76586326 HDFC Mutual Fund

8/20/2019 76586326 HDFC Mutual Fund

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MATS School of Business & IT

the fields as it is a finance compan! but it also has mar3eting offices called

In/estment Ser/ice )entres or Branch offices and so I did m! project in

Bangalore Branch.

1.! OB"ECTI#ES TO THE STUD:

$ri%&r' O()*cti+*,:

To understand the o/erall functioning and profile of the organi8ation.

To get information on the culture and effecti/eness of communicationin the organi8ation.

To anal!8e the performance of the compan! o/er a period of time.

To understand the role that mutual fund pla!s in the in/estment

mar3et.

To get to 3no, the details regarding the mar3et share* turno/er etc. of

/arious pla!ers in the mutual fund industr!.

To understand the products and financial performance of the compan!

o/er pre/ious !ears.

To stud! the 3e! business le/el functions li3e9 Mar3eting* 2*

:perations and Administration etc.

:n the $ob Training.

S*cond&r' O()*cti+*,:

In4depth research stud! of /arious in/estment opportunities.

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'etails regarding the mission* /ision* objecti/es and ambitions of

the)ompan!.

1.- SCO$E OF THE STUD:

This stud! helps in understanding the crucial role of mutual funds in

Indian mar3et.

Pro/ides an insight into the products that the mutual fund companies

offer for the benefit of in/estor

:pportunit! to appl! the concepts practicall!* ,hich ,e learnt in first

semester and second semester.

An idea of the current mar3et share of /arious mutual fund companies.

;no,ledge on the gro,th and prospects of mutual fund sector in

India.

An idea on the future of mutual fund sector in India.

1. ETHODOLOG:

It ,as important to collect detailed information on /arious aspects for

effecti/e anal!sis. As


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1.R*,*&rc0 D*,in:

2esearch design can be of three forms9

• D*,criti+* R*,*&rc09 It is conducted to ascertain certain magnitudes

and to pro/ide an accurate snapshot of some aspect of the mar3et

en/ironment. For *3&%4*: 'etermining the si8e of the mar3et*

mar3et share* a/ailabilit! of distributors* sales anal!sis* studies of

consumer attitude etc.

•

E34or&tor' R*,*&rc09 This is used ,hen one is see3ing insight intothe general nature of a problem* the possible decision alternati/es* and

rele/ant /ariables that need to be considered. +ittle prior 3no,ledge is

re>uired. 2esearch methods are highl! fle7ible* unstructured and

>ualitati/e. For *3&%4*: ?hat ne, product should be de/eloped*

,hat should be the positioning of our product* ,hat product appeal

,ould be effecti/e in ad/ertising* or ho, can our ser/ices be

impro/ed@ etc.

• C&u,&4 R*,*&rc09 )ausal studies are designed to determine ,hether

one or more /ariables cause or determine the /alue of other /ariables.

It is an e/idence of relationships of /ariables. For *3&%4*: ?hether

decrease in price ,ill lead to an increase in the sales of a product* or

,hether the presence of a sales person ,ill help in increasing the sales

in a retail outlet* etc.

These three t!pes can be /ie,ed as cumulati/e. The research design adopted

for project research is D*,criti+* R*,*&rc0 &nd An&4'tic&4 R*,*&rc0.

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D*5in* R*,*&rc0 $ro(4*%

The problem is to manage the portfolio in the best possible ,a! so as to get

the optimal return. So the 0>uit! 2esearch ,ill be carried out for the purpose

of building optimal portfolio.

1.6 LIITATIONS

The stud! is restricted to a period of 5# da!s onl!.

A thorough anal!sis ,ill not be possible due to restricted time period.

Most of the information ,ill be obtained through secondar! sources.

The stud! is restricted to Bangalore alone.

.

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2.1 7HAT IS UTUAL FUND8

A Mutual (und is an ideal in/estment /ehicle ,here a number of

in/estors come together to pool their mone! ,ith common in/estment goal.

2especti/e Asset Management )ompan! AM) manages each Mutual

(und ,ith different t!pe of schemes. An in/estor can in/est his mone! in

one or more schemes of Mutual (und according to his choice and becomes

the unit holder of the scheme. (und manager in different t!pes of suitable

stoc3 and securities* bonds and mone! mar3et instruments then in/ests the

in/ested mone! in a particular scheme of a Mutual (und. Cualified

professional men* ,ho use this mone! to create a portfolio* ,hich includes

stoc3 and shares* bonds* gilt* mone!4mar3et instruments or combination of

all* manage each Mutual (und. Thus Mutual (und ,ill di/ersif! !our

portfolio o/er a /ariet! of in/estment /ehicles. Mutual (und offers an

in/estor to in/est e/en a small amount of mone!.

Mutual (unds schemes are managed b! respecti/e Asset Management

)ompanies sponsored b! financial institutions* ban3s* pri/ate companies or

international firms. The biggest Indian AM) is DTI ,hile AllianceE (ran3lin

Templeton etc are international AM)Fs.

Mutual (unds offers se/eral benefits to an in/estor such as potential return*

li>uidit!* transparenc!* income gro,th* good post ta7 return and reasonable

safet!. There are number of options a/ailable for an in/estor offered b! a

mutual fund.

Before in/esting in a Mutual (und an in/estor must identif! his needs and

preferences. ?hile selecting a Mutual (undFs schemes he should consider the



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effect of inflation rate* di/ersification of in/estment* the time period of

in/estment and the ris3 factors. There are /arious t!pe of ris3 factors as9

Mar3et 2is3

)redit 2is3

Interest 2ate 2is3

Inflation 2is3

Political 0n/ironment

)2ISI+Fs composite performance ran3ing )P2 measures the performance

for each of the open4ended scheme of Mutual (und. There are four

parameters considered to measure the performance of a mutual fund such as

2is34adjusted returns of the schemeFs GAH* 'i/ersification of Portfolio*

+i>uidit! and Asset Si8e.

2.2T$ES OF UTUAL FUND

A Mutual (und ma! float se/eral schemes* ,hich ma! be classified on the

basis of its structure* its in/estment objecti/es and other objecti/es.

A. utu&4 Fund ,c0*%*, (' ,tructur*:

O*n9End*d Fund,: :pen40nded fund scheme is open for

subscription all through !ear. An in/estor can bu! or sell the units at

GAH Get Asset Halue related price at an! time.

C4o,*9End*d Fund,: A )lose40nded fund is open for subscription

onl! during a specified period* generall! at the time of initial public



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issue. The )lose40nded fund scheme is listed on the some stoc3

e7changes ,here an in/estor can bu! or sell the units of this t!pe of

scheme.

Int*r+&4 Fund,: Inter/al (unds combines both the features of :pen4

0nded funds and )lose40nded funds.

B.utu&4 5und ,c0*%*, (' in+*,t%*nt o()*cti+*,:

Grot0 Fund,: The objecti/e of Jro,th (und scheme is to pro/ide

capital appreciation o/er the medium to long term. This t!pe of

scheme is an ideal scheme for the in/estors see3ing capital

appreciation for a long.

Inco%* Fund,: The Income (und schemes objecti/e is to pro/ide

regular and stead! income to in/estors.

B&4&nc*d Fund,: The objecti/e of Balanced (und schemes is to

pro/ide both gro,th and regular income to in/estors.

on*' &r;*t Fund,: The objecti/es of Mone! mar3et funds are to

pro/ide eas! li>uidit!* regular income and preser/ation of income.

C. Ot0*r 5und,:

T&3 S&+in Sc0*%*,: The objecti/e of Ta7 Sa/ing schemes is to

offer ta7 rebates to the in/estors under specific pro/isions of the

Indian Income Ta7 +a,s. In/estment made under some schemes is

allo,ed as deduction uKs LL of the Income Ta7 Act.

Indu,tr' ,*ci5ic Sc0*%*,: Industr! specific schemes in/est onl! in

the industries specified in the offer document of the schemes

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S*ctori&4 Sc0*%*,: The scheme in/est particularl! in a specified

industries or initial public offering.

Ind*3 ,c0*%*,: Such schemes lin3s ,ith the performance of BS0

sense7 or GS0.

Lo&n Fund,: +oan (unds charges a commission each time ,hen !ou

bu! or sale units in the fund.

No9Lo&n Fund,: Go4+oan (unds does not charge a commission on

purchase or sale of the units in the fund.

2.! B*n*5it, o5 In+*,t%*nt in utu&4 Fund

Mutual (unds offer se/eral benefits to an in/estor that unmatched b! the

other in/estment options. The major benefits are good post4ta7 returns and

reasonable safet!* the other benefits in in/esting in Mutual (unds are9

$ro5*,,ion&4 &n&*%*nt:

Mutual (unds emplo! the ser/ices of e7perienced and s3illed professionals

and dedicated in/estment research team. The ,hole team anal!ses the

performance and balance sheet of companies and selects them to achie/e the

objecti/es of the scheme.

$ot*nti&4 R*turn: Mutual (unds ha/e the potential to pro/ide a

higher return to an in/estor than an! other option o/er a reasonable

period of time.

Di+*r,i5ic&tion: Mutual (unds in/est in a number of companies

across a ,ide cross section of industries and sectors

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Li


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An Act of Parliament established Dnit Trust of India DTI on "-1. It ,as

set up b! the 2eser/e Ban3 of India and functioned under the 2egulator! and

administrati/e control of the 2eser/e Ban3 of India. In "-6L DTI ,as de4

lin3ed from the 2BI and the Industrial 'e/elopment Ban3 of India I'BI

too3 o/er the regulator! and administrati/e control in place of 2BI. The first

scheme launched

b! DTI ,as Dnit Scheme "-5. At the end of "-LL DTI had 2s.* 6%% crores

of assets under management.

S*cond $0&,* = 1>?@91>>! Entr' o5 $u(4ic S*ctor Fund,

"-L6 mar3ed the entr! of non4 DTI* public sector mutual funds set up b!

public sector ban3s and +ife Insurance )orporation of India +I) and

Jeneral Insurance )orporation of India JI). SBI Mutual (und ,as the

first non4 DTI Mutual (und established in $une "-L6 follo,ed b! )anban3

Mutual (und 'ec L6* Punjab Gational Ban3 Mutual (und Aug L-* Indian

Ban3 Mutual (und Go/ L-* Ban3 of India $un -%* Ban3 of Baroda

Mutual (und :ct -. +I) established its mutual fund in $une "-L- ,hile

JI) had set up its mutual fund in

'ecember "--%.At the end of "--1* the mutual fund industr! had assets

under management of 2s.56* %%5 crores

T0ird $0&,* = 1>>!92! Entr' o5 $ri+&t* S*ctor Fund,

?ith the entr! of pri/ate sector funds in "--1* a ne, era started in the Indian

mutual fund industr!* gi/ing the Indian in/estors a ,ider choice of fund

families. Also* "--1 ,as the !ear in ,hich the first Mutual (und 2egulations

came into being* under ,hich all mutual funds* e7cept DTI ,ere to be

registered and go/erned. The erst,hile ;othari Pioneer no, merged ,ith

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(ran3lin Templeton ,as the first pri/ate sector mutual fund registered in

$ul! "--1.

The "--1 S0BI Mutual (und 2egulations ,ere substituted b! a more

comprehensi/e and re/ised Mutual (und 2egulations in "--. The industr!

no, functions under the S0BI Mutual (und 2egulations "--.

The number of mutual fund houses ,ent on increasing* ,ith man! foreign

mutual funds setting up funds in India and also the industr! has ,itnessed

se/eral mergers and ac>uisitions. As at the end of $anuar! %%1* there ,ere

11 mutual

funds ,ith total assets of 2s. "*"*L%# crores. The Dnit Trust of India ,ith

2s.55* #5" crores of assets under management ,as ,a! ahead of other

mutual funds.

Fourt0 $0&,* = ,inc* F*(ru&r' 2!

In (ebruar! %%1* follo,ing the repeal of the Dnit Trust of India Act "-1

DTI ,as bifurcated into t,o separate entities. :ne is the Specified

Dnderta3ing of the Dnit Trust of India ,ith assets under management of

2s.-* L1# crores as at the end of $anuar! %%1* representing broadl!* the

assets of DS 5 scheme* assured return and certain other schemes. The

Specified Dnderta3ing of Dnit Trust of India* functioning under an

administrator and under the rules framed b! Jo/ernment of India and does

not come under the pur/ie, of the Mutual (und 2egulations.

The second is the DTI Mutual (und +td* sponsored b! SBI* PGB* B:B and

+I). It is registered ,ith S0BI and functions under the Mutual (und

2egulations. ?ith

the bifurcation of the erst,hile DTI ,hich had in March %%% more than

2s.6* %%% crores of assets under management and ,ith the setting up of a

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DTI Mutual (und* conforming to the S0BI Mutual (und 2egulations* and

,ith recent mergers ta3ing place among different pri/ate sector funds* the

mutual fund industr! has entered its current phase of consolidation and

gro,th. As at the end of September %%5* there ,ere - funds* ,hich

manage assets of 2s."#1"%L crores under 5" schemes.

The graph indicates the gro,th of assets o/er the !ears.

GRO7TH IN ASSETS UNDER ANAGEENT

Gote9

0rst,hile DTI ,as bifurcated into DTI Mutual (und and the Specified

Dnderta3ing of the Dnit Trust of India effecti/e from (ebruar! %%1. The

Assets under management of the Specified Dnderta3ing of the Dnit Trust of

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India has therefore been e7cluded from the total assets of the industr! as a

,hole from (ebruar! %%1 on,ards.

2. A,,*t %&n&*%*nt co%&ni*, in Indi&9 K*' 4&'*r,

". A++IAG)0 )APITA+ MDTDA+ (DG'

. BI2+A MDTDA+ (DG'

1. B:B MDTDA+ (DG'

5. B:I MDTDA+ (DG'

#. )AGBAG; MDTDA+ (DG'

. ):+AMA'A+AM )A0G:H0 MDTDA+ (DG'

6. 'SP M022I++ +NG) MDTDA+ (DG'

L. 'DG'00 MDTDA+ (DG'

-. 0S):2TS MDTDA+ (DG'

"%.(I2ST IG'IA MDTDA+ (DG'

11.HDFC UTUAL FUND

".I'BI4P2IG)IPA+ MDTDA+ (DG'

"1.I+&(S MDTDA+ (DG'

"5.IG'IAG BAG; MDTDA+ (DG'

"#.IGJ SAHIGJS MDTDA+ (DG'

".$A2'IG0 (+0MIGJ MDTDA+ (DG'

"6.$M MDTDA+ (DG'

"L.;:TA; MAIG'2A MDTDA+ (DG'

"-.+I) MDTDA+ (DG'

%.M:2JAG STAG+0N MDTDA+ (DG'

".PI:G002 ITI MDTDA+ (DG'

.PGB MDTDA+ (DG'

1.P2D'0GTIA+ I)I)I MDTDA+ (DG'



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5.20+IAG)0 MDTDA+ (DG'

#.SBI MDTDA+ (DG'

.STAG'A2' )A2T020' MDTDA+ (DG'

6.SDG'A2AM MDTDA+ (DG'

L.SDG (&) MDTDA+ (DG'

-.TATA MDTDA+ (DG'

1%.TAD2DS MDTDA+ (DG'

1".T0MP+0T:G MDTDA+ (DG'

1.DGIT T2DST :( IG'IA

11.D2I) IG'IA MDTDA+ (DG'

Dnit trust of India DTI is the IndiaFs largest Mutual (und organi8ation. DTI

manages funds o/er 2s. #L*" crore as on 1%KK%%" and o/er 5".L% million

in/estors account fe,er than L# schemes.

DTI ,as set up in "-5 b! an act of parliament and commenced its operation

from $ul! "-5* ,ith a /ie, to encouraging sa/ing and in/estment and

participation in the income* profit and gain accruing to corporation from the

ac>uisition* holding* management and disposal of securities.

DTI is a trust ,ithout o,nership capital and independent Board of trustees.

The first scheme ,as Dnit scheme "-5. The contributors of initial capital of

2s. # crore for DS45 scheme ,ere 2BI* +I)* SBI and some foreign ban3s.

Dnder the pro/ision of the act* the Jo/ernment of India ,ould appoint

chairman of the board. Toda! it has #5 branch offices* chief

representati/es and about 6*%%% agents.

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2.6 &r;*t S0&r*

The mar3et share of the /arious asset management companies is sho,n in

the gi/en chart9

N&%* o5 t0* AC A,,*t, und*r &n&*%*nt in

R,. Cror*

&r;*t

S0&r*

B:B Asset Management 5"- %.6O)anban3 In/estment Management

Ser/ices

"5L- %.-O

SBI (unds Management #- 1.5%ODTI Asset Management )o. "LL6# ".""OJI) Asset Management )o. %5 %."1OI+ & (S Asset Management %"# ".-O+I) Asset Management 5-% 1."LOBenchmar3 Asset Management )o. 6L %.%#O

)holamandalam Asset Management "51 %.L%O0scorts Asset Management "1" %.%LO$.M.)apital Management 5""" .5O;ota3 Mahindra Asset Management )o. ##" 1.1O2eliance )apital Asset Management ""%5 6."-OSahara Asset Management )o. 15# %.OSundaram Asset Management )o. "L5" "."LOBirla Sun +ife Asset Management )o. -1-6 .%1O)redit )apital Asset Management "1" %.%LO'SP Merrill +!nch (und Managers 1L- 5."%OHDFC A,,*t &n&*%*nt Co. 161 1.!!

Alliance )apital Asset Management

India

55 ".#6O

'uetsche Asset Management India ".5#O(ran3lin Templeton Asset Management "615 ""."1O



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IndiaSB) Asset Management India

Pri/ate

#51 1.#"O

IGJ In/estment Management India "56 %.-5O

Morgan Stanle! In/estment Management "%-# %.6%OPrudential I)I)I Asset Management "%6" "%.1"OPrincipal Asset Management )o. 5L# 1."%OStandard )hartered Asset Management

)o.

-555 .%O

Tata Asset Management )o ##16 1.##OTotal 1?- 1

!.1 # i,ion

To be a dominant pla!er in the Indian mutual fund space* recogni8ed for its

high le/els of ethical and professional conduct and a commitment to,ards

enhancing in/estor interests.

!.2 &n&*%*nt

HDFC Tru,t** Co%&n' Li%it*d:



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A compan! incorporated under the )ompanies Act* "-# is the Trustee to

the Mutual (und /ides the Trust deed dated $une L* %%%* as amended from

time to time. '() Trustee )ompan! +imited is a ,holl! o,ned subsidiar!

of '() +imited.

HDFC A,,*t &n&*%*nt Co%&n' Li%it*d AC:

It ,as incorporated under the )ompanies Act* "-#* on 'ecember "%* "---*

and ,as appro/ed to act as an Asset Management )ompan! for the Mutual

(und b! S0BI on $ul! 1* %%%. The registered office of the AM) is situated

at 2amon ouse* 1rd (loor* .T. Pare3h Marg* "-* Bac3ba! 2eclamation*

)hurchgate* Mumbai 4 5%% %%. In terms of the In/estment Management

Agreement* the Trustee has appointed '() Asset Management )ompan!

+imited to manage the Mutual (und. The paid up capital of the AM) is 2s.

6#."" crore.

The present share holding pattern of the AM) is as follo,s9

PA2TI)D+A2SO :( T0 PAI' DP

SA20 )APITA+

HDFC .1

St&nd&rd Li5* In+*,t%*nt,

Li%it*d->.>

urich Insurance )ompan! I)* the Sponsor of urich India Mutual (und*

follo,ing a re/ie, of its o/erall strateg!* had decided to di/est its Asset

Portfolio Management"L

http://www.hdfcfund.com/aboutus/standardLifeShow.jsphttp://www.hdfcfund.com/aboutus/standardLifeShow.jsphttp://www.hdfcfund.com/aboutus/standardLifeShow.jsphttp://www.hdfcfund.com/aboutus/standardLifeShow.jsp


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Management business in India. The AM) had entered into an agreement

,ith I) to ac>uire the said business* subject to necessar! regulator!

appro/als. :n obtaining the regulator! appro/als* the Schemes of urich

India Mutual (und has no, migrated to '() Mutual (und on $une "-*

%%1. The AM) is managing "L open4ended schemes of the Mutual (und

/i8. '() Jro,th (und J(* '() Balanced (und B(* '()

Income (und I(* '() +i>uid (und +(* '() Ta7 Plan %%%

TP* '() )hildrenFs Jift (und '() )J(* '() Jilt (und

JI+T* '() Short Term Plan STP* '() Inde7 (und* '()

(loating 2ate Income (und (2I(* '() 0>uit! (und 0(* '()

Top %% (und* T%%* '() )apital Builder (und )B(* '() Ta7

Sa/er TS* '() Prudence (und P(* '() igh Interest (und

I(* '() So/ereign Jilt (und SJ( and '() )ash Management

(und )M(. The AM) is also managing the respecti/e Plans of '()

(i7ed In/estment Plan* a closed ended Income Scheme. The AM) has

obtained registration from S0BI /ide 2egistration Go. 4 PM K IGP%%%%%%#%

dated 'ecember * %%% to act as a Portfolio Manager under the S0BI

Portfolio Managers 2egulations* "--1. The )ertificate of 2egistration is

/alid from $anuar! "* %%" to 'ecember 1"* %%1. The AM) is also

pro/iding portfolio management K ad/isor! ser/ices and such acti/ities are

not in conflict ,ith the acti/ities of the Mutual (und.

!.! S on,or,

ousing 'e/elopment (inance )orporation '()9

'() ,as incorporated in "-66 as the first speciali8ed housing finance

institution in India. '() pro/ides financial assistance to indi/iduals*

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corporate and de/elopers for the purchase or construction of residential

housing. It also pro/ides propert! related ser/ices e.g. propert!

identification* sales ser/ices and /aluation* training and consultanc!. :f

these acti/ities* housing finance remains the dominant acti/it!. '()

currentl! has a client base of o/er #*%%*%%% borro,ers* "1*%%*%%% depositors*

"*%%*%%% shareholders and #*%%% deposit agents. '() raises funds from

international agencies such as the ?orld Ban3* I() ?ashington* DSAI'*

)')* A'B and ;f?* domestic term loans from ban3s and insurance

companies* bonds and deposits. '() has recei/ed the highest rating for its

bonds and deposits program for the eighth !ear in succession. '()

Standard +ife Insurance )ompan! +imited* promoted b! '() ,as the first

life insurance compan! in the pri/ate sector to be granted a )ertificate of

2egistration on :ctober 1* %%% b! the Insurance 2egulator! and

'e/elopment Authorit! to transact life insurance business in India.

St&nd&rd Li5* In+*,t%*nt, Li%it*d:

The Standard +ife Assurance )ompan! ,as established in "L# and has

considerable e7perience in global financial mar3ets. In "--L* Standard +ife

In/estments +imited became the dedicated in/estment management

compan! of the Standard +ife Jroup and is o,ned "%%O b! The Standard

+ife Assurance )ompan!. ?ith global assets under management of

appro7imatel! DS" billion as at Ma! "#* %%1* Standard +ife

In/estments +imited is one of the ,orldFs major in/estment companies and

is responsible for in/esting mone! on behalf of fi/e million retail and

institutional clients ,orld,ide. ?ith its head>uarters in 0dinburgh* Standard

+ife In/estments +imited has an e7tensi/e and de/eloping global presence

,ith operations in the Dnited ;ingdom* Ireland* )anada* DSA and ong

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;ong. In order to meet the different needs and ris3 profiles of its clients*

Standard +ife In/estments +imited manages a di/erse portfolio co/ering all

of the major mar3ets ,orld4,ide* ,hich includes a range of pri/ate and

public e>uities* go/ernment and compan! bonds* propert! in/estments and

/arious deri/ati/e instruments. The compan!Fs current holdings in D;

e>uities account for appro7imatel! O of the mar3et capitali8ation of the

+ondon Stoc3 07change. The Standard +ife Assurance )ompan! ,as

present in the Indian life insurance mar3et from "L56 to "-1L ,hen agencies

,ere set up in ;ol3ata and Mumbai. The Standard +ife Assurance )ompan!

,as therefore 3een to re4enter the Indian mar3et and in "--#* signed an

agreement ,ith '() to launch an insurance joint /enture. '() and

Standard +ife In/estments +imited are neither responsible nor liable for an!

loss resulting from the operation of the Schemes be!ond their contribution

of an amount of 2s. " la3h each made b! them to,ards the corpus of the

Mutual (und.

!.- H DFC utu&4 Fund $roduct,

SCHEES

" 0CDITN (DG'S

BA+AG)0' (DG'S

1 '0BT (DG'S

#ALUE ADDED SER#ICES

" SIP S!stematic In/estment Plan



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STP S!stematic Transfer Plan

1 S?AP S!stematic ?ithdra,al Ad/antage Plan

T'*, o5 E


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earnings and cash return on in/estment as the means of /aluation of

companies.

(i/e basic principles ser/e as the foundation for this in/estment approach.

The! are as follo,s9

• (ocus on the long term9 There is substanti/e empirical e/idence to

suggest that e>uities pro/ide the ma7imum ris3 adjusted returns o/er

the long term. In an attempt to ta3e full ad/antage of this

phenomenon* in/estments ,ould be made ,ith a long4term

perspecti/e.

• In/estment confers proportionate o,nership9 The approach to /aluing

a compan! is similar to ma3ing an in/estment in a business.

Therefore* there is a need to ha/e a comprehensi/e understanding of

ho, the business operates. The 3e! issues to focus on are gro,th

opportunities* sustainable competiti/e ad/antage* industr! structure

and margins and >ualit! of the management.

• Maintain a margin of safet!9 The benchmar3 for determining relati/e

attracti/eness of stoc3s ,ould be the intrinsic /alue of the business.

The In/estment Manager ,ould endea/or to purchase stoc3s that

represent a discount to this /alue* in an effort to preser/e capital and

generate superior gro,th.

• Maintain a balanced outloo3 on the mar3et9 the in/estment portfolio

,ould be regularl! monitored to understand the impact of changes in

business and economic trend as ,ell as in/estor sentiment. ?hile

short4term mar3et /olatilit! ,ould affect /aluations of the portfolio*



24/69


this is not e7pected to influence the decision to o,n fundamentall!

strong companies.

• 'isciplined approach to selling9 The decision to sell a holding ,ould

be based on either the anticipated price appreciation being achie/ed or

being no longer possible due to a change in fundamental factors

affecting the compan! or the mar3et in ,hich it competes* or due to

the a/ailabilit! of an alternati/e that* in the /ie, of the In/estment

Manager* offers superior returns.

In order to implement the in/estment approach effecti/el!* it ,ould beimportant to periodicall! meet the management face to face. This ,ould

pro/ide an understanding of their broad /ision and commitment to the long4

term business objecti/es. These meetings ,ould also be useful in assessing

3e! determinants

of management >ualit! such as orientation to minorit! shareholders* abilit!

to cope ,ith ad/ersit! and approach to allocating surplus cash flo,s.

'iscussion ,ith management ,ould also enable benchmar3ing actual

performance against stated commitments.

In summar!* the In/estment Strateg! is e7pected to be a function of

e7tensi/e research and based on data and reasoning* rather than current

fashion and emotion. The objecti/e ,ill be to identif! (u,in*,,*, it0

,u*rior rot0 ro,*ct, &nd ood %&n&*%*nt &t & r*&,on&(4*

ric*.

The Scheme ma! in/est in listed K unlisted andKor rated K unrated debt or

mone! mar3et securities subject to limits indicated in the in/estment pattern.

In/estment in unrated debt securities ,ill be made after obtaining the prior



25/69


appro/al of the Board of the AM) and Trustees as per the S0BI

2egulations.

The Scheme ma! in/est in listed K unlisted and K or rated K unrated debt or

mone! mar3et securities subject to limits indicated in the in/estment pattern.

Pursuant to S0BI )ircular Go. M('K )I2K-K"%K%%% dated Go/ember 5*

%%%E the AM) ma! constitute committees to appro/e proposals for

in/estments in unrated debt instruments. The AM) Board and the Trustee

shall appro/e the detailed parameters for such in/estments. The details of

such in/estments ,ould be communicated b! the AM) to the Trustee in

their periodical reports. It ,ould also be clearl! mentioned in the reports*

ho, the parameters ha/e been complied ,ith. o,e/er* in case an! unrated

debt securit! does not fall under the parameters* the prior appro/al of Board

of AM) and Trustee shall be sought.

Fund &n&*r

Mr. Tushar Pradhan

HDFC Grot0 Fund Grot0 Otion

In+*,t%*nt O()*cti+*

The primar! in/estment objecti/e of the Scheme is to generate long4term

capital appreciation from a portfolio that is in/ested predominantl! in e>uit!

and e>uit! related instruments.

In+*,t%*nt $&tt*rn



26/69


The corpus of the Scheme ,ill be in/ested primaril! in e>uit! and e>uit!

related instruments. The Scheme ma! in/est a part of its corpus in debt and

mone! mar3et instruments* in order to manage its li>uidit! re>uirements

from time to time* and under certain circumstances* to protect the interests of

the Dnit holders.

HDFC Lon T*r% Ad+&nt&* Fund Di+id*nd Otion


The primar! objecti/e of the Scheme is to generate long4term capital

appreciation from a portfolio that is in/ested predominantl! in e>uit! and

e>uit! related instruments.

In+*,t%*nt $&tt*rn

The net assets of the Scheme ,ill be in/ested primaril! in e>uit! and e>uit!

related instruments. The Scheme ma! in/est a part of its net assets in debt

and mone! mar3et instruments* in order to manage its li>uidit! re>uirements

from time to time* and under certain circumstances* to protect the interests of

the Dnit holders.

In+*,t%*nt Str&t*' Ri,; Contro4

The funds collected under the Scheme shall be in/ested in e>uities*

cumulati/e con/ertible preference shares and full! con/ertible debentures

and bonds of companies. In/estment ma! be made in partl! con/ertible

debentures and bonds including those issued on a rights basis subject to the

condition that* as far as possible* the non4con/ertible portion of the



27/69


debenture so ac>uired or subscribed shall be disin/ested ,ithin a period of

" months.

It shall be ensured that funds of the Scheme shall remain in/ested to the

e7tent of at least L%O in securities specified abo/e. In e7ceptional

circumstances* this re>uirement ma! be dispensed ,ith b! the AM)* in

order that the interests of the Dnit holders are protected.

Pending in/estment of funds of the Scheme in the re>uired manner* the

AM) ma! in/est the funds of the Scheme in short4term mone! mar3et

instruments or other li>uid instruments or both. After 1 !ears from the dateof allotment of the Dnits* the Mutual (und ma! hold up to %O of net assets

of the Scheme in short4term mone! mar3et instruments.

The in/estment approach ,ill be based on a set of ,ell established but

fle7ible principles that emphasi8e the concept of sustainable economic

earnings and cash return on in/estment as the means of /aluation of

companies.

HDFC Lon T*r% Ad+&nt&* Fund Grot0 Otion


The primar! objecti/e of the Scheme is to generate long4term capital

appreciation from a portfolio that is in/ested predominantl! in e>uit! and

e>uit! related instruments.




28/69


The funds collected under the Scheme shall be in/ested in e>uities*

cumulati/e con/ertible preference shares and full! con/ertible debentures

and bonds of companies. In/estment ma! be made in partl! con/ertible

debentures and bonds including those issued on a rights basis subject to the

condition that* as far as possible* the non4con/ertible portion of the

debenture so ac>uired or subscribed shall be disin/ested ,ithin a period of

" months.

It shall be ensured that funds of the Scheme shall remain in/ested to the

e7tent of at least L%O in securities specified abo/e. In e7ceptional

circumstances* this re>uirement ma! be dispensed ,ith b! the AM)* in

order that the interests of the Dnit holders are protected.

Pending in/estment of funds of the Scheme in the re>uired manner* the

AM) ma! in/est the funds of the Scheme in short4term mone! mar3et

instruments or other li>uid instruments or both. After 1 !ears from the date

of allotment of the Dnits* the Mutual (und ma! hold up to %O of net assets

of the Scheme in short4term mone! mar3et instruments.

Fund &n&*r

Mr. )hirag Setal/ad

HDFC Ind*3 Fund Ni5t' $4&n Grot0 Otion


Gift! Plan9 The objecti/e of this Plan is to generate returns that are

commensurate ,ith the performance of the Gift!* subject to trac3ing errors.

In+*,t%*nt $&tt*rn



29/69


The net assets of the Plan ,ill be in/ested predominantl! in stoc3s

constituting the S&P )GQ Gift! and K or in e7change traded deri/ati/es on

the S&P )GQ Gift!. This ,ould be done b! in/esting in almost all the

stoc3s comprising the S&P )GQ Gift! in appro7imatel! the same ,eightage

that the! represent in the S&P )GQ Gift! Inde7 and K or in/esting in

deri/ati/es including futures contracts and options contracts on the S&P

)GQ Gift! Inde7. A small portion of the net assets ,ill be in/ested in

mone! mar3et instruments permitted b! S0BI K 2BI including call mone!

mar3et or in alternati/e in/estment for the call mone! mar3et as ma! be

pro/ided b! the 2BI* to meet the li>uidit! re>uirements of the Plan.

Fund &n&*r

Mr. Tushar Pradhan

HDFC Ind*3 Fund SENSE $4&n Grot0 Otion


S0GS0Q Plan9 The objecti/e of this Plan is to generate returns that are

commensurate ,ith the performance of the S0GS0Q* subject to trac3ing

errors.

In+*,t%*nt $&tt*rn

The net assets of the Plan ,ill be in/ested predominantl! in stoc3s

constituting the S0GS0Q and K or in e7change traded deri/ati/es on

S0GS0Q. In/esting in almost all the stoc3s comprising the S0GS0Q in

appro7imatel! the same ,eightage that the! represent in the S0GS0Q andKor

in/esting in deri/ati/es including futures contract and options contracts on

Portfolio Management-


30/69


the S0GS0Q ,ould do this. A small portion of the net assets ,ill be in/ested

in mone! mar3et instruments permitted b! S0BIK2BI including call mone!

mar3et or in alternati/e in/estment for the call mone! mar3et as ma! be

pro/ided b! the 2BI* to meet the li>uidit! re>uirements of the Plan.

Fund &n&*r

Mr. Tushar Pradhan

HDFC Ind*3 Fund SENSE $4u, $4&n Grot0 Otion


S0GS0Q Plus Plan9 The objecti/e of this Plan is to in/est L% to -%O of the

net assets of the Plan in companies ,hose securities are included in

S0GS0Q and bet,een "%O & %O of the net assets in companies ,hose

securities are not included in the S0GS0Q.

In+*,t%*nt $&tt*rn

The net assets of the Plan ,ould be in/ested in such a manner that L%O to

-%O of the net assets are in/ested in almost all stoc3s constituting the

S0GS0Q in appro7imatel! the same ,eightage that the! represent in the

S0GS0Q. The balance "%O to %O of the net assets of the Plan ,ould be

in/ested in stoc3s that do not form part of the S0GS0Q in a manner that

indi/idual stoc3 e7posures do not e7ceed the S0BI stipulated limits. A small

portion of the net assets ,ill be in/ested in mone! mar3et instruments

permitted b! S0BIK2BI including call mone! mar3et or in alternati/e

in/estment for the call mone! mar3et as ma! be pro/ided b! the 2BI* to

meet the li>uidit! re>uirements of the Plan.

Portfolio Management1%


31/69


Fund &n&*r

Mr. Tushar Pradhan

HDFC E


32/69



The in/estment objecti/e of the Scheme is to achie/e capital appreciation.

Fund &n&*r

Mr. Prashant $ain

HDFC T&3 S&+*r 5or%*r4' uric0 Indi& T&3 S&+*r Di+id*nd

$4&n


The in/estment objecti/e of the Scheme is to achie/e long4term gro,th of

capital.

Fund &n&*r

Mr. )hirag Setal/ad

HDFC C&it&4 Bui4d*r Fund 5or%*r4' uric0 Indi& C&it&4 Bui4d*r

Fund Di+id*nd $4&n


The In/estment :bjecti/e of the Scheme is to achie/e capital appreciation in

the long term.


This Scheme aims to achie/e its objecti/es b! in/esting in strong companies

at prices* ,hich are belo, fair /alue in the opinion of the fund managers.

The Scheme defines a strong compan! as one that has the follo,ing

characteristics9

• Strong management* characteri8ed b! competence and integrit!



33/69


• Strong position in its business preferabl! mar3et leadership

• 0fficienc! of operations* as e/idenced b! profit margins and asset

turno/er* compared to its peers in the industr!

• ?or3ing capital efficienc!

• )onsistent surplus cash generation

• igh profitabilit! indicators returns on funds emplo!ed

In common parlance* such companies are also called FBlue )hipsF.

The Scheme defines reasonable prices as9

•

A mar3et price >uote that is around 1%O lo,er than its /alue* asdetermined b! the discounted /alue of its estimated future cash flo,s

• A PK0 multiple that is lo,er than the compan!Fs sustainable 2eturn on

funds emplo!ed

• A PK0 to gro,th ratio that is lo,er than those of the compan!Fs

competitors

• In case of companies in c!clical businesses* a mar3et price >uote that

is around #%O lo,er than its estimated replacement cost

Fund &n&*r

Mr. Tushar Pradhan

HDFC To 2 Fund 5or%*r4' uric0 Indi& To 2 Fund Di+id*nd

$4&n


The in/estment objecti/e is to generate long4term capital appreciation from a

portfolio of e>uit! and e>uit!4lin3ed instruments. The in/estment portfolio



34/69


35/69


Mr. Prashant $ain

HDFC Cor* S&t*44it* Fund Di+id*nd Otion


The objecti/e of the Scheme is to generate capital appreciation through

e>uit! in/estment in companies ,hose shares are >uoting at prices belo,

their true /alue.

Fund &n&*r

Mr. Prashant $ain

T'*, o5 B&4&nc*d Fund,:

HDFC C0i4dr*nJ, Gi5t Fund In+*,t%*nt $4&n Grot0 Otion


The primar! objecti/e of both the Plans under the Scheme is to generate

long4term capital appreciation. o,e/er* there can be no assurance that the

in/estment objecti/e of the Scheme K Plans ,ill be achie/ed.

Fund &n&*r

Mr. Tushar Pradhan

HDFC C0i4dr*nJ, Gi5t Fund S&+in, $4&n Grot0 Otion


Portfolio Management1#


36/69


The primar! objecti/e of both the Plans under the Scheme is to generate

long4term capital appreciation. o,e/er* there can be no assurance that the

in/estment objecti/e of the Scheme K Plans ,ill be achie/ed.

Fund &n&*r

Mr. Tushar Pradhan

HDFC B&4&nc*d Fund Di+id*nd Otion

In+*,t%*nt O()*cti+*: The primar! objecti/e of the Scheme is to generate

capital appreciation along ,ith current income from a combined portfolio of

e>uit! and e>uit! related and debt and mone! mar3et instruments.

Fund &n&*r

Mr. Tushar Pradhan

HDFC $rud*nc* Fund 5or%*r4' uric0 Indi& $rud*nc* Fund

Di+id*nd $4&n

In+*,t%*nt O()*cti+*The in/estment objecti/e of the Scheme is to pro/ide

periodic returns and capital appreciation o/er a long period of time* from a

judicious mi7 of e>uit! and debt in/estments* ,ith the aim to pre/entK

minimi8e an! capital erosion. Dnder normal circumstances* it is en/isaged

that the debt9 e>uit! mi7 ,ould /ar! bet,een %95% and 5%9% respecti/el!.

This mi7 is geared to achie/e the in/estment objecti/e and is e7pected to

result in regular income* capital appreciation and also pre/ent capital

erosion.


As outlined abo/e* the in/estments in the Scheme ,ill comprise both debt

and e>uities. The (und ,ould in/est in 'ebt instruments such as

Jo/ernment securities* mone! mar3et instruments* securities debts*

corporate debentures and bonds* preference shares* >uasi Jo/ernment bonds*



37/69


and in e>uit! shares. In the long term* the mi7 bet,een debt instruments and

e>uit! instruments is targeted bet,een %95% and 5%9% respecti/el!. The

e7act mi7 ,ill be a function of interest rates* e>uit! /aluations* reser/es

position* ris3 ta3ing capacit! of the portfolio ,ithout compromising the

consistenc! of di/idend pa! out in the case of 'i/idend Plan* need for

capital preser/ation and the need to generate capital appreciation.

Fund &n&*r

Mr. Prashant $ain

T'*, o5 D*(t Fund,:

HDFC Inco%* Fund Di+id*nd Otion

The primar! objecti/e of the Scheme is to optimi8e returns ,hile

maintaining a balance of safet!* !ield and li>uidit!.

Fund &n&*r

Mr. Shabbir ;apasi

HDFC Liuidit!* through a judicious portfolio mi7 comprising of

mone! mar3et and debt instruments.

HDFC Gi4t Fund S0ort T*r% $4&n Di+id*nd Otion



38/69


The primar! objecti/e of the Scheme is to generate credit ris3 free returns

through in/estments in so/ereign securities issued b! the )entral

Jo/ernment andKor State Jo/ernment.

Fund &n&*r

Mr. Mustafa Mahmood

HDFC S0ort T*r% $4&n Di+id*nd Otion

The primar! objecti/e of the '() Short Term Plan is to generate regular

income through in/estment in debt securities and mone! mar3et instruments.

HDFC C&,0 &n&*%*nt Fund 9 In+*,t%*nt $4&n 5or%*r4' uric0

Indi& Liuidit!. Accordingl!* in/estments ,ill be

made in Mone! Mar3et Instruments* Jo/ernment Securities and )orporate

'ebt.

Portfolio Management1L


39/69


HDFCF ont04' Inco%* $4&n 9 S0ort T*r% $4&n

The primar! objecti/e of Scheme is to generate regular returns through

in/estment primaril! in 'ebt and Mone! Mar3et Instruments. The secondar!

objecti/e of the Scheme is to generate long4term capital appreciation b!

in/esting a portion of the Scheme’s assets in e>uit! and e>uit! related

instruments. o,e/er* there can be no assurance that the in/estment

objecti/e of the Scheme ,ill be achie/ed.

HDFC u4ti4* i*4d Fund Grot0 Otion

The objecti/e of the Scheme is to generate positi/e returns o/er medium

time frame ,ith lo, ris3 of capital loss o/er medium time frame.

!. A,,*t, Und*r &n&*%*nt:

Assets Dnder Management of '() increased to 2s."#%%.51 crore as onMarch 1"*%%5 from 2s.5L".6 crore as on March 1"*%%1.According to

the latest data it has been increased to 2s.""%# crore.

!.6 Nu%(*r O5 In+*,tor:

The number of in/estor accounts increased to o/er .6" la3hs as on March

1"*%%5 from .L1 la3hs as on March 1"*%%1.

Portfolio Management1-


40/69


!.@ A&rd, Acco4&d*,:

The Annual )GB) R TH "L R BGP Paribas A,ards %%5.

The :utloo3 Mone! A,ards %%5. The )2ISI+ Best (und A,ards %%1.

The ICRA Online Mutual Fund Awards 2004.

B&,ic&44' m! Project includes t,o areas9

".Mar3eting

.(inance portfolio management

&r;*tin

I did mar3eting for the /arious t!pes of mutual fund schemes of '() Asset

Management )ompan!. I had been assigned to one of the distributor to help

him out in mar3eting for the /arious t!pes of mutual fund schemes of '()

Asset Management )ompan!. I did all the follo,4ups after the distributor

attends his client.

Fin&nc* ort5o4io %&n&*%*nt

Also I helped m! )ompan! guide in portfolio management b! doing 0>uit!

2esearch. (or doing portfolio management I identified some good

sectors for doing e>uit! research and after that I pic3ed up best fe,

stoc3s among them. The portfolio is di/ersified among sectors. (or

pic3ing up stoc3s I follo,ed (otto% u &nd to Don Aro&c0.

Botto% U &nd To Don Aro&c0 999 70&t t0*' ,ini5'8

Portfolio Management5%


41/69


Stoc3 pic3ing can essentiall! be done in t,o basic ,a!s 4444444 one is using a

bottom4up approach and the other is using a top4do,n approach.

A top do,n approach ,or3s its ,a! from the macro picture of an econom!

to trac3 do,n certain sectors* ,hich ,ould outperform other sectors. Then

all companies ,ithin the short listed sector are anal!8ed and the best among

them are pic3ed in the portfolio.

Thus it aims to ma7imi8e return b! sta!ing in/ested in the best companies in

the most attracti/e sectors of economic gro,th in future.

e.g. In IndiaFs annual budget major thrust is being pro/ided to infrastructure

and infrastructure projects. This ,ould benefit Indian companies related to

infrastructure li3e companies in the )apital Joods space* electricit!* cement

etc.

Thus anal!sts pic3ing stoc3s in the top do,n approach ,ould loo3 at good

companies in these sectors to in/est in.

:n the other hand a bottom up approach loo3s at companies per se and its

micro4economics for deciding on ,hether to in/est or not. The! loo3 at

companies* ,hich on their sheer microeconomics ,ould outperform peers in

their sector and achie/e higher gro,th than industr! a/erages.

Halue In/esting is a 3ind of bottom4up stoc3 pic3ing ,herein stoc3s are

pic3ed* ,hich are beaten do,n so considerabl! that the! offer immense

/alue. Some basic parameters of /alue stoc3s are that their PBH Price to

Boo3 Halue is less than " and that the! ha/e a high di/idend !ield of more

than the a/erage inde7 di/idend !ield.

Such stoc3s ,ould be chosen inspite of the fact that the sector the! are

operating in could underperform in future. Protagonists of this theor!

maintain that /alue stoc3s offer limited do,nside and higher upside due to

Portfolio Management5"


42/69


the fact that the! ,ould be beaten do,n so much that an! good ne,s ,ould

spi3e up prices.

e.g. 'abur in its recent earnings report stated a rise in operating margins

e/en at a time ,hen other companies in the same space li3e industan +e/er

+td. ,ere facing intense s>uee8e of margins.

More often than not* in/esting re>uires a mi7 of bottom4up and top4do,n

approaches ,herein some stoc3s are chosen on sectoral merit and some on

indi/idual. Geither of the approaches should be undermined and a portfolio

is best to include gro,th stoc3s and also /alue stoc3s through a fine blend of

bottom4up and top4do,n approaches.

Id*nti5i*d ,*ctor, 5or ort5o4io %&n&*%*nt

1.C&it&4 ood, Ori*nt A(r&,i+*,

2.FCG D&(ur

!.S0iin GE S0iin

-.T*3ti4*, C*ntur' T*3ti4*,

.$0&r%& "B C0*%ic&4, $0&r%&c*utic&4,

6.Fi,0in G&r&r* 7&44 Ro*,

@. HINDUSTAN INC

?.Fr&n;4in FCG Fund

>.HDFC $rud*nc* Fund

1.HDFC Cor* S&t*44it* Fund

11.$rinci&4 Di+id*nd i*4d Fund

12.SBI &nu% $0&r%& Fund.



43/69


"5th $anuar! %%5*mar3ets close at "#6 le/elsE ,ith complete euphoria all

around* e/er! mar3et anal!st and pundit belie/ing 6%%% ,ould be just round

the cornerAlas

"6th Ma! %%5*The BS0 Sense7 touches a lo, of 564intra da!E mar3et

pundits are again predicting le/els of 1L%% for the mar3et bottom.

1"st 'ecember %%5*the BS0 Sense7 closes at #5" and once again mar3et

anal!sts ,ith rene,ed energ! re/ise their earlier targets to more than L%%%

?ell* such /olatilit! ,ould e/en fo7 the smartest of punters at Monte )arlo

and shame the best of anal!sts.

Throughout the !ear man! an e/ent occurred ,hich shoo3 the confidence of

man! mar3et participants and pundits ali3e.

"6th of Ma!* no, better 3no,n as the dreaded Blac3 Monda! ,itnessed

stoc3s falling li3e nine pins* reminiscent of the old da!s of the arshad

Mehta era as ,ell as the tech bubble.

But &&in 5und&%*nt&4i,t, *r* +indic&t*d in t0*ir 5&it0 o5 4oo;in &t

t0* (i*r ictur* r&t0*r t0&n on ,0ort9t*r% &in,.

Some stoc3s li3e Tata Steel ,hich touched a high of 2s.5#% in $anuar!

plummeted to as lo, as 2s.1% intra da! on that scar! Monda! afternoon.



44/69


S3eptics and short4term participants could ha/e burnt their fingers badl!* but

for the bra/e hearted the stoc3 rallied bac3 from those le/els to more than

2s.#6% le/els adjusted for bonus at the close of %%5.

The latter half of the !ear also ,itnessed the emergence of the mid cap space

of the mar3et ,herein in/estor lapped up under/alued stories ,ith good

potential.

This Bull 2un* unli3e man! in the past has been more of a fundamentall! led

one ,ith a secular mo/e up.

Most of the upside also has been in stoc3s ,ith good fundamentals and

future stories* though not to mention that a tide ta3es up ,ith it e/er!thing*

and so there ,ould be the odd stoc3* the operators delight ,hich might be

lur3ing around to ma3e !ou lose e/er! single penn! of ,hat has been

poc3eted in the past one and a half !ears of the mar3et’s recent rall!. T0*

%or&4 (*in 0i4* ,*& ,ur5in on* ,0ou4d %&;* t0* %o,t o5 &n' 0i0

tid*, 0i4* &t t0* ,&%* ti%* ,t&'in &&r* o5 &n' t,un&%i 0ic0 %i0t

t&;* *+*r't0in 'ou o,,*,,.

The Near %%# heralds a ne, era ,herein the ?T: regime 3ic3s off. This

ne, phase ,ill graduall! bring ,ith it ne, challenges and opportunities ,ith

it ,hich could pro/e to be a boon for some ,hile a bane for man! others.

The mantra continues to be in/esting into stoc3s ,ith good management and

strong financials* but at the same time ha/ing a gro,th stor! in the ma3ing.

I firml! re4iterate our belief that In+*,t%*nt, ,0ou4d (* %&d* in

co%&ni*, &nd not in ,toc;, ,o 'ou ro &, t0* co%&n' ro,.



45/69


?e ha/e listed herein fe, of our best stoc3 and mutual fund pic3s.

These pic3s are based on research and in some cases direct communication

,ith the compan! management also.

Mutual (unds are chosen in terms of their fund philosoph!* fund manager

and to a certain e7tent past performance. ?e ,ish that Near %%# ,ould be a

happ! !ear for all of !ou* ,ith lots of blessings of Jodess +a3shmi on !our

happiness and prosperit!.

"B CHEICALS AND $HARACEUTICALS

$ric* &, on !rd "u4'99999 R,.>-.!

0

100

200

300

400

500

600

%"st $an %%1

1"st 'ecember %%5

Stoc3 price mo/ement. Source9 ,,,.nse4india.com

Sni*t,

$B )hemicals is one of the leading pharmaceutical companies in India.

T0* co%&n' *n)o', & ,tron r*,*nc* in Indi&n %&r;*t, &, *44 &,

o+*r,*&, %&r;*t, &, *3ort, Con,titut* 2 o5 t0* co%&n', turno+*r.

Portfolio Management5#


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Some of the brands of the compan! in India include 2antac and Metrog!l.

:/erseas brands include 'o3tor Mom*Gicardia etc. 'o3tor Mom /oted

t0* (*,t (r&nd in the cold an cough segment in the ,hole of 0urope b!

2eaders 'igest for three consecuti/e !ears

The compan! is more or less d*(t 5r**.

$oint Henture ,ith Spectrum Ds )o. for mar3eting generic products in

the DSA.

T0* co%&n' 0&, r*c*i+*d US FDA &ro+&4 5or it, 5or%u4&tion, &nd

A$U 4&nt &t $&no4i

R*n*&4 o5 USFDA &ro+&4 5or it, *tronid&Mo4* 4&nt &t T0&n*.

More than O of re/enue dedicated to 2&' ,hich is e/er increasing.

State of the Art production facilities.

For&' into (iot*c0no4o'

Co%&n' 0o4d, (ot0 t0* ANDA &nd DF &ro+&4, 5or %&r;*tin

Ciro54&3&cin t&(4*t, in U.S.

Fin&nci&4,

Turno/er (N’%544442s.1"5.## crores

PAT Profit After Ta7444444442s.#".%5 crore

Turno/er (N’%#44442s.1#L." crores

PAT Profit After Ta7444444442s.#-. crores

0PS44444442s.6.16 (N’%#

P044444444".5#

#&4u&tion, &nd T&r*t



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?ith the compan!’s focus on 2&'*DS('A appro/ed manufacturing

facilities and DS('A appro/als for manufacturing )iprofla7acin tablets in

the DSA it seems the management is ade>uatel! geared to ma3e the most of

the ne, regime.

In lieu of the abo/e* ,e feel the compan! ,ould gro, at more than #O

annuall! o/er the ne7t 54# !ears and thereb! the stoc3 should command a P0

of more than #* ,hich &t curr*nt ric*, ou4d tr&n,4&t* to & ric* o5

1 5or t0* ,toc;.

The recentl! announced stoc3 split ,ould also add much needed li>uidit! to

the counter.

Another interesting fact is $B )hemicals is currentl! a stoc3 ,hich is not

trac3ed b! man! anal!sts or bro3erage houses pro/iding that e7tra fillip of a

substantial rise as and ,hen the compan!’s impressi/e performance gets

noticed b! these /er! bro3erage houses.

In+*,t%*nt Str&t*'

The stoc3 has had a good run up post the stoc3 split announcement but since

the highs has also cooled off to settle at 5% le/els. In/estors ,ith a long run

hori8on could in/est at current mar3et prices.

But in/estors not ,illing to ta3e on high ris3s* could in/est their total

allocation in portions. The first portion could be in/ested at present le/els

and then at lo,er le/els getting themsel/es full! in/ested at e/er! fall till the

stoc3 touched 5%%.

:n the upper side a brea3out o/er #%% could ta3e the stoc3 all the ,a! to

##% le/els.



48/69


D&(ur Indi& Li%it*d$ric* &, on !rd "u4'99999 R,.1!2

0

50

100

150

1%th Go/ %%5 1"st 'ec %%5

Stoc3 price chart from 1%th Go/.44 1"st 'ec’%5 4444444Source ,,,.nse4

india.com

Sni*t,

• :ne of the largest (M)J companies in India.)onsolidated turno/er

of 2s."1.1 billion

Portfolio Management5L


49/69


• 7id* di,tri(ution n*tor;99999999Co+*rin 1. %n. R*t&i4 out4*t,

• Out*r5or%*d t0* indu,tr' in F 29! &nd F !9-

• 1 r*duction in d*(t 5ro% R,.?1@%n. to R,.!>? %n.

FINANCIALS

The compan! sales for (N ’%14’%5 ,as 2s. ""#".- crores and its net profit

,as 2s.-L.1 crores.

The (N ’%14’%5 0PS ,as 2s.1.#5.The compan! sales for (N ’%54’%# ,as 2s."##.## crores and its net profit

,as 2s."56.- crores

The (N ’%54’%# 0PS ,as 2s.#."6 and Price earning ratio ,as 5.-".

OUTLOOK

The compan!* ,hich ,as a famil! o,ned business* is no, trul! e/ol/ing

into a professionall! managed unit. The compan! has re launched its decades

old ban!an tree logo to a ne,er and more modern image.

The compan!’s fora! into food processing and increasing share of the

consumer care di/ision emphasi8es the fact that 'abur is on a long4term

gro,th path.

The compan! has outperformed most of the (M)J companies in basic

financial parameters since the past t,o financial !ears.

Portfolio Management5-


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TARGET BASIS

:ur target for the stoc3 is R,.1.This should be achie/ed ,ithin 'ecember

%% as the compan! continues to gro, at more than %O annuall! and the

for,ard earnings for %% coupled ,ith price earnings multiple of % should

result in a price of 2s."#%.

Gr*&t E&,t*rn S0iin

$ric* &, on !rd "u4'99999 R,.1!?.6

0

50

100

150

200

"st $an. %%1 #th $an. %%#

Stoc3 price mo/ement. Source9,,,.nse4india.com

B&c;round

J0 Shipping is one of the largest shipping companies in India ,ith an

e7cellent record of corporate go/ernance.

The compan! has been a consistent di/idend pa!er since the past se/eral!ears.

Sni*t, Co%&n'

Portfolio Management#%


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• The compan! is on a major e7pansion dri/e ,ith ne, fleet deli/eries

planned for the ne7t three !ears.

• The compan! is sitting on good cash reser/es.

• Pro acti/e management

• uge surge in profits since the past couple of !ears due to up mo/e of

the shipping c!cle.

• Ade>uatel! prepared for post %"% regime in shipping industr!

,herein single hull carriers ,ould be prohibited from pl!ing an!,here

in the ,orld.

• The compan! is on* o5 t0* (*,t di+id*nd 4&', in the mar3ets at

current prices and in the past fi/e !ears* it has been statisticall! pro/en

that high di/idend !ielding stoc3s outperform all other mar3et indices.

This is 3no,n as the


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,ould be in short suppl! for the ne7t fe, !ears ma3ing for good times

for the shipping industr!.

Fin&nci&4,

22J! 2!J- 2-9

S&4*, Cr. -##.# "1#".- %5-.

$ro5it, Cr.6 56" L%L.L

E$S "".5 5.1 5.5-

The (N %54%# Price earning ratio ,as 1.1".

Contr&ri&n #i*

The past fe, da!s ha/e ,itnessed a sharp fall in tan3er rates ,orld,ide on

falling crude prices and e7pectations of mild ,inter. ?e personall! feel this

is a short4term blip and rates ,ould strengthen once again in the forthcoming

months.

Stic3ing to the larger picture ,e are confident that or4d d*%&nd 5or oi4

ou4d continu* to ri,* in t0* 5utur* !ears thereb! pro/iding a long term

sustainabilit! for the shipping c!cle.

T&r*t

:ur target for the stoc3 is 2s. #%* ,hich should be achie/ed ,ithin

'ecember %%#.



53/69


Shipping stoc3s are currentl! trading at massi/e discounts to other sectors

due to apprehensions about earnings sustainabilit!. ?e belie/e that freight

rates ,ould continue to remain attracti/e for the ne7t fe, !ears leading to

good times for the shipping industr!. In/estors should sail the stoc3 through

the good times and bad.

C*ntur' T*3ti4*,

$ric* &, on !rd "u4'99999 R,.2?6.6

BACKGROUND

)entur! te7tiles are a B.;.Birla group compan! that has interests in te7tiles*

cement* paper etc.

The compan! in the past fe, !ears has re/amped its operations and has also

gained due to the commodit! s,ing in the cement sector.

SNI$$ETS

• T0* co%&n' 0&, incr*&,*d it, c*%*nt c&&cit' 5ro% ..%n.

ton*, to 6.! %n. tonn*,

• )entur! Te7tiles produces "%%O cotton fabrics.

• The compan! has a dominant e7port presence in the cotton fabric

segment.

• The compan! also produced denim fabric.

Portfolio Management#1


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FINANCIALS

Out4oo;

The compan! in the past t,o !ears is trul! *+o4+in into & ro5*,,ion&44'%&n&*d or&niM&tion and interests in te7tiles and cement should see the

compan! post immense gains in the future.

A ood *3ort r*,*nc* curr*nt4' ou4d &4,o 0*4 t0* co%&n' in

*n*r&tin 4&r*r ord*r, in t0* r*,*nt o,t9


55/69


:rient Abrasi/es operates in the capital goods industr! ,herein it ma3es

abrasi/es ,hich are used in capital intensi/e industries li3e steel* cement

construction* automobiles etc.

The alumuna4based abrasi/es are used to remo/e metal and smoothen

surfaces.

The stoc3 has had a massi/e run up in the past fe, !ears but the future

seems good as the compan! is *3*ct*d to ro &t %or* t0&n 2

&nnu&44' o+*r t0* n*3t 29! '*&r,.

The stoc3 is currentl! trading at around 6 ti%*, its’%# earnings.

OUTLOOK

The compan! has a health! order boo3 and the stoc3 had just announced a

bonus ,herein the compan!’s capital increased from 2s..-- crores to

2s.#.-L crores.

The compan! is e7pected to continue its impressi/e gro,th of more than

#O for the forthcoming t,o !ears.

FINANCIALS

29J! !9J- -J9J

S&4*, Cr. " "#%.L "-%

$ro5it, Cr. -. "5.L "

E$S&d). For (onu," 1

$E 5or&rd .""

TARGET

:rient Abrasi/es is trading &t & ,u(,t&nti&4 di,count to it, ,toc; %&r;*t

**r, 4i;* Grind*44 Norton &nd C&r(or&ndu% Uni+*r,&4 (ot0 o5

0ic0 *n)o' dou(4* diit ric* %u4ti4*,. The stoc3 going b! the present

Portfolio Management##


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trends and the future earnings should attain a price target of 2s.1#% ,ithin

%%# as at a price of 2s.1#% the stoc3 ,ould still be at a single digit price

multiple.

HINDUSTAN INC

$ric* &, on !rd "u4'99999 R,.1-6.1

industan inc is the largest producer of inc in India and enjo!s a

monopol! situation in respect to inc production

industan inc earlier a go/ernment concern ,as ta3en o/er b! the Hedantagroup.

The group has e/en post the ac>uisition continued to bu!bac3 shares from

the open mar3et* a clear /indication of the management’s faith in the

compan!’s future outloo3 and current stoc3 prices.

The compan! is gro,ing /er! fast and being a monopol! is adding to the

compan!’s gro,th prospects.

Outlook

industan inc is a stoc3 onl! for in/estors ha/ing a t,o !ear hori8on and

,illing to ta3e into stride the /olatile mo/ements of the stoc3.

The stoc3’s price in the short run being e7tremel! sensiti/e to commodit!

ne,s*is /er! /olatile.

The ne7t fe, !ears could also see industan inc coming out ,ith another

open offer to control the remaining 1%O of go/ernment sta3e in the

compan! ,hich ,ould further boost the stoc3 price.



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Target

Our to9'*&r t&r*t 5or t0* ,toc; i, R,.!. (irstl! the monopol! situation

,ould lead to gro,ing gains for the compan!. Secondl! the management

bu!ing bac3 shares from the open mar3et is a clear indication of the stoc3

price being under/alued.

G&r&r* 7&44 Ro*,$ric* &, on !rd "u4'99999 R,.-.-

B&c;round

G&r&r* Ro*, o*r&t*, in t0* 5i*4d o5 5i,0in n*t, &nd i, t0* 4&r*,t

roduc*r o5 5i,0in n*t, in Indi&.

The compan! ,ould immensel! benefit in the near future due to increased

demand for fishing nets after the tsunami has ,ashed a,a! thousand of

fisherman’s fishing nets in the coastal areas in India as ,ell as abroad.

The fishing net mar3et in India is more of an unorgani8ed one ,ith Jar,are

one of the fe, large and organi8ed manufacturers a/ailable.

The current mar3et price of the stoc3 is around 2s.5-.

Fin&nci&4,

The compan! is currentl! discounts its (N’%5 earnings b! some,hat less

than "% times ,hile discounting its ’% earnings b! around L times.

Portfolio Management#6


58/69


This could be substantiall! less as the compan! could ma3e immense profits

on the ,a3e of rising demand for fishing nets after the tsunami effect.

T0* co%&n' i, & con,i,t*nt di+id*nd &'*r.

In the past financial !ear the compan! paid a di/idend of 2s..%K4 per share

,hich itself appro7imates to a di/idend !ield of 5. percent at current le/els.

T&r*t

:ur t,o !ear target for the stoc3 is bet,een -%4"%%* ,hich could be e/en

earlier if the compan! is able to capitali8e on the huge opportunit! in front of

it.

In+*,t%*nt Str&t*'

In/estors can enter the stoc3 at current le/els .The stoc3 faces immense

resistance at #"4## le/els and a brea3out abo/e those le/els ,ould impl! a

clear bullish trend ,hich might immediatel! ta3e the stoc3 up to 6% le/els.

Fr&n;4in FCG Fund

Portfolio Management#L


59/69


History

The fund ,as launched in March "--- to ta3e ad/antage of the increasing

purchasing po,er in the rural sector* ,hich ,ould directl! benefit the(M)J sector.

But as it turned out* due to natural reasons ,herein monsoons had a major

dent on the rural mar3ets* ,hich impacted (M)J stoc3s negati/el!.

Top oldings

Returns

Ti%* R*turn,

" month .%1

1 month "."-

" !ear 1.15

1 !ear 1.L"

# !ear 5.""

Outlook


Stoc; o5 ort5o4ioITC 23.51

N*,t4* 8.91

&rico 8.66

Godr*) 8.39

T&t& T*& 8.36

#-


60/69


?e feel that %%# ,ould the !ear of (M)J stoc3s coming bac3 into their

o,n.?ith the rural thrust on agriculture imparted b! the present

go/ernment*this should rub off on the sector as a ,hole.

The fund is ,ell managed and a loo3 at the portfolio emphasi8es its

conser/ati/e stance.

In/estors ,illing to place sectoral bets could loo3 at the (ran3lin (M)J

(und ,ith a t,o !ear hori8on.

HDFC $RUDENCE FUND

Hi,tor'

'() Prudence (und is a Prashant $ain managed fund and ,as part of

erst,hile urich Mutual (und ,hich ,as ta3en o/er b! '() Mutual

(und . The fund has outperformed all other funds in its categor! o/er a

long period of time.)onsistenc! is the hallmar3 and lo,er portfolio

turno/er are ,hat ma3es this fund /er! attracti/e for all class of in/estor

To Ho4din,

Portfolio Management%


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Game 'escriptionO

SBI 0>uit! .6

"".5 J:I %%LG)' #.51

2I+ Ind 0>uit! 5."

SBI G)' 1.L1Amte3 Auto 0>uit! 1.

R*turn,

Ti%* R*turn,

" month 5.%

1 month "".5#

" !ear ".-1 !ear 5.L

# !ear %.5

Out4oo;

T0* 5und in,it* o5 (*in & (&4&nc*d 5und &, out*r5or%in & 4ot o5

di+*r,i5i*d *uate cushion of safet!

HDFC Cor* &nd S&t*44it* Fund

Hi,tor'



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FUND $HILOSO$H

The fund maintains t,o portions of the portfolio* namel! the core and the

satellite portions. The core portion ,ould consist of stoc3s* ,hich are more

of large cap in nature ,ith strong fundamentals and good managements.

The remaining %O ,ould be in/ested in small and mid cap stoc3s ,hich

are presentl! not fundamentall! sound or of mediocre management but

,hich are e7pected to turn around in the immediate future.

:DT+::;

In+*,tor ,**;in 0i0*r r*turn, it0 &n iot& o5 &ddition&4 ri,; ,0ou4d

in+*,t in t0i, 5und it0 & t0r**9'*&r 0oriMon in 0ic0 t0*' (* &(4* to

%&3i%iM* r*turn,.

$rinci&4 Di+id*nd i*4d Fund

Background

The fund ,as launched in :ctober last !ear ,ith a clearl! defined objecti/e

of in/esting #O of the corpus in stoc3s ,hich ha/e a di/idend !ield ,hich

is more than times the Sense7 di/idend !ield.

The fund since then has been performing ,ell .



64/69


Fund $0i4o,o0'

The fund has described ,ould onl! in/est #O of the assets into high

di/idend !ielding stoc3s ,hich ha/e a di/idend !ield of more than times of

the Sense7 di/idend !ield.

Out4oo;

The fund is ,ell managed and has been able to deli/er superior returns

inspite of the fact that a lot of the fund’s assets are in cash .

T0* &,t 5i+* '*&r, 0&, ,**n t0&t in+*,tin in 0i0 di+id*nd 'i*4din

,toc;, out*r5or% &44 ot0*r indic*, ;non &, t0* di+id*nd do t0*or' in

t0* Unit*d St&t*,. T0* ,&%* 0&, (**n ,t&ti,tic&44' ro+*n in t0* Indi&n

%&r;*t, too.

Being a high di/idend !ielding fund* the fund ,ould also be less /olatile His

a /is other di/ersified e>uit! funds.

7* ,tron4' r*co%%*nd & (u' on t0* 5und 0*r*in in+*,tor, c&n (*

,ur* o5 *n*r&tin 0*&4t0' r*turn, it0 & no%in&4 &%ount o5 ri,;.

SBI &nu% $0&r%& Fund

Background

SBI Mutual (und since the past couple of !ears has been performing ,ell

and has in the !ear %%5 outperformed most other fund houses.



65/69


The sudden change in the fund performance can be ,ell attributed to the fact

that the fund house no, operates as an autonomous bod! and not ,ithin the

pur/ie, of SBI.

Performance

The fund has outperformed the onl! other t,o funds under its categor!*

namel! the 2eliance Pharma (und and the $M ealthcare (und

Outlook

The !ear %%# ,ould be a good !ear for man! pharma companies ,hich can

ta3e on the challenges of the ne, product patent regime ,hile at the same

time pro/e to be a disaster for man! as the! buc3le under huge pressure.

The SBI Magnum Pharma (und has been a top performer and could pro/e to

be an outperformer this !ear also* if some of its pharma calls stand

/indicated.

Investment Strategy

The fund being a sectoral fund ,ould be prone to high ris3s and high

re,ards. But unli3e technolog! funds in the !ear %%% ,hich ,ere trading at

price multiples of more than 6# and in some cases "%%* the pharma sector is

trading at multiples of #41%.



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A S.I.P ,ould be a better strateg! on this fund as lot of the /olatilit! can be

captured.

In/estors ,illing to ta3e a call on the pharma sector* should loo3 to in/est in

this fund as it ,ould pro/ide better di/ersification rather than in/esting

directl! in pharma stoc3s

The Indian mutual fund industr!* ,hich manages assets close to ".#% la3h

crore* is passing through its biggest transitional phase. ?hile domestic

pla!ers continue to loo3 at consolidating their mar3et share* ne, big foreign

pla!ers ha/e entered Indian mar3ets. More ban3s sponsored and foreign

pla!ers ,ill be entering the mar3et in the coming !ears. But e7isting top

asset management companies ,ill able to garner a bigger share of the



67/69


customer base* as the! ,ill ha/e the capabilit! to pour in more funds* put up

better infrastructure and are able to educate in/estors. The pla!ers ,ho are

committed to the in/estors and ,ho sta! tuned to the times ,ill prosper. The

,ea3er pla!ers could* o/er time* be marginali8ed and be ta3en o/er.

The biggest challenge before the industr! continues to attract ne, in/estors.

ere (oreign4ban3 sponsored asset management companies ha/e led the

,a!.

(rom pro/iding plain /anilla products li3e e>uit!* income and li>uid funds*

these funds ha/e launched products that ha/e responded to mar3et and

in/estors re>uirements* li3e asset allocations funds* d!namic asset allocation

funds based on mar3et price4earning or inde7 le/els* floating funds* short

term income plans* e7change traded funds and fund4of4funds and thematic

funds. Joing for,ard* both the bond and e>uit! mar3ets are li3el! to remain

chopp! and hence it is important that a proacti/e fund management st!le is

adopted to,ards asset allocation.

An asset management compan! can hope to ma3e mone! onl! if it reaches

critical mass in terms of assets. ?ithout si8e* it is impossible to generate a

reasonable return on in/estment.

The mentioned stoc3s and funds are just a fe, of the uni/erse of stoc3s

,hich e7ist* and there ,ould be man! of them ,hich might offer better

potential and returns. But* I ha/e listed the fe, ,hich I feel offer good scope

of appreciation and more importantl! stoc3s ,hich I 3no, about* businesses

,hich I full! understand.

:n a final note* I ,ould li3e to sum up b! sa!ing that in/esting is all about

capping one’s do,nside and uncapping the upside.



68/69


In+*,t%*nt, ,0ou4d on4' (* %&d* in ,toc;, 0ic0 &r* 5und&%*nt&44'

,ound t0*r*(' cu,0ionin &n' don,id*.

The Bull 2un* unli3e man! in the past has been more of a fundamentall! led

one ,ith a secular mo/e up.

Most of the upside also has been in stoc3s ,ith good fundamentals and

future stories* though not to mention that a tide ta3es up ,ith it e/er!thing*

and so there ,ould be the odd stoc3* the operators delight ,hich might be

lur3ing around to ma3e !ou lose e/er! single penn! of ,hat has been

poc3eted in the past one and a half !ears of the mar3et’s recent rall!. T0*

%or&4 (*in 0i4* ,*& ,ur5in on* ,0ou4d %&;* t0* %o,t o5 &n' 0i0

tid*, 0i4* &t t0* ,&%* ti%* ,t&'in &&r* o5 &n' t,un&%i 0ic0 %i0t

t&;* *+*r't0in 'ou o,,*,,.

The Near %%# heralds a ne, era ,herein the ?T: regime 3ic3s off. This

ne, phase ,ill graduall! bring ,ith it ne, challenges and opportunities ,ith

it ,hich could pro/e to be a boon for some ,hile a bane for man! others.

The mantra continues to be in/esting into stoc3s ,ith good management and

strong financials* but at the same time ha/ing a gro,th stor! in the ma3ing.



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76586326 HDFC Mutual Fund

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