mutual funds need to set up a Board of Trustees and Trustee Companies. They

should also have their Board of Directors.

The net worth of the AMCs should be at least Rs.5 crore.

AMCs and Trustees of a MF should be two separate and distinct legal entities.

The AMC or any of its companies cannot act as managers for any other fund.

AMCs have to get the approval of SEBI for its Articles and Memorandum of

Association.

All Mutual fund schemes should be registered with SEBI.

Mutual funds should distribute minimum of 90% of their profits among the

investors.

Trends in Transactions on Stock Exchanges by Mutual Funds

(as on 19-MAR-2009)

(Provisional and subject to revision) April 2007)

Trading

Date

Debt/Equi

ty

Gross Purchases(Rs

Crores)

Gross Sales(Rs

Crores)

Net Investment (Rs

Crores)

19-MAR-2009

Equity 352.40 397.40 (45.00)

Debt 1904.20 603.10 1301.20

Trends in Transactions on Stock Exchanges by Mutual Funds (since January

2000

PeriodDebt/Equi

ty

Gross

Purchases(Rs

Crores)

Gross

Sales(Rs

Crores)

Net Investment

(Rs Crores)

Jan 2000-Mar Equity 11070.54 11492.19 -421.65

Debt 2764.72 1864.29 900.43


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2000

April 2000-Mar

2001

Equity 11375.78 20142.76 -2766.98

Debt 13512.17 8488.68 5023.49

April 2001-Mar

2002

Equity 12098.11 15893.99 -3795.88

Debt 33583.64 22624.42 10959.22

April 2002-Mar

2003

Equity 14520.89 16587.59 -2066.70

Debt 46663.83 34059.41 12604.42

April 2003-Mar

2004Equity 36663.58 35355.67 1307.91

Debt 63169.93 40469.18 22700.75

April 2004-Mar

2005Equity 45045.25 44597.23 448.02

Debt 62186.46 45199.17 16987.29

April 2005-Mar

2006Equity 100435.90 86133.70 14302.20

Debt 109804.91 73003.67 36801.24

April 2006-Mar

2007 Equity 135948.16 126885.82 9062.34

Debt 153733.05 101189.59 52543.

According to Mutualfundsindia Research Team, Performance Measures ofMutual Funds are:

Mutual Fund industry today, with about 34 players and more than five hundred

schemes, is one of the most preferred investment avenues in India. However, with a

plethora of schemes to choose from, the retail investor faces problems in selecting

funds. Factors such as investment strategy and management style are qualitative, but

the funds record is an important indicator too. Though past performance alone can


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not be indicative of future performance, it is, frankly, the only quantitative way to

judge how good a fund is at present. Therefore, there is a need to correctly assess the

past performance of different mutual funds.

Worldwide, good mutual fund companies over are known by their AMCs and this fame

is directly linked to their superior stock selection skills. For mutual funds to grow,

AMCs must be held accountable for their selection of stocks. In other words, there

must be some performance indicator that will reveal the quality of stock selection of

various AMCs.

Return alone should not be considered as the basis of measurement of the

performance of a mutual fund scheme, it should also include the risk taken by the

fund manager because different funds will have different levels of risk attached to

them. Risk associated with a fund, in a general, can be defined as variability or

fluctuations in the returns generated by it. The higher the fluctuations in the returns

of a fund during a given period, higher will be the risk associated with it. These

fluctuations in the returns generated by a fund are resultant of two guiding forces.

First, general market fluctuations, which affect all the securities, present in the

market, called market risk or systematic risk and second, fluctuations due to specific

securities present in the portfolio of the fund, called unsystematic risk. The Total

Risk of a given fund is sum of these two and is measured in terms of standard

deviation of returns of the fund. Systematic risk, on the other hand, is measured in

terms ofBeta, which represents fluctuations in the NAV of the fund vis--vis market.

The more responsive the NAV of a mutual fund is to the changes in the market; higher

will be its beta. Beta is calculated by relating the returns on a mutual fund with the

returns in the market. While unsystematic risk can be diversified through investments

in a number of instruments, systematic risk can not. By using the risk return

relationship, we try to assess the competitive strength of the mutual funds vis--vis

one another in a better way.

In order to determine the risk-adjusted returns of investment portfolios, several

eminent authors have worked since 1960s to develop composite performance indices

to evaluate a portfolio by comparing alternative portfolios within a particular risk

class.


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Mutual fund- an investment option

Mutual fund in simple terms is money managing institutions that pool the

money received from the general public having limited financial means but

similar financial goals. The money collected from the public is then invested incapital market instruments like shares, debentures and other securities under

several mutual funds schemes. It is established in the form of trust and

managed by Asset Management Companies (AMC).

Buying a mutual fund is like buying a small slice of a big pizza. The owner of a

mutual fund unit gets a proportional share of the funds gains, losses, income

and expenses. At present there are 32 mutual funds in India as per AMFI.

Each mutual fund has a specific stated objective

Fund Objective What the fund will invest in

Equity (Growth) Only in stocks

Debt (Income) Only in fixed-income securities

Money Market(including Gilt)

In short-term money market instruments (includinggovernment securities)

Balanced Partly in stocks and partly in fixed-income securities,

in order to maintain a 'balance' in returns and risk

Investment options:

Category Return Safety Volatility Liquidity

Equity High Low High High

Bonds Moderate High Moderate Moderate


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Corporate

Debentures

Moderate Moderate Moderate Low

Company

F.D

Moderate Low Low Low

Bank

Deposits

Low High Low High

PPF Moderate High Low Moderate

Life

Insurance

Low High Low Low

Gold Moderate High Moderate Moderate

Real Estate High Moderate High Low

Mutual

Funds

High High Moderate High

Tips for investing in mutual fund

Select a long or short term investment horizon- equity, debt, or balanced

option depending on your age and income.

Match your objective with that of fund scheme. Go for less aggressive

Fund if you want steady returns.

Checks how high are the expense incurred on the fund management

Charged to investors.

Choose dividend options if you want a regular income on your

investment

Or else opt for growth option.

Opt for Systematic Transfer Plan (STP). If you want to make lump-sum

investment in installments to another scheme.


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Expert guidelines on Mutual Funds

Consistency and low volatility are very important.

It is very important to keep in mind the investment philosophy of the fund

house.

Investors should redeem only if the reason to save changes drastically.

Performance evaluation of mutual fund

Different investment avenues are available to investors. Mutual funds also

offer good investment opportunities to the investors. Like all investment, they

also carry certain risks. Risk factor is an important aspect while investing with

the mutual fund schemes. So, it is very important from the investors point of

view to choose the right kind of scheme based on different parameters of

performance evaluation. To help investors in evaluating the performance of a

scheme , a comparative analysis of 28 equity growth schemes has been

made on certain set parameters which has been discussed below:

For the purpose of analyzing the various schemes following parameters has

been used:

Portfolio

Expenses

Risk and Volatility

Risk Adjusted Return

Returns

A valuable judging parameter for any scheme is its portfolio. It tells us the

exposure the fund has to various stocks and also various sectors. Careful

analysis of the funds portfolio would help an investor in making valuable

insights into the investment strategy of the fund manager. For analysis of the

performance of the various mutual funds on the basis of portfolio, Portfolio

turnover rate has been considered which has been explained as under:

By definition Portfolio Turnover is the lesser of annual purchases or

annual sales, divided by the average portfolio value. It measures the amount


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of buying and selling done by the fund manager and hence tells us the

weighted average holding period of a given security. For example, if a fund

produced a turnover of 50%, it is presumed that the average holding period for

any given security is 2 years and that 50% of the portfolios total assets were

replaced every year. This number varies by the type of fund and the

investment philosophy of the manager. A high turnover ratio means high

transaction costs.

Expenses

From an investor point of view, it is very important to know about the

expenses related with the buying, selling, transferring fees and any other costs

you may incur if you invest in a specific fund .So for analyzing the expenses of

the various mutual funds; the expense ratio of the funds has been considered.

By definition Expense ratio is the ratio of total expenses to average net

assets. An investor can check information on schemes expenses ratio in its

offer document. Depending upon the type of scheme, expense ratio may vary

from scheme to scheme. The lowest expense ratio is observed among index

funds and ETFs. Stock funds have higher expense ratio than fixed income

funds. Funds that invest internationally tend to have significantly higher

expense ratio than to domestic portfolios, due to greater research and other

costs associated with foreign investing .Expense ratios of the schemes in same

category are to be compared .Low expense ratio is desirable.

Risk and Volatility

Risk

Risk is the key dimension of performance measurement, and a decisive factor

in determining a fund managers skill .One cannot make a judgment about

how skilful a manger is in a particular period by looking at return only.


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Risk in a generic sense is the possibility of loss, damage, or harm. For

investment a more specific definition of risk can be given .It refers to

variability in the expected return.

For a mutual fund the following factors cause variability of the investmentperformance:

The kind of securities in the portfolio. For e.g., small cap stocks may be

more volatile than large cap stock

The degree of diversification. For e.g., a portfolio of only 5 stocks may be

more volatile than a portfolio comprising of 15 stocks

The extent to which the portfolio manager times the market. For e.g., an

index fund tends to be less volatile than an aggressive growth fund.

Risk is neither good nor bad rather as it is viewed in some context. The

difference between the required rate of return on a mutual fund investment

and the risk free rate is the risk premium. There are many sources that

determine appropriate risk premium including market risk, business risk,

liquidity risk, financial risk (leverage), duration, and credit risks for bonds and

political and currency risk for international assets. Broadly, the market risk can

be divided into 2 following categories:

Systematic Risk - Systematic risk is market related or non-

diversifiable. It is the risk that influences a large number of assets. An

example is political events. It is virtually impossible to protect yourself

against this type of risk.

Unsystematic Risk Unsystematic risk is one that is unique to given

particular mutual fund portfolio and is diversifiable. It is the risk that

affects a very small number of assets. An example is news that affects a

specific stock such as a sudden strike by employees.


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Volatility

Volatility is a measure of the variability of returns over a chosen time-period. It

reveals the extent by which the daily/weekly/monthly price changes from the

average. Low percentage volatility shows that the price has stayed quite close

to the average whereas high percentage volatility shows that the price has

moved up and down a lot over the time-period. The higher the volatility of a

fund, the greater the difference between the highest and lowest returns and

the higher the risk of the investment. So volatility is a market measure of

uncertainty investors keep changing their minds as to the value of the share,

which reflects uncertainty surrounding the companys future profit potential.

As such, it's an excellent indicator of investment risk. So for measuring the risk

in context of volatility of the fund, following measures has been used:

Funds Volatility ( ) i.e; variation from the average.

Funds Resemblance (R2) i.e; the extent to which the movement in the

fund can be explained by corresponding benchmark index.

Funds Volatility as regards the market index ( ) i.e; the extent of co-

movement of fund with that of benchmark index.

Returns

Returns referred to total returns that an investor gets by investing into

particular schemes. Higher the return better it is from an investor point of

view. .For the purpose of our analysis last 3 years return shas been taken into

consideration so as to have true picture of the average return that a particular

schemes fetched. For comparing the returns earned by the schemes, BSE 30has been taken as the benchmark index...Return for both benchmark market

index i.e; BSE 30 and the schemes has been calculated from the daily index

value and net asset value (NAV) respectively. Then the average of the series so

developed has been taken. By comparing last 3 years average returns with the

benchmark one can know how much returns were given by particular schemes


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in comparison to the return given by the market on the schemes under that

same category.

Risk-free return

Risk-free rate of return refers to the minimum return on investment that has no

risk of loosing the investment over which it is earned. For the present study, it has

been marked around 5.75% per annum as the banks provides at the same rate on

fixed deposits on an average during the period under the study


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CHAPTER

3

RESEARCH METHODOLOGY

SCOPE OF THE STUDY:

Subject matter is related to the investors preference towards investment in mutual funds

People of age between 20 to 60


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Area is limited to New Delhi

Demographics include names, age, qualification, occupation, marital status and annual

income.

INFORMATION NEEDED: This first step states that what is the information that is actually

required. Information in this case we require is that what is the approach of investors while

investing their money in HDFC mutual funds e.g. what do they consider while deciding as to

invest in mutual funds .Also, it studies the extent to which the investors are aware of the various

costs that one bears while making any investment. So, the information sought and information

generated is only possible after defining the information needed.

RESEARCH METHODOLOGY AND SURVEY

An in depth analysis of the data generated by own observation and collected from

primary and secondary sources has been carried out.

Primary sources :- (a) Questionnaire technique

Secondary data: - (a) Mutual funds related Organizations website.

(b) Journals

(c) Newspapers and other magazines.

RESEARCH DESIGN

Descriptive Research

Under this type the research the facts and information already available has been used

and analysed them to make evaluation of the market.Data has been collected from the Fact sheet of the various mutual fund schemes and

used those data s for the research.

SAMPLE DESIGN

Population

All the clients of HDFC Mutual


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SAMPLE UNIT

Investors and non-investors.

SAMPLE SIZE

This study involves 50 respondents.

SAMPLING TECHNIQUE

Convenience Sampling: In convenience sampling, the selection of units from the

population is based on easy availability and/or accessibility.

DATA COLLECTION

Primary Research: Primary data was obtained through questionnairesfilled by people

Secondary Research: The secondary sources of data were taken from the

various websites , books, journals, reports, articles etc. This mainly provided

information about the mutual fund

ANALYSIS

All the data from primary and secondary sources, is studied andhave been analyzed with the help of different techniques

and presented graphically in the form of pie charts, bar diagram, line

graph etc. Reasonable assumptions have been made where data is

found lacking. Based on finding conclusion, a suitable suggestion has

been provided in this report.


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LIMITATIONS

1. Some people were not responsive

2. Possibility of error in data collection because many investors may

not have given actual answer of the questionnaire

3. Sample size is limited to 50 visitors of HDFC mutual fund branch

Connought Place. The sample size may not adequately represent

the whole market

4. Some respondents were reluctant to divulge personal information

which may affect the validity of responses

CHAPTER 4


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DATA ANALYSIS

HDFC Index Fund - Sensex Plan

Fund Type Open-EndedAsset Size (Rs cr) 47.14 (Jun-30-2011)

Minimum Investment Rs.5000Launch Date Jul 10, 2002Benchmark BSE Sensitive Index

Returns (as on Aug 23, 11)

Period

1 mth

3 mths

6 mths

1 year

2 year

3 year

5 year


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Absol

uteReturn

s (in

%)

Year Qtr 1 Qtr 2 Qtr 3 Qtr 4

2011 -6.4 -2.4 - -

2010 -0.7 0.3 15.0 0.4

2009 -3.3 44.0 16.9 1.7

2008 -24.7 -14.1 -0.1 -27.0

2007 -6.7 17.1 16.6 14.9

2006 19.1 -5.4 13.6 10.6

V

HDFC Prudence Fund

Investment Objective |Scheme Information & NAV |Investment Pattern & Strategy |Portfolio |Returns and benchmarks | SystematicInvestment Plan (SIP) Details |Fund Manager|Offer Document / Scheme Information Document (SID)|Application Form|LeafletsValue Research Rating *

HYBRID EQUITY - ORIENTED CATEGORY (24 schemes) for 3 and 5 year periods ending July 31, 2011*Past performance is no guarantee of future results.Pleaseclick herefor details on the Rating Methodology.

CRISIL Mutual Fund Rank

HDFC Prudence Fund Growth Option was assigned CRISIL Mutual Fund Rank 1# in the Open End Balanced Schemes Category (out of 17schemes) for the 2 year period ending March 31, 2011 by CRISIL.

HDFC Prudence Fund Growth Option was assigned CRISIL Mutual Fund Rank 1# in the Open End Consistent Balanced Category (out of 14

schemes) for the 5 year period ending March 31, 2011 by CRISIL.

# Past Performance is no guarantee of future results.

Ranking MethodologyThe criteria used in computing the CRISIL Mutual Fund Rank are Superior Return Score based on NAVs over the 1/ 2/ 5-year period ended 31 March 2011,Sectoral concentration, Company concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied bythe scheme. The CRISIL Mutual Fund Rank is no indication of the performance that can be expected from the scheme in future.

Pleaseclick herefor Crisil Ranking Methodology and Disclaimer for the ranking.
http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/CMT/Upload/ArticleAttachments/SID_equity_16.PDFhttp://www.hdfcfund.com/CMT/Upload/ArticleAttachments/SID_equity_16.PDFhttp://www.hdfcfund.com/Downloads/ApplicationForm.aspx?ReportId=CF5CD6D4-A526-4503-B0C0-74D3EF9CA779http://www.hdfcfund.com/Downloads/ApplicationForm.aspx?ReportId=CF5CD6D4-A526-4503-B0C0-74D3EF9CA779http://www.hdfcfund.com/Downloads/ApplicationForm.aspx?ReportId=CF5CD6D4-A526-4503-B0C0-74D3EF9CA779http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/CMT/Upload/ArticleAttachments/SID_equity_16.PDFhttp://www.hdfcfund.com/Downloads/ApplicationForm.aspx?ReportId=CF5CD6D4-A526-4503-B0C0-74D3EF9CA779http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5


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Investment Objective

The investment objective of the Scheme is to provide periodic returns and capital appreciation over a long period of time, from a judicious mix of

equity and debt investments, with the aim to prevent/ minimise any capital erosion.

Basic Scheme Information

Nature of SchemeOpen Ended Balanced SchemeInception DateFebruary 01, 1994Option/PlanDividend Option,Growth Option. The Dividend Option offers Dividend Payout and Reinvestment Facility.Entry Load(For Lumpsum Purchases and investments through SIP/STP)NILUnfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment ofvarious factors including the service rendered by the ARN Holder.

Pleaseclick hereto go through the addendum.Exit Load(as a % of the Applicable NAV)

In respect of each purchase / switchin of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 yearfrom the date of allotment..

No Exit Load is payable if Units are redeemed / switched-out after 1 year from the date of allotment.

Minimum Application Amount(click herefor SIP Details)For new investors :Rs.5000 and any amount thereafter.For existing investors : Rs. 1000 and any amount thereafter.Lock-In-PeriodNilNet Asset Value PeriodicityEvery Business Day.Redemption ProceedsNormally dispatched within 3-4 Business daysTax Benefits(As per present Laws)

Please click for details

Current Expense Ratio (#)(Effective Date 22nd May 2009)

On the first 100 crores average weekly net assets 2.50%On the next 300 crores average weekly net assets 2.25%On the next 300 crores average weekly net assets 2.00%On the balance of the assets 1.75%

(#) Any change in the expense ratio will be updated within two working days.

Plan Name NAV Date NAV AmountDividend Option 23 Aug 2011 27.9280Growth Option 23 Aug 2011 204.8760

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Investment Pattern

The following table provides the asset allocation of the Scheme's portfolio.

The asset allocation under the respective Plans will be as follows :

Sr.No. Type of Instruments Normal Allocation(% of Net Assets)

Risk Profile

1 Equities & Equity related instruments 40 - 75% Medium to High2 Debt Securities, Money Market instruments(including cash/call money) 25 - 60% Low to Medium

(Investment in Securitised debt, i f undertaken,would not exceed 10% of the net assets of the Scheme.)

In such times when the interest rates are high, investment in debt would be more attractive versus equities and accordingly the Fund is likely to

increase the debt component in the Scheme's portfolio. Similarly in times when the interest rates are low and the equity valuations are cheap,
http://www.hdfcfund.com/CMT/Upload/ArticleAttachments/248Introduction%20of%20No%20Entry%20Load-July%2023%2009.pdfhttp://www.hdfcfund.com/CMT/Upload/ArticleAttachments/248Introduction%20of%20No%20Entry%20Load-July%2023%2009.pdfhttp://www.hdfcfund.com/CMT/Upload/ArticleAttachments/248Introduction%20of%20No%20Entry%20Load-July%2023%2009.pdfhttp://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/KC/ContentDisplay.aspx?ReportID=5CEFCAD6-63C3-47AE-B448-5209341FB627http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/CMT/Upload/ArticleAttachments/248Introduction%20of%20No%20Entry%20Load-July%2023%2009.pdfhttp://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/KC/ContentDisplay.aspx?ReportID=5CEFCAD6-63C3-47AE-B448-5209341FB627http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5


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the Scheme is likely to reduce exposure to debt and increase exposure to equities. In addition to debt and equities the scheme will also invest in

money market instruments. The exact proportion in money market instruments will be a function of the liquidity needs and the attractiveness of

the debt/ equity markets. At times when neither the debt market nor equities are attractive for investment, more resources may be temporarily

invested in money market investments to be invested in debt/ equi ties at a more appropriate time.

The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative

instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and other uses as may be permitted

under the Regulations and Guidelines.

The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas markets in Global Depository Receipts

(GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to

time. Also refer to the Section on Policy on off-shore Investments by the Scheme(s).

Subject to the Regulations and the applicable guidelines, the Scheme may, engage in Stock Lending activities. Also refer to Section on Stock

Lending by the Fund.

If the investment in equities and related instruments falls below 40% of the portfolio or rises above 60% of the portfolio of the Scheme at any

point in time, it would be endeavoured to review and rebalance the composition.

Notwithstanding anything stated above, subject to the regulations, the asset allocation pattern indicated above may change from time to time,

keeping in view market conditions, market opportunities, applicable regulations and political and economic factors. It may be clearly understood

that the percentages stated above are only indicative and are not absolute and that they can vary substantially depending upon the perception

of the AMC, the intention being at all times to seek to protect the NAV of the scheme. Such changes will be for short term and defensive

considerations.

Provided further and subject to the above, any change in the asset allocation affecting the investment profile of the Scheme and amounting to a

change in the Fundamental Attributes of the Scheme shall be effected in accordance with sub-regulation (15A) of regulation 18 of SEBI

regulations.

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Investment Strategy

As outlined above, the investments in the Scheme will comprise both debt and equities. The Fund would invest in Debt instruments such as

Government securities, money market instruments, securitised debts, corporate debentures and bonds, preference shares, quasi Government

bonds, and in equity shares. In the long term, the mix between debt instruments and equity instruments is targeted between 60:40 and 40:60

respectively. The exact mix will be a function of interest rates, equity valuations, reserves position, risk taking capacity of the portfolio without

compromising the consistency of dividend pay out (in the case of Dividend Plan), need for capital preservation and the need to generate capitalappreciation.

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Systematic Investment Plan (SIP) Details

Serial No.Scheme Name

Minimum Application Amount(Rs.)Entry Load #Exit Load #

1HDFC Prudence Fund - Dividend / GrowthRs.500 for Monthly & Rs.1500 for QuarterlyNIL

In respect of each purchase / switch-in of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 year

from the date of allotment.


# Applicable for SIPs registered w.e.f from August 1, 2009

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Fund Manager

Mr. Prashant Jain (since Jun 19, 03)

Mr. Miten Lathia - Dedicated Fund Manager - Foreign Securities

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http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5http://www.hdfcfund.com/Products/SchemeDetails.aspx?SchemeID=2ea70d4d-e479-49f8-9f09-903a3d7bd8d5


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Portfolio - Holdings (as on July 31, 2011)

Company / Issuer Industry+ / RatingEQUITY & EQUITY RELATED State Bank of India BanksICICI Bank Ltd. BanksInfosys Ltd. SoftwareTata Consultancy Services Ltd. Software

Coal India Ltd. Minerals/MiningBank of Baroda BanksPage Industries Ltd. Textile ProductsBharti Airtel Ltd. Telecom - ServicesTata Motors Ltd. DVR AutoBharat Petroleum Corporation Ltd. Petroleum ProductsTotal of Top Ten Equity Holdings Total Equity & Equity Related Holdings Total Government Securities & Other Credit Exposure (aggregated holdings in a single issuer)

Cash, Cash Equivalents and Net Current AssetsGrand Total Average AUM for the quarter ended June 30, 2011 (Rs In Lakhs)

Note : $ Sponsor

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Returns

HDFC Prudence Fund (NAV as at evaluation date29-Jul-11, Rs.217.771 Perunit)

Date Period NAV Per Unit (Rs.) Returns (%) $$ ^March 30, 2007 Last 1582 days 110.132 17.03**January 28, 2011 Last 182 days 206.492 5.46*July 29, 2010 Last 1 Year (365 days) 202.267 7.67*July 29, 2008 Last 3 Years (1095 days) 113.973 24.09**July 28, 2006 Last 5 Years (1827 days) 89.404 19.47**July 27, 2001 Last 10 Years (3654 days) 16.980 29.03**July 29, 1996 Last 15 Years (5478 days) 8.570 24.82**February 1, 1994 Since Inception (6387 days) 10.000 21.01**

* Absolute Returns ** Compounded Annualised Returns

# CRISIL Balanced Fund Index

^ Past performance may or may not be sustained in the future

$$ Adjusted for the dividends declared under the scheme prior to its splitting into the Dividend and Growth Plans

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SIP Returns

SIP Investments Since Inception 15 Year 10 Year 5 Year 3 Year 1 Year Total Amount Invested (Rs.) 210,000 180,000 120,000 60,000 36,000 12,000Market Value as on July 29, 2011 (Rs.) 2,357,367.83 1,563,914.63 477,608.75 96,058.07 52,956.15 12,207.33Returns (Annualised)*(%) 23.95% 25.57% 26.08% 18.95% 26.90% 3.26%Benchmark Returns (Annualised)(%)# N.A. N.A. N.A. 8.50% 11.12% -3.10%Market Value of SIP in Benchmark# N.A. N.A. N.A. 74,286.53 42,484.74 11,800.87

HDFC Index Fund - SENSEX Plus PlanInvestment Objective |Scheme Information & NAV |Investment Pattern & Strategy |Portfolio |Returns and benchmarks | SystematicInvestment Plan (SIP) Details |Fund Manager|Offer Document / Scheme Information Document (SID)|Application Form

Value Research Rating *

EQUITY - LARGE CAP CATEGORY (40 schemes) for 3 and 5 year periods ending July 31, 2011
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*Past performance is no guarantee of future results.Pleaseclick herefor details on the Rating Methodology.


HDFC Index Fund - SENSEX Plus Planwas assigned CRISIL Mutual Fund Rank 2 # in the Open End Large Cap Oriented Equity SchemesCategory(out of 30 schemes) for the 2 year period ending December 31, 2010 by CRISIL.

#Past Performance is no guarantee of future results, pleaseclick herefor Crisil Ranking Methodology and Disclaimer for the ranking.

Investment Objective

The objective of this Plan is to invest 80 to 90% of the net assets of the Plan in companies whose securities are included in SENSEX and

between 10% & 20% of the net assets in companies whose securities are not included in the SENSEX.


Nature of Scheme Open Ended Index Linked Scheme

Inception Date July 17, 2002Option/Plan Growth Plan.Entry Load(For Lumpsum Purchases and investments throughSIP/STP)

NILUnfront commission shall be paid directly by the investor to the ARN Holder (AMFI registeredDistributor) based on the investors' assessment of various factors including the servicerendered by the ARN Holder.


NILNo Entry/ Exit Load shall be levied on bonus units

Minimum Application Amount(click herefor SIP Details)

For new investors :Rs.5000 and any amount thereafter.For existing investors : Rs. 1000 and any amount thereafter.

Lock-In-Period NilNet Asset Value Periodicity Every Business Day.Redemption Proceeds Normally dispatched within 3-4 Business daysTax Benefits

(As per present Laws)

Please click for details


1.00%


Plan Name NAV Date NAV AmountSensex Plus Plan (Growth) 23 Aug 2011 206.9235

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Investment Pattern

The net assets of the Plan would be invested in such a manner that 80% to 90% of the net assets are invested in almost all stocks constituting

the SENSEX in approximately the same weightage that they represent in the SENSEX. The balance 10% to 20% of the net assets of the Plan

would be invested in stocks that do not form part of the SENSEX in a manner that individual stock exposures do not exceed the SEBI stipulatedlimits. A small portion of the net assets will be invested in money market instruments permitted by SEBI/RBI including call money market or in

alternative investment for the call money market as may be provided by the RBI, to meet the liquidity requirements of the Plan.

Instruments Normal Allocation Risk Profile of the Instrument

Securities covered by the SENSEX 80 to 90 Medium to HighSecurities other than covered by SENSEX 10 to 20 Medium to HighMoney Market Instruments, convertible bonds & cash including money at call butexcludingSubscription and Redemption Cash Flow

0 to 5 Low to Medium

Subscription Cash Flow is the subscription money in transit before deployment and Redemption Cash Flow is the money kept aside for meeting
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redemptions.

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Investment Strategy

The SENSEX Plan and the Nifty Plan will be managed passively with investments in stocks in a proportion that is as close as possible to the

weightages of these stocks in the respective indices. The investment strategy would revolve around reducing the tracking error to the least

possible through regular rebalancing of the portfolio, taking into account the change in weights of stocks in the indices as well as the

incremental collections / redemptions from these Plans.

The SENSEX Plus Plan will be passively managed to the extent of 80-90% of the net assets of the Plan and would follow similar investment

strategy as for the SENSEX and the Nifty Plan, for this component. The actively managed portion of 10-20% of net assets of the Plan would be

invested in stocks that have been identified as having high probability to outperform the SENSEX. The Investment Manager would follow the

process of in-depth research to identify such candidates from stocks other than those comprising the SENSEX, for potential investment.

Pursuant to the SEBI Regulations, the respective Plans shall not make any investment in:

any unlisted security of an associate or group company of the Sponsor; or

any security issued by way of private placement by an associate or group company of the Sponsor; or

the listed securities of group companies of the Sponsor which is in excess of 25% of the net assets.

Risk Control

For the SENSEX Plan, the Nifty Plan and the proportion of the SENSEX Plus Plan that would be managed similar to the SENSEX Plan, risks

would be the impact cost on securities, the delayed communication of weightage changes by the index service providers and the delayed

calculation of net change in assets of each of the Plans, amongst others.

It is proposed to manage the risks by placing limit orders for basket trades and other trades, proactive follow-up with the service providers for

daily change in weights in the respective indices as well as monitor daily inflows and outflows to and from the Fund closely.

While these measures are expected to mitigate the above risks to a large extent, there can be no assurance that these risks would be

completely eliminated.

Risk control for the actively managed portion of the SENSEX Plus Plan would entail setting limits for single stock and single industry exposures

by the Investment committee for this portion, subject to SEBI Regulations.TOP

Systematic Investment Plan (SIP) Details

Serial No. Scheme Name Minimum ApplicationAmount(Rs.)

Entry Load # Exit Load #

1 HDFC Index Fund - Sensex PlanPlus

Rs.500 for Monthly &Rs.1500 forQuarterly

NIL NIL

# Applicable for SIPs registered w.e.f from August 1, 2009

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Fund Manager

Mr. Vinay Kulkarni (since Nov 21, 06)

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Portfolio - Holdings (as on July 31, 2011)

Company Industry+EQUITY & EQUITY RELATED Infosys Ltd. SoftwareReliance Industries Ltd. Petroleum ProductsICICI Bank Ltd. BanksITC Ltd. Consumer Non DurablesHousing Development Finance Corporation Ltd. $ Finance
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Larsen & Toubro Ltd. Construction ProjectHDFC Bank Ltd. BanksState Bank of India BanksTata Consultancy Services Ltd. SoftwareBharti Airtel Ltd. Telecom - ServicesTotal of Top Ten Equity Holdings Total Equity & Equity Related Holdings Total Money Market Instrument & Other Credit Exposures (aggregated holdings in a single issuer)

Other Cash, Cash Equivalents and Net Current AssetsGrand Total Average AUM for the quarter ended June 30, 2011 (Rs In Lakhs)

Note : $ Sponsor

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Returns

HDFC Index Fund - Sensex Plus Plan (NAV as atevaluationdate 29-Jul-11,Rs.225.7527 Per unit)

Date Period NAV Per Unit (Rs.) Returns (%) ^March 30, 2007 Last 1582 days 139.6805 11.71**

January 28, 2011 Last Six months (182 days) 223.0872 1.19*July 29, 2010 Last 1 Year (365 days) 217.3504 3.87*July 29, 2008 Last 3 Years (1095 days) 148.078 15.09**July 28, 2006 Last 5 Years (1827 days) 113.466 14.73**July 27, 2001 Last 10 Years (3654 days) N.A N.A.July 17, 2002 Since Inception (3299 days) 32.161 24.06**

* Absolute Returns ** Compounded Annualised Returns

# SENSEX (Total Returns Index)

^ Past performance may or may not be sustained in the future

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SIP Returns

SIP Investments Since Inception 15 Year 10 Year 5 Year 3 Year 1 Year Total Amount Invested (Rs.) 109,000 N.A. N.A. 60,000 36,000 12,000

Market Value as on July 29, 2011 (Rs.) 305,986.64 N.A. N.A. 81,106.05 46,600.28 11,669.98Returns (Annualised)*(%) 21.79% N.A. N.A. 12.04% 17.60% -5.13%Benchmark Returns (Annualised)(%)# 20.14% N.A. N.A. 9.52% 14.89% -7.49%Market Value of SIP in Benchmark# 282,623.92 N.A. N.A. 76,199.03 44,848.39 11,516.16

HDFC Top 200 Fund

Investment Objective |Scheme Information & NAV |Investment Pattern & Strategy |Portfolio |Returns and benchmarks | SystematicInvestment Plan (SIP) Details |Fund Manager|Offer Document / Scheme Information Document (SID)|Application Form|Leaflets

Value Research Rating *

EQUITY - LARGE & MID CAP CATEGORY (60 schemes) for 3 and 5 year periods ending July 31, 2011*Past performance is no guarantee of future results.Please click herefor details on the Value Research Rating MethodologyMorningstar Rating- Elite #
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"'Elite' Rating: These funds represent Morningstar analysts' highest conviction picks. Morningstar awards the rating to funds that it believes are capable ofoutperforming their peers over the long term. To earn this rating, a fund must be significantly better than its peers in most key respects.#Past performance is no guarantee of future results, pleaseclick here for details on the Morningstar Rating Methodology & Desclaimer.


HDFC Top 200 Fund Growth Option was assigned CRISIL Mutual Fund Rank 1 # in the Open End Large Cap Oriented Equity Schemes Category(out of 34 schemes) for the 2 year period ending March 31, 2011 by CRISIL.

HDFC Top 200 Fund Growth Option was assigned CRISIL Mutual Fund Rank 1 # in the Open End Consistent Equity Category (out of 40 schemes)for the 5 year period ending March 31, 2011 by CRISIL.

# Past Performance is no guarantee of future results.

Ranking MethodologyThe criteria used in computing the CRISIL Mutual Fund Rank are Superior Return Score based on NAVs over the 1/ 2/ 5-year period ended 31 March 2011,Sectoral concentration, Company concentration and Liquidity of the scheme. The methodology does not take into account the entry and exit loads levied bythe scheme. The CRISIL Mutual Fund Rank is no indication of the performance that can be expected from the scheme in future.

Pleaseclick herefor Crisil Ranking Methodology and Disclaimer for the ranking.

Investment ObjectiveTo generate long term capital appreciation from a portfolio of equity and equity-linked instruments primarily drawn from the companies in BSE

200 index.


Nature of SchemeOpen Ended Growth SchemeInception DateOctober 11, 1996Option/PlanDividend Option,Growth Option. The Dividend Option offers Dividend Payout and Reinvestment Facility.Entry Load(For Lumpsum Purchases and investments through SIP/STP)NIL

Unfront commission shall be paid directly by the investor to the ARN Holder (AMFI registered Distributor) based on the investors' assessment ofvarious factors including the service rendered by the ARN Holder.


In respect of each purchase / switchin of units, an Exit Load of 1.00% is payable if Units are redeemed / switched-out within 1 yearfrom the date of allotment..


Minimum Application Amount

(click herefor SIP Details)For new investors :Rs.5000 and any amount thereafter.For existing investors : Rs. 1000 and any amount thereafter.Lock-In-Period

Nil

Net Asset Value PeriodicityEvery Business Day.Redemption Proceeds

Normally dispatched within 3-4 Business daysTax Benefits(As per present Laws)Please click for details


On the first 100 crores average weekly net assets 2.5000%On the next 300 crores average weekly net assets 2.25%On the next 300 crores average weekly net assets 2.00%On the balance of the assets 1.75%

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Plan Name NAV Date NAV AmountDividend Option 23 Aug 2011 40.9000Growth Option 23 Aug 2011 188.8910

TOP

Investment PatternThe asset allocation under the Scheme will be as follows :

Sr.No. Asset Type (% of Portfolio) Risk Profile1 Equities and Equity Related

InstrumentsUpto 100% (including use of derivatives for hedging and other uses aspermitted by prevailing SEBI Regulations)

Medium to High

2 Debt & Money Market Instruments Balance in Debt & Money Market Instruments Low to Medium

* Investment in Securit ised debt, i f undertaken, would not exceed 20% of the net assets of the scheme.

The Scheme may also invest upto 25% of net assets of the Scheme in derivatives such as Futures & Options and such other derivative

instruments as may be introduced from time to time for the purpose of hedging and portfolio balancing and and other uses as may be permitted

under the regulations and guidelines.

The Scheme may also invest a part of its corpus, not exceeding 40% of its net assets, in overseas markets in Global Depository Receipts(GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to

time.

Subject to the Regulations and the applicable guidelines, the Scheme may, engage in Stock Lending activities. Also refer to Section on Stock

Lending by the Fund.

If the investment in equities and related instruments falls below 65% of the portfolio of the Scheme at any point in time, it would be endeavoured

to review and rebalance the composition.

a critical analysis of mutual fund 1[1]

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