MUTUAL FUNDS: AN OVERVIES

A

SUMMER TRAINING

PROJECT REPORT

ON

Various Mutual Fund schemes of HDFC Bank & their comparison with other companies

MUTUAL FUNDS: AN OVERVIEWA Mutual fund is a trust that pools the saving of the number of investors who share a common financial goal. The money thus collected is invested by the fund manager in different types of securities depending upon the objective of the scheme. These could range from share to debentures these investments and the capital appreciation realized by the scheme are shared by its unit holders in proportion to the number of units owned by them (prorate). 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 portfolio at a relatively low cost. Anybody with an investment in mutual funds. Each mutual funds scheme has a defined investment objective and strategy.

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

Investors

Passed

pool their

back to

money with

Returns

Fund

Manager

Generates

Invest in

Securities

A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Markets for equity shares, bonds and other fixed income instruments, real estate, derivatives and other assets have become mature and information driven. Price changes in these assets are driven by global events occurring in fare way places. A typical individual is unlikely to have the knowledge, skills inclination and time to keep track of events, understand their implications and act speedily. An individual also finds it difficult to keep track of ownership of his assets, investments., brokerage dues and bank transactions etc. A mutual fund is the answer to all these situations. It appoints professionally qualified and experience staff that manages each of these functions on a full times basis. The large pool of money collected in the fund allows it to hire such at a very low cost to each investor. In effect, the mutual fund vehicle exploits economics of scale in all three areas-research, investments and transaction processing. While the concept of individual coming together the invest money collectively is now new, the mutual fund its present from is 20th century phenomenon. In fact, mutual funds gained popularity only after the second world war. Globally there are thousand of funds offering ten of thousands of mutual funds with different investment objectives. Today, mutual funds collectively mange almost as much as or more money as compared to banks.

A draft offer document is to be prepared at the time of lunching the fund. Typically, it pre species the investment objectives of the fund, the risk associated, the costs involved in the process and the broad rules fro entry in to and exit from the fund and other areas of operation. In India, as in countries, these sponsors need approval from a regulator, SEBI (Security and Exchange Board of India) in our case SEBI looks at track records of the sponsor and its financial strength in grating approval to the fund for commencing operations.

A sponsor then hires an asset management company to invest the funds according to the investment objective. It also hires another entity to bt the custodian of the assets of the fund and perhaps a third one to handle registry work for the unit holders (subscribers) of the fund.

In the Indian context, the sponsors promote the asset Management Company also, in which it holds a majority stake. In many cases a sponsor can hold a 100% stake in the asset management Company (AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life Asset Management Ltd. Which has floated mutual funds schemes and also acts as a manger for the funds collected under the schemes? BRIEF HISTORY OF MUTUAL FUNDS (MFS)The end of millennium marks 36 years pf existence of mutual funds in this country. The ride through these 36 years is not been smooth. Investor opinion is still divided. While some are for mutual funds other against it.

UTI commenced its operations from July 1964. the impetus for establishing a formal UTI. On came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India. With war on the boards and economic turmoil that depressed the financial market, entrepreneurs were hesitant to enter capital market. The already existing companies found it difficult to raise fresh capital, as investors did not responds adequately to new issues. Earnest efforts were required to canalize saving of the community into productive uses in order to speed up the process of industrial growth. The them finance minister, T.T Krishanmachari set up the idea of a unit trust that would be open the any person or UTI on o purchase the units offered by the truest. However this UTI on as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small. His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail saving and investing those savings in the capital market and passing on the benefits so accrued to the small investors.

UTI commenced its operations from July 1964 with a view to encouraging saving and investment and participation in the income, profits and gain occurring to the corporation from the acquisition, holding, management and disposal of securities.Different, provisions of the UTI act laid down the structure of management, scope of business, powers and functions of the trust as well as accounting, disclosures and regulatory requirements for the trust.

One things is certain the fund industry is here to stay. The industry was one entity show till 1986 when the UTI monopoly was broken when SBI and Can bank mutual fund entered the area. This was followed by the entry of others like LIC, IC, etc. sponsored by public sectors banks. Starting with an asset base of Rs. 0.25 ban in 1964 the industry has grown at a compounded average growth rate of 26.34% to its current size Rs. 1130 ban. The period 1986-1993 can be termed as the period of public sector mutual funds (PMFs). From one player in 1985 the number increased to 8 in 199. the party did not last long. When the private sector made its debut in 1993-94, the stock market was booming.

The opening up of the assets management business to private sector in 1993 saw international along with the host of domestic players join the party. But for the equity funds, the period of 1994-96 was one of the worst in the history of Indian mutual funds.1999-2000 years of the funds:Mutual fund have been around for a long period of time precise for 36 yrs. But the year 1999 saw immense future potential and developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs this time around all the participants are developments in this sector. This year signaled the year of resurgence of mutual funds and the regaining of investor confidence in these MFs. this time around all the participants are involved in the revival of the funds the AMCs the unit holders, the other related parties. However the sole factor that give lift to the revival of the funds was the union budget. The budget brought about a large number of changes in one stroke. An insight of the union budget on mutual funds taxation benefits is provided later.It provided center stage to the mutual funds, made them more attractive and provides acceptability among the investors. The union budget exempted mutual fund dividend given out by equity-oriented schemes from, both at the hands of the investor as well as the mutual fund. No longer were the mutual funds interested in selling the concept of mutual funds they wanted to talk business which would mean to increase asset base, and to get asset base and investor base they had to be fully armed with a whole lot of schemes for every investor. So new schemes for new IPOs were inevitable. The quest to attract investors extended beyond just new schemes. The funds started to regulate themselves and were all out on wining the trust and confidence of the investors under the ages of the Association of Mutual funds of India (AMFI)One can say that the industry is moving from infancy to adolescence, the industry is maturing and the investor and funds are frankly and openly discussing difficulties opportunities and compulsions.

FUTURE SCENARIO:The asset base will continue to grow at an annual rate of about 30 to 35 % over the next few years as investors shift their assets from banks and other traditional avenues. Some of the older public and private sector players will either close shop or be taken over.

Out of ten public sector players five will sell out, close down or merge with stronger players in three to four years. In the private sector this trend has already started with two mergers and one takeover. Here too some of them will down their shutters in the near future to come.

But this does not mean there is no room for other players. The market will witness a flurry of new players entering the arena. There will be a large number of offers from various asset management companies in the time to come. Some big names like Fidelity, Principal, Old Mutual etc. are looking at Indian market seriously. One important reason for it is that most major players already have presence here and hence these big names would hardly like to get left behind.

In the U.S. most mutual funds concentrate only on financial funds like equity and debt. Some like real estate funds and commodity funds also take an exposure to physical assets. The latter type of funds are preferred by corporates who want to hedge their exposure to the commodities they deal with.

For instance, a cable manufacturer who needs 100 tons of Copper in the month of January could buy an equivalent amount of copper by investing in a copper fund. For Example, Permanent Portfolio Fund, a conservative U.S. based fund invests a fixed percentage of its corpus in Gold, Silver, Swiss francs, specific stocks on various bourses around the world, short term and long-term U.S. treasuries etc.

In U.S.A. apart from bullion funds there are copper funds, precious metal funds and real estate funds (investing in real estate and other related assets as well.).In India, the Canada based Dundee mutual fund is planning to launch a gold and a real estate fund before the year-end.

In developed countries like the U.S.A there are funds to satisfy everybodys requirement, but in India only the tip of the iceberg has been explored. In the near future India too will concentrate on financial as well as physical funds.

The mutual fund industry is awaiting the introduction of DERIVATIVES in the country as this would enable it to hedge its risk and this in turn would be reflected in its Net Asset Value (NAV).

SEBI is working out the norms for enabling the existing mutual fund schemes to trade in Derivatives. Importantly, many market players have called on the Regulator to initiate the process immediately, so that the mutual funds can implement the changes that are required to trade in Derivatives.

TYPE OF MUTUAL FUNDSMutual fund schemes may be classified on the basis of its

structure and its investment objectives.

By Structure:Open-ended fundsAn open-end 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 the open-end schemes is liquidity.

Closed-ended FundsA closed-end-fund has a stipulated maturity period generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investor can invest in the scheme at the time of the initial public issue and thereafter they can by or sell the units of the stock exchanges where they are listed. In order to an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations Stipulate that at least one of the two exit routes is provided to the investor.Interval FundsInterval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during predetermined intervals at NAV related prices.

By Investment Objective :Growth FundsThe aim of growth 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, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long term out look seeking growth over a period of time.

Income FundsThe aim of income fund is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities. Income Funds are ideal for capital stability and regular income.

Balanced IncomeThe aim of balanced funds is to provide both growth and regular income. Such schemes periodically discibute a part of their earning and invest both in equities and fixed securities in the proportion indicated in their offer documents. In a rising market, the NAV of these schemes may not 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 FundsThe aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposits, commercial paper and inter-bank call money. Returns of this schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a mean to park their surplus funds for short periods.Load fundsA load Fund is one that charges a commission for entry or exit. That is each time you buy or sell units in the fund, a commission will be payable. Typically entry or exit loads range from 1% to 2% It could be worth paying the load if the fund has a good performance history.

No-load FundA No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to workOther Schemes:Tax Saving SchemesThese schemes offer tax rebate to the investors under specific provision of the Indian income tax law as the Government offers tax incentives for investment in specified avenues. Investment made in Equity Liquid Saving Schemes (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 u/s 54 EA and 54 EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

Special SchemesIndustry Specific SchemesIndustry Specific Schemes invest only in the industries specified in offer document. The investment of these funds is limited to specific industries like Info Tech, FMCG, Pharmaceuticals HDFC BANK LTD. calls etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE sensex or the NSF 50

Sectoral SchemesSectoral 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.

REGULATORY ASPECTSchemes of a Mutual FundThe asset management company shall launch no schemes unless the trustees approve such scheme and a copy of the offer document has been filled by board.

Every mutual fund shall along with the offer document of each scheme pay filing fees.

The offer document shall contain disclosures which are adequate in order to enable the investors to make informed investment decision including the disclosure on maximum investments proposed to be made by the scheme in the listed securities of the group companies of the sponsor. A close-ended scheme shall be fully redeemed at the end of the maturity period. Unless a majority of the unit holders otherwise decide for its rollover by passing a resolution.The mutual fund and Asset Management Company shall be liable to refund the application money to the applicants:(i) If the mutual fund fails to receive the minimum subscription amount referred in to clause (a) of sub-regulation (1).

(ii) If the money received from the applicants for units are in excess of subscription amount referred to in clause (a) of sub-regulation (1).

The asset management company shall issue to the applicant whose application has been accepted as soon as possible but not later than six week from the date of closure of the initial subscription list and or from the date of receipt of the request from the unit holders in any open ended scheme.

Rules regarding advertisementThe offer document and advertisement materials shall not be misleading or contain any statement or opinion, which are incorrect or false.

Investment Objectives and Valuation Policies:The price at which the units may be subscribed or sold and the price at which such units may at any time be repurchased by the mutual fund shall be made available to the investors.

General obligations:

Every asset management company for each scheme shall keep and maintain proper books of accounts, records and documents, for each sachem so as to explain its transaction and the disclose at any point of time the financial position of each scheme and in particular give a true and fair view of the state of affairs of the fund intimate to the board the place where such books of accounts, records and documents are maintained.

The financial year of all the schemes end as of March 31 of each year. Every mutual fund or the asset management company shall prepare in respect of each financial year an annual report and annual statement of accounts of the schemes and the fund as specified in Eleventh Schedule.

Every mutual fund shall have the annual statement of accounts audited by an auditor who is not in any way associated with the auditor of the asset management company.

Procedure for Action in Case of Default :On and from the date of the suspension of the certificate or the approval, as the case may be, the mutual fund, trustees or asset management company, shall cease to carry on any activity as a mutual fund, trustee or asset management company, during the period of suspension, and shall be subject to the directions of the board with regard to any records, documents, or securities that may be in its custody or control, relating to its activities as mutual fund, trustees or asset management company.

No mutual fund under all its schemes should own more than ten percent of any companys paid up capital carrying voting rights.

Such transfers are done at the prevailing market rate for quoted instruments on spot basis.

The securities so transferred shall be in conformity with the investment objective of the scheme to which such transfer has been made.

A scheme may invest in another scheme under the same asset management company or any other mutual fund without charging any fees, provided that aggregate inter scheme investment made by all schemes under the same management company shall not exceed 5% of the net asset value of the mutual fund.

The initial issue expense in respect of any scheme may not exceed six percent of the funds raised under that scheme.

Every mutual fund shall, get the securities purchased or transferred in the name of mutual fund on the account of the concerned scheme, wherever investments are intended to be of long-term nature.Pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme a mutual fund can invest the funds of the scheme in short term deposits of scheduled commercial banks.No mutual fund scheme shall make any investment in :

(i) Any unlisted security of an associate or group company of the sponsor or

(ii) Any security issued by way of private placement by an associate or group company of the sponsor or The listed securities of proup companies of the sponsor which is an excess of 30% of the net assets of all the schemes of a mutual fund.

No mutual fund scheme shall invest more than 10% of its NAV in the equity shares or equity relates instruments of any company. Provided that, the limit of 10% shall not be applicable for investments in index fund or sector or industry specific scheme.

A mutual fund scheme shall not invest more than 5% of its NAV in the equality related investment s in case of open-ended scheme and 10% of its NAV in case of close-ended scheme.

BENEFITS OF MUTUAL FUND INVESTMENTProfessional ManagementMutual funds provide the service of experienced and skilled professionals, backed by a dedicated investment research team that analyze the performance and prospect of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification Investing in 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.

Return PotentialOver a medium to a long-term, Mutual Funds have the potential to provide a higher returns as they invest in a diversified basket of selected securities.Low CostsMutual 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.

LiquidityIn open end schemes, the investor gets the money back promptly at net asset value related prices from the mutual funds. 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 Mutual fund.TransparencyYou get regular information on the value of your investment in addition to disclosure on the specific investment made by you r scheme, the proportion invested in each class of assets and the fund managers investment strateer5gy and outlook.

FlexibilityThrough features such as regular investment plans, regular withdraw plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.Choice of schemesMutual funds offer a family of schemes of suit your varying needs over a lifetime.

Well regulatedAll mutual funds are registered with SEBI and there function with the provisions of strict regulations designed to protect the interest of investors. The operations of mutual funds are regularly monitored by SEBI.

AN APPRAISAL OF MUTUAL FUND INDUSTRYQ.Why had mutual funds in India performed so poorly in the past?

Most investors associate mutual funds with Master gain, Monthly Equity Plans of SBI Mutual Fund, HDFC BANK LTD. and Can bank Mutual fund and of course Morgan Stanley Growth Fund units still trade below the original IPO price of Rs. 10. it is incorrect to think that all mutual funds have performed poorly. If one looks at some income funds, they have come with reasonable returns. It is only the performance of equity funds, which has been poor. Their poor performance has been amplified by the closed end discounts i.e. units of these funds quoting at sharp discounts to their NAV resulting in an even poorer return in the underlying asset class in which the fund invests. Good funds can beat returns in their asset class to some extend but thats all. Take the case of a sector specific fund like a pharma fund which invest only in shares of pharmacy HDFC BANK LTD. cal companies. If Govt. comes with new regulation that severally restrict the pricing freedom of these companies resulting in a several erosion in the NAV of the fund. No one can do anything about it. A good fund manager would probably sell part of the fund before prices fall too much and wait for an opportune time to reinvest at lower levels once the dust has settled. In that case, the NAV of the fund would fall to a lessor extend but fall it will. If the investor in the fund has invested in some stocks in the sector on his own, in all probability, his personal investment may have depreciated to a larger extent.Lastly, investors would do well to have a look at the investments, which they made on their own. In most cases, they would have done much worse than the mutual funds. We have received numerous requests for advice from individual investors on what to do about their own investments. It that were any indicator, indicators would have done really badly.

Q.Should an investor invest in a mutual fund despite its limitations or not?Yes, investor should invest some part or their investment portfolio in mutual funds. In fact some investors may be better off by putting their entire portfolio in mutual funds. This is on account of the following reasons:-On their own, uninformed investors could perform much worse that mutual funds.

Diversification of risks which is difficult for an investor to achieve with the small amount of funds at his disposal.

Possibility of investing in small amounts as and when the investor has finds to invest.

Unquestioned service of transaction processing, tracking of investment, collecting dividends/interest warrants etc.

Debt funds in India offer exposure to a diversified portfolio of bonds/debentures, which is possible, only if the investor is investing millions or rupees. Further, they offer easy liquidity and tax benefits. Debt fund thus offer a great proposition that is impossible for ordinary investors to replicate on their own. This proposition compares favorably against competing investment like small savings. Investors require analytical capability and access to research and information and need to people have the inclination and the time to make better decisions that fund manager do, but the vast majority does not. Those who can are advised to invest some part of their money into funds, especially debt funds, to diversify their risk. They may also note one of the objectives of this site is to help improve the odds in their favor.Q.Are mutual funds safe ? Are returns on mutual funds guaranteed by Government of India, or Reserve bank or any other government body ?Any mutual fund is as unsafe as the assets that it invests in there are two basis categories of mutual funds with other being variations or mixtures of these. Firstly, there are those that invest purely in equity shares and secondly, there are those that invest purely in equity shares and secondly, there are those that invest purely in bonds, debenture and other interest bearing instruments called and secondly there are those that invest income or debt funds, the NAV of growth fund fluctuates in lime with the fluctuation of the shares held by them. They can also witness face substantial erosion in value, which could be permanent in some cases. On the other hand, prices of dent instruments fluctuate to a much lesser degree and an income fund is extremely unlikely to face erosion in value especially of the permanent kind.

Most mutual funds have qualified and experienced personnel, who understand the risks of investing. But nobody is immune from making mistakes. However, funds diversify the investment portfolio substantially so that default in any single investment will not affect the overall performance of a fund in a significant manner. In the event of default of a part of the portfolio, an income fund is extremely unlikely to face erosion in face value.Generally mutual funds are not guaranteed by anybody. However in the India context, some of the mutual funds have floated guaranteed or assured return schemes which guarantee a certain annual return or guarantee buyback a specified price after some time. Example of these includes funds floated by the HDFC BANK LTD. can ban Mutual Fund, LIC Mutual fund etc. Many of these have not earned returns that they promised and the asset management companies of the respective mutual funds or their sponsors have made good their promises. They biggest case pertains to the US 64, which never guaranteed any return but is being bailed out by the government due to the million of individual who have invested in it. QCan the foreign mutual funds operating in India take investors money outside the country ?

A mutual funds and the company that manages it are 2 entirely different companies. Legally speaking, a mutual fund is a trust formed and registered under the India trust act. The sponsor asset management company is formally appointed by the trustees of the trust to manage money on their behalf e.g. DSP Merrill Lynch equity fund is a mutual benefit trust registered under the Indian trust act. The trustees have appointed DSP Merrill Lynch Asset Management Company Pvt. Ltd. To manage the funds in the trust and the company cant touch one rupee from the trust except to the extent of the fees that it receives for managing the funds. Repatriation of money outside India comes under the purview of the foreign exchange regulation act, 1973 which specifies the situations in which money can be remitted outside India. Under the act, banks that repatriate money on behalf of their clients have to ensure compliance with various legal formalities and ensure that the entity, which remits money is entitled to do so. Any failure or violation leads to serious consequences for both the remitter and the bank. Money collected by a mutual fund domestically is not allowed to be remitted outside India. However with the repeal of FERA, 1973 regulations are likely to be eased. QHow different are style of different mutual funds ?

Different mutual funds have very different investing styles. These styles are a function of the individuals managing the fund with the overall investment objective and policies of the organization acting as a constraint. These are manifest in things like. Portfolio turnover buy and hold strategy versus frequent investment changes.

Kind of Investment made Small versus large companies, multi beggars (investment which yield high gains) versus percentage players (investing in shares which will give small gains in line with the market), high quality how yield bonds yield quality - high yields bonds. Asset allocations varying percentage of cash depending on aggressive view on markets.

QWhat are the risk associated in investing income in mutual fund and how should one find out about these ?

Income funds invest in a diversified portfolio of debt in instruments which provides interest income. There is a possibility that some of these instruments are of low quality and the issuers of these instruments default in the payment of interest or principal. Such loses, called credit loses, continued an area of risk for income funds. The process of diversification mitigates this risk i.e. by the fund investing in number of debt instruments. However, it should be noted that the funds returns could be eroded considerably if even 10% of the investment have credit quality problems. Also, the problem can be the loses show in a particular period resulting in a short term decline in NAV. Investor can check the credit quality of the investment portfolio, which is published by more funds on quarterly bases. The second are of risks comes from the fluctuation in the prices of the underlying instruments in which the funds invests. Any rise in interest rate will result in fall in the value of investments causing a dip in the NAV. The fall in value is maximum for longer dated instrument and negligible for short dated instrument. Hence , the risk is higher is higher in a fund that has an investment portfolio with a higher average maturity this can again be checked from the investment portfolio which is published by the funds. Even if interest rate rise by 2-3%, the fall in NAV for most mutual funds in unlikely to exceed to 5%. Similarly, a portfolio with as high as 10% of poor quality instrument will result in fall in NAV by 10% Regular interest income will take care of the loses in few months. Thus there is unlikely to be permanent erosion of capital is more reasonable circumstances. Hence, debt or income funds have a much lower risk than equity funds, which can have permanent erosion in value. Todays environment is characterized by a deep industrial recession and consequent high level of default on loans provide by banking sector to industry. In such scenario, it may be prudent to look at the credit quality aspect very carefully before investing in an income mutual fund.

RECENT TRENDS IN MUTUAL FUNDINDUSTRY IN INDIAN RECENT trends in mutual fund flows suggest that the Indian investor is regaining his appetite for equities. But is he willing to make them a part of his regular diet? The evidence on this is not conclusive. For this, the robust inflows into equity funds since 2003 will have to be sustained through the ups and downs of the stock market.

Equity funds are certainly making a come back, judging by their sales numbers over the past year and a half. Equity funds notched up average sales of about Rs 2,700 crore a month in 2004. This is a hefty 70 per cent increase over the number for 2003 and about five times the monthly sales registered during the bull market of 1999.

With new investments steadily building up the corpus and rising equity values lending a helping hand, equity funds have doubled their asset base over the past year.

Yet to be tested

But an analysis of trends in Indian mutual fund flows over a five-year period shows that it may be early days yet to expect such a jump. It is only in the 22 months since August 2003 that equity fund flows accelerated sharply, and this has been a particularly buoyant period for the stock market.

Judging from the experience until 2003, investors appear typically comfortable entering an equity fund midway through a stock market rally, when the NAVs (net asset values) are trending steadily upwards. Few investors venture into equity funds in a moribund market, confident that they will gain upon recovery.

Robust monthly inflows into equity funds usually follow a month or two of good stock market returns. In this respect, the period since August 2003 has been quite conducive to equity fund sales. The stock market has either notched up positive monthly returns or has stayed flat in 18 of the 22 months between May 2003 and February 2005. With the market marching predictably upwards and the returns on equity funds outpacing the market by a big margin, recent investors have tasted the rewards of equity investing, without experiencing its risks.

Disconcerting trend

However, the one disconcerting feature of the recent inflows is that new funds garnered a significant portion of the money flowing into equity funds. Over the past year, about 16 per cent of all inflows into equity funds (or Rs 5,168 crore) poured into initial public offerings from fund houses. Though old funds with an established record have garnered much more (Rs 27,000 crore), investments routed through an IPO suffer from a couple of disadvantages.

One, many investors who take the IPO route make one-off investments in equity funds and are not regular investors. This may not be the ideal way to invest in equity funds, as the returns from such an investment would depend heavily on the timing of the IPO. Should the market enter a corrective phase, these investors may be vulnerable to a sharp erosion in the value of their entire investment.

Two, many investors who prefer a new fund over an established one do so under the mistaken notion that entering a fund at an NAV of Rs 10 reduces the downside risk associated with an equity investment.

These investors may be less prepared (than those who invest in established funds) for a blip in the value of their investments, in the event of a market correction.

Instead of rolling out new funds, fund houses need to put greater effort into persuading investors to place faith in established funds that have a good track record. Regular monthly investments in mutual funds also need to encouraged, rather than one-off investments prompted by a booming stock market.

They have made a beginning on this, by announcing entry load waivers on investments routed through the systematic investment route.

If the fund industry, through its distributors, does manage to convince a larger proportion of investors to make systematic investments in equity funds, one can look forward to fund flows that are not too influenced by the ebb and flow of the stock market.

OBJECTIVE OF THE STUDY

1. To study the various schemes of Mutual Fund provided by HDFC Bank.

2. To make the comparison of Mutual fund schemes of different companies.

RESEARCH METHODOLOGY

Methodology is conceptual structure with in which research is conducted. It constitute the blue prints for collection, measurement and analysis of data.

Research is an academic activity and the term is used in a technical sense. According to CLIFFORD research comprises defining & refining problems, formulating hypothesis or suggested so HDFC Bank Ltd. ons, collecting, organizing & evaluating data, making deductions and reaching conclusion; and at last carefully testing the conclusion to determine whether fit the formulating hypothesis.

Research Design

The methodology adopted to achieve the project objective involved casual and descriptive research method. The information required for fulfilling the objective of the study was collected from various secondary sources.

SAMPLINGThe survey comprised of Judgment Sampling Technique for preferred mutual fund companies.SAMPLE DESIGNNumber of Schemes studied:

EQUITY FUNDS

LIQUID FUNDS

BALANCED EQUITY FUNDS

MIP FUNDS

GILT FUNDS

TIME

2014-15SOURCES OF DATAAs the study is broadly descriptive in nature, it requires collections of information from secondary sources.

SECONDARY DATASecondary data needed for the purpose of study are collected from newspaper, journals, magazines and websites etc.

DATA ANALYSISFor data analysis pie charts & time series have been use.COMPANY PROFILE

HDFC BANK LTD

TypePrivate

Founded1994

HeadquartersHDFC Bank Ltd.,

Mumbai, India

IndustryBankingInsuranceCapital Markets and allied industries

ProductsLoans, Credit Cards, Savings, Investment vehicles, Insurance etc.

Websitewww.hdfcbank.com

Branch Hyderabad, AmeerpetHDFC Bank (NYSE:HDB), one amongst the firsts of the new generation, tech-savvy commercial banks of India, was incorporated in August 1994, after the Reserve Bank of India allowed setting up of Banks in the private sector. The Bank was promoted by the Housing Development Finance Corporation Limited, a premier housing finance company (set up in 1977) of India. Net Profit for the year ended March 31, 2013 was Rs. 1,141 crores. Results of the latest quarter ended June 2014, indicate that the bank continues to grow in a steady manner.

HistoryThe Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

Branch networkCurrently HDFC Bank has 758 branches, 1,716 ATMs, in 325 cities in India, and all branches of the bank are linked on an online real-time basis. The bank offers many innovative products & services to individuals, corporates, trusts, governments, partnerships, financial institutions, mutual funds, insurance companies.

It is a path breaker in the Indian banking sector. In 2007 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. Though, the official license was given to Centurion Bank of Punjab branches, to continue working as HDFC Bank branches, on May 23, 2014.Board of DirectorsMr. Jagdish Capoor (Chairman)

Mr. Aditya Puri (Managing Director)

Mr. Keke Mistry

Dr. (Mrs.) Amla Samanta

Mr. Venkat Rao Gadwal

Mr. Anil Ahuja

Mr. Vineet Jain

Mr. Ranjan Kapoor

Mr. Bobby Parikh

Mrs. Renu Karnal

VICE President (Legal ) & Co. Secretary

Mr. Sanjay Dongre

Auditor

P.C. Honsolia & Co. (Chartered Accountant)

Registered Office

HDFC Bank House

Senapati Bapat Marg

Loveer Parel Mumbai 400013

Tel. No. 56521000

Fax No. 24960739

Web. Site www.hdfcbank.comProduct Range

RecognitionOver a decade of its operations, HDFC Bank has been recognized, rated and awarded by a number of organizations.Awards & AchievementsHDFC Bank began operations in 1995 with a simple mission: to be a World-class Indian Bank.

We realized that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal.

It is extremely gratifying that our efforts towards providing customer convenience have been recognized both nationally and internationally.

In 2012, HDFC Bank was named Best Overall Local/Domestic Bank India in the Corporate Cash Management Poll conducted by the Hong Kong-based Asia money magazine

In 2010, Forbes Global again named us in its ranking of Best Under a Billion, 200 Best Small Companies for 2003.

Hong Kong-based Finance Asia Magazine rated s Best Domestic Commercial Bank of India in 1999, 2000 and 2001 respectively and Best Local Bank in India in 2002 and 2003.

HDFC Bank has been named Best Domestic Bank in India Region in The asset Triple A country Award 2010.

Leading Indian business Magazine business Today in a survey rated us Best Private Sector Bank in India in 1999 and Best Bank in India in 2003.

NASSCOM and economictimes.com have named us the Best IT User in Banking at the IT users Awards 2003.

Leading Personal Finance magazine in India Outlook Money named HDFC Bank the Best Bank in the Private Sector for the year 2003.

There have been some other proud moments as well :

London-based Euro Money Magazine gave us the award for Best Bank India in 2001 and 2002.

Asia Money Magazine has named us Best Commercial Bank in India 2002

The Economic Times has conferred on us The Economic Times Awarded for corporate Excellences as the Emerging Company of the Year 2000-01. For our use of information technology we have been recognized as a Computerworld Honors Laureate and awarded the 21st Century Achievement Award in 2002 for Finance, Insurance & Real Estate category by computer world, in USA. Our technology initiative has been included as a case study in their online global archives.

The Economic Times has conferred on us The Economic Times Awarded for Corporate Excellence as the Emerging Company of the Year 2000-01.

Leading Indian Business magazine Business India named us Indias Best Bank in 2000.

In the year 200, Leading financial magazine Forbes Global named us in its list of The 300 Best Small Companies In the world and as one of the 20 for 2001 best small companies in the world.

We are aware that all these awards are mere milestones in the continuing, never-ending journey of providing excellent service to our customer. We are confident, however, that with your feedback and support, we will be able to maintain and improve our services.FUND RANKING(1) Equity Diversified

1Year

Rank. Scheme Name Launch Return 1 years As on

1ICICI Prudential Infrastructure16, August200526.8512 Jun 14

2Tata Infrastructure22, December, 200421.4212 Jun. 14

3Reliance Growth7, October,199516.2912 Jun. 14

4Kotak 3021, December, 199815.5412 Jun. 14

5HDFC Growth 10, August 200414.9412 Jun. 14

Equity Diversified

5Year

Rank. Scheme Name Launch Return 1 years As on

1Reliance Growth 7 Oct 199556.1912 June 14

2Kotak 30 21 Dec 199844.8112 June 14

3HDFC Growth 10 Aug 200043.6812 June 14

4Tata Growth25 June 199439.1212 June 14

5ICICI Prudential Infrastructure19 June 199837.0012 June 14

(2) Income Funds

Rank Scheme Name 1 Year

1Birla Income plus Growth 12.8

2ING income Fund

Regular plan growth 11.44

3Frank filin India Inter National fund10.46

4HSBC Income fund- Growth 9.55

Rank Scheme Name 5 year

1ICICI Prudential Long Term Plan Cumulative 7.84

2Birla Sunlife Income fund wroth 6.36

3Tata Income Fund growth 5.87

4Escort income plan growth 5.87

(3) Liquid funds

Rank Scheme Name 1 year

1ICICI Prudential Liquid plan 8.4

2LIC MF Liquid fund growth8.13

3Reliance liquid fund growth 8.078

4HDFC liquid fund8.072

5Birla Cash Plus Retail growth 7.98

Rank Scheme Name 5 year

1LIC MF Liquid fund growth6.56

2HDFC liquid fund6.13

3Birla Cash Plus Retail growth 6.07

(4) Gilt FundsRank Scheme Name 1 year

1HDFC Gilt Fund15.7

2Kotak Gilt12.0

3Birla Gilt plus Regular plan growth 10.53

4ICICI Prudential Gilt fund investment plan PF option growth 9.37

5Reliance Gilt Fund 9.01

Rank Scheme Name 5 year

1HDFC Gilt Fund 20.

2Kotak Gilt 16.5

3Birla Gilt plus Regular plan growth 5.715

4ICICI Prudential Gilt fund investment plan PF option growth 5.6788

(5) Balanced Funds Rank Scheme Name 1 year

1Reliance regular saving fund balanced growth 14.8

2LIC Balanced plan C (growth)13.9

3Kotak Balance Growth 11.0

4ING Balance Growth9.0

5HDFC Balance Fund Growth7.7

6TATA Balance Fund Growth7.2

Rank Scheme Name 5 year

1HDFC Balance fund growth 33.13

2Tata Balance fund growth 32.9

3Kotak Balance growth 31.9

Analysis & InterpretationTable -1

Comparison Showing Equity Funds For

1 Year(1) Equity Funds

1 YearReliance RSF Equity Growth26.79

HDFC Growth Fund14.90

Birla Sun life Frontline Equity Fund Growth8.79

LIC Equity Fund Growth7.63

ICICI Prudential Growth Plan Cumulative 4.80

Table -2Comparison Showing Equity Funds For

3 Years

Equity Fund

3 YearReliance RSF Equity Growth27.76

HDFC Growth Fund32.76

Birla Sun life Frontline Equity Fund Growth33.17

LIC Equity Fund Growth19.95

ICICI Prudential Growth Plan Cumulative 29.79

Table -3

Comparison Showing Balanced Funds For

1 year

(2) Balance Fund

1 YearReliance RSF Balance Growth14.48

LIC Balance Plan Growth13.90

HDFC Balance Fund Growth7.73

Birla Balance Fund Growth3.54

ICICI Prudential Balanced Growth0.34

Balanced Mutual Funds

A balanced mutual fund generally consists of a Mix of 60% stocks and 40% bonds. This is a traditional asset allocation model for investors who want exposure to equities but want the security of fixed income securities. Although these mutual funds do allow investors to reach a certain asset mix, there are other investment methods for obtaining similar asset allocations.

There are some drawbacks to investing in balanced mutual funds. The bond holdings in a balanced fund may be a varying lengths; hence, they can never match the individual needs of each investor. For instance, a balanced fund may hold bonds for 3 years while you need a bond for 10 in that case, you would significantly earn less on your bond investments for a do-it-yourself investor not familiar or comfortable with making investment mix decisions, a balance fund may be suitable.

Investors should consider building their own portfolio mix by owing stocks, or stock index funds with either bond funds or individual bonds that you hold to maturity., an independent Fee only Financial Adviser can help you do that

Table -4Comparison Showing Balanced Funds For

3 Years

Balance Fund

3 YearReliance RSF Balance Growth10.52

LIC Balance Plan Growth20.26

HDFC Balance Fund Growth17.92

Birla Balance Fund Growth18.13

ICICI Prudential Balance Growth20.23

HDFC Liquid Fund ;

HDFC Liquid Fund has declared a weekly dividend of Rs. 0.01247 per unit on a face-value of Rs. 10 under its reinvestment plan for the week ended 11 February 2014. The record date for the same was 11 February 2002 and the cum-dividend NAV as on 11 February 2014 is Rs. 10.0152.

The dividend declared by HDFC Liquid Fund is tax-fee in the hands of investors. The actual declaration of dividend and the frequency will depend on the availability of distributable profits and the past performance may or not be sustained in the future.

Launched in October2000 as an open-ended scheme, the assets under management for HDFC Liquid Fund constitutes Rs. 1657.17 crore as at 31 Jan. 2013. the primary objective of HDFC Liquid Fund is to enhance investors income consistent with a high level of liquidity, through a judicious mix of money market and debt instrument.

HDFC Asset Management Company Limited has eight schemes under its product portfolio: Liquid Fund, Growth Fund, Balanced Fund, Income Fund, Tax Plan 2014, Gilt Fund, Fixed investment plan and Children Gift Fund. In the Mutual fund venture, HDFC has tied up with the standard life Assurance Companys (SLAC) investment arm, Standard Life Investments. SLAC is one of the leading Insurance companies in the UK.

Table-5Comparison Showing Liquid Funds For

1 Years(3) Liquid Fund

1YearLIC MF Liquid Fund Growth8.14

ICICI Prudential Liquid Plan Growth7.78

HDFC Liquid Fund Growth8.07

Reliance Liquid Fund Growth5.13

Birla Sunlife Cash Manager Growth7.71

Table-6Comparison Showing Liquid Funds For

3 Years(3) Liquid Fund

3 YearLIC MF Liquid Fund Growth7.42

ICICI Prudential Liquid Plan Growth6.92

HDFC Liquid Fund Growth7.13

Reliance Liquid Fund Growth5.70

Birla Sunlife Cash Manager Growth6.92

Table -7

Comparison Showing Gilt Funds For

1 Years

(4)Gilt Fund

1 YearICICI Prudential GFIP-PF Option Growth9.38

Birla GPRF Growth10.54

HDFC GILT-STP Growth5.44

Reliance G Sec Fund-LTP-PF-option9.02

LIC-G Sec Fund Growth5.72

Table -8

Comparison Showing Gilt Funds For

3 Years

Gilt Fund

3 YearICICI Prudential GFIP-PF Option Growth6.79

Birla GPRF Growth7.12

HDFC GILT-STP Growth4.75

Reliance G Sec Fund-LTP-PF-option6.18

LIC-G Sec Fund Growth4.97

MIPs

For most individuals living away from their family, life tends to be tough. The situation is further complicated by concerns for the familys financial well-being. This is a condition those staying away from home will easily identify with (including NRIs). So what can be done to ease the financial burden on the family within the given constraints? The solution lies in providing regular income to family members using financial tools like monthly income plans (MIPs) and pension plans.

Monthly income plans are a hybrid version of balanced funds; however the composition is lop-sided in favour of the debt component. The equity component (ranging from 0% to 20%) provides the much required impetus to the returns while retaining the relative safety and stability from the debt element.

Although MIPs dont assure monthly returns, their performance history seems to suggested otherwise. Leading MIPs (Templeton MIP, Principal MIP) have consistently offered tax-free dividends to investors. More importantly for the investors, investing is a one-time activity. All an investor needs to do is select a top performing MIP and invest and appropriate amount for his/her dependants. The MIPs dividends will act as monthly income for the recipients. To make things even better, dividends can be credited directly to the unit holders bank account using the electronic clearing system (ESC)

Pension plans are touted as ideal retirement tools; however their utility clearly transcends the stated purpose. Like MIPs pension can also be used to provide regular income to dependent. Heres want you need to do. Decide the amount you would like to gift your dependants , now opt for a pension plan which delivers the requisite amount in favour of your parents.

Gifting a pension plan need not involve any inconvenience. If paying annual premiums seems like a tough chore, the option of paying a single premium is always available. Effectively a one-time payment can ensure that your parents back home are provided with a monthly income.

If your dependant is currently 50 years of age, you can gift him/her a pension plan with a vesting period of 10 years i.e. from the age of 60 years, he / she will start receiving a pension of approximately Rs. 5000 per month. This is what the pension plan will look like.

Effectively making a one-time payment of Rs. 700,000 as a single premium towards the pension plan will provide nearly Rs. 5000 as a monthly income to your dependants back home. Also a pure pension plan (like the one offered by HDFC Standard Life) works out to be very convenient vis--vis an insurance policy. The policy holder is not required to undertake medical check-ups or grapple with cumbersome paper work.

In both the above cases after the initial investment is made with the fund house/insurance company, the onus of providing regular returns lies on the respective entities, which implies that you are spared the bother of drawing drafts, delivering them and hoping that they are credited promptly.

Another aspect which needs to be highlighted is asset creation. By investing in a monthly income plan or a pension plan, an asst is created which will provide for your dependants over a longer horizon. Clearly a MIP or pension plan is much smarter choice vis--vis a monthly draft.

Table -9

Comparison Showing MIP For

1 Year(5) MIP

1 YearLIC MIP Cumulative9.80

Birla MIP Saving 5 Growth10.06

ICICI Prudential MIP Cumulative 6.19

Reliance MIP Growth5.76

HDFC MIP-LTP- Growth5.72

Table -10

Comparison Showing MIP For

3 Year

MIP

3 YearLIC MIP Cumulative11.34

Birla MIP Saving 5 Growth7.64

ICICI Prudential MIP Cumulative 9.04

Reliance MIP Growth9.35

HDFC MIP-LTP- Growth11.33

SUGGESTIONS

The investors are basically influenced by the intrinsic qualities of products followed by efficient fund management and general image of the fund/ scheme in their selection of fund schemes. Hence, it is Suggested that HDFC Bank Ltd. Should design products consciously to meet the investors need and should be alert to capture the changing market moods and be innovative. Continuous product development and introduction of innovative products is a must to attract and retain this market segment. Some suggestions are :

1. Since insurance business has now become open. MFs can design more & more products combining insurance and investment benefits to cater to the investors needs of safety and returns respectively. This will surely attract / retain low and moderate risk profile investors who often resist their desire to play directly in capital market.

2. Retirement schemes will attract the middle income group which seeks regular income after retirement AMFl has suggested a similar scheme and submitted on monthly or yearly basis to select MFs which in turn will invest them. On retirement of the individual his accumulated NAV will be converted into units of their monthly income scheme.

3. Theme based schemes on attract specific groups. These funds generally differ among themselves in defining problems and purusuing investment goals. For example Aquinal fund of US is a social Responsibility Fund to promote catholic values.

4. The investors are influenced by the infrastructural facilities of the sponsor and the deputation enjoyed by the sponsor, in their selection of the schemes. Hence , HDFC Bank Ltd. Should take steps to develop their infrastructure facilities.

5. Further, investor are influenced by the extent by quality of disclosure of information subsequent to their investment regarding dfesclosure of NAV, portfolio investment and disclosure of deviation of investment from the stated objectives and the attached brings benefits to the scheme in their selection of the scheme. Hence, HDFC Bank Ltd. Should take steps to be as connection.

6. The falling interest rates and reasonably food performance of many growth schemes during the turn of the century might have been the reason for the high preference of growth schemes in the past Now the scale is in favour of income scheme. So, it is suggested that HDFC Bank Ltd. Should react in time to the changing market moods by launching new products or repositioning old ones.

7. Inspite of having access to internet, investors prefer Personal Communication Mode to automated service Mode. This necessitates establishment or more manually operated service centers throughout the length and breadth of the country.

8. Information dissemination through all possible routes which will reach the investors should be tapped in a cost effective manner by UTI. The agencies and person engaged in giving investment advice should gear up to win the confidence of the investors. In the long run, it will help both the investors and the investment advisers, thus strengthening the link between the individual investors and the Mutual Funds.

SHORT COMINGS OF THE SURVEY

A Study without shortcoming is like an illusion

I have tried to put in maximum efforts to obtain the best possible data but despite of all hardships, I sincerely accept some limitations which were beyond my control in this research.

The limitations of the present study can be summarized as follows

Due to the paucity of time the data could not be collected in entirety

The method adopted for forecasting ignores cyclical fluctuations.

Due to difficulty in selecting moving average period the result could be inaccurate and misleading. BIBLIOGRAPHY1. www.hdfcbank.com2. www.hdfc.com3. www.hdfcmutualfunds.com4. www.google.comProduct Range of HDFC Bank

Accounts & Deposits

Forex Services

Access your Bank

Investments & Insurance

Cards

Loans

Accou--nts & Deposits

Saving Account

Demat Account

Safe Deposits Lockers

Fixed Deposits

Current

Account

Salary

Account

Loans

Personal Loan

Tractor Loan

Gold Loan

Loan Against Property

Education Loan

Two Wheeler Loan

Home Loan

Cards

Debit cards

Credit Cards

Prepaid Card

Investment & Insurance

Mutual Fund

Equities & Derivatives

Mudra Gold Bar

Knowledge Center

Bonds

General & Health Insurance

Insurance

Forex services

Product & Services

RBI Guideline

Forex services Branch Locator

Forex Limited

Trade Services

Access Your Bank

ATM

Branch Network

Email Statement

Net Banking

Phone Banking

Mobile Banking

EMBED Excel.Chart.8 \s

_1275475679.xlsChart1

10.52

20.26

17.92

18.13

20.23

Balanced Funds

Sheet1

Reliance RSF Balance Growth10.52

LIC Balance Plan Growth20.26

HDFC Balance Fund Growth17.92

Birla Balance Fund Growth18.13

ICICI Prudential Balance Growth20.23

Sheet1

Balanced Funds

Sheet2

Sheet3