Description
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.
AT BHAVNAGAR
•
INDEX
5 6 8 11 14 17 19 20 22 23 24 27
1. 2. 3.
4. 5. 6.
Introduction Company Profile Retail Banking Services ? Accounts & Deposits ? Loans ? Cards ? Investment & insurance ? Forex & Trade Services ? Product & Services ? Payment Services Private Banking SWOT analysis of the bank. Mutual Fund
•
The important of commercial banks in the process of economical development has been stressed from time to time by the economical thinkers & progressive bankers in the country. Commercial banks play a very important role in our economic, in fact, it is difficult to imagine. How our economic system could foundation efficiently without many of their services. They are the heart of our financial structure, since they have the ability, in cooperation with the Reserve Bank of India.
Today scenario in banking industry has totally changed. There is a significant transaction in Indian banking industry. Cross border flow and entry of
new products, particularly derivative instruments, have impacted significantly on the domestic banking factor forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operation in order to remain competitive to the globalize environment. These developments have facilitated greater choice for consumers, who have become more discerning and demanding, compelling banks to offer a broader range of products through diverse distribution channels.
•
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The housing development finance corporation ltd was amongst the first to receive an in principal approval from the reserve bank of India to set up a bank in the private sector, as a part of RBI”s liberalization of the Indian banking industrial in 1994.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1412 branches spread over 528 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base.
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred 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 is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People.
•
The HDFC bank provides the following accounts & deposits: ? Saving Account ? Current Account ? Fixed Deposit ? Demat Account
?
Saving Plus Account :
The HDFC bank saving plus account is the best banking option. It’s
an account that gives you access to some of the finest banking features that you can ask for in a saving account.
All you have to do is maintain an Average Quarterly Balance of Rs. 10,000. In addition to this, the account is also a great way to discover the rewards of relationship banking which entitles you to get special pricing or other product.
?
Current Account :
A Current account is ideal for carrying out day-to-day business
transactions. With the HDFC Bank Regular Current Account, you can access your account anytime, anywhere, pay using payable at par cheques or deposit cheque at any HDFC bank branch. Regular Current Account requires you to maintain an average quarterly balance of only Rs. 10,000.
?
Fixed Deposits :
The deposit for a fixed period of time are called term or fixed deposit
since the deposits are for a fixed periods. The bank can use the funds for lending to their other clients.
By investing in HDFC bank fixed deposit, you can get up to 8.50% with an additional 0.50% for Senior Citizens. Partial withdrawal from your fixed deposit before the date of maturity can bail you out in times of need.
?
Demat Account :
Through this account, the customers can conduct hassle free
transaction on his shares; it can also be accessed on the interest. 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 physical documents that get mutilated or lost in transits.
•
?
Personal loan :
Whatever the occasion, our range of Personal Loans can help. The procedure is
simple, documentation is minimal and approval is quick. HDFC personal loans provide loans for the purpose of:
? ? ?
International Tour Admission Weeding Occasions
?
Home loan :
HDFC Bank brings HDFC home loans to your doorstep. Over 3 decades of exclusive experience, a dedicated team of experts and a complete
package to meet all your housing finance needs, HDFC Home Loans, help you realize your dream.
? Two wheeler loan :
Whichever the bike, HDFC
Two Wheeler loan is the answer. With quick approvals, flexible
payment options and easy repayment that will help you to buy the bike you desire.
? New car loan :
HDFC bank helps you to borrow up to 90% of the car invoice value. The bank gives flexible repayment option ranging from 12 to 84 months. The bank does the processing within 48 hours.
? Loan against property :
HDFC Bank brings to you Loan against Property (LAP). You can now take a loan against your residential or commercial property, to expand your business, plan a dream wedding, and fund your child's education and much more.
You can depend on us to meet all your business requirements even to purchase a new shop or office for your business. Loan to purchase Commercial Property (LCP)
is a specially designed product to help you expand your business without reducing the capital from your business.
? Education Loan :
The HDFC bank provides Loans up to Rs.15 Lakhs for Education in India and up to Rs.20 Lakhs for Education abroad. The interest rate is attractive. Loans are available for other course related to the expenses also.
? Gold Loan :
? Gold Term Loan :
With HDFC Bank's Gold Loan, you can get an instant loan against your gold Jewellery and ornaments. The procedure is simple, documentation is minimal and approval is quick. Avail Loan up to Rs.10,00,000 & up to 80% of value for any purpose If you are an HDFC Bank customer, we have special rates are available.
? Gold Overdraft Loan :
Get HDFC Bank's Overdraft against Gold Jewellery with flexible repayment option and No EMI. It is a simple overdraft facility with all the features
of a bank account. So instead of keeping your Jewellery in the locker, use the value of your asset to meet your business or personal needs.
•
The HDFC bank provides:
? Silver Credit Card :
Choose HDFC Internationally accepted Silver Credit Card and enter a world of privileges and savings.
? Value Plus Credit Card :
A true value card that enables you to avail 5% cash back on all your purchases.
? Gold Credit Card :
A card to match your premium lifestyle with features like special offers on air and train ticketing and rewards redemption against air miles.
•
? Easy Shop International Debit Card :
With the international debit card, shopping can be done all over the country and in over 140 countries. The customer can spend any currency and pay in rupees.
? Easy Shop International Gold Debit Card :
You can use your easy shop gold debit card to withdraws cash at the ATM and make your day to day purchases at merchant location including department stores, petrol pumps, restaurant etc.
•
? Forex Plus Card :
A pre-paid traveler’s card designed to give you a secure and hasslefree travel experience.
? Gift Plus Card :
A pre-paid gift card designed to give your loved ones the freedom to buy the gift of their choice.
? Money Plus Card :
A prepaid card that gives Freedom from cash disbursement and administrative hassles.
• ? Fund : Mutual
Mutual funds are funds that pool the money of several investors to invest in equity or debt markets. Mutual Funds could be Equity funds, Debt funds or balance funds. Mutual Funds are financial intermediaries in the investment business. They collect funds from public and invest on behalf of the investors as “pass through entities” with losses and gains accruing to the invests only.
? Insurance :
Life insurance is designed to offer financial protection for you and your family during the times of uncertainties. HDFC bank provides general &
health insurance which provide complete protection for your business, health & travel.
? Bonds :
Bond is a secure investment avenue giving you stable returns with tax benefits. Bond represents long term investment. The issues of bond premise to pay a stipulated stream of cash flush. They pay periodical interest over the life of investment and principal payment at the time of reduction. HDFC bank offers 2 types of bonds: Section 54 EC- Capital Gain Bonds. 8% Savings (Taxable) Bonds.
? ?
•
Are you a frequent flyer for business or often holiday abroad? Are you an importer/exporter of foreign and Indian goods?
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.
•
?
Travelers Cheques :
Travelers Cheques are a safe and easy way to protect your money
when you travel. You can enact them only when you need to, and only against your signature, unlike cash which can be stolen and misused by anybody, immediately. Loss of Travelers Cheques can be reported anywhere in the world by making a single phone and the pre-fixed amount on the cheques are made refundable.
?
Foreign Currency Cash :
Foreign Currency Cash is a convenient way of meeting personal
expenses along your journey, paying for taxis / internal travel, food expenses etc.
?
Foreign Currency Cheque Deposits :
You can directly deposit your foreign currency cheques, foreign
currency demand draft and Travelers Cheques in to your saving or current account. HDFC Bank will then have the cheques sent for collection and the funds will be credited to your account in Indian rupees.
? Remittances :
HDFC Bank offers you the remittance facilities by which you can to send and receive money to your loved ones. They are categorized depending on your location and the urgency with which you want the money transferred.
?
Cheque Box - A convenient way to remit money, currently Telegraphic transfer - Remittance of money through our
available for NRIs in the US and Europe.
?
Correspondent Banks.
? Trade Services:
As one of the fast emerging private banks to provide trade services from Exports to Imports, Bank Guarantees to Domestic Bills, nobody understands
your business requirements like we do. We are rapidly expanding our base in the retail segment. We have people with high level of expertise and experience in trade services to provide services to suit your specific requirements and structure solutions for your business needs. Our bank's growing networks of over 500 branches and correspondent relationship with banks worldwide enables us to meet your various business requirements.
• ? Prepaid Mobile Refill :
If you are an HDFC Bank Account holder, you can now recharge your Prepaid Mobile Phone with this service
? Bill Pay :
Pay your telephone, electricity and mobile phone bills at your convenience. Through the Internet, ATMs, your mobile phone and telephone with Bill Pay, our comprehensive bill payments solution.
? Visa Bill Pay :
Pay your utility bills from the comfort of your home! Pay using your HDFC Bank Visa credit card and forget long queue and late payments forever
? Direct Pay :
Shop or Pay bills online without cash or card. Debit your account directly with our Direct Pay service.
•
Initially focusing on corporate banking & treasury operations, the new private sector banks are now entering retail banking. The RBI gave a green signal to set up banks in the private sector in January 1993.
HDFC bank offers private banking services to high net worth individuals and institutions. The team of seasoned financial and investment professionals provide objective guidance backed by thorough research and in depth analysis keeping in mind your financial goals. The service offers research – based advice to optimize returns on your investment portfolio across a range of financial instruments, keeping in line with your profile and investment objectives.
•
STRENGTHS:1. It has good market reputation. 2. Though it is new it is one of the top three companies in private sector in India. 3. Its excellent service. 4. Their main strength is their trained human resources.
WEAKNESSES:1. Spend very less in advertising as compare to competitors. 2. Number of plans is less compare to others in this sector.
OPPORTUNITIES:1. Can expand more in the future and can get the top position.
2. Can open up various branches even in small cities. 3. It is introducing stage huge opportunity for growing in future. 4. To get competitive advantage.
THREAT:1. Other private players in history. 2. Global bank are coming in India. The other private players are very much aggressive.
INDEX
1) 2) 3) 4) 5) 6) 7) 8) 9) Introduction How a mutual fund works Process of investment in mutual fund Characteristic of mutual fund Advantages of mutual fund Disadvantages of mutual fund Classification of mutual fund Types of mutual fund Organization of mutual fund 27 28 29 32 33 36 37 39 42 43 45 47 48
10) Systematic investment plan 11) Short term plan 12) 13) Current portfolio strategy Investment strategy
14) 15) 16) 17) 18) 19)
Research objective Research methodology Data analysis Conclusion Appendix Bibliography
50 51 52 62 63 65
•
Introduction About Mutual Fund
M utual Funds: A Packaged Product
Professi onal Management Diversification
C onvenience Tax Benefits
Liquidity
Mutual fund is a trust which pools money, which then is invested in the capital market instruments like shares, debentures, g-sec and other related instruments. Mutual Fund units are investment vehicles that provide a means of participation in the stock market for people who have neither the time nor the
expertise to undertake direct investment in equities successfully. A large number of investors pool their money in order to obtain a spread of professionally managed stock exchange investments that they cannot obtain individually. The investor in a Mutual Fund takes much less of a risk than a direct equity investor takes, because increase in the number of stocks held reduces the effect that any one stock can have on the overall equity portfolio. Mutual Fund provides professional management.
•
How a Mutual Fund Works
Investors
Income/Dividend/ Total Return
Professional Manager
Stock Market Debt market Money Market
Investors put their saving as an investment in Mutual Fund. A professional Fund Manager takes the decisions where the money should be invested in securities according to the scheme’s objective. Securities include equities, debentures, Govt. securities, bonds and commercial papers etc. These securities generate returns. The Fund Manager passes return to the investors
•
Process of Investment in Mutual Fund
? Know Your Needs
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.
? Choose the right Mutual Fund
The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed
by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications.
? Select the ideal mix of Schemes
Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.
? Invest regularly
The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.
? Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.
? The final step
All you need to do now is to go for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor – whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking.
•
Characteristics of a Mutual Fund
? A Mutual Fund actually belongs to the investors who have pooled their funds. The ownership of the Mutual Fund is in the hands of investors. ? Investment professionals and other service providers, who earn a fee for their services, from the fund, manage a Mutual Fund. ? The pool of funds is invested in portfolio of marketable investments. The value of portfolio is updated every day. ? The investor’s share in the fund is denominated by ‘units’. The value of units changes with change in the portfolio’s value, every
day. The value of one unit of investment is called as the Net Asset Value or NAV. ? The investment portfolio of the Mutual Fund is created according to the stated investment objectives of the fund.
•
Advantages of Mutual Fund
• Portfolio Diversification
Mutual Fund normally invests in a well- diversified portfolio of securities. Each investor is a part owner of all of the fund’s assets. This enables him to hold a diversified investment portfolio even with a small amount of investment, which would otherwise require big capital.
• Professional Management
The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own.
• Reduction of Transaction Costs
A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors.
• Reduction/diversification of Risk
Diversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. When an investor invests directly, all the risk of potential loss is his own. While investing in the pool of funds with other investors, any loss on one or two securities is also shared with other investors. This reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.
• Liquidity
An investor can liquidate the investment by selling the units to the fund if it is an open-end fund, or by selling the units in the stock market if the fund is a close-end fund.
• Safety
Mutual Fund industry is well-regulated; all funds are registered with SEBI which lays down rules to protect the investors. Thus, investors also benefit from the safety of a regulated investment environment.
• Convenience and Flexibility
Mutual Fund management companies offer many investor services that a direct market investor cannot get. Within the same fund family, investors can easily transfer/switch their holdings from one scheme to another. They can also invest or withdraw their money at regular investors in most open end schemes. Mutual Fund investment process has been made further more convenient with the facility offered by funds for investors to buy or sell their units through the internet or email or using other communication means. The investors also get updated market information from the funds. The information about the schemes is also shared by the fund managers in a transparent manner, with all material facts required by regulators to be disclosed to the investors.
•
Disadvantages of Mutual Fund
• No Control over Costs
An investor in a mutual fund has any control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing by the investors.
• No Tailor-made Portfolios
Investors who invest on their own can build their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. High-net-worth individuals
or large corporate investors may find this to be a constraint in achieving their objectives.
• Managing a Portfolio of Funds
Availability of a large number of options from mutual funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has to select individual shares or bonds to invest in.
•
Classifications of Mutual Fund
? Open-end Vs. Closed-end Funds
An open-end fund is one that sells and repurchases units at all times. An investor can buy units or redeem units from the fund itself at a price based on the based on the net asset value per unit. The ‘unit capital’ of an open-end mutual fund is not fixed but variable. When sale of units exceeds repurchase, the fund increases in size. When repurchase exceeds sale, the fund shrinks. The ‘unit
capital’ of a closed-end fund is fixed, as it makes a one-time sale of a fixed number of units. After the offer closes, closed-end funds do not allow investors to buy or redeem units directly from the funds. However, to provide the much-needed liquidity to investors, close-end funds list on a stock exchange.
Trading through a stock exchange enables investors to buy or sell units of a close-end mutual fund from each other, through a stockbroker, in the same fashion as buying or selling shares of a company. The number of outstanding units of a close-end fund does not vary on account of trading in the fund’s units at the stock exchange. Sometimes, closed-end funds do offer “buy-back of fund shares/units”.
• Load and No-load Funds
A Load fund is one that charge commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. While 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 the units in the fund. The advantage of no load fund is that the entire corpus is put to work.
•
Types of Mutual Fund
? Gilt Funds
• The funds are invested only in Central/State Government securities. • No principal risk on the product. • Best suited for the medium-long term investors who are averse to risk.
? Liquid (Cash) Fund
• These funds invest in very short-term instruments. • Ideal for corporate, institutional investors and business houses. • Period of investment may be as low as one day. • Used as a stop gap arrangement before investing/utilizing the money for other purposes.
? Debt (Income) Funds
• These funds invest in debt instruments (bonds, debentures, GOI Securities, etc). • The returns are steadier and can be benchmarked against comparable debt instruments in the markets. • Best suited for the medium-long term investors who are averse to risk.
? Balanced Funds
• A combination of the above two types where in some part of the money is invested in debt and some in equity market. • Generally seen as a step through from debt funds towards the equity funds for the investors who were not willing to invest in the equity funds up till now.
• Best suited for medium-long term investors who are willing to take moderate risk.
? Equity (Growth) Funds
• These funds invest in stocks of various companies. • The returns here are volatile as they are directly linked to the stock markets. • Best suited for long term investors who are not averse to taking risk. Over a long period of time these funds give the maximum returns.
SECTOR
R E T U R N
GROWTH EQUITY
BALANCE DIVERSIFIED BOND GILT LIQUID
RISK
Risk & Return Graph
•
Organization Of A Mutual Fund
There are many entities involved in a mutual fund. The
diagram below illustrates the organizational set up of a mutual fund:
“Sponsor” is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor will form a Trust and appoint a Board of Trustees. The sponsor will also generally appoint an Asset Management Company (AMC) as fund managers. The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the fund assets. All these appointments are made in accordance with SEBI Regulations. Trustees have the legal capacity and therefore all acts in relation to the trust are taken on its behalf by the Trustees. The Trustees hold the unit-holders’ money in a fiduciary capacity.
•
SYSTEMATIC INVESTMENT PLAN
The systematic investment plan is helpful for the taking following benefits: ? SIP decreased the risk of the market time. ? More benefits if long investment in SIP. ? In SIP, anytime investment or anytime exit from the investment.
? SIP helpful for retirement planning. ? SIP helpful for children planning for future. • If you invest Rs. 1000/ month in the following scheme,
you get return as bellow,
HDFC EQUITY FUND (FOUR STAR FUND) INVESTMENT
( SIP) TOTAL INV. M.P. AS ON 29,4, O9 ANNUAL RETURN FOR STATRTING ( JAN, 1, 95) LAST 10 YEARS LAST 5 YEARS
LAST 1 YEAR
1,72,000 13,38,465 25.58 %
1,20,000 4,47,485 24.84 %
60,000 78,589 10.73 %
12,000 12,866 13.67 %
• SIP OFFERS INVESTORS TWO PLANS:? Monthly systematic plan
Under the MSIP, the investor must submit post-dated cheques for each month. An investor is eligible to issue only one cheque for each month.
? Quarterly systematic plan
Under the QSIP, the investor must submit post-dated cheques for each quarter. An investor is eligible to issue only one cheque for each quarter. There should be a gap of three months between two cheques. An open ended equity linked saving scheme with a lock in period of 3 years. Entry load • In respect of less each than SIP Rs.5
installment
crore in value, an Entry Load of 2.25% is payable. • In respect of each SIP installment equal to or greater than Rs.5 crore in value, no entry load is payable. Exit Load Nil
•
SHORT TERM PLAN
Open Ended Income Scheme To Generate Regular Income Through Investment In Debt Securities And Money Market Instruments
Nature of Scheme Investment Objective
Risk Profile Of The Scheme Mutual Fund Investments are subject to market risks. Please read the offer document carefully for details on risks factors before investment. Option/Plan Minimum Application Amount Amount/Numbers of units. Growth Option, Monthly Dividend Option. Dividend Option offers Dividend Reinvestment and payout facility. Purchase New Rs.5000 Additional Purchase In Repurchase Rs.500 or
Investor Exiting Investors Rs.1000
multiples of Rs.100 thereafter In multiples of Rs.100 thereafter
minimum of 50 units. Rs.500 or minimum of 50 units.
Dividend policy
It is proposed to declare dividends subject to availability of distributable profit, as computed in accordance with SEBI (Mutual Funds) Regulations, 1996. Dividends, if declared, will be paid to those unit holders whose names appear in the register of unit holders on the notified record date. The dividend warrants shall be dispatched within 30 days of the declaration of the dividend. Anil Bamboli
Name Of The Fund Manager Entry Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) Exit Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP))
Direct Applications & Application not routed through any distributor/agent/broker: Nil No Entry Load shall be levied on bonus units and units allotted on dividend Reinvestment.
In respect of each purchase / switch-in of Units less than Rs. 1 crore in value, an Exit Load of 0.50% is payable if Units are redeemed/switched-out within 3 months from the date of allotment. In respect of each purchase / switch-in of Units equal to or greater than Rs. 1 crore in value, an Exit Load of 0.25% is payable if Units are redeemed/switched-out within 1 month from the date of allotment. No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment.
Lock-In-Period Net Asset Value Periodicity Redemption Proceeds
Nil Every Business Day. Normally dispatched within 3 business days
? TAX BENEFIT IN SHORT TERM PLAN
Income received, otherwise than on transfer, in respect of units of a mutual fund would be exempt from tax under section 10(35) of the act.
• TAX DEDUCTION AT SOURCE No income-tax is deductible at source, on any income distribution by the mutual fund under the provision of section 194k and 196A of the act.
• Current portfolio strategy
? ? ?
The fund had increased its exposure to index heavyweights when the markets were at lower levels. Portfolio strategy is currently built around non index heavyweights which are more attractive. The portfolio strategy offers a rich and optimal balance of two themes: -- Infrastructure related sectors: 43.12 % of the portfolio -- Consumption related sectors: 41.56 % of the portfolio
EQUITIES:% of Total Equity portfolio
MARKET CAPITALIZATION Large caps Mid & Small caps October 2008 56 44 May 2009 40 60
DEBT:• Portfolio comprises high quality corporate bonds which have higher yields and will benefit if corporate spreads reduce. • Cash is being used to manage duration between 4 and 5.
•
?
Investment strategy
In the long term, the mix between equity and debt instrument is targeted between 40 – 75 and 60 – 25 respectively.
? In such times when the interest rates are high and equities are expensive, investments in debt would be generally more attractive versus equities and accordingly the fund would increase the debt component in the portfolio.
? Similarly in times when the interest rates are low and equity valuation is cheap, the fund would increase equity exposure while lowering its debt component in the portfolio.
•
Research problem
There are too many scheme are available in the market. Each of the schemes has its different benefit. So people find difficulty in choosing the most suitable scheme. So here the comparison is made between open ended scheme & close ended scheme and giving some factor which are mostly affected in choosing between the schemes, Even though people choose their scheme according to their convenience.
•
Objective of Research
The objectives of the research for which it was carried out are as follows.
? To become familiar with basic knowledge of Mutual Fund. ? To become familiar with the retail banking channel in HDFC bank.
•
Research Methodology
•
Research design :
The research design in the project is exploratory in nature.
•
Sample design :
The customers are divided into four major group like
• Businessman • Professional • Service class • Retired people
•
Data collection :
The whole research project can be considered to be dependent on data
collection. The data collection consists of primary as well as secondary data. The primary data is collected with the help of questionnaires. And secondary data is collected with the help of various websites.
•
Data Analysis
1. How many member are their in your family?
1 to 2 3 to 4 1 to 2 6 3 to 4 32 5 to 6 44
5 to 6 7+ 7+ 18
Family members
1 to 2 3 to4 5 to6
18%
6% 32%
7+
44%
Out of the sample size of 100, 6% of the respondents were having the family members between 1 to 2, 32% of the respondents were having the family member between 3 to 4, 44% of the respondent were having the family member between 5 to6 and 18% of the respondent were having more than 7 family member.
2. Which of the below mention categories do you belong?
Businessman Salaried Professional Retired Others, Please specify____________
Businessman 48
Professional 7
Salaried 36
Retired 9
Others 0
Occupation
9% 48% 36% 7%
Business man Professional salaried Retired
3. What proportion of total income do you save?(In%)
Below 10 11-30
31-50 Above 50
Below 10 31
11-30 43
31-50 17
Above 50 9
Savings
9% 17% 31%
Below 10 11 to 30 31 to 50 Above 50
43%
Out of sample size of 100, 31%of the people saved income below 10% of their total income, 43% of the people saved income between 11% to 31% of their total income, 17% of the people saved income between 31 to 50 % of their total income and 9% of the people saved income above 50% of their total income.
4. Where do you most prefer to invest your money?
Government securities Mutual funds Fixed deposits Equity market Others, please specify_________ Government securities Fixed Deposits Mutual funds 17 48 12 Equity market 18 Others 5
Investment
5% 17%
Govt security Fixed deposits Mutual funds Equity Market Others
18%
12% 48%
Out of sample size of 100, 17%of the people invest their money in government securities. 48% of invest their money in fixed deposite.12% of the people invest their money in mutual fund. 18% invest their money in Equity market. While 5% people invest their money in others.
5. Do you have access to any financial consultants for management of your funds?
Yes NO Yes 35 No 65
Financial Consultant
35% Yes No 65%
Out of the sample size of 100, 35% of respondent were having financial consultants and 65% of respondents were not having access to any financial consultant.
6. Are you aware about the functioning of the mutual fund?
Yes
No
Yes 73
No 27
Awareness about mutual fund functioning
27%
Yes
No
73%
Out of the sample size of 100, only 73% of the respondents were aware about the functioning of the mutual funds while 27% of the respondents were not aware about the functioning of the mutual funds.
7. Which type of return you want? High Medium
Low
High 25
Medium 35
Low 40
Return
25% 40% High Medium Low 35%
Out of the sample size of 100, only 25% of the respondent preferred to invest in mutual funds with high return even, 40% are preferred to invest with low return, 35% of the preferred to invest with medium return.
8. How much time to invest? Short term ? Long term
Short term 60
Long term 40
Time period for investment
40%
Short term Long term
60%
Out of 100 respondent 100 respondents, 60%of the respondent preferred to invest in mutual funds for short period of time even if the risk were high, While 40% preferred to invest in mutual funds for long period of time even if the return is low.
9. What level of risk you are willing to take for investing in above mention mutual funds?
High risk Low risk Low risk 34
Medium risk
Medium risk 46
High risk 20
Willingness to take risk
Low risk 20% 34% Medium risk High risk
46%
Out of 100 respondents, only 34% of the respondent preferred to invest in mutual funds with Low risk even if the return is low, 46% are preferred to invest with medium risk and medium return, while 20% of the preferred to invest with high return even if the risk was high.
10. Which type of fund you preferred for investment? Open ended fund
? Close ended fund Open ended fund 60 Close ended fund 40
Out of 100 respondents, 60% of the respondent preferred to invest in open ended mutual funds with high risk even if the returns were low, while 40% are preferred to invest in close ended mutual funds with medium risk or low risk even if return were medium or low.
11. Which companies do you prefer for investing in mutual fund? Out of customer surveyed the customers who preferred to invest in mutual funds invested in Tata M.F, HDFC M.F, ICICI M.F, Reliance M.F. Birla sun life M.F, SBI M.F.
•
Conclusion
Through these research and analysis I conclude that open ended and close ended mutual funds are two option provide better facility to investor for invest their money for long term and short term. Open ended schemes are very popular option for investment for short term and high return while close ended option are popular for long term investment and for low return with minimum risk.
So, through these research and analysis I conclude that in India out of these two scheme open ended and close ended more preferable and popular scheme is Reliance Growth scheme because of it’s features and it provide the facility to redeem the money at any time, while these facility is not available in close ended scheme. The open ended schemes are providing the facility to purchase and redeem the unit after one year. So, people like the Reliance Growth scheme.
But today In India most of the people are invested in money in fixed deposit because they want takes low risk and fixed return.
•
Appendix
1. How many member are their in your family? 1 to 2 3 to 4 5 to 6 7+
2. Which of the below mention categories do you belong? Businessman Salaried Professional Retired Others, Please specify____________ 3. What proportion of total income do you save? (In %) Below 10 11-30 31-50 Above 50
4. Where do you most prefer to invest your money? Government securities Fixed deposits Others, please specify___________ Mutual funds Equity market
5. Do you have access to any financial consultants for management of your funds? Yes No
6. Are you aware about the functioning of the mutual fund? Yes No
7. Which type of return you want? High Low 8. How much time to invest? Short term Long term 9. What level of risk you are willing to take for investing in above Mention mutual funds? High risk Low risk Medium risk Medium
10. Which type of fund you preferred for investment? Open ended fund Close ended fund
11. Which companies do you prefer for investing in mutual fund?
Thanking You
•
Bibliography
Books:
• Kothari C.R. Research Methodology • Vasant Desai, The Indian Financial System.
Website:
• www.mutualfundindia.com • www.amfiindia.com • • www.hdfcbank.com www.hdfcfund.com
doc_195416160.doc
A mutual fund is a type of professionally managed collective investment vehicle that pools money from many investors to purchase securities.
AT BHAVNAGAR
•
INDEX
5 6 8 11 14 17 19 20 22 23 24 27
1. 2. 3.
4. 5. 6.
Introduction Company Profile Retail Banking Services ? Accounts & Deposits ? Loans ? Cards ? Investment & insurance ? Forex & Trade Services ? Product & Services ? Payment Services Private Banking SWOT analysis of the bank. Mutual Fund
•
The important of commercial banks in the process of economical development has been stressed from time to time by the economical thinkers & progressive bankers in the country. Commercial banks play a very important role in our economic, in fact, it is difficult to imagine. How our economic system could foundation efficiently without many of their services. They are the heart of our financial structure, since they have the ability, in cooperation with the Reserve Bank of India.
Today scenario in banking industry has totally changed. There is a significant transaction in Indian banking industry. Cross border flow and entry of
new products, particularly derivative instruments, have impacted significantly on the domestic banking factor forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operation in order to remain competitive to the globalize environment. These developments have facilitated greater choice for consumers, who have become more discerning and demanding, compelling banks to offer a broader range of products through diverse distribution channels.
•
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. The housing development finance corporation ltd was amongst the first to receive an in principal approval from the reserve bank of India to set up a bank in the private sector, as a part of RBI”s liberalization of the Indian banking industrial in 1994.
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1412 branches spread over 528 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base.
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred 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 is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and People.
•
The HDFC bank provides the following accounts & deposits: ? Saving Account ? Current Account ? Fixed Deposit ? Demat Account
?
Saving Plus Account :
The HDFC bank saving plus account is the best banking option. It’s
an account that gives you access to some of the finest banking features that you can ask for in a saving account.
All you have to do is maintain an Average Quarterly Balance of Rs. 10,000. In addition to this, the account is also a great way to discover the rewards of relationship banking which entitles you to get special pricing or other product.
?
Current Account :
A Current account is ideal for carrying out day-to-day business
transactions. With the HDFC Bank Regular Current Account, you can access your account anytime, anywhere, pay using payable at par cheques or deposit cheque at any HDFC bank branch. Regular Current Account requires you to maintain an average quarterly balance of only Rs. 10,000.
?
Fixed Deposits :
The deposit for a fixed period of time are called term or fixed deposit
since the deposits are for a fixed periods. The bank can use the funds for lending to their other clients.
By investing in HDFC bank fixed deposit, you can get up to 8.50% with an additional 0.50% for Senior Citizens. Partial withdrawal from your fixed deposit before the date of maturity can bail you out in times of need.
?
Demat Account :
Through this account, the customers can conduct hassle free
transaction on his shares; it can also be accessed on the interest. 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 physical documents that get mutilated or lost in transits.
•
?
Personal loan :
Whatever the occasion, our range of Personal Loans can help. The procedure is
simple, documentation is minimal and approval is quick. HDFC personal loans provide loans for the purpose of:
? ? ?
International Tour Admission Weeding Occasions
?
Home loan :
HDFC Bank brings HDFC home loans to your doorstep. Over 3 decades of exclusive experience, a dedicated team of experts and a complete
package to meet all your housing finance needs, HDFC Home Loans, help you realize your dream.
? Two wheeler loan :
Whichever the bike, HDFC
Two Wheeler loan is the answer. With quick approvals, flexible
payment options and easy repayment that will help you to buy the bike you desire.
? New car loan :
HDFC bank helps you to borrow up to 90% of the car invoice value. The bank gives flexible repayment option ranging from 12 to 84 months. The bank does the processing within 48 hours.
? Loan against property :
HDFC Bank brings to you Loan against Property (LAP). You can now take a loan against your residential or commercial property, to expand your business, plan a dream wedding, and fund your child's education and much more.
You can depend on us to meet all your business requirements even to purchase a new shop or office for your business. Loan to purchase Commercial Property (LCP)
is a specially designed product to help you expand your business without reducing the capital from your business.
? Education Loan :
The HDFC bank provides Loans up to Rs.15 Lakhs for Education in India and up to Rs.20 Lakhs for Education abroad. The interest rate is attractive. Loans are available for other course related to the expenses also.
? Gold Loan :
? Gold Term Loan :
With HDFC Bank's Gold Loan, you can get an instant loan against your gold Jewellery and ornaments. The procedure is simple, documentation is minimal and approval is quick. Avail Loan up to Rs.10,00,000 & up to 80% of value for any purpose If you are an HDFC Bank customer, we have special rates are available.
? Gold Overdraft Loan :
Get HDFC Bank's Overdraft against Gold Jewellery with flexible repayment option and No EMI. It is a simple overdraft facility with all the features
of a bank account. So instead of keeping your Jewellery in the locker, use the value of your asset to meet your business or personal needs.
•
The HDFC bank provides:
? Silver Credit Card :
Choose HDFC Internationally accepted Silver Credit Card and enter a world of privileges and savings.
? Value Plus Credit Card :
A true value card that enables you to avail 5% cash back on all your purchases.
? Gold Credit Card :
A card to match your premium lifestyle with features like special offers on air and train ticketing and rewards redemption against air miles.
•
? Easy Shop International Debit Card :
With the international debit card, shopping can be done all over the country and in over 140 countries. The customer can spend any currency and pay in rupees.
? Easy Shop International Gold Debit Card :
You can use your easy shop gold debit card to withdraws cash at the ATM and make your day to day purchases at merchant location including department stores, petrol pumps, restaurant etc.
•
? Forex Plus Card :
A pre-paid traveler’s card designed to give you a secure and hasslefree travel experience.
? Gift Plus Card :
A pre-paid gift card designed to give your loved ones the freedom to buy the gift of their choice.
? Money Plus Card :
A prepaid card that gives Freedom from cash disbursement and administrative hassles.
• ? Fund : Mutual
Mutual funds are funds that pool the money of several investors to invest in equity or debt markets. Mutual Funds could be Equity funds, Debt funds or balance funds. Mutual Funds are financial intermediaries in the investment business. They collect funds from public and invest on behalf of the investors as “pass through entities” with losses and gains accruing to the invests only.
? Insurance :
Life insurance is designed to offer financial protection for you and your family during the times of uncertainties. HDFC bank provides general &
health insurance which provide complete protection for your business, health & travel.
? Bonds :
Bond is a secure investment avenue giving you stable returns with tax benefits. Bond represents long term investment. The issues of bond premise to pay a stipulated stream of cash flush. They pay periodical interest over the life of investment and principal payment at the time of reduction. HDFC bank offers 2 types of bonds: Section 54 EC- Capital Gain Bonds. 8% Savings (Taxable) Bonds.
? ?
•
Are you a frequent flyer for business or often holiday abroad? Are you an importer/exporter of foreign and Indian goods?
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.
•
?
Travelers Cheques :
Travelers Cheques are a safe and easy way to protect your money
when you travel. You can enact them only when you need to, and only against your signature, unlike cash which can be stolen and misused by anybody, immediately. Loss of Travelers Cheques can be reported anywhere in the world by making a single phone and the pre-fixed amount on the cheques are made refundable.
?
Foreign Currency Cash :
Foreign Currency Cash is a convenient way of meeting personal
expenses along your journey, paying for taxis / internal travel, food expenses etc.
?
Foreign Currency Cheque Deposits :
You can directly deposit your foreign currency cheques, foreign
currency demand draft and Travelers Cheques in to your saving or current account. HDFC Bank will then have the cheques sent for collection and the funds will be credited to your account in Indian rupees.
? Remittances :
HDFC Bank offers you the remittance facilities by which you can to send and receive money to your loved ones. They are categorized depending on your location and the urgency with which you want the money transferred.
?
Cheque Box - A convenient way to remit money, currently Telegraphic transfer - Remittance of money through our
available for NRIs in the US and Europe.
?
Correspondent Banks.
? Trade Services:
As one of the fast emerging private banks to provide trade services from Exports to Imports, Bank Guarantees to Domestic Bills, nobody understands
your business requirements like we do. We are rapidly expanding our base in the retail segment. We have people with high level of expertise and experience in trade services to provide services to suit your specific requirements and structure solutions for your business needs. Our bank's growing networks of over 500 branches and correspondent relationship with banks worldwide enables us to meet your various business requirements.
• ? Prepaid Mobile Refill :
If you are an HDFC Bank Account holder, you can now recharge your Prepaid Mobile Phone with this service
? Bill Pay :
Pay your telephone, electricity and mobile phone bills at your convenience. Through the Internet, ATMs, your mobile phone and telephone with Bill Pay, our comprehensive bill payments solution.
? Visa Bill Pay :
Pay your utility bills from the comfort of your home! Pay using your HDFC Bank Visa credit card and forget long queue and late payments forever
? Direct Pay :
Shop or Pay bills online without cash or card. Debit your account directly with our Direct Pay service.
•
Initially focusing on corporate banking & treasury operations, the new private sector banks are now entering retail banking. The RBI gave a green signal to set up banks in the private sector in January 1993.
HDFC bank offers private banking services to high net worth individuals and institutions. The team of seasoned financial and investment professionals provide objective guidance backed by thorough research and in depth analysis keeping in mind your financial goals. The service offers research – based advice to optimize returns on your investment portfolio across a range of financial instruments, keeping in line with your profile and investment objectives.
•
STRENGTHS:1. It has good market reputation. 2. Though it is new it is one of the top three companies in private sector in India. 3. Its excellent service. 4. Their main strength is their trained human resources.
WEAKNESSES:1. Spend very less in advertising as compare to competitors. 2. Number of plans is less compare to others in this sector.
OPPORTUNITIES:1. Can expand more in the future and can get the top position.
2. Can open up various branches even in small cities. 3. It is introducing stage huge opportunity for growing in future. 4. To get competitive advantage.
THREAT:1. Other private players in history. 2. Global bank are coming in India. The other private players are very much aggressive.
INDEX
1) 2) 3) 4) 5) 6) 7) 8) 9) Introduction How a mutual fund works Process of investment in mutual fund Characteristic of mutual fund Advantages of mutual fund Disadvantages of mutual fund Classification of mutual fund Types of mutual fund Organization of mutual fund 27 28 29 32 33 36 37 39 42 43 45 47 48
10) Systematic investment plan 11) Short term plan 12) 13) Current portfolio strategy Investment strategy
14) 15) 16) 17) 18) 19)
Research objective Research methodology Data analysis Conclusion Appendix Bibliography
50 51 52 62 63 65
•
Introduction About Mutual Fund
M utual Funds: A Packaged Product
Professi onal Management Diversification
C onvenience Tax Benefits
Liquidity
Mutual fund is a trust which pools money, which then is invested in the capital market instruments like shares, debentures, g-sec and other related instruments. Mutual Fund units are investment vehicles that provide a means of participation in the stock market for people who have neither the time nor the
expertise to undertake direct investment in equities successfully. A large number of investors pool their money in order to obtain a spread of professionally managed stock exchange investments that they cannot obtain individually. The investor in a Mutual Fund takes much less of a risk than a direct equity investor takes, because increase in the number of stocks held reduces the effect that any one stock can have on the overall equity portfolio. Mutual Fund provides professional management.
•
How a Mutual Fund Works
Investors
Income/Dividend/ Total Return
Professional Manager
Stock Market Debt market Money Market
Investors put their saving as an investment in Mutual Fund. A professional Fund Manager takes the decisions where the money should be invested in securities according to the scheme’s objective. Securities include equities, debentures, Govt. securities, bonds and commercial papers etc. These securities generate returns. The Fund Manager passes return to the investors
•
Process of Investment in Mutual Fund
? Know Your Needs
Your financial goals will vary, based on your age, lifestyle, financial independence, family commitments, and level of income and expenses among many other factors. Therefore, the first step is to assess your needs. You can begin by defining your investment objectives and needs which could be regular income, buying a home or finance a wedding or educate your children or a combination of all these needs, the quantum of risk you are willing to take and your cash flow requirements.
? Choose the right Mutual Fund
The important thing is to choose the right mutual fund scheme which suits your requirements. The offer document of the scheme tells you its objectives and provides supplementary details like the track record of other schemes managed
by the same Fund Manager. Some factors to evaluate before choosing a particular Mutual Fund are the track record of the performance of the fund over the last few years in relation to the appropriate yardstick and similar funds in the same category. Other factors could be the portfolio allocation, the dividend yield and the degree of transparency as reflected in the frequency and quality of their communications.
? Select the ideal mix of Schemes
Investing in just one Mutual Fund scheme may not meet all your investment needs. You may consider investing in a combination of schemes to achieve your specific goals.
? Invest regularly
The best approach is to invest a fixed amount at specific intervals, say every month. By investing a fixed sum each month, you buy fewer units when the price is higher and more units when the price is low, thus bringing down your average cost per unit. This is called rupee cost averaging and is a disciplined investment strategy followed by investors all over the world. You can also avail the systematic investment plan facility offered by many open end funds.
? Start early
It is desirable to start investing early and stick to a regular investment plan. If you start now, you will make more than if you wait and invest later. The power of compounding lets you earn income on income and your money multiplies at a compounded rate of return.
? The final step
All you need to do now is to go for online application forms of various mutual fund schemes and start investing. You may reap the rewards in the years to come. Mutual Funds are suitable for every kind of investor – whether starting a career or retiring, conservative or risk taking, growth oriented or income seeking.
•
Characteristics of a Mutual Fund
? A Mutual Fund actually belongs to the investors who have pooled their funds. The ownership of the Mutual Fund is in the hands of investors. ? Investment professionals and other service providers, who earn a fee for their services, from the fund, manage a Mutual Fund. ? The pool of funds is invested in portfolio of marketable investments. The value of portfolio is updated every day. ? The investor’s share in the fund is denominated by ‘units’. The value of units changes with change in the portfolio’s value, every
day. The value of one unit of investment is called as the Net Asset Value or NAV. ? The investment portfolio of the Mutual Fund is created according to the stated investment objectives of the fund.
•
Advantages of Mutual Fund
• Portfolio Diversification
Mutual Fund normally invests in a well- diversified portfolio of securities. Each investor is a part owner of all of the fund’s assets. This enables him to hold a diversified investment portfolio even with a small amount of investment, which would otherwise require big capital.
• Professional Management
The investment management skills, along with the needed research into available investment options, ensure a much better return than what an investor can manage on his own.
• Reduction of Transaction Costs
A direct investor bears all the costs of investing such as brokerage or custody of securities. When going through a fund, he has the benefit of economies of scale; the funds pay lesser costs because of larger volumes, a benefit passed on to its investors.
• Reduction/diversification of Risk
Diversification reduces the risk of loss, as compared to investing directly in one or two shares or debentures or other instruments. When an investor invests directly, all the risk of potential loss is his own. While investing in the pool of funds with other investors, any loss on one or two securities is also shared with other investors. This reduction is one of the most important benefits of a collective investment vehicle like the mutual fund.
• Liquidity
An investor can liquidate the investment by selling the units to the fund if it is an open-end fund, or by selling the units in the stock market if the fund is a close-end fund.
• Safety
Mutual Fund industry is well-regulated; all funds are registered with SEBI which lays down rules to protect the investors. Thus, investors also benefit from the safety of a regulated investment environment.
• Convenience and Flexibility
Mutual Fund management companies offer many investor services that a direct market investor cannot get. Within the same fund family, investors can easily transfer/switch their holdings from one scheme to another. They can also invest or withdraw their money at regular investors in most open end schemes. Mutual Fund investment process has been made further more convenient with the facility offered by funds for investors to buy or sell their units through the internet or email or using other communication means. The investors also get updated market information from the funds. The information about the schemes is also shared by the fund managers in a transparent manner, with all material facts required by regulators to be disclosed to the investors.
•
Disadvantages of Mutual Fund
• No Control over Costs
An investor in a mutual fund has any control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. A mutual fund investor also pays fund distribution costs, which he would not incur in direct investing by the investors.
• No Tailor-made Portfolios
Investors who invest on their own can build their own can build their own portfolios of shares, bonds and other securities. Investing through funds means he delegates this decision to the fund managers. High-net-worth individuals
or large corporate investors may find this to be a constraint in achieving their objectives.
• Managing a Portfolio of Funds
Availability of a large number of options from mutual funds can actually mean too much choice for the investor. He may again need advice on how to select a fund to achieve his objectives, quite similar to the situation when he has to select individual shares or bonds to invest in.
•
Classifications of Mutual Fund
? Open-end Vs. Closed-end Funds
An open-end fund is one that sells and repurchases units at all times. An investor can buy units or redeem units from the fund itself at a price based on the based on the net asset value per unit. The ‘unit capital’ of an open-end mutual fund is not fixed but variable. When sale of units exceeds repurchase, the fund increases in size. When repurchase exceeds sale, the fund shrinks. The ‘unit
capital’ of a closed-end fund is fixed, as it makes a one-time sale of a fixed number of units. After the offer closes, closed-end funds do not allow investors to buy or redeem units directly from the funds. However, to provide the much-needed liquidity to investors, close-end funds list on a stock exchange.
Trading through a stock exchange enables investors to buy or sell units of a close-end mutual fund from each other, through a stockbroker, in the same fashion as buying or selling shares of a company. The number of outstanding units of a close-end fund does not vary on account of trading in the fund’s units at the stock exchange. Sometimes, closed-end funds do offer “buy-back of fund shares/units”.
• Load and No-load Funds
A Load fund is one that charge commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. While 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 the units in the fund. The advantage of no load fund is that the entire corpus is put to work.
•
Types of Mutual Fund
? Gilt Funds
• The funds are invested only in Central/State Government securities. • No principal risk on the product. • Best suited for the medium-long term investors who are averse to risk.
? Liquid (Cash) Fund
• These funds invest in very short-term instruments. • Ideal for corporate, institutional investors and business houses. • Period of investment may be as low as one day. • Used as a stop gap arrangement before investing/utilizing the money for other purposes.
? Debt (Income) Funds
• These funds invest in debt instruments (bonds, debentures, GOI Securities, etc). • The returns are steadier and can be benchmarked against comparable debt instruments in the markets. • Best suited for the medium-long term investors who are averse to risk.
? Balanced Funds
• A combination of the above two types where in some part of the money is invested in debt and some in equity market. • Generally seen as a step through from debt funds towards the equity funds for the investors who were not willing to invest in the equity funds up till now.
• Best suited for medium-long term investors who are willing to take moderate risk.
? Equity (Growth) Funds
• These funds invest in stocks of various companies. • The returns here are volatile as they are directly linked to the stock markets. • Best suited for long term investors who are not averse to taking risk. Over a long period of time these funds give the maximum returns.
SECTOR
R E T U R N
GROWTH EQUITY
BALANCE DIVERSIFIED BOND GILT LIQUID
RISK
Risk & Return Graph
•
Organization Of A Mutual Fund
There are many entities involved in a mutual fund. The
diagram below illustrates the organizational set up of a mutual fund:
“Sponsor” is defined under SEBI regulations as any person who, acting alone or in combination with another body corporate, establishes a mutual fund. The sponsor will form a Trust and appoint a Board of Trustees. The sponsor will also generally appoint an Asset Management Company (AMC) as fund managers. The sponsor, either directly or acting through the Trustees, will also appoint a Custodian to hold the fund assets. All these appointments are made in accordance with SEBI Regulations. Trustees have the legal capacity and therefore all acts in relation to the trust are taken on its behalf by the Trustees. The Trustees hold the unit-holders’ money in a fiduciary capacity.
•
SYSTEMATIC INVESTMENT PLAN
The systematic investment plan is helpful for the taking following benefits: ? SIP decreased the risk of the market time. ? More benefits if long investment in SIP. ? In SIP, anytime investment or anytime exit from the investment.
? SIP helpful for retirement planning. ? SIP helpful for children planning for future. • If you invest Rs. 1000/ month in the following scheme,
you get return as bellow,
HDFC EQUITY FUND (FOUR STAR FUND) INVESTMENT
( SIP) TOTAL INV. M.P. AS ON 29,4, O9 ANNUAL RETURN FOR STATRTING ( JAN, 1, 95) LAST 10 YEARS LAST 5 YEARS
LAST 1 YEAR
1,72,000 13,38,465 25.58 %
1,20,000 4,47,485 24.84 %
60,000 78,589 10.73 %
12,000 12,866 13.67 %
• SIP OFFERS INVESTORS TWO PLANS:? Monthly systematic plan
Under the MSIP, the investor must submit post-dated cheques for each month. An investor is eligible to issue only one cheque for each month.
? Quarterly systematic plan
Under the QSIP, the investor must submit post-dated cheques for each quarter. An investor is eligible to issue only one cheque for each quarter. There should be a gap of three months between two cheques. An open ended equity linked saving scheme with a lock in period of 3 years. Entry load • In respect of less each than SIP Rs.5
installment
crore in value, an Entry Load of 2.25% is payable. • In respect of each SIP installment equal to or greater than Rs.5 crore in value, no entry load is payable. Exit Load Nil
•
SHORT TERM PLAN
Open Ended Income Scheme To Generate Regular Income Through Investment In Debt Securities And Money Market Instruments
Nature of Scheme Investment Objective
Risk Profile Of The Scheme Mutual Fund Investments are subject to market risks. Please read the offer document carefully for details on risks factors before investment. Option/Plan Minimum Application Amount Amount/Numbers of units. Growth Option, Monthly Dividend Option. Dividend Option offers Dividend Reinvestment and payout facility. Purchase New Rs.5000 Additional Purchase In Repurchase Rs.500 or
Investor Exiting Investors Rs.1000
multiples of Rs.100 thereafter In multiples of Rs.100 thereafter
minimum of 50 units. Rs.500 or minimum of 50 units.
Dividend policy
It is proposed to declare dividends subject to availability of distributable profit, as computed in accordance with SEBI (Mutual Funds) Regulations, 1996. Dividends, if declared, will be paid to those unit holders whose names appear in the register of unit holders on the notified record date. The dividend warrants shall be dispatched within 30 days of the declaration of the dividend. Anil Bamboli
Name Of The Fund Manager Entry Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP)) Exit Load (as a % of the Applicable NAV) (Other than Systematic Investment Plan (SIP)/ Systematic Transfer Plan (STP))
Direct Applications & Application not routed through any distributor/agent/broker: Nil No Entry Load shall be levied on bonus units and units allotted on dividend Reinvestment.
In respect of each purchase / switch-in of Units less than Rs. 1 crore in value, an Exit Load of 0.50% is payable if Units are redeemed/switched-out within 3 months from the date of allotment. In respect of each purchase / switch-in of Units equal to or greater than Rs. 1 crore in value, an Exit Load of 0.25% is payable if Units are redeemed/switched-out within 1 month from the date of allotment. No Exit Load shall be levied on bonus units and units allotted on dividend reinvestment.
Lock-In-Period Net Asset Value Periodicity Redemption Proceeds
Nil Every Business Day. Normally dispatched within 3 business days
? TAX BENEFIT IN SHORT TERM PLAN
Income received, otherwise than on transfer, in respect of units of a mutual fund would be exempt from tax under section 10(35) of the act.
• TAX DEDUCTION AT SOURCE No income-tax is deductible at source, on any income distribution by the mutual fund under the provision of section 194k and 196A of the act.
• Current portfolio strategy
? ? ?
The fund had increased its exposure to index heavyweights when the markets were at lower levels. Portfolio strategy is currently built around non index heavyweights which are more attractive. The portfolio strategy offers a rich and optimal balance of two themes: -- Infrastructure related sectors: 43.12 % of the portfolio -- Consumption related sectors: 41.56 % of the portfolio
EQUITIES:% of Total Equity portfolio
MARKET CAPITALIZATION Large caps Mid & Small caps October 2008 56 44 May 2009 40 60
DEBT:• Portfolio comprises high quality corporate bonds which have higher yields and will benefit if corporate spreads reduce. • Cash is being used to manage duration between 4 and 5.
•
?
Investment strategy
In the long term, the mix between equity and debt instrument is targeted between 40 – 75 and 60 – 25 respectively.
? In such times when the interest rates are high and equities are expensive, investments in debt would be generally more attractive versus equities and accordingly the fund would increase the debt component in the portfolio.
? Similarly in times when the interest rates are low and equity valuation is cheap, the fund would increase equity exposure while lowering its debt component in the portfolio.
•
Research problem
There are too many scheme are available in the market. Each of the schemes has its different benefit. So people find difficulty in choosing the most suitable scheme. So here the comparison is made between open ended scheme & close ended scheme and giving some factor which are mostly affected in choosing between the schemes, Even though people choose their scheme according to their convenience.
•
Objective of Research
The objectives of the research for which it was carried out are as follows.
? To become familiar with basic knowledge of Mutual Fund. ? To become familiar with the retail banking channel in HDFC bank.
•
Research Methodology
•
Research design :
The research design in the project is exploratory in nature.
•
Sample design :
The customers are divided into four major group like
• Businessman • Professional • Service class • Retired people
•
Data collection :
The whole research project can be considered to be dependent on data
collection. The data collection consists of primary as well as secondary data. The primary data is collected with the help of questionnaires. And secondary data is collected with the help of various websites.
•
Data Analysis
1. How many member are their in your family?
1 to 2 3 to 4 1 to 2 6 3 to 4 32 5 to 6 44
5 to 6 7+ 7+ 18
Family members
1 to 2 3 to4 5 to6
18%
6% 32%
7+
44%
Out of the sample size of 100, 6% of the respondents were having the family members between 1 to 2, 32% of the respondents were having the family member between 3 to 4, 44% of the respondent were having the family member between 5 to6 and 18% of the respondent were having more than 7 family member.
2. Which of the below mention categories do you belong?
Businessman Salaried Professional Retired Others, Please specify____________
Businessman 48
Professional 7
Salaried 36
Retired 9
Others 0
Occupation
9% 48% 36% 7%
Business man Professional salaried Retired
3. What proportion of total income do you save?(In%)
Below 10 11-30
31-50 Above 50
Below 10 31
11-30 43
31-50 17
Above 50 9
Savings
9% 17% 31%
Below 10 11 to 30 31 to 50 Above 50
43%
Out of sample size of 100, 31%of the people saved income below 10% of their total income, 43% of the people saved income between 11% to 31% of their total income, 17% of the people saved income between 31 to 50 % of their total income and 9% of the people saved income above 50% of their total income.
4. Where do you most prefer to invest your money?
Government securities Mutual funds Fixed deposits Equity market Others, please specify_________ Government securities Fixed Deposits Mutual funds 17 48 12 Equity market 18 Others 5
Investment
5% 17%
Govt security Fixed deposits Mutual funds Equity Market Others
18%
12% 48%
Out of sample size of 100, 17%of the people invest their money in government securities. 48% of invest their money in fixed deposite.12% of the people invest their money in mutual fund. 18% invest their money in Equity market. While 5% people invest their money in others.
5. Do you have access to any financial consultants for management of your funds?
Yes NO Yes 35 No 65
Financial Consultant
35% Yes No 65%
Out of the sample size of 100, 35% of respondent were having financial consultants and 65% of respondents were not having access to any financial consultant.
6. Are you aware about the functioning of the mutual fund?
Yes
No
Yes 73
No 27
Awareness about mutual fund functioning
27%
Yes
No
73%
Out of the sample size of 100, only 73% of the respondents were aware about the functioning of the mutual funds while 27% of the respondents were not aware about the functioning of the mutual funds.
7. Which type of return you want? High Medium
Low
High 25
Medium 35
Low 40
Return
25% 40% High Medium Low 35%
Out of the sample size of 100, only 25% of the respondent preferred to invest in mutual funds with high return even, 40% are preferred to invest with low return, 35% of the preferred to invest with medium return.
8. How much time to invest? Short term ? Long term
Short term 60
Long term 40
Time period for investment
40%
Short term Long term
60%
Out of 100 respondent 100 respondents, 60%of the respondent preferred to invest in mutual funds for short period of time even if the risk were high, While 40% preferred to invest in mutual funds for long period of time even if the return is low.
9. What level of risk you are willing to take for investing in above mention mutual funds?
High risk Low risk Low risk 34
Medium risk
Medium risk 46
High risk 20
Willingness to take risk
Low risk 20% 34% Medium risk High risk
46%
Out of 100 respondents, only 34% of the respondent preferred to invest in mutual funds with Low risk even if the return is low, 46% are preferred to invest with medium risk and medium return, while 20% of the preferred to invest with high return even if the risk was high.
10. Which type of fund you preferred for investment? Open ended fund
? Close ended fund Open ended fund 60 Close ended fund 40
Out of 100 respondents, 60% of the respondent preferred to invest in open ended mutual funds with high risk even if the returns were low, while 40% are preferred to invest in close ended mutual funds with medium risk or low risk even if return were medium or low.
11. Which companies do you prefer for investing in mutual fund? Out of customer surveyed the customers who preferred to invest in mutual funds invested in Tata M.F, HDFC M.F, ICICI M.F, Reliance M.F. Birla sun life M.F, SBI M.F.
•
Conclusion
Through these research and analysis I conclude that open ended and close ended mutual funds are two option provide better facility to investor for invest their money for long term and short term. Open ended schemes are very popular option for investment for short term and high return while close ended option are popular for long term investment and for low return with minimum risk.
So, through these research and analysis I conclude that in India out of these two scheme open ended and close ended more preferable and popular scheme is Reliance Growth scheme because of it’s features and it provide the facility to redeem the money at any time, while these facility is not available in close ended scheme. The open ended schemes are providing the facility to purchase and redeem the unit after one year. So, people like the Reliance Growth scheme.
But today In India most of the people are invested in money in fixed deposit because they want takes low risk and fixed return.
•
Appendix
1. How many member are their in your family? 1 to 2 3 to 4 5 to 6 7+
2. Which of the below mention categories do you belong? Businessman Salaried Professional Retired Others, Please specify____________ 3. What proportion of total income do you save? (In %) Below 10 11-30 31-50 Above 50
4. Where do you most prefer to invest your money? Government securities Fixed deposits Others, please specify___________ Mutual funds Equity market
5. Do you have access to any financial consultants for management of your funds? Yes No
6. Are you aware about the functioning of the mutual fund? Yes No
7. Which type of return you want? High Low 8. How much time to invest? Short term Long term 9. What level of risk you are willing to take for investing in above Mention mutual funds? High risk Low risk Medium risk Medium
10. Which type of fund you preferred for investment? Open ended fund Close ended fund
11. Which companies do you prefer for investing in mutual fund?
Thanking You
•
Bibliography
Books:
• Kothari C.R. Research Methodology • Vasant Desai, The Indian Financial System.
Website:
• www.mutualfundindia.com • www.amfiindia.com • • www.hdfcbank.com www.hdfcfund.com
doc_195416160.doc