PROJECT REPORT ON

COMPARATIVE ANALYSIS OF EQUITY SCHEMES OF HDFC MF WITH OTHER AMCS AND CONSUMERS PERCEPTION TOWARDS MUTUAL FUND IN CURRENT MARKET SCENARIO

SUBMITTED TOWARDS THE PARTIAL FULFILLMENT OF POST GRADUATE DIPLOMA IN MANAGEMENT (Approved By AICTE, Government of India) ACADEMIC SESSION 2008- 2010

Under the guidance of:

External GuideMrs. Alpana Dubey Designation- Branch Manager HDFC Mutual Fund Internal GuideDr. Simmi Agrawal Finance Faculty IMS Ghaziabad

SUBMITTED BY Rashi Rastogi PGDM (BM) Roll No. BM-08142

TO WHOM SO EVER IT MAY CONCERN

This is to certify that Miss Rashi Rastogi, student of Post Graduate Diploma In Management, Ghaziabad has completed her summer training project titled Comparative analysis of equity schemes of HDFC MF with other AMCs and comsumers perception towards mutual funds in current market scenario. with HDFC Mutual Fund, under my guidance and supervision.

Prof. Simmi Agarwal IMS Ghaziabad

ACKNOWLEDGEMENT

With great pleasure, I extend my deep sense of gratitude towards Mr. Pankaj Mishra (AVP) for providing me with an opportunity to learn about the mutual fund industry and gain an insiders perspective of the same. I would also like to thank Ms. Alpana Dubey (Branch Manager), who has given me the opportunity to work on this project. My special thanks to Ms. Bineet Kaur (client services), Mr.Roshan, Ms.Shipra Rastogi, Mr. Anil.K.Awasthi for their active guidance and support from time to time during the training. The Director and Prof. Simmi Agarwal (Faculty Mentor of my institute) deserve the praise for their role in shaping this summer training. I am also thankful to all the people who directly or indirectly helped me in preparation of this report. Finally, I am grateful to HDFC AMC for providing me with an opportunity to enhance my marketing skills and knowledge.

CONTENT PAGE TOPIC

RESEARCH METHEDOLOGY EXECUTIVE SUMMARY RISK TYPES OF RISK HOW TO MINIMIZE RISK METHODS TO CALCULATE RISK RELATIONSHIP BETWEEN RISK &RETURN INTRODUCTION TO MUTUAL FUND ORGANISATION OF A MUTUAL FUND INDUSTRY PROFILE COMPANY PROFILE COMPARISON OF HDFC EQUTI , GROWTH, TAX SAVER SCHEMES WITH OTHER COMPANIES PERFORMANCE ANALYSIS BASED ON TREYNOR RATIO PERFORMANCE ANALYSIS BASED ON SHARPES RATIO PERFORMANCE BASED ON THE BASIS OF BETA CUSTOMER PERCEPTION TOWARDS MUTUAL FUND IN CURRENT MARKET

PAGE NOS.
3 6 7

11 12 13 22 53

70 73 80 84

SCENERIO(TABLES BASED ON QUESSIONNAIRE) QUESTIONNAIRE MODEL FINDINGS CONCLUSION FORMS THAT WE GENERALLY USE IN HDFC MUTUAL FUND

111 112 113 114

RESEARCH METHODOLOGY

Research Objective
1. The present study has been undertaken with the object of examining, analyzing and inferring the consumers perception about mutual investors which addresses the following issues. 2. Analyzing the awareness of mutual funds in Lucknow. 3. To find the awareness of HDFC MF products among investors. 4. Comparison among HDFC, Reliance and Tata on the basis of risk, return and portfolio.

Which investment option is most suitable to investors?

Research Method
A questionnaire is designed in such a way so as to acquire maximum mindset of a person with reference to mutual funds and also what the person thinks about the alternative investment options available in the market. Copies were served to brokers and walk-in customers of HDFC mutual fund and private and public sector banks. In all around 200 was the sample size of the research. The research methodology implemented in this research report primarily consists of personal interviews with those very investors in Lucknow city who invest in mutual funds as well as other options such as shares, fixed deposits & insurance, etc. Interview was conducted in depth to know about their investments why they prefer to choose that particular investment type only, and are they satisfied with the returns they receive from their returns.

Sampling Design. Sampling Procedure

In our study we have opted for judgemental sampling as we wanted to get feedback only from those investors who are already investors into mutual funds.

Sample size
The sample size was kept as 200. This sample size was fair enough to achieve reliable results for our study.

Sample unit
In this study, the sampling unit included only those people who are already investors in mutual funds to get to get reliable and true results.

Source: Primary data

Primary data helped in the knowledge gathered from our sources. Primary data was collected by means of: Questionnaire Personal interviews Telephonic interviews Data provided by HDFC AMC

Primary data helped a lot in order to analyze the whole scnenario and to take out the relevant data from the data provided to us.

Secondary data
Secondary data provided the knowledge about the other investment options other than HDFC in terms of facts and figures. It is a data, which are arrived from the primary data and collected from the other various sources also as followsInternet sites and newspapers and through the help of our office executives.

Interpretation
Data was interpreted and inferences were drawn and transformed in to meaningful information so as to get vivid picture to make accurate decisions.

EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring ones financial well being. Mutual Funds have not only contributed to the India growth story but have also helped families tap into the success of Indian Industry. As information and awareness is rising more and more people are enjoying the benefits of investing in mutual funds. The main reason the number

of retail mutual fund investors remains small is that nine in ten people with incomes in India do not know that mutual funds exist. But once people are aware of mutual fund investment opportunities, the number who decide to invest in mutual funds increases to as many as one in five people. The trick for converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to understand which of the potential investors are more likely to buy mutual funds and to use the right arguments in the sales process that customers will accept as important and relevant to their decision.

A mutual fund is the ideal investment vehicle for todays complex and modern financial scenario. Mutual funds are a sound investment option because among all the investment avenues mutual fund is giving a significant return. This report also deals with the findings and references regarding the annual returns of top mutual fund schemes available in the market when the market is too volatile to invest. The significance of this report is to know the perception of investors about mutual funds. This report assesses a company against competitors in its major operational business

segments. This Project gave me a great learning experience and at the same time it gave me enough scope to implement my analytical ability. The analysis and advice presented in this Project Report is based on market research on the saving and investment practices of the investors and preferences of the investors for investment in Mutual Funds. This Report will help to know about the investors Preferences in Mutual Fund means Are they prefer any particular Asset Management Company (AMC), Which type of Product they prefer, Which Option (Growth or Dividend) they prefer or Which Investment Strategy they follow (Systematic Investment Plan or One time Plan). This Project as a whole can be divided into two parts. The first part gives an insight about Mutual Fund and its various aspects, the Company Profile, Objectives of the study, Research Methodology. One can have a brief knowledge about Mutual Fund and its basics through the Project. The report compares the equity schemees of HDFC MF with Reliance and Tata mutual fund. This report lies in the fact that it can guide an investor to invest in which scheme during the current fluctuations in the market to get good returns in the long run.
The second part of the Project consists of data and its analysis collected through survey done on 200 people. For the collection of Primary data I made a questionnaire and surveyed of 200 people. I have also taken interview of many people those who were coming at the HDFC MF Branch where I have done my Project. I visited other AMCs in Lucknow to get some knowledge related to my topic. I studied about the products and strategies of other AMCs in Lucknow to know

why people prefer to invest in those AMCs.

This Project covers the

topic Customers perception towards mutual fund in current market scenario. The data collected has been well organized and presented. I hope the research findings and conclusion will be of use.

METHODS TO CALCULATE THE RISK Standard Deviation:

Volatility is a direct indicator of the risk of the fund. The standard deviation of a fund measures this risk by measuring the degree to which the fund fluctuates in relation to its average return of a fund over a period of time. A security that is volatile is also considered higher risk because its performance may change quickly in either direction at any moment.

Beta
Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta is fairly a commonly used measure of risk. It basically indicates the level of volatility associated with the fund as So quite

compared to the benchmark and is also known as "beta coefficient".

naturally the success of Beta is heavily dependent on the correlation between a fund and its benchmark. Thus if the funds portfolio doesnt have a relevant

benchmark index then a beta would be grossly inadequate.Beta can be calculated using regression analysis, and beta is the tendency of a security's returns to

respond to swings in the market. A beta that is greater than one means that the fund is more volatile than the benchmark, while a beta of less than one means that the fund is less volatile than the index. A fund with beta very close to 1 means the

funds performance closely matches the index or benchmark.

RETURN
The gain or loss of a security in a particular period is called return. The return consists of the income and the capital gains relative on an investment. It is usually quoted as a percentage. The general rule is that the more risk you take, the greater the potential for higher return - and loss. Return can come from two sources, capital growth and income. Capital growth occurs when the market value of the share increases. Income is the cash flow paid by a share such as dividends.

VOLATILITY
Volatility is the degree to which an asset's value rises and falls. Typically, higher volatility equals higher risk. Generally, growth assets (such as shares and property) have a higher risk than defensive assets (such as government bonds and cash).

INTRODUCTION TO MUTUAL FUNDS

A mutual fund is a trust that pools the savings of a number of investors who share a /common financial goal. The money thus collected is then invested in capital market instruments such as, shares, debentures and other securities. The income earned through these instruments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus the mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. Mutual Funds is a body corporate registered with the Securities and Exchange Board of India (SEBI) that pools up the money from individual/corporate investors and invests the same amount on behalf of the investors/unit holders in equity shares, government securities, bonds, call money markets, etc, and distributes the profits. In other words, a mutual fund allows investors to indirectly take a position in a basket of assets. Mutual Fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as

disclosed in offer document. Investments in securities are spread among a wide cross-section of industries and sectors thus the risk is reduced. Diversification reduces the risk because all stock may not move in the same direction in the same proportion and at the same time. Investors of mutual funds are known as unit holders. The investors in proportion to their investments share the profits or losses. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from public.

ORGANISATION OF A MUTUAL FUND

Mutual funds diversify their risk by holding a portfolio of instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced. Mutual fund investments are not totally risk free. In fact, investing in mutual funds contains the same risk as investing in the markets, the only difference being that due to professional management of funds the controllable risks are substantially reduced. A very important risk involved in mutual fund investments is the market risk. When the market risk is in doldrums, most of the equity funds will also experience a downturn. However, the company specific risks are largely eliminated due to professional fund management.

INDUSTRY PROFILE

History of the Indian Mutual Fund Industry

The origin of the mutual fund industry in India was with the formation of UTI in the year 1963, at the initiative of the reserve bank and Government of India. 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. It has seen 218.5% increase in assets under their management from 2003 to 2007 (May 31st), 38 fund houses managing Rs. 3,87,896 crore (May 31st,2008). The main reason of its slow growth initially, was because mutual fund industry was new in India. I experienced that lot of investors are aware of mutual fund and how does it work but still they are not aware of how does it function and how does the investments decision take place.

DIFFERENT PHASES OF MUTUAL FUND INDUSTRY

First Phase : 1964-87 ( Growth of Unit Trust of India )

Unit Trust of India (UTI) was established in 1963 by an act of Parliament. It was set up by the RBI and functioned under the Regulatory and administrative control of RBI. In 1978 UTI was de-linked from the RBI and IDBI took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was unit scheme in 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.

Second Phase: 1987-1993 ( Entry of Public sector funds )

1987 marked the entry of non- UTI, public sector mutual funds set up by PSU bamks and LIC& GIC. SBI Mutual fund was the first non- UTI Mutual fund established in June 1987

followed by canbank mutual fund (Dec87), Punjab National Bank Fund (Aug 89), Indian Bank (Nov 89), Bank of India (Jun90), Bank of Baroda (Oct 92), LIC established its mutual fund in June 1989 while GIC had established its mutual fund in December 1990.at the end of 1993 the mutual fund industry had assets under management of Rs. 47,004 crores.

Third Phase : 1993-1996 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first mutual fund regulations came into being, underwhich all mutual funds, except UTI were to be registered and governed. The

erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund to be registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a amore

comprehensive and revised mutual fund regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of mutual houses went on increasing, with many foreign mutual funds setting up in India and also the industry had witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets under management was way ahead of other mutual funds.

Fourth

Phase

1996-1999

(Growth

and

SEBI

Regulation)
From here onwards mutual fund industry in India saw tighter regulations and higher growth. Competition arises because of deregulation and liberalization of the Indian economy. Measures were taken both by SEBI to protect the investor, and the government to enhance the investors returns through tax benefits. NOTE: In 1996 SEBI introduced comprehensive set of regulation for all mutual fund companies operating in India. During this phase both SEBI and AMFI launched various investor awareness campaigns aimed at educating the investors about the investment through mutual fund.

Fifth

Phase:

1999-2004

(Emergence

of

uniform

industry )
In 1999, dividends from mutual funds were tax exempt in the hands of the investors. In Feb 2003, UTI act was repealed. UTI no longer has special legal status as a trust established by an act of parliament. Instead it has to adopt the same structure as any fund in India-a trust and an AMC.

NOTE: UTI mutual fund is the present name of the erstwhile Unit Trust Of India.

Phase

Sixth:

2004

onwards

Consolidation

and

growth )
As at the end of May 2007, there were 38 fund houses. Now it is the time to strengthen what is the best channel to invest your funds. The stage is set for growth through consolidation and new entry both in international and private sectors.

MUTUAL FUNDS

Dictionary definition of a mutual fund might go something like this: portfolio of stocks, bonds or cash managed by an investment company on behalf of many investors. The Investment Company is responsible for the management of the fund and it sells shares in the fund to individual investors. When u invest in mutual fund, you become a part owner of the large investment portfolio, along with all the other

shareholders of the fund. When u purchase the shares, the fund manager invests your money along with the money contributed by the rest of the shareholders. Everyday, the fund manager counts up the value of all the funds holdings figures out how many shares have been purchased by the shareholders and then calculate the Net Asset Value (NAV) of the mutual fund, the price of the single share of the fund on that day. If the fund manager is doing a good job, the NAV of the will usually gets bigger- your shares will be worth more. But exactly how does mutual funds NAV increase? There are a couple of ways that a mutual fund can make money in its portfolio. A mutual fund can receive dividends from the stocks that it owns. Dividends are shares of corporate profits paid to the stockholders of public companies. The fund might have money in the blank that earns interest, or it might receive interest payments from bonds that it owns. These are all the sources of income for the fund. Mutual funds are required to hand out (or distribute) this income to shareholders. Usually they do this twice a year; in a move thats called an income distribution. At the end of the year, a fund makes another kind of distribution this time, from the profits they might make by selling stocks or bonds that have gone up in price. These profits are known as capital gains, and the act of passing them out is called a capital gains distribution.

YOU CAN MAKE MONEY FROM MUTUAL FUND IN THREE WAYS:

Income is earned from dividends on stocks and interest on bonds. A fund manager pays out nearly all income it receives over the year to fund owners. If the fund sells securities that have increased in price, the fund have 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 funds shares increase in the price. You can 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. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost.

NET ASSET VALUE (NAV)

The Net Asset Value, or NAV, is ia a measure of the current value of one share of a mutual fund. The value of a mutual fund share is calculated based on the value of the assets owned by the fund at the end of every trading day. The fund calculates the value: A shares value is called the Net Asset Value (NAV). The fund calculates the NAV by adding up the total value of all the securities it owns, subtracting the expenses of the fund, and then dividing by the number of shares owned by the shareholders.

NAV= Net Assets of the scheme / number of outstanding units. Net assets of the scheme= market value of investments + receivables + other accrued income + other assets accrued expenses other payables other liabilities.

Value changes daily: Since the value of the stocks or bonds owned by the fund can change daily, hence the value of the fund can also change daily. Therefore, a fund is required by the law to adjust its price once every trading day to provide investors with the most current NAV. How many units you own: To see the value of your investment, you take the value of NAV and multiply with the number of units you have in the fund or, if you are considering investing say 1,00,000 in the fund, you would divide that money by the value of one unit to see how many units that 1,00,000 would give you.

HOW TO CHOOSE THE RIGHT KIND OF MUTUAL FUND SCHEME

Once you are comfortable with these basics, the next step is to understand your investment choices, and draw up your investment plan relevant to your requirements. Choosing your investment mix depends on factors such as your risk appetite, time horizon of your investment, your investment objectives, age etc. What should be kept in mind before investing in Mutual Funds? Mutual Fund

investment decision, require consistent effort on the part of the investor. Before investing in mutual funds, the following weights must be given due weightage to decide the kind of scheme: Identifying the investment objective Selecting the right scheme category Selecting the right mutual fund Evaluation of portfolio

IDENTIFYING THE INVESTMENT OBJECTIVE

Your financial goals vary, based on your age, lifestyle, financial Therefore the first step is to access your needs. independence,

family commitments and level of income and expensed among many other factors.

SELECTING THE SCHEME CATEGORY

The next step is to select a scheme category that matches your investment objectives. For capital appreciation go for equity sector funds, equity diversified funds and balanced funds.

SELECTING THE RIGHT MUTUAL FUND

Once you have a clear strategy in mind, you now have to choose which mutual fund and scheme you want to invest in. The offer document of the scheme tells you its objectives and its track record.

EVALUATION OF THE PORTFOLIO

Evaluation of equity fund involves analysis of risk and return, volatility, expense

ratio, fund managers style of investment, portfolio diversification, fund managers experience. Good equity fund provides consistent returns over a period of time.

COMPANY PROFILE

HDFC MUTUAL FUND

Introduction to HDFC Asset Management Company.

VISION To be a dominant player in the Indian Mutual Fund industry recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

SPONSOR

HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC).

The sponsor of HDFC MF is Housing Development Finance Corporation (HDFC). HDFC was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for purchase or construction of residential housing. As on December 31 st , 2002, HDFCs cumulative loan disbursement are Rs.40,060 crore financing over 2.1 million units all over India.

PARTNERS
Standard Life Insurance Company of UK set up base in 1825. It is today the largest pension fund in UK and the largest Mutual life assurance company in Europe. Standard Life Investment was set up as a dedicated investment management company.

MANAGEMENT

HDFC Trustee Company Limited

A company incorporated under companies Act, 1956 is the trustee to the Mutual Fund vide the trust deed dated June 8th, 2000 as amended from time to time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

HDFC ASSET MANAGEMENT COMPANY LIMITED (HDFC AMC)

It was incorporated under the companys act ,1956, on December 10 th , 1999 and was approved to act as an asset management company for the MF by SEBI on July 3rd 2000. In terms of the joint participation agreement dated October 29 th , 1999 entered between Housing Development Finance Corporation (HDFC) and Standard Life Investment , 25.6% of the paid up share capital of the AMC had been transferred by HDFC to Standard Life assurance company, the parent company of Standard Life Investment Limited , on April 17th 2001. Pursuant to the shareholders agreement dated October 17th entered between Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited. 13.9% of the paid up share capital of the AMC has been transferred by HDFC to Standard Life Investments Limited as on January 31st , 2002.

The present share holding pattern of the AMC is as follows:

HDFC Standard Life Investments 50.1% 49.9%

The AMC is managing many schemes as per the requirements of the varied class of investors. The AMC has obtained registration from SEBI vide registration no. PM

/inp0000000506 dated December 22nd, 2000 to act as a portfolio manager under the SEBI regulations, 1993. The certificate of registration is valid from January 1st,2003 to December 31st, 2003 . The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the mutual funds.

TYPES OF MUTUAL FUNDS

There are a number of mutual funds to suit the needs and preferences of investors. The choice of the fund is linked to the demand of the investor. The earning objective of investor helps in deciding the types of funds where investment should be done. To achieve the differing objective of investors, mutual funds adopt different stategies and accordingly offer different schemes of investment.

According to structure:
The most important classification of mutual fund is on the basis of the structure of their operations as all types of mutual funds fall under this classification. Accordingly, to this scheme, the mutual funds can be divided into three categories, i.e. open-ended funds, close-ended funds and the interval funds.

Open-ended schemes
Open-ended scheme means a scheme of mutual fund, which offers units for sale without specifying any duration for redemption. These schemes do not have a fixed maturity and entry or exit to the fund is always open to the investors who can subscribe at any time. The fund redeems or repurchases the units or shares at periodically announced rates. First, open-end mutual fund shares are priced at their net asset value (NAV) , which are computed on a daily basis when market is closed. These repurchase rates are based upon the net current assets of the fund. Thus, open-ended funds provide better liquidity to the investors. In the same manner the price at which the units are offered to the public is also announced periodically. Note: It should be noted here that an open-end mutual funds performance needs to be judged by its total return, both annually and over extended periods of time, and not its net asset value.

Close-ended schemes
The mutual fund industry did begin its innings in India with close ended equity funds. A close ended equity scheme means any scheme of mutual fund in which the period of maturity of the scheme is specified. Unlike open-ended funds, the corpus of close-ended scheme is fixed and an investor can subscribe directly to the scheme only at the time of initial issue. After the initial issue is closed, a person can buy or sell the units of the scheme in the secondary market i.e. the stok exchanges where these are listed. The price in the secondary market is determined on the basis of demand and supply and hence could be different from the net assets value.

WHY SUDDEN RISE IN CLOSE-ENDED FUNDS?

Before the SEBI guidelines issued in April 2006, the MFs were allowed to writeoff issue expenses of a new fund offer (NFO), from the fund, over a period of 5 years. Therefore marketing expenses on new funds, usually about 6% of the corpus raised, were incurred and written-off from the fund over the next 5 years. Since, these expenses were written-off over a period, the NFOs could open at par. Also quite a few of them were introduced with no up-front entry load, with the new guidelines, this has been stopped. Now in open-ended NFO all the expense have to be either met out of the entryloads or netted off from the fund on day 1 . It is difficult to assume that anyone would be willing to pay 2.25% entry load.

According to investment objective:

Equity funds These funds invest a major portion of their corpus in equity shares issued by companies. Equity funds are considered at the high end of risk spectrum. Equity oriented investors should invest in equity mutual funds to earn better returns and also save on time and efforts which goes in direct investing in shares.

Debt funds (or income funds)

The aim of the debt funds is to provide regular and steady income to the investors.

Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Debt funds are ideal for capital stability and regular income. Debt funds are largely considered as income funds as they dont target capital appreciation, look for high current income, and therefore distribute a substantial part of their surplus to the investors. Different investment objectives set by the fund managers would result in different risk profiles like diversified debt funds ( funds that invest in all available types of debt securities, issued by entities across all industries) , focused debt funds (funds which have a narrow focus, with less diversification in its invesment), high yield debt funds (usually , debt funds control the borrower default risk by investing in securities issued by borrowers who are rated by credit rating agencies and are considered to be of investment grade ).

Balanced funds (65% equity and 35% debt)

Balanced funds attempt to provide investors with the best of both worlds. They aim for growth (through a high equity allocation) and stability (through the debt allocation ) of the investment. Balanced funds invest both in equity and debt. These are ideal for investors looking for a combination of both income and growth. Investing in a balanced fund ensures that fixed proportion stays in equity and debt, because of equity holdings these funds are affected by fluctuations in share prices in the stock market.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally inveat in safer short term investments such as treasury bills, certificates of deposit, commercial paper and inter- bank call money. Returns on these schemes may fluctutate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

Gilt funds
Gilts are government securities with medium to long term maturities typically of

over one year (under one year instruments being money market securities). In India, we have now seen the emergence of government securities or gilt funds that invest in government paper called dated securities (unlike treasury bills that mature in less than one year). Since the issuer is the government of India, these funds have little risk of default and hence better protection of principle.

Hybrid funds
We have seen that in terms of the nature of financial securities held, there are three major mutual fund types : money market, debt and equity. Many mutual funds mix these different types of securities in their portfolios. Thus, most funds, equity or debt, always have some money market securities in their portfolios as these securities offer the much-needed liquidity. However, money market holdings will constitute a lower proportion in the overall portfolios of debt or equity funds like balanced funds (funds that has a portfolio comprising debt instruments, convertible securities, and preference and equity shares)

Load funds
load fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the funds, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the performance history. a good

No- Load funds

A No- Load fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no-load fund is that the entire corpus is put to work.

Commodity funds
While all of the debt/equity/money market funds invest in financial assets, the mutual fund vehicle is suited for investment in any other : example- physical assets. Commodity funds specialize in investing the different commodities directly or

through shares of commodity companies or through commodity futures contracts. Specialized funds may invest in a single commodity or a commodity group such as edible oil or grains, while diversified commodity funds will spread their assets over many commodities. A most common example of commodity funds is the so called the precious metal funds.

Real Estate funds

Specialized Real Estate funds would invest in real estate directly, or may fund real estate developers, or lend to them, or buy shares of housing finance companies or may even buy their securities assets. These funds may have a growth orientation or seek to give investors regular income. Recently there has been an initiative to offer such an income by the HDFC.

Bond funds
These funds employ their resources in bonds. These investments ensure fixed and regular income. Sometimes bonds are available in the market at lower than face value, the net income on these bonds goes higher because interest will be received on the face value of the bond. Some companies offer non-convertible bonds along with the shares. Any person subscribing for the shares will have to take up bonds also. Bonds funds may have a tie up with the companies and offera certain price if the subscribers want to sell their bonds at the time of allotment. Bond fund will pay a fixed amount to the company and some amount will be paid by the subscriber also. The shareholder is saved of the botheration of buying bonds compulsorily while bond fund will pay less than the face value of the bond, thus saving some money. Bond fund ensure regular income to the investors.

Exchange Trade funds

An exchange traded funds is a mutual fund that trades like a stock. An ETF represents a basket of stocks that reflect an index. An ETF, however, is mutual fund; it trades just like any other company on a stock exchange. not a

Fund of Funds
It is a mutual fund that invests in other mutual funds. A normal mutual fund invests in a portfolio of securities such as debt or equity, on the other side fund of funds invest in a portfolio of the units of the other mutual fund schemes. It uses an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities.

According to Security Selection

The type of security that the fund invest in is what determines this particular group.

Technical Fundsselect scripts.

These funds are those that use technical analysis to

Small Cap Fundsinvestment portfolio.

these funds focuses on small cap stocks for their

Mid Cap Funds- these funds invest in mid cap scripts. Large Cap Fundsscripts. These funds are those that invest in large cap

AAA Rated Funds-

These funds are those that invest only in triple a

rated or higher rated securities.

SYSTEMATIC INVESTMENT PLAN

An existing unit holder can benefit under this facility by investing specified amount regularly. By investing a fixed amount of rupees at regular interval, one would end up buying more units of the funds when the price is lower and fewer units when the price is high. As a result , over a period, the average cost per unit to the unit holders with always be less than the average subscription price per unit, irrespective of weather it is a rising, falling or fluctuating market. Thus the unit holders automatically gain an averages out the fluctuation of the market without having the market price on day to day basis. This concept is called RUPEE COST

AVERAGING.

AUTO

DEBIT

FACILITY

AND

ELECTRONIC

CLEARING

SERVICE:

A systematic investment plan can be affected in two ways. The investor can pay post dated cheque dated at requisite interval or investor can choose for an auto debit facility/ECS (electronic clearing service). In an auto debit/ECS facility, the account mentioned in his application would be automatically debited on the date of investment and the amount would be invested in the scheme. The investor opting for auto debit/ECS facility will be required to sign up the mandate form based on which the Mutual Funds will arrange for his account to be debited as per the frequency, and amount & date chosen by the investor.

The following should be noted regarding SIP:

1. All the mutual funds specify the minimum amount for investing in scheme. In case of SIPs facility of minimum amount is much lower around Rs. 500 to Rs. 1000. 2. Every mutual fund specify the minimum number of payment that should be invested in order to get this facility. It might be twelve cheques of Rs. 500 each of six cheque Rs 1000 each. 3. It is mandatory that the cheque should be of same value. 4. The frequency of investment offered for SIP varies from fund to fund. However , in general all mutual funds offer monthly or quarterly investment facility. 5. The first cheque can be of any date in the month but the subsequent cheque should bear any of the dates offered by mutual funds for this facility.

SYSTEMATIC TRANSFER PLAN

A systematic transfer plans gives investor facility to transfer from one scheme to another scheme at periodic interval. The following are the important features:

1. Investor can choose between a fixed systematic transfer plan and capital appreciation systematic transfer plan. 2. Each mutual fund specifies the scheme in which the amount can be transferred. 3. The frequency also varies from fund to fund. Generally funds offer weekly, monthly and quarterly option.

THE BASIC ISC FUNCTIONS

Undergoing summer training at the investor service center (ISC), Lucknow, HDFC MF was a great learning experience for us. During our stay at the ISC in the capacity of summer trainees we tried to observe the functioning of a MF from within and thus gain an inside perceptive of the same. For the purpose of explaining the detail of what we learnt during our stint with HDFC MF, we would first like to explain the basic functions, which are carried out at a Mutual Fund office on a day to day basis. The work flowchart of an MF ISC is basically of following nature.i.e. shown in the next page.

The previous page flowchart indicate that the new investors investing in varied MF schemes route their investments through two channels a) the selling agents & distribution houses b) the direct marketing team at the ISC

Subsequently the applications are forwarded to the OPERATIONS dept. at the ISC, which is in direct contact with the REGISTERAR, which in case of HDFC MF in CAMS, Chennai. The application are processed at the ISC, either manually or scanned to the registrar where a) Records of the same are maintained b) The investor are allotted FOLIO No.s c) And subsequently allotted the units as per the amount invested by them.

All further subsequent transaction initiated by investor like a) Redemption and b) Switching using a transaction slip (annexure1) are routed through the ISC to the Ragistrar who finally execute the same

Apart from the above mentioned functions, an ISC performs the following as well 1) tapping the potential investors which is done by the sales team at the ISC 2) Mobilizing the investment through the selling agents and distribution houses like banks and other private distribution channels 3) Client service which involves a. Answering investors valuation enquiries b. Issuing a/c statement to the investor every time a fresh transaction is initiated by the investor c. Reconciling issues related to the dividend payable to investors d. Carrying out non functional transaction like i. ii. Changing of correspondence addresses of investors Changing their bank mandates

e. Verifying investors signature before executing a switch or redemption request.

PROBLEM FACED BY US

During the two months learning experience, we came across several problems which dealing with prospective investors, as we made efforts to transform their wrong perspective about MFs which unfortunately were a result of lack of information, & knowledge about this investment avenue.

A detailed account of the problem faced by us is mentioned here under 1) The misconception that MFs are all about shares equity marketingThis was probably the most difficult thing to explain to prospective investors that MFs are not all about equity markets. It was an experience education them about the various avenues MFs invested in, right from debt market, to call money & sovereign papers.

2) Misconception of all MF scheme being risk oriented

Yet another huge misconception that today exists in potential investors is that all scheme offered by MF are high risk oriented, thus it was again quite an experience explaining & informing them about several products available which cater to the risk appetite of investors across the board depending on the investors risk profile.

3) Comparison with governments assured return schemes & other assured return avenuesThe sales calls that we made had one thing in common peoples expectation for assured returns & their knacks of comparing MFs with government offered schemes

like PPF, IVP, KVP, etc and since MFs do not offer assured returns it was tough task convincing investors that in todays context assured returns are even more risk oriented propositions because of credit risk- and even more risk oriented propositions because of credit risk and further convincing them of the benefits of anytime liquidity offered by MFs which other investment avenues did not offer.

4) People fixation with the UTI-Scam

UTI scam has most certainly taken its toll when it comes to scaring away probable investors from mutual funds. A number of sales call made by us were to inevitable discussion on how MFs were all about siphoning off investors hard earned money a ready reference to the UTI scam thus it was quite a task explaining the investors that whatever happened in the US-64 fiasco was a direct result of unaccountability of the UTI- officials & lack of regulation of the fund by a strict watch dog like SEBI. Informing the investors about the strict disclosure norms of SEBI didi help though to a certain extent.

COMPARISON OF HDFC EQUITY FUND WITH RELIANCE AND TATA

HDFC EQUITY FUND Nature of scheme Open-ended scheme Investment Objective To achieve capital appreciation Fund Manager Mr. Prashant Jain Inception Date January 1 , 1995

RELIANCE EQUITY FUND Nature of scheme Open-ended growth scheme Investment objective The primary investment objective is to seek to generate Capital appreciation and provide long term growth opportunities. Fund Manager Mr. Sunil Singhania Inception date March 30, 2006

TATA EQUITY FUND Nature of scheme Open-ended growth scheme Investment objective The primary investment objective is to seek to generate Capital appreciation and provide long term growth opportunities.

Fund Manager Mr. Mahendra Jajoo. Inception date July 7,2000

HDFC Equity Fund April 2008 May 2008 June 2008 July 2008 -0.037 August 2008 Septemb er 2008 October 2008 Novembe -0.070 r 2008 Decembe -0.046 r 2008 January 2009 February -0.053 -0.051 -0.069 -0.049 -0.040 -0.008 -0.004 0.020

Reliance Equity Fund 0.004

Tata Equity Fund 0.008

&

Nifty 2.754

-0.053 -0.006

-0.003 0.054

2.616 -11.790

-0.041 -0.046 -0.051

-0.035 -0.042 -0.048

-7.752 7.016 -4.699

-0.063 -0.060

-0.063 -0.060

-26.983 -12.398

-0.044 -0.053

-0.044 -0.053

2.178 -3.010

-0.054

-0.54

-10.580

2009 March 2009 -0.042 -0.044 -0.044 -7.670

THE RELATIONSHIP OF THE NIFTY WITH HDFC , RELIANCE AND TATA EQUITY FUND-GROWTH PLAN WITH NIFTY HYPOTHESIS Ho: Ha:
There is no significant relationship of the fund with nifty return.

There is a significant relationship of the selected fund with nifty return.

Correlations Hdfcequityfund hdfcequityfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N 12 .516 .086 12 12 1 nifty .516 .086 12 1

For HDFC Equity Fund the correlation comes to 51.6%

when compared

with nifty and the significance comes to .086. So in our study we accept null hypothesis because there is correlation OF HDFC equity fund with its benchmark that is nifty.

Correlations relianceequityf und relianceequityfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N 12 .267 .401 12 12 1 nifty .267 .401 12 1

For Reliance equity fund the correlation comes to 26.7% which is quite less and the significance is very high that is 0.401. But we accept the null hypothesis as there is correlation of reliance equity fund with its benchmark that is nifty.

Correlations tataequityfund tataequityfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N 12 .214 .505 12 12 1 nifty .214 .505 12 1

For Tata equity fund the correlation comes to very low that is 21.4% and the significance figure is also too less that is 0.505. We accept the null hypothesis as there is correlation of tata equity fund with its benchmark that is nifty

COMPARISON OF HDFC GROWTH FUND WITH RELIANCE AND TATA

HDFC GROWTH FUND Nature of scheme Open-ended growth scheme Investment Objective To generate long term capital appreciation Fund Manager Mr. Srinivas Rao Ravuri Inception Date September 11, 2000

RELIANCE GROWTH FUND Nature of scheme Open-ended growth scheme Investment objective Seeks to provide long term capital appreciation Fund Manager Mr. Sunil Singhania Inception date October 8, 1995

TATA GROWTH FUND Nature of scheme Open-ended growth scheme Investment Objective Aims to provide a vehicle to investors for generation of long term capital appreciation Fund Manager Mr. Mahendra Jajoo Inception date July 1,1994

Months

HDFC Growth Fund -0.046 -0.056 -0.053 -0.039 -0.046 -0.049 -0.060 -0.083 -0.025 4.219 -0.050 -0.047

Reliance Growth Fund 0.004 -0.004 -0.009 -0.003 -0.001 -0.007 -0.013 -0.008 -0.006 -0.006 -0.002 -0.042

Tata Growth Fund .006 -0.004 -0.008 -0.005 -0.001 -0.005 -0.010 -0.007 0.005 -0.005 -0.002 -0.043

Sensex

April 2008 May 2008 June 2008 July 2008 August 2008 Septembe r 2008 October 2008 November 2008 December 2008 January 2009 February 2009 March 2009

9.986 -5.174 -19.839 6.431 1.444 -12.443 -27.299 -7.369 5.921 -3.480 -8.780 -6.340

THE RELATIONSHIP OF THE NIFTY WITH HDFC , RELIANCE AND TATA GROWTH FUND-GROWTH PLAN WITH NIFTY HYPOTHESIS
Ho: There is no significant relationship of the fund with nifty return. Ha: There is a significant relationship of the selected fund with nifty return.

HDFC GROWTH FUND WITH NIFTY.

Correlations hdfcgrowthfun d hdfcgrowthfund Pearson Correlation Sig. (2-tailed) N Sensex Pearson Correlation Sig. (2-tailed) N 12 .066 .838 12 12 1 sensex .066 .838 12 1

For HDFC Equity Fund the correlation comes to 6.6% when compared with sensex which is very less and the significance comes to .838. So in our study we accept null hypothesis because there is correlation OF HDFC growth fund with its benchmark that is sensex.

RELIANCE GROWTH FUND WITH SENSEX.

Correlations Reliancegrowth fund reliancegrowthfund Pearson Correlation Sig. (2-tailed) N Sensex Pearson Correlation Sig. (2-tailed) N 12 .313 .321 12 12 1 sensex .313 .321 12 1

For Reliance growth fund the correlation comes to 31.3% which is quite less and the significance is very high that is 0.401. But we accept the null hypothesis as there is correlation of reliance equity fund with its benchmark that is nifty.

Correlations tatagrowthfund tatagrowthfund Pearson Correlation Sig. (2-tailed) N Sensex Pearson Correlation Sig. (2-tailed) N 12 .402 .196 12 12 1 sensex .402 .196 12 1

For Tata growth fund the correlation comes to very low that is 40.2% and the significance figure is also too less that is 0.196. We accept the null hypothesis as there is correlation of tata growth fund with its benchmark that is sensex.

TAX SAVING FUNDS

Tax-saving fund (also referred to as Equity-Linked Savings Scheme) is a diversified equity which offers tax benefits. However unlike typical diversified equity funds, they are subject to a mandatory 3-Yr lock-in period. From the tax-planning stand-point, the biggest advantage offered by tax-saving funds is the opportunity to invest in sync with one's risk appetite. Investments for the purpose of tax-saving are no different from conventional investments and the principle of investing in tune with the risk appetite is equally applicable. Tax-saving funds are similar to diversified equity funds in terms of risk profile i.e. they are high risk - high return investments. Investors with a flair for instruments of the aforesaid variety would approve of tax-saving funds. Investing in equities should always be conducted with a long-term horizon; it is over this time frame that equities have the potential to truly unlock their value and outperform other comparable assets. Tax-saving funds (courtesy the mandatory lock-in period) propagate this cause. The fund manager is not bothered by factors like the fund's performance over shorter time frames or redemption pressures (which the fund manager of a conventional diversified equity fund is subject to) and can go about doing his job with a long-term perspective. From the investors' perspective, tax-saving funds instill a degree of discipline in the investment activity. Tax-saving funds offer a unique investment proposition since investors are granted the opportunity to invest in a market-linked investment avenue and yet claim tax benefits. Conventionally the domain of tax-saving instruments has been populated by assured return instruments like PPF and NSC. The higher risk profile in turn also means that tax-saving funds are better equipped to clock superior returns vis--vis their assured return counterparts like PPF and NSC. For investors who attach more importance to returns and

have the ability to take on higher risk levels, tax-saving funds are the place to be. Another area where tax-saving funds (despite the 3-Yr lock in period) score over their counterparts from the tax-saving domain is liquidity. While investments in NSC run over a 6-Yr time frame; it scores very poorly in terms of liquidity. Premature withdrawals are not permitted except in special circumstances like the investor's death or on order by the court of law. Similarly the PPF has tenure of 15 years; however premature withdrawals are permitted only from the 7th year based on a preset formula. Having established tax-saving funds' credentials as an efficient device for tax-planning, now let's find out how they score as a pure investment vehicle. For the purpose of this comparison, we shall consider the top performers from the diversified equity funds vis--vis those from the tax-saving funds segment over a 3-Yr period.

COMPARISON OF HDFC TAX SAVER FUND WITH RELIANCE AND TATA

HDFC TAX SAVER FUND Nature of scheme Open-ended Equity Linked Savings Scheme with a lock-in period of 3 years. Investment objective To achieve long term growth of capital. Fund Manager Mr. Vinay Kulkarni Inception date March 31, 1996

RELIANCE TAX SAVER FUND Nature of scheme Open-ended Equity Linked Saving Scheme Investment objective To generate long-term capital appreciation. Fund Manager Ashwani Kumar Inception date Sep 22, 2005

TATA TAX SAVER FUND Nature of scheme Open-ended Equity Linked Saving Scheme Investment objective To generate long-term capital appreciation.

Fund Manager Mr. Mahendra Jajoo Inception date March 31, 1996

Months

HDFC

Tax Reliance Tax Fund

Tata

Tax S & P Nifty

Saver Fund

Saver Saver Fund

April 2008 May 2008 June 2008 July 2008 August 2008 September 2008 October 2008 November 2008 December 2008 January 2009 February 2009 March 2009

-0.046 -0.056 -0.052 -0.039 -0.046

0.004 0.002 0.009 0.003 0.007

-0.044 -0.051 -0.049 -0.039 -0.046

2.753 2.615 -11.799 -7.752 7.015

-0.048

0.003

-0.050

-4.698

-0.014

0.010

-0.063

-26.983

-0.044

0.002

-0.055

-12.397

-0.041

0.003

-0.039

2.177

-0.056

0.002

-0.048

-3.010

-0.054

0.002

-0.050

-10.580

-0.043

0.004

-0.044

-7.670

THE RELATIONSHIP OF THE NIFTY WITH HDFC , RELIANCE AND TATA TAX SAVER FUND-GROWTH PLAN WITH NIFTY HYPOTHESIS
Ho: There is no significant relationship of the fund with nifty return. Ha: There is a significant relationship of the selected fund with nifty return. HDFC Tax saver fund with nifty.

Correlations hdfctaxsaverfu nd hdfctaxsaverfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N *. Correlation is significant at the 0.05 level (2-tailed). 12 -.602* .038 12 12 1 nifty -.602* .038 12 1

For HDFC tax saver fund the correlation comes to 60.2% when compared with nifty and the significance comes to . 038. So in our study we accept null hypothesis because there is correlation OF HDFC tax saver fund with its

benchmark that is nifty.

Reliance tax saver fund with nifty

Correlations reliancetaxsav erfund reliancetaxsaverfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N **. Correlation is significant at the 0.01 level (2-tailed). 12 .768** .004 12 12 1 Nifty .768** .004 12 1

For Reliance tax saver fund the correlation comes to 76.8% and the significance is very high that is 0.004. But we accept the null hypothesis as there is correlation of reliance tax saver fund with its benchmark that is nifty.

Tata tax saver fund with nifty

Correlations tatataxsaverfu nd tatataxsaverfund Pearson Correlation Sig. (2-tailed) N Nifty Pearson Correlation Sig. (2-tailed) N 12 .681* .015 12 12 1 Nifty .681* .015 12 1

*. Correlation is significant at the 0.05 level (2-tailed).

For Tata tax saver fund the correlation comes to that is 68.1% and the significance figure is 0.015. We accept the null hypothesis as there is correlation of tata tax saver fund with its benchmark that is nifty.

PERFORMANCE ANALYSIS BASED ON TREYNOR RATIO

TREYNOR RATIO

A ratio developed by Jack Treynor that measures the returns earned in excess of that which could have been earned on a riskless investment per each unit of market risk. In other words, the treynor ratio is a risk-adjusted measure of return based on a systematic risk. It is similar to the sharpe ratio with the difference being that the treynor ratio uses beta as the measurement of volatility.

The treynor ratio is a method often used by mutual fund to evaluate the performance of their funds and compare it to the market performance, the underlying philosophy being that the fund shall be classified as an out performer if its treynor ratio comes to be greater than that of the market an vice versa.

The ratio signifies the return per unit of risk, thus the ratio is of the following form: (R r f ) /

R = reurns r
f=

the risk free rate of return (prevailing rate on 90 day T- bill)

Beta = the measure of risk

Thus for the purpose of comparing the performance of our portfolio with the market, BSE200 was taken as the market benchmark. The comparison was done again for the period between 1st April, 2008 to 31st March , 2009.

The Treynor ratio of S&P Nifty, for the aforementioned period was calculated as follows ( Rm r f ) /beta Rp = Average return of portfolio Beta

HDFC

Tax Reliance Tax fund

Tata

Tax S & P Nifty

saver fund

saver saver fund

Treynor Ratio

-0.59

-0.75

-0.95

-0.015

The above graph shows that while comparing HDFC Tax saver fund with its peer group fund on the basis of treynor ratio and its benchmark S & P Nifty clearly signifies that the performance of HDFC Tax Saver fund is the best for the period concerned

FUND

HDFC

Reliance

Tata Equity S & P Nifty

Equity Fund Equity Fund Fund TREYNOR RATIO -0.51 -0.69 -0.82 -0.015

The above graph shows that while comparing HDFC Equity fund with its peer group fund on the basis of treynor ratio and its benchmark S & P Nifty clearly signifies that the performance of HDFC Tax Saver fund is the best for the period concerned.

FUND

HDFC Growth Fund

Reliance Growth Fund -0.87

Tata Growth Fund -1.27

TREYNOR RATIO

-0.71

PERFORMANCE ANALYSIS ON THE BASIS OF SHARPES RATIO

The Sharpes Ratio

The Sharpe ratio is a single number which represents both the risk, and return inherent in the fund. As is widely accepted, high returns are generally associated with a high degree of volatility. The sharpe ratio represents the trade off between risk and returns. At the same time, it also factors in the desire to generate returns, which are higher than risk-free returns.

Mathemetically, the sharpe ratio is the returns generated over the risk free rate, per unit of risk. Risk in this case is taken to be the funds standard deviation. A higher sharpe ratio is therefore better as it represents a higher return generated per unit of risk. The definition of the sharpe ratio is : S(x) = (Rx Rf)/ std dev(X) X= investment Rx = average annual rate of return of X

Rf = best available rate of return of a risk free security (i.e. cash) Std dev (X) = standard deviation of Rx The Sharpe Ratio is a direct measure of reward-to-risk.

Fund

HDFC Saver Fund

Tax Reliance Saver Fund 0.72

Tax Tata Tax Saver Fund 0.77

Sharpe Ratio

0.83

FUND

HDFC Equity Reliance Fund Equity Fund -0.12

Tata Fund -0.14

Equity

Sharpe Ratio

-0.08

FUND

HDFC Growth Fund

Reliance Growth Fund -0.14

Tata Growth Fund -0.21

Sharpe Ratio

-0.12

IMPROVING THE SHARPE RATIO

How do we choose between alternative investments that have differing expected returns but also entail different degrees of risk? In particular given that higher expected returns are desirable but higher risk are not, how should we choose between an investment with a high-expected return and a relatively high risk, and an alternative investment with a lower expected return and lower risk? The obvious answer is that we should adjust expected returns for the risk involved, but how

should we make this adjustment? The traditional answer is that we should use the Sharpe Ratio. Suppose we have a portfolio, p, with an expected return RP , and are using a benchmark, b, with an expected return Rb . Assume too that all returns are normally distributed. If d is the differential expected return, RP Rb , then our portfolios Sharpe ratio is : SR = d/standard deviation of d This ratio takes account of both the expected differential return between two portfolios and the associated differential risk. Since it gives risk estimates before decision are actually taken, the Sharpe ratio can be useful for decision-making and, in particular, for choosing between alternative risky investments. Note that the Sharpe ratio always refers to the differential between the two portfolios, we can think of this differential as reflecting a self financing investment portfolio, with the first component representing the acquired asset and the second reflecting the short position taken to finance that acquisition. As Sharpe himself explains. Central to the usefulness of the Sharpe ratio is the fact that a differential return represents the result of a zero investment strategy. This can be defined as any strategy that involves a zero outlay of money in the present. A differential return clearly falls in this class, because it can be obtained by taking a long position in one asset (the fund ) and a short position in another (the benchmark), with the funds from the latter used to finance the purchase of the former. The traditional Sharpe ratio enables us to choose reliably between two or more alternative investments, provided the returns to the assets in the question are normally distributed and uncorrelated with the returns to our institutions existing portfolio : we simply pick the alternative with higher Sharpe ratio. In effect, we can take the Sharpe ratio to be a proxy for the risk adjusted return and then choose the investment whose risk adjusted return is highest. However, there is the unfortunate qualification that the traditional sharpe ratio presupposes that each prospective investment returns is uncorrelated with the return to the existing portfolio. As Sharpe himself acknowledges, the Sharpe ratio

may not give a reliable ranking if one or more of the assets involved is correlated with the rest of our portfolio. If assets A has a lower Sharpe ratio than asset B, the Sharpe ratio criterion would suggest that we prefer B to A. however if As return is negatively correlated with the rest of our portfolio and Bs is positively correlated with our portfolio then the purchase of asset would reduce portfolio risk while the purchase would increase it, and it is possible that we would prefer A over B if we take these correlation effects into account. Correlation between the assets in question and the rest of our portfolio mean that the traditional Sharpe ratio cannot be relied upon to give us the right answer to out investment problem. Fortunately, this problem with the traditional Sharpe ratio is easily put right . all we need to do is redefine our alternatives. Instead of constructing Sharpe ratios for each of our alternative investments considered on their own, we construct Sharpe ratios for each of the alternative portfolios we are choosing between- each such portfolio consisting of out present portfolio plus the investment we consider- and then choose the investment whose associated portfolio has the highest Sharpe ratio. The optimality of this rule follows from the previous discussion, which told us that we should choose the position with the highest Sharpe ratio if the positions being considered are uncorrelated with the rest of our portfolio and this condition is now automatically satisfied. Unlike the traditional Sharpe ratio, this new Sharpe rule is valid regardless of the correlations of the prospective new assets with our existing portfolio. These correlations can take any value, not just zero and are already implicitly allowed in the construction of the portfolio Sharpe ratio. The difference between the traditional Sharpe ratio and the improved one can also be illustrated in terms of the required returns to alternative investments. If two or more alternative investments have no correlation with our existing portfolio return, the two different Sharpe ratios will produce identical and correct- rankings of these alternatives assuming that returns are normal. Both Sharpe ratios will also give correct estimates of the alternative investments required returns. However, if returns are positively correlated with our existing portfolio, the traditional Sharpe ratio will understate the true risk- because it ignores the correlation- and therefore lead to an underestimate of required returns on each investment. The higher the

correlation, the greater the underestimate of the required returns and the greater the potential for mistaken decisions to acquire new positions. Conversely, if returns are negatively correlated with our existing portfolio, the traditional Sharpe ratio will overstate the true risk-again because it ignores the correlation- and lead to an overestimate of the required return on each investment and, once again, the further the correlation is from zero, the greater the error in our estimate of required returns and the greater the potential for us to mistakenly reject good investments. The Sharpe rule proposed here is superior to the traditional Sharpe ratio because it is valid regardless of the correlation of the investments being considered with the rest of our portfolio. It is also straightforward to implement and can be easily programmed into packages for decision makers to use. Of course, it is still depends on the assumption of normality, and we all know that this is a very dubious assumption because most returns are not in fact normally distributed. It should therefore go without saying that even the improved Sharpe ratio should be used cautiously where departures from normality may be important.

ANALYSIS ON THE BASIS OF BETA

BETA
Beta is a statistical tool, which gives you an idea of how a fund will move in relation to the market. In other words, it is a statistical measure that shows how sensitive a fund is to market moves. If the sensex moves by 25%, a funds beta number will tell you whether the funds returns will be more than this or less. The beta value for an index itself is taken as 1. Beta depends on the index used to calculate it but it bears no correlation with the movements in the funds. The RSquare value shows how reliable the beta number is. It varies between 0 and 1. An R- squared value of one indicates perfect correlation with the index. Thus, an index fund investing in the Sensex should have an R-squared value of one when compared to the sensex.

Fund Beta

HDFC

Reliance

Tata Equity S & P Nifty

Equity Fund Equity Fund Fund

0.87

0.73

0.67

Beta only represents how volatile your fund is in comparison to

market. The beta of the market is taken as 1. Here beta for HDFC Equity fund is 0.87. It shows that our fund is less volatile than the market, i.e. our fund does not give the proportion of returns when compared to the market.

Fund

HDFC Growth Reliance Fund Growth Fund

Tata Growth Sensex Fund

Beta

0.82

0.78

0.82

in the above graph also the benchmark of the fund i.e. sensex the

beta of which is also taken as 1. Here we find that both HDFC Growth fund and Tata Growth fund have the same beta 0.82 , which means that the fund is again less volatile when compared with sensex.

Fund

HDFC

Tax Reliance Tax Tata Saver Fund

Tax S & P Nifty

Saver Fund Beta

Saver Fund

0.83

0.72

0.77

Here again the beta of the benchmark i.e nifty is again taken as 1. The HDFC tax saver fund has the highest beta amongst its peer group i.e 0.83 but still the fund is less volatile when compared to the benchmark.

CONSUMERS PERCEPTION TOWARDS MUTUAL FUNDS IN CURRENT MARKET SCENARIO

RELATIONSHIP BETWEEN AGE OF AN INDIVIDUAL AND FACTORS CONSIDERED WHILE INVESTING IN A MUTUAL FUND BY MEANS OF CROSSTAB.
Case Processing Summary Cases Valid N age * factors 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

age * factors Crosstabulation Count factors return on risk age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 0 15 11 2 0 28 investment 2 60 38 12 6 118 time period tax benefits diversification 0 10 3 1 0 14 0 9 10 4 1 24 1 9 6 0 0 16 Total 3 103 68 19 7 200

The above case-processing summary shows that we have a sample size of 200 and we had valid feedback of all the 200 samples. The age factors cross tabulation matrix shows the relationship between the age of the individual and the factors that he considers while investing in a mutual fund. The above table shows that for in the age group for below 18 years there is no person who considers risk before investing while 15 people look in for risk in the age group 20-35 years, 11 people take risk as a factor in 35-50 years group. Only 2 people consider risk in the 50-60 years and no one in >60 years age group. As far as return on investment is considered 2 people are in the <18 years and the maximum number in the age group 20-35 years for this factor. There are 38 people in the 35-50 age group, 12 in 50-60 age group and 6 in >60 years age group.

CROSSTABS RELATIONSHIP BETWEEN AGE AND TIME PERIOD

Case Processing Summary Cases Valid N age * timeperiod 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

age * timeperiod Crosstabulation Count Timeperiod 6months-1 <6 months age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 1 3 0 0 0 4 year 0 18 7 1 1 27 1-3 years 1 23 15 6 1 46 3-5 years 1 54 42 12 5 114 >5 years 0 5 4 0 0 9 Total 3 103 68 19 7 200

The third factor considered is time period. For less than 18 years, there is no person who looks in for it. There are 10 people in the age group 20-35 years who look in for time period as a factor. Only three people correspond in the age 35-50 year and one in 50-60 years but no one in greater than 60-year group. Nobody looks in for tax benefit in less than 18 years age group. There are 9 people in the age group of 20-35 years, 10 in 35-50 years. 4 people consider tax benefit as an important factor in 5060 year group and only one in greater than 60-year age group. Now considering the relationship between age & time period a person looks in for before investing in a MF scheme. There is only one person who would like to invest for less than 6 months and three people in the age group 20-35 years. Whereas there is no case in 35-50, 50-60 and >60 years respectively. Considering this the maximum number is seen in age group 20-30

years with a time period of 3-5 years.

CROSSTABS RELATIONSHIP BETWEEN AGE AND INVESTMENT MODE

age * investmentmode Crosstabulation Count Investmentmode savings equity market fixed deposits age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 0 24 25 4 1 54 0 14 8 3 0 account 1 22 4 2 3 32 insurance 0 10 7 3 0 20 mutual funds 2 33 24 7 3 69 Total 3 103 68 19 7 200

From the above table we can analyze that investors lying in the age group of 20-35 years prefer mutual funds as their major mode of investment.

CROSSTABS RELATIONSHIP BETWEEN AGE AND PERCEPTION THEORY.

Case Processing Summary Cases Valid N age * perception 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

age * perception Crosstabulation Count perception vehicle to pool money from investors in a basket of secrities by a professional manager age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 1 50 37 9 5 102 invest money by a mutually cooperative group 1 18 10 3 2 34 high returns with moderate risk 1 18 18 7 0 44 safe vehicle for investment purposes 0 17 3 0 0 20 Total 3 103 68 19 7 200

From the above table we can analyze that investors lying in the age group of 20-35 regard mutual funds as a vehicle to pool money from investors in a basket of securities by a professional manager.

CROSSTABS RELATIONSHIP BETWEEN AGE AND FACTORS

Case Processing Summary Cases Valid N age * factors 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

age * factors Crosstabulation Count Factors return on Risk age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 0 15 11 2 0 28 investment 2 60 38 12 6 118 time period tax benefits diversification 0 10 3 1 0 14 0 9 10 4 1 24 1 9 6 0 0 16 Total 3 103 68 19 7 200

From the above table we can analyze that investors lying in the age group of 20-35 years regard return on investment as the major factor for investing in mutual funds.

CROSSTABS RELATIONSHIP BETWEEN AGE AND SCHEME OPTION

Case Processing Summary Cases Valid N age * schemes 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

age * schemes Crosstabulation Count Schemes open ended scheme age <18 years 20-35 years 35-50 years 50-60 years >60 years Total 0 55 28 3 4 90 close ended scheme 0 3 4 3 0 10 both 3 45 36 13 3 100 Total 3 103 68 19 7 200

From the above table we can analyze that investors lying in the age group of 20-35 years consider open ended scheme as the better option for investment.

Crosstabs ANNUAL INCOME AND FACTORS

Case Processing Summary Cases Valid N annualincome * factors 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

annualincome * factors Crosstabulation Count factors return on Risk annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 3 0 7 14 4 28 investment 12 14 15 46 31 118 time period tax benefits diversification 2 1 2 6 3 14 1 3 6 8 6 24 1 1 5 6 3 16 Total 19 19 35 80 47 200

From the above table we can analyze that all the investors falling in the income bracket from below 1 lakh-above 4 lakh consider return on investment as a better factor while investing in a mutual fund.

ANNUAL INCOME AND SCHEME OPTION

Crosstabs

Case Processing Summary Cases Valid N annualincome * schemeoption 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

annualincome * schemeoption Crosstabulation Count Schemeoption dividendgrowth Annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 16 13 18 55 27 129 payout 3 5 14 22 14 58 dividendreinvestment 0 1 3 3 6 13 Total 19 19 35 80 47 200

In the above table we can analyze that all the investors falling in all the income

brackets consider growth option as a scheme option to invest in mutual funds.

ANNUAL INCOME AND SCHEME

Crosstabs

Case Processing Summary Cases Valid N annualincome * schemes 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

open ended scheme Annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 11 13 21 34 11 90

close ended scheme 0 2 3 5 0 10 Both 8 4 12 41 35 100 0 Total 19 19 35 80 47 20

From the above table we can analyze that customers falling in the 3-4 lakh income bracket prefer open-ended scheme as well as closed ended schemes to invest in mutual funds.

Crosstabs

Case Processing Summary Cases Valid N annualincome * timeperiod 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

annualincome * timeperiod Crosstabulation Count Timeperiod 6months-1 <6 months Annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 2 0 2 0 0 4 year 5 8 4 9 1 27 1-3 years 7 3 9 18 9 46 3-5 years 5 6 20 51 32 114 >5 years 0 2 0 2 5 9 Total 19 19 35 80 47 200

From the given table we can analyze that major investors prefer 3-5 years time period to invest in mutual funds. Secondly 1-3 years time period for investments.

ANNUAL INCOME AND FACTORS

Crosstabs

Case Processing Summary Cases Valid N annualincome * factors 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

annualincome * factors Crosstabulation Count factors return on risk annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 3 0 7 14 4 28 investment 12 14 15 46 31 118 time period tax benefits diversification 2 1 2 6 3 14 1 3 6 8 6 24 1 1 5 6 3 16 Total 19 19 35 80 47 200

From the given table we can analyze that investors primarily focus on return on investment, secondly risk.

ANNUAL INCOME AND PERCEPTION

Crosstabs

Case Processing Summary Cases Valid N annualincome * perception 200 Percent 100.0% N 0 Missing Percent .0% N 200 Total Percent 100.0%

annualincome * perception Crosstabulation Count perception vehicle to pool money from investors in a basket of securities by a professional manager annualincome upto1 lakh 1-2 lakh 2-3 lakh 3-4 lakh >4 lakh Total 6 8 19 38 31 102 invest money by a mutually cooperative group 6 4 5 14 5 34 high returns with moderate risk 5 5 6 19 9 44 safe vehicle for investment purposes 2 2 5 9 2 20 Total 19 19 35 80 47 200

From the given table, we can analyze that major investors think that a mutual fund is a vehicle to pool money from investors in a basket of securities by a professional manager.

NON PARAMETRIC CHI SQUARE TEST

FACTORS: Chi-Square Test

Frequencies

Factors Observed N Risk return on investment time period tax benefits Diversification Total 28 118 14 24 16 200 Expected N 40.0 40.0 40.0 40.0 40.0 Residual -12.0 78.0 -26.0 -16.0 -24.0

Test Statistics factors Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 40.0. 193.400a 4 .000

INVESTMENT MODE Chi-Square Test Frequencies

Investmentmode Observed N equity market fixed deposits savings account Insurance mutual funds Total 54 25 32 20 69 200 Expected N 40.0 40.0 40.0 40.0 40.0 Residual 14.0 -15.0 -8.0 -20.0 29.0

Test Statistics investmentmod e Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 40.0. 43.150a 4 .000

MUTUAL FUND SCHEME Chi-Square Test

Frequencies

Schemes Observed N open ended scheme close ended scheme Both 4 Total 89 10 100 1 200 Expected N 50.0 50.0 50.0 50.0 Residual 39.0 -40.0 50.0 -49.0

Test Statistics schemes Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 50.0. 160.440a 3 .000

PERCEPTION Chi-Square Test

Frequencies

Perception Observed N vehicle to pool money from investors in a basket of secrities by a professional manager invest money by a mutually cooperative group high returns with moderate risk safe vehicle for investment purposes 5 Total 2 200 40.0 -38.0 20 40.0 -20.0 42 40.0 2.0 34 40.0 -6.0 102 Expected N 40.0 Residual 62.0

Test Statistics perception Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 40.0. 143.200a 4 .000

SCHEME OPTION OUTPUT

Chi-Square Test

Frequencies

Schemeoption Observed N Growth dividend-payout dividend-reinvestment Total 129 58 13 200 Expected N 66.7 66.7 66.7 Residual 62.3 -8.7 -53.7

Test Statistics schemeoption Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 66.7. 102.610a 2 .000

TIME PERIOD Chi-Square Test

Frequencies

Timeperiod Observed N <6 months 6months-1 year 1-3 years 3-5 years >5 years Total 4 27 46 114 9 200 Expected N 40.0 40.0 40.0 40.0 40.0 Residual -36.0 -13.0 6.0 74.0 -31.0

Test Statistics timeperiod Chi-Square df Asymp. Sig. a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 40.0. 198.450a 4 .000

DISCRIMINANT ANALYSIS
Discriminant

Analysis Case Processing Summary Unweighted Cases Valid Excluded Missing or out-of-range group codes At least one missing discriminating variable Both missing or out-ofrange group codes and at least one missing discriminating variable Total Total 0 200 .0 100.0 0 .0 0 .0 N 200 0 Percent 100.0 .0

Group Statistics Valid N (listwise) Riskandriskfreeinstruments equity maket and mutual Risk funds Satisfactionwithroi Brandname Taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt fixed deposits, savings account, insurance Risk Satisfactionwithroi Brandname Taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt Total Risk Satisfactionwithroi Brandname Taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt 2.19 .841 200 200.000 2.21 2.18 1.83 2.07 1.76 .824 .819 .817 .857 .719 200 200 200 200 200 200.000 200.000 200.000 200.000 200.000 2.39 .912 79 79.000 2.53 2.46 1.95 2.23 2.00 .903 .889 .904 .862 .716 79 79 79 79 79 79.000 79.000 79.000 79.000 79.000 2.06 .767 121 121.000 Mean 2.00 2.00 1.74 1.96 1.60 Std. Deviation .695 .719 .748 .841 .678 Unweighted 121 121 121 121 121 Weighted 121.000 121.000 121.000 121.000 121.000

Tests of Equality of Group Means Wilks' Lambda Risk Satisfactionwithroi Brandname Taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt .962 7.821 1 198 .006 .900 .926 .985 .976 .924 F 21.984 15.900 3.056 4.805 16.309 df1 1 1 1 1 1 df2 198 198 198 198 198 Sig. .000 .000 .082 .030 .000

Pooled Within-Groups Matrices satisfactionwit risk Risk Satisfactionwithroi Brandname Taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt .503 .331 .191 .117 .157 1.000 1.000 .415 .263 .117 .167 hroi .415 1.000 .235 .172 .277 brandname .263 .235 1.000 .246 .219 taxbenefits .117 .172 .246 1.000 .180 systematicfina mfbettermodeo ncialplannig .167 .277 .219 .180 1.000 finvestment .503 .331 .191 .117 .157

orrelation

Analysis 1
Summary of Canonical Discriminant Functions

Eigenvalues Functio n 1 Eigenvalue .184a % of Variance 100.0 Cumulative % 100.0 Canonical Correlation .394

a. First 1 canonical discriminant functions were used in the analysis.

Wilks' Lambda Test of Functio n(s) 1 Wilks' Lambda .845 Chi-square 32.860 Df 6 Sig. .000

Standardized Canonical Discriminant Function Coefficients Function 1 risk satisfactionwithroi brandname taxbenefits systematicfinancialplanni g mfbettermodeofinvestme nt -.002 .584 .274 -.077 .181 .481

Structure Matrix Function 1 risk systematicfinancialplanni g satisfactionwithroi mfbettermodeofinvestme nt taxbenefits brandname Pooled within-groups correlations between discriminating variables and standardized canonical discriminant functions Variables ordered by absolute size of correlation within function. .364 .290 .661 .464 .778 .670

Functions at Group Centroids riskandriskfreeinstrument s equity maket and mutual funds fixed deposits, savings account, insurance Unstandardized canonical discriminant functions evaluated at group means .528 Function 1 -.344

Classification Processing Summary Processed Excluded Missing or out-of-range group codes At least one missing discriminating variable Used in Output 200 0 200 0

Prior Probabilities for Groups riskandriskfreeinstrument s equity maket and mutual funds fixed deposits, savings account, insurance Total 1.000 200 200.000 .500 79 79.000 Prior .500 Cases Used in Analysis Unweighted 121 Weighted 121.000

Classification Resultsb,c Predicted Group Membership fixed deposits, equity maket riskandriskfreeinstrument s Original Count equity maket and mutual funds fixed deposits, savings account, insurance % equity maket and mutual funds fixed deposits, savings account, insurance Cross-validateda Count equity maket and mutual funds fixed deposits, savings account, insurance % equity maket and mutual funds fixed deposits, savings account, insurance a. Cross validation is done only for those cases in the analysis. In cross validation, each case is classified by the functions derived from all cases other than that case. b. 71.5% of original grouped cases correctly classified. c. 71.0% of cross-validated grouped cases correctly classified. 43.0 57.0 100.0 80.2 19.8 100.0 34 45 79 97 24 121 41.8 58.2 100.0 80.2 19.8 100.0 33 46 79 and mutual funds 97 savings account, insurance 24 Total 121

INTERPRETATION OF THE DISCRIMINANT ANALYSIS

Dependent variable-: We categorized the equity and mutual fund as risky instruments and fixed deposits, savings account and insurance as non risky instruments. Independent Variable-: We took risk associated with investments in mutual funds and equities, systematic financial planning, satisfaction with return on investment, mf as abetter mode of investment, tax benefits, brand name as our independent variable. Conclusion-: We can analyze from our structure matrix that investors look at risk as the major cause while their investments decisions. Secondly they look at systematic financial planning for choosing their investment avenues. Then satisfaction with return on investment for choosing investment avenues. Similarly mode of investment, tax benefits and brand name as decision criteria for investments decisions.

FINDINGS
In the first part of our project we have compared the performance of HDFC Mutual fund with other mutual funds. In that we have compared the performance of HDFC Equity fund with equity schemes of other mutual funds. Secondly performance of HDFC Growth Fund with Growth Schemes of other mutual funds. Then HDFC Tax Saver Fund with tax savings schemes of other mutual funds. For the analysis of first part we took sharpe ratio, treynor ratio, beta coefficients as our tools to measure volatility of the schemes. Secondly we calculated correlations coefficients between schemes of mutual funds with their benchmark indices to evaluate the performance of schemes using SPSS Software.

In the second part of our project we constructed a questionnaire and took a sample of 200 and tried to find out the reasons about their perception towards investing in mutual fund. For the analysis of this part, we took the help of SPSS Software. In that we constructed cross tables to measure consumer perception with different characteristics. We also applied Non-Parametric Chi-Square test to measure the preferences of the customers. Then we used discriminant analysis for categorical study of risk(1) and non-risk(2) with other independent variables to study consumer perception about mutual fund investments.

CONCLUSION
Mutual funds have been a growth industry, and more and more investors have become mutual fund owners over the years. This report all the sides of the issue and compare some of the equity schemes of HDFC Mutual Fund with Reliance and Tata. It focuses on a more objective approach to one of the most important decisions people make is how to invest their money appropriately. Running a successful Mutual Fund requires complete understanding of the peculiarities of the Indian Stock Market and also the psyche of the small investors. This study has made an attempt to understand the financial behavior of Mutual Fund investors in connection with the preferences of Brand (AMC), Products, Channels etc. I observed that many of people have fear of Mutual Fund. They think their money will not be secure in Mutual Fund. They need the knowledge of Mutual Fund and its related terms. Many of people do not have invested in mutual fund due to lack of awareness although they have money to invest. As the awareness and income is growing the number of mutual fund investors are also growing. Brand plays important role for the investment. People invest in those Companies where they have faith or they are well known with them. There are

many AMCs in Lucknow but only some are performing well due to Brand awareness. Some AMCs are not performing well although some of the schemes of them are giving good return because of not awareness about Brand. Reliance, UTI, SBIMF, ICICI Prudential etc. they are well known Brand, they are performing well and their Assets Under Management is larger than others whose Brand name are not well known like Principle, Sunderam, etc. Distribution channels are also important for the investment in mutual fund. Financial Advisors are the most preferred channel for the investment in mutual fund. They can change investors mind from one investment option to others. Many of investors directly invest their money through AMC because they do not have to pay entry load. Only those people invest directly who know well about mutual fund and its operations and those have time.

On the basis of the study undertaken by us and the data that was collected by us and thus analyzed it was found that people prefer to invest in mutual funds because of liquidity , tax benefits and for less amount of risk as compared to investing in the equity market. Sine the concept of mutual fund is not new most of the people have awareness about it. The investor of HDFC mutual fund have great reliability on it because of the companys good performance and its good brand image. At last it can be concluded that mutual fund is an ideal investment vehicle for todays complex and modern scenario.

BIBLIOGRAPHY
www.hdfcfund.com www.bseindia.com www.nseindia.com www.valueresearchonline.com www.moneycontrol.com www.mutualfundsindia.com Internet Magazines

QUESTIONNAIRE
CONSUMERS PERCEPTION TOWARDS INVESTING IN MUTUAL FUND IN CURRENT MARKET SCENARIO

Sample Characteristics : Name: Gender : Male ( ) Occupation: Contact number: Female ( )

1. What is your age ? (a) < 18 years (b) 20-35 years (c) 35-50 years (d) 50-60 years (e) > 60 years

2. What is your annual income? (a) < Rs. 1 lakhs (b) 1-2 lakhs (c) 2-3 lakhs (d) 3-4 lakhs (e) > 4 lakhs

3. Your mode of major investment of savings. (a) Equity market (b) Fixed deposits (c) Savings a/c (d) Insurance (e) Mutual Funds

4. What is your perception about Mutual funds? (a) A vehicle to pool money from investors in a basket of securities by a professional manager. (b) Invest the money by a mutually co-operative group. (c) High returns with moderate risk. (d) Safe vehicle for investment purposes.

5. Which factors do you consider while investing in mutual fund? (a) Risk (b) Return on Investment (c) Time period (d) Tax benefits

(e) Diversification

6. Time frame you look in while investing in mutual fund. (a) < 6months (b) 6months-1yr (c) 1-3yrs (d) 3-5 yrs (e) > 5 yrs

7. which type of mutual fund scheme would you like to invest in ? (a) open-ended scheme (b) close-ended scheme (c) both

8. Which type of scheme option would you prefer investing in ? (a) Growth (b) Dividend Payout (c) Dividend Reinvestment

Please rank the following statements on the basis of these graphic indications: : Strongly agree : Agree : Neither agrees nor disagrees : Disagree : Strongly disagree

9. Is investing in Mutual fund less risky as compared to other options available in the market. () () () () ()

10.are you satisfied with the return on investment from the mutual fund. () () () () ()

11.Does brand name of a company affects your investment decision in any mutual fund. () () () () ()

12.Tax benefits offered by various schemes of mutual funds affects your investment decision. () () () () ()

13.Systematic financial planning helps you in achieving your financial goals. () () () () ()

14.Is mutual fund a better medium of investment as compared to other modes. () () () () ()

We are grateful for your contribution for filling up this Questionnaire. Date: ________________