Summer Internship Report (NDIM)

SUMMER TRAINING REPORT ON
The European Crisis and its impact on Indian

share market with reference to mutual funds.
For
HDFC ASSET MANAGEMENT CO. LTD.
Under the supervision

of
Mr. Siddharth Chatterjee
Submitted By- Submitted to-

Punita Mittal Prof. Arti Basu
Roll No - 151
i
ACKNOWLEDGEMENT
I would like to extend my sincere thanks to Mr. Siddharth Chatterjee, my

industry mentor at HDFC AMC, Civil Lines, Allahabad for his guidance and
support throughout my training. His willingness to teach has been a great help in
the successful completion of the project. The learning during the project has been
immeasurable and working under him was a great experience. My sincere thanks
also extends to Mrs. Madhusmita Jha(Exceutive - Client services), Mr. Ankit
Kumar(Unit Mgr - Sales) and Ms. Shobhita(Officer - Client services) for the
knowledge they shared with me as a trainee and providing me a friendly and co-
operative environment during the training. .
I also express my gratitude to Prof. Arti Basu, my faculty mentor, New Delhi
Institute of Management, for her constant help throughout my working on the
project. Her guidance was valuable for the effective completion of my project.
Finally, I would like to say that the learning from the experience of training has
been immense and would be cherished throughout my life.
Punita Mittal
New Delhi Institute of Management
HDFC AMC- Summer Internship Report 1

DECLARATION
I Punita Mittal student of New Delhi Institute of Management 2009- 2011 batch
declare that every part of the Project Report „ The European crisis and its impact
on Indian share market with reference to mutual funds‟ that I have submitted is
original.
I was in regular contact with the nominated guide and contacted 5-6 times for
discussing the project.
Date of project submission:
Faculty’s Comments: _________________________________________________

___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
Prof. Arti Basu
HDFC AMC- Summer Internship Report iii

TABLE OF CONTENTS
Content Pg No.
Acknowledgement 1
Executive Summary 2
1.Company Background
1.1 HDFC AMC Ltd. 3
1.2 Sponsors 5
1.3 HDFC mutual fund products 7
1.4 Awards 8
2.Industry Overview
2.1 Introducing Mutual funds 9
2.2 Advantages of Mutual Funds 10

2.3 Disadvantages of Mutual Funds 11
2.4 Categories of Mutual Funds

2.4.1 Open Ended, Close Ended and Interval Funds 12
2.4.2 Equity, Debt and hybrid funds 13
2.4.3 Other Fund 14
2.5 Mutual Fund structure 15

2.6 Current Trends and key developments 17
3.Introduction to the project

3.1 Introduction to the European debt crisis 19
3.2 Objective of the project 23
3.3 Job and key responsibilities 23
3.4 Activity sheet 24
4.Details of the work done

4.1 Overview of the Indian stock market
4.1.1 The Stock Market 25
4.1.2 Factors affecting the stock market 26
HDFC AMC- Summer Internship Report iv

4.2 Global reaction to the crisis 28
4.3 Impact on Indian Economy 32
4.4 The Indian share market - in the time of the crisis 36
4.5 Reaction of Investors

4.5.1 Investor sentiments 42
4.5.2 Where are the investors moving? 42
4.6 India- an outperformer 44
4.7 Mutual Funds-India
4.7.1 Impact of crisis 45
4.7.2 Reasons behind the crisis 48

4.7.3 Performance of funds 49
4.7.4 New products in the market 53
4.7.5 Gold ETF - An Investment option 54
5. Research Methodology 56
6. Learnings from the project 58
7. Findings 59
8. Conclusion 60
9. Recommendations 61
10. 10.References 62
HDFC AMC- Summer Internship Report v

EXECUTIVE SUMMARY
Politicians were proud of the Greece`s strong economy they had created, proved by
its entrance into the EMU. Greece was not a small poor country anymore. But
unfortunately, a strong economy is transformed into a bailout with the PIGS
(Portugal, Italy, Greece and Spain) of Europe delving into a sovereign debt crisis.
During the project, I have tried to find out all about Greek crisis, the reasons
behind it and its impact on the world markets. The report concentrates mainly on
its impact on the Indian share market and mutual funds.
Firstly, the report talks about the company background and an overview of the
mutual fund industry. In the main text, it studies the economy of Europe and how
the functioning of its economy is related to the economies of the rest of world.
It talks about the crisis and the share market. It studies the reaction of the global
markets to the crisis and does an in depth analysis of the impact of the crisis on the
Indian share market and mutual funds industry. It traces the route of the financial
markets during the crisis. Investor’s reaction and perception about the crisis is
analyzed. Both negative and positive sides of the crisis have been uncovered.
The project is completely a secondary research project. All facts stated about the
market are on the basis of regular news paper reading and following websites.
Lesson that can be learned from the crisis is figured out.
Finally the report contains the recommendations based on the study and the
conclusion based on the findings.

1. COMPANY BACKGROUND
1.1 HDFC AMC Ltd.
Vision
To be a dominant player in the Indian mutual fund space, recognized for its high level of
ethical and professional conduct and a commitment towards enhancing investor interests
HDFC Asset Management Company Ltd (AMC) was incorporated under the
Companies Act, 1956, on December 10, 1999, and was approved to act as an Asset
Management Company for the HDFC Mutual Fund by SEBI vide its letter dated
July 3, 2000.
The registered office of the AMC is situated in Mumbai.
In terms of the Investment Management Agreement, the Trustee has appointed the
HDFC Asset Management Company Limited to manage the Mutual Fund.
Particulars % of the paid up equity

capital
Housing Development Finance Corporation 60

Limited
Standard Life Investments Limited 40

The paid up equity capital of the company – 2.561 crore.
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, some schemes of Zurich India Mutual Fund
have migrated to HDFC mutual fund on June 19, 2003.
BOARD OF DIRECTORS of HDFC AMC Ltd. –
The Board of Directors of the HDFC Asset Management Company Limited (AMC)
consists of the following eminent persons. (HDFC)
Mr. Deepak S. Parekh Chairman of the board
Mr. N. Keith Skeoch CEO of Standard Life Investments Ltd.
Mr. Keki M. Mistry Associate director
Mr. James Aird Investment director
Mr. P. M. Thampi Independent director
Mr. Humayun Dhanrajgir Independent director
Dr. Deepak B. Phatak Independent director
Mr. Hoshang S. Billimoria Independent director
Mr. Rajeshwar Raj Bajaaj Independent director
Mr. Vijay Merchant Independent director
Ms. Renu S. Karnad Joint managing director
Mr. Milind Barve Managing director
Mr. Prashant Jain Chief Investment Officer

1.2 SPONSORS
HOUSING DEVELOEMENT FINANCE CORPORATION LTD
5
HDFC was incorporated in 1977 as the first specialised housing finance institution
in India. HDFC provides financial assistance to individuals, corporate and
developers for the purchase or construction of residential housing. It also provides
property related services (e.g. property identification, sales services and valuation),
training and consultancy. Of these activities, housing finance remains the dominant
activity.
HDFC currently has a client base of over 8, 00,000 borrowers, 12, 00,000
depositors, 92,000 shareholders and 50,000 deposit agents. HDFC raises funds
from international agencies such as the World Bank, IFC (Washington), USAID,
CDC, ADB and KFW, domestic term loans from banks and insurance companies,
bonds and deposits. HDFC has received the highest rating for its bonds and
deposits program for the ninth year in succession. HDFC Standard Life Insurance
Company Limited, promoted by HDFC was the first life insurance company in the
private sector to be granted a Certificate of Registration (on October 23, 2000) by
the Insurance Regulatory and Development Authority to transact life insurance
business in India.
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to

remain the market leader in mortgages. Its outstanding loan portfolio covers well
over a million dwelling units.
.
STANDARD LIFE INVESTMENTS LTD.

The Standard Life Assurance Company was established in 1825 and has
considerable experience in global financial markets. In 1998, Standard Life
Investments Limited became the dedicated investment management company of
the Standard Life Group and is owned 100% by The Standard Life Assurance
Company. With global assets under management of approximately US$186.45
billion as at March 31, 2005, Standard Life Investments Limited is one of the
world's major investment companies and is responsible for investing money on
behalf of five million retail and institutional clients worldwide.
With its headquarters in Edinburgh, Standard Life Investments Limited has an

extensive and developing global presence with operations in the United Kingdom,
Ireland, Canada, USA, China, Korea and Hong Kong. In order to meet the different
needs and risk profiles of its clients, Standard Life Investments Limited manages a
diverse portfolio covering all of the major markets world-wide, which includes a
range of private and public equities, government and company bonds, property
investments and various derivative instruments. The company's current holdings in
UK equities account for approximately 2% of the market capitalization of the
London Stock Exchange.
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HDFC AMC- Summer Internship Report
1.3 HDFC MUTUAL FUND PRODUCTS
HDFC provides a variety of products which have different objectives.
Equity /Growth Debt/ Income

Liquid Funds Special Funds
Funds Funds
HDFC Cash
HDFC Medium Term HDFC Children's Gift
HDFC Growth Fund Management Fund -
Opportunities Fund Fund - Investment Plan
Savings Plan
HDFC Floating Rate
HDFC Liquid Fund HDFC Children's Gift
HDFC Top 200 Fund Income Fund - Long
Premium Plus Plan Fund - Savings Plan
Term Plan
HDFC High Interest
HDFC Gold Exchange
HDFC Prudence Fund Fund - Short term HDFC Liquid Fund
Traded Fund
Plan
HDFC Cash
HDFC Capital Builder HDFC Multiple Yield
Management Fund -
Fund Fund - Plan 2005
Call Plan
HDFC Mid-Cap HDFC Gilt Fund - HDFC Liquid Fund
Opportunities Fund Short Term Plan Premium Plan
HDFC Index Fund - Nifty

HDFC Income Fund
Plan
HDFC MF Monthly
HDFC Index Fund -
Income Plan - Short
Sensex Plan
Term Plan
HDFC MF Monthly
HDFC Premier Multi-
Income Plan - Long
Cap Fund
Term Plan
HDFC MF Monthly
HDFC Arbitrage Fund Income Plan - Long
Term Plan
HDFC Multiple Yield
HDFC TaxSaver (ELSS)
Fund
HDFC Core and Satellite HDFC Gilt Fund -

Fund Long Term Plan
HDFC Short Term

HDFC Balanced Fund
Opportunities Fund

7
1.4 AWARDS
ICRA Mutual Fund Awards 2010
ICRA Gold Award for 'Best Performance' - Seven Star Fund Ranking
- HDFC Prudence Fund has been ranked ―A Seven Star Fund" # and has been
awarded Gold Award # for 'Best Performance' in the category of Open Ended
Balanced fund for one year period ending December 31, 2009 (from amongst 24
schemes).
- HDFC MF Monthly Income Plan has been ranked ―A Seven Star Fund"# and
has been awarded Gold Award # for 'Best Performance' in the category of Open
Ended Marginal Equity for one year period ending December 31, 2009 (from
amongst 46 schemes).
ICRA Five Star Fund Ranking
HDFC Multiple Yield Fund - Plan 2005 has been ranked “A Five Star Fund"#
indicating performance among top 4.6% in the category of Open Ended Marginal
Equity for one year period ending December 31, 2009 (from amongst 46 schemes).
HDFC Cash Management Fund - Savings Plan has been ranked “A Five Star
Fund”# indicating performance among top 4.6% in the category of Open Ended
Liquid for one year period ending December 31, 2009 (from amongst 29 schemes).

2. INDUSTRY OVERVIEW
2.1 INTRODUCTION TO MUTUAL FUNDS

FUNDS
The origin of mutual fund industry in India is with the introduction of the concept
of mutual fund by UTI in the year 1963. Though the growth was slow, but
it accelerated from the year 1987 when non-UTI players entered the industry.
In the past decade, Indian mutual fund industry had seen dramatic improvements,
both quality wise as well as quantity wise. Before, the monopoly of the market had
seen an ending phase; the Assets under Management (AUM) were Rs. 67bn. The
private sector entry to the fund family raised the AUM to Rs. 470 bn in March
1993 and till April 2004; it reached the height of 1,540 bn.
What is Mutual fund - Mutual fund is an investment company that pools
money from small investors and invests in a variety of securities, such as stocks,
bonds and money market instruments depending upon the investment objective.
The mutual fund will have a fund manager who is responsible for investing the
gathered money into specific securities (stocks and bonds). When one invests in a
mutual fund, he/she is buying units or portions and on investing becomes a
shareholder or unit holder of the fund. A mutual fund is the most suitable
investment for common man as it offers an opportunity to invest in a
diversified, professionally managed basket of securities at a relatively low cost.
Mutual funds stand ready to sell and redeem their shares at any time at the fund’s
current
NET ASSET VALUE= total fund assets /by shares outstanding.
9
INVEST THEIR INVEST IN VARIETY OF
MARKET (FLUCTUATIONS)
MUTUAL FUND SHEMES
MONEY STOCKS/BONDS
INVESTOR
PROFIT/LOSS FORM PROFIT/LOSS FROM

PORTFOLIO OF INDIVIDUAL
INVESTMENT
Fig 1. Mutual Fund- An investment platform
Investments in securities are spread across a wide cross-section of industries

and sectors and thus the risk is reduced. Diversification reduces the risk because
not all stocks may move in the same direction in the same proportion at the same
time. Mutual fund issues units t o the investors in accordance with quantum
of money invested by them. Investors of Mutual fund are known as unit holders.
The profits or losses are shared by the investors in proportion to their investments.
The Mutual funds normally come out with a number of schemes with different
investment objectives which are launched from time to time.
2.2 ADVANTAGES OF MUTUAL FUNDS
a) Professional Management
Funds are managed by a team of qualified professionals, who do research work
have better investment management skills which ensure higher returns to the
investor than what he can manage on his own.

b) Risk Mitigation
Investors have a luxury of having a diversified portfolio of securities with a
small investment and this diversification helps significantly in risk mitigation.
c) Diversified Portfolio
Through mutual funds an investor can have much more diversity in his/her
portfolio than any other means of investment at much lower cash inflow as there
is a economy of scale in place.
d) Customized Investment Options

Mutual funds come up with various schemes which are according to the
investment objectives of the investors as per their risk appetite, financial goals
and current market scenario.
e) Flexibility
Investors can switch their holdings from a debt scheme to an equity scheme and
vice-versa. Option of systematic (at regular intervals) investment and withdrawal
is also offered to the investors in most open-end schemes.
2.3 DISADVANTAGES OF MUTUAL FUNDS
a) Investor‟s Say in Cost Control is absent.

Investor has to pay investment management fees and fund distribution costs as a
percentage of the value of his investments (as long as he holds the units),
irrespective of the performance of the fund.

b) No Customized Portfolio of Securities
The portfolio of securities in which a fund invests is a decision taken by the fund
manager. Investors have no right to interfere in the decision making process of a
fund manager, which some investors find as a constraint in achieving their
financial objectives.
c) Difficulty in Suitable Scheme Selection
Many investors find it difficult to select one option from the plethora of
funds/schemes/plans available.
2.4 CATEGORIES OF MUTUAL FUNDS
2.4.1 Open Ended/ Closed Ended/ Interval Funds

Open-ended funds are open for investors to enter or exit at any time, even after
the NFO. Although some unit-holders may exit from the scheme, wholly or partly,
the scheme continues operations with the remaining investors. The scheme does
not have any kind of time frame in which it is to be closed. The unit capital in an
open-ended fund would keep changing on a regular basis.
Close-ended funds have a fixed maturity. Investors can buy units of a close-
ended scheme, from the fund, only during its NFO. The fund makes arrangements
for the units to be traded, post-NFO in a stock exchange.
Interval funds combine features of both open-ended and close-ended schemes.

They are largely close-ended, but become open-ended at pre-specified intervals.

2.4.2 Equity/Debt/Hybrid Funds
Equity Schemes : A scheme with an investment objective to invest largely in

equity shares and equity-related investments like convertible debentures.
TYPE OF SCHEME REMARKS
Diversified Equity Fund Diverse mix of Securities across sectors
Sector Funds Invest in only a Specific Sector
Thematic Fund Invest in line with an investment theme - Infrastructure:
cement, steel, power etc.
Equity Linked Savings For tax benefits - 3 yr lock in period

Scheme (ELSS)
Equity Income/ Dividend Invest in less fluctuated shares - mostly dividend oriented
Yield Schemes
Arbitrage Fund Taking contrary positions in the market - two exchanges,

exchange and F/O market
Debt Schemes: A scheme with an investment objective that limits them to

investments in debt securities like Treasury Bills, Government 14 Securities, Bonds
and Debentures.
TYPE OF SCHEME REMARKS
Gilt Funds Invest in T Bills/ G-Secs
Diversified Debt Funds In a mix of Govt and Non Govt Securities
Junk Bond Schemes/ High Invest in Poor Credit Quality Companies
Yield Bond Schemes
Fixed Maturity Plans Investment portfolio is closely aligned to maturity of the

scheme
Liquid Schemes Money repaid within 91 days - Money Market
Floating Rate Funds Interest rate payable by the issuer changes in line with the
market - NAV fluctuates lesser than debt funds investing in
fixed rate securities

Hybrid funds have an investment charter that provides for a reasonable level of
investment in both debt and equity.
Type of Scheme Remarks
Monthly Income Plan (MIP) Seek to declare dividend periodically - Largely invest in
Debt Securities, small portion in Equity to improve yield
Capital Protected Schemes Ensure getting back of principal - invest in zero coupon govt
securities whose maturity is aligned to scheme's maturity
2.4.3 Other Funds
Gold Funds
a) Gold Exchange Traded Fund: It is similar to index fund and is traded in
exchange just like a stock. The movement of its price is based on gold price in
the market.
,,,
b) Gold Sector Funds: Fund will invest in shares of the companies engaged in
mining.
Real Estate Funds :These funds make it possible for small investors to take
exposure to real estate as an asset class. Although permitted by law, real estate
mutual funds are yet to hit the market in India.
Commodity Funds: These funds invest in the asset classes like food crops,
spices, cotton, industrial metals, oil and gas, gold, silver etc .
International Funds: These are funds that invest outside the country.
Fund of Funds: Funds can be structured to invest in various other funds, whether
in India or abroad. They are designed to help investors get over the trouble of
choosing between multiple schemes and their variants in the market.

Exchange Traded Funds (ETF): ETF are open-ended index funds that are traded
in a stock exchange. The benefits of ETF are that investors can buy and sell their
units in the stock exchange, at various prices during the day that closely track the
market at that time and the unique structure of ETFs, make them more cost-
effective than normal index funds.
2.5 ORGANISATION OF MUTUAL FUND:
Fig2.Structure of mutual fund industry
SPONSOR
Sponsor is the person who acting alone or in combination with another body
corporate establishes a mutual fund. Sponsor must contribute at least 40% of the
net worth of the Investment managed and meet the eligibility criteria prescribed
under the Securities and Exchange Board of India (Mutual Fund) Regulations,
1996. The sponsor is not responsible or liable for any loss or shortfall resulting

from the operation of the Schemes beyond the initial contribution made by it
towards setting up of the Mutual Fund.
TRUST
The Mutual Fund is constituted as a trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the
Indian Registration Act, 1908.
TRUSTEE
Trustee is usually a company (corporate body) or a Board of Trustees (body of
individuals) whose responsibility is to safeguard the interest of the unit holders and
ensure that the AMC functions in the interest of investors and in accordance with
the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.
ASSET MANAGEMENT COMPANY (AMC)

The AMC is appointed by the Trustee as the Investment Manager of the Mutual
Fund. It is required to be approved by the Securities and Exchange Board of India.
The AMC must have a net worth of at least 10 cores at all times.
REGISTRAR AND TRANSFER AGENT

The Registrar processes the application form, redemption requests and dispatches
account statements to the unit holders. The Registrar and Transfer agent also
handles communications with investors and updates investor records.

2.6 CURRENT TRENS AND KEY DEVELOPMENTS
Fig. 3 Market share of major mutual fund Companies
Fig 4.Graph showing growth in Assets under Management over the years (source:AMFI)

Distribution of Total AUM amongst Funds – Year 2009 (Source: AMFI)
Distribution of Total AUM based on all Fund Types (Year 2010 – Amfi)

3. INTRODUCTION TO THE PROJECT
3.1 INTRODUCTION TO THE EUROPEAN DEBT CRISIS
In early 2010 fears of a sovereign debt crisis or the 2010 Euro Crisis also known as
Aegean Contagion developed concerning some countries in Europe including:
Greece, Spain, and Portugal and Italy (PIGS). A sovereign bond is a bond
issued by a national government. The term usually refers to bonds issued in foreign
currencies. The total amount owed to the holders of the sovereign bonds is called
sovereign debt. This led to a crisis of confidence as well as the widening of bond
yield spreads and risk insurance on credit default swaps between these countries
and other EU members, most importantly Germany.
The Greek economy was one of the fastest growing in the Euro zone during the
2000s; from 2000 to 2007 it grew at an annual rate of 4.2% as foreign capital
flooded the country. A strong economy and falling bond yields allowed the
government of Greece to run large structural deficits. After the introduction of the
euro Greece was initially able to borrow due to lower interest rates that
government bonds could command. Since the introduction of the Euro, debt to
GDP has remained above 100%.The global financial crisis that began in 2008
had a particularly large effect on Greece. Two of the country's largest industries are
tourism and shipping, and both were badly affected by the downturn with revenues
falling 15% in 2009. To keep within the monetary union guidelines, the
government of Greece has been found to have consistently and deliberately
misreported the country's official economic statistics. In the beginning of 2010, it
was discovered that Greece had paid Goldman Sachs and other banks hundreds of
millions of dollars in fees since 2001 for arranging transactions that hid the actual

level of borrowing.
The government of PIGS nations mopped up a huge debt bill. Greece is

struggling with a total debt of 300 billion euro($406 billion). The state of
affairs in Greece made it the epicenter of the sovereign default malaise as
country was known to live beyond its means.
Fig. 6. Debt skeleton of PIGS

On 27 April 2010, the Greek debt rating was decreased to 'junk' status by Standard
& Poor's amidst fears of default by the Greek government. Yields on Greek
government two-year bonds rose to 15.3% following the downgrading. Analysts
question Greece's ability to refinance its debt. Standard & Poor's estimates that in
the event of default investors would lose 30–50% of their money. Stock markets
worldwide declined in response to this announcement.
Fig. 7-shows Greece to be in maximum credit default as on Jan 2010

AUSTERITY AND LOAN AGREEMENT
On 5 March 2010, the Greek parliament passed the Economy Protection Bill,
expected to save €4.8 billion through a number of measures including public sector
wage reductions. Passage of the bill occurred amid widespread protests against
government austerity measures in the Greek capital, On 2 May 2010, a loan
agreement was reached between Greece, the other Euro zone countries, and the
International Monetary Fund, conditional on the implementation of harsh Greek
austerity measures.The deal consists of an immediate €45 billion in low interest
loans to be provided in 2010, with more funds available later. A total of €100
billion has been agreed. The interest for the Euro zone loans is 5%, considered to
be a rather high level for any bailout loan. The government of Greece agreed to
impose a fourth and final round of austerity measures. Some of the measures
include-
 Freeze on increases in public sector wages for three years.

 Changes planned to the laws governing lay-offs and overtime pay.
 Extraordinary taxes on company profits.
 Increases in VAT to 23%, 11% and 5.5%.
 10% rise in taxes on alcohol, cigarettes, and fuels.
 Creation of a financial stability fund.
 Average retirement age for public sector workers increased from 61 to 65.
On 5 May 2010, a nationwide general strike was held in Athens to protest to the
planned spending cuts and tax increases. Three people were killed, dozens injured,
and 107 arrested. On May 5 and 6, the Hellenic Parliament passed the proposed
austerity measures, claiming they show the Greek government's commitment to
tackling its budget deficit, amongst continued protests.

3.2 OBJECTIVE OF THE PROJECT
Primary:
The project aims at studying the European crisis and its impact on Indian share
market and Mutual fund industry.
Secondary:
To fulfill the primary objective, following were required:
a) To understand the Greek crisis and the factors causing it..
b) To understand the functioning of the mutual fund industry, its various schemes
and objectives.
c) Analysis of relationship among different economies as how one affects the stock
markets and investment industry around the world.
d) Study of the various factors affecting the Indian stock market and mutual Fund
3.3 JOB AND KEY RESPONSIBILITIES
a) In order to make me equipped with a good knowledge of the mutual fund

industry’s working, initially I was assigned to read and understand the material
provided and the schemes information documents.
b) Later, to deal with small investors and walk-ins under a guidance, to understand
their requirements, tell them about the schemes and analyze what type of
investment they are interested in. I was expected to analyze the investor’s
perception with the changing face of the market and their reaction towards it.
c) To help investors with the filling of SIP forms.
d) My project being a totally research based project, I was required to follow the

share market updates daily and analyse the trend of investments in the HDFC
AMC for the past few months. Conclusions and suggestions on the same were
required.
3.4 ACTIVITY SHEET
Dates Week Activity sheet

Introduction to the mutual fund industry and the
10 May – 16 May 1st week HDFC AMC by our mentor. Read through the
AMFI material to understand the basics.
Completed with the understanding of equity

17 May- 23 May 2nd week
schemes under HDFC.
Understanding of the office work and how to

24 May-30 May 3rd week deal with investors while sitting with the ISC
members.
Started filling SIP forms for investors and also

31 May – 6 June 4th week started with the research on the project topic,
going through news, websites, office documents
SIP forms filling and dealing with investors,

7 June – 13 June 5th week
mainly walk-ins.
14 June-20 June 6th week Did some calling to brokers for the ISC.
Prepared excel sheets for the company along

21 June-27 June 7th week
with the investor dealing.
28 June- 04 July 8th week Continued with report work mainly.
10 July 9th week Submitted the report

4. DETAILS OF WORK DONE
4.1 OVERIEW OF THE INDIAN STOCK MARKET
4.1.1 The stock market: The Indian stock market is more than a century old. Its
history goes back to 1875, when 22 brokers formed the Bombay Stock Exchange
(BSE). Over the period, the Indian securities market has evolved continuously to
become one of the most dynamic, modern, and efficient securities markets in
Asia. Today, Indian market confirms to best international practices and standards
both in terms of structure and in terms of operating efficiency .The Indian
securities market consists of primary (new issues) as well as secondary (stock)
market in both equity and debt. The primary market provides the channel for sale
of new securities, while the secondary market deals in trading of securities
previously issued. Two exchanges, namely National Stock Exchange (NSE),
Delhi and the Stock Exchange, Mumbai (BSE) are the major stock exchanges in
India. There are 22 other regional exchanges, but NSE and BSE combined account
for about 80% of the equity volume traded in India. The markets are closed on
Saturdays and Sundays. Both the exchanges have switched over from the open
outcry trading system to a fully automated computerized mode of trading known as
SBTS (Screen Based Training System). It facilitates more efficient processing,
automatic order matching, faster execution of trades and transparency. The key
regulator governing Stock Exchanges, Brokers, Depositories, Depository
participants, Mutual Funds, FIIs and other participants in Indian secondary and
primary market is the Securities and Exchange Board of India (SEBI) Limited.

The average daily turnover at the exchanges has increased from Rs 851crore in
1997-98 to Rs1284crore in 1998-99 and further to Rs2273crore in 1999-2000. NSE
has around 1500 shares listed with the total market capitalization of around Rs9,
21,500crore. The BSE has over 6000 stocks listed and has a market capitalization
of around Rs9,68,000 crore.
MARKET INDICATORS
The Sensex is an “index”. An index is basically an indicator. It gives you a general

idea about whether most of the stocks have gone up or most of the stocks have
gone down. The Sensex is the primary index of BSE, which comprises of 50
stocks. The Nifty is the primary index of NSE, comprising 30 stocks. . If the
Sensex goes up, it means that the prices of the stocks of most of the major
companies on the BSE have gone up. If the Sensex goes down, this tells you that
the stock price of most of the major stocks on the BSE have gone down. Just like
the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks
of the NSE.
4.1.2 FACTORS AFFECTING STOCK MARKET
a) Three Es i.e. Economy (both global as well as domestic), Earning &

Emotions:
Economy: The growth in economy should be at pace to encourage common man to
invest more by creating faith on account of transparent financial system. This is
applicable to both global as well as domestic economy. There should be overall
growth of all three sectors of economy i.e. Primary, Secondary, &Tertiary.

Earning: An accelerated economy always reaps more fruits for people.
Emotions: depends on above two, since healthy economy brings more wealth to
investors which in turns increase one’s morale.
b) Domestic factors:
Domestic political scenario: A stable political scenario always gives boost to

economy.
Domestic business scenario: Certainly if global business is under peril then it will
affect our stock market, but that effect will be nuance if our domestic business
houses are performing well.
Inflation: Increase in inflation lowers the stock market, since under a high inflation
people need more money to fulfill their basic needs, than to save and invest.
c) Natural and artificial calamities:

Natural calamities like Tsunami, Flood, Drought, Earthquake has tremendous
impact on stock market. On the same line artificial irregularities like Wars, Riots,
over manipulation in economy leads to catastrophic effect.
d) Supply & Demand:
These are the mega driver of share market; whatever happens in the stock market is
mainly due to Matching or Mismatching of demand & supply.

4.2 GLOBAL REACTION TO THE CRISIS
Most attention continued to center on the European debt crisis as investors fretted
that efforts to cut deficits and debt will kill growth by withdrawing government
stimulus from economies in Greece, Spain and Portugal.
The biggest casualty over the period from the euro zone debt crisis has been the
euro, whose exchange rate has been falling since 2009. Fitch Ratings said
investors are deeply skeptical about the ability of governments to get a handle on
their huge debt burdens.
CONVERSION RATES (Fall of Euro..)
American Dollars to 1 EURO

Duration Exchange Exchange Exchange
Duration Duration
rate rate Rate
2009-12-30 1.4338 USD 2010-02-16 1.3649 USD 2010-04-26 1.3321 USD
2009-12-31 1.4406 USD 2010-02-17 1.3726 USD 2010-04-27 1.329 USD
2010-01-04 1.4389 USD 2010-02-22 1.3626 USD 2010-04-28 1.3245 USD
2010-01-05 1.4442 USD 2010-02-23 1.3577 USD 2010-05-03 1.3238 USD
2010-01-06 1.435 USD 2010-03-01 1.3525 USD 2010-05-05 1.2924 USD
2010-01-07 1.4304 USD 2010-03-02 1.3548 USD 2010-05-10 1.2969 USD
2010-01-11 1.4528 USD 2010-03-08 1.3662 USD 2010-05-11 1.2698 USD
2010-01-12 1.4481 USD 2010-06-01 1.2155 USD 2010-05-14 1.2492 USD
2010-01-13 1.4563 USD 2010-03-17 1.3756 USD 2010-05-17 1.2349 USD
2010-01-18 1.4369 USD 2010-03-22 1.3471 USD 2010-05-18 1.2428 USD
2010-01-19 1.4279 USD 2010-03-23 1.3519 USD 2010-05-24 1.236 USD
2010-01-20 1.4132 USD 2010-03-24 1.3338 USD 2010-05-25 1.2223 USD
2010-01-25 1.4151 USD 2010-03-29 1.3471 USD 2010-05-28 1.2384 USD
2010-01-26 1.4085 USD 2010-03-30 1.3482 USD 2010-06-01 1.2155 USD
2010-01-27 1.4072 USD 2010-03-31 1.3479 USD 2010-06-01 1.2155 USD
2010-01-29 1.3966 USD 2010-04-01 1.3468 USD 2010-06-02 1.2218 USD

2010-02-01 1.3913 USD 2010-04-05 1.34863 USD 2010-06-07 1.1959 USD
2010-02-02 1.3937 USD 2010-04-06 1.3396 USD 2010-06-08 1.1942 USD
2010-02-05 1.3691 USD 2010-04-07 1.334 USD 2010-06-10 1.2045 USD
2010-02-08 1.3675 USD 2010-04-08 1.3296 USD 2010-06-11 1.2127 USD
2010-02-09 1.376 USD 2010-04-13 1.3583 USD 2010-06-14 1.2249 USD
2010-02-12 1.3572 USD 2010-04-14 1.3615 USD 2010-06-15 1.2258 USD
2010-02-15 1.3607 USD 2010-04-19 1.3432 USD 2010-06-16 1.2277 USD
Average : 1.33787 Lowest: 1.1942 (Jun 08 ’10) Highest: 1.4563(Jan 13 ‘ 10)

(Source : www.xrates.com)
The record shows that the rate of Euro with respect to American Dollar has been
continuously falling since Dec 2009 to June 2010.
American $ to Euro – Conversion rate
latest(Jun30) lowest(Jun8) highest(Jan13)

120 days
1.2271 1.1942 1.4563
Fig. 8. Coversion rate of Euro falling since Feb 2010 to June 2010

June 2010 - US: Stocks took their deepest plunge in more than a year as fears
grew that Europe's debt crisis could spread around the world and undermine the
U.S. economic recovery. The possibility has been brewing for weeks, but analysts
said some investors are just waking up to it.
The Dow Jones industrial average fell 376 points, its biggest point drop since
February 2009. All the major indexes were down well over 3 percent and are now
showing losses for 2010. Interest rates fell sharply in the Treasury market as
investors once again sought the safety of U.S. government debt.
They said more investors seemed to be grasping the possibility that the U.S.
recovery could be in jeopardy, and that many were realizing that the stock market's
big rebound since March 2009 might not have been justified. The Dow fell 376.36,
or 3.6 percent, to 10,068.01. The S&P 500 fell 43.46, or 3.9 percent, to 1,071.59.
The drop was the worst for the Dow since February 2009, and the S&P's worst
since April 2009. (As on June 8, 2010)
Rising Market volatility : The resurgence of a sharp volatility over the whole
months of April, May and June reiterate the fact that market players are clueless
and uncertain about the future course of action, leading to a broad range bound
movement in the benchmarks.
From April 1 through May 24, there were 17 trading days in which the Standard &
Poor's 500 Index rose or fell by at least 1%—a traditional benchmark for
volatility—and 3 days in which it rose or fell at least 3%. That's higher than the
long-term historical averages, but it's significantly lower than the volatility we
experienced in 2008 and 2009.

Fig. 9. shows the maximum volatility in US market in 2009-10
Fig. 10. S&P 500 index vs CBOE volatility index

4.3 IMPACT ON INDIAN ECONOMY
A crisis in an economy impacts other economies via three channels. It is the

affected economy which in turn affects the financial markets.
a) Trade Channel: When an economy falls into a recession, it impacts the affected
country’s trading partners too. Falling household and business demand in the
slump-hit economy hits the exports/imports of its trading partners. Decreased
business brings a downfall of the stock market and other financial markets
also, of both the countries.
The share of Indian exports to EU (excluding UK) and imports from EU has fallen
over the years. In 1987-88, exports to EU constituted about 18.6% of total exports.
This has declined to 17.5% by 2008-09. The decline of imports is higher from 25%
in 1987-88 to 12% in 2008-09. Hence, total trade between India and EMU is about
29.5% in 2008-09. The trade has been forecasted to fall further in 2009-10
( source: RBI)
Europe accounts for almost 26% of the overall Indian exports. Euro which was
quoting at around Rs.67 before crisis is way below currently. The sharp
depreciation of the euro has concerned exporters as that could ultimately have cash
flow impact on the remittances.
The trade in services also declines immediately as a result of a crisis in a trading

partner country. It declined visibly in Jan-Mar 2009 quarter when the global crisis
started in September 2008. Though, the impact of crisis is more on goods than
on services. According to the NASSCOM estimates, Indian IT services and BPO
companies earned around 30% of their total export revenues of $50 billion from
Europe. India’s top three IT companies TCS, Infosys and Wipro earn anywhere

between 23 to 26% of their total revenues from Europe. Tech Mahindra is worst
placed with European exposure to the extent of 59% of its revenues..
b) Financial Channel: The impact of turmoil in one economy’s financial markets

is not merely transmitted to other markets, the quantum and direction of the
movement is also more or less similar (decline in equity markets, rise in corporate
bond spreads and depreciation in currency). This is because cross border financial
linkages have increased substantially over the years. Besides, the correlation
between assets too has been rising across the world. If one plots the BSE Sensex
with other advanced economy stock indices, one sees more or less see the same
trend. Other three kinds of financial flows could impact Indian financial markets:
Foreign Direct Investment: There are many European companies which have
investments in India. So, there could be a possibility of slowdown in FDI in India.
But FDI remained robust throughout this crisis. The FDI inflows actually helped
keep maintain capital account when all other categories showed sharp decline.
(Source: RBI )
(in USD billion) Gross FDI inflows Gross FDI Net FDI (Inflows minus
Outflows Outflows)
Jul – Sep 2008 8.8 -3.9 4.9
Oct-Dec 2008 6.3 -5.9 0.4
Jan - Mar 2009 8.0 -4.8 3.2
April-June 2009 8.7 -2.6 6.1
Jul-Sep 2009 10.7 -4.2 6.5
The table shows that FDI showed a decrease in Oct-Dec 2008, as a result of the US
crisis being at its peak, but the Europe crisis shows no impact on FDI till now.

Foreign Institutional Investment: Portfolio inflows into India from foreign
institutional investors are likely to see huge volatility this year, as the Greece crisis
and the relief package may adversely impact global liquidity.
(in USD billion) FII

Jan – Mar 2008 -3.7
Apr – Jun 2008 -4.2
Jul – Sep 2008 -1.3
Oct-Dec 2008 -5.8
Jan - Mar 2009 -2.7
April-June 2009 8.3
Jul-Sep 2009 9.7
Oct-Dec 2009 5.7
The table shows a decrease in FDI during Oct-Dec 2008 due to US crisis being at
its peak. It again shows a decline in Oct-Dec 2009, with the onset of the spreading
impact of the European crisis.
Remittances and NRI deposits: Former shows whether NRI depositors withdrew
funds in wake of crisis and latter shows whether Indians living abroad stopped
sending funds to their homes again because of the crisis.
(In USD billion) NRI Deposits Remittances

Jan – Mar 2008 1.1 13.4
Apr – Jun 2008 0.8 11.6
Jul – Sep 2008 0.3 13.0
Oct-Dec 2008 1.0 10.0

Jan - Mar 2009 2.2 9.5
April-June 2009 1.8 12.9
Jul-Sep 2009 1.0 13.8
Oct-Dec 2009 0.6 12.8
From the table: The deposits increased in the crisis periods Oct-Dec 2008 and Jan-
Mar 2009 and decline thereafter. In case of remittances, we see a decline in crisis
period Oct 08 – Mar 09 but see improvements as crisis eases.
Confidence channel: This channel shows confidence declines in business and

households seeing the global uncertainty. So even if an economy’s macroeconomic
conditions and outlook look favorable, the decline in confidence can disrupt the
economic conditions. Decline in confidence is also one of the reasons for decline
in business investments which led to decline in overall Indian GDP growth.
Decreasing investments in business and lesser profits, adversely impact the stock
market.

4.4 THE INDIAN SHARE MARKET- In the time of the crisis
The decreasing exports to Europe from India, lesser FDI receipts and other foreign
investments have hit the Indian economy to an extent, following the crisis.
One of the major impacts of Greece delving into the debt crisis is the fall in value
of Euro. The exchange rate of Euro has also fallen against Rupee since 2009-
2010. But ofcourse, Euro being cheaper it has boosted the travel from India to
European countries. An advantage thus to the Indian airlines and foreign
exchange.
Indian Rupees to 1 EUR
Conversion Convesrion Conversion

Duration Duration Duration
rate rate rate
2009-12-29 67.38 INR 2010-03-17 62.38 INR 2010-05-07 57.9691 INR
2009-12-30 67.06 INR 2010-03-18 62.092 INR 2010-05-10 58.166 INR
2009-12-31 67.0401 INR 2010-03-09 61.827 INR 2010-04-29 59.009 INR
2010-01-04 66.6211 INR 2010-03-19 61.6501 INR 2010-04-30 59.0649 INR
2010-01-05 66.787 INR 2010-03-22 61.408 INR 2010-05-11 57.497 INR
2010-01-08 65.3099 INR 2010-03-23 61.5859 INR 2010-05-12 57.2389 INR
2010-01-11 65.8599 INR 2010-03-24 60.61 INR 2010-05-13 56.7315 INR
2010-01-12 66.21 INR 2010-03-25 60.7699 INR 2010-05-14 56.483 INR
2010-01-19 65.405 INR 2010-03-30 60.802 INR 2010-05-19 56.8779 INR
2010-01-22 65.459 INR 2010-03-31 60.514 INR 2010-05-20 57.754 INR
2010-01-25 65.406 INR 2010-04-01 60.2019 INR 2010-05-21 58.667 INR
2010-01-26 64.82 INR 2010-04-05 59.9026 INR 2010-05-24 58.073 INR
2010-01-29 64.5159 INR 2010-04-06 59.5521 INR 2010-05-25 58.3199 INR
2010-02-01 64.522 INR 2010-04-07 59.376 INR 2010-05-26 58.215 INR
2010-02-02 64.3999 INR 2010-04-08 59.1294 INR 2010-05-27 57.4271 INR
2010-02-05 64.07 INR 2010-04-09 59.271 INR 2010-05-28 57.4346 INR
2010-02-08 64.013 INR 2010-04-12 60.301 INR 2010-05-31 57.055 INR

2010-02-15 63.034 INR 2010-04-15 60.192 INR 2010-06-03 57.255 INR
2010-02-16 63.0745 INR 2010-04-16 59.98 INR 2010-06-04 56.501 INR
2010-02-19 62.6 INR 2010-04-19 60.088 INR 2010-06-07 56.3211 INR
2010-02-22 62.973 INR 2010-04-20 60.0059 INR 2010-06-08 56.0649 INR
2010-02-23 62.7459 INR 2010-04-21 59.583 INR 2010-06-09 56.4724 INR
2010-02-26 62.5639 INR 2010-04-22 59.3681 INR 2010-06-10 56.503 INR
2010-03-01 62.4109 INR 2010-04-23 59.2171 INR 2010-06-11 56.8091 INR
2010-03-02 62.246 INR 2010-04-26 59.139 INR 2010-06-14 56.952 INR
2010-03-05 61.926 INR 2010-04-27 59.067 INR 2010-06-15 57.0309 INR
2010-03-08 62.105 INR 2010-04-28 59.132 INR 2010-06-16 57.162 INR
Average:61.2062 Lowest:56.0649(June8’10) Highest:67.38(Dec 29

’10) (Source:www.xrstes.com)
The record shows that the rate of Euro with respect to Rupee has been continuously
falling since Dec 2009 to June 2010.
120 latest (Jun 30) lowest (Jun 8) highest (Jan 13)

days 56.993 56.0649 66.327
Fig. 11. Indian Rupee against Euro

(June ‟10 2010) Indian stock markets have corrected 10% from its recent peaks
on the back of the jitters from the Greece-led European crisis. In fact, the concerns
about the stability in the European region have once again resurfaced with the
latest down grade of Spain by the Fitch.
The recent healthy correction in the stock markets is under the fear of worsening of
the European crisis and a possibility of a double dip recession in the US. Indian
stock markets, the benchmark indices had slumped to a nine-week low as foreign
institutional investors book gains in emerging markets to offset their losses in
crisis-hit European regions. Leading the slump in Indian indices were Metal
counters on concerns of drop in metal prices. State-owned SAIL lowered
prices of long steel products on falling demand. This led to fear of yet another
round of slackening of demand for ferrous and non-ferrous metals
However, India has out-performed the global indices during this correction
phase. India has not corrected as much as have other global markets, during the
phase of European debt crisis.
It must be noted over here that Indian equities have been an outright out-performer
during the play-out of the major Greece crisis. Indian stock markets have out-
classed equity markets of other economies on the back of a number of positive
fundamental factors.
Without any doubt it can be pointed out that the contagion risks of Greek crisis are
now spreading to other weaker European countries such as Portugal, Spain, Italy
and now even Hungary; regarding their susceptibility of exiting the vicious debt
traps.

MARKETS WAITING FOR CUES : The stocks witnessed across the board fall on
concerns that the $144 billion bail out package sponsored by EU and IMF for
Greece may not be able to contain the region’s debt risks. Further, the budget
deficit in Spain is likely to worsen over next few months. Ultimately, this may
affect Indian exports to susceptible regions of Europe and fund inflows from there.
At the same time, the crisis in developed nations may also lead to flight of capital
to fund their own requirements. Questions are being raised upon ability of Greek
government to tackle the budget deficit over next three years just as it comes under
the grip of severe recession. Romania’s central bank reduced its benchmark
interest rates to stimulate its economy.
RECORD OF THE INDICES DURING THE CRISIS
Indices: SENSEX For the period: January 2009 to July 2010
Price/Earni Price/ Book Dividend

Month Open High Low Close
ngs value Yield
January 2009 9,720.55 10,469.72 8,631.60 9,424.24 12.21 2.53 1.88
February 2009 9,340.37 9,724.87 8,619.22 8,891.61 12.82 2.50 1.89
March 2009 8,762.88 10,127.09 8,047.17 9,708.50 12.68 2.47 1.92
April 2009 9,745.77 11,492.10 9,546.29 11,403.25 15.23 2.95 1.68
May 2009 11,635.24 14,930.54 11,621.30 14,625.25 17.88 3.35 1.47
June 2009 14,746.51 15,600.30 14,016.95 14,493.84 19.75 3.64 1.30
July 2009 14,506.43 15,732.81 13,219.99 15,670.31 19.10 3.53 1.32
August 2009 15,694.78 16,002.46 14,684.45 15,666.64 20.08 3.73 1.24

September
2009 15,691.27 17,142.52 15,356.72 17,126.84 21.20 3.95 1.17

October 2009 17,186.20 17,493.17 15,805.20 15,896.28 21.66 4.06 1.14
November
2009 15,838.63 17,290.48 15,330.56 16,926.22 21.23 3.99 1.15
December
2009 16,947.46 17,530.94 16,577.78 17,464.81 21.82 4.10 1.12
January 2010 17,473.45 17,790.33 15,982.08 16,357.96 21.99 4.11 1.10
February 2010 16,339.32 16,669.25 15,651.99 16,429.55 19.97 3.65 1.18
March 2010 16,438.45 17,793.01 16,438.45 17,527.77 21.05 3.85 1.12
April 2010 17,555.04 18,047.86 17,276.80 17,558.71 21.28 3.88 1.10
May 2010 17,536.86 17,536.86 15,960.15 16,944.63 19.96 3.56 1.15
June 2010 16,942.82 17,919.62 16,318.39 17,700.90 20.57 3.34 1.18
July 2010 17,679.34 17,679.34 17,455.41 17,509.33 20.85 3.34 1.19
The record shows the major fall in Indices during may 2010, after the junk status of
Europe was announced on 23 April.
Historical Data for S&P CNX NIFTY
For the period 01-04-2010 to 02-07-2010
Turnover
Date Open High Low Close Shares Traded
(Rs. Cr)
01-Apr-2010 5249.20 5298.60 5249.20 5290.50 127773261 5365.11
09-Apr-2010 5302.40 5377.45 5302.25 5361.75 154497751 6207.69
12-Apr-2010 5354.15 5382.15 5324.90 5339.70 134901999 5502.80
13-Apr-2010 5340.85 5356.50 5301.70 5322.95 126581805 7839.07
20-Apr-2010 5208.30 5257.25 5208.30 5230.10 199478130 7155.88
21-Apr-2010 5230.30 5266.30 5230.30 5244.90 196901598 6577.43
29-Apr-2010 5215.25 5264.75 5214.80 5254.15 171683419 7264.42
30-Apr-2010 5254.20 5294.80 5254.20 5278.00 152495257 6591.23
03-May-2010 5278.40 5278.70 5210.05 5222.75 111445668 4663.49
07-May-2010 5072.30 5085.65 4984.60 5018.05 233345722 8765.29
13-May-2010 5157.55 5212.70 5147.95 5178.90 179378582 6054.24

14-May-2010 5180.55 5192.75 5070.95 5093.50 144381001 6094.56
20-May-2010 4924.30 4980.25 4924.30 4947.60 197303335 7215.28
21-May-2010 4946.70 4946.70 4842.30 4931.15 230483809 7363.95
22-Jun-2010 5353.95 5354.35 5311.05 5316.55 162043358 5453.37
23-Jun-2010 5316.15 5333.30 5288.15 5323.15 150160458 5457.95
24-Jun-2010 5323.25 5348.30 5284.55 5320.60 218787111 8902.73
25-Jun-2010 5320.50 5320.50 5259.90 5269.05 164967805 6750.84
28-Jun-2010 5271.10 5339.45 5270.75 5333.50 154140414 6284.06
29-Jun-2010 5333.55 5334.15 5235.80 5256.15 158720263 5859.41
30-Jun-2010 5254.25 5320.35 5210.00 5312.50 183722824 7083.92
01-Jul-2010 5312.05 5312.55 5232.10 5251.40 141430947 5489.08
02-Jul-2010 5251.25 5277.25 5225.60 5237.10 149979351 5158.26
WHY BEARS WERE POWERFUL IN RECENT DAYS ??
Stock market is more depending on the behaviour and the expectations of investors in
the market. What small corrections are coming in the market, are the repercussions of
the European crisis that well understood, however, if you apply fundamentals it is
quite evident that Indian companies having sound financial position, good order
books, increasing profits, increasing sales and doing good business domestically
or globally, will (has) definitely hedge all these risk and in near time will be able to
generate sizable earnings Stocks become more risky, not less, as their prices rise - and less
risky, not more, as their prices fall. The fact lies in the fear in the minds of the minds of
the people which forces them to think irrationally.

4.5 REACTION OF INVESTORS
4.5.1 INVESTOR SENTIMENTS

The uncertainty in the global economy and the subsequent volatility have seen
domestic retail investors shy away from Indian equity markets.
Increased Risk Aversion : High net worth individual (HNI) traders have halved
their activity in the past two months(April and May).While they are confident
about Indian stories, they are concerned about Indian developments.
Profit Booking: Insvestors sold their shares as soon as they could get some profit.
This made the share market tumble as on 11 May ’10- The Bombay Stock
Exchange benchmark Sensex tumbled by 189 points with investors booking profit
a day after market witnessed a 561 point rally. The 30-share barometer fell by
189.02 to 17,141.53 points. The Sensex had gained 561 points in the last session.
The wide-based National Stock Exchange index Nifty fell by 57.45 to 5,136.15
points.
4.5.2 WHERE ARE THE INVESTORS MOVING??
In such a scenario, most of the money has found its way into liquid debt-based
funds and gold. The market sees a lot of demand for liquid and short-term debt,
and in the long-term investments space, a demand for structured products that offer
capital protection.

With gold prices zooming, gold ETFs look like a safe in-vestment avenue. Gold-
based ETFs have generated a returning excess of 10 per cent over the past month,
the best among all fund categories.
Gold as an investment option:

- Demand and supply balance.
- As a hedge against inflation and store of value.
- As a safe haven in times of financial, economic and political crisis.
-Gold provides effective diversification for investment portfolios by exhibiting
Fig. 12. Rising investment demand in gold in India(Amount in Crores)

4.6 INDIA - AN OUT PERFORMER
Indian economy is far less dependent on exports to Europe. Indian IT companies

have a lower exposure to European clients to the extent of roughly a quarter of
their revenues. Add to that India’s exposure to debt-stuck economies such as
Greece, Spain, Italy and Portugal is far more limited to 4% of total exports.
According to the latest macro-economic figures, India’s IIP data has registered a
growth of 5.1% compared to 3.7% witnessed during April 2009. The Central
Statistical Organization has pegged India’s GDP growth for 2009-10 at 7.4%.
Thus, there are various parameters on which Indian stock markets have out-
performed the global indices while going passing through the turmoil phase of
European crisis. Investors waiting on sidelines should use every dip from here to
create a portfolio for long-term duration.

4.7 MUTUAL FUNDS – INDIA
4.7.1 Impact of crisis: The mutual fund industry works on the share market as a
backbone. So any effect on the share market will directly affect the mutual fund
industry also in the same way.
Fall in AUM of fund houses: The domestic mutual fund market has seen the
steepest fall in assets since the crisis of October 2008.According to latest data from
the Association of Mutual Funds in India (Amfi), the industry’s average assets
under management (AAUM) plunged 15.89 per cent, or Rs 1,27,695 crore, in June
to Rs 6,75,864.20 crore, compared to the May figures.
Fig 13. Decrease in AUMs of fund houses in June 2010

The top 5 players in Mutual funds, Reliance MF, HDFC MF, ICICI MF, UTI MF
and Birla Sunlife MF – saw their AAUMs fall 14-18 per cent. UTI MF saw the
sharpest fall of 18 per cent, followed by ICICI MF at 15.86 per cent.
Mutual Fund House % fall in AUM AUM value

Reliance Mutual Funds 15% Rs 1 lakh crore
HDFC Mutual Fund 14.9% Rs 86,648 crore
UTI Mutual Fund 18% Rs 64,445 crore.
Kotak Mutual Fund 29.8% Rs 28,540 crore.
Birla Sun Life Mutual Fun 14.5% Rs 63,111 crore
SBI Mutual Fund 6.9% Rs 33,727 crore,
Fig. 14. Fall in AUM of top mutual fund players.
Exit Of Investors from mutual fund industry: The Indian mutual fund industry
has seen exit of investors in the month of April- May’ 10. Distributors' lack of
interest in selling MFs to investors and profit-booking by retail investors and
financial institutions are the two reasons behind the exodus. The profit- booking
is a result of uncertainty in the market over the sustainability of the global
economic recovery, especially given the recent events in Europe.
Figures –
The number of accounts fell from 46.9 million to 46.5 million.

Equity assets of around Rs 1,300 crore were redeemed net of new sales in April.
More than 10 times the drop in investor accounts between September 2009 and
March 2010. During that period, the number of accounts fell by 37,161.
(Source: AMFI)

Fig. 15. Retail folios declining in number

4.7.2 REASONS BEHIND THE IMPACT
 The overall liquidity crisis and outflows due to advance tax and 3G auction
payments pulled down the assets sharply. The pullout by banks in the
quarter-end was another major factor.
 June saw the highest outflow of over 1.25 lakh crore..Liquidity crunch and
advance tax payments had their impact. Moreover, banks took out money at
the end of the quarter.‖
 Investments by large institutional investors and corporates make up 50 per
cent of the segment, who started investing primarily in ultra-short-term debt
schemes.
Though fund houses expect that most of the banks’ and corporate money would
come back, independent industry experts seemed sceptical. They said following the
rate hike by the Reserve Bank of India today, banks might not park the money with
fund houses so soon. On the corporate side too, companies may wait for clarity on
new norms on valuation of debt and money market instruments by mutual fund
houses on the mark-to-market basis.
The Greek sovereign crises, increase in credit spreads along with tightening of
lending standards in the property sector by the Chinese government hurt sentiment
across the world causing a fall in equity markets for the month. The BSE Sensex
closed down 3.5% while the Nifty closed down 3.6% (31May’10).
Under performers - Realty, Metals, Banking and Power sectors.
Outperformers - FMCG, pharmaceuticals and domestic plays like Auto and

Capital Goods, the oil and gas sector did well with a gas price hike and expectation
of further reforms.

4.7.3 PERFORMANCE OF FUNDS
SECTOR SPECIFIC FUNDS: Investors in sector specific funds have reason to

be happy. Most schemes have consistently outperformed the benchmark
indices – the Bombay Stock Exchange’s Sensex and the national Stock
Exchange’s Nifty. An analysis of category average returns over five years
shows that sector funds, especially pharma, banking and FMCG (fast
moving consumer goods), have outperformed diversified funds and also
the benchmark indices. Over the past five years, banking and pharma
funds have provided average annual returns in excess of 20 per cent,
significantly higher than most other instruments. In the past three years,
the category average returns of pharma funds has been around 17 per cent.
FMCG and banking funds have provided returns of 15 and 11 per cent,
respectively. The Sensex or Nifty, in the same time period, has given only
single-digit returns. Both pharma and FMCG are defensive sectors. As
a result, during the lean phase in 2008-09, they were able to provide
stable returns. Pharmaceuticals, being a defensive sector will have
investor interest even when the market corrects. Moreover, it also has
steady fundamental growth. So, one can expect some consistency.
Certain retail, energy and infrastructure-related funds have also been
stable, if not good during the 2010 crisis period.

Losers Parade
Assets (inRs)
Fund Houses Dec-09 Jan-09 Change (%)
Baroda Pioneer Mutual Fund 2984.12 3694.34 23.80
Sahara Mutual Fund 499.15 608.33 21.87
Canara Robeco Mutual Fund 8516.91 9199.94 8.02
Sundaram BNP Paribas Mutual
13075.69 13755.84 5.20
Fund
Axis Mutual Fund 2569.18 2641.13 2.80
Escorts Mutual Fund 209.48 214.29 2.30
JM Financial Mutual Fund 8853.16 9025.18 1.94
Quantum Mutual Fund 84.90 86.34 1.69
ING Mutual Fund 1516.76 1542.37 1.69
JPMorgan Mutual Fund 4252.27 4315.47 1.49
Taurus Mutual Fund 1898.04 1911.51 0.71
Morgan Stanley Mutual Fund 2299.41 2302.24 0.12
DSP BlackRock Mutual Fund 20182.87 20107.58 -0.37
HSBC Mutual Fund 7020.30 6894.11 -1.80
Reliance Mutual Fund 119981.79 117248.57 -2.28
IDFC Mutual Fund 25361.01 24759.36 -2.37
HDFC Mutual Fund 97183.85 94797.01 -2.46
SBI Mutual Fund 37900.13 36623.30 -3.37
UTI Mutual Fund 78203.44 74509.87 -4.72
ICICI Prudential Mutual Fund 82432.25 78372.39 -4.93
Fidelity Mutual Fund 8350.29 7834.93 -6.17
Tata Mutual Fund 23778.93 22298.89 -6.22
Fortis Mutual Fund 8601.76 7960.01 -7.46
Birla Sun Life Mutual Fund 68066.19 62595.13 -8.04
LIC Mutual Fund 49681.48 45599.20 -8.22
Shinsei Mutual Fund 447.65 400.15 -10.61
Deutsche Mutual Fund 13613.31 12162.13 -10.66
Kotak Mahindra Mutual Fund 41401.75 36781.33 -11.16
Religare Mutual Fund 15865.25 13823.34 -12.87
Edelweiss Mutual Fund 129.99 111.42 -14.28
Fig. 16.The record shows the assets of the fund houses. While most of them have lost on their assets, from
Dec to Jan (shown by negative change %), some of them have managed to have increase to some extent.
The biggest loser has been Edelweiss Mutual fund with change percentage of -14.28
(Source: www.valueresearchonline.com)

Top performer schemes in last 1 year (2009- June 2010)
Scheme %Return
Reliance Pharma Fund (Bonus) 106.17
Reliance Pharma Fund (G) 106.16
Franklin Pharma Fund – (G) 89.74
DSP BR Micro-Cap Fund (G) 89.03
UTI-Pharma & Healthcare Fund (G) 72.16
SBI Magnum SFU – FMCG Fund 70.25
UTI-Master Value Fund (G) 69.15
UTI-Transportation & Logistics Fund (G) 68.33
ICICI Pru Discovery Fund – Inst Option – 1 (G) 67.30
ICICI Pru Technology Fund (G) 65.84
ICICI Pru Discovery Fund (G) 65.34
DSP BR Small And Mid Cap Fund (G) 62.01
SBI Magnum SFU – Pharma Fund (G) 61.56
Reliance Equity Opportunities Fund (B) 60.81
ICICI Pru FMCG Fund - (G) 60.81
HSBC Small Cap Fund (G) 59.90
Franklin Infotech Fund - (G) 59.65
SBI Magnum SFU - Infotech Fund 58.74
Sundaram BNP Paribas Select Small Cap (G) 58.32
ICICI Pru Emerging S.T.A.R. Fund-Inst Option-1 (G) 57.49
UTI-Mid Cap Fund (G) 57.40
Franklin FMCG Fund - (G) 57.38
Birla Sun Life Long Term Advantage Fund - Sr.1 (G) 56.07
Canara Robeco Emerging Equities (G) 55.87
(Source: www.valueresearchonline.cm)

Bottom performer schemes in last 1 year (2009- June 2010)
Scheme %Return
Tata Index Fund - Sensex Plan (B) -47.81
JM Telecom Sector Fund (G) -14.92
DSP BR World Gold Fund - Inst (G) -13.80
Birla Sun Life CEF - Global Agri Plan (G) -4.17
JM Agri & Infra Fund (G) -2.13
Birla Sun Life CEF - Global MCP (G) 0.18
Birla Sun Life International Equity - Plan A (G) 2.58
DWS Global Thematic Offshore Fund (G) 3.27
JM HI FI Fund (G) 5.89
JM Basic Fund (G) 6.59
JM Financial Services Sector Fund (G) 6.81
HSBC Emerging Markets Fund (G) 7.41
L&T Global Advantage Fund (G) 7.83
JM Core 11 Fund - Series I (G) 8.02
L&T Infrastructure Fund (G) 9.2
Franklin Asian Equity Fund (G) 9.39
LICMF Infrastructure Fund (G) 9.46
Reliance Natural Resources Fund (G) 9.74
JM Equity Fund - (G) 11.28
SBI Infrastructure Fund - Series I (G) 11.90
UTI-Infrastructure Advantage Fund - Sr.I (G) 11.97
LICMF India Vision Fund (G) 12.77
Reliance Equity Fund (G) 12.84
LICMF Opportunities Fund (G) 12.97
Sahara Infrastructure - Fixed Pricing (G) 13.05
LICMF Tax Plan - (G) 13.19
(Source: www.valueresearchonline.com)

4.7.4 NEW PRODUCTS IN THE MARKET
Several fund houses launched new offers in May to bring fresh investors into
the fold. Some have been successful, but not to the extent expected. The biggest of
these offers, was from DSP Black Rock which collected Rs 670 crore. Out of the
about 54,000 applications, roughly 80% would be retail and HNI (high net worth
individual) applications. The figures are reasonable given the volatile markets.
Birla Sun Life Asset Management Co. Ltd, SBI Funds Management Pvt. Ltd, Axis
Asset Management Co. Ltd, IDFC As- set Management Co. Ltd and Mirae Asset
Global are selling their new funds currently.
Investors considering debt and gold funds as the safe investments in the time of
market volatility, new funds have been launched in the debt and hybrid type.
Some schemes launched by HDFC mutual funds :
Min
Scheme Name Type Open Date Close Date Category
Amount.[Rs.]
HDFC Gold Exchange Traded Gold – ETFs
HYBRID 25-Jun-10 23-Jul-10 5000.00
Fund
HDFC FMP - 100Days - June Fixed
DEBT 29-Jun-10 05-Jul-10 5000.00
2010(1)(XIII) (G) Maturity Plans
DEBT 29-Jun-10 05-Jul-10 5000.00
2010(1)(XIII) (D) Maturity Plans
DEBT 29-Jun-10 05-Jul-10 5000.00
2010(2)(XV) (G) Maturity Plans
DEBT 29-Jun-10 05-Jul-10 5000.00
2010(2)(XV) (Div-Q) Maturity Plans
DEBT 29-Jun-10 05-Jul-10 5000.00
2010(2)(XV) (D) Maturity Plans

4.7.5 GOLD ETF- AN INVESTMENT OPTION
With the global economic environment once again turning bleak because of the
European sovereign debt crisis, gold, the ultimate safe-haven investment, has once
again found favor with investors. It is currently trading at around Rs 18,825 per 10
gram.
Besides acting as a safe-haven investment, gold also acts as a hedge against

inflation, which is currently high in India. The yellow metal has registered a
compounded annual growth rate of 16.4 per cent and 24.6 per cent over the 10-year
and five-year horizon respectively.
A gold fund or an ETF is by all means a great portfolio diversifier. The returns
have also been impressive. In the month of May ’10, gold ETFs have returned
6.5%, slightly lower than the 5.3% category average of FMCG funds. Over the
Past 3 months it has returned around 9.8%. Over one and three years it has returned
around 24.4% and 27.1% respectively. The latter was the best performer among all
MF categories.
NFO UPDATE 2010
1. HDFC Gold Exchange Traded Fund

Offer Open Offer Close Structure Nature
Jun 25, 2010 Jul 23, 2010 Open Ended ETF
Scheme Objective
The investment objective of the Scheme is to generate returns that are in line with the
performance of gold, subject to tracking errors.

Mutual Fund Minimum Incremental SIP NRI
Investment Investment allowed Investment
HDFC Mutual Fund
Ramon House, 3rd Floor,
H.T. Parekh Marg
169, Backbay Reclamation, Rs. 5000 Rs. 1 No
Churchgate
Mumbai
Tel.-22029111
2. ICICI Prudential Gold Exchange Traded Fund

Offer Open Offer Close Structure Nature
Jun 28, 2010 Jul 27, 2010 Open Ended ETF
Scheme Objective
The objective of the scheme is to seek to provide investment returns that, before expenses,
closely track the performance of domestic prices of Gold derived from the LBMA AM
fixing prices. However, the performance of the scheme may differ from that of the
underlying gold due to tracking error.
Mutual Fund Minimum Incremental SIP NRI

Investment Investment allowed Investment
ICICI Prudential Mutual
Fund
8th Floor, Peninsula Tower,
Ganpatrao Kadam Marg,
Rs. 5000 Rs. 1 No Yes
Off Senapati Bapat Marg,
Lower Parel
Mumbai
Tel.-24997000

5. RESEARCH METHODOLOGY
A. Statement of Problem:
1. Understanding the Greek crisis in detail, working of the mutual fund industry
and the share market.
2. To identify the impact of the crisis on the Indian share market and the mutual
funds industry. To understand the relationship between the Greek instability and
the movement of the share market indices of India.
B. Research Design :
Research design is a master plan that specifies the method and procedure for
collecting and analyzing the needed information. The research design for this
project is descriptive where the data is collected mainly through extensive reading
and establishing relationships between the findings. Real time environment helped
in understanding the investment industry better from the perspective of industry
mentor. .
C. Sources of Data Collection:.

Secondary Research: The report is based totally on secondary data. The tools
include web access to documents, articles, news and reports discussing the crisis,
the share market and mutual funds .The offer documents and reports provide in the
ISC also were a great aid.

D. Statistical Tools Used:
The main statistical tools used to present data in the report are :
 Pie Charts
 Line Graphs
 Bar Graphs
E. Limitations of the Study:
Any facts stated or any assumptions made on the basis of it, may not be accurate as
there were limitations to the study:
1. The study is based on secondary data available from monthly fact sheets,
websites and other books, as primary data was not accessible.
2. The study is based mainly on the schemes and functioning of HDFC AMC and
results generalized for other AMCs.
3.The assumption that all investors have the same belief and perception towards
investments.

6. LEARNINGS FROM THE PROJECT
1. Working culture and structure of Mutual fund industry.
2. Strategy of investing in shares and mutual funds.
3. Understanding of the economy.
4. Learnings from the study of the crisis:
a. Importance of fiscal prudence for economies.

b. Too much dependence on foreign funds is destructive.
c. Self awareness necessary for an investor. It took a long time for credit agencies
to discover real fiscal position of Greece, which proved very harmful for those
investors who rely deeply on the ratings.

7. FINDINGS
The working on the project has provided understanding of the working of the
economy and the stock market. The findings in abridged form are-
1. It was living beyond means that led Greece and other EU countries into the
debt crisis. The economy of one country has impact on the economy of others.
2. Stock market depends on the corporate action but more on the behavior and the
expectations of investors in the market. Thus despite Indian companies having
very less exposure in Greek economy, the market is correcting to an
extent. The correction is more because of investor’s fear of the crisis and risk
aversion, which is making them pull out money from the market.
3. With respect to mutual funds, Fund houses are coming up with new schemes to
attract new investors. The AUM of mutual funds has fallen following the exit of
investors during the crisis. Debt, hybrid and EFT schemes are on the rise, while
equity is falling.
3. Similarities exist between the sub-prime crisis and the Greek crisis: Firstly, both
the crises have been caused by a large section of the population living beyond
its means for an extended period of time. Secondly, both the crises have rattled
global investors and put a downward pressure on two strong currency pegs: the
US Dollar and the Euro. Lastly, both have predominantly affected the
developed Western economies, while the emerging economies including the
BRICs have showed unprecedented resilience

8. CONCLUSION
1. The India share market and the mutual fund industry have been adversely
affected by the crisis. The indices fell rapidly through the months and the
market became aggressively volaltile.
2. More than the crisis actually bringing down the Indian market, it is
investors ignorance about the fundamentals and their apprehension that
makes them de-invest.
3. Currently, normalcy seems to be returning to the financial markets. The

equity markets are again seeing an inflow of funds.Markets which are
down will go up again, bringing profits to those who invest at the lower prices.
Infact, it’s the regularity with which crises occur that makes stocks such risky
investments. And that’s why stocks have historically been priced to provide a
large equity risk premium. If crises were rare, equity investing would be less
risky, the equity risk premium would be smaller, and equity returns would be
lower. In other words, BEAR MARKETS ARE A NECESSARY EVIL.
4. India can turn Euro crisis into an opportunity:

a) India can contain its fuel subsidy bill as the crisis has pulled commodity
prices, including petroleum products.
b) Lower prices will contain inflation.
c) If inflatin starts to cool off, RBI may not push up interest rates and continue
with its soft rate regime.

9. RECOMMENDATIONS
1. Investor education: in the form of programs or briefing at the ISCs, brokerage

houses itself to be more self aware about products, markets and economy before
investing. They should be made to understand that market volatility is not a reason
to be worried, but only to act cautiously. Opportunities are hidden inside.
2. Innovative products by mutual fund houses: The challenge is to create

products that are relevant to evolving regulatory conditions and changing customer
requirements. The year 2009 had witnessed a boom for mutual funds, but the
schemes are now rapidly losing attractiveness. Market revival is the current need
and for this, innovation, both in products and schemes, is the key.
3. Investment in fundamentally strong Companies at the time of bearish market,

is a good investment strategy, as they will certainly give profits once the market
revives.
4. Investments in certain sectors can be considered, which are not affected by the
unfavourable prevailing conditions and can be expected to be steady or grow
throughout the period .
61
10. REFERENCES
Books:
Khan and Jain – Financial management

NCFM- Mutual Funds Distributor’s Certification
NCFM- Capital Market (Dealers) module
Prasana Chandra – Investment Analysis and portfolio management
Websites:
www.amfiindia.com
www.bseindia.com
www.businessstandards.com
www.hdfcfund.com
www.investorzworld.com
www.moneycontrol.com
www.nseindia.com
www.valueresearchonline.com
Newspapers:
Business Standards
The Times of India

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SUMMER TRAINING REPORT ON

The European Crisis and its impact on Indian

HDFC ASSET MANAGEMENT CO. LTD.

Under the supervision

Mr. Siddharth Chatterjee

Submitted By- Submitted to-

I would like to extend my sincere thanks to Mr. Siddharth Chatterjee, my

HDFC AMC- Summer Internship Report 1

Date of project submission:

Faculty’s Comments: _________________________________________________

Prof. Arti Basu

HDFC AMC- Summer Internship Report iii

1.1 HDFC AMC Ltd. 3

1.3 HDFC mutual fund products 7

2.1 Introducing Mutual funds 9

2.2 Advantages of Mutual Funds 10

2.4 Categories of Mutual Funds

2.5 Mutual Fund structure 15

3.Introduction to the project

4.Details of the work done

HDFC AMC- Summer Internship Report iv

4.3 Impact on Indian Economy 32

4.4 The Indian share market - in the time of the crisis 36

4.5 Reaction of Investors

4.6 India- an outperformer 44

4.7 Mutual Funds-India

4.7.1 Impact of crisis 45

4.7.2 Reasons behind the crisis 48

HDFC AMC- Summer Internship Report v

HDFC AMC- Summer Internship Report 2

The registered office of the AMC is situated in Mumbai.

Particulars % of the paid up equity

Housing Development Finance Corporation 60

Standard Life Investments Limited 40

HDFC AMC- Summer Internship Report 3

BOARD OF DIRECTORS of HDFC AMC Ltd. –

Mr. Deepak S. Parekh Chairman of the board

Mr. N. Keith Skeoch CEO of Standard Life Investments Ltd.

Mr. Keki M. Mistry Associate director

Mr. James Aird Investment director

Mr. P. M. Thampi Independent director

Mr. Humayun Dhanrajgir Independent director

Dr. Deepak B. Phatak Independent director

Mr. Hoshang S. Billimoria Independent director

Mr. Rajeshwar Raj Bajaaj Independent director

Mr. Vijay Merchant Independent director

Ms. Renu S. Karnad Joint managing director

Mr. Milind Barve Managing director

Mr. Prashant Jain Chief Investment Officer

HDFC AMC- Summer Internship Report 4

HOUSING DEVELOEMENT FINANCE CORPORATION LTD

HDFC AMC- Summer Internship Report 5

STANDARD LIFE INVESTMENTS LTD.

With its headquarters in Edinburgh, Standard Life Investments Limited has an

HDFC provides a variety of products which have different objectives.

Equity /Growth Debt/ Income

HDFC Index Fund - Nifty

HDFC Core and Satellite HDFC Gilt Fund -

HDFC Short Term