RISK RETURN ANALYSIS AND COMPARATIVE

STUDY OF MUTUAL FUNDS

FOR
HDFC Asset Management Company Ltd.
A Report on Project work
In
MASTER OF BUSINESS ADMINISTRATION (MBA)
By
Somesh Behere
GUIDED BY: SUBMITTED BY:
PROF.GARGI NAIDU SOMESH BEHERE
HOD ACADEMICS MBA IV Semester
VIM BHOPAL BHOPAL
VIDYASAGAR INSTITUTE OF MANAGEMENT
BARKATULLAH UNIVERSITY BHOPAL(M.P.)
SESSION (2008-2010)
BONOFIDE CERTIFICATE
This is to certify that the Report on Proect !or" tit#e$ %RIS& RET'R( A(AL)SIS A(D
COMPARATIVE ST'D) OF M'T'AL F'(DS* for HDFC Asset Mana+ement Company
Lt$, is a -onafi$e recor$ of the .or" $one -y
Somesh Behere
st/$yin+ in Master of B/siness A$ministration in Vi$hyasa+ar Instit/te of Mana+ement
0Bhopa# $/rin+ the year 1223452,
Proect Vi6a4Voce he#$ on,,,,,,,,,,,,,,,,,,,,,
Internal examiner External examiner
EXECUTIVE SUMMARY
The performance e6a#/ation of m/t/a# f/n$ is a 6ita# matter of concern to the f/n$ mana+ers0
in6estors0 an$ researchers a#i"e, The core competence of the company is to meet o-ecti6es
an$ the nee$s of the in6estors an$ to pro6i$e optim/m ret/rn for their ris", This st/$y tries to
fin$ o/t the ris" an$ ret/rn a##ie$ .ith the m/t/a# f/n$s,
This proect paper is se+mente$ into three sections to e7p#ore the #in" -et.een con6entiona#
s/-ecti6e an$ statistica# approach of M/t/a# F/n$ ana#ysis, To start .ith0 the first section
$ea#s .ith the intro$/ctory part of the paper -y +i6in+ an o6er6ie. of the M/t/a# f/n$
in$/stry an$ company profi#e,
This section a#so ta#"s a-o/t the theory of portfo#io ana#ysis an$ the $ifferent meas/res of ris"
an$ ret/rn /se$ for the comparison,
The secon$ section $etai#s on the nee$0 o-ecti6e0 an$ the #imitations of the st/$y, It a#so
$isc/sses a-o/t the so/rces an$ the perio$ for the $ata co##ection, It a#so $ea#s .ith the $ata
interpretation an$ ana#ysis part .herein a## the "ey meas/res re#ate$ to ris" an$ ret/rn are
$one .ith the interpretation of the res/#ts,
In the thir$ section0 an attempt is ma$e to ana#yse an$ compare the performance of the e8/ity
m/t/a# f/n$, For this p/rpose 946a#/e0 stan$ar$ $e6iation0 an$ ris" a$/ste$ performance
meas/res s/ch as Sharpe ratio0 Treynor meas/re0 :enson A#pha0 an$ Fema meas/re ha6e -een
/se$,
The portfo#io ana#ysis of the se#ecte$ f/n$ has -een $one -y the meas/re ret/rn for the
ho#$in+ perio$,
At the en$0 it i##/strates the s/++estions an$ fin$in+s -ase$ on the ana#ysis $one in the
pre6io/s sections an$ fina##y it $ea#s .ith conc#/sion part,
ACKNOWLEDGEMENT
I ta"e this opport/nity to e7press my $eep sense of +ratit/$e to a## those .ho ha6e
contri-/te$ si+nificant#y -y sharin+ their "no.#e$+e an$ e7perience in the comp#etion of
this proect .or", I am +reat#y o-#i+e$ to0 for pro6i$in+ me .ith the ri+ht "in$ of
opport/nity an$ faci#ities to comp#ete this 6ent/re,
My first .or$ of +ratit/$e is $/e to Mr.Sidhartha Chattergee ; Branch Manager,
HDFC AMC,Allhabad, my corporate +/i$e, for his "in$ he#p an$ s/pport an$ his
6a#/a-#e +/i$ance thro/+ho/t my proect, I am than"f/# to him for pro6i$in+ me .ith
necessary insi+hts an$ he#pin+ me o/t at e6ery sin+#e step, I am a#so than"f/# to Pro A!ho"
Di#edi Executive Trainee0 the former st/$ent of VIDH)ASA<AR I(STIT'TE OF
MA(A<EME(T0 Bhopa# for her constant 6a#/a-#e assistance an$ cons/#tancy, I a#so than"
Mr.A$"it K%&r0 Unit Manager for his "in$ .or$s of enco/ra+ement, A-o6e a##0 I e7press
my .or$s of +ratit/$e to HDFC AMC0 A##aha-a$ Branch for pro6in+ me .ith a## the
"no.#e$+e reso/rces an$ ena-#in+ me to pass AM'I(MTUTUAL 'UND )ADVISOR*
MODULE+ NSE`s CERTIFICATION IN FINANCIAL MARKETS (NCFM) .ith =>,?
percenta+es,
I am e7treme#y than"f/# to Mi!!. Gargi Naid% ; my interna# fac/#ty +/i$e /n$er .hose
a-#e +/i$ance this proect .or" .as carrie$ o/t, I than" her for her contin/o/s s/pport
an$ mentorin+ $/rin+ the ten/re of the proect, Fina##y0 I .o/#$ a#so #i"e to than" a## my $ear
frien$s for their cooperation0 a$6ice an$ enco/ra+ement $/rin+ the #on+ an$ ar$/o/s tas" of
carryin+ o/t the proect an$ preparin+ this report,
PREFACE
This is the a+e of technica# /p +ra$ation, (othin+ remains same for a #on+ perio$ e6ery thin+
chan+e .ith a certain span of time, So it is m/st for e6ery or+ani@ation to p/t a -ir$s eye
6ie. on itAs o6er a## f/nctionin+,
This report .as preparin+ $/rin+ practica# trainin+ of Master of -/siness
a$ministration (M.B.A.) from Vidyasagar institute of management Bhopal (M.P.) ,The
st/$ent of M,B,A,essentia##y re8/ire$ a practica# trainin+ of >toB .ee"s in any or+ani@ation,
It +i6es an opport/nity to the st/$ent to test their ac8/ire$ "no.#e$+e thro/+h practica#
e7periences,
The o-ecti6e of my st/$y .as Risk Return Analysis And Comparative Study Of Mutual
Funds %HDFC Asset Management Company Ltd. I ho.e6er present this report In a## my
mo$esty to the rea$ers .ith a faith that it sha## ser6e the ca/ses of s/-ect,
,
PLACE4CCC,, SOMESH BEHERE
DATECCCC,,
TABLE OF CONTENTS Page No.
Part-I 54D=
E7ec/ti6e S/mmary Iii
A. Mutual Fund Overview 1-19
5,5 M/t/a# F/n$ an In6estment P#atform 541
1.2A$6anta+es of M/t/a# F/n$ D
5,D Disa$6anta+e of In6estin+ Thro/+h M/t/a# F/n$s >
5,> Cate+ories of M/t/a# F/n$ >43
5,? In6estment Strate+ies 3
5,B Or+anisation of M/t/a# F/n$ E455
5,= Distri-/tion Channe#s 51
5,3 HDFC AMC Company O6er6ie. 5145E
B. Measuring and Evaluating Mutual Funds Performance 20-37
5,1,5 P/rpose of Meas/rin+ an$ E6a#/atin+ 12415
5,1,1 Financia# P#annin+ for In6estors referrin+ to M/t/a# F/n$s 11
5,1,D !hy Has It Become One Of The Lar+est Financia# Instr/mentsF 1141?
5,1,> E6a#/atin+ Portfo#io Performance 1B
5,1,? Ho. to Re$/ce Ris" !hi#e In6estin+ 1B413
5,1,B A St/$y of Portfo#io Ana#ysis from The Point Of F/n$ Mana+er 1341E
5,1,= Meas/res of Ris" an$ Ret/rn 1E4D=
Part-II 38-40
Research Methodology
1,5 (ee$ For the St/$y D34DE
1,1 O-ecti6e of the St/$y DE
1,D Limitations of the St/$y >2
1,> Data Co##ection >2
Part-III 41-102
Case Analysis
D,5 Data Interpretation >543=
D,1 Ana#ysis of the o-ser6ation 3=4E=
D,D Fin$in+s E3
D,> Recommen$ations EE4522
D,? Conc#/sion 525
References 521
PART-I
1. MUTUAL FUND OVERVIEW
,., MUTUAL 'UND AN INVESTMENT PLAT'ORM
M/t/a# f/n$ is an in6estment company that poo#s money from sma## in6estors an$
in6ests in a 6ariety of sec/rities0 s/ch as stoc"s0 -on$s an$ money mar"et instr/ments, Most
open4en$ M/t/a# f/n$s stan$ rea$y to -/y -ac" Gre$eemH its shares at their c/rrent net asset
6a#/e0 .hich $epen$s on the tota# mar"et 6a#/e of the f/n$Is in6estment portfo#io at the
time of re$emption, Most open4en$ M/t/a# f/n$s contin/o/s#y offer ne. shares to
in6estors, It is a#so "no.n as an open4en$ in6estment company0 to $ifferentiate it from a
c#ose$4en$ in6estment company,
M/t/a# f/n$s in6est poo#e$ cash of many in6estors to meet the f/n$Is state$ in6estment
o-ecti6e, M/t/a# f/n$s stan$ rea$y to se## an$ re$eem their shares at any time at the f/n$As
c/rrent net asset 6a#/eJ tota# f/n$ assets $i6i$e$ -y shares o/tstan$in+,
Figure: 1.1
In Simp#e !or$s0 M/t/a# f/n$ is a mechanism for poo#in+ the reso/rces -y iss/in+ /nits
to the in6estors an$ in6estin+ f/n$s in sec/rities in accor$ance .ith o-ecti6es as
$isc#ose$ in offer $oc/ment,
In6estments in sec/rities are sprea$ across a .i$e cross4section of in$/stries an$
sectors an$ th/s the ris" is re$/ce$, Di6ersification re$/ces the ris" -eca/se not a## stoc"s
may mo6e in the same $irection in the same proportion at the same time, M/t/a# f/n$ iss/es
/nits t o the in6estors in accor$ance .ith 8/ant/m of money in6este$ -y them,
In6estors of M/t/a# f/n$ are "no.n as /nit ho#$ers, The profits or #osses are share$ -y the
in6estors in proportion to their in6estments, The M/t/a# f/n$s norma##y come o/t .ith a
n/m-er of schemes .ith $ifferent in6estment o-ecti6es .hich are #a/nche$ from time to
time,



















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INVEST
THEIR
MONEY
INVEST IN
VARIETY OF
STOCKS/BONDS







M
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F
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S
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M
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F
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PROFIT/LOSS FORM
PORTFOLIO OF
INVESTMENT
PROFIT/LOSS FROM
INDIVIDUAL
In In$ia0 A M/t/a# f/n$ is re8/ire$ to -e re+istere$ .ith Sec/rities an$ E7chan+e Boa
r$ of In$ia GSEBIH .hich re+/#ates sec/rities mar"ets -efore it can co##ect f/n$s from the
p/-#ic,
In Short 0 a M/t/a# f/n$ is a common poo# of money in to .hich in6estors .ith
common in6estment o-ecti6e p#ace their contri-/tions that are to -e in6este$ in
accor$ance .ith the state $ in6estment o-ecti6e of the scheme, The in6estment mana+er
.o/#$ in6est the money co##ecte$ from the in6estor in to assets that are $efine$K permitte$
-y the state$ o-ecti6e of the scheme, For e7amp#e0 a n e8/ity f/n$ .o/#$ in6est
e8/ity an$ e8/ity re#ate$ instr/ments an$ a $e-t f/n$ .o/#$ in6est in -on$s0 $e-ent/res0
+i#ts etc, M/t/a# f/n$ is a s/ita-#e in6estment for the common ma n a s it offers an Oporto
/nity to in6est in a $i6ersifie$0 professiona##y mana+e$ -as"et of sec/rities at a
re#ati6e#y #o. cost,
,.- ADVANTAGES O' MUTUAL 'UND
Table:1.1
S.
No.
Advant
age
Particulars
1.
Portfoli
o
Diversif
ication
M/t/a# F/n$s in6est in a .e##4$i6ersifie$ portfo#io of sec/rities
.hich ena-#es in6estor to ho#$ a $i6ersifie$ in6estment portfo#io
G.hether the amo/nt of in6estment is -i+ or sma##H,
2.
Professi
onal
Manage
ment
F/n$ mana+er /n$er+oes thro/+h 6ario/s research .or"s an$ has
-etter in6estment mana+ement s"i##s .hich ens/re hi+her ret/rns
to the in6estor than .hat he can mana+e on his o.n,
3.
Less
Risk
In6estors ac8/ire a $i6ersifie$ portfo#io of sec/rities e6en .ith a
sma## in6estment in a M/t/a# F/n$, The ris" in a $i6ersifie$
portfo#io is #esser than in6estin+ in mere#y 1 or D sec/rities,
4.
Low
Transac
tion
Costs
D/e to the economies of sca#e G-enefits of #ar+er 6o#/mesH0
m/t/a# f/n$s pay #esser transaction costs, These -enefits are
passe$ on to the in6estors,
5.
Liquidit
y
An in6estor may not -e a-#e to se## some of the shares he#$ -y
him 6ery easi#y an$ 8/ic"#y0 .hereas /nits of a m/t/a# f/n$ are
far more #i8/i$,
6.
Choice
of
Scheme
s
M/t/a# f/n$s pro6i$e in6estors .ith 6ario/s schemes .ith
$ifferent in6estment o-ecti6es, In6estors ha6e the option of
in6estin+ in a scheme ha6in+ a corre#ation -et.een its in6estment
o-ecti6es an$ their o.n financia# +oa#s, These schemes f/rther
ha6e $ifferent p#ansKoptions
7.
Transpa
rency
F/n$s pro6i$e in6estors .ith /p$ate$ information pertainin+ to
the mar"ets an$ the schemes, A## materia# facts are $isc#ose$ to
in6estors as re8/ire$ -y the re+/#ator,
8.
Flexibili
ty
In6estors a#so -enefit from the con6enience an$ f#e7i-i#ity offere$
-y M/t/a# F/n$s, In6estors can s.itch their ho#$in+s from a $e-t
scheme to an e8/ity scheme an$ 6ice46ersa, Option of systematic
Gat re+/#ar inter6a#sH in6estment an$ .ith$ra.a# is a#so offere$ to
the in6estors in most open4en$ schemes,
9. Safety
M/t/a# F/n$ in$/stry is part of a .e##4re+/#ate$ in6estment
en6ironment .here the interests of the in6estors are protecte$ -y
the re+/#ator, A## f/n$s are re+istere$ .ith SEBI an$ comp#ete
transparency is force$,
,.. DISADVANTAGE O' INVESTING T/ROUG/ MUTUAL 'UNDS
Table:1.2
S.
No.
Disadva
ntage
Particulars
1.
Costs
Control
Not in
the
Hands
of an
Investor
In6estor has to pay in6estment mana+ement fees an$ f/n$
$istri-/tion costs as a percenta+e of the 6a#/e of his
in6estments Gas #on+ as he ho#$s the /nitsH0 irrespecti6e of the
performance of the f/n$,
2.
No
Custom
ized
Portfoli
os
The portfo#io of sec/rities in .hich a f/n$ in6ests is a $ecision
ta"en -y the f/n$ mana+er, In6estors ha6e no ri+ht to interfere
in the $ecision ma"in+ process of a f/n$ mana+er0 .hich some
in6estors fin$ as a constraint in achie6in+ their financia#
o-ecti6es,
3.
Difficult
y in
Selectin
g a
Suitable
Fund
Scheme
Many in6estors fin$ it $iffic/#t to se#ect one option from the
p#ethora of f/n$sKschemesKp#ans a6ai#a-#e, For this0 they may
ha6e to ta"e a$6ice from financia# p#anners in or$er to in6est in
the ri+ht f/n$ to achie6e their o-ecti6es,
,.0 CATEGORIES O' MUTUAL 'UND

Figure:1.2
BASED ON THEIR
STURCTURE
OPEN ENDED FUNDS
CLOSE-ENDED FUNDS
2. BASED ON INVESTMENT OBJECTIVE
EUITY FUNDS BALANCED
FUNDS
DEBT FUNDS
Mutual funds can be classified as follow:
Based on their structure:
Open-ended funds: In6estors can -/y an$ se## the /nits from the f/n$0 at any point of
time,
Close-ended funds: These f/n$s raise money from in6estors on#y once, Therefore0
after the offer perio$0 fresh in6estments cannot -e ma$e into the f/n$, If the f/n$ is
#iste$ on a stoc"s e7chan+e0 the /nits can -e tra$e$ #i"e stoc"s GE,+,0 Mor+an Stan#ey
<ro.th F/n$H, Recent#y0 most of the (e. F/n$ Offers of c#ose4en$e$ f/n$s pro6i$e$
#i8/i$ity .in$o. on a perio$ic -asis s/ch as month#y or .ee"#y, Re$emption of /nits
can -e ma$e $/rin+ specifie$ inter6a#s, Therefore0 s/ch f/n$s ha6e re#ati6e#y #o.
#i8/i$ity,
Based on their investment objective:
Equity fundsJ These f/n$s in6est in e8/ities an$ e8/ity re#ate$ instr/ments, !ith
f#/ct/atin+ share prices0 s/ch f/n$s sho. 6o#ati#e performance0 e6en #osses, Ho.e6er0
short term f#/ct/ations in the mar"et0 +enera##y smoothens o/t in the #on+ term0
there-y offerin+ hi+her ret/rns at re#ati6e#y #o.er 6o#ati#ity, At the same time0 s/ch
f/n$s can yie#$ +reat capita# appreciation as0 historica##y0 e8/ities ha6e o/tperforme$
DEVIDEND YEILD
EUITY
DIVERSIFIED
THEMANTIC FUND
SECTOR FUND
EUITY
ORIENTED
DEBT
ORIENTED
ARBITA!E
FUNDS
FLOATIN! RATE
FMPS FUNDS
INCOME FUNDS
!UILT FUNDS
LEUID FUNDS
ELSS
INDE" FUNDS
a## asset c#asses in the #on+ term, Hence0 in6estment in e8/ity f/n$s sho/#$ -e
consi$ere$ for a perio$ of at #east D4? years, It can -e f/rther c#assifie$ asJ
1. Index funds4 In this case a "ey stoc" mar"et in$e70 #i"e BSE Sense7 or (ifty is trac"e$,
Their portfo#io mirrors the -enchmar" in$e7 in terms of -oth composition an$ in$i6i$/a#
stoc" .ei+hta+es,
2. Equity diversified funds- 522L of the capita# is in6este$ in e8/ities sprea$in+ across
$ifferent sectors an$ stoc"s,
3. Dividend yield funds- it is simi#ar to the e8/ity4$i6ersifie$ f/n$s e7cept that they in6est in
companies offerin+ hi+h $i6i$en$ yie#$s,
4. Thematic funds- In6est 522L of the assets in sectors .hich are re#ate$ thro/+h some
theme,
e,+, 4An infrastr/ct/re f/n$ in6ests in po.er0 constr/ction0 cements sectors etc,
5. Sector funds- In6est 522L of the capita# in a specific sector, e,+, 4 A -an"in+ sector f/n$
.i## in6est in -an"in+ stoc"s,
B, ELSS4 E8/ity Lin"e$ Sa6in+ Scheme pro6i$es ta7 -enefit to the in6estors,
Balanced fund: Their in6estment portfo#io inc#/$es -oth $e-t an$ e8/ity, As a res/#t0
on the ris"4ret/rn #a$$er0 they fa## -et.een e8/ity an$ $e-t f/n$s, Ba#ance$ f/n$s are
the i$ea# m/t/a# f/n$s 6ehic#e for in6estors .ho prefer sprea$in+ their ris" across
6ario/s instr/ments, Fo##o.in+ are -a#ance$ f/n$s c#assesJ
1 Debt-oriented funds -In6estment -e#o. B?L in e8/ities,
D Equity-oriented funds -In6est at #east B?L in e8/ities0 remainin+ in $e-t,
Debt fund: They in6est on#y in $e-t instr/ments0 an$ are a +oo$ option for in6estors
a6erse to i$ea of ta"in+ ris" associate$ .ith e8/ities, Therefore0 they in6est
e7c#/si6e#y in fi7e$4income instr/ments #i"e -on$s0 $e-ent/res0 <o6ernment of In$ia
sec/ritiesM an$ money mar"et instr/ments s/ch as certificates of $eposit GCDH0
commercia# paper GCPH an$ ca## money, P/t yo/r money into any of these $e-t f/n$s
$epen$in+ on yo/r in6estment hori@on an$ nee$s,
1. Liquid funds- These f/n$s in6est 522L in money mar"et instr/ments0 a #ar+e
portion -ein+ in6este$ in ca## money mar"et,
2. Gilt funds ST- They in6est 522L of their portfo#io in +o6ernment sec/rities of an$ T4
-i##s,
3. Floating rate funds - In6est in short4term $e-t papers, F#oaters in6est in $e-t
instr/ments0 .hich ha6e 6aria-#e co/pon rate,
4. Arbitrage fund- They +enerate income thro/+h ar-itra+e opport/nities $/e to miss4
pricin+ -et.een cash mar"et an$ $eri6ati6es mar"et, F/n$s are a##ocate$ to e8/ities0
$eri6ati6es an$ money mar"ets, Hi+her proportion Garo/n$ =?LH is p/t in money
mar"ets0 in the a-sence of ar-itra+e opport/nities,
5. Gilt funds LT- They in6est 522L of their portfo#io in #on+4term +o6ernment
sec/rities,
6. Income funds LT- Typica##y0 s/ch f/n$s in6est a maor portion of the portfo#io in
#on+4term $e-t papers,
7. MIPs- Month#y Income P#ans ha6e an e7pos/re of =2L4E2L to $e-t an$ an e7pos/re
of 52L4D2L to e8/ities,
8. FMPs- fi7e$ month#y p#ans in6est in $e-t papers .hose mat/rity is in #ine .ith that
of the f/n$,
How are funds different in terms of their risk profile:
Table:1.3
E8/ity F/n$s Hi+h #e6e# of ret/rn0 -/t has a hi+h #e6e# of ris" too
De-t f/n$s Ret/rns comparati6e#y #ess ris"y than e8/ity f/n$s
Li8/i$ an$ Money
Mar"et f/n$s
Pro6i$e sta-#e -/t #o. #e6e# of ret/rn
,.1 INVESTMENT STRATEGIES
1. Systematic Investment Plan: 'n$er this0 a fi7e$ s/m is in6este$ each month on a fi7e$
$ate of a month, Payment is ma$e thro/+h post4$ate$ che8/es or $irect $e-it faci#ities, The
in6estor +ets fe.er /nits .hen the (AV is hi+h an$ more /nits .hen the (AV is #o., This is
ca##e$ as the -enefit of R/pee Cost A6era+in+ GRCAH
2. Systematic Transfer Plan: 'n$er this0 an in6estor in6est in $e-t4oriente$ f/n$ an$ +i6e
instr/ctions to transfer a fi7e$ s/m0 at a fi7e$ inter6a#0 to an e8/ity scheme of the same
m/t/a# f/n$,
3. Systematic Withdrawal Plan: if someone .ishes to .ith$ra. from a m/t/a# f/n$ then he
can .ith$ra. a fi7e$ amo/nt each month,
,.2. ORGANISATION O' MUTUAL 'UND3
Figure:1.4
THE STRUCTURE CONSISTS OFJ
SPONSOR
Sponsor is the person .ho actin+ a#one or in com-ination .ith another -o$y corporate
esta-#ishes a m/t/a# f/n$, Sponsor m/st contri-/te at #east >2L of the net .orth of the
In6estment mana+e$ an$ meet the e#i+i-i#ity criteria prescri-e$ /n$er the Sec/rities an$
E7chan+e Boar$ of In$ia GM/t/a# F/n$H Re+/#ations0 5EEB, The sponsor is not responsi-#e or
#ia-#e for any #oss or shortfa## res/#tin+ from the operation of the Schemes -eyon$ the initia#
contri-/tion ma$e -y it to.ar$s settin+ /p of the M/t/a# F/n$,
TRUST
The M/t/a# F/n$ is constit/te$ as a tr/st in accor$ance .ith the pro6isions of the In$ian
Tr/sts Act0 5331 -y the Sponsor, The tr/st $ee$ is re+istere$ /n$er the In$ian Re+istration
Act0 5E23,
TRUSTEE
Tr/stee is /s/a##y a company Gcorporate -o$yH or a Boar$ of Tr/stees G-o$y of in$i6i$/a#sH,
The main responsi-i#ity of the Tr/stee is to safe+/ar$ the interest of the /nit ho#$ers an$
ens/re that the AMC f/nctions in the interest of in6estors an$ in accor$ance .ith the
Sec/rities an$ E7chan+e Boar$ of In$ia GM/t/a# F/n$sH Re+/#ations0 5EEB0 the pro6isions of
the Tr/st Dee$ an$ the Offer Doc/ments of the respecti6e Schemes, At #east 1KDr$ $irectors
of the Tr/stee are in$epen$ent $irectors .ho are not associate$ .ith the Sponsor in any
manner,
ASSET MANAGEMENT COMPANY (AMC)
The AMC is appointe$ -y the Tr/stee as the In6estment Mana+er of the M/t/a# F/n$, The
AMC is re8/ire$ to -e appro6e$ -y the Sec/rities an$ E7chan+e Boar$ of In$ia GSEBIH to act
as an asset mana+ement company of the M/t/a# F/n$, At #east ?2L of the $irectors of the
AMC are in$epen$ent $irectors .ho are not associate$ .ith the Sponsor in any manner, The
AMC m/st ha6e a net .orth of at #east 52 cores at a## times,
REGISTRAR AND TRANSFER AGENT
The AMC if so a/thori@e$ -y the Tr/st Dee$ appoints the Re+istrar an$ Transfer A+ent to the
M/t/a# F/n$, The Re+istrar processes the app#ication form0 re$emption re8/ests an$
$ispatches acco/nt statements to the /nit ho#$ers, The Re+istrar an$ Transfer a+ent a#so
han$#es comm/nications .ith in6estors an$ /p$ates in6estor recor$s,
ASSET UNDER MANAGEMENT3
Ta-#e5,>
ASSET '(DER MA(A<EME(T OF TOP AMC0S as on Jun 30,
2009
M/t/a# F/n$ (ame (o, of
schemes
Corp/s GRs,CroresH
Re#iance M/t/a# F/n$ 1BD 5230DD1,DB
HDFC M/t/a# F/n$ 121 =305E=,E2
ICICI Pr/$entia# M/t/a# F/n$ D1? =205BE,>B
'TI M/t/a# F/n$ 12= B=0E=3,5E
Bir#a S/n Life M/t/a# F/n$ 13D ?B0131,3=
SBI M/t/a# F/n$ 5D2 D>02B5,2>
LIC M/t/a# F/n$ =2 D10>5>,E1
&ota" Mahin$ra M/t/a# F/n$ 51> D203DD,21
Fran"#in Temp#eton M/t/a# F/n$ 5E5 1?0>=1,3?
IDFC M/t/a# F/n$ 5B> 150B=B,1E
Tata M/t/a# F/n$ 5=? 150111,35
The +raph in$icates the +ro.th of assets o6er the years.
Figure:1.5
,.4 DISTRI5UTION C/ANNELS3
M/t/a# f/n$s posses a 6ery stron+ $istri-/tion channe# so that the /#timate c/stomers $oesnAt
face any $iffic/#ty in the fina# proc/rement, The 6ario/s parties in6o#6e$ in $istri-/tion of
m/t/a# f/n$s areJ
1, Direct marketing by the AMCs: the forms co/#$ -e o-taine$ from the AMCs $irect#y,
The in6estors can approach to the AMCs for the forms, some of the top AMCs of In$ia areM
Re#iance 0Bir#a S/n#ife0 Tata0 SBI ma+n/m0 &ota" Mahin$ra0 HDFC0 S/n$aram0 ICICI0
Mirae Assets0 Canara Ro-eco0 Lot/s In$ia0 LIC0 'TI etc, .hereas forei+n AMCs inc#/$eJ
Stan$ar$ Chartere$0 Fran"#in Temp#eton0 Fi$e#ity0 :P Mor+an0 HSBC0 DSP Meri## Lynch0 etc,
2. Broker/ sub broker arrangementsJ the AMCs can sim/#taneo/s#y +o for -ro"erKs/-4
-ro"er to pop/#ari@e their f/n$s, AMCs can enoy the a$6anta+e of #ar+e net.or" of these
-ro"ers an$ s/- -ro"ers,
3, Individual agents, Banks, NBFC: in6estors can proc/re the f/n$s thro/+h in$i6i$/a#
a+ents0 in$epen$ent -ro"ers0 -an"s an$ se6era# non4 -an"in+ financia# corporations too0
.hiche6er he fin$s con6enient for him,
,.6 /D'C AMC COMPANY OVERVIEW
HDFC ASSET MANAGEMENT COMPANY LIMITED (AMC)
AMC .as incorporate$ /n$er the Companies Act0 5E?B0 on Decem-er 520 5EEE0 an$ .as
appro6e$ to act as an AMC for the M/t/a# F/n$ -y SEBI on :/#y D20 1222,
The re+istere$ office of the AMC is sit/ate$ at Ramon Ho/se0 Dr$ F#oor0 H,T, Pare"h Mar+0
5BE0 Bac" -ay Rec#amation0 Ch/rch +ate0 M/m-ai 4 >22 212,
In terms of the In6estment Mana+ement A+reement0 the Tr/stee has appointe$ HDFC Asset
Mana+ement Company Limite$ to mana+e the M/t/a# F/n$
As per the terms of the In6estment Mana+ement A+reement0 the AMC .i## con$/ct the
operations of the M/t/a# F/n$ an$ mana+e assets of the schemes0 inc#/$in+ the schemes
#a/nche$ from time to time,
The present share ho#$in+ pattern of the AMC is as fo##o.sJ
Table:1.5
Partic/#ars L of the pai$ /p capita#
Ho/sin+ De6e#opment Finance Corporation Limite$ ?2,52
Stan$ar$ Life In6estments Limite$ >E,E2
N/rich Ins/rance Company GNICH0 the Sponsor of N/rich In$ia M/t/a# F/n$0 fo##o.in+ a
re6ie. of its o6era## strate+y0 ha$ $eci$e$ to $i6est its Asset Mana+ement -/siness in In$ia,
The AMC ha$ entere$ into an a+reement .ith NIC to ac8/ire the sai$ -/siness0 s/-ect to
necessary re+/#atory appro6a#s,
On o-tainin+ the re+/#atory appro6a#s0 the Schemes of N/rich In$ia M/t/a# F/n$ has no.
mi+rate$ to HDFC M/t/a# F/n$ on :/ne 5E0 122D,
The AMC is a#so pro6i$in+ portfo#io mana+ement K a$6isory ser6ices an$ s/ch acti6ities are
not in conf#ict .ith the acti6ities of the M/t/a# F/n$, The AMC has rene.e$ its re+istration
from SEBI 6i$e Re+istration (o, 4 PM K I(P222222?2B $ate$ Decem-er 110 1222 to act as a
Portfo#io Mana+er /n$er the SEBI GPortfo#io Mana+ersH Re+/#ations0 5EED, The Certificate of
Re+istration is 6a#i$ from :an/ary 50 122> to Decem-er D50 122B,
Board of Directors
The Boar$ of Directors of the HDFC Asset Mana+ement Company Limite$ GAMCH consists
of the fo##o.in+ eminent persons,
Table:1.6
Mr, Deepa" S, Pare"h Chairman of the -oar$
Mr, (, &eith S"eoch CEO of Stan$ar$ Life In6estments Lt$,
Mr, &e"i M, Mistry Associate $irector
Mr, :ames Air$ In6estment $irector
Mr, P, M, Thampi In$epen$ent $irector
Mr, H/may/n Dhanra+ir In$epen$ent $irector
Dr, Deepa" B, Phata" In$epen$ent $irector
Mr, Hoshan+ S, Bi##imoria In$epen$ent $irector
Mr, Raesh.ar Ra Baaa In$epen$ent $irector
Mr, Viay Merchant In$epen$ent $irector
Ms, Ren/ S, &arna$ :oint mana+in+ $irector
Mr, Mi#in$ Bar6e Mana+in+ $irector

Mr. Deepak Parekh, the Chairman of the Boar$0 is associate$ .ith HDFC Lt$, in his
capacity as its E7ec/ti6e Chairman,
Mr, Pare"h oine$ HDFC Lt$, in a senior mana+ement position in 5E=3, He .as in$/cte$ as
!ho#etime Director of HDFC Lt$, in 5E3? an$ .as appointe$ as the E7ec/ti6e Chairman in
5EED,
Mr. N. Keith Skeoch is associate$ .ith Stan$ar$ Life In6estments Limite$ as its Chief
E7ec/ti6e an$ is responsi-#e for a## company -/siness an$ in6estment operations .ithin
Stan$ar$ Life In6estments Limite$,
Mr. Keki M. Mistry is an associate $irector on the Boar$, He is the Vice4Chairman O
Mana+in+ Director of Ho/sin+ De6e#opment Finance Corporation Limite$ GHDFC Lt$,H He is
.ith HDFC Lt$, since 5E35 an$ .as appointe$ as the E7ec/ti6e Director of HDFC Lt$, in
5EED, He .as appointe$ as the Dep/ty Mana+in+ Director in 5EEE0 Mana+in+ Director in
1222 an$ Vice Chairman O Mana+in+ Director in 122=,
SPONSORS
HOUSING DEVELOPMENT FINANCE CORPORATION LIMITED (HDFC):
HDFC .as incorporate$ in 5E== as the first specia#ise$ ho/sin+ finance instit/tion in In$ia,
HDFC pro6i$es financia# assistance to in$i6i$/a#s0 corporate an$ $e6e#opers for the p/rchase
or constr/ction of resi$entia# ho/sin+, It a#so pro6i$es property re#ate$ ser6ices Ge,+, property
i$entification0 sa#es ser6ices an$ 6a#/ationH0 trainin+ an$ cons/#tancy, Of these acti6ities0
ho/sin+ finance remains the $ominant acti6ity,
HDFC c/rrent#y has a c#ient -ase of o6er 30 220222 -orro.ers0 510 220222 $epositors0 E10222
shareho#$ers an$ ?20222 $eposit a+ents, HDFC raises f/n$s from internationa# a+encies s/ch
as the !or#$ Ban"0 IFC G!ashin+tonH0 'SAID0 CDC0 ADB an$ &F!0 $omestic term #oans
from -an"s an$ ins/rance companies0 -on$s an$ $eposits, HDFC has recei6e$ the hi+hest
ratin+ for its -on$s an$ $eposits pro+ram for the ninth year in s/ccession, HDFC Stan$ar$
Life Ins/rance Company Limite$0 promote$ -y HDFC .as the first #ife ins/rance company in
the pri6ate sector to -e +rante$ a Certificate of Re+istration Gon Octo-er 1D0 1222H -y the
Ins/rance Re+/#atory an$ De6e#opment A/thority to transact #ife ins/rance -/siness in In$ia,
HDFC is In$iaIs premier ho/sin+ finance company an$ enoys an impecca-#e trac" recor$ in
In$ia as .e## as in internationa# mar"ets, Since its inception in 5E==0 the Corporation has
maintaine$ a consistent an$ hea#thy +ro.th in its operations to remain the mar"et #ea$er in
mort+a+es, Its o/tstan$in+ #oan portfo#io co6ers .e## o6er a mi##ion $.e##in+ /nits, HDFC
has $e6e#ope$ si+nificant e7pertise in retai# mort+a+e #oans to $ifferent mar"et se+ments an$
a#so has a #ar+e corporate c#ient -ase for its ho/sin+ re#ate$ cre$it faci#ities, !ith its
e7perience in the financia# mar"ets0 a stron+ mar"et rep/tation0 #ar+e shareho#$er -ase an$
/ni8/e cons/mer franchise0 HDFC .as i$ea##y positione$ to promote a -an" in the In$ian
en6ironment,
STANDARD LIFE INVESTMENTS LIMITED
The Stan$ar$ Life Ass/rance Company .as esta-#ishe$ in 531? an$ has consi$era-#e
e7perience in +#o-a# financia# mar"ets, In 5EE30 Stan$ar$ Life In6estments Limite$ -ecame
the $e$icate$ in6estment mana+ement company of the Stan$ar$ Life <ro/p an$ is o.ne$
522L -y The Stan$ar$ Life Ass/rance Company,
!ith +#o-a# assets /n$er mana+ement of appro7imate#y 'SP53B,>? -i##ion as at March D50
122?0 Stan$ar$ Life In6estments Limite$ is one of the .or#$Is maor in6estment companies
an$ is responsi-#e for in6estin+ money on -eha#f of fi6e mi##ion retai# an$ instit/tiona# c#ients
.or#$.i$e, !ith its hea$8/arters in E$in-/r+h0 Stan$ar$ Life In6estments Limite$ has an
e7tensi6e an$ $e6e#opin+ +#o-a# presence .ith operations in the 'nite$ &in+$om0 Ire#an$0
Cana$a0 'SA0 China0 &orea an$ Hon+ &on+, In or$er to meet the $ifferent nee$s an$ ris"
profi#es of its c#ients0 Stan$ar$ Life In6estments Limite$ mana+es a $i6erse portfo#io
co6erin+ a## of the maor mar"ets .or#$4.i$e0 .hich inc#/$es a ran+e of pri6ate an$ p/-#ic
e8/ities0 +o6ernment an$ company -on$s0 property in6estments an$ 6ario/s $eri6ati6e
instr/ments, The companyIs c/rrent ho#$in+s in '& e8/ities acco/nt for appro7imate#y 1L of
the mar"et capita#i@ation of the Lon$on Stoc" E7chan+e,
HDFC MUTUAL FUND PRODUCTS

Equity Funds
HDFC <ro.th F/n$
HDFC Lon+ Term A$6anta+e F/n$
HDFC In$e7 F/n$
HDFC E8/ity F/n$
HDFC Capita# B/i#$er F/n$
HDFC Ta7 sa6er
HDFC Top 122 F/n$
HDFC Core O Sate##ite F/n$
HDFC Premier M/#ti4Cap F/n$
HDFC Lon+ Term E8/ity F/n$
HDFC Mi$4Cap Opport/nity F/n$
Balanced Funds
HDFC Chi#$renIs <ift F/n$ In6estment P#an
HDFC Chi#$renIs <ift F/n$ Sa6in+s P#an
HDFC Ba#ance$ F/n$
HDFC Pr/$ence F/n$
De-t F/n$s
HDFC Income F/n$
HDFC Li8/i$ F/n$
HDFC <i#t F/n$ Short Term P#an
HDFC <i#t F/n$ Lon+ Term P#an
HDFC Short Term P#an
HDFC F#oatin+ Rate Income F/n$ Short Term P#an
HDFC F#oatin+ Rate Income F/n$ Lon+ Term P#an
HDFC Li8/i$ F/n$ 4 PREMI'M PLA(
HDFC Li8/i$ F/n$ 4 PREMI'M PL'S PLA(
HDFC Short Term P#an 4 PREMI'M PLA(
HDFC Short Term P#an 4 PREMI'M PL'S PLA(
HDFC Income F/n$ Premi/m P#an
HDFC Income F/n$ Premi/m p#/s P#an
HDFC Hi+h Interest F/n$
HDFC Hi+h Interest F/n$ 4 Short Term P#an
HDFC So6erei+n <i#t F/n$ 4 Sa6in+s P#an
HDFC So6erei+n <i#t F/n$ 4 In6estment P#an
HDFC So6erei+n <i#t F/n$ 4 Pro6i$ent P#an
HDFC Cash Mana+ement F/n$ 4 Sa6in+s P#an
HDFC Cash Mana+ement F/n$ 4 Ca## P#an
HDFCMF Month#y Income P#an 4 Short Term P#an
HDFCMF Month#y Income P#an 4 Lon+ Term P#an
HDFC Cash Mana+ement F/n$ 4 Sa6in+s P#/s P#an
HDFC M/#tip#e )ie#$ F/n$
HDFC M/#tip#e )ie#$ F/n$ P#an 122?
ACHIEVEMENT AND AWARDS
CNBC - TV 18 - CRISIL Mutual Fund of the Year Awards 2008 :
HDFC Prudence Fund .as the on#y scheme that .on the C(BC 4 TV 53 4 CRISIL M/t/a#
F/n$ of the )ear A.ar$ 1223 in the Most Consistent Balanced Fund under CRISIL ~
CPR for the ca#en$ar year 122= Gfrom amon+st D schemesH,
HDFC Cash Management Fund - Savings Plan .as the on#y scheme that .on the C(BC 4
TV 53 4 CRISIL M/t/a# F/n$ of the )ear A.ar$ 1223 in the Most Consistent Liquid Fund
under CRISIL ~ CPR for the ca#en$ar year 122= Gfrom amon+st ? schemesH,
HDFC Cash Management Fund - Savings Plan .as the on#y scheme that .on the C(BC 4
TV 53 4 CRISIL M/t/a# F/n$ of the )ear A.ar$ 1223 in the Liquid Scheme - Retail
Category for the ca#en$ar year 122= Gfrom amon+st 5E schemesH,
Lipper Fund Awards 2008:
HDFC Equity Fund - Growth has -een a.ar$e$ the IBest Fund over Ten Years' in
the 'Equity India Category' at the Lipper Fund Awards 2008 Gform amon+st 1D schemesH,
It .as a.ar$e$ the Best F/n$ o6er ten years in 122B an$ 122= as .e##, 1223 ma"es it three in
a ro.,
Lipper Fund Awards 2009 :
HDFC E8/ity F/n$ 4 <ro.th has -een a.ar$e$ the IBest F/n$ o6er Ten )earsI in the IE8/ity
In$ia Cate+oryI Gform amon+st D> schemesH an$ HDFC Prudence Fund - Growth Plan in
the QMixed Asset INR Aggressive CategoryA Gfrom amon+st B schemesH0 ha6e -een a.ar$e$
the QBest Fund over 10 YearsA -y Lipper F/n$ A.ar$s In$ia 122E,
ICRA Mutual Fund Awards - 2008 :
HDFC MF Monthly Income Plan - Long Term Plan 4 Ran"e$ a Seven Star Fund an$ has
-een a.ar$e$ the Gold Award for "Best Performance" in the cate+ory of "Open Ended
Marginal Equity" for the three year perio$ en$in+ Decem-er D50 122= Gfrom amon+st 1=
schemesH
HDFC High Interest Fund - Short Term Plan - Ranked a Five Star Fund in$icatin+
performance amon+ the top 52L in the cate+ory of "Open Ended Debt - Short Term" for
one year perio$ en$in+ Decem-er D50 122= Gfrom amon+st 12 schemesH.
HDFC Prudence Fund - Ranked a Five Star Fund in$icatin+ performance amon+ the top
52L in the cate+ory of "Open Ended Balanced" for the three year perio$ en$in+ Decem-er
D50 122= Gfrom amon+st 5B schemesH
B. MEASURING AND EVALUATING MUTUAL FUNDS
PERFORMANCE:
,.-., PURPOSE O' MEASURING AND EVALUATING
E6ery in6estor in6estin+ in the m/t/a# f/n$s is $ri6en -y the motto of either .ea#th creation
or .ea#th increment or -oth, Therefore itAs 6ery necessary to contin/o/s#y e6a#/ate the f/n$sA
performance .ith the he#p of factsheets an$ ne.s#etters0 .e-sites0 ne.spapers an$
professiona# a$6isors #i"e HDFC AMC, If the in6estors i+nore the e6a#/ation of f/n$sA
performance then he can #ose ho#$ of it any time, In this e6er4chan+in+ in$/stry0 he can face
any of the fo##o.in+ pro-#emsJ
1, Variation in the f/n$sA performance $/e to chan+e in its mana+ementK o-ecti6e,
2, The f/n$sA performance can s#ip in comparison to simi#ar f/n$s,
3, There may -e an increase in the 6ario/s costs associate$ .ith the f/n$,
4 .Beta0 a technica# meas/re of the ris" associate$ may a#so s/r+e,
5, The f/n$sA ratin+s may +o $o.n in the 6ario/s #ists p/-#ishe$ -y in$epen$ent ratin+
a+encies,
6. It can mer+e into another f/n$ or co/#$ -e ac8/ire$ -y another f/n$ ho/se,
Performance measures:
Equity fundsJ the performance of e8/ity f/n$s can -e meas/re$ on the -asis ofJ (AV
<ro.th0 Tota# Ret/rnM Tota# Ret/rn .ith Rein6estment at (AV0 Ann/a#i@e$ Ret/rns an$
Distri-/tions0 Comp/tin+ Tota# Ret/rn GPer Share Income an$ E7penses0 Per Share Capita#
Chan+es0 Ratios0 Shares O/tstan$in+H0 the E7pense Ratio0 Portfo#io T/rno6er Rate0 F/n$
Si@e0 Transaction Costs0 Cash F#o.0 Le6era+e,
Debt fundJ Li"e.ise0 the performance of $e-t f/n$s can -e meas/re$ on the -asis ofJ Peer
<ro/p Comparisons0 The Income Ratio0 In$/stry E7pos/res an$ Concentrations0 (PAs0
-esi$es (AV <ro.th0 Tota# Ret/rn an$ E7pense Ratio,
Liquid funds: the performance of the hi+h#y 6o#ati#e #i8/i$ f/n$s can -e meas/re$ on the
-asis ofJ F/n$ )ie#$0 -esi$es (AV <ro.th0 Tota# Ret/rn an$ E7pense Ratio,
Concept of benchmarking for performance evaluation:
E6ery f/n$ sets its -enchmar" accor$in+ to its in6estment o-ecti6e, The f/n$s performance
is meas/re$ in comparison .ith the -enchmar", If the f/n$ +enerates a +reater ret/rn than the
-enchmar" then it is sai$ that the f/n$ has o/tperforme$ -enchmar" 0 if it is e8/a# to
-enchmar" then the corre#ation -et.een them is e7act#y 5, An$ if in case the ret/rn is #o.er
than the -enchmar" then the f/n$ is sai$ to -e /n$erperforme$,
Some of the benchmarks are:
1, E8/ity f/n$sJ mar"et in$ices s/ch as SOP C(R nifty0 BSE5220 BSE1220 BSE4PS'0 BSE
?22 in$e70 BSE -an"e70 an$ other sectora# in$ices,
2, De-t f/n$sJ Interest Rates on A#ternati6e In6estments as Benchmar"s0 I4Be7 Tota# Ret/rn
In$e70 :PM T4Bi## In$e7 Post4Ta7 Ret/rns on Ban" Deposits 6ers/s De-t F/n$s,
3, Li8/i$ f/n$sJ Short Term <o6ernment Instr/mentsA Interest Rates as Benchmar"s0 :PM T4
Bi## In$e7,
To meas/re the f/n$As performance0 the comparisons are /s/a##y $one .ithJ
IH .ith a mar"et in$e7,
ii) F/n$s from the same peer +ro/p,
iiiH Other simi#ar pro$/cts in .hich in6estors in6est their f/n$s,
,.-.- 'INANCIAL PLANNING 'OR INVESTORS RE'ERRING TO
MUTUAL 'UNDS3
In6estors are re8/ire$ to +o for financia# p#annin+ -efore ma"in+ in6estments in any m/t/a#
f/n$, The o-ecti6e of financia# p#annin+ is to ens/re that the ri+ht amo/nt of money is
a6ai#a-#e at the ri+ht time to the in6estor to -e a-#e to meet his financia# +oa#s, It is more than
mere ta7 p#annin+, Steps in financial planning are:
Asset a##ocation,
Se#ection of f/n$,
St/$yin+ the feat/res of a scheme.
In case of m/t/a# f/n$s0 financia# p#annin+ is concerne$ on#y .ith -roa$ asset a##ocation0
#ea6in+ the act/a# a##ocation of sec/rities an$ their mana+ement to f/n$ mana+ers, A f/n$
mana+er has to c#ose#y fo##o. the o-ecti6es state$ in the offer $oc/ment0 -eca/se financia#
p#ans of /sers are chosen /sin+ these o-ecti6es,
,.-.. W/Y /AS IT 5ECOME ONE O' T/E LARGEST 'INANCIAL INSTRUMENTS7
If .e ta"e a #oo" at the recent scenario in the In$ian financia# mar"et then .e can fin$ the
mar"et f#oo$e$ .ith a 6ariety of in6estment options .hich inc#/$es m/t/a# f/n$s0 e8/ities0
fi7e$ income -on$s0 corporate $e-ent/res0 company fi7e$ $eposits0 -an" $eposits0 PPF0 #ife
ins/rance0 +o#$0 rea# estate etc, a## these in6estment options co/#$ -e /$+e$ on the -asis of
6ario/s parameters s/ch as4 ret/rn0 safety con6enience0 6o#ati#ity an$ #i8/i$ity, Meas/rin+
these in6estment options on the -asis of the mentione$ parameters0 .e +et this in a ta-/#ar
form
Table:1.7
Ret/rn Safety Vo#ati#ity Li8/i$ity Con6enienc
e
E8/ity Hi+h Lo. Hi+h Hi+h Mo$erate
Bon$s Mo$erate Hi+h Mo$erate Mo$erate Hi+h
Co,
De-ent
/res
Mo$erate Mo$erate Mo$erate Lo. Lo.
Co,
FDs
Mo$erate Lo. Lo. Lo. Mo$erate
Ban"
Deposi
ts
Lo. Hi+h Lo. Hi+h Hi+h
PPF Mo$erate Hi+h Lo. Mo$erate Hi+h
Life
Ins/ra
nce
Lo. Hi+h Lo. Lo. Mo$erate
<o#$ Mo$erate Hi+h Mo$erate Mo$erate <o#$
Rea#
Estate
Hi+h Mo$erate Hi+h Lo. Lo.
M/t/a#
F/n$s
Hi+h Hi+h Mo$erate Hi+h Hi+h
!e can 6ery .e## see that m/t/a# f/n$s o/tperform e6ery other in6estment option, On three
parameters0 it scores hi+h .hereas itAs mo$erate at one, comparin+ it .ith the other options0
.e fin$ that e8/ities +i6es /s hi+h ret/rns .ith hi+h #i8/i$ity -/t its 6o#ati#ity too is hi+h .ith
#o. safety .hich $oesnAt ma"es it fa6o/rite amon+ persons .ho ha6e #o. ris"4 appetite,
E6en the con6enience in6o#6e$ .ith in6estin+ in e8/ities is /st mo$erate,
(o. #oo"in+ at -an" $eposits0 it scores -etter than e8/ities at a##
fronts -/t #a+s -a$#y in the parameter of /tmost important ieM it scores #o. on ret/rn 0 so itAs
not an happenin+ option for person .ho can affor$ to ta"e ris"s for hi+her ret/rn, The other
option offerin+ hi+h ret/rn is rea# estate -/t that e6en comes .ith hi+h 6o#ati#ity an$
mo$erate safety #e6e#0 e6en the #i8/i$ity an$ con6enience in6o#6e$ are too #o., <o#$ ha6e
a#.ays -een a fa6o/rite amon+ In$ians -/t .hen .e #oo" at it as an in6estment option then it
$efinite#y $oesnAt +i6es a 6ery -ri+ht pict/re, A#tho/+h it ens/res hi+h safety -/t the ret/rns
+enerate$ an$ #i8/i$ity are mo$erate, Simi#ar#y0 the other in6estment options are not at par
.ith m/t/a# f/n$s an$ ser6e the nee$s of on#y a specific c/stomer +ro/p, Strai+htfor.ar$0
.e can say that m/t/a# f/n$ emer+es as a c#ear .inner amon+ a## the options a6ai#a-#e,
The reasons for this being:
I)Mutual funds combine the advantage of each of the investment products: m/t/a# f/n$
is one s/ch option .hich can in6est in a## other in6estment options, Its princip#e of
$i6ersification a##o.s the in6estors to taste a## the fr/its in one p#ate, /st -y in6estin+ in it0
the in6estor can enoy the -est in6estment option as per the in6estment o-ecti6e,
II) Dispense the shortcomings of the other options: e6ery other in6estment option has
more or #ess some shortcomin+s, S/ch as if some are +oo$ at ret/rn then they are not safe0 if
some are safe then either they ha6e #o. #i8/i$ity or #o. safety or -othC,#i"e.ise0 there
e7ists no sin+#e option .hich can fit to the nee$ of e6ery-o$y, B/t m/t/a# f/n$s ha6e
$efinite#y sorte$ o/t this pro-#em, (o. e6ery-o$y can choose their f/n$ accor$in+ to their
in6estment o-ecti6es,
III) Returns get adjusted for the market movementsJ as the m/t/a# f/n$s are mana+e$ -y
e7perts so they are rea$y to s.itch to the profita-#e option a#on+ .ith the mar"et mo6ement,
S/ppose they pre$ict that mar"et is +oin+ to fa## then they can se## some of their shares an$
-oo" profit an$ can rein6est the amo/nt a+ain in money mar"et instr/ments,
IV) Flexibility of invested amount: Other then the a-o6e mentione$ reasons0 there e7ists
one more reason .hich has esta-#ishe$ m/t/a# f/n$s as one of the #ar+est financia#
interme$iary an$ that is the f#e7i-i#ity that m/t/a# f/n$s offer re+ar$in+ the in6estment
amo/nt, One can start in6estin+ in m/t/a# f/n$s .ith amo/nt as #o. as Rs, ?22 thro/+h SIPs
an$ e6en Rs, 522 in some cases,
Not all award-winning funds may be suitable for everyone
Many in6estors fee# that a simp#e .ay to in6est in M/t/a# f/n$s is to /st "eep in6estin+ in
a.ar$ .innin+ f/n$s, First of a##0 it is important to /n$erstan$ that more than the
a.ar$sM it is the metho$o#o+y to choose .inners t at is more re#e6ant,
A ratin+ firm +enera##y e#a-orates on the criteria for $eci$in+ the .innerAs i,e,
consistent performance0 ris" a$/ste$ ret/rns0 tota# ret/rns an$ protection of capita#, Each
of these factors is 6ery important an$ ha s its si+nificance for $ifferent cate+ories of
f/n$s,
Besi$es0 each of these factors has 6aryin+ $e+ree of si+nificance for $ifferent "in$s of
in6estors, For e7amp#e0 consistent ret/rn re a##y foc/ses on ris", If someone is afrai$ of
ne+ati6e ret/rns0 consistency .i## -e a more import ant meas/re than tot a# ret /rn i,e,
<ro.th in (AV as .e## as $i6i$en$ recei6e$,
A f/n$ can ha6e 6ery impressi6e tota# ret /rns o6ertime0 -/t can -e 6ery 6o#ati#e an$ to/+h
for a ris" a$6erse in6estor, Therefore0 a## the .ar$ .innin+ f/n$s in $ifferent
cate+ories may not -e s/ita-#e for e6eryone, Typica##y0 .hen one has to se#ect f/n$s0 the
first step sho/#$ -e to consi$er persona# +oa#s an$ o-ecti6es, In6est ors nee$ to $eci$e .hich
e#ement they 6a#/e the most an$ the n prioriti@e the other criteria
Once one "no.s .hat one is #oo"in+ for0 one sho/#$ +o a-o/t se#ectin+ the f/n$s accor$in+
to the asset a##ocation, Most in6estors nee$ /st a fe. f/n$s0 caref/##y pic"e$0 .atche$ an$
mana+e$ o6er perio$ of time,
,.-.0 EVALUATING PORT'OLIO PER'ORMANCE
It is important to e6a#/ate the performance of the portfo#io on an on4+oin+ -asis, The
fo##o.in+ factors are important in this processJ
Consi$er #on+4term recor$ of accomp#ishment rather than short 4term performance, It is
important -eca/se #on+4term trac" recor$ mo$erates the effects .hich /n/s/a##y +oo$
or -a$ short 4term performance can ha6e on a f/n$Is trac" recor$, Besi$es0 #on+er4term
trac" recor$ compensates for the effects of a f/n$ mana+erIs partic/#ar in6estment sty#e,
E6a#/ate the recor$ of accomp#ishment a+ainst simi#ar f/n$s, S/ccess in mana+in+ a sma##
or in a f/n$ foc/sin+ on a partic/#ar se+ment of the mar"et cannot -e re #ie$ /pon as an
e6i$ence of anticipate$ performance in mana+in+ a #ar+e or a -roa$ -ase$ f/n$,
Discip#ine in in6estment approach is an important factor as the press/re to perform can ma"e
a f/n$ mana+er s/scepti-#e to ha6e a n /r+e to chan+e trac"s in terms of stoc" se#ection as
.e## a s in6estment strate+y,
The o-ecti6e sho/#$ -e to $ifferentiate in6estment s"i## of the f/n$ mana+er from #/c"
an$ to i$entify those f/n$s .ith the +reatest potentia# of f/t/re s/ccess,
,.-.1 /OW TO REDUCE RISK W/ILE INVESTING3
Any "in$ of in6estment .e ma"e is s/-ect to ris", In fact .e +et ret/rn on o/r
in6estment p/re#y an$ so#e#y -eca/se at the 6ery -e+innin+ .e ta"e the ris" of partin+
.ith o/r f/n$s0 for +ettin+ hi+her 6a#/e -ac" at a #ater $ate, Partition it se#f is a ris", !e##
"no.n economist an$ (o-e# Pri@e recipient !i##iam Sharpe trie$ to se+re+ate the tota#
ris" face$ in any "in$ of in6estment into t.o parts 4 systematic (Systemic) risk and
unsystematic (Unsystematic) risk.
Systematic risk is that ris" .hich e7ists in the system, Some of the -i++est e7amp#es of
systematic ris" are i$8atio$9 re:e!!io$9 #ar9 ;o8iti:a8 !it%atio$ et:,
Inf#ation ero$es ret/rns +enerate$ from a## in6estments e ,+, If ret/rn from fi7e$ $eposit is 3
percent an$ if inf#ation is B per cent then rea# rate of ret/rn from fi7e$ $eposit is re$/ce$ -y B
percent, Simi#ar#y if ret/rns +enerate$ from e8/ity mar"et is 53 percent an$ inf#ation is sti## B
per cent then e8/ity ret/rns .i## -e #esser -y the rate of inf#ation, Since inf#ation e7ists in the
system there is no .ay one can stay a.ay from the ris" of inf#ation,
Economic cyc#es0 .ar an$ po#itica# sit/ations ha6e effects on a## forms of in6estments, A#so
these e7ist in the system an$ there is no .ay to stay a.ay from them, It is #i"e #earnin+
to .a#", Anyone .ho .ants to #earn to .a#" has to first fa##M yo/ cannot #earn to .a#"
.itho/t fa##in+, Simi#ar#y0 anyone .ho .ants to in6est has to first face systematic ris",
Therefore0 one can ne6er ma"e any "in$ of in6estment .itho/t systematic ris",
Another form of ris" is unsystematic risk, This ris" $oes not e7ist in the system an$
hence is not app#ica-#e to a## forms of in6estment,
'nsystematic ris" is associate$ .ith partic/#ar form of in6estment, S/ppose .e in6est in
stoc" mar"et an$ the mar"et fa##s0 then on#y o/r in6estment in e8/ity +ets affecte$ OR if .e
ha6e p#ace$ a fi7e$ $eposit in partic/#ar -an" an$ -an" +oes -an"r/pt0 than .e on#y
#ose money p#ace$ in that -an", !hi#e there is no .ay to "eep a.ay from ris"0 .e can
a#.ays re$/ce the impact of ris", Di6ersification he#ps in re$/cin+ the impact of
/nsystematic ris", If o/r in6estment is $istri-/te$ across 6ario/s asset c#asses0 the impact of
/nsystematic ris" is re$/ce$,
If .e ha6e p#ace$ fi7e$ $eposit in se6era# -an"s0 then e6en if one of the -an"s +oes
-an"r/pt o/r entire fi7e$ $e posit in6estment is not #ost, Simi#ar#y if o/r e8/ity
in6estment is in Tata Motors0 HLL0 Infosys0 a$6erse ne.s a-o/t Infosys .i## on#y
impact in6estment in Infosys0 a## other stoc"s .i## not ha6e any impact , To re$/ce the
impact of systematic ris"0 .e sho/#$ in6est re+/#ar#y, By in6estin+ re+/#ar#y0 .e a6era+e o/t
the impact of ris", Mutual fund, as an investment vehicle gives us benefit of both
diversification and averaging, Portfo#io of m/t/a# f/n$s consists of m/#tip#e sec/rities
an$ hence a$6erse ne.s a-o/t sin+#e sec/rity .i## ha6e nomina# impact on o6era## portfo#io,
By systematica##y in6estin+ in m/t/a# f/n$0 .e +et -enefit of r/pee cost a6era+in+, M/t/a#
f/n$ as an in6estment 6ehic#e he#ps re$/ce0 -oth0 systematic as .e## a s /nsystematic ris"
,.-.2 A STUDY O' PORT'OLIO ANALYSIS 'ROM T/E POINT O'
'UND MANAGER3
Effecti6e /se of portfo#io mana+ement $iscip#ines impro6es c/stomer satisfaction0 re$/ces
the n/m-er of ris"s pro-#ems0 an$ increases s/ccess, The +oa# of portfo#io ana#ysis is to
rea#i@e these same -enefits at the portfo#io #e6e# -y app#yin+ a consistent str/ct/re$
mana+ement approach,
The consi$erations /n$er#yin+ the portfo#io ana#ysis is a matter of concern to the f/n$
mana+ers0 in6estors0 an$ researchers a#i"e, This st/$y attempts to ans.er t.o 8/estions
re#atin+ to the portfo#io ana#ysisJ
Ma"e an a6era+e Gor fairH ret/rn for the #e6e# of ris" in the portfo#io
To fin$ o/t the portfo#io .hich -est meets the p/rpose of the in6estor,
At a minim/m0 any comprehensi6e m/t/a# f/n$ se#ection an$ ana#ysis approach sho/#$
inc#/$e the fo##o.in+ +enera#i@e$ processesJ
F/n$ se#ection
F/n$ prioriti@eK reprioriti@e
Se#ection of the accepta-#e an$ re8/ire$ f/n$
F/n$ ana#ysin+ an$ monitorin+
Correcti6e action mana+ement
The f/n$ portfo#io ana#ysis +i6es the a-i#ity to se#ect f/n$s that are a#i+ne$ .ith the in6estorAs
strate+ies an$ o-ecti6es, It he#ps the f/n$ mana+er to ma"e the -est /se of a6ai#a-#e
opport/nities -y app#yin+ to the hi+hest priority of the in6estor, A f/n$ mana+er can re+/#ar#y
assess ho. sec/rities an$ stoc"s are contri-/tin+ to portfo#io hea#th an$ can ma"e the
correcti6e action to "eep the portfo#io in comp#iance .ith the in6estorAs interest an$
o-ecti6es,
M/t/a# f/n$s $o not $etermine ris" preference, Ho.e6er0 once in6estor $etermines hisKher
ret/rn preferences0 heKshe can choose a m/t/a# f/n$ a #ar+e an$ +ro.in+ 6ariety of a#ternati6e
f/n$s $esi+ne$ to meet a#most any in6estment +oa#, St/$ies ha6e sho.e$ that the f/n$s
+enera##y .ere consistent in meetin+ in6estors state$ +oa#s for in6estment strate+ies0 ris"0 an$
ret/rn, The maor -enefit of the m/t/a# f/n$ is to $i6ersify the portfo#io to e#iminate
/nsystematic ris", The instant $i6ersification of the f/n$s is especia##y -eneficia# to the sma##
in6estors .ho $o not ha6e the reso/rces to ac8/ire 522 shares of 51 or 5? $ifferent iss/es
re8/ire$ to re$/ce /nsystematic ris",
M/t/a# f/n$s ha6e +enera##y maintaine$ the sta-i#ity of their corre#ation .ith the mar"et
-eca/se of reasona-#y .e## $i6ersifie$ portfo#ios, There are some meas/res for the ana#ysis
an$ each of them pro6i$es /ni8/e perspecti6es, These meas/res e6a#/ate the $ifferent
components of performance,
,.-.4 MEASURES O' RISK AND RETURN3
Ris" is 6aria-i#ity in f/t/re cash f#o.s, It is a#so "no.n as /ncertainty in the $istri-/tion of
possi-#e o/tcomes, A ris"y sit/ation is one0 .hich has some pro-a-i#ity of #oss or /ne7pecte$
res/#ts, The hi+her the pro-a-i#ity of #oss or /ne7pecte$ res/#ts is0 the +reater the ris",
It is the /ncertainty that an in6estment .i## earn its e7pecte$ rate of ret/rn, For an in6estor0
e6a#/atin+ a f/t/re in6estment a#ternati6e e7pects or anticipates a certain rate of ret/rn is 6ery
important,
Portfo#io ris" mana+ement inc#/$es processes that i$entify0 ana#yse0 respon$ to0 trac"0 an$
contro# any ris" that .o/#$ pre6ent the portfo#io from achie6in+ its -/siness o-ecti6es, These
processes sho/#$ inc#/$e re6ie.s of proect #e6e# ris"s .ith ne+ati6e imp#ications for the
portfo#io0 ens/rin+ that the proect mana+er has a responsi-#e ris" miti+ation p#an,
A$$itiona##y0 it is important to $o a conso#i$ate$ ris" assessment for the portfo#io o6era## to
$etermine .hether it is .ithin the a#rea$y specifie$ #imits, Since portfo#io an$ their
en6ironments are $ynamic0 mana+ers sho/#$ re6ie. an$ /p$ate their portfo#io ris"
mana+ement p#ans on a re+/#ar -asis thro/+h the f/n$ #ife cyc#e,
Simple measure of returns:
The ret/rn on m/t/a# f/n$ in6estment inc#/$es -oth income Gin the form of $i6i$en$s or
in6estment paymentsH an$ capita# +ains or #osses Gincrease or $ecrease in the 6a#/e of a
sec/rityH, The ret/rn is ca#c/#ate$ -y ta"in+ the chan+e in a f/n$As (et Asset Va#/e0 .hich is
the mar"et 6a#/e of sec/rities the f/n$ ho#$s $i6i$e$ -y the n/m-er of the f/n$As shares
$/rin+ a +i6en time perio$0 ass/min+ the rein6estment a## income an$ capita# +ains
$istri-/tions0 an$ $i6i$in+ it -y the ori+ina# net asset 6a#/e, The ret/rn is ca#c/#ate$ net of
mana+ement fees an$ other e7penses char+e$ to the f/n$, Th/s0 a f/n$As month#y ret/rn can
-e e7presse$ as fo##o.sJ
Rt (NAVt- NAVt-1)/NAVt-1
!here0
Rt is the ret/rn in month t
NAVt is the c#osin+ net asset 6a#/e of the f/n$ on the #ast tra$in+ $ay of the month
NAVt-5 is the c#osin+ net asset 6a#/e of the f/n$ on the #ast $ay of the pre6io/s month
Measure of risk
In6estors are intereste$ not on#y in f/n$As ret/rn -/t a#so in ris" ta"en to achie6e those
ret/rns, So ris" can -e tho/+ht as the /ncertainty of the e7pecte$ ret/rn0 an$ /ncertainty is
+enera##y e8/ate$ .ith 6aria-i#ity, Varia-i#ity an$ the ris" are corre#ate$M hence hi+h ret/rns
.i## ten$ to hi+h 6aria-i#ity,
Standard deviation:
in simp#e terms stan$ar$ $e6iation is one of the common#y /se$ statistica# parameter to
meas/re ris"0 .hich $etermines the 6o#ati#ity of a f/n$, De6iation is $efine$ as any 6ariation
from a mean 6a#/e G/p.ar$ O $o.n.ar$H, Since the mar"ets are 6o#ati#e0 the ret/rns
f#/ct/ate e6ery $ay, Hi+h stan$ar$ $e6iation of a f/n$ imp#ies hi+h 6o#ati#ity an$ a #o.
stan$ar$ $e6iation imp#ies #o. 6o#ati#ity,
S.D. \1/T (Rt-AR)
!here0
S.D. is the perio$ic stan$ar$ $e6iation0
AR is the a6era+e perio$ic ret/rn0
T is the n/m-er of o-ser6ations in the perio$ for .hich the stan$ar$ $e6iation is -ein+
ca#c/#ate$,
Rt is the ret/rn in month t
Beta analysis: ) (Beta) Co-efficient:
Systematic ris" is meas/re$ in terms of Beta0 .hich represents f#/ct/ations in the (AV of the
f/n$ 6is4S46is mar"et, The more responsi6e the (AV of a M/t/a# F/n$ is to the chan+es in
the mar"etM hi+her .i## -e its -eta, Beta is ca#c/#ate$ -y re#atin+ the ret/rns on a M/t/a# F/n$
.ith the ret/rns in the mar"et, !hi#e /nsystematic ris" can -e $i6ersifie$ thro/+h
in6estments in a n/m-er of instr/ments0 systematic ris" cannot, By /sin+ the ris" ret/rn
re#ationship0 .e try to assess the competiti6e stren+th of the M/t/a# F/n$s 6is4S46is one
another in a -etter .ay,
(Beta) is calculated as N (XY) - XY]/ N (X
2
) - (X)
2
]
Beta is /se$ to meas/re the ris", It -asica##y in$icates the #e6e# of 6o#ati#ity associate$ .ith
the f/n$ as compare$ to the mar"et, In case of f/n$s0 as compare$ to the mar"et, In case of
f/n$s0 -eta .o/#$ in$icate the 6o#ati#ity a+ainst the -enchmar" in$e7, It is /se$ as a short
term $ecision ma"in+ too#, A -eta that is +reater than 5 means that the f/n$ is more 6o#ati#e
than the -enchmar" in$e70 .hi#e a -eta of #ess than 5 means that the f/n$ is more 6o#ati#e
than the -enchmar" in$e7, A f/n$ .ith a -eta 6ery c#ose to 5 means the f/n$As performance
c#ose#y matches the in$e7 or -enchmar",
The s/ccess of -eta is hea6i#y $epen$ent on the corre#ation -et.een a f/n$ an$ its
-enchmar", Th/s0 if the f/n$As portfo#io $oesnAt ha6e a re#e6ant -enchmar" in$e7 then a -eta
.o/#$ -e +ross#y inappropriate, For e7amp#e if .e are consi$erin+ a -an"in+ f/n$0 .e sho/#$
#oo" at the -eta a+ainst a -an" in$e7,
R-Squared (R2):
R s8/are$ is the s8/are of QRA Gi,e,M coefficient of corre#ationH, It $escri-es the #e6e# of
association -et.een the f/nAs mar"et 6o#ati#ity an$ mar"et ris", The 6a#/e of R4 s8/are$
ran+es from2 to5, A hi+h R4 s8/are$ Gmore than 2,32H in$icates that -eta can -e /se$ as a
re#ia-#e meas/re to ana#y@e the performance of a f/n$, Beta sho/#$ -e i+nore$ .hen the r4
s8/are$ is #o. as it in$icates that the f/n$ performance is affecte$ -y factors other than the
mar"ets,
For e7amp#eJ
Case 5 Case 1
R1 2,B? 2,33
B 5,1 2,E
In the a-o6e ta-#eR1 is #ess than 2,32 in case 50 imp#ies that it .o/#$ -e .ron+ to mention
that the f/n$ is a++ressi6e on acco/nt of hi+h -eta, In case 10 the r4 s8/are$ is more than 2,3?
an$ -eta 6a#/e is 2,E, it means that this f/n$ is #ess a++ressi6e than the mar"et,
Portfolio turnover ratioJ
Portfo#io t/rno6er is a meas/re of a f/n$Is tra$in+ acti6ity an$ is ca#c/#ate$ -y $i6i$in+ the
#esser of p/rchases or sa#es Ge7c#/$in+ sec/rities .ith mat/rities of #ess than one yearH -y the
a6era+e month#y net assets of the f/n$, T/rno6er is simp#y a meas/re of the percenta+e of
portfo#io 6a#/e that has -een transacte$0 not an in$ication of the percenta+e of a f/n$Is
ho#$in+s that ha6e -een chan+e$, Portfo#io t/rno6er is the p/rchase an$ sa#e of sec/rities in a
f/n$Is portfo#io, A ratio of 522L0 then0 means the f/n$ has -o/+ht an$ so#$ a## its positions
.ithin the #ast year, T/rno6er is important .hen in6estin+ in any m/t/a# f/n$0 since the
amo/nt of t/rno6er affects the fees an$ costs .ithin the m/t/a# f/n$,
Total expenses ratioJ
A meas/re of the tota# costs associate$ .ith mana+in+ an$ operatin+ an in6estment f/n$ s/ch
as a m/t/a# f/n$, These costs consist primari#y of mana+ement fees an$ a$$itiona# e7penses
s/ch as tra$in+ fees0 #e+a# fees0 a/$itor fees an$ other operationa# e7penses, The tota# cost of
the f/n$ is $i6i$e$ -y the f/n$Is tota# assets to arri6e at a percenta+e
amo/nt0 .hich represents the TERJ
Total expense ratio (Total fund Costs/ Total fund Assets)
The most important and widely used measures of performance are:
The Sharpe Meas/re
The TreynorAMeas/re
:enson Mo$e#
Fama Mo$e#
The Sharpe Measure :-
In this mo$e#0 performance of a f/n$ is e6a#/ate$ on the -asis of Sharpe Ratio0 .hich is a
ratio of ret/rns +enerate$ -y the f/n$ o6er an$ a-o6e ris" free rate of ret/rn an$ the tota# ris"
associate$ .ith it,
Accor$in+ to Sharpe0 it is the tota# ris" of the f/n$ that the in6estors are concerne$ a-o/t, So0
the mo$e# e6a#/ates f/n$s on the -asis of re.ar$ per /nit of tota# ris", Sym-o#ica##y0 it can -e
.ritten asJ
Sharpe Ratio (Si) (Ri - Rf)/Si
!here0
Si is stan$ar$ $e6iation of the f/n$0
Ri represents ret/rn on f/n$0 an$
Rf is ris" free rate of ret/rn,
!hi#e a hi+h an$ positi6e Sharpe Ratio sho.s a s/perior ris"4a$/ste$ performance of a f/n$0
a #o. an$ ne+ati6e Sharpe Ratio is an in$ication of /nfa6o/ra-#e performance,
The Treynor Measure:
De6e#ope$ -y :ac" Treynor0 this performance meas/re e6a#/ates f/n$s on the -asis of
TreynorIs In$e7,
This In$e7 is a ratio of ret/rn +enerate$ -y the f/n$ o6er an$ a-o6e ris" free rate of ret/rn
G+enera##y ta"en to -e the ret/rn on sec/rities -ac"e$ -y the +o6ernment0 as there is no cre$it
ris" associate$H0 $/rin+ a +i6en perio$ an$ systematic ris" associate$ .ith it G-etaH,
Sym-o#ica##y0 it can -e represente$ asJ
Treynor's Index (Ti) (Ri - Rf)/Bi.
!here0
Ri represents ret/rn on f/n$0
Rf is ris" free rate of ret/rn0 an$
Bi is -eta of the f/n$,
A## ris"4a6erse in6estors .o/#$ #i"e to ma7imi@e this 6a#/e, !hi#e a hi+h an$ positi6e
TreynorIs In$e7 sho.s a s/perior ris"4a$/ste$ performance of a f/n$0 a #o. an$ ne+ati6e
TreynorIs In$e7 is an in$ication of /nfa6ora-#e performance,
Comparison of Sharpe and Treynor
Sharpe an$ Treynor meas/res are simi#ar in a .ay0 since they -oth $i6i$e the ris" premi/m -y
a n/merica# ris" meas/re, The tota# ris" is appropriate .hen .e are e6a#/atin+ the ris" ret/rn
re#ationship for .e##4$i6ersifie$ portfo#ios, On the other han$0 the systematic ris" is the
re#e6ant meas/re of ris" .hen .e are e6a#/atin+ #ess than f/##y $i6ersifie$ portfo#ios or
in$i6i$/a# stoc"s, For a .e##4$i6ersifie$ portfo#io the tota# ris" is e8/a# to systematic ris",
Ran"in+s -ase$ on tota# ris" GSharpe meas/reH an$ systematic ris" GTreynor meas/reH sho/#$
-e i$entica# for a .e##4$i6ersifie$ portfo#io0 as the tota# ris" is re$/ce$ to systematic ris",
Therefore0 a poor#y $i6ersifie$ f/n$ that ran"s hi+her on Treynor meas/re0 compare$ .ith
another f/n$ that is hi+h#y $i6ersifie$0 .i## ran" #o.er on Sharpe Meas/re,
1enson Model:
:ensonIs mo$e# proposes another ris" a$/ste$ performance meas/re, This meas/re .as
$e6e#ope$ -y Michae# :enson an$ is sometimes referre$ to as the $ifferentia# Ret/rn Metho$,
This meas/re in6o#6es e6a#/ation of the ret/rns that the f/n$ has +enerate$ 6s, the ret/rns
act/a##y e7pecte$ o/t of the f/n$5 +i6en the #e6e# of its systematic ris", The s/rp#/s -et.een
the t.o ret/rns is ca##e$ A#pha0 .hich meas/res the performance of a f/n$ compare$ .ith the
act/a# ret/rns o6er the perio$, Re8/ire$ ret/rn of a f/n$ at a +i6en #e6e# of ris" GBiH can -e
ca#c/#ate$ asJ
E(Ri) Rf + Bi (Rm - Rf)
!here0
E(Ri) represents e7pecte$ ret/rn on f/n$0 an$
Rm is a6era+e mar"et ret/rn $/rin+ the +i6en perio$0
Rf is ris" free rate of ret/rn0 an$
Bi is Beta $e6iation of the f/n$,
After ca#c/#atin+ it0 A#pha can -e o-taine$ -y s/-tractin+ re8/ire$ ret/rn from the act/a#
ret/rn of the f/n$,
op Ri - Rf + Bi (Rm - Rf) ]
Hi+her a#pha represents s/perior performance of the f/n$ an$ 6ice 6ersa, Limitation of this
mo$e# is that it consi$ers on#y systematic ris" not the entire ris" associate$ .ith the f/n$ an$
an or$inary in6estor cannot miti+ate /nsystematic ris"0 as his "no.#e$+e of mar"et is
primiti6e,
Fama Model:
The E/+ene Fama mo$e# is an e7tension of :enson mo$e#, This mo$e# compares the
performance0 meas/re$ in terms of ret/rns0 of a f/n$ .ith the re8/ire$ ret/rn commens/rate
.ith the tota# ris" associate$ .ith it, The $ifference -et.een these t.o is ta"en as a meas/re
of the performance of the f/n$ an$ is ca##e$ (et Se#ecti6ity,
The (et Se#ecti6ity represents the stoc" se#ection s"i## of the f/n$ mana+er0 as it is the e7cess
ret/rns o6er an$ a-o6e the ret/rn re8/ire$ to compensate for the tota# ris" ta"en -y the f/n$
mana+er, Hi+her 6a#/e of .hich in$icates that f/n$ mana+er has earne$ ret/rns .e## a-o6e
the ret/rn commens/rate .ith the #e6e# of ris" ta"en -y him,
Selectivity: meas/res the a-i#ity of the portfo#io mana+er to earn a ret/rn that is consistent
.ith the portfo#ioAs mar"et GsystematicH ris", The se#ecti6ity meas/re isJ
Ri - Rf + Bi (Rm - Rf) ]
Diversification: meas/res the e7tent to .hich the portfo#io may not ha6e -een comp#ete#y
$i6ersifie$, Di6ersification is meas/re$ asJ
Rf +(Rm - Rf)(oi/ om)]-Rf + Bi (Rm - Rf)]
If the portfo#io is comp#ete#y $i6ersifie$0 contains no /nsystematic ris"0 then $i6ersification
meas/re .o/#$ -e @ero, A positi6e $i6ersification meas/re in$icates that the portfo#io is not
comp#ete#y $i6ersifie$M it .o/#$ contain /nsystematic ris" an$ it represents the e7tra ret/rn
that the portfo#io sho/#$ earn for not -ein+ comp#ete#y $i6ersifie$, The performance of the
portfo#io can -e meas/re$ asJ
Net selectivity selectivity - diversification
(et se#ecti6ity meas/res0 ho. .e## the portfo#io man+ers $i$ mana+er $i$ at earnin+ a fair
ret/rn for the portfo#ioA systematic ris" an$ $i6ersifyin+ a.ay /nsystematic ris", Positi6e net
se#ecti6ity in$icates that the f/n$ earne$ a -etter ret/rn,
The comparison0 $one -ase$ on sharpe ratio0 Treynor meas/re0 :ensen a#pha0 an$ Fema
meas/re notifies that the portfo#io performance can -e e6a#/ate$ on the fo##o.in+ -asisJ
Sahrpe ratioJ meas/res the re.ar$ to tota# ris" tra$e off
TreynorJ meas/res the re.ar$ to systematic ris" tra$e off
1ensen`s alpha: meas/res the a6era+e ret/rn o6er an$ a-o6e that pre$icte$,
Fema measure: meas/res ret/rn of portfo#io for its systematic ris" an$ $i6ersifyin+ a.ay
/nsystematic ris",
Amon+ the a-o6e performance meas/res0 t.o mo$e#s name#y0 Treynor meas/re an$ :enson
mo$e# /se Systematic ris" is -ase$ on the premise that the 'nsystematic ris" is $i6ersifia-#e,
These mo$e#s are s/ita-#e for #ar+e in6estors #i"e instit/tiona# in6estors .ith hi+h ris" ta"in+
capacities as they $o not face pa/city of f/n$s an$ can in6est in a n/m-er of options to $i#/te
some ris"s, For them0 a portfo#io can -e sprea$ across a n/m-er of stoc"s an$ sectors,
Ho.e6er0 Sharpe meas/re an$ Fama mo$e# that consi$er the entire ris" associate$ .ith f/n$
are s/ita-#e for sma## in6estors0 as the or$inary in6estor #ac"s the necessary s"i## an$
reso/rces to $i6ersify, Moreo6er0 the se#ection of the f/n$ on the -asis of s/perior stoc"
se#ection a-i#ity of the f/n$ mana+er .i## a#so he#p in safe+/ar$in+ the money in6este$ to a
+reat e7tent, The in6estment in f/n$s that ha6e +enerate$ -i+ ret/rns at hi+her #e6e#s of ris"s
#ea6es the money a## the more prone to ris"s of a## "in$s that may e7cee$ the in$i6i$/a#
in6estorsI ris" appetite,
PART-II
RESEARC/ MET/ODOLOGY
-., NEED 'OR T/E STUDY
The M/t/a# F/n$ Companies perio$ica##y -/i#$ /p a st/$y0 .hich can prioriti@e an$ ana#yse
the portfo#io of the m/t/a# f/n$s, This st/$y is he#pf/# in ha6in+ a comparison amon+ the
m/t/a# f/n$s -ase$ on the ris" -earin+ capacity an$ e7pecte$ ret/rn of the in6estor an$ .i##
a#so carry o/t an ana#ysis of the portfo#io of the se#ecte$ m/t/a# f/n$,
The m/t/a# f/n$ in$/stry is +ro.in+ +#o-a##y an$ ne. pro$/cts are emer+in+ in the mar"et
.ith a## capti6atin+ promises of pro6i$in+ hi+h ret/rn, It has -ecome $iffic/#t for the
in6estors to choose the -est f/n$ for their nee$s or in other .or$s to fin$ o/t a f/n$ .hich
.i## +i6e ma7im/m ret/rn for minim/m ris", Therefore0 they t/rn to their financia# a$6iser to
+et precise $irect in6estment, Hence0 the company as"e$ me to prepare a mo$e#0 .hich .i##
faci#itate them to ana#yse the f/n$ an$ to ha6e reasona-#e estimation for the f/n$
performance,
The $ri6in+ force of M/t/a# F/n$s is the Qsafety of the principa#A +/arantee$0 p#/s the a$$e$
a$6anta+e of capita# appreciation to+ether .ith the income earne$ in the form of interest or
$i6i$en$, The 6ario/s schemes of M/t/a# F/n$s pro6i$e the in6estor .ith a .i$e ran+e of
in6estment options accor$in+ to his ris" -earin+ capacities an$ interest -esi$esM they a#so +i6e
han$y ret/rn to the in6estor, M/t/a# F/n$s offers an in6estor to in6est e6en a sma## amo/nt of
money0 each M/t/a# F/n$ has a $efine$ in6estment o-ecti6e an$ strate+y, M/t/a# F/n$s
schemes are mana+e$ -y respecti6e asset mana+e$ companies0 sponsore$ -y financia#
instit/tions0 -an"s0 pri6ate companies or internationa# firms, A M/t/a# F/n$ is the i$ea#
in6estment 6ehic#e for to$ayAs comp#e7 an$ mo$ern financia# scenario,
The st/$y is -asica##y ma$e to ana#y@e the 6ario/s open4en$e$ e8/ity schemes of HDFC
Asset Mana+ement Company to hi+h#i+ht the $i6ersity of in6estment that M/t/a# F/n$ offer,
Th/s0 thro/+h the st/$y one .o/#$ /n$erstan$ ho. a common person co/#$ fr/itf/##y con6ert
a mea+re amo/nt into +reat penny -y .ise#y in6estin+ into the ri+ht scheme accor$in+ to his
ris" ta"in+ a-i#ities,
Sharpe ratio is a performance meas/re0 .hich ref#ects the e7cess ret/rn earne$ on a portfo#io
per /nit of its tota# ris" Gstan$ar$ $e6iationH, Treynor meas/re in$icates the ris" premi/m
ret/rn per /nit ris" of the portfo#io, !hi#e :ensen a#pha ta#"s a-o/t the $e6iation of the act/a#
ret/rn from its e7pecte$ one, Fema meas/re $ecomposes the portfo#io tota# ret/rn into t.o
main componentsJ systematic ret/rn an$ the /nsystematic ret/rn, It $etermines .hether the
portfo#io is perfect#y $i6ersifie$ or not, Hence0 it is a si+nificant meas/re to e6a#/ate the
performance of the f/n$ mana+er,
The ana#ysis of the f/n$ portfo#io has -een $one to fin$ o/t the inf#/ence of the top ho#$in+s
on the performance of the f/n$, A## these meas/res +i6e fair imp#ication an$ res/#ts a-o/t the
portfo#io performance an$ can sho. the +ro/n$ rea#ity to a rationa# in6estor,
-.- O5<ECTIVE O' T/E STUDY
!hether the +ro.th oriente$ M/t/a# F/n$ are earnin+ hi+her ret/rns than the
-enchmar" ret/rns Gor mar"et Portfo#ioKIn$e7 ret/rnsH in terms of ris",
!hether the +ro.th oriente$ m/t/a# f/n$s are offerin+ the a$6anta+es of
Di6ersification0 Mar"et timin+ an$ Se#ecti6ity of Sec/rities to their in6estors
This st/$y pro6i$es a proper in6esti+ation for #o+ica# an$ reasona-#e comparison an$
se#ection of the f/n$s,
It a#so assists in ana#ysin+ the portfo#io of the se#ecte$ f/n$s,
-.. LIMITATIONS O' T/E STUDY
The st/$y is #imite$ on#y to the ana#ysis of $ifferent schemes an$ its s/ita-i#ity to
$ifferent in6estors accor$in+ to their ris"4ta"in+ a-i#ity,
The st/$y is -ase$ on secon$ary $ata a6ai#a-#e from month#y fact sheets0 .e-sites an$
other -oo"s0 as primary $ata .as not accessi-#e,
The st/$y is #imite$ -y the $etai#e$ st/$y of si7 schemes of HDFFC,
Many in6estors are a## price ta"ers,
The ass/mption that a## in6estors ha6e the same information an$ -e#iefs a-o/t the
$istri-/tion of ret/rns,
Ban"s are free to accept $eposits at any interest rate .ithin the cei#in+s fi7e$ -y the
Reser6e Ban" of In$ia an$ interest rate can 6ary from c#ient to c#ient, Hence0 there
can -e inacc/racy in the ris" free rates,
The st/$y e7c#/$es the entry an$ the e7it #oa$s of the m/t/a# f/n$s,
-.0 DATA COLLECTION
The Metho$o#o+y in6o#6es the se#ecte$ Open4En$e$ e8/ity schemes of HDFC m/t/a# f/n$
for the p/rpose of ris" ret/rn an$ comparati6e ana#ysis the competiti6e f/n$s, The $ata
co##ecte$ for this proect is -asica##y from secon$ary so/rces0 they areM
The month#y fact sheets of HDFC AMC f/n$ ho/se an$ research reports from -an"s,
The (AVs of the f/n$s ha6e -een ta"en from AMFI .e-sites for the perio$ startin+ from D5
st
an 122= to D5
st
May0 122E,
For the Benchmar" prices0 $ata has -een ta"en from BSE an$ (SE sites,
Part-III
CASE ANALYSIS
.., DATA INTERPRETATION
Risk returns analysis and comparative study of funds
In this section0 a samp#e of HDFC e8/ity re#ate$ f/n$s ha6e -een st/$ie$0 e6a#/ate$ an$
ana#yse$, This st/$y co/#$ faci#itate to +et a fair comparison,
The e7pectations of the st/$y are to +i6e 6a#/e to the f/n$s -y "eepin+ the ris" in the 6ie.,
Here e8/ity f/n$s are ta"en as they -ear hi+h ret/rn .ith hi+h ris",
Fo##o.in+ are the pro$/cts of HDFC M/t/a# F/n$0 .hich ha6e -een ta"en the e6a#/ation
p/rpose,
HDFC E8/ity F/n$ <ro.th option
HDFC Capita# B/i#$er
HDFC <ro.th F/n$
HDFC Lon+ Term A$6anta+e F/n$
HDFC Top 122 F/n$
HDFC EQUITY FUND
Investment Objective
The in6estment o-ecti6e of the Scheme is to achie6e capita# appreciation,
Basic Scheme Information
Table:3.1
(at/re of Scheme Open En$e$ <ro.th Scheme
Inception Date :an 250 5EE?
OptionKP#an Di6i$en$ Option0 <ro.th Option0
Entry Load
Gp/rchase K a$$itiona# p/rchase K s.itch4
inH
NIL
G!ith effect from A/+/st 50 122EH
E7it Loa$,
Gas a L of the App#ica-#e (AVH
(i#
Minim/m App#ication Amo/nt Rs,?222 an$ in m/#tip#es of Rs,522
thereof to open an acco/nt K fo#io,
A$$itiona# p/rchases is Rs, 5222 an$ in
m/#tip#es of Rs, 522 thereof
Loc"4In4Perio$ (i#
(et Asset Va#/e Perio$icity E6ery B/siness Day
Re$emption Procee$s (orma##y $espatche$ .ithin D B/siness
$ays
Investment Pattern
The asset a##ocation /n$er the Scheme .i## -e as fo##o.sJ
Table:3.2
SR (O, T)PE OF I(STR'ME(TS (ORMAL
ALLOCATIO(
GLof net assetH
RIS&
PROFILE
5 E8/ities O E8/ities re#ate$
instr/ments
324522 Me$i/m to hi+h
1 De-t sec/rities0 money mar"et
instr/ments O cash
24522 Lo. to me$i/m
In6estment in Sec/ritise$ $e-t0 if /n$erta"en0 .o/#$ not e7cee$ 12L of the net assets of the
scheme, The Scheme may a#so in6est /pto 1?L of net assets of the Scheme in $eri6ati6es
s/ch as F/t/res O Options an$ s/ch other $eri6ati6e instr/ments as may -e intro$/ce$ from
time to time for the p/rpose of he$+in+ an$ portfo#io -a#ancin+ an$ other /ses as may -e
permitte$ /n$er the Re+/#ations,
Investment Strategy & Risk Control
In or$er to pro6i$e #on+ term capita# appreciation0 the Scheme .i## in6est pre$ominant#y in
+ro.th companies, Companies se#ecte$ /n$er this portfo#io .o/#$ as far as practica-#e
consist of me$i/m to #ar+e si@e$ companies .hichJ are #i"e#y achie6e$ a-o6e a6era+e +ro.th
than the in$/stryM enoy $istinct competiti6e a$6anta+es0 an$ ha6e s/perior financia#
stren+ths,
The aim .i## -e to -/i#$ a portfo#io0 .hich represents a cross4section of the stron+ +ro.th
companies in the pre6ai#in+ mar"et, In or$er to re$/ce the ris" of 6o#ati#ity0 the Scheme .i##
$i6ersify across maor in$/stries an$ economic sectors,
Benchmark Index J SOP C(R ?22, HDFC E8/ity0 .hich is -enchmar"e$ to SOP C(R ?22
In$e7 is not sponsore$0 en$orse$0 so#$ or promote$ -y In$ian In$e7 Ser6ice O Pro$/cts
Limite$ GIISLH,
Fund Manager J Mr, Prashant :ain
HDFC ET'IT) F'(D4<RO!TH OPTIO(
Table:3.3
(AV SOP
C(R
?22
Ri Rm Ri Rm Rm4Rm
a6
s8rGRm4
Rm a6H
Rm1
122=
:A(
5?5,D3E >3EE,DE
FEB 5>5,113 >?2>,=D 4B,=553? 43,2??1E ?>,2B?3= 4E,23B> 31,?B1B3 B>,33=B=
MAR 5>1,B21 >B2?,3E 2,E=13E? 1,1>?B> 1,53>==5 5,15>?1= 5,>=?2== ?,2>13E=
APL 5?5,5B >ED>,>B B,225D53 =,5DDBE1 >1,355?B B,521?3 D=,1>5>3 ?2,33E?B
MA) 5B5,135 ?53?,E? B,BE???> ?,2EBB2B D>,51>B >,2B?>E> 5B,?131> 1?,E=?>
:'( 5B?,D5D ?11D,31 1,>EEE3> 2,=D21>1 5,31??E> 42,D223= 2,2E2?1D 2,?DD1?>
:'L) 5=1,D1? ?>3D,1? >,1>5B?5 >,EBB13E 15,2B?1B D,ED?5== 5?,>3?B1 1>,BB>2D
A'< 5B3,31= ?>55,1E 41,21E3E 45,D51DB 1,BBDE>5 41,D>D>= ?,>E53BD 5,=111E
SEP 531,3> B2E>,55 3,D2215D 51,B53>D 52>,=D?= 55,?3=D1 5D>,1BB 5?E,11>3
OCT 152,D =5BD,D 5?,253B 5=,?>>B? 1BD,>E?E 5B,?5D?D 1=1,BEB3 D2=,35>B
(OV 12B,5=B BEE=,B 45,EB525 41,D5D53 >,?DB5B> 4D,D>>1E 55,53>1E ?,D?23
DEC 11D,D1> =>B5,>3 3,D5=5BB B,B1E5D ??,5D??= ?,?E3253 D5,DD=3 >D,E>?DB
1223
:A(
533,>1 B1>?,>? 45?,B1ED 45B,1E=> 1?>,=5== 45=,D13? D22,1=3B 1B?,B2B?
FEB 53=,?E> BD?B,E1 42,>D3D3 5,=3>35E 42,=31>D 2,=?D=2= 2,?B32=? D,53??3
MAR 5B?,=33 ?=B1,33 455,B1> 4E,D>>=3 523,B1>5 452,D=?E 52=,B?E5 3=,D1>3B
APL 5=3,5E5 B13E,2= =,>351>5 E,5D2B=3 B3,D233 3,2EE?BB B?,B21EB 3D,DBE13
MA) 5BE,B2? ?ED=,35 4>,353>D 4?,?3?1? 1B,E512E 4B,B5BDB >D,==B5E D5,5E>E=
:'( 5>D,5=5 >E1E,E3 45?,?3?B 45B,E=D5 1B>,?DBD 453,22>1 D1>,5?5> 133,23?E
:'L) 5?5,=5? ?1E=,>= ?,EB=B3E =,>?>533 >>,>3>13 B,>1D2=B >5,1??E5 ??,?B>ED
A'< 5?3,E1> ?DD=,13 >,=?5B=D 2,=?5>E5 D,?=23D3 42,1=EB1 2,2=3533 2,?B>=D3
SEP 5>?,=15 >32=,1 43,D2==> 4E,ED5B? 31,?2EB1 452,EB13 512,5311 E3,BD=B3
OCT 552,D11 D?DE,?= 41>,1E1D 41B,DBE> B>2,?=D3 41=,>22? =?2,=33D BE?,D>??
(OV 525,323 DD=E,?D 4=,=5=>5 4>,?15>? D>,3EDE 4?,??1?= D2,3D2E3 12,>>D?>
DEC 551,D== DBD?,3= 52,D35D5 =,?3?2=3 =3,=>D21 B,??DEBB >1,E?>>= ?=,?DD>5
122E
:A(
52D,=?> D?D3,?= 4=,B=D13 41,B=B55 12,?D>?B 4D,=2=1D 5D,=>D?1 =,5B5?31
FEB E3,5BD D>2D,DD 4?,D33=5 4D,31533 12,?E?25 4>,3?1EE 1D,??5?B 5>,B2B=E
MAR 523,3?1 D=12,?5 52,33E2D E,D5EBEB 525,>31? 3,133?3> B3,=22B1 3B,3?B=D
APL 51=,2E= >1=3,?> 5B,=B51E 5>,EE3=? 1?5,DE3> 5D,EB=B> 5E?,2E>E 11>,EB1?
MA) 5BE,3E= ?>32,55 DD,B=?2= 13,23DB? E>?,=53B 1=,2?1?D =D5,3DEB =33,BE55
Tota# 1E,==B= 13,3=55> D?DD,>BB 2 D>BE,>5= D>EE,53B
a6era+e 5,2BD>?> 5,2D5551 51B,5E?1 2 51D,E2==
Figure:3.1
omU V51D,E2==
U55,5D1DE
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U GE3ED=,2>=4 3?E,B3=1HKG E=E==,15>4 3DD,?>1B>H
U E32==,DBK E=5>D,B=1
U 5,22EB55>
Table:3.4
Ri Rm Ri4Rm De6 frm a6e s8 of De6 frm a6
122=
:A(
FEB 4B,=553? 43,2??1E 5,D>D>> 45,D555 5,=53E3
MAR 2,E=13E? 1,1>?B> 45,1=1=> 5,D2?23B 5,=2D1?
APL B,225D53 =,5DDBE1 45,5D1D= 5,5B>=5? 5,D?B?B5
MA) B,BE???> ?,2EBB2B 5,?E3E>3 45,?BBB5 1,>?>1?B
:'( 1,>EEE3> 2,=D21>1 5,=BE=>1 2,=?BE3 2,?=D253
:'L) >,1>5B?5 >,EBB13E 42,=1>B> 2,=?BE3 2,?=D253
A'< 41,21E3E 45,D51DB 42,=5=?D 2,=>E3BB 2,?B1D
SEP 3,D2215D 51,B53>D 4>,D5311 >,D?2?B1 53,E1=DE
OCT 5?,253B 5=,?>>B? 41,?1B2? 1,??3DE1 B,?>?DB=
(OV 45,EB525 41,D5D53 2,D?15=1 42,D5E3D 2,5211E5
DEC 3,D5=5BB B,B1E5D 5,B332DB 45,B??BE 1,=>5D1>
1223
:A(
45?,B1ED 45B,1E=> 2,BB351= 42,BD?=E 2,>2>11D
FEB 42,>D3D3 5,=3>35E 41,11D1 1,1???>D ?,23=>=?
MAR 455,B1> 4E,D>>=3 41,1=E1B 1,D55B2> ?,D>D?55
APL =,>351>5 E,5D2B=3 45,B>E>> 5,B35==3 1,313D==
MA) 4>,353>D 4?,?3?1? 2,=BB31 42,=D>>3 2,?DE>?E
:'( 45?,?3?B 45B,E=D5 5,D3=>B= 45,D??5D 5,3DBDBB
:'L) ?,EB=B3E =,>?>533 45,>3B? 5,?533>5 1,D2B3=3
A'< >,=?5B=D 2,=?5>E5 >,222531 4D,EB=3> 5?,=>D=B
SEP 43,D2==> 4E,ED5B? 5,B1DE2B 45,?E5?B 1,?DD2=3
OCT 41>,1E1D 41B,DBE> 1,2==2E1 41,2>>=? >,53522B
(OV 4=,=5=>5 4>,?15>? 4D,5E?EB D,1131E= 52,>15E
DEC 52,D35D5 =,?3?2=3 1,=EB113 41,=BD3E =,BDE2B=
122E
:A(
4=,B=D13 41,B=B55 4>,EE=5= ?,21E?2= 1?,1E?E>
FEB 4?,D33=5 4D,31533 45,?BB3D 5,?EE5BB 1,??=DDD
MAR 52,33E2D E,D5EBEB 5,?BEDDB 45,?DBEE 1,DB1D?1
APL 5B,=B51E 5>,EE3=? 5,=B1?> 45,=D21 1,EED?33
MA) DD,B=?2= 13,23DB? ?,?E5>11 4?,??E23 D2,E2DD=
Tota# 1E,==B= 13,3=55> 2,E2??B 5B2,1D?>
a6ra+e 5,2BD>?> 5,2D5551 2,2D1D>5 ?,=11BE>
Standard Deviation for the fund`s excess return (S.D.) oiUV?,=11BE>
U1,DE115?
Sharpe Index (Si) U GRi 4 RfHKSi
U G5,2BD>?>4?HK 1,DE115?
U45,B>??=
Treynor's Index (Ti) U GRi 4 RfHKBi,
UG5,2BD>?>4?HK 5,22EB55>
U4D,3EE2=
1enson alpha (op)U Ri ;W Rf Y Bi GRm 4 RfH X
U 5,2BD>?> 4 W ?Y5,22EB55> G5,2D55514?HX
U2,2=2>33
Expected return EGRiH U Rf Y Bi GRm 4 RfH
UW ?Y5,22EB55> G5,2D55514?HX
U2,EE1EB?
Fema Measures
Selectivity URi ;W Rf Y Bi GRm 4 RfH X
U 5,2BD>?> 4 W ?Y5,22EB55> G5,2D55514?HX
U2,2=2>33
Diversification UWRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfH X
UW?YG5,2D55514?HG1,DE115?K55,5D5DEHX4 W ?Y5,22EB55> G5,2D55514?HX
UD,5?>2E1
Net selectivity selectivity- diversification
U2,2=2>334D,5?>2E
U4D,23DB
HDFC CAPITAL BUILDER FUND
Investment Objective
The In6estment O-ecti6e of the Scheme is to achie6e capita# appreciation in the #on+ term,
Basic Scheme Information
Nature of Scheme Open En$e$ <ro.th Scheme
Inception Date Fe-r/ary 250 5EE>
Option/Plan Di6i$en$ Option0<ro.th Option, The Di6i$en$ Option offers
Di6i$en$ Payo/t an$ Rein6estment Faci#ity,
Entry Load
Gp/rchase K a$$itiona#
p/rchase K s.itch4inH
NIL
G!ith effect from A/+/st 50 122EH
Exit Load
(as a of the Applicable
NAV)
GOther than Systematic
In6estment P#an GSIPHK
Systematic Transfer P#an
GSTPHH
In respect of each p/rchase K s.itch4in of 'nits #ess
than Rs, ? crore in 6a#/e0 an E7it Loa$ of 5,22L is
paya-#e if 'nits are
re$eeme$Ks.itche$4o/t .ithin 5 year from the $ate of
a##otment,
In respect of each p/rchase K s.itch4in of 'nits e8/a#
to or +reater than Rs, ? crore in 6a#/e0 no E7it Loa$ is
paya-#e,
No Exit Load shall be levied on bonus units and
units allotted on dividend reinvestment.
Minimum Application
Amount
GOther than Systematic
In6estment P#an GSIPHK
Systematic Transfer P#an
GSTPHH
For ne. in6estors JRs,?222 an$ any amo/nt thereafter,
For e7istin+ in6estors J Rs, 5222 an$ any amo/nt thereafter,
Lock-In-Period (i#
Net Asset Value Periodicity E6ery B/siness Day,
Redemption Proceeds (orma##y $espatche$ .ithin D -/siness Days
Current Expense Ratio (#)
(Effective Date 22nd May
2009)
On the first 522 crores a6era+e .ee"#y net assets 1,?2L
On the ne7t D22 crores a6era+e .ee"#y net assets 1,1?L
On the ne7t D22 crores a6era+e .ee"#y net assets 1,22L
On the -a#ance of the assets 5,=?L
Pattern
The asset a##ocation /n$er the Scheme .i## -e as fo##o.s J
Sr,(o, Asset Type GL of Portfo#ioH Ris" Profi#e
5 E8/ities an$ E8/ity Re#ate$ Instr/ments 'pto 522L Me$i/m to Hi+h
1 De-t O Money Mar"et Instr/ments (ot more than 12L Lo. to Me$i/m
In6estment in Sec/ritise$ $e-t0 if /n$erta"en0 .o/#$ not e7cee$ 12L of the net assets of the
scheme,
Investment Strategy
This Scheme aims to achie6e its o-ecti6es -y in6estin+ in stron+ companies at prices .hich
are -e#o. fair 6a#/e in the opinion of the f/n$ mana+ers,
The Scheme $efines a [stron+ company[ as one that has the fo##o.in+ characteristics J
stron+ mana+ement0 characteri@e$ -y competence an$ inte+rity
stron+ position in its -/siness Gprefera-#y mar"et #ea$ershipH
efficiency of operations0 as e6i$ence$ -y profit mar+ins an$ asset t/rno6er0 compare$
to its peers in the in$/stry
.or"in+ capita# efficiency
consistent s/rp#/s cash +eneration
hi+h profita-i#ity in$icators Gret/rns on f/n$s emp#oye$H
In common par#ance0 s/ch companies are a#so ca##e$ IB#/e ChipsI,
The Scheme $efines [reasona-#e prices[ as J
a mar"et price 8/ote that is aro/n$ D2L #o.er than its 6a#/e0 as $etermine$ -y the
$isco/nte$ 6a#/e of its estimate$ f/t/re cash f#o.s
a PKE m/#tip#e that is #o.er than the companyIs s/staina-#e Ret/rn on f/n$s emp#oye$
a PKE to +ro.th ratio that is #o.er than those of the companyIs competitors
in case of companies in cyc#ica# -/sinesses0 a mar"et price 8/ote that is aro/n$ ?2L
#o.er than its estimate$ rep#acement cost
Fund Manager
Mr. Chirag Setalvad (since Apr 2, 07)
Mr. Anand Laddha 4 De$icate$ F/n$ Mana+er 4 Forei+n Sec/rities
HDFC CAPITAL BUILDER FUND
Table:3.5
(AV SOP
C(R
?22
Ri Rm Ri Rm Rm4Rm
a6
s8rGRm4
Rm a6H
Rm1
122=
:A(
B>,>?E >3EE,DE
FEB B5,1?E >?2>,=D 4>,EB>> 43,2??1E DE,E3EB> 4E,23B> 31,?B1B
3
B>,33
=B=
MAR B2,D >B2?,3E 45,?B?>3 1,1>?B> 4D,?5??5 5,15>?1= 5,>=?2=
=
?,2>1
3E=
APL B?,353 >ED>,>B E,5?2E51 =,5DDBE1 B?,1=E=E B,521?3 D=,1>5> ?2,33
3 E?B
MA) BE,353 ?53?,E? B,2==DB? ?,2EBB2B D2,E=DE> >,2B?>E> 5B,?131
>
1?,E=
?>
:'( =D,1= ?11D,31 >,E>>13> 2,=D21>1 D,B52?1? 42,D223= 2,2E2?1
D
2,?DD
1?>
:'L) =B,E5> ?>3D,1? >,E=DD3B >,EBB13E 1>,BEE1= D,ED?5== 5?,>3?B
1
1>,BB
>2D
A'< =B,D1D ?>55,1E 42,=B3DE 45,D51DB 5,223>2? 41,D>D>= ?,>E53B
D
5,=11
1E
SEP 3D,2E B2E>,55 3,3BB1BB 51,B53>D 555,3=3> 55,?3=D1 5D>,1BB 5?E,1
1>3
OCT EB,2B5 =5BD,D 5?,B52=3 5=,?>>B? 1=D,33?= 5B,?5D?D 1=1,BEB
3
D2=,3
5>B
(OV EE,2D> BEE=,B D,2E>E23 41,D5D53 4=,5?E23 4D,D>>1E 55,53>1
E
?,D?2
3
DEC 52B,?D
3
=>B5,>3 =,?==5EB B,B1E5D ?2,1D211 ?,?E3253 D5,DD=3 >D,E>
?DB
1223
:A(
33,DB= B1>?,>? 45=,2??E 45B,1E=> 1==,EB=1 45=,D13? D22,1=3
B
1B?,B
2B?
FEB 3=,>DE BD?B,E1 45,2?25= 5,=3>35E 45,3=>DB 2,=?D=2= 2,?B32=
?
D,53?
?3
MAR =?,EB= ?=B1,33 45D,51 4E,D>>=3 511,B2D? 452,D=?E 52=,B?E
5
3=,D1
>3B
APL =E,>53 B13E,2= >,?>1=B1 E,5D2B=3 >5,>=3? 3,2EE?BB B?,B21E
B
3D,DB
E13
MA) =?,2B? ?ED=,35 4?,>355D 4?,?3?1? D2,B5D>D 4B,B5BDB >D,==B5
E
D5,5E
>E=
:'( B>,5BE >E1E,E3 45>,?5?> 45B,E=D5 1>B,D=5B 453,22>1 D1>,5?5
>
133,2
3?E
:'L) B=,113 ?1E=,>= >,=B=2EE =,>?>533 D?,?D>3B B,>1D2=B >5,1??E
5
??,?B
>ED
A'< =2,5>E ?DD=,13 >,D>>E5B 2,=?5>E5 D,1B?5B> 42,1=EB1 2,2=353
3
2,?B>
=D3
SEP BD,DB? >32=,1 4E,B=23> 4E,ED5B? EB,2>=>> 452,EB13 512,531
1
E3,BD
=B3
OCT >=,?3= D?DE,?= 41>,E221 41B,DBE> B?B,B2D 41=,>22? =?2,=33
D
BE?,D
>??
(OV >>,??B DD=E,?D 4B,DBEDE 4>,?15>? 13,=E333 4?,??1?= D2,3D2E 12,>>
3 D?>
DEC >3,2B> DBD?,3= =,3=D1D3 =,?3?2=3 ?E,=5E5D B,??DEBB >1,E?>>
=
?=,?D
D>5
122E
:A(
>?,?B> D?D3,?= 4?,125> 41,B=B55 5D,E5E?D 4D,=2=1D 5D,=>D?
1
=,5B5
?31
FEB >D,D> D>2D,DD 4>,3352? 4D,31533 53,B?>=E 4>,3?1EE 1D,??5?
B
5>,B2
B=E
MAR >B,B2> D=12,?5 =,?D55>E E,D5EBEB =2,53321 3,133?3> B3,=22B
1
3B,3?
B=D
APL ?D,22B >1=3,?> 5D,=D=21 5>,EE3=? 12B,2D35 5D,EB=B> 5E?,2E>
E
11>,E
B1?
MA) B=,B ?>32,55 1=,?D1=D 13,23DB? ==D,15E? 1=,2?1?D =D5,3DE
B
=33,B
E55
TOTAL 15,2321E 13,3=55> D1=2,21E 2 D>BE,>5
=
D>EE,
53B
AVERA
<E
2,=?13B= 5,2D5551 55B,=3B3 2 51D,E2=
=
Figure:3.2
om U V51D,E2==
11.13239
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U GE5?B2,314 B23,B55EHK GE=E==,154 3DD,?>1BH
U E2E?1,15K E=5>D,B=
U 2,EDB1B?
Table:3.6
Ri Rm Ri4Rm De6 frm
a6e
s8 of De6 frm a6
122= :A(
FEB 4>,EB>> 43,2??1E D,2E23ED 4D,DBE5> 55,D?52E
MAR 45,?B?>3 1,1>?B> 4D,35551 D,?D13=E 51,>351>
APL E,5?2E51 =,5DDBE1 1,25=11 41,1E?>B ?,1BE5?E
MA) B,2==DB? ?,2EBB2B 2,E32=?E 45,1?E 5,?3?23E
:'( >,E>>13> 2,=D21>1 >,15>2>5 4>,>E11E 12,532BD
:'L) >,E=DD3B >,EBB13E 2,22=2E= 42,13?D> 2,235>1
A'< 42,=B3DE 45,D51DB 2,?>DE= 42,31115 2,B=B2D=
SEP 3,3BB1BB 51,B53>D 4D,=?15= D,>=DE1D 51,2B35>
OCT 5?,B52=3 5=,?>>B? 45,EDD3B 5,B??B5= 1,=>52BE
(OV D,2E>E23 41,D5D53 ?,>23233 4?,B3BDD D1,DD>D3
DEC =,?==5EB B,B1E5D 2,E>32BB 45,11BD5 5,?2D3D=
1223 :A( 45=,2??E 45B,1E=> 42,=?3>? 2,>3212> 2,1D2?EB
FEB 45,2?25= 5,=3>35E 41,3D>EE 1,??B=> B,?DBE11
MAR 45D,51 4E,D>>=3 4D,==?1D D,>EBE31 51,11333
APL >,?>1=B1 E,5D2B=3 4>,?3=E1 >,D2EB=5 53,?=D1B
MA) 4?,>355D 4?,?3?1? 2,52>51 42,D31D= 2,5>B12D
:'( 45>,?5?> 45B,E=D5 1,>?=B=D 41,=D?E1 =,>3?1>?
:'L) >,=B=2EE =,>?>533 41,B3=2E 1,>233>> ?,321?D5
A'< >,D>>E5B 2,=?5>E5 D,?ED>1? 4D,3=5B= 5>,E3E3D
SEP 4E,B=23> 4E,ED5B? 2,1B232= 42,?DE2? 2,1E2?==
OCT 41>,E221 41B,DBE> 5,>BE11D 45,=>=>= D,2?DB>1
(OV 4B,DBEDE 4>,?15>? 45,3>=ED 5,?BEB3E 1,>BDE1D
DEC =,3=D1D3 =,?3?2=3 2,1335B 42,?BB> 2,D1235>
122E :A( 4?,125> 41,B=B55 41,?1?13 1,1>=2> ?,2>E53E
FEB 4>,3352? 4D,31533 45,2?E5B 2,=32E5E 2,B2E3D>
MAR =,?D55>E E,D5EBEB 45,=33?? 5,?52D21 1,135251
APL 5D,=D=21 5>,EE3=? 45,1B5=D 2,E3D>3= 2,EB=1>=
MA) 1=,?D1=D 13,23DB? 42,??2E5 2,1=1BBE 2,2=>D>3
TOTAL 15,2321E 13,3=55> 4=,=E23? 535,D=B5
AVERA<E 2,=?13B= 5,2D5551 42,1=31> B,>===5E
Standard Deviation for the fund`s excess return (S.D.) oiUVB,>===5E
U1,?>?5DB
Sharpe Index (Si) U GRi 4 RfHKSi
U G2,=?13B=4?HK 1,?>?5DB
U45,BB3=1
Treynor's Index (Ti) U GRi 4 RfHKBi,
UG2,=?13B=4?K 2,EDB1B?
U4>,?DB1?
1enson alpha (op)U Ri ;W Rf Y Bi GRm 4 RfH X

U2,=?13B=4 W?Y2,EDB1B?G5,2D55514?HX
U 42,DED?=
Expected return EGRiH U Rf Y Bi GRm 4 RfH
UW?Y2,EDB1B?G5,2D55514?HX
U5,13>2BE
Fema Measures
Selectivity URi ;W Rf Y Bi GRm 4 RfH X

U2,=?13B=4 W?Y2,EDB1B?G5,2D55514?HX
U 42,DED?=
Diversification UWRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfH X
UW?YG5,2D55514?HG 1,?>?5DBK55,5D5DEHX4 W?Y2,EDB1B?G5,2D55514?HX
U1,323>B>
Net selectivity selectivity- diversification
U42,DED?=41,323>B>
U4D,DDEB=
HDFC GROWTH FUND
In6estment o-ecti6e
The primary in6estment o-ecti6e of the Scheme is to +enerate #on+ term capita# appreciation
from a portfo#io that is in6este$ pre$ominant#y in e8/ity an$ e8/ity re#ate$ instr/ments,
Basic Scheme Information
Table:3.7
(at/re of Scheme Open En$e$ <ro.th Scheme
Inception Date Sep 550 1222
OptionKP#an Di6i$en$ Option0 <ro.th Option0
Entry Load
Gp/rchase K a$$itiona# p/rchase K s.itch4
inH
NIL
G!ith effect from A/+/st 50 122EH
E7it Loa$,
Gas a L of the App#ica-#e (AVH
(i#
Minim/m App#ication Amo/nt Rs,?222 an$ in m/#tip#es of Rs,522
thereof to open an acco/nt K fo#io,
A$$itiona# p/rchases is Rs, 5222 an$ in
m/#tip#es of Rs, 522 thereof
Loc"4In4Perio$ (i#
(et Asset Va#/e Perio$icity E6ery B/siness Day
Re$emption Procee$s (orma##y $espatche$ .ithin D B/siness
$ays
In6estment pattern
The corp/s of the Scheme .i## -e in6este$ primari#y in e8/ity an$ e8/ity re#ate$ instr/ments,
The Scheme may in6est a part of its corp/s in $e-t an$ money mar"et instr/ments0 in or$er to
mana+e its #i8/i$ity re8/irements from time to time0 an$ /n$er certain circ/mstances0 to
protect the interests of the 'nit ho#$ers, The asset a##ocation /n$er the Scheme .i## -e as
fo##o.s J
Table:3.8
SR
(O,
T)PE OF I(STR'ME(TS (ORMAL
ALLOCATIO(
GLof net assetH
RIS&
PROFILE
5 E8/ities O E8/ities re#ate$
instr/ments
324522 Me$i/m to
hi+h
1 De-t sec/rities0 money mar"et
instr/ments O cash
24522 Lo. to
me$i/m
In6estment Strate+y O Ris" Contro#
The in6estment approach .i## -e -ase$ on a set of .e## esta-#ishe$ -/t f#e7i-#e princip#es that
emphasise the concept of s/staina-#e economic earnin+s an$ cash ret/rn on in6estment as the
means of 6a#/ation of companies, In s/mmary0 the In6estment Strate+y is e7pecte$ to -e a
f/nction of e7tensi6e research an$ -ase$ on $ata an$ reasonin+0 rather than c/rrent fashion
an$ emotion, The o-ecti6e .i## -e to i$entify [-/sinesses .ith s/perior +ro.th prospects an$
+oo$ mana+ement0 at a reasona-#e price[,
Benchmar" In$e7 J SE(SER
Fund Manager J Mr, Shrini6as Rao
HDFC <RO!TH F'(D
Table:3.9
(AV SE(SER Ri Rm Ri Rm Rm4Rm
a6
s8rGRm4
Rm a6H
Rm1
122=
:A(
>3,E5= 5>2E2,E1
FEB >?,2>= 51ED3,2E 4=,E55DB 43,535D= B>,=1?=? 43,E5EE= =E,?B?3> BB,ED>=3
MAR >?,>B5 5D2=1,5 2,E5E2> 5,2D?==E 2,E?5E11 2,1E=5=3 2,233D5? 5,2=13D3
APL >3,?35 5D3=1,D= B,3BD21? B,515E= >1,25?1D ?,D3DDBE 13,E32BB D=,>=3?5
MA) ?D,5E3 5>?>>,>B E,?2D=5? >,3>>35 >B,2>D= >,52B12E 5B,3B2E? 1D,>=15E
:'( ?>,BE? 5>B?2,?5 1,35>25B 2,=1E5>> 1,2?5315 42,22E>B 3,E>E42? 2,?D5B?
:'L) ?3,=5B 5???2,EE =,D?5B== B,5>B>2= >?,53B> ?,>2=32B 1E,1>>D= D=,==3D1
A'< ?3,5= 5?D53,B 42,E1EE 45,>E>D= 5,D3EB53 41,1D1E3 >,E3B5=E 1,1DD5??
SEP BD,31 5=1E5,5 E,=51E5 51,3=B? 51?,2B3D 51,5D=E 5>=,D13= 5B?,32>D
OCT =D,B31 5E3D=,EE 5?,>?13> 5>,=1E>E 11=,B51D 5D,EE233 5E?,=>>3 15B,E?==
(OV =>,3E? 5EDBD,5E 5,B>B1B> 41,DEDDE 4D,E>25? 4D,5D5EE E,32ED?1 ?,=13D2>
DEC 32,?=B 1213B,EE =,?3?13B >,==2E23 DB,533= >,2D1D2= 5B,1?E? 11,=B5?B
1223
:A(
B3,>D1 5=B>3,=5 45?,2=5? 45D,22>3 5EB,225? 45D,=>D> 533,332= 5BE,51>?
FEB B=,31= 5=?=3,=1 42,33>2E 42,DEB?= 2,D?2B2B 45,5D?5= 5,133B1 2,5?=1=
MAR B1,5? 5?B>>,>> 43,DBE31 455,22D? E1,2E=B5 455,=>15 5D=,3=== 515,2===
APL BB,5EB 5=13=,D5 B,?522?B 52,?25D B3,DB>2= E,=B1=21 E?,D52D? 552,1==>
MA) B1,35D 5B>5?,?= 4?,552?3 4?,2>1BB 1?,==2E5 4?,=351B DD,>11EB 1?,>13>
:'( ?D,>=1 5D>B5,B 45>,3=55 45=,EE>E 1B=,B2>3 453,=DD? D?2,E>?5 D1D,35=>
:'L) ?B,35E 5>D??,=? B,1?ED?5 B,B>111= >5,?=B2D ?,E2DB1B D>,3?13 >>,55E53
A'< ?3,3=5 5>?B>,?D D,B55>B3 5,>?>DD ?,1?11B= 2,=5?=1E 2,?511B3 1,55?2=B
SEP ?>,?> 513B2,>D 4=,D?B=B 455,=22D 3B,2=BB? 451,>D3E 5?>,=1=D 5DB,3E3
OCT >1,13D E=33,2B 411,>=D> 41D,3E25 ?DB,3E11 41>,B13= B2B,?=D5 ?=2,=D=
(OV >2,23E E2E1,=1 4?,5333? 4=,52DEB DB,3B5D= 4=,3>1?B B5,?2?=3 ?2,>BB1=
DEC >5,B?1 EB>=,D5 D,3E331? B,2EE1=? 1D,=3225 ?,DB2B=> 13,=DB3D D=,1255B
122E
:A(
D3,>>D E>1>,1> 4=,=2>D5 41,D511? 5=,35>D 4D,2?23? E,D2=BEB ?,D>B?2>
FEB DB,>1E 33E5,B5 4?,1D3ED 4?,B?5= 1E,B233? 4B,DE2D >2,3D?E3 D5,E>5=>
MAR D3,=D E=23,? B,D5BDEB E,53=1 ?3,2D 3,>>3?EE =5,D=33D 3>,>2>B?
APL >>,5D5 55>2D,1? 5D,E>?1B 5=,>?BD? 1>D,>DD> 5B,=5==? 1=E,>3D1 D2>,=1>1
MA) ?B,E31 5>B1?,1? 1E,51251 13,1??5 311,=E1 1=,?5B? =?=,5?=E =E3,D?23
TOTAL D2,DEEB1 12,B323D D5DE,B 2 DD35,BBB DDEB,E>5
AV< 5,23?=25 2,=D3B25 551,513B 2 512,==D3
Figure:3.3
omU V512,==D3
U52,E3E=5
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U G3=E23,34B13,B3EDHK GE?55>,D>4>1=,BEBBH
U 3=132,51K E>B3B,B>
U 2,E15==E
Table:3.10
Ri Rm Ri4Rm De6 frm a6e s8 of De6 frm
a6
Rm1
122=
:A(
FEB 4=,E55DB 43,535D= 2,1=2223 2,2==2E152> 2,22?E>D BB,ED>=3
MAR 2,E5E2> 5,2D?==E 42,55B=> 2,>BD3D3B>1 2,15?5>B 5,2=13D3
APL B,3BD21? B,515E= 2,=>52?B 42,DEDE??3?? 2,5??125 D=,>=3?5
MA) E,?2D=5? >,3>>35 >,B?3E2? 4>,D5532?D5B 53,?E5B= 1D,>=15E
:'( 1,35>25B 2,=1E5>> 1,23>3=1 45,=D===12?? D,25E3?1 2,?D5B?
:'L) =,D?5B== B,5>B>2= 5,12?1= 42,3?35=2DE 2,=DB>?B D=,==3D1
A'< 42,E1EE 45,>E>D= 2,?B>>=> 42,15=D=>??1 2,2>=1?1 1,1DD5??
SEP E,=51E5 51,3=B? 4D,5BD?E D,?52BE1?>> 51,D1>EB 5B?,32>D
OCT 5?,>?13> 5>,=1E>E 2,=1DD?5 42,D=B1?523B 2,5>5?B? 15B,E?==
(OV 5,B>B1B> 41,DEDDE >,2DEB?5 4D,BE1??5>2B 5D,BD>E> ?,=13D2>
DEC =,?3?13B >,==2E23 1,35>D=3 41,>B=1=32BD B,23=>B5 11,=B5?B
1223
:A(
45?,2=5? 45D,22>3 41,2BB= 1,>5D=E=>5D ?,31B>53 5BE,51>?
FEB 42,33>2E 42,DEB?= 42,>3=?1 2,3D>B5BD1B 2,BEB?3> 2,5?=1=
MAR 43,DBE31 455,22D? 1,BDD=23 41,13BB23>55 ?,113?=3 515,2===
APL B,?522?B 52,?25D 4D,EE51? >,DD3D>B13E 53,3151? 552,1==>
MA) 4?,552?3 4?,2>1BB 42,2B=E1 2,>5?2115>B 2,5=11>D 1?,>13>
:'( 45>,3=55 45=,EE>E D,51D32D 41,==B=21B== =,=522=3 D1D,35=>
:'L) B,1?ED?5 B,B>111= 42,D3133 2,=1EE=?EE? 2,?D13B? >>,55E53
A'< D,B55>B3 5,>?>DD 1,5?=5D3 45,3522D=E>> D,1=B1D= 1,55?2=B
SEP 4=,D?B=B 455,=22D >,D>D?3 4D,EEB>321D> 5?,E=53? 5DB,3E3
OCT 411,>=D> 41D,3E25 5,>5BB3E 45,2BE?3E1E? 5,5>>215 ?=2,=D=
(OV 4?,5333? 4=,52DEB 5,E5?55? 45,?B325>3=5 1,>?3B=5 ?2,>BB1=
DEC D,3E331? B,2EE1=? 41,122>? 1,?>=?>E35? B,>E225 D=,1255B
122E
:A(
4=,=2>D5 41,D511? 4?,DE12B ?,=DE5B52? D1,ED=E= ?,D>B?2>
FEB 4?,1D3ED 4?,B?5= 2,>51=== 42,2B?B==D?1 2,22>D5> D5,E>5=>
MAR B,D5BDEB E,53=1 41,3=23 D,15=E2DBE? 52,D?>E 3>,>2>B?
APL 5D,E>?1B 5=,>?BD? 4D,?552E D,3?35E2?5? 5>,33?BD D2>,=1>1
MA) 1E,51251 13,1??5 2,3B?25= 42,?5=E5=21= 2,1B31D3 =E3,D?23
TOTAL D2,DEEB1 12,B323D E,=53=E= 4>,>>23EE45? 535,=>2D DDEB,E>5
AV< 5,23?=25 2,=D3B25 2,D>=5 45,?3B2DE45B B,>E2=1?
Standard Deviation for the fund`s excess return (S.D.) oiUVB,>E2=1?
U1,?>=BE
Sharpe Index (Si) U GRi 4 RfHKSi
U G5,23?=254?HK 1,?>=BE
-1.53641
Treynor's Index (Ti) U GRi 4 RfHKBi,
UG5,23?=254?HK 2,E15==E
U4>,1>B>B
1enson alpha (opHU Ri ;W Rf Y Bi GRm 4 RfH X

U5,23?=254 W?Y2,E15==E G2,=D3B254?HX
U 2,25D=B=
Expected return E(RiH U Rf Y Bi GRm 4 RfH
UW?Y2,E15==E G2,=D3B254?HX
U5,2=5ED>
Fema Measures
Selectivity URi ;W Rf Y Bi GRm 4 RfH X

W?Y2,E15==E G2,=D3B254?HX
U5,23?=254
U 2,25D=B=
Diversification UWRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfHX
UW?YG2,=D3B254?HG 1,?>=BEK52,E3E=5HX4 W?Y2,E15==E G2,=D3B254?HX
U1,E>25B=
Net selectivity selectivity- diversification
U2,25D=B=41,E>25B=
U41,E1B>
HDFC LONG TERM FUND
Investment Objective
To achie6e #on+ term capita# appreciation,
Basic Scheme Information
Nature of Scheme C#ose En$e$ E8/ity Scheme .ith a mat/rity perio$ of ? years
.ith a/tomatic con6ersion into an open4en$e$ scheme /pon
mat/rity of the Scheme,
Inception Date 524Fe-42B
Closing Date 1=4:an42B
Option/Plan Di6i$en$ Option0<ro.th Option, Di6i$en$ Option c/rrent#y
offers payo/t faci#ity on#y,
Entry Load
Gp/rchase K a$$itiona#
p/rchase K s.itch4inH
NIL
G!ith effect from A/+/st 50 122EH
Exit Load
(as a of the Applicable
NAV)
GOther than Systematic
In6estment P#an GSIPHK
Systematic Transfer P#an
GSTPHH
Re$emption K S.itch4o/t from the Date of A##otment J
'pto 51 months >L
After 51 months /pto 1> months DL
After 1> months /pto DB months 1L
After DB months /pto >3 months 5L
After >3 months /pto ?> months 2,?L
After ?> months /pto Mat/rity (i#
No Exit Load shall be levied on bonus units and units
allotted on dividend reinvestment.
Specified Redemption Period A 'nit ho#$er can s/-mit re$emptionK s.itch4o/t re8/est on#y
$/rin+ the Specifie$ Re$emption Perio$, Present#y0 the
Specifie$ Re$emption Perio$ is the first fi6e B/siness Days
imme$iate#y after the en$ of each ca#en$ar ha#f year,
Minimum Application
Amount
GOther than Systematic
In6estment P#an GSIPHK
Systematic Transfer P#an
C/rrent#y no p/rchasesK s.itch4ins are a##o.e$ into this
scheme,

GSTPHH
Lock-In-Period (i#
Net Asset Value Periodicity E6ery B/siness Day,
Redemption Proceeds (orma##y $ispatche$ .ithin D Days
Current Expense Ratio (#)
(Effective Date 22nd May
2009)
On the first 522 crores a6era+e .ee"#y net assets 1,?2L
On the ne7t D22 crores a6era+e .ee"#y net assets 1,1?L
On the ne7t D22 crores a6era+e .ee"#y net assets 1,22L
On the -a#ance of the assets 5,=?L
Investment Pattern
The fo##o.in+ ta-#e pro6i$es the asset a##ocation of the Schemes portfo#io,
Type of Instr/ments Minim/m A##ocation
GL of (et AssetsH
Minim/m A##ocation
GL of (et AssetsH
Ris" Profi#e of
the Instr/ment
E8/ity O E8/ity re#ate$
instr/ments
=2 522 Hi+h
Fi7e$ Income Sec/rities
Ginc#/$in+ money mar"et
instr/mentsH
2 D2 Lo.
Investment Strategy
The in6estment strate+y of the Scheme is to -/i#$ an$ maintain a $i6ersifie$ portfo#io of
e8/ity stoc"s that ha6e the potentia# to appreciate in the #on+ r/n, Companies i$entifie$ for
se#ection in the portfo#io .i## ha6e $emonstrate$ a potentia# a-i#ity to +ro. at a reasona-#e
rate for the #on+ term,
The aim .i## -e to -/i#$ a portfo#io that a$e8/ate#y ref#ects a cross4section of the +ro.th
areas of the economy from time to time, !hi#e the portfo#io foc/ses primari#y on a -/y an$
ho#$ strate+y at most times0 it .i## -a#ance the same .ith a rationa# approach to se##in+ .hen
the 6a#/ations -ecome too $eman$in+ e6en in the face of reasona-#e +ro.th prospects in the
#on+ r/n,
Fund Manager
Mr. Srinivas Rao Ravuri (since Apr 3, 06)
Mr. Anand Laddha 4 De$icate$ F/n$ Mana+er 4 Forei+n Sec/rities
HDFC LONG TERM FUND
Table:3.11
(AV SE(SER Ri Rm Ri Rm Rm4Rm
a6
s8rGRm4
Rm a6H
Rm1
122=
:A(
E?,11> 5>2E2,E1
FEB 3=,=31 51ED3,2E 4=,35?1B 43,535D= BD,EDE>E 43,E5EE= =E,?B?3> BB,ED>=3
MAR 3B,DD= 5D2=1,5 45,B>B51 5,2D?==E 45,=2?21 2,1E=5=3 2,233D5? 5,2=13D3
APL E5,B1= 5D3=1,D= B,51=5?D B,515E= D=,?521> ?,D3DDBE 13,E32BB D=,>=3?5
MA) EB,?B5 5>?>>,>B ?,D3>3=B >,3>>35 1B,233= >,52B12E 5B,3B2E? 1D,>=15E
:'( 522,BE? 5>B?2,?5 >,1351D1 2,=1E5>> D,515BDD 42,22E>B 3,E>E42? 2,?D5B?
:'L) 521,E=B 5???2,EE 1,1B?1?B B,5>B>2= 5D,E1D5E ?,>2=32B 1E,1>>D= D=,==3D1
A'< 521,B1= 5?D53,B 42,DD3E5 45,>E>D= 2,?2B>B> 41,1D1E3 >,E3B5=E 1,1DD5??
SEP 52E,B3 5=1E5,5 B,3=1>B 51,3=B? 33,>ED1B 51,5D=E 5>=,D13= 5B?,32>D
OCT 553,53? 5E3D=,EE =,=?>D=B 5>,=1E>E 55>,153 5D,EE233 5E?,=>>3 15B,E?==
(OV 55E,>>? 5EDBD,5E 5,2BB51? 41,DEDDE 41,??5B? 4D,5D5EE E,32ED?1 ?,=13D2>
DEC 513,E3D 1213B,EE =,E3?1B? >,==2E23 D3,2EBE= >,2D1D2= 5B,1?E? 11,=B5?B
1223
:A(
551,121 5=B>3,=5 45D,2521 45D,22>3 5BE,5E?> 45D,=>D> 533,332= 5BE,51>?
FEB 552,??> 5=?=3,=1 45,>B3=3 42,DEB?= 2,?31>=3 45,5D?5= 5,133B1 2,5?=1=
MAR EB,52? 5?B>>,>> 45D,2BEB 455,22D? 5>D,3515 455,=>15 5D=,3=== 515,2===
APL 52D,>> 5=13=,D5 =,BD11== 52,?25D 32,5>33? E,=B1=21 E?,D52D? 552,1==>
MA) EE,53 5B>5?,?= 4>,553DD 4?,2>1BB 12,=B=DD 4?,=351B DD,>11EB 1?,>13>
:'( 3?,2>? 5D>B5,B 45>,1?5E 45=,EE>E 1?B,>B5D 453,=DD? D?2,E>?5 D1D,35=>
:'L) 33,E=1 5>D??,=? >,B5=??? B,B>111= D2,B=23? ?,E2DB1B D>,3?13 >>,55E53
A'< ED,D?E 5>?B>,?D >,ED2=B? 5,>?>DD =,5=2EB 2,=5?=1E 2,?511B3 1,55?2=B
SEP 31,13B 513B2,>D 455,3B2= 455,=22D 5D3,==DE 451,>D3E 5?>,=1=D 5DB,3E3
OCT BD,?2> E=33,2B 411,31?D 41D,3E25 ?>?,1E3 41>,B13= B2B,?=D5 ?=2,=D=
(OV ?=,1D= E2E1,=1 4E,3B3B= 4=,52DEB =2,52BB? 4=,3>1?B B5,?2?=3 ?2,>BB1=
DEC B5,>2B EB>=,D5 =,13D=? B,2EE1=? >>,>1??E ?,DB2B=> 13,=DB3D D=,1255B
122E
:A(
?3,=2E E>1>,1> 4>,DE123 41,D511? 52,5???E 4D,2?23? E,D2=BEB ?,D>B?2>
FEB ??,=3? 33E5,B5 4>,E32? 4?,B?5= 13,5>31E 4B,DE2D >2,3D?E3 D5,E>5=>
MAR ?E,12E E=23,? B,5D=3?5 E,53=1 ?B,D3EBB 3,>>3?EE =5,D=33D 3>,>2>B?
APL B3,1E3 55>2D,1? 5?,D?2=5 5=,>?BD? 1B=,EB=> 5B,=5==? 1=E,>3D1 D2>,=1>1
MA) 3=,E?3 5>B1?,1? 13,=3?B1 13,1??5 35D,D>2? 1=,?5B? =?=,5?=E =E3,D?23
TOTAL B,313E>D 12,B323D D2B?,2?B 2 DD35,BBB DDEB,E>5
AV< 2,1>D3E5 2,=D3B25 52E,>BBD 2 512,==D3
Figure:3.4
omU V512,==D3
U52,E3E=5
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U G3?315,?=4 5>5,1131HK GE?55>,D>4 >1=,BEBBH
U 3?B32,D>K E>B3B,B>
U 2,E2>33D
Table:3.12
Ri Rm Ri4Rm De6 frm a6e s8 of De6 frm a6
122=
:A(
FEB 4=,35?1B 43,535D= 2,DBB555 42,3B2315D1? 2,=>525D
MAR 45,B>B51 5,2D?==E 41,B35E 1,53=5E12=E >,=3D32E
APL B,51=5?D B,515E= 2,22?53D 42,>EE3EDDDD 2,1>E3ED
MA) ?,D3>3=B >,3>>35 2,?>22B? 45,2D>==??D= 5,2=2=B
:'( >,1351D1 2,=1E5>> D,??1233 4>,2>B=E32=5 5B,D=B?=
:'L) 1,1B?1?B B,5>B>2= 4D,3355? D,D3B>>2?EE 55,>B=E3
A'< 42,DD3E5 45,>E>D= 5,5??>B 45,B?25=2?5? 1,=1D2BD
SEP B,3=1>B 51,3=B? 4B,22>2> ?,?2EDD1>33 D2,D?1=>
OCT =,=?>D=B 5>,=1E>E 4B,E=?55 B,>32DE3B1 >5,EE??=
(OV 5,2BB51? 41,DEDDE D,>?E?5D 4D,E?>111E2D 5?,BD?33
DEC =,E3?1B? >,==2E23 D,15>D?= 4D,=2E2B=12E 5D,=?=53
1223
:A(
45D,2521 45D,22>3 42,22?>? 42,>3E1?B1B5 2,1DED=1
FEB 45,>B3=3 42,DEB?= 45,2=115 2,?==>EB?2? 2,DDD?21
MAR 45D,2BEB 455,22D? 41,2BB5 5,?=5D3E>B> 1,>BE1B?
APL =,BD11== 52,?25D 41,3BE2D 1,D=>D5?D=E ?,BD=D=>
MA) 4>,553DD 4?,2>1BB 2,E1>D1E 45,>5E2DE55B 1,25DB=1
:'( 45>,1?5E 45=,EE>E D,=>D2BD 4>,1D===135> 5=,E?3=1
:'L) >,B5=??? B,B>111= 41,21>B= 5,?1EEB51>D 1,D>2=35
A'< >,ED2=B? 5,>?>DD D,>=B>D? 4D,E=55>>=51 5?,=BEEE
SEP 455,3B2= 455,=22D 42,5B2D1 42,DD>D3B>BB 2,55535>
OCT 411,31?D 41D,3E25 5,2B>3D? 45,??E?>?DB> 1,>D1531
(OV 4E,3B3B= 4=,52DEB 41,=B>=5 1,1BEEE315 ?,5?13E1
DEC =,13D=? B,2EE1=? 5,53>>=? 45,B=E53?515 1,35EBBD
122E
:A(
4>,DE123 41,D511? 41,2=E3D 5,?3?5532?> 1,?51?EE
FEB 4>,E32? 4?,B?5= 2,B=512? 45,5B?E5??5> 5,D?ED?E
MAR B,5D=3?5 E,53=1 4D,2>ED? 1,??>BDE1B3 B,?1B531
APL 5?,D?2=5 5=,>?BD? 41,52?B? 5,B52ED?=DE 1,?E?55>
MA) 13,=3?B1 13,1??5 2,?D2?5D 45,21?11DD33 5,2?523D
TOTAL B,313E>D 12,B323D 45D,3?5E 4>,>>23EE45? 152,>=3
AV< 2,1>D3E5 2,=D3B25 42,>E>=5 45,?3B2DE45B ?,?D33E?
Standard Deviation for the fund`s excess return (S.D.) oiUV?,?D33E?
U1,D?D>3B
Sharpe Index (Si) U GRi 4 RfHKSi
U G2,1>D3E54?HK 1,D?D>3B
U41,21233
Treynor's Index (Ti) U GRi 4 RfHKBi,
UG2,1>D3E54?HK 2,E2>33D
U4?,1?B2?
1enson alpha (opHU Ri ;W Rf Y Bi GRm 4 RfH X
U2,1>D3E54 W?Y2,E2>33D G2,=D3B254?HX
U 42,E222>
Expected return E(Ri) U Rf Y Bi GRm 4 RfH
UW?Y2,E2>33D G2,=D3B254?HX
U5,5>DED1
Fema Measures
Selectivity URi ;W Rf Y Bi GRm 4 RfH X
U2,1>D3E54 W?Y2,E2>33D G2,=D3B254?HX
U 42,E222>
Diversification UWRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfHX
UW?YG2,=D3B254?HG 1,D?D>3BK52,E3E=5HX4 W?Y2,E2>33D G2,=D3B254?HX
U1,E>D>=>
Net selectivity selectivity- diversification
U42,E222>41,E>D>=>
U4D,3>D?1
HDFC TAXSAVER
In6estment O-ecti6e
The in6estment o-ecti6e of the Scheme is to achie6e #on+ term +ro.th of capita#,
Basic Scheme Information
Table:3.13
(at/re of Scheme Open En$e$ E8/ity Lin"e$ Sa6in+
Scheme
Inception Date Mar D50 5EEB
OptionKP#an Di6i$en$ Option0 <ro.th Option0
Entry Load
Gp/rchase K a$$itiona# p/rchase K s.itch4
inH
NIL
G!ith effect from A/+/st 50 122EH
E7it Loa$,
Gas a L of the App#ica-#e (AVH
(i#
Minim/m App#ication Amo/nt Rs,?222 an$ in m/#tip#es of Rs,522
thereof to open an acco/nt K fo#io,
Loc"4In4Perio$ D yrs
(et Asset Va#/e Perio$icity E6ery B/siness Day
Re$emption Procee$s (orma##y $espatche$ .ithin D B/siness
$ays
In6estment Pattern
The asset a##ocation /n$er the Scheme .i## -e as fo##o.sJ
Table:3.14
SR (O, ASSET T)PE GL OF
PORTFOLIOH
RIS&
PROFILE
5 E8/ities O E8/ities
re#ate$ instr/ments
Minim/m 32L Me$i/m to hi+h
1 De-t sec/rities0 money Minim/m 12L Lo. to me$i/m
mar"et instr/ments O
cash
In6estment in Sec/riti@e$ $e-t0 if /n$erta"en0 .o/#$ not e7cee$ 12L of the net assets of the
scheme,
The Scheme may a#so in6est /p to 1?L of net assets of the Scheme in $eri6ati6es s/ch as
F/t/res O Options an$ s/ch other $eri6ati6e instr/ments as may -e intro$/ce$ from time to
time for the p/rpose of he$+in+ an$ portfo#io -a#ancin+ an$ an$ other /ses as may -e
permitte$ /n$er the re+/#ations an$ +/i$e#ines,
The Scheme may a#so in6est a part of its corp/s0 not e7cee$in+ >2L of its net assets0 in
o6erseas mar"ets in <#o-a# Depository Receipts G<DRsH0 ADRs0 o6erseas e8/ity0 -on$s an$
m/t/a# f/n$s an$ s/ch other instr/ments as may -e a##o.e$ /n$er the Re+/#ations from time
to time, The ELSS GE8/ity Lin"e$ Sa6in+s SchemeH +/i$e#ines0 as app#ica-#e0 .o/#$ -e
a$here$ to in the mana+ement of this F/n$, If the in6estment in e8/ities an$ re#ate$
instr/ments fa##s -e#o. 32L of the portfo#io of the Scheme at any point in time0 it .o/#$ -e
en$ea6o/re$ to re6ie. an$ re-a#ance the composition,
Benchmar" In$e7 J
SOP C(R ?22, HDFC Ta7 sa6er0 .hich is -enchmar"e$ to SOP C(R ?22 In$e7 is not
sponsore$0 en$orse$0 so#$ or promote$ -y In$ian In$e7 Ser6ice O Pro$/cts Limite$ GIISLH,
Fund Manager J Dha.a# Mehta
HDFC TAR SAVER F'(D
Table:3.15
(AV SOP
C(R
?22
Ri Rm Ri Rm Rm4Rm
a6
s8rGRm4
Rm a6H
Rm1
122=
:A(
5>B,5D> >3EE,DE
FEB 5D?,5DD >?2>,=D 4=,?1321 43,2??1E B2,B>2DE 4E,23B> 31,?B1B3 B>,33=B=
MAR 5DD,331 >B2?,3E 42,E1?=? 1,1>?B> 41,2=3E5 5,15>?1= 5,>=?2== ?,2>13E=
APL 5>>,D23 >ED>,>B =,=3=>?? =,5DDBE1 ??,??DD B,521?3 D=,1>5>3 ?2,33E?B
MA) 5?D,=B? ?53?,E? B,??DD>> ?,2EBB2B DD,DEE31 >,2B?>E> 5B,?131> 1?,E=?>
:'( 5?B,?D? ?11D,31 5,325>? 2,=D21>1 5,D5?>E? 42,D223= 2,2E2?1D 2,?DD1?>
:'L) 5BD,B5 ?>3D,1? >,?5E=?B >,EBB13E 11,>>B>5 D,ED?5== 5?,>3?B1 1>,BB>2D
A'< 5B5,>35 ?>55,1E 45,D251= 45,D51DB 5,=2==1E 41,D>D>= ?,>E53BD 5,=111E
SEP 5=D,1= B2E>,55 =,D22?>E 51,B53>D E1,515>E 55,?3=D1 5D>,1BB 5?E,11>3
OCT 5E3,=D= =5BD,D 5>,BE=3= 5=,?>>B? 1?=,3B3E 5B,?5D?D 1=1,BEB3 D2=,35>B
(OV 5EB,=D? BEE=,B 45,22=DB 41,D5D53 1,DD2123 4D,D>>1E 55,53>1E ?,D?23
DEC 12>,13> =>B5,>3 D,3D=5>5 B,B1E5D 1?,>DBE5 ?,?E3253 D5,DD=3 >D,E>?DB
1223
:A(
5=D,1== B1>?,>? 45?,5=3> 45B,1E=> 1>=,DB3= 45=,D13? D22,1=3B
1B?,B2B?
FEB 5=5,3>? BD?B,E1 42,31B>1 5,=3>35E 45,>=?25 2,=?D=2= 2,?B32=? D,53??3
MAR 5?1,21 ?=B1,33 455,?DBB 4E,D>>=3 52=,32BB 452,D=?E 52=,B?E5 3=,D1>3B
APL 5?3,>55 B13E,2= >,12>2?1 E,5D2B=3 D3,D3?3> 3,2EE?BB B?,B21EB 3D,DBE13
MA) 5>3,=ED ?ED=,35 4B,2=5?? 4?,?3?1? DD,E552E 4B,B5BDB >D,==B5E D5,5E>E=
:'( 51B,>? >E1E,E3 45?,25B1 45B,E=D5 1?>,3=2= 453,22>1 D1>,5?5> 133,23?E
:'L) 5D?,E?D ?1E=,>= =,?5?11D =,>?>533 ?B,25E3E B,>1D2=B >5,1??E5 ??,?B>ED
A'< 5>1,D?3 ?DD=,13 >,=5553= 2,=?5>E5 D,?>2>5> 42,1=EB1 2,2=3533 2,?B>=D3
SEP 5D1,B31 >32=,1 4B,=EBE? 4E,ED5B? B=,?2>E1 452,EB13 512,5311 E3,BD=B3
OCT EE,55E D?DE,?= 41?,1E?3 41B,DBE> BB=,2D?= 41=,>22? =?2,=33D BE?,D>??
(OV E2,E?= DD=E,?D 43,1D>?? 4>,?15>? D=,1D151 4?,??1?= D2,3D2E3 12,>>D?>
DEC E3,E=1 DBD?,3= 3,3553?B =,?3?2=3 BB,3D3B1 B,??DEBB >1,E?>>= ?=,?DD>5
122E
:A(
ED,??? D?D3,?= 4?,>=D1= 41,B=B55 5>,B>=23 4D,=2=1D 5D,=>D?1
=,5B5?31
FEB 3E,>>E D>2D,DD 4>,D333B 4D,31533 5B,==D=1 4>,3?1EE 1D,??5?B 5>,B2B=E
MAR E=,2BD D=12,?5 3,?5155D E,D5EBEB =E,DD2D 3,133?3> B3,=22B1 3B,3?B=D
APL 551,2? >1=3,?> 5?,>>2>E 5>,EE3=? 1D5,?33 5D,EB=B> 5E?,2E>E 11>,EB1?
MA) 5>>,31= ?>32,55 1E,1?151 13,23DB? 315,?2B1 1=,2?1?D =D5,3DEB =33,BE55
TOTAL 5?,DBDBE 13,3=55> D1ED,B1= 2 D>BE,>5= D>EE,53B
AV< 2,?>3=2D 5,2D5551 55=,B1E? 51D,E2==
Figure:3.5
omU V51D,E2==
U55,5D5DE
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U GE1115,?>4 >>D,?B=5HK GE=E==,154 3DD,?>1BH
U E5===,E3K E=5>D,B=
U 2,E>>=B?
Table:3.16
Ri Rm Ri4Rm De6 frm
a6e
s8 of
De6 frm
a6
122=
:A(
FEB 4=,?1321 43,2??1E 2,?1=1BB 45,22EB3 5,25E>>>
MAR 42,E1?=? 1,1>?B> 4D,5=5DE 1,B33E3? =,1D2B>5
APL =,=3=>?? =,5DDBE1 2,B?D=BD 45,5DB5= 5,1E233B
MA) B,??DD>> ?,2EBB2B 5,>?B=D3 45,EDE5? D,=B21E5
:'( 5,325>? 2,=D21>1 5,2=5123 45,??DB1 1,>5D=1B
:'L) >,?5E=?B >,EBB13E 42,>>B?D 42,2D?33 2,22513=
A'< 45,D251= 45,D51DB 2,2552E? 42,>ED? 2,1>D?>B
SEP =,D22?>E 51,B53>D 4?,D5=33 >,3D?>=? 1D,D3531
OCT 5>,BE=3= 5=,?>>B? 41,3>B=3 1,DB>DBB ?,?E211=
(OV 45,22=DB 41,D5D53 5,D2?353 45,=331D D,5E==?=
DEC D,3D=5>5 B,B1E5D 41,=E5EE 1,D2E?3 ?,DD>5?3
1223
:A(
45?,5=3> 45B,1E=> 5,55E2?3 45,B25>= 1,?B>BEB
FEB 42,31B>1 5,=3>35E 41,B551> 1,5133DD >,?D5E1E
MAR 455,?DBB 4E,D>>=3 41,5E5=3 5,=2ED=D 1,E15E?B
APL >,12>2?1 E,5D2B=3 4>,E1BBD >,>>>15= 5E,=?52B
MA) 4B,2=5?? 4?,?3?1? 42,>3BD 2,22D3E> 5,?1E42?
:'( 45?,25B1 45B,E=D5 5,E?BE1E 41,>DED> ?,E?2D=1
:'L) =,?5?11D =,>?>533 2,2B52D? 42,?>D>> 2,1E?DD5
A'< >,=5553= 2,=?5>E5 D,E?EBEB 4>,>>155 5E,=D1D
SEP 4B,=EBE? 4E,ED5B? D,5D>=21 4D,B5=55 5D,23D>E
OCT 41?,1E?3 41B,DBE> 5,2=D?3> 45,???EE 1,>1555?
(OV 43,1D>?? 4>,?15>? 4D,=5D2E D,1D2B3> 52,>D=D1
DEC 3,3553?B =,?3?2=3 5,11B==3 45,=2E5E 1,E15D5E
122E
:A(
4?,>=D1= 41,B=B55 41,=E=5? 1,D5>=>D ?,D?32D?
FEB 4>,D333B 4D,31533 42,?BBE3 2,23>?= 2,22=5?1
MAR 3,?5155D E,D5EBEB 42,32=?3 2,D1?5=> 2,52?=D3
APL 5?,>>2>E 5>,EE3=? 2,>>5=D= 42,E1>5? 2,3?>2>B
MA) 1E,1?151 13,23DB? 5,5B3>=> 45,B?233 1,=1?>5?
TOTAL 5?,DBDBE 13,3=55> 45D,?2=? 5>=,51?5
AV< 2,?>3=2D 5,2D5551 42,>31>5 ?,1?>>B=
Standard Deviation for the fund`s excess return (S.D.) oiUV ?,1?>>B=
U 1,1E11B1
Sharpe Index (Si) U GRi 4 RfHKSi
U G2,?>3=2D4?HK 1,1E11B1
U45,E>533
Treynor's Index (Ti) U GRi 4 RfHKBi,
UG2,?>3=2D4?HK 2,E>>=B?
-4.71154
1enson alpha (opH U Ri ;W Rf Y Bi GRm 4 RfH X
U2,?>3=2D4 W?Y2,E>>=B? G5,2D55514?HX
U 42,=25BD
Expected return E(Ri) U Rf Y Bi GRm 4 RfH
UW?Y2,E>>=B? G5,2D55514?HX
U5,1?2DD1
Fema Measure:
Selectivity URi ;W Rf Y Bi GRm 4 RfH X

W?Y2,E>>=B? G5,2D55514?HX
U2,?>3=2D4
U 42,=25BD
Diversification U WRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfHX
UW?YG5,2D55514?HG 1,1E11B1K55,5D5DEHX4 W?Y2,E>>=B? G5,2D55514?HX
U1,ED1DBD
Net selectivity selectivity- diversification
U42,=25BD41,ED1DBD
U4D,BDDEE
HDFC TOP 200 FUND
In6estment O-ecti6e
The in6estment o-ecti6e is to +enerate #on+4term capita# appreciation from a portfo#io of
e8/ity an$ e8/ity #in"e$ instr/ments, The in6estment portfo#io for e8/ity an$ e8/ity4#in"e$
instr/ments .i## -e primari#y $ra.n from the companies in the BSE 122 In$e7, F/rther0 the
Scheme may a#so in6est in #iste$ companies that .o/#$ 8/a#ify to -e in the top 122 -y mar"et
capita#isation on the BSE e6en tho/+h they may not -e #iste$ on the BSE This inc#/$es
participation in #ar+e IPOAs .here in the mar"et capita#isation of the company -ase$ on iss/e
price .o/#$ ma"e the company a part of the top 122 companies #iste$ on the BSE -ase$ on
mar"et capita#isation,
Basic Scheme Information
Table:3.17
(at/re of Scheme Open En$e$ E8/ity <ro.th Scheme
Inception Date Oct 550 5EEB
OptionKP#an Di6i$en$ Option0 <ro.th Option0
Entry Load
Gp/rchase K a$$itiona# p/rchase K s.itch4
inH
NIL
G!ith effect from A/+/st 50 122EH
E7it Loa$, (i#
Minim/m App#ication Amo/nt Rs,?222 an$ in m/#tip#es of Rs,522
thereof to open an acco/nt K fo#io,
A$$itiona# p/rchases is Rs, 5222 an$ in
m/#tip#es of Rs, 522 thereof,
Loc"4In4Perio$ (i#
In6estment Pattern
The asset a##ocation /n$er the Scheme .i## -e as fo##o.sJ
Table:3.18
SR (O, ASSET T)PE GL OF PORTFOLIOH RIS&
PROFILE
5 E8/ities O E8/ities
re#ate$ instr/ments
'pto 522L Ginc#/$in+ /se of
$eri6ati6es for he$+in+ an$ other
/ses as permitte$ -y pre6ai#in+
SEBI Re+/#ationsH
Me$i/m to hi+h
1 De-t sec/rities0 money
mar"et instr/ments O
cash
Ba#ance in De-t O Money Mar"et
Instr/ments
Lo. to me$i/m
In6estment in Sec/ritise$ $e-t0 if /n$erta"en0 .o/#$ not e7cee$ 12L of the net assets of the
scheme, The Scheme may a#so in6est /pto 1?L of net assets of the Scheme in $eri6ati6es
s/ch as F/t/res O Options an$ s/ch other $eri6ati6e instr/ments as may -e intro$/ce$ from
time to time for the p/rpose of he$+in+ an$ portfo#io -a#ancin+ an$ other /ses as may -e
permitte$ /n$er the re+/#ations an$ +/i$e#ines,
In6estment Strate+y O Ris" Contro#
The in6estment strate+y of primari#y restrictin+ the e8/ity portfo#io to the BSE 122 In$e7
scrips is inten$e$ to re$/ce ris"s .hi#e maintainin+ stea$y +ro.th, Stoc" specific ris" .i## -e
minimise$ -y in6estin+ on#y in those companies K in$/stries that ha6e -een thoro/+h#y
researche$ -y the in6estment mana+erIs research team, Ris" .i## a#so -e re$/ce$ thro/+h a
$i6ersification of the portfo#io,
Benchmar" In$e7 J BSE 122
Fund Manager J Mr, Prashant :ain
HDFC TOP 122 F'(D
Table:3.19
Ri Rm Ri Rm Rm4A6Rm GRm4
A6RmH1
Rm1
122=
:A(
551,D?E 5B3=,D?
FEB 52D,1BE 5?>?,1= 43,2E25> 43,>12D B3,515>> 4E,D>235 3=,1?2=? =2,E25?1
MAR 52>,?2> 5??B,=1 5,5E?E2B 2,=>2E=5 2,33B5D5 42,5=E?> 2,2D11DD 2,?>E2D3
APRI
L
555,32? 5BBB,5> B,E3BDD? =,213335 >E,52B51 B,523D=> D=,D511D >E,>2?5=
MA) 55E,2EB 5=BB,23 B,?155=? ?,EE31E? DE,55?E> ?,2===33 1?,=3DED D?,E=E??
:'(E 512,D> 532>,35 5,2>>?DB 1,5E1EE1 1,1E2B?3 5,1=1>3? 5,B5E15E >,32E15B
:'L) 51=,B5> 53E>,53 B,2>>?> >,E?5=B3 1E,ED55B >,2D51B5 5B,1?52B 1>,?1
A'< 51B,125 53?=,= 45,52=1? 45,E1?E 1,5D1>>D 41,3>B>5 3,5212D D,=2E233
SEPT 5>2,>E 1553,3B 55,D11>5 5>,2?31> 5?E,5=DD 5D,5D==> 5=1,B225 5E=,BD>1
OCT 5B2,15? 1>DE,3= 5>,2>25? 5?,5?25D 151,=5 5>,11EB1 121,>315 11E,?1B>
(OV 5?3,D?B 1>?>,1D 45,5B2D1 2,?33??B 42,B31E5 42,DD5E? 2,5525E1 2,D>BDE3
DEC 5BE,=E> 1B?B,?1 =,111EBB 3,1>1?2> ?E,?D?D1 =,D15EE= ?D,B55BD B=,ED33=
1223
:A(
5>=,=53 11D2,DE 45D,225B 45B,2>2E 123,??35 45B,EB5> 13=,B3E= 1?=,D523
FEB 5>=,B3E 115=,>= 42,25EBD 42,?=E1= 2,255D=1 45,>EE=3 1,1>EDD> 2,DD????
MAR 5D5,?>> 5ED1,>5 452,ED53 451,3??1 5>2,?1E3 45D,==?= 53E,=BEE 5B?,1??E
APRI
L
5>D,21? 15?=,?1 3,=1=3=3 55,B>E53 525,B=1= 52,=13B3 55?,52>? 5D?,=2D?
MA) 5D=,B=? 12D3,11 4D,=>2B 4?,?1E? 12,B3DBB 4B,>? >5,B21?? D2,?=?D>
:'(E 55?,>1> 5B>>,53 45B,5B1 45E,DD1B D51,>?1D 412,1?D5 >52,53B? D=D,=>==
:'L) 51D,E21 5=>E,55 =,D>?2ED B,D35E2? >B,3=?B3 ?,>B5DE3 1E,31B3B >2,=13=5
A'< 51E,1D? 5=31,23 >,D2>123 5,33>E?E 3,55D1?> 2,EB>>?1 2,ED25B= D,??D2BE
SEPT 553,=?> 5???,= 43,5522D 451,=2D5 52D,2113 45D,B1DB 53?,B2DB 5B5,DBEB
OCT E1,D1> 55>?,B3 411,1?B5 41B,D?B ?3B,?351 41=,1=B? =>>,22B3 BE>,BD==
(OV 3B,?>B 52B1,D? 4B,1?3DE 4=,1=D>5 >?,?5E3= 43,5EDE1 B=,5>21= ?1,E21>E
DEC E1,=E3 55?B,?E =,11DE2> 3,3=23EE B>,231?D =,E?2DE1 BD,123=> =3,BE13B
122E
:A(
33,2=> 552=,2B 4?,2E2BD 4>,131>1 15,32253 4?,121E1 1=,2=2>5 53,DDE2E
FEB 3>,D=E 52>>,E> 4>,5E?D> 4?,B551B 1D,?>555 4B,?D5== >1,BBDEB D5,>3B11
MAR E1,??1 55>2,>D E,B3B2?E E,5D3D1> 33,?5>D? 3,15=35= B=,?D1?5 3D,?23EB
APRI
L
52=,?3> 5DDE,D3 5B,1>5B3 5=,>>?5= 13D,DD3E 5B,?1>B= 1=D,2B>B D2>,DD>5
MA) 5DE,D>5 5==1,31 1E,?53DD D1,DB51> E??,1>E3 D5,>>2=D E33,?5E3 52>=,1?
Tota# D=,D25D3 1?,==>1 DBD1,3B= 2 >5>5,D1B >5B?,2?5
A6era
+e
5,DD15E1 2,E12?2= 51E,=>?D 2 5>=,E2>?
Figure:3.6
omU V5>=,E2>?
U51,5B5B
(Beta) UW( GR)H ; R) XKW ( GR
1
H ; GRH
1
X
U G525=12,D4 EB5,>5DDHK G55BB15,>4 BB>,D2EDH
U 522=?3,EK 55?E?=,5
U 2,3B3ED1
Table:3.20
Ri Rm Ri4Rm $e6 frm a6 s8 of $e6 Rm1
122=
:A(
FEB 43,2E25> 43,>12D 2,DD25B> 2,235?15 2,22BB>B =2,E25?1
MAR 5,5E?E2B 2,=>2E=5 2,>?>ED? 42,2>D1? 2,2253=5 2,?>E2D3
APRIL B,E3BDD? =,213335 42,2>1?? 2,>?>1D5 2,12BD1B >E,>2?5=
MA) B,?155=? ?,EE31E? 2,?1133 42,5555E 2,251DB> D?,E=E??
:'(E 5,2>>?DB 1,5E1EE1 45,5>3>B 5,?B25>1 1,>D>2>D >,32E15B
:'L) B,2>>?> >,E?5=B3 5,2E1==D 42,B352E 2,>BD33 1>,?1
A'< 45,52=1? 45,E1?E 2,353B?> 42,>2BE= 2,5B?B1> D,=2E233
SEPT 55,D11>5 5>,2?31> 41,=D?3D D,5>=?5? E,E2B3?5 5E=,BD>1
OCT 5>,2>25? 5?,5?25D 45,52EE3 5,?15BB3 1,D5?>=D 11E,?1B>
(OV 45,5B2D1 2,?33??B 45,=>33= 1,5B2??= >,BB322B 2,D>BDE3
DEC =,111EBB 3,1>1?2> 45,25E?> 5,>D511D 1,2>3DEE B=,ED33=
1223
:A(
45D,225B 45B,2>2E D,2DE1=D 41,B1=?E B,E2>11 1?=,D523
FEB 42,25EBD 42,?=E1= 2,??EBDE 42,5>=E? 2,2153E 2,DD????
MAR 452,ED53 451,3??1 5,E1D>DB 45,?55=? 1,13?D3E 5B?,1??E
APRIL 3,=1=3=3 55,B>E53 41,E15D5 D,DD1EE5 55,5233D 5D?,=2D?
MA) 4D,=>2B 4?,?1E? 5,=333E1 45,D==15 5,3EBBEE D2,?=?D>
:'(E 45B,5B1 45E,DD1B D,5=2?=E 41,=?33E =,B55>EB D=D,=>==
:'L) =,D>?2ED B,D35E2? 2,EBD533 42,??5? 2,D2>5?B >2,=13=5
A'< >,D2>123 5,33>E?E 1,>5E1? 41,22=?B >,2D2D5? D,??D2BE
SEPT 43,5522D 451,=2D5 >,?ED525 4>,535>1 5=,>3>1> 5B5,DBEB
OCT 411,1?B5 41B,D?B >,2EE33E 4D,B331 5D,B213? BE>,BD==
(OV 4B,1?3DE 4=,1=D>5 5,25?25? 42,B2DDD 2,DB>22= ?1,E21>E
DEC =,11DE2> 3,3=23EE 45,B>= 1,2?3B35 >,1D35B? =3,BE13B
122E
:A(
4?,2E2BD 4>,131>1 42,32315 5,15E3EB 5,>335>? 53,DDE2E
FEB 4>,5E?D> 4?,B551B 5,>5?E1D 45,22>1> 5,223>ED D5,>3B11
MAR E,B3B2?E E,5D3D1> 2,?>==DB 42,5DB2? 2,253?5 3D,?23EB
APRIL 5B,1>5B3 5=,>>?5= 45,12D>E 5,B5?5=E 1,B2332D D2>,DD>5
MA) 1E,?53DD D1,DB51> 41,3>1E5 D,1?>?E= 52,?E1> 52>=,1?
D=,D25D3 1?,==>1 55,?1=53 52=,=E35 >5B?,2?5
5,DD15E1 2,E12?2= 2,>55B3? D,3>EED1
Standard Deviation for the fund`s excess return (S.D.) oiUVD,3>EED1
U5,EB151>
Sharpe Index (Si) U GRi 4 RfHKSi
U G5,DD15E14?HK 5,EB151>
U45,3BED
Treynor's Index (Ti) U GRi 4 RfHKBi,
U G>,?13E254?HK 2,3B3ED1
U4>,1152?
1enson alpha (op)U Ri ;W Rf Y Bi GRm 4 RfH X

U5,DD15E14 W?Y2,3B3ED1 G2,E12?2=4?HX
U 42,51D25
Expected return E(Ri) U Rf Y Bi GRm 4 RfH
UW?Y2,3B3ED1 G2,E12?2=4?HX
U5,>??5E3
Fema Measure:
Selectivity URi ;W Rf Y Bi GRm 4 RfH X
U5,DD15E14 W?Y2,3B3ED1 G2,E12?2=4?HX
U 42,51D25
Diversification UWRf Y GRm 4 RfHGZiK ZmHX4WRf Y Bi GRm 4 RfHX
UW?YG2,E12?2=4?HG 5,EB151>K51,5B5BHX4 W?Y2,3B3ED1 G2,E12?2=4?HX
U1,33BB1B
Net selectivity selectivity- diversification
U42,51D2541,33BB1B
U41,3=3D>
..- ANALYSIS O' T/E O5SERVATION3
The ta-#e +i6en -e#o. i##/strates the comparison amon+ the ana#yse$ f/n$s -ase$ on the
$ifferent meas/res of comparison,
Performance of Fund portfolio and Benchmark return for 29 months (jan07-may08)
Table:3.21
F'(D
RET'R(S
BE(CHMAR&
RET'R(
ET'IT)
F'(D
51,11?>B 55,3?1E
Capita#
-/i#$er
>,3=13B? 55,3?1E
<ro.th
f/n$
5B,>3=55 D,=E125B
Lon+ term
a$6
4=,BD2>D D,=E125B
Ta7 sa6er 42,3E>D3 55,3?1E
Top 122 1>,25>5 ?,2B?DDE
Figure:3.7
Performance Evaluation against Benchmarks
The a-o6e ta-#e presents ret/rn an$ ris" of the si7 f/n$s a#on+ .ith mar"et ret/rn an$ ris",
From the ta-#e it is e6i$ent that0 Top 1220 E8/ity f/n$ an$ <ro.th f/n$ ha6e earne$ +reater
ret/rn as a+ainst the mar"et earnin+, Capita# -/i#$er0 Lon+ term a$6anta+e an$ Ta7 sa6er
f/n$s ha6e not earne$ hi+her ret/rn than the Mar"et portfo#io, Lon+4term a$6anta+e an$ Ta7
sa6er f/n$s ha6e e6en ne+ati6e ret/rns,
Comparison of ratios:
Table:3.22
F/n$
name
S,D,
mar"et
S,D, f/n$ B 6a#/e Sharpe
ratio
Treynor
ratio
:ensonAs
a#pha
Fema Ret/ns
an2=4
may23G1E
monthsH
HDFC
E8/ity
55,5D1DE 1,DE115? 5,22EB55> 45,B>??= 4D,3EE2= 2,2=2>33 4D,23DB 51,11?>B
HDFC
Capita#
B/i#$er
55,5D1DE 1,?>?5DB 2,EDB1B? 45,BB3=1 4>,?DB1? 42,DED?= 4D,DDEB= >,3=13B?
HDFC
<ro.th
F/n$
52,E3E=5 1,?>=BE 2,E15==E 45,?DB>5 4>,1>B>B 2,25D=B= 41,E1B> 5B,>3=55
HDFC
Lon+
Term
A$6
52,E3E=5 1,D?D>3B 2,E2>33D 41,21233 4?,1?B2? 42,E222> 4D,3>D?1 4=,BD2>D
HDFC
Ta7
sa6er
55,5D5DE 1,1E11B1 2,E>>=B? 45,E>533 4>,=55?> 42,=25BD 4D,BDDEE 42,3E>D3
HDFC
Top 122
51,5B5B 5,EB151> 2,3B3ED1 45,3BED 4>,1152? 42,51D25 41,3=3D> 1>,25>5
Standard Deviation of the Market:
Hi+h stan$ar$ $e6iation of a f/n$ imp#ies hi+h 6o#ati#ity an$ a #o. stan$ar$ $e6iation imp#ies
#o. 6o#ati#ity, HDFC e8/ity f/n$0 HDFC capita# B/i#$er an$ HDFC Ta7 sa6er ta"e SOP
C(R ?22 as their -enchmar"0 HDFC <ro.th f/n$ an$ HDFC #on+ term ha6e ta"en Sense7
as -ench mar" an$ HDFC Top 122 has ta"en BSE 122 as its -ench mar", !e fo/n$ o/t that
BSE 122As S,D, is 51,5B5B0 .hich is +reater than Sense7 an$ SOP C(R ?22 ha6in+ 52,E3E=5
an$ 55,5D5DE S,D, respecti6e#y, Therefore0 BSE 122 is more 6o#ati#e than Sense7 an$ SOP
C(R ?22,
Standard deviation of the Fund:
It has -een fo/n$ that HDFC Top 122As S,D, is #esser than a## other f/n$s, A#tho/+h
-enchmar" in$e7 GBSE 122H is more 6o#ati#e as it has hi+her S,D, than other in$e7es sti##
HDFC Top 122 is #ess 6o#ati#e -eca/se of #esser f/n$ S,D, This is mi+ht -e -eca/se of
$i6ersification of /nsystematic ris" as it compensates the systematic ris",
Value :
As .e "no. in case of f/n$s0 -eta .o/#$ in$icate the 6o#ati#ity a+ainst the -enchmar" in$e7,
It is /se$ as a short term $ecision ma"in+ too#, A -eta that is +reater than 5 means that the
f/n$ is more 6o#ati#e than the -enchmar" in$e70 .hi#e a -eta of #ess than 5 means that the
f/n$ is more 6o#ati#e than the -enchmar" in$e7, A f/n$ .ith a -eta 6ery c#ose to 5 means the
f/n$As performance c#ose#y matches the in$e7 or -enchmar",
The ana#ysis i##/strates that HDFC E8/ity f/n$As is #ess 6o#ati#e an$ its performance is 6ery
c#ose to its -enchmar" as its -eta 6a#/e is 5,22EB55> compare$ to other f/n$s .hich ha6e
-eta 6a#/e #esser than 5 point, HDFC Top 122As -eta 6a#/e is more 6o#ati#e than the
-enchmar" as its 6a#/e is 2,3B3ED10 .hich is 6ery far from point 5,
Sharpe ratio:
A f/n$ .ith a hi+her Sharpe ratio means that these ret/rns ha6e -een +enerate$ ta"in+ #esser
ris", In other .or$s0 the f/n$ is #ess 6o#ati#e an$ yet +eneratin+ +oo$ ret/rn,
The ana#ysis sho.s that a## the f/n$s ha6e ne+ati6e Sharpe ratio therefore they are more
ris"y, Comparin+ a## the f/n$s HDFC +ro.th f/n$ has #esser ne+ati6e mar"s that means its
ret/rn 5B,>3=55 is +enerate$ ta"in+ #esser ris",
Treynor ratio:
!hi#e a hi+h an$ positi6e TreynorIs In$e7 sho.s a s/perior ris"4a$/ste$ performance of a
f/n$0 a #o. an$ ne+ati6e TreynorIs In$e7 is an in$ication of /nfa6o/ra-#e performance
Gsystematic ris" associate$ .ith it G-etaHH,
A## the f/n$s are ha6in+ ne+ati6e TreynorAs ratio .hich means they are affecte$ -y the
6o#ati#ity of the mar"et Gsystematic ris"Hor -y the +reat recession,
1enson`s alpha:
Its meas/re in6o#6es e6a#/ation of the ret/rns that the f/n$ has +enerate$ 6s, the ret/rns
act/a##y e7pecte$ o/t of the f/n$ +i6en the #e6e# of its systematic ris", Hi+her a#pha
represents s/perior performance of the f/n$ an$ 6ice 6ersa,
The ana#ysis points o/t that a## the f/n$s are ha6in+ ne+ati6e a#pha e7cept HDFC E8/ity f/n$
an$ HDFC <ro.th f/n$ .hich ha6e positi6e points, :enson a#pha ratio /stifies that these
t.o f/n$s are at #east a-#e to achie6e the e7pecte$ ret/rn +i6en the #e6e# of their systematic
ris",
Fema measure:
The (et Se#ecti6ity GFemaH represents the stoc" se#ection s"i## of the f/n$ mana+er0 as it is
the e7cess ret/rns o6er an$ a-o6e the ret/rn re8/ire$ to compensate for the tota# ris" ta"en -y
the f/n$ mana+er, Hi+her 6a#/e of .hich in$icates that f/n$ mana+er has earne$ ret/rns .e##
a-o6e the ret/rn commens/rate .ith the #e6e# of ris" ta"en -y him,
It has -een that a## the f/n$s are ha6in+ ne+ati6e net se#ecti6ity -eca/se of the hi+her ris"
fo/n$ -oth in systematic ris" GBH an$ /nsystematic ris", This fin$in+s point o/t0 that the stoc"
se#ection of the f/n$ mana+er has -een fai#e$ -eca/se of the systematic ris" i,e, recession,
Comparin+ to other f/n$s HDFC <ro.th f/n$ G41,E1B>H has #esser ne+ati6e points in this
time of +reat crisis, This in$icates that HDFC <ro.th f/n$ is +ettin+ enhance$ ret/rn -y
n/##ifyin+ systematic ris" an$ /nsystematic ris",
From the a-o6e ana#ysis there is no f/n$ .hich has consistency, The f/n$s are -ein+ affecte$
6ery -a$#y either -y the systematic ris" or -y the /nsystematic ris", As .e o-ser6e c#ose#y0 it
is the HDFC <ro.th f/n$0 .hich has -etter option for the in6estment, Its Sharpe ratio is
#esser ne+ati6e than other f/n$s .hich i##/strates that its ret/rn is #ess affecte$ -y o6era## ris",
Its a#pha 6a#/e is more than 2 .hich means its #ess affecte$ -y the mar"et ris" Gsystematic
ris"H an$ a#so its Fema 6a#/e Gse#ecti6ityH has #esser ne+ati6e 6a#/e .hich has mana+e$ to
n/##ify systematic ris" an$ /nsystematic ris" $/rin+ the time of recession,
An in6estor .ho is enterin+ into the capita# mar"et for ma"in+ #on+4term in6estment0 the
6o#ati#ity of the mar"et is important to accomp#ish his or her +oa# an$ these e7pectations are
often forme$ on the -asis of historica# recor$ of month#y ret/rns0 meas/re$ for ho#$in+ perio$
an$ other important ratios, !e .i## ta"e this f/n$ GHDFC <ro.th f/n$H for f/rther ana#ysis
of its portfo#io,
HDFC Growth Fund Portfolio Analysis
Table:3.23
Portfolio D54May42E
Name of Instrument Industry + Quantity Market/
Fair
Value(Rs.
In Lakhs)

toNAV
Equity & Equity Related
(a) Listed / awaiting listing on Stock Exchanges
State Ban" of In$ia Ban"s >>30222 30D=1,>? =,12
Nee Entertainment Enterprises Lt$, Me$ia O
Entertainment
>05B205=E =0225,?3 B,21
ICICI Ban" Lt$, Ban"s ED10DE= B0E25,5> ?,ED
Bharti Airte# Lt$, Te#ecom 4 Ser6ices =?20D>B B05?E,?E ?,D2
Crompton <rea6es Lt$, In$/stria# Capita#
<oo$s
102EE035E ?0?5D,2= >,=>
Bharat Petro#e/m Corporation Limite$ Petro#e/m Pro$/cts E1B0??= >0D2?,=5 D,=2
Ho/sin+ De6e#opment Finance
Corporation Lt$,P
Finance 5310?22 D0E==,== D,>1
E7i$e In$/stries Lt$, A/to Anci##aries ?0D5E0E52 D0=BE,5B D,1>
Di6is La-oratories Lt$, Pharmace/tica#s D530?D? D0BBB,53 D,5?
S/n Pharmace/tica# In$/stries Lt$, Pharmace/tica#s 1=10DB? D0D2?,3D 1,3>
H T Me$ia Lt$, Me$ia O
Entertainment
10D2=0222 103B5,3D 1,>B
So#ar E7p#osi6es Lt$, Chemica#s E5D01?= 1032=,35 1,>5
(est#e In$ia Lt$, Cons/mer (on
D/ra-#es
5B201B3 10=BB,=E 1,D3
Dr Re$$ys La-oratories Lt$, Pharmace/tica#s >120222 10=5E,?2 1,D>
ITC Lt$, Cons/mer (on
D/ra-#es
50>B10D2? 10B3?,?1 1,D5
Coroman$e# Ferti#isers Lt$, Ferti#isers 50>DD01=5 10B23,?? 1,1>
Biocon Limite$ Pharmace/tica#s 50D5E022B 10DE=,E? 1,2B
Re#iance In$/stries Lt$, Petro#e/m Pro$/cts 52>01?2 10DB3,>B 1,2>
Hin$/stan Petro#e/m Corporation Lt$, Petro#e/m Pro$/cts BDD0=15 10D22,2E 5,E3
Da-/r In$ia Lt$, Cons/mer (on
D/ra-#es
102?2055? 101B>,D? 5,E?
Ban" of Baro$a Ban"s >BE05?5 102?3,BD 5,==
Infosys Techno#o+ies Lt$ Soft.are 5120222 50E1B,51 5,BB
MphasiS Limite$ Soft.are ?BE0222 50E5B,EB 5,B?
A7is Ban" Lt$ Ban"s 1120222 50=5D,BE 5,>=
Apo##o Tyres Lt$ A/to Anci##aries ?0DB=0512 50B31,?E 5,>?
Tata Stee# Limite$ Ferro/s Meta#s >220222 50B15,>2 5,DE
Hin$/stan 'ni#e6er Lt$, Cons/mer (on
D/ra-#es
B?D0D?? 50?2=,E> 5,D2
(oi$a To## Bri$+e Company Lt$, Transportation D0B2=0222 50>>5,22 5,1>
Therma7 Lt$, In$/stria# Capita#
<oo$s
DB=0DBB 50D>?,1E 5,5B
Oi# O (at/ra# <as Corporation Lt$, Oi# 5550D?D 50D25,EE 5,51
(a+ar/na Constr/ction Co, Lt$, Constr/ction Proect =550=D3 EE2,2D 2,3?
Ba##arp/r In$/stries Lt$, Paper Pro$/cts D0EB=013= E3=,3? 2,3?
Eimco E#econ GIn$iaH Lt$, In$/stria# Capita#
<oo$s
1=B0>13 355,53 2,=2
Amara Raa Batteries Lt$, A/to Anci##aries 3DB0>?> =2?,E= 2,B5
C O C Constr/ctions Lt$ Constr/ction DEB0>EB BD?,=3 2,??
Maytas Infra Lt$ Constr/ction =B50E51 ??1,25 2,>=
&(R Constr/ction #imite$ Constr/ction =520?E= ?D5,?D 2,>B
ISMT Lt$, Ferro/s Meta#s 505=?0BB3 >5D,1? 2,DB
Ahme$na+ar For+in+s Lt$, In$/stria# Pro$/cts >1>01D> 1>?,15 2,15
Disa In$ia Lt$ En+ineerin+ 510B51 12=,3? 2,53
Technocraft In$/stries GIn$iaH Lt$ Ferro/s Meta#s ?D30=>? 5EE,2= 2,5=
Sub total 101,548.67 87.33
Total 101,548.67 87.33
Short Term Deposits as mar+in for F/t/res O Options 50222,22 2,3B
Cash mar+in K Earmar"e$ cash for F/t/res O Options ?02=1,22 >,DB
Other Cash0Cash E8/i6a#ents an$ (et C/rrent Assets 30B=E,D1 =,>?
Net Assets 116,299.99 100.00
Table:3.24
Sectoral Allocation of Assets()
Ban"s 5B,D=
Pharmace/tica#s 52,DE
Me$ia O Entertainment 3,>3
Cons/mer (on D/ra-#es =,E>
Petro#e/m Pro$/cts =,=1
In$/stria# Capita# <oo$s B,B2
Te#ecom 4 Ser6ices ?,D2
A/to Anci##aries ?,D2
Finance D,>1
Soft.are D,D5
Chemica#s 1,>5
Ferti#isers 1,1>
Ferro/s Meta#s 5,E1
Constr/ction 5,>3
Transportation 5,1>
Oi# 5,51
Constr/ction Proect 2,3?
Paper Pro$/cts 2,3?
In$/stria# Pro$/cts 2,15
En+ineerin+ 2,53
Cash0Cash E8/i6a#ents an$ (et 51,B=
C/rrent Assets
TOTAL 522
Figure:3.8
Table:3.25
HDFC <ro.th
F/n$
G(AV as at e6a#/ation $ate D24:/ne42E0 Rs, ?=,15E Per /nitH
Date Perio$ (AV Per 'nit
GRs,H
Ret/rns
GLH \
Benchmar" Ret/rns GLH
Sense7
Decem-er D20
1223
Last Si7 months G531
$aysH
>5,BE= D=,1D >E,5=
:/ne D20 1223 Last 5 )ear GDB? $aysH ?D,>=1 =,25 =,B=
:/ne D20 122B Last D )ears G52EB
$aysH
DB,2D> 5B,B? 52,E?
:/ne D20 122> Last ? )ears G531B
$aysH
5B,>DE 13,D5 1>,=>
:/ne D20 5EEE Last 52 )ears GDB?D
$aysH
(,A (,A, 5D,D>
Septem-er 550
1222
Since Inception GD15>
$aysH
52 15,E5 5D,B?
Figrure:3.9
/D'C Gro#th '%$d ( A$a8=!i!
It re8/ires a #ot of research an$ constant .atch on the capita# mar"et for a f/n$ mana+er to
ana#y@e the portfo#io of the partic/#ar f/n$, I too" the secon$ary $ata from the f/n$ re6ie. of
the artic#e corner from The B/siness Line .e- site, I comprehen$e$ the ana#ysis an$
conc#/$e$ my 6ie. as state$ -e#o.,
HDFC <ro.th F/n$ in6ests in stoc"s across mar"et capita#isations, Despite a #ar+e4cap -ias0
mi$ an$ sma## cap stoc"s acco/nt for 13 per cent of the portfo#io, The f/n$ has mana+e$ to
consistent#y -eat its -enchmar" Sense7 o6er one40 three4 an$ fi6e4year perio$s,
In the #atest portfo#io0 the f/n$ has in6este$ in as many as ?1 stoc"s across 53 $ifferent
sectors ma"in+ it a fair#y $i6ersifie$ portfo#io, This may in$icate net inf#o.s into the f/n$,
Sector Moves: There is a fair -it of sta-i#ity in terms of top sector ho#$in+s in the portfo#io,
Ban"s G5B,DE per centH an$ pharmace/tica#s G52,D= per centH sectors contin/e to -e the top
t.o sector ho#$in+s0 a#tho/+h e7pos/res ha6e -een a -it re$/ce$,
Ban"s an$ cons/mer non4$/ra-#es a#so fi+/re amon+ top ho#$in+s in the f/n$0 an$ ha6e seen
increase$ e7pos/res o6er the Septem-er4Fe-r/ary perio$, !hi#e capita# +oo$s an$ -an"s
ha6e $one .e## in the past year0 they ha6e -een amon+ the .orst hit in the recent me#t$o.n,
The respecti6e sector in$ices .ere -eaten $o.n -y o6er 1? per cent in the #ast co/p#e of
months, Constr/ction an$ pre$icta-#y0 soft.are e7pos/res ha6e -een pare$ in the si74month
perio$,
Interestin+#y0 me$ia an$ entertainment G3,>3 per centH0 .hich .ere not part of the portfo#io
si7 months a+o is no. in the top ten sector ho#$in+s for the f/n$, The po.er sector has -een
e7ite$0 .hi#e te#ecom ser6ices an$ a/to anci##aries e7pos/res ha6e -een increase$
s/-stantia##y,
Stock MovesJ Most stoc"s are those .hose prices ha6e fa##en $/rin+ Septem-er4Fe-r/ary0
inc#/$e stoc"s s/ch as Nee Entertainment0 HT Me$ia an$ Dr Re$$yIs La-s,
The f/n$ has a#so ta"en profit -oo"in+ opport/nities0 .ith se6era# stoc"s .hose prices rose
-et.een B2452? per cent ha6e -een e7ite$, These inc#/$e0 A7is Ban"0 Han/n+ Toys an$ Tata
Po.er, Other hi+h4profi#e e7its inc#/$e DLF0 HPCL0 Ran-a7y La-s0 an$ P/n L#oy$,
Re#iance In$/stries0 SBI0 O(<C an$ BHEL are the stoc"s retaine$ -y the f/n$ $/rin+ the
perio$ an$ are amon+ the f/n$Is top ho#$in+s,
..0 'INDINGS
As far as ana#ysis is concerne$0 .e fo/n$ o/t that the HDFC <ro.th F/n$ .as amon+
the -est performers f/n$, A#tho/+h a## the f/n$s are affecte$ -y the +#o-a# me#t$o.n0
GrecessionH sti## HDFC <ro.th F/n$ has -etter performe$ comparin+ to other f/n$s
for its systematic an$ /nsystematic ris", It offers a$6anta+es of $i6ersification0 mar"et
timin+0 an$ se#ecti6ity, In the comparison of samp#e of f/n$s0 HDFC <ro.th f/n$ is
fo/n$ hi+h#y $i6ersifie$ f/n$ an$ -eca/se of hi+h $i6ersification0 it has re$/ce$ the
tota# ris" of portfo#io,
F/rther0 other f/n$s .ere fo/n$ 6ery poor in $i6ersification0 mar"et timin+0 an$
se#ecti6ity, A#tho/+h HDFC Top 122 F/n$ an$ E8/ity F/n$ performe$ -etter in terms
of ret/rns -/t these s/ffere$ -y the systematic ris" Gmar"et 6o#ati#ityH an$ #ac" of
$i6ersification, For the f/rther c#arification0 .e too st/$ie$ the portfo#io of HDFC
<ro.th f/n$,
One of the fin$in+s that I came across is that +enera##y0 a +oo$ mo$e# of asset c#asses
is the one that can e7p#ain a #ar+e portion of the 6ariance of ret/rns on the assets an$
there .ere some stoc"s in the f/n$ portfo#io0 .hich .ere not a#i+ne$ .ith strate+y of
the f/n$ portfo#io,
The optima# sit/ation in6o#6es the se#ection that procee$s from sensi-#e ass/mptions0
is caref/##y an$ #o+ica##y constr/cte$0 an$ is -roa$#y consistent .ith the $ata .hi#e
co##ectin+ the stoc"s for the portfo#io, The portfo#io .as sho.in+ constr/cti6e
o/tcome in #on+ time hori@on an$ the res/#ts can -e impro6e$ -y ma"in+ the minor
chan+es in f/n$ portfo#io,
Hence0 the portfo#io theory teaches /s that in6estment choices are ma$e on the -asis
of e7pecte$ ris" an$ ret/rns an$ these e7pectations can -e satisfie$ -y ha6in+ ri+ht
mi7 of assets,
..1 RECOMMENDATIONS3
Consi$erin+ the a-o6e ana#ysis0 it can -e note$ that the three +ro.th oriente$ m/t/a# f/n$s
GHDFC E8/ity F/n$0 HDFC <ro.th F/n$ an$ HDFC Top 122 f/n$H ha6e performe$ -etter
than their -enchmar" in$icators, Other f/n$s s/ch as HDFC Capita# B/i#$er F/n$0 HDFC
Lon+ term A$6anta+e F/n$ $i$ not perform .e## e6en some performe$ ne+ati6e#y, Tho/+h
HDFC E8/ity F/n$0 HDFC <ro.th F/n$ an$ HDFC Top 122 f/n$ ha6e performe$ -etter
than the -enchmar" of their systematic ris" G6o#ati#ityH -/t .ith respect to tota# ris" the f/n$
ha6e not o/tperforme$ the Mar"et In$e7,
<ro.th oriente$ m/t/a# f/n$s are e7pecte$ to offer the a$6anta+es of Di6ersification0 Mar"et
timin+ an$ Se#ecti6ity, In the samp#e0 HDFC E8/ity F/n$0 HDFC <ro.th F/n$ an$ HDFC
Top 122 f/n$ is fo/n$ to -e $i6ersifie$ f/n$ an$ -eca/se of hi+h $i6ersification0 it has
re$/ce$ tota# ris" of the portfo#io, !hereas0 others are #o. $i6ersifie$ an$ -eca/se of #o.
$i6ersification their tota# ris" is fo/n$ to -e 6ery hi+h, F/rther0 the f/n$ mana+ers of these
/n$er performin+ f/n$s are fo/n$ to -e poor in terms of their a-i#ity of mar"et timin+ an$
se#ecti6ity,
The f/n$ mana+er of HDFC E8/ity F/n$0 HDFC <ro.th F/n$ an$ HDFC Top 122
f/n$ can impro6e the ret/rns to the in6estors -y increasin+ the systematic ris" of the
portfo#io0 .hich in t/rn can -e $one -y i$entifyin+ hi+h#y 6o#ati#e shares,
A#ternati6e#y0 these can ta"e a$6anta+e -y $i6ersification0 .hich +oes to re$/ce the
ris" if the same ret/rn is +i6en to the in6estor at a re$/ce$ ris" #e6e#0 the
compensation for ris" mi+ht seem a$e8/ate, The f/n$ mana+er of HDFC Capita#
B/i#$er F/n$0 HDFC Lon+ term A$6anta+e F/n$ can earn -etter ret/rns -y a$optin+
the mar"etin+ timin+ strate+y an$ se#ectin+ the /n$er price$ sec/rities,
The f/n$ mana+er can $i6i$e a## sec/rities into se6era# asset c#asses an$ tries to
constr/ct an efficient portfo#io -ase$ on e7pecte$ ret/rns0 ris"0 an$ corre#ations of
in$e7es representin+ these asset c#asses, The in6estment sho/#$ -e $one in the -ench
mar" in$e7es to +et an %efficient* portfo#io in s/ch a .ay that no other com-ination
of these in$e7es .o/#$ res/#t in a portfo#io .ith a hi+her ret/rn for a +i6en #e6e# of
ris", It sho/#$ -e emphasi@e$0 ho.e6er0 that this is not a f/##y efficient portfo#io
-eca/se information a-o/t corre#ations amon+ in$i6i$/a# sec/rities .ithin an in$e7
an$ across the in$e7es is #ost in the transition from in$i6i$/a# sec/rities to the
-enchmar"s that represent them,
These meas/res are more /sef/# to in6estors .ho are p/ttin+ their money into one
$i6ersifie$ f/n$ an$ are a-#e to /se #e6era+e or in6est in the ris"4free asset, !hen the
in6estor is in6estin+ in the $ifferent f/n$s0 the f/n$As mar+ina# contri-/tion to the
portfo#ioAs ris" an$ ret/rn is more important than its in$i6i$/a# sec/rity
characteristics, To constr/ct an efficient portfo#io0 an in6estor m/st ta"e acco/nt of the
corre#ations amon+ the -ein+ consi$ere$,
It is not a$6isa-#e to app#y /st proce$/re or approach for a## sit/ations at #east .hen it comes
to in6estments tho/+h the /se$ meas/res are hi+h#y re#ia-#e in the st/$ies $one on simi#ar
6eins, E6en at this /nct/re it .o/#$ sti## -e recommen$e$ that instea$ of +oin+ ahea$ on#y on
the -asis of ris" an$ ret/rn0 other in$icators #i"e ne. proects0 sector impact0 in$i6i$/a#
sentiments a-o/t companies etc -esi$es Qcommon sense an$ int/itionA may a#so -e #oo"e$
into,
..2 CONCLUSIONS3
M/t/a# f/n$ has -ecome one of the important so/rces for in6estin+, It is 8/ite #i"e#y that a
more efficient portfo#io can -e constr/cte$ $irect#y from f/n$s, Th/s0 the t.o4step process of
choosin+ an asset a##ocation -ase$ on the information a-o/t -enchmar" in$e7es an$ then
choosin+ f/n$s in each cate+ory may -e one of the -est rea#istica##y attaina-#e approaches, To
/se this approach to portfo#io se#ection effecti6e#y0 in6estors .o/#$ -enefit from estimates of
f/t/re asset ret/rns0 ris"s an$ corre#ations0 as .e## as from f/n$ mana+ementAs $isc#os/re of
f/t/re asset e7pos/res an$ appropriate -enchmar"s,
It has -een a +reat opport/nity for me to +et a first e7perience of M/t/a# F/n$s, My st/$y is
to +et the fee# of ho. the .or" is carrie$ o/t in re#ation to f/n$As portfo#io aspect, I +ot an
opport/nity in re#ation to the $oc/mentation an$ a#so the portfo#io ana#ysis that ha6e -een
carryin+ o/t in faci#itatin+ the in6estor an$ the f/n$ mana+er,
RE'ERENCES
Books:
5, Sec/rity Ana#ysis an$ Portfo#io Mana+ement Gsi7th E$ition 5EE?H -y Dona#$
E, Fisher an$ Rona#$ :, :or$an, P/-#icationJ Pearson e$/cation,
1, The In$ian Financia# System Gsecon$ e$itionH -y Bharati V, Patha", P/-#ishe$
-y Dor#in+ &in$ers#ey GIn$iaH P6t, Lt$,0 #icensees of Pearson E$/cation in
So/th Asia,
D, Sec/rity Ana#ysis an$ Portfo#io Mana+ement -y &han an$ :ain,
Magazines:
Money O/t#oo" GMay O:/ne 122EH
B/siness .or#$ GMay O :/ne 122EH
Websites
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