SANGHAVI INSTITUTE OF MANAGEMENT AND SCIENCE

INDORE (M.P)

MARKET RESEARCH PROJECT REPORT (MRP)

STUDY OF ATTRACTIVE FEATURES OF HDFC MUTUAL FUND TO DEVELOP

PERCEPTION LEVEL OF INVESTOR

ON

HDFC MUTUAL FUNDS, INDORE

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE DEGREE OF

POST GRADUAT DIPLOMA IN MANAGEMENT

SUBMITTED TO

SANGHAVI INSTITUTE OF MANAGEMENT AND SCIENCE

INDORE (M.P)

SUBMITTED BY

SUNIL SANJODIYA

P.G.D.M 5TH TRIMESTER (BATCH 2009-2011)

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 EXPRESSION OF GRATITUDE

I sincerely and religiously devote this folio to all the gem of persons who have openly or
silently left an ineradicable mark on this assignment so that they may be brought into
consideration and given their share of credit, which they genuinely and outstandingly deserve.

This expedition of assignment encountered many trials, troubles and tortures along the way. I
am essentially indebted to my faculty, Prof. Sachidanand Pachori for this sweating learning
experience. He overlooked my faults and follies, constantly inspired and mentored via the
proficient direction. It was a privilege to work under his sincere guidance.

I express my thanks to Prof. Rakesh Shrivastava, Director General, Sanghvi Institute of

Management and Science, Indore for his considerate support whenever and wherever needed. I
express my indebtedness to the management of Sanghvi Institute of Management and Science,
for inspiring us to grab and utilize this opportunity.

With profound sense of gratitude, I would like to truthfully thank a recognizable number of
individuals whom I have not mentioned here, but who have visibly or invisibly facilitated in
transforming this assignment into a success saga.

Above all, I would like to conscientiously thank the Omnipotent, Omnipresent and
Omniscient God for His priceless blessings!

Sunil Sanjodiya

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 DECLARATION

I, Sunil Sanjodiya student of P.G.D.M program at Sanghvi Institute of Management and Science
(SIMS). I hereby declare that all the information ,facts and figures produce in this report are
based on my own experience and study during my study on “Customer perception towards
mutual fund” at HDFC Mutual FUND Indore.

The matter embodied in this project report has not been submitted to any other University or
Institution for the award of degree.

Date: (SUNIL SANJODIYA)

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 ACKNOWLEDGEMENT

This research was made possible as per the requirement of the PGDM course under Sanghvi
Institute of Management and Science. Many individual took interest and were supportive of my
effort. In fact, many have given me their time generously and it is not possible to mention all of
them here and there act of goodness. I take the opportunity to place and record my deep sense of
gratitude to all who have helped me in completion of my study.

I express my heartiest thanks to Prof. Sachidanand Pachori who took keen interest towards my
project and provided me with deep insight on importance of mutual fund awareness. I also
humbly thank my friends and batch mates for their generous participation in the data collection
process.

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 CERTIFICATE FROM FACULTY GUIDE

This is to certify that “Mr. Sunil Sanjodiya” of PGDM (Batch 09-11) in Sanghvi Institute of
Management and Science, Indore has carried out a Major Research Project titled “Study of
Attractive features of HDFC Mutual Fund to Develop Perception level of Investor”.
The work done by him is genuine and authentic.

The work carried out by the student was found satisfactory. I wish him all the success in career.

Prof. Sachidanand Pachori

Signature

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 PREFACE

“Give a man a fish, he will eat it.

Train a man to fish, he will feed his family.”

The above saying highlights the importance of Practical knowledge. Practical Training is an
important part of the theoretical studies. It is of an immense Importance in the field of
management. It offers the student to explore the valuable treasure of experience and an
exposure to real work culture followed by the industries and thereby helping the students
to bridge gap between the theories explained in the books and their practical implementations.

Research Project plays an important role in future building of an individual so

that he/she can better understand the real world in which he has to work in future. The theory
greatly enhances our knowledge and provides opportunities to blend theoretical with the practical
knowledge.

I have completed the Research Project on “Study of Attractive features of HDFC

Mutual Fund to Develop Perception level of Investor”... I have tried to cover each and every
aspect related to the topic with best of my capability.

I hope research would help many people in the future.

(Sunil Sanjodiya)

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CONTENTS
Topic Page No.

 Industry Profile…....…………………………………………………….8-11
 Company Profile…..……………………………………………………..13-16
 Types of Mutual Fund……..……………………………………………17-
 Conceptual Framework………………………………………………......29
 Need for the Study…………………………………………………...34
 Literature Review………………………………………………………..35
 Research Methodology…………………………………………………..54
 Consumers perception towards mutual funds in current market scenario
 Comparison of Hdfc mutual fund with reliance and Tata
 Problem faced by me
 Findings………………………………………………………………….57
 Suggestions
 Conclusion……………………………………………………………….72
 Bibliography……………………………………………………………..75
 Appendix
 Questionnaire……………..……………………………………………..76

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 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% increases in assets under their management from 2003 to
2007(May 31st), 38 fund houses managing Rs. 3, 87,896 crores (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 banks and
LIC& GIC. SBI Mutual fund was the first non- UTI Mutual fund established in June
1987 followed by can bank 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 cores.

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 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, under which 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 more 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.

 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)

In1999, 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.

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 COMPANY PROFILE

HDFC MUTUAL FUND

Introduction to HDFC Asset Management Company.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995. HDFC is India's premier housing finance company and enjoys an impeccable
track record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain the
market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling
units. HDFC has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related credit facilities. With
its experience in the financial markets, a strong market reputation, large shareholder base and
unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian
environment. HDFC provides financial assistance to individuals, corporate and developers for
the purchase or construction of residential housing. It also provides property related services (e.g.
property identification, sales services and valuation), training and consultancy. Of these
activities, housing finance remains the dominant activity. HDFC has a client base of around 11
lac borrowers, 9 lac depositors, 1.95 lac shareholders and about 25,000 deposit agents, as at
December 31, 2010.

HDFC had 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. HDFC has received the highest rating for its bonds
and deposits program for the fifteenth year in succession.

HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life
insurance company in the private sector to be granted a Certificate of Registration (on October
23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance
business in India. (Data source from-www.hdfcfund.com) 2011

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STANDARD LIFE INVESTMENTS LIMITED

Standard Life Investments was launched as an investment management company in 1998. It is

the dedicated investment management company of the Standard Life group and is a wholly
owned subsidiary of Standard Life Investments (Holdings) Limited, which in turn is a wholly
owned subsidiary of Standard Life plc With global assets under management of approximately
US$213.9 billion as at June 30, 2010 Standard Life Investments Limited is one of the world's
major investment companies, operating in the UK, Canada, Hong Kong, China, Korea, Ireland
and the USA, and is responsible for investing money on behalf of five million retail and
institutional clients worldwide 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. In 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 favor 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.

In order to meet the different needs and risk profiles of its clients, Standard Life Investments
Limited manages a diverse portfolio covering all of the major markets world-wide, which
includes a range of private and public equities, government and company bonds, property
investments and various derivative instruments. The company's current holdings in UK equities
account for approximately 1.8% of the market capitalization of the London Stock Exchange.

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 31st, 2002, HDFC’s cumulative loan disbursement are
Rs.40, 060 crores financing over 2.1 million units all over India.
PARTNERS

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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 company’s act, 1956, on December 10th, 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 29th, 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 50.1%

Standard Life Investments 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.

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 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 strategies 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 fund’s 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
stock 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.

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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 don’t 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 investment), 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 invest in safer short term investments such as
treasury bills, certificates of deposit, commercial paper and inter- bank call money. Returns on
these schemes may fluctuate 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.

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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.
s
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 good performance history.

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 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

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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 a bond 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
offer 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 both eration of buying bonds compulsorily while bond fund will
Payless 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 not a mutual fund; it trades just like any
other company on a stock exchange.

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 invests in is what determines this particular group.

Technical Funds-
These funds are those that use technical analysis to select scripts.

Small Cap Funds-

This fund focuses on small cap stocks for their investment portfolio.

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Midcap Funds-
These funds invest in mid cap scripts.

Large Cap Funds- These funds are those that invest in large cap scripts.

AAA Rated Funds-

These funds are those that invest only in triple a rated or higher rated securities.

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 CONCEPTUAL FRAMEWORK

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 invests in mutual fund, you become a part owner of the large
investment portfolio, along with all the other shareholders of the fund. When you purchase the
shares, the fund manager invests your money along with the money contributed by the rest of the
shareholders. Every day, the fund manager counts up the value of the entire fund’s 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 fund’s NAV increase? There are a couple of ways
that a mutual fund can make money in its portfolio

NET ASSET VALUE (NAV)

The Net Asset Value or NAV is 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 share’s 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.

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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 is less than the average
subscription price per unit, irrespective of whether it is a rising, falling or fluctuating market.
Thus the unit holders automatically gain averages out the fluctuation of the market without
having the market price day to day basis. This concept is called” RUPEE COST AVERAGING”.

.The following should be noted regarding SIP:

 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.
 Every mutual fund specifies 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 1000each.
 It is mandatory that the cheque should be of same value.
 The frequency of investment offered for SIP varies from fund to fund. However, in
general all mutual funds offer monthly or quarterly investment 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:

Investor can choose between a fixed systematic transfer plan and capital appreciation
systematic transfer plan.

Each mutual fund specifies the scheme in which the amount can be transferred the
frequency also varies from fund to fund.

Generally funds offer weekly, monthly and quarterly option.

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 NEED FOR STUDY

The basic reason for conducting this research is to find the awareness of HDFC-MF products and
attractive features of HDFC Mutual Funds to develop Perception Level of Investor and try to
analyzing the awareness of mutual funds in Indore and which investment option is most suitable
for investors as their point of view.
As mutual fund is an growing industry and more and more investors have become
mutual fund owners over the year , there is a wide scope for analyzing the basis of preference for
investing in mutual fund is they based on influenced by the variables such as liquidity, tax saving
etc. thus we compared the performance of HDFC equity fund with equity schemes of other
mutual fund and secondly performance of HDFC growth fund schemes with growth fund
schemes of reliance and Tata as well as tax saving schemes.

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 LTERRATURE REVIEW

The Determinants of mutual fund Performance

A Cross-Country Study find that performance worsens with lagged fund size for Domestic U.S.
funds, but not for non-U.S. funds and international funds. This finding is consistent with the
view that diminishing returns to scale in the U.S. are explained by liquidity constraints due to a
particular fund style (small stocks) or geographic focus (domestic stocks). Fund age and fees are
negatively related to performance, while funds that belong to large fund families, solo-managed
funds, and funds distributed in several countries perform better. Country characteristics also help
to explain fund performance. Domestic funds located in developed countries, especially those
with liquid stock markets and strong legal institutions, display better performance.

Competition in the mutual fund Industry:

Evidence and Implications for Policy –

Show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund
performance is consistent with competition exerting a strong disciplinary force on funds and
fees. Our findings lead us to reject the critics' views in favor of the legal framework established
by §36(b) of the Investment Company Act and the lead case interpreting that law (the Gutenberg
decision), while suggesting Gutenberg is best interpreted to allow the introduction of evidence
regarding competition between funds.

Evaluating mutual fund -

They found that that the performance measures are badly misspecified. Regardless of the
performance measure, there are indications of abnormal fund performance, including market-
timing ability, when none exists.

Conflicts of Interest and Competition in the mutual fund Industry -

They find no evidence that investors derive any benefit from 12b-1 fees. Product differentiation
strategies are also effective in obtaining market share. Families that perform better, and start
more funds relative to the competition (a measure of innovation) have a higher market share.

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Innovation is rewarded more it he new fund is more differentiated from existing offerings and is
in a less crowded objective. Finally, market share within an investment objective is driven
primarily by a family's policies within that objective, but there are important performance
spillover effects from other funds in the family. Our findings are robust to various tests for
endogeneity of the explanatory variables. Overall, this paper highlights a number of conflicts
between fund families and investors.

The Determinants of mutual fund Performance:

A Cross-Country Study

They find that fund performance worsens with lagged fund size for domestic U.S. funds, but not
for non-U.S. funds and international funds. This finding is consistent with the view that
diminishing returns to scale in the U.S. are explained by liquidity constraints due to a particular
fund style (small stocks) or geographic focus (domestic stocks). Fund age and fees are negatively
related to performance.

Estimation Risk in mutual fund Ratings:

The Case of Morningstar

As a result, investors can be somewhat less confident that the ratings of young funds are truly
what they are estimated to be. We illustrate our point by investigating 1281 international equity
mutual. Results for bond mutual funds are similar to those for equity mutual funds but hedge
funds show better ex-post and ex-ante risk adjusted performance than do mutual funds. Sensible
advice for most investors would be to hold low cost index funds and avoid holding past "active"
loser funds. Only very sophisticated investors should pursue an active investment strategy of
trying to pick winners - and then with much caution .The evidence suggests that ex-post, there
are around 2-5% of top performing UK and US equity mutual funds which genuinely outperform
their benchmarks whereas around 20-40% of funds have genuinely.

Improved Forecasting of Alphas and mutual fund Betas

It shows that the combined use of an OLS and Kalman filter model increases the number of
funds with predictable out of sample alphas by about 60%. Overall, a strategy that uses very
modest ex-ante filters to eliminate funds whose parameters likely derive primarily from
estimation errors produces an out of sample risk adjusted return of over 4% per annum.

Mutual fund herding and the impact on stock prices

22 | P a g e
It finds much higher levels in trades of small stocks and in trading by growth-oriented funds.
Stocks that herds buy outperform stocks that they sell by four percent during the following six
months; this return difference is much more pronounced among small stocks. Our results are
consistent with mutual fund herding speeding the price-adjustment process.

23 | P a g e
 RESEARCH METHODOLOGY

Research Objective
The present study has been undertaken with the object of examining, analyzing and inferring the
consumer’s perception about mutual investors which addresses the following issues.

 Analyzing the awareness of mutual funds in Indore.

 To find the awareness of HDFC MF products among investors.
 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 Indore 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 Procedure
In our study we have opted for judgmental 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.

24 | P a g e
 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.

Data Collection:
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 scenario 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 follows-Internet sites and newspapers.

Tools used in data analysis:

 Correlation

 Regression

 ANOVA test

 Trey nor ratio

 Sharpe ratio

25 | P a g e
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 Missing Total
N Percent N Percent N Percent
age * factors 200 100.0% 0 .0% 200 100.0%

age * factors Cross tabulation

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

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.

26 | P a g e
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 Missing Total
N Percent N Percent N Percent
age * time 200 100.0% 0 .0% 200 100.0%
period

age * time period Cross tabulation

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

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.

27 | P a g e
 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 50-60 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 * investment mode Cross tabulation

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

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.

28 | P a g e
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
age * perception 200 100.0% 0 .0% 200 100.0%

age * perception Cross tabulation

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

From the above table we can analyze those 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

29 | P a g e
 Case Processing Summary

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

age * factors Cross tabulation

Count

Factors Total
return on time tax diversificat
Risk investment period benefits ion
Age <18 years 0 2 0 0 1 3

20-35 15 60 10 9 9 103
years
35-50 11 38 3 10 6 68
years
50-60 2 12 1 4 0 19
years
>60 years 0 6 0 1 0 7

Total 28 118 14 24 16 200

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

30 | P a g e
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
age * schemes 200 100.0% 0 .0% 200 100.0%

age * schemes Cross tabulation

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

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

31 | P a g e
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
annual income * 200 100.0% 0 .0% 200 100.0%
factors

annual income * factors Cross tabulation

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

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

32 | P a g e
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
annual income * 200 100.0% 0 .0% 200 100.0%
scheme option

annual income * scheme option Cross tabulation

Count
Scheme option
dividend- dividend-
Growth payout reinvestment Total
Annual upto1 lakh 16 3 0 19
income 1-2 lakh 13 5 1 19
2-3 lakh 18 14 3 35
3-4 lakh 55 22 3 80
>4 lakh 27 14 6 47
Total 129 58 13 200

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

33 | P a g e
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
annual income * schemes 200 100.0% 0 .0% 200 100.0%

open ended close ended

scheme scheme Both Total
Annual upto1 lakh 11 0 8 19
income 1-2 lakh 13 2 4 19
2-3 lakh 21 3 12 35
3-4 lakh 34 5 41 80
>4 lakh 11 0 35 47
Total 90 10 100 2
00

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 Missing Total
N Percent N Percent N Percent
annual income * time 200 100.0% 0 .0% 200 100.0%
period

34 | P a g e
 annual income * time period Cross tabulation
Count
Time period Total
6months-1
<6 months year 1-3 years 3-5 years >5 years
Annual upto1 2 5 7 5 0 19
income lakh
1-2 lakh 0 8 3 6 2 19
2-3 lakh 2 4 9 20 0 35
3-4 lakh 0 9 18 51 2 80
>4 lakh 0 1 9 32 5 47
Total 4 27 46 114 9 200

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 Missing Total
N Percent N Percent N Percent
annual income * 200 100.0% 0 .0% 200 100.0%
factors

35 | P a g e
 annual income * factors Cross tabulation
Count
Factors Total
return on time tax diversificat
Risk investment period benefits ion
annual upto1 3 12 2 1 1 19
income lakh
1-2 lakh 0 14 1 3 1 19
2-3 lakh 7 15 2 6 5 35
3-4 lakh 14 46 6 8 6 80
>4 lakh 4 31 3 6 3 47
Total 28 118 14 24 16 200

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 Missing Total
N Percent N Percent N Percent
annual income * 200 100.0% 0 .0% 200 100.0%
perception

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

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 manage.

37 | P a g e
COMPARISON OF HDFC EQUITY FUND WITH
RELIANCE AND TATA

HDFC EQUITY FUND

Nature of scheme – Open-ended scheme

Investment Objective – To achieve capital appreciation

38 | P a g e
 Fund HDFC Reliance Tata Equity S & P Nifty
Equity Equity Fund
Fund Fund
April 2008 0.020 0.004 0.008 2.754
May 2008 -0.004 -0.053 -0.003 2.616
June 2008 -0.008 -0.006 0.054 -11.790
July 2008 -0.037 -0.041 -0.035 -7.752
August -0.040 -0.046 -0.042 7.016
2008
September -0.049 -0.051 -0.048 -4.699
2008
October -0.069 -0.063 -0.063 -26.983
2008
November -0.070 -0.060 -0.060 -12.398
2008

December -0.046 -0.044 -0.044 2.178

2008

January -0.051 -0.053 -0.053 -3.010

2009

February -0.053 -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

39 | P a g e
 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

Correlations

Hdfc equity
fund Nifty
Hdfc equity Pearson Correlation 1 .516
fund
Sig. (2-tailed) .086
N 12 12
Nifty Pearson Correlation .516 1

Sig. (2-tailed) .086

N 12 12

For HDFC Equity Fund the correlation comes to 51.6% when compared with nifty and the
significance comes to .086. So in my study i accept null hypothesis because there is correlation
OF HDFC equity fund with its benchmark that is nifty.

Correlations
reliance
equity fund nifty
reliance equity Pearson Correlation 1 .267
fund Sig. (2-tailed) .401
N 12 12
Pearson Correlation .267 1
Sig. (2-tailed) .401
N 12 12

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.

40 | P a g e
 Correlations
Tata equity
fund Nifty
Tata equity Pearson Correlation 1 .214
fund Sig. (2-tailed) .505
N 12 12
Nifty Pearson Correlation .214 1
Sig. (2-tailed) .505
N 12 12

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

Months HDFC Growth Reliance Tata Growth Sensex

Fund Growth Fund Fund

April 2008 -0.046 0.004 .006 9.986

May 2008 -0.056 -0.004 -0.004 -5.174

June 2008 -0.053 -0.009 -0.008 -19.839

July 2008 -0.039 -0.003 -0.005 6.431

August 2008 -0.046 -0.001 -0.001 1.444

September -0.049 -0.007 -0.005 -12.443

2008

October 2008 -0.060 -0.013 -0.010 -27.299

November 2008 -0.083 -0.008 -0.007 -7.369

December 2008 -0.025 -0.006 0.005 5.921

January 2009 4.219 -0.006 -0.005 -3.480

February 2009 -0.050 -0.002 -0.002 -8.780

41 | P a g e

March 2009 -0.047 -0.042 -0.043 -6.340

Nature of scheme – Open-ended growth scheme

Investment Objective – Aims to provide a vehicle to investors for generation of long term
capital appreciation.

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.

42 | P a g e
 Correlations
Hdfc growth
fund sensex
Hdfc growth Pearson Correlation 1 .066
fund Sig. (2-tailed) .838
N 12 12
Sensex Pearson Correlation .066 1
Sig. (2-tailed) .838
N 12 12

For HDFC Equity Fund the correlation comes to 6.6% when compared with sense 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 sense.

RELIANCE GROWTH FUND WITH SENSEX.

Correlations
Reliance
growth fund sense
reliance growth Pearson Correlation 1 .313
fund Sig. (2-tailed) .321
N 12 12
Sensex Pearson Correlation .313 1
Sig. (2-tailed) .321
N 12 12

43 | P a g e
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
Tata growth
fund sense
Tata growth Pearson Correlation 1 .402
fund Sig. (2-tailed) .196
N 12 12
Sensex Pearson Correlation .402 1
Sig. (2-tailed) .196
N 12 12

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 sense

ONE WAY ANOVA TABLE

44 | P a g e
 ANOVA
Sum of Mean
Squares do Square F Sig.
Hdfc growth Between 16.710 11 1.519 . .
fund Groups
Within Groups .000 0 .
Total 16.710 11
reliance growth Between .001 11 .000 . .
fund Groups
Within Groups .000 0 .
Total .001 11
Tata growth fund Between .002 11 .000 . .
Groups
Within Groups .000 0 .
Total .002 11

TAX SAVING FUNDS

45 | P a g e
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

COMPARISON OF HDFC TAX SAVER FUND WITH RELIANCE AND

TATA

46 | P a g e
 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.

RELIANCE TAX SAVER FUND

Nature of scheme – Open-ended Equity Linked Saving Scheme

Investment objective – To generate long-term capital appreciation.

TATA TAX SAVER FUND

Nature of scheme – Open-ended Equity Linked Saving Scheme

Investment objective – To generate long-term capital appreciation.

Months HDFC Tax Reliance Tax Tata Tax S & P Nifty

Saver Fund Saver Fund Saver Fund

April 2008 -0.046 0.004 -0.044 2.753

47 | P a g e
 May 2008 -0.056 0.002 -0.051 2.615

June 2008 -0.052 0.009 -0.049 -11.799

July 2008 -0.039 0.003 -0.039 -7.752

August 2008 -0.046 0.007 -0.046 7.015

September -0.048 0.003 -0.050 -4.698

2008

October 2008 -0.014 0.010 -0.063 -26.983

November -0.044 0.002 -0.055 -12.397

2008

December -0.041 0.003 -0.039 2.177

2008

January 2009 -0.056 0.002 -0.048 -3.010

February -0.054 0.002 -0.050 -10.580

2009

March 2009 -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

48 | P a g e
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
Hdfc
TaxSaver
fund Nifty
Hdfc tax saver Pearson Correlation 1 -.602*
fund Sig. (2-tailed) .038
N 12 12
Nifty Pearson Correlation -.602* 1
Sig. (2-tailed) .038
N 12 12
*. Correlation is significant at the 0.05 level (2-tailed).

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

49 | P a g e
 Correlations
reliance tax
saver fund Nifty
reliance tax saver Pearson Correlation 1 .768**
fund Sig. (2-tailed) .004
N 12 12
Nifty Pearson Correlation .768** 1
Sig. (2-tailed) .004
N 12 12
**. Correlation is significant at the 0.01 level (2-tailed).
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
Tata TaxSaver
fund Nifty
Tata tax saver Pearson Correlation 1 .681*
fund Sig. (2-tailed) .015
N 12 12
Nifty Pearson Correlation .681* 1
Sig. (2-tailed) .015
N 12 12
*. 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
50 | P a g e
 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 it’s Treynor ratio comes
to be greater than that of the market and vice versa.

The ratio signifies the return per unit of risk, thus the ratio is of the following form:

(R – R f) /

R = returns

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 1 st
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

HDFC Tax Reliance Tax Tata Tax S & P Nifty

saver fund saver fund saver fund

Treynor -0.59 -0.75 -0.95 -0.015

Ratio

51 | P a g e
 TREYNOR RATIO
0 HDFC TAX RELIANCE TAX TATA TAX S&P NIFTY
SAVER FUND SAVER FUND SAVER FUND
-0.1
-0.2
-0.3 TREYNOR RATIO
-0.4
-0.5
-0.6
-0.7
-0.8
-0.9
-1

FUND HDFC Equity Reliance Tata Equity S & P Nifty

Fund Equity Fund Fund

TREYNOR -0.51 -0.69 -0.82 -0.015

RATIO

TREYNOR RATIO
HDFC EQUITY RELIANCE TATA EQUITY S&P NIFTY
0 FUND EQUITY FUND FUND
-0.1

-0.2

-0.3 TREYNOR RATIO

-0.4

-0.5

-0.6

-0.7

-0.8

-0.9

52 | P a g e
 FUND HDFC Reliance Tata Growth
Growth Fund Growth Fund Fund

TREYNOR -0.71 -0.87 -1.27

RATIO

TREYNOR RATIO
HDFC Growth Fund Reliance Growth Fund Tata Growth Fund
0

-0.2

-0.4

TREYNOR RATIO
-0.6

-0.8

-1

-1.2

-1.4

PERFORMANCE ANALYSIS ON THE BASIS OF SHARPE’S RATIO

The Sharpe’s 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 tradeoff between risk and returns. At the same time, it
also factors in the desire to generate returns, which are higher than risk-free returns.

53 | P a g e
 Fund HDFC Tax Saver Reliance Tax Tata Tax Saver
Fund Saver Fund Fund

Sharpe Ratio 0.83 0.72 0.77

Mathematically, 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 fund’s 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.

Sharpe Ratio
0.82
0.74
0.66 Sharpe Ratio
nd nd nd
r Fu r Fu r Fu
ve ve ve
Sa Sa Sa
Ta
x ax ax
FC ceT taT
HD lia
n Ta
Re

FUND HDFC Equity Reliance Tata Equity

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 Fund Equity Fund Fund

Sharpe Ratio -0.08 -0.12 -0.14

Sharpe Ratio
0 d d d
Fun Fun Fun
-0.02 ui
ty ity u ity
Eq Equ Eq
-0.04 FC e ta Sharpe Ratio
nc Ta
HD le ia
-0.06 R
-0.08
-0.1
-0.12
-0.14

FUND HDFC Reliance Tata Growth

Growth Fund Growth Fund Fund

Sharpe Ratio -0.12 -0.14 -0.21

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 -0.2
-0.1

-0.25
-0.15
-0.05
0

HD
FC
GR
OW
TH
FU
ND

RE
LIA
NC
E GR
OW
TH
FU
ND

TA
TA
GR
OW
TH
FU
ND

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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 sense moves by 25%, a fund’s beta number will tell you whether the fund’s 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 R-Square 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 sense.

Fund HDFC Relianc Tata S & P

Equity e Equity Equity Nifty
Fund Fund Fund

Beta 0.87 0.73 0.67 1

BETA

1
0.8
BETA
0.6
0.4
0.2
0
HDFC EQUITY RELIANCE EQUITY TATA EQUITY S&P NIFTY
FUND FUND FUND

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Fund HDFC Reliance Tata Growth Sensex
Growth Fund Growth Fund Fund

Beta 0.82 0.78 0.82 1

BETA
1
0.8
0.6 BETA
0.4
0.2
0
HDFC GROWTH
FUND RELIANCE
GROWTH FUND TATA GROWTH
FUND SENSEX

Fund HDFC Tax Reliance Tax Tata Tax S & P Nifty

Saver Fund Saver Fund Saver Fund

Beta 0.83 0.72 0.77 1

BETA

1
0.8
0.6 BETA
0.4
0.2
0
HDFC TAX SAVER RELIANCE TAX TATA TAX SAVER S&P NIFTY
FUND SAVER FUND FUND

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 PROBLEM FACED BY ME

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 MF’s
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 MF’s are all about shares equity marketing-

This was probably the most difficult thing to explain to prospective investors that MF’s
are not all about equity markets. It was an experience education them about the various
avenues MF’s 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
avenues-

The sales calls that we made had one thing in common people’s expectation for assured
returns & their knacks of comparing MF’s with government offered schemes like PPF,
IVP, KVP, etc and since MF’s do not offer assured returns it was tough task convincing
investors that in today’s 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 MF’s which other
investment avenues did not offer.

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 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.

Then we used discriminate analysis for categorical study of risk (1) and non-risk (2) with other
independent variables to study consumer perception about mutual fund investments.

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 SUGGESTIONS:

1. Mutual Funds should maintain its quality of minimum risk for attracting large investment.

2. With the booming economy here is a need to provide proper knowledge about mutual funds so
that investors invest easily.

3. Promotion efforts can increase the selling of mutual fund schemes, therefore these must be
done timely & wisely.

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 CONCLUSION

Mutual funds have been a growth industry, and more and more investors have become mutual
fund owners over the years. This reports all the sides of the issue and compares 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. 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. Since the
concept of mutual fund is not new most of the people have awareness about it. The investors of
HDFC mutual fund have great reliability on it because of the company’s good performance and
its good brand image. At last it can be concluded that mutual fund is an ideal investment vehicle
for today’s complex and modern scenario.

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 BIBLIOGRAPHY

www.ho.fund.com

www.bse.com

www.nseindia.com

www.moneycontrol.com

Kundkar.nagesh (marketing research)

JOURNALS

 Kothari.s.p, (aug1997) “Evaluating mutual fund Performance”

 Hubbard.gellen, coates.C.jhon (aug2007) Competition in the mutual fund Industry:

Evidence and Implications for Policy

 Kothari.s.p, warner.B.jerold (aug1997) “Evaluating mutual fund Performance

 Khorana. jay, servais.henri,(july2004) “Conflicts of Interest and Competition in the

mutual fund Industry”

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 APPENDIX

QUESTIONNAIRE

CONSUMER’S PERCEPTION TOWARDS INVESTING IN MUTUAL FUND IN CURRENT

MARKET SCENARIO

Sample Characteristics:

Name:

Gender: Male ( ) Female ( )

Occupation:

Contact number:

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) Saving’s 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.

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(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

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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. A tax benefit 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: ________________

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