Name: Anmol Karnani Mobile : +91-8121926043

Enrollment No.: 12BSPHH010161 Email id : [email protected]

Summer Internship Program

PROJECT PROPOSAL

I.

Project Proposed:
Study Analysis of Two Asset Classes - Equity and Gold in the context of HDFC and Other Mutual Fund Schemes and a Comparison of the two and a focus on investment avenues in Commodity Mutual Funds. The project also covers the benchmarking of the various funds On the basis of their respective indices.

II.

Description of the Project in brief:

India is a developing country and the growth of the economy is only possible through large scale investment into manufacturing and production sector which will ensure not only self dependency but will also reduce the amounts of our imports and Current and Capital Account Deficits. Large investment into these sectors would mean large number of people investing money in setting up plants and industry and development of stock markets and listings of the shares of the companies. With a desire to see ones own money making more money, people invest into shares of companies, and for that is required help which is basically the prime feature of the Mutual Fund Industry wherein people from diverse backgrounds having little or no knowledge about share prices or stocks but having money to invest come together for a common goal and pool in their funds to form what is known as Mutual Funds. The Mutual Fund is offered by an Asset Management Company (AMC) which is managed by a Fund Manager who is a techinal person having expertise and skill required to make investment decisions of various companies. To hedge or protect the money of the investors, the investment is not made into one stock only, instead the amount to be invested is divided among the shares of various companies in various sectors so that in case of some industry not performing well, the investors money is safe as some other company may give great returns.

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The money so collected is then invested into the capital market instruments such as various kinds of shares, debentures, gold and other securities. The income thus earned from such investments and the appreciation of capital realized is shared by its unit holders in the proportion of the units held by them. Thus it is the most suitable investment option for the common man as it provides an opportunity to invest into a well-diversified, professionally managed basket of securities at a relatively low cost. Mutual Funds thrive at minimizing the risk and maximisation of returns through diversification. Mutual Funds can be classified into various categories and based on various parameters. The broad classifications are: On the basis of structure: Open Ended Schemes Close Ended Schemes Interval Schemes

On the basis of Investment Objective: Income Schemes Growth Schemes Money Market Schemes

On the basis of nature of funds: Equity based Funds Debt based Funds Hybrid/Balanced Funds

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The mutual fund industry started in India in the year of 1963 with the establishment of Unit Trust of India (UTI), which was a combined initiative of the Indian Government and Reserve Bank of India. A new trend or new era started in the Indian industry with the entry of private sector funds in Mutual Funds in 1993, allowing the Indian investors a wider choice of fund schemes. The first private sector mutual fund company was registered in July 1993, the erstwhile Kothari Pioneer (now merged with Franklin Templeton). The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The Mutual Fund Industry has another regulator in India, namely Association of Mutual Funds in India (AMFI) which is the body under which the distributors of Mutual Funds have to get themselves registered to carry out distribution of Mutual Fund Schemes. The Mutual Fund Industry is currently going through a transformation stage. On side we see rigid and stringent norms of the governing bodies and on the other side we see the economy as whole still jottling out to recover from the world wide economic and financial crisis of 2008-2009. The Indian Economy has a 7.4% growth rate of Gross Domestic Product (GDP) and has great potential to reach into double digits backed by a strong support.

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This report seeks to describe the current state of the industry, from the perspective of a basket of selected Mutual Fund schemes and Gold as an investment avenue. It also seeks to draw a comparison of the scheme with their corresponding benchmarks to evaluate their performance and generalise a report of performance of their corresponding houses based on these schemes. The funds chosen for this project are : HDFC Top 200 Fund HDFC Equity Fund Reliamce Vision Fund SBI Blue Chip Fund DSP Blackrock Equity Fund Franklin Templeton Prime Plus Fund ICICI Pru Top 200 Fund

A comparison of the above mentioned funds will be done. Apart from it, the various investment options for Gold as an Asset Class will be studied which includes: Investment in Physical Gold Gold exchange Traded Fund Gold-Fund of Fund E-Gold Investemnt in Gold in Foreign Nation

After this, a comparison would be made among a better investment option between Equity and Gold as an Asset Class. HDFC Mutual Fund is one of the largest mutual funds and well-established fund house in India with consistent performance of funds across various categories since its very incorporation on 10th of December, 1999. HDFC AMC Ltd was approved to act as an Asset Management Company(AMC) for the HDFC Mutual Fund by SEBI vide its letter dated July 3, 2000. In terms of the Investment Management Agreement, the Trustee has appointed the HDFC Asset Management Company Limited to manage the Mutual Fund. As for HDFC AMC, Mr. Prashant Jain is the Fund Manager of both the HDFC Top 200 Fund and HDFC Equity Fund. Both the funds are open ended and thrive to generate long term capital appreciation in the long run.
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The Mutual Fund Industry has a world wide penetration of about 70% of GDP in US, 60% of GDP in France and over 35% in Brazil and less than even 5% of the GDP of India. Mutual funds as an investment tool has gained great popularity in the current times, this is clearly reflected in the robust growth levels of Assets Under Management (AUM). Despite this growth, the level of penetration of Mutual Funds in India is very low as compared to other global economies. The industry is facing a number of issues that could be characterized by lack of investor awareness, high dependence on corporate sector, low penetration levels and spiralling cost of operations along with the non-trust on the expertise of well-known Fund Managers.

III.

Objective of the Project:

The projects aims at comparing the returns and risks of the various Equity funds of the various fund houses in the Large and Mid-cap Sector. The project also focuses on Gold as a separate Asset Class and the avenues of investment available to an investor. The project also aims at comparing the returns of both the asset classes of Gold and Equity and suggests the possible investment options. The project also aims at benchmarking the various funds to their respective indices. Value Addition to the company: The company gets a clear picture acconding to the industry in which it operates.

IV.

Methodology:

The projects covers Mutual Funds of 5 Fund Houses of the large and midcap sector and a comparison and analysis will be done using financial and statistical tools which include: Sharpe Ratio: To measure the risk-return comparison of the fund. Standard Deviation and Beta: To show the volatility and systematic risk of a Portfolio/ Fund to the market as a whole. Returns: The annualized year on year returns of the Mutual Funds. Since the project also covers details of the investment opportunities in Gold as an Asset Class, hence the various returns or fluctuations in price of Gold over the years on a comparitive analysis will be undertaken based on the price of the underlying asset, which in this is Gold. Statistical and numerical analysis tools will also be used to draw a comparison between the returns of both the Asset Classes with one another (Equity Mutual Funds and Gold)

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V.

Schedule:
The following schedule will be followed: Project Component Time Status Schedule Understanding about Mutual 1 week Complete Funds Understanding Industry about the 2 weeks Complete Complete Ongoing Date 12th March 2013 to 18th March 2013 18th March 2013 to 1st April 2013 1st April 2013 to 8th April 2013 8th April 2013 to 22nd April 2013

Understanding about Various 1 week Schemes of HDFC AMC Data Collection and Comparison of Equity based Mutual Fund Schemes of different Fund Houses and Benchmarking with the respective Indices. Data Collection and Investment options in Gold as an Asset Class and comparison with the different investment avenue options Comparison between Equity based Funds and Gold as an Investment Option Discussions & Recommendations Formatting Completion & 2 week

2 weeks

Pending

22nd April 2013 to 6th May 2013

1 week

6th May 2013 to 13th May 2013 Pending Pending 13th May 2013 to 20th May 2013 20th May 2013 to 1st June 2013

1 weeks

Project 2 weeks

VI.

Limitations of the Study:

The scope of the project is related to only 6 fund houses out of the 44 fund houses existing in the country, hence a comparitive study between the funds of all fund houses is not possible. Emphasis is more on secondary data rather than on primary data because an analysis of performance will give a true picture only when actual figures are used instead of future hypothetical figures. There is always a time lag between the data available and the current period, hence the time factor may be a hindrance in some cases. Future predictions based on past performance is not possible as it is mostly driven through the market forces and accurate forecasts cannot be drawn.

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VII.

References:
www.valueresearchonline.com www.moneycontrol.com www.amfiindia.com www.hdfcfund.com www.reliancemutual.com www.sbimf.com www.dspblackrock.com www.franklintempletonindia.com www.icicipruamc.com Fact Sheet (named Intouch Mutually) of HDFC AMC

Faculty Guide : Dr. Amlan Ghosh Company Guide : Mr. Loknath Agarwalla Date : 12th April, 2013 Anmol Karnani (Sinature of Student)

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