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CH INSTITUTE OF MANAGEMENT AND COMMERCE

A STUDY OF THIRD PARTY PRODUCTS AND WEALTH MANAGEMENT ACTIVITIES IN HDFC BANK As a Partial Fulfillment For the Degree of Post Graduate Diploma in Management (PGDM)

Reporting Officer: Rashmi Singh

Submitted By: Konark Jain

CERTIFICATE
This is to certify that Konark Jain of PGDM in CHInstitute of Management and Commerce, Indore has carried out a Major Research Project titled A STUDY OF THIRD PARTY PRODUCTS AND WEALTH MANAGEMENT ACTIVITIES IN HDFC BANK. The work done by him is genuine and authentic. The work carried out by the student was found satisfactory. I wish him all the success in career.

Date: Place: -

Reporting Officer Rashmi Singh HDFC Bank. Indore

ACKNOWLEDGEMENT This research was made possible as per the requirement of the PGDM course under CHInstitute of Management and Commerce. Many individual took interest and were supportive of my effort. In fact, many have given me their time generously and it is not possible to mentionall of them here and there act of goodness. I take the opportunity to place and record my deep sense of gratitude to all who have helped me in completion of my study. I express my heartiest thanks to Rashmi Singh who took keen interest towards my project and provided me with deep insight on importance of mutual fund awareness. I also humbly thank my friends and batch mates for their generous participation in the data collection process.

Introduction

A Third-Party Product: - A third party products refers to a product that's produced by a


company other than Apple. Usually, third-party products are supported by the company that made them. If you need help with a third-party product, contact the company who made the product instead of Apple. Apple does support some third-party products that come with an Apple computer. Who are the first and second party? Technically speaking, Apple is the first party. Second party" usually refers to the person using the product. Example of third party products:- Mutual fund, life Insurance, General Insurance, Health Insurance.

Wealth Management:- A professional service which is the combination of financial/investment


advice, accounting/tax services, and legal/estate planning for one fee.

Wealth management services are provided by banks, professional trust companies, and brokerages. For those with sizeable assets [usually over $500,000], professional wealth management can help you plan your estate or invest your assets based on personal criteria and financial goals.

Mutual Fund:- A mutual fund is a professionally managed type of collective investment


scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities. They offer investors a variety of goals, depending on the fund and its investment charter. Some funds, for example, seek to generate income on a regular basis. Others seek to preserve an investor's money. Still others seek to invest in companies that are growing at a rapid pace. Funds can impose a sales charge, or load, on investors when they buy or sell shares. Many funds these days are no load and impose no sales charge. Mutual funds are investment companies regulated by the Investment Company Act of 1940. Related: open-end fund, closed-end fund.

Concept of mutual funds


A mutual fundis a trust that pools the savings of a no. of investors, who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciations realized are shared by its unit holders in proportion to the number of units owned by them. Thus a mutual fund is the most suitable investment for the common man as it offers an opportunity to invest in diversified, professionally managed basket of securities at a relatively low cost.

History of the Indian Mutual Fund Industry


The origin of the mutual fund industry in India was with the formation of UTI in the year 1963, at the initiative of the reserve bank and Government of India. Though the growth was slow, but it accelerated from the year 1987 when non-UTI players entered the industry. In the past decade, Indian mutual fund industry had seen dramatic improvements, both quality wise as well as quantity wise. It has seen 218.5% increases in assets under their management from 2003 to 2007(May 31st), 38 fund houses managing Rs. 3, 87,896 crores (May 31st, 2008). The main reason of its slow growth initially, was because mutual fund industry was new in India. I experienced that lot of investors are aware of mutual fund and how does it work but still they are not aware of how does it function and how does the investments decision take place.

DIFFERENT PHASES OF MUTUAL FUND INDUSTRY


First Phase: 1964-87 (Growth of Unit Trust of India) Unit Trust of India (UTI) was established in 1963 by an act of Parliament. It was set up by the RBI and functioned under the Regulatory and administrative control of RBI. In 1978 UTI was De-linked from the RBI and IDBI took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was unit scheme in 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.

Second Phase: 1987-1993 (Entry of Public sector funds) 1987 marked the entry of non- UTI, public sector mutual funds set up by PSU banks and LIC& GIC. SBI Mutual fund was the first non- UTI Mutual fund established in June 1987 followed by can bank mutual fund (Dec87), Punjab National Bank Fund (Aug 89), Indian Bank (Nov 89), Bank of India (Jun90), Bank of Baroda (Oct 92), LIC established its mutual fund in June 1989 while GIC had established its mutual fund in December 1990.at the end of 1993 the mutual fund industry had assets under management of Rs. 47,004 cores.

Third Phase: 1993-1996 (Entry of Private Sector Funds)

With the entry of private sector funds in 1993, a new era started in the Indian Mutual Fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first mutual fund regulations came into being, under which all mutual funds, except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund to be registered in July 1993.The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised mutual fund regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.The number of mutual houses went on increasing, with many foreign mutual funds setting up in India and also the industry had witnessed several mergers and acquisitions.

Fourth Phase: 1996-1999 (Growth and SEBI Regulation) From here onwards mutual fund industry in India saw tighter regulations and higher growth. Competition arises because of deregulation and liberalization of the Indian economy. Measures were taken both by SEBI to protect the investor, and the government to enhance the investors returns through tax benefits. NOTE: In 1996 SEBI introduced comprehensive set of regulation for all mutual fund companies operating in India. During this phase both SEBI and AMFI launched various investor awareness campaigns aimed at educating the investors about the investment through mutual fund.

Fifth Phase: 1999-2004 (Emergence of uniform industry) In1999, dividends from mutual funds were tax exempt in the hands of the investors. In Feb 2003, UTI act was repealed. UTI no longer has special legal status as a trust established by an act of parliament. Instead it has to adopt the same structure as any fund in India-a trust and an AMC. NOTE: UTI mutual fund is the present name of the erstwhile Unit Trust of India.

Phase Sixth: 2004 onwards (Consolidation and growth) As at the end of May 2007, there were 38 fund houses. Now it is the time to strengthen what is the best channel to invest your funds. The stage is set for growth through consolidation and new entry both in international and private sectors.

TYPES OF MUTUAL FUNDS


There are a number of mutual funds to suit the needs and preferences of investors. The choice of the fund is linked to the demand of the investor. The earning objective of investor helps in deciding the types of funds where investment should be done. To achieve the differing objective of investors, mutual funds adopt different strategies and accordingly offer different schemes of investment.

According to structure:
The most important classification of mutual fund is on the basis of the structure of their operations as all types of mutual funds fall under this classification. Accordingly, to this scheme, the mutual funds can be divided into three categories, i.e. open ended funds, close-ended funds and the interval funds.

Open-ended schemes Open-ended scheme means a scheme of mutual fund, which offers units for sale without specifying any duration for redemption. These schemes do not have a fixed maturity and entry or exit to the fund is always open to the investors who can subscribe at any time. The fund redeems or repurchases the units or shares at periodically announced rates. First, open-end mutual fund shares are priced at their net asset value (NAV) , which are computed on a daily basis when market is closed. These repurchase rates are based upon the net current assets of the fund. Thus, Open-ended funds provide better liquidity to the investors. In the same manner the price at whichthe units are offered to the public is also announced periodically. Note: It should be noted here that an open-end mutual funds performance needs to be judged by its total return, both annually and over extended periods of time, and not its net asset value.

Close-ended schemes The mutual fund industry did begin its innings in India with close ended equity funds. A close ended equity scheme means any scheme of mutual fund in which the period of maturity of the scheme is specified. Unlike open-ended funds, the corpus of close-ended scheme is fixed and aninvestor can subscribe directly to the scheme only at the time of initial issue. After the initial issue is closed, a person can buy or sell the units of the scheme in the secondary market i.e. the stock exchanges where these are listed. The price in the secondary market is determined on the basis of demand and supply and hence could be different from the net assets value.

According to investment objective:


Equity funds These funds invest a major portion of their corpus in equity shares issued by companies. Equity funds are considered at the high end of risk spectrum. Equity oriented investors should invest in equity mutual funds to earn better returns and also save on time and efforts which goes in direct investing in shares.

Debt funds (or income funds) The aim of the debt funds is to provide regular and steady income to the investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and government securities. Debt funds are ideal for capital stability and regular income. Debt funds are largely considered asincome funds as they dont target capital appreciation, look for high current income, and therefore distribute a substantial part of their surplus to the investors. Different investment objectives set by the fund managers would result in different risk profiles like diversified debt funds (funds that invest in all available types of debt securities, issued by entities across all industries),focused debt funds (funds which have a narrow focus, with less diversification in its investment), high yield debt funds (usually , debt funds control the borrower default risk by investing in securities issued by borrowers who are rated by credit rating agencies and are considered to be of investment grade).

Balanced funds (65% equity and 35% debt) Balanced funds attempt to provide investors with the best of both worlds. They aim for growth (through a high equity allocation) and stability (through the debt allocation) of the investment. Balanced funds invest both in equity and debt. These are ideal for investors looking for a combination of both income and growth. Investing in a balanced fund ensures that fixed

Proportion stays in equity and debt, because of equity holdings these funds are affected by fluctuations in share prices in the stock market.

Money Market Funds The aim of money market funds is to provide easy liquidity, preservation of capital and moderate-income. These schemes generally invest in safer short term investments such as treasury bills, certificates of deposit, commercial paper and inter- bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for corporate and individual investors as a means to park their surplus funds for short periods.

Gilt funds Gilts are government securities with medium to long term maturities typically of over one year (under one year instruments being money market securities). In India, we have now seen the emergence of government securities or gilt funds that invest in government paper called dated securities (unlike treasury bills that mature in less than one year). Since the issuer is the government of India, these funds have little risk of default and hence better protection of principle.

Hybrid funds We have seen that in terms of the nature of financial securities held, there are three majormutual fund types: money market, debt and equity. Many mutual funds mix these different types of securities in their portfolios. Thus, most funds, equity or debt, always have some money market securities in their portfolios as these securities offer the much-needed liquidity. However, money market holdings will constitute a lower proportion in the overall portfolios of debt or equity funds like balanced funds (funds that has a portfolio comprising debt instruments, convertible securities, and preference and equity shares). Load funds Load fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the funds, a commission will be payable. Typically entry and exit loads range from 1% to 2%. It could be worth paying the load, if the good performance history.

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No- Load funds A No- Load fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no-load fund is that the entire corpus is put to work.

Commodity funds While all of the debt/equity/money market funds invest in financial assets, the mutual fund vehicle is suited for investment in any other: example- physical assets. Commodity funds specialize in investing the different commodities directly or through shares of commodity companies or through commodity futures contracts. Specialized funds may invest in single commodity or a commodity group such as edible oil or grains, while diversified Commodity funds will spread their assets over many commodities. A most common example of commodity funds is the so called the precious metal funds.

Real Estate funds Specialized Real Estate funds would invest in real estate directly, or may fund real estate developers, or lend to them, or buy shares of housing finance companies or may even buy their securities assets. These funds may have a growth orientation or seek to give investors regular income. Recently there has been an initiative to offer such an income by the HDFC.

Bond funds These funds employ their resources in bonds. These investments ensure fixed and regular income. Sometimes bonds are available in the market at lower than face value, the net income on these a bond goes higher because interest will be received on the face value of the bond. Some companies offer non-convertible bonds along with the shares. Any person subscribing for the shares will have to take up bonds also. Bonds funds may have a tie up with the companies and offer certain price if the subscribers want to sell their bonds at the time of allotment. Bond fund will pay a fixed amount to the company and some amount will be paid by the subscriber also. The shareholder is saved of the both eration of buying bonds compulsorily while bond fund will Payless than the face value of the bond, thus saving some money. Bond fund ensure regular income to the investors.

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Exchange Trade funds An exchange traded funds is a mutual fund that trades like a stock. An ETF represents a basket of stocks that reflect an index. An ETF, however, is not a mutual fund; it trades just like any other company on a stock exchange.

Fund of Funds It is a mutual fund that invests in other mutual funds. A normal mutual fund invests in a portfolio of securities such as debt or equity, on the other side fund of funds invest in a portfolio of the units of the other mutual fund schemes. It uses an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. According to Security Selection The type of security that the fund invests in is what determines this particular group. Technical FundsThese funds are those that use technical analysis to select scripts. Small Cap FundsThis fund focuses on small cap stocks for their investment portfolio. Midcap FundsThese funds invest in mid cap scripts. Large Cap Funds- These funds are those that invest in large cap scripts. AAA Rated FundsThese funds are those that invest only in triple a rated or higher rated securities.

BENEFITS OF MUTUAL FUNDS


Professional Management: - Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification: - Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. 12

Convenient Administration: - Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient. Return Potential: - Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities. Low Costs: - Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors Liquidity: - In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund Transparency: - You get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook. Flexibility: - Through features such as regular investment plans, regular with drawls plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience. Affordability: - Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy. Choice of Schemes: - Mutual Funds offer a family of schemes to suit your varying needs over a lifetime. Well Regulated: - All Mutual Funds are registered with SEBI and they function with in the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

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CONCEPTUAL FRAMEWORK
MUTUAL FUNDS Dictionary definition of a mutual fund might go something like this: portfolio of stocks, bonds or Cash managed by an investment company on behalf of many investors. The Investment Company is responsible for the management of the fund and it sells shares in the fund to individual investors. When u invests in mutual fund, you become a part owner of the large investment portfolio, along with all the other shareholders of the fund. When you purchase the shares, the fund manager invests your money along with the money contributed by the rest of the shareholders. Every day, the fund manager counts up the value of the entire funds holdings figures out how many shares have been purchased by the shareholders and then calculate the Net Asset Value (NAV) of the mutual fund, the price of the single share of the fund on that day. If the fund manager is doing a good job, the NAV of the will usually gets bigger- your shares will be worth more. But exactly how does mutual funds NAV increase? There are a couple of ways that a mutual fund can make money in its portfolio

NET ASSET VALUE (NAV) The Net Asset Value or NAV is a measure of the current value of one share of a mutual fund. The value of a mutual fund share is calculated based on the value of the assets owned by the fund at the end of every trading day. The fund calculates the value: A shares value is called the Net Asset Value (NAV). The fund calculates the NAV by adding up the total value of all the securities it owns, subtracting the expenses of the fund, and then dividing by the number of shares owned by the shareholders.

NAV= Net Assets of the scheme / number of outstanding units. Net assets of the scheme= market value of investments + receivables + other accrued income + other assets accrued expenses other payables other liabilities.

Value changes daily: Since the value of the stocks or bonds owned by the fund can change daily, hence the value of the fund can also change daily. Therefore, a fund is required by the law to adjust its price once every trading day to provide investors with the most current NAV.

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SYSTEMATIC INVESTMENT PLAN


An existing unit holder can benefit under this facility by investing specified amount regularly. By investing a fixed amount of rupees at regular interval, one would end up buying more units of the funds when the price is lower and fewer units when the price is high. As a result, over a period, the average cost per unit to the unit holders with always is less than the average subscriptionprice per unit, irrespective of whether it is a rising, falling or fluctuating market. Thus the unitholders automatically gain averages out the fluctuation of the market without having the market price day to day basis. This concept is called RUPEE COST AVERAGING. The following should be noted regarding SIP: All the mutual funds specify the minimum amount for investing in scheme. In case ofSIPs. Facility of minimum amount is much lower around Rs. 500 to Rs. 1000. Every mutual fund specifies the minimum number of payment that should be invested in order to get this facility. It might be twelve cheques of Rs. 500 each of six chequesRs. 1000each. It is mandatory that the cheque should be of same value. The frequency of investment offered for SIP varies from fund to fund. However, in general all mutual funds offer monthly or quarterly investment facility.

Life Insurance
Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit in the event of specified event, typically a lump sum payment. A common form of this design is term insurance. Investment policies where the main objective is to facilitate the growth of capital by regular or single premiums. Common forms (in the US) are whole life, universal life and variable life policies. 15

Types of Life Insurance


Life insurance may be divided into two basic classes temporary and permanent or following subclasses term, universal, whole life and endowment life insurance. Term Insurance Term assurance provides life insurance coverage for a specified term of years in exchange for a specified premium. The policy does not accumulate cash value. Term is generally considered "pure" insurance, where the premium buys protection in the event of death and nothing else. There are three key factors to be considered in term insurance: 1. Face amount (protection or death benefit), 2. Premium to be paid (cost to the insured), and 3. Length of coverage (term). Permanent Life Insurance Permanent life insurance is life insurance that remains in force (in-line) until the policy matures (pays out), unless the owner fails to pay the premium when due (the policy expires OR policies lapse). The policy cannot be canceled by the insurer for any reason except fraud in the application, and that cancellation must occur within a period of time defined by law (usually two years). Permanent insurance builds a cash value that reduces the amount at risk to the insurance company and thus the insurance expense over time. This means that a policy with a million dollar face value can be relatively expensive to a 70 year old. The owner can access the money in the cash value by withdrawing money, borrowing the cash value, or surrendering the policy and receiving the surrender value. The four basic types of permanent insurance are whole life, universal life, limited pay and endowment.

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General insurance General insurance or non-life insurance policies, including automobile and homeowners policies, provide payments depending on the loss from a particular financial event. General insurance typically comprises any insurance that is not determined to be life insurance. It is called property and casualty insurance in the U.S. and Non-Life Insurance in Continental Europe. Health Insurance
Health insurance is insurance against the risk of incurring medical expenses among individuals.By estimating the overall risk of health care expenses among a targeted group, an insurer can develop a routine finance structure, such as a monthly premium or payroll tax, to ensure that money is available to pay for the health care benefits specified in the insurance agreement. A health insurance policy is: 1) A contract between an insurance provider (e.g. an insurance company or a government) and an individual or his sponsor (e.g. an employer or a community organization). The contract can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance, or be mandatory for all citizens in the case of national plans. The type and amount of health care costs that will be covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in a national health policy for public insurance.

Health plan vs. Health insurance


Historically, HMOs tended to use the term "health plan", while commercial insurance companies used the term "health insurance". A health plan can also refer to a subscription-based medical care arrangement offered through HMOs, preferred provider organizations or point of service plans.

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Scope of the Study


To make people aware about concept of mutual fund & insurance. To provide information regarding advantages and demerits of mutual fund & insurance. To advice where to invest or not to invest. To provide information regarding types of mutual fund &insurance this is beneficial for whom.

Need of the study


The basic reason for conducting this research is to find the awareness of HDFC Third party products and attractive features of HDFC Mutual Funds & Insurance to develop Perception Level of Investor and try to analyzing the awareness of mutual funds in Indore and which investment option is most suitable for investors as their point of view. As mutual fund is an growing industry and more and more investors have become mutual fund owners over the year , there is a wide scope for analyzing the basis of preference for investing in mutual fund is they based on influenced by the variables such as liquidity, tax saving etc. thus we compared the performance of HDFC equity fund with equity schemes of other mutual fund and secondly performance of HDFC growth fund schemes with growth fund schemes of reliance and Tata as well as tax saving schemes.

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Literature Review
The Determinants of mutual fund Performance A Cross-Country Study find that performance worsens with lagged fund size for Domestic U.S. funds, but not for non-U.S. funds and international funds. This finding is consistent with the view that diminishing returns to scale in the U.S. are explained by liquidity constraints due to a particular fund style (small stocks) or geographic focus (domestic stocks). Fund age and fees are negatively related to performance, while funds that belong to large fund families, solo-managed funds, and funds distributed in several countries perform better. Country characteristics also help to explain fund performance. Domestic funds located in developed countries, especially those with liquid stock markets and strong legal institutions, display better performance. Competition in the mutual fund Industry: Evidence and Implications for Policy Show higher advisory fees significantly reduce fund market shares, and so constrain fees. Fund performance is consistent with competition exerting a strong disciplinary force on funds and fees. Our findings lead us to reject the critics' views in favor of the legal framework established by 36(b) of the Investment Company Act and the lead case interpreting that law (the Gutenberg decision), while suggesting Gutenberg is best interpreted to allow the introduction of evidence regarding competition between funds. Evaluating mutual fund They found that that the performance measures are badly misspecified. Regardless of the performance measure, there are indications of abnormal fund performance, including markettiming ability, when none exists. Conflicts of Interest and Competition in the mutual fund Industry They find no evidence that investors derive any benefit from 12b-1 fees. Product differentiation strategies are also effective in obtaining market share. Families that perform better, and start more funds relative to the competition (a measure of innovation) have a higher market share. Innovation is rewarded more it he new fund is more differentiated from existing offerings and is in a less crowded objective. Finally, market share within an investment objective is driven primarily by a family's policies within that objective, but there are important performance spillover effects from other funds in the family. Our findings are robust to various tests for endogeneity of the explanatory variables. Overall, this paper highlights a number of conflicts between fund families and investors.

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The Determinants of mutual fund Performance: A Cross-Country Study They find that fund performance worsens with lagged fund size for domestic U.S. funds, but not for non-U.S. funds and international funds. This finding is consistent with the view that diminishing returns to scale in the U.S. are explained by liquidity constraints due to a particular fund style (small stocks) or geographic focus (domestic stocks). Fund age and fees are negatively related to performance. Estimation Risk in mutual fund Ratings: The Case of Morningstar As a result, investors can be somewhat less confident that the ratings of young funds are truly what they are estimated to be. We illustrate our point by investigating 1281 international equity mutual. Results for bond mutual funds are similar to those for equity mutual funds but hedge funds show better ex-post and ex-ante risk adjusted performance than do mutual funds. Sensible advice for most investors would be to hold low cost index funds and avoid holding past "active" loser funds. Only very sophisticated investors should pursue an active investment strategy of trying to pick winners - and then with much caution .The evidence suggests that ex-post, there are around 2-5% of top performing UK and US equity mutual funds which genuinely outperform their benchmarks whereas around 20-40% of funds have genuinely.

Improved Forecasting of Alphas and mutual fund Betas It shows that the combined use of an OLS and Kalman filter model increases the number of funds with predictable out of sample alphas by about 60%. Overall, a strategy that uses very modest ex-ante filters to eliminate funds whose parameters likely derive primarily from estimation errors produces an out of sample risk adjusted return of over 4% per annum. Mutual fund herding and the impact on stock prices It finds much higher levels in trades of small stocks and in trading by growth-oriented funds. Stocks that herds buy outperform stocks that they sell by four percent during the following six months; this return difference is much more pronounced among small stocks. Our results are consistent with mutual fund herding speeding the price-adjustment process.

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Company Profile

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Introduction to HDFC Bank


Background The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. HDFC Bank's objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People. HDFC Standard Life Insurance Company Limited, promoted by HDFC was the first life insurance company in the private sector to be granted a Certificate of Registration (on October 23, 2000) by the Insurance Regulatory and Development Authority to transact life insurance business in India. Capital Structure As on 31st March, 2011 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on the said date is Rs. 465, 22, 56,840/- (46, 52, 25, 684 equity shares of Rs. 10/each). The HDFC Group holds 23.35% of the Bank's equity and about 17.44% of the equity is held by the ADS / GDR Depositories (in respect of the bank's American Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 28.53% of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has 4, 11,464 shareholders.

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The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

Distribution Network HDFC Bank is headquartered in Mumbai. As on March 31, 2011, the Bank has a network of 1986 branches in 996 cities across India. All branches are linked on an online real-time basis. Customers in over 800 locations are also serviced through Telephone Banking. The Banks expansion plans take into account the need to have a presence in all major industrial and commercial centers, where its corporate customers are located, as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing / settlement bank to various leading stock exchanges, the Bank has branches in centers where the NSE / BSE have a strong and active member base. The Bank also has a network of 5471 ATMs across India. HDFC Banks ATM network can be accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.

Financials The Banks total income for the quarter ended March 31, 2011, was Rs. 6,724.3 crores. Net revenues (net interest income plus other income) at Rs. 4,095.2 crores for the quarter ended March 31, 2011 increased by 24.0% over Rs. 3,302.1 crores for the corresponding quarter ended March 31, 2010. Net interest income (interest earned less interest expended) for the quarter ended March 31, 2011 was Rs. 2,839.5 crores as against Rs. 2,351.4 crores for the quarter ended March 31, 2010. This was driven by loan growth of 27.1% and a core net interest margin for the quarter of 4.2% 24

Credit Rating The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high"

The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments.

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Business Profile
Wholesale Banking The Banks target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporates and agri-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the banks Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.

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Retail Banking The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 14 million. The Bank is also one of the leading players in the merchant acquiring business with over 90,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

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HDFC Bank history The merged entity now holds a strong deposit base of around Rs. 1,22,000crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs. 1,63,000crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. STANDARD LIFE INVESTMENTS LIMITED Standard Life Investments was launched as an investment management company in 1998. It is the dedicated investment management company of the Standard Life group and is a wholly owned subsidiary of Standard Life Investments (Holdings) Limited, which in turn is a wholly owned subsidiary of Standard Life plc With global assets under management of approximately US$213.9 billion as at June 30, 2010 Standard Life Investments Limited is one of the world's major investment companies, operating in the UK, Canada, Hong Kong, China, Korea, Ireland and the USA, and is responsible for investing money on behalf of five million retail and institutional clients worldwide The Standard Life Assurance Company was established in 1825 and has considerable experience in global financial markets. The company was present in the Indian life insurance market from 1847 to 1938 when agencies were set up in Kolkata and Mumbai. The company re-entered the Indian market in 1995, when an agreement was signed with HDFC to launch an insurance joint venture. In April 2006, the Board of The Standard Life Assurance Company recommended that it should demutualize and Standard Life plc float on the London Stock Exchange. At a Special General Meeting held in May voting members overwhelmingly voted in favor of this. The Court of Session in Scotland approved this in June and Standard Life plc floated on the London Stock Exchange on 10th July 2006.

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In order to meet the different needs and risk profiles of its clients, Standard Life Investments Limited manages a diverse portfolio covering all of the major markets world-wide, which includes a range of private and public equities, government and company bonds, property investments and various derivative instruments. The company's current holdings in UK equities account for approximately 1.8% of the market capitalization of the London Stock Exchange.

VISION To be a dominant player in the Indian Mutual Fund industry recognized for its high levels of ethical and professional conduct and a commitment towards enhancing investor interests.

SPONSOR HOUSING DEVELOPMENT FINANCE CORPORATION (HDFC) The sponsor of HDFC MF is Housing Development Finance Corporation (HDFC). HDFC was incorporated in 1977 as the first specialized housing finance institution in India. HDFC provides financial assistance to individuals, corporate and developers for purchase or construction of residential housing. As on December 31st, 2002, HDFCs cumulative loan disbursement are Rs.40, 060 crores financing over 2.1 million units all over India. PARTNERS Standard Life Insurance Company of UK set up base in 1825. It is today the largest pension fund in UK and the largest Mutual life assurance company in Europe. Standard Life Investment was set up as a dedicated investment management company.

MANAGEMENT HDFC Trustee Company Limited A company incorporated under companies Act, 1956 is the trustee to the Mutual Fund vide the trust deed dated June 8th, 2000 as amended from time to time. HDFC Trustee Company Limited is a wholly owned subsidiary of HDFC Limited.

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HDFC ASSET MANAGEMENT COMPANY LIMITED (HDFC) It was incorporated under the companys act, 1956, on December 10th, 1999 and was approved to act as an asset management company for the MF by SEBI on July 3rd 2000. In terms of the Joint participation agreement dated October 29th, 1999 entered between Housing Development Finance Corporation (HDFC) and Standard Life Investment , 25.6% of the paid up share capital of the AMC had been transferred by HDFC to Standard Life assurance company, the parent company of Standard Life Investment Limited, on April 17th 2001. Pursuant to the shareholders agreement dated October 17th entered between Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited. 13.9% of the paid up share capital of the AMC has been transferred by HDFC to Standard Life Investments Limited as on January 31st, 2002.

The present share holding pattern of the AMC is as follows: HDFC Standard Life Investments 50.1% 49.9%

The AMC is managing many schemes as per the requirements of the varied class of investors. The AMC has obtained registration from SEBI vide registration no. PM /inp0000000506 dated December 22nd, 2000 to act as a portfolio manager under the SEBI regulations, 1993. The certificate of registration is valid from January 1st, 2003 to December 31st, 2003. The AMC is also providing portfolio management / advisory services and such activities are not in conflict with the activities of the mutual funds.

Products and Schemes of HDFC mutual fund: -

(i)Equity funds (iii) Debt funds

(ii) Balanced funds (iv) Liquid funds

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Product & schemes of HDFC Life Insurance: -

Traditional Plans HDFC SL New Money Back Plan HDFC Term Assurance Plan HDFC Loan Cover Term Assurance Plan HDFC Single Premium Whole of Life Insurance Plan HDFC Savings Assurance Plan HDFC SL Classic Assure Insurance Plan

Unit Linked Plans HDFC SL Crest Plan HDFC SL Young Star Super II Plan HDFC SL ProGrowth Super II Plan HDFC SL Young Star Super Premium HDFC SL ProGrowth Maxi miser

Product & schemes of HDFC General Insurance: -

Home insurance Travel insurance Motor insurance: - (i) Commercial Vehicle (ii) Private car

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Product & schemes of HDFC Health Insurance: -

[i] Health surkasha [iii] Personal accident

[ii] Critical illness [iv] Accidental protection plan-health cash

Departmental Details: - HDFC Bank offers a wide range of commercial and transactional
banking services and treasury products to wholesale and retail customers. The bank has three key business segments: Wholesale Banking Services - The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporates and agri-based businesses. Retail Banking Services - The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. Treasury - Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. HDFC Securities (HSL) and HDB Financial Services (HDBFSL) are its subsidiaries.

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RESEARCH METHODOLOGY
Research refers to search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. It is an art of scientific investigation. Research Objective The present study has been undertaken with the object of examining, analyzing and inferring the consumers perception about mutual investors which addresses the following issues. Analyzing the awareness of mutual funds in Indore. To find the awareness of HDFC MF products among investors. Which investment option is most suitable to investors?

Research Method Direct contact with the customers of HDFC mutual fund and private and public sector banks. In all around 30 was the sample size of the research. The research methodology implemented in this research report primarily consists of personal interviews with those very investors in Indore city who invest in mutual funds as well as other options such as shares, fixed deposits & insurance, etc. Interview was conducted in depth to know about their investments why they prefer to choose that particular investment type only, and are they satisfied with the returns they receive from their returns.

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Sampling Procedure In our study we have opted for judgmental sampling as we wanted to get feedback only from those investors who are already investors into mutual funds. Sample size The sample size was kept as 100. This sample size was fair enough to achieve reliable results for our study. Sample unit In this study, the sampling unit included only those people who are already investors in mutual funds to get to get reliable and true results.

Data Collection:
Primary data Primary data helped in the knowledge gathered from our sources. Primary data was collected by means of: Personal interviews Telephonic interviews Data provided by HDFC AMC Primary data helped a lot in order to analyze the whole scenario and to take out the relevant data from the data provided to us. Secondary data Secondary data provided the knowledge about the other investment options other than HDFC in terms of facts and figures. It is a data, which are arrived from the primary data and collected from the other various sources also as follows-Internet sites and newspapers.

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Data Analysis

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CONSUMERS PERCEPTION TOWARDS MUTUAL FUNDS IN CURRENT MARKET SCENARIO


RELATIONSHIP BETWEEN AGE OF AN INDIVIDUAL AND FACTORS CONSIDERED WHILE INVESTING IN A MUTUAL FUND BY MEANS OF CROSSTAB. Case Processing Summary Cases Valid N age * factors 100 Missing N 0 Total N 200

Percent 100.0%

Percent .0%

Percent 100.0%

age * factors Cross tabulation Count Factors risk age <18 years 0 20-35 years 35-50 years 50-60 years 7 6 1 return on time investment period 1 29 18 6 3 57 0 5 2 1 0 8 tax benefits 0 5 5 2 1 13 Diversificat ion Total 1 4 3 0 0 7 2 50 34 10 4 100

>60 years 0 Total 14

The above case-processing summary shows that we have a sample size of 100 and we had valid feedback of all the 100 samples. The age factors cross tabulation matrix shows the relationship between the age of the individual and the factors that he considers while investing in a mutual fund. The above table shows that for in the age group for below 18 years there is no person who considers risk before investing while 7 people look in for risk in the age group 20-35 years, 6 people take risk as a factor in 35-50 years group. Only 1 people consider risk in the 50-60 years and no one in >60 years age group. As far as return on investment is considered 1 people are in the <18 years and the maximum number in the age group 20-35 years for this factor. There are 18 people in the 35-50 age group, 6 in 50-60 age group and 3 in >60 years age group. 37

Wealth Management
HDFC SL Crest Plan Review HDFC SL Crest is a unit-linked insurance policy (ULIP) where the insurance company does not carry the risk associated with the investment of premiums paid by the policy holder. Since the premiums are invested in the markets the investment risk is borne by the policy holder Key Features of HDFC SL Crest Plan
Benefit of Highest NAV recorded during the entire policy term Guaranteed benefit of minimum NAV of Rs 15 at maturity Policy term is 10 years but the policy holder has to pay premium for only 5 years

Benefits you get from HDFC SL Crest Plan Death Benefit In case of death of the policy holder, the nominee gets the Sum Assured (minus partial withdrawals) or Fund Value, whichever is higher. Death benefit shall exclude any rider premiums and deduct any previous partial withdrawals. Maturity Benefit - If the policy holder survives the policy term, then he/she gets the Fund Value. There are two types of investment fund options in this policy. So if the policy holder chooses Highest NAV Guaranteed Fund then he/she will get a guaranteed return as per the highest NAV attained during the period subject to a minimum guaranteed NAV of Rs.15. Income Tax Benefit: - Life Insurance premiums paid up to Rs. 1,00,000 are allowed as a deduction from the taxable income each year under section 80C. The maturity amounts you receive from this plan are exempt from tax under section 10(10D)

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Data Analysis for Life Insurance


Comparision between HDFC Life with ICICI & SBI Life Insurance Plan:- ULIP PLAN

Company plan

Min. Entry Premium age

Partial withdrawal

Surrender Premium paying term

Brief
HDFC SL Crest insurance cum investment plan provides valuable financial protection to your family when needed the most along with an investment option for certainty of highest NAV along with a guarantee on returns. So that when you reap the returns of life, they are on crests not on lows. It is a unique single premium ULIP that provides the opportunity to enjoy potentially higher returns over the long term investments, with just a single premium. The Plan can be bought online at your ease. SBI Life SaralMahaAnand, a unit linked insurance cum savings plan. Getting a Life Insurance policy has been made very easy. No medical examination, which means hassle-free coverage. Enjoy the power of liquidity through partial withdrawals.

50,000
HDFC SL Crest

14-55 Yrs

5 Yrs

5 Yrs

5 Yrs

Life Link Wealth SP Plan

40,000

0-60 Yrs

5 Yrs

5 Yrs

10-30 Yrs

30,000
SaralMahaAnand

18-55 Yrs

6 Yrs

5 Yrs

10-20 Yrs

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Saving Assurance Plan


Despite your best efforts, you find it hard to save regularly for you and your familys future. Unexpected expenses, unplanned purchases and often, sheer lack of time defeat your efforts. Dont you wish that someone would take on the responsibility of regularly saving your money for you? HDFC Saving Assurance plan is a with profits savings plan, which helps you built your long-term saving conveniently and ensures that your family is protected even if you are not around. HDFC SAP is non-underwritten product i.e. it requires no medical test. The minimum age for availing In case of death of the holder after the first year and during the policy term, all premium paid todate will be returned with compound interest calculated at 6% per annum, subject to a maximum of the Sum Assured plus Reversionary bonuses declared to date. FEATURES AND BENEFITS This plan is a With Profits savings policy, which offers the followings features: o The policy receives simple reversionary bonuses, which are usually added annually. o At maturity, the policy pays out the basis Sum Assured plus Reversionary bonuses declared during the policy term. Interim or Terminal Bonus may also be payable, if declared. In the unfortunate event of death during the first year, a sum equal to 80% of the premiums received in payable. If the death takes place after the first year and the during the policy term, all premiums paid to-date will be returned with compound interest calculated at 6% per annum, subject to a maximum of the Sum Assured plus Reversionary bonuses declared till date. Tax benefit under Section 80C and 10(10D) of the Income Tax Act 1969, subject to provisions contained there in this plan is 18 years and the maximum age is 60 years. The maximum age at maturity is 75 years.

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Comparision between HDFC Life with ICICI & LIC Insurance Plan:TRADITIONAL PLAN
Company plan
HDFC Life Insurance (Term assurance plan)

Overview

The HDFC Term Assurance Plan secures your familys financial need in case of uncertainty. A lump sum will be given to the family of the life assured in case of death or critical illness( if option is chosen) of the life assured during the term of contract. You can choose a lump sum that will replace the income lost. Minimum- 18 years Maximum- 60 years 5 - 30 years 1). Minimum premium is only 2000 p.a. 2). The plan can be taken on a single life basis or on joint life basis. 3). Nominee or assignee will get the chosen Sum Assured. 4). Plan doesnt provide any maturity or survival benefit. 5). Additional option benefit offered. Tax benefits under sections 80C, 80D and 10(10D) of Income Tax Act, 1961.

ICICI prudential life insurance (iprotect) ICICI Prudential Life Insurance has launched ICICI PruiProtect - a term insurance plan that you can buy online at your convenience. You can now secure your familys future at the click of a button and can even customize this term plan according to your insurance needs. Minimum- 20 years Maximum- 65 years 10-30 years 1). Minimum premium is only Rs.2000 p.a. 2). Life Insurance covers at extremely affordable premiums. 3). Special Premium rates for Non-Tobacco users. 4). This is the cheapest Term Plan which can be bought online.

LIC (Anmol Jeevan) The plan is available to standard & sub standard lives (up to Class VI). This plan is also available for females & handicappers. You need to submit a standard age proof with the proposal form.

Entry age

Minimum- 18 years Maximum- 65 years

Term Features

Tax benefits

Tax benefit available under section 80C of the Income Tax act, 1961.

5-25 years 1). You can invest minimum Rs 1,414 p.a. only. 2). Sum assured will be paid to the beneficiary in the unfortunate event of death of the policy holder. 3). Sum Assured Rebate: In case of regular premium payment the rebate is NIL. 4). Mode Rebate: In case of yearly mode the annual premium is of 1% and NIL in case of 6 months. 5). The policy does not require any paid-up value. 6). No surrender value is available under this policy too. Tax benefit available under section 80C of the Income Tax act, 1961. 41

Analysis of customer satisfaction towards Mutual Funds & Insurances scheme provided by HDFC bank:
1. Customer satisfaction towards rightly guidance by the bank executive at the time of mutual fund and insurance scheme application-

Customer satisfaction
Dissatisfied 20%
Agree Netural 25% Agree 55% netural Disagree

Findings: Maximum no. of customers said that they are guided rightly by the bank executive at the time of mutual fund and insurance schemeapplication.

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2. Time taken by valuator in valuation

valuation done
10% 25% 25%
5-15min 15-30min

40%

30min- 1hr more than 1 hr

Findings:out of 100 customers 65% customers get their valuation done in 5 min to 30 min. this shows that maximum customers are satisfied by the time taken by the bank in valuation done. 3. Behavior of valuator

Valuator Behaviour 15% 50% 35% Polite Average Rude

Findings: Behavior of valuator is fair towards the customer.

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4) Satisfaction of customer towards investment plan provided by HDFC bank?

Customer satisfaction

Dissatisfied 35%

Satisfied 65%

satisfied dissatisfied

Findings:maximum no. of customers is satisfied by the investment plan provided by the HDFC bank.

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Fixed Deposit
The term Fixed Deposit refers to a savings account or certificate of deposit that pays a fixed rate of interest until a given maturity date. Funds placed in a Fixed Deposit usually cannot be withdrawn prior to maturity or they can perhaps only be withdrawn with advanced notice and/or by having a penalty assessed.

Benefits
1. Safety: - The fixed deposits of reputed banks and financial institutions regulated by RBI (Reserve Bank of India) the banking regulator in India are very secure and considered as one of the safest investment methods. 2. Regular Income: - Fixed deposits earn fixed interest rates for their entire tenure, which is usually compounded quarterly. So, those who want an income on a regular basis can invest into fixed deposits and use the interest rate as their income. This makes a fixed deposit very popular way of investing money for retirees. 3. Saves tax: - With the directives of the income tax department stating that investment in fixed deposits up to a maximum of Rs.100,000 for 5 years are eligible for tax deductions under section 80 C of income tax act, fixed deposits have again become popular. Fixed deposits save taxand give high returns on invested money.

Drawbacks
1. Lower rate of returns: - While the money invested in stock markets may give you a return of 20% the fixed deposits will yield only about 10%. So, the money grows slowly in the case of fixed deposits. 2. Taxes: - The interest earned on fixed deposits is fully taxable and is added to the annual income of the individual. Gains from stocks are considered capital gains while dividends are tax free.

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ICICI Fixed Deposit Interest Rate Maturity Period


7 days to 14 days 15 days to 29 days 30 days to 45 days 46 days to 60 days 61 days to 90 days 91 days to 120 days 121 days to 184 days 185 days to 189 days 190 days 191 days to 210 days 211 days to 269 days 270 days to 289 days 290 days 291 days to less than 1 year 1 year to 389 days 390 days 391 days to 589 days 2 years to 789 days 991 days to less than 3 years 3 years to less than 8 years Rates of Interest (% p.a.) w.e.f July 22, 2011 General Senior Citizen 3.75 3.75 4.00 4.50 5.00 5.50 6.25 6.75 6.50 7.00 7.00 7.50 7.00 7.50 7.50 8.00 7.75 8.25 7.50 8.00 7.50 8.00 7.50 8.00 7.75 8.25 7.50 8.00 8.25 8.75 9.25 9.75 8.25 8.75 8.50 9.00 8.50 9.00 8.75 9.25

HDFC Fixed Deposit Interest Rate Period


7 - 14 days 15 - 29 days 30 - 45 days 46 - 60 days 61 - 90 days 91 Days to less than 6 months 1 day 6 months 1 day - 6 months 15 days 6 months 16 days 6 months 17 days - 9 months 15 days 9 months 16 days 9 months 17 days - 1 year 1 year 1 day - 1 year 15 days 1 year 16 days 1 year 17 days - 2 years 2 years 1 day - 2 years 15 days 2 years 16 days 2 years 17 days - 3 years 3 years 1 day - 5 years 5 years 1 day - 8 years 8 Year 1 Day - 10 Years Interest Rate (per annum) 3.50% 4.00% 5.00% 7.00% 6.50% 6.75% 7.75% 7.75% 7.25% 8.00% 7.25% 9.00% 9.25% 8.50% 8.50% 9.25% 8.50% 8.25% 8.25% 8.25% Senior Citizen Rates (per annum) 4.00% 4.50% 5.50% 7.50% 7.00% 7.25% 8.25% 8.25% 7.75% 8.50% 7.75% 9.50% 9.75% 9.00% 9.00% 9.75% 9.00% 8.75% 8.75% 8.75%

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Interpration As compaire to his best competitor icici bank fd rates of return is quite lesser and need to modify to be in competition, and to maintain stability in the market.

Recurring Deposit
Recurring Deposits in banks are one of the instruments of accumulating a particular amount periodically, to help us during various occasions of unexpected financial burden. It is a good saving instrument for ordinary middle class, which has a fixed amount of revenue as its monthly income. It is also suitable for small time businessmen, Traders etc., as they do not have to block a large sum, which is a requirement for other types of saving instruments. Even some smart students open recurring deposit accounts with the pocket money they get from the parents. Almost all banks offer Recurring Deposit Scheme, and all of them have their own set of features. Benefits The Recurring Deposit scheme, like all other investment avenues, comes with its own set of
benefits and they are

1. Minimum amount of Deposit is Rs.500. Deposit should be made every month within the calendar month. 2. Premature closure is permitted. Interest is to be calculated as per the rules and rate applicable to individual savings account. at the rate applicable to savings account from time to time is calculated and paid

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ICICI Recurring Deposit Interest Rate

Rates of Interest (% p.a.) w.e.f July 22, 2011

Maturity Period
General 6 months 9 months 12 months 15 months 18 months 21 months 24 months 27 months 30 months 33 months 3 years to less than 8 years 8 years upto 10 years 7.00 7.50 8.25 8.25 8.25 8.25 8.50 8.50 8.50 8.50 8.75 8.75 Senior Citizen 7.50 8.00 8.75 8.75 8.75 8.75 9.00 9.00 9.00 9.00 9.25 9.25

HDFC Recurring Deposit Interest Rate Period


6 Months 9 Months 12 Months 15 Months 24 Months 27 Months 36 Months 39 Months 48 Months 60 Months 90 Months 120 Months

Interest Rate (per annum) 6.75% 7.25% 7.25% 8.50% 8.50% 8.50% 8.50% 8.25% 8.25% 8.25% 8.25% 8.25%

Senior Citizen Rates (per annum) 7.25% 7.75% 7.75% 9.00% 9.00% 9.00% 9.00% 8.75% 8.75% 8.75% 8.75% 8.75%

Interpration As compaire to his best competitor ICICI bank Recurring Deposit rates of return is quite lesser and need to modify to be in competition, and to maintain stability in the market, but positive point is that RD can only done by the account holders, so HDFC can retain there customers on this product. Customer can be attracted by the facility of depositing there amount automatically from their account, no need to go to Bank and deposit it every month like ICICI Bank.

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Findings & Limitations

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Findings
In my reasearch I have founded following thing Investors have more faith with HDFCs mutual fund & Insurance plan. As the age increases investors are much satisfied, see more risk & become more risk adverse. Old people &Widows prefer lower risk. Investors are satisfied by company rules & employee behavior. Investors think that HDFC provides better returns than other bank.

Limitations: There are some limitations of my study, those are as following: Sample limitation: - which sample is taken by me is very small in size to Compare mutual fund of two companies. Reliability: - The data collected by me is not much reliable because many investors chosen by me have invested in HDFC. Parameters: - All the parameters have not been taken. Time limitation: - I had the shortage of time because of that I was not able to do my study in a good manner. Awareness: - Investors chosen for study are not fully aware of all the terms and conditions related to mutual fund .So, it is very difficult to construct right information from them.

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PROBLEM FACED BY ME
During the two months learning experience, we came across several problems which dealing with prospective investors, as we made efforts to transform their wrong perspective about MFs which unfortunately were a result of lack of information, & knowledge about this investment avenue. A detailed account of the problem faced by us is mentioned here under: 1) The misconception that MFs are all about shares equity marketingThis was probably the most difficult thing to explain to prospective investors that MFs are not all about equity markets. It was an experience education them about the various avenues MFs invested in, right from debt market, to call money & sovereign papers.

2) Misconception of all MF scheme being risk oriented


Yet another huge misconception that today exists in potential investors is that all scheme offered by MF are high risk oriented, thus it was again quite an experience explaining & informing them about several products available which cater to the risk appetite of investors across the board depending on the investors risk profile.

3) Comparison with governments assured return schemes & other assured return avenuesThe sales calls that we made had one thing in common peoples expectation for assured returns & their knacks of comparing MFs with government offered schemes like PPF, IVP, KVP, etc and since MFs do not offer assured returns it was tough task convincing investors that in todays context assured returns are even more risk oriented propositions because of credit risk- and even more risk oriented propositions because of credit risk and further convincing them of the benefits of anytime liquidity offered by MFs which other investment avenues did not offer.

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Recommendations/Suggestions
In my study I have found some limitations. For that I can suggest to HDFC bank following suggestions or areas of improvement:

HDFC should try to invest in better securities for better profits. HDFC should try to satisfy their customer by better customer service or by improving customer relationship management. HDFC Bank should try to make people initiative towards risk. Investors should be made fully aware of the concept of mutual fund and insurance & all the terms and conditions. It should more emphasize in advertising, as it is the most powerful tool to position ant brand in the mindsets of customers. Promotion efforts can increase the selling of mutual fund schemes, therefore these must be done timely & wisely. With the booming economy here is a need to provide proper knowledge about mutual funds so that investors invest easily.

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Conclusion
Mutual funds have been a growth industry, and more and more investors have become mutual fund owners over the years. This reports all the sides of the issue of HDFC Mutual Fund & Insurance. It focuses on a more objective approach to one of the most important decisions people make is how to invest their money appropriately. On the basis of the study undertaken and the data that was collected by us and thus analyzed it was found that people prefer to invest in mutual funds because of liquidity, tax benefits and for less amount of risk as compared to investing in the equity market. Since the concept of mutual fund is not new most of the people have awareness about it. The investors of HDFC mutual fund have great reliability on it because of the companys good performance and its good brand image. At last it can be concluded that mutual fund is an ideal investment vehicle for todays complex and modern scenario. To conclude we can say that mutual fund is a very much profitable tool for investment because of its low cost of acquiring fund, tax benefit, and diversification of profits & reduction of risk. Many investors who have invested in mutual fund have invested with HDFC and them also thinks that it provides better returns than other mutual funds scheme .There is also an affect of age on mutual fund investors like; old people & widows want regular returns than capital appreciation. Companies can adopt new techniques to attract more & more investors.

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Bibliography
Websites :www.wikipedia.com www.scribd.com www.hdfcbank.com www.icicibank.com www.google.com www.sbibank.com www.moneycontrol.com

Other source :- HDFC Bank & other Bank Brochure Magazines:- Business world.
Business today.

News paper:- Times of India.


Economic Times.

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