hdfc mutual funds

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CHAPTER-1

EXECUTIVE SUMMARY

Primary investment objective of any individual or organisation is to maximize the

returns and minimizing Market risk and Credit risk through diversification.

Mutual Funds (MF) have become one of the most attractive ways for the average

person to invest their money. It is said that Bank investment is the first priority of people

to invest their savings and the second place is for investment in Mutual Funds and other

avenues. A Mutual Fund pools resources from thousands of investors and then diversifies

its investment into many different holdings such as stocks, bonds, or Government

securities in order to provide high relative safety and returns.

The Project is a FINANCE PROJECT which tries to explain in laymans

language about the history, growth, & pros and cons of investing in Mutual Funds and the

second part of it deals with the analysis of risk and returns of Equity scheme, Tax saver

fund scheme, Balanced fund, Liquid fund, Capital builder fund, Gilt fund, Floating rateincome fund, Prudence fund and short term plan fund provided by HDFC Mutual Fundin

comparison with the benchmark of S&P CNX indices.

The main objective of the project was to get an Overview of Mutual Fund Industry,

its set up, its working and to find out the risks and returns of selected HDFC Mutual Fund

Schemes comparison with the benchmark of S&P CNX indices.

The project includes a brief idea about the growth of MF industry (History), the

broad idea about the organization and concept of MF and SEBI Guidelines on Mutual

Funds.

There are many improvements pending in the field and it has to happen as soon as

possible so as to call the MF industry as an Organized and well-developed sector.

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The past performance of MF is not necessarily indicative of future performance of

the scheme and no AMC guarantees Returns and or safety of Principal.

Analysis is done by calculating standard deviation, beta calculation.

Findings: The HDFC Balanced Fund has not given stable returns to the investors. The

beta of the fund is 0.47546. The Standard Deviation of the fund is 0.85433. The HDFC

Floating rate Income Fund has given stable returns for the investors. The beta of the fund

is 0.00187. The Standard Deviation of the fund is 0.02186. The HDFC Equity Fund has

not given stable returns to the investors. The beta of the fund is 0.69971. The StandardDeviation of the fund is 1.1237. The Liquid Fund has given below average returns for the

investors in this period. It is moderate riskier because the beta of the fund is 0.00148. The

Standard Deviation of the fund is 0.01953.

Recommendations: HDFC Floating rate Income Fund has a beta of 0.00187 hence the

scheme is less volatile than the market. The scheme should generate reasonable returns

while maintaining safety and providing investor superior liquidity. The standard deviation

of the HDFC Liquid Fund Short Term Plan Funds is high, so the company should try to

reduce the risk involved by reducing the standard deviation of the fund. The HDFC Liquid

Fund & Short Term Plan Funds beta is 0.00148, 0.00383 so it means these schemes are

less volatile. So the companies should harness on it by excessively advertising its benefits

and in turn invite investors to invest whose risk appetite is less.

Conclusions: In the above selected schemes of HDFC Mutual Fund all nine Schemes are

defensive assets and the Gift Fund has negative beta. The scheme which contains beta is

less than one is called defensive asset.

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CHAPTER-2

A.INTRODUCTION TO MUTUAL FUNDS

Mutual Funds - The 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. The flow chart below

describes broadly the working of a mutual fund:

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Advantages of Mutual Funds

1. Affordability:-

A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending

upon the investment objective of the scheme. An investor can buy in to a portfolio of

equities, which would otherwise be extremely expensive. Each unit holder thus gets an

exposure to such portfolios with an investment as modest as Rs.500/-. Thus it would be

affordable for an investor to build a portfolio of investments through a mutual fund rather

than investing directly in the stock market.

2. Diversification:-

It means that investor must spread his investment across different securities

(money market instruments, bonds, stocks, real estate, fixed deposits etc.) and different

sectors (banking, textile, IT, etc.). This kind of a diversification may add to the stability of

investors returns, so as to offset any underperformance by any one sector or instrument

and help investor meet his investment objective.

3. Variety:-

Mutual funds offer a whole variety of schemes. This variety is beneficial in two

ways: first, it offers different types of schemes to investors with different needs and risk

appetites; secondly, it offers an opportunity to an investor to invest sums across a variety

of schemes, both debt and equity. For example, an investor can invest his money in a debt

scheme and a equity scheme depending on his risk appetite to create a balanced portfolio

easily or simply just buy a Balanced Scheme.

4. Professional Management:-

Qualified investment professionals seek to maximize returns and minimize risk

monitor investor's money. In a mutual fund, investors are handing their money with an

investment professional who has experience in making investment decisions. It is then the

Fund Manager's job to (a) find the best securities for the fund, given the fund's stated

investment objectives; and (b) keep track of investments and changes in market conditions

and adjust the mix of the portfolio, as and when required.

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5. Liquidity:-

Investors are free to take their money out of open-ended mutual funds whenever

they want, no questions asked. Most open-ended funds mail investor redemption proceeds,

which are linked to the fund's prevailing NAV (net asset value), within three to five

working days of investor putting their request.

6. Regulations:-

Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator

has clearly defined rules, which govern mutual funds. These rules relate to the formation,

administration and management of mutual funds and also prescribe disclosure andaccounting requirements. Such a high level of regulation seeks to protect the interest of

investors.

7. Other advantages:

Return Potential

Low Costs

Transparency

Flexibility

Tax benefits

Disadvantages of Mutual Funds

There are certainly some benefits to mutual fund investing, but investor should

also be aware of the drawbacks associated with mutual funds.

1. No Insurance:-

Mutual funds, although regulated by the government, are not insured against

losses. The Federal Deposit Insurance Corporation (FDIC) only insures against certain

losses at banks, credit unions, and savings and loans, not mutual funds. That means that

despite the risk-reducing diversification benefits provided by mutual funds, losses can

occur, and it is possible (although extremely unlikely) that investors could even lose their

entire investment.

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2. Dilution:-

Although diversification reduces the amount ofrisk involved in investing in

mutual funds, it can also be a disadvantage due to dilution. For example, if a single

security held by a mutual fund doubles in value, the mutual fund itself would not double in

value because that security is only one small part of the fund's holdings. By holding a

large number of different investments, mutual funds tend to do neither exceptionally well

nor exceptionally poorly.

3. Fees and Expenses:-

Most mutual funds charge management and operating fees thatpay for the fund's

management expenses (usually around 1.0% to 1.5%peryear). In addition, some mutual

funds charge highsales commissions, 12b-1 fees, and redemption fees. And some funds

buy and trade shares so often that the transaction costs add up significantly. Some of these

expenses are charged on an ongoing basis, unlike stock investments, for which a

commission ispaid only when youbuy andsell.

4. Poor Performance:-

Returns on a mutual fund are by no means guaranteed. In fact, on average, around

75% of all mutual funds fail to beat the major market indexes, like the S&P 500, and a

growing number of critics now question whether or not professional money managers

have better stock-picking capabilities than the average investor.

5. Loss of Control:-

The managers of mutual funds make all of the decisions about which securities to

buy andsell and when to do so. This can make it difficult for investors when they trying

to manage their portfolio. For example, the taxconsequences of a decision by the manager

tobuy orsell an asset at a certain time might not be optimal for investors. Investors also

should remember that investors are trusting someone else with their money when they

invest in a mutual fund.

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6. Trading Limitations:-

Although mutual funds are highly liquid in general, most mutual funds (called

open-ended funds) cannot be bought or sold in the middle of the trading day. Investors

can onlybuy and sell them at the end of the day, after they've calculated the current value

of their holdings.

7. Size:-

Some mutual funds are too big to find enough good investments. This is especially

true offunds that focus on small companies, given that there are strict rules about howmuch of a single company a fund may own. If a mutual fundhas $5 billion to invest and is

only able to invest an average of $50 million in each, then it needs to find at least 100 such

companies to investin; as a result, the fund might be forced to lower its standards when

selecting companies toinvest in.

8. Inefficiency of Cash Reserves:-

Mutual funds usually maintain large cash reserves as protection against a large

number of simultaneous withdrawals. Although this provides investors with liquidity, it

means that some of the fund'smoneyis invested in cash instead of assets, which tends to

lower the investor's potential return.

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INDUSTRY PROFILE

HISTORY OF MUTUAL FUNDS:

When three Boston securities executives pooled their money together in 1924 to

create the first mutual fund, they had no idea how popular mutual funds would become.

The idea of pooling money together for investing purposes started in Europe in

the mid-1800s. The first pooled fund in the U.S. was created in 1893 for the

faculty and staff of Harvard University. On March 21st, 1924 the first official

mutual fund was born. It was called the Massachusetts Investors Trust.

After one year, the Massachusetts Investors Trust grew from $50,000 in

assets in 1924 to $392,000 in assets (with around 200 shareholders). In contrast,

there are over 10,000 mutual funds in the U.S. today totaling around $7 trillion

(with approximately 83 million individual investors) according to the Investment

Company Institute.

The stock market crash of 1929 slowed the growth of mutual funds. In

response to the stock market crash, Congress passed the Securities Act of 1933

and the Securities Exchange Act of 1934. These laws require that a fund be

registered with the SEC and provide prospective investors with a prospectus.

The SEC (U.S. Securities and Exchange Commission) helped create the

Investment Company Act of 1940, which provides the guidelines that all funds

must comply with today. With renewed confidence in the stock market, mutual

funds began to blossom. By the end of the 1960s there were around 270 funds

with $48 billion in assets.

In 1976, John C. Bogle opened the first retail index fund called the First

Index Investment Trust. It is now called the Vanguard 500 Index fund. In

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November of 2000 it became the largest mutual fund ever with $100 billion in

assets.

History of Indian Mutual Fund Industry

The history of Mutual Funds in India can be broadly divided into 4 Phases:

1. First phase (1964-1987)

The Unit Trust of India (UTI) was established in the year 1963 by passing an Act

in the Parliament.

The UTI was setup by the Reserve Bank of India (RBI) and functioned under the

Regulatory and Administrative control of the RBI.

The First scheme in the history of mutual funds was UNIT SCHEME-64, which is

popularly known as US-64.

In 1978, UTI was de-linked from RBI. The Industrial Development Bank of India

(IDBI) took over the Regulatory and Administrative control.

At the end of the year 1988, UTI had Rs.6700/- Crores of Assets Under

Management.

2. Second phase (1987-1993)

Entry of Public Sector Funds.

In the year 1987, public sector Mutual Funds setup by public sector banks, Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India

(GIC) are came in to existence.

State Bank of India Mutual Fund was the first non-UTI Mutual Fund.

The following are the non-UTI Mutual Funds at initial stages.

SBI Mutual Fund in June 1987.

Can Bank Mutual Fund in December 1987.

LIC Mutual Fund in June 1989.

Punjab National Bank Mutual Fund in August 1989.

Indian Bank Mutual Fund in November 1989.

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Bank of India Mutual Fund in June 1990.

GIC Mutual Fund in December 1990.

Bank of Baroda Mutual Fund in October 1992.

At the end of 1993, the entire Mutual Fund Industry had Assets Under Management of

Rs.47, 004/- Crores.

3. Third phase (1993-2003)

Entry of Private Sector Funds - a wide choice to Indian Mutual Fund investors.

In 1993, the first Mutual Fund Regulations came into existence, 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.

In 1996, the 1993 Securities Exchange Board of India (SEBI) Mutual Funds

Regulations were substituted by a more comprehensive and revised Mutual Fund

Regulations.

The number of Mutual Fund houses went on increasing, with many foreign mutual

funds setting up funds in India.

In this time, the Mutual Fund industry has witnessed several Mergers

&Acquisitions.

The UTI with Rs.44, 541/- Crores. Of Assets Under management was way ahead

of all other Mutual Funds.

The following was the status at end of February 2003:

(Source AMFI website)

Number of schemes Amount (in Crores)Open-ended schemes 321 82,693

Close-ended schemes 51 4497

TOTAL 372 87,190

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The diagram below shows the three segments and some players in each segment:

4. Fourth phase (since 2003 February)

Following the repeal of the UTI Act in February 2003, it was (UTI) bifurcated into

2 separate entities.

One is the specified undertaking of the UTI with asset under management of

Rs.29, 835/- Crores as at the end of January 2003.

The second is the UTI Mutual Funds Limited, sponsored by State Bank of India,

Punjab National Bank, Bank of Baroda and Life Insurance Corporation of India.

UTI is functioning under an Administrator and under the Rules framed by the

Government of India and does not come under the purview of the Mutual Fund

Regulations.

The UTI Mutual Funds Limited is registered with SEBI and functions under the

Mutual Funds Regulations.

With the bifurcation of the Erstwhile UTI, with the setting up of a UTI Mutual

Fund, confirming to the SEBI Mutual Fund Regulations and with recent mergers

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taking place among different private sector funds, the Mutual Fund Industry has

entered its current phases of consolidation and growth.

At the end of September 2004, there were 29 funds, which manage assets of

Rs.153108/- Crores under 421 different schemes.

At the end of July 2005, the status of Mutual fund Industry was:

No. of schemes Amount (in crores)

Open-ended schemes 414 1,64,998

Close-ended schemes 46 10,920

TOTAL 460 1,75,918


At the end of March 2006, the status of Mutual fund Industry was:

No. of schemes Amount (in crores)

Open-ended schemes 414 1,85,999

Close-ended schemes 46 71,500

TOTAL 460 2,57,499


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ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)

With the increase in Mutual Fund players in India, a need for Mutual Fund

Association in India was generated to function as a non-profit organization. Association of

Mutual Funds in India (AMFI) was incorporated on 22nd August 1995.

AMFI is an apex body of all Asset Management Companies (AMC) which has

been registered with Securities Exchange Board of India (SEBI). Till date all the AMCs

are that have launched mutual fund schemes are its members. It functions under thesupervision and guidelines of its Board of Directors. Association of Mutual Funds India

has brought down the Indian Mutual Fund Industry to a professional and healthy market

with ethical lines enhancing and maintaining standards. It follows the principal of both

protecting and promoting the interest of mutual funds as well as their unit holders.

The objectives of Association of Mutual Funds in India

The Association of Mutual Funds of India works with 30 registered AMCs of the

country. It has certain defined objectives which juxtaposes the guidelines of its Board of

Directors. The objectives are as follows:

This Mutual Fund Association of India maintains high professional and ethical

standards in all areas of operation of the industry

It also recommends and promotes the top class business practices and code of

conduct which is followed by members and related people engaged in the activities

of Mutual Fund and Asset Management. The agencies who are by any means

connected or involved in the field of capital markets and financial services also

involved in this code of conduct of the association.

AMFI interacts with SEBI and works according to SEBIs guidelines in the Mutual

Fund industry.

Associations of Mutual Fund of India do represent the Government of India, the

Reserve Bank of India and other related bodies on matters relating to the Mutual

Fund Industry.

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It develops a team of well qualified and trained Agent distributors. It implements a

programme of training and certification for all intermediaries and other engaged in

the mutual fund industry.

AMFI undertakes all India awareness programme for investors in order to promote

proper understanding of the concept and working of Mutual Funds.

At last but not the least Association of Mutual Fund of India also disseminate

information on Mutual Fund Industry and undertakes studies and research either

directly or in association with other bodies.

The sponsors of Association of Mutual Funds in India

Bank Sponsored

SBI Fund Management Ltd.

BOB Asset Management Co. Ltd.

Canbank Investment Management Services Ltd.

UTI Asset Management Company Pvt. Ltd.

Institutions

GIC Asset Management Co. Ltd.

Jeevan Bima Sahayog Asset Management Co. Ltd.

Private Sector

Indian:-

Benchmark Asset Management Co. Pvt. Ltd.

Cholamandalam Asset Management Co. Ltd.

Credit Capital Asset Management Co. Ltd.

Escorts Asset Management Ltd.

JM Financial Mutual Fund

Kotak Mahindra Asset Management Co. Ltd.

Reliance Capital Asset Management Ltd.

Sahara Asset Management Co. Pvt. Ltd

Sundaram Asset Management Company Ltd.

Tata Asset Management Private Ltd.

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Predominantly India Joint Ventures:-

Birla Sun Life Asset Management Co. Ltd.

DSP Merrill Lynch Fund Managers Limited

HDFC Asset Management Company Ltd.

Predominantly Foreign Joint Ventures:-

ABN AMRO Asset Management (I) Ltd.

Alliance Capital Asset Management (India) Pvt. Ltd.

Deutsche Asset Management (India) Pvt. Ltd.

Fidelity Fund Management Private Limited

Franklin Templeton Asset Mgmt. (India) Pvt. Ltd.

HSBC Asset Management (India) Private Ltd.

ING Investment Management (India) Pvt. Ltd.

Morgan Stanley Investment Management Pvt. Ltd.

Principal Asset Management Co. Pvt. Ltd.

Association of Mutual Funds in India Publications: AMFI publishes mainly two types

of bulletin. One is on the monthly basis and the other is quarterly. These publications are

of great support for the investors to get intimation of the know how of their parked money.

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SEBI REGULATIONS ON MUTUAL FUNDS

The Government brought Mutual Funds in the Securities market under the

regulatory framework of the Securities and Exchange board of India (SEBI) in the year

1993. SEBI issued guidelines in the year 1991 and comprehensive set of regulations

relating to the organization and management of Mutual Funds in 1993.

SEBI REGULATIONS 1993 (20.1.1993)

The regulations bar Mutual Funds from options trading, short selling and carrying

forward transactions in securities. The Mutual Funds have been permitted to invest only

in transferable securities in the money and capital markets or any privately placed

debentures or securities debt. Restrictions have also been placed on them to ensure that

investments under an individual scheme, do not exceed five per cent and investment in all

the schemes put together does not exceed 10 per cent of the corpus. Investments under all

the schemes cannot exceed 15 per cent of the funds in the shares and debentures of a

single company.

SEBI REGULATIONS, 1996

SEBI announced the amended Mutual Fund Regulations on December 9, 1996

covering Registration of Mutual Funds, Constitution and Management of Mutual funds

and Operation of Trustees, Constitution and Management of Asset Management

Companies (AMCs) and custodian schemes of MFs, investment objectives and valuation

policies, general obligations, inspection and audit. The revision has been carried out with

the objective of improving investor protection, imparting a greater degree of flexibility

and promoting innovation.

TYPES OF MUTUAL FUND SCHEMES

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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.

By Structure

Open - Ended Schemes

Close - Ended Schemes

Interval Schemes

By Investment Objective

Growth/Equity Schemes

General Purpose

Income/Debt Funds

Money Market

Guilt Funds

Balanced Schemes

Other Schemes

Tax Saving Schemes

Special Schemes:

Sector Specific Schemes

Index Schemes

.

Open Ended Schemes

The units offered by these schemes are available for sale and repurchase on any

business day at NAV based prices. Hence, the unit capital of the schemes keeps changing

each day. Such schemes thus offer very high liquidity to investors and are becoming

increasingly popular in India. Please note that an open-ended fund is NOT obliged to keep

selling/issuing new units at all times, and may stop issuing further subscription to new

investors. On the other hand, an open-ended fund rarely denies to its investor the facility

to redeem existing units.

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Close Ended Schemes

The unit capital of a close-ended product is fixed as it makes a one-time sale of

fixed number of units. These schemes are launched with New Fund Offer (NFO) with a

stated maturity period after which the units are fully redeemed at NAV linked prices. In

the interim, investors can buy or sell units on the stock exchanges where they are

generally listed. Unlike open-ended schemes, the unit capital in Close-ended schemes

usually remains unchanged. After an initial closed period, the scheme may offer direct

repurchase facility to the investors. Close-ended schemes are usually more illiquid as

compared to open-ended schemes and hence trade at a discount to the NAV. This discount

tends towards the NAV closer to the maturity date of the scheme.

Interval Schemes

These schemes combine the features of open-ended and Close-ended schemes.

They may be traded on the stock exchange or may be open for sale or redemption during

pre-determined intervals at NAV based prices.

Growth/Equity Schemes

These schemes, also commonly called Growth Schemes, seek to invest a majority

of their funds in equities and a small portion in money market instruments. Such schemes

have the potential to deliver superior returns over the long term. However, because they

invest in equities, these schemes are exposed to fluctuations in value especially in the

short term.

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Equity schemes are hence not suitable for investors seeking regular income or

needing to use their investments in the short-term. They are ideal for investors who have a

long-term investment horizon. The NAV prices of equity fund fluctuates with market

value of the underlying stock which are influenced by external factors such as social,

political as well as economic.

General Purpose Equity Schemes

The investment objectives of general-purpose equity schemes do not restrict them

to invest in specific industries or sectors. They thus have a diversified portfolio of

companies across a large spectrum of industries. While they are exposed to equity pricerisks, diversified general-purpose equity funds seek to reduce the sector or stock specific

risks through diversification. They mainly have market risk exposure.

Income /Debt Schemes

These schemes, also commonly known as Income Schemes, invest in debt

securities such as corporate bonds, debentures and government securities. The prices of

these schemes tend to be more stable compared with equity schemes and most of the

returns to the investors are generated through dividends or steady capital appreciation.

These schemes are ideal for conservative investors or those who are not in a position to

take higher equity risks. However, as compared to the money market schemes they do

have a higher price fluctuation risk and compared to a Gilt fund they have a higher credit

risk.

These schemes invest in money markets, bonds and debentures of corporate

companies with medium and long-term maturities. These schemes primarily target current

income instead of capital appreciation. Hence, a substantial part of the distributable

surplus is given back to the investor by way of dividend distribution. These schemes

usually declare quarterly dividends and are suitable for conservative investors who have

medium to long-term investment horizon and are looking for regular income through

dividend or steady capital appreciation.

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Money Market Schemes

These schemes invest in short term instruments such as commercial paper ("CP"),

certificates of deposit ("CD"), treasury bills ("T-Bill") and overnight money ("Call"). The

schemes are the least volatile of all the types of schemes because of their investments in

money market instrument with short-term maturities. These schemes have become popular

with institutional investors and high net-worth individuals having short-term surplus funds

Gilt Funds

These primarily invest in Government Debt. Hence, the investor usually does not

have to worry about credit risk since Government Debt is generally credit risk free. The

investor is open to Interest risk, where the value of the securities changes in relation to the

market scenario.

Balanced Schemes

These schemes are also commonly called balanced schemes. These invest in both

equities as well as debt. By investing in a mix of this nature, balanced schemes seek to

attain the objective of income and moderate capital appreciation. Such schemes are ideal

for investors with a conservative, long-term orientation.

Tax Saving Schemes

Investors (individuals and Hindu Undivided Families (HUFs)) are being

encouraged to invest in equity markets through Equity Linked Savings Scheme ("ELSS")

by offering them a tax rebate. Units purchased cannot be assigned / transferred/ pledged /

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redeemed / switched - out until completion of 3 years from the date of allotment of the

respective Units. The Scheme is subject to Securities & Exchange Board of India (Mutual

Funds) Regulations, 1996 and the notifications issued by the Ministry of Finance

(Department of Economic Affairs), Government of India regarding ELSS. Subject to such

conditions and limitations, as prescribed under Section 80 C of the Income-tax Act, 1961,

subscriptions to the Units not exceeding Rs.1, 00, 000 would be fully tax exempt from

income tax. The exemption under section 80 C of IT act is also applicable to other eligible

schemes.

Special Schemes

Sector Specific Equity Schemes:

These schemes restrict their investing to one or more pre-defined sectors, e.g.

technology sector. They depend upon the performance of these select sectors only and are

hence inherently more risky than general-purpose equity schemes. Ideally suited for

informed investors who wish to take a view and risk on the concerned sector.

Index schemes:

An Index is used as a measure of performance of the market as a whole, or a

specific sector of the market. It also serves as a relevant benchmark to evaluate the

performance of mutual funds. Some investors are interested in investing in the market in

general rather than investing in any specific fund. Such investors are happy to receive the

returns posted by the markets. As it is not practical to invest in each and every stock in the

market in proportion to its size, these investors are comfortable investing in a fund that

they believe is a good representative of the entire market. Index Funds are launched and

managed for such investors.

Comparison Of Mutual Funds With Other Products/ Investment

Opportunities:

The mutual fund sector operates under stricter regulations as compared to most

other investment avenues. Apart from the tax efficiency and legal comfort how do mutual

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funds compare with other products? Here the investment in Mutual Funds is compared

with:

1. Company Fixed Deposits.

2. Bank Fixed Deposits.

3. Bonds and Debentures.

4. Equity.

5. Life Insurance

1. Company Fixed Deposits versus Mutual Funds

Fixed deposits are unsecured borrowings by the company accepting the deposits?Credit rating of the fixed deposit program is an indication of the inherent default risk in

the investment moneys of investors in a mutual fund scheme are invested by the AMC in

specific investments under that scheme. These investments are held and managed in-trust

for the benefit of schemes investors. On the other hand, there is no such direct

correlation between a companys fixed deposit mobilization, and the avenues where these

resources are deployed.

A corollary of such linkage between mobilization and investment is that the gains

and losses from the mutual fund scheme entirely flow through to the investors.

Therefore, there can be no certainty of yield, unless a named guarantor assures a return or,

to a lesser extent, if the investment is in a serial gilt scheme. On the other hand, the return

under a fixed deposit is certain, subject only to the default risk of the borrower.

Both fixed deposits and mutual funds offer liquidity, but subject to some differences:

The provider of liquidity in the case of fixed deposits is the borrowing company.

In mutual funds, the liquidity provider is the scheme itself (for open-end schemes)

or the market (in the case of closed-end schemes).

The basic value at which fixed deposits are encashed is not subject to market risk.

However, the value at which units of a scheme are redeemed entirely depends on

the market. If securities have gained in value during the period, then the investor

can even earn a return that is higher than what she anticipated when she invested.

Conversely, she could also end up with a loss.

Early encashment of fixed deposits is always subject to a penalty charged by the

company that accepted the fixed deposit. Mutual fund schemes also have the

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option of charging a penalty on early redemption of units (by way of an exit

load). If the NAV has appreciated adequately, then despite the exit load, the

investor could earn a capital gain on her investment.

2. Bank Fixed Deposits versus Mutual Funds

Bank fixed deposits are similar to company fixed deposits. The major difference is

that banks are more stringently regulated than are companies. They even operate under

stricter requirements regarding Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio

(CRR).While the above are causes for comfort, bank deposits too are subject to default

risk. However, given the political and economic impact of bank defaults, the Governmentas well as Reserve Bank of India (RBI) tries to ensure that banks do not fail.

Further, bank deposits up to Rs 1, 00, 000 are protected by the Deposit Insurance

and Credit Guarantee Corporation (DICGC), so long as the bank has paid the required

insurance premium of 5 paise per annum for every Rs 100 of deposits. The monetary

ceiling of Rs 100,000 is for all the deposits in all the branches of a bank, held by the

depositor in the same capacity and right.

3. Bonds and Debentures versus Mutual Funds

As in the case of fixed deposits, credit rating of the bond / debenture is an

indication of the inherent default risk in the investment. However, unlike fixed deposits,

bonds and debentures are transferable securities an investor may have an early encashment

option from the issuer (for instance through a put option), generally liquidity is through

a listing in the market. Implications of this are:

If the security does not get traded in the market, then the liquidity remains on

paper. In this respect, an open-end scheme offering continuous sale / re-purchase

option is superior.

The value that the investor would realize in an early exit is subject to market risk.

The investor could have a capital gain or a capital loss. This aspect is similar to a

MF scheme.

It is possible for an astute investor to earn attractive returns by directly investing in

the debt market, and actively managing the positions. Given the market realities in India,

it is difficult for most investors to actively manage their debt portfolio. Further, at times, it

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is difficult to execute trades in the debt market even when the transaction size is as high as

Rs 1 crore. In this respect, investment in a debt scheme would be beneficial.

Debt securities could be backed by a hypothecation or mortgage of identified fixed and /

or current assets (secured bonds / debentures). In such a case, if there is a default, the

identified assets become available for meeting redemption requirements. An unsecured

bond / debenture are for all practical purposes like a fixed deposit, as far as access to

assets is concerned. The investment in mutual fund scheme is held by a Custodian for the

benefit of all investors in that scheme. Thus, the securities that relate to a scheme are ring-

fenced for the benefit of its investors.

4. Equity versus Mutual Funds

Investment in both equity and mutual funds are subject to market risk. An investor

holding an equity security that is not traded in the market place has a problem in realizing

value from it. But investment in an open-end mutual fund eliminates this direct risk of not

being able to sell the investment in the market. An indirect risk remains, because the

scheme has to realize its investments to pay investors. The AMC is however in a better

position to handle the situation. Another benefit of equity mutual fund schemes is that they

give investors the benefit of portfolio diversification through a small investment. For

instance, an investor can take an exposure to the index by investing a mere Rs 5,000 in an

index fund.

5. Life Insurance versus Mutual Funds

Life insurance is a hedge against risk and not really an investment option. So, it

would be wrong to compare life insurance against any other financial product.

Occasionally on account of market inefficiencies or mis-pricing of products in India, life

insurance products have offered a return that is higher than a comparable safe fixed

return security thus, you are effectively paid for getting insured! Such opportunities are

not sustainable in the long run.

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B.COMPANY PROFILE

History:

HDFC was incorporated in 1977 with the primary objective of meeting a social

need that of promoting home ownership by providing long-term finance to households

for their housing needs. HDFC was promoted with an initial share capital of Rs.100million. HDFC has AAA rating by CRISIL and ICRA for seven consecutive years.

These reflects the efficiency by which HDFC manage their asset bases of Rs.21450 Cr.

Billion. HDFCs 120 offices have serviced customers in over 2400 cities/towns.

Subsidiaries and Associates

HDFC Bank

HDFC Mutual Fund

HDFC Standard Life Insurance Company

HDFC Realty

HDFC Chubb General Insurance Company Ltd.

Intelenet Global Services Ltd.

Credit Information Bureau (India) Limited

Other Companies Co-Promoted by HDFC:

26
http://www.hdfcbank.com/http://www.hdfcfund.com/http://www.hdfcinsurance.com/http://www.hdfcrealty.com/http://www.hdfcchubbindia.com/http://www.hdfcchubbindia.com/http://www.intelenetglobal.com/http://www.intelenetglobal.com/http://www.cibil.com/http://www.hdfcbank.com/http://www.hdfcfund.com/http://www.hdfcinsurance.com/http://www.hdfcrealty.com/http://www.hdfcchubbindia.com/http://www.intelenetglobal.com/http://www.cibil.com/


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HDFC Trustee Company Ltd.

GRUH Finance Ltd.

HDFC Developers Ltd.

HDFC Ventures Trustee Company Ltd.

HDFC Investments Ltd.

HDFC Holdings Ltd.

Home Loan Services India Pvt. Ltd.

HDFC is known to its large customer and with its strong brand name. The service

provided by the company is better than any other finance corporation. The company is

rated nine times AAA by CRISIL & ICRA. The company is also rated the second best

employer after INFOSYS.

HDFC Asset Management Company Ltd (AMC) / HDFC Mutual Fund:

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 June 30,

2000.

The registered office of the AMC is situated at Ramon House, 3rd Floor, H.T.

Parekh Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.

As per the terms of the Investment Management Agreement, the AMC will

conduct the operations of the Mutual Fund and manage assets of the schemes, including

the schemes launched from time to time.

The present equity shareholding pattern of the AMC is as follows:

Particulars % of the paid up equity capital

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Housing Development Finance Corporation Limited 60

Standard Life Investments Limited 40

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund,

following a review of its overall strategy, had decided to divest its Asset Management

business in India. The AMC had entered into an agreement with ZIC to acquire the said

business, subject to necessary regulatory approvals.

On obtaining the regulatory approvals, the following Schemes of Zurich India

Mutual Fund have migrated to HDFC Mutual Fund on June 19, 2003. These Schemes

have been renamed as follows:

Former Name New Name

Zurich India Equity Fund HDFC Equity Fund

Zurich India Prudence Fund HDFC Prudence Fund

Zurich India Capital Builder Fund HDFC Capital Builder Fund

Zurich India TaxSaver Fund HDFC TaxSaver Zurich India Top 200 Fund HDFC Top 200 Fund

Zurich India High Interest Fund HDFC High Interest Fund

Zurich India Liquidity Fund HDFC Cash Management Fund

Zurich India Sovereign Gilt Fund HDFC Sovereign Gilt Fund*

*HDFC Sovereign Gilt Fund has been wound up in March 2006

The AMC is managing 24 open-ended schemes of the Mutual Fund viz. HDFC

Growth Fund (HGF), HDFC Balanced Fund (HBF), HDFC Income Fund (HIF), HDFC

Liquid Fund (HLF), HDFC Long Term Advantage Fund (HLTAF), HDFC Children's Gift

Fund (HDFC CGF), HDFC Gilt Fund (HGILT), HDFC Short Term Plan (HSTP), HDFC

Index Fund, HDFC Floating Rate Income Fund (HFRIF), HDFC Equity Fund (HEF),

HDFC Top 200 Fund (HT200), HDFC Capital Builder Fund (HCBF), HDFC TaxSaver

(HTS), HDFC Prudence Fund (HPF), HDFC High Interest Fund (HHIF), HDFC Cash

Management Fund (HCMF), HDFC MF Monthly Income Plan (HMIP), HDFC Core &

Satellite Fund (HCSF), HDFC Multiple Yield Fund (HMYF), HDFC Premier Multi-Cap

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Fund (HPMCF), HDFC Multiple Yield Fund . Plan 2005 (HMYF-Plan 2005), HDFC

Quarterly Interval Fund (HQIF) and HDFC Arbitrage Fund (HAF).

The AMC is also managing 8 closed ended Schemes of the HDFC Mutual Fund

viz. HDFC Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Fixed

Maturity Plans, HDFC Fixed Maturity Plans - Series II, HDFC Fixed Maturity Plans -

Series III, HDFC Fixed Maturity Plans - Series IV, HDFC Fixed Maturity Plans - Series V

and HDFC Fixed Maturity Plans - Series VI.

The AMC is also providing portfolio management / advisory services and suchactivities are not in conflict with the activities of the Mutual Fund. The AMC has renewed

its registration from SEBI vide Registration No. - PM / INP000000506 dated December 8,

2006 to act as a Portfolio Manager under the SEBI (Portfolio Managers) Regulations,

1993. The Certificate of Registration is valid from January 1, 2007 to December 31, 2009.

HDFC Mutual Fund is one of the largest mutual funds in India with an investor

base of over 25 lakh which is serviced primarily by our vide network of distributors. We at

HDFC Mutual Fund recognize our distributors as the most important link between our

investors and us. To help distributors to advise and service their clients better, we, together

with our registrar (CAMS) offer a range of facilities to them.

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CHAPTER-3

DESIGN OF THE STUDY

INTRODUCTION:

A detail study is done on Equity scheme, Tax saver fund scheme, Balanced fund,

Liquid fund, Capital builder fund, Gilt fund, Floating rate income fund, Prudence fund and

short term plan fund provided by HDFC Mutual Fund, Analysis is done on the Risk and

Returns of selected schemes provided by the organizations. Where it is useful to the

investors to mobilize the savings in the respective schemes provided by the Company.

A. STATEMENT OF THE PROBLEM:The project deals with the Overview of Mutual Industry in India and evaluation study of

Risk and Returns of selected HDFC Mutual Fund Schemes comparison with the

benchmark of S&P CNX indices.

B. OBJECTIVES OF THE STUDY:

To study Mutual Fund Industry in India.

To study the different Schemes provided by the origination.

To study the performance of different schemes.

To study the Risk involved in different Schemes.

To study the Scheme returns with respect to Benchmark of S&P CNX Nifty

index.

C. NEED FOR THE STUDY:

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The evaluation study of risk and returns of selected HDFC Schemes is useful to

know the performance of schemes and it helps the investors to invest in Mutual Fund

schemes. The performance of different schemes however helps the prospective investors

to choose the good schemes that suit their objective.

D. SCOPE OF THE STUDY:

The study was limited to just finding the risk and returns associated with the

schemes.

The study covers the Equity scheme, Tax saver fund scheme, Balanced fund,

Liquid fund, Capital builder fund, Gilt fund, Floating rate income fund,

Prudence fund and short term plan fund provided by HDFC Mutual Fund.

The study covers the period of past forty days from 1 st December2007 to 10th

January2008.

The study covers only the open-ended funds.

E. LIMITATIONS OF THE STUDY:

The study was limited only to Equity scheme, Tax saver fund scheme,

Balanced fund, Liquid fund, Capital builder fund, Gilt fund, Floating rate

income fund, Prudence fund and short term plan fund provided by HDFC

Mutual Fund.

Time duration for the study was very short as it was restricted to just six

weeks. The study was limited to the extent of just finding the risks and returns of each

schemes of the fund.

F. RESEARCH DESIGN:

A Research design is a method and procedure for acquiring information needed to

solve the problem. A research design is the basic plan that helps in the data collection or

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analysis. It specifies the type of information to be collected the sources and data collection

procedure.

METHOD OF RESEARCH DESIGN USED UNDER STUDY IS:

DESCRIPTIVE RESEARCH:

Descriptive research is study of existing facts to come to a conclusion. In this

research an attempt has been made to analyze the past performance of the Equity scheme,

Tax saver fund scheme, Balanced fund, Liquid fund, Capital builder fund, Gilt fund,

Floating rate income fund, Prudence fund and short term plan fund provided by HDFCMutual Fund to know the benefits to the investors. The study is done on selected schemes

provided by the companies to know the companies performance for the past forty days and

to know the risk and returns of the funds.

G. THE THEORITICAL CONCEPT

I. RATE OF RETURN:

The compounded annual return on a mutual fund scheme represents the return to

investors from a scheme since the date of issue. It is calculated on NAV basis or price

basis. On NAV basis it reflects the return generated by the fund manager on NAV. On

price basis it reflects the return to investors by way of market or repurchase price

Rate of Return for a period:

R= ((A-B)/B)*100

Where,

A = NAV at the end of the period of the period;

B = NAV at the beginning of the period;

Net Asset Value (NAV):

The net asset value of the fund is the cumulative market value of the assets fund of

its liabilities. In other words, if the fund is dissolved or liquidated, by selling off all the

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assets in the fund, this is the amount that the shareholders would collectively own. This

gives rise to the concept of net asset value per unit, which is the value, represented by the

ownership of one unit in the fund. It is calculated simply by dividing the net asset value of

the fund by the number of units. However, most people refer loosely to the NAV per unit

as NAV, ignoring the per unit. We also abide by the same convention.

Computation of Net Asset Value

The Net Asset Value (NAV) of the units will be determined as of every working

day and for such other days as may be required for the purpose of transaction of units.

The NAV shall be calculated in accordance with the following formula, or such otherformula as may be prescribed by SEBI from time to time.

Market /Fair value of schemes investments + Receivables

+ Accrued Income + Other Assets Accrued Expenses

Payables Other Liabilities

NAV = ------------------------------------------------------------------------------------------

Number of Units Outstanding

II. RISK:

The dictionary meaning of risk is the possibility of loss or injury. Any rational

investor, before investing his/her investible wealth in the security, analyzes the risk

associated with a particular security. The actual return he receives from a security may

vary from his expected return and the risk is expressed in term of variability of return. The

down side of risk may be caused by several factors, either common to all securities or

specific to a particular security. Investor in general would like to analyze the risk factors

and a through knowledge of a risk helps him to plan his portfolio in such a manner so as to

minimize risk associated with the investment.

Risk consists of two components:

1. The systematic risk.

2. The unsystematic risk.

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The systematic risk is caused by the factors external to a particular company and

uncontrollable by the company. The systematic risk affects the market as a whole.

In case of unsystematic risk the factors are specific, unique and related to a

particular industry or company.

Systematic Risk: The systematic risk affects the entire market. The economic conditions,

political situations and the sociological changes affect the security market. These factors

are beyond the control of the corporate and the investor. The investor cannot avoid them.

This is subdivided into:

A. Market Risk

B. Interest Rate Risk

C. Purchasing Power Risk.

Unsystematic Risk: The unsystematic risk is unique and peculiar to a firm or an industry.

Unsystematic Risk stems from managerial inefficiency, technological change in the

production process, availability of raw material, changes in the customer preference, and

labour problems. The nature and magnitude of the above-mentioned factors differ from

industry to industry, and company to company. They have to be analyzed separately for

each industry and firm. Broadly, unsystematic risk can be classified into:

A. Business Risk

B. Financial Risk

Risk Measurement: Understanding the nature of risk is not adequate unless the investor

or analyst is capable of expressing it in some quantitative terms. Measurements cannot be

assured of cent percent accuracy because risk is caused by numerous factors such as

social, political, economic and managerial efficiency. The statistical tools used to quantify

risk are:

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1) Standard Deviation:

= Standard Deviation;

N = Number of observations;

d = Deviations from actual mean;

a) A measure of the dispersion of a set of data from its mean. The more

spread apart the data is, the higher the deviation.

b) In finance, standard deviation is applied to the annual rate of return of an

investment to measure the investment's volatility (risk).

A volatile stock would have a high standard deviation. In mutual funds, the

standard deviation tells us how much the return on the fund is deviating from the expected

normal returns. Standard deviation can also be calculated as the square root of the

variance.

2) Beta: Beta describes the relationship between the securities return and the index

returns.

= Beta of the fund;

N = Number of Observations;

X = Weekly return of NAV;

Y = Weekly return of the Index.

Beta = + 1.0

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One percent change in market index returns causes exactly one percent change in

the security return. It indicates that the security moves in tandem with the market.

Beta = + 0.5

One percent change in the market index return causes 0.5 percent change in the

security return. The security is less volatile compared to the market.

Beta = + 2.0

One percent change in the market index return causes 2 percent change in the

security return. The security return is more volatile. When there is a decline of 10% in the

market return, the security with beta of 2 would give a negative return of 20%. The

security with more than 1 beta value is considered to be risky.

Negative Beta

Negative beta value indicates that the security return moves in the opposite

direction to the market return. A security with a negative beta of -1 would provide a return

of 10%, if the market return declines by 10% and vice-versa.

H.METHODOLOGY OF DATA COLLECTION:

SOURCES OF DATA:

PRIMARY DATA used for the study:

Discussions with company officials

Informal discussions with Financial Advisors

SECONDARY DATA used for the study:

Internet sources.

Newspapers.

Announcements and publishings by the company.

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CONCEPTUAL DESIGN:

Sample unit: Equity, Income Tax saver, Gilt fund prudence fund, long term fund Capital

Builder Fund and Balanced schemes provided by HDFC Mutual Fund.

Sample size: Forty days NAV of the Schemes.

Sampling Procedure: Direct.

CHAPTER-4

ANALYSIS & INTERPRETATION OF DATA

The table showing the daily returns of S&P CNX Nifty Index and HDFC equity fund

Date Net Asset Value Returns

Total Index

Returns Returns03-Dec-07 207.921 7121.74

04-Dec-07 207.709 - 10.20% 7133.64 16.71%

05-Dec-07 211.803 197.10% 7212.82 111.00%

06-Dec-07 212.077 12.94% 7230.63 24.69%

07-Dec-07 213.228 54.27% 7254.45 32.94%

10-Dec-07 213.451 10.46% 7237.85 -22.88%

11-Dec-07 216.943 163.60% 7403.77 229.24%

12-Dec-07 218.360 65.32% 7479.08 101.72%

13-Dec-07 217.747 - 28.07% 7356.20 -164.30%

14-Dec-07 216.845 - 41.42% 7343.61 -17.11%

17-Dec-07 209.757 -326.87% 7014.87 -447.65%

18-Dec-07 209.392 - 17.40% 6972.75 -60.04%

19-Dec-07 209.843 21.54% 6984.11 16.29%

20-Dec-07 210.041 9.44% 7002.72 26.65%

24-Dec-07 214.741 223.77% 7268.18 379.08%

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26-Dec-07 217.682 136.96% 7379.02 152.50%

27-Dec-07 218.797 51.22% 7392.06 17.67%

28-Dec-07 219.857 48.45% 7389.90 -2.92%

31-Dec-07 223.324 157.69% 7461.48 96.86%

01-Jan-08 224.592 56.78% 7468.49 9.39%

02-Jan-08 226.239 73.33% 7511.06 57.00%

03-Jan-08 225.043 - 52.86% 7511.02 -0.05%

04-Jan-08 227.097 91.27% 7626.41 153.63%

07-Jan-08 227.613 22.72% 7632.26 7.67%

08-Jan-08 225.209 -105.62% 7642.89 13.93%

09-Jan-08 223.089 - 94.13% 7623.64 -25.19%

10-Jan-08 220.013 -137.88% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC equity

fund

X d d2 Y Y2 X*Y

-0.10 -0.10 0.01 0.17 0.03 -0.02

1.97 1.97 3.88 1.11 1.23 2.19

0.13 0.13 0.02 0.25 0.06 0.03

0.54 0.54 0.29 0.33 0.11 0.18

0.10 0.10 0.01 -0.23 0.05 -0.02

1.64 1.64 2.68 2.29 5.26 3.75

0.65 0.65 0.43 1.02 1.03 0.66

-0.28 -0.28 0.08 -1.64 2.70 0.46

-0.41 -0.41 0.17 -0.17 0.03 0.07

-3.27 -3.27 10.68 -4.48 20.04 14.63

-0.17 -0.17 0.03 -0.60 0.36 0.10

0.22 0.22 0.05 0.16 0.03 0.04

0.09 0.09 0.01 0.27 0.07 0.03

2.24 2.24 5.01 3.79 14.37 8.48

1.37 1.37 1.88 1.53 2.33 2.09

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0.51 0.51 0.26 0.18 0.03 0.09

0.48 0.48 0.23 -0.03 0.00 -0.01

1.58 1.58 2.49 0.97 0.94 1.53

0.57 0.57 0.32 0.09 0.01 0.05

0.73 0.73 0.54 0.57 0.32 0.42

-0.53 -0.53 0.28 0.00 0.00 0.00

0.91 0.91 0.83 1.54 2.36 1.40

0.23 0.23 0.05 0.08 0.01 0.02

-1.06 -1.06 1.12 0.14 0.02 -0.15

-0.94 -0.94 0.89 -0.25 0.06 0.24

-1.38 -1.38 1.90 -1.83 3.36 2.53

5.82 5.82 34.13 5.23 54.81 38.79

N = 26 XY = 38.79

X = 5.82 = 1.1237

d = 5.82 = 0.69971

d = 34.13

Y = 5.23

Y = 54.81

Inference: As the is less than 1 it can be said that the scheme is less risky. For One

percent change in the market index causes 0.69971 percent change in the scheme return.

The scheme is less volatile compared to the market. The Standard Deviation of the scheme

is 1.1237.which means the schemes returns vary with the index to the extent of 1.1237.

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The table showing the daily returns of S&P CNX Nifty Index and HDFC tax saver

fund

DateNet Asset

Value ReturnsTotal Index

Returns Returns

03-Dec-07 198.817 7121.74

04-Dec-07 198.559 - 12.98% 7133.64 16.71%

05-Dec-07 201.064 126.16% 7212.82 111.00%

06-Dec-07 201.993 46.20% 7230.63 24.69%

07-Dec-07 201.797 - 9.70% 7254.45 32.94%

10-Dec-07 201.949 7.53% 7237.85 - 22.88%

11-Dec-07 204.557 129.14% 7403.77 229.24%

12-Dec-07 204.992 21.27% 7479.08 101.72%

13-Dec-07 203.660 - 64.98% 7356.2 -164.30%

14-Dec-07 203.229 - 21.16% 7343.61 - 17.11%

17-Dec-07 196.064 -352.56% 7014.87 -447.65%

18-Dec-07 195.440 - 31.83% 6972.75 - 60.04%

19-Dec-07 195.234 - 10.54% 6984.11 16.29%

20-Dec-07 195.283 2.51% 7002.72 26.65%

24-Dec-07 199.642 223.21% 7268.18 379.08%

26-Dec-07 202.735 154.93% 7379.02 152.50%

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27-Dec-07 202.575 - 7.89% 7392.06 17.67%

28-Dec-07 203.031 22.51% 7389.90 - 2.92%

31-Dec-07 204.284 61.71% 7461.48 96.86%01-Jan-08 205.662 67.46% 7468.49 9.39%

02-Jan-08 207.731 100.60% 7511.06 57.00%

03-Jan-08 206.283 - 69.71% 7511.02 - 0.05%

04-Jan-08 208.115 88.81% 7626.41 153.63%

07-Jan-08 208.583 22.49% 7632.26 7.67%

08-Jan-08 207.222 - 65.25% 7642.89 13.93%

09-Jan-08 205.604 - 78.08% 7623.64 - 25.19%

10-Jan-08 203 -126.65% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC tax

saver fund

X d d2 Y Y2 X*Y

-0.13 -0.13 0.02 0.17 0.03 -0.02

1.26 1.26 1.59 1.11 1.23 1.40

0.46 0.46 0.21 0.25 0.06 0.11

-0.10 -0.10 0.01 0.33 0.11 -0.03

0.08 0.08 0.01 -0.23 0.05 -0.02

1.29 1.29 1.67 2.29 5.26 2.96

0.21 0.21 0.05 1.02 1.03 0.22

-0.65 -0.65 0.42 -1.64 2.70 1.07

-0.21 -0.21 0.04 -0.17 0.03 0.04

-3.53 -3.53 12.43 -4.48 20.04 15.78

-0.32 -0.32 0.10 -0.60 0.36 0.19

-0.11 -0.11 0.01 0.16 0.03 -0.02

0.03 0.03 0.00 0.27 0.07 0.01

2.23 2.23 4.98 3.79 14.37 8.46

1.55 1.55 2.40 1.53 2.33 2.36

-0.08 -0.08 0.01 0.18 0.03 -0.01

0.23 0.23 0.05 -0.03 0.00 -0.01

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0.62 0.62 0.38 0.97 0.94 0.60

0.67 0.67 0.46 0.09 0.01 0.06

1.01 1.01 1.01 0.57 0.32 0.57-0.70 -0.70 0.49 0.00 0.00 0.00

0.89 0.89 0.79 1.54 2.36 1.36

0.22 0.22 0.05 0.08 0.01 0.02

-0.65 -0.65 0.43 0.14 0.02 -0.09

-0.78 -0.78 0.61 -0.25 0.06 0.20

-1.27 -1.27 1.60 -1.83 3.36 2.32

2.23 2.23 29.81 5.23 54.81 37.54

N = 26 XY = 37.54

X = 2.23 = 1.06735

d = 2.23 = 0.6899

d = 29.81

Y = 5.23

Y = 54.81



The scheme is less volatile compared to the market. The Standard Deviation of the scheme

is 1.06735. Which means the schemes returns vary with the index to the extent of

1.06735?

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The table showing the daily returns of S&P CNX Nifty Index and HDFC balanced

fund

Date

NetAsset

Value Returns

Total Index


04-Dec-07 38.640 34.28% 7133.64 16.71%

05-Dec-07 39.100 119.05% 7212.82 111.00%

06-Dec-07 39.108 2.05% 7230.63 24.69%

07-Dec-07 39.177 17.64% 7254.45 32.94%

10-Dec-07 39.281 26.55% 7237.85 - 22.88%

11-Dec-07 39.533 64.15% 7403.77 229.24%

12-Dec-07 39.946 104.47% 7479.08 101.72%

13-Dec-07 40.165 54.82% 7356.20 - 164.30%14-Dec-07 40.326 40.08% 7343.61 - 17.11%

17-Dec-07 39.170 -286.66% 7014.87 -447.65%

18-Dec-07 39.254 21.44% 6972.75 - 60.04%

19-Dec-07 39.156 - 24.97% 6984.11 16.29%

20-Dec-07 39.194 9.70% 7002.72 26.65%

24-Dec-07 39.757 143.64% 7268.18 379.08%

26-Dec-07 40.200 111.43% 7379.02 152.50%

27-Dec-07 40.256 13.93% 7392.06 17.67%

28-Dec-07 40.648 97.38% 7389.90 - 2.92%

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31-Dec-07 40.862 52.65% 7461.48 96.86%

01-Jan-08 41.135 66.81% 7468.49 9.39%

02-Jan-08 41.579 107.94% 7511.06 57.00%03-Jan-08 41.682 24.77% 7511.02 -0.05%

04-Jan-08 41.979 71.25% 7626.41 153.63%

07-Jan-08 41.841 - 32.87% 7632.26 7.67%

08-Jan-08 41.495 - 82.69% 7642.89 13.93%

09-Jan-08 41.428 - 16.15% 7623.64 -25.19%

10-Jan-08 41.002 -102.83% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFCbalanced fund

X d d2 Y Y2 X*Y

0.34 0.34 0.12 0.17 0.03 0.06

1.19 1.19 1.42 1.11 1.23 1.32

0.02 0.02 0.00 0.25 0.06 0.01

0.18 0.18 0.03 0.33 0.11 0.06

0.27 0.27 0.07 -0.23 0.05 -0.06

0.64 0.64 0.41 2.29 5.26 1.47

1.04 1.04 1.09 1.02 1.03 1.06

0.55 0.55 0.30 -1.64 2.70 -0.90

0.40 0.40 0.16 -0.17 0.03 -0.07

-2.87 -2.87 8.22 -4.48 20.04 12.83

0.21 0.21 0.05 -0.60 0.36 -0.13

-0.25 -0.25 0.06 0.16 0.03 -0.04

0.10 0.10 0.01 0.27 0.07 0.03

1.44 1.44 2.06 3.79 14.37 5.45

1.11 1.11 1.24 1.53 2.33 1.70

0.14 0.14 0.02 0.18 0.03 0.02

0.97 0.97 0.95 -0.03 0.00 -0.03

0.53 0.53 0.28 0.97 0.94 0.51

0.67 0.67 0.45 0.09 0.01 0.06

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1.08 1.08 1.17 0.57 0.32 0.62

0.25 0.25 0.06 0.00 0.00 0.00

0.71 0.71 0.51 1.54 2.36 1.09-0.33 -0.33 0.11 0.08 0.01 -0.03

-0.83 -0.83 0.68 0.14 0.02 -0.12

-0.16 -0.16 0.03 -0.25 0.06 0.04

-1.03 -1.03 1.06 -1.83 3.36 1.89

6.38 6.38 20.54 5.23 54.81 26.84

N = 26 XY = 26.84X = 6.38 = 0.85433

d = 6.38 = 0.47546

d = 20.54

Y = 5.23

Y = 54.81



The scheme is less volatile compared to the market. The standard deviation of the schemeis 0.85433 which means there is almost no variation in the returns with the index.

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The table showing the daily returns of S&P CNX Nifty Index and HDFC liquid fund

Date

NetAssetValue Returns

Total IndexReturns Returns

03-Dec-07 15.665 7121.74

04-Dec-07 15.6684 2.17% 7133.64 16.71%

05-Dec-07 15.6721 2.36% 7212.82 111.00%

06-Dec-07 15.6754 2.11% 7230.63 24.69%

07-Dec-07 15.6788 2.17% 7254.45 32.94%

10-Dec-07 15.6885 6.19% 7237.85 -22.88%

11-Dec-07 15.692 2.23% 7403.77 229.24%

12-Dec-07 15.6954 2.17% 7479.08 101.72%

13-Dec-07 15.6989 2.23% 7356.2 -164.30%

14-Dec-07 15.7023 2.17% 7343.61 -17.11%

17-Dec-07 15.7127 6.62% 7014.87 -447.65%

18-Dec-07 15.7162 2.23% 6972.75 -60.04%

19-Dec-07 15.7198 2.29% 6984.11 16.29%

20-Dec-07 15.7236 2.42% 7002.72 26.65%

24-Dec-07 15.7378 9.03% 7268.18 379.08%

26-Dec-07 15.7449 4.51% 7379.02 152.50%

27-Dec-07 15.7485 2.29% 7392.06 17.67%

28-Dec-07 15.7521 2.29% 7389.9 -2.92%

31-Dec-07 15.763 6.92% 7461.48 96.86%

01-Jan-08 15.7666 2.28% 7468.49 9.39%

02-Jan-08 15.7699 2.09% 7511.06 57.00%

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03-Jan-08 15.7735 2.28% 7511.02 -0.05%

04-Jan-08 15.7769 2.16% 7626.41 153.63%

07-Jan-08 15.7869 6.34% 7632.26 7.67%08-Jan-08 15.7901 2.03% 7642.89 13.93%

09-Jan-08 15.7936 2.22% 7623.64 -25.19%

10-Jan-08 15.7973 2.34% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC liquid

fund

X d d2 Y Y2 X*Y

0.02 0.02 0.00 0.17 0.03 0.00

0.02 0.02 0.00 1.11 1.23 0.03

0.02 0.02 0.00 0.25 0.06 0.01

0.02 0.02 0.00 0.33 0.11 0.01

0.06 0.06 0.00 -0.23 0.05 -0.01

0.02 0.02 0.00 2.29 5.26 0.05

0.02 0.02 0.00 1.02 1.03 0.02

0.02 0.02 0.00 -1.64 2.70 -0.04

0.02 0.02 0.00 -0.17 0.03 0.00

0.07 0.07 0.00 -4.48 20.04 -0.30

0.02 0.02 0.00 -0.60 0.36 -0.01

0.02 0.02 0.00 0.16 0.03 0.000.02 0.02 0.00 0.27 0.07 0.01

0.09 0.09 0.01 3.79 14.37 0.34

0.05 0.05 0.00 1.53 2.33 0.07

0.02 0.02 0.00 0.18 0.03 0.00

0.02 0.02 0.00 -0.03 0.00 0.00

0.07 0.07 0.00 0.97 0.94 0.07

0.02 0.02 0.00 0.09 0.01 0.00

0.02 0.02 0.00 0.57 0.32 0.01

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0.02 0.02 0.00 0.00 0.00 0.00

0.02 0.02 0.00 1.54 2.36 0.03

0.06 0.06 0.00 0.08 0.01 0.000.02 0.02 0.00 0.14 0.02 0.00

0.02 0.02 0.00 -0.25 0.06 -0.01

0.02 0.02 0.00 -1.83 3.36 -0.04

0.84 0.84 0.04 5.23 54.81 0.25

N = 26 XY = 0.25

X = 0.84 = 0.01953

d = 0.84 = 0.00148d = 0.04

Y = 5.23

Y = 54.81



The scheme is less volatile compared to the market. The standard deviation of the scheme

is 0.01953 which means there is almost no variation in the returns with the index.

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The table showing the daily returns of S&P CNX Nifty Index and HDFC capital

builder fund

Date

NetAssetValue Returns

Total IndexReturns Returns

03-Dec-07 100.220 7121.74

04-Dec-07 100.636 41.51% 7133.64 16.71%

05-Dec-07 101.797 115.37% 7212.82 111.00%

06-Dec-07 101.778 - 1.87% 7230.63 24.69%07-Dec-07 101.872 9.24% 7254.45 32.94%

10-Dec-07 102.468 58.50% 7237.85 -22.88%

11-Dec-07 103.702 120.43% 7403.77 229.24%

12-Dec-07 104.917 117.16% 7479.08 101.72%

13-Dec-07 104.570 - 3.07% 7356.2 -164.30%

14-Dec-07 104.227 - 2.80% 7343.61 -17.11%

17-Dec-07 100.558 -352.02% 7014.87 -447.65%

18-Dec-07 99.663 - 89.00% 6972.75 -60.04%19-Dec-07 99.594 - 6.92% 6984.11 16.29%

20-Dec-07 99.572 - 2.21% 7002.72 26.65%

24-Dec-07 102.369 280.90% 7268.18 379.08%

26-Dec-07 104.284 187.07% 7379.02 152.50%

27-Dec-07 103.958 - 1.26% 7392.06 17.67%

28-Dec-07 105.123 112.06% 7389.9 -2.92%

31-Dec-07 106.538 134.60% 7461.48 96.86%

01-Jan-08 107.225 64.48% 7468.49 9.39%

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02-Jan-08 108.559 124.41% 7511.06 57.00%

03-Jan-08 108.376 - 16.86% 7511.02 -0.05%

04-Jan-08 108.974 55.18% 7626.41 153.63%

07-Jan-08 108.974 0.00% 7632.26 7.67%

08-Jan-08 107.833 -104.70% 7642.89 13.93%

09-Jan-08 106.477 -125.75% 7623.64 -25.19%

10-Jan-08 104.744 -162.76% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC capital

builder fund

X d d2 Y Y2 X*Y

0.42 0.42 0.17 0.17 0.03 0.07

1.15 1.15 1.33 1.11 1.23 1.28

-0.02 -0.02 0.00 0.25 0.06 0.00

0.09 0.09 0.01 0.33 0.11 0.030.59 0.59 0.34 -0.23 0.05 -0.13

1.20 1.20 1.45 2.29 5.26 2.76

1.17 1.17 1.37 1.02 1.03 1.19

-0.33 -0.33 0.11 -1.64 2.70 0.54

-0.33 -0.33 0.11 -0.17 0.03 0.06

-3.52 -3.52 12.39 -4.48 20.04 15.76

-0.89 -0.89 0.79 -0.60 0.36 0.53

-0.07 -0.07 0.00 0.16 0.03 -0.01-0.02 -0.02 0.00 0.27 0.07 -0.01

2.81 2.81 7.89 3.79 14.37 10.65

1.87 1.87 3.50 1.53 2.33 2.85

-0.31 -0.31 0.10 0.18 0.03 -0.06

1.12 1.12 1.26 -0.03 0.00 -0.03

1.35 1.35 1.81 0.97 0.94 1.30

0.64 0.64 0.42 0.09 0.01 0.06

1.24 1.24 1.55 0.57 0.32 0.71

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-0.17 -0.17 0.03 0.00 0.00 0.00

0.55 0.55 0.30 1.54 2.36 0.85

0.00 0.00 0.00 0.08 0.01 0.00-1.05 -1.05 1.10 0.14 0.02 -0.15

-1.26 -1.26 1.58 -0.25 0.06 0.32

-1.63 -1.63 2.65 -1.83 3.36 2.99

4.62 4.62 40.26 5.23 54.81 41.56

N = 26 XY = 41.56

X = 4.62 = 1.23167

d = 4.62 = 0.75582

d = 40.26Y = 5.23

Y = 54.81





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The table showing the daily returns of S&P CNX Nifty Index and HDFC floating

rate income fund long term

DateNet Asset


Returns Returns

03-Dec-07 13.0367 7121.74

04-Dec-07 13.0394 2.07% 7133.64 16.71%

05-Dec-07 13.0423 2.22% 7212.82 111.00%

06-Dec-07 13.0456 2.53% 7230.63 24.69%

07-Dec-07 13.0485 2.22% 7254.45 32.94%

10-Dec-07 13.0579 7.20% 7237.85 -22.88%11-Dec-07 13.0606 2.07% 7403.77 229.24%

12-Dec-07 13.0636 2.30% 7479.08 101.72%

13-Dec-07 13.0659 1.76% 7356.2 -164.30%

14-Dec-07 13.0686 2.07% 7343.61 -17.11%

17-Dec-07 13.0774 6.73% 7014.87 -447.65%

18-Dec-07 13.0803 2.22% 6972.75 -60.04%

19-Dec-07 13.0832 2.22% 6984.11 16.29%

20-Dec-07 13.0862 2.29% 7002.72 26.65%

24-Dec-07 13.0986 9.48% 7268.18 379.08%

26-Dec-07 13.1049 4.81% 7379.02 152.50%

27-Dec-07 13.108 2.37% 7392.06 17.67%

28-Dec-07 13.1122 3.20% 7389.9 -2.92%

31-Dec-07 13.1223 7.70% 7461.48 96.86%

01-Jan-08 13.1276 4.04% 7468.49 9.39%

02-Jan-08 13.1317 3.12% 7511.06 57.00%

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03-Jan-08 13.1349 2.44% 7511.02 -0.05%

04-Jan-08 13.1379 2.28% 7626.41 153.63%

07-Jan-08 13.1479 7.61% 7632.26 7.67%

08-Jan-08 13.1509 2.28% 7642.89 13.93%

09-Jan-08 13.154 2.36% 7623.64 -25.19%

10-Jan-08 13.1571 2.36% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC floating

rate income fund long term

X d d2 Y Y2 X*Y

0.02 0.02 0.00 0.17 0.03 0.00

0.02 0.02 0.00 1.11 1.23 0.02

0.03 0.03 0.00 0.25 0.06 0.01

0.02 0.02 0.00 0.33 0.11 0.01

0.07 0.07 0.01 -0.23 0.05 -0.02

0.02 0.02 0.00 2.29 5.26 0.05

0.02 0.02 0.00 1.02 1.03 0.02

0.02 0.02 0.00 -1.64 2.70 -0.03

0.02 0.02 0.00 -0.17 0.03 0.00

0.07 0.07 0.00 -4.48 20.04 -0.30

0.02 0.02 0.00 -0.60 0.36 -0.01

0.02 0.02 0.00 0.16 0.03 0.00

0.02 0.02 0.00 0.27 0.07 0.01

0.09 0.09 0.01 3.79 14.37 0.36

0.05 0.05 0.00 1.53 2.33 0.07

0.02 0.02 0.00 0.18 0.03 0.00

0.03 0.03 0.00 -0.03 0.00 0.00

0.08 0.08 0.01 0.97 0.94 0.07

0.04 0.04 0.00 0.09 0.01 0.00

0.03 0.03 0.00 0.57 0.32 0.02

0.02 0.02 0.00 0.00 0.00 0.00

0.02 0.02 0.00 1.54 2.36 0.04

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0.08 0.08 0.01 0.08 0.01 0.01

0.02 0.02 0.00 0.14 0.02 0.00

0.02 0.02 0.00 -0.25 0.06 -0.010.02 0.02 0.00 -1.83 3.36 -0.04

0.92 0.92 0.04 5.23 54.81 0.29

N = 26 XY = 0.29

X = 0.92 = 0.02186

d = 0.92 = 0.00187

d = 0.04

Y = 5.23

Y = 54.81





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The table showing the daily returns of S&P CNX Nifty Index and HDFC prudence

fund

DateNet Asset


Returns Returns

03-Dec-07 152.673 7121.74

04-Dec-07 153.402 47.75% 7133.64 16.71%

05-Dec-07 156.148 179.01% 7212.82 111.00%

06-Dec-07 156.622 30.36% 7230.63 24.69%

07-Dec-07 156.732 7.02% 7254.45 32.94%

10-Dec-07 157.195 29.54% 7237.85 -22.88%

11-Dec-07 158.877 107.00% 7403.77 229.24%

12-Dec-07 160.152 80.25% 7479.08 101.72%

13-Dec-07 160.141 -0.69% 7356.2 -164.30%

14-Dec-07 159.945 -12.24% 7343.61 -17.11%

17-Dec-07 156.061 -242.83% 7014.87 -447.65%

18-Dec-07 156.169 6.92% 6972.75 -60.04%

19-Dec-07 155.83 -21.71% 6984.11 16.29%

20-Dec-07 155.553 -17.78% 7002.72 26.65%

24-Dec-07 157.346 115.27% 7268.18 379.08%

26-Dec-07 159.298 124.06% 7379.02 152.50%

27-Dec-07 159.741 27.81% 7392.06 17.67%

28-Dec-07 160.687 59.22% 7389.9 -2.92%

31-Dec-07 162.849 134.55% 7461.48 96.86%

01-Jan-08 164.064 74.61% 7468.49 9.39%

02-Jan-08 165.475 86.00% 7511.06 57.00%

03-Jan-08 166.03 33.54% 7511.02 -0.05%

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04-Jan-08 166.484 27.34% 7626.41 153.63%

07-Jan-08 166.365 -7.15% 7632.26 7.67%

08-Jan-08 163.751 -157.12% 7642.89 13.93%09-Jan-08 162.846 -55.27% 7623.64 -25.19%

10-Jan-08 161.108 -106.73% 7483.81 -183.42%

The table showing the calculations of Beta and Standard deviation of HDFC

prudence fund

X d d2 Y Y2 X*Y

0.48 0.48 0.23 0.17 0.03 0.08

1.79 1.79 3.20 1.11 1.23 1.99

0.30 0.30 0.09 0.25 0.06 0.07

0.07 0.07 0.00 0.33 0.11 0.02

0.30 0.30 0.09 -0.23 0.05 -0.07

1.07 1.07 1.14 2.29 5.26 2.45

0.80 0.80 0.64 1.02 1.03 0.82

-0.01 -0.01 0.00 -1.64 2.70 0.01

-0.12 -0.12 0.01 -0.17 0.03 0.02

-2.43 -2.43 5.90 -4.48 20.04 10.87

0.07 0.07 0.00 -0.60 0.36 -0.04

-0.22 -0.22 0.05 0.16 0.03 -0.04

-0.18 -0.18 0.03 0.27 0.07 -0.05

1.15 1.15 1.33 3.79 14.37 4.37

1.24 1.24 1.54 1.53 2.33 1.89

0.28 0.28 0.08 0.18 0.03 0.05

0.59 0.59 0.35 -0.03 0.00 -0.02

1.35 1.35 1.81 0.97 0.94 1.30

0.75 0.75 0.56 0.09 0.01 0.07

0.86 0.86 0.74 0.57 0.32 0.49

0.34 0.34 0.11 0.00 0.00 0.00

0.27 0.27 0.07 1.54 2.36 0.42

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-0.07 -0.07 0.01 0.08 0.01 -0.01

-1.57 -1.57 2.47 0.14 0.02 -0.22

-0.55 -0.55 0.31 -0.25 0.06 0.14

-1.07 -1.07 1.14 -1.83 3.36 1.96

5.49 5.49 21.91 5.23 54.81 26.59

N = 26 XY = 26.59

X = 5.49 = 0.89337

d = 5.49 = 0.47416

d = 21.91Y = 5.23

Y = 54.81





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The table showing the daily returns of S&P CNX Nifty Index and HDFC gilt fund

Date Net Asset Value Returns

Total Index


04-Dec-07 16.3401 5.51% 7133.64 16.71%

05-Dec-07 16.3632 14.14% 7212.82 111.00%

06-Dec-07 16.3771 8.49% 7230.63 24.69%

07-Dec-07 16.3952 11.05% 7254.45 32.94%

10-Dec-07 16.4069 7.14% 7237.85 - 22.88%

11-Dec-07 16.4082 0.79% 7403.77 229.24%

12-Dec-07 16.4218 8.29% 7479.08 101.72%

13-Dec-07 16.4081 -8.34% 7356.2 - 164.30%

14-Dec-07 16.4258 10.79% 7343.61 - 17.11%

17-Dec-07 16.4477 13.33% 7014.87 - 447.65%

18-Dec-07 16.4652 10.64% 6972.75 - 60.04%

19-Dec-07 16.4692 2.43% 6984.11 16.29%

20-Dec-07 16.4796 6.31% 7002.72 26.65%

24-Dec-07 16.4923 7.71% 7268.18 379.08%

26-Dec-07 16.4964 2.49% 7379.02 152.50%

27-Dec-07 16.5219 15.46% 7392.06 17.67%

28-Dec-07 16.58 35.17% 7389.9 - 2.92%

31-Dec-07 16.6354 33.41% 7461.48 96.86%

01-Jan-08 16.6995 38.53% 7468.49 9.39%

02-Jan-08 16.7119 7.43% 7511.06 57.00%

03-Jan-08 16.6838 -16.81% 7511.02 - 0.05%

04-Jan-08 16.7496 39.44% 7626.41 153.63%

07-Jan-08 16.8182 40.96% 7632.26 7.67%

08-Jan-08 16.8168 -0.83% 7642.89 13.93%

09-Jan-08 16.8338 10.11% 7623.64 - 25.19%

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10-Jan-08 16.9368 61.19% 7483.81 - 183.42%

The table showing the calculations of Beta and Standard deviation of HDFC gilt fund

X d d2 Y Y2 X*Y

0.06 0.06 0.00 0.17 0.03 0.01

0.14 0.14 0.02 1.11 1.23 0.16

0.08 0.08 0.01 0.25 0.06 0.02

0.11 0.11 0.01 0.33 0.11 0.04

0.07 0.07 0.01 -0.23 0.05 -0.02

0.01 0.01 0.00 2.29 5.26 0.02

0.08 0.08 0.01 1.02 1.03 0.08

-0.08 -0.08 0.01 -1.64 2.70 0.14

0.11 0.11 0.01 -0.17 0.03 -0.02

0.13 0.13 0.02 -4.48 20.04 -0.60

0.11 0.11 0.01 -0.60 0.36 -0.06

0.02 0.02 0.00 0.16 0.03 0.00

0.06 0.06 0.00 0.27 0.07 0.02

0.08 0.08

hdfc mutual funds

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