Documentos de Académico
Documentos de Profesional
Documentos de Cultura
ON
COMPARATIVE ANALYSIS OF DIFFERENT INVESTMENT
ALTERNATIVES
Submitted by:
ANANT DEV MISHRA
PGDM 2008-10
FINAL REPORT
On
Comparative analysis of different investment
alternatives with mutual fund
By
ANANT DEV MISHRA
at
2
ACKNOWLEDGMENT
“Expression of feelings by words makes them less significant when it comes to make
statement of gratitude”
The Joy of Exploring! That’s why I am drawn to research work. Completion of this project to
the satisfaction of the company (HDFC bank Limited) is one of the most difficult and
interesting jobs I have ever done. First of all I am grateful to the GOD and my PARENTS
who gave me courage and moral support during hard times in the project development stages.
knowledge about Research Methodology tools and especially to MR. HEMANT NANDA
under whom I undertook my research work, for his valuable suggestions and guidance.
I am grateful to all those people who could not find their place here but have helped me in
some ways.
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DECLARATION
I hereby declare that this Project Report entitled “comparative analysis of different
investment alternatives” in HDFC bank ltd. submitted in the partial fulfilment of the
Research & Technology, Lucknow is based on primary & secondary data found by me in
various departments, books, magazines and websites & Collected by me in under guidance of
I further declare that all the facts and figures furnished in this project report are the outcome
Submitted by-
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PREFACE
Mutual fund is a trust that pools money from a group of investors (sharing common financial
goals) and invests the money thus collected into asset classes that match the stated investment
objectives of the schemes. Since the stated investment objectives of a mutual fund scheme
genrally forms the basis for an investor’s decision to contribute money to the pool, a mutual
fund can not deviate from its stated objective at any point of time.
Every mutual fund is managed by a fund manager, who using his investment management
skills and necessary research works ensures much better return than what an investor can
manage on his own. The capital appreciation and other incomes earned from these
investments are passed on to the investor (also known as unit holders) in proportion of the
number of units they own. Every Asset Management Company (AMC) sells its product with
the help of distributor .The distributor gets the fixed commission in return. Each Asset
Management Company adopt different ways to promote their mutual fund so that they can
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The project focuses upon different ways of promoting and selling mutual funds. The project
also focuses on the core basic of mutual funds, their types, their promotional schemes and my
experiences of promoting and selling mutual funds. The project also focuses on impressing
the host organization with our hard work, sincerity, knowledge and ethics and the project also
Table of contents
S. no. Title Page no.
1. Acknowledgement 3
2. Declaration 4
3. Preface 5
4. Executive summary 10
5. Banking in India 12-20
➢ Banking overview
➢ Notification
➢ Liberalisation
➢ Current scenario
➢ Structure
6. About HDFC bank 21-26
7. Strategies of HDFC bank 27-32
➢ Business strategy
6
➢ Positioning strategy
➢ Life cycle segmentation strategy
8. Organisational chart 33
9. Product & services 34-44
➢ Introduction
➢ Concept
➢ Investment strategy
12. Type of mutual fund 56-62
13. Risk Vs return 63
14. Performance evaluation of mutual fund 64-68
➢ Risk
➢ Return
➢ Liquidity
➢ Expense Ratio
➢ Composition of portfolio
15. How do investor choose between mutual fund 69-71
16. Time to invest 72
17. Most lucrative sectors & funds 73-76
18. Other investment options 77-84
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19. Objective of study 85
20. Research methodology 87-88
21. Data analysis & interpretation 89-114
22. Findings 115
23. Conclusion 117
24. Suggestions % recommendations 118
25. Limitations of the study 119
26. overall experience 120
27. Bibliography 121
28. Annexure 122
List of figure
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Fig. 3 GDP paid to mortgages 31
Fig. 4 Org. Structure of HDFC bank 33
Fig. 5 What is Mutual fund 51
Fig. 6 Concept of mutual fund 52
Fig. 7 Types of mutual fund 57
Fig. 8 Mutual fund by objectives 58
Fig. 9 Risk Vs return 63
Fig. 10 Performance evaluation 65
Fig. 11 Right time to invest 72
Fig. 12 No of mutual fund betting on the sectors 75
Fig. 13 Most popular stocks 76
Fig. 14 Age distribution in corporate 90
Fig. 15 Gender wise distribution 91
Fig. 16 Income wise distribution 92
Fig. 17 No. of persons invested in mutual fund 93
Fig. 18 No. of females invested in mutual fund 94
Fig. 19 No. of males invested in mutual fund 96
Fig. 20 Causes of not investing in mutual fund 96
Fig. 21 Satisfaction level of investors 97
Fig. 22 Return expectation of investors 98
Fig. 23 Investment criteria 99
Fig. 24 Purpose of investment 100
Fig. 25 Age wise Investment motives 101
Fig. 26 Income wise investment motives 102
Fig. 27 Most preferred investment 103
Fig. 28(I) Age wise distribution of investment choices 104
Fig. 28(II) Income wise distribution of investment choices 105
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111Fig. 28(III) No. of mutual fund investor choosing other 106
options
Fig. 28(IV) MF chosen by persons preferring other options 107
Fig. 29 Factors a investor like to have in mutual fund 108
Fig. 30 Returns 109
Fig. 31,32 Liquidity, investment objective 110
Fig. 33,34 Tax saving, past performance, service from agent 111
Fig. 35,36 Security, market conditions 112
Fig. 37,38 Reputation of the company, friends relatives 113
Fig. 39 Fund manager 114
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EXECUTIVE SUMMARY
In few years Mutual Fund has emerged as a tool for ensuring one’s financial well being.
Mutual Funds have not only contributed to the India growth story but have also helped
families tap into the success of Indian Industry. As information and awareness is rising more
and more people are enjoying the benefits of investing in mutual funds. The main reason the
number of retail mutual fund investors remains small is that 56% of the people with incomes
in India do not invest in mutual fund and 21% of the people do not know that mutual funds
exist. But once people are aware of mutual fund investment opportunities, the number who
decide to invest in mutual funds increases to as many as one in five people. The trick for
converting a person with no knowledge of mutual funds to a new Mutual Fund customer is to
understand which of the potential investors are more likely to buy mutual funds and to use
the right arguments in the sales process that customers will accept as important and relevant
to their decision. This Project gave me a great learning experience and at the same time it
gave me enough scope to implement my analytical ability. The analysis and advice presented
in this Project Report is based on market research on the saving and investment practices of
the investors
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This Project as a whole can be divided into three parts. The first part gives an insight about
the Company Profile and various strategies adopted, Objectives of the study, Research
Methodology. The second part of the Project consists of data and its analysis collected
through survey done on 100 people. For the collection of Primary data I made a questionnaire
and surveyed of 100 people. I also taken interview of many People those whom we visit at
their corporate and tried to cross sell our products i.e. Mutual Fund. The third part gives a
brief overview of what is mutual fund and its various features. One can have a brief
knowledge about Mutual Fund and its basics through the Project.
I studied about the products and strategies of other AMCs in Lucknow to know why people
prefer to invest in those AMCs. This Project covers the topic “COMPARITIVE ANALYSIS
organized and presented. I hope the research findings and conclusion will be of use.
12
13
BANKING IN INDIA
The Indian banking scenario witnessed a significant development in the recent years with
the entry of private banks and their focus on retail banking and convergence of services. The
business models of the leading players are adapting to this impending change as banks
widen the spectrum of savings and loan products they offer. Private Banks are the best
positioned to acquire market share in the emerging scenario: A change is expected to make
mergers between banks and Foreign Institutional Investors possible, which will. Benefit
14
large private bank group(s).
Nationalization
A significant milestone in Indian Banking happened in the late 1960s when the then Indira
Gandhi government nationalized, on 19th July, 1969, 14 major commercial Indian banks,
followed by nationalization of 6 more commercial Indian banks in 1980. The stated reason
for the nationalization was more control of credit delivery. After this, until the 1990s, the
nationalized banks grew at a leisurely pace of around 4%-also called as the Hindu growth of
After the amalgamation of New Bank of India with Punjab National Bank, currently there are
Liberalization
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation
and gave licenses to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks like ICICI Bank and HDFC Bank. This
move along with the rapid growth in the economy of India, kick started the banking sector in
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India, which has seen rapid growth with strong contribution from all the three sectors of
banks, namely, government banks, private banks and foreign banks. However there had been
a few hiccups for these new banks with many either being taken over like Global Trust Bank
while others like Centurion Bank have found the going tough.
The next stage for the Indian banking has been setup with the proposed relaxation in the
norms for Foreign Direct Investment, where all Foreign Investors in banks may be given
The Indian banking market is growing at an astonishing rate, with Assets expected to reach
US$1 trillion by 2010. An expanding economy, middle class, and technological innovations
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are all contributing to this growth. The country’s middle class accounts for over 320 million
people. In correlation with the growth of the economy, rising income levels, increased
standard of living, and affordability of banking products are promising factors for continued
expansion.
Fig. 1
The Indian banking Industry is in the middle of an IT revolution, Focusing on the expansion
of retail and rural banking. Players are becoming increasingly customer - centric in their
approach, which has resulted in innovative methods of offering new banking products and
services. Banks are now realizing the importance of being a big player and are beginning to
focus their attention on mergers and acquisitions to take advantage of economies of scale
and/or comply with Basel II regulation. “Indian banking industry assets are expected to reach
US$1 trillion by 2010 and are poised to receive a greater infusion of foreign capital,” says
Prathima Rajan, analyst in Celent's banking group and author of the report. “The banking
industry should focus on having a small number of large players that can compete globally
FUTURE OUTLOOK
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• Total banking assets are expected to double and grow to $915 billion by 2010 - a
CAGR of 15%
• $70 billion additional equity needed for growth plus Basel II compliance
• Mutual Funds: Assets Under Management (AUM) are expected to grow by 15% till
2010
POTENTIAL
• Demographic profile favours higher retail offtake - 54% of the population is in the 15-
high rate
account for 40% of the industrial output and 35% of direct exports
• The Banking system is technologically enabled with RTGS and cheque truncation in
place
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BANKING STRUCTURE IN INDIA
The banking institutions in the organized sector, commercial banks are the oldest institutions,
some them having their genesis in the nineteenth century. Initially they were set up in large
numbers, mostly as corporate bodies with shareholding with private individuals. In the sixties
of the 20th century a large number of smaller and weaker banks emerged in the country.
Subsequently there has been a drift towards state ownership and control. Today 27 banks
Commercial Banks operating in India fall under the different sub categories on the basis of
1. Public Sector Banks: Public Sector Banks emerged in India in three stages. First the
conversion of the then existing Imperial Bank of India into State Bank of India in
1955, followed by the taking over of the seven associated banks as its subsidiary.
2. New Private Sector Banks: after the nationalization of the major banks in the private
sector in 1969 and 1980, no new bank could be setup in India for about two decades,
though there was no legal bar to that effect. The Narasimham Committee on financial
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sector reforms recommended the establishment of new banks of India. RBI thereafter
issued guidelines for setting up of new private sector banks in India in January 1993.
These guidelines aim at ensuring that new banks are financially viable and
manner, so as to improve the image of commercial banking system and to win the
Eight private sector banks have been established including banks sector by financially
3. Local Area Banks: Such Banks can be established as public limited companies in the
private sector and can be promoted by individuals, companies, trusts and societies.
The minimum paid up capital of such banks would be 5 crores with promoters
contribution at least Rs. 2 crores. They are to be set up in district towns and the area
local area banks are functional, one each in Punjab, Gujarat, Maharashtra and Andhra
Pradesh.
4. Foreign Banks: foreign commercial banks are the branches in India of the joint stock
5. Cooperative Banks: Besides the commercial banks, there exists in India another set of
banking institutions called cooperative credit institutions. These have been made in
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existence in India since long. They undertake the business of banking both in urban
and rural areas on the principle of cooperation. They have served a useful role in
spreading the banking habit throughout the country. Yet, there financial position is
not sound and a majority of cooperative banks has yet to achieve financial viability on
Scheduled Banks
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Public sector banks Private sector banks (30)
(27)
State Governments. Hence the State Governments regulate these banks. In 1966, need was
felt to regulate their activities to ensure their soundness and to protect the interests of
made applicable to the cooperative Banks as well. These Banks have thus fallen under dual
control viz., that of the State Government and tat of the RBI which exercises control over
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“I am confident that India will become a Developed Nation by 2020. Come, let us
strive together to turn this resolve into reality” – Atal Bihari Vajpayee
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We understand your world
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Housing Development Finance Corporation Limited, more popularly known as HDFC Bank
Ltd, was established in the year 1994, as a part of the liberalization of the Indian Banking
Industry by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in
principle' approval from RBI, for setting up a bank in the private sector. The bank was
incorporated with the name 'HDFC Bank Limited', with its registered office in Mumbai. The
leading housing finance company, HDFC Bank is one of India's premier banks
providing a wide range of financial products and services to its over 15 million customers
across hundreds of Indian cities using multiple distribution channels including a pan-India
network of branches, ATMs, phone banking, net banking and mobile banking. Within a
relatively short span of time, the bank has emerged as a leading player in retail banking,
wholesale banking, and treasury operations, its three principal business segments.
The bank’s competitive strength clearly lies in the use of technology and the ability to deliver
world-class service with rapid response time. Over the last 13 years, the bank has
successfully gained market share in its target customer franchises while maintaining healthy
As of March 31, 2009, the Bank had a distribution network with 1,412 branches and 3,295
For the quarter ended March 31, 2009, the Bank earned total income of INR 53.65 billion
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of the previous year. Net revenues (net interest income plus other income) for the quarter
ended March 31, 2009 were INR 29.66 billion (Rs.2, 966.7crore), up by 35.4% over INR
21.91 billion (Rs.2191.4crore) for the quarter ended March 31, 2008. Net Profit for the
quarter ended March 31, 2009 was INR 6.30 billion (Rs.630.9crore), up by 33.9% over the
The Bank’s total balance sheet size increased by 37.6% from INR 1331.77 billion (Rs.
133,177 crore) as of March 31, 2008 to INR 1832.71 billion (Rs.183,271crore) as of March
31, 2009. Total deposits were INR 1428.12 billion (Rs.142,812crore), an increase of 41.7%
Total income for the year ended March 31, 2009 grew by 58.2% to INR 196.22 billion
Leading Indian and international publications have recognized the bank for its performance
and quality.
Vision
Mission
26
Use enabling technology to provide valued added products and services to customers. The
proffered provider of banking services for target retail and wholesale customer segments, and
to achieve healthy growth in profitability, consistent with the bank’s risk appetite. The bank
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CRISIL`s rating reflects HDFC Bank`s healthy resource profile, strong asset quality and
earnings profile. The rating is also supported by HDFC Bank`s good market position and
HDFC Bank has a healthy resource profile, backed by a large deposit base, coupled with a
high proportion of low-cost current and savings account (CASA) deposits. During the last
one year, the bank`s deposit base has grown by around 50%; as on Dec. 31, 2007, HDFC
Bank had deposits of Rs 993.87 billion, of which CASA deposits constituted 50.9%, as
against the system average of 36%. The bank has a high proportion of stable retail deposits,
which account for about 64% of its total deposits. The high CASA levels and limited reliance
on wholesale deposits have enabled the bank to maintain a low cost of deposits; the bank`s
cost of deposits, at 4.34% in 2006-07 (refers to financial year, April 1 to March 31), was
The bank`s corporate loan book is healthy, with a large exposure to entities rated AAA and
AA. The bank`s retail portfolio also exhibits healthy asset quality. HDFC Bank has
on Dec. 31, 2007, HDFC Bank`s gross NPAs stood at 1.2% of total advances, as against the
Further, HDFC Bank`s strong earnings profile is marked by a high net profitability margin
(NPM) of 3.03% (on a yearly average basis for 2006-07), as against the system average of
1.6%. The bank derives its high profitability levels from its low cost of deposits. Its
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profitability is also supported by fee income of 1.8%, which is higher than the system average
of 1.1%.
HDFC Bank`s healthy capitalisation is underpinned by its large net worth of Rs 113.58
billion translating into a high Tier I capital adequacy ratio of 10.5% as on Dec. 31, 2007. In
June and July of 2007, the bank raised equity from its promoters and through an American
Depository Share (ADS) issue. Additionally, HDFC Bank is the second largest private sector
bank in India, with a market share of 3.2%. The bank has a widespread network of branches
and automatic teller machines, although these are restricted largely to the urban areas. HDFC
Bank is also the second largest player in the non-mortgage retail finance segment.
Shares of the company gained Rs 25, or 1.62%, to settle at Rs 1,564.1. The total volume of
29
30
Business Strategy of HDFC bank
HDFC BANK mission is to be "a World Class Indian Bank", benchmarking themselves
against international standards and best practices in terms of product offerings, technology,
service levels, risk management and audit & compliance. The objective is to build sound
services for target retail and wholesale customer segments, and to achieve a healthy growth in
profitability, consistent with the Bank's risk appetite. Bank is committed to do this while
ensuring the highest levels of ethical standards, professional integrity, corporate governance
and regulatory compliance. Continue to develop new product and technology is the main
business strategy of the bank. Maintain good relation with the customers is the main
• Increase market share in India’s expanding banking and financial services industry by
following a disciplined growth strategy focusing on quality and not on quantity and
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• Leverage our technology platform and open scalable systems to deliver more products
• Maintain current high standards for asset quality through disciplined credit risk
management.
• Develop innovative products and services that attract the targeted customers and
• Continue to develop products and services that reduce bank’s cost of funds.
HDFC incorporated without any government ownership, allowing it to have a very unique
position within the Indian economy. Even though HDFC did not suffer from
government ownership, its major competitors did. Up to this day, nineteen different Indian
Private banks without any government ownership generally are held liable by their
shareholders and generally strive to maximize profits. In addition, without any government
ownership these organizations face a real potential for going bankrupt without any help from
the government. These realities encompass a hard budget constraint, which means the
organization faces a real chance of death; the management will have more of an incentive to
The government ownership of these banks conceivable changes the priorities of these banks
from profit maximization to abiding by what priorities the Indian government lays down. If
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the Indian government decides that the additional growth is necessary within small business
loans; the Indian banks will feel pressured to issue all loans that are in relation to small
business’s even if they may result in a lose. In addition, government controlled banks will
fear bankruptcy less because of the fact their organization is owned by the Indian
government. This mentality will result in these organizations being run less efficiently as well
Therefore, HDFC, one of the few private banks in India with profit maximization as its sole
priority competing against government controlled banks with possibly multiple priorities in
The central customer base for HDFC is India’s middle class and upper class. In the last
ten years the percentage of the population that makes up the middle class has doubled
from 7% to nearly 15%.5 The current economic growth of seven percent will probably be
maintained for the foreseeable future allowing for additional growth in the middle class.
By all accounts, if the growth rate is maintained then half of India will turn middle class
These potential growth prospects for HDFC are enormous especially with their key client
base will experience so much growth over the next two decades assuming that current growth
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Mortgages In India
HDFC present strategy concentrates greatly around the growth of the Indian mortgage
GDP as compared to other countries with significantly bigger mortgage markets. HDFC
believes it can break the cultural barrier and expand into the Indian mortgage market, which
has the potential for tremendous growth. Factors working for a good market scenario:
• Increased Urbanization
• Housing Shortages 7
HDFC has the ability to expand the present Indian mortgage market because of the ideally
strong market climate, but also because HDFC has the home court advantage in respect to
culture in India. Like most culture, Indians would like to borrow from a “local” bank rather
Fig. 3
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Life cycle segmentation strategy
Lifecycle strategies are the most common used approach in segmenting investor based on
their income group and determining the investment. This approach is based on the financial
periods of an investor during his or her life. The table below illustrates the different strategies
of banks which it presents to the investor which he or she can take at different points of his or
her life
Your goals Get Started Build and Consolidate for Income and
Invest future Security
35
Your When and how to Family Plan To have
concerns start saving commitments retirement sufficient
Savings need to be (mortgage, Manage existing income for
liquid to cover short- paying for investments to retirement
term obligations child’s obtain Return on
education) maximum investment that
Managing returns is sufficient to
investments maintain pre-
retirement living
standards
ORGANISATIONAL CHART
Managing director
Group head
Business head
36
RMSr.
1/Relationship
RM 2/
manager/ RM 3/ RM 4/
Fig. 4
37
PRODUCTS AND SERVICES
38
occupation, we are confident that you will find the perfect banking solution. Open an
account in your name or register for one jointly with a family member today
b) Savings plus
g) Salary account
• Classic:
• Payroll
• Regular
• Premium
• Defence
• Reimbursement
1. Current account: Now, with an HDFC Bank Current Account, experience the
freedom of multi-city banking! You can have the power of multi-location access to
your account from any of our 1412 branches in 528 cities. Not only that, you can do
most of your banking transactions from the comfort of your office or home without
39
stepping out.
We make it our business to help you with your business by offering you a Current
Account with all the benefits you need to stay ahead of your competition.
At HDFC Bank, we understand that running a business requires time and money, also
that your business needs are constantly evolving. That's where we come in. We
provide you with a choice of Current Account options to exclusively suit your
Open an HDFC Bank Current Account & control your business operations centrally.
e) RFC-domestic account
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from your own funds for a limited period, thus fulfilling your needs as well as
b) Super saver:
c) Sweep in facility
1. Demat account: HDFC BANK is one of the leading Depository Participant (DP)
in the country with over 8 Lac demat accounts.
HDFC Bank Demat services offers you a secure and convenient way to keep track of
your securities and investments, over a period of time, without the hassle of handling
2. Safe deposits locker: A Safe Deposit Locker with HDFC Bank is the solution to
your concern. Located at select branches in cities all over the country, our lockers
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Loans
Haven't you occasionally dreamt of buying a PC, a car of your choice or even travelling
abroad? Your dreams are now within your reach. Whatever your need, we offer an entire
1. Personal loans
2. Smart draft
3. Home loans
7. Express loans
8. Gold loans
9. Educational loans
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Cards
1. Credit cards: Besides arming you with unmatched spending power, our Credit
Cards are designed to meet your unique needs. Choose one that's tailored for you. The
best credit cards are available here, including even the online credit cards service
Netsafe.
a) Classic card
a) Premium cards
a) Commercial cards
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1. Debit cards: What if you could carry your bank account with you? HDFC Bank
Debit Cards give you complete and instant access to the money in your accounts
a) Classic card
a) Premium cards
a) Specialised cards
• Kisan card
1. Prepaid cards: besides offering convenience, our prepaid cards have been
a) Forex plus card: A pre-paid traveller's card designed to give you a secure and
b) Gift plus card: A pre-paid gift card designed to give your loved ones the freedom
44
c) Food plus card: Prepaid Food Plus Card - Freedom from cumbersome meal
vouchers
d) Money plus card: The Corporate Payment Card - Freedom from cash
advantage. We help you invest wisely through our financial and investment services. Profit
1. Mutual fund: Invest through the Mutual Fund route to meet your varied
investment objectives.
2. Insurance: Life insurance is designed to offer financial protection for you and
your family during the times of uncertainties. Choose from a range of traditional
insurance and unit linked plans designed to help you with your savings, retirement,
HDFC saving assurance plan HDFC unit linked enhanced life protection 2
HDFC loan cover term assurance plan HDFC unit linked young star 2
45
HDFC single premium whole of life HDFC unit linked young star champion
insurance plan
3. General and health insurance: Complete protection for you business, health,
travel & more.
• Home insurance
• Health insurance
• Travel insurance
• Car/motorbike insurance
• Shop/office insurance
run into is that they typically need far more money than the average bank can provide.
The solution is to raise money by issuing bonds (or other debt instruments) to a public
market. Thousands of investors then each lend a portion of the capital needed. A bond
is nothing more than a loan for which you are the lender. The organization that sells a
46
bond is known as the issuer. You can think of a bond as an IOU given by a borrower
designed to put you in charge of your finances and lets you trade in the comfort of
your home or office. Finally, you can trade with complete ease.
3. Mudra gold bar: HDFC Bank presents Mudra, an offering worth its weight in
gold. Mudra is a 24 Carat, 99.99% pure gold bar that you can purchase for
investment or gifting.
Gold continues to be one asset that appreciates steadily. HDFC Bank now offers Pure
Gold bars imported from Switzerland with an Assay certification, signifying the
Forex services
Are you a frequent flyer for business or often holiday abroad? Are you an importer/exporter
If you need to deal in foreign currency and keep tabs on exchange rates every now and then,
transfer monies to India, make payments etc., HDFC Bank has a range of products and
services that you can choose from to transact smoothly, efficiently and in a timely manner.
47
1. Travellers cheques
4. Cheque deposits
5. Remittances
6. Cash to master
7. Trade services
Payment services
1. Netsafe
2. Merchant services
4. Bill pay
6. Pay now
7. Insta pay
8. Direct pay
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12. Religious offering
49
DEPARTMENTS IN HDFC BANK
There are three main departments in the bank, they are described below
1. Treasury/ corporate: Within this business, the bank has three main product areas -
Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities,
and Equities. With the liberalisation of the financial markets in India, corporate need
50
These and fine pricing on various treasury products are provided through the bank's
Treasury team. To comply with statutory reserve requirements, the bank is required to
responsible for managing the returns and market risk on this investment portfolio
2. Wholesale: The Bank's target market ranges from large, blue-chip manufacturing
companies in the Indian corporate to small & mid-sized corporate and agri-based
businesses. For these customers, the Bank provides a wide range of commercial and
transactional services, cash management, etc. The bank is also a leading provider of
structured solutions, which combine cash management services with vendor and
distributor finance for facilitating superior supply chain management for its corporate
customers. Based on its superior product delivery / service levels and strong customer
orientation, the Bank has made significant inroads into the banking consortia of a
3. Retail: The objective of the Retail Bank is to provide its target market customers a
full range of financial products and banking services, giving the customer a one-stop
window for all his/her banking requirements. The products are backed by world-class
service and delivered to customers through the growing branch network, as well as
51
through alternative delivery channels like ATMs, Phone Banking, NetBanking and
Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank
Plus and the Investment Advisory Services programs have been designed keeping in
mind needs of customers who seek distinct financial solutions, information and advice
on various investment avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal Loans and Loans
for retail customers, providing customers the facility to hold their investments in
electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the Mastercard Maestro debit card
as well. The Bank launched its credit card business in late 2001. By March 2009, the
bank had a total card base (debit and credit cards) of over 13 million. The Bank is also
one of the leading players in the “merchant acquiring” business with over 70,000
establishments. The Bank is well positioned as a leader in various net based B2C
opportunities including a wide range of internet banking services for Fixed Deposits,
52
• Retail asset banking
3. Operations
5. Human resource
7. Information technology
9. Trading
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54
INTRODUCTION TO MUTUAL FUND
A mutual fund is a professionally-managed form of collective investments that pools money
from many investors and invests it in stocks, bonds, short-term money market instruments,
and/or other securities.[1In a mutual fund, the fund manager, who is also known as the
portfolio manager, trades the fund's underlying securities, realizing capital gains or losses,
and collects the dividend or interest income. The investment proceeds are then passed along
to the individual investors. The value of a share of the mutual fund, known as the net asset
value per share (NAV) is calculated daily based on the total value of the fund divided by the
Legally known as an "open-end company" under the Investment Company Act of 1940(the
primary regulatory statute governing investment companies), a mutual fund is one of three
basic types of investment companies available in the United States.[2] Outside of the United
States (with the exception of Canada, which follows the U.S. model), mutual fund may be
used as a generic term for various types of collective investment vehicle. In the United
Kingdom and Western Europe (including offshore jurisdictions), other forms of collective
investment vehicle are prevalent, including unit trusts, open-ended investment companies
(OEICs), SICAVs and unitized insurance funds. In Australia and New Zealand the term
mutual fund" is generally not used; the name "managed fund" is used intead.
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What is mutual fund
Mutual funds belong to the class of firms known as investment companies. While companies
may offer a "family" of funds under a single umbrella name and common administration - for
example, the Vanguard Group, Fidelity Investments, or Strong Funds - each fund offered is a
separately incorporated investment company. These are entities that pool investor money to
buy the securities that make up the fund’s portfolio. The idea behind this pooling of investor
money is to give each investor the benefits that come from the ownership of a diversified
The funds create and sell new shares on demand. Investors` shares represent aportion of the
fund’s portfolio and income proportional to the number of shares they purchase. Individual
shareholders of the mutual funds have voting rights in the operation of the fund, just as most
holders of common stocks in corporations have the right to vote on certain issues involving
the running of the company. The key attribute of a mutual fund, regardless of how it is
structured, is that the investor is entitled to receive on demand, or within a specified period
after demand, an amount computed by reference to the value of the investor’s proportionate
interest in the net assets of the mutual fund. This means that the owner of mutual fund shares
56
Fig. 5
Mutual funds, therefore, are considered a liquid investment. The investor’s selling
(redemption) price may be higher or lower than the purchase price. It all depends on the
performance of the fund’s portfolio. The fund has an adviser who charges a fee for managing
the portfolio. The adviser decides when and what securities to buy and sell, and is responsible
for providing or causing to be provided all services required by the mutual fund in carrying
on its day-to-day activities. All fund investors get this built-in portfolio management whether
they own 50 shares or 10,000.The adviser generally purchases many different securities for
the portfolio, since investment theory holds that diversification reduces risk. It is this
diminished risk that is one of the attractions of mutual funds. The fund also has a custodian,
usually a financial institution such as a bank, which holds all cash and securities for the fund.
57
Fig. 6
58
portfolio is lesser than investing in merely 2 or 3 securities
5 Liquidity An investor may not be able to sell some of the shares held by
. him very easily and quickly, whereas units of a mutual fund are
far more liquid.
6 Choice of schemes Mutual funds provide investors with various schemes with
. different investment objectives. Investors have the option of
investing in a scheme having a correlation between its
investment objectives and their own financial goals. These
schemes further have different plans/options
59
Sr. Disadvantages Particulars
No.
1 cost control not in Investor has to pay investment management fees and fund
. the hand of distribution costs as a percentage of the value of his investments
investor (as long as he holds the units), irrespective of the performance
of the fund.
3 Difficult in Many investors find it difficult to select one option from the
. selecting a plethora of funds/schemes/plans available. For this, they may
suitable fund have to take advice from financial planners in order to invest in
the right fund to achieve their objectives
• Number of foreign AMC's are in the que to enter the Indian markets like Fidelity
Investments, US based, with over US$1trillion assets under management worldwide.
• Our saving rate is over 23%, highest in the world. Only channel zing these savings in
mutual funds sector is required.
• We have approximately 29 mutual funds which are much less than US having more
than 800. There is a big scope for expansion.
• 'B' and 'C' class cities are growing rapidly. Today most of the mutual funds are
concentrating on the 'A' class cities. Soon they will find scope in the growing cities.
• Mutual fund can penetrate rural like the Indian insurance industry with simple and
limited products.
60
• Introduction of Financial Planners who can provide need based advice
wealth. SIPs entail an investor to invest a fixed sum of money at regular intervals in mutual
fund scheme the investor has chosen. For instance an investor opting for SIP in xyz mutual
fund scheme will need to invest a certain sum of money every month / quarter /half year in
the scheme.
These plans are best suited for people nearing retirement. In these plans an investor invests in
a mutual fund scheme and is allowed to withdraw a fixed sum of money at regular intervals
They allow the investors to transfer on a periodic basis a specified amount from one
scheme to another within the same fund family meaning two schemes belonging to the same
from the scheme from which the transfer is made .Such redemption or investment will be at
the applicable NAV. This service allows the investor to manage his investment actively to
61
achieve his objectives. Many funds do not even charge even any transaction feed for this
62
TYPES OF MUTUAL FUND SCHEMES
BY STRUCTURE:
An open-end fund is one that is available for subscription all through the year. These do not
have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value
A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15
years. The fund is open for subscription only during a specified period. Investors can invest
Fig. 7
in the scheme at the time of the initial public issue and thereafter they can buy or sell the
63
units of the scheme on the stock exchanges where they are listed. In order to provide an exit
route to the investors, some closeended funds give an option of selling back the units to the
Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate
that at least one of the two exit routes is provided to the investor.
Interval Schemes
Interval Schemes are that scheme, which combines the features of open-ended and close-
ended schemes. The units may be traded on the stock exchange or may be open for sale or
BY NATURE:
Fig. 8
1. Equity fund:
These funds invest a maximum part of their corpus into equities holdings. The structure
of the fund may vary different for different schemes and the fund manager’s outlook on
different stocks. The Equity Funds are sub-classified depending upon their investment
objective, as follows:
• Mid-Cap Funds
64
• Tax Savings Funds (ELSS)
Equity investments are meant for a longer time horizon, thus Equity funds rank high on
1. Debt funds:
The objective of these Funds is to invest in debt papers. Government authorities, private
companies, banks and financial institutions are some of the major issuers of debt papers.
By investing in debt instruments, these funds ensure low risk and provide stable income
• Gilt Funds: Invest their corpus in securities issued by Government, popularly known
as Government of India debt papers. These Funds carry zero Default risk but are
associated with Interest Rate risk. These schemes are safer as they invest in papers
backed by Government.
• Income Funds: Invest a major portion into various debt instruments such as bonds,
• MIPs: Invests maximum of their total corpus in debt instruments while they take
minimum exposure in equities. It gets benefit of both equity and debt market. These
scheme ranks slightly high on the risk-return matrix when compared with other debt
schemes.
• Short Term Plans (STPs): Meant for investment horizon for three to six months.
These funds primarily invest in short term papers like Certificate of Deposits (CDs)
65
and Commercial Papers (CPs). Some portion of the corpus is also invested in
corporate debentures.
• Liquid Funds: Also known as Money Market Schemes, These funds provides easy
like Treasury Bills, inter-bank call money market, CPs and CDs. These funds are
meant for short-term cash management of corporate houses and are meant for an
matrix and are considered to be the safest amongst all categories of mutual funds.
Equity funds High level of return, but has a high level of risk too.
Debt funds Returns comparatively low, less risky than equity
Liquid and money Provide stable but low level of return
market funds
1. Balanced funds: As the name suggest they, are a mix of both equity and debt funds.
They invest in both equities and fixed income securities, which are in line with pre-
defined investment objective of the scheme. These schemes aim to provide investors
with the best of both the worlds. Equity part provides growth and the debt part
Further the mutual funds can be broadly classified on the basis of investment parameter
viz,
66
Each category of funds is backed by an investment philosophy, which is pre-defined in the
objectives of the fund. The investor can align his own investment needs with the funds
BY INVESTMENT OBJECTIVE
• Growth Schemes: Growth Schemes are also known as equity schemes. The aim of
these schemes is to provide capital appreciation over medium to long term. These
schemes normally invest a major part of their fund in equities and are willing to bear
• Income Schemes: Income Schemes are also known as debt schemes. The aim of
these schemes is to provide regular and steady income to investors. These schemes
generally invest in fixed income securities such as bonds and corporate debentures.
• Balanced Schemes: Balanced Schemes aim to provide both growth and income by
periodically distributing a part of the income and capital gains they earn. These
schemes invest in both shares and fixed income securities, in the proportion indicated
• Money Market Schemes: Money Market Schemes aim to provide easy liquidity,
preservation of capital and moderate income. These schemes generally invest in safer,
67
short-term instruments, such as treasury bills, certificates of deposit, commercial
OTHER SCHEMES
• Tax Saving Schemes: Tax-saving schemes offer tax rebates to the investors under tax
laws prescribed from time to time. Under Sec.88 of the Income Tax Act, contributions
made to any Equity Linked Savings Scheme (ELSS) are eligible for rebate.
index such as the BSE Sensex or the NSE 50. The portfolio of these schemes will
consist of only those stocks that constitute the index. The percentage of each stock to
the total holding will be identical to the stocks index weightage. And hence, the
returns from such schemes would be more or less equivalent to those of the Index.
• Sector Specific Schemes: These are the funds/schemes which invest in the securities
stocks, etc. The returns in these funds are dependent on the performance of the
68
respective sectors/industries. While these funds may give higher returns, they are
more risky compared to diversified funds. Investors need to keep a watch on the
Risk vs return
69
Fig. 9
70
PERFORMANCE EVALUATION OF MUTUAL FUND
Parameters
Risk
Returns
Liquidity
Expense ratio
Composition of portfolio
Risk associated with mutual fund: Investing in mutual funds as with any security,
does not come without risk. One of the most basic economic principles is that risk and reward
are directly correlated. In other words, the greater the potential risk, the greater the potential
return. The types of risk commonly associated with mutual funds are:
71
Fig. 10
Market risk:
Market risk relate to the market value of a security in the future. Market prices fluctuate and
are susceptible to economic and financial trends, supply and demand, and many other factors
Political Risk:
Changes in the tax laws, trade regulations, administered prices etc. is some of the many
political factors that create market risk. Although collectively, as citizens, we have indirect
control through the power of our vote, individually as investors, we have virtually no control.
Inflation Risk:
72
Inflation or purchasing power risk, relates to the uncertainty of the future purchasing power
of the invested rupees. The risk is the increase in cost of the goods and services, as measured
Interest Rate risk relates to the future changes in interest rates. For instance, if an investor
invests in a long term debt mutual fund scheme and interest rate increase, the NAV of the
scheme will fall because the scheme will be end up holding debt offering lowest interest
rates.
Credit risk:
company through its cashflows determines the Credit Risk faced by you. This credit risk is
measured by independent rating agencies like CRISIL who rate companies and their paper.
An ‘AAA’ rating is considered the safest whereas a ‘D’ rating is considered poor credit
Liquidity risk:
Liquidity risk arises when it becomes difficult to sell the securities that one has purchased.
internal risk controls that lean towards purchase of liquid securities. You have been reading
about diversification above, but what is it? Diversification The nuclear weapon in your
arsenal for your fight against Risk. It simply means that you must spread your investment
73
across different securities (stocks, bonds, money market instruments, real estate, fixed
deposits etc.) and different sectors (auto, textile, information technology etc.). This kind of a
Returns: Returns have to be studied along with the risk. A fund could have earned higher
return than the benchmark. But such higher return may be accompanied by high risk.
therefore, we have to compare funds with the benchmarks, on a risk adjusted basis. William
Sharpe created a metric for fund performance, which enables the ranking of funds on a risk
adjusted basis.
Risk Premium = Difference between the Fund’s Average return and Risk free return on
Liquidity: Most of the funds being sold today are open-ended. That is, investors can sell
their existing units, or buy new units, at any point of time, at prices that are related to the
NAV of the fund on the date of the transaction. Since investors continuously enter and exit
funds, funds are actually able to provide liquidity to investors, even if the underlying markets,
in which the portfolio is invested, may not have the liquidity that the investor seeks.
Expense ratio: Expense ratio is defined as the ratio of total expenses of the fund to the
average net assets of the fund. Expense ratio can actually understate the total expenses,
because brokerage paid on transactions of a fund are not included in the expenses. According
to the current SEBI norms, brokerage commissions are capitalized and included in the cost of
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the transactions.
composition of the portfolio and the investments in various asset classes over time. Portfolio
turnover rate is the ratio of lesser of asset purchased or sold by funds in the market to the net
assets of the fund. If Portfolio ratio is 100% means portfolio has been changed fully. When
In order to meaningfully compare funds some level of similarity in the following factors has
to be ensured:
• Investment objective
• Risk profile
• Portfolio composition
• Expense ratios
When the market is flooded with mutual funds, it’s a very tough job for the investors to
choose the best fund for them. Whenever an investor thinks of investing in mutual funds, he
must look at the investment objective of the fund. Then the investors sort out the funds whose
75
investment objective matches with that of the investor’s. Now the tough task for investors
start, they may carry on the further process themselves or can go for advisors like SBI . Of
course the investors can save their money by going the direct route i.e. through the AMCs
directly but it will only save 1-2.25% (entry load) but could cost the investors in terms of
returns if the investor is not an expert. So it is always advisable to go for MF advisors. The
mf advisors’ thoughts go beyond just investment objectives and rate of return. Some of the
basic tools which an investor may ignore but an mf advisor will always look for are as
follow:
1. Rupee cost averaging: The investors going for Systematic Investment Plans(SIP)
and Systematic Transfer Plans(STP) may enjoy the benefits of RCA (Rupee Cost
Averaging). Rupee cost averaging allows an investor to bring down the average cost
and nowadays even as low as Rs. 500 or Rs. 100. In this case, the investor is always at
a profit, even if the market falls. In case if the NAV of fund falls, the investors can get
more number of units and vice-versa. This results in the average cost per unit for the
investor being lower than the average price per unit over time. The investor needs to
decide on the investment amount and the frequency. More frequent the investment
interval, greater the chances of benefiting from lower prices. Investors can also
benefit by increasing the SIP amount during market downturns, which will result in
reducing the average cost and enhancing returns. Whereas STP allows investors who
have lump sums to park the funds in a low-risk fund like liquid funds and make
76
2. Rebalancing: Rebalancing involves booking profit in the fund class that has gone up
and investing in the asset class that is down. Trigger and switching are tools that can
switch if a specified event occurs. The trigger could be the value of the investment,
the net asset value of the scheme, level of capital appreciation, level of the market
indices or even a date. The funds redeemed can be switched to other specified
schemes within the same fund house. Some fund houses allow such switches without
charging an entry load. To use the trigger and switch facility, the investor needs to
specify the event, the amount or the number of units to be redeemed and the scheme
into which the switch has to be made. This ensures that the investor books some
In case of mutual funds, the investor may enjoy it afterwards also through dividend
transfer option. Under this, the dividend is reinvested not into the same scheme but
For example, the dividends from debt funds may be transferred to equity schemes.
This gives the investor a small exposure to a new asset class without risk to the
principal amount. Such transfers may be done with or without entry loads, depending
1. Tax efficiency: Tax factor acts as the “x-factor” for mutual funds. Tax efficiency
affects the final decision of any investor before investing. The investors gain through
either dividends or capital appreciation but if they haven’t considered the tax factor
then they may end loosing. Debt funds have to pay a dividend distribution tax of
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12.50 per cent (plus surcharge and education cess) on dividends paid out. Investors
who need a regular stream of income have to choose between the dividend option and
a systematic withdrawal plan that allows them to redeem units periodically. SWP
implies capital gains for the investor. If it is short-term, then the SWP is suitable only
for investors in the 10-per-cent-tax bracket. Investors in higher tax brackets will end
up paying a higher rate as short-term capital gains and should choose the dividend
option.
If the capital gain is long-term (where the investment has been held for more than one
year), the growth option is more tax efficient for all investors. This is because
investors can redeem units using the SWP where they will have to pay 10 per cent as
long-term capital gains tax against the 12.50 per cent DDT paid by the MF on
dividends.
All the tools discussed over here are used by all the advisors and have helped
investors in reducing risk, simplicity and affordability. Even then an investor needs to
examine costs, tax implications and minimum applicable investment amounts before
committing to a service.
Time to invest
78
Fig. 11
For an investor the most appropriate time to invest in mutual fund is when the market
is lowest the investor purchases more of the units of a fund because they get more no.
of units and when the market grows their value grows. When the market is on high the
less potential is left so the investor buys less stock of the fund to reduce the chances
of loss or sells of its existing units in profit and waits for the market to grow.
What are the most lucrative sectors for mutual fund managers?
This is a question of utmost interest for all the investors even for those who don’t invest in
mutual fund. Because the investments done by the MFs acts as trendsetters. The investments
made by the fund managers are used for prediction. Huge investments assure liquidity and
reflects a positive picture whereas tight investment policy reflects crunch and investors may
Their investments show that which sector is hot? And will set the market trends. The expert
management of the funds will always look for profitable and high paying sectors. So we can
have a look at most lucrative sectors to know about the recent trends:
79
Sector name No. of mutual
fund on it
Automotive 255
Banking and financial services 196
Cement and construction 237
Consumer durables 51
Conglomerates 218
Chemicals 259
Consumer non durables 146
Engineering and capital goods 317
Food and beverages 175
Information technology 284
Media and entertainment 218
Manufacturing 259
Metals and mining 275
Miscellaneous 250
Oil % gas 290
Pharmaceuticals 250
Services 200
Telecom 264
Tobacco 150
Utility 225
From the above data collected we can say that engineering & capital goods sector has
emerged as the hottest as most of the funds are betting on it. We can say that this sector is on
boom and presents a bright picture. Other than it other sectors on height are oil & gas,
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telecom, metals & mining and information technology. Sectors performing average are
miscellaneous, pharmaceuticals and utility. The sectors which are not so favourite are
banking & financial services, conglomerates, consumer non- durables, food & beverages,
And the sector which failed to attract the fund managers is consumer durables with just 51
funds betting on it. Thus this analysis not only gives a picture of the mindset of fund
managers rather it also reflects the liquidity existing in each of the sectors. It is not only
useful for investors of mutual funds rather the investors of equity and debt too could take a
hint from it. Asset allocation by fund managers are based on several researches carried on so,
it is always advisable for other investors too take a look on it. It can be further presented in
BHEL 200
81
Fig. 12
Reliance communications ventures ltd. 169
We can easily point out that reliance industries limited emerges as a true winner over here
attracting the attention of almost244 managers well followed by Larsen & toubro ltd ICICI
bank ltd and Bharat heavy electricals ltd. The other companies succeeding in getting a place
at top 10 are SBI, Bharti airtel limited, reliance communications, Infosys technologies
Fig. 13
82
83
Equity
Equity investment generally refers to the buying and holding of shares of stock on a stock
market by individuals and funds in anticipation of income from dividends and capital gain as
the value of the stock rises. It also sometimes refers to the acquisition of equity (ownership)
investing and is generally understood to be higher risk than investment in listed going-
concern situations.
Corporate debentures
Corporate debentures are normally backed by the reputation and general creditworthiness of
Corporations occasionally issue this type of debt securities in order to raise capital and like
bonds; the debentures too, are documented as indentures. It is a type of debt instrument that is
not covered by the security of physical assets or collateral. Debentures are a method of
raising credit for the company and although the money thus raised is considered a part of the
84
Fixed Deposits in companies that earn a fixed rate of return over a period of time are called
(NBFCs) also accept such deposits. Deposits thus mobilised are governed by the Companies
Act under Section 58A. These deposits are unsecured, i.e., if the company defaults, the
investor cannot sell the documents to recover his capital, thus making them a risky
investment option.
• High interest.
• Short-term deposits.
financial year
• Investment can be spread in more than one company, so that interest from one
Bank deposits
A fixed deposit is meant for those investors who want to deposit a lump sum of money for a
fixed period; say for a minimum period of 15 days to five years and above, thereby earning a
higher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity
of the deposit.
85
Bank fixed deposits are one of the most common savings scheme open to an average
investor. Fixed deposits also give a higher rate of interest than a savings bank account. The
facilities vary from bank to bank. Some of the facilities offered by banks are overdraft (loan)
facility on the amount deposited, premature withdrawal before maturity period (which
involves a loss of interest) etc. Bank deposits are fairly safer because banks are subject to
The Public Provident Fund is the darling of all tax saving investments.
Little wonder! You invest in it and you get a deduction on your income. Besides, the interest
you earn on it is tax-free. Since it is a scheme run by the Government of India, it is also
totally safe. You can be sure no one is going to run away with your money.
The minimum amount to be deposited in this account is Rs 500 per year. The maximum
amount you can deposit every year is Rs 70,000. The interest you will earn is 8% per annum.
Gold
Of all the precious metals, gold is the most popular as an investment. Investors generally buy
gold as a hedge or safe haven against any economic, political, social, or currency-based
crises. These crises include investment market declines, inflation, war, and social unrest.
Investors also buy gold during times of a bull market in an attempt to gain financially
86
Real estate sector
Real estate investing involves the purchase, ownership, management, rental and/or sale of
real estate for profit. Improvement of realty property as part of a real estate investment
strategy is generally considered to be a sub-specialty of real estate investing called real estate
development. Real estate is an asset form with limited liquidity relative to other investments,
it is also capital intensive (although capital may be gained through mortgage leverage) and is
highly cash flow dependent. If these factors are not well understood and managed by the
investor, real estate becomes a risky investment. The primary cause of investment failure for
real estate is that the investor goes into negative cash flow for a period of time that is not
sustainable, often forcing them to resell the property at a loss or go into insolvency.
ULIP/ Insurance
Unit Linked Insurance Plan (ULIP) provides for life insurance where the policy value at any
time varies according to the value of the underlying assets at the time. ULIP is life insurance
solution that provides for the benefits of protection and flexibility in investment. The
investment is denoted as units and is represented by the value that it has attained called as Net
ULIP came into play in the 1960s and is popular in many countries in the world. The reason
that is attributed to the wide spread popularity of ULIP is because of the transparency and the
87
As times progressed the plans were also successfully mapped along with life insurance need
to retirement planning. In today's times, ULIP provides solutions for insurance planning,
financial needs, financial planning for children’s marriage planning also can be done with
this.
Unit Linked Insurance Plan - is a financial product that offers you life insurance as well as an
investment like a mutual fund. Part of the premium you pay goes towards the sum assured
(amount you get in a life insurance policy) and the balance will be invested in whichever
commercial papers and bonds of companies and other similar instruments. They offer
“indicative returns” to the investors. FMPs usually offer returns that are slightly higher,
around 1percentage points, than FDs because of their exposure to other instruments As stocks
become the most hated word, FMPs have emerged as favourites by simply combining small
investments, tax savings and assured returns FMPs offer good fixed income. Their portfolios
do not change much. Risk-averse investors and especially those falling into the higher tax
With more than 27 fund houses having launched FMPs with tenures ranging from 3 months
to a few years, FMPs are being lapped up by all and sundry as a viable alternative to fixed
88
deposits in banks. The minimum investment of Rs 5,000 is attracting scores of smaller
investors. By investing in debt instruments with the intent of holding them to maturity, FMPs
are appearing to be a safer haven for all those who are fed up with falling share prices.
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Scheme Return Safety Volatility Liquidity
convenience
Moderate
90
Company fixed Moderate Low Low Low
Deposits
High
High
Moderate
Low
Low
High
Moderate
Deposits Low
91
PPF Income Low Long
92
OBJECTIVE OF THE STUDY
93
4. To identify the customer segment of mutual fund
RESEARCH METHODOLOGY
This report is based on primary as well secondary data, however primary data collection was
given more importance since it is overhearing factor in attitude studies. One of the most
94
important users of research methodology is that it helps in identifying the problem,
collecting, analyzing the required information data and providing an alternative solution to
the problem .It also helps in collecting the vital information that is required by the top
management to assist them for the better decision making both day to day decision and
critical ones.
• Research design needed is exploratory where primary data can be used to analysis
consumer preference.
Data sources:
Primary data
Primary data helped in the knowledge gathered from our sources. Primary data was collected
by means of:
➢ Questionnaire
➢ Personal interviews
➢ Telephonic interviews
Primary data helped a lot in order to analyze the whole scenario and to take out the relevant
Secondary data
95
Secondary data provided the knowledge about the other investment options other than HDFC
It is a data, which are arrived from the primary data and collected from the other various
sources also as follows- through various articles, books, reports and websites.
Sampling procedure:
Type of sampling used was clustering sampling, and data was selected of them who are the
customers of HDFC bank by visiting their corporate like TCS, Idea, Ansal API, HDFC
standard life insurance ltd., Aeges BPO, Nokia Siemens network and Radio Mirchi etc.
irrespective of them being investors or not. Through filling up the questionnaire prepared.
Target population-
Elements Individuals male or female earner in the family responsible to take decision
Extent Lucknow
96
97
DATA ANALYSIS AND INTERPRETATION
Interpretation
According to this chart out of 100 employees 50 are in the age group of 21-30 which is 50%
and second highest group is 31-40 age group where 32% of the employees are in this age
group whereas only 6% were in the age group of 50-60. The data mainly represents the big
corporate houses where youngsters are preferred as the field is related to market.
98
B Female 14
Fig. 15
Interpretation
Out of 100 employees of different corporate only 14 % are female employees rest are male
employees.
Fig. 16
Interpretation
99
Major income group is 1lakh to 4lakh per annum which consist of 31% each, and then 4lakh
group has 22% of employees which is a big number and have a potential to invest and below
1lakh is the least numbers i.e. 16% of the total. This shows that the investors have a good
investment capacity.
Options Numbers
yes 46
No 54
Fig. 17
Option numbers
100
Yes 7
No 7
Fig. 18
Option Numbers
Yes 39
No 47
Fig. 19
101
Interpretation
Number of persons investing in mutual funds is less than the persons not investing in mutual
funds i.e. 56%. From the above given data it can be seen that females are more interested in
savings and investment in comparison to man. Where 50% of the women are interested in
mutual funds and rest 50% are not where as male are less mutual fund investment oriented as
Causes Numbers
Awareness 21
Not any specific 14
reason
Risk averse 19
Fig. 20
Interpretation
From the above data it is very clear that out of 54 people who are not investing in mutual
fund 39% are those who are not aware of the mutual fund, which is a big number for AMC
and a potential source for financial advisors to cater that part of customers, apart from this
102
people consider mutual fund as risky investment, and 26% of the customers doesn’t have any
Scale Numbers
Highly satisfied -
Satisfied 23
Moderate 19
Dissatisfied 4
Highly dissatisfied -
Fig. 21
Interpretation
Out of those customers who have invested in mutual funds 50% are satisfied which is a main
cause and the focus area for a company, which provides customer loyalty, only 9% of those
customers are dissatisfied which is not a big number yet to be focussed upon. The above data
shows that mutual fund investors got satisfaction on their investment with the returns
Returns Numbers
103
5-7% 4
8-14% 20
15-22% 52
23-30% 18
Above 30% 6
Fig. 22
Interpretation
More than 50% of the customers expect 15-22% returns on their investment which only
Option Numbers
Mutual fund 22
Equity 7
Others 23
Fig. 23
Interpretation
Out of those 52 people who were interested in returns of more than 15%, only 42% are
investing in mutual funds and 14 % are investing in equity market rest 44% is under other
investment plans.
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4. Purpose of investment
Option Numbers
Tax saving 36
Income 41
Security/hedging 20
Other 3
Fig. 24
Interpretation
Out of 100 people 42% are interested in investing their money for growth purposes and they
consider mutual funds as a source of income. Whereas the second major part i.e. 36%
belongs to tax saver as per SEBI instructions rebate on tax is allowed if anyone invests in
mutual fund. Because of the volatile nature of mutual funds very less people wants to invest
Age
21-30 31-40 41-50 51-60 Total
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Options Tax saving 23 7 4 2 36
Income 17 17 6 1 41
Security/hedging 7 8 2 3 20
others 3 0 0 0 3
Total 50 32 12 6 100
Fig. 25
Interpretation
Age group 21-30 mainly holds the concept of investing for tax saving as their priority and in
next group they look for income motive and people near their retirement age look for security
motive.
Income
0-1lakh 1-2.5lakh 2.5-4lakh 4above Total
Options Tax saving 5 13 12 6 36
Income 5 11 15 10 41
Security/hedging 5 6 3 6 20
others 1 1 1 0 3
Total 16 31 31 22 100
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Interpretation
0-1lakh income group invest equally for all motives, whereas in the next income group focus
is towards tax saving and in next two groups income is the main motive of investment from
the above diagram it is clear that in every income group people like to invest for income or
Option Numbers
Mutual fund 13
Insurance/ unit 18
linked plan
Fixed deposits 40
Equity 13
Gold 16
Interpretation
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This was the most shocking result of the survey where after expecting too high from the
market and their investment plans people still work traditionally and put their money on
unproductive investment plans. Least growing fund (7% return) is being more preferred as
40% of the investors prefer this, whereas mutual fund and equity market are least preferred
With the increase in age, number of mutual fund investors also decrease. In the age group 30-
40 investors diversify their fund and there is a consistency in that period. In every age group
Income
0-1lakh 1-2.5lakh 2.5-4lakh 4 above Total
MF 2 5 4 2 13
Unit 1 7 7 3 18
linked
FD 11 9 11 9 40
Equity 0 4 5 4 13
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Investment
Gold 2 6 4 4 16
Total 16 31 31 22 100
Fig. 28(II)
In this diagram it is clearly shown that each income group prefer FD as their priority as the
income level rise it investors starts considering other options, but a low income group
Fig. 28(III)
40% of the customers who invest in mutual fund also prefer FD, the second highest option
insurance
Yes 10(56%) 14(35%) 5(38%) 6(38%)
No 8(44%) 26(65%) 8(62%) 10(62%)
Fig. 28(IV)
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Interpretation
A person investing in Unit linked plan also prefer MF as 10 out of 18 also go for it. Whereas
if we talk of numbers investor of FD which is 40, 14 goes for MF which is 3rd in number and
Options Numbers
Liquidity 36
Growth 71
Convenient amount 47
Security 56
Transparency 34
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Fig. 29
Interpretation
Customers rate growth as the most important factor for investing in mutual fund whereas
following by it security comes which a mutual fund doesn’t provide but from past records it
can be said that it is more secured than Equity investment and very rarely gives loss to
someone, following it convenient amount comes which is a great factor for the success of
mutual fund, every income group can invest now because of this convenient amount. There is
Option Numbers
Returns 80
Liquidity 42
Investment objective 39
Tax savings 52
Past performance 35
Service from agent 22
Security 57
Market conditions 38
Reputation of company 40
Friends/ relatives 38
Fund manager 27
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Returns or growth on the investment is the main cause of why a investor puts his/her money
Fig. 30
in. As from the given pie chart it can be clearly seen that 80% of the people has accepted that
deciding to invest as a customer wants to put its money at a place where it is easily
convertible into cash. Out of 100, 58% believe that this is important factor and they consider
it.
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Fig. 32
Fig. 34
As from the above chart is is very clear that very few people only 22% consider service from
agent otherwise they look for funds and their returns. As far as past performance is
considered only 35% are looking for it. It doesn’t matter that how old is fund people are
Fig.35
Security is the degree of protection against danger and loss. Security comes with reliability
but there is a difference, that security must take into account the actions that can cause
destructions. 57% of the people look for security for their investment others have more risk
taking ability
Fig. 36
There are rational customers who look for market conditions if the market is goind down
some of them prefer to invest, some prefer in rising market. It is found out that 38% of the
customers go for market conditions and thes customers look for risk also.
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Fig. 37
With this chart it is very clear that brand doesn’t mean much now the customers are looking
for those who can give returns, like here only 40% looks for brand but rest 60% looks for
growth.
Fig. 38
38% of the investors refer their relatives and friends, and directly or indirectly these investors
depend on them. They buy and sell their securities on recommendations of their peers.
Fig. 39
Fund manager is one who professionally manages your securities and investment like a
trustee, 27% of the investor consider him as an important factor and in the rest most are
unaware of this thing.
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FINDINGS
➢ In corporate of Lucknow major section belong to 20-30yrs of age group, the second
highest group is in age group 31-40yrs and the least were in 51-60yrs age group.
➢ There are 54% of the people who are still not investing in mutual funds out of which
women are more saving cautious as 50% of the women invest in mutual fund this also
show that women’s have more risk taking ability whereas 45% of the males are
➢ Out of the persons who don’t invest in mutual fund are not aware of it i.e.39% which
is the largest among all reasons and the second reason is risk averse means 31%
people don’t want to take risk and like to move traditional way and rest 26% which is
➢ The satisfaction level of mutual fund investor is quite expected because of the
structure of mutual fund, it gives return, that is why most number of people who are
investing in mutual fund are satisfied i.e.50% and only 9% are dissatisfied with the
returns.
➢ Most of the people expect a rate of 15-22% i.e.52% and those who expect this rate
only 44% prefer mutual fund and 42% prefer equity rest prefer other investment
➢ Out of all most preferred investment is FD which shows that still the employees are
following conventional way and mutual fund and equity funds are less preferred.
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○ It is being seen that young people or newly employed person who are less than
of age 30 invest more in FD but as age grows investment pattern changes and
investment decreases. Youngsters prefer FD because they are new and don’t
➢ According to the survey mutual fund is the least preferred type of investment, in
➢ Out of all factors growth and returns are the main factors which a customer want in its
mutual fund
➢ Return, tax saving, security, liquidity and reputation of the company are the main
factors which an investor look before putting his money to any investment.
➢ In this study it is found out that with the rise in income level investment pattern of
➢ Before making any decision an investor considers return and security at the same
time.
➢ There is a lack of awareness in people below 30 yrs but as the time grows investment
diversified investment.
➢ 40% of the mutual fund investor invests in FD, 27% invests in Unit linked plan. There
is a 35% chance that a Fix deposit investor will invest in Mutual fund, and 55% i.e.
with unit linked plan, there is a 38% chance that a gold & Equity investor also invest
in MF.
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CONCLUSION
➢ Mutual fund satisfies all the expectations of the investors except security, but with the
past records it is clear that it is also secure because of its structure, most of the
investors are not aware of mutual funds or due to lack of time they don’t invest in
mutual funds.
➢ With rise in income and age the investment pattern also changes.
➢ There is a huge potential below income group of 4lakhs and due to lack of awareness
➢ SIP strategy of MF is found to be better for income group below 2.5lakh because they
don’t understand the intricacies of the market, and the person top of its carrier is
➢ There is a surprising outcome of male to female ratio and still its male dominated
sector.
➢ Investors are still unaware of the benefits of mutual fund they don’t know the
difference with other, thus they consider it risky but from the past performance it can
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be seen that it is very secure not because it offer liquidity but its structure which
➢ Gold and Equity are riskier than the rest 2 options, this shows that a person investing
in FD and Unit linked plan feels safe and thus they go for risky investment and also
benefits. Nobody will invest until and unless he is fully convinced. Investors should
be made to realize that ignorance is no longer good and they should realise that they
should be investing
➢ Mutual funds offer a lot of benefit which no other single option could offer. But most
of the people are not even aware of what actually a mutual fund is? They only see it
as just another investment option. So the advisors should try to change their mindsets.
The advisors should target for more and more young investors. Young investors as
well as persons at the height of their career would like to go for advisors due to lack
of time.
➢ Company needs to give the training of the Individual Financial Advisors about the
Fund/Scheme and its objective, because they are the main source to influence the
investors.
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➢ Before making any investment Financial Advisors should first enquire about the risk,
tolerance of the investors/customers, their need and time (how long they want to
invest). By considering these three things they can take the customers into
consideration.
➢ Younger people aged under40 will be a key new customer group into the future, so
making greater efforts with younger customers who show some interest in investing
➢ While explaining the product factors like growth, liquidity, tax saving benefits, past
➢ Investors investing in FD & Unit linked plan should be focussed as they are also a
➢ Factors show that not a perfect time to invest expecting it to fall further.
➢ My visits were in corporate in account opening so the data is of those who are new to
the organisation.
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OVERALL EXPERIENCE
In HDFC bank I worked in retail banking and I was under corporate salary relationship
manager (CSRM), my work was to cross sell the products of HDFC bank and product given
Main work of CSRM is to take care of accounts of corporate given to them it mainly consist
of account opening of new employees hired in that organisation, and to cross sell them.
That was a great experience working with them I got the opportunity to visit some big
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I could have done my work better if got opportunity to visit more organisations, due to
shortage of time I was able to visit few organisations those who were more preferred.
I learn how to talk to a customer, how to sell him, and how to identify his desire and convert
it into his need. I learn the importance of relationship with your peers and your customer; I
learn what the bank actually does and what are the departments in a bank.
This experience will help me guiding my carrier and in my future job as from initially I know
BIBLIOGRAPHY
Name of the site URL of the site
About banking 1. http://www.bharatbook.com/Market-
Research-Reports/Report-on-Indian-Banking-
Sector.html
2. http://business.mapsofindia.com/banks-in-
india/
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s/The_Sunday_ET/Special_Report/HDFC_Bank
_Long_on_vision_long_on_objectives/articlesh
ow/3480663.cms
3. http://www.sec.state.ma.us/sct/sctprs/prsamf
/amfidx.htm
4. www.mutualfundsindia.com
5. www.hdfcfund.com
Annexure /Appendices
122
Questionnaire
Q1. What is your name................................
a) 20-30
b) 31-35
c) 36-50
d) 50 above
a) 0-1 lakhs
b) 1-2.5 lakhs
c) 2.5-4 lakhs
d) 4 lakhs above
a) Yes
b) No
a) Lakh of awareness
b) Not interested
c) Risk averse
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Highly satisfied satisfied moderate dissatisfied highly dissatisfied
a) 5-7%
b) 8-14%
c) 15-20%
d) 20-25%
e) 25 above
a) Tax saving
b) Income
c) Security/ hedging
d) Others
a) Mutual fund
c) Fixed deposits
d) Equity
e) Gold
a) Liquidity
b) Growth
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c) Convenient amount
d) Security
e) Transparency
a) Returns
b) Liquidity
c) Investment objective
d) Tax savings
g) Security
h) Market conditions
i) Reputation of company
j) Friends/ relatives
k) Fund manager
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