Executive Summary: Chapter-1

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 rate income fund, Prudence fund and short term plan fund provided by HDFC Mutual Fund in 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.
PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.
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 Standard Deviation 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.
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:
The following simple diagram clearly shows the working of a mutual fund:
Funds Organization There Mutual are many entities involved and the diagrams illustrate the organizational set up of a mutual fund:
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.
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 and accounting 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.
2. Dilution:Although diversification reduces the amount of risk 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 that pay for the fund's management expenses (usually around 1.0% to 1.5% per year). In addition, some mutual funds charge high sales 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 is paid only when you buy and sell. 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 and sell and when to do so. This can make it difficult for investors when they trying to manage their portfolio. For example, the tax consequences of a decision by the manager to buy or sell 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.
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 only buy 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 of funds that focus on small companies, given that there are strict rules about how much of a single company a fund may own. If a mutual fund has $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 invest in; as a result, the fund might be forced to lower its standards when selecting companies to invest 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's money is invested in cash instead of assets, which tends to lower the investor's potential return.
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
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 The Erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the In 1996, the 1993 Securities Exchange Board of India (SEBI) Mutual Funds
mutual funds except UTI were to be registered and governed. first private sector Mutual Fund Registered in July 1993. 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 In this time, the Mutual Fund industry has witnessed several Mergers 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 321 51 372 Amount (in Crores) 82,693 4497 87,190 funds setting up funds in India. &Acquisitions.
Open-ended schemes Close-ended schemes TOTAL
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The diagram below shows the three segments and some players in each segment:
4.
Fourth phase (since 2003 February) 2 separate entities.
Following the repeal of the UTI Act in February 2003, it was (UTI) bifurcated into 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: Open-ended schemes Close-ended schemes TOTAL No. of schemes 414 46 460 (Source AMFI website) Amount (in crores) 1,64,998 10,920 1,75,918
At the end of March 2006, the status of Mutual fund Industry was:
No. of schemes Open-ended schemes Close-ended schemes TOTAL 414 46 460 (Source AMFI website)
Amount (in crores) 1,85,999 71,500 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 the supervision 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 Tax Saving Schemes Special 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. Sector Specific Schemes Index Schemes
Other Schemes
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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 price risks, 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. 2. 3. 4. 5. Company Fixed Deposits. Bank Fixed Deposits. Bonds and Debentures. Equity. 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 Government as 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 ringfenced 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.100 million. 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:
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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 Standard Life Investments Limited
60 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
28
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 such activities 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.
29
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:
30
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 1st 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
31
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 HDFC Mutual 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
32
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 other formula 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:
34
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
35
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.
36
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 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07
Net Asset Value 207.921 207.709 211.803 212.077 213.228 213.451 216.943 218.360 217.747 216.845 209.757 209.392 209.843 210.041 214.741
Returns - 10.20% 197.10% 12.94% 54.27% 10.46% 163.60% 65.32% - 28.07% - 41.42% -326.87% - 17.40% 21.54% 9.44% 223.77%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.20 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18
Returns 16.71% 111.00% 24.69% 32.94% -22.88% 229.24% 101.72% -164.30% -17.11% -447.65% -60.04% 16.29% 26.65% 379.08%
37
26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08 03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
217.682 218.797 219.857 223.324 224.592 226.239 225.043 227.097 227.613 225.209 223.089 220.013
136.96% 51.22% 48.45% 157.69% 56.78% 73.33% - 52.86% 91.27% 22.72% -105.62% - 94.13% -137.88%
7379.02 7392.06 7389.90 7461.48 7468.49 7511.06 7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
152.50% 17.67% -2.92% 96.86% 9.39% 57.00% -0.05% 153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC equity fund
X -0.10 1.97 0.13 0.54 0.10 1.64 0.65 -0.28 -0.41 -3.27 -0.17 0.22 0.09 2.24 1.37
d -0.10 1.97 0.13 0.54 0.10 1.64 0.65 -0.28 -0.41 -3.27 -0.17 0.22 0.09 2.24 1.37
d2 0.01 3.88 0.02 0.29 0.01 2.68 0.43 0.08 0.17 10.68 0.03 0.05 0.01 5.01 1.88
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33
X*Y -0.02 2.19 0.03 0.18 -0.02 3.75 0.66 0.46 0.07 14.63 0.10 0.04 0.03 8.48 2.09
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0.51 0.48 1.58 0.57 0.73 -0.53 0.91 0.23 -1.06 -0.94 -1.38 5.82
0.51 0.48 1.58 0.57 0.73 -0.53 0.91 0.23 -1.06 -0.94 -1.38 5.82
0.26 0.23 2.49 0.32 0.54 0.28 0.83 0.05 1.12 0.89 1.90 34.13
0.18 -0.03 0.97 0.09 0.57 0.00 1.54 0.08 0.14 -0.25 -1.83 5.23
0.03 0.00 0.94 0.01 0.32 0.00 2.36 0.01 0.02 0.06 3.36 54.81
0.09 -0.01 1.53 0.05 0.42 0.00 1.40 0.02 -0.15 0.24 2.53 38.79
N X d d Y Y
= = = = = =
26 5.82 5.82 34.13 5.23 54.81
XY = 38.79 = 1.1237 = 0.69971
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.
39
The table showing the daily returns of S&P CNX Nifty Index and HDFC tax saver fund
Date
Net Asset Value
Returns - 12.98% 126.16% 46.20% - 9.70% 7.53% 129.14% 21.27% - 64.98% - 21.16% -352.56% - 31.83% - 10.54% 2.51% 223.21% 154.93%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02
Returns 16.71% 111.00% 24.69% 32.94% - 22.88% 229.24% 101.72% -164.30% - 17.11% -447.65% - 60.04% 16.29% 26.65% 379.08% 152.50%
03-Dec-07 198.817 04-Dec-07 198.559 05-Dec-07 201.064 06-Dec-07 201.993 07-Dec-07 201.797 10-Dec-07 201.949 11-Dec-07 204.557 12-Dec-07 204.992 13-Dec-07 203.660 14-Dec-07 203.229 17-Dec-07 196.064 18-Dec-07 195.440 19-Dec-07 195.234 20-Dec-07 195.283 24-Dec-07 199.642 26-Dec-07 202.735
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27-Dec-07 202.575 28-Dec-07 203.031 31-Dec-07 204.284 01-Jan-08 205.662 02-Jan-08 207.731 03-Jan-08 206.283 04-Jan-08 208.115 07-Jan-08 208.583 08-Jan-08 207.222 09-Jan-08 205.604 10-Jan-08 203
- 7.89% 22.51% 61.71% 67.46% 100.60% - 69.71% 88.81% 22.49% - 65.25% - 78.08% -126.65%
7392.06 7389.90 7461.48 7468.49 7511.06 7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
17.67% - 2.92% 96.86% 9.39% 57.00% - 0.05% 153.63% 7.67% 13.93% - 25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC tax saver fund
X -0.13 1.26 0.46 -0.10 0.08 1.29 0.21 -0.65 -0.21 -3.53 -0.32 -0.11 0.03 2.23 1.55 -0.08 0.23
d -0.13 1.26 0.46 -0.10 0.08 1.29 0.21 -0.65 -0.21 -3.53 -0.32 -0.11 0.03 2.23 1.55 -0.08 0.23
d2 0.02 1.59 0.21 0.01 0.01 1.67 0.05 0.42 0.04 12.43 0.10 0.01 0.00 4.98 2.40 0.01 0.05
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00
X*Y -0.02 1.40 0.11 -0.03 -0.02 2.96 0.22 1.07 0.04 15.78 0.19 -0.02 0.01 8.46 2.36 -0.01 -0.01
41
0.62 0.67 1.01 -0.70 0.89 0.22 -0.65 -0.78 -1.27 2.23
0.62 0.67 1.01 -0.70 0.89 0.22 -0.65 -0.78 -1.27 2.23
0.38 0.46 1.01 0.49 0.79 0.05 0.43 0.61 1.60 29.81
0.97 0.09 0.57 0.00 1.54 0.08 0.14 -0.25 -1.83 5.23
0.94 0.01 0.32 0.00 2.36 0.01 0.02 0.06 3.36 54.81
0.60 0.06 0.57 0.00 1.36 0.02 -0.09 0.20 2.32 37.54
N X d d Y Y
= = = = = =
26 2.23 2.23 29.81 5.23 54.81
XY
= 37.54 = 1.06735 = 0.6899
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 0.6899 percent change in the scheme return. 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?
42
The table showing the daily returns of S&P CNX Nifty Index and HDFC balanced fund
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07
Net Asset Value 38.508 38.640 39.100 39.108 39.177 39.281 39.533 39.946 40.165 40.326 39.170 39.254 39.156 39.194 39.757 40.200 40.256 40.648
Returns 34.28% 119.05% 2.05% 17.64% 26.55% 64.15% 104.47% 54.82% 40.08% -286.66% 21.44% - 24.97% 9.70% 143.64% 111.43% 13.93% 97.38%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.20 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.90
Returns 16.71% 111.00% 24.69% 32.94% - 22.88% 229.24% 101.72% - 164.30% - 17.11% -447.65% - 60.04% 16.29% 26.65% 379.08% 152.50% 17.67% - 2.92%
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31-Dec-07 01-Jan-08 02-Jan-08 03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
40.862 41.135 41.579 41.682 41.979 41.841 41.495 41.428 41.002
52.65% 66.81% 107.94% 24.77% 71.25% - 32.87% - 82.69% - 16.15% -102.83%
7461.48 7468.49 7511.06 7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
96.86% 9.39% 57.00% -0.05% 153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC balanced fund
X 0.34 1.19 0.02 0.18 0.27 0.64 1.04 0.55 0.40 -2.87 0.21 -0.25 0.10 1.44 1.11 0.14 0.97 0.53 0.67
d 0.34 1.19 0.02 0.18 0.27 0.64 1.04 0.55 0.40 -2.87 0.21 -0.25 0.10 1.44 1.11 0.14 0.97 0.53 0.67
d2 0.12 1.42 0.00 0.03 0.07 0.41 1.09 0.30 0.16 8.22 0.05 0.06 0.01 2.06 1.24 0.02 0.95 0.28 0.45
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01
X*Y 0.06 1.32 0.01 0.06 -0.06 1.47 1.06 -0.90 -0.07 12.83 -0.13 -0.04 0.03 5.45 1.70 0.02 -0.03 0.51 0.06
44
1.08 0.25 0.71 -0.33 -0.83 -0.16 -1.03 6.38
1.08 0.25 0.71 -0.33 -0.83 -0.16 -1.03 6.38
1.17 0.06 0.51 0.11 0.68 0.03 1.06 20.54
0.57 0.00 1.54 0.08 0.14 -0.25 -1.83 5.23
0.32 0.00 2.36 0.01 0.02 0.06 3.36 54.81
0.62 0.00 1.09 -0.03 -0.12 0.04 1.89 26.84
N X d d Y Y
= = = = = =
26 6.38 6.38 20.54 5.23 54.81
XY
= 26.84 = 0.85433 = 0.47546
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 0.47546 percent change in the scheme return. The scheme is less volatile compared to the market. The standard deviation of the scheme is 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 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08
Net Asset Value 15.665 15.6684 15.6721 15.6754 15.6788 15.6885 15.692 15.6954 15.6989 15.7023 15.7127 15.7162 15.7198 15.7236 15.7378 15.7449 15.7485 15.7521 15.763 15.7666 15.7699
Returns 2.17% 2.36% 2.11% 2.17% 6.19% 2.23% 2.17% 2.23% 2.17% 6.62% 2.23% 2.29% 2.42% 9.03% 4.51% 2.29% 2.29% 6.92% 2.28% 2.09%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.9 7461.48 7468.49 7511.06
Returns 16.71% 111.00% 24.69% 32.94% -22.88% 229.24% 101.72% -164.30% -17.11% -447.65% -60.04% 16.29% 26.65% 379.08% 152.50% 17.67% -2.92% 96.86% 9.39% 57.00%
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03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
15.7735 15.7769 15.7869 15.7901 15.7936 15.7973
2.28% 2.16% 6.34% 2.03% 2.22% 2.34%
7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
-0.05% 153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC liquid fund
X 0.02 0.02 0.02 0.02 0.06 0.02 0.02 0.02 0.02 0.07 0.02 0.02 0.02 0.09 0.05 0.02 0.02 0.07 0.02 0.02
d 0.02 0.02 0.02 0.02 0.06 0.02 0.02 0.02 0.02 0.07 0.02 0.02 0.02 0.09 0.05 0.02 0.02 0.07 0.02 0.02
d2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32
X*Y 0.00 0.03 0.01 0.01 -0.01 0.05 0.02 -0.04 0.00 -0.30 -0.01 0.00 0.01 0.34 0.07 0.00 0.00 0.07 0.00 0.01
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0.02 0.02 0.06 0.02 0.02 0.02 0.84
0.02 0.02 0.06 0.02 0.02 0.02 0.84
0.00 0.00 0.00 0.00 0.00 0.00 0.04
0.00 1.54 0.08 0.14 -0.25 -1.83 5.23
0.00 2.36 0.01 0.02 0.06 3.36 54.81
0.00 0.03 0.00 0.00 -0.01 -0.04 0.25
N X d d Y Y
= = = = = =
26 0.84 0.84 0.04 5.23 54.81
XY
= 0.25 = 0.01953 = 0.00148
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The table showing the daily returns of S&P CNX Nifty Index and HDFC capital builder fund
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08
Net Asset Value 100.220 100.636 101.797 101.778 101.872 102.468 103.702 104.917 104.570 104.227 100.558 99.663 99.594 99.572 102.369 104.284 103.958 105.123 106.538 107.225
Returns 41.51% 115.37% 1.87% 9.24% 58.50% 120.43% 117.16% 3.07% 2.80%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.9 7461.48 7468.49
Returns 16.71% 111.00% 24.69% 32.94% -22.88% 229.24% 101.72% -164.30% -17.11% -447.65% -60.04% 16.29% 26.65% 379.08% 152.50% 17.67% -2.92% 96.86% 9.39%
-352.02% - 89.00% 6.92% 2.21% 280.90% 187.07% 1.26% 112.06% 134.60% 64.48%
49
02-Jan-08 03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
108.559 108.376 108.974 108.974 107.833 106.477 104.744
124.41% - 16.86% 55.18% 0.00% -104.70% -125.75% -162.76%
7511.06 7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
57.00% -0.05% 153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC capital builder fund
X 0.42 1.15 -0.02 0.09 0.59 1.20 1.17 -0.33 -0.33 -3.52 -0.89 -0.07 -0.02 2.81 1.87 -0.31 1.12 1.35 0.64 1.24
d 0.42 1.15 -0.02 0.09 0.59 1.20 1.17 -0.33 -0.33 -3.52 -0.89 -0.07 -0.02 2.81 1.87 -0.31 1.12 1.35 0.64 1.24
d2 0.17 1.33 0.00 0.01 0.34 1.45 1.37 0.11 0.11 12.39 0.79 0.00 0.00 7.89 3.50 0.10 1.26 1.81 0.42 1.55
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32
X*Y 0.07 1.28 0.00 0.03 -0.13 2.76 1.19 0.54 0.06 15.76 0.53 -0.01 -0.01 10.65 2.85 -0.06 -0.03 1.30 0.06 0.71
50
-0.17 0.55 0.00 -1.05 -1.26 -1.63 4.62 N X d d Y Y
-0.17 0.55 0.00 -1.05 -1.26 -1.63 4.62 = = = = = =
0.03 0.30 0.00 1.10 1.58 2.65 40.26 26 4.62 4.62 40.26 5.23 54.81
0.00 1.54 0.08 0.14 -0.25 -1.83 5.23 XY
0.00 2.36 0.01 0.02 0.06 3.36 54.81 = 41.56 = 1.23167 = 0.75582
0.00 0.85 0.00 -0.15 0.32 2.99 41.56
51
The table showing the daily returns of S&P CNX Nifty Index and HDFC floating rate income fund long term
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08
Net Asset Value 13.0367 13.0394 13.0423 13.0456 13.0485 13.0579 13.0606 13.0636 13.0659 13.0686 13.0774 13.0803 13.0832 13.0862 13.0986 13.1049 13.108 13.1122 13.1223 13.1276 13.1317
Returns 2.07% 2.22% 2.53% 2.22% 7.20% 2.07% 2.30% 1.76% 2.07% 6.73% 2.22% 2.22% 2.29% 9.48% 4.81% 2.37% 3.20% 7.70% 4.04% 3.12%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.9 7461.48 7468.49 7511.06
Returns 16.71% 111.00% 24.69% 32.94% -22.88% 229.24% 101.72% -164.30% -17.11% -447.65% -60.04% 16.29% 26.65% 379.08% 152.50% 17.67% -2.92% 96.86% 9.39% 57.00%
52
03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
13.1349 13.1379 13.1479 13.1509 13.154 13.1571
2.44% 2.28% 7.61% 2.28% 2.36% 2.36%
7511.02 7626.41 7632.26 7642.89 7623.64 7483.81
-0.05% 153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC floating rate income fund long term
X 0.02 0.02 0.03 0.02 0.07 0.02 0.02 0.02 0.02 0.07 0.02 0.02 0.02 0.09 0.05 0.02 0.03 0.08 0.04 0.03 0.02 0.02
d 0.02 0.02 0.03 0.02 0.07 0.02 0.02 0.02 0.02 0.07 0.02 0.02 0.02 0.09 0.05 0.02 0.03 0.08 0.04 0.03 0.02 0.02
d2 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57 0.00 1.54
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32 0.00 2.36
X*Y 0.00 0.02 0.01 0.01 -0.02 0.05 0.02 -0.03 0.00 -0.30 -0.01 0.00 0.01 0.36 0.07 0.00 0.00 0.07 0.00 0.02 0.00 0.04
53
0.08 0.02 0.02 0.02 0.92
0.08 0.02 0.02 0.02 0.92
0.01 0.00 0.00 0.00 0.04
0.08 0.14 -0.25 -1.83 5.23
0.01 0.02 0.06 3.36 54.81
0.01 0.00 -0.01 -0.04 0.29
N X d d Y Y
= = = = = =
26 0.92 0.92 0.04 5.23 54.81
XY
= 0.29 = 0.02186 = 0.00187
54
The table showing the daily returns of S&P CNX Nifty Index and HDFC prudence fund
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08 03-Jan-08
Net Asset Value 152.673 153.402 156.148 156.622 156.732 157.195 158.877 160.152 160.141 159.945 156.061 156.169 155.83 155.553 157.346 159.298 159.741 160.687 162.849 164.064 165.475 166.03
Returns 47.75% 179.01% 30.36% 7.02% 29.54% 107.00% 80.25% -0.69% -12.24% -242.83% 6.92% -21.71% -17.78% 115.27% 124.06% 27.81% 59.22% 134.55% 74.61% 86.00% 33.54%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.9 7461.48 7468.49 7511.06 7511.02
Returns 16.71% 111.00% 24.69% 32.94% -22.88% 229.24% 101.72% -164.30% -17.11% -447.65% -60.04% 16.29% 26.65% 379.08% 152.50% 17.67% -2.92% 96.86% 9.39% 57.00% -0.05%
55
04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08 10-Jan-08
166.484 166.365 163.751 162.846 161.108
27.34% -7.15% -157.12% -55.27% -106.73%
7626.41 7632.26 7642.89 7623.64 7483.81
153.63% 7.67% 13.93% -25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC prudence fund
X 0.48 1.79 0.30 0.07 0.30 1.07 0.80 -0.01 -0.12 -2.43 0.07 -0.22 -0.18 1.15 1.24 0.28 0.59 1.35 0.75 0.86 0.34 0.27
d 0.48 1.79 0.30 0.07 0.30 1.07 0.80 -0.01 -0.12 -2.43 0.07 -0.22 -0.18 1.15 1.24 0.28 0.59 1.35 0.75 0.86 0.34 0.27
d2 0.23 3.20 0.09 0.00 0.09 1.14 0.64 0.00 0.01 5.90 0.00 0.05 0.03 1.33 1.54 0.08 0.35 1.81 0.56 0.74 0.11 0.07
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57 0.00 1.54
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32 0.00 2.36
X*Y 0.08 1.99 0.07 0.02 -0.07 2.45 0.82 0.01 0.02 10.87 -0.04 -0.04 -0.05 4.37 1.89 0.05 -0.02 1.30 0.07 0.49 0.00 0.42
56
-0.07 -1.57 -0.55 -1.07 5.49
-0.07 -1.57 -0.55 -1.07 5.49
0.01 2.47 0.31 1.14 21.91
0.08 0.14 -0.25 -1.83 5.23
0.01 0.02 0.06 3.36 54.81
-0.01 -0.22 0.14 1.96 26.59
N X d d Y Y
= = = = = =
26 5.49 5.49 21.91 5.23 54.81
XY
= 26.59 = 0.89337 = 0.47416
57
The table showing the daily returns of S&P CNX Nifty Index and HDFC gilt fund
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08 03-Jan-08 04-Jan-08 07-Jan-08 08-Jan-08 09-Jan-08
Net Asset Value 16.3311 16.3401 16.3632 16.3771 16.3952 16.4069 16.4082 16.4218 16.4081 16.4258 16.4477 16.4652 16.4692 16.4796 16.4923 16.4964 16.5219 16.58 16.6354 16.6995 16.7119 16.6838 16.7496 16.8182 16.8168 16.8338
Returns 5.51% 14.14% 8.49% 11.05% 7.14% 0.79% 8.29% -8.34% 10.79% 13.33% 10.64% 2.43% 6.31% 7.71% 2.49% 15.46% 35.17% 33.41% 38.53% 7.43% -16.81% 39.44% 40.96% -0.83% 10.11%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.2 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.9 7461.48 7468.49 7511.06 7511.02 7626.41 7632.26 7642.89 7623.64
Returns 16.71% 111.00% 24.69% 32.94% - 22.88% 229.24% 101.72% - 164.30% - 17.11% - 447.65% - 60.04% 16.29% 26.65% 379.08% 152.50% 17.67% - 2.92% 96.86% 9.39% 57.00% 0.05% 153.63% 7.67% 13.93% - 25.19%
58
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 0.06 0.14 0.08 0.11 0.07 0.01 0.08 -0.08 0.11 0.13 0.11 0.02 0.06 0.08 0.02 0.15 0.35 0.33 0.39 0.07 -0.17 0.39 0.41 -0.01
d 0.06 0.14 0.08 0.11 0.07 0.01 0.08 -0.08 0.11 0.13 0.11 0.02 0.06 0.08 0.02 0.15 0.35 0.33 0.39 0.07 -0.17 0.39 0.41 -0.01
d2 0.00 0.02 0.01 0.01 0.01 0.00 0.01 0.01 0.01 0.02 0.01 0.00 0.00 0.01 0.00 0.02 0.12 0.11 0.15 0.01 0.03 0.16 0.17 0.00
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57 0.00 1.54 0.08 0.14
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32 0.00 2.36 0.01 0.02
X*Y 0.01 0.16 0.02 0.04 -0.02 0.02 0.08 0.14 -0.02 -0.60 -0.06 0.00 0.02 0.29 0.04 0.03 -0.01 0.32 0.04 0.04 0.00 0.61 0.03 0.00
59
0.10 0.61 3.65
0.10 0.61 3.65
0.01 0.37 1.26
-0.25 -1.83 5.23
0.06 3.36 54.81
-0.03 -1.12 0.03
N X d d Y Y
= = = = = =
26 3.65 3.65 1.26 5.23 54.81
XY
= = =
0.03000 0.16994 -0.01320
Inference: The beta of the scheme is negative. This means that the scheme is moving in the opposite direction to that of the market. If the market declines by 1 percent then the scheme gains by 0.0132 percent. The standard deviation of the scheme is 0.16994, which means the fund does not have much variation in the returns.
60
The table showing the daily returns of S&P CNX Nifty Index and HDFC short term plan fund
Date 03-Dec-07 04-Dec-07 05-Dec-07 06-Dec-07 07-Dec-07 10-Dec-07 11-Dec-07 12-Dec-07 13-Dec-07 14-Dec-07 17-Dec-07 18-Dec-07 19-Dec-07 20-Dec-07 24-Dec-07 26-Dec-07 27-Dec-07 28-Dec-07 31-Dec-07 01-Jan-08 02-Jan-08 03-Jan-08 04-Jan-08 07-Jan-08
Net Asset Value 14.2875 14.2897 14.2934 14.2965 14.3001 14.3103 14.3104 14.3118 14.3095 14.3123 14.3217 14.3261 14.3296 14.3331 14.3487 14.3584 14.3615 14.3698 14.3888 14.4039 14.4139 14.4170 14.4211 14.4369
Returns 1.54% 2.59% 2.17% 2.52% 7.13% 0.07% 0.98% -1.61% 1.96% 6.57% 3.07% 2.44% 2.44% 10.88% 6.76% 2.16% 5.78% 13.22% 10.49% 6.94% 2.15% 2.84% 10.96%
Total Index Returns 7121.74 7133.64 7212.82 7230.63 7254.45 7237.85 7403.77 7479.08 7356.20 7343.61 7014.87 6972.75 6984.11 7002.72 7268.18 7379.02 7392.06 7389.90 7461.48 7468.49 7511.06 7511.02 7626.41 7632.26
Returns 16.71% 111.00% 24.69% 32.94% - 22.88% 229.24% 101.72% -164.30% - 17.11% -447.65% - 60.04% 16.29% 26.65% 379.08% 152.50% 17.67% - 2.92% 96.86% 9.39% 57.00% - 0.05% 153.63% 7.67%
61
08-Jan-08 09-Jan-08 10-Jan-08
14.4373 14.4409 14.4467
0.28% 2.49% 4.02%
7642.89 7623.64 7483.81
13.93% - 25.19% -183.42%
The table showing the calculations of Beta and Standard deviation of HDFC short term plan fund
X 0.02 0.03 0.02 0.03 0.07 0.00 0.01 -0.02 0.02 0.07 0.03 0.02 0.02 0.11 0.07 0.02 0.06 0.13 0.10 0.07 0.02 0.03 0.11 0.00
d 0.02 0.03 0.02 0.03 0.07 0.00 0.01 -0.02 0.02 0.07 0.03 0.02 0.02 0.11 0.07 0.02 0.06 0.13 0.10 0.07 0.02 0.03 0.11 0.00
d2 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01 0.00 0.00 0.00 0.02 0.01 0.00 0.00 0.00 0.01 0.00
Y 0.17 1.11 0.25 0.33 -0.23 2.29 1.02 -1.64 -0.17 -4.48 -0.60 0.16 0.27 3.79 1.53 0.18 -0.03 0.97 0.09 0.57 0.00 1.54 0.08 0.14
Y2 0.03 1.23 0.06 0.11 0.05 5.26 1.03 2.70 0.03 20.04 0.36 0.03 0.07 14.37 2.33 0.03 0.00 0.94 0.01 0.32 0.00 2.36 0.01 0.02
X*Y 0.00 0.03 0.01 0.01 -0.02 0.00 0.01 0.03 0.00 -0.29 -0.02 0.00 0.01 0.41 0.10 0.00 0.00 0.13 0.01 0.04 0.00 0.04 0.01 0.00
62
0.02 0.04 1.11
0.02 0.04 1.11
0.00 0.00 0.08
-0.25 -1.83 5.23
0.06 3.36 54.81
-0.01 -0.07 0.43
N X d d Y Y
= = = = = =
26 1.11 1.11 0.08 5.23 54.81
XY
= 0.43 = 0.03725 = 0.00383
63
CHAPTER-5
SUMMARY OF FINDINGS
The research project was done about HDFC Companies and the data collected for the project was for a period of forty days i.e. from 10 th Dec 2007 to 20th Jan 2008. And on the collected data, study was done and the following were the 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 Standard Deviation 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. The Gilt Fund has given stable returns for the investors. It has very low risk & the beta of the fund is -0.01320 (Negative beta). The Standard Deviation of the fund is 0.16994. The Short Term Plan Fund has given fewer returns to the investors. The beta of the scheme is 0.00383. The Standard Deviation of the fund is 0.03725.
64
The Prudence Fund has not given stable returns for the investors. It has very low risk & the beta of the fund is 0.47416. The Standard Deviation of the fund is 0.89337. The Capital Builder Fund has given fewer returns to the investors. The beta of the scheme is 0.75582. The Standard Deviation of the fund is 1.23167. The HDFC Tax saver Fund has not given stable returns to the investors. The beta of the fund is 0.6899. The Standard Deviation of the fund is 1.06735.
65
CHAPTER-6
RECOMMENDATIONS & CONCLUSIONS

RECOMMENDATIONS: The Beta of HDFC Balanced Fund is 0.47546. Therefore the Company should try to reduce the high risk associated with HDFC Balanced Fund by wisely selecting the portfolio for investments and thereby reducing the risks. Since HDFC Balanced Fund has very high Beta i.e. it describes the volatility attached with this particular scheme the companys fund managers should take necessary steps to in the interests of the investors so as not to expose their investments to such magnitude of volatility. 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. Although it is not beating the index it is giving consistent returns are possible. 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. The company should educate the HNIs, Corporates, Banks, and other cooperative societies about the merits of this product and try to induce them to invest.
66
The HDFC Gilt Fund has the negative betas -0.0132 has given stable returns to the investors. It is better to maintain the beta at same level and advertise more to encourage investing in the schemes.
CONCLUSIONS: From the findings it can be concluded that: 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. The beta of HDFC Floating rate Income Fund HDFC Liquid Fund Short Term Plan Funds Are 0.00383, 0.00148 and 0.00187, hence can be said the schemes are volatile compared to the market. The HDFC Gilt Fund has given stable returns the beta of the funds are
-0.0132 that means the fund is less volatile than the market but its inconsistency in movement with the market is a major concern. The beta of the fund is negative which means the fund moves in the opposite direction to that of the market. The standard deviation of the HDFC Balanced Fund, HDFC Equity Fund, Tax saver Plan fund Capital fund are high which means the returns of these funds have varied from the average return of the respective funds.
67
68

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What are the main types of mutual funds discussed?

What are the main types of mutual funds discussed?

What are some of the key metrics used to analyze mutual fund performance?

What are some of the key metrics used to analyze mutual fund performance?

CHAPTER-1

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

A.INTRODUCTION TO MUTUAL FUNDS

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

History of Indian Mutual Fund Industry

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

Open-ended schemes Close-ended schemes TOTAL

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

Fourth phase (since 2003 February) 2 separate entities.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

Amount (in crores) 1,85,999 71,500 2,57,499

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

TYPES OF MUTUAL FUND SCHEMES

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

Housing Development Finance Corporation Limited Standard Life Investments Limited

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

DESIGN OF THE STUDY

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

ANALYSIS & INTERPRETATION OF DATA

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

26 5.82 5.82 34.13 5.23 54.81

XY = 38.79 = 1.1237 = 0.69971

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

Net Asset Value

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.

PG DEPARTMENT OF MANAGEMENT STUDIES, ATRIA INSTITUTE OF TECHNOLOGY, BANGALORE.