Chapter - 1

Introduction

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INTRODUCTION TO MUTUAL FUND AND ITS VARIOUS
ASPECTS:

Mutual fund is a trust that pools the savings of a number of investors who share a
common financial goal. This pool of money is invested in accordance with a stated
objective. The joint ownership of the fund is thus “Mutual”, i.e. the fund belongs to
all investors. The money thus collected is then invested in capital market
instruments such as shares, debentures and other securities. The income earned
through these investments and the capital appreciations realized are shared by its
unit holders in proportion the number of units owned by them. Thus a Mutual Fund
is the most suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a relatively
low cost. A Mutual Fund is an investment tool that allows small investors access to
a well-diversified portfolio of equities, bonds and other securities. Each shareholder
participates in the gain or loss of the fund. Units are issued and can be redeemed as
needed. The funds Net Asset value (NAV) is determined each day.

Investments in securities are spread across a wide cross-section of industries and

sectors and thus the risk is reduced. Diversification reduces the risk because all
stocks may not move in the same direction in the same proportion at the same time.
Mutual fund issues units to the investors in accordance with quantum of money
invested by them. Investors of mutual funds are known as unit holders.

2
When an investor subscribes for the units of a mutual fund, he becomes part
owner of the assets of the fund in the same proportion as his contribution
amount put up with the corpus (the total amount of the fund). Mutual Fund
investor is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market
instruments (such as shares, debentures etc) is reflected in the Net Asset
Value (NAV) of the scheme. NAV is defined as the market value of the
Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is
calculated by dividing the market value of scheme's assets by the total
number of units issued to the investors.

3
 ADVANTAGES OF MUTUAL FUND

• Portfolio Diversification
• Professional management
• Reduction / Diversification of Risk
• Liquidity
• Flexibility & Convenience
• Reduction in Transaction cost
• Safety of regulated environment
• Choice of schemes
• Transparency

DISADVANTAGE OF MUTUAL FUND

• No control over Cost in the Hands of an Investor

• No tailor-made Portfolios
• Managing a Portfolio Funds
• Difficulty in selecting a Suitable Fund Scheme

4
About the Mutual Funds:

A Mutual Fund is a trust that pools the savings of a number of investors who share a
common financial goal. The money thus collected is then invested in capital
market instruments such as shares, debentures and other securities. The
income earned through these investments and the capital appreciations
realized are shared by its unit holders in proportion to the number of units
owned by them. Thus a Mutual Fund is the most suitable investment for the
common man as it offers an opportunity to invest in a diversified,
professionally managed basket of securities at a relatively low cost.
The flow chart below describes broadly the working of a Mutual Fund.

A Mutual Fund is a body corporate registered with the Securities and Exchange Board
of India (SEBI) that pools up the money from individual/corporate investors and invests
the same on behalf of the investors/unit holders, in Equity shares, Government

5
securities, Bonds, Call Money Markets etc, and distributes the profits. In the other
words, a Mutual Fund allows investors to indirectly take a position in a basket of assets.

Mutual Fund is a mechanism for pooling the resources by issuing units to the investors
and investing funds in securities in accordance with objectives as disclosed in offer
document. Investments in securities are spread among a wide cross-section of industries
and sectors thus the risk is reduced. Diversification reduces the risk because all stocks
may not move in the same direction in the same proportion at same time. Investors of
mutual funds are known as unit holders.

The investors in proportion to their investments share the profits or losses. The mutual
funds normally come out with a number of schemes with different investment
objectives which are launched from time to time. A Mutual Fund is required to be
registered with Securities Exchange Board of India (SEBI) which regulates securities
markets before it can collect funds from the public.

ORGANIZATION OF A MUTUAL FUND:

There are many entities involved and the diagram below illustrates the organizational
set up of a Mutual Fund:

STRUCTURE OF A MUTUAL FUND:

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 Sponsor

Trustee Mutual
s fund

ASSET
MANAGEMENT
COMPANY

Custodia Registra
n r

Mutual Funds diversify their risk by holding a portfolio of instead of only one asset.
This is because by holding all your money in just one asset, the entire fortunes of your
portfolio depend on this one asset. By creating a portfolio of a variety of assets, this risk
is substantially reduced.

Mutual Fund investments are not totally risk free. In fact, investing in Mutual Funds
contains the same risk as investing in the markets, the only difference being that due to
professional management of funds the controllable risks are substantially reduced. A
very important risk involved in Mutual Fund investments is the market risk. However,
the company specific risks are largely eliminated due to professional fund management.

IMPORTANT CHARACTERISTICS OF A MUTUAL FUND

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 • A Mutual Fund actually belongs to the investors who have pooled their
Funds. The ownership of the mutual fund is in the hands of the Investors.

• A Mutual Fund is managed by investment professional and other

Service providers, who earns a fee for their services, from the funds.

• The pool of Funds is invested in a portfolio of marketable investments.

• The value of the portfolio is updated every day.
• The investor’s share in the fund is denominated by “units”.
• The value of the units changes with change in the portfolio value, every day.
• The value of one unit of investment is called net asset value (NAV).
• The investment portfolio of the mutual fund is created according to The stated
Investment objectives of the Fund.

TYPES OF MUTUAL FUNDS:

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 1. OPEN-ENDED MUTUAL FUNDS:-
The holders of the shares in the Fund can resell them to the issuing Mutual Fund
company at the time. They receive in turn the net assets value (NAV) of the shares at
the time of re-sale. Such Mutual Fund Companies place their funds in the secondary
securities market. They do not participate in new issue market as do pension funds or
life insurance companies. Thus they influence market price of corporate securities.
Open-end investment companies can sell an unlimited number of Shares and thus keep
going larger. The open-end Mutual Fund Company Buys or sells their shares. These
companies sell new shares NAV plus a Loading or management fees and redeem shares
at NAV in other words, the target amount and the period both are indefinite in such
funds

2. CLOSED-ENDED MUTUAL FUNDS:-

A closed–end Fund is open for sale to investors for a specific period, after which
further sales are closed. Any further transaction for buying the units or repurchasing
them, Happen in the secondary markets, where closed end Funds are listed. Therefore
new investors buy from the existing investors, and existing investors can liquidate their
units by selling them to other willing buyers. In a closed end Funds, thus the pool of
Funds can technically be kept constant. The asset management company (AMC)
however, can buy out the units from the investors, in the secondary markets, thus
reducing the amount of funds held by outside investors. The price at which units can be
sold or redeemed Depends on the market prices, which are fundamentally linked to the
NAV. Investors in closed end Funds receive either certificates or Depository receipts,
for their holdings in a closed end mutual Fund.

ORGANIZATION AND MANAGEMENT OF MUTUAL FUNDS:-

9
In India Mutual Fund usually formed as trusts, three parties are generally involved viz.

• Settler of the trust or the sponsoring organization.

• The trust formed under the Indian trust act, 1982 or the trust company
registered under the Indian companies act, 1956
• Fund mangers or The merchant-banking unit
• Custodians.

MUTUAL FUNDS TRUST:-

Mutual fund trust is created by the sponsors under the Indian trust act, 1982

Which is the main body in the creation of Mutual Fund trust

The main functions of Mutual Fund trust are as follows:

♦ Planning and formulating Mutual Funds schemes.

♦ Seeking SEBI’s approval and authorization to these schemes.
♦ Marketing the schemes for public subscription.
♦ Seeking RBI approval in case NRI’s subscription to Mutual Fund is Invited
♦ Attending to trusteeship function. This function as per guidelines can be
assigned to separately established trust companies too. Trustees are required to
submit a consolidated report six monthly to SEBI to ensure that the guidelines
are fully being complied with trusted are also required to submit an annual
report to the investors in the fund.

♦ FUND MANAGERS (OR) THE ASSETS MANAGEMENT

COMPANY (AMC)
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AMC has to discharge mainly three functions as under:

I. Taking investment decisions and making investments of the funds through

market dealer/brokers in the secondary market securities or directly in the
primary capital market or money market instruments

II. Realize fund position by taking account of all receivables and realizations,
moving corporate actions involving declaration of dividends,etc to compensate
investors for their investments in units; and

III. Maintaining proper accounting and information for pricing the units and arriving
at net asset value (NAV), the information about the listed schemes and the
transactions of units in the secondary market. AMC has to feed back the trustees
about its fund management operations and has to maintain a perfect information
system.
CUSTODIANS OF MUTUAL FUNDS:-

Mutual funds run by the subsidiaries of the nationalized banks had their respective
sponsor banks as custodians like canara bank, SBI, PNB, etc. Foreign banks with
higher degree of automation in handling the securities have assumed the role of
custodians for mutual funds. With the establishment of stock Holding Corporation
of India the work of custodian for mutual funds is now being handled by it for
various mutual funds. Besides, industrial investment trust company acts as sub-
custodian for stock Holding Corporation of India for domestic schemes of UTI,
BOI MF, LIC MF, etc

Fee structure:-

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 Custodian charges range between 0.15% to 0.20% on the net value of the
customer’s holding for custodian services space is one important factor which has
fixed cost element.

RESPONSIBILITY OF CUSTODIANS:-

♦ Receipt and delivery of securities

♦ Holding of securities.
♦ Collecting income
♦ Holding and processing cost
♦ Corporate actions etc
RATE OF RETURN ON MUTUAL FUNDS:-

An investor in mutual fund earns return from two sources:

♦ Income from dividend paid by the mutual fund.

♦ Capital gains arising out of selling the units at a price higher than the
acquisition price
♦ CATEGORIES OF MUTUAL FUND:

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13
INVESTMENT STRATEGIES

1. Systematic Investment Plan: under this a fixed sum is invested each

month on a fixed date of a month. Payment is made through post dated
cheques or direct debit facilities. The investor gets fewer units when the
NAV is high and more units when the NAV is low. This is called as the
benefit of Rupee Cost Averaging (RCA)

2. Systematic Transfer Plan: under this an investor invest in debt

oriented fund and give instructions to transfer a fixed sum, at a fixed
interval, to an equity scheme of the same mutual fund.

3. Systematic Withdrawal Plan: if someone wishes to withdraw from a

mutual fund then he can withdraw a fixed amount each month.

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RISK V/S. RETURN:

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AUM of mutual fund in May 2009:

AUM
MUTUAL FUND NAME
May 2009 (RS CR)
AIG Global Investment Mutual Fund 1520.78
Baroda Pioneer Mutual Fund 3483.36
Benchmark Mutual Fund 1042.40
Bharti AXA Mutual Fund 272.06
Birla Sun Life Mutual Fund 56586.02
Canara Robeco Mutual Fund 8051.48
DBS Chola Mutual Fund 2159.21
Deutsche Mutual Fund 12780.49
DSP BlackRock Mutual Fund 17096.64
Edelweiss Mutual Fund 20.63
Escorts Mutual Fund 193.32
Fidelity Mutual Fund 8601.35
Fortis Mutual Fund 7380.91
Franklin Templeton Mutual Fund 23617.96
HDFC Mutual Fund 75406.10
HSBC Mutual Fund 9813.45
ICICI Prudential Mutual Fund 65549.86
IDFC Mutual Fund 20139.13
ING Mutual Fund 2422.31
JM Financial Mutual Fund 7012.33
JPMorgan Mutual Fund 3955.88
Kotak Mahindra Mutual Fund 28337.83
LIC Mutual Fund 28598.76
Mirae Asset Mutual Fund 216.23
Morgan Stanley Mutual Fund 1845.65
PRINCIPAL Mutual Fund 8555.36
Quantum Mutual Fund 59.97
Reliance Mutual Fund 102730.16
Religare Mutual Fund 9289.57
Sahara Mutual Fund 196.30
SBI Mutual Fund 34441.20
Sundaram BNP Paribas Mutual Fund 12413.43
Tata Mutual Fund 21304.79

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Taurus Mutual Fund 597.43
UTI Mutual Fund 63437.87
Grand Total 639130.20

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18
JOINT VENTURE:

FORMATION OF COMPANY: HOUSING DEVELOPMENT FINANCE

CORPORATION: HDFC was started by Hasmukh Bhai Parekh in1977 with the
formation of Malhotra Committee. HDFC was incorporated 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. HDFC was promoted with an initial share capital
of Rs. 10 crores.

HDFC has since emerged as the largest residential mortgage finance institution in
the country. The corporation has had a series of share issues raising its capital to Rs. 119
crores. The net worth of the corporation as on March 31, 2000 stood at Rs. 2,096 crores.

HDFC operates through 75 locations throughout the country with its Corporate
Headquarters in Mumbai, India. HDFC also has an international office in Dubai, U.A.E.,
with service associates in Kuwait, Oman and Qatar.

HDFC’s main goals are: a) Develop close relationships with individual households.

b) Maintain its position as the premier housing finance institution in the country.

c) Transform ideas into viable and creative solutions.

d) Provide consistently high returns to shareholders.

e) To grow through diversification by leveraging off the existing client base.

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STANDARD LIFE:

The Standard Life Assurance Company ("Standard Life") was established in 1825 and the
first Standard Life Assurance Company Act was passed by Parliament in 1832. Standard
Life was reincorporated as a mutual assurance company in 1925.

Standard Life is Europe's largest mutual life assurance company. Standard Life,
which has been in the life insurance business for the past 182 years, is a modern company
surviving quite a few changes since selling its first policy in 1825. The company
expanded in the 19th century from its original Edinburgh premises, opening offices in
other towns and acquiring other similar businesses.

Standard Life currently has assets exceeding over £70 billion under its
management and has the distinction of being accorded "AAA" rating consequently for the
past six years by Standard & Poor.

STANDARD LIFE ASIA LIMITED/JOINT VENTURES:

The group’s Hong Kong subsidiary, Standard Life Asia Limited (“SL Asia”), was
incorporated in 1999 as a joint venture and became a wholly-owned subsidiary of
Standard Life in 2002. The group’s operations in Hong Kong were established to give the
group a presence in the Far East from which it could expand into China. The group’s
joint ventures in India with Housing Development Finance Corporation Limited
(“HDFC”) were incorporated in 2000 (in relation to the life assurance and pension’s joint
venture) and 2003 (in relation to the investment management joint venture). The group’s
joint venture in China with Tianjin Economic Development Area General Company
(“TEDA”) became operational in 2003.

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 PRODUCT SCOPE:

HDFC Standard Life offers a bouquet of insurance solutions to meet every need.
The company caters to both, individuals as well as to companies looking to provide
benefits to their employees.

For individuals, the company has a range of protection, investment, pension and
savings plans that assist and nurture dreams apart from providing protection. The
customers can choose from a range of products to suit their life-stage and needs.

For organizations they have a host of customized solutions that range from Group
Term Insurance, Gratuity, Leave Encashment and Superannuation Products. These
affordable plans apart from providing long term value to the employees help in enhancing
goodwill of the company.

The products of the company are categorized into various sections which are as
follows :

A. INDIVIDUAL PRODUCTS
B. GROUP PRODUCTS
C. RURAL PRODUCTS
D. SOCIAL PRODUCTS
E. TAX BENEFITS

For Individuals: HDFC Standard Life has a range of protection, investment,

pension and savings plans that assist and nurture dreams apart from providing protection.
Customer can choose from a range of products to suit his life-stage and needs.

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 For Organizations: HDFC Standard Life has a host of customized solutions that
range from Group Term Insurance, Gratuity, Leave Encashment and Superannuation
Products. These affordable plans apart from providing long term value to the employees
help in enhancing goodwill of the company.

Individual Products:

1. HDFC Children's Plan,

2. HDFC Endowment Assurance Plan,
3. HDFC Loan Cover Term Assurance Plan,
4. HDFC Money Back Plan,
5. HDFC Personal Pension Plan,
6. HDFC Single Premium Whole Of Life Plan,
7. HDFC Term Assurance Plan,
8. HDFC Unit Linked Endowment,
9. HDFC Unit Linked Endowment Plus,
10. HDFC Unit Linked Pension,
11. HDFC Unit Linked Pension Plus,
12. HDFC Unit Linked Young Star,
13. HDFC Unit Linked Young Star Plus
PRODUCTS & SERVICES

The right investment strategies won't just help plan for a more comfortable tomorrow --
they will help you get “Sar Utha ke Jiyo”. At HDFC SLIC, life insurance plans are
created keeping in mind the changing needs of family. Its life insurance plans are
designed to provide you with flexible options that meet both protection and savings
needs. It offers a full range of transparent, flexible and value for money products. HDFC
SLIC products are modern and contemporary unitized products that offer unique
customer benefits like flexibility to choose cover levels, indexation and partial
withdrawals. (Source: www.hdfcslic.com)

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PRODUCT PORTFOLIO:

HDFC offers products as per the life stages of the customers and their respective needs.

Your insurance need will change as your life does, from starting to work to enjoying your
golden years and all the stages in between. Each one of these stages may pose a different
insurance need/cover for you. In this section, we have drawn up the basic life stages and
help you analyze various insurance needs accordingly

OBJECTIVES OF THE STUDY:

23
 1. To find out the Performance of the Asset Management Company.

2. To know the investors Preferences for the portfolios.

3. To know why one has invested or not invested in HDFCsMutual fund

4. To know the various Insurance policies provided by HDFC Bank.

5. To know the features of the Insurance poloicies.

6. To know the benefits of the policies to the customers

Limitation:

 The study is based on secondary data available from monthly fact

sheets, websites and other books, as primary data was not accessible.
 Some people have not given response to my questionnaire.

 Possibility of error in data collection because many of investors may

have not given actual answers of my questionnaire.
 Sample size is limited to 80 visitors of HDFC Bank, Banjara hills
Branch Hyderabad, of these only 30 had invested in Mutual Funds and
remaing 50 invested in Insurance. The sample size may not adequately
represent the whole market.
 Some respondents were reluctant to divulge personal information
which can affect the validity of all responses.
 The research is confined to a certain part of Hydearbad.

Methodology:

24
 Primary data: Information collected through observation of bank operations.
Guides Company and faculty and questionnaire.

Secondary data: Bank reports and website, journals, magazines and Internet.

Techniques and tools: questionnaire, bar/pie charts, graphs

Analysis and interpretation: Averages, percentages, Analysis of variance.

25
 Chapter-2

Industrial profile

26
Industrial profile:

Definition of banking:

A bank is an institution that deals in money and its substitutes and provides other
financial services. Banks accept deposits and make loans or make an investment to derive
a profit from the difference in the interest rates paid and charged, respectively.

In India the banks are being segregated in different groups. Each group has their
own benefits and limitations in operating in India. Each has their own dedicated target
market. Few of them only work in rural sector while others in both rural as well as urban.
Many even are only catering in cities. Some are of Indian origin and some are foreign
players.

India’s economy has been one of the stars of global economics in recent years. It
has grown by more than 9% for three years running. The economy of India is as diverse
as it is large, with a number of major sectors including manufacturing industries,
agriculture, textiles and handicrafts, and services. Agriculture is a major component of
the Indian economy, as over 66% of the Indian population earns its livelihood from this
area. Banking sector is considered as a booming sector in Indian economy recently.
Banking is a vital system for developing economy for the nation.

However, Indian banking system and economy has been facing various challenges
and problems which have discussed in other parts of project.

HISTORY OF BANKING IN INDIA:

27
 Thout a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should
beable to meet new challenges posed by the technology and any other external and
internal factors.For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system
has reached even to the remote corners of the country. This is one of the main reasons of
India's growth process. The government's regular policy for Indian bank since 1969 has
paid rich dividends with the nationalization of 14 major private banks of India. Not long
ago, an account holder had to wait for hours at the bank counters for getting a draft or for
withdrawing his own money. Today, he has a choice. Gone are days when the most
efficient bank transferred money from one branch to other in two days.
SThe first bank in India, though conservative, was established in 1786.
From 1786 till today, the journey of Indian Banking System can be segregated into three
distinct phases.
They are as mentioned below:
• Early phase from 1786 to 1969 of Indian Banks
• Nationalization of Indian Banks and up to 1991 prior to Indian banking
Sector Reforms.

• New phase of Indian Banking System with the advent of Indian

Financial&Banking Sector Reforms after 1991.

• To make this write-up more explanatory, I prefix the scenario as Phase I,

Phase II and Phase III.

Phase I

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 The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and
ImperialBank of India was established which started as private shareholders banks,
mostlyEuropeans shareholders.In 1865 Allahabad Bank was established and first time
exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters
at Lahore. Between1906 and 1913, Bank of India, Central Bank of India, Bank of
Baroda, Canara Bank,Indian Bank, and Bank of Mysore were set up. Reserve Bank of
India came in 1935.During the first phase the growth was very slow and banks also
experienced periodicfailures between 1913 and 1948. There were approximately 1100
banks, mostly small. To streamline the functioning and activities of commercial banks,
the Government of India came up with The Banking Companies Act, 1949 which was
later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23
of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of banking in India as the
Central Banking Authority. During that day’s public has lesser confidence in the banks.
As an aftermath deposit mobilization been slow. Abreast of it the savings bank facility
provided by the Postal department was comparatively safer. Moreover, funds were
largely given to traders.

Phase II

29
 Government took major steps in this Indian Banking Sector Reform after
Independence. In 1955, it nationalized Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of
India to act as the principal agent of RBI and to handle banking transactions of the Union
and State Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960
On 19th July, 1969, major process of nationalization was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the
country were nationalized.Second phase of nationalization Indian Banking Sector Reform
was carried out in1980 with seven more banks. This step brought 80% of the banking
segment in India under Government ownership. The following are the steps taken by the
Government of India to Regulate Banking Institutions in the Country:
• 1949 : Enactment of Banking Regulation Act.
• 1955 : Nationalization of State Bank of India.
• 1959 : Nationalization of SBI subsidiaries.
• 1961 : Insurance cover extended to deposits.
• 1969 : Nationalization of 14 major banks.
• 1971 : Creation of credit guarantee corporation.
• 1975 : Creation of regional rural banks.
• 1980 : Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector bank India
raised to approximately 800% in deposits and advances took a huge jump by
11,000%.Banking in the sunshine of Government ownership gave the public implicit
faith and immense confidence about the sustainability of these institutions.

Phase III
30
 This phase has introduced many more products and facilities in the banking sector
in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee
was set up by his name which worked for the liberalization of banking practices.The
country is flooded with foreign banks and their ATM stations. Efforts are being put to
give a satisfactory service to customers. Phone banking and net banking is introduced.
The entire system became more convenient and swift. Time is given more importance
than money. The financial system of India has shown a great deal of resilience. It is
sheltered from any crisis triggered by any external macroeconomics shock as other East
Asian Countries suffered. This is all due to a flexible exchange rate regime,the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.

31
BANKING SERVICES IN INDIA:-
With years, banks are also adding services to their customers. The Indian banking
industry is passing through a phase of customers market. The customers have more
choices in choosing their banks. A competition has been established within the banks
operating in India.With stiff competition and advancement of technology, the service
provided by banks has become more easy and convenient. The past days are witness to an
hour wait before withdrawing cash from accounts or a cheque from north of the country
being cleared in one month in the south.

32
This section of banking deals with the latest discovery in the banking instruments along
with the polished version of their old systems.
_-: SPECIALIZED BANKS:-
There are specialized forms of banks catering to some special needs with this unique
nature of activities. There are thus,
1. Foreign exchange banks,
2. Industrial banks,
3. Development banks,
4. Land development banks,
5. Exim bank.
-: CENTRAL BANK:-
A central bank is the apex financial institution in the banking and financial system
of a country. It is regarded as the highest monetary authority in the country. It acts as the
leader of the money market. It supervises, control and regulates the activities of the
commercial banks. It is a service oriented financial institution.
India’s central bank is the reserve bank of India established in 1935.a central
Bank is usually state owned but it may also be a private organization. For instance, the
reserve bank of India (RBI), was started as a shareholders’ organization in 1935,however,
it was nationalized after independence, in 1949.it is free from parliamentary control.

INNOVATION IN BANK:
Innovation drives organizations to grow, prosper and transform in sync
with the changes in the environment, both internal and external. Banking is no exception
to this. In fact, this sector has witnessed radical transformation of late, based on many
innovations in products, processes, services, systems, business models, technology,
governance and regulation. A liberalized and globalize financial infrastructure has
provided an additional impetus to this gigantic effort. The pervasive influence of in
formation technology has revolutionaries banking. Transaction costs have crumbled and

33
handling of astronomical number of transactions in no time has become a reality.
Internationally, the number brick and mortar structure has been rapidly yielding ground
to click and order electronic banking with a plethora of new products. Banking has
become boundary less and virtual with a 24 * 7 model. Banks who strongly rely on the
merits of relationship banking’ as a time tested way of targeting and serving clients, have
readily embraced Customer Relationship Management (CRM), with sharp focus on
customer centricity, facilitated by the availability of superior technology. CRM has,
therefore, become the new mantra in customer service management, which is both
relationship based and information intensive.

Risk management is no longer a mere regulatory issue.basel-2 has accorded a primacy of

place to this fascinating exercise by repositioning it as the core of banking. We now see
the evolution of many novel deferral products like credit derivatives, especially the Credit
Risk Transfer (CRT) mechanism, as a consequence. CRT, characterized by significant
product innovation, is a very useful credit risk management tool that enhances liquidity
and market efficiency. Securitization is yet another example in this regard, whose
strategic use has been rapidly rising globally. So is outsourcing.

34
 Chapter-3
COMPANY PROFILE

COMPANY PROFILE:
REASON FOR SELECTION OF THIS TOPIC:
The financial sector is one of the booming and increasing sectors in India. The
Sales Executives are one of the most powerful, efficient and effective channel through
which the company sales it’s various types of financial products. It is really difficult to
convince customers and sell a single product but since these executives have their own
personal contacts which make the entire task easier to sell product. Whereas in my entire
project work I found my interest in working in a team, dealing with customers and finally
convincing them to open an account with the bank.

35
IMPORTANCE TO THE COMPANY:
The ultimate purpose of giving me this topic was to know about the customer’s
perceptions about the different products of the bank, how these products can attract them
and how the company can generate maximum profit by convincing them through sales
executives.
FORMATION OF THE COMPANY:
The Housing Development Finance Corporation Limited (HDFC) was amongst
the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set
up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations
as a Scheduled Commercial Bank in January 1995.

PROMOTER
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain
the market leader in mortgages. Its outstanding loan portfolio covers well over a million
dwelling units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, a strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.
36
BUSINESS FOCUS:
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.

CAPITAL STRUCTURE:
The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion). The paid-up
capital is Rs424.6 crore (Rs.4.2 billion). The HDFC Group holds 19.4% of the bank's
equity and about 17.6% of the equity is held by the ADS Depository (in respect of the
bank's American Depository Shares (ADS) Issue). Roughly 28% of the equity is held by
Foreign Institutional Investors (FIIs) and the bank has about 570,000 shareholders. The
shares are listed on the Stock Exchange, Mumbai and the National Stock Exchange. The
bank's American Depository Shares are listed on the New York Stock Exchange (NYSE)
under the symbol 'HDB'.
DISTRIBUTION NETWORK

37
 HDFC Bank is headquartered in Mumbai. The Bank at present has an
enviable network of over 1229 branches spread over 444 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.
The Bank also has a network of about over 2526 networked ATMs
across these cities. Moreover, HDFC Bank's ATM network can be accessed by all
domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and
American Express Credit/Charge cardholders.

MANAGEMENT
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this,
Mr. Capoor was a Deputy Governor of the Reserve Bank of India. The Managing
Director, Mr. Aditya Puri, has been a professional banker for over 25 years and before
joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia. The Bank's
Board of Directors is composed of eminent individuals with a wealth of experience in
public policy, administration, industry and commercial banking. Senior executives
representing HDFC are also on the Board.Senior banking professionals with substantial
experience in India and abroad head various businesses and functions and report to the
Managing Director. Given the professional expertise of the management team and the

38
overall focus on recruiting and retaining the best talent in the industry, the bank believes
that its people are a significant competitive strength.

TECHNOLOGY:
HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems. All the bank's branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the branch
network and Automated Teller Machines(ATMs).The Bank has made substantial efforts
and investments in acquiring the best technology available internationally, to build the
infrastructure for a world class bank. The Bank's business is supported by scalable and
robust systems which ensure that our clients always get the finest services we offer. The
Bank has prioritized its engagement in technology and the internet as one of its key goals
and has already made significant progress in web-enabling its core businesses. In each of
its businesses, the Bank has succeeded in leveraging its market position, expertise and
technology to create a competitive advantage and build market share.

BUSINESS FOCUS:
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.
RATING:

39
 I. Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis
& Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed
Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which
represents instruments considered to be "of the best quality, carrying negligible
investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme
"PR 1+" which represents "superior capacity for repayment of short term promissory
obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned
the "tAAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating
as "stable". This rating indicates "highest credit quality" where "protection factors are
very high". The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated
by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and
Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of
"CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has
assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has
also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II
bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual
Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the
ratings awarded were the highest assigned by the rating agency for those instruments.

II. Corporate Governance Rating:

The bank was one of the first four companies, which subjected itself to a
Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit
Rating Information Services of India Limited (CRISIL). The rating provides an
independent assessment of an entity's current performance and an expectation on its
"balanced value creation and corporate governance practices" in future. The bank has
been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability
with respect to wealth creation for all its stakeholders while adopting sound corporate
governance practices is the highest.
40
PRODUCT SCOPE:
HDFC Bank offers a bunch of products and services to meet the every need of the
people. The company cares for both, individuals as well as corporate and small and
medium enterprises. For individuals, the company has a range accounts, investment, and
pension scheme, different types of loans and cards that assist the customers. The
customers can choose the suitable one from a range of products which will suit their life-
stage and needs. For organizations the company has a host of customized solutions that
range from funded services, Non-funded services, Value addition services, Mutual fund
etc. These affordable plans apart from providing long term value to the employees help in
enhancing goodwill of the company. The products of the company are categorized into
various sections which are as follows:
· Accounts and deposits.
· Loans.
· Investments and Insurance.
· Forex and payment services.
· Cards.
PRODUCTS AND SERVICES AT A GLANCE
1. PERSONAL BANKING
A. Accounts & Deposits - Premium Salary Account
- Regular Savings Account - Defence Salary Account
- Savings plus Account - Kid's Advantage Account
- SavingsMax Account - Pension Saving Bank Account
- Senior Citizens Account - Family Savings Account
- No Frills Account - Kisan No Frills Savings Account
- Institutional Savings Account - Kisan Club Savings Account
- Payroll Salary Account - Plus Current Account
- Classic Salary Account - Trade Current Account
- Regular Salary Account - Premium Current Account

41
- Regular Current Account - Bonds
- Apex Current Account - Financial Planning
- Max Current Account - Knowledge Centre
Reimbursement Current Account - Equities & Derivatives
- RFC - Domestic Account - Mudra Gold Bar
- Regular Fixed Deposit D. Forex Services
- Super Saver Account - Trade Finance
- Sweep-in Account - Travelers’ Cheques
- HDFC Bank Preferred - Foreign Currency Cash
- Private Banking - Foreign Currency Drafts
B. Loans - Foreign Currency Cheque
- Personal Loans Deposits
- Home Loans - Foreign Currency Remittances
- Two Wheeler Loans - Cash To Master
- New Car Loans - ForexPlus Card
- Used Car Loans E. Payment Services
- Overdraft against Car - Net Safe
- Express Loans - Prepaid Refill
- Loan against Securities - Bill Pay
- Loan against Property - Direct Pay
- Commercial Vehicle Finance - Visa Money Transfer
- Working Capital Finance
- Construction Equipment Finance - E-Monies Electronic Funds
- Offers & Deals Transfer
- Customer Center - Excise & Service Tax Payment
F. Access Your Bank
C. Investments & Insurance - One View
- Mutual Funds - Insta Alerts
- Insurance - Mobile Banking
42
 - ATM
- Phone Banking
- Branch Network
G. Cards
- Silver Credit Card
- Gold Credit Card
- Woman's Gold Credit Card
- Platinum plus Credit Card
- Titanium Credit Card
- Value plus Credit Card
- Health plus Credit Card
- HDFC Bank Idea Silver Card
- HDFC Bank Idea Gold Card
- Compare Cards
- Transfer & Safe
- Track your Credit Card
H. Get More from Your Card
- Offers & Savings
- My Rewards
- Insta Wonders
- Add-On Cards
- Credit Card Usage Guide
- Easy EMI
- Net safe
- Smart Pay
- Secure Plus
- My City Benefit Card
HDFC BANK ACHIEVEMENTS:
- Debit Cards
- Easy Shop International Debit
Card
- Easy Shop Gold Debit Card
- Easy Shop International
Business Debit Card
- Easy Shop Woman’s Advantage
Debit Card
- Prepaid Cards
- Forex Plus Card
- Kisan Card
2. Wholesale Banking
A. Corporate
Funded Services
Non Funded Services
Value Added Services
Internet Banking
B. Small & Medium Enterprises
Funded Services
Non-Funded Services
Specialized Services
Internet Banking
C. Financial Institutions & Trusts
Banks
Financial Institutions
Mutual Funds
Stock Brokers
43
 2009
1) IBA Banking Best IT Governance Award - Runner up'
Technology Awards
2009
2) Global Finance
Award 'Best Trade Finance Bank in India for 2009
3) IDRBT Banking
Technology Excellence 'Best IT Governance and Value Delivery'
Award
2008
1) Asian Banker
Excellence in 'Asian Banker Best Retail Bank in India Award 2009 '
RetailFinancialServices

2) Finance Asia
Country Awards for 'Best Bank and Best Cash Management Bank'
Achievement
3) CNN-IBN 'Indian of the Year (Business)'
4)Nasscom IT User 'Best IT Adoption in the Banking Sector'
Award 2008
5) Business India 'Best Bank 2008'
6) Forbes Asia Fab 50 companies in Asia Pacific
7)Asian Banker Best Retail Bank 2008
Excellence in Retail
Financial Services
8)Asia money Best local Cash Management Bank Award voted by
Corporate

44
Microsoft& Indian Security Strategist Award 2008
Express Group
9) World Trade Center For outstanding contribution to international trade services.
Award of honour
10) Business Today- One of India's "Most Innovative Companies"
Monitor

11) Group survey

Financial Express-Ernst Best Bank Award in the Private Sector category
& Young Award
12)Global HR 'Employer Brand of the Year 2007 -2008'Award -First Rune
Excellence Awards - rup,& many more
Asia Pacific HRM
Congress:
13) Business Today 'Best Bank' Award

2007
Business Today-Monitor Group survey
Financial Express-Ernst & Young Award
Global HR Excellence Awards - Asia
Pacific HRM Congress:
One of India's "Most Innovative
Companies".
Best Bank Award in the Private Sector
Category.
‘Employer Brand of the Year 2007-
2008’-Award- First Runner-up.

Business Today ‘Best Bank Award’.

Dun & Bradstreet – American Express ‘Corporate Best Bank’-Award.

45
Corporate Best Bank Award 2007
The Bombay Stock Exchange and Nasscom ‘Best Corporate Social Responsibility
Foundation's Business for Social Practice’ Award.
Responsibility Awards 2007

Outlook Money & NDTV Profit Best Bank Award in the Private sector
Category.
The Asian Banker Excellence in Retail Best Retail Bank in India.
Financial Services Awards

Asian Banker Managing Director Aditya Puri won the

Leadership achievement Award for
India.

2006
Business Today Best Bank in India.

Forbes Magazine One of Asia Pacific's Best 50 companies.

The Asset Magazine's Triple A Country Best Domestic Bank.
Awards
Asiamosssney Awards Best Local Cash Management Bank in
Large and Medium segments.
Euromoney Awards "Best Bank" in India.

46
MERGER
HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of 1:29
The Boards of HDFC Bank and Centurion Bank of Punjab met on 25 February, 2008 and
approved, subject to due diligence, the share swap ratio for the proposed merger of
Centurion Bank of Punjab with HDFC Bank. The Scheme of Amalgamation envisages a
share exchange ratio of one share of HDFC Bank for twenty nine shares of Centurion
Bank of Punjab. The combined entity would have a nationwide network of 1,148
branches (the largest amongst private sector Banks) a strong deposit base of around Rs.
1,200 billion and net advances of around Rs. 850billion. The balance sheet size of the
combined entity would be over Rs. 1,500billion. Commenting on the proposed merger,
Mr. Deepak Parekh, Chairman, HDFC said, “We were amongst the first to get a
banking license, the first to do a merger in the private sector with Times Bank in 1999,
and now if this deal happens, it would be the largest merger in the private sector banking
space in India. HDFC Bank was looking for an appropriate merger opportunity that
would add scale, geography and experienced staff to its franchise. This opportunity arose
and we thought it is an attractive route to supplement HDFC Bank’s organic growth. We
believe that
Centurion Bank of Punjab would be the right fit in terms of culture, strategic intent and
approach to business.”
Mr. Aditya Puri, Managing Director, HDFC Bank said, “These are exciting times for
the Indian banking industry. The proposed merger will position the combined entity to
significantly exploit opportunities in a market globally recognized as one of the fastest
growing. I’m particularly bullish about the potential of business synergies and cultural fit
between the two organizations. The combined entity will be an even greater force in the
market.”

47
Mr. RanaTalwar, Chairman, Centurion Bank of Punjab stated, “Over the last few
years, Centurion Bank of Punjab has set benchmarks for growth. The bank today has a
large nationwide network, an extremely valuable franchise, 7,500 talented employees,
and strong leadership positions in the market place. I believe that the merger with HDFC
Bank will create a worldclass bank in quality and scale and will set the stage to compete
with banks both locally as well on a global level.”
ABOUT HDFC BRANCH:

Organizational structure of HDFC bank Banjara hills

Branch manager

Personal
Personalbanker
bankerauthorizer
authorizer Personalbanker
Personal bankerauthorizer
authorizer

RelationshipManager
Relationship Manager RelationshipManager
Relationship Manager Relationship Manager
Relationship Manager

Personalbanker
Personal banker Personal
Personal banker
banker Personal banker
personal banke Personal banker

This branch was opened on 14th june in the year 2001.Total employees are 19 and
yearly turnover is above 500crores. All kinds of HDFC products are having good
performance,but only draw back is there is no locker facility.

48
 Chapter-4
Theoretical background

Based on their investment objective:

49
 Equity funds: These funds invest in equities and equity related
instruments. With fluctuating share prices, such funds show volatile
performance, even losses. However, short term fluctuations in the market,
generally smoothens out in the long term, thereby offering higher returns at
relatively lower volatility. At the same time, such funds can yield great
capital appreciation as, historically, equities have outperformed all asset
classes in the long term. Hence, investment in equity funds should be
considered for a period of at least 3-5 years. It can be further classified as:

i) Index funds- In this case a key stock market index, like BSE Sensex or
Nifty is tracked. Their portfolio mirrors the benchmark index both in
terms of composition and individual stock weightages.

ii) Equity diversified funds- 100% of the capital is invested in equities

spreading across different sectors and stocks.

iii|) Dividend yield funds- it is similar to the equity diversified funds

except that they invest in companies offering high dividend yields.

iv) Sector funds- Invest 100% of the capital in a specific sector. e.g. - A
banking sector fund will invest in banking stocks.

v) ELSS- Equity Linked Saving Scheme provides tax benefit to the

investors.

Balanced fund: Their investment portfolio includes both debt and equity. As a
result, on the risk-return ladder, they fall between equity and debt funds. Balanced
funds are the ideal mutual funds vehicle for investors who prefer spreading their
risk across various instruments. Following are balanced funds classes:

i) Debt-oriented funds -Investment below 65% in equities.

50
 ii) Equity-oriented funds -Invest at least 65% in equities, remaining in
debt.

Debt fund: They invest only in debt instruments, and are a good option for
investors averse to idea of taking risk associated with equities. Therefore,
they invest exclusively in fixed-income instruments like bonds, debentures,
Government of India securities; and money market instruments such as
certificates of deposit (CD), commercial paper (CP) and call money. Put your
money into any of these debt funds depending on your investment horizon
and needs.

i) Liquid funds- These funds invest 100% in money market instruments, a

large portion being invested in call money market.

ii) Gilt funds ST- They invest 100% of their portfolio in government
securities of and T-bills.

iii) Floating rate funds - Invest in short-term debt papers. Floaters invest
in debt instruments which have variable coupon rate.

iv) Arbitrage fund- They generate income through arbitrage

opportunities due to mis-pricing between cash market and derivatives
market. Funds are allocated to equities, derivatives and money markets.
Higher proportion (around 75%) is put in money markets, in the absence of
arbitrage opportunities.

v) Gilt funds LT- They invest 100% of their portfolio in long-term

government securities.

51
vi) Income funds LT- Typically, such funds invest a major portion of the
portfolio in long-term debt papers.

vii) MIPs- Monthly Income Plans have an exposure of 70%-90% to debt

and an exposure of 10%-30% to equities.

viii) FMPs- fixed monthly plans invest in debt papers whose maturity is in
line with that of the fund.

52
 Chapter-5
Analysis &Interpretation

Various types of Investments

53
 TableNo.1

No. of Respondents and their various types of investments

Investments No. of Investors Percent to total

Insurance 05 16.66
Fixed deposits 03 10
Mutual funds 22 73.34
Total 30 100

Chart No.1

No. of Respondents and their various types of investments

Intrepretation: From the above chart we know the no.of respondents and their various
types of investments. Around 57 percent of the respondents are interested to invest on
mutual funds. Because, it gives good returns to the investors compare to other
investments and the risk is also low compare to investing on securities directly.

Various types of companies for investments

54
 Table No. 2

No. of Respondents and their preferences for investing on various companies

Types of companies No. of respondents Percentage To Total

Large cap 19 63.34
Mid cap 06 20
Small cap 05 16.66
Total 30 100

Chart No. 2

No. of Respondents and their preferences for investing on various companies

No. of respondents

Interpretation: Chart No. 2 disclosing the No. of respondents and their preferences for
investing on various types of companies. Out of 30 respondents 63.34 percent of the
respondents are interested to invest on Mid Cap companies. Only 16.66 percent of the
respondents are interested to invest on Small Cap companies. Thus, Majority of the
respondents are interested to invest on Large Cap companies to earn more returns on their
investments.

Various types of mutual funds

Table No. 3

No. of Respondents interested to invest on various types of mutual funds

55
Schemes No. of respondents Percentage to total
Open ended 23 76.64
Close ended 07 23.33
Total 30 100

Chart No. 3

No. of Respondents interested to invest on various types of mutual funds

Interpretations: It is showing that the various types of mutual funds and the no. of
respondents interest to invest on these mutual funds. Around 77 percent of the
respondents are interested to go for open ended. Because, here they will get more
number of units for their investment compare to close ended.

Various types of Funds

Mutual Funds are invested in various types of funds like Equity funds, Debt funds
and Liquidity funds. The below table will shows the perception of the respondents on the
investment of their savings on various funds.

56
 Table No. 4

No. of Respondents and their preferences for investments on various types of Funds

Types of funds No. of respondents Percentage to total

Equity funds 20 66.66
Debt funds 05 16.67
Liquid funds 05 16.67
Total 30 100

Chart No 4

No. of Respondents and their preferences for investments on various types of Funds

Interpretations: There are three types of funds in the mutual funds investments. In the
above chart out of 30 respondents 20 respondents are interested to invest on equity funds.
Thus, compare to other funds the risk and returns are more in the equity funds.

Time Horizon

In the investment of mutual funds there are three types of time horizons are
there. They are short term, mid term and long term investment time horizons.
Table No. 5
57
No. of Respondents and their preferred time horizon for their investment

Time horizon No. of respondents Percentage to total

Short term 10 33.34
Mid term 06 20
Long term 14 46.66
Total 30 100

Chart No. 5

No. of Respondents and their preferred time horizon for their investment

Interpretations: The above table presenting the respondents preference investment time
horizon. Here, 46.66 percent of the respondents are interested to invest on long term
period. The others are interested to earn returns as early as possible.

Reason for investing in HDFCMF

Table No. 6

No. of Respondents and their reasons for investing in HDFCMF

Reason No. of respondents Percentage to total
Associated with HDFC 08 26.67
Better returns 17 56.67
Agent advice 05 16.66

58
Total 30 100

Chart No 6

No. of Respondents and their reasons for investing in HDFCMF

Interpretations: From the above chart we can understand majority of the respondents are
interested to invest in the HDFCMF to get better returns. As per the respondent’s view
this mutual fund is giving goods returns compare to others.

Perception of the respondents on HDFCMF

Table No. 7

No. of Respondents and their perception on HDFCMF

Customer perception No. of respondents Percentage to total

Good 15 53.34
Unexpected 05 16.66
Reliable returns 10 30
Total 30 100
59
 Chart No. 7

No. of Respondents and their perception on HDFCMF

Interpretations: In this chart we can see the perception of the respondents about the
HDFCMF. Out of 30 respondents 15 are got good returns through this Mutual funds.
Only 5 persons has got Unexpected returns from this fund.

Types of Plans in Mutual Fund

In the mutual funds there are three types of mutual funds are there. They are
Systematic investment plan, Systematic transfer plan and Systematic Withdrawal
plan.

Table No. 8

No. of Respondents and their preferences on various types of investment plans

Types of plans No. of respondents Percentage to total
SIP 23 76.66
60
STP 05 16.68
SWP 02 6.66
Total 30 100
Chart No 8

No. of Respondents and their preferences on various types of investment plans

Interpretations: According to the above graph, out of 30 respondents 76.66 percent of

the investors preferring On Systematic Investment Plans(SIP), 16.68 percent investors
are preferring Systematic Transfer plans (STP) and the balance are preferring SWP.
Thus, in the SIP a set amount will electronically transferred from one account to another
at a specified frequency.

Types of Risk

Table No. 9

No. of Respondents and their preferred Risk

Types of Risk No. of respondents Percentage to total

High risk 17 56.66
Low risk 05 16.66
Secured risk 07 26.68
Total 30 100
61
 Chart No 9

No. of Respondents and their preferred Risk

Interpretation: The above chart is showing the respondents perception on risk. Here,
majority of the respondents are interested to take risk because to get more returns.

Types of Equity funds

There are basically four types of equity funds like Index fund, sector fund, ELSS funds
and other funds. Index fund means S&P 500 companies i.e. standard and Poor’s 500 companies.
Sector funds are those mutual funds that restrict their investments to a particular segment
or sector of the economy. ELSS funds are equity linked savings schemes.

Table No. 10

No. of Respondents on various types of equity funds

62
Type of equity funds No. of respondents Percentage to total
Index fund 04 13.33
Sector fund 18 60
ELSS funds 05 16.66
Others 03 10.01
Total 30 100

Chart No.10

No. of Respondents on various types of equity funds

Interpretation: From the above graph of equity funds, out of 30 respondents 13.33
percent investors choose index fund,60 percent of the investors choose sectorfunds,16.66
percent of the respondents choose ELLS funds and 10.1% choose other funds.

Insurance Sector

Age wise insurance Investors

Table-11

Age wise No. of respondents invested in Insurance

Age group No. of respondents Percentage to total

25-35 30 60
35-45 15 30
Above45 05 10
Total 50 100
63
 Chart No 11

Age wise No. of respondents invested in Insurance

Interpretation: From the above graph, out of 50 respondents 60 percent of investors are
from 25-35 age groups ,30 percent of the investors are 35-45 and 10 percent investors
are above 45age group. Thus, nowadays people are not having security for their life
because of that they are very much interested to invest in the insurance sector.

Occupation wise Insurance investors

Table-12

No. of Respondents and their Occupation

Occupation No. of respondents Percentage to total

Govt 10 20
IT 15 30
Business 20 40
Other 05 10
Total 50 100

64
 Chart No 12

No. of Respondents and their Occupation

Interpretation: According to the above graph , out of 50 respondents 20 percent of the

investors are Govt employees,30 percent of the investors are IT employees, 40percent
of the investors are business peoples and 10 percent of the investors are others. Thus,
the uncertainty in the business and the life of the business people they are interested to
invest in the insurance policies.

Types of Insurance
Table:13

No. of Respondents in different Types of insurance

Types of insurance No. of respondents Percentage to total

Life Insurance 40 80
General insurance 10 20
Total 50 100

Chart No 13
65
 No. of Respondents in different Types of insurance

Interpretation: From the selected sample size 80 percent of the people are interested to invest
on life insurance policies. Only 20 percent of the people are interested to General insurance. In
the fast moving world there is no guarantee for the life of the human beings. So, to avoid the risk
or to manage the risk people are selecting mostly life insurance.

Different types of insurance policies

Table No.14

No. of Respondents in different types policies

Type of policies No.of respondents Percentage to total

young star 20 40
Pension 15 30
Endowment policy 10 20
Other 05 10
Total 50 100

66
 Chart No 14

No. of Respondents in different types policies

Interpretation: In the selected respondents 40 percent are invested in the young star
plan. 30 percent of the respondents are invested in the pension plans. Thus, the people are
taking more care for their present and future of their life by investing these two plans.

Benefits of the insurance sector

Table No. 15

No. of Respondents and their preferred Benefits

Benefits No. of respondents Percentage to total

Tax benefit 15 30
Youngster benefit 15 30
Life benefit 10 20
Pension benefit 10 20
Total 50 100

Chart No 15
67
Interpretation: Apart from the life security people interested to invest in the insurance
industry for tax benefits. The above chart is showing the majority of the people are
selected the tax benefit is the preferable reason for the investment in the insurance sector.

Time horizon
Table No.16

No. of Respondents and their preferred time horizon in investment on insurance

Time period No. of respondents Percentage to total

Short term 15 30
Mid term 05 10
Long term 30 60
Total 50 100

Chart No 16

No. of Respondents and their preferred time horizon in investment on insurance

68
Interpretation: In this survey maximum of the respondents i.e. 60 of them are
interested to invest in the insurance sector for the long time horizon.

Reason for investing in the insurance sector

Table: 17

No. of Respondents and their reasons for choosing investment on insurance

Reason No. of respondents Percentage to total

Secured life 30 60
Less risk 10 20
More returns 10 20
Total 50 100

Chart No 17

No. of Respondents and their reasons for choosing investment on insurance

69
Interpretation: From the graph out of 50 respondents 60 per cent of the investors
invested in secured life, 20 per cent of them invested in less risk and 20percent of the
investors invested in more returns. Thus, Majority of the people are taking insurance
policy for their security purpose.

Reason for investing in the HDFC standard life insurance

Table No. 18

No. of Respondents and their reasons for investing in HDFC Insurance

Reasons for investing in No. of respondents Percentage to total

HDFC
Association with HDFC 05 10%
Policy features 10 20%
Existing HDFC customer 05 10%
Good services 30 60%
Total 50 100%

Chart No 18

70
 No. of Respondents and their reasons for investing in HDFC Insurance

Interpretation: The above graph showing the reason for selecting the HDFC Standard
life insurance by the respondents. Majority of the respondents are selected because of the
good service of the company.

Perception on HDFC Standard Life insurance

Table No 19

No. of Respondents and their perception on HDFC standard life insurance

Customer perception No. of respondents Percentage to total

Excellent 40 80%
Aggressive 05 10%
Average 05 10%
Total 50 100%

Chart No 19

No. of Respondents and their perception on HDFC standard life insurance

71
Interpretation: From the above chart we can understand the people’s perception on the
HDFC Standard life insurance polices. Thus, 80 percent of the respondents are given
excellent on the performance of this life insurance.

AUM RS. IN CR AS ON MAY Percent

AMC NAME 2009 age
Reliance MF 1,02,730 16.11%
HDFC MF 75,406 11.82%
ICICI PMF 65,550 10.28%
UTI MF 63,438 9.94%
Birla sun life MF 56,586 8.87%
SBI MF 34,441 5.40%
LIC MF 28,599 4.48%
Kotak Mahindra
MF 28,338 4.44%
Franklin Templeton
MF 23,618 3.70%
Tata mutual fund 21,305 3.34%
IDFC MF 20,139 3.31%
Others 1,4 22.86%
72
 5,797
6,3
Total 7,609 100%

73
 This above graph represents top 11 Asset Management companies
AUM unto May 2009. In this Reliance AMC is having highest contribution
that is 1,02,730crores and 2nd highest is HDFC AMC contributing 75,406
crores and next comes ICICI AMC contributing 65,550 crores.

HDFC Growth fund:

74
 RM- RP-
Years RP RM RF RF(X) RF(Y) X² XY X-X(D) D²

Last
Year 1.99 62.96 4.25 58.71 -2.26 3446.86 -132.68 36.06 1300.32

Last 3rd
Year 18.23 7.53 4.25 3.28 13.98 10.75 45.43 -19.37 375.19

Last 5th
Year 29.52 16.55 4.25 12.3 25.27 151.29 310.82 -10.35 107.12

Since
inception 22.02 20.81 4.5 16.31 17.52 266.01 285.75 -6.34 40.19

∑x=90. ∑y=81.5 ∑x²=3874.

Total 6 1 9 509.32 0 1822.82

Where,

Rp - Portfolio Return- HDFC Growth fund

Rm - Market Return-Fund’s bench mark- BSE 200

RF - Risk free rate of return.

• CALCULATION OF ARTHMETIC MEAN:-

= Σ X/N

= 90.6/4

= 22.65

• CALCULATION OF STANDARD DEVIATION (σ ):-

= √ Σ (X-Xbar) 2 / N

= √Σ (x-x(bar)) 2 /2

= √1822.82

= 42.69/2=21.34

• CALCULATION OF BETA CO-EFFICIENT:-

75
 = N (Σ XY) – Σ XΣ Y

N (Σ X2) – (Σ X) 2

= ( 4×509.32) - (90.6×81.51)

(4×3,874.91) –(8,208.36)

= (2037.28) – (7,384.80)

15,499.64 – 8,20.36

= -5,347.8

7,291.28

β = -0.73

HDFC Equity fund:

76
 RM- RP-
Years RP RM RF RF(X) RF(Y) X² XY X-X(D) D²

Last
Year 16.38 74.45 4.25 70.2 12.13 3446.86 82.33 45.95 2,111.40

Last 3rd
Year 17.30 8.77 4.25 4.52 13.05 10.75 58.98 -19.73 382.27

Last 5th
Year 31.58 15.11 4.25 10.86 27.33 151.29 296.80 -13.39 179.29

Since
inception 21.82 15.95 4.5 11.45 17.32 266.01 198.31 -12.80 163.84

Total ∑x=97.03 ∑y=82.7 ∑x²=5,197.50 636.42 0.03 2,836.8

Where,

Rp - Portfolio Return-HDFC Equity fund

Rm - Market Return-Fund’s benchmark-BSE-200

Rf - Risk free rate of return.

• CALCULATION OF ARTHMETIC MEAN:-

=Σ X/N

= 97.03/4

= 24.25

• CALCULATION OF STANDARD DEVIATION (σ):-

σ = √ Σ (X-Xbar)2 / N

= √2,836.8/2

σ = 26.63

• CALCULATION OF BETA CO-EFFICIENT:-

= N (Σ XY) – Σ XΣ Y

N (Σ X2) – (Σ X) 2

77
 = (4×636.42) – (8,024.38)

(4×5,197.50) – (9,44.50)

= 2,545.68 – 8,024.38

20,790- 9,414.82

= -5,478.7

11,375.18

β = - 0.48

HDFC Top 200 fund:

RM- RP-
Years RP RM RF RF(X) RF(Y) X² XY X-X(D) D²

78
 Last
Year 19.56 74.45 4.25 63.80 12.13 3446.86 976.77 40.99 1680.18

Last 3rd
Year 21.28 8.77 4.25 3.55 13.05 10.75 60.45 -19.26 370.94

Last 5th
Year 32.89 15.05 4.25 10.80 27.33 151.29 309.31 -12.01 144.24

Since
inception 23.61 17.34 4.5 13.09 17.32 266.01 250.14 -9.72 94.47

Total ∑x=91.24 ∑y=80.09 ∑x²=4,371.02 1,596.67 0 2289.83

Where,

Rp - Portfolio Return- HDFC Top 200 fund:

Rm - Market Return-Fund’s benchmark-BSE-200

Rf - Risk free rate of return.

• CALCULATION OF ARTHMETIC MEAN:-

Xbar =Σ X/N

Xbar =Σ 91.24/4

= 22.81

• CALCULATION OF STANDARD DEVIATION (σ):-

σ = √ Σ (X-Xbar)2 / N

σ = √Σ 2289.83/2

=23.92

• CALCULATION OF BETA CO-EFFICIENT:-

= N (Σ XY) – Σ XΣ Y

N (Σ X2) – (Σ X) 2

79
 = (4×1596.67) – (7,307.41)

((4×4,371)- (8,324.73)

= 6,386.68-7,307.41

17,484.08-8,8324.73

= -920.73

9,159.35

β = -0.10

HDFC Capital Builder fund:

RM- RP-
Years RP RM RF RF(X) RF(Y) X² XY X-X(D) D²

80
 Last
Year 2.84 70.45 4.25 66.2 -1.41 4382.44 -93.34 43.2 1866.24

Last 3rd
Year 12.25 8.77 4.25 4.52 8 20.43 36.16 -18.48 341.51

Last 5th
Year 26.61 15.11 4.25 10.86 22.36 117.93 242.82 -12.14 147.37

Since
inception 13.4 14.42 4.5 10.42 8.91 108.57 92.84 -12.52 156.75

Total ∑x=92 ∑y=37.86 ∑x²=4629.37 278.48 -0.12 2511.87

Where,

Rp - Portfolio Return-HDFC Capital Builder fund

Rm - Market Return-Fund’s benchmark-BSE-200

RF - Risk free rate of return.

CALCULATION OF ARTHMETIC MEAN:-

Xbar =Σ X/N

Xbar =Σ 92/4

=23

CALCULATION OF STANDARD DEVIATION (σ):-

σ = √ Σ (X-Xbar)2 / N

σ = √Σ 2511.87/2

= 25.05

CALCULATION OF BETA CO-EFFICIENT:-

= N (Σ XY) – Σ XΣ Y

N (Σ X2) – (Σ X) 2

81
 = (4×278.48) – (3483.12)

((4×4629.37)- (92)²

= 1,113.92-3,483.12

17,484.08-8,464

= -2369.2

10,053.45

β = -.235

From the above four fund performance charts we can know about the volatile market
condition from the given period of analysis in the all four funds beta value is –(minus)
value. The reason for this voltaile market is Global Finance Crises in the year 2008. In
this time period most of the FIIs has withdraw their money from the Indian stock market.
Now again our market condition is again picking up in the positive because of the stable
government.

82
 Chapter – 6

Research design
&
Methodology

1. RESEARCH METHODOLOGY:

This report is based on primary as well secondary data, however primary

data collection was given more importance since it is overhearing factor in
83
 attitude studies. One of the most important users of research methodology is
that it helps in identifying the problem, collecting, analyzing the required
information data and providing an alternative solution to the problem .It
also helps in collecting the vital information that is required by the top
management to assist them for the better decision making both day to day
decision and critical ones.

Data sources:

Research is totally based on primary data. Secondary data can be used only
for the reference. Research has been done by primary data collection, and
primary data has been collected by interacting with various people. The
secondary data has been collected through various journals and websites.

Duration of Study:

The study was carried out for a period of two months, from 21st April to
27th June 2009.

Sampling procedure:

84
 The sample was selected from the customers/visitors of HDFC Bank,
banjarahills, irrespective of them being investors or not or availing the
services or not. It was also collected through personal visits to persons, by
formal and informal talks and through filling up the questionnaire prepared.
The data has been analyzed by using mathematical/Statistical tool.

• Sample size:

The sample size of my project is limited to 80 in total in which 30 are for

Mutual funds and the remaining 50 for insurance.

• Sample design:

Data has been presented with the help of bar graph, pie charts etc.

85
 Chapter –7

Findings & suggestions

Findings:

86
 • Comparing with the various type of investments out of 30 respondents 22
are invested in mutual funds.

• 63.34 percent of the respondents has chosen Large cap for their investments
to get more returns.

• Around 77 percent of the respondents have chosen open ended scheme

because, here they will get more number of units for their investment
compare to close ended.

• Majority of the Respondents preferred to the Equity funds for their

investments . Thus, compare to other funds the risk and returns are more in
the equity funds.

• As per the respondent’s view HDFC mutual fund is giving goods returns
compare to others.
• 77 percent of the respondents have invested their money SIP plan thus, in
the SIP a set amount will electronically transferred from one account to
another at a specified frequency.

• 57 percent of the respondents ready to take high risk to get more returns

• In the insurance sector 40 percent of the respondents have taken young star
plan and 30 percent of the respondents are in the pension plan for their
security purpose .

• Because of the uncertainty in the business and the life of the business
people they are interested to invest in the insurance policies.

• To avoid the risk or to manage the risk 80 percent of the respondents

invested in the life insurance policies.

• Comparing insurance with mutual funds the returns are very low in
insurance sector. So the percentage of investors in the insurance are low.

SUGGESTIONS:

87
 • Finally some recommendations for the company are as fallows:-
• Asset Management Company should conduct more awareness programs
about the various types of mutual funds to the public.

• To make people aware about the benefit of becoming HDFC Standard

Life’s Financial Consultant, following activities of advertisement should be
done through

a. Print Media.
b. Hoarding & Banners.
c. Stalls in Trade Fares
d. Distribution of leaflets containing details information.
e. Company can recruit sales promoters so that maximum information can be
provided to the potential client.

• By showing additional and alternative income source along with various

schemes for Financial Consultant in the company so that more and more FC
can be recruited.

• Free life cover for every active Financial Consultant.

• Discounted rate premium for its family members.

• Make people understand about the meaning of the IRDA authorization and
its validity.

• Company should organize the program in the society, so that people will be
aware about the company

• Separate time slot for Working Professionals, House Wives and Retired
people.
• Agency of non-life products should also be provided along with life.

Conclusion:

88
From the project, I got the knowledge on mutual funds, Insurance policies and also the
performance of various funds in HDFC AMC.For this I have used “β” (beta) calculation.
And also learned how to calculate NAV values and units of mutual funds. I have learned
various Insurance policies provided by HDFC bank and who are mostly benefited by
these policies.

I have also taken help of questionnaire and through this I came to know
perception and their preference for HDFC product.

Bibliography:
1.AMFI-Mutual Fund (Basic/Advisors) Module-NCFM

2.Mutual Funds( ICFAI University Press)

3.www.hdfcbank.com

4.www.amfi.com

5. www.hdfcmutualfunds.com

6 . www.hdfcinsurance.com
7. www.irda.com
8. www.onlinevalueresearch.com

Annexure:

MUTUAL FUNDS

1. Do u have any investment in HDFC BANK?

89
(a)Yes (b) No

2. What type of investment do you have?

(a)Insurance (b) Fixed deposits (c) Mutual Funds

3. Why do you choose to invest in Mutual funds?

(a) Less risk (b) Diversified (c) More returns

4. Which type of companies do you choose to invest in Mutual funds?

(a)Large cap (b) Mid cap (c) Small cap

5. In which type of scheme are you interested to invest in Mutual funds?

(a)Open ended (b) Closed ended (c) Interval

6. Which type of funds are ready to invest?

(a)Equity funds (b) Debt funds (c) Liquidity funds

7. What is the time period would you like to choose while investing?

(a)Short term (b) Long term (c)Mid term

8. What is the reason for investing in HDFCMF?

(a) Associated with HDFC (b)Better returns (c) Agents advice

9. Is the HDFCMF has given better returns for your expectation?

(a)Good (b)Unexpected ( c)Reliable returns

10. what is the strategy would you like to invest in Mutual funds?

(a)SIP (b)STP (c)SWP

11. What type of risk do you like to take while investing in Mutual funds?

90
(a)High Risk (b) Low Risk (c) Secured Risk

12. If you invest in equity fund, what type of fund would you select?

(a)Index Fund (b)Sector Fund (c)ELSS Fund (d)Others

13.If you invest in Debt Fund what type of fund would you select?

(a)Liquidity fund (b)Gilt fund (c)Income fund (d)others

INSURANCE

1. Do you have any insurance policies in HDFC Bank?

(a)Yes (b) No

2. What type of insurance policies do u have in HDFC bank ?

91
(a)Life insurance (b)General insurance

3. In life insurance what type of policy do u have in HDFC Bank?

(a)Young star (b) Pension (c) Endowment policy (d) others

4. What type of time period would u like to prefer in insurance policy?

(a)Short term ( b)Mid term (c)Long term

5. What makes you to choose the Insurance for investing?

(a)Secured life (b) Less risk (c) More benefit

6.Why did u choose HDFC bank to invest in insurance policies?

(a) Associated with HDFC (b) Policy features (c) Existing HDFC customer (d) Good services

7. Mostly what type of benefits do u see for?

(a) Tax benefits (b) Youngster benefit (c) Life benefits (d) Pension benefits.

8. What is your age ?

(a) 25-35 ( b)35-45 (c)Above 45

9. What type of perception customers have towards the HDFC standard life insurance company

(a)Excellent (b) Aggressive (c) Average

92
93