COMPARATIVE ANALYSIS OF EQUITY SCHEMES OF HDFC MF

WITH OTHER AMC’S AND CONSUMER’S PERCEPTION

TOWARDS MUTUAL FUND IN CURRENT MARKET SCENARIO

ON

HDFC MUTUAL FUNDS, LUCKNOW

FOR THE PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE DEGREE OF

MASTER OF BUSINESS AND ADMINISTRATION

SUBMITTED TO

ITM-SCHOOL OF MANAGEMENT

ITM UNIVERSE, GWALIOR (M.P)

SUBMITTED BY

NEHA SINGH

M.B.A.3ND SEM (BATCH 2008-2010)

1
 CONTENT PAGE

CHAPTER 1 - Industry Profile

CHAPTER 2- Company Profile

CHAPTER 3- Need for the Study

CHAPTER 4 - Literature Survey

CHAPTER 5 - Research Methodology

CHAPTER 6- Analysis of the Study

CHAPTER 7 - Findings and suggestions

Bibliography

Appendix

2
 ACKNOWLEDGEMENT

With great pleasure, we extend our deep sense of gratitude towards Mr. Pankaj Mishra (AVP) for

providing us with an opportunity to learn about the mutual fund industry and gain an insider’s

perspective of the same. We would also like to thank Ms. Alpana Dubey (Branch Manager), who

has given us the opportunity to work on this project.

Our special thanks to Ms. Bineet Kaur (client services), Mr.Roshan, Ms.Shipra Rastogi, and Mr.

Anil.K.Awasthi for their active guidance and support from time to time during the training.

The Director and Faculty Mentor of our institutes deserve the praise for their role in shaping this

summer training. We are also thankful to all the people who directly or indirectly helped us in

preparation of this report.

Finally we are grateful to HDFC AMC for providing us an opportunity to enhance our marketing

skills and knowledge.

3
 DECLERATON

I, hereby, undertake that the project titled, “comparative analysis of equity schemes of HDFC MF

with other AMC’s and consumer perceptions toward mutual fund market scenario” has been

taken by me in original project

The finding of the study are based on information collected by me on summer training .

Ms Neha singh

MBA 3rdSemester

ITM-SOM, Gwalior

4
 PREFACE

A summer training report is one of the most vital and active part of the curriculum of

management student. Its basic idea behind this is to strengthen the student concept

through partial training and make them acquainted with actual method and procedures.

As the part of M.B.A. course I underwent 6 weeks summer training on Analysis of

mutual fund of HDFC BANK LTD. (LUCKNOW)I do the complete study of different mutual

fund scheme of HDFC BANK and on the market survey of these mutual funds like

perception of people regarding mutual fund, awareness of mutual fund, return of mutual

fund, comparison of bank & mutual fund and all about mutual fund.

It had the privilege to being summer training at HDFC SLIC under concern of HDFC at

LUCKNOW. This training is important as it is a vital part of our curriculum during the course

and its gives me good experience of my work. I had the opportunity to interact with many people

from diverse fields, which further enriched my knowledge.

5
CHAPTER – 1

6
 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 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

7
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.

 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
8
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 )

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 )

9
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.

10
CHAPTER - 2

11
 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 31st, 2002, HDFC’s cumulative loan disbursement are

Rs.40, 060 crores 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

12
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

13
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

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

14
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.

15
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.

According to investment objective:

Equity funds

These funds invest a major portion of their corpus in equity shares issued by companies. Equity

16
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” ).

17
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.

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

18
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

19
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 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

20
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

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 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
21
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- these funds focuses on small cap stocks for their investment

portfolio.

 Mid Cap 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.

22
 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

23
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.

24
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:

1. All the mutual funds specify the minimum amount for investing in scheme. In case of

SIPs

2. facility of minimum amount is much lower around Rs. 500 to Rs. 1000.

3. Every mutual fund specifies the minimum number of payment that should be invested in

order to
25
 4. get this facility. It might be twelve cheques of Rs. 500 each of six cheque Rs 1000 each.

5. It is mandatory that the cheque should be of same value.

6. The frequency of investment offered for SIP varies from fund to fund. However , in

general all

7. 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:

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

appreciation systematic transfer plan.

2. 3. Each mutual fund specifies the scheme in which the amount can be

transferred.

26
4. The frequency also varies from fund to fund. Generally funds offer weekly, monthly and

5. quarterly option.

27
CHAPTER - 3

NEED FO R STUDY

The basic reason for conducting this research is to find the awareness of HDFC-MF

products among the investors and make comparison between HDFC, Reliance and Tata

on the basis of risk, return and portfolio and try to analyzing the awareness of mutual

funds in lucknow and which investment option is most suitable for investors as their point

of view.

28
 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.

29
CHAPTER - 4

LTERRATURE REVIEW

Ferriera.a.migual, ramos.bitto, (4june2009) 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

30
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

Hubbard.gellen, coates.C.jhon (aug2007) 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.

Kothari.S.P, warner.B.jerold (aug1997) “Evaluating mutual fund

Performance” Theyfound 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

31
Khorana.ajay, servais.henri,(july2004) “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. Innovation is rewarded more

ithe 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

Miguel A. Ferreira, Antonio Freitas Miguel (june2009) The Determinants of

mutual fund Performance: A Cross-Country Study they find that fund

performance worsens with lagged fundsize 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

32
Morey.r.methew,vinod.d.harikkesh,(17may2001) 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.

Nitzsche.dirk, Keith Cuthbertson (2006) “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 benchmarkswhereas around 20-40% of funds have genuinely

Spiegel.I.methew,Zhang Hong(feb2006) “Improved Forecasting of

Alphas and mutual fund Betas They 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.

33
Wermers.Russ (aug1999) mutual fund herding and the impact on stock

prices” , they find 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.

34
CHAPTER - 5

35
 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 Lucknow.

• 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

36
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 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.

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

37
  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 and through the help of our office executives.

Tools used in data analysis:

• Correlation

• Regression

• ANOVA test

• Treynor ratio

38
• Sharpe ratio

CHAPTER - 6

39
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

40
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
41
THE RELATIONSHIP OF THE NIFTY WITH HDFC ,

RELIANCE AND TATA EQUITY 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.

42
Correlations

Hdfc equity fund nifty

hdfc equity fund Pearson Correlation 1 .516

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 fund Pearson Correlation 1 .267
Sig. (2-tailed) .401
N 12 12
Nifty 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.

43
Correlations
Tata equity fund nifty
Tata equity fund Pearson Correlation 1 .214
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

TATA GROWTH FUND

44
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 -0.083 -0.008 -0.007 -7.369

2008
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

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

Fund Manager – Mr. Mahendra Jajoo

Inception date – July 1,1994

45
THE RELATIONSHIP OF THE NIFTY WITH HDFC ,

RELIANCE AND TATA GROWTH FUND-GROWTH PLAN

WITH NIFTY

HYPOTHESIS

46
 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
hdfc growth fund sensex
hdfc growth fund Pearson Correlation 1 .066
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 fund Pearson Correlation 1 .313
Sig. (2-tailed) .321
N 12 12
Sensex Pearson Correlation .313 1
Sig. (2-tailed) .321
N 12 12

47
 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 fund Pearson Correlation 1 .402
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

48
ANOVA

Sum of Squares do Mean Square F Sig.

hdfc growth fund Between Groups 16.710 11 1.519 . .
Within Groups .000 0 .
Total 16.710 11
reliance growth fund Between Groups .001 11 .000 . .

Within Groups .000 0 .

Total .001 11
Tata growth fund Between Groups .002 11 .000 . .

Within Groups .000 0 .

Total .002 11

49
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

50
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.

51
 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 Tata Tax Saver S & P Nifty

Saver Fund Saver Fund Fund

April 2008 -0.046 0.004 -0.044 2.753

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 2008 -0.044 0.002 -0.055 -12.397

December 2008 -0.041 0.003 -0.039 2.177

January 2009 -0.056 0.002 -0.048 -3.010

February 2009 -0.054 0.002 -0.050 -10.580

52
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

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.

53
 Correlations
hdfc TaxSaver

fund nifty
hdfc tax saver fund Pearson Correlation 1 -.602*
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

Correlations
reliance tax saver

fund Nifty
reliance tax saver fund Pearson Correlation 1 .768**
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).

54
 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 fund Pearson Correlation 1 .681*
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).

55
 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 it’s treynor ratio comes to be

greater

56
 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 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

HDFC Tax Reliance Tax Tata Tax saver S & P Nifty

saver fund saver fund fund

Treynor Ratio -0.59 -0.75 -0.95 -0.015

57
FUND HDFC Equity Reliance Tata Equity S & P Nifty

Fund Equity Fund Fund

TREYNOR -0.51 -0.69 -0.82 -0.015

RATIO

58
FUND HDFC Growth Reliance Tata Growth

Fund Growth Fund Fund

TREYNOR -0.71 -0.87 -1.27

RATIO

59
60
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.

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 :

61
 S(x) = (Rx – Rf)/ std dev(X)
Fund HDFC Tax Saver Reliance Tax Tata Tax Saver

Fund Saver Fund Fund

Sharpe Ratio 0.83 0.72 0.77

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 Equity Reliance Equity Tata Equity

62
 Fund Fund Fund

Sharpe Ratio -0.08 -0.12 -0.14

FUND HDFC Growth Reliance Tata Growth

Fund Growth Fund Fund

Sharpe Ratio -0.12 -0.14 -0.21

63
ANALYSIS ON THE BASIS OF BETA
64
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 Reliance Tata S & P

Equity Equity Equity Nifty

Fund Fund Fund

Beta 0.87 0.73 0.67 1

65
Fund HDFC Reliance Tata Growth Sensex

Growth Fund Growth Fund Fund

Beta 0.82 0.78 0.82 1

66
Fund HDFC Tax Reliance Tax Tata Tax S & P Nifty

Saver Fund Saver Fund Saver Fund

Beta 0.83 0.72 0.77 1

67
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.

68
 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

risk investment time period tax benefits diversification Total

age <18 years 0 2 0 0 1 3
20-35 years 15 60 10 9 9 103
35-50 years 11 38 3 10 6 68
50-60 years 2 12 1 4 0 19
>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

69
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.

70
 CROSSTABS

RELATIONSHIP BETWEEN AGE AND TIME PERIOD

Case Processing Summary

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

71
age * time period Cross tabulation
Count
Time period
<6 months 6months-1 year 1-3 years 3-5 years >5 years Total
age <18 years 1 0 1 1 0 3
20-35 years 3 18 23 54 5 103
35-50 years 0 7 15 42 4 68
50-60 years 0 1 6 12 0 19
>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.

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
72
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.

73
 CROSSTABS

RELATIONSHIP BETWEEN AGE AND INVESTMENT MODE

age * investment mode Cross tabulation

Count
Investment mode
equity market fixed deposits savings account insurance mutual funds Total
age <18 years 0 0 1 0 2 3

20-35 years 24 14 22 10 33 103

35-50 years 25 8 4 7 24 68
50-60 years 4 3 2 3 7 19
>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.

74
CROSSTABS

RELATIONSHIP BETWEEN AGE AND PERCEPTION

THEORY.

Case Processing Summary

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

75
age * perception Cross tabulation
Count
perception
vehicle to pool

money from

investors in a

basket of invest money by

securities by a a mutually safe vehicle for

professional cooperative high returns with investment

manager group moderate risk purposes Total

age <18 years 1 1 1 0 3
20-35 years 50 18 18 17 103
35-50 years 37 10 18 3 68
50-60 years 9 3 7 0 19
>60 years 5 2 0 0 7
Total 102 34 44 20 200

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

76
 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

Risk investment time period tax benefits diversification Total

age <18 years 0 2 0 0 1 3

20-35 years 15 60 10 9 9 103

35-50 years 11 38 3 10 6 68

50-60 years 2 12 1 4 0 19

>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.

77
CROSSTABS

RELATIONSHIP BETWEEN AGE AND SCHEME OPTION

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.

78
 Crosstabs

ANNUAL INCOME AND FACTORS

Case Processing Summary

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

annual income * factors Cross tabulation

Count
factors
return on

Risk investment time period tax benefits diversification Total

annual income upto1 lakh 3 12 2 1 1 19
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

79
 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 Missing Total
N Percent N Percent N Percent
annual income * scheme option 200 100.0% 0 .0% 200 100.0%

80
 annual income * scheme option Cross tabulation
Count
Scheme option
dividend-

Growth dividend-payout reinvestment Total

Annual income upto1 lakh 16 3 0 19
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

81
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 income upto1 lakh 11 0 8 19
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 10 100 200

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

82
 Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
annual income * time period 200 100.0% 0 .0% 200 100.0%

annual income * time period Cross tabulation

Count
Time period
<6 months 6months-1 year 1-3 years 3-5 years >5 years Total
Annual income upto1 lakh 2 5 7 5 0 19
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.

83
 ANNUAL INCOME AND FACTORS

Crosstabs

Case Processing Summary

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

annual income * factors Cross tabulation

Count
factors
return on

Risk investment time period tax benefits diversification Total

annual income upto1 lakh 3 12 2 1 1 19

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”,

84
secondly “risk”.

ANNUAL INCOME AND PERCEPTION

Crosstabs

Case Processing Summary

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

85
annual income * perception Cross tabulation
Count
Perception
vehicle to pool

money from

investors in a high

basket of invest money by

securities by a a mutually safe vehicle for

professional cooperative returns with investment

manager group moderate risk purposes Total

annual income upto1 lakh 6 6 5 2 19
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

86
 CHAPTER - 7

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, &

87
 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,

88
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.

FINDINGS

In the first part of our project we have compared the performance of HDFC Mutual fund
89
 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.

90
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.

91
3. Promotion efforts can increase the selling of mutual fund schemes,
therefore these must be done timely & wisely.

CONCLUSION

92
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 investor of HDFC mutual fund have great reliability on it because of the

company’s

93
 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

BIBLIOGRAPHY

www.ho.fund.com

94
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.ajay, servais.henri,(july2004) “Conflicts of

Interest and Competition in the mutul fund Industry”

95
 APPENDIX

QUESTIONNAIRE

CONSUMER’S PERCEPTION TOWARDS INVESTING IN

MUTUAL FUND IN CURRENT MARKET SCENARIO

Sample Characteristics :

Name:

Gender : Male ( ) Female ( )

Occupation:

Contact number:

96
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.

(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?

97
 (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

98
 : 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.

() () () () ()

99
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: ________________

100