Changing Trend of Investment Pattern in India and

Emergence of Mutual Fund Industry

[HDFC Asset Management Company]
By
Sheeba Lole
MBA II Semester
Shree Amreli Jilla Leuva Patel MBA Collage Of Women
Amreli–365 601 GJ
E-mail: vijaypithadia@lycos.com

ABSTRACT:

This project is about hoe the Investor's Behavior is changing and they are now leaving behind the
sacred investment options like the fixed deposits, company deposits, gold etc. Investors are now
looking towards equity linked investment options.

Like most developed and developing countries the mutual fund cult has been catching on in India.
There are various reasons for this. Mutual Fund makes it easy and less costly for investors to satisfy
their need for capital growth, income preservation.

And in addition to this a mutual fund brings the benefit of diversification and money management to
the individual investor, providing an opportunity for financial success that was once available only to a
select few.

In this project I have given a brief about economy, inflation, and equity and debt market. Then it is
explained how to cope with the inflation and how mutual fund is one of the best investment options
today. A brief about mutual fund industry and the some information about HDFC Mutual Fund and its
various products are given

INTRODUCTION:

Many individuals find investments to be fascinating because they can participate in the decision
making process and see the results of their choices. Not all investments will be profitable, as investor
wills not always make the correct investment decisions over the period of years; however, you should
earn a positive return on a diversified portfolio. In addition, there is a thrill from the major success,
along with the agony associated with the stock that dramatically rose after you sold or did not buy.
Both the big fish you catch and the fish that get away can make wonderful stories.

Investing is not a game but a serious subject that can have a major impact on investor's future well
being. Virtually everyone makes investments. Even if the individual does not select specific assets such
as stock, investments are still made through participation in pension plan, and employee saving
programme or through purchase of life insurance or a home. Each of this investment has common
characteristics such as potential return and the risk you must bear. The future is uncertain, and you
must determine how much risk you are willing to bear since higher return is associated with accepting
more risk.

In 1986, Microsoft Corporation first offered its stock to the public. Nine years later, the stock's value
had increased over 5,000 percent- a $ 10,000 investment was worth over $ 5,00,000 in the same
year, worlds of wonder also offered its stocks to the public. Nine years later the company was defunct-
a $ 10,000 was worth nothing. These are two examples of emerging firms that could do exceedingly
well or fail. Would investing in large, well establish firms generate more consistent returns? The
answer depends, of course, on which firms were invested in. Over the years some investments have
generated extraordinary gains, while others have produced only mediocre returns, and still others
have resulted in substantial losses.

The individual should start by specifying investment goals. Once these goals are established, the
individual should be aware of the mechanics of investing and the environment in which investment
decisions are made. These include the process by which securities are issued and subsequently bought
and sold, the regulations and tax laws that have been enacted by various levels of government, and
the sources of information concerning investment that are available to the individual.

An understanding if this financial background leads to three important general financial concepts that
apply to investing.

Toady the field of investment is even more dynamic than it was only a decade ago. World event
rapidly-events that alter the values of specific assets the individual has so many assets to choose
from, and the amount of information available to the investors is staggering and continually growing.
Furthermore, inflation has served to increased awareness of the importance of financial planning and
wise investing. In this project I will first talk about economy, inflation, equity markets and debt
markets to understand investments behavior.

INFLATION:

Inflation is a situation where there is ' too much money chasing too few goods'. In such times buyers
bid up prices of scarce products/services The scarcity could be caused by supply issues or a faster than
expected rise in demand. Irrespective of what causes inflation, the impact is the same. The value of
the currency you are holding declines.

Let's explain this with the help of an example. Suppose the Indian Rupee was freely exchangeable with
only one commodity- crude oil. Let's assume the conversion rate is Re 1= 1 barrel of crude (wish it
were true!). Now there is tension in the Gulf region resulting in reduced supply. Due to the subsequent
rise in price of crude oil in international markets, we would now have to pay more Rupees for every
barrel of oil. Suppose crude prices rise by 10%. The new exchange rate will be Rs. 1.1 = 1 barrel of
declined from 1 barrel of crude per Rupee to only 0.91 barrel of crude per Rupee this is the erosion in
the value of the currency that we are talking about. Also note that while the Indian Rupee may be
appreciating vis-à-vis other currencies, in the ' real sense' there is erosion in value.

Another important fallout one can expect due to rising inflation is higher interest rates. The central
banks aim to reduce demand in the economy by rising the cost of money.

When making fresh investments or evaluating your existing holdings in potentially inflationary times
you need to keep two things in mind:

The possibility of higher interest rates

The erosion in the value of the currency

CONCEPT OF MUTUAL FUND:

A mutual fund is a pool of money, collected from investors, and is invested according to certain
investment objectives.

A mutual fund is created when investors put their money tighter. It is therefore a pool of the investor's
funds The most important characteristic of a mutual fund is that the contributors and the beneficiaries
of the fund are the same class of people, namely the investors. The term mutual means that investors
contribute to the pool, and also benefit from the pool. There are no other claimants to the funds. The
pool of fund mutually by investors is the mutual fund.

A mutual fund's business is to invest the funds thus collected, according to the wishes of the investors
who created the pool. In many markets these wishes are articulated as "investment mandates".
Usually, the investors appoint professional investment managers, to manage their "product", and offer
it for investment to the investor. This product represents a share in the pool, and pre-states
investment objectives. For example, a mutual fund, which sells a " money market mutual fund ", is
actually seeking investors willing to invest in a pool that would invest predominantly in money market
instruments.

IMPORTANT CHARACTERSTICS:

A Mutual fund belongs to the investors who have pooled their funds. The ownership of the mutual fund
in the hands of the investors

Investment professional and other service providers, who earn a fee for their services, from the fund,
manage the mutual fund.

The pool of funds is invested in a portfolio of marketable investments. The value of the portfolio is
updated every day.

The investor's share in the fund is denominated by "units". The value of the units changes with change
in the portfolio's value, every day. The value of one unit of investors is called as the Net Asset Value or
NAV.

The investment portfolio of the mutual fund is created according to the stated investment objectives of
the fund.

PHASES IN THE HISTORY OF MUTUAL FUND:

The history of mutual fund in India can be divided into 5 important phases:

A 1963-1987: The Unit Trust of India was the sole player in the industry. Created by an Act of
Parliament in 1963, UTI launched its first product, the unit scheme 1964, which is even today the
single largest mutual fund scheme. UTI created a number products such as monthly income plans,
children's plans, equity-Oriented schemes and offshore funds during this period. UTI managed assets
of Rs 6700 crore at the end of this phase.

B 1987-1993: In 1987 public sector banks and financial institutions entered the mutual fund industry.
SBI mutual fund was the first non-UTI fund to be set up in 1987. Significant shift of investors from
deposits to mutual fund industry happened during this period. Most funds were growth oriented closed
ended funds. By the end of this period, assets under UTI's management grew to Rs 38247 crore and
public sector funds managed Rs 8750 crore.

C 1993-1996: In 1993, the mutual fund industry was open to private sector players, both Indian and
foreign. SEBI's first set of regulations for the industry was formulated in 1993 and, substantially
revised in 1996. Significant innovations in servicing, product design and information disclosure
happened in the phase, mostly initiated by private sector players.

D 1996-1999: The implementation of the new SEBI regulation and the restructuring of the mutual
fund industry led to rapid asset growth. Bank mutual fund was re-cast according to the SEBI
recommended structure, and UTI came under voluntary SEBI supervision.

E 1999-2003: very rapid growth in the industry and significant increase in market shares of private
sector player marked this phase. Assets crossed Rs. 100,0000 crore. The tax break offered to mutual
funds in 1999 created arbitrage opportunities for a number of institutional players. Bond funds and
liquid funds registered the highest growth in this period, accounting for nearly 60% of the assets.
UTI's share of the industry dropped below 50%.

2.3 ADVANTAGES OF MUTUAL FUND:

The following are the important advantages of mutual funds to investors:

Portfolio diversification
Professional management
Reduction in risk
Reduction of transaction costs
Liquidity
Convenience and flexibility

DISADVANTAGES OF MUTUAL FUND,

The following are important disadvantages of investing through mutual fund:

No control over costs: Since investors do not directly monitor the fund's operations they cannot control
the costs effectively. Regulators therefore usually limit the expenses of mutual funds.

No tailor- made portfolio: Mutual fund portfolio is created and marketed by AMCs, into which investors
invest. They cannot create tailor made portfolios.

Managing a portfolio of funds: As the number of mutual funds increase, in order to tailor a portfolio for
himself, an investors may be holding a portfolio of funds, with the costs

Of monitoring them and using them, being incurred by him.

NEED FOR INVESTMENT:

Increasing household expense.

Creation of wealth
Increasing cost of living.
Financial needs according to life stages.
Regular income
Combination of all above

INVESTMENT OPTION AVAILABLE:

Physical and Financial assets.

Equity and Debt
Govt. securities and non-govt. securities
Other option
Public provident fund
RBI Relief Fund.
Mutual Fund
Others like Indira Vikas Patra, Kisan Vikas Patra CP FD, and Debenture.

FDs FI BONDS Mutual Fund

Accessibility Low Low Low
Tenor Fixed (medium) Fixed (Long) No lock in period
Tax Benefit None Under section 80C None
Liquidity Low Very Low none
Convince Medium Tedious Very high
Transparency None None Very high

CONCLUSION:

The unique investment strategy of letting the maturity of the debt investment run down with time and
targeting equity investments to capture dividends is targeted to deliver positive returns over medium
time frame. The investment strategy of the fixed income portfolio is designed to remove the impact of
interest rate movements over the medium term. The strategy of targeting dividends in equities over a
period is expected to improve the yield of the fund. The above investment strategy expects to
minimize capital loss in adverse market condition and deliver moderate returns in stable/positive
market conditions.

So, if you are looking for an investment product that offers you low risk of capital loss and the
potential to earn reasonable returns in the uncertain environment of today, HDFC Multiple Yield Fund
might be the right fund for you.
HDFC Bank
From Wikipedia, the free encyclopedia

Jump to: navigation, search

HDFC Bank Ltd.

Type Public (BSE: 500180, NYSE: HDB)

Founded 1994
Founder(s) Mr Deepak Parekh of HDFC
Headquarters Mumbai, India
Mr. Aditya Puri, Managing Director
Key people
Mr. Harish Engineer, Executive Director
Banking
Industry Insurance
Capital Markets and allied industries
Products Financial services[1]
Revenue ▲ Rs. 197.5 billion (2009)[2]
Net income ▲ Rs. 2.24 billion (2009)
Total assets ▲ Rs. 1.8 trillion (2009)
Employees 52,687 (2009)
Website www.hdfcbank.com

HDFC Bank Ltd. (BSE: 500180, NYSE: HDB) is a commercial bank of India,
incorporated in August 1994, after the Reserve Bank of India allowed establishing private
sector banks. The Bank was promoted by the Housing Development Finance
Corporation, a premier housing finance company (set up in 1977) of India. HDFC Bank
has 1,412 branches and over 3,295 ATMs, in 528 cities in India, and all branches of the
bank are linked on an online real-time basis. As of September 30, 2008 the bank had total
assets of INR 1006.82 billion.[3] For the fiscal year 2008-09, the bank has reported net
profit of Rs.2,244.9 crore, up 41% from the previous fiscal. Total annual earnings of the
bank increased by 58% reaching at Rs.19,622.8 crore in 2008-09.[4]

Contents
[hide]
 • 1 History
• 2 Business Focus
o 2.1 Wholesale Banking Services
o 2.2 Retail Banking Services
o 2.3 Treasury
• 3 Distribution Network
• 4 References
o 4.1 Websites

• 5 External links

[edit] History
HDFC Bank was incorporated in the year of 1994 by Housing Development Finance
Corporation Limited (HDFC), India's premier housing finance company. It was among
the first companies to receive an 'in principle' approval from the Reserve Bank of India
(RBI) to set up a bank in the private sector.The Bank commenced its operations as a
Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization
policies.

In a milestone transaction in the Indian banking industry, Times Bank Limited (promoted
by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., in 2000.
This was the first merger of two private banks in India. 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.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more
than 1,000. The amalgamated bank emerged with a strong deposit base of around Rs.
1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the
combined entity is over Rs. 1,63,000 crore. 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.

[edit] Business Focus

HDFC Bank deals with three key business segments - WholesaleBanking Services, Retail
Banking Services, Treasury. It has entered the bankingconsortia of over 50 corporates for
providing working capital finance, tradeservices, corporate finance and merchant
banking. It is also providingsophisticated product structures in areasof foreign exchange
and derivatives, money markets and debt trading and equityresearch.

[edit] 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. 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. HDFC 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.

[edit] 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. 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, NetBanking and Mobile
Banking.

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 2009, the bank
had a total card base (debit and credit cards) of over 13 million. The Bank is also one of
the leading players in the “merchant acquiring” business with over 70,000 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.

[edit] Treasury

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. These
services are provided through the bank's 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.

[edit] Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank has an network of 1,725 branches
spread in 771 cities across India. All branches are linked on an online real-time basis.
Customers in over 500 locations are also serviced through Telephone Banking. The Bank
has a presence in all major industrial and commercial centres across the country. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has branches in the
centres where the NSE/BSE have a strong and active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's
ATM network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.