Deterninats of Mutual Fund by Kavita Chetry

TABLE OF CONTENTS
Certificate from the external guide/ Organisation

Certificate from the internal guide
Declaration
Acknowledgement
Abstract Summary
CHAPTER-1: INTRODUCTION
CHAPTER-2: OVERVIEW OF GLOBAL MUTUAL FUND INDUSTRY
CHAPTER-3: OVERVIEW OF MUTUAL FUND INDUSTRY IN INDIA
CHAPTER-4: OVERVIEW OF HDFC ASSET MANAGEMENT COMPANY
CHAPTER-5: CONCEPTUAL FOUNDATION OF STUDY

 MOTIVATION OF STUDY
 LITERATURE REVIEW
CHAPTER-6 BASIC FRAMEWORK OF STUDY

 OBJECTIVE OF STUDY
 METHODLOGY
 SOURCES OF DATA
 SCOPE OF THE STUDY
 LIMITATION OF STUDY
CHAPTER-6: DATA ANALYSIS AND INTERPRETATION
CHAPTER-7: FINDINGS AND CONCLUSION
BIBLIOGRAPHY
1
CHAPTER-1
Basics of mutual funds
The article mentioned below, is for the investors who have not yet started investing in
mutual funds, but willing to explore the opportunity and also for those who want to clear
their basics for what is mutual fund and how best it can serve as an investment tool.
Getting Started
Before we move to explain what is mutual fund, it’s very important to know the area in
which mutual funds works, the basic understanding of stocks and bonds.
Stocks
2
Stocks represent shares of ownership in a public company. Examples of public
companies include Reliance, ONGC and Infosys. Stocks are considered to be the most
common owned investment traded on the market
Bonds
Bonds are basically the money which you lend to the government or a company, and in
return you can receive interest on your invested amount, which is back over
predetermined amounts of time. Bonds are considered to be the most common lending
investment traded on the market.
There are many other types of investments other than stocks and bonds (including
annuities, real estate, and precious metals), but the majority of mutual funds invest in
stocks and/or bonds.
Working of Mutual Fund
3
Regulatory Authorities
To protect the interest of the investors, SEBI formulates policies and regulates the
mutual funds. It notified regulations in 1993 (fully revised in 1996) and issues guidelines
from time to time. MF either promoted by public or by private sector entities including
one promoted by foreign entities is governed by these Regulations.
SEBI approved Asset Management Company (AMC) manages the funds by making
investments in various types of securities. Custodian, registered with SEBI, holds the
securities of various schemes of the fund in its custody.
According to SEBI Regulations, two thirds of the directors of Trustee Company or board
of trustees must be independent.
The Association of Mutual Funds in India (AMFI) reassures the investors in units of
mutual funds that the mutual funds function within the strict regulatory framework. Its
objective is to increase public awareness of the mutual fund industry.
AMFI also is engaged in upgrading professional standards and in promoting best

industry practices in diverse areas such as valuation, disclosure, transparency etc
What is a Mutual Fund?
A mutual fund is just the connecting bridge or a financial intermediary that allows a group
of investors to pool their money together with a predetermined investment objective. The
mutual fund will have a fund manager who is responsible for investing the gathered
money into specific securities (stocks or bonds). When you invest in a mutual fund, you
4
are buying units or portions of the mutual fund and thus on investing becomes a
shareholder or unit holder of the fund.
Mutual funds are considered as one of the best available investments as

compare to others they are very cost efficient and also easy to invest in, thus by pooling
money together in a mutual fund, investors can purchase stocks or bonds with much
lower trading costs than if they tried to do it on their own. But the biggest advantage to
mutual funds is diversification, by minimizing risk & maximizing returns.
Diversification
Diversification is nothing but spreading out your money across available or different
types of investments. By choosing to diversify respective investment holdings reduces
risk tremendously up to certain extent.
The most basic level of diversification is to buy multiple stocks rather than just one stock.
Mutual funds are set up to buy many stocks. Beyond that, you can diversify even more
by purchasing different kinds of stocks, then adding bonds, then international, and so on.
It could take you weeks to buy all these investments, but if you purchased a few mutual
funds you could be done in a few hours because mutual funds automatically diversify in
a predetermined category of investments (i.e. - growth companies, emerging or mid size
companies, low-grade corporate bonds, etc).
Types of Mutual Funds Schemes in India
Wide variety of Mutual Fund Schemes exists to cater to the needs such as financial
position, risk tolerance and return expectations etc. thus mutual funds has Variety of
flavors, Being a collection of many stocks, an investors can go for picking a mutual fund
might be easy. There are over hundreds of mutual funds scheme to choose from. It is
easier to think of mutual funds in categories, mentioned below.
Overview of existing schemes existed in mutual fund category: BY STRUCTURE
5
1. Open - Ended Schemes
An open-end fund is one that is available for subscription all through the year.
These do not have a fixed maturity. Investors can conveniently buy and sell units at
Net Asset Value ("NAV") related prices. The key feature of open-end schemes is
liquidity.
2.Close - Ended Schemes
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can
invest in the scheme at the time of the initial public issue and thereafter they can buy or
sell the units of the scheme on the stock exchanges where they are listed. In order to
provide an exit route to the investors, some close-ended funds give an option of selling
back the units to the Mutual Fund through periodic repurchase at NAV related prices.
SEBI Regulations stipulate that at least one of the two exit routes is provided to the
investor.
3.Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and
close-ended schemes. The units may be traded on the stock exchange or may be open
for sale or redemption during pre-determined intervals at NAV related prices.
6
The risk return trade-off indicates that if investor is willing to take higher risk then
correspondingly he can expect higher returns and vise versa if he pertains to lower risk
instruments, which would be satisfied by lower returns. For example, if an investors opt
for bank FD, which provide moderate return with minimal risk. But as he moves ahead to
invest in capital protected funds and the profit-bonds that give out more return which is
slightly higher as compared to the bank deposits but the risk involved also increases in
the same proportion.
Thus investors choose mutual funds as their primary means of investing, as Mutual
funds provide professional management, diversification, convenience and liquidity. That
doesn’t mean mutual fund investments risk free. This is because the money that is
pooled in are not invested only in debts funds which are less riskier but are also invested
in the stock markets which involves a higher risk but can expect higher returns. Hedge
fund involves a very high risk since it is mostly traded in the derivatives market which is
considered very volatile.
Overview of existing schemes existed in mutual fund category: BY NATURE
7
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:
• Diversified Equity Funds

• Mid-Cap Funds
• Sector Specific Funds
• Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on
the risk-return matrix.
2. Debt funds
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt
papers. By investing in debt instruments, these funds ensure low risk and provide stable
income to the investors. Debt funds are further classified as:
Gilt Funds: Invest their corpus in securities issued by Government, popularly known as
Government of India debt papers. These Funds carry zero Default risk but are
associated with Interest Rate risk. These schemes are safer as they invest in papers
backed by Government
Income Funds: Invest a major portion into various debt instruments such as bonds,
corporate debentures and Government securities.
MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
8
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.
Short Term Plans (STPs): Meant for investment horizon for three to six months. These
funds primarily invest in short term papers like Certificate of Deposits (CDs) and
Commercial Papers (CPs). Some portion of the corpus is also invested in corporate
debentures.
Liquid Funds: Also known as Money Market Schemes, These funds provides easy
liquidity and preservation of capital. These schemes invest in short-term instruments like
Treasury Bills, inter-bank call money market, CPs and CDs. These funds are meant for
short-term cash management of corporate houses and are meant for an investment
horizon of 1day to 3 months. These schemes rank low on risk-return matrix and are
considered to be the safest amongst all categories of mutual funds.
3. Balanced funds
As the name suggest they, are a mix of both equity and debt funds. They invest in both
equities and fixed income securities, which are in line with pre-defined investment
objective of the scheme. These schemes aim to provide investors with the best of both
the worlds. Equity part provides growth and the debt part provides stability in returns.
Further the mutual funds can be broadly classified on the basis of investment
parameter viz,
Each category of funds is backed by an investment philosophy, which is pre-defined in

the objectives of the fund. The investor can align his own investment needs with the
funds objective and invest accordingly
9
By investment objective
Growth Schemes: Growth Schemes are also known as equity schemes. The aim of these
schemes is to Provide capital appreciation over medium to long term. These schemes
normally invest a major part of their fund in equities and are willing to bear short-term
decline in value for possible future appreciation
.Income Schemes: Income Schemes are also known as debt schemes. The aim of these
schemes is to provide regular and steady income to investors. These schemes generally
invest in fixed income securities such as bonds and corporate debentures. Capital
appreciation in such schemes may be limited.
Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These schemes
invest in both shares and fixed income securities, in the proportion indicated in their offer
documents (normally 50:50).
Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer,
short-term instruments, such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money
Other schemes
Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax
laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions
made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
Index Schemes: Attempt to replicate the performance of a particular index such as the
BSE Sensex or the NSE 50. The portfolio of these schemes will consist of only those
stocks that constitute the index. The percentage of each stock to the total holding will be
identical to the stocks index weightage. And hence, the returns from such schemes
would be more or less equivalent to those of the Index.
10
Sector Specific Schemes: These are the funds/schemes which invest in the securities of
only those sectors or industries as specified in the offer documents. e.g.
Pharmaceuticals, Software, Fast Moving Consumer Goods (FMCG), Petroleum stocks,
etc. The returns in these funds are dependent on the performance of the respective
sectors/industries. While these funds may give higher returns, they are more risky
compared to diversified funds. Investors need to keep a watch on the performance of
those sectors/industries and must exit at an appropriate time.
Types of returns
There are three ways, where the total returns provided by mutual funds can be enjoyed
by investors
• Income is earned from dividends on stocks and interest on bonds. A fund pays
out nearly all income it receives over the year to fund owners in the form of a
distribution.
• If the fund sells securities that have increased in price, the fund has a capital
gain. Most funds also pass on these gains to investors in a distribution.
• If fund holdings increase in price but are not sold by the fund manager, the fund's
shares increase in price. You can then sell your mutual fund shares for a profit.
Funds will also usually give you a choice either to receive a check for
distributions or to reinvest the earnings and get more shares
Pros & cons of investing in mutual funds:
For investments in mutual fund, one must keep in mind about the Pros and cons of
investments in mutual fund.
Advantages of Investing Mutual Funds:
11
1.Professional Management - The basic advantage of funds is that, they are professional
managed, by well qualified professional. Investors purchase funds because they do not
have the time or the expertise to manage their own portfolio. A mutual fund is considered
to be relatively less expensive way to make and monitor their investments.
2. Diversification - Purchasing units in a mutual fund instead of buying individual

stocks or bonds, the investors risk is spread out and minimized up to certain extent.
The idea behind diversification is to invest in a large number of assets so that a loss
in any particular investment is minimized by gains in others
1. . Economies of Scale - Mutual fund buy and sell large amounts of securities at a
time, thus help to reducing transaction costs, and help to bring down the average
cost of the unit for their investors.
2. . Liquidity - Just like an individual stock, mutual fund also allows investors to
liquidate their holdings as and when they want.
3. . Simplicity - Investments in mutual fund is considered to be easy, compare to

other available instruments in the market, and the minimum investment is small.
Most AMC also have automatic purchase plans whereby as little as Rs. 2000,
where SIP start with just Rs.50 per month basis.
Disadvantages of Investing Mutual Funds:
1.Professional Management- Some funds doesn’t perform in neither the market, as their
management is not dynamic enough to explore the available opportunity in the market,
thus many investors debate over whether or not the so-called professionals are any
better than mutual fund or investor him self, for picking up stocks.
2. Costs – The biggest source of AMC income, is generally from the entry & exit load
which they charge from an investors, at the time of purchase. The mutual fund industries
are thus charging extra cost under layers of jargon.
12
3.Dilution - Because funds have small holdings across different companies, high returns
from a few investments often don't make much difference on the overall return. Dilution
is also the result of a successful fund getting too big. When money pours into funds that
have had strong success, the manager often has trouble finding a good investment for
all the new money.
Taxes - when making decisions about your money, fund managers don't consider your
personal tax situation. For example, when a fund manager sells a security, a capital-gain
tax is triggered, which affects how profitable the individual is from the sale. It might have
been more advantageous for the individual to defer the capital gains liability.
Investments in Mutual Fund
Mutual Funds over the years have gained immensely in their popularity. Apart from the
many advantages that investing in mutual funds provide like diversification, professional
management, the ease of investment process has proved to be a major enabling factor.
However, with the introduction of innovative products, the world of mutual funds
nowadays has a lot to offer to its investors. With the introduction of diverse options,
investors needs to choose a mutual fund that meets his risk acceptance and his risk
capacity levels and has similar investment objectives as the investor.
With the plethora of schemes available in the Indian markets, an investors needs to
evaluate and consider various factors before making an investment decision. Since not
everyone has the time or inclination to invest and do the analysis himself, the job is best
left to a professional. Since Indian economy is no more a closed market, and has started
integrating with the world markets, external
factors which are complex in nature affect us too. Factors such as an increase in short-
term US interest rates, the hike in crude prices, or any major happening in Asian market
have a deep impact on the Indian stock market. Although it is not possible for an
individual investor to understand Indian companies and investing in such an
environment, the process can become fairly time consuming. Mutual funds (whose fund
managers are paid to understand these issues and whose Asset Management Company
13
invests in research) provide an option of investing without getting lost in the
complexities.
Most importantly, mutual funds provide risk diversification: diversification of a portfolio is

amongst the primary tenets of portfolio structuring, and a necessary one to reduce the
level of risk assumed by the portfolio holder. Most of us are not necessarily well qualified
to apply the theories of portfolio structuring to our holdings and hence would be better off
leaving that to a professional. Mutual funds represent one such option.
Lastly, Evaluate past performance, look for stability and although past performance is no
guarantee of future performance, it is a useful way to assess how well or badly a fund
has performed in comparison to its stated objectives and peer group. A good way to do
this would be to identify the five best performing funds (within your selected investment
objectives) over various periods, say 3 months, 6 months, one year, two years and three
years. Shortlist funds that appear in the top 5 in each of these time horizons as they
would have thus demonstrated their ability to be not only good but also, consistent
performers.
An investor can choose the fund on various criteria according to his investment
objective, to name a few:
• Thorough analysis of fund performance of schemes over the last few years
managed by the fund house and its consistent return in the volatile market.
• The fund house should be professional, with efficient management and

administration.
The corpus the fund is holding in its scheme over the period of time.
• Proper adequacies of disclosures have to seen and also make a note of any
hidden charges carried by them.
14
• The price at which you can enter/exit (i.e. entry load / exit load) the scheme and
its impact on overall return
CHAPTER -2
GLOBAL MUTUAL FUND INDUSTRY
2.1) H istory of mutual fund(you can put this in the BASIS OF MUTUAL FUNDS IN
LAST)
15
The modern mutual fund was first introduced in Belgium in 1822. This form of
investment soon spread to Great Britain and France. Mutual funds became popular in
the United States in the 1920s and continue to be popular since the 1930s, especially
open-end mutual funds. Mutual funds experienced a period of tremendous growth after
World War II, especially in the 1980s and 1990s.
In the Beginning
Historians are uncertain of the origins of investment funds; some cite the closed-end
investment companies launched in the Netherlands in 1822 by King William I as the first
mutual funds, while others point to a Dutch merchant named Adriaan van Ketwich whose
investment trust created in 1774 may have given the king the idea. Van Ketwich
probably theorized that diversification would increase the appeal of investments to
smaller investors with minimal capital. The name of van Ketwich's fund, Eendragt Maakt
Magt, translates to "unity creates strength". The next wave of near-mutual funds
included an investment trust launched in Switzerland in 1849, followed by similar
vehicles created in Scotland in the 1880s.
The idea of pooling resources and spreading risk using closed-end investments
soon took root in Great Britain and France, making its way to the United States in the
1890s. The Boston Personal Property Trust, formed in 1893, was the first closed-end
fund in the U.S. The creation of the Alexander Fund in Philadelphia, Pennsylvania, in
1907 was an important step in the evolution toward what we know as the modern mutual
fund. The Alexander Fund featured semi-annual issues and allowed investors to make
withdrawals on demand.
The Arrival of the Modern Fund

The creation of the Massachusetts Investors' Trust in Boston, Massachusetts, heralded
the arrival of the modern mutual fund in 1924. The fund went public in 1928, eventually
spawning the mutual fund firm known today as MFS Investment Management. State
Street Investors' Trust was the custodian of the Massachusetts Investors' Trust. Later,
State Street Investors started its own fund in 1924 with Richard Paine, Richard
Saltonstall and Paul Cabot at the helm. Saltonstall was also affiliated with Scudder,
Stevens and Clark, an outfit that would launch the first no-load fund in 1928. A
16
momentous year in the history of the mutual fund, 1928 also saw the launch of the
Wellington Fund, which was the first mutual fund to include stocks and bonds, as
opposed to direct merchant bank style of investments in business and trade.
Regulation and Expansion

By 1929, there were 19 open-end mutual funds competing with nearly 700 closed-end
funds. With the stock market crash of 1929, the dynamic began to change as highly-
leveraged closed-end funds were wiped out and small open-end funds managed to
survive.
Government regulators also began to take notice of the fledgling mutual fund industry.
The creation of the Securities and Exchange Commission (SEC), the passage of
the Securities Act of 1933 and the enactment of the Securities Exchange Act of 1934 put
in place safeguards to protect investors: mutual funds were required to register with the
SEC and to provide disclosure in the form of a prospectus. The Investment Company
Act of 1940 put in place additional regulations that required more disclosures and sought
to minimize conflicts of interest..)
The mutual fund industry continued to expand. At the beginning of the 1950s, the
number of open-end funds topped 100. In 1954, the financial markets overcame their
1929 peak, and the mutual fund industry began to grow in earnest, adding some 50 new
funds over the course of the decade. The 1960s saw the rise of aggressive growth
funds, with more than 100 new funds established and billions of dollars in new asset
inflows.
Hundreds of new funds were launched throughout the 1960s until the bear market of
1969 cooled the public appetite for mutual funds. Money flowed out of mutual funds as
quickly as investors could redeem their shares, but the industry's growth later resumed.
Latter Developments
In 1971, William Fouse and John McQuown of Wells Fargo Bank established the first
index fund, a concept that John Bogle would use as a foundation on which to build The
Vanguard Group, a mutual fund powerhouse renowned for low-cost index funds. The
1970s also saw the rise of the no-load fund. This new way of doing business had an
17
enormous impact on the way mutual funds were sold and would make a major
contribution to the industry's success.
With the 1980s and '90s came bull market mania and previously obscure fund managers
became superstars; Max Heine, Michael Price and Peter Lynch, the mutual fund
industry's top gunslingers, became household names and money poured into the retail
investment industry at a stunning pace. More recently, the burst of the tech bubble and a
spate of scandals involving big names in the industry took much of the shine off of the
industry's reputation. Shady dealings at major fund companies demonstrated that mutual
funds aren't always benign investments managed by folks who have their shareholders'
best interests in mind and who treat all investors equally.
Conclusion
Despite the 2003 mutual fund scandals, the story of the mutual fund is far from over. In
fact, the industry is still growing, opening up new markets around the world. The first
Korean mutual fund, the Mirae Asset Park Hyun-joo Fund, was launched in Dec 1998.
Today there are 20 trillion Korean won (about US$19.32 billion) invested in Korea's
funds. In the U.S. alone there are more than 10,000 mutual funds, and if one accounts
for all share classes of similar funds, fund holdings are measured in the trillions of
dollars. Despite the launch of separate accounts, exchange-traded funds and other
competing products, the mutual fund industry remains healthy and fund ownership
continues to grow.
2.2) The worldwide mutual fund market
The global mutual funds market reached a value of $13.43 trillion in 2003, having
grown with a compound annual growth rate (CAGR) of 2.3% in the 1999-2003 period.
The leading revenue source for the global mutual funds market in 2003 was the
equity funds sector, which accounted for 44.2% of the market’s value.
The European and Asia-Pacific markets are looking at bright futures, due to new
innovative fund concepts and expanding economies, especially in the emerging markets
of Asia and Eastern Europe.
18
Most mutual fund markets around the world experienced a significant sales
slowdown and a decline in assets under management in the first couple of years
of this decade. From strong growth during much of the 1990’s, many mutual
fund markets experienced declines in assets under management and revenues,
and a rapid increase in redemption levels from 2000 through 2002.
Economic uncertainty, declining stock markets, the string of high profile
corporate failures; as well as the global uncertainty that emerged from the
increase in terrorism, changed the outlook of many investors from the investment
attitudes of the late 1990’s boom. Of course, most trends are overly exaggerated
at their peak and the lack of appeal in equities kept many investors out of the
market in 2003, or discouraged them from putting additional savings into equities
at a time when prices were low.
By the end of 2003, most countries around the world were experiencing
improving economies, following the recession and economic slowdown from
2000 through 2002. Savers who were not substantially invested in equities in
2003 lost out as many stock markets rebounded from the 2002 lows. By mid-
2006 the global mutual fund business had grown to US$19,400 billion, up from
US$11,900 billion at the end of 2000.
The mutual fund business around the world has been increasingly consolidated
to the large multi-line financial services companies. The number of large independent
mutual fund management businesses declined rapidly during the 1990’s as large banks
and insurance companies bought their way to market
share in the funds business. At the same time, the number of multinational and
global mutual fund players increased as the larger companies moved boldly to
global expansion during the 1990’s.
Analytica’s new report on worldwide mutual fund markets will identify the major
drivers for growth in each market, assess the expected flow of new
money into mutual funds, develop projections for overall growth in assets under
management, and identify those markets likely to offer the best growth potential
over the next decade.
19
Economic and demographic factors will continue to play a major role in the
ongoing development of mutual fund markets worldwide. Aging baby boomers are
getting more serious about retirement savings, and governments around the world are
increasingly worrying about how they will continue to fund pay-asyou-go retirement
benefits for their aging populations. Those countries that ntroduce mandatory defined
contribution pension plans with private sector participation will provide a boost to the
mutual fund business. In other countries, the encouragement of increased private
savings through improved tax treatments, such as lower income taxes on interest and
investment income, Wealth management has been the buzzword of the past decade, as
most financial institutions around the world increased their attention to the high net worth
market. However, the reality in many countries is that the mutual fund business is funded
by savers in the middle market, who have much more modest savings, and limited
options if they want to invest in equity-based products.In spite of the boom in on-line
(discount) brokerage around the world as a result of the internet revolution, the reality is
that less than 25% of people with savings to invest are comfortable investing on their
own. The rest need the help of a financial advisor. The array of available products is
simply too complex for most individuals to be comfortable selecting which products and
which suppliers to use. Complexity is continuing to increase, and most country markets
have their own unique product characteristics, driven by domestic savings and
retirement planning rules, income tax issues, and the historic development of the
market.
The focus of our report is on the companies that provide mutual funds and the
potential growth and profitability of this business. Our financial analysis will
assess the financial performance of the companies in the mutual fund business
around the world. Based on this analysis we will present a series of company
rankings based on financial performance, global market share and, for the large
companies where mutual funds are only a portion of the overall business, quantify the
financial impact of the mutual fund business on these companies. The analysis will
segment the market by type of supplier, including specialist retail mutual fund managers,
banks, insurance companies, bancassurance complexes, and institutional fund
managers with retail products. The results of this analysis will be presented in a
20
comprehensive market analysis and forecasts report that will provide an easy to use
assessment of worldwide mutual fund markets and their growth potential, at a very
economical
2.3) The top performing mutual in the world

The denomination below doesnot indicate their ranking
1Vanguard 500 Index Fund

2. vanguard GNMA inv
3. Calvert Social Bond A
4. Calvert Income Fund A
5. Pax World Balanced
6. Fidelity Contrafund
7. Fidelity Government Income Fund
8. Fidelity Value Fund
9. Alpine U.S. Real Estate Eq Y
10. Vanguard Insured Long Term T-E Inv
1. Vanguard 500 Index Fund (VFINX)

Statistics as of 05/31/2005
Fund family: Vanguard Funds
Investment objective: Growth
Overall Morningstar Rating: 4 Stars
Inception: 08/31/1976
Min. initial investment: $3,000
Min. IRA investment: $1,000
Management Fees %: .16% per year
Expense ratio %: .18% per year
12b1 Expense %: N/
No Front Load or Back Load
Returns (average):
1 year: 8.11%
3 years: 5.49%
5 years: -2.01%
10 years: 10.10%
Since inception: 12.16%
21
Growth of $10,000 (1994 - 05/2005): Ending value of $31,101.
Source: Morningstar
2. Vanguard GNMA Inv (VFIIX)

Fund family: Vanguard
Investment objective: Income
Holding: US Government & Agency bonds
Min. subsequent investment: $100/month
12b1 Expense %: N/A
Returns (average):
1 year: 6.72%
3 years: 4.80%
5 years: 6.94%
10 years: 6.62%
Growth of $10,000 (/1994 - 05/2005): Ending value of $20,657.
3. Calvert Social Bond A (CSIBX)

Fund family: Calvert Group
Holding: Investment Grade Bonds
22
Expense ratio %: 1.18% per year
12b1 Expense %: .20% per year
Front Load: 3.75%
Returns (average):
1 year: 8.51%
3 years: 6.96%
5 years: 8.65%
10 years: 6.86%
Growth of $10,000 (1994 - 05/2005): Ending value of $20,222
4. Calvert Income Fund A (CFICX)

Fund family: Calvert Group
Holding: Investment Grade Bonds
Front Load: 3.75%
Returns (average):
1 year: 6.63%
3 years: 7.51%
5 years: 9.04%
10 years: 8.32%
23
5. Pax World Balanced (PAXWX)

Fund family: Pax World
Investment objective: Growth & Income
Holding: A mix of stock and bonds
Min. initial investment: $250
Min. IRA investment: $250
Returns (average):
1 year: 11.14%
3 years: 7.24%
5 years: 3.21%
10 years: 10.63%
Since inception: N/A
6. Fidelity Contrafund (FCNTX)

Fund family: Fidelity Investments
Holding: Stocks considered to be �unpopular� or �undervalued�
12b1 Expense %: N/A
24
Returns (average):
1 year: 12.46%
3 years: 9.34%
5 years: 3.00%
10 years: 12.54%
7. Fidelity Government Income Fund (FGOVX)

Holding: US Government Short & Intermediate Term Bonds
12b1 Expense %: N/A
Returns (average):
1 year: 6.13%
3 years: 5.32%
5 years: 7.05%
10 years: 6.16%
8. Fidelity Value Fund (FDVLX)

Investment objective: Growth & Income
25
Holding: Stocks that are considered �undervalued�
12b1 Expense %: N/A
Returns (average):
1 year: 19.00%
3 years: 11.51%
5 years: 12.69%
10 years: 12.57%
9. Alpine U.S. Real Estate Eq Y (EUEYX)

Fund family: Alpine Funds
Holding: Undervalued real estate securities
12b1 Expense %: N/A
Returns (average):
1 year: 49.83%
3 years: 34.08%
5 years: 33.78%
10 years: 21.22%
26
10. Vanguard Insured Long-Term T-E Inv (VILPX)

Fund family: Vanguard
Investment objective: Tax Free Income
Holding: Tax exempt municipal bonds
12b1 Expense %: N/A
Returns (average):
1 year: 7.97%
3 years: 6.08%
5 years: 7.50%
10 years: 6.13%
CHAPTER-3
PRESENT STATUS OF MUTUAL FUND INDUSTRY IN INDIA
27
3.1) The Evolution
The formation of Unit Trust of India marked the evolution of the Indian mutual fund
industry in the year 1963. The primary objective at that time was to attract the small
investors and it was made possible through the collective efforts of the Government of
India and the Reserve Bank of India. The history of mutual fund industry in India can be
better understood divided into following phases:
Phase 1. Establishment and Growth of Unit Trust of India - 1964-87
Unit Trust of India enjoyed complete monopoly when it was established in the year 1963
by an act of Parliament. UTI was set up by the Reserve Bank of India and it continued to
operate under the regulatory control of the RBI until the two were de-linked in 1978 and
the entire control was tranferred in the hands of Industrial Development Bank of India
(IDBI). UTI launched its first scheme in 1964, named as Unit Scheme 1964 (US-64),
which attracted the largest number of investors in any single investment scheme over
the years.
UTI launched more innovative schemes in 1970s and 80s to suit the needs of different
investors. It launched ULIP in 1971, six more schemes between 1981-84, Children's Gift
Growth Fund and India Fund (India's first offshore fund) in 1986, Mastershare (Inida's
first equity diversified scheme) in 1987 and Monthly Income Schemes (offering assured
returns) during 1990s. By the end of 1987, UTI's assets under management grew ten
times to Rs 6700 crores.
Phase II. Entry of Public Sector Funds - 1987-1993

The Indian mutual fund industry witnessed a number of public sector players entering
the market in the year 1987. In November 1987, SBI Mutual Fund from the State Bank of
India became the first non-UTI mutual fund in India. SBI Mutual Fund was later followed
28
by Canbank Mutual Fund, LIC Mutual Fund, Indian Bank Muatual Fund, Bank of India
Mutual Fund, GIC Mutual Fund and PNB Mutual Fund. By 1993, the assets under
Amount Assets Under Mobilisation as % of

1992-93
Mobilised Management gross Domestic Savings
UTI 11,057 38,247 5.2%
Public Sector 1,964 8,757 0.9%
Total 13,021 47,004 6.1%
management of the industry increased seven times to Rs. 47,004 crores. However, UTI
remained to be the leader with about 80% market share.
PrivPhase III. Emergence of Private Secor Funds - 1993-96
The permission given to private sector funds including foreign fund management
companies (most of them entering through joint ventures with Indian promoters) to enter
the mutal fund industry in 1993, provided a wide range of choice to investors and more
competition in the industry. Private funds introduced innovative products, investment
techniques and investor-servicing technology. By 1994-95, about 11 private sector funds
had launched their schemes.
Phase IV. Growth and SEBI Regulation - 1996-2004

The mutual fund industry witnessed robust growth and stricter regulation from the SEBI
after the year 1996. The mobilisation of funds and the number of players operating in the
industry reached new heights as investors started showing more interest in mutual
29
funds.
Invetors' interests were safeguarded by SEBI and the Government offered tax benefits to
the investors in order to encourage them. SEBI (Mutual Funds) Regulations, 1996 was
introduced by SEBI that set uniform standards for all mutual funds in India. The Union
Budget in 1999 exempted all dividend incomes in the hands of investors from income
tax. Various Investor Awareness Programmes were launched during this phase, both by
SEBI and AMFI, with an objective to educate investors and make them informed about
the mutual fund industry.
In February 2003, the UTI Act was repealed and UTI was stripped of its Special legal
status as a trust formed by an Act of Parliament. The primary objective behind this was
to bring all mutal fund players on the same level. UTI was re-organised into two parts: 1.
The Specified Undertaking, 2. The UTI Mutual Fund Presently Unit Trust of India operates
under the name of UTI Mutual Fund and its past schemes (like US-64, Assured Return
Schemes) are being gradually wound up. However, UTI Mutual Fund is still the largest
player in the industry. In 1999, there was a significant growth in mobilisation of funds
from investors and assets under management.
Phase V. Growth and Consolidation - 2004 Onwards

The industry has also witnessed several mergers and acquisitions recently, examples of
which are acquisition of schemes of Alliance Mutual Fund by Birla Sun Life, Sun F&C
Mutual Fund and PNB Mutual Fund by Principal Mutual Fund. Simultaneously, more
international mutal fund players have entered India like Fidelity, Franklin Templeton
Mutual Fund etc. There were 29 funds as at the end of March 2006. This is a continuing
phase of growth of the industry through consolidation and entry of new international and
private sector players.
30
3.2) TOP PERFPORMING FUNDS OF INDIA
TOP PERFORMING FUNDS (based on one year returns)
Category Top Performer 3 mth 6 mth 1 year
Equity Diversified Sundaram Media&Ent. Opp-RP (G) 45.40 23.80 21.50
Equity Tax Saving Can Robeco Equity TaxSaver (G) 71.20 47.80 16.30
Equity Index Kotak PSU Bank ETF 87.40 35.60 42.20
Equity Institutional ICICI Pru Focused Equity -IO-I 53.40 46.90 12.70
Equity - Banking Sundaram Fin-Serv. Opp.-RP (G) 85.90 40.50 28.50
Equity - FMCG Franklin FMCG Fund (G) 25.40 19.70 0.30
Equity - MNC UTI MNC Fund (G) 34.40 33.20 5.70
Equity Others UTI Transport & Logistics (G) 48.80 50.00 11.40
Equity - Pharma Reliance Pharma Fund (G) 47.70 32.10 9.60
Equity -
Franklin Infotech Fund (G) 46.10 42.10 -17.40
Technology
Balanced Reliance RSF - Balanced (G) 58.10 43.90 20.10
Monthly Income
Reliance MIP (G) 13.70 9.90 25.20
Plan
Hybrid ING Opti AA Multi-Mgr. FoF (G) 46.10 21.50 17.40
Debt Speciality Can Robeco CIGO (G) 13.50 21.80 18.70
Debt - Short Term Can Robeco Income (G) 4.20 5.60 30.40
31
Debt - Long Term ICICI Pru Gilt Inv Plan - PF 6.20 -0.10 41.00
Debt - Floating
HDFC Floating Rate Inc -LTP(G) 2.60 4.70 10.30
Rate
Debt - Institutional ICICI Pru Income-Ins. Plan (G) 5.10 1.30 24.70
Money Market UTI Short Term Income - RP (G) 4.60 5.70 10.60
Gold Benchmark Gold BeES -6.60 13.10 15.00
Gold Kotak Gold ETF -6.60 11.50 15.00
Gold UTI Gold Exchange Traded Fund -6.50 11.50 15.00
Gold Quantum Gold Fund -6.50 11.40 15.00
CHAPTER-4
HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC)
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 at Ramon House, 3rd Floor, H.T. Parekh
Marg, 169, Backbay Reclamation, Churchgate, Mumbai - 400 020.
In terms of the Investment Management Agreement, the Trustee has appointed the
HDFC Asset Management Company Limited to manage the Mutual Fund. The paid up
capital of the AMC is Rs. 25.161 crore.
The present equity shareholding pattern of the AMC is as follows :

Particulars % of the paid up equity capital
Housing Development Finance Corporation Limited 60
Standard Life Investments Limited 40
Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, following a
review of its overall strategy, had decided to divest its Asset Management business in
India. The AMC had entered into an agreement with ZIC to acquire the said business,
subject to necessary regulatory approvals. On obtaining the regulatory approvals, the
32
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*
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 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 11 closed ended Schemes of the HDFC Mutual Fund viz.
HDFC Long Term Equity Fund, HDFC Mid-Cap Opportunities Fund, HDFC Infrastructure
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, HDFC Fixed Maturity Plans - Series VI, HFDC Fixed Maturity Plans -
Series VII and HFDC Fixed Maturity Plans - Series VIII.
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,
33
1993. The Certificate of Registration is valid from January 1, 2007 to December 31,
2009.
The Board of Directors of the HDFC Asset Management Company Limited (AMC)
consists of the following eminent persons.
• Mr. Deepak S. Parekh

• Mr. N. Keith Skeoch
• Mr. Keki M. Mistry
• Mr. Mark Connolly
• Mr. P. M. Thampi
• Mr. Humayun Dhanrajgir
• Dr. Deepak B. Phatak
• Mr. Hoshang S. Billimoria
• Mr. Rajeshwar Raj Bajaaj
• Mr. Vijay Merchant
• Ms. Renu S. Karnad
• Mr. Milind Barve
Trustees
HDFC Trustee Company Limited, a company incorporated under the Companies Act,
1956 is the Trustee to HDFC Mutual Fund vide the Trust deed dated June 8, 2000, as
amended from time to time. HDFC Trustee Company Ltd is wholly owned subsidiary of
HDFC
The Board of Directors of HDFC Trustee company Limited consists of the

following eminent persons.
• Mr. Anil Kumar Hirjee

• Mr. James Aird
• Mr. Shishir K. Diwanji
• Mr. Ranjan Sanghi
• Mr. V. Srinivasa Rangan
SPONSORS
Housing Development Finance Corporation Limited (HDFC)
HDFC was incorporated in 1977 as the first specialised mortgage company in India.
HDFC provides financial assistance to individuals, corporates 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 has a client base
of around 12 lac borrowers, around 8 lac depositors, over 1.08 lac shareholders and
34
50,000 deposit agents, as at March 31, 2008. HDFC has raised funds from international
agencies such as the World Bank, IFC (Washington), USAID, DEG, ADB and KfW,
international syndicated loans, domestic term loans from banks and insurance
companies, bonds and deposits.
Standard Life Investments Limited
The Standard Life Assurance Company was established in 1825 and has considerable
experience in global financial markets. The company was present in the Indian life
insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai.
The company re-entered the Indian market in 1995, when an agreement was signed with
HDFC to launch an insurance joint venture. On April 2006, the Board of The Standard
Life Assurance Company recommended that it should demutualise and Standard Life plc
float on the London Stock Exchange. At a Special General Meeting held in May voting
members overwhelmingly voted in favour of this. The Court of Session in Scotland
approved this in June and Standard Life plc floated on the London Stock Exchange on
10th July 2006. Standard Life Investments was launched as an investment management
company in 1998.
HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in
the country with consistent and above average fund performance across categories
since its incorporation on December 10, 1999. While our past experience does make us
a veteran, but when it comes to investments, we have never believed that the
experience is enough
Investment Philosophy
The single most important factor that drives HDFC Mutual Fund is its belief to give the
investor the chance to profitably invest in the financial market, without constantly
worrying about the market swings. To realize this belief, HDFC Mutual Fund has set up
the infrastructure required to conduct all the fundamental research and back it up with
effective analysis. Our strong emphasis on managing and controlling portfolio risk avoids
chasing the latest “fads” and trends.
Achievements
35
HDFC Asset Management Company (AMC) is the first AMC in India to have been
assigned the ‘CRISIL Fund House Level – 1’ rating. This is its highest Fund Governance
and Process Quality Rating which reflects the highest governance levels and fund
management practices at HDFC AMC It is the only fund house to have been assigned
this rating for two years in succession. Over the past, we have won a number of awards
and accolades for our performance
CHAPTER -5
OBJECTIVE OF THE STUDY
• To know the variables or factors which effects the performance of mutual

fund
• To find out the determinants essential to calculate the performance of

mutual funds
36
CHAPTER-6
METHODOLOGY
37

Deterninats of Mutual Fund by Kavita Chetry

Caricato da

Informazioni sul documento

Descrizione originale:

Copyright

Formati disponibili

Condividi questo documento

Condividi o incorpora il documento

Opzioni di condivisione

Hai trovato utile questo documento?

Questo contenuto è inappropriato?

Copyright:

Formati disponibili

Deterninats of Mutual Fund by Kavita Chetry

Caricato da

Copyright:

Formati disponibili

TABLE OF CONTENTS

Certificate from the external guide/ Organisation

CHAPTER-2: OVERVIEW OF GLOBAL MUTUAL FUND INDUSTRY

CHAPTER-3: OVERVIEW OF MUTUAL FUND INDUSTRY IN INDIA

CHAPTER-4: OVERVIEW OF HDFC ASSET MANAGEMENT COMPANY

CHAPTER-5: CONCEPTUAL FOUNDATION OF STUDY

CHAPTER-6 BASIC FRAMEWORK OF STUDY

CHAPTER-6: DATA ANALYSIS AND INTERPRETATION

CHAPTER-7: FINDINGS AND CONCLUSION

Basics of mutual funds

Working of Mutual Fund

AMFI also is engaged in upgrading professional standards and in promoting best

What is a Mutual Fund?

Mutual funds are considered as one of the best available investments as

Types of Mutual Funds Schemes in India

Overview of existing schemes existed in mutual fund category: BY STRUCTURE

2.Close - Ended Schemes

Overview of existing schemes existed in mutual fund category: BY NATURE

• Diversified Equity Funds

Each category of funds is backed by an investment philosophy, which is pre-defined in

Pros & cons of investing in mutual funds:

Advantages of Investing Mutual Funds:

2. Diversification - Purchasing units in a mutual fund instead of buying individual

3. . Simplicity - Investments in mutual fund is considered to be easy, compare to

Disadvantages of Investing Mutual Funds:

Investments in Mutual Fund

Most importantly, mutual funds provide risk diversification: diversification of a portfolio is

• The fund house should be professional, with efficient management and

GLOBAL MUTUAL FUND INDUSTRY

The Arrival of the Modern Fund

Regulation and Expansion

2.2) The worldwide mutual fund market

2.3) The top performing mutual in the world

1Vanguard 500 Index Fund

1. Vanguard 500 Index Fund (VFINX)

2. Vanguard GNMA Inv (VFIIX)

Growth of $10,000 (/1994 - 05/2005): Ending value of $20,657.

3. Calvert Social Bond A (CSIBX)

Growth of $10,000 (1994 - 05/2005): Ending value of $20,222

4. Calvert Income Fund A (CFICX)

5. Pax World Balanced (PAXWX)

6. Fidelity Contrafund (FCNTX)

Growth of $10,000 (1994 - 05/2005): Ending value of $36,594

7. Fidelity Government Income Fund (FGOVX)

Growth of $10,000 (1994 - 05/2005): Ending value of $19,020

8. Fidelity Value Fund (FDVLX)

9. Alpine U.S. Real Estate Eq Y (EUEYX)

Growth of $10,000 (1994 - 05/2005): Ending value of $66,148

10. Vanguard Insured Long-Term T-E Inv (VILPX)

Growth of $10,000 (1994 - 05/2005): Ending value of $19,114

PRESENT STATUS OF MUTUAL FUND INDUSTRY IN INDIA

Phase 1. Establishment and Growth of Unit Trust of India - 1964-87

Phase II. Entry of Public Sector Funds - 1987-1993

Amount Assets Under Mobilisation as % of

UTI 11,057 38,247 5.2%

Public Sector 1,964 8,757 0.9%

Total 13,021 47,004 6.1%

PrivPhase III. Emergence of Private Secor Funds - 1993-96

Phase IV. Growth and SEBI Regulation - 1996-2004

Phase V. Growth and Consolidation - 2004 Onwards

TOP PERFORMING FUNDS (based on one year returns)

Category Top Performer 3 mth 6 mth 1 year

Equity Diversified Sundaram Media&Ent. Opp-RP (G) 45.40 23.80 21.50