Need for the Study:

The study will help the organization in knowing how the Equity schemes of the company’s

are performing and which schemes are preferred most by the investors.

LITERATURE REVIEW:

 Sapar & Narayan

o Examines the performance of Indian mutual funds in a bear market through relative

performance index, risk-return analysis, Treyor's ratio, Sharp's ratio, Sharp's measure with a

sample of 269 open ended schemes (out of total schemes of 433).

 Rao D. N

o Studied the financial performance of select open-ended equity mutual fund schemes

for the period 1st April 2005 - 31st March 2006 pertaining to the two dominant investment

styles and tested the hypothesis whether the differences in performance are statistically

significant. The analysis indicated that growth plans have generated higher returns than that

of dividend plans but at a higher risk studied classified the 419 open-ended equity mutual

fund schemes into six distinct investment styles.

 Mehta Sushilkumar

o Analyze the performance of mutual fund schemes of SBI and UTI and found out that

SBI schemes have performed better then the UTI in the year 2007-2008 studied the risk and

return relationship of Indian mutual fund schemes. The study found out that out of thirty five

sample schemes, eleven showed significant t–values and all other twenty four sample

schemes did not prove significant relationship between the risk and return. According to t-

alpha values, majority (thirty two) of the sample schemes' returns were not significantly
different from their market returns and very few number of sample schemes' returns were

significantly different from their market returns during the study period.

 R.Nithya

o R.Nithya in the IFMR Chennai (2004). The objective of the study is to analyse the

performance of all the schemes available in the Franklin Templeton Mutual funds and

Emphasize the values of mutual funds to the target people by identifying Asset Management

Company that is performing well and identifying the top schemes in the category such as

equity, balanced, Monthly Income Plan (MIP) & Income in the AMC. The AMC chosen was

Franklin Templeton Mutual funds and it performed well and met the expectations.

 Prasath.R.H

o The study is trying to emphasize the core values of mutual fund investment, benefits

of mutual funds, types of mutual funds, etc., The study is going to conducted by taking the

NAV values of different types of HDFC mutual fund products. The study concludes that

before choosing the mutual fund scheme, the investor should undergo fact sheet thoroughly

and he has to choose the best one by calculating NAV calculation. If the investor finds

difficulty of getting Rp, Rf, Standard deviation, and Beta parameters, NAV calculations are

the best alternative to assess the performance.

 Sharad Panwar and Dr. R. Madhumathi

o The objective of the study is to identify differences in characteristics of public-sector

sponsored & private-sector sponsored mutual funds and to find the extent of diversification in

the portfolio of securities of public-sector sponsored and private-sector sponsored mutual

funds and to compare the performance of public-sector sponsored and private-sector

sponsored mutual funds using traditional investment measures. The study found that public-

sector sponsored , private-sector Indian sponsored and private-sector foreign sponsored

mutual funds do not differ statistically in terms of portfolio characteristics such as net assets,

common stock%, market capitalization, holdings, Top Ten %. Portfolio risk characteristics

measured through private-sector Indian sponsored mutual funds seems to have outperformed

both Public- sector sponsored and Private-sector foreign sponsored mutual funds.

 Jaspal Singh and Subhash Chander

o The results show that the investors consider gold to be the most preferred form of

investment, followed by NSC and Post Office schemes. Hence, the basic psyche of an Indian

investor, who still prefers to keep his savings in the form of yellow metal, is indicated.

Investors belonging to the salaried category, and in the age group of 20-35, years showed

inclination towards close-ended growth (equity-oriented) schemes over the other scheme

type.

 Dr. S. Anand & Dr. V Murugaiah

o The purpose of this study is to apply the measurement tools of modern portfolio

theory to the performance of mutual funds. The study aims to examine the degree of

correlation that exists between fund and market return, to understand the impact of fund

specific characteristics on performance ,to evaluate the diversification and selectivity skills of

fund managers. The study concluded on the basis of overall analysis in can be inferred here

that the additional return on sampled schemes and the market over risk free return was

significantly low during the study period. The study covers the period between April 1999

and March 2003 This indicates that the majority of schemes were showed underperformance

in comparison with risk free return.

Objectives:

o To know the Performance of the preferred by comparison of Mutual Fund.

o To understand the concept of Mutual Fund its working, mechanism and types traded

in India.

o To compare the risk and return associated with the Equity Schemes of Reliance

Mutual Fund.

o To know which scheme of Equity of Reliance Mutual Fund is most preferred by the

investors and what factors they consider while investing in reliance mutual fund.

Scope Of Project:

The Equity Schemes were categorized and selected on evaluating their performance and

Relative risk. The scope of the project is mainly concentrated on the various companies

mutual funds such as equity schemes.

Sample Size:

100 Mutual fund Investors

Sampling Method:

The sampling method is convenience sampling and sampling technique is non probability

sampling.

Area of research: Ahmedabad City

Research design :
The research is done to find out preference level of investor’s towards reliance mutual fund

so it is a Conclusive type of research.

Further the study is about analyzing why people prefer other investment, so a Descriptive

Research style is used.

Data Source:

The Data collected is of the Primary & Secondary type:

 Primary Data: Primary data was collected by administering questionnaire. It is

systematic collection of information directly from the Mutual Fund Investors. The basic

purpose of collecting primary data is to know the preferred Equity Schemes of Mutual funds

 Secondary data: Secondary data’s are collected from Companies website, financial

journals, recent Fact sheet of mutual fund relating to mutual funds

 Limitations of the study:

o Research cannot be taken for entire population.

o The data collection was strictly confined to secondary sources. Primary data

was associated with only the survey conducted on the investors.

o Collecting historical NAV is very difficult.

o Selection of schemes for study is very difficult because lot of Varieties in

equity Schemes

o To get an insight in the process of risk and return and deployment of funds by

fund manager is difficult.

o The project is unable to analyse each and every equity scheme of mutual funds

to create awareness about risk and return. The risk and return of mutual fund

equity schemes can change according to the market conditions.

 o Questionnaire method which is adopted for collecting data has its own

limitations.

o It may be hard for participants to recall information or to tell the truth about a

controversial question.

o Sample size is also the limited.

o Some of the respondents of the survey were unwilling to share information.

o Some of the respondents could not answer the questions due to lack of

knowledge.

Period of Study:

The period of our research study is of 6 weeks.

CHAPTER – 2 INDUSTRY PROFILE

Definition:

A mutual fund is an investment vehicle which allows investors with similar (one could say

mutual) investment objectives, to pool their resources and thereby achieve economies of scale

and diversification in their investing.

History:

A mutual fund is a financial intermediary that pools the savings of investors for collective

investment in a diversified portfolio of securities. A fund is “mutual” as all of its returns,

minus its expenses, are shared by the fund’s investors.

The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 defines a

mutual fund as a ‘a fund established in the form of a trust to raise money through the sale of

units to the public or a section of the public under one or more schemes for investing in

securities, including money market instruments’.

According to the above definition, a mutual fund in India can raise resources through sale of

units to the public. It can be set up in the form of a Trust under the Indian Trust Act. The

definition has been further extended by allowing mutual funds to diversify their activities in

the following areas:

· Portfolio management services

· Management of offshore funds

· Providing advice to offshore funds

· Management of pension or provident funds

· Management of venture capital funds

· Management of money market funds

· Management of real estate funds

A mutual fund serves as a link between the investor and the securities market by mobilising

savings from the investors and investing them in the securities market to generate returns.

Thus, a mutual fund is akin to portfolio management services (PMS). Although, both are

conceptually same, they are different from each other. Portfolio management services are

offered to high net worth individuals; taking into account their risk profile, their investments

are managed separately. In the case of mutual funds, savings of small investors are pooled

under a scheme and the returns are distributed in the same proportion in which the

investments are made by the investors/unit-holders.

Mutual fund is a collective savings scheme. Mutual funds play an important role in

mobilising the savings of small investors and channelising the same for productive ventures

in the Indian economy.

The history of mutual funds, dates back to 19th century Europe, in particular, Great Britain.

Robert Fleming set up in 1868 the first investment trust called Foreign and Colonial

Investment Trust which promised to manage the finances of the moneyed classes of Scotland

by spreading the investment over a number of different stocks. This investment trust and

other investment trusts which were subsequently set up in Britain and the US, resembled

today’s close-ended mutual funds. The first mutual fund in the US, Massachusetts Investors’

Trust, was setup in March 1924. This was the first open-ended mutual fund.

The stock market crash in 1929, the Great Depression, and the outbreak of the Second World

War slackened the pace of growth of the mutual fund industry. Innovations in products

and services increased the popularity of mutual funds in the 1950s and 1960s. The first

international stock mutual fund was introduced in the US in 1940. In 1976, the first tax-

exempt municipal bond funds emerged and in 1979, the first money market mutual funds

were created. The latest additions are the international bond fund in 1986 and arm funds in

1990. This industry witnessed substantial growth in the eighties and nineties when there was

a significant increase in the number of mutual funds, schemes, assets, and shareholders. In the

US, the mutual fund industry registered a ten fold growth in the eighties (1980-89) only, with

25% of the household sector’s investment in financial assets made through them. Fund assets

increased from less than $150 billion in 1980 to over $4 trillion by the end of 1997. Since

1996, mutual fund assets have exceeded bank deposits. The mutual fund industry and the

banking industry virtually rival each other in size.

CONCEPT OF MUTUAL FUNDS
BUSINESS STRUCTURE OF MUTUAL FUND

Benefits of Mutual Funds

An investor can invest directly in individual securities or indirectly through a financial

intermediary. Globally, mutual funds have established themselves as the means of investment

for the retail investor.

1. Professional management: An average investor lacks the knowledge of capital market

operations and does not have large resources to reap the benefits of investment. Hence, he

requires the help of an expert. It, is not only expensive to ‘hire the services’ of an expert but it

is more difficult to identify a real expert. Mutual funds are managed by professional

managers who have the requisite skills and experience to analyse the performance and
prospects of companies. They make possible an organised investment strategy, which is

hardly possible for an individual investor.

2. Portfolio diversification: An investor undertakes risk if he invests all his funds in a single

scrip. Mutual funds invest in a number of companies across various industries and sectors.

This diversification reduces the riskiness of the investments.

3. Reduction in transaction costs: Compared to direct investing in the capital market,

investing through the funds is relatively less expensive as the benefit of economies of

scale is passed on to the investors.

4. Liquidity: Often, investors cannot sell the securities held easily, while in case of mutual

funds, they can easily encash their investment by selling their units to the fund if it is an

open-ended scheme or selling them on a stock exchange if it is a close-ended scheme.

5. Convenience: Investing in mutual fund reduces paperwork, saves time and makes

investment easy.

6. Flexibility: Mutual funds offer a family of schemes, and investors have the option of

transferring their holdings from one scheme to the other.

7. Tax benefits Mutual fund investors now enjoy income-tax benefits. Dividends received

from mutual funds’ debt schemes are tax exempt to the overall limit of Rs 9,000 allowed

under section 80L of the Income Tax Act.

8. Transparency Mutual funds transparently declare their portfolio every month. Thus an

investor knows where his/her money is being deployed and in case they are not happy with

the portfolio they can withdraw at a short notice.

9. Stability to the stock market Mutual funds have a large amount of funds which provide

them economies of scale by which they can absorb any losses in the stock market and

continue investing in the stock market. In addition, mutual funds increase liquidity in the

money and capital market.

10. Equity research Mutual funds can afford information and data required for investments as

they have large amount of funds and equity research teams available with them.

Growth of Mutual Funds in India

The Indian mutual fund industry has evolved over distinct stages. The growth of the mutual

fund industry in India can be divided into four phases: Phase I (1964-87), Phase II (1987-92),

Phase III (1992-97), and Phase IV (beyond 1997).

Phase I: The mutual fund concept was introduced in India with the setting up of UTI in 1963.

The Unit Trust of India (UTI) was the first mutual fund set up under the UTI Act, 1963, a

special act of the Parliament. It became operational in 1964 with a major objective of

mobilising savings through the sale of units and investing them in corporate securities for

maximising yield and capital appreciation. This phase commenced with the launch of Unit

Scheme 1964 (US-64) the first open-ended and the most popular scheme. UTI’s investible

funds, at market value (and including the book value of fixed assets) grew from Rs 49 crore

in1965 to Rs 219 crore in 1970-71 to Rs 1,126 crore in 1980-81 and further to Rs 5,068 crore

by June 1987. Its investor base had also grown to about 2 million investors. It launched

innovative schemes during this phase. Its fund family included five income-oriented, open-

ended schemes, which were sold largely through its agent network built up over the years.

Master share, the equity growth fund launched in 1986, proved to be a grand marketing

success. Master share was the first real close-ended scheme floated by UTI. It launched India

Fund in 1986-the first Indian offshore fund for overseas investors, which was listed on the

London Stock Exchange (LSE). UTI maintained its monopoly and experienced a consistent

growth till 1987.

Phase II: The second phase witnessed the entry of mutual fund companies sponsored by

nationalised banks and insurance companies. In 1987, SBI Mutual Fund and Canbank Mutual
Fund were set up as trusts under the Indian Trust Act, 1882. In 1988, UTI floated another

offshore fund, namely, The India Growth Fund which was listed on the New York Stock

Exchange (NYSB). By 1990, the two nationalised insurance giants, LIC and GIC, and

nationalised banks, namely, Indian Bank, Bank of India, and Punjab National Bank had

started operations of wholly-owned mutual fund subsidiaries. The assured return type of

schemes floated by the mutual funds during this phase were perceived to be another banking

product offered by the arms of sponsor banks. In October 1989, the first regulatory guidelines

were issued by the Reserve Bank of India, but they were applicable only to the mutual funds

sponsored by FIIs. Subsequently, the Government of India issued comprehensive guidelines

in June 1990 covering all ‘mutual funds. These guidelines emphasised compulsory

registration with SEBI and an arms length relationship be maintained between the sponsor

and asset management company (AMC). With the entry of public sector funds, there was a

tremendous growth in the size of the mutual fund industry with investible funds, at market

value, increasing to Rs 53,462 crore and the number of investors increasing to over 23

million. The buoyant equity markets in 1991-92 and tax benefits under equity-linked savings

schemes enhanced the attractiveness of equity funds.

Phase III: The year 1993 marked a turning point in the history of mutual funds in India. Tile

Securities and Exchange Board of India (SEBI) issued the Mutual Fund Regulations in

January 1993. SEBI notified regulations bringing all mutual funds except UTI under a

common regulatory framework. Private domestic and foreign players were allowed entry in

the mutual fund industry. Kothari group of companies, in joint venture with Pioneer, a US

fund company, set up the first private mutual fund the Kothari Pioneer Mutual Fund, in 1993.

Kothari Pioneer introduced the first open-ended fund Prima in 1993. Several other private

sector mutual funds were set up during this phase. UTI launched a new scheme, Master-gain,

in May 1992, which was a phenomenal success with a subscription of Rs 4,700 crore from
631akh applicants. The industry’s investible funds at market value increased to Rs 78,655

crore and the number of investor accounts increased to 50 million. However, the year 1995

was the beginning of the sluggish phase of the mutual fund industry. During 1995 and 1996,

unit holders saw an erosion in the value of their investments due to a decline in the NA V s of

the equity funds. Moreover, the service quality of mutual funds declined due to a rapid

growth in the number of investor accounts, and the inadequacy of service infrastructure. A

lack of performance of the public sector funds and miserable failure of foreign funds like

Morgan Stanley eroded the confidence of investors in fund managers. Investors perception

about mutual funds, gradually turned negative. Mutual funds found it increasingly difficult to

raise money. The average annual sales declined from about Rs 13,000 crore in 1991-94 to

about Rs 9,000 crore in 1995 and 1996.

The Unit Trust of India is losing out to other private sector players. While there has been an

increase in AUM by around 11% during the year 2002, UTI on the contrary has lost more

than 11% in AUM. The private sector mutual funds have benefited the most from the debacle

ofUS-64 of UTI. The AUM of this sector grew by around- 60% for the year ending March

2002.

Types of Mutual Fund Schemes

The objectives of mutual funds are to provide continuous liquidity and higher yields with

high degree of safety to investors. Based on these objectives, different types of mutual fund

schemes have evolved.

Types of Mutual Fund Schemes

Functional :- Portfolio :- Geographical :- Other :-

Open-Ended Event Income Funds Domestic Sectoral Specific

Close-Ended Scheme Growth Funds Off-Shore Tax Saving

Interval Scheme Balanced Funds ELSS

Money Market Special

Mutual Fund Gilt Funds

Load Funds

Index Funds

ETFs

PIE Ratio Fund

Functional Classification of Mutual Funds :-

1. Open-ended schemes: In case of open-ended schemes, the mutual fund continuously offers

to sell and repurchase its units at net asset value (NAV) or NAV-related prices. Unlike close-

ended schemes, open-ended ones do not have to be listed on the stock exchange and can also

offer repurchase soon after allotment. Investors can enter and exit the scheme any time during

the life of the fund. Open-ended schemes do not have a fixed corpus. The corpus of fund

increases or decreases, depending on the purchase or redemption of units by investors.

There is no fixed redemption period in open-ended schemes, which can be terminated

whenever the need arises. The fund offers a redemption price at which the holder can sell

units to the fund and exit. Besides, an investor can enter the fund again by buying units from

the fund at its offer price. Such funds announce sale and repurchase prices from time-to-time.

UTI’s US-64 scheme is an example of such a fund. The key feature of open-ended funds is

liquidity. They increase liquidity of the investors as the units can be continuously bought and

sold. The investors can develop their income or saving plan due to free entry and exit frame

of funds. Open-ended schemes usually come as a family of schemes which enable the

investors to switch over from one scheme to another of same family.

2. Close-ended schemes: Close-ended schemes have a fixed corpus and a stipulated maturity

period ranging between 2 to 5 years. Investors can invest in the scheme when it is launched.

The scheme remains open for a period not exceeding 45 days. Investors in close-ended

schemes can buy units only from the market, once initial subscriptions are over and thereafter

the units are listed on the stock exchanges where they dm be bought and sold. The fund has

no interaction with investors till redemption except for paying dividend/bonus. In order to

provide an alternate exit route to the investors, some close-ended funds give an option of

selling back the units to the mutual fund through periodic repurchase at NAV related prices.

If an investor sells units directly to the fund, he cannot enter the fund again, as units bought

back by the fund cannot be reissued. The close-ended scheme can be converted into an open-

ended one.

3. Interval scheme: Interval scheme combines the features of open-ended and close-ended

schemes. They are open for sale or redemption during predetermined intervals at NAVrelated

prices.

Portfolio Classification :-

Here, classification is on the basis of nature and types of securities and objective of

investment.

1. Income funds: The aim of income funds is to provide safety of investments and regular

income to investors. Such schemes invest predominantly in income-bearing instruments like

bonds, debentures, government securities, and commercial paper. The return as well as the

risk are lower in income funds as compared to growth funds.

2. Growth funds: The main objective of growth funds is capital appreciation over the

medium-to-long- term. They invest most of the corpus in equity shares with significant

growth potential and they offer higher return to investors in the long-term. They assume the
risks associated with equity investments. There is no guarantee or assurance of returns. These

schemes are usually close-ended and listed on stock exchanges.

3. Balanced funds: The aim of balanced scheme is to provide both capital appreciation and

regular income. They divide their investment between equity shares and fixed nicebearing

instruments in such a proportion that, the portfolio is balanced. The portfolio of such funds

usually comprises of companies with good profit and dividend track records. Their exposure

to risk is moderate and they offer a reasonable rate of return.

4. Money market mutual funds: They specialise in investing in short-term money market

instruments like treasury bills, and certificate of deposits. The objective of such funds is high

liquidity with low rate of return.

Geographical Classification :-

1. Domestic funds: Funds which mobilise resources from a particular geographical locality

like a country or region are domestic funds. The market is limited and confined to the

boundaries of a nation in which the fund operates. They can invest only in the securities

which are issued and traded in the domestic financial markets.

2. Offshore funds: Offshore funds attract foreign capital for investment in ‘the country of the

issuing company. They facilitate cross-border fund flow which leads to an increase in foreign

currency and foreign exchange reserves. Such mutual funds can invest in securities of foreign

companies. They open domestic capital market to international investors. Many mutual funds

in India have launched a number of offshore funds, either independently or jointly with

foreign investment management companies. The first offshore fund, the India Fund, was

launched by Unit Trust of India in July 1986 in collaboration with the US fund manager,

Merril Lynch.
Others :-

1. Sectoral: These funds invest in specific core sectors like energy, telecommunications, IT,

construction, transportation, and financial services. Some of these newly opened-up sectors

offer good investment potential.

2. Tax saving schemes: Tax-saving schemes are designed on the basis of tax policy with

special tax incentives to investors. Mutual funds have introduced a number of tax saving

schemes. These are close--ended schemes and investments are made for ten years, although

investors can avail of encashment facilities after 3 years. These schemes Contain various

options like income, growth or capital application. The latest scheme offered is the

Systematic Withdrawal Plan (SWP) which enables investors to reduce their tax incidence on

dividends from as high as 30% to as low as 3 to 4%.

3. Equity-linked savings scheme (ELSS): In order to encourage investors to invest in equity

market, the government has given tax-concessions through special schemes. Investment in

these schemes entitles the investor to claim an income tax rebate, but these schemes carry a

lock-in period before the end of which funds cannot be withdrawn.

4. Special schemes: Mutual funds have launched special schemes to cater to the special needs

of investors. UTI has launched special schemes such as Children’s Gift Growth Fund, 1986,

Housing Unit Scheme, 1992, and Venture Capital Funds.

5. Gilt funds: Mutual funds which deal exclusively in gilts are called gilt funds. With a view

to creating a wider investor base for government securities, the Reserve Bank of India

encouraged setting up of gilt funds. These funds are provided liquidity support by the

Reserve Bank.

6. Index funds: An index fund is a mutual fund which invests in securities in the index on

which it is based BSE Sensex or S&P CNX Nifty. It invests only in those shares which
comprise the market index and in exactly the same proportion as the companies/weight age in

the index so that the value of such index funds varies with the market index. An index fund

follows a passive investment strategy as no effort is made by the fund manager to identify

stocks for investment/dis-investment. The fund manager has to merely track the index on

which it is based. His portfolio will need an adjustment in case there is a revision in the

underlying index. In other words, the fund manager has to buy stocks which are added to the

index and sell stocks which are deleted from the index.

7. PIE ratio fund: PIE ratio fund is another mutual fund variant that is offered by Pioneer IT!

Mutual Fund. The PIE (Price-Earnings) ratio is the ratio of the price of the stock of a

company to its earnings per share (EPS). The PIE ratio of the index is the weighted average

price-earnings ratio of all its constituent stocks.

The PIE ratio fund invests in equities and debt instruments wherein the proportion of the

investment is determined by the ongoing price-earnings multiple of the market. Broadly,

around 90% of the investible funds will be invested in equity if the Nifty Index PIE ratio is 12

or below. If this ratio exceeds 28, the investment will be in debt/money markets. Between the

two ends of 12 and 28 PIE ratio of the Nifty, the fund will allocate varying proportions of its

investible funds to equity and debt. The objective of this scheme is to provide superior risk-

adjusted returns through a balanced portfolio of equity and debt instruments.

8. Exchange traded funds: Exchange Traded Funds (ETFs) are a hybrid of open-ended mutual

funds and listed individual stocks. They are listed on stock exchanges and trade like

individual stocks on the stock exchange. However, trading at the stock exchanges does not

affect their portfolio. ETFs do not sell their shares directly to investors for cash. The shares

are offered to investors over the stock exchange. ETFs are basically passively managed funds

that track a particular index such as S&P CNX Nifty.

Since they are listed on stock exchanges, it is possible to buy and sell them throughout the

day and their price is determined by the demand-supply forces in the market. In practice, they

trade in a small range around the value of the assets (NAV) held by them.

Net Asset Value: The net asset value of a fund is the market value of the assets minus the

liabilities on the day of valuation. In other words, it is the amount which the shareholders will

collectively get if the fund is dissolved or liquidated. The net asset value of a unit is the net

asset value of fund divided by the number of outstanding units. Thus NAV = Market Price of

Securities + Other Assets – Total Liabilities + Units Outstanding as at the NAV date. NAV =

Net Assets of the Scheme + Number of units outstanding, that is, Market value of

investments + Receivables + Other Accrued Income + Other Assets - Accrued Expenses -

Other Payables - Other Liabilities + No. of units outstanding as at the NAV date.

A fund’s NAV is affected by four sets of factors: purchase and sale of investment securities,

valuation of all investment securities held, other assets and liabilities, and units sold or

redeemed.

SEBI has issued guidelines on valuation of traded securities, thinly traded securities and non-

traded securities. These guidelines were issued to streamline the procedure of calculation

of NAV of the schemes of mutual funds. The aggregate value of illiquid securities as defined

in the guidelines shall not exceed 15% of the total assets of the scheme and any illiquid

securities held above 15% of the total assets shall be valued in the manner as specified in the

guidelines issued by the SEBI. Where income receivables on investments has accrued but has

not been received for the period specified in the guidelines issued by SEBI, provision shall be

made by debiting to the revenue account the income so accrued in the manner specified

By guidelines issued by SEBI.

Mutual funds are required to declare their NAV s and seller purchase prices of all schemes

updated daily on regular basis on the AMFI website by 8.00 p.m. and declare NA V s of their

Close-ended schemes on every Wednesday.

Mutual Fund Investors

Mutual funds in India are open to investment by

o Residents including:-

o Resident Indian Individuals, including high net worthindividuals and the retail or

small investors. Indian Companies

o Indian Trusts/Charitable Institutions

o Banks

o Non-Banking Finance Companies

o Insurance Companies

o Provident Funds

o Non-Residents, including

o Non-Resident Indians

o Other Corporate Bodies (OCBs)

c. Foreign entities, namely, Foreign Institutional Investors (FIIs) registered with SEBI.

Foreign citizens/ entities are however not allowed to invest in mutual funds in India.

Market survey plays a vital role in understanding the investment pattern of the customer and

the level of satisfaction. It is very important for the company to perform such activities like

market research and surveys at regular intervals and accordingly further plans and policies

can be formulated. By studying the investment pattern of the customers, the company can
plan the strategies to capture the more market share by providing the better services and

customized plans.

CHAPTER – 3 COMPANY PROFILE

Objectives of the Research

OBJECTIVES OF THE STUDY

o To assess the satisfaction level of the consumers towards various insurance products of the
HDFC Bank
o To find out the performance factor of the sampling branch on selling of the insurance
product in comparison to other branches of the bank.
o To describe in detail about the various insurance products launched by the HDFC bank.
o To find out type and numbers of different income category of people accepting the
insurance policy in HDFC Bank.
o To suggest/ recommend measures to improve the performance factor of the sampling
branch in regard to dealing with various insurance product.

o Objective of the Research is to achieve an understanding of the practical banking

activities and related knowledge that I have gained abstract training, University
education and various document of the HDFC Bank .
Limitations

There were certain limitations while conducting the Research. These are summarized
below:

The main obstacle while preparing this report was time. As the tenure of the internship
program was very short, it was not possible to highlight everything deeply. Work
pressure in the office was another limitation.
Confidentiality of information was another barrier that hindered the Research. Every
organization has its own secrecy that is not revealed to someone outside the
organization. While collecting data at The HDFC BANK, personnel did not disclose
enough information for the sake of confidentiality rule of the organization.

While doing the survey some employees were not participates, some were busy and
some were reluctant during answering the question.

Some of the answers from the survey varied between higher level officers and lower
level employees.

Scope of the Research

The Research report is prepared in term of the three months of internship program; the
report covered all the aspects of HDFC Bankemployee‟s job satisfaction. But the report
is prepared based only Nashik branch employees. All the department of Nashik branch
has participated on this report.

Research of the Methodology

In general, Methodology is the efficient explanation of sequence of activates required. In

this internship report, both the descriptive and exploratory method has been used. To
get internship report elements and to implement the report I worked in some steps.
Those steps are sampling methods, Questionnaire development, and data collection,
data analysis.

In general, Methodology is the efficient explanation of sequence of activates required. In

this internship report, both the descriptive and exploratory method has been used. To
get internship report elements and to implement the report I worked in some steps.
Those steps are sampling methods, Questionnaire development, and data collection,
data analysis.

Nature of the report:

Exploratory report. An exploratory research project is an attempt to lay the ground

work that will lead to future studies, or to determine if what is being observed might be
explained by a currently existing theory. Most often, exploratory research lays the initial
ground work for future research.

Data Collection:

The questionnaire method has been used for data collection for the Research
.Information collected to deliver this report is both from primary and secondary
sources.

Sample size: 10 people

Population size: 20 people

Primary Data:

The primary data are collected from several desk works in different departments of
HDFC BankLtd. I have done some face to face discussion with executive and officer from
different division which is consider being another source of primary data. I also
collected some interesting and important data through my observation during of my
internship period. And my survey questionnaire was the best of the lot from other
methods. It helps me to get specified data which is essential for my internship report.

Secondary Data:

The secondary data are collected from annual reports of the HDFC BankLtd. the manual
of export procedures of HDFC is also another source of data. Procedure manual
published by HDFC, those kinds of sources can be considered as a secondary data. And
data regarding the operations and analysis of financial statement were collected from
secondary sources like annual report, Broachers and company website.

History of HDFC bank:

HDFC Bank popularly named as Housing Development Finance Corporation Limited was founded by
HasmukhBhaiParakh in the year 1977. In the year 1994, the HDFC Bank was incorporated. The bank
was promoted by The Housing Development Finance Corporation which is the India's largest housing
finance company. The Bank started operations as in January 1995. On 26 February 2000, Times Bank
Limited owned by The Times Group (Bennett, Coleman & Co.) was merged with HDFC Bank Ltd. This
was the first merger of two private banks in India. Shareholders of Times Bank received 1 share of
HDFC Bank for every 5.75 shares of Times Bank.
HDFC is a brainchild of the founder Chairman, the late Mr. H. T. Parekh.
HDFC has come a long way since its inception in 1977, overcoming numerous obstacles in
the evolution from a fledging start-up to India’s leading provider of Housing Finance.

Housing Development Finance Corporation Ltd was incorporated in the year 1977. The
Corporation is established with the primary objective of meeting a social need that of
promoting home ownership by providing long-term finance to households for their housing
needs. The company was promoted with an initial share capital of Rs. 100 million.

In the year 1993, the company made a joint venture with General Electric Capital
Corporation of US to promote Countrywide Consumer Financial Services Ltd for consumer
finance. In the year 1994, the Corporation introduced Non-Residential Premises Loans for
Individuals.

In the year 1998, the Corporation in partnership with a South-based NGO launched the Indian
Association for Savings & Credit (IASC), a pioneering micro-finance institution operating in
the states of Tamil Nadu and Kerala. Also, they introduced Home Equity Loans and
Corporate Employees Group Finance Arrangement.

In the year 1999, the Corporation invested in a new Housing Finance company in Sri Lanka.
They launched the Corporation website www.hdfcindia.com (now hdfc.com). Also, they
introduced the Adjustable Rate Home Loans and became the first housing finance institution
to do so.During the year 2009-10, the Corporation introduced 'HDFC Systematic Savings
Plan', which is a monthly savings plan offering a variable rate of interest. They launched a
key brand campaign - 'HDFC - because every family needs a home'. The objective of the
campaign was to connect with HDFC's existing customers as well as prospective customers,
making the HDFC brand synonymous with a home.

In April 2010, the company launched a special home loan product at a fixed rate of 8.25% per
annum up to March 31, 2011, 9% for the period between April 4, 2011 and March 31, 2012
and the applicable floating rate for the balance term. This is a flexible product with dual rates.
They also re-launched their product loan against property to assist customers.

In 2013, HDFC Mutual Fund acquires the schemes of Morgan Stanley Mutual Fund-HDFC-
Board recommends dividend.The HDFC Board recognised as one of the 'Five Best Boards'
by ET and the Hay group in 2013.In 2014, HDFC launches fixed home loan, lowers deposit
rate-HDFC- Board recommends dividend.

COMPANY MANAGEMENT:

HDFC:
Mr. DEEPAK PAREKH (DIRECTOR)

Chairman of the corporation is a Fellow of the Institute of Chartered Accountants (England &
Wales). Mr. Parekh joined the Corporation in a senior management position in 1978. He was
inducted as a whole-time director of the Corporation in 1985 as the Managing Director
(designated as 'Chairman') of the Corporation in 1993 and continued to be appointed as such
from time to time.He retired as the Managing Director (designated as 'Chairman') of the
Corporation with effect from the close of business hours on December 31, 2009. Mr. Parekh
has been appointed as an Additional Director of the Corporation with effect from January 1,
2010.

MR. KEKI. M. MISTRY (VICE CHAIRMAN)

Vice Chairman and Chief Executive Officer of the Corporation, is a Fellow of the Institute of
Chartered Accountants of India. He has been employed with the Corporation since 1981 and
was appointed as the executive director of the Corporation in 1993. He was appointed as the
Deputy Managing Director in 1999, as the Managing Director in 2000, and re-designated as
the Vice Chairman & Managing Director of the Corporation in October 2007.

MS. RENU SUD KARNAD (M.D)

Managing Director of the Corporation is a graduate in law from the University of Mumbai and holds
a Master's degree in economics from the University of Delhi. She is a Parvin Fellow - Woodrow
Wilson School of International Affairs, Princeton University, U.S.A. She has been employed with the
Corporation since 1978 and was appointed as the Executive Director of the Corporation in 2000 and
was re-designated as the Joint Managing Director of the Corporation in October 2007. She has been
appointed January 1, 2010. as the Managing Director of the Corporation for a period of 5 years with
effect from

About HDFC BANK:-

HDFC bank is a private bank which was promoted by Housing Finance Development
Corporation. It was incorporated in the year 1994 and it started its commercial operations in
1995. HDFC Bank’s philosophy is based on customer focus, operational excellence, product
leadership, and human values. HDFC bank limited is an Indian financial service company
based in Mumbai, Maharashtra

The first two private banks in India which merged are Times Bank Limited (owned by
Bennett, Coleman and The Co./ Times Group ) and HDFC bank limited on February 26,
20000. It would be interesting to know that the first bank in India who launched an
International Debit Card in association with VISA and issues the Master Cared Maestro debit
card as well

HDFC VISION AND MISSION

 Vision :

To be customer driven best managed enterprise that enjoys market

leadership in providing housing related finance.

 Mission :

To provide a package of attractive financial services for housing purposes

through a competed and motivated team of employees using the state of the
 Increasing market share in India’s expanding banking.
art technology to maintain financial stability and growth of the organization
whilst contributing to the national goal of providing descent housing to all.
The business strategies of HDFC Bank Limited are:

 Delivering high quality customer service.

 Delivering more products to more customers.
 Maintaining current high standards for asset quality through disciplined credit risk
management.
  Develop innovative products and services that attract targeted customers and address
inefficiencies in the Indian financial sector.

Thus, HDFC Bank is always trying to develop some new innovative product which can
satisfy the customers. It aims not only to deliver more products to customer but also makes
sure that it is delivering a quality service to its customers. By doing this, HDFC Bank is
contributing towards the Indian economy.Future plan of HDFC is to launch 250 new
branches. It also aims to set up NBFC.The HDFC Bank is the second largest private sector
bank in India and it has won the NASSCOM CNBC-TV 18 IT innovation award for the BEST IT
DRIVEN INNOVATION IN BANKING (COMMERCIAL) in the VERTICAL category.

THE BOARD OF DIRECTORS OF THE BANK ARE :

Name Designation
A.N. Roy Director
Aditya Puri CEO
Bobby Parikh Director
CM Vasudev Chairman
Kaizad Bharucha Additional and Executive Director
Partho Datta Director
Renu Karnad Director
Pandit Palande Director
Keki Mistry Director
Paresh Sukthankar Deputy Managing Director
Sanjay Dongra Company Secretary

PRODUCT PROFILE:

HDFC:

Mortgages
The company provides housing finance to individuals and corporates for
purchase/construction of residential houses. It is one of the largest providers of housing loans
in India. In its Annual Report for financial year 2012-13, the company has disclosed that it
has disbursed approx. INR 456,000 crore in 35 years of its existence for a total of 4.4 million
housing units.
The average loan profile amounts to INR 2.18 million (US$ 35,160) which lasts for about 13
years and covers approx. 65% of actual property value.

Life Insurance

The company has been providing life insurance since the year 2000, through its subsidiary
HDFC Standard Life Insurance Company Limited. It offers 33 individual products and 8
group products. It uses HDFC group network to cross sell by offering customized products. It
operates out of 451 offices across India serving over 965 locations. It had a market share of
4.6% of life insurance business in India as of 30 September 2013. HDFC Life has over
15,000 employees.

General Insurance

The company offers general insurance products such as:

 Motor, health, travel, home and personal accident in the retail segment which accounts
for 47% of its total business and
 Property, marine, aviation and liability insurance in the corporate segment

Mutual Funds

HDFC provides mutual fund services through its subsidiary HDFC Asset Management
Company Limited. The average Assets under Management (AUM) of HDFC Mutual Fund
for the quarter Jul-13 to Sep-13 was INR 1.03 trillion.

They have Extensive distribution network of 378 interconnected offices (including 103
offices of HDFC Sales) with outreach programs to several towns and cities all over India.

CORPORATE SOCIAL RESPONSIBILITY:

HDFC:
HDFC recognizes that there are various challenges faced by low income communities. A
holistic approach is required to address these issues in order to ensure the sustainable
development of communities. HDFC supported the following initiatives for community
development:

 Gender based violence

 Community based maternal health
 Rehabilitation of displaced and destitute persons.
 Prime Minister’s Relief Fund

Child Welfare:

The complexities in the society often allow children to fall through the cracks, perpetuating
cycles of malnourishment, poverty, illiteracy and crime. HDFC recognized that the
environment in which they grow up and the influences around them play an important role in
the adults that they become. HDFC supported the following initiatives in child welfare and
development:

 Preventing child malnutrition

 Care for children with cancer

 Reducing vulnerabilities

SWOT ANALYSIS

HDFC:
  \

• Diversified • Products are

porfolio suitable only for
• Market leader high income
group

Brand Name Weaknessses

• Ample scope Opportunities Threats • Nationalised

for financing banks like SBI,
flates and Union Bank
appartments in • private banks
the salaried like ICICI,Axis,
class in high standard
income group chartered with
its home credit
schemes

COMPARATIVE STUDY:

Geographic Presence:
HDFC:
Financial Presence:

A. Balance sheet:
HDFC:

Balance Sheet figures

March 206 March 2017 March 2018

Share Capital 25 25 105
Reserves 1,126 1,398 2.055
Borrowing 0 0 0
Other Liabilities s+ 272 177 211
Total Liabilities 1,423 1,600 2,371
Fixed Assets+ 31 31 33
CWIP 1 2 6
Investment 986 1,237 1,951
Other Assets+ 405 329 382
Total Assets 1,432 1,600 2,371

Ratio Analysis

Ratios
 March 2016 March 2017 March 2018
ROCE % 62% 59%
Debtor Days 9 20 18
Inventor Turnover

140
120
100
Series 3
80
Debtor Days
60
40 ROCE

20
0
ROCE Debtor Days Inventor
Turnover

Debt coverage ratio:

HDFC Bank Mar’18 Mar’17 Mar’16 Mar’15 Mar’14

Interest Cover 1.48 1.46 1.47 1.51 1.64

Total Debt to Owners Fund 4.23 4.03 4.38 5.05 4.78

Debt Coverage Ratio

4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Interest Cover Total Debt
Problem faced and solution:
HDFC:
At present, the bank's 55 per cent branches are in rural and semi-urban areas. It is targeting 35
per cent revenue from these in the next few years. The current figure is 15 per cent.

India's second-largest private sector bank by assets (ICICI Bank is the leader), headed by
Aditya Puri, a former Citibank executive, has set in motion a strategy to become a full-scale
digital bank.
Of course, India is years away from something like Atom Bank, which is targeting 18-32 year
olds through its app-only model. "This is not such a big phenomenon here.For HDFC Bank,
the biggest challenges include new payment banks - such as Paytm, Reliance Industries, Tech
Mahindra, NSDL and India Post - that are ready to launch operations. These are allowed to
accept deposits up to Rs 1 lakh but cannot lend. Interestingly, whereas SBI has entered into
an equity partnership with Reliance for a payment bank and Kotak Mahindra Bank has joined
hands with Bharti Airtel, HDFC Bank has decided to take on the challenge alone.